BUSINESS

HealthSouth fraud figures higher than thought

Company officials update investors as an audit nears completion.

By Katherine Vogt, AMNews staff. Feb. 9, 2004.

The embattled outpatient services giant HealthSouth now believes its accounting fraud could total as much as $4.6 billion, significantly more than previous estimates.

In a meeting with investors on Jan. 20, HealthSouth officials said an audit was expected to reveal between $3.8 billion and $4.6 billion in fraudulent accounting. In July 2003, the company estimated the fraud to total at least $2.5 billion.

The updated estimates were given as work on the audit was nearing its end. Guy Sansone, HealthSouth's acting chief financial officer, said the audit was "substantially complete" and that a report on it was being drafted.

"We'd like to put this behind us," Sansone said. "We'd like to concentrate on managing the business going forward, improving operations and growing the company. And while we know questions regarding this are going to continue, it's our hope that we can try to put this chapter behind us as soon as possible."

HealthSouth's accounting woes were first revealed in March 2003, when the government alleged that the company inflated earnings by about $2.5 billion to meet Wall Street expectations. Since then, 15 former HealthSouth executives have pleaded guilty to various criminal charges. Company founder and ousted CEO Richard M. Scrushy also has been charged in the scandal, though he has maintained his innocence and is awaiting trial.

In the company's July 2003 update to investors, HealthSouth executives said they expected the audit to find $2 billion in fraudulent entries, $500 million in aggressive accounting and an unknown amount in acquisition accounting and goodwill.

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