National Indian Gaming Commission 

IN THE MATTER OF 

Seneca Nation of Indians 

1 

1 CFA-05-12 

1 

1 October 7,2005 

1 

Appeal to the National Indian Gaming Commission ("NIGC" or "Commission") 

from Civil Fine Assessment ("CFA") issued to the Seneca Nation of Indians 

("Respondent" or "Tribe"). This appeal is brought pursuant to the Indian Gaming 

Regulatory Act (IGRA), 25 U.S.C. 4 2701 et. seq., and NIGC regulations, 25 C.F.R. Part 

501, el. seq. 

FINAL DECISION AND ORDER 

After careful review of the agency record and the Respondent's submissions, the 

Commission finds and orders that: 

1. 25 U.S.C. 5 2710(b)(2)(C) requires that tribes submit annual audits of each 

gaming facility. 

2. The Tribe owns the Seneca Niagara Casino and Seneca Allegany Casino. 

3. The Tribe operated both facilities during all or part of 2003 and 2004. 

4. The Tribes audit reports were due by January 27,2005, but were not 

received at the Commission's offices until May 20,2005. 

5. The Chairman properly applied the factors contained in 

25 C.F.R. $9 575.3, 575.4, in determining the amount of the civil fine. 
6. Civil Fine Assessment CFA-05-12 in the full amount of $20,000.00 is 

upheld. 

STATUTORY, PROCEDURAL, AND FACTUAL BACKGROUND 

Respondent is a federally recognized Indian Tribe with tribal headquarters in 

Salamanca, New York. Respondent operated its class I11 gaming facilities, Seneca 

Niagara Casino and Seneca Allegany Casino, during all or part of 2003 and 2004. 

IGRA requires that a gaming tribe submit an annual audit for each gaming facility 

it operates. 25 U.S.C. 271 0(b)(2)(C). NIGC regulations require that a tribe cause to be 

conducted an annual independent audit of the financial statements of each of its gaming 

operations and submit a copy of the audit report(s), and any management letter(s) setting 

forth the results of the annual audit(s), to the NIGC within 120 days after the end of each 

fiscal year. 25 C.F.R. 571.12,571.13. The fiscal year for both Seneca casinos ended 

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September 30,2004. 

Therefore, the audit reports had to be received by the NIGC no later than January 

28,2005.' Respondent's fiscal year 2004 audit reports for Seneca Niagara Casino and 

Seneca Allegany Casino were submitted to the NIGC in a combined audit report on May 

20,2005. Separate audit reports for Seneca Niagara Casino and Seneca Allegany Casino 

were received on June 14,2005. Therefore, on June 16,2005, the Chairman of the NIGC 

issued NOV-05-12 to the Respondent for failure to submit a timely annual independent 

audit report. 

' We note that NOV-05-12 incorrectly stated that the audit reports were due by January 1,2005. Audit 

reports were in fact due to the NIGC within 120 days of the end of the fiscal year. The~efore, the audit 

reports were due to the NIGC before January 28,2005. Regardless, the audit reports were not received by 

the NlGC within the time allowed. The Respondent has not challenge the NOV so it is not necessary for us 

to discuss the effect of this mistake. 
The NIGC regulations provide that, within 15 days after service of a notice of 

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violation, or such longer period as the Chairman may grant for good cause, the 

respondent may submit written information about the violation. 25 C.F.R. $ 575.5. 

The Chairman shall consider any information so submitted in determining the 

facts surrounding the violation and the amount of the civil fine. 

The Tribe requested and the Chairman granted extra time for the submission of 

written information about the violation which was received by the NIGC on July 15, 

2005. 

On August 9,2005, the Chairman issued proposed civil fine assessment CFA-05- 

12 requiring the Respondent to pay a fine of $20,000.00. 

On September 9,2005, the Respondent filed a timely notice of appeal from the 

proposed assessment. The Respondent elected to waive its right to an oral hearing and 

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instead chose to have the issue decided by the full Commission on the basis of written 

submissions. On September 19,2005, the Commission received Supplemental Statement 

for Appeal CFA-05-12 from the Respondent. The Respondent argues that the Chairman 

failed to properly apply the factors in the CFA and failed to explain how the facts and 

circumstances are weighed or considered when applying the factors. For those reasons 

and for policy reasons the Respondent requests that the fine be eliminated or substantially 

reduced. 

BURDEN OF PROOF AND STANDARD OF REVIEW 

In administrative appeals of enforcement actions undertaken pursuant to 25 

C.F.R. Part 573, the Chairman bears the burden of proof and the standard of review is 

w, preponderance of the evidence. In the Matter of JPW Consultants, NIGC 97-4; NIGC 
98-8; (Nov. 13, 1998) (citing In the Matter of Shingle Springs Band of Mewok Indians, 

NIGC 97-1, Dec. 3, 1998). 

