HealthSouth Corporation was statrted in Alabama in February of 1984 by Richard Scrushy. The company went public in 1986, and continued to grow throughout the late 1980's and 1990's through a series of mergers and acquisitions.
The company began having accounting problems in early 2002 when CEO Scrushy sold $75 million in stock a few days before HealthSouth corporation posted a huge loss. The SEC accussed the company of inflating their revenues by $1.4 billion. The CEO Scrushy allegedly instructed the company's senior officers to falsify the company's earnings to meet the expectations of investors, and inflated the company's income by as much as 4,700 percent!
The SEC investigated the stock sale by Scrushy, and determined the sale and huge loss posted were not related. The FBI searched the company headquarters after the CFO failed to get Scrushy to talk about the fraud while wearing a wire. In June of 2005, Scrushy was acquitted on all of the accounting fraud accounts against him including the charge that he violated the Sarbanes-Oxley Act. Following the search of the company headquarters the board of directors terminated CEO Richard Scrushy.
The company hired a restructuring firm Alvarez and Marsal to get its finances in order, and to deal with their cash flow problems. The company cut all ties with Scrushy and was able to avoid Chapter 11 bankruptcy in 2003. The company began selling divisions of the company over the next three years, and was able to again file with the SEC and be publically traded on the New York Stock Exchange in 2006.
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