Former Chief Executive Officer Of Hospital For Special Surgery Sentenced In Manhattan Federal Court To 18 Months In Prison For Participating In Fraudulent Kickback Scheme

Preet Bharara, the United States Attorney for the Southern District of New York, announced that JOHN R. REYNOLDS, the former Chief Executive Officer (“CEO”) of the Hospital for Special Surgery (the “Hospital”), was sentenced today in Manhattan federal court to 18 months in prison for participating in a fraudulent scheme in which he was paid nearly $300,000 in undisclosed kickbacks from a subordinate Hospital employee. REYNOLDS pled guilty in July 2013 to one count of wire fraud and one count of making false statements to a law enforcement agent. He was sentenced by U.S. District Judge Harold Baer, Jr.

Manhattan U.S. Attorney Preet Bharara said: “During his tenure as CEO of a world-renowned New York hospital, John Reynolds shamelessly put his own personal interests above those of the institution he was charged with running. The successful prosecution of Mr. Reynolds reaffirms the Office’s unwavering commitment to stamping out corruption, particularly by those who abuse positions of power and authority.”

According to the allegations in the Indictment and Superseding Information filed in Manhattan federal court, as well as statements made during court proceedings:

From 1986 until 1997, REYNOLDS served as the Chief Financial Officer of the Hospital, the oldest orthopedic hospital in the United States. In 1997, he was promoted to the position of CEO, and served in that capacity as a full-time Hospital employee until October 2006. In order to effectuate a smooth transition in Hospital leadership to a newly hired CEO, REYNOLDS served as a contract employee in the same position from October 2006 through December 2008.

Between 2000 and 2005, REYNOLDS demanded and received approximately $298,500 in kickbacks from a subordinate employee of the Hospital in exchange for negotiating payment of that employee’s annual bonus. During this same time period, REYNOLDS also repeatedly made false statements to, and deliberately withheld information from, the Hospital’s board of directors about certain conflicts of interest, including his undisclosed financial arrangement with the subordinate Hospital employee.

In addition, in May 2008, during the course of the investigation of his involvement in this fraudulent scheme, REYNOLDS made a number of false statements to an agent of the New York Office of the U.S. Department of Health and Human Services, Office of Inspector General (“HHS-OIG”), about his relationship with that Hospital employee and the funds he had received from that employee.

In addition to his prison term, REYNOLDS, 64, of Venice, Florida, was sentenced to two years of supervised release. REYNOLDS was also ordered to forfeit $718,500. A final determination on restitution is scheduled before Judge Baer on December 11, 2013 at 10:30 a.m.

Mr. Bharara praised the investigative work of the HHS-OIG.

This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Christopher D. Frey is in charge of the prosecution.