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6 NATIONAL INDIAN GAMING COMMISSION MEETING

7 THURSDAY, FEBRUARY 15, 2018

8 10:00 AM - 11:36 AM

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10 CAPITOL HILTON HOTEL

11 1001 16TH STREET, NW 

12 WASHINGTON, DC 20036

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23 Reported by: BEVERLY D. EARLY, CSR . 
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4 (EXTERNAL CALL-IN PHONE LINE AND ADOBE CONNECT 

5 LINK ESTABLISHED) 

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7 >> JONODEV CHAUDHURI: Welcome everybody. 

8 Before my fellow Commissioners and I get 

9 started with formal consultation, in keeping with our 

10 traditions at NIGC, and the fact that we are here in 

11 conjunction with the National Congress of American 

12 Indians, we will start with the blessing today. And 

13 Secretary Greg Abramson from the Spokane Tribe has 

14 offered to provide us with a blessing before we begin. 

15 (OPENING BLESSING.)

16 >> JONODEV CHAUDHURI: Thank you so much, 

17 Secretary. 

18 So, my name is Jonodev Chaudhuri. I serve as 

19 Chairman of the National Indian Gaming Commission. I 

20 am joined by my fellow Commissioners, as well as 

21 many senior staff at the Agency. And I want to 

22 welcome everybody here today. I know a lot is going 

23 on during NCAI, there are other consultations going on 

24 and a lot of travel considerations that everybody --
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1 everybody has. Traffic was horrible. So, I am just very 

2 thankful for those of us who are here for today's 

3 consultation, and I want to thank you all for making the 

4 time to come join us today. We are going to hear from 

5 subject matter experts, who will lay out the background 

6 for each of our topics, but beyond the specifics of what 

7 we are here to discuss today, I think it's important that 

8 the form and process that we are undertaking is 

9 important. 

10 As an Agency, we have been committed for many, 

11 many, many years, from our inception, to be actively 

12 engaged in meaningful consultation, and today's 

13 discussion is an extension of that. For us, what that 

14 means is working hand in hand, not just to get buy-in 

15 on the final product, but to get buy-in before we put 

16 pen to paper. So, we are actively trying to work on 

17 positive deliverables to -- to issue from the 

18 Commission. And the topics we are hearing today, the 

19 reason we are here discussing these topics, we heard 

20 from Indian country through continuing consultations 

21 three topics that provides areas of opportunity to 

22 improve the gaming landscape. 

23 I want to welcome everybody here today as 

24 Muskogee Creek, member of the Bear Clan, it's an 
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1 honor to have a consultation here in conjunction with 

2 NCAI. 

3 I will turn it over to my Commissioners, who will 

4 share opening comments.

5 >> KATHRYN ISOM-CLAUSE: Thank you. Good 

6 morning. I am Kathryn Isom-Clause, Vice Chair of the 

7 Commission. 

8 I would like to thank you for being here today. As 

9 the Chairman mentioned, it's a busy day, busy week. 

10 We know you have competing interests for your time, 

11 we thank you for being here. This is kind of a special 

12 consultation for us because while we usually like to be 

13 in person face-to-face, that's preferable, we know 

14 that's not always possible for folks. So we have Adobe 

15 Connect going today. We have people joining us online 

16 through the phone lines. So we are really excited we 

17 can offer that as well today.

18 Tribal consultation is primarily a means for us to 

19 listen to tribes, not only to honor the 

20 government-to-government relationship, but in 

21 recognition of the role of tribes. 

22 As primary regulator, it's very important to 

23 acknowledge when you start out. It's also a time for us 

24 to present ideas, how we can strengthen our regulatory 
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1 partnerships to make our work more efficient. With 

2 our topics today we are hoping to do exactly all of 

3 those things, make the processes more efficient, and 

4 work a little bit better together in partnership. 

5 I would like to note that while our time with this 

6 current Commission may be somewhat limited, we are 

7 continuing stability on policy initiatives that we have 

8 been working towards. Those will be reflected in our 

9 strategic plan, which is coming out very shortly now 

10 this month, you will be able to see that online pretty 

11 soon. 

12 And just to sum up, we are really looking forward 

13 to hearing from you all and sharing your ideas as well. 

14 Thank you.

15 >> SEQUOYAH SIMERMEYER: Good morning. I am 

16 Sequoyah Simermeyer. I am Coharie, my Tribe's 

17 community is in eastern North Carolina. I am the third 

18 member of the National Gaming Commission and I 

19 have served a little over two years, of my three-year 

20 term. 

21 I am going to join my colleague in saying thank 

22 you for being here. There is a lot going on, we 

23 appreciate everyone engaging in this. 

24 I want to briefly, just as part of the introduction, 
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1 share a bit about my approach to the Commission, and 

2 then my colleagues will share. 

3 In the work that I do with the Commission I try to keep 

4 three considerations in mind: First, that the 

5 Commission has an obligation to follow the Indian 

6 Gaming Regulatory Act, it sets up the framework for 

7 how tribal gaming operates today, and importantly, 

8 articulates policy objectives that helps to ensure tribes 

9 are the primary beneficiary of the over $31billion 

10 industry. 

11 I also keep in mind the importance of seeking the 

12 institutional knowledge and expertise that exists 

13 among the regulatory community, including the dozens 

14 of compliance officers, auditors, financial analysts and 

15 attorneys that work within the Gaming Commission, as 

16 well as the approximately 6,000 members of the tribal 

17 regulatory bodies and the institutional knowledge 

18 exists across the many state regulatory bodies as well. 

19 As a matter of good governance and improved 

20 partnerships, it's important that we look to these 

21 resources in how we develop the decisions. 

22 And finally, it's important to make the 

23 Commission diplomatic in decision processes. The 

24 tribes best execute what is best for the people. And a 
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1 part of that is being respectful to intergovernmental 

2 relationships and tribes engaging, whether between 

3 tribes of the federal government or state governments, 

4 so it's important, I think, that the Commission is 

5 diplomatic in how we make a decision. I think that 

6 improves our ability to do your mission. Engaging in 

7 consultation sessions, like this today, is an important 

8 way for the federal agencies not only to make sure that 

9 the appropriate decision-makers are at the table 

10 engaging in discussions, and not only provide more 

11 transparency and more informed decision making, I 

12 think, importantly, the gaming consultation helps to 

13 define and give meaning to the 

14 government-to-government relationship that exists 

15 between tribes. 

16 I want to say thank you for being here, and 

17 drawing my colleagues in our appreciation today.

18 >> JONODEV CHAUDHURI: Thank you fellow 

19 Commissioners.

20 So, we always try to recognize members of the 

21 NIGC family when we can. I want to recognize Liz 

22 Homer, former Vice Chair, as well as Paxton Myers, a 

23 former Chief of Staff from NIGC. 

24 We are going to do introductions a little bit 
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1 differently today, given the fact that we have so many 

2 competing concerns. We have a lot of staff here today. 

3 We also ask the audience to introduce themselves when 

4 they make comments, that will help today's 

5 conversation flow a little bit more smoothly and move 

6 things along. 

7 So with that, if we could introduce ourselves, 

8 whoever is providing subject matter background, 

9 please begin. Traci.

10 >> TRACI SANTILLANES: Good morning, Traci 

11 Santillanes from the audit manager and I'm Shoshone 

12 Band. 

13 >> TANA FITZPATRICK: Good morning, Tana 

14 Fitzpatrick, staff attorney with the Commission and I'm 

15 Crow Montana. 

16 >> YVONNE LEE: Good morning, Yvonne Lee, 

17 manager of finance of the NIGC. 

18 >> TOM CUNNINGHAM: Tom Cunningham, 

19 Assistant Director of Compliance. I am Seminole 

20 Nation of Oklahoma.

21 >> JONODEV CHAUDHURI: We have an open 

22 door, open phone line policy at the Agency. And 

23 beyond today's back and forth open dialogue I want to 

24 encourage anybody to reach out to NIGC at any time 
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1 with any questions, comments or concerns. Before we 

2 get into the housekeeping section, of the consultation, 

3 again, recognizing people have other things to do, 

4 planes to catch, if anybody needs to get a statement on 

5 the record now, we will afford time and opportunity to 

6 do that before we actually jump into the specific 

7 subjects. 

8 Anybody need to get on the record before we 

9 start? Okay.

10 With that, again, we very excited to have this 

11 consultation, not only be a live consultation, or 

12 in-person consultation but, also, to be accessible by 

13 Adobe Connect. This is part of our technology and 

14 outreach initiatives. We are committed to staying 

15 ahead of the technology curve wherever and whenever 

16 possible, not only in the training and technical 

17 assistance that we do but also internally in our Agency 

18 operations. So, we are excited to be able to livestream 

19 this and have it accessible through Adobe Connect. 

20 Additionally, we recognize the expense involved in 

21 traveling to consultations, and so we are excited to 

22 have the opportunity for people to attend from -- from 

23 home or from their office, wherever that may be. 

