Richard Scrushy the HealthSouth executive was one of the first executives to be charged under the Sarbanes Oxley Act. Personal morality and ethics make up the collective morality and ethics of a corporation. Scrushy went from being a healthcare worker to the owner of HealthSouth then to prison for bribery instead of any charges stemming from his wrong doing at HealthSouth. Another big area of fraud was around mergers and acquisitions. What would be an appropriate motive for whistleblowing, and how much proof do you believe the employee would have needed to be credible? After resigning, he sent an email to the auditors informing them of the fraudulent entries. Scrushy was accused deliberately lying to regulators and urging subordinate to lie to support his story while using his position of power to intimidate them.
To accomplish the task of expansion HealthSouth opted to take over other companies with financial issues. The total asset turnover in 2010 was 94. He was one of three employees overseeing the purchase of equipment. The result is that he was convicted and sentenced to prison. There was a degree of leniency in exchange for his testimony against Richard Scrushy.
Later even the Governor of Alabama was influenced by the former HealthSouth executive and also served time in prison. All of this, of course, was a recipe for fraudulent behavior. She signed off on the entries and Vines posted them. The picture to the left is an example of one of many clinics. The influence that comes with money and power is something that is really obvious in this story. For a long time, HealthSouth posted profits, and Scrushy was a darling of Wall Street analysts. Several people from HealthSouth in fact did end their career that way; it all started with small, seemingly insignificant, compromises.
Nobody caught them — they got away with it! The major problems of the fraud are lack of credulity, lack of integrity on the management part, lack of independence on the auditor part, and negligent of the auditors played role in the fraud. Livesay justified his participation in the beginning because his boss promised the fraud was temporary one time and would end and get corrected. Vines left his position at HealthSouth for another job. A clear example of a faulty organizational structure and hypocritical leadership. It was during this time that Martin, an executive in the accounting department, was approach by Scushy and told to fix the books.
Based on the information I would pick Level One: Stage Two: Instrumental and Relative Orientation primarily because Scrushy ultimately gets what he wants. However, a management team that is intent and unified in its attempt to override the audit can easily do so. There were also characteristics of HealthSouth on the structural level which allowed for the accounting fraud to occur. The opinions expressed are those of the writer. This note is all that I can do about it. Was there imminent harm to people? How can the company carry tens of millions of dollars in accounts receivable that are well over 360 days? I write on white-collar crime and try to provide a different perspective than that of the mainstream media. This volume of work was a clear indication that the participation and knowledge of the fraud was widespread within the company.
They have staff in on the plan to try to get the person fired. That capital flowed in from individual investors as well as institutional money. Beam initially did this because of the pressure from Scrushy to make the company appear more profitable. In January 2004 the lawyers representing the former HealthSouth Corp. HealthSouth executives put their own wealth and well-being before the rights of their shareholders and creditors to have legitimate and trustworthy company financial data.
He became a very influential man in Alabama. Many members who plead guilty used regulations to limit the charges to bank fraud. He never admitted guilt for his part in the HealthSouth Accounting Scandal nor did he serve any prison time for it. The company is listed as an Industry Healthcare Facilities. In our acquisition account we created every liability we could dream of and put them into the open entry under assumed debt.
Is it ok to lie if the higher goal is important? Problems at Healt hSouth started to become evident in mid-2002. None of the others who did the same thing were convicted. HealthSouths hospitals provide a higher level of rehabilitative care to patients who are recovering from conditions such as stroke and other neurological disorders, orthopedic, cardiac and pulmonary conditions, brain and spinal cord injury, and amputations. The charges included conspiracy, securities fraud, mail fraud and a single charge under the Sarbanes-Oxley Act. It could use its inflated script in mergers and takeovers instead of cash. The company was the largest publicly listed healthcare company in the United States based on the number of locations and the third based on revenue.
A legal or ethical compromise opens up the possibility of that original compromise being used as blackmail to participate further. Now go back to your offices and do it! In Birmingham, Alabama, on June 28, 2005, after only 21 days of deliberation, the jury of men and women cleared Mr. He was acquitted of 36 charges related to HealthSouth fraud but others admitted guilt and served time in prison for the crimes. Although it can be argued that HealthSouth was exceptionally skilled in deceiving the audit team, there were many instances and red flags that should have led the auditors to discover the fraud. Access to case studies expires six months after purchase date.
The events surrounding the scandal, as well as a discussion of how the fraud was perpetrated and some key lessons to be learned as a result, are the topics of this paper. HealthSouth continued to pay back multiple accounts of fraud and fight other new accounts that began to creep up. At this point Scrushy hopes to separate the company into profitable and unprofitable sections. It knew the marketplace, the culture and the interdependency of the whole system. Finally, false documents were created to hide the false entries. HealthSouth was a successful company. I wonder if any of the Scrushy family has preferred stock left in HealthSouth since he was the founder.