Mexico Preparing to Sue U.S. Companies Deemed Culpable For Drug-War Crimes

Mexican Government Will Pursue Civil Lawsuits Over Arms Trafficking and Money Laundering

The Attorney General’s Office of Mexico has retained a U.S. law firm to explore options for filing litigation against U.S.-based companies or individuals “believed to be participating” in money laundering and weapons trafficking activities “that may be harming Mexico,” a recent filing with the U.S. Department of Justice reveals.

The issue of weapons trafficking has been a major flashpoint in relations between Mexico and the United States. Mexican President Felipe Calderon has publicly stated that it is U.S. guns that are being used to arm Mexico’s violent narco-trafficking organizations. However, U.S. officials stress they have increased efforts and resources to stem the flow of arms, typically blamed on illegal gun-store and gun-show sales.

Neither side, however, is acknowledging the role played by the criminal diversion of legal weapons sales — those shipped by U.S. companies to the Mexican government and later, due to widespread corruption, diverted to criminal organizations. [See link].

In any event, the Mexican government’s decision to contract with a U.S. law firm to pursue civil claims against parties it deems responsible for illegal arms sales is not likely to seriously impede the flow of weapons into Mexico — given that the full force of U.S. law enforcement has failed to do so to date.

The move seems to be more of a cynical political PR stunt designed to help deflect blame for Mexico’s failed drug-war policies. Some four years ago, Mexican President Felipe Calderon enlisted the military to launch a “war” on the “drug cartels,” resulting, to date, in at least 40,000 murders in Mexico — many involving innocent civilians.

Also of interest in Mexico’s pact with the U.S. law firm is the call for litigation against non-Mexican entities suspected of being engaged in money laundering. Based on the wording in the DOJ filing, the potential targets of such lawsuits could well include mainstream U.S. banks – which, to date, have been widely successful in washing their hands of the hundreds of billions of dollars in drug money coursing through the world’s financial systems.

It is not clear what Mexico hopes to accomplish by threatening U.S. lenders with money-laundering litigation, though it might be deemed by some as an effort to create a bit of leverage to move U.S. government policy in a direction that is even more favorable to the Calderon administration and its interests.

A few mainstream media outlets, including the Associated Press and CBS News, reported this week that “anonymous sources” told them Mexico had hired a “New York-based law firm” to pursue possible lawsuits against U.S. gun makers and distributors.

“The law firm is looking at charges that may include civil RICO [Racketeer Influenced and Corrupt Organization Act],” the CBS News report states.

It appears, though, that the reporters with those mainstream media outlets do not know about a certain federal law requiring parties who are representing foreign governments in the U.S. to register with the Department of Justice. As a result, they relied on “anonymous sources,” to convey information that is already in the public record, and failed to get the whole story in the process, including the fact that, according to the public DOJ filing, the law firm hired by Mexico is based in Texas — though it does have a New York office.

In the official contract included with the recent DOJ filing obtained by Narco news, the Austin, Texas-based law firm of Reid Collins & Tsai LLP states that it has “agreed to serve as lead counsel for PGR [the Mexican Attorney General’s Office]” and that it also has retained a Florida firm, Berg Associates LLC, to assist with research and investigations for potential litigation.

More from the contract:

Reid will provide legal services to, and represent, PGR in connection with the investigation and pursuit of claims against certain entities and individuals in the U.S. [the “Targeted Defendants”] believed to be participating in money-laundering activities as per the research carried out by Berg, the illegal manufacture, import/export, or sale of weapons, or other conduct that may be harming Mexico.

Berg will act as consulting experts to the Legal Team, and as such, Berg’s research will be protected by the attorney-client privilege. Berg will work up and investigate potential claims, and assist in prosecuting any and all potential claims … for which PGR provides written authorization.

Berg Associates’ Web site describes the firm as a “leader in investigating financial crimes” and in “developing proactive strategies to … detect and defeat counterfeiting and contraband.”

The Austin law firm, according to the contract, will be rewarded for its services by getting a 23.5 percent cut of the “net recovery” from successful litigation efforts and will be reimbursed by the PGR for expenses – up to $3 million in aggregate, unless PGR provides written approval to exceed that amount.

The filing outlining the PGR’s contract relationship with Reid Collins & Tsai was lodged with DOJ in early February of this year per the requirements of the Foreign Agents Registration Act. However, the contract between the law firm and Mexico’s PGR was actually inked on or before Oct. 27, 2010, as evidenced by the date on a letter included with the Reid Collin’s FARA filing.

From that letter, drafted by William T. Reid of Reid Collins and directed to the PGR’s Washington, D.C., legal attaché, Guillermo Fonseca Leal:


As you know my firm Reid Collins & Tsai, LLP … and Berg Associates LLC have now entered into the Investigative and Legal Services Agreement with you in your capacity as the Legal Attaché of the Procuraduria General de la Republica – the Office of the Attorney General….

… I write you to confirm that you have agreed that Reid and Berg have “Research Authorization” under the agreement to proceed with the investigation of PGR’s potential claims for the following:

(1) Guns/Arms: The manufacture, sale, import/export, and/or distribution of all weapons or firearms that have been illegally imported into Mexico for which PGR may possess a viable claim; and

(2) Foreign Financial Institutions: Any and all foreign financial institutions (defined as financial institutions that are not chartered or set up under Mexican law) that have been or are engaged in money laundering, asset concealment, tax evasion, or providing other financial assistance to any person or entity for which PGR may possess a viable claim.

Another Client

This is not the first time Reid Collins & Tsai (formerly known as Reid Davis LLP) has been retained by a foreign government seeking legal representation in the U.S.

The law firm was hired last year by the government of Colombia to represent it in an ongoing lawsuit against two of the world’s largest liquor producers, England-based Diageo Plc and France-based Pernod Ricard SA — both of which have major U.S. operations and produce well-known brands such as Smirnoff, Johnnie Walker, Captain Morgan Chivas Regal and Martell.

In the litigation, a civil Racketeer Influenced and Corrupt Organization (RICO) Act case filed in U.S. District Court in Brooklyn, the government of Colombia accuses the giant liquor companies and their co-conspirators, including distributors based in Aruba (a Caribbean island nation just northeast of Colombia), of having “engaged in and facilitated organized crime by laundering the proceeds of narcotics trafficking,” among other acts, according to the court pleadings.

The spirits companies Diageo and Pernod, of course, deny the allegations made against them in the lawsuit and are intent on proving in court that they lack merit.

“Diageo is vigorously defending itself in this matter. [However,] we make it a practice not to comment on pending litigation,” Zsoka McDonald, a spokesperson for Diageo, told Narco News in a prepared statement for a prior story [link here] on the Colombian lawsuit.

Representatives from Pernod Ricard issued a public statement previously indicating that the company “will continue to vigorously defend itself against the claims” in the lawsuit.

William T. Reid, in a prior interview with Naro News, confirmed that his law firm was retained to represent the government of Colombia in the ongoing litigation (filed originally in 2004). He said the case is still in the discovery phase in the wake of a critical 2007 ruling in which the judge refused to dismiss the litigation.

Reid adds that he “cannot say for a fact” that the money laundering activity allegedly carried out by the liquor companies named in the lawsuit is still going on today. However, he does say the size of the “black market” for illegal liquor and drug sales is “as large as it’s ever been.”

A letter filed with the court in 2008 by the government of Colombia’s attorneys alleges that the money laundering conspiracy began “on or before 1990 and [continued] through the date of the filing of the complaint (October 2004) and into the future.”

Stay tuned….

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About Bill Conroy