Scrushy Said To Pay For Positive Articles

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Friday, January 20, 2006 -- BIRMINGHAM, Ala. - A writer who turned out a stream of sympathetic newspaper stories about former HealthSouth Corp. CEO Richard Scrushy during his fraud trial says Scrushy secretly paid her $11,000 through a public relations firm and typically read her articles before publication.

Scrushy, acquitted in June of involvement in a $2.7 billion accounting fraud scheme at the chain of health clinics, strongly denied authorizing any payments to Audry Lewis, a church secretary whose freelance articles appeared in The Birmingham Times, a small but influential black, weekly newspaper.

Documents obtained by The Associated Press show that the PR firm wrote thousands of dollars in checks to Lewis and her pastor, Herman Henderson, who says he was paid to help bring fellow black preachers into the courtroom in a bid to sway the mostly black jury in Scrushy's favor.

The executive said he only gave money to Henderson's church for a building fund and Hurricane Katrina relief, and said he had recorded conversations to prove it.

The lead prosecutor in Scrushy's case said there was nothing criminal in what Lewis and Henderson described, and members of the jury have said the only thing that influenced them was a lack of evidence against the defendant. But the payments raise questions about the legitimacy of the ostensibly grass-roots support for Scrushy seen throughout his trial.

During the trial, prosecutors worried that Scrushy was attempting to sway community opinion - and possibly the jury - with a Bible-study program he hosts on local TV, as well as a daily show about the trial that aired on a local-access channel purchased by Scrushy's son-in-law.

Lewis and Henderson said Scrushy still owes them a combined $150,000 for the newspaper stories and other public relations work. An attorney for Scrushy, Donald V. Watkins, said the allegations and the request for more money "could be perceived as a shakedown."

Scrushy recorded conversations with Lewis and Henderson in his home office, and says the tapes prove there was no agreement for any work, including newspaper stories. On the tapes provided to The Associated Press, Scrushy repeatedly tells Henderson the two had no contract for money.

Henderson has said that he suspected Scrushy was recording him during their meetings but thought the tapes were irrelevant.

Lewis' articles in the city's oldest black-owned newspaper were uniformly flattering toward the defense before and after money changed hands. But the newspaper moved them to the front page after she started receiving payments from the PR firm.

Between March and June, five articles - four of which were marked commentary - appeared on the front page. Two other articles appeared on opinion pages and she wrote one letter to the editor.

The day jurors got the case, the Times featured a front-page piece by her saying "pastors and community leaders have rallied around Scrushy showing him the support of the Christian and African American community."

The PR firm, The Lewis Group, is headed by Jesse J. Lewis Sr. He is the founder of the Times, and his son is listed as the paper's editor. Jesse Lewis Sr. denied being part of any scheme to plant favorable coverage of Scrushy in the paper.

"We are in the advertising and public relations business, period," he said.

The editor of The Birmingham Times, James Lewis, did not immediately respond to a request for comment Thursday.

Audry Lewis, who is not related to Jesse Lewis Sr., said she initially wrote the columns and submitted them to the paper for free because she believed Scrushy was innocent. Scrushy liked the pieces and began paying her to write the articles midway through the case, she said.

"He didn't think he was getting a fair shake in the media, which is why he hired me," she said in an interview.

Scrushy said he had considered her to be "a nice Christian woman that thought we had been treated badly and she wanted to help."

Audry Lewis said she sent unedited copies of her pieces to Scrushy and Jesse Lewis Sr., who had them put in the paper. Scrushy said he looked at some of her stories before publication "to make sure the facts from the trial were correct."

Documents obtained by the AP show The Lewis Group wrote $5,000 checks to Audry Lewis and Henderson on April 29, 2005 - the day Scrushy hired the company. Audry Lewis said she later got an additional $6,000 from Scrushy that was routed through the public relations firm.

Separately, a Colorado public relations man who worked for Scrushy, Charlie Russell, said he gave Audry Lewis $2,500 during the trial and signed a contract stating the money was an advance payment for possible work after the verdict.

No such work was done, but Russell denied the payment was for her articles. Russell said he gave Audry Lewis money mainly out of sympathy when one of her relatives died in Detroit and she could not afford to go to the funeral.

