Demoledora defensa de los Sanchez Paredes en Nueva York

Robert J. Cleary Proskauer Rose LLP Eleven Times Square New York, NY 10036 Telephone: (212) 969-3000 Facsimile: (212) 969-2900 [email protected] 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 of 30

mailto:[email protected]

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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


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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


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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


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


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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


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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 –


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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.


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“[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.


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.


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.


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


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


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).


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.


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).


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


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-


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”).


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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.


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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


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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.


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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.


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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


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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


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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.


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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.


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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.”


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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 [email protected] -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).



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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 [email protected]

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



Demoledora defensa de los Sanchez Paredes en Nueva York

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