Wednesday, September 7, 2005

Records In Scrushy Trial Being Released

A lot was happening behind the scenes before and after the Scrushy trial. Several in the media filed a motion for the release of undisclosed documents during this trial. (see here) The defense did not object to the release of almost all information, objecting only to items pertaining to personal  and financial data of Scrushy. (see here) According to the Website of the New York Society of CPAs here, the media has been successful in having these records unsealed.  So  stay tuned.

(esp)

September 7, 2005 in HealthSouth | Permalink | TrackBack (0)

Thursday, August 25, 2005

3 months to a cooperator in HealthSourh

AP reports here that Aaron Beam, a government witness in the Richard Scrushy trial, received a sentence of three months in prison and a year probation. Beam, the former CFO of HealthSouth, testified in the Scrushy trial, a trial that resulted in a not guilty verdict for Scrushy. Prosecutors asked the court for leniency in light of the substantial cooperation provided by Beam.  Yes, in some cases the cooperators get a greater sentence than the person they are cooperating against.  Obviously this is true when the accused is found not guilty, like Richard Scrushy.

(esp)

August 25, 2005 in HealthSouth | Permalink | TrackBack (0)

Sunday, August 7, 2005

SEC Doesn't Get It

Reported here (AP Ala.Com) and here (Wall Street Jrl) are how two judges (one in the civil case and another in the criminal case) reached the same conclusion in the Richard Scrushy case - the DOJ and SEC had worked too closely together.  The SEC is concerned that these rulings will obligate them to notify defendants who are targets of a criminal investigation.

Two judges have now said the same thing and the SEC just doesn't seem to get it.  They seem to think that the ruling by these judges will preclude their ability to cooperate on matters.  Maybe, just maybe, cooperation is not the issue.  Perhaps the issue is the type of cooperation occurring here.  The backdoor conversation to find the best location that would disadvantage a defendant, and then in fact disadvantaging the defendant by not notifying him of being a target is perhaps what seems the most disturbing aspect of events here.  And is it really so cumbersome for the SEC to tell someone their status in an investigation?  If DOJ places an individual before a grand jury, there is an obligation to notify him or her of target status under the U.S. Attorneys Manual and there is an explicit guideline on "Advice of "Rights" of Grand Jury Witnesses. (U.S.Atty.Manual 9-11.151)

(esp)

August 7, 2005 in HealthSouth | Permalink | TrackBack (0)

Thursday, August 4, 2005

Cooperation Buys Probation for Former HealthSouth Exec

Often when the government is investigating a company or individual, they uncover criminal conduct that may be outside the focus of their initial investigation.  The question arises - what do you do with this evidence?  These extraneous criminal charges sometimes serve as the basis for the government securing cooperation agreements with individuals who will provide information related to the main investigation.

The Wall Street Journal (AP) reports here that a former HealthSouth executive received a sentence of probation and a $500 fine for a conviction on a false statement to the FBI "about [a] bribe, which was uncovered during an investigation into the huge fraud that nearly bankrupted the rehabilitation and medical-services chain."  The false statement was for "lying about a plan to pay a $1 million bribe in return for a $50 million deal to run a hospital linked to Saudi Arabia's royal family."

(esp)

August 4, 2005 in HealthSouth | Permalink | TrackBack (0)

Saturday, July 23, 2005

Scrushy Seeks Dismissal of SEC Securities Fraud Suit

Former HealthSouth CEO Richard Scrushy filed a brief in response to U.S. District Judge Inge Johnson's order to show cause seeking dismissal of the SEC's securities fraud and accounting suit.  Scrushy argues that the government has not offered any "credible" evidence that he knew about the fraud at the company, and because the Commission's evidence will be the same as that presented in the criminal trial that resulted in an acquittal, the court should dismiss the SEC case.  The usual analysis is that, because the SEC only seeks a civil remedy and not a criminal punishment, the lower burden of proof means that an acquittal in a prosecution has no effect on the enforcement action.  Nevertheless, nothing about this case has been usual, and the district court may dismiss some or all the counts in the SEC complaint (here). 

If the SEC survives the show cause hearing, then the next step will be the deposition of Scrushy, which promises to be an interesting proceeding.  The Department of Justice's decision not to seek appellate review of the dismissed perjury charges means that Scrushy would not be able to postpone the deposition because of the pending criminal case, and he no long has a Fifth Amendment problem because he was acquitted of the charges.

Scrushy posted a letter on July 15 to his personal website (here) that, among other things, discusses the government's continued pursuit of him:

However, what pains me the most, is how our United States government conducted this investigation in a way that maximized the damage done to HealthSouth and to its shareholders. Some have called the government’s tactics a “shock-and-awe” campaign—but it was the shareholders who were shocked and awed. Had the government conducted their investigation properly, instead of prioritizing their media blitz, I believe HealthSouth’s stock would never have been delisted, and the stock price drop would have been minimal.

Has there been a more overworked phrase in the last couple years than "shock and awe"?

The oral argument at the show cause hearing (assuming there is one) will certainly be a hot ticket.  A Washington Post article (here) discusses Scrushy's brief in the SEC case and also mentions that he is pursuing repayment from the company of his $20+ million legal expenses in the criminal action.  Under Delaware law, Scrushy has a good argument for payment of the fees, but don't look for that litigation to be any less contentious than the criminal or SEC cases. (ph)

July 23, 2005 in Civil Enforcement, HealthSouth, Securities | Permalink | TrackBack (0)

Wednesday, July 13, 2005

Government Dismisses Scrushy Appeal

According to the Birmingham Business Journal (here ) the government has dismissed its appeal of the three perjury counts that had been struck down by the district court at trial. Judge Bowdre dismissed these three counts noting that "[t]he Government represented on the record to the court that it has no evidence of perjury apart from Mr. Scrushy's S.E.C. deposition. As a result, the perjury counts, Counts 30, 31, and 32, of the Superseding Indictment based on that testimony will be dismissed at the appropriate time." 

To pursue a case without merit would clearly be improper and the double Jeopardy clause of the Constitution raised serious questions about the government's appeal (see here).

Doing the right thing can sometimes be difficult, but the government has clearly done this today in the case of Richard Scrushy.  Applause to Prosecutor Alice Martin for not only dismissing the appeal, but for changing her mind publicly.  It is difficult to have stood before the public and advocated a position of proceeding with the appeal in this case, and then turn around and dismiss the matter. The lesson she teaches all here is that prosecutors need to be flexible in positions that they take.  Oftentimes they need to rethink their actions after they have examined and studied the issues fully.

(esp)

July 13, 2005 in HealthSouth | Permalink | TrackBack (0)

Monday, July 11, 2005

Scrushy - Double Jeopardy Should Preclude Retrial

The Motion to Dismiss the government's appeal in the Scrushy case is pretty telling. (see Download motion_to_dismiss.pdf)

This motion includes as an attachment the judge's order that dismissed the three counts that the government is appealing.  After noting the improper conduct by the government in this case, the order explicitly states - "The Government represented on the record to the court that it has no evidence of perjury apart from Mr. Scrushy's S.E.C. deposition. As a result, the perjury counts, Counts 30, 31, and 32, of the Superseding Indictment based on that testimony will be dismissed at the appropriate time."  This sure sounds like a decision premised upon sufficiency of the evidence.  And if premised upon sufficiency of the evidence the law is clear that the government cannot appeal the decision because it will be double jeopardy. Co-blogger  Peter Henning notes the problems that the government could have with respect to collateral estoppel as a result of the jury verdict in this case (see here).  But looking at the language used by the court in this Order, not once, but more than once, it sounds like the cases of Martin Linen and Smalis should preclude the prosecution from appealing this decision.

P.S.  And if you didn't like the verdict, well check out Dean John Carroll's op ed piece here. Sometimes the evidence just isn't there.

