Healthsouth Scandal Essay

2596 words - 11 pages


Richard Martin Scrushy was born in 1952 in Selma Alabama. Richard is the son to Gerald and Gerri Scrushy. Gerald was a cash register salesman and Gerri was a registered nurse (Watson, 2005, p. 2). Richard worked until he became successful, wealthy, and powerful. He was able to obtain the American dream of family, security and wealth. In 2003, an accounting scandal threatened to change his career, his wealth, and his freedom. The Securities and Exchange Commission (SEC) filed a civil law suit against HealthSouth Corporation and Richard M. Scrushy. The SEC charged that the company inflated their books by $1.9 billion since 1999 (SEC, 2003). The filing of these charges ...view middle of the document...

Dr. Phillips a cardiologist who testified at the congressional hearings stated there was another company, Amcare, in 1983 before HealthSouth. Scrushy proposed that Dr. Phillips merge his practice facility with Amcare to form a Comprehensive Outpatient Rehabilitation Facility (CORF). Dr. Phillips testified, “The unique concept of a CORF was to combine outpatient surgery and rehabilitation facilities into one stand-alone medical complex in order to ease patient burden and expense, and ultimately provide for more successful patient recoveries,” (cited by Jennings, 2012, p. 189). The concept was appealing and cost effective to the physician. He would be used to persuade other medical professionals to buy into the concept. Dr. Phillips testified he felt that this concept was and still is very comprehensive. He did not know of the fraudulent accounting and believes under the new directors the company can continue to succeed.
Executives at HealthSouth

According to Jennings (2012), the workers consider Scrushy as a tyrant and micromanager. He had Monday morning numbers meetings which were referred to as the “Monday morning beatings,” (p. 184). This meeting was an opportunity for Scrushy to flex his authority. He questioned the staff about cellphone bills, hospital performance and tactical issues. He often said to the team of executives, “That was the stupidest thing I ever heard,” (Heylar, Cherry, and Neering, 2003, p. 76).
Heylar, Cherry, and Neering (2003) continue to report, the company’s team motto was “Pulling the Wagon Together.” Scrushy had printed up posters, tee shirts and a sculpture of eight stick figures pulling the wagon. Outside of his office in Birmingham, Scrushy had the replica of the wagon. Aaron Beam, co-founder and CFO felt, “the team was really pulling the wagon for Richard and in the end, he was leading all of us to a sure disaster,” (cited by Heylar, Cherry, Neering, 2003, p. 76).
Beam’s sentiments regarding Richard’s self-centered attitude was shared by many. Scrushy’s extravagant living earned him the name Birmingham’s Donald Trump, or King Richard. Peter Emch, a health-care analyst with Credit Suisse First Boston told Chief Executive (2001), "He's one of the most visible and flamboyant leaders in health care." In Birmingham he had buildings and streets named after him. He built a moment to himself behind the company. During the trail his assets were listed by the SEC as 34 cars, a yacht, captain, maids, homes, helicopters, private jets, vacation homes and other luxury items.
King Richard did not appear to be a popular King. Many of his executive’s testimonies painted him as a tyrant. He behaved as a man who did not get what he wanted during his childhood, so he created a lifestyle where he could reward himself at all times. Nevertheless, his executives remained loyal subjects within the company. Why did these executives endure the harsh treatment and engage in fraudulent behavior? The...

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