[Senate Hearing 109-50]
[From the U.S. Government Publishing Office]



                                                  S. Hrg. 109-50, Pt. 1

                                 GAMING

=======================================================================

                                HEARING

                               BEFORE THE

                      COMMITTEE ON INDIAN AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                                   ON

          OVERSIGHT HEARING ON THE REGULATION OF INDIAN GAMING

                               __________

                             APRIL 27, 2005
                             WASHINGTON, DC

                               __________

                                 PART 1


                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
20-956                      WASHINGTON : 2005
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
Fax: (202) 512ï¿½092250 Mail: Stop SSOP, Washington, DC 20402ï¿½090001


                      COMMITTEE ON INDIAN AFFAIRS

                     JOHN McCAIN, Arizona, Chairman

              BYRON L. DORGAN, North Dakota, Vice Chairman

PETE V. DOMENICI, New Mexico         DANIEL K. INOUYE, Hawaii
CRAIG THOMAS, Wyoming                KENT CONRAD, North Dakota
GORDON SMITH, Oregon                 DANIEL K. AKAKA, Hawaii
LISA MURKOWSKI, Alaska               TIM JOHNSON, South Dakota
MICHAEL D. CRAPO, Idaho              MARIA CANTWELL, Washington
RICHARD BURR, North Carolina
TOM COBURN, M.D., Oklahoma

                 Jeanne Bumpus, Majority Staff Director

                Sara G. Garland, Minority Staff Director

                                  (ii)

  
                            C O N T E N T S

                              ----------                              
                                                                   Page
Statements:
    Coburn, M.D., Hon. Tom, U.S. Senator from Oklahoma...........    20
    Colombe, Charles, treasurer, National Indian Gaming 
      Association and president, Rosebud Sioux Tribe.............    24
    DesRosiers, Norman H., commissioner, Viejas Tribal Government 
      Gaming Commission..........................................    22
    Devaney, Earl, Inspector General, Department of the Interior.     7
    Dorgan, Hon. Byron L., U.S. Senator from North Dakota, vice 
      chairman, Committee on Indian Affairs......................     2
    Heffelfinger, Thomas B., U.S. attorney, District of 
      Minnesota, Department of Justice...........................    10
    Hogen, Phil, chairman, National Indian Gaming Commission.....     3
    Light, Steven, assistant professor, University of North 
      Dakota.....................................................    29
    McCain, Hon. John, U.S. Senator from Arizona, chairman, 
      Committee on Indian Affairs................................     1
    Rand, Kathryn, associate professor, University of North 
      Dakota School of Law.......................................    29
    Van Norman, Mark, executive director, National Indian Gaming 
      Commission Association.....................................    24
    Washburn, Kevin, associate professor of law, University of 
      Minnesota..................................................    26

                                Appendix

Prepared statements:
    Devaney, Earl................................................    39
    DesRosiers, Norman H. (with attachment)......................    43
    George, Keller, president United South and Eastern Tribes, 
      Inc........................................................    53
    Heffelfinger, Thomas B. (with attachment)....................    62
    Hogen, Phil (with attachment)................................    76
    Light, Steven (with attachment)..............................   101
    Rand, Kathryn (with attachment)..............................   101
    Rose, Calvin, tribal chairman, Strawberry Valley Rancheria...   343
    Stevens, Jr., Earnest L., chairman, National Indian Gaming 
      Association, Washington, DC................................   346
    Washburn, Kevin (with attachment)............................   363
Additional material submitted for the record:
    Bullis, Paul, director, Arizona Department of Gaming, letter.   378

 
                                 GAMING

                              ----------                              


                       WEDNESDAY, APRIL 27, 2005


                                       U.S. Senate,
                               Committee on Indian Affairs,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:31 a.m. in room 
485, Senate Russell Building, Hon. John McCain (chairman of the 
committee) presiding.
    Present: Senators McCain, Akaka, Burr, Cantwell, Coburn, 
Conrad, Crapo, Domenici, Dorgan, Inouye, Johnson, Murkowski, 
Smith, and Thomas.

   STATEMENT OF HON. JOHN McCAIN, U.S. SENATOR FROM ARIZONA, 
             CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS

    The Chairman. In 1988, Congress enacted the Indian Gaming 
Regulatory Act with the intent of providing a statutory 
framework for the operation and regulation of gaming 
activities. At that time, Indian gaming was a $100-million a 
year industry. Today, over 220 tribes participate in an $18-
billion industry. This explosive growth was not anticipated by 
Congress, the States or even the Indian tribes. Gaming has 
transformed the face of Indian country and in many respects 
people's perception of it.
    There is no doubt that Indian gaming has benefited many 
tribes. It has produced economic opportunities where before 
there were none; paid for critically needed governmental 
services and strengthened tribal self-determination. In some 
States, the regulatory system appears to be working well. In 
Arizona, for example, tribal regulators work closely with State 
regulators to oversee a gaming industry that shares proceeds 
among all tribes and whose operation was approved by the voters 
of my State.
    There also are reports, however, that the purposes of IGRA 
are not always being met. Rather than improve the lives of 
Native Americans, we have heard of cases in which gaming has 
resulted in non-Indian developers, investors and vendors making 
exorbitant sums and of tribal leaders benefiting at the expense 
of their own members. I hope our witnesses will address the 
extent to which this is occurring and the extent to which 
information is available that would allow an honest assessment 
of this.
    On the issue of transparency in gaming operations, some 
tribes have challenged the National Indian Gaming Commission's 
very ability to regulate class III gaming. I disagree with this 
challenge, though I believe that Congress has not provided 
adequate funding for NIGC to carry out its charge. I recognize 
that there is a tension between claims of tribal sovereignty 
and ensuring that the Federal law that governs Indian gaming is 
enforced. I believe it is time that this committee and the 
responsible Federal agencies engage in a constructive dialog 
with the gaming tribes on where the act can be positively 
improved or meet its original intent.
    Just yesterday, the Secretary of the Senate sent the 
committee a legislative proposal from NIGC for amendments to 
IGRA. I look forward to working with the NIGC and others to 
implement needed changes to the laws.
    Senator Dorgan.

  STATEMENT OF HON. BYRON L. DORGAN, U.S. SENATOR FROM NORTH 
       DAKOTA, VICE CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS

    Senator Dorgan. Mr. Chairman, thank you very much.
    Let me thank all of those who have come to this hearing.
    As you indicated, Indian gaming is something that is 
relatively new. It is just a little over a decade-and-a-half 
old. There is very little research that has been done on these 
issues. The Congress has done what it can and what it felt was 
appropriate to create a regulatory system, working within the 
issues of sovereignty as well. We obviously have received 
comments from those who contend that Indian gaming is not 
sufficiently regulated. Others feel that the regulation is not 
working appropriately.
    On the other hand, Indian tribes have argued that Indian 
gaming is the most heavily regulated gaming industry because it 
is overseen by Federal, State, and Tribal Governments. I think 
because it has grown as rapidly as it has into an $18-billion 
industry, it is very important that we monitor it and work to 
make improvements in the law where necessary. I really 
appreciate the people that we have coming to testify today to 
help us think through some of these issues.
    I did want to mention that, Mr. Chairman, we have two 
witnesses, Kathryn Rand and Dr. Steven Light, who co-founded 
what is called the Institute for the Study of Tribal Gaming 
Law, coincidentally at the University of North Dakota. I 
believe because it is a relatively new industry, there is very 
little research done. I think we will have some testimony from 
them today, and I think it will be interesting testimony as 
well.
    I look forward to all of the witnesses' testimony today, 
and I look forward to working with you, Mr. Chairman, to sort 
through all of the recommendation we receive for future policy 
courses.
    The Chairman. Thank you very much.
    Our first panel is Phil Hogen, chairman, National Indian 
Gaming Commission. Would you please come forward? Earl Devaney, 
inspector general, Department of the Interior; and Thomas B. 
Heffelfinger, U.S. attorney, District of Minnesota, Department 
of Justice.
    Welcome to our first panel of witnesses. We will begin with 
you, Chairman Hogen. Welcome.

