International Tax-Shelter Plot Thickens; Mogul Sues UBS

International Tax-Shelter Plot Thickens; Mogul Sues UBS
Posted by Dan Slater on September 17, 2008

"Back in May, the Feds unsealed an indictment against a former UBS banker, Bradley Birkenfeld, for allegedly helping one of the world’s richest men, Igor Olenicoff, evade taxes on $200 million held in Swiss and Liechtenstein bank accounts. When Birkenfeld pleaded guilty, a month later, he explained that he participated the alleged scheme to help Olenicoff evade taxes. “I was employed by UBS,” said Birkenfeld, “I was incentivized to do this business.”

Yesterday, the UBS-Olenicoff plot thickened, when Olenicoff, a billionaire property developer, sued UBS and nearly a dozen current and former executives of the bank in federal court in Santa Ana, Calif. Here’s the NYT report.

The suit reportedly accuses UBS, a small Swiss firm, and two private firms based in Liechtenstein and their employees of luring Olenicoff into becoming a client and a participant in a deceptive investment scheme intended to cheat the IRS of millions in taxes. The suit also contends that Birkenfeld, the former UBS banker, received a large settlement from UBS after complaining that it had encouraged its private bankers to violate U.S. tax laws.

The suit claims that UBS turned over Olenicoff’s name to the IRS, a move that would have been surprising for a Swiss bank that follows a centuries-old tradition of banking secrecy. Olenicoff is accusing the defendants of fraud and breach of fiduciary duty, among other things.
UBS said it had not seen the complaint and thus could not comment upon it.
In December, notes the Times, Olenicoff pleaded guilty to criminal charges of tax evasion and lying on his tax returns, all in connection with his offshore private banking accounts. He agreed to pay $52 million in back taxes.