Notice of Proposed Civil Fine Assessment

CFA 18-03
Page 5 of 10

Region Director Linda Durbin sent a letter to Chairman Frazier summarizing CO
McKee’s discussion with Ms. Four Bear about the overdue audit.

On April 5, 2018, CO McKee had a telephone call with the Tribe’s
Administrative Officer, Kenneth Little Thunder, and asked about the status of the
late audit. CO McKee sent a follow-up email to Mr. Little Thunder summarizing
their conversation on the same day.

On May 3, 2018, the NIGC Chair sent a satisfaction letter for SA 16-02 to
Chairman Frazier which emphasized that the Tribe was still required to comply
with IGRA, NIGC regulations, and the Tribe’s gaming ordinance, and that the
satisfaction letter did not have any bearing on the Tribe’s failure to submit its
fiscal year 2017 audit.

On June 6, 2018, the NIGC Compliance Director Dustin Thomas issued a Letter
of Concern to Chairman Frazier regarding the late fiscal year 2017 audit. Director
Thomas asked the Tribe to submit the late audit or a corrective action plan by
June 20, 2018.

On June 29, 2018, RD Durbin called the Chairman Frazier’s office. RD Durbin
was informed that Chairman Frazier was out of the office on travel.

On July 3, 2018, RD Durbin sent a copy of the June 6, 2018 Letter of Concern to
Tribal Treasurer Benita Clark.

On July 16, 2018, Jessica Four Bear, now the Executive Director of the Cheyenne
River Economic Development Corporation — the tribal entity that began managing
CRST Bingo in June 2018- sent an email to Director Thomas. Ms. Four Bear
stated the fiscal year 2017 audit was not yet completed, but asked whether the
Tribe could do anything to come into compliance.

On July 30, 2018, Ms. Four Bear sent an email to the NIGC and attached a
corrective action plan addressed to Director Thomas. In the corrective action plan,
Ms. Four Bear stated the fiscal year 2017 audit was in progress and would be
available within three to four weeks. Also in the corrective action plan, Ms. Four
Bear stated that the Tribe planned to reopen CRST Bingo during the Tribe’s
annual fair and Labor Day celebrations between August 30 and September 3,
2018.

On August 7, 2018, CO McKee had a telephone call with the Ms. Four Bear. Ms.
Four Bear stated the fiscal year 2017 audit would be completed “any day now.”
Ms. Four Bear also indicated that the Tribe still planned to offer gaming at CRST
Bingo over the Labor Day weekend.


Notice of Proposed Civil Fine Assessment
CFA 18-03
Page 10 of 10

Certificate of Service

I, Frances Fragua, certify that this Notice of Proposed Civil Fine Assessment (CFA 18-
03) was sent by certified U.S. mail, return receipt requested, on this 21st day of November, 2018
to:

Ev Ann White Feather, Tribal Secretary
Cheyenne River Sioux Tribe

P.O. Box 590

Eagle Butte, SD 57625

Courtesy Copy to:

Harold Frazier, Chairman
Cheyenne River Sioux Tribe
P.O. Box 590

Eagle Butte, SD 57625
haroldcfrazier@yahoo.com

Mark Van Norman

1731 Harmony Heights Lane, #305
Rapid City, SD 57702
mevnconsulting@gmail.com

Frandes | Fraghd =
Legal Staff Assistant
National Indian Gaming Commission

10


Notice of Proposed Civil Fine Assessment
CFA 18-03
Page 7 of 10

13.

14.

15.

16.

17.

18.

facts are not relevant to any factor the NIGC Chair considers when issuing a proposed
civil fine assessment.!* Additionally, whether an operation is small and/or charitable, it is
still required to submit financial statements each year to the NIGC.'*

Regarding Chairman Frazier’s statements about the Dakota Access Pipeline protests and
damage to equipment and records at CRST Bingo caused by increased traffic and mice,
the NIGC Chair is again sympathetic to the Tribe’s circumstances and has taken these
facts into consideration as he determines an appropriate proposed fine. While the
Chairman acknowledges that the Tribe’s willingness to support the protests led to certain
issues that made the audit more difficult to complete, and has factored that in to setting a
reduced fine, it does not entirely excuse the failure to submit the required financial
information.