(esp)

July 11, 2005 in HealthSouth | Permalink | TrackBack (0)

Wednesday, July 6, 2005

SEC Plans to Push Ahead Against Scrushy

An AP story (here) states that the SEC plans to file papers in connection with a hearing on July 7 before U.S. District Judge Inge Johnson that it wants to move forward with the civil fraud case against former (and future?) HealthSouth CEO Richard Scrushy.  The Commission filed its case back in March 2003 (complaint here) alleging violations of the antifraud, reporting, and books-and-records provisions of the federal securities laws and related rules, including allegations that Scrushy aided and abetted violations by HealthSouth's various CFOs.  The SEC seeks a permanent injunction, civil penalties, and a director-and-officer bar against Scrushy.  The story quotes one of Scrushy's attorneys stating, ""We'll challenge everything . . . Mr. Scrushy doesn't believe he's done anything [wrong]."  It sure sounds like this one will be Round Two of the Battle of Birmingham because the SEC is unlikely to back down from the challenge of a CEO whose company had every CFO in its history plead guilty to conspiracy to commit securities fraud and related charges. (ph)

July 6, 2005 in Civil Enforcement, Fraud, HealthSouth, Securities | Permalink | TrackBack (0)

Friday, July 1, 2005

Does Scrushy Really Want His Old Job Back?

The HealthSouth saga could rival the finest Gothic novels as a Wall Street Journal article (here) states that Richard Scrushy plans to contact large shareholders of the company he founded about reclaiming his position as CEO.  Whether or not it is posturing, in the afterglow of the acquittal in the criminal trial, he may feel emboldened to take back what he rightfully believes belongs to him -- regardless of the fact that it is a publicly-traded company and he still has an SEC securities fraud action and numerous civil lawsuits hanging over his head. 

As the article also notes, this may be posturing by Scrushy to ensure that his legal bills, estimated at $25 million from the criminal trial and likely to be significant if the SEC case proceeds, are paid by the company, and that he receives the severance benefits under the employment agreement the board of directors nullified in 2003 when he was terminated (see earlier post here about continuing litigation).  If Scrushy does return to an executive position at HealthSouth, would you want to be CFO of the company?  They have quite a track record with him around. (ph)

July 1, 2005 in HealthSouth | Permalink | TrackBack (0)

Judge Bowdre Speaks to the Press

U.S. District Judge Karon O. Bowdre, who presided of the recently completed criminal trial of Richard Scrushy, gave an interview to the Birmingham News (article here) offering -- in very general terms -- her views on the judicial process during the Scrushy trial.  She refused to comment on the lawyers or any of her rulings, but did discuss generally her approach to the trial and willingness to have a few lighter moments with the jury and lawyers.  On the issue of whether she would accept the case once it was assigned to her, Judge Bowdre noted that she could have recused herself because of contacts with Scrushy's family -- specifically his first wife and their daughter -- but instead ""I decided to grin and bear it, suck it up and do my job."  Good to hear from a federal judge, and a former law professor to boot (not that we professors have to "suck it up" all that often).  I am always leery of judges speaking to the press about cases, especially one which could be back before her if the perjury and obstruction charges are reinstated by the Eleventh Circuit and the government decides to pursue them in another trial.  That said, judges have very few avenues to express informally their position, usually being confined to judicial opinions that are rarely what could be described as a "good read," and their contacts with the local bar must be limited.  Human nature being what it is, Judge Bowdre's comments are hardly problematic, and do not show any favoritism to one side or the other -- although the U.S. Attorney's Office may not feel the same way. (ph)

July 1, 2005 in HealthSouth, Media | Permalink | TrackBack (0)

Wednesday, June 29, 2005

Back to Court for Scrushy?

On the TV lawyer shows, once the jury announces a not guilty verdict -- the outcome of both Matlock episodes I've watched -- everyone leave the courtroom and nothing further happens to the defendant.  Not so, most likely, with Richard Scrushy.  As discussed in our earlier posts (here and here) and in news stories (see AP story here), the government appealed the dismissal of three perjury charges and an obstruction of justice charge during trial because of misconduct by the prosecutors and the SEC in connection with taking Scrushy's deposition in the SEC investigation.  Because the dismissal was not based on the sufficiency of the evidence, the government has the right to appeal and, if the Eleventh Circuit reverses U.S. District Judge Karon Bowdre's order, the government can retry Scrushy, as it has indicated it will.  That may be a bad tactical decision, as Ellen has already noted, and the odds of winning a retrial are not very high, given that the case will be in Birmingham. 

