THE COURT:  Is the government ready to proceed?  

          MS. MARTIN:  We are, Your Honor.

          THE COURT:  You may. 

          MS. MARTIN:  Thank you.  May it please the Court, counsel, ladies and gentlemen of the jury, I would like, if you would, to have you join me and look back.  Let's go back to three days in March of 2003. 

          The first day I want to go back to is a Friday.  It's March the 14th of 2003, and we're out on Highway 280 in the headquarters building of HealthSouth. 

          And you're in a conference room, and in that conference room is a table, and seated at that table is the defendant, Richard Scrushy, and with him are about five lawyers.  There's a court reporter present. 

          Good.  There she is.  We have to have a court reporter.

          The court reporter is present, and there are two other men in the room, and they are with the Securities and Exchange Commission.  You've heard the judge mention that name.  And they are there to take his deposition.  He has been subpoenaed because he's under investigation by the Securities and Exchange Commission. 

          They're investigating forms that he signed and the truthfulness of financial forms that he signed and put out in the public, and some stock sales that he had made in the summer of 2002. 

          And at 8:58 that morning in that conference room, defendant raised his right hand and he swore to tell the truth, and he was asked about those forms.  He was shown those forms.  And they said, did you sign those?  Yes, I signed those. 

          And was the information contained in those forms that you signed that you gave to the public, was it true and correct?  Yes, it was true to the best of my knowledge. 

          Now, that's Friday.  I want you to step through the weekend with me.  Monday morning, back in that same headquarters building out on 280, HealthSouth, up at the executive suite, up on the fifth floor, where Mr. Scrushy had his office and where his Chief Financial Officer, his head accountant, had his office on the fifth floor.

          Mr. Scrushy comes to work that morning about 9:00 o'clock, and he goes down into Mr. Owens' office and he says, this didn't happen.  Swear to it. 

          He sees another man in the room that he knows, he knows him very well, Ken Livesay.  Mr. Livesay is somebody that's now, at this time in 2003, in the computer department of HealthSouth, but he used to be in the finance department, and he says you need to hear this because you were sitting under the CFO for a long time. 

          They are on a witch hunt.  They don't know blank.  They're not looking at the numbers.  Are they not?  No, no.  They asked me something about the financial forms I signed.  The guy, he didn't know what he was doing.  The guy from the SEC, he didn't have a clue.  He shuffled some papers around on the desk, and he asked did I sign that, and I said, yeah, I signed that; sure, I signed that. 

          He said, was it true?  And I said, sure.  What else am I going to say?  Yeah, it's true to the best of my knowledge.  And Bill -- because, you see, Bill was under subpoena to testify before the SEC, too.  And he said, Bill, that's your answers, to the best of my knowledge. 

          I want to take you two days later, to March the 19th of 2003, less than two years ago, to the home of Ernest Reiner.  Mr. Reiner, a retired Alabama Power Company employee, seventy years old, lives in Parrish, Alabama, about forty- five minutes from here. 

          He woke up that morning, got dressed, came in, sat down, wanted to watch the news that morning, and when he turned on the TV, what he heard was very upsetting to him because he was one of that public, the people they were giving that information, too.  He was a stockholder in HealthSouth.  He was an investor.

          And what he learned on that day, on March the 19th, was that because of allegations of accounting fraud, that the Securities and Exchange Commission had halted trading on the New York Stock Exchange of HealthSouth, a Fortune 500 company stock, and no one in the United States on that day could sell their stock.  People owned something that they couldn't sell. 

          And what you're going to find out is that, when the authorities allowed HealthSouth to start trading again, what was worth almost four dollars when he raised his right hand to tell the truth, when they could sell it, it was worth a dime.  That's what people sold it for.

          My name is Alice Martin, and I am the United States Attorney for the Northern District of Alabama.  I'm a federal prosecutor, and I prosecute federal crimes that occur in the counties where you live, Blount, Shelby and Jefferson. 

          The defendant Richard Scrushy is represented by Mr. Parkman and his legal team, who I am sure he will introduce, and I would like to introduce you to the attorneys for the United States. 

          With me is Richard Smith, Richard Wiedis, Colleen Conry, and James Ingram.  We're all attorneys for the Department of Justice. 

          Also at counsel table and probably more important than the attorneys is our paralegal Tonya Phillips.  And the lead case agent for the Federal Bureau of Investigation is seated at the end of table, Special Agent Gerry Kelly.  Together, we have the privilege of representing the United States, and we have the duty and responsibility, as the judge told you, of presenting evidence to you.  And we will over the next few weeks present to you evidence that Richard Scrushy knew about the conspiracy, that he participated in the conspiracy, and he profited from the conspiracy.

          The defense is going to be he didn't know.  Yeah, something happened out there, but he just didn't know about it.  So, the case is really going to come down to one word, something I predict that you're going to discuss a lot when you go into deliberate, and it's knowledge. 

          We are going to prove to you that he did know, and the way we're going to prove to you that he did know is we're going to take you inside HealthSouth.  We're going to take you inside there with other conspirators, co-conspirators, his inner circle, the people that were on that fifth floor with him, the people whose offices were as close as here to the other side of the courtroom. 

          You're going to meet the people that he met with, the people he conspired with.  And you are going to see the private reports that he was given showing what the true numbers were, and you're going to hear what they told him and you're going to listen to what he said. 

          Now, let's start with, first of all, what did he know about HealthSouth?  Well, he knew a lot about HealthSouth because he started HealthSouth.  Richard Scrushy started HealthSouth in 1984.  He had been a businessman, vice-president for a Texas-based healthcare company, and he had an idea that he would have outpatient rehabilitation centers that would be very nice. 

          They wouldn't be in the back halls of some hospital, they would be very nice, more like a health club atmosphere.  He started that company, and he headquartered it here in Birmingham, Alabama. 

          And you will understand, when you hear the proof, that there were facilities all over the United States, every fifty state, by the time the company grew and during the time we're talking about. 

          But you're going to hear the conspiracy we're talking about, it wasn't in all those two thousand or so facilities.  It really has nothing to do with the fifty thousand or so people that were at HealthSouth by the time of the conspiracy.  It's up at that fifth floor level. 

          So that's why we're going to take you inside there, because the rest of United States, the fact that it was in all those states, really you're going to see the significance is not there. 

          Richard Scrushy was the Chief Executive Officer. That means he was the boss.  He was the man.  There wasn't anybody higher than him. 

          He was also the chairman of the board, and you will hear a little bit about the board.  They're a group of people that come in and have meetings and oversee -- they're there to protect the investors' interest.  But Richard Scrushy chaired that, he set the agenda. 

          You are going to hear that he was a hands-on leader. This was his baby.  He gave birth to this idea and to this company and he grew it to what it was.  He picked -- he hand-picked all of his top officers.  You would expect that.  I would expect any Chief Executive Officer to pick the top officers that are on that fifth floor with him.  And he promoted them. 

          You will hear about his style of running HealthSouth.  And you will hear that in 1986, two years after HealthSouth started, he took the company public.  And when you take the company public, when you take it out to the public and you sell shares of stock to the public, you have certain obligations. 

          You know, when you are a private company, it's like your private finances, they're your business.  You don't have to share them with anybody. 

          But when you want to become a public company, you're saying I want to sell the company to the public and you can own a share.  And I know many of you do, you have retirement funds, you have stock that you own. 

          And when a company goes public, there are laws and rules and regulations that they have to follow, and those rules and laws are there for the purpose of protecting the public.  Because you're putting your money out there, you want it protected. 

          Those rules and regulations are there to protect the people in the United States.  And those rules and regulations, many of them are overseen by a federal agency call the Securities and Exchange Commission.  Other laws are federal in nature. 

          One of the primary rules when you're public is that you have to file truthful financial statements, and HealthSouth filed these.  They have to be filed four times a year. There are four main forms that have to be filed.  There are two forms, you have to file different ones. 

          You have to file one every three months.  After you've operated for three months, January, February, March, then you file one.  It's called the 10-Q for quarter. And then at the end of the year, you file a 10-K.  That's your annual report.  So you have the three quarters, and then you have the end of the year report which is the 10-K. 

