It could and it was — just one more of the bizarre expenses HealthSouth incurred during the leadership of former CEO Richard Scrushy.
The fake boobs were for a girl band called 3rd Faze. Scrushy had formed the band as part of HealthSouth’s “Go For It! Road Show.” The touring program was meant to promote healthy habits to school-aged kids, because nothing communicates health and wellness better than silicone breast implants.
The girl group had at least one music video, too, which played on screens in Jefferson County Circuit Court on Monday morning. A bad Spice Girls knock-off, the group sang a cheap bubble gum pop tune while performing something akin to a PG-rated pole dance.
Four years after a federal jury acquitted Scrushy of criminal charges that he participated in the $2.7 billion accounting fraud at HealthSouth, a shareholders’ civil lawsuit in Jefferson County Circuit Court seeks damages from Scrushy. The plaintiffs have accused Scrushy of leading the fraud at the company.
Plaintiff’s attorney John Haley played the music video as an example of how, he says, Scrushy wasted money at HealthSouth. In addition to the $40,000 for fake boobs, HealthSouth spent about $1.2 million on the girl band, and it gave 250,000 stock options to a music executive Scrushy hoped would sign 3rd Faze for a record contract, Haley said.
In a hokey attempt at a narrative, 3rd Faze took its name from the three phases of life — the past, present and future — and somehow the girl group’s three members were supposed to signify that. It’s unintentionally appropriate. Looking back on it evokes the same feeling you might get from looking at the fashion choices in your high school yearbook. Everything then was so garish and shortsighted.
Of course, Haley played the video to embarrass Scrushy, and $40,000 for plastic surgery is a pittance compared to the $2.7 billion fraud and the $1.4 billion the company had to pay out of pocket to stay in business after the fraud was discovered. Yet, there is something important here worthy of notice.
Six years ago, $40,000 for boob jobs could be chalked off as a business expense.
And that wasn’t all. Scrushy had his own Country and Western band, Dallas County Line, made up of HealthSouth employees. When the band played at HealthSouth, it paid the members twice. When the band played in Australia, the company flew them there on the corporate jet.
Dallas County Line made a music video, too, which the plaintiffs played in court during opening arguments. In cutoff sleeves and a cowboy hat, Scrushy crooned “Honk if You Love to Honky Tonk” with the same unabashed narcissism that’s made eight seasons of American Idol possible and popular.
Compare that to the CEOs today being lined up before firing squads of angry congressmen. On the news today, you hear a lot of talk about corporate culture, but less than a decade ago, HealthSouth had the culture you might find at a tractor pull. The fraud was hidden, but the excess was not. This was acceptable behavior.
And it was the house paint that covers the mold in the walls.
What the public didn’t see back then was the accounting fraud. An army of accountants has spent more than 1 million man-hours piecing together how the fraud worked.
However, still I don’t believe many people understand the motives that drove the fraud.
In a video deposition played in court, a lawyer asked former CFO Aaron Beam if he participated in the fraud because of greed. Yes, he benefited from the fraud, Beam said, but there was something else that kept him involved in it. He struggled to articulate something I’ve seen throughout this saga since the meltdown in 2003.
It had little or nothing to do with greed.
For some of the conspirators at HealthSouth, preserving their lifestyles was important, but another emotion was at work — the fear of confronting the truth. A lot of people who have since pleaded guilty to crimes went to work every day thinking something like this:
Today I can go to the U.S. Attorney’s Office and tell them what I know. I might get immunity, but even if I do, many of the people closest to me will go to jail. Hundreds or even thousands of people at this company could lose their jobs. The company could go bankrupt, and no one will likely employ me again. My family will hate me. I might not be able to support them anymore. That’s the right thing to do, and I probably should do that.
Or I can roll this stone another day, and go to the U.S. Attorney’s Office tomorrow.
When given the opportunity to postpone the inevitable, most people will.
My guess is that there are a lot of Wall Street investment bankers who have been thinking the same things.
There’s another important pattern in the HealthSouth saga: small problems growing gradually into insurmountable ones. It began with a $7 million fudge in 1996. Within a few years, HealthSouth was concealing losses of $10 million per week. And we wonder how our derivatives markets got so big.
There are defects of human nature we have not fully explored. There are aspects of our behavior that we must understand before we can prevent future crises of these kinds. And grandstanding in congressional hearings will never get to the heart of any of it.
Some of those answers might be found at the Jefferson County Courthouse, not that many people are looking. On Monday, the lawyers outnumbered the onlookers. There was no jury; the defense chose a bench trial before the judge instead. Scrushy’s following of preachers, once known as his “Amen Corner,” was nowhere to be seen.
Jefferson County has fresh crises to deal with, as does the national media. Any day now the courthouse will be auctioned on the courthouse steps. Birmingham struggles to keep its one Fortune 500 company. There’s no time to reminisce about one it has lost.
No one cares much about Richard Scrushy anymore, at least not how they did when $2.7 billion was still a lot of money.
War on Dumb is a column about political culture. Write to email@example.com