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Another HealthSouth Former CFO Pleads Guilty

Feb 26, 2003 | USA TODAY

Federal prosecutors investigating financial fraud at HealthSouth scored another coup Thursday when Aaron Beam, a co-founder and close associate of former CEO Richard Scrushy, agreed to plead guilty to one count of bank fraud.

Beam, one of HealthSouth's original investors, served as chief financial officer from 1984 until 1997. He resigned that year after a falling out with Scrushy.

He is the 11th former HealthSouth official to enter a guilty plea and cooperate with the government's investigation at the rehabilitation hospital chain. His plea also means that each of the five men who served as CFO under Scrushy have admitted to fraud.

''Mr. Beam's cooperation allows us greater understanding of the accounting fraud scheme at HealthSouth and those persons who participated,'' said Alice Martin, the U.S. attorney in Birmingham, Ala.

According to the charges filed against him, in 1996 Beam and Scrushy allegedly provided false earnings information to a syndicate led by AmSouth Bank to secure a $1.25 billion credit line and a $55 million loan.

On March 19, the Securities and Exchange Commission charged Scrushy with inside trading and accused him of orchestrating a scheme to overstate HealthSouth's earnings by $1.4 billion since 1999. Former executives have since admitted that the total fraud was at least $2.5 billion.

Scrushy's assets were frozen, and HealthSouth subsequently fired him. For two weeks, he has been in a Birmingham courtroom seeking access to at least $40 million from his fortune to pay for legal costs and living expenses.

Neal Webster, a former employee, testified Thursday that Scrushy fired him in 1989 after questioning an accounting irregularity. According to Webster, Scrushy said, ''You don't understand big business. We're under pressure to make certain numbers.''

No criminal charges have been filed against Scrushy, but his attorneys expect him to be charged. Scrushy attorney Thomas Sjoblom said Webster ''made it all up.''

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