24 I am going to turn it over to Mr. Cunningham at this 
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1 time to go over some housekeeping matters before we 

2 get into the topic discussions.

3 >> TOM CUNNINGHAM: Thank you, Chairman. 

4 As the Chairman said, the meeting is scheduled to 

5 go from 9 to 12 p.m. -- yes, 12 p.m. However, if all 

6 topics have been covered, and all comments from the 

7 tribes have been received, we may end early. 

8 The meeting will be transcribed, so if you stand to 

9 make a comment, please state your name clearly so the 

10 transcriptionist can hear it. Also, tell them what party 

11 you represent, what tribal government you are here 

12 representing. 

13 We have an additional consultation on February 

14 21 at the Potawatomi Hotel and Casino in Milwaukee, 

15 Wisconsin. 

16 Questions and comments will be taken after each 

17 topic, so please hold your questions until the subject 

18 matter expert has completed their speaking.

19 Our topics for today are: Management Contract, Audit 

20 Submissions, and Management and Sole Proprietary 

21 Definitions. The time period for written comments and 

22 topics will end February 28, 2018.

23 >> JONODEV CHAUDHURI: Okay. So the structure 

24 of today's consultation, again, is going to be a little bit 
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1 different than our purely live consultations. We will 

2 hear from each subject matter expert, who will provide

3 background, and then we will open up the floor for 

4 questions, comments and concerns from both the 

5 in-person audience, as well as those attending via 

6 Adobe Connect. I would ask folks who are -- who have 

7 any questions or comments, to work with our 

8 moderator, and -- and what was the process? You 

9 hit –

10 >> (Inaudible)

11 (Discussion off record.) 

12 >> JONODEV CHAUDHURI: Okay. The 

13 moderator will prompt those attending online to ask 

14 questions. 

15 So, with that, we will begin with our first topic of 

16 consultation. Our presenter for that will be Yvonne Lee, 

17 our Director of Finance.

18 >> YVONNE LEE: Thank you, Chairman. Under 

19 the regulations tribes wanting to engage a third party to 

20 manage their operations are required to enter into a 

21 management agreement with a third party that must be 

22 approved by the Chairman of the National Indian 

23 Gaming Commission. Following the NIGC's 2017 

24 consultation sessions, the Commission carefully 
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1 reviewed its regulations, and the Agency's internal 

2 procedures for reviewing and approving management 

3 contracts. As a result of that review, and based on 

4 comments received during the consultations, the 

5 Commission believes that changes to our management 

6 contract regulations will improve the efficiency of the 

7 contract review process and ensure consistency with 

8 IGRA's requirements regarding term limits. I 

9 will provide some background on this topic, including 

10 current regulations, Agency concerns, and the 

11 Commission's proposed amendments to the regulations.

12 The Chair of the NIGC may only approve a 

13 management contract if it does not exceed a term of five 

14 years, or in rare circumstances, seven years. NIGC 

15 regulations reflect that stipulation and management 

16 contracts are not approved unless they comply with all 

17 requirements of IGRA, including term limits.

18 After management contracts have been 

19 approved, tribes and their management contractors may 

20 amend their contracts by following the streamlined 

21 procedures for review and approval of contract 

22 amendments found in NIGC regulations, 25 CFR Part 

23 535. Part 535 provides an expedited process within 

24 which federal sessions are only required if the third 
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1 party individual and entities responsible for the contract 

2 have changed, and no new business plan or updated 

3 financial information is required. The expedited process 

4 is designed to allow the parties to sustain their 

5 relationship in a dynamic business environment while 

6 maintaining the integrity of the Chair's initial 

7 management contract review and approval.

8 The safeguards found in NIGC's management 

9 contract review process serve to assure IGRA's primary 

10 policy goals are met, including protecting Indian gaming 

11 and ensuring the tribe is the primary beneficiary of the 

12 gaming operation. 

13 A thorough review of past practice reveal parties 

14 using Part 535's expedited process have submitted 

15 amendments to the initially approved contracts that 

16 have extended the term of the approved contract by an 

17 additional one to five years resulting in a contract that

18 extends beyond the explicit term limits of IGRA.

19 Thus, the Commission believes it is important to 

20 update regulations to maintain IGRA's mandate.

21 The proposed amendments clarify the 

22 regulations by explicitly noting that amendments that 

23 extend the approved management agreement beyond 

24 the term limits permitted by IGRA, which is five or seven 
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1 years, will be reviewed under the full requirements of a 

2 new management contract under Part 531.

3 So, for example, if an approved contract with a 

4 five-year term is nearing the end of its term, and the 

5 parties are happy with the relationship and simply wish 

6 to extend it for an additional five years, they may do so, 

7 but it may not be reviewed as an amendment. Because 

8 IGRA limits contract terms to five or seven years, the 

9 Chairman will review the agreement under Part 531, and 

10 the entire requisite information that 531 requires must 

11 be submitted.

12 For another example, though, if a management 

13 contract had a one-year term and the parties wanted to 

14 amend the agreement to extend it for an additional year, 

15 for a total term of two years, the Chair would review the 

16 amendment under Part 535 because the term limit 

17 would still be within the statutory limit of five or seven 

18 years.

19 The Commission understands this change may 

20 affect the timing and expense of updating background 

21 investigations for making suitability determination of 

22 management contractors. And independent of the 

23 changes discussed above, the Commission received 

24 comments during the last round of consultation that the 
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1 background investigation process was time-consuming 

2 and expensive. As a result, the Commission has done a 

3 thorough review of its background investigation process 

4 and is proposing changes to our internal procedures to 

5 make the process more efficient, thereby reducing the 

6 cost of investigations. 

7 Under the new process, NIGC staff will review 

8 the background investigation applications and divide 

9 them into different investigative groups based on the 

10 level of risk. This process will allow the Agency staff to 

11 focus their investigative resources on the most vital 

12 individuals and entities. This replaces a 

13 one-size-fits-all model that scrutinizes all applicants 

14 the same.

15 For example, under the current process, the top 

16 direct financial interest goes through the same 

17 background investigation as the smallest indirect 

18 financial interest. But under the new process entities 

19 and individuals with a direct financial interest, holding 

20 the highest level of risk to the tribe, will have a more 

21 in-depth background investigation completed versus 

22 those entities or individuals who have an indirect 

23 financial interest.

24 In addition, the Commission has proposed 
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1 changing the individuals and entities that are required to 

2 submit background applications under the regulations 

3 to those that have 10% or greater financial interest. This 

4 proposed change should significantly reduce the costs 

5 to the management contractors in submitting full 

6 applications on smaller investors.

7 Further, this proposed change will also better 

8 align the Agency's requirements with other regulatory 

9 agencies. 

10 This change should not increase the risk to 

11 tribal gaming as the Commission will retain 

12 discretionary authority to conduct background 

13 investigations on the owners with even the smallest 

14 interests, who may pose a threat to the industry.

15 In addition, the Commission is proposing a 

16 regulatory change to clarify "the reduced scope of the 

17 investigation" provision to reduce the burden of 

18 background investigations for those who qualify. To 

19 further reduce the time and cost of background 

20 investigations, the Agency will no longer use the Office 

21 of Personnel Management, or OPM, to conduct part of 

22 the background investigations. Instead, we will process 

23 fingerprint checks through FBI and perform credit 

24 checks through other more efficient alternatives.
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1 Lastly, to reduce the up-front financial burden 

2 and timing concerns, the proposed amendments to the 

3 regulation removes the requirement of a deposit before 

4 the background investigations begin. Instead, the 

5 Agency will bill the management contractors regularly as 

6 the investigation proceeds.

7 I would now like to turn it back over to the 

8 Commission to lead the discussion. Thank you.

9 >> JONODEV CHAUDHURI: Thank you, Miss Lee. 

10 I am going to turn it over to my fellow Commissioners 

11 for a little bit more background.

12 >> SEQUOYAH SIMERMEYER: Thank you. This 

13 is Sequoyah Simermeyer. The management contract 

14 review process is conducted by the Chair, not the full 

15 Commission, unless there is an appeal. And it's 

16 generally, it's rare that a Chairman's management denial 

17 comes up on appeal to the Commission. 

18 However, as a full Commission, we are hoping some of 

19 the proposed changes will provide more efficiency to 

20 help avoid backlogs and improve stewardship of the 

21 tribal fees that support the Agency. Efficiencies in the 

22 process will ensure it does not create unnecessary 

23 burdens on the tribes when they are trying to seek 

24 partnerships they deem are necessary for their success. 
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1 So specifically, not using OPM, removing the $25,000 

2 deposit, and creating tiers of background investigation 

3 to help assure the work for suitability determinations 

4 should create a more efficient, less costly, and less 

5 burdensome review process. 