Regarding Chairman Frazier’s statement that CRST Bingo is currently closed and will
remain closed until the fiscal year 2017 audit is submitted, this demonstrates general
good faith efforts by the Tribe. However, these steps are not the type of good faith the
NIGC Chair is required to consider for a proposed civil fine assessment, which looks at
the Tribe’s attempts to achieve rapid compliance after the notification of violation.!7

Pursuant to IGRA and NIGC regulations, the NIGC Chair has authority to levy and
collect appropriate civil fines, not to exceed $51,302 per violation, against a tribe, a
management contractor, or an individual operating Indian gaming for any violation of
any provision of IGRA and NIGC regulations.'* If noncompliance continues for more
than one day, the NIGC Chair may treat each daily illegal act or omission as a separate
violation."

On the date NOV 18-03 was issued, the Tribe was 269 days late in submitting the fiscal
year 2017 audit for CRST Bingo, resulting in 269 separate violations.

The maximum fine amount for failure to submit the fiscal year 2017 audit for CRST
Bingo is $13,800,238.

The NIGC Chair, having carefully reviewed the written submissions from the Tribe and
the factors stated above, assesses a fine in the amount of $76,953.00 on the Tribe for the
failure to submit the fiscal year 2017 audit for CRST Bingo.

'S See 25 C.F.R. § 575.4.

"© See 25 C.F.R. §§ 571.12, 571.13. Ifa gaming operation has gross gaming revenues of less than $2,000,000 during
the prior fiscal year, the operation may submit reviewed financial statements if the operation had three prior years of
compliant financial submissions or received a waiver from the Commission. 25 C.F.R. § 571.12(c)(1-2). The Tribe
did not request a waiver from the Commission to submit reviewed financial statements for fiscal year 2017 for
CRST Bingo.

'725 C.F.R. § 575.4(e).

1895 U.S.C. § 2713(a)(1); 25 C.F.R. § 575.4; Annual Adjustment of Civil Monetary Penalty to Reflect Inflation, 83
Fed. Reg. 2,059 (Jan. 16, 2018).

925 CFR. § 575.4(a)(2).


Notice of Proposed Civil Fine Assessment

CFA 18-03
Page 6 of 10

On August 27, 28, and 31, 2018, RD Durbin called and left telephone messages
for Ms. Four Bear regarding the late audit and the potential re-opening for the
Labor Day weekend. Ms. Four Bear did not respond to RD Durbin’s calls and
messages.

On September 6, 2018, Ms. Four Bear informed CO McKee by email that the
fiscal year 2017 audit would be done “any day now.”

On October 24, 2018, the NIGC Chair had a telephone call with Chairman Frazier
where the NIGC Chair advised that he was about to issue NOV 18-03 for the
Tribe’s failure to submit the fiscal year 2017 audit for CRST Bingo.

On October 24, 2018, the NIGC Chair issued NOV 18-03.

As of the date of this Proposed Civil Fine Assessment, the Tribe has not
submitted the fiscal year 2017 audit for CRST Bingo. The Tribe estimates it will
submit the audit by December 30, 2018.

The Tribe’s failure to timely submit the required audit despite the NIGC’s best
efforts to inform and remind the Tribe about the overdue audit, suggests, at best, a
severe negligence on the part of the Tribe, or, at worst, a willful disregard of
IGRA, NIGC regulations, and the Tribe’s gaming ordinance.

Good faith. A civil fine may be reduced based on the degree of good faith of the
Tribe in attempting to achieve rapid compliance after notification of the violation.
NOV 18-03 required the Tribe to submit the fiscal year 2017 audit by November
2, 2018, a deadline that was reasonable based on the representations made by
tribal officials to the NIGC throughout 2018. The Tribe did not submit the audit
by November 2, 2018. As of the date of this Proposed Civil Fine Assessment, the
Tribe has not submitted the fiscal year 2017 audit. However, the Tribe is
attempting compliance by engaging an independent CPA firm to perform the
fiscal year 2017 audit for CRST Bingo. The Tribe estimates it will submit the
audit by December 30, 2018.