          So you have to file these, and on each one the CEO, Richard Scrushy, signed his name saying these are -- these are the true -- this is the true financial condition, the true financial results of what we've done over the last three years or the last year -- the last three months or the last year.

          If you will, the 10-Q and 10-K are essentially financial report cards.  The law required the CEO to sign, as I said, and that information was then filed with the Securities and Exchange Commission that puts it out over the Internet for the public to have. 

          The public, you will learn during this trial, relied on that information.  They relied on it to make important investing decisions.  You will hear people that say, I looked at that information, and because of that, I bought.  And you will hear banks say that I looked at that information, because of that, we lent money. 

          Those financial statements, those financial report cards are the way that the public gets to look inside. 

          Think of it as a house or if you're going to buy a car, if you go down the street and you're house hunting and you see a house you like, you don't say, well, I think I'm going to buy that without going inside and inspecting, do you?  If you've got a car, you've got a used car or a new car, you're going to want to inspect it. 

          Well, the way the public gets to inspect the inside of a company like HealthSouth is to look at those financial statements. 

          Now, those 10-Ks and 10-Qs show what's happened in the past, and that's important information for investors because they want to know how much money have you been making, how well have you been doing. 

          And it's important, especially to the big institutional investors, and you're going to learn that eighty percent of HealthSouth's stock was owned by institutions, mutual funds, retirement funds like the Retirement Systems of Alabama, mutual funds like AmSouth Bank's Value Fund. 

          And they not only wanted to know what was already out there, what HealthSouth had done the past three months or the past year, they also wanted to know, you know, from the inside, can you tell us?  

          You'll hear analysts say, can you tell us what you think you're going to do next year because, of course, what you want to do is get into a stock when it's at this level and you want to ride up with it.  You want to know it's doing well and you want to make a profit. 

          And if the company says, well, it looks like business may not be as well next year because there's going to be some changes of some regulations or we may have -- you know, salaries are going to go up, and we're not going to make as much money, you don't necessarily want to be on the downside of that.  They may take their money out and go put it in another stock that they think is going to perform better.

          So they would ask Richard Scrushy how is it looking for the future, and they would give their thoughts on how they were going to do.  We're going to grow by this much.  We're going to grow by that much.  We're getting these new contracts.  We're going to have a great year. And that's called guidance.  It's where the company tries to guide you into the future. 

          Now, the public got their information in a number of ways -- if I could have the first slide.  We'll work on our technology, no doubt, the first few days.  They're going to pull that slide up. 

          But the public got their information in a number of ways.  One is the SEC filings that I've told you about, the 10-Ks and the 10-Qs.  The public also got their information in conference calls.  The company, HealthSouth, would have conference calls about every quarter and people from the public would call in and they would listen to what was said about what had happened in the past three months and what HealthSouth was looking forward to in the future.  And people from all over the United States would call in on these 1-800 numbers for those conference calls that Mr. Scrushy, the Chief Executive Officer, hosted. 

          You will also learn that they received information from press releases that HealthSouth put out and that were authorized to be released to the public by the Chief Executive Officer, Richard Scrushy, and you will hear that he did interviews.  He did interviews with the business magazines.  He did interviews on TV.  He did interviews with the newspapers. 

          And also, another requirement for public companies is that once a year, you have to send all of your stockholders, everybody that owns a share, has to get an annual report, and you will see these annual reports.  And in that annual report each year, he included a letter to the shareholders and he told them what he expected in the future and he described to them what had happened in the past year.

          Evidence will show -- and that's illustrated on this.  The evidence will show in each and every one of the charges contained in the indictment that Richard Scrushy, as the Chief Executive Officer, gave phony numbers to the public.  And the purpose was to make HealthSouth look like it was making more money than it was.  HealthSouth was making money, but it wasn't making as much money as Richard Scrushy had given guidance to Wall Street that it would. 

          Now, the purpose of doing that was to pump up the stock price, and the effect was that he deceived the public.  So in summary, a company has information that only people on the inside can get.  And they give it to the outside, to the public that's buying the stock.  And the reason is because of those laws, and those laws require that information to be accurate and that they're not being material misrepresentations. 

          Now, let's go and look inside the house of HealthSouth.  We've already stepped inside the headquarters there.  Mr. Scrushy was the Chief Executive Officer, and his job described, and you will see his contract, it provided that he was to give day-to-day leadership and day-to-day management at HealthSouth.  He was the man at the top, and the evidence will show that he was the man in control, he was in charge, and he was a man that was in this conspiracy.  You will hear that he said often, "HealthSouth is the best managed healthcare company in America." Why?  Because he would tell people "I manage weekly.  I manage by the numbers." And that's exactly what he did.  He managed by the numbers and he demanded a lot of financial information.  And you're going to get to see a lot of financial information, and you're going to get to see those reports that he saw, those private reports that the public never saw.  You're going to get to see how the picture painted in those final reports is not what was going out to the public. 

          Think of it as a house management.  Each of you manage a business.  You manage the business of your life.  You manage your family.  And you've got to know what's coming in one pocket, what kind of income you've got, to know what you're going to be able to get out on this side, what you're going to be able to pay.  It's no different from a big business.  And once you've taken in your income or your revenues and paid out your expenses, what you've got left is your profit.  We might call it our spending money.  For a company, it's their earnings, it's how much did they earn.  And they do that for their shareholders because that's who owns the company, the profit.  And it's that profit number, that's what was being pumped up. 

          As I said earlier, HealthSouth headquarters was out on 280, but there weren't any operations at that location.  No, the money was made out in the field, out in the operations throughout the United States, which is where healthcare was provided, where people got rehabilitation services, where people were in hospitals run by HealthSouth.  And each week they would send the numbers for that week over to the accountant, who would send the report up to Richard Scrushy.  Operations didn't have the software the accountants did, and they would send those reports up. 

          And Richard Scrushy, you will hear him say, you'll hear testimony that he would receive those every week, near the end of the week, and he would frequently use those in his Monday morning meetings with employees to ask about certain numbers, to talk about how well a facility was doing or to talk about why a facility was doing poorly. 

          You will hear from that top inner circle that he controlled the flow of that information.  HealthSouth had various divisions:  Inpatient, outpatient, diagnostic.  And you will hear that only the very few people, people on that fifth floor, got the whole report.  Richard Scrushy directed his staff otherwise -- you only give people what they need to know.  Only what they need for their portion of the company, only to run the division they have.  They don't need to know this.  We don't need to have that information out there.  We need to control that information flow.  And that's what you do in a conspiracy.  Richard Scrushy got the private financial records that the public didn't see. 

          There were also two other key financial documents that you will hear that he and certain inner circle people saw, and they're called monthly and quarterly consolidated statements.  You remember, I said there are a lot of facilities out in the United States?  They each had their own bank account.  At one time, over 2,000 bank accounts.  Well, obviously, the public isn't going to get a report in a 10-K or 10-Q with 2,000 bank reports.  So what they do is they send all of their numbers into the headquarters in Birmingham on 280, and software packages would run those numbers together and it would produce one report, and that was called a consolidated report.  And those consolidated reports would be shown, and Richard Scrushy would be briefed regularly by his Chief Financial Officer on those reports.  And you will hear from those officers, because there was more than one of them over time.  You're going to hear from five of them. 

          You're going to hear how he didn't keep those reports.  If they handed him one of those reports, he would hand it right back after they discussed it.  He did not want to keep those reports.  And I think we'll be able to show you why.  You will get to hold some of those reports, though.  And you will hear the CFOs testify what they told him, what he said, and what together they did when they saw those reports, and you will hear how Richard Scrushy directed them to inflate that profit, that earnings, to make HealthSouth look more profitable, more healthy to the public.  That pumped up the profits and he hid it from the public. 

          Now, how, when, and why did this start?  The indictment charges that the conspiracy started in mid-1996, and that's a long time ago.  The first Chief Financial Officer was Aaron Beam.  This was someone that Richard Scrushy had worked with in Texas, back in the '80s, and he brought with him and he was a founder of HealthSouth, along with Mr. Scrushy.  And he was the first Chief Financial Officer and he was there from 984 to 1996.  And he's going to tell you that in mid-1996, he and Bill Owens, who at the time was his controller; that's another accountant.  But they went to Mr. Scrushy's office, and they said, "Richard, here are the numbers, and we're just not going make it this quarter. We're not going to hit the numbers that we had predicted." And they said Richard looked at them and said "I'm not reporting that.  We're not going to do that." He said "There's nothing more we can do.  There's no techniques that we can use in accounting to make the number." They were short, you know, a little less than ten million dollars.  And they said "We can't do anything." He said "Fix it." They said "The only way we can fix it is just to make up numbers, just fake it." "Do it; fix it."

