Jury Acquits Scrushy In HealthSouth Fraud Trial

KTVU 2 Bay Insider

KTVU 2 Bay Insider Mobile, AL

POSTED: 10:09 am PDT June 28, 2005

UPDATED: 11:23 am PDT June 28, 2005

BIRMINGHAM, Ala. — In a stunning defeat for federal prosecutors, a federal jury in Birmingham has found former HealthSouth founder and ousted CEO Richard Scrushy not guilty on all 36 counts of fraud, securities violations, money laundering and conspiracy.

Tuesday’s decision comes on the fifth day of deliberations since Judge Karon Bowdre replaced a sick juror with an alternate and told the panel to start from scratch.

Prosecutors had alleged Scrushy directed a more than $2 billion earnings overstatement over seven years beginning in 1996 at HealthSouth — a medical services company.

Prosecutors had portrayed Scrushy as a micro-manager who dictated everything from T-shirt designs to seating in the executive dining room.

His defense team said about 15 HealthSouth executives had hidden the fraud from Scrushy.

The group called itself “the family,” and they’d gather in the company’s conference rooms to figure out how much fraud was needed to make it appear HealthSouth was meeting forecasts.

They have all pleaded guilty.

Scrushy had been on trial since Jan. 25. Jury deliberations began May 19.

Scrushy was the first chief executive charged under the Sarbanes-Oxley law, passed by Congress in 2002 after a wave of corporate accounting scandals.

After the verdict was announced, Jim Parkman, one of Scrushy’s lawyers, told WVTM-TV that he was “thrilled it was over, and that we did well. It ain’t bad for a bunch of hicks.”

U.S Attorney Alice Martin told reporters following the verdict that she was “shocked at today’s verdict. I think it’s a blow to the victims of this fraud.”

The scene outside of the Federal courthouse Tuesday afternoon was punctured by security concerns. Police were seen taking one person into custody following the announcement of the verdict.

Scrushy attorney Jim Parkman told reporters that “There were reports of someone out here with a firearm, and we were concerned about that.”

While this portion of the HealthSouth fraud saga is drawing to a close, there are still a number legal options under consideration by federal prosecutors and stock holders.

Several stockholder groups are reportedly considering filing a civil suit.

Martin told reporters that prosecutors planned to appeal Judge Karon Bowdre’s decision to throw out some of the counts during the trial.

Art Leach, another member of Scushy’s defense team, said there were a number of other legal issues left to deal with, including the release of his bond, passport and assets that had previously been seized by prosecutors.

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