Scrushy Acquitted: Jury Doubts Witness Credibility

Scrushy acquitted: Jury doubts witness credibility

Scrushy, the first CEO charged under Sarbanes-Oxley, also becomes the first CEO acquitted

6.28.05 Former HealthSouth CEO Richard Scrushy, the first CEO tried under Sarbanes-Oxley, has been acquitted of all charges brought against him. "This is a stunning defeat for the government," said former federal prosecutor Robert Mintz.

Federal prosecutors, with the cooperation of HealthSouth CFOs, tried to prove that Scrushy had masterminded a $2.7 billion accounting fraud at his former company. Scrushy's defense maintained that the fraud at HealthSouth was committed by Scrushy's subordinates, without his knowledge.

Several factors likely contributed to Scrushy's victory. Prosecutors decided to try Scrushy in Birmingham, AL, where Scrushy is a prominent public figure. "It turned out that he had the home court advantage. And that's what ultimately, I think, won the case for him," according to Mintz. The prosecution's use of HealthSouth CFOs' testimony against Scrushy also backfired. Fifteen HealthSouth executives pleaded guilty and have never faced trial, which raised suspicion as to their motivation for testifying against Scrushy. The result was "not surprising at all," according to former SEC lawyer Ernest Badway, who noted that defense lawyers "made it very clear that they were going to put Mr. Scrushy's underlings on trial," and were successful in their attacks against them.

Federal prosecutors were shocked by the defeat. U.S. attorney Alice Martin said of the case, "We think that we did put on overwhelming evidence, but the jury thought otherwise."

HealthSouth officials have made it clear that Scrushy will have no further involvement with the company, saying, "The new Board and new management team remain appalled by the multi-billion dollar fraud that took place under Mr. Scrushy's management and the environment under which such fraud could occur. Under no circumstances will Mr. Scrushy be offered any position within the company by this management team or by this Board of Directors."

Scrushy, who still faces investor and civil lawsuits, as well as the possibility of perjury and obstruction of justice charges said after the trial, "I've got my life back. Now that I got my acquittal, I am