Victims Say HSBC Helped Finance Terrorist Cartel Attacks

Law360 profiled the Zapata v. HSBC lawsuit that EGS filed yesterday on behalf of American victims of drug cartel terrorism:

HSBC Holdings PLC is facing claims that it financed terrorism by allowing a number of Mexican drug cartels to launder billions of dollars through its branches, according to the families of victims of three “horrific” attacks, who sued the bank in Texas federal court on Tuesday.

For years, despite full knowledge of the cartels’ potential to harm Mexican and U.S. citizens, HSBC knowingly serviced the cartels, including the Sinaloa, Juarez and Los Zetas cartels, aided by a pervasive culture of “recklessness and corruption” stemming from deficient anti-money-laundering programs.

“Money laundering is the lifeblood of the Mexican drug cartels, enabling them to construct a facade of legitimacy through which they establish, continue and grow their global enterprises,” the families said. “By facilitating the laundering of billions of dollars of drug cartel proceeds through its banks, HSBC materially supported the terrorist acts of the cartels.”

The 104-page complaint, which could be the first Anti-Terrorism Act suit filed against a bank for its connection to a Mexican cartel, includes 19 pages of examples of killings and kidnappings tied to the cartels, in addition to the detailed accounts of the three attacks that form the basis of the suit.

“Torture, beheadings, hanging corpses, public assassinations of government officials and journalists, mass executions, kidnappings, attacks on civilians, car bombs — these things have become a way of life for millions of Mexicans,” the complaint said. “And with virtually no recourse with local and state law enforcement, who are often corrupted or unwilling to apprehend or prosecute the perpetrators of the violence, millions of people in Mexico and along the U.S. border live in fear.”

The Attacks

The first featured attack occurred in March 2010, when Lesley and Arthur Redelfs, along with their seven-month-old daughter, left a children’s birthday party in Ciudad Juarez, Mexico. The party was hosted by the U.S. Consulate office in the city, which borders El Paso, Texas.

The family was ambushed by the Juarez cartel while driving, and Lesley — then four months pregnant — was shot twice in the head. Her husband made a “desperate dash” for the border, but was killed just before he reached it, the complaint says. Their infant daughter survived.

Two months later, about 16 members of the Sinaloa cartel, aided by allegedly corrupt Mexican police officers, invaded a church courtyard after a wedding, forcing the whole congregation to the ground, the complaint says.

The groom, Rafael Morales Jr., his uncle, Guadalupe Morales, and his brother, Jaime M. Valencia, were abducted, tortured and suffocated by duct tape that was wrapped around their heads, the families say.

Almost a year later, in February 2011, Jaime Zapata and Victor Avila Jr., special agents for U.S. Immigrations and Customs Enforcement, were transporting cargo to Mexico City when they were attacked “in broad daylight” by two vehicles packed with Los Zetas members on a highway outside of the central Mexican city of San Luis Potosi.

Ignoring the armored vehicle’s U.S. diplomatic plates and the agents’ cries that they were U.S. citizens and diplomats, the cartel members fired more than 100 rounds from AK-47s and other military-grade weapons into and at the vehicle, killing Zapata and seriously wounding Avila, the families say.

“The gruesome attacks on the innocent American victims on foreign soil were unquestionably acts of international terrorism,” Richard M. Elias of Elias Gutzler Spicer LLC, a lawyer for the families, said in a statement Wednesday. “HSBC was complicit in laundering billions of dollars for drug cartels and should be held accountable under the Anti-Terrorism Act for supporting their terrorism.”

HSBC’s Alleged Support

Even though the bank knew that attacks like these could, and did, happen to U.S. and Mexican citizens, HSBC, driven by a desire to increase profits, intentionally implemented shoddy anti-money-laundering programs designed to guarantee billions in illicit proceeds would pass through their banks undetected or unreported, the families say.

HSBC employees routinely accepted deposits of hundreds of thousands, sometimes millions, of U.S. dollars that showed “unmistakable” signs of money laundering. These included deposits from people with no identifiable source of income, delivered in multiple boxes specially designed to fit the precise dimensions of teller windows, the complaint says.

Even when money laundering accounts were identified and ordered closed, HSBC employees, some of whom accepted cartel bribes, often refused to report the activity to authorities and allowed the accounts to stay open and active for years, the families say.

HSBC’s U.S. arm also rated Mexico as “low risk,” and $670 billion in wire transfers passed through HSBC Mexico unmonitored, the complaint says.

The London-based bank has previously admitted criminal liability as a result of their anti-money-laundering failings, and in 2010 was ordered by the U.S. office of the Comptroller of the Currency to make dramatic changes to its anti-money-laundering program, the complaint says.

In 2012, the U.S. Department of Justice and HSBC entered into a deferred prosecution agreement, which included allegations that the bank laundered at least $881 million.

HSBC could not be reached for comment Wednesday.

The plaintiffs are represented by Richard M. Elias, Greg G. Gutzler and Tamara M. Spicer of Elias Gutzler Spicer LLC, Benigno Trey Martinez of the Law Offices of Benigno Trey Martinez, and E. Michael Rodriguez of Atlas Hall & Rodriguez LLP.

The case is Zapata, et al., v. HSBC Holdings PLC, et al., case number 1:16-cv-00030, in the U.S. District Court for the Southern District of Texas.

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