White Tiger Logo

OPERATION


White Tiger Logo


THE DOCUMENTS THE GOVERNMENT
DIDN'T WANT YOU TO SEE!

Read all the pertinent stories about "Operation White Tiger". It involves U.S. government agency's cover up of serious investigations in the Hank-Rhon's [Carlos, Jorge and Hank Gonzalez senior aka El Professor (now deceased)] case.

There are also two links to a couple of very good articles, one by Jaime Dettmer of Insight Magazine and one by Dolia Estevez of El Financiero. The government did NOT wish to have these documents entered into the file for public access. The Judge denied the requests to have them deleted. After a long wait and much red tape, I now have them available for the first time to the public.

There is a public document and sworn statement by a DOJ official named Michael T. Horn, head of the National Drug Intelligence Center (NDIC) which is filed at the Alexandria Virginia District Court House.(Dated: 1-20-00)

You can get your own copy of the document if you send a check or money order to:

Clerk's Office
U.S. District Court
Alexandria, Virginia
Fax:(703)299-0119

Civil Docket: 02-MC-6

Request documents (c) (d) & (e) from Exhibit R to Docket item #11.( about 32 pages in all)

Certified copies are about 50 cents each page and $7.00 for certification. (About $21.00)

"Operation White Tiger" is explained fully and you can read the certified documents. The fact that the government did NOT wish to reveal certain "sources" illustrates that it would cause a MAJOR problem with Mexican-U.S. relations. There was definitely collusion going on to protect people like Jorge Hank-Rhon. I know first hand. I experienced the protectionist retaliation for doing my job.

It makes you wonder why Customs Supervisor John "Jack" Maryon "ordered" me NOT to put Jorge Hank-Rhon's name into the TECS II computer; status "look out", or at least on a MOIR/ROI distribution list???

If there is a "National Security" interest, NO ONE ever said so. On the contrary, I was told by my Supervisor John "Jack" Maryon, that he "had lunch" with the suspect Jorge Hank-Rhon once a week! THAT is no reason to retaliate against someone who is just doing their job! THAT is not justification for ruining someone's career. The agency should inform and discuss this issue very candidly with anyone that discovers sensitive information and explain that "other" national interests prevail, before retaliating without apparent reason. This was NOT done, because there was no special legitimate interests. Our government should not damage our own people to protect foreign interests. Are WE to be considered "collateral damage"? NO!

It makes you wonder which "internal" sources OUR government is really protecting? What do you think?

The following articles may help explain some things too.

John Carman
Editor~ www.customscorruption.com




The following articles are actual scans of the magazine to preserve the integrity and validity of the source. The White Tiger Document is a scan as well, with certification stamp affixed.

El Financiero

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Insight Magazine

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<<RETURN TO CUSTOMSCORRUPTION.COM






The Last Word
Posted Feb. 25, 2002
By Paul M. Rodriguez

Free Press Facing Challenge to Its Rights

What do an international business consultant, an Ohio professor and three journalists have in common? Nothing more than independent work to expose squalid and disturbing allegations of ties among politicians, banks, narcotraffickers and money launderers on both sides of the U.S.-Mexican border and tie-ins elsewhere around the world.

A second common factor is that all have incurred the wrath of the Hank family — one of the most powerful clans in Mexico — which has launched high-powered legal exercises in Texas and Ohio to intimidate and harass members of the press and challenge their rights afforded by the First Amendment. This includes Insight and one of its senior editors, Jamie Dettmer, as well as Washington Post reporter Douglas Farah and Dolia Estevez, the Washington correspondent of Mexico's El Financiero newspaper. All three have received subpoenas to produce a wide range of information protected by U.S. press-shield laws and our Constitution.

Reading the subpoena is like reading the summary of a high-suspense plot from a John Grisham novel, what with tantalizing hints of conspiracies, organized-crime ties, secret U.S. intelligence agencies, shady gumshoes, undercover sources and the assassination of a Roman Catholic prelate. Details are indeed contained in the two legal cases that now have enmeshed the magazine and the two newspapers in a lawsuit filed in Laredo, Texas, against writer and business consultant Christopher Whalen, and another filed in Cleveland against Donald Schulz, a political-science professor.

If the subpoenas served on the news organizations are allowed to stand, many in the trade believe the precedent would chill reporting by the American press on efforts by U.S. authorities to resist suspected narcotrafficking and organized crime.

So how did this happen? It began with an exclusive report by Dettmer back in March 1999 outlining details in federal law-enforcement and intelligence documents alleging close ties between the Hank family and Mexico's suspected top narcotraffickers, including the Arellano Felix cartel in Tijuana. The story included details of how tons of illegal drugs move freely across borders and the lax security that allows these substances to destroy the lives of millions.

The article about the Hanks reported findings of a major multiagency probe into the Mexican family involving political and business support to help mask or otherwise support the illegal-drug trade. One of the documents referenced in the story involved Operation White Tiger. It concluded that the Hank family, consisting of the now-dead patriarch Carlos Hank Gonzalez, a billionaire businessman and top Mexican politician, and his two sons, Carlos Hank Rhon and Jorge Hank Rhon, represented a "major criminal threat" to the United States because of alleged political protection they afforded to drug cartels (see "Family Affairs," March 29, 1999).

A month after Insight broke that story, U.S. and Mexican newspapers followed our lead with yet more information based on their own sources. The stories caused quite a stir within the Clinton administration and in Mexico, where at a summit of law-enforcement chiefs, Mexicans complained loudly to their U.S. counterparts, as did Mexico's then-president Ernesto Zedillo, whose campaign-nomination papers Carlos Hank Gonzalez had signed.

Since then, the Hanks have mounted a major counterattack, including their recent U.S. lawsuits against Whalen and Schultz. Whalen is the former editor of The Mexico Report, a newsletter on politics and finance that carried similar stories about the allegations against the Hanks and others. Whalen also was an adviser to the U.S. Federal Reserve and reportedly helped to block a bid by Carlos Hank Rhon to buy a second bank in Texas to add to the family's ownership of the Laredo National Bank.

In addition to suing Whalen for "tortious interference" in their effort to buy a second U.S. bank, the Hanks sued Schulz following a Wall Street Journal report identifying him as a "probable source" of leaks from Operation White Tiger to the press. Schulz is considered an expert on Central and South American issues and author of an unpublished (but circulated) study entitled Narcopolitics in Mexico. The Hanks' lawsuit charges that Schulz spread false and defamatory information about the family based on insider knowledge from the White Tiger report and his ties with U.S. law-enforcement agencies.

There have been several stories about the ongoing cases in local press and one overview by The Nation magazine (see www.nation.com). But this is the first report on the subpoenas recently served on the news outlets — demands that seek astonishing access to a wide range of protected information. For example, in the subpoena accepted for Insight by the Washington law firm of Akin Gump, the Hanks want all unpublished documents, materials and e-mails and all details of conversations reporters and editors had on a wealth of matters relating to the family, federal law enforcement, other news outlets and any documents in our possession. In short, the whole enchilada, and to hell with the First Amendment!

Such chilling requests are rare — and, generally, fail — but they raise serious issues about the rights of a free press to do its job. For smaller publications with limited resources it could deal a deathblow to enterprise reporting and shut down those who stand up to the rich and powerful. We'll keep you posted.

Paul M. Rodriguez is the managing editor of Insight.





Drug War On Trial
URL: http://www.mapinc.org/drugnews/v01/n1683/a06.html
Newshawk: Terry Liittschwager
Pubdate: Mon, 17 Sep 2001
Source: Nation, The (US)
Page: 18
Author: Mark Schapiro
Note: Mark Schapiro writes frequently on international affairs. Research support was provided by the Investigative Fund of the Nation Institute.
Bookmark: http://www.mapinc.org/people/Al+Giordano (Giordano, Al)

A new counteroffensive has been launched in the drug war: Financiers have begun to retaliate against allegations of money laundering and drug trafficking by suing the messengers.  If successful, the suits could hinder future investigations into the G spot of the drug trade, where billions of dollars in illicit profits meet the highest precincts of international finance.

