The lawsuit arose out of the multi-billion dollar accounting fraud that took place at HealthSouth during Scrushy’s tenure between July 1996 and March 2003. Scrushy previously had been acquitted of federal criminal charges relating to the fraud. However, following a two-week bench trial, Jefferson County, Alabama Circuit Court Judge Allwin Horn found that Scrushy had knowledge of the fraud, participated in the fraud, and directed the fraud. Judge Horn also found that even if Scrushy had not known of the fraud, he consciously disregarded his duties as the CEO of HealthSouth in failing to prevent the fraud. On either basis, the court said, Scrushy breached his fiduciary duties to HealthSouth and its shareholders. The substantial damage award consisted entirely of compensatory damages. In addition to the award of damages, the court also voided Scrushy’s employment and retirement contracts with HealthSouth.
The lawsuit against Scrushy was one of several legal proceedings that arose out of the disclosure of the accounting scandal at HealthSouth. Bradley Arant Boult Cummings lawyers David Hymer, Anne Marie Seibel and John Mark Goodman handled the case against Scrushy on behalf of HealthSouth and worked with lawyers representing HealthSouth shareholders.