Richard M. Scrushy: Fraud, Acquittal, and Bribery Conviction

Richard Scrushy is the Alabama healthcare executive who founded HealthSouth Corporation, was acquitted in 2005 of orchestrating a $2.7 billion accounting fraud, and was convicted the following year in a separate case of bribing former Alabama Governor Don Siegelman. He served roughly five years in federal prison, faced billions of dollars in civil judgments, and in 2025 launched a public campaign seeking a presidential pardon.¹²

From Respiratory Therapist to Healthcare CEO

Scrushy was born in 1952 in Selma, Alabama. He dropped out of high school as a teenager, married, had a child, and worked as a gas station attendant and a bricklayer before returning to school to train as a respiratory therapist. He later earned a bachelor’s degree from the University of Alabama at Birmingham.³

In February 1984, after working in management at a Texas hospital administration company, Scrushy incorporated the business that would become HealthSouth. It went public on the NASDAQ in 1986 and moved to the New York Stock Exchange in 1988. Growth came through a rapid string of acquisitions, and at its peak HealthSouth operated more than 1,800 locations in all 50 states and four countries, employed over 50,000 people, and generated about $4.4 billion in annual revenue. It joined the S&P 500 in January 1999.⁴¹

Scrushy was paid accordingly. Between 1996 and 2002, he received approximately $267 million in total compensation, including $7.5 million in base salary, more than $53 million in bonuses, and stock options valued at over $206 million at the time they were exercised.¹

The $2.7 Billion HealthSouth Accounting Fraud

According to federal prosecutors and the Securities and Exchange Commission, HealthSouth had been inflating its earnings almost from the moment it went public in 1986. The government estimated the fraud produced approximately $2.7 billion in fictitious income between 1996 and 2003. By the third quarter of 2002, assets were overstated by at least $800 million.⁵

The SEC described the mechanics in its complaint. Each quarter, senior officers presented Scrushy with actual earnings alongside analyst forecasts. When the real numbers fell short, Scrushy would tell them to “fix it.” Senior accounting personnel then gathered for what they called internally “family meetings,” where they entered false figures, usually by reducing a revenue contra-account or decreasing expenses, with matching fictitious increases to assets. On August 14, 2002, Scrushy personally certified that HealthSouth’s 2001 annual report contained no “untrue statement of material fact,” even though earnings in that filing were overstated by at least 4,700 percent, according to the SEC.⁵

The SEC sued in March 2003. HealthSouth’s board fired Scrushy on March 31, 2003. By November of that year, 16 former HealthSouth employees had been charged and 14 had pleaded guilty, including all five of the company’s former chief financial officers: Aaron Beam, Michael Martin, William Owens, Weston Smith, and Malcolm McVay. All admitted conspiring to inflate earnings and falsify financial reports.⁶⁴

The 2005 Acquittal That Stunned Observers

On November 4, 2003, a federal grand jury returned an 85-count indictment charging Scrushy with conspiracy, mail fraud, wire fraud, securities fraud, false statements, money laundering, and false certifications under the then-new Sarbanes-Oxley Act. He was the first CEO ever charged under Sarbanes-Oxley’s requirement that chief executives personally certify the accuracy of their company’s financial filings. The theoretical maximum sentence, had he been convicted on every count, was 650 years.¹

The trial in Birmingham lasted four months. Prosecutors called 15 former HealthSouth executives, including all five ex-CFOs, to testify against Scrushy. They also played recordings that CFO William Owens had made in March 2003 while wearing a hidden FBI microphone sewn into his necktie. On the tapes, Scrushy could be heard saying that if the financial problems became public “everybody goes down,” and reminding Owens that he had eight children who “need their daddy.”⁷⁸

Scrushy’s defense conceded that a massive fraud had occurred, but placed the blame on what his lawyers called “rats in the accounting department” who had concealed everything from the CEO. The cooperating witnesses, the defense argued, were liars who had cut deals to reduce their own prison time. During the trial, Scrushy preached at Birmingham churches, hosted a local cable television show about his Christian faith, and donated more than $20 million to area causes.⁹

On June 28, 2005, after three weeks of deliberation, the jury acquitted Scrushy on all 36 remaining counts. The judge had earlier dismissed three perjury counts and one obstruction count. Lead prosecutor Alice Martin said the government believed it had presented “a very powerful case.”⁹

The Siegelman Bribery Conviction

Scrushy’s acquittal did not last. In a separate federal prosecution in Montgomery, Alabama, he was tried alongside former Governor Don Siegelman. The case centered on a $500,000 payment Scrushy directed to a Siegelman-backed lottery-initiative campaign, allegedly in exchange for a seat on the state Certificate of Need Board, which regulated HealthSouth’s industry.²

Nick Bailey, one of Siegelman’s closest aides, was the key prosecution witness. Bailey testified that when Scrushy delivered a $250,000 check from Integrated Health Services, Siegelman showed it to him and said Scrushy was “halfway there.” Asked what Scrushy wanted in return, Siegelman replied: “The CON Board.”¹⁰

On June 29, 2006, the jury convicted Scrushy on all six counts he faced: one count of bribery, one count of conspiracy to commit honest-services mail fraud, and four counts of honest-services mail fraud. Siegelman was convicted on seven of the 33 counts against him.²