          You'll hear he was a very demanding man, very cunning.  And the accountants went down, and that night, they made the entry.  One of them made the entries.  Came back the next day and said, "Well, here's what it looks like now.  We made the entries." And you will hear him say Richard Scrushy looked at him and said, "Ever get caught, you're on your own." But quarter after quarter, year after year -- not one, not two, but lots of people showed him those reports, the true numbers, the inside numbers.  And you will see those reports, and you will hear what was said, and then you will get to look at what was given to the public. 

          And each time they came up, and after that very first time when he said "You're on your own," there's evidence he signed it.  He signed it saying it was true, and that report went out to the public, and that was the beginning of that conspiracy. 

          Over time, the conspiracy grew.  Not only in the size of people involved, but in the dollar amount.  These are the five CFOs that will tell you the story of their involvement in this conspiracy, and they've all pled guilty to the their crimes.  You will hear the story in detail from each of these people. 

          You will hear that there was movement of people.  And I want to watch the movement of the people because the Chief Executive Officer picks who his Chief Financial Officer is going to be.  He makes recommendations.  He promotes people.  And look who he put in those places.  I want you to look at the movement of people.  Look how they were moved about like pawns on a chess board.  I want you to watch that during the course of this trial.  And I want to make it very clear right now that these Chief Financial Officers on the fifth floor, and Richard Scrushy, the Chief Executive Officer on the fifth floor, they didn't make these entries.  People down in the accounting department made the entry.  Those people made the technical entry.  You're going to meet some of them, and you're going to hear testimony that ten of them have pled guilty to being involved in the conspiracy. 

          There are a lot of details during these years, 1996 to 2002, and we will fill them in during the trial. 

          Now, I want to turn, and let's go forward to the summer of 2002, because that's why the fraud didn't go on forever. That answers the question.  There are two things that happened in the summer of 2002; two events.  One, Richard Scrushy had huge sales of HealthSouth stock.  The second was a new law came into place, Sarbanes-Oxley, and you heard the judge mention that.  And that law required and carried with it, it required that they certify the numbers as being materially true.  That means we're not talking about a little error here and there.  But these are believed to be true, and they carry tough, new criminal penalties. 

          And the fourth CFO who was on this slide, Weston Smith, you're going to hear that he grew very concerned about this because he was the one who was going to have to sign that public filing, and he had read this new law and it concerned him greatly. 

          In fact, he left the building one day and he said, "I'm not going to do it.  I'm not going to do it." And, of course, this concerned the Chief Executive Officer, because if your Chief Financial Officer won't sign the form and that information is made known to the public, these people are going to have a lot of questions, aren't they?  

          They're going to want to know, why isn't somebody that is, is the Chief Financial Officer, that is on the inside, on the inside, is not willing to sign his name?  

          So that new law brought a real focus to it.  Richard Scrushy was cunning, though.  He got him back in the fold by saying, if you just come back in, because we don't want to blow all this, and you've been involved, you've been involved, you know.  We don't want to blow this, so if you'll come back and sign this, I will promote you.  I will put you somewhere where you don't ever have to sign another one of these that's false.  And the evidence will show that's what happened. 

          But because of the huge stock sale, SEC had opened an investigation, as we talked about earlier. And the SEC had subpoenaed Richard Scrushy and members, people that were on that fifth floor, members of the conspiracy, to come and testify. 

          And that brings us back, ladies and gentlemen, full circle to the first day I talked to you about in March 2003, because that's when this conspiracy began to crumble, on that Friday.  That's when it began to crumble. 

          The second day, remember was when he walked into Bill Owens' office, and he said, "This didn't happen, swear to it.  That's your answer, Bill, to the best of my knowledge."

          He knew what Bill Owens knew.  Bill Owens will come in here and tell you that he had known it.  He had been participating in this conspiracy.  He knew that wasn't true. 

          What he knew was that this man, who knew he was going to have to go testify in front of the SEC, wanted him to do the same thing, commit the perjury that Richard Scrushy is charged with having committed on March the 14th of 2002.  And that's the obstruction of justice charge that you will see in the indictment. 

          Well, the next day, ladies and gentlemen, on March 18, the FBI executed a search warrant at HealthSouth headquarters out on 280, and evidence was gathered.  You will hear testimony from a forensic auditor, Harvey Kelly.  He's going to tell you what a forensic auditor does. 

          A forensic auditor goes in looking for fraud.  A forensic auditor is brought in when you believe there's fraud, and they go through every, every entry. 

          And he's going to testify that between 1996 and 2002, based on the forensic audit of the books and records of HealthSouth Corporation, that they had inflated the profits by two billion seven hundred million dollars. 

          He's going to tell you that the public was given information that HealthSouth had made two billion seven hundred million dollars more than it ever had. 

          And he's also going to tell you that when you inflate your profit, you know, if you say you've made this much, then it needs to be somewhere, doesn't it?  It either needs to be in cash, your bank account or you spent it on something.  You paid down debt.  So you've got to do some finagling there, and he's going to tell you about that. 

          But what they did was, on HealthSouth's books, they just made up two point seven billion dollars worth of things, hospital beds, MRI machines.  In fact, they made up four hundred million dollars almost of cash that they didn't have. 

          And you will hear about the forensic audit results.  And the rest of this case is about presenting all of that evidence, all of this evidence. 

          Motive?  Why did Richard Scrushy do this?  He was living very well.  The evidence will show you that between 1996 and 2002, he spent over two hundred million dollars. 

          That contract that he had that provided that he would give the day-to-day leadership of this company and the day-to-day management of this company and that he would spend substantially all of his time working for this company, he was paid a little over a million dollars for that.  So you can see spending two hundred million, earning a million a year during those years, that leaves a big gap. 

          Remember when I talked to you at the beginning about pumping up the price of the stock, pumping up the profits to pump up the price of the stock, Richard Scrushy had a personal motivation, and you will see that through this trial.  He owned about five percent of the HealthSouth stock, five percent of all there was in the nation.  And he owned lots of stock, and he owned lots of stock options. 

          Now, I want to just briefly tell you what a stock option is, because you're going to hear about it, and it's an important perk that the top executives, the top executives get.  A few people get a few shares down here, but it's the top ones that get the lion's share. 

          What it says in essence is they give them a piece of paper, and it says today our stock is selling for this amount, but any time in the next ten years, if that's the length of the stock option, you can pay today's price and buy our stock. 

          It would be like me giving you a piece of paper and saying that today I'm going to lock in your rent for the next ten years, or today I will give you a slip that says you can buy this car, a Camry, today in ten years for today's price.  That's what an option is. 

          And that's called option wealth.  Because I can sit here with my option and wait for ten years and when the stock hits a really good price that I like, I sell it, and I reap the difference. 

          And during this conspiracy between 1996 and 2002, Richard Scrushy sold stock options and stock that put over a hundred and fifty million dollars in his pocket. 

          The Court has given you some instructions on the indictment.  And when you go back to deliberate, you're going to get to take the whole document back.  This is the indictment. 

          The first count in the indictment, she said it's about nine different crimes charged, the first is conspiracy.  We've talked about the scheme to defraud.  And she told you how a conspiracy is two or more people agreeing to do something unlawful. 

          Now, everybody in the conspiracy doesn't have to know what everybody else is doing.  And everybody in the conspiracy doesn't have to agree on what everybody else is going to do.  See?  

          What you've got to have is two or more people agreeing, and they agreed in that fifth floor office, in that private conversation over those private reports what they would do, and then other people did the dirty work.  They got the people down below making thirty thousand dollars a year to do that.  That's what they did. 

          The other crimes that are charged are securities fraud, wire fraud, mail fraud, false statements and false certifications. 

