- The Washington Times - Wednesday, May 11, 2005

BIRMINGHAM, Ala. (AP) - Richard Scrushy’s defense rested yesterday without the fired HealthSouth Corp. chief taking the stand to deny charges that he directed a $2.7 billion fraud at the rehabilitation chain.

After calling 21 witnesses to rebut prosecution accusations that Mr. Scrushy was at the heart of the scheme, defense attorneys told the judge that they were finished with their case.

“Your honor, at this time the defense rests,” said Scrushy attorney Jim Parkman.

Prosecutors grinned broadly as Mr. Parkman walked away from the lectern; so did the defense. Jurors looked at one another with surprised expressions.

U.S. District Judge Karon Bowdre told jurors to return Monday for closing arguments and instructions on the law. Attorneys said deliberations are set to begin Tuesday, but the judge still must rule on defense motions to dismiss some of the charges against Mr. Scrushy.

Outside court, Mr. Scrushy said the prosecution’s entire case was built on “a handful of people who admitted they were involved in the fraud.”

“I can’t believe that in this country someone could be convicted with not one shred of evidence,” he said.

Prosecutors decided against calling any witnesses to counter the defense case. “There’s no need,” said U.S. Attorney Alice Martin.

The decision on whether Mr. Scrushy should testify was a calculated gamble either way: Without him taking the stand, jurors won’t get to hear his explanation of how he failed to detect a fraud the defense says continued for years without his knowledge.

But Mr. Scrushy could have been beset with a blistering cross-examination, including questions about secretly recorded tapes that prosecutors say prove he knew of the crime.

Larry Soderquist, a securities law specialist who has followed the trial, said the fear of what could happen under prosecution questioning was likely what kept Mr. Scrushy off the stand.

“His lawyers must have had a very good reason for not wanting him to testify,” said Mr. Soderquist, director of the Corporate and Securities Law Institute at Vanderbilt University in Nashville, Tenn.

Scrushy attorney Donald Watkins said the defense team “unanimously concluded that we are comfortable with where the case stands and there is no need for further witnesses.”

Prosecutors contend that Mr. Scrushy led subordinates in a conspiracy to overstate HealthSouth earnings for seven years to make it appear that HealthSouth was meeting Wall Street forecasts. Mr. Scrushy made about $249 million from the accounting scam, a prosecution witness testified.

The defense blames the fraud on the 15 former HealthSouth executives who pleaded guilty, including all five finance chiefs who served under Mr. Scrushy, the company’s primary founder.

Free on $10 million bond, Mr. Scrushy is the first chief executive officer tried under the Sarbanes-Oxley corporate reporting law, passed in 2002 in response to a string of corporate frauds. He also is charged with conspiracy, fraud, money laundering and obstruction of justice.

If convicted, he could receive what amounts to a life sentence and be ordered to forfeit $278 million in assets.

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