SlideShare une entreprise Scribd logo
1  sur  11
Télécharger pour lire hors ligne
HealthSouth Scandal
by Mason Sakoda
BUS-206-Q3590 Business Law I 15EW3
HealthSouth Introduction
• Leading provider of medical
rehabilitation
• More than 2000 locations
• Focused on economic
enrichment
• known for accounting fraud
Wikipedia (2015, February 4) HealthSouth. Retrieved from http://en.wikipedia.org/wiki/HealthSouth
History
• Founded in 1984 by Richard
Scrushy
• Became a publicly traded
company in 1986
• Grew by acquisition
Wikipedia (2015, February 4) HealthSouth. Retrieved from http://en.wikipedia.org/wiki/HealthSouth
The Start of a Scheme
Wallstreet Expectations
• By 1991, market analysts giving
positive stock evaluations
• Between 1995-1998, stock
increased by 250%
• Accountants match optimistic
profit projections to prevent
falling stock prices.
Ethics and Fraud at HealthSouth: Lessons from Inside a
Corporate Meltdown. (2011). Retrieved January 20, 2015,
from https://www.youtube.com/watch?v=R_K7bQpDJzg
Accounting Fraud
“Fix” the Numbers
• If actual earnings were short, Scrushy told management to “fix
it”
• “Family meetings” were convened
• Accounting entries to reflect increased assets and decreased
liabilities
• Necessary to comply with GAAP
Detection of Fraud
HealthSouth and Scrushy under radar
• Scrushy accused of insider trading
• Scrushy’s lavish lifestyle goes public
• HealthSouth Headquarters raided by FBI agents
By the Numbers
• Securities Exchange
Commission(SEC) had
been investigating
HealthSouth for awhile
• By 2002, overstated
earnings by $1.4 billion
and assets by $800 million
• In 2002, sworn statements
required when submitting
financial reports.
Overstated by 4700%
Wikipedia (2015, February 4) HealthSouth. Retrieved from http://en.wikipedia.org/wiki/HealthSouth
Civil Action Lawsuit
• In 2003, SEC filed
accounting fraud in
federal court against
HealthSouth
• First time Sarbanes-
Oxley Act was enforced
• Violated sections of the
Securities Act of 1933
and Exchange Act of
1934
SEC(2012, August 10) Securities Exchange Act of 1934. Retrieved from http://www.sec.gov/about/laws/sea34.pdf
Morals and Ethics
• A company’s morals and
ethics start with each
individual
• Crime starts with small
compromising ideas
• You have the power to
stop fraud before getting
sucked in to it
Wikipedia (2015, February 4) HealthSouth. Retrieved from http://en.wikipedia.org/wiki/HealthSouth
References
HLSsettlements(2014, April 8) HealthSouth Securities Settlement Funds. Retrieved from
http://www.hlssettlement.com/healthsouth/docs.htm
B. Dooley, D. Gordon, M. Shachem(2013, July 10) Section 17(a) of the Securities Act of 1933: Unanswered
Questions. Retrieved from http://www.jdsupra.com/legalnews/section-17a-of-the-securities-act-of-1-59190/
SEC(2012, August 10) Securities Exchange Act of 1934. Retrieved from
http://www.sec.gov/about/laws/sea34.pdf
Assosiated Press (2003, March 20) SEC charges HealthSouth with $1.4 billion fraud. Retrieved from
http://www.sptimes.com/2003/03/20/Business/SEC_charges_HealthSou.shtml
Wikipedia (2015, February 4) HealthSouth. Retrieved from http://en.wikipedia.org/wiki/HealthSouth
Wikipedia (2015, February 3) Securities Act of 1933. Retrieved from
http://en.wikipedia.org/wiki/Securities_Act_of_1933
Any Questions?

Contenu connexe

Tendances

Collapse of Silicon valley bank.pptx
Collapse of Silicon valley bank.pptxCollapse of Silicon valley bank.pptx
Collapse of Silicon valley bank.pptxABHISEKPADHI5
 
Merger of public sector banks in india
Merger of public sector banks in indiaMerger of public sector banks in india
Merger of public sector banks in indiaVIRAAT RAGHAVENDRA
 
Merger & Acquisition of HDFC Bank with Centurian Bank of Punjab
Merger & Acquisition of HDFC Bank with Centurian Bank of PunjabMerger & Acquisition of HDFC Bank with Centurian Bank of Punjab
Merger & Acquisition of HDFC Bank with Centurian Bank of PunjabRohan Solanki
 
