|
By Chris Warner, co-author of "The Wagon to Disaster" by Aaron Beam
It's been called "The biggest story to come out of the State of Alabama since the Civil Rights Movement," but I'd wager it's even bigger. The emergence, meteoric rise and eventual razing of HealthSouth Corporation is a story of great tragedy for not only the City of Birmingham, the State of Alabama and the South-but also for the United States, as it is proof of the inherent perils of capitalism, an indictment of indifferent American citizenship and a harsh reminder of the Deep South's ongoing infatuation with race, religion and quid pro quo "good ole boy" politics. More than savings were lost in the wake of the multi-billion dollar HealthSouth accounting fraud. The unthinkable crime has left a city, a state and a country seemingly without a moral compass; wondering how it happened; and what is really being done among government circles to ensure its future prevention in a shaky, new world financial order clamoring for fairness, accountability and a welcome return to steady growth and profitability.
The frauds committed by Enron, Worldcom and Tyco were much larger than the $2.8 billion ruse at Birmingham-based HealthSouth. Predictably, because of the scope of the fraud, the HealthSouth story somehow amazingly slid below radar and away from the prying, questioning focus of the mainstream media. The fact that it did was an unfortunate mistake, as there are many related lessons to be learned.
While the stories behind the aforementioned fraud cases and the insidious crimes of investment charlatans like Bernie Madoff and Allen Stanford have evoked little to no interest from the reading American public, there remains hope for the untold HealthSouth story, for it is one that interestingly is not about a fraud-it's about a singular fraudster. "The Wagon to Disaster," by Aaron Beam, former HealthSouth founder and first CFO, provides a first-hand perspective of the true nature of Richard Marin Scrushy, one of the most chilling and truly nefarious characters to ever come out of the State of Alabama and undoubtedly one of the biggest fraudsters in American business history.
In the following piece I will provide a unique perspective on the ongoing HealthSouth saga after having spent nearly a year researching the story and writing two books about it. I will share my thoughts on the uniqueness and importance of the story, how I met Aaron Beam, how we worked together to provide his written account and how it all inspired me to write a novel, titled "Professional Bone."
Because of a job offer my family and I moved from Baton Rouge, the viper pit of Louisiana politics, to the quiet retirement community of Fairhope, Alabama in 2005. I did not know Aaron Beam and I knew little about Alabama state politics. The first day in my new Lower Alabama home I connected the television and fastened the rabbit ears to its back housing, as the cable guy had yet to be called. By toying with the antennae in different directions I managed to get one of the local Mobile news stations. The evening anchor led with: "Alabama Governor Don Siegelman and former HealthSouth CEO Richard Scrushy were indicted today on 30 counts of money laundering, extortion, obstruction of justice, racketeering and bribery charges." I was flabbergasted. I'd just moved from a state deplored universally for its third-world politics. I figured Alabama couldn't be any worse. Although I've lived here nearly five years, I'm still unsure if that's not the case. I eventually met Aaron Beam, and he has provided an indelible, introspective look into how the politics of big business was conducted in Alabama from 1983 to 2005 in Richard Scrushy's corrupted and profligate domain.
I first met Aaron Beam at a crawfish boil he was having for LSU fans at his sprawling home amidst 25 pecan-adorned acres in Fairhope, Alabama off of Highway 98 near the Highway 181 connector. I had heard from another Tiger fan that Aaron, a graduate of LSU and a successful, retired health care executive, was having a party and had invited all of the LSU fans in the greater Eastern Shore and Mobile areas to come since he had managed to entice nearly all of the LSU Football coaches-except for head coach Nick Saban-to attend the event. Jimbo Fisher and Will Muschamp were among the noted LSU assistants in attendance that sunny afternoon near the spot where Fish River meets Weeks Bay. I was an LSU graduate, and as a result I was genuinely intrigued by this Mr. Beam.