6 Finally, it's important to me that these changes 

7 do not exceed what IGRA requires for management 

8 contract terms and any Agency changes can be 

9 reconciled with the Agency's past interpretations of 

10 IGRA. 

11 It's helpful to see what works for tribes with 

12 management and non-management services like 

13 financing services to make sure the changes don't 

14 unintentionally hinder the processes that tribes use 

15 while at the same time helping NIGC to be more efficient 

16 and remain in-line with IGRA.

17 >> KATHRYN ISOM-CLAUSE: Thank you. I 

18 would certainly echo Commissioner Simermeyer's 

19 comments on that. The 

20 changes proposed to the background investigation 

21 process is really moving from a blanket approach to a 

22 more targeted approach where we use our resources 

23 and our Agency time and we really hope that will result 

24 in a lot of efficiencies for the industry. 
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1 I want to thank the staff, to think through the 

2 processes and how we go about it and looking at our 

3 regs, the management contracts is one we have been 

4 talking about quite a while going around with a lot of 

5 different creative ideas. So I just, again, want to thank 

6 our staff for doing that. Thank you.

7 >> JONODEV CHAUDHURI: Thank you fellow 

8 Commissioners. 

9 So these proposals, I think, have the potential of 

10 advancing the ball an important way at the Commission. 

11 Let me just give a little background about why we are 

12 consulting on the management agreements. 

13 For several years now, we have been operating under 

14 some core initiatives at the Agency. One of those 

15 initiatives is protecting against gamesmanship on the 

16 backs of tribes, which is a fancy way of restating our 

17 mandate under IGRA to protect the primary beneficiary 

18 status of tribal nations, and to ensure that the sole 

19 proprietary interest requirements of IGRA are met. 

20 Management agreements are an important part of that. 

21 The backgrounding that the Agency does that's part of 

22 the management agreement review, helps -- helps 

23 ensure that we work hand in hand with tribes to protect 

24 the industry but protect generally against any third party 
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1 threats to assets or operations.

2 So, the fact that we are considering, in my view, 

3 aligning our management agreement process to be 

4 more in keeping with the intent of IGRA's timeframes 

5 involved, namely, the five and seven-year timeframes, 

6 goes a long way towards furthering one of our key 

7 initiatives, but also fulfilling our mandates under IGRA. 

8 In addition to those initiatives, we have an ongoing 

9 commitment to good governance and promoting sound 

10 economic development as well as sound regulation. I 

11 believe these recommendations that come from staff 

12 come from Indian country; they go a long way to 

13 streamline the process without sacrificing regulatory --

14 regulatory duties. 

15 So, with that, we are going to turn -- turn the 

16 floor over to the audience as well as those attending 

17 online. 

18 Please -- moderator, please open up the lines 

19 for any questions. If we don't have any questions 

20 that's -- there is never any crime in finishing early, as I 

21 always say, but we will open the floor up now for 

22 question, comments, concerns.

23 >> MODERATOR: Thank you. If you would like 

24 to ask a question, please press star 1, please unmute 
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1 your phone and record your name, tribal affiliation or 

2 organization fully and clearly when prompted. Your 

3 information is required to introduce our question. 

4 Again, that is star 1. One moment, wait.

5 >> JONODEV CHAUDHURI: Going once? Going 

6 twice?

7 >> MODERATOR: At this time we have no 

8 questions.

9 >> JONODEV CHAUDHURI: All right. Okay. Any 

10 questions or comments from attendees in the room?

11 Bingo. Okay. 

12 (LAUGHTER)

13 >> JONODEV CHAUDHURI: Well, I'm sorry, the 

14 time closed.

15 >> ELIZABETH HOMER: No, no, I am right here, 

16 Elizabeth Homer. I don't really have a comment, I think 

17 that my clients will be sending their written comments in 

18 to you, but I do have a question. 

19 You know, I think that, you know, reviewing 

20 the -- the management contract process is really 

21 important, you know. My question is -- is a logistical 

22 one. You know, I am a former member of the 

23 Commission, as you know, and you know, even back in 

24 our day, we -- the Commission was criticized by the 
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1 amount of time that it took to do management contract 

2 review. 

3 And I understand a large part of that is due to 

4 the time it took to do investigations, the background 

5 investigations. 

6 So, my question is: As you all know, a lot of 

7 Tribal Governments are creating entities that are, you 

8 know, actually providing management services to other 

9 tribes. And some years ago in the regulations, there 

10 was a provision dropped in that said that, you know, for 

11 tribal management contractors could have an expedited 

12 process. 

13 And that has really never kind of been fleshed 

14 out to my knowledge. I don't know, maybe you guys 

15 have you know talked about that. So, 

16 long question, but it really boils down to this, is: Have 

17 you all thought about adding some kind of more meat 

18 on the skeleton of this tribal management contractor? 

19 And what are you thinking in terms of, you know, the 

20 scope of a background of a tribal entity? So that's my 

21 question.

22 >> JONODEV CHAUDHURI: Thank you 

23 Miss Homer. Excellent question. 

24 So, I should add, in addition to our subject 
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1 matter expert, we are joined by the Chief of Staff and 

2 general counsel here today Christinia Thomas and Mike 

3 Hoenig, respectively, who may weigh in at various times. 

4 Excellent point. Excellent question. Yes, we absolutely 

5 see the benefit of sister tribe investment in Indian 

6 country; we want to encourage that at every step. 

7 However, some of those streamlinings are cooked in our 

8 process as it exists, but also will be cooked into the 

9 process moving forward. 

10 So, as Miss Lee discussed, there is kind of two 

11 parts to this. There is -- there is a change in how we 

12 are -- how often we are going to be doing these 

13 reviews. And basically, you know, moving away from 

14 the amendment approach to trying to stay closer to 

15 IGRA's five to seven-year spirit is part of that. 

16 But there is also internal operational tweaks that we are 

17 making. And Miss Lee mentioned the three tiers of 

18 backgrounding that we are going to be working off of.

19 Well, those three tiers of backgrounding are 

20 aligned with risk. When you are figuring out how to 

21 streamline within those tiers the presumption is tribal 

22 nations who have a longstanding track record of 

23 regulation will -- their risk levels will be assessed in that 

24 process. So, that on the backgrounding side, you know, 
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1 the assumption is that there will be some overlap in 

2 some of the key officials who will be -- will be 

3 backgrounded in the sister arrangements. But, also, on 

4 the management agreement review side, you know, 

5 there may be streamlining there as well, so some of that 

6 is cooked into the process already. 

7 And that's kind of the point of having the 

8 different tiers of risk deciding -- controlling how much 

9 backgrounding will take place. 

10 It's very difficult to -- to anticipate all situations 

11 that would come up under management agreements 

12 because every agreement, every transaction is different. 

13 And so, in terms of creating blanket processes, the best 

14 that we can do is streamline the categories that we are 

15 operating under and recognize that every agreement is 

16 different and every backgrounding involves different 

17 individuals.

18 So, I don't know if any members of our team 

19 want to add to that, but that's an excellent, excellent 

20 point. We want to encourage sister -- sister tribe 

21 investment at every stage.

22 >> MICHAEL HOENIG: Hi, this is Michael 

23 Hoenig, general counsel at NIGC. One of the things the 

24 regs allows and IGRA allows is certain entities to -- that 
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1 includes tribal government and institutional investors, in 

2 the draft regulatory change will be put out, we tried to 

3 clarify a little bit who can make the request. I know 

4 internally and our Chief of Staff, Yvonne, might talk 

5 better to this, internally we are trying to figure out what 

6 that would look like and what that means for actually 

7 how we would process the background investigation. 

8 This is certainly something we are thinking about as we 

9 go forward.

10 >> ELIZABETH HOMER: Thank you. 

11 One other question has jumped into my mind. If anyone 

12 else has something, come and grab the mic from me. 

13 The other question is logistical because these 

14 backgrounds do take a long time. And -- and you 

15 know, if you are coming up on a hard date this contract 

16 ends like today, and your process, because you are 

17 treating this like a brand new submission, is not 

18 finished, that poses a logistical and a major problem for 

19 tribal gaming operations that is under, you know, a 

20 particular management contract. 

21 So, is there a way to build in some timeframes 

22 or some kind of process where maybe you are at the end 

23 of, you know, something, and maybe a few days are 

24 going to, you know, go over where the contract is 
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1 expired so that, you know, tribes are not facing a 

2 shutdown or the loss of their management team or, you 

3 know, that kind of thing? I guess any time you do 

4 regulations, the devil is in the details. I really worry 

5 about the deadlines here.