At the heart of the legal assault are a Mexican billionaire and majority owner of a Texas bank, Carlos Hank Rhon, of the powerful Hank family ( frequently referred to as the "Mexican Rockefellers" ), and Roberto Hernandez, president of Banamex, Mexico's second-largest bank.  The suits are being fought out in US courts, pitting scions of the Mexican elite against an American journalist, a scholar and a little-known agency of the US government.

Carlos Hank Rhon is the eldest son of Carlos Hank Gonzalez, who parlayed friendships with former Mexican President Carlos Salinas and his predecessor into a multibillion-dollar financial empire.  Hank Gonzalez died in August at the age of 73; his two surviving sons, Carlos Hank Rhon and Jorge Hank Rhon, now oversee a multinational conglomerate that includes holdings in real estate, television, manufacturing, trucking and banking.  In the mid-1990s Incus, a Caribbean-based holding company controlled by Carlos Hank, engineered the purchase of the Laredo National Bank of Texas, in one of the most significant expansions of Mexican capital into the United States in the NAFTA era.

Carlos Hank's takeover of Laredo, however, ignited the interest of the Federal Reserve Board and the suspicions of the National Drug Intelligence Center ( NDIC ), which supplies intelligence and analyses to law enforcement agencies.  In a draft summary of an 800-page report detailing the links between drug traffickers and top Mexican politicians and financial figures, the NDIC drew connections suggesting that Hank was involved in the drug trade and included reports of his involvement in money laundering for Mexican drug organizations.  The report, compiled at the request of the FBI and the Drug Enforcement Administration, was dubbed Operation White Tiger, in reference to an attempt by Carlos Hank to smuggle an endangered white tiger into Mexico in the back seat of his Mercedes in 1991.

In the spring of 1999 the contents of the leaked White Tiger draft summary--including the assertion that Hank posed "a significant criminal threat to the United States" and that his enterprises helped facilitate cocaine and heroin shipments into the United States--broke in a series of articles in the Washington Times's weekly magazine Insight, the Washington Post, the Mexican newspaper El Financiero and a feisty quarterly journal of Hispanic politics and culture, El Andar, based in Santa Cruz, California, which has been dogging the Hanks with investigative reports over the past two years.  The Laredo bank immediately threatened legal action against El Andar, which has a circulation of some 10,000 readers, demanding a retraction, $10 million and the bank's approval of any future articles.  Julia Reynolds, author of the story and editor of El Andar, refused, and continued to write about the bank's funding and connections to Texas political figures--including George W.  Bush.  After publicity on the threat against El Andar appeared in the Los Angeles Times, Laredo backed off its threat to sue.

The news about the Hanks was explosive, breaking just as then-Attorney General Janet Reno and then-White House drug czar Gen.  Barry McCaffrey were visiting Mexico for a series of meetings on US-Mexican cooperation in the drug war.

The White Tiger findings would generate more attention to the NDIC than at any time in its short, mostly obscure history.  Based in Johnstown, Pennsylvania, the center, with a staff of some 200 scholars and researchers, was created by George Bush senior as an arm of the Justice Department to signal his commitment to fighting drugs ( and as a signal of Democratic Congressman John Murtha's commitment to providing employment for his constituents ).  Until recently, its investigators have been mostly nameless, the millions of words issuing from its government-issue red-brick offices mostly anonymous.

But that changed when the NDIC was hit with a multimillion-dollar lawsuit by Laredo's American president, Gary Jacobs.  In the suit, filed this past May 23 in federal court in Laredo, Texas, Jacobs demands $129 million from the NDIC on the grounds that the center's leak of the White Tiger summary constituted a violation of the Privacy Act, which prohibits the leak of classified government documents.  Jacobs terms the NDIC's allegations "life-shattering lies." His attorney, Patrick McLaughlin, contends that the information in White Tiger was little more than "unproven and uncharged allegations" contained in an "unvetted" report that was "illegally disseminated to the news media." White Tiger, he says, "assassinated my client's character." On August 20 the Justice Department filed suit in federal district court in Laredo asking that the case be dismissed.

Though Jacobs's name is on the lawsuit, it is Carlos Hank Rhon who is the unseen player behind the legal machinations.  Carlos Hank's company, Incus, has controlled 70 percent of the shares in Laredo, and it is Hank's name that surfaces most prominently in the White Tiger and related stories.  Jacobs's suit was filed a week before the settlement of a longstanding Federal Reserve Board civil complaint against Hank and Incus accusing him of using the names of relatives and associates to cover up his financial interest in Laredo.  The settlement does not require Hank to admit guilt, but he is required to turn over his controlling shares in the bank to an independent trust.  And he agreed to pay $40 million in penalties--the second-biggest fine in the Federal Reserve's history.

That was not Hank's first run-in with the Fed.  In the mid-1990s, as reports similar to those later contained in White Tiger began surfacing in Mexico and the United States, the Fed launched an investigation into Laredo's bid to purchase the Mercantile Bank of Brownsville, Texas.  After a lengthy investigation Laredo withdrew its bid.

Jacobs's suit against the NDIC followed, by less than a year, a legal blitzkrieg that transformed the life of a mild-mannered political scientist named Donald Schulz.  Currently chairman of the political science department at Cleveland State University, Schulz worked for eight years as a specialist on Latin America and national security for the Strategic Studies Institute at the US Army War College.  While researching an academic book exploring the links between the drug trade and Mexican politicians, Schulz interviewed several officials at the National Drug Intelligence Center, one of whom sent him a copy of the draft executive summary of White Tiger containing material on the Hanks.  Jacobs filed suit against Schulz in August 2000, accusing him of violations of the RICO act, alleging that he was involved in an "enterprise...designed to...unlawfully acquire, use and disseminate top secret, predecisional, law enforcement sensitive information...to the direct detriment of plaintiffs," that the assertions in White Tiger constituted defamation and that release of the draft report was a violation of Justice Department regulations prohibiting unauthorized release of documents considered "law enforcement sensitive." In essence, Jacobs accuses Schulz of "infiltrating" the NDIC and providing researchers there with "disinformation" that was later leaked to the press in White Tiger.

Laredo's lawyer, Ricardo Cedillo, denies the White Tiger allegations and asserts that they have resulted in deep damage to Jacobs's professional standing.  "Gary Jacobs is a border banker with an impeccable reputation," Cedillo said in a telephone interview from his office in San Antonio.  "Suddenly, he's not being invited to the seminars and programs on both sides of the border, he's not enjoying the fruits of his labor.  He has been on a first-name basis with ambassadors from the United States and Mexico, and now he is [treated like] a pariah after being associated [in White Tiger] with money launderers."

Schulz denies providing any such information or leaking the report.  Schulz's trial, when it commences in August 2002, will revolve not necessarily around the truth of such assertions but whether he leaked the report and whether he conspired to interject allegedly defamatory information into the contents of the NDIC report.  Schulz says he didn't receive a copy of the summary until late March of 1999 ( the court record indicates it was sent to him on March 25 ), and the Insight magazine story--the first to publish the White Tiger allegations, and running at almost 4,000 words--appeared on March 29.  The author of the story, Jamie Dettmer, has declined to name his source, but he insists that it wasn't Schulz.  An internal investigation by the Justice Department determined that the source of the leak--and the person who sent the draft summary to Schulz--was the supervisor of the White Tiger project, an NDIC agent named Daniel Huffman; Huffman, a former FBI agent, resigned under pressure last year.

