Scrushy case is off in the hands of the jury.  See here.

(esp)

The defense closing has been full steam ahead.  The Birmingham Alabama News reports the details here.  And as anticipated, a key issue is whether Scrushy "knew."  A second strong defense argument appears to be the – "holes" in the government case.

When a case comes down to what the defendant "knew,"  the credibility or lack thereof of the witnesses who testify can be crucial. And in this case the jury will not have Scrushy’s testimony to balance against the witnesses who did in fact testify.  The jury also will not have a cross-examination of Scrushy to consider.  What they do have is witnesses who received "deals."   

Meanwhile the Wall Street Jrl reported on some of the ethics issues underlying the case here.  (esp)

Closing arguments have started in the Scrushy trial with the prosecution calling the accused the "the quintessential micromanager."  (see AP in Birmingham News here)   Clearly the government is trying to demonstrate that Scrushy had the knowledge and intent required for the crimes charged.

CEOs reading and listening to this are likely troubled by this description.  On one hand the government is sending a message in some of the recent trials that you need to know what is going on in the company.  But here, knowing too much and being involved in too much is being held to be a problem. 

Obviously, some will argue that it all comes down to what is really happening in the company. That is, you need to know what is going on, but also need to correct improprieties that may be occurring, and most certainly you shouldn’t be causing, participating in, or allowing illegalities to occur. It sounds simple, but for the CEO at the top, the job is becoming more difficult and the responsibilities greater.

(esp)

As the prosecution of Richard Scrushy enters its final phase, with closing arguments set for today, the various sideshows should be coming to an end (see earlier post here on the investigation into a Wall Street Journal story on the dismissal of a juror).  Judge Karon Bowdre released a transcript of a hearing held in November 2003, shortly after the original indictment and her assignment to the case, in which she informed the counsel that she had a prior relationship with Scrushy’s daughter and ex-wife from when their show horses were boarded together.  Indeed, Judge Bowdre’s horse was in a stable owned by Scrushy and she met him on a few occasions.  Neither side took up her recusal offer, no doubt because the contacts were probably no more extensive — and perhaps even much less — than other federal district court judges in Birmingham.  Scrushy’s prominence in the business community likely put him in contact, in one way or another, with most of the judges or members of their families.  The hearing transcript also has Judge Bowdre stating that she was not very happy with drawing the Scrushy prosecution, a feeling that has probably grown stronger since the trial started back in January. An AP story (here) discusses the hearing in November 2003. (ph)

Listen to co-blogger Peter Henning, as he comments on the Scrushy case here as part of a special on "Scrushy and Sarbanes-Oxley."

(esp)

According to the Birmingham News, there is another delay in the Scrushy trial (see here).  Looks like closing arguments will now be on Wed. And an even more interesting question is whether there has been an ethical violation by one of the attorneys in the case. It seems that the Wall Street Jrl article here, contains a statement  that refers to " two lawyers familiar with the case."  The issue involved the dismissal of a juror. It seems that the lawyers involved in the case are all under a gag order that prohibits them from discussing the case with the media. The Birmingham News reports that the judge assembled all the lawyers in the case to make certain that none had violated her order. And it sounds like none have done so. (see Birmingham News Report here)

This  case presents an interesting study of ethics in the courtroom. The judge has issued rulings that demonstrate a strict adherence to proper courtroom conduct.  See here and here.  And now we have the judge stopping to see if a court order has been violated.

There are also other interesting questions to ask here:  Doesn’t it seem like lately in a good number of high profile white collar cases, jurors have been removed? Are the number of jurors in excess of the norms from past cases?  And if they are, why might this be happening?

(esp)

With the defense resting without the testimony of Scrushy himself, it seems that the prosecution has decided not to present additional evidence.  But it is far from over yet.  According to the Wall Street Jrl here, the judge threw out two more counts against the accused. The Birmingham News here reports that it was an obstruction of justice charge and a SOX fraud charge that have been dismissed.  It seems that the judge also has some doubt about the money laundering charges, although so far they remain.  Money laundering, initially passed to combat drug trafficking, shows up more and more as add-on charges with white collar offenses.

There are also still closing arguments to come (starting Monday) and then 48 counts for the jury to consider.  The Birmingham News notes here that 12 of these are forfeiture charges that only come into play if the accused is convicted. The large number of charges can work both ways.  On one hand it can be difficult for the defense to overcome even with a strong case as the jury might come back with a compromise verdict.  On the other hand, the jury can think the prosecution went too far and refuse to accept anything.  Of course, there is always the possibility of guilty as to all counts.  Stay tuned.

(esp)

If you’ve ever gone to the racetrack, you’ve seen the tout sheets that proudly display their winning picks for the day.  I am proud to say that I hit the daily double in predictions about testifying defendants: my prognostication back in January (no, I won’t search for the link) was that Bernie Ebbers was less likely to testify and Richard Scrushy (much) more likely to take the stand.  Today, the defense rested in Scrushy’s trial without calling him to testify. We all know how Ebbers came across to the jury in his testimony.  I won’t hazard a prediction on how the jury will come out in Scrushy’s case, although I did pick North Carolina in one of my NCAA pools (along with everyone else). (ph) 

The trial of Richard Scrushy has turned positively somnambulant over the past week as the defense called two expert witnesses to split hairs about the value of Scrushy’s stock options and the effects of the fraud on HealthSouth’s share price.  Things may have hit a new low on the interest meter on Tuesday when the defense spent the day reading into the record transcripts of two witnesses who testified last year at the SEC’s asset freeze hearing but who have since asserted their Fifth Amendment privilege and refused to testify (with the government unwilling to grant immunity).  If you have ever had the joy of reading a transcript to a jury (grand or petit) you know just how boring the process can be..  That may change in the next day or so, however, as lead defense trial counsel James Parkman has indicated that Scrushy is prepped and ready to take the witness stand.  This will be the key to the defense because the other witnesses will be overshadowed by the direct and, more importantly, the cross-examination of the former CEO. 

Of course, Parkman has hinted that he may not call Scrushy to testify, no doubt trying to keep the government off-balance and creating the possibility that prosecutors would appear unprepared if he were to suddenly rest the defense case.  Given the particular spin on the "Honest-but-Ignorant CEO" defense being used here, which accuses HealthSouth’s Five Guilty CFOs (and others) of actively lying to Scrushy for years and not just that the defendant did not pay attention to all that complicated accounting stuff (the Ebbers/Lay variant), it will be difficult for him not to testify to try to counter the extensive testimony about his involvement in all aspects of the company.  This just seems like a very difficult case to rely on the burden of proof, attacking witnesses who entered plea bargains, and accusations that everyone lied and engaged in a grand conspiracy to keep Scrushy in the dark without the defendant saying what he did and did not know.  The trial can move from something just this side of watching paint dry to an edge-of-the-seat drama once Scrushy takes the witness stand. An AP story here discusses the statements of Scrushy’s counsel about the possibility of calling him to testify. (ph)