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The Richard Scrushy Fraud Trial
This corporate web site addresses the issues of
corporate health care within a broad framework. A
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This web page describes how the prosecution's apparently
strong fraud prosecution against Richard Scrushy,
HealthSouth's founder came undone. The strategies of the
prosecution and the defence are examined. It gives a
fascinating insight into the US legal system. trial by jury
and the patterns of relationships in parts of the USA.
The HealthSouth scandal is unique in that the prosecution concentrated its efforts on criminal prosecution of the staff and the company itself was very secondary. In other health care frauds it has been the companies that have paid large settlements and the executives responsible have walked away with their profits. This change was probably due to the recently enacted Sarbanes-Oxley laws. These held executives personally responsible. The Scrushy trial was the first test of this new law and the prosecution seemed to have an open and closed case.
The prosecution were inept in electing to charge Scrushy in his home town of Birmingham and in their public grandstanding. They probably rubbed the judges up the wrong way and made a number of other errors. Scrushy was very resourceful and had the money to buy the best. He also knew his home town and the black population there well. He was able to align himself with them and get the support of the black clergy. He claimed that he had been set up and had not known what was happening.
There was no clear paper trail and the case depended on the testimony of multiple witnesses from HealthSouth who testified to Scrushy's involvement. The defence attacked their credibility and ultimately the jury refused to believe them and acquitted Scrushy of all charges. Many critics and analysts believe that there was a miscarriage of justice.
The interest in this case is what it tells us about Richard Scrushy and the legal system in the USA - a fascinating glimpse into middle America. It gives an indication of what happened or did not happen at HealthSouth.
The way in which the HealthSouth scandal was exposed and the nature of the accounting fraud is addressed on the accounting fraud page. Estimated at close to US $4 billion prosecutors have concentrated on the fraud in the years since 1996. They have used a sum of US $2.7 billion in their actions. Scrushy and HealthSouth are involved in multiple other law suits. Scrushy was subsequently convicted of bribery and HealthSouth has settled whistle blower actions for Medicare fraud.
The fraud and its extent have never been denied. The issue has been culpability. Large numbers of senior executives pleaded guilty to the fraud and sought reduced sentences by cooperating with the prosecution. The majority of them named Scrushy as the driving force responsible for the fraud and indicated that he knew about it. He was portrayed as a micromanager who controlled every facet of the company's operations. It seems there was no paper trail.
Scrushy denied any knowledge of the fraud and claimed that he had been set up by those who had organised the fraud. Few believed him but when he came to trial the jury acquitted him of all charges. He was later charged with bribing the governor of Alabama and convicted.
Those who had pleaded guilty received lenient sentences from different judges on the basis that they they had played only a supporting role and had cooperated fully with the investigation. Two judges who sentenced them were very critical of the Scrushy jury's decision. Another judge involved was skeptical of the case against Scrushy from the outset and distrustful of the confessions.
"The man most singularly responsible for this criminal conduct has been found not guilty and will serve no time at all," said (judge) Clemon, referring to Scrushy."Where the head honcho is found not guilty," Clemon said, incarceration of a minor participant "might actually encourage disrespect of the law." Clemon did not preside over Scrushy's case.
Ex-HealthSouth exec resentenced to jail Reuters September 20, 2005
Judge Blackburn said Mr. Scrushy's lawyers had unfairly blamed Mr. Owens for the fraud."I do not believe you were the architect or the personal instigator of the fraud," she told Mr. Owens before she sentenced him. "That person escaped justice."
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The judge who presided over Mr. Scrushy's trial, Karon O. Bowdre, sat through much of the hearing. Afterward, she declined to respond to Judge Blackburn's comment.
Executive Gets 5-Year Term in Fraud Case The New York Times December 10, 2005
But whether the SEC will succeed where criminal authorities stumbled is far from clear, experts said.U.S. District Judge Inge P. Johnson last week ordered the agency to "show cause . . . why this case should not be dismissed."
Two years ago, the same judge rejected the agency's attempt to freeze hundreds of millions of dollars in Scrushy's cash and property after an unusual 11-day hearing in Birmingham. The SEC sought to protect the assets so eventually they could be distributed to investors who lost money after the fraud came to light.
"Evidence of defendant Scrushy's involvement in the alleged scheme to inflate profits . . . is lacking," the judge wrote in a May 2003 opinion.
She added that testimony from former HealthSouth finance chiefs who pleaded guilty to taking part in the scheme lacked credibility and called a secret recording of Scrushy talking about the company's financial problems "ambivalent at best."
Similar doubts also were cited by jurors who last week acquitted Scrushy on three dozen fraud, conspiracy and money-laundering charges - - - - - .
SEC to Try To Pursue Scrushy in Civil Court : Judge Asked Agency Why Case Should Not Be Dismissed The Washington Post July 5, 2005
It is now clear that the situation is understood differently by different people and the available information is interpreted in different ways. In the end no one has been held fully responsible for the fraud. We are left with the press reports and the various judges comments. We must draw what conclusions we can from the information we have and consider the possibilities. It does seem that the prosecution was outgunned both in court and out of it.
This web page examines the criminal trial of Richard Scrushy, HealthSouth's founder, chairman and CEO.
Aaron Beam Jr., a former HealthSouth executive, recalled meeting Mr. Scrushy, then 26, while he was an executive at the Lifemark Corporation, then a Texas hospital chain. "I went home and told my wife that I just interviewed with the biggest con artist I ever met, or the most brilliant young man I ever met," he told The Birmingham News in 1996.
The Scrushy Mix: Strict and So Lenient The New York Times April 20, 2003
The most fascinating figure in the HealthSouth saga is the self made, ambitious man at the centre of it. HealthSouth was his company. He made it and he considered it to be his creation. Everything revolved around him. His trial and the way it was conducted tell us a great deal about him and add to the confusion and the contradictions.
Was Scrushy the innocent and gullible man framed by a skilled group of conspirators who carefully set him up and rehearsed their accounts of him so that there were few contradictions. Were the prosecution so focused on securing a conviction that they ignored due process, suppressed evidence and drilled witnesses until there were no contradictions.
There seem to be three possibilities.
An innocent man:- The defence asserted that Scrushy had been framed by his staff. This is also what much of the religious black community in Birmingham believed. The evidence of several of the defence's own witnesses does not really support their case. The accounts of those who claim they spoke to and challenged Scrushy rings true.
An arch villain:- Was Scrushy the arch scheming villain, a malign intelligence who set up a gigantic fraud, at the same time ensuring that there were no links to implicate him directly. A defining feature of this case is the absence of a clear paper trail. Did he then skillfully and deceitfully manipulate the community in his home town to the extent that a local jury believed and acquitted him in spite of the facts and the evidence of multiple witnesses. This is what the prosecution asserted, what is reflected in the press reports and what the wider community saw. A separate jury trial in another city later convicted Scrushy of bribery on the basis of evidence given by the same witnesses.
A personality disorder:- Alternately do we have an extreme example of the sort of disturbing sociopathic personality that I have suggested flourishes in the corporate marketplace (see my web page on sociopathy). I have written about some of the mechanisms in "Belief vs Reality" (download pdf file)
Is this a man supremely confident, extremely intelligent, driven by extreme ambition, and ultimately living only in the external world of his fame and successful image. Does reality for him become what he decides it is? Can he be so confident that he can convince others? Is all else disregarded, compartmentalised and rationalised - expunged from some levels of consciousness. Can all of his actions be seen as a process of maintaining that illusion and all of his intelligence be focused on that. These people typically surround themselves with yes men and build a protective aura around themselves so that no one dare challenge them. They denigrate others so that they can ignore them.
- - - - - - - but to confront Mr. Scrushy directly was a risk," Livesay (executive) said, indicating Scrushy did not welcome bad news and such messengers tended to find their employment future unstable.
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"I was there for 14 years. I observed, worked for and admired Mr. Scrushy. He was an incredibly talented and gifted man, a very intelligent man. It was like he could achieve anything he set his mind to," Livesay said, adding, "It is inconceivable to me that something this massive was going on without his knowledge."
Scrushy trial: Witness still admires the accused chief executive The Birmingham Business Journal February 28, 2005
Under prosecution questioning, Livesay described Scrushy as an intimidating leader no one would cross. Scrushy worked hard, was "incredibly talented and gifted" and could "achieve anything he set his mind to," Livesay said.
Witness calls Scrushy 'commander in chief' Miami Herald (Associated Press) Feb. 28, 2005
Describing an atmosphere of intimidation at HealthSouth, Smith said Scrushy would "humiliate'' subordinates who challenged him during meetings."He was referred to as the king. He made every decision,'' said Smith.
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"He did not tolerate people who were not `yes' men. If you were not in the room you were a target, because he loved to talk about people behind their back,'' said Smith.
