reg.review@nigc.gov

 

Attention:

Lael Echo-Hawk

Counselor to the Chair

National Indian Gaming Commission

1441 L Street, NW., Suite 9100

Washington, DC 2005

 

COMMENTS ON BEHALF OF ASSOCIATION OF GAMING EQUIPMENT 

MANUFACTURERS

 

The following comments are submitted on behalf of the Association of Gaming 

Equipment Manufacturers ("AGEM"). These comments are in response to the 

National Indian Gaming Commission's ("NIGC") Notice of Inquiry and Notice 

of Consultation dated November 18, 2010, regarding the NIGC's comprehensive 

review of all regulations promulgated to implement the Indian Gaming Regulatory 

Act ("IGRA") and the NIGC's announced intent to take a "fresh look at its rules in 

order to determine whether amendments are necesssary to more effectively 

implement IGRA's policies of protecting Indian gaming as a means of generating 

Tribal revenue, ensuring that gaming is conducted fairly and honestly by both the 

operator and players, and ensuring that Tribes are the primary beneficiaries of 

gaming operations."

 

I. BACKGROUND OF AGEM AND INTEREST IN SUBMITTING COMMENTS

 

AGEM is an international trade association representing manufacturers of 

electronic gaming devices, systems, and components for the gaming industry. 

AGEM works to further the interests of gaming equipment manufacturers 

throughout the world. AGEM acts upon issues relating to education, regulation, 

manufacturing and licensing standards, and promotes the expansion of 

responsible gaming for the benefit of its members and the gaming industry. 

AGEM currently has approximately 110 members, many of whom are doing 

business with tribal casinos around the United States.

 

Although AGEM understands that the NIGC intends to review all of its 

regulations, AGEM's primary interest is in providing comments pertinent to Part 

502 Definitions and whether the definition of management contract should be 

expanded to include "any contract, such as slot lease agreements, that pays a 

fee based on a percentage of gaming revenues." It is AGEM's position that the 

definition of management contract should not be expanded.

 

II. NIGC REVIEW OF MANAGEMENT CONTRACTS IS INTENDED TO 

PROTECT INTEGRITY OF TRIBAL GAMING INDUSTRY

 
The current NIGC regulations define a management contract as "any contract, 

subcontract, or collateral agreement between an Indian tribe and a contractor or 

between a contractor and a subcontraactor if such contract or agreement 

provides for the management of all or part of a gaming operation." 25 C.F.R. 

Section 502.15. A collateral agreement is defined as "any contract, whether or 

not in writing, that is related, either directly or indirectly, to a management 

contract, or to any rights, duties or obligations created between a tribe (or any of 

its members, entities, or organizations) and a management contractor or 

subcontractor (or any person or entity related to a management contractor or 

subcontractor). 25 C.F.R. Section 502.5. Failure to obtain approval of a 

management contract can result in severe consequences. Indeed, a 

management contract that has not been approved by the NIGC Chair is void and 

unenforceable. As a result, the parties to such a contract are reluctant to take 

any action until approval has been secured.

 

Since the passage of the IGRA and promulgation of the NIGC regulations, a total 

of 64 management contracts have been approved by the NIGC. See NIGC 

Website regarding approved management contracts. (The first contract was 

approved in October, 1993, and the most recent contract approval - as posted on 

the NIGC website - was October, 2010.) From a pure statistical perspective, that 

results in an average of 3-4 management agreements being approved over a 

year's time. Understandably, the review process for a management contract is 

extensive. There are three prongs to the NIGC approval process. Each prong 

must be completed in its entirety before the management contract can be 

approved by the NIGC Chair. These prongs include (1) legal and financial review 

of the management agreement and all collateral documents; (2) compliance with 

the National Environmental Policy Act ("NEPA"); and (3) background 

investigation/finding of suitability of all companies and individuals with a direct or 

indirect financial interest in the management contract, as well as anyone having 

management responsibilities for the management contract.

 

Pursuant to the NIGC website's "Helpful Hints for Submitting a Management 

Contract and Obtaining the Chairman's Approval," the NIGC acknowledges that 

the review process is "comprehensive" and the length and amount of time 

involved in the review process are dependent upon several factors. These 

include: (1) the completeness of the submission, (2) responsiveness of the 

parties, (3) degree to which the submission meets the IGRA requirements, and 

(4) the NIGC's backlog. Based on this comprehensive review process, obtaining 

approval of a management contract can take several months and, in most cases, 

9-12 months - if not longer, depending on the circumstances.

