Commission Obtains Emergency Relief Requiring HealthSouth To Place in Escrow All Extraordinary Payments to Officers, Directors and Employees
FOR IMMEDIATE RELEASE
Court Freezes CEO Richard Scrushy's Assets; Commission's Investigation Continues
Washington, D.C., March 20, 2003 -- The Securities and Exchange Commission has obtained emergency relief in its case against HealthSouth Corp. and CEO Richard Scrushy, including a court order temporarily freezing substantially all of Scrushy's assets.
In further emergency relief, HealthSouth consented to a court order (1) requiring that the company place in escrow, under the Court's supervision, all extraordinary payments (whether compensation or otherwise) to its directors, officers, partners, controlling persons, agents, or employees, pursuant to Section 1103 of the Sarbanes-Oxley Act of 2002, (2) prohibiting the company and its employees from destroying documents relating to the company's financial activities and/or the allegations in the Commission's case against HealthSouth and Scrushy, and (3) providing for expedited discovery in the Commission's case.
The Commission filed suit Wednesday against HealthSouth and Scrushy in U.S. District Court in Birmingham, Ala. The Commission's complaint alleges that since 1999, at the insistence of Scrushy, HealthSouth systematically overstated its earnings by at least $1.4 billion in order to meet or exceed Wall Street earnings expectations. The false increases in earnings were matched by false increases in HealthSouth's assets. By the third quarter of 2002, HealthSouth's assets were overstated by at least $800 million, or approximately 10 percent.
Under a separate Commission order, trading in the securities of HealthSouth was suspended Wednesday for two business days. The Commission's trading suspension expires tonight at 11:59 p.m. E.S.T.
The Commission and the U.S. Department of Justice are continuing their investigations. The Commission cannot predict what additional facts may be found or what additional conclusions may be reached in these investigations.