Note: The "Timeline" included at the end of this story was on a 2nd page

DRUG DEALER TAKES BANKER TO COURT

Eduardo Masferrer, the urbane chairman of Hamilton Bank and a leader in
Miami's international banking circles, is mired in a legal struggle with an
unsavory opponent: a convicted Mexican drug smuggler who says the Miami
banker owes him millions.

Jose Pineda Trinidad -- who spent three years and 10 months in a Mexico
City prison on narcotics trafficking charges and whose own self-description
is prosperous pig farmer -- has waged a legal battle on several fronts with
the ire of Shakespearean betrayal. Masferrer, he claims, was not only his
banker, but also his friend.

That is, Pineda says, until Masferrer went to U.S. authorities in 1988 and
accused him of drug trafficking, triggering his arrest in Mexico.

Pineda, 51, claims the motivation was to put him away in jail while
Masferrer was able to keep at least part of some $20 million entrusted to
him -- $10 million deposited in Panama and a second $10 million he says
Masferrer dipped into for the purchase of Hamilton Bank.

"This was a double-cross by Masferrer so he could keep my money," said
Pineda, who is demanding a reckoning for events that took place more than a
decade ago -- some in Panama City, some in Guadalajara, Mexico, and some in
Miami.

These allegations are sharply denied by Masferrer's lawyer, former U.S.
Attorney Roberto Martinez. The only money his client ever handled was the
$10 million deposited in Panama and that the money was returned with
interest, Martinez said. Copies of letters and wire transfers made
available to The Herald by Martinez appear to show these transfers.

"Jose Pineda has undertaken to harass and intimidate Mr. Masferrer and his
family by embarking upon a public relations effort to taint Mr. Masferrer's
good name and by filing a meritless lawsuit, making the nonsensical claim
that he waited over 10 years before asking for the whereabouts of his $10
million," Martinez said.

Pineda has already won one lawsuit claiming money in Panama, although Banco
del Istmo, and not Masferrer, was ruled responsible by the judge.

In his lawsuit in Panama, filed March 5, 1999, Pineda alleged that
Masferrer, as an officer of Banco del Itsmo, transfered more than $10
million of Pineda's deposits out of Panama's Banco del Istmo and into an
account in a Miami bank controlled by Masferrer and his wife, Maura. The
Panamanian verdict is based on Banco del Istmo's inability to produce
documents that were legally acceptable in Panama showing that the money had
been returned to Pineda.

Martinez said the Panama judgment was a victory for his client.

"We are confident that Mr. Masferrer will prevail once again and this time
in a U.S. courtroom," he said.

A year ago, Pineda filed a new lawsuit against Masferrer in U.S. District
Court in Miami, this time adding Maura Masferrer and Hamilton Bank to the
case. He alleged the Masferrers failed to deliver or account for $10
million he handed over to the banker in Mexico about the time Masferrer
acquired Hamilton.

That lawsuit is in its early stages.

The couple's attorneys filed for its dismissal on Feb. 14, , and their
attorneys insist there is not a shred of evidence the money alleged to have
been delivered in Mexico ever existed.

According to an amendment to the lawsuit, filed June 1 and pending the
approval of U.S. Magistrate Judge William C. Turnoff, "The Masferrers were
able to acquire stock in Hamilton Bank or Southern Bancorp, its holding
company, utilizing plaintiff's funds."

The details from the first complaint to the amended version have changed
somewhat, from Pineda's assertion that the $10 million was all for the bank
purchase or capitalization, to the latest version, which alleges that only
a small portion was to buy shares in the bank. The rest, Pineda says, was
to be held in trust for his children.

Pineda's lawsuits have stirred up long-buried events.

Since settling in Miami in 1988, Masferrer, 52, has nurtured a reputation
as a civic leader and philanthropist. Colleagues consider him a savvy
international banker, with a knack for operating in financially volatile
environments in Latin America. The couple's Hamilton Bank Foundation has
underwritten charities in Central America and Israel, and funded
scholarships at local universities.

Maura Masferrer, a Panamanian banker who met her future husband during his
10-year stint as a financier in Panama City, served as Hamilton's executive
vice president until last month, when it was announced she resigned to
dedicate herself to charitable causes. According to documents she signed,
she handled most of Pineda's transactions.

Masferrer declined to comment for this story, referring inquiries to Martinez.

The attorney denied that Masferrer had anything to do with Pineda's arrest,
noting that Masferrer's brother, Miguel Angel, and his wife Iraida were
picked up in the June 16, 1988, raid on Pineda's walled estate, where they
were guests. They were held by federal agents, who tortured Masferrer's
brother, Martinez said.

"It was as a result of [the arrests] that Mr. Masferrer thought that the
man who had been his customer in Panama was not the man who he thought he
was," Martinez said.

