February 11, 2011 

Lael Echo-Hawk, Counselor to the Chair 

National Indian Gaming Commission 

1441 L Street, NW. 

Suite 9100 

Washington, DC 20005 

Via email: reg.review@NIGC.gov

Dear Chairwoman Stevens, Vice-Chairwoman Cochran, and Commissioner Little, 

On behalf of the Choctaw Nation of Oklahoma, I thank you for the opportunity to provide 

comments on the National Indian Gaming Commission's ("Commission") proposed regulatory 

amendments as published in the Federal Register on November 18, 2010. Your commitment to 

tribal consultation is both noteworthy and much appreciated and I look forward to working with 

you, together with the rest of Indian country, on these and other matters in the future. 

The Choctaw Nation believes that while some of the changes proposed in the 

Commission's Federal Register notice may be helpful, others are unnecessary and/or potentially 

detrimental. In the paragraphs below we explain which of the changes proposed we believe 

should be developed and which should be abandoned, and explain our reasoning in each case. 

We support our position by providing specific examples of how the proposed changes would 

affect the Choctaw Nation. Finally, we attempt to provide constructive input where possible by 

suggesting alternative ways the Commission may address some of the issues identified in the 

Federal Register notice. 

25 CFR Part 502: Definitions

Definition of "Net Revenues"

The Commission inquired whether the definition of "Net Revenues" should be revised to 

ensure that Tribes consider cash flow prior to allocating gaming revenues for non-gaming 

purposes. 

We believe that the definition of "Net Revenues" should not be revised as outlined in the 

Federal Register. As you know, tribal governments are sovereign and independent and their 

sovereignty must be respected, subject only to Congressional limitation. Under the Indian 

Gaming Regulatory Act, tribes may consider cash flow, financial integrity, and any other matter 

prior to allocating their net revenues to non-gaming programs, but there is no specific matter they 

are required to consider when doing so. Indeed, IGRA gives tribal governments relatively wide 
discretion in deciding whether and how to allocate their net revenues as long as those revenues 

are intended for one of the five permitted types of expenditures. Tribal sovereignty requires that 

tribes continue to exercise this right freely, without being required to account for extraneous 

issues. 

We understand that the Commission's interest in the definition of net revenues stems 

from a concern that some tribes may be allocating gaming revenue to non-gaming venues 

without properly taking into account their gaming operation's financial integrity. Enacting a 

regulation that requires tribes to take cash flow into account prior to making allocations would, 

paternalistically, protect tribes from making (at least some) bad financial decisions. However, 

such a regulation would also cut into tribal sovereignty. Making decisions about how to expend 

tribal revenue lies at the core of tribal governmental decision-making and at the core of tribal 

sovereignty. Thus, while the Commission may want to assist tribes in making prudent financial 

decisions by providing training, seminars, or other such optional guidance, it should not 

undermine tribal sovereignty by limiting tribal governmental discretion beyond the limitations 

explicitly imposed by Congress. 

Furthermore, we question whether it is possible to come up with a definition of cash flow 

that would be appropriate for all tribes. Indian tribes finance their gaming operations in a 

multitude of ways using various tribal governmental instrumentalities, boards, corporations, and 

other entities. In some cases the tribal gaming operation takes out loans or enters into financing 

agreements to fund gaming operations, whereas in other cases some other entity may take out the 

loan and subsequently transfer the funds to the gaming operation. In the latter situation, the 

gaming operation's cash flow may not be affected by loan payments even if such payments 

impose heavy burdens on tribal government as a whole. Defining "cash flow" as "Net income 

plus depreciation minus principal loan payments and reserve funding" would not adequately 

address the financial situation of such a tribe, nor would it achieve the outcome the Commission 

proposes to achieve. 

In short, while we agree with the Commission that it is prudential, from an economic 

standpoint, to take cash flow into account prior to distributing gaming revenue for non-gaming 

purposes, we believe that each tribe should have the freedom to make this determination on its 

own. Respect for tribal sovereignty requires that tribal governments be permitted to act in 

accordance with their rightful discretion in the manner they believe best serves their citizens. 

