Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 1 of 44 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK

Transcription

1 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 1 of 44 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK PETRÓLEOS MEXICANOS AND PEMEX-REFINACIÓN Plaintiffs, - against - 12 CV 9070 (LLS) ECF CASE ORAL ARGUMENT REQUESTED SK ENGINEERING & CONSTRUCTION CO. LTD., AND SIEMENS AKTIENGESELLSCHAFT Defendants. MEMORANDUM OF LAW IN SUPPORT OF SIEMENS AG S MOTION TO DISMISS Thomas D. Yannucci, P.C.* Brant W. Bishop, P.C. Chris Posteraro* Ragan Naresh* KIRKLAND & ELLIS LLP 655 Fifteenth Street, NW Suite 1200 Washington, DC Tel.: (202) thomas.yannucci@kirkland.com brant.bishop@kirkland.com chris.posteraro@kirkland.com ragan.naresh@kirkland.com Counsel for Siemens AG * Pro hac vice motion pending

2 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 2 of 44 TABLE OF CONTENTS Page INTRODUCTION...1 PROCEDURAL HISTORY...3 ARGUMENT...4 I. PEMEX S RICO CLAIMS MUST BE DISMISSED BECAUSE THEY ARE BASED ON EXTRATERRITORIAL CONDUCT...4 II. III. THE COURT LACKS SUBJECT MATTER JURISDICTION OVER PEMEX S FRAUD CLAIM AND MUST BE DISMISSED...11 PEMEX DOES NOT STATE A VIABLE RICO OR FRAUD CLAIM AGAINST SIEMENS AG...12 A. Pemex Does Not State A Viable RICO Claim Against Siemens AG Pemex Does Not Adequately Plead That Siemens AG Committed RICO Predicate Acts, Much Less With The Required Particularity...14 a. Pemex Does Not Adequately Plead That Siemens AG Committed Any Predicate Offenses Of Wire Fraud...14 b. Pemex Does Not Adequately Plead That Siemens AG Committed Any Predicate Offenses Of Honest Services Fraud Pemex Does Not Adequately Allege A RICO Pattern Of Predicate Acts The Speculative Chain Of Causation Between The Supposed Fraud And The Payment Of Invoices For Cost Overrun Claims Falls Far Short Of The Required Direct Causation Pemex Has Not Adequately Pled That Siemens AG Joined A Conspiracy To Violate RICO...30 B. Pemex Does Not State A Common Law Fraud Claim IV. PEMEX S RICO CLAIMS ARE BARRED BY THE STATUTE OF LIMITATIONS...33 CONCLUSION...36 i

3 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 3 of 44 TABLE OF AUTHORITIES Page(s) CASES Adler v. Berg Harmon Assocs., 790 F. Supp (S.D.N.Y. 1992) Agency Holding Corp. v. Malley-Duff & Assocs., Inc., 483 U.S. 143 (1987) Amsterdam Tobacco Inc. v. Philip Morris Inc., 107 F. Supp. 2d 210 (S.D.N.Y. 2000) Anza v. Ideal Steel Supply Corp., 547 U.S. 451 (2006) Aschroft v. Iqbal, 556 U.S. 662 (2009)... 7 Benedict v. Amaducci, No. Civ (KMW), 1995 WL (S.D.N.Y. July 12, 1995)... 15, 20 Boritzer v. Calloway, No. 10 Civ. 6264(JPO), 2013 WL (S.D.N.Y. Jan. 24, 2013) Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (2008) Cedeño v. Intech Grp., Inc., 733 F. Supp. 2d 471 (S.D.N.Y. 2010), aff d sub nom., Cedeño v. Castillo, 457 F. App x 35 (2d Cir. 2012)... 6, 7, 8, 10 Cofacredit, S.A. v. Windsor Plumbing Supply Co., 187 F.3d 229 (2d Cir. 1999)... 30, 31 Colony at Holbrook, Inc. v. Strata G.C., Inc., 928 F. Supp (E.D.N.Y. 1996)... 17, 32 Conan Props., Inc. v. Mattel, Inc., 619 F. Supp (S.D.N.Y. 1985) Cresswell v. Sullivan & Cromwell, 922 F.2d 60 (2d Cir. 1990) De Falco v. Bernas, 244 F.3d 286 (2d Cir.2001) ii

4 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 4 of 44 Page(s) Deloach v. Manhattan Mini Storage, No. 94 Civ (JFK), 1994 WL (S.D.N.Y. Sept. 14, 1994) European Cmty. v. RJR Nabisco, Inc., No. 02-CV-5771 (NGG)(VVP), 2011 WL (E.D.N.Y. Mar. 8, 2011)... 6, 10 Evercrete Corp. v. H-Cap Ltd., 429 F. Supp. 2d 612 (S.D.N.Y. 2006) First Capital Asset Mgmt., Inc. v. Satinwood, Inc., 385 F.3d 159 (2d. Cir 2004)... 24, 25, 31 First Nationwide Bank v. Gelt Funding Corp., 27 F.3d 763 (2d Cir. 1994) Frankel v. Cole, 313 F. App x 418 (2d Cir. 2009) Fresh Meadow Food Servs., LLC v. RB 175 Corp., 282 F. App x 94 (2d Cir. 2008) Fuji Photo Film U.S.A., Inc. v. McNulty, 640 F. Supp. 2d 300 (S.D.N.Y. 2009)... 15, 19, 20, 31 GICC Capital Corp. v. Tech. Fin. Grp., Inc., 67 F.3d 463 (2d Cir. 1995)... 24, 25 Greenes v. Empire Blue Cross & Blue Shield, No. 92 Civ (KMW), 1996 WL (S.D.N.Y. Nov. 4, 1996) Gross v. Waywell, 628 F. Supp. 2d 475 (S.D.N.Y. 2009) H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229 (1989) Hecht v. Commerce Clearing House, Inc., 897 F.2d 21 (2d Cir. 1990) Hemi Grp., LLC v. City of New York, 559 U.S. 1 (2010) Hourani v. Mirtchev, --- F. Supp. 2d ----, No (TFH), 2013 WL (D.D.C. May 8, 2013) In re Gas Reclamation, Inc. Sec. Litig., 659 F. Supp. 493 (S.D.N.Y. 1987) iii

