What do you think?
Rate this book
HealthSouth: The Wagon To Disaster
It was the quintessential American success Identify a niche; form a company to exploit it; raise millions in venture capital; take the concept public; meet stockholder expectations for 40 straight quarters, in the process becoming a darling of Wall Street; and of course make money plenty of it while the stock price steadily climbs and revenue projections increase. In a few short years you ve gone from rags to riches...you re on a monster roll... Until your boss, saddled with the realization that the Street expectations cannot realistically be met, asks you to creatively fix the numbers. It s the toughest decision you ve ever made, and one where the easiest way out could be the most difficult, given the circumstances. Caught squarely between greed and fear, Aaron Beam did the unthinkable. Corporate greed is the Black Plague of the modern financial world threatening America s ability to maintain free market capitalism in an increasingly distrusting, changing, and socialistic world economy. The Wagon to Disaster, told by former co-founder and CFO Aaron Beam, is the untold story of HealthSouth, one of America s most successful health care companies and consequently, the perpetrator of one of its biggest frauds in history. How big was the fraud? In 2003, just before news of the crime broke in the mainstream media, HealthSouth paid more money in taxes to the Federal Government than it legitimately earned the previous year. Beam takes the reader from HealthSouth s humble beginnings, through its meteoric rise and to its disastrous revelation, subsequent trial and his three-month incarceration in a federal prison. Moreover, he reveals the nature of the fraud and the true personality of the driving force behind HealthSouth Richard Marin Scrushy, one of the most enigmatic, nefarious characters the State of Alabama has ever produced a hard-charging, unscrupulous visionary whose caustic, Machiavellian approach ensured HealthSouth s success, and oddly, his predictable fall as the company s benevolent dictator. Read more at wagontodisaster.com, the official book website.
- GenresBusinessNonfiction
216 pages, Kindle Edition
First published November 1, 2009
35 people are currently reading
165 people want to read
Ratings & Reviews
Friends & Following
Create a free account to discover what your friends think of this book!
Community Reviews
Displaying 1 - 15 of 15 reviews
March 26, 2011
An honest, humble, yet scathing indictment and historical narrative of one of the largest corporate fraud cases in history written by former CFO and co-founder of HealthSouth, Aaron Beam. Author Beam paints a villainous portrait of company founder Richard Marin Scrushy, portraying him as an avaricious psychopath whose ascent into wealth and fame accelerated his descent into paranoia and madness. As the fraud at the corporate giant increased, so did Scrushy's irrational behavior. Beam's description of Scrushy is one of a madman out of control and out of touch with reality who, through recklessness and narcissism, left in his wake an incomprehensible path of ruin and destruction. Although I lived in Birmingham, AL through the years of the fraud and thus read this book with special interest, I would recommend this book to anyone anywhere with an interest in business ethics, corporate fraud, the Sarbanes-Oxley Act (the government's case against HealthSouth was the first to be tried under this new law), greed, or simply one who appreciates an honest and searching memoir written by a redeemed former corporate insider.
January 18, 2021
Beam isn't the best writer but he did a mostly good job relating this story. I like that he included Weston Smith's words as well because reading his raving and ranting about Scrushy could have gotten stale and a bit unbelievable. Greed is nasty.
February 11, 2025
My fascination towards HealthSouth has to do with Mulford’s book Creative Cash Flow Reporting where he referenced casually on the case of HealthSouth.
