Business
The hits keep coming: More HealthSouth indictments
■ Prosecutors probe an alleged bribery plot.
By Katherine Vogt — Posted July 26, 2004
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Two more former HealthSouth executives have been indicted on criminal charges for their roles in an alleged bribery and kickback scheme related to a contract that the outpatient services giant had with a hospital in Saudi Arabia.
A grand jury indicted Robert E. Thomson and James C. Reilly on conspiracy charges, federal prosecutors announced July 1. Two other former HealthSouth executives already had pleaded guilty to charges for their involvement in the alleged scheme.
Thomson, a former division president, and Reilly, a former group vice president, were allegedly involved in a scheme to bribe an executive of a Saudi Arabian foundation to help HealthSouth secure a contract to provide staffing and management services for a hospital, prosecutors said. The contract, which was eventually executed, said HealthSouth would get $10 million a year for five years.
The indictment alleged that the Saudi Arabian foundation's director general solicited a $1 million payment from HealthSouth as a sort of "finder's fee." Against advice of counsel, the company allegedly agreed to pay the director $500,000 per year for five years in exchange for his agreement to execute the contract. Then HealthSouth officers allegedly devised a scheme to conceal the payments.
Former HealthSouth executives Vincent Nico and Thomas Carman pleaded guilty in April to criminal charges for their roles in the Saudi Arabian operation. They have agreed to cooperate with prosecutors.
The latest indictments bring the number of former HealthSouth leaders who have faced criminal charges to at least 19 since a major accounting scandal surfaced in March 2003. Federal prosecutors have accused HealthSouth of inflating earnings by $2.7 billion or more. Ousted CEO Richard M. Scrushy is among those facing charges and is awaiting trial for fraud.
Meanwhile, on July 1 the company announced that it would shutter HealthSouth Metro West Hospital in Fairfield, Ala., effective Sept. 2. HealthSouth said it was unable to recruit and retain the physicians necessary to make the hospital profitable.
The company had some positive news for investors June 30. HealthSouth said its first-quarter results were better than expected and on track with its 2004 financial goals.
