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A federal judge has rejected a challenge by fired HealthSouth chief executive Richard Scrushy to the new corporate fraud law aimed at top executives that was adopted after a series of major accounting scandals. In the first court test of the Sarbanes-Oxley Act — which requires top executives of public corporations to vouch for the financial reports of their companies — U.S. District Judge Karon O. Bowdre disagreed with Scrushy’s argument that the act is unconstitutionally vague and should not be part of the indictment accusing him of a massive fraud at HealthSouth. Ruling in what she said was the first decision on the constitutionality of the 2002 law, Bowdre said jurors — not a judge — should decide key questions raised in Scrushy’s case. U.S. Attorney Alice Martin said prosecutors were pleased with the decision but declined further comment. Scrushy spokesman Charlie Russell said the defense wasn’t surprised by Bowdre’s decision, which he said will not be appealed. Bowdre’s decision was dated Thursday, but Russell said the defense was unaware of the order until Monday. Birmingham, Ala.’s federal court is switching to a new electronic filing system, making it difficult to access documents in some criminal cases. Scrushy last year became the first CEO charged under Sarbanes-Oxley. Free on $10 million bond, Scrushy is accused of heading a scheme to overstate HealthSouth earnings by some $2.7 billion. Attorneys for Scrushy claimed the new law uses phrases like “willfully certifies” and “fairly represents” that make it all but impossible for corporate officers to tell if they are abiding by the law. Prosecutors argued that similar language is used without problem in other laws. In her 11-page opinion, Bowdre sided with the government and said it was up to a jury to decide if Scrushy met the letter of the law. “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. Originally indicted last year on charges of fraud, conspiracy and violating the Sarbanes-Oxley Act, Scrushy was named in September on a new indictment that added perjury and obstruction of justice charges. The judge held a hearing in June on Scrushy’s request to overturn Sarbanes-Oxley, but she didn’t rule before the new indictment was filed. The defense renewed its attack on the law in a document filed last month, but Bowdre sided with prosecutors in refusing to dismiss the three counts of the 58-count indictment dealing with Sarbanes-Oxley. Jury selection is set to begin Jan. 5. Attorneys have said the trial could last for months. Copyright 2004 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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