As a result, according to Martinez, Masferrer contacted and then held a
meeting with members of a federal task force on money laundering, which
included agents from the Drug Enforcement Administration, on the advice of
an attorney, Robert Josefsberg. A memo written by Josefsberg's assistant
said it took place in Josefsberg's office in July 1988, the month after
Pineda's arrest.

"Eduardo went to extraordinary lengths to go to the authorities. He didn't
have to do that. He asked the authorities for guidance. They said they'd
get back to him, and they didn't," Martinez said.

Martinez said there was no follow-up from federal officials after the
meeting, so Masferrer followed his customer's instructions over the next
four years and wired the money -- the original $10 million from Panama --
back to Mexico.

Pineda has provided The Herald a sworn affidavit from Jose Daniel Najera
Rios, stating the information for Pineda's arrest was provided to Mexican
agents by the DEA acting on a lead from Masferrer. Najera is listed as an
arresting agent in Pineda's original case file.

The lawsuit is just one of the problems facing Masferrer and Hamilton Bank.
Disputes with federal regulators over how to account for problem loans in
Ecuador have forced the bank to restate earnings, reporting losses over the
past three years. It announced on June 14 that federal regulators have
reclassified the publicly traded institution as "undercapitalized" because
of loan exposure in Latin America.

But little matches the intrigue of Pineda's claims, a tale of global
banking and of the high-stakes courtship between bankers and their clients.

The saga ties together Banco del Istmo, now the largest banking group in
Panama's banking center; Hamilton Bank, one of Miami's most successful
trade finance banks; and Southern Bank & Trust, a bank opened in 1988 in
Montserrat.

What connects these banks is Masferrer, a Cuban-born and U.S.-educated
banker. Masferrer was general manager at Banco del Istmo until 1988, then
raised capital to purchase Hamilton Bank in mid-1988 for a reported $4.4
million, serving as chairman, president and chief executive of its holding
company, Hamilton Bancorp. Since 1988, he has also been a director of
Southern Bank & Trust.

Although none of the money in dispute was ever deposited in Hamilton, funds
were allegedly used for its purchase. Hamilton Bank also has a close
relationship with Southern Bank & Trust, which in a separate federal
lawsuit was alleged to be an "alter ego" of Hamilton. Southern Bank &
Trust's address is a P.O. box in Montserrat. The Masferrers say they are
not shareholders of the holding company, Southern Financial Holdings, that
owns Southern Bank & Trust, but they are directors of the bank.

Both sides agree that Masferrer and Pineda met in Panama City in 1985.

Pineda, a Guadalajara resident, was looking for a place to invest his
fortune to protect it from the rampant devaluations in Mexico. On a
friend's recommendation, he went to Masferrer, opening three accounts at
Banco del Istmo.

Pineda says Masferrer would send a gold Mercedes Benz to retrieve him at
the airport when he would go to Panama City to make deposits, his account
growing in time to $10.2 million, court documents show. As Pineda tells it,
a friendship flourished over dinner and drinks, eventually leading to
family retreats in Cancun. Martinez disputes this characterization, and
some of the details. Neither Masferrer nor his associates had a gold
vehicle, he said. He confirmed a Cancun meeting, but said it was a short
business affair and not a family event.

Masferrer, Pineda says, even invited him to Puerto Rico in 1988, where he
attended the 44th anniversary dinner for Masferrer's parents.

Martinez disagrees.

"The relationship they had was one of banker and customer," he said, adding
that Pineda showed up at the anniversary celebration uninvited.

By early 1988, hostilities between the United States and former Panamanian
strongman Manuel Noriega were reaching a breaking point. The Panamanian
bank said the $10 million was transferred from Banco del Istmo to Miami
because of concerns that accounts would be frozen.

Banco del Istmo said the money was transferred on March 3, 1988 into the
account of Banistmo Financial Services at First Interstate Bank
International in Miami. Banistmo Financial Services listed Masferrer and
his wife Maura as the sole officers, according to Florida corporate records.

Pineda claimed he never knew the $10 million he had in Panama had been
moved out of the country because on June 16, 1988, he was arrested by
Mexican anti-drug police and it was not until late 1998 that he could
travel to Panama to ask for his money. The bank produced a copy of a March
1988 letter with Pineda's signature where he approves the transfer. Pineda
claimed the signature was a forgery, and the judge in the lawsuit ruled it
was a forgery based on the report of an independent handwriting expert
hired by the Panamanian court.

Last year, Panamanian District Judge Samuel Jimenez handed an initial
victory to Pineda, ruling that Banco del Istmo owed him the $10.2 million,
plus $11.2 million in interest and costs. "It has not been established in
documents that the money, property of Jose Pineda Trinidad, was ever
delivered to him," the ruling said.

The judge did not find Masferrer committed any wrongful act and ruled that
he had no legal responsibility because he was acting as an employee of the
bank.

