Post on 28-Apr-2015
description
transcript
Robert J. Cleary Proskauer Rose LLP Eleven Times Square New York, NY 10036 Telephone: (212) 969-3000 Facsimile: (212) 969-2900 rjcleary@proskauer.com UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK XUNITED STATES OF AMERICA,
Plaintiff,
v.
ANY AND ALL FUNDS ON DEPOSIT AT JPMORGAN CHASE ACCOUNT NUMBER 61442003 HELD IN THE NAME OF CIA MINERA AURIFERA SANTA ROSA SA, AKA COMARSA, et al.,
Defendants in rem;
-and-
CIA MINERA SAN SIMON S.A., et al. Claimants.
: : : : : : : : : : : : : : : : : : :
X
Case No.: 12-CV-7530 (GBD/JCF) ECF Case MEMORANDUM OF LAW IN SUPPORT OF CLAIMANTS’ MOTION TO DISMISS THE AMENDED COMPLAINT PURSUANT TO SUPPLEMENTAL RULE G(8)(B) AND FED. R. CIV. P. 12(B)(6)
MEMORANDUM OF LAW IN SUPPORT OF
CLAIMANTS’ MOTION TO DISMISS THE AMENDED COMPLAINT
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 1 of 30
i
TABLE OF CONTENTS
Page I. Introduction..........................................................................................................................1 II. Summary of the Allegations ................................................................................................2
A. Drug Trafficking Allegations...................................................................................2 B. Money Laundering Allegations ...............................................................................4
III. Legal Standards....................................................................................................................6 IV. Applicable Law....................................................................................................................7 V. Argument .............................................................................................................................9
A. The Government Fails to Plead Specific Facts that Support its Money Laundering Cause of Action. ...................................................................................9
B. The Amended Complaint does not Allege Facts that Tie the Seized Funds to Drug Activity. ....................................................................................................13 1. The Government Has Failed to Allege a Substantial Connection
Between the Seized Funds and Decades Old Narcotics Trafficking Allegations. ................................................................................................14
2. Allegations Regarding Closed Peruvian Investigations Fail to Establish a Substantial Connection Between the Seized Funds and Narcotics Trafficking. ................................................................................16
3. Allegations that a Claimant Lacks Legitimate Sources of Income Are Insufficient to Connect the Seized Funds to Narcotics Trafficking. ................................................................................................19
4. Profile Based Allegations are Insufficient to Establish a Connection Between Seized Funds and Narcotics Trafficking. ................20
5. Allegations that Claimants are “Shell” Companies are Insufficient to Establish a Connection Between the Seized Funds and Narcotics Trafficking. ................................................................................................21
C. The Government Has Not Pled Facts that Show that Any of the Claimant Accounts are Traceable to Narcotics Trafficking ..................................................23
VI. Conclusion .........................................................................................................................25
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 2 of 30
ii
TABLE OF AUTHORITIES
Page(s) CASES
In re Initial Pub. Offering Secs. Litig., 544 F. Supp. 2d 277 (S.D.N.Y. 2008)........................................................................................9
Jordan (Bermuda) Inv. Co., Ltd., v. Hunter Green Invs. Ltd., 154 F. Supp. 2d 682 (S.D.N.Y. 2001)................................................................................18, 19
Lopez v. United States, No. Civ. A. 96-1972 AK, 2006 WL 2788999 (D.D.C. Sept. 26, 2006) ......................15, 16, 18
Ortiz v. Green Bull Inc., No. 10-CV-3747 ADS ETB, 2011 WL 55554522 (E.D.N.Y. Nov. 14, 2011) ........................10
United States v. $1,399,313.74 in United States Currency, 591 F. Supp. 2d 365 (S.D.N.Y. 2008)..............................................................................6, 7, 11
United States v. $1,399,313.74 in United States Currency, 592 F. Supp. 2d 495 (S.D.N.Y. 2008)..........................................................................12, 14, 20
United States v. $22,173.00 in United States Currency, 716 F. Supp. 2d 245 (S.D.N.Y. 2010)....................................................................................7, 8
United States v. Banco Cafetero Panama, 797 F.2d 1154 (2d Cir. 1986)...................................................................................................23
United States v. Contents in Account No. 059-644190-69, 253 F. Supp. 2d 789 (D. Vt. 2003)...........................................................................................23
United States v. Daccarett, 6 F.3d 37 (2d Cir. 1993).............................................................................................................6
United States v. Fernandez, 559 F.3d 303 (5th Cir. 2009) .....................................................................................................9
United States v. Iacaboni, 221 F. Supp. 2d 104 (D. Mass. 2002) .................................................................................. 9-10
United States v. One Tyrannosaurus Bataar Skeleton, No. 12 Civ. 4760 PKC, 2012 WL 5834899 (S.D.N.Y. Nov. 14, 2012) ........................7, 17, 19
United States v. Pole No. 3172, Hopkinton, 852 F.2d 636 (1st Cir. 1988)....................................................................................................17
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 3 of 30
iii
United States v. Real Property and Premises Known as 90-23 201st Street, Hollis, New York, 775 F. Supp. 2d 545 (E.D.N.Y. 2011) ............................................................................. passim
Williams v. Calderoni, No. 11 Civ. 3020 CM, 2012 WL 691832 (S.D.N.Y. Mar. 1, 2012) ........................................25
Wilson v. Merrill Lynch & Co., 671 F.3d 120 (2d Cir. 2011).....................................................................................................25
STATUTES
18 U.S.C. § 981(a)(1)(A) .......................................................................................................6, 8, 23
18 U.S.C. § 983(c)(1).......................................................................................................................7
18 U.S.C. § 983(c)(3).......................................................................................................................8
18 U.S.C. § 1956 et seq....................................................................................................6, 8, 10, 16
18 U.S.C. § 1957 et seq..........................................................................................................6, 8, 16
21 U.S.C. § 881(a)(6).......................................................................................................6, 8, 23, 24
OTHER AUTHORITIES
Federal Rule of Civil Procedure 12(b)(6) ....................................................................................1, 6
Rule 12(b) ........................................................................................................................................6
Supplemental Rule E(2)(A) .......................................................................................................6, 12
Supplemental Rule G(2)(f) ..................................................................................................6, 10, 13
Supplemental Rule G(8)(b)..........................................................................................................1, 6
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 4 of 30
Claimants Cia Minera San Simon (“San Simon”), Pacific Gateway Corporation
(“Pacific”), Advancer Logistics LLC (“Advancer”), Horizonte Dorado SRL (“Horizonte”), and
Carlos Alberto Sanchez Alayo (“Carlos Alayo”) (together, the “San Simon Claimants”)
respectfully submit this memorandum of law in support of their motion to dismiss the Amended
Complaint pursuant to Rule G(8)(b) of the Supplemental Rules for Admiralty or Maritime
Claims and Asset Forfeiture Actions (“Supplemental Rules”) and Rule 12(b)(6) of the Federal
Rules of Civil Procedure.
