A Diagnostics & Imaging Week

The trial of former HealthSouth (Birmingham, Alabama) CEO Richard Scrushy started in Birmingham Tuesday. Scrushy faces 58 criminal counts, including conspiracy to commit fraud, filing false financial statements, securities and wire fraud and money laundering at the rehabilitation and surgical clinics company.

Describing Scrushy as "the flamboyant Birmingham mogul" accused of orchestrating a $2.64 billion accounting scandal at the healthcare company he founded, Reuters reported that he will be "the first major U.S. executive to be tried for violating the Sarbanes-Oxley Act," which was passed in 2002 and imposes strict criminal penalties on top-level officials who certify false financial statements filed with the Securities and Exchange Commission.

If convicted of all charges, Scrushy faces up to 650 years in prison and more than $36 million in fines, plus forfeiture of any so-called ill-gotten gains, possibly including several homes, boats, planes and luxury automobiles.

The entrepreneur and "local celebrity," who once hobnobbed with the rich and famous and had his name adorning buildings all over Alabama, is accused of ordering the overstatement of HealthSouth earnings and assets for several years in order to prop up the company's share price.

Last Thursday, a federal judge refused to throw out secret recordings that prosecutors say prove that Scrushy was part of a massive fraud.

Judge Karon Bowdre, of U.S. District Court in Birmingham, also ruled that the FBI did not violate Scrushy's privacy by searching his HealthSouth office suite without a warrant.

Scrushy had asked Bowdre to bar jurors from hearing digital recordings made secretly in 2003 by William Owens, a former HealthSouth CFO, at the direction of FBI agents. The recordings of conversations between Owens and Scrushy are full of flaws that make them inadmissible, the defense claimed. But the judge agreed with prosecutors, who said the recordings should not be thrown out before the trial.

Scrushy also challenged a search of his corporate office conducted March 20, 2003, as being illegal. But the judge again sided with prosecutors, who said the search was legal because HealthSouth lawyers granted permission.

In other legalities:

Inverness Medical Innovations (Waltham, Massachusetts), a developer of medical devices and provider of women's health and nutritional products, reported settling a patent infringement litigation suit brought against Advanced Clinical Systems International (ACS) in the Federal Court of Australia by acquiring ACS' consumer pregnancy test business for about $4.55 million.

The acquired business includes all rights to the brand Crystal Clear, which is the leading consumer pregnancy test in Australia and has a leading position in New Zealand. ACS will operate the acquired business for Inverness for up to 12 months pursuant to a transition services agreement entered into as part of the transaction.

Inverness Medical is a global manufacturer of diagnostic products for the over-the-counter pregnancy and fertility/ovulation test market and the professional rapid diagnostic test market.

The company said it is "presently exploring new opportunities for its proprietary electrochemical and other technologies in a variety of professional diagnostic and consumer-oriented applications, including immuno-diagnostics, with a focus on women's health and cardiology."

Rubicor Medical (Redwood City, California), maker of the EnCapsule minimally invasive breast biopsy devices, reported that the lawsuit filed against it by Neothermia (Natick, Massachusetts) for breach of contract and patent infringement has been dismissed.

James Vetter, MD, Rubicor CEO, said the ruling "is further evidence that our confidence [in our intellectual property] is well-founded," adding that 2005 "will be a year of great growth for Rubicor with the full-scale launch of the EnCapsule Precise and the EnCapsule Stereo product lines."

Rubicor develops office-based breast biopsy devices for use by surgeons and radiologists. Neothermia is a developer of minimally invasive systems for the diagnosis of cancer.

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