5 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 5 of 44 Page(s) In re Royal Bank of Scot. Grp. PLC Sec. Litig., 765 F. Supp. 2d 327 (S.D.N.Y. 2011)... 9 In re UBS Auction Rate Sec. Litig., No. 08-cv-2967, 2010 WL (S.D.N.Y. June 10, 2010) In re Vivendi Universal, S.A. Sec. Litig., 765 F. Supp. 2d 512 (S.D.N.Y. 2011)... 8, 9 Kramer v. Time Warner Inc., 937 F.2d 767 (2d Cir. 1991) Lakonia Mgmt. Ltd. v. Meriwether, 106 F. Supp. 2d 540 (S.D.N.Y. 2000)... 15, 16, 17 Landy v. Heller, White & Co., 783 F. Supp. 125 (S.D.N.Y. 1991) LC Capital Partners, LP v. Frontier Ins. Grp., Inc., 318 F.3d 148 (2d Cir. 2003) Lerner v. Fleet Bank, N.A., 459 F.3d 273 (2d Cir. 2006) Leung v. Law, 387 F. Supp. 2d 105 (E.D.N.Y. 2005) Lichtenstein v. Reassure Am. Life Ins. Co., Nos. 07-cv-1653 (DLI)(LB) & 07-cv-1680 (DLI)(LB), 2009 WL (E.D.N.Y. Mar. 23, 2009) McLaughlin v. Anderson, 962 F.2d 187 (2d Cir. 1992) Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Young, No. 91 Civ (CSH), 1994 WL (S.D.N.Y. Mar. 15, 1994) Metromedia Co. v. Fugazy, 983 F.2d 350 (2d Cir. 1992) Mills v. Polar Molecular Corp., 12 F.3d 1170 (2d Cir. 1993) Miranda v. Ponce Fed. Bank, 948 F.2d 41 (1st Cir. 1991) Morrison v. Nat l Austl. Bank Ltd., 130 S. Ct (2010)... passim iv

6 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 6 of 44 Page(s) Moss v. Morgan Stanley Inc., 719 F.2d 5 (2d Cir. 1983) Naso v. Park, 850 F. Supp. 264 (S.D.N.Y. 1994)... 14, 31 Nat l Grp. for Commc ns & Computers Ltd. v. Lucent Techs. Inc., 420 F. Supp. 2d 253 (S.D.N.Y. 2006) Nichols v. Mahoney, 608 F. Supp. 2d 526 (S.D.N.Y. 2009) Norex Petroleum Ltd. v. Access Indus., Inc., 540 F. Supp. 2d 438 (S.D.N.Y. 2007)... 7 Norex Petroleum Ltd. v. Access Indus., Inc., 631 F.3d 29 (2d Cir. 2010)... passim Pier Connection, Inc. v. Lakhani, 907 F. Supp. 72 (S.D.N.Y. 1995) Purchase Real Estate Grp. Inc. v. Jones, No. 05 Civ , 2010 WL (S.D.N.Y. Aug. 24, 2010) Republic of Iraq v. ABB AG, --- F. Supp. 2d ----, No. 08 Civ. 5951(SHS), 2013 WL (S.D.N.Y. Feb. 6, 2013)... passim Roberto s Fruit Mkt., Inc. v. Schaffer, 13 F. Supp. 2d 390 (E.D.N.Y. 1998) Rotella v. Wood, 528 U.S. 549 (2000) S.Q.K.F.C., Inc. v. Bell Atl. TriCon Leasing Corp., 84 F.3d 629 (2d Cir. 1996) Salinger v. Projectavision, Inc., 934 F. Supp (S.D.N.Y. 1996), aff d, 328 F. App x 695 (2d Cir. 2009) Snam Progetti S.P.A. v. Lauro Lines, 387 F. Supp. 322 (S.D.N.Y. 1974) Spool v. World Child Int l Adoption Agency, 520 F.3d 178 (2d Cir. 2008) v

7 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 7 of 44 Page(s) U1IT4less, Inc. v. FedEx Corp, 896 F. Supp. 2d 275 (S.D.N.Y. 2012) United States v. Giffen, 326 F. Supp. 2d 497 (S.D.N.Y. 2004) United States v. Persico, 832 F.2d 705 (2d Cir. 1987) United States v. Philip Morris USA, Inc., 783 F. Supp. 2d 23 (D.D.C. 2011) United States v. Rybicki, 354 F.3d 124 (2d Cir. 2003) Vemco, Inc. v. Camardella, 23 F.3d 129 (6th Cir. 1994) Vicon Fiber Optics Corp. v. Scrivo, 201 F. Supp. 2d 216 (S.D.N.Y. 2002) World Wrestling Entm t, Inc. v. Jakks Pac. Inc., 328 F. App x 695 (2d Cir. 2009)... 33, 34 World Wrestling Entm t, Inc. v. Jakks Pac., Inc., 530 F. Supp. 2d 486 (S.D.N.Y. 2007)... 16, 26, 27, 35 Xin Wei Lin v. Chinese Staff & Workers Ass n, No. 11 Civ. 3944(RJS), 2012 WL (S.D.N.Y. Nov. 8, 2012) Zaloom v. Trupin, No. 86 Civ. 465 (KMW), 1991 WL (S.D.N.Y. Dec. 10, 1991) STATUTES AND RULES 18 U.S.C U.S.C , U.S.C. 1961(1) U.S.C. 1961(5) U.S.C. 1962(c) U.S.C. 1962(d)... 30, U.S.C. 1964(c) vi

8 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 8 of 44 Page(s) 28 U.S.C Fed. R. Civ. P Fed. R. Civ. P. 5(b)(2)... 3 Fed. R. Civ. P. 8(a) Fed. R. Civ. P. 9(b)... passim OTHER AUTHORITIES Petróleos Mexicanos, 2010 Annual Report (Form 20-F) (June 30, 2011), available at 12 vii

