IN THE MATTER OF ) 

NOVICFA 01-01 

COLORADO RIVER INDIAN TRIBES ) 

) May 30,2002 

MEMORANDUM DECISION AND ORDER 

Appeal to the National Indian Gaming Commission (NIGC or Commission) from 

a Notice of Violation and Proposed Civil Final Assessment issued to the Colorado River 

Indian Tribes (Respondent or Tribe). 

STATEMENT OF THE CASE 

On January 23, 2001, the NIGC Chairman issued a Notice of Violation (NOV) to 

the Tribe. The NOV alleged that NIGC representatives had been denied access to the 

Tribe's Class I11 gaming records and to areas of the Tribe's gaming facility where Class 

111 gaming was being conducted. 

As the basis for the NOV, the Chairman cited the Indian Gaming Regulatory Act 

(IGRA) and NIGC regulations permitting Commission representatives to enter Indian 

Gaming premises and to have access to records concerning any matters necessary for the 

Commission to carry out its duties. 25 U.S.C. 5 2706(b)(4); 25 C.F.R. $9 571.5-6. The 

NOV also stated that the NIGC must have access to all gaming facilities and records to 

w fulfill its responsibilities under IGRA. 
In an effort to settle the matter, Respondent and NIGC held discussions and 

'Y exchanged letters in which the parties set forth their respective positions regarding the 

NOV. When the matter was not resolved, the Chairman issued a Proposed Civil Fine 

Assessment (CFA). In turn, Respondent appealed both the NOV and the CFA and 

requested a hearing. The appeals were consolidated at the request of the parties. 

A preliminary issue identified in Respondent's appeal was the Commission's 

authority to issue the regulation establishing the Minimum Internal Control Standards 

(MICS) (25 C.F.R. Part 542) for class I11 gaming operations.' Respondent maintained 

that the NOV should be vacated because the Commission lacked authority under IGRA to 

issue and enforce the MICS regulation as to class I11 gaming. Respondent argued that, 

given this lack of authority, the NIGC could not conduct an audit of Respondent's class 

I11 gaming activities and could not demand access to books and records that relate solely 

W to class I11 gaming.2 

Counsel for the parties notified the recently designated Presiding Official that 

they had agreed to bifurcate the proceedings. The agreement was to have the Presiding 

Official first issue a recommended decision on the legal question of whether NIGC had 

authority to issue the regulation establishing the MICS. If the Commission accepted a 

recommended decision that NIGC lacked statutory authority to promulgate the MICS, the 

proceeding would be over. If, on the other hand, the Commission determined that it 

I "Class I1 gaming" and "class I11 gaming" are terms defmed in IGRA. "Class 11" gaming includes bingo, 

games similar to bingo, and card games that are not prohibited by the laws of the state in which a tribe 

conducts gaming. The term does include not banking card games such as blackjack or "electronic or 

electromechanical facsimiles of any game of chance or slot machines of any kind." "Class I11 gaming" 

means all form of gaming that are not class I or class 11. "Class I gaming" involves traditional and social 

games played by tribes and is not the subject of MICS. See 25 U.S.C. 3 2703(6)-(8). 

Respondent does not challenge the authority of the Commission to issue MICS that pertain to class I1 

gaming. 
possessed the requisite authority, the matter would be remanded to the Presiding Official 

,I riu for a second, evidentiary, hearing and recommended decision on the fact issue of whether 

NIGC or Respondent terminated the MICS compliance audit. The parties also agreed 

that if, after the first hearing, the Commission determined that it had the requisite 

authority, that determination would not be a final agency action for the purposes of an 

