Scrushy Jurors Hear Opening Arguments

Fired HealthSouth Corp. Chief Executive Richard Scrushy made millions off a seven-year scheme to overstate earnings by about $2.7 billion as investors large and small suffered, a prosecutor told jurors Tuesday as testimony opened in Scrushy’s federal corporate fraud trial.

A Scrushy lawyer countered that the fraud at HealthSouth was the work of a tightly knit group of executives -- known as “the family” -- who purposely kept Scrushy in the dark.

“This was no ordinary family. This was a family that operated as a unit on their own,” defense attorney Jim Parkman said.

U.S. Atty. Alice Martin said Scrushy, 52, sold about $150 million worth of his own HealthSouth stock as subordinates created false financial statements to make it seem the rehabilitation giant was meeting analysts’ expectations, boosting company shares.

The government also charged that Scrushy spent more than $200 million on such luxuries as waterfront mansions, opulent cars, a racing boat, bronze statues, a 21-carat diamond ring and a $3.2-million airplane.

All the while, Scrushy was getting private reports to show him the company’s true financial condition and not telling investors what was going on, Martin said.

“The evidence will show that Richard Scrushy, as chief executive officer, gave phony numbers to the public,” said Martin, calling Scrushy “a very hands-on leader” who picked his top aides and later tried to sway their statements to federal agents once an investigation had begun.

The defense conceded that a fraud occurred. But Parkman blamed it on a group of executives who hid the misstatements from Scrushy.

The U.S. District Court trial in Birmingham, Ala., could last four months.

The government’s case is expected to include testimony by HealthSouth’s five chief financial officers under Scrushy, each claiming they talked with Scrushy about the scheme.

The five CFOs and 10 others agreed to plead guilty in the criminal fraud case, which surfaced in March 2003 when the Securities and Exchange Commission filed a civil suit against HealthSouth and Scrushy.