Like any other government, tribal governments too should be permitted to exercise discretion in 

making financial decisions. 

Definition of "Management Contract"

The Commission inquired whether the definition of management contract should be 

expanded to include any contract paying a fee based on a percentage of gaming revenues. We 

believe that the said definition should not be altered in the manner suggested. 

Many tribes have numerous contracts, including slot machine lease agreements, in which 

fees are based on a percentage of gaming revenue. Our tribe, for example, has multiple 

agreements with each of our slot vendors, for a total of more than 25 agreements. Were the 

 2 

#9972151_v6 
Commission to amend the definition of management contract as proposed, each of these 

agreements would be subject to review and approval by the Commission in order to be valid. 

Requiring NIGC approval for each such agreement would have several detrimental 

effects. First, the Commission could easily become overwhelmed by the onslaught of 

agreements that tribes nationwide would submit for approval. Several thousand agreements, 

above and beyond those currently submitted for approval, would be submitted to the NIGC 

annually. Given that it currently takes staff a little more than a year, on average, to process 

management contracts, the Commission would likely need to hire additional staff to meet 

increased workloads or risk unreasonably prolonged approval times. 

In addition, requiring such approval could significantly debilitate tribal gaming. Tribal 

gaming operations must be free to enter into percentage-based gaming agreements easily and 

quickly. Flexibility in introducing new games and removing unsuccessful ones is key to running 

a successful casino. Were the Commission to require approval for each percentage-based slot 

lease, gaming operations would be slowed to the point of stagnation. Tribes would have to wait 

months, if not years, to make changes on their gaming floors, leading to potentially significant 

losses in revenue. 

Finally, the Commission did not express any rationale that might justify expanding the 

definition of management contract. If the Commission feels that increasing its approval 

authority to encompass slot leases or other percentage-based contracts is required, it should share 

its rationale with tribes so that we may discuss the underlying issues openly. 

25 CFR Part 514: Fees

Fiscal Year versus Calendar Year

The Commission suggested that calculating fees based on a calendar year may be 

difficult for some tribes and inquired whether the difficulty may be resolved by changing 

"calendar" to "fiscal" throughout part 514. You also inquired how such a revision might be 

implemented if it were to be pursued. It is our position that while such a revision may make 

things somewhat easier for our accounting department and those of other tribes, the difficulties 

involved are not significant and do not justify making the regulatory change proposed. Thus, if 

only a small number of tribes would benefit from switching over to a fiscal year fee calculation, 

the change should not be made. On the other hand, if the vast majority of tribes operates on the 

basis of a fiscal year, the change may be warranted. 

For our tribe, it would be easier to calculate fees based on a fiscal year than on a calendar 

year because our accounting system is based on fiscal year calculations. Currently, in order to 

perform the calculations required by existing regulations our accounting department is required 

to generate two separate reports and to manually combine them, thereby arriving at calendar-year 

fees. We note, however, that the fact that manual reconciliation is required in our case may be a 

product of the particular software we use. There may be alternative accounting software 

available that would perform the required calculations automatically. 

Although calculating fees based on a calendar rather than fiscal year poses some minimal 

inconveniences for us (and, presumably, for some other tribes as well), we do not believe that a 

 3 

#9972151_v6 
regulatory change is required to address this matter unless the vast majority of gaming tribes 

would likewise benefit from such a change. We have become accustomed to performing the 

required calculations -- which do not in and of themselves require significant resources on our 

part -- and are prepared to continue doing so going forward. On the other hand, adopting a new 

regulation would be costly for the Commission. The small inconvenience to tribes (like us) who 

use fiscal year accounting is far outweighed by the cost involved in adopting a regulatory 

change. We therefore think the change is unnecessary unless it would significantly benefit a 

large number of tribes. 

