E&Y sent memo about HealthSouth problems

In Practice, p73

Companies will be held to account for any deaths resulting from their negligence if a draft Bill on corporate manslaughter becomes law. Individual directors will not be criminally liable, however.

Stressing the government' s strong commitment to legislating for victims of corporate killing, home secretary David Blunkett (pictured) has announced that there will be consultation with companies, business leaders and trade unions, and that further details of the Bill will be revealed in the autumn.

' There is great public concern at the criminal law' s lack of success in convicting companies of manslaughter where a death has occurred due to gross negligence by the organisation as a whole,' Blunkett said in a statement.

' The law needs to be clear and effective in order to secure public confidence and must bite properly on large corporations whose failure to set or maintain standards causes a death.'

The government initially published a consultation paper on reform to the law on involuntary manslaughter, including corporate manslaughter, three years ago, but has come under increased pressure of late, particularly from rail crash victims.

Although Ernst &Young in the US said it was alerted to accounting problems at HealthSouth in June last year, new evidence shows that the firm was aware of accounting problems at the clinic operator as far back as 1998.

Eleven former employees of HealthSouth now face charges in connection with an alleged $2.5bn (£1.4bn) fraud, which is thought to have begun in the 1980s, and could cause the collapse of the company.

E&Y confirmed it had been sent a memo by the House Energy and Commerce Committee in Washington in November 1998 alerting it to a host of alleged accounting problems, despite earlier saying it was only made aware of the problems in June 2002.

E&Y admitted it had sent a team to HealthSouth' s headquarters in Birmingham (Alabama) in 1998, following receipt of the memo, to investigate any wrongdoings. E&Y said after its 1998 investigation that it had ' determined the issues raised did not affect the presentation of HealthSouth' s financial statements.'

In a separate development, E&Y' s subsidiary, Executive Temporary Management (ETM) in the Netherlands, is set to be acquired by Resources Connection, an international professional services firm. The two firms have signed a non-binding memorandum of understanding, and if the deal goes ahead then Resources Connection intends to operate out of ETM' s six offices in the Netherlands. ETM would change its name to Resources Connection but its current management team would remain the same.

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