Business Law

White Collar Crime: Fraud
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Institutional Affiliation
White Collar Crime: Fraud
White collar crimes are crimes committed by persons who exploit operations and systems (social, economic and political) with the sole intent of monetary gains through deception (“White Collar Crime” n.d.) Money laundering, fraud, scams, tax evasion and embezzlement are types of white-collar crime. The most common form of white-collar crime is fraud, and a good example of corporate fraud is the case involving Encompass Health previously known as HealthSouth. The company defrauded people in the 1990s by inflating their financial records to match investor expectations so that the share prices remained high. One of HealthSouth’s employee, Weston Smith, was behind the discovery of the scandal. He chose to speak the truth regarding the ongoing issues in the institution.
After the whistleblowing, federal agencies went ahead to investigate the claims. Audits were carried out to check the depth of the damages caused by the fraud scheme. HealthSouth was found to have tailored their revenue records along with other records to stake their relevance on the stock market. The audit returned daunting results. $2.5 billion had been faked in through fraudulent entry of financial records between 1996 and 2002; a further $500 million had been drained in incorrect accounting (lost items of acquisitions) between 1994 and 1999. Amounts more than $1 billion were inflated through aggressive accounting in the period starting 1992 to March 2003” (Freudenheim, 2004)
Following these new developments, further investigations were carried out on chief officials at HealthSouth.

Together with four other Chief Financial Officers, Smith admitted to lying. The five were charged and each sentenced for different periods of time in prison. Scrushy claimed he was not aware of what had been developing at the firm and avoided a jail sentence. Lessons regarding reliance on financial reports and their accuracy were taken.
Works Cited
Freudenheim, M. (2004). HealthSouth Audit Finds as Much as $4.6 Billion in Fraud. Nytimes.com. Retrieved from http://www.nytimes.com/2004/01/21/business/healthsouth-audit-finds-as-much-as-4.6-billion-in-fraud.htmlHealthSouth Whistleblower Weston Smith Shares Insider Story of $2.9b Fraud (Mar/Apr 2014. (2014). Thecpt.org. Retrieved from https://thecpt.org/2014/04/10/healthsouth-whistleblower-weston-smith-shares-insider-story-of-2-9b-fraud-marapr-2014/White Collar Crime. (n.d.) Retrieved from http://criminal.findlaw.com/criminal-charges/white-collar-crime.html