FARGO — The U.S. Court of Appeals for the 8th Circuit has rejected another attempt by Susan Bala, founder of Racing Services Inc., to obtain a certificate of innocence in connection with legal troubles stemming from her time as owner of the onetime parimutuel wagering operation.
RSI filed for bankruptcy in 2004, shortly after the company came under scrutiny by federal authorities. A criminal case was brought in federal court, and in 2005 Bala was convicted of illegal gambling charges and ultimately sentenced to prison.
She was released early after her convictions were overturned on an appeal before the 8th Circuit court, which reversed Bala's convictions on the grounds the government, in the words of the court, "failed to prove any of the offenses charged."
In 2008, Bala filed her first request for a certificate of innocence, which requires that someone prove not only that their case was reversed because evidence in the case did not support a finding of guilt, but also that they are actually innocent of a charge.
Such a certificate is necessary if someone wants to seek damages through the U.S. Court of Federal Claims for unjust imprisonment or conviction.
In response to Bala's first request for a certificate of innocence, the district court concluded she could not meet her legal burden to establish she was actually innocent, according to background material provided by the office of Drew Wrigley, U.S. attorney for North Dakota.
The district court reasoned that not only had Bala likely violated multiple provisions of North Dakota law, she also brought about her prosecution through her actions, according to Wrigley's office.
Wrigley was a prosecutor in the criminal case that led to Bala's convictions, convictions that were ultimately overturned on appeal.
The district court ruling denying Bala a certificate of innocence was upheld by the 8th Circuit court, which stated, "RSI and Bala were not truly innocent of state criminal gaming law violations."
Nearly a decade after Bala filed her first petition seeking a certificate of innocence, she filed another request, claiming that parties in bankruptcy proceedings involving RSI used her overturned convictions and the denial of a certificate of innocence against her.
The district court denied her second petition as well, concluding that Bala was not actually innocent and that legal doctrine barred her from making another attempt at securing a certificate of innocence.
In a ruling issued Tuesday, Feb. 4, the 8th Circuit court upheld the district court's most recent decision denying Bala a certificate of innocence.
The appeals court rejected Bala's argument that circumstances had changed since the courts rejected her first petition for a certificate, concluding that a second attempt was barred by a legal doctrine known as "res judicata," which refers to a matter that has been adjudicated by a court and may not be pursued further.
Asked to respond to the latest appellate court ruling, Bala said certificates of innocence, which she underscored allow a person to sue the federal government for compensation for wrongful imprisonment, are a very rare area of the law.
"The first request was made after I had won the (criminal) case and the conviction was vacated. We thought at the time that was sufficient," Bala said.
"There was confusion that remained that is now fully explained and answered in the extensive court records since," Bala said, adding that the second request for a certificate was made after legal matters involving RSI, taxes and the state of North Dakota received final adjudication.
"The court records now show that every issue was addressed that supports the certificate of innocence. The Eighth Circuit determined, however, unfortunately, it was not able to have the petition brought a second time to hear these merits," Bala said.
Asked whether she would attempt to take her bid for a certificate of innocence further, Bala responded:
"I am fully satisfied that I won the case and every aspect of my innocence has been proven in the 17-year legal battle in which I have prevailed.
"The bottom line is that it (the appeals court's latest ruling) doesn't change anything — I won the case and I have proven everything about my innocence on the record," Bala said.
She added that not getting a piece of paper that allows her to sue the federal government for wrongful imprisonment "doesn't change the facts that I won and that everything has been proven in the record before the courts."
According to background information regarding Bala's criminal case that was provided by Wrigley's office, in 2002, without notifying state regulators, RSI moved some of its equipment and tellers to a call site in Fargo and began conducting account wagering there.
Over several months, RSI processed account wagering bets at the site totaling more than $99 million; and, contrary to law, no part of the proceeds went to the state or to charities licensed as off-track bettor operators, the background information said.
After an RSI employee reported to the state that RSI was conducting rogue parimutuel gambling at the site, the state shut it down and referred the matter to the FBI, according to the background information from Wrigley's office.
"The federal district and circuit courts have been perfectly consistent about Susan Bala for a decade, refusing to declare her innocent, and basing their decisions on the well-developed factual record," Wrigley said.
"Once again, the court has found that Susan Bala is 'not truly innocent,''' Wrigley added.
A legal matter still pending stems from a federal judge's ruling in 2014, which found that the state of North Dakota wasn't authorized to collect taxes on account wagering, a form of gambling that utilized services like RSI.
As part of that case, the state of North Dakota agreed to pay more than $15 million to RSI's bankruptcy estate.
Early in RSI's bankruptcy case, a large creditor — PW Enterprises — filed an initial claim of about $2.2 million.
Then, after the state of North Dakota agreed to pay the bankruptcy estate nearly $16 million, PWE amended its claim, increasing what it sought from the estate by about $10.8 million.
In late 2018, a bankruptcy court judge denied PWE's amended claim, but approved PWE's initial claim of about $2.2 million.
PWE appealed the decision, maintaining that under state law it was entitled to money North Dakota paid to the bankruptcy estate. In the alternative, PWE said, money returned to RSI from North Dakota should go to charities.
In late 2018, the state of North Dakota filed a claim against the bankruptcy estate on behalf of eligible nonprofit groups, and PWE filed a brief in support of the state's claim.
An appeals court has yet to issue a final ruling regarding PWE's amended bankruptcy claim.
However, in late January the U.S. Bankruptcy Court issued a ruling denying the state of North Dakota's claim against RSI's bankruptcy estate, a claim specifically made on behalf of one nonprofit — Team Makers, the fundraising arm for the North Dakota State University athletic department.
The bankruptcy court said North Dakota did not have standing to bring a claim on behalf of Team Makers and even if it did, the claim was barred because the record "overwhelmingly demonstrates that there was a long delay in asserting a claim that was entirely unnecessary and inexcusable."