He should be able to walk into the Apple store, ask for the size iPhone that he wants (4 GB, 8 GB) and walk out with the box in hand. Activation is done via iTunes. At this point in time,though,activation is ONLY going to work in the US.
Don't know how things are done in the AT&T store if by chance he had ventured in there.... Maybe they insist that the customer be ready to sign up for a two-year contract. ??
I am guessing that he ran into problems if he proffered a credit card that was clearly based in some other country -- Europe, Canada, Asia, Australia, New Zealand.... and that may be why he wasn't allowed to buy an iPhone because the people at the store would know that he COULDN'T just go home and activate it the way it is meant to be.... They sure as heck aren't going to encourage hacking!
So how is a European or someone from another country who is visiting in the US to get the iPhone? Pay for it in cash. That way no one knows where it's going or what will happen to it....