HealthSouth gets $440 million tax refund for overpayments
BIRMINGHAM (AP) — HealthSouth Corp. said it has received a $440 million income tax refund from the IRS for overpayments made on inflated profits reported under the management of founder and former CEO Richard Scrushy.
The refund includes $296 million for overpayments and $144 in interest, the company said.
Higher-than-actual profits were reported by the former management to make the books look better, but also required higher tax payments. Five former finance chiefs in 2003 pleaded guilty to inflating profits to increase share prices and prompt performance bonuses.
Prosecutors say the dishonest practices occurred from 1996 to 2002, but HealthSouth got refunds only for 1996 through 1999.
"We are very pleased to have completed this project, which is another major step in the reorganization of HealthSouth," current CEO Jay Grinney said.
Scrushy was fired in 2003 after an FBI raid. Despite testimony from the former finance chiefs who implicated him, he was acquitted on all counts during a federal criminal trial over the fraud in 2005.
In June, Scrushy was sentenced to nearly seven years in federal prison for bribing former Gov. Don Siegelman in an unrelated federal court case.
HealthSouth said the money from the tax refund will be used to pay debt. The company has paid off about $1 billion in debt this year. At the end of last year, the company owed about $3.4 billion. Grinney told the News he estimates the company will owe about $2 billion by the end of the year after paying back lenders from assets sales and the money from the IRS.
Investors were encouraged by news of the refund. HealthSouth shares rose 5.6 percent, or 97 cents, to $18.43 Monday.
Information from: The Birmingham News
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