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Lawyer: Scrushy sanctioned fraud

By Times Wire
Published January 26, 2005

BIRMINGHAM, Ala. - Richard Scrushy's trial on corporate fraud charges opened Tuesday with a prosecutor telling jurors the fired HealthSouth CEO was the driving force behind a conspiracy to overstate earnings in the rehabilitation giant by about $2.7-billion.

With underlings generating bogus financial statements to make it appear HealthSouth Corp. was meeting Wall Street forecasts from 1996 through 2002, a prosecutor argued, Scrushy sold about $150-million worth of his HealthSouth stock and spent more than $200-million on a lavish lifestyle.

All the while, Scrushy was getting private reports on the company's true financial condition, but he never told investors what was going on, U.S. Attorney Alice Martin told jurors in opening statements.

She described Scrushy as "a very hands-on leader" who personally selected top aides and tried to sway their statements to federal agents once an investigation began.

"The evidence will show that Richard Scrushy as chief executive officer gave phony numbers to the public," Martin said.

The defense conceded that a fraud occurred, but Scrushy lawyer Jim Parkman blamed it on a group of overly ambitious, tightly knit executives who called themselves "the family" - a group that hid the misstatements from Scrushy.

"This was no ordinary family. This was a family that operated as a unit on their own," Parkman said.

In a deep, folksy drawl that contrasted with Martin's more businesslike approach, Parkman portrayed the Alabama-born Scrushy as an everyman CEO from humble beginnings who did his best yet failed to detect fraud that eluded graduates of top Ivy League schools.

"How could it get by Richard Scrushy? You know how? This group controlled the numbers," Parkman said.

NEW YORK - Bernard Ebbers told "lie after lie after lie" about the crumbling state of WorldCom Inc. in a drive to meet Wall Street expectations and keep its stock price high, a federal prosecutor said Tuesday.

In opening statements at Ebbers' accounting-fraud trial, prosecutor David Anders told jurors that even when subordinates made clear the books were wrong, Ebbers repeatedly said in a near-mantra: "We have to hit the number."

"It was a command to commit fraud," Anders said, placing Ebbers directly responsible for what later was revealed as an $11-billion accounting fraud at WorldCom, driving the company into the largest bankruptcy in U.S. history.

Ebbers' defense lawyer presented a profoundly different story, hailing his client as a self-made corporate hero who never had an inkling of the massive fraud carried out by others on his watch.

Lawyer Reid Weingarten described Ebbers as the gusto behind WorldCom, a leader who gladly ceded the accounting rains to Scott Sullivan, his whiz-kid chief financial officer - and the government's star witness against Ebbers.

"Bernie, he's charisma and vision," Weingarten told jurors. "If you're interested in the numbers, you go to Scott Sullivan."

Ebbers stands accused of fraud, conspiracy and making false regulatory filings - nine total counts that carry up to 85 years in prison. The trial is expected to last into March.

The opening statements suggested the trial might turn on the testimony of Sullivan, who pleaded guilty to fraud in 2002 and agreed to testify against his former boss.

Anders told jurors that Sullivan carried out the shady accounting at WorldCom at the clear direction of Ebbers, who wanted to keep profits high even as his company, and the economy in general, sagged from 2000 to 2002.

But Weingarten stressed to jurors that Sullivan stands to win a lighter sentence in the future if he cooperates with the government, and said they should reject his claim that "big, bad Bernie made me do it."

NEW YORK - Jury selection was completed Tuesday for the larceny retrial of two former top Tyco International Ltd. executives who are accused of looting the company of $600-million. Opening statements will begin today.

The 12 main and six alternate jurors, chosen after three days of interviews, include a retail saleswoman, a building superintendent, two nurses, a home health aide and several present and former bank employees. The first 12 are evenly divided between men and women.

The jurors will hear the trial of L. Dennis Kozlowski, 58, Tyco's former chief executive, and Mark Swartz, 44, the conglomerate's former finance chief. The men are charged with first-degree grand larceny, securities fraud and related counts.

[Last modified January 26, 2005, 00:12:14]