**TESTIMONY OF MARK C. VAN NORMAN, EXECUTIVE DIRECTOR**

**NATIONAL INDIAN GAMING ASSOCIATION**

**SEPTEMBER 21, 2005**

**BEFORE THE SENATE COMMITTEE ON INDIAN AFFAIRS**

**OVERSIGHT HEARING ON INDIAN GAMING**

**Introduction**

Good morning Mr. Chairman, Vice-Chairman Dorgan, and Members of the
Committee. Thank you for providing the National Indian Gaming
Association with the opportunity to testify this morning. My name is
Mark Van Norman, I am a member of the Cheyenne River Sioux Tribe of
South Dakota.

The National Indian Gaming Association ("NIGA") is an association of 184
tribal governments that use Indian gaming to generate essential
government revenue. For the past five years, I have served as Executive
Director of NIGA. Previously, I served as the Director of the Office of
Tribal Justice in the U.S. Department of Justice and as attorney for my
tribal government. I have also worked for a state government and in the
private sector.

For NIGA and its Member Tribes, our foremost concern is to preserve
Indian sovereignty and to protect Indian gaming as a means of generating
essential tribal government revenue. We are committed to effective
regulation for Indian gaming and our experience has demonstrated that
the highest standard of regulation can be achieved in a manner
consistent with Indian sovereignty and self-determination.

Concerning amendments to the Indian Gaming Regulatory Act, in prior
years, NIGA has asked Congress to address the Supreme Court's *Seminole*
decision, which permitted states to raise an 11^th^ Amendment defense to
litigation to enforce the Tribal-State Compact process. We have asked
for provisions allowing timely access to the Secretary's procedures in
lieu of a compact when an 11^th^ Amendment defense is raised because the
Tribal-State Compact process is critical to the proper functioning of
IGRA. We oppose amendments to the Indian Gaming Regulatory Act that do
not include provisions on secretarial procedures.

In *Colorado River Indian Tribes (CRIT) v. NIGC (2005 WL 2035946),* the
U.S. District Court in Washington, D.C. ruled on August 24, 2005 that
the NIGC does not have authority to issue rules for Class III gaming,
i.e., MICS, outside of the Tribal-State compact process. The NIGC is
seeking new rulemaking authority to issue Minimum Internal Control
Standards ("MICS") over and above the existing Tribal-State Compact
process. In short, NIGC is seeking a legislative "quick fix" to the CRIT
decision.

There is no need for a quick fix to the [CRIT]{.underline} decision,
which remains in litigation. Because the NIGC has not first consulted
with tribal governments about this issue and attempted to work out an
approach to the MICS issue that imposes the least burden on tribal
governments, we oppose NIGC's efforts to secure general Federal
regulatory authority for its MICS over and above the Tribal-State
Compact process.

We believe that through consultation with tribal governments, NIGC can
work out an approach that uses its existing statutory authority to
approve tribal gaming regulatory ordinances to address this problem. In
short, without creating a duplicative new Federal regulatory regime, the
NIGC might simply seek to have *tribal* MICS included in tribal
ordinances. After all, its current Federal regulation asked tribal
governments to adopt MICS through their tribal regulations. Accordingly,
we ask the Senate Committee to defer action on this issue to give NIGC
time to consult with tribal governments.

**Indian Gaming is the Native American Success Story**

In the 18^th^ and 19^th^ Centuries, the United States alternated between
negotiating treaties with tribal governments and a few years later,
engaging in warfare to take treaty protected lands. The legacy of
genocide and deprivation left Indian tribes destitute and suffering from
lack of education, poor health care, and premature death.

Gaming has always been a traditional Native American past time, from
hand games and athletic contests to horse-racing. In the late 1960s and
'70s, as states were developing state lotteries, tribal governments
turned to high stake bingo to raise essential tribal government revenue.

Only the most visionary tribal leaders could have forseen the success of
tribal governments through Indian gaming. Last year, Indian gaming
generated over \$19 billion in gross revenues -- before salaries, goods
and services, capitol costs, and debt repayment. Nationwide, directly
and indirectly, Indian gaming generates over 550,000 jobs. Considering
the economic multiplier effect, Indian gaming generates over \$5.5
billion annually in Federal Government revenue and reduces Federal
payments by \$1.4 billion. In addition, Indian gaming generates \$1.8
billion in state government revenue and over \$100 million in local
government revenue.

