updated 5/4/2005 6:56:53 PM ET 2005-05-04T22:56:53

A star witness for Richard Scrushy’s defense took the stand Wednesday at the trial of the fired HealthSouth Corp. CEO, testifying that a finance chief took over the company in the final years of a huge earnings overstatement and hid the scheme from Scrushy.

Jim Goodreau, who once headed security at HealthSouth and served as Scrushy’s bodyguard, said former CFO Bill Owens seemed to be “running the company” by 2001, when Scrushy spent about seven months living in Palm Beach, Fla.

Recounting a private meeting at a Mexican restaurant in 2002, Goodreau said Owens told him there were “some accounting problems” at HealthSouth. The problems were “not another Enron, but significant,” Goodreau quoted Owens as saying.

Goodreau said Owens told him Scrushy was unaware of what was going on with the numbers.

“I said, ‘You need to tell him, Bill,”’ said Goodreau. “He said, ‘I will.”’

The defense contends Owens never told Scrushy about the conspiracy, and Goodreau said he didn’t tell Scrushy about Owens’ comments, either.

“He didn’t tell me it was anything criminal,” said Goodreau.

Goodreau now has his own security firm, which testimony showed has made nearly $185,000 working for the Scrushy defense team over the last 22 months.

The defense claims Owens — one of 15 former HealthSouth executives who pleaded guilty in the accounting scheme — ran the conspiracy beginning in 1996 and hid the crime from Scrushy.

Prosecutors accuse Scrushy of directing the scheme over seven years to make millions off bonuses, stock sales and salary while HealthSouth’s earnings remained artificially high.

Portraying Scrushy as out of touch with HealthSouth finances, Goodreau said Owens or another finance official typically briefed Scrushy on company finances as they all flew to investor conferences on a corporate jet.

“He saw the presentation for the first time on the plane,” said Goodreau, who came to HealthSouth from the Alabama Department of Public Safety, where he worked as a state trooper, pilot and narcotics agent. Goodreau said he never heard any mention of inflated numbers.

Responding to earlier prosecution testimony about armor plating on Scrushy’s two Yukon sport-utility vehicles and hidden cameras at HealthSouth headquarters, Goodreau testified the measures were needed because of threats toward Scrushy.

Earlier, the former lead attorney for HealthSouth testified he often wrote words attributed to Scrushy in financial reports, which Scrushy sometimes signed without seeing.

Former HealthSouth corporate counsel Bill Horton testified that he put together the company’s annual and quarterly financial statements plus major news releases using information gathered from workers in the treasury or accounting departments.

Horton, who was not charged in the accounting scheme, said he often made up statements that appeared to be quotations from Scrushy in those documents.

“Normally I would draft a quote from Mr. Scrushy based on points he told me he wanted to make,” Horton testified.

Scrushy sometimes signed his name to signature pages that were later attached to documents filed with the Securities and Exchange Commission without seeing the contents of the reports, Horton said.

But Horton also said Scrushy and finance executives reviewed his drafts of company statements before they were released to the public. Under prosecution questioning, Horton said “nothing of significance happened at the company that Mr. Scrushy didn’t approve of.” He also disputed defense claims that Owens tried to stage a “coup” to remove Scrushy from the company in 2002 before the fraud came to light.

While the defense has claimed Horton was in a meeting where Owens tried to get Scrushy fired, Horton testified Owens spoke against removing Scrushy, whose actions were drawing complaints from major investors.

“(Owens) was loyal to Mr. Scrushy and was not going to do anything to disrupt his position,” said Horton.

Scrushy is the first CEO charged with violating the Sarbanes-Oxley corporate reporting law, passed in 2002 in response to a string of business scandals. He also is accused of conspiracy, fraud, money laundering and obstruction of justice.

Scrushy could receive the equivalent of a life sentence and be ordered to forfeit some $278 million if convicted.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


Discussion comments


Most active discussions

  1. votes comments
  2. votes comments
  3. votes comments
  4. votes comments

Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 3.79%
$30K home equity loan FICO 4.99%
$75K home equity loan FICO 4.69%
Credit card rates View more rates
Card type Today +/- Last Week
Low Interest Cards 13.83%
Cash Back Cards 17.80%
Rewards Cards 17.18%
Source: Bankrate.com