   STATEMENT OF PHIL HOGEN, CHAIRMAN, NATIONAL INDIAN GAMING 
                           COMMISSION

    Mr. Hogen. Good morning, Chairman McCain and Vice Chairman 
Dorgan. The National Indian Gaming Commission is here in total. 
I am Phil Hogen, chairman, Nelson Westrin, vice chairman, and 
Commissioner Choney are with me this morning.
    The Chairman. Welcome.
    Mr. Hogen. I think they concur in what we have said.
    I have prepared a written statement and I would ask that be 
included in the record. I will attempt to summarize the points 
that I made therein.
    The Chairman. Thank you. All the written statements will be 
included in the record, without objection. Thank you.
    Mr. Hogen. I am very happy to report that the Indian gaming 
industry is quite healthy. It is growing. It is doing what I 
think the authors intended, that is, it is bringing economic 
development to Indian country that desperately needed it. This 
success is due in no small part, of course, to the ingenuity, 
the hard work of the gaming tribes. But it is also due to the 
regulatory efforts that have been put forth from several 
quarters. That is, those involved in the gaming industry know 
that if they are going to get customers to their facilities, 
there has to be a degree of confidence there, and that is best 
generated by a well-regulated, transparent structure.
    The most effort is exerted by the tribes themselves with 
their tribal regulatory bodies, tribal gaming commissions, and 
tribal gaming authorities. They are there on-site all day every 
day, and the other players, States when there are class III 
compacts and the NIGC, oversee what is done there and are 
partners in that effort. So regulation has been key to the 
success and helped the industry grow to this multi-billion 
dollar proportion that it has reached.
    The National Indian Gaming Commission does what it does 
with about 80 staff members. When we, this commission, came 
onboard in December 2002, there were 60 folks that worked for 
NIGC. The limit on the amount of revenue that we could run the 
agency with was $8 million. That has since changed to $12 
million. With that additional money, we have hired additional 
auditors, additional investigators. They operate out of five 
regional offices, and four satellite offices. About one-half of 
our staff is in the Washington, DC office. The other one-half 
is out in the field.
    In 2004, we spent about $10.6 million to run the National 
Indian Gaming Commission. All of that, of course, is fees that 
are paid by the gaming tribes. We expect in this year to expend 
about $11.2 million, which of course is starting to approach 
that $12 million limit. If the industry continues to grow, as 
we expect it will, we will be asking Congress to increase the 
amount of funds available to us so that we can increase the 
staff to meet the challenges.
    In terms of challenges that face the National Indian Gaming 
Commission, Mr. Chairman, you mentioned in your opening remarks 
the challenge to the NIGC's authority over class III gaming. 
Class III gaming is where the money is. That is the vast 
majority of the gaming in Indian country that is conducted 
pursuant to the tribal-State compacts. We developed in the last 
century minimum internal control standards. Those I think were 
initially suggested by you, Senator McCain. The industry itself 
jumped on that idea, and came up with recommended standards, 
and shortly thereafter the National Indian Gaming Commission 
embraced those as regulations. They now apply to class II and 
class III gaming activity.
    As we have rules, we say to tribes, you have to, at a 
minimum, do these things with respect to tracking the money 
from the time it comes in the door until it goes to the tribal 
bank account. There are many checks and balances therein.
    However, litigation has been commenced by a tribe where we 
did an audit challenging our class III authority on the grounds 
that class II is to be regulated by the tribes with the NIGC 
oversight, but class III is to be regulated pursuant to the 
tribal-State compacts. It is the NIGC's view that we have full 
class III authority in as much as we are authorized to take 
enforcement action if there are violations of the Indian Gaming 
Regulatory Act, NIGC regulations or tribal gaming ordinances.
    The Chairman. Where is that in the judicial system?
    Mr. Hogen. The action entitled Colorado River Indian Tribes 
v. Hogen is in U.S. District Court here in the District of 
Columbia. Oral arguments were held earlier this month, and we 
expect that the trial court level will be rendering a decision 
in the coming weeks.
    The Chairman. Thank you.
    Mr. Hogen. So we will be, of course, watching that with 
great interest. I am sure however that comes out there will 
likely be an appeal. But if we lose that authority, the ability 
to use these minimum internal controls over the vast majority 
of tribal gaming activity, we will be asking Congress to fix 
that for us.
    The Chairman. I do not mean to interrupt you. You have to 
excuse me. I do not understand the logic of the suit that the 
Colorado River Indian tribes. The purpose of IGRA was to 
regulate class III gaming, the primary purpose. Now, they are 
challenging that authority under IGRA?
    Mr. Hogen. That portion of the commission's authority is 
being challenged, yes, Senator.
    The Chairman. On what grounds? Tribal sovereignty?
    Mr. Hogen. On the grounds that the act divided up the 
regulatory tasks; that class III was left to the tribes and 
States. Of course, we argue that, no, we have an oversight role 
with respect to all of it.
    The Chairman. Thank you. Please proceed.
    Mr. Hogen. S. 1529 as introduced in the last Congress would 
have addressed this, would have clarified that NIGC's authority 
extended to both class II and class III.
    The Chairman. Would it help you if that were passed by 
Congress?
    Mr. Hogen. It certainly would. It would resolve the 
questions before the court.
    A second major challenge that faces the National Indian 
Gaming Commission relates to how you distinguish class II 
electronic aids to class II gaming, from electronic facsimiles 
that are class III gaming and are permitted only pursuant to 
tribal-State compacts. When Congress enacted IGRA in 1988, it 
said tribes can use computers and technology to play these 
class II games, bingo, pull-tabs and so forth. They have 
successfully utilized that technology. But technology has now 
reached the point where if you look at one of these class II 
devices or purportedly class II devices, it looks a lot like a 
slot machine. It will have slot machine reels that the players 
view, although they really are not part of the game. They tell 
the player whether they have won or lost, and you push the 
button and the game is over.
    So we, NIGC, is concerned that this has crossed the line, 
but we find ourselves hampered in terms of enforcing that by a 
lack of standards. So we are trying to write some standards. We 
have formed a tribal advisory committee. We have held meetings, 
consultation with tribes; held public hearings. We have 
attempted to get to the right place to reflect what Congress 
intended in 1988. We think that Congress clearly intended that 
there was going to be a difference between class II and class 
III.
    We also think that one of the main characteristics of that 
difference was the class II activities were going to be 
activities where the players participated. We think that if the 
machine so aids the player so it is one touch and the game is 
over, you have crossed that line. There has got to be more 
player participation in the play of bingo and games of that 
nature. So we are trying to develop standards that will clearly 
set that out.
    It is important that the industry have standards because 
tribes, as they use class II and they will use it in the 
situation where they cannot get a compact with the State. They 
will use it in the situation where they have a compact, but it 
limits their class III game numbers and so forth, and just in 
the traditional venues where they have always had bingo and 
pull-tabs and that sort of thing. It is an important tool for 
them to have, but they need to know the scope of that. The 
people that build the equipment need to know the scope of that. 
We need to know the scope of that so that we can adequately 
regulate. So we are trying to draft these regulations.
    Now, the effort has been I think transparent. We have 
written four drafts of these standards, published them on our 
Web site, met with the Tribal Advisory Committee. But the 
tribes are giving us a great deal of criticism, saying we are 
way too conservative, we are too restrictive; that the one-
touch-and-it-is-over is okay.
    Then on the other hand, our brethren from the Justice 
Department take a different view with respect to the scope of 
the Johnson Act. The Johnson Act was enacted in 1951 to deal 
with illegal gambling. It was amended in 1962 to broaden the 
definition of these gaming devices to which it applies. I think 
it was intended to address unregulated gaming. Well, class II 
Indian gaming is regulated gaming. I think it is a horse of a 
different color, so to speak. But nevertheless, the Justice 
Department takes a perhaps more conservative view than the 
National Indian Gaming Commission with respect to what the 
Johnson Act excludes without a compact. I think they might say, 
even though you may have a class II bingo game, if it has some 
electronics connected to it, it would have to have a compact to 
be played.
    The courts have addressed this. In many cases, those courts 
have sided with those who have said this is carved out from the 
Johnson Act. But clarity is desperately needed out there. There 
are over 30,000 of these devices that we think go probably 
beyond the pale in play now, and there are going to be more if 
we do not bring some clarity to this.
    If this committee thinks that we are on the wrong track, 
that player participation is not a crucial element, we would 
love to have that guidance. We are going to try to get to the 
right place. We are going to try to work within the Federal 
family. We are going to try and get where we need to get in 
this connection.
    The Chairman. I cannot speak for the entire committee, but 
I do not think you are on the wrong track.
    Mr. Hogen. Thank you, Senator.
    Senator Dorgan. Mr. Chairman, I share that view.
    Mr. Hogen. Thank you.
    In any event, that is one of the big challenges. S. 1529 as 
introduced in the last Congress would also have clarified that 
fact that the Johnson Act would not apply to these technologic 
aids. That would not completely resolve the differences that we 
have within the Federal family, but it would help clarify this. 
So we are on the way to getting these technical classification 
standards written, but we do want to sort out some of the 
issues with our fellow agency, the Department of Justice.
    Things are good for the most part, but there are some 
problems in Indian gaming. Not all tribes that are generating 
lots of revenue from their gaming activities have the mechanics 
in place to appropriately spend their gaming revenues. The 
Indian Gaming Regulatory Act limits what you can use the 
revenues for, although it gives them great flexibility. In some 
cases, there have been abuses. We have issued an NIGC bulletin 
dealing with use of tribal gaming revenues. This I think has 
helped address that. We have worked directly with some tribes 
that we think have not had the appropriate objective due 
process mechanisms in place, and progress is being made.
    There are instances where tribal gaming authorities are not 
getting the resources that they need and we are encouraging 
tribes to expand that. But for the most part, the effort is 
good, the effort is adequate, and the success of the industry 
speaks for itself.
    So the National Indian Gaming Commission will continue to 
try to play an effective role in the regulation of Indian 
gaming, working with our regulators at the tribal level, and 
when there are compacts with regulators from the State level, 
trying to avoid inefficiency and duplication, yet getting the 
job done. If the industry grows, we will need to grow. I think 
that the more open communication we have with Congress, with 
the tribes we are working with, and with our fellow Federal 
agencies such as the Department of the Interior's Office of 
Inspector General and the Department of Justice, the more 
successful we will be.
    I stand ready to attempt to respond to any questions the 
committee might have with respect to the NIGC's role in this 
regard.
    [Prepared statement of Mr. Hogen appears in appendix.]
    The Chairman. Thank you very much.
    Mr. Devaney.