9 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 9 of 44 INTRODUCTION This RICO suit must be dismissed because it has nothing to do with the United States. The conduct alleged is overwhelmingly extraterritorial: all of the parties are foreign; all of the alleged bribery took place abroad; the refining project that was the subject of the alleged bribery was abroad; and the underlying contracts were executed abroad. It is by now black-letter law that [t]he RICO statutes do not apply extraterritorially. Republic of Iraq v. ABB AG, --- F. Supp. 2d ----, No. 08 Civ. 5951(SHS), 2013 WL , at *21 (S.D.N.Y. Feb. 6, 2013) (citing Norex Petroleum Ltd. v. Access Indus., Inc., 631 F.3d 29, (2d Cir. 2010) (per curiam); see Morrison v. Nat l Austl. Bank Ltd., 130 S. Ct (2010)). This threshold issue is dispositive of Pemex s 1 RICO claims: plaintiffs have attempted to allege an extraterritorial RICO claim, but extraterritorial RICO claims are barred as a matter of law. Indeed, tacitly acknowledging this fatal flaw, Pemex tacks on a cursory common law fraud claim in the hopes that at least some aspect of this case can survive a motion to dismiss. It cannot. Even if Pemex s fraud claim were adequately pled (and it is not), the jurisdictional bases alleged by Pemex federal question jurisdiction and the inapplicable RICO statute cannot support jurisdiction for a common law fraud claim. Further, even if RICO could apply, Pemex does not allege a viable RICO claim at all. Its RICO allegations are a collection of conclusory, vague and therefore inadequate allegations that do not cohere as a plausible basis for charging that Siemens AG (or anyone else) directly harmed Pemex in its business or property by managing an enterprise through a related pattern of racketeering activity. The alleged RICO theory, in short, consists of conclusory assertions assembled to construct an appearance of scandal, but not a coherent RICO claim. Indeed, 1 Pemex refers collectively to plaintiffs Petróleos Mexicanos and Pemex-Refinación.

10 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 10 of 44 Pemex s theory defies logic, alleging upon information and belief that fees paid to a business consultant in late 2004 somehow became bribes to secure agreements and invoice payments that had already been made two to four years earlier. Am. Compl. 6, Moreover: Pemex does not adequately plead that Siemens committed RICO predicate acts, much less with the required particularity. Pemex alleges seven predicate acts of wire fraud based on a scheme that involved transmitting invoices for payments allegedly approved as the result of bribery. Yet, Pemex does not identify a single statement in any of those invoices that is false or deceptive. Furthermore, Pemex s honest services fraud claim is based on deprivation of honest services of a foreign official based on foreign bribery. But it is blackletter law that the U.S. honest services statute does not reach abroad. The alleged predicate acts do not constitute a pattern of racketeering activity. Pemex does not allege facts setting forth a plausible basis for concluding that Pemex was directly harmed, but depends instead on a speculative and indirect relationship between its alleged harm and supposed RICO violations. Indeed, the Amended Complaint fails to allege that Pemex detrimentally relied on any of the alleged instances of fraud. Pemex s conclusory assertion of an agreement among participants in the refinery project at issue here lacks any factual detail. It need not be credited and fails to allege a RICO conspiracy. Separate and apart from the failure adequately to plead a RICO claim s elements, Pemex s RICO claim is time-barred. According to the Amended Complaint itself, the supposed bribery of Pemex officials to ensure approval of payment and processing of invoices occurred no later than January 2002 far more than four years ago, which is the statute of limitations for RICO claims. Indeed, the Amended Complaint itself show that Pemex knew (or reasonably should have known) sufficient information to investigate and pursue its claims long before the last allegedly fraudulent act in Pemex s claims should be dismissed. 2 SK Engineering also demonstrates that the claims in this case are foreclosed by res judicata. Rather than repeat that argument here, Siemens AG simply notes and incorporates by reference this argument that is set forth in SK s memorandum in support of its motion to dismiss. 2

11 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 11 of 44 PROCEDURAL HISTORY The procedural background of this case is a history of improper and desultory proceedings by Pemex all part of its broader effort to evade payment of the $530 million international arbitration award it owes Conproca S.A. de C.V., a Mexican joint venture between Defendants. Pemex initiated this lawsuit on December 12, (Dkt. 1.) The Court issued a summons, but instead of trying to serve the summons or the complaint on Defendants, Pemex moved to stay the case. (Dkts. 2-3.) Pemex then failed to take any further steps to prosecute the action. Given that Defendants do not want this baseless litigation hanging like a cloud over them, they moved to dismiss on March 8, (Dkts ) Pemex failed timely to respond to the motions to dismiss. Instead, after the response date passed, Pemex indicated that it would amend its complaint, and requested and received a 20-day extension to file an amended complaint (until April 18, 2013). (Dkt. 23.) Pemex failed to meet that deadline, instead requesting yet another extension of time. The Court ordered Pemex to serve its amended complaint no later than May 8, 2013 but warned that no further extensions would be granted absent unusually compelling circumstances. (Dkt. 32.) 3 On May 8, 2013, Pemex filed a second amended complaint (simply titled Amended Complaint ) (Dkt. 34), which it improperly served via even though the parties have not consented to service in writing. See Fed. R. Civ. P. 5(b)(2). The Amended Complaint was not properly served until May 9 after the deadline set by this Court which is when the Court s ECF system delivered it to counsel of record (though Pemex s filing was initially rejected for failure to comply with the ECF rules). Although the Amended Complaint was untimely 3 After requesting an extension, Pemex attempted to file an amended complaint on April 18, 2013 but did not comply with the Court s procedural rules in doing so. (Dkts. 30, 33.) That night Pemex also voluntarily dismissed one of the Defendants Conproca S.A. de C.V. (Dkt. 31.) 3

12 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 12 of 44 served and is thus arguably void ab initio Siemens nonetheless files this motion to dismiss so that the Court may dismiss this case with prejudice and remove the stigma caused by the pendency of unwarranted RICO litigation. ARGUMENT I. PEMEX S RICO CLAIMS MUST BE DISMISSED BECAUSE THEY ARE BASED ON EXTRATERRITORIAL CONDUCT Pemex s attempt to apply RICO to the alleged conduct of German and South Korean corporations in Mexico in relation to a Mexican refinery project (Cadereyta) is squarely foreclosed as a matter of law, and the Amended Complaint should be dismissed accordingly. Less than three years ago, the Supreme Court decided Morrison v. National Australia Bank Ltd., 130 S. Ct (2010), holding that the U.S. securities laws do not apply extraterritorially because the statutes give no clear indication of an extraterritorial application. Id. at Three months later, the Second Circuit confirmed that RICO like the securities laws at issue in Morrison has no extraterritorial application, and that RICO claims fail as a matter of law where, as here, they are based on allegations... primarily involv[ing] foreign actors and foreign acts. Norex, 631 F.3d at Applying Morrison and Norex, courts in this Circuit routinely dismiss RICO claims based on allegations that primarily involve[] foreign actors and foreign acts. See id. Pemex is well aware of this fatal flaw to their RICO claims (indeed, Defendants raised it in their motions to dismiss Pemex s original complaint) and have now had multiple opportunities to attempt to cure it. But they have not done so nor can they. The Amended Complaint confirms that this case is squarely foreclosed by Morrison and Norex. All of the actors here are foreign: plaintiffs are decentralized public entities of the federal government of [Mexico], see Am. Compl. 1, defendants are German and South Korean entities, see id. 4-5, and the non-party co-conspirators are all Mexican, see id. 6(a)-(e). 4

