Posted by Mike Matthews: 7/2/05
News Channel 3, WREG TV Memphis
Memphis, TN- They took a little midday stroll. Former State Senator John Ford and a lawyer by the name of Donald Watkins. And Donald Watkins doesn’t like what the feds are doing to John Ford. No sir…not a bit. “I’m just surprised that once again we’ve got this politically motivated attack on the Ford family,” Watkins says. “It didn’t pan out the first time with former Congressman Ford. It will not pan out this time with Senator Ford.”
The Fords have had their legal battles. Former Congressman Harold Ford, Sr. faced federal charges twice. One time he got a hung jury…the second time he was found not guilty. And when a family has some legal troubles…the big thing is to find some good lawyers. That’s why Ford wants Donald Watkins, Jim Parkman and Lewis Gillis to become part of his legal dream team. “They’re the very best,” John Ford says.
A lot of people agree with him, especially after the acquittal of the former CEO of Healthsouth, Richard Scrushy. A huge case…and a huge victory for Parkman, Gillis and Watkins. “It took Mr. Scrushy two and a half years to get his freedom,” Watkins said. “We hope to have Senator Ford’s freedom secured by next year.”
Watkins says he and the other lawyers are about 90 percent sure they’ll represent Ford. Which makes the former state senator pretty happy. “I feel great,” Ford says, “…you know what I mean? When things like this happen, the best thing to have is a competent legal team in place.
Ford is out on bond right now, and is only allowed out of his home to work and to visit family. He has a 6 p.m. curfew. His activities are constantly monitored by federal officials. But Watkins says, “One of the first things we’re going to do is ask for some changes in the condition of his bond, and the way he’s monitored. Because his time, his conduct, his availability is now needed by the defense team to adequately and effectively prepare his defense.”
HealthSouth Founder Scrushy Is Acquitted of Fraud (Update6)
June 28 2005 (Bloomberg) — Richard Scrushy, the former chief executive of HealthSouth Corp., was acquitted of directing a $2.7 billion accounting fraud that nearly bankrupted the company he built into the largest U.S. operator of rehabilitation hospitals.
The jury deliberated 21 days before finding Scrushy innocent of 36 charges accusing him of inflating profit from 1996 to 2002. Scrushy, 52, was the first chief executive cleared at trial of fraud charges since the government began prosecuting corporate wrongdoing following the collapse of Enron Corp. in 2001.
The verdict was a resounding defeat for U.S. prosecutors who secured guilty pleas from 15 HealthSouth executives, including five former finance chiefs who told jurors they discussed phony accounting with Scrushy. Lawyers for Scrushy, who did not testify, said the government’s case was built on witnesses who lied to save themselves. Jurors said they agreed.
“The reason behind our verdict was the lack of substantial evidence and witnesses’ credibility,” the panel of seven men and five women said in a joint statement released after the verdict in federal court in Birmingham, Alabama.
Eight of the jurors discussed the case in the courtroom, and several said Scrushy was a smart businessman who had no motive to lead a fraud at a company that he built. They said they were not convinced of Scrushy’s guilt by secret recording made of him for the FBI by one of the former finance chiefs, William Owens.
“You could definitely tell there was a fraud,” said Juror No. 538, whose name was not released.
“The smoking gun just wasn’t there pointing to Mr. Scrushy.”
Prosecutors, who said Scrushy propped up HealthSouth shares to enrich himself and meet the expectations of Wall Street analysts, suffered a “stunning defeat” said Robert Mintz, a former federal prosecutor himself.
“I think they have to be scratching their heads over exactly how this one slipped away from them,” said Mintz, now at McCarter & English in Newark, New Jersey. “What the defense was able to do here was raise questions as to the motives of all of these various cooperators.”
Scrushy, who wept as U.S. District Judge Karon Bowdre read the verdict, hugged his lawyers and his wife Leslie, and shook the hand of U.S. Attorney Alice Martin, the lead prosecutor.
“I want to give all the glory to God,” said Scrushy, who hosts a Christian cable television program and preaches in local churches. “I’ve got my life back. I am going to let my family get theirs. There are a lot of wrongs that need to be made right.”
