When Health Goes South

Background
In 2003, HealthSouth, one of the most dominant players in outpatient replenishment and surgery became the center of a incarnate fraud turd exposed under the juvenilely enacted Sarbanes-Oxley Act (SOX). SOX, which set new standards in financial reporting of all U.S. public companies, was enacted in July 2002 in response to a number of major corporate and accounting scandals such as Enron and WorldCom, that had cost investors billions of dollars (Wang, Lin, and Ju, 2009). CEO and Co-founder of HealthSouth, Richard Scrushy, was allegedly the mastermind behind an accounting scheme that inflated gelt by as much as 4700% in effect to deceive Wall Street and control the company course price (SEC, 2003). Between the period of 1999 and 2002, the companys remuneration were overstated by $1.4 billion (SEC, 2003).
HealthSouths accounting problems began to scarper in late 2002 after Scrushy sold $75 one thousand million in stock shortly before the company post a large loss (Wynne, 2007). This drew the attention of the already suspicious Securities and Exchange Commission (SEC), which moved in to probe documents and question employees.



March 18, 2003 FBI agents executed search warrants at the companys home base after the companys Chief Financial Officer, William Owens, agreed to wear a wire in an attempt to get Scrushy to talk active the fraud (Wynne, 2007). The following day they raided the companys headquarters and commenced civil actions against HealthSouth and Scrushy, followed before long by an action against Scrushy alleging insider trading (Wynne, 2007). Scrushy and 16 of HealthSouths executives became the graduation to be charged under the SOX provisions.

HealthSouth employees, including all five designer CFOs, claimed that Scrushy was not only aware of the scheme; he had instructed senior executives and accountants to fix or manipulate the earnings whenever they spend short of Wall Streets expectations (Ibrahim, 2009, p.1).
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