A Diplomatic Spat Between the U.S. and Switzerland

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By Mark Hosenball

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For decades Switzerland's banks have provided a haven for the ill-gotten wealth of Nazis, dictators and shady businessmen. But after 9/11, as U.S. investigators hunted for terrorist assets, the Swiss government promised to cooperate. For the first time, they opened some of their books. But that good will was fleeting. Swiss bankers and politicians have come to resent what they see as a squeeze on their most vital industry.

The strain is starting to show. This month, NEWSWEEK has learned, Swiss authorities threatened to throw a top U.S. congressional aide in jail as a spy if he tried to enter the country on official business. Douglas Frantz, chief investigator of the Senate Foreign Relations Committee, contacted the Swiss Embassy to set up meetings regarding a family facing trial for alleged nuke smuggling. As it turned out, the CIA had secretly recruited members of the family as informants, infuriating the Swiss. According to a U.S. official familiar with the matter who asked for anonymity when discussing a sensitive issue, Switzerland's police chief warned Frantz in an e-mail that he'd face arrest on espionage charges. Frantz, who declined to comment, canceled his trip. A Swiss spokesman said Frantz was turned away due to "ongoing" investigations, but that U.S.-Swiss relations remain "excellent."

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