Ex-CEO Scrushy Sues HealthSouth for $70M

BIRMINGHAM, Ala. – Former HealthSouth Corp. CEO Richard Scrushy is suing the company he founded, seeking more than $70 million for what he says was a breach of contract stemming from his March 2003 firing.

Scrushy also wants to recover legal expenses. He was fired shortly after a $2.7 billion fraud was uncovered at the rehabilitation and medical services chain.

HealthSouth board members planned to vote him off the company's the board at a Dec. 29 shareholders meeting, but he resigned Dec. 4 and formally invoked provisions requiring back payment and other benefits.

Scrushy claims in the suit filed Wednesday that his employment agreement with HealthSouth should remain in force given his June acquittal on 36 criminal counts related to the fraud. He still faces civil lawsuits by the Securities and Exchange Commission and HealthSouth investors.

According to the state court lawsuit, Scrushy's 2002 contract calls for at least $1.2 million per year in salary for his role as chairman and director, at least $1.2 million per year in bonuses, a portion of bonuses or incentive plans other top executives at HealthSouth were entitled to, stock options, employee benefits and various fringe benefits and severance pay.

A HealthSouth spokesman declined to comment Thursday on the lawsuit but said the company considers Scrushy's employment contract null and void. The company declared Scrushy's contract "null and void" in a March 19, 2003 letter, but Scrushy's lawyers say it had no power to do so.

"HealthSouth cannot simply say the contract is null and void," Scrushy attorney Art Leach told the Birmingham News in a story for Friday editions. "This lawsuit will determine whether a person or a company can simply ignore its contractual obligations."

Scrushy's lawyers maintain the agreement was good for five years and was to be extended for an additional year each Sept. 17 unless the company notified him in writing it would not be extended.