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HealthSouth Finance Officials May Sign Plea Agreements

Mar 26, 2003 | The Wall Street Journal

Federal prosecutors are expected to reach plea agreements with some senior HealthSouth Corp. finance officials in the coming days as investigators build their criminal case against the company's chairman and chief executive, Richard M. Scrushy, Wednesday's Wall Street Journal reported.

The first such agreement is expected today with a key HealthSouth executive, a development that would further advance the fast-moving investigation.

Alice Martin, the U.S. attorney in Birmingham, Ala., said her office would file criminal charges against the HealthSouth executive today in federal court. This "filing of an information" is expected to be similar to the plea agreement reached last week with HealthSouth's former chief financial officer, Weston L. Smith. He pleaded guilty to conspiracy to commit wire fraud and securities fraud in connection with what the government says was a longstanding scheme to artificially inflate the company's financial results. Mr. Smith is assisting prosecutors.

The Securities and Exchange Commission, in a civil complaint last week, accused HealthSouth and Mr. Scrushy with overstating earnings by $1.4 billion since 1999. The SEC contends, however, that the earnings manipulation goes back to shortly after HealthSouth went public in 1986.

Ms. Martin said her investigation has progressed quickly, in part, because so many company employees have agreed to share information about the alleged fraud at HealthSouth, the Birmingham provider of outpatient surgery and rehabilitation services.

Plea agreements, according to lawyers representing certain HealthSouth executives, are expected to be reached with as many as half a dozen people who worked in the tight-knit finance and accounting offices. They said they could include agreements with William T. Owens, who is the company's most recent chief financial officer, and top finance officials. Some defense attorneys had lengthy negotiations with the U.S. attorney's office about possible pleas.

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