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House Panel Seeks Documents From UBS About HealthSouth

May 9, 2003 | Wall Street Journal Lawmakers want investment-banking firm UBS Warburg to turn over records relating to financial dealings with HealthSouth Corp.

The request comes as the House Energy and Commerce Committee expanded its inquiry into accounting scandals at HealthSouth, a Birmingham, Ala., health-care provider, that allegedly inflated revenue by $2.5 billion.

HealthSouth and auditor Ernst & Young turned over 60 boxes of documents to the House panel Tuesday.

House Energy and Commerce Committee Chairman W.J. "Billy" Tauzin (R., La.), and Rep. John Dingell (D., Mich.), the senior Democrat on the panel, also want information from UBS Warburg about how diligent it was in reviewing HealthSouth's finances.

The unit of UBS AG was one of 10 banks that reached a $1.4 billion settlement with regulators, announced last week, involving allegations the firms issued upbeat stock research to curry favor with investment-banking clients. The banks didn't admit to or deny the allegations.

Rep. Tauzin said the settlement "raises additional concerns about the potential conflicts of interest that may have arisen at UBS Warburg in connection with the HealthSouth account."

UBS Warburg's health-care analyst gave favorable ratings to HealthSouth stock and encouraged investors to buy shares last year as HealthSouth warned of lower earnings, noted Rep. Tauzin.

He wants UBS Warburg to hand over all records it provided under subpoena in connection with the Securities and Exchange Commission probe of HealthSouth.

Draft versions of UBS Warburg research reports, earnings conference calls and internal memos also are sought, along with any communication on a possible leveraged buy-out of HealthSouth by company executives.

Lawmakers also want details on a $1 billion bond sale by HealthSouth in 2000, arranged by UBS Warburg, and information on MedCenterDirect.com, whose investors included HealthSouth executives and a private company controlled by UBS Warburg.

Rep. Tauzin asked records be supplied within two weeks.

"Like everyone else, UBS Warburg was shocked and dismayed to learn of the accounting fraud that took place at HealthSouth," said a UBS Warburg spokeswoman. "Of course, the firm will cooperate fully with the request."

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