Fired HealthSouth CEO Richard Scrushy was an overbearing "Pied Piper" who led underlings into a $2.7 billion accounting fraud so he could...
BIRMINGHAM, Ala. — Fired HealthSouth CEO Richard Scrushy was an overbearing “Pied Piper” who led underlings into a $2.7 billion accounting fraud so he could get fabulously rich, prosecutors told jurors yesterday.
But the defense countered in closing arguments that Scrushy was betrayed by subordinates, and not a single piece of evidence clearly linked him to the crime. In a folksy drawl, Scrushy lawyer Jim Parkman even called a main prosecution witness “a big rat.”
U.S. Attorney Alice Martin, describing Scrushy as a “financial genius” and “master manipulator,” said all the evidence pointed toward Scrushy directing the massive earnings overstatement, which took the rehabilitation and medical chain to the edge of bankruptcy.
Scrushy made hundreds of millions of dollars off bonuses and stock options simply by signing financial reports containing billions of dollars in false numbers created by workers in HealthSouth’s accounting department, she said.
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The defense disagreed, claiming that subordinates pulled off the systematic accounting scheme and hid it from Scrushy for years. The government “completely botched” the HealthSouth investigation, said Scrushy attorney Art Leach.
Scrushy, HealthSouth’s primary founder in 1984, already had $175 million in assets before the fraud began, Leach told jurors as he argued that the crime couldn’t have paid well enough for Scrushy to get involved in fraud.
Jury deliberations will begin today in a trial that started Jan. 25.
Scrushy is the first chief executive accused of violating the Sarbanes-Oxley Act, passed three years ago in response to a string of corporate scandals. He also is accused of conspiracy, false reporting to the Securities and Exchange Commission, multiple fraud counts and money laundering.
Scrushy, 52, faces millions of dollars in fines and a maximum sentence that amounts to life if convicted of all counts, and prosecutors are seeking $278 million in assets including vintage cars, oceangoing boats, mansions and art they claim were linked to the fraud.
Seated beside his attorneys and with his wife and other relatives behind him in a full courtroom, Scrushy showed no emotion during closing arguments.
Martin told jurors that years of financial statements seen only by Scrushy and a few others prove his guilt, along with the testimony of one-time aides including former Chief Financial Officer Bill Owens, one of 15 former HealthSouth executives and five ex-CFOs who pleaded guilty.
As Martin provided commentary, jurors listened to a key part of the prosecution’s case: secret recordings that Owens made for the FBI of private talks with Scrushy.
During one exchange, Scrushy asked Owens: “You’re not wired, are you?”
Martin said greed got the best of Scrushy, along with an immense ego and unrelenting pressure to meet Wall Street forecasts.
“Richard Scrushy is guilty beyond a reasonable doubt of having directed and participated in this huge accounting fraud,” Martin told jurors.
The defense painted a completely different picture, depicting Scrushy as a hardworking idea man who was unaware of a conspiracy led by Owens. Parkman called Owens “a big rat” leading “a bunch of little mice” to commit fraud.
Repeating a near-constant theme of the defense, Leach told jurors that prosecutors failed to find a single memo, letter or e-mail that clearly linked Scrushy to the fraud, which evidence showed lasted from 1996 through 2002.