Richard M. Scrushy
Encyclopedia
Richard Marin Scrushy is an American
business man and founder of HealthSouth Corporation, a global healthcare company based in Birmingham, Alabama
.
In 2004, following an investigation by the Federal Bureau of Investigation
(FBI), Scrushy had charges brought against him by the U.S. Securities and Exchange Commission (SEC). Scrushy was charged with 36 of the original 85 counts but was acquitted of all charges on June 28, 2005, after a jury trial
in Birmingham.
Four months after his acquittal in Birmingham, Scrushy was indicted along with former Alabama Governor Don Siegelman
on October 28, 2005, by a federal grand jury in Montgomery, Alabama
. The indictment included 30 counts of money laundering
, extortion
, obstruction of justice
, racketeering, and bribery
. Although the new charges were filed a month before the previous trial ended, Scrushy's attorneys accused prosecutors of filing charges as retaliation for Scrushy's acquittal. Scrushy pleaded not guilty to all charges, but was convicted along with Siegelman in June 2006.
On May 7, 2009, Scrushy was transferred from the Texas jail where he had been incarcerated and placed in the custody of the Shelby County Jail in Columbiana, Alabama
. Scrushy was returned to Alabama in order to testify in a new civil trial in the Jefferson County Circuit Court
brought against him by shareholders of HealthSouth who sought damages related to Scrushy's trial and conviction. On June 18, 2009, Judge Allwin E. Horn ruled that Scrushy was responsible for HealthSouth’s fraud, and ordered him to pay $2.87 billion.
. The son of a middle class
family, Scrushy's father, Gerald Scrushy, worked as a cash register
repairman and his mother, Grace Scrushy, worked as a nurse and respiratory therapist. At an early age, Scrushy taught himself to play the piano and guitar and was earning money doing odd jobs by the time he was 12 years old. Scrushy, who then went by his middle name Marin, attended school until he was 17. He dropped out prior to graduating from Parrish High School
and married his pregnant girlfriend.
Scrushy soon found himself living in a Selma trailer park
and working manual labor jobs to support his family. After a run-in with a boss, Scrushy quit his job hauling cement and decided to return to school. He earned his GED
, and at his mother's advice, began studying respiratory therapy at Wallace State Community College
. After a year at Wallace State, Scrushy transferred to Jefferson State Community College
and later entered the respiratory therapy program at the University of Alabama at Birmingham
(UAB). Upon graduating from UAB's program, Scrushy was offered a position teaching at the university, where he was promoted to director during his two and a half year tenure. Scrushy divorced his wife, with whom he had two children, and took a position teaching at Wallace State Community College in Dothan, Alabama
. While teaching at Wallace State, Scrushy met and married his second wife, Karen Brooks. The two had four children before they divorced in 1996. In early June 1997, Scrushy married Leslie Anne Jones in Jamaica
, with guests such as Martha Stewart
attending. The group met at the HealthSouth Hangar at the Birmingham International Airport and boarded a chartered Boeing 727
to Jamaica. Together Richard and Leslie have had an additional three children.
In the late 1970s, following his time teaching at UAB and Wallace State Community College, Scrushy was offered a position with Lifemark Corporation, a Houston, Texas
based health care company. Within a few years of being hired at Lifemark, Scrushy was running a 100-million-dollar operation that included the pharmacy, physical rehabilitation, and hospital acquisition divisions. While working for Lifemark, Scrushy moved to St. Louis, Missouri
, where he worked as the regional director of the respiratory therapy division. He then moved to Houston where he became the company's chief operating officer
.
Still working for Lifemark, Scrushy devised a plan for an outpatient diagnostics and rehabilitative health clinic chain. He presented the plan to Lifemark, but the company was unable to act on it due to a company merger that was already underway with American Medical International. Scrushy left Lifemark in 1983 and founded Amcare, Inc within a year. The new company opened its first facility in Little Rock, Arkansas
and had initial capital between $50,000-$70,000. With the assistance of four partners from Amcare Inc. and a one million dollar investment by Citicorp Venture Capital, Scrushy took the quickly growing company and founded HealthSouth in 1984. Two years after its founding, HealthSouth became a publicly traded
company in 1986. The next year, HealthSouth expanded into two new fields, worker’s compensation and sports medicine, allowing the company to double its earnings and obtain assets close to $100 million. By the early 1990s, the company had expanded even more, with facilities in each of the 50 U.S states and revenues in excess of $181 million.
