Although ethical behavior is paramount in any company in every industry, sometimes it takes a scandal to realize just how important ethics can be. The early 2000s were replete with examples of unethical behavior and cases of corporate fraud. HealthSouth Corporation is an example of how creative accounting practices can rapidly run afield.
At HealthSouth’s height in 2003, it was the largest publicly listed healthcare company in the United States. It recorded nearly $4.5 billion in revenue, dominating the rehabilitation, surgery and diagnostic services market and employing more than 60,000 people at 2,000 facilities. However, it all came crumbling down when Weston Smith, then serving as CFO for the company, voluntarily came forward and exposed that this success was due to an elaborate multi-year billion-dollar accounting fraud. As it came to be disclosed, the top-level executives, including the CEO, had all been involved in this fraud. For Smith, this participation in perpetrating the fraud resulted in jail time and a significant financial penalty.
On Nov. 6, Smith will visit the David Eccles School of Business at the University of Utah for a discussion hosted by the Daniels Fund Ethics Initiative and the Student Center for the Public Trust’s Ethics Club. In a session that he calls “Crossing the Line: An Insider’s Perspective of the HealthSouth Fraud,” Smith will describe the culture of the company, the mechanics of the fraud and how detection was avoided. He will highlight both financial and non-financial red flags of corporate misconduct. Most importantly, Smith will challenge and motivate attendees “to simply do the right thing.”
“Many times, the people who get involved in frauds like these are not horrible people, but they make a few bad choices and get off course,” said Melissa Western, assistant professor of accounting and faculty advisor to the Ethics Club. “To avoid getting caught up in a situation like this, we need to remember that it is the small, daily decisions that make the biggest impact in who we are. We also need to be able to walk away from toxic situations.”
The public is welcome to join University of Utah students at Weston Smith’s discussion on Thursday, Nov. 6, at 3:30 p.m. in the auditorium of the Spencer Fox Eccles Business Bu