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United States v. Calle Serna

United States District Court, E.D. New York

August 29, 2017

UNITED STATES OF AMERICA,
v.
JAVIER ANTONIO CALLE SERNA, et al. Defendants.

          MEMORANDUM & ORDER

          Sandra L. Townes United States District Judge.

         Third-party petitioner Ross R. Hartog, the trustee for the Chapter 7 bankruptcy estate of Banah International Group, Inc., filed a petition pursuant to 21 U.S.C. § 853(n) and Federal Rule of Criminal Procedure 32.2 to adjudicate his interest in approximately $2.7 million that is subject to a preliminary forfeiture order of this Court. The United States of America has moved to dismiss the petition. For the reasons that follow, the government's motion is granted.

         I. Background

         A. Factual History

         1.Underlying Criminal Case

         Javier Antonio Calle Serna and several codefendants were charged with various crimes for their involvement in Los Rastrojos, "a paramilitary organization that employed hundreds of individuals and controlled the drug trade along the Pacific coast of Colombia." Superseding Indictment, unsealed Apr. 10, 2014, Dkt. No. 392 ("Superseding Indictment") ¶ 1. A grand jury indicted Calle Serna, the "principal leader" of Los Rastrojos, on charges of, among other things, continuing criminal enterprise for acts occurring between January 2004 and February 2011, international cocaine distribution conspiracy for acts occurring between January 2004 and December 2012, and conspiracy to launder money for acts occurring between January 2004 and December 2012. Id. ¶¶ 1, 5, 14, 26.

         2.Bankruptcy Proceedings and Seizure of Funds

         On February 21, 2013, Banah International Group., Inc., an international sugar wholesaler based in Miami, Florida, filed a voluntary petition for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of Florida. Verified Petition of Third Party Ross R. Hartog dated Feb. 2, 2016, Dkt. No. 522 ("Pet.") ¶¶ 4, 6.[1] At this time, Banah owed creditors more than $5 million, and the company was experiencing cash flow shortages and net operating losses. Pet. ¶¶ 5, 7. During the pendency of the Chapter 11 proceedings, Banah revamped aspects of its business and continued to operate. Id. ¶¶ 10-13.

         On March 10, 2014, Banah filed a plan of reorganization in the Florida bankruptcy court. Id. ¶ 14. The plan provided that Cana De Azucar & Cereales, S.A., Inc.-a company that had recently provided Banah with financing after negotiating to serve as its exclusive sugar supplier-would purchase Banah for approximately $9 million. Id. ¶¶ 9, 14, 16. The deal would have allowed Banah's creditors to recoup an estimated $2.8 to $3.5 million. Id. ¶ 20. According to the third-party petition, the creditors "overwhelmingly" supported the plan of reorganization. M¶19.

         On May 15, 2014, the bankruptcy court approved plan. Id. ¶ 18. Pursuant to the plan's terms, the sale was to close by June 30, 2014. Id. ¶ 21. On July 9, 2014, however, Banah filed a motion to extend the closing date to July 30, 2014. Bankr. Dkt. No. 598 ¶ 10.[2] According to its motion, Banah expected approximately $3.5 million in cash as part of the sale, but it had received only about $2.7 million to date, leaving a cash shortfall of approximately $800, 000. Bankr. Dkt. No. 598 ¶ 8.[3] Banah represented that the sale could not close and the plan could not become effective without the missing funds. Bankr. Dkt. No. 598 ¶ 8.

         The bankruptcy court granted Banah's request to extend the closing date to July 30, 2014, and scheduled a status conference for August 7, 2014. Bankr. Dkt. No. 600. On July 31, 2014, however, Banah again moved to extend the closing date-this time to August 30, 2014, because it still had not received the necessary cash. Bankr. Dkt. No. 607 ¶¶ 9-10. It appears that the bankruptcy court did not act on this extension request before the August 7, 2014 conference.

         On August 5, 2014, based on an affidavit sworn to by an agent of the U.S. Drug Enforcement Administration, Magistrate Judge Ramon E. Reyes of this District signed a warrant to seize the approximately $2.7 million in cash that Banah had already received. Pet. Ex. 3 (Seizure Warrant dated Aug. 5, 2014); Pet. ¶¶ 26-27. According to the third-party petition, the government had asserted that these funds "derived from criminal activity." Pet. ¶ 28. The warrant itself indicates that there was probable cause to believe that the funds were linked to drug and money-laundering activities. Pet. Ex. 3 (Seizure Warrant dated Aug. 5, 2014) (citing 21 U.S.C. § 881(a)(6); 18 U.S.C. §§ 981(a)(1)(A), 982(a)(1)).

         Following the August 7 conference, the bankruptcy court ordered Banah to show cause why, given the seizure of the $2.7 million by federal authorities, the order confirming the plan of reorganization should not be vacated and the case converted from Chapter 11 to Chapter 7. Bankr. Dkt. No. 620; Pet. ¶ 30.[4] On September 11, 2014, the bankruptcy court vacated its previous order approving the plan of reorganization. Bankr. Dkt. No. 642. On October 3, 2014, the bankruptcy court converted the case from Chapter 11 to Chapter 7. Bankr. Dkt. No. 688. Banah's operations soon ceased and the company was liquidated. Pet. ¶ 39. The liquidation generated a total of approximately $700, 000-leaving significantly less for Banah's creditors than the $2.8 to $3.5 million that they had expected to recoup after the sale of the company. Id. ¶¶ 20, 40.

         3. Preliminary Order of Forfeiture

         On February 26, 2015, defendant Javier Antonio Calle Serna pleaded guilty to charges of, among other things, continuing criminal enterprise, international cocaine distribution conspiracy, and conspiracy to launder money. Dkt. No. 467. On June 18, 2015, this Court signed a preliminary order of forfeiture for $1 billion against him, which included the nearly $2.7 million that was seized pursuant to the warrant issued by Judge Reyes. Dkt. No. 487 ¶ 2.[5] In accordance with 21 U.S.C. § 853(n)(1), the government publicly posted notice of this order from December 3, 2015, to January 1, 2016, and also sent direct notice of it to petitioner on December 3, 2015. Dkt.Nos. 517, 518.

         B. ...


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