Wednesday, July 06, 2005
bad day for the prosecution
The jury trying Richard Scrushy in connection with financial fraud has found the former HealthSouth boss not guilty. The verdict surprised many observers but can be explained by both the quality of the evidence against him and the way in which the trial was conducted. There are lessons for those who are yet to take part in corporate-fraud trials, including Enron’s former bosses and their prosecutors.
“GOD is good” was Richard Scrushy’s initial reaction to the verdict, on Tuesday June 28th, that he was not guilty on 36 charges related to accounting fraud at HealthSouth, a hospital chain he used to run. Prosecutors, on the other hand, were dumbfounded that their case had failed. It was widely regarded as the most solid in a recent slew of fraud trials against top American executives. Moreover, prosecutors in a similar trial, that of Bernie Ebbers, had successfully secured a conviction against the former WorldCom boss in March—and are now pressing the judge to hand down the maximum jail term of 85 years when she sentences Mr Ebbers on July 13th.
Mr Scrushy’s acquittal is the biggest setback so far for those seeking to punish former corporate chieftains for accounting misdeeds that undermined confidence in American business after the bursting of the stockmarket bubble in 2000-01. It is especially embarrassing for prosecutors because it was the first big case to be brought under the provisions of the Sarbanes-Oxley act, which had been rushed through Congress in 2002 in an effort to overhaul corporate governance.
posted by Brian Moran @ 10:06 AM