Scrushy


May 26, 2006: 10:17 am: Birmingham, Scrushy

There are a lot of trophies and honors to shoot for in life. Trophies gather dust, honors can be forgotten. You make it into the language, and you’re remembered forever — when your name becomes a verb or an adjective.

Think “Ruthian” home run, “Wagnerian” epic, “Freudian” slip. Even “Goliath” is a name that came to mean something else.

Just make sure your lexical legacy is a good one. Richard Scrushy is close to that, and not in a good way.

It’s starting to show up in the coverage of the Ken Lay/Enron prosecution. Apparently, Lay is trying to reclaim a 7-figure gift to the University of Missouri. At first, he asked the money be re-allocated to churches and relief organizations responding to last year’s hurricanes. By this February, his attorney’s were back in Columbia, seeking to tap that endowment to cover legal expenses.

What interested me was the description of a strategy that involves a great deal of public pre-trial philanthropy:

This has all the smell of a Richard Scrushy effort,” says Mizzou alum Thomas Battistoni, a New York litigator who until recently sat on an alumni board for the MU College of Arts and Science, overseers of the economics department — and hence the chair. Scrushy, the former head of HealthSouth Corp., poured over $700,000 into Birmingham, Ala., churches and ministries during his felony trial in 2004, a coincidence noted with more than a little skepticism by his prosecutors. (Scrushy was acquitted). Battistoni raises similar questions about Lay’s attempt to divert the money to charities in the fall before his trial started, but he doesn’t believe the money is “tainted” since it was donated before the shenanigans at Enron began.

The adjective “Scrushyesque” has only appeared once before this post, in the Jackson Clarion-Ledger, used by former federal prosecutor Jacob Frenkel to describe the effect of home-court advantage on fraud cases:

Frenkel said it’s too early to know if the government was smart in bringing the (Ken Lay) trial to Houston, where there has been a huge loss of jobs. “It’s a different jury pool, different facts, a different city. There’s no way of knowing if the verdict is going to be Scrushyesque.”

Reputation management is all about protecting your name and your brand. And if it’s your name on the line, there is no reset button to switch to change it, a move Scrushy’s old company is considering.

February 7, 2006: 5:12 pm: Birmingham, Scrushy

We’re told that ignorance is no defense… except when the law is so poorly defined that it “really is.”

Case in point: Richard Scrushy, the ousted founder of HealthSouth.

During his fraud trial, some pundits wondered whether he could put away the ego and admit to “not being in charge of the ship.” It was his only real defense, as five former CFOs took the stand to implicate him.

Some would go down swinging, especially those who are so concerned about their reputations and public personae.

The dynamic that played out here was a quirk of the new Sarbanes-Oxley law: it required “proof of knowledge.” One had to knowingly violate it — and science-fiction aside, there is no way short of a paper trail of proving what is going on in someone’s head.

So the state couldn’t make a case, Scrushy was acquitted, and now he’s touring state pulpits as a reformed man. He recently appeared on Hannity and Colmes, painting himself as a cockolded spouse:

“I think the buck stops with the people that are guilty,” Scrushy said. “In any situation you can be deceived. Take, for example, a husband and wife, live together for many, many years. The wife finds out the husband was having an affair. They sleep in the same bed every night. They brush their teeth in the same bathroom. They eat together every day for years. So, if you’re deceived, if something is concealed and not shown to you or if no one tells you about it, you shouldn’t be held responsible for something you had nothing to do with.”

Scrushy said a company as large as HealthSouth makes it more difficult to monitor what everyone is doing.

“I do know that when you have big corporations and you have a lot of people – the CEO – there is no way that he can know everything,” he said.

The folks over at CFO.com took a different read, calling it the “Sergeant Shultz defense:

Last night, Sean Hannity and Alan Colmes made Larry King look like Edward R. Murrow. I’m referring to Hannity and Colmes’s cartoonish interview of Richard Scrushy on FOX.

Scrushy didn’t need to break a sweat in reprising his ”Sergeant Schultz” defense — that he ”knew nothing” while his rogue underlings, including five former chief financial officers, committed a $2.7 billion fraud at HealthSouth.

The pathetic bipartisan duo allowed Scrushy to say things like “the buck stops with people who were guilty,” to compare his innocence to the person who is unaware of their spouse’s transgressions even though they share a bed, and to assert that the government didn’t spend that much time investigating his case.

