A long day in a long trial

In a voice choked with emotion, Bill Horton talked this afternoon about the high price of fraud:

"Mr. Watkins, if I had to sit in Mr. Scrushy’s office and tell him to step down, I had to turn my back on so many of my friends for the good of this company, I would have told him to do so."

It was a busy day in the trial as yet another good news/bad news scenario played itself out for the defense. In the nearly two weeks since the defense got the case, they have been sputtering and unable to gain any real ground in their version of the events, until today, when they finally got some information out that made it across the room and was felt and heard by the jury. That’s the good news. The bad news is that the mouthpiece for this information is a baggage laden witness, Jim Goodreau.

The other witnesses today seem to be part of a curious defense game of chicken, practically tempting fate and daring the jury to return an unfavorable verdict. The general sense in the courtroom is almost of a stunned curiosity as people strain their ears, waiting for the defense to put a witness up that can actually help their side. And the inability to do this seems to be creating a vacuum, a gaping hole that the jury can not help but notice. Many of the fears, concerns and issues I have raised from the beginning of this trial may be coming true behind the defense table. Scrushy may be meddling in the process. Parkman may be burning out in an environment he is not accustomed to. Leach and Watkins, or Leach and Parkman might be at odds about the best course of action. Some of these things or all of them, or things yet unseen. It is not that the prosecution is so strong, but that the surprising lack of a defense simply must be felt by the jury.

The people on the stand today were important people, if not necessarily important witnesses. Last week, the defense called Brandi White, who had something to do with cash management, at HealthSouth, but in terms of the defense or this case, had a very marginal role. I am sure the jury will not remember her when the time comes. But since then, the people on the stand have had a certain stature that we’ve heard before, from both in and out of the trial, but yet it is like putting Brandi White on the stand over and over again. Long time board members Sage Givens and George Strong both told us that Richard Scrushy did not interfere with their duties on the board, and that they relied on the CFOs and the outside auditors to give them financial data. This shows a certain amount of insulation between Scrushy and the fraud, but it does very little to prove that Scrushy was not involved. Alice Martin made a point, during the cross-examination of Strong, which I didn’t pick up until reviewing my notes, and don’t think the jury would have got it either, but it was that Scrushy would have been “interfering with his ability to do his job” as a board member, if he knew about the fraud and didn’t tell them. The nature of a conspiracy is that there are a group of people who have various roles in doing something wrong, and they are taking steps to conceal their activities. It is entirely within the prosecution’s theory that Scrushy could have been ordering the finance department to book fraud, and then to provide the bogus numbers to the board. All Givens and Strong said was that he didn’t wave any flags around, saying he was part of this conspiracy. And that the board expended very little effort to challenge Richard Scrushy, or anyone else who was giving them information. I am not saying that this does anything to show Scrushy was part of the fraud, but that these defense witnesses did not say anything to disprove the information that is already on the record.

We did learn a little more about Scrushy’s departure as the CEO, and about Owens tenure. Scrushy’s defense team and others have termed it his exit strategy, that he was fazing out his involvement with the company. But Givens said that when they had the plan for splitting the company in two, Scrushy would not be able to be CEO of both companies, so he requested that he be made Chairman of the Board of both companies. This looks more like a way to broaden his power, then an exit strategy. At least it looks this way. And the board also said that when they had Owens demoted from CEO back to CFO, they expected Scrushy to fire him within a few months. They had no confidence in him, and felt he was detrimental to the company.

Then we heard from someone who has been mentioned by many, if not most, of the other witnesses. The fraud was swirling in and around and up and down HealthSouth, and in the middle of it was corporate counsel, Bill Horton. The rhetorical question has often been asked, in reference to Horton, about how he could be so closely involved with so many people involved in the fraud, and not have known that something was going on. Perhaps it could be found in that voice, choked with emotion, when he was talking about the devastating personal consequences of the fraud. Perhaps he asks himself the same question. Weston Smith came into his office one day, and asked him what would happen if he didn’t sign the 10Q. Horton told him this would be a very bad thing: Stocks would go down, there would be an investigation, there would be law suits. But the amazing thing, the hard to take thing, is that this guy just implied he had a problem signing the 10Q, and Horton didn’t even make a perfunctory inquiry about why this was so. He didn’t tell Scrushy that his CFO seemed to have a problem with signing the 10Q. Remember that Horton was HealthSouth’s attorney, and did not have an attorney-client relationship with Smith. What also seemed amazing in the processing of a defense that seems to have wondered into a slough, is that Watkins revisited the meeting Horton had with Owens and McVay, in which they were discussing the possibility of ousting Richard Scrushy, as chairman of the board. When he brought this up, and reminded the jury of it, I thought that perhaps Horton’s version would differ from what Owens said, and the defense could make something of it. But no, Horton said it happened exactly as Bill Owens had testified to. Horton and McVay believed that Scrushy should go, and Owens not only defended Scrushy, saying they should be loyal to him, but he was a good employee, and actually told Scrushy about the meeting. What seems like years ago, during the opening statements of the trial, Jim Parkman said the fraud was masterminded by Owens who did it to achieve money and power, or as Parkman said, “to climb the corporate ladder.” If this was true, then Owens was that close to the completion of this diabolical plan. He could push Scrushy out and the company would be his. But that didn’t happen. (And if Scrushy didn’t know of the fraud, as the defense claims, there would be no consequence in getting rid of him, as opposed to getting rid of people who did know of the fraud). And even if he thought they couldn’t get away with it, there would not have been a good reason to tell Scrushy, as keeping disgruntled employees around would only benefit his plan, sooner or later. So as a witness, it is hard to figure what his testimony could possibly add to the defense’s case.

