July 28 (Bloomberg) -- Joseph Grano, who ran UBS AG’s U.S. wealth-management business before leaving in 2003, said the Swiss bank’s senior management ignored his suggestion early last year that they spin off or sell the unit.

Grano, now chief executive officer of advisory firm Centurion Holdings LLC, said he sent letters to former UBS Chairman Marcel Ospel and former CEO Marcel Rohner urging them to make Paine Webber independent again, perhaps selling a stake to investors or employees. He said he never heard back from either executive.

“It wasn’t a definitive offer, it was something for them to consider, but the message was clear that if you would entertain something like that, let’s talk,” Grano, 61, said in an interview. “And they didn’t even have the courtesy to respond to the letter.”

Christoph Meier, a spokesman for UBS in Zurich, declined to comment and said he would try to pass on a message to Ospel and Rohner seeking comment. Ospel left UBS in April 2008 after creating the bank in a merger a decade earlier. Rohner served as CEO from July 2007 until February of this year. A woman who answered the phone at Exigen Capital in Zurich, a private-equity firm at which Rohner became an adviser this month, said Rohner was on vacation and couldn’t be contacted for two weeks.

UBS bought Paine Webber Group Inc. for $11.5 billion in 2000 to win a bigger presence in U.S. wealth management. The Swiss bank scrapped the Paine Webber brand three years later, re-labeling it UBS. The Zurich-based bank has taken more than $50 billion of writedowns and credit losses since 2007, the most of any European bank.

Justice Probe

In addition, a U.S. Justice Department investigation into whether the bank helped American clients evade taxes was made public in May 2008. Since then, UBS’s wealth-management units have suffered 134 billion francs ($125 billion) of net outflows.

UBS’s wealth-management business in the Americas reported a 35 million franc pretax loss in the first quarter and said it attracted 16.2 billion of net new money in the period. In March the bank agreed to sell up to 55 of its U.S. branches to Stifel Financial Corp. for as much as $27 million in cash up-front and payments related to employee performance.

In February the bank agreed to pay $780 million and disclose the names of some secret account holders to avoid U.S. prosecution. The U.S. and Swiss government are now in talks about resolving a Justice Department suit that seeks information on the identities of as many as 52,000 UBS customers. A settlement, while positive for the company, may result in a fine of 1 billion francs, estimated Huw van Steenis, a London-based analyst at Morgan Stanley.

Swiss Bankers

The Justice Department probe is related to Swiss bankers who traveled into the U.S. to help Americans move assets offshore and was unrelated to the Paine Webber brokers.

“I wrote a letter to Rohner basically suggesting to them that they should consider spinning out the old Paine Webber, separately branding it and perhaps selling a portion of it which I would put a group together,” Grano said. Part of the sale could be used for an employee stock-ownership plan, Grano said.

Grano said he’s heard “only rumors” about potential management changes at UBS’s wealth-management unit in the U.S. He said he would consider Robert McCann, the former wealth management chief at Merrill Lynch & Co., an excellent candidate to run the business. McCann left Merrill Lynch after it was acquired by Bank of America Corp. in January.

“I certainly heard the rumors that they’ve been doing a management search,” he said. “I hear Bobby McCann, who’s a great guy, I think he’d be a big help to the franchise if they were smart enough to choose him.”

Karina Byrne, a spokeswoman for UBS in New York, said Marten Hoekstra continues to run the U.S. wealth management business and declined to comment further.

To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net.

Last Updated: July 27, 2009 19:00 EDT