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This web page addresses the lenient sentences given
those at HealthSouth who pleaded guilty to the fraud, and
the trial and harsh sentence of the only person who was
convicted by a jury after pleading not guilty.
At least 17 of our former officers, including all five of our former chief financial officers, have agreed to plead guilty to federal criminal charges filed in connection with the investigations described above. These individuals pled guilty to a variety of charges, including securities fraud, accounting fraud, filing false tax returns, making a false statement to governmental authorities, falsifying books and accounts, wire fraud, conspiracy, and falsely certifying financial information with the SEC.
HealthSouth form 10-K filing with the SEC June 27, 2005
The full extent of the fraud was exposed when CFO Weston Smith, realised that the fraud was about to be detected and the penalties inherent in the recently enacted Sarbanes-Oxley. He went to authorities and was followed soon after by William Owen. A string of other staff followed.
Although some who came forward believed that Scrushy did not know, the majority including the principle people involved indicated that he had driven the fraud and several indicated they had discussed it with him and even remonstrated. There was however no direct paper trail. Scrushy in contrast adamantly denied any involvement claiming that he had been duped and that the conspirators were trying to escape by blaming him.
Scrushy's trial became very much a trial by media. The prosecution's public grandstanding was no match for Scrushy's skill in this sector. The strengths and weaknesses of the cases, and the role of Scrushy in getting the jury at his trial on side is difficult to assess from the many reports but can only be inferred. It is significant that the state did not appeal Scrushy's acquittal.
If Scrushy master minded the fraud as all the press material suggests then he escaped justice. If on the other hand the real conspirators duped him and are now falsely blaming him, then they escaped with extremely lenient sentences. One way or another the real criminal or criminals escaped and the penalties paid for a massive crime were trivial.
The Judiciary was divided in their approach to this. In the early stages of Scrushy's prosecution the judge took care to preserve Scrushy's rights and were critical of the prosecution. The judge refused to impound Scrushy's wealth when the state indicated that he might flee.
The judges sentencing those who had pleaded guilty were divided and gave markedly different sentences. Judges Johnson and Clemon considered many of those who had pleaded guilty to have been minor conspirators and gave considerably more weight to the role those charged had played in helping the prosecution. Their sentences were far more lenient than the prosecution had asked for. The prosecution appealed and the appeal court agreed with them. Judges Propst and Blackburn took a rather different view.
The sentences also seemed to become more severe after Scrushy was acquitted although some judges were very critical of that acquittal and clearly believed that he had escaped justice and that making underlings bear the brunt of the sentences was unfair.
A report suggests some executives used company money to fund their legal expenses.
Former executives of HealthSouth Corp., Birmingham, Ala., allegedly appropriated $561,728 of the company's money to pay for their or other executives' legal fees just days before pleading guilty to securities fraud.A HealthSouth spokesman said the company would seek repayment of the funds at a later date. - - - - - - - - According to HealthSouth, the funds were used to pay legal fees for 10 of the 15 executives who have pleaded guilty so far in the government investigation of alleged accounting fraud at the company.
HealthSouth to seek return of execs' legal fees Modern Healthcare's Daily Dose Nov. 3, 2003
The way in which the HealthSouth fraud was exposed and the people who initially spoke to authorities and pleaded guilty is described on the page documenting the accounting fraud.
The participation of Weston Smith, William Owens, Michael Martin, Aaron Beam and Jason Brown in the fraud is described there as is their assistance to investigators and their guilty pleas. This sections addresses the charges and the initial sentences they were given. It also documents the actions against Malcolm McVay, Kenneth Livesay, Emery Harris, Angela Ayers, Cathy Edwards, Rebecca Kay Morgan and Virginia Valentine.
July 2003
Valentine, 33, claimed she was only following instructions from a superior when she began making bogus entries in HealthSouth's books around 1997 to increase revenues.
