Aaron Beam helped co-found HealthSouth, one of the companies that pioneered outpatient treatment as a way of reducing costs. He was chief financial officer of the company during its early years of rapid growth. And he’s a member of the Hall of Distinction at LSU’s E.J. Ourso College of Business Administration.
But all of that was washed away by Beam’s role in the $2.7 billion securities fraud scandal at HealthSouth.
“I am a felon today. I will be a felon for the rest of my life,” said Beam, who spoke before a group of local business leaders Friday at a luncheon sponsored by Christ in the City, a downtown Baton Rouge ministry that was formed in 2014. “My legacy is not that I started one of the most successful companies in the history of the state of Alabama. I am the guy who cooked the books at HealthSouth.”
Former Gov. Buddy Roemer introduced Beam as “good man who paid a heavy price for a corporate scandal that was not of his own device.” Beam said this was Roemer’s first public speech after suffering a small stroke a year ago.
Beam served three months in federal prison for his role in inflating earnings at the company he helped to start. He cooperated with federal investigators and testified against HealthSouth CEO Richard Scrushy. Scrushy was acquitted in the federal criminal case. Scrushy was ordered in a state civil case to pay nearly $2.9 billion to shareholders. Scrushy testified in the state civil case that he knew nothing about any fraud. He served a federal prison sentence in a separate state government bribery case.
Beam, who earned an economics degree from LSU, met Scrushy in the early 1980s. At the time, Beam was interviewing for an accounting job with Lifemark Corp. in Houston. Beam thought Scrushy was brilliant — he was named as a vice president with Lifemark when he was 26 — but he had a huge ego. “No one in this room will ever meet a person with a bigger ego than Richard Scrushy,” Beam said. “In fact, Donald Trump does not have an ego as big as Richard Scrushy.”
After Lifemark was taken over by another company, Scrushy started HealthSouth in Birmingham, Alabama. He hired Beam as his first CFO.
HealthSouth started as a chain of outpatient rehabilitation centers, aimed at reducing medical costs by taking patients out of hospitals. The company grew quickly, and just after two years, it became publicly traded.
As HealthSouth grew, more money came in. Beam said the money and success started to change him. Beam bought a condo in the French Quarter, three Florida beach houses, a different luxury car each year and $30,000 worth of Hermès silk ties.
“It sounds like a great story, two guys with no real wealth started a company and it became a Fortune 500 company,” Beam said. “What could go wrong? One thing: greed. We lost our moral compass. Everything we did was to make more money and push the value of the stock.”
“In health care, it’s very tempting to play around with your revenue,” Beam said. That’s made easier by the complexity of medical bills, all of the bad debt health care companies are saddled with, plus the contracts with HMOs and Medicaid reimbursements.
Beam said he retired from HealthSouth in 1997 because of stress he was feeling over inflating earnings. “I just wanted out,” he said. Beam built a home in south Alabama, complete with a football field in the backyard.
But in 2003, when Beam heard television reports about the investigation at HealthSouth, he knew he was going to end up in prison.
“I got caught up in the glamour of being rich, and I thought cheating was OK,” he said.
Beam now serves as a speaker on business ethics, making his living speaking at universities, before CPA societies and at health care companies. He tells people there’s no acceptable amount of fraud or cheating.
“You have to really live your life trying to be perfect,” he said. “As soon as you get away from that as your standard and you start rationalizing a little bit of bad behavior as OK, you’re on a slippery slope and it can go the wrong way.”
Follow Timothy Boone on Twitter, @TCB_TheAdvocate.