Fired HealthSouth CEO Richard Scrushy filed a complaint Wednesday accusing prosecutors of misconduct in the probe that led to federal fraud charges against him in a massive accounting scandal.
Attorneys for Scrushy said prosecutors and investigators withheld evidence showing Scrushy’s innocence during a hearing last year, including comments he made during a conversation secretly recorded by a former HealthSouth financial chief.
“The government attorneys knew about this kind of evidence and sat on it,” said Donald Watkins, a lawyer for Scrushy.
The complaint was filed against U.S. Attorney Alice Martin, FBI agent Gerry Kelly and Richard Smith, deputy chief of the fraud section of Justice Department.
The defense sought an investigation by the Justice Department’s Office of Professional Responsibility. It sent a copy of the complaint to three federal judges in Birmingham.
No specific sanctions were requested, but Scrushy attorney Thomas Sjoblom said the complaint could result in prosecutors being removed from the case or the dismissal of parts of the indictment against Scrushy.
Martin, who is heading the federal investigation of HealthSouth, did not immediately return messages seeking comment.
At a news conference with Scrushy present, defense attorneys said that during hearings last year the government failed to disclose recorded evidence and witness statements that showed Scrushy did not know what was going on, even after a judge asked for such material.
While the government accused Scrushy of leading a scam to overstate earnings so HealthSouth would meet Wall Street expectations, the defense claimed Scrushy said just the opposite during a conversation recorded secretly by chief financial officer William T. Owens.
In that recording — which the government contends is proof of Scrushy’s guilt — Owens asked Scrushy what they should do about the possibility HealthSouth might not meet forecasts.
According to the complaint, Scrushy replied that he wanted “to make sure we are not giving — ever giving the street more than we promise them, and we’re never going to promise them more than we can deliver, Bill.”
“What we have witnessed here is the government misleading a sitting federal judge during a hearing,” said Scrushy lawyer Donald Watkins.
During the hearing, the government released a part of the recording in which Owens talked about his fear of going to prison and Scrushy discussed his belief that many companies had fraudulent entries on their books.
Free on $10 million bond, Scrushy was named last year in an 85-count indictment accusing him of masterminding a scam that the company has said resulted in profits overstated by as much as $4.6 billion.
Scrushy has pleaded innocent; his trial is set Aug. 23.
Co-founded by Scrushy, Birmingham-based HealthSouth is the largest U.S. provider of diagnostic imaging, outpatient surgery and rehabilitation services.
Owens and 16 other former executives have agreed to plead guilty to fraud charges and are cooperating with federal agents. Former assistant controller Emery Harris already is serving a five-month prison term.
Scrushy, meanwhile, has started a local TV talk show with his wife.