Weekly interest and loan rates | Home values Northwest stock contest 2004 | Consumer affairs

Two more avoid prison in scam at HealthSouth

By Jay Reeves
The Associated Press

Malcolm McVay

E-mail this article Print this article Search archive Most e-mailed articles

Another one-time executive with the rehabilitation giant also avoided prison time in the scandal.

Former Chief Financial Officer Malcolm "Tadd" McVay said he was "profoundly sorry" and "totally embarrassed" over his role in a far-reaching scam the company estimates was worth at least $3.4 billion.

"I'll go forward. I'll bear the scarlet letter. It won't be an 'A,' it will be an 'F,' for fraud," McVay, 42, told U.S. District Judge U.W. Clemon.

McVay had pleaded guilty to conspiracy to commit fraud and certification of false financial reports. He also agreed to forfeit money he made in the scam.

While the government requested a lighter sentence because of McVay's cooperation in the investigation, Justice Department attorney Richard Wiedis said McVay should still go to prison for more than five years.

"Mr. McVay is the new face of corporate fraud," Wiedis told the judge in seeking a 65-month term.

Clemon ruled that McVay's actions cost investors $400 million. He then rejected prosecutors' request for imprisonment and sentenced McVay to six months of house arrest followed by five years on probation.

Clemon also fined McVay $10,000 and ordered him to forfeit $50,000 gained through the fraud.

"The probationary sentence is influenced by the exemplary record you compiled before becoming involved in this most serious of criminal offenses," Clemon said.

McVay, a single father with custody of a daughter, was the first of five former HealthSouth CFOs scheduled for sentencing.

After McVay's hearing, Clemon imposed similar punishment on Richard Botts, a former senior vice president for taxes at HealthSouth. Prosecutors had sought a prison term of more than three years.

	Richard Botts

Botts, 45, admitted to filing false tax forms to hide the fraud and pleaded guilty to a conspiracy charge. While he received the same house arrest, probation and fine as McVay, he was ordered to forfeit more money: $265,000.

"I'm ashamed and embarrassed by my actions," Botts said.

The sentences were similar to the ones Clemon imposed Tuesday on Kenneth Livesay, a former assistant controller depicted by prosecutors as a key figure in the fraud.

Prosecutors said they were considering an appeal of Livesay's light sentence, and Wiedis objected to the sentences for McVay and Botts in court, saying Clemon was disregarding rules that a sentence should reflect the seriousness of the crime.

Of eight one-time HealthSouth executives sentenced so far, seven have avoided jail time and one was sentenced to five months in prison.

McVay, a former commercial banker, worked at the Birmingham-based HealthSouth less than four years. He played a major role in refinancing the company's long-term debt and its bank credit line and served as CFO in late 2002.

McVay also served as treasurer, and prosecutors said he oversaw the accounting department where much of the fraud was committed to make it appear HealthSouth was meeting analysts' forecasts.

Seventeen former HealthSouth executives have reached plea deals and are cooperating with investigators; fired Chief Executive Richard Scrushy is awaiting trial after pleading not guilty.

Documents filed by the government said McVay and Botts would testify against Scrushy at his trial.

McVay told agents he and Scrushy discussed a potential buyout of HealthSouth and other possible deals despite knowing the company's cash was overstated by up to $400 million.

Copyright © 2004 The Seattle Times Company

E-mail this article

Print this article

Search archive

More business & technology headlines...