The subprime mortgage crisis
The subprime mortgage crisisThe subprime mortgage crisis
The subprime mortgage crisistuxxa1
 
Worldcom scam 2002
Worldcom scam 2002Worldcom scam 2002
Worldcom scam 2002Sanket Jha
 
Evolution of banking
Evolution of bankingEvolution of banking
Evolution of bankingVinor5
 
Corporate Action
Corporate ActionCorporate Action
Corporate ActionImran Kazi
 
Critical Analysis of Reasons of IPO failure
Critical Analysis of Reasons of IPO failureCritical Analysis of Reasons of IPO failure
Critical Analysis of Reasons of IPO failurenitingoswami
 
Case study of Baring bank & Nick Leeson
Case study of Baring bank & Nick LeesonCase study of Baring bank & Nick Leeson
Case study of Baring bank & Nick LeesonUTCC
 
World com corporate governance failure
World com   corporate governance failureWorld com   corporate governance failure
World com corporate governance failuremanojsedai2
 

Tendances (20)

Basel iii presentation
Basel iii presentationBasel iii presentation
Basel iii presentation
 
Collapse of Silicon valley bank.pptx
Collapse of Silicon valley bank.pptxCollapse of Silicon valley bank.pptx
Collapse of Silicon valley bank.pptx
 
Merger of public sector banks in india
Merger of public sector banks in indiaMerger of public sector banks in india
Merger of public sector banks in india
 
Worldcom scandal
Worldcom scandalWorldcom scandal
Worldcom scandal
 
Internship report HBL
Internship report HBLInternship report HBL
Internship report HBL
 
Merger & Acquisition of HDFC Bank with Centurian Bank of Punjab
Merger & Acquisition of HDFC Bank with Centurian Bank of PunjabMerger & Acquisition of HDFC Bank with Centurian Bank of Punjab
Merger & Acquisition of HDFC Bank with Centurian Bank of Punjab
 
SVB CRISES.pptx
SVB CRISES.pptxSVB CRISES.pptx
SVB CRISES.pptx
 
The subprime mortgage crisis
The subprime mortgage crisisThe subprime mortgage crisis
The subprime mortgage crisis
 
Budget 2022: A Macroeconomic Perspective
 Budget 2022: A Macroeconomic Perspective Budget 2022: A Macroeconomic Perspective
Budget 2022: A Macroeconomic Perspective
 
Worldcom scam 2002
Worldcom scam 2002Worldcom scam 2002
Worldcom scam 2002
 
Worldcom,Enron.Fraud,Bankruptcy,SOA,GAAP,SEC
Worldcom,Enron.Fraud,Bankruptcy,SOA,GAAP,SECWorldcom,Enron.Fraud,Bankruptcy,SOA,GAAP,SEC
Worldcom,Enron.Fraud,Bankruptcy,SOA,GAAP,SEC
 
Evolution of banking
Evolution of bankingEvolution of banking
Evolution of banking
 
Worldcom
WorldcomWorldcom
Worldcom
 
Corporate Action
Corporate ActionCorporate Action
Corporate Action
 
Development banks
Development banksDevelopment banks
Development banks
 
Critical Analysis of Reasons of IPO failure
Critical Analysis of Reasons of IPO failureCritical Analysis of Reasons of IPO failure
Critical Analysis of Reasons of IPO failure
 
Case study of Baring bank & Nick Leeson
Case study of Baring bank & Nick LeesonCase study of Baring bank & Nick Leeson
Case study of Baring bank & Nick Leeson
 
The Wells Fargo Cross-Selling Scandal
The Wells Fargo Cross-Selling Scandal The Wells Fargo Cross-Selling Scandal
The Wells Fargo Cross-Selling Scandal
 
World com corporate governance failure
World com   corporate governance failureWorld com   corporate governance failure
World com corporate governance failure
 
Hbl
HblHbl
Hbl
 

Similaire à Health south presentation la

Lucy Reynolds: the NHS as investment opportunity
Lucy Reynolds: the NHS as investment opportunityLucy Reynolds: the NHS as investment opportunity
Lucy Reynolds: the NHS as investment opportunityUKFacultyPublicHealth
 
Healthsouth Research Paper
Healthsouth Research PaperHealthsouth Research Paper
Healthsouth Research PaperKelly Doepke
 