Fifth Former CFO Testifies Against Scrushy The New York Times March 22, 2005
Could the absence of a paper trail, the way Scrushy gave his instructions to staff to fix the problem, and the use of euphemisms when talking about it, as well as the elaborate security measures and intimidation of staff, all be a part of a process of shielding himself from what he was doing.
What about his religious conversion and his charisma when dealing with the community during his trial. Could this be genuine? Could he be so convincing if he did not believe in and identify with what he was saying - at least temporarily. I have seen others with this sort of personality use religion in this way.
According to a statement from Russell, "Richard was raised in a churchgoing family and was saved at age 11. He felt called to the ministry at age 15 but put that call aside when he moved into teaching and then business. He has regularly attended church throughout his adult life and is married to the daughter of a minister."
Former HealthSouth CEO Scrushy turns televangelist USA TODAY October 24, 2004
Could all of the participants in this saga really be sincere within their own lights? Can we explain this on the basis of aberrant social process and personality pathology alone? Probably not fully.
If the evidence given by HealthSouth staff is real then the Scrushy story in some ways challenges the credibility of my thesis and in other ways supports it. Can there really be such an extreme example with so little insight? Perhaps there is an interplay of factors, part of our complexity - the playing of multiple separate roles, each kept away from the others - a sort of Jekyll and Hyde phenomenon where different understandings throw light on different roles each kept separate from the other. In some he was scheming and in others sincere - which ties in with what I was saying in "Belief vs Reality" above.
The different attitudes of the judges illustrates the different ways in which Scrushy's behaviour was understood - and the very real consequences for the parties involved.
The important issues related to who was to be believed. It would be the largely black jury in Birmingham, Alabama who would decide that. Scrushy's lawyer said as much.
"I expect the case to boil down to the credibility of the C.F.O.'s versus Scrushy's credibility," said Donald K. Watkins, Mr. Scrushy's lead lawyer. "By their own admission, we know that the C.F.O.'s have engaged in a pattern and practice of deception, where they had a duty to tell the truth."
Former HealthSouth Chief Indicted by U.S. The New York Times November 5, 2003
In looking at what happened and in selecting illustrative extracts I will have these issues in mind. This is a small selection from a vast amount of material.
The company's own audit found that the fraud was closer to US $4 billion. Many accounts indicate that it went back into the 1980s - perhaps even before HealthSouth. There was initially a propensity to aggressively stretch the limits, isolate themselves from critics and associate with supporters. This is revealed in the Amcare saga below.
Another of the witnesses describes the way in which aggressive accounting progressed to fraud. It was incremental - a small step at a time - plenty of opportunity for rationalisation and compartmentalisation as people learned to live with what they were doing.
Amcare Inc., the company that became HealthSouth in 1984, couldn't convince auditors KPMG that its books were reliable, prosecutors said in a court notice that outlines additional evidence they plan to present to jurors at the former chief executive's accounting fraud trial. Scrushy's response: He fired them, the government said.
Prosecutors add new Scrushy allegations The Business News July 01, 2004
Scrushy is accused of directing a $2.7 billion earnings overstatement, and jurors repeatedly have heard testimony that the fraud began in 1996. But the transcripts reveal that prosecutors have evidence that the scheme really began nearly a decade earlier.During a private session to preview the testimony of former HealthSouth chief financial officer Weston Smith, Bowdre asked him about the start of the accounting scheme, which Scrushy blames on underlings.
"When ... was the first conversation you had with Mr. Scrushy about this fraud?" Bowdre asked.
"The very first conversation was in, I believe it was early 1988, probably February, February or March of 1988," said the former finance chief, among 15 one-time HealthSouth executives who pleaded guilty and agreed to help prosecutors.
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"We chose to cut it off at '96 because at some point in time we don't want to go back I mean, there is one thing if we go back to '84 from out of the balancing charge, we specifically choose that time period because we had the most records available," he (Richard Smith prosecutor) said.
Transcripts Show Allegations of Fraud at HealthSouth May Be Traced Back to Late 1980s ABC News (Associated Press} Apr. 24, 2005
Although the government originally hinted at signs of fraud dating back to 1984 -- the very year HealthSouth went public -- it has narrowed its focus down to a recent seven-year window in its complaint against the company's founder.
Scrushy's Prognosis Looking Worse Than HealthSouth's The Street.com (Melissa Davis) November 10, 2003
He (Aaron Beam) described a directors meeting in about 1985 where board members told Scrushy they were turning down his request for a large raise. Beam said Scrushy immediately "walked out" of the meeting but returned a few minutes later."He said, `If you guys want to run the company you can, otherwise you are going to pay me what I deserve,'" Beam said. U.S. District Judge Karon Bowdre instructed jurors to disregard testimony about the meeting after defense attorneys objected that it occurred before the alleged fraud.
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The government also charged that Scrushy spent more than $200 million on such luxuries as waterfront mansions, opulent cars, a racing boat named "Monopoly", bronze statues, a 21-carat diamond ring and a $3.2 million airplane.
HealthSouth Co-Founder Discusses Ex-CEO : HealthSouth Co-Founder Portrays Former CEO As 'Micromanager' When It Came to Company Finances ABC News January 26, 2005
The process of getting to trial took a long time and there were many preliminary skirmishes. The prosecution were aggressive in their public announcements and their tendency to grandstand in the public arena. This trial by public opinion backfired very badly as they were dealing with a skilled adversary who would play that game far more successfully. They were certainly inept in their initial efforts then made the critical blunder of deciding to prosecute in Birmingham, Scrushy's home town. He was very popular here and knew the population and which social buttons to press. The prosecution controlled public opinion across the country but Scrushy controlled it where it mattered.
The first debacle was when the Securities and Exchange Commission attempted to freeze Scrushy's assets. They were unable to make a sufficiently convincing case. The judge felt that Scrushy's rights were threatened and rejected this. Scrushy taunted them by spending lavishly. He proclaimed his innocence forcefully and continued to lead the extravagant life he felt was his right.
The Securities and Exchange Commission has named him in a lawsuit as the mastermind of massive accounting fraud at the company.
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Donald Watkins, a Birmingham lawyer representing Scrushy, said Thursday his client has not done anything wrong and shouldn't have to change his lifestyle.
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Scrushy's spending comes after the SEC failed to persuade U.S. District Judge Inge Johnson in Birmingham to freeze Scrushy's assets, estimated at $150 million.
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"This is the government's worst nightmare in the sense it looks like he intends to dissipate the fortune he has accumulated over the years by pursuing an extravagant lifestyle," said Chris Bebel, now a partner with Houston's Shepherd Smith & Bebel law firm. "Even if his fortune is of an enormous nature, it won't stand up to this type of spending pressure much longer, especially when his legal fees are factored into the equation."
Scrushy continues to live the high life Birmingham News August 22, 2003
Most of the people at the center of corporate scandals have played a cat-and-mouse game with investigators, laying low and trying to keep their assets out of the limelight. But not Richard M. Scrushy, a founder and the former chief executive of HealthSouth, the nation's largest chain of rehabilitation hospitals and surgery centers.
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Still, Mr. Scrushy is living the outsized life he favored before HealthSouth's fortunes plunged, and his legal team is taking a combative tack.
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Meanwhile in Alabama, where Mr. Scrushy lives and HealthSouth has its headquarters, Mr. Scrushy is maintaining a high profile.
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Some of Mr. Scrushy's legal foes say that he is being deliberately provocative. He and Mr. Watkins are "thumbing their noses at people pursuing him and his money," said Doug Jones, a former United States attorney in Birmingham who is representing shareholders suing to recover their losses on HealthSouth stock.
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The government is trying to reclaim assets it believes were obtained by executives as a result of fraud, Ms. Martin explained.
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Mr. Scrushy, who was once among the nation's highest paid chief executives, owns four elaborate residences as well as other real estate, more than 40 cars, several planes and powerboats, securities and other property. He also has a custom-built 92-foot yacht, the Chez Soiree, berthed near his mansion in Palm Beach, Fla.The total value is "substantially more" than an earlier government estimate of $150 million, officials said.
Preparing to seek forfeiture in connection with a criminal case can be complicated, officials said.
HealthSouth Scandal Doesn't Slow Former Chief The New York Times September 26, 2003
In May, a federal judge in Birmingham denied an SEC motion to indefinitely freeze Scrushy's assets, saying the government had failed to establish he was involved in the fraud.
Former HealthSouth CEO indicted : Feds want Scrushy to forfeit $278 million in assets CBS Marketwatch November 4, 2003
The battle escalated when the charges were laid and Scrushy was paraded in leg irons. The judge took a more benign view and released him on US $10 million bail and many restraints. There were to be delays before the case came to court.
This was the first test of the Sarbanes Oxley act holding CEO's accountable for the documents they signed. It seemed an ideal case.
