HealthSouth shareholders ask judge to freeze ex-CEO’s assets during appeal of $2.9B judgment

Lawyers seek freeze on HealthSouth ex-CEO’s assets

MONTGOMERY, Ala. — Attorneys for HealthSouth shareholders asked an Alabama judge Friday to freeze the assets of former HealthSouth CEO Richard Scrushy so they can begin collecting a nearly $2.9 billion judgment against him.

An attorney for the shareholders, Bruce McKee, said they don’t expect to get the full judgment but hope eventually to collect as much as $100 million from the imprisoned HealthSouth founder.

McKee said the motion seeks to stop Scrushy from hiding assets while the case is being appealed.

“We want to get started today. Every day gives him opportunity to do something else with his assets and makes them harder for us to find,” McKee said.

Scrushy’s attorneys, meanwhile, have said they plan to appeal the judgment by Circuit Judge Allwin E. Horn to the Alabama Supreme Court.

Horn, who heard the case in Birmingham without a jury, ruled in favor of HealthSouth and shareholders who filed a lawsuit claiming Scrushy was involved in years of overstating the company’s earnings and assets to make it appear the company was meeting Wall Street expectations.

Horn wrote in his ruling that Scrushy “knew of and participated in” the faked reports filed with regulators from 1996 to 2002. Scrushy testified he knew nothing of the fraud.

State law gives defendants in civil cases 30 days to appeal after a verdict and normally suspends collection efforts during that time. But the shareholders’ Friday motion asks Horn to freeze Scrushy’s assets and allow attorneys to begin collection efforts immediately.

Horn has scheduled a hearing for Tuesday on the request to freeze Scrushy’s assets.

Scrushy was acquitted in 2005 of criminal charges in stemming from the HealthSouth fraud, but 15 former company executives pleaded guilty and a 16th was convicted. Some testified in the civil case, claiming Scrushy knew that financial reports were faked.

Scrushy is currently serving an almost seven-year sentence in a federal prison in Texas for a conviction in an unrelated bribery case.

Scrushy’s attorney, Jack McNamee, said Friday that Scrushy would make no effort to conceal his assets.

“He’s not going to hide anything,” McNamee said.

Montgomery plaintiff’s attorney Jere Beasley, whose firm has won numerous multimillion-dollar awards in civil cases, said in these types of cases, the judge gives attorneys time to discover the defendant’s assets.

“Ultimately, whatever he has, he has to reveal,” Beasley said. He said the discovery process often does not begin until the defendant has exhausted his appeals, which could take a year or longer.

But McKee said he hopes that process can begin sooner.

Before Scrushy’s 2005 trial in Birmingham, federal prosecutors estimated he was worth $275 million. Since then, Scrushy has defended himself in several criminal and civil actions, possibly spending several million dollars on legal fees, McKee said.

“That still leaves a whole lot to be accounted for,” he said.


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