Magazine article American Banker

Western Union Wins Legal Battle over Seized Funds

Magazine article American Banker

Western Union Wins Legal Battle over Seized Funds

Article excerpt

Western Union Co. said an Arizona state court had ruled that the state could not seize remittances originated outside Arizona and intended for Mexico.

The ruling, issued late Tuesday, ended a five-month standoff between the Englewood, Colo., money transmitter and Arizona Attorney General Terry Goddard, who seized about $200,000 of Mexico-bound remittances from Western Union in September. Mr. Goddard suspected the money was linked to drug activity and human smuggling.

Shares of Western Union rose about 1% Wednesday.

In a note to investors, Craig J. Maurer, an analyst with Soleil Securities in New York, called the ruling "a significant win for Western Union, which is highly dependent on the trust of its customers." He said the ruling was unlikely to affect Western Union's fourth-quarter 2006 earnings, but could boost first-quarter results in 2007.

The court said the seizures were "unconstitutional," because Mr. Goddard could not seize remittances that were sent from out of state or were not intended for Arizona residents. The remittances Mr. Goddard seized in September originated from 26 U.S. states and were intended for recipients in Sonora, Mexico.

In October, Western Union filed an emergency motion to quash Mr. Goddard's warrant, which was granted temporarily pending the court's ruling. Since 2001 he has seized about $17 million of Mexico-bound remittances from money transmitters, suspecting they were involved in smuggling activity.

That month Ezra Levine, a lawyer representing the Money Services Roundtable, a trade group for Western Union and other money-services businesses, called the case "absolutely revolutionary," because it is "the first time in memory where a licensed money transmitter has gone to court against state regulators. …

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