          Remember the reports I said -- we've talked about the 10-Qs and 10-Ks.  When you file those and they have false information in those, you've committed federal crimes of security fraud, false certifications and false statements when you are trying to defraud the public.  They have a right to know. 

          When you get on the telephone each quarter and you tell the public how well the company has just done and how well you think they're going to do in the future, and you know what you're saying is not true and you do it to deceive them, that's a wire fraud. 

          And when you send out that annual report each year to all those shareholders, and you again are just feeding them a line, untrue numbers, that's a mail fraud.  And those laws are in place, those regulations are in place, to protect the public. 

          Other charges are perjury and obstruction of justice.  And I think you all know what perjury is, and I think you all know the day it happened.  It happened on day one, the beginning of the conspiracy crumble, on March the 14th of 003.  And the obstruction of justice was the following Monday morning, following Monday morning. 

          The last set of counts in the indictment are money laundering.  They are Counts 34 through 46.  And on your screen are some details. 

          Ladies and gentlemen, when you take proceeds from a crime, and you spend at least ten thousand dollars of it on something, that is called money laundering. 

          The judge will give you the full instructions at the end of case, but for right now, you need to know it's that activity of making money illegally and then spending it. 

          And in the indictment, you will see that we charged Richard Scrushy with money laundering in the purchase of property, boats, armored vehicles, bronzes, classic automobiles, Rolls-Royce, antique rugs, more boats, property in Gulf Shores, twenty-one carat diamond ring and a three million two hundred twenty-five thousand dollar airplane. 

          Ladies and gentlemen, you are the sole judges of the facts.  We are going to take you inside that private house that Richard Scrushy built at HealthSouth.  And you're going to go there with conspirators, people that have pled guilty.  Fifteen people have pled guilty to this conspiracy.  You're going to see who profited from this conspiracy. 

          You're going to hear what Richard Scrushy heard.  You're going to hear what Richard Scrushy said.  You're going to see what Richard Scrushy saw.  And you're going to see that through the evidence. 

          And you know what?  You're the first ones to ever see it.  Judge is right, you're going to know more than anybody else, because the public has never seen it.  And that's the point of why we're here, because we have laws.  Because when you don't show the public the truth, this is where you come, this is where you come. 

          From what you know, from what you see, you will know at the end of this case beyond a reasonable doubt, you'll have the answer to that question, knowledge.  What you're going to know is that he did know.  And we're going to ask you to return a verdict of guilty on all forty-six counts.  Thank you.

____________Defense________________________

MR. PARKMAN:  We are, Your Honor.

          THE COURT:  You may proceed. 

          MR. PARKMAN:  Boy, after listening to all that from the government, it doesn't sound like we stand much of a chance, does it?  You know, except for something that my grandmamma used to tell me a long time ago that fits into an opening statement and what a trial is all about.  She used to tell me, she used to look at me and say, you know what, grandson, no matter how thin you make the pancake, it still has two sides to it. 

          And you know what, that is exactly what an opening statement is all about.  You have heard one side.  And that is exactly what a trial is all about, because you get to hear two sides. 

          So, now from the defense and words from probably one of the greatest commentators in the world, "now the rest of the story."

          You know, we all know now by listening to Ms.  Martin and her telling us about this case, this is not going to be just a good old fashion murder case, is it?  No, nope, no forensics, no, we are not going to have any blood, not going to find any gun, not going to be any DNA, no CSI Miami.  You know what it is going to be like?  It is going to be like, in a way, finding a body. 

          And in that we have got to find out through the course of this trial whether Richard Scrushy is the one that directed or pulled the trigger, whether he is the one that directed or drove the get away car and whether he is the one that directed or disposed of the gun. 

          You know, in this case, they tell you that this case is made up of forty-six counts.  They showed you up on their board that it involved conspiracy, that it involved mail fraud, it involved wire fraud, it involved money laundering, it involved perjury, it involved obstruction of justice.  But you know what, we want to try to make this case as simple as we can for you. 

          So I am going to tell you right now, it's not going to matter, it's not going to matter who licked the stamp.  It's not going to matter who faxed the letter. It's not going to matter who put the envelope in the mail, because if the evidence in this case shows that he (indicating), Richard Scrushy, did not know, did not commit, did not participate in the fraud, then the rest of all of these charges go with it, not guilty also. 

          Fraud, well, it's really simple.  All it is is deciding whether or not Richard Scrushy had actual knowledge of what was going on in the fraud, whether he intended for the fraud to continue, whether he knowingly participated in the fraud with others. 

          You know, in deciding where to go from here, what do we want to look at right now?  I would like to talk about these others for just a minute.  What I would like to do is show you, if I can, the others. 

          In this corporation, you are going to hear that there was this group of people, they called themselves "the family". 

          Oh, this was no ordinary family.  Oh, no.  This was a family that operated as a unit, as an entity in their own rite.  Oh, you couldn't get in this family.  Not by blood or not through marriage.  Oh, no.  This family was by invitation only. 

          Before I go any further, I want to state this, please in no way take and apply the actions of these fifteen members of this family and apply it to the other fifty thousand people, good people, that worked at HealthSouth Corporation and each day did the right thing to make HealthSouth a great corporation. 

          So how did this family get together?  How did they combine together, out of all fifty thousand people, how did they group together. Real simple. 

          You have heard about Aaron Beam, former CFO, he started with the company, he worked there, and he hired two people.  He hired two people.  These two people have branches just like a family tree.  We have got a maternal side, we have a paternal side.  So let's look at the mama side.  Here it is right here (indicating). 

          He hired Bill Owens.  How did he know Bill Owens?  Simple.  Bill Owens worked for one of the largest accounting firms in the country, in the world, Ernst & Young.  He met Aaron Beam when Bill Owens was working at Ernst & Young, Ernst & Young who did the auditing for who?  HealthSouth.  Aaron Beam liked Bill Owens.  So he hired him and put him in in 984. 

          All right.  How do we go from there?  Real simple.  Bill Owens then decides that he wants to have people that he likes working for him.  So who does he go to first?  We all know, Richard Botts.  Richard Botts came to work in 1988.  Why did he come there?  Because he was a life long friend, a fraternity brother at Troy State University in Troy, Alabama, of guess who?  You got it, Bill Owens. 

          How about Ken Livesay?  Real simple.  He came to work in the eighties also.  How did he know Bill Owens?  How did Bill know to get him?  Because he worked at E&Y. 

          Weston Smith, 1984, HealthSouth.  How did Bill Owens know to get him?  Real simple, worked at E&Y. 

          Also, listen to this, not only did he work at E&Y, he was friends of Owens during the time and also Bill Owens is the godfather of his children. 

          Are you starting to see the connection now?  

          We go over here to Emery Harris.  This is kind of a loner in the business.  Emery was there in 1992.  He came in, got to know Bill Owens, got to be friends, he, too, was an accountant just like Weston, Ken, and Richard, and Bill. 

          From there, he then worked on getting people, as you heard Ms.  Martin say, under them to do all the dirty work that this group wanted done. 

          Who did they go to?  Watch this.  They go to a lady by the name of Kay Morgan.  Came to work in 1987 at HealthSouth.  No college degree.  No knowledge of accounting whatsoever. This is going to be important in a minute. 

          Virginia Valentine, 1995, she had just gotten out of school in accounting and this was her very first job. 

          Angela Ayers, 1994 with HealthSouth, computer science degree.  No accounting, no CPA like the others. 

          Cathy Edwards, 1993, she had an education degree. 

          Do you remember I said let's take a look and see why this is important?  It's important because this group is the group that did the dirty work.  These are the people that they got, these are the people that they got to start putting in entries.  These people up here.  And they got these people to start doing it because they didn't know any better. They didn't know what they were doing.  They were just told, start filling in entries. 

          And I am going tell you right now, we are going to show you that there is no reason in the world why Angela Ayers, Virginia Valentine, and Kay Morgan should have ever been charged or convicted in this case.  Because they were used, they were used as pawns and they didn't know what was going on.

With that in mind, what I would like to do is end at this side of the family and talking about Cathy Edwards just a minute. 

          I am not going to group her with these three right now because during the trial I am going to show you something.  I am going to show you something that took place later on that is going to involve, and I want you to remember this, her and Mr. Harris.  (Indicating). 