When I arrived at the crawfish boil the person who told me about the party and provided directions introduced me to Aaron and his wife, Phyllis. I was surprised to learn that Aaron knew who I was. He had purchased and read a book I wrote about SEC Football, "A Tailgater's Guide to SEC Football." He had also read some of my other books on Southeastern Conference sports. I could tell Aaron truly bled purple and gold and that he and his wife were generous and kind; as everyone seemed to be thoroughly enjoying the wonderful party they had thrown. However, I knew nothing of Aaron's immediate, sordid business past.
The fellow who introduced Aaron to me immediately afterward informed me that Aaron was a convicted felon waiting on jail time. I was shocked. "That guy?" I thought. "No way!" It just didn't fit. But, I did not know Aaron well at the time, nor did I know the full story of his involvement with one of the most diabolical confidence men in United States history. It would be four years until I'd learn completely of it, and how fascinating and all-consuming the untold tale really is.
Before Aaron left for Montgomery, Alabama for a three month prison term in November 2005, he told me that he was going to write me and that he would appreciate it greatly if I would write back. I promised him I would. He also mentioned to me that he might one day want to write a book about what happened at HealthSouth and that he wanted me to help him write it. I listened, but I knew Aaron better by this time, and I felt that writing a book would be a difficult task for him, given his fidgety and quixotic nature. Nevertheless, it was something I felt was noteworthy and certainly considerable as a writing project, as I knew HealthSouth and its accounting fraud had made serious waves and was a huge regional story. Furthermore, I knew that the CFO's of Worldcom, Enron and Tyco were incarcerated in federal penitentiaries for periods much longer than Aaron's sentence. To the contrary, instead of tens of years, Aaron would be out in just ninety days.
Although he bragged to me before he left for Montgomery that he'd be able to do 90 days "standing on his head" Aaron returned to Baldwin County after his prison stay thinner, humbled and noticeably more appreciative of life's little things. However, he said nothing of his earlier idea to pen a book regarding his experiences at HealthSouth. It seemed Aaron was simply more intent on catching up on lost meals and tending to his newly-formed grass cutting business, "Green Beam Lawn Service." Several months passed until I finally broached the topic of him writing a book with my help.
At this later date Aaron was extremely apprehensive about writing a tell-all book, particularly because he was fearful of what Richard might do to him. I asked him if he was serious about his fear of Richard bringing harm to him for exercising his Constitutional right to free speech and self-expression. Aaron told me without cracking a smile that Richard was the kind of person who was "capable of anything"-especially when his livelihood was at stake. He qualified it with the grim statement that Richard could easily have him killed. I was stunned. I could tell Aaron was deadly serious-so much so that I too became concerned about moving forward with the project. For many months I did not mention it again, as I genuinely felt it was a moot point-Aaron simply didn't have the courage to write a book. The fear of Richard's eventual reaction was too great.
A year later, in the summer of 2007, Richard Scrushy was sentenced to a seven-year federal prison sentence for his involvement in a quid pro quo arrangement with former Alabama Governor Don Siegelman to maintain a powerful and lucrative appointment to the Certificate of Need Board-a body that ostensibly controls the scope and direction of health care in the state. Siegelman also received a prison sentence but has had some success with appeals to that conviction, allowing him an unusual reprieve from serving his restitution.
Upon Richard's incarceration I saw an immediate and dramatic difference in Aaron's attitude and, more importantly, his posture toward writing a book. He talked again about it openly, and stated emphatically that he really thought it was something he should do, as so many people had encouraged him. We began talking seriously about a business agreement and a start date, only for Aaron to again get cold feet. Exasperated, I told him not to talk about it again until he was definitely ready to write the book.
More than a year passed and during the days following Christmas and preceding New Year's Eve 2008, Aaron phoned me. The tone of his voice was serious. "I want to write a book and I want to get started after the first of the year!" We forthwith revisited the contract, signed it and hit the ground running in the first week of January 2009. This time we were literally on our way, as Aaron never again flinched. Moreover, he was relentless. He more than met me halfway in my direction. He was the ideal writing pupil, learning quickly to scribe in short, punchy sentences and to continually revise.
