Scrushy Is Fired as HealthSouth Chief.

[TexasStooge]

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HealthSouth Corp., the surgical center operator under a widening investigation for accounting fraud, has fired its embattled chief executive and chairman, Richard Scrushy, and voided his employment contract, the company said on Monday.

Scrushy's ouster is the latest development in what has become a mushrooming probe into HealthSouth, the largest U.S. operator of outpatient surgical centers, and its executives over years of suspicious accounting. Federal securities regulators have accused HealthSouth and Scrushy of overstating earnings by $1.4 billion since 1999, and of inflating the value of assets by $800 million.

Over the weekend, the Federal Bureau of Investigation said it is looking into all of Scrushy's business interests. To date, two former top executives have pleaded guilty to fraud charges and more are expected to do so, according to published reports.

In a letter dated Sunday, the board of the Birmingham, Alabama, company said Scrushy was terminated as chairman and CEO, and the directors asked him to resign from the board, saying they are not permitted under law to remove him themselves.

The letter stated that Scrushy's rights to any payments, benefits or perquisites under his employment agreement were terminated, suggesting that he will receive no severance. The actions in the letter were made retroactive to March 19, when the board placed Scrushy on administrative leave.

The board also said it will replace Ernst & Young as its auditors.

In the letter to Scrushy, the board told him that under new regulations, he will have to forfeit any bonuses or other incentive-based or equity-based compensation and certain profits from the sale of HealthSouth securities if the company is forced to restate its financial results.