Igor Olenicoff long has been one of the biggest names in Orange County real estate. Now he’s something of a global media star for his crusade against the world’s largest investment bank for the wealthy.
Olenicoff’s at the center of a growing global firestorm surrounding Switzerland’s time-honored, secretive banking system. He’s become a big thorn in the side of the country’s largest investment bank, Zurich-based UBS AG.
If not for Bernard Madoff and the ongoing tumult in the global banking system, the row Olenicoff has helped to ignite over Swiss banking laws would be the finance story of the year.
It’s still a front-page story here and in Europe, complete with bickering governments, secretive offshore dealings and plenty of bombshell allegations.
This is “far bigger than I ever thought,” said Olenicoff, president of Newport Beach’s Olen Properties Corp., a real estate owner and developer.
Newspapers and TV stations from around the globe have come calling on Olen’s ornate Newport Center headquarters. Olenicoff hasn’t shied away from the press.
Olenicoff said he hopes the media exposure paints him as “the man who lit the match that brought the Swiss banking secrecy wall down.”
It’s one more chapter in a life story that seems made for the movies.
Notable events include Olenicoff’s family escaping political turmoil in his native Russia during the 1940s, an early childhood in an Iranian mining town and an American upbringing that included a stint at Motown Records. All of this before Olenicoff started Olen Properties in the early 1970s.
Much of the latest media attention comes with a share of skepticism about how Olenicoff, one of the world’s richest men, could in his view be used as an unwitting pawn in a massive global scheme to defraud investors and governments alike.
For its part, UBS refutes Olenicoff’s allegations of conspiracy and fraud.
Background
The story centers on Olenicoff’s use of UBS accounts to shield some $200 million from taxes. The accounts and similar ones held by others sparked a Justice Department investigation into UBS’ role in helping wealthy U.S. clients evade taxes.
As part of the probe, Olenicoff last year was sentenced to two years of probation after pleading guilty to filing a false tax return and paying $52 million in back taxes and penalties.
In September, Olenicoff struck back with a $500 million lawsuit against UBS and others, claiming they orchestrated a massive fraud that led to federal tax charges against him.
Former UBS banker Bradley Birkenfeld is at the heart of many of the media stories about Olenicoff’s fight against the bank.
Birkenfeld was Olenicoff’s personal banker earlier this decade. His assistance in large part helped U.S. investigators gain access to the inner workings of the secretive Swiss banking world.
Last May, Birkenfeld was charged with conspiring to defraud the U.S. government by creating fake corporations and trusts for his clients.
As part of a plea agreement, Birkenfeld,who once counted Olenicoff as his largest client,agreed to give the government inside information on UBS’ private banking business.
Since then, the Swiss banking system has been put under a microscope, much to the consternation of bank officials there as well the country’s government.
The issue has become a bilateral row as Washington has pressed the Swiss government to make its banks turn over information.
On Friday, the Swiss government said it would cooperate on cases of international tax evasion, breaking with a long-running history of shielding wealthy foreigners.
UBS executives have been indicted here and declared fugitives.
Olenicoff, when asked if he is proud of what’s transpired, said, “UBS executives created it. I was (just) the point where the (Department of Justice) evidently could start to pursue UBS.”
UBS, which has been seeing heavy executive turnover since the scandal began, recently agreed to a $780 million settlement with the U.S. for its role in hiding assets of wealthy American investors out of the sight of the Internal Revenue Service.
The names of up to 300 of UBS’ American clients reportedly will be handed over as part of the agreement.
The IRS hasn’t stopped there. It wants the names of nearly 52,000 Americans who have UBS accounts.
The government estimates there’s been nearly $20 billion hidden in offshore UBS accounts in the past few years.
Olenicoff’s Story
Olenicoff has been more than willing to give his side of the story, in which he describes himself as being taken in by UBS.
It appears to be a refreshing change for the developer, who for much of the past year saw the words “tax fraud” linked to his name any time he was mentioned in the national media.
How $200 million of Olenicoff’s money came to be managed by UBS earlier this decade is a tangled story spanning more than 20 years.
Olenicoff said the origins of the overseas accounts began in the late 1970s. To qualm bank fears over a large loan made to Olen Properties, he said an offshore company was formed in the Cayman Islands.
Shares issued in the company, which were used as collateral for the loans, ultimately were controlled by Olenicoff.
Birkenfeld, who Olenicoff describes as “a smooth-talking fellow,” didn’t come into the picture until earlier this decade. Olenicoff said that Birkenfeld worked hard to ingratiate himself with the billionaire. Ultimately he convinced Olenicoff earlier this decade to move the money from a Barclays PLC account to UBS, promising Olenicoff his funds would be safer there.
