The Curious Case of Rob Riley and HealthSouth

The connections between Alabama attorney Rob Riley and HealthSouth Corp. just get curiouser and curiouser. And they are yielding some possible clues about my unlawful termination at UAB.

Riley, the son of Alabama governor and former Don Siegelman opponent Bob Riley, recently announced a $109-million settlement in a fraud lawsuit involving Birmingham-based HealthSouth. Investors had alleged that the accounting firm Ernst & Young failed to detect a pattern of fraud at HealthSouth.

We noted that, in what appeared to be a case of "legal insider-trading," Riley had maneuvered himself into a hugely profitable role as lead counsel in the massive HealthSouth lawsuit. Now we learn that Riley's conflicts might be even more alarming than we thought. Follow us on this timeline:

* According to Sam Stein at Huffington Post, Rob Riley abruptly joined the HealthSouth lawsuit on January 13, 2005, representing the New Mexico State Investment Council.

* Sources tell Legal Schnauzer that a few months after entering the HealthSouth case, Riley and two partners formed a company called Performance Group LLC.

* Performance Group, our sources say, is a Birmingham-based corporation that provides physical-therapy services. The company has clinics in Birmingham, Cullman, and Albertville.

* Performance Group apparently has plans to grow. Our sources say Riley and his partners sold ownership interests in the company to some 20 Alabama physicians who referred patients to the Performance Group entities for physical therapy.

* This arrangement, in which physicians refer patients to an entity in which they have a "compensation relationship," appears to violate federal law, our sources tell us.

* That's not the only way Riley and his partners seem to be skirting the law. They also are filing false claims for reimbursement with federal health-care programs, sources say.

What could be at stake in all of this? A whole lot of money--so much that some 150 plaintiffs' lawyers involved in the HealthSouth case seem willing to overlook Riley's conflicts of interest (and lack of experience in complex securities cases) as long as the governor's son helps secure favorable settlements. And so far, he is doing just that--with two settlements totaling more than $500 million (and more to come).

So let's step back and assess what seems to be going on. Rob Riley becomes involved in the HealthSouth lawsuits even though he has little experience in securities litigation. But Riley, through his connections to the governor's office and U.S. Judge Mark Fuller, appears to have access to inside information about the criminal prosecution of former Alabama Governor Don Siegelman and former HealthSouth CEO Richard Scrushy. Did that information prove useful in the HealthSouth civil case? It sure looks like it. Riley somehow becomes lead local counsel in the HealthSouth lawsuit and helps secure more than $500 million worth of settlements--so far.

But now we have learned about a second prong to the story. Months after signing on in the HealthSouth civil case, Riley started a company that focuses on rehabilitation medicine. That just happens to be the field in which HealthSouth has made its name. And by enlisting some 20 physicians as owners in the company, and playing fast and loose with federal health-care law, Riley appears to have plans for growing Performance Group into a substantial organization.

Could Performance Group hit it big by snagging a market that opens up when HealthSouth is weakened from shelling out massive sums in civil damages?

In sophisticated legal parlance, is Rob Riley trying to "have his cake and eat it, too"? That sounds like a question for reasonable minds to ask.

What about possible connections among Riley, the HealthSouth litigation, and my unlawful termination at UAB? Let's just say that Riley's partners in Performance Group have some interesting affiliations. And I happened to be blogging about a certain topic--one that could involve a whole lot of money for Rob Riley, his partners, and their affiliates--about the time I got fired.

Hmmm. Our Schnauzer curiosity is certainly piqued.

Much more on this coming soon. Stay tuned.