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UBS Analyst Quits After E-mail Reveals HealthSouth Comment

Jul 3, 2003 | USA TODAY

A UBS research analyst quit Wednesday after the bank confronted him with an e-mail in which he disparaged HealthSouth, a company that had long benefited from bullish UBS research reports.

UBS spokesman Mark Arena says that in cooperating with document requests by regulators investigating a $2.5 billion fraud at HealthSouth, UBS found isolated cases in 1999 where Howard Capek ''violated internal UBS policies.''

In particular, Arena says that on Sept. 10, the day after HealthSouth announced an earnings restatement and a restructuring, the analyst sent an e-mail to an institutional investor saying, ''He would not own a share'' of HealthSouth.

By doing that, UBS says, Capek violated a policy forbidding analysts from commenting on companies that were investment banking clients. In June 1999, HealthSouth hired UBS to explore a possible spinoff, so UBS put HealthSouth on a ''restricted'' list, meaning that analysts couldn't comment on it.

But on Sept. 9, HealthSouth said it was no longer pursuing the spinoff, meaning that UBS' investment banking services were presumably no longer needed.

UBS gave the e-mail to the House Energy and Commerce Committee on Wednesday. In the Sept. 10, 1999, e-mail, Capek wrote: ''What a mess. I would not own a share.'' But a year later he rated HealthSouth a ''strong buy.''

''What changed Capek's mind?'' asks Rep. James Greenwood, R-Pa., who heads investigations for the Energy and Commerce Committee. ''Perhaps a better question is: Who changed his mind?''

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