I. Introduction
The Supplemental Rules impose a heightened pleading standard that requires the
Government to allege sufficiently detailed facts to demonstrate that it will be able to meet its
burden of proof at trial. Here, the Government must allege particularized facts to support a
reasonable inference that it will be able to prove a substantial connection between the funds
seized from the San Simon Claimants and the alleged drug activity. It has failed to do so.
On October 9, 2012, based upon an ex parte affidavit and seizure warrant executed on
September 7, 2012, the Government filed this civil in rem forfeiture action against seized funds
associated with, inter alia, San Simon, a gold mining company located in Peru, its intermediary
U.S. broking entities (Pacific and Advancer), its managing entity (Horizonte), and Carlos Alayo
(one of the officers of Horizonte and Advancer). The Government seized approximately $2
million on the premise that these funds were derived from money laundering and drug trafficking
activity. But the original complaint suffered from fatal pleading defects. It failed to allege a
coherent theory of money laundering, its allegations of drug trafficking lacked any specificity, it
failed to demonstrate any connection between those allegations and the seized funds, it did not
make a single factual allegation that demonstrated that the Government was entitled to forfeit the
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 5 of 30
2
San Simon Claimants’ property, and it was replete with factual inaccuracies of basic biographical
and substantive information.
The Government has not cured any of those deficiencies in the Amended Complaint. Its
amended pleading is equally devoid of specific, detailed facts that the Government must –
but plainly cannot – allege to meet the particular pleading requirement imposed by the
Supplemental Rules. Like its predecessor, the Amended Complaint turns on two types of
allegations. First, the Government alleges drug trafficking dating back to the 1970s, 1980s and
1990s – nothing more recent than that – and a 2007 Peruvian investigation into the purchase and
use of a controlled substance, calcium oxide, that is used legitimately in the mining process but
apparently can also be used to produce cocaine. Second, the Government alleges that
intermediary companies San Simon used to broker the sale of gold to a metal refinery in the U.S.
were “shells” for money laundering under its original theory of “layering” and a newly-minted
“commingling” theory. Critically, there is not a single factual allegation in the Amended
Complaint that substantially connects the seized funds to drug trafficking. Indeed, the Amended
Complaint is categorically devoid of any factual allegation that ties the decades-old allegations
of drug activity to any of the alleged financial transactions – all of which are dated between 2009
and 2012 – much less to the actual funds seized by the Government in September 2012. Thus,
even if these dated drug allegations were true, the Amended Complaint does not contain any set
of facts that entitles the Government to forfeit the San Simon Claimants’ funds, and should be
dismissed with prejudice.
II. Summary of the Allegations
A. Drug Trafficking Allegations
The Government alleges that the “Sanchez-Paredes family” are foreign nationals who
live and work in countries that are “known source(s) … of narcotics,” have been involved in
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 6 of 30
3
narcotics trafficking since the 1970s, and under investigation by Peruvian authorities for decades.
Am. Compl. ¶¶ 4, 8-9, 10, 14. A “lengthy investigation” in Peru resulted in an April 2010
criminal complaint. Id. ¶ 9. The Government contends that the Peruvian complaint is still
“pending,” but acknowledges that the Peruvian prosecutor has recommended that the case be
“archived.” Id.
Based upon information provided by an unnamed cooperating witness and other
unidentified sources, the Government alleges that two members of the “Sanchez-Paredes
family,” Segundo Simon Sanchez Paredes (“Segundo Simon”) and Percyles Hermenegildo
Sanchez Paredes (“Percyles”), were involved in international drug trafficking in the 1970s, 1980s
and 1990s, and assassinated in 1987 and 1991, respectively, as a result of that involvement. See
id. ¶¶ 10-13. The same unnamed cooperating witness allegedly claimed that a nephew, Fidel
Sanchez Alayo (“Fidel”), “partnered” with Percyles in managing a drug trafficking organization
(“DTO”) purportedly affiliated with the “Sanchez-Paredes family” prior to Percyles’ death in
1991. Id. ¶ 16. According to these allegations, Fidel was one of the “main contributors” to the
Mexican cocaine trade at the time of Segundo Simon’s death in 1987 – when Fidel was only 17
years old. See id. These allegations are devoid of any factual specificity. They are mere
conclusions. According to the unnamed cooperating witness, Fidel and Ruben Santana
(“Santana”) brought drugs into the U.S. at some unspecified date. See Am. Compl. ¶ 17. The
Government further alleges that, in 1995, Santana and other individuals were arrested during a
Florida cocaine bust, and claims, in conclusory fashion, that Fidel was involved in some
unspecified way, but concedes that Fidel was not arrested. See id.
The Government further alleges a seizure of 125 tons of calcium oxide – a chemical used
legitimately in the gold mining business that can also allegedly be used in cocaine production –
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 7 of 30
4
from some unspecified entity in 2007. See id. ¶ 19. The Government also separately alleges that
Peruvian authorities reviewed the books of San Simon’s supplier, Calcareos e Inversiones
Amazones (“Calcareos”) and that Calcareos’ books showed “an absence of 179 tons of calcium
oxide.” Id. ¶ 20. The Government concludes, without any specific factual basis, that the missing
chemicals were sold to San Simon. Id. Significantly, there is no allegation that any of the
calcium oxide was used by San Simon for any illegal purposes.1
B. Money Laundering Allegations
The Government alleges that Peruvian authorities “tied” members of the “Sanchez-
Paredes family” to various entities “through which they have the ability to layer and disguise”
drug money. Id. ¶ 18. The Government posits a theory that the family has “financed various
businesses … for the purpose of laundering enormous amounts of money stemming from
narcotics trafficking.” Id. Allegedly, the family used “multiple bank accounts” including the
seized property, to “launder narcotics proceeds derived from the family’s cocaine operation,
dating back to the 1970s.” Id. ¶ 22. No facts are alleged to support these conclusory statements.
The Amended Complaint further baldly asserts, without factual support, that members of the
“Sanchez-Paredes family,” including Segundo Manuel Sanchez Paredes (“Segundo Manuel”),
Miguel Angel Sanchez Alayo (“Miguel”), and Carlos Alayo have been unable to substantiate
their income. See Am. Compl. ¶¶ 15, 54.2
The Government speculates that the “Sanchez-Paredes DTO” “may be using COMARSA
and San Simon to launder drug proceeds by commingling drug proceeds into the business
operations of these companies.” Id. ¶ 23 (emphasis added). The Government hypothesizes that
1 In contrast, the Amended Complaint does make such an allegation with respect to Comarsa. Am. Compl. ¶ 19. 2 Segundo Manuel, Miguel, Fidel, and Carlos Alayo are members of the Sanchez Alayo family, not the Sanchez Paredes family.