6 >> JONODEV CHAUDHURI: And thank you, 

7 Miss Homer, that's an excellent point. And in practice, 

8 we do quite a bit of coordination with tribes to work 

9 together to manage upcoming deadlines. In my opinion, 

10 you know, I am only one of three commissioners that 

11 would vote on any regulatory change, but in my opinion 

12 this will help bring clarity to the industry because the 

13 way that the Agency has typically functioned in the past 

14 is through the amendment process and through the 

15 extension process. It's a little bit ad hoc. And bringing 

16 some clarity to the -- the time periods management 

17 agreements and the deadlines they are absolutely maybe 

18 some growing pains in the short-term, but I think in the 

19 long-term clarity does help people predict what -- you 

20 know, predict upcoming deadlines -- I mean, the impact 

21 of upcoming deadlines passing. And I -- it is my hope 

22 that that additional clarity will help the industry work 

23 to -- to not be in a situation where workarounds have to 

24 be developed to get around IGRA's five to seven-year 
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1 period through amendments or one-off ad hoc 

2 extensions.

3 And, so, over time the hope is there will be 

4 clarity in the industry, that folks will work together. But 

5 certainly in the short-term as the -- any new changes 

6 are implemented we are always aware of growing pains 

7 and our team will work with -- work with folks who have 

8 upcoming deadlines to process the best that we can.

9 Additional comments, questions, concerns? 

10 Mr. Abramson?

11 >> GREGORY ABRAMSON: I will come to the 

12 table here so -- is it on? Yes. Spokane Tribe of 

13 Indians. 

14 We have just gone through this process, and we 

15 are very appreciative of NIGC. As you know, a lot of 

16 times when I catch some of you, as kind of like a fly 

17 bothering you completely all the time there, so it's as 

18 there does seem to be tedious and a long time. I do 

19 appreciate the regulations that we have to go through. 

20 And one thing that with our tribe is we buck that we are 

21 the primary regulators there. And that's one thing that I 

22 don't like to see is that we have to duplicate our -- we 

23 are on the same page when we go through a FBI 

24 background or FBI prints and stuff there, if the tribes, if 
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1 our tribe is on the same -- I don't know if there are 

2 different FBI sites that you go to, to be able to find it out 

3 if one is more in-depth than the other, and I know that 

4 our tribe, we go through that there, getting the 

5 fingerprints and going through that there. But one thing 

6 when -- I first wanted to thank the Commission there as 

7 we went through this, and the staff. The staff is the one 

8 that had to deal a lot with our attorneys and had to deal 

9 a lot with that there. And Michael and others, we know 

10 that because we did have deadlines.

11 And Liz stated too when you have these 

12 deadlines and stuff we want to try to hit them and you 

13 guys did assist and help us, and even though we are 

14 right down to the very last day and stuff there of getting 

15 them accomplished. 

16 But I guess my main portion is duplicative 

17 things, but we do believe that our regulatory body is the 

18 main regulatory people and we do know that you guys 

19 have oversight on it there. And we do appreciate it 

20 there, so --

21 >> JONODEV CHAUDHURI: Thank you very much 

22 Secretary Abramson. Thanks to you and the Spokane 

23 Tribe for collaboration and coordination in terms of 

24 working with us, getting whatever we needed, and 
29

1 meeting the deadline at hand with Spokane. 

2 To answer the question, I am going to -- in 

3 terms of the backgrounding, we try to avoid duplication 

4 wherever possible, but I don't know if Christinia or 

5 Yvonne want to add anything more to how we kind of 

6 use readily available information, and we do try to do 

7 that but Yvonne, did you --

8 >> YVONNE LEE: For background investigation 

9 there are actually, you know, two main categories. One 

10 are the entities and the other ones are the individuals. 

11 So, for individuals, yes, you know if you already have 

12 gone through the FBI and all of those fingerprint check, 

13 of course we do more than that. But if you have already 

14 gone through that you can send us the results and we 

15 definitely will review those documents and we won't 

16 duplicate those efforts that's already been done. But for 

17 entities we have to kind of, you know, if it's a brand new 

18 entities, we do have to look at their corporate 

19 organization, their, you know, their holding status and 

20 their financial statements and all of that, that's a little 

21 bit different, yeah.

22 >> GREGORYABRAMSON: Okay.

23 >> JONODEV CHAUDHURI: But Secretary 

24 Abramson, your point is absolutely well taken, and I 
30

1 think echoed from -- in terms of our philosophy. Tribes 

2 are the primary regulators at their gaming -- we have an 

3 important role to play hand-in-hand with the tribes to 

4 strengthen the regulatory structure of Indian gaming, 

5 but we always recognize and respect tribal regulators 

6 and tribal leadership because that's where it starts and 

7 ends. 

8 Thank you very much for --

9 >> GREGORY ABRAMSON: Now, yield my time 

10 from my gaming chair, he was supposed to be here, but 

11 will see you next week in Milwaukee there.

12 >> JONODEV CHAUDHURI: Wonderful.

13 >> GREGORY ABRAMSON: He will probably be 

14 up here making more comments next week.

15 >> JONODEV CHAUDHURI: Wonderful, 

16 wonderful. 

17 That's an excellent point. Our comment period 

18 goes through February 28? February 28. 

19 I want to encourage everybody if -- this isn't the only 

20 opportunity to get comments, and we welcome and 

21 encourage comments in any form, whether they are 

22 written or statements on the record that will be 

23 transcribed later. But we look forward to seeing your 

24 Chairman, your gaming commissioner. So, thank you 
31

1 very much, Secretary.

2 >> GREGORY ABRAMSON: Thank you. Thank 

3 you.

4 >> JONODEV CHAUDHURI: So any additional 

5 comments, questions, concerns on this topic?

6 >> SEQUOYAH SIMERMEYER: Before we go on, 

7 this is Sequoyah Simermeyer, I want to say I appreciate a 

8 lot of the comments that are being made because for me 

9 there is two -- on this particular issue, kind of two 

10 things that will be helpful to consider in the coming 

11 weeks during our conversation series. 

12 One is what is being proposed, or is there anything else 

13 that we are not thinking of that will make this process 

14 more efficient. 

15 And, secondly, is what is being proposed able to 

16 reconcile with the intent of IGRA or the practices we 

17 have had that Indian country has come to expect from 

18 our Agency and provide better clarification in that area. 

19 So thank you for the comments and ideas that spoke to 

20 those today, and any more that will come in will be very 

21 much appreciated.

22 >> JONODEV CHAUDHURI: You want to?

23 >> KATHRYN ISOM-CLAUSE: (Shakes head side 

24 to side.)
32

1 >> JONODEV CHAUDHURI: So, Amanda, if we 

2 can ask the virtual audience one last time if there are 

3 any additional questions before we move on to the next 

4 topic?

5 >> MODERATOR: Thank you. As a reminder if 

6 you would like to ask a question, please press star 1. 

7 One moment. 

8 At this time we have no questions.

9 >> JONODEV CHAUDHURI: Okay. Thank you. 

10 So with that, we will move on to our next topic, which is 

11 audit submissions, I will turn it over to our audit 

12 manager.

13 >> TRACI SANTILLANES: Thank you, Chairman. 

14 I am Traci Santillanes. 

15 Under IGRA and current NIGC regulations, 

16 gaming operations, regardless of income, are required 

17 to submit an annual audited financial statement, 

18 completed by certified public accountants, to the 

19 Commission within 120 days of their fiscal year end. 

20 These audits may be encompassed within existing 

21 independent tribal audit systems.

22 Submission of the annual audit report is critical 

23 to the NIGC's mission to protect the integrity of Indian 

24 gaming and provides a certain level of assurance as to 
33

1 the safekeeping of tribal gaming revenues. The audit 

2 report prepared and submitted on a timely basis is 

3 evidence of, among other things, the integrity of the 

4 gaming operation and, more specifically, of the 

5 adequacy of the books and records, the functioning of 

6 the internal financial controls, and the disclosure of 

7 information having a bearing on the financial 

8 statements.

9 The Commission, however, recognizes that 

10 small or charitable gaming operations often struggle 

11 with the cost of these requirements. With this in mind, 

12 the Commission is seeking feedback and 

13 recommendations on whether changes are needed to 

14 the audit submission regulations. Specifically, we want 

15 input on what level or levels of audit should be required

16 for smaller gaming operations or charitable gaming 

17 operations.

18 A gaming operation earning less than $2 million 

19 in gross gaming revenue annually can request from the 

20 Commission to submit a CPA reviewed financial 

21 statement, if it has submitted an audited financial 

22 statement for three consecutive years. A reviewed 

23 financial statement must be completed by an 

24 independent CPA and conform to statements on 
34

1 standards for accounting and review services of the 

2 gaming operation.

3 In fiscal year 2016, only 80 operations earned 

4 less than $2 million in gross gaming revenue. Of those 

5 80, only six submitted the lesser financial statement 

6 review. Small or charitable gaming operations often 

7 produce less than $100,000 in gross gaming revenue 

8 annually, some less than $10,000. Contracting a CPA 

9 firm perform an annual audit can prove cost prohibitive, 

10 and as a result, may deter tribes from pursuing these 

11 gaming opportunities.

