Federal agencies have raided the headquarters of HealthSouth Corp., the nation's largest provider of ambulatory surgery and rehabilitation centers, and filed a $1.4 billion fraud lawsuit against the company and its CEO, Richard Scrushy.
A release from the Birmingham, Ala.-based company confirms that last night "agents from the Federal Bureau of Investigation served a search warrant at the company's corporate headquarters and were provided access to a number of current and historical financial records and other materials."
And in the lawsuit, filed today in federal district court in Birmingham, the Securities and Exchange Commission charges HealthSouth and Scrushy with a "massive accounting fraud," an SEC release states.
The SEC says the suit alleges that since 1999, HealthSouth "systematically overstated its earnings by at least $1.4 billion in order to meet or exceed Wall Street earnings expectations."
"The false increases in earnings were matched by false increases in HealthSouth's assets," the SEC says. "By the third quarter of 2002, HealthSouth's assets were overstated by at least $800 million, or approximately 10%."
Trading in HealthSouth shares has been suspended for two business days, the SEC adds in its statement.
HealthSouth also has been under federal investigation for several months on the timing of stock trades made last year by Scrushy. Today, the U.S. Department of Justice announced that Weston Smith, the former CFO of HealthSouth, has agreed to plead guilty to securities fraud charges and cooperate with that investigation.