Former HealthSouth whistleblower addresses ethics
Gabriela Malespin | Tuesday, April 15, 2014
Weston Smith, frequent speaker on ethics and integrity on business and former CFO-turned-whistleblower for HealthSouth, presented a talk titled “Crossing the Line: An insider’s story” at the Mendoza College of Business in the Jordan Auditorium.
The talk, sponsored by the Center for Accounting Research and Education, focused on Smith’s time as CFO of HealthSouth Corporation, the United States’ largest owner and operator of inpatient rehabilitative hospitals and subject of a corporate accounting scandal. Smith spoke about CEO Richard Scrushy, the development of the accounting fraud and the impact it had on employees.
“I’m not just talking about a business story, I’m talking about every day life. When I hear people say business ethics I cringe because I think ethics is ethics,” Smith said. “It’s just a question of where it’s played out.”
Smith said Scrushy’s development of HealthSouth had an effective model for healthcare and the company’s accounting scandal was atypical for a company with that type of growth.
“When I do talk about Richard it’s to illustrate the tone of the company,” said Smith “This company was a very, very good idea because the timing was perfect, the business model was very strong. It was a very fast growing company.”
The accounting fraud was not a single, orchestrated event, but rather a progression of small accounting frauds that eventually developed over time, Smith said. Over the years, the fraud was so developed it was almost impossible to stop it.
“The rationalization was one of fear — fear of getting caught. Stopping the fraud would have revealed the fraud at that point in time,” he said.
Smith said one of his primary motivations to leave HealthSouth and to refuse to continue the accounting fraud was the Sarbanes-Oxley Act (SOX) of 2002. The act required corporations’ top management certify the accuracy of financial information.
“I was ashamed of who I was and what I had become. I was part of a massive fraud. Sarbanes-Oxley was a wake up call,” he said.
Smith said the most detrimental part of the HealthSouth accounting fraud was the toll it took on employees who were innocent of the actions of the company and whose reputations were later damaged by their association with HealthSouth.
“When we think of corporate fraud we probably think of shareholders who lost a lot of money,” he said. “But it’s also the human toll on people. People who had nothing to do with the fraud lost their jobs.”
“The value of ethics and integrity in business had both emotional and practical worth in business,” Smith said. “The key to becoming successful in business is maintaining a transparent, honest relationship with employees and company members and recognizing the responsibility leaders have towards others in business as well as other spheres in life.
“A lot of people were hurt because I was focused on ‘the what’ instead of ‘the who.’ Never lose focus on who you are,” Smith said. “My definition of a good leader it a leader who will not be defined by his own successes but by the success of those he leads.”