Judge Imposes House Detention On CFO For $2.7 Million Healthsouth Securtities Fraud

Showing once again that crime does pay, Carrick Mollenkamp,
Staff Reporter of The Wall Street Journal today reports that a federal judge gave a former HealthSouth Corp. chief financial officer a sentence of home detention and probation for his role in the company's $2.7 billion accounting fraud.

The case is the first sentencing under the Sarbanes-Oxley Act, designed to impose severe penalties on top executives who sign false financial statements.
U.S. District Judge U.W. Clemon sentenced Malcolm "Tadd" McVay to six months of home detention and a $10,000 fine, and ordered him to forfeit $50,000, an amount based on his HealthSouth compensation, after taking into account his cooperation with the investigation.
The ruling, which came against the wishes of federal prosecutors, who had sought a prison term of more than five years, came one day after Judge Clemon also refused to send former HealthSouth assistant controller Kenneth Livesay to prison. Mr. Livesay was sentenced to six months of home detention and five years of probation.

Maybe I'm missing something, but it seems to me that judges perceive securites fraud as victimless. Why would anyone buy stock when the incentives are so great to cheat the investors. Mark this down as a negative to strenghtening our markets, and a postitive for corporate officers who cheat. I'm sure they are sleeping well in Corpville tonight.

Mr. McVay, one of five former HealthSouth chief financial officers who have pleaded guilty in the accounting-fraud case, is the most senior executive to be sentenced so far in the 14-month-long government investigation. He is the seventh former HealthSouth executive to be sentenced. Only former assistant controller Emery Harris, who was sentenced by U.S. District Judge Inge Johnson to a five-month prison term in December, has been sent to jail.

In a separate sentencing yesterday before Judge Clemon, Richard Botts, who ran HealthSouth's tax department before resigning in advance of a plea deal, also was sentenced to six months of home detention, as well as a $10,000 fine and an order to forfeit $265,000.