20 January 2004

"HealthSouth Probe Finds Up to $4.6 Bln in Past Fraud

"HealthSouth Probe Finds Up to $4.6 Bln in Past Fraud : (Update5)

Jan. 20 (Bloomberg) -- HealthSouth Corp. uncovered as much as $4.6 billion in fraudulent accounting over the past decade, or almost $2 billion more than U.S. prosecutors accused company founder Richard Scrushy of inflating, said interim Chief Financial Officer Guy Sansone.

HealthSouth, the largest U.S. operator of rehabilitation hospitals, uncovered $2.5 billion in fraud and as much as $1.6 billion that the company deemed as aggressive, Sansone said in an interview following an investor meeting in New York. The company also improperly accounted for $500 million in acquisition costs, he said.

Scrushy was indicted Nov. 4 for allegedly inflating earnings by $2.7 billion from 1996 to 2003 and laundering money. Fifteen other executives pleaded guilty and are helping prosecutors. Sansone said the company is sharing information from its review with the government.

``The government is aware of this,'' Sansone said. U.S. Attorney Alice Martin said HealthSouth shared its presentation with prosecutors and she declined to comment further.

HealthSouth is trying to avoid bankruptcy after the U.S. Securities and Exchange Commission sued Scrushy and the company last March for fraud. The company also is trying to avoid indictment and has made a series of changes to corporate governance, internal controls and its board of directors."

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