Richard Scrushy, the former HealthSouth CEO found liable in 2009 for accounting fraud in a civil case involving the company, says his past legal troubles offer lessons for entrepreneurs.
Scrushy spoke Wednesday at the Westin Charlotte for a Pfeiffer University conference on fraud and forensic investigation. He said his experience as CEO of HealthSouth illustrates how things can go wrong in a company when those at the top think they have everything under control.
He said the fraud at HealthSouth happened after he decided to be less involved in the day-to-day operations.
“Things went wrong for me at HealthSouth when I bought the beach house and the boat that I’d always dreamed of and moved to the beach,” he said.
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He now advises CEOs to “stay in the driver’s seat. Drive as hard as you until the day you leave.”
Scrushy was acquitted in 2005 of criminal charges that he was involved in a roughly $2 billion accounting scheme at the Birmingham, Ala.-based medical rehabilitation company he founded in 1984.
Later, in a 2009 civil judgment, an Alabama state judge found Scrushy liable for fraud in a related case and ordered him to pay HealthSouth shareholders about $2.8 billion. Scrushy still takes issue that it was a non-jury trail that he was not allowed to attend.
In an unrelated case in 2006, Scrushy and former Alabama Gov. Don Siegelman were convicted on federal bribery charges. Prosecutors alleged Scrushy arranged for $500,000 in donations to Siegelman’s campaign for a state lottery in exchange for a hospital regulatory board seat. Siegelman is appealing the conviction.
Scrushy, 61, served a roughly five-year prison sentence after being convicted. He was released in 2012. He maintains that he did not know about the fraud at HealthSouth at the time it took place and did not participate in it.
Other company officials knew about the fraud but kept it hidden from him, he claims. Although the company had a fraud hotline, no one reported it, he said.
Scrushy, who said he lives in Houston, remains unable to serve as an officer or director of a public company as part of a settlement with the Securities and Exchange Commission. That five-year ban has passed, but he said he needs a judge’s approval to lift it, which he plans to seek in a year or two.
Scrushy used the heads of big banks, which have paid billions of dollars to settle claims of alleged misdeeds that contributed to the financial crisis, as examples of cases where top company officials can be blind to wrongdoing under their noses.
“The CEO is just a human,” he said. “The mind can only absorb so much.” Staff researcher Maria David contributed.