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Valentine pleaded guilty to conspiracy to commit fraud in April and was fired. Assistant vice president of inpatient accounting at the time, Valentine's annual salary was $74,000, the papers stated. She received $30,000 in bonuses since 2001.
Leniency sought by former HealthSouth executive The Associated Press July 24, 2003
Sep 2003
In April, former HealthSouth Chief Financial Officer Aaron Beam was charged with, and pleaded guilty to bank fraud for making false representations to HealthSouth's lenders. Treasurer Malcolm McVay and former HealthSouth CFO Michael Martin have pleaded guilty to conspiracy to commit wire and securities fraud, and filing false information with the SEC. Five HealthSouth officers were also charged and pleaded guilty in connection with accounting fraud, including Chief Information Officer Kenneth Livesay. Vice President of Finance Emery Harris had previously pleaded guilty to accounting fraud charges, as had CFO William Owens and former CFO Weston Smith. All defendants charged to date are cooperating with the government's investigation.
FORMER HEALTHSOUTH EXECUTIVE CATHERINE FOWLER AGREES TO PLEAD GUILTY TO CHARGES OF CONSPIRACY TO DECEIVE AUDITORS AND MAINTAIN FALSE BOOKS AND RECORDS US Government Release SEPTEMBER 26, 2003
Nov 2003
U.S. District Judge Inge Johnson decided last week to proceed with the sentencings despite requests for a delay by lawyers on both sides.
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Also scheduled for sentencing Wednesday were former corporate vice presidents Angela C. Ayers, Cathy C. Edwards and Rebecca Kay Morgan, and former assistant vice president Virginia B. Valentine.Prosecutors have said upper managers approached the women in 1994, when they held lower-level jobs, and asked them to enter false numbers in accounts on a temporary basis. They face sentences ranging from five to 10 years in prison or probation, as well as fines.
Attorneys for the four women have said their clients trusted upper management, which they say directed the fraud, and received no financial gain.
5 Ex-HealthSouth Workers to Be Sentenced LA Times November 12, 2003
Nov 2003
In two days of testimony during the sentencing hearing, Harris said he told the four women to make fraudulent entries in computerized accounting ledgers on orders from three different chief financial officers and a fourth executive.To explain the pressure being exerted on top management to create earnings that matched Wall Street estimates, then-CFO Michael Martin let him and others listen to a phone message he received from an analyst named ``Ben'' believed to be from UBS Warburg, Harris testified.
In the message, Ben told Martin ``it was important for him to lay down for the family'' or else he could ``get whacked,'' according to Harris. Harris said ``the family'' referred to HealthSouth executives who were in on the fraud.
Judge Delays HealthSouth Case Sentencing The New York Times November 13, 2003
Dec 2003
Emery Harris, a former assistant controller at HealthSouth Corp., Birmingham, Ala., was sentenced today in U.S. District Court in Birmingham to five months in prison for his role in an alleged $2.7 billion accounting fraud at the rehabilitation company. Four other former executives from the company's accounting and finance departments received probation, Reuters reported.Harris, 33, is the first person to receive a jail sentence for playing a role in the fraud. He had been facing 15 years in prison and $1.5 million in fines.
Harris testified last month that he kept silent about the fraud out of fear after realizing HealthSouth was buying guns, grenades and spy equipment.
U.S. District Judge Inge Johnson ordered Harris to pay $106,500 in restitution, plus a $3,000 fine, and said his jail time would be followed by six months' home detention and three years' probation, according to Reuters.
Three former vice presidents -- Angela Ayers, 34, Cathy Edwards, 34, and Rebecca Kay Morgan, 56 -- and an ex-assistant vice president, Virginia Valentine, 33, each were sentenced to four years' probation, six months' home detention and $2,000 fines, Reuters reported. Morgan also agreed to pay $235,000 restitution out of her HealthSouth stock and options, Reuters said.
