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Former HealthSouth CEO Scrushy's bribery conviction upheld

Richard Scrushy talks to reporters moments before he enters the Hugo L. Black Federal Courthouse in Birmingham, Alabama, May 18, 2005. REUTE
Richard Scrushy talks to reporters moments before he enters the Hugo L. Black Federal Courthouse in Birmingham, Alabama, May 18, 2005. REUTE

By Jonathan Stempel

(Reuters) - A federal appeals court on Monday upheld the bribery conviction of HealthSouth Corp founder and former Chief Executive Richard Scrushy, rejecting his argument that new evidence of possible juror and judicial bias warranted a new trial.

The 11th U.S. Circuit Court of Appeals let stand Scrushy's 2006 conviction for paying $500,000 to former Alabama Governor Don Siegelman in exchange for a seat on a state hospital board.

Scrushy, 60, had originally been convicted of six criminal counts, but two were thrown out after the U.S. Supreme Court in 2010 narrowed the definition of "honest services" fraud.

He was resentenced in January 2012 to 70 months in prison, a year less than his original sentence, and ended up spending just over five years in federal custody prior to his July 2012 release.

In his appeal, Scrushy argued that his trial judge should have recused himself over conversations with federal marshals that might have raised questions about his impartiality.

He also said he was a victim of "selective prosecution" because others who donated money and got gubernatorial appointments were not prosecuted.

Scrushy also said jurors were biased for having conducted improper research and apparently being infatuated romantically with an FBI agent who sat with prosecutors during the trial.

But a three-judge 11th Circuit panel said there was no abuse of discretion in the trial judge not recusing himself, and that Scrushy waited too long to allege selective prosecution.

It also rejected claims of bias among jurors, including a female gymnast who Scrushy said was known to prosecutors as "Flipper" because she did back flips to entertain other jurors, and who was "very interested" in the FBI agent.

"That a mere expression of attraction would infect the jury's decision with bias strains credulity," Circuit Judge Gerald Tjoflat wrote for the panel.

James Jenkins, a lawyer who argued Scrushy's appeal, did not immediately respond to requests for comment. Arthur Leach, another lawyer for Scrushy, declined to comment. Scrushy did not immediately respond to a request for comment.

The office of U.S. Attorney George Beck for the Middle District of Alabama had no immediate comment.

Scrushy was acquitted in 2005 in a separate criminal trial where he was accused of masterminding a $2.6 billion accounting fraud at HealthSouth, which he had built into one of the largest U.S. hospital operators.

He agreed in 2007 without admitting wrongdoing to pay $81 million to settle a related U.S. Securities and Exchange Commission civil fraud case.

In 2009, an Alabama state judge entered a $2.9 billion civil judgment against Scrushy after finding that he played a key role in the accounting problems.

Siegelman, 67, is serving a 6-1/2-year prison term after being resentenced last August, court records show.

The case is U.S. v. Scrushy, 11th U.S. Circuit Court of Appeals, No. 12-10694.

Scrushy now works in the Houston area. In May he asked a federal judge to lift a ban on his serving as an officer or director of a public company, which was part of the SEC settlement.

(Reporting by Jonathan Stempel in New York; Editing by Phil Berlowitz)

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