When Prohibition Meets Free Trade: Wealth, Power and Intimidation in Mexico
Reynolds, Julia
What was lost with this settlement was a chance to get a glimpse of documents that might have answered important questions about the rise of the transnational drug cartels and their ties to...
...history...
...1 0 The suit has "devastating implications," says Giordano...
...And he is a threat to the Salinistas, the Zedillistas and the Foxistas, because they can't control him...
...Email interview with Al Giordano, May 2001...
...Email interview with Al Giordano, May 2001...
...Banamex was able to get $3 biltook office, new developments continued to unfold lion in overdue debts covered by the FOBAPROA involving old PRI stalwarts such as Ratil Salinas or banker-turned-fugitive Carlos Cabal Peniche, accused of funneling illegal Zedillo campaign donations through Mexican banks...
...Professor Schulz worries that he cannot afford the drawn-out legal wars ahead...
...fronttic passion...
...Nobody can...
...5 Ironically, on May 31, the same day Hank Rhon and the Fed announced their settlement, Whalen struck back and filed a counter-suit, charging Carlos Hank and his bank with libel, abuse of process and causing emotional distress...
...It's about ALL of them, and all of the ones yet to come...
...7. Telephone interview with Donald Schulz, April 2001...
...So they hired Akin Gump to lobby congress...
...The board had gone after the scion of one of Mexico's most powerful families for violations of laws regarding his control of Laredo National Bank (LNB) in Texas...
...Make no mistake...
...Across the scandals as too much money exchanged hands too board, billions in debts were forgiven or restructured quickly and, often, too secretly...
...Banamex tried to sue Mendndez twice in Mexico for libel, but both attempts were thrown out of court...
...In both countries, journalists hold their breath, awaiting the fates of the researchers and reporters accused...
...8. Letter from Schulz to American Political Science Association, December 2000...
...2. Interview with Mario Men~ndez, by Jos6 Martinez, January 15, 2001: "Banamex, the shot from the barrel: Roberto Hernandez, Economic Power, and Narco-Politics," translated from El Boletin Mexicano de La Crisis, and published on NarcoNews Website: <<www.narconews.com...
...But the Hank camp was celebrating, too...
...Even after Vicente Fox under generous terms...
...Although the President's brother was never whom saw their own small, family businesses colindicted, he did end up spending much of the Zedillo lapse-were outraged at seeing public funds going to presidency "banished" in San Antonio, Texas...
...Among the many shocking revelations that continue to surface about Vol XXXV No 1 JuLY/AUGUST 2001 45 Vol XXXV, No 1 JuLY/AUGUST 2001 45REPORT ON THE DRUG WAR FOBAPROA, the Citibank deal is one of the worst...
...So it was no surprise that he would tackle the big boys in Yucatan...
...One of the judges refused to try the case because, he said, "all the accusations [in the newspaper...
...Jacobs told Lowell Bergman of PBS, "those cockroaches in the government are gonna pay...
...A spokesman for the Fed was happy: He claimed the Board got everything it wanted...
...Donald Schulz at Cleveland State "University...
...So far, the bank has come up smiling...
...In 1998, for example, the bank lent $2.5 billion to FOBAPROA to help Mexican business recover from the peso crash...
...In 1999, LNB initiated a lawsuit against investment consultant and sometimes muckraking reporter Christopher Whalen, who testified about the Hank family's alleged ties to drug trafficking before a senate subcommittee...
...A big chill will occur, especially regarding reporting on banks and other large institutions, if Banamex is allowed to proceed...
...R-FL: "Sadly, we have discovered in this Congress that we are not insulated from efforts of the kingpins to buy influence and corrupt our political institutions...
...When dig up a number of cases involving prominent business the sale went through, Mexicans were furious...
...A Banamex security guard discourages a photographer in Mexico City on May 17, 2001, the day Citigroup announced plans to buy Banamex...
...But with the settlement, these exhibits NAC4A REPORT ON THE AMERICAS 0 9 a S 0 44REPORT ON THE DRUG WAR will never make it into the public record...
...Gary Webb, the reporter who broke the story of CIA-Contra-cocaine links in his "Dark Alliance" series in the San Jose Mercury News, wrote a support letter for Giordano's defense...
...1 3 Giordano is vocal in his backing of Men6ndez...
...When the bill was first under consideration, TMM officials worried their company might show up on the hot list...
...Fun, I say, because Banamex and Akin Gump have inadvertently handed us a way to get the facts out there internationally...
...Open letter from Gary Webb, published on NarcoNews Website: <<www.narconews.com...
