Identify at least 3 major flaw in HealthSouths corporate governance?
CHAPTER and CEO from CEO ik HealthSouth Can Five CFOs Be Wrong? served as its chaiusy, w tion and its CEO, Richard Scrushy. Scrushy August 27, 200ished the O fying the accurasy anld mConse instructed that HRC earni th ing fraud charges in the Northern District of Alabama against Health South Corpora to 2002. He CASE was also charged with knowingly miscerti ary 6, 003eas fying the accuracy and completeness of the The On March 19, 2003, the SEC filed account symbol HRC reassumed ito aimrnings be inf SEC claim states financial stats rst CEO to as early as just after the ce 28. 2005, the on June 30, 2002, HRCs the governanice was listed on the NYSE ipay five HealthSouth cally, during the fort 1986. Specfi CFOs testified that Scrushy had knowingly between 1999 and the moPe directed the fraud, on June quently, Scrushy became month period six months endedl income d six criminal charges, and later some civil was infated by at las mny i charges were initially dismissed. In con. Each quarter, HRCsseniebo Alabuma jury acquitted him of all thirty. before income taxes ad trast, the five CFOs were initially sentenced meet with Scrush to receive a total of 115 years in prison and actual results with hcompare te $11.2 million in fines One of the CFOs. Street analysts. If there Weston Smith, had become a whistle- Scrushy would tell HR' blower who had launched a gui tam' law. re HRC was a shonil HRC's senior accoun ix it' by recording false entranagement to ing personnel then con the earnings. How this was in the SEC complaint as follows: suit under the False Claims Act against accounting records."5HRCntries on then convened a meeti HealthSouth and first told prosecutors rocess. He was sentenced to twenty-five about the financial statement falsification referred to as "famil vl and years and a $22 million fine. How did all how the auditors were deceived is this happen? Heilthsouth was founded in 1984 and At these meetings, HRC' grew to become the largest provider of out accounting personnel d patient surgery, diagnostic, and rehabilita- false entries could be According to the SEC complaint, discussed what tive health care services in the United ecorded to inflate reported earniner States. By 2003, it owned or operated over to match Wall Street analyst's expes 1800 different facilities with worldwide tations. These entries primarily con- revenues and earnings of $4 billion and $76 million, respectively, in 2001. Health- South's stock was listed on the New York Stock Exchange (NYSE), trading under the sisted of reducing a contra r account, called "contractual adjust ment," and/or decreasin (either of which increased earnings). evenue g expenses, -Qui is a stat de under the False Claims Act (31 USC. 3729 et seq.), which allows for a private indi. vidual, or whistleblower with knowledge of past or present fraud on the federal government to bring suit on behailf of the government. Its name is an abbreviation of the phrase "qui tam pro domino rege quam p seipse, meaning The who sues for the king as well as for himself This provision allows a private person known as a "relator,"to bring a lawsuit on behalf of the United States, where the private person has informi tion that the named defendant has knowingly submitted or caused the submission of false or fraudulent dains to the United States. The relator need not have been personally harmed by the defendant's tam. bttpollen.wikipedia.org/wliiQui tam. Securities and Exchange Commission . Health South Corporation and Richard M. Scrushy, Com conduct Injunctive and Other Redief, Civl Action No. CV.03-1-0615-S (March 19, 2003), http://www.sec govling laint for Ibid