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 8 of 30
5
“[t]he use of drug proceeds to fund mining operations—for example by using drug money to pay
for equipment, labor, or materials, or even purchasing gold on the secondary market with drug
money and adulterating that gold to disguise it as mined minerals—would all launder money by
converting drug proceeds into mining output.” Id. (emphasis added). Under this theory, “bars of
minerals that were extracted or created with drug proceeds would appear to be legitimate items
of commerce.” Id. These allegations, according to the Government, provide “example[s]” of
how money could be “clean[ed].” Id. Critically, there is no specific allegation that San Simon in
fact engaged in any of these activities.
The Government then concludes that Pacific, Exim Logistics (“Exim”) – another
intermediary broking entity – and Advancer, “appear to be” “shell companies” created and
managed by the “Sanchez-Parades DTO,” and that they were organized to “facilitate” the
laundering of drug proceeds through their associated bank accounts and to create “additional
layers of apparently legitimate transactions” to enable the laundering of drug money. See id. ¶¶
32-37, 38-43, 44-49. Allegedly, Carlos Alayo manages some of these “shell companies” for the
“Sanchez-Paredes DTO,” and oversees transfers of what “appear to be narcotics proceeds” from
the intermediary brokers. See id. ¶ 54. No specific facts are alleged here either. The Amended
Complaint argues that the use of family members as corporate officers, limited numbers of
employees, minimal infrastructure, lack of Internet presence, and limited sales volume and
revenue suggest that these intermediary brokers are fronts for drug trafficking. See generally, ¶¶
32-37, 38-43, 44-49. And, according to the Amended Complaint, San Simon has been subject to
and is run by members of the family who have been involved in unspecified investigations, and
previously sold gold to a metal refining company that pleaded guilty in 2004 to money
laundering traceable to customs violations. See id. ¶¶ 14, 61-63.
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 9 of 30
6
Based upon these allegations, the Government claims the right to forfeit funds in the
seized accounts under 18 U.S.C. § 981(a)(1)(A) and 21 U.S.C. § 881(a)(6). See id. ¶¶ 1, 68, 74.
The Government asserts predicate violations of 18 U.S.C. § 1956, which criminalizes knowingly
conducting financial transactions involving proceeds of specified unlawful activity with intent to
promote or conceal such activity, and transmitting the same to or through the United States, as
well as 18 U.S.C. § 1957, which criminalizes knowingly engaging in financial transactions with
“criminally derived property.”3 Id. ¶ 72.
III. Legal Standards
A complaint must be dismissed if the allegations do not state a claim upon which relief
can be granted. See Fed. R. Civ. P. 12(b)(6); see also Supp. Rules G(8)(b) (establishing
claimants’ right to move to dismiss a civil forfeiture action under Rule 12(b)). Under the
Supplemental Rules, the Government’s pleading burden is enhanced. Because of the “drastic
nature of the civil forfeiture remedy,” the Government must satisfy a “stringent” pleading
standard. United States v. $1,399,313.74 in United States Currency, 591 F. Supp. 2d 365, 369
(S.D.N.Y. 2008)4; see also United States v. Daccarett, 6 F.3d 37, 47 (2d Cir. 1993) (heightened
pleading is intended to counterbalance claimant’s deprivation of property without due process).
The complaint must “assert specific facts supporting an inference that the property is in fact
subject to forfeiture.” $1,399,313.74 in United States Currency, 591 F. Supp. 2d at 369 (granting
motion to dismiss for failure to state a claim) (emphasis added). Pursuant to Supplemental Rule
G, the complaint must “state sufficiently detailed facts to support a reasonable belief that the
government will be able to meet its burden of proof at trial.” Supp. Rule G(2)(f) (emphasis
added). Under Supplemental Rule E(2)(a), the complaint must be pleaded “with such
3 Section 1956(h) criminalizes conspiring to violate § 1957. 4 Unless otherwise noted, all internal citations and quotation marks omitted throughout.
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 10 of 30
7
particularity that the . . . claimant will be able, without moving for a more definite statement, to
commence an investigation of the facts and to frame a responsive pleading.” $1,399,313.74 in
United States Currency, 591 F. Supp. 2d at 369. “A complaint devoid of any facts to support its
bare allegations and consisting solely of speculative assertions and innuendo cannot stand.” Id.
at 374. Although it does not have to satisfy its evidentiary burden at the pleading stage, the
Government “may not seize and continue to hold property upon conclusory allegations that the
defendant property is forfeitable.” Id. at 369 (quoting United States v. Certain Accounts
Together With All Monies On Deposit Therein, 795 F. Supp. 391, 394 (S.D. Fla. 1992)).
The Federal Rules of Civil Procedure also apply to civil forfeiture actions. United States
v. $22,173.00 in United States Currency, 716 F. Supp. 2d 245 (S.D.N.Y. 2010). On a motion to
dismiss under Rule 12(b)(6), courts accept the well-pleaded factual allegations in the complaint
as true and draw all reasonable inferences from those allegations in the light most favorable to
the non-movant. $1,399,313.74 in United States Currency, 591 F. Supp. 2d at 370. Conclusory
allegations and legal conclusions, however, are not entitled to any presumption of truth, and must
be disregarded. See United States v. One Tyrannosaurus Bataar Skeleton, No. 12 Civ. 4760
PKC, 2012 WL 5834899, at *3 (S.D.N.Y. Nov. 14, 2012). Accordingly, a complaint should be
dismissed for failure to state a claim if its factual allegations fail “to raise a right to relief above
the speculative level.” $1,399,313.74 in United States Currency, 591 F. Supp. 2d at 370.5
IV. Applicable Law
To meet its burden, the Government must establish that the seized property is subject to
forfeiture by a preponderance of the evidence. 18 U.S.C. § 983(c)(1). For its first cause of
5 Further, as is relevant here, the Court may consider on a motion to dismiss “matters of which judicial notice may be taken, or … documents either in plaintiffs’ possession or of which plaintiffs had knowledge and relied on in bringing suit.” One Tyrannosaurus Bataar Skeleton, 2012 WL 5834899, at *4.
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 11 of 30
8
action, the Government claims the right to forfeit funds in the seized accounts under 18 U.S.C. §
981(a)(1)(A), which authorizes forfeiture of property “involved in” money laundering under §§
1956 and 1957. The Government pleads its second cause of action under 21 U.S.C. § 881(a)(6),
which allows the Government to seek forfeiture of money that is “furnished by any person in
exchange for a controlled substance,” “traceable to such an exchange,” or “used or intended to be
used to facilitate any violation of this subchapter.”
Pursuant to 18 U.S.C. § 983(c)(3), “if the Government’s theory of forfeiture is that the
property was used to commit or facilitate the commission of a criminal offense, or was involved
in the commission of a criminal offense,” as the Government alleges here, it “shall establish that
there was a substantial connection between the property and the offense” (emphasis added).
Although the Government does not have to prove a connection to a “specific drug transaction,” it
must show a substantial connection to drug trafficking. See $22,173.00 in United States
Currency, 716 F. Supp. 2d at 249-50; United States v. Real Property and Premises Known as 90-
23 201st Street, Hollis, New York, 775 F. Supp. 2d 545, 564 (E.D.N.Y. 2011) (when the
Government’s theory of forfeiture is premised upon facilitation it “must show a substantial
connection between the . . . property [seized] and narcotics activity”).