Scrushy gave Henderson's Believers Temple Church and an associated thrift store five checks totaling $25,000 during and after the trial, according to copies of checks provided by Henderson.

Henderson, who employs Audry Lewis at his church, said he was paid for his efforts to rally support for the defendant.

Bishop James Johnson of Miracle Deliverers Church in Birmingham said he went to Scrushy's trial at Henderson's urging. Johnson said Wednesday that he was not paid to attend but that Scrushy did give a donation to his church; he declined to say how much.

U.S. Attorney Alice Martin, who prosecuted the case, said the claims of Audry Lewis and Henderson, if true, do not appear to amount to a crime. "If you want to pay someone to write favorable stories and can get a paper to print them, I don't know of any law it violates," Martin said.

Kelly McBride, who directs ethics programs of the Poynter Institute, which trains professional journalists, said the payments described by Audry Lewis are "a complete aberration" in American journalism.

McBride said it is so unusual for a reporter to be paid by a news source to write favorable stories that the allegations "are going to be on a lot of people's radar" and will be used as fresh ammunition by critics of the media.

Copyright 2006 by The Associated Press (via ClariNet)

Richard Scrushy: from accused to the acquitted

Scrushy is Found Not Guilty

Scrushy Trial

The Complaint

SEC Charges HealthSouth Corp. CEO Richard Scrushy
With $1.4 Billion Accounting Fraud
Trading in HealthSouth Securities Is Suspended;
Commission Action Seeks Injunction, Money Penalties, Officer and Director Bar
FOR IMMEDIATE RELEASE
2003-34

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Washington, D.C., March 19, 2003  The Securities and Exchange Commission today charged HealthSouth Corp., the nation's largest provider of outpatient surgery, diagnostic and rehabilitative healthcare services, and its Chief Executive Officer and Chairman Richard M. Scrushy with a massive accounting fraud. The Commission's complaint, filed in federal district court in Birmingham, Ala., alleges that since 1999, at the insistence of Scrushy, HealthSouth systematically overstated its earnings by at least $1.4 billion in order to meet or exceed Wall Street earnings expectations. The false increases in earnings were matched by false increases in HealthSouth's assets. By the third quarter of 2002, HealthSouth's assets were overstated by at least $800 million, or approximately 10 percent.

Pursuant to a separate Commission order issued this morning, trading in the securities of HealthSouth was suspended for two business days due to the materially misleading information in the marketplace.

The complaint further alleges that, following the Commission's order last year requiring executive officers of major public companies to certify the accuracy and completeness of their companies' financial statements, Scrushy certified HealthSouth's financial statements when he knew or was reckless in not knowing they were materially false and misleading.

"HealthSouth's fraud represents an appalling betrayal of investors," said Stephen M. Cutler, the SEC's Director of Enforcement. "HealthSouth's standard operating procedure was to manipulate the company's earnings to create the false impression that the company was meeting Wall Street's expectations."

Richard P. Wessel, District Administrator of the SEC's Atlanta District Office, added: "The Commission's action against HealthSouth is another example of the excellent coordination and cooperation that has become the hallmark of efforts by the Commission and the Department of Justice to combat financial fraud. By bringing to bear the expertise of both agencies, we achieve maximum deterrence and greater relief for investors."

The Commission alleges that HealthSouth and Scrushy's actions violated and/or aided and abetted violations of the antifraud, reporting, books-and-records, and internal controls provisions of the federal securities laws. For these violations, the Commission is seeking a permanent injunction against HealthSouth and Scrushy, civil money penalties and disgorgement of all ill-gotten gains or losses avoided by both defendants, and an order prohibiting Scrushy from ever serving as an officer or director of a public company.

The Commission thanks the U.S. Attorney's Office for the Northern District of Alabama, the U.S. Department of Justice, and the Federal Bureau of Investigation for their cooperation in this matter.

The Commission's investigation is continuing.

For further information contact:

Richard P. Wessel, District Administrator, Atlanta District Office: (404) 842-7600

Richard P. Murphy, Assistant District Administrator, Atlanta District Office: (404) 842-7600

How Did Richard M. Scrushy of HealthSouth Hospitals Get Acquitted of All SEC Charges? Some Say Only God Knows