Essays Healthsouth Scandal

02. Aaron Beam And The Health South Fraud

Running head: ETHICS AND ORGANIZATIONS 1


Ethics and Organizations


Case Study 1


Vernon Tilly Jr.


University of Central Oklahoma

ETHICS AND ORGANIZATIONS 2


In reference to the Aaron Beam and the HealthSouth Fraud case in our text Velasquez


(2012), the following questions from the text and my answers to these questions are provided as


requested.


1. Which of the "obstacles to moral behavior do you see at work in Aaron Beam's behavior and thinking? In Scrushy's?


The obstacles I see in Aaron Beam's behavior are "Rationalizing Our Actions and


Displacement of Responsibility". Rationalizing his actions is supported by comments he made


in reference to the actions he had or was about to take in supporting his employer. Aaron Beam


stated in Velasquez (2012), "He described the move to himself as aggressive accounting but


definitely not fraudulent" (p 68). In the continual cooking of the books, each time Beam was


press or directed by Scrushy to do so. Aaron Beam possibly considers that to be his get out of


jail free card, by pointing the finger back at his employer, as displacement of his responsibility.


We see clearly what he was thinking in Velasquez (2012), as he "felt it was technically


within the bounds of accounting rules and investors would be sophisticated enough to understand


what was happening" (page 68). This would relate to "Biased Theories about Others", as he


believed this group of investors was sophisticated. You cannot help but think he also felt


secretly an investor(s) would question their actions and bring them to account for their actions


considering the situation he was in with his employer.


The obstacles I see in Richard Scrushy's behavior are "Disregarding or Distorting Harm,


Euphemistic Labeling, and Rationalizing Our Actions". In reference to "Disregarding or


Distorting Harm" based on the belief he was doing a good thing by providing rehabilitation


therapy to patients at lower costs than regular hospitals, one could surmise he found doing

ETHICS AND ORGANIZATIONS 3


whatever it takes to succeed he would do, all on the backs of his employees, of which as CEO he


could discredit at will. We could also, along these lines consider "Euphemistic Labeling" as he


was not above lying as interpreted by the various financial reports produced to make the


company look more profitable under the veil of only business. He himself would feel pressure in


1996 as they could not meet second quarter projections. He would once again ask Aaron Beam


to cook the books, or the company would face financial ruin. Scrushy rationalizes this away by

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The Accounting Scandal of Healthsouth - Essay

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The Accounting Scandal of HealthSouth

HealthSouth Corporation is based in Birmingham, Alabama, it is the largest provider of rehabilitative health care services. It operates in 26 states in the United States of America and in Puerto Rico. HealthSouth provides rehabilitation hospitals, long term heightened care hospitals, outpatient rehabilitation satellite clinics and home health agencies.
HealthSouth was found by Richard Scrushy in the year 1984 and was called Amcare, Inc. It opened its first facility in Arkansas and later on that year another one in Birmingham. In 1985 the company changed its name into HealthSouth Rehabilitation Corporation, in 1990 the company expanded to 50 facilities around the US.…show more content…

At the trial some of the former executives of HealthSouth testified against Scrushy claiming he ordered the accounting manipulation, but these officials were pleaded guilty so they agreed to testify against Scrushy to lower their sentence; therefore prosecutors could not come up with evidence to tie Scrushy with the fraud. Judge Karen then dismissed 49 charges out of the 85 against Scrushy, Scrushy however faced further court action, and in 2006 he was convicted of conspiracy, mail fraud and bribery. He was sentenced in 2007 eighty two months of prison and 3 years of probation and ordered to $150,000 of fines and costs of his confinement.
Ever since the accounting scandal was revealed and found, HealthSouth have taken many steps to turn the company around to the better and into becoming a stronger company. It got a new senior management team and the directors working in the company when the fraud occurred have been fired. HealthSouth was able to avoid bankruptcy by selling assets and by renewing contracts. Hundreds of experts were brought to help in reconstructing the company’s record, improve the accounting policies and more.
HealthSouth even got approved by the NYSE in October of the year 2006, as part of corporate restricting plan; the company also sold its diagnostics division, surgery division and outpatients divisions on 2007. With this new structure for HealthSouth firmly in

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