BIRMINGHAM, Ala. (AP) — A main government witness in the failed prosecution of fired HealthSouth Corp. Chief Executive Officer Richard Scrushy was sentenced to five years in prison yesterday by a judge who sharply criticized Mr. Scrushy’s acquittal earlier this year.
Bill Owens, a one-time HealthSouth chief financial officer who secretly recorded Mr. Scrushy for federal agents, had asked for probation, saying he was deeply sorry for a crime that wrecked his marriage, career and personal finances.
U.S. District Judge Sharon Lovelace Blackburn rejected Owens’ plea to stay out of prison but said he would have been sentenced to twice as long in prison without his “extraordinary” assistance to the government.
Judge Blackburn said she would hold a hearing later on how much money Owens must forfeit — an amount that could reach into the millions, although Owens said he is broke. She declined to impose a fine, saying he wouldn’t be able to pay it once the forfeiture is assessed early next year.
Reading from a statement interspersed with other comments, Judge Blackburn said it was apparent to her that Mr. Scrushy directed the $2.7 billion fraud but, with his acquittal, would never go to prison for it.
“In my opinion, that is a travesty,” said Judge Blackburn. The judge said she watched some of the Scrushy trial and reviewed much of the government’s evidence, which she called “overwhelming.”
Judge Blackburn repeatedly said she believed Owens’ testimony that Mr. Scrushy led HealthSouth through intimidation and oversaw the fraud. While the Scrushy defense painted Owens as the architect of the scheme, Owens said Mr. Scrushy hatched the fraud to make it appear the company was meeting Wall Street forecasts.
“I believe you told the truth,” Judge Blackburn told Owens.
U.S. District Judge Karon Bowdre, who presided over Mr. Scrushy’s trial, was in the courtroom audience but left during a break after Judge Blackburn’s most biting comments. Outside of court, she declined comment.
In a statement, Mr. Scrushy repeated his assertion that Owens was to blame.
“I believe that anyone who sat in the courtroom during my six-month trial would know that today’s comments about me are totally inappropriate given that there was not one shred of evidence or credible testimony linking me to the fraud,” he said.
Standing before Judge Blackburn, Owens choked back tears as he apologized to HealthSouth investors, employees and his family for what he had done. He said he got involved in the plot at the direction of Mr. Scrushy and that he would carry the guilt “for the rest of my life.”
“I do understand that I must pay for my crimes,” said Owens, 47, the last of five CFOs who served under Mr. Scrushy to be sentenced in the massive earnings overstatement.
Owens pleaded guilty in March 2003 to charges of conspiracy, wire fraud and falsifying a financial report. Prosecutors said he provided invaluable help with the cases against Mr. Scrushy, 14 other HealthSouth executives who pleaded guilty and another who was convicted by a jury.
Despite the assistance, prosecutors said Owens could be sentenced to as long as 30 years in prison under federal guidelines and recommended a sentence of 71/4 years behind bars.
Owens wore a hidden FBI microphone to record conversations with Mr. Scrushy and testified against Mr. Scrushy for 11 days. Like four other former CFOs, Owens said he was pressured into the crime by Mr. Scrushy.
In acquitting Mr. Scrushy, jurors rejected all the accusations and sided with the defense, which portrayed Owens as the mastermind of the fraud and Mr. Scrushy as an unwitting victim. In closing arguments, Mr. Scrushy’s attorney portrayed Owens as “a big rat” who turned on his former boss.
An accountant with the Securities and Exchange Commission, Neil Seiden, said the latest evidence showed the earnings overstatement totaled at least $2.7 billion and cost investors about $6.9 billion in lost share and bond value.
The defense disputed Mr. Seiden’s loss calculations as excessive and said Owens deserved leniency because he admitted his guilt and devoted himself to righting the wrongs he committed by helping prosecutors.
Owens’ wife of 30 years divorced him after learning of his role in the fraud, and the defense said Owens’ liabilities outweigh his assets by $157,000. Despite $1.8 million in holdings, including a $1.4 million home, Owens said in court documents he owed HealthSouth $1.3 million for an executive loan, the Internal Revenue Service $400,000 in penalties and interest, and his lawyer $250,000.
Of the four other HealthSouth CFOs who were previously sentenced, whistleblower Weston Smith got the stiffest punishment: 27 months in prison.
Aaron Beam, who helped Mr. Scrushy found the company, was sentenced to three months in prison; and Mike Martin, who told Owens which numbers to falsify, was sentenced to one week in prison. Tadd McVay was sentenced to probation and house arrest.
While Mr. Scrushy was acquitted of all charges in June, he faces civil lawsuits over the accounting fraud and has been indicted by a federal grand jury in Montgomery for purportedly paying $500,000 to the lottery campaign of ex-Gov. Don Siegelman for a position on a state health regulatory board.
Mr. Scrushy pleaded innocent and said the charges are government retaliation for the not-guilty verdicts in his the HealthSouth fraud trial.