In testimony yesterday, a former HealthSouth executive didn't include Richard Scrushy among the people who helped pull off what prosecutors describe as a huge fraud at the medical-rehabilitation giant.
BIRMINGHAM, Ala. — A former HealthSouth executive testifying yesterday in the trial of Richard Scrushy didn’t include the ousted chief executive among the people who helped pull off what prosecutors describe as a huge fraud at the medical-rehabilitation giant.
Under cross-examination by Scrushy lawyer Art Leach, former assistant controller Ken Livesay listed himself and nine other people as members of “the family,” the group that engineered the scheme to overstate earnings.
But Livesay — who pleaded guilty shortly after the fraud became public — didn’t include Scrushy in the group, and he said he never told Scrushy about his discomfort after “aggressive” accounting at HealthSouth became outright fraud in 1996.
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“Did you ever speak to Richard Scrushy about crossing that line?” Leach asked.
“I did not,” said Livesay, who earlier testified that two superiors, finance executives Bill Owens and Mike Martin, told him Scrushy knew of the fraud.
Earlier, Owens testified he considered his private discussions with Scrushy about the fraud to be family meetings. Owens said Scrushy directed the scheme but wasn’t necessarily aware of all its details.
Scrushy is accused of directing a conspiracy to inflate HealthSouth earnings by some $2.7 billion for seven years beginning in 1996. Prosecutors contend he made millions off the scam through stock sales, bonuses and salary.
The defense argues underlings including Livesay committed the fraud on their own and lied to Scrushy for years to keep it hidden.
Attempting to bolster the defense claim, Leach tried to show that Livesay got off light after admitting his guilt because he agreed to testify against Scrushy. Livesay said he avoided prison time and had to pay only $750,000 in restitution for a fraud prosecutors estimate at $2.7 billion.
“You could be held responsible for all the fraud in the HealthSouth case, couldn’t you?” Leach asked.
“Yes,” responded Livesay, one of 15 former HealthSouth executives to reach plea deals with prosecutors.
Scrushy is on trial on charges including conspiracy, fraud, money laundering, obstruction of justice and perjury. He also is charged with false corporate reporting in the first test of the 2002 Sarbanes-Oxley Act against a chief executive.