13 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 13 of 44 None of the Parties or Relevant Non-Parties identified in the Amended Complaint are domestic actors. See id. at 2-4. The acts complained of are foreign, too. The Amended Complaint confirms that, to an overwhelming degree, the alleged principal acts occurred in Mexico and involved Mexican entities and Mexican contracts governed by Mexican law: the refinery project at issue was in Mexico, id ; the alleged bribery was in Mexico and of Mexican officials, id. 38, 46-47; the contracts themselves and related agreements were executed in Mexico, in Spanish, and are governed by Mexican law, id. 18 & n.4, 20, 26, 29-30; the alleged witnesses are in Mexico, id ; and Conproca s claims were audited by a private Mexican entity (CICATA IPN) related to Mexico s Department of Public Administration, reviewed by the internal control department of Mexico s Public Administration Department, and further reviewed by a Technical Committee in Mexico, id Indeed, as Pemex previously argued to the Court, [t]he underlying issues in this case relate to whether defendants bribed Mexican officials in order to secure and maintain a refinery modernization contract in Mexico, and most of the underlying events occurred in Mexico and the relevant witnesses and evidence are located there. (See Dkt. 3 at 4-5.) Pemex s attempt to apply RICO to allegations like this cannot be squared with the Supreme Court s opinion in Morrison. Morrison was a watershed decision: it set forth clear and unambiguous limits on the extraterritorial application of all U.S. statutes [w]hen a statute gives no clear indication of an extraterritorial application, it has none. Morrison, 130 S. Ct. at The Supreme Court explained that [i]t is a longstanding principle of American law that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States, id. at 2877 (citation and internal quotation marks omitted), and only a clearly expressed, affirmative intention of extraterritorial effect can 5

14 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 14 of 44 overcome the presumption that a statute s reach stops at the U.S. border, id. (citation and internal quotation marks omitted). Applying these general principles, the Supreme Court rejected the conduct and effects tests previously used in the securities context and in the RICO context by some circuits (including the Second Circuit), flatly holding that U.S. securities laws do not apply to extraterritorial conduct. Id. at It is by now well-settled that Morrison s rule applies to other statutes, such as RICO. The Supreme Court itself made clear that Morrison sets forth a general rule of statutory construction. Id. at Just months after Morrison, the Second Circuit expressly applied Morrison to dismiss a civil RICO claim that primarily involve[d] foreign actors and foreign acts. Norex, 631 F.3d at And since Morrison, district courts in this Circuit have routinely dismissed civil RICO claims on the grounds that the conduct complained of was primarily extraterritorial. See, e.g., Republic of Iraq v. ABB AG, --- F. Supp. 2d. ----, No. 08 Civ. 5951(SHS), 2013 WL , at *30 (S.D.N.Y. Feb. 6, 2013); European Cmty. v. RJR Nabisco, Inc., No. 02-CV-5771 (NGG)(VVP), 2011 WL , at *7 (E.D.N.Y. Mar. 8, 2011); Cedeño v. Intech Grp., Inc., 733 F. Supp. 2d 471, (S.D.N.Y. 2010), aff d sub nom., Cedeño v. Castillo, 457 F. App x 35 (2d Cir. 2012). Pemex cannot avoid dismissal pursuant to Morrison and Norex 4 through its strained invocation of U.S. conduct. Pemex alleges two types of U.S. contacts: (1) the existence of a Pemex bank account in New York, see Am. Compl. 8, 32-36, 41-45, and the use of the wires to transmit a financing plan and move funds in and out of that account, see id. 37, 41, 60-61, and (2) bonds registered with the Securities and Exchange Commission used to finance the 4 Norex is the Second Circuit s most thorough analysis of Morrison in the RICO context to date and it examined the extraterritoriality of the allegations in their entirety it did not focus on the enterprise or the pattern in particular. See Norex 631 F.3d at Even if the Court were to focus on the enterprise or the pattern, however, Pemex s RICO claims would remain impermissibly extraterritorial and should be dismissed. 6

15 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 15 of 44 Mexican project, but having no involvement in supposedly unlawful conduct, see id. at 1, These U.S. contacts fall far short of what is needed to state a RICO claim in light of Morrison. First, courts have expressly rejected the claim that the use of a U.S. bank account and the wires, combined with incidental U.S. activity, suffices to state a domestic RICO claim. In Norex itself, the plaintiffs alleged that a group of U.S. and foreign defendants had committed numerous acts in the United States..., including mail and wire fraud, money laundering,... and bribery, by, among other things, employing U.S. bank accounts for fraudulent transactions. Norex, 631 F.3d at 31; see also Norex Petroleum Ltd. v. Access Indus., Inc., 540 F. Supp. 2d 438, 443 (S.D.N.Y. 2007) (U.S. conduct alleged by plaintiffs included general allegations that U.S. defendants masterminded, operated and directed the illegal conduct;... used money transferred through U.S. wires to bribe Russian officials... ;... traveled between the U.S. and Russia in aid of various aspects of the alleged Illegal Scheme;... [and] an extortion attempt was made by [a] Defendant... in San Francisco ). The Second Circuit nonetheless held that use of the wires and a U.S. bank account to accomplish allegedly fraudulent transactions failed to state a domestic RICO claim under Morrison and affirmed dismissal. Norex, 631 F.3d at 31. Similarly, in Cedeño, 733 F. Supp. 2d at , the court held that a Venezuela-based scheme that utilized New York-based U.S. banks to hold, move and conceal the fruits of fraud, extortion, and private abuse of public authority failed to state a RICO claim under Morrison and was dismissed. Pemex s counsel are well aware of Cedeño given that they signed the briefs successfully urging dismissal and the Second Circuit s affirmance of dismissal in that case. 5 The Amended Complaint also conclusorily alleges that Defendants obtained financing through institutional credit, a substantial amount of which [was] issued by U.S. financial institutions and guaranteed by the Export- Import Bank of the United States. Am. Compl. 18. Pemex does not allege which Defendants supposedly received credit from U.S. financial institutions, who the U.S. financial institutions supposedly were, or how much credit was provided. This is precisely the type of unadorned, conclusory allegation that the Supreme Court has held need not be credited on a motion to dismiss. See Aschroft v. Iqbal, 556 U.S. 662, (2009). 7

