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S. HRG. 109–443

INDIAN GAMING REGULATORY ACT AMENDMENTS

HEARING

BEFORE THE

COMMITTEE ON INDIAN AFFAIRS

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

ON

S. 2078

TO AMEND THE INDIAN GAMING REGULATORY ACT TO CLARIFY THE

AUTHORITY OF THE NATIONAL INDIAN GAMING COMMISSION TO

REGULATE CLASS III GAMING, TO LIMIT THE LANDS ELIGIBLE FOR

GAMING

MARCH 8, 2006

WASHINGTON, DC

(
COMMITTEE ON INDIAN AFFAIRS

JOHN McCAIN, Arizona, Chairman

BYRON L. DORGAN, North Dakota, Vice Chairman

PETE V. DOMENICI, New Mexico

CRAIG THOMAS, Wyoming

GORDON SMITH, Oregon

LISA MURKOWSKI, Alaska

MICHAEL D. CRAPO, Idaho

RICHARD BURR, North Carolina

TOM COBURN, M.D., Oklahoma

DANIEL K. INOUYE, Hawaii

KENT CONRAD, North Dakota

DANIEL K. AKAKA, Hawaii

TIM JOHNSON, South Dakota

MARIA CANTWELL, Washington

JEANNE BUMPUS, Majority Staff Director

SARA G. GARLAND, Minority Staff Director

(II)
(III)

C O N T E N T S

Page

S. 2078, text of ......................................................................................................... 3

Statements:

Akaka, Hon. Daniel K., U.S. Senator from Hawaii ....................................... 43

Bullis, Paul, director, Arizona Department of Gaming ................................. 49

DesRosiers, Norman, commissioner, Viejas Tribal Government Gaming

Commission ................................................................................................... 47

Dorgan, Hon. Byron L., U.S. Senator from North Dakota, vice chairman,

Committee on Indian Affairs ....................................................................... 37

His Horse Is Thunder, Ron, chairman, Standing Rock Sioux Tribe ............ 44

Hogen, Philip, chairman, National Indian Gaming Commission ................. 37

McCain, Hon. John, U.S. Senator from Arizona, chairman, Committee

on Indian Affairs ........................................................................................... 1

APPENDIX

Prepared statements:

Akaka, Hon. Daniel K., U.S. Senator from Hawaii ....................................... 59

Bullis, Paul (with attachment) ........................................................................ 60

Crooks, Stanley, chairman, Shakoppee Mdewakanton Sioux Community

(with attachment) ......................................................................................... 67

DesRosiers, Norman ......................................................................................... 81

His Horse Is Thunder, Ron .............................................................................. 87

Hogen, Philip (with attachment) ..................................................................... 96

Spurr, Laura, chairwoman, Nottawaseppi Huron Band of Potawatomi ...... 116

(1)

INDIAN GAMING REGULATORY ACT

AMENDMENTS

WEDNESDAY, MARCH 8, 2006

U.S. SENATE, COMMITTEE ON INDIAN AFFAIRS, Washington, DC.

The committee met, pursuant to notice, at 9:30 a.m. in room 485

Senate Russell Office Building, Hon. John McCain (chairman of the

committee) presiding.

Present: Senators McCain, Akaka, and Dorgan.

STATEMENT OF HON. JOHN MCCAIN, U.S. SENATOR FROM

ARIZONA, CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS

The CHAIRMAN. Good morning.

In April 2006, the Committee on Indian Affairs began a series of

hearing that have taken an in-depth look at the Indian Gaming

Regulatory Act. IGRA was enacted in 1988, following the decision

of the Supreme Court in the Cabazon case. Following the dictates

of that case, Congress established a regulatory structure for tribes

that conduct gaming on their lands.

The intervening 17 years has seen an astronomical growth in Indian gaming, both in the amount of revenues generated and in the

number of gaming operations established. Yet the act has not been

amended to keep up with these changes.

Regulators have scrambled to keep up and lessons have been

learned about what is needed to create and maintain a fair and

well-regulated industry. In response to the growth of the industry,

on November 18, 2005, I introduced S. 2078, the Indian Gaming

Regulatory Act Amendments of 2005. Essentially, this bill addresses three areas that I believe are in need of reform.

First, the bill clarifies that the National Indian Gaming Commission has authority to promulgate and enforce minimum internal

control standards as to class III gaming, a topic on which this committee held a hearing last year.

Second, the bill tightens restrictions on off-reservation gaming.

Several committee hearings have focused on this problem and the

committee has received testimony from numerous parties on all

sides of these issues.

Last, the bill expands the NIGC chairman’s authority over contract approvals to include not only management contracts, but also

consulting, development and other significant contracts. Unfortunately, when IGRA was drafted we unwittingly tied the hands of

the NIGC by requiring approval only for management contracts.
2

Among the lessons learned over the past 17 years is that in order

to avoid NIGC review, some unscrupulous contractors have fashioned agreements as consulting or development contracts. That is,

something other than management contracts that require NIGC review.

In these cases, tribes run a risk that contractors will enforce unfair contract terms and tribes and patrons run the risk that the

tribe will contact with unsuitable partners. S. 2078 extends NIGC

approval to all significant gaming operations related contracts, so

that Indian tribes remain the primary beneficiaries of their gaming

operations, which was and remains among the fundamental purposes for which IGRA was enacted.

I am aware that some tribes are concerned that the bill language

may overburden the NIGC and duplicate activities already performed by their tribal and State regulatory authorities. Amending

IGRA to address concerns about these consulting contracts and

contractors, while maintaining an efficient Federal regulatory

agency, is a goal shared by all.

I look forward to hearing from the witnesses today, anticipating

that they will provide us a real world view of how to achieve this

goal.

I just want to reiterate a point. There are many Native Americans, particularly gaming tribes, who have approached me and

said, we don’t even need this issue reviewed, much less changed.

Any act, any legislation that is 18 years old clearly needs review.

And second of all, any operation that has gone from $500 million

to $20 billion a year and continues to go up obviously needs to be

scrutinized and looked at. Things have changed since 1988.

So I steadfastly reject, steadfastly reject some kind of allegation

that we should not be reviewing and making necessary changes to

the Indian Gaming Regulatory Act. So this committee will mark up

on March 29 a bill, and it will be subject to amendment, and we

will try to move it to the floor of the Senate.

[Text of S. 2078 follows:]
3

1

II

109TH CONGRESS

1ST SESSION S. 2078

To amend the Indian Gaming Regulatory Act to clarify the authority of

the National Indian Gaming Commission to regulate class III gaming,

to limit the lands eligible for gaming, and for other purposes.

IN THE SENATE OF THE UNITED STATES

NOVEMBER 18, 2005

Mr. MCCAIN introduced the following bill; which was read twice and referred

to the Committee on Indian Affairs

A BILL

To amend the Indian Gaming Regulatory Act to clarify the

authority of the National Indian Gaming Commission

to regulate class III gaming, to limit the lands eligible

for gaming, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Indian Gaming Regu5 latory Act Amendments of 2005’’.

6 SEC. 2. DEFINITIONS.

7 Section 4 of the Indian Gaming Regulatory Act (25

8 U.S.C. 2703) is amended—
4

2

•S 2078 IS

1 (1) in paragraph (7)(E), by striking ‘‘of the In2 dian Gaming Regulatory Act (25 U.S.C.

3 2710(d)(3))’’; and

4 (2) by adding at the end the following:

5 ‘‘(11) GAMING-RELATED CONTRACT.—The term

6 ‘gaming-related contract’ means—

7 ‘‘(A) a contract or other agreement relat8 ing to the management and operation of an In9 dian tribal gaming activity, including a contract

10 for services under which the gaming-related

11 contractor—

12 ‘‘(i) exercises material control over the

13 gaming activity (or any part of the gaming

14 activity); or

15 ‘‘(ii) advises or consults with a person

16 that exercises material control over the

17 gaming activity (or any part of the gaming

18 activity);

19 ‘‘(B) an agreement relating to the develop20 ment or construction of a facility to be used for

21 an Indian tribal gaming activity (including a fa22 cility that is ancillary to such an activity) the

23 cost of which is greater than $250,000; or

24 ‘‘(C) an agreement that provides for com25 pensation or fees based on a percentage of the
5

3

•S 2078 IS

1 net revenues of an Indian tribal gaming activ2 ity.

3 ‘‘(12) GAMING-RELATED CONTRACTOR.—The

4 term ‘gaming-related contractor’ means an entity or

5 an individual, including an individual who is an offi6 cer, or who serves on the board of directors, of an

7 entity, or a stockholder that directly or indirectly

8 holds at least 5 percent of the issued and outstand9 ing stock of an entity, that enters into a gaming-re10 lated contract with—

11 ‘‘(A) an Indian tribe; or

12 ‘‘(B) an agent of an Indian tribe.

13 ‘‘(13) MATERIAL CONTROL.—The term ‘mate14 rial control’, with respect to a gaming activity,

15 means the exercise of authority or supervision over

16 a matter that substantially affects a financial or

17 management aspect of an Indian tribal gaming ac18 tivity.’’.

19 SEC. 3. NATIONAL INDIAN GAMING COMMISSION.

20 Section 5 of the Indian Gaming Regulatory Act (25

21 U.S.C. 2704) is amended—

22 (1) in subsection (c)—

23 (A) by striking ‘‘(c) Vacancies’’ and insert24 ing the following:

25 ‘‘(c) VACANCIES.—
6

4

•S 2078 IS

1 ‘‘(1) IN GENERAL.—Except as provided in para2 graph (2), a vacancy’’;

3 (B) by striking the second sentence and in4 serting the following:

5 ‘‘(3) EXPIRATION OF TERM.—Unless a member

6 has been removed for cause under subsection (b)(6),

7 the member may—

8 ‘‘(A) serve after the expiration of the term

9 of office of the member until a successor is ap10 pointed; or

11 ‘‘(B) be reappointed to serve on the Com12 mission.’’; and

13 (C) by inserting after paragraph (1) (as

14 designated by subparagraph (A)) the following:

15 ‘‘(2) VICE CHAIRMAN.—The Vice Chairman

16 shall act as Chairman in the absence or disability of

17 the Chairman.’’; and

18 (2) in subsection (e), in the second sentence, by

19 inserting ‘‘or disability’’ after ‘‘in the absence’’.

20 SEC. 4. POWERS OF THE CHAIRMAN.

21 Section 6 of the Indian Gaming Regulatory Act (25

22 U.S.C. 2705) is amended—

23 (1) in subsection (a)—

24 (A) in paragraph (3), by striking ‘‘and’’ at

25 the end;
7

5

•S 2078 IS

1 (B) by striking paragraph (4) and insert2 ing the following:

3 ‘‘(4) approve gaming-related contracts for class

4 II gaming and class III gaming under section 12;

5 and’’; and

6 (C) by adding at the end the following:

7 ‘‘(5) conduct a background investigation and

8 make a determination with respect to the suitability

9 of a gaming-related contractor, as the Chairman de10 termines to be appropriate.’’; and

11 (2) by adding at the end the following:

12 ‘‘(c) DELEGATION OF AUTHORITY.—

13 ‘‘(1) IN GENERAL.—The Chairman may dele14 gate any authority under this section to any member

15 of the Commission, as the Chairman determines to

16 be appropriate.

17 ‘‘(2) REQUIREMENT.—In carrying out an activ18 ity pursuant to a delegation under paragraph (1), a

19 member of the Commission shall be subject to, and

20 act in accordance with—

21 ‘‘(A) the general policies formally adopted

22 by the Commission; and

23 ‘‘(B) the regulatory decisions, findings,

24 and determinations of the Commission pursuant

25 to Federal law.’’.
8

6

•S 2078 IS

1 SEC. 5. POWERS OF THE COMMISSION.

2 Section 7(b) of the Indian Gaming Regulatory Act

3 (25 U.S.C. 2706(b)) is amended—

4 (1) in paragraphs (1) and (4), by inserting

5 ‘‘and class III gaming’’ after ‘‘class II gaming’’ each

6 place it appears;

7 (2) in paragraph (2), by inserting ‘‘or class III

8 gaming’’ after ‘‘class II gaming’’; and

9 (3) in paragraph (10), by inserting ‘‘, including

10 regulations addressing minimum internal control

11 standards for class II gaming and class III gaming

12 activities’’ before the period at the end.