Press release by dept justice
The indictment alleges that between 1996 and 2003, internal reports by HealthSouth's corporate accounting staff showed that the company routinely failed to produce sufficient net income to meet the expectations of Wall Street securities analysts, the market and its own internal budgets - a failure that Scrushy and others allegedly referred to as "not making the numbers." According to the indictment, Scrushy and others devised a scheme to inflate HealthSouth's earnings by making false and fraudulent entries in HealthSouth's books and records, and to cover up the accounting fraud with false financial filings and statements. The indictment alleges that the scheme added approximately $2.7 billion in fictitious income to HealthSouth's books and records during the course of the conspiracy. The indictment further alleges that Scrushy paid himself and others in the form of salaries, bonuses and stock options as a result of the fraudulently inflated results.According to the indictment, Scrushy and his accomplices would meet to discuss HealthSouth's actual financial performance and the need to falsify those internal results before they were publicly reported. The indictment states that Scrushy, through his accomplices, caused members of the corporate accounting staff to falsify the company's books and records. The fraud allegedly included false entries in income statement and balance sheet accounts, including property, plant and equipment accounts, cash accounts and accounts receivable, among others. According to the indictment, the co-conspirators referred to those methods as "filling the hole" or "filling the gap."
As part of the conspiracy, Scrushy and other co-conspirators allegedly signed and filed false statements with the Securities and Exchange Commission, and sought to conceal the fraud by controlling the internal distribution of actual financial results and providing false information to federal and state tax authorities. The indictment also alleges that Scrushy sought to control his co-conspirators, HealthSouth employees and the company's Board of Directors by, among other things, threats, intimidation, electronic and telephonic surveillance, and reading their e-mails. To further control others at HealthSouth, Scrushy allegedly obtained large compensation packages for co-conspirators and offered them other incentives to keep them from discussing the fraudulent scheme, including, at one point in early 2003, an offer to take care of a co-conspirator's family if the co-conspirator would take the blame for HealthSouth's financial overstatements.
The indictment alleges that Scrushy knowingly signed false statements to the SEC, including a false 10-Q form for the third quarter of 2002, in violation of the recently enacted Sarbanes/Oxley law. Scrushy also allegedly continued the scheme through false representations to HealthSouth's stockholders and the rest of the investing public through press releases that misstated HealthSouth's financial condition. In June 2000, for example, Scrushy appeared in a HealthSouth State of the Company videotape, stating that "we have remained committed to prudent fiscal policy and the integrity of our balance sheet," and boasting that HealthSouth had an outstanding balance sheet. In early 2003, Scrushy boasted at a company managers meeting that HealthSouth did not have the same type of problems as WorldCom and Tyco.
The money laundering counts of the indictment allege that Scrushy knowingly engaged in financial transactions using criminally derived property, including the purchase of land, aircraft, boats, cars, artwork and jewelry, among other items. The indictment seeks forfeiture of all such gains derived from criminal activity, totaling $278,727,674.35, including: several residences in the state of Alabama and property in Palm Beach, Florida; a 92-foot Tarrab yacht called Chez Soiree, a 38-foot Intrepid Walkaround watercraft and a 42-foot Lightning boat; a 1998 Cessna Caravan 675, together with amphibious floats and other equipment, and a 2001 Cessna Citation 525 aircraft; diamond jewelry; several luxury automobiles, including a 2003 Lamborghini Murcielago, a 2000 Rolls Royce Corniche, and two 2002 Cadillac Escalades; and paintings by Pablo Picasso, Marc Chagall, Pierre-August Renoir, among others.
If convicted of all the charges, Scrushy faces a possible maximum sentence of 650 years in prison and more than $36 million in fines, in addition to the forfeiture.
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Members of the public are reminded that an indictment contains only charges. A defendant is presumed innocent of the charges and it will be the government's burden to prove a defendant's guilt beyond a reasonable doubt at trial.
HEALTHSOUTH FOUNDER AND FORMER CEO RICHARD SCRUSHYCHARGED IN $2.7 BILLION ACCOUNTING FRAUD CONSPIRACY Press release Department of Justice Seal Department of Justice November 4, 2003
- - - - - former chief executive, Richard Scrushy, was hit with 85 criminal charges and put on a fast track toward a trial at the start of the new year.With a subdued Scrushy in leg irons, Judge T. Michael Putnam made sure Scrushy understood the charges against him before setting a trial date for Jan. 5, a mere nine weeks away.
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Now the man who enjoyed a rock star-like celebrity in his home base of Alabama and owned a fleet of planes, a yacht, racing boats and luxury cars, will be severely restricted in his movements as he awaits his day in court.Before being released on $10 million bail, Scrushy had to agree to a host of humiliating conditions.
He will trade his leg shackles for an electronic monitoring bracelet that he must wear on his ankle at all times. He also must check in with authorities by telephone every day.
Thomas Sjoblom, another of Scrushy's attorneys, argued that his client was no flight risk, "in spite of the fact that he is a pilot and has his own plane."
But the former high flyer will not be allowed to leave the northern or central districts of Alabama, and to help ensure those conditions he agreed to surrender the keys to his aircraft, his pilot's license and his passport.
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His lawyers said under no circumstances will Scrushy plead guilty and that he will take the stand in his own defense."At the end," predicted Watkins (lawyer and friend), "he'll be a free man."
Scrushy on Fast Track to Criminal Trial Reuters Nov 5, 2003
Experts on white-collar crime said the case gave federal prosecutors their best chance yet in the corporate scandals to secure the conviction of a former chief executive. Fourteen former HealthSouth executives and accounting managers who have already pleaded guilty to various fraud charges -- including all five of the company's former chief financial officers -- are expected to testify against Mr. Scrushy. So are numerous employees not implicated in the government's investigation."The government will use those witnesses to testify that Mr. Scrushy was a hands-on C.E.O., that he knew everything that was going on in every corner of the company, and that it was inconceivable that he was unaware of the gross inflation of corporate assets and income," said Eric Havien, a former federal prosecutor who is now with Phillips & Cohen, a San Francisco law firm. "They won't need to rely on criminally culpable people to put on that sort of testimony."
Former HealthSouth Chief Indicted by U.S. The New York Times November 5, 2003
Scrushy's assets had been frozen in this and other actions against him. His lawyers fought hard to unfreeze them and to get him more freedom. They complained about the way the prosecution used the media to drive the case.
Also Wednesday, Scrushy's attorneys filed a motion seeking to unfreeze $79 million of his assets, $49 million of which they claim Scrushy earned apart from his HealthSouth income and investments."They have grabbed more assets to hold prior to trial than the law allows them to," attorney Abbe Lowell said in a conference call with reporters.
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Lowell also complained about prosecutors' public release of an affidavit regarding Scrushy and his family's finances, saying they had sought the document "for weeks" but didn't receive it before it was made public.
Former HealthSouth chief ordered to repay $25 million loan San Francisco Chronicle November 26, 2003
Fired HealthSouth CEO Richard Scrushy wants a court to ease restrictions of his $10 million bond as he awaits trial on fraud charges, arguing that Martha Stewart and a host of other former executives accused of crimes have gotten better treatment.
Scrushy Seeks Easing of Bond Restrictions The New York Times December 17, 2003
HealthSouth Corp. founder and former CEO Richard Scrushy will be able to travel to Atlanta, New York and Washington to consult with his attorneys now that a federal judge relaxed his strict travel restrictions implemented last month.
Judge eases Scrushy's travel restrictions Modern Healthcare's Daily Dose Dec. 30, 2003
A judge in sentencing those who pleaded guilty rejected the claim to a $2.7 billion fraud and substituted US $66 million instead. This put the whole prosecution case in question. It went to appeal and US $2.7 billion was reinstated.
A federal judge has rejected a key government claim in the fraud case engulfing HealthSouth Corp., ruling that an accounting scam cost shareholders $66 million - a fraction of the $2.8 billion prosecutors had suggested. Judge:
HealthSouth fraud cost investors $66 million THE ASSOCIATED PRESS November 22, 2003
HealthSouth staff who were to give evidence were barred from reading pretrial publicity and this interfered with their work. HealthSouth appealed.
U.S. District Judge Karon Bowdre ruled Dec. 16 that potential witnesses in the nearly $3 billion accounting fraud trial of former HealthSouth CEO Richard Scrushy are not allowed to follow media coverage of the trial.In a motion filed Jan. 14, HealthSouth attorneys requested five individuals be released from the decree because ignorance of the material prevents them from adequately performing their jobs.
HealthSouth asks judge to lift limits on 5 employees Birmingham Business Journal January 17, 2005
The defences strategies can be divided into several streams.
The support from the black churches was glaringly apparent to the jury. The black clergy were prominent among his supporters attending the trial. This was a risky strategy. Had the jury felt that he was manipulating them, then it might have back fired. It seems to have succeeded spectacularly.
