Risk Management

HealthSouth CFO Avoids Prison, Again

''We did get substantial assistance from him,'' said the prosecutor at Malcolm McVay's sentencing hearing, ''but that is not a get-out-of-jail-free...
Dave CookFebruary 23, 2007

Former HealthSouth chief financial officer Malcolm “Tadd” McVay was sentenced Thursday to five years’ probation, the same sentence an appeals court threw out last year.

McVay — one of five former CFOs charged in connection with the company’s $2.7 billion accounting scandal — served as CFO for only four months. In 2004 he pleaded guilty to conspiracy to commit wire and securities fraud and filing false financial reports. Given his cooperation in the case against former CEO Richard Scrushy, prosecutors reportedly sought a prison term of five years and five months.

In 2005, however, U.S. District Judge U.W. Clemon cited the defendant’s cooperation with prosecutors, as well as his previous “exemplary record” and his status as a single father, and sentenced him to six months’ home detention and five years’ probation. He also fined McVay $10,000 and ordered him to forfeit $50,000.

That sentence was set aside last May by a three-judge panel of the 11th U.S. Circuit Court of Appeals, which ruled that “the district court’s consideration of factors unrelated to substantial assistance was improper,” according to the South Florida–based Daily Business Review. “Moreover, under the facts and circumstances of this case, the district court’s single mention of the government’s substantial-assistance motion alone did not warrant the extraordinary departure” from federal sentencing guidelines.

After prosecutors objected to Clemon’s hearing the case a second time, he recused himself in favor of U.S. District Judge Inge Johnson, who presided over Thursday’s resentencing.

On this occasion, prosecutors sought a prison term of 28 months, according to The Birmingham News. “We did get substantial assistance from him,” Assistant U.S. Attorney James Ingram reportedly told the judge, “but that is not a get-out-of-jail-free card.”

Judge Johnson put it differently; she took special note of McVay’s financial expertise, which was critical to the prosecution’s ultimately unsuccessful case against Scrushy, according to the News. HealthSouth’s co-founder, former chairman, and former chief executive officer was acquitted by a jury on all counts in 2005.

“The one person the government still believes was responsible for the whole thing was acquitted,” Johnson reportedly stated during the hearing. “The irony of the whole situation is that the people below him who pleaded guilty are the ones winding up with various sentences.”

McVay reportedly will receive credit for the two-plus years of probation he has already served, according to the newspaper.

Ingram objected to the sentence, but later told the News that the government had not yet decided whether to take its case to the appeals court once again.