National Indian Gaming Commission 

IN THE MATTER OF 

J. RANDY GALLO, 

BETTOR RACING, INC. 

I FINAL DECISION AND ORDER 

1 September 12,2012 

I NIGC NOV and CFA 1 1-01 

OHA Docket No. DIR-2011-0066 

Bettor Racing, Inc. (BRI), and its president J. Randy Gallo (Gallo), (together 

Respondents) appeal the National Indian Gaming Commission Chairwoman's notice of 

violation 11-10 (NOV) and civil fine assessment 11-01 (CFA). The NOV alleged 

Respondents: (1) managed a tribal gaming operation without an approved management 

contract from September 24, 2004, through March 16, 2005, in violation of the Indian 

Gaming Regulatory Act (IGRA) and National Indian Gaming Commission (NIGC or the 

Commission) regulations, 25 U.S.C. $5 2710(d)(9), 2711, 25 C.F.R. 5 533.1; (2) 

managed an off-track betting operation at a tribal casino under two unapproved 

modifications to a management contract from February 15, 2007, through April 5, 2010, 

in violation of IGRA and NIGC regulations, 25 U.S.C. $5 2710(d)(9), 2711, 25 C.F.R. 5 

535.1(a); and (3) violated the sole proprietary interest provisions of IGRA, 25 U.S.C. $ 

2710@)(2), 25 C.F.R. $5 522.4@)(1), 522.6(a). The Chairwoman assessed a fine in the 

amount of $5,000,000. 

Appearances 

Meredith A. Moore, Esq., for Respondents 

Melissa Schlichting, Esq., and Heather Nakai, Esq., for the Chairwoman 

John M. Peebles, Esq., and Patrick R. Bergin, Esq., for Intervenor, the Flandreau 

Santee Sioux Tribe 

Presiding Oficial 

T. Britt Price 

FINAL DECISION AND ORDER 

After careful and complete review of the agency record, the pleadings filed by the 

Respondents, the Chairwoman and the Tribe, and the Presiding Official's recommended 

decision, the Commission finds and orders that: 

1. There are no genuine issues of material fact regarding the first violation for 

managing an Indian gaming operation without an approved management contract 

and it therefore grants summary judgment to the Chairwoman on this violation. 
2. There are no genuine issues of material fact regarding the second violation for 

operating under two unapproved modifications to an approved management 

contract and it therefore grants summary judgment to the Chairwoman on this 

violation. 

3. There are no genuine issues of material fact regarding the thrd violation for 

possessing a proprietary interest in Royal River Racing and it therefore grants 

summary judgment to the Chairwoman on this violation. 

4. There are no genuine issues of material fact regarding the civil fine assessment 

and it therefore grants summary judgment to the Chairwoman on the civil fine 

assessment. Therefore, Respondents are ordered to pay the civil fine assessment 

of $5,000,000 as set forth in the Proposed Civil Fine Assessment. 

STATUTORY BACKGROUND 

IGRA and NIGC regulations provide a tribe may enter into a management 

contract for the operation of gaming if such contract has been approved by the Chair of 

the NIGC. 25 U.S.C. 55 2710(d)(9), 2711(a)(l); 25 C.F.R. 5 533.1. Management 

contracts not approved by the Chair are void. 25 C.F.R. 5 533.7; Wells Fargo Bank v. 

Lake ofthe Torches Economic Development Corp., 658 F.3d 684, 686 (7th Cir. 2011); 

Catskill Development LLC v. Park Place Entertainment Corp., 547 F.3d 115, 120 (2d 

Cir. 2008); First Am. Kickapoo Operations LLC v. Multimedia Games, 412 F.3d 1166, 

1168 (10th Cir. 2005). Subject to the Chair's approval, a tribe may amend a management 

contract. 25 C.F.R. 5 535.1(a). To be valid, amendments shall be submitted to the Chair 

within 30 days of execution. 25 C.F.R. 5 535.10). 

To be approved, management contracts must meet certain criteria. For example, 

IGRA generally limits management contract terms to five years and caps management 

fees at 30 percent of net revenues, unless certain conditions are present. 25 U.S.C. $5 

2711(b)(S),(c). IGRA defines net revenues as "gross revenues of an Indian gaming 

activity less amounts paid out as, or paid for, prizes and total operating expenses, 

excluding management fees." 25 U.S.C. 5 2703(9); 25 C.F.R. 5 502.16. Management 

contracts must also provide "a minimum guaranteed payment to the Indian tribe that has 

preference over the retirement of development and construction costs." 25 U.S.C. 5 

271 1(b)(3). 

IGRA was enacted to "provide a statutory basis for the operation of gaming by 

Indian tribes as a means of promoting tribal economic development, self sufficiency, and 

strong tribal governments." 25 U.S.C. 5 2702(1); see also 5 2701(4). In enacting IGRA, 

Congress sought to ensure that Indian tribes are the primary beneficiaries of Indian 

gaming activities. 25 U.S.C. 5 2702(2). Therefore, IGRA and NIGC regulations require 

that a tribe have the sole proprietary interest in its gaming operation. 25 U.S.C. $5 

2710(b)(2)(A), 2711(d)(2)(A); 25 C.F.R. 55 522.4(b)(l), 522.6(a). 
FACTUAL BACKGROUND 

The Flandreau Santee Sioux Tribe (Tribe) is a federally-recognized Indian tribe 

with headquarters in Flandreau, South Dakota. See "Indian Entities Recognized and 

Eligible to Receive Services from the United States Bureau of Indian Affairs," 75 Fed. 

