Another former HealthSouth chief financial officer was charged on Tuesday in the conspiracy to commit a $2.5bn fraud at the US healthcare company.
Michael Martin, who served as CFO from 1997 to 2000, is expected to plead guilty this week to artificially inflating earnings and falsifying financial reports, bringing to nine the number of employees who have been criminally charged in the investigation.
Mr Martin, 42, joined HealthSouth in 1989 and worked in the accounting department until his appointment to CFO. He left the company in 2000.
“Mr Martin’s plea demonstrates you cannot leave a corporate fraud conspiracy by simply walking out the corporation’s front door” said Alice Martin, the US attorney prosecuting the case. “Today he accepts criminal responsibility for actions which began in 1997 and ended more than three years ago. He is cooperating with our investigation and helping supply additional information”.
The government alleges that Mr Martin and other executives made sure that HealthSouth’s earnings matched or exceeded Wall Street expectations.
“The purpose of the conspiracy was for Martin and others to fraudulently enrich themselves by artificially inflating HealthSouth’s publicly reported earnings and financial condition,” the government claims.
Charges were first brought in the case nearly three weeks ago, when the Securities and Exchange Commission charged HealthSouth and Mr Scrushy with inflating earnings by at least $1.4bn between 1999 and the second quarter of 2002.
The earnings overstatement has increased to nearly $2.5bn. The justice department (news – web sites) filed documents on Thursday in connection with a plea agreement for Kenneth Livesay, the company’s chief information officer and former assistant controller, that said the group inflated earnings by $440m in 1997 and $635m in 1998.