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Copyright 1996 Federal Information Systems Corporation 

Federal News Service 

OCTOBER 2, 1996, WEDNESDAY 

SECTION: IN THE NEWS 

LENGTH: 4218 words 

HEADLINE: PREPARED TESTIMONY OF 

CHAIRMAN HAROLD MONTEAU 

OF THE NATIONAL INDIAN GAMING COMMISSION 

ACCOMPANIED BY 

ASSOCIATE COMMISSIONER PHILIP HOGEN 

AND ASSOCIATE COMMISSIONER THOMAS FOLEY 

BEFORE THE SENATE COMMITTEE ON INDIAN AFFAIRS 

BODY: 

Mr. Chairman, members of the Committee, my name is Harold Monteau, I am Chairman of the National Indian Gaming Commission. With me today on the panel are Associate Commissioners Tom 

Foley and Philip Hogen. This a particularly historic hearing today. It is the first Senate Committee 
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PREPARED TESTIMONY OFCHAIRMAN HAROLD MONTEAUOF THE NATIONAL INDIAN GAMING 

COMMISSIONACCOMPANIED BYASSOCIATE COMMISSIONER PHILIP HOGENAND ASSOCIATE 

COMMISSIONER THOMAS FOLEYBEFORE THE SENATE COMMITTEE 

oversight hearing of the National Indian Gaming Commission (NIGC) since its establishment by 

Congress under the Indian Gaming Regulatory Act of 1988. 

BACKGROUND 

To assist you in understanding the NIGC, let me briefly describe the history of the passage of the 

Indian Gaming Regulatory Act of 1988, and the creation of the Commission under that Act. Before 

and after the United States Supreme Court decision of 1987, in California v. Cabazon Band of MiSsion Indians (which found that Indian tribes located in States that otherwise allow gaming have a 

right to conduct gaming on Indian lands unhindered by State regulation) several versions of Indian 

gaming legislation were considered by Congress to address the issues surrounding Indian gaming. 

In an attempt to balance the competing interests of the Indian tribes and the States, Congress, 

through the Indian Gaming Regulatory Act, set up the jurisdictional framework which presently 

governs Indian gaming. 

The IGRA classifies Indian gaming into three categories and designates the governmental entity or 

entities with regulatory authority for each category. Class I gaming is gaming conducted on Indian 

lands at traditional ceremonies and celebrations. Regulatory jurisdiction for class I is retained solely 

in the Indian tribe. Class II gaming includes bingo, bingo related games, pull-tabs, lotto, punchboards, tip jars, instant bingo and other games similar to bingo and certain non-banking card games. 

Primary jurisdiction for regulatory control of these class II gaming activities is retained by the Indian tribes. The National Indian Gaming Commission, however, also has certain enforcement, approval, and oversight responsibilities for class II gaming as further discussed in this testimony. 

Class III gaming is all forms of gaming that are not class I or II. The regulation of Class III gaming 

is primarily governed by the Tribal-State compacting process set out in the IGRA. 

ENFORCEMENT 
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PREPARED TESTIMONY OFCHAIRMAN HAROLD MONTEAUOF THE NATIONAL INDIAN GAMING 

COMMISSIONACCOMPANIED BYASSOCIATE COMMISSIONER PHILIP HOGENAND ASSOCIATE 

COMMISSIONER THOMAS FOLEYBEFORE THE SENATE COMMITTEE 

Congress delegated certain enforcement authority to the Commission to take actions against violations of the Indian Gaming Regulatory Act, the Commission's regulations and violations of the 

tribal ordinances which are approved by the Commission. Violations are addressed through the 

Commission's authority to issue closure orders and impose and collect civil fines. 

In contrast to the early years of the Commission, during which regulatory development and management contract approvalwere necessarily emphasized, during my tenure at the Commission, we 

have turned our focus to enforcement activities. This is the result of the tremendous growth of Indian gaming in recent years and the natural evolution of the NIGC from its regulation promulgation 

phase to one of monitoring, compliance and enforcement. 

When the IGRA was enacted, it was not contemplated that Indian gaming would be so successful 

and that it would grow so quickly. However, the uncertainties of the law pre-IGRA were somewhat 

resolved by passage of the Act, resulting in tribes who had been uncertain about entering into the 

gaming arena deciding to begin gaming operations. Today, there are 184 Indian tribes with 257 

gaming facilities located on their lands. This has caused an increase in regulatory expectations of 

the Commission by the both the public and private sectors without a concomitant increase in the 

NIGC's budget, authority or staff. 

