Pubdate: Fri, 01 Jun 2001
Source: New York Times (NY)
Copyright: 2001 The New York Times Company
Contact:  http://www.nytimes.com/
Details: http://www.mapinc.org/media/298
Author: Tim Weiner

BIG U.S. FINE FOR MEXICAN IN BANK CASE

MEXICO CITY, May 31 -- Carlos Hank Rhon, one of the richest and most 
politically connected businessmen in Mexico, will pay a $40 million fine to 
settle charges that he violated banking laws when he bought Laredo National 
Bancshares in Texas, the Federal Reserve Board said today.

The fine, one of the largest ever imposed by the Fed, will be paid to the 
United States Treasury in installments: $10.75 million immediately and 
$29.25 million over the next seven years, the Fed announced.

Mr. Hank will also resign as chairman and as a director of Laredo National 
Bancshares, which has about $2.5 billion in assets, $2.2 billion in 
deposits and two subsidiaries, Laredo National Bank and South Texas 
National Bank, all based in Laredo.

The Fed contended that Mr. Hank filed false or misleading reports regarding 
his acquisition of a controlling stake in Laredo National through an 
offshore holding company that he controls, the Incus Company, which is 
based in the British Virgin Islands.

It said he failed to disclose the sale of a $20 million share in Laredo 
National to his father, Carlos Hank Gonzales.

The elder Mr. Hank, a former mayor of Mexico City and a past president of 
the Institutional Revolutionary Party, which ruled Mexico for 71 years 
until it lost the presidency last July, amassed one of Mexico's biggest 
family fortunes during his years as a politician and a federal minister of 
tourism. That fortune was built on banking, finance, real estate, 
construction and transportation enterprises.

The younger Mr. Hank also failed to disclose his connections to at least 
five offshore investments, the Fed said. It also contended that Mr. Hank 
took part in improper lending when one of his companies in Mexico received 
a $3.4 million loan from Laredo National.

The Fed had charged Mr. Hank, in an administrative proceeding filed in 
December 1998, with violating the Bank Holding Company Act and other United 
States laws. Mr. Hank denied the violations and did not acknowledge 
wrongdoing in the settlement, which he called "an important business 
initiative I have taken to enable Laredo to move forward."

He is now banned from controlling or directing banking organizations in the 
United States without Fed approval.

The $40 million fine appears to be exceeded only by the $200 million 
penalty the Fed levied against the Bank of Credit and Commerce 
International in 1992. That bank collapsed in 1991 with debts of more than 
$12 billion, a result of what is generally considered to be the biggest 
fraud in banking history.

Mr. Hank will become chairman emeritus of Laredo National and will retain 
his controlling interest in it, the bank said. He "will not be otherwise 
involved in its management or operation," the Fed said. His 71 percent 
stake will be placed in a voting trust, whose trustees are to include 
Eugene Ludwig, a former comptroller of the currency, bank officials said.

Last year, lawyers representing the bank sued the chairman of the political 
science department at Cleveland State University, saying that he had given 
reporters in the United States copies of a draft Justice Department report 
that suggested the Hank family engaged in drug-related money laundering 
through the bank.

Janet Reno, then the United States attorney general, disavowed the report 
as the work of unsophisticated authors at the National Drug Intelligence 
Center, an arm of the Justice Department. She did so in part at the urging 
of former United States Senator Warren B. Rudman, who had been retained by 
the Hank family in the matter.

Gary G. Jacobs, the president and chief executive of Laredo National Bank, 
has also sued officials of the drug intelligence center.
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