The interest to me is how this successful white businessman could have worked so closely with these black ministers and the jury and have so effectively convinced them unless he was sincere. Charisma involves some conviction and that means taking on and accepting the role that is being portrayed without any doubt - if only temporarily. This does not mean that there is no self interest involved or driving the process. It is self interest and success which drives the sort of people that I have described. What is different is that they are able to conceptualise to themselves. in ways that are unattached to the real situation, and then convincingly present that conception to others. Because they believe it they do so with such conviction that others are convinced and carried along.
During the early stages of the investigation Scrushy was accused of trying to manage the report of the consultants HealthSouth had appointed to investigate its own practices - an investigation that it was claimed showed no wrongdoing by Scrushy. This is reminiscent of Tenet's strategy in the 1991 fraud. There were the usual stories of shredded documents.
HealthSouth Corp. Chairman Richard Scrushy tried to manage the public perception of an outside law firm's investigation of insider-trading allegations at the medical services giant, documents released by a (congressional) House committee showed.House investigators claimed the internal HealthSouth memos released Tuesday showed Scrushy and aides may have compromised the probe's findings, but it was not immediately clear from the documents whether that was so.
The probe by attorneys at Fulbright & Jaworski found no evidence of wrongdoing by Scrushy, who was ousted in the company's $2.5 billion accounting scandal.
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E-mail memos released by the panel Tuesday "clearly call into question the fairness and the independence of the Fulbright & Jaworski investigation," committee spokesman Ken Johnson said. He said the documents show that Scrushy and his colleagues were desperate last fall to influence the findings of the inquiry commissioned by the company's board, and that Scrushy and HealthSouth outside attorney Lanny Davis "had every expectation of steering the direction of the investigation."
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In an Oct. 20 e-mail, Scrushy told Davis in regard to the law firm's report: "I do not believe we should give the full report to the press. We should force an executive summary or a press release to give to press (sic) and to post on the web site. ... I think we should not trust the press and we should give them small sound bites and the first round should not have all information, i.e. total info on what, when, who."As the law firm finished its probe, Davis wrote to Scrushy on Nov. 4, 2002: "We must cut off (Fulbright & Jaworski) this morning -- not this afternoon, but immediately -- before more harm is done ... ."
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The Fulbright & Jaworski's six-week review found that Scrushy did not know about the rule changes or their impact when he sold his company stock earlier in the year, prior to a HealthSouth announcement that sent share prices plummeting.
Law firm's investigation of HealthSouth compromised by company's chairman, House aides say San Francisco Chronicle (AP) , October 15, 2003
Fulbright & Jaworski LLP, in an Oct. 29, 2002, report to the Alabama-based clinic operator's board, said its lawyers found shredded documents in offices containing the files of four former HealthSouth executives."There was no indication of when the documents had been shredded," said the report - - - - -.
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The law firm's report said that some of the shredded documents found on Sept. 26, 2002, appeared to be e-mails.
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A committee spokesman has said it has "serious concerns" about the Fulbright & Jaworski report.
HealthSouth Law Firm Says It Found Shredded Documents Reuters Oct 14, 2003
Scrushy invoked his 5th amendment rights refusing to answer questions at the congressional inquiry into HealthSouth. This was in spite of his going very public in a no questions barred interview with Mike Wallace on CBS Television program "60 minutes" shortly before. He proclaimed his innocence on this program. He later sought to subpoena the CBS staff as a witness at his trial.
"Scrushy spoke to Wallace without lawyers in a no-holds-barred interview at his home in Birmingham," the announcement from the network says.
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Wallace, in addition to Scrushy, interviewed former U.S. Attorney Doug Jones, who is now a lawyer in private practice representing HealthSouth shareholders who claim to have lost money as a result of the fraud.
Scrushy interview on CBS Sunday Birmingham News October 9, 2003
In his first public interview since the government accused HealthSouth Corp. in March of $2.5 billion in securities fraud, former company CEO Richard Scrushy said Sunday on CBS' "60 Minutes" program that previous HealthSouth CFOs orchestrated and committed the fraud without his knowledge. Scrushy, who appeared on television without his attorney present, said he signed off on financial documents that inflated company profits but was completely unaware of his employees' scam. "You have to rely, you have to trust people," Scrushy told Mike Wallace, according to program transcripts. "You have to believe. You have to delegate. I mean, you hire them. You pay them good salaries. You expect them to do the right thing. And I signed off on the information based on what was provided to me. And what I was told."
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"There was no motive for me to destroy a great company that I built, a company that I loved," he said.
Scrushy speaks out Modern Healthcare's Daily Dose Oct. 13, 2003
On his personal Web site, he posted a defiant statement proclaiming, "I now embrace the opportunity to clear my name."
Former HealthSouth Chief Indicted by U.S. The New York Times November 5, 2003
Richard Scrushy, the founder and former chief executive of scandal-rocked HealthSouth Corp., has subpoenaed CBS News journalist Mike Wallace as a witness at his criminal trial later this month.Wallace and CBS News producer Robert Anderson, who was also subpoenaed, have in turn filed a motion with Judge Karon Bowdre of the U.S. District Court for the Northern District of Alabama to have the subpoenas thrown out, according to court documents filed on Monday.
HealthSouth Ex-CEO Subpoenas Mike Wallace Yahoo.com (Reuters) January 4, 2005
Scrushy employed a large number of skilled lawyers and they used every strategy they could to dent the government case before trial. Scrushy's first lawyer was a friend and a prominent black bank owner in Birmingham. Scrushy's master stroke was to finally replace outside lawyers at the trial with a homespun black lawyer who spoke the language of the Birmingham jury and related well with them. He left the complex and difficult to understand legal, accounting and business arguments to the prosecution. He concentrated on influencing the jury's perception of the witnesses as he set out to discredit them.
Scrushy said Thomas Sjoblom of Chadbourne & Park, Washington, who has represented Scrushy since April, and Sjoblom's partner Abbe David Lowell would defend him in the upcoming trial. Donald Watkins of Birmingham, Scrushy's longtime friend and counsel, will continue to be a principal counselor and adviser to Scrushy and the legal team.Sjoblom has been a Securities and Exchange Commission trial attorney and a federal criminal prosecutor and now heads the securities litigation and regulatory enforcement practice at Chadbourne.
Lowell, who heads the firm's white collar defense practice, was named one of the nation's 10 best trial lawyers by the National Law Journal and served as the chief attorney for the House Democrats during impeachment proceedings against former President Clinton.
Also joining Scrushy's defense team is Arthur Leach, a private consultant who was chief of asset forfeiture for the U.S. attorney's office in Georgia from 1989 to 2002.
Scrushy's trial delayed; defense team announced Modern Healthcare's Daily Dose Nov. 17, 2003
Mr. Russell, the spokesman for Mr. Scrushy, said he had chosen Mr. Watkins because he was a friend and entrepreneur with a "unique grasp of legal and business issues."
Will the Real Richard Scrushy Please Step Forward New York Times February 17, 2005
Former HealthSouth CEO Richard Scrushy is restructuring his legal team to bring in a little-known Alabama lawyer to take over the lead counsel's role from a well-known Washington attorney.Scrushy has designated Jim Parkman of Dothan as the lead attorney for his upcoming trial on charges of conspiracy, fraud and money laundering. He takes over from Abbe Lowell, who remains on Scrushy's legal team, a legal adviser to Scrushy said.
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Another attorney in Parkman's firm, Martin Adams, is also joining Scrushy's team, according to court papers filed by the defense. Adams is married to Scrushy's daughter Amy. Watkins said Adams' role on the legal team will not be high profile.
Former HealthSouth CEO Reconfigures Team LA Times (Associated Press) September 16, 2004
Attorneys Abbe Lowell, Thomas Sjoblom and Scott S. Balber with the firm Chadbourne & Parke withdrew with Scrushy's permission, according to a court filing Wednesday.Andrew Blum, a spokesman for the firm, said Scrushy and the firm made a mutual decision that the lawyers might work on civil cases while Scrushy brought in an Alabama lawyer to work on the criminal case.
HEALTHSOUTH CORP.: Scrushy gets OK to change legal team Chicago Tribune (Associated Press) November 27, 2004
Scrushy's legal team, headed by Watkins, has filed a blizzard of legal motions and challenges aimed at undercutting the government's case. Scrushy's lawyers have argued against the legality of the Sarbanes-Oxley Act, under which Scrushy has been charged, and questioned Martin's handling of the grand jury investigation into wrongdoing at HealthSouth. But one fact remains irrefutable: Martin has secured 17 cooperation agreements from former HealthSouth employees, including plea agreements from all five men who served as chief financial officer under Scrushy. It is expected they will testify that Scrushy orchestrated the fraud at HealthSouth.