Preponderance of the evidence is the degree of relevant evidence that a reasonable 

person, considering the record as whole, would accept as sufficient to find that a 

contested fact is more likely to be true than untrue. Id. at 4. Since the violation alleged 

in the NOV as the basis for the CFA is conceded and not contested by the parties, we find 

the violation to be true for purposes of deciding the issues raised on appeal. 

DISCUSSION 

Pursuant to 25 U.S.C. $2713 (a) and 25 C.F.R. 5 575.4, the Chairman of the 

NIGC may assess a civil fine, not to exceed $25,000 per violation, against a tribe, 

management contractor, or individual operating Indian gaming for each violation cited in 

a notice of violation issued under 25 C.F.R. 5 573.3. If noncompliance continues for 

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more than one day, the Chairman may treat each daily illegal act or omission as a 

separate violation. 25 C.F.R. $ 575.4 (a)(2). 

While the Chairman may exercise discretion in assessing a civil fine, 25 C.F.R. 

§575.4(a)-(e) identifies five factors the Chairman is to consider prior to assessing any 

civil fine: (I) the economic benefit of noncompliance; (2) the seriousness of the violation; 

(3) any history of violations by the tribe; (4) the degree of fault of the tribe, that is, any 

negligence or willfUlness; and (5) the good faith of the tribe to correct or attempt to 

correct the violation. Since these factors come within the ambit of the Congressional 

instructions in IGRA these regulations are not "arbitrary" or "capricious". Bluestone 

Energy Design v. Federal Energy Regulatory Commission, 74 F.3d 1288 @.C. Cir 1996). 
The Respondent did not challenge the underlying notice of violation, and has 

readily admitted that its audit reports were submitted late. However, the Respondent 

argues that the CFA does not reflect all of the information and arguments the Nation has 

made nor does it reveal how the Chairman weighed and balanced the factors or what 

other factors the Chairman used on making the assessment. 

Neither IGRA nor NIGC regulations require the Chairman to discuss in the CFA 

all information provided by the Respondent. The CFA simply reflects the information 

the Chairman felt most important in the assessing of a civil fine. 

Neither IGRA nor NIGC regulations require the Chairman to assign a weight to 

any of the factors or facts involved in assessing a civil fine. It is important to note that 

four of the five factors contain the word "may," signifying that it is within the 

Chairman's discretion what weight, if any, to give that factor. We would like to discuss 

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each of the factors in turn. 

Economic Benefit of Noncompliance 

The Chairman found and the Tribe agrees that no economic benefit was received 

from the late submission of the audit report. However, the Tribe argues that the 

Chairman did not state how this factor was balanced or if this factored weighed against 

the issuance and size of the fine. Again, neither IGRA nor NIGC regulations require that 

the Chairman specify what weight to give each factor. In this case, it is clear that the 

Chairman considered this factor to mitigate in favor of a lower fine, as do we. The 

Chairman had the authority to assess a fine of $25,000.00 per day. He chose not to assess 

the maximum. Instead, the Chairman assessed a fine less than that allowed under IGRA 

and NIGC regulations. 

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Seriousness of the Violation 

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The Commission considers the submission of an annual independent audit report 

by an independent accountant critical to the NIGC's mission to protect the integrity of 

Indian gaming. An accountant's ability to conduct an audit in accordance with generally 

accepted auditing principles and render an opinion on audited financial statements 

provides assurances about the security of tribal gaming revenues. The audit report 

prepared and submitted on a timely basis is evidence of, among other things, the integrity 

of the gaming operation, the adequacy of its regulation and, more specifically, of the 

adequacy of the books and records, the hnctioning of the internal financial controls, and 

the disclosure of information having a bearing on the financial statements. 

As an explanation, the NIGC uses the audit reports to perform a risk analysis in 

order to measure the likelihood that the gaming operation has failed to maintain its 

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accounting records and conduct its activities in a manner consistent with generally 

accepted accounting principles, or has failed to authorize, recognize, and record its 

gaming and gaming related transactions and activities in a manner consistent with the 

NIGC Minimum Internal Control Standards set forth in 25 C.F.R.4 542. During the risk 

analysis, the audited financial statements are evaluated to detect information reflecting, 

among other things: if transactions are properly authorized, if accounting records are 

properly designed, if adequate safeguards exist over assets and records, if controls exist 

over activities conducted, if controls exist over information systems, if controls exist over 

access to sensitive or confidential information, and if investigation of discrepancies 

between control and subsidiary records are conducted. The analysis is intended to detect 

information that would indicate directly or indirectly that a gaming operation may be 

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noncompliant with the aforementioned NIGC regulations, which the agency has 

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determined to be necessary to ensure the interests of the tribal stakeholder and gaming 

public are adequately protected. 

