Health South: A Case Study Of Business Ethics

1717 words - 7 pages

Ethics in business has always been an issue. The business of business is a take-no-prisoners, dog-eat-dog world aspect of looking at things and with this being said at times ethics seem to go out the proverbial window. Over the years, with situations becoming more and more visible to the public, the U.S. government has had to step in and take some actions. These actions came in the form of the Sarbanes-Oxley Act of 2002 which defined a lot of the accounting practices of companies as well as outlined the need for honesty in financial reporting. Richard Scrushy, CEO of HealthSouth, was the first and only CEO to be tried and now convicted under the Sarbanes-Oxley Act of 2002.Richard Scrushy and ...view middle of the document...

HealthSouth surgery and diagnostic centers also became highly reputed for their outstanding services and state-of-the-art technology. (www.richardmscrushy.com/biography)In March of 2003 Scrushy and his establishment HealthSouth were accused of account fraud, giving false impressions of the company's financial status to meet the Wall Street's expectations. As a result, Richard is working diligently to clear his name of the accusations being made against him in connection with the alleged fraudulent activities of HealthSouth. He also "focuses on the real-estate development business, Marin, Inc., and assists his wife Leslie with her company, uppseedaisees" (www.richardmscrushy.com/biography).Allegation of BriberyBusiness ethics serve the important social function of integrating business and society, by promoting the legitimacy of business operations, through critical reflection. Bribery is one of the factors that affect business ethics and Richard M. Scrushy is a dramatic example for allegation of bribery, which is, of course, ethically wrong. Scrushy surrounded himself with an empire that consisted of possessions most people can only dream of, but never have the opportunity to own or experience. Life as Scrushy had become accustomed was about to change as his empire began to crumble as lies, deceit, and money laundering through Medicare fraud surfaced.On March 19, 2003, The Securities and Exchange Commission (SEC) and Justice Department (DOJ) filed accounting fraud and insider trading charges against HealthSouth Corporation and Richard Scrushy in federal court. The Commission alleged Scrushy falsely overstated earning of HealthSouth by at least $1.4 billion in order to meet or exceed Wall Street earnings expectations (SEC, 2003). Scrushy faces bribery and mail fraud counts. Prosecutors allege that he improperly funneled $500,000 to a campaign fund created by Siegelman, a Democrat and Alabama's governor from 1999 to 2003, in exchange for a position on the state board that authorizes hospital expansions (Johnson, 2005).The capitalist economy system gets corrupted by (ethically and morally wrong) bribery. In the capitalist system, people tend to buy the best product at the best price due to competition in an open and free market. People make purchases that do not reward the most competent manufacturer through bribery, thus corrupting free-market mechanism. Not only this, it also destroys people's trust in the integrity of professional services, of government and the courts, of law enforcement, religion, and anything it touches (Kusi, 2005).Sarbanes-Oxley ActHealthSouth's fraudulent activity put them in the company of industry giants like Freddie Mac, Enron, WorldCom and Sunbeam. According to the Economist magazine, "in 2001 approximately 250 cases of revenue overstatement occurred" (Hutton, 2005, p.354). The questionable accounting practices included:aggressive accounting, weak internal controls, management attitudes, lax ethical standards,...

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