UBS Sues Former Billionaire Offshore Bank Account Client

A recent chapter of the Swiss Banks vs. the IRS saga features a plot twist; large Swiss bank UBS sues a wealthy American client.

UBS, Switzerland’s largest bank filed a lawsuit last week suing their former client, billionaire real estate developer, Igor Olenicoff for damages from a 2008 federal lawsuit he filed against the them. Janet Novack of Forbes’ article UBS Sues Billionaire Olenicoff in Offshore Tax Cheating Case explains this intriguing, yet complicated offshore banking mess.

According to Novack, back in December 2007, the Olenicoff struck a deal with federal prosecutors and admitted he lied on his tax returns about ownership of offshore bank accounts from 1998 – 2004. He then paid $52 million in back taxes, IRS penalties and interest, and in exchange for a sentence reduction, plead guilty to a single felony for filing a false tax return for 2002.

In 2008, the billionaire then turned around and sued UBS and others claiming he was misled in particular about the “legality and taxation” of his offshore bank accounts. His charges against the bank were the following:

He effectively lost $1.5-1.7 million in business loans due to his guilty plea to the feds and would now be forced to liquidate his properties.
They mismanaged the $180 million he held in his offshore bank accounts and charged excessive fees. (Forbes notes that as of March 2012, Olenicoff’s net worth was $2.6 billion).

This last April, a US District judge dismissed all of Olenicoff’s claims stating that because he pleaded guilty (for the reduced sentence) he was “assuming responsibility for his tax fraud.” The judge denied Olenicoff’s claim that he was an “innocent dupe” misled by UBS.

UBS’ suit for malicious prosecution (filed last week in Orange County, CA) charges that Olenicoff’s federal lawsuit was built on lies and an attempt to distract attention away from his own offshore tax woes. UBS is seeking the following:

Punitive damages
Compensation for damage to the bank’s reputation
$3 million in attorney’s fees defending the federal case against Olenicoff’s (dismissed) suit.

UBS appears to have the upper hand in this case, but it will be interesting to see how this case plays out in the months to come.

Besides being a good read, this article demonstrates just how much the Government has raised the stakes when it comes to offshore bank account reporting. Foreign banks like UBS must report their American clients to the U.S. Government and those clients are also required to disclose their accounts and adhere to FBAR regulations as well.

If you have unreported offshore accounts, it is imperative you contact a certified tax resolution specialist or tax attorney before the IRS contacts you. By hiring a tax expert, you can increase your chances of avoiding huge penalties and criminal prosecution for failing to file the appropriate FBAR reports for foreign accounts.

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Tags: Back Taxes, certified tax resolution specialist, FBAR regulations, IRS penalties, offshore bank accounts, tax attorney, UBS