Sentence and Time Served

On June 28, 2007, U.S. District Judge Mark Fuller sentenced Scrushy to 82 months in prison, a $150,000 fine, $267,000 in restitution, and three years of supervised release.¹¹

Scrushy reported to federal prison in July 2007. He spent three weeks in Atlanta before being transferred, eventually, to a minimum-security facility in Beaumont, Texas.¹²¹³¹⁴¹⁵

The U.S. Supreme Court declined to hear Siegelman’s related appeals in both 2012 and 2016.¹⁶¹⁷

Civil Judgments and Lost Fortune

Even after his criminal acquittal on the accounting fraud, Scrushy did not escape financial consequences from it. He settled the SEC’s civil case on April 23, 2007, agreeing to pay $81 million: $77.5 million in disgorgement and $3.5 million in civil penalties. He was permanently barred from serving as an officer or director of any public company. He neither admitted nor denied the allegations.¹⁸ Under the settlement, he was allowed to keep his home.¹⁹

A far larger judgment landed in Alabama state court. In a shareholder derivative suit in Jefferson County, Judge Allwin E. Horn ruled on June 18, 2009, that Scrushy was liable for approximately $2.8 billion, finding him complicit in the fraudulent earnings and in self-dealing real estate transactions with company funds.²⁰

At the time of his 2003 indictment, the government had sought forfeiture of more than $278 million in assets, including homes in Alabama and Palm Beach, a 92-foot yacht named Chez Soirée, two Cessna aircraft, a Lamborghini Murciélago, a Rolls-Royce Corniche, and artwork by Picasso, Chagall, and Renoir.¹

In December 2025, Scrushy tried to reopen the state fraud case by petitioning to disqualify the law firm Bradley Arant Boult Cummings, arguing he had discovered new evidence that the firm had previously represented both him and HealthSouth. Jefferson County Circuit Judge Elisabeth French denied the request, ruling that Scrushy, as a judgment debtor, lacked standing for post-judgment discovery against the firm and that granting the request would “invite harassment” and increase costs.²¹

The Pardon Campaign

Since his release in 2012, Scrushy has said the felony conviction left a “black cloud” preventing him from working in any professional capacity. He describes himself as having an ordained ministry and says he has completed more than 600 hours of volunteer work helping prison inmates.²²

In March 2025, Scrushy held a public news conference with attorney Tommy Gallion to announce a campaign to overturn the bribery conviction. He alleged that federal prosecutors in the Middle District of Alabama had withheld exculpatory evidence, including FBI interview reports involving witness Nick Bailey. He claimed Bailey met with the government more than 70 times and that notes from 24 of those sessions involving him and Siegelman were never disclosed to the defense. He also said a trial witness was prepared to recant testimony.²²²³

Scrushy asked U.S. Attorney General Pam Bondi to investigate the prosecution and asked presidential pardon adviser Alice Marie Johnson to review his case. He said Siegelman supported the effort. As of March 2025, his legal team said a motion to reverse the conviction had been drafted but not filed, and no timeline had been set. Scrushy did not present the alleged evidence at his press conference, and news outlets reported that his claims had not been independently verified.²⁴²³

1
U.S. Department of Justice. Former HealthSouth CEO Richard Scrushy Indicted
2
U.S. Department of Justice. Former Alabama Governor and Former HealthSouth CEO Convicted
3
Encyclopedia.com. Scrushy, Richard M. 1952
4
EBSCO. HealthSouth Scandal
5
U.S. Securities and Exchange Commission. SEC v. HealthSouth Corporation and Richard M. Scrushy
6
U.S. Department of Justice. Former HealthSouth Executives Sentenced
7
The Washington Post. Ex-HealthSouth Officer Says He Was Wired by FBI
8
The Seattle Times. Scrushy Tapes Played in HealthSouth Trial
9
PBS NewsHour. Ex-HealthSouth CEO Richard Scrushy Found Not Guilty on All 36 Charges
10
U.S. Department of Justice. Scrushy v. United States, Opposition
11
U.S. Department of Justice. Former Alabama Governor and Former HealthSouth CEO Sentenced
12
New Haven Register. Former HealthSouth CEO Scrushy Arrives at Texas Prison
13
U.S. Court of Appeals for the Eleventh Circuit. United States v. Siegelman
14
AL.com. Former HealthSouth CEO Moved From Federal Prison to Halfway House
15
WBRC. Richard Scrushy’s Prison Sentence Ends
16
The Washington Post. Supreme Court Turns Down Appeal From Siegelman
17
Montgomery Advertiser. U.S. Supreme Court Won’t Review Siegelman Appeal
18
U.S. Securities and Exchange Commission. SEC v. Richard M. Scrushy, Final Judgment
19
Law360. Scrushy Keeps Home in $81M SEC Settlement
20
PNHP. Scrushy and the Medical System
21
AL.com. Ex-HealthSouth CEO Richard Scrushy Loses Appeal to Reopen $3B Fraud Case
22
WVTM 13. Richard Scrushy Claims Wrongful Conviction
23
ABC 33/40. Richard Scrushy Seeks Federal Pardon in 2006 Conviction
24
1819 News. Richard Scrushy Asks Trump for Pardon of 2006 Bribery Conviction