Bo!Mazzetti SStephanie!Spencer Charlie!Kolb Steve!Stallings Kenneth!Kolb

Chairman Vice,Chairwoman Council!Member Council!Member Council!Member

FORMAL SUPPLEMENTAL COMMENTS OF THE RINCON BAND

TO THE NIGC REGARDING ITS NOTICE OF INQUIRY (NOI) 

CONCERNING ITS COMPREHENSIVE REVIEW OF ALL REGULATIONS 

PROMULGATED TO IMPLEMENT IGRA

February 11, 2011

The Rincon Band presented four overarching priorities during the Formal 

Consultation of January 11, 2011.

Priority #1: Adhere to the limits of NIGC’s statutory authority as set out in IGRA

and as articulated by the several court decisions in C.R.I.T vs. NIGC.

Priority #2: Deference and support of TGAs as primary regulators

Priority #3: Maintain the viability of a Class II gaming industry

Priority # 4: Sole proprietary interest

This Supplement provides responses to each of the questions raised in the 

formal Notice of Inquiry.

RINCON BAND RESPONSES TO SPECIFIC MATTERS IDENTIFIED IN 

THE NIGC NOTICE OF INQUIRY

RESPONSES TO SPECIFIC INQUIRIES:

Rather than repeat the NIGC’s comments and questions, these answers 

and comments simply track the organization set forth in the NOI, beginning with 

Section IV. On each matter, the NOI seeks input as to the process for amending 

regulations, suggesting negotiated rule-making or advisory groups. The problem 

with both is that Tribes not selected in the process or unable to participate, are 
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excluded. The Band suggests circulating drafts for formal consultation sessions, 

then proceed with publishing the proposed rule and having further consultation 

during the formal comment period. This allows tribes to participate as they deem 

appropriate for the particular change or changes being considered.

IV. Regulations Which May Require Amendment or Revision

A: Definitions:

1. Definition of “net revenue”

The definition of “net revenue” should be clarified to include as an 

allowable operating expense in the calculation of net revenue machine lease 

payments, participation fees, and contributions to wide area progressives. 

The current definition better reflects the reality that management fees are 

a cost of doing business even though not recognized as an expense under 

GAAP.

Both of these category of expenses should not be included as part of net 

revenue consistent with GAAP. The only reason to use GAAP is for convenience. 

GAAP’s function is to establish uniformity and consistency for purposes of 

financial audits. Those considerations do not overcome the policy reasons for the 

NIGC for using definitions that more accurately reflect the costs of business 

regarding Indian gaming.

A separate definition of “allowable uses” is not needed. The concerns 

about adequate reserves and cash flow can be satisfied by the Tribe in 

exercising its self governance under IGRA’s allowable use “to promote tribal 

economic development.” Any new definition carries the risk of unduly impeding 

on the Tribe’s self-governance.

2. Definition of Management Contract.

The definition of management agreement should be revised to make clear 

that collateral agreements can be made and are binding upon the parties before 

NIGC approval of the management agreement. No entity should be allowed to 

perform day-to-day decision making of a tribal gaming facility prior to NIGC 

approval, but other agreements should be valid. Many times, tribes are hindered 

from entering into finance and consulting agreements with desired contractual

parties because of the collateral agreement rule. All that accomplishes is to 

restrict the Tribe’s ability to enter into contracts. It is an arbitrary restriction of the 

Tribe’s exercise of self governance. Collateral agreements should be required to 

be submitted with proposed management contracts to ensure full disclosure of all 

aspects of the relationship between the Tribe and the contracting entity, but that 
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can be accomplished without the current rule that voids collateral agreements 

unless and until the management agreement is approved.

Additionally, formal regulations regarding declination letters would provide 

the Tribes and contracting parties greater confidence that declination letters are 

meaningful and correct.

The suggestion of expanding the definition to include any percentagebased fee is not based in IGRA. If Congress wanted to provide NIGC with that 

authority, they would not have used the term “management contract.” If NIGC is 

inclined to fiat such authority, it should expect litigation and it should expect to 

lose. Further, if it pursues such approval authority, NIGC should be fully staffed in 

this regard so that it does not cause delay in tribal business decision-making,

The stated concerns in the NOI regarding aggregate fees 

(loans/expenses/ development fees, etc.) is valid, but that discussion is more 

appropriate in the context of “sole proprietary interests” and “primary beneficiary,” 

and not in the context of defining “management agreement.”

