The latest CEO to crack up in a multibillion-dollar, cooked-books scandal went over the edge from his obsession with rock-and-roll glamour.
Richard Scrushy, 50, was a legend in the health care industry for launching HealthSouth with $200,000 and parlaying it into the nation’s biggest chain of rehab centers – making the company at one time worth $12 billion.
By day, he was Alabama’s favorite son: a poorboy-turned-titan, a contender for its state house, and an adviser to G.O.P. revolutionary Newt Gingrich.
But by night, he was a die-hard country-band frontman and singer who got caught up in show business and ignored business, friends say.
In fact, his whole management team during the 1990s consisted of members of his band, the Proxies: CFO Bill Owens was the drummer; assistant vice president Fielding Pierce was lead vocalist; assistant controller Ken Livesay was lead guitar; purchasing director Mark Smith played bass guitar; and Scrushy was a singer and keyboard player.
Federal investigators say Scrushy and his collaborators also played fast and loose, allegedly fabricating books at HealthSouth for as long as a decade by using phony invoices, inflated assets and hyped profits.
Owens pleaded guilty yesterday to fraud for inflating assets by nearly $1.8 billion, including $300 million in cash that wasn’t there.
Scrushy has been relieved of his chairman-CEO post and faces criminal prosecution.
Scrushy was an idol in HealthSouth’s hometown of Birmingham. A generous philanthropist, his name appeared on buildings all over town – on libraries, medical centers, schools, parks and sports stadiums. His statues stood in public places, and busts of his head sat in his offices.
“The problem was that he was caught up in all the trappings of being a celebrity. He couldn’t handle it and ignored business too long,” said Mike Tomberlin, a Birmingham journalist who knew him. “Maybe his next band will be “Jail House Rockers,’ ” he said.
Scrushy’s executive band, the Proxies, performed on national TV and played Alabama’s circuits, but it wasn’t enough. Scrushy next started a second group, Dallas County Line, which he also fronted.
His third act, the all-girl group 3rd Faze, was launched as a teen-queen wannabe band and listed in the company’s 2001 annual report.
“He was always looking for the next Britney Spears,” commented one colleague.
Scrushy typically earned as much as $20 million in annual compensation, and had cashed out more than $247 million in company stock since he took it public in 1989.
The thrice-married executive began working at 17, pumping gas and cleaning bathrooms in his native Selma, Ala. He launched the company in 1983 with four pals.
His lavish corporate life eventually included a fleet of 11 jets, which he personally flew, as well as a helicopter, sea plane and a fleet of antique and race cars. He also had homes in Palm Beach and Alabama.
Locals worry that the disappearance of his millions in philanthropy will hurt local charities and the numerous events he sponsored, which included the America’s Junior Miss pageant.
HealthSouth shares, which once traded at $29, closed yesterday at 11 cents. Investors fear the firm will file soon for bankruptcy protection.
Let’s rock
HealthSouth CEO Richard Scrushy, the target of an SEC fraud probe, apparently had plenty of time to pursue a wide range of interests that had nothing to do with healthcare. Some of his wacky moves:
Let’s rock
Embattled HealthSouth CEO Richard Scrushy is a colorful character with an interest in show biz. Some of the things he’s done:
* Hired “Wonder Years” actor Jason Hervey as communications exec
* Created a company to promote music groups and launched Britney-Spears-wannabe bands
* Kept a fleet of 11 corporate jets
* Had buildings and parks named after him in Mobile, Ala., HealthSouth’s headquarters