Scrushy Participated in Scheme, Ex-CFO Says
Fired HealthSouth Corp. Chief Executive Richard Scrushy actively orchestrated and participated in a scheme to overstate earnings at the rehabilitation giant, a former finance chief testified Tuesday.
Bill Owens, who served as HealthSouth’s chief financial officer and secretly recorded talks with Scrushy for the FBI in 2003, painted his onetime boss as a micromanager who oversaw everything from major acquisitions to who parked where at headquarters.
“Basically, he was responsible for everything,” Owens said.
Owens said that 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, Owens said.
After adding millions in false revenue to the books, Owens said, he took the new, bogus numbers to Scrushy and explained what had been done.
“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 enriched himself by directing a fraud that led to the overstatement of HealthSouth earnings by some $2.7 billion. They accuse him of using bonuses, profit from stock sales and his salary to finance a lavish lifestyle of mansions, luxury cars and boats.
Scrushy, 52, is named in a 58-count indictment charging him with conspiracy, fraud, money laundering, obstruction of justice and perjury. He also is accused of false corporate reporting in the first test against a CEO of the Sarbanes-Oxley Act, passed in 2002.
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.
