BIRMINGHAM, Ala. – A key witness against Richard Scrushy (search) paid cash for more than $3 million worth of property and ran up a $700,000 tax bill while helping engineer a huge financial scam at HealthSouth Corp., testimony at Scrushy's fraud trial showed Tuesday.
In his 10th day on the stand in the former CEO's trial, former HealthSouth (search) chief financial officer Bill Owens — an accountant — testified he failed to file federal tax returns for nine years beginning in 1995. He said he now has a $700,000 lien on a home he bought for $1.3 million in 1997.
Owens is among 15 former HealthSouth executives who have pleaded guilty in what prosecutors describe as a $2.7 billion overstatement of earnings from 1996 through 2002. Owens and another former CFO have testified that Scrushy, the primary founder of HealthSouth, directed the fraud.
The defense claims Owens was in charge of a group known as "the family" that inflated earnings on their own and hid the crime from Scrushy for years.
Parkman said Owens "not only orchestrated this fraud" at HealthSouth but also manipulated workers at the rehabilitation giant and his own personal debts — a charge Owens denied.
Owens testified that he paid cash for the $1.3 million house, three others in Alabama and South Carolina and two tracts of land. He also gave his daughter and her husband $290,000 for a home and purchased a condominium for her while she attended the University of Alabama, he said.
Under pointed questioning from Scrushy attorney Jim Parkman, Owens recounted his spending and admitted it occurred in years he wasn't filing federal tax forms.
"I paid my federal and state taxes, the vast majority of them. I simply was delinquent in filing my tax returns," said Owens, who reached a plea deal with prosecutors and is cooperating with the government in the Scrushy case.
Owens said he was still working on a settlement with the Internal Revenue Service (search), but he denied Parkman's claim that his testimony against Scrushy would play a role in determining how much he owed the government.
Owens also denied his testimony could help wipe out a $1.3 million executive loan he still owes HealthSouth, which paid some of his legal bills. Owens testified he wrote the company a check for the loan, but told another worker involved in the fraud to hold it because he didn't have the money to cover it.
On Monday, Owens admitted that Scrushy never attended a meeting of "the family" when there were multiple people present, but said he considered anyone who was involved in the fraud was a member of the group.
Owens admitted that he didn't previously refer to Scrushy as being a member of "the family," referring to him before only as a "co-conspirator."
Scrushy is charged with conspiracy, fraud, money laundering, obstruction of justice and perjury. He also is accused of false corporate reporting in the first test against a CEO of the 2002 Sarbanes-Oxley Act (search).
Scrushy could get what amounts to a life sentence and have to forfeit as much as $278 million in assets if convicted.