Corporate Compliance

Accountant testifies HealthSouth’s false data came from top level

Compliance Monitor, February 2, 2005

An accountant on January 27 testified that officials at HealthSouth's Birmingham, AL, headquarters "cooked the books," leading the government to level fraud charges at former company president and chief executive Richard Scrushy, the Associated Press (AP) reported January 28.

During his testimony, Harvey Kelly told a prosecutor that Scrushy reported falsified data during meetings with analysts, in HealthSouth's annual report, and in reports submitted to the government, the AP reported.

"If they didn't have that fraud in there, their numbers would have looked a whole lot worse," Kelly told the prosecutor.

Though Kelly never said whether Scrushy knew the numbers were false--a point Scrushy's defense likely will focus on during cross examination, the AP reports--he did say that HealthSouth's rehabilitation clinics, hospitals, and other facilities always submitted valid and accurate financial reports and any fraudulent behavior happened after that point.

Scrushy is accused of being behind the fraud at HealthSouth, increasing his personal wealth by using false earnings numbers to increase HealthSouth's shares, the AP reported. Scrushy's defense contends that he was unaware of any fraud and that it was conducted by Scrushy's subordinates, who kept the scheme from him for years.

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