Reg. 60810, 60811 (Oct. 1, 2010). The Tribe owns and operates the Royal River Casino 

(Casino) on its tribal lands in Flandreau, South Dakota. AR 64, AR 68, AR 72. The Casino 

offers Class I1 and Class III gaming pursuant to the Tribe's approved gaming ordinance. 

AR 64; AR 68; AR 72. 

J. Randy Gallo is president of BRI, a pari-mutuel betting business incorporated in 

South Dakota. AR 58 at 11:22-12:09. In mid-2003, Gallo approached the Tribe about 

relocating BRI from Sioux Falls, South Dakota to the Royal River Casino. Id. at 15:25 - 

17:06. Respondents desired the move, in part, to avoid a 4.5% tax that South Dakota 

imposed on the gross revenue, or handle, of the business. Id. at 16:16-23. 

On August 27, 2003, the Tribe submitted a draft agreement between it and 

Respondents (the Parties) for review by the NIGC. AR 58(C). Gallo understood the 

Parties' agreement constituted a management agreement. AR 58 at 2624 - 27:3. He also 

knew that NIGC approval was required for a management agreement to be valid. AR 58 

at 28.16-24. On September 12, 2003, NIGC Acting General Counsel Penny Coleman 

issued an opinion that the agreement was a management contract that was subject to the 

Chair's review and approval, and advised that without the Chair's approval, the agreement 

was void. AR I. On March 26, 2004, the NIGC received a management contract between 

Respondents and the Tribe for review and approval by the Chair. AR 58 at 41:22 - 42.13; 

AR 58(H). Also on March 26, 2004, the NIGC received from the Tribe a copy of the 

Ordinance on Pari-Mutuel Betting for review and approval. AR 2. On June 21, 2004, 

Chairman Hogen notified the Tribe that he had approved the Ordinance on Pan-Mutuel 

Betting. AR 58(J). 

On September 20, 2004, the Parties entered into an agreement pending NIGC 

approval of the management contract. AR 58 at 47:14 - 49:II; AR 58(K). Gallo named 

the operation Royal River Racing. AR 58 at 99.1. On September 24, 2004, Respondents 

began operating Royal River Racing at the Casino. AR 58 at 35.11-16. During this time 

period, Respondents paid the Tribe its share of the revenue earned pursuant to the terms 

of the unapproved management contract. AR 50(Q); AR 58 at 47.14 - 49:4. Furthermore, 

Respondents admit they operated without an approved management contract from 

September 24,2004, through March 17,2005. AR 58 at 35.11-16. 

Respondents admit that they owned Royal River Racing separate and distinct 

from the Casino. AR 58 at 98.13 - 99.19; AR 59 at 331:lO-14, 337:lO-15. The simulcast 

license for Royal River Racing was held only by BRI. AR 58 at 11.9-19; 99.9-12. 

Respondents had sole access to Royal River Racing's betting information provided by 

United Tote, a pari-mutuel betting service provider. AR 58 at 67.22 - 69.14. Royal River 

Racing was audited independently from the Casino by an audit firm hired by 
Respondents. AR 56(T); AR 58 at 115:9-171. Respondents employed their own 

accountants. AR 58 at 31:25 - 32:02. 

Respondents considered their employees to be separate and distinct from those 

employed at the Casino. AR 59 at 300:06 - 301:14. They completed performance reviews 

solely for Royal River Racing employees and provided them with discretionary bonuses. 

AR 58 I31:2I - I32:24. Additionally, they reimbursed the Casino for providing Royal 

River Racing employees with the same food and drink discounts that Casino employees 

received. AR 58 at 50:09-19. 

On March 17,2005, NIGC Chairman Hogen approved the management contract 

between the Parties. AR 58 at 74:OI-22; AR 58(N); AR 74. The approved management 

contract provided that Respondents' fee was to be a percentage of the net revenue of 

Royal River Racing, based on a sliding scale, and payable in monthly installments. AR 74 

at 44-45. When the gross revenue was less than $30,000,000, Respondents received 40% 

and the Tribe received 60%. Id. When the gross revenue was between $30,000,000 and 

$60,000,000, Respondents received 35% and the Tribe received 65%. Id. When the gross 

revenue was more than $60,000,000, Respondents received 30% and the Tribe received 

70%. AR 58 at 76:21- 77:7, 78:14-19, 80:18 - 81:08; AR 58(0) at 29-31; AR 74 at 44-45. 

This provision of the management contract states that "the Tribe's share of the 

profits shall never be less than 4% of gross public handle generated by non-telephone or 

walk-in betting at the Casino, plus the greater of $5,769.23 per week or I% of all gross 

handle generated by telephone betting at the Casino." AR 74 at 45 (emphasis added). 

Thus, the Tribe was guaranteed $5,769.23 per week, the equivalent of 1% of $30,000,000 

($300,000) per year no matter how Royal River Racing performed. Id; AR 58 at I9:I-8. 

Additionally, since the provision states that Respondents were to pay the greater of 1% 

of all gross handle or this guaranteed minimum, when the gross handle of Royal River 

Racing exceeded $30,000,000 per year Respondents were required to continue paying a 

rate of 1% on all additional revenue over and above that $30,000,000. AR 74 at 45. 

