SEC to hit Scrushy with civil charges

Barely a week after a federal jury found HealthSouth founder Richard Scrushy not guilty of participating in a massive accounting fraud, the Securities and Exchange Commission was preparing civil charges against the former chief executive.

Scrushy was the first CEO charged under the Sarbanes-Oxley Act, and had faced 36 counts of fraud, false corporate reporting and making false statements to regulators after prosecutors said that he led a $2.7 billion earnings overstatement at the medical services company beginning in 1996.

After a five-month trial and nearly another month of jury deliberations, he was acquitted on all counts.

The SEC was expected to file the formal paperwork to retry Scrushy and seek $786 million in penalties and disgorgement. The HealthSouth founder would also not be allowed to serve as an officer or director at any public company if found guilty. Scrushy remains a member of HealthSouth's board of directors.

In bringing a civil claim, the SEC must show "a preponderance of the evidence" that Scrushy was involved in and had knowledge of the fraud, a lower burden than the "reasonable doubt" standard required for a criminal conviction.

Two other former executives, including HealthSouth's first finance chief, Aaron Beam, and former vice president Will Hicks, who both pleaded guilty and testified against Scrushy, are set for sentencing this summer. Another pair of indicted executives await trial in Alabama.

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