Colorado River Indian Tribe NOV 01-01-MDO

Memorandum Decision and Order -

IN THE MATTER OF )

) NOV/CFA 01-01

COLORADO RIVER INDIAN TRIBES ) 

) May 30, 2002

)

_______________________________________)

MEMORANDUM DECISION AND ORDER 

Appeal to the National Indian Gaming Commission (NIGC or Commission) from a Notice of 

Violation and Proposed Civil Final Assessment issued to the Colorado River Indian Tribes 

(Respondent or Tribe). 

STATEMENT OF THE CASE

On January 23, 2001, the NIGC Chairman issued a Notice of Violation (NOV) to the Tribe. The 

NOV alleged that NIGC representatives had been denied access to the Tribe’s Class III gaming 

records and to areas of the Tribe’s gaming facility where Class III gaming was being conducted.

As the basis for the NOV, the Chairman cited the Indian Gaming Regulatory Act (IGRA) and 

NIGC regulations permitting Commission representatives to enter Indian Gaming premises and 

to have access to records concerning any matters necessary for the Commission to carry out its 

duties. 25 U.S.C. § 2706(b)(4); 25 C.F.R. §§ 571.5-6. The NOV also stated that the NIGC must 

have access to all gaming facilities and records to fulfill its responsibilities under IGRA. 

In an effort to settle the matter, Respondent and NIGC held discussions and exchanged letters in 

which the parties set forth their respective positions regarding the NOV. When the matter was 

not resolved, the Chairman issued a Proposed Civil Fine Assessment (CFA). In turn, Respondent 

appealed both the NOV and the CFA and requested a hearing. The appeals were consolidated at 

the request of the parties.

A preliminary issue identified in Respondent’s appeal was the Commission’s authority to issue 

the regulation establishing the Minimum Internal Control Standards (MICS) (25 C.F.R. Part 542) 

for class III gaming operations. [1] Respondent maintained that the NOV should be vacated 

because the Commission lacked authority under IGRA to issue and enforce the MICS regulation 

as to class III gaming. Respondent argued that, given this lack of authority, the NIGC could not 

conduct an audit of Respondent’s class III gaming activities and could not demand access to 
books and records that relate solely to class III gaming. [2] 

Counsel for the parties notified the recently designated Presiding Official that they had agreed to 

bifurcate the proceedings. The agreement was to have the Presiding Official first issue a 

recommended decision on the legal question of whether NIGC had authority to issue the 

regulation establishing the MICS. If the Commission accepted a recommended decision that 

NIGC lacked statutory authority to promulgate the MICS, the proceeding would be over. If, on 

the other hand, the Commission determined that it possessed the requisite authority, the matter 

would be remanded to the Presiding Official for a second, evidentiary, hearing and 

recommended decision on the fact issue of whether NIGC or Respondent terminated the MICS 

compliance audit. The parties also agreed that if, after the first hearing, the Commission 

determined that it had the requisite authority, that determination would not be a final agency 

action for the purposes of an Administrative Procedure Act (APA) review. Rather, final agency 

action would occur only after the Commission acted on the Presiding Official’s second 

recommended decision on the facts. Letter from Michele F. Mitchell, NIGC Staff Attorney, and

Gwenellen P. Janov, Respondent’s counsel, to Presiding Official Candida S. Steel (October 29, 

2001). [3] 

The Chairman filed his Amended Brief on November 6, 2001. Respondent filed its Response on 

November 9, 2001. The Chairman filed his Reply Brief on December 17, 2001, and Respondent 

filed a Surreply on December 28, 2001. Several amici curiae also filed briefs. [4] The parties 

reached a stipulation concerning facts necessary for resolution of the legal issues. The Presiding 

Official held a hearing for oral argument on the legal issues January 16, 2002. The record as to 

the legal issues was closed on March 19, 2002. The Presiding Official submitted a recommended 

decision (Recommended Decision) to the Commission on May 2, 2002.

