Aaron Beam and the HealthSouth Fraud

Question: 1.
There were following obstacles to moral behaviour we saw at work in Aaron Beams
behaviour and thinking. The principal obstacle was that Beam saw this issue as a business
issue as opposed to a legitimate issue. He thought it would hurt individuals on the basis if he
didnt change the financials, and he was sure that he was going to do it "just this one time."
This made him not "outline" this misrepresentation as moral. In any case, it didn't just start
from here but he first began when he prepared the financial records to "look" better. He
vindicated his conduct by utilizing the utilitarian view on the matter and advocated the
methodology by improving the biggest measure of individuals. Beam "diffuses the
responsibility" to Scrushy, and feels as if he doesn't have a sufficient muscle to remain up to
Scrushy despite the fact that he induced others to tail them and he himself just must be
convinced the first run through, and later expressing that it got simpler the second time to
change the financials. In the second step making a judgment about what the ethical course of
action is, Beam has thought that the adjustments in the financial statements are so small that
no one would even think about it, although he often called it as aggressive accounting rather
than fraudulent. Nonetheless, he didn't consider the FBI and what might happen to those
included, particularly the shareholders, when they get caught. Beam demonstrated an "ability
to comply" Scrushy despite the fact that he did realize what they were doing wasn't right.
Whether he "confined" it moral or not he still realized that it wasn't precisely right and did
not have enough good character to question.
As far as the Scrushys moral reasoning is concerned, he lacked it altogether. The moral as
defined by the the standards that an individual or a group has about what is right and wrong
or good and evil which the HealthSouth company lacked. Scrushy first told Beam that he
should do whatever he could to make their financials reports look even better which shows
that Scrush didnt bother to care about the investment of shareholders and didnt even bother
to care about the life of others who were being involved in that case later. He only wanted to
get fame as much as possible in a short period of time. He neglected all the ethics and morals
by just involving Beam in fraudulent activities and every quarter when the company went
short of meeting Wall Street analysts expectation, they inflated the revenues. His ethical
conduct went rogue when a company was negotiating a new credit agreement with a
syndicate of 32 lenders from around the world totalling of $1.25 billion, and he pressurised
Beam that if the banks got wind of shortfall it would cripple the company they had worked so
hard to build.
Question: 2.
The loyal agent argument that was developed by Alex C. Michales, to show the business
managers should single-mindedly purse the interests of their firms and should ignore the
ethical consideration. As a loyal agent to the company, Beam was putting his effort to make
the company more profitable by using the aggressive accounting. He moved some of the
companys start-up cost from the expenses to the capital investment column and also put
the account receivables into an asset account. By doing so he not only inflated the revenues
but also performed his duty as a loyal agent to the employer and served the employer as the
employer would want to be served. He also served his employer in whatever ways to increase

his benefits by changing the financials every time when the company went short of revenues
especially when the company was negotiating a new credit agreement with a syndicate of 32
lenders from all around the world. He might have used this argument to defend his action
because he was told by his employer to do all the things in order keep the financials high.
Beam did what he was told to advance his employers interest. He not only violated the
accounting principles but also involved other people from different departments by making
their life in jeopardy.
The loyal agent argument is not a valid argument because it doesnt cater the moral and
ethical standards. It only provides benefit to the employer by advancing his interest rather
than the companys interest as a whole. In the case Aaron never stood up to his employer,
Scrushy, and stated that Scrushy made himself and others fearful of contradicting him.
Question: 3.
Throughout Aaron Beams participation in the HealthSouth scandal he admits that his actions
were misleading and unethical. Initially he justifies his participation as aggressive
accounting. However, it is clear intimidation played a role in his decision to follow
Scrushys orders. According to Kohlbergs theory on moral development, Aaron Beam would
be placed at level two Conventional Stages. In the beginning of his involvement he portrays
the behaviour of Stage Three: Interpersonal Concordance Orientation. He is aware of right
and wrong actions but nonetheless has a stronger desire to please his employer, Scrushy.
Perhaps he had more fear than trust in Scrushy, nonetheless he wanted to fulfil the role of
living up to his expectations. As the fraud escalated into a more serious crime, Beam starts to
fall into Stage Four: Law and Order Orientation. By retiring from the company, he is
attempting to forfeit his involvement. Kohlberg states that a person at the Conventional Stage
can justify decisions in terms of the norms of the group to which the person belongs.
Aaron Beam battled his moral development for nearly two decades. He knew the
consequences would be too difficult to come clean, which is why he is essentially trapped at
Kohlbergs Level Two of Moral Development.
Richard Scrushy is described to be charismatic, have boundless energy, and worked like a
dictator. These traits resemble certain qualities of a child. This is one reason that Scrushy
would be placed at level one. Although this man was also described as brilliant, his spectrum
of intelligence can be perceived in many different ways. Scrushy may have been a brilliant
businessman but his moral development would be at a childs level, according to Kohlbergs
moral development. As a role model of the HealthSouth scandal, Scrushy never displayed any
regret for the millions of dollars that he stole. On top of that he refuses to take any
responsibility of the situation. Level One/Stage One: Punishment and Obedience Orientation
states that there is little awareness that others have needs and desires like ones own.
Although this man contributed to charities, his acts of generosity were merely a mask to
cover his selfish acts. The most significant factor that co-relates Scrushy at the preconventional stage is his relentless efforts of avoiding punishment.

Question: 4.
Yes, Aaron Beam was morally responsible for engaging in the aggressive accounting
methods he used in the HealthSouth Company. From the beginning when the company went
short of revenues and the Scrushy told Beam to change the financials, Beam know that this
kind of activity is unethical and immoral but despite the fact he change the financials and
inflated the revenues and assets in order to capture more shareholders. He also violated the
generally accepted accounting principles and continued to commit fraud until F.B.I. came in
to investigate about the insider trading. His responsibility was not mitigated in anyway, he
was the key player in all these activities besides Scrushy who continuously pressured him to
do such fraudulent activities. However, he was not morally responsible for changing the
clinic reports in order to increase the companys earnings. At this point his responsibility was
mitigated due to the fact that he himself was not involved at this point, there were other
employees who were also involved in such activities which they called themselves as a
family. All those people who were co-operated to increase the companys earnings were
morally responsible. Also the Richard Scrushy was also morally responsible for accounting
fraud because apparently he didnt work in the accounting department but he gave
instructions to Beam which he had to comply with. He knew what would be the consequences
of this fraud but he didnt bother to care into the account of investment that shareholders put
in. He thought that these little kind of adjustments would fix the problems and the companys
earnings in the future would solve all these problems.