There's another issue in that Scrushy's lawyers will likely argue regarding the perjury/obstruction counts aside from the merit of Judge Bowdre's decision, and that is whether the jury's not guilty verdict on the 36 counts constitutes collateral estoppel on the perjury charges.  Under the double jeopardy clause, the Supreme Court has recognized that the government may be collaterally estopped from prosecuting a different crime if the jury has already decided the underlying factual basis in favor of the defendant in a prior proceeding.  The main case in this area is Ashe v. Swenson, which involved a second prosecution for robbing a participant in a poker game after the defendant was acquitted of robbing another participant in the same game.  Scrushy will argue that the perjury counts (indictment here), which allege that he knew the company's financial statements were false when he testified as to their veracity, were effectively decided by the jury when it accepted his defense that he was misled by the company's CFOs and had no knowledge of improper accounting or revenue recognition.  Collateral estoppel is a very difficult argument to win, but in this case, at least with regard to the perjury charges, Scrushy has a good claim that the not guilty verdict means that he did not know of the fraud, and therefore could not have intended to testify falsely.

Although most of the criminal case is over, and perhaps all of it, the SEC plans to pursue its civil enforcement action alleging securities fraud related to both the false financial statements and insider trading related to Scrushy's sales of HealthSouth stock.  The judge in that case has scheduled a hearing in July to consider whether to dismiss the case, and the Commission will argue that the acquittal has no effect on the civil case because of the different burdens of proof.  The standard understanding in this area is that the not guilty verdict does not mean the person is innocent, only that the government did not prove the case beyond a reasonable doubt, so the civil case with its lower "preponderance of the evidence" standard can go forward.  This case, however, has been far from standard, beginning with the asset freeze hearing in 2004, so it is difficult to predict what will happen.  If the SEC case does move forward, the Commission will be able to depose Scrushy, and call him to testify at trial, unlike in the criminal case.  Fireworks are sure to ensue from that confrontation.

The media reports also hint that Scrushy may seek to regain his job as CEO, and file a wrongful termination suit against the company.  This will put him in a far different, and potentially weaker, position.  As a defendant, he can rely on the burden of proof, while as the plaintiff he will have to establish that his termination was improper.  Given that his defense in the criminal case was that he was misled for years by CFOs and others about the company's false accounting, that is hardly an endorsement of his conduct as CEO of the company.  What worked as a criminal defense may undermine his claim that he was removed from office wrongfully when all these problems happened on his watch and, perhaps, with a measure of his participation.  Once again, he will have to testify in a wrongful termination suit, and be subject to extensive cross-examination.

Finally, there can be plenty of litigation involving corporate issues if the board seeks to have the shareholders remove him, or if Scrushy mounts a hostile proxy to get himself and others on the board as a first step toward restoring himself to office.  If the SEC were to win its securities fraud suit, he would be prohibited from serving as an officer and director for a period of at least five years, and HealthSouth's current management has been quite cooperative in the SEC's case.  That could change if Scrushy retakes power, and he may be thinking that the best defense here is a good offense (hey, this is football country!). 

Unlike a Matlock episode, this one will be in court for a while yet. (ph)

_____________________________________

Update (6/29): Not to belabor the point, but Scrushy's employment agreement is available at Findlaw (here), and contains the following provisions for termination:

(c)  Termination  for Cause.  The Company  may  terminate  the  Executive's employment  hereunder for Cause.  For purposes of this Agreement,  the Executive shall be considered  to be  terminated  for "Cause" only if (i) the Executive is found, by a  non-appealable  order of a court or competent  jurisdiction,  to be guilty of a felony under the laws of the United  States or any state  thereof or (ii) the Executive is found, by a  non-appealable  order of a court of competent jurisdiction,  to have committed a fraud, which has a material adverse effect on the Company. However, in no event shall the Executive's employment be considered to have been  terminated for "Cause"  unless and until the Executive  receives a copy of a resolution duly adopted by the  affirmative  vote of a majority of the Board at a meeting  called and held for such purpose (after  reasonable  written notice is provided to the Executive setting forth in reasonable detail the facts and  circumstances  claimed to provide a basis of termination  for Cause and the Executive is given an opportunity, together with counsel, to be heard before the Board)  finding that the  Executive is guilty of acts or omissions constituting Cause.

