Court Of Appeals Rejects Bala’s Request for a Certificate of Innocence

On February 4, 2020, the United States Court of Appeals for the Eighth Circuit rejected Susan Bala’s second attempt to obtain a “certificate of innocence,” based on the Court’s previous decision finding that Bala was “not truly innocent of state criminal gaming law violations.”  United States v. Bala, No. 18-2849 (8th Cir. Feb. 4, 2020); United States v. Racing Servs., Inc., 580 F.3d 710 (8th Cir. 2009).

This matter arose from a jury’s 2005 conviction of Bala for running an illegal gambling operation. In 1989, North Dakota legalized parimutuel wagering on horse races conducted outside of North Dakota and simulcast to a licensed off-track betting operator within the state. State law allowed only licensed charitable organizations to conduct simulcast parimutuel wagering. In 1993, Bala’s company, Racing Services, Inc. (“RSI”), was authorized to simulcast horse races to licensed off-track betting locations in North Dakota. RSI also established and maintained the combined parimutuel pools of North Dakota bets on behalf of licensed off-track betting operators.

North Dakota amended its parimutuel laws in 2001 to permit a form of betting called account wagering, which allowed a bettor to deposit funds in an account and use those funds to pay for parimutuel wagers, either in person, by telephone, or through electronic communication. Parimutuel wagers previously had to be made in person. In the wake of the 2001 amendments, RSI became the sole entity in North Dakota through which parimutuel bettors could conduct account wagering bets. State law required an entity conducting account wagering to pay some portion of the account wagering proceeds to a charitable organization. RSI set up a call center to conduct account wagering at its Fargo headquarters where RSI employees processed bets from bettors with wagering accounts.

In 2002, without notifying state regulators, RSI moved some of its equipment and tellers to an undisclosed call site in Fargo and began conducting account wagering there. Over the course of several months, RSI processed “off book” account wagering bets at the undisclosed site totaling over $99,000,000. Contrary to state law, RSI and Bala paid no part of these wagering proceeds to the state or to the charities licensed as off-track bettor operators. RSI and Bala also hid the gambling occurring at this undisclosed site from the state by not licensing the site and the tellers working there, using a bookkeeping system that disguised the gambling activities occurring there, and omitting those activities from RSI’s required weekly reports of all parimutuel bets placed in North Dakota. After an RSI employee reported to the state that RSI was conducting rogue parimutuel gambling at the undisclosed site, the state shut it down.

The state referred the matter to the Federal Bureau of Investigation. Following an investigation, a federal grand jury indicted Bala on charges of conspiring to conduct an illegal gambling business and to commit money laundering, among others. Bala proceeded to trial. Bala’s co-defendants—a vice president of RSI and the chief financial officer of RSI—acknowledged the illegal nature of the unreported account wagering conducted at the undisclosed site, pleaded guilty, and testified against Bala. The jury convicted Bala, and the district court sentenced her to 27 months in prison. The Eighth Circuit later reversed her convictions on the grounds that, although Bala committed the acts alleged, insufficient evidence supported the guilty verdicts beyond a reasonable doubt. United States v. Bala, 489 F.3d 334 (8th Cir. 2007).

Bala filed her first petition for a certificate of innocence in 2008. To obtain a certificate of innocence, an individual must prove she is actually innocent, a different determination from the Eighth Circuit’s ruling that the evidence of criminality did not support a finding of guilt beyond a reasonable doubt. The district court concluded that Bala could not meet her legal burden and was not actually innocent. The district court reasoned that, not only had Bala likely violated multiple provisions of North Dakota law, but she also brought about her prosecution through her actions. As the district court held, “a certificate [of innocence] . . . is appropriate only when ‘no offense’ was committed and the defendant did not contribute to his or her prosecution. Clearly, this is not the case here.” On appeal, the Eighth Circuit “agree[d] with the [district] court’s assessment” that Bala was not truly innocent of all state law offenses and thus did not qualify for a certificate of innocence. United States v. Racing Servs., Inc., 580 F.3d 710 (8th Cir. 2009); United States v. Racing Servs., Inc., No. 3:03-cr-00112, Doc. 202 (D.N.D. Sept. 19, 2008).

Nine years later, Bala filed another petition for a certificate of innocence, claiming that other parties in ongoing bankruptcy proceedings used her overturned convictions and the denial of a certificate of innocence against her. The district court denied her petition, concluding again that Bala was not actually innocent and that Bala could not revisit the prior denial of a certificate of innocence. United States v. Bala, No. 3:03-cr-00112, Doc. 234 (D.N.D. Aug. 8, 2018).

The Eighth Circuit today agreed, holding that the Court’s prior conclusion that Bala was “not truly innocent of state criminal gaming law violations” barred her second attempt to obtain a certificate of innocence. A certificate of innocence is available only to “the truly innocent, making it necessary to separate from the group of persons whose convictions have been reversed, those few who are in fact innocent of any offense whatever.” The Court rejected Bala’s argument that circumstances had changed since the Court rejected her first petition for a certificate of innocence. The Court thus concluded he legal doctrine of res judicata barred her second petition. 

Assistant United States Attorney Megan A. Healy represented the United States.