Ex-HealthSouth Treasurer to Plead Guilty in Growing Scandal

Former HealthSouth Corp. Treasurer Malcolm “Tad” McVay agreed to plead guilty to conspiracy and fraud charges in the growing accounting scandal at the rehabilitation giant, federal prosecutors said Monday.

McVay is the 10th HealthSouth executive to reach a plea deal with the government and the fourth of the company’s five former chief financial officers to be accused in the scheme. McVay, 41, is cooperating with authorities, prosecutors said.

Although the investigation is only a month old, U.S. Atty. Alice Martin said it was moving swiftly in part because of the assistance of many of the corporation’s top financial executives.

“Their knowledge of how the fraud was perpetrated and perpetuated makes this a very focused search for the truth,” she said.

McVay faces a maximum sentence of 15 years in prison and fines totaling $1.25 million, but the government could recommend a lighter penalty in return for his help.

Defense attorney J. Don Foster of Mobile, Ala., said the company had fired McVay.

“He deeply regrets and apologizes for his actions and poor judgment,” Foster said.

Martin said more charges were likely. Although not accused of any crime, fired HealthSouth Chief Executive Richard M. Scrushy is the target of a criminal investigation, according to his attorneys.

A former commercial banker, McVay had worked at HealthSouth less than four years. He played a major role in refinancing the company’s long-term debt and its bank credit line, according to his corporate biography. McVay served as finance chief from August through January.

The Securities and Exchange Commission filed a civil lawsuit last month accusing HealthSouth and Scrushy of overstating earnings by $1.4 billion since 1999 to meet Wall Street forecasts.

The amount has swelled to $2.5 billion in allegedly false earnings since 1997 as investigators went further back.

Although many of his top subordinates have reached plea deals, Scrushy contends he knew nothing of the fraud until last month, two days before the SEC filed suit and former CFO Weston Smith became the first person to plead guilty.