Ex-HealthSouth controller gets five months' prison Modern Healthcare's Daily Dose Dec. 10, 2003
Dec 2003
Although the five faced lengthy prison time for their actions, Judge Inge P. Johnson of United States District Court in Birmingham, Ala., sentenced only one executive to prison and the others to probation. Prosecutors said they had filed notice that they would appeal."We routinely appeal where we think there are erroneous findings of fact,'' said Alice H. Martin, the United States attorney in Birmingham, who described the sentences as an "unacceptable downward departure'' from sentencing guidelines.
4 of 5 HealthSouth Executives Spared Prison Terms The New York Times December 11, 2003
June 2004
Meanwhile, Kenneth Livesay, the first of fifteen former HealthSouth executives to plead guilty to criminal charges in the scandal, avoided jail time for his role. Livesay, previously an assistant controller and chief information officer at HealthSouth, was sentenced by to five years probation.Livesay, 42, must also pay a $10,000 fine, forfeit $750,000 for his part in overstating HealthSouth's earnings and assets, and spend six months under electronic monitoring.
Prosecutors had been seeking a five-year prison sentence for Livesay, who agreed to cooperate with federal investigators as part of a plea deal. In April 2003, he pleaded guilty to falsifying financial records.
HealthSouth fraud review consistent with estimates Modern Healthcare June 1, 2004
June 2004
Malcolm McVay, a former HealthSouth Corp. chief financial officer, was sentenced to six months home detention and five years probation on Wednesday for his part in the multibillion-dollar accounting scandal that rocked the health-care company.
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U.S. District Judge U.W. Clemon, ignoring prosecutors' requests for jail time for the highest-ranking former HealthSouth officer yet to come up for sentencing, also fined McVay $10,000 and ordered him to forfeit $50,000.
No Jail Time for 2nd HealthSouth Exec Yahoo News (Reuters) June 2, 2004
June 2004
A federal judge on Saturday sentenced former HealthSouth Corp. Chief Financial Officer Michael Martin to five years probation for his role in the company's massive accounting scandal, again ignoring the government's recommendations for jail time.Judge U.W. Clemon also fined Martin $50,000 and ordered him to forfeit gains of $2,375,000. The prosecution had asked for five years in prison, protesting what it considered extreme leniency in sentencing.
Nine other HealthSouth executives who pleaded guilty in the fraud have been sentenced. Only one -- Emery Harris -- has received jail time, for five months.
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"He was the most culpable of those sentenced to date. He had the most seniority, the most authority and the longest time. He also obtained substantial income," said Michael Rasmussen, assistant U.S. attorney for the northern district of Alabama.
Ex-HealthSouth CFO Gets 5 Years Probation (Reuters) June 19, 2004
Aug 2005 (after Scrushy's acquittal)
Aaron Beam, the first chief financial officer of Birmingham, Ala.-based HealthSouth Corp., was sentenced to three months in jail today by a U.S. District judge in Birmingham. Beam was also fined $10,000 and ordered to forfeit $275,000. Although Beam was facing up to 30 years in jail and fines of $1 million after pleading guilty to bank fraud, government lawyers had requested leniency because he provided investigators with information about accounting fraud at the company.
Former HealthSouth CFO receives 3 months in jail Modern Healthcare August 25, 2005
Sep 2005
Former HealthSouth Corp. finance chief Weston Smith, who blew the whistle on the accounting scandal that rocked the company, on Thursday was given 27 months in prison - the stiffest sentence for any executive involved in the fraud.Smith, one of five former HealthSouth chief financial officers who pleaded guilty to fraud charges, was also ordered to forfeit $1.5 million in ill-gotten gains and will spend one year on probation after his release.
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One of Smith's lawyers expressed deep frustration at the prison term given his client's participation in helping the government uncover the years of bogus accounting at HealthSouth."I believe with all my heart that if [former Chief Executive] Richard Scrushy had been convicted, I wouldn't be here today," Bill Baxley said.