13 SEC. 6. COMMISSION STAFFING.

14 (a) GENERAL COUNSEL.—Section 8(a) of the Indian

15 Gaming Regulatory Act (25 U.S.C. 2707(a)) is amended

16 by striking ‘‘basic’’ and all that follows through the end

17 of the subsection and inserting the following: ‘‘pay payable

18 for level IV of the Executive Schedule under chapter 11

19 of title 2, United States Code, as adjusted by section 5318

20 of title 5, United States Code.’’.

21 (b) OTHER STAFF.—Section 8(b) of the Indian Gam22 ing Regulatory Act (25 U.S.C. 2707(b)) is amended by

23 striking ‘‘basic’’ and all that follows through the end of

24 the subsection and inserting the following: ‘‘pay payable

25 for level IV of the Executive Schedule under chapter 11
9

7

•S 2078 IS

1 of title 2, United States Code, as adjusted by section 5318

2 of title 5, United States Code.’’.

3 (c) TEMPORARY AND INTERMITTENT SERVICES.—

4 Section 8(c) of the Indian Gaming Regulatory Act (25

5 U.S.C. 2707(c)) is amended by striking ‘‘basic’’ and all

6 that follows through the end of the subsection and insert7 ing the following: ‘‘pay payable for level IV of the Execu8 tive Schedule under chapter 11 of title 2, United States

9 Code, as adjusted by section 5318 of title 5, United States

10 Code.’’.

11 SEC. 7. TRIBAL GAMING ORDINANCES.

12 Section 11 of the Indian Gaming Regulatory Act (25

13 U.S.C. 2710) is amended—

14 (1) in subsection (b)—

15 (A) in paragraph (1)(A), by striking ‘‘,

16 and’’ and inserting ‘‘; and’’;

17 (B) in paragraph (2)(F)—

18 (i) by striking clause (i) and inserting

19 the following:

20 ‘‘(i) ensures that background investigations

21 and ongoing oversight activities are conducted

22 with respect to—

23 ‘‘(I) tribal gaming commissioners and

24 key tribal gaming commission employees,

25 as determined by the Chairman;
10

8

•S 2078 IS

1 ‘‘(II) primary management officials

2 and other key employees of the gaming en3 terprise, as determined by the Chairman;

4 and

5 ‘‘(III) any person that is a party to a

6 gaming-related contract; and’’; and

7 (ii) in clause (ii)(I), by striking ‘‘pri8 mary’’ and all that follows through ‘‘with’’

9 and inserting ‘‘the individuals and entities

10 described in clause (i), including’’;

11 (C) in paragraph (3)—

12 (i) by redesignating subparagraphs

13 (C) and (D) as subparagraphs (D) and

14 (E), respectively; and

15 (ii) by striking subparagraph (B) and

16 inserting the following:

17 ‘‘(B) the plan is approved by the Secretary

18 after the Secretary determines that—

19 ‘‘(i) the plan is consistent with the uses de20 scribed in paragraph (2)(B);

21 ‘‘(ii) the plan adequately addresses the

22 purposes described in clauses (i) and (iii) of

23 paragraph (2)(B); and

24 ‘‘(iii) a per capita payment is a reasonable

25 method of providing for the general welfare of
11

9

•S 2078 IS

1 the Indian tribe and the members of the Indian

2 tribe;

3 ‘‘(C) the Secretary determines that the plan

4 provides an adequate mechanism for the monitoring

5 and enforcement, by the Secretary and the Chair6 man, of the compliance of the plan (including any

7 amendment, revision, or rescission of any part of the

8 plan);’’; and

9 (D) in paragraph (4)(B)(i)—

10 (i) in subclause (I), by striking ‘‘of

11 the Act,’’ and inserting a semicolon;

12 (ii) in subclause (II), by striking ‘‘of

13 this subsection’’ and inserting a semicolon;

14 (iii) in subclause (III), by striking ‘‘,

15 and’’ and inserting ‘‘; and’’; and

16 (iv) in subclause (IV), by striking

17 ‘‘National Indian Gaming’’;

18 (2) in subsection (d)—

19 (A) in paragraph (1)—

20 (i) in subparagraph (A)—

21 (I) in clause (i), by striking

22 ‘‘lands,’’ and inserting ‘‘lands;’’;

23 (II) in clause (ii), by striking ‘‘,

24 and’’ and inserting ‘‘; and’’; and
12

10

•S 2078 IS

1 (III) in clause (iii), by striking

2 the comma at the end and inserting a

3 semicolon; and

4 (ii) in subparagraph (B), by striking

5 ‘‘, and’’ and inserting ‘‘; and’’;

6 (B) in paragraph (2)—

7 (i) in subparagraph (B)(i), by striking

8 ‘‘, or’’ and inserting ‘‘; or’’; and

9 (ii) in subparagraph (D)(iii)(I), by

10 striking ‘‘, and’’ and inserting ‘‘; and’’;

11 (C) in paragraph (7)(B)—

12 (i) in clause (ii)(I), by striking ‘‘,

13 and’’ and inserting ‘‘; and’’;

14 (ii) in clause (iii)(I), by striking ‘‘,

15 and’’ and inserting ‘‘; and’’; and

16 (iii) in clause (vii)(I), by striking ‘‘,

17 and’’ and inserting ‘‘; and’’;

18 (D) in paragraph (8)(B)—

19 (i) in clause (i), by striking the

20 comma at the end and inserting a semi21 colon; and

22 (ii) in clause (ii), by striking ‘‘, or’’

23 and inserting ‘‘; or’’; and

24 (E) by striking paragraph (9); and

25 (3) by adding at the end the following:
13

11

•S 2078 IS

1 ‘‘(f) PROVISION OF INFORMATION TO CHAIRMAN.—

2 Immediately after approving a plan (including any amend3 ment, revision, or recision of any part of a plan) under

4 subsection (b)(3), the Secretary shall provide to the

5 Chairman—

6 ‘‘(1) a notice of the approval; and

7 ‘‘(2) any information used by the Secretary in

8 approving the plan.’’.

9 SEC. 8. GAMING-RELATED CONTRACTS.

10 Section 12 of the Indian Gaming Regulatory Act (25

11 U.S.C. 2711) is amended to read as follows:

12 ‘‘SEC. 12. GAMING-RELATED CONTRACTS.

13 ‘‘(a) IN GENERAL.—To be enforceable under this

14 Act, a gaming-related contract shall be—

15 ‘‘(1) in writing; and

16 ‘‘(2) approved by the Chairman under sub17 section (c).

18 ‘‘(b) CONTRACT REQUIREMENTS.—

19 ‘‘(1) IN GENERAL.—A gaming-related contract

20 under this Act shall provide for the Indian tribe, at

21 a minimum, provisions relating to—

22 ‘‘(A) accounting and reporting procedures,

23 including, as appropriate, provisions relating to

24 verifiable financial reports;
14

12

•S 2078 IS

1 ‘‘(B) the access required to ensure proper

2 performance of the gaming-related contract, in3 cluding access to, with respect to a gaming

4 activity—

5 ‘‘(i) daily operations;

6 ‘‘(ii) real property;

7 ‘‘(iii) equipment; and

8 ‘‘(iv) any other tangible or intangible

9 property used to carry out the activity;

10 ‘‘(C) assurance of performance of each

11 party to the gaming-related contract, including

12 the provision of bonds under subsection (d), as

13 the Chairman determines to be necessary; and

14 ‘‘(D) the reasons for, and method of, ter15 minating the gaming-related contract.

16 ‘‘(2) TERM.—

17 ‘‘(A) IN GENERAL.—Except as provided in

18 subparagraph (B), the term of a gaming-related

19 contract shall not exceed 5 years.

20 ‘‘(B) EXCEPTION.—Notwithstanding sub21 paragraph (A), a gaming-related contract may

22 have a term of not to exceed 7 years if—

23 ‘‘(i) the Indian tribal party to the

24 gaming-related contract submits to the

25 Chairman a request for such a term; and
15

13

•S 2078 IS

1 ‘‘(ii) the Chairman determines that

2 the term is appropriate, taking into consid3 eration the circumstances of the gaming4 related contract.

5 ‘‘(3) FEES.—

6 ‘‘(A) IN GENERAL.—Notwithstanding the

7 payment terms of a gaming-related contract,

8 and except as provided in subparagraph (B),

9 the fee of a gaming-related contractor or bene10 ficiary of a gaming-related contract shall not

11 exceed an amount equal to 30 percent of the

12 net revenues of the gaming operation that is

13 the subject of the gaming-related contract.

14 ‘‘(B) EXCEPTION.—The fee of a gaming15 related contractor or beneficiary of a gaming-re16 lated contract may be in an amount equal to

17 not more than 40 percent of the net revenues

18 of the gaming operation that is the subject of

19 the gaming-related contract if the Chairman de20 termines that such a fee is appropriate, taking

21 into consideration the circumstances of the

22 gaming-related contract.

23 ‘‘(c) APPROVAL BY CHAIRMAN.—

24 ‘‘(1) GAMING-RELATED CONTRACTS.—
16

14

•S 2078 IS

1 ‘‘(A) IN GENERAL.—An Indian tribe shall

2 submit each gaming-related contract of the

3 tribe to the Chairman for approval by not later

4 than the earlier of—

5 ‘‘(i) the date that is 90 days after the

6 date on which the gaming-related contract

7 is executed; or

8 ‘‘(ii) the date that is 90 days before

9 the date on which the gaming-related con10 tract is scheduled to be completed.

11 ‘‘(B) FACTORS FOR CONSIDERATION.—In

12 determining whether to approve a gaming-relat13 ed contract under this subsection, the Chairman

14 may take into consideration any information re15 lating to the terms, parties, and beneficiaries

16 of—

17 ‘‘(i) the gaming-related contract; and

18 ‘‘(ii) any other agreement relating to

19 the Indian gaming activity, as determined

20 by the Chairman.

21 ‘‘(C) DEADLINE FOR DETERMINATION.—

22 ‘‘(i) IN GENERAL.—The Chairman

23 shall approve or disapprove a gaming-relat24 ed contract under this subsection by not

25 later than 90 days after the date on which
17

15

•S 2078 IS

1 the Chairman makes a determination re2 garding the suitability of each gaming-re3 lated contractor under paragraph (2).

4 ‘‘(ii) EXPEDITED REVIEW.—

5 ‘‘(I) IN GENERAL.—If each gam6 ing-related contractor has been deter7 mined by the Chairman to be suitable

8 under paragraph (2) on or before the

9 date on which the gaming-related con10 tract is submitted to the Chairman,

11 the Chairman shall approve or dis12 approve the gaming-related contract

13 by not later than 30 days after the

14 date on which the gaming-related con15 tract is submitted.

16 ‘‘(II) FAILURE TO DETERMINE.—

17 If the Chairman fails to make a deter18 mination by the date described in sub19 clause (I), a gaming-related contract

20 described in that subclause shall be

21 considered to be approved.

22 ‘‘(III) AMENDMENTS.—The

23 Chairman may require the parties to

24 a gaming-related contract considered

25 to be approved under subclause (II) to
18

16

•S 2078 IS

1 amend the gaming-related contract, as

2 the Chairman considers to be appro3 priate to meet the requirements under

4 subsection (b).

