© D.L. Crumbley
HealthSouth’s Richard Scrushy
The beauty of acquisition accounting – perfectly legal - - was the room it allowed for all sorts of gimmicks and restatements, masking true operating performance.
Enter Richard Scrushy (HealthSouth). Allegedly King Richard and 11 other co-conspirators were called the “family.” From 1997 through mid-2002, the SEC says HealthSouth overstated its earnings by $2.5 billion - - 2,500% higher than true earnings. [By 1/21/04, $2.5 to $4.6 billion.]
Scrushy allegedly met monthly with company financial executives, and he would say, “If we are not making the numbers, go figure it out.”
Lower-level bean counters then inflated assets and used other creative accounting to plug the difference. They overstated profits by at least $1.4 billion by billing Medicare for physical-therapy services the company never performed. They submitted falsified documents to Medicare to verify the claims.
Source: John Helyar, “The Insatiable King Richard,” Fortune, July 7, 2003, p. 84.