16 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 16 of 44 Before the Second Circuit, for example, Pemex s counsel successfully argued for dismissal under Morrison for reasons that are remarkably similar to the allegations presented here. Indeed, replacing Venezuela with Mexico in Pemex s counsel s Cedeño Second Circuit briefing makes clear that Pemex s case should be dismissed for the same reasons Cedeño was dismissed: [T]he enterprise involved [Mexican] governmental officials who supposedly laundered money in [Mexico], resulting in harm to a [Mexican] national. Indeed, nearly all of the participants in the alleged enterprise are [Mexican] citizens. Appellants have failed to plead any facts to demonstrate that the brains of the alleged enterprise was located in the United States. The facts in the Amended Complaint portray a complex corporate structure entirely based in [Mexico].... Appellants scant allegations of domestic activity cannot save the Amended Complaint from dismissal. The only activity that took place in the U.S. was the usage of a New York and Florida bank account by certain Appellees to effect the [transactions]. Appellants also allege that certain Appellees deposited funds... into U.S. bank accounts. See Appellee Br. at 24-25, Cedeño v. Castillo, 457 F. App x 35 (2d Cir. 2012) (No cv), 2011 WL , at *24-25 (citations omitted); see also Republic of Iraq, 2013 WL , at *21-24 (RICO claim extraterritorial even though numerous defendants were U.S. entities, the bank account used to make allegedly improper payments was in New York, and U.S. wires were used to transfer money to and from the bank account). Second, the allegation that the Mexican refinery was partly financed by bonds registered with the SEC fares no better. In the first place, the registration of bonds in the U.S. is not alleged to be part of the RICO conduct. Pemex s reference to those bonds thus represents a catch-ascatch-can effort to use any incidental U.S. connection as a pretense for invoking RICO. Moreover, courts have squarely and routinely rejected the argument that mere registration of securities with the SEC constitutes domestic conduct for Morrison purposes. In In re Vivendi Universal, S.A. Securities Litig., 765 F. Supp. 2d 512, (S.D.N.Y. 2011), which arose in the securities context, a foreign issuer registered shares with the SEC and listed some of them on 8

17 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 17 of 44 the New York Stock Exchange (though not for trading purposes). For the SEC-registered, non- NYSE-listed shares, the court had no trouble rejecting the plaintiffs argument that Morrison did not apply. Id. at 528. The court further rejected the plaintiffs argument that even shares registered with the SEC and listed on the NYSE are actionable post-morrison, holding that [a]ll the courts who have directly or indirectly addressed this issue have dismissed the argument as a technical one that is contrary to the spirit of Morrison. Id. at 530 (citing cases); see also In re Royal Bank of Scot. Grp. PLC Sec. Litig., 765 F. Supp. 2d 327, (S.D.N.Y. 2011) (rejecting argument that mere listing or registration of shares in the United States creates domestic conduct for Morrison purposes). Indeed, as the Vivendi court pointed out, the securities at issue in Morrison itself were SEC-registered. See Vivendi, 765 F. Supp. 2d at 528 n.13 (citing Morrison at 2875). Taken together or apart, the scant U.S. conduct alleged by Pemex falls far short of what is needed to state a RICO claim post-morrison. Recent case law underscores that alleged domestic conduct far more robust than the domestic conduct alleged here fails to state a RICO claim. Judge Stein s recent decision in Republic of Iraq, 2013 WL , is illustrative. In Republic of Iraq, the plaintiff alleged that U.S. and foreign defendants violated RICO by allegedly conspiring with Saddam Hussein s government to defraud the U.N. Oil-for-Food Program. The plaintiff attempted to cast the claim as a domestic RICO claim by highlighting alleged U.S. contacts: numerous defendants were U.S. entities, the Program the alleged RICO enterprise was centered and located in New York, Program contracts were negotiated in New York, the Program bank account was in New York, and U.S. wires were used to transfer money to and from the bank account. See id. at * The court, however, observed that the scheme was nonetheless primarily foreign, was engineered by foreign actors, and was concerned with 9

18 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 18 of 44 [foreign] oil, goods, and contracts. Id. at *21. The court thus concluded that the alleged enterprise was foreign, see id. at *21-22, and that the alleged pattern of racketeering was focused abroad, see id. at * The court s holding in dismissing the plaintiff s RICO claims is directly on point here: When foreign actors were the primary operators, victims, and structure of a RICO claim, courts in this Circuit have properly concluded that the claims were extraterritorial. Id. at *24 (citing, inter alia, Norex, 631 F.3d at 32). Republic of Iraq and Cedeño are but a few of the numerous recent cases illustrating just how inadequate Pemex s allegations are in light of Morrison. In Hourani v. Mirtchev, --- F. Supp. 2d ----, No (TFH), 2013 WL , at *5-6 (D.D.C. May 8, 2013), for example, the court dismissed a RICO claim as extraterritorial even though the plaintiff, defendant, and key non-parties were all U.S. citizens, the alleged extortion scheme was approved from the United States, and money from the scheme was sent to banks located in the United States. See also European Cmty., 2011 WL , at *7; United States v. Philip Morris USA, Inc., 783 F. Supp. 2d 23, 29 (D.D.C. 2011) (communications between U.S. based and foreign actors, visits to the United States, and use of an experimental farm in North Carolina failed to state a domestic RICO claim under Morrison). These cases reinforce that the scant U.S. contacts alleged by Pemex fall far short of stating a claim in light of Morrison. As the case law cited above makes clear, allegations of domestic conduct far more robust than the existence of SEC-registered bonds and the use of a U.S. bank account and U.S. wires fail to state a RICO claim under Morrison. Indeed, as the Supreme Court itself pointed out in Morrison, the presumption against extraterritorial application would be a craven watchdog indeed if it retreated to its kennel whenever some domestic activity is involved in the case. 130 S. Ct. at 2884 (emphasis omitted). Given that the claims alleged by Pemex primarily involve[] 10