5 ‘‘(iii) EARLY OPERATION.—

6 ‘‘(I) IN GENERAL.—On approval

7 of the Chairman under subclause (II),

8 a gaming-related contract may be car9 ried out before the date on which the

10 gaming-related contract is approved

11 by the Chairman under clause (i).

12 ‘‘(II) APPROVAL BY CHAIR13 MAN.—The Chairman may approve

14 the early operation of a gaming-relat15 ed contract under subclause (I) if the

16 Chairman determines that—

17 ‘‘(aa) adequate bonds have

18 been provided under paragraph

19 (2)(G)(iii) and subsection (d);

20 and

21 ‘‘(bb) the gaming-related

22 contract will be amended as the

23 Chairman considers to be appro24 priate to meet the requirements

25 under subsection (b).
19

17

•S 2078 IS

1 ‘‘(D) REQUIREMENTS FOR DIS2 APPROVAL.—The Chairman shall disapprove a

3 gaming-related contract under this subsection if

4 the Chairman determines that—

5 ‘‘(i) the gaming-related contract fails

6 to meet any requirement under subsection

7 (b);

8 ‘‘(ii) a gaming-related contractor is

9 unsuitable under paragraph (2);

10 ‘‘(iii) a gaming-related contractor or

11 beneficiary of the gaming-related

12 contract—

13 ‘‘(I) unduly interfered with or in14 fluenced, or attempted to interfere

15 with or influence, a decision or proc16 ess of an Indian tribal government re17 lating to the gaming activity for the

18 benefit of the gaming-related contrac19 tor or beneficiary; or

20 ‘‘(II) deliberately or substantially

21 failed to comply with—

22 ‘‘(aa) the gaming-related

23 contract; or
20

18

•S 2078 IS

1 ‘‘(bb) a tribal gaming ordi2 nance or resolution adopted and

3 approved pursuant to this Act;

4 ‘‘(iv) the Indian tribe with jurisdiction

5 over the Indian lands on which the gaming

6 activity is located will not receive the pri7 mary benefit as sole proprietor of the gam8 ing activity, taking into consideration any

9 agreement relating to the gaming activity;

10 ‘‘(v) a trustee would disapprove the

11 gaming-related contract, in accordance

12 with the duties of skill and diligence of the

13 trustee, because the compensation or fees

14 under the gaming-related contract do not

15 bear a reasonable relationship to the cost

16 of the goods or the benefit of the services

17 provided under the gaming-related con18 tract; or

19 ‘‘(vi) a person or an Indian tribe

20 would violate this Act—

21 ‘‘(I) on approval of the gaming22 related contract; or

23 ‘‘(II) in carrying out the gaming24 related contract.

25 ‘‘(2) GAMING-RELATED CONTRACTORS.—
21

19

•S 2078 IS

1 ‘‘(A) IN GENERAL.—Not later than 90

2 days after the date on which the Chairman re3 ceives a gaming-related contract, the Chairman

4 shall make a determination regarding the suit5 ability of each gaming-related contractor to

6 carry out any gaming activity that is the sub7 ject of the gaming-related contract.

8 ‘‘(B) REQUIREMENTS.—The Chairman

9 shall make a determination under subparagraph

10 (A) that a gaming-related contractor is unsuit11 able if, as determined by the Chairman—

12 ‘‘(i) the gaming-related contractor—

13 ‘‘(I) is an elected member of the

14 governing body of an Indian tribe that

15 is a party to the gaming-related con16 tract;

17 ‘‘(II) has been convicted of—

18 ‘‘(aa) a felony; or

19 ‘‘(bb) any offense relating to

20 gaming;

21 ‘‘(III)(aa) knowingly and willfully

22 provided any materially important

23 false statement or other information

24 to the Commission or an Indian tribe
22

20

•S 2078 IS

1 that is a party to the gaming-related

2 contract; or

3 ‘‘(bb) failed to respond to a re4 quest for information under this Act;

5 ‘‘(IV) poses a threat to the public

6 interest or the effective regulation or

7 conduct of gaming under this Act,

8 taking into consideration the behavior,

9 criminal record, reputation, habits,

10 and associations of the gaming-related

11 contractor;

12 ‘‘(V) unduly interfered, or at13 tempted to unduly interfere, with any

14 determination or governing process of

15 the governing body of an Indian tribe

16 relating to a gaming activity, for the

17 benefit of the gaming-related contrac18 tor; or

19 ‘‘(VI) deliberately or substan20 tially failed to comply with the terms

21 of—

22 ‘‘(aa) the gaming-related

23 contract; or
23

21

•S 2078 IS

1 ‘‘(bb) a tribal gaming ordi2 nance or resolution approved and

3 adopted under this Act; or

4 ‘‘(ii) a trustee would determine that

5 the gaming-related contractor is unsuit6 able, in accordance with the duties of skill

7 and diligence of the trustee.

8 ‘‘(C) FAILURE TO DETERMINE.—If the

9 Chairman fails to make a suitability determina10 tion with respect to a gaming-related contractor

11 by the date described in subparagraph (A), each

12 gaming-related contractor shall be considered to

13 be suitable to carry out the gaming activity that

14 is the subject of the applicable gaming-related

15 contract.

16 ‘‘(D) REVOCATION.—At any time, based

17 on a showing of good cause, the Chairman

18 may—

19 ‘‘(i) make a determination that a

20 gaming-related contractor is unsuitable

21 under this subsection; or

22 ‘‘(ii) revoke a suitability determination

23 under this subsection.

24 ‘‘(E) TEMPORARY SUITABILITY.—
24

22

•S 2078 IS

1 ‘‘(i) IN GENERAL.—For purposes of

2 meeting a deadline under paragraph

3 (1)(C), the Chairman may determine that

4 a gaming-related contractor is temporarily

5 suitable if—

6 ‘‘(I) the Chairman determined

7 the gaming-related contractor to be

8 suitable with respect to another gam9 ing-related contract being carried out

10 on the date on which the Chairman

11 makes a determination under this

12 paragraph; and

13 ‘‘(II) the gaming-related contrac14 tor has not otherwise been determined

15 to be unsuitable by the Chairman.

16 ‘‘(ii) FINAL DETERMINATION.—The

17 Chairman shall make a suitability deter18 mination with respect to a gaming-related

19 contractor that is the subject of a tem20 porary suitability determination under

21 clause (i) by the date described in subpara22 graph (A), in accordance with subpara23 graph (F).

24 ‘‘(F) UPDATING DETERMINATIONS.—The

25 Chairman, as the Chairman determines to be
25

23

•S 2078 IS

1 appropriate, may limit an investigation of the

2 suitability of a gaming-related contractor

3 that—

4 ‘‘(i) has been determined to be suit5 able by the Chairman with respect to an6 other gaming-related contract being carried

7 out on the date on which the Chairman

8 makes a determination under this para9 graph; and

10 ‘‘(ii) certifies to the Chairman that

11 the information provided during a preced12 ing suitability determination has not mate13 rially changed.

14 ‘‘(G) RESPONSIBILITY OF GAMING-RELAT15 ED CONTRACTOR.—A gaming-related contractor

16 shall—

17 ‘‘(i) pay the costs of any investigation

18 activity of the Chairman in carrying out

19 this paragraph;

20 ‘‘(ii) provide to the Chairman a notice

21 of any change in information provided dur22 ing a preceding investigation on discovery

23 of the change; and

24 ‘‘(iii) during an investigation of suit25 ability under this paragraph, provide to the
26

24

•S 2078 IS

1 Chairman such bonds under subsection (d)

2 as the Chairman determines to be appro3 priate to shield an Indian tribe from liabil4 ity resulting from an action of the gaming5 related contractor.

6 ‘‘(H) REGISTRY.—The Chairman shall es7 tablish and maintain a registry of each suit8 ability determination made under this para9 graph.

10 ‘‘(3) ADDITIONAL REVIEWS.—Notwithstanding

11 an approval under paragraph (1), or a determination

12 of suitability under paragraph (2), if the Chairman

13 determines that a gaming-related contract, or any

14 party to such a contract, is in violation of this Act,

15 the Chairman may—

16 ‘‘(A) suspend performance under the gam17 ing-related contract;

18 ‘‘(B) require the parties to amend the

19 gaming-related contract; or

20 ‘‘(C) revoke a determination of suitability

21 under paragraph (2)(D).

22 ‘‘(4) TERMINATION.—Termination of a gaming23 related contract shall not require the approval of the

24 Chairman.

25 ‘‘(d) BONDS.—
27

25

•S 2078 IS

1 ‘‘(1) IN GENERAL.—The Chairman may require

2 a gaming-related contractor to provide to the Chair3 man a bond to ensure the performance of the gam4 ing-related contractor under a gaming-related con5 tract.

6 ‘‘(2) REGULATIONS.—The Chairman, by regula7 tion, shall establish the amount of a bond required

8 under this subsection.

9 ‘‘(3) METHOD OF PAYMENT.—A bond under

10 this subsection may be provided—

11 ‘‘(A) in cash or negotiable securities;

12 ‘‘(B) through a surety bond guaranteed by

13 a guarantor acceptable to the Chairman; or

14 ‘‘(C) through an irrevocable letter of credit

15 issued by a banking institution acceptable to

16 the Chairman.

17 ‘‘(4) USE OF BONDS.—The Chairman shall use

18 a bond provided under this subsection to pay the

19 costs of a failure of the gaming-related contractor

20 that provided the bond to perform under a gaming21 related contract.

22 ‘‘(e) APPEAL OF DETERMINATION.—

23 ‘‘(1) IN GENERAL.—An Indian tribe or a gam24 ing-related contractor may submit to the Commis-
28

26

•S 2078 IS

1 sion a request for an appeal of a determination of

2 the Chairman under subsection (c) or (d).

3 ‘‘(2) DETERMINATION OF COMMISSION.—

4 ‘‘(A) HEARINGS.—The Commission shall

5 schedule a hearing relating to an appeal under

6 paragraph (1) by not later than 30 days after

7 the date on which a request for the appeal is

8 received.

9 ‘‘(B) DEADLINE FOR DETERMINATION.—

10 The Commission shall make a determination, by

11 majority vote of the Commission, relating to an

12 appeal under this subsection by not later than

13 5 days after the date of the hearing relating to

14 the appeal under subparagraph (A).

15 ‘‘(C) CONCURRENCE.—If the Commission

16 concurs with a determination of the Chairman

17 under this subsection, the determination shall

18 be considered to be a final agency action.

19 ‘‘(D) DISSENT.—

20 ‘‘(i) IN GENERAL.—If the Commission

21 dissents from a determination of the

22 Chairman under this subsection, the Chair23 man may—

24 ‘‘(I) rescind the determination of

25 the Chairman; or
29

27

•S 2078 IS

1 ‘‘(II) on a finding of immediate

2 and irreparable harm to the Indian

3 tribe that is the subject of the deter4 mination, maintain the determination.

5 ‘‘(ii) FINAL AGENCY ACTION.—A deci6 sion by the Chairman to maintain a deter7 mination under clause (i)(II) shall be con8 sidered to be a final agency action.

9 ‘‘(3) APPEAL OF COMMISSION DETERMINA10 TION.—An Indian tribe, a gaming-related contrac11 tor, or a beneficiary of a gaming-related contract

12 may appeal a determination of the Commission

13 under paragraph (2) to the United States District

14 Court for the District of Columbia.

15 ‘‘(f) CONVEYANCE OF REAL PROPERTY.—No gam16 ing-related contract under this Act shall transfer or other17 wise convey any interest in land or other real property un18 less the transfer or conveyance—

19 ‘‘(1) is authorized under law; and

20 ‘‘(2) is specifically described in the gaming-re21 lated contract.

