Comments of the Lytton Rancheria of California
Notice of Inquiry and Request for Information
February 12, 2011

contract and/or the submission package are not satisfactory, the Commission should
communicate the deficiencies to the tribe and the management contractor and provide them with
a full opportunity to cure the deficiencies. The Chairwoman should not disapprove a
management contract under circumstances where the parties would have been willing to cure the
deficiencies if they had fully understood the Commission’s concerns.

In any event, these issues concerning deficient management contracts or submission packages
are unrelated to the trustee standard for disapproving a management contract. However, if the
Chairwoman intends to invoke the trustee standard in the future as a basis for disapproving
management contracts, the Commission should give consideration to clarifying the factors which
will be taken into account with respect to invoking the trustee standard in order to give notice
and guidance to tribes and their actual and prospective management contractors regarding how
the trustee standard will be applied.

PART 537 - BACKGROUND INVESTIGATIONS FOR PERSONS
OR ENTITIES WITH A FINANCIAL INTEREST IN, OR HAVING
MANAGEMENT RESPONSIBILITY FOR, A MANAGEMENT CONTRACT

Should this part be revised to clarify whether the contractor should be required to submit the Class IT
background information when the contract is only for Class III gaming?

The Notice of Inquiry suggests that there is confusion as to whether a management contractor
should be required to submit the Class II background information when the management contract
is only for Class III gaming. In multiple instances, the IGRA and the regulations establish a
clear distinction between the authority of the Commission with respect to the oversight of Class
II gaming operations versus Class III gaming operations. The Commission recognized this
distinction when it issued the Part 537 background investigation regulations in 1993. The
Commission needs to carefully consider its position regarding its legal authority concerning
background investigations for management contracts governing Class III gaming. Upon review
of those issues, the Commission should then consider clarifying its regulations accordingly.

If the Part 537 regulations are clarified, consideration should also be given as to whether there
should be thresholds which exclude institutional investors or persons or entities with de minimis
financial interests in the management contractor from some or all of the background
investigation requirements, similar to the institutional investor or de minimus interest exclusions
established by other federal and state regulatory authorities.

PARTS 519, 524, 539 & 577 — PROCEEDINGS BEFORE THE COMMISSION

Should the Commission consider more comprehensive and detailed procedural rules?

The less detailed procedures for appeals to the Commission of decisions by the Chairwoman to
approve or disapprove tribal gaming ordinances and management contracts set forth in Parts 524
and 539, respectively, should be deleted, and all appeals to the Commission of decisions by the
Chairwoman should be governed by the more detailed appeals procedures set forth in Section
577.


Comments of the Lytton Rancheria of California
Notice of Inquiry and Request for Information
February 12, 2011

consulting with tribes, to ensure that these regulations are not too onerous for such tribes. As part of
the review process, the Commission should consider issuing bulletins, where possible, to cover best
practices rather than making such a regulatory requirement.

PROPOSED NEW REGULATIONS

Fingerprinting for Non-Primary Management Officials or Key Employees.

Should the fingerprinting process be expanded to include vendors, consultants, and other non-
employees that have access to the gaming operations?

Expanding the fingerprinting process to include vendors, consultants, and other non-employees
cannot be mandated by the Commission. However, providing a voluntary process requesting such
fingerprinting may be beneficial to tribes. The Commission should work closely with tribes to
develop a process that will ensure compliance with FBI requirements as well as Commission and
tribal regulations.

Tribal Advisory Committee
Should a regulation be adopted or a policy statement be made?

Developing a policy statement outlining the formation, purpose, scope, and rules relating to Tribal
Advisory Committees (TAC) would be beneficial to both the Commission and tribes. In the past,
there has been confusion and uncertainty surrounding the use of TACs, particularly regarding the
rules governing TAC meetings. This confusion and uncertainty has led to tension between the
Commission and the tribal community, which in turn, has disrupted the more important substantive
discussions. A clear and detailed policy statement that can be applied across the board could help to
prevent such issues in the future.

