Richard M. Scrushy, the jailed founder and former chief executive of HealthSouth Corp. (NYSE: HLS), believes a ruling against him last week by the Alabama Supreme Court will have a chilling impact on business in his home state.
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“If this ruling stands it will hurt Alabama business for many years to come,” said Scrushy in e-mails sent exclusively to a FOX Business Network producer.
The state high court last Friday ruled against Scrushy’s appeal of a $2.88 billion civil case filed by HealthSouth shareholders, who accused Scrushy of masterminding a massive accounting fraud at the Birmingham, Ala.-based healthcare provider.
Scrushy was ultimately held liable for those shareholders’ losses.
Scrushy, who was sent to prison in 2007 on criminal charges for allegedly bribing former Alabama governor Don Siegelman, has always maintained his innocence.
The state Supreme Court ruled that in his appeal of the civil case Scrushy had “demonstrated no error in any aspect of the trial court’s judgment.”
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But Scrushy believes the ruling will have unintended consequences harmful to the state’s business environment: “They (the judges) may not understand the ramifications of such a ruling today but they have opened a door that will cause a lot of pain for business leaders and company founders forever in Alabama,” he wrote a day after the court’s ruling.
“Any CEO worth his salt wouldn’t pitch a pup tent in a plaintiff attorney controlled state,” Scrushy noted.
The former CEO added, “It is this type of ruling that creates the opportunity for plaintiff attorneys to feed on businesses, CEOs and their officers and directors.”
Scrushy said his attorneys feel the ruling “was very wrong and contrary to Alabama law” and said they are “looking into our next remedy.” It’s uncertain what that remedy might be.
A Scrushy attorney did not immediately return a call seeking comment.
One of Scrushy’s arguments in his appeal was that he and the rest of HealthSouth’s board of directors were protected by something called the business-judgment rule, which essentially prevents certain company officials from being held financially liable for decisions made in good faith related to the company on whose board they are serving.
But the high court ruled that for various reasons the business-judgment rule did not apply to Scrushy’s case.
John Haley, an attorney representing the stockholders, told Bloomberg News that Scrushy’s assets would only cover about $100 million of the ruling. He said authorities will be keeping an eye on Scrushy once he’s out of jail to determine if he hid additional money away before going to prison.
Scrushy is serving six years and 10 months on a federal bribery conviction for allegedly making campaign contributions to Siegelman in return for a seat on an influential statewide healthcare regulatory board.
Scrushy is also appealing that case, using as his foundation a recent U.S. Supreme Court ruling in the case of jailed former Enron CEO Jeffrey Skilling.
In the wake of the accounting scandal, HealthCareSouth teetered on the brink of bankruptcy but has since recovered under new leadership.
Before going to jail, Scrushy was an influential and high-profile player in Alabama corporate and political circles and one of the highest paid CEOs in the U.S.