Judge Rejects Scrushy Request

A federal judge on Thursday rejected a request by HealthSouth Corp. founder Richard Scrushy to throw out a Securities and Exchange Commission lawsuit and instead told the agency to refile by Sept. 7.

U.S. District Judge Inge Johnson issued the order after a closed-door conference in Birmingham, Ala. The SEC sued Scrushy in March 2003 after the discovery of a $2.7-billion accounting fraud at HealthSouth Corp., a major operator of rehabilitation hospitals.

The case was put on hold when Scrushy was indicted. A jury acquitted Scrushy in June of 36 counts of fraud and money laundering after a four-month trial. The SEC has maintained that the civil suit should not be dismissed because the burden of proof is lighter than in a criminal case.

Scrushy’s lawyers, Arthur Leach and Kile Turner, didn’t return phone calls for comment. They have accused the SEC of trying to humiliate their client. The SEC didn’t immediately comment.

The SEC suit accuses Scrushy of lying to investors and falsifying records. Scrushy has until Sept. 30 to file a motion asking Johnson to dismiss the case.