Administrative Procedure Act (APA) review. Rather, final agency action would occur 

only after the Commission acted on the Presiding Official's second recommended 

decision on the facts. Letter fiom Michele F. Mitchell, NIGC Staff Attorney, and 

Gwenellen P. Janov, Respondent's counsel, to Presiding Official Candida S. Steel 

(October 29,2001).~ 

The Chairman filed his Amended Brief on November 6, 2001. Respondent filed 

its Response on November 9, 2001. The Chairman filed his Reply Brief on December 

V 17, 2001, and Respondent filed a Surreply on December 28,2001. Several amici curiae 

also filed brief^.^ The parties reached a stipulation concerning facts necessary for 

resolution of the legal issues. The Presiding Official held a hearing for oral argument on 

the legal issues January 16,2002. The record as to the legal issues was closed on March 

19, 2002. The Presiding Official submitted a recommended decision (Recommended 

Decision) to the Commission on May 2,2002. 

While not wishing to second-guess counsel for the parties at this juncture, the Commission notes that 

bifurcation of the hearing, with a separate submission of the question of NIGC's authority to issue class I11 

MICS, has resulted in a delay in the final disposition of this matter. The Commission discourages the use 

of this bifurcated procedure except in the unusual case in which a legal issue, not previously decided, 

controls the result. In this case, factual questions are also important to the disposition. 

Amici Curiae were: the National Indian Gaming Association; Oneida Tribe of Indians of Wisconsin; and 

Lac Vieux Desert Band of Lake Superior Chippewa Indians, Tule River Tribe, Spokane Indian Tribe, 

Shoshone-Bannock Tribe, Santee Sioux Tribe of Nebraska, Shoalwater Bay, and Coquille Indian Tribe 

(one brief). 

w 
RECOMMENDED DECISION OF THE PRESIDING OFFICIAL 

In her Recommended Decision, the Presiding Official concludes that the NIGC 

did not have authority under IGRA to impose the MICS on class I11 gaming and, 

therefore, that Respondent did not refuse entry to NIGC personnel who were carrying out 

their duties under IGRA. She recommends that the NOV and Proposed CFA be 

dismissed. Recommended Decision at 33. The Commission reverses the Recommended 

Decision for the reasons stated herein. 

DISCUSSION 

The NOV at issue in this appeal concerns an alleged refusal by tribal officials to 

allow NIGC representatives the access necessary to audit class 111 gaming records and to 

observe class I11 gaming activities and related cash handling procedures. We address 

Respondent's challenges to the Commission's authority to promulgate the MICS, to 

conduct audits, and to enforce the MICS. 

I. Authority to Promulgate the MICS 

Respondent argues that a threshold legal issue is whether NIGC had statutory 

authority to promulgate class 111 MICS. The Commission has already decided the 

question. In January 1999, the Commission determined that it had statutory authority to 

promulgate class I11 MICS when it published a regulation adopting standards for both 

class I1 and class 111 gaming as a final rule. Citing several provisions of IGRA, the 
Commission stated in the rule's preamble, "The Commission believes that it does have 

-4 the authority to promulgate this final rule.. .. [Tlhe Commission's promulgation of MICS 

is consistent with its responsibilities as the federal regulator of Indian gaming." 64 Fed. 

Reg. 509 (Jan. 5, 1999). 

The Commission reaffirms its conviction that it had authority to promulgate the 

MICS as to class 111 gaming. We address the question herein only to reassert our 1999 

determination. 

An examination of the Commission's authority begins with IGRA, the general 

purposes of which are: 

(2) to provide a statutory basis for the regulation of gaming by an Indian 

Tribe adequate . . .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 operator and players; and 

(3) to declare that the establishment of independent Federal regulatory 

authority, Federal standards for gaming, and the establishment of a 

National Indian Gaming Commission are necessary to meet congressional 

concerns regarding gaming and to protect such gaming as a means of 

generating tribal revenue. 

25 U.S.C. fj 2702. 

IGRA does not contain specific direction to the Commission to adopt and publish 

minimum internal control standards. In the absence of this specific direction, the 

question becomes whether a reasonable interpretation of IGRA would allow the 

Commission to promulgate such standards. An examination of IGRA indicates that the 

Commission's interpretation is reasonable. 

