Witness: Scrushy Resisted Firing CFO

Former HealthSouth Corp. (search) chief Richard Scrushy (search) resisted firing a top aide who was later revealed to be key to the huge accounting fraud at the rehabilitation chain, a former director testified Wednesday at Scrushy's trial.

Sage Givens said board members wanted to fire chief financial officer Bill Owens on the belief he failed to properly handle a change in Medicare billing rules in 2002 that cost HealthSouth millions in patient rebimbursements. The board lost confidence in Owens' relationship with Scrushy after the debacle, she said.

But Scrushy said he didn't want to dismiss Owens because he was needed to sign HealthSouth's financial statements, said Givens, a defense witness being cross-examined by prosecutors.

Givens said Scrushy also seemed to believe Owens was "a very good chief financial officer" and was needed as HealthSouth faced questions including the impact of the Medicare billing change, sagging earnings and a probe into allegations of insider trading by Scrushy.

"There were a lot of allegations and bad press about the company, and we were under pressure to answer those questions," Givens said.

Owens' possible ouster is important to the defense, which claims Owens went to the FBI and falsely blamed the fraud on Scrushy after learning the board wanted to fire him.

Scrushy claims Owens and 14 other former HealthSouth executives who pleaded guilty in the conspiracy engineered the fraud on their own and hid it from Scrushy while trying to climb the corporate ladder.

Prosecutors accuse Scrushy of directing the scheme over seven years to make millions off bonuses, stock sales and salary while HealthSouth's earnings remained artificially high.

Directors fired Scrushy after the fraud was revealed publicly in March 2003, and Givens testified that he would have been ousted years earlier had directors known of the scheme to overstate earnings. Owens also was fired because of the fraud.

Scrushy is the first CEO charged with violating the Sarbanes-Oxley corporate reporting law, passed in 2002 in response to a string of business scandals. He also is accused of conspiracy, fraud, money laundering and obstruction of justice.

Scrushy could receive the equivalent of a life sentence and be ordered to forfeit some $278 million in mansions, cars, boats and other assets if convicted.

Free on $10 million, Scrushy has been subject to monitoring, including computerized telephone calls from probation officials since his indictment. In a brief order issued at the defense's request, a judge said Scrushy no longer had to check in by phone in the morning while on trial but must call his probation officer each evening.