12‐3777‐cr
United States v. Rubin
In the
United States Court of Appeals
For the Second Circuit
________
AUGUST TERM 2013
No. 12‐3777‐cr
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.*
________
Appeal from the United States District Court
for the Southern District of New York.
No. 10 CR 336(10) ― Lewis A. Kaplan, Judge.
________
ARGUED: DECEMBER 12, 2013
DECIDED: FEBRUARY 19, 2014
________
The Clerk of Court is directed to amend the caption in this case to conform to
*
the listing of the parties above.
2 No. 12‐3777‐cr
Before: CABRANES, HALL, AND CHIN, Circuit Judges.
________
Defendant‐Appellant Ira Rubin appeals from the August 6,
2012 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 commit
money laundering 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 exempt 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
(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. Accordingly, we AFFIRM the
judgment of the District Court.
________
3 No. 12‐3777‐cr
TIMOTHY J. STRAUB1 (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.
________
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.
1 Timothy J. Straub, a law student, argued the case for defendant Rubin under the
supervision of an attorney of Lincoln Square Legal Services, Inc. of Fordham Law School
pursuant to Local Rule 46.1(e).
4 No. 12‐3777‐cr
We hold that, in light of United States v. Cotton, 535 U.S. 625
(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.” See
31 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
Under 18 U.S.C. § 371, it is a crime for “two or more persons [to] conspire either
2
to commit any offense against the United States . . . , and one or more of such persons [to]
do any act to effect the object of the conspiracy.”
5 No. 12‐3777‐cr
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.” See 31 U.S.C. § 5363. The statute does not directly define
the phrase “business of betting or wagering,” but states that it “does
6 No. 12‐3777‐cr
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
7 No. 12‐3777‐cr
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 (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 jurisdiction4 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. 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.
The quoted passages from Garcia and Tollett are not absolute, inasmuch as the
3
Supreme Court itself has recognized narrow exceptions for two constitutional claims—
due process claims for vindictive prosecution, see Blackledge v. Perry, 417 U.S. 21, 30‐31
(1974), and double jeopardy claims that are evident from the face of the indictment, see
Menna v. New York, 423 U.S. 61, 62 n.2 (1975). Rubin does not argue that either exception
is applicable here.
Article III confers upon the federal courts subject‐matter jurisdiction over all
4
cases arising under the laws of the United States. Const. art. III, § 2, cl. 1. By statute,
Congress has conferred upon the “district courts of the United States . . . original
jurisdiction . . . of all offenses against the laws of the United States.” See 18 U.S.C. § 3231
(emphasis supplied).
8 No. 12‐3777‐cr
Cotton.5 Following the Supreme Court’s decision in Apprendi v. New
Jersey, 530 U.S. 466 (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—
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 (quoting Steel Co. v. Citizens for
Better Env’t, 523 U.S. 83, 89 (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, 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 (quoting Lamar v. United
States, 240 U.S. 60, 65 (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‐
The indictment in Cotton charged the defendants with a drug offense involving
5
a “detectable amount” of cocaine or cocaine base under 21 U.S.C. § 841(b)(1)(C), which, at
that time, established “a term of imprisonment of not more than 20 years.” 535 U.S. at
628. The district court in Cotton did not sentence the defendants under that provision,
however. “Consistent with the practice in federal courts at the time,” the district court
made a finding of drug quantity at sentencing that triggered enhanced penalties under 21
U.S.C. § 841(b)(1)(A), which prescribed “a term of imprisonment which may not be . . .
more than life” for drug offenses involving at least 50 grams of cocaine base. Cotton, 535
U.S. at 628. The district court then sentenced the defendants principally to terms of
imprisonment in excess of the 20‐year statutory limit provided in 21 U.S.C. § 841(b)(1)(C).
Cotton, 535 U.S. at 628.
