Article: Executive Gets 5-Year Term in Fraud Case (accounting fraud at HealthSouth)

"That good character deserted you while you were at HealthSouth because of greed," she said.

NY Times

December 10, 2005

Executive Gets 5-Year Term in Fraud Case

By KYLE WHITMIRE

BIRMINGHAM, Ala., Dec. 9 - A former chief financial officer at HealthSouth, William T. Owens, who cooperated with federal prosecutors, was sentenced Friday to five years in prison for his role in an accounting fraud at the company.

It was the longest sentence given in the accounting scandal, which has resulted in the convictions of about 15 executives at HealthSouth, an outpatient health care provider. The company overstated results by $2.7 billion to $4.6 billion.

Judge Sharon L. Blackburn of Federal District Court in Birmingham spoke extensively about Mr. Owens's assistance before giving him the prison term along with two years of probation. Despite his "unprecedented" cooperation, the judge said, the sentence had to be strict enough to deter other white-collar criminals.

"Corporate offenders are nothing but common thieves wearing suits and wielding pens as their weapons," Judge Blackburn said.

The judge did not impose a fine, citing Mr. Owens's inability to pay. In court, Mr. Owens said that he had lost everything, including his marriage, and he wept as he apologized.

In March 2003, Mr. Owens secretly recorded conversations with Richard M. Scrushy, then the HealthSouth chief executive.

Federal agents raided HealthSouth hours after the last recording. Mr. Owens later pleaded guilty to conspiracy to commit securities fraud, wire fraud and certifying a false financial statement.

His lawyers said that he had spent hundreds of hours in interviews with investigators and forensic accountants, and that he testified for more than 11 days in February during Mr. Scrushy's trial.

In June, a federal jury acquitted Mr. Scrushy of involvement in the fraud. During that trial, defense lawyers accused Mr. Owens of being the mastermind behind the fraud.

Judge Blackburn said Mr. Scrushy's lawyers had unfairly blamed Mr. Owens for the fraud.

"I do not believe you were the architect or the personal instigator of the fraud," she told Mr. Owens before she sentenced him. "That person escaped justice."

The judge who presided over Mr. Scrushy's trial, Karon O. Bowdre, sat through much of the hearing. Afterward, she declined to respond to Judge Blackburn's comment.

"It is improper for me to comment on what another judge has said," Judge Bowdre said.

Mr. Scrushy did comment, however, again calling Mr. Owens the mastermind behind the fraud.

"Anyone who sat in the courtroom during my six-month trial would know that today's comments about me are totally inappropriate, given that there was not one shred of evidence or credible testimony linking me to the fraud," Mr. Scrushy said in a statement.

Of all the HealthSouth executives convicted in the conspiracy, Mr. Owens was the only one who participated from beginning to end.

During the sentencing, Judge Blackburn read from dozens of letters sent by family and friends, vouching for Mr. Owens's reputation and pleading for mercy. But she rejected his claim that his crimes had not been motivated by the lifestyle they afforded him.

"That good character deserted you while you were at HealthSouth because of greed," she said.