Prosecution Rests in Scrushy HealthSouth Trial

The prosecution rested its case in the corporate fraud trial of fired HealthSouth Corp. (search) CEO Richard Scrushy (search) on Tuesday after 12 weeks of trial.

The defense — which argues that the testimony by the CFOs and about two dozen other government witnesses proved no such link — said it will ask U.S. District Judge Karon Bowdre to dismiss all charges.

Bowdre scheduled a hearing for Thursday on whether to throw out the case. Assuming she doesn't, the defense will present its first witness later that day.

Scrushy is the first chief executive officer charged with violating the Sarbanes-Oxley (search) corporate reporting law, passed in 2002. He also is accused of conspiracy, fraud, money laundering and obstruction of justice.

Scrushy went on trial Jan. 25, but the case has been delayed repeatedly by fights over evidence, juror illness and days off for spring break.

As its case neared an end, the government filed papers asking Bowdre to throw out charges accusing Scrushy of mail fraud for allegedly causing a proxy card, an annual report and other documents to be mailed to AmSouth Bank in Birmingham. The materials actually went to an address in Georgia, the motion stated.

Prosecutors also said they couldn't prove a charge alleging Scrushy laundered profits from the fraud by purchasing four antique Persian-style rugs because the company that sold the items destroyed documents related to the deal.

Scrushy would still be charged with 52 other counts if Bowdre agrees to drop the two minor counts.

The judge previously threw out a single money-laundering count and three perjury charges against Scrushy at the request of the defense.

In court Tuesday, Scrushy lawyer Art Leach continued tough questioning of government expert William Bavis about the remaining money-laundering charges, which accuse Scrushy of spending millions on assets like vintage cars and boats even though he knew he made the money illegally.

Money laundering typically is thought of as trying to hide proceeds of a crime, not simply spending money — a point Leach tried to make by having Bavis read from Scrushy's indictment.

"It doesn't say money spending, does it?" asked Leach.

"No sir, it does not," said Bavis, one of the government's final witnesses.

Prosecutors claim Scrushy directed a seven-year scheme to overstate HealthSouth earnings to make it appear the rehabilitation and medical services chain was meeting Wall Street forecasts. Scrushy made millions from stock sales, bonuses and salary because of the fraud, they say.

The defense blames the fraud on 15 aides who pleaded guilty in the scheme, including the five former finance chiefs who testified against Scrushy.

If convicted on all charges, Scrushy could be sentenced to life imprisonment and ordered to give up assets worth some $278 million.