     (d)  Termination  other than for Cause.  The Board  shall have the right to terminate  the  Executive's  employment  hereunder  for any  reason at any time, including  for any  reason  that  does  not  constitute  Cause,  subject  to the consequences of such termination as set forth in this Agreement.

For a non-cause termination, Scrushy receives a number of benefits as set forth in the agreement.  Yet one more cost to the company, most likely, along with the attorney's fees from the defense. (ph)

June 29, 2005 in Civil Enforcement, HealthSouth, Prosecutions, Verdict | Permalink | TrackBack (0)

Tuesday, June 28, 2005

More Scrushy From the Other Side of the Pond

The "not-guilty" verdict in the Scrushy trial is not surprising, although its timing is -

1.  The judge replaced a juror after 16 days of deliberations, telling them to start "anew."  But 4 days later there is a verdict.  Did they really start anew?  Or did this new juror help to reconcile the prior split that the jury had?

2.  No one really won here.  The government received a "not guilty" on a major case it had worked on for years - -  a case that had to have cost taxpayers significant amounts of money.  The company paid 100 million in a civil penalty.  And Richard Scrushy, although walking out of court a free man, has had to have suffered enormously throughout this process. As he stated earlier, it is a shame that his father who passed away days ago did not get to hear the sound "not-guilty" after sitting through the entire trial.

3. Using the Sarbanes-Oxley Act will not mean an automatic guilty verdict for the government. 

4.  Jurors want to know that a defendant is responsible for the acts and that he or she really knew what was happening at a company - - that is  before they will convict - and at least in Alabama.

5. One has to wonder what effect the prosecutor's conduct had on the jury-- the repeated references to Enron and WorldCom, even after being admonished by the judge not to do this.  Also the government sending witnesses in who are wired up to "get" evidence is probably not something that plays well in the south. The fact that the government used so many charges - "the throwing of spaghetti against the wall and hoping something sticks" can make jurors wonder if the government really has a strong case.

6.  And finally, the most important -  Richard Scrushy is innocent.  Maybe this verdict is because he did not know what others in the company, other who did plead guilty and tried to cut deals for themselves (although 2 sentences were vacated see here), were doing in the company.  With jurors listening attentively to the trial, taking its time to deliberate, the reason for this result is because it represents what really happened here --  the man should not have been charged with a crime.

7. So government- my advice is to take this decision and move on to other cases.   To proceed against Richard Scrushy on dismissed charges of perjury and obstruction of justice, as now stated by Alice Martin here is not the answer.  And would this statement have been made if the verdict was guilty? 

esp (from across the pond -in Edinburgh, Scotland - at the International Society for the Reform for Criminal Law -ISRCL).

P.S.  I am still bothered by that other southern jury case (here), where the jurors had to work through Memorial Day weekend and Memorial Day.   

June 28, 2005 in HealthSouth | Permalink | TrackBack (0)

Scrushy Acquitted on All Counts

The jury returned not guilty verdicts on all counts in the prosecution of Richard Scrushy, dealing the government a significant blow, at least for now.  Among the charges was the first prosecution under the CEO/CFO certification provision adopted in the Sarbanes-Oxley Act (18 U.S.C. Sec. 1350), and the acquittal means that legal issues related to the provision, such as the requisite intent level for a violation, will have to await another case. 

We will not doubt hear from the jurors later, and I expect their comments on the verdict to focus on the government's failure to meet its burden of proof and the credibility (or lack thereof) of the government's many witnesses who participated in the fraud at HealthSouth.  One question for the government will be its decision to pursue the case in Birmingham, Alabama, which certainly gave Scrushy a "home court" advantage in a city in which he is well-known and was widely admired, at least by a segment of the population -- think about the prosecution of Bernie Ebbers in New York City, a venue that he challenged but did not win.  While U.S. Attorney Alice Martin and some members of the prosecution team are equally local, it is almost impossible for the federal government to play the home town card.

