The many extracts on these pages are from copyright material. They are owned by the reference given or its owner. They are reproduced here for educational purposes and to stimulate public debate about the provision of health and aged care. I consider this to be "fair use" in the common interest. They should not be reproduced for commercial purposes.

Every attempt is made to provide accurate and well written material. Your contributions, suggestions, additional information and advice sent to the web address at the foot of the page are welcome. Where possible they will be included in revised pages.

The intention is to show the general thrust of corporate practices as well as the nature and extent of any allegations made. Material contained here represents my views based on my study of the operation of the health care marketplace and the material available to me. It should not be assumed to represent the views of any other individual or organization.

Links to Site Maps

Corporate Practices

Path to this page
Home Page
US Corporate page
HealthSouth Overview

US Hospital Companies


US Aged Care

Aged care entry
Aged overview

Managed Care
Citigroup (financiers)

HealthSouth Pages I

HealthSouth's Problems

Accounting fraud
Medicare Fraud
Care of patients
Australian operations

HealthSouth Pages II

Investigations and trials
Congress investigates
Scrushy's fraud trial
Scrushy's bribery trial
HealthSouth staff
HealthSouth court actions

The Business
HealthSouth's recovery

USA section 

HealthSouth in Australia

Introductory page
This corporate web site addresses the issues of corporate health care within a broad framework. A web page describing this broad context should be considered as an introduction to each page on the web site. If you have not yet read it then
CLICK HERE to open it in another tab or web page.

Content of this page
HealthSouth entered Australia in 1997/98. While there it participated in the international part of the HealthSouth fraud. Australian authorities took no action. HealthSouth sold in 2006.




HealthSouth entered Australia in late 1997 by buying a single hospital in Melbourne. I knew about this but my investigations failed to reveal any reports of dysfunctional conduct. It was praised by some because it seemed to have avoided the many scandals around other health care companies.

Its meteoric growth, rapid market dominance and enormous wealth were simply not congruent with an ethic of care and integrity in the health care marketplace. Without evidence all I could do was make warning comments.

Why HealthSouth made no effort to expand in Australia remains a mystery. We now know that it was strapped for cash in 1998 and perhaps this caused it to have second thoughts. I am not aware of any concerns about fraud or the care provided in Australia.

The fraud was exposed in the USA in March 2003.

to contents

The Cedar Court HealthSouth Rehabilitation Hospital

This Melbourne Hospital was owned by a small local company Krinsky Pty. Limited registered in 1979. HealthSouth acquired the company and appointed HealthSouth directors.

HealthSouth's vehicles in Australia were "HEALTHSOUTH AUSTRALIA PTY LTD", registered in July 1997 and HEALTHSOUTH INTERNATIONAL, INC registered in August 1997

to contents

The Australian Companies and the Fraud

In March 2004 evidence from the USA indicated that HealthSouth's Australian companies had been directly involved in part of the fraud. In this instance it was in paying a bribe or kickback to a Saudi Arabian official in the awarding of a hospital contract to HealthSouth.

Two HealthSouth Officials pleaded guilty and were sentenced. Two others went to trial and were acquitted by a jury in Birmingham Alabama.

More criminal behavior involving HealthSouth Corp. made news as the U.S. attorney's office in Birmingham, Ala., announced that two former company executives would plead guilty to criminal charges related to a kickback scheme stemming from a deal to provide staffing and management services to a 450-bed hospital in Saudi Arabia.

Vincent Nico, 47, a former vice president at HealthSouth, agreed to forfeit $1 million received in kickbacks and will face up to 20 years in prison and a $250,000 fine after pleading guilty to wire fraud.

Thomas Carman, 52, a former executive vice president, will face up to five years in prison and a $250,000 fine after pleading guilty to making false statements to the FBI. U.S. Attorney Alice Martin said other charges related to the Saudi kickback scandal may be forthcoming.
HealthSouth VPs to plead guilty in Saudi fraud case Modern Healthcare's Daily Dose March 2, 2004

HealthSouth said its new management team discovered "certain irregular payments made to a foreign official" in the summer of 2003 and immediately notified the U.S. Department of Justice.
Law enforcement officials accused HealthSouth of agreeing to pay the director general of the Saudi foundation that built and owned the Riyadh hospital $500,000 per year for five years in exchange for the $50 million, 5-year contract.

Of that $500,000, Nico received $125,000 per year from 2001 through 2003, the government said, adding that Nico also received $631,502 after taxes from HealthSouth as a bonus for securing and maintaining the Saudi contract.
To conceal the alleged bribery, federal officials contend HealthSouth officers, including Nico and Carman, arranged a bogus consulting contract for the Saudi foundation's director general with a HealthSouth affiliate in Australia.
Until that arrangement was detected last year, HealthSouth paid the phony consulting contract by first wiring the money to Australia, and from there to the official in Saudi Arabia, according to the charges.