9 No. 12‐3777‐cr
matter jurisdiction, and that his appeal rests on a separate basis—
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 (“[D]efects in
an indictment do not deprive a court of its power to adjudicate a
case.” (emphasis supplied)); id. at 631 (“[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]his Court some time ago departed from
[the] view that indictment defects are ‘jurisdictional.’” (emphasis
supplied)); id. (“Insofar as [Ex parte Bain, 121 U.S. 1 (1887)] held that
a defective indictment deprives a court of jurisdiction, Bain is
overruled.” (emphasis supplied)).
The two cases upon which the Supreme Court relied in
Cotton—Lamar v. United States, 240 U.S. 60 (1916), and United States v.
Williams, 341 U.S. 58 (1951)—confirm that challenges to indictments
on the basis that the alleged conduct does not constitute an offense
under the charged statute are also non‐jurisdictional challenges.
In Lamar, a jury convicted the defendant, who had
impersonated a U.S. Representative, of falsely pretending to be a
U.S. officer. Lamar, 240 U.S. at 64. The defendant argued on appeal
that the district court lacked jurisdiction because a Congressman
was not “an officer of the United States” as alleged in the
indictment—i.e., the indictment charged a non‐offense. Id. Justice
Holmes, writing for the Court, rejected this argument, noting that
“[j]urisdiction is a matter of power and covers wrong as well as right
decisions,” and that “[t]he objection that the indictment does not
charge a crime against the United States goes only to the merits of
the case.” Id. at 64–65.
10 No. 12‐3777‐cr
In Williams, the Court rejected a similar argument. The district
court there dismissed the defendants’ perjury charges under the
theory that the court presiding over the conspiracy trial in which the
perjury had allegedly occurred had “no jurisdiction”—and hence
was not a competent tribunal as required by the perjury statute—
because the conspiracy alleged in the earlier indictment was not
proscribed by the charged conspiracy statute. Williams, 341 U.S. at
59–61, 65. The Supreme Court reversed the jurisdictional holding,
stating that the court in the conspiracy case “had jurisdiction of the
subject matter, to wit, an alleged violation of a federal conspiracy
statute, and, of course, of the persons charged.” Id. at 66. That a
higher court ultimately held the indictment defective did “not affect
the jurisdiction of the trial court to determine the case presented by
the indictment.” Id. The Court concluded that, “[t]hough the trial
court or an appellate court may conclude that the statute is wholly
unconstitutional, or that the facts stated in the indictment do not
constitute a crime or are not proven, [the court] has proceeded with
jurisdiction . . . .” Id. at 68–69. In sum, the precedents of the
Supreme Court make clear that a district court has “jurisdiction”
even where an indictment alleges conduct that does not state an
offense under the statute purportedly violated.
Sister Courts of Appeals that have considered the issue have
rejected similar arguments that the failure to state an offense under
the charged statute deprives a district court of jurisdiction.6 In
No Second Circuit case has previously addressed this issue squarely in the
6
wake of Cotton. In United States v. Moloney, 287 F.3d 236 (2d Cir. 2002), the Court held
that “a claim that the indictment charges a non‐offense implicates the jurisdiction of the
federal courts.” Id. at 240. Yet Moloney was decided on April 9, 2002, roughly a month
before the Supreme Court decided Cotton. More recently, in United States v. Kumar, 617
F.3d 612 (2d Cir. 2010), in reviewing whether an indictment sufficiently alleged an
offense, we stated that, “[t]o challenge the court’s jurisdiction, the defendant who has
11 No. 12‐3777‐cr
United States v. De Vaughn, 694 F.3d 1141 (10th Cir. 2012), the Court
of Appeals held that, by unconditionally pleading guilty, the
defendant had waived his argument that threatening letters alleged
in the charging documents were not, as a matter of law, “threats”
prohibited by 18 U.S.C. § 876(c).7 Id. at 1143–44, 1148. In Vanwinkle
v. United States, 645 F.3d 365 (6th Cir. 2011), the Court of Appeals
held that the district court had jurisdiction to accept a defendant’s
