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the New York Times

US Cites 'Secrets' Privilege as It Tries to Stop Suit on Banking Records

Eric Lichtblau

WASHINGTON, Aug. 30 - The Bush administration is signaling that it plans to turn again to a legal tool, the "state secrets" privilege, to try to stop a suit against a Belgian banking cooperative that secretly supplied millions of private financial records to the United States government, court documents show.

The suit against the consortium, known as Swift, threatens to disrupt the operations of a vital national security program and to disclose "highly classified information" if it continues, the Justice Department has said in court filings.

A hearing on the suit is scheduled for Friday in federal court in Alexandria, Va.

The "state secrets" privilege, allowing the government to shut down litigation on national security grounds, was once rarely used. The Bush administration has turned to it more than 30 times in terrorism-related cases, seeking to end public discussion of cases like the claims of an F.B.I. whistle-blower and the abduction of a German terrorism suspect.

Most notably, the administration has sought to use the privilege to kill numerous suits against telecommunications carriers over the National Security Agency's eavesdropping program.

But a judge in California rejected the argument because the program had been discussed so widely. The government challenge is pending before the United States Court of Appeals for the Ninth Circuit, where judges at a hearing two weeks ago expressed skepticism on the secrecy argument.

Asserting the privilege requires the director of national intelligence and the attorney general to certify legally the potential harm to national security.

If the administration makes good on its intention to invoke the privilege in the Swift suit, it would be one of the most significant tests of the privilege.

Swift is considered the nerve center of the global banking industry, routing trillions of dollars each day among banks, brokerage houses and other financial institutions. Its partnership with Washington, reported in The New York Times in June 2006, gave Central Intelligence Agency and Treasury Department officials access to millions of records on international banking transactions.

The access was part of an effort to trace money that investigators believed might be linked to financing of terrorism.

Months after the Sept. 11, 2001, attacks, Swift began turning over large chunks of its database in response to a series of unusually broad subpoenas from the Treasury Department.

Administration officials have defended the program as an important tool in the war on terror. European banking regulators and privacy advocates were quick to denounce the program as improper and possibly illegal.

The pressure resulted in an agreement this year by Swift and United States officials to tighten restrictions for using the data.

Two American banking customers also sued Swift on invasion-of-privacy grounds. Legal and financial analysts had expected that the suit would have been thrown out because American banking privacy laws are considered much laxer than those in much of Europe.


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But the chief judge in Federal District Court in Chicago, James F. Holderman, ruled in June that he would allow the suit to proceed, partly on grounds of claims of a Fourth Amendment violation and his finding that Swift's arguments on that point were "unpersuasive."

"The decision in Chicago was a pretty big win for our side," Steven E. Schwarz, a lawyer in Chicago who represents the plaintiffs, said in an interview.

The Swift program, Mr. Schwarz said, "is an Orwellian example of government overreaching and unfettered access to private financial information that is not consistent with the values upon which our country was founded."

Judge Holderman did agree to move the suit to the federal court in Alexandria at the request of Swift lawyers. Its main American arm operates from Manassas, Va.

The hearing on Friday is on a motion by Swift for Judge T. S. Ellis to reconsider Judge Holderman's ruling.

In a motion filed on July 25, the Justice Department urged the court to throw out the suit to "preserve" the program against financing terrorism, "protect Swift from the burden of further litigation here and minimize the likelihood that highly classified information will be threatened."

The department said this week that it would send a lawyer to the hearing, but it was unclear whether the "state secrets" privilege would be raised.

Lawyers for the Justice Department and Swift would not discuss the case in substance beyond the court filings.

The administration has turned to the privilege much more frequently than past administrations. According to a report due out this weekend by an advocacy group,, the administration has used it 39 times in the last six years, compared with 59 times in the 24 years before that.

Historically, courts have been reluctant to challenge the secrecy privilege. But the administration has suffered setbacks in seeking to use the secrecy claim in the eavesdropping case and several other recent cases.

"We've seen a real erosion of the 'state secrets' privilege in the last year," said Mr. Schwarz, the lawyer suing Swift. "I think it is from overuse. We've seen it used in record numbers, in situations where it was inappropriate, and the courts are starting to recognize that."

Tom Blanton, director of the National Security Archive at George Washington University, said: "What seems clear is that until a year or two ago, the judges rarely even questioned it when the government raised the 'state secrets' claim. It was a neutron bomb - no plaintiffs left standing.

"But we're now seeing that judges are starting to actually look behind the government's secrecy claims and see what's really there."

Copyright 2007 The New York Times Company

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