June 18 (Bloomberg) -- HealthSouth Corp. founder Richard Scrushy, acquitted in 2005 on criminal charges of directing an accounting fraud, was found liable for $2.876 billion in a civil trial in Birmingham, Alabama.

“Scrushy knew of and actively participated in the fraud,” state court Judge Allwin E. Horn said in his ruling today. After a two-week trial, Horn ruled in favor of investors who brought the suit on behalf of the company.

“Scrushy was the CEO of the fraud,” Horn said in his ruling. The judge decided the case without a jury.

Scrushy, 56, testified that only a “bungling idiot” would have contemplated taking the company private, as he was, knowing a fraud might be discovered.

The investors’ lead attorney, John W. Haley, said in a statement that the ruling “is a shot across the bow for those who engage in corporate greed and fraud in our country.”

Scrushy’s attorney, Jim Parkman, didn’t immediately return a phone call seeking comment on the ruling.

Horn heard from former chief financial officers, all of whom pleaded guilty to their roles in the accounting fraud and testified against Scrushy. Scrushy defended his actions in open court for the first time since the FBI raided HealthSouth offices in 2003. A jury acquitted him in June 2005 of criminal charges that he ran an accounting fraud that almost bankrupted the company, the largest U.S. provider of inpatient rehabilitation services.

Invalidates Pension

The judge’s ruling invalidates Scrushy’s employment contracts with HealthSouth, including his pension. John Somerville, an attorney for the plaintiffs, estimated that Scrushy’s pension could have totaled more than $200 million over his lifetime.

Somerville said in an interview in front of the courthouse that he didn’t know Scrushy’s current net worth. He estimated that he earned more than $200 million in one five-year span at HealthSouth. Estimates during Scrushy’s federal criminal trial put his worth at about $275 million, Somerville said.

“We think he still has significant money,” Somerville said. He said Scrushy’s assets would not approach the amount of the judgment.

‘Collect Every Penny’

The plaintiffs can also go after Scrushy’s future wages once he is released from prison on a separate bribery conviction, including garnishing his salary.

“We will collect every penny we can,” said Somerville.

Scrushy is serving a federal prison term of six years and 10 months for bribery. A jury convicted him in 2006 of giving Alabama Governor Don Siegelman a $500,000 campaign contribution in return for a seat on a state hospital regulatory board. Siegelman, a Democrat, was also found guilty and a federal appeals court upheld convictions against both men in March.

HealthSouth said in a statement that “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.”

Scrushy paid $81 million to the U.S. Securities and Exchange Commission to settle fraud charges filed in 2003. He paid $31 million to HealthSouth in the case before Horn, who decided in a pre-trial ruling that Scrushy didn’t deserve his bonuses.

Drop in Share Value

Scrushy is a defendant in a federal securities class-action lawsuit, which names UBS AG, HealthSouth’s investment bank, as well. Investors seek billions of dollars to recoup what they lost in the drop in share value after the fraud came to light. Ernst & Young LLP, the company’s auditor, proposed in March to settle its part for $109 million.

In the current case, shareholders suing on behalf of Birmingham-based HealthSouth sought $2.6 billion in damages. They said Scrushy wrongly used company money for personal expenses, including real-estate purchases and 400 flights to his lake house on a company helicopter.

While he was an all-girl band impresario, he paid for a member’s breast implants. The band performed, under a HealthSouth banner, in shows designed to persuade kids to stay in school and maintain healthy lifestyles.

Scrushy’s attorneys said he often paid the company beforehand for private expenses and that his employment contract allowed personal use of the aircraft. The breast implants were a medical emergency, as one of the band member’s implants caused her to get sick while on tour, Scrushy said.

The financial chiefs all lied and carried out the fraud behind Scrushy’s back, Scrushy and his lawyer told Horn.

“It was ridiculous what was done to this company” by others, Scrushy testified.

The shareholders had to prove their case by a “preponderance of the evidence,” a lower standard than the “proof beyond a reasonable doubt” prosecutors faced in the criminal case.

The case is Tucker v. Scrushy, CV 02-5212, Jefferson County Circuit Court of Alabama (Birmingham).

To contact the reporters responsible for this story: Laurence Viele Davidson in Atlanta at lviele@bloomberg.net; David Beasley in Birmingham, Alabama at dbeasley4@yahoo.com.

Last Updated: June 18, 2009 13:51 EDT