The Wall Street Journal

August 19, 2005 7:27 a.m. EDT

HEALTH
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Key Events in Scrushy's Case
August 19, 2005 7:27 a.m.

HealthSouth founder Richard Scrushy, who formerly served as the company's chairman and CEO, is accused in a 58-count indictment of scheming to inflate the health-care giant's earnings from 1996 to 2003 to meet Wall Street forecasts and artificially inflate HealthSouth's stock price. If convicted of all charges, Mr. Scrushy, 52 years old, faces up to 450 years in prison and more than $30 million in fines.

2002

July -- Sarbanes-Oxley law is passed by Congress and signed into law by President Bush, requiring executives of publicly traded companies to swear to the accuracy of their corporate financial statements.

August -- Mr. Scrushy and Chief Financial Officer Weston L. Smith certify the accuracy of HealthSouth's financial statements to securities regulators, as required by the new law. Mr. Smith resigns shortly thereafter, with little fanfare.

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Sept. 18 -- Securities and Exchange Commission requests a range of company documents, dating back to late 2001, for a fact-finding accounting inquiry. The request is believed to be related to the timing of a 2002 profit warning and stock sales by Mr. Scrushy.

2003

Early March -- Mr. Smith tells federal prosecutors in Alabama that senior executives had been falsifying financial results for more than five years. Mr. Scrushy is among those he accuses. Mr. Smith pleads guilty to four federal criminal charges and is released on bond.

March 17 -- Mr. Scrushy tells other HealthSouth executives about what the SEC had asked him in a question-and-answer session, and tries to influence another person who was going to testify to the SEC, prosecutors later allege.

March 18 -- Federal agents raid HealthSouth's headquarters.

March 19 -- The SEC files a civil case against HealthSouth and Mr. Scrushy, accusing them of "massive accounting fraud." The case alleges that they had overstated earnings by a total of $1.4 billion since 1999.

March 31 -- HealthSouth's new management fires Mr. Scrushy as CEO, though he remains a member of the company's board.

June 17 -- Mr. Scrushy sues the HealthSouth board, alleging it isn't providing him with financial information and is excluding him from meetings.

Nov. 4 -- Mr. Scrushy pleads not guilty to 85 federal criminal charges of conspiracy, securities fraud, wire fraud, mail fraud, making false statements, money laundering and providing false certifications to securities regulators in violation of Sarbanes-Oxley. He is the first major executive charged for violations of the corporate-crime law.

2004

March -- Mr. Scrushy and his wife launch a religion-tinged local television show called "Viewpoints," in which they interview Birmingham, Ala., personalities and others in the public eye. The show is billed as a "a place where news stories can be discussed truthfully and accurately, free from the bias of mainstream media."

April -- Mr. Scrushy's lawyers challenge Sarbanes-Oxley, arguing that it is "so vague as to defy comprehension." U.S. District Judge Karon O. Bowdre issues a gag order.

May 3 -- HealthSouth names industry veteran Jay Grinney, formerly of HCA, as its new CEO.

June -- Michael D. Martin, who served as HealthSouth's CFO from 1997 to early 2000, is sentenced to six months of home detention and ordered to forfeit $2.4 million after pleading guilty to fraud and agreeing to testify against Mr. Scrushy. Another former, CFO, Malcolm "Tadd" McVay, is sentenced to six months of home detention and a $10,000 fine, and ordered to forfeit $50,000. They are among five former HealthSouth CFOs -- and 15 former executives -- who have pleaded guilty in the accounting-fraud case.

Sept. 29 -- Grand jury consolidates original 85 charges against Mr. Scrushy and adds three charges of perjury and one of obstruction of justice, for a new total of 58 charges.

Nov. 24 -- Judge Bowdre upholds Sarbanes-Oxley, turning back Mr. Scrushy's challenge, in a major setback for the executive's case.

Dec. 22 -- The SEC notifies UBS AG that it is considering steps against the investment bank for possible violations of securities laws in its business with HealthSouth.

Dec. 30 -- HealthSouth agrees to pay the U.S. government $325 million to settle numerous allegations that the company defrauded Medicare and other government health programs, separate from the accounting case.

2005

Jan. 5 -- Jury selection begins in Scrushy trial.

Jan. 7 -- Scrushy asks HealthSouth to turn over a mountain of credit-card records, personnel files and other internal documents prior to the start of his trial.

Jan. 7 -- Scrushy asks a federal judge to delay by one week the start of opening arguments in his trial on fraud charges.

Source: The Wall Street Journal

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