3 States, NYC Drop Sanctions on Swiss Banks

New York City and State, California and Pennsylvania on Thursday canceled planned sanctions against Swiss banks, thereby eliminating an obstacle to implementing the agreement by Switzerland’s leading banks to pay $1.25 billion to settle claims by Jewish Holocaust victims and their heirs.

The bank agreement, reached Wednesday, is contingent on the withdrawal of threats by many U.S. states and municipalities to stop business dealings with the banks and subject them to other penalties if a settlement was not reached.

In California, state Treasurer Matt Fong said he had instructed his staff to immediately lift investment sanctions imposed by his state on and off since last summer.

New York City Comptroller Alan G. Hevesi and state Comptroller Carl McCall had planned to begin phasing in sanctions Sept. 1. In Harrisburg, Pa., state Treasurer Barbara Hafer said her office is putting plans to impose sanctions on indefinite hold.

Hevesi had organized a nationwide network of state and local financial officers to monitor the settlement negotiations, with an eye to sanctions if the talks faltered. The tactic was denounced bitterly by the banks and the Swiss government and opposed strongly by the Clinton administration. Nevertheless, sources familiar with the negotiations said, the threat was a major factor in inducing the banks to settle.

Hevesi, who lost members of his family in the Holocaust, said his group would recommend that all of its nearly 900 members also drop planned sanctions.

The agreement is intended to provide some compensation for funds and other valuables deposited in Swiss banks by Jews, most of whom later died in Nazi extermination camps. After the war, those who survived and the heirs of those who didn’t found that the banks intended to keep these assets because the claimants could not prove their ownership rights.

Meanwhile, Swiss insurer Zurich Insurance Co. agreed to resolve outstanding insurance claims of Holocaust victims, New York state officials said. Zurich is the first European company to do so.