Case File
A Wall Street Wonder Takes a Fall
- The Golden Touch
- It's the classic rags to riches story. Richard Marin Scrushy is a brilliant businessman with the "golden touch." The one time bricklayer turns billionaire after starting HealthSouth, a big provider of outpatient rehab services. Scrushy is the darling of Wall Street. Investors pour money into HealthSouth stock.
- High-Flying CEO
- The high-flying CEO always travels in style... by air, land and water. Scrushy has a Lamborghini, Rolls Royce, a yacht, seaplane and four mansions. The town of Birmingham, Alabama names buildings after him... and a parkway. But, not everyone is impressed.
- Jekyll and Hyde
- Employees call Scrushy a sinister CEO... a classic Dr. Jekyll and Mr. Hyde. To the outside world, all appears well... but on the inside a billion dollar fraud is brewing. Accountants conspire to cook the books and report fake earnings.
- No Ordinary Trial
- The accounting scandal at HealthSouth becomes front-page news. Scrushy is indicted. But the HealthSouth founder puts his faith in a higher power. Scrushy becomes a televangelist.
Producer's Notes
By Jeanine Ibrahim, Producer, "American Greed"
- The story of HealthSouth and its CEO Richard Scrushy began as the perfect rags-to-riches tale. In the end, it became just another breaking news headline of high-priced greed on Wall Street.
- Richard Scrushy wasn't born into money. He grew up in the depressed town of Selma, AL. And after high school, he lived in a trailer park and worked as a day laborer until one day he decided to head for higher education, eventually graduating from the University of Alabama-Birmingham with a degree in respiratory therapy. The move paid off.
- By his mid-20s Scrushy was a vice president at a large healthcare company when he met Aaron Beam. We interviewed Beam. He initially found Scrushy to be a charismatic and extremely intelligent man. Together, Beam and Scrushy eventually cofounded HealthSouth, a company based on Scrushy's idea of taking rehabilitation services out of hospitals and into outpatient facilities. The idea proved to be brilliant.
- To say HealthSouth was doing well by the mid-1990's would be an understatement. The company boasted an unbelievable winning streak on Wall Street, meeting or exceeding expectations for more than 40 quarters in a row. Scrushy had become a Wall Street darling and was the nation's third-highest-paid CEO in 1997, pulling in more than 100 million dollars.
- Things on the outside looked good, but HealthSouth wasn't rock solid behind closed doors. Instead, a massive securities fraud was brewing – one that would ultimately exceed two billion dollars and turn Scrushy's American dream into a nightmare.
- According to Beam, Scrushy's charismatic exterior was just a show. Behind closed doors, Beam says Scrushy was an egomaniac with a dark side and ran HealthSouth like a dictator. Beam claims Scrushy created a fearful work environment where he'd constantly lash out at employees, including Beam himself. As CFO, Beam says he was crippled by fear, so much so that he became a "yes man."
- In the second quarter of 1996, Beam says HealthSouth's growth had slowed and the company could not meet Wall Street's expectations. Rather than report the truth, Beam says Scrushy ordered him to cook the books by generating false revenue. So the CFO did just that, and reported fake numbers to Wall Street. From that point forward, HealthSouth's books would never be clean.
- Over the next five years, the fraud grew to 2.4 billion dollars and seemed to have no end in sight. But then, one man decided he had had enough. Former CFO Weston blew the whistle, and it all came crashing down.
- We interviewed Smith. He tells a story similar to Beam's. In fact, all five former CFOs claim Scrushy gave the orders to keep the fraud going.
- In the end, Scrushy was indicted but amazingly a jury found him not guilty on all charges relating to the HealthSouth fraud. While all five CFOs served prison time, Scrushy walked away scott-free. Today, Scrushy sits in a federal prison, serving time on unrelated charges for another case.