Hpf indaba presentation nov 2011 - Hans Onya
Hpf indaba presentation nov 2011 - Hans OnyaHpf indaba presentation nov 2011 - Hans Onya
Hpf indaba presentation nov 2011 - Hans OnyaNCAS1
 
Application Of The Physical Mobility Scale
Application Of The Physical Mobility ScaleApplication Of The Physical Mobility Scale
Application Of The Physical Mobility ScaleJennifer Ontiveros
 
Emerging trends in indian mutul funds
Emerging trends in indian mutul fundsEmerging trends in indian mutul funds
Emerging trends in indian mutul fundsRanjith Kumar
 
Strategically Manage the Risk of Saving For Your Retirement retirementplans2 ...
Strategically Manage the Risk of Saving For Your Retirement retirementplans2 ...Strategically Manage the Risk of Saving For Your Retirement retirementplans2 ...
Strategically Manage the Risk of Saving For Your Retirement retirementplans2 ...Louis Wolkenstein
 
Hitech changes-to-hipaa
Hitech changes-to-hipaaHitech changes-to-hipaa
Hitech changes-to-hipaageeksikh
 
Grassroots basics
Grassroots basicsGrassroots basics
Grassroots basicsShcl1438
 
AssignmentNow you try it!! Develop your own SWOT for the follow.docx
AssignmentNow you try it!! Develop your own SWOT for the follow.docxAssignmentNow you try it!! Develop your own SWOT for the follow.docx
AssignmentNow you try it!! Develop your own SWOT for the follow.docxmckellarhastings
 
The Accounting Scandal Of Healthsouth
The Accounting Scandal Of HealthsouthThe Accounting Scandal Of Healthsouth
The Accounting Scandal Of HealthsouthJessica Lopez
 
Strategically Manage the Risk of Saving for Your Retirement
Strategically Manage the Risk of Saving for Your Retirement    Strategically Manage the Risk of Saving for Your Retirement
Strategically Manage the Risk of Saving for Your Retirement Louis Wolkenstein
 
Socially Responsible Investing
Socially Responsible InvestingSocially Responsible Investing
Socially Responsible InvestingSocial Thread
 
eHealth is Going Mainstream: Why, How & When? - Ville Koiste at the Nordic Di...
eHealth is Going Mainstream: Why, How & When? - Ville Koiste at the Nordic Di...eHealth is Going Mainstream: Why, How & When? - Ville Koiste at the Nordic Di...
eHealth is Going Mainstream: Why, How & When? - Ville Koiste at the Nordic Di...Sitra / Hyvinvointi
 
Henry J. Kaiser And Sidney R
Henry J. Kaiser And Sidney RHenry J. Kaiser And Sidney R
Henry J. Kaiser And Sidney RNichole Brown
 
venture capital financing | venture capital history
venture capital financing | venture capital historyventure capital financing | venture capital history
venture capital financing | venture capital historyvoboli3090
 
88. ge healthcare part 1
88. ge healthcare part 188. ge healthcare part 1
88. ge healthcare part 1Hispros
 
88. ge healthcare part 1
88. ge healthcare part 188. ge healthcare part 1
88. ge healthcare part 1Tim Histalk
 

Similaire à Health south presentation la (20)

Lucy Reynolds: the NHS as investment opportunity
Lucy Reynolds: the NHS as investment opportunityLucy Reynolds: the NHS as investment opportunity
Lucy Reynolds: the NHS as investment opportunity
 
Healthsouth Research Paper
Healthsouth Research PaperHealthsouth Research Paper
Healthsouth Research Paper
 
Healthsouth
HealthsouthHealthsouth
Healthsouth
 
Hpf indaba presentation nov 2011 - Hans Onya
Hpf indaba presentation nov 2011 - Hans OnyaHpf indaba presentation nov 2011 - Hans Onya
Hpf indaba presentation nov 2011 - Hans Onya
 
Application Of The Physical Mobility Scale
Application Of The Physical Mobility ScaleApplication Of The Physical Mobility Scale
Application Of The Physical Mobility Scale
 
Best Buy Company Inc.
Best Buy Company Inc.Best Buy Company Inc.
Best Buy Company Inc.
 
Emerging trends in indian mutul funds
Emerging trends in indian mutul fundsEmerging trends in indian mutul funds
Emerging trends in indian mutul funds
 
Strategically Manage the Risk of Saving For Your Retirement retirementplans2 ...
Strategically Manage the Risk of Saving For Your Retirement retirementplans2 ...Strategically Manage the Risk of Saving For Your Retirement retirementplans2 ...
Strategically Manage the Risk of Saving For Your Retirement retirementplans2 ...
 
