Great Moments in Black History: Richard Scrushy, HealthSouth, and Black Birmingham

The HealthSouth Story: Richard Scrushy, black Birmingham, and the black defense

Few moments in black history are as important – and telling -  as the story of  HealthSouth founder Richard Scrushy.

A white man born in Selma, Scrushy was once known as the ultimate villain of American capitalism – a real life manifestation of the Monopoly man. Once one the highest paid CEOs in America, Scrushy and HealthSouth would come under intense fire from the Securities and Exchange Commission (SEC) for accounting fraud in the early part of this past decade.

Money laundering, extortion, obstruction of justice, racketeering, and bribery – you name it, Scrushy as the head of HealthSouth was indicted of doing.

This story predates the collapse of 2008 – when your Bernie Madoff’s, Lehman Brothers, American International Group (AIG), and Bear Stearns captured all the headlines – and didn’t transpire in a sexy news locale like New York City.

No – the story of HealthSouth and Scrushy comes to you live from Birmingham, Alabama. And it involves a white man trying to cozy up to potential jurors from a city that was (and is) nearly 75 percent black.

You see, Scrushy understood the dynamics of Black-Run America (BRA) and he attempted to bestow black people and black churches with buckets of cash – all in the hopes of beating the SEC and the 30 indictments against him. He even paid to be a Christian talk show on a television program that caters to a black audience [Will the Real Richard Scrushy Please Step Forward, New York Times, 2-17-2005]:

The members of Guiding Light Church welcome Richard M. Scrushy, the ousted founder of the HealthSouth Corporation, with open arms each week to services, where he and his wife are among the handful of whites in a mostly African-American congregation. 

"I've seen him in services so often with members of his family," Pat Lowe, the wife of the Guiding Light pastor, said of Mr. Scrushy, who is married for a third time and has nine children. "I believe he is a man of integrity." 

Mr. Scrushy, 52, began attending Guiding Light not long before his indictment in 2003 on charges of overseeing a $2.7 billion conspiracy to defraud shareholders of HealthSouth, a chain of rehabilitation hospitals he started two decades ago. A spokesman for Mr. Scrushy said Mr. Scrushy had given money to Guiding Light, but he declined to specify how much. "He has always supported the churches he attends," the spokesman, Charlie Russell, said. 

It is not uncommon, of course, for someone in the public eye who has fallen from grace to migrate to a house of prayer. But Mr. Scrushy's new emphasis on his ties to Birmingham's large black population and his churchgoing ways have many people in this city asking, is it all part of his defense strategy? About 70 percent of Birmingham is African-American, and of the 18 jurors and alternates at his trial, 11 are African-American. 

The danger is that Mr. Scrushy's very public moves could backfire, especially considering that inside the courtroom his lawyers are following a different, and decidedly uncharitable, strategy. His legal team has been aggressively seeking to tarnish the reputations of Mr. Scrushy's former employees who are testifying against him. In fact, in late January, one lawyer, Jim Parkman, of Dothan, Ala., accused a former HealthSouth executive of being a heavy-drinking philanderer. 

In the months before the start of his trial on Jan. 25, Mr. Scrushy seems not to have missed an opportunity to portray himself as a friend of Birmingham's black community. His personal Web site describes his humble origins in Selma, Ala., "a town known as the birthplace of the civil rights movement," where he says he apprenticed with a brick mason and washed cars at a filling station. He also hired prominent black lawyers to help guide his legal strategy, including Donald Watkins, a lawyer and financier who successfully defended Birmingham's first black mayor, Richard Arrington Jr., in a government investigation into corruption allegations. 

These actions have astounded some former associates of Mr. Scrushy, who was known around Birmingham for the conspicuous display of his wealth before his problems with the law. According to a list of assets drawn up by federal prosecutors, Mr. Scrushy owns two Cessna jets; a Lamborghini Murcielago and a Rolls Royce Corniche; three Miros, two Chagalls and a Picasso; and several multimillion-dollar homes. 

"In all my visits to the executive suite at HealthSouth, I never saw a black person there, not among the executives, the doctors or the secretaries," said Paul Finebaum, a radio talk-show host and former business associate of Mr. Scrushy. "The first time I heard religion and Richard Scrushy mentioned in the same sentence was when I read about him going to Guiding Light Church. I think he must be running out of options."

Enron, Arthur Anderson, Worldcom… they have nothing on Mr. Scrushy. Nor did they dare consider playing the ‘black card’ --- the ultimate card to play in the judicial system in America. Cynthia Tucker of the Atlanta Journal Constitution summed up the Scrushy Defense in a hilarious column:

Let’s say you’re a rich white guy who — according to the feds — has cooked the books at his company to get even richer, inflating earnings to the tune of $2.7 billion. What do you do when the law comes after you? 

… Well, if you’re Richard Scrushy — founder and former CEO of Birmingham-based HealthSouth, a rehabilitation services company — you try to pass yourself off as a black man who is the victim of government persecution.

USA Today’s profile of Scrushy was even better [Former HealthSouth CEO Scrushy turns televangelist, 10-25-2004]:

When Martha Stewart was indicted, she turned to Barbara Walters for a sympathetic broadcast interview. When Ken Lay was indicted, he turned to Larry King. But former HealthSouth (HLSH) CEO Richard Scrushy, whose trial on charges stemming from a $2.7 billion accounting fraud is scheduled to begin in January, is reaching out to a higher power: Jesus. 

