UBS AG, reeling from record losses, said the US Department of Justice is investigating whether the world's biggest money manager for the wealthy helped clients evade American taxes.
One senior bank employee was "briefly detained" by US authorities as a "material witness," the firm said in an e-mailed statement, Bloomberg News reported.
The Financial Times reported that the employee was Martin Liechti, the Zurich-based head of UBS's international wealth management business for the Americas.
Rohini Pragasam, a UBS spokeswoman in New York, declined to comment on the FT report. Liechti could not immediately be reached for comment.
Battered by US$38 billion of writedowns, UBS said yesterday clients pulled a net 12.8 billion francs (US$12.1 billion) from its asset and wealth management units, the first withdrawal in almost eight years.
UBS's US private bank pledges on its Website to help meet objectives including "tax minimization." German prosecutors said in March they were considering a criminal investigation into whether UBS helped clients evade taxes. "UBS has been hit by a perfect storm," said Edwin Merner, who oversees US$2 billion at Atlantis Investment Research Corp in Tokyo. "Clients may run away if they think they'll leak information to tax authorities."
UBS fell 1.8 percent to 34.58 francs by 11:40am in Swiss trading. The bank said yesterday it plans to cut about 5,500 jobs, including as many as 2,600 at its investment-banking unit, which had 18.2 billion francs of first-quarter losses.
Chief Executive Officer Marcel Rohner told analysts he expects "tough business conditions" to continue.
The US Department of Justice is investigating UBS's conduct in relation to services provided by Swiss-based client advisers to US clients between 2000 and 2007, the bank said.
The US Securities and Exchange Commission is also investigating whether UBS employees in Switzerland who advised US clients failed to register with the agency as required.
UBS is cooperating with the US investigations, it said. The employee who was detained has not been charged with any wrongdoing, though will remain in the US "pending discussions with the US authorities regarding resolution of his status as a witness," the bank said.
The bank said damage to its reputation because of subprime losses led to an 82-percent drop in net new money inflows to its private bank in the first quarter compared with the fourth.