Health South

On March 19, 2003, SEC filed an accounting fraud charge against HealthSouth and its CEO for inflating their revenue by $1.4B since 1999. To meet the Wall Street expectations, the allegation mentions, at the insistence of the CEO, Health South systematically overstated earnings , false increases in earnings were matched by false increases in the assets. The company’s methodology is quite interesting- every quarter the senior officer’s of the company met with the CEO with the actual results and they compared that to the street’s expectation. If earnings were lower than the expectations, the senior accounting personnel convened and decided on the entries that will help inflate revenues- mostly being reduction of contra revenue account , called contractual adjustment, and or decreasing expenses, and correspondingly increasing assets or decreasing liabilities. Quite an organized scheme.