Over the next decade, HealthSouth’s sports medicine programs received international attention by being linked to star athletes including Bo Jackson
, who served as the president of HealthSouth's Sports Medicine Council, Roger Clemens
, Jack Nicklaus
, Kyle Petty
, Michael Jordan
, Shaquille O'Neal
, and Lúcio Carlos Cajueiro Souza
. At its height, HealthSouth employed more than 50,000 physicians, was the "nation's largest provider of outpatient surgery and rehabilitative and diagnostic healthcare services", and had over 2,000 facilities in the United States
, Puerto Rico
, Australia
, and the United Kingdom
. HealthSouth facilities worldwide saw more than 120,000 patients daily, and with earnings around $106 million in 1997, Scrushy was the third highest paid CEO
in the United States.
of illegally adding costs to reports for outpatient physical therapy and inpatient rehabilitation admissions. In 1998, Medicare changed its funding arrangements in an attempt to reduce exploitation and payments by $100 billion. Scrushy insisted that the change would not affect HealthSouth's bottom line
but profits dropped by 93 percent by the end of the year. Around this same time, HealthSouth began facing additional accusations of fraud. An investigation by the insurance company Blue Cross Blue Shield of Alabama determined that HealthSouth had "improperly billed Medicare for therapy by students, interns, athletic trainers, and other unlicensed aides".
Additional lawsuits alleged HealthSouth had committed widespread abuse of Medicare by "billing for services it never provided, delivering poor care, treating patients without a formal plan of care, and using unlicensed therapists". In March 2003, the U.S. Securities and Exchange Commission filed a civil suit against Scrushy and HealthSouth alleging the company had falsified at least $2.7 billion worth of profit between 1996 and 2002. HealthSouth agreed to pay the United States government
$325 million on December 30, 2004, in order to "settle allegations that the company defrauded Medicare and other federal healthcare programs".
(FBI) announced that it had begun a criminal investigation relating to the "trading of shares of the HealthSouth Corporation" and possible securities law
violations. A criminal complaint was filed by the FBI against HealthSouth's Chief Financial Officer
Weston Smith and Scrushy had civil charges brought against him by the U.S. Securities and Exchange Commission (SEC). Scrushy became the first CEO to be tried under the Sarbanes-Oxley Act
when he was indicted
by the United States Department of Justice
in United States of America v. Richard M. Scrushy on November 4, 2003.
The indictment included 85 counts of conspiracy
, money laundering
, securities fraud
, and mail fraud but Scrushy was ultimately charged with just 36 counts. In the indictment, Scrushy was accused of using intimidation, threats, and cash payments to coerce top executives into committing fraud. These top executives called themselves "The Family" and referred to their creative accounting
as "filling the gap". The group attempted to hide the false earnings by illegally inflating balances of accounts such as fixed assets and estimated insurance reimbursements. Despite multiple chief executives testifying against Scrushy, the prosecutors were unable to produce any material evidence that Scrushy had been involved in the fraudulent accounting.
During the trial, Scrushy defended himself both inside and outside the courtroom. Scrushy was interviewed by Mike Wallace
for a 60 Minutes
segment called "Cooking The Books", began hosting a Christian television show
with his wife called Viewpoint, backed a city-wide 40 day prayer movement referred to as "City, thou art loosed", and joined the predominantly African American
Guiding Light Church. These actions were seen as an attempt to sway potential jurors, since 70 percent of Birmingham's population and 11 of the 18 jurors were African American. Following more than a month of deliberations, Scrushy was acquitted of all charges on June 28, 2005.
. The indictment included 30 counts of money laundering
, extortion
, obstruction of justice
, racketeering, and bribery of Alabama Governor Don Siegelman
. Prosecutors claimed that Scrushy had agreed to pay over $500,000 of Siegelman's debt, which he accumulated during a failed attempt to bring a state lottery to Alabama, in exchange for a seat on the Certificates of Need Review Board. The board serves the state by reviewing hospitals and approving their construction. Although the new charges were filed a month before the previous trial ended, Scrushy's attorney's accused prosecutors of filing charges as retaliation for Scrushy's acquittal. Scrushy and Siegleman pleaded not guilty to all charges, but they were both convicted following a trial that lasted approximately six weeks. Scrushy was convicted of bribery, conspiracy, and mail fraud, while Siegelman was convicted of bribery, conspiracy, mail fraud, and obstruction of justice.
While awaiting sentencing, on March 29, 2007, Scrushy's probation officer filed a report claiming that Scrushy had violated the conditions of his bond by leaving Walt Disney World in Orlando, Florida
and traveling to Palm Beach
where he boarded a yacht and sailed to Miami
. The probation officer suggested that Scrushy should be placed under house arrest and that he be required to wear an electronic monitoring device
at all times. United States Magistrate Judge
Charles Coody warned Scrushy that he "would not tolerate any future deviations from the requirements the court has placed on" him and ruled that Scrushy must wear a GPS tracking device anytime he travels outside of Alabama.
