By Jay Reeves
The Associated Press

BIRMINGHAM, Ala. - Ousted HealthSouth CEO Richard Scrushy and a top aide discussed the company's unraveling finances and fear of going to jail the day before the government accused the company of massive accounting fraud, according to a secret recording played in court Thursday.

William T. Owens, HealthSouth's then-chief financial officer, told Scrushy that his wife feared Owens could go to prison for falsifying corporate records, according to the recording.

It was made by Owens, who was fired March 27 and is cooperating with investigators.

Scrushy acknowledged Owens' fears on the recording.

He also discussed watching his young son play ball and about "how profitable this company is."

"Do we really want to trash this?" Scrushy could be heard saying on the recording.

Scrushy repeatedly said he would do whatever Owens wanted, but added: "I think we ought to go down fighting."

Scrushy's lawyers had tried earlier Thursday to prevent the government from playing the recording.

FBI agent Greg Gauger testified that the 4 1/2-hour digital recording was made by Owens on March 18, the day before the government filed suit accusing the company and Scrushy of a massive accounting fraud.

Owens, who has pleaded guilty to fraud, was outfitted with a hidden recorder and had two discussions that day with Scrushy, Gauger said.

But the government delayed playing the recording as Scrushy attorney Tom Sjoblom raised objections and went into minute detail asking FBI evidence technicians about the handling of the compact disc.

The hearing began Wednesday on whether Scrushy's assets should be frozen during the ongoing investigation into fraud claims at HealthSouth.

Government lawyers say Scrushy is seeking access to $10 million for living expenses and $60 million to pay his legal bills and tax liability.

In testimony Thursday, Scrushy's personal accountant, Mary Schabacker, testified that Scrushy made $7.15 million in salary and bonuses after taxes last year.

His total tax liability for the year was $31 million, and as much as $17 million of that remains unpaid and due next week, she said.

Also Thursday, HealthSouth said its creditors, J.P. Morgan Chase Bank and Wachovia Securities, had agreed not to charge the company penalties for defaulting last month on $367 million in bond and interest payments.

The Securities and Exchange Commission filed suit last month accusing the rehabilitation giant and Scrushy of running a massive accounting fraud to make it appear the company was meeting Wall Street forecasts.

HealthSouth describes itself as the biggest U.S. provider of outpatient surgery, diagnostic and imaging and rehabilitative health care services, with nearly 1,700 facilities in every state and abroad.