Will tax cheats become Miami art fair’s vice?

Weak sales, falling prices, fewer parties, less champagne and smaller servings of caviar - there are good reasons for avoiding the annual Art Basel Miami Beach sales bash this week. But an even better excuse for anyone looking to get out of making the trip to the fair, which begins tomorrow, is offered by the FBI.

According to recent reports, the law enforcement agency is taking a close look at as many as 60 bankers - and hundreds of their clients - employed by the fair's main sponsor, the Swiss banking giant UBS. Many of them - bankers and clients - will be attending the investment bank's Friday night dinner, traditionally the most lavish and coveted invitation of the week. Unless, of course, they are put off by the rumours now rife of an FBI sting.

The famous agency, and its friend the IRS - the American tax authority - appear to be alert to the fact that art is not only an excellent way to move capital between tax jurisdictions unseen but that the intersection of banking and art collecting is a productive place to pursue their line of work.

A month ago, Raoul Weil, chairman of UBS global wealth management, was indicted in Miami of conspiring to help 17,000 US clients of the bank evade taxes by hiding more than $20bn in secret offshore accounts in Panama and Lichtenstein.

It is alleged UBS used its sponsorship of the art fair to wine and dine tax cheats

Soon after, a second UBS banker, Bradley Birkenfeld, pleaded guilty on similar charges. Birkenfeld, one of the private bankers at UBS who look after an estimated 222 American billionaire clients with a combined net worth of $706bn, is said to be singing like a canary.

In court documents lodged in Federal Court in Miami, prosecutors allege UBS bankers used its sponsorship of the art fair to wine and dine clients now suspected of tax evasion. One UBS client unmasked early in the probe has been forced to pay $52m in taxes and penalties.

Lawyers for others say the FBI's request for tax information constitutes an illegal "fishing expedition" because it appears designed to catch a few tax cheats by obtaining information on all customers.

Since half the point of having a Swiss bank account - numbered, of course - is to avoid such disclosure, several of the bank's US clients have lodged complaints in Switzerland to block Swiss cooperation with the US investigation.

The FBI is likely to watch the UBS Friday dinner, in scenes worthy of Miami Vice

Still, some juicy details of the investigation have already emerged. Allegations against UBS private bankers include smuggling diamonds into the US in a toothpaste tube; lying to US immigration agents that business trips were for non-business purposes; and evidence that bankers have been slipping from hotel to hotel to elude detection. The bank itself, which has not been charged in the investigation and is sore from $50bn in losses and write-downs this year, says it isn't re-thinking its sponsorship of the fair but it doesn't want to appear "frivolous".

It's shaping up to be an improbable week in Miami. As the respected art critic Dave Hickey recently warned, if the big collectors - the whales who have been keeping the art market going for the past year or so - now decide to dump at cut-rate prices, "the art world will undergo its first catastrophic value re-adjustment in 40 years. It won't be pretty, but it will be exciting to watch".

Meanwhile many in the art world fear the FBI will be keeping a close eye on the UBS Friday dinner, imagining scenes worthy of Miami Vice. Will agents be hiding bugs with the mountains of stone crabs, lobster and shrimp, seared tuna, beef tenderloin and giant strawberries? If they can't talk money, what will guests talk about? Art?