The question now is what's next for Scrushy and HealthSouth.  Just last week the company entered into a final settlement with the SEC on its civil securities fraud suit, agreeing to pay a $100 million penalty and to adopt corporate governance changes (Litigation Release here).  The SEC's civil fraud suit against Scrushy is pending (complaint here), and his first victory against the government came last year when he defeated the SEC's attempt to freeze his assets.  While Scrushy was dismissed as CEO in March 2003, when the fraud at HealthSouth first came to light, he remains a member of the board of directors, largely because the company has not been able to hold an annual meeting because of its inability to put out an audited financial statement until just last week.  Scrushy owns over 3 million shares of HealthSouth stock, and still has stock options for 700,000 shares (see HealthSouth 10-K here).  Given the "vindication" the verdict has delivered for his defense that he was misled by, among others, the Five Guilty CFOs, I think it is likely that Scrushy will seek to reclaim his position at the company he founded, or go down fighting any effort to remove him from the board.

The acquittal delivers even more bad news to the company because, under Delaware law (the jurisdiction in which HealthSouth is incorporated), Scrushy has been "successful on the merits or otherwise" in the criminal trial for conduct related to his actions on behalf of the corporation.  Therefore, under Delaware General Corporation Act Sec. 145(c), the company is legally required to pay all of his attorney's fees related to the criminal case.  There is litigation pending in the Delaware Chancery Court about the company's obligation to advance expenses in the criminal case (disclosed in the 10-K), but the acquittal means the decision is out of the hands of the board and the expenses must be paid.  Scrushy had a large, and no doubt expensive, legal team, a bill the company will have to foot -- and disclose at some point, which will give us an idea of just how much this defense cost.

Each week seems to bring a new view of the success and failure of the government in prosecuting cases of corporate fraud.  The convictions of Dennis Kozlowski and Mark Swartz for their conduct related to Tyco meant the government could not be stopped, while this verdict means the government has suffered a significant blow to its effort.  I suspect the lesson the government will learn is to try to stay away from smaller venues, but we'll see if there's more. 

These are just some first thoughts, and I'm sure Ellen will want to weigh in from across the pond in Scotland where she is at the moment, although it may take her a bit longer to supply a reaction. (ph)

June 28, 2005 in HealthSouth, Verdict | Permalink | TrackBack (0)

Thursday, June 23, 2005

What Happens Next in the Scrushy Trial

Now that the jury, in the trial of Richard Scrushy, has to resume deliberations "anew" because of the replacement of a juror with an alternate - - what happens next?   The NY Times here, Wall Street Jrl here, and Birmingham, Alabama News here, all talk of the long process that has accompanied the deliberations. The NYTimes even includes a detailed hourly summary of the deliberation process (see here) But the effect of a new process and new individual as a part of the process is truly an unknown.

If the jury was 11-1 for a verdict and the one holdout for a particular view was the dismissed juror, then we may see some quick action.  But if the votes are split further than that, this replacement may not be as consequential to a speedy resolution as some might want. (unless the juror is a master at negotiation or advocacy and can convince the others to come around to a position). Because of the secrecy of the jury process, we really will not know the full extent of what has occurred in this deliberation, until perhaps it is over.  And it is possible that we may never know.

Some may not agree with the slow process of this trial and the failure to have fuller days of deliberation, but the judge's response to this criticism is important. The judge recognizes the sacrifices being made by jurors. (see here) and in doing so she is considering not merely the accused, but also the costs to everyone when the government proceeds to  trial.  I guess slow justice isn't super, but I'm still bothered by the lightening speed of the "other southern jury" that worked through Memorial Day and Weekend (see here).

(esp)

June 23, 2005 in HealthSouth | Permalink | TrackBack (0)

Wednesday, June 22, 2005

Back to Square One with the Scrushy Jury

U.S. District Judge Karon Bowdre sent the jury in the prosecution of Richard Scrushy back to the beginning by replacing a juror, whose recent health problems had caused the jury to miss three days of deliberations, with one of the alternates alternate.  Federal Rule of Criminal Procedure 24(c)(3) (here) provides in part that "[i]f an alternate replaces a juror after deliberations have begun, the court must instruct the jury to begin its deliberations anew."  The judge kept alternate jurors available, which is permitted under the same Rule although not required, in case of this very situation in which a juror would need to be replaced, .  I suspect that while the deliberations have been painful for the jurors, the wait for the alternates must be excruciating because Rule 24(c)(3) also states that "[t]he court must ensure that a retained alternate does not discuss the case with anyone until that alternate replaces a juror or is discharged."  Is being an alternate on this jury cruel and unusual punishment?  An AP story (here) discusses the judge's ruling replacing the juror. (ph)

