June 30, 2006
Scrushy Convicted--But Not of Fraud
Posted by Lisa Fairfax

Almost a year after an Alabama jury acquitted HealthSouth founder Richard Scrushy of accounting fraud charges, another Alabama jury convicted him of bribery charges for apparently paying half a million in bribes to get a seat on a state health care board.

The conviction seems to discredit one popular theory regarding Scrushy’s acquittal on the accounting fraud charges. That theory essentially blamed the acquittal on jury nullification—the idea that Scrushy and his defense team played on the sympathies of the Alabama jury by cultivating support within African American churches and playing up his religious ties. (The underlying point apparently being that such a ploy would not have worked on New York jurors). It seems like the same kind of tactics were employed in the bribery case. Complete with, according to the Washington Post, references in the closing argument to God and Martin Luther King’s “I Have a Dream” speech.

The fact that Scrushy was convicted this time of course may suggest that the defense took the tactics too far. But, by possibly discrediting the nullification theory, this conviction also sheds a different light on the first acquittal. Indeed, it leads me to wonder (a) if the first acquittal does in fact have implications for Sarbanes-Oxley since the case was the very first attempt to try a CEO under Sarbanes-Oxley (and prosecutors appear to have had better success with laws already on the books) or (b) if the first acquittal reflected the jury’s refusal to imply Scrushy's knowledge of fraud. Such a refusal seems inconsistent with other cases where jurors seem to have rejected the “I don’t know” defense, but arguably more consistent with the standard of intent in criminal cases.

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Comments (2)

1. Posted by Jake on June 30, 2006 @ 20:20 | Permalink

Scrushy's conviction tends to prove the old adage that, sooner or later, you can antagonize one person too many, and that person will help you through the jailhouse door.

The first acquittal last year plainly "reflected the jury's refusal to imply Scrushy's knowledge of fraud," as Prof. Fairfax puts it in her alternative hypothesis. In the 2005 trial, as widely reported in the press, a highly credentialed forensic accounting investigator, hired by HealthSouth's board of directors, admitted that he and his team reviewed millions of pages of documents, but found not one directly fingering Scrushy.

Powerful stuff for a jury. One member cited this very point as a reason for the acquittal.

(I had the opportunity to briefly discuss the 2005 Scrushy trial with the forensic accountant a few months after the acquittal, when I took his deposition in an unrelated matter.)


2. Posted by Chuck Gallagher on July 1, 2007 @ 20:03 | Permalink

While every media outlet is reporting that HealthSouth's founder, Richard Scrushy, was sentenced to six years and 10 months in Federal prison for bribery, there many looming questions that will likely be overshadowed by numerous shouts of judicial victory. Immediately there were cheers of judicial joy shouted all over the internet. Scrushy finally got what he deserved stated one blog with no apology for the gleeful tone.

I feel for Scrushy. I know what he has been through and I know what its like to walk into Federal prison. On a crisp October day in 1995, I took 23 physical steps… opened a door… and began a new experience that was life-changing. Thinking back 12 years ago, I would never have considered that I, a competent, well educated man, would be sitting in prison. That was a life educational experience where I learned, really for the first time, that there are consequences to every unethical choice we make.

Prison time gave me the opportunity to focus on "choices." Every choice has a consequence. The consequences are inescapable. They can be negative (prison for example) or positive and we, through the choices we make in life, control the outcome.

But, is there life following prison? Once again from personal experience I found the answer is yes! However, it is without doubt a function of the choices you make. Never forget, every choice has a consequence. We can make from the trials of life what we want. We all journey through life struggling to find some meaningful purpose to our earthly existence. Through this we all make choices and mistakes. From time to time we may receive help along the way and if we are really fortunate we might have the insight to "pay it forward" and help others.

As a former CPA, through a series of bad choices or serious ethics lapses, I became a white-collar criminal. Now, I am a sales executive in a publicly held company and an international motivational speaker (www.chuckgallagher.com). I now take the time to review my lessons from prison and write about those experiences so that others may gain benefit and perhaps learn from the experience of others. Some of us learn lessons the hard way. Yet, through sharing the experience of my incarceration and return to productivity, others have stated that they've been able to look at their choices in a different and more productive way.

I learned a lot in prison. Mostly I became aware that success is not defined by our material possessions, but rather how we can help others. People often ask, looking back, what I think about my time in prison. My response, "Best thing that ever happened to me." Perhaps, over time, Mr. Scrushy will learn through careful insight that following his time in prison he will emerge stronger and able to be a powerful voice of hope.

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