The Wall Street Journal

August 26, 2005

EXECUTIVES ON TRIAL
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HealthSouth Ex-Finance Chief
Gets Three-Month Prison Term

Prosecutors Urged Leniency
After Beam's Cooperation
In Scrushy Fraud Trial

By ANN CARRNS
Staff Reporter of THE WALL STREET JOURNAL
August 26, 2005; Page C3

A federal judge sentenced HealthSouth Corp.'s first finance chief to three months in prison for his part in a scheme to inflate profit at the Birmingham, Ala., health-care company by about $2.7 billion.

Aaron Beam, 61 years old, pleaded guilty in 2003 to bank fraud and cooperated with the federal government in its investigation of HealthSouth and founder Richard M. Scrushy. Mr. Beam, chief financial officer at HealthSouth from 1984 until his retirement in 1997, testified at Mr. Scrushy's criminal trial but said little to directly connect his former boss to the fraud. Mr. Scrushy was acquitted by a jury in June on all 36 charges against him.

[Aaron Beam, who co-founded HealthSouth Corp., was sentenced to three months in prison and a year probation for his part in the $2.7 billion accounting fraud at the company.]
Aaron Beam, who co-founded HealthSouth Corp., was sentenced to three months in prison and a year probation for his part in the $2.7 billion accounting fraud at the company.

Despite that defeat, prosecutors asked U.S. District Judge Robert Propst earlier this week to impose a lenient sentence on Mr. Beam, citing "substantial assistance" that included helping forensic auditors piece together details of the fraud.

Mr. Beam faced a maximum of 30 years in prison. U.S. Attorney Alice Martin, who led the prosecutions of Messrs. Beam and Scrushy, said federal sentencing guidelines called for a prison term of six months to a year because the bank fraud to which the former finance chief pleaded guilty didn't result in a financial loss. The three-month prison sentence matched the government's recommendation to the judge.

Mr. Beam also was ordered to forfeit $275,000 related to proceeds from the bank fraud and pay a fine of $10,000. He is scheduled to begin serving his sentence Nov. 1 and faces one year of probation after being released from prison.

Donald Briskman, Mr. Beam's lawyer, said he had hoped his client wouldn't have to go to prison but was glad the former finance chief would be able "go on with his life" after completing his prison term.

Mr. Beam is just the second person to get prison time for participating in the fraud at HealthSouth. Emery Harris, a former assistant controller at the company, served five months. Michael Martin, another onetime chief financial officer, got six months of home detention, but a federal appeals court in June ordered a new sentencing after concluding a Birmingham judge hadn't sufficiently explained his departure from sentencing guidelines.

Two other former HealthSouth finance chiefs who testified against Mr. Scrushy at his trial, William Owens and Weston Smith, are scheduled to be sentenced later this year.

Mr. Beam was an early witness for the prosecution, claiming Mr. Scrushy once vowed to deny any knowledge of the fraud if it were exposed. After the not-guilty verdict, some jurors said they were bothered by revelations such as Mr. Beam's alleged drinking and carousing with women other than his wife.

Mr. Scrushy's lawyers contended during the trial that Mr. Beam and other former HealthSouth executives were lying to win lighter punishment for their own crimes. Mr. Scrushy, who has denied any knowledge of the accounting scheme, still faces an SEC civil lawsuit alleging he led the fraud, engaged in insider trading and committed other wrongdoing.

Write to Ann Carrns at ann.carrns@wsj.com1

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