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HealthSouthFactualBasisCplt8 2 04

HealthSouthFactualBasisCplt8 2 04

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Published by fruityloops
Healthsouth Scrushy Benjamin Ben Lorello William McGahan Bill
Healthsouth Scrushy Benjamin Ben Lorello William McGahan Bill

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Categories:Types, Research, Law
Published by: fruityloops on Aug 18, 2008
Copyright:Attribution Non-commercial

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03/04/2013

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 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ALABAMASOUTHERN DIVISIONIn re HEALTHSOUTH CORPORATIONSECURITIES LITIGATIONThis Document Relates To: All ActionsIn re HEALTHSOUTH CORPORATIONSTOCKHOLDER LITIGATIONThis Document Relates To: All ActionsIn re HEALTHSOUTH CORPORATIONBONDHOLDER LITIGATIONThis Document Relates To: All Actions)))))))))))))))Master File No. CV-03-BE-1500-SConsolidated Case No. CV-03-BE-1501-SCLASS ACTIONConsolidated Case No. CV-03-BE-1502-SCLASS ACTIONJOINT SECOND AMENDED CONSOLIDATED CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS [FACTUAL BASIS]
DEMAND FOR JURY TRIAL
 
TABLE OF CONTENTSPage
- i -INTRODUCTION...........................................................................................................................1The Scheme..........................................................................................................................3Ernst & Young’s Participation in the Fraudulent Scheme...................................................5Underwriters’ Knowing Involvement..................................................................................8Financial Fraud..................................................................................................................14Medicare Fraud..................................................................................................................15Passage of the Balanced Budget Act and Defendants’ Sale of Stock and Notes...............16Defendants Reinflate the Price of HealthSouth Stock.......................................................19Transmittal 1753................................................................................................................20JURISDICTION AND VENUE....................................................................................................30THE PARTIES...............................................................................................................................30Stockholder Plaintiffs.........................................................................................................30Bondholder Plaintiffs.........................................................................................................32Defendant HealthSouth......................................................................................................33Senior Officer Defendants.................................................................................................33Employee Defendants........................................................................................................40Director Defendants...........................................................................................................44Defendant Ernst & Young.................................................................................................49Underwriter Defendants.....................................................................................................51Additional Underwriter Defendants...................................................................................54Individual Underwriter Defendants...................................................................................59Summary of Claims Against the Defendants.....................................................................63Senior Officer Defendants’, Employee Defendants’ and Director Defendants’Involvement in Scheme..........................................................................................64
 
 Page
- ii -Insider Selling....................................................................................................................67Healthsouth’s Board of Directors Recklessly Allows the Misconduct to Occur and Continue Unabated..........................................................................................68OVERVIEW OF THE SCHEME..................................................................................................69HealthSouth’s False Financial Statements.........................................................................70The SARC Report Provides Further Details of the Accounting Misstatements................73Contractual Adjustments/Improper Classification of Expenses........................................75Improper Entries on Facilities’ Results..............................................................................77Acquisition Accounting.....................................................................................................80Improper Accounting For Bonuses....................................................................................81Investment Accounting......................................................................................................82Other Accounting Manipulations.......................................................................................84Former HealthSouth Executives Disclose Facts of Wrongdoing......................................89The Balanced Budget Act of 1997...................................................................................100HealthSouth’s Overbilling Fraud.....................................................................................106The
Qui Tam
Actions.......................................................................................................107The
 Devage
Action..........................................................................................................108The
 Darling 
Action..........................................................................................................111The
Mandel 
Action..........................................................................................................111The
Manning 
Action........................................................................................................111HealthSouth Employees Complained to Their Supervisors About the OverbillingFraud....................................................................................................................112Scrushy Knew that HealthSouth Was Improperly Billing Medicare When He SoldHis Stock..............................................................................................................115Scrushy Knew that Transmittal 1753 Would Have a Material Impact onHealthSouth’s Operations Before Selling His Stock to Repay His Loan............116

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