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UBS Bankers Had Bigger Role at HealthSouth

May 14, 2003 | Minutes of HealthSouth board meetings reportedly show a much larger role than previously believed in the company's business decisions for investment bankers from UBS Warburg.

While there's no indication UBS was aware of the multibillion-dollar fraud HealthSouth was allegedly engineering, its top two health care investment bankers attended a combined total of eight board meetings with the company, and had an unusually close relationship with CEO Richard Scrushy.

The minutes, which were released in a court proceeding in Alabama, show bankers Benjamin Lorello and William McGahan helped guide the company on financing and investor relations, and gave a "detailed overview of strategic alternatives" for HealthSouth's "long-term objectives," The Wall Street Journal reported. They also had a role in a September 2002 plan to split the company into separate parts and sell off divisions. Some have labeled that plan an effort to cover up the surgical rehabilitation company's accounting problems.

UBS said in a statement that "it is not inconsistent that a representative of an investment bank would occasionally make a presentation to a board meeting when invited by a client to do so." It added: "We have not found any evidence suggesting that UBS Warburg or any of its staff had knowledge of the accounting fraud at UBS." McGahan recently resigned from UBS, citing personal issues.

Scrushy denies any wrongdoing in the alleged $2.5 billion fraud that has knocked the company's shares off the New York Stock Exchange and sent several top executives into plea agreements with federal prosecutors.

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