SEC Urges Judge to Let Scrushy Case Proceed

HealthSouth Corp. founder Richard Scrushy should face civil-fraud charges for his role in “one of the largest financial frauds in U.S. history,” the Securities and Exchange Commission said Thursday in urging a judge to let the case proceed.

The SEC’s filing in federal court in Birmingham, Ala., called Scrushy “desperate” for asking last month that the lawsuit be dismissed because of the agency’s collaboration with the Justice Department. Any guidance given to the SEC was within acceptable rules, the agency said.

“Scrushy wants this court to create new law, from scratch, that would obligate the SEC to keep suspects apprised of developments in parallel DOJ investigations,” the SEC said. “Scrushy wants the SEC to become the con man’s ear in the Justice Department.”

Scrushy is accused by the SEC of lying to investors and signing false financial reports. The lawsuit is one of several stemming from fraud that happened under Scrushy’s watch from 1996 to 2002 at HealthSouth, the largest U.S. operator of rehabilitation medicine services. Scrushy, who is fighting to regain control of the company he started in 1984, was acquitted June 28 of criminal charges.

Arthur Leach, Scrushy’s lawyer, said he hadn’t yet read the SEC filing and couldn’t comment.