Predicate evidence establishing a substantial connection between the funds seized and the
alleged illegal activity is therefore an indispensable part of the Government’s evidentiary burden.
The Government may not rely upon unsubstantiated or dated evidence of a claimant’s
involvement in drug trafficking or a prior narcotics conviction to make this showing. See Real
Property, 775 F. Supp. 2d at 564 (government’s reliance on 1987 and 2000 narcotics
convictions insufficient to carry its burden on summary judgment in the absence of other
evidence showing a substantial connection between the seized funds and drug activity). Nor may
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 12 of 30
9
the Government simply rely upon assertions that a claimant lacks legitimate sources of income to
satisfy its burden. See id. (court refused to infer a connection from evidence that the claimant
lacked sufficient income to afford the defendant property). Indeed, prior drug activity and
questionable sources of income are relevant, if at all, as supporting evidence. See id. This type
of supporting evidence, alone, is not sufficient to demonstrate a substantial connection between
the supposed drug activity and the seized funds. See id.
V. Argument
A. The Government Fails to Plead Specific Facts that Support its Money Laundering Cause of Action
The Government appears to rely on two distinct theories of money laundering in the
Amended Complaint. First, as in the original complaint, the Government refers, obliquely, to the
“ability to layer and disguise narcotics proceeds” with respect to “a number of” entities,
including San Simon, Exim, Pacific and Advancer. See Am. Compl. ¶¶ 18-19, 37, 43, 49. The
amended pleading supplements this “layering” theory with a newly-minted, but unspecific,
allegation, namely, a “belie[f]” that drug money “may be” laundered by “commingling drug
proceeds into the business operations” of San Simon and Comarsa. See id. ¶ 23. That is not a
factual allegation, it is mere opinion. See In re Initial Pub. Offering Secs. Litig., 544 F. Supp. 2d
277, 284 (S.D.N.Y. 2008) (opinions couched as factual allegations not entitled to a presumption
of truth).
“Layering” is a term used to describe a sophisticated money laundering technique that
involves multiple levels of transactions, often involving “shell” companies or fictitious entities.
See United States v. Fernandez, 559 F.3d 303, 320 (5th Cir. 2009). “Commingling,” by contrast,
describes money laundering by means of mixing tainted funds with legitimate funds “for the
purpose of concealing their nature or source.” See United States v. Iacaboni, 221 F. Supp. 2d
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 13 of 30
10
104, 117 (D. Mass. 2002). While both layering and commingling are theories of concealment,
see 18 U.S.C. § 1956(a)(1)(B), they are conceptually distinct. The Government has failed to
allege either theory with the requisite particularity.
The “layering” allegations are as deficient as they were in the initial complaint – there are
simply some more of them. The Amended Complaint does not allege facts that support layering
by any of the accounts affiliated with the San Simon Claimants. Rather, other than general
layering allegations (see Am. Compl. ¶¶ 18, 43, 49), the Government simply tracks the language
of 18 U.S.C. § 1956, and then merely asserts, in the most conclusory fashion, that certain
accounts seem suspicious. For instance, it alleges that because the intermediary Pacific had few
employees, little overhead, and minimal office structure, Pacific’s wire transfers “appear to have
been conducted to disguise SAN SIMON’s role in providing gold to be sold, and thus to create
additional layers of apparently legitimate transactions to facilitate the narcotics trafficking
activities.” Am. Compl. ¶¶ 36-37 (emphasis added). There are no “sufficiently detailed facts,”
Supp. Rule G(2)(f), to support this conclusory and entirely speculative allegation. Indeed, there
are no facts alleged at all to support a reasonable conclusion that the Pacific funds that were
seized were related to the alleged predicate offenses. To the contrary, the allegation accepts that
San Simon was legitimately selling gold in the first instance (but just wanted to hide itself). Any
notion that San Simon was trying to obfuscate its role in the gold transactions is directly refuted
by documents filed with the State of Florida, which clearly identify the corporate officers of
Pacific and Advancer (another intermediary) as members of the Sanchez Alayo family.6 Other
6 Attached hereto as Exhibit A to the Declaration of Robert J. Cleary (“Cleary Decl.”) are incorporation and organization documents filed by Pacific and Advancer with the Florida Department of State, Division of Corporations (“Ex. A”), of which the Court may take judicial notice. See Ortiz v. Green Bull, Inc., No. 10-CV-3747 ADS ETB, 2011 WL 5554522, at *1 (E.D.N.Y. Nov. 14, 2011).
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 14 of 30
11
allegations related to the funds seized from Advancer, Horizonte, and Carlos Alayo follow the
same pattern and are equally deficient. See, e.g. Am. Compl. ¶¶ 48-49, 54, 56, 58.
Likewise, the Government’s new “commingling” allegation is entirely vacuous and is
bereft of any specific fact alleged in support. By its own terms, it is a mere statement of
conjecture about what could have happened. Id. ¶ 23. But there are no facts alleged in support
of these musings. As alleged, commingling would involve mixing drug proceeds into the
business operations of legitimate enterprises. The Government states that it “believes” that San
Simon “may” be laundering drug proceeds by using them to “pay for equipment, labor,
materials, and/or gold on the secondary market,” “or even” to purchase “gold on the secondary
market and adulterating that gold to disguise it as mined minerals” creating “clean funds from
purchasers, who need not know of the illicit origins of the minerals.” Id. There is absolutely no
fact cited in support and the allegation is speculative under any construction. These hypotheses –
and that is all they are – fail to articulate in any way what the Government asserts that the San
Simon Claimants have actually done. They are also devoid of any facts indicating the basis of
the Government’s alleged belief. Although the Government is not required to set forth all of the
facts and evidence at the pleading stage, it must plead some facts that support its theory. See
$1,399, 313.74 in United States Currency, 591 F. Supp. 2d at 376. It has not done so here. This
theory fails “to raise a right to relief above the speculative level.” Id. at 370.
Even if the Government were to allege that San Simon in fact laundered funds by
utilizing drug proceeds to pay for equipment, labor, materials, or gold on the secondary market,
it bears note that San Simon is an active, productive gold mining company which utilizes
extensive amounts of equipment, labor, and material.7 Absent detailed facts connecting
identifiable portions of the seized funds to narcotics activity through particular transactions, it 7 The Government no longer disputes this fact.
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 15 of 30
12
would be impossible for San Simon to determine which sales or resales of gold are alleged to
constitute money laundering under either of the Government’s named theories. The absence of
any particularity with regard to the Government’s theory, and any facts that conceivably underlie
it, severely hampers the San Simon Claimants’ ability to file a responsive pleading. See United
States v. $1,399,313.74 in United States Currency, 592 F. Supp. 2d 495, 500 (S.D.N.Y. 2008)
(“There is simply no way to investigate and respond to the allegation that Defendant Funds are
criminally derived on the ground that they were exchanged on markets that are sometimes used
to launder money, but which … have many legitimate uses.”).
