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Litigation Release No. 18941 / October 25, 2004

Accounting and Auditing Enforcement
Release No. 2128 / October 25, 2004

Securities and Exchange Commission v. Kenneth K. Livesay, et al., United States District Court for the Northern District of Alabama, Civil Action No. CV-03-HS-0758-S

On October 22, 2004, the Honorable Virginia Emerson Hopkins, U. S. District Judge for the Northern District of Alabama, entered a Final Judgment as to defendant Kay Morgan (Morgan), group vice president, accounting and assistant controller of HealthSouth Corporation. The Final Judgment enjoined her from further violations of Section 17(a) of the Securities Act of 1933 (Securities Act), Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5 and 13b2-1 thereunder, and from aiding and abetting violations of Section 17(a) of the Securities Act, Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1 and 13a-13 thereunder. Morgan was also permanently barred from serving as an officer or director of a public company. Morgan was not ordered to pay disgorgement and civil penalties in view of the forfeiture and fine ordered against her in the related criminal proceeding. Morgan consented to the entry of the judgment without admitting or denying any of the allegations of the Commission's Complaint.

The Commission's Complaint alleged that Morgan made false accounting entries to inflate reported operating results in order to meet or exceed Wall Street earnings expectations.

See also: L.R. 18044/March 20, 2003; L. R. 18059/April 1, 2003; L. R. 18060/April 1, 2003; AAER No. 1749/April 1, 2003; L. R. 18070/April 4, 2003; and L. R. 18339/September 10, 2003; AAER No. 2004/May 10, 2004; AAER No. 2083/August 23, 2004; and AAER No. 2111/September 28, 2004


Modified: 10/26/2004