Kenneth Livesay's promotion to chief information officer of HealthSouth Corp. in 1999 was not just a chance to get ahead but to get away.
It turned out that as assistant controller of the Birmingham, Ala.-based provider of rehabilitation services, he faced pressure to go along with a fraudulent accounting scheme to inflate corporate earnings by billions of dollars, according to Thomas Spina, Livesay's attorney.
"He did not want to participate in those practices anymore," Spina said. The move distanced Livesay from the accounting function but not from responsibility for his past actions, Spina said.
Livesay, 42, pleaded guilty April 3 to falsifying financial records because he wanted to acknowledge his role and put the matter behind him, Spina said. Industry observers said it was the first time they could remember a healthcare CIO being charged with fraud.
Federal prosecutors charged that company executives overstated earnings by $1.4 billion since 1999 to meet or exceed Wall Street expectations. But after talking to Livesay, investigators said the total value of overstatements beginning in 1997 was about $2.5 billion.
Keith Fraidenburg, vice president of education and communications for the College of Healthcare Information Management Executives, said Livesay's plea represented the first implication of fraud for a healthcare CIO.
"This is the first that we know of in the 10 years that CHIME staff has been around," Fraidenburg said. The Ann Arbor, Mich.-based trade group of nearly 800 healthcare information executives was established in 1992.
The position was just coming into being at that time, a response to the increasing importance of information technology as an executive concern, Fraidenburg said.
Becoming part of senior management has been a key objective of CIOs, but the position exposes them to personal liability for what goes on at the corporate level, he said.
"Certainly when CIOs start breaking into the executive ranks and are part of the executive cabinet, they have to play by all the rules that the other executives play by," Fraidenburg said. In addition to the benefits, "you've got to be able to take the consequences as well."