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Federal Document Clearing House Congressional Testimony 

June 23, 1999 

SECTION: CAPITOL HILL HEARING TESTIMONY 

LENGTH: 2240 words 

HEADLINE: TESTIMONY June 23, 1999 MONTIE R. DEER CHAIRMAN NATIONAL 

GAMING COMMISSION SENATE INDIAN AFFAIRS NATIONAL GAMBING COMMISSION 

REPORT 

BODY: 

 TESTIMONY OF THE HONORABLE MONTIE R. DEER, CHAIRMAN NATIONAL INDIAN 

GAMING COMMISSION BEFORE THE SENATE COMMITTEE ON INDIAN AFFAIRS June 

23, 1999 Mr. Chairman, Mr. Vice-Chairman, members of the Committee, my name is Montie Deer 

and I am the Chairman of the National Indian Gaming Commission (NIGC or Commission). Thank 

you for the opportunity to appear before you today to testify on National Gambling Impact Study 

Commission's (Study Commission) final report. As you know, this report was issued this past Friday on June 18, 1999. At this time, the NIGC has not had ample time to fully review and digest the 

report. We would appreciate an opportunity to more fully comment on the report's recommenda-
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 TESTIMONY June 23, 1999 MONTIE R. DEER CHAIRMAN NATIONAL GAMING COMMISSION SENATE 

INDIAN AFFAIRS NATIONAL GAMBING COMMISSION REPORT Federal Document Clearing House 

Congressional Testimony June 23, 19 

tions once we are able to thoroughly analyze the report's contents. Additionally, we would like to 

comment on the "Survey of Regulatory Practices in the Gaming Industry" submitted by Dr. Amy 

Bunger Pool. This survey was conducted at the request of the Study Commission and discusses 

many characteristics of the Indian gaming industry, particularly with regard to regulation. You 

have asked me here today to address two issues: (1) the regulation of Indian gaming and (2) the 

NIGC's disclosure of aggregate tribal revenue figures to the Study Commission. Indian gaming 

regulation Indian gaming has three tiers of regulation: tribal, state and federal. The Study Commission report recognizes the fact that as sovereign governments, tribes provide the first level of regulation for their gaming operations. Indeed, the report recommends that tribal sovereignty should be 

"recognized, protected and preserved." With respect to state involvement, many Tribal-State compacts provide for some level of state regulation. Finally, the NIGC provides a third level of regulation including (1) monitoring all tribal gaming operations on a continuing basis; (2) approving management contracts; (3) conducting background investigations on management company officials; (4) 

reviewing and conducting audits of the gaming operations; and (5) initiating enforcement actions to 

ensure the integrity of Indian gaming operations. We sincerely appreciate the Study Commission's 

acknowledgment of, and support for, the NIGC's role in regulating Indian gaming. (Executive 

Summary Recommendation (E. S. Recommendation) 6.1). Tribal gaming regulatory authority is 

often delegated to tribal gaming commissions under the tribes' tribal gaming ordinances which are 

submitted and approved by the NIGC. They may also be established or delegated authority under 

Tribal-State compacts entered into to govern Class III gaming. Occasionally, tribes establish their 

regulatory bodies by other means such as a tribal resolution or may even change the tribe's governing document, its constitution. Although not mandated by the Indian Gaming Regulatory Act 

(IGRA), the NIG-C works closely with tribes to establish independent regulatory bodies. The NIGC 
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 TESTIMONY June 23, 1999 MONTIE R. DEER CHAIRMAN NATIONAL GAMING COMMISSION SENATE 

INDIAN AFFAIRS NATIONAL GAMBING COMMISSION REPORT Federal Document Clearing House 

Congressional Testimony June 23, 19 

has issued a bulletin which encourages tribes to establish independent tribal gaming commissions 

and describes our expectations for the regulatory function that those commissions will provide. I 

have attached the most recent version of the NIGC's Report to the Secretary of the Interior on Compliance with the Indian Gaming Regulatory Act. This report focusses on eight key requirements of 

IGRA. As you will see the report shows that gaming tribes maintain a strong compliance record. In 

January of this year, the NIGC promulgated regulations on Minimum Internal Control Standards 

(MICS) which are intended to protect and preserve the integrity of Indian gaming. The MICS were 

drafted to provide protection against potential risk of loss at tribal casinos due to customer or employee access to cash and cash equivalents within the casino -- which is true of any casino. The 

