Oct. 4 (Bloomberg) -- Western Union Co., the biggest U.S. money-transfer company, won a court stay to keep Arizona from seizing money sent from its outlets in 28 other states to a region of Mexico, Chief Executive Officer Christina Gold said.

Western Union, which was spun off from First Data Corp. last week, disclosed Sept. 22 that Arizona Attorney General Terry Goddard had obtained a seizure warrant as part of a probe into drug and immigrant smuggling. Goddard sought to block most money transfers of $500 or more to 26 locations in Sonora, even if the senders and recipients had no ties to Arizona.

The company won't have to comply with the order until at least Oct. 16, when a court is scheduled to hear Western Union's case for quashing the warrant, Gold said in an interview. U.S. District Judge Kenneth Fields issued the stay on Sept. 25, according to court documents.

``We did comply at the very beginning, and then we did go before a judge who gave us a date for a hearing,'' Gold said in a telephone interview from New York. ``Everything is stopped before the hearing.''

The warrant required funds to be held in a ``detention account'' for review before being sent on to recipients in Sonora, according to Western Union's Sept. 22 filing with the U.S. Securities and Exchange Commission. The company said in a Sept. 19 federal court complaint that Arizona had seized money before, and then ``interrogated'' senders and recipients.

``We're prepared to fight our case in court,'' said Goddard's press secretary, Andrea Esquer.

Customers Fingerprinted

First Data said in July that U.S. proposals to tighten immigration rules cut Western Union's revenue from migrant workers, who feared authorities might use money-transfer records to track them down. Gold said today customers in Arizona who received $500 or more from nine states were fingerprinted by authorities at the company's stores, under a previously issued warrant by Goddard's office.

``They have put a seizure on any transaction over $500, and that's assuming that something is wrong with every transaction,'' Gold said. ``It's really problematic for us, because our brand is all about trust, convenience and reliability. Our consumers really don't understand why if you send a transaction from California to Mexico, you'd have to call the attorney general in Arizona first.''

Call the Police

Arizona has issued 22 seizure warrants to money-transfer companies as part of its investigations, according to Esquer.

The warrants work by forcing recipients of targeted transfers to call a phone number before their money is released, she said. They talk to a police officer on an Arizona financial task force, who decides if the transfer is legitimate. If so, the money is released ``typically within a day,'' Esquer said. Otherwise, the funds are detained and an investigation ensues.

Western Union has already accounted for any negative impact on remittances and earnings if the warrant is upheld, Gold said.

``As we developed the guidance for '06 and '07, we had already had some issues related to immigration and the impact on our business,'' she said.

The company is ``ramping up'' its marketing programs to win back customers turned off by the latest investigations, J.P. Morgan Securities Inc. analysts Tien-tsin Huang and Reginald Smith wrote in an Oct. 2 research note initiating coverage of Western Union with a ``neutral'' rating on the stock. They estimated the ``real risk'' tied to the company's U.S. and Mexico remittance business was already reflected in the stock price.

Shares of Englewood, Colorado-based Western Union fell 22 cents to $19.78 at 4 p.m. in New York Stock Exchange composite trading.

The case is: Western Union Financial Services Inc. d.b.a. Western Union v. Terry Goddard, CV 06-02249, U.S. District Court, District of Arizona.

To contact the reporter on this story: Will Edwards in Charlotte, North Carolina at wiedwards@bloomberg.net.

Last Updated: October 4, 2006 16:15 EDT