HealthSouth Judge Hears Recording

A secretly recorded conversation suggesting HealthSouth Corp. founder Richard Scrushy was aware of fraudulent accounting was admitted as evidence Thursday in a hearing over whether to unfreeze Scrushy’s assets.

Over the objections of Scrushy’s lawyers, U.S. District Judge Inge Johnson ruled that Securities and Exchange Commission attorneys could play excerpts of Scrushy’s conversation with a former chief financial officer. Scrushy’s lawyers argued in vain that the recording could have been tampered with and was therefore inadmissible.

HealthSouth, the nation’s largest operator of rehabilitation hospitals and surgical clinics, fired Scrushy last week as chairman and chief executive. He faces civil insider trading and fraud charges stemming from an alleged conspiracy to overstate earnings by $1.4 billion and assets by $800 million since 1999.

“We just need to get those numbers where we want them to be. You’re my guy. You’ve got the technology and know-how,” Scrushy was heard telling William Owens, one of three former CFOs who have agreed to cooperate with government probes of Scrushy and HealthSouth.

Owens, one of eight former HealthSouth executives who have pleaded guilty to criminal fraud and conspiracy charges in the accounting scandal, agreed to an FBI request to wear a wire to record the conversation.

On the tape, Scrushy said he would listen to whatever solution Owens was proposing, but he appeared to be trying to talk Owens out of actions that might damage the company.

“I have small children. I look around and I say, ‘Do I really want to trash all this?”’ Scrushy was heard to say.