...Tom McLish, the Akin Gump attorney representing Banamex in the case, did not return phone calls asking for comment...
...5. Halmos declaration, May 2000, Federal Reserve Board in The Matter of Incus Co...
...Most of the country's top corsunk $8 million into a construction project with porations received billions in financial bailouts under a President Zedillo's brother...
...afford a credit card in 1980," as this underside may be, During the Zedillo Presidency says Yucatin journalist Mario journalists in Mexico have Men6ndez...
...were based on fact...
...And in both U.S...
...This court fight isn't about any particular story Narco News has done," wrote Webb...
...In the exhibits list for this hearing that never saw the light of day were documents purportedly showing that $4.5 million was transferred from Hank Rhon to accounts held in Deutsche Bank by Ratil Salinas, the jailed brother of former Mexican president Carlos Salinas-transfers allegedly made with the friendly assistance of a top official at Citibank in New York...
...With ten unnamed co-defendants-called "John Does" for now-and the bank's lawyers calling for damages of over $100 million, the case is "almost surreal," says Schulz...
...In with legitimate business 1991, HernAndez led a group is "the less celebrated-- of investors who bought and rarely acknowledged- Mexico's top national bank 'underside' of U.S.-Mexico Mexico's press has for $2.3 billion...
...The flow of Panama with Hank Rhon's father, the billionaire PRI $4.5 million in cash from the son of a powerful politi- insider, Carlos Hank Gonzdlez, also a recurring target cian into an account, held under a pseudonym, of the of corruption investigations...
...1 1 Now that Citibank has become a party to the suit, he plans to subpoena depositions from Robert Rubin and Amy Elliot, the "private banker" who handled secret offshore accounts for Radl Salinas and Carlos Hank Rhon...
...If this case goes to trial," he says, "that's when Narco News will triumph...
...So Hank Rhon's Texas bank hired Bush family friend Ben Barnes to lobby when the act came up for budgetary approval in early 2000...
...And just this past May, Mario Villanueva, the former governor of the Yucatin-peninsula state of Quintana Roo, was arrested on charges of accepting payoffs from the Judrez cartel...
...In the end, the "narco-lobby" efforts didn't work...
...What was lost with this settlement was a chance to get a glimpse of documents that might have answered important questions about the rise of the transnational drug cartels and their ties to Mexican and U.S...
...First, there were what one congressman called the "narco-lobbyists...
...Bad as it was, the bailout was not the worst scandal Banamex has weathered...
...The paper covered the story with huge photos of the property, next to images of stacks of kilos of cocaine, and the Mexican Air Force corroborated that arrests had been made there...
...The bust was dramatic, full of intriguing characters, and made news around the world...
...It filed a defamation suit last year against Yucatin journalist Mario Men6ndez, who publishes the daily newspaper Por Esto!, and Al Giordano, publisher of a lively, rabble-rousing Website called Narco News...
...being sued by Laredo Nati character of its former ovi reporters found remnants of cocaine packages, along with bits of debris manufactured in Colombia, washed up on a beach owned by Roberto Herndndez...
...Citibank had lent Mexico large amounts of money to bail out institutions such as Banamex, and in the end, made a nice profit doing so...
...Por Esto...
...Published on <<www.apsanet.org...
...undercover agents and Mexican bankers...
...Whalen, myself and probably others are to be made object lessons to those who might be tempted to write or provide information on these matters...
...One investigation came per- Then hard times fell with the 1994 peso crash...
...pages like flies at a picnic...
...Villanueva now faces ex-president's brother will now most likely disappear extradition to the United States on drug-related into oblivion, and these new details of the relationship charges...
...His team dug up some interesting evidence on what he calls the "Cocaine Peninsula" Donald Schulz, author of of Yucatan...
...The Citibank-owned Banco Conffa was also indicted...
...To sell and political figures...
...When Prohibition Meets Free Trade 1. "Does free Market Reform Unintentionally Undermine Drug Market Prohibition...
...7 Schulz is charged with spreading false and defamatory information on the Hanks and their businesses and associates...
...Brookings Institution research fellow scored the deal of the decade under Carlos Salinas' Peter Andreas has warned that the merging of crime freewheeling privatization of essential industries...
...Giordano is an expatriate New Yorker and former writer for the Village Voice and the Boston Phoenix, now living "somewhere in a country called Amdrica"-in Mexico, actually...
...By the late 1990s, Mexicans-many of cartel...
...And the permission the Fed said it would require before Hank Rhon acquired another U.S...
...The Narco News case has begun to attract attention in the United States...
...BY JULIA REYNOLDS ome say he got away with everything...