June 22, 2005 in HealthSouth | Permalink | TrackBack (0)

Tuesday, June 21, 2005

Former HealthSouth Executives Sentences Vacated

Former HealthSouth CFO Michael Martin-- one of the Five Guilty CFOs who testified against former CEO Richard Scrushy -- and former senior vice president for tax Richard Botts had their sentences vacated and remanded for resentencing by the Eleventh Circuit in two unpublished opinions that employ the same language and reach identical conclusions (Martin here and Botts here).  Martin entered a guilty plea in June 2004 to one count of conspiracy to commit securities fraud and one count of filing false financial statements with the SEC, and under the Sentencing Guidelines his offense level was 31, which called for a sentence of 108-135 months.  The government filed a 5K1.1 motion and asked Chief U.S. District Judge U.W. Clemon to sentence Martin to a 60-month term of imprisonment.  Instead, the judge sentenced Martin to 60 months probation, with six months home confinement, by granting a 21-level downward departure.  Botts entered a guilty plea to conspiracy and mail fraud charges in August 2003, and although the offense level under the Guidelines was 34, which would result in a sentencing range of 151-188 months, the statutory maximum for the crimes (at that time) was five years, so his sentence was capped at 60 months.  The government made a 5K1.1 motion and asked for a 40-month term of imprisonment for Botts, but  Chief Judge Clemon sentenced Botts to 60 months probation, with six months home confinement, by granting a 26-level downward departure.   The government appealed both sentences, and the appellate court remanded them because the judge provided no written or oral statement supporting what the Eleventh Circuit termed "this extraordinary departure" in both cases, rendering the sentences "incapable of meaningful appellate review."

On remand, Chief Judge Clemon can give each the same sentence, and both have served the term of home confinement, a point played upon quite heavily by Scrushy's defense counsel in cross-examining each.  The judge will, however, have to give reasons for the departures that relate to permissible factors under the Guidelines, and the sentence will be subject to appellate review for reasonableness under Booker.  (ph)

June 21, 2005 in HealthSouth, Sentencing | Permalink | TrackBack (0)

Monday, June 20, 2005

Scrushy- How Long is Too Long?

Ebbers and Kozlowski have had a resolution of their cases, although most likely one they are not pleased with, as both were found guilty.  Adelphia Communications executives John and Timothy Rigas are set for sentencing today.  And the jury is still out for Richard Scrushy. 

How long should a judge keep a jury out, especially when they have indicated their inability to reach a verdict, been given an Allen charge, and silence is all that comes out of the jury room.  It has been a good many days since any notes were sent out from the jury room. Will they decide when they resume their deliberations on Monday, day 17?  See here.  Or will they continue to deliberate?  And if so, when does a judge decide that holding these individuals in the jury room will not resolve the case? Or is it that you just hold them until a verdict is reached? 

(esp)

June 20, 2005 in HealthSouth | Permalink | TrackBack (0)

Tuesday, June 14, 2005

Is Scrushy Using an "O.J. Defense"?

Cynthia Tucker, an editorial writer with the Atlanta Journal-Constitution, has a provocative column (here) entitled Scrushy Tries O.J. Defense.  She asserts that Scrushy's defense is designed to "try to pass yourself off as a black man who is the victim of government persecution."  According to Tucker, "Strange as it may seem, the strategy may be working."  Racial issues related to juries are certainly in the news today, with the Supreme Court's decision in Miller-El v. Dretke (here) that reinvigorates the Batson analysis of peremptory challenges based on race or sex.  The Scrushy jury had a quiet day of deliberations on Monday after taking a long break last week, and the leisurely pace of the deliberations has certainly stretched things out (see AJC story here, with a quote from blog co-editor Ellen Podgor on the jury's schedule).  While one would expect some resolution of the case -- even a hung jury -- sometime soon now that deliberations have stretched into a fourth week, there's no way to know whether the Allen charge has started to move them toward a verdict.  Perhaps this jury is like a watched pot.  (ph)

June 14, 2005 in HealthSouth | Permalink | TrackBack (1)

Wednesday, June 8, 2005

That Other Southern Jury v. Scrushy (and HealthSouth Addendum)

While the other southern jury (Senator Charles Walker) is long since over (see here) , the Scrushy case is proceeding leisurely through the week. It looks like they will only be working two days this week. (see AP Birmingham News here).

