Because of the thousands upon thousands of press releases that I have seen, very few impress or take me by surprise. But the one at www.healthsouth.com/who_we_are/press_releases.asp did just that. In the release, HealthSouth Corporation announced that it has received a $440 million tax recovery from the IRS “for overstatements of taxable income attributable to financial fraud perpetrated by members of prior management.” This recovery includes a $296 million tax refund for the tax years 1996 through 1999, and $144 million of associated interest income.
HealthSouth engaged specialists to conduct a forensic tax accounting analysis to isolate journal entries for specific financial fraud schemes and compute the amount of taxable income overstated for each year of 1996 through 1999. The reductions of taxable income in 1997 also entitled HealthSouth to use carrybacks from that year to recover an additional $21 million of taxes paid in years 1994 and 1995.
Perhaps it is no coincidence, and poetic justice, that on the same day of the issuance of the press release, HealthSouth made its final payment to the SEC as result of a $100 million 2005 settlement, and indicates that it will shortly make its last payment to the U.S. Department of Justice--Civil Division, the Office of the Inspector General of the Department of Health and Human Services, and the Centers for Medicare & Medicaid Services (CMS) because of a $325 million 2004 global settlement.
Fraudulent overstatements, regulatory action, forensic accountants at work, substantial tax refunds, and utter glee from a company that wasn’t sure it was going to survive all in one press release. A press release in which it seems to this somewhat jaded reporter that HealthSouth is proudly proclaiming finally something good has come out of the “fraud perpetrated by members of its prior management.”
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