Martin, who brought the original indictment in November 2003, said: “We are very disappointed in the verdict. We think that we did put on overwhelming evidence, but the jury thought otherwise.”
Scrushy was acquitted of conspiracy, money laundering, securities fraud, mail fraud, wire fraud, making false statements to investors and certifying a false financial statement in violation of the Sarbanes-Oxley Act of 2002.
Scrushy, who was fired as HealthSouth CEO in March 2003, remains on the board of directors and can only be removed by a shareholder vote. In a statement, the company said that the board and its new managers “remain appalled by the multi-billion dollar fraud that took place under Mr. Scrushy’s management and the environment under which such fraud could occur.”
The company said that “under no circumstances” would Scrushy be offered any position at HealthSouth.
Scrushy is the company’s largest individual stockholder and the eighth-largest overall, with 3.7 million shares.
U.S. Pursues Appeal
HealthSouth yesterday released its first audited financial statements since 2002, lowering the previously stated profit in 2000 and 2001 by $1 billion. The company’s net loss in 2002 was $466.8 million, or $200 million more than previously stated, it said.
Prosecutors said they would retry Scrushy if they win an appeal of Bowdre’s dismissal during the trial of three counts of perjury and one for obstruction of justice.
During closing arguments on May 18, defense attorney Jim Parkman told jurors that the government’s case had “more holes in it than Swiss cheese.”
At a news conference today, Parkman said that defense attorneys sought to “cut the five CFOs down to one” and blame the entire fraud on Owens, who testified for 11 days.
“Either you believe in Bill Owens, or you don’t convict Richard Scrushy,” Parkman said today.
The testimony of Owens “was a little strange,” Juror No. 152 said after the verdict. “I definitely did not find him credible. There were different parts of his testimony that were not substantially the same as other people in the conspiracy.”
Reporters asked whether race, a historically divisive subject in Alabama, played a role in acquitting Scrushy, a white man. Scrushy joined a predominantly black church and was supported in the courtroom by several black pastors.
All eight jurors who sat in the jury box and answered questions after the verdict denied that race played any role.
“I don’t know what part of Alabama you’ve been hanging out in,” said Juror No. 300, a black man. “But where I work, there are several whites who hang out with blacks.”
During the deliberations, jurors sent several notes saying they were divided and confused by the conspiracy charge at the heart of the case. Last week, Bowdre dismissed a juror who had been ill and replaced him with an alternate on June 22. The reconstituted panel didn’t communicate with Bowdre again until today’s verdict.
“Obviously, introducing that new juror was a catalyst in bringing a verdict in short order,” said Evan Stewart, who represented Theodore Sihpol III, a former Bank of America Corp. broker who was acquitted of securities fraud on June 9.
Scrushy was described during the trial as a charismatic salesman and financial genius. He claimed the former HealthSouth finance chiefs hid the fraud from him. Lawyers for Scrushy said prosecutors botched the case and relied on the testimony of liars and thieves.
Scrushy faced dozens of years in prison and forfeiture of $279 million of his assets, had he been convicted. He still faces investor lawsuits and a civil fraud suit filed by the U.S. Securities and Exchange Commission on March 19, 2003, just days before HealthSouth’s board fired him.
During the trial, defense attorneys derided prosecutors for producing no documents directly tying Scrushy to the fraud. They debunked several hours of secret tape recordings that Owens made for the Federal Bureau of Investigation on March 17 and 18, 2003, just before agents raided HealthSouth’s headquarters.
Parkman attacked Owens as a “rat” who failed to file tax returns for nine years. He assailed another former finance chief as a drunk and a philanderer and another as an extortionist.
Another defense attorney, Arthur Leach, said the government’s theory of the case was “insane,” questioning why Scrushy would fire or demote co-conspirators who might betray him later on.
Leach said Scrushy was worth $175 million in 1996 and therefore, too rich to commit fraud. Martin said Scrushy, who owns a stable of luxury and antique cars, was worth only $38 million at the time.
