Scrushy Lawyers Argue Sarbanes-Oxley Law Too Vague

Former HealthSouth CEO Richard Scrushy asked a federal judge Wednesday to throw out a key part of his indictment, saying a 2002 law aimed at clamping down on corporate fraud is unconstitutionally vague. Attorneys for the ousted chief of the rehabilitation giant also argued that the Sarbanes-Oxley Act puts corporate officers in an unfair position. Scrushy last year became the first chief executive charged under the law.

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Former HealthSouth CEO Richard Scrushy asked a federal judge Wednesday to throw out a key part of his indictment, saying a 2002 law aimed at clamping down on corporate fraud is unconstitutionally vague. Attorneys for the ousted chief of the rehabilitation giant also argued that the Sarbanes-Oxley Act puts corporate officers in an unfair position. Prosecutors defended the law, describing it as clear and contending Scrushy’s claims were irrelevant and premature. Scrushy last year became the first chief executive charged under the law, which was passed in the wake of massive corporate fraud cases. Free on $10 million bond, he is accused of making millions in a conspiracy to inflate HealthSouth’s earnings. The 85-count indictment includes three counts accusing him of falsely certifying three HealthSouth financial statements in violation of the 2002 law. But Scrushy attorney Tom Sjoblom told U.S. District Judge Karon Bowdre that the law was only two weeks old when Scrushy signed the first of the three documents cited in the charges. He said the law contained words and phrases like “willfully certifies” and “fairly represents” that are too complex for anyone to understand in the context of securities statutes. “There is no way a person in Mr. Scrushy’s position can look at this and say, ‘If I do this, I know I’m engaging in criminal conduct,’” Sjoblom said. He described the 2002 act as “unconstitutional on its face.” Justice Department attorney Thomas Gannon said the law is clear enough that someone in a high corporate position would know when he is committing a crime. “It passes constitutional muster with flags flying,” he said. Bowdre asked Gannon how a CEO can know whether a report he is signing is accurate. Gannon responded that a CEO can talk to subordinates to make sure the figures contained in the statements are correct. Sjoblom said the three counts at issue in Wednesday’s hearing carry a maximum sentence of 60 years and $15 million in fines if convicted. Copyright 2004 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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