1 The HONORABLE RALPH R. ERICKSON, Unite d States District Judge for the District of North Dakota 

## United States Court of Appeals FOR THE EIGHTH CIRCUIT

___________ No. 08-3287

___________ United States of America, *
* Plaintiff - Appellee, * * Appeal from the United States v. * District Court for the * District of North Dakota. Racing Services, Inc.; Susan Bala, *
* Defendants - Appellants. *

___________ Submitted: June 11, 2009 Filed: September 4, 2009

___________ Before LOKEN, Chief Judge, JOHN R. GI BSON and GRUENDER, Circuit Judges.

___________ LOKEN, Chief Judge.

In United States v. Bala , 489 F.3d 334 (8th Cir. 2007), we reversed federal gambling and money launderi ng convictions arising out of a parimutuel account wagering operation in Fargo, North Dakota. The criminal defendants, Racing Services, Inc. (RSI), and its president and sole shareholder, Su san Bala, petitioned the district court for a certificate of innocence, the statutory prerequisite to an action against the government in the Court of Claims seeking damages for wrongful imprisonment. 28 U.S.C. §§ 1495, 2513. The district court 1 denied the petition on2 Citations to the North Dakota Century C ode are to the provisions in effect at the time of Bala’s and RSI’s alleged offenses, October 2002 to April 2003.
-2- two grounds. RSI and Bala appeal. Reviewing the denial of a cer tificate of innocence for abuse of discretion, we affirm, agreei ng with the court thatRSI and Bala were not truly innocent of state criminal gaming law violations. See Betts v. United States , 10 F.3d 1278, 1283 (7th Cir. 1993) (standard of review).

To recover damages for wrongful im prisonment under 28 U.S.C. § 1495, Bala must obtain a certificate of innocence from the district court in which she was convicted. See 28 U.S.C. § 2513(b). As relevant he re, to obtain the certificate, Bala must allege and prove that her conviction (1) “has been reversed or set aside on the ground that [s]he is not guilty of the offense of which [s]he was convicted . . . and (2) . . . [her] acts, deeds, or omissions in connection with such charge constituted no offense against the United States, or any State . . . and [s]he did not by misconduct or neglect cause or bring about [her] own prosecution.” 28 U.S.C. § 2513(a). This statute, first enacted in 1938, compen sates only the truly innocent, making it “necessary to separate from the group of persons whose convictions have been reversed, those few who are in fact i nnocent of any offense whatever.” Betts , 10 F.3d at 1284, quoting S. Rep. No. 75-202 (1937). A reversal of the criminal conviction based on insufficiency of the prosecution’s evidence does not entitle the defendant to a certificate of innocence. See Osborn v. United States , 322 F.2d 835, 840 (5th Cir. 1963).

Under North Dakota law, only charities and other “public-spirited organizations” may be licensed as off-tr ack betting operators (“OTBs”) to conduct parimutuel wagering on simultaneously broadcasted horse races. SeeN.D. Cent. Code § 53-06.2-06. 2RSI was the sole entity licensed to provide simulcast services to the3 RSI’s simulcast services included provi ding satellite broadcasts of live races, establishing and maintaining combined parimutuel pools of North Dakota wagers, and many record-keeping functions. For additional background facts, seeBala , 489 F.3d at 336-37.
-3- OTBs. 3 RSI as simulcast service provider wa s required to pay specified percentages of the parimutuel pools to the Racing Co mmission and the state treasurer. N.D. Cent. Code § 53-06.2-11.1 and .2. After paying th ese fees and “qualifying expenses,” the remainder of the amount withheld from the pool must be used “for eligible uses allowed to charitable gambling organizati ons.” § 53-06.2-11.5. Any violation of these statutes was a class A misdemeanor. § 53-06.1-16.1.

In 2001, the Legislature amended this regime to permit parimutuel “account wagering,” wagers that are paid electroni cally from player accounts rather than in person. The statute provided that account wagers “may only be made through the licensed simulcast service provider,” RSI. § 53-06.2-10.1. After enactment, RSI equipped an account wagering call center at 1318 23rd AvenueSouth in Fargo (“the 1318 site”). Between October 1, 2002, a nd April 28, 2003, R SI processed over $99 million of account wagers atthe 1318 site. RSI and Bala distributed none of the wagering proceeds to the Racing Commission, to the state treasurer, or to any charity licensed to conduct OTB operations. The acc ount wagers were not reported, and RSI used a bookkeeping system that disguised the gambling activities at the 1318 site.

