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Third HealthSouth CFO Could Plead Friday

Apr 14, 2003 | Birmingham Business Journal

Former HealthSouth chief financial officer Michael Martin could plead guilty Friday in federal court in Birmingham as the government's case against the health care provider continues.

According to a spokesperson with the U.S. Attorney's Office for the Northern District of Alabama, Martin, 42, of Birmingham, is set to appear before a judge at 10 a.m. Friday. Martin was to have pleaded April 1 to wire and securities fraud and falsifying financial information, but that move was halted by a judge.

The judge cited media leaks about the plea as the reason for the delay.

Meanwhile, the Wall Street Journal is reporting that more HealthSouth employees could plead guilty to their part in the alleged accounting scandal later this week. The spokesperson for the U.S. Attorney's Office says she did not know of any specific cases, put could not rule out the possibility of more people coming forward.

The Securities and Exchange Commission has charged HealthSouth and its founder and now disposed CEO Richard Scrushy of inflating company earnings by some $2.5 billion since 1997 in order to meet or exceed Wall Street expectations.

Charged with insider trading, Scrushy again spent Monday in court to seek the unfreezing of some of financial assets.

On Friday, a federal judge granted Scrushy $17 million of his assets so he can pay taxes. According to a report by NBC13, Scrushy must show proof that the money will be used to pay taxes. He had been seeking $30 million for that purpose.

Scrushy is seeking another $40 million for legal fees and personal living expenses. The court did not release any new funds Monday, NBC13 reports.

Scrushy made millions at the head of the company he founded in the 1980s, including $169 million in salary, bonuses and exercised options from 1992 until the HealthSouth board fired him March 31.

The SEC considers the money as "ill-gotten gains."

The insider trading charges stem from the SEC's allegation that Scrushy sold millions of dollars of HealthSouth stock after learning of a $175 million pretax earnings hit due to a change in Medicare reimbursement rules but before announcing it publicly Aug. 27.

Scrushy's attorney, Donald Watkins, has lambasted the accusations in the media, maintaining his client's innocence.

Eight now-fired HealthSouth employees, including two other CFOs, have pleaded guilty to various charges in the probe and are cooperating with prosecutors.

One of the CFOs, William Owens, testified Friday about a taped conversation between him and Scrushy. Discussions of company finances are on the tape.

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