Sole Proprietary Interest Regulation

The Tribe has general concerns regarding the Commission’s interpretation and application of the
sole proprietary interest requirement which is set forth in the tribal gaming ordinance provisions
of the IGRA and the regulations. The body of Commission determinations regarding the sole
proprietary interest requirement which is in the public domain is internally inconsistent and does
not provide clear guidance to tribes and contractors regarding which contracts would or would
not violate the requirement. The resulting confusion and uncertainty has made it more difficult
for tribe to attract suitable business partners to Indian country. The Tribe considers the status
quo regarding the sole proprietary interest requirement to be unhelpful to Indian country
generally and encourages the Commission to review this topic carefully.


Comments of the Lytton Rancheria of California
Notice of Inquiry and Request for Information
February 12, 2011

Commission work closely with tribes to develop a payment system that is comprehensive, clear, and
provides appropriate due process.

Should the Commission consider adding a type of “ticket” system to Part 514 so that an NOV would
only be issued in instances of gross negligence or wanton behavior, or ina dollar amount that
allowed the Tribe to reap an economic benefit from its failure to pay ina timely manner?

See above comment.

PART 518 — SELF REGULATION OF CLASS Il

Currently, Part 518 is inconsistent with the IGRA. Self-regulation is a hallmark of tribal sovereignty
and should be supported and encouraged by Part 518. The Commission should revise Part 518 to
ensure (i) that it is consistent with the IGRA; (ii) the steps to achieve self-regulation are clear; (iii)
that the regulations are not punitive.

PART 531 — COLLATERAL AGREEMENTS

Should the Commission consider whether it has authority to approve collateral agreements to a
management contract?

The Commission’s past practice has been to require that, at the time a tribe submits a
management contract to the Commission for approval, the tribe also submit all collateral
agreements to the management contract. At the same time, the Commission’s position has been
that the only agreement which requires the Chairwoman’s approval is the management contract
and that collateral agreements are not void under the IGRA due to lack of approval by the
Chairwoman.

The Commission’s past practice and positions with regard to these matters have been the correct
approach. The Commission should not seek to alter its previous positions by now adopting a
new position that collateral agreements also require approval of the Chairwoman, even in
circumstances in which the management contractor may be receiving substantial compensation
pursuant to such collateral agreements. If the Commission were to change its position on this
issue more than 20 years after the IGRA has been enacted, the change could generate unhelpful,
uncertainty in the marketplace regarding the effectiveness of previously executed collateral
agreements and future collateral agreements. Such an outcome would likely have a negative
impact on tribes.

PART 533 - APPROVAL OF MANAGEMENT CONTRACTS

Should this Part be revised to clarify the trustee standard by adding the following two grounds for
possible disapproval: The management contract was not submitted in accordance with the
submission requirements of 25 CFR Part 533 or the management contract does not contain the
regulatory requirements for approval pursuant to 25 CFR Part 531?

It is unnecessary for the Commission to add to the grounds specified in the IGRA and the
regulations for disapproving a management contract. If the Commission feels the management


Comments of the Lytton Rancheria of California
Notice of Inquiry and Request for Information
February 12, 2011

The appeals procedures in 577 should be updated to provide a more comprehensive set of
procedural rules, including clarification of rules relating to the following: computation of time;
participation in appeals proceedings as a matter of right; rights to intervene, or oppose the
intervention, of parties in the appeals proceedings; the records available in appeals proceedings;
and the role of Commission staff and attorneys in appeals proceedings.

PART 543 ~- CLASS I IMUM INTERNAL CONTROL STANDARDS (MICS)

The Commission should make the development of a complete Class I] MICS package a priority. As
The Commission is aware, the development of the Class II MICS, under the prior administration,
involved a multi-phase process. The first stage of the process addressed only the development of
bingo standards (Section 543.7). The Tribe actively participated in this process, both through a
representative on the MICS Tribal Advisory Committee (MTAC) and its attorney, who was part of
the general public that attended the many meetings and telephone conferences dedicated to the
drafting of Section 543.7. In the Tribe’s view, this process, although time consuming, was very
productive and resulted in a product that, for the most part, accurately reflects appropriate minimum
internal control standards in a Class II gaming environment.

Unfortunately, the second stage of this process (although similar to the first in that an MTAC formed
and meetings were held between the MTAC and the Commission) was far less productive and
resulted in what we believe is a seriously flawed and potentially damaging product. The Tribe’s
representative attended all of the meetings and believes that the process was ineffectual and
inappropriate for the following reasons:

1. Unlike the first stage, tribal representatives who were not part of the MTAC were
unable to participate in any meaningful way due to the Commission’s strict rules.!

2. Although these meetings were touted by the Commission as being a review of both
Class III and Class Il MICS, this was not the case. In reality, the Commission only reviewed and
revised the Class III MICS and then cut and pasted the changes into the Class II MICS.

3. The vast majority of the MTAC members were Class III gaming regulators who had
little, if any, experience in, or knowledge of, Class II gaming.

As a result of the foregoing process issues, the Class Il MICS in their current form are fatally
flawed.? Thus, the Tribe strongly encourages the Commission to abandon the “cut and paste”
regulations that were developed through what was, in reality, a Class III MICS review process and
undertake a process specifically devoted to the development of Class II MICS.

| Tribal representatives who attended these meetings, but were not part of the MTAC, where permitted to speak only
during the last hour of each day. Being denied the opportunity to address the MTAC or the Commission during any
actual debate over specific substantive issues and being limited to only an hour when there were at least fifteen tribal
representatives in attendance, made it nearly impossible for the tribal representative to provide any substantive input.
While the Tribe recognizes the need for some sort of organizational controls to ensure each meeting is productive,
the Tribe believes that the Commission’s chosen method was inappropriate and disrespectful to one of the most
elemental tenants of the government-to-government relationship.

2 Examples of some of the most notable flaws were provided in the Tribe’s response to the Commission’s 2010
request for comments on Minimum Internal Control Standards.


Comments of the Lytton Rancheria of California
Notice of Inquiry and Request for Information
February 12, 2011

CONCLUSION

The Tribe appreciates the opportunity to submit these comments. The Tribe looks forward to future
discussions and/or consultations with representatives of Commission regarding the review of the
Commission’ regulations

Sincerely,

} -
} } ) f
Koel pw HH C9445

Kathryn A. Ogas
Attorney for the Lytton Rancheria of California



TOMARAS & OGAS, LLP

10755-F SCRIPPS POWAY PARKWAY #281 © SAN DIEGO, CALIFORNIA 92131
‘TELEPHONE (858) 554-0550 © FACSIMILE (858) 777-5765 * WWW.MTOWLAW.COM

Kathryn A. Ogas kogas@mtowlaw.com
Brenda L. Tomaras tomaras@mtowlaw.com

February 12, 2011

VIA EMAIL

Lael Echo-Hawk

Counselor to the Chair

National Indian Gaming Commission
1441 L Street, Suite 9100
Washington, DC 20005

Re: Comments on Notice of Inquiry and Request for Information
Dear Ms. Echo-Hawk:

On behalf of the Lytton Rancheria of California (Tribe), we hereby submit the following comments
in response to the National Indian Gaming Commission’s (Commission) Notice of Inquiry and
Request for Information. The Tribe would like to thank the Commission for the opportunity to
submit comments on the Commission’s regulatory framework for implementing the Indian Gaming
Regulatory Act (“IGRA”). The Tribe supports the Commission’s efforts to seek tribal input
regarding which regulations need revision and the process by which such regulations should be
revised.

PART 502 - DEFINITIONS

502.15 — Management Contracts

Should the definition be expanded to include any contract that pays a fee based on a percentage of
gaming revenue?

The IGRA provides the Chairwoman with authority to approve a management contract for the
operation and management of a Class I and Class III gaming activity. Consistent with the
statute, the regulations define a “management contract” as a contract which provides for “the
management of part or all of a gaming operation.”

