Additionally, Weston Smith's wife Susan Jones-Smith, was also a finance executive at the company, a further example of the incestuous relationships that characterized the financial leadership of HealthSouth. A failure of the company meant the failure in the financial future of the family of one's friends and spouses. Another warning sign should have been the nature of the company's assets. The firm was able to conceal its financial shenanigans for so long from outside auditors because of its multiple and constant stream of acquisitions of a variety of inpatient and outpatient facilities. The nature of the acquisitions should have been a clear warning sign to be wary of HealthSouth's spiraling profits. The volume of transactions meant there was great difficulty in keeping track of the 'real' value of the different operations, despite the company's alleged revenues on paper.

Also, the existence of such superficial nods to ethical practices, such as a whistleblower's hotline, rather than a real codified ethical methodology should have been another indication of the fact that the company's actual practices and philosophies were held to two very different standards. While the hotline might have created an appearance of a commitment to ethics, all ethical queries had to go up the chain of company command. This meant that there was no outside body to vet ethical conundrums that did not have a stake in the leadership of the company.

Now, the newly chastened...

Additionally, to lessen the 'groupthink' mentality that once pervaded HealthSouth, members of executive board must meet independently with auditors, rather than in a collective, so if one member has reservations about the company's activities, he or she will be able to explain them to an outside authority.
Other warning signs should have been evident on a technical level, not merely a structural or a cultural level. The fact that the company's earnings would jump mechanically with each increase of quarter-end consolidations, a virtual impossibility with such precision on a regular basis, should have been another clue that earnings were being manipulated to create a cosmetic profile of a profitable and solvent company, rather than reflecting a true reality. There were also a number of unexplained increases in earnings during 1999.

Upon reflecting on the scandal, the commitment to perpetrate such a long-standing fraud seems irrational, given that the rewards did not really balance the risks. This may have been one of the primary concealing factors -- no one could believe such a great lie could be effectively perpetrated, even despite the clearly inflated earning figures and the difficult-to-keep-track of assets that were propping up such figures on paper.

Works Cited

Stuart, Alix Nyberg. (2005) "Keeping secrets: how five CFOs cooked the books at HealthSouth." CFO Magazine.