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March 16, 2018 

VIA EMAIL (Vannice_Doulou@nigc.gov) 

The Honorable Jonodev O. Chaudhuri, Chairman 

The Honorable Kathryn Isom-Clause, Vice Chair 

The Honorable E. Sequoyah Simermeyer, Associate Commissioner 

National Indian Gaming Commission 

1849 C Street NW, Mail Stop #1621 

Washington, DC 20240 

RE: Comments of Boyd Gaming Corporation in Response to the NIGC’s 2018 

Consultation on “Management and Sole Proprietary Interest” and “Management 

Contract Amendment Regulations – Discussion Draft” 

Dear Chairman Chaudhuri, Vice Chair Isom-Clause and Associate Commissioner Simermeyer: 

 I write on behalf of Boyd Gaming Corporation in response to the National Indian Gaming 

Commission’s (“NIGC” or “Commission”) December 22, 2017 “Notice of Consultation Sessions 

for 2018” letter (“Consultation Letter”) soliciting comments on three topics. Our comments are 

limited to two topics: “Management and Sole Proprietary Interest” and “Management Contract 

Amendment Regulations – Discussion Draft.” We very much appreciate the NIGC’s efforts in 

engaging in this meaningful consultation and the opportunity to participate and comment. 

I. “Management and Sole Proprietary Interest” 

As noted in the Consultation Letter, the Indian Gaming Regulatory Act, 25 U.S.C. §§2701 

et seq. (“IGRA”) requires that all management contracts be submitted to the NIGC for the 

Chairman’s review and approval. Although the term “management contract” is defined in existing 

NIGC regulations, the term “management” is not. Similarly, although IGRA also requires that a 

Tribe maintain the “sole proprietary interest” in its gaming establishment, neither IGRA nor NIGC 

regulations define this term. Accordingly, the Commission seeks consultation and input on 

developing regulations that would set forth clear standards for what constitutes “management” and 

“sole proprietary interest.” 

A. “Management – Discussion Draft” 

The Commission has included on its website, and has provided at consultation sessions, a 

discussion draft of a definition of “Management” that would be added to the regulations at 25 

KEVIN J. WADZINSKI

Kevin.Wadzinski@ppsv.com 

202.872.6774 
National Indian Gaming Commission 

March 16, 2018 

Page 2 

C.F.R. Part 502 (Definitions). The discussion draft includes two parts: first, a broad definition of 

what constitutes management, and second, a non-exhaustive list of examples of management. 

Draft Section 502.25(1) would define management broadly as “planning, organizing, 

directing, coordinating, controlling or the performance of any one of these with respect to all or 

part of a gaming operation.” We believe that should the NIGC decide to promulgate a regulation 

defining management, the definition should clearly provide that management only pertains to a 

gaming operation that actually exists and is operating. We are concerned that this proposed 

definition is overly broad and could inadvertently encompass activities related to developing a 

gaming facility that take place prior to the commencement of actual gaming operations and that 

may indirectly involve planning and organizing of what will ultimately become the gaming 

operation. For example, it is not uncommon for development agreements, which are not intended 

to provide for management, to include provisions such as location of gaming equipment in general, 

types of games, and number of games, that could be construed as planning or organizing a gaming 

operation under the draft definition. We do not believe this is the intent of the draft definition. 

Moreover, clarifying that management only applies to on-going existing gaming operations would 

be consistent with the present definition of “gaming operation” which provides, in part, that 

“Gaming Operation” means each economic entity that . . . operates the games, receives the 

revenues, issues the prizes, and pays the expenses.” 25 C.F.R. Part 502.10 (emphasis added). 

 We believe this concern could be addressed by excluding from the definition of 

management the stated actions (planning, organizing, directing, coordinating, controlling) as they 

pertain to the development of a gaming facility that will ultimately house a gaming operation. 

Relatedly, as you are aware, the Office of General Counsel of the NIGC has issued 

numerous “declination letters,” including those letters that opine that certain development 

agreements do not provide for management and therefore, are not management contracts requiring 

the Chairman’s approval. We encourage the Commission to consider including a grandfather 

provision that would allow developers that have received such letters to continue to rely upon 

them. We understand that the Commission’s intent in possibly promulgating a definition of 

management is not to introduce new requirements or interpretations of the term, but rather, to 

codify its prior analyses and standards. As such, we believe a grandfather provision for existing 

declination letters opining that a contract does not contain management would be appropriate. 

