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HealthSouth's Ex-Treasurer Reaches Plea

Apr 21, 2003 | UPI

A former HealthSouth Corp. treasurer pleaded guilty to federal charges Monday, adding to the list of executives cooperating with an investigation of possible accounting fraud at the nation's largest for-profit hospital chain.

Malcolm McVay, a former chief financial officer and treasurer of the company, pleaded guilty to conspiracy to commit wire and securities fraud and to filing false financial information with the Securities and Exchange Commission, the Justice Department said.

On the conspiracy charges, McVay is facing a maximum of five years in prison and a $250,000 fine, or double the monetary gain or loss. The charge of knowingly causing false certification of financial information under the Sarbanes-Oxley law carries a maximum sentence of 10 years in prison and a fine of $1 million fine.

McVay may also face civil charges by the SEC at a later date.

McVay's plea agreement, under which he agreed to cooperate with investigators, makes him the 10th former HealthSouth executive to plead guilty to criminal charges in connection with the alleged accounting scheme. McVay, 41, joined HealthSouth in September 1999. He previously served as CFO of Capstone Capital Corp. and senior vice president of investor relations at CaremarkRx.

In keeping with company policy, McVay was terminated by HealthSouth once he pleaded guilty.

"HealthSouth has had five chief financial officers since its incorporation," U.S. Attorney Alice Martin said. "Today's filing brings to four the number of former CFOs for HealthSouth that have been charged with conspiracy to commit wire fraud and securities, and all four have agreed to cooperate with investigators."

Former HealthSouth CFO Michael Martin was charged on April 8, with conspiracy to commit wire fraud and securities fraud and falsifying financial information. A court date has not been set, the Justice Department said.

On April 3, five HealthSouth officers were charged and pleaded guilty in connection with accounting fraud, including Chief Information Officer Kenneth Livesay. HealthSouth Vice President of Finance Emery Harris had previously pleaded guilty to accounting fraud charges, as had Chief Financial Officer William Owens and former CEO Weston Smith.

"Their knowledge of how the fraud was perpetrated and perpetuated make this a very focused search for the truth about this vast accounting fraud," said Martin.

The government alleges that a group of HealthSouth executives deliberately overstated earnings by $2.5 billion since 1994 in an alleged accounting scandal, that broke on March 19. The company's shares closed Monday at 15 cents per share on the over-the-counter exchange.

Scrushy, who was fired March 31, is facing insider trading and other civil charges, but no criminal charges have been brought against him.

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