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DoJ Drops Reinstatement of Scrushy Perjury Charges

By Reuters
Published | Updated

WASHINGTON – The Justice Department (search) Wednesday said it is dropping its effort to reinstate perjury charges against HealthSouth Corp. (search) founder and former Chief Executive Richard Scrushy (search), who was acquitted last month in a criminal fraud case.

"Based on legal considerations, the United States has filed a motion with the Eleventh Circuit Court of Appeals today to drop its appeal of perjury counts which were dismissed by the lower court" against Scrushy," said a statement from Alice Martin, the U.S. Attorney for Alabama's northern district, who was the lead prosecutor at Scrushy's criminal trial.

In late June, Scrushy was found not guilty by a federal jury of criminal charges that he directed a $2.7 billion accounting fraud at the medical rehabilitation chain he founded.

U.S. District Judge Karon Bowdre, who presided over Scrushy's trial in Birmingham, in April dismissed three perjury charges from the total counts against the fired CEO, who was also charged with wire fraud and money laundering in the criminal case.

Last week, the Securities and Exchange Commission (search) asked a federal judge to allow its civil case against Scrushy to proceed, saying the criminal acquittal was no basis to dismiss the agency's charges that Scrushy had engaged in insider trading and other violations.

In March 2003 the SEC filed accounting fraud charges against HealthSouth and Scrushy. A federal judge ended up denying the SEC's civil injunction request to freeze Scrushy's assets but the company agreed last month to pay $100 million to settle with the SEC.

"We intend to pursue our case against Mr. Scrushy," SEC spokesman John Nester said.

If the judge accepts the SEC's argument, it could mark round two for Scrushy, who was found not guilty of all 36 charges he faced, including conspiracy, mail fraud, making false statements, securities and wire fraud, and money laundering.

Scrushy, who was fired from his position and removed from the board after the massive fraud came to light in March of 2003, has maintained that the scheme was carried out by former executives without his knowledge.