SOBORBA TRIBAL GAMING COMMISSION

F. Part 533 - Approval of Management Contracts.

The NIGC's proposed revisions to this Part may prove useful, but the STGC does not regard them as
warranting high priority or the convening of a Tribal Advisory Committee.

G. MICS & Technical Standards
1. Part 542 - Class III MICS.

The STGC recommends retention of the NIGC's existing Class III MICS as a regulation. If so retained,
the NIGC's MICS not only would continue to set a clear industry-wide standard, but also would set a
clear standard for compact compliance, particularly in circumstances under which states have agreed to
accept the NIGC's MICS and MICS compliance audits in lieu of state-imposed MICS or compliance
audits. However, revisions and or recommendations to Part 542 should be undertaken through a
legitimately constituted Tribal Advisory Committee (TAC), selected by tribes on a statewide basis with
representation on the TAC to be apportioned in accordance with the number of Tribal Class III gaming
operation in each state. Revisions and recommendations of the TAC should then be placed into a NIGC
Bulletin as an advisement of tribal industry standards. Further, updates and changes to a Bulletin or a
guideline would allow flexibility in addressing changes to industry standards and technological
advancements. Revisions to the NIGC's MICS should be undertaken through a legitimately constituted
Tribal Advisory Committee, selected by tribes on a statewide basis with representation on the TAC to be
apportioned in accordance with the number of tribal Class III gaming operations in each state. This is a
high-priority issue.

2. Part 543 - Class Il MICS.

Tribal Gaming Agencies should be given the opportunity to provide comment on the NIGC's proposed
revisions to its existing Class If MICS in advance of public meetings. Input from accounting
practitioners can be provided through TGAs. A legitimately constituted TAC, with representation
proportionate to the number of Class II gaming operations or activities in each state, would be of
assistance to the NIGC in the ongoing administration of the regulation.

H. Part 556 - Backgrounds and Licensing.

The STGC supports promulgation of a regulation formalizing the pilot NOR program as a matter of
moderate priority, through standard notice and comment rulemaking. The STGC also supports
promulgation of a regulation, through standard notice and comment rulemaking, allowing tribes, at their
option, to submit fingerprint cards for vendors, consultants and other non-employees, having access to
the gaming operation.

K. Part 573 - Enforcement.

The STGC supports promulgation of a regulation that would permit the withdrawal of a NOV after
issuance, either at the discretion of the Chairman or by a vote of a majority of the Commissioners.

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SOBOBA TRIBAL GAMING COMMISSION

2. Part_514.1(b) (1)-Annual Fees. Part 514.1 (b) (1) reads, “Unless otherwise provided by the
regulations, generally accepted accounting principles shall be used.” We agree that amending the
definition of gross gaming revenue should be consistent with GAAP. In our opinion, the
Commission’s question is whether the NIGC MICS definition of ‘gross revenue’ should be amended
to be consistent with GAAP. Generally Accepted Accounting Principles (GAAP) are the standards
of financial reporting established by the Financial Accounting Standards Board (FASB) and adopted
by the American Institute of Certified Public Accountants (AICPA), which publishes those standards
as industry accounting and audit guides. NIGC’s definition of gross gaming revenue and the AICPA
gaming industry audit guide definition are similar (i.e. NIGC — gross gaming revenue equals total
amount of cash wagered less any amounts paid out as prizes, versus AICPA — gross gaming revenue
equals the difference between patron wagers and the payouts made on winning wagers). In our
opinion, the NIGC definition is consistent with GAAP. In addition, amending this definition to
industry standards should provide a greater level of clarity and consistency, which could make
calculation of the fee and reconciliation easier.

The Commission should consider amending Part 514.1, to include fingerprint-processing fees;
however, the amendment should separate Annual Fees from fingerprint processing fees. Fingerprint
processing fees should determined by the cost for reimbursing the Commission and should be
reviewed on annual basis and adjusted accordingly.

C. Part 518 - Self-Regulation of Class II Gaming.

The STGC understands the need for the NIGC to be satisfied that an applicant for a certificate of self-
regulation has demonstrated the capacity to implement effective self-regulation. However, the existing
regulation unnecessarily intrudes into areas of tribal government outside the area of gaming regulation,
and to that extent should be revised to limit the NIGC's inquiry into the tribe's self-regulatory capacity,
rather than into other areas of tribal governance. A Tribal Advisory Committee would be of assistance
to the NIGC in revising this regulation.

