HealthSouth Countersues against Scrushy's "Pillage"

Yiddish has a word which American English desperately needs – “chutzpah.” Inevitably, it is defined by the story of the man who is charged with the murder of his parents, and he throws himself on the mercy of the court on the grounds that he is an orphan. In British English, “cheek” covers it nicely. That is the quality exhibited by HealthSouth’s ousted CEO Richard Scrushy and his $100 million claim against the company he almost destroyed. The company announced recently it was countersuing, claiming the former CEO was trying to "pillage" the firm.

Mr. Scrushy was charged with loads of crimes related to the massive overstatement of earnings at HealthSouth. A jury acquitted him earlier this year. His defense was that he was duped by his aides and his middle managers. Or if one prefers plain speaking, “I ain’t guilty just real gullible.” Given the choice between crooked and stupid, one prefers crooked, but chacun à son gout. Nonetheless, he feels he was unfairly treated by HealthSouth and is suing for $100 million in compensation.

HealthSouth, a shell of its former self, has countersued saying that he isn’t due a penny. The legality of the case is a matter for the courts, but the justice of the case clearly lies with HealthSouth’s shareholders (except Mr. Scrushy, who is a big shareholder to this day). Mr. Scrushy was removed as CEO after the government filed suit against him and others at the company for what prosecutors called a $2.7 billion fraud.

Now, Mr. Scrushy has been found not guilty of criminal activity, and that’s the end of that. However, his defense is essentially incompetence as a corporate officer. No CEO of any corporation, let alone a firm listed on the New York Stock Exchange (as HealthSouth them was; it is currently what is known as on the “pink sheets,” not even over-the-counter), can realistically expect any pay for incompetent work any more than a janitor who doesn’t clean the floors should. He had a duty to protect the shareholders from the predations of those who committed the fraud, and he failed miserably.

The legal cases may get to the trial and jury deliberations stage, which will prove entertaining if nothing else, largely because the two sides see no reason to talk. HealthSouth said in a press release earlier this year, “Under no circumstances would we reach out to Scrushy, who by his own defense has claimed a complete lack of knowledge as to the financial workings of the Company during his tenure as CEO and Chairman, despite his claims of possessing valuable expertise.” A complete lack of knowledge shouldn’t be worth $100 million.


© Copyright 2005 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.
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