In January, after writing the preface of the book, which explained fully its unusual title and the reason why Aaron wrote the book, Aaron appeared on an hour-long CNBC American Greed documentary on HealthSouth. While I had learned much of the story's uncanny nature from Aaron's casual conversations through the years, I really had no clue as to how bizarre the story was. The American Greed documentary gave me the first true glimpse of Richard's quirky, multi-faceted, narcissistic personality. I had no idea that the former CEO turned con had made a half-hearted attempt at a country music career with glorified hits like "Honk if you Want to Honky Tonk" and had even moonlighted as band manager for his hand-picked teenie-bopper glam band, 3rd Faze, which opened for Britney Spears.
The documentary also depicted Richard's unscrupulous side, and that he was as excessive as he was diabolical and cruel toward getting what he wanted. Eleven homes, 40 cars, a dozen or more jet airplanes, nine children, three wives, expenses ranging at $600,000 per month-all obtained by a man with only a G.E.D., an associate's degree from Wallace State Community College in Hanceville, Alabama and a degree in respiratory therapy from U.A.B. It was clearly obvious that Richard was the classic overachiever and as enigmatic as he was predictably self-absorbed.
After the American Greed documentary I remember discussing it with Aaron a couple of days later. I told him the segment only created more questions for me, as it was so compelling and had revealed many facts about the story that I had not yet heard. I was anxious to ask Aaron to fill in the many gaps in the story that was being slowly pieced together for me. However, we were bent on a chronological approach. Our work was deliberate and time-bound with relation to its unfolding. I would simply have to wait.
One of the more interesting aspects of Aaron's book is that it explains how he and Richard-a couple of upstart yokels-were able to succeed at bringing a model business concept public and thereafter build a Fortune 500 company. While Aaron and Richard weren't Ivy League-educated, they were nevertheless smart, determined and possessed the savvy and business acumen necessary to pull off such a daring feat. While Aaron often said that Richard's only redeeming quality as a human being was that he had a "brilliant business mind," he also always insisted that the bottom line is that HealthSouth went public the same way every other company had-they played by the same set of prescribed rules and through hard work and salesmanship made it happen. It was only after the company was formed and became successful that Richard became a benevolent dictator and the entire HealthSouth wagon took, like Aaron said, a sure, runaway path to disaster.
While it is certain Richard possesses above average intelligence, evidenced by the fact that he learned to play the piano by watching his sister take lessons or that he could pilot multiple jet airplanes, it is equally certain that he was a master manipulator. Aaron said more than once that he felt Richard tested everyone he hired to see if they would go along with him. If they didn't, he would quickly get rid of them, as they were then a problem. Richard needed sycophants, not visionaries, and he had many of them. Aaron recalls at the beginning of his book that the first day he worked for Richard he witnessed Richard tell a brazen lie. In hindsight, Aaron felt that Richard was testing him to see if he would play along.
Richard was cunning, but at his best he was a terrific salesman. Aaron repeatedly admitted that Richard's ability to pitch the company like no other certainly had a tremendous early impact on HealthSouth's success. His tireless drive to bring the concept forward and take it public was irrefutable. In many ways Richard willed HealthSouth to happen; just as he ultimately did its painful undoing.
Richard Scrushy has been described as complex. It is a massive understatement. Not only is he complex as a person in all the many roles he's played in his life, Richard Scrushy is also equally a psychological conundrum, as he appears to have several demons competing for his ever-embattled conscience.
Richard Scrushy is likely a malignant narcissist. Consider its definition. Malignant narcissism is a syndrome of a cross breed of the narcissistic personality disorder, the antisocial personality disorder, and paranoid traits. The malignant narcissist derives higher levels of psychological gratification from accomplishments over time (thus worsening the disorder). Because the malignant narcissist becomes more involved in this heightened psychological gratification, they are apt to develop the antisocial, the paranoid, and the schizoid personality disorders. When one considers Richard's insistence on continuing the fraud for years on end, it demonstrates clearly that he enjoyed that heightened thrill of the deceit as the fraud perilously, exponentially continued.
