BIRMINGHAM, Ala. — Former HealthSouth Corp. head Richard Scrushy pleaded not guilty Tuesday to 85 counts alleging he masterminded a fraud scheme that allowed him to pocket more than a quarter-billion dollars from rigged books at the rehabilitation services giant.
An indictment, dated Oct. 29 and released Tuesday, accuses Scrushy of a range of criminal violations, including false certification of corporate statements — a charge the FBI says makes Scrushy the nation's first CEO accused under a new federal law.
The charges carry a maximum penalty of 650 years in prison and $36 million in fines.
"Instead of telling the public the truth, Scrushy and his accomplices lied," Assistant Attorney General Christopher Wray said at a news conference in Washington.
The case against HealthSouth has been viewed as an important test for the federal Sarbanes-Oxley Act, passed last year in reaction to a wave of corporate accounting scandals that engulfed Enron, WorldCom, Global Crossing and Adelphia Communications.
That law requires chief executive and chief financial officers to certify their company's financial statements and holds them criminally liable for inaccuracies.
Scrushy, 51, surrendered to federal marshals and appeared before U.S. Magistrate Judge T. Michael Putnam. Prosecutors asked Putnam to set bail at $10 million and require electronic monitoring to make sure Scrushy does not flee the country. Scrushy's lawyers asked for lesser bail and no monitoring.
"At least now we can get our day in court," defense attorney Tom Sjoblom said before the hearing.
Sjoblom did not rule out a possible plea agreement. "We are leaving all doors open," he said.
The indictment alleges Scrushy and his accomplices reported $2.7 billion in fictitious income. Because Scrushy's compensation was tied in part to HealthSouth's performance, the scheme allowed him to pocket $267 million in salary, bonuses and stock options, Wray said.
To hide the fraud, Scrushy ordered HealthSouth's employees to falsify financial documents, Wray said. He enforced discipline among the members of the conspiracy "through threats, intimidation and payoffs," Wray said, and also eavesdropped on employees' telephone calls and e-mail.
The indictment seeks forfeiture of more than $278 million in Scrushy's allegedly ill-gotten gains, including a 92-foot yacht; luxury cars such as a Rolls Royce Corniche and a Lamborghini; a nearly 22-carat diamond and platinum ring; property in Alabama and Florida; aircraft and other boats; and paintings by Picasso, Chagall, Renoir and Miro.
Fourteen former HealthSouth employees, including all five of the company's former chief financial officers, already have pleaded guilty to criminal fraud charges since the Justice Department investigation began in March. Another person has agreed to plead guilty.
A federal court official in Birmingham, speaking on condition of anonymity, said a grand jury heard evidence last week from witnesses who included some of the former HealthSouth executives who have pleaded guilty.
At a recent congressional hearing, several current and former HealthSouth employees said Scrushy knew about efforts to massage company accounts to meet earnings forecasts.
HealthSouth and Scrushy previously had been charged with fraud in a civil lawsuit by the Securities and Exchange Commission.
Birmingham-based HealthSouth, founded by Scrushy in 1984, is the largest U.S. provider of outpatient surgery, diagnostic imaging and rehabilitation services. It has some 50,000 employees and about 1,700 sites in all 50 states and overseas.
Scrushy is well known in the region for his philanthropy. In all, he and HealthSouth have raised more than $100 million for charities. Jefferson State Community College, where Scrushy attended school, has an entire campus named for him.
Associated Press writer Curt Anderson in Washington, D.C., contributed to this story.