HealthSouth founder and former CEO Richard Scrushy, on trial for leading a $2.7 billion fraud at his own company, is a self-taught "financial...
HealthSouth founder and former CEO Richard Scrushy, on trial for leading a $2.7 billion fraud at his own company, is a self-taught “financial genius” who understands accounting issues, an ex-board member testified yesterday.
Charles Newhall, a HealthSouth board member from 1986 to 2004, said he trusted Scrushy’s business acumen so much that he invested in the rehabilitation-hospital chain when it was still a startup company. Newhall, the third board member to testify for the defense, said they served together on five corporate boards since 1986.
“He was better with numbers than any investment banker I have ever seen,” Newhall told jurors in Birmingham, Ala. federal court. He also said that he considered using his own venture-capital company to perform a leveraged buyout of HealthSouth in March 2003. Newhall said he abandoned the idea a week later when the FBI raided HealthSouth’s offices.
Newhall is the fifth defense witness to undercut Scrushy’s contention that he left business details to subordinates, who in turn hid the fraud from him. The trial is in its 15th week.
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In an interview outside the courtroom, Scrushy lawyer Jim Parkman said the defense is trying to show that the fraud required specialized accounting knowledge to create fake entries in company books, something that neither Scrushy nor the board members had.
“There is a distinction between understanding accounting and how deep your knowledge is,” said Martin Adams, another Scrushy lawyer.
Scrushy is charged with money-laundering, wire, mail and securities fraud. If convicted he faces dozens of years in prison and forfeiture of $279 million in assets. He claims ex-HealthSouth finance chief Bill Owens orchestrated the fraud with the help of 14 other company executives. All 15 pleaded guilty to fraud.