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NOTICE OF VIOLATION

NOV-04-04

Michael A. Sandoval, Chairman

San Felipe Pueblo Gaming Regulatory Commission
P.O. Box 1540

Bernalillo NM 87004

FAX: 505.867.4827

Re: Notification of Violation

The Chairmar of the National Indian Gaming Commission (“NIGC”) hereby gives notice
that the San Felipe Pueblo, located in San Felipe Pueblo, New Mexico, is in viciation of the
Indian Gaming Regulatory Act (“IGRA”), NIGC regulations, and the Pueblo’s Third
Amended and Restated Gaming Ordinance, SFG3-04, for failure to submit a timely annual
audit.

1. Authority
Under NIGC regulations, the Chairman of the NIGC (“Chairman”) may issue a Notice of
Violation (“NOV”) to any person for violation of any provision of IGRA, of NIGC
regulations, or of any provision of a tribal gaming ordinance or resolution approved by the

Chairman. 25 C.F.R. § 573.3.

2. Applicable Federal and Tribal Laws

A. 25 U.S.C. § 2710(b)(2)(C) — IGRA requires an annual audit of each gaming
operation and requires that a copy of the results of the annual audit be submitted
to the NIGC.

B. 25 C.F.R. §§ 571.12 and 571.13 — NIGC regulations require that a tribe cause to
be conducted annual independent audits of the financial statements of each
gaming operation on Indian lands and submit a copy of the audit report(s) and
any management letter(s) setting forth the results of the annual audit(s) to the
NIGC within 120 days after the end of each fiscal year.

NATIONAL HEADQUARTERS 1441 L St. NW, Suite 9100, Washington, DC 20005 Tel: 202.632.7003 Fax: 202.632.7066 WwWW.NIGC.cov

REGIONAL OFFICES Portland, OR; Sacramento, CA; Phoenix, AZ, St. Paul, MN; Tulsa, OK


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Section 13E of the Pueblo’s Third Amended and Restated Gaming Ordinance —
the Pueblo’s approved gaming ordinance — requires the Pueblo, through its
agent, the San Felipe Pueblo Gaming Regulatory Commission, to obtain outside
annual audits for all of its gaming operations and to submit the results of those

audits to the NIGC.

3. Role of Independent Audit Report

Submission of the annual independent audit report by a firm of certified public accountants
is critical to the NIGC’s mission to protect the integrity of Indian gaming. A 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 principals provides a certain level of assurance as to the security of tribal gaming
revenues. The audit report prepared and submitted on a timely basis is evidence of, among
other things, the integrity of the gaming operation and, more specifically, of the adequacy of
the books and records, the functioning of the internal financial controls, and the disclosure
of information having a bearing on the financial statements.

4. Circumstances of the Violation

A. The Pueblo is a federally recognized Indian tribe with headquarters in San Felipe
Pueblo, New Mexico.

B. The Pueblo operated its gaming facility, Casino Hollywood, during all of 2003.

Cc. NIGC received an untimely audit report for the Casino Hollywood fiscal year
ending December 31, 2003. The audit report was due initially on April 29, 2004.
The Pueblo requested an extension until May 14, 2004, a request upon which
NIGC took no action. NIGC received the Pueblo’s audit report on June 10,
2004.

D. _IGRA requires that tribes submit annual audits of each gaming facility.
25 U.S.C. 2710(b)(2)(C). NIGC regulations require that a tribe cause to be
conducted an annual independent audit of the financial statements of each
gaming operation on Indian lands and submit a copy of the audit report(s) and
any management letter(s) setting forth the results of the annual audit(s) to the
NIGC within 120 days after the end of each fiscal year. 25 C.F.R. §§ 571.12,
571.13. The Pueblo is therefore in violation of these statutes and regulations, as
well as section 13E of the Pueblo’s Gaming Ordinance, for failure to submit a
timely annual independent audit report.

5. Measures Required to Correct these Violations

There is no way to rectify the late submission of the 2003 audit. The regulations require that
audits be received within 120 days of the end of the fiscal year.


6.

PHILIP N. HOGEN

Appeal

Within 30 (thirty) days after service of this Notice of Violation, the Pueblo may appeal to the
full Commission under 25 C.F.R. Part 577 by submitting a notice of appeal and, if desired, a
request for a hearing to the National Indian Gaming Commission, 1441 L Street, NW, Ninth
Floor, Washington, DC 20005. The Pueblo has a right to assistance of counsel in such an
appeal. A notice of appeal must reference this Notice of Violation.

Within ten (10) days after filing a notice of appeal, the Pueblo must file with the Commission
a supplemental statement that states with particularity the relief desired and the grounds
therefore and that includes, when available, supporting evidence in the form of affidavits. If
the Pueblo wishes to present oral testimony or witnesses at the hearing, the Pueblo must
include a request to do so with the supplemental statement. The request to present oral
testimony or witnesses must specify the names of proposed witnesses and the general nature
of their expected testimony, whether a closed hearing is requested and why. The Pueblo
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.

Fine — Submission of Information

The violation cited above may result in the assessment of a civil fine against the Pueblo in an
amount not to exceed $25,000 per violation per day. Under 25 C.F.R. § 575.5(a), the Pueblo
may submit wri information about the violation to the Chairman within 15 days after

s notice of violation (or such longer period as the Chairman may grant for good
all consider any information submitted in determining the facts

ton and the amount of the civil fine, if any.

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Chairman
National Indian Gaming Commission

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