STATEMENT OF EARL E. DEVANEY, INSPECTOR GENERAL, DEPARTMENT OF 
                          THE INTERIOR

    Mr. Devaney. Mr. Chairman, I want to thank you and the 
members of the committee for inviting me up here today to talk 
about regulation of Indian gaming. In the last decade, my 
office has conducted a number of audits on issues directly 
related to Indian gaming regulations under IGRA, and the 
financial management activities of the NIGC, particularly 
tribal gaming revenue allocation plans and the taking of land 
into trust.
    We have investigated or prosecuted individuals for theft 
and/or embezzlement from Indian gaming establishments, 
investigated allegations surrounding the Federal recognition 
process, and we are currently working with our Federal law 
enforcement partners on several criminal investigations related 
to the Indian gaming industry.
    All of these audits and investigations, coupled with my 
personal observations and a background as a law enforcement 
professional for over 30 years, leads me to believe it is time 
to seriously consider regulatory enhancements and potential 
legislative changes to reflect the realities of an $18.5-
billion industry.
    My experience and intuition also tells me that when there 
is this much money involved, bad guys will come. To think 
otherwise or to imagine that Indian gaming will somehow escape 
the evils faced by non-Indian gaming equates to the proverbial 
ostrich sticking its head in the sand.
    While the investigations we have conducted into allegations 
involving particular tribal recognitions made by the Department 
have rarely uncovered any improper behavior, we are nonetheless 
troubled by the invariable presence of wealthy individuals and 
companies invested heavily in the recognition outcome for 
seemingly one reason only, that is to ultimately fund and then 
reap the financial benefits of a new gaming operation.
    As this committee well knows, one of IGRA's primary 
purposes was to ensure that the proceeds from Indian gaming 
were used to fund tribal operations, economic development and 
the general welfare of its members. Therefore, any loss of 
gaming revenue as a result of criminal behavior will obviously 
negatively impact the ability of the tribes to provide vital 
services such as health care, law enforcement, housing and 
education.
    Our audits of IGRA and the NIGC dating back as far as 1993 
chronicle the lack of Federal resources available to 
effectively oversee Indian gaming. For instance, in a 1993-
audit report, we reported that the NIGC had only a field staff 
of 24 and a budget of $2 million to oversee 149 tribes which 
had already initiated 296 gaming operations. When we recently 
took a snapshot of NIGC, we found that the commission had a 
budget cap of $12 million and only 39 auditor-investigators in 
the field tasked with overseeing more than 200 tribes with over 
400 gaming operations. By contrast, the Nevada Gaming 
Commission has a budget of $35 million with a staff of 279 
folks to oversee 365 gaming operations, with total reported 
revenues of $19.5 billion.
    One also has to consider the fact that today's Indian 
gaming operations range from a 30-seat bingo parlor in Alaska 
to a tribal operation in Connecticut with six separate casinos, 
nearly 7,500 slots, 388 table games, 23 restaurants, and three 
hotels.
    In our opinion, the NIGC needs additional resources to 
fulfill their expanding role commensurate with the escalating 
growth of the Indian gaming industry. However, we continue to 
be concerned with the dual role that NIGC's field staff often 
performs. One role is to act as liaisons to the gaming tribes. 
In this capacity, the field staff consults with the gaming 
tribes and provides compliance training regarding statutory 
requirements and regulations. On the other hand, these same 
staff member are also asked to issue preliminary violation 
notices against tribes for civil gaming violations and to refer 
criminal matters to the FBI.
    While I understand that the NIGC does not see this as a 
conflict, our view is that these dual roles are wholly 
incompatible. Put another way, it is hard to wear a white hat 
on a Monday and Tuesday, and then switch to a black hat on a 
Friday and a Saturday.
    Recently, under the direction of the attorney general's 
Indian country subcommittee, and specifically under the 
leadership of my good friend Tom Heffelfinger, the U.S. 
attorney for the District of Minnesota, various Federal law 
enforcement and local and State law enforcement entities came 
together to form the Indian Gaming Working Group. We are proud 
to be part of this effort. None of the Federal, State or local 
law enforcement members of this Working Group have the 
resources to address the potential crimes in Indian country 
gaming alone. Therefore, leveraging our investigative resources 
in a common alliance not only makes perfect sense for us, but I 
would submit is the kind of good government action that the 
American public would expect us to take.
    Mr. Chairman, my greatest fear is not that the integrity or 
accountability of Indian gaming will be compromised from the 
inside of the actual casinos, but rather by the horde of paid 
management advisers, consultants, lobbyists and financiers 
flocking to get a piece of the enormous amount of revenues 
being generated by this industry.
    For instance, when tribes enter into management contracts 
for the operation of their gaming activities, those contracts 
are submitted to and approved by the chairman of the NIGC. 
Included in the NIGC's review is a background investigation of 
the principals and investors. Some tribes have circumvented 
this review, approval and background process by entering into 
consultant agreements which, although called by a different 
name, do not significantly in substance differ from management 
contracts. As a result, the terms of these consulting 
agreements, including the financing and compensation, are not 
subject to review and approval by the NIGC, nor do the 
backgrounds of the consultants, principals and investors get 
scrutinized.
    Another concern we have is the Federal statute that carves 
out an exception to the usual recusal period for departing 
Department of the Interior officials. The statute permitting 
these officials to represent recognized Indian tribes in 
connection with any matter pending before the Federal 
Government immediately after leaving the Department perpetuates 
a classic revolving door. This law was enacted in 1998 because 
Indian tribes often lacked effective representation in front of 
Federal agencies. At the time, the only persons with expertise 
in Indian matters were DOI employees. Today, that dynamic has 
obviously changed and the statute has outlived its original 
intent. In fact, it is hard to find a law firm in Washington 
today that does not have a thriving Indian practice area.
    IGRA prohibits gaming on trust lands acquired after 1988 
unless the lands meet specific statutory exemptions. Both BIA 
and NIGC share responsibility for reviewing applications for 
converting existing trust lands into gaming. Our recent 
evaluation of this process found 10 instances in which tribes 
have converted the use of lands taken into trust by the Bureau 
of Indian Affairs [BIA] after 1988 from non-gaming purposes to 
gaming purposes without the approval of BIA or NIGC. 
Surprisingly, we also learned that neither the BIA nor NIGC 
even had a process for identifying these converted lands.
    In an audit report issued in 2003, we discovered that 
neither the BIA nor the NIGC were monitoring gaming tribes to 
determine whether they were complying with their BIA-approved 
revenue allocation plans, or whether the tribes were making per 
capita distributions on gaming revenues without an approved 
plan. While IGRA provides that the tribes make per capita 
payments of net gaming revenues only after BIA's approval of 
their plan, it does not provide the BIA or the NIGC the 
authority to monitor them once they are approved. Absent a 
process for monitoring tribal revenue distributions, BIA's 
approval authority and NIGC's enforcement authorities serve 
little practical purpose.
    Because Indian casinos are a cash-rich enterprise, they 
are, in our opinion, particularly attractive to money 
launderers. In these instances, criminals use casinos to cash-
in illegal proceeds for chips, tokens or coins in amounts that 
do not trigger reporting requirements and then game for short 
periods of time to redeem clean money. Tribal financial 
institutions without Federal or State charters and attendant 
regulations are also particularly vulnerable to manipulation. 
For instance, the U.S. Reservation Bank and Trust is an Indian-
controlled banking institution. Although represented as a bank 
to other financial institutions and investors, it is alleged to 
have been established solely to execute a Ponzi scheme. Twenty-
million dollars was seized in Arizona shortly before the 
operators of this bank could wire the funds to an off-shore 
account.
    Finally, as this committee so recently demonstrated, great 
care must be exercised by gaming tribes when they are 
approached by unsavory lobbyists promising imperceptible 
services for astonishing fees.
    Mr. Chairman and members of the committee, we are currently 
reviewing our authorities in Indian country to determine 
whether we can establish an even more vigorous presence in the 
gaming arena. In the meantime, we have had the opportunity to 
review the proposed technical amendments to IGRA advanced by 
the NIGC. Overall, we support NIGC's efforts in regards to 
funding flexibilities and regulatory enhancements, particularly 
the provisions that would allow in-depth background 
investigations to be conducted on a much broader range of 
individuals working in or on behalf of the Indian gaming 
industry.
    In the meantime, should this committee have specific issues 
of concern that might benefit from an audit, evaluation or an 
investigation by my office, I stand ready to assist the 
committee in any way I can.
    Mr. Chairman and members of the committee, thank you for 
the opportunity to testify here today. I stand ready to answer 
any questions you might have.
    [Prepared statement of Mr. Devaney appears in appendix.]
    The Chairman. Thank you very much.
    Welcome, Mr. Heffelfinger.

