UBS AG won dismissal of a lawsuit brought by billionaire Igor Olenicoff, who blamed the bank for events leading him to plead guilty to failing to disclose about $200 million in offshore accounts on U.S. tax forms.
U.S. District Judge Andrew Guilford in Santa Ana, California, threw out Olenicoff’s lawsuit against Zurich-based UBS, the largest Swiss bank, and his former banker, Bradley Birkenfeld. Olenicoff claimed UBS committed fraud by not telling him he owed U.S. taxes. He also said UBS traded excessively in his accounts.
Guilford said at a hearing yesterday that he was likely to dismiss the case. Olenicoff, who built his fortune as the chief executive officer of Newport Beach, California-based Olen Properties Corp., pleaded guilty in 2007 to filing a false tax return. He admitted he hid offshore accounts from the Internal Revenue Service for seven years.
“Olenicoff has already sworn that he was not an innocent dupe,” Guilford wrote in an opinion filed today. “It is directly inconsistent for him to now claim that he unwittingly relied on UBS’ counsel. If Olenicoff wanted to claim he was misled by UBS, he had the option of pleading not guilty in the criminal proceedings.”
UBS is pleased with Guilford’s decision, said Torie von Alt, a company spokeswoman.
“It corresponds with our view that Olenicoff’s claims for damages have been without merit,” she said in an e-mail. “The judge confirmed that Olenicoff cannot turn to UBS to blame it for his own omissions/failures to disclose his offshore accounts and to pay taxes.”
Olenicoff said he had no immediate comment on the ruling. He was sentenced to two years’ probation and ordered to pay $52 million in back taxes, fines and penalties. He admitted that from 1998 to 2004, he filed false returns that hid accounts in Switzerland, Liechtenstein, England and the Bahamas.
An attorney for Birkenfeld, John D. Cline, declined to comment. Birkenfeld is serving 40 months in a federal prison in Pennsylvania for helping Olenicoff and others evade taxes. At his sentencing, a prosecutor said Birkenfeld exposed a “massive tax scheme” at UBS while hiding his own dealings with Olenicoff.
Birkenfeld’s evidence helped lead to criminal charges against UBS in 2009. UBS avoided prosecution by paying $780 million, admitting it helped thousands of Americans evade taxes and disclosing to U.S. authorities the names of 250 American clients. UBS later revealed 4,450 more accounts of U.S. clients.
After UBS admitted to helping U.S. clients cheat on their taxes, prosecutors charged almost 50 customers of offshore banks and about two dozen foreign bankers or advisers with tax crimes.
Seven current or former bankers at Credit Suisse AG and Switzerland’s oldest private lender, Wegelin & Co., were indicted. About 33,000 more Americans avoided prosecution by declaring offshore accounts to the IRS.
The case is Olenicoff v. UBS AG, 08-cv-1029, U.S. District Court, Central District of California (Santa Ana).