Scrushy is the co-founder and recently fired chairman of HealthSouth Corp. of Birmingham, Ala., the largest U.S. operator of rehabilitation hospitals and clinics, with about 1,700 health centres in the United States and abroad, some 51,000 employees and 2002 revenues of $4.3 billion.
Last month, Scrushy and HealthSouth were accused by the U.S. Securities and Exchange Commission of overstating company profits by at least $1.4 billion over the past four years.
A former executive has testified HealthSouth inflated profits a further $1.1 billion in 1997 and 1998. Federal investigators say the pattern of investor deception at HealthSouth stretches back almost to its inception about two decades ago.
And in a separate action, the company faces U.S. justice department allegations of defrauding Medicare, a federal health program. Scrushy was recently deposed by his hand-picked board of directors, and HealthSouth has laid off hundreds of employees as it scrambles to avoid a bankruptcy protection filing.
The Scrushy scandal does have all the elements of an Enron saga. They include accusations of repeated balance-sheet manipulation to inflate the value of company shares held by top executives, and alleged stock sales by those same executives ahead of bad news that caused the stock to plummet.
Plus a cult-like fear of the CEO by employees who say they routinely jiggered the books on command from higher-ups. And who, in fear of a verbal beating from Scrushy, also pinched the company's pennies - often at the expense of patient care - while the CEO accumulated a trove of creature comforts.
Scrushy acquired four mansions, at least seven corporate jets, nearly three dozen cars, including the inevitable pair of Rolls-Royces and a Lamborghini, and a 92-foot yacht, the "Chez Soiree," for entertaining the CEO's celebrity friends, like basketball superstar Michael Jordan and company mascot Jason Hervey, former teen star on TV's Wonder Years. There is, as you imagine, a ton of overhead in the above - spending that didn't go into patient care, that diminished returns to ordinary shareholders, and was in part financed by taxpayers as deductible business expenses.
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http://ktownhealthcoalition.tripod.com/press/2003/april/profits.htmDid the board know:- The new chairman and remaining directors deny knowledge of the fraud. Is this credible? Perhaps they simply chose not to know at the time. They have fired Scrushy and claim that the company is now different. We should remember Columbia/HCA. Richard Scott its chairman got all the blame and Thomas Frist all the credit for not agreeing with him and then putting Columbia/HCA back on the straight and narrow. Most of the Qui Tam whistle blower actions which set off the US $1.7 billion fraud settlement were initiated against HCA while Thomas Frist was its chairman. This was before Richard Scott's Columbia merged with HCA. The response is likely to be similar in HealthSouth.
http://www.uow.edu.au/arts/sts/bmartin/dissent/documents/health/healthsouth_culture.htmlThat was rich, considering the fact that Frist's Senate service has been all about profiting from the suffering of the nation. By blocking needed health care reforms, pushing for tort reforms that would limit malpractice payouts and supporting moves to privatize Medicare, Frist has pumped up his family's fortunes at the expense of Americans who are lack access to health care. As Mother Jones explained some years ago, "Some companies hire lobbyists to work Congress. Some have their executives lobby directly. But Tennessee's Frist family, the founders of Columbia/HCA Healthcare Corp., the nation's largest hospital conglomerate, has taken it a step further: They sent an heir to the Senate. And there, with disturbingly little controversy, Republican Sen. Bill Frist has co-sponsored bills that may allow his family's company to profit from the ongoing privatization of Medicare."
Frist has delivered well for his family. That $800-million stake in HCA that his father, and brother had at the time Frist was elected in 1994 shot up in value over the decade that followed. Frist's brother, Thomas, has moved up steadily on the Forbes magazine list of the world's richest people in recent years. In 2003, Forbes estimated that Thomas Frist Jr. was worth $1.5 billion. According to Forbes: "source: health care."
So Bill Frist certainly knows a thing or two about profiteering from human misery.
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