19 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 19 of 44 foreign actors and foreign acts, Pemex s RICO claims should be dismissed with prejudice. Norex, 631 F.3d at II. THE COURT LACKS SUBJECT MATTER JURISDICTION OVER PEMEX S FRAUD CLAIM AND MUST BE DISMISSED Given the inapplicability of RICO, the Court lacks subject matter jurisdiction over Pemex s common law fraud claim. The sole bases for subject matter jurisdiction alleged in the complaint are federal question jurisdiction under 28 U.S.C and the RICO statute, 18 U.S.C. 1964(c). See Am. Compl. 7. Neither supports Pemex s common law fraud claim. Federal question jurisdiction is limited to claims arising under the Constitution, laws, or treaties of the United States. 28 U.S.C Common law fraud, of course, does not arise under federal law and cannot support jurisdiction under 28 U.S.C Cresswell v. Sullivan & Cromwell, 922 F.2d 60, 69 (2d Cir. 1990) (finding no jurisdiction under 28 U.S.C for common law fraud claims); Xin Wei Lin v. Chinese Staff & Workers Ass n, No. 11 Civ. 3944(RJS), 2012 WL , at *3, *9 (S.D.N.Y. Nov. 8, 2012) (dismissing state claims alleg[ing]... common law fraud for lack of jurisdiction after dismissing federal claims because the Court has original jurisdiction only over the federal claims, see 28 U.S.C ); Deloach v. Manhattan Mini Storage, No. 94 Civ (JFK), 1994 WL , at *1 (S.D.N.Y. Sept. 14, 1994) (finding that complaint which [a]t best... states a claim for state common law fraud does not provide a basis for jurisdiction under the federal question statute ); Zaloom v. Trupin, No. 86 Civ. 465 (KMW), 1991 WL , at *2 (S.D.N.Y. Dec. 10, 1991) (where Plaintiff asserted only [federal Securities Act] and common law fraud claims.., dismissal of the Securities Act claims eliminates any federal question as to this defendant ). And the RICO 11

20 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 20 of 44 statute plainly does not provide a jurisdictional basis for Pemex s common law fraud claim the RICO statute only provides a basis for a RICO claim. 6 III. PEMEX DOES NOT STATE A VIABLE RICO OR FRAUD CLAIM AGAINST SIEMENS AG Although this Court need look no further than the extraterritoriality of the RICO claim and the lack of jurisdiction over the fraud claim to dismiss this case, the Amended Complaint fails to make out a RICO or fraud claim for additional reasons. A. Pemex Does Not State A Viable RICO Claim Against Siemens AG Plaintiffs pull together an incoherent assortment of conclusory accusations to conjure up a scandal that it hopes will provide leverage to counter the $530 million international arbitration award it is required to pay. But RICO requires more rigor than the Amended Complaint offers. The Amended Complaint s string of unsupported innuendo, incomplete accusations, and nonsensical chronology reveal no plausible basis for a RICO claim. 7 The Second Circuit has long required specific factual pleadings of RICO s elements to state a plausible RICO claim: (1) that the defendant (2) through the commission of two or more acts (3) constituting a pattern (4) of racketeering activity (5)... participates in (6) an enterprise (7) the activities of which affect interstate or foreign commerce.... [A] plaintiff must [also] allege [(8)] that he was injured in his business or property [(9)] by reason of [the] violation of section If any aspect of this case were to survive this motion to dismiss, Siemens reserves its right to seek dismissal pursuant to the forum non conveniens doctrine given that the parties, witnesses, and alleged evidence are all in Mexico, and Mexican law governs the underlying contracts. See Snam Progetti S.P.A. v. Lauro Lines, 387 F. Supp. 322 (S.D.N.Y. 1974) (party need not raise forum non conveniens dismissal on initial motion to dismiss). Indeed, in Pemex s own publicly-available SEC filings, it explained that it had conducted an investigation into allegations of bribery in connection with the Cadereyta project and did not find evidence to support the allegations. See Petróleos Mexicanos, 2010 Annual Report (Form 20-F) at 169 (June 30, 2011), available at This Court may take judicial notice of publicly-filed documents in considering this motion to dismiss. See In re UBS Auction Rate Sec. Litig., No. 08-cv-2967, 2010 WL , at *7 & n.6 (S.D.N.Y. June 10, 2010) (citing, inter alia, Kramer v. Time Warner Inc., 937 F.2d 767, (2d Cir. 1991)). 12

21 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 21 of 44 Moss v. Morgan Stanley Inc., 719 F.2d 5, 17 (2d Cir. 1983) (emphasis and citations omitted). Each element must be established as to each defendant. Purchase Real Estate Grp. Inc. v. Jones, No. 05 Civ , 2010 WL , at *5 (S.D.N.Y. Aug. 24, 2010). This requires more than bald assertions, periphrastic circumlocutions, unsubstantiated conclusions, or outright vituperation : the complaint must be anchored in a bed of facts, not allowed to float freely on a sea of bombast. Miranda v. Ponce Fed. Bank, 948 F.2d 41, 44 (1st Cir. 1991) (citations and internal quotation marks omitted). The Supreme Court s Twombly and Iqbal decisions further underscore that RICO s elements must be established with particular factual allegations, not conclusory assertions. See, e.g., Nichols v. Mahoney, 608 F. Supp. 2d 526, 536 (S.D.N.Y. 2009) ( [T]he Second Circuit has indicated that there are certain types of cases where Twombly obliges a pleader to amplify a claim with some factual allegations in those contexts where such amplification is needed to render the claim plausible. A civil RICO case is just such a case. ) (emphasis, citation and internal quotation marks omitted). While it attempts formulaically to touch all the bases of a RICO claim, the Amended Complaint fails to put forth factual allegations (rather than conclusory labels) that Siemens AG violated the RICO statute. The Amended Complaint fails in at least four respects: (1) it does not adequately plead that Siemens AG committed any RICO predicate acts of wire or honest services fraud because it does not identify any fraudulent statements or the particulars of a coherent fraudulent scheme; (2) it alleges no pattern of predicate acts that satisfy RICO s requirements of continuous and related wrongdoing; (3) it does not allege facts setting forth a plausible basis for concluding Pemex was directly harmed, but depends on a speculative, indirect, and chronologically implausible relationship between its harm and supposed RICO violations; and (4) it pleads no factual basis for charging that Siemens AG, or anyone else, conspired to violate 13