Whoever was the source, the leaks were not popular in Washington, which was on the verge of certifying Mexico as a "partner" in the drug war.  In a letter to former Senator Warren Rudman, who as a Hank lobbyist on Capitol Hill had disputed the White Tiger allegations, Attorney General Janet Reno disassociated herself from the findings in the report.  Shortly afterward, Schulz's work on Mexico at the War College was terminated, and he was diverted to research on Colombia as the wheels of Plan Colombia were grinding their way through Congress.  White Tiger itself was shelved by the NDIC when a new director took over in June 1999.

For Schulz, the lawsuit has had a devastating impact.  He has spent, thus far, some $25,000 on legal costs and has received no assistance from either the NDIC or the US Army War College; his appeal to the government for legal help has now been sitting with the Justice Department for more than eight months.  If the case goes to trial, Schulz, 59, says it will eat up all his retirement savings.  Ironically, Schulz and the NDIC, which tried to distance itself from him after he was sued last year, have now been thrown together as parallel defendants in the legal offensive launched by Jacobs.  "It doesn't matter whether I win or lose; I lose," Schulz says.  "My time, my costs to lawyers--I will have lost even if I'm vindicated in the end." In June Schulz filed a countersuit for "harassment" against Laredo, asking $1 million in damages and demanding that Carlos Hank Rhon's name be added to Jacobs's complaint as a plaintiff.  As the majority owner and chairman of Laredo, and as a primary target of Operation White Tiger, Hank, Schulz argues, dodged behind Jacobs.  Keeping Hank's name off the suit, asserts Schulz, protects him from being deposed and keeps information about his business activities in the United States and Mexico from being entered into the legal record.

Cedillo discounts this charge: "Jacobs is no surrogate for Carlos Hank Rhon." Rather, he says, the reason the Mexican mogul has kept his name off the suit is that he "has a thick skin, and didn't want to aggravate Mexican press attention at a time when his father was ill." Indeed, the Mexican press has had a voracious appetite for stories on the Hank family--ranging from serious corruption investigations to salacious tabloid reports, in which they are cast as a symbol of the PRI oligarchy that dominated Mexico for seven decades.

Jacobs's legal offensive appears to be the culmination of a campaign foreshadowed on national television when, in an interview with PBS's Frontline for its fall 2000 special on the drug war, he announced, "With the lawsuits I [am] getting ready to file, these cockroaches in the government are going to run for cover." Jacobs's choice of "cockroaches" appears to be based on the potential for sending a warning signal to any future investigators--from the government or the press.  The Washington Times never heard from Jacobs's legal team.  After being contacted by Carlos Hank's lawyers, the Washington Post printed a "clarification" of its earlier story by saying it had mistakenly identified a trucking company as a Hank property.  ( The Post stands by the rest of its reporting on the White Tiger findings concerning Hank family links to the drug trade.  )

Schulz says the suit against him "is part of a larger campaign of intimidation against journalists, scholars and US government researchers who have researched or written about the Hanks.  It's an attempt to intimidate and silence everything from El Andar to the US government, or those who speak with the US government.  If it succeeds, simply threatening a lawsuit could be used by others to deter government or journalistic investigations."

Another case wending its way through the courts involves a Mexican banker's legal attack against a US journalist, Al Giordano, the editor and publisher of Narco News ( www.narconews.com ), an Internet magazine that for the past year has been covering the intersection between corruption and the drug war in Latin America.  Giordano is facing a libel suit filed by Banamex, Mexico's second-largest bank, for a series he wrote last year asserting that the bank's president, Roberto Hernandez, was involved with drug trafficking and money laundering.

Giordano's reports were based on stories in the Mexican newspaper Por Esto!, based in Yucatan.  The author of the Por Esto! series was the newspaper's founder and editor, Mario Menendez, a veteran Mexican journalist who was briefly imprisoned in 1968 after publishing details about the massacre of students demonstrating in Mexico City's Tlatelolco Plaza before the 1968 Olympics.

Por Esto!'s most explosive charges--which Giordano went on to repeat, describing them as "what lawyers call beyond a reasonable doubt"--concerned the appearance of several bales of cocaine on land owned by Hernandez along the Yucatan coast.  Hernandez himself is a leading figure of the Mexican old guard allied to the PRI, having purchased the government's shares in Banamex in 1991, turning that investment into a financial empire.  There was no proof of Hernandez's knowledge of the shipment, but the Por Esto! series, which ran from 1996 through 1999, included photographs of the cocaine seized on Hernandez-owned property and of containers frequently associated with drug-running along the Yucatan coast that were found on Hernandez-owned beachfront.  The stories proved particularly embarrassing when President Clinton traveled to Yucatan in 1999 for an antidrug conference attended by then-Mexican President Ernesto Zedillo and hosted by Hernandez at a local resort.

Banamex responded by suing Mario Menendez for libel and slander.  Two years later, a Mexican judge ruled against the bank; that decision was upheld in May 2000 on appeal ( a subsequent effort to pursue Menendez on criminal libel charges was thrown out of court in Mexico City last October ).  Having failed to discredit the charges in Mexico, in August 2000 Banamex shifted venue, filing suit on the same grounds against Giordano, Narco News and Menendez in a state court in New York.  The defendants, allege Banamex, defamed the bank and issued "false statements" that interfered with the bank's "prospective economic advantage," based on the fact that the journalists repeated their charges during an interview on New York public radio station WBAI and during a Columbia University conference on Latin America in March of 2000.  According to the bank's filing, "Neither Banamex nor its Chairman and General Director are or ever have been engaged in illegal drug trafficking...nor is it funded with such money."

The case represents an unprecedented turn of events for Internet journalism.  Narco News, produced and written in English from a town in Mexico, has broken some important stories related to the drug war--including an expose of the CIA's hiring of mercenaries in Peru, months before an airplane with an American missionary family aboard was shot down by one of those private CIA-contractor teams in the Peruvian jungle.  "You've got a Mexican Internet magazine, published in English, being sued in an American court," comments veteran civil liberties lawyer Thomas Lesser, who is defending Narco News.  "If they can get away with this, nobody on the Internet will be safe from legal harassment." The suit has been a nerve-rattling experience for Giordano, a former political correspondent for the Boston Phoenix.  With no legal insurance and operating on a bare-bones budget, he is conducting a joint defense with Lesser, representing Narco News, and David Atlas, representing Menendez.

"What was said here in New York about Banamex is mild when compared with what was said about Hernandez in Mexico," comments Atlas, who is with the New York law firm of Frankfurt, Garbus, Kurnit, Klein & Selz, noted for its defense of First Amendment cases.  "And Mexican courts decided three times that what Menendez published was not defamatory to Banamex.  This is purely an attempt to intimidate journalists, this time in an entirely new venue." In a hearing at the New York Supreme Court in Manhattan on July 20, Atlas, Lesser and Giordano argued that Banamex's suit should be thrown out of court on jurisdictional grounds and because New York law requires malice, which they deny.  The judge is considering their request.

he accuracy of all these stories will in the end be determined by a court of law.  In the meantime, there is one revealing element common to all the legal actions.  It is a financial institution that is far closer to home than any of the Mexican enterprises operating south of the Rio Grande: Citibank.  It was Citibank that brought Carlos Hank Rhon to the attention of the Fed during the Mercantile Bank investigation because of his ties to Raul Salinas, brother of then-Mexican President Carlos Salinas.  Hank Rhon introduced Raul Salinas to the top banking agent in Mexico for Citibank, which Treasury Department investigators claim helped facilitate the laundering of some $200 million that Raul Salinas skimmed off Mexican government food programs, corrupt procurements and drug payoffs during his brother's tenure as president.  ( Raul Salinas is currently serving a twenty-year sentence in a Mexican prison for murder and illicit enrichment; Carlos Salinas is living in self-imposed exile in Ireland.  )

Most pungently, on May 18 Citibank, now Citigroup, announced that it was purchasing Banamex for $12.5 billion in cash and stock--making Hernandez, overnight, one of the richest men in the Americas.