In fall 2005, Respondents first approached the Tribe seeking an amendment to the 

approved management contract (First Modification). AR 58 at 84:18 - 85:12. By 2006, 

the Parties agreed to reduce the Tribe's guaranteed minimum payment from 1% on all 

gross revenue to 1% only on the first $30,000,000 and then .5% for those amounts in 

excess of $30,000,000. AR 29; AR 57w; AR 58 at 109t06 - 110:l. Therefore, this 

amendment preserved the $5,769.23 per week ($300,000 per year) minimum guarantee, 

but reduced the percentage the Tribe received on amounts made after the $30,000,000 

threshold was met from 1% on all additional gross revenue to .5%. Id. This First 

Modification, however, was not submitted to the NIGC for review and approval until 

January 25, 2007. AR 58(X). The Parties later executed a First Modification on February 

15, 2007, and from at least that day until to July 31, 2008, Respondents managed Royal 

River Racing pursuant to the unapproved First Modification. AR 56(HH); AR 57(VV); 

and AR 58 at 108:I 7 - 109:05, 121:7 - 122t20, I33:2-18; AR 62; see also, AR 56(J). 

Then on April 13,2007, through its legal counsel, the Tribe requested that the NIGC hold 

in abeyance a final decision on the First Modification pending the resolution of litigation 
regarding the Tribal-State Compact with the State of South Dakota. AR 12; AR 54 at 

18:19 - 19:04; AR 58(Y). 

During fiscal year 2006, Respondents made payments to the Tribe under this 

arrangement. AR 58 at 108tI7 - 110:04. The Parties accomplished this using a checkswap scheme whereby Respondents annually remitted to Tribe a check for the full 

amount due under the approved management contract, and the Tribe wrote Respondents a 

check styled a "bonus," which represented the difference due under the unapproved 

modification and the approved management contract. AR 20; AR 26; AR 58 at 87:12 - 88: 

17, 108:20 - 109:05, 119.15 - 120:19; AR58(HH); AR 58(W). 

On August 1,2008, the Parties again modified the approved management contract 

(Second Modification), reducing the Tribe's minimum guaranteed payment from .5% to 

.25% on all annual gross revenue over the $30,000,000 threshold. AR 29; AR 56(J); see 

also AR 58 at 136:20 - 139.04, 152:16 - 153t07. The Second Modification, likewise, 

preserved the guaranteed minimum of $5,769.23 per week, but again reduced the 

percentage the Tribe received on amounts Royal River Racing made after the first 

$30,000,000. The Second Modification was never submitted to the NIGC and so was 

never approved by the NIGC Chairman. AR 54 at 52:033 - 53:14. Beginning in August 1, 

2008, and through at least December 30, 2009, the parties acted in accordance with the 

unapproved Second Modification. AR 55(1); AR 58 at 158:II - 158t20. To carry out the 

Second Modification, the Parties continued to use the check swap scheme explained 

above. AR 29; AR 58 at 87.12 - 88.1 7, 89:ll-15, 92t08 - 92:19. 

The check-swap scheme was a mandatory prerequisite to maintaining Royal River 

Racing at the Casino, and the Tribe had no discretion in the matter. AR 58 at 156:25 - 

158.05; AR 59 at 226t24 - 227:15, 252.25 - 253:09. In May 2007 and again in June 

2008, the Parties swapped checks in the amounts of $752,133.78 and $1,058,853.56, 

respectively. AR 19 at 23, 43; AR 20; AR 26; AR 56(HH); AR 56(Q). In June 2009, the 

parties exchanged checks for a total of $1,435,734. AR 19 at 69; AR 20; AR 55(L); AR 

56(P); AR 56(R); AR 58 at 153:2 - 155:18. Gallo documented each check swap and 

undertook an annual reconciliation, demonstrating the amounts owed to each party based 

on the percentages called for in each unapproved modification. AR 19 at 23, 43, 69; AR 

20; AR 29 at 2; AR 56(P); AR 56(Q); AR 56(R); AR (HH); AR 57(DDDDD). 

Under the terms of the approved management contract, the Tribe should have 

received a total of $4,544,755 for 2005, 2006, 2007, and 2008 combined. AR 61. The 

following table demonstrates the how the check swap worked to increase Respondent's 

share of the revenues as compared to the Tribe: 
7- Net Income 

On Which 

Split Is 

Based 

$1,786,756 

$2,262,866 

$3,057,549 

$3,882,770 

Amount 

Received 

By Tribe 

$625,241 

$571,368 

$754,665 

$861,292 

Amount 

Received 

By Bettor 

Racing 

$1,161,515 

$1,691,497 

$2,302,885 

$3,021,479 

Percentage 

Of 

Revenues 

Received 

By Bettor 

Racing 

65% 

75% 

75% 

Percentage 

Of 

Revenues 

Received 

By Tribe 

35% 

25% 

25% 

22% 

PROCEDURALBACKGROUND 

In August 2009, the NIGC conducted a management contract compliance review. 

The Tribe assisted in the investigation by submitting extensive documentation and other 

information to the NIGC. On May 19, 2011, Chairwoman Stevens served Respondents 

and the Tribe with the NOV based on the evidence f?om the investigation. The NOV 

cited Bettor Racing for: 1) managing a tribal gaming operation without an approved 

management contract; 2) managing under two unapproved modifications to a 

management contract; and 3) holding a proprietary interest in Royal River Racing. The 

NOV ordered Respondents to reimburse the Trihe $4,544,755, the amount paid 

Respondents in excess of what it was owed under the management contract. On June 20, 

201 1, the Respondents appealed the NOV. Per NIGC regulations at 25 C.F.R. 5 577.4, 

the matter was referred to Presiding Official (PO), T. Britt Price on July 8,201 1. 