22 ‘‘(g) CONTRACT AUTHORITY.—The authority of the

23 Secretary under section 2103 of the Revised Statutes (25

24 U.S.C. 81) relating to contracts under this Act is trans25 ferred to the Commission.
30

28

•S 2078 IS

1 ‘‘(h) NO EFFECT ON TRIBAL AUTHORITY.—This sec2 tion does not expand, limit, or otherwise affect the author3 ity of any Indian tribe or any party to a Tribal-State com4 pact to investigate, license, or impose a fee on a gaming5 related contractor.’’.

6 SEC. 9. CIVIL PENALTIES.

7 Section 14 of the Indian Gaming Regulatory Act (25

8 U.S.C. 2713) is amended—

9 (1) by striking the section designation and

10 heading and all that follows through subsection (a)

11 and inserting the following:

12 ‘‘SEC. 14. CIVIL PENALTIES.

13 ‘‘(a) PENALTIES.—

14 ‘‘(1) VIOLATION OF ACT.—

15 ‘‘(A) IN GENERAL.—An Indian tribe, indi16 vidual, or entity that violates any provision of

17 this Act (including any regulation of the Com18 mission and any Indian tribal regulation, ordi19 nance, or resolution approved under section 11

20 or 13) in carrying out a gaming-related con21 tract may be subject to, as the Chairman deter22 mines to be appropriate—

23 ‘‘(i) an appropriate civil fine, in an

24 amount not to exceed $25,000 per viola25 tion per day; or
31

29

•S 2078 IS

1 ‘‘(ii) an order of the Chairman for an

2 accounting and disgorgement, including in3 terest.

4 ‘‘(B) APPLICATION TO INDIAN TRIBES.—

5 An Indian tribe shall not be subject to

6 disgorgement under subparagraph (A)(ii) unless

7 the Chairman determines that the Indian tribe

8 grossly violated a provision of this Act.

9 ‘‘(2) APPEALS.—The Chairman shall provide,

10 by regulation, an opportunity to appeal a determina11 tion relating to a violation under paragraph (1).

12 ‘‘(3) WRITTEN COMPLAINTS.—

13 ‘‘(A) IN GENERAL.—If the Commission has

14 reason to believe that an Indian tribe or a party

15 to a gaming-related contract may be subject to

16 a penalty under paragraph (1), the final closure

17 of an Indian gaming activity, or a modification

18 or termination order relating to the gaming-re19 lated contract, the Chairman shall provide to

20 the Indian tribe or party a written complaint,

21 including—

22 ‘‘(i) a description of any act or omis23 sion that is the basis of the belief of the

24 Commission; and
32

30

•S 2078 IS

1 ‘‘(ii) a description of any action being

2 considered by the Commission relating to

3 the act or omission.

4 ‘‘(B) REQUIREMENTS.—A written com5 plaint under subparagraph (A)—

6 ‘‘(i) shall be written in common and

7 concise language;

8 ‘‘(ii) shall identify any statutory or

9 regulatory provision relating to an alleged

10 violation by the Indian tribe or party; and

11 ‘‘(iii) shall not be written only in stat12 utory or regulatory language.’’;

13 (2) in subsection (b)—

14 (A) by striking ‘‘(b)(1) The Chairman’’

15 and inserting the following:

16 ‘‘(b) TEMPORARY CLOSURES.—

17 ‘‘(1) IN GENERAL.—The Chairman’’;

18 (B) in paragraph (1)—

19 (i) by striking ‘‘Indian game’’ and in20 serting ‘‘Indian gaming activity, or any

21 part of such a gaming activity,’’; and

22 (ii) by striking ‘‘section 11 or 13 of

23 this Act’’ and inserting ‘‘section 11 or 13’’;

24 and

25 (C) in paragraph (2)—
33

31

•S 2078 IS

1 (i) by striking ‘‘(2) Not later than

2 thirty’’ and inserting the following:

3 ‘‘(2) HEARINGS.—

4 ‘‘(A) IN GENERAL.—Not later than 30’’;

5 (ii) in subparagraph (A) (as designat6 ing by clause (i))—

7 (I) by striking ‘‘management con8 tractor’’ and inserting ‘‘party to a

9 gaming-related contract’’; and

10 (II) by striking ‘‘permanent’’ and

11 inserting ‘‘final’’; and

12 (iii) in the second sentence—

13 (I) by striking ‘‘Not later than

14 sixty’’ and inserting the following:

15 ‘‘(B) DETERMINATION OF COMMISSION.—

16 Not later than 60’’; and

17 (II) by striking ‘‘permanent’’ and

18 inserting ‘‘final’’;

19 (3) in subsection (c), by striking ‘‘(c) A deci20 sion’’ and inserting the following:

21 ‘‘(c) APPEAL OF FINAL DETERMINATIONS.—A deter22 mination’’; and

23 (4) in subsection (d), by striking ‘‘(d) Nothing’’

24 and inserting the following:
34

32

•S 2078 IS

1 ‘‘(d) EFFECT ON REGULATORY AUTHORITY OF IN2 DIAN TRIBES.—Nothing’’.

3 SEC. 10. GAMING ON LATER-ACQUIRED LAND.

4 Section 20(b) of the Indian Gaming Regulatory Act

5 (25 U.S.C. 2719(b)) is amended—

6 (1) in paragraph (1)—

7 (A) in subparagraph (A), by striking ‘‘ (A)

8 the Secretary, after consultation’’ and inserting

9 the following:

10 ‘‘(A)(i) before November 18, 2005, the Sec11 retary reviewed, or was in the process of reviewing,

12 at the Central Office of the Bureau of Indian Af13 fairs, Washington, DC, the petition of an Indian

14 tribe to have land taken into trust for purposes of

15 gaming under this Act; and

16 ‘‘(ii) the Secretary, after consultation’’; and

17 (B) in subparagraph (B)—

18 (i) in clause (i), by striking the

19 comma at the end and inserting the follow20 ing: ‘‘under Federal statutory law, if the

21 land is within a State in which is located—

22 ‘‘(I) the reservation of such Indian

23 tribe; or

24 ‘‘(II) the last recognized reservation

25 of such Indian tribe;’’;
35

33

•S 2078 IS

1 (ii) in clause (ii), by striking ‘‘, or’’

2 and inserting ‘‘if, as determined by the

3 Secretary, the Indian tribe has a temporal,

4 cultural, and geographic nexus to the land;

5 or’’; and

6 (iii) in clause (iii), by inserting before

7 the period at the end the following: ‘‘if, as

8 determined by the Secretary, the Indian

9 tribe has a temporal, cultural, and geo10 graphic nexus to the land’’; and

11 (2) by adding at the end the following:

12 ‘‘(4) EFFECT OF SUBSECTION.—Notwithstand13 ing any other provision of this subsection, land that,

14 before the date of enactment of the Indian Gaming

15 Regulatory Act Amendments of 2005, was deter16 mined by the Secretary or the Chairman to be eligi17 ble to be used for purposes of gaming shall continue

18 to be eligible for those purposes.’’.

19 SEC. 11. CONFORMING AMENDMENT.

20 (a) IN GENERAL.—Section 123(a)(2) of the Depart21 ment of the Interior and Related Agencies Appropriations

22 Act, 1998 (Public Law 105–83; 111 Stat. 1566) is

23 amended—

24 (1) in subparagraph (A), by adding ‘‘and’’ at

25 the end;
36

34

•S 2078 IS

1 (2) in subparagraph (B), by striking ‘‘; and’’

2 and inserting a period; and

3 (3) by striking subparagraph (C).

4 (b) APPLICABILITY.—Notwithstanding any other pro5 vision of law, section 18(a) of the Indian Gaming Regu6 latory Act (25 U.S.C. 2717(a)) shall apply to all Indian

7 tribes.

Æ
37

The CHAIRMAN. Senator Dorgan, welcome.

STATEMENT OF HON. BYRON L. DORGAN, U.S. SENATOR FROM

NORTH DAKOTA, VICE CHAIRMAN, COMMITTEE ON INDIAN

AFFAIRS

Senator DORGAN. Mr. Chairman, thank you very much.

As you have indicated, this is a hearing, one of several where we

have reviewed various provisions of the Indian Gaming Regulatory

Act to determine whether the act needs to be adjusted or changed

or amended in any way. Part of the stimulus for this comes from

the Colorado River Indian Tribes decision. I think it raises reasonable questions.

I have been helped enormously by these hearings because I have

been forced to go back and take a look at what the original thinking was, what the history was with respect to the construction of

these laws. Your legislation is a starting point. Some say that it

goes too far in some areas. I share that view.

On the other hand, I think to suggest that there is nothing going

on here that needs any Federal legislation is being oblivious to the

obvious. We do need, it seems to me, to take a good look at what

we have and what we should do. I commend the chairman for stimulating this discussion. I think these hearings are necessary, not

just worthy, but necessary. We have an Indian gaming industry now of nearly $20 billion a

year. It provides needed revenue to be helpful to the tribes to meet

their obligations and funding for some critical services. I want to

make certain that Indian gaming is as well regulated as can be, to

make certain that it continues to be able to be a generator of revenue for the tribes with which to do good things.

One way to do that is for us to have these kinds of reviews and

these hearings. So Mr. Chairman, I commend you for that. I look

forward to working with you as we proceed to a markup in this

matter.

The CHAIRMAN. Thank you very much.

Philip Hogen is the chairman of the National Indian Gaming

Commission. Welcome back, Mr. Chairman.

STATEMENT OF PHILIP HOGEN, CHAIRMAN, NATIONAL

INDIAN GAMING COMMISSION

Mr. HOGEN. Good morning, Chairman McCain and Vice Chairman Dorgan. I am delighted to be here on behalf of the National

Indian Gaming Commission. My fellow commissioner, Chuck

Choney from Oklahoma, is present here as well. So the full commission as it stands today is here.

Indian country owes this committee a great debt of gratitude for

the work you did to create the Indian Gaming Regulatory Act.

That, of course, did not create Indian gaming, but it created the

structure that has permitted the development of a very powerful

industry that has brought economic development to Indian country

that languished in poverty for generations. It has not solved all the

problems, but it has solved a lot of them.

So somebody in my position, who chairs the Federal regulatory

body that has oversight has a heavy responsibility to make sure,
38

as things go forward, they go in an orderly fashion and they complement what is happening, not complicate it.

But I certainly agree with the sentiments that have just been expressed that given the passage of time, the growth, the development of the industry, it is appropriate to look at the Act and to see

if there are things that might be improved or revised.

The two areas I want to comment on this morning are the clarification of NIGC’s class III authority. I testified in September of

last year about this and want to associate these remarks with that

testimony because all of that is still true.

The CHAIRMAN. I think we will see it is not a fine line between

class II and class III.

Mr. HOGEN. Well, that is a significant challenge, but in my testimony in September I attempted to point out how we got into the

regulation of class III to begin with. I think at the time IGRA was

designed, many thought it will always be bingo. Well, it wasn’t,

and 80 percent of it is not bingo; 80 percent of it is class III gaming. That is where the money, that is where the action is. So to

that end——

The CHAIRMAN. These are slot machines that look——

Mr. HOGEN. Slot machines and house banked games, blackjack

and so forth. Yes.

So recognizing this in 1999, starting in 1998, the National Indian

Gaming Commission developed minimum internal control standards. We did not invent the concept. We just adopted it and tried

to improve it and applied it to all of Indian gaming, class II and

class III. We said these are the rules you have to follow at a minimum to track the dollars as they flow through the gaming operation and they go to the tribe. These are the things you have to

do to ensure that the game is fair.

So for the first time, we had a rulebook, we had a yardstick, and

we were able to go out and measure the performance of tribes’

gaming operations and regulation. I think it worked splendidly.

Most tribes probably were ahead of the game, were already there,

but there were a lot of tribes that were not. So we were able to

bring them up to that standard.

Of course, since that time, we have gone out to look periodically

at how those performances measure up. We have done nearly 40

audits of individual facilities since we adopted those regulations.

We found a lot of violations. We found over 2,300 violations of minimum internal control standards. That probably sounds like a lot.