STATEMENT OF THOMAS B. HEFFELFINGER, U.S. ATTORNEY, DISTRICT OF 
                MINNESOTA, DEPARTMENT OF JUSTICE

    Mr. Heffelfinger. Chairman McCain, Vice Chairman Dorgan and 
members of the committee, thank you very much for the 
opportunity to appear before you.
    I am Tom Heffelfinger. I am not only the U.S. attorney for 
the District of Minnesota, but I also am the chairman of the 
Native American Issues Subcommittee of the Attorney General's 
Advisory Committee. The NAIS is the responsible body for 
developing policy recommendations and practical recommendations 
for the Attorney General, related to the Department of 
Justice's involvement in Indian country.
    Since 2001, the U.S. attorneys on my committee have focused 
on five primary priority issues, one of which is Indian gaming. 
In that connection, I appreciate the opportunity to speak 
before you today regarding the Department of Justice's role in 
the enforcement of Indian gaming.
    There are several different components, numerous components 
actually, within the Department of Justice responsible for 
issues related to regulation and enforcement in Indian gaming. 
First of all are the U.S. attorneys; second, the FBI, the 
Criminal Division; the Environmental and Natural Resources 
Division; and the Office of Tribal Justice.
    First of all, I would like to address one of the issues 
raised by my good friend Chairman Hogen, an area where there 
may be some disagreements as to strategy and outcomes, but 
there is no disagreement as to the issue, and that is on the 
need to clarify the distinction between class II and class III 
games. There has been considerable litigation regarding tribal 
gaming enterprises and the need to classify types of games as 
either class II or class III.
    It is the Department of Justice's position and continues to 
be that whether a machine is characterized as class II or class 
III, the Johnson Act prohibits gambling devices absent a State-
tribal compact. It is also the Department of Justice's position 
that both Congress and the Indian Gaming Regulatory Act 
intended that there be a clear distinction between class III 
games that require a compact and class II games that do not. In 
this era of creativity, the manufacturers of gaming equipment 
have attempted to use creative engineering and graphic design 
to blur the lines between these two classes.
    This clarification is actually not only in the best 
interests of just the Department of Justice and the regulators 
at the NIGC, but also of the industry itself and of the tribal 
gaming operators. Certainty is what is needed here. We continue 
to work with and will continue to work with the NIGC to attempt 
to develop a united strategy to present to you if appropriate.
    There is a unique legal and political relationship that 
exists between the United States and the tribes. On September 
23, 2004, President Bush recognized this relationship when he 
reaffirmed the longstanding policy of the United States to work 
with federally recognized tribes on a government-to-government 
basis and to support and respect tribal sovereignty and tribal 
self-determination.
    The Office of Tribal Justice within the Department of 
Justice is the entity which serves to coordinate activities 
pursuant to this relationship between the tribes and the 
Department of Justice. Federal law in the area of criminal 
responsibility vests the Department of Justice with primary 
jurisdiction over most felonies that occur in Indian country. 
The FBI and the U.S. Attorneys' offices are the Federal law 
enforcement agencies primarily responsible for investigating 
major felonies that occur in Indian country. This includes the 
area of Indian gaming.
    Within the Department, the FBI is the Federal criminal 
investigative agency primarily responsible for investigating 
criminal acts related to casino gaming operations, including 
operations that occur in Public Law 280 or State jurisdictional 
criminal venues.
    Similarly, within title 18 of the U.S. Code, there are 
provisions at section 1167 and 1168 for which the FBI and the 
U.S. attorneys are responsible, addressing theft from Indian 
casinos. This is one of those areas, however, in which most 
States, in which the States also have parallel jurisdiction 
either under the Public Law 280 status or under the terms of 
their compact, for the prosecution and investigation of theft 
cases. The Johnson Act criminally prohibits among other things 
the transportation and operation of all gambling devices, 
including slot machines in Indian country, absent the existence 
of a tribal compact.
    Within the FBI, oversight for efforts devoted to Indian 
country lies with the Indian country Unit Special Jurisdiction 
Unit. The NAIS's role is to coordinate and support the efforts 
of the various U.S. Attorneys around the country. In the area 
of Indian gaming in particular there are a variety of FBI sub-
programs, the Department of Justice components I mentioned, and 
representatives of as many as seven other Federal agencies that 
have varying degrees of interest in Indian gaming.
    In early 2003, the FBI and the U.S. Attorneys decided to 
fundamentally change our response to this rapidly growing 
industry, to change from a reactive posture where we waited for 
referrals to be received from the tribes or from other 
agencies, to a proactive posture in which we are developing 
policies and practices designed to enhance the number of 
referrals of criminal activity arising in the context of Indian 
gaming.
    As part of that proactive effort, the Indian Gaming Working 
Group was developed by the FBI. The Indian Gaming Working 
Group's purpose is to identify resources through multi-agency, 
multi-program approaches to address the most pressing and 
significant criminal violations in Indian gaming. This group 
consists of representatives from not only the FBI and the U.S. 
attorneys' offices, and the criminal division within the 
Department of Justice, but also, as Mr. Devaney has mentioned, 
the Office of the Inspector General at DOI, the NIGC, the 
Internal Revenue Service Office of Indian Tribal Governments, 
the Treasury Department's FinCEN, and the BIA's Office of Law 
Enforcement Services.
    The Indian Gaming Working Group met several times during 
fiscal year 2003 in order to get structured, and since that 
time on a monthly basis has conducted telephone conferences 
among its members to address matters of a national significance 
and also the needs of ongoing investigations being conducted by 
the member groups.
    The Indian Gaming Working Group is currently providing 
analysts, financial assistance, functional area expertise and 
coordination assistance in cases that have national 
significance or are of significant impact to the industry and 
to the tribes that the industry serves.
    The FBI's Indian country unit offered regional training 
starting in fiscal year 2004 on the area of Indian gaming. 
Those trainings have been conducted to date in Groton, CN; San 
Diego, CA; Oklahoma City, and the next one is scheduled for 
Minneapolis in June. The purpose of these regional trainings 
being conducted by the FBI with the support of the NIGC and the 
U.S. attorneys, is to develop expertise and to encourage the 
establishment of local working groups. These regional 
conferences to date have resulted in the establishment of local 
groups in both Oklahoma and Arizona, this in addition to local 
Indian Gaming Working Groups that already exist in Sacramento, 
CA, and Minnesota.
    In addition, in its efforts to be proactive and to marshal 
the resources of the FBI, in February 2004 the criminal 
division of the FBI sent out a communication to all of its 
field offices alerting the FBI nationally of the existence of 
the Indian Gaming Working Group, the resources it could apply, 
in an attempt to generate additional referrals and make 
resources available nationally.
    Similarly in a proactive mode, in September 2003, the 
Native American Issues Subcommittee held a 3-day summit of 
Federal, State, and tribal agencies engaged in Indian gaming 
regulation and enforcement. The net effect of that conference 
and our experience in this area has been the development of a 
series of best practices which has been communicated to all the 
U.S. attorneys in an attempt to assist the U.S. attorneys in 
more aggressively responding to this rapidly growing industry.
    Among those best practices is the suggestion that U.S. 
