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FORMER HEALTHSOUTH OFFICERS INDICTED IN CONNECTION
WITH BRIBERY INVOLVING SAUDI HOSPITAL
WASHINGTON, D.C. - Assistant Attorney General Christopher
A. Wray of the Criminal Division,
U.S. Attorney Alice H. Martin of the Northern District of Alabama and
Carmen S. Adams, Special
Agent in Charge of the FBI's Birmingham office, announced today that
Robert E. Thomson, former
President and Chief Operating Officer of HealthSouth Corporation's In-Patient
Division, and
James C. Reilly, former HealthSouth Group Vice President of Legal Services,
have been indicted
by a federal grand jury for conspiracy, and violations of the Travel
Act and the Foreign Corrupt
Practices Act.
Thomson, 56, of Indian Springs, Alabama, and Reilly, 48, of Birmingham,
Alabama were charged
in a three-count indictment filed today at U. S. District Court in Birmingham.
HealthSouth was a corporation organized under the laws of the state
of Delaware with headquarters
in Birmingham, Alabama. HealthSouth claimed to be the nation's largest
provider of outpatient
surgery, diagnostic imaging and rehabilitative healthcare services with
approximately 1,800
locations in all 50 states, Puerto Rico, the United Kingdom, Australia
and Canada.
The charges stem from the defendants' alleged participation in a scheme
to bribe the director
general of a Saudi Arabian foundation in furtherance of HealthSouth's
effort to secure an agreement
to provide staffing and management services for a 450-bed hospital in
Saudi Arabia. Under
the contract that HealthSouth eventually executed with the Saudi Arabian
foundation, HealthSouth
was to receive $10 million annually over a five-year term.
According to the indictment, the Saudi Arabian foundation's director
general solicited a $1
million payment from HealthSouth, ostensibly as a "finder's fee." Against
the advice of counsel,
HealthSouth allegedly agreed to pay the Saudi Arabian foundation's director
general the sum
of $500,000 per year for a five-year period in return for his agreement
to execute the contract
on behalf of the Saudi Arabian foundation. In order to conceal the true
nature of the scheme,
HealthSouth officers, including Thomson and Reilly, allegedly arranged
for the Saudi Arabian
foundation's director general to execute a bogus consulting contract
with a HealthSouth-affiliated
entity in Australia. Until the scheme was detected in 2003, HealthSouth
paid the amounts due
under this phony consulting contract by wiring them to Australia, where
they were subsequently
wired to the foundation's director general in Saudi Arabia, according
to the indictment. The
HealthSouth officers allegedly undertook this conduct despite the fact
that they had been specifically
advised beforehand by an attorney retained by HealthSouth that such conduct
would amount to
a violation of federal criminal law.
The indictment charges that Thomson and Reilly violated the Travel Act
by using the facilitiesof interstate commerce to promote unlawful activity,
namely bribery in violation of Alabama
law. In addition, the indictment charges that Thomson and Reilly violated
the Foreign Corrupt
Practices Act by causing HealthSouth's books, records and accounts to
falsely and fraudulently
reflect that the payments made to fund the bogus consulting contract
were made for legitimate
purposes.
Two individuals have already pled guilty for their role in this scheme.
On April 22, 2004,
former HealthSouth Vice President Vincent Nico admitted to violating
the wire fraud statute,
and agreed to forfeit $1,005,602 that he received as the result of his
participation in the
scheme. On April 27, 2004, former HealthSouth Executive Vice President
Thomas Carman admitted
to making a false statement to the FBI during that agency's investigation
of this matter.
Both Nico and Carman have agreed to cooperate with the investigation,
which is active and ongoing.
The maximum sentence for conspiracy and violation of the Travel Act
is five years in prison
and a $250,000 fine. The maximum sentence for violation of the Foreign
Corrupt Practices Act
is 10 years in prison and a fine of $1 million.
"American businessmen
will face serious consequences when they violate the law in their financial
dealings, here in the United States or abroad," said Assistant Attorney
General Wray. "It
is critically important that representatives of U.S. companies conduct
their business honestly
and within the confines of the law."
"Today's indictments
of two former HealthSouth officials, one from operations and the other
being one of HealthSouth's in-house attorneys, reflects our continuing
efforts to ensure the
HealthSouth investigation is thorough and complete," said U.S. Attorney
Martin. "I continue
to encourage individuals with information about any illegal actions at
HealthSouth to contact
the FBI or my office."
The investigation is being conducted by the FBI-Birmingham Field Office.
The prosecution
is being handled jointly by the U.S. Attorney's Office and the Fraud
Section of the Criminal
Division of the Department of Justice in Washington, D.C. The prosecution
is being conducted
under the auspices of the President's Corporate Fraud Task Force, headed
by Deputy Attorney
General James Comey.
Members of the public are reminded that the indictment contains only
charges. A defendant
is presumed innocent of the charges and it will be the government's burden
to prove a defendant's
guilt beyond a reasonable doubt at trial.
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