January 12, 2010 - Phil Hodgen

Your name is “Chum” in the “I’m going deep-sea fishing” sense

In early 2009 the Swiss government released the identities of 250 U.S. account holders at UBS. Anecdotally, I understand that a huge number of these people are in the gunsights of the Department of Justice.

The government entity in Switzerland that ordered UBS to release this information is called FINMA.

Last week a Swiss administrative court reviewed the actions of the bureaucrats at FINMA, and found that telling the names to the U.S. was illegal under Swiss law.

Sorry, Chum.


FINMA bureaucrats are unrepentant and are considering an appeal to the Swiss Supreme Court.

Of. Course. They. Will. CYA and all that.

What happens next?

I would assume (this is a rank amateur’s assumption) that in due course the Swiss Supreme Court will agree with the lower court and say that FINMA stepped out of bounds and violated Swiss bank secrecy laws. The Swiss banking industry has been irreparably damaged and remedial repairs are forthcoming. Barn door. Horse. Etc. But still, I would expect the rule of law to be consistent in Switzerland, and breaches of bank secrecy to be identified as such by the Supreme Court.

For the unfortunate 250

For the unfortunate 250 people, the Administrative Court’s ruling means nothing. It’s like finding out Mistakes Were Made after administering the electric chair.


Is there a cause of action for damages in Switzerland? I’m going to check with some of my contacts there to find out. But (ahem) #GoodLuckWithThat. (Oblig. Twitter hashtag reference.)

For the 4,450

Heh. The 4,450 names to be blurted out by the Swiss Federal Tax Authorities to the IRS. Kinda reminds me of the Book of Revelations and the 144,000. Except the 144,000 are headed for glory and the 4,450 are not.

For those of you who are wondering whether you will be identified in the 4,450 names to be identified from UBS to the IRS via the SFTA, I have a bit more hope. (Primer: the players in the game — UBS, Swiss government, IRS — have agreed that 4,450 names will be divulged via the information-sharing process in the income tax treaty between the USA and Switzerland. Certain criteria have been agreed to for identification.)

Does this court ruling trump the bilateral agreement made between the UBS and the IRS as part of the litigation settlement? If it does, then the Swiss administrative court ruling (especially if appealed to the Swiss Supreme Court) will at least put the disclosure of 4,450 names on hold, and may torpedo it entirely.

I need more information on this so I can understand (a) the implications in the Swiss legal system and (b) the impact of this decision on the negotiated settlement with the IRS.

For the moment at least, there is a new joker in the deck.

We’ll keep playing. Because what else can we do?

Voluntary Disclosure