The ruling was largely a technical one. Evidence from the Montserrat bank
showing the wire transfers to Pineda was not admitted by the court because
the documents lacked proper diplomatic certification.

Banco del Istmo has appealed the decision.

Around the same time Pineda's money was transferred, Masferrer also made
plans to exit Panama. In March of 1988, Masferrer and Miami banker Andres
Gomez-Mena signed an agreement to purchase Miami's bankrupt Alliance
National Bank, a community bank, and after the closing of the deal on May
25, 1988, the bank was renamed Hamilton Bank and its business was
redirected to international trade finance.

Based on the original incorporation documents of Hamilton, Gomez-Mena was
the sole shareholder for about two months of Hamilton Bank's holding
company, Southern Bancorp, until his ownership was diluted, as other
investors, individuals and companies from Latin America were sold
additional shares. Gomez-Mena declined to be interviewed. He sold his
shares in May 1990.

In his Miami lawsuit, Pineda alleges that Masferrer contacted him on May
10, 1988, apprising him of his plans for Hamilton and asking him for money
"to finance and capitalize the venture."

DISPUTED TRANSFER

Pineda says in the lawsuit he personally handed the banker $10 million in
bank checks made out to third parties when Masferrer traveled to
Guadalajara on May 15, 1988. The money included $250,000 to entitle him to
a 5 percent interest in the institution, and the rest was to be invested
for Pineda in trust accounts for his children.

This $10 million had nothing to do with the money in Panama, Pineda insisted.

Echoing the allegationsin his lawsuit, Pineda said: "He was my advisor, and
I totally trusted him."

Martinez confirmed Masferrer traveled to Mexico at that time, but said it
was to discuss the trust accounts for Pineda to be set up in an offshore
bank, Southern Bank & Trust.

Ten days later, Pineda was in Miami.

In the Panamanian lawsuit, Banco del Istmo contended First Interstate Bank
International in Miami made the funds available to Pineda on May 25, 1988
- -- the same day the Hamilton Bank purchase agreement took effect. The next
day, Pineda opened three trust accounts at Southern Bank & Trust, the
Montserrat institution where Masferrer and Maura are listed as directors,
according to court documents. By Masferrer's account, this is the money
from Panama that was later wired to Pineda over a period of years.

Martinez says that while Pineda was in Miami to open his trust accounts, he
expressed interest in becoming a shareholder in Hamilton Bank, and
authorized the transfer of $250,000 for that purpose. Masferrer gave Pineda
the paperwork required under U.S. law -- but Pineda never returned it.
After his arrest, Maura wrote a letter to Pineda saying that his investment
money was being transferred back into his account at Southern Bank & Trust.

In a telephone interview, Pineda says he was treated in princely fashion
while in Miami to celebrate the birth of the bank.

He says he attended a party held in a hotel overlooking Biscayne Bay, whose
name he does not remember. Investors held a dinner in the Grand Bay to
celebrate the closing of the deal and then went to the now Sheraton
Biscayne Bay Hotel on Brickell for more drinks, one participant confirmed.

Recalling the party held more than a decade ago, Pineda says that he met
one of the bank shareholders by the name of "Mena," referring to Gomez-Mena.

Pineda says he has few documents to support his allegations of a second $10
million given to Masferrer because boxes of documents were confiscated by
Mexican federal agents after his arrest and never returned.

The only alleged written link to the Guadalajara $10 million, court
documents show, is a copy of a Mexican bank check for $236,479, dated June
6, 1988 and made out to Shepherd Machinery Company, a farm equipment
company in Los Angeles where Pineda made purchases.

Pineda claims that Shepherd was one of many "fictitious payees" referred to
in the lawsuit that Masferrer told him to make out checks to, though he
admits doing business with them in the past.

The check, submitted as evidence by Pineda's attorneys, was deposited in an
account for Southern Bank & Trust at First Interstate Bank International in
Miami and was endorsed by Maura de Rojas, the name Masferrer's wife used at
that time.

Masferrer said through his attorney that the check was deposited in
Pineda's name as payment toward a larger purchase of farm equipment, which
was later carried out through a $536,000 wire transfer from Southern Bank &
Trust.

LETTERS FROM PRISON

Troubles for Pineda began shortly after the Hamilton Bank party in Miami.

On June 16, 1988, he was arrested in Guadalajara on charges of drug
trafficking, illegal weapons possession and conspiracy. As Mexican
narcotics agents picked up Pineda in a massage parlor, they also detained
Masferrer's brother, Miguel Angel, at Pineda's estate, according to Mexican
court documents provided to The Herald.

Pineda said Miguel Angel, a dog breeder who lives in Puerto Rico, was
staying at his home after arriving the previous day, bringing with him 18
Chihuahuas and a German shepherd as gifts. Martinez said that Miguel Angel
was delivering the dogs Pineda purchased for $50,000. Miguel Angel was not
charged.

