Former HealthSouth Exec Gets Prison in Fraud Case

A former HealthSouth Corp. executive was ordered Wednesday to serve five months in prison, and four other accounting employees of the Birmingham, Ala.-based hospital company were fined in the first sentences imposed in a $2.7-billion accounting fraud case.

Emery Harris, a former assistant controller, was also sentenced to six months of home confinement and ordered to pay a $3,000 fine and forfeit $106,500 in salary and bonuses. Angela Ayers, Cathy Edwards, Kay Morgan and Virginia Valentine, who worked for Harris in the accounting division, were each put on probation for four years, fined $2,000 and sentenced to six months of home confinement.

All five, who have been helping prosecutors in the investigation of the fraud, asked the sentencing judge for leniency. Sixteen former executives of HealthSouth, including fired Chief Executive Richard Scrushy, have been charged in the alleged fraud. All except Scrushy, who denies wrongdoing, have pleaded guilty.

“Regardless of their actions, these people believed in HealthSouth,” U.S. Atty. Alice Martin told the judge at a hearing in Birmingham. “They believed in management. Unfortunately they are people who misplaced their trust.”

Harris’ senior status in the company, where he supervised 200 people, was one reason that U.S. District Court Judge Inge Johnson said she sentenced him to prison. The judge said she had taken into account that Harris was “obviously remorseful” and had helped the government.

Sounds of crying and sniffling punctuated the hearing as each of the five apologized to the court. Each became teary-eyed in taking responsibility for the fraud and the damage caused.

The five admitted making thousands of false entries in HealthSouth’s books to reflect nonexistent cash and assets to boost the price of its shares.