This article I'm dividing into two parts. The first deals with lobbyist and former Texas Senator Phil (William Phillip) Gramm, currently also the national campaign general co-chair and economic advisor to Sen John McCain's Presidential campaign, and his connection to Swiss banking giant UBS. The second part deals with an update on the tax evasion investigation being faced by UBS (background).

• Enron gave over $100,000 to Gramm’s campaigns from 1989 to 2001.
• Senator Gramm’s wife, Dr. Wendy L. Gramm, served on Enron’s Audit Committee from 1993 to June 6, 2002. Dr. Gramm recieved between $915,000 and $1.8 million in salary, director’s fees and Enron stock during her nine-year tenure on the board of directors.
• As a member of the Senate Banking Committee, Sen. Gramm vigorously advocated, and helped pass, an energy market deregulation bill - the Commodity Futures Modernization Act, which was primarily lobbied for by Enron, and which ended up allowing Enron to manipulate the energy market.

That brings us to UBS, which acquired Enron's energy trading operations in January 2002, at which time Gramm was still in the Senate. UBS also paid $120,000 to the DC lobbying firm Sullivan & Cromwell to lobby Congress in favor of the Gramm-Leach-Bliley Act, which seperated investment banks from commercial banks, leading to reduced oversight of investment banks which in turn has led to the current subprime mortgage crisis. After leaving the Senate in 2002, Sen. Gramm joined UBS Warburg as a Vice-Chairman of their Investment Banking division. He also registered as a lobbyist in 2004, and lobbying disclosure forms filed by UBS point to Sen. Gramm as their lobbyist dealing specifically with legislation regarding the mortgage crisis.

This brings us to the present, with UBS and its executives facing charges of having helped clients evade taxes in multiple countries, including the U.S. and Germany. UBS has directed its private bankers to stay away from the U.S., fearing that they would be detained for questioning in relation with the ongoing probe by U.S. prosecutors. According to a Wall Street Journal report, a court filing disclosed that former UBS executive Bradley Birkenfeld has decided to cooperate with the Justice Department and plead guilty to tax fraud in federal court June 9. He is expected to provide prosecutors with the names of his U.S. clients.

UBS advised and helped its American clients to set up shell companies and accounts in places like Lichtenstein, and then advised the clients to place their funds under the name of these 'non-American' companies, thereby bypassing an agreement between the IRS and Swiss bankers in 2001 under which these banks had to disclose the names of U.S. clients to the IRS. The LGT bank probe, which triggered the U.S. investigation, began in mid-February, while the focus of U.S. Prosecutors shifted from LGT to UBS sometime in between mid-april and early May, when the afore mentioned former UBS employee fell into their hands. Sen. Gramm was 'deregistered' as a lobbyist for UBS on April 18th 2008. He still remains a vice-chairman for UBS.

To sum it up, Sen. Phil Gramm has has taken money from Enron and UBS in return for helping them with advantageous legislation while in the Senate, and lobbying for the same once he was out of the Senate. Unfortunately, these very bills are at the center of almost every crisis in the U.S. financial system, starting from the California energy meltdown to the subprime mortgage crisis, high gas and energy prices fueled by speculative commodity trading and now this unsavory involvement with off-shore tax evasion.

References:

http://market-ticker.denninger.net/2008/05/windup-wednesday_28.html

http://www.evb.ch/en/p25002047.html

http://en.wikipedia.org/wiki/Phil_Gramm

http://www.msnbc.msn.com/id/24844889

http://www.money-rx.com/blog/2008/05/ubs-tax-evasion-probe-nets-american.html

http://online.wsj.com/article/SB121208971164130241.html