FOR IMMEDIATE RELEASE|
TUESDAY, MARCH 2, 2004
TDD (202) 514-1888
FORMER HEALTHSOUTH OFFICERS CHARGED IN FRAUD CONSPIRACY INVOLVING SAUDI HOSPITALS
WASHINGTON, D.C. - Assistant Attorney General Christopher A. Wray of the Criminal Division, U.S. Attorney Alice Martin of the Northern District of Alabama, and Carmen S. Adams, Special Agent in Charge of the FBI’s Birmingham office, announced today that Vincent Nico, former Vice President of HealthSouth Corporation, has been charged with wire fraud related to contracts with a hospital in Saudi Arabia.
Nico, 47, of Palm Harbor, Florida, has agreed to plead guilty to the wire fraud charge contained in a criminal information that was filed at U.S. District Court in Birmingham, Alabama. In addition, former HealthSouth Executive Vice President Thomas Carman, 52, of Birmingham, has agreed to plead guilty to a separate criminal information charging him with making a false statement to the FBI. Hearings on their pleas will be scheduled at a later date.
HealthSouth was a corporation organized under the laws of the State of Delaware with its 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 against Nico and Carman stem from HealthSouth’s agreement to provide staffing and management services for a 450-bed hospital in Saudi Arabia. Under HealthSouth’s contract with a Saudi foundation which built and owned the hospital, HealthSouth was to receive $10 million annually over a five-year term.
According to the criminal informations, the Saudi foundation’s director general solicited a $1 million payment from HealthSouth, ostensibly as a “finders fee.” Against the advice of counsel, HealthSouth allegedly agreed to pay the Saudi 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 foundation. In order to conceal the true nature of the scheme, HealthSouth officers, including Nico and Carman, allegedly arranged for the 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 charges. 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 criminal information against Nico charges that he violated his duty of honest services to HealthSouth by accepting a kickback from the foundation’s director general whereby Nico received $125,000 per year from the $500,000 paid to the foundation’s director general. Under this agreement, Nico received a total of $375,000 in undisclosed payments. In addition, Nico received $631,502 from HealthSouth as payment of a bonus he demanded based his claim that he had performed exemplary service for the company in securing and maintaining the contract with the Saudi foundation, and that he had not received any compensation for that service. Nico has agreed to forfeit $1,005,602, the total amount he received from the foundation’s director general and as payment of the bonus from HealthSouth.
The criminal information against Carman charges that he made a false statement to the FBI when he claimed during an interview that the consulting contract with the foundation’s director general was intended to be a legitimate arrangement under which real services were to be provided.
“American businessmen must follow the law in all their financial dealings, here in the United States and abroad,” said Assistant Attorney General Wray of the Criminal Division. “Our efforts to combat corporate fraud are global. Executives who think they can hide or cover up foreign kickbacks from the watchful eye of U.S. law enforcement are sadly mistaken, and they will face the consequences.”
“We continue to investigate various aspects of financial practices by former and current HealthSouth employees, and today’s pleas demonstrate our efforts to follow important leads,” said U.S. Attorney Alice H. Martin.
“The FBI will be persistent in the investigation of those who attempt to perpetrate a fraud upon the public, even if they conduct business overseas to conceal the criminal nature of their activities,” stated Carmen S. Adams, Special Agent in Charge of the FBI’s Birmingham office.
If convicted, Nico faces a maximum sentence of 20 years imprisonment, and Carman faces a maximum sentence of five years imprisonment. Both men face fines of up to $250,000, or twice the pecuniary benefit each received. The government is also seeking the forfeiture of more than $1 million from Nico.
Nico and Carman have both agreed to cooperate with the investigation, which is active and ongoing. 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.