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HealthSouth CFO’s Salary, Stock Sales Outlined at Trial

From Associated Press

A defense attorney for fired HealthSouth Chief Executive Richard Scrushy attempted to show Tuesday that a former finance chief at the medical services chain profited financially while scheming with other executives to inflate earnings.

But Weston Smith, the fifth former chief financial officer to testify for the government at Scrushy’s corporate fraud trial, testified that there was no pleasure when the executives met to devise bogus financial figures for quarterly reports.

“There was no laughing,” he said. “If anything, it was a disgusting feeling sitting in those meetings.”

The prosecution claims that a group of executives known to one another as “the family” inflated earnings by about $2.7 billion from 1996 to 2002 to meet Wall Street expectations. Scrushy directed the scheme and made millions from the conspiracy, the government contends.

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The defense claims that Smith and other executives who have pleaded guilty in the fraud committed it on their own, profited from it and lied to Scrushy to keep it secret.

Defense attorney Jim Parkman, during cross-examination, outlined for the jury Smith’s salary, which grew from about $35,000 in the late 1980s to $325,000 by December 2002. He also introduced evidence that Smith netted nearly $3 million from the sale of company shares from 1996 to 2002.

“Were you nauseated when you took those checks to the bank?” Parkman asked. Smith said he was not.

Later, Smith testified that efforts were made to keep HealthSouth’s auditor, Ernst & Young, from detecting the fraud.


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