Easy Question -- Drug War, International Lawyers, Freedom of Speech: Which One Is Endangered? 
| The news magazine The Nation has uncorked a major exploration into efforts to silence investigators of international money laundering and drug trafficking. Here we show you just a small portion of their long, excellent article. |
Alleged Drug War Money Launderers and Journalists Collide
by Mark Schapiro
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. The suits could hinder future investigations, 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.
One 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 Menindez, 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 Menindez 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 Menindez 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 Menindez 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 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 Menindez.
"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 and Selz, noted for its defense of First Amendment cases. "And Mexican courts decided three times that what Menindez 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.
The accuracy of this and other such 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.
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