In addition, were the Commission to replace "calendar" with "fiscal" for purposes of part 

514, those tribes that currently base their accounting on the calendar year would be 

inconvenienced and some would incur costs associated with switching over to a new feecalculation system. Some of these tribes may even have elected calendar-year accounting in 

order to more easily meet part 514's requirements. It would be unfair to these tribes to change 

the accounting rules now, just to make things easier for a small number of other tribes who have 

already devised ways of meeting existing regulatory requirements. For this reason, too, we do 

not think the regulation should be revised unless the change would benefit a significant number 

of tribes. 

The Commission also inquired how such a change should be implemented were the 

Commission to effect it. We recommend that the transition occur pursuant to a detailed 

transition plan published by the Commission. The plan should provide in-depth explanations of 

the required calculations and specify deadlines by which the calculations must be completed. 

The Commission's transition plan should provide tribes with at least two years' prior notice to 

ensure that their accounting systems are adjusted and their accounting personnel trained to 

submit calculations in accordance with the Commission's new requirements. 

Definition of Gross Gaming Revenue

The Commission inquired whether this definition should be revised so that it is consistent 

with GAAP definitions. We have not had any difficulty calculating or reconciling gross 

revenues based on the existing definition, nor are we aware of any industry-wide problems in this 

regard. Accordingly, we see no need for its revision. 

Fingerprint Processing Fees

The Commission inquired whether fingerprint processing fees should be included in the 

total revenue collected by the Commission that is subject to statutory limitation. We believe that 

such fees should, as suggested in the Federal Register notice, be subject to the statutory cap

imposed on revenue collection. Tribes are burdened with significant fees, all of which should be 

subject to an overall cap. 

In addition, you asked whether the Commission should review and adjust fingerprint 

processing costs annually. We are not opposed to the Commission's reviewing and adjusting 

such costs annually, as long as tribes are only charged for the actual cost of fingerprint 

processing. Tribes should not be required to cover the cost of NIGC personnel or overhead 

beyond what they already pay. If the Commission limits the amount tribes may be charged for 

 4 

#9972151_v6 
fingerprint processing as described above, we would support the Commission's reviewing and 

adjusting fingerprint processing costs annually. 

Late Payment System versus NOV

The Commission inquired whether the existing NOV system for late payments should be 

modified, and if so, how. We believe that the system should be changed for the following 

reasons and in the following ways. 

The advantage in the current NOV system is that it provides a no-nonsense means of 

collecting late fees and serves as a deterrent against late payments. It is important that the 

penalties for late fee payments be such that tribes are incentivized to comply with payment 

schedules. In addition, it is imperative that the Commission have at its disposal a quick and easy 

method for dealing with late payments and levying penalties that does not involve endless 

reminders to delinquent tribes. 

On the other hand, as stated in the Federal Register notice, the system currently in place 

is unnecessarily draconian and inflexible in cases where late payments are only a few days late 

and/or are due to clerical error, personnel changes, or other similar causes. When a tribe that 

normally complies with fee schedules submits a late payment, that tribe is subject to the same 

treatment as repeat offenders; the tribe receives a Notice of Violation and is subjected to a fine. 

Furthermore, under the existing system tribes whose lateness results from clerical error are 

sometimes subject to large fines, followed by lengthy (and costly) settlement meetings with the 

Commission's Office of the General Counsel. Such meetings are a waste of resources both for 

tribes and for the Commission. 

For these reasons, we believe that the Commission should implement a system that 

provides some flexibility in the event of a late payment. And perhaps the late payment option 

should be available only to those tribes that normally pay their fees on time and only in 

connection with payments that are no more than two weeks late (or some similarly appropriate 

timeframe). For example, the Commission may decide to incorporate such a policy starting 

January 1, 2012. Each tribe would be forgiven for one late payment (up to two weeks late) in 

each pre-set 18 month period (e.g., from 1/1/12 through 6/1/13, and again from 6/2/13 through 

1/1/15, etc.). If a tribe submits more than one payment after its due date in any pre-set 18-month 

period, the second late payment would be subject to NOV and fine. Likewise, if a payment is 

more than two weeks late, the payment would be subject to NOV and fine. This type of solution 

would provide deterrence from making late payments while also allowing for clerical or 

oversight errors once in a while. 

