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Copyright 2006 Congressional Quarterly, Inc. All Rights Reserved. 

CQ Congressional Testimony 

February 8, 2006 Wednesday 

SECTION: CAPITOL HILL HEARING TESTIMONY 

LENGTH: 3277 words 

COMMITTEE: SENATE INDIAN AFFAIRS 

HEADLINE: INDIAN TRIBES AND THE FEDERAL ELECTION CAMPAIGN ACT

TESTIMONY-BY: PHILIP N. HOGEN, CHAIRMAN 

AFFILIATION: NATIONAL INDIAN GAMING COMMISSION 

BODY: 

Statement of Philip N. Hogen Chairman National Indian Gaming Commission 

Committee on Senate Indian Affairs 
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February 8, 2006 

Good morning Chairman McCain, Vice-Chairman Dorgan and members of the Committee. I am 

Philip Hogen, Chairman of the National Indian Gaming Commission. Currently the NIGC consists 

of two members, Associate Commissioner Cloyce Choney and myself. Mr. Choney is in Oklahoma 

recuperating from surgery and cannot be here today but extends his best wishes to the Committee. 

I understand the Committee seeks to gather information, generally about lobbying fees and political contributions paid by tribal governments and specifically about whether tribal revenues generated by Indian gaming are or can be used for such purposes; what laws, regulations and procedures are in place that would bear on such use of tribal gaming revenues; and the administration of 

such statutes, regulations or policies. 

HISTORICAL SUMMARY 

To put all of that information in proper context, I want to briefly discuss the history, nature and 

extent of the Indian gaming industry. In the 1980s, and perhaps even earlier, a number of tribes in 

pursuit of economic development opportunities for depressed tribal reservation communities and 

economies turned to high-stakes bingo games as a means of generating tribal revenues. Due to good 

tribal management, promotion, and favorable market opportunities, many of these high-stakes bingo 

operations thrived and prospered. Some states were perplexed by this gaming activity in their midst, 

and questions were raised regarding the legality of such tribal activity when that activity did not 

comport with those states' laws, regulations or limitations governing the play of bingo. 

Although in 1953, Public Law 280 was passed conferring state criminal and civil jurisdiction 

over Indians in Indian country in a number of states, the extent and nature of that jurisdiction 

evolved in the courts. The doctrine that resulted was that the civil jurisdiction conveyed by Public 

Law 280 was not as broad as some states had imagined, and it was held only to provide tribes and 
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Indians with access to states' civil court systems on tribal lands. It did not extend the full regulatory 

power of states to Indians in Indian country, nor did it permit state taxation of Indians in Indian 

country. 

When high-stakes tribal bingo games were challenged as being in violation of state law, including criminal statutes which limited the scope of the play of bingo (hours of operation, prize and pot 

limits, etc.), tribes defended on the grounds that those states did not criminally prohibit bingo. 

Rather, states regulated that activity, and hence tribes were free to similarly permit the activity and 

impose their own regulation, even if it differed from the states'. State challenges to high-stakes tribal 

bingo reached the federal courts, and those courts ruled that the tribes' gaming activity was permissible. Consistent with the evolution of the scope of state civil jurisdiction under Public Law 280, 

courts drew a criminal-prohibitory / civil-regulatory distinction, holding that when states did not 

criminally prohibit an activity but rather permitted and regulated it, such activity was similarly permitted in Indian country, subject to tribal regulation that might differ from state regulation. 

When the United States Supreme Court denied petitions for writs of certiorari in two of those 

cases, more and more tribes throughout the country began engaging in high-stakes bingo activity for 

economic development on their reservations, and it proved quite successful, particularly where there 

were large markets. A culmination of state challenges to such tribal activity occurred when the 

United States Supreme Court decided California v. Cabazon Band of Mission Indians in 1987.2 

Thereafter, in 1988, Congress enacted the Indian Gaming Regulatory Act, which provides the current structure for tribal gaming activities, created the NIGC, and tasked it with an oversight role 

with respect to tribal gaming. 
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Thus, as this committee studies Indian gaming and its ramifications, it should never lose sight of 

the fact that Indian gaming is not a federal program. The tribes invented it and were making it work 

prior to IGRA's enactment in 1988. 