3. What of other definitions in need of change?

The definition of Class II gaming should be revised to mirror the definition 

in IGRA. Specifically 25 CFR 502.3(b) equates “Lotto” with “Bingo” when 

Congress clearly identified them as separate games. The current definition is an 

unauthorized amendment to IGRA and should be revised to reflect the langage 

set forth in 2703(7)(A)(i)(III) “. . . including ... pull-tabs, lotto, punch boards, tip 

jars, instant bingo and games similar to bingo. 

B. NIGC Fees

Basing fees on fiscal year rather than calendar year is appropriate and 

simplifies matters for Tribes. A two year transition should be practical for all tribes 

to adjust accordingly. 

The Band has no position at this time on the issue of whether “gross 

revenue” should be redefined or whether fingerprinting fees should be included. 

As stated in our Priorities, listed above, replacing the NOV and fines now 

used for late payment with a late fee makes sense by making the penalty more 

commensurate with the offense. Such an approach would be appropriate for late 

financial and compliance audits, as well. On all matters of NIGC enforcement an 

NOV should only be issued in instances of gross negligence or wanton behavior, 
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C. Self-Regulation Certification

The Tribe has no comment on this issue at this time, except that it should 

not be identified as a high priority issue.

D. Approval of Existing Gaming Ordinances.

Part 523 is obsolete and should be eliminated, but it also is not a priority.

E. Management Contracts

1. Collateral Agreements

The Comments regarding collateral agreements are addressed in the 

context of the definitions, above and the priority discussion regarding sole 

proprietary interests set forth in the Band’s January 11 preliminary comments. 

The Band cautions NIGC not to compartmentalize just the management 

agreement and agreements collateral thereto. Over-reaching States taxing tribes 

in compact negotiations and over-reaching cities and counties in MOUs gouging 

tribes for services and mitigation also should be considered in determining 

whether the Tribe no longer has sole proprietary interests or is the primary 

beneficiary. 

2. Approval of Management Contracts

The Rincon Band has no objection to the proposed additions for grounds 

of disapproval, but questions whether they are necessary and should not be 

considered a matter of priority.

3. Background Investigations of Management Contractors

The issue is likely moot in that most gaming facilities offer both Class II 

and Class III gaming. It would be a concern that a contract is structured to 

separate that line in order to avoid any NIGC background check. In most such 

circumstances, however, the State would then have the backgrounding authority, 

or oversight authority, per the compact such that the NIGC could/should 

coordinate with the State in question so that an unsuitable entity is not allowed to 

provide management services. To assert backgrounding authority over Class III 

only compacts also likely triggers litigation over the parameters of the CRIT v. 

NIGC litigation. Accordingly, the Band believes this issue is not a priority and 

encourages NIGC to address this issue through cooperation with the licensing 

authority of the State at issue. 
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F. Proceedings Before The Commission

Given the potentially grave consequences of an adverse decision by NIGC, 

refinement and development of rules that are designed to provide fairness and 

due process are welcomed and encouraged. This matter is worthy of priority 

because it allows this Commission to establish precedent for due process for 

future Commissions. The current structure of the NIGC renders tribes too 

vulnerable to future Commissioners who may be hostile to tribal interests. As 

indicated in the Tribe’s priority discussions above, enforcement should only 

come as a last resort after attempts to work with the Tribe have failed, and in

such event, the Tribe should have the ability to make its case in a fair and 

impartial forum.

G. MICS and Technical Standards

1. Class III MICS

This is perhaps the most important issue addressed in the NOI and the 

Band’s view is set forth in Priority #1 in its Preliminary comments submitted on 

January 11, 2011. Since we provided our comments on January 14, we have 

heard a small but vocal group of tribes insists they want to see the Class III 

MICS continue in some form because they made some deal in a compact or 

state regulation. They made those agreements at their own peril knowing the 

NIGC did not have such authority, or at best, that the question was in serious 

dispute. This Commission should not perpetuate the problem. NIGC Class III 

MICS are illegal and have always been illegal. 