Finally, the Amended Complaint conflates these two theories of money laundering,
making it impossible to discern which theory the Government relies on for forfeiture, and how to
defend against it. For example, the Amended Complaint alleges that Pacific conducted wire
transfers to “disguise San Simon’s role in providing gold to be sold, and thus to create additional
layers of apparently legitimate transactions[.]” Am. Compl. ¶ 37. This makes it unclear whether
the Government is relying on commingling, layering, or some combination of the two theories.
The Government’s theory of commingling suggests that the sale and resale of gold in one form
or another could be money laundering. See id. ¶ 23. Accordingly, the allegations in ¶ 37 of the
Amended Complaint could be interpreted as alleging that the provision of gold by San Simon for
sale or resale constituted commingling, and therefore money laundering. Paragraph 37, however,
also suggests that the legitimate sale of gold actually amounts to layering (“create[s] additional
layers”). By failing to clearly identify which theory the Government is alleging and intends to
prove – and on the basis of what facts – the Amended Complaint is deficient. See Supp. Rules
E(2)(A).
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 16 of 30
13
The Government provides even less clarity – and creates more confusion – in articulating
the theory of money laundering it relies on to support forfeiture of San Simon’s funds. The
Amended Complaint alleges that the San Simon Account is “believed to be facilitating the
laundering of narcotics proceeds.” Id. ¶ 66. But there is no indication whether San Simon
supposedly facilitates the laundering of narcotics proceeds through commingling or layering.
This is particularly problematic where, as here, the Amended Complaint identifies two broad and
distinct theories of money laundering and implies that each of these theories could apply to this
case. See id. ¶ 18 (the “Sanchez-Paredes DTO” may be layering funds through San Simon); ¶ 23
(suggesting that the “Sanchez-Parades DTO” may be commingling drug proceeds into business
operations). And, with respect to Horizonte, San Simon’s management company, the
Government fails to allege any identifiable theory of money laundering at all, only alleging that
Horizonte received transfers from Advancer. See id. ¶¶ 55-58.
In light of the Government’s failures to meet its pleading burden, there is no reasonable
basis to believe that it could prove any theory of its case at trial and its claims should be
dismissed with prejudice as against the San Simon Claimants. See Supp. Rules G(2)(f).
B. The Amended Complaint does not Allege Facts that Tie the Seized Funds to Drug Activity
Beyond the failure to plead with the required particularity, the Amended Complaint is
devoid of any factual allegations that support a reasonable belief that the seized funds are even
tangentially linked, much less substantially connected, to the manufacture, sale or distribution of
cocaine. Even a cursory review of the Amended Complaint makes this obvious: all of the drug
trafficking allegations are decades old. The financial transactions at issue all occurred in the past
few years. It speaks volumes that the Amended Complaint does not even try to bridge this wide
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 17 of 30
14
gulf. There is simply no connection – let alone a substantial one – between the drug allegations
and the relevant financial transactions.
Without facts to make this requisite connection, the Government resorts to general
allegations of dated criminal activity as well as money laundering and drug trafficking
investigations that were repeatedly rejected by Peruvian prosecutors for lack of merit and that
never resulted in any convictions. The Government also piles on conclusory statements of
unsubstantiated income, assertions that the “Sanchez-Paredes family” fit a highly specious
criminal profile of foreign nationals who own and operate businesses in “South America,” and
mischaracterizations of the intermediary brokers. These categorical allegations are insufficient
as a matter of law to demonstrate a “substantial” connection between the supposed drug activity
and the seized funds. See Real Property, 775 F. Supp. 2d at 564; $1,399, 313.74 in United States
Currency, 592 F. Supp. 2d at 495.
1. The Government Has Failed to Allege a Substantial Connection Between the Seized Funds and Decades Old Narcotics Trafficking Allegations
Much of the Amended Complaint relies on a series of questionable criminal allegations
that are way too old to have any relevance to financial transactions that occurred between 2009
and 2012 or to the funds seized by the Government in 2012. The Government also fails to
specifically allege that the San Simon Claimants were aware that any of the seized funds
amounted to proceeds of a criminal activity, as required by the intent elements of the money
laundering statutes.
The Government tries in vain to meet its pleading burden by relying on the assertion that
two members of the “Sanchez-Paredes family,” Percyles and Segundo Simon, were involved in
narcotics trafficking in the 1970s – 40 years ago. See Am. Compl. ¶¶ 10-14. They were both
deceased by 1991. Id. ¶¶ 11-12. The Amended Complaint struggles to make the alleged drug-
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 18 of 30
15
related activities of Percyles and Segundo Simon appear relevant by the somewhat remarkable
allegation that Fidel “partnered” with Percyles in managing the “DTO” and that by 1987 was a
“leading contributor” to the Mexican drug trade – at the age of 17. Id. ¶¶ 11, 16. Other than this,
there are no allegations linking anyone affiliated with the San Simon Claimants to Percyles and
Segundo Simon’s purported illegal activities. More importantly, there is no alleged factual link
from the asserted activities of Percyles and Fidel, to the relevant financial transactions. The
allegations are far too dated to support any inference of a connection – let alone a substantial one
– between the seized property and narcotics trafficking. See Real Property, 775 F. Supp. 2d at
564 (rejecting Government’s reliance on prior drug convictions dating to 1987 and 2000).
The Government attempts to buttress Fidel’s purported links to narcotics trafficking by
alleging that he was generally “involved” in a number of cocaine shipments to the U.S. and that a
1995 shipment of cocaine was seized by American authorities. See Am. Compl. ¶ 17. This fails
for the same reason: the Amended Complaint contains no allegation connecting these claimed
activities to the funds seized at least 17 years later. That should end the inquiry. But there is
more. The Amended Complaint makes clear that Fidel was not even arrested in connection with
any of these purported activities. See id. While the Government may rely on “a claimant’s
narcotics conviction” as “one factor” under its burden to demonstrate a substantial connection,
see Real Property, 775 F. Supp. 2d at 564, in the absence of a conviction, as here, the
Government may not rely on general allegations of “involvement” in drug activities as a basis for
its claims. Id.; see also Lopez v. United States, No. Civ. A. 96-1972 AK, 2006 WL 2788999, at
*14 (D.D.C. Sept. 26, 2006) (claimant’s “history of drug trafficking, standing alone, does not
even establish probable cause, much less establish by a preponderance of the evidence, that the
[money] at issue here had a substantial connection to drug activity”).