Consequently, I have reorganized the Commission with a greater emphasis of NIGC resources on 

enforcement responsibilities. Until recently, the Commission had field representatives who spent the 

majority of their time performing background investigations or serving as liaisons. Now I have developed a strong Enforcement Division consisting of the Director of Enforcement and field investigators. The largest percentage of the NIGC staff is now under the authority of the Director of Enforcement. Consequently, during the last nine months the Commission has opened nineteen (19) 

new enforcement matters. This number far exceeds the total number of enforcement matters opened 
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PREPARED TESTIMONY OFCHAIRMAN HAROLD MONTEAUOF THE NATIONAL INDIAN GAMING 

COMMISSIONACCOMPANIED BYASSOCIATE COMMISSIONER PHILIP HOGENAND ASSOCIATE 

COMMISSIONER THOMAS FOLEYBEFORE THE SENATE COMMITTEE 

in the previous three years of the Commission's operation. The enforcement matters address a wide 

range of issues including gaming facilities operating without a tribal license, gaming operations failing to perform background investigations on key employees and primary management officials, facilities engaging in illegal pull-tab sales, operating gaming on lands which do not meet the Act's 

definition of Indian lands, operating class III games without a Tribal-State compact, management by 

contractors without approved management contracts, individually-owned gaming operations failing 

to make the required payments to the tribe which licensed them, and gaming facilities maintained in 

a manner which could threaten the health and safety of the public. 

As an example of the enforcement actions we have taken, we can look to the State of California and 

the many enforcement actions we have pursued there. In December 1994, The NIGC disapproved a 

management contract between the Morongo Band and Great Western Casino on the grounds that the 

contractor was leasing class III gaming devices to the casino and obtaining excessive gaming revenues through this arrangement. That action was stayed by federal court order because of a pending 

parallel criminal proceeding. That criminal action is still pending. In another case, the NIGC 

brought an action against American Casino Enterprises for operating a gaming operation without an 

approved management contract. As a result of that action, the companypaid a fine of $500,000. Recently, the Commission issued a notice of violation to the Mooretown Rancheria for operating without a gaming ordinance. This action resulted in a $30,000 fine. The Commission also issued three 

other notices of violation for operating without a gaming ordinance, failing to conduct background 

investigations, and operating in a manner which could threaten the health and safety of the public. 

In one of the closure actions in California, violence had erupted between rival factions over control 

of the tribal government and over a small gaming facility on the Elem Rancheria in northern California. I believed that the closure of the facility would prevent further injury and harm to the 
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PREPARED TESTIMONY OFCHAIRMAN HAROLD MONTEAUOF THE NATIONAL INDIAN GAMING 

COMMISSIONACCOMPANIED BYASSOCIATE COMMISSIONER PHILIP HOGENAND ASSOCIATE 

COMMISSIONER THOMAS FOLEYBEFORE THE SENATE COMMITTEE 

Rancheria membership and provide some measure of stability on the Rancheria, while the issues 

surrounding the control of tribal government were resolved. I also called upon the Bureau of Indian 

Affairs Law Enforcement program to lend assistance to local law enforcement authorities in diffusing the situation. They responded overnight and further violence was abated. 

Our enforcement actions in California have been complicated by two related cases which affect 

gaming in that state. One of these cases is Rumsey Rancheria v. Wilson, a case currently on appeal 

to the 9th Circuit Court of Appeals, and Western-Telecon v. California State Lottery , a case recently decided by the California Supreme Court. Both of these cases involve the question of the 

scope of gaming authorized in the State of California. The Rumsey Court has stayed its order until it 

has reviewed the briefs filed with the Court following the WesternTelecon decision. 

 While these cases have been pending in California, the United States Attorneys have elected not to 

prosecute tribal gaming operations for violations of the Gambling Devices Act (Johnson Act). 

In five situations the Commission found it necessary to exercise its most severe penalty, closure of a 

gaming facility. In other situations in Minnesota, Texas, Oklahoma, Washington, New York, North 

Dakota, California, Idaho, and Wisconsin, the NIGC has issued closure warnings in order to bring 

operators into compliance. 