First, IGRA provides that the Commission has the authority to promulgate 

regulations and guidelines "as it deems appropriate to implement the provisions of this 

chapter." 25 U.S.C. 2706(b)(10). This authority is not limited to class I1 gaming but 
extends also to class I11 gaming. The Commission believed, and continues to believe, 

w' that it was appropriate and necessary to promulgate regulations on MICS to implement 

the purposes of IGRA. The regulations help ensure that the Indian tribe is the primary 

beneficiary of the gaming operation and that both the operator and the player conduct 

gaming fairly and honestly. 

The MICS, then, represent the Commission's interpretation of its oversight role 

and its charter to protect tribal gaming as a means of generating tribal revenue. The 

standards promote IGRA's purposes by protecting tribal assets in order to support tribal 

economic development and self-sufficiency. They also help ensure that a tribe is the 

primary beneficiary of the gaming operation and protect gaming as a means of tribal 

gaming revenue.' Internal controls are the primary procedures used to protect the 

integrity of casino funds and games and are a vitally important part of properly regulated 

V gaming. Inherent in gaming operations are problems of customer and employee access to 

cash, unrecorded cash transactions at table games, questions of fairness of games, and the 

threat of collusion to circumvent controls. Internal control standards are therefore 

commonplace in the gaming industry. 

In short, internal controls over a gaming operation's revenue stream are necessary 

to protect the revenue. Indian gaming does not serve its purpose of benefiting tribes if 

tribes cannot account for the tribe's gaming assets. Issuance of the MICS, and 

conducting audits consistent with the MICS, are reasonable and necessary components of 

the regulation and oversight of Indian gaming. 

- - 

5 The standards set out in the Commission regulation are minimum standards. The Commission recognizes 

that Indian gaming is a diverse industry. The Commission's intent in promulgating the MICS was that 

tribes would develop their own internal control standards to addresses their particular needs and 

circumstances, not that tribes would simply adopt the MICS verbatim. 

w' 
2. Authority to Conduct Audits 

The Commission believes also that it has the necessary statutory authority to audit 

class I11 gaming operations. That authority derives fiom several sources. First, it derives 

from IGRA's specific provision that: 

(b) The Commission- 

... 

(4) may demand access to and inspect, examine, photocopy, and audit all 

papers, books, and records respecting gross revenues of class I1 gaming 

conducted on Indian lands and any other matters necessary to carry out the 

duties of the Commission under this chapter (emphasis added). 

25 U.S.C. § 2706. 

The "duties of the Commission7' are addressed throughout IGRA. The Commission's 

authority to have access to and audit class I11 operations is consistent with its duties 

created by the general purposes of IGRA and in the variety of Commission duties 

specifically established both as to class I1 and to class I11 gaming activities. As to class 

v 

I11 gaming, IGRA specifically gives NIGC authority to: 

Approve or disapprove class I11 gaming ordinances (25 U.S.C. 2710(d)(l)(A)); 

Approve or disapprove management contracts for the operation of class I11 

gaming (25 U.S.C. 27 10(d)(9)); and 

Collect fees on class 111 gaming revenue (25 U.S.C. 2717(a)(l)). 

Regardless of the class of gaming, IGRA gives NIGC authority to: 

Issue civil fines (25 U.S.C. 27 13(a)(l)); 

Issue notices of violations (25 U.S.C. 2713(a)(3); and 

Issue temporary and permanent closure orders (25 U.S.C. 2713(b)(l)). 

These provisions indicate Congress's intention that the Commission have both broad and 

specific duties as to class I11 gaming. 

vl 
The language and structure of the statute thus do not support the Presiding 

-r*v Official's statement that "the NIGC has no direct authority, review or regulatory, over the 

conduct of class I11 gaming." Recommended Decision at 16. Clearly, NIGC does have 

direct authority over aspects of class I11 gaming: IGRA grants to the NIGC broad 

enforcement powers to ensure continuing compliance with the tribal gaming ordinances 

approved by the Chairman or the ~ommission,6 as well as regulations the Commission 

may adopt under the authority given to it by IGRA. The Commission also has broad 

subpoena and deposition authority, and broad investigative authority. See 25 U.S.C. $5 

2713,2715, and 2716. 

