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Scrushy Blames Financial Officers

The ex-HealthSouth chief says his CFOs deceived him and were responsible for inflating earnings by $2.5 billion.

October 13, 2003|From Associated Press

Former HealthSouth Corp. Chief Executive Richard M. Scrushy proclaimed his innocence in a $2.5-billion accounting fraud at the medical services company in a television interview, blaming the deception on his top financial officers.

Speaking during a segment on CBS' "60 Minutes" Sunday, Scrushy said he signed off on fraudulent accounting figures because he trusted the five chief financial officers who had served the company Scrushy helped found in 1984.

"You have to rely, you have to trust people," he told reporter Mike Wallace during the interview last month.

"I mean, you hire them. You pay them good salaries. You expect them to do the right thing. And I signed off on the, on the information based on what was provided to me. And what I was told."

Scrushy had previously declined interview requests.

He was scheduled to appear before the House Energy and Commerce Committee next week, but was expected to invoke his 5th Amendment right against self-incrimination to avoid answering questions.

The Securities and Exchange Commission has filed a lawsuit accusing Birmingham, Ala.-based HealthSouth and Scrushy of inflating earnings by at least $2.5 billion to make it appear the company was meeting Wall Street analysts' expectations.

Scrushy has refused the company's request for his resignation and remains a non-active board member of HealthSouth, which operates nearly 1,700 facilities for outpatient surgery, diagnostic and imaging and rehabilitation services.

Fifteen former employees have reached plea-bargain deals in the investigation, including all five of the company's former CFOs. Scrushy has not been charged with a crime and predicted in the interview that he would not serve jail time because he was innocent.

In civil court, Scrushy faces shareholder lawsuits related to the company's troubles.

Scrushy said he didn't instruct anyone to commit the fraud and was unaware of it until the SEC began investigating. He said subordinates had plenty of motivation for plotting the scheme on their own.

"Promotions, bonuses, stock, stock options, an opportunity to make a lot of money," Scrushy said. "There's incentives in it, tremendous incentives. Power. Greed. There's a lot of reasons for what they did.

"There was no motive for me to destroy a great company that I built, a company that I loved, my fourth child. There was no reason for me to do that."

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