In another closure action, the Santee Sioux Tribe of Nebraska was offering class III gaming without 

an approved Tribal-State compact. The Santee had been in litigation with the State of Nebraska. 

However, this litigation was dismissed after the Supreme Court decision in Seminole. 

The Santee action demonstrates the difficulty in bringing what appeared to be a straight-forward 

enforcement action and having a closure order enforced. The Santee enforcement action commenced following Commission discussions with the United States Attorney for the District of Ne-
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PREPARED TESTIMONY OFCHAIRMAN HAROLD MONTEAUOF THE NATIONAL INDIAN GAMING 

COMMISSIONACCOMPANIED BYASSOCIATE COMMISSIONER PHILIP HOGENAND ASSOCIATE 

COMMISSIONER THOMAS FOLEYBEFORE THE SENATE COMMITTEE 

braska. Thereafter, in April 1996, I issued a Notice of Violation and Order of Temporary Closure to 

the Santee Sioux Tribe for operating a class III gaming operation without a Tribal-State compact. 

Upon the issuance of the closure order, the gaming operation was required to cease operating. The 

Tribe requested an expedited hearing asprovided by NIGC regulations. At that hearing, the Tribe 

presented evidence of the failure of the Governor of the State of Nebraska to negotiate a compact in 

good faith and the poor economic conditions of the reservation. During this hearing process the 

Chairman issued a temporary stay of the closure order. 

On May 1, I issued a Revised Temporary Closure Order and on May 2, I determined that the equitable arguments put forth by the Tribe failed to provide an adequate legal basis for rescission of the 

closure order. I ordered the gaming operation closed, and the Santee Sioux Tribe closed the facility 

on May 6, 1996. 

The Tribe then filed an appeal to the full Commission. During the pendency of the appeal, the Tribe 

filed an injunction action against the NIGC and other federal agencies and officials in the United 

States District Court for the District of Nebraska and reopened its casino in violation of the temporary closure order. After consultation with the United States Attorney for the District of Nebraska, 

the United States filed its own action against the Santee Sioux Tribe seeking to enjoin the Tribe 

from operating its class III casino in violation of the closure order. On July 10th, the Federal court 

dismissed both the Tribal action and the Federal closure action. The Tribe's action was dismissed 

for failure to exhaust the administrative remedies provided by the IGRA and NIGC regulations, and 

the federal action was dismissed on the grounds that the United States was not entitled to civil injunctive relief to enforce the closure order. The United States has filed a motion for reconsideration 

of the Court's dismissal of the federal enforcement action. This motion is currently pending before 

the court. The Tribe continues to operate the facility during the pendency of the federal action. This 
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PREPARED TESTIMONY OFCHAIRMAN HAROLD MONTEAUOF THE NATIONAL INDIAN GAMING 

COMMISSIONACCOMPANIED BYASSOCIATE COMMISSIONER PHILIP HOGENAND ASSOCIATE 

COMMISSIONER THOMAS FOLEYBEFORE THE SENATE COMMITTEE 

particular case illustrates the difficulties which can be encountered in a closure action. Bringing 

such an action severely impacts the limited resources of the Commission. The Santee closure action 

required the work of a field investigator, the Director of Enforcement, and three attorneys to handle 

the administrative action and to assist the United States Attorney in the judicial proceedings. Therefore, the Commission has had to be mindful of its limited resources and staff when it considers its 

enforcement priorities. Protracted litigation is assured in almost all such situations. 

In addition to direct enforcement actions, the Commission also seeks voluntary compliance in a variety of ways. It issues bulletins and letters notifying tribes and other gaming entities of their responsibilities under IGRA, such as the requirement to provide the Commission with audits, the requirement that banking card games can be played only under a tribal-state compact, and the requirement to allow the play of pull-tabs only in the same location as bingo. We provide advisory 

opinions on whether games fall within the class II or class III category and issue letters to parties if 

contracts submitted to the NIGC include prohibited gaming activities. All of these approaches encourage voluntary compliance as well as assist tribal gaming commissions in theircompliance efforts. 

The NIGC also relies upon both formal and informal networking to carry out its responsibilities. We 

work with tribal gaming commissions and tribal law enforcement as well as state gaming commissions and state law enforcement where the states are involved pursuant to a tribal- state compact. 

