United States Securities and Exchange Commission

Litigation Release No. 18070 / April 4, 2003
Accounting and Auditing Enforcement Release No. 1752 / April 4, 2003

, Civil Action No. CV-03-S-0758-S

   The Commission announced that on April 3, 2003, it filed a complaint
   charging Kenneth K. Livesay, Angela C. Ayers, Kay Morgan, Cathy C.
   Edwards and Virginia B. Valentine with violating and/or aiding and
   abetting violations of the antifraud, reporting, books-and-records,
   and internal controls provisions of the federal securities laws. These
   defendants served in HealthSouth's accounting and/or Finance
   department in different capacities. The complaint alleges that since
   at least as early as 1999, HealthSouth has been systematically
   overstating its earnings by at least $1.4 billion in order to meet or
   exceed Wall Street earnings expectations. The false increases in
   earnings were matched by false increases in HealthSouth's assets. By
   the third quarter of 2002, HealthSouth's assets were overstated by at
   least $1.3 billion, or approximately 20 percent.

   The complaint charged that, Livesay, Ayers, Morgan, Edwards and
   Valentine, in furtherance of the above scheme, made or directed other
   HealthSouth employees to make false accounting entries to inflate
   reported operating results. The Commission also charged that Morgan
   engaged in insider trading by selling at least 20,000 shares of
   HealthSouth stock while knowing that HealthSouth's financial
   statements grossly misstated the company's earnings and assets.

   The Commission's complaint against Livesay, Ayers, Morgan, Edwards and
   Valentine charges that they each violated Section 17(a) of the
   Securities Act of 1933 and Sections 10(b) and 13(b)(5) of the
   Securities Exchange Act of 1934 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) and of the Exchange Act and Rules
   10b-5, 12b-20, 13a-1 and 13a-13 thereunder. The complaint also charges
   Edwards with violating Rule 13b2-2 for providing a falsified invoice
   to HealthSouth's auditors. The Commission is seeking permanent
   injunctions, civil money penalties and disgorgement of all ill-gotten
   gains or losses avoided by the defendants, and an order an order
   prohibiting Livesay, Ayers, Morgan and Edwards from ever serving as an
   officer or director of a public company.

   The Commission also amended its complaint in , CV-03-J-0615-S (N.D.
   AL) to allege that, since 1991, Scrushy sold at least 13,823,000
   shares of HealthSouth common stock for proceeds in excess of $170
   million, based upon his knowledge of HealthSouth's actual financial
   results and the impact that disclosure of those results would have on