The North Dakota Racing Commission learned of the undisclosed operation and shut it down. An FBI inves tigation and federal criminal prosecution followed. The jury convicted RSI and Bala of conducting an illegal gambling business in violation of 18 U.S.C. § 1955; illegal transmission of wagering information in violation of 18 U.S.C. § 1084(a); and eight counts of mone y laundering and conspiracy to commit money laundering in violation of 18 U.S.C . §§ 1956(a)(1)(A)(i), (a)(1)(B)(i), and (h). The district court sentenced Bala to twenty seven months in prison. She had served seventeen months in prison when we revers ed the convictions because of insufficient-4- evidence to support the federal charges. Bala , 489 F.3d at 336. Bala was immediately released from custody. This application for a certificate of innocence followed.

After reviewing the entire case file, including the trial transcript and our decision in Bala , the district court concluded that Bala and RSI likely violated “numerous sections of the North Dakota Century Code.” Applying 28 U.S.C. § 2513(a)(2), the court denied a certificat e of innocence because petitioners failed to prove that “no offense” was committed, and also because Bala’s negligence “contributed to her prosecution.” On appeal, RSI and Bala challenge this ruling, arguing (i) it is contrary to our decision in Bala that the failure to obtain a license for the 1318 site and the failure to disburse proceeds to charity OTBs did not violate state law, and (ii) the court erred in concluding that the actions of Bala or RSI caused the baseless prosecution. We need consider only the first issue.

The decision to deny a certificate of innocence is committed to the sound discretion of the district court. Betts , 10 F.3d at 1283. Here, the decision was based on the court’s belief that the conduct at i ssue in the federal prosecution involved the violation of one or more state criminal laws . Unlike a criminal case, the court’s belief need not be based upon proof beyond a reas onable doubt. Rather, Bala and RSI must persuade the district judge who presided ove r their criminal prosecution that they were truly innocent of all crimes to qualify for civil damage relief. SeeUnited States v. Brunner , 200 F.2d 276, 280 (6th Cir. 1952) (“Innocence of the petitioner must be affirmatively established”).

When a certificate is denied because the federal court concludes that the conduct in question violated state law, our re view for abuse of discretion is especially deferential. As the D.C. Circuit e xplained in Rigsbee v. United States , 204 F.2d 70, 72 (D.C. Cir. 1953):-5- Where, as here, [the trial judge] ha s exercised that discretion, we cannot require him to stultify himself by certifying an opinion contrary to his real conviction -- no matter what our own view might be -- except, perhaps, in a case in which th e refusal to certify innocence was completely capricious and without rational basis.

The point is well-illustrated by the oft-c ited opinion in United States v. Keegan , 71 F. Supp. 623, 639 (S.D.N.Y. 1947), where the trial judge explained:

[I]f the above quoted dictum of the [United States] Supreme Court is binding upon me as an adjudication th at the testimony was insufficient to prove defendant guilty of [anothe r offense], the testimony is certainly sufficient to create so strong a belief in my mind that petitioner was guilty of [that offense], that I would not feel justified in certifying that he was not guilty of this crime.

Here, in the federal prosecution, proof of a violation of state law was an element of the primary charge, that RSI and Bala violated 18 U.S.C. § 1955 by conducting an “illegal gambling business.” Inreversing, we held that the government failed to prove a state law violation that turned lawful parimutuel account wage ring into an illegal gambling business. 489 F.3d at 340-41. Bu t we noted that “the government could have avoided this evidentiary insuffici ency by proving that RSI entered the account wagering business never intending to distribute its net proceeds to charity.” Id. at 341. We expressed doubt that the government pr oved any state law vi olation during the seven months in question because the Racing Commission ha d inexplicably failed to promulgate clarifying regulations. Id. at 339-40. But this was an issue we did not need to decide, like the Supreme C ourt dictum referred to in Keegan . In no way was our decision premised on Bala’s or RSI’s actual innocence of either state or federal charges. Our decision was based on the in sufficiency of the evidence to support the federal charges.-6- RSI and Bala secretly collected and distributed $99,000,000 of parimutuel account wagers without payi ng one penny to charities, to the Racing Commission, or to the state treasurer, as North Dakota’s gambling laws required. Focusing on the overall conduct in question, th e trial judge with the great est knowledge of the case, on whom Congress conferred the certification au thority, concluded that RSI and Bala are not truly innocent of all state law offens es and denied a certificate of innocence. Under the deferential st andard of review applicable to this issue, we may not overturn that decision as an abuse of discretion. Indeed, we agree with the court’s assessment. Given this conclusion, we need not addr ess the court’s alte rnate ground for denying a certificate, that Bala’s “negligence contributed to her prosecution such that a certificate of innocence is unwarranted” under 28 U.S.C. § 2513(a)(2).

The district court’s Order dated September 19, 2008, is affirmed. RSI’s motion to supplement the record on appeal is denied.

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