Physician's Money Digest, May 15 2003, Volume 10, Issue 9

HealthSouth, the nation's largestprovider of outpatient rehabilitationand surgery services, has been accusedby the SEC of "massiveaccounting fraud." According to theSEC, recently fired HealthSouthCEO Richard Scrushy, a former gasstation attendant, ordered his CFOs(there have been 4 since October1997, 1 of whom has pleaded guiltyto fraud) to barbecue the books tothe tune of $2.5 billion in fake profitssince 1999. It's alleged that theearnings manipulation goes back asfar as 1986, shortly after the companywent public. The SEC maintainsthat the fraud was designedto keep Wall Street analysts in thedark about the company's truefinancial picture and to bolster itsshare price. HealthSouth shareholdershave joined the fray, too,accusing Scrushy of unloading halfhis shares in the company justweeks before an earnings warningsent the stock into a tailspin. With51,000 employees, HealthSouth isthe only health care company operatingin all 50 states. It has 1229outpatient rehabilitation clinics,203 outpatient surgery centers, 117rehabilitation hospitals, and 127diagnostic imaging centers.