Lessons of the HealthSouth Fraud: An Insider's View

Abstract

T he night was December 6, 2005. I could not go to sleep. As I tossed and turned, my entire life replayed in my mind. How did I get to where I was? I went all the way back to my childhood. I was raised in a middle-income home with an older brother and sister and two loving parents. We were far from rich, but had what we needed. I was a normal kid. I loved riding my bike and being with friends. I never got into any real trouble. My thoughts on December 6 moved forward to college. I made good grades and was extremely involved in extracurricular activities. Lying in bed, my thoughts drifted forward. When I graduated from college, I had a job waiting at Ernst & Young. I passed the CPA exam, and for the next five years served as an auditor and specialized in the healthcare industry. I was surrounded by a lot of smart, hardworking people. As is so common with staff within CPA firms, with five years’ experience, my phone began ringing with various job offers. Then one day, a former colleague called and wanted to have lunch. An opportunity had opened at a small startup company named HealthSouth Rehabilitation Corporation. The next day, I interviewed with HealthSouth’s CEO and Founder, Richard Scrushy. He was extremely engaging and had a strong vision for the growth of the company. He also talked a lot about making money. I believed it was a great opportunity and accepted the position. The years rolled by and the company became enormously successful. During those years, HealthSouth grew from a dozen locations to over two thousand, located in all 50 states and five countries. I had risen from a middle-management position to become the company’s CFO. With a large salary, bonuses, and stock options, I had become financially successful. From the outside looking in, it was a dream come true. But why was I thinking about all of this on December 6? Let me tell you where I was. I was not at home in my comfortable bed that night. I was on the top rack of a bunk bed in a federal prison camp, looking at spending the next two years of my life there. All because I had become involved in a $3 billion accounting fraud at HealthSouth. Never in a million years would I have imagined being in prison. After all, I had always done all the ‘‘right things.’’ How on earth had I become a convicted felon? Simple. I crossed the line. In business and in our personal lives, we are constantly faced with situations of crossing the line. I am not writing about $3 billion frauds, I am talking about everyday life—the small temptations to cross the line are always there. Therein lies the danger. Facing a new line will create trepidation, but may be answered with the simple rationalizations, ‘‘It’s not that big of a deal,’’ ‘‘Everyone does it,’’ ‘‘It is