Business
HealthSouth, former auditor sue each other
NEWS IN BRIEF — Posted April 25, 2005
HealthSouth is suing its former auditor, Ernst & Young, accusing the firm of breaching its contract by failing to detect massive accounting fraud at the outpatient services giant.
The lawsuit, filed April 1 in circuit court in Jefferson County, Ala., was a response to an earlier lawsuit filed by Ernst & Young. According to published reports, that suit claimed HealthSouth hid the fraud, damaging the accounting firm's reputation and exposing it to lawsuits.
In HealthSouth's complaint, the company said Ernst & Young auditors either intentionally ignored the fraud or were negligent in failing to detect it. The complaint seeks compensatory and punitive damages.
An Ernst & Young spokesman did not return messages seeking comment.
The complaint also included statements that appear to mark the first time that the company has publicly accused its ousted founder, Richard M. Scrushy, of directing the $2.6 billion accounting fraud that was made public after the FBI raided the company in March 2003.
Federal prosecutors have alleged that Scrushy and others conspired to inflate earnings in a scheme to meet Wall Street expectations. At least 18 former executives have faced criminal charges in the case. Scrushy's trial in federal court began on Jan. 5.
Note: This item originally appeared at http://www.ama-assn.org/amednews/2005/04/25/bibf0425.htm.