Asa legal matter, the Commission does not have the authority to expand the regulatory
definition of the term “management contract” to include contracts which do not provide for the
“management” of some or all of a gaming operation. Therefore, the Commission does not have
authority to expand the definition of the term “management contract” to include any contract,
such as a slot lease agreement, which pays a fee based on a percentage of gaming revenues.


Comments of the Lytton Rancheria of California
Notice of Inquiry and Request for Information
February 12, 2011

The Tribe is uniquely interested in ensuring the development of Class II MICS that are appropriate
for, and specific to, a Class II gaming environment as such MICS will have a significant effect on the
Tribe. As the Commission is likely aware, the Tribe’s gaming operations are not merely
supplemented by Class II gaming, but are, in fact, entirely dependent on Class II gaming. Asa result,
any proposed regulations present the Tribe with a markedly different and more serious concern than
that of most other Tribes. Thus, the Tribe believes that proper consultation dictates that Commission
actively involve the Tribe in the rulemaking process.

The Tribe believes that either a negotiated rulemaking or a Tribal Advisory Committee process
would be appropriate. However, if the Commission should elect to use a Tribal Advisory
Committee, the Commission must ensure that such Committee is appropriately comprised of
individuals who (i) have adequate experience in, or knowledge of, Class If gaming; (ii) adequately
represent the tribes that are most impacted by the Class II MICS; and (iii) are able to fully commit
the necessary attention and time to the process.

PART 547 — CLASS I] MINIMUM TECHNICAL STANDARDS

Like the bingo portion of the Class I] MICS, the Class I] Minimum Technical Standards (Technical
Standards) were developed through an extensive process using a Tribal Advisory Committee with
assistance from technical and other experts. While the Tribe believes this process was useful and
resulted in a good initial product, the practical application of the Technical Standards has revealed
some issues. As the Commission is aware, the Technical Standards may have a direct and potentially
substantial impact on Class II gaming. Thus, the Tribe believes the Commission should make a
review of these regulations a priority.

The Tribe believes that either a negotiated rulemaking or a Tribal Advisory Committee process
would be appropriate. However, if the Commission should elect to use a Tribal Advisory
Committee, the Commission must ensure that such Committee is appropriately comprised of
individuals who (i) either have the technical experience necessary to develop appropriate standards or
are permitted to be accompanied and assisted by such experts; (ii) adequately represent the tribes that
are most impacted by the Technical Standards; and (iii) are able to fully commit the necessary
attention and time to the process.

PART 556 — BACKGROUND I

STIGATIONS FOR LICENSING

Should the pilot program for submission and processing of fingerprints through the Commission be
formalized with regulations?

The pilot program has been a success and should be formalized.

PART 559 — FACILITY LICENSE NOTIFICATIONS, RENEWALS AND SUBMISSIONS

Should this part be revised?

Part 559 presents many issues for tribes, like Lytton, who utilize other regulated entities to provide
services at the facility. Thus, the Commission should undertake a comprehensive review, including


Comments of the Lytton Rancheria of California
Notice of Inquiry and Request for Information
February 12, 2011

Should there be a definition regarding acceptable compensation to a manager contractor?

The Commission does not have the authority to approve development, loan, marketing, non-
gaming management and other agreements which do not provide for the “management” of a
gaming operation. Since the Commission does not have authority to approve such agreements in
general, it does not have the authority to approve the reimbursement and/or compensation
components of such agreements, in particular. Therefore, the Commission should not attempt to
expand its role by adopting a new definition for “acceptable compensation” or other regulations
in order to regulate the compensation paid to management contractors in agreements which do
not constitute management contracts requiring approval of the Chairwoman.

The body of Commission and court opinions relating to what constitutes a “management
contract” is extensive and reasonably clear. The Commission should not endeavor to muddy
those waters, and thereby unsettle the marketplace, by attempting to indirectly regulate
compensation paid by tribes to contractors under agreements which do not constitute
management contracts.

