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Mexican Bank, Mexican Web Site, New York Courtroom
Is Banamex forum shopping or simply seeking its day in court?

When Al Giordano, a former political reporter for the Boston Phoenix, moved to Mexico and started a Web site to cover the drug wars in Latin America, he didn't suspect the endeavor would land him in a New York courtroom.

But there he was on July 20, sitting in front of Judge Paula Omansky of the state Supreme Court, New York's trial-level court. The court's actions in the case bear watching by the legal community, law professors -- and anyone running a Web site. (For Giordano's take on the case, see the main article, Cross-fire in the Drug War.)

Narco News, which Giordano published from his laptop in Mexico, now has him in a legal standoff with one of Mexico's most important bankers and a powerful Washington, D.C.-based law firm. The lawsuit was filed a year ago, the first hearing was held 10 days ago, and attorneys said it could take five months before even the issue of jurisdiction will be decided.

Make no mistake, Narco News posts a style of writing you won't find landing in your typical American driveway or on the major wire services. The slant is opinionated, left-wing and activist. But that doesn't undermine its legitimacy, especially on the Web.

Last fall Giordano gained media attention when an Associated Press correspondent in Bolivia resigned after Narco News reported that the AP writer had lobbied the government there on a water project. And Giordano takes credit for spurring major U.S. papers like the Los Angeles Times to report that the president of Uruguay was calling for the decriminalization of illicit drugs.

The current libel and slander case was originally brought in 1997 against Por Esto!, a daily newspaper in the Yucat?n with a circulation of 70,000; it also publishes a Web site. It ran a three-part series in December 1996 alleging that drugs were being shipped to banker Roberto Hern?ndez Ramirez's beachfront property in the Yucat?n, unloaded and flown to the United States. It also said he was damaging Mayan ruins on his property and that he and his business partner were trying to run off local fisherman and other landowners.

Giordano said the Por Esto! report was 'supported by witness testimony, documents, facts.' He said 'the neighboring fishermen also went on the record, including at least one by name, as witnesses to the boat and plane activity in and out of Hern?ndez's property.'

The bank and Hern?ndez deny the accusations and maintain that the publishers of the Web site and the newspaper knew the statements were false when made.

Por Esto's reporters were taken to the Hern?ndez property by local fisherman who said they had seen drug trafficking taking place on the property. The reporters also took photos, which, according to the captions, show trash washed up on the shoreline that indicates drug traffickers were in the area. Another photo shows stacks of packages in a warehouse. The caption identifies the packages as cocaine seized by local authorities.

Thomas McLish, an attorney with Akin, Gump, Strauss, Hauer & Feld, the firm representing Banamex, disputes the caption information. 'Men?ndez and Giordano have continually mischaracterized and misrepresented what those photographs show. Banamex is unaware of any photographs that support the defendants' accusations,' he said in an e-mail interview last week.

However, after Por Esto publisher Mario Men?ndez ran the story, turned the cocaine over to the police, and filed a criminal complaint against Hern?ndez, the paper was slapped with trespassing and defamation charges. Giordano said local law officers were in Hern?ndez's back pocket, which is why the publisher and not the bank faced charges.

Men?ndez's case was heard in three different courts, but he eventually won at all levels. McLish said the case was dismissed on a technicality.

'Banamex did everything it could do under the law of Mexico,' David Atlas, the attorney for Men?ndez, said told the New York court July 20.

After the case was dismissed, Men?ndez and Giordano traveled to New York in March 2000 to attend an event at Columbia Law School, where they both made statements recounting the story about Hern?ndez. They returned to Mexico and in April 2000, Giordano started the Narco News Web site. In late May, he ran his first story about Hern?ndez, in which he cited Por Esto's reporting and says his own investigation into the allegations have convinced him the accusations are true.

On Aug. 9, 2000, the bank filed suit in New York, charging libel over the written accusations and slander charges for the statements made at the law school as well as statements made to the press around the same time. The defendants are Men?ndez, Giordano and the Narco News Bulletin.

Judge Omansky, who made it clear that she wanted more information about Mexican law and how this case was handled there, nonetheless said that if she were in the defendant's shoes, 'I would feel free to come to the United States and say substantially the same thing' if I'd just been cleared in Mexico.

