Scrushy defense attacks witness's credibility

BIRMINGHAM, Ala. -- The defense for fired HealthSouth Corp. chief executive Richard Scrushy depicted a main prosecution witness yesterday as a rich deal-maker on a ''mood-altering" drug but failed to shake his claim that Scrushy was in on a $2.7 billion fraud.

Under tough cross-examination, Scrushy lawyer Jim Parkman showed a mostly blue-collar jury that former chief financial officer Mike Martin was worth millions, even after paying $2.4 million in penalties from the fraud.

He also got Martin to admit to taking Lexapro, described by manufacturer Forest Laboratories Inc. as being for depression and anxiety disorders.

''You know it's a mood-altering drug, don't you?" Parkman asked.

''I don't think of it as a mood-altering drug," countered Martin, who acknowledged a volatile temper even as he remained calm and soft-spoken on the stand.

Martin stuck by earlier testimony that Scrushy was fully aware of the scheme to overstate earnings and saw printed reports that showed revenues falling short of expectations as expenses spiraled out of control.

''Did anyone hide expenses from [Scrushy] while you were CFO?" asked prosecutor Richard Smith.

''No, I went over these numbers with him every quarter," said Martin.

Prosecutors accuse Scrushy of leading a fraud to inflate HealthSouth earnings from 1996 through 2002 to make it appear the rehabilitation chain was meeting Wall Street estimates. Scrushy made millions off the scheme in salary, bonuses, and stock sales, they contend.

The defense alleges Martin and other former Scrushy subordinates committed the fraud on their own and got rich climbing through the corporate ranks.

In Martin's sixth day on the stand, Parkman asked Martin about his prescription for Lexapro. Martin said a doctor prescribed the medication for ''stress and anxiety" while he was suffering from high blood pressure in summer 2003 -- after the HealthSouth scandal became public -- and he is still taking it.

Parkman also brought out that Martin had cooperated with plaintiff's lawyers involved in shareholder lawsuits over the HealthSouth fraud, suggesting Martin did so in exchange for a favorable settlement of his part of the lawsuits.

''That is entirely wrong. I have no agreement with them," said Martin, the third former chief financial officer to link Scrushy to the fraud.

Trying to boost the defense claim that Scrushy subordinates had financial motives to commit fraud, Parkman showed that Martin had a net worth of as much as $10 million when he paid more than $2.4 million in forfeitures and fines for his role in the scheme.

Scrushy is charged with conspiracy, fraud, money laundering, obstruction of justice, and per-jury.

He also is accused of false corporate reporting in the first case of a chief executive being charged with violating the Sarbanes-Oxley Act.