7/7/2021 What happened - HealthSouth Scandal

HEALTHSOUTH SCANDAL

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WHO ARE HEALTHSOUTH

WHAT HAPPENED

HOW THEY DID IT     A downturn was     In 2003,

HOW THEY WERE happened in the Healthsouth was in
CAUGHT market in
1998, trouble and faced
PENALTIES largely influenced bankruptcy.
‘In the
by a Medicare middle of March
WHERE ARE THEY NOW
crackdown on 2003, the FBI and
REMEDIES AND fraud. However, the SEC raided
PREVENTION
HealthSouth HealthSouth's
CONCLUSION insisted that it headquarters. The
REFERENCES would not impact next day civil
on them. Since actions were
VIDEO
selling large commenced
MEETING MINUTES numbers of their against Scrushy
SITEMAP own shares, senior and
HealthSouth.
staffs believed that The company was
their profits would delisted from the
not be met. The stock exchange.
main trouble Shares, which
had
happened since exceeded US $30
1999. In order to early in 1998 now,
meet shareholders’ sold over the
expectation, counter for 14
Richard Scrushy, cents.’ (Michael
the founder of Wynne,
2009)
HealthSouth
Corporation     ‘In June 2005,
required to make Scrushy was
false
account. acquitted on
all 36
of the accounting
    As a result, the fraud counts
earning numbers against him, most
were notably one count
systematically in
violation of the
overstated by at Sarbanes-Oxley
least $1.4 billion Act. But in June
which is over 10% 2006, he was
of the company’s convicted on
total
assets. Then, bribery charges,
the scandal at having stood
HealthSouth accused of

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7/7/2021 What happened - HealthSouth Scandal

started to become arranging

evident in mid $500,000 in
2002.
In May campaign
2002, Richard donations in
Scrushy sold more exchange for a seat
than $75 million on a state hospital
worth of regulatory board.
HealthSouth
stock While this
and sold another executive
$25 million back unfortunately
to the Company. appears to have
By the third gotten away with
quarter of
2002, the
accounting
assets of scandal, he was
Healthsouth were ultimately found
overstated by at guilty of another.’
least $800 million. (Bhamwiki,
2012)
As a
result, the
government began

to pay attention to

the huge difference

between
the Michael
Wynne
number of actual (2009)
and reported profit HealthSouth
of Healthsouth. At Overview [online]
this time, the
scandal was not a http://www.bmartin.c
secret any more. [Accessed
25.11.
After that, share 2014]
prices of

Healthsouth
became extremely Bhamwiki(2012)
unstable.  HealthSouth
[online]
    At the end of
2001, Enron, one http://www.bhamwik
of the
world's title=HealthSouth
major electricity, [Accessed
natural gas, 25.11.2014]
communications,
and pulp and paper
companies, went
bankrupt because
of accounting
fraud, known since
as the Enron
scandal. Following
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7/7/2021 What happened - HealthSouth Scandal

the Enron scandal,

criminal
investigators
started looking at
accounting
practices in other
companies.
HealthSouth
became a target
towards
the end of
2002. The US
Securities and
Exchange
Commission
(SEC) started
investigating
insider trading.
However, Richard
Scrushy still sold a
large
number of
shares and
announced that
profits were
expected to fall.
He claimed
deceptively that
this was due to a
change in
Medicare funding.
However, it was
an
obvious deception
and Richard
Scrushy can not
gain trust by
investor. Share
value of
Healthsouth
plummeted and
Scrushy rode a
wave of
discontent. 

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