Pressure Rises for Holocaust Fund Pact

The two top financial officials in New York state on Thursday announced a series of escalating sanctions designed to pressure Swiss banks into reaching an agreement with Holocaust victims who claim the institutions illegally held their assets for decades.

If a settlement is not reached by Sept. 1, the New York City and the state comptrollers will bar short-term investments with Swiss banks and stop Swiss banks and investment firms from selling state and city debt.

Two months later, if the impasse continues, investment managers for the city and the state will be barred from trading through Swiss firms, with other penalties to follow periodically.

“This is about justice long delayed,” state Comptroller H. Carl McCall said during a news conference in Manhattan. “The average age of the Holocaust survivors is 81. They cannot wait any longer.”

In New Jersey, Gov. Christine Todd Whitman ordered state pension funds to stop making any new investments in Swiss banks. The Garden State currently holds 280,000 shares in the Union Bank of Switzerland, worth about $85 million. The New Jersey Senate is considering a bill to divest the stock.

The moves came a day after a commission representing 800 financial officers throughout the nation--chaired by New York City Comptroller Alan G. Hevesi--recommended sanctions against Switzerland’s three biggest banks.

California state Treasurer Matt Fong, a commission member, Wednesday ordered his staff not to do business with the banks.

“This program of actions is a last resort forced upon us by the continuing failure of the Swiss government to participate in the negotiations,” Hevesi charged.

The committee’s recommendation brought an angry rejoinder Thursday from the Swiss government. In a statement, it charged the sanctions were “counterproductive, unjustified and illegal.”

The statement said Switzerland would not be influenced by “attempts to exert pressure.”

“Switzerland and especially the Swiss banks have taken unparalleled, far-reaching measures in connection with their role in World War II. This has been recognized by the American and Israeli governments. Sanctions endanger implementation of these measures,” the Swiss government said, “and in no way do they serve the needs of Holocaust victims.” The Swiss government called for serious discussions with lawyers for the victims and their families, without threats.

Hevesi said the timing of the initial sanctions for Sept. 1 was designed to allow negotiations to resume.

“These are thoughtful and cautious actions designed to both send a strong message to the Swiss and encourage the parties to resume negotiations in good faith,” McCall added.

New York state’s short-term investment program holds $150 million in Union Bank of Switzerland securities maturing on Sept. 1. New York City’s pension funds own shares of stock in Switzerland’s three biggest banks totaling $136.7 million.

The ultimate sanctions in the schedule of escalating pressure would be applied by next July 1 under the plan announced by Hevesi and McCall.

The plan calls for divesting more than $1.1 billion in holdings in Swiss companies.