US. Attorney Alice Martin's office last week appealed the sentences of five former HealthSouth Corp. executives, arguing the punishments were too lenient.
"We will appeal the court's sentences for these defendants as well as the court's underlying factual findings concerning loss calculations, number of victims and other matters," Martin said.
Among the five, Emery Harris, a former assistant controller at HealthSouth, was the only one to receive a prison sentence. U.S. District Judge Inge Johnson in Birmingham, Ala., sentenced Harris to a five-month prison term; three years of supervised release, including five months of home detention; and a $3,000 fine. Harris, 33, who also was ordered to pay $106,500 in restitution for his role in the alleged $2.7 billion scheme to inflate the rehabilitation company's revenue, pleaded guilty in March to a charge of conspiracy and willfully falsifying books and records. He had faced the possibility of 15 years in prison and $1.5 million in fines.
Other former executives from HealthSouth's accounting and finance departments received probation. Three former vice presidents-Angela Ayers, 34, Cathy Edwards, 34, and Rebecca Kay Morgan, 56-and an ex-assistant vice president, Virginia Valentine, 33, each were sentenced to four years' probation, six months' home detention and $2,000 fines. Morgan also agreed to pay $235,000 restitution out of her HealthSouth stock and options. All four pleaded guilty in April to conspiracy to commit wire and securities fraud. Edwards and Morgan also pleaded guilty to wire fraud.
"The sentences they received appear appropriate given that all these witnesses cooperated with the government," said William Winning, an attorney and chairman of the white-collar crime department at the law firm Cozen O'Connor.
Sixteen individuals have been charged in connection with the HealthSouth investigation since it began in March, including company founder and former Chief Executive Officer Richard Scrushy, who was indicted on 85 counts of fraud. Also last week, Scrushy's attorneys told a federal judge they planned to challenge the federal Sarbanes-Oxley Act, under which Scrushy was indicted.
In Birmingham court before U.S. District Judge Michael Putnam, Scrushy's attorneys outlined a defense strategy that challenges the new law, which holds CEOs liable for financial misreporting. Scrushy is the first CEO to be indicted under the law.
Both sides want to delay Scrushy's jury trial, set to begin Feb. 2, because of the volume of documents turned over to Scrushy's defense team, and Martin said it will be pushed back.