Summary: Defendants sought dismissal of the indictment that alleged, among other things, a violation of 18 U.S.C. § 1955, which prohibits operation of an illegal gambling business. Whether a company constitutes an illegal gambling business requires an analysis of a state’s gambling laws. In North Dakota, gambling is not illegal when conducted through a charity. North Dakota also permits the licensed simulcast service provider to handle all account wagers. Since the Court had no evidence on what type of gambling was involved or whether a charity was involved, it denied the motion to dismiss.
Case Name: USA v. Racing Services, Inc.
Case Number: C3-03-112
Docket Number: 69
Date Filed: 12/2/04
Nature of Suit: 000
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NORTH DAKOTA
SOUTHEASTERN DIVISION
United States of America,
Racing Services, Inc., Susan Bala, Global Contact, Inc., and Raymundo Diaz, Jr.,
|
) ) MEMORANDUM OPINION ) AND ORDER DENYING ) MOTION TO DISMISS ) ) ) Criminal File No. C3-03-112 ) ) ) |
Before the Court is a motion from Defendants Racing Services, Inc. (RSI) and Susan Bala (Bala) to dismiss the indictment (doc. #8). The government filed a brief in opposition (doc. #22). On November 23, 2004, Defendants informed the Court that they were willing to forego a hearing and have the issue decided on the briefs.
FACTS
Count One of the Indictment charges Defendants with conspiracy to conduct an illegal gambling business. The foundation for this charge rests on a violation of 18 U.S.C. § 1955. Count Two specifically alleges a violation of 18 U.S.C. § 1955. Count Three charges Defendants with transmitting wagering information in violation of 18 U.S.C. § 1084(a). Count Four charges Defendants with conspiracy to commit money laundering. The remaining criminal counts charge Defendants with money laundering.
The Indictment alleges that Defendants’ criminal activity took place from on or about January 1, 2002 through the date of the Indictment, which was December 10, 2003. During this time period RSI was the sole licensed simulcast service provider in North Dakota. Bala was the president, chief executive officer, and sole shareholder of RSI.
ANALYSIS
Defendants’ Motion to Dismiss relies on the interpretation of 18 U.S.C. § 1955 and related North Dakota statutes. “Whoever conducts, finances, manages, supervises, directs, or owns all or part of an illegal gambling business shall be fined under this title or imprisoned not more than five years, or both.” 18 U.S.C. § 1955(a). An “illegal gambling business” means, in relevant part, a gambling business which “is a violation of the law of a State or political subdivision in which it is conducted . . . .” 18 U.S.C. § 1955(b)(1).
In North Dakota, it is a class C felony to engage or participate in the business of gambling. N.D. Cent. Code § 12.1-28-02(3). However, gambling does not include “[l]awful business transactions, or other acts or transactions now or hereafter expressly authorized by law.” N.D. Cent. Code § 12.1-28-01(1).
For simulcast parimutuel wagering, the North Dakota legislature has enacted two exceptions to its general prohibition against gambling. One exception allows “civic and service clubs; charitable, fraternal, religious, and veterans’ organizations; and other public-spirited organizations” to conduct racing and simulcast parimutuel wagering. N.D. Cent. Code § 53-06.2-06. The other exception allows parimutuel wagering through account wagering. N.D. Cent. Code § 53-06.2-10.1. An account wager may only be made through the licensed simulcast service provider. Id.
Since RSI was the licensed simulcast service provider, it could take “account wagers.” Id. If RSI only handled “account wagers” then it did not engage in “gambling.” See N.D. Cent. Code 12.1-28-01 (stating that gambling does not include acts or transactions expressly authorized by law). If RSI did not violate any state or political subdivision gambling law, then there is no basis for a charge under 18 U.S.C. § 1955.
At this time, no evidence has been presented relating to the type of wagering that forms the basis of the Indictment. Therefore, the Court cannot make any determination on whether RSI only conducted “account wagering.”
