Appeals court vacates sentence of HealthSouth official

A three-judge panel of the 11th U.S. Circuit Court of Appeals returned the sentence of Kenneth K. Livesay to the U.S. District Court in Birmingham, Ala., to bring it more in line with that recommended by federal prosecutors.

Livesay, a former assistant controller and chief information officer for HealthSouth, pleaded guilty five years ago this month to charges of conspiracy to commit wire fraud and securities fraud and falsification of financial information.

Prosecutors recommended five years in prison, saying he played a major role in the fraud.

U.S. District Judge U.W. Clemon rejected prison time, sentencing Livesay in June 2004 to six months of home detention and five years on probation. The judge noted Livesay's assistance with the HealthSouth investigation and his lack of a criminal record.

The government objected to Clemon's use of sentencing rules and asked for a sentence of 12 months in prison the maximum of the six- to 12-month range he established according to the appeals court opinion filed Wednesday.

The judge stood by his sentence, and the government appealed to the 11th Circuit, which sent the case back for resentencing.

By the time that happened, in December 2005, HealthSouth CEO Richard Scrushy had been acquitted by a jury in the fraud case. Clemon indicated he was mindful of that as the hearing began.

The government acknowledged that Livesay deserved a downward departure in the sentencing guidelines but said he "was a key player, a significant cog, in the operation of this fraud at HealthSouth for a number of years." Although he came forward, he did not do so until the fraud was uncovered, the prosecutors said.

They asked for six to 12 months in prison, but Clemon stuck to his original sentence.