Martin, lead prosecutor on the HealthSouth case, said the company had specifically been advised by attorneys beforehand that the arrangement would amount to a violation of federal criminal law.
Two More HealthSouth Execs to Plead Guilty Reuters March 2, 2004

Two more former HealthSouth Corp. executives have been indicted in connection with an alleged bribery scheme involving a hospital in Saudi Arabia, federal authorities said. A federal grand jury in Birmingham, Ala., approved a three-count indictment against Robert Thomson, 56, former president and chief operating officer of HealthSouth's inpatient division, and James Reilly, 48, former vice president of legal services at the company.
HealthSouth execs charged in Saudi bribery case Modern Healthcare July 1, 2004

Richard Scrushy isn't the only former HealthSouth Corp. executive on trial these days. Three floors below the federal courtroom where the fired CEO stands accused in a massive earnings overstatement, two more former HealthSouth executives are being tried in what prosecutors describe as an international bribery scheme involving a hospital in Saudi Arabia.
The money was allegedly filtered through a HealthSouth affiliate in Australia.

Thomson, a former president and chief operating officer of HealthSouth's inpatient division, and Reilly, a vice president for legal services, are each charged with conspiracy, securities violations and traveling outside the country to commit a crime.

The men allegedly gave a bribe to Dr. Rashid Aba-Alkheil, the director of the Sultan Bin Abdulaziz Al-Saud Foundation, which built the hospital near Riyadh, and then had false entries made on HealthSouth books to hide the payment.

The defense doesn't deny that payments were made, but it says neither Thomson nor Reilly considered the money a bribe. Rather, money was paid to Rashid "under a valid consulting agreement," the defense argued in court documents.
While Scrushy hasn't been implicated in the bribery case, Garber's testimony also showed that some of the same people are being mentioned in both trials.
Two HealthSouth Execs Accused of Bribery (Associated Press) May 8, 2005

A jury acquitted two former HealthSouth Corp. executives on charges that they participated in a bribery scheme to help win the company a $50 million contract to manage a rehabilitation hospital in Riyadh, Saudi Arabia. Robert Thomson, former president and chief operating officer at HealthSouth's inpatient division, and James Reilly, a former group vice president of legal services, were acquitted on four charges each in U.S. District Court, Birmingham, Ala.
Former HealthSouth execs cleared in Saudi hospital case Modern Healthcare May 20, 2005

A former HealthSouth Corp. vice president, Vincent Nico, was sentenced to three years' probation and a $250,000 fine for pleading guilty to wire fraud in connection with an alleged bribery scheme involving a hospital in Saudia Arabia, according to court records.
Ex-HealthSouth official sentenced in Saudi Arabia case Modern Healthcare June 13, 2005

A former HealthSouth Corp. vice president allegedly involved in a scheme to bribe a Saudi Arabian official received three years' probation and a $500 fine after he previously pleaded guilty to making false statements to the FBI. The government alleged that Thomas Carman - - - - .
HealthSouth exec gets probation in Saudi Arabia case Modern Healthcare August 3, 2005

In the summer of 2003, we discovered certain irregular payments made to a foreign official under a consulting agreement entered into in connection with an October 2000 agreement between us and the Sultan Bin Abdul Aziz Foundation to manage an inpatient rehabilitation hospital in Riyadh, Saudi Arabia. We notified the DOJ immediately, and we have cooperated fully with the investigation. One former executive pled guilty to charges of wire fraud in connection with the irregular payments, and another former executive pled guilty to charges of making a false statement to government investigators in connection with the investigation. Two additional former executives have been acquitted of charges that they participated in the fraud. We terminated the October 2000 agreement and entered into a new agreement, effective January 1, 2004, to manage the Riyadh facility. Effective October 2004, we terminated our relationship with the Sultan Bin Abdul Aziz Foundation and the Riyadh facility entirely.
HealthSouth form 10-K filing with the SEC June 27, 2005

to contents

Australian Authorities Response

Hospitals are a state responsibility. The Victorian health department and politicians were notified of the scandal in March 2003 immediately after it broke in the USA. They were subsequently supplied continuously with all of the full press reports used by me on these pages to illustrate what happened at HealthSouth as well as the many others that I did not use. They have consequently been kept fully informed.

I urged the minister to take steps to force this company to sell up in Australia but was informed that she did not have the power to do so. I contested this and sent emails to politicians in all parties in Victoria. None would act.

to contents

HealthSouth Finally Sells

HealthSouth did not sell this hospital until late 2006. This was more likely to be in response to its threatened financial position in the USA and not to any pressure put on it in Victoria.

ING Real Estate Healthcare Fund (ASX code: IHF) has contracted to buy the freehold interest in Cedar Court Rehabilitation Hospital in Melbourne's eastern suburbs for $12.9 million and three adjoining commercial properties for a further $2.8 million.

The hospital is located in the suburb of Camberwell and is a well-established and highly regarded rehabilitation business comprising 74 beds and associated outpatient rehabilitation services.

Contemporaneous with the fund's property acquisition, the Epworth Foundation will acquire the hospital business and lease back the hospital facilities under a 15-year lease commencing at settlement.

(AEIHF) ING Real Estate Healthcare buys rehabilitation hospital Ralph Wragg Australian Business News August 4, 2006

HealthSouth, another of the scandal-rocked large US corporations of the past decade, has sold the last of its international operations by disposing on Friday of its Cedar Court Rehabilitation Hospital and related assets in Melbourne to a consortium including the listed ING Real Estate Healthcare Fund for about $16 million.
HealthSouth sells up in Melbourne Australian Financial Review August 7, 2006

to contents

Web Page History
This page first created Oct 2007 by
Michael Wynne