United States District Court, E.D. New York
MEMORANDUM & ORDER
L. Townes United States District Judge.
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.
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.
Proceedings and Seizure of Funds
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,
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. ¶¶
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.
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 ¶
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 ¶
Banah represented that the sale could not close and the plan
could not become effective without the missing funds. Bankr.
Dkt. No. 598 ¶ 8.
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.
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)).
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. 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,
Preliminary Order of Forfeiture
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. 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.