- Nadia Roberts and Sean Roberts, discussion of plea conviction here.
- Bernhard Gubser and Heidi Gubser, who entered the OVDI and thus were not prosecuted or convicted (hence not subject to a blog discussion).
- Anton Ginzburg, discussion of plea conviction here.
- Arthur Joel Eisenberg, discussion of sentencing here:
- Jeffrey Chernick, individually and on behalf of SHAMBA, a foreign corporation, SIMBA, a foreign corporation - discussion of sentencing here.
Here is the Court's short presentation of the plaintiff's individual circumstances:
Execution Of The Scheme As To Plaintiffs
The Roberts are married. In 2004, Sean Roberts ("Mr. Roberts") owned a UBS AG account in the Isle of Mann and UBS AG banker Claude Ullman convinced Mr. Roberts to transfer his account to UBS AG's Swiss location. UBS AG engaged defendant Beda Singenberger ("Mr. Singenberger") to create a third-party trust for Mr. Roberts but neither UBS AG nor Mr. Singenberger "advised plaintiffs of the illegal nature of said third party trust and/or plaintiffs' reporting requirements." UBS AG failed to advise the Roberts of the QI Agreement, that their accounts violated the QI Agreement, and that the Roberts "needed to take steps to advise the IRS and mitigate their damages." In February 2009, UBS AG sent information to the IRS about the Roberts but delayed until November 2009 to advise the Roberts of an amnesty Voluntary Disclosure program.
In June 2011, the Roberts entered into plea agreements to plead guilty to filing a false tax return.
The Gubsers were married during 1978-2008 and held a Swiss UBS AG account which they allowed to sit and which experienced income growth during 2004-2009. UBS AG never advised the Gubsers that they were subject to the QI Agreement. In December 2010, the Gubsers "realized that they may be subject to prosecution by the IRS for failing to declare a 40-year old account originating in Switzerland." The Gubsers participated in the Voluntary Disclosure program.
In 2000, UBS AG banker Gian Gisler ("Mr. Gisler") advised Dr. Ginzburg to change the structure of Dr. Ginzburg's UBS AG funds. UBS AG representatives advised Dr. Ginzburg to close a Liechtenstein-based trust structure in favor of a Hong Kong-based trust, that Dr. Ginzburg "would not have to pay any taxes on any capital gains or dividends until the funds were repatriated" to Dr. Ginzburg's country of future domicile, the United States or Israel, and that he would pay only taxes on possible capital gains and dividends when he repatriated the funds. Dr. Ginzburg was never informed of the QI Agreement, and in November 2008, UBS AG froze his accounts to prevent him to mitigate market losses. UBS AG representatives refused to disclose information about Dr. Ginzburg's accounts and liquidated the stock portfolio at 2009 levels to result in a $1.5 million loss.
In July 2011, Dr. Ginzburg pled guilty to criminal tax fraud.
Mr. Eisenberg held a UBS AG account in the Grand Caymans and during a vacation there, entered a UBS AG branch to inquire about the account. He was informed that his account was on the "abandoned accounts" list and transferred to Switzerland. Mr. Eisenberg traveled to Switzerland and defendant Hansredi Schumacher ("Mr. Schumacher") advised Mr. Eisenberg to set up a trust. Mr. Eisenberg permitted Mr. Schumacher to set up a Liechtenstein account and was advised "that he would not be required to disclose his account because of the trust formation." In 2010, Mr. Eisenberg discovered that UBS AG double charged fees during the account's life.
UBS AG failed to advise Mr. Eisenberg of the QI Agreement, the need to report his account for taxes, and release by UBS AG of his name to the United States to preclude Mr. Eisenberg to correct defects or seek voluntary disclosure. The IRS prosecuted Mr. Eisenberg who entered into a December 2010 agreement to plead guilty to filing a false tax return and paid $2.5 million penalties on a $65,000 tax bill.
Mr. Chernick succeeded in manufacturing toys with his Shumba corporation. In 2000, UBS AG executive director Phillip Bigger ("Mr. Bigger") recommended to move Mr. Chernick's Cayman Islands account to UBS AG's Hong Kong office, and Mr. Chernick opened up UBS AG Hong Kong accounts. Mr. Chernick was advised to hold U.S. securities in the Hong Kong accounts "without disclosing that Chernick would have to report such holdings to the U.S. or otherwise advising him of the QI Agreement terms." In 2002, defendant Matthias Rickenbach with UBS AG's authorization "caused the setup of a sham entity to hold Shumba and Simba." In 2006, Mr. Bigger caused Mr. Chernick to close his Shumba account at the UBS Hong Kong office and transferred the account's assets, including U.S. securities, to a UBS AG Zurich account. UBS AG failed to inform Mr. Chernick of the QI Agreement requirements to file IRS forms or UBS AG withholding of taxes.
