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Forensic Accounting, Forensic Techniques, and Fraud Detection Copyrighted 2001 D. Larry Crumbley, ... - page 238 / 352

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© 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.

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