MICS will reduce the risk of loss to tribal gaming operations because the rule contains, among other 

things, standards and procedures that govern cash handling and counting, documentation, game integrity, auditing and surveillance. For example, with regard to the game of Bingo, the MICS (1) establish game play standards; (2) restrict access to bingo supplies and equipment; (3) require collection and review of data; and (4) establish standards for linked electronic games. In addition to 

Bingo, the MICS also establish minimum standards and PI procedures for Class II and III games 

such as pull tabs, card games, manual and computerized Keno, pari-mutuel wagering, table games 

and gaming machines. In short, the MICS provide strict rules which track money from the time it 

enters the casino, until the time it leaves. All gaming tribes must adopt Minimum Internal Control 

Standards by August 4, 1999. 1 appreciate the Study Commission's support of the MICS issued by 

the NIGC. As these standards become effective, we intend to emphasize compliance with them as a 

key aspect of our regulatory program. To meet this challenge we have established a separate Division of Audits as part of the NIGC staff structure and are in the process of hiring auditors experienced in gaming operations for positions within that division. Under the MICS, the annual inde-
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 TESTIMONY June 23, 1999 MONTIE R. DEER CHAIRMAN NATIONAL GAMING COMMISSION SENATE 

INDIAN AFFAIRS NATIONAL GAMBING COMMISSION REPORT Federal Document Clearing House 

Congressional Testimony June 23, 19 

pendent audit of a tribal gaming operation provided to the NIGC will include comment on that tribal 

gaming operation's compliance with the NIGC-directed MICS program, as recommended by the 

Study Commission (Recommendation 6.5). You should know that many tribes' internal controls 

already meet or exceed the NIGC's MICS. Just this past week I visited four tribes in Michigan to 

tour the casinos, including a review of surveillance, count room procedures and other casino regulation. I can tell you first hand that these particular tribes had state of the art surveillance and machinery to conduct the counting of money. I also learned about a cooperative network in which all 

Michigan gaming tribes share photographs and other information on cheaters and scam artists. 

Many employees I spoke with had prior experience in the industry and some had been with the operation for close to ten years, since the inception of Indian gaming. Let me add that I was impressed 

on my visit to Michigan last week by the tribal infrastructure and programs that have resulted from 

the revenues of Indian gaming for the tribes in that state. As the Study Commission report concludes, "gambling revenues have proven to be a very important source of funding from many tribal 

governments, providing much-needed improvements in the health, education and welfare of Native 

Americans on reservations across the United States." (Final Report at 2- 10.) The building of tribal 

schools, health centers and recreation centers as well as substance abuse programs, elderly and 

headstart programs and water treatment programs are just a few of the things I observed first hand. I 

was informed that 10 years ago many of these programs and much of the infrastructure simply did 

not exist. To be fair, this is not the case for all tribes. Some tribes which have smaller, less profitable operations may not have sophisticated surveillance or advanced machinery to assist in count 

room procedures. Indeed, some tribes will be required to expend additional revenues in order to 

come into compliance with the NIGC's MICS. With respect to the NIGC's regulatory authority, I 

would request again that the NIGC be granted licensing authority. Currently, there exists some gaps 
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INDIAN AFFAIRS NATIONAL GAMBING COMMISSION REPORT Federal Document Clearing House 

Congressional Testimony June 23, 19 

in the regulatory process because, under the current statutory authority, the NIGC is not authorized 

to investigate suspect individuals or companies which might be using vending or consulting contracts as a foothold into Indian gaming. The problem is that, because IGRA requires only the approval of management contracts and not the approval of consulting agreements and other similar 

arrangements, some parties have attempted to circumvent the management contract approval requirements by claiming that they are merely providing consulting or vendor services, or that they 

are simply lenders attempting to assure that they will be repaid in full. A national licensing system 

for all individuals engaged in Indian gaming and for gaming related contracts would give the NIGC 

the ability to scrutinize persons involved in consulting agreements, and similar gaming related contracts and would be an improvement in our regulatory scheme. Release of tribal financial information In addition to Indian gaming regulation, I wanted to briefly discuss the Study Commission's 

statement that the NIG-C refused to provide information to the Study Commission. (Report at 7-3 -- 

