United States v. Rubin

• Decision Date: 19 February 2014
• Docket Number: No. 12–3777–CR.,12–3777–CR.
• Parties: UNITED STATES of America, Appellee, v. Ira RUBIN, Defendant–Appellant, Daniel Tzvetkoff, Isai Scheinberg, Raymond Bitar, Scott Tom, Brent Beckley, Nelson Burtnick, Paul Tate, Ryan Lang, Bradley Franzen, Chad Elie, John Campos, Defendants.
• Court: U.S. Court of Appeals — Second Circuit

743 F.3d 31

UNITED STATES of America, Appellee,

v.Ira RUBIN, Defendant–Appellant,Daniel Tzvetkoff, Isai Scheinberg, Raymond Bitar, Scott Tom, Brent Beckley, Nelson Burtnick, Paul Tate, Ryan Lang, Bradley Franzen, Chad Elie, John Campos, Defendants.^*

No. 12–3777–CR.

United States Court of Appeals,Second Circuit.

Argued: Dec. 12, 2013.

Decided: Feb. 19, 2014.

Timothy J. Straub ¹ ( James A. Cohen, Ian S. Weinstein, Laura Jereski, on the brief), Fordham University School of Law, Lincoln Square Legal Services, Inc., New York, NY, for Ira Rubin.

Jared Lenow (Brent S. Wible, on the brief), Assistant United States Attorneys, for Preet Bharara, United States Attorney, United States Attorney's Office for the Southern District of New York, NY, for United States of America.

Before: CABRANES, HALL, and CHIN, Circuit Judges.

JOSÉ A. CABRANES, Circuit Judge:

Defendant–Appellant Ira Rubin appeals from the judgment of the United States District Court for the Southern District of New York (Lewis A. Kaplan, Judge), sentencing him principally to 36 months' imprisonment for: (1) conspiracy to violate the Unlawful Internet Gambling Enforcement Act of 2006 (the “UIGEA”), in violation of 18 U.S.C. § 371 and 31 U.S.C. § 5363, (2) conspiracy to commit bank fraud and wire fraud, in violation of 18 U.S.C. §§ 1343, 1344, and 1349, and (3) conspiracy to launder money, in violation of 18 U.S.C. §§ 1956(a)(2)(A), 1956(h), and 1957(a). Rubin's principal contention on appeal is that the indictment alleges conduct exempted from prosecution under the UIGEA—a so-called “non-offense”—depriving the District Court of jurisdiction to accept his guilty plea.

We hold that, in light of United States v. Cotton, 535 U.S. 625, 122 S.Ct. 1781, 152 L.Ed.2d 860 (2002), the purported defect in Rubin's indictment is non-jurisdictional in nature, and therefore could be, and was, waived by Rubin's unconditional guilty plea.

BACKGROUND

On March 10, 2011 the Government filed a nine-count Superseding Indictment (the “Indictment”), Count One charging Rubin and others with conspiring to violate the UIGEA, 31 U.S.C. §§ 5361–5367, in violation of 18 U.S.C. § 371.² Section 5363 of the UIGEA makes it a federal offense for gambling businesses to “knowingly accept” most forms of payment “in connection with the participation of another person in unlawful Internet gambling.” See31 U.S.C. § 5363. The Indictment alleged that from 2006 to 2011, the three leading internet poker companies doing business in the United States (the “Internet Poker Companies”) violated this prohibition by deceiving United States banks and financial institutions into processing billions of dollars in payments for illegal gambling activity on their sites.

The Internet Poker Companies accomplished the alleged deception by hiring third-party payment processors, such as Rubin, to disguise payments from United States gamblers as payments to hundreds of purportedly legitimate, but non-existent, online merchants and other non-gambling businesses. In mid–2008, for instance, Rubin and others allegedly created dozens of phony e-commerce websites purporting to sell clothing, jewelry, and sporting equipment, which Rubin knew would be used to conceal gambling transactions. Rubin then opened bank accounts to process transactions on behalf of the Internet Poker Companies by using the names of these phony companies and falsely claiming to the banks that these accounts would be used to process transactions for legitimate e-commerce merchants. The Indictment alleged that Rubin thereafter disguised gambling transactions as payments to dozens of these phony web stores, payments to a medical billing company, and payments related to payroll and marketing expenses.

On January 17, 2012, Rubin pleaded guilty to conspiracy to violate the UIGEA as alleged in Count One, pursuant to an unconditional, written plea agreement with the Government. Rubin also pleaded guilty to Counts Eight and Nine of the Indictment, charging, respectively, conspiracy to commit bank fraud and wire fraud and conspiracy to launder money. As set forth in the plea agreement, the Guidelines range for the offenses to which Rubin pleaded guilty was 18 to 24 months' imprisonment. On July 26, 2012, the District Court sentenced Rubin principally to an aggregate term of 36 months' imprisonment, an upward variance. This timely appeal followed.

