Former CIO Sentenced in HealthSouth Fraud

The former CIO of HealthSouth, Kenneth K. Livesay, was sentenced to six months of home detention for his role in falsifying financial information that the health-care company filed with the Securities and Exchange Commission.

Livesay will also have to serve five years’ probation, pay a $10,000 fine and forfeit $750,000 from his gains at HealthSouth. He had pleaded guilty in April 2003 to three counts of conspiracy to commit wire fraud and securities fraud, and to falsifying quarterly and annual financial statements with the SEC.

Livesay, 43, of Birmingham, Ala., joined HealthSouth in 1989 and was assistant controller until 1999 when he was promoted to CIO. His lawyer says he took the CIO job to avoid continuing his participation in the company’s fraudulent activities, according to The Wall Street Journal.

Federal prosecutors had sought a five-year jail term for Livesay, and may still appeal the sentence he received. U.S. District Judge U.W. Clemon says Livesay merited home detention for his cooperation with government prosecutors.

Livesay was sentenced the same week as former CFO Malcolm “Tadd” McVay, who also received a home detention and probation sentence for his role in the HealthSouth scandal.

A forensic accounting review showed HealthSouth’s fraud totaled between $3.8 billion and $4.6 billion, the company said in a June 1 statement.