"How can they [Banamex] claim that I've ruined their reputation when they've just done a massive deal with Citibank." exclaimed Giordano, interviewed by telephone from his office in Mexico shortly after the sale was announced.

The Citibank-Banamex deal now joins the largest US financial institution--which was criticized by the Federal Reserve Board during Senate subcommittee hearings in 1999 as having lacked the proper procedures to detect Salinas's and other corrupt Mexican politicians' money-laundering activities--with a bank that has been excoriated in the Mexican and US press for its corrupt ties to the PRI.  ( Responding to widespread criticisms of its monitoring of suspect accounts, this past spring Citigroup hired one of the Fed's top experts on money laundering, Rick Small, to oversee its compliance office.  ) A further irony: When Citigroup chairman Robert Rubin was Treasury Secretary during the Clinton Administration, he authorized a comprehensive assault on money laundering that was dubbed Operation Casablanca.  Among the tens of millions of dollars identified as having illicit origins over the course of Casablanca's multipronged investigation ( which was partly immortalized in the film Traffic ) was $3.3 million seized during a sting against none other than Banamex, which the DEA, in coordination with Mexican law enforcement, alleged was drug money from a northern Mexican smuggling operation.

In many ways, all these cases are also united by the phenomenon of NAFTA's having opened the door to Mexican capital flowing north, just as US capital and jobs have been flowing south.  Follow the money far enough across the ever-more-open US-Mexican frontier, these challenges suggest, and journalists and scholars alike, not to mention the federal government itself, could face a new NAFTA-inspired boomerang of unintended consequences.  Giordano now claims that if his case goes to trial, it will not be just him but "the entire drug war" that will be going on trial.

The guiding principle of Operation Casablanca was to "follow the money" that helps fuel the drug trade.  Whatever the courts decide, the three pending cases offer an ominous warning sign to anyone who tries to do just that.  Congressional investigators estimate that as much as $500 billion is laundered through the US financial system each year.  But attempting to draw the links between the legitimate and illegitimate economies, the great untold secret of the drug war, remains a dangerous business. 



Carlos Hank's NAFTA Bank
by Louis Dubose

it's owned by Incus?
-- That's correct?
Who holds the majority of the stock?
-- Incus.
Who owns Incus?
-- Carlos Hank Rhon


Laredo

On the third floor of Laredo's palatial new court house, in a room appointed with rose-colored faux marble, extravagant drapery, and dark hardwood bar, bench, and tables, a plaintiff was telling a cattle rustling tale. Though it was a tale of modern cattle rustling -- involving show cattle, high-dollar auctions, the implantation of fertilized eggs, and a business partner doing the rustling -- it was a case you would expect to be tried in one of the old architectural monuments Laura Bush is trying to preserve in rural Texas. And if the claim that "with embryo transfer there is no limit as to how many calves you can get from one cow" seemed as over the top as Laredo's four-story monument to justice and county government, the plaintiff was earnest, eloquent, and compelling. Judge Elma Salinas Ender ruled on a substantial default judgment that provided $75,000 and attorneys' fees for the plaintiff and enjoined the defendant from selling any more cows owned in partnership. The quick resolution of the case provided one of those sweet moments in a courtroom, when equity is efficiently delivered and justice is served -- even if the defendant was nowhere to be seen.

It also provided a stark contrast to the case that would follow: Laredo National Bank's claim that a New York investment banker had queered the deal when LNB set out to acquire Mercantile National Bank of Brownsville. Neither of the principals was present -- only the attorneys. The defense counsel told the judge the plaintiff's counsel had been "childish and rude." The plaintiff's counsel -- who had walked out of a deposition in San Antonio after complaining "this is bullshit" -- told the judge the defense counsel was an "obstructionist." The judge was being asked to schedule the deposition in her courtroom, where she could mediate fights between lawyers. No attorney had yet mentioned the facts and the law. And Judge Salinas, no doubt looking forward to her next case (a sullen defendant in handcuffs and an orange jumpsuit, waiting to be escorted into the courtroom by a deputy sheriff), was only being asked to settle a question of jurisdiction.

This particular episode of Laredo National Bancshares vs. Richard Christopher Whalen -- sandwiched between an animal husbandry tort and a pre-trial hearing of a felony prosecution -- was all pre-trial posturing. It is also the smaller of two oddly related lawsuits. Part of LNB's complaint against Christopher Whalen alleges that he provided the Federal Reserve Board with information damaging to the bank. The Fed's legal staff, in a separate legal procedure, has taken aim at the bank's owners. And Whalen is being pressed by the bank's attorneys to tell them who he talked to at the Fed, and when he talked.

It is evident that the real action is in Washington, where the Federal Reserve Board is attempting to take Laredo National Bank from its owner, Mexican industrialist and investor Carlos Hank Rhon. Attorneys in the Fed's enforcement division have built a detailed factual case against Hank Rhon, alleging that he played an elaborate shell game with bank shares and lied about who owns Laredo National Bank. If LNB wins in Laredo, the bank's lawyers might wring a few million dollars out of Christopher Whalen. If the Fed wins in Washington, it can collect $41 million from Hank Rhon, order him to divest himself of his 71 percent ownership in LNB, and bar him from bank ownership in the U.S. "This is a really big deal," said one former Fed employee in Washington.

It is a big deal that involves the Washington offices of two powerful Texas law firms: Fulbright & Jaworski, which bears the name of one-time Watergate Special Prosecutor Leon Jaworski; and Akin Gump, best known for one of its senior partners, former Democratic Party Chair Bob Strauss of Dallas. There is even a New York public relations firm hired to do the talking for the Hanks, the bank, and the attorneys.

It's a big deal because it involves "los Hank," one of Mexico's richest and politically powerful families. The Federal Reserve Board is asking, "who owns the bank?" It is also quietly asking, "who are the Hanks?" The Fed's case is straightforward and built on charges of misrepresentation about the ownership of the Laredo bank. Yet its investigation involves the D.E.A., the National Drug Intelligence Center, and local police department drug task forces -- agencies rarely involved in chartering federal banks.


Who Owns the Bank?

Through an offshore holding company, which owns Laredo National Bancshares, which in turn owns Laredo National Bank, Hank Rhon "controls" 71 percent of the border bank. Bank ownership structure can be complex, so there is nothing out of the ordinary about shares moving through Switzerland, the U.S., Mexico, and the British Virgin Islands. It's a global economy, and if you think a friendly local holding company in North Carolina owns your hometown bank in Texas, you're wrong.

But the Bank Holding Company Act requires banks to provide a full accounting of who owns controlling interest, and the Fed retains the right to approve or reject buyers. For decades, Laredo National Bank had been locally owned. As a large border bank it appealed to wealthy Mexicans in the habit of keeping dollar-denominated accounts. It has branch offices as far away as Houston and is the third largest independently owned bank Texas. Until 1990 LNB had been owned by the Alexanders and Mandels of Laredo. When Gary Jacobs married into the Mandel family, he went to work at his father-in-law's bank and ultimately became president -- a position he still holds today.

In 1990 major shareholders were bought out by what the Fed describes as "nominees" for clients from Mexico and several European countries. In 1991, Hank Rhon advised the Federal Reserve that he was buying 74,000 shares of Laredo National Bancshares Holding Company stock for $7.4 million. What Federal Reserve board investigators have learned since, they allege in their "notice of enforcement," is that Rhon paid an extra $1.2 million for the stock and threw in a luxury car to sweeten the deal for the seller.