          Now, on the other side of the coin, we have over here, we have Mike Martin. 

          Now Mike got into this, as we talked about, through Mr. Beam, he met Mr. Beam because he was working at AmSouth Bank and they became friends and he liked Mike Martin. 

          So what he did is he got Mike Martin to come to work in 1989 at HealthSouth Corporation. 

          Now, he doesn't have a CPA degree like these do here or an accounting degree (indicating), what he has is a finance degree and a master's of business administration. 

          From there, Mike Martin then hired Tadd McVay.  Where did he pick him up from?  Just like we saw over here with Mr. Owens picking up his buddies from E&Y, we are going to find out that Mike Martin goes right back to AmSouth to his buddy, to a friend of his, and gets Tadd McVay to come to work there. 

          From there, Jason Brown was working at the time over here with Emery Harris, moved over here to help them with this problem.  And then we come to Catherine Fowler, and again, she has got an MBA, guess where she came from, AmSouth Bank.  There is your family. 

          These are all members of the group that in this case we are going to show you developed, devised, and did this fraud. 

          Why did they do it?  Why did they get into a fraud?  It's not going to be difficult. 

          There are several reasons.  You know, this started off in an area of what we are going to hear is aggressive accounting.  And aggressive accounting, I kind of like to think of it as permissible speed.  You get out on 65, when you are moving on 65, and you get out on 65 and, you know, the police kind of let you go five miles over the speed limit.  They don't arrest you for that. 

          That is permissible accounting.  Everybody knows it.  Everybody did it.  The street does it, Wall Street, SEC allows it, it's nothing illegal about it.  And this group right here was involved in permissible accounting. 

          Well, the company grew.  Got bigger. As it got bigger, they had needs.  They had ideas, they had dreams, they had to grow with it.  All it took was one step over the line.  One step over into the fraud. 

          And with that in mind, what they did then is simply they did the things that doctored the books, as we have heard, in order to increase earnings, but they did it not for Richard Scrushy, they did it for themselves.  They had ideas of their own that they had to have.  They needed the power. They needed larger raises and more money that they got when income started going up and the books started looking better.

          They had to impress the others to show them that they could stay in and also climb the corporate ladder, which they did. 

          And they, as a group, were in charge of what we know as obtaining acquisitions.  Real simple.  This group was in charge of going out and buying other companies.  And when you go out and buy other companies, you want to make sure they are profitable, so that when you bring them into the fold, it increases your profitability. 

          The problem was is this group who did the purchasing of other acquisitions, other businesses, they didn't do it right and it turned out to be bad. 

          So to hide that, to hide their failure, to hide the fact that they were going to be demoted or fired, they used bad acquisitions to hide this fraud they were committing so no one would ever know. 

          You know something, the question ought to come, how were these people able, if this is the group, as I say, how were they able to keep it away from everybody else?  How could they hide it?  

          Well, you know what, in every corporation, you know, there is the top dog.  There is the top person.  The top of the food chain.  You know who the one is in this case and in every corporation case, it's not Richard Scrushy, it's the Board of Directors.  They are the top.  They are the ones that people answer to.  Even Richard Scrushy answers to the Board of Directors.  They say he is the chairman.  Great.  Do you know he doesn't even get a vote unless there is a tie?  

          The key to it is is that the Board of Directors control the corporation.  And how do they do it?  

          First of all, you are going to find that the Board of Directors with HealthSouth, it's no ordinary board.  These are going to be the smartest, the brightest men and women in the country that are set apart to run HealthSouth and to make sure it's done right.  These are not going to be a bunch of dummies they put in.  You are going to find some of them on the Board of Directors are going to be Harvard graduates, MBA's, they are to observe and make sure things are happening. 

          What else goes on in a corporation?  Well, through Richard Scrushy's leadership, they developed what was known as a check and balance system in the corporation.  And it's done in every corporation.  And the checks and balances are there to prevent people like this from trying to do the fraud. 

          So, first of all, what you have is you have two different committees that are supposed to take care of these problems:  The compliance committee and the audit committee.   

          I want to start with the audit committee just a minute.  Who are they?  Group of people, excluding the CEO, it's a group of people who are known in the law as the gate keepers, the gate keepers for the shareholders, the watch dogs for the shareholders. 

          They are there to take a look at the enter goings of the corporation and make sure things are going correctly and make sure there is not going to be any fraud. 

          They are there to audit the books and the records and to go back over what has been done. 

          Now, important about this, as you remember I told you, is a board member sits as the head of this committee.  George Strong.  Board member. Graduated from Yale University, graduated in accounting.  You are going to see that he ran the audit committee.  There were even two other board members on that committee and then this started exactly in '89.  This has been going on, not at the end, but since '89 when HealthSouth went public and went to the New York Stock Exchange. 

          What is interesting about this is, is that when they meet and they have meetings, it consists of the internal auditors, we are going to get to that in a minute, listen to this, it consists of Bill Owens coming, the CFO, during the time he was, the controller, E&Y people, and then the compliance people. 

          Now, listen.  These people came (indicating) to the audit committee meetings.  These people reported to the audit committee meetings what they found, what they didn't find, how books were doing, what they were being told.  This was a complete separate committee of the board. 

          Who did they answer to?  Not the CEO.  They answered directly to the Board of Directors.  They were responsible right here (indicating) for the internal and external audits of the company. 

          What do we mean by that?  Listen to this.  HealthSouth had employed Ernst & Young, one of the largest accounting firms, like I mentioned to you, to audit their books every year. They bring in a team of people, not just one, a team of people and they go through and they look at everything, they dissect everything, they try the best that they can, they are bright people, they are all accountants, they all graduated from great places and they come in and they try to figure out what is going on and how it's working and make sure it's done right. 

          That is not enough.  Oh, no.  We then have the internal audit group made up of internal people that go behind and go with E&Y, the external people, to check and make sure that E&Y is doing it right and to make sure that they are there to give the answers that they need. 

          So when E&Y needs an answer, who do they go to, they can go to the internal audit committee, they can go to Bill Owens, or any of the CFOs to get their answers. 

          On top of that, the audit committee and E&Y, both of them, had to approve, listen to this, folks, had to approve what you heard from her (indicating) all the press releases, all the 10-Qs and 10-Ks.  Everything that went out that they say Richard Scrushy said, guess who approved it?  (Indicating) and the Board of Directors. 

          Finally, late in 2000, 1999, somewhere around there, Richard Scrushy came up with an idea.  He wanted to add another audit on top of it. 

          So what he did is he went to E&Y, Ernst & Young and said, listen, why don't we do a pristine audit.  I want every facility that we have in the United States, somebody from E&Y, the closest location, to go to the building and I want you to look for several things.  I want you to look to see how the facility is kept.  I want you to see if the people are nice so that patients can enjoy going there.  I want you to see if it's clean.  I want you to take a look at how they are handling the cash.  Take a look at the furniture and everything. 

          I am going to tell you something right now, the evidence in this case is going to show you that this pristine audit stopped the family from doing further damage to this corporation.  Stopped them in their tracks. 

          On top of this, with regard to this group, we then have the compliance committee.  This is made up of a board member. This started in '97. 

          Now, he was on the committee, unlike he was at the audit committee.  The only time he could go to the audit committee was when, when he was invited as a guest.  But he started until there was a rule change made by the Stock Exchange in '99 at which time Richard Scrushy couldn't even go to this committee meeting and take part in it.  There were five or eight people at HealthSouth that worked on compliance.  Who did they report to?  The Board of Directors. 

          Who helped them with this?  Not only the board members, but also we have what is known as the corporate counsel, an attorney, that has a staff who ran it, a guy named Bill Horton.  And he ran the staff.  He reported to the Board of Directors, too.  And he was the one that was in charge of putting together all these 10-K Q's and these 10-Ks and these financial statements that you have heard. 

          You are going to hear in this case when they talk about Richard Scrushy signing these documents, you know what you are going to hear, you are going to hear that when Richard Scrushy signed the document, what they did was, Bill Horton would bring up the last page, the signature page to him and a lot of times when he would come out of his office door, he would say sign it, he would sign his name, and ask him, is everything all right, Bill, he would say yes, bam, gone.  Just that quick. 

