Scrushy on Tape Tells CFO to ‘Go Down Fighting’

Former HealthSouth Corp. Chief Executive Richard Scrushy told his finance chief to “go down fighting” on the eve of an FBI raid that resulted in fraud charges against several executives from the rehabilitation giant, according to evidence Friday at Scrushy’s trial.

Unknown to Scrushy when he made the comment, then-Chief Financial Officer Bill Owens already had quit fighting: He was cooperating with prosecutors and wearing a hidden recorder that captured Scrushy’s words.

Jurors listened to a recording of the conversation during Owens’ eighth day of testimony in U.S. District Court in Birmingham, Ala. In all, prosecutors played six secretly made recordings that they say prove Scrushy was the director of a scheme to overstate HealthSouth earnings by some $2.7 billion.

Scrushy claims that Owens and other aides lied to him for years while committing the fraud on their own.

After prosecutors played the final tape, defense lawyers cross-examined Owens, whom they described as the “godfather” of a group that ran the scheme.

“Is there any one [document] ... that indicates on its own that Richard Scrushy was involved in this fraud?” Scrushy attorney Jim Parkman asked.

“I believe the tapes do,” Owens answered.

“That was good,” Parkman said with a smile. Parkman then asked whether there were letters, e-mails or other documents linking Scrushy to the scheme.

“No, there’s not,” Owens said.

Parkman repeatedly suggested that Owens was lying about his own actions and Scrushy’s role in the fraud. At one point, Owens asked Parkman to look at him, not jurors, when asking a question.

Owens, who is among 15 former HealthSouth executives who reached plea deals, said the conversation was recorded as he and Scrushy talked in a hallway at HealthSouth’s headquarters in Birmingham on March 18, 2003, the day before agents began searching the building.

In the recording, Owens told Scrushy his wife, Kaye, was angry about his signing “phony financial statements” and feared he would end up in prison, leaving her without an income.

Suggesting that his wife wanted him to go to prosecutors, Owens told Scrushy he was trying to decide what to do.

Lowering his voice, Scrushy said: “You’ve got accountants signing off on all this. You’ve got everything set up. You’re smart, Bill, but you’ve got to lead your troops. I’ll do whatever you want me to. I think you ought to go down fighting, Bill. You ought to go down fighting.”

Apparently trying to encourage Owens, Scrushy said banks weren’t “coming in” on HealthSouth, a reference to keeping the company out of bankruptcy.

“And we’re seeing a healthy day every now and then in the stock. We are seeing that. I just hate to go down there and just give the keys to them,” Scrushy said.

“Well, I don’t want to do that,” Owens replied.

“But if you think that’s what we ought to do, then tell me. But I sure as hell would hate to see us do that,” Scrushy said.

In testimony, Owens said he thought the fraud would be temporary when he began fudging numbers in 1996 on orders of “my boss,” referring to Scrushy.

“Unfortunately, it was a line that once you crossed it was hard to step back,” Owens said.

Owens is awaiting sentencing; his attorney has said he expects him to serve time in prison.

Scrushy is on trial on a 58-count indictment accusing him of conspiracy, fraud, money laundering, obstruction of justice, perjury and false corporate reporting in the first test against a CEO of the Sarbanes-Oxley Act. He could receive what amounts to a life sentence if convicted.