Richard M. Scrushy

Richard M. Scrushy was born in August 1952 in Selma, Alabama. The son of a middle-class family, his 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 twelve 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.

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 the Wallace State campus in Dothan. There, 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 three children.

Following his release from federal custody in 2012, Scrushy returned to business life as a consultant, advisor and speaker, focusing on entrepreneurship, leadership and corporate governance. He has written and promoted books including When Building a Billion Dollar Company, which discusses entrepreneurial growth and risk management, and It Should Not Happen in America: From Selma to Wall Street—A Journey of Fire and Faith, a memoir that describes his upbringing, business career and views on the legal proceedings that affected him and HealthSouth.

Scrushy has continued to speak at conferences and events on topics such as small-business development, financial controls and lessons from corporate crises, and he has launched media projects including an entrepreneurial podcast and online content aimed at early-stage business owners. Public profiles describe him as working with small businesses and advisory clients in Texas and other states while remaining connected to Alabama through family, church and civic engagements.

In the late 1970s, following his time teaching at UAB and Wallace State, 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 part of a $100 million 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 Corporation in 1984. Two years after its founding, HealthSouth became a publicly traded company. 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. Scrushy even allowed Jordan to stay free during the summer and fall of 1994 in a secondary house he owned in Greystone Golf and Country Club when Jordan played for the Birmingham Barons.

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 U.S.

Although HealthSouth grew tremendously throughout the 1990s, becoming the largest comprehensive rehabilitative services company in the U.S., 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 Medicare of illegally adding costs to reports for outpatient physical therapy and inpatient rehabilitation admissions at the corporation's Bakersfield Rehabilitation Hospital. 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 and Blue Shield of Alabama determined that HealthSouth had "improperly billed Medicare for therapy by students, interns 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 (SEC) 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".

Birmingham criminal trial

On February 6, 2003, the Federal Bureau of Investigation (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 civil charges were brought against Scrushy by the SEC. Scrushy became the first CEO to be tried under the Sarbanes–Oxley Act when he was indicted by the U.S. Department of Justice in United States of America v. Richard M. Scrushy on November 4, 2003.

Scrushy's initial charges included 85 counts of conspiracy, money laundering, securities fraud, and mail fraud, but he was ultimately indicted with just 36 counts. In the indictment, Scrushy was accused of using intimidation, threats, and cash payments to coerce top HealthSouth 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, prosecutors were unable to produce any material evidence that he 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 citywide 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 eleven of the eighteen jurors, were African American. Following more than a month of deliberations, Scrushy was acquitted of all charges on June 28, 2005.