12 NIGC reviewed statutes and regulations from a 

13 number of jurisdictions and agencies concerned with 

14 financial entities, including the State of Nevada, the 

15 Federal Deposit Insurance Corporation and the 

16 Department of Interior. We found no consistency in the 

17 audit requirements. For example, Nevada gaming 

18 regulations require audits of financial statements for 

19 operations grossing more than $5 million, but maintain 

20 the right to require audits, compiled statements or 

21 reviews of financial statements of those operations 

22 whose gross revenue is less than $5 million. Interior 

23 exempts nonfederal entities from their audit 

24 requirement if the entity spends less than $750,000 per 
35

1 year. As NIGC considers altering its own regulations, it 

2 recognizes that there are currently 95 tribal operations 

3 that produce less than $3 million in gross gaming 

4 revenue. Further, the Commission is aware that tribal 

5 operations comply with the most regulations from their 

6 own governments as well as state and federal entities. 

7 Our hope through this consultation session is to discuss 

8 opportunities or receive feedback and recommendations 

9 on how to amend this regulation while still ensuring we 

10 are supporting financial stability and maintaining a high 

11 level of protection of tribal gaming operations. Thank 

12 you for listening, and with that, I will hand the floor back 

13 over to the Commission to lead the discussion.

14 >> JONODEV CHAUDHURI: Turn it over to my 

15 fellow Commissioners for comments

16 >> SEQUOYAH SIMERMEYER: Thanks, Chairman. 

17 This is Sequoyah Simermeyer, thank you for the 

18 presentation. 

19 Like with the management contract review 

20 process that we just discussed, what the Commission is 

21 looking at with regard to audit is making sure that any 

22 changes in process comply with the IGRA requirements 

23 that tribes submit an annual independent audit. 

24 In whatever changes to auditing the Commission 
36

1 considers, we need to make sure that the Agency 

2 supports IGRA'S expectations and that these 

3 requirements are going to promote financial stability 

4 and enhance tribes' regulatory capacity. Many tribes' 

5 regulatory bodies already have a very sophisticated level 

6 of capacity to conduct audits and to ensure 

7 independence and integrity. 

8 It's also the case that the high cost of 

9 independent audits can make a small gaming operation 

10 not profitable for a community, or worse, can create a 

11 disincentive to comply with any audit submissions, or it 

12 can create a disincentive to small gaming operations 

13 opening up unfortunately. It would be helpful to hear 

14 about tribe's experience with the NIGC's auditing 

15 requirements compared with a tribe's own auditing 

16 practices. It will also help to hear and to know more 

17 about why tribes may or may not want to participate in 

18 lesser financial statement reviews. As was mentioned, 

19 in fiscal year 2016, only six of potentially eligible 80 

20 operations submitted lesser financial statement reviews. 

21 And finally, it would help to hear about how increasing 

22 the $2 million threshold, or providing more 

23 customized technical assistance, or drafting new 

24 guidance might help to incentivize or dis-incentivize 
37

1 tribes from participating in those reduced reviews or 

2 more efficient processes.

3 >> KATHRYN ISOM-CLAUSE: So this topic aligns 

4 with our rural outreach initiative because we know that 

5 the burden can be especially heavy on smaller 

6 operations, but we also, of course, have to recognize the 

7 need for audit. So, as Commissioner Simermeyer 

8 mentioned, we are interested in your feedback on 

9 different ways that we can kind of meet both of those 

10 goals, you know, still having the audits that are 

11 required, and to the extent that they were required and 

12 how we can make it more efficient for smaller 

13 operations. You know, we have a couple of more 

14 questions. I think Commissioner Simermeyer went over 

15 most of them, but we are very happy to have an 

16 open-ended discussion too, related to these questions.

17 >> JONODEV CHAUDHURI: Thank you Vice 

18 Chair. 

19 And I just want to echo my fellow 

20 Commissioners' comments. This is really an extension 

21 of our commitment to doing whatever we can to support 

22 smaller operations in recognition of the fact that 

23 everybody involved in Indian gaming, we are in it 

24 together, we want to make sure that small operations 
38

1 are able to meet that balancing point that is so 

2 important for all of us. Which is, not inhibiting the 

3 entrepreneurial spirit of tribal nations while ensuring 

4 sound regulation at the same time. 

5 The proposals that are being discussed today are an 

6 attempt to hit that balancing point, but we are 

7 absolutely open to comments or concerns about 

8 whether or not it's -- this is the right approach. 

9 So, at this time, we are going to turn it over to 

10 the floor for questions and comments. But as I always 

11 say, there's no shame in finishing early either. We will 

12 ask Amanda at this time -- Amanda, do you mind 

13 polling the audience to see if there are any questions on 

14 the phone or online?

15 >> MODERATOR: Yes, of course. 

16 As a reminder, if you would like to ask a question, 

17 please press star 1. One moment, please.

18 >> JONODEV CHAUDHURI: And while we are 

19 waiting, we always try to put our consultation tables up 

20 as close to the circle as possible with the idea of being, 

21 you know, this is a group discussion. I mean, anybody 

22 that wants to sit right at the table and chairs are free to. 

23 Of course, you are welcome to sit wherever you would 

24 like.
39

1 >> MODERATOR: At this time we have no 

2 phone questions.

3 >> JONODEV CHAUDHURI: Okay. 

4 So, turn it over to the in-person audience. Questions, 

5 comments or concerns?

6 >> ELIZABETH HOMER: Just a question. Have 

7 you all considered the possibility of making this a 

8 permissive rule and allowing the tribe, through its 

9 regulatory Agency, to determine, you know, what level 

10 of review and then you just kind of set the upper 

11 threshold and let them decide if they are going to, you 

12 know, want, you know, a full audit or what kind of 

13 standard that the tribe wants to set?

14 >> JONODEV CHAUDHURI: Well, thank you, 

15 Miss Homer. That's the type of feedback we absolutely 

16 welcome, and we want to hear. 

17 So, I think one of the slides discuss whether or 

18 not our current threshold really reflects the full universe 

19 of smaller operations out there. We also, as I said, this 

20 is an attempt to set the right balancing point between 

21 those two issues. If there are specific recommendations, 

22 please feel free to weigh in in writing or here in further 

23 detail. But that's certainly one approach that we would 

24 love to hear more about. Additional 
40

1 questions, comments, concerns?

2 Okay. Well, thank you. 

3 We will move on to our third and final topic, 

4 which is Management and Sole Proprietary Definition, 

5 and for that, we have Tana Fitzpatrick.

6 >> TANA FITZPATRICK: Good morning, 

7 everyone. My name is Tana Fitzpatrick, and I am staff 

8 attorney with the Commission. 

9 As previously discussed, IGRA provides that a 

10 tribal gaming operation owned by the tribe may either 

11 be managed by the tribe or by a management contractor 

12 subject to a management contract approved by the NIGC 

13 Chair. This applies to any arrangement in which a 

14 contractor manages all or part of an Indian gaming 

15 operation. To provide better clarity, the Commission is 

16 considering developing regulations clearly setting out its 

17 standard for what constitutes management, as well as 

18 its criteria for evaluating when a sole proprietary interest 

19 violation has occurred. 

20 With this in mind, I will provide some brief 

21 background information of these terms and then pass it 

22 back to the Commission to open the floor for questions 

23 and discussion.

24 To assist tribes in determining whether an 
41

1 activity constitutes management, NIGC Bulletin No. 94-5 

2 explains that the term encompasses activities such as 

3 planning, operating -- excuse me -- organizing, 

4 directing, coordinating, and controlling all or part of a 

5 gaming operation. In addition, the NIGC Office of 

6 General Counsel issued an opinion letter expanding on 

7 these terms by providing examples of management 

8 activities.

9 However, to date, the Commission has not 

10 issued a regulation formally defining management. The 

11 Commission believes that, in consultation with tribes, 

12 developing a regulatory definition consistent with past 

13 interpretations would help provide greater certainty to 

14 the tribal gaming industry regarding what constitutes 

15 management. The Commission recognizes that the 7th 

16 Circuit has also recommended that the Commission 

17 provide more guidance.

18 A stated purpose of IGRA is "to ensure that the 

19 Indian tribe is the primary beneficiary of the gaming 

20 operation." Seeking to serve this purpose, IGRA requires 

21 that the gaming ordinances provide that tribes have the 

22 sole proprietary interest and responsibility for the 

23 conduct of any gaming activity, unless the gaming 

24 activity is individually owned.
42

1 To determine whether a third party has received 

2 a proprietary interest in a tribal gaming operation in 

3 violation of the sole proprietary interest mandate, the 

4 NIGC considers the term of the relationship; the amount 

5 of revenue paid to the third party; and the right of 

6 control over the gaming activity provided to the third 

7 Party.

8 The Commission has previously consulted on 

9 developing guidance or regulations concerning sole 

10 proprietary interest in 2008 and 2010. Courts have had 

11 the opportunity to consider and discuss this issue in 

12 intervening years, noting and upholding NIGC's 

13 formulation of the criteria to evaluate for such 

14 violations. The Commission believes that a regulation 

15 consistent with past NIGC enforcement actions and 

16 litigation would provide greater certainty to the tribal 

17 gaming industry regarding what constitutes a violation 

18 of the sole proprietary interest mandate

19 The draft regulations we provided you today as a 

20 handout incorporate these interpretations for 

21 consideration, as an addition to the Commission's 

22 compliance regulations. I 

23 would now like to turn it back over to the Commission 

24 to lead the discussion.
43

1 >> SEQUOYAH SIMERMEYER: Thanks. 