502.16 — Net Revenues

Should the Commission’s definition of Net Revenue be revised to be consistent with GAAP?

The IGRA specifically defines the term “net revenues.” In 1992, the Commission adopted
regulations defining “net revenues” in a manner which faithfully tracked the statutory definition.
In 2008, the Commission revised the regulatory definition of “net revenues” in a manner which
does not faithfully track the statutory definition and which is internally inconsistent. In the 2010
Notice of Inquiry, the Commission raises the question as to whether it should adopt two new
regulatory definitions of “net revenues,” each of which is inconsistent with the statute,
inconsistent with the 2008 regulatory definition, and inconsistent with each other.

The Commission should only adopt regulations which are consistent with the statute, especially
when there is clear statutory guidance. Therefore, if the Commission elects to revise the
regulations regarding the definition of “net revenues,” it should conform the regulatory definition
to the statutory definition. In any event, the Commission should not attempt to exceed its
statutory authority by creating new definitions of “net revenues” which are inconsistent with the
statute.

Should the Commission consider adding a new definition for Net Revenues-allowable uses that is
based on cash flow?

There is no statutory authority which permits the Commission to expand the IGRA’s definitions.
Thus, it is inappropriate for the Commission to arbitrarily create a new definition. In addition, the
existing Bulletin (05-1) defining Net Revenues should be withdrawn as it is overreaching and outside
the Commission’s authority.


Comments of the Lytton Rancheria of California
Notice of Inquiry and Request for Information
February 12, 2011

If the Commission should nevertheless decide to add such a definition, it should do so in consultation
with tribes to ensure that such definition does not adversely impact the ability of tribes to provide for
the general welfare of their members or engage in economic development or charitable activities.

PART 514 - FEES

Should the Commission consider amending this part to define gross gaming revenue consistent with
GAAP?

The term Gross Gaming Revenues is specifically defined by the IGRA for the purposes of
calculating the Commission’s fees. The current regulations clarify the meaning of “gross
revenues” in a manner consistent with the statute and add that “{u]nless otherwise provided by
the regulations, generally accepted accounting principles shall be used.”

Therefore, if the Commission’s question is whether to amend the regulatory definition of “gross
revenues” in a manner which is inconsistent with the statute, the Commission does not have the
authority to do so in light of the statutory definition. If the Commission’s question is whether to
use generally accepted accounting principles in calculating “gross revenues” to the extent those
principles are not inconsistent with the statutory definition of “gross revenues,” it would appear
that the regulations already accomplish that purpose.

Should the Commission consider amending this Part to include fingerprint process fees? If so, how
should the Commission consider including fingerprint processing fees?

If the intent is to pay fingerprint fees as an annual fee, where a billing would be made once a year
either by the Commission or the operation and paid in addition to the annual fee, then the
Commission should not amend 514 to include fingerprint process fees. If, however, the intent is to
increase the Commission’s annual fee by a small percentage and eliminate the need to pay fingerprint
fees at all, then Part 514 should be amended to include fingerprint process fees.

Should the Commission include a requirement for it to review fingerprint processing costs on an
annual basis and, if necessary, adjust the fingerprint processing fee accordingly?

The Commission should review and adjust fingerprint processing costs on an annual basis. In
addition, it would be a good practice for the Commission to publish all charges as far in advance as
possible. This would facilitate budgeting by Tribes and provide adequate time for comments. The
Commission should consider utilizing a bulletin to set out the process and fees rather than a
regulation; this would enable the Commission to more easily update and revise the process and fees
as needed.

Should the Commission consider a late payment system in lieu of a Notice of Violation (NOV) for
submitting fees late?

If the intent is to reduce the severity of the Commission’s current practice regarding late payments,
then the Commission should implement a late payment system. A Notice of Violation (NOV) should
be used only after the Commission has exhausted other avenues. However, the Commission should
be careful that any change does not result in a more aggressive system. Thus, it is imperative that the