Since March, Scrushy and his wife, Leslie, have been hosting a half-hour talk show every weekday morning on a local independent TV station here. Although Viewpointoccasionally tackles subjects such as media bias and self-improvement, Scrushy's bread-and-butter topic is the Bible and the importance of following the word of God.  

To that end, Scrushy books a steady stream of local ministers and pastors as guests.Scrushy, 52, used to attend church services in Vestavia Hills, the affluent suburb where he lives. But last year, around the time of his indictment, he began attending the Guiding Light Church, a ministry across town that caters primarily to African-Americans. 

Early this year, Guiding Light purchased 12 months' worth of airtime for the show. Scott Campbell, general manager of WTTO Channel 21, would not disclose how much Scrushy's church paid, but he says about 5,000 Birmingham households tune in each morning. "This is a paid program, just like the Ginsu knife commercials," Campbell says. 

Critics of Scrushy's show see it as a cynical attempt to generate goodwill among potential jurors in the Birmingham area, which is about 70% African-American."I've never seen the show because I don't watch infomercials," says Doug Jones, the Birmingham attorney leading a shareholder lawsuit against Scrushy. "It's clear that it's a jury selection strategy, and I guess it will remain to be seen how effective it might be."

Never mind the doubters – Scrushy’s legal strategy of placating the black community worked: he was acquitted of all charges by a jury trial in nearly 75 percent black Birmingham.

CNN Money would profile Donald Watkins, Scrushy’s black lead-attorney, who crafted the black defense for a man whose indictments looked like a long prison sentence [THE MAN WHO SAVED RICHARD SCRUSHY, 7-25-2005]:

RICHARD SCRUSHY'S $2.7 BILLION accounting-fraud trial looked like a slam-dunk for the prosecution. All five CFOs who had ever reported to the former HealthSouth CEO copped guilty pleas and agreed to testify against him. Ten lesser company officials also pleaded guilty and agreed to testify. Yet the prosecutors threw up 36 airballs, failing to score with a Birmingham, Ala., jury on any of the three dozen counts. 

 What happened? Scrushy's lead attorney, Donald Watkins, would be glad to explain--and to continue the hoops metaphor. "They never expected a hard, full-court press throughout the trial, and that's what they got. It was unrelenting," says Watkins, who put together an unlikely defense team and unleashed it on what he calls the "overconfident" feds. Art Leach was the Designated Objector, contesting prosecutors' questions frequently and knocking them off stride. Jim Parkman was the cross-examiner whose down-home demeanor won over the jury even as he destroyed witnesses' credibility. 

 Watkins, of course, was the coach--and, it turns out, the perfect person for the role. His worldview was shaped by his youth in civil-rights-era Montgomery. Though the son of a university president, he knew the indignities of drinking from separate water fountains and the stresses of integration. Now 56, he was one of the first blacks to attend the University of Alabama law school in the 1960s. Even decades later, the emotions and fissures of that era's upheaval profoundly influence Alabama's dynamics--and, as necessary, Watkins's tactics. 

 And so he deployed a brilliant, if controversial, racial strategy in a city where blacks and whites still, according to Watkins, view certain things very differently. "Black people are more open to receiving their information in the courtroom," he says. "Whites will buy into the media hype put out by the U.S. Attorney and Justice Department for two years...." Watkins tried to maximize the number of black jurors--seven of 12 would be African American. He seemed to be speaking directly to those jurors in his closing argument, comparing the legal travails of Richard Scrushy (who--need it be noted?--is a wealthy white man) to the struggles of blacks in the 1950s and 1960s. Outside the court, the black community was wooed by Scrushy himself, who joined a black church, and preached or donated to other black congregations. Some of them sat behind the defense table at trial in what became known as his "amen corner." Critics saw that as an effort to influence jurors; Watkins asserts it was an unbidden show of support.
 

Though he would be convicted for later charges brought up against him, Scrushy beat the system the first time around. And all by playing the black defense: The Birmingham News off all papers questioned this strategy when it was first being reported in 2003 [Scrushy's charitable donations continue as trial approaches, 11-18-03]:

Scrushy and his wife recently switched churches, joining Guiding Light Church, a predominantly black congregation of 3,800 people that wants to build a new worship center, school and day-care center on 215 acres near Irondale. 

This year, the Scrushy foundation has also given money to Miles College Law School, part of the historically black university in Fairfield, and the Holy Family Foundation, which helps support St. Mary's Catholic Church, which is also predominantly black. 

"He's not acting inconsistently," said Watkins. "He has a long record of giving to a variety or organizations based on their need, not their racial make-up." 

Any appearance of attempting to curry favor as he faces legal trouble might backfire, said former Securities and Exchange Commission lawyer Chris Bebel, who is now with the Houston law firm Shepherd Smith & Bebel. 

"It could cause members of the African-American community to be resentful and to feel that Scrushy is attempting to manipulate them," Bebel said. 

Watkins said Scrushy doesn't need to create a favorable impression among blacks, who remember him for supporting former Birmingham Mayor Richard Arrington during the politician's battles last decade with federal prosecutors who unsuccessfully tried to charge him with corruption. 

"He has enjoyed a favorable impression with the black community since he stood beside Richard Arrington at the height of that man's troubles and said, `This is my friend,'" Watkins said. "So his giving isn't part of any litigation strategy. I would hope that jurors in any trial would discharge their responsibilities based on the facts."

So, a quick piece of advice to the next CEO of a major Fortune 100 corporation accused by the SEC of accounting fraud – paint yourself as a poor black man, merely persecuted by the man. The white man. Donate vast sums of money to black churches and poorly run black colleges. And by all means, go on TV as a televangelist. 

This has been another great moment in black history