Two More Plead Guilty in HealthSouth Case, IRS Joins Probe

And then there were 14. Two more former HealthSouth officials agreed this week to plead guilty to conspiracy charges as part of what investigators say is a $2.5 billion accounting fraud.

Richard Botts, 45, former senior vice president in the tax department, and Will Hicks, 39, former vice president of investments, join 12 of their former colleagues who formerly pled guilty in the case — including the only five people to serve as the company’s chief financial officer.

In other news from the HealthSouth case, the Internal Revenue Service has joined the Federal Bureau of Investigation, which is leading the probe, along with the U.S. Department of Justice’s fraud unit and the Securities and Exchange Commission.

Investigators have said in court documents that they are looking at dozens of people and corporations as suspects in money laundering, obstruction of justice, witness tampering and public corruption charges.

U.S. Attorney Alice Martin said at a news conference yesterday that Botts allegedly participated in the doctoring of the company’s federal and state tax returns, while Hicks misrepresented the value of company investments.

"This is not a mere `accounting fraud,' but rather a business scheme to fraudulently boost HealthSouth's reported earnings," said Martin, who is leading the investigation in HealthSouth’s hometown of Birmingham, Alabama.

In noting the IRS’s new involvement in the case, she said, "The probe is being expanded into the operations division, and we are aware that false numbers were being pushed down."

The company’s founder and former CEO Richard Scrushy has not been charged, blaming the fraud on his subordinates, but most of those pleading guilty have implicated Scrushy. He and HealthSouth, which is attempting to reorganize under new management, have been sued by the SEC on charges that they inflated earnings by $1.4 billion.

Scrushy was removed from his post as chief executive of HealthSouth, the country’s leading operator of outpatient surgery centers and physical therapy clinics.

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