28 June 2007

The Perils of Accounting Fraud

Richard Scrushy, former chairman and CEO of a company (HealthSouth) that nearly collapsed, was sentenced in federal court to 6 years, 10 months, in prison for bribery. Two years earlier, Scrushy was acquitted of numerous accounting fraud charges, despite eyewitness testimony against him.

Accounting fraud is a great threat to our economy, and we salute efforts to root it out and punish the offenders. Investors would be a lot stingier should they decide they can't rely on corporate financial statements. Jobs would be lost because companies would have fewer funds for capital and operating expenditures.

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