The audited financial statements are only useful if they are timely. The 120-day 

period after the end of the fiscal year is the time afforded the independent certified public 

accountant to perform such testing of the financial data necessary to express an opinion 

on the fairness of the financial statements. Any delay in receipt of the financial 

statements significantly reduces the reliability and relevancy of the data to the NIGC. 

The Chairman clearly articulated the above stated policy on submission of audits 

in a timely manner. The Commission recognizes that the Respondent was, in performing 

an investigation and audit, taking steps to ensure the integrity of the gaming operation. 

However, this fact does not lessen the seriousness of this violation. Again, the Chairman 

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is not required to detail his thought process or engage in a sort of regulatory calculus in 

assessing a fine. The Chairman is simply to consider various factors in ultimately 

assessing an appropriate fine. The factors are simply guidelines for the Chairman. 

History of Violations 

THE CFA cited two prior notices of violations that had been issued to the 

Respondent. One violation was for the untimely submission of quarterly statement and 

fee payments, and the other was for the failure to license two tribally-owned gaming 

operations and for offering pull-tabs at a location that did not offer bingo. The 

Respondent argues that prior violations should not be weighed against the Tribe because 

they were not received under the current Tribal leadership nor were they for the same 

violation. Elections and changes in tribal leadership are routine in Indian Country. It is 

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not the intent of IGRA nor is it the policy of this Commission to wipe the slate clean 

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every time the leadership of a tribe changes. If such a policy were to exist it would make 

regulatory enforcement unworkable. Additionally, if the Commission were only to 

consider similar violations in assessing a fine it would allow a gaming operation to 

violate every provision of IGRA without having any effect on the fine assessment. The 

Chairman and looks to prior violations as some indication of the gaming operations 

overall willingness to comply with IGRA and NIGC regulations. 

Ne~linence or Willfulness 

The Chairman found that this was a willhl violation because the Tribe was aware 

that the failure to meet submission deadlines could result in enforcement action but still 

did not meet the deadline. The Respondent has argued that it was its auditor, not the 

Tribe that was responsible for the late audit. IGRA makes clear that it is the 

responsibility of the Tribe to ensure that audits are submitted in a timely fashion. The 

auditor serves as an agent of the Tribe and its actions do not relieve the Tribe of its 

responsibility. Based on the fact that the Tribe knew its submission would be late, it is 

clear that the Chairman had enough evidence to conclude that the violation was willful. 

Ultimately, the conduct of the gaming activity and the compliance with IGRA and NIGC 

regulations falls to the Respondent. 

Good Faith 

It is clear to us that the good faith factor is not applicable in this situation. This 

factor only applies when a Respondent moves quickly to achieve compliance after 

receiving a Notice of Violation. IGRA and NIGC regulations make clear that a written 

- NOV is different then simply notice to the Tribe. Regardless, the Tribe did not move 
quickly to cure the violation. By its own admission it knew as early as January 17,2005, 

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that it would not be able to submit the audit by the January 28Ih deadline. Respondent's 

Supp. Statement at 3. Simply informing the Commission that it would be in violation is 

not enough to demonstrate good faith. 

CONCLUSION 

We find that assessment of a $20,000.00 fine was appropriate in this instance and, 

--Y--- therefore, CFA-Ow is upveld. It is so ordered by the National Indian Gaming 
CERTIFICATE OF SERVICE 

I hereby certify that on the 7th day of October, 2005, I served a copy of the 

foregoing COMMISSION DECISION by facsimile and by certified mail, return receipt 

requested, upon the following: 

Barry E. Snyder (and Agent for Service of Process) 

Seneca Nation of Indians 

G.R. Plummer Building 

P.O. Box 231 

Salmanca, NY 14779 

Fax: 71 6-945-1565 

Christopher Karnes, Esq. 

Seneca Nation of Indians 

G.R Plummer Building 

P.O. Box 231 

Salmanca, NY 14779 

Fax: 71 6-945-6869 

I hereby certify that on the 7'h day of October, 2005, I served a copy of the 

'l~h*rJI foregoing Commission Decision by hand delivery upon the following: 

Andrea Lord, Esq. 

National Indian Gaming Commission 

1441 L Street NW, Suite 9100 

Washington, D.C. 20005 

Dated: m7 hn Hay, Staff Attorney