On June 28, 2007, Scrushy was sentenced to six years and ten months in a federal prison, ordered to pay $267,000 in restitution to United Way of Alabama, three years probation, and a fine of $150,000. Scrushy is also expected to personally pay for his time in prison and perform 500 hours of community service. Siegelman was sentenced on the same day to seven years and four months in prison, restitution of $181,325 to the state, three years probation, a $50,000 fine, and 500 hours of community service upon his release. U.S. District Judge Mark Fuller would later rule, however, that Sieglman would not be required to pay the $181,325 in restitution. The restitution was based on debts accumulated by the State of Alabama during a fraudulent warehouse deal, but Siegelman was acquitted on charges related to the deal. Upon sentencing, Scrushy and Siegelman were taken into custody and transported to a federal prison in Atlanta, Georgia
, where they briefly shared a cell
.
from Scrushy's indictment. The prosecutors quickly dropped their appeal, and United States Attorney Alice Martin indicated they had reconsidered.
Awaiting appeal, Scrushy was briefly transported to a transfer site for inmates in Oklahoma City, Oklahoma
before being sent to his permanent location at a low security federal prison in Beaumont, Texas
. Scrushy filed a request with the 11th U.S. Circuit Court of Appeals
, asking to be released on appeal bond. The 11th US Circuit Court of Appeals rejected Scrushy's request to be released on bond, citing an earlier ruling written by U.S. District Judge Mark Fuller. The ruling was issued while Scrushy was on bond awaiting sentencing, and deemed him a flight risk. Scrushy again filed for release in February and May 2008 but both requests were denied.
In March 2009, a panel of three judges from the 11th U.S. Circuit Court upheld all charges against Scrushy and dismissed two of the seven charges against Siegelman. A further appeal for a full court review of the case was also denied by the 11th U.S. Circuit Court of Appeals on May 15, 2009. The next step in the appeals process is the Supreme Court of the United States
. On June 29, 2010, the Court issued an order directing the appeals court to review the case in light of their (Supreme Court's) ruling the previous week on the "honest services" fraud statute.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
business man and founder of HealthSouth Corporation, a global healthcare company based in Birmingham, Alabama
Birmingham, Alabama
Birmingham is the largest city in Alabama. The city is the county seat of Jefferson County. According to the 2010 United States Census, Birmingham had a population of 212,237. The Birmingham-Hoover Metropolitan Area, in estimate by the U.S...
.
In 2004, following an investigation by the Federal Bureau of Investigation
Federal Bureau of Investigation
The Federal Bureau of Investigation is an agency of the United States Department of Justice that serves as both a federal criminal investigative body and an internal intelligence agency . The FBI has investigative jurisdiction over violations of more than 200 categories of federal crime...
(FBI), Scrushy had charges brought against him by the U.S. Securities and Exchange Commission (SEC). Scrushy was charged with 36 of the original 85 counts but was acquitted of all charges on June 28, 2005, after a jury trial
Jury trial
A jury trial is a legal proceeding in which a jury either makes a decision or makes findings of fact which are then applied by a judge...
in Birmingham.
Four months after his acquittal in Birmingham, Scrushy was indicted along with former Alabama Governor Don Siegelman
Don Siegelman
Don Eugene Siegelman is an American Democratic Party politician who held numerous offices in Alabama. He was the 51st Governor of Alabama for one term from 1999 to 2003...
on October 28, 2005, by a federal grand jury in Montgomery, Alabama
Montgomery, Alabama
Montgomery is the capital of the U.S. state of Alabama, and is the county seat of Montgomery County. It is located on the Alabama River southeast of the center of the state, in the Gulf Coastal Plain. As of the 2010 census, Montgomery had a population of 205,764 making it the second-largest city...
. The indictment included 30 counts of money laundering
Money laundering
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
, extortion
Extortion
Extortion is a criminal offence which occurs when a person unlawfully obtains either money, property or services from a person, entity, or institution, through coercion. Refraining from doing harm is sometimes euphemistically called protection. Extortion is commonly practiced by organized crime...
, obstruction of justice
Obstruction of justice
The crime of obstruction of justice, in United States jurisdictions, refers to the crime of interfering with the work of police, investigators, regulatory agencies, prosecutors, or other officials...
, racketeering, and bribery
Bribery
Bribery, a form of corruption, is an act implying money or gift giving that alters the behavior of the recipient. Bribery constitutes a crime and is defined by Black's Law Dictionary as the offering, giving, receiving, or soliciting of any item of value to influence the actions of an official or...
. Although the new charges were filed a month before the previous trial ended, Scrushy's attorneys accused prosecutors of filing charges as retaliation for Scrushy's acquittal. Scrushy pleaded not guilty to all charges, but was convicted along with Siegelman in June 2006.
On May 7, 2009, Scrushy was transferred from the Texas jail where he had been incarcerated and placed in the custody of the Shelby County Jail in Columbiana, Alabama
Columbiana, Alabama
Columbiana is a city in Shelby County, Alabama, United States. At the 2010 census the population was 4,197. The city is the county seat of Shelby County.-History:...