Over the next several years, Pineda sent letters to Masferrer from prison,
giving instructions for the transfer of money, usually in multiples of
$100,000. The money would then be wired from a trust account in Southern
Bank & Trust to Mexican bank accounts, usually in a branch of the Mexican
bank, Banamex, to a third party.

Copies of these letters and wire transfer orders signed by Maura Masferrer
to debit Pineda's accounts at Southern Bank and Trust were shown to The
Herald. At the bottom, Pineda usually wrote personal notes to the
Masferrers, wishing them well and especially Merry Christmas and Happy New
Year.

"Hello friends," Pineda jotted at the bottom of a Sept. 30, 1991 letter.
"Soon, God willing, my vacation will be over," he wrote, referring to his
prison stay. Seven months later, he was released from prison. After his
release the following year, a Mexican court ruled that the origin of his
fortune was legitimate and authorities returned his pig farm and other
property, his attorney said in a telephone interview.

The letters leave little doubt that money was returned since the letters
from Pineda kept coming without complaint. Masferrer's attorney showed The
Herald copies of the letters and wire transfers that showed transfers
totaling $12.1 million.

But Pineda -- who says he understood Masferrer was returning part of the
money delivered in Mexico, not the $10 million pot from Panama -- claims he
only received $4.7 million and is suing for the difference, plus interest.

According to an adage in Spanish: Good accounting makes for good friends.
The cloud of intrigue that muddied Pineda and Masferrer's banking
relationship took its toll on their other ties.

Several years after Pineda was released from prison in April 1992, he says
Masferrer stopped taking his calls or answering letters.

In time, the once florid language of Pineda's correspondences to Masferrer
was replaced by undertones of raw resentment. "I am happy that now you are
a big banker, but you have forgotten the past and stopped talking with me,"
Pineda wrote in 1997.

(TIMELINE)

TIMELINE

1985: Eduardo Masferrer, general manager at Banco del Istmo, currently the
largest bank in Panama, meets Mexican pig farmer Jose Pineda Trinidad in
Panama City. Pineda opens three separate accounts at bank.

March 3, 1988: Letter signed by Pineda authorizing transfer of funds from
Banco del Istmo to the United States. Pineda says his signature was forged,
a point supported by a Panama court ruling.

March 3, 1988: Funds transfered from Banco del Istmo to First Interstate
Bank International, into the account of Banistmo Financial Services, a
company controlled by Masferrer and his wife Maura.

March 21, 1988: Masferrer and Miami banker Andres G. Gomez-Mena, president
and managing director of Hamilton-Lombard & Co., sign agreement to purchase
shares of faltering Alliance National Bank.

March 30, 1988: Ownership of bank is transferred to holding company,
Southern Bancorp, where Gomez-Mena and Masferrer are directors. From March
30 to Sept. 29, Gomez-Mena is the sole shareholder.

April 22, 1988: Southern Bank & Trust was incorporated in Montserrat on
behalf of Southern Bancorp, whose directors were Masferrer, Maura A. Rojas
(Masferrer's wife) and Andres Gomez-Mena.

May 15, 1988: Pineda says the Masferrers traveled to Guadalajara to pick up
$10 million he claims was used to capitalize Hamilton Bank. The money would
give Pineda a 5 percent stake, he says.

May 25, 1988: Pineda says he flew to Miami on May 25 to celebrate the
closing of the deal that created Hamilton Bank.

May 26, 1988: Funds transferred from First Interstate Bank International in
Miami to three trusts and a certificate of deposit Pineda opens in Southern
Bank & Trust.

June 16, 1988: Pineda arrested in Guadalajara, Mexico, on charges of drug
trafficking, illegal weapons possession and conspiracy. Masferrer's
brother, Miguel Angel, and sister-in-law are also detained.

July 27, 1988: Masferrer, on advice of legal counsel, meets with members of
a multi-agency task force on money laundering in Miami. (Pineda says
contact with U.S. authorities was initiated prior to his arrest and is
supported by a sworn affidavit from a former Mexican federal agent who
participated in the detention.)

April 28, 1992: Pineda released from prison.

December 1998: Pineda travels to Panama, seeking funds at Banco del Istmo.

March 1999: Pineda's first lawsuit filed in Panama calls for $10 million to
be returned.

Aug. 24, 2000: Panamanian judge rules that Banco del Istmo owes Pineda
$10.2 million, plus $11.2 million in interest and costs. The bank has
appealed the ruling.

May 2000: Pineda files suit in circuit court in Miami, against Hamilton
Bank, Masferrer and his wife, Maura, alleging they failed to account for or
return his $10 million.

Feb. 14, 2001: Masferrer files motion in a Miami federal court to dismiss
Pineda's lawsuit. A judge has not ruled on the motion or whether to admit a
second amended complaint.