In the first court test of the constitutionality of the Sarbanes-Oxley Act, a federal judge sided with the government and rejected a challenge by fired HealthSouth chief executive Richard Scrushy that the act is unconstitutionally vague, according to published reports.
U.S. District Judge Karon O. Bowdre disagreed with Scrushy's argument that the act is unconstitutionally vague and shouldn't be part of the indictment accusing him of a massive fraud at HealthSouth, the Associated Press reported.
Ruling in what she said was the first decision on the constitutionality of the 2002 law, Bowdre said that jurors -- not a judge -- should decide key questions raised in Scrushy's case, according to the report. Scrushy, the first CEO to be charged under Sarbanes-Oxley, is accused of heading a scheme to overstate HealthSouth earnings by some $2.7 billion.
Attorneys for Scrushy had claimed that 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.
"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," Bowdre reportedly wrote in her 11-page decision.
A spokesman for Scrushy said that the decision will not be appealed, according to AP.
Originally indicted last year on charges of fraud, conspiracy and violating the Sarbanes-Oxley Act, Scrushy was named in September on a new 58-count indictment that added perjury and obstruction of justice charges.
Jury selection is set to begin Jan. 5.
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