Ousted HealthSouth chief invokes the Fifth

Richard Scrushy's silence irks lawmakers, especially because he had appeared on a TV news show a few days before.

By Katherine Vogt, amednews staff. Nov. 3, 2003.

Former HealthSouth chief executive and founder Richard M. Scrushy refused to answer questions from congressional investigators probing his role in a massive accounting scandal at the outpatient services giant.

Lawmakers called Scrushy to testify Oct. 16 before the House Energy and Commerce subcommittee on oversight and investigations, which is investigating the financial troubles of HealthSouth. But on the advice of his attorneys, Scrushy declined to answer questions, instead repeatedly invoking the Fifth Amendment, which protects against self-incrimination.

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Donald Watkins, one of the attorneys representing Scrushy, did not return phone messages seeking further explanation.

But according to published reports, Watkins dismissed the hearing as an event aimed at generating publicity.

The anticipated move drew criticism from lawmakers. They questioned why the former CEO talked about the scandal in an interview that was broadcast on the CBS television show "60 Minutes" Oct. 12 but refused to answer the same questions from lawmakers.

"While I respect the rights afforded to him under the Constitution to refuse to incriminate himself, I question why he felt it appropriate to tell his story to a television journalist but is unwilling to tell his story to members of Congress under oath," said Rep. Billy Tauzin, (R, La.), chair of the energy and commerce committee, in a written statement.

Federal investigators have accused HealthSouth of overstating earnings by nearly $2.5 billion to meet Wall Street expectations. Since the allegations of fraud were announced in March, at least 15 executives have agreed to plead guilty to criminal charges, including all five former chief financial officers. HealthSouth founder Scrushy was fired as CEO, although he still has his board seat, and he has not been charged with a crime.

In his interview with "60 Minutes," Scrushy was asked to respond to allegations that he inflated earnings and betrayed stockholders and employees. "There's no evidence of that," he said, "and many of the, what the people have said is not true."

Scrushy said his financial officers had their own motives for overstating earnings. "Promotions, bonuses, stock, stock options, an opportunity to make a lot of money. ... There's a lot of reasons for what they did.

"There was no motive for me to destroy a ... company that I built, a company that I loved, my fourth child."

But investigators have asserted that HealthSouth's numbers were inflated at Scrushy's urging, and former executives have alleged that Scrushy participated in the fraud. In a written statement prepared for the hearing, Rep. James Greenwood, (R, Pa.), said, "Every CFO as well as other senior officers of HealthSouth have stated publicly under oath that Mr. Scrushy directed them to falsify HealthSouth's public financial statements."

Several other HealthSouth employees, current and former, were called as witnesses at the hearing. Susan Jones-Smith, a former senior vice president of finance and reimbursement, also invoked the Fifth Amendment. Others testified that there was a corporate culture of intimidation at HealthSouth and they feared retaliation from their bosses, according to published reports.

A committee spokesman said a second hearing is expected in the next few weeks. He said it likely would focus on HealthSouth's board of directors and whether members had a role in the company's financial troubles.

The Birmingham, Ala.-based company has undergone a significant corporate overhaul since the fraud scandal first emerged, bringing in new leadership and trying to scrub its financial record clean. Though burdened by more than $3 billion in debt, HealthSouth has avoided a bankruptcy filing and has resumed paying interest to lenders and note holders.

HealthSouth provides outpatient surgery, diagnostic imaging and rehabilitative health care services at nearly 1,700 facilities nationwide and abroad.