Former HealthSouth CEO Scrushy turns televangelist USA TODAY October 24, 2004
Also in November, Scrushy replaced his high-profile Washington-based legal team headed by Abbe Lowell and Thomas Sjoblom in favor of home-grown representation that might play better in front of an Alabama jury
Trial of HealthSouth Ex-CEO Scrushy Set to Begin Reuters January 3, 2005
After the trial's first week, the move appears to be nothing short of brilliant. Jim Parkman, who glories in his role as a simple country lawyer, is clearly the star of the show.During opening statements Tuesday, Parkman's hyperbolic rhetoric and scenery-chewing antics captivated the jury of nine men and nine women (six are alternates).
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On paper, Martin's case against Scrushy seems overwhelming. But in the courtroom, where the only thing that matters is the opinion of the jury, Parkman is a master of the "game-within-the-game."Through an anomaly of design in the ultramodern Hugo Black Federal Courthouse here, the witness stand is located across the courtroom from the jury box.
As a result, when questioning witnesses from the lectern in the middle of the courtroom, prosecutors have had their backs to the jury.
Unlike the prosecutors, Parkman stayed focused on his audience. During the most intense portions of his cross-examination of Beam, he didn't even look at the witness, directing his questions - and his insinuations about Beam's private life - directly at the jury box.
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Where Parkman excels in making an emotional connection with jurors, Leach's job is to act as the team's pit bull.
Scrushy's surprise switch to different lawyer appears smart USA Today January 31, 2005
A primary target of the defence was the charges under the Sarbanes-Oxley act which had never before been tested in court. The defence also tried to have all the charges thrown out claiming a breach of process.
The Scrushy defense team informed U.S. District Judge T. Michael Putnam that it would seek to overturn the Sarbanes-Oxley Act, which Congress passed last year in response to accounting scandals at Enron, WorldCom and other corporate giants.
Fired CEO Scrushy seeking to overturn new corruption law THE ASSOCIATED PRESS December 1, 2003
A judge has recommended against dismissing the 85-count fraud indictment against former HealthSouth Chief Executive Richard Scrushy, rejecting defense claims that prosecutors failed to screen grand jurors for bias.U.S. Magistrate Judge T. Michael Putnam ruled Tuesday that prosecutors and a judge took adequate steps to ensure that no one with ties to the company or potential witnesses served on the panel.
Ex-CEO of HealthSouth loses bid in fraud case Chicago Tribune (Associated Press) April 14, 2004
The defense team for Richard Scrushy made its case for dismissing three key charges against the former HealthSouth Corp. chief executive officer, who stands accused of directing a $2.7 billion accounting fraud scheme at the company. The three charges stem from the Sarbanes-Oxley Act, created in 2002 in the wake of Enron Corp. and other corporate scandals to hold CEOs personally liable for false financial reporting. Scrushy is the first to be charged with violating the law. - - - - - - - Scrushy attorney Thomas Sjoblom called the law "unconstitutional on its face," the Associated Press reported.
Scrushy defense challenges law aimed at CEOs Modern Healthcare June 17, 2004
HealthSouth Corp. founder and former Chief Executive Officer Richard Scrushy will be the first person tried under the Sarbanes-Oxley Act for his actions as CEO when his criminal trial begins next year. A U.S. District Court judge in Birmingham, Ala., refused to dismiss three charges based on the Sarbanes-Oxley Act in the federal government's 58-count indictment accusing Scrushy of directing multibillion-dollar accounting fraud at HealthSouth.
Ruling sticks Scrushy with Sarbanes-Oxley charges Modern Healthcare November 30, 2004
Scrushy's defense team challenged the use of Sarbanes-Oxley, arguing it is too vague and broad in scope.Judge Karon Bowdre dismissed the challenge in late November, asking the rhetorical question: "Hasn't certifying a document that is materially false been illegal all along?"
Trial of HealthSouth Ex-CEO Scrushy Set to Begin Reuters January 3, 2005
The lawyers tried hard to limit the evidence to be presented both before the trial and with objections during the trial. They challenged the admissibility of the secretly recorded tapes while at the same time claiming they exonerated Scrushy. They challenged the process leading to the charges and tried to discredit it.
The defense team for HealthSouth Corp. founder Richard Scrushy asked the U.S. District Court in Birmingham, Ala., to suppress taped conversations between Scrushy and former HealthSouth Chief Financial Officer William Owens. Owens - - - - In court documents filed Monday, Scrushy's attorneys called the taping a violation of "well-established ethical principles." They also asked the court to determine if a grand jury was biased in indicting Scrushy on 85 criminal counts in November 2003. Scrushy's trial is slated to begin in mid-August. He has denied wrongdoing.
Scrushy team wants taped conversations tossed Modern Healthcare's Daily Dose Jan. 27, 2004
"The tape recordings ... conclusively demonstrate that Scrushy's criminal activity was ongoing," prosecutors said in a court filing reported by The Birmingham News on Saturday.
Secret Tapes at Issue in HealthSouth Case ABC News (Associated Press) February 15, 2004
Attorneys for Scrushy said prosecutors and investigators withheld evidence showing Scrushy's innocence during a hearing last year, including comments he made during a conversation secretly recorded by a former HealthSouth financial chief."The government attorneys knew about this kind of evidence and sat on it," said Donald Watkins, a lawyer for Scrushy.
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The defense sought an investigation by the Justice Department's Office of Professional Responsibility. It sent a copy of the complaint to three federal judges in Birmingham.
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"It's part of the defense checklist. They're challenging everything they can," Martin said after a hearing where prosecutors and the defense haggled over evidence.
Prosecutors withheld evidence, says fired CEO of HealthSouth The Seattle Times March 2004
Mr. Scrushy's attorneys are expected to contend that certain audio recordings should be excluded from his trial because of gaps caused when Federal Bureau of Investigation agents repeatedly switched the recorder off and on, depending on whether Mr. Scrushy was in the room or whether there were other seemingly relevant conversations taking place.
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Federal prosecutors acknowledge that the recordings "are not flawless," according to a court filing, but the government has argued that the tapes contain "a wealth of valuable evidence" that shouldn't be tossed out because of accidental recording glitches.
Ex-HealthSouth CEO Challenges FBI Recordings smartmoney.com January 10, 2005
The defence accused the government of ethical breaches and also took the prosecutors initiation of a trial by media head on by doing it even more successfully. This caused prosecutors to object.
Since then, his (Scrushy) lawyers have frequently questioned the credibility of expected government witnesses in print and over the airwaves. This month, the (Scrushy) attorneys filed an ethical complaint against prosecutors who are preparing to try Scrushy in Birmingham federal court in August.
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The prosecutor's request includes a transcript of the March 11 Paul Finebaum radio show, broadcast live every afternoon from Birmingham and heard in surrounding states, during which Watkins blasted the prosecution and its expected witnesses - the former employees who have pleaded guilty."If you're a U.S. attorney trying to go from U.S. attorney to federal judge, you need to bring down a big fish," Watkins said on the radio show, according to the federal request.
On the same program, Watkins "accused the government of manufacturing evidence and witness tampering," the gag order request says. Some of the comments "were specifically designed to influence the jury pool," the request says.
Prosecutors seek to gag Scrushy lawyers : Says public comments contaminate jury pool Birmingham News March 26, 2004
U.S. prosecutors trying former HealthSouth Chief Executive Richard Scrushy for accounting fraud asked a judge Thursday to order his lawyers not to discuss the case with news outlets.Prosecutors say comments by the defense have poisoned the jury pool and are an unfair attack on the government.
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The defense team is "threatening to undermine the integrity of the judicial process," the request says. "The court has a duty to address those threats."
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"This will be one of the major battles in the case, and we plan to fight it," Watkins said. "I think it's retaliation for our ethics complaint; I think they are afraid because they have no evidence, and I think they know they will lose."
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The government's request also seeks to bar Scrushy from talking about the case. The Selma native began hosting a talk show on Birmingham morning television this month. He hasn't discussed the case on the show or spoken about it in any public forum since he pleaded not guilty. His lawyers, particularly Watkins, have.
Prosecutors seek to gag Scrushy lawyers : Says public comments contaminate jury pool Birmingham News March 26, 2004
President Bush, who made comments about corporate fraud in a visit to Birmingham last year, is part of a government publicity campaign against fired HealthSouth CEO Richard Scrushy, defense lawyers claimed Friday.Answering a government request for a partial gag order in the case, the defense accused prosecutors of creating a media frenzy that included the comments by Bush and leaks and news conferences by prosecutors.
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"After having its way with Richard Scrushy for almost 18 months including improper leaks during the grand jury stage of the case ... the prosecutors in this case have now decided that the climate is right for them to declare a freeze on public comment," the defense argued.
Scrushy: Bush part of government blitz in HealthSouth case The Ledger-enquirer.com (Associated Press) April 2, 2004
U.S. District Court Judge Karon Bowdre effectively gagged the prosecution and Richard Scrushy's defense team on Tuesday, saying only the former HealthSouth CEO himself can speak about the accounting fraud charges against him.