Mr. Chernick entered into a July 2009 agreement to plead guilty to filing a false tax return.
CONCLUSION AND ORDEROne interesting, but not surprising, part of the opinion is:
For the reasons discussed above, this Court:
1. DISMISSES with leave to amend the FAC's (first) fraudulent misrepresentation and concealment and (third) negligent misrepresentation claims;
2. DISMISSES with prejudice the FAC's claims arising from an alleged fiduciary relationship among UBS AG and plaintiffs but DISMISSES with leave to amend claims arising from general negligence or malpractice;
3. DISMISSES with prejudice the FAC's (fourth and fifth) securities fraud claims;
4. DISMISSES with prejudice the FAC's (seventh and eighth) RICO claims based on predicate acts of securities fraud but DISMISSES with leave to amend RICO claims based on predicate acts other than securities fraud;
5. DISMISSES with prejudice the FAC's (tenth) disgorgement claim;
6. DISMISSES with prejudice the FAC's (eleventh) [*54] civil conspiracy claim;
7. DISMISSES with prejudice the FAC's (nineteenth) accounting claim;
8. DISMISSES with leave to amend the FAC's (twentieth) declaratory relief claim;
9. DISMISSES with leave to amend the FAC's (sixteenth) breach of contract claim;
10. DISMISSES with leave to amend the FAC's (seventeenth) conversion claim;
11. ORDERS plaintiffs, no later than February 21, 2013, to file and serve either: (a) a second amended complaint, excluding claims dismissed with prejudice; or (b) a statement that plaintiffs do not seek to pursue claims in this action; and
12. ORDERS UBS AG, no than March 14, 2013, to file and serve a response to the second amended complaint.
If plaintiffs proceed with this action, this Court ADMONISHES plaintiffs to file a clear, concise second amended complaint to comply with F.R.Civ.P. 8(b)'s requirement to state "a short and plain statement of the claim" and F.R.Civ.P. 8(d)(1)'s requirement that "[e]ach allegation must be simple, concise, and direct." n8 This requirement "applies to good claims as well as bad, and is the basis for dismissal independent of Rule 12(b)(6)." McHenry v. Renne, 84 F.3d 1172, 1179 (9th Cir. 1996). "Something labeled a complaint but written more as a press release, prolix in evidentiary detail, yet without simplicity, conciseness and clarity as to whom plaintiffs are suing for what wrongs, fails to perform the essential functions of a complaint." McHenry, 84 F.3d at 1180. "Prolix, confusing complaints . . . impose unfair burdens on litigants and judges." McHenry, 84 F.3d at 1179. This Court FURTHER ADMONISHES plaintiffs that failure to file a second amended complaint with requisite simplicity, conciseness and directness will serve as grounds to dismiss its claims. This Court FURTHER ADMONISHES plaintiffs not to attempt to replead or purse claims dismissed with prejudice or for which there are insufficient supporting facts and that this Court will grant plaintiffs no further attempts to plead claims.
n8 This Court contemplated setting a page limit for plaintiffs' second amended complaint. Given dismissal of several claims and this Court's requirements of simplicity, conciseness and clarity, this Court sees no reason why the second amended complaint should exceed 40 pages.
Bar Of Plaintiffs' Own Fraud
UBS AG initially challenges the complaint's fraud claims as barred by plaintiffs' own fraud. UBS AG points to Olenicoff v. UBS AG, 2012 U.S. Dist. LEXIS 57360, 2012 WL 1192911, at *1 (C.D. Cal. 2012), where the plaintiff pursued claims against UBS AG after the plaintiff pled guilty to knowingly and willfully failing to disclose off-shore accounts on his tax returns. The fellow district judge in Olenicoff, 2012 U.S. Dist. LEXIS 57360, 2012 WL 1192911, at *1, observed:
To defend itself, UBS is forced to strenuously insist that its prior guilty plea only admitted to assisting willing clients with tax fraud, not forcing unsuspecting clients into tax evasion. While its argument is ironic, UBS is right. Even assuming that UBS gave [plaintiff] fraudulent tax advice, that makes UBS a co-conspirator, not a defendant in this litigation.
UBS AG argues that plaintiffs must bear responsibility for their own fraud and related actions in absence of FAC allegations that they misinterpreted or did not know of Line 7a or that UBS AG prepared their tax returns, advised them how to answer tax return questions, or represented that plaintiffs could legally deny existence of their UBS AG accounts.