In 2003, Aaron Beam turned on his TV and saw a report about accusations of massive accounting fraud at HealthSouth, which at the time was a wildly successful darling of Wall Street. At that moment, Beam knew he was going to prison.
That’s because in 1996, when he was chief financial officer of the company he co-founded, he helped cook the books. The company was doing well, Beam says, but it wasn’t going to reach its projections for the quarter. Rather than take a hit in the stock market and slow down the company’s rapid growth, he says the company added small amounts of nonexistent revenue to the records of its 2,500 health care facilities.
Beam says he committed fraud at the urging of CEO Richard Scrushy. But as Beam explained today to a Baton Rouge luncheon audience at Christ in the City’s Ethics First lecture and in a subsequent interview with Daily Report, the company already was “fudging” the numbers before doing anything criminal. They weren’t technically breaking the law, and their auditors had been signing off on their practices, but Beam now believes they were on a slippery slope. Apparently, the company continued on that slope after Beam left in 1997, he says.
“We lost our moral compass,” Beam says.
Beam came forward in 2003 and cooperated in the federal government’s unsuccessful prosecution of Scrushy. The former CEO maintained that he didn’t know about the fraud. Scrushy later was convicted in an unrelated case for bribing former Alabama Gov. Don Siegelman, and he lost a civil trial after being sued by former HealthSouth investors.
Beam served three months in a minimum-security prison, and he says he lost his wealth after paying restitution, fines and legal fees. Today, he makes his living giving presentations about the importance of business ethics, often to college students, using his own life as a negative example.
He says Scrushy perfectly fits the profile of a high-level fraudster, in that he was a charismatic salesman who convinced others to follow him and was driven by ego and greed. Beam says young people would be well advised to avoid such leaders as they embark on their careers.
“Everybody has a fudge factor,” says Beam. “Everybody will cheat sometimes.”
The key, he says, is striving every day to be ethically perfect, even while knowing that you may never reach perfection.
—David Jacobs
