(Bloomberg) UBS AG and a banker-turned-whistleblower were deemed to have too “unclean hands” to bring a malicious prosecution lawsuit against a real-estate developer who had accused them of duping him into filing a false tax return.

A state court judge in Santa Ana, California, threw out the claims by the Swiss bank and whistleblower Bradley Birkenfeld, according to a transcript provided by a lawyer for developer Igor Olenicoff. The ruling, based on the legal doctrine that those who commit wrongdoing can’t sue others involved in it, couldn’t be confirmed in court records Monday.

California Superior Court Judge Kim G. Dunning said at a July 23 hearing on Olenicoff’s “unclean hands” defense that all three—UBS, Birkenfeld and Olenicoff—had admitted to illegal conduct and that it wouldn’t serve justice to let UBS and Birkenfeld proceed with their claims.

The case had been headed for a six-week jury trial until the judge’s ruling ended it, said Christian Counts, a lawyer for Olenicoff.

“This was the most economical way to resolve it,” Counts said Monday in a phone interview.

Jeffrey Thomas, a lawyer for UBS, and Nelson Franse, a lawyer for Birkenfeld, didn’t immediately respond to phone and e-mail messages after regular business hours Monday seeking comment on the decision.

UBS avoided prosecution in February 2009 by admitting it helped clients evade taxes from 2000 to 2007. The bank also paid $780 million, gave the IRS data on 250 secret accounts and agreed to reveal information on 4,450 more.

False Return
Olenicoff, who built his fortune as the chief executive officer of Newport Beach, California-based Olen Properties Corp., pleaded guilty in 2007 to filing a false tax return. He admitted that he failed to disclose about $200 million in offshore accounts to the Internal Revenue Service.

After his plea, Olenicoff sued UBS and Birkenfeld, claiming the Zurich-based bank committed fraud by not telling him he owed taxes. That lawsuit was dismissed because Olenicoff had sworn in his guilty plea that “he was not an innocent dupe.”

The case is UBS AG v. Olenicoff, 2012-00589134, California Superior Court, Orange County (Santa Ana).

—With assistance from David Voreacos in federal court in Newark, New Jersey.

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