## Facts

- Richard M. Scrushy founded HealthSouth Corporation and served for years as its Chairman and Chief Executive Officer.
- HealthSouth was a large, publicly traded company required to file periodic reports with the SEC under the Securities Exchange Act of 1934.
- Sarbanes–Oxley Act § 906 (18 U.S.C. § 1350) requires an issuer’s CEO and CFO to certify that each covered periodic report (1) fully complies with the Exchange Act reporting requirements and (2) fairly presents, in all material respects, the issuer’s financial condition and results of operations.
- A federal grand jury indicted Scrushy on multiple charges arising out of alleged fraudulent inflation of HealthSouth’s earnings and stock price over several years.
- The indictment included counts alleging that Scrushy signed and submitted § 906 certifications while knowing HealthSouth’s reported financial information was materially false or misleading.
- Scrushy moved pretrial to dismiss the § 906 false-certification counts, arguing that § 1350 is facially unconstitutional under the Due Process Clause because key phrases are impermissibly vague.

## Issues

1. Whether § 1350’s requirement that an officer certify that a periodic report “fairly presents, in all material respects” the issuer’s financial condition and results of operations is facially void for vagueness.
2. Whether § 1350’s “willfully certifies” mens rea language is facially void for vagueness.

## Decision

- The court denied Scrushy’s motion to dismiss the § 906 (18 U.S.C. § 1350) counts.
- The court held § 1350 is not facially unconstitutionally vague.
- The court concluded the challenged phrases provide adequate notice of prohibited conduct and do not authorize arbitrary enforcement.
- The § 906 counts remained in the indictment for resolution on the evidence at trial.

## Legal Principles

- A criminal statute is void for vagueness only if it fails to give a person of ordinary intelligence fair notice of prohibited conduct or is so standardless that it invites seriously discriminatory enforcement.
- Facial vagueness challenges are disfavored where there is a plainly legitimate “core” of conduct the statute clearly proscribes.
- Terms such as “material” and “fair presentation,” when used in the securities-reporting context, may be sufficiently definite because they are informed by established securities-law and accounting concepts.
- A “willfully” requirement generally narrows criminal liability by limiting punishment to knowing or intentional wrongdoing, reducing vagueness concerns.
- In economic and business regulation, some flexibility in statutory language is permissible where regulated parties operate in a specialized, heavily regulated setting with available interpretive guidance.

## Conclusion

The court refused to dismiss the Sarbanes–Oxley § 906 counts, ruling that 18 U.S.C. § 1350 is not facially vague because its “fairly presents, in all material respects” standard is anchored in established securities and accounting concepts and its “willfully certifies” requirement narrows liability to intentional or knowing false certifications.


United States v. Scrushy, No. CR-03-BE-0530-S, 2004 WL 2713262 (N.D. Ala. Nov. 23, 2004)