A Diagnostics & Imaging Week

A judge last week sentenced the first CFO of HealthSouth (Birmingham, Alabama) to three months in prison for his role in the $2.7 billion overstatement of earnings by the rehabilitation/medical services chain.

In a plea bargain, Aaron Beam, who helped Richard Scrushy found the company in 1984 and testified against Scrushy, the company's ousted CEO, in his recent fraud trial – also must pay $275,000. The judge added a $10,000 fine, plus one year of probation.

Shedding tears at sentencing, Beam told Judge Robert Probst that he caved in to Scrushy's demands to "fix" the company's corporate numbers, and he apologized for the fraud.

"I should have stood up to Richard Scrushy and said 'no,' but I didn't," he said. Probst said he believed Beam's testimony, which clearly pointed to Scrushy as mastermind of the fraud, despite escaping conviction on about three dozen counts by a jury last month. Probst said that Beam had not been "the worst fish in the sea" which plotted the fraud.

However, Donald Watkins, a Scrushy attorney, said that Beam was attempting to shift the blame. "No one made Aaron Beam break the law," he said.

Although 15 former HealthSouth executives pleaded guilty in the fraud, Beam is only the second of the group to receive prison time.

In other legalities:

Misonix (Farmingdale, New York), a developer of ultrasonic technology, reported that a jury in the District Court of Boulder County, Colorado, has ruled against Sonora Medical Systems, 90%-owned by Misonix, in the amount of $460,000. The case involved royalties claimed on recoating of transesophageal probes – used to obtain ultrasound images of the heart, among other uses – a process performed by Sonora.

About 80% of the judgment was based on the jury's estimate of royalties for potential sales of the product.

Misonix said that Sonora has moved for judgment, notwithstanding the verdict based on, among other things, the award of damages for future royalties, and that Sonora has moved for a new trial.

Misonix said it would take a one-time charge against FY05 income of $460,000, with hoped-for reversal upon an overturned judgment. Michael McManus Jr., president and CEO of Misonix, said that because of the charge, its FY05 earnings would fall below prior guidance.

He added: "Despite this event, Sonora and Misonix continue to make progress with initiatives to enhance our Medical Devices business" and still has "a strong balance sheet."

Misonix manufactures ultrasound technologies. Sonora is a provider of products and services to the diagnostic ultrasound and MRI markets.

Immucor (Norcross, Georgia) reported that the Securities and Exchange Commission has issued a formal order in its previously reported investigation of over-payments made by the company's Italian subsidiary to individuals associated with government medical facilities. Immucor said that the order allows SEC staff "to compel testimony and document production."

As reported, the investigation began after the company self-reported a violation of the books and records requirements of the Foreign Corrupt Practices Act. Immucor said it would cooperate by providing to the commission of an internal investigation into the matter, plus "documents and testimony."

Immucor manufactures reagents and automated instrument systems for detecting certain properties of the cell and serum components of blood prior to transfusion.

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