Reply #17: HealthSouth to Pay $3 Million in U.S. Accounting Fraud Case

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http://www.nytimes.com/2006/05/19/business/19health.html?ex=1305691200&en=a1014c359c33a65f&ei=5088&partner=rssnyt&emc=rss

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BIRMINGHAM, Ala., May 18 — The Justice Department announced Thursday that HealthSouth, the chain of outpatient rehabilitation hospitals, would pay $3 million and avoid prosecution over a giant accounting fraud discovered at the company three years ago.

"Prosecution would likely have pushed this company into bankruptcy," Alice H. Martin, United States attorney in Birmingham, said in a statement. "By taking this nonprosecution approach, jobs of thousands have been saved, and the company has an opportunity to rebuild shareholder value."

HealthSouth, which agreed to accept responsibility for crimes committed by its executives, must pay the money to the United States Postal Inspection Service's consumer fraud division, enact more stringent internal controls and commit no other illegal acts for three years. In essence, the company is on probation until 2009, Ms. Martin said.

The decision brings an end to an investigation that began in March 2003, when the investigators raided the company's headquarters. Since then, 15 executives, including 5 chief financial officers, have pleaded guilty or been convicted of participating in the fraud. According to more recent company estimates, the fraud's impact was greater than $4 billion.

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