It is a lot, but it is not a lot compared to all of the compliance that

occurs. But to say that nothing is wrong out there would be a

misstatement.

The average number that we would find in these approximately

40 MICS audits would be about 64 relatively serious violations at

each facility. The kinds of things we would find is a failure of the

tribe to regularly do an analysis of the statistical performance of

their gaming. They should monitor each slot machine to see if it

is performing as the specs say it should. If it is not, there are questions to raise, and either somebody is taking the money or something is wrong with the machine.

We found ineffective key control. That is, all these machines and

cages and so forth are locked, and not everybody is following the
39

rules with respect to that. The jackpot fill and drop process is not

always tracked the way it should be. Occasionally, cash variances

occur and they are not always investigated as the controls say that

they ought to be. Sometimes there is not the appropriate segregation of duties within the facilities, if the same guy is counting and

doing the approval, and that sort of thing.

Internal audits have not been satisfactory, they are getting a lot

better, but there was a time when there just was not an appropriate internal audit effort at the facilities. One of these situations

will not necessarily mean a disaster, but let me just share with you

an incident that we currently are working with where a couple of

these things combined to result in a significant tribal loss.

The tribe was not monitoring the statistical analysis of its machines. When we did our audit, we observed this. When they got

around to doing that, they found that there were some significant

shortages or inconsistencies with what the dollars that they were

counting were compared to what was projected.

It was also discovered that there was a blind spot with respect

to their surveillance system. When they finally put all of this together, it was discovered that some of the drop team was taking

the money before it got to the cage. We do not know for sure how

much was taken, but maybe over $250,000. Had the MICS been followed from day one, I think that would have been avoided.

Now, does this mean that there has to be a Federal rule and a

Federal agency to do this? Not necessarily. The tribes could do this

on their own, but obviously they do not always do that. So without

the ability to promulgate these rules and to apply them to class III

gaming, instances like this are going to occur.

The CHAIRMAN. And to oversight.

Mr. HOGEN. Say again?

The CHAIRMAN. And to oversight.

Mr. HOGEN. Absolutely, yes.

The regulation sometimes is the stepchild of the system. That is,

it is not a revenue generating part of the business. So there are

temptations to shortcut it. But if you have somebody looking over

your shoulder and saying these are the rules you have to play by,

there is less of a temptation to do that.

We have an all Indian system here. That is, we have the National Indian Gaming Commission, the law you wrote says you

have to have two members on that commission that are tribal

members. Of course, they oversee, then, what the tribes who do the

heavy lifting, who do all the day to day stuff, do. So if we continue

to have the authority that we started with back in 1999, as I say,

I think it has worked beautifully, I think we can continue to ensure

the integrity that the industry needs.

People come to the tribal gaming facilities in droves and part of

the reason they do that is they have a good reputation for having

a fair game, for having integrity, and of course the fruits of the operation, building tribal communities and so forth. But if that starts

to erode, starts to disintegrate, I think it bodes ill for the future

of this industry.

So I refer the committee to my testimony where I attempt to

track the history of how we got into this, where we went, and why
40

it is effective, but if we are handcuffed, if we cannot look over 80

percent of these revenues, I think that the industry will suffer.

Also attached to my testimony is a chart, and this was also submitted to the committee in September, that looks at the tribalState compacts that tribes enter into for class III gaming. Those

compacts vary greatly, but many of them adopt the NIGC minimum internal control standards. Some unfortunately have no reference to internal control standards, and so if we are not out there,

we are afraid what needs to be done will not get done.

So if there is one thing we would ask for at the top of the list

with respect to any revision of the Indian Gaming Regulatory Act

it would be clarification of that authority. We, of course, have the

Colorado River Indian Tribes v. NIGC case or decision on appeal,

but we cannot predict how that will come out, and I think it would

be better if, rather than doing that in a judicial forum, if Congress

would say, this is what we intended: A Federal oversight role with

respect to the dominant form of gaming.

The CHAIRMAN. Mr. Chairman, when do you expect the Court of

Appeals to rule on that case?

Mr. HOGEN. The briefing schedule is just being implemented,

later this month, the first briefs will be filed, and then of course

it is a 60- or 90-day schedule. You cannot predict when the argument will be or how long.

The CHAIRMAN. We are talking about a minimum of 3 or 4

months, at a bare minimum.

Mr. HOGEN. Absolutely.

The CHAIRMAN. More likely 1 year.

Mr. HOGEN. It could well be. Of course, that is not necessarily

the end of the line. The Supreme Court might want to visit the

issue.

With respect to the contracting provision, NIGC has complained

for years that there are contracts out there that under the relatively narrow definition of management contracts, that IGRA now

provides we could not adequately provide the oversight we think

Congress intended. The committee has been responsive. S. 2078 expands the scope of what we might do. As we have studied this, we

are asking ourselves, maybe we have asked for a little too much,

or maybe now that we are better informed, we could be a little

more articulate with respect to just how best to address the situation.

I think it is important first of all to distinguish what NIGC does,

as opposed to other gaming jurisdictions with respect to contracts

and contractors. Many established gaming jurisdictions are concerned about contractors, those folks that do business with the casinos and the bingo halls. To that end, they license the people that

do that business. They do suitability determinations, background

investigations, but thereafter they kind of let the parties do as they

wish. If the casino wants to make a bad deal with the contractor,

they are free to do that.

Well, at NIGC we have an additional mandate. Not only do we

want to make sure the folks that deal with tribes are suitable to

do so, but that in our role as the trustee, we want to make sure

that tribes are not taken undue advantage of. To that extent, we

go over those management contracts that IGRA tasked us with
41

with a fine-toothed comb, and we make sure that what IGRA says,

the manager cannot get more than 30 percent of the proceeds, it

cannot last for more than 5 years, is adhered to.

Where we found it problematic was, as you mentioned in your

opening statement, Mr. Chairman, agreements were written that

were not called management contracts, but actually did get the

third party into the management, and we were not there scrutinizing that. We were not making suitability determinations. So we

asked that we have an expanded authority.

Tribal gaming operations enter into literally thousands of contracts. They buy paper towels. They buy poker chips. They enter

into consulting agreements, things like that. I think there is a risk

that if NIGC were tasked with looking at each and every contract,

that would be overkill. We might become a bureaucratic bottleneck

and tribes probably know a whole lot more about buying paper towels than the NIGC would.

The CHAIRMAN. Well, suggest language to us on how we can differentiate between what you think is correcting an abuse, and not

installing micromanagement. Okay? Have you got an idea there?

Mr. HOGEN. We do, and my staff has been working with the committee staff to try and put together language that would narrow

the category of gaming contracts wherein we would have a role.

But there are instances where nefarious people have gotten into casinos kind of through the back door we think that maybe there

should be a permissive category there where we could reach out

and identify, and say we would like to look at this garbage disposal

contract and background that firm to make sure organized crime

is not trying to come in from another direction.

So I think we can get there without becoming this bottleneck

that I am concerned about, but clarity is required. We have some

specifics in that connection in our testimony and we will continue

to work with the committee staff and the committee to try and

achieve that.

So that fairly well summarizes what is contained in my statement. I ask that it be included in the record and I stand ready to

respond to questions that might arise.

[Prepared statement of Mr. Hogen appears in appendix.]

The CHAIRMAN. I thank you very much for coming back, Mr.

Chairman. I think we need to correct the Colorado River decision.

I don’t know if we can or not, but I think it is obvious. Many times,

I do not understand judicial decisions, but I certainly do not understand that one because IGRA was framed with having in mind

oversight of a commission. To deny them that necessity, in my

view, is hard to understand. That is why I have some confidence

in the appeals process, but we probably, at least in my view, have

to fix it legislatively.

I thank you, Mr. Chairman, you were very clear and straightforward as always.

Senator Dorgan.

Senator DORGAN. Mr. Chairman, could you introduce the other

commission members? You said all of the commission members are

here with you.

Mr. HOGEN. Both of us are here. Our three-member commission

group is down to two.
42

Senator DORGAN. Okay.

Mr. HOGEN. Commissioner Chuck Choney from the Comanche

Tribe, a retired FBI agent, is our other commissioner.

Senator DORGAN. Thank you very much.

And what is the prospect of filling the third?

Mr. HOGEN. Well, I know that that is on the desk of the folks

at the Secretary of the Interior’s office and White House Personnel,

but we have not been told more about that.

The CHAIRMAN. How long has it been empty?

Mr. HOGEN. Nelson Westrin went home to Michigan on December 31, so it is just a little over 11⁄2 months.

Senator DORGAN. I do not want to ask a lot of questions here.

I will send you a good number of questions that relate to the kind

of thing that Senator McCain just asked you about, how to tailor

some of the provisions that I think might be broader than is advisable.

Let me ask about the audit activity of the commission and the

commission staff. Can you give me some sense of what kind of auditing goes on during the year and what those audits are finding?

Mr. HOGEN. Okay. We have a staff of auditors. One of the main

things they do all day every day is go in a group, we will take several auditors to an individual facility. They will say we want to

look at the records to see, (a), what your rules are; and (b) did you

follow them?; and is there a paper trail there to document this?

They will spend a couple of weeks, maybe longer depending on the

size of the operation, review those kinds of things.

They will work with the staff at the gaming facility, with the

tribal gaming regulators to ask questions and make sure they understand what happens. At the end of that exercise, they will prepare a report and they will list the exceptions, the deficiencies that

they have identified. They are auditors. That is their business.

They go nitpicking. They look for that stuff, and they almost always find.

After that is done and they send the report to the gaming facility, they say, will you please address each of these exceptions that

we have identified, and give us a report. We are going to come back

and see if those have been solved.

Now, in some instances they will say you misunderstood; we

were not doing that wrong; here is why we are doing it right. In

other instances, they will say we will fix it.

Senator DORGAN. Mr. Hogen, I would understand that to be the

approach, but I am talking about what quantity of work is done

relative to the number of gaming facilities across the country?

Mr. HOGEN. I wrote some of those numbers down.

Senator DORGAN. You can submit that for the record if you wish.

Mr. HOGEN. There are nearly 400 operations and we have only

done about 40 audits.

Senator DORGAN. So about 10 percent.

Mr. HOGEN. Let me add that one of the things our minimum internal control standards require is that when this annual independent financial audit is done, that auditor, that CPA firm must

also look at the tribe’s compliance with the MICS, prepare a report,

and send that to us. That, of course, helps us select where we are

going to go with our next audit.
43

Senator DORGAN. If you would, you could submit this to us. Do

you believe that the commission should be given expanded authority to monitor and enforce tribal revenue allocation plans? Give us

examples of why you believe the commission would need that expanded authority.

Mr. HOGEN. Okay. NIGC is responsible for taking enforcement

action if there are violations of the Indian Gaming Regulatory Act,

our regulations in the CFR, and that tribal gaming ordinance that

the tribe adopts to get into gaming. If they are going to do per capita payments, they have to adopt a revenue allocation plan that is

approved by the Secretary of the Interior.

After the Secretary approves that plan, she has no further responsibility or authority to monitor its compliance or to take action

if it is not complied with. But because it is a creature of the Indian

Gaming Regulatory Act, I think NIGC has the responsibility to inquire, is it being complied with. It is not crystal clear in the act

that that is one of our duties, but I think by reasonable implication

that we should look there.

It would be useful to know if we should do that with greater

specificity. There have been instances where a plan has been approved by the Secretary of the Interior, and the tribe is actually

distributing, and that plan typically will limit the percentage that

can be made, for example, for per capita payments.

But there have been instances where they are doing a whole lot

more per capita payment than is set forth in the plan, and because

of competition in the area, their revenues go down, and it becomes

politically unpopular at the local level to say let’s cut that per capita, and tribal programs that otherwise would be funded by tribal

gaming revenue suffer. Nobody is watching the store if NIGC does

not come out there and inquire into that.