It was the beginning of a bewildering series of moves that seem to make it impossible to determine who owns Laredo National Bank. Hank Rhon, the Fed's lawyers also allege, acquired another 93,250 shares of LNB stock, which he failed to disclose at the time of the transactions. He also used what in Mexico are known as prestanombres (borrowed names), acquiring LNB shares in the name of his daughter Graciela Hank González; his accountant, Agustín López Morales; and Arturo Mart?nez de la Mora, who managed other Hank Rhon businesses. In what appears to be a bit of wry humor in their complaint, Fed attorneys observe: "In arranging to have the shares purchased in the name of López Morales, Hank Rhon had forgotten that López Morales was a director of Kline, and therefore was also barred by the commitment from acquiring additional shares, even if López Morales had held them on his own behalf." Kline was a Hank Rhon holding company expressly prohibited, the Fed's lawyers observe, from buying additional stock at the time.

Money and shares, according to the Fed, moved in circles and those circles moved. Follow, for example, $10 million, that seems to move from Laredo to New York to Switzerland and back to Laredo, all according to allegations in the Fed complaint, at the direction of Carlos Hank Rhon (who either was or wasn't bringing Mexico City newspaper publisher Gabriel Alarcón Velázquez into the LNB ownership scheme):

Alarcón agreed to participate in the acquisition of LNB's stock at or shortly after the time of Hank Rhon's invitation. To fund his purchase, Alarcón requested that Laredo National Bank grant him a $10 million loan. Laredo National Bank's management agreed to make the loan, and it was funded on November 19, 1993. Hank Rhon told Alarcón to send the funds to Citibank, N.A., where upon Hank Rhon's instructions, the funds were placed in the escrow account established to hold in consideration for the shares that Incus had contracted to purchase from the Swiss shareholders. At the same time, Hank Rhon instructed Citibank to release back to him $10 million worth of the peso-denominated mutual fund shares that he had represented to the Board would be the source of funds for the acquisition.

In 1994, David Peñaloza Sandovál, C.E.O. of one of the largest construction companies in Mexico, purchased a $21 million interest in LNB and failed to report it for two years, according to court documents filed by Federal Reserve lawyers. Two years after the fact, Hank Rhon, Peñaloza, and a New York law firm drafted contracts documenting the sale. Hank Rhon and Peñaloza even established an escrow account, "which purported to hold the $21,161,845 in escrow, with Hank Rhon as the escrow agent."

"In fact, the escrow account was a sham," the Federal Reserve complaint continues, "designed to make it appear that Peñaloza's acquisition of an equity interest in Incus was pending the Board's approval, rather than completed, as it actually had been in 1993 and 1994.... Hank Rhon treated the funds in this 'escrow' account as his own, transferring balances to and from his personal accounts at Laredo National Bank and at Interacciones" [another Hank Rhon company].

Loans made by LNB also tended to move in circles. The Fed document describes a $3.5 million loan made to Carlos Oilmon Meraz, Hank Rhon's brother-in-law. "Approximately $3.5 million of this loan were transferred to Palenque, Ltd., a company of which Hank Rhon was the beneficial owner." Two years later, in 1993, Oilmon borrowed another $1.5 million. In 1994 the loan balance was transferred to Oilmex, a corporation owned by Oilmon. "In 1995, that loan went into default, and Laredo National Bank wrote off at least $2.8 million...," according to the Fed's court filings.

Listed in the Fed's long and detailed complaint are numerous incidents in which millions of dollars moved in mysterious ways, many alleged to be in violation of federal banking law. It was all in the family. If the extended Hank family of business associates, brothers-in-law, and close friends worried lawyers at the Fed's enforcement division, the alleged unauthorized participation of Hank Rhon's father, Carlos Hank González, could present a problem when Hank Rhon and his legal team stand before the Federal Reserve Board of Governors -- a.k.a. Alan Greenspan and the Six Dwarves. Carlos Hank González, according to the Fed complaint, at one time bought $20 million of LNB stock, without reporting it to federal regulators.


Who are the Hanks?

Hank patriarch Carlos Hank González was born into fairly modest circumstances. He owes his fortune, which Forbes estimates at $1.3 billion, to the Institutional Revolutionary Party that has ruled Mexico for seven decades. He was a schoolteacher and party operative who went on to serve as a federal congressman from the state of Mexico, mayor of Mexico City, mayor of Toluca, secretary of tourism, secretary of agriculture, and director of Mexico's federal commodities distribution program. (Hank González' c.v. is not unusual in a country with a constitutional ban on holding any elected office twice. Because of term limits, politicians move from one office to another.)

It has been observed that Hank González was never president of Mexico only because his father was born in Germany. The Mexican constitution requires the president to be the child of Mexican-born citizens of Mexico.

Manuel Buendía, a nationally syndicated Mexico City columnist who was assassinated in the eighties, once wrote a wry humorous column about Hank González' frustration with the constitutional provision that denied him his six years in Los Pinos -- Mexico's White House. A Mexican congressman, Buendía wrote, convened a panel of scholars and ordered them to look for proof that the word "Hank" had its origin in the language of the Mazahua, an indigenous Amerindian group from the region around the state of Mexico. When the report was delivered to Toluca (the state Hank González represented in Congress) the eager congressman opened the envelope and read that the word Hank was indeed Mazahua. In that language it meant: "He who came from Germany."

It has also been observed that "El Professor" González amassed a billion-dollar fortune while working as an elected or appointed government official. According to the Mexican newsweekly Proceso, Hank González made much of his fortune investing in companies who did business with the government. González and his son, Hank Rhon, were also two of the power brokers behind disgraced Mexican president Carlos Salinas de Gortari.

None of this would disqualify los Hank from owning a "beneficial interest" in a U.S. bank. But if the Hanks were found to be engaged in illegal activities, there could be a problem with the "character test" in the law governing bank ownership. LNB attorneys have asked Christopher Whalen about conversations he has had with federal drug enforcement agencies concerning Laredo National Bank. And the Federal Reserve's legal staff seems to be pursuing reports that first appeared in the Mexico City daily El Financiero and later in the Washington Post. Both papers reported on U.S. drug-enforcement investigations linking the Hank Clan to alleged drug dealing and money laundering.

Dolia Estévez is the Washington correspondent for El Financiero and a particular favorite of American sources leaking information they decide needs to be reported in the Mexican press. Her stories often travel a circular route similar to the one the Fed alleges Hank's money follows -- from the U.S. to Mexico and back to the U.S. In 1995, she reported on a Senate Foreign Relations Committee internal memo that accused Hank Rhon of laundering money for Mexican narcotraficantes. The document Estévez cites makes the same claim about Hank González, describing him as "a principal intermediary between narcotraficantes and the political system."

Estévez cited the date of the memo (August 3, 1995) as well as the pages that referred to the Hanks. And in fairness to the Hanks, she reminded her readers that the committee is chaired by Senator Jesse Helms, widely known to have a strong anti-Mexico disposition. Hank González, she wrote, was a close associate of President Salinas and leader of the Dinosaurios -- the retrograde defenders of position, power, and the old politics of the P.R.I. Some of the huge fortune amassed by former president Carlos Salinas de Gortari, now in self-imposed exile in Ireland, was deposited at Laredo National Bank, according to the Foreign Relations Committee report Estévez cited.

Last June Estévez reported that the Hanks were the target of a drug task force investigation documented in a report leaked to her from a source at the National Drug Intelligence Center. The story was quickly picked up by the Washington Post, and although no one at the intelligence center will discuss the report, its existence was confirmed when the D.E.A. investigation extended to Costa Rica.

Kathleen Daly at the U.S. Embassy in San José told the press the report was "extremely confidential" and could not be released. "As a final point we were informed that the investigation of the Hank González organization in the United States is ongoing and therefore it is not appropriate to comment on any possible accusations of criminal activity," she said in an interview quoted in Proceso.