. Scrushy was returned to Alabama in order to testify in a new civil trial in the Jefferson County Circuit Court
Courts of Alabama
Courts of Alabama include:State courts of Alabama*Alabama Supreme Court**Alabama Court of Civil Appeals**Alabama Court of Criminal Appeals***Alabama Circuit Courts ****Alabama District Courts...
brought against him by shareholders of HealthSouth who sought damages related to Scrushy's trial and conviction. On June 18, 2009, Judge Allwin E. Horn ruled that Scrushy was responsible for HealthSouth’s fraud, and ordered him to pay $2.87 billion.
Early life and background
Richard M. Scrushy was born in August 1952 in Selma, AlabamaSelma, Alabama
Selma is a city in and the county seat of Dallas County, Alabama, United States, located on the banks of the Alabama River. The population was 20,512 at the 2000 census....
. The son of a middle class
Middle class
The middle class is any class of people in the middle of a societal hierarchy. In Weberian socio-economic terms, the middle class is the broad group of people in contemporary society who fall socio-economically between the working class and upper class....
family, Scrushy's father, Gerald Scrushy, worked as a cash register
Cash register
A cash register or till is a mechanical or electronic device for calculating and recording sales transactions, and an attached cash drawer for storing cash...
repairman and his mother, Grace Scrushy, worked as a nurse and respiratory therapist. At an early age, Scrushy taught himself to play the piano and guitar and was earning money doing odd jobs by the time he was 12 years old. Scrushy, who then went by his middle name Marin, attended school until he was 17. He dropped out prior to graduating from Parrish High School
Selma High School
Selma High School is a public secondary school in Selma, Alabama, part of the Selma City School System. It is the only public high school in the Selma City Schools System. It is also an eight-year accredited institution with the Western Association of Schools and Colleges. -History:Selma High...
and married his pregnant girlfriend.
Scrushy soon found himself living in a Selma trailer park
Trailer park
A trailer park is a semi-permanent or permanent area for mobile homes or travel trailers. The main reasons for living in such trailer parks are the often lower cost compared to other housing, and the ability to move to a new area more quickly and easily, for example when changing jobs to another...
and working manual labor jobs to support his family. After a run-in with a boss, Scrushy quit his job hauling cement and decided to return to school. He earned his GED
GED
General Educational Development tests are a group of five subject tests which, when passed, certify that the taker has American or Canadian high school-level academic skills...
, and at his mother's advice, began studying respiratory therapy at Wallace State Community College
Wallace State Community College
Wallace State Community College is a community college located in Hanceville, Alabama. Wallace State offers a variety of associate's degrees. It is named for former Alabama governor George C. Wallace, who greatly expanded Alabama's community college system...
. After a year at Wallace State, Scrushy transferred to Jefferson State Community College
Jefferson State Community College
Jefferson State Community College, more often known as 'Jeff State', is a two-year college in the Alabama Community College System. The current campus locations are the Jefferson Campus in eastern Jefferson County, the Shelby-Hoover Campus in northern Shelby County, the St...
and later entered the respiratory therapy program at the University of Alabama at Birmingham
University of Alabama at Birmingham
The University of Alabama at Birmingham is a public university in Birmingham in the U.S. state of Alabama. Developing from an extension center established in 1936, the institution became an autonomous institution in 1969 and is today one of three institutions in the University of Alabama System...
(UAB). Upon graduating from UAB's program, Scrushy was offered a position teaching at the university, where he was promoted to director during his two and a half year tenure. Scrushy divorced his wife, with whom he had two children, and took a position teaching at Wallace State Community College in Dothan, Alabama
Dothan, Alabama
Dothan is a city located in the southeastern corner of the US state of Alabama, situated approximately west of the Georgia state line and north of Florida. It is the seat of Houston County, with portions extending into nearby Dale County and Henry County...
. While teaching at Wallace State, Scrushy met and married his second wife, Karen Brooks. The two had four children before they divorced in 1996. In early June 1997, Scrushy married Leslie Anne Jones in Jamaica
Jamaica
Jamaica is an island nation of the Greater Antilles, in length, up to in width and 10,990 square kilometres in area. It is situated in the Caribbean Sea, about south of Cuba, and west of Hispaniola, the island harbouring the nation-states Haiti and the Dominican Republic...
, with guests such as Martha Stewart
Martha Stewart
Martha Stewart is an American business magnate, author, magazine publisher, and television personality. As founder of Martha Stewart Living Omnimedia, she has gained success through a variety of business ventures, encompassing publishing, broadcasting, and merchandising...
attending. The group met at the HealthSouth Hangar at the Birmingham International Airport and boarded a chartered Boeing 727
Boeing 727
The Boeing 727 is a mid-size, narrow-body, three-engine, T-tailed commercial jet airliner, manufactured by Boeing. The Boeing 727 first flew in 1963, and for over a decade more were built per year than any other jet airliner. When production ended in 1984 a total of 1,832 aircraft had been produced...
to Jamaica. Together Richard and Leslie have had an additional three children.
