Church donor and CEO accused of fraud

Christian Century, May 17, 2003

Founder Richard Scrushy of the Alabama-based HealthSouth Corporation has been accused by federal investigators of overseeing a massive accounting fraud. Yet, according to his pastor, Scrushy sat through many Sunday sermons on corporate ethics and the hazards of wealth.

"Richard has been a part of our church and has heard and responded to strong messages about biblical ethics," said William Elder, pastor of Mountain-Top Community Church in the affluent Birmingham suburb of Vestavia Hills. Scrushy has attended services there for six years with his third wife, Leslie, and as many as five of his eight children.

In addition, Scrushy donated $600,000 toward construction of the church's $11.5 million new building. Though the ousted chief executive of the nation's largest chain of rehabilitation hospitals has missed worship services since being accused in March of accounting fraud, the church has attempted to show him support, Elder said last month. "God does incredible things with repentance and brokenness," the pastor said.

The Securities and Exchange Commission has filed a federal lawsuit accusing Scrushy of insider trading and inflating profits by $1.4 billion to prop up the value of the stock he sold. One of eight former HealthSouth executives who have pleaded guilty so far told investigators of another $1.1 billion in false profit claims. No criminal charges have been brought against Scrushy, but a grand jury has been investigating. However, the controversy surrounding HealthSouth threw another spotlight on business executive ethics.

The temptation to abandon integrity and long-term business stability in favor of short-term profit runs rampant in corporate America, some ethicists contend. "Nobody usually starts off trying to defraud," said Rick Boxx, founder of Integrity Resource Center in Kansas City, Missouri. "It's usually a small step at first, then once they get away with it, it expands."

Highlighting a major Wall Street scandal, security regulators announced on April 28 that ten brokerage firms agreed to pay settlements totaling $1.4 billion and institute reforms to require their stock analysts to tell the truth to clients. Days earlier, the CEO of American Airlines resigned after disclosing that big bonuses and pensions were coming to many of its executives--information unknown to pilots, mechanics and flight attendants when they accepted pay cuts in order to help the airline avert bankruptcy.

Unethical executive behavior was blamed last year for scandals at Adelphia, Enron, Tyco and WorldCom. Enron CEO Kenneth Lay, son of a Baptist minister and a member of the board of trustees at First United Methodist Church in Houston, had his churchgoing ridiculed by comedians after the Enron scandal broke.

A New York Times profile of Scrushy, published April 20, said that interviews with associates, former employees and government officials painted a picture of a corporate executive "who ruled by top-down fear, threatened critics with reprisals and paid his loyal subordinates well."

Elder said he hopes Scrushy didn't do what he's accused of insider trading and faking $2.5 billion in profits. "We don't know that he did anything wrong," Elder said. "That remains to be seen. If he did do something wrong, that indicates that he is a sinner, just as we are."

Scrushy spread some of his wealth through charitable donations. The Richard M. Scrushy Foundation, which listed assets of nearly $13 million at the end of 2001, also contributed $250,000 to a building fund for the Presbyterian-run Briarwood Christian School. With what it knows now, the school would not accept a donation possibly tainted by corporate fraud, said Harry Reeder III, pastor of Briarwood Presbyterian Church.

Reeder said his congregation includes people who lost jobs at HealthSouth, as well as stockholders and retirees affected by the scandal. "In a town like this, it really reverberates," Reeder said. The pastor said executives need to get beyond viewing success in terms of profit and loss. "There has to be a higher virtue of how we judge success corporately," he said.--RNS