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 19 of 30
16
Even, assuming arguendo, that Percyles and Segundo Simon participated in cocaine
trafficking, and assuming that Fidel was somehow “involved” in cocaine shipments to the U.S. in
the 1990s, the Government does not connect those actions in any way to the seized funds. The
inference that the Government seeks – that, because two deceased family members were
allegedly involved in drug trafficking (albeit never convicted of drug-related offenses), and
because the nephew of those deceased individuals allegedly worked with one of them over
twenty years ago, the rest of the family, and by implication, their legitimate businesses and
accounts, are currently involved in the laundering of drug proceeds – is preposterous. Indeed, to
state the proposition is to reject it. See Lopez, 2006 WL 2788999, at *14-16. In sum, the stale
and irrelevant allegations of narcotics trafficking are insufficiently connected to the seized funds
to support forfeiture.8
As an additional pleading deficiency, the Amended Complaint contains no allegation that
any Claimant knew or should have known that any wire transfer, deposit, or any funds in the
seized accounts were proceeds of narcotics activities. The omission of this element alone
requires dismissal. See 18 U.S.C. § 1956(a)(1); 18 U.S.C. § 1957(a).
2. Allegations Regarding Closed Peruvian Investigations Fail to Establish a Substantial Connection Between the Seized Funds and Narcotics Trafficking
Throughout the Amended Complaint, the Government also relies on one or more
Peruvian governmental investigations into various members of the “Sanchez-Paredes DTO,” the
“Sanchez-Paredes family,” the Sanchez Alayo family, San Simon, and the alleged diversion of
calcium oxide, in an attempt to establish a connection between the seized properties and
8 The Government’s allegation that an officer (“Officer 1”) of Advancer was arrested for purchasing a kilogram of cocaine in 2010, see Am. Compl. ¶ 46, does not save the Government’s claims. The Government has failed to allege that Officer 1’s actions were related to the “Sanchez-Paredes family” or to any of the seized property. Moreover, the Amended Complaint does not assert that Officer 1’s alleged trafficking was tied to any financial transaction associated with the seized funds.
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 20 of 30
17
narcotics trafficking. See Am. Compl. ¶¶ 9, 14, 19-20, 45, 64. As an initial matter, none of the
allegations concerning the Peruvian investigations are relevant in any way to the question at
hand, i.e., whether the Government has alleged a substantial connection between the supposed
drug trafficking and the financial transactions at issue. This is because the fact that some foreign
law enforcement authority has merely investigated whether a predicate offense was committed
does not address in any way whether in fact there was such a predicate offense. See, e.g. United
States v. Pole No. 3172, Hopkinton, 852 F.2d 636, 639 (1st Cir. 1988) (dismissing complaint in
part because “third-hand allegations [in a seizure warrant]that [claimant] was arrested in
connection with an unsuccessful drug run in 1978, although charges against him were
subsequently dropped” could not alleviate deficient pleading). This is especially true here,
where the Government never alleges that any of these investigations resulted in a conviction for
any criminal offense, much less any San Simon Claimant’s conviction. To the contrary, whereas
the original complaint alleged that a “multi-decade” investigation culminated in the April 16,
2010 Peruvian Criminal Complaint against “numerous members of the Sanchez-Paredes DTO,”
Dkt. 1 ¶ 9, the Government now concedes that the prosecutor handling the Peruvian Criminal
Complaint in fact “recommended that the case be archived.” Am. Compl. ¶ 9. The Government
thus heavily relies, inappropriately, on an investigation that has been shelved at the request of the
prosecutor himself.9
9 Attached hereto as Exhibits B, C and D to the Cleary Decl. are the Ruling, First District Attorney’s Office, dated March 19, 2010, at 22 (“Ex. B”) (declining case against Carlos, Simon, Manuel Andres Sanchez Alayo (“Manuel”) and Lola Rosmery Sanchez Alayo (“Lola”) for lack of evidence of involvement in the laundering of drug proceeds); an excerpt from the Advisory Opinion of the Attorney General’s Office, Second Superior Public Prosecutor’s Office Specialized in Organized Crime, dated Mar. 29, 2012, at 296 (“Ex. C”) (dismissing San Simon, Segundo Manuel, Fidel and Manuel from the investigation), and the Resolution of the Government Attorney General’s Office, Supreme State Attorney’s Office for Internal Control, dated Dec. 3, 2012, at 7-8 (“Ex. D”) (affirming prosecutor’s determination to decline charges). Documents relating to the “Peruvian Criminal Complaint” and the prosecutor’s recommendation, as referred to and relied on in ¶ 9 of the Amended Complaint, are properly before the Court on a motion to dismiss. See One Tyrannosaurus Bataar Skeleton, 2012 WL 5834899, at *4. The Court may also take
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 21 of 30
18
The Peruvian government’s archived investigation does nothing to establish a connection
between the seized funds and narcotics trafficking where the prosecutor determined that the
Peruvian government lacked sufficient evidence to formally charge any criminal activity. Cf.
Real Property, 775 F. Supp. 2d at 564; Lopez, 2006 WL 2788999, at *14-16. But even if these
investigations were, as the Government erroneously asserts, still “pending,” see Am. Compl. ¶ 9,
that would not satisfy its pleading burden. It is pure speculation to infer any particular
underlying fact from the mere existence of the investigation. Moreover, the allegations
concerning the investigations fail to link the seized funds to narcotics trafficking. In the absence
of such a connection, the Amended Complaint does not pass muster.10
Nor can the entirely speculative allegations regarding the Peruvian calcium oxide
investigation save the day. The Government alleges that Peruvian authorities seized 125 tons of
calcium oxide in March 2007. Id. ¶ 19. One of the purchasers of this calcium oxide was
purportedly “identified” as San Simon. Id. Separately, the Government alleges that San Simon’s
supplier of calcium oxide was missing 179 tons of calcium oxide which is believed to have been
sold to San Simon. Id. ¶ 20. But there is no allegation that any of the calcium oxide was used by
San Simon for illegal purposes.11 And there is no allegation that the calcium oxide investigation
judicial notice of foreign judgments. See Jordan (Bermuda) Inv. Co., Ltd., v. Hunter Green Invs. Ltd., 154 F. Supp. 2d 682, 689 (S.D.N.Y. 2001) (taking judicial notice of judgment of B.V. I. court). 10 For these same reasons, the Amended Complaint is not salvaged by its bare allegations that various members of the Sanchez Paredes and Sanchez Alayo families have been “identified as targets” of investigations into money laundering and narcotics trafficking at some unidentified points in time, and that San Simon was investigated in July 2007, November 2007, and January 2008 for drug trafficking. See Am. Compl. ¶¶ 14, 39, 54, 61. There is no allegation that any of these investigations ever resulted in formal charges, much less a conviction. The mere existence of closed investigations cannot substantially connect the seized funds to narcotics trafficking. 11 Tellingly, the Government does allege as much against Comarsa. Id. ¶¶ 19, 64.
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 22 of 30
19
ever resulted in formal charges.12 In short, the investigations cited in the Amended Complaint
fail to establish any connection between the seized funds and narcotics trafficking.
