Federal Reserve Cracks Down on Hanks

0 Comments | Insight on the News, July 2, 2001 | by Jamie Dettmer

The Federal Reserve Board has dealt a severe setback to the media and legal campaign launched by Mexican billionaire Carlos Hank Gonzalez and his sons to clear their names. Allegations link the immensely powerful family to money laundering, narco-trafficking and banking irregularities.

The Hanks, who have been described as a "major criminal threat" by a U.S. intelligence report, details of which Insight first disclosed, were on May 31 forced to settle an enforcement action brought by the Federal Reserve Board. This action charged that the eldest son, Carlos Hank Rhon, and an offshore company in the British Virgin Islands that he controls hid the ownership interest of the father in two Texas banks.

While terms of the agreed settlement are not that onerous for the wealthy Hanks -- Hank Rhon has to pay an immediate $10.75 million in fines and an additional $29.25 million during the next seven years -- their loss in the proceedings represents a major blow to the family.

Since March 1999, when Insight disclosed details of an intelligence study dubbed "White Tiger" -- it alleged the family provided political protection for Mexico's major narco-traffickers, including the Arellano-Felix cartel of Tijuana -- the Hanks have mounted a major effort to clear their names. (See "Family Affairs," March 29, 1999.)

They have filed lawsuits against individuals they claim have defamed them, sought to persuade the U.S. government to disavow the intelligence report and retained high-profile legal counsel, including former New Hampshire senator Warren Rudman, to lobby for them. (See "Reno Contradicts U.S. Drug Report," July 3, 2000.)

Under terms of the agreed settlement, Hank Rhon now has to resign his chairmanship of Laredo National Bancshares, the parent of Laredo National Bank, and the South Texas National Bank. "White Tiger" alleged that the Hanks used both Texas banks for narco-related money laundering -- a claim Laredo National Bank Chief Executive Officer Gary Jacobs dismissed as "undocumentable lies."

Before the settlement, Jacobs claimed "rogue" elements in the Drug Enforcement Administration and the Federal Reserve were out to get the Hanks because "they don't want Latinos to own or control banks in the United States."

Hank Rhon, who is the hands-on manager of the family's extensive business empire, also now is prohibited from being a board member or controlling shareholder of any bank in the United States without the prior approval of the Federal Reserve. The family's diverse commercial empire boasts vast holdings in Mexico and overseas, as well as in the United States, in the fields of telecommunications, brokerage, transport, manufacturing, construction, energy and gaming.

Over the years Carlos Hank has been mayor of both Toluca and Mexico City, governor of Mexico state and secretary of tourism as well as agriculture. But his formal posts hardly reflect the spidery influence he has exerted in the center of the web of Mexican politics. Described by former Mexican president Miguel de la Madrid as the "master of gratitudes," Hank has been called the Cardinal Richelieu of his generation.

An Armani-suited political godfather armed with an easy smile and a ready handshake, he is steeped in the ways of developing and keeping power through the art of dispensing favors. But since the election last year of Vicente Fox as Mexican president, his power has ebbed.