The Healthsouth Corporation Inc.

One of the main defenses E&Y took during the early stages of the HealthSouth suit was the fact that the SEC had no well-defined rules with regards to audit-related practices. Another defense was the mere fact that E&Y never faced a criminal indictment for the HealthSouth fraud. This was mainly due to the statute of limitations placed on securities fraud. It sets it at the earlier of (a) 2 years after the discovery of the facts constituting the violation or (2) 5 years after such violation. Thus, the DOJ was unable to file criminal charges against the firm because the partner on the audit (G. Marcus Neas) was “unaware” of the fraud in 1993.

In 1984, Richard Scrushy founded HealthSouth in Birmingham, Alabama. Scrushy was the company’s Chairman and Chief Executive Officer (CEO) when the company went public in 1986. HealthSouth grew quickly over the next several years. Shortly after HealthSouth went public, it is alleged that Scrushy instructed senior staff to materially inflate the company’s earning to match expectations. In 2002, the first sign of troubles occurred when Scrushy sold $75 million of HealthSouth stock days before HealthSouth announced a large loss. After this the SEC began to investigate if any insider trading laws had been violated. In 2003,

Richard Scrushy defrauded, stakeholders, stockholders, and the community out of millions of dollars. His deceptive, unethical, and commanding behavior was the stone that caused the biggest misappropriation avalanche of all time. We must consider this question, how is corporate cheating happening and who is heading the deception? Behind every crime, there is a ringleader or a group of individuals "calling the shots." In this case, Scrushy was the one who told his "family meeting members" to "fix" financial records, so HealthSouth to meet or exceed the business financial goals. A person from the beginning may have the objective to cheat; others get sucked into the whirlpool of white-collar crime.

HealthSouth Corporation was incorporated in January 1984 in Birmingham, Alabma by the founder Richard M. Scrushy. HealthSouth Corporation is the leading provider of medical rehabilitation health care and outpatient surgery services in the United States. Richard M. Scrushy was the former CEO& Founder of HealthSouth Corporation, and there were 5 CFO which were Aaron Beam, Weston, Smith, Bill Owens, Michael Martin and Tadd Mcvay.

HealthSouth grew rapidly during the 1980’s and 1990’s. This growth was largely due to acquisitions. HealthSouth owned more than 330 hospitals worldwide. It was also during this time that Scrushy became known as one of the highest paid CEOs in the United States.

The story of HealthSouth begins with two of the most well know founders. Richard Scrushy was a bold, charismatic man of middle-class beginnings. He would rise from a mason to one of the highest earning CEO’s in the country due mainly to his ability to drive, charm, and manipulate those around him. Driven by the desire to attain wealth and status Scrushy was hired in at LifeMark where he rose through the ranks as a result of his unbridled competitive nature and workaholic tendencies.

The executive branch is a very powerful branch of the government. Decisions made from this branch affect all Americans. It is important for the people to pay close attention to congressional deliberations, as well as administrative decisions in order to be aware of the impact of these decisions on Americans and to ensure the executive is accountable for these decisions.

After years of economic struggle, Alabama Governor Don Siegelman was convicted, along with Chief of Healthsouth Richard Scrushy of fraud. While being charged of lying about millions of dollars of Healthsouth’s finances, they were in the middle of building a new location. This partially finished beauty was abandoned for over 10 years before it was purchased to be Grandview Medical Center. This overlooked building would soon become one of the most advanced hospitals in the country.

HealthSouth Corporation was one of the largest publicly traded owners of rehabilitative hospitals within the Untied States and paved the way for its industry. However, prior to 2003 the company had a very dark secret: fraud. In 2003 HealthSouth was accused of making $2.7 billion in false journal entries in the company’s system (Helios, 2013). These false entries allowed the corporation to inflate its earnings and revenue. While the corporation was dabbling in a fraudulent, aggressive account system, auditors were unable to detect the extent of the fraud occurring. If not for Michael Vines and Weston Smith, HealthSouth Corporation might have continued its false entries and continued deceiving shareholders and even Wall Street itself. HealthSouth serves as a historical example of how corporate culture can use fraud and deception schemes to not only rationalize what it is doing, which is an element of the fraud triangle, but also encourage fraudulent financial statements.

BlueCross BlueShield Association (BCBSA) is an independent health insurance association which is founded in 1929. It is made up by 37 different health insurance organizations and companies in the United States. They directly or indirectly provide health insurance to over 100 million Americans. Under the Association, it has two famous products. One is Health Maintenance Organizations (HMOs), and the other is Preferred Provider Organization (PPOs). Most American who has health insurance from their employer are enrolled either an HMO or PPO. All of these managed care plans go through the health plan’s network, which contract with doctors, health care providers, clinics, and hospital.

As aforementioned, the Sarbanes Oxley Act’s requirements reduced fraud and increased corporate governance across both for-profit and not-for-profit organizations. That said, the SOX act has, in my opinion, been absolutely effective in regulating ethical behavior among for-profit as well as not-for-profit health organizations. The establishment of this law has contributed greatly to the investigations of fraud among health care organizations. According to attorneys at Post and Schell, several federal, criminal investigations have been started after the law’s enactment, making it clear that healthcare organizations were within the same scope of corporate governance and would not be immune from the same criminal prosecution. In 2003, United Memorial Hospital in Michigan—a not-for-profit healthcare organization—signed a guilty plea in federal court admitting to fraud for over use of pain management surgical procedures after the death of a patient. Even though sentencing has been deferred, this admittance of and plea agreement contained many of the corporate “not-tos” from the board down. The system of reporting for the hospital, its internal audit investigation, conflict of interest disclosures and response to complaints were all held as objects of interrogation (Levine & Short, 2004).

Rising costs of healthcare is a valid concern for many households in America. A factor in the cost of healthcare insurance is fraud. Fraud is often very difficult to detect. The magnitude of healthcare fraud is unknown. Initial reimbursement and payment and billing timeframe of 90 days allows for fast payment of services, however, many times before there is an indication of fraudulent billing the company has closed up and moved on. Fraud in American healthcare, costs American’s millions perhaps even billions of dollars annually. Without doubt, behind every act of fraud lies a lapse in ethics. This paper will review several pieces of literature to look

The majority of this revenue, however, was fraudulently created. Then CFO, Weston Smith, talks in detail about the fraudulent activity going on at HealthSouth during his 16 year career

Hawaii Health Systems Corporation has twelve facilities across five different islands with 1,275 licensed beds. It consists of five regions: East Hawaii, West Hawaii, Kauai, Maui and Oahu. HHSC is listed as the fourth largest health system in the country and the fourth largest on the islands, outside of Oahu (www.hhsc.org, 2014). In addition, it is the only provider of acute care on Maui and Lanai. In the West Hawaii Region, HHSC operates two facilities, Kona Community Hospital and Kohala Hospital. Kona Community Hospital, opened in 1914, operates a 94 bed acute care facility with a fully operational 24 hour Emergency Room. The East Hawaii region operates three facilities. The largest facility is located in Hilo, with Ka’u being a

As HealthSouth started reviving from the scandal, Scrushy’s problems were only starting. In October of the year 2003 Scrushy faced more than 85 charges, including charges that he falsified accounts at the HealthSouth’s company which lead to $2.7 billion fraud of investors, by reporting conjured