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Ex-Health South CFO: Scrushy ‘directed’ fraud

Associated Press

BIRMINGHAM, Ala. — Fired HealthSouth CEO Richard Scrushy actively orchestrated and participated in a scheme to overstate earnings at the rehabilitation giant, a former finance chief testified Tuesday as prosecutors got to the heart of their multibillion dollar fraud case against Scrushy.

Bill Owens, who served as HealthSouth Corp.’s chief financial officer and secretly recorded talks with Scrushy for the FBI in 2003, painted his one-time boss as a micromanager who oversaw everything from major acquisitions to who parked where at headquarters.

“Basically, he was responsible for everything,” said Owens.

Owens said after Scrushy “directed” him to overstate earnings, it was his job to figure out how to alter financial statements and accounts. Owens, an accountant, went through a long list of executives he said helped with the scheme.

Owens said it was “very important” to Scrushy that HealthSouth meet Wall Street earnings estimates. Scrushy told him and another former CFO, Aaron Beam, to “fix the numbers” once a shortfall occurred in 1996, Owens said.

“His primary question to me was could I get this past the auditors,” Owens said. Scrushy later pressured him and Beam to continue the fraud as HealthSouth’s real numbers sagged, Owens said.

Prosecutors allege Scrushy directed a fraud that led to the overstatement of HealthSouth earnings by some $2.7 billion and enriched himself. They accuse him of using bonuses, profits from stock sales and his salary to finance a lavish lifestyle of mansions, luxury cars, boats, jewels and art.

If convicted, he could receive what amounts to a life sentence. Prosecutors also are seeking $278 million in assets. The defense contends Owens and other subordinates in HealthSouth’s corporate accounting offices lied to Scrushy for years, leaving him unaware of the conspiracy.

Scrushy has depicted Owens as the leader of the fraud, with defense lawyer Jim Parkman calling Owens the “godfather” of a “family” that was in on the scam, which lasted seven years.