Mediaboss Marketing

By Lynnley Browning

(Reuters) - The case of a wealthy U.S. businessman who pleaded guilty to evading taxes but then sued the Swiss bank where he hid his money is scheduled to go to trial on May 8, the first major test of civil legal challenges to Swiss banks that sold offshore private banking services to help Americans evade taxes.

The civil suit, filed against UBS AG in federal court in Santa Ana, California - and another filed against UBS in federal court in Chicago - will probe 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.

Tax lawyers describe the suits, emerging from a crackdown by federal authorities on Swiss banks, as the first of their kind in the United States to assert that Swiss bankers made improper assertions to their U.S. clients about the tax implications of their offshore accounts.

In the California case filed in 2008, Russia-born American billionaire Igor Olenicoff accuses UBS of fraud in handling some $200 million he kept in offshore accounts and wrongfully advising him he did not have to report them to the tax-collecting IRS. Olenicoff pleaded guilty to tax evasion in 2007 and to lying on his tax returns by failing to disclose his offshore accounts, and paid $52 million in back taxes. His suit seeks $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. 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.

UBS argues in both cases that its clients have a duty to know what to declare on their U.S. tax returns. A UBS spokeswoman in New York, Karina Byrne, declined to comment specifically on the lawsuits, but said the bank "does not give any tax advice to our clients, and we encourage clients to seek third-party tax advice."

U.S. INVESTIGATION UNDER WAY

The two cases are unfolding at a time when U.S. authorities are conducting a major investigation into the Swiss banking industry. The U.S. Justice Department has indicted one Swiss private bank, Wegelin, and charged scores of Swiss bankers and their American clients with tax evasion.

In 2009, UBS averted indictment and paid a $780 million fine to the U.S. Justice Department as part of a deferred-prosecution agreement in which it admitted to fraud and conspiracy in helping about 19,000 wealthy Americans hide up to $20 billion in secret bank accounts.

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Lawsuits test UBS advice on offshore bank accounts