Most people who are following this case and are working on theories or versions or revisions of the truth are having trouble seeing clearly because they are too close to the flame, on either side. Every lawyer knows that the most reliable witness is not always the one who was there, not always the one who had the best view.

Last week ended with Leif Murphy’s powerful testimony, which brought the fraud right into Richard Scrushy’s office, and this week began with a second employee who found fraud, but did not have the kind of position where she could bring it to the CEO. So Diana Henze used the existing corporate structure for reporting problems. HealthSouth had a hotline to report problems. We heard the director of the compliance office, and she said that 80% of the calls they got on the hotline were personnel problems, of the kind where someone in Topeka thinks their boss is playing favorites, or someone in Largo doesn’t like their employee review. On more serious matters, they might have got a report that some of the petty cash was gone, or perhaps one of the accountants was a little lose with their figures. So when Diana Henze walked into the compliance office—she didn’t need the hotline, it was practically next to her office—it was something they weren’t used to. It became another chapter in a massive fraud. In order to orchestrate a massive fraud there must be a massive cover-up. A lot of people are watching a public company: Several government agencies, stockholders, thousands of employees, hundreds of executives.

We heard from the director of the compliance office and from the chief internal auditor, only to find out more about what we already knew. If the company had adequate systems for the reviewing and putting checks and balances of the way they did business, there could not have been this massive fraud. When the director of compliance said she did not have access to the kind of information she would need to investigate this claim, or when the internal auditor also said that she did not have access to the general ledger, we already knew that. We knew that if nothing else, it was a company out of control.

 

And there were two and a half days of testimony from a co-conspirator. It was a journey into the world of people who rob banks and loot institutions with a calculator. Ken Livesay’s deliberate, precise, calculated answers were the standards of the week. When he gave a figure as an answer to a question, and was asked how he got that figure, Livesay was perfectly willing to stand at the flipchart, and punching numbers into his calculator, write out the numbers he used to give the answer. And in case we have forgotten what this is all about, he later gave a chilling smirk when he described how him and his co-conspirators managed to shift some money and hide $400 million of fraud embedded in an acquisition. The fact that the conspirators were able to hide money like this leaves the ultimate amount the fraud open to question. Was $2.6 billion too low? As I wrote in the daily reports, Livesay was in and out of the conspiracy at several crucial moments, including giving Leif Murphy the documents that allowed him to figure out the fraud, having Henze run reports were she saw the fraud, and finally, ending up in Bill Owens office, on the day he was wired. He when everywhere and did everything except have the meeting with Scrushy where they talked about fraud. He didn’t do that. He was in close proximity to the Murphy and Henze documents, but never came in contact with a Richard Scrushy fraud memo. All he was able to offer up for the prosecution were some vague statements from Scrushy, and an assumption that the fraud was known all the way to the top. Being very familiar with the corporate world, I know that assumptions like this are often true, but if there comes a time when they have to be played out for a jury, the documents and tapes will end up in the jury room, but assumptions will be left behind. With a lack of much information that helped the prosecution, Livesay became an opportunity for the defense to further poke holes in the testimony of Murphy, Henze and Owens. And he was still there when the week ended. His direct examination lasted about half a day, and his cross-examination is two and a half days running.

Imbedded in the testimony was more information about a pattern and portrayal of what happened out there, and what the nature of the rise and fall of HealthSouth in the Scrushy era really was. I promised some writings about this over the weekend, but I’ve been busy talking to some sources and doing some further research. Much more is coming from me. Mike Martin, Weston Smith and Tadd McVay are on deck in the trial, and each were present during key components of the narrative.

And don’t worry, week five is over, and the truth will emerge, regardless of what the voices say or don’t say.