California stops doing business with Swiss banks

A spokesman for California Treasurer Matt Fong said in a statement Tuesday that Fong "has asked the Swiss parent companies for full disclosure of the nature of dormant accounts and implemented a moratorium on investment activities with these firms until we have such disclosure."

Last week, New York City Comptroller Alan Hevesi said he would not let Union Bank of Switzerland participate in a letter of credit arrangement because he did not want to see the banking giant profit from expanded dealings with the city. Hevesi was acting on his discomfort that the Swiss bank's top officials remain unapologetic for their response to the ongoing probe into Switzerland's wartime financial transactions.

Hevesi was among those who protested earlier this year when Union Bank fired a night watchman, Christoph Meili, who rescued Holocaust-era documents from the bank's shredder.

"We were faced with the decision of whether to go ahead and do business as usual or send a message to Union Bank of Switzerland," said Hevesi, whose family included a number of Holocaust victims.

"We decided it would be sending the wrong message to accept the bid."

Union Bank was the lead bank in a consortium that had successfully bid on the letter of credit deal, under which banks are paid a fee for their guarantee of anticipated state and federal aid payments to the city.

Morgan Guaranty agreed to take the place of Union Bank, which would have received close to half of a $1.3 million fee paid for the guarantee.

The State Department criticized New York City's decision, calling it "counterproductive."

"It is our view," State Department spokesman James Rubin said, "that rather than confrontation, cooperation is the best means to achieve the results we want."

Union Bank expressed dismay at the move.

"We're all deeply sorry and disappointed that Mr. Hevesi continues to feel obliged to perpetuate this story, particularly at a time when the Swiss banks, including UBS, are working so hard and making so much progress," Richard Capone, chief operating officer for the bank's Americas region, said in a statement.

Union Bank is one of the Swiss banks that has contributed millions of dollars to a special fund for Holocaust victims.

"Mr. Hevesi's actions are taking on the characteristics of a vindictive and targeted campaign to single out and punish UBS," Capone said.