25 CFR Part 523: Review and Approval of Existing Ordinances or Resolutions

You asked whether the Commission should consider eliminating part 523 as obsolete, 

and if so, how it should do so. 

We believe the section should be eliminated for the reasons stated in your Federal 

Register notice, but only provided there are no tribes whose ordinances justify keeping the 

 5 

#9972151_v6 
regulations in place. Given that the section is more than likely obsolete, standard notice and 

comment rulemaking should suffice for its elimination. 

25 CFR Part 531: Collateral Agreements

The Commission inquired whether it should consider its authority to approve agreements 

that are collateral to a management contract. We understand that on occasion tribes ask the 

Commission to determine whether the cumulative effect of management and collateral 

agreements violate the sole proprietary interest provisions of the IGRA. The Commission now 

wants to know whether it should have -- or seek to find -- authority to certify that no such 

violation has occurred. 

First, we believe that it is important to distinguish between requiring tribes to get NIGC 

approval with regard to the "sole proprietary interest" issue and enabling them to do so on a 

voluntary basis. Under existing rules tribes are already burdened with obtaining a large number 

of costly approvals. We believe that they should not be required to obtain any additional 

approvals. Requiring tribes to meet strict criteria under a "sole proprietary interest" standard 

rather than enabling them to determine the matter on their own would be unnecessarily 

paternalistic. Thus, our first response to the Commission's inquiry is that tribes should not be 

required to obtain NIGC approval with regard to the sole proprietary interest issue. 

With regard to the NIGC's providing an opinion on "proprietary interest" to those tribes 

that voluntarily seek such an opinion, we believe that authority to issue such a non-binding 

opinion already exists. The Commission may, under existing law, review collateral agreements 

(if a tribe so requests) for purposes of providing an opinion on whether the "proprietary interest" 

rules have been followed. There is nothing in existing law that would preclude the Commission 

from doing so. Under existing law, however, the Commission can only approve such 

agreements if they meet the definition of a "management contract." 

It seems that the Commission now seeks to go a step beyond merely providing an opinion 

on collateral agreements, and instead wants to explore the possibility of its having and exercising 

authority to "approve" them, i.e., to conclusively determine whether the arrangements they create 

meet IGRA's proprietary interest rule. It is our understanding that the Commission proposes 

"obtaining" authority to approve collateral agreements by expanding the definition of 

"management contract" to include collateral agreements as well. Were the definition of 

management contract thus expanded, the Commission would have authority to approve collateral 

agreements (because, by definition, such agreements would be part of the "management 

contract" over which the Commission retains approval authority). We believe that expanding the 

definition of "management contract" to include collateral agreements should not be undertaken 

for the following reasons. 

First, there are policy considerations that weigh against the Commission's having 

authority to approve collateral agreements. Were the Commission to obtain such authority, 

tribes would ultimately be required to obtain yet another approval before moving forward with 

their management contracts. Obtaining such approval, above and beyond the approvals already 

 6 

#9972151_v6 
required today, would encumber tribal gaming operations significantly. Obtaining NIGC 

approval for management contracts can easily take more than one year under existing conditions. 

It is an expensive process that costs tribes time, manpower, and money. If tribes were further 

obligated to obtain approval of the entirety of their agreements, the approval process would take 

longer and cost more. And in any case, requiring this additional approval is unwarranted. 

Accordingly, we do not think the Commission should spend time on expanding its formal 

authority to cover approval of collateral agreements. 

