Review the following case:
According to the Securities and Exchange Commission (SEC), HealthSouth Corp., a Birmingham, Alabama, health-services company, overstated its profits by at least $1.4 billion between the years 1999 and 2003 to meet or exceed Wall Street estimates. The allegations came just seven months after an earnings restatement and insider-trading charges triggered the investigation. Although this case happened years ago, the fallout from the scandal was still in the news in 2012, demonstrating the long-term damage a healthcare organization can suffer as a result of fraud.
There is a tremendous amount of publicly available information about the fraud committed by HealthSouth Corp. The fraud included many of the typical earnings-manipulation tricks such as capitalizing expenses, understating reserves for receivables, and extending the usefulness of equipment. There was none of the highly technical fraud such as that seen in Enron.
Access the following link to learn more about this case:
U.S. Securities and Exchange Commission. (2003). Complaint for injunctive and other relief. Retrieved from https://www.sec.gov/litigation/complaints/comphealths.htm
Analyze each element of this case. Consider the following aspects in your analysis:
Identify the specific methods used by management to manage earnings.
Establish a scenario in which you are a midlevel manager in a healthcare organization and you suspect that management is manipulating earnings. You benefit from the manipulation because your bonus is based on earnings. In addition, you have determined that becoming a whistleblower will be detrimental to your career. What will you do? If you decide to be a whistleblower, what protection is available to you?
Give reasons to support your statements.
Write your initial response in approximately 300–500 words. Apply APA standards to citation of sources.
By Saturday, September 17, 2016, post your response to the appropriate Discussion Area. Through Wednesday, September 21, 2016, review and comment on at least two peers’ responses. Explore any points you have not previously considered.
Bouchard, S. (2012, January 12). Former HealthSouth CFO warns of the dangers of an ethics meltdown. Healthcare Finance News. Retrieved from http://www.healthcarefinancenews.com/news/former-healthsouth-cfo-warns-dangers-ethics-meltdown?page=1
United States Securities and Exchange Commission. (2013). HealthSouth Corporation: Form 10-Q Quarterly report pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934 [Civil Action No. CV-03-J-0615-S]. Retrieved from http://investor.healthsouth.com/secfiling.cfm?filingID=785161-13-45
DQ Grading Criteria Points
Initial response was:
Insightful, original, accurate, and timely.
Substantive and demonstrated advanced understanding of concepts.
Compiled/synthesized theories and concepts drawn from a variety of sources to support statements and conclusions.
Discussion Response and Participation:
Responded to a minimum of two peers in a timely manner.
Offered points of view supported by research.
Asked challenging questions that promoted discussion.
Drew relationships between one or more points in the discussion.
Wrote in a clear, concise, formal, and organized manner.
Responses were error free.
Information from sources, where applicable, was paraphrased appropriately and accurately cited.