About 60% of Indian tribes (229 out of 335) use Indian gaming to
generate essential government services, and for these tribes, Indian
gaming is transforming the reservation landscape and providing a
brighter future. First and foremost, Indian gaming funds essential
government services, including education, health care, police and fire
protection, water and sewer service, elderly and child care, and
cultural preservation. For example, using Indian gaming revenue:

-   The Mescalero Apache Tribe of New Mexico built a new high school;

-   The Choctaw Nation of Oklahoma built a new hospital;

-   Gila River Indian Community established a new police and emergency
    medical unit;

-   The Pechanga Band of Luiseno Indians established a new fire
    department;

-   The Mohegan Tribe is building a water system for the Tribe and seven
    of its surrounding communities;

-   The Rosebud Sioux Tribe established child care and provides new
    school clothes for impoverished students;

-   The Fort Berthold Tribes established a new headstart center;

-   The Tohono O'dham Nation is funding the Tohono O'odham Community
    College and used \$30 million to fund a student scholarship program;
    and

-   Several tribal governments provided major funding for the new
    Smithsonian Museum of the American Indian.

These types of positive developments are happening across Indian
country, for the 60% of Indian tribes in the lower 48 states that have
access to Indian gaming.

Naturally, the development of Indian lands is a benefit to surrounding
communities. For example, Gila River EMTs serve as first responders to
accidents in their stretch of I-10. The Pechanga Band's Fire Department
responded to the California wildfires, working hard to save homes and
lives in neighboring communities. Indian gaming is also benefiting
neighboring Indian tribes. The Shakopee Sioux Tribe, for example, has
generously assisted many Indian tribes in Minnesota, the Dakotas, and
Nebraska, including refinancing the Oglala Sioux Tribe's debt, a grant
to assist with a new nursing home for the Cheyenne River Sioux Tribe and
an economic development grant for the Santee Sioux Tribe.

**Tribal Governments Work Hard to Provide Strong Regulation**

No one has a greater interest in the integrity of Indian gaming than
Indian tribes. Naturally, tribal governments are dedicated to building
and maintaining strong regulatory systems because our sovereign
authority, government operations and resources are at stake. Under IGRA,
tribal governments are the primary day-to-day regulators of Indian
gaming and regulate Indian gaming through tribal gaming commissions.
Tribal gaming regulators work with the NIGC to regulate Class II gaming,
and through the Tribal-State Compact process, tribal gaming regulators
work with state regulators to safeguard Class III gaming.

Indian gaming is also protected by the oversight of the FBI and the U.S.
Attorneys. The FBI and the U.S. Justice Department have authority to
prosecute anyone who would cheat, embezzle, or defraud an Indian gaming
facility -- this applies to management, employees, and patrons. 18
U.S.C. 1163.

Tribal governments work with the Department of Treasury Financial Crimes
Enforcement Network to prevent money laundering, the IRS to ensure
Federal tax compliance, and the Secret Service to prevent
counterfeiting. Tribal governments have stringent regulatory systems in
place that compare favorably with any Federal or state regulatory
systems.

Tribal governments have dedicated tremendous resources to the regulation
of Indian gaming: Tribes spent over \$290 million last year nationwide
on tribal, state, and Federal regulation:

-   \$228 million to fund tribal government gaming regulatory agencies;

-   \$55 million to reimburse states for state regulatory work under the
    Tribal-State Compact process; and

-   \$12 million for the NIGC's budget.

At the tribal, state, and Federal level, more than 3,350 expert
regulators and staff protect Indian gaming:

-   Tribal governments employ former FBI agents, BIA, tribal and state
    police, New Jersey, Nevada, and other state regulators, military
    officers, accountants, auditors, attorneys and bank surveillance
    officers;

-   Tribal governments employ more than 2,800 gaming regulators and
    staff;

-   State regulatory agencies assist tribal governments with regulation,
    including California and North Dakota Attorney Generals, the Arizona
    Department of Gaming and the New York Racing and Wagering
    Commission;

-   State governments employ more than 500 state gaming regulators,
    staff and law enforcement officers to help tribes regulate Indian
    gaming;

-   The National Indian Gaming Commission is chaired by Philip Hogen,
    former U.S. Attorney, Associate Solicitor for Indian Affairs, and
    the past Vice Chairman of NIGC; Vice Chairman Nelson Westrin, former
    Executive Director of Michigan Gaming Control Commission and State
    Deputy Attorney General; and Chuck Choney, Commissioner and former
    FBI Agent; and

-   At the Federal level, the NIGC employs 80 Regulators.

