The Case Against Scrushy

A veteran of one corporate scandal and two trials, Richard Scrushy has been under indictment for about twenty-nine out of the last thirty-two months; he has spent seven of the last seventeen months of his life at the defense table next to a group of the best friends money can buy. At the pinnacle, he was a darling of the media, especially in Alabama, where his company brought a sense of pride to a state still reeling from it’s central role in the events of the civil rights era along with a role it shared with Mississippi as being poster-child image of the South. In places like the Northeast and California, the images most often associated with the south was guys in white robes and illiteracy and poverty and an agrarian society that never managed to flip the switch and plug into the rest of the country. To be fair, Alabama had quietly built a banking and medical industry, and had begun to make inroads in establishing a manufacturing sector that would make its presence felt in the nation’s shifting industrial landscape. But as far as the rest of the world was concerned, it is always easier to see the scars than it is to see the healing. And of course, the scars last longer. And that’s the stage that was set for Scrushy, driven by ambition and an interwoven set of complex psychological forces, he built a healthcare company that became a nationwide force with global visions. By the late 90s, Richard M. Scrushy was considered an innovator, he was considered a leader, he was considered an important philanthropist, he was considered a genius (as he would often be called, from the witness stand in Birmingham). Years before Richard Scrushy would strive to build a global ministry, there was talk of him using his economic muscle to bring a major sports franchise to Birmingham, there was talk of a Senator Scrushy or a Governor Scrushy, there was talk of spin-off empires, or a record production company. Before the whole thing came crashing down, the guy who was once symbolic of a new found pride in Alabama, a guy who would put a face and a certain energy on the old concept of the New South, would go from being the most meteoric figure in the state to a polarizing flame-out, sitting next to counsel, at the table for the defense.

The roots of Scrushy’s involvement in this trial began in the summer of 2003, or may have actually began a few months earlier, around March 18th. That was the day the FBI kicked in the doors at HealthSouth, and raided most of the corporate offices, with perhaps the exception of Bill Owens’. They already knew what Owens had to say, and his information was already locked away somewhere. By the middle of the summer, news accounts said the government was looking into links between Governor Siegelman, who was being investigated at that time, and recent fallen-hero Richard Scrushy, who was at the center of a corporate scandal. Nick Bailey had been to the feds about seven months before, and a few months before Weston Smith and Bill Owens went to the government ahead of a company that was about to fall on top of them, but Bailey had revisited the government about a month before the government confirmed they were investigating the Siegelman-HealthSouth link. And by this time, Bailey was highly motivated to tell some stories. It is clear that this brand of creative prosecution came about because the HealthSouth scandal happened at the same time the government was investigating the Siegelman administration. It is doubtful that these kinds of links were as vigorously investigated to fellow Alabama Fortune 500 companies Saks or Regions Financial. But years before the prosecution would employ an everything-but-the-kitchen-sink strategy in a courthouse in Montgomery, the media was waging one of their own. Embarrassed by the scandals of the Siegelman administration, humiliated by the public scandal involving a nationwide Alabama company, and angry over losses felt by stock holders and pensioners, there was a great and easy license for ambitious government attorneys to seize the moment.

Interestingly, in the first round of indictments that followed, someone was missing. Siegelman and Hamrick and Philip Bobo were indicted in a scandal that was thrown out in late 2004, almost a year and a half later. Some of the elements of the current indictment were being discussed as early at the summer of 2003, but it would be three years until they made it into a courtroom. And what about Scrushy? It was two years after they first announced an investigation into an investigation into a HealthSouth-Siegelman link that he was named in a sealed indictment, shortly after the jury rested in a trial that was going very badly for the government.

And I will note here, before I get too many letters and posts and things, that this discussion does not include much about what actually happened within HealthSouth. I have spent a couple of years on that topic alone, and have much knowledge and belief concerning the events surrounding the scandal of HealthSouth, but it is much too broad for this discussion of the events leading up to the current investigation and trial. For now, it is important to note that the Siegelman-administration scandal and the HealthSouth scandal had nothing to do with each other except a coincidence of timing which made the two situations a convenient target for creative prosecution. Richard Scrushy has often been accused of deliberately doing things to manipulate and gain positive publicity, but think about how the prosecution could piggy-back the negative publicity of the Siegelman situation to be used against Scrushy; and they could likewise piggy-back the negative publicity of he fallen-hero status, from the HealthSouth situation, to bolster the evidence of the Siegelman trial. The prosecutors have lately been fond of proclaiming the righteousness of their case, so is this just conjecture? Circumstantial evidence with a leap of faith? For now it might be an hypothesis—a starting point—but we may be able to bring the matter closer to something that looks like proof.

