FOR IMMEDIATE RELEASE|
THURSDAY, APRIL 24, 2003
TDD (202) 514-1888
FORMER HEALTHSOUTH CHIEF FINANCIAL OFFICER AARON BEAM CHARGED WITH BANK FRAUD
WASHINGTON, D.C. - Deputy Attorney General Larry Thompson, Assistant Attorney General Michael Chertoff of the Criminal Division and U.S. Attorney Alice Martin of the Northern District of Alabama announced today that Aaron Beam, the former chief financial officer of HealthSouth Corporation, has been charged with bank fraud for making false representations to HealthSouth’s lenders.
A two-count criminal information filed at federal court in Birmingham, Alabama, charges Beam, 59, of Fairhope, Alabama, with bank fraud in violation of 18 USC Sections 1344 and 2. Beam has agreed to plead guilty to the charge in the information, at a hearing to be set at a later date.
Beam, an original founder of HealthSouth, served as HealthSouth’s chief financial officer from the company’s creation in 1984 until October 1997. The criminal information alleges that from about April 1996 to October 1997, Beam and others, including HealthSouth’s chief executive officer at the time, devised a scheme to obtain loans and credit from Birmingham-based AmSouth Bank by filing false and fraudulent financial information with the bank.
“As a founder of HealthSouth and the CFO from 1984 to 1997, Mr. Beam’s cooperation allows us greater understanding of the accounting fraud scheme at HealthSouth and those persons who participated in the scheme,” said U.S. Attorney Alice Martin.
According to the information, beginning in about 1996, a group of HealthSouth senior officers recognized that HealthSouth’s financial results were not producing sufficient earnings per share to meet or exceed the expectations of Wall Street analysts. That group, including Beam and the then-CEO of HealthSouth, allegedly engaged in a scheme to artificially inflate HealthSouth’s publicly reported earnings and falsify reports of HealthSouth’s financial condition. Their actions allegedly caused HealthSouth to file annual and quarterly reports with the Securities and Exchange Commission that materially misstated HealthSouth’s net income, revenue, earnings per share, assets and liabilities.
According to the criminal charges filed today, Beam and other senior officers of the company provided those false reports of HealthSouth’s financial condition to banks and other lenders when applying for extensions of credit.
The information states that in April 1996, HealthSouth entered into a restated credit agreement with a syndicate of 32 lenders from around the world, including AmSouth Bank. The lenders extended a line of credit totaling $1.25 billion to HealthSouth, including a $55 million loan from AmSouth, in exchange for quarterly and annual financial statements which were to be certified as true and accurate.
The bank fraud charge carries a maximum sentence of 30 years in prison and a fine of up to $1 million.
Beam is the 11th individual to be charged with an ongoing criminal investigation into HealthSouth’s finances. On April 21, 2003, HealthSouth Corp. Treasurer Malcolm McVay was charged with conspiracy to commit wire and securities fraud, and filing false information with the Securities and Exchange Commission. The same charges were filed against former HealthSouth CFO Michael Martin on April 8. Three weeks ago, five HealthSouth officers were charged and pleaded guilty in connection with accounting fraud, including Chief Information Officer Kenneth Livesay. HealthSouth Vice President of Finance Emery Harris had previously pleaded guilty to accounting fraud charges, as had CFO William Owens and former CFO Weston Smith. All defendants charged to date in the HealthSouth case are cooperating in the government’s investigation, which is ongoing and active.
The investigation is being conducted by the FBI-Birmingham Field Office, with assistance from the SEC, Atlanta District-Enforcement Division. The prosecution is being handled by U.S. Attorney Martin and Assistant U.S. Attorneys with the White Collar Section and Asset Forfeiture Section of the U.S. Attorney’s Office, with assistance from attorneys with the Fraud Section of the Criminal Division of the Department of Justice in Washington, D.C. The prosecution is being overseen by the President’s Corporate Fraud Task Force, headed by Deputy Attorney General Larry Thompson.