by Betsy Atkins
from November/December 2003
Corporate Board Member
In this exclusive account—based on a diary she kept as events unfolded, e-mails she exchanged with other directors, and interviews with Corporate Board Member’s Colin Leinster—Atkins reconstructs what the board discussed the day the FBI moved in, what she did to help the company stay in business, how she put together the professional backup the board needed in its time of crisis, and why she suddenly decided to RESIGN.
The allegations came right out of the blue. The SEC hadn’t requested any information or data before filing its complaint, which I think it usually does in such cases. It had certainly done so before announcing its investigation into insider trading, and these new allegations were clearly very much more serious. We weren’t just looking at manageable fines here; if anyone were to prove criminal fraud against the company, HealthSouth could be out of business.
As chair of the special litigation committee, I knew that the board had to make a series of immediate decisions to try and minimize the damage. And as the newest member of the board, and therefore the most objective, I took it upon myself to chair an emergency board meeting later that day, something we could do via a conference call.
I started to keep a diary of what I did and of what the board needed to do, sometimes making handwritten notes, sometimes dictating them. I see that I began March 19’s entry with a typo, saying it “started as a regularly day.” Then I noted that after I got word of the criminal allegations, I went to my computer to call up the Associated Press article, and printed it. “From there,” I wrote, “things cascaded at a rapid pace.” I listed some of the events of that day, breaking them down by the hour:
By 10:00 am EST, I had received phone calls from 5 of the board members.
By 11:00 am, I was on a telephone conference call, the first impromptu board meeting of the day with [board members] Sage Givens, Chuck Newhall, and George Strong.
By 12:00 noon, I had spoken to Joel Gordon, the largest shareholder and [a] board member who sold his surgery centers to HealthSouth.
By 1:00 pm I was on a Special Investigation Committee call with Wilson Sonsini’s Bruce Vanyo [the lawyer I’d picked to represent the committee] discussing the SEC complaint, analyzing it, reviewing it, and determining the impact of this complaint.
By 5:00 pm EST, there was a board call of the entire board including Mr. Scrushy.
This last entry isn’t quite accurate. One director, Bob May, was on a cruise and we couldn’t get through to him in time. Jon Hanson was on a plane. He got through, but the static was so bad he drowned us all out and had to hang up. In addition, Bill Horton, HealthSouth’s corporate lawyer, joined the conference call, as did a large number of other lawyers representing all kinds of interested parties, including HealthSouth itself, Mr. Scrushy, William Owens, the CFO, different individual directors, and various board committees, including my own. Even the corporate counsel had his counsel on the line. They all kept jumping in, and it was often impossible to know who was speaking for whom.
The one clear decision we made that afternoon was that the board would cooperate fully in the Justice Department’s investigation. It was agreed I’d chair and host daily emergency board meetings for the foreseeable future. It was clear I would be very busy. As I was. I have six lines at my office in Coral Gables, and all of them were lit up from six in the morning until 11 at night from that point on.
Continued...