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A Test of Service Quality - Careem V Uber
A Test of Service Quality - Careem V Uber
A Test of Service Quality - Careem V Uber
SCANDAL
HA IDE R R A Z A
KHU R R A M A HMER
A D E E L HA SSA N A S K A R E Y
INTRODUCTION
• HealthSouth Corporation was founded in 1984, in Birmingham,
Alabama.
• HealthSouth Corporation is one of United States' largest providers of
post-acute healthcare services.
• At the company's height in 2003, it recorded nearly $4.5 billion in
revenue, dominated the rehabilitation, surgery and diagnostic
services market and employed more than 60,000 people at 2,000
facilities.
SCANDAL
• In 2002, HealthSouth was involved in an Accounting Scandal
regarding its earning reports and price of common stock.
• What was the scandal?
• In 2002, then HealthSouth CEO, Richard M. Scrushy, sold $75 million
in stocks, days before the company posted a large loss.
• The U.S SEC accused HLS of falsifying accounting information in
order to create a false aura of accomplishments and meeting
investor’s expectations.
• Who was involved in the scandal?
• HLS CEO Richard Scrushy & five other CFOs
• How was the scandal pulled off?
• Scrushy and HealthSouth officials met analyst expectations for 40
consecutive quarters, using creative accounting methods and
ultimately fraudulent accounting.
• They altered their earnings numbers; explained as: plugging “holes”
in the balance sheet with “dirt.”
• The fraud included improperly capitalizing expenses, overestimating
insurance reimbursements, overvaluing fixed assets, and using faulty
reserve accountings
• When did the scandal occur?
• The entire fraud was a culmination of works from the early 1990s.
• It went on, undetected, until 2003.
• Why did the scandal occur?
• The 1990s saw investors and lenders who were less focused on
profitability and more so on revenue.
• When looking for capital as a company, growth was key.
• This pressured CEOs, like Scrushy, to continue growing their
companies and meeting analyst expectations quarter after quarter.
•HOW DID IT GO UNNOTICED?
•EXECUTIVES FOLLOWED THREE BASIC STEPS WHILE
COMMITTING THE FRAUD:
•1) COMPANY OFFICIALS COMPARED THEIR INTERNAL
FINANCIAL STATEMENTS TO SEE IF THEY WOULD MEET
ANALYST EXPECTATIONS.
•2) IF EARNINGS APPEARED TO BE SHORT, MANAGERS
WERE TOLD TO FIX THEM AND MANIPULATE THE
RESULTS IN ANY WAY NECESSARY.
• 3) FALSE DOCUMENTS WERE CREATED TO CONCEAL
THE FALSE ENTRIES ADDED TO THE FINANCIAL
STATEMENTS.
• HealthSouth employees went above and beyond to conceal the fictitious
entries from the auditors, which was what allowed the fraud to exist for
so long.
• Where did all the money go?
• Greed also was a significant motive for HealthSouth management to
inflate earnings.
• By manipulating earnings and stock price, Scrushy was able to secure
stock options for himself on the lowest trading day of HealthSouth
stock, netting him the highest profit possible.
• In 1997, Martin (CFO) sold $3 million worth of HealthSouth shares while
Scrushy sold a hefty $100 million.
What were the shortcomings of the scandal?
•Michael Vines was a bookkeeper at HealthSouth who oversaw
the purchase of equipment.
•Upon leaving HealthSouth, Mr. Vines sent a letter to the E&Y
auditors which read: