The Accounting Scandal of HealthSouth
HealthSouth Corporation is based in Birmingham, Alabama, it is the largest provider of rehabilitative health care services. It operates in 26 states in the United States of America and in Puerto Rico. HealthSouth provides rehabilitation hospitals, long term heightened care hospitals, outpatient rehabilitation satellite clinics and home health agencies. HealthSouth was found by Richard Scrushy in the year 1984 and was called Amcare, Inc. It opened its first facility in Arkansas and later on that year another one in Birmingham. In 1985 the company changed its name into HealthSouth Rehabilitation Corporation, in 1990 the company expanded to 50 facilities around the US. HealthSouth finished out in 1992 with $400 million and in 1993 the company made its first large acquisition when it bought 28 hospitals and 45 outpatient rehabilitation facilities from National Medical Enterprise for around $300 million in cash; this doubled the company’s annual revenue to $1 billion. Scrushy became one of the most paid CEO’s, from 95 to 98 Scrushy earned $8.3 million in salary, more than $23 million in bonuses, $4.8 million in stock option award and $700,000 in other compensations. By the year 2002 Scrushy owned 5.1% of HealthSouth shares, which equaled to $20.9 million of the company’s shares. HealthSouth is known for the massive accounting fraud that was discovered in 2003 and this accounting fraud almost led the company to bankrupt. Although HealthSouth emerged from this experience and has so far had a successful recovery, but the memory of the scandal is still and will always be fresh. HealthSouth problems started to show in the middle of 2002. Scrushy sold about $75 million of HealthSouth stock several days before the company announced those big losses, on top of that the 7.7 million shares that he sold between the year 1999 and 2001. The Securities and Exchange Commission started investigating in...
Please join StudyMode to read the full document