          What is important about this, though, with the compliance committee, is Richard Scrushy came up with an idea in the corporation that we are going to have a 1-800 hot line.  Fraud hot line. 

          And he would tell people, and you are going to hear it time and time again, week in and week out, he said, hold up your card, because every employee, every fifty thousand plus employee had a card that had a number on it that they had to carry with them, just like your driver's license when you get in the car, and he would go to meetings and he would go to agenda and he would ask them, have you got your card, have you got your card, and weekly he would tell them, we are not going to commit fraud in this corporation, if you know anything about fraud going on, you call the 1-800 fraud hot line, don't have to give your name, if you don't want to.  We want to know if it's happening.  Weekly he told these people. 

          And the unfortunate thing about it is, nobody called.  They weren't calling him.  They were calling the compliance committee.  Who do they report to?  The Board of Directors. 

          We talked a little bit about the internal audit department.  We have talked about the external auditors.  We even have a corporate governance committee that sits down and takes place and controls all the other committees and helps establish who is going to be on them and also talks about personnel and hiring personnel. 

          We also have a compensation committee.  A separate committee that reports to the Board of Directors.  This committee is in charge of recommending compensation for everyone, including the CEO. 

          They are also in charge of recommending what stock options should be done.  And you know what you are going to hear, you are going to hear this committee was so good, that they were so thorough, that they would even go out and bring in thesis and papers written in the United States about what other corporate executives were making and what other corporate executives bonuses and stock options were doing to see if they were in line.  And just like the others, they reported to the Board of Directors. 

          So you know something, how then, how could the family, how could they get it by all these people?  It wasn't as difficult as you think.  You know why?  Because this group right here (indicating), they controlled the numbers.  They controlled the access to all the committees.  They were the ones that went to the committees with their reports, not the CEO.  They were the ones that sat in on all the committees and controlled them and told them what the numbers were.  They were the ones that took the numbers and would tell Mr. Scrushy what the numbers were right before a meeting or right before he was on a telecast. 

          They were the ones that had the connections and the contacts with E&Y, Ernst & Young.  Evidence in this case is going to show you clearly, a Ernst & Young employee will tell you, I rarely even met with him, I don't even know him that well, I rarely even saw him.  Because their contact was right here (indicating).  Right here (indicating). 

          Now that you have got the control, now that you have got it, the way you want it, now that you are putting the input in to where you need it to go, so as to cover all this up, why do you do it?  

          Well, we talked about the money and bonuses.  Oh, they all made a lot of money.  Not just thirty thousand dollars down here, folks, wait until you hear what these people ended up making through the recommendations of these people (indicating) and the compensation committee agreed with it.  Not Richard Scrushy.  The Board of Directors agreed with it.  Not Richard Scrushy. 

          When you take a look at this group, we are going to find out a lot about them and how they operated together. You are right.  We are going to go inside, but we are not going to go inside HealthSouth to do it, we are going inside the family to do it. 

          In this family what you are going to find out is Bill Owens, for example, listen to this, on the Friday that she mentioned to you, on March 15th, Friday before the Monday, guess what Bill Owens was doing?  Bill Owens was down at his attorney's office changing the deeds on all of his property from his name over to his wife's name, before all this came falling down, changing property that he had and condos up in South Carolina, over at the lake, down in Mobile, big house here, changed them all over on the Friday that he was working with the government, changed them over and put his wife's name on it so nobody could get their hands on it.  Nobody.  So it would be bullet proof. 

          On top of that, we are going to find out that he had a loan that he owed, back in the summer of 2002, he owed 1.2 million dollars of an executive loan.  He didn't pay that loan.  He gave a check that was worthless, and he gave that check to Kay Morgan and told her "I want you to write off my loan.  This check is no good.  It isn't going to go through.  Write off my loan so I don't have to pay it.  Take this check and hide the amount into another deposit to make it look like I paid it back.  And on top of that, take the check and stick it over here where nobody can find it again." And she did it, because they are the family.  And you know what?  He not only benefitted from the 1.2 million dollar loan he didn't pay back, but he also had the stock that he sold and kept the money from. 

          This guy, Bill Owens, on top of that, why him?  Why orchestrating this fraud?  Because you are going to find out during the course of this trial he needed the money, he needed it more than anybody else.  Because he either didn't pay his taxes or didn't file the income tax return.  And now, every year that goes by, he's got to have more and more and more because his spending is out of control and he needs the money to pay the government. 

          How about the rest of the family?  Richard Botts, Ken Livesay, Weston Smith, Emery Harris.  Emery, Weston and Ken -- guess what?  They all did the same thing with their property that Bill Owens did.  They all transferred it over into someone else's name or a trust so that nobody could get to it and they could keep all their money and all their property and all their stock. 

          Even over here, Mike Martin, he transferred property, but you know what else he did?  There is a lawsuit that you have heard about that involves stockholders and their money.  Mike Martin runs down to the plaintiff's lawyers --

          MS.  MARTIN:  Object, Your Honor.

          THE COURT:  Overruled.  We have already discussed it. 

          MR. PARKMAN:  Thank you, Your Honor.

          Went to the plaintiff's lawyers and reached a deal with them.  Said "I will testify against Richard Scrushy if you will let me out of this lawsuit and won't come after my money." And they did it.   

          Tadd McVay, oh, he transferred property, too, just like all the others.  Put it in a trust so nobody could get ahold of it.  This group right here worked together as a unit.  It's even going to get so bad when all of this fell apart that there is going to be a memo that you are going to see, that Bill Owens wrote, in which he went and got lawyers for all the family members to represent them in the criminal cases.  And on top of that, got HealthSouth to pay for it, to pay for the lawyers.  Oh, it's a group.  It's a real group. 

          Now, you know, we haven't said a whole lot here about Richard Scrushy.  We have talked about the family.  We have talked about how they got into it and why.  We talked about what they did.  So, let's talk about Richard Scrushy just a minute.  Who is he?  Where did he come from?  Real simple.  Selma, Alabama, grew up.  Humble beginnings, very humble beginnings, you are going to see.  Grew up in Selma, born and raised.  Came up here to Birmingham.  Got a degree in respiratory therapy from UAB. 

          From there, got a job with a company out in Houston, Texas, known as Lifemark Rehabilitation Company, just like he started here.  That is where he learned it from.  Grew up out there to vice-president.  A time came in the '80s that Lifemark was going to merge with somebody else, and Mr. Scrushy and the other people there were going to lose their jobs.  So Richard Scrushy came up with an idea, an idea that he had. 

          Now, I want to tell you this right now.  You know, the government tells you today that this case is about numbers, about fraud, about the greed of Richard Scrushy.  This case is about Richard Scrushy and people.  That is what it's about.  It's not only about the good people that worked at HealthSouth, but also, and more importantly, the people that he wanted to help.  The people that he wanted to work with and try to help in the rehabilitation process.  Oh, yeah.  He wanted clean facilities because he wanted to be proud of it.  He wanted people to come in and enjoy what they had.  Enjoy the services that were provided for them.  Oh, yeah.  No, it's about people. 

          And through this, he got four people to come with him to Birmingham, Alabama, in 1983.  He started what was originally going to be HealthSouth Corporation, called it Amcare.  You know where he started it, folks?  In a one-room, little office.  Had a little folding table in the middle, one telephone with a wall -- can you imagine this?  One telephone sitting on the table with that line, not these nice things that you see, with the line running from the wall all the way up through the table here.  Four little chairs.  Uh-oh -- Four?  We had five people that started it. 

          Did you know in the beginning that because they only had four chairs, one of the founding members of HealthSouth had to stay at home and do the work there because he couldn't sit down?  They didn't have enough chairs to do it. 

          At times, Richard Scrushy reached in his own pocket and helped pay the salaries that he had promised these four other people that would come with him, come with him with a dream that he had, a dream of building something great.  Not just for himself, huh-uh, but for others.  And they came.  And from there, in 1984, they changed the name to HealthSouth Corporation. 

          What happened to it?  Well, what happened is this corporation started with five employees and, in 1984, they went out and bought a rehabilitation center over in Little Rock, Arkansas, bought one down here in Birmingham, started growing, ending up buying another one up there in Baltimore, and then it really took off. 

