Scrushy’s Subordinate Details Fake Numbers

Former HealthSouth Corp. finance executive Bill Owens on Thursday laid out more details of a $2.7-billion accounting fraud at the criminal trial of his former boss, Richard Scrushy.

In his third day as a prosecution witness, Owens, a former chief financial officer at HealthSouth, went over financial documents, explaining bogus entries quarter by quarter. The government alleges that the fraud went on from 1996 through 2002.

The jury also heard a tape of a speech in which Scrushy boasted to employees of 46 consecutive quarters of earnings growth at the Birmingham, Ala.-based company he founded.

“No other healthcare corporation has achieved that,” Scrushy was heard telling employees.

“No other healthcare company achieved that level of growth because we were fraudulently inflating our income,” Owens testified in U.S. District Court in Birmingham.

Owens, who had been the drummer in Scrushy’s country band, previously had testified that he came up with ways to alter HealthSouth’s financial reports, but that it was done with Scrushy’s full knowledge and at his instruction.

Scrushy, who ran HealthSouth until he was ousted in 2003 after the scandal came to light, faces 58 criminal counts as the accused mastermind of the scheme to inflate earnings to meet Wall Street expectations and prop up the share price.

“When we made expectations, the stock rose,” Owens said.

The defense contends that the fraud was carried out by Owens and others without Scrushy’s knowledge.

Owens testified that Scrushy “asked me repeatedly who was involved with the fraud because he wanted to keep the number as small as possible.”

But Owens said anyone with full knowledge of HealthSouth’s financial picture could figure out the fraud. A couple of those who did figure it out were later brought into the conspiracy, Owens said. He named Michael Martin and Malcolm “Tad” McVay, two of the five former CFOs who, along with Owens, have pleaded guilty to fraud charges.