Richard Scrushy is likely a sociopath. Consider its definition. Sociopaths are unable to experience emotional responses for other people outside of their own personal interests. This is the psychological inability to show emotion or caring for others. While a sociopath can feel emotion, it is (even if it results in care for another) because they find it viable for themselves, as opposed to what would be termed as selflessness. Sociopaths are also natural psychologists, as they intrinsically seem to understand how to size up a person-to recognize their needs and wants and how they might ruthlessly exploit them to their own gain. Aaron said that he felt Richard sized up everyone in the organization to ensure that everyone that worked there was subservient and willing to "play ball" with Richard.
Richard Scrushy is likely a psychopath. Consider its definition. A psychopath is a person with an antisocial personality disorder, manifested in aggressive, perverted, criminal or amoral behavior without empathy or remorse. This definition likely best typifies the Selma, Alabama native, as Richard demonstrated all of these psychopathic traits during his rise to fortune and fame and more importantly-during his subsequent, precipitous fall. When Richard conveniently found Jesus before the securities fraud trial in Birmingham and became a veritable black televangelist in a shameless attempt to contaminate the jury pool in his favor, it was clear that his malignant narcissistic, sociopsychopathic tendencies were guiding his actions.
I've spoken to Karon Brooks Harris, Richard's second wife, with whom he has four children. Karon is contemplating writing her story, and if she does, it will surely be a fascinating read, as it was she who was married to Richard for 18 years. I asked Karon what it was that made Richard so convincing in his dealings with others-what physical feature made him so irrefutable. "His eyes," she convincingly said. His dark eyes look right through you." When I shared this with Aaron Beam he immediately agreed. "He gets that Hannibal Lectur look," he solemnly recalled.
Noted writer Greg Farrell, who covered the Enron, Worldcom and Tyco fraud trials for USA Today, said that of the major fraudsters, Richard Scrushy was "…by far the most diabolical… and fascinating." He further qualified the statement. "Ken Lay at Enron was a teddy bear compared to Richard Scrushy," Farrell said.
One thing that occurred throughout the writing of Aaron's book was various people coming forward, offering information and in particular, theretofore unknown Scrushy stories. This happened so often that Aaron and I joked that Richard had seemingly pissed off everyone in the State of Alabama.
Since finishing the writing of the book Aaron spoke at Troy University to their business and graduate students. The college students explained to Aaron during their question and answer time together that when Troy University was trying to take its upstart football program to the division one playing ranks it needed as a prerequisite a certain number of season tickets sold. Richard Scrushy came to the heroic aid of Troy by buying the necessary number of unsold tickets. However, this charitable act was actually part of a quid pro quo agreement between Scrushy and the university brass. In return for the purchased allotment of season football tickets Troy's band had to play Richard's song, "Honk if you Want to Honky Tonk" at halftime of every home football game. Furthermore, per Richard's request, the football field had to be renamed, "Richard Scrushy Field." Thereafter the Troy marching band became proficient at playing a decent version of "Honk if you Want to Honky Tonk" and the Troy Football players referred to the gridiron affectionately as, "The Dick."
Scrushy pulled off what he did in large part because he purchased it. Richard realized early that once he created a cult of personality built on the many shiny trappings of wealth and fame, he could easily draw others into his circle. Once he drew them in, he determined their price. Some were more expensive than others; but everyone had a price to Richard, and he had many willing whores. There were many who played their selling role and allowed it to happen. Among these people were Aaron Beam, Weston Smith, Bill Owens and many respected physicians throughout the Birmingham medical community. Moreover, there were the investment bankers driving Richard to cut acquisition deals and increase profits, as well as the stockholders, who ostensibly bankrolled Richard's criminal enterprise. As stated, the willing participants-all motivated by greed-not only allowed it, but made it happen.
