On Wednesday May 28^th 2008, the world awoke to the Financial Times (of London) headline UBS tells unit staff to avoid US visits. According to the FT, UBS has told current and former members of it private banking team responsible for rich US clients not to travel to the United States. Apparently, the reason for the move follows the recent indictment of one of the unit's former senior executives, Mr. Bradley Birkenfeld, who US authorities have accused of helping a billionaire client evade taxes. Perhaps the more genuine reason for the recommended travel restriction is that UBS may not yet want more negative publicity with the revelations of other wealthy Americans who sought to avoid taxes through illicit means arranged by UBS?

The FT article goes on to disclose that UBS has made legal counsel available to the more than 50 members of the private banking unit that had serviced American clients. UBS announced back in November 2007 that it had decided to wind down its cross-border private banking business with US customers, and many of these staff members have already left the private banking unit. Mr. Birkenfeld, an American citizen who has lived in Switzerland for some number of years was formerly part of the team headed by Mr. Martin Liechti, UBS' Swiss-based head of international private banking for North and South America. In April 2008, Mr. Liechti was detained by American authorities and remains in the United States as a "material witness."

Mr. Birkenfeld apparently was hired by Mr. Liechti because of his particularly close relationship with Igor Olenicoff, a US real estate tycoon, who reached a legal settlement with authorities last December. Apparently, because of his relationship with Mr. Olenicoff, Mr. Birkenfeld was able to negotiate a higher rate of remuneration than many of the other team members. Mr. Birkenfeld also apparently had only two major clients rather than the twenty or so serviced by other team members. The article concludes with information that Mr. Birkenfeld's relationship with the UBS private banking unit soured after UBS claimed that he not performed to expectations. Mr. Birkenfeld took legal action against UBS over his termination and then cooperated with the US authorities in their on-going investigations of UBS.

Toomre Capital Markets LLC ("TCM") wonders what UBS is trying to hide in making this travel restriction recommendation. Fifty senior bankers servicing as many as twenty accounts each suggests that there are as many as one thousand Americans who will be extremely angry and embarrassed if their names were to be revealed about potentially avoiding United States taxes. One has to wonder though about whether those potentially one thousand clients or the United States government is worse to piss off. What is near certain is that UBS will be in the news in coming days and months about its potential violation of US banking and tax laws.