- The Washington Times - Tuesday, February 15, 2005

From combined dispatches

Richard Scrushy’s lawyers yesterday depicted a main witness against the fired HealthSouth chief as a free-spending, tax-dodging liar who made millions while orchestrating a huge fraud at the rehabilitation giant.

But the tough cross-examination didn’t sway former HealthSouth finance chief Bill Owens from the central theme of his 10 days on the stand: that Mr. Scrushy was behind what prosecutors describe as a scheme to overstate earnings by some $2.7 billion.

Testimony showed Mr. Owens ” one of 15 former HealthSouth executives who pleaded guilty and could testify against Mr. Scrushy ” paid cash for more than $3 million worth of property and has a $700,000 tax lien from 1996 on his $1.3 million home.

Mr. Owens, an accountant, testified in Birmingham, Ala., he failed to file federal tax returns for nine years beginning in 1995, the year before the HealthSouth accounting fraud began.

He insisted Mr. Scrushy was in charge of the fraud at HealthSouth and kept close tabs on how many people were involved in the scam.

“Mr. Scrushy was always concerned about who knew and how much they knew,” said Mr. Owens.

Seated at the defense table, Mr. Scrushy shook his head when Mr. Owens said he informed Mr. Scrushy that a former assistant vice president for finance figured out the company was overstating its results. The worker, Diana Henze, subsequently was transferred to another division, Mr. Owens said.

The defense claims Mr. Owens was in charge of a group known as “the family” that inflated earnings on its own and hid the crime from Mr. Scrushy for years.

Scrushy attorney Jim Parkman said Mr. Owens “not only orchestrated this fraud” at HealthSouth but also manipulated workers at the rehabilitation giant and his own debts ” a charge Mr. Owens denied.

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

If convicted, Mr. Scrushy could get what amounts to a life sentence and have to forfeit as much as $278 million in cars, houses, boats, jewelry, art and other items.

In other court action yesterday:

• The star government witness in the fraud trial of former WorldCom chief Bernard Ebbers settled in for what will be a lengthy, grueling cross-examination .

Legal experts say they expect Scott Sullivan to face tough questions about marital infidelity, his admitted drug use, and his lavish Florida home ” not to mention the $11 billion WorldCom fraud in which he admits he participated.

Mr. Sullivan, who was finance chief under Mr. Ebbers, testified for 23 hours over five days under questioning from a federal prosecutor, repeatedly saying Mr. Ebbers was aware of, and refused to stop, the massive fraud.

• Tyco International Ltd.’s ex-head of human resources testified that the company’s compensation committee took no action when it learned in early 2002 that its top executives had millions of dollars of outstanding loans from the company.

Facing cross-examination by defense attorneys during her fourth day on the stand, Patricia Prue, senior vice president of human resources at the Bermuda conglomerate from 1998 to 2002, said the directors made no changes to the company’s so-called Key Employee Loan Program or its relocation loan program in February 2002, other than to ask for a regular update of loan balances of more than $50,000.

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