In my view and experience, Indian gaming has been the most effective economic development 

tool ever brought to Indian country nationwide. Its success, of course, depends not only on wise 

management, but also on market opportunities, and thus it does not work as an economic development tool equally for all tribes. Those tribes that are in remote and rural areas likely will never enjoy large revenues, whereas tribes situated near populated areas may find it extremely profitable and 

successful. 

Revenue generation, of course, is not the only objective or benefit for tribes. In many instances, 

even small, rural tribal gaming operations have brought employment opportunities to tribal members where none existed before. I am a member of the Oglala Sioux Tribe from the Pine Ridge Reservation in South Dakota. Unfortunately, our reservation is located in the poorest county in the 

United States, and our rural location out in the Badlands will likely never permit the tribe to solve 

the great economic challenges it faces through gaming alone. Nevertheless, when my tribe opened 

the Prairie Winds Casino on the west edge of our reservation, it created approximately 200 jobs, 

99% of which are filled by Indians, and most of them are our own tribal members. For many, these 

were the first long-term jobs they ever held or had the opportunity to hold. 

INDIAN GAMING REVENUE 

Indian gaming has grown dramatically since the enactment of IGRA in 1988, and the attached 

chart, Exhibit 1, shows the increase in those revenues from 1995 through 2004. Today Indian gaming generates over $20 billion in gross gaming revenues - that is, the amount wagered at Indian casinos, less the amount returned to patrons as jackpots and prizes. 
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This gaming is conducted on Indian lands throughout the country by approximately 225 tribes, 

which together operate over 400 tribal gaming operations. The diversity among these operations is 

dramatic. They vary from the largest casino in the world, Foxwoods, operated by the Mashantucket 

Pequot Tribe on its land in Connecticut, to Bear Soldier Bingo on the Standing Rock Reservation in 

South Dakota, where bingo is played for small crowds 4:30 pm to 10:30 pm five days a week. 

With this diversity in mind, it is instructive to examine how gaming revenue is distributed 

among the 367 tribal gaming operations reporting financial information to NIGC. Three further 

charts, Exhibits 2-4, are attached to my testimony. These reflect that most of the $19.4 billion generated in 2004, the last year for which we have final figures, is generated by a relatively small number of facilities. As shown, 55 of the 367 operations in 2004 - 15% of them - grossed $13.5 billion, 

just over two-thirds of the total revenues. By contrast, 116 of the 367 operations, representing those

that are the smallest - 31.6% of operations overall - generated less than 1% of total revenue. 

As this demonstrates, a relatively small number of tribes have very large tribal gaming revenues, 

while a large number have relatively small tribal gaming revenues. 

PERMISSIBLE EXPENDITURES GENERALLY AND NIGC MONITORING OF INDIAN 

GAMING REVENUE 

The Indian Gaming Regulatory Act restricts the purposes for which tribes can spend their gaming revenues. These categories are very general and very broad. Found at 25 U.S.C. 2710(b)(1)(B), 

these categories are: (i) to fund tribal government operations or programs; (ii) to provide for the 

general welfare of the Indian tribe and its members; (iii) to promote tribal economic development; 

(iv) to donate to charitable organizations; or (v) to help fund operations of local government agencies. To provide guidance on the uses of gaming revenue, the NIGC issued Bulletin 01-05, which 
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discusses and illustrates permissible and prohibited uses. I have attached this bulletin to my testimony as Exhibit 6. 

The Indian Gaming Regulatory Act also authorizes the use of tribal gaming revenues to make 

equal, per capita payments to tribal members, but only if a tribe first adopts a revenue allocation 

plan that is then reviewed and approved by the Secretary of the Interior. 

Not every tribe makes per capita payments, for to make them or not is a sovereign tribal decision. Tribes that do make per capita payments allocate in their revenue allocation plans a percentage 

of gaming revenues to most or all of the other permitted categories as well as a percentage to per 

capita payments. (The Interior Department regulations require a revenue allocation plan to "reserve 

an adequate portion of net gaming revenues ... for one or more" of the permitted categories in 

2710(b)(1)(B). 25 C.F.R. 290.12(b)(2)). However tribes decide to distribute gaming revenue, if they 

use it for purposes inconsistent with the aforementioned restrictions, or if their distributions are inconsistent with an approved revenue allocation plan, they would violate IGRA. 

