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To: Jim Willie CB who wrote (20247)	6/11/2003 8:09:42 PM
From: Cactus Jack	Read Replies (2) \| Respond to of 89467

JW, Seen this one yet? biz.yahoo.com HealthSouth paid auditors for janitorial checks NEW YORK, June 11 (Reuters) - HealthSouth Corp. paid more to accountants Ernst & Young to inspect its bathrooms, parking lots and other facilities, than it did to audit its financial statements from 2000 to 2002, the company admitted on Wednesday. The fees, some $2.6 million for janitorial inspections by junior accountants, were disguised in the company's official statements to government regulators as "audit-related fees," raising questions about the company's relationship with its former auditor. HealthSouth (Other OTC:HLSH.PK - News), which is embroiled in a massive accounting scandal, said the inspection program, called "pristine audits," used a 50-point checklist that surveyed everything from the state of its bathrooms to the arrangement of magazines in waiting rooms. The company touted Ernst & Young's role in these inspections of its surgical centers and physical therapy clinics at an investor conference on June 11, 2002, according to a Securities and Exchange Commission (News - Websites) filing. Thomas Sjoblom, an attorney for former HealthSouth Chief Executive Richard Scrushy, said some of the items on the pristine audit checklists were directly related to accounting. "To suggest that this was janitorial work to see if the toilets were clean, that's not accurate," insisted Sjoblom. "Those 50-point checklists also include things like tagging of inventory, which goes directly to the property, plant and equipment accounting, which the SEC has raised an issue about in its complaint," he said. Fees paid to auditors have attracted scrutiny in recent years over concern that millions of dollars for consulting and other non-audit services threaten their ability to independently vouch for a company's books. HealthSouth paid Ernst & Young $1.3 million a year for the pristine audits in 2000 and 2001 and $1.4 million in 2002, HealthSouth spokesman Andy Brimmer said. In comparison, Ernst & Young received $1.03 million to audit financial statements for 2000, $1.16 million for 2001, and $1.1 million for 2002 results. HealthSouth has halted the pristine audit program and that responsibility now lies with company managers, Brimmer said. HealthSouth's April 2002 proxy statement shows it paid Ernst & Young $1.16 million in audit fees for 2001 and $2.39 million in "audit-related fees," though it does not describe those services. Just $122,000 is listed as non-audit-related fees. Ernst & Young maintains that the inspection fees were properly classified. In a statement, it said there were no SEC rules that defined audit-related services at the time the fees for inspections were disclosed. Classifying those fees as audit-related was not meant to imply that they were part of the annual financial audit, Ernst said. It argued that some companies like HealthSouth classified operational audit procedures done by independent auditors, similar to those done by internal auditors, as audit-related services. In March, HealthSouth replaced Ernst & Young with PricewaterhouseCoopers (News - Websites)as its auditors. The SEC has accused HealthSouth of inflating its profit by $1.4 billion since 1999, leading to the ouster of company founder Scrushy, and guilty pleas to criminal fraud charges from 11 HealthSouth accounting and finance executives. In Washington on Wednesday, a congressional committee demanded that Scrushy turn over records on the company's personnel, finances and accounting practices by June 25. The House of Representatives Energy and Commerce Committee also sought records related to HealthSouth's links with Ernst & Young and investment bank UBS Warburg (News - Websites). (Additional reporting by Deepa Babington, Jed Seltzer and Bill Berkrot)