US: Jury Convicts HealthSouth Founder in Bribery Trial

An Alabama jury yesterday convicted HealthSouth Corp. founder Richard M. Scrushy -- acquitted last year of federal accounting-fraud charges -- of paying half a million dollars in bribes to former governor Don Siegelman in exchange for a seat on a state health-care board.

Despite a defense that employed some of the same tactics that worked for Scrushy in his previous trial -- including comparing his troubles to discrimination against blacks and urging jurors to "make Dr. King's dream come true" by acquitting him -- the jury convicted Scrushy of all six bribery, mail fraud and conspiracy charges.

Scrushy, 53, could be sentenced to up to 10 years in prison.

A year ago, a separate federal jury in Birmingham acquitted Scrushy of three dozen fraud counts in connection with a $2.7 billion accounting fraud at HealthSouth, the nation's largest operator of rehabilitation hospitals. That acquittal came despite testimony from every one of the five finance chiefs in the company's history implicating Scrushy in the fraud.

Shortly after that verdict, widely viewed as a blow to prosecutors' efforts to enforce a new law holding executives accountable for fraud on their watch, prosecutors in Montgomery, Ala., unsealed political corruption charges against Scrushy, Siegelman and two of the former governor's aides. Defense lawyers denounced the case as a sour-grapes effort by the government to win a conviction against Scrushy after an initial setback.

But prosecutors, led by Assistant U.S. Attorney Louis V. Franklin Sr., told the jury they amassed "overwhelming" evidence of bribes. "It could not have been anything but a bribe," Franklin said yesterday in a telephone interview.

Charles Russell, a spokesman for Scrushy, said his client "maintains he is absolutely innocent of all the charges" and intends to appeal.

Outside the courthouse, Scrushy said, "It's a sad day in this country," according to the Associated Press.

Jurors yesterday convicted Siegelman, 60, of seven bribery, conspiracy and fraud counts but acquitted him of racketeering and 25 other charges. They also acquitted Siegelman's former chief of staff, Paul Hamrick, and onetime highway director Mack Roberts of all charges against them.

The two-month trial featured the sworn account of Scrushy's onetime investment banker at UBS, former finance chief Michael Martin and gubernatorial aide Nick Bailey, who told jurors that Scrushy had directed HealthSouth and affiliated businesses to make contributions to Siegelman's lottery campaign in a clear attempt to win a voice on an influential state commission that controlled hospital expansion.

In deliberations spread over 11 days, the jury twice received instructions from U.S. District Judge Mark Fuller designed to break a deadlock. The language the judge used to direct the jury could be a central focus of a Scrushy appeal, legal experts said.

From the start, Scrushy signaled that the panel's composition would be a key issue in the case, unsuccessfully arguing before the trial began that the jury pool contained too few African Americans. The jury ultimately included seven African Americans and five whites.

Civil rights lawyer Fred Gray, who worked alongside Rosa Parks and the Rev. Martin Luther King Jr., gave a rousing closing argument for Scrushy this month, invoking some of King's most potent rhetoric on freedom and social justice for a white man who grew up on what he called the wrong side of the tracks in Selma, Ala.

"Free at last, free at last, thank God almighty, we're free at last," Gray said in closing arguments, according to transcripts.

The judge released Scrushy on $1 million bond and ordered him to turn over his passport. Siegelman, who spoke openly of his financial woes, remained free on a $25,000 unsecured bond. The judge has not yet set a sentencing date.

Siegelman, a Democrat, served one term as Alabama's highest elected official, exiting in 2003. He mounted a bid to return to the governor's mansion this year. But the veteran politician overwhelmingly lost the June 6 Democratic primary in a campaign that overlapped with his criminal trial.

Scrushy, a former physical therapist who grew wealthy enough from his HealthSouth stock to purchase Gulf Coast vacation homes, impressionist art, diamonds and armored vehicles, remains a polarizing figure in Alabama. He founded a religious-themed television program months before his first trial, cultivated support from African American clergy and eventually became an ordained minister. Months after his trial, news outlets reported that Scrushy had used an intermediary to pay a handful of journalists covering the case, accusations he sharply denied.

Scrushy also made an unusual, brief appearance at the criminal trial of former Enron Corp. leaders Kenneth L. Lay and Jeffrey K. Skilling in March, telling a reporter he was trying to "rebuild his life" and expressing disdain for witnesses who cooperated with the government. The key witness against Scrushy in his accounting fraud trial last year was sentenced to five years in prison. In a rare turnabout, that witness's lawyer went on to defend Scrushy in the corruption trial.

Scrushy continues to fight civil record-keeping charges filed by the Securities and Exchange Commission. He is suing HealthSouth for more than $70 million in unpaid compensation and benefits. Meanwhile, multiple civil lawsuits filed by disgruntled shareholders also are proceeding through the courts.

• 106 Money & Politics
• 185 Corruption