Tadd McVay

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Malcolm E. "Tadd" McVay (born c. 1962) was one of five former chief financial officers for HealthSouth that were charged with crimes related to the company's $2.7 billion accounting fraud scandal. He was characterized by prosecutors as being outside the "family" that initiated the fraud, having served only a few months as CFO. He did, however, knowingly put his signature to a false financial statement. He cooperated with investigators and testified against his former employers at trial, factors in a mild sentence that was appealed by prosecutors.

Early life

After majoring in English, McVay earned his Masters in Business Administration at the University of North Carolina in Chapel Hill. He became acquainted with HealthSouth founder Richard Scrushy as the CFO of Scrushy's Capstone Capital Corporation from 1996 to 1998. He had also served as a Senior Vice President of Investor Relations at Caremark Rx and a senior vice president at SouthTrust Bank.

HealthSouth

McVay began working at HealthSouth as Vice President of Finance in September 1999. He was promoted to Senior Vice President and Treasurer in February 2000, succeeding Michael Martin. In 2001 he was promoted to Executive Vice President and was named CFO in August 2002, succeeding Weston Smith. His corporate biography credited him with helping refinance HealthSouth's long-term debts and bank credit line.

In late 2002 McVay met with Bill Owens to discuss the possibility of removing Scrushy from the company he founded, in part to satisfy the demands of investors. Owens informed Scrushy of the meeting and McVay was promised that the entire executive team would commit themselves to correcting the growing problems with the company's accounting. On January 6, 2003 Scrushy resumed his role as CEO and replaced McVay with Owens as CFO. McVay remained on board as full-time Treasurer.

Investigation and trial

The United States Securities and Exchange Commission began a civil investigation of HealthSouth's books in the fall of 2002, provoked in part by newspaper articles questioning the veracity of a company report warning investors that changes in Medicaid billing could cost the company $175 million per year. The civil case became a criminal investigation for the Federal Bureau of Investigation after Bill Owens agreed to wear a wire in an attempt to gather evidence incriminating Scrushy and other top executives.

McVay cooperated with the investigation and agreed to plead guilty in April 2003, a week after he was fired from the company. At trial he testified in court that he became aware of the fraud and was alternately intimidated by Scrushy and Owens and cajoled into continuing the activity until it could be corrected quietly. In his testimony he stated that Scrushy had told him that "all companies fudge the numbers."

Conviction and sentencing

McVay pleaded guilty in 2003 to filing a false financial report on behalf of the company. Those charges carried a maximum sentence of 15 years and fines of $1.25 million, but prosecutors recommended a 65-month sentence based on the value of his cooperation. He was sentenced in 2004 by U. W. Clemon to serve five years probation, pay a fine of $10,000, and forfeit $50,000 in earnings. In addition to prosecutor's considerations, Clemon cited McVay's "exemplary record" before his involvement in the conspiracy and his status as a single father in reducing the sentence.

That sentence was appealed by prosecutors who wanted him to serve at least 28 months in prison. The 11th Circuit Court of Appeals sent the issue back to district court, where it was upheld by judge Inge Johnson, who noted that CEO Richard Scrushy was acquitted while the executives who pleaded guilty and assisted in his prosecution were earning imprisonment. In September 2008 the Appeals Court reviewed Johnson's resentencing and found it unreasonable as well. She held a resentencing hearing and ordered him on June 30, 2009 to serve 90 says in jail. McVay's attorney, Tommy Spina, argued that his client suffered from obsessive compulsive disorder and that HealthSouth officials preyed on his weaknesses. He has said that he would appeal the resentencing to the U. S. Supreme Court.

In August 2007 McVay was indicted in separate charges of structuring personal bank deposits (totaling $180,000) to avoid having them reported to federal regulators. He pleaded guilty in that case as well. McVay worked for a while at Meadowcraft, but lost his position there in April 2009.

References

  • Stuart, Alix Nyberg (June 2005) "Keeping secrets: how five CFOs cooked the books at healthsouth" CFO: Magazine for Senior Financial Executives.
  • ''United States v. Malcolm E. McVay (May 5, 2006) United States Court of Appeals for the Eleventh Circuit. No. 04-13455
  • Walton, Val (September 23, 2008) "Appeals court tosses out Malcolm Tadd McVay's probation sentence for HealthSouth fraud for second time." Birmingham News
  • Tomberlin, Michael (July 1, 2009) "Malcolm McVay becomes fifth HealthSouth CFO to get prison for accounting fraud." Birmingham News