June 29 (Bloomberg) -- HealthSouth Corp. founder Richard Scrushy was found guilty of bribing the governor of Alabama, a year and a day after being acquitted of masterminding a $2.7 billion accounting fraud at his own company.

Former Governor Don Siegelman, 60, and Scrushy, 53, were convicted today by a federal jury in Montgomery after 12 days of deliberations and a near-mistrial. The Justice Department said Scrushy paid Siegelman $500,000 for a seat on the state's hospital regulatory board while Scrushy served as chief executive officer of Birmingham-based HealthSouth, the largest U.S. rehabilitation hospital chain.

U.S. prosecutors in Montgomery succeeded where their colleagues in Birmingham failed last year, obtaining guilty verdicts for bribery, conspiracy and mail fraud against a defendant who at both trials courted public support from local clergy and regularly predicted his acquittal to the media. He now faces up to 30 years in prison at sentencing.

``This is the greatest miscarriage of justice since General Sherman burned Atlanta,'' Scrushy lawyer and former Alabama Supreme Court Justice Terry Butts said after the verdicts. His client, sitting with his wife in court after the jury left, said he would appeal. ``It's not over,'' Scrushy said.

State Lottery

The government said Scrushy paid $500,000 in state lottery campaign donations for an appointment to the hospital board to influence decisions on HealthSouth's competitors. Siegelman in 1999 appointed Scrushy to the Certificate of Need Board, a nine- member group that grants and denies hospitals permission to add beds and equipment. The appointment came after the first of two $250,000 donations to the governor's campaign in support of a lottery to fund education.

Siegelman was found guilty of seven charges of bribery, conspiracy, mail fraud and obstruction of justice. All but one count was part of the Scrushy bribery allegation. A Democrat, Siegelman served as governor from 1999 to 2002. He tried a comeback this year, running an unsuccessful campaign during the trial for his party's nomination for governor.

Assistant U.S. Attorney Louis Franklin said in closing arguments that Siegelman created a corrupt political environment in which ``you had to donate to participate.'' After the verdict, Franklin said the jury ``looked at that evidence and found it the most compelling.''

Siegelman also said he plans to appeal. Two of his former cabinet members, Paul Hamrick, a former chief of staff, and Gary Mack Roberts, an ex-state highway director, were acquitted of accepting bribes for state contracts.

Deadlocked

The jury returned verdicts just two days after telling U.S. District Judge Mark Fuller it was deadlocked. The judge twice during deliberations told the panel it was its duty to reach verdicts if possible. His refusal to declare a mistrial could be a ground for appeal, a law professor said.

``The question will become whether the jury was coerced,'' said Pam Bucy, who teaches at the University of Alabama. Telling jurors to keep trying ``will certainly be an issue for appeal.''

The men remain free pending sentencing. The judge met with defense lawyers after the verdicts and kept secret the terms of their release.

During the trial, prosecution witnesses testified the hospital board voted on two HealthSouth projects during Scrushy's tenure, approving an application for a cancer screening device and one for a 38-bed rehabilitation center. Scrushy noted that he didn't vote or participate in any board discussions on HealthSouth matters.

Forgave Fees

The $500,000, donated in 1999 and 2000, didn't come from Scrushy personally. Half came from HealthSouth, the rest from IHS Inc., a Maryland nursing home company once affiliated with HealthSouth.

Bill McGahan, HealthSouth's investment banker at UBS AG, testified the bank forgave fees it was owed by IHS so the company could donate to the lottery campaign. McGahan told jurors Scrushy and former HealthSouth finance chief Mike Martin urged him to arrange the contribution.

Martin testified for the prosecution that he pressured UBS, at Scrushy's behest, to make a lottery donation.

Scrushy insisted the payments weren't bribes. He said he wanted to support the new governor after having backed his opponent earlier and that he wanted to help public education.

Fraud Acquittal

Little more than a year ago, a federal jury in Birmingham deliberated 21 days before finding Scrushy not guilty of 36 charges related to a $2.7 billion fraud at HealthSouth. Fifteen former company executives testified against him at the Birmingham trial after pleading guilty to participating in the fraud.

The former executive still faces civil suits by HealthSouth shareholders and the U.S. Securities and Exchange Commission growing out of the scandal at the company.

Separately, the SEC said today it reached a settlement with William Owens, a former HealthSouth chief financial officer.

Owens, who secretly recorded conversations to help the Federal Bureau of Investigation uncover the fraud at HealthSouth, was ordered to pay $15.6 million.

The SEC said he had already forfeited $2.5 million in a related criminal case, and the agency waived the rest of the penalty because of his financial condition. Owens didn't admit or deny wrongdoing as part of the settlement, which was approved by a federal judge in Alabama last month, the SEC said.

Owens was sentenced in December to five years in prison for his role in the fraud.

The case is U.S. v. Siegelman, 05cr119, U.S. District Court, Middle District of Alabama (Montgomery).

To contact the reporter on this story: Laurence Viele Davidson in Montgomery, Alabama, at lviele@bloomberg.net.

Last Updated: June 29, 2006 19:53 EDT