HealthSouth Whistle-Blower Sentenced in Fraud : The former CFO is given 27 months in prison, the stiffest sentence for any former executive. LA Times (Reuters) September 23, 2005
Dec 2005
William Owens, a former chief financial officer and briefly chief executive officer at HealthSouth Corp., Birmingham, Ala., was sentenced to five years in prison for his role in massive accounting fraud at the company.
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He is the last to be sentenced among five former HealthSouth CFOs who pleaded guilty in connection with the scheme, and his sentence, handed down by a U.S. District Court judge in Birmingham, was the longest.Owens is contesting the government's request that he forfeit $12 million in assets, and a hearing likely will be scheduled for late January, a court clerk said.
Ex-HealthSouth CFO gets five-year sentence Modern Healthcare December 9, 2005
Dec 2005
Judge Sharon L. Blackburn of Federal District Court in Birmingham spoke extensively about Mr. Owens's assistance before giving him the prison term along with two years of probation. Despite his "unprecedented" cooperation, the judge said, the sentence had to be strict enough to deter other white-collar criminals."Corporate offenders are nothing but common thieves wearing suits and wielding pens as their weapons," Judge Blackburn said.
The judge did not impose a fine, citing Mr. Owens's inability to pay. In court, Mr. Owens said that he had lost everything, including his marriage, and he wept as he apologized.
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Of all the HealthSouth executives convicted in the conspiracy, Mr. Owens was the only one who participated from beginning to end.
Executive Gets 5-Year Term in Fraud Case The New York Times December 10, 2005
Dec 2005
"I made two very poor decisions in 2002. I learned a very painful and difficult lesson," he (Owens) said.Blackburn responded: "The fact that you have suffered weighs very little because it is a suffering of your own making."
Former HealthSouth exec gets year and day in jail Reuters December 21, 2005
Jul 2006
A federal judge in Alabama (in a separate civil action) has ruled that a former chief financial officer of HealthSouth, Weston L. Smith, must pay $6.92 million for his part in an accounting fraud at the chain of rehabilitation and surgery centers.Judge L. Scott Coogler ruled that Ms. Smith must pay a $4.9 million penalty and $2.02 million in interest, the Securities and Exchange Commission said yesterday in a statement.
The judgment requires that Mr. Smith first pay a $1.5 million fine related to his criminal conviction last year.
Former HealthSouth Executive Fined $6.92 Million BLOOMBERG NEWS July 21, 2006
The HealthSouth fraud was seen very differently by different judges and by the appeal court. The concern is that the standards employed in sentencing were not uniform and that some were much luckier than others.
Jul 2004
Of 10 people who pleaded guilty and have been sentenced in the multibillion dollar scandal, only Emery Harris, a former assistant controller, was sent to prison. He finished a five-month term in late June.Judges gave the others a combination of house arrest, probation, fines and forfeitures.
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Pam Bucy, a University of Alabama law professor following the HealthSouth case, called the sentences "unusual" for their apparent leniency."You have to wonder if there are problems with the cases instead of the judges," she said.
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Evidence showed that three people involved in the fraud - Angela Ayers, Virginia Valentine and Cathy Edwards - were little more than clerks following orders to enter bogus accounting numbers despite having lofty titles like vice president. Another, Catherine Fowler, made wire transfers to falsify a stock sale, also on orders from superiors."There were a couple in that group that I was surprised were even charged," said Jones. "They were pretty low on the totem pole. They were taking marching orders
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Salter said there was one key difference in the cases - five people were sentenced by one judge, and five by another judge.
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The next five appeared before U.S. District Judge U.W. Clemon, who also accepted the government's call for lighter sentences but went a step further than Johnson and rejected all of prosecutors' calls for prison.
HealthSouth sentences raise questions about punishment Associated Press Jul. 05, 2004
Jun 2005
Appeals court rules that the trial judge did not give any reasons for his ''extraordinary departure'' from federal sentencing guidelines.
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The court has vacated the sentences of former chief financial officer Michael Martin and former senior vice president for tax Richard Botts, ruling that the lower-court judge did not give any reasons for his "extraordinary departure" from federal sentencing guidelines, according to The Birmingham News.