In November, Proceso published the full text of a confidential U.S. Customs Service Report on Operation White Tiger, which referred to the white Siberian tiger customs officials confiscated from Jorge Hank Rhon in 1991, when he tried to smuggle the animal into Mexico through San Ysidro, California. Carlos Hank González' younger son is the enfant terrible of the Hank family. Jorge Hank owns the Agua Caliente horse track in Tijuana and several off-track betting parlors in Mexico. "My only vice is animals," he told Proceso, referring to the horse track, the tiger, and a chimp and gorilla he was caught illegally shipping into Mexico -- as well as a separate incident at the Mexico City airport where customs agents discovered his suitcase was packed full of skins of rare, protected animals.

Jorge Hank also owns the Tijuana daily, El Heraldo. Since 1988, he has been the indirect subject of a standing ad in the Tijuana weekly Zeta. Paid for by Zeta publisher Jesús Blancornelas, the ad has nothing to do with the fights over circulation and ad revenue that normally animate fights between rival publications. It demands that the government prosecute the "intellectual author" of the assassination of Héctor "el Gato" Félix, the Zeta co-editor and columnist murdered by Antonio Vera Palestina and Victoriano Medina. At the time of the murder, Vera Palestina, the former bodyguard of Carlos Hank González, was Jorge Hank Rhon's bodyguard. Medina worked as a security agent at Jorge Hank Rhon's Tijuana racetrack. Both men are serving prison terms for the murder. (Blancornelas himself was shot and critically wounded in a 1997 assassination attempt in which his bodyguard was killed while shooting at the assailants.)

The customs report reprinted in Proceso also focuses on Transportacíon Marítima Mexicana, a shipping company controlled by Carlos Hank; the Tijuana race track; and Laredo National Bank. It also provides details about alleged drug dealing and money laundering by the Hank enterprises. None of this has anything to do with federal banking law, but Federal Reserve lawyers would have to be blind to miss it. "The enforcement and supe supervision] people at the Fed don't do criminal investigations," a former Fed employee said. "They license and supervise banks, it's all financial. But they do pay attention to this sort of stuff."

It appears that they are paying attention. A Fed legal staff memorandum subpoenaed in the Washington proceeding cites a September 11, 1996, news story in which Reuters reported that "Mexican officials have discovered additional U.S. bank accounts belonging to former President Carlos Salinas' brother Raúl Salinas that may have been used to launder illegal drug money. Reforma, a Mexico-City daily, reported that one of the accounts being investigated by Mexican and U.S. officials is at the LNB], which is located just over the border in Texas and owned by Mexican financier Carlos Hank Rhon.... The government documents show Salinas may have used the U.S. accounts to transfer money to and from large secret bank accounts in Switzerland that were discovered late last year."

Subpoenas issued by the Federal Reserve staff also request information dating from 1991 for eighteen companies, including Incus, Kline, and Grupo Financiero Interacciones (a Hank family holding company). The Hanks began acquiring LNB shares in 1991. Also subpoenaed are records of transactions believed to be related to money laundering involving Mr. Hank Rhon, Raúl Salinas, and Juan Gómez. Juan Gómez is the name on a Mexican passport Swiss authorities seized from a safety deposit box in a bank in Zurich. On the passport was a photo of Raúl Salinas, the brother of former Mexican President Carlos Salinas. Swiss authorities seized $90 million from Raúl Salinas' accounts. Raúl Salinas is in prison in Mexico.

"After taking into account the size of Hank Rhon's financial resources, his good faith, the gravity of the violations, the history of previous violations, and such other matters as justice may require, the Board of Governors hereby assesses a civil money penalty of $10,000,000 against Hank Rhon...." reads the complaint. In similar language, the Fed's legal staff recommends $31,100,000 in fines for Incus, the Hank's holding company in the British Virgin Islands.

"We intend to have this matter taken off the table," said Richard Bickler, the Fulbright & Jaworski attorney representing Hank Rhon. In an abbreviated telephone interview, Bickler said the Fed's charges have no merit. (He has returned no calls since an initial conversation and is speaking through Robert Siegfried of New York.) Should they lose the first round, Hank Rhon and Incus can appeal before the Federal Reserve Board, and then in the Federal Court of Appeals in Washington, D.C.


In Court in laredo?

What does all this have to do with Christopher Whalen? LNB alleges that Whalen cost the bank its opportunity to purchase Mercantile in Brownsville, which was ultimately acquired by Norwest Bank. Whalen, who once published a business newsletter called The Mexico Report, wrote about the Hanks, and was on one occasion called before a House Banking subcommittee, where he testified about their business interests. The bank's lawyers claim he later provided the Federal Reserve Board with information that damaged the bank -- and that he did it for his own personal gain.

Yet one document in possession of the Federal Reserve's Washington legal staff and Hank Rhon's Washington lawyers suggests that Citibank might have pointed the Fed toward Laredo. The Fed's summary describes a meeting the Fed's staff held with Citibank -- at the request of Citibank. "At the meeting, the Citibank representative provided information concerning possible violations of banking laws and misrepresentations to the Board that had come to the attention of Citibank's attorneys."

Citibank -- for years the only U.S. bank with a branch office in Mexico -- has had problems of its own. It was through "Citi" that Raúl Salinas moved much of his money out of Mexico and on to Switzerland. The New York Times and the Washington Post have reported on Salinas' dealings with Amy Elliott, his personal banker in Citibank's New York office. It has also been reported in the Mexican and U.S. press that Carlos Hank Rhon provided Raúl Salinas suggestions on how to get his money out of Mexico.

LNB's suit against Whalen is still focused on jurisdiction -- whether the case can be tried in state district court in Texas. In a court appearance on February 23, Laredo National Bank's attorney Richard Cedillo argued the merits of a long-arm provision of

Texas law, which holds out-of-state defendants responsible for actions committed in another state if the effects of the action are felt in Texas. He also claimed that Whalen's ownership of a Texas corporation, Legal Research International, makes him subject to Texas tort law.

Whalen's local counsel, John Convery, argued that Whalen never owned a Texas business. He had once considered a joint business venture with a Houston resident. When the company was incorporated, Houston businessman Billy Flanigan listed Whalen as officer -- admittedly (in Flanigan's deposition) without Whalen's consent. Flanigan, the elderly co-defendant from Houston, seemed bewildered and angry to have been dragged into court to provide Laredo National Bank with Texas jurisdiction.

His February 7 deposition is antagonistic, hostile, and filled with monosyllabic responses. One non-responsive response Flanigan offered summed up his frustration. "No," he said to a question about contacts with government officials. He added, "I believe that I have been wrongfully named. My company has been wrongfully named. And I am not a party to this case." He is. Unless the judge dismisses him. Or Laredo National Bank drops him, which would eliminate one of their jurisdictional claims to keep the case in a Texas court.

Christopher Whalen's deposition was ultimately held in Judge Salinas' courtroom. It's more revealing than Flanigan's, in part because Whalen was too forthright. And it returns to the backstory of the Fed's investigation of LNB: drugs and federal drug enforcement officials.

In 1998, in a statement he now regrets, Whalen advised a Florida investor shopping for a bank that LNB's request to buy Mercantile National bank would not be approved by the Fed. "In terms of your negotiating strategy," Whalen wrote in a letter to the potential buyer, "you should be mindful of the fact that the Fed, through regulatory inaction, did not permit LNB to purchase Mercantile Bank in Brownsville (through my efforts and those of others)..." Whalen claims his comment "through my efforts" was hyperbole. "It was overblown and inflated. It was hyperbole on my part." Laredo National Bank isn't buying Whalen's hyperbole argument.

