UBS expects charges over health group
|22nd Dec 2004
|UBS, Switzerland's biggest bank, said yesterday it faces legal action from watchdogs for its involvement in one of America's most extraordinary financial scandals.
The bank has received a so-called Wells Notice from the Securities & Exchange Commission in connection with work it did for HealthSouth, which has admitted to inflating profits by $2.5 billion.
The notice is a formal indication that charges are imminent, while allowing UBS an opportunity to present its case.
HealthSouth was a small Alabama business that grew into the biggest provider of health services in the US under the charismatic leadership of chief executive Richard Scrushy.
It later emerged that the company's accounts were almost entirely fictitious.
Mr Scrushy pleads not guilty to 58 charges.
UBS had close ties to HealthSouth, leading a $1 billion bond sale in 2000. UBS analyst Howard Capek, who held a "buy" rating on the stock even after HealthSouth was accused of alleged fraud, had to resign after writing an e-mail noting that he "would not own a share" of the company.
Lawsuits from investors claim UBS bankers helped to conceal HealthSouth's losses.
UBS said it is co-operating with the SEC. A spokesman said it would be "inappropriate to speculate on any financial consequences at this stage".
Mr Scrushy blames underlings for the alleged fraud, insisting he was unaware of the accounting games that saw the company borrowing money to pay taxes on profits that didn't exist.
UBS said earlier this year that it had no reason to believe any of its staff had broken any securities laws in relation to HealthSouth.