Accounting & Tax

Prosecutors Finally Rest in Scrushy Case

Government attorneys have moved to block the testimony of a prospective witness who the defense may call to testify about the authenticity of secre...
Stephen Taub and Dave CookApril 21, 2005

The prosecution finally rested its case against HealthSouth Corp. founder and former chief executive officer Richard Scrushy, whose trial began January 25.

“This has been a long time coming. We’ve all been looking forward to this day,” said U.S. District Court Judge Karon Bowdre in the Birmingham, Alabama courtroom, reported Reuters.

Scrushy has been accused by federal prosecutors of overseeing a scheme to deliberately inflate HealthSouth’s earnings and assets by roughly $2.7 billion over several years. He was indicted in November 2003 on 85 counts “stemming from a wide-ranging scheme to defraud investors, the public and the U.S. government about HealthSouth’s financial condition,” according to a statement at the time from the Department of Justice.

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According to Reuters, U.S. Attorney Alice Martin told reporters outside the courtroom that her team “presented direct testimony from five witnesses with clear discussions of the fraud, not ambiguous but direct discussions,” referring to the testimony of five former HealthSouth chief financial officers. Two of the most significant pieces of evidence that Martin singled out, the wire service added, were a ledger that itemized the fraud, kept by former treasurer Leif Murphy, and secretly taped conversations between Scrushy and former CFO William Owens.

According to the Associated Press, 15 former HealthSouth executives have pleaded guilty and cooperated with prosecutors.

Scrushy attorney Lewis Gillis told reporters he planned to file a motion to dismiss the entire case, adding that “the government presented a flimsy case,” Reuters reported. According to the AP, the defense has indeed filed that motion, and Judge Bowdre has scheduled a hearing today.

In anticipation that the trial will continue, the AP added that prosecutors have moved to block the testimony of prospective witness Paul Ginsberg, who the defense may call to testify about the authenticity of the Scrushy-Owens recordings.

Of the 54 criminal charges remaining against Scrushy from the 85 in the original indictment, the prosecution also asked that two more be dropped, according to Reuters: a money laundering charge related to Scrushy’s purchase of antique Persian rugs, because “pertinent business records have been destroyed,” and a mail fraud charge, because it involves documents sent through a bank outside the prosecutor’s jurisdiction.

If convicted on the remaining counts, Scrushy could be effectively sentenced to life in prison and ordered to surrender assets totaling about $278 million, according to the AP.

Meanwhile, in New York the trial continues against former Tyco chief executive officer Dennis Kozlowski and former chief financial officer Mark Swartz on charges of grand larceny and securities fraud. Each faces up to 25 years in prison on the most serious charge of grand larceny, the AP pointed out.