All Scrushy, All The Time

HealthSouth's embattled ex-CEO takes his defense directly to the people

Nobody expected former HealthSouth Corp. (HLSH ) CEO Richard M. Scrushy, who has been charged with leading a conspiracy to inflate earnings and asset values at the company by $3 billion, to go down without a fight. But few could have anticipated the furious public-relations and legal blitzkrieg the 51-year-old Scrushy has unleashed since being indicted in October.

In recent months, the speedboat-driving, celebrity-chasing centimillionaire has made a series of moves that, critics charge, are intended to win favor with the citizens of Birmingham, Ala., who may one day be sitting on his jury. One of these steps has been frequenting the Guiding Light Church, whose congregation is primarily African American and whose services are broadcast locally several days a week. Scrushy is also funding his own TV talk show on Channel 21, the Birmingham WB Television Network (TWX ) affiliate, starring him and his wife, Leslie, and containing a one-of-a-kind mixture of scripture, law, and politics. Promising to deliver the news without "mainstream media" bias, it has featured multiple interviews with, among others, his flamboyant lead defense lawyer, Donald V. Watkins.

On the legal front, Scrushy has taken the highly aggressive step of filing a formal complaint against Alice H. Martin, the U.S. Attorney for the Northern District of Alabama, with the Justice Dept.'s Office of Professional Responsibility. Also named are FBI agent Gerry Kelly and Richard Smith, deputy chief of the Justice Dept.'s fraud section. His gripe? That the trio allegedly withheld evidence that might have helped Scrushy in the early skirmishing over efforts to freeze at least $150 million worth of assets.

This is either state-of-the-art legal defense or a fast track to life in prison. Facing 85 counts of malfeasance, Scrushy could conceivably be sentenced to more than 600 years behind bars. Most criminal defendants do everything possible to stay out of jail -- but avoid taking steps that might unnecessarily antagonize prosecutors and judges. Scrushy apparently has thrown the old rule book out the window. "I am innocent of the accusations against me and have been blessed by the Lord in having the resources to confront my accusers," Scrushy told BusinessWeek through a spokesperson.

PANDERING TO JURORS? On Mar. 25, U.S. Attorney Martin filed a motion for a gag order against the Scrushy team, alleging that the efforts of Watkins and other Scrushy lawyers to mold public opinion "are threatening to undermine the guarantee of a fair trial by an impartial jury by poisoning the potential jury pool in the community." Since Scrushy's indictment, writes Martin, he has run "an obvious strategy of attempting to prejudice the impartiality of this proceeding." A hearing on the gag order motion is scheduled for Apr. 9.

Attorney Watkins says the Scrushy legal team will fight the proposed gag order to the Supreme Court, if necessary, because the government is using his client as the poster boy for corporate fraud in an election year. "The government prosecutors are crybabies," says Watkins, a businessman-lawyer who owns stakes in a local bank and energy-investment company. "Just because you're under a false criminal indictment doesn't mean you have to go into a hole and hide."

Scrushy's legal counterattack may be over the top, but it's "completely consistent with his character," says Pamela H. Bucy, a former federal prosecutor who teaches white-collar criminal law at the University of Alabama School of Law. He built HealthSouth from a small rehab hospital in 1984 into a $4 billion national health-care force by 1998 -- and earned well over $300 million along the way. Before he was fired as HealthSouth CEO last March, Scrushy was renowned for cavorting with sitcom stars, bankrolling a girl band called 3rd Faze, and roaring around Alabama's Lake Martin in his cigarette boat. At HealthSouth headquarters in Birmingham, he built a museum glorifying his achievements.

Like Martha Stewart, Scrushy launched his own Web site shortly after his indictment last year to broadcast his side of the story. offers an homage to his up-by-the-bootstraps life story, serves up legal documents, and rapidly rebuts alleged errors in reporters' stories. When Scrushy's lawyers filed the complaint alleging government misconduct, a press release posted on the site screamed: "Feds Hid Evidence of Scrushy's Innocence for Nearly a Year." His biography recalls that he was born in Selma, Ala., "birthplace of the civil-rights movement."

ON THE AIR. Although Scrushy's defenders insist he has been a man of faith for decades, it wasn't until his indictment last October that citizens of Birmingham, a city that is 73% black, knew of his affiliation with Guiding Light. Bishop Jim Lowe Jr., a local celebrity, prayed with the Scrushy family at the time. Scrushy is one of the few white members in the church's flock. Scrushy claims he joined the church well before his indictment. BusinessWeek's calls to Lowe were not returned.

In March, Scrushy took to the airwaves himself. Viewpoint with Richard & Leslie Scrushy runs every day at 7:30 a.m. He has purchased 12 months of air time for the show. Viewpoint is supposedly a forum for "news, events, and commentary," says Scrushy's publicist, Charlie Russell. But Scrushy isn't afraid to attack critics on air. While interviewing Roy S. Moore, the ousted Chief Justice of the Alabama Supreme Court, Scrushy described mainstream media as "Satan sneaking in the back door." The show's most frequent guest, defense lawyer Watkins, says Viewpoint seeks "to humanize him as a man of principle."

Will the gambit work? The conventional wisdom would suggest not. But Scrushy didn't accumulate a fortune by playing it safe. All he has to do is influence the right person. After all, it takes only one juror to block a conviction.

By Brian Grow in Atlanta

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