Scrushy Lawyers Seek to Overturn Sarbanes Act

Attorneys for ousted HealthSouth Corp. Chief Executive Richard Scrushy said Tuesday that they would challenge a new federal law aimed at false corporate reports and used for the first time against Scrushy in a massive accounting fraud case.

In a meeting with U.S. District Judge T. Michael Putnam, the Scrushy defense team said it would seek to overturn what is known as the Sarbanes-Oxley Act, which was passed in the wake of scandals at Enron Corp., WorldCom Inc. and other corporate giants.

The law requires chief executives and chief financial officers to certify their company’s financial statements as accurate and holds them criminally liable for falsehoods. Scrushy is accused of signing off on false earnings reports in a scheme that inflated numbers for his own enrichment.

Scrushy attorney Abbe Lowell declined to give details, but he said such a legal challenge was common where a law was being used for the first time.

U.S. Atty. Alice Martin said the move had been anticipated and that her office and the Justice Department would work together to defend the new law.

Although Scrushy is set for trial Feb. 2, both sides agreed that a delay was needed because of the expected challenge to the law and the fact that the government has said it has more than 1 million documents to turn over to the defense.

Martin said she would ask the defense to agree to a trial date in August. Lowell was noncommittal on whether that would be acceptable to the defense.

Scrushy, 51, faces an 85-count indictment that charges him with conspiracy, wire fraud, mail fraud, securities fraud and money laundering. He is accused of directing accounting fraud at HealthSouth that inflated profit, revenue and assets by $2.7 billion since 1996.

Separately, a lawyer for Scrushy denied a filing by authorities that said Scrushy used fraudulently obtained money to pay $21 million in legal fees.