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Former HealthSouth executive sentenced to 5 months in prison

[JURIST] A judge from the US District Court for the Northern District of Alabama [official website] sentenced former HealthSouth [corporate website; JURIST news archive] executive Ken Livesay to five months in prison on Tuesday for his involvement in the company's accounting fraud. Judge Karon Bowdre sentenced [NBC report] Livesay for the fourth time after the US Court of Appeals for the Eleventh Circuit [official website] in November vacated [JURIST report] the trial court's third sentence for being too lenient. The Eleventh Circuit had found that due to the severity of the crime and the possibility of deterring similar behavior, the trial court's sentence of five years probation was "patently unreasonable." The sentence remains below the 78 to 97 months recommended by the Federal Sentencing Guidelines [text]. Livesay pleaded guilty in 2004 to charges that he participated in accounting fraud while at HealthSouth in order to overstate the company's earnings. In exchange for his guilty plea and testimony against fellow conspirators, the government promised to recommend a reduced sentence.

HealthSouth founder and former CEO Richard Scrushy [JURST news archive] was found liable [JURIST report] to the company's shareholders for fraud in June and ordered to pay $2.88 billion in restitution. Also in June, the Eleventh Circuit rejected [JURIST report] Scrushy's challenges to a $445 million settlement against HealthSouth. In May, the Eleventh Circuit denied [JURIST report] Scrushy's petition for an en banc rehearing of his conviction for unrelated federal bribery and corruption charges for paying campaign debts of former Alabama governor Don Siegelman in exchange for a seat on a state-operated review board that regulates Alabama hospitals. In 2007, the US Securities and Exchange Commission [official website] settled its accounting fraud claims [JURIST report] against Scrushy for $81 million. In 2005, Scrushy was acquitted [JURIST report] of criminal charges of wire and mail fraud, money laundering, conspiracy, and violations of the Sarbanes-Oxley Act of 2002 [text]. In 2003, HealthSouth conceded that its prior financial statements had overstated its income and assets by a substantial amount. Several class action suits were subsequently filed by investors against the company and its officers for alleged violations of the Securities Act of 1933 and the Securities Exchange Act of 1934. The actions were consolidated and, in 2006, the $445 million settlement was reached.

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