Former HealthSouth Chief Executive Officer Richard Scrushy wants to testify in his own defense at his securities-fraud trial, and his defense...

Share story

Former HealthSouth Chief Executive Officer Richard Scrushy wants to testify in his own defense at his securities-fraud trial, and his defense team is divided over whether such a move is advisable, an attorney said.

Scrushy, accused of a $2.7 billion fraud, wants to proclaim his innocence to jurors in Birmingham, Ala., federal court, said Jim Parkman, one of his defense lawyers. Five ex-finance chiefs have implicated Scrushy. Prosecutors said they hope to rest their case next week.

Parkman said that exposing Scrushy to tough questioning by prosecutors is a gamble that could backfire. Parkman said two other defense attorneys, Donald Watkins and Art Leach, currently favor letting Scrushy tell his story. Several witnesses said Scrushy is a charismatic salesman who is used to getting his way.

Most Read Stories

Unlimited Digital Access. $1 for 4 weeks

“He could make a misstatement,” Parkman said outside the federal courthouse on Tuesday. “And that one thing can kill you. Fear of the unknown ought to scare any lawyer. It scares me. I don’t want it blown over one little question.”

Defense attorneys say that the decision on whether to put a defendant on the witness stand may be the most important one they face at trial. Former WorldCom CEO Bernard Ebbers testified at his accounting-fraud trial after his former finance chief testified against him. Ebbers was convicted on March 15 by jurors who rejected his story.

Jurors convicted former Credit Suisse First Boston banker Frank Quattrone after he testified at his obstruction-of-justice trial. Martha Stewart, the homemaking entrepreneur, did not take the stand at her obstruction-of-justice trial and was convicted.

“It’s one of the most difficult decisions for a lawyer,” said defense attorney Thomas Puccio. If a client takes the stand, the case turns from “whether jurors believe the prosecution’s case to whether they believe the defendant.”

Puccio represented former Cendant Vice Chairman E. Kirk Shelton, who testified for 10 days at his accounting-fraud trial and was convicted on Jan. 4.

Since Scrushy’s trial began Jan. 25, prosecution witnesses have testified that he ran the fraud from 1996 to 2002 at HealthSouth, the largest U.S. operator of rehabilitation hospitals. Scrushy also laundered money to live a lavish lifestyle and lied to U.S. investigators probing his sale of company stock, prosecutors say.

Scrushy, who faces dozens of years in prison and forfeiture of $279 million in assets, denies wrongdoing and blames the fraud on 15 executives who pleaded guilty. His attorneys attacked the credibility of the government’s witnesses and claim that he was lied to by a group of executives who enriched themselves.

Disagreement among defense lawyers about having a client testify is common, said Duke University law professor Jim Cox. He said Scrushy’s testimony “will be brutal” for the defense.

“We all have different levels of risk tolerance … ,” Cox said. “The only surprise is how well Scrushy will do after two or three days of being skewered. With him, prosecutors don’t have to be delicate. This is not a pitiful character.”

U.S. Attorney Alice Martin, who is prosecuting Scrushy, has declined to talk about the trial, citing a judicial gag order.

Defendants have no legal obligation to testify, and judges tell juries not to infer wrongdoing if they remain silent. Testifying would mean Scrushy will face cross-examination by prosecutors who could introduce evidence of related conduct not charged in the 58-count indictment.

Several witnesses who pleaded guilty and testified against Scrushy described his powers of persuasion. Jurors have heard and seen audiotapes and videotapes of him hyping the company’s financial condition. Former finance chief William Owens, who secretly taped Scrushy for the Federal Bureau of Investigation, told jurors, “Richard may be the best salesman I ever met.”

Scrushy risks appearing nervous or unlikable if he testifies, Parkman said. The decision on whether to put Scrushy on the stand will be based on a gut feeling “the night before,” Parkman said. If Leach and Watkins insist that Scrushy testify, “I will cede to the majority,” Parkman said.

Parkman said he would limit questions to a rebuttal of testimony of the five CFOs who claim Scrushy directed them to inflate revenue, overvalue assets or hide expenses.

Scrushy also would testify about the conversations that Owens recorded and which prosecutors played for jurors, Parkman said. On one tape, made just hours before the FBI raided HealthSouth’s headquarters on March 18, 2003, Owens said his wife feared he would go to prison if he signed more “phony financial statements.”

If he testified, Scrushy would put that conversation in a broader context and explain why he didn’t appear outraged at the mention of phony records, Parkman said.

Other defense witnesses will talk about Scrushy’s church donations and good works in the community. “Mr. Scrushy shouldn’t toot his own horn,” Parkman said.