BIRMINGHAM, Feb. 8 -- A former finance chief at HealthSouth Corp. testified Tuesday that he "reluctantly" agreed to be wired by the FBI and to capture conversations with company founder Richard M. Scrushy as investigators closed in on a long-running $2.7 billion accounting fraud.
William T. Owens marched the jury toward two crucial days in March 2003, when FBI agents sewed a recording device into his necktie and gave him a separate mini-recorder to monitor his telephone conversations with Scrushy, who is now on trial facing 58 criminal charges including fraud, conspiracy and money laundering.
HealthSouth founder Richard M. Scrushy leaves the courthouse in Birmingham, where he faces federal charges of accounting fraud and conspiracy.
(Jan-michael Stump -- AP)
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"I was wearing the recording device to seek evidence that Mr. Scrushy had knowledge of the conspiracy," Owens told the jury.
Owens described his mounting fears in early 2003 that the earnings manipulation scheme would unravel and take him along with it. By February of that year, U.S. Attorney Alice H. Martin and Securities and Exchange Commission lawyers stepped up investigations of possible insider trading at HealthSouth, doling out subpoenas to Owens and even visiting the homes of other corporate officials, he said.
Owens said he left the SEC subpoena on his office credenza for two weeks without opening it. When he finally tore open the envelope in late February, "all of a sudden it hit me, that for me to provide the documents and to provide the testimony I would have to provide to the SEC, I would have to commit perjury." Assistant U.S. Attorney Richard N. Wiedis reminded Owens that he had "told a lot of lies" over the course of the fraud, which began in 1996. "Why was this any different?" the prosecutor asked.
"I never swore an oath to tell the truth and then proceeded to lie," Owens responded. "Ultimately I decided I had to report the fraud. I couldn't do it any longer." So Owens said he called a lawyer and met with about 15 government investigators March 12. Five days later, he met before work with FBI agents who provided him with the recording equipment and a "game plan."
Sometime that week, HealthSouth was to file an amended quarterly financial statement with the SEC, papers that required signatures from both Owens and Scrushy certifying the accuracy of the data.
"I was to tell the defendant that I had come clean with my wife, which I had, and she was very upset, threatening to file for divorce, and she was unsure what she was going to do, and she said that if I continued on with the conspiracy she would definitely file for divorce," Owens told the jury.
Owens testified that his wife of more than 25 years eventually divorced him, a statement that brought a grimace to his face.
The tapes themselves could be played as early as Wednesday morning, after both sides resolve a dispute over technical issues. Legal experts said that wiring crucial witnesses to implicate confederates is unusual in white-collar crime cases, though a former lieutenant to Rite Aid Corp. chief executive Martin L. Grass recorded him a few years ago.
The HealthSouth tapes are all the more important because Scrushy's defense team contends there are no e-mail messages or other documents to tie him to fraud at the Birmingham rehabilitation hospital chain. Defense lawyers James W. Parkman III and Arthur W. Leach told the jury in opening statements that, when heard in context, the tapes offer plenty of exculpatory evidence for Scrushy.
More than a dozen former HealthSouth executives have pleaded guilty to taking part in the scheme, including all five finance officers during the company's history. Scrushy's lawyers say he was misled by Owens and others, who maneuvered to take control of HealthSouth and line their own pockets.
