HealthSouth Sues Scrushy for $76M

HealthSouth Corp. (HLSH), trying to recover from an accounting scandal, on Wednesday sued founder Richard Scrushy for more than $76 million, and rejected a breach of contract lawsuit that he had filed against it.

HealthSouth said Scrushy "systematically plundered" the company by directing a multibillion dollar accounting fraud to inflate the company's financial health and enrich himself, the company said in papers filed with the Jefferson County Circuit Court in Alabama.

HealthSouth sued for back salary, bonuses and stock awards, and said it would seek millions of dollars in punitive damages. It said Scrushy's attempt to recover more than $100 million for compensation, severance, other benefits and legal fees marks "the latest in his ongoing efforts to pillage HealthSouth."

Scrushy, who founded the Birmingham, Alabama-based operator of rehabilitation hospitals and surgical centers, was ousted as HealthSouth's chairman and chief executive in 2003.

The government accused him of directing a $2.7 billion accounting fraud at HealthSouth between 1996 and 2002, but a federal jury in June found him innocent of criminal charges.

Scrushy still faces U.S. Securities and Exchange Commission civil charges. A trial is not set to begin until April 2007.

Scrushy announced his resignation from HealthSouth's board this month, saying the company had denied him the powers and responsibilities that directors typically hold. He also repeated his charge that HealthSouth had no right to fire him under his employment agreement.

Earlier this month, HealthSouth mapped out a three-phase strategy designed to improve operations and reduce debt over four years.