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HealthSouth Execs Discussed Jail in Tape

Apr 11, 2003 | AP In a secret recording, top HealthSouth officials discussed the prospect of going to jail just a day before federal prosecutors accused the company of fraudulently inflating earnings by billions of dollars.

The recording, made by HealthSouth's then-chief financial officer William T. Owens, was played Thursday on the second day of a federal hearing to determine whether ousted CEO Richard Scrushy's assets should remain frozen during the investigation.

The hearing was to continue Friday afternoon.

On the recording, Owens discusses his wife's fears that his actions could land him in jail.

Scrushy acknowledged Owens' fears on the recording. He also talked about "how profitable this company is."

"Do we really want to trash this?" Scrushy could be heard saying on the recording.

Scrushy repeatedly said he would do whatever Owens wanted, but added: "I think we ought to go down fighting."

Owens was fired March 27 and is cooperating with investigators. He is one of eight former HealthSouth executives who have pleaded guilty to fraud charges in the case, which involves about $2.5 billion in alleged income overstatements.

The tape was played despite extensive objections from Scrushy's lawyers.

Owens made the recording on March 18, the day before the government filed the accounting fraud suit, according to testimony from FBI agent Greg Gauger. Owens was fitted with a hidden recorder and had two discussions that day with Scrushy, Gauger said.

The tape included references to Enron Corp. and WorldCom Inc., two other corporations that have been tainted by fraud.

Government lawyers say Scrushy wants $10 million for living expenses and $60 million to pay legal bills and tax liability.

Mary Schabacker, Scrushy's personal accountant, testified Thursday that Scrushy made $7.15 million in salary and bonuses after taxes last year. She also said $17 million of his $31 million tax liability for last year is unpaid and due next week.

Scrushy's personal living expenses were $2.7 million last year, including jewelry, a yacht, art, wine, furniture, interior design work, vehicles and other items, she said. None of the amounts were revealed in court.

Five companies he controls had operating expenses totaling $2 million.

In other developments Thursday, HealthSouth said its creditors, J.P. Morgan Chase Bank and Wachovia Securities, told the company it won't be penalized for defaulting last month on $367 million in bond and interest payments.

HealthSouth is accused of inflating earnings by more than $2.5 billion since 1997, an amount that has increased as investigators reached back into the corporation's past.

HealthSouth describes itself as the biggest U.S. provider of outpatient surgery, diagnostic and imaging and rehabilitative health care services, with nearly 1,700 facilities in every state and abroad.

Founded by Scrushy in 1984, Birmingham, Ala.-based HealthSouth employs more than 51,000 people.

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