DISCUSSION

I

Rubin's principal argument on appeal is that he was convicted of a “non-offense” when he pleaded guilty to Count One. Rubin was prosecuted for conspiring to violate Section 5363 of the UIGEA, which applies to anyone “engaged in the business of betting or wagering.” See31 U.S.C. § 5363. The statute does not directly define the phrase “business of betting or wagering,” but states that it “ does not include the activities of a financial transaction provider,” id. § 5362(2) (emphasis supplied), such as the activities of those entities or individuals engaged in the business of transferring or transmitting credit or funds, see id. § 5362(4). A financial transaction provider may be charged under Section 5363, however, if such individual has, among other requirements, “actual knowledge and control of bets and wagers.” Id. § 5367.

Rubin contends that Count One charged a non-offense because it alleged that he did nothing more than handle gambling funds— i.e., engage in “the activities of a financial transaction provider”—which are expressly excluded from the “business of betting or wagering” and thus generally exempted from prosecution under the UIGEA. According to Rubin, in order to charge him as a financial transaction provider, Count One needed to allege that he had actual knowledge and control of bets and wagers. The Government responds that Rubin did in fact conspire in the business of betting or wagering within the meaning of the proscription of Section 5363 because his conduct was not limited to the activities of a “financial transaction provider,” understood as the routine processing of financial transactions between gamblers and internet gambling companies.

We need not resolve this dispute because, even assuming arguendo that Count One alleged a so-called “non-offense,” Rubin's unconditional guilty plea precludes his argument on appeal. Generally, “in order to reserve an issue for appeal after a guilty plea, a defendant must obtain the approval of the court and the consent of the government, and he must reserve the right to appeal in writing.” United States v. Coffin, 76 F.3d 494, 497 (2d Cir.1996) (citing Fed.R.Crim.P. 11(a)(2)). Rubin did not reserve a right to appeal here. Absent such a reservation, “a defendant who knowingly and voluntarily enters a guilty plea waives all non-jurisdictional defects in the prior proceedings.” United States v. Garcia, 339 F.3d 116, 117 (2d Cir.2003) (emphasis supplied); see also Tollett v. Henderson, 411 U.S. 258, 267, 93 S.Ct. 1602, 36 L.Ed.2d 235 (1973) (“When a criminal defendant has solemnly admitted in open court that he is in fact guilty of the offense with which he is charged, he may not thereafter raise independent claims relating to the deprivation of constitutional rights that occurred prior to the entry of the guilty plea.”).³

II

Rubin attempts to circumvent this bar by contending that the Indictment's supposed failure to state an offense under the UIGEA deprived the District Court of subject-matter jurisdiction ⁴ to enter his plea of guilty to Count One, and that defects in subject-matter jurisdiction “can never be forfeited or waived,” Cotton, 535 U.S. at 630, 122 S.Ct. 1781. We disagree that the purported defect in the indictment affects the Court's subject-matter jurisdiction.

The Supreme Court most recently addressed the effect of indictment defects on a district court's jurisdiction in United States v. Cotton.⁵ Following the Supreme Court's decision in Apprendi v. New Jersey, 530 U.S. 466, 120 S.Ct. 2348, 147 L.Ed.2d 435 (2000)—which held that, in federal prosecutions, any fact that increases the penalty for a crime beyond the prescribed statutory maximum must be charged in the indictment, id. at 476, 120 S.Ct. 2348—the Fourth Circuit sua sponte vacated the Cotton defendants' sentences on the basis that “an indictment setting forth all the essential elements of an offense,” such as drug quantities resulting in an enhanced penalty, “is both mandatory and jurisdictional.” United States v. Cotton, 261 F.3d 397, 404 (4th Cir.2001).

The Supreme Court reversed. It clarified that “jurisdiction” refers to “ ‘the courts' statutory or constitutional power to adjudicate the case.’ ” Cotton, 535 U.S. at 631, 122 S.Ct. 1781 (quoting Steel Co. v. Citizens for Better Env't, 523 U.S. 83, 89, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998)). The Court then held that “defects in an indictment do not deprive a court of its power to adjudicate a case,” id. at 630, 122 S.Ct. 1781, and that the question whether “ ‘the indictment does not charge a crime against the United States goes only to the merits of the case,’ ” id. at 630–31, 122 S.Ct. 1781 (quoting Lamar v. United States, 240 U.S. 60, 65, 36 S.Ct. 255, 60 L.Ed. 526 (1916)).

Rubin argues that Cotton stands for the limited proposition that indictment omissions, such as a missing element or an inadequate factual basis, do not deprive a district court of subject-matter jurisdiction, and that his appeal rests on a separatebasis—namely, that the conduct as charged in Count One was simply not a crime under the UIGEA. We do not read Cotton so narrowly. The Court did not speak merely of omissions; rather, it invoked the broader concept of “indictment defects.” See id. at 630, 122 S.Ct. 1781 (“ [D]efects in an indictment do not deprive a court of its power to adjudicate a case.” (emphasis supplied)); id. at 631, 122 S.Ct. 1781 (“[T]hat the indictment is defective does not affect the jurisdiction of the trial court to determine the case presented by the indictment.” (emphasis supplied) (internal quotations omitted)); id. (“[T]...