HealthSouth was a rapidly growing healthcare company. During the beginning of the company’s founding years, the company did indeed have its merit in having a leaner operation, resulting in higher return rate than their competitors. Yet, as the company grew and became public, they were under tremendous pressure to “cook the book”. The author of this book commented that unlike Enron where they use sophisticated accounting methods such as SPVs, HealthSouth did none of that - they simply made numbers up from thin air. In order to avoid being audited, they mostly make accounting entries that are less than $5,000. The author commented on the operation:
Another method the company used was to simply overstate things, the author wrote:
Few years into the operation, the company finds itself having few bad quarters - just like any company would face. But the head of the company refuses to report bad earnings. In order to show the company is constantly growing, in addition to faking their numbers, the company began a rapid merging spree (thankfully due to its status as a Wall Street darling meriting a high P/E multiple). The author wrote:
By quickly absorbing competitors (the author noted that the company did very little due diligence of it), the company can quickly “combine” the new acquisitions into their own book. In theory, merger could be cost cutting as one single company would only employ one CEO, versus 2 by being separate. Yet, the real issue with this rapid growing strategy is that the synergy between the companies can’t be easily merged. In addition, the cost-savings between multiple companies often do not work in practice, due to the fact that companies often have different scenarios that warrant duplicate departments when merging. The best way for a company to grow would be to grow organically and to grow gradually.
Lastly - perhaps the main reason why I want to read this book is because Mulford mentioned that HealthSouth even faked their Cash and Cash Equivalents: how the hell were they able to do that? The author explain in this book:
I guess my major takeaway from the book is that if a company truly wants to cook its book, there are very few ways to catch them just through reading their annual reports (the author also mentioned that unlike industry standards where when they switch accounting standards, a footnote would be generated. HealthSouth at the time didn’t even bother with having footnotes at all). The author did leave hints on seeing signs of HealthSouth’s money problem: their over-opportunistic forecast grants them far superior return than their competitors. Thus, perhaps one way to see through an accounting scandal is to ask why one company could fundamentally have a higher - for instance, bad debt collection rate - than their competitors.
PS: as of the writing, it seems like HealthSouth is now Encompass Health, a S&P400 company and doing rather well for themselves. While the company did indeed engage in outright accounting fraud, it does have some intrinsic values. Wall Street’s overreaction of dropping the stock all the way to $0.33/share in March 2003 is probably not warranted.
HealthSouth was a rapidly growing healthcare company. During the beginning of the company’s founding years, the company did indeed have its merit in having a leaner operation, resulting in higher return rate than their competitors. Yet, as the company grew and became public, they were under tremendous pressure to “cook the book”. The author of this book commented that unlike Enron where they use sophisticated accounting methods such as SPVs, HealthSouth did none of that - they simply made numbers up from thin air. In order to avoid being audited, they mostly make accounting entries that are less than $5,000. The author commented on the operation:
To complete the financial statements for earnings releases, it took approximately 120,000 fraudulent journal entries per quarter. As you can imagine, this was extremely labor-intensive.
Another method the company used was to simply overstate things, the author wrote:
accounting for health care revenues is especially judgmental. Bad debts are extremely high in healthcare. People just do not budget for major injury or sickness. Insurance companies usually do not pay full charges and Medicare has its own payment system. Companies such as HealthSouth must estimate how much they will eventually collect from these various payers. This opens up much room for earnings management.
Few years into the operation, the company finds itself having few bad quarters - just like any company would face. But the head of the company refuses to report bad earnings. In order to show the company is constantly growing, in addition to faking their numbers, the company began a rapid merging spree (thankfully due to its status as a Wall Street darling meriting a high P/E multiple). The author wrote:
Weston realized all along what I did--that they were using the acquisitions to mask HealthSouth’s core problems. The logic was that the true value of the deals wouldn’t be revealed, and that the synergies of the deal or additional revenues could be used to carry some of HealthSouth’s shortfalls. This scheme didn’t work though, because many of the acquisitions were conducting their own book-cooking operations, which meant that they not only continued to falsely prop up HealthSouth numbers, but also the numbers of the new acquisitions in order to meet the expectations of Wall Street and Richard.
By quickly absorbing competitors (the author noted that the company did very little due diligence of it), the company can quickly “combine” the new acquisitions into their own book. In theory, merger could be cost cutting as one single company would only employ one CEO, versus 2 by being separate. Yet, the real issue with this rapid growing strategy is that the synergy between the companies can’t be easily merged. In addition, the cost-savings between multiple companies often do not work in practice, due to the fact that companies often have different scenarios that warrant duplicate departments when merging. The best way for a company to grow would be to grow organically and to grow gradually.