...As of press time, judges there appear to favor the bank...
...1 4 "They see him as a threat," he says...
...A few months later, a man came to the door with a thick packet...
...Fox's critics, however, have charged that the merger means that 80 to 90% of Mexico's financial infrastructure will be foreign-owned...
...Citibank, too, has been under money-laundering lenses for setting up offshore accounts on behalf of the ex-president's brother Ratil Salinas...
...They are often drug- trolled companies by President Salinas in the late related, involving money-laundering or the hiding of 1980s...
...bank was buying a debt-free, bailed-out Banamex, and Mexican taxpayers, through IPAB, were repaying the bailout loans to both Citibank and Banamex...
...In 1999, tired of nega- Hanks "a sign tive press, the company hired threat to the Akin Gump to lobby against a new bill called the Drug Kingpin The Hanks ai Act...
...But in May 2000, FOBAPROA's successor, now called the Institute for Protection of Bank money for Colombia's Cali drug cartel...
...This past May, it was announced that Banamex had been sold to the U.S...
...The U.S.-Mexico Experience," Testimony of Peter Andreas, Research Fellow, the Brookings Institution, before the House Subcommittee on Crime, U.S...
...the Drug Kingpin Act passed and was funded, though when the list came out, neither TMM nor Carlos Hank Rhon were on it...
...Julia Reynolds is the editor of El Andar magazine and recipient of the 2000 New California Media Award for investigative reporting...
...They never imagined that I would go as high as the Supreme Court to defend myself," he told Mexican investigative reporter Jos6 Martinez...
...According to DEA and other investigations, TMM has been the shipper of choice for The docume a number of confiscated drug cargoes...
...And it's 48 NACIA REPORT ON THE AMERICAS 48 NACIA REPORT ON THE AMERICASREPORT ON THE DRUG WAR a battle over the continued independence of Internet journalism as well...
...Banamex is in the process of suing two journalists in Mexico who had published detailed reports of cocaine deliveries found on ex-CEO Roberto Hernindez's private Canctin beach...
...bank, has, as one journalist pointed out, always been the procedure for foreign buyers of U.S...
...legal system to do it...
...Roberto Hernmndez, estimated to own more than half the bank's parent company, walked away from the deal with at least $6 billion in his pocket, plus a seat on Citicorp's elite board of directors...
...The case brings up serious questions regarding Web sites and legal jurisdiction...
...1 5 Giordano is confident: "This is going to be very interesting when and if Mario and I take the witness stand in New York...
...Whalen was hit with a suit that charges him with "tortious interference" in the bank's business affairs...
...Interview with Mario Men6ndez, by Jos6 Martinez, January 15, 2001: "Banamex, the shot from the barrel: Roberto Hernandez, Economic Power, and Narco-Politics," translated from El Boletin Mexicano de La Crisis, and published on NarcoNews Website: <<www.narconews.com...
...In 1998, the bank found itself cast as the most prominent victim of Operation Casablanca, the largest money-laundering sting in U.S...
...arly on, a common thread emerged in the corWhat we do know is that the relationship has blos- p ruption exposes: Many of those involved were somed since the passage of NAFTA...
...In early 1999, the White Tiger summary began to fall into the hands of reporters who described some of its allegations...
...Gary Webb believes that in the courtroom, the real story of the ties between business and the narco industry may begin to emerge...
...And all of us will win with it, as the real facts of the corruption of the international drug war come to light in the media center of New York...
...After two years of postponements, the case was settled behind closed doors...
...And they got it...
...Men6ndez has a long and colorful history of covering insurgent movements in Mexico, and in earlier times, he was jailed and his newspaper shut down because of his outspoken reporting...
...and Mexican media, Citibank has been linked to Mexican dirty money, to Juirez Cartel operations in South America, and to the Hank family's purchase of Laredo National Bank with questionable funds and, according to the Federal Reserve Board, illegal methods...
...giant, Citibank, for $12.5 billion...
...On May 31, the Federal Reserve Board agreed to a settlement that hit Hank Rhon with one of the largest fines the Fed ever levied...
...The idea is to keep the targeted individuals, including such notables as Tijuana cartel heads Ram6n and Benjamin Arellano Felix, from conducting business activities in the United States...
...It forfeited $12 million in seized Sanford Weill, right, Chairman and CEO of Citigroup, shakes hands with Roberto Hernindez of Banamex, as Citigroup executive Robert Rubin looks on after the press ;- + th h r fi Fk y l. * _ n rence announ cg e merger o e .11 Va-P.-rouuy Savings (IPAB), abruptly paid off the balance-and used a loan from Banamex to do it...