Senator DORGAN. All right. I will submit some additional questions. Mr. Hogen, it is helpful for us and for our staffs as well to

be able to have access to you and to receive your recommendations

and suggestions as we think through the range of opportunities for

legislation and what we should be considering.

So thank you very much for appearing.

Mr. HOGEN. Thank you.

The CHAIRMAN. Senator Akaka.

STATEMENT OF HON. DANIEL K. AKAKA, U.S. SENATOR FROM

HAWAII

Senator AKAKA. Thank you very much, Mr. Chairman.

I want to thank you, Chairman McCain and Vice Chairman Dorgan, for holding this hearing.

After hearing your testimony, I share the concern that you have

and also the concern of many here with regard to considering oversight and ensuring accountability of not only gaming tribes, but

also the contractors that they do business with. Although S. 2078

will have a substantial regulatory impact on tribal gaming, we cannot ignore that this legislation may impact the ability of Indian nations to exercise their sovereignty. That is a personal concern.

Tribal governments have established gaming regulatory systems

and have demonstrated their vested commitment to comply with

the IGRA. As we move forward to address the regulatory authority
44

of your group, the NIGC, I am hopeful that we can proceed in a

manner that acknowledges and strengthens the government-to-government relationship between the United States and tribal governments.

My question to you is one that has to do with oversight. Is there

a schedule that you have of oversights?

Mr. HOGEN. We do not have a strict schedule, for example, that

says every third Tuesday we will be visiting a particular facility,

but we have five regional offices plus our region here on the East

Coast out of the Washington, DC office, with a team of investigators and auditors at each of those regions.

They visit all of the facilities in their region, hopefully several

times a year. Of course, there will be facilities that have some

problems that will be visited more often than that, but every year

we will visit the facility, hopefully several times, and then we select a number of tribes or a number of operations each year to do

a comprehensive minimum internal control standard audit.

We will be able to do more of those more recently than we were

able to before because we have more auditors now, and we are still

hiring auditors. Ideally, we would get to maybe 20 a year, as opposed to the 10 or so that we have been able to do up to this point.

But at each facility not only do we receive their records, their audits, and do we look at it that way, but we actually walk in the

door, talk to the people, and discuss the operation at the site.

Senator AKAKA. I look forward to members of this committee

having the opportunity to fully review any proposed changes in the

future to this bill. Also again, my interest in having the tribal governments, giving them the opportunity to look at this legislation as

well, and what impact it may have on them.

Mr. Chairman, I would like to just place my statement in the

record. Thank you very much.

The CHAIRMAN. Without objection.

Thank you very much, Mr. Chairman. We will appreciate your

continued fine work, and thanks for coming back.

The next panel is Ron His Horse Is Thunder, chairman, Standing

Rock Sioux Tribe; Norman DesRosiers, who is the commissioner of

the Viejas Tribal Government Gaming Commission; Paul Bullis,

who is the Director of the Arizona Department of Gaming.

Welcome.

We will begin with you, Chairman His Horse Is Thunder.

STATEMENT OF RON HIS HORSE IS THUNDER, CHAIRMAN,

STANDING ROCK SIOUX TRIBE

Mr. HIS HORSE IS THUNDER. Mr. Chairman and honorable members of this committee, my name is Ron His Horse Is Thunder. I

am the great-great-great-grandson of Chief Sitting Bull. I am the

chairman of the Standing Rock Sioux Tribe in North and South Dakota.

I appreciate the opportunity to testify before the committee on

this legislation. I have a longer written statement which I wish to

submit for the record, and I will summarize our position on this

legislation.

The CHAIRMAN. All the written statements will be made part of

the record. Please proceed.
45

Mr. HIS HORSE IS THUNDER. Thank you.

Mr. Chairman, while I appear as a representative of my tribe

and our position, it is shared by 32 members of the Great Plains

Indian Gaming Association covering the States of North Dakota,

South Dakota, Nebraska, Iowa, and Kansas, as well as the member

tribes of the Minnesota Indian Gaming Association and the six

member tribes of the Montana Indian Gaming Association.

These tribes are strongly opposed to the provisions of S. 2078

and in particular to the provisions conferring power on the National Indian Gaming Commission to adopt and enforce minimum

control standards and other regulations on class III Indian gaming.

It is important to understand that the Indian Gaming Regulatory

Act did not empower tribes to engage in gaming activities. That

right arises from the status of Indian tribes as sovereign nations

under Federal Indian law. That right was made clear in the 1987

decision of the Supreme Court in the Cabazon case. This was, of

course, before Congress passed the Indian Gaming Regulatory Act.

The fact of the matter is that IGRA was a limitation imposed by

Congress on that right. Most tribes were opposed to the enactment

of the legislation restricting their rights to get involved in gaming

activities, but the anti-Indian forces of the day were strong enough

for Congress to force it to act.

The few friends the tribes had in Congress had to make several

compromises with anti-Indian forces. One of these compromises involved tribal class III gaming. Against the wishes of tribes, IGRA

provides that class III gaming on Indian lands will be illegal without tribal-State class III compacts. This was because the States insisted that they have the right to be involved in the regulation of

all class III gaming. We did not like it, but that was what we were

stuck with.

Even after the Supreme Court decision in the Seminole case that

prohibits tribes from suing States as provided in IGRA, most Indian tribes involved in class III gaming have been able to reach

some kind of compact with the States. As intended by IGRA, these

compacts make provision for the regulation of tribal gaming. These

compacts provide for the sharing of regulatory power between the

tribe and the State. Some compacts provide for a lot of State regulation and some don’t. That is a decision made by the State and

the tribes.

In the 1990’s, NIGC, over the strong opposition of tribes, promulgated its MICS. These MICS imposed the most detailed kind of regulation on class II and class III gaming. Even though most tribes

already had their own regulatory schemes under the compacts,

they had to conform to the NIGC MICS by the year 2000.

Finally, one tribe challenge the right of the commission to enforce its MICS. Last year, the Federal court here in Washington,

DC found that the Indian Gaming Regulatory Act did not confer

that power on the National Indian Gaming Commission. Now, we

are faced with legislation that would overturn this Federal court

victory for tribal rights, and specifically confer that right to regulate class III gaming on the commission.

Mr. Chairman, we do not understand why the legislation is necessary. In the State of North Dakota, the leading Indian and nonIndian officials are satisfied with the State-tribal compact, that the
46

compacts make adequate provisions for effective regulation of our

gaming. We thought that that was what IGRA intended. In 2004, approximately $7 million was spent on regulation of

tribal gaming in North Dakota alone. Over 300 personnel were assigned to this very function. For the five tribes in North Dakota,

approximately 15 percent of the total gaming personnel are involved in regulatory activities.

The North Dakota tribal-State compact requires that the five

tribal nations, Governor and the attorney general must meet every

2 years to review and adjust any problems concerning regulatory

and policy issues. These biennial reviews have taken place with

both Democratic and Republican attorneys general and two different governors.

There has been no major problem that has been reported concerning our tribal governmental gaming regulatory activities to

date. In fact, the Attorney General on several occasions has commented on his outstanding working relations with the tribal nations of North Dakota concerning his oversight responsibilities in

regards to the tribal-State gaming compact regulatory requirements.

There is no scandal in North Dakota regarding our gaming. The

rights of participants in our gaming activities are being effectively

and adequately protected through regulations under our compact.

Nor are we aware of any significant scandal in the regulation of Indian gaming in other States. We have followed the hearings this

committee has had on this issue in the last year. We have not seen

any record made that would justify the further erosion of our tribal

sovereignty and the right of self-government.

Mr. Chairman, we know that some have compared the amount

of money the State of Nevada spends on regulations of its gaming

industry with a budget of the National Indian Gaming Commission. I have been told that Nevada spends $80 million a year, while

the commission spends $8 million a year. If that is the measure,

of course it looks like Indian class III gaming is not being adequately regulated. However, it totally ignores the fact that Indian

tribes spend over $200 million a year on their own regulatory efforts. This does not even include the millions that we pay to State

agencies under the compacts for their regulatory efforts.

To discount and disregard the millions of dollars that tribes

spend for their own regulatory efforts is to show a regrettable disrespect for the ability of Indian people to govern their own affairs.

It is to say to my Indian people that the non-Indian world believes

that we as Indians cannot be trusted to regulate ourselves and to

protect our participation in our gaming enterprises.

Mr. Chairman, I know the hearing was to be limited to the class

III provisions of S. 2078. However, as I noted, my tribe and many

of the other tribes are very much opposed to the other provisions

of the bill. These include the provisions to subject our day to day

contracting to NIGC’s control, to permit the Secretary of the Interior to decide if our tribal decision to make per capita payments is

a reasonable method of providing for the general welfare of our

members, and to eliminate the ability of tribal and State governments to decide if an off-reservation land transfer to Indian gaming

is okay.
47

Mr. Chairman, the tribes I represent are opposed to the MICS

provision of S. 2078 and all of the other burdensome provisions. I

would close my statement with a comment that this legislation,

which is supposed to be for the benefit of Indian tribes, does not

contain a provision fixing the problem created by the Seminole decision. When Congress made class III gaming on Indian land illegal

unless done under State-tribal compact, it was putting tribes at the

mercy of States. That is why Congress authorized the tribes to sue

the States if they refused to negotiate or negotiated in bad faith.

When the Supreme Court struck that provision down, it opened

up Indian tribes to coercion by the States. They now tax us when

this was prohibited by the Indian gaming regulatory practices.

The CHAIRMAN. Mr. Chairman, your time has expired.

Mr. HIS HORSE IS THUNDER. Thank you, Mr. Chairman.

[Prepared statement of Mr. His Horse Is Thunder appears in appendix.]

The CHAIRMAN. Commissioner DesRosiers, welcome.

STATEMENT OF NORMAN DESROSIERS, COMMISSIONER,

VIEJAS TRIBAL GOVERNMENT GAMING COMMISSION

Mr. DESROSIERS. Thank you, Mr. Chairman, Mr. Vice Chairman.

It is an honor and privilege to have been invited here to speak

to you again today on behalf of my regulatory colleagues and myself. As you know, we are the ones that are going to be ultimately

responsible for implementing and enforcing whatever our elected

leaders enact. Based on that, first, we would like to really express

our appreciation and compliment the committee on their willingness to hear from us regulators.

We have commented on a number of areas that have been submitted for change in IGRA, but my comments here will focus on

gaming-related contracts and contractors. Forgive me for reading

those comments, but I think time constraints dictate that.

We fully understand and recognize that there have been abuses

in the past where unscrupulous contractors have taken advantage

of tribes. We understand the desire to address this issue in amending the act. Section 2703, paragraph 11 attempts to define gamingrelated contracts.

Throughout that definition, there are numerous references to

gaming activity. Without a very clear definition of gaming activity,

this section is open to very broad interpretations which would virtually be all-inclusive of any contract that the tribes’ casinos entered into, such as training or IT assistance, marketing studies, et

cetera.

We also believe that the tribes should be free to develop economic

enterprises such as hotels, golf courses, shopping centers, et cetera,

without NIGC involvement in contracts. However, a broad interpretation of the word ‘‘ancillary’’ in paragraph (b) could be argued to

include all other such tribal economic enterprises.

Paragraph (a)(2) of this section suggests that any contract which

includes a contractor advising or consulting with a person that exercises material control over gaming activity will require NIGC approval, with suitability findings of the contractor. This is very

broad and all-inclusive, and as a matter of practicality, we really

feel NIGC is going to be unable to manage this.
48

As drafted, the language would require NIGC to review and approve hundreds of contracts every year for every tribal gaming facility in the country, bringing business to a halt in many instances.

The broad definition of gaming-related contracts in section 11

would encompass numerous contracts for services by contractors

with no ability to significantly affect the management of the facility.

