Judge Upholds Sarbanes-Oxley In Scrushy Fraud Case

Arguments that the Sarbanes-Oxley corporate reform law is unconstitutionally vague did not convince a federal judge, who has rejected Richard Scrushy's claims in his HealthSouth fraud case.

Attorneys for Scrushy, HealthSouth's former chief executive, said the law should not be part of the indictment accusing him of fraud, the Associated Press reported. U.S. District Judge Karon O. Bowdre said jurors - not a judge - should decide central questions raised in the case.

"If the jury finds that the reports did not fairly present, in all material aspects, the financial condition and results of operations of HealthSouth, the jury must then determine whether Mr. Scrushy willingly certified these reports knowing that the reports did not comport with the statute's accuracy requirements," she wrote.

Scrushy was the first CEO charged under the Sarbanes-Oxley Act, and his case is the first legal test against it. Scrushy is accused of masterminding the accounting scheme that resulted in HealthSouth's profits being inflated by roughly $2.7 billion. The law holds top executives responsible for financial reports, among other requirements.

Scrushy spokesman Charlie Russell said the Nov. 23 decision will not be appealed.

Scrushy was indicted last year on charges of fraud, conspiracy and violating the Sarbanes-Oxley Act. In September, a new indictment added perjury and obstruction of justice charges. Jury selection is set to begin Jan. 5.


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