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Bowdre noted that the prosecution and Scrushy's legal team have orchestrated press conferences or have appeared in a variety of media outlets, including Scrushy's appearance on CBS' "60 Minutes" news program. Scrushy also has a talk show that airs on a Birmingham television station weekday mornings.The judge did not preclude Scrushy from speaking on his own behalf.
One legal observer noticed that both sides were playing to the press.
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Bowdre said in an opinion memoranda that the prosecution has "through press conferences, press releases and statements created and/or played to the intense publicity surrounding the SEC investigation and civil suits, the guilty pleas of various former Healthsouth employees and officers and the indictment of Mr. Scrushy."The trial is to take place in the court and not in the newspapers, on radio, or TV or Web sites," Bowdre had said on Friday during a hearing.
U.S. judge says ex-HealthSouth CEO Scrushy can talk Reuters April 13, 2004
A federal judge raised the prospect yesterday that fired HealthSouth Corp. chief executive officer Richard Scrushy could be jailed if the defense again violates a court order limiting publicity ahead of his January federal trial in a massive fraud.
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Bowdre's ruling came after testimony in a hearing showed that Scrushy apparently approved the release of a defense statement criticizing government witnesses earlier this week.
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Bowdre ordered Scrushy and his lawyers to court for the hearing after the defense issued a public statement saying a government document implicating Scrushy in the $2.7 billion accounting fraud at HealthSouth was based on "lies and inconsistencies."
HealthSouth's ex-CEO reminded to keep quiet Philadelphia Daily Newshttp://www.philly.com (Associated Press) December 9, 2004
While Scrushy used the media to attack his detractors, he sued those that were critical of him. The portrayal of Scrushy as an upstanding moral god fearing citizen was a key to Scrushy's claims and the defence's case. The paper sued was the widely read local paper in the city where Scrushy was to be tried. The question is whether this was a strategy or came from Scrushy's heart and his belief in himself. We are inclined to cynically ascribe such actions to opportunism or strategy but Scrushy may see it very differently.
HealthSouth Corp. founder Richard Scrushy, who faces a criminal fraud trial next month, sued an Alabama newspaper Monday over articles and cartoons that Scrushy claims are defamatory.The libel suit claims the Birmingham News, which is owned by Newhouse Publications Inc., is trying to convict Scrushy in the press with its coverage of his accounting fraud trial, Scrushy's lawyer said.
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"It is outrageous, intolerable, mean-spirited and beyond the bounds of decency what the Birmingham News has done to an honorable man during the last 21 months," lawyer Julian McPhillips said.
HealthSouth Founder Sues Paper for Libel LA Times (Bloomberg News) December 21, 2004
There were some strategies probably aimed at delaying, such as the late demand of multiple documents from HealthSouth.
Fired HealthSouth CEO Richard Scrushy wants his former employer to turn over years of financial records, personnel information and news releases on the eve of his trial on corporate fraud charges - a request the company objected to Thursday as unreasonable.
HealthSouth Fighting Subpoenas From Ex-CEO Forbes January 6, 2005
Religion and race became an integral part of the trial. The many press reports might lead us to conclude that this trial really occurred in the community, that it was more about a perception of righteousness than fact and that the trial itself was simply the public arena for the expression of the result. The reports describing Scrushy's religiosity are worth reading and reflecting on. They tell us much about Scrushy but at the end just what do we make of it?
When Martha Stewart was indicted, she turned to Barbara Walters for a sympathetic broadcast interview. When Ken Lay was indicted, he turned to Larry King.But former HealthSouth (HLSH) CEO Richard Scrushy, whose trial on charges stemming from a $2.7 billion accounting fraud is scheduled to begin in January, is reaching out to a higher power: Jesus. Since March, Scrushy and his wife, Leslie, have been hosting a half-hour talk show every weekday morning on a local independent TV station here. Although Viewpoint occasionally tackles subjects such as media bias and self-improvement, Scrushy's bread-and-butter topic is the Bible and the importance of following the word of God. To that end, Scrushy books a steady stream of local ministers and pastors as guests.
Scrushy, 52, used to attend church services in Vestavia Hills, the affluent suburb where he lives. But last year, around the time of his indictment, he began attending the Guiding Light Church, a ministry across town that caters primarily to African-Americans. Early this year, Guiding Light purchased 12 months' worth of airtime for the show. Scott Campbell, general manager of WTTO Channel 21, would not disclose how much Scrushy's church paid, but he says about 5,000 Birmingham households tune in each morning. "This is a paid program, just like the Ginsu knife commercials," Campbell says. Critics of Scrushy's show see it as a cynical attempt to generate goodwill among potential jurors in the Birmingham area, which is about 70% African-American. "I've never seen the show because I don't watch infomercials," says Doug Jones, the Birmingham attorney leading a shareholder lawsuit against Scrushy. "It's clear that it's a jury selection strategy, and I guess it will remain to be seen how effective it might be."
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"I don't automatically disagree with people who decide to use the media," he (Rusty Hardin, the Houston attorney who defended Enron auditor Arthur Andersen) says. "The dilemma for somebody like Scrushy is that the government uses official press conferences to create an impression of people that they're powerless to counteract unless they do something in response."
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According to a statement from Russell, "Richard was raised in a churchgoing family and was saved at age 11. He felt called to the ministry at age 15 but put that call aside when he moved into teaching and then business. He has regularly attended church throughout his adult life and is married to the daughter of a minister." Of his show, the statement says, "Viewpoint resulted from Richard finding time on his hands while awaiting trial. He sees the daily television program as a community service, providing uplifting programming while providing access to pastors and others performing essential services in the community which could not find a voice on ordinary commercial television."
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To watch the show is to get a glimpse of Scrushy, the charismatic leader. Most mornings, Viewpoint opens with a prayer from Leslie Scrushy, but it is Richard who animates the program. He's no stranger to the stage.
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Some of his monologues on God sound like speeches from his CEO days. During the Oct. 5 telecast, Scrushy talked about the power of faith and belief, criticizing people who whine about their circumstances, "talking and groaning and, 'I don't think I can do this' ... rather than taking a positive attitude and realizing where they need to be in Christ, and where they need to be every day in Scripture and where they need to walk." Scrushy's call to the Christian faithful sounded similar to the motivational speech he gave to employees soon after founding HealthSouth in 1984.
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"When we were called and given the opportunity to do this television show," Scrushy continued in the same telecast, "we called up some of our dear friends and people we believe in. (They said,) 'You don't want to do that. That's too much work. You'll be attacked.' They were right. You know what those people are saying today? 'Thank God you did this.' We saw an opportunity. We saw a ministry. This wasn't about Leslie and Richard. This is about God."Moments later, Scrushy delivered a message that would sound strange to the enemies, real and perceived, he has accumulated in his career: "It's not what people say about you that matters. It's what God sees in you that matters." That's a radically different message from the one found on Scrushy's own Web site, www.richardmscrushy.com, which regularly blasts stories from the local paper that he deems unfair. As CEO of HealthSouth, Scrushy took legal action against people who criticized him. The Birmingham News reported that in 1998, for example, Scrushy hired a private investigator to uncover the identity of someone who criticized him and his family on an Internet message board, and then sued that individual for libel.
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He named his infant son Jaden Malachi, an Old Testament name that means messenger of God. According to his Web site, Scrushy's wife gave birth to the boy (Scrushy's ninth child from three marriages) in September. On his Oct. 5 show, Scrushy talks about raising children and laments the materialism that has taken over society. He urges his viewers to think twice about the advertising that bombards them. "It's a real problem. If you can put God in your life, and you have a church, you've got a pastor that is teaching and feeding you, you've filled yourself with the spirit and accepted Christ, you become somebody else. Once you are filled with the spirit, a lot of that stuff (advertising) doesn't sink in anymore."
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Despite the wealth and Scrushy's previous reputation, Hammock (priest) says he's impressed with the man he's come to know the past year. "I have spent a lot of time with Richard," he says. "I have seen extreme genuineness. I've looked and I've found a genuine man, a very tender man, a man who talks about his desires and dreams."
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Outside Guiding Light Church in a suburban neighborhood beyond the Birmingham airport, where Scrushy attends Sunday services and films his TV show, the message board displays the following exhortation from Pastor Jim Lowe: "Don't abort your trial. God is about to birth something great."
Former HealthSouth CEO Scrushy turns televangelist USA TODAY October 24, 2004
The members of Guiding Light Church welcome Richard M. Scrushy, the ousted founder of the HealthSouth Corporation, with open arms each week to services, where he and his wife are among the handful of whites in a mostly African-American congregation."I've seen him in services so often with members of his family," Pat Lowe, the wife of the Guiding Light pastor, said of Mr. Scrushy, who is married for a third time and has nine children. "I believe he is a man of integrity."