Richard was adept at cultivating a powerful philanthropic image. In Birmingham his name was attached to many donated public facilities. These gifts provided with HealthSouth funds to the local populace elevated Scrushy's God-like status among the citizenry. He was seen as a generous benefactor; someone locally successful who genuinely cared about the community and liked to give back. Highways, day care centers, ball fields, libraries and school buildings all bore his name-Richard M. Scrushy. His icon, by design, was ubiquitous across the State of Alabama. Before the fraud broke, King Richard was widely accepted as a respected Alabama business leader and philanthropist. Of course, that opinion quickly changed when the fraud broke in 2003. From that point forward Richard was seen as a curse.
One of the most amazing observations I have noted regarding Richard Scrushy is that he has not demonstrated one bit of remorse for his crimes. Not once has Scrushy admitted any wrongdoing in all that happened under his watch. This clearly demonstrates his psychosociopathic tendencies. After all, even Madoff finally admitted the game was up and apologized for hurting so many people with his massive deceit. Richard remains less than contrite. He insists that he knew nothing of the fraud or its massive administration requiring thousands of real man hours to enter tens of thousands of manufactured entries by a team known affectionately as "the family." I and many others find it hard to believe that Richard, the consummate micromanager and overbearing CEO, would know nothing of such a large thing going on at HealthSouth.
While untold hundreds of millions in real dollars have been lost as a result of the HealthSouth fraud, there are still other untallied, real costs. Marriages were lost from the resulting tumult and strife. Families were devastated and splintered. Unquestionably, lives were ruined.
Take Weston Smith, the former HealthSouth CFO who broke the fraud to the FBI in early 2003 at the Wynfrey Hotel, as a prime example of somewhat who has lost everything. Weston reached his breaking point after Congress passed Sarbanes-Oxley, the law precipitated in the wake of the Worldcom and Enron fiascoes that essentially holds chief financial and executive officers completely responsible for their accounting practices, procedures and of course, official recordings. Weston said that it was difficult enough to have to commit fraud and sign falsified earnings statements. However, he said that once Congress passed Sarbanes-Oxley, it only compounded the treachery and insanity of his ways.
Weston Smith served two years in the same federal prison Aaron did in Montgomery, Alabama. Their sentences briefly overlapped. They celebrated Christmas 2005 together, behind bars. The day Aaron left the prison to go home, as he drove away on the bus that was taking him beyond the prison gates, back to freedom, he saw Weston cutting grass. Aaron said he realized that Weston was going to be in prison for a much longer time than he was. Aaron said he wondered if Weston held a grudge against him for not standing up to Richard.
Weston served his time and has since tried to re-assimilate into society, given his dubious track record and plight. He told me that he lost a good marriage, started a bad one and divorced again, and has basically had to start over.
The stark reality however, is that as a convicted felon Weston has difficulty finding work near the level of responsibility and compensation he enjoyed at HealthSouth. As a result, he's worked a bevy of odd professional and line jobs ranging from accountant, to salesman to shift worker. More recently, like his former colleague, Aaron Beam, he has been talking to business students and leaders about his involvement in the HealthSouth fraud's fascinating revelation. You can find out more about Weston Smith's involvement in the HealthSouth fraud by logging on to his website: http://www.westonsmith.biz .
Aaron Beam left HealthSouth in late 1997. This gave him nearly six years between when he retired to when the fraud broke in early 2003. This time lapse created a problem for Aaron in his quest to write the full story about HealthSouth. Aaron called Weston, the CFO at the time in question, and asked if he would participate in the telling of the story from his point of view from when Aaron left to when he revealed the fraud to the Federal Government. Weston was completely cooperative and he did a fantastic job of telling the complete story of the true nature of the fraud, including how strange and bizarre the HealthSouth corporate culture became under Scrushy and his well-paid Vice President, Jason Hervey, the former Wonder Years child star, who was married to a porn star, Angel Hart.
As Birmingham, the Deep South and an entire nation pull themselves from the rubble of one of the biggest market corrections in history, we see an economic and political landscape that resembles the surface of the moon. Birmingham's finances under the administration of Mayor Larry Langford have diminished faster than Langford's credibility, as he now faces up to 800 years of incarceration for his conviction of over 60 crimes committed in office. Nevertheless, it appears that Birmingham is only a microcosm of what is transpiring nationally, as the Obama Administration is saddled with its own budget and credibility problems in the turbulent wake of a fraudulently inflated economy and a public wondering what is going to be done to prevent future fraudulence from their business and political leaders.
