Case Summa subsequent ego therapist could be shited to outpatient services PETER became a CEO of HealthSouth, a company he joined many years ago as therapist. As case with the other CEOs, MR PETER used his aggressive business strategy and his dominated the decision making at Health South. MR PETER started as a respiratory realized that a lot of money could be made if certain services performed in hospital n quarterly results were driving the decision making at HealthSouth. MR PETER an EPS (earnings per share) target and then he would make sure that HealthSouth always e short ter Th would set met or exceeded this benchmark. This continuous winning streak actually became competitors to const accounts had complained about since HealthSouth was the only firm in the industry to be able antly hit their financial targets. HealthSouth would manipulate their figures through such as the contractual adjustment account which is used to estimate the variance between the amount insurance will pay. This account was used since i . As a result mount billed to a patient and ed on estimates and it was very hard to verify any balances within the account was bas every quarter, HealthSouth would generate fraudulent financial statements that were urities and Exchange Commission. The statements would always match the financial presented by MR PETER o the forecast Despite statements from all the previous HealthSouth's CFOs that MR PETER was involved it the tinancial statement manipulation, MR PETER went with an ostrich defense that he did n know about any wrongdoing and that it was all the fault of the subordinates. By the time M PETER went on trial in January 2005, the estimated level of the fraud had reached S5 billion Despite the guilty pleas of lower level employees and the conviction of others, MR PETER ble to walk away a free man. He was found not guilty on June 28, 2005 on all 36 criminal cour against him. However, almost exactly one year later, on June 29,2006, MR PETER was convicte of giving a $500,000 bribe to a government official. I. Is it reasonable to think a CEO would not be aware of fraud of this magnitude? Explai 2. Identify the stakeholders in this case. Explain the impact of the fraud o stakeholders What would you think will be the future of the company? And what lessons do you dra form this? 3. 4. Why do so many illegal activities that occur within a firm relate to the manipulatic of the firm's financial statements