Apart from issuing the MICS, the Commission's oversight role includes the 

responsibility of auditing tribal gaming operations, including class I11 gaming, and 

evaluating gaming records according to its internal control standards in order to 

V determine whether tribal assets are being protected.7 Conducting audits that evaluate 

whether a tribal gaming operation--class 111 as well as class 11-functions under an 

effective internal control system is a proper exercise of Commission oversight 

responsibilities to protect the tribal gaming operation from fraud and loss of gaming 

revenue. Access to the gaming premises and to the operations' records is thus, as alleged 

in the Chairman's NOV and in IGRA, "necessary to carry out the duties of the 

Commission under this chapter [IGRA]." NIGC's attempt to access and audit 

6 The Commission disagrees with the presiding official's characterization of the duties of the Chairman and 

the Commission to approve tribal gaming ordinances as "ministerial." Recommended Decision at 16. 

These approval decisions involve the discretion to determine whether a particular ordinance meets the 

requirements specified in IGRA. 25 U.S.C. § 2710(b) and (d). 

7 The presiding official incorrectly states the proffered position of the Chairman regarding the 

Commission's ability to regulate within the ambit of class I11 gaming. The Commission does assert that 

its role is to "regulate the day-to-day minutia of tribal Class I11 gaming operations." Recommended 

Decision at 12. To the contrary, the Commission's position is that IGRA assigns the Commission a broad 

v oversight and regulatory role over the conduct of Indian gaming generally. 
Respondent's class I11 gaming operation was therefore consistent with IGRA's purposes 

w and with the range of authority that IGRA grants NIGC over class 111 gaming. 

3. Authority to Enforce the MICS 

Respondent argues that NIGC does not have authority to "enforce" the MICS as 

to class 111 gaming. This case, however, is not a MICS enforcement case; the NOV did 

not allege a violation of the MICS adopted by the Commission or by the Tribe's 

regulation. Accordingly, this decision does not address the ability of the Commission to 

"enforce" MICS per se. Instead, this case concerns access by NIGC representatives to 

conduct an audit. 

Audits are a useful tool for the NIGC and for tribal gaming regulators. In fact, 

NIGC representatives have performed several audits for tribes that involve both class I1 

and class I11 gaming operations. The results of these audits are shared with tribal leaders 

V and tribal gaming regulators. Except in rare situations, audits are scheduled in advance 

with the cooperation of the tribal gaming facility. In the event deficiencies are found, 

NIGC representatives notify the tribe and allow a reasonable period of time for 

resolution. Unless the deficiencies create an immediate and severe threat to the integrity 

of the gaming operation, NIGC will work with the tribe and tribal gaming regulators to 

remedy the deficiencies. The NIGC would contemplate enforcement action only if a tribe 

failed to address noted deficiencies within a reasonable period of time. This process has 

led to improvements in the internal control systems for the tribal gaming operations that 

were audited. None has resulted in a notice of violation. 
ORDER 

For the reasons indicated, the recommended decision of the Presiding Official is 

reversed on the specified legal questions set forth above. The Commission concludes, as 

it has previously concluded, that it has the requisite authority to establish MICS for both 

class I1 and class I11 tribal gaming operations. The Commission also concludes it has the 

requisite authority to conduct a MICS audit of class 111 gaming activities in furtherance of 

its oversight responsibilities. 

The case is remanded to the Presiding Official for a hearing on the facts and other 

pertinent legal issues. 

Montie R. Deer 

Chairman 

Teresa Poust 

Commissioner 

Commissioner Elizabeth Homer did not participate in the Commission's decision.