In announcing that two more executives at HealthSouth Corp. have agreed to plead guilty to financial wrongdoing, government officials said today that the Birmingham, Ala., company duped not only the investing public but Uncle Sam as well.
An Internal Revenue Service official joined U.S. Attorney Alice Martin and an FBI special agent in Birmingham today to disclose that Richard Botts, HealthSouth senior vice president for tax, and Will Hicks, vice president of investments, have admitted to criminal fraud charges. They are the 13th and 14th current or former HealthSouth executives charged in a $2.5 billion accounting scandal that has plagued the nation's largest operator of ambulatory surgery and rehabilitation centers.
HealthSouth founder Richard Scrushy, who was ousted from his CEO position earlier this year, has not been charged with any criminal activity.
According to U.S. officials, Botts, 45, of Hoover, Ala., admits to being part of a scheme to provide false tax information to the IRS and Alabama tax authorities in order to hide assets and cover up the overstatement of earnings. Botts faces up to five years in prison and a $250,000 fine for conspiracy and a similar maximum penalty for a charge of mail fraud against him.
Hicks, 39, of Birmingham, is charged with conspiracy to lie to auditors and to falsify HealthSouth's books, federal authorities say. His criminal penalty could be as severe as five years in prison and a fine of $250,000 or twice the gain or loss as a result of his alleged activity, the government says.
"Today's charges show this fraud was not isolated in the accounting department of HealthSouth Corporation. This is not a mere 'accounting fraud,' but rather a business scheme to fraudulently boost HealthSouth's reported earnings," Martin says. "The actions of both of these defendants helped conceal the scheme to fraudulently inflate earnings from the investing public, the auditors and government regulators."
Martin says that HealthSouth is providing "full cooperation" into the ongoing investigation.
The company has been accused of overstating profits by $2.5 billion between 1997 and 2002 and with inflating the value of company assets by $800 million in public financial reports. Prosecutors have said they suspect wrongdoing may go back as far as 1986.