Scrushy, a former respiratory therapist who co-founded HealthSouth in 1984, was described by witnesses as a visionary who built a chain of rehabilitation hospitals and outpatient surgery centers in all 50 U.S. states. Former finance chief Aaron Beam said Scrushy turned to fraud in 1996 when HealthSouth failed to meet the earnings expectations of Wall Street analysts.
Beam said Scrushy told him to “fix the numbers,” a directive he took as a license to commit fraud. Beam and other CFOs said Scrushy reviewed internal reports showing HealthSouth’s shortfall and ordered phony revenue to make up the difference.
Fear and Intimidation
Beam’s successor, Michael Martin, described an atmosphere of fear and intimidation at HealthSouth and said he desperately wanted to quit. Martin recalled that when he and Owens described a fraudulent plan to move $300 million in expenses off the books, Scrushy said: “Damn, you guys are good.”
Former Treasurer Leif Murphy, who wasn’t charged with a crime, testified that he analyzed the company’s true financial condition in 1999 by reviewing internal reports at Michael Martin’s behest.
He concluded that HealthSouth would have to “fabricate” 72 percent of its earnings to hit estimates. Scrushy exploded in anger when he was shown those findings, Murphy testified.
Another ex-finance chief, Weston Smith, said he quit in August 2002 rather than certify a false financial statement. Owens testified that Scrushy told him to get Smith “back on the reservation.” Smith returned to the company and signed the statement. In March 2003, he became the first CFO to cooperate with prosecutors and plead guilty.
‘Engineer Your Way Out’
Former Chief Financial Officer Malcolm “Tadd” McVay said he also balked when asked to sign a false financial statement in November 2002. After agreeing to do so, he said, Scrushy told him “all public companies fudge their numbers.”
During jury deliberations, the panel listened anew to recordings made by Owens. Prosecutors said the tapes showed Scrushy knew of the fraud. Scrushy said they proved he didn’t.
On one of the six tapes Owens made of meetings with Scrushy, the former CFO could be heard saying his wife would divorce him unless he stopped signing “phony financial statements.” Owens said she also asked him, “How can you-all continue to lie?” Scrushy asked Owens if he was wearing a wire.
On a later tape, Scrushy was heard telling Owens: “You ought to be able to engineer your way out of what you engineered your way into.”
The case is U.S. v. Scrushy, 03CR530, U.S. District Court, Northern District of Alabama (Birmingham).
HealthSouth’s Scrushy Bets Freedom and Fortune on ‘Hick’ Lawyer
Jan. 27 2005 (Bloomberg) — HealthSouth Corp. founder Richard Scrushy is staking his freedom and $278 million fortune on a small-town Alabama lawyer who made a career out of representing violent criminals, not corporate executives.
James W. Parkman III of Dothan, Alabama, population 58,000, is defending Scrushy against charges he directed a $2.7 billion fraud at HealthSouth, the biggest U.S. rehabilitation hospital operator. The 54-year-old attorney last year replaced Abbe Lowell, a New Yorker who represented former President Bill Clinton during his impeachment.
“Who is this guy?” Birmingham, Alabama, radio host and former Scrushy business associate Paul Finebaum asked listeners after the change of lawyers was announced in September. “This guy is a country hick. He’s totally Mayberry.”
Parkman made the opening arguments on Scrushy’s behalf this week in federal court in Birmingham, Alabama. The trial is the first of a former chief executive officer accused of violating Sarbanes-Oxley, a three-year-old law that makes it a crime to knowingly sign false financial statements.
Scrushy, 52, had no knowledge of the HealthSouth fraud the government accuses him of leading, Parkman told jurors Jan. 25. It was conducted by 15 people who pleaded guilty to the crime, including five former finance chiefs, who cooked the books and betrayed Scrushy by lying to him, Parkman said.
A founding partner of Parkman Adams & Associates, a four- lawyer firm that includes Scrushy son-in-law Martin Adams, Parkman isn’t concerned that people question his ability.
“I hope they keep thinking I’m a hick,” he said in an interview Jan. 13.
Parkman is running a case that had been handled by Chadbourne & Parke, a New York firm with 426 attorneys. He probably has never had a case that approaches the complexity of the facts and the law that Scrushy’s does, said former Birmingham U.S. Attorney Doug Jones, who sued HealthSouth and Scrushy on behalf of investors damaged by the alleged fraud.