The NIGC also utilizes and cooperates with many agencies within the federal government including 

the individual U.S. Attorneys around the country, the FBI, the U.S. Marshals, the Department of the 

Treasury, the IRS, the Justice Department (headquarters), the Solicitor General, the Department of 

the Interior and the Bureau of Indian Affairs. We have also participated in conferences with state 

Governors and Attorneys General to discuss their issues. 
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PREPARED TESTIMONY OFCHAIRMAN HAROLD MONTEAUOF THE NATIONAL INDIAN GAMING 

COMMISSIONACCOMPANIED BYASSOCIATE COMMISSIONER PHILIP HOGENAND ASSOCIATE 

COMMISSIONER THOMAS FOLEYBEFORE THE SENATE COMMITTEE 

TRIBAL BACKGROUND INVESTIGATIONS AND MANAGEMENT CONTRACTS 

 Under the IGRA the Commission is responsible for approving tribal gaming ordinances and processing tribal background investigations of gaming employees. In fulfilling these obligations, the 

Commission has approved 227 gaming ordinances for 221 tribes. As part of the background investigations, tribes must complete a criminal history check of each key employee and primary management official by requiring the fingerprinting of each employee required to undergo a background 

investigation. One hundred thirty-four (134) Indian tribes have entered into Memoranda of Understanding with the NIGC for the purpose of processing fingerprint cards. In addition, 84 Indian tribes 

are currently submitting fingerprint cards for processing. As a result, the NIGC processes monthly 

approximately 1200-1300 fingerprint cards. The Commission currently has over 36,000 records on 

individuals in its database. 

In an effort to cope with the significant volume of tribal background investigations, the Commission 

has recently engaged in a pilot project to streamline the filing of applications and reports. This project will be tested for the next six months and will involve 20 Indian tribes who are in full compliance with the background investigation requirements. Under this pilot project, each participating 

tribe will be allowed to maintain on-site employee applications for tribal licensing rather than submitting those applications to the NIGC. Those participating tribes will still be required to submit to 

the NIGC a copy of the "investigative report" and "suitability determination", along with a list of all 

employees whose background investigations have been completed and for whom a suitability determination for licensing has been made. The fingerprint cards will continue to be processed 

through the NIGC or the states. 

There exists a general misconception that Congress vested the NIGC with the responsibility for 

conducting background investigations on all persons and entities involved in management contracts 
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PREPARED TESTIMONY OFCHAIRMAN HAROLD MONTEAUOF THE NATIONAL INDIAN GAMING 

COMMISSIONACCOMPANIED BYASSOCIATE COMMISSIONER PHILIP HOGENAND ASSOCIATE 

COMMISSIONER THOMAS FOLEYBEFORE THE SENATE COMMITTEE 

and in Indian gaming generally. However, under thepresent statutory scheme Congress has vested 

this responsibility to a large extent in the tribes and the states. While the NIGC reviews and comments on tribal investigations and conducts investigations of class II contractors, it was anticipated 

in the IGRA that states would conduct the background investigations for Class III gaming. 

Moreover, under Section 2710d(9) of the Act, the Commission cannot charge a fee to the contractors for the purpose of conducting a background investigation when the contract is for class III only. 

These limitations are consistent with the overall scheme of the Act, that is class III gaming, including background investigations, is generally controlled by a TribalState compact. The limitations do, 

however, create the potential of inconsistent results when compared with Class II management contract approval authority. 

The Commission also has the responsibility of approving management contracts for both class II 

and III gaming on Indian lands. Prior to the establishment of the NIGC and it becoming operational 

in 1993, the Bureau of Indian Affairs was vested with responsibility of approving management contracts. Beginning in February 1992, the Commission assumed the responsibility for management 

contract approval. Since then the Commission has approved 22 contracts and disapproved 16 contracts. The Commission currently has 22 management contract submittals before it for review. In 

addition, since 1992 the Commission has received 14 amendments to management contracts. The 

Commission has approved 7 amendments, disapproved 2 amendments, and 2 have been withdrawn. 

