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Scrushy-HealthSouth Fraud Trial Opens

Scrushy-HealthSouth Fraud Trial Opens

by Rick Turoczy on January 25, 2005

Richard Scrushy’s (search) trial on corporate fraud charges opened Tuesday with a prosecutor telling jurors the fired HealthSouth (search) CEO was the driving force behind a conspiracy to overstate earnings in the rehabilitation giant by about $2.7 billion.

With underlings generating bogus financial statements to make it appear HealthSouth Corp. was meeting Wall Street forecasts from 1996 through 2002, a prosecutor argued, Scrushy sold about $150 million worth of his own HealthSouth stock and spent more than $200 million on a lavish lifestyle.

All the while, Scrushy was getting private reports on the company’s true financial condition, but he never told investors what was going on, U.S. Attorney Alice Martin told jurors in opening statements.

“They pumped up the profits, and he hid it from the public,” said Martin. She described Scrushy as “a very hands-on leader” who personally selected top aides and tried to sway their statements to federal agents once an investigation began.

“The evidence will show that Richard Scrushy as chief executive officer gave phony numbers to the public,” Martin said.

The defense conceded that a fraud occurred, but Scrushy lawyer Jim Parkman blamed it on a group of overly ambitious, tightly knit executives who called themselves “the family” — a group, he said, that hid the misstatements from Scrushy.

Scrushy-HealthSouth Fraud Trial Opens

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