D. Part 523 - Review and Approval of Existing Ordinances or Resolutions.

This Part should be deleted as obsolete. Given its irrelevance, it should not be given high priority.
E. Part 531 - Collateral Agreements.

Because collateral agreements often are integral to the relationship created by a management agreement,
the Commission should consider whether it has the authority not only to require the submission of
collateral agreements, but also to approve them. Therefore, doing would greatly reduce the risks to both
tribes and would-be management contractors, thus reducing tribal vulnerability to, overreaching by
developers and financiers.

The STGC regards this issue as one of fairly high (but not necessarily the highest) priority, and
recommends formation of a Tribal Advisory Committee to assist the Commission in its analysis.

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V. Potential New Regulations

B. Sole Proprietary Interest Regulation.

Adoption of a regulation that clearly defines the standards for determining whether an agreement violates
IGRA's requirement that a tribe have the sole proprietary interest in its gaming operation, and establishing a
process by which a definitive determination on this question can be obtained quickly, would be very helpful
in the negotiation of management, consulting, development and financing agreements. This is an issue of
high priority that can be accomplished through standard notice and comment rulemaking.

In closing, the STGC appreciates the opportunity to offer these comments, and we look forward to working with
the NIGC as it proceeds with its comprehensive regulatory review. If additional information is needed, please
contact the undersigned at (951) 665-1000, ext. 199.

Cordially,

4 Tipccsegee
eleste Hughes, Commission Chair

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Jerry Peebles, Commissioner
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oben, MBA, Commissioner

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Soboba Tribal Council
Jane Long, In-House Legal Counsel
Forman & Associates

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SOBOBA TRIBAL GAMING COMMISSION

February 12, 2012

Ms. Tracy Stevens, Chairwoman
National Indian Gaming Commission
14111 L Street NW, Ste. 9100
Washington, DC 20005

Via Email: reg.review@nigc.gov

Re: Response of the Soboba Tribal Gaming Commission to the NIGC’s November 2010,
“Notice of Inquiry and Request for Information; Notice of Consultation”.

Dear Ms. Stevens:

The Soboba Tribal Gaming Commission (“STGC”) would like to thank the Commission for the opportunity to
respond to the Notice published in the Federal Register on November 18, 2010, when NIGC announced its
intention to conduct a comprehensive review of all regulations promulgated to implement the Indian Gaming

Regulatory Act ("IGRA"). Although the NIGC's Notice announced a "comprehensive review of all

regulations," the Notice actually specifies only a few regulations of particular interest to the NIGC. Because the
NIGC intends that its review of existing regulations will be "comprehensive," the comments set forth below will
address those regulations that are of particular concern to the STGC, including regulations that have not been

specified in the NIGC's notice.
IV. Regulations Which May Require Amendments or Revisions

A. Part 502, Definitions of this Chapter.

1. Net Revenues: The NIGC should consider separate definitions for Net Revenues — management fee

and Net Revenues — allowable uses.

2. Management Contract: The definition of "management contract" should not be expanded to include
any contract with a fee based on a percentage of gaming revenues. Such an expansion would
introduce needless and burdensome delays and costs into the process of procuring gaming
equipment, and would serve no useful purpose. While we agree that there is a need to more clearly
and narrowly define the permissible elements of compensation under a management contract so as to
protect vulnerable tribes from overreaching by gaming developers, most tribes have the experience
and sophistication to negotiate a management contract that would be in the best interest of the tribe;

therefore, we would not assign a high priority to this issue.

3. Amendments to Existing Definitions:

a). Part 502.7 - Electronic, computer or other technologic aid. As currently written, the definition of
"Electronic, computer or other technologic aid" has been the source of confusion and controversy,
not so much because of the existing definition's language, but because of the way that-individual

Commission members and/or staff, without legal justification and in ways that have prevented

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judicial review, have imposed their own additional classification criteria so as to significantly reduce
the economic utility of electronically-aided Class II games to tribal gaming operations. In addition,
and with particular reference to California, the unilateral imposition of these limiting criteria have
resulted in conflicts between tribes and states concerning tribal compliance with the terms of Class
III gaming compacts.

Although tribal gaming agencies retain the authority to determine what is a permissible electronic,
computer or other technologic aid to a Class II game and what is a Class III gaming device, state
gaming agencies often look to the NIGC as the ultimate authority on this issue. In particular, the
State of California has on several occasions cited a letter from a former NIGC Chairman as authority
for the contention that particular equipment that a tribal gaming agency had classified as a
permissible electronic, computer or other technologic aid to a Class II bingo game actually
constituted a Class III gaming device, operation of which allegedly violated a tribe's compact.

