Saturday, December 10, 2005

Former HealthSouth CFO Receives Five Year Sentence -- Did He Tell the Truth?

The fifth and last former HealthSouth CFO who entered a guilty plea, William Owens, received the longest sentence by far of any executive when U.S. District Judge Sharon Blackburn imposed a five-year prison term.  The other former CFOs received sentences that ranged from probation to three months, including one who was resentenced to a week when the Eleventh Circuit found that the sentencing judge had not adequately articulated the reason for a downward departure.

One interesting question was whether the court would find that Owens' testimony against former CEO Richard Scrushy at his fraud trial was credible.  The defense had portrayed Owens as the ringleader of the fraud, and that he kept Scrushy in the dark about the massive, long-term effort to inflate revenues and earnings, while Owens testified that Scrushy was the one who orchestrated the fraud.  While the jury apparently did not believe Owens, Judge Blackburn said at the sentencing, "That person in my view escaped justice . . . I personally believe you told the truth in Mr. Scrushy's trial."  Needless to say, Scrushy's lawyers have a rather different view on the matter.

One troubling aspect of the sentencing of the former HealthSouth CFOs, all of whom admitted wrongdoing, were the widely disparate sentences they received.  While Owens may have been more responsible than the others due to his tenure during the height of the accounting fraud, it is hard to reconcile a five-year sentence for one executive that is twenty times longer than any other CFO received when all cooperated.  The government sought an eight-year term for Owens, so in that regard the judge imposed a lighter sentence than could have been given.  A story (here) discusses the sentencing. (ph)

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