Call it the case of the missing HealthSouth Corp. audit-committee meetings.
HealthSouth’s 2002 proxy statement clearly states that the company’s audit committee met only once in 2001. Within days of the government’s accounting-fraud accusations against the company and its top officers, critics seized on the disclosure as a sign that the committee was asleep at the switch.
But now an attorney for the HealthSouth board’s audit committee, Michael Young of the law firm Willkie Farr & Gallagher, says newly uncovered information shows the committee was not.
The proxy statement, he says, got it wrong. Just how wrong is the subject of conflicting accounts, both provided at different times by Mr. Young.
On Friday night, in response to an article in The Wall Street Journal that day citing the proxy, Mr. Young called a Journal reporter to say the audit committee had met “at least five times” in 2001, based on newly found records, copies of which he declined to provide.
Before the article’s publication, HealthSouth audit committee members and company spokesmen hadn’t returned calls seeking comment, and a spokesman for HealthSouth’s auditor, Ernst & Young LLP, had declined to comment on the audit committee’s activities.
For a Reuters article published Sunday night, Mr. Young told a reporter that the audit committee had met at least three times, citing records from Ernst & Young and the committee’s chairman. Mr. Young Monday said the lower tally is the best available information. An Ernst spokesman Monday said the accounting firm’s records show Ernst auditors attended three HealthSouth audit-committee meetings in 2001. The three audit-committee members are George H. Strong, C. Sage Givens and Larry D. Striplin Jr. An assistant to Mr. Striplin said he wouldn’t comment, while the other two members couldn’t be reached.
Some critics remain skeptical. “A proxy statement is an official document,” says Columbia University accounting professor Itzhak Sharav, adding that HealthSouth should file an amended proxy if the committee met more than once in 2001. “A statement over the phone carries very little weight with me.” Asked if an amended proxy would be filed, Mr. Young says: “I have no idea. There are more pressing issues than amending a proxy statement with regard to the number of audit-committee meetings in 2001.”
A HealthSouth spokesman Monday said he couldn’t confirm how many times the committee met, and had no immediate comment on whether the company would file an amended proxy statement.
The Securities and Exchange Commission recommends audit committees meet at least four times a year. Ideally, former SEC Chairman Arthur Levitt said in a 1998 speech, an audit committee would meet 12 times a year.