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Remedies Keyed to Kovacic-Fleischer, 8th
Scrushy v. Tucker
Citation:
955 So. 2d 988 (2006)Facts
Richard Scrushy served as CEO and Chairman of the Board of HealthSouth Corporation from 1984 until March 2003. During 1997-2002, HealthSouth paid Scrushy annual and monthly target bonuses totaling $36,366,709. According to HealthSouth’s annual proxy statements filed with the SEC on Form 14A, no bonuses were payable to any executive unless the company’s annual net income exceeded budgeted net income, and all bonuses were to be paid from a bonus pool capped at the lesser of ten percent of net income or the amount by which actual net income exceeded budgeted net income. After HealthSouth’s accounting fraud became public in March 2003, audits revealed that for 1997-2002, HealthSouth had actually sustained annual losses ranging from $65 million to $556 million, meaning no bonus pool existed from which bonuses could have been properly paid. Fifteen senior HealthSouth executives, including all five CFOs who served during the relevant period, pled guilty to criminal fraud related to falsifying HealthSouth’s financial statements. Scrushy was criminally prosecuted but acquitted; however, he did not dispute that the originally filed financial statements were inaccurate, unreliable, false, and fabricated.
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