Ousted HealthSouth chief refuses lawmakers' questions

WASHINGTON -- Saying he was denied "a fair hearing" by Congress, ousted HealthSouth chief Richard Scrushy invoked his constitutional privilege Thursday and refused to answer lawmakers' questions in their investigation of the $2.5 billion accounting scandal engulfing the major medical services company.

In testimony, several current and former HealthSouth officials countered his assertion that he was unaware of manipulation of the company's accounts to meet Wall Street's earnings forecasts. They described an atmosphere of intimidation in which high-ranking executives didn't want to hear bad news and employees feared retaliation by their bosses.

Diana Henze, the former assistant vice president for finance, testified that then-chief financial officer William T. Owens learned of her suspicions about accounting fraud in the spring of 1999. Owens is among the 15 former HealthSouth employees who have pleaded guilty to criminal fraud charges.

"Bill said that HealthSouth had to make its numbers or innocent people would lose their jobs and the company would suffer," Henze recounted. "I told Bill that I believed whatever was going on to be fraudulent, and I would not participate in it and wanted no part of it. I also asked him to stop whatever it was they were doing and told him that I was going to keep an eye on it."

Scrushy and the company have been charged with fraud in a civil lawsuit by the Securities and Exchange Commission.

Earlier, Scrushy sat somberly in the front row as members of the House Energy and Commerce Committee's investigative panel denounced his conduct and what they called a massive fraud at HealthSouth that nearly brought it down.

Before standing and raising his right hand to take the oath, at the order of chairman Rep. Jim Greenwood, R-Pa., Scrushy complained that it was not a fair hearing, because he couldn't face his accusers in the congressional hearing room.

Reading from a prepared statement, Scrushy said, "There is not and there has never been any financial collapse of HealthSouth."

Greenwood challenged Scrushy's complaint of unfair proceedings, noting that Scrushy did not face accusers in a recent television interview in which he proclaimed his innocence.

He called Scrushy "the last man standing" after a wave of admissions and guilty pleas by former HealthSouth officials.

Rep. Diana DeGette, D-Colo., a member of the panel, called Scrushy's statement "self-serving."

The flamboyant Scrushy faces a government civil suit accusing him and the company of fraud. In the TV interview, he said he signed off on the fraudulent accounting figures because he trusted the five chief financial officers of the company he helped found in 1984.

Greenwood said he was deeply troubled that Scrushy granted a "no-holds-barred" interview while refusing to answer questions from Congress.

"Why is Mr. Scrushy unwilling to answer here today, under oath, some of the exact same questions asked of him by a reporter?" Greenwood demanded.

Fifteen former HealthSouth employees have reached plea deals with the Justice Department, including all five of the Birmingham, Ala.-based company's former CFOs. Scrushy hasn't been charged with any criminal wrongdoing; his lawyers have said they expect him to be indicted, however.

"You have to rely, you have to trust people," Scrushy said during the interview Sunday on CBS' "60 Minutes." "I mean, you hire them. You pay them good salaries. You expect them to do the right thing."

The committee has been investigating the accounting mess at HealthSouth Corp., which operates nearly 1,700 facilities for outpatient surgery, diagnostic and imaging and rehabilitation services in every state and abroad.

In the latest twist, Scrushy's attorneys filed a formal complaint with Justice this week charging that the lead FBI agent in the HealthSouth investigation has a "special, personal relationship" with a government witness and may have broken the law by supplying sensitive confidential information to her.

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HealthSouth Corp.: http://www.healthsouth.com