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FEATURE Carlos Hank’s NAFTA Bank BY LOUIS DUBOSE It’s owned by Incus? That’s correct? Who holds the majority of the stock? Incus. Who owns Incus? Carlos Hank Rhon Laredo 0 n 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 esasked 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. WHO OWNS THE BANK? 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 dollardenominated 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 Euro 8 THE TEXAS OBSERVER MARCH 17, 2000 44,00WIMAIreWPO…-011,