Accounting & Tax

Ex-CFO of HealthSouth Gets Three Months

Aaron Beam, who co-founded the company with Richard Scrushy, will begin serving his sentence in November after selling his home to pay a forfeiture...
Craig SchneiderAugust 25, 2005

HealthSouth Corp.’s first chief financial officer was sentenced to three months in prison on Thursday for his part in the company’s $2.7 billion accounting fraud, according to reports.

Aaron Beam, who co-founded the rehabilitation and medical services chain with ex-chief executive officer Richard Scrushy, pleaded guilty to bank fraud in 2003 and later testified against his former boss. In June, Scrushy was acquitted by a federal jury of all 36 criminal counts against him.

In sentencing Beam, U.S. District Court Judge Robert Propst reportedly said that Beam was “not the worst fish in the sea in this deal.”
The judge added that he believes Beam’s trial testimony regarding Scrushy’s orders to “fix the numbers” so earnings would meet Wall Street expectations, according to press reports.

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Beam’s bank-fraud plea concerned signing fraudulent financial statements to obtain loans and credit from AmSouth Bank during his tenure at HealthSouth. The former finance chief had faced a maximum of 30 years in prison and a $1 million fine. However, prosecutors asked the judge for leniency and suggested the three-month sentence because of his “substantial assistance” in testifying against Scrushy and other defendants. Beam faced fewer charges than other HealthSouth executives, Reuters also noted, because he left the company early in the fraud and the statute of limitations on some potential charges had expired.

Beam will begin serving his sentence on November 1. He was also fined $10,000 and ordered to forfeit $275,000; he is reportedly scheduled to auction his Baldwin County home in October to pay the fine and forfeiture. Judge Propst also ordered him to serve one year of probation.

A total of 15 ex-executives of HealthSouth have pleaded guilty in connection with the company’s massive fraud. Two other former finance chiefs, Weston Smith and William Owens, are expected to be sentenced later this year. Former HealthSouth assistant controller Emery Harris served five months in prison; nine other previously sentenced executives received combinations of probation, house arrest, fines, and forfeitures.

The Securities and Exchange Commission is reportedly still pushing ahead with a civil lawsuit against Scrushy seeking $785 million in penalties.