Lastly - perhaps the main reason why I want to read this book is because Mulford mentioned that HealthSouth even faked their Cash and Cash Equivalents: how the hell were they able to do that? The author explain in this book:
Furthermore, the cash balance was extremely overstated. At one point HealthSouth recorded $320 million in cash on the books, but in reality had only $10 million in the bank… Richard’s Gulfstream jet owned by the company was sold to a leasing company for over $30 million, and was subsequently leased back for about $300,000 per month for the same jet.
I guess my major takeaway from the book is that if a company truly wants to cook its book, there are very few ways to catch them just through reading their annual reports (the author also mentioned that unlike industry standards where when they switch accounting standards, a footnote would be generated. HealthSouth at the time didn’t even bother with having footnotes at all). The author did leave hints on seeing signs of HealthSouth’s money problem: their over-opportunistic forecast grants them far superior return than their competitors. Thus, perhaps one way to see through an accounting scandal is to ask why one company could fundamentally have a higher - for instance, bad debt collection rate - than their competitors.
PS: as of the writing, it seems like HealthSouth is now Encompass Health, a S&P400 company and doing rather well for themselves. While the company did indeed engage in outright accounting fraud, it does have some intrinsic values. Wall Street’s overreaction of dropping the stock all the way to $0.33/share in March 2003 is probably not warranted.
July 3, 2024
I’m biased by my profession as a healthcare compliance and audit executive, but I really enjoyed reading Aaron Beam’s account of the HealthSouth fraud. Reading through the pressures and emotions that led to the fraud and observing the different reactions to the pressure was very insightful. I read the ebook, but am going to purchase a physical copy to sit in my office at work.
April 20, 2021
Interesting book. Easy to read and understand. Could use some proofreading though
July 13, 2021
Classic story of a good idea totally ruined by shady business practices and corrupt management.
November 5, 2011
Among other things, The Wagon to Disaster is an almost hilarious story about the outsized ego of Richard Scrushy, perhaps one of the most colorful of the corporate scammers of the last decade. Because the author worked with Scrushy from the very beginning in founding his company HealthSouth, and served as that company's first CFO and was one of the first to participate in its fraud, there are plenty of fly-on-wall observations of Scrushy's nearly sociopath style of management. From his desire to own and operate a nightclub in Birmingham, to being a lead singer in his own country band Dallas County Line, to starting and managing a girl-band, to having half the public buildings in Birmingham (and a parkway) renamed after him, to paying a D-list Hollywood celebrity to be his lapdog, to Scrushy's ever-grating, belittling persona--there is a wealth of juicy dirt here to help paint him as a villain so farcical he could have come from a movie.
There is also some detail about the author himself, including his stint in prison, and his new life mowing lawns and speaking to business schools on corporate fraud. And there is plenty about how the scam itself started and operated. The parts of the story that the author cannot tell first-hand regarding the fraud (since he left only a year after it began) are given over to a later CFO who helped perpetuate it up until its unraveling. By then, Scrushy appears to have become so disconnected from reality (buying a Sirkosky helicopter to fly to his Parkway-naming ceremony, while simultaneously laying off 600 people to 'cut costs,' for example) one can't help but think of Nero fiddling.
However, this book could have benefited from more editing or better ghostwriting. It is somewhat choppy, written in a staccato style, with the timeline often jumping around disjointedly. Even the way it's formatted could have used some help (note to typesetters: it's not necessary to offset a new paragraph by both indenting and skipping a line). The two chapters written by the other CFO are much cleaner and are better at bringing out the depth of the absurdity of Scurshy; I wish he'd write his own book.
