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Executive Faces Fine, Jail Over Fraud

Mar 28, 2003 | The Age

HealthSouth Corp chief financial officer William Owens has pleaded guilty to falsifying financial statements and has agreed to help a federal probe of the company and of chief executive Richard Scrushy.

Owens admitted he began conspiring in 1996 with Scrushy to inflate earnings of HealthSouth, the biggest US operator of rehabilitation hospitals. The US Securities and Exchange Commission accused HealthSouth and Scrushy last week of overstating profit by $US1.4 billion ($A2.3 billion) since 1999.

Owens is the second company executive to plead guilty and agree to help prosecutors build their case. Former CFO Weston Smith pleaded guilty last week and is also helping investigators unravel the alleged fraud.

HealthSouth placed Scrushy and Owens on leave last Thursday, after the SEC disclosed its charges. The company was moving to sack Owens, HealthSouth spokesman Ernie Knewitz said after yesterday's guilty plea.

Owens, 44, faces up to 30 years in prison and a fine of $US5.5 million.

"As the most senior HealthSouth executive to admit to this accounting fraud, Mr Owens's co-operation in the investigation has helped us rapidly identify and understand the extent to which the company falsified its financial reports for the purpose of inflating its stock price," US Attorney Alice Martin said.

Owens pleaded guilty under a new law that penalises CEOs and CFOs who falsely certify financial results. He also admitted wire fraud, conspiracy to commit wire fraud and securities fraud. He told investigators that in the autumn of 1997 Scrushy told him to "continue falsifying HealthSouth's books" because the CEO planned to sell HealthSouth stock and "he wanted to maintain the stock's current level", court papers said.

Scrushy sold 11.8 million shares of HealthCare stock for $207 million. He sold $108 million in shares in November 1997 and $99 million last year.

US District Judge Sharon Blackburn set no sentencing date.

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