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Lessons Learned from the HealthSouth Fraud: Promoting the Need to Build an Ethical Framework

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Lessons Learned from the HealthSouth Fraud: Promoting the Need to Build an Ethical Framework
ISSUES IN ACCOUNTING EDUCATION
Vol. 28, No. 4
2013
pp. 901–912

American Accounting Association
DOI: 10.2308/iace-50542

Lessons of the HealthSouth Fraud: An
Insider’s View
Weston L. Smith
INTRODUCTION

T

he night was December 6, 2005. I could not go to sleep. As I tossed and turned, my entire life replayed in my mind. How did I get to where I was? I went all the way back to my childhood. I was raised in a middle-income home with an older brother and sister and two loving parents. We were far from rich, but had what we needed. I was a normal kid. I loved riding my bike and being with friends. I never got into any real trouble. My thoughts on December 6 moved forward to college. I made good grades and was extremely involved in extracurricular activities. Lying in bed, my thoughts drifted forward. When I graduated from college, I had a job waiting at Ernst & Young. I passed the CPA exam, and for the next five years served as an auditor and specialized in the healthcare industry. I was surrounded by a lot of smart, hardworking people.
As is so common with staff within CPA firms, with five years’ experience, my phone began ringing with various job offers. Then one day, a former colleague called and wanted to have lunch. An opportunity had opened at a small startup company named HealthSouth Rehabilitation Corporation.
The next day, I interviewed with HealthSouth’s CEO and Founder, Richard Scrushy. He was extremely engaging and had a strong vision for the growth of the company. He also talked a lot about making money. I believed it was a great opportunity and accepted the position. The years rolled by and the company became enormously successful. During those years, HealthSouth grew from a dozen locations to over two thousand, located in all 50 states and five countries. I had risen from a middle-management position to become the company’s CFO. With a large salary, bonuses, and stock options, I had become financially successful. From the outside looking in, it was a

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