The Indictment states that all of the alleged gambling that forms the basis of the charges was conducted at Suite B5, 1318 South 23rd Street, Fargo. The activity at this site was allegedly done in concert with the other named corporation in this case, Global Contact. Assuming, for the sake of this discussion, that only “account wagering” took place at this site, the involvement of Global Contact raises another issue.
As stated earlier, only the licensed simulcast service provider can handle “account wagers.” N.D. Cent. Code § 53-06.2-10.1. Since Global Contact was not the licensed simulcast service provider, it cannot qualify for this exception. Therefore, if Global Contact was directing the activities at Suite B5 by leasing the space or hiring and supervising the tellers who processed the account wagers, the licensed simulcast service provider was not taking the “account wagers.” Assuming Global Contact also is not the type of organization listed in the exception at section 53-06.2-06 of the North Dakota Century Code, then this alleged parimutuel wagering would constitute “gambling” under North Dakota law.
The other issue raised by Defendants’ brief is whether a violation of an administrative regulation can serve as a “violation of the law of a State” under 18 U.S.C. § 1955(b). When interpreting a statute, a court must examine the ordinary meaning of the words used by the Congress. United States v. Jones, 965 F.2d 1507, 1520 (8th Cir. 1992). The Ninth Circuit has held that the ordinary meaning of the words “the law of a State” can reasonably be interpreted two different ways. United States v. Gordon, 464 F.2d 357, 358 (9th Cir. 1972). The phrase can “cover gambling businesses that are only in violation of state penal laws” or the phrase can cover “gambling businesses that are in violation of any state law – criminal or civil.” Id.
When a court faces two reasonable interpretations of a criminal statute and Congressional intent is unclear, the rule of lenity requires adoption of the less punitive interpretation. Jones, 965 F.2d at 1521. The rule of lenity is a rule of narrow construction “rooted in the concern of the law for individual rights, and in the belief that fair warning should be accorded as to what conduct is criminal and punishable by deprivation of liberty or property.” United States v. Warren, 149 F.3d 825, 828 (8th Cir. 1998) (quoting Huddleston v. United States, 415 U.S. 814, 831 (1974)). “Lenity is reserved for those situations in which a reasonable doubt persists about a statute’s intended scope even after resort to the language, structure, legislative history, and motivating policies of the statute.” Id. (citing Moskal v. United States, 498 U.S. 103, 108 (1990)).
The legislative history indicates that this statute is only concerned with “illegal” gambling because of its effect on interstate commerce and the facilities of interstate commerce. H.R. Rep. NO. 91-1549, at 4028 (1970). The history continues by explaining that Congress’ intent was “to reach only those persons who prey systematically upon our citizens and whose syndicated operations are so continuous and so substantial as to be of national concern . . . .” Id. at 4029. These statements could be read to indicate Congress’ intent that this statute only encompasses gambling activity that is made criminal by the state in which it primarily occurred. The Court could find no statements to support the conclusion that even a non penal state statute could serve as the basis for a charge under 18 U.S.C. § 1955.
Even assuming the legislative history provides no guidance on Congressional intent, the rule
of lenity dictates the adoption of the less punitive interpretation of this ambiguous statute. Jones,
965 F.2d at 1521. In this case, the less punitive interpretation of 18 U.S.C. § 1955 would be that the
statute only covers violations of state penal statutes. Gordon, 464 F.2d at 358.
The only administrative code provisions mentioned in the Indictment are found in Chapter 69.5-01-11. There are no penal consequences attached to a violation of any of these rules. The only consequence would be a suspension or revocation of a simulcast license. N.D. Admin. Code § 69.5-01-11-09. Since Chapter 69.5-01-11 is not a penal statute, it cannot serve as the basis of a “violation of the law of a State” under 18 U.S.C. § 1955(b). Gordon, 464 F.2d at 358.
DECISION
Based on the foregoing, Defendants’ Motion to Dismiss is DENIED.
IT IS SO ORDERED.
Dated this 2nd day of December, 2004.
_________________________
Ralph R. Erickson, District Judge
United States District Court