Former HealthSouth Corp. CEO Richard M. Scrushy was found not guilty today by the jury in the trial over over his alleged participation in a $2.7 billion accounting fraud at the huge health services company. Along with the sentencings in the Enron-related Nigerian Barge trial, the reversal in the Arthur Andersen case and the recent acquittal of Theodore H. Sihpol, the acquittal of Mr. Scrushy is the latest in a series of setbacks to governmental prosecutors’ attempts to criminalize business figures in the period after the meltdown of Enron at the end of 2001. Previous posts on the Scrushy case are here and here.
The Scrushy trial had turned into the legal equivalent of the Bataan Death March, as the jury was forced to endure four months of trial and 21 days of deliberations before arriving at a not guilty verdict on all 36 criminal counts against Mr. Scrushy, most of which related to conspiracy and securities fraud charges. The acquittal also marked the Department of Justice’s failure in its first attempt to convict a CEO for violating the 2002 Sarbanes-Oxley Act that requires CEO’s and CFO’s to confirm the accuracy of corporate regulatory filings personally.
But at the end of the day, the Scrushy case will stand for the dubious nature of the government’s policy of criminalizing merely questionable business practices. As much as the government protests that true business crimes are deterred by such vigorous prosecution of questionable business conduct, the fact of the matter is that any reasonable interpretation of justice is strained in squaring the result in the Scrushy case with the results in the Martha Stewart case, the sad case of Jamie Olis, the case of Dan Bayly, the case of William Fuhs, the DOJ’s handling of the Global Crossing case, the Tyco case, the Bernie Ebbers case and many others. As Professor Ribstein has noted:
So white collar prosecutions become a sort of lottery. If the prosecution can come up with something colorful, it wins, or maybe loses if it’s too colorful (Sardinia). These are not the elements of a rational criminal justice system.
Professor Ribstein comments further here.
The Scrushy verdict
Scrushy of HealthSouth was acquitted of all charges, in a stunning defeat of the extraordinarily misguided campaign to criminalize business. Tom Kirkendall has this early report. As I said here, the HealthSouth trial illustrated the problems of
Former HealthSouth Corp. CEO Richard M. Scrushy Acquited
In a stunning blow to the government’s crusade against business malfeasance, the jury has rendered a not guilty verdict in the first major trial under the 2002 Sarbanes-Oxley Act. Tom Kirkendall has the details and excellent analysis. Money quote:…
Tom,
What kind of watter do you have in Houston?
You wrote, “at the end of the day, the Scrushy case will stand for the dubious nature of the government’s policy of criminalizing merely questionable business practices.”
My recollection is that there have been 15 guilty pleas at HealthSouth and that there is no dispute over the books having been cooked. The conduct certainly went beyond merely questionable business practices.
Those of us who try cases all know why there was an acquittal, but in case you don’t look up a piece or two by Jay Reeves written in may for the AP
So, what are you saying? Scrushy is guilty until proven innocent because 15 people have pled guilty?
You are correct, however, that there are many reasons for an acquittal other than the defendant not committing the act related to the crime with which he is charged.
Rather than question the quality of the “watter” in Houston, perhaps a question or two should be asked about the quality of a system of justice that allows prosecutors the power to coerce the very plea agreements that are now used to question the validity of the jury’s decision. That the jury saw through this — and that without a doubt many do not — should be grist for some clear thinking on the subject. What on earth are “we the people” doing just sitting on the sidelines when fundamental, constitutionally based concepts of fairness are being so seriously undermined?
Preston Tucker spins, the system “allows prosecutors the power to coerce the very plea agreements”
cry me a river
Preston, as I understand your argument, we have two classes of people in America. Rich corporate executives and everyone else. I have never heard you or Tom or Bainbridge or Ribstein ever lift a finger for any person caught up in the criminal justice system in America, but you can not wait to suck-up to the likes of Richard Scrushy. What is your motive other than the money?
The fifteen HealthSouth defendants faced less coercion than any other targets in the criminal justice system. For starters they had well financed defenses, in no small part because of the indemnity agreements made by HealthSouth and most other corporations (albeit my recollection is that HealthSouth may not have stood by such). They had access to the media, well connected friends, etc.
If you compare and contrast their situation with that of the average criminal defendant, there is no comparison. To suggest the system coerced guility pleas from these people is silly, foolish.
JL, I don’t believe that Preston even implied that there is any meaningful difference in coerced plea agreements in blue collar cases than in white collar cases. The dynamics of the cases may be different (such as the nature of the offense, public animus toward the defendant, etc.), but the overwhelming leverage that the government has in negotiating plea deals against defendants in all such cases is quite similar and foreboding.
By the way, and I understand your comment was made for effect rather than as fact because we do know each other, but I do “lift a finger” for little people “caught up in the criminal justice system.” Although I specialize in business litigation and not criminal defense law, I have for several years provided extensive pro bono services on behalf of criminal defendants in the juvenile justice system of the county where I reside. I have found that work far more rewarding than sucking “up to the likes of Richard Scrushy,” but that experience does not mean that we should fail to protest the misuse of the state’s awesome power even against wealthy people.
The inference is that I am in the pay of Scrushy? Ugh.
First, I have immense sympathy for anyone whose rights are gutted by the plea bargaining system.
Second, one of the huge sub-stories here is the abandonment by companies targeted by the DOJ of their employees. See, e.g., comment to June 25, 2005 posting by Mr. Kirkendall regarding Dynegy. And even when idemnity is provided, what do you think it might cost to go up against a well-resourced and highly motivated group of prosecutors?
In any event, consider the words of Paul Craig Roberts, a senior fellow at the Hoover Institution, former editor and columnist of the Wall Street Journal and former Business Week columnist, in his ?The Causes of Wrongful Conviction,? The Independent Review, Vol. VII, No. 4 (Spring 2003) 567, 567-68, 571.
“The older Marxist view that justice is a function of the size of the pocketbook ? the rich get it and the poor don?t ? has no credibility in our time of asset freezes and prosecutors in search of high-profile cases. [?] It is easier to frame a white-collar defendant than to frame a poor member of a minority group. The common-law crimes associated with the poor ? theft, assault, murder ? are well defined. Frame-ups for such crimes require prosecutors to suborn perjury, suppress exculpatory evidence, and coerce false confessions. To frame a white-collar victim, a prosecutor need only interpret an arcane regulation differently or with a new slant.”
“Crowded court dockets ?, bureaucracy, budgetary pressures, and careerism have contributed to elevating ambition above justice. The emergence of moral causes or ends that justify the means ? has contributed greatly to the breakdown of prosecutorial restraint. Today a prosecutor who gives the defendant the benefit of the doubt is regarded as a failure. Robert [Merkle], a U.S. attorney during 1982-88, says that prosecution ‘is a result-oriented process today, fairness be damned.'”