The Commission is frequently asked to review other contracts affecting the operation of class II and 

III gaming. These contracts include financing agreements, lease agreements, employment agreements, consulting agreements, slot-route agreements and employee lease agreements. 
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PREPARED TESTIMONY OFCHAIRMAN HAROLD MONTEAUOF THE NATIONAL INDIAN GAMING 

COMMISSIONACCOMPANIED BYASSOCIATE COMMISSIONER PHILIP HOGENAND ASSOCIATE 

COMMISSIONER THOMAS FOLEYBEFORE THE SENATE COMMITTEE 

 All contracts are reviewed to see if they constitute a "management contract", thereby requiring 

Commission approval. In addition, those agreements which are not "management contracts" are 

forwarded to the Bureau of Indian Affairs for review as to the applicability of 25 U.S.C. S 81. The 

Commission is presently reviewing its policy with regard to the so-called "slot-route" or "machineleasing agreements" because of the potential for abuse of these types of agreements. It may be 

relatively easy to "manage" the gaming operations under the guise of these types of agreements. 

The anticipated budget for the Commission for Fiscal Year 1997 is 4.22 million dollars. Of this 

amount, only 1 million dollars is from appropriated dollars. The rest of the funds comes from fees 

paid by the tribes and contractors. Under the provisions of the IGRA, the Commission is authorized 

to receive annual appropriations from Congress of 1.5 million dollars. Inaddition to the appropriations, the Commission is authorized to impose annual assessments of no less than 0.5% of gross 

revenues of the first 1.5 million dollars of gross revenues on class II gaming operations. Class III, 

which generates far greater revenues than class II gaming, is not assessed because such assessments 

are not authorized in the IGRA. The Commission spends the largest part of its resources addressing 

class III related or class II and III combined activities despite the fact that only class II operations 

are assessed. 

When the Commission was first established, it promulgated regulations to implement the class II fee 

assessment provisions of the IGRA and began collecting fees in 1991. These revenues were deposited with the United States Treasury for future use by the Commission. The Commission sought and 

obtained an amendment to the IGRA (codified at 25 U.S.C. S 2717a) authorizing the Commission 

to carry over unused fee assessments. For the first two years, the NIGC built up a surplus of fees. 

However, since fiscal year 1993, the Commission has been using the surplus fees to supplement its 
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PREPARED TESTIMONY OFCHAIRMAN HAROLD MONTEAUOF THE NATIONAL INDIAN GAMING 

COMMISSIONACCOMPANIED BYASSOCIATE COMMISSIONER PHILIP HOGENAND ASSOCIATE 

COMMISSIONER THOMAS FOLEYBEFORE THE SENATE COMMITTEE 

budget. Without these surplus fees, the Commission would have been limited to operating on a 

budget of 2.5 million dollars annually. 

The problem for the Commission is that the before mentioned carry-over fee assessment funds 

could be exhausted during fiscal year 1998. 

There are approximately 257 Indian gaming operations in the United States. Although the role of 

the Commission is not that of day-to-day regulation of these gaming facilities, the IGRA does vest 

oversight authority in the Commission over these operations. Even when the role of the tribes and 

the states is taken into account for class III regulation, the Commission's staff is not large enough to 

adequately meet its current statutory obligations. 

By way of comparison, the State of Arizona exercises regulatory function over 17 gaming operations with a budget of 4 million dollars. The State of Nevada regulates 400 operations with a budget 

of 20 million dollars. Clearly, the Commission needs some relief from the present cap imposed on it 

by the Act. 

NEW INITIATIVES 

In addition to the overall reorganization of the Commission and the background investigation pilot 

project, the Commission has started a variety of new initiatives. Most importantly, we are now emphasizing our enforcement activities. This is probably the most important step we can take as a 

regulatory agency. We are increasing and improving our records and physical security and improving our information storage and retrieval capabilities. As Chairman, I am delegating certain authority to others and seeking to streamline our processes to eliminate bureaucratic obstacles and to place 

more responsibility in the staff and the other Commissioners. Commissioner Hogen will also presenttestimony on the role of the Associate Commissioners. Finally, the Commission is proceeding 

to contract with outside agencies and the private sector to provide services which our small staff 
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PREPARED TESTIMONY OFCHAIRMAN HAROLD MONTEAUOF THE NATIONAL INDIAN GAMING 

COMMISSIONACCOMPANIED BYASSOCIATE COMMISSIONER PHILIP HOGENAND ASSOCIATE 

COMMISSIONER THOMAS FOLEYBEFORE THE SENATE COMMITTEE 

cannot provide. For example, the Office of Personnel Management will now be conducting large 

segments of our background investigations, and a private contractor will provide the necessary 

technical expertise for environmental and health and safety compliance. We are also exploring the 

use of contractors to compile background information that is a matter of public record. 