Olenicoff’s resulting tax case “is what it is,” he said.
“There are probably not too many Americans living who have not pushed the envelope on their tax filings,” Olenicoff said.
Other than Olenicoff’s prior run-ins with the IRS over the Cayman Island account, Olen Properties ownership and his outsized wealth,estimated last year by the Business Journal to be about $1.5 billion,Olenicoff said he had no knowledge at the time why the government specifically went after him in 2007, rather than any other UBS account holder.
After entering his plea deal, Olenicoff said he learned it was Birkenfeld,who is said to have begun cooperating with investigators nearly a year before his arrest,who was “diming him out.”
He minces few words in expressing his frustration.
“I had no idea that this was going on and all this time the SOB is eating at my table and the feeding trough at UBS while singing like a parakeet to the feds,” Olenicoff told Bloomberg.
Upon learning more details of how the bank operated, Olenicoff said he felt betrayed not only by Birkenfeld,who he traveled with and considered a trusted associate, if not a friend,but also by UBS executives.
Dramatic Flair
His half-billion lawsuit against UBS isn’t out of character. Olenicoff favors the dramatic,as anyone who’s been to his company’s headquarters, adorned with czarist-era sculptures and paintings, can attest.
One sculpture next to his desk shows a pack of dogs attacking a boar.
His lawsuit accuses UBS of racketeering, creating sham corporations and running pump and dump schemes, among other charges.
Put more simply, “they’re crooks,” Olenicoff alleges.
Since filing the lawsuit, Olenicoff asserts that most of his claims have been proven true, through statements from current and former UBS executives, including Birkenfeld.
UBS has a decidedly different view. Representatives of the investment bank declined to comment for this story but referred the Business Journal to court filings.
The bank’s attempting to get Olenicoff’s lawsuit dismissed for a number of reasons, including jurisdictional issues. It also argues that Olenicoff’s 2007 guilty plea undermines his contention that he relied on misrepresentations from UBS.
Olenicoff “can’t have it both ways,” accepting responsibility for his actions in court one day and then suing UBS for damages the next, the bank’s lawyers said in court filings.
Rather than “being a pawn or a victim,he was a knowing participant in a scheme to hide assets from the IRS,” UBS filings to dismiss the case claim.
Olenicoff’s response?
“This is laughable. They are flat-out liars,” he said.
A hearing on whether the suit will be dismissed is slated for Santa Ana’s U.S. District Court next month. Any punitive damages Olenicoff ultimately gets from the lawsuit will be donated to charity, he said.
Fighting Streak
|
|
||
|
Olenicoff at headquarters in 1990s: sued local developers who borrowed money |
Igor Olenicoff admits he has a reputation for being litigious.
In the late 1980s, his Olen Properties Corp. once loaned upward of $140 million to other real estate companies. When the market went south, Olenicoff sued a number of those companies to get the money back, in many cases taking over their real estate.
“It was my money,” he said.
His latest lawsuit comes as Olen Properties, like all local real estate developers, is looking to weather the latest downturn. Olen owns some 6 million square feet of commercial property and more than 8,000 apartments. Most of the company’s office buildings are local.
Other than a $362 million acquisition of a Chicago skyscraper in 2006, the company wasn’t a big buyer of properties during the past few years. Olen is said to have a low level of debt.
Olenicoff survived prior recessions. But it wasn’t easy, he said, as he relied on his fair share of good fortune.
In the early 1990s, as vacancy levels jumped and property values across the county plummeted, he was prepared to hand the keys of many Olen properties back to the bank. One Olen-backed portfolio of properties tied to some $140 million in loans filed for bankruptcy. The lender, Prudential Insurance Co., sued Olenicoff personally for fraud.
He said he was able to survive by the skin of his teeth, through hard work and tough negotiations with lenders including Prudential.
“There wasn’t a single (local commercial) developer,save Irvine Company and Olen,that survived,” he said.
Even with demands that come with his recent media exposure, the lawsuit isn’t distracting Olenicoff from running his business, he said.
“I’m here seven days a week sometimes,” Olenicoff said. “I’m the first to show up, and the last to go home.”
Olenicoff calls himself “goal oriented.” He’s known as a shrewd businessman who’s able to work around problems to get projects done.
When plotting a course “to go from A to Z, I’ve always been one who doesn’t necessarily follow the cookbook,” he said.
,Mark Mueller
