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HealthSouth Probe Widens

Sep 10, 2003 |

A US Congressional committee said on Wednesday it was widening its investigation of the alleged $3bn accounting fraud at HealthSouth, the US rehabilitation hospital chain, sending subpoenas to several former employees and requests for information to two major law firms.

The requests, sent by the House energy and commerce committee, focus on an internal review by Fulbright & Jaworski, an outside law firm that was brought in to review a controversial stock sale by Richard Scrushy, HealthSouth's former chief executive.

"Based on extensive internal e-mail traffic, we have serious concerns that the Fulbright & Jaworski report may have been misleading, biased, and not as independent as some have been led to believe," said Ken Johnson, a spokesman for Billy Tauzin, the committee chairman. Mr Scrushy sold about $25m worth of his HealthSouth shares in May and July last year, a few months before the company announced on August 27 that its earnings were likely to suffer as a result of changes to government insurance payment policies last year.

The HealthSouth board asked Fulbright in September to determine, among other things, whether Mr Scrushy was aware of the financial impact of the insurance changes when he made those stock sales ahead of the company's public announcement.

Fulbright reported in October that it had found no written or oral evidence of Mr Scrushy's knowledge, according to the committee, but that he had attended a meeting on July 8 at which the matter was discussed.

The committee is planning to hold a closed-door hearing next week before a broader public hearing later this year.

Fulbright & Jaworski could not be reached for comment.

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