Proposed Section 502.25(2) sets forth a non-exhaustive list of examples of what constitutes 

management. The need to clarify that these examples should only apply to on-going operations is 

evident by examining a few in the context of developing a gaming facility. 

Draft Section 502.25(2)(k) provides that “Management includes, but is not limited to, 

planning, organizing, directing, coordinating, or controlling . . . the supervision of construction.” 

A typical development agreement obligates the developer to engage in just this activity. Also, it is 
National Indian Gaming Commission 

March 16, 2018 

Page 3 

very common for construction loans to give some degree of control to the lender with respect to 

construction controls and draw-downs. 

Draft Section 502.25(2)(h) provides that “Management includes, but is not limited to, 

planning, organizing . . . the purchase, lease . . . of any gaming equipment.” It is not uncommon 

for developers to assist a tribe in setting forth the advantages and disadvantages of purchasing or 

leasing gaming equipment. Often, this decision is made months before the operational stage. 

We encourage the Commission to consider revising the introductory language in Section 

502.25(2) to read as follows: “Management includes, but is not limited to, planning, organizing, 

directing, coordinating, or controlling, with respect to an on-going or existing gaming operation:” 

or similar language to that effect. 

B. “Sole Proprietary Interest – Draft Regulation” 

The Commission has posted on its website, and has provided at consultation sessions, a 

discussion draft regulation pertaining to sole proprietary interest that if adopted, would be added to 

the compliance regulations at 25 C.F.R. Part 573. 

At the onset, we note that the Commission is not proposing a definition of sole proprietary 

interest. Rather, the Commission proposes a non-exhaustive illustrative list of factors, the 

existence of one or more that may cause the Chair to determine that a violation of the sole 

proprietary interest mandate has occurred. Like most non-tribal entities involved in Indian 

gaming, we fully support and respect IGRA’s sole proprietary mandate and desire to continue to 

comply with it. Accordingly, and in light of the potentially severe consequences of a violation of 

the mandate, we believe that if the Commission decides to promulgation regulations on this 

subject, the Commission should endeavor to first set forth a clear and concise definition of sole 

proprietary interest. We also believe that such definition should derive directly from, and be 

limited by, the commonly understood definition of proprietary. 

We are also concerned that the Chair can take other factors that are not set forth in the list – 

and are therefore unknown – into consideration in determining that a violation has occurred. As 

such, and in the absence of any definition, let alone a clear and concise definition, we believe the 

draft proposal is vague and does not provide sufficient or clear guidance as to the meaning of the 

sole proprietary mandate. 

Also, we note that the list of factors does not include factors that may weigh in favor of the 

Chair concluding that a violation of the sole proprietary interest requirement has not occurred. For 

example, the discussion draft states that the Chair may take into consideration merely one factor, 

such as “the amount of revenue paid or given to the third party or kept by it” in determining that 

the mandate has been violated. In the past, when examining compensation paid or to be paid to 

third parties, the NIGC has examined the relationship between the parties as a whole and in 
National Indian Gaming Commission 

March 16, 2018 

Page 4 

particular, the investment risks undertaken by the third party and on several occasions has opined 

that the particular compensation did not violate the sole proprietary requirement because it was 

justified given the risks. The draft regulation casts uncertainty on whether the Chair may continue 

to take this factor into consideration. We believe this is not the Commission’s intent as the 

Commission has made clear in consultation sessions that the draft regulations are intended to 

codify prior NIGC analyses and decisions and not alter them. 

In keeping with the Commission’s stated intent to promulgate standards that reflect its 

current practices and decisions, we believe any regulation pertaining to the sole proprietary interest 

requirement should clarify that declination letters previously issued on the subject remain in effect 

and unaltered by the new regulation. In the absence of such a grandfather provision, and the 

uncertainty created by the lack thereof, we believe that numerous tribes and third parties will incur 

unnecessary costs in seeking new declination letters. 