In looking back at the Walker case, a case tried by two of Atlanta's finest attorneys (Don Samuel & Ed Garland), one has to wonder was the work week too grueling for the jury. In Walker the jury worked from 8:00 a.m. to 7:00 p.m., seven days a week, including holidays and Sundays. (see here) They worked, yes- Memorial Day weekend including Memorial Day. Is this fair to a jury and what happens when a jury is put under this strain? In the Walker case, the jury convicted the state senator of 127 counts. (see here).

With so much talk about uniformity in sentencing, one has to wonder if maybe the focus should be on uniformity in trials. Where is the happy medium between the Scrushy trial and Walker case. On one hand we praise the judge in Scrushy for accommodating the jurors, individuals who are giving up valuable time in their lives to assist the justice process. After all if you were a juror who had pre-paid for a vacation, to be asked to cancel it might influence your decision. But is it right that one defendant is fast tracked through trial and another is not?

Some of the forthcoming post trial issues in Walker are likely to be? (1) Can an honest services mail fraud conviction be sustained where evidence is premised on a failure of the defendant to file state-required personal financial statements, (2) The judge's reseating a juror that the defense had struck premised upon the background of the individual and the type of case involved. (3) The honest services prong of the indictment.

(esp)

Addendum - Wall St. Jrl reports here that HealthSouth has "agreed to pay $100 million to settle claims brought by the Securities and Exchange Commission" and that the jury in the Scrushy case will resume deliberations on Monday of next week.  (esp)

June 8, 2005 in HealthSouth, Prosecutions | Permalink | TrackBack (0)

Friday, June 3, 2005

Allen Charge Delivered in Scrushy Trial

U.S. District Judge Karon Bowdre delivered an Allen charge (see prior post for link discussing it) to the jury in the trial of Richard Scrushy.  The text of the charge (from the Birmingham News here):

Members of the jury:

I am going to ask that you continue your deliberations in an effort to agree upon a verdict and dispose of this case; and I have a few additional comments I would like for you to consider as you do so.

The trial has involved great time and exceptional effort by both the government and the defendant. If you should fail to agree on a verdict, the case is left open and must be tried again. I have no reason to believe that the case can be tried again better or more thoroughly that it has been tried before you.

Any future jury must be selected in the same manner and from the same source as you were chosen, and I have no reason to believe that the case could ever be submitted to 12 people more conscientious, more impartial, or more competent to decide it than you. You have heard all the relevant evidence and I have no reason to believe that either side could produce more or clearer evidence in a new trial.

If a substantial majority of your number are in favor of a conviction, those of you who disagree should reconsider whether your doubt is a reasonable one because it appears to make no effective impression upon the minds of the others. On the other hand, if a majority or even a lesser number of you are in favor of an acquittal, the rest of you should ask yourselves again, and most thoughtfully, whether you should accept the weight and sufficiency of evidence that fails to convince your fellow jurors beyond a reasonable doubt.

Remember at all times that no juror is expected to yield a conscientious conviction he or she may have as to the weight or effect of the evidence. But remember also that, after full deliberation and consideration of the evidence in the case, your duty is to agree upon a verdict if you can do so without surrendering your conscientious conviction.

You may be as leisurely in you deliberations as the occasion may require and should take all the time that you may feel is necessary. Your goal should never be to just return a verdict, but to return a just verdict.

I will ask now that you retire once again and continue your deliberations with these additional comments in mind to be applied, of course, in conjunction with all of the instructions I have previously given to you.

The dynamite charge can raise questions regarding improper judicial interference in the jury's deliberations if a guilty verdict is returned, especially when it does so in a short time after the charge is delivered.  Given the apparent deadlock that has persisted since last week, it's certainly an open question whether the above charge will have any effect. (ph)

June 3, 2005 in HealthSouth | Permalink | TrackBack (0)