Accounting & Tax

Former HealthSouth CFO Sentenced to Jail

Previously given probation, former CFO Mike Martin is handed a jail term at a resentencing.
Stephen TaubSeptember 21, 2005

Former HealthSouth Corp. chief financial officer Mike Martin was sentenced to one week in prison for his role in the company’s $2.7 billion accounting fraud, according to the Associated Press.

The resentencing hearings for Martin and former HealthSouth senior vice president Richard Botts were held at the behest of the 11th Circuit Court of Appeals, which ruled that U.S. District Judge U.W. Clemon had not sufficiently explained his previous sentencing decisions. Clemon had sentenced Martin to probation.

For his part, Botts received the same sentence he did before: five months of probation, six months of house arrest, and $275,100 in fines and forfeitures. He had pleaded guilty to conspiracy, mail fraud, and falsifying records.

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Martin had pleaded guilty to conspiracy, securities fraud, and other counts, according to the AP. He previously received five years of probation, six months of house arrest, a $50,000 fine, and a demand that he forfeit $2.38 million in proceeds. His lawyers had argued for the same sentence, while prosecutors sought a three-and-a-half-year prison sentence.

Martin is now the third former HealthSouth executive sentenced to prison, according to the report. Altogether, 15 former HealthSouth employees have pleaded guilty. Last month, former finance chief Aaron Beam was sentenced to three months in prison, and former assistant controller Emery Harris served five months, according to the AP.

Clemon said Martin would have gotten a stiffer penalty if not for “substantial assistance” to prosecutors, including testimony against former HealthSouth CEO Richard Scrushy, according to the report.

Noting the fact that the sentence was stiffened the second time around, Clemon told defense attorney Mark Hulkower that “the court from time to time changes its mind.”

But the judge gave Martin credit for not taking part in the fraud at the beginning and for having tried to talk Scrushy, his former boss, into ending the scheme before quitting the company, the AP noted. Scrushy was ultimately acquitted for his alleged role in the accounting fraud.