The former head of the oldest and frequently top orthopedic hospital in the United States has been arrested.
John R. Reynolds, the former CEO of New York’s Hospital for Special Surgery (HSS) was arrested on September 26 at his home in Massachusetts in connection with a decade-long kickback scheme involving $1.4 million in payments that Reynolds allegedly extorted or solicited from hospital vendors, a hospital employee, and a United Kingdom-based healthcare organization.
According to a press release from the U.S. Attorney’s Office for the Southern District of New York, Reynolds is also charged with making false statements to law enforcement.
Manhattan U.S. Attorney Preet Bharara said: “By allegedly exploiting his position at the helm of a world renowned hospital for his own personal gain, John Reynolds tarnished the hospital’s reputation and did a disservice to its employees. This office has zero tolerance for corruption, and we will aggressively prosecute anyone who engages in such conduct.”
According to allegations unsealed on the 26 in Manhattan federal court, Reynolds was the CFO of HSS from 1986 until 1997. In 1997 he was made CEO and stayed in that position until October 2006 and served as a contract employee through December 2008.
“In violation of both the law and his duty to provide honest services to the Hospital, ” state the allegations, Reynolds engaged in three separate kickback schemes from 1996 through 2007 in which he solicited or extorted approximately $1.4 million in illegal kickbacks. Between 1996 and November 2002, he allegedly solicited and received approximately $420, 000 in kickbacks from at least two different hospital vendors, in return for using his position at HSS to help them secure contracts and future business.
Between 2000 and 2005, the government claims Reynolds extorted and received approximately $298, 500 in kickbacks from a subordinate employee of HSS in exchange for negotiating payment of that employee’s annual bonus. And between 2005 and 2007, he allegedly solicited and received approximately $670, 000 in kickbacks from a U.K.-based healthcare organization, in exchange for using his position at the hospital to approve a clinical partnership between the Hospital and the organization.
During these time periods, Reynolds also, according to the government, repeatedly made false statements to, and withheld information from, HSS’s board of directors about his outside consulting arrangements, and other conflicts of interest that would or might prevent him from acting in the best interests of the hospital.
Reynolds, 63, of Cataumet, Massachusetts, is charged with one count of racketeering, which carries a maximum sentence of 20 years in prison, and one count of making false statements to the federal government, which carries a maximum sentence of 5 years in prison.
The New York Times reported on September 26 that Reynolds’ lawyer, Michael J. Grudberg, said that his client had appeared before a federal magistrate judge in Boston, and was released pending further proceedings in Manhattan.
“The government’s allegations are without basis in fact or law, ” Grudberg told the Times. “Mr. Reynolds served HSS faithfully and diligently for two decades, and looks forward to making his case in court.”
Kickback charges that led to the federal indictment and arrest of Reynolds were not, according to Crain’s New York Business.com, news to the hospital. But their scope and severity was “a shock, ” said Deborah Sale, the hospital’s executive vice president for external affairs.
It’s not the first time an allegation has been made that Reynolds was involved in kickbacks.
According to Crain’s, he was named in a $10 million lawsuit brought by Healthwave Inc. in 2009 that alleged he took kickbacks from a Long Island supplier in return for steering roughly $150, 000 a year in contracts its way.”