The NIGC is authorized to take enforcement actions against tribes that violate IGRA, regulations promulgated by the NIGC, and the tribes' own tribal gaming ordinances, which must meet requirements in IGRA and be approved by the NIGC Chairman before they are effective. In this way, 

the NIGC has an oversight responsibility with respect to tribes' expenditures of tribal gaming revenues. We take this responsibility seriously and will be looking at ways to enhance our enforcement 

of IGRA requirements. 

The standard underlying the NIGC's approach to expenditures is that where gaming revenues are 

spent in a manner that does not benefit the tribal government or tribal membership as a whole, then 

the NIGC will investigate. In taking this approach, we have encountered instances where tribal 

gaming revenues were not expended for authorized purposes, and we initiated investigations and 
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enforcement actions. Included in these situations were instances where gaming revenues were expended: 1) for the benefit of certain tribal officials or tribal factions rather than the benefit of the 

tribe as a whole; 2) to influence the outcome of tribal elections; 3) to secure contracts in which certain individuals had an undisclosed financial interest; 4) without the required approvals designated 

by tribal law; 5) as payments to an individual or entity that was managing the tribe's gaming operation under a contract that had not been approved by the NIGC; 6) by a tribal entity that was not recognized by the Bureau of Indian Affairs as the lawful tribal government; and 7) to provide unauthorized or unlawful incentives for certain patrons of a gaming operation. 

We have also found or are investigating allegations where tribes were not spending revenue 

consistently with their revenue allocation plans; where tribal council members were making socalled discretionary payments to preferred tribal members to the exclusion of others in violation of 

the per capita payment requirements in its revenue allocation plan; where per capita payments were 

not properly held for minors or incompetent individuals; and where per capita payments, or the lack 

thereof, are inextricably tied up with tribal membership disputes. I should also note that in a number

of circumstances, our investigation discovered evidence of possible criminal activity. As required 

by IGRA, we referred the relevant information to the appropriate law enforcement agency for further investigation. 

Lastly, we took this investigative approach with regard to what has become the widely publicized investigation that has brought so much attention to the question of lobbying fees. In its investigation, the NIGC identified concerns about the propriety of certain expenditures of tribal gaming 

revenue - not because gaming revenue was spent on lobbying, but because the circumstances surrounding the expenditure suggested potential criminality, and so we referred the matter to the Interior Department Office of Inspector General for further investigation. 
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All of that said, however, exactly how the NIGC should best oversee or monitor the expenditure 

of gaming revenue is not clearly specified in IGRA, in the NIGC's regulations, or in regulations of 

the Bureau of Indian Affairs. Attached to this testimony is a fifth chart, Exhibit 5, which generally 

depicts the line of authority with respect to the operation of tribal gaming operations and the flow of 

revenues generated thereby. Most tribes directly manage their gaming operations by themselves, 

employing both tribal members and non-members to operate the gaming business at the tribe's direction. In other instances, tribes enter into management agreements with outside third parties (and 

the NIGC Chairman must review and approve those agreements). 

Further, in most instances under their gaming ordinances, tribes will attempt to separate governmental operations from gaming business operations and tribal gaming regulation. Ordinarily, a 

tribal council will serve as the governing body for the tribe; the council will create a board of trustees or enterprise board which will oversee the tribe's businesses, including gaming activities, and 

an independent tribal gaming commission will provide regulatory oversight. When the gaming 

business generates its revenues, typically they will be passed back to the tribe's enterprise board, 

which in turn will disperse them to the tribal government, through its treasurer's office or otherwise. 

Thereafter, those funds may well be placed in the tribal general fund, where they are commingled 

with tribal revenues from other sources such as grazing, forestry, oil and mineral revenues. From 

that general fund, the tribe will operate its programs for the benefit of its tribal members. These include health and public safety programs, housing programs, educational programs and the like. The 

NIGC does not attempt to follow each dollar of tribal gaming revenue after it is dispersed from the 

tribal gaming operation, and nowhere is it required to. 