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It is not uncommon, of course, for someone in the public eye who has fallen from grace to migrate to a house of prayer. But Mr. Scrushy's new emphasis on his ties to Birmingham's large black population and his churchgoing ways have many people in this city asking, is it all part of his defense strategy? About 70 percent of Birmingham is African-American, and of the 18 jurors and alternates at his trial, 11 are African-American.
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In the months before the start of his trial on Jan. 25, Mr. Scrushy seems not to have missed an opportunity to portray himself as a friend of Birmingham's black community. His personal Web site describes his humble origins in Selma, Ala., "a town known as the birthplace of the civil rights movement," where he says he apprenticed with a brick mason and washed cars at a filling station.He also hired prominent black lawyers to help guide his legal strategy, including Donald Watkins, a lawyer and financier who successfully defended Birmingham's first black mayor, Richard Arrington Jr., in a government investigation into corruption allegations.
And for nearly a year, Mr. Scrushy and his wife have hosted a daily evangelical television show taped at the Guiding Light Church and intended for audiences in Birmingham. In one of the first episodes of the show, "Viewpoint," he compared the news media to "old Satan sneaking in the back door" and later used the program as a pulpit for his views on God, morality and federal efforts to put him in jail and seize his $278 million fortune.
Mr. Scrushy's son-in-law, Mike Plaia, owns the local television station that was broadcasting Mr. Scrushy's religious program and is now also showing a 30-minute program each day on the trial itself.
These actions have astounded some former associates of Mr. Scrushy, who was known around Birmingham for the conspicuous display of his wealth before his problems with the law.
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"In all my visits to the executive suite at HealthSouth, I never saw a black person there, not among the executives, the doctors or the secretaries," said Paul Finebaum, a radio talk-show host and former business associate of Mr. Scrushy. "The first time I heard religion and Richard Scrushy mentioned in the same sentence was when I read about him going to Guiding Light Church. I think he must be running out of options."
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Mr. Scrushy and his advisers have rejected criticism that his actions were motivated by a desire to influence the jury at his trial. Only one dissenting juror is needed for a hung outcome, a decision that could spare Mr. Scrushy a lengthy term in prison.
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Mr. Russell (spokesman for Mr. Scrushy) added that Mr. Scrushy decided to start attending services at Guiding Light after watching the church's pastor, Jim Lowe, on television while exercising. "He felt called to attend that church," Mr. Russell said.Still, Mr. Scrushy's effort to refashion his image is a dramatic shift for someone from Vestavia Hills, the upscale district south of Birmingham, where he still lives in a 20-room estate with a helicopter pad.
"There is a type of race-baiting in this case that is so blatant it can backfire," said Allen Shealy, a forensic psychologist in Birmingham who also works as a jury selection consultant. "This has the potential to anger people about their religion being used, their race being used."
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"Everybody goes down," Mr. Scrushy was recorded as saying in early 2003, in a discussion with a HealthSouth aide, if discrepancies with accounting practices were made public. Still, despite whatever testimony or evidence the United States attorney's office introduces during the trial, many people here have their minds made up about the defendant. Some of his supporters, which include members of Guiding Light and other churches, even sit behind him in court each day of the trial, clutching small Bibles."He comes from very humble beginnings so he understands what it means not to have," said E. B. McClain, a state senator from Midfield, Ala. Mr. McClain said he remained grateful for a gift of $1 million that Mr. Scrushy made in 2002 to Lawson State, a predominantly black community college in Birmingham, one of many philanthropic donations made by Mr. Scrushy in Alabama. In recent months, Mr. McClain said, Mr. Scrushy has dropped in at services at African-American churches around Birmingham in addition to his time at Guiding Light.
"Churches are the ones who believe in forgiveness and praying with the individual," Mr. McClain said.
"He has the financial wherewithal to attempt this strategy and a lot of people are fascinated, wondering, will he get away with it?" said Don Cochran, a former federal prosecutor in Birmingham who is now a professor at Cumberland School of Law. "The danger is if the jury feels like it's being manipulated. Juries don't react too well to that."
No one can tell how the jury will measure Mr. Scrushy, but there are those who have attended services at Guiding Light with him and come away with distinct impressions.
Will the Real Richard Scrushy Please Step Forward New York Times February 17, 2005
Richard Scrushy's charitable foundation gave Guiding Light Church $1.05 million in 2003, the foundation's biggest gift in the year that an investigation revealed accounting fraud at HealthSouth and prompted charges against its founder.
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Lowe said Scrushy has a history of giving money to predominantly black schools such as Miles College and Lawson State Community College. He directed HealthSouth to purchase Fairfield's struggling hospital, which served a large number of black patients."He was doing that before his trial came up," Lowe (Bishop Jim Lowe, pastor at Guiding Light) said. "My question has always been: Where were all of the white entrepreneurs and benefactors before? Here is a man who was doing something for the black community long before this trial came up. He's merely doing the same thing he always did."
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Lowe said Scrushy has become an active member of Guiding Light, teaching an entrepreneurship class and attending retreats. Scrushy also gives Lowe and other church officials financial advice.Scrushy uses Guiding Light's studios to produce his television show, "Viewpoint," hosted with his wife, that regularly features black preachers as guests. Lowe said Guiding Light brokered the purchase of the TV time, but Scrushy reimburses the church through sponsorships. Alamerica Bank, owned by Scrushy attorney Donald Watkins, is a sponsor.
Lowe said some members of his congregation have raised questions about Scrushy's reasons for attending Guiding Light. That prompted him to have Scrushy speak to the church during a Wednesday night service earlier this month.
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"He's been a blessing to us to see him continuously put his faith in Jesus and the onslaught he takes is a very inspirational thing to the vast majority of the congregation," Lowe said. "People will constantly say it's manipulative, and then we're seeing the truth of understanding the lies that people are saying about him. Seeing those lies is an eye-opener. Black people are not the only people that are railroaded by lies, and we see even whites railroad whites."
Scrushy foundation gave $1.05 million to Guiding Light The Birmingham News February 24, 2005
As members of Point of Grace Ministries, a Pentecostal congregation, pulled into the church parking lot on a Sunday evening early this month, they drove past a blue and white marquee blaring the featured attraction:"Join us tonight at 6 pm for a good time in Jesus. Special guest Richard Scrushy.
An hour later, the ousted chief executive of HealthSouth Corp., now on trial over a $2.7 billion, nearly seven-year accounting fraud at his company, was at the pulpit. Jesus one day will separate the blessed from the cursed, he said, quoting Matthew, just as a shepherd separates his sheep from the goats. "We can choose to be a goat or we can choose to be a sheep. We can choose to walk with the devil," Mr. Scrushy said, stepping from one side of the pulpit to the other. "Or we can choose to walk over here, with Him."
As a parade of witnesses has testified in federal court here to Mr. Scrushy's knowledge of the HealthSouth fraud, he and his attorneys have mounted a righteous rejoinder. They've pilloried government witnesses for their moral failings, while casting Mr. Scrushy as a target of overzealous prosecutors lost in their own complex accounting theories.
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Meanwhile, Mr. Scrushy has been preaching regularly for months at fundamentalist churches and appearing daily in a Scripture-laced morning TV show. Prosecutors privately contend it's all a bid for sympathy in this Bible Belt city, or an effort to reach jurors indirectly through family or friends. Mr. Scrushy denies it is anything of the sort, as do his attorneys.
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On Mr. Scrushy's TV talk show each weekday before court, at least 200 Christian ministers have been guests over the last year, by his count. Clergymen often accompany Mr. Scrushy to court. So do churchgoers such as Mona Beck, who spends much of her time there reading from a Bible in her lap and praying.His preaching is often at churches with large African-American congregations. Of the 12 jurors and four alternates, nine are African-Americans. His preaching "isn't about influencing jurors," Mr. Scrushy says in an interview.
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"Brother Richard has been with the Lord all his life," says Bishop Lowe. "As near as I can determine, he was always there."
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While many in Birmingham scoff at Mr. Scrushy as an opportunistic convert, religion has long been part of his life. As an 11-year-old, he accepted Jesus as his savior during a seven-day church revival in his native Selma, Ala., he says. Ten years later, he attended Bible studies at friends' houses that discussed the teachings of Jesus in the context of the Civil Rights movement, according to a friend, John Tabor.
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There is one sign his church appearances have impinged on the trial. The unexplained dismissal of a juror last month resulted because the juror belonged to a church where Mr. Scrushy had preached, say two lawyers familiar with the case.
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The Scrushy lawyers have also sought to make the moral laxity of some HealthSouth executives part of the defense. They signaled this intention in September 2003, just before prosecutors obtained an indictment of Mr. Scrushy. His lawyers sent prosecutors a document warning that the lawyers knew of "unsavory conduct" of key witnesses and noted that "the government will rely on such witnesses at its peril.... In a highly visible, national case, such backgrounds will inevitably surface in some form."
