Congress demands UBS' records on HealthSouth
By Kevin Drawbaugh
WASHINGTON, May 8 (Reuters) - A U.S. congressional panel on Thursday asked Swiss-controlled investment bank UBS Warburg <UBSZn.VX> to hand over records of its financial dealings with scandal-plagued HealthSouth Corp. and accused executives at both firms of "an incestuous-like relationship."
As part of an expanding probe into the Alabama-based operator of physical therapy and surgical clinics, the House of Representatives Energy and Commerce Committee said it requested in a letter to UBS Warburg Chairman and Chief Executive John Costas that the records be turned over by May 22.
The committee -- which has probed scandals at Enron Corp. <ENRNQ.PK>, WorldCom Inc. <WCOEQ.PK> and Global Crossing Ltd. <GBLXQ.PK> -- said in its letter: "The financial collapse of HealthSouth fits squarely within our jurisdiction."
A UBS Warburg spokeswoman said: "Like everyone else, UBS Warburg was shocked and dismayed to learn of the accounting fraud that took place at HealthSouth. Of course, our firm will cooperate fully with the request."
Eleven former HealthSouth officers -- including five ex-chief financial officers -- have pleaded guilty to criminal charges and agreed to cooperate with government investigations of the company and its fired chief executive, Richard Scrushy.
The government has accused HealthSouth and former officers of deliberately overstating earnings by $2.5 billion over several years. Scrushy, who has been sued by securities regulators for insider trading and other civil charges, has not been charged with any criminal wrongdoing. But he remains the central figure in probes of the company he founded.
Scrushy's lawyers have said the accounting fraud was carried out by a group of executives in the HealthSouth finance department without Scrushy's knowledge.
UBS Warburg was one of 10 brokerages involved in a $1.4 billion settlement, finalized last week, of federal and state investigations of alleged analyst misconduct. In the settlement, none of the brokerages admitted wrongdoing.
The committee said in its letter that "UBS Warburg's investment banking division performed work for the HealthSouth account that, over a period of several years, generated substantial revenue for UBS Warburg."
In a statement, Rep. James Greenwood said: "The cozy financial relationship that UBS Warburg appears to have had with HealthSouth and other related entities raises serious questions about whether investors were misled by these guys to further their own financial gain."
The Pennsylvania Republican heads the Energy and Commerce panel's investigative subcommittee. He signed the letter to Costas, along with committee Chairman Billy Tauzin, a Louisiana Republican, ranking committee Democrat Rep. John Dingell of Michigan, and Florida Democratic Rep. Peter Deutsch.
"We have questions about the extent to which investment banking firms, including UBS Warburg LLC, were diligent in their review and assessment of HealthSouth's financial health and the interwoven financial relationships of many officers and directors at HealthSouth," the committee's letter said.
The letter cited press reports that UBS became HealthSouth's primary investment banker when Benjamin Lorello joined the firm, bringing the HealthSouth account with him.
"Based on our interviews with a key whistle-blower, there was an incestuous-like relationship between top HealthSouth officials and a small group of investment bankers and analysts. We intend to haul them all in for interviews...in a matter of weeks," committee spokesman Ken Johnson told Reuters.
Johnson said the committee planned to seek interviews soon with Lorello and others who worked with him.
05/08/03 18:30 ET |