Why the fuss? The Scrushys still aren’t out of the woods yet, with civil suits (and a lower burden of proof) still looming. Expect the positioning to continue.

January 19, 2006: 3:12 pm: Birmingham, Scrushy

You can buy a paper for fifty cents… but buying the content will cost you a whole lot more.

It appears now that part of Richard Scrushy’s PR campaign has surfaced. While his unspoken strategy was well-documented and transparent, what wasn’t so well-known was the people on the payroll:

Audry Lewis, the author of those stories in The Birmingham Times, the city’s oldest black-owned paper, now says she was secretly working on behalf of Scrushy, who she says paid her $11,000 through a public relations firm and typically read her articles before publication.

Documents obtained by The Associated Press show The Lewis Group wrote a $5,000 check to Audry Lewis on April 29, 2005 — the day Scrushy hired the company. The head of the company, Times founder Jesse J. Lewis Sr., is not related to Audry Lewis.

The firm wrote another $5,000 check that day to the Rev. Herman Henderson, who employs Audry Lewis at his Believers Temple Church and was among the black preachers supporting Scrushy who were present in the courtroom throughout.

Audry Lewis and Henderson now say Scrushy owes them $150,000 for the newspaper stories and other public relations work, including getting black pastors to attend the trial in a bid to sway the mostly black jury.

Scrushy is denying personal knowledge, and the prosecutors say this doesn’t warrant action. After all, while it may be unethical, it isn’t illegal — and they are satisfied that the jury wasn’t swayed by news coverage anyway. Reporter Jay Reeves described Scrushy’s reaction to the news about the news about the news:

In an e-mail response to questions from the AP, Scrushy denied authorizing payments to Henderson or Audry Lewis for any work on his behalf.

Scrushy said he “hit the ceiling” when he learned that the PR firm had paid Henderson but added that he had considered Audry Lewis to be “a nice Christian woman that thought we had been treated badly and she wanted to help.”

Now he said he knows they are both “about the bucks.”

Thoughts, people?

January 14, 2006: 8:12 am: Birmingham, Scrushy

One would certainly hope that Richard Scrushy is truly following his heart.

If not, he is certainly following his public relations rehab prescription to the letter:

The Anniston-Calhoun chapter of the Southern Christian Leadership Conference lists “Minister/Evangelist Richard Scrushy” as special guest speaker at its 4 p.m. MLK program. The church’s pastor, Rev. N.Q. Reynolds, is the group’s president.

Scrushy will be accompanied by the Trinity Broadcasting Network, which is filming a documentary on Scrushy and his faith.

His spokesman, Charlie Russell, said Scrushy will speak on the topic “Creation vs. Evolution” and “how God moves man to speak God’s word and make it reality.”

Maybe God moves man to speak by humbling him before federal judges, and stripping him of his worldly desires.

I’ll say this… I certainly hope and pray at this point that Richard and Leslie are sincere about their faith. Because if they aren’t, keeping up an act for public appearance’s sake is its own hell. This is the equivalent of O.J. running around with a magnifying glass and a sidekick, actually looking for the “real killer.”

Hat tip again to Wade, for reading the paper more thoroughly than I do.

December 23, 2005: 8:40 pm: Birmingham, External PR, Scrushy

I hereby apologize for setting in motion the chain of events that got Paul Finebaum sued.

(Thanks Wade, for bringing this to my attention.)

We’ve documented Richard Scrushy’s legal battles — not so much for the courtroom fireworks but instead looking at his stated goal: repairing his civic and corporate reputation. Having won an acquittal from a jury in his HealthSouth fraud trial, the founder and CEO has been keeping fairly low on the second part of Operation Renewal. For the most part, he’s even heeded the advice I laid out months ago.

Now, he has filed suit against both the Birmingham News and radio talk-show host Paul Finebaum, for separate statements and allegations he feels are false and damaging.

BIRMINGHAM, Ala. (AP) — Libel suits filed by former HealthSouth CEO Richard Scrushy accuse The Birmingham News and Alabama radio personality Paul Finebaum of defaming him in reports or commentary about his relationship with a black church that he joined.

Scrushy’s wife, Leslie, is a plaintiff with her husband in the suit against Finebaum.

In both suits, Scrushy, who is white, accuses the defendants of unfairly portraying his decision in 2003 to leave his longtime church in Vestavia Hills and join the Guiding Light Church, a predominantly black church in Birmingham. Scrushy changed churches while under criminal investigation.

