More Headaches at HealthSouth - TheStreet

More Headaches at HealthSouth

Two more onetime execs will cooperate with the ongoing government probe.
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HealthSouth

has new headaches.

The ailing healthcare chain, suspected of carrying out a lengthy $3.5 billion accounting scam, could soon feel its tax and investment practices come under feverish heat, as well. Following the path of 12 former finance executives, two HealthSouth vice presidents -- overseeing tax filings and company investments -- agreed Thursday to plead guilty to criminal charges and cooperate in the government's sweeping probe of the fallen healthcare giant.

Richard Botts, a senior vice president who filed HealthSouth's tax statements, stands accused of falsifying reports to both federal and state tax authorities. William Hicks, vice president of investments, is suspected of falsifying records and misleading the company's outside auditors. Botts and Hicks have agreed to plead guilty to fraud and conspiracy charges, respectively.

Hicks is also tied up in a close HealthSouth affiliate that may be under federal watch as well. The former healthcare analyst, who recommended buying HealthSouth shares before joining the company, served on the board of directors at MedCenterDirect.com. As

TheStreet.com

revealed in late March, MedCenterDirect.com is a struggling e-commerce venture -- owned in part by HealthSouth executives and directors -- that relies heavily on HealthSouth for business and funding. In early April,

The Wall Street Journal

reported that MedCenterDirect.com had caught the attention of federal investigators conducting the massive HealthSouth probe.

Before taking over HealthSouth's investment business, Hicks worked as a healthcare analyst at Cowen & Co. in Boston. He became suddenly bullish on HealthSouth in late 1993, following HealthSouth's acquisition of 73 healthcare centers from the predecessor of troubled

Tenet

(THC) - Get Report

. He went on to upgrade the stock even more, taking it from buy to strong buy just two months later -- but declined to share his reasoning with reporters.

After hiring him to handle its own investments, HealthSouth would later point to Hicks as a former "top-ranked Wall Street healthcare service analyst" in published materials about the company. It would also tap Hicks -- along with ousted CEO Richard Scrushy and former Treasurer Tadd McVay -- to handle calls from inquiring investors. McVay has already pleaded guilty to fraud charges in the HealthSouth case. While Scrushy faces no formal charges yet, he is suspected of orchestrating the entire scheme. He has denied any wrongdoing.