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Special Reports

Part 1: A UBS insider blows the whistle on Swiss banking.
Part 2: Feeding the UBS obsession with North American wealth.
Part 3: Meet Bradley Birkenfeld's biggest client, and nemesis, US billionaire Igor Olenicoff.
Part 4: UBS whistle-blower pays a high price for tipping off US investigators.
Part 5: As whistle-blower is jailed, perpetrator of massive tax fraud gets backdoor bailout.

Telling Swiss secrets: The golden goose

Part 3: Meet Bradley Birkenfeld's biggest client, and nemesis, US billionaire Igor Olenicoff.

(Getty Images)

NEW YORK — Igor Olenicoff would seem the incarnation of the American Dream. Born to Russian parents in the mountains of Northern Iran during World War II, his journey to the U.S. began with the family’s dash for the American zone near Tehran in the aftermath of the war.

Having escaped Stalin’s forced repatriation campaign, the Olenicoffs sewed what little money they had into their coat linings and sailed for America, settling in Southern California. Father Michael, an engineer, took work as a janitor. Mother Zina worked as a housekeeper.

Igor pulled shifts at a local hardware store to put himself through school. Now 68 and head of Olen Properties, the powerhouse Orange Country real estate firm he built from a single 16 unit duplex in the early '70s, he is a fixture on the Forbes 400 list of the wealthiest Americans — number 236 last year, with an estimated net worth of $1.5 billion. Olen Properties posts annual gross revenues of more than $250 million.

"Life from an economic standpoint has been a fairy tale," Olenicoff said in a lengthy interview. He splits time between "fabulous" homes in Emerald Bay, CA, Lighthouse Point, Florida and a 4,400-square-foot Las Vegas retreat, jetting to and fro in his Cessna Citation. A yacht lover, he recently replaced his 150-foot Sterling with a 120-foot Christensen. "I’ve scaled back 30 feet because I enjoy operating this one myself," he said. "I’m my own captain."

Beginning in early 2001, Captain Olenicoff would surrender an astonishing amount of control of quite a lot of money to a beguiling banker whose name he'd never heard until the phone rang in his Newport Beach office a few months prior: “The person on the other end says, 'Hi, my name is Bradley Birkenfeld,' " he recalled.

Birkenfeld was with Barclays then, and Olenicoff had $200 million with the bank in the Bahamas, having started to move money offshore “as a safety measure” during the savings and loan crisis in the early '90s.

It was an intriguing phone call, as Olenicoff tells it: After introducing himself, Birkenfeld said he had inside information about changes coming to Barclays Bahamas that would jeopardize Olenicoff’s accounts. Birkenfeld would be in California on other business and would be happy to explain further if Olenicoff was willing to meet.

Bradley Birkenfeld and Igor Olenicoff aboard Olenicoff's yacht, the Rusalka, off the Belize coast. Birkenfeld is giving Olenicoff a gold Swiss cow bell as a gift. (Courtesy of Igor Olenicoff)

When Birkenfeld arrived in Newport, he told Olenicoff that Barclays was closing out its Bahamas business, information that wasn’t yet public: Olenicoff would have to move his money. Birkenfeld was moving, too, he told the billionaire — from Barclays to UBS, where Birkenfeld said he was being heavily recruited. When Birkenfeld formally joined UBS in 2001, he suggested to Olenicoff that he come along. "It dovetailed," Birkenfeld told me (and then some, Olenicoff and his lawyers now allege).

At the time, the two hit it off. Birkenfeld impressed the older Olenicoff with his energy and intelligence. Olenicoff and his son, Andrei, soon flew to Geneva to hear more. Birkenfeld had recommended a plush hotel on the Rhône and met them in the lobby the next morning. They walked through town to a set of offices down the street from UBS headquarters, highly secure but unmarked but for a small plaque identifying it as belonging to the bank, Olenicoff recalled. A guard checked their briefcases, punched a code into the elevator pad and escorted them up. "This was sold with all the pizzazz and secrecy," Olenicoff said. "It certainly wasn't that way in the Bahamas."

Birkenfeld left them with a senior UBS banker who took them for a sneak peek at the bank’s storied subterranean vault. "My son and I thought we were big shots," Olenicoff said. He agreed to open an account, eventually for the full $200 million. It was "just a family nest egg" anyway, he said.

Birkenfeld became Olenicoff’s account executive. UBS bankers did business in person, keeping correspondence to a minimum to cover their tracks, and Birkenfeld made regular trips to the U.S. There were dinners at the Intercontinental in Miami Beach, the Montage in Laguna, the Balboa Bay Club in Newport, even a chance encounter with Hugh Hefner and his blond entourage at Mastro’s in Beverly Hills, Olenicoff recalled. On a couple of occasions, Birkenfeld joined Olenicoff and some of his friends on Olenicoff’s yacht, touring the islands off Honduras, exploring the jungle ruins in the interior, eventually jetting out from a Guatemalan military base where Olenicoff (somehow) had an arrangement to land his plane.

Birkenfeld (center front) with Olenicoff in Central America. On Birkenfeld's right is Mario Staggl, a Lichtenstein trust manager who was indicted as his co-conspirator but remains free in Lichtenstein. (Courtesy of Igor Olenicoff)

Olenicoff said he eventually gave his UBS bankers and the brokers they worked with full control over his cash and securities accounts with an understanding that funds would be invested in the name of offshore corporate trusts rather than his own. The brokers, working with Birkenfeld and other UBS bankers, created various "structures" in Lichtenstein and Denmark along these lines. Olenicoff says they assured him (erroneously, at best) that income from the accounts wasn't taxable until he repatriated it. "There's this Swiss attorney there nodding his head," he recalled. "It’s all very proper and precise —I mean, you feel you’re in the German Reichstag with all the generals there!" At the time, he said, the arrangement left him with an underlying "peace of mind."

Peace from the tax police would have been great relief. Beginning in 1994 and continuing for years, the IRS had relentlessly audited Olen Properties, at one point insisting the company had hidden $330 million in one year alone, owing some $148 million in back taxes.

In the interview, Olenicoff said that he had never had trouble with the IRS for 25 years of Olen's existence but that the IRS began auditing based on allegations by a former employee.  In the end, the government settled with Olen for $272,024 — "Pennies on the Dollar," one headline read — but the IRS wasn't done. Investigators turned their klieg lights on Olenicoff’s personal finances. "They audited and audited and audited," he said.

The myriad civil investigations at IRS were finally settled in 2003. "I assumed everything was done and happy," he said.

It wasn't.

http://www.globalpost.com/dispatch/europe/100724/globalpost-investigation-telling-swiss-secrets-part-3