          And what we have now, we are starting to see it grow, 800 employees, ,000 employees, all the way down to the year of 2000 when it was 53,000 employees and held fast thereafter. They had over ,000 facilities in the United States.  They covered 50 states.  Each dot right here represents a separate facility that was purchased and owned by HealthSouth Corporation. 

          Not only did they do that, listen to this, HealthSouth grew so big that they entered into what they call joint ventures, they owned part of or half of other institutions, great institutions, in this country. 

          Look at this.  Vanderbilt University Medical Center, joint venture with HealthSouth.  Look at them.  Methodist HealthSouth out here, Missou, all the way up to the University of Virginia.  They also entered into what we call employee deals, employee contracts.  And they had the employers agree, because HealthSouth was so good at what they did, not numbers, but taking care of people, that they agreed to send their people to HealthSouth.  Look who they had a group with.  Delta Airline, Holiday Inn, Fed Ex, Marriott, Ford Motor Company.  Look over here.  Honeywell, GE.  The top corporations in the world recognized that HealthSouth Corporation was the best providers of healthcare services for their employees. 

          On top of that, did it stop there?  No.  Richard Scrushy wanted to build something even better. He wanted then to go into the sports area and make sure that people that were involved in sports injuries and accidents could come to HealthSouth because he believed that it was the best. 

          And what did he do?  He went out, the company went out, and what did they end up with?  Things like the Marlins, the Jaguars, the NFL in total.  Look over here.  The LA Lakers, the Wings, the PGA.  All of them had agreement with HealthSouth that if anybody needed help, they sent them to HealthSouth Corporation, that started in a one room, one table, one phone, four chairs building.  Because he had the belief. 

          You know what?  Healthcare changed.  But regardless of that, this company that you see as HealthSouth, it's a real company.  It's the real deal.  And while healthcare may have changed through the years, it never changed Richard Scrushy.  Because he kept on, he kept on with the idea of being a motivator, a thinker, an innovator and a salesman.  These companies were built because good people worked there and because it was a great company, because it's a great company today, and it will be a great company tomorrow. 

          Now, you know, what separates this -- what separates this, Richard Scrushy, from the family?  I will tell you what; a lot of things.  We now know that he got his degree in respiratory therapy.  He can tell you all about it.  Everything there is to know about respiratory therapy, he can tell you.  He didn't have a CPA accounting degree or an MBA degree in business administration.  No, sir, he did not.  Because you know why he didn't?  Because that wasn't his field.  That wasn't his expertise.   

          So if it's not your expertise, what do you do to fill in the gaps?  It's real simple, isn't it?  You go out and you hire the people that have got the expertise, that you think have got the knowledge and that you think are trustworthy people.  Where else would you go but to E&Y, one of the largest accounting firms, and AmSouth Bank, to get people that you think you could trust?  If they hired them, why shouldn't HealthSouth?  

          You know what else is different in this case?  Guess who isn't a member of the family?  Guess who didn't go to a single family meeting.  Richard Scrushy.  In this case, what you are going to find out is, is there are a lot of difference between Richard Scrushy and them.  You are going to find out that he paid his taxes, he paid his notes.  He didn't transfer his property. 

          When they talk about money laundering and put all this up here on the board and all his cars, guess where they all are?  Sitting in his garage, sitting there in his name without transferring a single thing over to them.  Because he is not this (indicating). 

          You are going to hear tape recordings that were made secretly on the 7th and 18th of March of 2003.  You know what is on those tapes?  I can't go into it, because it's hours.  But let me tell you what I want you to look for. Look for this.  Bill Owens came into Richard Scrushy, secretly wired, Richard Scrushy doesn't know about it.  And he says to him, "My wife wants me to quit." And Richard Scrushy says, "Quit what? "

          Throughout the tapes and the conversations, what you are going to hear is, "Bill, I don't know how you got into this, whatever it is, but you engineered your way in it -- you engineered your way into this, you engineer your way out of it." "Bill, I am trying to figure out how you did whatever you are saying you did." "Bill, is there anything wrong with the 0-Qs, 10-Ks, are you telling me we have got a problem? " "Bill, we are not going to put anything on the income statement or balance sheet that is not correct, are we? " And Bill Owens' answer, even though he was committing the fraud, said "No, we're not."

          There is a smoking gun.  There is a smoking gun in this case, just like in a murder case, and it's going to come in these tapes.  And what I want you to do is I want you to listen, I am not going to go through it, I don't have time anymore, but I want to you listen for something.  I want you to listen for a part in these tapes where Tadd McVay and Bill Owens were talking after Bill Owens had gone to talk to Richard on the tape, secretly.  Listen to what is being said. 

          The gist of it is going to be this:  That these people right here (indicating) lied to Richard Scrushy.  They didn't want to answer the truthful questions to him about the money and about what was going on.  This is not going to be a dumb defense.  This is not going to be a defense that is built on someone like Richard Scrushy being stupid or oblivious to what's been done, no.  This is going to be a defense based on a lied-to defense. 

          As we go through this case, finally, I want you to do something for me.  I want you to look at the evidence and help me with it, help me with it.  Look at the evidence. 

          Look at what isn't in evidence, for example.  You are going to find there is not one single memo.  There is not one single document.  There's not one note, email, nothing with Richard Scrushy's fingerprint on it that indicates he was involved in the fraud.  And I am going to show you a lot of it, as it relates to these people right here (indicating). 

          So the question that I want you to ask as we go through this, why would Richard Scrushy take any risk that would kill his child, kill his baby, to take away one of the great loves of his life, he wouldn't.  He wouldn't then, and he wouldn't now.  Thank you.

          THE COURT:  Thank you.  Mr. Leach. 

          MR. LEACH:  May it please the Court, counsel for the government, Scrushy family, members of the defense and those observing.  Ladies and gentlemen, today we begin a long walk through what will be the government's evidence and our defense in the government's case against Richard Scrushy.  Every long march has to start with a first step, and here we are. 

          First, let me introduce to you the members of the defense team.  Mr. Parkman didn't even introduce himself.  That is Jim Parkman, our lead counsel on the case. 

          You have Martin Adams; next to him, Donald Watkins; of course, Mr. Scrushy; then Lewis Gillis; and next to him is Leonard Bowen, who is an assistant to Mr. Parkman and will help us throughout this case. 

          Now, as you may know, I am Art Leach, and I also represent Richard Scrushy.  And as I prepared my portion of this opening statement, I tried to think of a situation that would help you understand our defense in this case, a defense that acknowledges, yet denies the anticipated testimony of those who have pled guilty. 

          So, for comparison, I thought back to the first time I took a pounding from a bully in the school yard.  I came home crying and upset.  It was such a shock to me when he hit me and knocked me down on the ground. 

          I came home, and I was crying to my dad.  My dad was a World War II United States Marine, and you can imagine the reception that I got.  He sat me down, and he gave me some sage advice.  He said to me, son, until you go out there and until you stand up and fight that bully, you are going to continue to have trouble with that bully. 

          So I prepared myself mentally, and I got myself ready for the day, and I had that fight with that bully.  And let me tell you, I took some licks, but I was ready for him that time, and I gave that bully some licks.  And we had it out in that school yard, and that bully never bothered me again. 

          We know what evidence is coming in this courtroom.  Mr. Parkman's outlined it for you.  Ms.  Martin has taken time to outline it for you.  We will take our licks in this courtroom, but I am here to tell you about the licks we intend to deliver on the government's case in this courtroom. 

          Bottom line, we expect you will hear evidence from those who have pled guilty and perhaps others, testimony to the extent that Richard Scrushy was knowledgeable of the fraud in this case.  We expect that. 

          But like the street yard fight, and like the recognition that we know we are going to take those licks, there is a whole lot of other evidence that you have to consider in this case. 

          We expect that evidence that you will hear from those pleaders is but a very, very small portion of what's going to come out in this courtroom.  I am here to tell you and to prepare you for the fact that we are here to fight for Richard Scrushy. 

          John Adams, the second President of the United States, once said something to the effect that there is no way better to get to the truth than through argument.  As I said, this fight will occur through a long-running argument, which you will witness in this courtroom. 

