HealthSouth Probe Now Includes Possible Kickbacks

The Justice Department is now looking into whether HealthSouth officials offered bribes in an attempt to secure business in Saudi Arabia, which would be a violation of federal laws that prohibit such payments to secure business oversees.

Specifically, federal prosecutors are investigating a deal signed in 2000 by HealthSouth to manage a 400-bed rehabilitative hospital outside of Riyadh, Saudi Arabia. HealthSouth, based out of Birmingham, AL, specializes in rehabilitative and surgical clinics and operates nearly 1,700 facilities, mostly in the U.S.

The Justice Department has been investigating fraud within the company that it puts at $2.7 billion, while the company’s own internal figures hover closer to $4.6 billion. Fifteen former executives have already pleaded guilty in the case, including five former chief financial officers. Founder and former chief executive Richard Scrushy has denied wrongdoing and will stand trial on 85 federal charges in August.

The Wall Street Journal reported that HealthSouth issued a press release in 2000 announcing its agreement to manage the Saudi Arabian hospital. In the release, Scrushy said, "HealthSouth is proud to be part of this affiliation, the goal of which is to integrate the highest quality of rehabilitative health care into the Kingdom of Saudi Arabia, with its strong cultural beliefs and traditions."

Now investigators are wondering if behind the scenes, kickbacks were offered to secure the deal. According to the Journal, the parties involved in the deal were not available for comment. However, Steven Miles, a lawyer close to the deal is cooperating with prosecutors looking into the matter. Miles is an expert in Saudi Arabian businesses at the Washington office of Baker Botts, the Journal reported.

Gale Smith, a spokeswoman for Baker Botts, said in an e-mail reply to a question from the Journal Miles: "Mr. Miles is aware of the U.S. government's interest in matters involving HealthSouth. While Mr. Miles was a lawyer at Arent Fox Kintner Plotkin & Kahn, he worked on one of the matters currently under investigation by the U.S. government. Mr. Miles is cooperating fully with the government, and he is neither a target nor a subject of this investigation."

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