As to the Tribe, the NOV asserted four counts. First, that it permitted Respondents 

to manage Royal River Racing without an approved management contract. Second, that it 

allowed Respondents to operate under two unapproved modifications to the management 

contract. Third, that the Tribe failed to submit the management letters prepared by the 

Casino's independent auditors within 120 days of its 2005 and 2006 fiscal year ends. 

Finally, it charged that the Tribe's payments to Respondents violated IGRA's use of net 

gaming revenue mandates and the Tribe's gaming ordinance. 

On July 20, 201 1, the NIGC settled NOV-11-01 with the Tribe. By the terms of 

the Agreement, the Tribe admitted to all of the allegations in the NOV and agreed to take 

several remedial measures, including providing training and submitting required 

documents to ensure that the violations do not reoccur. Should the Tribe breach the terms 

of the Agreement, it must pay a fine of $750,000. 
The Tribe intervened in the appeal of the NOV. The Chairwoman moved for 

summary judgment, arguing under Rule 56 of the Federal Rules of Civil Procedure, that 

there was no genuine issue as to any material fact and, therefore, was entitled to judgment 

as a matter of law. The Tribe also moved for summary judgment in favor of the 

Chairwoman. Respondents opposed both the Chairwoman's and the Tribe's motions for 

summary judgment. 

Respondents submitted a supplemental statement for the Chairwoman's 

consideration in determining whether and to what extent to assess a civil fine. After 

considering the arguments set forth in Respondents' submission, as well as the factors in 

NIGC regulation 25 C.F.R. 5 575.4, the Chairwoman issued a CFA on February 10,2012 

that assessed a fine against Respondents in the amount of $5,000,000. On March 9,2012, 

the Respondents timely filed a notice of appeal. 

The proceedings on the motion for summary judgment on the NOV and motion 

for summary judgment on the CFA were combined on May 16,2012. The Chairwoman, 

the Tribe and the Respondents then submitted briefs on the CFA. 

The PO handed down her Recommended Decision granting the motions for 

summary judgment on the NOV and CFA on August 13, 2012. The PO agreed with the 

Chairwoman and the Tribe, finding that there is no .genuine issue of material fact 

regarding both the NOV and the CFA, and as a result, the Chairwoman is entitled to 

judgment as a matter of law. 

Respondents now object to the Recommended Decision. Respondents argue there 

are still issues of material fact and that summary judgment was therefore inappropriate. 

They dispute the Recommended Decision's analysis of: 1) their defense of lack of 

knowledge as to the first violation; 2) their defense of reliance on Tribe's counsel as to 

the first violation; 3) their defense of reliance on Tribe's counsel as to the second 

violation; 4) their statements regarding his ownership of Royal River Racing as evidence 

that the Tribe did not retain the sole proprietary interest in Royal River Racing; 5) 

regarding the remedial measure in the NOV, Respondents counter that the Tribe was 

compensated in accordance with the parties' agreements and that no law precludes the 

payment of a bonus; and 6) the amount of the CFA under the 8th amendment. 

The Commission now reviews the Presiding Official's Recommended Decision 

granting summary judgment in favor of the Chairwoman. As the remedial measure has 

been supplanted by the CFA, the Commission will not consider this issue. 

DISCUSSION 

I. IGRA Does Not Have A Scienter Requirement 

Black's Law Dictionary defines scienter as "a degree of knowledge that makes a 

person legally responsible for the consequences of his or her act or omission; the fact of 

acts having been done knowingly." 1347 (7'h Ed. 1999). Respondents' overarching 
argument is that they had no knowledge their actions constituted violations of IGRA, and 

had no intent to deceive the Tribe or violate the law. 

The PO considered this argument and found that Respondents cited no statutory 

or regulatory provision, no legislative history, no provision in the Tribe's gaming 

ordinance, and no agency or judicial case law interpreting IGRA to require intent to 

deceive or violate the law to establish the violations. Instead, the PO found the 

Chairwoman is neither expressly nor impliedly required to establish wrongful intent or 

intent to violate the law. In other words, the lack of knowledge cannot be raised as an 

affirmative defense to aper se violation. 

The Commission agrees that IGRA does not have a scienter requirement and 

therefore will not consider the Respondents lack of knowledge as an affirmative defense 

in its assessment of the PO'S recommendation for summary judgment on the three 

violations and the CFA. 

11. Summary Judgment Was Appropriate As There Are No Issues of Material 

Fact Regarding the NOV or CFA. 

Standard of Review 

Summary judgment is appropriate where "the pleadings, depositions, answers to 

interrogatories, and admissions on file, together with the affidavits, if any, show that 

there is no genuine issue as to any material fact and that the moving party is entitled to a 

judgment as a matter of law." Fed. R. Civ.P. 56(c). All evidence must be viewed in the 

light most favorable to the nonmoving party and all reasonable inferences from that 

evidence drawn in the non-moving party's favor. Wilburn v. Robinson, 480 F.3d 1140, 

1148 (D.C. Cir. 2007). 

