Healthsouth (C): The Trial

Abstract

In the winter of 2005, former HealthSouth CEO Richard Scrushy went on trial for fraud after he and other executives at HealthSouth, which specialized in outpatient surgery, rehabilitation, and physical therapy, were accused of inflating profits. The trial attracted a lot of attention, not only because of the size of the fraud and Scrushy's colorful personality and legendarily lavish spending habits, but also because this was the first case in which a corporate CEO was tried for violating the Sarbanes-Oxley Act, passed in 2002. The case summarizes the four-month trial, the tactics of both the defense and prosecution teams, and some of the long-term implications for companies accused or convicted of ethics violations. See also the A and B cases (UVA-E-0273 and UVA-E-0274).