Career and HealthSouth
Houston, Texas
Houston is the fourth-largest city in the United States, and the largest city in the state of Texas. According to the 2010 U.S. Census, the city had a population of 2.1 million people within an area of . Houston is the seat of Harris County and the economic center of , which is the ...
based health care company. Within a few years of being hired at Lifemark, Scrushy was running a 100-million-dollar operation that included the pharmacy, physical rehabilitation, and hospital acquisition divisions. While working for Lifemark, Scrushy moved to St. Louis, Missouri
St. Louis, Missouri
St. Louis is an independent city on the eastern border of Missouri, United States. With a population of 319,294, it was the 58th-largest U.S. city at the 2010 U.S. Census. The Greater St...
, where he worked as the regional director of the respiratory therapy division. He then moved to Houston where he became the company's chief operating officer
Chief operating officer
A Chief Operating Officer or Director of Operations can be one of the highest-ranking executives in an organization and comprises part of the "C-Suite"...
.
Still working for Lifemark, Scrushy devised a plan for an outpatient diagnostics and rehabilitative health clinic chain. He presented the plan to Lifemark, but the company was unable to act on it due to a company merger that was already underway with American Medical International. Scrushy left Lifemark in 1983 and founded Amcare, Inc within a year. The new company opened its first facility in Little Rock, Arkansas
Little Rock, Arkansas
Little Rock is the capital and the largest city of the U.S. state of Arkansas. The Metropolitan Statistical Area had a population of 699,757 people in the 2010 census...
and had initial capital between $50,000-$70,000. With the assistance of four partners from Amcare Inc. and a one million dollar investment by Citicorp Venture Capital, Scrushy took the quickly growing company and founded HealthSouth in 1984. Two years after its founding, HealthSouth became a publicly traded
Public company
This is not the same as a Government-owned corporation.A public company or publicly traded company is a limited liability company that offers its securities for sale to the general public, typically through a stock exchange, or through market makers operating in over the counter markets...
company in 1986. The next year, HealthSouth expanded into two new fields, worker’s compensation and sports medicine, allowing the company to double its earnings and obtain assets close to $100 million. By the early 1990s, the company had expanded even more, with facilities in each of the 50 U.S states and revenues in excess of $181 million.
Over the next decade, HealthSouth’s sports medicine programs received international attention by being linked to star athletes including Bo Jackson
Bo Jackson
Vincent Edward "Bo" Jackson is a former American baseball and football player. He was the first athlete to be named an All-Star in two major American sports, and also won the Heisman Trophy in 1985....
, who served as the president of HealthSouth's Sports Medicine Council, Roger Clemens
Roger Clemens
William Roger Clemens , nicknamed "Rocket", is a former Major League Baseball pitcher who broke into the league with the Boston Red Sox, whose pitching staff he would help anchor for 12 years. Clemens won seven Cy Young Awards, more than any other pitcher. He played for four different teams over...
, Jack Nicklaus
Jack Nicklaus
Jack William Nicklaus , nicknamed "The Golden Bear", is an American professional golfer. He won 18 career major championships on the PGA Tour over a span of 25 years and is widely regarded as one of the greatest professional golfers of all time. In addition to his 18 Majors, he was runner-up a...
, Kyle Petty
Kyle Petty
Kyle Eugene Petty is a former American NASCAR driver and is currently a co-host for NASCAR RaceDay and panel member for NASCAR Smarts which are both on SPEED. He also commentates for TNT in the summer. He is the son of racer Richard Petty, grandson of racer Lee Petty, and father of the late Adam...
, Michael Jordan
Michael Jordan
Michael Jeffrey Jordan is a former American professional basketball player, active entrepreneur, and majority owner of the Charlotte Bobcats...
, Shaquille O'Neal
Shaquille O'Neal
Shaquille Rashaun O'Neal , nicknamed "Shaq" , is a former American professional basketball player. Standing tall and weighing , he was one of the heaviest players ever to play in the NBA...
, and Lúcio Carlos Cajueiro Souza
Lúcio Carlos Cajueiro Souza
Lúcio Carlos Cajueiro Souza , commonly known as Lúcio, is a Brazilian footballer, currently playing for Grêmio.- Career :...
. At its height, HealthSouth employed more than 50,000 physicians, was the "nation's largest provider of outpatient surgery and rehabilitative and diagnostic healthcare services", and had over 2,000 facilities in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, Puerto Rico
Puerto Rico
Puerto Rico , officially the Commonwealth of Puerto Rico , is an unincorporated territory of the United States, located in the northeastern Caribbean, east of the Dominican Republic and west of both the United States Virgin Islands and the British Virgin Islands.Puerto Rico comprises an...
, Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
, and the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
. HealthSouth facilities worldwide saw more than 120,000 patients daily, and with earnings around $106 million in 1997, Scrushy was the third highest paid CEO
Chief executive officer
A chief executive officer , managing director , Executive Director for non-profit organizations, or chief executive is the highest-ranking corporate officer or administrator in charge of total management of an organization...
in the United States.
Legal battles
Although HealthSouth grew tremendously throughout the 1990s, becoming the largest comprehensive rehabilitative services company in the United States, ethical and financial questions began to arise as early as 1989. An internal auditor alleged that he was fired for drawing attention to HealthSouth's financial problems and that he was pressured to meet certain earnings targets. Two years later, in 1991, HealthSouth was accused by MedicareMedicare (United States)
Medicare is a social insurance program administered by the United States government, providing health insurance coverage to people who are aged 65 and over; to those who are under 65 and are permanently physically disabled or who have a congenital physical disability; or to those who meet other...
of illegally adding costs to reports for outpatient physical therapy and inpatient rehabilitation admissions. In 1998, Medicare changed its funding arrangements in an attempt to reduce exploitation and payments by $100 billion. Scrushy insisted that the change would not affect HealthSouth's bottom line
Bottom Line
The Bottom Line was a music venue at 15 West Fourth Street between Mercer Street and Greene Street in the Greenwich Village neighborhood of Manhattan, New York City...
but profits dropped by 93 percent by the end of the year. Around this same time, HealthSouth began facing additional accusations of fraud. An investigation by the insurance company Blue Cross Blue Shield of Alabama determined that HealthSouth had "improperly billed Medicare for therapy by students, interns, athletic trainers, and other unlicensed aides".
Additional lawsuits alleged HealthSouth had committed widespread abuse of Medicare by "billing for services it never provided, delivering poor care, treating patients without a formal plan of care, and using unlicensed therapists". In March 2003, the U.S. Securities and Exchange Commission filed a civil suit against Scrushy and HealthSouth alleging the company had falsified at least $2.7 billion worth of profit between 1996 and 2002. HealthSouth agreed to pay the United States government
Federal government of the United States
The federal government of the United States is the national government of the constitutional republic of fifty states that is the United States of America. The federal government comprises three distinct branches of government: a legislative, an executive and a judiciary. These branches and...
$325 million on December 30, 2004, in order to "settle allegations that the company defrauded Medicare and other federal healthcare programs".
Birmingham criminal trial
On February 6, 2003, the Federal Bureau of InvestigationFederal Bureau of Investigation
The Federal Bureau of Investigation is an agency of the United States Department of Justice that serves as both a federal criminal investigative body and an internal intelligence agency . The FBI has investigative jurisdiction over violations of more than 200 categories of federal crime...
(FBI) announced that it had begun a criminal investigation relating to the "trading of shares of the HealthSouth Corporation" and possible securities law
Security (finance)
A security is generally a fungible, negotiable financial instrument representing financial value. Securities are broadly categorized into:* debt securities ,* equity securities, e.g., common stocks; and,...
violations. A criminal complaint was filed by the FBI against HealthSouth's Chief Financial Officer
Chief financial officer
The chief financial officer or Chief financial and operating officer is a corporate officer primarily responsible for managing the financial risks of the corporation. This officer is also responsible for financial planning and record-keeping, as well as financial reporting to higher management...
Weston Smith and Scrushy had civil charges brought against him by the U.S. Securities and Exchange Commission (SEC). Scrushy became the first CEO to be tried under the Sarbanes-Oxley Act
Sarbanes-Oxley Act
The Sarbanes–Oxley Act of 2002 , also known as the 'Public Company Accounting Reform and Investor Protection Act' and 'Corporate and Auditing Accountability and Responsibility Act' and commonly called Sarbanes–Oxley, Sarbox or SOX, is a United States federal law enacted on July 30, 2002, which...
when he was indicted
Indictment
An indictment , in the common-law legal system, is a formal accusation that a person has committed a crime. In jurisdictions that maintain the concept of felonies, the serious criminal offence is a felony; jurisdictions that lack the concept of felonies often use that of an indictable offence—an...
by the United States Department of Justice
United States Department of Justice
The United States Department of Justice , is the United States federal executive department responsible for the enforcement of the law and administration of justice, equivalent to the justice or interior ministries of other countries.The Department is led by the Attorney General, who is nominated...
in United States of America v. Richard M. Scrushy on November 4, 2003.
The indictment included 85 counts of conspiracy
Conspiracy (crime)
In the criminal law, a conspiracy is an agreement between two or more persons to break the law at some time in the future, and, in some cases, with at least one overt act in furtherance of that agreement...