As Birmingham and the rest of the country rally to improved accountability from its business and political leaders and the resulting respectability that will surely come on its needed heels, we must be hopeful that the hard lessons taught by the collapse are not forgotten. Americans must remember the greed that fueled the irrational exuberance that enabled the HealthSouth ruse to occur. Americans must remember that charlatans like Richard Scrushy, Ken Lay, Bernie Ebbers and Bernie Madoff and others who promise things that sound too good to be true are often frauds. American confidence is once-bitten. It must be twice shy. New safeguards to fraud must be implemented. Improved auditing and accounting practices should include increased third party scrutiny of financial records. Boards of Directors need to do their job and protect stockholders from renegade CEO's and unscrupulous business practices. Moreover, the overall business culture and stance toward fraud and its prevention must be changed; and that can only be done with continued education.
I was so thoroughly intrigued by Aaron's story and all of the other related Richard stories I'd heard from those willing to tell, that I decided early on I was going to write a novel based loosely on what happened at HealthSouth. My intention was to write something adaptable for the silver screen. I did and it is titled, "Professional Bone." It is simply an art-imitating life story that attempts to draw semblance to what is happening in our country with regard to indifferent citizenship, greed and the ongoing threats they present to American free market capitalism.
The novel is about a young orthopedic surgeon, Dr. Ron Barton, from Fairhope, Alabama who practices medicine in Birmingham. Barton locks horns with an overbearing health care CEO, Philip Lucci, who is trying to create a rehabilitative sports medicine monopoly in Birmingham. Barton refuses to be a part of Lucci's diabolical plan and pays for it. However, Barton proves resilient and bent on revenge. The story is set in Birmingham, Alabama in 1995.
As crazy as it sounds, this story is not over. Richard Scrushy only received a sentence of seven years. With good time served and with the completion of a federal drug education course he is entitled to a slight reduction in his prison sentence. Barring any new charges or added jail time he will one day in the near future walk out of prison a free man. This is sobering considering the scope of the crime he committed and more importantly, that he has shown no remorse.
While the $2.88 billion civil judgment against him is the single largest ever levied against an American fraudster, Richard had ample time to protect and harbor his money in surely different, accessible locations. The lawyers for the class action party receiving the bulk of the judgment are busy liquidating Scrushy's toys, but one can only imagine where Richard's investments are being held in his required absence from society. Moreover, one can only imagine how the government will treat Scrushy once he leaves prison. Part of the judgment against him meant that his future wages can be garnished to pay down the unpaid balance. Certainly his transactions after prison will be monitored closely so as to ensure he does not reclaim his hidden, ill-gotten gains.
It has been rumored that Richard started a bank in the Bahamas with Birmingham politico and attorney Donald Watkins. However, nothing substantive has ever been reported to that effect. Moreover, there has been little to nothing reported about Richard's larger investments and cash holdings outside of his other noted immovable and movable properties like his many homes, jets and cars. Nevertheless, it has been estimated conservatively that Richard made around nine hundred million dollars as HealthSouth CEO and in other related business ventures. If he did, one would think that there is something left-somewhere.
It was revealed during the trial that much of the $25 million paid for Richard's legal defense was directed toward his son-in-law's legal firm. Some surmise that his son-in-law has played a major role in helping Scrushy manage his remaining money while he serves his prison term. Nevertheless, no one is certain. The truth regarding Scrushy's finances remains as big a mystery as their owner. Richard had a full year from the time he was found guilty to his sentencing. He had time to shuffle resources and create a golden parachute for himself for a later day. Reclaiming these remaining stolen funds is now the difficult job of lawyers representing former HealthSouth shareholders.
The wagon ride is not over. Until Richard Scrushy finds the redemptive power of remorse and contrition, the story continues while communities continue to wait for closure and the healing that comes naturally from it.
|