2 This is Patrick -- this Sequoyah Simermeyer. 

3 As the presentation mentioned, the Agency's 

4 guidance and legal opinions as well as Federal case law 

5 informed the management definitions in the past. 

6 As a member of the full Commission I would not make 

7 the determination that an unauthorized management 

8 occurred or that there was a violation of sole proprietary 

9 interest, that is a determination made by the Chair. 

10 However, as a member of the Commission, we could 

11 hear an appeal to review the Chair's decision. It is 

12 hoped that promulgating a standard would support the 

13 transparency and good governance practices at both the 

14 initial decision stage and at the appeal stage. 

15 I also hope that promulgating a definition where one 

16 does not already exist could help to provide more 

17 certainty to the partners working with Indian country 

18 and reduce the costs associated with making these types 

19 of arrangements. 

20 For example, in 2017 NIGC's Office of General 

21 Counsel provided 60 declination letters for tribe's 

22 financial agreements in order to bring certainty to the 

23 question of whether financial agreement might 

24 constitute management of a tribal gaming operation. 
44

1 It's important to provide assistance with declination 

2 letters, and there's no reason that should stop, but it 

3 adds time and associated transaction costs for gaming 

4 operations and their partners. 

5 Finally, promoting a definition can improve 

6 general awareness about the sole proprietary interest 

7 and management contract provisions within IGRA, and 

8 the Chair's ability to make enforcements. There have 

9 only been a small number of actions by the Agency or 

10 Chair over the NIGC's history. And nobody hoped for 

11 enforcement action, but that there is additional ways for 

12 the full Commission to articulate the definition of these 

13 issues. 

14 So thanks for everyone's feedback today and in 

15 the coming weeks on this topic.

16 >> KATHRYN ISOM-CLAUSE: So, this topic, we 

17 have had, you know, several years to think this through 

18 within our own Agency as well as the courts have 

19 interpreted this for us. So we believe that the proposed 

20 definitions that we are putting forth captures all of those 

21 ideas, as much as we can, but just in one place, so you 

22 are not kind of hunting all over for these different ideas 

23 of the definition. 

24 So, as Commissioner Simermeyer mentioned, we 
45

1 hope that it will provide more clarity to the industry and 

2 overall make relationships more efficient because you 

3 don't have to have any uncertainty. One question that 

4 came up in a previous session was whether by doing this 

5 we intend to kind of back away from doing declination 

6 letters, and that is certainly not the case. We really 

7 appreciate that service that the Office of General 

8 Counsel provides and we would continue to do that, but 

9 this would also just provide some parameters on the 

10 definition.

11 >> JONODEV CHAUDHURI: Thank you, Vice 

12 Chair. 

13 I just want to expand on my fellow 

14 Commissioners' statements. I agree with everything 

15 they said. But you know, also tie this proposed -- or 

16 this proposal to our gamesmanship initiative. 

17 As I mentioned before, one of our tent pole initiatives is 

18 protecting against gamesmanship on the backs of 

19 tribes, essentially that's doing what we can to work hand 

20 in hand with the primary regulators of gaming to protect 

21 tribal assets and operations. It flows from our 

22 responsibilities in IGRA, that flows from our work in 

23 every aspect of operations. And that's -- it's an 

24 important initiative to us. 
46

1 How this proposal is tied into that, obviously 

2 bringing clarity to the industry regarding sole 

3 proprietary interest regarding management will assist 

4 tribal nations in the conduct of their own reviews to 

5 protect their own operations. 

6 So, while there is nothing earth shattering in 

7 terms of these definitions, I mean, we are basically 

8 codifying various pieces of law that have been 

9 pronounced in different arenas and putting them in one 

10 place, we do think this will go a long way to protecting 

11 the integrity of Indian gaming so that tribal regulators, 

12 tribal nations, can clearly point to regulation when 

13 raising any concerns about any outside threats to their 

14 assets or operations. 

15 So, this is an extension of what we are about as 

16 an Agency. I am very excited by this proposal, in the 

17 sense that, in addition to good governance and 

18 transparency, it also furthers one of our tent pole 

19 initiatives. 

20 So I really want to thank our team, as well as our 

21 partners in Indian country who worked hard to come up 

22 with some workable definitions in these areas. So, with 

23 that, we are going to turn it over to the floor for 

24 questions, comments, and concerns. And Amanda, if 
47

1 you could poll the folks online, we would appreciate it.

2 >> MODERATOR: Thank you. 

3 As a reminder, if you would like to ask a question please 

4 press star 1. One moment, please.

5 >> JONODEV CHAUDHURI: Thanks.

6 >> MODERATOR: At this time we have no 

7 questions.

8 >> JONODEV CHAUDHURI: Okay. Thank you. In 

9 person questions, comments or concerns? 

10 Yes. 

11 >> WILDA WAHPEPAH: Thank you. I am Wilda 

12 Wahpepah, W-i-l-d-a, W-a-h-p-e-p-a-h, attorney at 

13 Sheppard, Mullin, Richter and Hampton, from Norman, 

14 Oklahoma. 

15 I have a question about the language for Part 

16 573, which is the sole proprietary interest draft 

17 regulation. There is a list of seven factors here, and my 

18 question is about number 7. 

19 So the lead-in says that "in determining whether 

20 sole proprietary interest mandate has been violated, the 

21 Chair can take any of the following factors, including a 

22 single factor into consideration." 

23 And number 7 says, "The provision or 

24 assignment of tribal rights to the third party, including 
48

1 but not limited to, the third party's right to access to 

2 records or financial information regarding the gaming 

3 operation or part thereof; the right to place gambling 

4 devices that are controlled by a third party in the 

5 gaming operation or part thereof; and the grant of 

6 security interest in the gaming operation." 

7 So, if you look at this from a tribal gaming 

8 finance perspective involving, let's just say, a 

9 commercial lender, a federally recognized national bank, 

10 it would be not uncommon to see in the covenants the 

11 borrower, a tribal borrower agreeing to provide its 

12 audits. For example, year-end audit to the lender or a 

13 quarterly audit to the lender. That's a customary 

14 provision that you see, a market provision. 

15 And with respect to C, the grant of the security 

16 interest in the gaming operation, also in this commercial 

17 tribal finance perspective, it's customary to see that a 

18 security interest in the revenue and personal property of 

19 the gaming authority, for example, that's entering into 

20 the lending contract, is a security interest that's being 

21 granted because that's the collateral for the loan. 

22 So, I was wondering if you could provide a little color on 

23 what the intent was in this particular factor into what is 

24 the concern driving that.
49

1 >> JONODEV CHAUDHURI: Thank you. Excellent 

2 question. 

3 Just to give Mike a heads up, probably going to 

4 ask for his way in, but let me address those in turn. 

5 First of all, all of these portions of the definition come 

6 from, you know, either our Agency decisions or case law 

7 that's out there. We -- there is a distinction between 

8 audit records that are somewhat sanitized and 

9 summarized, versus original source material, original 

10 source records I mean. And there is certainly --

11 certainly an amount of degree involved -- or analysis of 

12 degree involved when you are looking at access to 

13 records and in terms of proprietary interest. You are 

14 thinking about control, influence, things of that nature. 

15 But I wanted to draw that distinction, but also, 

16 distinction of a financial interest.

17 You know, when we talk about sole proprietary 

18 interest, we are talking about concepts involving 

19 ownership and control. And it's really a case by case 

20 analysis that speaks to the ownership and control that is 

21 exerted by a third party. So it's always going to be 

22 somewhat fact specific. 

23 But I don't know if -- Mike, do you want to 

24 weigh in on any of the background of those provisions 
50

1 at all? 

2 >> MIKE HOENIG: Sure. Thank you. 

3 So, I think, first, it's important to remember that when 

4 we talk about the kind of documents that we are 

5 reviewing, when we talk about sole proprietary interest, 

6 it's not just financing documents. Certainly, as far as 

7 the declination letter process has gone, financing has 

8 certainly taken up a big chunk of what we now review. 

9 But before -- before, in the early days, it was mostly 

10 consulting agreements and development agreements, as 

11 well as -- in fact, I don't think we ever saw financing 

12 agreements, or rarely did, until after the Wells Fargo 

13 litigation. 

