Judge Says SEC Can’t Freeze Scrushy’s Assets

Richard M. Scrushy, HealthSouth Corp.’s fired chief executive, may use his assets for any purpose, a U.S. judge ruled Wednesday, denying a government motion to freeze his money and property pending his civil trial on allegations of accounting fraud.

Scrushy, accused of inflating earnings by $1.4 billion since 1999 by the Securities and Exchange Commission, had asked for at least $49 million to be unfrozen, arguing that he had made that amount before he founded HealthSouth, the largest U.S. operator of rehabilitation hospitals, in 1984. Scrushy has about $150 million in assets, the SEC said in court papers last week.

“This court found that the SEC had failed to present sufficient evidence to warrant the issuance of a freeze of defendant Scrushy’s assets,” the ruling by U.S. District Judge Inge P. Johnson said.

Scrushy will have millions at his disposal to defend the SEC fraud suit and a criminal probe by federal prosecutors. The SEC had argued that Scrushy’s assets should be frozen so shareholders would have a chance to sue him for stock losses caused by alleged fraud, which other HealthSouth executives have blamed on the former CEO.

SEC attorney William Hicks would not comment.