A Medical Device Daily
For the second time in a week, a former HealthSouth (Birmingham, Alabama) CFO has testified that he was given direct orders by Richard Scrushy, the company's founder and former CEO, to alter the firm's financial accounting to meet stated expectations.
William Owens, who had served as both company controller and then CFO, said that Scrushy told him to “adjust those earnings.“ And he fended off the expected defense that Scrushy was unaware of the changes made in the reports.
There was “not an instance,“ Owens testified, that Scrushy did not know of the gap between reported and actual financial results for HealthSouth. Scrushy “was fully informed“ of the changes made, he said.
Owens is being targeted by Scrushy's attorneys as the executive who headed a general company conspiracy to pump up HealthSouth's earnings reports. The lawyers have attempted to portray Owens as a sort of “Godfather“ in a kind of family conspiracy to carry out the scam.
Owens' testimony echoed that delivered last week by Aaron Beam, another former CFO of HealthSouth. Both Beam and Owens said that fraud conducted in the accounting office was long-standing, beginning in 1996.
At the time Owens was company controller. He said he and Beam told Scrushy of a second-quarter earnings shortfall and Scrushy told them “to fix the numbers.“ These “adjustments“ were then shown to Scrushy, whose only concern, Owens said, was that they would pass muster by company auditors.
This set a pattern for ongoing reporting of false figures, he said, with continuing pressure from Scrushy.
Revenue for 1996 was overstated by about $85 million, Owens said, and that this was followed by financial overstatements relating to such things as company properties and equipments.
Owens supported his overall picture of Scrushy by characterizing him as someone who micro-managed the company's affairs, and so it was unlikely that he would not know what the true figures were.
Owens, who is expected to be on the stand for several days, is one of a group of five former company CFOs who have pled guilty in the alleged conspiracy to overstate earnings by as much as $2.7 billion.
Owens in 2003 aided the FBI in its probe by secretly recording his discussions with Scrushy.
The defense has accused the FBI of tampering with those recordings, but an FBI agent, while acknowledging problems with logs of this evidence, said therewas no tampering.