attorneys consider outreach and consultation with tribal 
operators and with State gambling regulators. It is also 
recommended that each U.S. attorney's office designate a 
specific assistant U.S. attorney who will gain expertise in 
this industry, therefore being able to be responsible for 
enforcement in his or her respective district, and for 
coordination with other Federal, State, and tribal regulators.
    It is also recommended that each U.S. attorney's office 
participate in the trainings that are being offered and conduct 
trainings at a local level, not only for their own assistant 
U.S. attorneys, but for enforcement officers both at a State 
and Federal level.
    Another recommendation is that each U.S. attorney's office 
consider flexibility in charging thresholds in order to 
increase the number of cases that are prosecuted at the Federal 
level. There is a recognition within the Department of Justice 
that the Federal Government bears a unique trust relationship 
and a government-to-government relationship with the tribes and 
their gaming operators, and therefore cases which have a 
significant impact on the tribal gaming operation should be 
considered for Federal prosecution even if the amounts in 
question are lower than we might usually use for determining 
whether or not to take on a fraud case.
    It is also recommended U.S. attorneys actively support the 
National Working Group and develop a local working group within 
his or her specific district. The idea of a local working group 
and a national working group operating in tandem is to provide 
an effective vehicle for the exchange of intelligence upwards 
and downwards and inwards and outwards among the various 
districts within the United States.
    Another one of our policy recommendations is that the U.S. 
attorneys in the Department of Justice support the development 
of national information sharing and cooperation arrangements 
within the industry, whether that development is conducted 
either by the NIGC or by the industry itself, such as the 
National Indian Gaming Association. Information sharing and 
national cooperation are essential to having effective 
background investigations and criminal investigations.
    The Department of Justice is making important strides in 
the prosecution of criminal activity arising from the conduct 
of Indian gaming operations. As with most law enforcement 
efforts, limitations exist due to resources. However, as is 
also true in most law enforcement operations, coordination, 
communication and cooperation can compensate for many of those 
lack of resources.
    I want to thank you very much for the opportunity to speak 
to you. We feel that our proactive approach in response to this 
major industry is making major strides in improving our ability 
to respond to the growth in this industry. I stand ready for 
questions, Mr. Chairman.
    [Prepared statement of Mr. Heffelfinger appears in 
appendix.]
    The Chairman. Thank you very much.
    You just stated you are making strides in enforcement in 
prosecution. What have you been doing lately?
    Mr. Heffelfinger. We have tracked the statistics for the 
last few years and found that roughly on an average since 2000 
there are about 60 cases annually that are referred to the U.S. 
attorneys' offices for prosecution nationally. We believe that 
statistic under reports the number of cases that have been 
referred because it only tracks those that are referred under 
the two sections I mentioned, 1167 and 1168. Those referrals 
also do not pick up the cases that are referred to prosecution 
in Public Law 280 jurisdictions or pursuant to compact to our 
State counterparts.
    The Chairman. In your view, is there a problem out there? 
If so, is it growing less or what is the status?
    Mr. Heffelfinger. Our view is that the number of cases 
reported under represents the problem that exists within the 
industry, that the theft incidence is in fact greater than 
that. Part of our effort here is to improve the referral rates 
from the tribes, as well as improve our own ability to detect 
these independent of a referral.
    The Chairman. I understand that there is a difference 
between you and the Indian Gaming Commission as to how we can 
define class II gaming. I certainly would like to see those 
differences reconciled if at all possible because we need to 
act on this issue. I agree with the witnesses that now the 
definition is so badly blurred thanks to advances in technology 
that there is gaming under, quote, ``class II'' that is clearly 
not class II, certainly not the intention of the original act.
    So I would hope that you could get us, first, to sit down 
together and see if you can work out the differences; and 
second, if there are differences maybe we can help work them 
out because I think it is very likely we may have to act 
legislatively on that issue. Would you all increase the level 
of communication and see if we cannot come up with a common 
position. I do believe that it is a serious problem. Do you 
agree, Mr. Devaney?
    Mr. Devaney. Yes; I do. Absolutely. It has to be resolved.
    The Chairman. Okay, so we need to act on that.
    On the issue of managing contracts versus consultants, 
obviously it was the intent of the law to limit the amount of 
money that a, quote, ``management contract'' would entail, so 
they just changed the name to consultant. Am I right, Mr. 
Hogen?
    Mr. Hogen. That has happened in a number of instances, and 
after that trend was discovered or perceived by the National 
Indian Gaming Commission, we asked all tribes to send to NIGC 
all the agreements of this nature that they were entering into 
so that we could look at them even though the label said 
something else, ``did it constitute a management contract?''
    The Chairman. And some of them have been exorbitant?
    Mr. Hogen. Yes; we found many instances where at least 
initially on the drawing board that would have given the lion's 
share of the revenue to the developer. Fortunately, in some 
cases we got that resolved. There are still situations we are 
looking into, and hopefully we can make sure that in fulfilling 
the trust responsibility that we have, the tribes get their 
fair shake.
    The Chairman. I think we may have to legislatively act to 
define the role, because they can continue to change the name, 
so we may have to describe exactly what that activity is or 
that relationship is, as opposed to a specific name.
    One of the issues that is extremely sensitive here and that 
has aroused a lot of controversy is the taking of lands into 
trust status for the purpose of initiating gaming operations. I 
would be interested in the opinion of all three of the 
witnesses on that issue, beginning with you, Mr. Hogen.
    Mr. Hogen. Well, from the National Indian Gaming 
Commission's point of view, those are really tough questions. 
Fortunately for us, the Department of the Interior often is the 
first place that question has to be answered. But we often have 
to address it ourselves. For example, if a management contract 
arrives, we consider it. Does this really deal with gaming on 
Indian lands as defined under the Indian Gaming Regulatory Act?
    The easy places to do Indian gaming have already been taken 
advantage of. It is going to take some creativity to develop 
new or perhaps competitive ones.
    When these questions arise, they often deal with tribes 
that were terminated and have been restored, perhaps newly 
recognized tribes, and in most cases tribes that are remotely 
located and do not have a good opportunity to do gaming. So 
they want to go in some cases to old homelands and so forth.
    It is not a model of clarity the way it is set up, and you 
cannot expect something that goes back historically through 
some very tragic changes in Federal Indian policy to 
necessarily be simple. But we need to scrutinize those 
instances when they come before us. We want to do justice where 
it is deserved, but if some developer is the driving force and 
there is really not a legitimate claim, we ought to say no in 
those instances.
    The Chairman. Mr. Devaney.
    Mr. Devaney. Senator, my critique, first of all the audit I 
mentioned earlier in my testimony is still in draft stage. When 
it is done, I will get it up to every member of the committee.
    The Chairman. You have to pull the mike a little closer 
please.
    Mr. Devaney. The audit that I mentioned earlier is at the 