The "others" were federal drug enforcement agents, whose names Whalen tried to avoid revealing until Judge Salinas ordered him to provide them. In his deposition, Whalen states that because he knew Mexican finance, he was contacted by D.E.A. agents inquiring about Carlos Hank Rhon. (The officers named, according to D.E.A. agent Vincent Rice in San Diego, were local police officers assigned to D.E.A. task forces.) Whalen passed the contacts on to the Fed when their investigators called on him. Throughout his deposition, Whalen repeated that it was the Hank family and not Laredo National Bank that investigators from the D.E.A. and the Fed wanted talk about. "I indicated to him that I had been contacted in the past by a variety of law enforcement organizations, primarily the D.E.A., who had interest in or ongoing investigations of connections between the Hank family and drug trafficking and money laundering," Whalen said. Whalen also said he once asked former U.S. ambassador to Mexico Jim Jones about the Hanks and was told "I really don't think there's anything there." (An odd fact revealed in questions about the Fed is that Whalen's father is a longtime friend of Fed Chairman Alan Greenspan.)

Their bank's attorney also pressed Whalen for information about Citibank. Does he have any relationship with Citibank? Does he know a Citibank employee named Amy Elliott? "Any relationship with Philip Jordan? Do you know who Phil Jordan is?" Whalen answered no to each question, which suggests that he might not be the best source on current affairs in Mexico. As has been widely reported in the U.S. press, Amy Elliott is the bank officer in New York who handled the personal affairs of Raúl Salinas. Philip Jordan is a former D.E.A. agent living in El Paso, who has been openly critical of the agency's failure to aggressively pursue big players in Mexico and is frequently quoted in drug-related stories.

LNB's lawyers are also looking for information from federal drug agents. Richard Cedillo subpoenaed fourteen separate items from federal drug enforcement agencies. The Assistant U.S. Attorney in Laredo responded by promptly moving the subpoena to federal court in Laredo: "Laredo National Bank had a long laundry list, a long list," Hector Ramírez said. "And the agencies said we can agree to release documents listed in items one and two. And we released the documents in items one and two, and that's where we are." Ramírez said the U.S. attorney's office provided Laredo National Bank with some information from the National Drug Intelligence Center and implied that further requests for drug agency information will have to be litigated.

Whalen was also asked about his contacts with the press: Knute Royce of Newsday, Michael Allen of the Wall Street Journal, and finally Dolia Estévez of Financiero, who has written extensively on the Hanks. Estevéz is the only Mexican reporter writing extensive stories about the Hank's fight with the Federal Reserve. She has even briefly covered the Laredo Bancshares suit against Whalen.

Attempts to speak to Gary Jacobs in Laredo, Richard Cedillo in San Antonio, and attorneys representing Hank Rhon and Incus in Washington, D.C., resulted in a response from a public relations firm in New York. Responding to calls and faxed questions sent to Akin Gump and Fulbright & Jaworski's Washington offices, and to Richard Cedillo's office in San Antonio, bank spokesperson Robert Siegfried responded for all three lawyers, by telephone and email:

Your questions appear to confuse two separate actions -- Laredo National Bancshares litigation against Christopher Whalen and the Federal Reserve's inquiry conducted by its staff with respect to Carlos Hank Rhon of which Laredo National Bank is not a party. With respect to the Whalen litigation, Laredo National Bank clearly lays out its charge that Whalen specifically interfered with an executed contract of purchase between Laredo and Mercantile and that, as a result, Laredo has been harmed by this interference. Laredo National Bank has brought these proceedings to prove just that. Beyond this, we have no further comment, other than to say that the facts and information in this case speak for themselves. In terms of the Federal Reserve inquiry with respect to Mr. Hank, Mr. Hank and his representatives have made it quite clear that the inquiry is without merit and will be shown to be just that. In summary, neither litigation is determinative of the other.

Siegfried also called the Fed action inconsistent with of the "intent and spirit of NAFTA."

Whalen's attorneys point to a timeline they claim will establish that he could not have interfered with the case before the Fed, and argue that no one individual can move the Federal Reserve in the way the plaintiffs claim -- unless that individual is Alan Greenspan. (Part of LNB's claim is that information provided by Whalen so slowed the Fed's consideration of the attempt to acquire Mercantile that the opportunity was lost.) In Judge Salinas' courtroom, Whalen's lawyers said their client was contacted by

Fed investigators and asked for information. He put them in touch with the D.E.A. officers who had called him earlier to inquire about the Hanks, the lawyers insist. The Federal Reserve, they add, is responsible for LNB's problems.

The lawsuit in Texas is grinding forward and thus far has amounted to discovery, depositions, and two court hearings. After one hearing that included a loud, angry discussion at the judge's bench, John Convery stopped at the back of the courtroom and commented on the cattle custody suit heard earlier in the day. "What a great plaintiff," Convery said. "The kind of guy every lawyer wants on the stand. Honest, sincere, eloquent."

In Laredo, Judge Salinas is expected to rule on jurisdiction for the Whalen suit within a month. In Washington, the Hanks and Incus requested a private hearing, claiming that the "'airing of private and personal business affairs' could act as a disincentive for foreign investors with unidentified repercussions in Mexico." The Federal Reserve Board rejected the request and ordered a public hearing, scheduled for October.







Reporters subpoenaed in suit over leak of ‘corrupted’ drug report

  • A Texas bank sued a college professor, accusing him of infiltrating a federal drug investigation and providing reporters with an unofficial government document that allegedly contained incorrect information linking the bank and its officers to illegal drug activity.

Two newspaper reporters have been subpoenaed by a Texas bank that is accusing an Ohio man of planting lies in an unofficial government document that links the bank and its Mexican owners to drug trafficking and then distributing the tainted report to the press.

The lawsuit, which already involved two states and a Mexican family, stretched to Virginia and Washington, D.C., in the last few weeks when subpoenas were served on Dolia Estevez, a reporter for El Financiero, a Mexican newspaper; and Jamie Dettmer, senior editor of Insight, the weekly magazine of The Washington Times.

Laredo National Bank also has tried to serve a subpoena on Washington Post reporter Douglas Farah, who has been out of the country, an attorney for the Post said.

The subpoenas seek all documents the reporters used in preparing their stories about the federal drug investigation, as well as notes from conversations the reporters had with key players in the civil lawsuit.

Laredo National Bank also wants to know whether the reporters provided documents to each other while they were preparing their stories.

The bank is "trying to conjure up some idea that we are in some kind of conspiracy together," Dettmer said. "They completely misunderstand how the press works in the United States. We are competitors and rivals."

Laredo National Bank's lawsuit, filed in August 2000 in U.S. District Court in Cleveland, accuses Donald Schulz, chairman of the political science department at Cleveland State University, and unnamed defendants of infiltrating a federal investigation called "Operation White Tiger" and causing "disinformation and flat-out lies" to become part of a draft government report in March 1999.

The lawsuit says the report incorrectly linked the bank, bank president Gary G. Jacobs and bank chairman and majority shareholder Carlos Hank Rhon to illegal drug activity and money laundering. U.S. government officials later said the report contained names that may not have been targets of the investigation, the lawsuit claims, and that news reports linking the bank, Jacobs and Rhon to crime were not true.

The bank accuses Schulz of fraudulently obtaining the flawed draft report and distributing it to reporters, including Estevez. The lawsuit accuses Schulz and the unnamed defendants of conspiracy, violation of federal and state racketeering laws, tortious interference with contract, defamation and invasion of privacy.

The bank has threatened to add Estevez as a defendant for "deliberately and tortiously traffick(ing) in an unauthorized, unvetted, draft executive summary of a government report overflowing with rumor, innuendo and outright falsehoods," according to court documents.

Estevez, who lives in Reston, Va., and covers Washington, D.C., for the Mexican business paper, believes the bank is trying to intimidate reporters.

