Accounting & Tax

Scrushy Case to Go to Jury

One Sarbanes-Oxley count was thrown out last week; one more remains to be decided.
Stephen TaubMay 16, 2005

Richard Scrushy’s fate could be decided this week.

Last Thursday in a federal court in Birmingham, Alabama, the defense rested without calling HealthSouth Corp.’s founder and former chief executive officer to the stand. U.S. District Judge Karon Bowdre is preparing her instructions to the jury and plans to begin them tomorrow, reported Reuters.

Closing arguments, originally scheduled for today, were postponed late last week to give both sides more time to prepare, according to the judge. Those arguments will now begin on Wednesday; the case will probably go to the jury a day later.

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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.

Judge Bowdre gave Scrushy some good news on Friday when she threw out two charges against him: one count of pressuring a former company executive to sign a false certification under the Sarbanes-Oxley Act, and one count of obstruction of justice. Scrushy now faces 36 charges, according to the Associated Press, plus another 12 if he is convicted, seeking the forfeiture of $278 million in assets.

In throwing out the Sarbox-related charge, Judge
Bowdre said prosecutors did not present enough
evidence to support their allegation that Scrushy
caused former finance chief William Owens to falsify certify a Securities and Exchange Commission filing. Owens was one of five ex-CFOs of HealthSouth who pleaded guilty and testified against their former boss, reported The New York Times.

Of three Sarbanes-Oxley counts in the original indictment, the only one that jurors will consider, reported the Birmingham Business Journal, is a charge of false certification of financial results in August 2002. In December, Judge Bowdre rejected an argument by Scrushy’s lawyers that the landmark law is vaguely worded and therefore unconstitutional.

In additional to what may be millions of dollars in fines and forfeitures, Scrushy, who is 52, faces what amounts to a life sentence if he is convicted on all remaining counts.