11. Regarding Chairman Frazier’s assertions that bingo is a Class I game, IGRA and NIGC
regulations specifically define bingo as a Class II game," and the NIGC has consistently
regulated bingo as a Class II game. Because CRST Bingo conducted Class II gaming
during fiscal year 2017, the Tribe was required to submit an annual audit.'4

12. Regarding Chairman Frazier’s assertions that CRST Bingo is a small and charitable
operation, grosses minimal revenues, and only serves as entertainment for tribal
members, the NIGC Chair is sympathetic to the Tribe’s circumstances; however, these

25 U.S.C. § 2703(7)(AM(i); 25 C.F.R. § 502.3(a).
"495 U.S.C. § 2710(b)(2)(C); 25 CFR. §§ 571.12, 571.13.


Notice of Proposed Civil Fine Assessment
CFA 18-03
Page 9 of 10

Dated this 21st day of November, 2018.

p4[Ldl,

Jonodev O. Chaudhuri
Chairman


National Indian Gaming Commission

To:

NOTICE OF PROPOSED CIVIL FINE ASSESSMENT

CFA 18-03

Ev Ann White Feather, Tribal Secretary
Cheyenne River Sioux Tribe

P.O. Box 590

Eagle Butte, SD 57625

. Pursuant to the Indian Gaming Regulatory Act and National Indian Gaming Commission

regulations, the NIGC Chair may issue a Notice of Violation to any person for violations
of any provision of IGRA, NIGC regulations, or any provision of a tribal gaming
ordinance or resolution approved by the NIGC Chair."

. On October 24, 2018, the NIGC Chair issued NOV 18-03 to the Cheyenne River Sioux

Tribe (“Tribe”) for the failure to submit annual audited financial statements for fiscal
year 2017 for the Cheyenne River Sioux Tribe Bingo Operation (“CRST Bingo”).

. NIGC regulations permit a party to appeal a notice of violation within 30 days of

issuance.” The Tribe appealed NOV 18-03 on November 2, 2018.

. IGRA authorizes the NIGC Chair to issue civil fines for violations of IGRA, NIGC

regulations, or tribal regulations, ordinances, or resolutions approved by the NIGC
Chair.‘ If the NIGC Chair issues a civil fine assessment, the NIGC Chair must do so
within 30 days of issuance of a notice of violation, when practicable.”

. NIGC regulations provide that within 15 days after service of a notice of violation, or a

longer period as the NIGC Chair may grant for good cause, a respondent may submit
written information about the violation to the NIGC Chair.°

. Ina letter dated November 2, 2018, the Tribe’s Chairman Harold Frazier provided the

following facts for the NIGC Chair to consider:

a. The Tribe objected to and appealed NOV 18-03 based on violations of the U.S.
Constitution, treaties between the United States government and the Tribe, IGRA,

"25 U.S.C. § 2713(a)(3); 25 C.F.R. § 573.3(a).

225 CFR. §§ 584.3(a), 585.3.

3 See Letter from Harold Frazier, Chairman, Cheyenne River Sioux Tribe, to Jonodev Chaudhuri, NIGC Chair (Nov.
2, 2018).

425 U.S.C. § 2713(a)(1).

525 C.F.R. § 575.5(b).

£25 C.F.R. § 575.5(a).


Notice of Proposed Civil Fine Assessment
CFA 18-03
Page 8 of 10

19. Interest shall be assessed at rates established from time to time by the Secretary of the
Treasury on amounts remaining unpaid after their due date.”

20. After balancing the factors found at 25 C.F.R § 575.4, as well as considering the Tribe’s
circumstances, the NIGC Chair believes a $76,953.00 fine is appropriate. The Tribe has
presented evidence of extenuating circumstances pursuant to 25 C.F.R. § 575.5 and has
represented to the NIGC Chair that it has hired a CPA firm to complete the fiscal year
2017 audit by the end of December 2018. However, the financial statements and audits
are due at the same time every year, and IGRA allows the Tribe 120 days after the
gaming operations fiscal year end for the preparation of the audit. NIGC staff made
telephone calls and sent emails and letters regarding the overdue audit. Repeatedly, tribal
officials told NIGC staff that the audit was underway or would be submitted shortly.
Because the Tribe did not submit the fiscal year 2017 audit, the NIGC was not able to
analyze CRST Bingo’s regulatory compliance or technical assistance needs in a timely
manner. The NIGC Chair finds a fine of $76,953.00 is appropriate to balance the Tribe’s
excessive delinquency in meeting a critical requirement of IGRA.