HealthSouth Execs to Be Resentenced CFO Magazine <http://www.cfo.com/> June 23, 2005
Sep 2005 (after Scrushy's acquittal)
A Federal judge on Tuesday resentenced a former HealthSouth Corp. <HLSH.PK> chief financial officer to one week in prison and affirmed a probation sentence for a lower-level company executive.
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Former HealthSouth finance chief Michael Martin was now sentenced to a week in prison on top of the original five years of probation. He must also pay a fine of more than $2 million.
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The circuit court judge in Birmingham who presided over both cases, U.W. Clemon, maintained his probation sentence on Richard Botts, a former vice president in the HealthSouth tax department, who had pleaded guilty to conspiracy, mail fraud and falsifying records.
Ex-HealthSouth exec resentenced to jail Reuters September 20, 2005
May 2006
A federal appeals court ruling may send Malcolm McVay to prison after all, according to the Daily Business Review, a South Florida-based legal and business newspaper.
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That (Judge Clemon's) sentence was set aside on Friday by a three-judge panel of the 11th U.S. Circuit Court of Appeals, which ruled that "the district court's consideration of factors unrelated to substantial assistance was improper," according to the Review. "Moreover, under the facts and circumstances of this case, the district court's single mention of the government's substantial-assistance motion alone did not warrant the extraordinary departure granted in this case."
Ex-CFO of HealthSouth Faces Resentencing : Home detention and probation were an ''extraordinary departure'' from federal criminal sentencing guidelines, an appeals court has ruled. CFO Magazine <http://www.cfo.com/> May 9, 2006
Jul 2006
A federal appeals court, for a second time, threw out a prison sentence for Michael Martin, the former finance chief for HealthSouth, calling the sentence too lenient for his role in a $2.7 billion fraud at the company.The United States Court of Appeals for the 11th Circuit in Atlanta reassigned Mr. Martin's case to a new judge. The three-judge panel criticized Chief District Judge U. W. Clemon's initial decision to sentence Mr. Martin to five years' probation, and then to one week in jail after his first reversal by the court.
HealthSouth Sentence Rejected Again BLOOMBERG NEWS July 12, 2006
Sep 2006
Michael Martin, former chief financial officer at HealthSouth Corp., Birmingham, Ala., was sentenced to 36 months in prison and two years' supervised release for his part in multibillion-dollar accounting fraud at the company, according to the U.S. attorney's office in Birmingham. The sentence was the third for the former CFO, who was the government's key witness in its unsuccessful criminal case against former HealthSouth Chief Executive Officer Richard Scrushy. Martin, 46, initially received five years' probation and two years' supervised release, in addition to being ordered to pay a $50,000 fine and about $2.4 million in restitution. After the government appealed, the probationary period was replaced with seven days in prison. The government appealed the second sentence, contending it was still too light. "Today, the court imposed a just sentence that struck a balance between the fact that Mr. Martin provided substantial assistance to the government throughout our investigation of the fraud at HealthSouth and the serious nature of his offenses," the U.S. attorney's office said. Martin will begin his prison term Oct. 12. At deadline, an attorney for Martin was unavailable for comment.
Former HealthSouth CFO gets three years' prison Modern Healthcare September 13, 2006
Former HealthSouth chief financial officer Malcolm "Tadd" McVay was sentenced Thursday to five years' probation, the same sentence that an appeals court threw out last year.
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After prosecutors objected to Clemon's hearing the case a second time, he recused himself in favor of U.S. District Judge Inge Johnson, who presided over Thursday's resentencing.On this occasion, prosecutors sought a prison term of 28 months, according to the Birmingham News.
