Monday, April 18, 2005

Problems Mount for the Government at Scrushy's Trial

As the prosecution of Richard Scrushy moves inexorably toward its third month, the government did not have a good week before Judge Karon Bowdre.  First, she dismissed the three perjury counts, which were added to the indictment last September, because of apparent coordination between prosecutors and SEC investigators immediately before Scrushy testified under oath in the SEC's investigation (see earlier post here).  I doubt the loss of the perjury counts was a major blow to the prosecution, but it does make it easier for the defense to call Scrushy to testify without him having to explain why his statements to the SEC were not false.  The Judge then dismissed one of the money laundering counts on the ground that the government had not introduced sufficient evidence linking the funds to specified unlawful activity.  Once again, not a major blow to the government's case because the core securities fraud, conspiracy, and money laundering charges remain.

The testimony of the government's expert witness about tracing the money Scrushy used to acquire various assets related to the money laundering and forfeiture counts took a turn for the worse during cross-examination last week.  The witness, William Bavis, testified that he analyzed 34,000 transactions in Scrushy's personal accounts to trace the funds from the alleged fraud.  Unfortunately, Bavis appears to have struggled with the details, and at one point said that a statement that $5 million was the product of the fraud should have been $3 million. Judge Bowdre then asked about the missing $2 million: "Did that just evaporate in your calculations?" Needless to say, when the financial expert gets confused about the numbers, and the judge starts asking about basic math, it cannot help his credibility.  While the tracing testimony does not go to the financial fraud, and Scrushy's awareness of it, if more counts start dropping off the government's case, then the core claim about Scrushy's involvement in the fraud could become more difficult to prove.  An AP story (here) discusses the testimony of the government's expert. (ph)

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