Tribal governments also employ state-of-the-art surveillance and
security equipment. For example, the Mashantucket Pequot Tribal Nation
uses the most technologically advanced facial recognition, high
resolution digital cameras and picture enhancing technology. The digital
storage for the system has more capacity than the IRS or the Library of
Congress computer storage system. The Nation assisted Rhode Island state
police after the tragic nightclub fire by enhancing a videotape of the
occurrence, so the police could study the events in greater detail.

**IGRA Established the Tribal-State Compact Process as the Regulatory
Framework for Class III Gaming**

IGRA divides Indian gaming into three classes: Indian Tribes retain
exclusive authority to regulate Class I gaming, defined as traditional
gaming, such as horse-racing, stick games, or hand games at tribal
celebrations.

Class II gaming is defined as bingo, lotto and similar games, pull-tabs,
and non-banked card games, whether or not electronic, computer, or other
technologic aids are used in connection therewith. Class II gaming is
regulated by tribal gaming regulatory agencies, under NIGC approved
ordinances, in cooperation with NIGC.

Class III is all other forms of gaming, including lotteries, casino
gaming, banked card games, and pari-mutuel racing. For Class III gaming,
Congress established a Tribal-State Compact requirement. Congress
provided that Indian Tribes may engage in Class III gaming, if they
enter into a Tribal-State Compact to set forth a regulatory framework
for such gaming. The IGRA outlines the subjects for Tribal-State Compact
negotiation:

(i) the application of the criminal and civil laws of the Indian tribe
    or the State that are directly related to, and necessary for, the
    licensing and regulation of such activity;

(ii) the allocation of criminal and civil jurisdiction between the State
     and the Indian tribe necessary for the enforcement of such laws and
     regulations;

(iii) the assessment by the State of such activities in such amounts as
      are necessary to defray the costs of regulating such activity;

(iv) taxation by the Indian tribe of such activity in such amounts
     comparable to amounts assessed by the State for comparable
     activities;

(v) remedies for breach of contract;

(vi) standards for the operation of such activity and maintenance of the
     gaming facility, including licensing; and

(vii) any other subjects that are directly related to the operation of
      gaming activities.

25 U.S.C. sec. 2710(d)(7).

The Senate Committee Report to IGRA explains that Congress established
the Tribal-State Compact process because:

> \[T\]here is no adequate Federal regulatory system in place for class
> III gaming, nor do tribes have such systems for the regulation of
> class III gaming currently in place. Thus a logical choice is to make
> use of existing State regulatory systems, although the adoption of
> State law is not tantamount to an accession to State jurisdiction. The
> use of State regulatory systems can be accomplished through negotiated
> compacts but this is not to say that tribal governments have no role
> to play in the regulation of class III gaming -- many can and will
>
> The terms of each compact may vary extensively depending on the type
> of gaming, the location, the previous relationship of the tribe and
> State, etc.... A compact may allocated most or all jurisdictional
> responsibility to the tribe, to the State or any variation in between.
> The Committee does not intend that compact be used as a subterfuge for
> imposing State jurisdiction on tribal lands.

Senate Report 100-446, 100^th^ Cong. 2^nd^ Sess. at 13-14 (1988).

Given the comprehensive framework established by the Tribal-State
Compact process, the NIGC has a background role in supporting tribal and
state regulation under the compacts:

-   NIGC reviews and approves tribal gaming regulatory laws;

-   NIGC reviews tribal background checks and gaming licenses;

-   NIGC receives independent annual audits of tribal gaming facilities;

-   NIGC approves management contracts; and

-   NIGC works with tribal gaming regulatory agencies to promote tribal
    implementation of tribal gaming regulatory ordinances.

NIGC does not have authority to issue Federal regulations over and above
the Tribal-State Compact process.