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Judge Johnson put it differently; she took special note of McVay's financial expertise, which was critical to the prosecution's ultimately unsuccessful case against Scrushy, according to the News. HealthSouth's co-founder, former chairman, and former chief executive officer was acquitted by a jury on all counts in 2005."The one person the government still believes was responsible for the whole thing was acquitted," Johnson reportedly stated during the hearing. "The irony of the whole situation is that the people below him who pleaded guilty are the ones winding up with various sentences."
HealthSouth CFO Avoids Prison, Again CFO.com February 23, 2007
This section documents the charges, trials and convictions of others caught up in the HealthSouth fraud scandal in more detail. Some are also referred to in the sections above.
Jason Brown
Jul 2003
Brown, 34, earlier this month became the 12th one-time executive at HealthSouth to reach a plea agreement in an investigation into claims the company overstated earnings by $2.5 billion. He is accused of falsifying documents in a scheme that included HealthSouth's failure to report its sale of $27 million worth of stock in another company in 2001. The stock allegedly was kept on the books, inflating HealthSouth's assets.
Former HealthSouth VP pleads innocent http://www.nj.com (The Associated Press) July 17, 2003
Jul 2003
Eleven former HealthSouth executives, including all five ex-chief financial officers, have pleaded guilty to criminal fraud charges and agreed to cooperate with investigators.
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Brown was accused of fraudulently reporting $27 million worth of stock as an asset in a 2002 financial filing to the government when, prosecutors allege, it had already been sold.The charges also allege that Brown provided a bogus spreadsheet for delivery to HealthSouth auditors, and that he altered HealthSouth's volume records for the third quarter of 2002 before the fraudulent figures were disseminated to analysts and the public.
HealthSouth Exec Pleads Not Guilty 'at This Time' Reuters Jul 17, 2003
Aug 2003
Jason Brown, former vice president of finance, had changed his plea to guilty before Judge Sharon Lovelace Blackburn to charges of conspiracy to commit securities fraud, falsifying books and records and wire fraud.
Ex-HealthSouth Execs Enter Guilty Pleas Reuters August 27, 2003
Dec 2005 (after Scrushy acquittal)
A former HealthSouth Corp. <HLSH.PK> finance executive was sentenced to a year and a day in prison on Wednesday for his part in the multibillion-dollar accounting fraud that rocked the company.
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He was also ordered to serve two years of supervised release following his prison term.
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"The magnitude of the fraud is mind boggling," said Blackburn, adding she was sorry the sentences of the others handed down by different judges were not more severe.
Former HealthSouth exec gets year and day in jail Reuters December 21, 2005
Richard Botts
Botts was one of those given a lenient sentence - one which became the subject of appeal and dispute between judges (see section above for details)
Jul 2003
Richard Botts, the senior vice president for finance-tax, was charged with conspiracy to commit securities fraud and mail fraud for filing and mailing false state and federal tax statements involving company income and assets.The charges against Botts involved the Internal Revenue Service in the growing HealthSouth scandal for the first time.
Two More Ex-HealthSouth Execs to Plead Guilty Reuters Jul 31, 2003
Jul 2003
Richard Botts, the Senior Vice President for Tax at HealthSouth Corp., has agreed to plead guilty to conspiring to commit securities fraud falsifying books, and mail fraud.
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Botts, who went to work at HealthSouth's tax department in 1998, was in charge of the company's tax returns, according to the government's charges. He filed federal returns in 2001 and 2002 that concealed the fact that assets had been inflated to artificially boost earnings, prosecutors charged.
2 at HealthSouth to plead guilty : Latest plea deals in fraud case show inquiry widening Press Release WWW.USDOJ.GOV JULY 31, 2003
Jun 2004
After McVay's hearing, Clemon issued nearly the same terms for Richard Botts, a former senior vice president for taxes at HealthSouth who admitted filing false tax forms to hide the fraud. The lone exception: Botts was ordered to forfeit more money -- $265,00
Two HealthSouth Ex-Execs Sentenced LA Times (Associated Press) June 3, 2004
Jul 2003
Will Hicks, Vice President of Investments at HealthSouth Corp., has also agreed to plead guilty to conspiracy to make false statements to auditors and maintain false books and records.
2 at HealthSouth to plead guilty : Latest plea deals in fraud case show inquiry widening Press Release WWW.USDOJ.GOV JULY 31, 2003
Aug 2003
Will Hicks admitted telling auditors that HealthSouth had a $13-million stake in assisted-living facilities that he knew was worthless
Former HealthSouth Exec Admits Lying Los Angeles Times August 29, 2003
Sep 2005 (after Scrushy acquittal)
Earlier Thursday, U.S. Circuit Court Judge Robert Propst sentenced Will Hicks, HealthSouth's former vice president of investment, to three months of home detention, along with a $2,500 fine and forfeiture of $50,000. Hicks had pleaded guilty to conspiracy to make false statements to auditors and maintain false books and records.
HealthSouth Whistle-Blower Sentenced in Fraud. LA Times (Reuters) September 23, 2005
Bennet was investigated and charged but continued to deny involvement. The case against him was withdrawn without any explanation.
Aug 2003
The U.S. Department of Justice is investigating accounting fraud at HealthSouth and James Bennett's activities there before he left three years ago, Bennett's lawyers said in a filing on July 25.
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"Jim Bennett was on the operations side of this. He was not involved in finance or accounting and simply was not a participant in anything that was going on out there and has no knowledge of anything that was going on out there," said Long, who is representing Bennett in insurance litigation related to HealthSouth. "He was running a hospital/rehabilitation operation.
Ex-HealthSouth President Under Probe: Court Filing Reuters August 25, 2003
Aug 2003
HealthSouth said Bennett, who also served as chief operating officer, left the company in July 2000 "to pursue other opportunities and spend more time with his family."
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Bennett now serves as chairman of Pathology Partners, a Dallas company that operates labs that perform blood and tissue tests for surgery centers and hospitals.Scrushy was an investor in Pathology Partners, whose board members once included Will Hicks, a HealthSouth executive who has agreed to plead guilty to making false statements to auditors and falsifying financial records.
Former HealthSouth president's lawyers says he's target of probe The Miami Herald (Associated Press) Aug. 28, 2003
Feb 2005 - charged
In other legal news, a former president and chief operating officer of HealthSouth Corp., Birmingham, Ala., became the first former employee of the company accused of insider trading and the 18th charged in connection with a $2.6 billion accounting fraud scandal. Prosecutors filed 38 counts -- including 30 related to insider trading -- against James Bennett, 47, HealthSouth's president and COO from 1995 to 2000. If convicted, Bennett would face up to 350 years in prison, $33 million in fines and forfeiture of $28.1 million.
Alvarado case nears end; more HealthSouth charges Modern Healthcare February 3, 2005
Feb 2005
Bennett, 47, was accused of fraud, conspiracy, insider trading, money laundering and lying to the FBI in a scheme in which he sold company stock worth about $17.4 million, according to a statement from prosecutors.Testimony in Scrushy's trial has indicated Bennett knew of the scam, in which 18 people have now been charged. Fifteen have reached plea deals and are expected to testify in Scrushy's trial.
Scrushy Jury Sees Video of HealthSouth CEO Forbes February 4, 2005
Jul 2005 Case dropped
Federal prosecutors asked a court to throw out an indictment accusing a former HealthSouth Corp. president of fraud in a huge accounting scandal at the medical services chain.In a one-sentence motion filed late Monday, the U.S. attorney's office said it wanted to dismiss the case against James P. Bennett, who denied any wrongdoing.
HealthSouth Prosecutors Drop Charges The Washington Post (Associated Press) July 19, 2005
Catherine Fowler
Fowler participated in the fraud but did not believe that Scrushy was involved.
Sep 2003
Catherine Fowler, a former Vice President of Treasury and Cash Manager at HealthSouth Corp., has been charged in an information with conspiracy to deceive auditors and maintain false books and records. The defendant has also agreed to plead guilty to the charges outlined in the information filed today in U.S. District Court in the Northern District of Alabama.