Because there is no threshold, no dollar threshold mentioned in

the provisions that would trigger review by NIGC of every contract,

and section 11 encompasses any contract related to the operation

or management of gaming activity, even a contractor or a contract

for $500 worth of chairs carved by a local woodcarver for purchase

in a local casino poker room would require that small vendor at his

own expense to submit his contract to NIGC. Established small

vendors in rural areas where many tribal gaming facilities are located, providing service such as electrical work or catering work,

would be unable to afford the cost of doing business with tribes and

unable to compete.

Paragraph (b) of the gaming-related contract definitions suggests

that development or construction contracts of $250,000 or more

would require NIGC approval. We believe this dollar threshold is

unreasonably low. Most gaming facilities are in constant motion

with remodeling, expansion, or improvement projects that involve

contracts of $250,000 or more. To require every one of these contracts to have NIGC approval and every contractor to be found

suitable would be overly burdensome and impose major delays to

projects which would negatively affect tribal gaming operations.

Tribal casinos need to be able to quickly and immediately respond to catastrophic failures of infrastructure, structures or equipment. They would be unable to do that and go out and immediately

fix things and buy the necessary equipment under contracts if they

required prior NIGC review.

The scope of contracts related to the construction of gaming and

ancillary facilities would capture such vendors as waste water consultants, architects and environmental engineers who are critical

components for keeping a casino functioning in an environmentally

sound manner, but who have absolutely no control over any gaming

activity.

This next area, which I can personally attest to, being caught in

this quagmire, I think is important. If these contracts should happen to be with publicly traded companies, an entirely new set of

complexities come into play. Very often these publicly traded companies are wholly-owned subsidiaries of other publicly traded companies, and in many of these, five percent or more of the stock is

held by other publicly traded investment companies. So it is easy

to see how NIGC could get bogged down in backgrounding officers

and directors of a myriad of different companies just for one contract with a tribe by one of those companies.

I see my red light is on, so I will jump toward the end.

For these reasons, we believe any Federal approval of gaming-related contracts should be submitted only that affect tribes and companies that have entered into management or consulting agreements, or finance agreements, that have their fees based on a per-
49

centage of net revenues. I think that is where most of the abuses

have been in the past.

Also, any contractors, of course, which exercise significant material control over the gaming facility.

Again, I would like to emphasize, we understand the desire to

address the issues of the contracts and contractors. It is neither our

intent nor desire to appear as overly critical or as obstructionist.

However, this is a highly complex area requiring a great deal of

thought to make it workable. We share the same goals as the committee, to keep undesirables out of Indian gaming and for tribes to

be the primary beneficiaries of their tribal gaming revenues. At the

same time, we must endeavor not to stifle or inhibit economic

progress.

I want to thank you again for the opportunity to speak here and

I would be happy to answer any questions.

[Prepared statement of Mr. DesRosiers appears in appendix.]

The CHAIRMAN. Thank you very much.

Mr. Bullis, welcome.

STATEMENT OF PAUL BULLIS, DIRECTOR, ARIZONA

DEPARTMENT OF GAMING

Mr. BULLIS. Thank you, Mr. Chairman. Good morning, Mr. Vice

Chairman.

My name is Paul Bullis. I am director of the Arizona Department

of Gaming. We are the State agency which, along with Arizona’s

Indian tribes and the National Indian Gaming Commission, oversees Indian gaming in Arizona. Thank you for the opportunity to

speak today.

I would like to address some of the provisions of S. 2078 from

the perspective of a State regulator. More importantly, I speak

from the perspective of a State regulator where the State and

tribes have developed a successful partnership for the effective

oversight of Indian gaming. That partnership between sovereign

governments has as its cornerstone our tribal-State compact. Although the compact is the cornerstone of our partnership, what

makes that partnership work is communication, discussion, engagement and a process for resolving issues.

My overall message is that when considering amendment to the

Indian Gaming Regulatory Act, the committee should take into consideration success stories such as Arizona.

Senator DORGAN. Mr. Bullis, can you pull that microphone a bit

closer?

Mr. BULLIS. Yes; I am sorry, Senator Dorgan.

I would hope and request that any amendments would be crafted

to not disrupt those successes.

I will first address those provisions of S. 2078 that deal with the

National Indian Gaming Commission’s role in approving gamingrelated contracts and determining suitability of gaming-related contractors. These provisions would create overlap between the activities of the Arizona Department of Gaming and the NIGC. Let me

discuss the role of the Arizona Department of Gaming in this area.

Under our tribal-State gaming compact, the Arizona Department

of Gaming certifies all persons other than regulated lending institutions that provide financing to tribes for gaming facilities, all
50

management contractors engaged by a tribe to assist in the management or operation of the gaming facility, all manufacturers and

distributors of gaming devices, and all persons providing gaming

services in excess of $10,000 in any 1 month.

Our certification process involves a determination of suitability.

Each company, each principal of a company, and each individual

providing gaming services must undergo a thorough background investigation. This includes a criminal history, credit history, financial background, regulatory history, and other pertinent information.

Manufacturers and distributors of gaming devices and other

items used in the play of class III games undergo a particularly rigorous investigation, including site visits and face to face interviews.

Tribal regulators are also required to license each of these persons

and companies.

The universe of persons required to be certified by the Arizona

Department of Gaming I believe is larger than and includes the

universe of gaming-related contractors defined by S. 2078, which

would also have to be approved by the NIGC. This is the area of

overlap where both the Arizona Department of Gaming and the

NIGC would be approving the same gaming-related contractors.

There is, though, a role laid out for the NIGC under S. 2078 in

this area where there is no overlap. That is the area of review and

approval of gaming-related contracts. The Arizona Department of

Gaming reviews only the suitability of the vendors. We do not review the terms of the agreements themselves, nor do we approve

those agreements. That would be solely within the purview of the

NIGC.

In that area of overlap where the Department of Gaming does

play a role, we would hope that the intent of Congress would not

be to preempt our role, especially where we have performed it effectively, nor to preempt the efforts of other States that are also performing effectively.

I would also like to address the proposal contained in S. 2078 to

clarify the NIGC’s authority to promulgate minimum internal control standards. Governor Janet Napolitano has previously addressed this issue in her letter of October 4, 2005 to this committee. Let me summarize Governor Napolitano’s position. When the

State and tribes were negotiating the current compact, the NIGC’s

minimum internal control standards applying to class III gaming

were in effect.

The State and tribes recognized the importance of internal controls in the operation and regulation of casinos, and so incorporated

the NIGC’s MICS in one of the appendices to the compact. If the

NIGC had not issued its minimum internal control standards,

which had to be complied with by the tribes in any event, I am

quite certain that our compact would not contain comparable controls.

The point to be made is that the existence of the NIGC’s MICS

issued under the NIGC’s presumed authority at the time was instrumental in making Arizona’s compact as strong as it is in terms

of protecting the integrity of gaming. We therefore support language in S. 2078 clarifying that the NIGC has authority to issue

minimum internal control standards governing Class III gaming.
51

Thank you.

[Prepared statement of Mr. Bullis appears in appendix.]

The CHAIRMAN. Thank you very much.

I want to thank the witnesses for being here.

Mr. DesRosiers, I am somewhat unclear on your testimony regarding so-called participation agreements between tribes and slot

machine manufacturers. You indicate that requiring the slot machine manufacturers to have background checks would change the

way the industry does business. Is that correct, in your testimony?

Mr. DESROSIERS. That is not what I intended. We already background all the machine manufacturing companies and license

them. Every contract, though, there are contracts, hundreds of

them, with participation agreements which require a percentage of

each machine in these wide area progressive banks to be paid. For

every one of those contracts, which I personally review, but to have

to go to NIGC would be overly cumbersome.

The CHAIRMAN. Do you acknowledge there may be a need for an

expanded NIGC authority? If you were making changes, what area

would you address, perhaps expanded authority for the NIGC?

Mr. DESROSIERS. I am not sure where I would put that. We support the notion of, and I do not speak for all tribes and tribal regulators, our tribe supports the notion that they should have authority over Class III minimum internal controls, to preserve the public

perception of the integrity of Indian gaming. As Chairman Hogen

already testified, virtually all the tribes are there anyway. I mean,

we are already complying with those MICS.

In the past, in years past, not in this testimony, I would have

liked to have had NIGC to have the authority to help me on my

request, not to be mandated to be in charge of it, but to assist me

in backgrounding some contracts and contractors. There are occasions where companies that are so large think that they do not

need my tribe’s business and don’t want to be bothered with the

attempts that we make to background and license them.

The CHAIRMAN. And do you agree that there have been cases of

unscrupulous individuals or companies coming in and signing these

contracts and basically exploiting the Native American tribes by

taking too much money from them. Would you agree with that?

Mr. DESROSIERS. I would have to agree. I have seen that first

hand.

The CHAIRMAN. Mr. Bullis, would you agree with that?

Mr. BULLIS. Yes; Senator McCain.

The CHAIRMAN. Mr. Bullis, this legislation calls for the NIGC to

perform background investigations and make suitability determinations on a wide range of persons. Your background and your experience is pretty important. Can you share your experience with us?

For example, how long a process is it for your agency to do a background investigation and make a determination?

Mr. BULLIS. Certainly. It is important to recognize that our agency divides up the different kinds of vendors and contractors. The

most significant types are those vendors that provide equipment

that is used in the play of Class III games. In Arizona, there are

about 70 in that category right now. We have about 460 vendors

that provide goods and services that are otherwise used in casinos.

They do not receive the same depth and degree of scrutiny. Clearly,
52

those vendors that are providing equipment used in the play of

class III games get the much more in-depth level of scrutiny.

In terms of the time period that it takes us to do those types of

investigations, it certainly varies in terms of any issues we find

and the type of provider. What we do have in place, though, to kind

of mitigate those concerns are, first of all, within 20 days if we

have identified within the first 20 days no concerns about the vendor and upon request of the tribal gaming office, we will issue a

temporary certification allowing that vendor to do business with

the tribe. That allows us whatever time is necessary to continue

our in-depth investigation.

The CHAIRMAN. But things are going well in Arizona?

Mr. BULLIS. I believe so. I believe so.

The CHAIRMAN. Thanks to the compact that was entered into between the State and the tribes.

Mr. BULLIS. The strength of the compact, as well as the communication and the partnership that we have developed with the

tribes. I will tell you, when I first got on the job about three years

ago, I thought the most important thing was getting together,

reaching agreement on issues, and moving on. I have learned that

the most important thing is not that we reach agreement on items,

on issues, but how we go about doing that, how we interact with

each other, how we communicate regularly.

The CHAIRMAN. Mr. Chairman His Horse Is Thunder, since your

statement said that this legislation is based on anecdotal anti-Indian press reports on Indian gaming, the overblown issue of off-reservation gaming, and pin the blame on the victim reaction to the

Abramoff scandal, I have no questions. We are too far apart in our

views of what this committee is trying to do in the 20 some years

that I have been involved on behalf of Native Americans.

Senator Dorgan.

Senator DORGAN. Chairman His Horse Is Thunder, on the issue

of class III gaming, let me say I share the chairman’s thoughts

about that. That is a statement that does not at all compare to the

facts. This committee has worked very hard to receive comments

and opinions and suggestions from a wide range of interests, including many Indian tribes from across the country.

While I think the chairman’s bill is broader than it should be,

for example, in the area of contracts and so on, I also, as you know,

having visited with you and the other tribal chairmen in our region, I also believe that class III gaming ought to be subject to regulation by the National Indian Gaming Commission.

So we have approached this very carefully, very thoughtfully,

and I do not share the sentiments in your testimony that were expressed. They should not certainly be attributed to any actions or

any attitudes by the current chairman or the members of this committee. I think we have approached this very carefully.

