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HealthSouth Ex-CFO Pleads Guilty

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From Reuters

Federal prosecutors completed their sweep of former HealthSouth Corp. chief financial officers Monday when Aaron Beam -- the company’s first CFO -- pleaded guilty to criminal fraud charges in the massive accounting scandal.

Beam, 59, pleaded guilty in U.S. District Court in Birmingham to bank fraud and making false representations to HealthSouth’s lenders. The charges carry a maximum penalty of 30 years in prison and a $1-million fine, plus forfeiture of any profit gained through fraud.

Sentencing was set for July 31, and Beam was released on bond and told to surrender his passport.

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“We hope and pray for probation instead of prison,” Beam’s attorney, Donald Briskman, told reporters.

Beam, one of the company’s founders, served as CFO of the Birmingham-based operator of physical therapy and surgical clinics from its creation in 1984 until October 1997.

Eleven former HealthSouth executives, including all five men who held the CFO post, have pleaded guilty to criminal charges and agreed to cooperate with government investigations of the company and its fired chief executive, Richard Scrushy.

The government has accused HealthSouth and a group of its former officers of deliberately overstating earnings by $2.5 billion over several years.

“Obviously there were inappropriate activities with HealthSouth,” Briskman said. “When the U.S. attorney invited officials to come forward, we came immediately.”

Scrushy, who has been sued by securities regulators on insider trading and other civil charges, has not been charged with criminal wrongdoing. But he remains the central figure in Justice Department and congressional investigations of accounting practices at the company he founded.

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Scrushy’s lawyers contend that the accounting fraud was carried out by a group of executives in the HealthSouth finance department without Scrushy’s knowledge.

The latest charges in the scandal, which has left the company in default on its loans and battling to avoid a bankruptcy filing, allege that from April 1996 to October 1997 Beam and others devised a scheme to obtain loans and credit from a Birmingham bank by filing false and fraudulent financial information with the bank.

Judge Robert Propst asked Beam: “Did you knowingly participate in this scheme?”

He responded: “I did, sir.”

The company’s four other former CFOs pleaded guilty to conspiracy to commit wire and securities fraud and to filing false financial statements with the government.

Beam was charged with bank fraud, prosecutors said, because the statute of limitations on securities fraud charges ran out after five years. The statute of limitations on the bank fraud charges is 10 years, the U.S. attorney said.

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