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Fowler, in a court filing setting forth her factual basis for the plea agreement, admitted that she participated in a scheme to create a paper trail to provide to HealthSouth's auditors which would falsely and fraudulently give the appearance that HealthSouth had sold its stock in a publicly traded company in 2002, when, as the conspirators well knew, the stock had been sold for more than $27 million in 2001.Fowler attended a meeting with senior officers where the stock manipulation scheme was discussed. In furtherance of the conspiracy, Fowler also sent a series of wire transfers from HealthSouth's investment account in New York to another HealthSouth operating account in Birmingham, Alabama for the purpose of generating false back-up documentation to support the bogus stock transactions.
FORMER HEALTHSOUTH EXECUTIVE CATHERINE FOWLER AGREES TO PLEAD GUILTY TO CHARGES OF CONSPIRACY TO DECEIVE AUDITORS AND MAINTAIN FALSE BOOKS AND RECORDS US Government Release SEPTEMBER 26, 2003
Dec 2003
Latest to plead guilty was a former vice president, Catherine Fowler, who said she did not believe Scrushy was involved in the accounting fraud when asked by Judge U.W. Clemon.
Scrushy trial rescheduled to start Feb. 2 Modern Healthcare's Daily Dose Dec. 3, 2003
Jun 2004
An eighth former executive of the HealthSouth Corporation escaped prison time for fraud on Thursday as a judge rejected government claims that her actions led to millions of dollars in losses.
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While prosecutors requested six months imprisonment, Judge Clemon sentenced Ms. Fowler to two years on probation and fined her $5,000.
Probation and Fine in HealthSouth Case New York Times June 4, 2004
Crumpler was the only executive, other than Scrushy, who pleaded not guilty to involvement in the accounting fraud and who went to trial by jury to be convicted.
Dec 2004
The U.S. attorney in Birmingham, Ala., filed three counts of conspiracy and securities fraud charges against Sonny Crumpler, a former HealthSouth Corp. employee, in connection with the $2.6 billion accounting scandal that occurred at the Birmingham-based company.In a news release, the government said Crumpler, 44, held various positions from 1986 to 2000 at HealthSouth, including working as a controller of a division. Crumpler in 2000 became chief financial officer for Source Medical Solutions, a company started by HealthSouth, but remained on the HealthSouth payroll until October 2002, the release said, contending that Crumpler knowingly signed financial statements that inflated how much Source Medical owed HealthSouth.
If convicted of all charges, Crumpler faces a maximum sentence of 15 years in prison and more than $1.25 million in fines.
Former HealthSouth division controller charged Modern Healthcare December 30, 2004
Nov 2005 (after Scrushy acquittal)
A former HealthSouth Corp. executive was convicted Friday of conspiracy and lying to auditors for his role in a $2.7 billion fraud at the rehabilitation chain.Hannibal Sonny Crumpler was only the second person to stand trial in the fraud. The first, fired CEO Richard Scrushy, was acquitted in June.
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Besides 15 years imprisonment and more than $1 million in fines, prosecutors are asking a court to make Crumpler turn over $2.2 million in assets they claim he made from the earnings overstatement.
Ala. Jury Convicts Ex-HealthSouth Exec Washington Post (Associated Press) November 18, 2005
Jun 2006
The only HealthSouth Corp. executive convicted by jurors in a $2.7-billion fraud was sentenced to eight years in federal prison Thursday, the longest term imposed in the huge accounting scam at the rehabilitation chain.
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Crumpler's attorneys said they may appeal because of the harshness of the penalty, and prosecutors said they would challenge it as being too lenient.
HealthSouth Executive Sentenced to Eight Years: The only person from the company convicted in a jury trial receives the harshest term of anyone in the firm's accounting scam. LA Times (Associated Press) June 16, 2006
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This page first created Oct 2007 by
Michael
Wynne
