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Ex-N.Y. Hospital CEO Charged With Taking Vendor Kickbacks

John R. Reynolds, former chief executive officer of New York’s Hospital for Special Surgery, was charged by federal prosecutors with taking $1.4 million in a decade-long illegal-kickback scheme.

Reynolds, 63, was arrested at his home in Massachusetts this morning, according to a statement from the office of U.S. Attorney Preet Bharara. An indictment unsealed today in Manhattan federal court charges Reynolds with racketeering and making false statements to the government. He faces as long as 25 years in prison if convicted.

Prosecutors claim that, from 1996 to 2007, Reynolds took money from at least two hospital vendors, a hospital employee and an unidentified health-care organization in the U.K. The orthopedic hospital is known for treating sports stars including New York Mets third baseman David Wright and New York Yankee relief pitcher Mariano Rivera. Reynolds left the hospital in 2008, according to the indictment.

“The government’s allegations are without basis in fact or law,” Reynolds’s lawyer, Michael Grudberg, said in an e-mailed statement today. “Mr. Reynolds served HSS faithfully and diligently for two decades and looks forward to making his case in court.”

Reynolds appeared today in federal court in Boston and was released on $100,000 bond, Grudberg said.

Sports Medicine

The Hospital for Special Surgery was founded in 1863 as the Hospital for the Relief of the Ruptured and Crippled, according to its website. In addition to the Mets and Yankees, players for teams including the New York Giants, New York Knicks, New York Red Bulls, USA Swimming and St. John’s University are treated by doctors at the hospital, according to the site.

“Obviously, it was a shock to us,” said Deborah Sale, a hospital spokeswoman, referring to the charges. Sale said the hospital cooperated with Bharara’s investigation.

Reynolds served as the hospital’s chief financial officer from 1986 to 1997, when he was promoted to chief executive officer, according to the indictment. He was replaced as CEO and continued as a contract worker from October 2006 until December 2008, according to prosecutors.

The government claims Reynolds took a total of $420,000 in kickbacks from at least two hospital vendors, from 1996 to 2002, in exchange for steering hospital business to them. From 2000 to 2005, he extorted an additional $298,500 from a subordinate at the hospital after negotiating an annual bonus for the employee, according to the charges. Reynolds also received $670,000 for approving a clinical partnership between his hospital and the U.K. health-care organization, prosecutors claim.

Inspector General

Reynolds is also charged with lying in 2008 to an agent of the U.S. Department of Health and Human Services inspector general’s office.

“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,” Bharara said in the statement.

The case is U.S. v. Reynolds, 12-cr-708, U.S. District Court, Southern District of New York (Manhattan).

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