22 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 22 of 44 RICO. Pemex first asserted that its construction contractor, Conproca, was really a front for international racketeering only after Conproca won a $530 million international arbitration award for amounts due under the governing contracts. See Compl. 25. This desperate effort to avoid paying a settled judgment lacks the necessary factual allegations to satisfy the pleading standards this Court must apply. The Amended Complaint should be dismissed accordingly. 1. Pemex Does Not Adequately Plead That Siemens AG Committed RICO Predicate Acts, Much Less With The Required Particularity Pemex s RICO claim fails because the Amended Complaint does not plead facts alleging that Siemens AG, or indeed any of the Defendants, engaged in racketeering activity by committing, or aiding and abetting in the commission of, predicate acts listed in 18 U.S.C. 1961(1). See McLaughlin v. Anderson, 962 F.2d 187, 190, 192 (2d Cir. 1992). Here, Pemex alleges nine RICO predicate offenses: eight charges of wire fraud under 18 U.S.C and one charge of honest services fraud under 18 U.S.C and Am. Compl. 61. a. Pemex Does Not Adequately Plead That Siemens AG Committed Any Predicate Offenses Of Wire Fraud The wire fraud statute requires showing: (1) the existence of a scheme to defraud, (2) defendant s knowing or intentional participation in the scheme, and (3) the use of interstate mails or transmission facilities in furtherance of the scheme. S.Q.K.F.C., Inc. v. Bell Atl. TriCon Leasing Corp., 84 F.3d 629, 633 (2d Cir. 1996). The Amended Complaint fails to allege the existence of a coherent scheme to defraud, and therefore fails to allege any acts of wire fraud. The gravamen of the mail fraud offense is the scheme to defraud, Bridge v. Phoenix Bond & Indemnity Co., 553 U.S. 639, 647 (2008), and [t]o establish a scheme to defraud, an element of deception must be present. Naso v. Park, 850 F. Supp. 264, 274 (S.D.N.Y. 1994). Specifically, the existence of a scheme to defraud[] requires fraudulent or deceptive means, such as material misrepresentation or concealment. Benedict v. Amaducci, No. Civ

23 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 23 of 44 (KMW), 1995 WL , at *6 (S.D.N.Y. July 12, 1995) (quoting In re Gas Reclamation, Inc. Sec. Litig., 659 F. Supp. 493, 512 (S.D.N.Y. 1987)). Pemex must plead the scheme to defraud with particularity in accordance with Fed. R. Civ. P. 9(b), which states: [i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. See Fuji Photo Film U.S.A., Inc. v. McNulty, 640 F. Supp. 2d 300, 310 (S.D.N.Y. 2009). [N]ot once in [the Amended] Complaint... does [Pemex] identify a misrepresentation, omission or any other deceptive act which would evidence such a scheme. This failure is fatal to [Pemex s] substantive RICO claim. See Lakonia Mgmt. Ltd. v. Meriwether, 106 F. Supp. 2d 540, (S.D.N.Y. 2000). The Amended Complaint alleges eight predicate acts of wire fraud: one based on the transmission of a financing plan for the Cadereyta Project, see Am. Compl. 61(a), and seven invoices for payments from Pemex, see id. 61(c)-(i). It baldly asserts both that the invoices were fraudulent, and that the wirings were in furtherance of a broader scheme to defraud involving an unrealistic bid, manufacture[d]... cost overruns, and bribery. Id. 37, 38. But this theory offers little more than conclusory allegations and disjointed insinuations of misconduct. Specifically, the Amended Complaint fails to plead any predicate offenses of wire fraud because it does not allege that the wirings either contained or furthered any particular false statements, misrepresentations, or other fraudulent pretenses, and therefore cannot survive the particularity crucible of Rule 9(b). Leung v. Law, 387 F. Supp. 2d 105, (E.D.N.Y. 2005). No Fraud In The Invoices: There is no scheme based on invoices submitted by Conproca because Pemex fails to allege with particularity that they are fraudulent. 8 When a 8 While Pemex refers to the invoices as fraudulent, it never alleges that the financing plan was fraudulent. Since Pemex appears to allege that this document was submitted in furtherance of a general scheme, it will be addressed below. 15

24 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 24 of 44 plaintiff alleges that the wire transmissions were themselves fraudulent, i.e., themselves contained false or misleading information, Evercrete Corp. v. H-Cap Ltd., 429 F. Supp. 2d 612, 624 (S.D.N.Y. 2006), the complaint must: (1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent, Lerner v. Fleet Bank, N.A., 459 F.3d 273, 290 (2d Cir. 2006) (quoting Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir. 1993)). 9 The Amended Complaint falls far short of this particularity requirement because it does not identify a single false statement in any of the invoices. Pemex never alleges any falsehood in the invoices i.e., that the charges were inflated or that they were for work that was never performed. It provides no description of the content of the invoices (let alone copies of them) and instead only provides the amounts charged and the dates they were submitted. The Amended Complaint, in fact, acknowledges that Pemex approved each invoice. See Am. Compl. 20, 27, 30, and 31. Even if these approvals were procured through bribery an unsubstantiated contention addressed below this would not render the invoices fraudulent because it does not alter the fact that they accurately represent charges for work actually performed and for payments approved by Pemex. See World Wrestling Entm t, Inc. v. Jakks Pac., Inc., 530 F. Supp. 2d 486, 511 (S.D.N.Y. 2007) ( [T]here was nothing illegal about selling videogames or paying (or receiving) royalties pursuant to a contract. Nor is there a plausible allegation that these royalty payments were intended to conceal or disguise the supposedly corrupt means Defendants used to procure the videogame license. ) This requirement applies even though Pemex also avers a general scheme to defraud. See Lakonia Mgmt. Ltd. v. Meriwether, 106 F. Supp. 2d 540, 556, n.31 (S.D.N.Y. 2000) (allegations that defendants communications... were fraudulent had to be pled with particularity even though plaintiffs also alleged a general scheme). Nor can the Amended Complaint be sustained on a theory of fraud by omission. The Amended Complaint makes no such assertion. To satisfy Rule 9(b), Pemex would be required to specify: (1) precisely what statements were made in what documents... or what omissions were made, and (2) the time and place of each 16