14 But at any rate, as far as the security interest, 

15 and the third party's access to records, I would say that's 

16 one of the factors that we have looked at in the past to 

17 look for that element of control that goes along with 

18 sole proprietary interest. But at the same time, I would 

19 say we have also issued hundreds now of declination 

20 letters that have reviewed security interests. And we 

21 understand that it's part of financing that security 

22 interest is almost always part of that. And oftentimes, it 

23 includes a right to, in the event of default, to call in the 

24 gross gaming revenues from the operation. 
51

1 And what we have seen though, is at the same time 

2 there has been other safeguards that have been put into 

3 security agreements and loan documents and financing 

4 agreements that say, even if that happens, that there is 

5 all of these other things that protect the tribe's sole 

6 proprietary interest in its gaming operation. I think they 

7 are, in the industry, they are referred to as the IGRA's 

8 savings provisions. You know, we see that it's almost a 

9 standard -- just as now getting a declination letter is a 

10 standard condition, that language is almost a standard 

11 provision in all of the documents. 

12 So, I think that we would be looking at this more 

13 in the sense of if, for example, someone just gets all of 

14 the gaming revenue plus they have all of the control 

15 over the facility, they are the ones that get to come in 

16 and demand, we are going to review every document, 

17 those are the kind of things that we would look at in 

18 maybe a different context than the standard lending 

19 framework that we have seen. 

20 So it certainly is a factor that we would want to 

21 keep in there, it's something we always would look at, 

22 but I don't think it's a primary one. I don't think it's -- I 

23 can't -- I mean, it's possible, but I don't know that it 

24 would ever be the sole factor that we would look at if we 
52

1 were making a determination on sole proprietary 

2 interest. I don't know if that helps or presents any 

3 clarity but --

4 >> JONODEV CHAUDHURI: Thank you for the 

5 question. As I mentioned, it's a matter of degree too 

6 and it's a very fact intensive analysis.

7 I see another question.

8 >> ELIZABETH HOMER: Yes. Thank you, 

9 Chairman. 

10 I have gotten a lot of feedback from my 

11 colleagues that do gaming law and, you know, also from 

12 my clients in their gaming enterprises about this 

13 particular issue. There is a great concern that the

14 definition of management is going to sweep in all kinds 

15 of standard agreements, and end up, you know, having 

16 to get declination letters for every kind of agreement 

17 that the enterprise might enter into, including training 

18 and things that are mundane, happen all the time, are 

19 necessary. You know, help the tribe to make sure that it 

20 has properly adequately trained staff. 

21 You know, also, with respect to marketing 

22 contracts. You know, and most of these contracts they 

23 are just a fee-for-service contract. You know, they are 

24 not where somebody is actually gaining a security 
53

1 interest in the gaming operation or, you know, in the 

2 revenue stream or anything like that. 

3 And so, I guess that that is -- the question is: 

4 Will you all consider the breadth of that definition and 

5 the potential unintended consequences that could end 

6 up costing, you know, a lot of money, a lot of time, a lot 

7 of slowing down on business activity, you know, if there 

8 are these more mundane and routine types of 

9 agreements that are now going to be subject to 

10 management contract review. That's what people are 

11 afraid of.

12 >> JONODEV CHAUDHURI: And thank you 

13 Miss Homer. If there are any specific tribal concerns 

14 from any of the specific tribes we would absolutely 

15 welcome that more targeted commentary as well. You 

16 know, we very much welcome input. You mentioned 

17 clients generally, if there are any specific tribal 

18 comments you want to follow up with, we would be 

19 welcome to review that.

20 But let me just share a few kind of thoughts that 

21 come to mind.

22 I am not sure if bringing clarity to the industry 

23 would result in an uptick in declination letters of 

24 collateral agreements. If we are clear what the 
54

1 definitions are, which we are attempting to be, it will be 

2 clear that fee-for-service contracts don't fall into this 

3 management definition. That, I think, that's one of the 

4 purposes of having a definition that everybody can look 

5 to.

6 In fact, the result may very well be as lenders, as 

7 tribes are more aware of the black-and-white definition, 

8 there very well may be a reduction in the declination 

9 letter requests that come in. Bring clarity to the industry 

10 is what -- what one of our objectives is. 

11 But if there are specific types of agreements that there is 

12 concern over following into this definition, we would be 

13 happy to examine that and talk about it. And certainly 

14 the issue would be whether or not such agreements 

15 would give rise to an enforcement action or void them in 

16 some way. I don't think -- you know, hiring somebody 

17 to do a training is necessarily going to fall under the 

18 definition of management.

19 >> ELIZABETH HOMER: That's very reassuring, 

20 Chairman. And we will take you at your word on that. 

21 That is reassuring. 

22 However, you know, the sad truth is you may not 

23 always be the Commissioners that are interpreting this 

24 language. And you know, I think that there is possible 
55

1 mischief with respect to -- you know, potential mischief 

2 with respect to the scope of the definition. It does 

3 include things like training and marketing. The long list 

4 of things, you know. So, I think that that's the concern. 

5 You know, and if you think about specific examples, 

6 another example are machine leases. You know, I mean, 

7 they do -- they are usually, you know, a 30/70 or an 

8 80/20 kind of split or those kinds of things. 

9 So the question is: Would these machine lease 

10 agreements, and sometimes machine purchase 

11 agreements also, you know, they are being paid for with 

12 the gaming revenue. So, there is kind of a participation 

13 here. Would that bring those kinds of agreements into 

14 the management contract review process?

15 >> JONODEV CHAUDHURI: I think that's an 

16 excellent question.

17 And absolutely it's the intent, if through under 

18 the guise of an ancillary agreement, management is 

19 taking place, it's helpful to have a definition that assists 

20 in the process to -- to address that. And so, if there is 

21 a machine lease agreement that bleeds into 

22 management authorities, that's a concern. That's a real 

23 concern, and we want to address that. 

24 And I don't want to -- and a lot of that, the 
56

1 proof is in the -- I mean, the devil is in the details in the 

2 language of those agreements. And so, by providing a 

3 definition, the hope is that there is clarity as folks are 

4 negotiating things like machine lease agreements, so 

5 that issues of management are avoided and not included 

6 into these agreements before they ever become a 

7 problem. And you can't do that without a clear 

8 definition. 

9 And so -- or you can do it, it's just more 

10 difficult. And so, that's a very good -- excellent point. 

11 We will kind of think through it as -- if this is, indeed, 

12 approved by the Commission, certainly the 

13 implementation will have to be reasonable as well. But 

14 the more clarity there is in terms of the playing field that 

15 we are working under, the less freedom there is for 

16 myself or any future Chairs to interpret management 

17 arbitrarily. Thanks.

18 >> MARK VAN NORMAN: Thank you. 

19 Mark Van Norman. 

20 You know, Mr. Chairman, we have kind of an 

21 interesting situation in South Dakota where most of the 

22 tribes are operating, you know, small gaming facilities 

23 that we, you know, view them still as casino hotels, 

24 casino resorts. But we also have a situation where the 
57

1 state has probably a video lottery with probably 8 to 

2 10,000 machines. And there are 10 machines per 

3 building. And then they define building to say, if you 

4 add a wall here or there, you could get up to 30, 

5 wherever there is on sale or off sale liquor license. 

6 So, on the reservations, we really haven't had the state 

7 lottery because the state video lottery is set up to be a 

8 revenue share of the proprietor where the machines are 

9 located, gets 50% of the net revenue, and the state gets 

10 50% of the net revenue. And the state owns the video 

11 lottery gaming devices and they own the central server.

12 So, they really have a model there where there is 

13 revenue sharing, it wouldn't comport with the IGRA 

14 because we have to have at least 60% of the revenue 

15 going to the tribes, and we understand that. But, you 

16 know, at some level it may be more effective for the 

17 tribes, rather than purchasing the games outright, which 

18 may then become outmoded to lease, you know, the 

19 electronic player stations -- which are not gaming 

20 devices -- so that, you know, you can change them out. 

21 And what -- what we are hearing from folks is, and from 

22 other tribes, is it's more effective to be flexible and be 

23 able to change out your games and see which ones are 

24 going to be successful, and that kind of thing. 
58

1 So I don't think you should rely too heavily on this 

2 percentage of profits because it may be more effective 

3 to work with the suppliers on the basis of doing some 

4 kind of a percent share of net profits, rather than buying 

5 the games outright because they -- the technology 

6 changes so quickly. So, I think that's an important thing 

7 to consider.

8 And then if you are working with folks that 

9 maybe are the proprietors of establishment that has on 

10 or off sale, and we were to do something equivalent, you 

11 know, they have to receive some -- some compensation 

12 also.

