In the civil suit that was filed in 2008, the Russia-born American billionaire Igor Olenicoff had accused UBS of fraud in handling some US$200 million that he kept in offshore accounts and wrongfully advising him as to not to report them to the tax-collecting IRS.
The case has been filed against UBS AG in federal court in Santa Ana, California and against UBS in federal court in Chicago and will probe into whether clients can legally rely on their private bankers’ assertions there is no need to disclose the accounts on their tax returns or sign required disclosures.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
In 2007, Olenicoff had pleaded guilty to tax evasion and to lying on his tax returns by failing to disclose his offshore accounts, paying US$52 million in back taxes.
Presently, his suit seeks US$500 million in damages.
The Chicago case, which seeks class-action status, was filed in June 2011 on behalf of former UBS clients Matthew Thomas of California and Himanshu Patel of Arizona.
Thomas and Patel previously paid back taxes, interest and penalties to the IRS related to their Swiss accounts and they accuse UBS of fraud and breach of fiduciary duty for allegedly telling them that their accounts, opened when the two worked overseas during the last two decades, did not have to be disclosed to the IRS.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataMeanwhile, UBS argues that in both cases that its clients have a duty to know what to declare on their US tax returns.
According to the legal norms, though it is legal for US residents to hold offshore bank accounts, the IRS requires taxpayers to disclose the accounts on their tax returns as well as to sign special disclosures provided by the banks, known as W9 forms.
And if the client refuses to sign the disclosures, the banks must sell any US securities held in the offshore accounts.
The process would thereby trigger a tax bill for the client and a requirement that the bank report the sale and the client’s identity to the IRS.