RECOMMENDED DECISION OF THE PRESIDING OFFICIAL

In her Recommended Decision, the Presiding Official concludes that the NIGC did not have 

authority under IGRA to impose the MICS on class III gaming and, therefore, that Respondent 

did not refuse entry to NIGC personnel who were carrying out their duties under IGRA. She 

recommends that the NOV and Proposed CFA be dismissed. Recommended Decision at 33. The 

Commission reverses the Recommended Decision for the reasons stated herein.

DISCUSSION

The NOV at issue in this appeal concerns an alleged refusal by tribal officials to allow NIGC 

representatives the access necessary to audit class III gaming records and to observe class III 

gaming activities and related cash handling procedures. We address Respondent’s challenges to 

the Commission’s authority to promulgate the MICS, to conduct audits, and to enforce the 

MICS. 

1. Authority to Promulgate the MICS

Respondent argues that a threshold legal issue is whether NIGC had statutory authority to 

promulgate class III MICS. The Commission has already decided the question. In January 1999, 
the Commission determined that it had statutory authority to promulgate class III MICS when it 

published a regulation adopting standards for both class II and class III gaming as a final rule. 

Citing several provisions of IGRA, the Commission stated in the rule’s preamble, “The 

Commission believes that it does have the authority to promulgate this final rule.... [T]he 

Commission’s promulgation of MICS is consistent with its responsibilities as the federal 

regulator of Indian gaming.” 64 Fed. Reg. 509 (Jan. 5, 1999). 

The Commission reaffirms its conviction that it had authority to promulgate the MICS as to class 

III gaming. We address the question herein only to reassert our 1999 determination.

An examination of the Commission’s authority begins with IGRA, the general purposes of which 

are:

(2) to provide a statutory basis for the regulation of gaming by an Indian Tribe adequate ...to 

ensure that the Indian tribe is the primary beneficiary of the gaming operation, and to assure that 

gaming is conducted fairly and honestly by both operator and players; and

(3) to declare that the establishment of independent Federal regulatory authority, Federal 

standards for gaming, and the establishment of a National Indian Gaming Commission are 

necessary to meet congressional concerns regarding gaming and to protect such gaming as a 

means of generating tribal revenue.

25 U.S.C. § 2702. 

IGRA does not contain specific direction to the Commission to adopt and publish minimum 

internal control standards. In the absence of this specific direction, the question becomes whether 

a reasonable interpretation of IGRA would allow the Commission to promulgate such standards. 

An examination of IGRA indicates that the Commission’s interpretation is reasonable.

First, IGRA provides that the Commission has the authority to promulgate regulations and 

guidelines “as it deems appropriate to implement the provisions of this chapter.” 25 U.S.C. 

2706(b)(10). This authority is not limited to class II gaming but extends also to class III gaming. 

The Commission believed, and continues to believe, that it was appropriate and necessary to 

promulgate regulations on MICS to implement the purposes of IGRA. The regulations help 

ensure that the Indian tribe is the primary beneficiary of the gaming operation and that both the 

operator and the player conduct gaming fairly and honestly. 

The MICS, then, represent the Commission’s interpretation of its oversight role and its charter to 

protect tribal gaming as a means of generating tribal revenue. The standards promote IGRA’s 

purposes by protecting tribal assets in order to support tribal economic development and selfsufficiency. They also help ensure that a tribe is the primary beneficiary of the gaming operation 

and protect gaming as a means of tribal gaming revenue. [5] Internal controls are the primary 

procedures used to protect the integrity of casino funds and games and are a vitally important 

part of properly regulated gaming. Inherent in gaming operations are problems of customer and 

employee access to cash, unrecorded cash transactions at table games, questions of fairness of 

games, and the threat of collusion to circumvent controls. Internal control standards are therefore 
commonplace in the gaming industry. 

