UBS AG, the largest Swiss bank, sued California billionaire Igor Olenicoff for malicious prosecution over his failed legal claim that the company defrauded him into believing the tax crimes he confessed to were lawful.
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 that he failed to disclose about $200 million in offshore accounts to the Internal Revenue Service.
After his plea, Olenicoff sued UBS in federal court in Santa Ana, California, claiming the Zurich-based bank committed fraud by not telling him he owed taxes. U.S. District Judge Andrew Guilford dismissed that case on April 10. He said Olenicoff swore in his guilty plea that “he was not an innocent dupe” and he could have pleaded not guilty if UBS misled him. The bank repeatedly cited Guilford’s ruling in its lawsuit, filed Aug. 7 in state court in Orange County, California.
“In order to pursue his claim of fraud, he disavowed the sworn statements he made in the criminal case acknowledging his own active deceit, and instead claimed he actually had been unaware that he had lied on his tax returns,” UBS claimed in the complaint. “This change of his story was done for the purpose of pursuing a false claim of fraud against UBS.”
Olenicoff said today in an e-mail that he couldn’t comment on the lawsuit because he hadn’t seen the complaint and his lawyers hadn’t been served with it.
“However it is clear this is some sort of a publicity stunt to chill anyone else’s plans to sue UBS,” he said.
After his guilty plea, Olenicoff 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.
Olenicoff also unsuccessfully sued his former UBS banker, Bradley Birkenfeld, who was recently released from federal prison after pleading guilty to conspiracy. Birkenfeld was a whistle-blower whose 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.
In its complaint, UBS claimed that because of Olenicoff’s lawsuit, the bank “was forced to expend a huge amount of time and internal resources, and incurred millions of dollars in legal fees and related costs.” The bank also said it “suffered harm to its reputation and business interests.”
UBS seeks “special damages” of more than $3 million, including attorneys’ fees. It also seeks unspecified general damages, attorneys’ fees and punitive damages.
The bank claims that Olenicoff falsely accused UBS of mismanaging his accounts, resulting in no profit to him.
“This too was false, as Olenicoff was himself directly involved in the accounts and regularly apprised of the activity in his accounts, and he made a net profit of over $14 million, not $0,” according to the complaint.
Olenicoff and his company, Olen, also falsely claimed it was damaged by UBS even though it never had an account or any transactions with the bank, according to the complaint.
They claimed that “because of Olen’s association with Olenicoff, it had been unable to secure a single loan after Olenicoff’s criminal conviction, and this failure to obtain a loan resulted in damage to Olen of $1.5 billion to $1.7 billion,” according to the complaint.
“In fact, it was a lie that Olen could not get a loan, because it had in fact secured two loans aggregating in excess of $300 million,” UBS claimed.
The complaint cited Guilford’s order, which said the denial of those loans by Olenicoff and Olen was a “coordinated blatant lie.”
The UBS case is UBS AG v. Olenicoff, 30-2012-00589134-CU-MC-CJC, Superior Court of California, County of Orange. The earlier case is Olenicoff v. UBS AG, 08-cv-1029, U.S. District Court, Central District of California (Santa Ana).