Wednesday, September 13, 2006
An arbitrator has decided that HealthSouth must pay former CEO Richard Scrushy's attorney's fees from the criminal trial in which he was acquitted of all counts related to the massive accounting fraud at the company. Scrushy claimed that his employment contract required the company to pay the fees, and under Delaware corporate law -- HealthSouth is incorporated there -- he had a statutory right to have the attorney's fees paid because he was successful on the merits. The arbitrator's decision is not a surprise, although Scrushy did not get all that he claimed, however, only being awarded $17 million of the $32 million claimed. Nevertheless, that is a significant amount to spend on a criminal defense, and shows the costs of defending a large-scale criminal prosecution..
Scrushy victory may not result in him receiving any money to pass along to his attorneys. HealthSouth earlier obtained a judgment, upheld by the Alabama Supreme Court, that he must repay over $47 million in bonuses, plus interest, that he received when the accounting fraud took place that were awarded based on the company meeting certain performance targets. HealthSouth has requested that the $17 million for attorney's fees be offset against the large judgment, so look for yet another fight over the attorney's fees. An AP story (here) discusses the arbitrator's decision. (ph)