7-9). 1 believe the record is quite clear that the NIGC provided extensive amounts of information to 

the Study Commission. What we did not produce were complete copies of tribal audits. In September of 1998, prior to my Chairmanship at the NIGC, the Study Commission made a blanket request 

for individual proprietary tribal audits which tribes must provide to the NIGC pursuant to IGRA. In 

response to the Study Commission's request for copies of the tribal gaming operation audit reports, 

we explained in a series of letters dated September 9, October 23, and December 4, 1998, and in a 

face-to-face meeting with Chairman James, that we are prohibited by the Indian Gaming Regulatory 

Act from releasing the audit reports except in certain limited circumstances, e.g., when the audits 

are used for law enforcement purposes. IGRA provides that: Except as provided in subsection (b), 

the Commission shall preserve any and all information received pursuant to this Act as confidential 

pursuant to the provisions of paragraph (4) and (7) of section 552(b) of title 5, United States Code. 
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INDIAN AFFAIRS NATIONAL GAMBING COMMISSION REPORT Federal Document Clearing House 

Congressional Testimony June 23, 19 

The reference to paragraph 4 in 2716(a) refers to exemption 4 of the Freedom of Information Act 

which protects "trade secrets and commercial or financial information obtained from a person that is 

privileged or confidential." Section 2716(a) thus eliminates the NIGC's discretion to release exemption 4 information. Consequently, because the audit information is confidential information under 

exemption 4, and that the release of the information could result in substantial competitive harm, we 

concluded that the NIGC is not authorized to provide copies of the audits to the Study Commission. 

In addition to the legal restrictions, the confidentiality provisions of IGRA allow the NIGC to efficiently conduct business as tribes are more inclined to provide the NIG-C with a full and complete 

audit of their operations. Notwithstanding the statutory prohibition of full disclosure of audits, we 

met and discussed on several occasions, this issue with the Study Commission. Ultimately, NIG-C 

staff metMth Study Commission researchers to reach some workable solution to the request. The 

NIGC and Study Commission researchers finally agreed that the release of aggregate financial information on Indian gaming would satisfy the purposes for which the Study Commission requested 

the information. On two occasions, December 4, 1998 and April 13, 1999 the NIGC provided aggregate data to the Study Commission. Interestingly, the Study Commission recommends in its report that the NIGC compile and present for public release certain aggregated audit information 

about tribal gaming operations -- the precise solution that the NIGC recommended to the Study 

Commission, albeit not for public release. In addition to the aggregate financial data, the NIGC produced, among other things, the following additional information to the Study Commission: (1) a list 

of all tribal auditors used by tribes to conduct audits; (2) NIGC's Report to the Secretary of the Interior on Compliance with IGRA- (3) copies of redacted audits; and (4) copies of NIGC regulations 

including the MICS. I am concerned about the Study Commission's recommendation that the NIGC 

compile for public release certain aggregated audit information about tribal gaming operations. (E. 
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INDIAN AFFAIRS NATIONAL GAMBING COMMISSION REPORT Federal Document Clearing House 

Congressional Testimony June 23, 19 

S. Recommendation 6.5). To the extent the Commission recommends a change in the current law, 

we do not believe that is necessary. As I stated earlier, we have already provided aggregate data to 

the Study Commission and believe this to be permissible pursuant to IGRA. However, I have concerns with the vague recommendation made by the Study Commission. For example, the Study 

Commission does not articulate any sound public policy rationale for the public release of the data 

as to Indian gaming. In addition, public release in other than aggregate form does have impact on 

tribal sovereignty. The Study Commission report would otherwise recommend that sovereignty be 

"recognized, protected and preserved." The public release of tribal financial data seems at odds with 

this fundamental position. To the extent this Committee recommends any change in the law, we 

would be happy to work with Committee staff in reaching some resolution. Under IGRA, we are 

currently bound to treat such information as confidential and as such, the NIGC has ready access to 

tribal financial data related to gaming. We receive the annual independent auditors' reports and 

when we are monitoring or investigating gaming operations, tribal books and records are normally 

provided without objection. While a legislative change could result in a requirement that we release 

financial information to the public, I think such a change could have a negative impact on our oversight authority. Thank you again for the opportunity to present my views on this subject. 

LOAD-DATE: June 25, 1999