“I do think what he brings to the case is a Southern accent, which is important,” Jones said. Parkman was born in Dothan to a family that owned an ice- cream company. He failed his freshman year at University of Alabama and spent six years in the U.S. Army in Virginia and New Jersey, Parkman said.
He finished college after the military and graduated in 1979 from Cumberland Law School of Samford University in Birmingham. U.S. District Judge Karon Bowdre, the presiding judge in the Scrushy case, once taught at Cumberland.
“If he’s a hick, I think he’s the smartest, richest hick,” said District Attorney Doug Valeska, whose jurisdiction includes Dothan, about 100 miles southeast of the state capital, Montgomery. Valeska, who has known Parkman since the third-grade, says he hates him and loves him.
“I’ve been to all of his weddings and been in two of them,” said Valeska, who once made stickers that said “Honk if You’ve Been Married to Jim Parkman” and stuck them on cars around Dothan.
Parkman’s four marriages are a sore spot for him, Parkman said. Valeska likes to toss salt in this wound of his courtroom enemy, just for fun, he said. The bumper-sticker prank was a response to Parkman’s idea of a joke: having Valeska’s car jacked up and the tires removed.
Parkman’s first three marriages were casualties of long work hours and a passion for representing unpopular clients, including accused murderers, drunk drivers and drug smugglers, Parkman said. Parkman is now married to Joy Parkman, 37. They have a 2 1/2-year-old boy.
Parkman drew attention to himself as a lawyer in the early 1980s, soon after he graduated from law school, said his former law partner, Alabama Circuit Judge Lawson Little. Parkman sued the local sheriff in Dothan, a two-decade incumbent, on behalf of several fired deputies who claimed civil rights violations. He got them their jobs back.
“That was something for a young lawyer to take on the sheriff and prevail,” Little said.
Parkman prepares for cases with long hours of research and days of mastering the facts, Valeska said. Parkman can make a jury cry and has a knack for persuading them to see a case his way, Valeska said.
“I’ve heard a lot of stories about his dead grandmother. And then there are the pancakes, Valeska said.
“No matter how thin they are, they always have two sides,” is a remark Parkman often uses, Valeska said. Parkman used the saying in his opening remarks to encourage the jury to consider there is another side to the prosecutor’s case.
‘Rest of the Story’
Parkman also used, as Valeska said he has before, the catchphrase that radio broadcaster Paul Harvey made famous: “And now for the rest of the story.”
Billy Graham, the Christian evangelist, is a speaker whose style Parkman tries to emulate most, he said.
Two weeks ago, Parkman portrayed himself as a computer neophyte in asking jurors if they might have seen Scrushy’s personal Web site, which has posted information about his case, background and religion.
“Do they call it surfing the Web?” he asked jurors. “I can’t surf,” he said, prompting smiles and chuckles from jurors. Lawyers for both sides worked with laptop computers in the courtroom on opening day. Parkman worked with just legal pad and pen.
Though born and raised in Dothan, Parkman doesn’t live a small-town life. He canceled a golfing and hunting trip to Scotland with Atlanta Braves manager Bobby Cox so he could defend Scrushy.
Parkman, who was a Sigma Nu fraternity member at Alabama, has salt-and-pepper hair and favors wool trousers and a camelhair blazer when he’s not in court. When trying a case, he wears a dark suit, a white shirt with cufflinks and a multicolored tie.
Parkman rejected Scrushy as a client once, in early 2003, when the U.S. Securities and Exchange Commission was investigating possible insider trading by the then-CEO.
“I didn’t like the direction” the rest of the legal defense team wanted to take, he said. He quit after a week.
“There’s no amount of money or fame for me to stick my neck out,” for a defense strategy he doesn’t endorse, he said.
Now, with millions of documents in evidence and 15 guilty pleas stacked against his client, Parkman said he’s looking forward to the trial, which may last four months.
“It’s a chance to see whether I measure up as a man,” he said.
The case is: U.S. v. Scrushy, 03-CR-530, U.S. District Court, Northern District of Alabama (Birmingham).