Scrushy Cajoles Ex-Finance Chief on Tapes

Former HealthSouth Corp. chief executive Richard M. Scrushy and his wife, Leslie, head to the federal courthouse in Birmingham yesterday. (Jan-michael Stump -- AP)

BIRMINGHAM, Feb. 10 -- Former HealthSouth Corp. chief executive Richard M. Scrushy told his finance chief who contemplated walking away rather than persist with a $2.7 billion accounting fraud, "Let's don't take ourselves out. Let's don't throw all these people to the wolves. Let's don't destroy this," according to audiotapes played at his fraud trial Thursday.

Scrushy also told the finance chief in a taped phone conversation the same day, "All right, well, just remember I got eight kids. I got a bunch of babies at home. They need their daddy."

Scrushy stands accused of 58 criminal charges, including fraud, money laundering and filing false financial statements under the Sarbanes-Oxley Act. He could spend more than a decade behind bars if he is convicted. Scrushy's defense lawyers contend he was misled by top officials at the company, including William T. Owens, the former chief financial officer who agreed to an FBI request to record conversations with Scrushy in March 2003.

Jurors heard well over an hour of tapes that Owens made March 17 and March 18, using a recording unit sewn into his necktie, another device hidden in the watch pocket of his trousers, and a third recorder he held up to his home telephone. The attentive jury made frequent use of written transcripts the court provided.

Those transcripts came in handy early Thursday when the poor quality of one tape sometimes rendered the words nearly inaudible. It is not clear whether jurors, however, will be able to refer to all of the transcripts during their deliberations, according to a ruling by U.S. District Judge Karon O. Bowdre.

On the tapes, Scrushy seemed alternately to cajole, threaten and sweet-talk Owens into signing Securities and Exchange Commission forms that attested to the accuracy of a HealthSouth filing that was due that week. Scrushy, however, never used direct words such as "fraud" or "scheme" to define the conduct.

Shortly after Owens walked into Scrushy's office March 17 and the tape began, Scrushy asked, "You're not wired, are you?" Owens denied it.

Owens told the jury that Scrushy took his suit coat off and motioned for Owens to do the same, then walked him outside the office, through a private work room, and into a hallway where he had never before been. Owens explained after the tape was played that Scrushy had warned him weeks earlier "to be on the lookout" because lawyers had advised Scrushy that there could be a turncoat in the ranks.

"He had expected someone close to him to engage him in conversation, and they would be wearing a wire," Owens added.

Many of HealthSouth's executives had been on edge for weeks by March 2003, Owens testified, because the SEC and U.S. Attorney Alice H. Martin had recently stepped up probes of the company's billing practices and Scrushy's stock sales.