Assignment # 8
Health South: The Scrushy way
Table of Contents
1. Assignment cover sheet p. 1
2. Title page: HealthSouth and the Scrushy Way p. 2
3. Table of Contents p. 3
4. Introduction p. 4
5. Scrushy’s Background p. 4
6. Scrushy as in a public eye p. 5
7. Scrushy as a CEO p. 5
8. HealthSouth during the good times p.5
9. Collapse of HealthSouth p. 6
10. Impact on Stakeholders p. 7
11. Outcome and Fairness of Punishment p. 7
12. Conclusion p. 7
13. References p. 8
The fiasco occurred at HealthSouth in 2003, when Richard Scrushy’s empire fell and
collapsed in front of the stakeholders, HealthSouth employees, and general public. The lies of the
multi-year fraud have been revealed and exposed, accusing Mr. Schushy by the Securities
Exchange Commission (SEC) in falsely exaggerating HealthSouth earnings. In this paper, I will
analyze organizational culture of that Richard Scrushy has created, and the consequences of the
financial fraud that has occurred at HealthSouth.
Scrushy’s story of climbing the ladder is quite impressive. Richard Scrushy was a
High school dropout. He got married at a young age to his first wife with whom he had two
children. Scrushy was a diligent provider in the family. While residing in the trailer park and
working hard, Scurshy got very frustrated and dissatisfied with his life. Therefore, he chose to
obtain a certification through college as a respiratory technician. Eventually, Scrushy became an
instructor of Respiratory Therapy at the University of Birmingham. After serving years as an
instructor, he was able to become a director of the respiratory unit at a Birmingham hospital.
Then, in 1979, Scrushy transitioned into Life-mark Corporation, a company that managed
hospitals. Once again, Scrushy was able to rise up the ladder in the company. He held several
positions at Life-mark, and eventually became a corporate director. There he was, at the age of
twenty-eight, a successful young man, who has made himself. (Matulich, 2007).
Jennings(2012) described the start of HealthSouth in steps. Frist, Life-mark was acquired
in 1983. Scrushy had many brilliant ideas; one of them consisted of incorporating a
rehabilitation services for patients at a lower cost. This new line of service would make an
organization a “one stop shop”, providing patients with surgery, rehabilitation, and much quicker
recovery. Scrushy was able to put his idea into practice, forming HealthSouth (Jennings, 2007).
Scrushy in the public eye
It is interesting to study Mr. Scrushy and his business practice. He was a person, who was
comfortable at living a double life. On one side, he was a charismatic, kind, generous, and very
likable individual. Scrushy was loved by most celebrities, and he was, indeed, a celebrity. He
had that lifestyle: a jet, several homes, multiple cars, and a lot of money. Scrushy was an
influential figure; his name stood behind many growing businesses, endorsements, and
promotional materials. He lived a life, where money could buy everything. As a business man he
was a dynamic risk taker, excellent goal setter and achiever.
Scrushy as a CEO
Unfortunately, Scrushy had another personality as a CEO that only his employees knew
about. Helyar (2003) wrote about Scrushy’s ways of getting things accomplished. Helyar
described Scrushy as a terror CEO, who created a very intimidating, controlling, based on fear
and pressure corporate culture. His meetings were torture and pure harassment;...
References: Bergeniv, P., Magrath, L.,Weld, L.(2004) Anatomy of a Financial Fraud. CPA Journal, Vol. 74 (10), p44-49.
Currie, D., Matulich, S. (June 2008). "Richard Scrushy: The Rise and fall of the King of Health Care". Handbook of Frauds, Scams, and Swindles: Failures of Ethics in Leadership (Illustrated ed.). CRC Press. pp. 315–351. ISBN 978-1-4200-7285-3. OCLC 214285931
Helyar, J. (2003) The bizarre reign of King Richard, FORTUNE, Vol 148 (1), p76 .
Jennings, M. M. (2012). Business ethics: Case studies and selected readings 7th Ed. Mason, OH: South-Western Cen gage Learning. ISBN: 9780538473538
Ibrahim, J., (2013). A Wall Street Wonder Takes a Fall. American greed, retrieved from http://www.cnbc.com/id/100000081 on Apr, 28th, 2013.
Pavlo, W. (2012). Former HealthSouth CEO, Richard Scrushy, Gets Prison Sentenced Reduced.Retrieved from http://www.forbes.com/sites/walterpavlo/2012/01/26/former-healthsouth-ceo-richard-scrushy-gets-prison-sentenced-reduced/ on Apr. 28th, 2013
Werner, C., (2003). The friend of the devil. Healthcare Purchasing News, Vol. 27(5) p4.
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