- The Washington Times - Friday, February 11, 2005

BIRMINGHAM, Ala. (AP) — Former HealthSouth CEO Richard Scrushy told his finance chief to “go down fighting” on the eve of an FBI raid that resulted in fraud charges against a string of executives from the rehabilitation giant, according to evidence yesterday at Mr. Scrushy’s trial.

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

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

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

After prosecutors played the final tape, defense lawyers began cross-examining 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?” Mr. Scrushy’s attorney, Jim Parkman, asked.

“I believe the tapes do,” Owens said.

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

“No, there’s not,” Owens said.

Mr. Parkman repeatedly suggested that Owens was lying about his own actions and Mr. Scrushy’s role in the fraud. At one point, Owens asked Mr. 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 Mr. Scrushy talked in a private hallway of HealthSouth headquarters on March 18, 2003, the day before agents began searching the building.

In the recording, Owens told Mr. Scrushy his wife, Kaye, was angry about him signing “phony financial statements” and feared he would end up in prison, leaving her without an income. In questioning, prosecutors brought out that Mr. Scrushy continued with the conversation without pause.

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

Lowering his voice, Mr. 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, Mr. 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,” Mr. 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 … would hate to see us do that,” Mr. Scrushy said.

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

Mr. 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.

Mr. Scrushy could receive what amounts to a life sentence if convicted, and prosecutors are seeking $278 million in personal property and accounts.

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