Now, let me say this as well. My view, and let me just take class

III for a moment, my view of class III is this. It is not believable

to me that the construct of establishing a commission for the purpose of providing both investigatory capabilities and enforcement

capabilities would have anticipated that we would not do that for

class III gaming. I mean, it is just not believable to me. The Colorado decision I think needs to be addressed. I believe this commit-
53

tee will address it. I do not know whether the full House or the

full Senate will address it, but I believe this committee should address it.

There are other portions of the legislation that the chairman has

offered that we will I believe change and alter and amend as we

get additional testimony and thoughts from tribes and the commission and so on.

This is a $20-billion industry. In North Dakota, for example, the

only State for which I have a great deal of information, although

I have some about Arizona and some other States, in North Dakota, the State enforcement is by two part-time people working at

the attorney general’s office. That is not, with all due respect, enforcement.

I am not suggesting the attorney general is not doing his job.

That is not my suggestion at all. I am just suggesting there is not

an aggressive enforcement mechanism at the State level. They

have not funded it and it just does not exist. I believe with a $20-billion industry, the way to preserve and

protect this industry to be able to provide the resources and the income stream in the long term for the tribes that have gaming, is

to make sure that we do not have scandals, and that we have adequate management, and that we have enforcement of standards.

One final point I wanted to make. My understanding of the

North Dakota compact is that the North Dakota compact on gaming includes the minimum internal control standards that were established by the National Indian Gaming Commission. Is that true,

Mr. Chairman?

Mr. HIS HORSE IS THUNDER. I believe so.

Senator DORGAN. And if that is the case, why on earth would we

not have the National Commission be enforcing that standard and

auditing that standard? If we have in fact adopted that standard,

would we want to fall short of the enforcement of that standard?

Mr. HIS HORSE IS THUNDER. No; we would not, sir.

Senator DORGAN. And so, I guess, that makes my point. I know

there is strong feeling out there about a lot of things. Some of it

I think stems, Mr. Chairman, from anger and concern about the

lack of resources for health care, the lack of resources for housing,

and education. There is a lot of strong feeling.

But that ought not replace good commonsense when we try to

evaluate what to do about gaming and what to do to make sure

that we have enforcement that is adequate. As I understand it, we

have several levels of enforcement at the present time: the tribe,

and Mr. DesRosiers, you are a compliance officer for a tribe. You

have worked there for, is it 14 years, I believe? Right?

Mr. DESROSIERS. Yes, sir.

Senator DORGAN. You have an enforcement mechanism for the

tribe itself.

Mr. Bullis, you represent a State. I think that perhaps Arizona

has the most aggressive, if you simply measure it by people, you

probably have more people and are spending more money on enforcement than most other States, so you have a legitimate mechanism at the State level. And some of the tribal chairs will say, well,

if we have the tribal enforcement, you have State enforcement, you

do not need triplicate levels of enforcement. But the honest fact is,
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most States do not have an aggressive State enforcement mechanism and they are not funding it. That is just the honest facts.

That is why I come to a conclusion different than you, Mr. Chairman, and the other chairmen of the tribes in the Northern Great

Plains. I really believe it is in the interests of Indian tribes, as the

other two witnesses have suggested, for this Congress to proceed

with some legislation.

Now, having done that, or preparing to do that, at least, let me

make a couple of other observations. Contracts, I think, Mr.

DesRosiers, you and Mr. Bullis have both pointed out that the contracting provision in the proposed legislation probably should be altered. And I think also the commission chairman suggested the

same thing. I happen to feel the same. My guess is that the offering of the chairman, well I know this to be the case, was an attempt to put something out there and then let’s evaluate how you

make some changes to it in a way that makes some sense.

Obviously we do not need to have some sort of national scrutiny

for somebody providing linens for a gaming facility in Northern

South Dakota, for example. So I think the testimony you have

given today about that is very helpful. I think not only that, but

in three or four other areas, background checks and other things,

are helpful.

One thing that I would like to ask about is the number of vendors. You indicated there are some 400 vendors, Mr. DesRosiers,

providing gaming machines. Are those national or is that just in

Arizona?

Mr. DESROSIERS. No; I am sorry. I don’t know where you came

up with that.

Senator DORGAN. How many different vendors, let’s assume that

you want to buy new slot machines. How many vendors would you

look to and how many vendors exist in this country from which you

might make that purchase? And you are going to want to know

about suitability?

Mr. DESROSIERS. Right. I would say typically, just slot machine

type vendors, and I think Paul would agree, there are 40 to 50 of

those. And then other gaming equipment vendors, whether it be

bingo or card games and that kind of thing, there are probably another 30 or so vendors.

In our facility, we have 260 backgrounded and licensed vendors,

but those include anybody that is doing any business with the casino of $25,000 or more. But just if you limit it to machine manufacturers and suppliers and gaming equipment, I think as Paul

said, they have somewhere in the neighborhood of 80 such vendors.

That is about right.

Senator DORGAN. Mr. Bullis, you could probably have been expected to come here and suggest that there is no need for the NIGC

to take a look at class III because you probably have the resources

and you feel like you have the capability. So why have you not

come to tell us that? Why do you believe that class III enforcement

is appropriate for the commission?

Mr. BULLIS. Senator Dorgan, as I mentioned 1 moment ago, I

know that the fact that the NIGC had issued its MICS allowed the

State of Arizona in its compact to incorporate that MICS into our
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compact and make it stronger. I think it benefits Indian gaming,

certainly in Arizona and nationally as well.

I think the importance is to strike the proper balance in each

particular State between the State, the Federal and the tribal regulators, and to allow each of those regulatory legs of the stool to devote resources and to apply resources as necessary. I think in Arizona we have struck a proper balance among all the different jurisdictions.

Senator DORGAN. Chairman His Horse Is Thunder, how important is gaming to your tribe? Your tribe is a North Dakota and

South Dakota tribe. You are a former college president. You have

just been elected as a new tribal chair. You inherit a tribe that has

enormous challenges, as do most of our tribes in the Northern

Great Plains. You have a gaming facility. I believe one facility, is

that correct?

Mr. HIS HORSE IS THUNDER. We have two, one in North Dakota

and one in South Dakota.

Senator DORGAN. And tell me how important is that gaming facility and the revenue from it for the social services and other revenue needs that the tribe has?

Mr. HIS HORSE IS THUNDER. It is absolutely imperative, given

the budget constraints that we are under today. It provides necessary services that otherwise would go unmet.

Senator DORGAN. If this committee and this Congress proceeds to

enact legislation that addresses the Colorado decision, and gives

the commission authority over class III gaming, along with some

other issues, what is your response to that?

Mr. HIS HORSE IS THUNDER. I would agree with you, Senator,

that the MICS are important. They are. We do believe that the rest

of the provisions go too far in constraining tribes.

Senator DORGAN. Do you see any risk at all in us doing nothing,

a risk that would attend to circumstances where there is not sufficient tribal regulation, there is virtually no State regulation, and

we have dealt the commission out of class III gaming, which is the

one that would attract probably the greatest area of abuse, if there

were to be abuse by some? Do you see any risk at all?

Mr. HIS HORSE IS THUNDER. Senator, given your hypothetical

that there is lack of tribal regulation, lack of State regulation, then

I think at that point in time there needs to be some oversight, but

again, that is where I think the MICS are appropriate, but the rest

of it goes too far.

Senator DORGAN. Mr. Chairman, I think we are getting a lot of

good information from people. One of the things that you and I

have both talked a lot about is consultation. I think we should, as

we proceed to a markup, we should keep open a record and seek

to receive consultation from any tribal leaders that wish to offer

that consultation in the form of written statements, so that we can

have as broad a consultation as is possible from the tribes.

I think that is needed on the contracts and background checks,

and a whole range of things. But I do want to say that consultation

to me includes a strong feeling on my part that we as a committee

should proceed to address the issue of class III gaming and the jurisdiction of the National Indian Gaming Commission. That is not

anti-tribe. That is, in my judgment, in the long term the very best
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interests of Indian tribes in this country, and the maintaining of

the economic opportunity that exists with gaming facilities in the

long term.

So I hope we will perhaps write to tribes, invite them to provide

us information, and then use that information, because there are

a number of variances of how we do three or four areas of this bill,

that we can, should and perhaps will change as a result of this consultation.

So I think this hearing has been very important. I appreciate all

three witnesses. Let me also say that Chairman His Horse Is

Thunder is a new chairman. He has inherited the leadership of a

tribe with a lot of challenges. I look forward to working with him

on those challenges as well, in dealing with housing, health care

and education.

Thank you very much to all three witnesses.

The CHAIRMAN. Thank you.

I want to thank the witnesses. We have gotten some good advice

and recommendations on narrowing the definition of gaming-related contract. We certainly do not want to create bottlenecks, Mr.

DesRosiers. I think we can put some parameters around it. Obviously, we are trying to eliminate an obvious evil that was a loophole in the original bill. I think most people acknowledge that, that

there have been contracts where management or something entered into by the tribes which have really caused them to suffer

enormous financial burdens which they never should have. It certainly was not the intent of the legislation.

So I think that is very helpful, and your other recommendations

are.

Mr. Bullis, I do not often tout what we do in our State. It is kind

of a waste of time sometimes. Everybody knows what kind of a

wonderful place we live in. But the process that we went through

in Arizona of proposing a compact, negotiating with the tribes, and

then submitting it to the voters of our State for ratification was an

open process.

I meet quite frequently with Arizona tribal chairmen, both gaming and those who have difficulty in gaming because of the remoteness of their location. I think this sharing revenue, sharing the slot

machines has been a marvelous thing for tribes that have not been

able to take advantage of the large population areas.

Everything I can see is that things work very well. Is that your

view?

Mr. BULLIS. Absolutely, Senator McCain. I think things are

working well. I think the relationship, I hope, between the State

and the tribes in the area of gaming is a successful partnership,

and we strive to make it that way.

The CHAIRMAN. That might serve as a model in the future because the people of Arizona were allowed to vote, to decide whether

we wanted to enter this compact or not, both Indians and non-Indians. And a majority of them, a significant majority, decided they

wanted that. I think that that has been a beneficial part of the

process.

Senator DORGAN. Mr. Chairman, might I just observe that part

of your population this time of the year are Dakotans. [Laughter.]
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If you would like to take some credit, we would like to receive

some of the credit for all those Dakotans that bring some commonsense to the Southwest.

The CHAIRMAN. And we are very, very grateful for them coming

and spending the winter with us. They are notoriously cheap, but

other than that we are always pleased to have those wonderful people come down and spend time with us, as many of us enjoy in the

summer months to come and visit your beautiful State, and its Indian reservations. [Laughter.]

So it is a nice reciprocal relationship we have.

I thank the witnesses.

The hearing is adjourned.

[Whereupon, at 10:45 a.m., the committee was adjourned, to reconvene at the call of the Chair.]

(59)

APPENDIX

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

PREPARED STATEMENT OF HON. DANIEL K. AKAKA, U.S. SENATOR FROM HAWAII

Thank you Mr. Chairman and Mr. Vice Chairman for holding this important legislative hearing. I share the concern of many present here today, with regard to ensuring accountability of not only gaming tribes, but also the contractors they do

business with.

Although, S. 2078 will have a substantial regulatory impact on tribal gaming, we

cannot ignore that this legislation may impact the ability of Indian nations to exercise their sovereignty. Tribal governments have established gaming regulatory systems and have demonstrated their vested commitment to comply with the Indian

Gaming Regulatory Act [IGRA]. As we move forward to address the regulatory authority of the National Indian Gaming Commission, I am hopeful that we proceed

in a manner that acknowledges and strengthens the government-to-government relationship between the United States and tribal governments.

Due to the complex nature of the issues raised in this committee, there has been

a long tradition of operating in an inclusive and bipartisan manner. I look forward

to members of this committee having the opportunity to fully review proposed

changes to this bill. I also firmly believe that it is in the best interest of the committee to consider the concerns raised by some tribal governments that this legislation

may adversely impact them.

I thank the witnesses here today and look forward to their testimony.
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