guilty plea to the unauthorized use of an access device,
notwithstanding the defendant’s claim on appeal that the device, as
alleged in the indictment, did not constitute an “access device”
within the meaning of 18 U.S.C. § 1029(a).8 Id. at 368–69. Finally, in
United States v. Delgado‐Garcia, 374 F.3d 1337 (D.C. Cir. 2004), Judge
Sentelle, writing for himself, asserted that the defendants had
waived their argument that the charged statute did not apply
extraterritorially, as alleged in the indictment, by unconditionally
pleading guilty. Id. at 1340–41.9
pleaded guilty must establish that the face of the indictment discloses that the count or
counts to which he pleaded guilty failed to charge a federal offense.” Id. at 620 (internal
quotations omitted). However, Kumar did not purport to undertake a jurisdictional
inquiry. Moreover, Kumar relied on Hayle v. United States, 815 F.2d 879 (2d Cir. 1987), for
the proposition that, where an “indictment alleges all of the statutory elements of a
federal offense and the defendant’s contention is that in fact certain of those elements are
lacking, the challenge goes to the merits of the prosecution.” Id. at 882. In the instant
case, as in Hayle, Count One alleged all of the statutory elements of a conspiracy to
violate Section 5363 of the UIGEA. Rubin’s contention is that all the elements of the
charged offense are not satisfied because the allegations establish that he only acted as a
“financial transaction provider.”
18 U.S.C. § 876(c) makes it an offense to knowingly mail any communication
7
“containing any threat to kidnap any person or any threat to injure the person of the
addressee or of another.”
18 U.S.C. § 1029(a) generally prohibits fraud and related activity in connection
8
with the production, use, and trafficking of counterfeit or unauthorized access devices.
The Third Circuit charted an alternative course in United States v. Hedaithy, 392
9
F.3d 580 (3d Cir. 2004), holding that a defendant’s challenge to the indictment does not
concern any jurisdictional grounds, but could be heard for the first time on appeal based
12 No. 12‐3777‐cr
In order to invoke a district court’s jurisdiction, an indictment
need only allege that a defendant committed a federal criminal
offense at a stated time and place in terms plainly tracking the
language of the relevant statute. See United States v. Frias, 521 F.3d
229, 23536 (2d Cir. 2008) (holding that an indictment that “plainly
tracks the language of the statute and states the time and place of the
alleged [crime]” is “sufficient to invoke the district court’s
jurisdiction”); see also United States v. Jacquez‐Beltran, 326 F.3d 661,
662 n.1 (5th Cir. 2003) (“To confer subject matter jurisdiction upon a
federal court, an indictment need only charge a defendant with an
offense against the United States in language similar to that used by
the relevant statute.”); United States v. González, 311 F.3d 440, 442 (1st
Cir. 2002) (“[A] federal criminal case is within the subject matter
jurisdiction of the district court if the indictment charges . . . that the
defendant committed a crime described in Title 18 or in one of the
other statutes defining federal crimes.”). When such jurisdiction is
established, a district court has authority to decide all other issues
presented within the framework of the case, including whether to
accept a guilty plea.
In this case, Count One of the Indictment invoked the District
Court’s jurisdiction by charging Rubin with an offense against the
United States—conspiring to violate the UIGEA, in violation of 18
U.S.C. § 371 and 31 U.S.C. § 5363—at a specified time and place and
on language in Federal Rule of Criminal Procedure 12(b)(3)(B). Id. at 589; see also Fed. R.
Crim. P. 12(b)(3)(B) (stating that “at any time while the case is pending, the court may
hear a claim that the indictment or information fails to invoke the court’s jurisdiction or
to state an offense”). Rubin briefly mentions this Rule in his opening brief, but only for
the proposition that jurisdictional challenges to an indictment may be raised at any time,
including for the first time on appeal. Accordingly, Rubin has waived any argument that
Rule 12(b)(3)(B) allows him to challenge for the first time on appeal that the Indictment
fails to state an offense—a non‐jurisdictional challenge to the prosecution.