The party seeking summary judgment always bears the initial responsibility of 

establishing the absence of a genuine issue of material fact. Celotex Coy. v. Catrett, 477 

U.S. 317, 323 (1986). To discharge this burden, the moving party must point out that 

there is an absence of evidence to support the non-moving party's case. After the movant 

has met this burden, the burden of production shifts and "the non-moving party must do 

more than simply show that there is some metaphysical doubt as to the material facts." 

Matsushita Electric Industrial Co., LTD et al. v. Zenith Radio Corp. et al., 475 U.S. 574, 

586 (1986) (citations omitted). The non-moving party "may not rest upon the mere 

allegations or denials of [the adverse party's] pleadings, but his response . . . must set 

forth specific facts showing that there is a genuine issue for trial." First National Bank v. 

Cities Service Co., 391 U.S. 253,288 (1968). 

There Are No Issues Of Material Fact As To Respondents' Management Of Royal 

River Racing Without An Approved Management Contract. 

The Chair must review and approve all contracts for the management of tribal 

gaming operations. 25 U.S.C. $5 2711(a)(l), 2710(d)(9). Management contracts not 
approved by the Chair are void and unenforceable. 25 U.S.C. 5 271 l(a)(l); 25 C.F.R. 5 

533.7; see First Am. Kickapoo Operations, L.L.C., 412 F.3d at 1176; see also WeUs 

Fargo BankNat'l. Ass'n., 658 F.3d. at 699-700. Failure to obtain the Chair's approval of 

a management contract prior to operation under such contract is a per se violation of 

IGRA. See 25 U.S.C. 5 2713. 

The Chainvoman alleges that Respondents violated IGRA and NIGC regulations 

by managing Royal River Racing without an approved management contract from 

September 24, 2004 to March 17, 2005. NOV-11-01 at I. Gallo admits Respondents 

operated Royal River Racing, without an approved management contract during that time 

frame. AR 58 at 43.18-25, 35.11-14. He also admits he knew the contract required 

approval. AR 58 at 28.16-24; 76.4-11. Further, other undisputed facts reveal Respondents 

managed Royal River Racing. AR 50(M); AR 56(FF); AR 58 at 53:lO-15, 54.25 - 55.7, 

56.11-16, 57:2-14, 57t21 - 58.22, 59.2 - 60-12, 61:3 - 61-13, 166.18 - 167tI5, 169:5-19, 

170t15 - 171:23; AR 59 at 298.11 - 299.9. Respondents do not offer any evidence to 

controvert the assertions or show there is any dispute to the material facts supporting the 

violation. 

Respondents raise as an affirmative defense their detrimental reliance on the 

Tribe's Gaming Commission attorney Terry Pechota. Gallo asserts that Pechota told him 

that operating without an approved contract was acceptable to NIGC Chairman Hogen. 

This argument was raised before the PO as well. The PO found Respondents cannot cite 

to any provision in IGRA or NIGC regulations permitting the operation of Royal River 

Racing without an approved management contract. Further, oral representations cannot 

relieve a party of its obligation to comply with statutes and regulations. The Commission 

is also not aware of any source of law that would relieve the Respondents of 

responsibility even if what they allege were true. 

Therefore, as the Respondents admitted actions constitute management under 

IGRA, the Presiding Official found there is no genuine issue as to any material fact. As a 

result, the Commission agrees with the Presiding Official that that the Chairwoman's 

Motion for Summary Judgment on this issue should be granted. 

There Are No Issues Of Material Fact As To Managing Royal River Racing 

Pursuant To Two Unapproved Modifications To The Management Contract. 

IGRA prohibits third parties from managing a tribal gaming operation without a 

management contract that has been approved by the Chair. 25 U.S.C. § 2710(d)(9). 

27Il(a)(I). NIGC regulations require any amendments to an approved management 

contract be reviewed and approved by the Chair. 25 C.F.R. J 535. 

Respondents admit that the Parties first modified the approved management 

contract on February 15, 2007. AR 57(VV). From at least February 15, 2007, to July 31, 

2008, Respondents managed Royal River Racing pursuant to the unapproved First 

Modification to the Management Contract, which decreased the Tribe's share of the net 

gaming revenue that had been agreed to under the approved management contract. AR 
56(HH); AR 57(VV); AR 58 at 108:17 - 109:05, 121: 7 - 122:20, 133:Z-18; AR 62; see 

also AR 56(J). Beginning in August 1, 2008, and through at least December 30, 2009, 

the parties acted in accordance with the unapproved Second Modification. AR 55(1); AR 

58 at 158:11- 158:ZO. 

Respondents again raise the affirmative defense of reliance on Terry Pechota's 

statement that operating without an approved contract was acceptable to NIGC so long as 

the Tribe receives its portion of the revenue. However, the PO found Respondents' 

testified they knew and understood an approved management contract was a prerequisite 

to conducting Indian gaming and confirms they operated Royal River Racing during the 

relevant period without approved modifications. The PO further found Respondents' 

assertions raise neither genuine nor material issues of fact and there is no reasonable basis 

for an expectation that anything but the NIGC's formal written approval could authorize 

the operation of Royal River Racing. Where unapproved management contracts and 

modifications are void ab initio, a rational trier of fact could not find '~es~ondents' 

reasonably inferred they had the requisite written approval of the modifications. 

