Tuesday, March 22, 2005

"King Richard of HealthSouth"

Weston Smith, the fifth of the Guilty CFOs (a good name for a garage band, for which HealthSouth was infamous), began his testimony in the prosecution of former HealthSouth CEO Richard Scrushy, by noting that executives referred to Scrushy as the "king" because he made every decision.  The defense objection to that description was upheld, and I'm not good enough with my Shakespeare to do much with that for any analogy, but Smith did testify that he wanted to quit the company rather than sign financial statements that would subject him to liability under the newly enacted Sarbanes-Oxley Act's CEO/CFO certification provisions.  Smith stated that Scrushy persuaded him to sign because he planned to end the fraud in the near future.  As the final CFO to testify (of the five who served the company and entered guilty pleas), the cross-examination will be equally tough as with the previous four. 

I'm wondering whether the government's case has started to get bogged down with all the CFOs, and whether the jurors are still paying attention.  It has been going on for about two months, the jury has been subjected to a parade of cooperating witnesses who agreed to plead guilty in exchange for possible leniency, and there is still a ways to go before the prosecution wraps up.  Saying that all five of a company's CFOs participated in a fraud may sound better than it plays with the jury.  Moreover, the defense may take a while, especially if, as I expect, Scrushy testifies to establish his claim that he was lied to by all those CFOs (and others).  The Ebbers prosecution was a veritable model of efficiency compared to this trial by taking only six weeks (including 8 days of jury deliberations), and I suspect that time is not on the government's side here.  An AP story here discusses Smith's testimony. (ph)

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