Birmingham, Ala. – HealthSouth Corp. founder Richard Scrushy walked away a free man Tuesday after a jury cleared him of all charges in a stunning setback for federal prosecutors who sought to add his name to a list of chief executives convicted of fraud.
Scrushy was the first of the high-profile chief executives to escape conviction since a wave of corporate scandals and indictments followed Enron Corp.’s collapse almost four years ago, even though the case against him was widely considered among the strongest.
With all five former chief financial officers pleading guilty and testifying that Scrushy led a scheme to inflate earnings by $2.7 billion at the rehabilitation and medical-services chain, some viewed the government’s case as stronger than in other fraud trials.
Yet when it finished 21 days of deliberations, the last five with an alternate replacing a sick juror, the panel acquitted Scrushy of all 36 counts of fraud, false corporate reporting and making false statements to regulators.
Eight jurors who met with reporters after the verdict said key witnesses were not credible and the prosecution failed to present substantial evidence linking the fraud to Scrushy.
“The smoking gun wasn’t pointing toward Mr. Scrushy,” said one juror, identified only by court-assigned number and not by name.
As the “not guilty” verdicts were read on count after count, Scrushy started crying, then reached around and hugged his wife, Leslie, in the first row behind the defense table.
“I’m going to go to a church and pray,” Scrushy said as he left the courthouse. “I’m going to be with my family. Thank God for this.”
Emerging from the building to cheers from his supporters, Scrushy said, “You’ve got to have compassion, folks, because you don’t know who’s next. You don’t know who’s going to be attacked next.”
Scrushy still faces civil charges by the Securities and Exchange Commission, a case that some experts say is more likely to be successful for the government.
“I’m disappointed in the verdict,” said U.S. Attorney Alice Martin, who plans to ask the 11th U.S. Circuit Court of Appeals to reinstate obstruction-of-justice and perjury charges that were thrown out earlier by U.S. District Judge Karon Bowdre.
Scrushy’s acquittal contrasts with recent convictions of several former prominent CEOs for their roles in various frauds, including Tyco International’s former chief L. Dennis Kozlowski, former WorldCom boss Bernard Ebbers and Adelphia Communications Corp. founder John Rigas.
A corporate-law specialist who had followed Scrushy’s trial was stunned at the verdict.
“There was a mass of evidence against him. I certainly expected the jury to convict. I thought the prosecution could get a fair hearing in Birmingham, but that appears not to be the case,” said Larry Soder quist, director of the Corporate and Securities Law Institute at Vanderbilt University.
Soderquist noted that the defense appeared to appeal throughout the trial to the sympathies of the jury, composed of seven blacks and five whites. Soderquist said Scrushy, a white businessman, has “a very high reputation in the African-American community” as he took on a more visible role at black churches in the months after his indictment.
Jurors told reporters after the verdict that race played no part in their views of the case.
Executives on trial
How top corporate officers have fared in recent high-profile corporate scandals:
Richard Scrushy: HealthSouth’s ex-CEO is acquitted in an alleged $2.7 billion earnings overstatement; he still faces civil charges by the Securities and Exchange Commission.
L. Dennis Kozlowski: Tyco’s former CEO and his chief financial officer, Mark H. Swartz, face up to 30 years in prison after being convicted of conspiring to defraud Tyco of millions of dollars.
Bernard Ebbers: WorldCom’s ex-chief faces up to 85 years in prison in sentencing next month for an $11 billion accounting scandal.
John Rigas: Adelphia’s founder gets 15 years in prison and his son Timothy gets 20 for conspiracy and fraud; another Rigas son, Michael, is acquitted of conspiracy charges before the case ends in a mistrial.
THE ASSOCIATED PRESS