A November 2003 story in the News quoted a legal expert as saying that by changing churches, Scrushy was “laying the groundwork for endearing himself to African-American jurors.”

The suit claims the statement was libelous because it “made Scrushy sound like a devious hypocrite and heathen.” McPhillips said Scrushy changed churches as a result of his “own faith walk with the Lord.”

The Scrushys’ suit against Finebaum, who also is a sports columnist for the Mobile Register, cites a radio show in which Finebaum and his callers discussed who might play Leslie Scrushy in a movie about the couple.

“Who is the fakest actress in Hollywood? I mean the one with the fakest smile — that would be Mrs. Scrushy, wouldn’t it?” Finebaum said during a radio show in February.

According to the lawsuit, Finebaum “publicly described Mrs. Scrushy as plastic, as a gold digger, as a fake, as a phony, and as an air head.”

Three years ago, when the SEC was trying to clamp down on Scrushy’s assets, I was a regular contributor to Finebaum’s show. During a long segment on a slow news day, Paul asked me how the reporters stayed awake with little to do. I told him how we were already casting the Scrushy movie, and gave a few examples. (Andy Garcia as Richard Scrushy, Courtney Cox as Lesley, Samuel Jackson as Donald Watkins…)

Who would have thought it would come to this?

August 8, 2005: 1:42 pm: Big Blunders, Helpful Hints, Scrushy

If you’re going to deflect a reporter to a spokesperson, make sure it’s not a dead end.

The board of directors of the Gloria Wise Boys and Girls Club in New York is on the hot seat. A former board member (who was one of the go-to-guys in launching liberal talk network Air America) is now being investigated for redirecting more than half-a-million dollars in grant money and “investing” it in the Air America startup.

Air America has been quick to point out that it is under new ownership, and has the appearance of deniability.

The current Gloria Wise board is running into trouble, though. Hugh Hewitt at the Weekly Standard tried getting some answers:

My producer and I have spent a lot of time trying to get a member of the board on the record about the investment. The only one who agreed to talk to us referred us to Rubenstein Public Relations. An assistant to Richard Rubenstein called me to relay that he didn’t know anything about the “Gloria Wise story.” Odd.

Either there is a huge disconnect in protocol at Rubenstein (which I highly doubt,) or someone is trying to buy some time.

To make matters worse, the article didn’t mention which board member had been approached, so now this little cloud of avoidance is hanging over all of them, until it gets cleared up.

We’ve seen in the Richard Scrushy case how important your pre-trial PR posture can be. Looking like you’re ducking tough questions is not the way to get there.

June 28, 2005: 12:32 pm: Birmingham, Scrushy

Dear Mr. Scrushy:

Congratulations on beating the rap in your $2.7-billion accounting fraud trial. That is no mean feat.

However, there are a lot of people who are coming to terms with your acquittal, not ready to attach “innocence” to your name. Just ask Michael Jackson, who beat his charges, but was labelled as a “probable pedophile” by one of the twelve who set him free.

So, here are some things I recommend you do to repair your public image:

1) Be Gracious. Avoid speaking ill of anyone who wished you the worst. Keep the focus on you and your family. And take a vacation.

2) Don’t storm the citadel at HealthSouth. Yes, it’s your baby. Yes, as far as the law is concerned, you’ve been vindicated and have every right to reclaim your office. Don’t. They will make your return ugly. Express your relief that HealthSouth is on better financial footing. You can go home again, but don’t sour your public persona by running back inside today. That would look too greedy.

3) Do not cancel your “Morning Viewpoint” show. Too many people saw this show as a transparent ploy to recast your image. Prove them wrong.

4) Re-invest in the community. Yeah, a lot of organizations were quick to pull your name off those schools and buildings and streets and libraries that carried your name. That’s not what you need to re-approach. Let your next wave of philanthropy be quiet — let word of mouth carry the day. As long as you don’t appear to be “buying” good will, you’ll succeed. You lost a lot of people at once, you need to get them back one at a time.

As I write this, you are already putting some of this advice to use. I heard you say something to the effect of “We give all the glory to God, who gave me and my wife the strength to endure this torture…” It’s not enough to say the right things… you’ve got to live them over time. Just use the same discipline you did in the pre-trial phase.

Just be content to re-cast a new legacy. Leave the old one behind. There was too much baggage there anyway.

Trying to be fair, your pal…

Ike.

(p.s. — some of my friends reading this may have other advice for you too. They’ll add it to the comments section.)