draft stage and I will get it up to everybody when it is 
finally done. The scope of it was rather limited. We were 
looking at lands taken into trust prior to 1988 that had 
subsequently been converted to gaming without the knowledge of 
BIA. That is a problem. The BIA did not know it happened. So we 
are going to hopefully show that to the Secretary and see if we 
can get some closer monitoring.
    But like other issues where NIGC has approval authority or 
BIA has approval authority, the difficulty comes after it has 
been approved. The monitoring of, for instance, the per capita 
distribution does not occur. The approval is granted and then 
after that nobody monitors to ensure that what was approved is 
actually happening. So there may be some legislative fixes 
needed there to give BIA and the NIGC the authority to monitor 
and enforce subsequent to approvals that have been given.
    The Chairman. Do you have any views, Mr. Heffelfinger?
    Mr. Heffelfinger. Yes; I do, Mr. Chairman. I agree with 
Chairman Hogen. This is an industry where location, location, 
location are the three rules and all the good locations are 
taken. The pressure therefore, because of the amount of money 
that can be had, is to identify new lands on which gaming can 
be operated under some kind of an arrangement. This creates 
great opportunities or temptations, if you will, from people 
outside of tribes to enter into cooperative arrangements, et 
cetera.
    I think that the future holds a whole bunch of cooperation 
agreements between Indian and non-Indian entities in an attempt 
to develop land which can be taken into trust for purposes of 
gaming. As those relationships become more and more bizarre, 
the need for the Department of Justice to look into those is 
going to become greater and greater because of concerns of 
theft, fraud or abuse.
    The Chairman. We would appreciate any legislative 
recommendations if you think they are necessary. I think this 
is a huge problem. One of the first hearings we have had this 
year on this committee was the designation of a place in 
downtown Oakland as a gaming establishment that was put into an 
appropriations bill, a bizarre situation to say the least.
    My final question, Mr. Devaney, you have been looking at 
this issue of Federal employees leaving the Government and 
immediately beginning to work for the tribes. I understand in 
IGRA while we may have at the time we wrote the legislation, 
because the only experts on Indian gaming may have been Federal 
employee. It seems to me there has clearly been abuses of that. 
Is that your view?
    Mr. Devaney. Well, my view is that it is not necessary any 
longer. I think in 1988 when this came about, there was a real 
need for tribes to have people that had the knowledge to be 
representing them before the Federal Government. Today, that 
dynamic has changed and it is not necessary to exclude, to 
carve out this exception which otherwise would be a conflict of 
interest violation for any other Federal employee departing 
Federal Government.
    The Chairman. Thank you very much. I thank the witnesses.
    Senator Dorgan.
    Senator Dorgan. Mr. Chairman, thank you very much.
    I have a couple of questions, but just a curiosity item. I 
know one of the issues with respect to Indian gaming is 
recognition of tribes. I am curious, what are the smallest or 
what is the smallest tribe that has been recognized that has a 
gaming operation?
    Mr. Hogen. I do not know of the National Indian Gaming 
Commission keeps statistics of that nature. I believe that 
there is a tribe that had a single adult member.
    Senator Dorgan. One person?
    Mr. Hogen. Yes.
    Senator Dorgan. I had heard as well, there is one person 
that sought recognition as a tribe and has a casino. I also 
heard that there are either three or five people that gained 
recognition and now have a casino. Would you send us some 
statistics about that, because that is another part of this 
issue.
    Commissioner Hogen, you heard the Inspector General's 
assessment, which I thought was reasonably pessimistic about 
the challenges and the ability with the current resources to 
address the challenges. Would you respond to the Inspector 
General's testimony generally?
    Mr. Hogen. Well, I think there are a number of concerns 
that are legitimate concerns, for example, tracking the use of 
tribal gaming revenues and following up on the revenue 
allocation plans. I guess the first thing that I think could be 
said, we have to remember that Indian gaming is not a Federal 
program. The Indians invented Indian gaming. They are doing it 
and they are doing it very well, and the Great White Father 
should not tell them where to spend every penny.
    Nevertheless, it is a specialized industry. There is a 
regulatory structure there. And when there are rules, you can 
only use the dollars for this or that, they ought to be adhered 
to.
    When the check gets written from the casino to the tribal 
general fund, then those funds go in with mining and timber and 
grazing revenues and so forth. NIGC really is not equipped to 
follow that through.
    Senator Dorgan. When you say ``not equipped,'' what do you 
mean by ``not equipped''?
    Mr. Hogen. We are experts on gaming and we know how a 
casino ought to be run, but in terms of distinguishing which 
dollars in the general fund got spent for this housing program 
or to send these people to that, is really not what we do, nor 
do we see a real mandate in the Indian Gaming Regulatory Act to 
do that. But it is a challenge. It ought to be better 
addressed. The Inspector General's report that was done here a 
couple of years ago clearly identified that concern and we 
share that concern.
    Senator Dorgan. Let me ask, one of the points Mr. Devaney 
made that I think is important, I think Senator McCain asked a 
question about it, and that is the circumvention of the 
management contracts by calling them consulting contracts, 
which in one instance can cause a substantial amount of revenue 
to be drained away. Even more importantly, I think Mr. Devaney 
pointed out, it can become a feeder for organized crime and 
other undesirable elements to get into the system because you 
do not have the background check requirement.
    Now, you indicate that you are taking a look at these 
consulting contracts in terms of the finances and whether it 
would bleed some of these Indian gaming operations. But are you 
in fact looking at any that exist with respect to background 
checks on all of those involved in the contracts?
    Mr. Hogen. The scenario that is often followed is, we ask 
the tribe, send us the agreement you have with your developer. 
They send us the consulting agreement, the development 
agreement, whatever. We look at it to determine is it a 
management contract that may require background investigations. 
IGRA only requires NIGC background investigations if it relates 
to class II gaming or class II and class III gaming. We think 
that is an area that needs to be addressed, a concern that 
should be fixed.
    So usually if we say this looks like a management contract, 
they say, well, let us fix it. We will take the part out that 
gave us the control, so it is not a management contract. They 
do that, then there is no legal requirement that we do 
background investigations.
    Now, tribes may require those individuals to be licensed at 
the tribal level to do investigations in that connection, but 
we would be out of that direct loop.
    Senator Dorgan. I think the concern expressed by the 
Inspector General is that when you have an $18-billion 
industry, we have elements that will flock to that money to try 
to find a way to get a piece of it. I think there are several 
things that have been discussed today that need addressing.
    With respect to the court case that you described earlier, 
it seems to me that the minimum internal control standards, 
which is apparently the subject of the lawsuit, probably 
especially needs to apply to class III, right? I mean, is the 
lawsuit contending that it should not apply to class III 
gaming?
    Mr. Hogen. Yes; that is what it contends.
    Senator Dorgan. Wouldn't it be logical that it especially 
should apply to class III? Is that your position?
    Mr. Hogen. Well, that is where the money is. That is where 
the major action is. Yes, I think we would be a much less 
effective oversight body, watchdog so to speak, if we could not 
go there.
