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.

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.

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.

• 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

A Narco News Global Alert

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
https://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:
https://www.narconews.com/warroom.html