...1 2 So far, the courts have upheld the banks, allowing them to file what many see as frivolous charges against individuals they perceive as threatening...
...Hank Rhon's bank then began battling its perceived enemies on other fronts, most notably the courtroom...
...Men6ndez, however, is confident he will triumph, and is ready for the long fight...
...In the shadow of LJbusinessmen who had become billionaires the promise of prosperity, binational criminal business thanks to the massive sell-off of government-conenterprises have flourished...
...The object," he wrote to his academic colleagues, is "to intimidate other researchers, scholars and journalists in order to deter them from Vol XXXV...
...First, Men6ndez and Giordano had appeared at a speaking engagement in the city...
...Schulz says he had "a sinking feeling in the pit of the stomach...
...Villanueva was a partner in major transportation projects in plan...
...Rumor had it that law enforcement agents were also aiming to put Carlos Hank Rhon on the hot list...
...Schulz worries that others will be encouraged to adopt similar tactics...
...The case was finally settled when IPAB issued Citi a $3.09 billion ten-year maturity note...
...The suit d their bank was filed against professor hit back...
...This says a economic integration...
...Giordano sees this as cause for concern for all Internet publishers: "If a Mexican bank can sue a Website published from Mexico, uploaded directly to a data center in Maryland, over stories that were reported, investigated and written in Mexico, where all the facts and supporting witnesses and evidence are in Mexico, and they can somehow bring suit in New York, then no journalist or Website anywhere is safe from this kind of harassment...
...Unlike Citibank, a number of Mexican corporations, including Banamex, have decided not to turn the other cheek to media criticism and investigation...
...banks...
...Their narco-lobbyists were paid well to try to shape and gut this bill through this process...
...9. See El Boletin Mexicano de La Crisis, January 15, 2001...
...between U.S...
...Facing the prospect of losing millions in interest, Citibank furiously went after IPAB with a lawsuit...
...3 But Citibank, with high-level players like former Treasury Secretary Robert Rubin on board, has quietly survived the money-laundering inquiries for half a decade now...
...6. Ricardo Cedillo and Gary Jacobs have said in several interviews that they decided to fight back against their detractors...
...4 He was referring to the well-connected Washington law firm of Akin, Gump, Strauss, Hauer and Feld, which represented the Mexican transport giant TMM...
...It is this last bit of logic that raises the hackles of civil libertarians and Internet publishers...
...Together, they brokered deals to launder funds...
...Most inflammatory was a section of the document that called the Hanks "a significant criminal threat to the United States...
...It has preferred to lie low and let the press vent away, even while it faces congressional probes and law enforcement investigations in four countries...
...They are counterattacking, and they are using the U.S...
...The goal was to weaken or even kill the bill, which was also under attack by civil libertarians, due to its potential for McCarthyesque abuse...
...Menrndez believes that the Banamex president's property and airstrip were the delivery site for large cocaine shipments from Colombia...
...It was a quote heard round the world, and the Hanks and their bank decided to hit back...
...More than 160 people were arrested-though many were later acquitted-and Banamex was indicted on money-laundering charges...
...Later comes the fun part," Giordano says, "the depositions and the trial...
...Giordano promises an interesting discovery phase...
...He informed me I was being sued," says Schulz, "and I think my response was 'Lovely...
...l lot for a person who couldn't But "rarely acknowledged" begun flexing its muscle...
...Forty million to a well-connected Mexican billionaire is pocket change...
...n in and finally, as an Internet site, Narco News can be read on computers in New York, just as anywhere else...
...Schulz had been identified by the Wall Street Journal as the probable source of a government document called "White Tiger," which included a summary of various criminal investigations of the Hanks and Jacobs...
...t called the Meanwhile, another lawsuit by LNB on behalf of Carlos Hank :icant criminal Rhon and his top employee Gary nited States...
...No 1 JULY/AUGUST 2001 47 Vol XXXV, No 1 JULY/AUGusT 2001 47REPORT ON THE DRUG WAR investigating the Hanks and their associates...
...Citicorp not only 0 46NAC[A REPORT ON THE AMERICAS 46 NACIA REPORT ON THE AMERICASREPORT ON THE DRUG WAR acquired the bank, it also acquired a defamation lawsuit and all the problems that entails...
...Anahuac was also found to program called the Banking Fund to Protect Savings have been infused with money from the Juirez drug (FOBAPROA...
...For Mexico's first non-PRI president in over 70 years, the outraged reaction to his Citibank stance may well signify that his honeymoon is over...
...Email interview with Al Giordano, May 2001...
...It was stockbroker Roberto Hernindez who ill-gotten assets...