"I definitely think that one of the reasons or motivations they have is to intimidate reporters, not only Mexican reporters but American reporters, into not covering any news related to their activities in the United States," Estevez said.

Her attorney, Richard Goehler, said Estevez obtained information lawfully and properly and published it, which is newsgathering activity protected by the First Amendment.

Estevez is refusing to comply with the subpoena. A U.S. District Court judge in Alexandria, Va., will hear arguments on Feb. 22 on Estevez's motion to quash the subpoena.

Dettmer, who has been subpoenaed in Washington, D.C., said he will provide nothing more than his published articles.



(Laredo National Bancshares, Inc. v. Schulz; Media counsel for Dolia Estevez: Richard M. Goehler, Frost Brown Todd LLC, Cincinnati, Ohio; Media counsel for Jamie Dettmer: Allen V. Farber and James A. Barker, Akin, Gump, Strauss, Hauer & Feld LLP, Washington, D.C.) -- MD






Bankers Attack Mexican Reporter

The "Hank Bank," Laredo National, Tries to Force Estévez to Reveal Her Source

Banker Gary Jacobs: Enemy of a Free Press

narconnews A Narco News Global Alert narconnews

Narco News Commentary:

The desperation of the narco-banking industry to silence scrutiny upon its operations is coming to a head in yet another lawsuit in the United States; the effort by Gary Jacobs, the Mexican Hank family and the Laredo National Bank to abuse the court system to harass, now, at least four journalists and academics who have reported on their activities.

The bankers and their lawyers began with a vicious campaign against author and expert on Mexican finance Christopher Whalen, hauling him into court and then getting caught in an entrapment scheme that preceded the suspicious exit of the Washington law firm Akin, Gump, Strauss, Hauer & Feld from the case. Whalen has since counter-sued.

Then, the same bankers had their lawyers send a threatening letter to journalists at El Andar magazine in California, demanding $10 million dollars from the small magazine that covers Latino-American news and issues. El Andar and its reporter Julie Reynolds courageously pressed on with the story.

Then, the same bankers sued a mild-mannered professor, Donald Schulz, accusing him -- without solid evidence -- of leaking a joint report by five U.S. law enforcement agencies on connections between the Hank family (an infamous Mexican political empire), drug trafficking and drug money laundering. The bankers don't deny the existence of the report. They simply blame Schulz for its publication in El Financiero of Mexico City and the Washington Post.

Now, the Mexican news agency Notimex reports that the bankers are trying to subpoena Mexican journalist Dolia Estévez of the daily business newspaper El Financiero of Mexico City -- who first reported on the joint allegations by the FBI, Customs, the DEA, the CIA and Interpol linking the Hank family with narco-banking and trafficking -- to force her to reveal her source for the document.

Gary Jacobs and the Laredo National Bank of Texas are using their questionably-earned financial might to attempt to bully and silence the press by abusing the U.S. court system. They seem hell-bent on reversing more than two centuries of free speech law. Jacobs and Laredo wish to halt the right of the press to print government documents. They wish to erase established protections for reporters to protect their sources. They file expensive legal suits that have, in our opinion, zero chance of succeeding, with the sole goal of harassing and intimidating journalists from reporting on their activities.

In other words, Gary Jacobs and the Laredo National Bank are desperate to prevent you, the public, from knowing about their questionable behavior in the banking industry.

It is important to note that, like Banamex-Citigroup in its failed attack on Narco News, Jacobs and Laredo National Bank haven't sued the real source of their problems: the Federal Reserve Board; the agency that, after a long series of legal proceedings, forced Carlos Hank Rohn to resign as chairman of the Laredo National Bank after the Fed revealed that he had bought the bank by laundering massive amounts of mysterious money through Caribbean islands.

Instead of facing the music on the official enforcement actions against them, the bankers use their billions to go after journalists. And even there, they don't attack the large newspapers like the Washington Post or El Financiero who have published the stories and who have pockets deep enough to defend themselves. They instead target individual journalists and academics who, they know, don't have the financial resources to mount a full legal defense.

This is an abuse of the court system. It reveals the unwillingness of the bankers to live within an open society of press freedom and free speech. It attempts to purchase impunity and immunity from public scrutiny.

It also reveals how dirty the narco-banking industry is in our era: Only those with big secrets to hide fear public scrutiny. And these secrets, if disclosed, could stop the source of illicit billions: the insincere prohibition on drugs.

Gary Jacobs and the Laredo National Bank have thus revealed themselves as enemies of the United States Constitution and of every authentic journalist in our América.

The threats against Whalen, Reynolds, El Andar, Schulz and, now, Estévez are threats against all of us.

Narco News expresses its solidarity with each of these persecuted journalists and academics, and reiterates our continued commitment to cover this story about the systematic attacks on press freedom by Gary Jacobs and the Laredo National Bank.

We urge our colleagues throughout the news media to provide greater coverage of this story. If enemies of freedom like Gary Jacobs and Laredo National Bank are allowed to continue this campaign of high-powered abuse of the Courts, who will they target next? Silence, in this case, is complicity.

Today we provide a translation of the Notimex report on the persecution of Mexican journalist Dolia Estévez, and a series of background links for other journalists to use in covering this story.

From somewhere in a country called América,

Al Giordano, Publisher
The Narco News Bulletin
http://www.narconews.com/
narconews@hotmail.com





Journalist Subpoenaed in Hank Bank Case

She published U.S. intelligence report that connected Hank's group with the narco

Lee Ud. el Articulo en Español

From the NOTIMEX news agency and La Jornada of Mexico City
February 7, 2001

The United States judicial story of the Hank family opened a new chapter with the subpoena of a Mexican journalist who published a report of intelligence agencies from that country that connects them with narco-trafficking.

Attorneys for Dolia Estévez, correspondent of the Mexican daily El Financiero, sought to have the subpoena quashed on First Amendment grounds according to the United States Constitution, that protects reporters against having to reveal their information sources.

The District Court judge of the State of Virginia must decide on February 22nd whether to grant or not the motion by Estévez's attorney to annul the citation.

"This is unquestionably a case of abuse... of violation of the First Amendment of the constitution," said Lucy Dalglish, president of the Reporters Committee for Freedom of the Press, an organization that backs and brings legal help to Estévez.

"It's about a fishing expedition," in which the accusors want to cause pain to whoever exposes their story in public, Dalglish emphasized.

Last January 9th, a District Court in the State of Virginia presented - on the petition of Laredo National Bank (LNB) - a subpoena to Estévez to testify in the case of Laredo National Bankshares, LNB and Gary Jacobs against Donald E. Schulz.

Jacobs is the president of Laredo National Bank - property of the Mexican businessman Carlos Hank Rhon - and Shulz is the academic that LNB accuses of having conspired to have a branch of the Justice Department of the United States emit a report about presumed connections of the Hank group with drug trafficking.

The National Drug Intelligence Center (NDIC) elaborated the report, and the case is now known as Operation White Tiger.

Estévez was the first Mexican journalist to reveal the fact - in May 1999 - some months after a Washington Times reporter published aspects of the story and days before the Washington Post published its version.

The lawsuit against Schulz, filed in the state of Ohio - where he lives - also accuses him of having "disseminated" the report to the press, and among the journalists to whom he leaked the document was Estévez.






Background Links
The June 7, 1999 Washington Post Story:
http://www.mapinc.org/drugnews/v99/n587/a09.html?1256

Hank Owned Bank Violated Election Laws:
http://elandar.com/hank/

Hank Bank's Entrapment Scheme Foiled:
http://www.elandar.com/back/spring01/stories/story_entrapment.html

Mark Schapiro on Narco Bankers vs. the Press from The Nation:
http://www.thenation.com/doc.mhtml?i=20010917&s=schapiro

History and Archives of the Drug War on Trial Case:
http://www.narconews.com/warroom.html



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