: 12:04 pm: Birmingham, Scrushy

Let the PR punditry begin.

: 11:25 am: Birmingham, Scrushy

The corporate fraud trial of HealthSouth founder Richard Scrushy is over. Verdict at 11:30 Central.

I’ve said before that he has to win in court, and in the court of public opinion.

We’ll see if he beats the first to have a chance at the second.

May 26, 2005: 3:12 pm: Birmingham, Scrushy

To save his reputation, ousted HealthSouth founder Richard Scrushy has to win in court twice — once in a court of law, and the other in a court of public opinion. It’s not enough to earn a mistrial or a hung jury. Getting off on a technicality won’t restore his luster.

Earlier this week, I documented the extent of his public relations campaign. In some respects, it’s all the old messages but done through alternate media.

The first part of that battle is leaning his way. Jurors have indicated they are deadlocked on the key charge of conspiracy. That bodes well, as it tends to hang doubt on all of the rest of the charges that follow. If you can’t prove he was part of the creation of the scheme, it’s hard to prove “what he knew and when he knew it.”

May 24, 2005: 5:04 pm: Birmingham, Scrushy

This blog is about media relations, and how shaping public opinion (through positive positioning) can help you. It’s also about how neglecting to defend your image can backfire.

So, why have I intentionally avoided the elephant in the room? My own backyard, even?

HealthSouth founder and CEO Richard Scrushy was on trial for his knowledge of a $2,700,000,000.00 (billion) accounting fraud. Over a number of years, HealthSouth fudged the numbers to meet Wall Street expectations. Fifteen former officers (including five CFOs) have reached plea agreements with the feds, in exchange for their cooperation against Scrushy.

(I will say that unlike the Enron’s and the Tyco’s of the corporate fraud world, HealthSouth was actually a profitable company delivering tangible service. Just not nearly as profitable as most were led to believe.)

The jury is now in its fourth day of deliberations, having to sort through 55 days of testimony and 6,000,000 documents. So again… why have I held off?

The Scrushy indictments and SEC hearings were among the last big stories I covered in my previous life as a journalist. That $2.7-billion figure came out of my addition and reporting. Needless to say, I know a heck of a lot about what prosecutors were up to, as they fought to freeze Scrushy’s assets. With my new job, I didn’t get the chance to directly see or hear a lot about what the defense was up to in the legal realm. But it’s been interesting to see what’s been happening on the public relations front.

I’ve maintained all along that Scrushy faces a monumental task: winning his freedom while keeping his reputation intact. He always had a corporate swagger of control, and was known for the degree to which he micro-managed certain aspects of HealthSouth. Richard Scrushy is a proud man, and intensely proud of the company he dreamed and established from nothing.

It takes a lot of moxie and ego to bring all of that together — and those are exactly the sorts of things he had to let go of during the trial. How can one maintain that reputation, when the defense amounts to a lot of “I didn’t know” and “I guess I’m not a great judge of character to have had such crooks in my trust.”

The Scrushy saga has been the elephant in the room — and now that it’s in the hands of the jury, I can feel more comfortable as an ex-journalist to comment. And this particular missive has to do with Scrushy’s playing of the race card. (I know what you’re thinking… what’s a white billionaire know about being black?) Throughout this ordeal, Scrushy has positioned himself as a simple man who grew up poor on the wrong side of the tracks in Selma, Alabama. A high-school dropout with no formal education, he made his way into the medical world as a respiratory therapist, married young with kids he could barely feed.

His attorneys have equated this to a civil rights case. Even now, you can’t find Scrushy walking to or from the courthouse without an entourage of black attorneys, pastors, and supporters. Some think the display a little transparent, and will not affect the jury (split 6-6 black and white.) Some point to the timing of Scrushy’s relationship with those inner city pastors, and a $1,000,000 gift he gave one influential congregation. Some even point to the executives Scrushy surrounded himself with, none of whom were black.

Richard Scrushy has spent a lot of time in and out of the courthouse on reputation managment. He and his wife Leslie did a religious talk show for more than a year, he had a website to refute the bias and false claims he saw in the media. From a trial standpoint, he bluffed jurors and reporters alike into believing he was prepped and ready to testify on his own behalf — which he ultimately did not do. (I for one was not fooled, and I have witnesses to back that up.)

The prosecution’s strategy was to play against Scrushy’s need to rehabilitate his public image. Play his own ego against himself. It’s not easy to win simultaneously in Federal court and the court of public opinion. We’ll see how it works out.