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MBAB Term3

on 21 June 2013

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Transcript of 5P25

Aaron Beam and the HealthSouth Fraud Qifang Chen
Xingyu Zeng
Linqing Wang
Chengjie Li
Jingfei Li
Yue Wu Moral Responsibility Slippery Slope loyal agent's argument Background 1983 1984 1986-1996 1997 Aaron Beam joins with Richard Scrushy to start HealthSouth, a medical rehabilitation center. Scrushy asks Beam to utilize "aggressive accounting" techniques to meet investors and lenders expectations HealthSouth becomes a Fortune 500, while fraud continues to occur throughout the company Beam retires & does not
disclose fraud to SEC HealthSouth is investigated and is found to have overstated earnings by $2.7 billion 2003 Agenda Background Loyal agent's argument Slippery slope Moral responsibility Question: Should the "family" take the moral responsibility for this fraud Slippery slope can be expressed in this form:

1.Event A has occurred(or will or might occur)
2.Event B will inevitably happen Justify aggressive to illegal Slippery Slope Moral responsibility Causality
Freedom I am innocent. I don't know
anything about fraud. Is the family supposed to be morally responsibility? Traditional view More humankind Causality
Freedom Kind of "Job"
Conduct based on company's order An employer would want to be served in whatever ways will advance his or her self-interests. Therefore, as a loyal agent of his or her employer, the manager has a duty to serve his or her employer in whatever ways will advance the employer's self-interests. 1.An agent has an obligation to obey only reasonable directives of the principal, and so an agent cannot be required to do anything illegal or immoral.

2.The obligations of an agent are confined to the needs of the relationship. Thus, an employee is not obligated to do anything that falls outside the scope of his or her employment. Definition I do what my boss told me to do.
If the company failed, a lot of people would be hurt. Aaron Beam's morally responsibility started from? “Aggressive accounting” 1984
1996 Mitigated 2ed Quarter of 1996 Result 3 month in a federal prisoner
$285,000 fine
$250,000 lawyer‘s fee Could Aaron Beam have used the"loyal agent's argument" to defend his action? Utilitarianism(Rule/Act) Reference Manuel G. V.(2012), Business Ethics concepts and cases, Person(7). Wilke, John R., Chad Terhune & Carrick Mollenkamp (2003). “HealthSouth Ex-Chairman Faces Charges He Took Part In Big Accounting Fraud”. Wall Street Journal. (Eastern editionNew York, N.Y.: Nov 4, 2003. p. A.3. Weil, Jonathan (2003a). “HealthSouth and Ernst Renew Flap Over Fee Disclosures.” Wall Street Journal. (Eastern edition). New York, N.Y.: Jul 1, 2003. pg. C1 Securities and Exchange Commission (2003). “Complaint: HealthSouth Corporation and Richard M. Scrushy”. http://www.sec.gov/litigation/complaints/comphealths.htm. Accessed on August 10, 2006. Reference Manul G. V.(2012), Business Ethics concepts and cases, Person(7). Wike, John R., Chad T. & Carrick M.(2003), "HealthSouth Ex-Chariman Faces Charges He Took Part In Big Accounting Fraud". Wall Street Journal. (Eastern edition New York, N. Y.: Nov 4, 2003. p. A. 3. Weil, Jonathan(2003a). "HealthSouth and Ernst Renew Flap Over Free Disclosures." Wall Street Journal. (Eastern edition). New York, N. Y.: Jul 1, 2003. pg. C1 Securities and Exchange Commission (2003). "Complaint: HealthSouth Corporation and Richard M. Scrushy". Retrieved from: http://www.sec.gov/litigation/complaints/comphealths.htm.
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