HealthSouth Attorneys Found Shredded Files

Attorneys hired by the board of HealthSouth Corp. found shredded documents in company offices days after the firm ordered records be preserved because of the launch of a federal investigation, a report released by Congress on Tuesday said.

Fulbright & Jaworski, in an Oct. 29, 2002, report to the Alabama-based clinic operator’s board, said its lawyers found shredded documents in offices containing the files of four former HealthSouth executives.

“There was no indication of when the documents had been shredded,” said the report by Fulbright & Jaworski, which has been criticized by a congressional committee for its probe of HealthSouth’s $2.5-billion accounting scandal.

The Fulbright & Jaworski report was released by the House Energy and Commerce Committee, which has scheduled a hearing on the HealthSouth matter for Thursday.

Chaired by Louisiana Republican Rep. W.J. “Billy” Tauzin, the committee for months has been investigating HealthSouth, which runs physical therapy, imaging and outpatient surgery centers.

The law firm’s report said that some of the shredded documents found Sept. 26, 2002, appeared to be e-mails.

HealthSouth had received a request for documents from the Securities and Exchange Commission on Sept. 17. The company hired Fulbright & Jaworski on Sept. 18.

The law firm said it asked HealthSouth the next day to begin preserving records, which executives ordered Sept. 20.

It said a health claims administrator destroyed some patient information Oct. 2. HealthSouth founder and Chief Executive Richard Scrushy later ordered a subordinate “to seize every shredder [approximately 50] in HealthSouth’s corporate headquarters and to secure them under lock and key.”

A committee spokesman has said the panel has “serious concerns” about the Fulbright & Jaworski report.

“Our firm is continuing to cooperate fully with the House Committee on Energy and Commerce,” a Fulbright & Jaworski spokesman said in a statement.