Risk Management

Former HealthSouth CFO Gets Probation

Of the 10 former company executives who have been sentenced so far, only one received prison time.
Stephen TaubJune 22, 2004

If you are one of the scores of top corporate executives who have been accused of committing accounting fraud during the past few years, the best place to have performed these transgressions, it seems, was at HealthSouth Corp.

Even though the government has boasted that it quickly extracted guilty pleas from 15 former executives, including five erstwhile chief financial officers, only one has been sentenced to prison so far. The others have received different permutations of probation.

The latest one to skate: Former CFO Michael Martin, who was sentenced by U.S. District Judge U.W. Clemon to five years’ probation, according to Reuters. Martin was also fined 50,000 and ordered to forfeit gains of $2,375,000.

Martin pleaded guilty in May 2003 to conspiracy to commit fraud and file false financial statements in a ploy to overstate earnings. He had faced a maximum penalty of $1.25 million in fines and 15 years in prison; prosecutors had sought a five-year prison stretch, reported the wire service.

Martin “was the most culpable of those sentenced to date,” said Michael Rasmussen, assistant U.S. attorney for the Northern District of Alabama, in the Reuters report. “He had the most seniority, the most authority, and the longest time. He also obtained substantial income.”

Added Rasmussen: “There were $400 million in losses and thousands of victims. Ordinarily that would be grounds for upward departure” — that is, a tougher sentence.

Of the first 10 former HealthSouth executives to be sentenced in connection with the company’s accounting scandal, only Emery Harris has been sentenced to prison, for a five-month term.

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