The perils of being rich and stupid

There is risk when reaching for that upside

Author

George Pillari
November 07, 2024

As the founder and CEO of HealthSouth, Richard Scrushy ran an outpatient surgery and physical rehabilitation company that treated more 100,000 patients per year. Scrushy was the third-highest paid CEO in the U.S. in 1997.

Yes, HealthSouth did treat a lot of patients, but it took liberties with how it recorded and reported its profits. As a public company, HealthSouth reported its earnings every quarter. Earnings go up, the stock price goes up, and everybody is happy. Scrushy amassed a fortune estimated in the hundreds of millions along the way.

Then the FBI got involved.

When law enforcement started going after Scrushy and HealthSouth for cooking the books and inflating earnings, it had taped recordings of Scrushy talking to his CFO about “doing the right thing” and how the management team was a “family.”

One of the big differences between local police and the FBI is that local police try to prevent a crime from happening while the FBI allows the crime to happen and incriminate as many bad guys as possible with informants, people wearing wires, telephone lines being tapped, etc.

Despite the FBI recordings and plea deals with five (count ‘em, five) former CFOs who confessed that HealthSouth manipulated earnings by more than $2.0 billion to boost its stock price, Scrushy was acquitted of all 36 counts against him. How can this be?

Wiretap. Image by author

In the middle of his trial, Scrushy and his wife started to travel around Alabama (HealthSouth was based in Birmingham) and made large donations to churches and started a Christian television show. He continued his money tour while his jury deliberated for some 30 days. Scrushy used his money to sway the opinion of the public and the jury in his favor. Whomever said that money can’t buy happiness was wrong. Scrushy walked away a free man.

Buying Happiness. Image by author.

But, not for long. In a separate lawsuit, Scrushy was sentenced to seven years in prison for bribing the governor of Alabama to get himself placed on an important state healthcare regulatory board. The governor received a similar sentence.

Takeaway

It is definitely possible be rich and stupid.

Being Blinded by the Upside is one of the Seven Deadly Stupidities.

Why are we so optimistic?

Optimism leads to bad decision making

www.stupid.blog/p/optimistic

How Alabama Won the 2018 NCAA Title

Coach Saban went for the upside; he had no choice.

www.stupid.blog/p/alabama-wins-2018-ncaa-title

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