 

Pursuant to the IGRA, the NIGC is charged with certain authority to oversee tribal 

gaming operations, which includes the review of management contracts to 

"ensure lasting integrity of the gaming industry". See, Coyote Valley Band of 

Pomo Indians v. California, 331 F. 3d 1094 (9th Cir. 2003), cert. denied, 540 U.S. 

1179 (2004). As noted above, the review of a management contract includes a 
comprehensive and exhaustive background investigation of all companies and 

entities with a financial interest in the management contract, as well as anyone 

having management responsibilties for the management contract. The manager 

has intimate and extensive involvement with all aspects of the tribal gaming 

operations, including financials, security, surveillance, employment, and other 

extremely sensitive components of running a casino. As such, it is reasonable for 

the NIGC to assure that all companies and individuals involved in the 

management of the tribal casino have been thoroughly backgrounded to assure 

there are no unsuitable entities or individuals involved that could impact the 

integrity of the tribal casino operations.

 

III. REVIEW OF SLOT LEASE AGREEMENTS IS UNNECESSARY TO 

PROTECT INTEGRITY OF TRIBAL GAMING INDUSTRY

 

The addition of other contracts, such as slot lease agreements, to the definition 

of management agreements would unreasonably and exorbitantly increase the 

administrative burden already faced by the NIGC in its management contract 

review process. A slot lease agreement is an agreement whereby the tribal 

casino leases certain gaming device equipment (ie, slot machines) from a 

vendor. The vendor retains ownership over the slot machines while they are 

being used by the tribal casino; however, the tribal casino retains the sole 

decision-making duties for placement of the slot machines and their operation 

within the tribal casino. The vendor is compensated based on the amount of play 

and revenues generated by each particular machine. The vendor has absolutely 

no control over the slot machines once they have been placed in the tribal 

casino. The vendor will periodically visit the tribal casino to service the slot 

machines or respond to technical requests from the tribal casino. Otherwise, the 

tribal casino is in charge of managing the machines as part of the overall tribal 

casino operations. The vendor has no management functions whatsoever over 

the tribal gaming operations. The vendor has no access to sensitive areas of the 

tribal casino such as the cage, backroom, surveillance areas, and the like. The 

vendor has no involvement whatsoever in the tribal casino activities, other than 

participating in the revenues from the gaming devices. All control and 

management resides with the Tribe, and not the vendor. As such, there are no 

"integrity" or similar issues associated with slot lease agreements, as there may 

be with a management contract.

 

At present, there are over 400 tribal gaming operations around the United 

States. As a result, there are thousands of slot lease agreements already in 

place around the country. These agreements have become extremely commonplace in the gaming industry over the last number of years. Indeed, it is possible 

that more than half (if not more) of all tribal contracts with gaming device vendors 

are slot lease/participation arrangements. Participation and lease agreements 

are considered the normal form for commercial transactions used in many 

industries, not just gaming. For example, the technology sector has multiple 

kinds of "participation" arrangements such as recurring license fees for computer 
programs. That is the same concept applicable to gaming device vendors 

and participation/lease agreements. In these other industries, there is no 

suggestion that any of the vendors who are employing these agreements are 

somehow directing or otherwise participating in the business of their customers. 

 

Moreover, the slot lease agreements are usually only in place for a limited 

timeframe (sometimes one year or less) and terminable at will within 30-60 days. 

Accordingly, these agreements usually require renegotiation on a more frequent 

basis than management contracts, which can have a term as long as 7 years.

 

Based on the foregoing, adding the review of slot lease agreements to the 

NIGC's already busy workload would present a tremendous administrative 

burden, with no added value of "ensuring lasting integrity of the gaming industry." 

There are already sufficient protections in place to monitor the slot lease 

agreements. Most, if not all, of the tribal regulators require that the gaming device 

vendors involved with slot lease agreements obtain tribal gaming licenses, which 

necessarily involves disclosures and background checks. 

 

As noted above, non-compliance with the IGRA and the NIGC regulations in not 

obtaining approval of a management contract can be severe - the management 

contract may be deemed void and unenforceable. To extend NIGC review over 

slot lease agreements, will essentially disrupt the tribal gaming operations if a 

slot lease agreement cannot be deemed valid and enforceable until the NIGC 

approves it. The NIGC should not expand the definition of management contracts 

to include slot lease agreements. 

 

RESPECTFULLY SUBMITTED on behalf of the Association of Gaming 

Equipment Manufacturers.

Dated: February 11, 2011

 

 

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