          The rules of evidence are such that we submit objections.  Often you will hear those objections.  You will hear the government's response to those objections, and you will hear the Court's ruling right here in your presence.  That's just the way it's done.  That is the way our system of government, that's the way the courts, the Federal Rules of Evidence are constructed. 

          Sometimes these arguments will take place at the bench.  Sometimes they will take place while you are on recess.  All these things are very common. 

          The lawyers for the government and the lawyers for the defense are all human beings.  We on the defense are very passionate in our defense of Richard Scrushy.  We believe in Richard Scrushy. 

          MR. SMITH:  I'm going to object this.  This is argument. 

          THE COURT:  Sustained. 

          MR. LEACH:  We make no apology for our efforts in this regard.  If you were on trial, you would expect nothing less. 

          MR. SMITH:  Objection, Your Honor. The argument is not about the evidence, what they intend to prove. 

          THE COURT:  That's enough.  Continue, Mr. Leach. 

          MR. LEACH:  We expect the evidence will show that the government cannot and will not prove Richard Scrushy guilty beyond a reasonable doubt.  That is what is at issue in this case. 

          Therefore, do not be surprised when we attack the government's evidence.  Do not be surprised when we object to the admission of evidence.  Do not be surprised when we attack the government's witnesses in this case.  Mr. Scrushy is here on trial for his life. 

          MR. SMITH:  Objection, Your Honor.

          THE COURT:  Sustained.  Mr. Leach. 

          MR. LEACH:  Yes, ma'am.  Let me take a moment and explain what we expect the evidence in this case to show.  We expect the evidence to be, from the government, that they are have a group of former senior officers who will testify that Richard Scrushy was part of a conspiracy to violate the law.  You have heard that repeatedly today. 

          There will be proof of a fraud.  You're going to hear that.  There will be proof of a conspiracy.  You're going to hear that.  Where you need to focus your attention is upon the evidence that supports or fails to support the government's indictment that Richard

          130 Scrushy had any part in that conspiracy, had any part in any crime associated with that conspiracy. 

          That is to say, if he is not guilty of the fraud, he's not guilty of money laundering, he's not guilty of securities fraud, he hadn't lied to anybody, he hasn't encouraged anyone to lie. 

          Be mindful when you look at all these many charges that we are talking about in this case, it all depends on Richard Scrushy's knowledge of this fraud.  And when you find that he was not knowledgeable of that fraud, you have met the burden of the law, and he is not guilty of everything. 

          Now, we expect there will be an absence of evidence that corroborates what the real conspirators are going to tell you.  Corroborating evidence is evidence that confirms what the convicted participants in the fraud will tell you. 

          Let's talk about that for a second.  Such evidence supports the testimony by showing you evidence from the time of the crime:  A letter from the time of the crime, an email from the time of the crime, a fax, a handwritten note. 

          When investigators and prosecuting lawyers set out to solve a who-done-it, in this case, did Richard Scrushy do it, they look for corroborating evidence, evidence that supports what the convicted conspirators are going to tell you. 

          We expect that you will find that there is a stark absence of corroborating evidence in this case.  We expect there will be an absence of letters, faxes, emails made at the time of the crime.  We expect you will find the absence of such corroborating evidence will be a basis for your reasonable doubt in this case. 

          MR. SMITH:  Objection, argument, in this case, Your Honor.

          MR. LEACH:  That is perfectly legitimate. 

          THE COURT:  Overruled. 

          MR. LEACH:  Additionally, you

          132 will hear about the tapes from Bill Owens, and you need to think about those tapes carefully.  We expect you will find that tapes made once a person has confessed their guilt can be controlled by the person who is doing the taping.  They are controlling the conversation. 

          Further, it can be controlled by the instructions given by investigators to that person when he walks in to have that conversation. 

          We expect you will find that the very tapes that the government submits to you as evidence of this crime will form the very basis for your determination that there is a reasonable doubt in this case. 

          We expect you will see that there was a flow of information, emails and documents between the conspirators in this fraud, but that Richard Scrushy was not included in that flow of information. 

          We expect you will find that the conspirators pointed the finger at Richard Scrushy, because that is where the investigators wanted the investigation to go.

          We expect to submit evidence to you that Emery Harris, a critical witness in this case, was told by the FBI that he would not be charged at all if he gave up Richard Scrushy. 

          We expect you will find that there was a rush to judgment, and that they proceeded to strip Mr. Scrushy of his assets and go forward with the prosecution before any meaningful review of the documents that were seized at HealthSouth on March 18th 2003. 

          There are a series of key questions that we are going to try to raise, and evidence that will be submitted in support of those questions.  Where were the outside auditors?  We expect to produce evidence that E&Y was deceived by the co-conspirators.  And you will see that there will be no documents to support the proposition that Richard Scrushy participated in that. 

          Did Richard Scrushy have a right to rely on E&Y?  Sure he did.  So did the

          134 Board of Directors, so did the audit committee.  Where were the inside auditors?  We expect you will see that the conspirators deceived them just as well. 

          There will be no evidence, no independent evidence, no corroboration showing Richard Scrushy was part of that deception. 

          Where was the audit committee?  We expect the evidence to show that these people as well were deceived. 

          Why was the fraud so successful?  Bill Owens and several other co-conspirators came from E&Y.  They knew how the system worked.  That is what you are going to find.  They knew how to rig it.  They knew how to design it so that E&Y would see nothing. 

          Did Richard Scrushy undertake actions to try to show the actual financial condition of HealthSouth real time?  He did.  He tried to install a system -- we will prove it to you -- to get that information. 

          Who caused that system not to come into effect?  Bill Owens.  Why did Richard Scrushy fire and demote co-conspirators?  We expect the evidence will show that he did these things because he was not part of the conspiracy.  What co-conspirator in his right mind is going to fire the person who can get you indicted?  

          Why was Bill Owens trying to push Richard Scrushy out of HealthSouth?  We will refer to this as the coup.  We will prove that it was because Richard Scrushy was the only person who was a threat to the fraud being revealed. 

          Turning to the tapes.  Why did Bill Owens and Tadd McVay lie to Richard Scrushy right on the tape?  You are going to hear about the cash at HealthSouth.  We will show through the evidence that the cash was critical.  Was it just a slip on the recording?  Why didn't Bill Owens and Tadd McVay speak frankly to Richard Scrushy?  

          Why didn't they walk in there and say, Richard, we have been doing this fraud for years.  What are you talking about?  I don't understand you.  You will see it's cryptic.  There are no direct references. 

          And the reason why they didn't do it is because they were wired.  They had confessed.  And if Richard Scrushy had found out exactly what was going on, this house of cards would have fallen. 

          Why did the FBI come in the very day of the last taping?  Why didn't they allow that thing to run for a week, keep on taping him, be explicit, and let's see where it goes. 

          What would have happened if Richard Scrushy had shut this thing down, called for an investigation, started firing people.  Wouldn't that have been important to your resolution here today?  

          This is but a sampling of the questions that we are going the raise in this case. 

          I ask that you keep an open mind about the evidence in this case.  If you will keep an open mind, I expect you will

 find that when the conspirators made the tapes on the 17th and 18th, they were deceiving the government as well. 

          Rather than confirming the government's theory, those tapes will help you in your analysis of reasonable doubt.  Most importantly, you will see that the tapes do nothing to assist you in the job of finding Richard Scrushy was a willing participant in this criminal activity. 

          Always remember, as you listen to the evidence and arguments unfolding here before you, that Richard Scrushy is presumed innocent, that you are to give him the benefit of the reasonable doubt, and that you are to assume, as he sits here today, that he is innocent. 

          Always remember that the indictment has no special meaning in this courtroom.  It has no weight under the law.  An indictment is simply a ticket to the dance, and we're here, and we're ready to dance.  Remember that the government must prove its case beyond a reasonable doubt and to a moral certainty.

          Also, we ask that you do not get hung up on labels of the participants in the trial.  The fact that someone is an Assistant United States Attorney is a great honor. I held that title in Atlanta --

          MR. SMITH:  Objection, Your Honor. This is argumentative. 

          THE COURT:  It's the same thing we had from the government, Mr. Smith.  Thank you.  You may proceed. 

          MR. LEACH:  I held that title in Savannah, in Atlanta, Georgia, and I was an Assistant District Attorney for a total of twenty-two years of my legal career.

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