Scrushy Denies Role in HealthSouth Fraud

FILE- This June 28, 2005 file photo shows Richard Scrushy, second from left, with his wife Leslie,...

FILE- This June 28, 2005 file photo shows Richard Scrushy, second from left, with his wife Leslie, left, and attorneys Jim Parkman and Donald Watkins, right, meeting with reporters outside the Hugo Black Federal Courthouse in Birmingham, Ala., after jurors acquitted the HealthSouth Corp. founder of all charges. Richard Scrushy's federal criminal trial, which ended in his acquittal, was an entertaining, white-collar whodunit with everything from a courtroom prayer circle to a big cartoon rat. (AP Photo/Butch Dill, File)

(AP)

Testifying publicly for the first time about the financial debacle at HealthSouth Corp., fired CEO Richard Scrushy denied any involvement Wednesday with the huge accounting swindle that engulfed the rehabilitation company.

On the witness stand in a lawsuit filed by shareholders seeking $2.6 billion from Scrushy on behalf of HealthSouth, the longtime chief executive repeatedly portrayed himself as being unaware of an accounting fraud that evidence showed lasted for six years, starting in 1996.

Scrushy said he didn't know the company had cooked its books until 2003, when an FBI raid and government lawsuit revealed the scheme.

"I had no knowledge of any financial fraud at HealthSouth," said Scrushy, temporarily out of the federal prison where he is serving time for a separate corruption conviction.

Scrushy said he wasn't aware of some financial details at the company, including a $350 million budgeting error that his attorney depicted as a mistake, not fraud.

As Scrushy looked through old financial statements where he had circled numbers years before that didn't add up, defense lawyer Jim Parkman asked why he would raise such questions if he were in on the scam.

"That's a real good question," Scrushy answered.

Scrushy still looked like a high-powered executive in a dark business suit and tie. But his leg shackles jingled when he walked into court. He spent lunch in a holding cell rather than the fast-food restaurant where his legal team dined.

Scrushy was questioned first by Parkman, who represented him in the federal criminal trial that ended in his acquittal on criminal charges in 2005. Shareholder attorneys will cross-examine him as early as Thursday after Parkman finishes his questions.

Plaintiff's attorneys are making the same basic claim that prosecutors used unsuccessfully four years ago: That HealthSouth vastly inflated assets and revenues at Scrushy's direction when the company failed to meet Wall Street earnings estimates.