Upon looking around at various companies at the height of their business operations, I found that HealthSouth, based out of Birmingham, Alabama, caught my attention. Known for being the largest publicly listed healthcare company in the U.S. at one point, HealthSouth provides outpatient rehabilitation centers, surgical centers, and various diagnostics. In 1986, CEO and founder Richard Scrushy led HealthSouth through its transition to a publicly held company; HealthSouth was the largest publicly listed healthcare company in the U.S. With only minimal research, I discovered that Richard Scrushy was instrumental in the falsification of several financial reports, while also selling $100 million in HealthSouth stock only days before a huge loss was recorded. In 1998, the company was accused of violating the Securities Exchange Act, and under thorough investigation, Richard Scrushy was charged on 36 accounts of fraud for inflating earnings by over $1.4 billion. With such a strong presence in the healthcare industry, it is a shame the CEO abused his power and HealthSouth’s internal controls to falsify reports to prove a higher financial standing to all investors.
Some sources used so far:
- https://bucknell.worldcat.org/search?q=Healthsouth&qt=owc_search&scope=0&oldscope (exploring articles and court cases based on ‘HealthSouth’ search results)
Based on the fraudulent actions during the life of the business, there are some similarities between Enron and HealthSouth. Though very different industries, internal controls and authoritative powers conflicted with business operations, allowing for fraudulent practices to continue for several years. Based on HealthSouth, I plan on talking about ethics from two lenses: deontology and justice. Deontology, as we know, is the school of ethics based on rules while following professional ethics or an ethical code. Similarly, I will speak about justice and whether the actions of Richard Scrushy were just, impartial, and fair. This case exposes much more than accounting fraud, but I will focus mainly on the incentives, risks, and potential rationalizations Scrushy had during his time at HealthSouth, and the aftermath of his fraudulent actions/decisions. With this in mind, I will conduct more researching on rationalizing fraudulent actions, corporate greed, tone at the top, and the effects of financial collapses on all stakeholders. I plan on exploring other sources using phrases or key words listed above.
- http://bucknell.worldcat.org/search?qt=wc_org_bucknell&oldscope=&q=deontology&scope=0 (deontology articles)
- http://bucknell.worldcat.org/title/fraud-bringing-light-to-the-dark-side-of-business/oclc/30472960&referer=brief_results (or other business-related fraudulent acts)
This paper is linked to accounting fraud and the laws, rules, regulations, and practices set in place by HealthSouth and other regulating bodies. I am interested in seeing what allowed for such errors in HealthSouth’s internal controls, and determining the tone at the top. My final paper will examine various companies faced with fraud-related problems and what specifically occurs in companies to allow such acts to take place. There are regulatory bodies in place, but all of the rules and laws in our nation cannot prevent fraud from developing within companies.