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SEC LITIGATION RELEASE
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EXTRACTED KEY WORDS
EXCHANGE ACT HEALTHSOUTH MARTIN SECURITIES COMPLAINT ALLEGES COMMISSION ACCOUNTING MCVAY VIOLATIONS THEREUNDER CHIEF FINANCIAL OFFICERS UNITED STATES DISTRICT COURT CIVIL HEALTHSOUTH CORPORATION FALSE FINANCIAL STATEMENTS DIRECTORS KNOWING PRICE PERMANENT INJUNCTIONS ORDER DISGORGEMENT PREJUDGMENT THEREON CIVIL PENALTIES DEFENDANT ORDERS BARRING MARTIN SERVING PUBLICLY-HELD COMPANIES |
U.S. Securities and Exchange Commission
Litigation Release No. 18339 / September 10, 2003
Accounting and Auditing Enforcement Release No. 1853 / September 10, 2003
United States District Court for the Northern District of Alabama, Civil
Action No. CV-03-AR-2424-S
SEC Sues Former Chief Financial Officers of HealthSouth Corporation
On September 3, 2003, the Securities and Exchange Commission filed a
complaint against two former Chief Financial Officers ("CFOs") of
HealthSouth Corporation, Michael Martin and Malcolm McVay. HealthSouth
was the nation's largest provider of outpatient surgery, diagnostic
and rehabilitative healthcare services, owning approximately 1,800
different facilities throughout the United States and abroad.
The complaint alleges that Martin and McVay participated in the
massive accounting fraud at HealthSouth by signing reports filed with
the Commission that they knew contained materially false financial
statements. The complaint further alleges that, while CFO, Martin
directed lower level accounting personnel to make false entries to
HealthSouth's accounting books and records so that HealthSouth's
quarterly and annual earnings would meet or exceed Wall Street
expectations. The complaint further alleges that Martin sold
HealthSouth stock while knowing that the share price was inflated
artificially due to the materially false financial statements.
The complaint alleges that Martin violated Section 17(a) of the
Securities Act of 1933 ("Securities Act") and Sections 10(b) and
13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act") and
Rules 10b-5 and 13b2-1 thereunder, and aided and abetted HealthSouth's
violations of Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of
the Exchange Act and Rules 10b-5, 12b-20, 13a-1 and 13a-13 thereunder.
The complaint alleges that McVay violated Section 10(b) of the
Exchange Act and Rules 10b-5 and 13a-14 thereunder and aided and
abetted HealthSouth's violations of Sections 10(b) and 13(a) of the
Exchange Act and Rules 10b-5, 12b-20 and 13a-13 thereunder.
The complaint asks the Court to issue permanent injunctions and to
order disgorgement, prejudgment interest thereon and civil penalties
against each defendant. The Commission also seeks orders barring
Martin and McVay from serving as officers and directors of
publicly-held companies in the future.
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