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On Wednesday evenings and on Sundays, he often preaches. He says he has become an ordained, nondenominational Christian preacher. Mr. Scrushy says his lawyers asked Judge Bowdre for a list of churches the jurors attend so he could avoid them.At Point of Grace Ministries on May 1, a mixed-race congregation watched as Bishop Dusty Hammock performed five full-dunk baptisms. Then Mr. Scrushy's wife, Leslie, was called to the pulpit. (In an interview, Ms. Scrushy says the embarrassment of the trial -- in which she says her husband has been unfairly dragged through the mud -- has made her no longer embarrassed to express her faith publicly. She also says that she sometimes speaks in tongues, an ability many Pentecostals regard as a gift from the Holy Spirit.)
Then Mr. Scrushy took the pulpit. He preached for 47 minutes, swinging from booming Southern cadence to tear-choked whispers. "I not only talk to God, I listen to Him," he said.
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He closed with a prayer, and the "Amens" gave way to a standing ovation as he walked down the steps to stand next to his wife. Soon, at Bishop Hammock's direction, many in the congregation were laying hands on Mr. Scrushy's shoulders and praying for him.Bishop Hammock also thanked the couple for their message. "People around the city know that we're friends with the Scrushys. They ask us all the time: 'He's guilty, isn't he?' They'll do it like that: 'He's guilty, isn't he?' And we go, 'Let me tell you something.... Everything I've seen in their life is a display of innocence and a display of character and integrity in God."
Faith and Hope : For Former HealthSouth Chief, :: An Appeal to Higher Authority THE WALL STREET JOURNAL May 13, 2005
More than a dozen supporters of Mr. Scrushy, both white and black, gathered in the lobby of the federal courthouse here on Tuesday afternoon."We believe in God, and what God wants is for Richard Scrushy's innocence to be shown to that jury," said one supporter, P. Donald Wilder, who identified himself as a minister.
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"There is not one e-mail, not one fax, not one document on their side," said Mr. Scrushy, accompanied by his wife, Leslie, who was clutching a small Bible.
Jury Hints of Impasse on Verdict on Scrushy The New York Times May 25, 2005
Throughout the six-month trial that led to Richard Scrushy's acquittal in the $2.7 billion fraud at HealthSouth Corp., a small, influential newspaper consistently printed articles sympathetic to the defense of the fired CEO.Audry Lewis, the author of those stories in The Birmingham Times, the city's oldest black-owned paper, now says she was secretly working on behalf of Scrushy, who she says paid her $11,000 through a public relations firm and typically read her articles before publication.
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The firm wrote another $5,000 check that day to the Rev. Herman Henderson, who employs Audry Lewis at his Believers Temple Church and was among the black preachers supporting Scrushy who were present in the courtroom throughout.Audry Lewis and Henderson now say Scrushy owes them $150,000 for the newspaper stories and other public relations work, including getting black pastors to attend the trial in a bid to sway the mostly black jury.
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Scrushy said he ''hit the ceiling'' when he learned that the PR firm had paid Henderson but added that he had considered Audry Lewis to be ''a nice Christian woman that thought we had been treated badly and she wanted to help.''Now he said he knows they are both ''about the bucks.''
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Audry Lewis' columns were uniformly flattering toward the defense, both before and after money changed hands. After Scrushy hired The Lewis Group, her stories moved from inside the newspaper to the front page.The day jurors got the case, the Times featured a front-page piece by Audry Lewis saying ''pastors and community leaders have rallied around Scrushy showing him the support of the Christian and African American community.''
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Scrushy gave Henderson's church and an associated thrift store five checks totaling $25,000 during and after the trial, according to copies of checks provided by Henderson.Henderson said he was paid for his efforts to raise support for the defendant, but Scrushy said he had given money to the church because Henderson and Audry Lewis had asked for his help with a church building project.
Writer Says Ex-Chief of HealthSouth Paid for Positive Coverage The New York Times (ASSOCIATED PRESS) January 19, 2006
An analysis by The Birmingham News found that churches and religious groups received most of the $716,000 in donations distributed by the Richard M. Scrushy Charitable Foundation in 2005, the year pastors and leaders of those groups regularly attended Scrushy's fraud trial.The trial in Birmingham ended with the HealthSouth founder and former CEO being acquitted. A separate trial in 2006 in Montgomery ended with Scrushy and former Gov. Don Siegelman being convicted bribery and conspiracy.
The 2005 charitable donations, revealed in tax records recently made public, show that of the 25 organizations receiving donations, only three had no apparent connection with a church or religious organization.
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The transition from secular to spiritual donations reflects changes in Scrushy's own life. He has gone from being the well-known leader of a major healthcare corporation to being the founder of his own church and the host of an early morning television Bible show seen in Birmingham and Montgomery.
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In 2004, his foundation made donations totaling $882,000, around $700,000 of which was to predominantly black churches and groups that made up the so-called "Amen Corner" that showed up daily at his six-month trial.Pastors of churches that received money from the foundation have said their backing of Scrushy during the trial came out of support for a fellow Christian they felt was innocent of the charges, not due to donations from his foundation.
The donations in 2005 also went mostly to religious groups.
Tax documents show the largest donations in 2005 were $164,000 to Guiding Light and $151,075 to Project One, an organization headed by Pastor James "Scott" Moore of Trinity Life Church in Bessemer. Trinity Life also received a separate $37,000 donation from Scrushy's foundation in 2005.
Those numbers were a fraction of what the foundation gave in 2004, when it donated $313,000 to Guiding Light and $300,000 to Trinity Life, documents show. The foundation gave $11,000 to Project One that year.
Moore supported Scrushy during the trial and founded the Kingdom Builders religious organization with him. Moore has also been a regular guest on "Viewpoint," the religious television show hosted by Scrushy and his wife, Leslie.
Scrushy's foundation gave $107,000 to World Outreach Ministries of Jacksonville, Fla., led by Bishop Lewis Jones, who lived with the Scrushys during the trial and accompanied them to the courthouse most days.
Special Forces for Jesus, whose leader Sherry Connor was a fixture at the fraud trial, received $71,500 from the foundation last year.
"Willing Wenkins at Bethel Baptist Church" was listed as getting $25,000. Bethel Baptist received a separate donation of $18,000.
The Rev. Tommy Lewis of Bethel Baptist regularly attended the trial and is a member of Kingdom Builders' Apostolic Council along with Scrushy and Trinity Life's Moore.
Scrushy reported a $25,000 donation to Christ Temple Deliverance Church, whose pastor, Theo Bailey, has been a vocal supporter of Scrushy.
Three other churches whose ministers either supported Scrushy at the trial or appeared regularly on his TV show received donations ranging from $2,500 to $4,400.
Scrushy foundation gave most money to churches, religious groups The Montgomery Advertiser (Associated Press) January 2, 2007
The fraud charges reflect the many press reports on this site and I will not dwell on them in detail. In essence they accuse Scrushy not only of being fully aware of the fraud but of being the driving force. They claim that he handed the accounting documents back to senior staff, when they did not meet analysts forecastes, telling them to fix them. He knew perfectly well what they were doing and discussed this with a small number of senior staff.
The initial 85 charges were later consolidated into 58 including some new charges. Scrushy denied them all.
Former HealthSouth Corp. head Richard Scrushy has been indicted on 85 counts in a massive federal fraud case that already has seen 15 former executives of the rehabilitating services giant plead guilty.The indictment, dated Oct. 29 and released Tuesday at the federal courthouse, accuses Scrushy of a range of criminal violations including securities fraud and false certification of corporate statements.
Former HealthSouth CEO Scrushy Indicted The Ledger-enquirer.com (Associated Press) November 4, 2003
Richard Scrushy, HealthSouth's ousted chairman and chief executive, was indicted Tuesday on charges of orchestrating one of the biggest accounting frauds in U.S. corporate history from 1996 to 2003.
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"I am deeply disappointed to have my innocence questioned and contested," he said on his <http://www.richardmscrushy.com/news.aspx>Web site. "The truth will emerge as I am able to confront my accusers and prove my innocence before a jury of my peers and the watchful eyes of our public."
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The criminal charges against Scrushy carry a maximum jail sentence of 650 years and $36 million in fines, plus forfeiture of personal assets.
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According to the indictment, Scrushy sought to control his co-conspirators through intimidation, threats, and installing equipment that allowed him to monitor their telephone conversations and e-mails.
Former HealthSouth CEO indicted : Feds want Scrushy to forfeit $278 million in assets CBS Marketwatch November 4, 2003
The indictment charges that Mr. Scrushy used threats, bribes, surveillance and eavesdropping to intimidate his lieutenants into participating in an effort to inflate the company's profits by $2.74 billion from 1996 to 2002. HealthSouth executives talked of "filling the hole" or "filling the gap" when they made false entries in the company's books, the indictment says.
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