HealthSouth's $2.8 billion fraud began like so many corporate scandals do; with a desire to please Wall Street. So says HealthSouth co-founder and former CFO Aaron Beam in his new tell-all, HealthSouth: The Wagon To Disaster.
Richard Scrushy, HealthSouth's co-founder and CEO, "did not want to disappoint Wall Street by reporting a bad quarter, and he gave us a long speech about how the company was doing good, and if could just get him through this quarter, everything would be OK," Beam told MarketPlace Morning Report in an interview broadcast Jan. 6. "My chief accountant, Bill Owens, actually suggested, you know, making fraudulent entries, and Richard said, 'That's fine, if that's what we need to do.'"
It was "a little easier going down that road" again when the when the following quarter's numbers also didn't meet Wall Street expectations, Beam writes in his book.
The scheme ended after post-Enron laws toughened the penalties for CFOs who signed off on fraudulent financial statements.
"Weston Smith, who was the CFO at the time, just couldn't take it, and he called the FBI and reported that there was fraud on the books at Healthsouth," Beam said.
Beam later admitted to cooking the books and testified against Scrushy--who was acquitted of all charges but later convicted of bribery. He's serving an 82-month sentence in a Texas federal prison.
The title of Beam's book is a reference to a favorite expression of Scrushy's; that everyone on the HealthSouth team was "pulling the wagon" for the good of the company. Scrushy even had t-shirts and posters printed up and erected a fancy sculpture outside of HealthSouth's Birmingham offices that showed stick figures pulling a wagon.
"For those of us 'pulling the wagon,' we soon realized it was all for Richard, and in the end, he was leading all of us to a sure disaster," Beam says on his website.
Today, Beam owns his own one-man lawn service. "I'm living my life honest now," says Beam, who once bragged about his $30,000 collection of designer Hermes neckties. "When I mow somebody's grass and they pay me $50 in the heat in south Alabama, I know I've earned that money, and I sleep well at night," he told Marketplace.
For more information:
- read the interview transcript
- visit Beam's website
- watch an interview with Beam