In short, internal controls over a gaming operation’s revenue stream are necessary to protect the 

revenue. Indian gaming does not serve its purpose of benefiting tribes if tribes cannot account for 

the tribe’s gaming assets. Issuance of the MICS, and conducting audits consistent with the 

MICS, are reasonable and necessary components of the regulation and oversight of Indian 

gaming.

2. Authority to Conduct Audits

The Commission believes also that it has the necessary statutory authority to audit class III

gaming operations. That authority derives from several sources. First, it derives from IGRA’s 

specific provision that:

(b) The Commission—

...

(4) may demand access to and inspect, examine, photocopy, and audit all papers, books, and 

records respecting gross revenues of class II gaming conducted on Indian lands and any other 

matters necessary to carry out the duties of the Commission under this chapter (emphasis added).

25 U.S.C. § 2706. 

The “duties of the Commission” are addressed throughout IGRA. The Commission’s authority to 

have access to and audit class III operations is consistent with its duties created by the general 

purposes of IGRA and in the variety of Commission duties specifically established both as to 

class II and to class III gaming activities. As to class III gaming, IGRA specifically gives NIGC 

authority to:

Approve or disapprove class III gaming ordinances (25 U.S.C. 2710(d)(1)(A)); 

Approve or disapprove management contracts for the operation of class III gaming (25 U.S.C. 

2710(d)(9)); and 

Collect fees on class III gaming revenue (25 U.S.C. 2717(a)(1)). 

Regardless of the class of gaming, IGRA gives NIGC authority to:

Issue civil fines (25 U.S.C. 2713(a)(1)); 

Issue notices of violations (25 U.S.C. 2713(a)(3); and 

Issue temporary and permanent closure orders (25 U.S.C. 2713(b)(1)). 

These provisions indicate Congress’s intention that the Commission have both broad and specific 

duties as to class III gaming.

The language and structure of the statute thus do not support the Presiding Official’s statement 

that “the NIGC has no direct authority, review or regulatory, over the conduct of class III 

gaming.” Recommended Decision at 16. Clearly, NIGC does have direct authority over aspects 

of class III gaming: IGRA grants to the NIGC broad enforcement powers to ensure continuing 
compliance with the tribal gaming ordinances approved by the Chairman or the Commission, [6] 

as well as regulations the Commission may adopt under the authority given to it by IGRA. The 

Commission also has broad subpoena and deposition authority, and broad investigative authority. 

See 25 U.S.C. §§ 2713, 2715, and 2716. 

Apart from issuing the MICS, the Commission’s oversight role includes the responsibility of 

auditing tribal gaming operations, including class III gaming, and evaluating gaming records 

according to its internal control standards in order to determine whether tribal assets are being 

protected. [7] Conducting audits that evaluate whether a tribal gaming operation—class III as 

well as class II—functions under an effective internal control system is a proper exercise of 

Commission oversight responsibilities to protect the tribal gaming operation from fraud and loss 

of gaming revenue. Access to the gaming premises and to the operations’ records is thus, as 

alleged in the Chairman’s NOV and in IGRA, “necessary to carry out the duties of the 

Commission under this chapter [IGRA].” NIGC’s attempt to access and audit Respondent’s class 

III gaming operation was therefore consistent with IGRA’s purposes and with the range of 

authority that IGRA grants NIGC over class III gaming.

3. Authority to Enforce the MICS

Respondent argues that NIGC does not have authority to “enforce” the MICS as to class III 

gaming. This case, however, is not a MICS enforcement case; the NOV did not allege a violation 

of the MICS adopted by the Commission or by the Tribe’s regulation. Accordingly, this decision 

does not address the ability of the Commission to “enforce” MICS per se. Instead, this case 

concerns access by NIGC representatives to conduct an audit.

