FEDERAL JUDGE GIVES HEALTHSOUTH EXECUTIVE FIVE MONTHS IN PRISON FOR ROLE IN $1.4 BILLION FRAUD
BIRMINGHAM - U.S. District Judge Karon O. Bowdre today sentenced former HealthSouth Corp. executive Kenneth Livesay to five months in prison for his role in the company’s $1.4 billion fraud, announced U.S. Attorney Joyce White Vance.
This was the fourth time Livesay, 49, has been sentenced for defrauding the company. The United States Court of Appeals for the 11th Circuit three times has ruled in favor of the government on appeal over whether a sentence of probation was legal in his case. In its most recent ruling, issued in November, the appeals court concluded that the sentence of probation was “patently unreasonable in light of Livesay’s role in the massive corporate fraud.”
Judge Bowdre ordered Livesay to forfeit $750,000 to the government and to pay a $10,000 fine, but noted those amounts already have been paid.
Livesay was a former senior vice president and assistant controller at HealthSouth. He conspired with HealthSouth executives to devise a scheme to artificially inflate the company’s publicly reported earnings and the value of its assets, and to falsify reports of HealthSouth’s financial condition. The purpose of the conspiracy was for Livesay and others to fraudulently enrich themselves through the inflated earnings reports.
Livesay pleaded guilty in April 2003 to conspiracy to commit wire fraud and securities fraud, and to falsifying financial information that was used in financial statements filed with the Securities and Exchange Commission.
“Mr. Livesay deserves to serve significant time in prison for his crime,” Vance said. “Livesay helped conceive and direct one of the largest accounting frauds in our country’s history, and continued to draw a HealthSouth paycheck and bonuses for years while employees’ and shareholders’ victimization continued unchecked,” Vance said.
Federal Sentencing Guidelines recommended a prison term between 78 months and 97 months. Livesay cooperated with prosecutors once the fraud at HealthSouth was discovered. Vance noted that the government gave him exceptional credit for his assistance in the investigation. The government recommended a sentence of one year in prison.
“Cooperation as a witness cannot wipe the slate completely clean for a witness in a $1.4 billion fraud,” Vance said.
Livesay was involved in or benefitted from the fraud from at least 1996 until March 2003. HealthSouth was then the nation’s largest provider of outpatient surgery and healthcare rehabilitation services. The massive accounting fraud cost hundreds of HealthSouth employees their jobs, caused unsuspecting investors to lose hundreds of millions of dollars, and drove the company to the brink of financial ruin.
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