Nov. 4 (Bloomberg) -- HealthSouth Corp. founder Richard Scrushy was indicted on charges he directed a $2.75 billion accounting fraud that almost bankrupted the company he had built into the biggest U.S. operator of rehabilitation hospitals.
Scrushy, 51, who was fired in March, was charged with conspiring to inflate earnings since 1996, laundering money to live a lavish lifestyle and certifying false financial statements. Prosecutors want to seize $279 million of his assets, including four houses, cars, airplanes, a marina and a 48-carat diamond bracelet.
He is the first chief executive prosecuted under the Sarbanes-Oxley Act, which was passed after the Enron Corp. collapse to require executives to certify the accuracy of company books. An indictment unsealed today in Birmingham, Alabama, accuses Scrushy of 11 charges, including mail fraud, wire fraud, securities fraud and making false statements.
``We will work to prove his innocence,'' said Scrushy's attorney, Donald V. Watkins. ``The indictment is just the government's way of letting us know the fight is on. We are ready to fight. Needless to say, we are going to plead not guilty on all counts.''
Scrushy turned himself into the Federal Bureau of Investigation in Birmingham at 8 a.m. local time and is scheduled for an initial court appearance at 11 a.m. He faces dozens of years in prison if convicted.
News Conference
The federal prosecutor from Birmingham, Alice Martin, is scheduled to join Justice Department officials at a news conference in Washington at 11 a.m.
Five chief financial officers who pleaded guilty told prosecutors that Scrushy ran a plot to inflate revenue and prop up company shares. A U.S. Securities and Exchange Commission civil lawsuit on March 19 accused him of inflating company earnings by $1.4 billion and assets by $800 million since 1999 to fund his lifestyle. The SEC later added insider-trading charges.
Scrushy has denied wrongdoing and branded his accusers as liars bent on reducing their potential prison terms. HealthSouth is struggling to repay more than $3 billion in debt and is restructuring to avoid a bankruptcy filing.
The 85-count indictment includes 11 different criminal charges. The indictment was filed last Wednesday and unsealed today. U.S. prosecutors obtained permission yesterday to search Scrushy's mansion in Birmingham, after U.S. District Judge Karon Bowdre signed a search warrant.
