Scrushy Used Scam to Aid Stock Sale, Ex-CFO Says

With earnings sagging at HealthSouth Corp., then-Chief Executive Richard Scrushy ordered aides to continue a huge fraud because he planned to sell $100 million in stock and “didn’t want to get sued,” a former finance chief testified Wednesday.

Bill Owens, one of 15 former executives who admitted guilt in the scheme, also described Scrushy as a master salesman who ruled with fear and intimidation that was great enough to make others go along with a scam that prosecutors have described as a $2.7-billion earnings overstatement.

Owens spent a second day on the stand in Scrushy’s federal trial on corporate fraud charges.

Testifying for the prosecution under a plea deal, Owens said Scrushy told him in late 1997 that he planned to sell $100 million in stock and wanted to know whether a fraud that began a year earlier could continue without being detected.

“He wanted to make sure I felt like I could get through the audit,” said Owens, adding, “As always, I told him we were going to do our best.”

Prosecutors allege that Scrushy, 52, got rich from stock sales, bonuses and salary by directing a fraud that led to the overstatement of HealthSouth earnings from 1996 through 2002.

The defense contends Owens and other subordinates in HealthSouth’s corporate accounting offices lied to Scrushy for years, leaving him unaware of the conspiracy.

In a Birmingham, Ala., court Wednesday, Owens said Scrushy directed him and another former finance chief, Mike Martin, to keep the fraud going for another year because he “didn’t want to get sued” by shareholders if the stock’s price dropped.

Evidence has shown the fraud continued through 2002. Owens said Scrushy was behind it from the start and received regular reports showing that the company’s true financial condition wasn’t good enough to meet Wall Street earnings estimates.