Opinion ID: 78505
Heading Depth: 2
Heading Rank: 1

Heading: The Fraud Conspiracy:

Text: The charges filed against Defendant-Appellee Kenneth Livesay (Livesay) arose out of a massive accounting fraud conspiracy at HealthSouth Corporation (HealthSouth), headquartered in Birmingham, Alabama. This massive fraud has been described in many of our previous decisions. See, e.g., United States v. Livesay, 484 F.3d 1324, 1326 (11th Cir. 2007) ( Livesay II ); United States v. Martin, 455 F.3d 1227, 1230-31 (11th Cir. 2006); United States v. McVay, 447 F.3d 1348, 1349-50 (11th Cir.2006) ( McVay I ). Suffice it to say that Livesay's participation in an illegal scheme to artificially inflate HealthSouth's earnings and to falsely report HealthSouth's financial condition is at the heart of the fraud. Senior officials at HealthSouth issued instructions as to the desired earnings per share and Livesay and members of the accounting staff would meet to discuss ways to artificially inflate HealthSouth's earnings. Once they decided upon the means of inflating earnings, Livesay instructed HealthSouth's accounting staff to manipulate various accounts to accomplish this purpose. False and fraudulent entries were made to accounts in HealthSouth's books and records including, but not limited to (1) the property plant and equipment account; (2) the cash account; (3) the inventory account; and (4) the intangible asset (goodwill) accounts. Livesay knew that there was no justification in fact or under generally accepted accounting principles for these entries. Additionally, Livesay participated in the preparation of HealthSouth's 1998 quarterly and annual reports filed with the Securities and Exchange Commission (SEC), including HealthSouth's 10-Ks. Livesay and others caused HealthSouth to file these reports publicly with the SEC, knowing that the reports materially misstated, among other things, HealthSouth's net income, revenue, earnings per share, assets, and liabilities. As a result of the scheme, HealthSouth's revenue and earnings were inflated by hundreds of millions of dollars in the publicly filed reports. Finally, Livesay knowingly caused, directly and indirectly, to be transmitted by wire, from Birmingham, Alabama, to Washington, D.C., the 10-Qs and 10-Ks for HealthSouth in 1998, knowing that the financial results and financial condition related in those reports were materially false or that the reports omitted material information.