Also, the author's own sins are glossed over, including his partying lifestyle at the peak of his power and his own poor decisions that hurt his family and the trust of his employees; but he does spend a fair amount of time playing the victim (of himself, he ultimately admits, but it still comes across as po-faced). And he undoubtedly can't be completely trusted to not spin his tales of Scrushy for maximum payback value.
Nonetheless, there really are not many books about the larger-than-life nonsense that was (or still is) Richard M. Scrushy. It is also an appropriate cautionary tale about how Wall Street's culture of demanding ever-greater results at all cost cultivates a breeding ground for such morally corrupt thinking.
There is also some detail about the author himself, including his stint in prison, and his new life mowing lawns and speaking to business schools on corporate fraud. And there is plenty about how the scam itself started and operated. The parts of the story that the author cannot tell first-hand regarding the fraud (since he left only a year after it began) are given over to a later CFO who helped perpetuate it up until its unraveling. By then, Scrushy appears to have become so disconnected from reality (buying a Sirkosky helicopter to fly to his Parkway-naming ceremony, while simultaneously laying off 600 people to 'cut costs,' for example) one can't help but think of Nero fiddling.
However, this book could have benefited from more editing or better ghostwriting. It is somewhat choppy, written in a staccato style, with the timeline often jumping around disjointedly. Even the way it's formatted could have used some help (note to typesetters: it's not necessary to offset a new paragraph by both indenting and skipping a line). The two chapters written by the other CFO are much cleaner and are better at bringing out the depth of the absurdity of Scurshy; I wish he'd write his own book.
Also, the author's own sins are glossed over, including his partying lifestyle at the peak of his power and his own poor decisions that hurt his family and the trust of his employees; but he does spend a fair amount of time playing the victim (of himself, he ultimately admits, but it still comes across as po-faced). And he undoubtedly can't be completely trusted to not spin his tales of Scrushy for maximum payback value.
Nonetheless, there really are not many books about the larger-than-life nonsense that was (or still is) Richard M. Scrushy. It is also an appropriate cautionary tale about how Wall Street's culture of demanding ever-greater results at all cost cultivates a breeding ground for such morally corrupt thinking.
February 24, 2017
I had to read this book for a course. I have learned about the Healthsouth Fraud before - and watched the American Greed episode about it. It was the same information as the book. Probably helped write the episode or - the other way around. If I could have gotten away with it, I would have watched the episode again. Still interesting and a personal story about how fraud happens and the aftermath of the fallout.
July 31, 2011
Aaron Beam gives a great inside look at the fraud that was HealthSouth. Although Mr. Beam is not a professional writer, he still makes it a very interesting story. He covers it from beginning (he was one of the founders) to end - to his time in federal prison. I came away convinced that it's just not worth it. Fraud might possibly bring you more riches than you can imagine, but in the end you will not be happy.
Interestingly, he reveals why federal prosecutors have something like a 90% conviction rate: unlimited resources. Facing down the federal government has less to do with innocence or guilt than it does with having a pile of money and the will to fight back.
Interestingly, he reveals why federal prosecutors have something like a 90% conviction rate: unlimited resources. Facing down the federal government has less to do with innocence or guilt than it does with having a pile of money and the will to fight back.
June 11, 2012
Not the most well written or edited book, but quite an interesting story. The book is a page turner and you will likely finish it in one sitting. Anyone interested in Alabama, true crime, or in America's financial system and the years of blatant white collar fraud and corruption will find this a fascinating read as told by a true insider.
February 24, 2012
Aaron Beam gave a unforgettable talk on the NASBA conference, and my boss got this signed copy for me. He wrote,"Pull the wagon". I felt in a way that it sounds like a kind of "fantasy". Very educational.
December 12, 2012
I enjoyed this book very much. Knowing the background of the story made me interested in hearing the personal stories of an insider.
November 3, 2015
For my auditing class ...
July 14, 2017
Fascinating story about the rise and fall of HealthSouth.
December 17, 2019
Very interesting book! I had to read it for class but found myself not putting it down when only having to read one chapter.
Displaying 1 - 15 of 15 reviews