In *Colorado River Indian Tribes v. NIGC*, 2005 WL 2035946 (August 24,
2005), the Federal district court held that NIGC did not have statutory
authority to promulgate new Federal Minimum Internal Control Standards
over and above Tribal-State Compacts. The Court explained:

> "A careful review of the text, the structure, the legislative history
> and the purpose of the IGRA, as well as each of the arguments advanced
> by the NIGC, leads the Court to the inescapable conclusion that
> Congress plainly did not intend to give the NIGC the authority to
> issue MICS for Class III gaming."

2005 WL 2035946, \*8. The district court correctly decided the issue.

It is noteworthy that NIGA and our Member Tribes developed the first
Minimum Internal Control Standards, and we encouraged our Member Tribes
to adopt the MICS as a matter of tribal law. Many tribal governments
were in the process of enacting tribal law MICS, when NIGC embarked on
its Federal rule-making process. As discussed below, it makes sense to
consider whether tribal governments may maintain minimum internal
control standards as a matter of tribal law.

**The Federal-Tribal Government-to-Government Relationship is the
Cornerstone of Federal Indian Policy**

The Constitution enshrines a basic principle of Federal Indian law:
Indian tribes are prior sovereigns, with whom the United States deals on
a government-to-government basis. Through treaties, the United States
recognized the rights of Indian tribes to self-government and our
grandfathers fought to protect that right.

In modern times, Congress has sought to promote Indian
Self-Determination and Self-Government. Hence, IGRA explains, "\[t\]he
purpose of the chapter is ... to provide a statutory basis for the
operation of gaming by Indian tribes as a means of promoting tribal
economic development, self-sufficiency, and strong tribal governments."
25 U.S.C. sec. 2702. Accordingly, tribal governments retained their
original rights to "regulate gaming activity on Indian lands if the
gaming activity is not specifically prohibited by Federal law and is
conducted within a State which does not, as a matter of criminal law and
public policy, prohibit such gaming activity." 25 U.S.C. sec. 2701(5).

On September 23, 2004, President Bush issued an Executive Memorandum to
the Executive Departments and Agencies on the Government-to-Government
Relationship with Tribal Governments, which explains:

> My Administration is committed to continuing to work with federally
> recognized tribal governments on a government-to-government basis and
> strongly supports and respect tribal sovereignty and
> self-determination for tribal governments in the United States.

President Bush has affirmed Executive Order 13175 (2000) on Consultation
and Coordination with Tribal Governments.

In our view, the first step for the National Indian Gaming Commission is
to consult with tribal governments. We note that the NIGC has issued a
consultation schedule, but it is not enough to consult after the fact --
the NIGC should engage in government-to-government consultation before
forwarding a legislative proposal to Congress. The NIGC has not complied
with its own internal agency policy or the President's Executive
Memorandum on Government-to-Government Relationships with Tribal
Governments (September 23, 2004). The NIGC must consult with tribal
governments in a manner that respects the right of Indian tribes as
sovereigns to address this issue through tribal law before it advocates
for a change in Federal law.

Tribal governments currently have tribal law standards in place that
meet or exceed the requirements of the NIGC MICS, so there is no need
for a legislative rush to supplant the federal court's judgment. Indeed,
the NIGC itself recently wrote to tribal governments to say that it will
not change its current MICS policy while it appeals the *CRIT v. NIGC*
decision to the higher courts. This case was decided less than one month
ago, and remains subject to appeal. The NIGC's press release after the
decision states as follows:

> U.S. District Court Judge John D. Bates expressly cautioned that 'this
> opinion should not be read to hold that the NIGC will never be able to
> audit a Class III gaming operation, or that the NIGC may not penalize
> a tribe that resists a valid audit....' '\[I\]t is important to focus
> on what the court did and did not do in this case.  What it *did* do
> was hold that the NIGC couldn\'t penalize the Colorado River Indian
> Tribes for resisting the NIGC\'s attempt to conduct an audit of its
> Class III gaming.  What it *did not* do was to enjoin the NIGC from
> applying its MICS on Class III gaming elsewhere, or from conducting
> audits to monitor tribal compliance with the MICS.' The NIGC disagrees
> with the CRIT decision.  Accordingly, beyond its dealings with the
> Colorado River Indian Tribes, and until the Commission revises its
> regulations or a court of competent jurisdiction orders changes in the
> scope of its MICS regulations,  it will continue to conduct business
> as usual with current MICS audits and enforcement actions.

NIGC Press Release (Aug. 30, 2005);
<http://www.nigc.gov/nigc/documents/releases/PR-8-05-3.jsp>. The NIGC's
request for *immediate action* to amend IGRA is premature.