We also suggest that any regulation on the subject should include a clear statement that the 

terms of an approved management contract do not violate the sole proprietary interest mandate and 

a manager operating pursuant to, and in accordance with such terms (and not exceeding such 

terms), does not violate the mandate. We believe such clarification is necessary because a number 

of the factors listed in the discussion draft that can form the basis for a violation, including the 

amount of revenue paid to a third party, aspects of control as it relates to management, term of the 

contract and the right to access gaming operation records, are typical provisions set forth in 

approved management contracts. 

Finally, we are particularly concerned that factor #7 concerning the assignment of “Tribal 

rights to the third party” is overly broad and could have a chilling effect on tribal gaming 

financing, both at the pre-development and construction stages. The discussion draft provides that 

the Chair, in determining whether the sole proprietary interest mandate has been violated, may take 

into consideration “the provision or assignment of Tribal rights to the third party, including, but 

not limited to: a. the third party’s right to access to records or financial information regarding the 

operation or part thereof; . . . and c. the grant of a security interest in the gaming operation.” 

It is very common for third party developers to advance to tribes in the form of a loan, 

certain pre-development expenses prior to the tribe obtaining permanent financing. As part of the 

pre-development and permanent financing, the developer and senior lender are granted certain 

rights that virtually always include the right to access financial records and the grant of a security 

interest in certain collateral associated with the gaming operation such as future gaming revenues 

and various accounts into which such revenues are deposited. The discussion draft language 

suggests that inclusion of these common and standard provisions in the financing agreements may 

violate IGRA’s sole proprietary interest requirement. 

Based on prior NIGC guidance and declination letters posted on the NIGC website, we 

believe the draft security interest language may be related to the NIGC’s position that a secured 
National Indian Gaming Commission 

March 16, 2018 

Page 5 

party, in the exercise of its rights in the event of a default, may not manage or operate the gaming 

enterprise. If this is the case, we suggest that the Commission include language, consistent with its 

prior pronouncements, upon which lenders have relied, that a secured party will not be in violation 

of the sole proprietary interest mandate if it is granted a security interest in collateral related to a 

gaming operation or (1) enforces compliance with any term in any loan agreement that does not 

require the gaming operation to be subject to any third-party decision-making as to any 

management activities; (2) requires that all or any portion of the revenues securing the loan to be 

applied to satisfy valid terms of the loan agreement; or (3) otherwise forecloses on all or any 

portion of the property securing the loan.1 

II. “Management Contract Amendment Regulations – Discussion Draft” 

The Consultation Letter indicates that the NIGC is considering certain changes to its 

management contract review process and has posted and circulated a document entitled 

“Management Contract Amendment Regulations – Discussion Draft” (“Discussion Draft”) that 

would amend 25 C.F.R. Part 502. We appreciate the opportunity to provide the following 

comments on the Discussion Draft. 

We are concerned that the Discussion Draft’s proposed modification to the definition of 

“Collateral agreement” (§502.5) would result in an inadvertently overly broad definition. The 

proposed modification language expands the definition of collateral agreement to include any 

contract between “a tribe . . . and any other third-party, that is related . . . to any rights, duties or 

obligations created between a tribe . . . and a management contractor.” As you know, existing 

NIGC regulations require that a management contract enumerate and assign responsibility to either 

the manager or the tribe (25 C.F.R. Part 531.1(b)) for certain specific functions, including 

“maintaining and improving the gaming facility,” “preparing the gaming operation’s financial 

statements and reports,” “providing fire protection services,” and “placing advertising.” In 

ensuring that these services are provided, regardless of which party assumes the responsibility, it is 

very common for the tribal enterprise (or the Tribe directly) to contract with a third party for the 

services. These contracts are related to the duties and obligations between the tribe and a manager. 

As such, under the proposed language, the following contracts with third parties would become 

collateral agreements: typical facility maintenance and repair contracts, including plumbing, 

electric, HVAC, roofing, window, etc., construction contracts for improvements, contracts with 

third parties related to preparing financial statements, contracts with local communities or 

municipalities that provide for fire protection services and contracts with advertising agencies that 

place advertisements for the gaming operation. 