The bank, popularly known as Banamex, is a wholly owned subsidiary of Grupo Financiero Banamex-Accival, also known as Banacci. Hern?ndez is the chairman of the board of directors, general director and largest shareholder of Banamex. U.S. financial behemoth Citigroup is in the process of buying Banacci in a $12.5 billion cash and stock deal. Reuters reported earlier this month that Hern?ndez's stake would be worth $1.9 billion if the takeover is completed. Banacci is also one of the most popular Latin American stocks with U.S.-based investment funds, according to a Reuters report.

McLish, who argued in court that the accusations against Hern?ndez could jeopardize his assets under the U.S. Drug Kingpin Act, declined in an e-mail exchange to address whether the issue holds any implications for Citigroup.

EFF warns of threat to independent journalists

The Electronic Frontier Foundation filed a brief with the court in support of Giordano. 'The EFF is concerned that the bank resorted to New York courts to try to shut down this Web site because it could not do so in Mexican courts,' Cindy Cohn, legal defense director of the EFF, said in a statement. 'This kind of forum shopping threatens to shut down one of the greatest benefits of the Internet -- giving a voice to independent, Internet-based journalists. Faced with having to defend themselves in far-flung jurisdictions, many independent journalists will simply choose not to publish on the Internet.'

But McLish said his client is not shopping around for a forum to convict. 'This is the first lawsuit that Banamex has filed regarding these accusations. There were prior proceedings in Mexico, but they were brought by the Mexican government, not Banamex, and did not even involve the same statements at issue now, and did not address the truth or falsity of the statements. Banamex was not a party to the Mexican proceedings.'

The bank's complaint spells out its defamation claim: 'Describing it as 'the Banamex story,' the Narco News Bulletin articles have falsely asserted and implied that (a) Banamex was purchased and is funded with the proceeds of illegal drug trafficking, (b) Banamex is controlled and managed by a criminal drug trafficker, (c) Banamex maintains a favored position with the government of Mexico, including law enforcement authorities, through bribery with money illegally obtained from drug trafficking, and (d) incontrovertible proof exists that Banamex's president and chairman is involved in drug trafficking. In addition, some of these articles repeated and republished false and defamatory statements defendant Men?ndez made about Banamex while in New York.'

Giordano claims that all his stories are true and whatever issue there is should be resolved in Mexican courts since that is where he posted the stories. Attorneys for the bank claim the stories are false, that the pictures do not show what the captions claim, and that the case can be tried in New York for a number of reasons.

McLish said in court that the bank pays taxes in the United States and does millions of dollars of business here. The complaint also points out that the Narco News site is registered to a post office box in New York, and that many of its readers live in New York. It also states that Narco News is affiliated with organizations in New York that raise funds on his behalf.

'Their false and scurrilous statements are highly damaging to Banamex in New York, where it is subject to U.S. laws that impose harsh and potentially ruinous penalties upon foreign banks associated with drug trafficking and money laundering. It would make no sense to sue somewhere else for false statements they made in New York to New York audiences,' McLish said.

The Internet service provider for Narco News, Voxel.net, is in Maryland.

Jurisdiction on the Net a murky issue

The problem faced by Narco News is not unique, said Jonathan Zittrain, an assistant professor at Harvard Law School and the faculty co-director of the Berkman Center for Internet & Society.

Zittrain, who has no involvement with the case, said that generally, someone could sue wherever a claim of harm arises. 'It would be up to the court where it was filed. The court could say people could read it here,' he said. 'It gets mushy pretty quickly.'

Zittrain said the possibility of so many Web sites being hauled into court is slim because of the expense in bringing a suit. But if a big corporation decides to sue a little guy and begins a long and costly court fight, that's nothing new just because it happened online.

'If a large bank wants to make you unhappy, they can make you unhappy even if you go nowhere near the Internet,' Zittrain said.

Giordano said about $20,000 has been given so far to the legal fund to battle Banamex, but that more is needed.

'This is becoming very expensive,' he said at a news conference following the New York court hearing. 'We're fighting for freedom of the press for journalists everywhere.'

Giordano also asserts that the case was filed in New York just to raise costs and slow down the process. 'They don't want a speedy trial. They don't want speedy justice,' Giordano said. 'They know this is the most bogged court in the United States.'