The Securities and Exchange Commission filed, and settled, civil fraud charges against Tenet Healthcare Corp. and four former senior executives.

The charges accused the company and executives of failing to disclose to investors that Tenet's strong earnings growth from 1999 to 2002 was driven largely by its exploitation of a loophole in the Medicare reimbursement system. Once Tenet finally revealed its scheme to the investing public and admitted that its strategy was not sustainable, the market value of Tenet's stock plunged by over $11 billion.

During the time of the fraud, Tenet was the second largest publicly traded health care company in the country.

To settle the charges, Tenet agreed to pay a civil penalty of $10 million, which will be distributed to investors. Without admitting or denying the allegations, Tenet also agreed to be permanently enjoined from violating the antifraud, reporting, and recordkeeping provisions of the federal securities laws.

In addition to Tenet, the SEC's complaint named:

  • Thomas B. Mackey, 58, of Keswick, Va., Tenet's former chief operating officer and co-president;
  • Christi R. Sulzbach, 52, of Santa Barbara, Calif., the former general counsel and chief compliance officer;
  • David L. Dennis, 58, of Los Angeles, the former chief financial officer and co-president; and,
  • Raymond L. Mathiasen, 63, of Los Angeles, the former chief accounting officer.

Mathiasen and Dennis both agreed to settle the SEC’s charges without admitting or denying the allegations and will be permanently enjoined from violating the antifraud, reporting and recordkeeping provisions of the federal securities laws.Mathiasen will pay a civil penalty of $240,000, and be barred from serving as an officer or director of a public company for five years. A CPA, he also agreed to be permanently denied the privilege of appearing or practicing before the SEC as an accountant.
Dennis will pay a $150,000 civil penalty.

In March 2006, the SEC also settled administrative improper professional conduct charges against three of Tenet's outside auditors, who were formerly employed by KPMG.


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