Accounting & Tax

HealthSouth Execs to Be Resentenced

Appeals court rules that the trial judge did not give any reasons for his ''extraordinary departure'' from federal sentencing guidelines.
Stephen TaubJune 23, 2005

When 10 former HealthSouth executives were sentenced last year after pleading guilty for their role in the health services company’s $2.7 billion accounting scandal, many observers were surprised that nine were able to avoid prison time.

Apparently, so was the 11th U.S. Circuit Court of Appeals.

The court has vacated the sentences of former chief financial officer Michael Martin and former senior vice president for tax Richard Botts, ruling that the lower-court judge did not give any reasons for his “extraordinary departure” from federal sentencing guidelines, according to The Birmingham News.

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Martin could have received 15 years after pleading guilty to conspiracy to commit fraud, securities fraud, and falsifying financial information, reported the News. But despite the prosecution’s request for prison time, U.S. District Judge U.W. Clemon sentenced Martin to six months of home detention and five years of probation, fined him $50,000, and ordered him to forfeit $2.38 million. Clemon praised Martin’s cooperation with investigators and prosecutors, the paper also noted.

Botts, whom prosecutors wanted to receive more than three years in prison, was sentenced to six months of home detention and five years of probation after pleading guilty to conspiracy, falsifying records, and mail fraud, according to the News. He was also fined $10,000 and ordered to forfeit $265,000.

Unlike Martin, Botts did not testify against former chief executive officer Richard Scrushy, who is now on trial for fraud.

David Meister, Botts’ attorney, offered no comment to the newspaper. But according to the report, Mark Hulkower, Martin’s attorney, asserted that the appeals court’s ruling “does not require a different sentence, it merely requires the sentencing judge to state his reasons for imposing sentence. We believe the original sentence appropriately recognized Mr. Martin’s extraordinary cooperation in this case and will respectfully ask the court to impose that same sentence again.”

U.S. Attorney Alice Martin told the paper that in light of the appeals court decision, she will once again seek time behind bars for Martin and Botts. Former assistant controller Emery Harris, who served five months, is the only former HealthSouth executive to be sentenced to prison.

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