 

1

 See January 23, 2009 letter from Acting General Counsel, Penny J. Coleman to Kent E. Richey. 

https://www.nigc.gov/images/uploads/ManagementReviewLetters/20090123MuscogeeCreekNationreGrossRevenues.

pdf (Accessed February 26, 2018) 
National Indian Gaming Commission 

March 16, 2018 

Page 6 

The Discussion Draft also considers revising the regulations to provide that an amendment 

to the term of an existing management contract that would result in the contract extending beyond 

the IGRA’s stated term limitations would be processed and reviewed as a new management 

contract. (§535.1). Although we do not comment on this specific proposal, we are concerned that 

proposed language designed to implement this change inadvertently conflicts with existing NIGC 

practice and regulations. Specifically, proposed Part 535.3(c)(5) provides that if applicable, a tribe 

shall include in any request for approval of an amendment “consistent with the provisions of 

§531.1(h) of the chapter, for a term limit in excess of five (5) years, but not exceeding seven (7) 

years inclusive of the time passed since contract approval.” Although this proposed language 

references Part 531.1(h) and is limited to amendments, we are concerned that the additional 

language conflicts with Part 531.1(h) and may cause uncertainty as to how management contract 

terms will be calculated in general. The proposed language suggests that the term commences 

upon approval of the contract; however, this directly conflicts with Part 531.1(h), which clearly 

states that “[t]he time period shall begin running no later than the date when the gaming activities 

authorized by an approved management contract begin.” 25 C.F.R. Part 531.1(h). 

The Discussion Draft also proposes a number of revisions to certain aspects of the NIGC’s 

background investigation process. 

Proposed Part 537.1(a)(3) would require the NIGC to conduct a background investigation 

on any “person” who has 10 percent or more direct or indirect financial interest in a management 

contract, as opposed to the existing regulation that requires background investigations on the ten 

persons who have the greatest financial interest in the management contract. We support this 

proposal as it focuses the investigative process on those individuals who have significant or 

meaningful financial interests in the contract. Under the existing regulations, it is not uncommon 

for several of the ten individuals with the greatest financial interest to have relatively small or 

insignificant interests. 

Proposed revisions to Part 537.1 would also clarify that the Chair may exercise discretion 

to reduce the scope of the background investigation of certain identified entities. We support this 

provision and would encourage the Commission to include a publicly traded company that holds a 

license by one or more gaming jurisdictions within the United States. Although we appreciate the 

independent regulatory authority of the Commission, we believe that licensure in other gaming 

jurisdictions is evidence of suitability and, at a minimum, should result in a more streamlined 

backgrounding process. 

The Discussion Draft also considers revisions to Part 537.3 pertaining to fees for 

background investigations, including eliminating the requirement for a manager to post deposits to 

cover the costs of background investigations and providing that an unpaid bill “may result in an 

approved contract being voided or cause a pending contract to be disapproved.” (§537.3(c)). 

While we support elimination of the deposit agreement, we strongly disagree with the proposal 
National Indian Gaming Commission 

March 16, 2018 

Page 7 

that an unpaid bill may result in voiding an approved contract because it raises serious due process 

issues, conflicts with Part 513, and does not take into consideration the requirements of Part 573. 

Existing Part 513 sets forth detailed and comprehensive procedures pursuant to which the 

NIGC may pursue collection of “debts” (defined broadly to include “fees”). These provisions 

include due process rights, including notice, an opportunity to review and inspect agency records 

and an opportunity to be heard. The concept of voiding an approved contract is contrary to both a 

tribe’s and a manager’s due process rights and conflicts directly with Part 513.7 which provides 

that the Chair may revoke a debtor’s ability to manage a tribal gaming operation only “if the 

debtor inexcusably or willfully fails to pay a debt.” 25 C.F.R. Part 513.7. Moreover, “[t]he 

revocation of ability to engage in gaming may last only as long as the debtor’s indebtedness.” Id. 

Finally, the proposed language stating an unpaid bill may result in an approved contract being 

voided does not take into consideration a tribe’s and a manager’s due process rights under Part 

573, nor does it appear to take into consideration the Commission’s goal of voluntary compliance. 

 Conclusion 

 We appreciate the Commission’s efforts in engaging in consultation on these important 

topics and our opportunity to comment. We look forward to working with the Commission. 

Should you have any questions, please contact me or Brian Larson at (702) 792-7281. 

Sincerely, 

Kevin J. Wadzinski 

cc: Brian Larson, Boyd Gaming Corporation