Tuesday, May 26, 2009

Siegelman and Scrushy Should Have Testified in Their Own Defense

The testimony of former HealthSouth CEO Richard Scrushy in a state-court civil case has been big news in Birmingham.

Accounts of Scrushy's performance on the stand has taught us at least one thing here at Legal Schnauzer: Scrushy and former Alabama Governor Don Siegelman should have testified in their own defense in the Montgomery criminal case that resulted in their convictions.

According to press reports, Scrushy did not crack under intense cross examination from shareholders' attorney John Haley, described by The Birmingham News as one of Alabama's "shrewdest litigators."

The civil case marked the first time that Scrushy had testified about the massive accounting fraud that nearly sank HealthSouth. In the end, it appears that Haley barely laid a glove on Scrushy.

The former CEO did not back down under stiff questioning, making a compelling case that he was one of the largest losers in the HealthSouth fraud.

Perhaps the strongest part of Scrushy's testimony came when he discussed his plans for mergers during the fraud period:

There were big plans for HealthSouth mergers during the fraud period, and Scrushy never objected to showing the books to outsiders.

In 1999, he said, he was deeply involved in merger talks with an Ohio-based nursing home company. Scrushy lawyer Jim Parkman produced a 20-page memo from Scrushy to the other firm's chief that contained detailed financial and operational notes on HealthSouth.

"Why would a CEO involved in fraud produce this document?" Parkman asked.

"You wouldn't do it," Scrushy said.

No one that I'm aware of ever has disputed that Scrushy is a bright, tough individual. Now we know that he also is a strong witness when questioned under fire. We also know that Don Siegelman is a pretty sharp fellow, one who almost certainly would make a strong impression on a witness stand.

All of which makes us think lawyers in the criminal case made a huge mistake by not having their clients take the stand in their own defense.

If Scrushy can fight off John Haley, he surely would have had little trouble against the ding dongs prosecuting the government's case for U.S. Attorney Leura Canary in Montgomery. If Siegelman can mount the kind of effective public offensive he has shown after his conviction, he surely would have made a strong case on the stand--probably preventing the conviction in the first place, even with a corrupt judge like Mark Fuller in charge.

I'm sure the Scrushy/Siegelman lawyers had valid reasons for not having their clients testify, and we have speculated about what some of those were. It seems clear the government had not proven its case, so declining to testify probably made sense at the time. Also, defense testimony would have dragged the trial out and possibly tested the patience of jurors.

From where I sit, having a defendant decline to testify makes sense when you have a client who maybe isn't terribly articulate, has a criminal history, or is likely to make a negative impression on a jury. But with smart, articulate clients like Scrushy and Siegelman, I'm thinking it was a huge mistake to not have them testify.

Former Auburn football coach Pat Dye used to say that "hindsight is 50-50, " and that's what I am using here. But think how easily the prosecution's key points could have been countered.

Nick Baily said he asked Siegelman, "What's (Scrushy) going to want for (his check)?" and the governor replied, "The CON board"?

Siegelman could testify, truthfully I presume, "I never was asked that, and I never gave that response."

The prosecution claims the Siegelman-Scrushy meeting involved a discussion of a something-for-something deal?

Siegelman could testify, truthfully I presume, "I wanted Richard to serve on the CON board because he had done so under three previous governors, and he was the most high-profile healthcare executive in our state. It would look bad not to have him on the board. Our discussion about the donation to the lottery campaign was a separate matter. One was not contingent on the other."

Prosecutors claim Scrushy badly wanted to serve on the CON board? Scrushy could back the testimony of former Alabama Power CEO Elmer Harris and say, "I'd been on the board a long time and was tired of being on it. I really didn't want to do it. I only agreed because our new governor asked me to do it."

Even with a corrupt judge and a goofy jury, it seems that kind of testimony would have resulted in an acquittal.

As for the current civil case, it continues in Birmingham this week. But from what I can tell, Scrushy acquitted himself pretty darn well on the stand.

That's not to say Scrushy will prevail in the case. It's a bench trial before Jefferson County Circuit Judge Allwin Horn, and I know from firsthand experience that Horn is a sorry excuse for a judge.

Horn already has ruled against Scrushy once, ordering him in 2006 to repay $47.8 million in bonuses, plus interest. My guess is that Horn already had determined how he was going to rule in the trial before testimony ever began.

I look for Horn to find in favor of the plaintiffs, in an amount that is roughly half of the $2.6 billion they are asking for. That sounds like a nice comfortable thing for the judge to do, and it should make the Birmingham legal community happy. If there is anything I've learned about Jefferson County judges, they want to keep the local lawyers happy.

Why did the Scrushy side agree to have Horn hear the case as a bench trial? My best guess is that they thought it would be easier to appeal under those circumstances than if a jury had heard the case.

Was Richard Scrushy really in the dark about the fraud going on at HealthSouth? Before I read his testimony from the current civil case, I found that pretty hard to believe. But now I'm not so sure. I think it's certainly possible that Scrushy was in the dark.

Either way, with Allwin Horn in charge, don't look for justice to be served. I imagine Scrushy's lawyers already are planning their appeal.

As for the criminal case in Montgomery, I think Scrushy's recent testimony shows that he and Siegelman easily could have beaten those flimsy charges if they had taken the stand.

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