Embattled surgery and rehabilitation center operator HealthSouth Corp., already reeling from allegations of overstating its earnings by as much as $1.4 billion, may be scrambling to avoid a bankruptcy filing, according to company statements and published reports.
HealthSouth, the largest provider of outpatient surgery and rehab services in the nation, said Monday that it has called in corporate restructuring specialists Alvarez & Marsal as it searches for badly needed liquidity and also has retained forensic accountants from PricewaterhouseCoopers and the law firm of Skadden, Arps, Slate, Meagher & Flom.
The Birmingham, Ala.-based company also says in a written statement issued Monday that previously filed financial statements "should no longer be relied upon," in light of Securities and Exchange Commission and Justice Department investigations into possible accounting fraud at the company.
Additionally, a recently appointed director resigned from the HealthSouth board on Monday morning, the company says.
However, company spokesperson Ernie Knewitz would not confirm a report in Monday's Wall Street Journal that says HealthSouth needs up to $1 billion in financing to stay out of bankruptcy court.
"We haven't provided any guidance on the amount of money we need," Knewitz says. He adds: "We are definitely talking with banks" about financing.
Knewitz also declined comment on a Reuters report Sunday evening that suggested HealthSouth lied in SEC filings about the number of times its audit committee met in 2001.
The SEC sued HealthSouth and CEO Richard Scrushy for fraud last Wednesday, alleging that HealthSouth has intentionally overstated its earnings by at least $1.4 billion since 1999. The regulatory agency also ordered a two-day halt to trading of HealthSouth shares, which the New York Stock Exchange extended indefinitely on Friday.
FBI agents had raided HealthSouth headquarters earlier that week.
Former CFO Weston Smith last week agreed to plead guilty to securities fraud charges and cooperate with a criminal investigation against the company. HealthSouth subsequently placed Scrushy and current CFO William Owens on administrative leave.