Scrushy Defense Attacks Ex-CFO

A former HealthSouth Corp. executive lashed out at both prosecutors and the defense Thursday but stuck by his claim that fired Chief Executive Richard Scrushy was in on a massive earnings overstatement.

Under cross-examination for a second day at U.S. District Court in Birmingham, Ala., former Chief Financial Officer Tadd McVay grew testy as Scrushy lawyer Jim Parkman suggested that he was lying about Scrushy’s involvement in the fraud to gain favor with prosecutors -- including Richard Wiedis, who questioned McVay earlier.

In a firm voice, McVay denied Parkman’s claims. And McVay recalled Wiedis asking a judge to send him to prison for five years during his sentencing in 2004.

Wiedis, McVay said, made him sound like “the scum of the Earth” while he was “begging” the judge for prison time.

“I’m not sure I like dealing with Mr. Wiedis much better than I like dealing with Mr. Parkman,” McVay told Parkman, prompting laughter in the room.

Parkman persisted, asking if McVay would do “anything to avoid prison.”

“I told the truth, period,” said McVay, the fourth former CFO to tie Scrushy to the scheme.

McVay could have received 15 years in prison after pleading guilty to conspiracy and signing a false financial certification. But a judge rejected the government’s bid for prison time and sentenced him to six months of house arrest and five years of probation and ordered him to pay $60,000 in criminal forfeitures and fines.

Keeping up his attack, Parkman asked whether McVay got to stay in his “very nice home” while under house arrest and to keep the home despite his role in what evidence has shown was a $2.7-billion fraud.

“My home was paid for before I ever went to work at HealthSouth,” McVay said.

Prosecutors contend that Scrushy led a conspiracy to inflate HealthSouth’s earnings over seven years beginning in 1996. Scrushy, they say, got rich off the scheme by making millions from bonuses, stock sales and salary.

The defense contends that Scrushy subordinates committed the fraud by themselves and lied to him to cover it up so they could climb the corporate ladder.

Helping bolster part of the defense’s case, McVay testified that former HealthSouth finance chief Bill Owens -- not Scrushy -- supplied the bogus numbers that Scrushy quoted during conference calls with investors.

Owens and McVay are among 15 people who pleaded guilty in the fraud at the rehabilitation and medical services chain. The defense contends Owens was a leader of a scheme to inflate earnings without Scrushy’s knowledge.

Scrushy is charged with false corporate reporting in the first test of the 2002 Sarbanes-Oxley Act against a chief executive. He also is charged with conspiracy, fraud, money laundering, obstruction of justice and perjury.

Scrushy could get the equivalent of a life sentence if convicted on all charges. He could be ordered to forfeit as much as $278 million in assets.