25 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 25 of 44 No General Scheme To Defraud: Rule 9(b) s rigorous particularity requirement also dooms Pemex s supposed general scheme to defraud. When a plaintiff alleges that the wirings were used in furtherance of a master plan to defraud, even though they did not contain false or misleading information themselves, a detailed description of the underlying scheme is still required to satisfy Rule 9(b). Lakonia Management Ltd. v. Meriwether, 106 F. Supp. 2d 540, 556 n.31 (S.D.N.Y. 2000) (emphasis added) (citation and internal quotation marks omitted); see also Boritzer v. Calloway, No. 10 Civ. 6264(JPO), 2013 WL , at *9 (S.D.N.Y. Jan. 24, 2013) (where a general scheme to defraud is alleged, Rule 9(b) requires the plaintiff to delineate, with adequate particularity, the specific circumstances constituting the overall fraudulent scheme ) (citation and internal quotation marks omitted). Here, however, the Amended Complaint does not contain a single, non-conclusory allegation of any misrepresentation, deception, or other fraudulent act. Pemex instead relies on general suggestions of misconduct and insinuations of fraud. Such allegations cannot survive the rigorous particularity requirements of Rule 9(b) and are wholly inadequate to allege the existence of a scheme to defraud. No Fraud In The Initial Bid: Insofar as Pemex alleges a scheme based on Conproca s winning bid for the Cadereyta Project, these allegations are wholly inadequate. Pemex insinuates that the bid price was inappropriate by stating that the Defendants presented a such statement and the person responsible for making (or, in the case of omissions, not making) the same, (3) the content of such statements and the manner in which they misled the plaintiff; and (4) what the defendants obtained as a consequence of the fraud. Conan Props., Inc. v. Mattel, Inc., 619 F. Supp. 1167, 1172 (S.D.N.Y. 1985) (citation and internal quotation marks omitted); see also Greenes v. Empire Blue Cross & Blue Shield, No. 92 Civ (KMW), 1996 WL , at *5 (S.D.N.Y. Nov. 4, 1996) (wire and mail fraud claims dismissed where the complaint failed, inter alia, to indicate precisely what statement or omissions were made in what documents and the manner in which they misled plaintiffs ); Colony at Holbrook, Inc. v. Strata G.C., Inc., 928 F. Supp. 1224, 1231 (E.D.N.Y. 1996) ( [T]he plaintiff must set forth the contents of the alleged misrepresentation and specify how each item was false and misleading. ) (citation and internal quotation marks omitted). But the Amended Complaint nowhere does this. 17

26 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 26 of 44 significantly lower economic proposal than their only other remaining competitor, Am. Compl. 37, and that they submitt[ed] an economically unrealistic bid in order to win the contract. Id. 38. This is not fraud. Pemex cannot rely on the fact that the contract execution costs ultimately exceeded the bid amount to plausibly allege that the bid was fraudulent. Indeed, if that were the test, a huge percentage of construction bids in America would constitute predicate acts for RICO claims because actual costs routinely exceed original bids for a variety of reasons. Nor does the Amended Complaint identify any false factual statement in the winning bid or the underlying construction contracts, the Financed Public Works Contract (the COPF ), and the Unit Price Public Works Contract (the COPPU ). To the contrary, the Amended Complaint alleges that the COPPU expressly included a provision requiring Pemex to cover cost overruns. See id. 19 ( The COPPU stated that CONPROCA would receive payment for work orders required by unexpected events resulting in additional work to timely complete the Cadereyta Project up to $80,0000, ). Quite the opposite of a supposed scheme to defraud, this allegation suggests Pemex understood at the time of contracting that the bid price was not inclusive of all potential costs and that additional payments would be necessary to cover costs incurred. Id. No Fraud In The Cost Overruns: Pemex s allegation that the Defendants manufacture[d] a series of cost overruns is also insufficient to support the existence of a scheme to defraud. Am. Compl. 38. Aside from this conclusory suggestion that the overrun claims were fraudulent, the Amended Complaint never explains how or why this is the case. Indeed, it never alleges that the claims contained any falsehoods i.e., that the amounts were inflated or the work was never performed or that the Defendants made any other misrepresentations about these claims. 18

27 Case 1:12-cv LLS Document 36 Filed 05/24/13 Page 27 of 44 The only allegations even remotely addressing the veracity of these claims are: (1) an auditor finding that the August 23, 2000 Claims, ultimately paid through Invoices 525 and 532, were not adequately documented or otherwise supported, see id. 22; and (2) that the payments for Invoices 582, 583, and 584 lacked evidentiary support, id But allegations of insufficient documentation are not equivalent to a suggestion that the work was never done; this would require a clear allegation subject to Rule 11 to that effect. Cf. Fuji Photo Film U.S.A., 640 F. Supp. 2d at 315 (scheme to defraud based on fraudulent invoices was adequately pled where plaintiff specifically alleged that many of the services for which AWOL billed Fuji were never performed and that none of the services for which RG billed Fuji were ever performed, and included invoices for these services). Nor does Pemex allege that the Defendants misrepresented anything else about the necessity of the work. In fact, the Amended Complaint provides almost no detail about the nature of these costs or the work underlying them. This is because Pemex cannot, consistent with Rule 11, allege that Conproca did not perform and that it did not receive the work reflected in the invoices. The relevant information is certainly available to Pemex: the claims were litigated extensively in the arbitration proceeding, and described in detail in the 500-page arbitration award. Indeed, the only detailed allegations about the work concern Invoices 525 and 532, and actually suggest that these payments were necessary. See Am. Compl. 21 (discussing payments for additional work necessary to complete the Cadereyta Project ); and 26 (stating that these payments were for work allegedly already performed including the installation of 11 Notably, the Amended Complaint contains no comparable allegations about the other two invoices. The brief allegations about Invoice 501, see Am. Compl 20, and Invoice 533, see id. 30, do not suggest that they were based on work that was never completed or otherwise explain how these costs were inappropriate. 19