Additionally, we challenge the allegation that some are at peril if the NIGC no 

longer promulgates Class III MICS. A number of tribal-state gaming compacts in 

North Dakota, Arizona, Oklahoma, Wisconsin, and Florida refer to the Class III 

MICS. That being said, the reference within those Compacts is not impacted by 

whether the Class III MICS exist or do not exist on a prospective basis. Many of 

these Compacts only refer to MICS as they existed at a date certain, thus if the 

Class III MICS were repealed today, they still would have existed on the date 

certain previously referenced. For example, the Arizona Form Compact refers to 

“minimum internal control standards of the Commission as set forth in 25 C.F.R. 

part 542 as published in 64 Fed. Reg. 590 (Jan. 5, 1999) as may be amended 

from time to time.” For those Compacts, or other agreements with individual 

states, which refer to the Class III MICS as they existed on a date certain, a 

repeal would have no impact as such an action does not undo the fact that the 

Class III MICS were published and found in the CFR on a date certain. 

Other Compacts refer to compliance with the Class III MICS that are found in 

the NIGC regulations (without a reference to a date). Our position is that even if 

the Class III MICS were to be repealed, it would not result in a violation of any of 

those “incorporation by reference” Compacts unless those individual Compact 
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require the Class III MICS to continue to be published. We are not aware of any 

Compact which has such a publication requirement. 

The Rincon Band supports a short phase out period to allow those impacted 

tribes to reach amendments or other means to proceed in an environment of no 

NIGC Class III MICS. But the Rincon Band strongly opposes the perpetuation of 

illegal MICS simply because it conveniences some tribes that have built a house 

of cards on a faulty foundation. They can transition into some other type of 

default MICS through a regulators organization, or amend their compacts, or 

defer to some other industry entity, or perhaps some other resolution outside of 

NIGC. Bottom line is that there are other ways to skin that cat rather than have 

NIGC continue to violate the clear orders of the federal courts.

Calling them guidelines rather than regulations does not work either. NIGC 

has a limited budget based on fees paid by the Tribes. The Rincon Band

certainly objects in the strongest terms to having its fees be used by this NIGC 

for an improper and illegal purpose that should never have been pursued by 

former Chairman Hogan to begin with.

2. Class II MICS and Gaming Equipment Standards

The Rincon Band addresses this issue in the Priorities discussion of its 

preliminary comments submitted on January 11. This is the one area where a 

Tribal Advisory Group will likely be beneficial, but any work product that comes 

out of such a group and NIGC should be open to consultation and comment by 

all interested tribes through the routine process of publishing a proposed rule, 

consult and seek comment, before publishing any final rule. 

H. Backgrounds and Licensing

1. Background Investigations for Licensing

Make the “pilot” program permanent. Do not delay or make it complicated 

with process. It is a farce to call it a pilot when it older than most tribal gaming 

facilities. 

2 Fingerprinting

Being able to turn to the NIGC to process fingerprint cards beyond primary 

management officials and key employees can only be a good thing that enables 

tribes to make better informed and faster decisions. This is particularly important 

because many states deny or severely restrict tribes from the State’s resources. 
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The costs, however, should be borne by the participating tribes and not paid out 

of fees paid by other tribes.

I. Facility Licensing

As discussed in Priority # 1 in the January 11, 2011 preliminary comments, 

the current regulation should be revoked before it is struck down in what will be 

the progeny of the CRIT v. NIGC decision. It is paternalistic and illegal.

J. Inspection and Access

The Band acknowledges that effective regulation requires access to 

needed documents so long as chain of custody is maintained, access is limited to 

those who truly require access and confidentiality is strictly enforced.

K. Enforcement

Enforcement is discussed in the Priority’s section of the Band’s January 

11, 2011 preliminary comments. A regulation clarifying that an NOV can be 

withdrawn is a reasonable proposal that should be implemented without delay.

V. Potential New Regulations

A. Tribal Advisory Committee

The Rincon Band opposes the concept as it will likely result in limiting access of 

tribes that wish to participate on issues of importance to that tribe.

B. Sole Proprietary Interest.

This issue is discussed at length in the priority section of the Band’s January 11, 

2011 preliminary comments.

C. Communication Policy

It should be up to the Tribe, as a matter of self-governance, to establish 

communication protocol with NIGC, and the NIGC should honor the wishes and 

direction of the Tribe’s government.

Thank you for the opportunity to review the status of the current

regulations and submit the Rincon Band’s recommendations to clarify and 

improve them. We hope you will take the Band’s comments today into serious 

consideration. The Rincon Band applauds your efforts to take on hard issues and 
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the Band looks forward to consulting with the NIGC on a government to 

government basis and commenting further as this process unfolds.

Respectfully submitted, 

/s/

Scott Crowell 

Attorney General 

Rincon Band of Luiseno Indians