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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 facilities of 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.