HealthSouth fraud impacts millions

You may have already heard a lot about Mr. Richard Scrushy, the founder and former CEO of HealthSouth Corp. Scrushy was indicted on 85 criminal counts alleging that he was the mastermind of an enormous corporate fraud involving money laundering, conspiracy, and securities fraud, that allowed him to pocket more than a quarter-billion dollars. The government wants him to fork over $279 million worth of his own personal assets, including a 92-foot yacht; a Rolls Royce Corniche and a Lamborghini; a nearly 22-carat diamond and platinum ring; aircraft; and paintings by Picasso, Chagall, Renoir and Miro.

HealthSouth is the largest provider of outpatient surgery, diagnostic imaging, and rehabilitation services in the United States. The multinational conglomerate operates more than 1,700 rehabilitation hospitals and other facilities across the country and in Australia, Puerto Rico, and the United Kingdom. In 2002, HealthSouth generated $4.3 billion in revenue, and employed 51,000 workers.

Scrushy is only the latest criminal to emerge out of HealthSouth’s unimaginably profitable boardrooms. Fifteen former executives at the company, including all five of its chief financial officers since the mid-1980s, have pleaded guilty to taking part in accounting tricks that misled investors and lenders, or they admitted to failing to file proper tax returns.

“In this sea of fraud, with 15 senior-level executives admitting fraud, is it possible that the board of directors and the accounting firm knew nothing about this?” asked Rep. Cliff Stearns (R-Fla.), during recent congressional hearings on the case. “Did they exercise their fiduciary duty and responsibility to shareholders?”

One might think this is making a profit “the old fashioned way,” much like robber barons during the Industrial Revolution. But recent history indicates (think Enron, WorldCom) that it is really not too much different than so many other present-day Fortune 500 corporations.

We might ask, “So what?” We go to work everyday and take the bus or train, or drive an old Chevy. We have no yacht to seize or Picassos to forfeit, and we still vastly overpay for health insurance and prescription drugs. Nothing has changed for us – as the corrupt company careens from one allegation of wrongdoing to another.

But it affects us. The company’s destruction, resulting from profit mongering, has led HealthSouth to lay off many thousands of workers whose lives and families have been thrown into disarray, and perhaps into hopelessness. Millions of families have had their health care disrupted or threatened as a result of the corruption at HealthSouth and the company’s subsequent “downsizing.”

In addition, consider that, as of Dec. 31, 2001, HealthSouth’s employee pension plan held approximately 3.3 million shares of HealthSouth stock. Now, following indictments of its top executives, including some who are pension trustees, HealthSouth stock is trading at a fraction of its previous value.

Healthcare is too important to leave to the arbitrary and mean machinations of everyday capitalism. We need a National Health Service like England and so many other countries have around the world. A National Health Service means no profits in health care, no health insurance companies to steal your money, and democratic control over the entire enterprise. People before profits! Let’s never be “Scrushyed” again!

The author can be reached at