, money laundering
Money laundering
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
, securities fraud
Securities fraud
Securities fraud, also known as stock fraud and investment fraud, is a practice that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of the securities laws....
, and mail fraud but Scrushy was ultimately charged with just 36 counts. In the indictment, Scrushy was accused of using intimidation, threats, and cash payments to coerce top executives into committing fraud. These top executives called themselves "The Family" and referred to their creative accounting
Creative accounting
Creative accounting and earnings management are euphemisms referring to accounting practices that may follow the letter of the rules of standard accounting practices, but certainly deviate from the spirit of those rules...
as "filling the gap". The group attempted to hide the false earnings by illegally inflating balances of accounts such as fixed assets and estimated insurance reimbursements. Despite multiple chief executives testifying against Scrushy, the prosecutors were unable to produce any material evidence that Scrushy had been involved in the fraudulent accounting.
During the trial, Scrushy defended himself both inside and outside the courtroom. Scrushy was interviewed by Mike Wallace
Mike Wallace (journalist)
Myron Leon "Mike" Wallace is an American journalist, former game show host, actor and media personality. During his 60+ year career, he has interviewed a wide range of prominent newsmakers....
for a 60 Minutes
60 Minutes
60 Minutes is an American television news magazine, which has run on CBS since 1968. The program was created by producer Don Hewitt who set it apart by using a unique style of reporter-centered investigation....
segment called "Cooking The Books", began hosting a Christian television show
Televangelism
Televangelism is the use of television to communicate the Christian faith. The word is a portmanteau of television and evangelism and was coined by Time magazine. A “televangelist” is a Christian minister who devotes a large portion of his ministry to television broadcasting...
with his wife called Viewpoint, backed a city-wide 40 day prayer movement referred to as "City, thou art loosed", and joined the predominantly African American
African American
African Americans are citizens or residents of the United States who have at least partial ancestry from any of the native populations of Sub-Saharan Africa and are the direct descendants of enslaved Africans within the boundaries of the present United States...
Guiding Light Church. These actions were seen as an attempt to sway potential jurors, since 70 percent of Birmingham's population and 11 of the 18 jurors were African American. Following more than a month of deliberations, Scrushy was acquitted of all charges on June 28, 2005.
Montgomery criminal trial
On October 26, 2005, four months after his acquittal in Birmingham, Scrushy was indicted by a federal grand jury in Montgomery, AlabamaMontgomery, Alabama
Montgomery is the capital of the U.S. state of Alabama, and is the county seat of Montgomery County. It is located on the Alabama River southeast of the center of the state, in the Gulf Coastal Plain. As of the 2010 census, Montgomery had a population of 205,764 making it the second-largest city...
. The indictment included 30 counts of money laundering
Money laundering
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
, extortion
Extortion
Extortion is a criminal offence which occurs when a person unlawfully obtains either money, property or services from a person, entity, or institution, through coercion. Refraining from doing harm is sometimes euphemistically called protection. Extortion is commonly practiced by organized crime...
, obstruction of justice
Obstruction of justice
The crime of obstruction of justice, in United States jurisdictions, refers to the crime of interfering with the work of police, investigators, regulatory agencies, prosecutors, or other officials...
, racketeering, and bribery of Alabama Governor Don Siegelman
Don Siegelman
Don Eugene Siegelman is an American Democratic Party politician who held numerous offices in Alabama. He was the 51st Governor of Alabama for one term from 1999 to 2003...
. Prosecutors claimed that Scrushy had agreed to pay over $500,000 of Siegelman's debt, which he accumulated during a failed attempt to bring a state lottery to Alabama, in exchange for a seat on the Certificates of Need Review Board. The board serves the state by reviewing hospitals and approving their construction. Although the new charges were filed a month before the previous trial ended, Scrushy's attorney's accused prosecutors of filing charges as retaliation for Scrushy's acquittal. Scrushy and Siegleman pleaded not guilty to all charges, but they were both convicted following a trial that lasted approximately six weeks. Scrushy was convicted of bribery, conspiracy, and mail fraud, while Siegelman was convicted of bribery, conspiracy, mail fraud, and obstruction of justice.
While awaiting sentencing, on March 29, 2007, Scrushy's probation officer filed a report claiming that Scrushy had violated the conditions of his bond by leaving Walt Disney World in Orlando, Florida
Orlando, Florida
Orlando is a city in the central region of the U.S. state of Florida. It is the county seat of Orange County, and the center of the Greater Orlando metropolitan area. According to the 2010 US Census, the city had a population of 238,300, making Orlando the 79th largest city in the United States...
and traveling to Palm Beach
Palm Beach, Florida
The Town of Palm Beach is an incorporated town in Palm Beach County, Florida, United States. The Intracoastal Waterway separates it from the neighboring cities of West Palm Beach and Lake Worth...
where he boarded a yacht and sailed to Miami
Miami, Florida
Miami is a city located on the Atlantic coast in southeastern Florida and the county seat of Miami-Dade County, the most populous county in Florida and the eighth-most populous county in the United States with a population of 2,500,625...