In addition, there are legal reasons for not expanding the definition of "management 

contract" to include collateral agreements. First, IGRA distinguishes between management 

contract review (25 U.S.C. § 2711) and the issue of "sole proprietary interest" (25 U.S.C. § 

2710). Expanding the definition of management contract for the sole purpose of granting the 

Commission authority to have a say on the "sole proprietary interest" issue would be mixing two 

issues that -- under IGRA -- are distinct. IGRA only grants the Commission authority to review 

the "sole proprietary interest" issue when it approves tribal gaming ordinances. No equivalent 

authority expressly exists in connection with approval of contracts. 

Second, in order to expand the definition of "management contract" to include collateral 

agreements, the Commission would first have to provide a sufficiently workable set of standards 

for what constitutes a management contract. The Commission has historically failed to provide a 

consistent set of standards. Were the Commission to attempt to provide standards that included 

not only the core management contract itself, but also all collateral agreements, the standards 

would likely be either too vague or too narrow. And while the Commission may resolve the 

uncertainty by providing a "model" management contract, doing so would be highly undesirable. 

A model contract would be overly restrictive in that it could not possibly capture all of the 

variations that tribes may wish to include in their management arrangements. 

In short, we believe the Commission should refrain from attempting to expand its 

approval authority to include collateral agreements and to cover the "sole proprietary interest" 

issue. Such an expansion would be detrimental to tribes and contrary to existing law. 

25 CFR Part 542: Class III MICS

The Commission inquired whether it should replace the class III MICS with guidelines. 

You also asked how such a change might affect tribes whose gaming compacts require 

compliance with the MICS. We believe that the MICS should, as suggested, be converted into 

guidelines. While such a change would necessitate some adjustment in tribal-state compacts, 

like ours, that require compliance with the MICS, we do not think such adjustments should pose 

any significant difficulties for tribes or states. 

We believe that the class III MICS should be removed from the regulations because, as 

recognized by the courts, the Commission lacks authority to enforce regulation of class III 

gaming. We acknowledge, however, that these MICS, which have been widely adopted 

throughout the industry, are helpful in that they provide a recognized standard for internal 

controls. To the best of our knowledge many (if not most) tribal gaming operations have 

adopted the MICS and adhere to them. Therefore, we urge the Commission not to abandon the 

MICS entirely, but rather to re-publish them as guidelines. 

 7 

#9972151_v6 
With regard to the transition from regulations to guidelines, we do not think the transition 

should pose significant problems for tribes, like ours, whose compacts incorporate the MICS. 

Compacts that refer to the MICS by reference to their CFR citation could be revised to refer to 

the MICS as guidelines rather than as regulations. While making this revision to existing 

compacts would require time and effort, it is a non-substantive change that should not meet any 

objection by tribes or states. Some tribes and states may even elect not to make the change, 

relying instead on their mutual understanding that the MICS are binding regardless of whether 

they are a regulation or a guideline under federal law. As far as substance goes, the fact that the 

MICS are guidance rather than regulation on a federal level should not affect a tribe's state-level 

commitment to be bound by them. Therefore, the Commission's classification of the MICS as 

guidelines rather than as regulations should not have any substantive impact on the tribal-state 

relationship. 

It is important to note that although revising a compact solely for purposes of changing 

the compact's citation to the MICS is a simple legal undertaking, some tribes might encounter 

practical difficulties while attempting to make the change. States may take the opportunity of a 

compact's being open to revision to try to demand amendments that go beyond the mere 

correction of the MICS' citation. Tribes have experienced such difficulties in the past. 

Under our tribal-state compact we are required to comply with the class III MICS. 

Specifically, we are required to comply with internal control standards that "provide a level of 

control that equals or exceeds those set forth in the National Indian Gaming Commission's 

Minimum Internal Control Standards (25 C.F.R., Part 542)." Were the Commission to transition 

from regulations to guidelines, we may (but will not necessarily) want to amend our compact to 

refer to the MICS as guidelines instead of referencing their citation in the Code of Federal 

Regulations. Other than that, however, no additional change would be required. Our 

commitment to adhere to standards equal to or more stringent than those present in the MICS 

would not change if the Commission were to classify the MICS as guidance rather than 

regulation. 

