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Pastimes : Investment Chat Board Lawsuits -- Ignore unavailable to you. Want to Upgrade?

To: RavenTree who wrote (8570)	6/28/2005 5:06:09 PM
From: scion	Respond to of 12465

Scrushy Is Found Not Guilty In HealthSouth Fraud Case By DAN MORSE and CHAD TERHUNE Staff Reporters of THE WALL STREET JOURNAL June 28, 2005 3:53 p.m. BIRMINGHAM, Ala. -- A federal jury acquitted HealthSouth Corp. founder Richard M. Scrushy of participating in a $2.7 billion accounting fraud at the chain of rehabilitation and outpatient-surgery clinics he led for nearly 20 years, handing the federal government a stinging defeat in its prosecution of a string of high-profile corporate scandals. After deliberating for 21 days, the jury found Mr. Scrushy not guilty of all 36 criminal counts he faced, including conspiracy and securities fraud. The government also failed in its first attempt to convince a jury to convict a chief executive for violating the Sarbanes-Oxley Act, the 2002 law requiring CEOs and finance chiefs to attest personally to the accuracy of their corporate financial filings. The verdict is vindication for the 52-year-old Mr. Scrushy, who repeatedly proclaimed no knowledge of the fraud, claiming subordinates were trying to pin the scheme on him to win lighter punishment for their crimes. "God is good," Mr. Scrushy said shortly before leaving the courthouse here. Outside the courthouse, with his wife Leslie at his side, he thanked his ministers before expressing gratitude to his lawyers. "Jesus taught us how to love each other," he said. "We've got to have compassion, folks, because you don't know who's going to be attacked next." Richard Smith, one of the federal prosecutors who worked on the case, said the government still plans to pursue perjury counts against Mr. Scrushy that were dismissed before the case went to the jury. The judge's ruling on those counts has been appealed. In a brief statement issued after the verdicts, HealthSouth said: "The new board and new management team remain appalled by the multibillion dollar fraud that took place under Mr. Scrushy's management and the environment under which such fraud could occur. Under no circumstances will Mr. Scrushy be offered any position within the company by this management team or by this board of directors." Case Built on CFO Testimony Federal prosecutors in the Scrushy trial built their case largely on the testimony of high-ranking HealthSouth executives, led by all five chief financial officers under Mr. Scrushy. They had pleaded guilty and agreed to testify against their former boss. Mr. Scrushy never took the stand to tell his side of the story directly. In the end, it wasn't immediately clear what swayed the jury of seven men and five women to Mr. Scrushy's side. The verdict came in the fourth day of deliberations since U.S. District Judge Karon O. Bowdre dismissed one ailing juror, recalled an alternate and ordered the panel to restart deliberations. Under the court's rules, the names of the jurors and alternates won't be publicly disclosed until 24 hours after the jury is released from service by the judge. Still, the acquittal shows the government was unable to overcome hurdles that included no documents or email linking Mr. Scrushy directly to the fraud. At the trial, Kenneth Livesay, a former HealthSouth assistant controller who pleaded guilty to participating in the scheme, testified Mr. Scrushy never attended any of the "family" meetings where executives devised ways to inflate earnings. In theory, Mr. Scrushy could have faced a sentence of more than 500 years, based on adding up the maximum punishment for each charge for which he was convicted. But the sentences would almost certainly have run concurrently. In addition, a Supreme Court ruling in January on federal sentencing guidelines would have given Judge Bowdre leeway in determining Mr. Scrushy's punishment. He could have been sentenced to 20 years on the Sarbanes-Oxley violation or gotten lighter punishment if the judge weighed the fact that several witnesses at Mr. Scrushy's trial who pleaded guilty to charges stemming from the fraud got no prison time. Restating Results HealthSouth fired Mr. Scrushy when the fraud was exposed, and has worked to reconstruct its books to undo the profits resulting from the scheme. On Monday, the company filed restated financial statements that slashed more than $1 billion in profit and revenue from the results it originally reported for 2000 to 2002. (See article.) Mr. Scrushy and other trial participants kept the proceedings inside and outside the courtroom colorful through the trial. Mr. Scrushy preached regularly for months at fundamentalist churches and appeared daily in a Scripture-laced morning TV show. Prosecutors privately contended it was all a bid for sympathy in the Bible Belt city of Birmingham, or an effort to reach jurors indirectly through family or friends. Mr. Scrushy denied it was anything of the sort, as did his attorneys. Late in the proceedings, the Birmingham News quoted from the previously sealed transcript of a Nov. 4, 2003, hearing, in which Judge Bowdre disclosed her contacts with Mr. Scrushy and some of his relatives to attorneys on both sides of the case. She offered to consider a motion to recuse herself, but neither the U.S. attorney's office nor Mr. Scrushy's lawyers asked the judge to withdraw. --Betsy McKay, Evan Perez and Evelina Shmuker contributed to this article. Write to Dan Morse at dan.morse@wsj.com and Chad Terhune at chad.terhune@wsj.com