Health South 1
Health South 1
Health South 1
Adan, Irish
Bautista, Paul Andrei
Casupas, Ryan Axiel
Gutierrez, Kimberly
Marqueses, Brenrich
Start-up costs – Non-recurring costs associated
with setting up a business, such as accountant’s
fees, legal fees, registration charges, as well as
advertising, promotional activities, and
employee training.
Sarbanes-Oxley Act – is designed to oversee the
financial reporting landscape finance
professionals. Its purpose is to review legislative
audit requirements and to protect investors by
KEY TERMS improving the accuracy and reliability of
corporate disclosures.
Based in Birmingham, Alabama. HealthSouth is the United States’ largest owner and
operator of inpatient rehabilitative hospitals.
The company was incorporated on February 2, 1984 by its founder Richard M. Scrushy.
The company was the largest publicly listed healthcare company in the US based on the
number of locations and the third based on Revenue.
Corporate
Accounting Top company officials reviewed quarterly
RICHARD M. SCRUSHY
• CEO and founder of HealthSouth
BILL OWENS “The Architect of the Fraud”
• 3rd Chief Finance Officer
• A Certified Public Accountant (CPA), and worked for Ernst and Young for 5 years before
joining HealthSouth as Controller in 1986
• Coined as the leader of a group of executives who committed the fraud
WESTON SMITH “The CFO Turned Whistleblower”
• 4th Chief Finance Officer
• Worked for Ernst & Young before Owens recruited him to HealthSouth
• Credited with being the first-ever whistleblower to warn federal investigators
• He came forward after the US Congress passed the Sarbanes-Oxley Act of 2002
…
Richard Scrushy
In June 2005, Scrushy was acquitted on all 36 of the accounting fraud counts
against him, most notably one count violation of the Sarbanes-Oxley Act
In 2006, he got a bribery conviction for paying $500,000 to former Alabama
Governor Don Siegelman’s campaign for a state lottery in exchange for a
seat on a state hospital regulatory board. He spent about five years in
federal custody.
In June 2009, he was sued for fraud by HealthSouth investors and ordered to
repay his company $2.8 billion.
Permanent “officer and director ban”
Ernst & Young
They were fined, sued, and required to pay $109 million by the stock holders.
The suit contends that they were aware of fraud at the company even as
they signed its financial statements.
Agreed to the settlement without admitting to or denying the allegations
Ethical Issues
HealthSouth executives
breach the Code. Every
Proper checks and balances time a corporate fraud is
were not in place at
committed, they disregard
HealthSouth. Their accounting
the moral values in favor of
systems did not sync properly
with the corporate ERP wealth and greed. There is
software. no honest relationship with
employees and company
members.
The connivance with the
members of the management
team makes the overriding of
audit to continue and difficult to
Conclusion catch.
…
executives and employees sums up what
will be the culture of the company so if the
people refused to participate to the
crime, the fraud could have been
stopped and damages will be avoided.
Investors and lenders should focus more on the operations of the business,
most especially on its profitability.
Scrushy and HealthSouth shouldn't alter their earnings and profits. They also
have to capitalize their expenses properly and they should have forecasted the
best estimate for insurance reimbursements. Also, they should value their fixed
assets according to the IFRS. Through all of this, they can also meet their
analysts' expectations and be profitable in a clean way.
Personal morality and ethics make up the collective morality and ethics of the
company.
Alternative Course of Action
1. HealthSouth accounting staff members then held “family meetings” to manipulate the results which
they called ________.
A. “family meetings” B.“filling the gap”
2. The company was incorporated on
A. Feb. 2, 1984 B. Feb. 4, 1982
3. The founder of HealthSouth Corporation is
A. Richard M. Scrushy B. Bill 77Owens
4. It is the United States’ largest owner and operator of inpatient rehabilitative hospitals
A. HealthSouth B. WealthSouth
5. He was “The Architect of the Fraud”
A. Richard M. Scrushy B. Bill Owens
…