In a report issued by the Office of Inspector General for the Department of the Interior on September 1, 2005, the Inspector General observed that there is not presently in place a mechanism that 
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would closely monitor the expenditure of such revenues. If Congress desires greater scrutiny of the 

expenditures of these dollars, directions therefore would not seem to be found in IGRA as it is now 

written. We should be careful, however, to ensure that any outside direction of the tribes' expenditure of their own earned revenues is consistent with IGRA's stated: tribal economic development, 

tribal self-sufficiency and strong tribal government. 25 USC 2701 (4). 

POLITICAL SPENDING 

I understand that a concern of this committee and the focus of this hearing is the expenditure of 

tribal funds for political purposes, lobbying expenditures, and the making of campaign contributions 

in state and federal elections. To date, the NIGC has not initiated enforcement action against a tribal 

government for making such campaign contributions, because such expenditures were deemed to 

fall into one or more of three permissible expenditure classifications: providing for the general welfare of the tribe and its members, promoting tribal economic development, and funding tribal governmental operations. In addition, lobbyists may arguably be engaged and paid for by the gaming 

operation, just like any non-Indian business, and not by the tribal government. In other words, lobbyists may also be paid not out of net gaming revenues but as an expense for the gaming operation. 

Tribal businesses generally, and tribal gaming businesses specifically, are dependent on the 

statutory and regulatory basis within which they operate, and tribes often need professional assistance in monitoring legislative and administrative developments which may influence and even 

eliminate those activities. 

Can expenditures of this nature be abused? Undoubtedly they can. Are there recent examples 

where this has occurred? Yes. Can or should Congress enact enforceable legislation that would 

more severely limit the purposes for which tribes may make expenditures of tribal gaming revenues 
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or change how those expenditures are reported or overseen? That is a question for the Committee to 

consider.. 

Where tribes have expended seemingly exorbitant amounts for lobbying services or contributed 

million of dollars to causes that seem to have little relationship to their immediate economic development interests, there may be cause for concern about the due diligence exercised by those tribes. 

While economic prosperity and the wherewithal to make political contributions are relatively recent 

developments for most tribes, some general inquiries into the nature and magnitude of political contributions by others would put into perspective what might be reasonable expenditures of tribal assets to promote the political viewpoints of tribal governments. When tribal governments make contributions that are grossly disproportionate to what others spend, great caution ought to be in order. I 

believe that the great attention that has come to this area, including this committee's scrutiny, as further evidenced by today's hearing, will send a clarion call to all of us, including tribes, that greater 

diligence and transparency is in order. 

Indian gaming is a very competitive industry, and it is becoming more so. Tribes are necessarily 

protective of their market share, and this will sometimes manifest itself in political and legal efforts. 

When it occurs, it ought to occur fairly and openly. Due diligence in this connection is required at 

several levels. Tribal leaders - tribal governments - should look before they leap. They should make 

every effort to be certain that precious tribal dollars are spent in the tribes' interest and that tribal 

dollars are truly being utilized as represented. Further, they must exert diligence in fully informing

their tribal membership with respect to the extent and nature of their significant expenditures. Certainly there are "trade secrets" and political strategies in the Indian gaming industry, as well as 

elsewhere, that from time to time need to be closely guarded. However, tribal members are the 

shareholders in the tribal gaming operations, and they have a right to be informed of, and to influ-
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ence, where their money is going. Similarly, tribal members themselves have a sacred duty to hold 

their leadership to account and to demand information to which they have a right. Thus, the whole 

Indian community has an obligation to help ensure that abuses do not occur. 

The NIGC will continue to attempt to fulfill its oversight responsibilities, including oversight of 

the expenditure of tribal gaming revenues for those limited purposes identified in IGRA. If greater 

scrutiny is expected of the NIGC in this area, additional tools would likely be required. As I have 

said, however, I believe that the current system can work, but it will only work if the tribal gaming 

community itself calls on the community of tribal nations to use greater due diligence as it participates in the political process. It will work if tribes operate with a transparency that permits tribal

members to be fully informed about tribal activities and that allows individuals and institutions such

as Congress and this committee to have confidence that the economic development opportunity 

which IGRA fosters is not abused. 

LOAD-DATE: February 8, 2006