The Commission noted that some tribal gaming ordinances recognize Commission 

authority to regulate and enforce class III MICS and that some tribal-state compacts have 

likewise done so. Neither our ordinance nor our compact accept federal oversight of class III 

MICS, and accordingly we cannot opine on whether and how the proposed change might impact 

such tribes and their compacts. 

Finally, the Commission inquired how the regulations should be published to the industry 

and whether a Tribal Advisory Committee should be convened to make any changes to the 

MICS. With regard to publishing, it might be easiest for tribes if the Commission could keep the 

guidelines at their current location in the CFR despite their being guidelines rather than 

regulations. Barring this, the NIGC could issue the guidelines in an advisory bulletin, post the 

guidelines on its website and distribute hard copies to all gaming tribes. With regard to 

procedures for making changes to the MICS, we strongly believe that tribes (and other industry 

participants) should be consulted. Past experience has shown that those on the grounds often 

have insights and experience that are invaluable in defining internal control problems and 

crafting solutions to those problems. 

 8 

#9972151_v6 
Because the NIGC's class III MICS are non-binding, we are not sure that a formal TAC 

needs to be convened. Instead, the Commission may want to consider convening a MICS 

working-group composed of representatives from all interested industry participants. The 

working group could convene on a pre-set schedule to discuss pressing issues, allocate work and 

research to its members, and -- utilizing a process that draws on the experience of a wide array of 

lawyers and practitioners -- narrow down the problems and craft a set of potential solutions. The 

Commission could then finalize its guidelines based upon the input presented by the working 

group. Several years ago a similar process was undertaken when the then-sitting Commission 

sought to revise its class II MICS. The process worked well, enabling the Commission to 

consider matters that would not otherwise have come to its attention. While the process 

proposed here is lengthier than one conducted by the small group of representatives who 

participate in a TAC, we believe that the final outcome will be infinitely better. 

25 CFR Part 556: Background Investigations for Licensing

The Commission inquired whether the background investigation pilot program should be 

formalized into the regulations. We think the pilot program should, as suggested, be formalized. 

The procedures that are currently in place under the pilot program are far easier to follow than 

those specified in the regulations. 

25 CFR Part 556: Fingerprinting for Non-Primary Management Officials or Key 

Employees

The Commission inquired whether it should adopt regulations that would allow tribes to 

submit fingerprint cards for non-primary management officials or key employees. We think the 

regulations should, as suggested, be revised to permit tribes to submit such fingerprints and 

obtain related reports. Permitting tribes to fingerprint vendors, consultants, and other nonemployees who have access to gaming operations would enable tribes to better protect the 

integrity of their gaming operations. 

General Comment on Class II MICS and Technical Standards

In several places throughout the Federal Register notice the Commission inquired 

whether it should assess, and possibly revise, the existing class II MICS and technical standards. 

We believe that some changes should be made to both the MICS and the technical standards. In 

our experience, the most comprehensive and effective means of effecting such change is through 

a working group consisting of tribal representatives, industry representatives, and NIGC 

representatives. We recommend that the need for, and final version of, any changes to the class 

II MICS and technical standards be defined by a committed working group. 

The Commission further inquired whether the draft prepared by an earlier commission 

should be used as a foundation for any future changes, or whether that draft should be 

abandoned. In our opinion, portions of the earlier draft were unclear and some of the regulatory 

changes it adopted were unnecessary and/or undesirable. Rather than comment on each portion 

of that draft, however, we recommend that the Commission convene a working group, comprised 

of all interested industry participants, and that the group discuss which of the previously 

proposed changes should be adopted and which should not. 

 9 

#9972151_v6 
In conclusion, on behalf of the Choctaw Nation I thank you for the opportunity to provide 

comment on the Commission's proposed regulatory changes. We look forward to working with 

the Commission as it moves to make some of the changes discussed above in the coming years. 

Sincerely, 

Paula Penz, Gaming Commissioner 

Choctaw Nation of Oklahoma 

 10 

#9972151_v6