That the Respondents operated Royal River Racing under two separate, 

unapproved modifications, to the management contract from February 15, 2007, to 

December 31, 2009, is uncontested. Therefore, there is no genuine issue as to any 

material fact that Respondents operated Royal River Racing under unapproved 

modifications to a management contract. As a result, the Commission agrees with the 

Presiding Official there is no genuine issue of material fact to submit for hearing and the 

Motions for Summary Judgment on this issue should be granted. 

There Are No Issues Of Material Fact As Respondents Held A Sole Proprietary 

Interest in Roval River Racina. 

IGRA requires a tribe must have the sole proprietary interest in, and responsibility 

for, the tribal gaming operation to ensure it receives the primary benefit of its gaming 

revenue. 25 U.S.C. §§ 2702, 2710(b)(2)(A). Moreover, Congress set explicit limitations 

on the amount of net gaming revenues that management contractors may receive for 

managing Tribes' gaming operations - 30% of net gaming revenues; 40% in certain 

circumstances. Id. at 5 271 l(c). IGRA does not allow a management contractor to receive 

more than 40% of net revenues of a tribal gaming activity. Id. To ensure compliance, 

Congress directed the Chair to disapprove management contracts and management 

contract modifications that violate such provisions. Id. at $271 l(a). 

When examining whether a tribe has the sole proprietary interest in the gaming 

operation, three factors are examined: "1) the term of the relationship; 2) the amount of 

revenue paid to the third party; and 3) the right of control provided to the third party over 

the gaming activity." City of Duluth v. Fond du Lac Band of Lake Superior Chippewa, 

830 F.Supp. 2d 712, 723 (D. Minn. 2011) (quoting in Re Fond du Lac Band of Lake 

Superior Chippewa, NIGC, NOV-11-02, p. 2). In this matter, the latter two factors are 

implicated when looking at the relationship between Respondents, the Tribe, and Royal 

River Racing. 
Respondents were the primary beneficiaries of the tribal gaming operation. The 

Tribe received only a minority percentage of the total profits. Using the check swap 

scheme discussed above, the Parties were able to style payments under their arrangement 

as a bonus to increase the flow of money to Respondents beyond the 40% permitted by 

IGRA. AR 20; AR 26; AR 58 at 87:12 - 88:17, 108:20 - 109t05, 119:15 - IZOt19; 

AR58(HH); AR 58(W). Further, Respondents made the check-swap scheme a mandatory 

prerequisite to maintaining Royal River Racing at the Tribe's Casino, eliminating the 

Tribe's discretion to determine the payment amount. AR 58 at 156:25 - 158:06; AR 59 at 

227:14-15, 253:08-09. The following table demonstrates the amount of revenues the 

Respondents received from the gaming operation as compared to the Tribe: 

Split Is 

Based Racing Received 

By Bettor / Racing 

2004 1 $1,786,756 1 $625,241 1 $1,161,515 65% 

Revenues 

Received 

By Tribe 

From 2004 through 2007, the Respondents received the bulk of the revenues, often taking 

three times the profits as the Tribe, far beyond what is permissible under IGRA. 

Therefore, as the Respondents received the majority of revenue, the Tribe was not the 

primary economic beneficiary of the Indian gaming operations as required by IGRA. 

Also a critical factor, Respondents controlled Royal River Racing, running it as a 

business separate from the Casino. Respondents admit they owned Royal River Racing 

separate from the Casino. AR 58 at 98:13 - 99:19; AR 59 at 331:lO-14, 337:IO-15. The 

simulcast license for Royal River Racing was held only by BRI. AR 58 at 11:9-19; 99:9- 

12. Respondents had sole access to Royal River Racing's betting information provided by 

United Tote, a pari-mutuel betting service provider. AR 58 at 67:22 - 69:14. Royal River 

Racing was audited independently from the Casino by a firm the Respondents hired. AR 

56(lJ; AR 58 at 115:9 - 117:l. Respondents employed their own accountants. AR 58 at 

31:25 - 32:02. Respondents considered their employees to be separate and distinct from 

those employed at the Casino. AR 59 at 300.06 - 301:14. They completed performance 

reviews solely for their employees and provided them with discretionary bonuses. AR 58 

at 131:21 - 132:24. Additionally, they reimbursed the Casino for providing Royal River 

Racing employees with the food and drink discounts that were exclusively provided to 

Casino employees. AR 58 at 50:09-19. As Respondents admit and the facts demonstrate, 
Royal River Racing operated as a separate business fkom the Casino and thus, 

Respondents were exerting an improper level of control over Royal River Racing. 

Respondents argue their statements of ownership should not be equated to a 

violation of sole proprietary interest. They further argue IGRA permits management 

agreements. While the Respondents are correct to note management agreements are 

permissible under IGRA, it does not permit management agreements giving the manager 

a proprietary interest in what is supposed to be a tribe's gaming operation. Therefore, 

Respondents' statements of ownership do bear on the analysis of sole proprietary interest 

as it speaks to the level of control. Here, the Respondents admittedly exercised near total 

control of Royal River Racing, such as an owner would, and such control is 

impermissible under IGRA. 

The PO further noted Respondents did not directly respond to the NOV's factual 

allegations, or its tables, noting the amount of money Respondents received in addition to 

their management fee. Instead, Respondents stated only the Tribe knew Bettor Racing 

was owned by Randy Gallo, and the Tribe had access to Royal River Racing facilities, 

book, safe, and general operations. The PO found these assertions do not raise any 

genuine or material issue of fact. Characterizing Mr. Gallo as a "consultant" does not 

change the admission he owned, controlled, managed, and operated Royal River Racing. 

