HealthSouth calls on NRP for PR aid in fraud scandal

BIRMINGHAM, AL: Facing charges of accounting fraud by federal prosecutors and the SEC, HealthSouth Corporation has enlisted healthcare firm Euro RSCG Life NRP (formerly Noonan Russo) to assist in its uphill communications battle.

BIRMINGHAM, AL: Facing charges of accounting fraud by federal prosecutors and the SEC, HealthSouth Corporation has enlisted healthcare firm Euro RSCG Life NRP (formerly Noonan Russo) to assist in its uphill communications battle.

Arriving one day after the story broke, Susan Noonan, president of the agency, and Ernie Knewitz, SVP, are working on-site at HealthSouth headquarters.

They join the company's in-house staff of six, while backup support is coming from NRP's New York office.

The total communications team, which reports directly to interim CEO Robert May, has been broken down by audience. Groups focusing on employees, physicians and patients, vendors, media, investors, and government are in place.

The company's former head of communications, Jason Hervey, was reportedly a close aide to the now disgraced former management, and was dismissed shortly after the scandal broke, according to a source at the company and a report in The Wall Street Journal. Hervey was said to have limited communications experience, and was originally brought on board to produce a TV show for teenagers, himself a former child star.

Noonan cited communicating with HealthSouth employees as the agency's most important and immediate area of concern. "People feel angry about what the former management team did," said Noonan. "But we're trying to get them to focus on getting back to business."

Reportedly, former CEO Richard Scrushy and other senior executives overstated earnings by $1.4 billion since 1999. Former CFO Weston Smith pleaded guilty to wire and securities fraud, and said he was instructed by Scrushy to inflate earnings. Soon after, Scrushy and current CFO William Owens were put on administrative leave. Board members Robert May and Joel Gordon were appointed acting CEO and chairman, respectively, for the interim.

A search is underway for a permanent CEO.

The second priority, said Noonan, is addressing investors. "Our goal is to rebuild credibility, which will take time among the investment community."

On March 19, the SEC suspended trading of HealthSouth stock - only the second time in 25 years the commission has done so for any stock. Last week, the NYSE announced its plans to delist HealthSouth shares.

At the time PRWeek went to press, no firms specializing in bankruptcy issues had been hired, according to Noonan. She said, however, that April 1 - the day on which HealthSouth is expected to make a payment on $345 million in convertible securities - could be a "trigger point" for changes in the company's communications strategy.

Similarly, the budget and length of contract for NRP's services are being renegotiated on a daily basis as the story continues to unfold.

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