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SEC to seek $785m in suit against Scrushy

WASHINGTON -- The Securities and Exchange Commission is preparing to press its civil fraud case seeking nearly $800 million from HealthSouth Corp. founder Richard Scrushy, despite his acquittal on criminal charges of orchestrating a $2.7 billion accounting fraud at the medical rehabilitation services chain.

The SEC's case has been on hold for two years because it was deemed to conflict with the Justice Department's criminal prosecution of HealthSouth, which Scrushy once led as chief executive. A jury acquitted Scrushy last week on 36 criminal counts of false reporting, conspiracy, fraud, and money laundering.

SEC attorneys plan to file court papers against him tomorrow, a spokesman said, in a civil case with its lower burden of proof for the government.

''We will pursue our case," spokesman John Nester said.

The SEC is seeking $785 million in fines and restitution to shareholders plus interest from Scrushy, and to have him barred from being an officer or director of any publicly traded company.

Last week, US District Judge Inge Johnson -- who in mid-2003 halted the SEC's case until Justice completed its criminal probe -- ordered the SEC to show by tomorrow why its case shouldn't be dismissed. In another setback to the agency at the time, Johnson lifted an SEC-requested freeze on Scrushy's assets.

Because Scrushy's compensation was tied in part to HealthSouth's performance, he pocketed $267 million in salary, bonuses, and stock options and used it to buy yachts, luxury cars, fine art, and jewels, prosecutors say.

Scrushy's attorneys have said he wishes to return as an executive to HealthSouth, where he still sits on the board. The company's new managers have made it clear that he would not be accepted.

The SEC is accusing him of accounting fraud and making a false declaration by signing as CEO the company's inaccurate financial statements.

Scrushy attorney Art Leach said his client's acquittal, combined with the previous findings in the case, ''may cause Judge Johnson to really question whether the SEC has a case with regard to Richard Scrushy."

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