HealthSouth’s Former COO Faces 39-Count Indictment

HealthSouth Corp.’s former president and chief operating officer, James P. Bennett, was indicted in connection with a $2.7-billion accounting fraud that prosecutors allege was directed by company founder Richard Scrushy.

Bennett, 47, was indicted on the eighth day of Scrushy’s fraud trial in Birmingham, Ala., and is the 18th executive charged in a case in which 15 executives have pleaded guilty. He is accused in a 39-count indictment of conspiracy, securities fraud and insider trading in the sale of $17.4 million of company stock.

“Bennett and other co-conspirators would and did discuss HealthSouth’s actual results of operations and financial performance and the need to falsify those before they were publicly reported,” the indictment said.

The charges complicate the legal strategy for Scrushy, whose attorney had intended to call Bennett as a defense witness. Bennett was one of the highest-ranking executives not charged before Thursday. He worked at HealthSouth from 1991 to 2000 and had been mentioned several times in testimony at the Scrushy trial.

Prosecutors are seeking the forfeiture of $28.1 million from Bennett, who faces dozens of years in prison if convicted.

“Mr. Bennett was not involved in any form of fraud or any other wrongdoing,” said Bennett’s attorney, Anthony Joseph.

U.S. Atty. Alice Martin said the indictment was not possible sooner because of the “limited numbers of attorneys” in her office and the volume of major cases they were handling. A looming legal deadline for filing charges also was a factor in the timing, she said.

Scrushy’s attorney, James Parkman, said he planned to call Bennett as a defense witness to counter testimony by former finance chief Bill Owens that Scrushy directed the fraud.