13 Obviously we don't want to go up to the level of 

14 the state video lottery, but there is some, oh, some 

15 appetite, you know, for having small numbers of 

16 electronic player stations in remote locations because, 

17 you know, these proprietors feel it would be an adjunct 

18 to their business, and the tribes feel, well, that my might 

19 be okay, and that might, you know, provide us an 

20 additional source of revenue without interfering with our 

21 main facility. 

22 So, I think those are things to consider when you 

23 think about sole proprietary interest because you know, 

24 we still feel that the tribe is going to own the full 
59

1 system, but we may have to do some leasing of the 

2 machines and some leasing of locations because, you 

3 know, we may have a network. So, that is something to 

4 think about.

5 >> JONODEV CHAUDHURI: Excellent food for 

6 thought Mr. Van Norman. And I may -- if Mike Hoenig 

7 is comfortable speaking to the guidance we issued in 

8 Washington State, well, and potential overlaps, but let 

9 me just say, your comments may -- are very well taken 

10 for this provision, but they may involve some food for 

11 thought that's even beyond the scope of today's 

12 consultation. And that's namely the role of the federal 

13 government and ensuring primary beneficiary status of 

14 tribes that came from IGRA. And frankly, I think it's 

15 worked out decently; although, I think there would be 

16 some -- some concerns that could be raised that it was 

17 somewhat paternalistic in terms of some of the 

18 requirements that would put into IGRA to kind of put 

19 limits on the types of business agreements that tribes 

20 could enter into. And so, whenever you talk about, 

21 whether it's the revenue requirements of IGRA or other 

22 requirements, such as primary beneficiary status, sole 

23 proprietary interest. You have this -- you have these 

24 competing concerns to -- to not inhibit tribal 
60

1 investment, tribal innovation, but at the same time 

2 uphold your responsibility to work with tribes to protect 

3 against third party threats. Now, as applied -- as 

4 applied to management, it's an interest -- a good point 

5 that you raised that we don't want to hamstring various 

6 economic ventures that tribes may not -- may want to 

7 consider but still at the end of the day we are still left 

8 with a responsibility of the Agency to enforce the -- the 

9 statute we operate under. So, that's -- that's frankly 

10 something that we try to do in a nonpaternallistic way as 

11 possible. But it's -- it exists in Indian gaming in a way 

12 that doesn't exist in other industries. 

13 And -- and some ways, you know, folks could 

14 comment on how valuable that -- that federal 

15 requirement of oversight has been, how respectful 

16 sovereignty it is, but one practical effect of it is since it's 

17 there, it gives us a hook to bring enforcement action 

18 when something goes awry. So, while it may very well 

19 make sense for tribes to consider very creative --

20 creative investment platforms, we still have 

21 responsibilities under IGRA. And that's what we are 

22 trying to work through. And if there is a specific portion

23 of the definition that you think could be tweaked to 

24 allow for sensible investment, we would be happy to 
61

1 continue chatting. But it's an excellent point you raise. 

2 Sorry for the rambling discussion about various 

3 investment platforms that are out there because it's --

4 IGRA is unique in that sense in terms of creating a 

5 federal agency that's mandated to ensure primary 

6 beneficiary status and there may be a lot of reasons for 

7 that there certainly were when it was passed in 88, but 

8 we are left with-- implementing what IGRA says. So 

9 sorry for the --

10 >> MARK VAN NORMAN: I will consult with him 

11 when we get back home.

12 >> JONODEV CHAUDHURI: No, sorry for the long 

13 speech there.

14 >> ELIZABETH HOMER: I hear where you guys 

15 are coming from. I understand well the concerns that 

16 you are trying to address here. And at the same time, 

17 you know, how does this provision square with the 

18 provisions of IGRA that allows tribes to license nontribal 

19 entities and yet retain 60% of the revenue. And what is 

20 this distinction there, does that give any kind of hint or 

21 clue as to what congress intended -- intended as the 

22 sole proprietary interest? I am not saying that it does. I 

23 am just saying that when you kind of open this can of 

24 worms, like a lot of other things come, you know, come 
62

1 spilling out about IGRA. And you know, I guess our goal 

2 always is to have a fair and reasonable interpretation of 

3 the law.

4 You know, but there are different kinds of ways 

5 that are permissible under IGRA for, you know, tribes to 

6 be involved in gaming without having the sole 

7 proprietary interest in the activity when it comes to 

8 licensing, you know, other entities within their 

9 jurisdiction.

10 So, I guess that's a question. You know, I don't 

11 know the answer to it, I don't pretend to, but I think it's 

12 something that we have to think about.

13 >> JONODEV CHAUDHURI: And I thank you 

14 Miss Homer. I mean, it goes back to ownership and 

15 control. And that's what we are trying to codify in our 

16 definition.

17 But we have seen, again, not to go way too off 

18 track, why -- not in this setting. I don't want to waste 

19 everybody's time with that. But those are good concerns 

20 this is our best attempt at articulating IGRA's 

21 requirement but it -- it's not just our attempt to -- kind 

22 of gleaned from a lot of court cases, a lot of decisions 

23 that we have made, and you know, many of our own 

24 opinions or Agency actions. And so those are great 
63

1 points, but again some of it goes beyond the scope of 

2 IGRA I think or beyond the scope of the consultation, 

3 speaks to the history of why certainly provisions were 

4 put into IGRA in the first place, so -- I mean, I don't 

5 think anybody was expecting historical discussion when 

6 they came in here today. But this is good.

7 (LAUGHTER)

8 >> JONODEV CHAUDHURI: Any additional 

9 comments, concerns? Amanda? 

10 We will give one last crack to the folks attending online?

11 >> MODERATOR: Thank you. As a reminder, 

12 please press star 1 if you would like to ask a question.

13 At this time we have no questions on the phone 

14 line.

15 >> JONODEV CHAUDHURI: Okay. Well, that 

16 concludes our third topic for discussion. You know, 

17 since we have a little time, I want to again open it up for 

18 any -- any final comments from the audience. 

19 Okay. With that, I will turn it over to my fellow 

20 Commissioners for some concluding remarks.

21 >> SEQUOYAH SIMERMEYER: Thanks, Chairman. 

22 This is Sequoyah Simermeyer. I want to thank 

23 you for participating today or for comments you might 

24 send in in the future, and I appreciate all of the 
64

1 conversations that -- I think there is open-ended 

2 discussion that was really helpful, as well talking about 

3 the importance of complying with IGRA's meaning. But 

4 in a lot of these for me -- a lot of what has been -- as a 

5 separate point for me, a lot of what has been discussed 

6 in this past few weeks is looking at ways to make the 

7 Agency more efficient and make sure we are removing 

8 any burdens that exist while still complying with IGRA. 

9 Thank you for your comments today.

10 >> KATHRYN ISOM-CLAUSE: Thank you. I 

11 think we have seen today that a lot of our work is trying 

12 to figure out the balance, you know, of being too broad, 

13 too narrow, how to reconcile the different interests. We 

14 appreciate your thoughtful feedback on this and helping 

15 us to work through this. And we hope we will see more 

16 written comments as well through February 28th, just as 

17 a reminder again. 

18 Thank you all again for being here.

19 >> JONODEV CHAUDHURI: Thank you. And just 

20 want to echo that, thank you everyone for being here. 

21 When, you know, when I first started to get my glimpse 

22 of how we do things at the Commission, you know, it's 

23 clear to me that we all believed in consultation. 

24 Consultation was the bedrock of our operations. We 
65

1 made commitment pretty early on that we would never 

2 consult for consultation sake. We would never be, you 

3 know, after -- we would never engage in after-the-fact 

4 consultation. I think we have been pretty true to that. 

5 Whenever we consulted we worked diligently to produce 

6 actual, tangible results, tangible deliverables on the 

7 topics that we discussed. 

8 So, I want to thank everybody for their past 

9 involvement and consultations. I think we, you know, 

10 have been able to produce some specific deliverables for 

11 each one of our priorities over the last few years. Today 

12 we are hearing on some -- we discussed some areas of 

13 opportunity to help us run through the tape. 

14 You know, as -- as my fellow Commissioner mentioned, 

15 we fully anticipate continued smooth operations at the 

16 Agency, even after the expiration of any of our terms. 

17 But we want to take the opportunity that we have now, 

18 given the fact that we have a full Commission, to do 

19 what we can to really take advantage of any areas of 

20 opportunity while we have it to do -- do good work. 

21 And that's what today's discussion is helping us do. 

22 Thank you everyone for taking the time to be here 

23 today. Thank you to NCAI for allowing us to piggyback 

24 with this consultation. And really, I want to wish 
66

1 everybody safe travels as they travel home. 

2 Meduk (phonetic). 

3 And I want to thank our team as well, our team has been 

4 incredible in terms of putting together all of the 

5 recommendations that working with all of you and 

6 putting together these recommendations and putting on 

7 today's consultations. So, thank you, safe travels. 

8 Meduk (phonetic). 

9 (MEETING CONCLUDES AT 11:36 A.M.)

10