Two more former HealthSouth Corp. executives have been indicted in connection with an alleged bribery scheme involving a hospital in Saudi Arabia, federal authorities said. A federal grand jury in Birmingham, Ala., approved a three-count indictment against Robert Thomson, 56, former president and chief operating officer of HealthSouth's inpatient division, and James Reilly, 48, former vice president of legal services at the company. Thomson and Reilly are accused of arranging for a $500,000 "finder's fee" to be paid annually for five years to the director general of a Saudi Arabian foundation that hired HealthSouth to operate a 450-bed hospital in the kingdom. The defendants are accused of masking the alleged bribes with a bogus consulting contract for the director and by diverting the payments through an Australian subsidiary of HealthSouth. Two other former HealthSouth executives have pleaded guilty in the case and are cooperating with prosecutors. The alleged bribery scheme was uncovered in the course of a federal probe of multibillion-dollar accounting fraud at HealthSouth.
Meanwhile, the company announced it will close HealthSouth Metro West Hospital, Fairfield, Ala., on Sept. 2, saying efforts to recruit and retain physicians have been unsuccessful and the hospital continues to lose more than $500,000 a month. HealthSouth said it will take several steps to help the hospital's 500 employees find new jobs and would work to fulfill its obligations to the city of Fairfield. In other news, the company said it expects to issue reconstructed books for 2000 to 2003 in the third quarter, report 2004 results about six months later and file its 2005 10-K on schedule. The company has not reported financial results since the third quarter of 2002 because of the accounting fraud. Wednesday HealthSouth officials told investors that the company is on target to record 2004 earnings of $650 million, before interest, taxes, depreciation and amortization. Although the company's ambulatory surgery division is not meeting performance targets, outpatient surgery and outpatient rehabilitation are exceeding goals, they said. -- by Vince Galloro and Julie Piotrowski