Scrushy Jurors Remain Divided

BIRMINGHAM, Ala. — In a worrisome turn for the government, a federal jury in the fraud trial of former HealthSouth Corp. Chief Executive Richard Scrushy on Thursday declared itself split on the key conspiracy charge, prompting the judge to again urge them back to work.

The jury of seven men and five women later finished their sixth day of deliberations without reaching a verdict on charges that Scrushy masterminded a $2.7-billion accounting fraud at the rehabilitative healthcare chain he founded.

“We cannot reach a unanimous decision on Count One conspiracy,” the panel said in a handwritten note delivered Thursday morning to U.S. District Judge Karon O. Bowdre. The word “cannot” was underlined twice. “Question: Does Count One have to be unanimous?” the note continued.

Legal experts said the jury’s confusion over the fundamental principle of unanimity and its deadlock on the conspiracy charge -- possibly one of the easier of the 36 counts for prosecutors to prove -- spelled trouble for the government’s case.

It was the third note this week in which the jury indicated it was divided on at least one charge.

In a brief session in open court, Bowdre told the jurors that unanimity was indeed necessary to reach a verdict on conspiracy or any other count.

She also gently suggested that they consider lengthening their workdays from the 9 a.m.-2:30 p.m. schedule they have adopted. Nevertheless, Bowdre agreed to the panel’s request to end deliberations at 1 p.m. today in advance of the Memorial Day weekend.

After the judge sent the panel back to their deliberations, Scrushy, who did not take the witness stand during his trial, emerged from the downtown Birmingham courthouse to hold a longer and more upbeat curbside news conference than usual.

“I feel it’s positive,” Scrushy said of the morning’s developments. “I have the sense that people in there want to do the right thing.”

U.S. Atty. Alice Martin, the chief prosecutor, downplayed the likelihood of a hung jury and said that jurors probably were confused by the complexity of the 37-page verdict sheet they must fill out. Six days isn’t a long time to deliberate after a nearly four-month trial, she said.

Although Scrushy and his defense lawyers have insisted that only an acquittal on all charges will satisfy them, legal experts said that a mistrial would be a victory for the defense and a crushing defeat for the prosecution.

“To try this again would be a tremendous expense for the government,” said Steven R. Smith, a securities litigation partner at the law firm of Bryan Cave in Chicago. “The longer this drags out,” he added, “the greater the probability of a mistrial.”

For jurors to repeatedly ask the judge for guidance on the issue of unanimity “suggests that there’s some fundamental confusion there,” said Samuel W. Buell, a former member of the Department of Justice’s Enron Corp. task force and now a visiting law professor at the University of Texas.

“This starts to become worrisome for the government,” he said. On the other hand, Buell noted that the judge had not yet seen the need to issue a so-called Allen charge, a last-ditch exhortation to a deadlocked jury.

Scrushy, 52, faces what would amount to life in prison if convicted of all charges, which include -- besides conspiracy -- securities fraud, wire fraud and money laundering. He also is the first business executive to be charged under the 2002 Sarbanes-Oxley Act, which made it a crime to falsely certify a corporate financial report.

The government contends that Scrushy directed underlings, including five former finance chiefs, to falsely inflate the company’s profit in order to buoy the value of his own huge stock holdings. Prosecutors alleged that he cashed in about $200 million of stock and stock options before the conspiracy came to light and caused the share price to plunge to pennies.

Scrushy and his defense team have held that his former subordinates, 15 of whom have pleaded guilty in the years-long investigation, kept him in the dark about the fraud at HealthSouth and then falsely testified against him in order to escape prison.

A not-guilty finding on conspiracy would not preclude a conviction on other counts, but Smith said that “the beauty” of the conspiracy charge was that the government didn’t have to show that Scrushy orchestrated the plot or personally cooked the books, simply that he participated.

“You’d think it would be one of the easier counts to prove,” he said.