Jury Acquits HealthSouth Founder of All Charges

"The reason behind our verdict was the lack of substantial evidence and witnesses' credibility," jurors said in a statement released by the court.

Later, eight jurors agreed to speak with reporters at the courthouse without revealing their names. Their names remained under seal until today under judge's orders. "The smoking gun wasn't pointing toward Mr. Scrushy," one male juror told the Associated Press. Another juror said race played no role in their decision.

Though he never testified, Scrushy made his case -- both in and out of court. The defendant, who came from relatively modest beginnings as a physical therapist, starred in a 30-minute television program called "Viewpoint" on weekday mornings. Scrushy and his wife, Leslie, read Bible verses. Scrushy, who is white, preached at predominantly black churches and donated more than $1 million to the Guiding Light Baptist church, which he joined shortly before he was indicted in 2003. He invited black pastors, some wearing clerical collars, to occupy benches in the courtroom in the jury's line of sight.

Defense lawyer Donald V. Watkins, a Birmingham fixture and owner of a local bank, entreated jurors in his closing to "send a message to Washington" and to remember the days of segregated water fountains and unequal treatment for blacks.

Watkins said in an interview yesterday that prosecutors had blundered by trying Scrushy in Alabama. "You never fight a man on his home turf," Watkins said. "Corporate leaders generate so much goodwill for actions they do over time that it's hard for an outsider to come in and persuade them otherwise."

The Scrushy acquittal came after juries in New York convicted former executives at Adelphia Communications Corp., WorldCom Inc. and Tyco International Ltd.

But unlike several chief executives who were convicted, Scrushy never took the witness stand. That left jurors to evaluate only the credibility of former HealthSouth officials who pleaded guilty and testified against him in exchange for more lenient sentences -- a fact the defense hammered repeatedly for the jury.

"Criminal cases that rely on co-conspirators are very difficult to prove unless you can corroborate what the co-conspirators say," said Patrick D. Robbins, a former federal prosecutor in San Francisco. He said that point was driven home when the jury asked to rehear the tapes of Scrushy during its deliberations. "The jury obviously concluded the tape was not incriminating enough."

That could give comfort to former Enron executives Kenneth L. Lay and Jeffrey K. Skilling, who await trial in January on fraud and conspiracy charges. Both men have mounted aggressive public defenses that point the finger at subordinates who pleaded guilty in exchange for lighter sentences.

Legal experts said it was difficult to predict how the Sarbanes-Oxley criminal charge might fare in a different trial and with a different jury -- one that did not soundly reject every aspect of the government's case.

"Sarbanes-Oxley is a good tool for prosecutors," U.S. Attorney Martin said. "I would look for the statute to continue to be used."

Prosecutors claimed that Scrushy pressured subordinates to meet Wall Street earnings targets and inflate profit by nearly $3 billion. The government said he spent more than $200 million in the course of the fraud, buying a Cessna jet, waterfront property on the Gulf Coast, Impressionist paintings and 21-carat diamond jewelry.

HealthSouth agreed to pay $100 million to the Securities and Exchange Commission this month to settle civil charges related to the fraud. The company operates with a new management team, but Scrushy remains a member of the board and one of the largest individual shareholders. HealthSouth's new leaders restated earnings by more than $1 billion Monday to erase some of the fraud off the books.

Robert P. May, the company's chairman, said in a statement that he was "appalled by the multibillion-dollar fraud that took place under Mr. Scrushy's management and the environment under which such fraud could occur." He said Scrushy would not be welcome at HealthSouth under any circumstances.