Judge Dismisses SOX Charge, But Refuses Early End to Scrushy Trial

A district court judge reportedly dismissed one of three counts accusing former HealthSouth chief executive Richard Scrushy of violating the Sarbanes-Oxley Act, but rejected defense requests to throw out key charges against Scrushy that would have brought an early end to his corporate fraud trial.

The decision on Thursday by U.S. District Judge Karon Bowdre means that the trial of Scrushy, who is accused of directing an accounting fraud that resulted in a $2.7 billion earnings overstatement, will continue. Scrushy is the first CEO accused of violating the corporate reporting law, which was passed in 2002 in response to a wave of corporate accounting scandals.

According to the Associated Press, Bowdre dismissed a count accusing Scrushy of violating Sarbanes-Oxley by forcing two subordinates to sign a false financial statement in 2002, but overruled defense claims that prosecutors, during the first 12 weeks of trial, failed to present enough evidence for jurors to even consider whether Scrushy was involved in the fraud.

Bowdre refused to throw out another Sarbanes-Oxley charge, and said that she would rule on a third SOX charge against Scrushy later, AP reported. She also refused to dismiss charges accusing Scrushy of conspiracy, securities fraud, wire fraud and filing false statements with the Securities and Exchange Commission.

The hearing continued on whether Bowdre would let jurors consider charges accusing Scrushy of obstruction of justice and money laundering, AP said.