Risk Management

Ex-CFO Helps Healthsouth Fight Scrushy

Mike Martin, who faces resentencing for his role in HealthSouth's accounting fraud, has cooperated in two cases against his former boss, Richard Sc...
Stephen TaubSeptember 11, 2006

A former finance chief for HealthSouth is helping the company fight former CEO Richard Scrushy’s claims against the company for $35 million in legal fees, according to The Birmingham News, citing court filings.

Mike Martin, who on Tuesday will be resentenced for his role in HealthSouth’s massive accounting fraud, has already met four times with company attorney Julia Cooper, according to the report. His cooperation may help him win a lighter sentence tomorrow from U.S. District Judge L. Scott Coogler.

“Mr. Martin’s testimony was significantly valuable in helping HealthSouth resist Mr. Scrushy’s claims for tens of millions of dollars,” Martin’s attorneys wrote Coogler in their filing for leniency, according to the report.

Scrushy, who was acquitted of charges stemming from the accounting scandal, subsequently demanded that HealthSouth pay him $35 million in legal fees incurred since the fraud was exposed in March 2003.

Martin was a key prosecution witness in Scrushy’s trail. He also reportedly played a key role providing testimony in the trial earlier this year that found Scrushy and former Gov. Don Siegelman guilty of bribery, conspiracy and mail fraud. In that case, Scrushy was charged with Scrushy bribing Siegelman for a seat on the state Certificate of Need Review Board by arranging two $250,000 donations to Siegelman’s 1999 lottery campaign, the paper noted.

“Martin’s testimony was absolutely vital to our case and critical to obtaining a conviction,” U.S. Attorney Louis Franklin wrote in a letter in support of Martin, according to the paper. “Mr. Martin was one of the only witnesses who provided first-hand evidence of defendant Scrushy’s state of mind, including that he viewed the contribution as a way to purchase a specific official act from defendant Siegelman.”

The paper noted that Martin’s initial sentence in the Healthsouth fraud case by Chief U.S. District Judge U.W. Clemon was deemed to be too light by an appeals court.

Martin has served seven days in prison and six months of home detention. He also forfeited $2.375 million that he allegedly was paid as a result of the fraud and paid a $50,000 fine, according to the report.