An indictment unsealed in Manhattan federal court the day of his arrest charges Reynolds with racketeering and making false statements to the federal government during the investigation. If convicted, he faces up to 25 years in prison.
The Hospital for Special Surgery, on Manhattan’s Upper East Side, specializes in orthopedics and rheumatology. It is the oldest orthopedic hospital in the country.
Hospital spokeswoman Deborah Sale said the hospital was “shocked” by Reynolds’ arrest. “This was clearly the act of an individual undermining our overall compliance procedures as well as our ethical standards,” Sale said. The hospital has been cooperating with the federal investigation since 2008.
Reynolds was released on $100,000 bond after an appearance Sept. 26 in U.S. District Court in Boston. His attorney, Michael Grudberg, denied his client’s involvement in the kickback schemes. “The government’s allegations are without basis in fact or law,” Grudberg said in a statement. “Mr. Reynolds served HSS faithfully and diligently for two decades and looks forward to making his case in court.”
Reynolds served as the hospital’s chief financial officer from 1986 until 1997, then as CEO through 2006, when he left the job with a $1.4 million severance, according to a Crain’s New York Health Pulse report. He worked at the hospital under contract until 2008 throughout the transition to a new CEO, according to Bharara’s office.
The federal indictment alleges Reynolds received $420,000 from two vendors in return for helping them secure hospital business; $300,000 from a subordinate hospital employee in exchange for negotiating his annual bonus; and $670,000 from an overseas healthcare center for approving a clinical partnership between the hospital and the center.
“By allegedly exploiting his position at the helm of a world-renowned hospital for his own personal gain, John Reynolds tarnished the hospital’s reputation and did a disservice to its employees,” Bharara said in a statement.