Jury Deliberations Begin in HealthSouth CEO's Fraud Trial

Jury deliberations begin in the federal fraud trial of former HealthSouth CEO Richard Scrushy. Jurors in Birmingham, Ala., will decide if Scrushy conspired to inflate earnings to keep up with Wall Street expectations.

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RENEE MONTAGNE, host:

Jury deliberations start today in the federal fraud trial of former HealthSouth CEO Richard Scrushy. Jurors have heard four months of testimony. Now they must decide whether he conspired to inflate earnings at their rehabilitation services firm in order to keep up with Wall Street expectations. NPR's Debbie Elliott reports.

DEBBIE ELLIOTT reporting:

The question for the Birmingham jury comes down to who they believe Richard Scrushy is: the micromanager who ordered company financial officers to overstate earnings by $2.7 billion or the leader of a huge corporation, who was unaware that his subordinates were cooking the books for nearly seven years. Both sides agree the case comes down to knowledge: Did Richard Scrushy know what was going on at the company he founded? Prosecutors say they proved he did based on three things.

Ms. ALICE MARTIN (US Attorney): What he saw, what he heard and what he said.

ELLIOTT: US attorney Alice Martin.

Ms. MARTIN: And that's how you show knowledge in anything. How do you know somebody knew? What questions are they asking? There was plenty of smoke going off when you look at those reports, and he never set off any alarms. He never told any of his checks and balances. And, in fact, we were able to show that there weren't any effective checks and balances at HealthSouth Corporation.

ELLIOTT: During closing arguments yesterday, Martin told jurors that HealthSouth financial documents showed the firm wasn't making budget and was in danger of missing Wall Street targets. She said, quote, "Wall Street pressure broke this man, but his ego helped." Martin said Scrushy orchestrated the fraud to profit, making $201 million from stock options based on an artificially inflated stock price. But defense lawyers countered that Scrushy was already a wealthy man with no need to unjustly enrich himself through fraud.

In a dramatic closing argument peppered with tears and a cartoon drawing of a big rat with cheese on his head, attorney Jim Parkman blamed the fraud on a group of, quote, "rats" who inflated earnings and then blamed it on their boss when they got caught. Fifteen former HealthSouth executives have pleaded guilty, including five former financial officers, who took the witness stand against Scrushy. Outside the courthouse, Parkman said Scrushy was too busy to scrutinize the books.

Mr. JIM PARKMAN (Attorney): He's got a company to run, and that involves 50,000 employees. It involves 2,000 facilities. It involves doing what I told the jury: worrying about the AutoAmbulator and things like this that make life better for people. So it's not a CEO's job to sit up there and just try to crunch numbers every day. He's a marketing man. He did a great job with it. How'd they get it by him? Same way they got it by all the other people that had the smarts.

ELLIOTT: Defense lawyers repeatedly said the government lacked any hard evidence--a document, memo, even a sticky note--that ties Scrushy to the crime. Scrushy, who did not take the witness stand in his own defense, appeared pleased at the end of yesterday's arguments.

Mr. RICHARD SCRUSHY (Former HealthSouth CEO): I thought the government's side was extremely weak, and, you know, as we said all along, they have no evidence. I'm not going to get into details of all that, but I think the jury has been given what they need to go back and make the right decision.

ELLIOTT: Scrushy is the first CEO to be tried under the Sarbanes-Oxley Act, a federal law passed in response to Enron and other corporate accounting scandals. Debbie Elliott, NPR News.

MONTAGNE: This is NPR News.

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