(RTTNews) -  Former Chairman and Chief Executive Officer as well as the founder of inpatient rehabilitation services provider HealthSouth Corp. (HLS: News ) Richard Scrushy Thursday was ordered by a federal judge to pay $2.88 billion in damages to shareholders of HealthSouth for an an accounting scam uncovered in 2003. The shareholders first filed a law suit six years back claiming massive accounting fraud by years of overstating the company's earnings and assets in order to to meet Wall Street expectations and to buoy the stock.

In an era of massive corporate scandals, this is among the largest financial penalty ever levied against a single executive. Scrushy is also the first chief executive officer to be tried under the Sarbanes-Oxley Act, which was passed to fight corporate corruption. The first trial began only in January 2005, and Scrushy was acquitted of fraud charges in 2005 by a federal jury in Alabama.

In a statement on the case, HealthSouth noted, "We are pleased to see that justice has been served through this judgment and that another chapter of our past has been put behind us. Mr. Scrushy, who was convicted earlier of a felony by a federal court, has now been found responsible through this civil trial for the multi-billion dollar fraud that took place under his management."

The company also added that the net recovery to the Company will be about 40% of any amounts recovered. While the company is unable to gauge the extent of recovery from Scrushy related to the court ruling, it is committed to pursue collection aggressively and to the full extent permitted by law.
Jefferson County Circuit Court Judge Allwin Horn III made the judgment in a 47-page ruling against Scrushy Thursday after an 11-day, nonjury trial in May, in the case brought by shareholders of HealthSouth on behalf of the company. Scrushy, who is currently serving a sentence related to a separate bribery conviction, maintained that he didn't know of the fraud happening at HealthSouth, the company he founded in 1984. The first trial began only in January 2005. Scrushy was acquitted of fraud charges in 2005 by a federal jury in Alabama.

The judge noted that Scrushy not only knew of the fraud, but also participated in it. The judge added that the HealthSouth founder also "consciously and willfully" violated his financial responsibilities as chief executive officer. The ruling says that Scrushy must also forgo a $200 million retirement plan he had with the company, also invalidating other terms on Scrushy's employment contracts with HealthSouth.

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