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Timeline of Accounting Scandal at HealthSouth

Compiled by staff

Thursday, September 30, 2004; 12:33 PM
HealthSouth, the largest U.S. operator of rehabilitation-hospitals, is under investigation by the Securities and
Exchange Commission and the Justice Department for allegedly overstating earnings by $2.5 billion since 1999.
Fifteen HealthSouth employees, including all five former chief financial officers, have pleaded guilty to criminal
charges. Former CEO Richard M. Scrushy has denied wrongdoing. He will appear before the House Energy and
Commerce Committee on Oct. 16, but is expected to invoke his Fifth Amendment right against self-incrimination.
Scrushy has refused the company's request for his resignation and remains a non-active board member of
HealthSouth. SEC Charges HealthSouth

Sept. 29, 2004: Federal prosecutors announce new perjury and obstruction-of-justice charges against HealthSouth
Corp. founder Richard M. Scrushy, accusing him of lying to regulators and urging a subordinate to lie to support his
Sept. 28, 2004: A prosecutor says the government won't seek more prison time for former HealthSouth Corp.
assistant controller Emery W. Harris, who is to be resentenced after serving five months for fraud.
July 1, 2004: A grand jury indicts former HealthSouth Corp. executives Robert E. Thomson and James C. Reilly in
a bribery scheme involving the company's $50 million contract to run a hospital in Saudi Arabia.
Jan. 26, 2004: Lawyers for former HealthSouth Corp. chief Richard M. Scrushy files court motions that raise
questions about the fairness of the grand jury that indicted him and demanding more information from prosecutors.
Nov. 26, 2003: Ousted HealthSouth Corp. chief Richard M. Scrushy is ordered by a Delaware judge to repay $25
million in loans he took from the company in 1999.
Nov. 4, 2003: Ousted HealthSouth chief Richard M. Scrushy is indicted on charges that he directed a $2.7 billion
fraud designed to boost the company's stock price and to bankroll an extravagant lifestyle that included a
Lamborghini, a 92-foot yacht, and paintings by Picasso and Renoir.
Oct. 16, 2003: Richard M. Scrushy refuses to testify before Congress, angering lawmakers who accused him of
being at the center of an organization whose employees were intimidated and threatened if they challenged him.
July 10, 2003: The House Energy and Commerce Committee releases documents showing that UBS AG analyst
Howard G. Capek referred to HealthSouth as a "pig" that couldn't "collect and convert sales into cash" in a 1999 e-
mail message. The message was written just weeks after Capek appeared alongside a UBS investment banker at a
HealthSouth board meeting to help promote a deal to spin-off a portion of the company's business.
July 7, 2003: HealthSouth announces it will try to avoid bankruptcy by conserving cash and hiring experts to help
unload underperforming assets.
July 2, 2003: A UBS AG stock analyst who long maintained bullish ratings on HealthSouth resigns after UBS gave
congressional investigators an e-mail the analyst wrote in 1999 that appeared to contradict his publicly stated
opinion about the company.
June 11, 2003: The House committee investigating accounting fraud at HealthSouth asks the company's former
chief executive to produce a slew of information and documents.
May 21, 2003: Congressional investigators release a 1998 letter from an anonymous writer that warned auditors at
Ernst & Young of serious accounting problems at HealthSouth, about 4 1/2 years before regulators swooped down
on the Alabama company.
May 8, 2003: The House Energy and Commerce Committee demands that investment-banking giant UBS Warburg
turn over hundreds of documents as part of the committee's investigation into alleged wrongdoing at HealthSouth.
April 22, 2003: The House Energy and Commerce Committee begins an investigation into what auditors and board
members knew about questionable accounting and billing practices at HealthSouth.
March 31, 2003: HealthSouth fires Scrushy and its auditors as a third finance official pleaded guilty to criminal
fraud. Separately, the Securities and Exchange Commission filed civil charges of accounting fraud and insider
trading against all three finance executives.
March 26, 2003: William T. Owens, chief financial officer of HealthSouth, pleads guilty to doctoring financial
statements at the company, a week after its former chief financial officer pleaded guilty.
March 19, 2003: The Securities and Exchange Commission files civil fraud charges against HealthSouth and
Scrushy for allegedly duping investors into believing the company had met earnings targets.