The case against Richard Scrushy has much to do with the difference between illegal bribery and legal lobbying. There is an entry that I wrote several weeks before the trial that has a pretty good discussion of this concept. It is the April 12th entry, you can view it by using the calendar at the right, or by following this link.. The problem is that the experiences of the jury will be mostly in the public sector, and they will not know or understand the ways and means of big business or the ins and outs of politics. And this could even be a little worse for the defendants, because neither politicians nor corporate leaders are not always liked and trusted by the rank and file. So the first challenge, for the defense attorneys, is to educate the jury, but this is easier said than done. Evidence and information can only come into the trial from the mouths of witnesses or in physical evidence, and there are strict court procedures that require the testimony to have direct relevance to the case at hand. So the lawyers can’t merely instruct the jury and only certain witnesses would be in a position to do so, but only while talking about things that pertain to the indictment.

The facts of the case as presented by the prosecution:
1) Richard Scrushy and Don Siegelman had a meeting. Nick Bailey was there when the meeting took place, but did not actually attend the meeting.; 2) At the meeting, Scrushy delivered a check for $250,000, written on IHS, a Maryland based nursing home company. The government implies the check was concealed because it went through IHS. Bailey says he saw this check. 3) Bailey said that Eric Hanson told him that Scrushy wanted the CON Board. Hanson was not called as a witness. 4) At a later day, Siegelman and Nick Bailey drove to the Birmingham headquarters of HealthSouth, and picked up a $250,000 HealthSouth check. 5) On July 26th, Richard Scrushy was appointed to the CON Board, a position he had held under three previous administrations. The last time he had resigned, Scrushy was quoted as saying his life was just too busy, and he was unable to make the meetings. By the time he joined the Siegelman administration CON Board, HealthSouth had 1,800 facilities in all fifty states. 6) At least one of these checks did not show up on required reports until much later.

The facts of the case as presented by the defense, including some things likely to be included in the upcoming defense:
1) Nick Bailey repeatedly said the meeting took place on July 14th, 1999. But the information that has been presented by Scrushy puts the date as June 29th, 1999. On the stand, Bailey finally said there might have been two meetings, even though he never said any such thing in numerous meetings with federal investigators. 2) Testimony in the trial has proved the check could not have been in Alabama until at least July 20th, which means Nick Bailey could not have seen it on either July 14th or June 29th. This piece of information is not trivial as it casts doubt on Nick Bailey’s assessment and on Bailey’s motivations. 3) Scrushy says there was nothing nefarious or below board about either check going to Siegelman.

Some new things the defense will likely introduce:
1) Scrushy’s defense will continue to dispute the day of the meeting, including Bailey’s memory of who was in attendance. There seems to be some dispute over if Jim Goodreau was at that meeting. (Goodreau was to Scrushy as Bailey was to Siegelman….except Siegelman may now wish he had Goodreau instead of Bailey.) 2) The defense will introduce information about Scrushy’s other philanthropic efforts. Scrushy’s philanthropy was well known in Alabama, including I believe $1 million to Troy State, $1 million to United Cerebral Palsy and many many more, including $25,000 to Siegelman’s inauguration. And these things are very important, because in the millions of dollars Scrushy and HealthSouth were known to have given to organizations, the notion that he would give $500,000 to benefit education and hopefully gain favor with his business does not seem too far fetched.

The defense has yet another problem to contend with, and it is a discussion that has to do with both Nick Bailey and Lanny Young, so it therefore effects not only Scrushy but Hamrick and Siegelman. Between Bailey and Young, this situation manifests itself differently but it is equally a real challenge impacting how the defense will be presented to the jury. I will begin by addressing the Nick Bailey part, as it relates to Scrushy, and will go over Lanny Young in tomorrow’s entry about the Siegelman-Hamrick portion of the trial.

The problem can be stated like this: What happens when you are relying on eyewitness testimony from a person who is hallucinating. I don’t mean this extreme example to be funny or over-the-top or bombastic, but in a very real way, Nick Bailey can give truthful testimony but still be dead wrong because there are many indications that Bailey doesn’t understand what he saw, and sometimes he comes off a little like a dog doing a trick to get a biscuit. And again, these stark images are not meant to be funny, but to be clear. This kind of witness can be a real problem in a trial, because all the jury has to go on are his words. They may not be able to tell if the person is delusional or mis-informed or has his own language to describe the things he sees. All they hear are the words. In a motion, Stephen Feaga once wrote: Words have meaning. Not always.

