Accounting & Tax

Former HealthSouth CFO Gets 27 Months

Even though prosecutors maintain that Weston Smith "was the first individual to come forward and advise the government of the accounting fraud," th...
Stephen TaubSeptember 22, 2005

Former HealthSouth Corp. chief financial officer Weston L. Smith was sentenced Thursday to 27 months in prison for his role in the company’s $2.7 billion accounting fraud, according to Bloomberg. He had pleaded guilty to one count each of conspiracy to commit wire and securities fraud, falsely certifying a financial report, and falsifying a report to the Securities and Exchange Commission.

The former finance chief will serve his sentence at the federal prison at Maxwell Air Force Base in Montgomery, Alabama, according to the Birmingham Business Journal. In addition, U.S. Circuit Court Judge Robert Propst reportedly ordered that Smith forfeit $1.5 million and serve two years’ probation after his release.

Smith was the first of five ex-CFOs of HealthSouth who agreed to plead guilty and to testify against former chief executive officer Richard Scrushy, who was acquitted for his alleged role in the scandal. Of the five former CFOs who have pleaded guilty, his sentence is the heaviest by far.

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Tadd McVay received home detention and probation; Aaron Beam, three months in prison; and Michael Martin, a mere week, according to press reports; all three were also required to pay fines and restitution. William Owens — whose secret tape recordings were played for the jury in the Scrushy trial — is scheduled to be sentenced in November, according to Bloomberg.

Smith had faced 25 years in prison, but prosecutors had requested a five-year sentence, reported Reuters. “The defendant was the first individual to come forward and advise the government of the accounting fraud at HealthSouth,” prosecutors argued in their sentencing motion, according to Bloomberg. “He has cooperated voluntarily with the government from the moment it learned of the fraud.”

Reuters also noted that the judge addressed the disparity in the sentences of the various ex-CFOs: “One got seven days, another got three months, but I didn’t impose those sentences. I have to sentence based on the way I see things.”

Earlier in the day, Propst also sentenced former HealthSouth vice president of investments Will Hicks to two years’ probation and three months’ home detention for his role in the scandal, according to Bloomberg. In addition, the judge reportedly fined him $2,500 and ordered him to pay $50,000 in restitution.

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