The NIGC's legislative proposal for Federal rulemaking authority over
and above Tribal-State Compacts intrudes upon Indian sovereignty and
disturbs the balance of authority between tribal governments, the states
and the Federal Government. While IGRA was under consideration in
Congress, the U.S. Departments of Justice and the Interior disclaimed
any interest in assisting tribal governments with a federal regulatory
process. Against this background, Congress established the Tribal-State
compact process to set forth the framework for the operation of Class
III gaming.

Through the Tribal-State compact process, tribal governments negotiate
with states to develop a framework for "the application of the criminal
and civil laws and regulations of the Indian tribe or the State that are
... necessary for ... the licensing and regulation" of Class III gaming.
In essence, the National Indian Gaming Commission is seeking a sweeping
amendment, which would put in place a Federal regulatory regime over and
above the existing Tribal-State Compact process. The NIGC proposal
totally restructures the existing balance of tribal, state and Federal
sovereignty under the Act. By adding a comprehensive NIGC role for Class
III gaming with no effort to harmonize that role with tribal and state
governments, NIGC would fully duplicate existing tribal and state
regulatory roles. This proposal must be rejected, unless Congress
strikes the existing Tribal-State Compact process.[^1]

After consultation with tribal governments, if the NIGC is determined to
continue to seek an amendment to IGRA regarding minimum internal control
standards, its proposal should be consistent with IGRA's existing
structure. IGRA requires tribal governments to maintain basic tribal law
provisions concerning the regulation of Indian gaming and, as noted
above, the NIGC approves these tribal ordinances. The NIGC might simply
seek to add a new section to tribal gaming regulatory ordinances
concerning *tribal* minimum internal control standards as follows:

**Title 25 U.S.C. sec. 2710(b)(1):**

**Requirements for Approval of Ordinance....**

(G) Minimum Internal Control Standards. Consistent with general industry
    guidelines and tribal-state compact provisions, there are effective
    minimum internal control standards in place to: (i) effectively
    regulate the play of games; (ii) ensure the accuracy and
    accountability of cash and credit transactions; (iii) provide
    effective security and surveillance; and (iv) provide for effective
    internal auditing of the gaming operation.

President Bush's Executive Memorandum on consultation with tribal
governments directs agencies to find the least intrusive means to
achieve agency goals. The NIGC does not need duplicative federal
rule-making authority over matters already addressed by tribal law and
the Tribal-State compact process. In fact, because there is such a
strong system of minimum internal control standards currently in place,
this principle could be put into place on a "best practices" basis in
the NIGC's model tribal ordinance without requiring a change in existing
federal or tribal law.

The NIGC must acknowledge the hard work that tribal governments have
undertaken to ensure that Indian gaming is regulated by the highest
standards of the gaming industry. After 17 years under IGRA, tribal
governments have established strong tribal government gaming commissions
and working relationships with the NIGC and state regulatory agencies.
Congress should not create a new duplicative Federal bureaucratic
regime, when there are options that are less intrusive on state and
tribal sovereignty.

**Conclusion**

In closing, Indian tribes are committed to both the highest standards of
regulation for Indian gaming and respect for Indian sovereignty. We
respectfully ask Congress to defer action on the NIGC's request for
additional federal regulatory authority, and tell the NIGC to consult
with tribal governments to develop an approach to Minimum Internal
Control Standards consistent with both the existing structure of IGRA
and the President's Executive Memorandum on Government-to-Government
Relationships with Tribal Governments.

If we can be of assistance to the Committee, we would be pleased to
answer any questions or provide additional documentation. Thank you
again for the opportunity to testify on this important matter.

[^1]: After the Supreme Court's *Seminole* decision, discussed above,
    the tribal-state compacting process expends great tribal
    governmental manpower, is time consuming, and with the recent surge
    for demands for revenue sharing and sovereignty concessions -- is
    costly and burdensome to tribal self-government. As a result, we
    believe that it would be patently unfair to "fix" the *CRIT v. NIGC*
    case, *which is less than one month old and remains in litigation*
    and add the burden of conflicting and duplicative federal
    regulations to class III gaming, without at the same time restoring
    balance and Congress' true intent to the compacting process, *which
    has been broken for nearly 10 years*.