So if I haven’t confused readers of these notes enough, let’s go to some examples:
Nick Bailey said that Richard Scrushy wanted “control” of the CON Board, but when asked about this, he could never say how anyone with a single vote could control the Board, and he said the first thing they did was make him vice chair. The vice chairman of the board is the person who fills-in when the Chair is not in attendance, and the chairperson only gets to vote in a tie. This would hardly give him control of the board, but in Bailey’s mind, because of his limited understanding of what was at stake in the matter, giving him the vice chair would do this. But it gets better. After Bailey said that Scrushy couldn’t be named chairman because it was already committed to Margie Sellers, David McDonald asked him “Well, is that because maybe Margie Sellers paid him a million dollars to be the head – the head of the CON board?” And Bailey said, “Let me see. Who was Margie Sellers representing? The Nursing Home Association?” STOP. Stop for a moment and consider what Bailey is doing here. He is calculating. Was the Nursing Home Association worth more than HealthSouth? And in fact it was. When Mcdonald affirms that Margie Sellers was indeed representing the Nursing Home Association, Bailey said, “It could have been more than that, yes.” He then says he doesn’t know if she bought her way onto the board, but that’s the calculation he just made. A million gets the chair and half a million gets the vice chair. Why did he back off at the end? Because the Feds never asked that question. I don’t care how much you hate Scrushy or the politicians and think that every single one of those guys should go to jail for life for violating our trust or being bad people or whatever, you have to concede that if the question had been asked to plea-bargaining Nick Bailey, Margie Sellers would be sitting at the defense table too. At the end of the same dialog, McDonald tells Bailey that, “I want to make a list of all the CON Board members that have or could have bought their way onto the board. Can we do that?” And what did Bailey say? I need to put on my best Jim Parkman dumbfounded look for this one. Nick Bailey said, “I suppose you could list all nine of them.” I’d like to say: I rest my case, but I know it is considerably more complicated for the guys who actually get paid for this stuff. But think about what Bailey just said (and these aren’t paraphrases, these lines are directly out of the transcripts). McDonald did not ask if all of the Board members gave a contribution, he specifically asked if they bought their way onto the board. It should be abundantly clear, no matter what you want to believe or would like to believe, that Nick Bailey really doesn’t know the difference between giving a contribution and giving a bribe, and the only reason he is fingering Scrushy is because that is the one they are asking about. And for everyone who say “Scrushy’s a jerk. Who care’s. He belongs in jail anyway.” That works just fine until the day they ask Nick Bailey about you.

In another exchange, Art Leach said to Bailey: “Do you know of a single document that in any way confirms the testimony that you’ve given about statements from the Governor or Eric Hanson involving Richard Scrushy’s contacts with the Governor?” And Nick Bailey’s response was, “The checks, Mr. Leach.” If Nick Bailey really believes the checks were documentary evidence of a bribe, then wouldn’t he also believe that the presence of a check written by someone who got any favorable ruling or action from the government would also be a bribe. Wouldn’t paying taxes be a bribe? (Yeah I know, some would call it extortion.) Bailey shows a fundamental lack of understanding of the issues involved in this case, which incidentally, may be evidence of a certain naïveté that had a lot to do with what happened when he was head of ADECA, and consequently the GH Construction project. Because of the these issues, it appears that Nick Bailey was a governmental wild card, and he could have been used as a GO TO JAIL card for just about any citizen of the government’s choosing. When they spun the wheel it came up on Scrushy because it a) Gave them some insurance for their weak Birmingham case; and b) Could be used to bolster a conspiracy case against Siegelman.

But is this how justice is supposed to work? Is this what the government has come to? And does anger at Scrushy or Siegelman outweigh a capricious system of justice? And to the 80% of the people of Alabama who believes the jury got it wrong, doesn’t this say just a little bit about what happened in Birmingham? Just a little?

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I’ll finish the new chart tonight. There’ll be more tomorrow. An article that I had planned to have up today, on the Government and their Case, is not done and I should have that up tomorrow along with and article about Hamrick and Siegelman’s defense.

Take care & keep the faith