Audits are a useful tool for the NIGC and for tribal gaming regulators. In fact, NIGC 

representatives have performed several audits for tribes that involve both class II and class III 

gaming operations. The results of these audits are shared with tribal leaders and tribal gaming 

regulators. Except in rare situations, audits are scheduled in advance with the cooperation of the 

tribal gaming facility. In the event deficiencies are found, NIGC representatives notify the tribe 

and allow a reasonable period of time for resolution. Unless the deficiencies create an immediate 

and severe threat to the integrity of the gaming operation, NIGC will work with the tribe and 

tribal gaming regulators to remedy the deficiencies. The NIGC would contemplate enforcement 

action only if a tribe failed to address noted deficiencies within a reasonable period of time. This 

process has led to improvements in the internal control systems for the tribal gaming operations 

that were audited. None has resulted in a notice of violation.

ORDER

For the reasons indicated, the recommended decision of the Presiding Official is reversed on the 

specified legal questions set forth above. The Commission concludes, as it has previously 

concluded, that it has the requisite authority to establish MICS for both class II and class III 

tribal gaming operations. The Commission also concludes it has the requisite authority to 

conduct a MICS audit of class III gaming activities in furtherance of its oversight 

responsibilities.
The case is remanded to the Presiding Official for a hearing on the facts and other pertinent legal 

issues. 

May 30, 2002

_______________

Date

/s/ Montie R. Deer /s/ Teresa Poust

________________________ ________________________

Montie R. Deer Teresa Poust

Chairman Commissioner

Commissioner Elizabeth Homer did not participate in the Commission’s decision.

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[1] “Class II gaming” and “class III gaming” are terms defined in IGRA. “Class II” gaming 

includes bingo, games similar to bingo, and card games that are not prohibited by the laws of the 

state in which a tribe conducts gaming. The term does include not banking card games such as 

blackjack or “electronic or electromechanical facsimiles of any game of chance or slot machines 

of any kind.” “Class III gaming” means all form of gaming that are not class I or class II. “Class 

I gaming” involves traditional and social games played by tribes and is not the subject of MICS. 

See 25 U.S.C. § 2703(6)-(8).

[2] Respondent does not challenge the authority of the Commission to issue MICS that pertain to 

class II gaming. 

[3] While not wishing to second-guess counsel for the parties at this juncture, the Commission 

notes that bifurcation of the hearing, with a separate submission of the question of NIGC’s 

authority to issue class III MICS, has resulted in a delay in the final disposition of this matter. 

The Commission discourages the use of this bifurcated procedure except in the unusual case in 

which a legal issue, not previously decided, controls the result. In this case, factual questions are 

also important to the disposition.

[4] Amici Curiae were: the National Indian Gaming Association; Oneida Tribe of Indians of 

Wisconsin; and Lac Vieux Desert Band of Lake Superior Chippewa Indians, Tule River Tribe, 

Spokane Indian Tribe, Shoshone-Bannock Tribe, Santee Sioux Tribe of Nebraska, Shoalwater 

Bay, and Coquille Indian Tribe (one brief).

[5] The standards set out in the Commission regulation are minimum standards. The Commission 
recognizes that Indian gaming is a diverse industry. The Commission’s intent in promulgating 

the MICS was that tribes would develop their own internal control standards to addresses their 

particular needs and circumstances, not that tribes would simply adopt the MICS verbatim.

[6] The Commission disagrees with the presiding official’s characterization of the duties of the 

Chairman and the Commission to approve tribal gaming ordinances as “ministerial.” 

Recommended Decision at 16. These approval decisions involve the discretion to determine 

whether a particular ordinance meets the requirements specified in IGRA. 25 U.S.C. § 2710(b) 

and (d). 

[7] The presiding official incorrectly states the proffered position of the Chairman regarding the 

Commission’s ability to regulate within the ambit of class III gaming. The Commission does not 

assert that its role is to “regulate the day-to-day minutia of tribal Class III gaming operations.” 

Recommended Decision at 12. To the contrary, the Commission’s position is that IGRA assigns 

the Commission a broad oversight and regulatory role over the conduct of Indian gaming 

generally.