13 No. 12‐3777‐cr
in terms tracking the language of the relevant statutes. Whether
Rubin’s alleged conduct amounted to nothing more than the
“activities of a financial transaction provider” concerns the merits of
the case, not the District Court’s jurisdiction over the action.
Accordingly, in pleading guilty unconditionally, Rubin waived his
challenge that the Indictment failed to state an offense.
III
Rubin also challenges the reasonableness of his sentence on
procedural and substantive grounds. We review his claim of
procedural unreasonableness for plain error because Rubin failed to
raise this claim below. United States v. Cassesse, 685 F.3d 186, 188 (2d
Cir. 2012) (reviewing for plain error an unpreserved claim that the
district court inadequately explained its reasons for a sentence); cf.
United States v. Villafuerte, 502 F.3d 204, 208 (2d Cir. 2007) (holding
that “rigorous plain error analysis” applies to unpreserved claims of
procedural sentencing error under 18 U.S.C. § 3553(a) and (c)).
Rubin argues that the District Court failed to justify adequately,
except in conclusory terms, the upward variance.
At sentencing, the District Court explained the upward
variance by stating that the nature of the offense was particularly
reprehensible, and that the Pre‐Sentence Investigation Report
prepared by the United States Probation Office, and adopted by the
Court without objection, had revealed a strong likelihood of
recidivism in light of Rubin’s extensive criminal past and string of
fraudulent conduct over the course of more than 30 years. The
District Court specifically found that the offenses to which Rubin
pleaded guilty were “brazen, quite deliberate, and deceptive,” and
that Rubin was “an unreformed con man and fraudster” who would
“cook up some new scheme” upon his release from incarceration.
14 No. 12‐3777‐cr
This explanation was not inadequate, or error, much less plain error.
See United States v. Fairclough, 439 F.3d 76, 81 (2d Cir. 2006) (“upward
departure from the Guidelines range might have been warranted on
the basis that the range under‐represented [defendant’s] past
criminal conduct and likelihood of recidivism”).
In examining the substantive reasonableness of a sentence, we
review the length of the sentence imposed to determine whether it
“cannot be located within the range of permissible decisions.”
United States v. Watkins, 667 F.3d 254, 261 (2d Cir. 2012) (internal
quotations omitted). Rubin argues that his sentence is
disproportionate to the minor role he played in the scheme as
compared to his co‐conspirators. He notes that the sentence of 36
months’ imprisonment is twice as long as that imposed on any other
co‐conspirator, and he asserts that he was merely a payment
processor in contrast to those actively involved in the gambling
enterprise.
We agree with the District Court that Rubin was not similarly
situated to his co‐conspirators. Rubin’s personal characteristics were
considerably different from those of his co‐defendants, and his co‐
defendants did not have lengthy criminal records and a
corresponding high likelihood of recidivism. With regard to Rubin’s
role in the offense, although he did not run a gambling website
himself, Rubin made it possible for the Internet Poker Companies to
operate in the United States by disguising gambling payments as
legitimate transactions so banks would not block them. Rubin also
played a central role in the fraud and money laundering
conspiracies charged in Counts Eight and Nine. Accordingly, the
District Court acted well within its discretion in imposing an above‐
guideline sentence of 36 months’ imprisonment.
15 No. 12‐3777‐cr
CONCLUSION
To summarize, we hold that:
(1) In light of United States v. Cotton, 535 U.S. 625 (2002), the
question whether Rubin’s conduct constitutes a conspiracy to
violate the UIGEA is a non‐jurisdictional challenge to the
prosecution. Count One of the Indictment sufficiently
invoked the District Court’s jurisdiction by alleging that
Rubin had committed a federal criminal offense at a stated
time and place in terms plainly tracking the language of the
relevant statute.
(2) Rubin’s unconditional guilty plea to Count One of the
Indictment precludes his argument on appeal that he was
convicted of a so‐called “non‐offense” under the UIGEA.
(3) Rubin’s sentence was neither substantively nor procedurally
unreasonable.
For the reasons stated above, we AFFIRM the August 6, 2012
judgment of the District Court.