UBS Analyst Resigns Over HealthSouth - TheStreet

UBS Analyst Resigns Over HealthSouth

Howard Capek told an investor he wouldn't own the stock, during a quiet period three years ago.
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Updated from 3:14 p.m. EDT



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health care analyst resigned Wednesday over what the firm described as an inappropriate email sent to an institutional investor in


, the surgical rehabilitation chain that allegedly cooked its books for many years.

A UBS spokesman said analyst Howard Capek resigned after being told that the 3-year-old email he sent to the investors had violated UBS's internal procedures.

The email came to light now because of a series of regulatory and criminal investigations of HealthSouth. UBS has been providing information and documents to investigators, as the investigations into the alleged accounting fraud at HealthSouth deepens.

UBS spokesman Mark Arena said Capek violated the firm's internal procedures by commenting on HealthSouth's financial prospects during a period in which the firm was handling an investment banking deal for the Alabama-based chain. Capek and other analysts had been told not to offer any investment advice on HealthSouth during the so-called "restricted" period.

But Capek allegedly violated that policy by responding to an email from an institutional investor, who wanted to know more about an earnings warning issued by HealthSouth on Sept. 9, 1999. The day after the warning, Capek sent an email back to the unnamed investor, in which he said he "wouldn't own a share" of the company.

In 1999, Capek was working for Warburg Dillon Read, a firm that was later acquired by UBS. Capek initiated his coverage with a strong buy in May 1999 and reiterated that in June of that year, according to Thomson First Call. He didn't publish any other reports until Feb. 11, 2000, when he reinitiated coverage with another strong buy. First Call said is had no record of Capek announcing he was suspending coverage.

Capek's resignation comes at an awkward time for UBS because some on Capital Hill have raised questions about its investment banking relationship with HealthSouth. The ties began in the late 1990s and involve one of UBS' biggest names, investment banker Ben Lorello. A congressional committee is expected to hold hearings on the matter later this year.

UBS officials, on several occasions, have said they had no prior knowledge of the alleged fraud at HealthSouth. And Arena repeated that denial again on Wednesday.

Meanwhile, Capek is not the first UBS employee with ties to HealthSouth to resign. Earlier this year, UBS investment banker William McGahan, one of the bankers assigned to HealthSouth, resigned. The firm said McGahan resigned for personal reasons.