Tuesday, February 1, 2005

Preparing to Introduce the Tapes at Scrushy's Trial

The government set the stage for introducing the audiotapes made by Bill Owens, HealthSouth's former CFO, who wore a wire for two days immediately before the FBI executed a search warrant at the company as part of its accounting fraud investigation.  The defense has raised questions regarding the  veracity of the tapes and problems regarding the government's handling of them.  At the trial today, prosecutors called an FBI evidence technician, who testified she made an "honest mistake" when she put the incorrect date on the evidence log for the tapes.  The defense has sought to exclude the tapes from being introduced at trial, a position U.S. District Judge Karon Bowdre rejected before trial (see earlier post here) but did give the defense the opportunity to raise admissibility questions at trial.  The government appears to be laying the foundation for admission of the tapes through Owens.  Interestingly, while the defense has sought to exclude them, counsel has also said they are exculpatory of Scrushy and show that it was Owens who was the perpetrator of the fraud.  No harm in having a fall-back position, in case the tapes come in. An AP story discussing the testimony at Scrushy's trial is here.

This type of evidence is uncommon in white collar cases, but not unique -- recall the prosecution of senior Rite Aid executives involved a cooperating witness who wore a wire to meetings with other defendants. The recordings in that case were challenged as being made in violation of Pennsylvania Rules of Professional Conduct 4.2 and 8.4 because it was an unauthorized contact with a represented person and involved dishonest conduct by the federal prosecutor, U.S. v. Grass, 239 F.Supp.2d 535 (M.D. Pa. 2003), arguments the district court rejected in refusing to suppress the tapes. (ph)

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Fraud, HealthSouth, Investigations, Legal Ethics, Securities | Permalink

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