May 16, 2003 3 min read

BIRMINGHAM, Ala. (AP) – HealthSouth Corp. said Thursday it was cutting 80 more office jobs and paring its aircraft fleet to save money because of an accounting scandal that has put the medical giant in danger of bankruptcy. The government, meanwhile, considered a second attempt to freeze the assets of the company’s embattled founder, ousted chief executive Richard Scrushy.

HealthSouth, which previously slashed 250 positions, said it would eliminate about 80 non-clinical corporate jobs. The move will leave the company with about 49,000 employees.

In a statement, HealthSouth said it had positive cash flow and its patient volume and referral rates were “strong.” To cut the size of its fleet of 11 aircraft, HealthSouth said it had reached an agreement with GE Capital, which leased a Gulfstream V jet to the company. GE Capital sued HealthSouth last month seeking the return of the plane plus more than $9 million in missed payments. The terms of the settlement weren’t disclosed. HealthSouth, which sold another jet in December, said it was trying to get rid of seven more planes it either owns or leases. The government has accused HealthSouth and Scrushy of overstating earnings by some $2.5 billion since 1997 to meet Wall Street expectations. The company is cooperating with investigators, while Scrushy has denied any involvement in the fraud. Eleven former executives have pleaded guilty, including all five of HealthSouth’s one-time chief financial officers.

While a federal judge previously lost a bid to freeze Scrushy’s assets until the case is resolved, the government is considering a second attempt to prevent Scrushy from dissipating his fortune.

Court documents filed Wednesday show the Justice Department is planning to pursue a civil forfeiture, a tactic the government can use to condemn property it believes was linked to illegal activity.

U.S. District Judge Inge Johnson last week refused an attempt by the Securities and Exchange Commission to freeze Scrushy’s assets. The SEC filed suit in March accusing Scrushy and the company of overstating earnings to meet Wall Street expectations.

Court documents filed by Scrushy’s attorneys criticize the Justice Department for considering a second attempt to freeze Scrushy’s assets, estimated by the SEC at $150 million.

While court papers show the government suggested that Scrushy voluntarily freeze assets, his lawyers rejected the idea.

While Scrushy has not been charged with a crime, a grand jury is considering the case. Scrushy’s lawyers have said they expect him to be indicted.

Faced with a cash crunch after lenders froze a $1.25 billion credit line, HealthSouth wasn’t able to make a $367 million debt payment last month. The company has said bankruptcy is a possibility.