    Senator Dorgan. I think all of you have raised a number of 
points. Mr. Heffelfinger, I do not know that you answered in 
brief form the chairman's question. Are there real causes for 
alarm here with respect to law enforcement and potential 
criminal activity? Or is this just a kind of a normal thing 
that you put together a working group to deal with?
    Mr. Heffelfinger. No; we have not been able to quantify the 
actual theft losses, but let me share with you the figure that 
I have found compelling. In our meeting a couple of years ago, 
we had a presentation from Nevada gaming authorities. In 
Nevada, they estimate that 6 percent of their net gaming 
revenues are lost to theft, fraud, and embezzlement every year.
    Now, I have no idea whether the 6 percent figure would 
apply in Indian gaming. Even if it is a 3-percent or a 5-
percent figure, we are still talking hundreds of millions of 
dollars of theft losses and fraud losses in this industry every 
year, even assuming good enforcement and regulation such as 
exists in Nevada.
    That amount of money being lost is money that is not going 
to the benefit of tribal people, as Congress intended, and it 
is more money than is reflected in the number of cases that 
have been referred to us to date. Therefore, our efforts have 
concluded that we had to change the way we did business. 
Instead of being reactive, we had to be proactive and go out 
and seek out referrals from the tribes and new ways to get 
those referrals.
    Senator Dorgan. Mr. Chairman, Indian gaming is legal. 
Tribal sovereignty, it exists. It was not given to the tribes. 
They are sovereign. I think we, however, have established an 
architecture or a mechanism for regulatory control. The purpose 
of this hearing is to evaluate how effective that is, what 
changes if necessary should apply. I think the testimony of all 
three of you has been very helpful and I appreciate your being 
here.
    The Chairman. Thank you.
    Senator Thomas.
    Senator Thomas. Thank you, Mr. Chairman. I will be very 
brief.
    The purpose of this whole operation is to have a fair, 
efficient and effective regulatory system. I guess I would like 
to ask each of you very briefly what would be your highest 
priority for change to cause that to happen?
    Mr. Devaney. Senator, I think the issue that we have 
already talked about, the one where the term ``consultant'' is 
being substituted for ``management.'' It gives me great 
concern. It is primarily due to the lack of backgrounds that 
get done on these folks that are now flocking to this money. I 
really worry about the players that are on the peripheral of 
this industry, that now see this enormous amount of cash there.
    There is always going to be embezzlement and theft from 
inside the casinos themselves. I think that the tribes and the 
States and to the extent that we get involved in that, we are 
always going to be able to contain that problem. My fear is the 
sophisticated white-collar scheme that the tribes may not know 
about, that we may not know about.
    Senator Thomas. All right. Thank you.
    Mr. Chairman.
    Mr. Hogen. If I were to list three or four of the 
priorities----
    Senator Thomas. List one. Your highest priority.
    Mr. Hogen. Just one, okay, one. I think we need to clarify 
that the National Indian Gaming Commission in its oversight 
role extends to all of the Indian commercial gaming, class II 
and class III. If that is in doubt, our role and our 
effectiveness in the structure of the Indian Gaming Regulatory 
Act is at risk.
    Senator Thomas. Okay. Thank you.
    Yes, sir.
    Mr. Heffelfinger. Senator, the system established under 
IGRA is a splintered system of shared responsibility between 
the tribes, the State and the Federal Government, depending on 
the class of gaming. But the Federal Government's role should 
be one, in my opinion, of organization in order to ensure that 
splinters don't go splintering and doesn't allow cracks to 
develop.
    I am very, very concerned about the lack of resources that 
are available to oversee an industry that is generating about 
$18 billion of revenues. California represents this, and is 
growing at a rate of about $1 billion a year. It is anticipated 
that in California the net gaming revenues will exceed Nevada's 
within a year or two. Yet if you look at the State of Nevada, 
and what we have found is that Nevada has hundreds of 
regulators to regulate just that State. We do not have those 
resources at a Federal level, even to fulfill our portion of 
the responsibility in this shared area.
    Senator Thomas. All right. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Senator Inouye.
    Senator Inouye. Thank you, Mr. Chairman.
    There are slightly over 200 tribes, and those tribes 
operate a little over 400 gaming operations. Of that number of 
tribes, how many have been investigated for criminal activity?
    Mr. Hogen. At the National Indian Gaming Commission, I do 
not think we have categorized it annually or totally. 
Certainly, the vast majority of those tribes have not been the 
subject of criminal investigations, and there have not been 
reports to us that we have not followed-up on indicating 
criminal activity there.
    Now, there may well be instances where they internally have 
revoked gaming licenses, referred things for local prosecution 
and so forth that we would not necessarily hear about, although 
we do have an improving line of communication in that 
connection.
    I expect we could try to put together numbers that we have, 
but I cannot quantify it at this moment.
    Senator Inouye. I would appreciate that because otherwise 
one may have a picture of these tribal leaders or these nations 
are crooked. We speak of embezzlement and theft. Have any 
involved tribal leaders?
    Mr. Heffelfinger. Senator Inouye, our experience has been 
that the vast majority of tribal leaders are working their 
hardest to realize the benefits of Indian gaming for their 
people. As Chairman Hogen has said, the industry has been very 
successful in that regard. In fact, the number of prosecutions, 
I do not have a number, but based on my experience both inside 
and outside of government, it is a very small handful of tribal 
leaders who have ever been indicted for anything arising from 
Indian gaming.
    In fact, of the cases that we have seen within the 
Department of Justice over the last 5 years, the vast majority 
involve thefts or embezzlements or gaming scams either 
committed by outsiders against the casino or committed by 
lower-level insiders such as cashiers and the like who are 
doing an embezzlement.
    I am not as pessimistic. This is a segue to your question. 
I am not as pessimistic regarding this as some others, because 
I believe that tribal governments and tribal members recognize 
the importance of profitable operations to their people. So it 
is difficult for someone who is outside the tribe to gain 
control over the money to a level that allows them to steal in 
great quantities.
    However, there are exceptions, and it is the exceptions 
that worry me. But the vast, vast majority of tribal leaders 
and tribal members simply, in my experience, would not allow 
this level of embezzlement to take place by a non-tribal 
member.
    Senator Inouye. Would you advise the committee as to how 
many tribal members have been convicted?
    Mr. Heffelfinger. Off the top of my head, I cannot, Senator 
Inouye, but I will do the research and we will send you a 
response with whatever we find.
    Senator Inouye. Do you know if any have been?
    Mr. Heffelfinger. I do not know of a single leader who has 
been convicted of a violation related to Indian gaming. There 
have definitely been tribal leaders, one of which I know is in 
the district of North Dakota, Senator, within the last 3 years, 
who was convicted of activity independent of the gaming 
operations. The problem with Indian gaming is that once the 
revenues are realized by the tribe, it funds many other tribal 
operations in which tribal leaders have involvement.
    So it is not quite so simple as to say that you do not stop 
the money at the casino door because it funds, as I said, other 
operations in which misconduct can occur, and I am afraid in a 
small number of cases has.
    Senator Inouye. I asked those questions because I wanted to 
commend you for protecting the Indian tribes from outside con-
men.
    Mr. Heffelfinger. Thank you, Senator.
    The Chairman. Senator Coburn.

