UBS, one of Wall Street’s largest investment banks, helped conceal the paper trail of a $250,000 payment that wound up getting ex-HealthSouth chief Richard Scrushy and the governor of Alabama convicted, according to documents obtained by The Post.
UBS health-care banker Bill McGahan helped Scrushy raise $250,000, money that he used to donate to a lottery campaign run by then-Alabama Gov. Don Siegelman, according to transcripts of testimony given to federal investigators.
Using another investment banking client, McGahan funneled Scrushy money to give to the governor without making it appear that HealthSouth was involved, while simultaneously appearing to fulfill UBS’ ban on political contributions and free Scrushy from allegations of conflict of interest.
Federal prosecutors alleged that Scrushy’s donation was really a bribe so he could win a seat on a key health-care oversight board in the state.
In late June, a jury in Montgomery, Ala., agreed with prosecutors. Scrushy was convicted on six counts of bribery and wire fraud; Siegelman was convicted of seven counts.
Last year, in a separate trial, Scrushy was acquitted of orchestrating a $2.7 billion accounting fraud.
In July 1999, under pressure to donate $500,000 to a lobbying initiative for a state lottery, Scrushy put heavy pressure on UBS’ McGahan, grand jury transcripts show.
Facing threats of a loss of business – HealthSouth CFO David Martin told him UBS “would be f****d if we didn’t come up with the money” – McGahan said he agreed to re-route part of a UBS banking fee to the company.
According to an FBI memo of a September 2003 interview, Martin – by now former HealthSouth CFO – said McGahan “offered up the idea to use fees owed to UBS” by Integrated Health Services, which owed the firm $1 million.
Striking a deal to have IHS send HealthSouth $250,000, McGahan arranged to have his firm forgive $267,000 in fees owed by IHS.
Martin testified that the donation to the lottery campaign “needed to be made without HealthSouth’s or Scrushy’s fingerprints on the transaction.”
McGahan’s lawyer did not return phone calls or e-mails seeking comment. In McGahan’s grand jury testimony, he said it was a HealthSouth lobbyist – and not himself – who proposed the fee swap, and that he simply arranged it.
“At no time did the government contend that anyone at UBS committed any wrongdoing in this matter,” a UBS spokesman said.
Sean Coffey, a partner at Bernstein, Litowitz, Berger & Grossman, which is lead counsel in a HealthSouth bondholder suit against UBS, disagrees with UBS’ claims of innocence.
“Lamentably, UBS’ agreement to fund Scrushy’s bribe of a sitting governor is just one example of the sordid relationship between these bankers and the company they saw as their personal honey pot,” said Coffey, who also directed a suit against banks that sold WorldCom bonds.
Coffey filed papers last month alleging that McGahan and other UBS bankers had firsthand knowledge of the HealthSouth accounting fraud by the summer of 1999.