Horton is in a class of problematic figures, in this case. There appear to be a number of people who although were not active participants in the fraud and did not gain from it, knew that something was going on and did little or nothing to act on that knowledge. There may have been a rather weird psychology that was going on in the company, and that people bought into the “people depend on us because we’re creating jobs, and we’re saving lives by doing important work in health care” kind of operating agenda. These people may have included, Jim Bennett, Daryl Brown, Pat Foster, Larry Taylor and Bill Horton. It may be another layer in a multi-tiered story.

And finally, there was a voice to be heard, but was the jury still listening? And what about the baggage? Jim Goodreau told about the meetings he had with a furtive Bill Owens. At one of these meetings, originally related in previous hearings, Goodreau said that Owens told him there was an accounting problem at HealthSouth, and that Richard Scrushy didn’t know about it. This was the meeting that Owens was supposed to have had with Goodreau, at On The Border restaurant. Owens had disagreed with the date of the meeting until Parkman produced a receipt for the restaurant, on that day. Goodreau told Owens that he should tell Scrushy about it. At another meeting, Goodreau said that Owens was acting paranoid and was worried that people were following him, and another time, Owens asked him if he could hack into computers at HealthSouth (Owens testified that he was interested in accessing patient accounts, presumably to prevent detection of the fraud). Before cross examination began, Goodreau was asked a question that the defense might have wished they hadn’t. He was asked why he hadn’t told Scrushy, himself. This was a table-turning moment because the defense would often ask the prosecution witnesses questions just like this. Why didn’t you just tell Mr. Scrushy? And Goodreau gave a rambling answer that not only made his own testimony look a little questionable; it seemed to give a general answer about why people didn’t just tell Scrushy anything. (Remember cognitive dissonance?) First, he said that he didn’t think Bill Owens was talking about anything criminal, and second, he said that as chief of security, he wouldn’t tell Scrushy about things going on in finance; third, he said it would make him look like an idiot; and fourth, he said: “I’m talking about things I don’t even know what I’m talking about.” It was a deflating moment, as the witness undermined his own testimony. (I should also mention that when asked if he knew Owens was talking about a massive fraud, Goodreau said “not in my wildest dreams.” The problem with this is that the actual line Goodreau used when he testified about what Owens told him was something like: “It wasn’t an Enron, but there was an accounting problem…” and then he later said he didn’t think it was criminal. If Owens really said the word “Enron,” then I think that would be a clue, or at least put it within his wildest dreams.)

There is more to say about Goodreau, but cross-examination has just begun, so this segment of the trial will continue tomorrow.

I have obviously never seen Ingram or Conry or Wiedis or Smith or Martin argue any cases before a jury (maybe I’ll have to go watch other cases for comparison, but they would think they’re in the twilight zone) but the sputtering defense seems to have brought about a transformation before my eyes. This may be a Parkmanization as the DC-based prosecution team adapts to a Birmingham jury. Last week, the usually calm, plodding Richard Smith turned into a document waving, gesturing TV lawyer, while doing the cross examination of Jim Whitten. And today, while doing the cross examination of Goodreau, Wiedis was asking about his employment at HealthSouth. He said: “It was a pretty good gig, wasn’t it.” Gig? Wiedis? And I could almost squint and see Parkman up there, saying “Y’got a pretty good gig, dincha?” This could also be an equalizing factor in what has been going on in the trial. In an odd way, however, it seems that it is easier for Wiedis, Martin & Co. to adapt elements of Parkman, then it is for the other side to adapt to the necessary elements of the prosecution. When Wiedis asked about the trips Goodreau would take with Scrushy, Goodreau said they were not strictly pleasure trips for him because he was doing his job by protecting the CEO of HealthSouth. One of those working trips occurred when Goodreau and his wife accompanied Scrushy to Argentina. Before it was objected to, Wiedis started to ask, “Your wife help you protect Scrushy?”

___________Possibility: Corporate Mythology Comes to Trial___________________________________

There is a thread that has developed in the trial in which I have little definitive information on, but it may be something for further research or discussion. I’ve been in and out of the corporate world for quite some time and have owned or run a couple of small businesses. There is a phenomenon that often occurs both in a corporate and small business environment. That is the existence of a mythology related to the origins and development of the business. These are quaint stories that are often about the founders or key moments in the development of the business or the position on the corporate landscape. These tales that make up the mythology often begin with a kernel of truth, and over the years, and with subsequent tellings, the story gets embellished. There are a couple of characteristics of this corporate mythology that are worth discussing. These stories have been told and retold so frequently around the corporate headquarters, that employees take them as the unvarnished truth, and they begin to creep into corporate and other publications. The other thing is that they are pretty much harmless and even helpful in building a corporate identity, but they were never meant to be discussed and passed along in a trial, where facts are the only thing. The other part of this mythology is that it becomes woven into the fabric of the real and the actual, so that over time, it is harder to separate out the individual fibers.

There are several stories that have come into the trial that I have seen told before in other contexts. When I first heard them, I generally thought of them as quaint stories which may or may not have been strictly true, but were of little consequence. But when these stories begin to get carried into the trial, and when people get asked about them who have told or heard them enough, they believe them to be true, it is a possibility that a harmless embellishment could taint a preceding.

The government says that it feels there is no factual basis that Richard Scrushy thought up the auto-ambulator and “gave” the patent away. But around HealthSouth, that is the story that has been told over and over, throughout the years. The one room office origins of the company, with the four chairs for the five founders of the company, and a telephone, has had variations in the telling, even in the trial. This is both the mark of an oral history and of a corporate mythology