Moreover, the Tribe's access does not establish a genuine or material issue of fact 

regarding ownership and control. 

As Respondents earned the majority of the revenues and exerted an inappropriate 

level of control over Royal River Racing, there is no genuine issue as to any material fact 

Respondents held a proprietary interest in Royal River Racing in violation of IGRA. As a 

result, the Commission agrees with the Presiding Official that the Motions for Summary 

Judgment on this issue should be granted. 

There Are No Issues Of Material Fact As to the Civil Fine Assessment. 

The Chair has the authority to levy and collect appropriate civil fines up to 

$25,000 per violation against a management contractor engaged in gaming in violation of 

IGRA. 25 U.S.C. 5 2713. NIGC regulations lay out the standard for assessing fines. 25 

C.F.R. 5 575.4: 

(a) Economic benefit of noncompliance. The Chair shall consider the 

extent to which the respondent obtained an economic benefit fiom the 

noncompliance that gave rise to a notice of violation, as well as the 

likelihood of escaping detection. 

(1) The Chair may consider the documented benefits derived fiom 

the noncompliance, or may rely on reasonable assumptions 

regarding such benefits. 

managing under two unapproved modifications to a management contract; and 

$2,000,000 for violating IGRA's sole proprietary interest requirement. 

In its Opposition to Motion for Summary Judgment on the CFA, the Respondents 

attacked the Chair's analysis of the above factors in 25 C.F.R. § 575.4. The PO 

considered the Respondents' arguments in its Recommended Decision. We now review 

this analysis. 

Economic benefit of noncompliance. Respondents argued any analysis 

determining they received a significant and greater-than-deserved economic benefit was a 

gross oversimplification of the facts as Respondents did not engage in any intentional or 

deceptive conduct in its dealings with the Tribe; the Tribe took it upon itself to submit the 

management contract and subsequent modifications to the NIGC and represented to 

Respondents it did so; the Tribe realized exactly the amount for which it contracted. and: 

no law exists precluding the Tribe's payment of a discretionary bonus to Bettor Racing. 

The PO after viewing Respondents' factual arguments in the light most favorable 

to Respondents found: they are not relevant to the question of whether the Chairwoman 

erroneously considered or determined the extent of the economic benefit derived from 

their noncompliance with the IGW, Respondents do not deny having received an 

economic benefit from their noncompliance; Respondents do not question the 

Chairwoman's calculation of that economic benefit or her use of Respondents' calculation 

of the net income from Royal River Racing; nothing in the record otherwise furnishes a 

basis for challenging the Chairwoman's calculation of the economic benefit of 

noncompliance to Respondent; and the regulations contain no bar against the assessment 

of a civil fine before an appeal of an NOV is concluded, while expressly permitting the 

Chairwoman to assess fines after an NOV has been issued. 

As the Respondents do not deny or challenge the amounts of economic benefits 

the Chairwoman determined they received for noncompliance, the Commission agrees 

with the Presiding Official's analysis of this factor. 

Seriousness of the violation. Respondents dispute the presumptions they 

committed any of the violations in the NOV and therefore also dispute the validity of the 

CFA. As the PO pointed out, this argument is not a factual contention the violations are 

not serious. The NIGC regulations expressly state managing a gaming operation without 

an approved contract constitutes a substantial violation. Further, the Chairwoman's 

mandate to consider "the extent to which the violation threatens the integrity of Indian 

gaming" adequately supports her determination that a violation of the sole proprietary 

interest is a serious violation given the declared policies of the IGRA, i.e., to ensure tribes 

are the primary beneficiaries of their gaming operations. Finally, the undisputed facts 

clearly establish a nexus between the NOV violations and the CFA and the Chairwoman 

is under no burden to "conclusively" establish any aspect or element of the NOV or CFA. 

As the Respondents do not dispute the seriousness of their violations, the Commission 

agrees with the Presiding Official's analysis of this factor. 
History of violations. The Chairwoman and .Tribe acknowledge Respondents have 

no previous violations and Chairwoman took this fact into consideration in determining 

the fine. The PO took this into account in her analysis as well. The Commission agrees 

with the Presiding Official's analysis of this factor. 

Negligence or willfulness. The Respondents assert the record demonstrates they 

did not negligently or willfully circumvent the management contract amendment 

approval process. However, the PO held even assuming Respondents believed their 

actions were lawful, there is no genuine issue of material fact. The facts of record negate 

the possibility a reasonable trier of fact could find Respondents' violations were not 

negligent (i.e., a result of a lack of ordinary care) or willful (i.e., purposeful and 

intentional, or reckless). Further, the Chairwoman reduced the amount of the fine in 

recognition of the Tribe's part in this matter. A trier of fact could not reasonably find 

Respondents had no role, or only an insignificant role, in causing or correcting the 

violations at issue. As the record demonstrates the Respondents negligently and willfully 

caused or failed to correct the violations at issue, the Commission agrees with the 

Presiding Official's analysis of this factor. 