21. Pursuant to 25 C.F.R. § 584.3, within 30 days after service of this Notice of Proposed
Civil Fine Assessment, the Tribe may appeal the proposed fine to the full Commission by
submitting a notice of appeal to the following:

NIGC Attn: Office of General Counsel
1849 C Street NW

Mail Stop #1621

Washington, D.C. 20240

22. The Tribe has a right to assistance of counsel in such an appeal. A notice of appeal must
identify this Notice of Proposed Civil Fine Assessment. Within 10 days after filing a
notice of appeal, the Tribe must file with the Commission a supplemental statement that
sets forth with particularity the relief desired and the grounds therefore, and that includes,
when available, supporting evidence in the form of affidavits. If the Tribe wishes to
present oral testimony or witnesses at the hearing, the Tribe must include a request to do
so with the supplemental statement. The request to present oral testimony or witnesses
must specify the names of the proposed witnesses, the general nature of their expected
testimony, and whether a closed hearing is requested and why. The Tribe may waive its
right to an oral hearing and instead elect to have the matter determined by the
Commission solely on the basis of written submissions.

2931 U.S.C. § 3717.


Notice of Proposed Civil Fine Assessment

CFA 18-03
Page 4 of 10

accounting standards.'° NIGC regulations further require a tribe to submit a copy
of the financial statements and audits, with any management letter(s) and other
documents/reports setting forth the results of the annual audit(s), to the NIGC
within 120 days after the end of each gaming operation’s fiscal year.'!

The submission of the annual audit report by an independent accountant is critical
to the NIGC’s mission to protect the integrity of Indian gaming. An accounting
firm’s ability to conduct an audit in accordance with generally accepted auditing
standards and render an opinion on the financial statements prepared in
conformity with generally accepted accounting principles provides assurance as to
the security of tribal gaming revenues. The audited financial statements are
evidence of, among other things, the integrity of the gaming operation and, more
specifically, of the adequacy of the books, records, and internal financial control
functions. Only after the financial statements of a gaming operation have been
audited by a certified public accountant can the NIGC confidently rely on the
data. Failure to conduct the required audits and submit reports leaves a gaming
operation vulnerable to financial improprieties.

History of violations. NOV 18-03 is the only notice of violation issued against the
Tribe in the last five years.

Negligence or willfulness. The Tribe knew, or should have known, that the fiscal
year 2017 audit was due by January 28, 2018, 120 days after CRST Bingo’s fiscal
year end. NIGC’s audit regulations were first adopted in 1993 and updated in
2009, and have always required a gaming operation to submit an annual
independent audit within 120 days of a gaming operation’s fiscal year end. 2
Further, the Tribe and the NIGC Chair entered into a settlement agreement in
2016 (SA 16-02) because the Tribe failed to submit annual audits for fiscal years
2011-2015. The settlement agreement listed the due date for each fiscal year in
which the Tribe failed to submit an audit for CRST Bingo. The audits were due on
or before January 30, 2012 (FY 2011); January 28, 2013 (FY 2012); January 28,
2014 (FY 2013); January 28, 2015 (FY 2014); and January 28, 2016 (FY 2015).
Lastly, the Tribe submitted a timely audit for CRST Bingo for fiscal year 2016.

Once the due date for the fiscal year 2017 audit passed, NIGC staff contacted the
Tribe on several occasions. On February 6, 2018, NIGC Compliance Officer
James McKee spoke by telephone with Jessica Four Bear, the Tribe’s legal
counsel, regarding the overdue fiscal year 2017 audit. On February 6, 2018, NIGC

'995 C.F.R. § 571.12(a, b).

125 C.F.R. § 571.13(a).

” See Compliance and Enforcement Procedures Under the Indian Gaming Regulatory Act, 58 Fed. Reg. 5,833,
5,844 (Jan. 22, 1993) (to be codified at 25 C.F.R. §§ 571.12, 571.13); see also Amendments to Various National
Indian Gaming Commission Regulations, 74 Fed. Reg. 36,926, 36,939 (July 27, 2009) (to be codified at 25 C.F.R.
§§ 571.12, 571.13).


Notice of Proposed Civil Fine Assessment

CFA 18-03
Page 3 of 10

a.

The Tribe asserted that gaming at CRST Bingo is offered primarily for social
activity and entertainment for tribal members. CRST Bingo does not generate a
profit and is subsidized by the Tribe.

The Tribe asserted that in 2016, the Tribe, its members, and visitors protested the
Dakota Access Pipeline. The Tribe offered its pow-wow grounds, fairgrounds,
and eventually the CRST Bingo hall to shelter tribal members and visitors
protesting the Dakota Access Pipeline. The CRST Bingo hall was used as a
shelter in early 2017.