Hitech changes-to-hipaa
Hitech changes-to-hipaaHitech changes-to-hipaa
Hitech changes-to-hipaa
 
Grassroots basics
Grassroots basicsGrassroots basics
Grassroots basics
 
AssignmentNow you try it!! Develop your own SWOT for the follow.docx
AssignmentNow you try it!! Develop your own SWOT for the follow.docxAssignmentNow you try it!! Develop your own SWOT for the follow.docx
AssignmentNow you try it!! Develop your own SWOT for the follow.docx
 
The Accounting Scandal Of Healthsouth
The Accounting Scandal Of HealthsouthThe Accounting Scandal Of Healthsouth
The Accounting Scandal Of Healthsouth
 
Strategically Manage the Risk of Saving for Your Retirement
Strategically Manage the Risk of Saving for Your Retirement    Strategically Manage the Risk of Saving for Your Retirement
Strategically Manage the Risk of Saving for Your Retirement
 
Socially Responsible Investing
Socially Responsible InvestingSocially Responsible Investing
Socially Responsible Investing
 
eHealth is Going Mainstream: Why, How & When? - Ville Koiste at the Nordic Di...
eHealth is Going Mainstream: Why, How & When? - Ville Koiste at the Nordic Di...eHealth is Going Mainstream: Why, How & When? - Ville Koiste at the Nordic Di...
eHealth is Going Mainstream: Why, How & When? - Ville Koiste at the Nordic Di...
 
Henry J. Kaiser And Sidney R
Henry J. Kaiser And Sidney RHenry J. Kaiser And Sidney R
Henry J. Kaiser And Sidney R
 
venture capital financing | venture capital history
venture capital financing | venture capital historyventure capital financing | venture capital history
venture capital financing | venture capital history
 
88. ge healthcare part 1
88. ge healthcare part 188. ge healthcare part 1
88. ge healthcare part 1
 
88. ge healthcare part 1
88. ge healthcare part 188. ge healthcare part 1
88. ge healthcare part 1
 
Paul Dawson
Paul DawsonPaul Dawson
Paul Dawson
 

Health south presentation la

  • 1. HealthSouth Scandal by Mason Sakoda BUS-206-Q3590 Business Law I 15EW3
  • 2. HealthSouth Introduction • Leading provider of medical rehabilitation • More than 2000 locations • Focused on economic enrichment • known for accounting fraud Wikipedia (2015, February 4) HealthSouth. Retrieved from http://en.wikipedia.org/wiki/HealthSouth
  • 3. History • Founded in 1984 by Richard Scrushy • Became a publicly traded company in 1986 • Grew by acquisition Wikipedia (2015, February 4) HealthSouth. Retrieved from http://en.wikipedia.org/wiki/HealthSouth
  • 4. The Start of a Scheme Wallstreet Expectations • By 1991, market analysts giving positive stock evaluations • Between 1995-1998, stock increased by 250% • Accountants match optimistic profit projections to prevent falling stock prices. Ethics and Fraud at HealthSouth: Lessons from Inside a Corporate Meltdown. (2011). Retrieved January 20, 2015, from https://www.youtube.com/watch?v=R_K7bQpDJzg
  • 5. Accounting Fraud “Fix” the Numbers • If actual earnings were short, Scrushy told management to “fix it” • “Family meetings” were convened • Accounting entries to reflect increased assets and decreased liabilities • Necessary to comply with GAAP
  • 6. Detection of Fraud HealthSouth and Scrushy under radar • Scrushy accused of insider trading • Scrushy’s lavish lifestyle goes public • HealthSouth Headquarters raided by FBI agents
  • 7. By the Numbers • Securities Exchange Commission(SEC) had been investigating HealthSouth for awhile • By 2002, overstated earnings by $1.4 billion and assets by $800 million • In 2002, sworn statements required when submitting financial reports. Overstated by 4700% Wikipedia (2015, February 4) HealthSouth. Retrieved from http://en.wikipedia.org/wiki/HealthSouth
  • 8. Civil Action Lawsuit • In 2003, SEC filed accounting fraud in federal court against HealthSouth • First time Sarbanes- Oxley Act was enforced • Violated sections of the Securities Act of 1933 and Exchange Act of 1934 SEC(2012, August 10) Securities Exchange Act of 1934. Retrieved from http://www.sec.gov/about/laws/sea34.pdf
  • 9. Morals and Ethics • A company’s morals and ethics start with each individual • Crime starts with small compromising ideas • You have the power to stop fraud before getting sucked in to it Wikipedia (2015, February 4) HealthSouth. Retrieved from http://en.wikipedia.org/wiki/HealthSouth
  • 10. References HLSsettlements(2014, April 8) HealthSouth Securities Settlement Funds. Retrieved from http://www.hlssettlement.com/healthsouth/docs.htm B. Dooley, D. Gordon, M. Shachem(2013, July 10) Section 17(a) of the Securities Act of 1933: Unanswered Questions. Retrieved from http://www.jdsupra.com/legalnews/section-17a-of-the-securities-act-of-1-59190/ SEC(2012, August 10) Securities Exchange Act of 1934. Retrieved from http://www.sec.gov/about/laws/sea34.pdf Assosiated Press (2003, March 20) SEC charges HealthSouth with $1.4 billion fraud. Retrieved from http://www.sptimes.com/2003/03/20/Business/SEC_charges_HealthSou.shtml Wikipedia (2015, February 4) HealthSouth. Retrieved from http://en.wikipedia.org/wiki/HealthSouth Wikipedia (2015, February 3) Securities Act of 1933. Retrieved from http://en.wikipedia.org/wiki/Securities_Act_of_1933

Notes de l'éditeur

  1. Today I’ll be presenting a company called HealthSouth and how it committed one of the biggest accounting frauds in history.
  2. HealthSouth is the nation’s largest provider of rehabilitation, outpatient surgery and diagnostic services. It is also the nation’s largest inpatient rehabilitation hospital. 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 in every state of the U.S. HealthSouth’s hospitals provide a higher level of rehabilitative care to patients who are recovering from conditions such as stroke and other neurological disorders, orthopedic, cardiac and pulmonary conditions, brain and spinal cord injury, and amputations. The company’s mission is “to be the healthcare company of choice for patients, employees, physicians and shareholders by providing high quality care in the communities we serve.” HealthSouth under CEO Richard Scrushy’s direction was primary focused on economic enrichment. Richard Scrushy demanded that HealthSouth would always attain analyst expectations by whatever means it took, including fraudulent accounting. HealthSouth financial officers and Richard Scrushy were part of an accounting scheme from the company’s establishment and continued for a decade before they were stopped.
  3. HealthSouth was incorporated in Birmingham, Alabama on February 22, 1984 by its founder Richard M. Scrushy. In 1986 the company went public with its IPO on the NASDAQ Stock Exchange. Throughout the mid-1990s, HealthSouth expanded rapidly through mergers and acquisitions. By 1990 the company had expanded to 50 facilities across the US. HealthSouth finished out 1992 with $400 million in annual revenue. In 1993 the company made its first large acquisition when it bought 28 hospitals and 45 outpatient rehabilitation facilities from National Medical Enterprise for around $300 million in cash. The acquisition doubled the company's annual revenue to $1 billion and also made HealthSouth the nation's largest provider of rehabilitative care.
  4. By 1991, a couple of market analysts at a firm started giving strongly positive stock evaluations to HealSouth. This allowed billions of dollars to come in from investors to support expansion. HealthSouth stock increased enabling them to get bank loans and buy other companies. Between 1995-1998, stock value increased by 250%. HealthSouth needed to match optimistic profit projections to prevent the stock to fall.
  5. If HealthSouth’s actual earnings were short, Scrushy would tell management to “fix it” by recording false earnings on accounting records to make up the shortfall. Accounting personnel then convened a meeting to “fix” the earning’s shortfall. By 1997, the attendees referred to these meetings as “family meetings” and referred themselves as “family members.” At these meetings, senior accounting personnel discussed what false accounting entries could be made and recorded to inflate reported earnings to match Wall Street analysts’ expectations. These entries primarily consisted of decreasing expenses and increasing assets or decreasing liabilities. The entries were necessary because generally accepted accounting principles (“GAAP”) require any increase in earnings or decrease in expenses to be matched with either an increase in assets or decrease in liabilities.
  6. HealthSouth had been operating for over a decade and had a great track record to the public eye. Which is why it was interesting when Richard Scrushy sold around $100 million of HealthSouth stock over a few years when the stock was affected by the inflated earnings and at the same time reduced Medicare funding was dropping profits significantly. Share prices fall and class action lawsuits build up by angry stockholders for insider trading. Cracks begin to appear in HealthSouths great image. Scrushy is in the newspapers about his lavish lifestyle fed by his gigantic bonuses. Post-Enron investigators start getting testimonies from accountants about the fraud and acquire recorded conversations of themselves and Scrushy. The FBI raided HealthSouth soon after.
  7. After the insider trading allegations, The Securities Exchange Commission investigated accounting records and found that between 1999 and 2003, HealthSouth had overstated earnings by $1.4 billion and its assets by $800 million. Authorities indicate the fraud had been going on since 1986 when the HealthSouth went public. The SEC required sworn statements when submitting financial reports, and that the reports contain no untrue statement of material fact. Scrushy and his Chief Financial Officer certified under oath that HRC’s 2001 commission report Form 10-K was correct when it was actually overstated by 4,700%.
  8. SEC filed accounting fraud charges in federal district court in the Northern District of Alabama against HSC and Scrushy. The Northern District of Alabama had jurisdiction because Scrushy lives in the district and HSC’s principal place of business is in this district. The SEC also charged Scrushy with the Sarbanes Oxley Act, which is the first time it was ever used, because he certified HSC’s false financial statements. In all, SEC alleged HSC and Scrushy were in violation of anti fraud , reporting, books and records and internal controls provisions of the federal securities laws. More specifically, section 17(a) of the securities act and 10(b), 13(a), 13(b)(2)(a), and 13(b)(2)(b) of the exchange act to name a few(HLSsettlements, 2014). The Securities Act of 1933 was enacted by Congress in the beginning of the Great Depression to make sure buyers of securities(tradable assets) receive complete and accurate information before they invest in securities. This was done by requiring companies to register and be accountable for statements about their business and finances(Wikipedia, 2015). The Securities Exchange Act of 1934 was made to govern stock trading and created the Securities Exchange Commission to enforce the federal securities laws. (Wikipedia, 2014) As the most important provision in the 1933 Securities Act, section 17(a) prohibits fraud in the offer or sale of securities(Dooley, 2013, para. 1). I think HSC and Scrushy violated 17(a) when they knowingly schemed to defraud with an intent to deceive via fake securities trading. Section 10(b) of the Exchange Act is similar to 17(a) of the Securities act except that it goes into a little more detail. The alleged reporting provisions as per 13(a) of the Exchange Act was violated, in my mind, when the defendants filed reports with SEC that materially misstated revenues, expenses, and assets. 13(a) of the Exchange Act requires corporations to file financial statements to SEC that conform with the regulations and that they aren’t misleading. Sections 13(b)(2)(a) and 13(b)(2)(b) of the Exchange Act require companies to make accounting records which show their actual transactions and the dispositions of their assets, to conform to GAAP and to ensure transactions are authorized by management(SEC, 2012, p. 147). HRC violated 13(b)(2)(a) of the Exchange Act by not keeping records of assets that were accurate(HLSsettlements, 2014). I believe they violated 13(b)(2)(b) of the Exchange Act by failing to maintain a sound accounting environment that assured transactions were done with management authorization, and conforming to GAAP. Judge Inge Johnson’s final judgment included restraining all people involved from violating the aforementioned sections in the Exchange and Securities Acts, making HSC liable for $100,000,000, having a consultant review the accounting department, training for financial officers, and various others.
  9. There are many lessons that we can learn from this case. Small ideas lead to greater compromises and will eventually lead to crime. No one wants to go to prison, but a lot of people with HSC did, and it started with small, insignificant ideas. When management cooperates to commit crimes, its almost impossible to stop. If I were an employee, asked to do something fraudulent by my boss, I think I’d at least have to think about my moral dilemma for a bit before I decided not to. When you’re making good money, you want to do anything to protect that. Morals and ethics of each individual in a company make up the company’s morality and ethics. A company is only what leadership and employees allow it to be. I’m sure many employees intended to steal without getting caught; but some might have been pulled into the scheme not even knowing it and then became labeled as a co-conspirator. Even though HSC was mandated to train their financial officers again, the company needs to focus and reenforce training about good business ethics and legal business rules. If everyone knows the laws of business and integrity is pressed through training bi-yearly, I don’t think this sort of thing would happen. Any person at HSC could have refused to be a part of the fraud and could have stopped it. We see here that companies that commit fraud will be caught and punished. HSC is still a large company today but the people’s lives that have committed fraud with them in the past are broken. Thousands of employees and investors of HSC lost all their money due to one man and a few others not willing to stop him.