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Ex-HealthSouth exec loses bid to escape ban

A judge declared on Wednesday that 'the temptation of personal enrichment is too much for' former HealthSouth Corp. CEO Richard Scrushy to bear.

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By Reuters
Wednesday, Aug. 28, 2013, 8:57 p.m.

A federal judge rejected former HealthSouth Corp. Chief Executive Richard Scrushy's bid to lift a ban on his serving as an officer or director of a public company, which was part of his settlement of the Securities and Exchange Commission charges that he masterminded a $2.6 billion accounting fraud.

Scrushy, 61, who last year finished nearly five years in prison in an unrelated bribery case, has contended that the ban was impeding his ability to return to the healthcare industry, where he built Birmingham, Ala.-based HealthSouth into a large medical rehabilitation company.

However, U.S. District Judge Inge Prytz Johnson in Montgomery, Ala., concluded that Scrushy “benefited greatly from the fraud, whether he knew about it or not,” and that there would be a “great likelihood” of misconduct if the ban were lifted.

“While the court has every confidence in Scrushy that he can once again create an empire out of nothing, the court also remains convinced that the temptation of personal enrichment is too much for him to bear,” she wrote in a decision on Tuesday.

The judge added that the ban does not prevent Scrushy from starting a new company or raising capital, but agreed with the SEC that he should not raise that capital in public offerings.

HealthSouth, like the SEC, also opposed lifting the ban on Scrushy, who was released from federal custody in July 2012.

“Life goes on. That's really all I can say. We're disappointed,” Scrushy said. “I'm meeting with my attorneys and we're reviewing what our options are.”

The SEC and HealthSouth did not respond to requests for comment.

Scrushy has consistently denied doing anything wrong at HealthSouth and blamed subordinates for its problems. His prison term stemmed from a 2006 conviction for paying money to former Alabama Governor Don Siegelman's campaign for a state lottery in exchange for a seat on a state hospital regulatory board.

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