A former HealthSouth executive lashed out at both prosecutors and the defense yesterday but stuck by his claim that fired CEO Richard Scrushy was in on a massive earnings overstatement.
BIRMINGHAM, Ala. — A former HealthSouth executive lashed out at both prosecutors and the defense yesterday but stuck by his claim that fired CEO Richard Scrushy was in on a massive earnings overstatement.
Under cross-examination for a second day, former Chief Financial Officer Tadd McVay grew testy as Scrushy lawyer Jim Parkman suggested he was lying about Scrushy’s involvement in the fraud to gain favor with prosecutors, including Richard Wiedis, who questioned McVay earlier.
In a firm voice, McVay denied Parkman’s claims. And McVay recalled Wiedis asking a judge to send him to prison for five years during his sentencing hearing in 2004.
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Wiedis, McVay said, made him sound like “the scum of the earth” while he was “begging” the judge for prison time.
“I’m not sure I like dealing with Mr. Wiedis much better than I like dealing with Mr. Parkman,” McVay told Parkman, prompting laughter in the courtroom.
Parkman persisted, asking if McVay would do “anything to avoid prison.”
“I told the truth, period,” said McVay, the fourth former CFO to tie Scrushy to the scheme.
McVay could have received 15 years in prison after pleading guilty to conspiracy and signing a false financial certification. But a judge rejected the government’s bid for prison time and sentenced him to six months of house arrest, five years on probation and ordered him to pay $60,000 in criminal forfeitures and fines.
Keeping up his attack, Parkman asked if McVay got to stay in his “very nice home” while under house arrest and to keep the home despite his role in what evidence has shown was a $2.7 billion fraud.
“My home was paid for before I ever went to work at HealthSouth,” said McVay.
Prosecutors claim Scrushy led a conspiracy to inflate HealthSouth’s earnings over seven years beginning in 1996. Scrushy got rich off the scheme by making millions from bonuses, stock sales and salary, they claim.
The defense contends Scrushy subordinates committed the fraud by themselves and lied to him to cover it up so they could climb the corporate ladder.
Helping bolster part of the defense’s case, McVay testified that former HealthSouth finance chief Bill Owens — not Scrushy — supplied the bogus numbers that Scrushy quoted during conference calls with investors.
Owens and McVay are among 15 people who pleaded guilty in the fraud at the rehabilitation and medical-services chain. The defense contends Owens was a leader of the scheme to inflate earnings without Scrushy’s knowledge.
Another former executive who pleaded guilty, investments vice president Will Hicks, testified that Scrushy sent him an e-mail urging him to complete the sale of HealthSouth’s partial ownership of CompHealth in January 2003, when HealthSouth was short on cash.
“Get it done and get most you can. We need this money bad,” said the e-mail, which was shown to jurors.
Hicks said HealthSouth had put $1.5 million into CompHealth, a medical staffing company, and had an offer to sell it for $15 million. HealthSouth’s stake later sold for $14 million, he said.
Prosecutors also showed jurors cellphone records and flight logs from a HealthSouth corporate jet indicating Scrushy was in the Birmingham area the afternoon of Aug. 5, 2002, the day Owens testified he and Scrushy held a key meeting about the fraud at Scrushy’s home in Birmingham. The defense earlier claimed Scrushy was out of town that day.
Scrushy is charged with false corporate reporting in the first test of the 2002 Sarbanes-Oxley Act against a chief executive. He also is charged with conspiracy, fraud, money laundering, obstruction of justice and perjury.
Scrushy could get the equivalent of a life sentence if convicted on all charges. He could be ordered to forfeit as much as $278 million in assets.