Healthsouth Fraud Essay

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The process of how HealthSouth “cooked” the books was quite simple. Executives would look over the unpublished financial statements and compare them with Wall Street’s expectations. Managers were ordered to fix the issue if earnings came up short. To do this, staff in the accounting department would hold so-called “family meetings” in which they would add false amounts to inflate the statements, especially assets and income. Documents that were false and had no true value were made to hide the “fixed” entries . During the ensuing trial of HealthSouth an accountant told the jurors that the recipe for this fraud was taking real numbers from hospitals and clinics and adding false numbers to them to record in their financials. Early reports stated that earnings during the five year fraud were only 1.7 billion instead of the states 2.7 …show more content…
With this scale of fraud, it would have taken close to two million false entries if the average entry was $2,500.The various facilities that HealthSouth owned submitted truthful statements to the company, but corporate workers added false amounts to inflate the numbers that went onto the consolidated corporate reports. To disguise the false revenues, accountants were ordered to place the phony numbers into an account called contractual adjustments. The account gave the impression that HealthSouth collected more money from patients than they planned to receive. Examples of fraud that occur include a sale of Source Medical, which was overstated by $29 billion in late 2001. Accountants in the company recorded the sale of Caremark stock shares for 1.7 million two times, even reporting a gain of 16 million in the second entry. It was discovered that some of the false journal entries were marked by a three letter indicator to keep up with which numbers were real and which were fantasy. $2 billion of assets were listed in HealthSouth’s books that did not exist
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