More charges against ex-HealthSouth chief

Ousted HealthSouth leader Richard M. Scrushy faces additional charges of perjury and obstruction of justice in the government's investigation of a major accounting scandal at the outpatient services giant.

A federal grand jury in Birmingham, Ala., returned a 58-count revised indictment against Scrushy that consolidates some of the previous charges he faced while adding the new ones, prosecutors said. Scrushy's original indictment, returned in November 2003, listed 85 counts.

Scrushy, fired last year as HealthSouth's CEO, was arraigned on the new indictment in U.S. District Court in Birmingham on Sept. 29. He told U.S. Magistrate Judge T. Michael Putnam that he was "absolutely not guilty" of the charges, according to a statement posted on his Web site (link).

Prosecutors allege Scrushy was the mastermind of a $2.6 billion accounting fraud at HealthSouth aimed at boosting earnings to meet Wall Street expectations.

Nineteen people, including several former top executives, have faced criminal charges in connection with the scandal since it surfaced in March 2003. Seventeen of them have entered guilty pleas.

Evidence or ploy?

The new charges against Scrushy -- three counts of perjury and one of obstruction of justice -- stem from an investigation into HealthSouth's finances by the U.S. Securities and Exchange Commission. Prosecutors allege that Scrushy knowingly gave false answers when he testified about the truth and accuracy of a HealthSouth financial report in 2001. They also say he later met with other HealthSouth officials to talk about the SEC's investigation and attempted to "corruptly persuade" one to influence his testimony in the proceedings.

Scrushy's attorneys said the new charges were a ploy by prosecutors to bolster their case after having to reduce the number of counts. In a written statement, attorney Jim Parkman said prosecutors were "adding another potato to the stew to replace the beef that just fell on the floor."

Donald Watkins, another Scrushy attorney, said there was little that was new in the revised indictment. "These charges have no merit and are mere add-ons. They are scrambling to come up with something," he said in a written statement.

The latest indictment consolidated some of the counts of the charges in the original indictment, which included conspiracy, mail and wire and securities fraud, false statements, false certifications and money laundering.

Scrushy's trial is scheduled to begin in January. If convicted on all counts, he could face a maximum sentence of 450 years in prison as well as $30 million in fines. Additionally, prosecutors are seeking to recover more than $278 million in property that they say Scrushy obtained through "ill-gotten gains."

Meanwhile, prosecutors were claiming a victory with a recent decision by the 11th U.S. Circuit Court of Appeals, a ruling they say could change the sentencing guidelines for those convicted in the HealthSouth investigation.

On Sept. 27, the federal appeals court ruled that it would use the government's formula for calculating how much HealthSouth investors lost as a result of the alleged fraud. Prosecutors said the appeals court agreed to use a formula that calculated a loss of $328 million as opposed to $66 million, which a lower court used. The difference could mean stiffer penalties at sentencing.

In a written statement, U.S. Attorney Alice H. Martin said the ruling was "a victory for the victims of the HealthSouth corporate fraud."