Therefore, we recommend that the NIGC add the following subsection (d) to its existing definition
as the four factors that, if satisfied, will conclusively determine that equipment is a permissible
electronic, computer or other technologic aid to a Class II bingo game:

i. The electronic player interface receives game determinations from the server to
which it is attached;
ii. A minimum of two players must be present to initiate a game;
iii. | The math of the game is derived from a bingo ball drop;
iv. _ If the electronic player interface is disconnected from the server, the game cannot
be played.

Adding those factors would ensure that electronic, computer or other technologic aids would be
properly classified in a manner that is consistent with IGRA and controlling case law, and would
enable tribal gaming agencies to make their classification decisions without having to worry
about being second-guessed by the NIGC, or putting their tribal governments at risk of being
accused by states of violating the terms of compacts.

Because this issue currently is the subject of a number of tribal-state disputes in California and
elsewhere, the STGC recommends that the NIGC assign a high priority to this issue.

b). Part 543.6(b), Charitable Gaming Operations. 25 U.S.C. Sec. 2710(b) (4) provides in relevant
part that a tribe may license or regulate,

.. class Il gaming activities owned by any person or entity other than the Indian tribe and
conducted on Indian lands, only if the tribal licensing requirements include ,the requirements
described in the subclauses of subparagraph (B) (i) and are at least~as restrictiye as those
established by State law governing similar gaming within the jurisdiction of the State within
which such Indian lands are located. No person or entity, other than*the Indian tribe, shall be
eligible to receive a tribal license to own a class II gaming activity conducted on Indian lands
within the jurisdiction of the Indian tribe if such person or entity would not be eligible to receive
a State license to conduct the same activity within the jurisdiction of the State. (B) (i) The

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provisions of subparagraph (A) of this paragraph and the provisions of subparagraphs (A) and
(B) of paragraph (2) shall not bar the continued operation of an individually owned class II
gaming operation that was operating on September 1, 1986, if-- (I) such gaming operation is
licensed and regulated by an Indian tribe pursuant to an ordinance reviewed and approved by the
Commission in accordance with section 13 of the Act, (II) income to the Indian tribe from such
gaming is used only for the purposes described in paragraph (2)(B) of this subsection, (III) not
less than 60 percent of the net revenues is income to the Indian tribe, and (IV) the owner of such
gaming operation pays an appropriate assessment to the National Indian Gaming Commission
under section 18(a)(1) for regulation of such gaming.

A number of tribes in California and elsewhere desire to authorize to charitable or other non-
profit organizations licensed under state law to conduct bingo games for charitable purposes to
operate bingo games on their Indian lands. However, requiring such organizations to pay at least
60% of their net revenues over to the tribe exercising jurisdiction over the lands on which the
games would be played not only would deprive the organizations of much of the economic
benefit of the games, but also may require the organizations to violate the state laws applicable to
such organizations (for example, California law prohibits a charity operating a bingo game from
paying more than 20% of its net revenues as overhead).

Section 543.6(b) of the NIGC's regulations permits the exemption of charitable gaming
operations from the application of the NIGC's Minimum Internal Control Standards if certain
conditions are satisfied. One of those conditions is that the annual gross gaming revenue cannot
exceed $2 million.

In a state where compacts have conferred upon the state jurisdiction to enforce the state's
gambling laws against gambling activities conducted by persons or entities other than the tribe
itself, and assuming that a tribal government desires to authorize a charitable or other non-profit
organization to operate bingo games on tribal lands in strict accordance with state law (and
subject to state regulation), tribal sovereignty and self-determination, the principles underpinning
IGRA, would be advanced by the NIGC's adoption of a regulation specifically allowing tribal
governments to permit the operation of bingo games by charitable or other non-profit
organizations eligible and licensed under state law and regulated by state licensing authorities.

B. Part 514 - Fees

1. Late Payment System in Lieu of NOV for late submission of fees. The Commission should strongly
consider a late payment system in lieu of a Notice of Violation (NOV) for submitting fees late. The
process of immediately issuing a Notice of Violation (NOV), as implemented by the prior NIGC
administration, was an invaluable use of time and resources for both the Commission, and the Tribal
Government. The STGC supports the creation of a late payment system in lieu of issuing NOVs for
late submission of fees due to inadvertence, excusable neglect, or circumstances beyond a tribe's
control.

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