...salvage the ruling party's wealthiest cronies...
...Hernmndez has simply claimed he has no responsibility for what washes up on his shore...
...We consider that this step, this investment by Citibank with Banamex, will promote more optimism, more growth," he said when the news broke...
...banks...
...Banamex wants to be untouchable, so that you can't touch them, not even with the petal of a rose...
...Well, they have not succeeded, fortunately...
...6 Schulz received a threatening letter from the Hanks' lawyer, demanding he give reasons why Carlos Hank Rhon shouldn't sue him...
...No evidence regarding Whalen's entrapment, for instance, has been allowed into the court record, even though a key witness admitted in a Federal hearing that he was hired by the bank to go after Whalen because he "had published articles that were negative toward the Hank family...
...Banamex pleaded guilty and was slapped with fines and a cease-and-desist order to halt practices that facilitated money laundering...
...banks...
...During the presidency of Universal could only mourn the loss of the "jewel in Ernesto Zedillo, scandals showed up on Mexico's front the crown of Mexico's banking system...
...House of Representatives, January 25, 1996...
...Akin Gump was not the only lobbyist trying to dilute the bill...
...both were interviewed by a reporter from the Village Voice...
...W hen Citicorp's purchase of Banamex went through, it acquired yet another thorny problem...
...But under new mood of democratic transparency, Mexico's press Salinas, the move was inevitable...
...The controversial act decided t empowers law enforcement officials to put together a list of foreign businessmen believed to be linked to drug trafficking...
...Schulz is a researcher of international military issues and is author of a study titled "Narcopolitics in Mexico...
...3. The 60+ page Federal Reserve document orginally filed on the case found that Carlos Hank Rhon violated banking laws...
...To the chagrin of the Mexican government, Treasury Secretary Robert Rubin (now a director of Citibank) and Attorney General Janet Reno proudly announced the arrests at a Washington press conference...
...Citi" counted on receiving five years' worth of payments with hefty interest, estimated to be $120 million per year for the life of the loan...
...Email interview with Al Giordano, May 2001...
...LNB's lawyers have indicated that journalists who reported on the White Tiger documents will be made to depose in the Cleveland case, among them Dolia Est6vez of El Financiero, Douglas Farah of the Washington Post and Insight magazine's Jamie Dettmer...
...Jacobs drives the attacks into a new realm: academia...
...The daily El has begun flexing its muscle...
...9 Having lost at home, Banamex took the case to the United States, and several factors were used to place the trial in New York...
...Keeping up with the country's the Banco Nacional was to sell Mexico...
...He plans to sublarcopolitics in Mexico," is poena Alfredo Harp Heli, nal Bank for defaming the chairman of Banamex, and ask him what internal investigations were conducted by the bank concerning the allegations against Hernmndez...
...The case is still underway in Laredo, Texas...
...What was lost and can never be regained with this settlement was a chance to get a glimpse of documents that might have answered important questions about the rise of the transnational drug cartels and their ties to Mexican and U.S...
...This is a trend that really began to take hold in the late 1990s...
...As that case unfolds in south Texas, evidence has emerged that shows Whalen was also set up in an elaborate entrapment plan-a phony business deal-engineered by the bank in an attempt to gather r if U n o evidence against him...
...Now, a year later, the U.S...
...President Vicente Fox is clearly delighted with the Citibank-Banamex merger...
...2 The institution become relentless in their scandals showed up on Mexico's Hernndez acquired had long coverage of activities involv- been a symbol of nationalising big business and crime...
...It was the veneraDuring the last decade, ble Banco Nacional de reporters have managed to M6xico, or Banamex...
...Others say he was nailed to the wall...
...and Mexican business and the hemispheric drug trade will remain hidden...
...But politiThroughout the Salinas and Zedillo eras, the privati- cians argued that to keep Mexico's economy going, the zation of Mexico's major industries led to ever more FOBAPROA bailouts had to continue...
...Navarro" had set up meetings with U.S...
...ilously close to the highest levels of the ruling party: A Banamex was among the many privatized institutions Guadalajara newspaper published copies of contracts that turned, tails between their legs, to the government showing that the investment bank Grupo Anahuac had for help...
...4. The Associated Press State & Local Wire November 5, 1999 quotes Rep...
...Hank Rhon was fined $40 million and would lose control of his Texas bank...
...That could be the corrido of Carlos Hank Rhon-the ballad of the rich man's son...
...A mysterious mortician called "Dr...
...Bill McCollum...
...8 Now Banamex has joined the fray...
Vol. 35 • July 2001 • No. 1
