OBSTRUCTION, PERJURY CHARGES ADDED TO INDICTMENT OF HEALTHSOUTH FOUNDER AND FORMER CEO RICHARD SCRUSHY

WASHINGTON, D.C. - Assistant Attorney General Christopher A. Wray of the Criminal Division, U.S. Attorney Alice H. Martin of the Northern District of Alabama, and Carmen S. Adams, Special Agent in Charge of the FBI-Birmingham Field Office, announced today that a federal grand jury in Birmingham, Alabama has returned a 58-count superseding indictment charging Richard M. Scrushy, former chief executive officer and chairman of the board of HealthSouth Corp., in connection with a wide-ranging scheme to defraud investors, the public and the U.S. government about HealthSouth’s financial condition.

The superseding indictment returned this morning adds charges of obstruction of justice and perjury to charges previously filed against Scrushy and consolidates some of the other charges from the initial indictment, which included conspiracy, mail, wire and securities fraud, false statements, false certifications and money laundering.

Scrushy, 52, of Birmingham, is scheduled to be arraigned before Magistrate Judge T. Michael Putnam at 2 p.m. today.

As in the 85-count indictment returned by a federal grand jury in November 2003, today’s superseding indictment also seeks the forfeiture of more than $278 million in property which Scrushy derived from proceeds of alleged offenses, including several residences, boats, aircraft and luxury automobiles.

The new charges in the superseding indictment, counts 30 to 33, charge Scrushy with three counts of perjury and one count of obstruction of justice arising out of a Securities and Exchange Commission investigation into HealthSouth’s finances. Counts 30 to 32 charge that Scrushy appeared as a witness under oath and gave testimony to an officer of the SEC during an SEC investigation, knowing that the testimony was false. Specifically, the indictment alleges that Scrushy gave false answers when he testified that the 10-K filed for 2001 was true and accurate, that he had not instructed anyone to change numbers and that he had never signed a document filed with the SEC that he believed or understood to not be accurate, and that he believed when he signed a 10-Q form that it was accurate.

The obstruction of justice charge alleges that on or about March 17, 2003, after Scrushy had testified before the SEC, he met with other HealthSouth officers and co-conspirators and advised them of the nature of the SEC’s investigation, certain of the examiners’ questions and his responses to those questions. The indictment alleges that Scrushy attempted to corruptly persuade one of the co-conspirators in order to influence his testimony in an official SEC proceeding.

HealthSouth Corporation, founded in 1984, was the nation’s largest provider of outpatient surgery, diagnostic imaging and rehabilitative healthcare services, with approximately 1,800 locations in all 50 states, Puerto Rico, the United Kingdom, Australia and Canada. Scrushy served as chairman of the Board of Directors from 1984 through early 2003, and as chief executive officer of the company during that time, except for periods in late 2002 and early 2003. Scrushy and other HealthSouth executives received salaries, bonuses, stock options and other benefits that were tied, directly or indirectly, to the company’s financial performance

Scrushy allegedly controlled HealthSouth while CEO and Chairman of the Board, and personally participated in the preparation of financial statements and other financial documents. The indictment alleges that Scrushy caused HealthSouth to falsify financial statements, making the company appear more successful than it actually was. According to the indictment, internal reports at HealthSouth between 1996 and 2003 showed that the company failed to produce sufficient net income to meet the expectations of Wall Street securities analysts, the market and its own internal budgets, a failure that Scrushy and others allegedly referred to as “not making the numbers.” Scrushy and others allegedly devised a scheme to inflate HealthSouth’s earnings by making false and fraudulent entries in HealthSouth’s books and records, and by covering up the accounting fraud with false financial filings and statements. The indictment alleges that the scheme added approximately $2.6 billion in fictitious income to HealthSouth’s books and records during the course of the conspiracy.

If convicted of all the charges in the superseding indictment, Scrushy faces a maximum sentence of 450 years in prison and more than $30 million in fines, in addition to the forfeiture of ill-gotten gains.

The HealthSouth investigation is continuing. The investigation is being conducted by the FBI-Birmingham Field Office, the Internal Revenue Service-Birmingham Division and the U.S. Postal Inspection Service. The prosecution is being handled by U.S. Attorney Alice H. Martin and Assistant U.S. Attorneys with the White Collar Section and Asset Forfeiture Section of the U.S. Attorney’s Office for the Northern District of Alabama, and the Fraud and Asset Forfeiture and Money Laundering Sections of the Criminal Division of the Department of Justice in Washington, D.C. The investigation is being overseen by the Corporate Fraud Task Force, established by President Bush in July 2002 to investigate and prosecute allegations of fraud and other illegal conduct by executives at U.S. corporations. The Task Force is headed by Deputy Attorney General James Comey.

Nineteen individuals have been charged with crimes in connection with the HealthSouth investigation since it began in March 2003. The government has secured 17 guilty pleas from those individuals, including former HealthSouth Chief Financial Officers Aaron Beam, Michael Martin, William Owens, Weston Smith, Malcolm McVay and Vice President of Finance Emery Harris. All 17 of these defendants are cooperating with the government in this prosecution and the ongoing investigation.

Members of the public are reminded that an indictment contains only charges. A defendant is presumed innocent of the charges and it will be the government’s burden to prove a defendant’s guilt beyond a reasonable doubt at trial.

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