. The probation officer suggested that Scrushy should be placed under house arrest and that he be required to wear an electronic monitoring device
Ankle monitor
An ankle monitor is a device that individuals under house arrest are often required to wear. At timed intervals, the ankle monitor sends a radio frequency signal containing location and other information to a receiver. If an offender moves outside of an allowed range, the police will be notified...
at all times. United States Magistrate Judge
United States magistrate judge
In the United States federal courts, magistrate judges are appointed to assist United States district court judges in the performance of their duties...
Charles Coody warned Scrushy that he "would not tolerate any future deviations from the requirements the court has placed on" him and ruled that Scrushy must wear a GPS tracking device anytime he travels outside of Alabama.
On June 28, 2007, Scrushy was sentenced to six years and ten months in a federal prison, ordered to pay $267,000 in restitution to United Way of Alabama, three years probation, and a fine of $150,000. Scrushy is also expected to personally pay for his time in prison and perform 500 hours of community service. Siegelman was sentenced on the same day to seven years and four months in prison, restitution of $181,325 to the state, three years probation, a $50,000 fine, and 500 hours of community service upon his release. U.S. District Judge Mark Fuller would later rule, however, that Sieglman would not be required to pay the $181,325 in restitution. The restitution was based on debts accumulated by the State of Alabama during a fraudulent warehouse deal, but Siegelman was acquitted on charges related to the deal. Upon sentencing, Scrushy and Siegelman were taken into custody and transported to a federal prison in Atlanta, Georgia
Atlanta, Georgia
Atlanta is the capital and most populous city in the U.S. state of Georgia. According to the 2010 census, Atlanta's population is 420,003. Atlanta is the cultural and economic center of the Atlanta metropolitan area, which is home to 5,268,860 people and is the ninth largest metropolitan area in...
, where they briefly shared a cell
Prison cell
A prison cell or holding cell or lock-up is a small room in a prison, or police station where a prisoner is held.Prison cells are usually about 6 by 8 feet in size with steel or brick walls and one solid or barred door that locks from the outside. Many modern prison cells are pre-cast. Solid doors...
.
Appeal
Following the trial and conviction, Scrushy, Siegelman, and the prosecutors all indicated they would appeal. Scrushy and Seigelman vowed to appeal their convictions and sentences, while the prosecution announced its desire to appeal a judge's decision to remove charges of perjuryPerjury
Perjury, also known as forswearing, is the willful act of swearing a false oath or affirmation to tell the truth, whether spoken or in writing, concerning matters material to a judicial proceeding. That is, the witness falsely promises to tell the truth about matters which affect the outcome of the...
from Scrushy's indictment. The prosecutors quickly dropped their appeal, and United States Attorney Alice Martin indicated they had reconsidered.
Awaiting appeal, Scrushy was briefly transported to a transfer site for inmates in Oklahoma City, Oklahoma
Oklahoma City, Oklahoma
Oklahoma City is the capital and the largest city in the state of Oklahoma. The county seat of Oklahoma County, the city ranks 31st among United States cities in population. The city's population, from the 2010 census, was 579,999, with a metro-area population of 1,252,987 . In 2010, the Oklahoma...
before being sent to his permanent location at a low security federal prison in Beaumont, Texas
Beaumont, Texas
Beaumont is a city in and county seat of Jefferson County, Texas, United States, within the Beaumont–Port Arthur Metropolitan Statistical Area. The city's population was 118,296 at the 2010 census. With Port Arthur and Orange, it forms the Golden Triangle, a major industrial area on the...
. Scrushy filed a request with the 11th U.S. Circuit Court of Appeals
United States Court of Appeals for the Eleventh Circuit
The United States Court of Appeals for the Eleventh Circuit is a federal court with appellate jurisdiction over the district courts in the following districts:* Middle District of Alabama...
, asking to be released on appeal bond. The 11th US Circuit Court of Appeals rejected Scrushy's request to be released on bond, citing an earlier ruling written by U.S. District Judge Mark Fuller. The ruling was issued while Scrushy was on bond awaiting sentencing, and deemed him a flight risk. Scrushy again filed for release in February and May 2008 but both requests were denied.
In March 2009, a panel of three judges from the 11th U.S. Circuit Court upheld all charges against Scrushy and dismissed two of the seven charges against Siegelman. A further appeal for a full court review of the case was also denied by the 11th U.S. Circuit Court of Appeals on May 15, 2009. The next step in the appeals process is the Supreme Court of the United States
Supreme Court of the United States
The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...
. On June 29, 2010, the Court issued an order directing the appeals court to review the case in light of their (Supreme Court's) ruling the previous week on the "honest services" fraud statute.