3. Allegations that a Claimant Lacks Legitimate Sources of Income Are Insufficient to Connect the Seized Funds to Narcotics Trafficking
Based on unidentified alleged “expert accounting reports” from the Peruvian money
laundering investigation, the Government tries, and fails, to connect the seized funds to narcotics
trafficking by alleging that Segundo Manuel and Miguel “have claimed substantial amounts of
unsubstantiated income over the years,” and that Carlos Alayo “appears to have no source of
legitimate income.”13 Am. Compl. ¶¶ 15, 54. Beyond the fact that these allegations are mere
conclusions with no specific facts pled, even if pled with sufficient particularity, they would still
be legally insufficient to establish a reasonable belief that the seized funds are substantially
connected to narcotics trafficking. See Real Property, 775 F. Supp. 2d at 565 (“[w]hile
[claimant’s] unexplained income supports an inference of illegal activity, it does not support an
inference of narcotics-related activity.”). Accordingly, even assuming that allegations of
unsubstantiated income attributable to Segundo Manuel, Miguel, and Carlos Alayo were
adequately pled – and they are not – such allegations would be insufficient to establish the
requisite connection between the seized funds and narcotics trafficking.
12 The calcium oxide investigation referred to in ¶ 61 of the Amended Complaint was declared groundless by the Attorney General’s office. Attached hereto as Exhibit E to the Cleary Decl. is an excerpt from the Resolution of Complaint, Government Attorney General’s Office, District Attorney’s Office Specialized in Organized Crime, dated January 10, 2013, at 75-77 (“Ex. E”). Documents referred to and relied on in the Amended Complaint are properly before the Court on a motion to dismiss. See One Tyrannosaurus Bataar Skeleton, 2012 WL 5834899, at *4. The Court may also take judicial notice of foreign judgments. See Jordan (Bermuda) Inv. Co., 154 F. Supp. 2d at 689. 13 The Amended Complaint makes this same allegation against Santos Orlando. But he is affiliated with Comarsa and not with San Simon.
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 23 of 30
20
4. Profile Based Allegations are Insufficient to Establish a Connection Between Seized Funds and Narcotics Trafficking
In the absence of any facts tying the seized funds to drug trafficking, the Government
resorts to broad, sweeping profile-based allegations, which lack specificity and are woefully
inadequate to prove the required “substantial connection.” For example, the Government alleges
generically, without any reference to the San Simon Claimants, that “suppliers of narcotics
located in . . . South American countries, which are known source locations of narcotics,”
“frequently utilize domestic and foreign banks . . . in order to . . . make their narcotics profits
appear to be from legitimate sources[.]” Am. Compl. ¶¶ 4-5; see also ¶¶ 10, 13 (referring to drug
activity based out of Peru, Colombia and Mexico in the 1970s to mid 1990s). These generalized
claims are insufficient as a matter of law.
Judge Scheindlin’s opinion in $1,399,313.74 in United States Currency, 592 F. Supp. 2d
at 495, is instructive. There, the Government filed a civil asset forfeiture suit against a bank
account used by the claimant to conduct monthly exchanges of dollars and Columbian pesos. Id.
at 497. Based on allegations that the transactions between claimant and a peso broker, who
frequently wired funds through Latvian banks, bore the hallmarks of a Black Market Peso
Exchange (“BMPE”) transaction, the Government seized funds it said were derived from
narcotics trafficking, claiming that the vast majority of funds transferred through the BMPE and
Latvian banking systems were derived from narcotics trafficking. Id. at 497-98. Judge
Scheindlin granted claimants’ motion to dismiss, concluding that the Government’s “sweeping”
allegations based on conjecture were “not sufficiently particular to permit Claimants to
commence an investigation of the facts and to frame a responsive pleading, as required by the
Supplemental Rules” and, that because the BMPE also had “many legitimate uses,” it was
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 24 of 30
21
impossible for the claimant to investigate the Government’s claims absent any specific
allegations of the claimant’s own activities. Id. at 500.
The allegations in the Amended Complaint closely mirror those appropriately rejected by
Judge Scheindlin. Similar to the general allegations relating to the BMPE and Latvian accounts,
here the Government alleges that because some South American suppliers of narcotics use
domestic and foreign banks to launder money, the seized funds at issue in this case represent
laundered proceeds of narcotics trafficking. See Am. Compl. ¶¶ 4-8. Such profile-based
allegations are insufficient to support the Government’s burden under the Supplemental Rules.
5. Allegations that Claimants are “Shell” Companies are Insufficient to Establish a Connection Between the Seized Funds and Narcotics Trafficking
The Government’s attempts to link the seized funds to narcotics trafficking through
Pacific, Exim, Advancer, and Horizonte are similarly unavailing. Even assuming for purposes of
this motion that those companies are “shells” – they are not – the allegations do not establish a
connection between those entities (or their seized funds) and narcotics trafficking. This is
because the only funds alleged to pass through these entities are the proceeds of legitimate gold
sales.
For example, at the center of the Government’s attempt to link Pacific, Advancer, and
Exim to narcotics trafficking are the alleged wire transfers from “Refining Company A.” See id.
¶¶ 34, 36, 42, 47-48. In the Amended Complaint, the Government no longer contends that
Refining Company A is complicit in narcotics trafficking or money laundering. Therefore, the
wire transfers from Refining Company A are not in themselves indicative of illicit activity.
Nor can the mere existence of wire transfers involving Refining Company A, Pacific,
Advancer, Exim, Horizonte, and San Simon establish a substantial connection to narcotics
trafficking. Upon receipt from Refining Company A of the purchase price of the gold, the
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 25 of 30
22
intermediary brokers (Pacific, Exim, and Advancer) then transferred those receipts to San Simon
and Horizonte.14 Id. ¶¶ 34, 36, 42, 48. The logical (and correct) inference drawn from the
transfers from Refining Company A is that the alleged “illicit” funds were, instead, the product
of fully transparent transfers of sales proceeds from a gold refining company to a gold mining
company that were routed through an intermediary broker. There is no hint of a connection to
narcotics trafficking suggested by the payment from Refining Company A to San Simon and
Horizonte, through Pacific, Advancer, and Exim.
The Government’s attempts to link these intermediaries to drug trafficking through their
associations with certain individuals or with abandoned “investigations” also fail. For instance,
allegations that Miguel, one of Pacific’s officers, has a familial relationship to a trafficker who
has been deceased for more than twenty years, has been “investigated” but never charged, and
has unsubstantiated income are insufficient to connect him, or Pacific, to narcotics trafficking.
Am. Compl. ¶¶ 14, 15, 35; see Real Property, 775 F. Supp. 2d at 564-65 (dated criminal
convictions and unsubstantiated income insufficient to establish the requisite connection between
narcotics activity and claimant). See also Point V.B.1 and 3, above.15
Finally, the Amended Complaint’s “catch-all” contentions that Pacific, Exim, and
Advancer engaged in financial transactions to facilitate the narcotics trafficking activities of the
“Sanchez-Paredes family” fail to tie these entities to narcotics trafficking because they are not
14 The Amended Complaint acknowledges that San Simon is in fact a mining company. Id. ¶ 61. 15 The same holds true for the Government’s attempts to link Exim, Advancer, and Horizonte to narcotics trafficking through Carlos Alayo, Manuel, Simon, and Lola Alayo’s familial ties to Percyles and Segundo Simon (two men who have been dead for decades). See id. ¶¶ 39, 45, 56, 58. Nor does the repeated reliance on the family members allegedly investigated in the “archived” Peruvian criminal investigation (or any other unidentified investigation), for the reasons stated in Point V.B.2., carry the Government’s burden. See id. ¶¶ 39, 45, 56, 58.
