Federal prosecutors and the creators of the Sarbanes-Oxley law watch HealthSouth founder Richard Scrushy stroll away with an acquittal.
Conventional wisdom says lengthy jury deliberations favor the defense. After 21 days, five of those with an alternate juror on board, Mr. Scrushy was acquitted of 36 counts linked to alleged $2.7 billion USD of accounting fraud he orchestrated at HealthSouth.
Legal experts and observers were stunned by the verdict. Originally, Mr. Scrushy was charged with 85 counts related to continual overstatements of earnings at the company. Those were later reduced to the 36 counts charged in the case.
There wasn’t any question that fraud took place. Fifteen former HealthSouth executives, including five former financial officers, all testified against Mr. Scrushy. One executive even wore a wire to record conversations with the former CEO about the fraud.
Jurors were not convinced of the credibility of the witnesses, nor did they feel the federal prosecutors provided any substantial evidence against Mr. Scrushy. His defense team had claimed the fraud was orchestrated by underlings and aides who hid their wrongdoing from the CEO.
Some observers feel the prosecution erred in bringing the case to Birmingham rather than New York, where they had won cases against the likes of Martha Stewart and John Rigas. And Mr. Scrushy’s lead attorney, Donald Watkins, agreed.
“That was a strategic mistake. Given a chance to indict him in New York, why would you indict him in Birmingham? That’s our home turf.”
US Attorney Alice Martin, who ran the investigation and brought charges against Mr. Scrushy, will likely face some painful questions about the blown case from superiors at the Justice Department.
David Utter is a staff writer for murdok covering technology and business. Email him here.
