Accounting & Tax

Former HealthSouth CFO Singles Out Scrushy

In an affidavit, former finance chief William Owens cites Scrushy as the center of HealthSouth's accounting fraud.
Stephen TaubDecember 8, 2004

Blame Scrushy. That’s what former HealthSouth Corp. chief financial officer William Owens told investigators probing the company’s massive accounting scandal, according to the Associated Press, which cited an affidavit unsealed Monday.

Owens, who is expected to be a key government witness at the upcoming trial of former chief executive officer Richard Scrushy, told investigators that Scrushy personally told management to make sure earnings per share came in at a dollar in 1999, twice what they should have been, according to the AP.

Scrushy, whose trial is scheduled to begin January 5, also refused subordinates’ requests to end the fraud, fearing it would hurt the company’s stock price, AP, citing Owens’ sworn statement, reported.

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Owens’ statement was contained in an affidavit that FBI agent Alton Sizemore Jr. submitted in asking a judge to approve a search warrant for HealthSouth’s headquarters in March 2003, the wire service reported.

“The public will see that this affidavit is based on lies and inconsistencies,” Scrushy attorney Art Leach said Monday evening, according to the AP. “The information provided by Richard Scrushy when he was unaware that he was being taped by the FBI directly contradicts the statements in the affidavit.”

Owens is one of about 15 former executives awaiting sentencing after pleading guilty to participating in the fraud. He started working at HealthSouth in 1986.

The former CFO reportedly told agents that Scrushy received weekly and quarterly revenue reports reflecting the company’s true finances, according to the AP’s account of Sizemore’s statement. “Owens personally observed Scrushy regularly reject the accumulated quarterly revenue figures, which were presented to him before quarterly and annual reports were to be filed with the SEC, and demand that changes be made to meet market expectations,” the affidavit reportedly said.

Acting on Scrushy’s instructions, Owens “helped devise various schemes to arbitrarily inflate the revenue figures,” according to the Sizemore affidavit.

Sizemore also cited another former HealthSouth CFO who pleaded guilty and is awaiting sentencing, Weston Smith. Smith, the document reportedly says, only heard from associates that Scrushy was demanding changes in revenue reports, the AP said. He said he participated in meetings with a group called “the family” that helped inflate numbers after the true earnings were rejected by Scrushy.

Although Smith wanted to resign because he feared being prosecuted, Scrushy assured him, “we’re not going to play games any more” with HealthSouth finances, according to the AP.

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