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 26 of 30
23
pled with the particularity required by the Supplemental Rules. See id. ¶¶ 37, 43, 49.16 Simply
stated, the Amended Complaint is devoid of a single specific factual allegation tying any
member of the “Sanchez-Paredes family,” much less the San Simon Claimants, to narcotics
trafficking after 1995.
C. The Government Has Not Pled Facts that Show that Any of the Claimant Accounts are Traceable to Narcotics Trafficking
In an apparent attempt to invoke the traceability provisions of 21 U.S.C. § 881(a)(6) and
18 U.S.C. § 981(a)(1)(A), the Government also alleges that funds seized in the Advancer and
San Simon accounts are subject to forfeiture because they are either “traceable to drug proceeds”
or “traceable to the proceeds of narcotics trafficking activity.” See Am. Compl. ¶¶ 49, 66.17
Pursuant to this theory, the Government must trace the funds it wishes to forfeit to illegal activity.
See United States v. Banco Cafetero Panama, 797 F.2d 1154, 1158-59 (2d Cir. 1986) (Section
881(a)(6)); United States v. Contents in Account No. 059-644190-69, 253 F. Supp. 2d 789, 795
(D. Vt. 2003) (Section 981(a)(1)(A)). It has failed to do so.
Here, the Government’s attempt to invoke these provisions fails as it has not identified
funds in the seized accounts that are alleged to be “tainted,” i.e., laundered drug money or
narcotics proceeds.18 As far as is discernable, the gist of the Government’s new § 981(a)(1)(A)
claim is based on mere opinion and conjecture, rather than any allegation of fact. As noted
above, Point II.B, the allegation states that “I believe” that San Simon “may be” receiving
16 Similarly, merely alleging that other officers of Pacific are believed to launder drug money, without any particular facts as to how, when, or why, does not satisfy the enhanced pleading requirement. See id. ¶¶ 35, 43. 17 To the extent that the Government premises forfeiture of funds in Pacific, Horizonte, and Carlos Alayo's accounts as “traceable” to drug proceeds, which is unclear from the allegations in the Amended Complaint, such theory is insufficiently pled for the same reasons set forth in this section. 18 Indeed, as to one of the Advancer accounts, Advancer Account-2, the Government has not alleged even a single sentence about the account’s activity, much less any connection to drug trafficking activity. Clearly, there is no basis whatsoever for the seizure of this account.
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 27 of 30
24
proceeds from the sale of narcotics and then “commingling” them into legitimate business
operations. Am. Compl. ¶ 23. This rank speculation, even if believed, does not connect the dots
because the Government does not allege which gold was produced or procured with narcotics
proceeds. It therefore does not provide facts from which one could infer that any of the funds
deposited in the seized San Simon and Advancer accounts are anything other than the legitimate
proceeds from gold produced or purchased and sold to Refining Company A, which then paid
San Simon and Horizonte through Pacific, Exim, and Advancer. See id. ¶¶ 23, 33, 34, 37, 42,
47-48, 56-57. In other words, the Government simply fails to allege that any funds deposited
into the accounts were drug proceeds ab initio – it does not identify what money, if any, was
“dirty” to start with.19
The Amended Complaint suffers from the same pleading deficiency with respect to its §
881(a)(6) claims. Although it alleges that a number of wire transfers were made from Refining
Company A to the Advancer accounts, there are no allegations or facts to support the leap that
funds transferred from Refining Company A, which has been dropped from the case, are the
proceeds of drug trafficking. See Am. Compl. ¶¶ 47-48. Similarly, the Government fails to
identify which sales to Refining Company A allegedly involved gold “purchased on the
secondary market with drug money,” under the Government’s current hypothesis. See id. ¶ 23.20
Since the allegedly tainted gold transactions are not identified, it is therefore impossible to trace
any proceeds from the sale of gold to narcotics trafficking. Id. ¶¶ 44-49; 60 (citing wire transfers
19 Allegations concerning long-deceased family members and closed investigations do not make this connection. See Point V.B.1,2. 20 As noted above, Point II.B, the Amended Complaint does not allege that San Simon actually bought gold “with drug money.”
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 28 of 30
25
from Exim to San Simon, but failing to allege facts to support the inference that any of the funds
transferred were the proceeds of drug trafficking).
In sum, the Government’s reliance on decades-old criminal allegations, references to
Peruvian investigations that have since been discontinued without conviction, allegations of
“unsubstantiated” sources of income, profile based arguments and naked allegations of the
existence of “shell” companies are patently insufficient to trace seized funds to illicit activity in
an in rem forfeiture action. This utter failure warrants a dismissal with prejudice.21
VI. Conclusion
For all of the foregoing reasons, the San Simon Claimants respectfully request that the
Court grant its motion to dismiss the Amended Complaint in its entirety with prejudice and
award such other and further relief as the Court deems just and proper.
Respectfully submitted, PROSKAUER ROSE LLP By: /s Robert J. Cleary
Robert J. Cleary Eleven Times Square New York, NY 10036 Telephone: (212) 969-3000 Facsimile: (212) 969-2900 rjcleary@proskauer.com -and-
LS LAW FIRM By: /s Lilly Ann Sanchez
Lilly Ann Sanchez 1441 Brickell Avenue
21 The Government provides no indication that it can plead any set of facts that would substantially connect the seized funds to narcotics trafficking and should not be permitted a third bite at the apple. See Wilson v. Merrill Lynch & Co., 671 F.3d 120, 140 (2d Cir. 2011) (complaint properly dismissed with prejudice where amendment would be futile); Williams v. Calderoni, No. 11 Civ. 3020 CM, 2012 WL 691832, at *8 (S.D.N.Y. Mar. 1, 2012).
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 29 of 30
26
cc: Paul Monteleoni Assistant U.S. Attorney One St. Andrew’s Plaza New York, NY 10007
Attorney for Plaintiff Abbe D. Lowell Chadbourne & Parke LLP 1200 New Hampshire Ave. NW Washington, DC 20036
Attorney for Claimant CIA Minera Aurifera Santa Rosa SA
Miami, FL 33131 Telephone: (305) 503-5503 Facsimile: (305) 503-6801 lsanchez@thelsfirm.com
Attorneys for Claimants Cia Minera San Simon S.A., Advancer Logistics LLC, Horizonte Dorado S.R.L., Pacific Gateway Corporation, and Carlos Alberto Sanchez Alayo
Case 1:12-cv-07530-GBD-JCF Document 52 Filed 02/28/13 Page 30 of 30