LEGISLATIVE AMENDMENTS 

The Commission is on record with this Committee in support of legislation proposed by the Committee (S.487) which would establish Federal minimum regulatory standards. The Commission 

again reaffirms its support for this concept. These standards proposed in the legislation will provide 

uniformity while still recognizing and supporting the concept that primary regulation for class II 

gaming remains with the tribes and, in the case where a Tribal-State compact is in place, with the 

tribe and the state. Although the IGRA limits the scope of Commission involvement in class III 

gaming activities, the Commission has quite necessarily found itself dedicating more and more of 

its time and resources to activities involving this class of gaming. For example, the Commission has 

conducted enforcement actions against contractors that were managing class III facilities without an 

approved "management contract." These kinds of enforcement actions are time consuming and expensive to carry out. In addition to the specific example just referenced, the majority of the Commission enforcement actions discussed in this testimony concern class III operations. As a consequence, the Commission supports the provision in S.487 that would authorize the NIGC to collect 

fees from class III gaming revenues and increase the cap to twenty-five million dollars. 

Under the IGRA, the NIGC is only authorized to conduct a background investigation on a person or 

entity with a financial interest in a management contract. The NIGC has informed the Committee in 

previous hearings of our support for expanding the Commission's authority to scrutinize the background of any person or entity with a financial interest in a gaming related agreement with an Indian 
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PREPARED TESTIMONY OFCHAIRMAN HAROLD MONTEAUOF THE NATIONAL INDIAN GAMING 

COMMISSIONACCOMPANIED BYASSOCIATE COMMISSIONER PHILIP HOGENAND ASSOCIATE 

COMMISSIONER THOMAS FOLEYBEFORE THE SENATE COMMITTEE 

tribe. S.487 would vest the Commission with that authority. However, the NIGC offers to work with 

the Committee in arriving at language that would insure that Federal minimum standards for background checks are adhered to and would give the NIGC authority to step in when violations occur. 

This could be done without duplication of tribal and tribal-state background investigations, unless 

the NIGC found it necessary to conduct anindependent federal background check. 

The NIGC should be given the authority to conduct background investigations and suitability determinations in the "precertification" process of bonafide management contractors. However, there 

is a concern that to also require NIGC approval or pre- certification for every gaming related contractor or vendor would in most instances duplicate the corresponding efforts of the tribes and the 

states. Moreover, it would tie up the resources of the NIGC which would be better used for monitoring, compliance and enforcement of Federal minimum standards. 

There should, however, be a filing requirement for tribal and tribal- state background checks with 

the NIGC. Also, the NIGC should have the authority to deny the individuals participation in Indian 

gaming based on information submitted or on the NIGC's own information. The NIGC, where good 

cause exists, should conduct its own background investigation and make its own suitability determination. 

The Commission supports the new requirements for Commissioners but encourages the Committee 

to re-examine the deletion of the requirement that two of the Commissioners should be tribal members. It is important to remember that the distinction for requiring tribal membership for two of the 

three Commissioners is based on the political distinction of Indian tribal governments pursuant to 

treaties with the United States, the Constitution of the United States and Federal statutes. It is not a 

race-based distinction. 
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PREPARED TESTIMONY OFCHAIRMAN HAROLD MONTEAUOF THE NATIONAL INDIAN GAMING 

COMMISSIONACCOMPANIED BYASSOCIATE COMMISSIONER PHILIP HOGENAND ASSOCIATE 

COMMISSIONER THOMAS FOLEYBEFORE THE SENATE COMMITTEE 

The Commission also supports the amendment that requires Presidential appointment and Senate 

confirmation of all Commissioners. The Commission likewise supports the increased authority 

vested in the Associate Commissioners viz-a-viz the Chairman. 

This concludes my prepared remarks. I would be happy to answer any questions from the Committee. 

 END 

LOAD-DATE: October 3, 1996