Iowa Ledger (2019) - Tippie College of Business

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Cautionary Tale
Whistleblower in massive fraud scandal speaks to Iowa accounting students
WRITTEN BY • LYNN DAVY
At the height of his career at HealthSouth Corporation,
Weston Smith enjoyed lavish fishing excursions on
yachts and business travel on private executive jets. But
he ditched those luxuries and others when he became
a whistleblower in one of the most spectacular financial
statement fraud cases in U.S. history.
As the chief financial officer of
HealthSouth Corp., Smith played a
role in misreporting financial figures
to investors and Wall Street. In a talk
with accounting students during the
Fall 2018 semester, Smith said the
misreporting started small, but quickly
grew as executives continued to try
to hide missed financial targets from
the finance world as well as ongoing
fraud from law enforcement.
At the height of the fraud, HealthSouth
had $275 million of cash recorded on
its balance sheet, but only about $25
million in the bank.
“Basically, it was one big shell game,”
Smith told students.
The stress of the cover-up and the
pressure from his boss to remain loyal
to the company despite the deception
finally became too much for Smith.
He was losing his hair and he was filled
with regret. In 2003, he went to federal
regulators and told them everything.
In the end, he served 27 months in
prison. The first night of his prison
stay will stick with him forever.
“I remember lying in my bunk bed and
thinking ‘What on earth are you doing
here?’” said Smith, who now travels
the country speaking about financial
maleficence and business ethics. “But
at the same time, I was so thankful that
the lying was over. I was involved in
something so wrong that I was serving
time in federal prison. I knew I had
broken the law and I knew I had to pay
for what I had done.”
Smith was invited to speak with students
by Jaron Wilde, associate professor of
accounting, to reinforce the immense
importance of accounting ethics. Wilde
conducts research on whistleblowers and
he knew of Smith from discussions with
academic colleagues.
“Weston’s presentation is a personal
account of a very difficult situation,
centered in accounting fraud,”
Wilde said.
“His presentation invites students to
reflect on their own decision framework
and determine what they will do when
they face difficult circumstances and
ethical dilemmas.” •
8 IOWA LEDGER 2019