$5bn HealthSouth 'accounts fraud'
RAGS-TO-RICHES entrepreneur Richard Scrushy is again in the sights of the US government over alleged accounting fraud at the healthcare company he founded, which appears to involve $2bn (£1bn) more than was thought.
The newly uncovered shortfall at HealthSouth brings the total amount by which the company is said to overstated earnings to about $5bn (£2.7bn).
Guy Sansome, HealthSouth's interim chief financial officer, said that the company had passed the newly discovered information to prosecutors.
Scrushy was indicted last November for allegedly inflating HealthSouth's earnings by $2.7bn since the mid-1990s, and for money-laundering.
Sixteen other former company executives have been hit with criminal charges relating to the accounting scandal and may also be affected by the new revelations.
The company had said it expected its audit review to end this year, but auditors from PricewaterhouseCoopers said it was now unlikely to finish before the first quarter of 2005.
HealthSouth, the largest healthcare services provider in the US, revealed $2.5bn in fraud and $1.6bn classified as aggressive accounting. A further $500m was improperly accounted for in acquisition costs.
However, the company, which is struggling to avoid bankruptcy, also said that it expected a dramatic rebound this year with revenue of almost $4bn.
Restructuring specialist Alvarez & Marshall, which is handling the company, said HealthSouth would remain healthy despite the mounting expenses related to the accounting scandal. It said 2004 earnings should be about $650m before tax. Sansome said: 'By the end of the second quarter, this company should be doing business as usual.'
The dramatic fall from grace of Richard Scrushy is equalled only by his meteoric rise from obscurity in Birmingham, Alabama.
At 17, Scrushy worked in a petrol station. In 1974 he earned a degree in respiratory therapy, and his idea for a form of rehabilitation that could get employees back to work faster revolutionised the industry when he set up his first rehab centre in 1984.
His pay peaked in 1997 at $106m, and he hung out with celebrities while enjoying all the trappings of wealth. But his fortune was frozen by the courts last April.