Good faith. Respondents argue they acted in good faith through the entirety of its 

dealings with the Tribe. The PO found the NOV does not charge a general lack of good 

faith in Respondents' dealings with the Tribe or rely on any such allegation to support the 

violations. Instead, it only alleges a lack of good faith in failing to comply with the 

NOV's corrective measure. There is no dispute that Respondents did not reimburse the 

Tribe the sum was due under the management contact. Further, the Respondents cite no 

statute, regulation, or case law that bars or restricts the weighing of this fact with others 

in considering whether to impose a civil fme and in what amount. As Respondents did 

not comply with the remedial measure in the NOV, the Commission agrees with the 

Presiding Official's analysis of this factor. 

ExcessiveJine. Respondents' next claim the fine levied against them is unfairly 

larger than that levied against the Tribe. However, the PO notes Respondents profited 

from Royal River Racing to a much greater extent than the Tribe. The PO also notes the 

maximum fine the Chairwoman could have issued under IGRA is $65,755,000. The 

$5,000,000 assessed is well within the statutory and regulatory maximum allowed. We 

continue this analysis by assessing each violation independently. 

The first violation is for managing Royal River Racing without an approved 

management contract from September 24, 2004, through March 16, 2005, which 

constitutes a period of 174 days. As the Chairwoman may assess up to $25,000 a day per 

violation, the maximum assessable fine for this violation is $4,350,000. The 

Chairwoman's decision to balance the factors in 25 C.F.R. 5 575 to determine a fine of 

$1,000,000, or $5,747 per day, thus falls well within her civil fine assessment powers 

under IGRA. Therefore, the Commission agrees with the Presiding Official's 

Recommended Decision regarding the appropriateness of this fine. 
The second violation is for managing Royal River Racing under two unapproved 

management contract modifications from February 15, 2007 to April 4, 2010, which 

constitutes 1,145 days. As the Chairwoman may assess up to $25,000 a day per violation, 

the maximum assessable fine for this violation is $28,625,000. The Chairwoman's 

decision to balance the factors in 25 C.F.R. 4 575 to determine a fine of $2,000,000, or 

$1,747 per day, thus falls well within her civil fine assessment powers under IGRA. 

Therefore, the Commission agrees with the Presiding Official's Recommended Decision 

regarding the appropriateness of this fine. 

The third violation is for holding a proprietary interest in Royal River Racing 

from August 31, 2006 to April 4, 2010, which constitutes 1,313 days. As the 

Chairwoman may assess up to $25,000 a day per violation, the maximum assessable fine 

for this violation is $32,825,000. The Chairwoman's decision to balance the factors in 25 

C.F.R. 5 575 to determine a fine of $2,000,000, or $1,523 a day, thus falls well within her 

civil fine assessment powers under IGRA. Therefore, the Commission agrees with the 

Presiding Official's Recommended Decision regarding the appropriateness of this fine. 

Eighth Amendment. Finally, the Respondents challenge the CFA on the basis on 

the Eighth Amendment to the United States Constitution. Although the Chairwoman and 

Tribe submitted arguments in opposition, the PO noted the responses did not address the 

question of whether IGRA or any other statute confers authority on the NIGC or a 

Presiding Official to entertain a Constitutional claim. The PO found there is no such 

authority and the Eighth Amendment claim must be pursued in a judicial forum. The 

Commission agrees with the PO it lacks jurisdiction to consider constitutional claims and 

therefore will not address Respondents' argument. 

After reviewing the Presiding Official's discussion on the CFA, we agree with the 

Presiding Official's analysis and conclusion that a trier of fact could not rationally find 

the proposed civil fine was unrelated to the established facts and therefore, summary 

judgment on the CFA should be granted. 
CONCLUSION 

For the reasons stated above, the Commission affirms the Presiding Official's 

conclusion that there are no genuine issues of material fact as to either the NOV or the 

CFA, and grants judgment in favor of the Chairwoman. 

It is .so ordered by the National Indian Gaming Commission, this 12th day of September, 

2012. 

Tracie Stevens 

Chairwoman , 

Vice-Chairwoman 
Certificate of Service 

I hereby certify that on September 12,2012, I served the foregoing Final Decision and 

Order by certified mail on: 

Meredith A. Moore 

Counsel for Respondents 

Cutler & Donahoe, LLP 

P.O. Box 1400 

Sioux Falls, SD 57101-1400 

John M. Peebles 

Patrick R. Bergin 

Counsel for Intervenor 

Fredericks Peebles & Morgan, LLP 

2020 L Street, Suite 250 

Sacramento, CA 9581 1 

T. Britt Price, Esq. 

U.S. Department of the Interior 

Office of Hearing and Appeals 

Office of the Director 

801 N. Quincy Street, Suite 300 

Arlington, VA 

I hereby certify that on September 12,2012 I served the foregoing Final Decision and 

Order by hand delivery on: 

Melissa Schlichting, Esq. 

Heather Nakai, Esp. 

Counsel to NIGC Chairwoman 

National Indian Gaming Commission 

1441 L St. NW 

Suite 9100 

Washington, DC 20005 

I hereby certify that on September 12,2012, I served the foregoing Final Decision and 

Order by e-mail delivery on: 

Meredith A. Moore 

Counsel for Respondents 

meredithm@cutlerlawfirm.com 

John M. Peebles 

Counsel for Intervenor 
Patrick R. Bergin 

Counsel for Intervenor 

pbergin@ndnlaw.com 

T. Britt Price 

Presiding Official 

T-Britt-Price@oha.doi.gov 

GQw.&yfw 

Alison M. C+rigonisU 

NIGC Staff Attorney