The Tribe asserted that due to the increased traffic at CRST Bingo, the doors to
the hall were damaged and allowed mice to enter. The increased traffic and mice
damaged some of the equipment and records at CRST Bingo, making it difficult
to file a timely fiscal year 2017 audit. As a result of the damage, the Tribe closed
CRST Bingo in September 2017.

The Tribe asserted that it established the Cheyenne River Economic Development
Corporation to operate CRST Bingo, which has professional staff.

The Tribe asserted that it has contracted with Moss Adams LLP to perform the
fiscal year 2017 audit. The Tribe expects to submit the fiscal year 2017 audit by
the end of December 2018.

10. In arriving at the proposed civil fine, the NIGC Chair considered the Tribe’s written
submissions and the following factors set forth in 25 C.F.R. § 575.4:

a.

Economic benefit of noncompliance. The Tribe has benefited economically from
the violation to the extent the Tribe did not hire and pay an independent auditor to
complete and timely submit the fiscal year 2017 audit for CRST Bingo.

Seriousness of the violation. One of the policy purposes of IGRA is to provide a
statutory basis for the regulation of gaming by an Indian tribe adequate to shield it
from organized crime and other corrupting influences, to ensure that the Indian
tribe is the primary beneficiary of the gaming operation, and to assure that gaming
is conducted fairly and honestly by both the operator and players.’ Accordingly,
IGRA requires an annual audit of the gaming,” and NIGC regulations clarify that
each tribe “shall engage an independent certified public accountant to provide an
annual audit of the financial statements of each ... gaming operation on ... Indian
lands for each fiscal year.”?

The financial statements must be prepared in accordance with generally accepted
accounting principles, and the audit must conform to generally accepted

725 U.S.C. § 2702(2).
895 U.S.C. § 2710(b)(2)(C).
° 25 CFR. § 571.12(b).


Notice of Proposed Civil Fine Assessment

CFA 18-03
Page 2 of 10

and NIGC regulations. The Tribe requested the NIGC Chair reconsider NOV 18-
03.

The Tribe asserted that for decades the Tribe has conducted bingo as a past-time
for its people, and the Tribe considers bingo to be Class I gaming under IGRA
when conducted at the Tribe’s annual fair and rodeo. According to the Tribe,
bingo provides traditional entertainment for those with limited mobility, social
interaction, modest prizes, and no appreciable net gaming revenue.

The Tribe asserted that CRST Bingo operated through September 2017, but solely
for tribal member entertainment and earned only minimal revenue. The Tribe
considers CRST Bingo to be a small and charitable bingo operation. The Tribe
closed CRST Bingo at the end of September 2017 for renovations.

The Tribe asserted that the Dakota Access Pipeline protests in 2017 and 2018
created an exigent situation that required the Tribe to focus significant resources
on the well-being of its tribal members and others to prevent hardship and injury.
The Tribe used the CRST Bingo hall as an emergency shelter to protect visitors
from inclement weather.

The Tribe asserted that due to a field mice infestation, CRST Bingo equipment
and records were damaged, making it difficult to perform administrative
functions.

The Tribe asserted that its circumstances have made it difficult to provide
complete records to its outside auditor, Moss Adams LLP. Moss Adams is
currently working with staff from the tribal Treasurer’s Office and has informed
the Tribe that it will provide the fiscal year 2017 audit of CRST Bingo within 45
days, presumably from the date of Chairman Frazier’s November 2, 2018 letter.

The Tribe asserted that CRST Bingo will not open until the Tribe submits the
fiscal year 2017 audit to the NIGC.

7. On November 8, 2018, Mark Van Norman, representative for the Tribe, requested a
seven day extension to submit mitigating circumstances concerning NOV 18-03.

8. On November 9, 2018, the NIGC Chair granted the Tribe’s request for a seven day
extension to submit mitigating circumstances.

9. On November 16, 2018, Chairman Frazier submitted a letter and memorandum to the
NIGC Chair. The letter stated the Tribe’s continued objection to NOV 18-03, reiterating
the points from Chairman Frazier’s November 2, 2018 letter. In the memorandum, the
Tribe submitted the following information for the NIGC Chair to consider in determining
the amount of the civil fine: