HSBC Sued Over Drug Cartel Murders After Laundering Probe

  • Civil action claims traffickers committed terrorist acts
  • Bank accused of aiding and abetting Sinaloa, other cartels

Families of U.S. citizens murdered by drug gangs in Mexico sued HSBC Holdings Plc, claiming the bank can be held responsible for the deaths because it let cartels launder billions of dollars to operate their businesses.

The lawsuit brings fresh scrutiny to the Mexican activities of HSBC, which in 2012 paid $1.9 billion to resolve a criminal investigation into whether it violated U.S. sanctions laws and laundered at least $881 million on behalf of drug cartels.

HSBC said it would fight the claims in the lawsuit, filed Tuesday in federal court in Brownsville, Texas.

The new case recounts a series of murders in 2010 and 2011 in horrific detail, arguing that the bank should be held to account for them under the U.S. Anti-Terrorism Act. 

Four Months Pregnant

Lesley Redelfs was four months pregnant when she and her husband, Arthur, were shot by the Juarez cartel after leaving a children’s birthday party hosted by the U.S. Consulate in Ciudad Juarez, where she worked. Jaime Zapata and Victor Avila Jr. were special agents for Immigration and Customs Enforcement, driving to Mexico City when they were run off the road by two vehicles filled with hit men from the Los Zetas cartel, who then opened fire. Avila survived. Rafael Morales Jr. was abducted on his wedding day, as were his brother and uncle, and the three died of asphyxiation after members of the Sinaloa cartel wrapped duct tape around their heads.

"The Mexican drug cartels are terrorists who routinely commit horrific acts of violence to intimidate, coerce, and control the civilian population and the government,” Richard Elias, a lawyer for the victims and their families, said in an e-mail. “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.”

First Lawsuit

The 1996 Anti-Terrorism Act, amended in the wake of Sept. 11, allows victims to seek compensation from organizations that provide material support to groups that commit terrorist acts. Although other violent drug-trafficking organizations, such as the Revolutionary Armed Forces of Colombia (FARC), have been designated by the U.S. Government as terrorists, the Mexican drug cartels have so far avoided that official label. The Texas lawsuit seems to be the first that’s based on the legal theory that the Mexican cartels are terrorist organizations.

The lawsuit draws on documents made public in 2012 as part of a U.S. Senate investigation. HSBC’s internal controls were ignored and the bank was dubbed by one drug lord as “the place to launder money,” according to the complaint -- a claim disputed by the bank.

“We are committed to combating financial crime and have taken strict steps to help keep bad actors out of the global financial system,” Robert Sherman, a spokesman for the bank, said in an e-mailed statement.

Zapata’s death drew particular public attention after it emerged that an automatic pistol used in the assault was traced to a gun-trafficking ring targeted by a U.S. operation known as Fast and Furious, in which agents from the Bureau of Alcohol, Tobacco, Firearms and Explosives allowed guns to slip into Mexico in an effort to trace the flow of weapons.

HSBC already is among banks facing a lawsuit from families of U.S. soldiers killed or injured by attacks in Iraq on accusations that the firms helped Iran process transfers and finance Hezbollah and other militant groups. Attorneys for banks including HSBC have denied wrongdoing. 

Document Sealed

The plaintiffs in that case are pushing for the release of a report by HSBC’s court-appointed monitor, Michael Cherkasky, detailing the bank’s uneven efforts to fix its controls. A federal judge in Brooklyn last month said a redacted version of that document should be made public.

The bank and the government have appealed that order, and the judge said Tuesday he is not likely to make the report public until a higher court weighs in. 

The case is Zapata v. HSBC Holdings Plc, 16-cv-00030. U.S. District Court, Southern District of Texas (Brownsville).

Before it's here, it's on the Bloomberg Terminal. LEARN MORE