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Ex-HealthSouth CFO Pleads Guilty To Fraud

May 5, 2003 | AP

The original chief financial officer of HealthSouth Corp. pleaded guilty to bank fraud Monday and implicated co-founder Richard Scrushy, the company's fired CEO, in an accounting scandal.

The plea by Aaron Beam, 59, meant all five of the medical company's CFOs have admitted their guilt in a books-rigging scheme that has pushed HealthSouth to near bankruptcy. Eleven former executives have pleaded guilty in all.

Beam admitted to using faked numbers to obtain a $1.25 billion credit line from a syndicate of 32 lenders in 1996. Banks have blocked the company from further borrowing under the credit agreement.

Under questioning from U.S. District Judge Robert Propst, Beam agreed to prosecutors' claim that Scrushy, the company's longtime chairman and chief executive officer, was in on the scheme.

Scrushy, who was fired in March, contends another former HealthSouth CFO, William T. Owens, engineered the fraud and kept him in the dark.

Scrushy has not been charged with a crime, but he was accused in a lawsuit filed by the Securities and Exchange Commission of overstating corporate earnings to make it seem HealthSouth was meeting the forecasts of Wall Street analysts.

Scrushy's lawyers have said they expect him to be indicted, and a federal judge is considering whether to maintain a temporary freeze on his assets.

Propst scheduled sentencing for July 31, when Beam could receive a maximum penalty of 30 years in prison and $1 million fine, plus seizure of any assets related to the fraud.

Defense attorney Donald Briskman said he was unsure whether Beam, who retired from HealthSouth in 1997, might be able to avoid prison time through probation.

Briskman declined comment on whether Beam quit work to get out of the fraud or whether anyone forced or pressured him to commit a crime.

"There is still an investigation going on," he said, noting that Beam was cooperating with federal authorities.

Beam and Scrushy met while working for Lifemark Corp. in Houston in the early 1980s. Outside court, Beam said he was a controller under Scrushy, a division vice president.

In 1984, the two men and three others formed Amcare Inc., a medical rehabilitation company that was renamed HealthSouth, which is based in Birmingham. Beam was CFO, and Scrushy was CEO.

The scandal at HealthSouth has weighed heavily on Beam, Briskman said.

"Anytime any individual is involved in actions that may be illegal it's going to prey on their mind and bother them," he said.

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