 STATEMENT OF HON. TOM COBURN, M.D., U.S. SENATOR FROM OKLAHOMA

    Senator Coburn. Thank you, Mr. Chairman, for holding this 
hearing. I apologize for being late. I was chairing another 
hearing.
    This is a significant issue in my home State. We have 39 
recognized tribes. Indian territory law is different than the 
reservation law. Oklahoma has compacted with a number of them. 
There are a couple of questions. The Nevada Gaming Commission 
is a rigorous commission to deal with. They are all business. 
They have absolute requirements. In my personal experience, I 
was in on the development of a coin acceptor. It was based on 
disruption of the magnetic field. We could not even submit bids 
until myself, my family and my children submitted information 
to the Nevada Gaming Commission before we were ever even 
allowed to enter a bid.
    If we really want to make sure that tribal gaming money 
goes to the tribes, we need to change the rules under which 
people deal with the tribes. We need to have a structure that 
assures the same kind of structure as that of Nevada gaming. 
You just testified they lose six percent, and they are the most 
rigorous in the world. For us not to have that, I think create 
it or create the outlines so that the tribes can have that kind 
of structure to assure that those moneys are going to the very 
people who are supposed to benefit from it. We are keenly 
interested in seeing that tightened up in Oklahoma.
    The other thing that I would just inject is trust lands and 
the determination of trust lands determines the winners and 
losers in Oklahoma by tribe. The fact is, the observation that 
I have made representing all 39 tribes in Oklahoma, is that it 
is not necessarily a fair process. At times, those that are in 
the game want to keep those that are not in the game from being 
in the game. I think that is something else that we need to 
look at. Again, that is distinct for Oklahoma because of 
Oklahoma Indian Territory laws and the treaties that were 
signed for Oklahoma that are different than the other 
reservations.
    I would love to hear your response from the Department of 
the Interior on that, and have you looked at the granting of 
trust status lands for smaller tribes, even though legitimate 
tribes that have been there for years, and their inability to 
gain trust status, to have a gaming operation.
    Mr. Devaney. Senator, I have been in the position of 
investigating allegations about land into trust, as opposed to 
being involved in the process, which is the Department of the 
Interior itself that does that. There are a number of things 
that bother me. One of which I mentioned earlier is that every 
time we look at one of these, there are a lot of wealthy 
individuals and wealthy companies that seem to be involved in 
the process. It appears to us that they are there for one 
reason, and that is to come in at the end of the game and be 
the financier and reap the profits.
    As an old law enforcement type, I am suspicious. But having 
said that, the few tribal recognitions that we have looked at, 
we have not really uncovered those kinds of problems. Now, it 
is a byzantine process and it is extraordinarily slow.
    The Chairman. Unless it is put into an appropriations bill.
    Mr. Devaney. Unless it is taken out of the Department of 
the Interior. But if it is in the Department of the Interior, 
it is slow and byzantine. So I am concerned. I am more 
concerned with, as I have said several times today, with the 
outsiders than I am with the problems that might exist inside.
    Senator Coburn. I recognize tribal gaming is here to stay. 
Our job has to be to create the framework so that those people 
who are supposed to benefit from tribal gaming, do.
    I again thank the chairman for having this hearing. I 
apologize I will not be able to stay for the rest of it, but I 
look forward to working with the chairman on clearing up some 
of these issues, especially the definition between class II and 
class III gaming. It needs to be clear with the technology. We 
need to straighten that out. And then we need to make sure that 
the structure is there for the tribes in Oklahoma to manage 
this themselves, but also under the regulatory framework that 
we create.
    I would just suggest that we need a tighter regulatory 
framework in terms of who can deal with the tribes and what 
they have to qualify before they can.
    Thank you.
    The Chairman. Thank you, Senator Coburn.
    We are going to have a hearing on this issue of taking land 
in to trust for gaming purposes, how the process works, where 
it needs to be fixed. I think that is a very, very important 
issue.
    I thank the witnesses. Mr. Heffelfinger, if you are not the 
right guy to negotiate with Mr. Hogen on the issue of class II, 
we will see if somebody else can. If we do not get agreement 
between the two of you, then it lessens the chances of us 
acting legislatively dramatically. We either have opposition 
from one very important player or another. So I hope we can 
resolve those differences because this is clearly one of the 
areas I think we need to act.
    So Mr. Hogen, you will be ready to compromise, right?
    Mr. Hogen. We will talk long and hard, Senator. Yes.
    Mr. Heffelfinger. Senator, I am on the team and we are 
meeting and we will continue to meet to get it done.
    The Chairman. Thank you very much.
    The testimony of all three witnesses has been very helpful, 
and we thank you for appearing today.
    Our next panel is Norman H. DesRosiers, commissioner, 
Viejas Tribal Government Gaming Commission, Alpine, CA; Charles 
Colombe, treasurer, National Indian Gaming Association and 
president, Rosebud Sioux Tribe, Rosebud, SD. He is accompanied 
by Mark Van Norman, executive director, National Indian Gaming 
Association. Kevin Washburn, associate professor of law, 
University of Minnesota; Steven Light, assistant professor, 
University of North Dakota; and Kathryn Rand, associate 
professor, University of North Dakota School of Law.
    I know that the vice chairman is pleased that the 
University of North Dakota is well represented here today.
    Commissioner DesRosiers, would you help me with the 
pronunciation of your name?
    Mr. DesRosiers. DesRosiers.
    The Chairman. DesRosiers. Thank you very much and please 
proceed.

STATEMENT OF NORMAN H. DesROSIERS, COMMISSIONER, VIEJAS TRIBAL 
                  GOVERNMENT GAMING COMMISSION

    Mr. DesRosiers. Thank you very much, Mr. Chairman, Mr. Vice 
Chairman, and committee members.
    It is genuinely an honor to have been invited here. To my 
knowledge, this may be the first time that a tribal regulator 
has been given the opportunity to testify. We hear usually only 
from Federal and State regulators. I have submitted written 
comments for the record.
    The Chairman. All the written statements will be made part 
of the record.
    Mr. DesRosiers. Thank you.
    You will probably hear a little different slant on things 
from what you heard earlier from me. On behalf of myself and my 
colleagues, the hundreds of men and women that do what I do 
every day, year-in and year-out, on-site regulation of tribal 
gaming facilities, we are a little bit frustrated that we 
continually hear how tribal gaming is insufficiently regulated.
    Let me tell you what we do and who we are. The Viejas 
Tribe, for example, appropriates over $3.9 million just to 
support my budget for my agency. I have over 52 regulatory 
personnel, and this is to regulate one facility. This is more 
resources than some States appropriate. We have the latest 
technology. We have facial recognition technology, digital 
fingerprinting. We have background service, computerized 
databases, and the list goes on.
    My staff has over 350 years cumulative law enforcement and 
regulatory experience. We have former IRS and Secret Service 
agents, and local, city, county, and State law enforcement 
agents on our staff. We have auditors. We have investigators, 
criminal investigators. We have the background investigators. 
We have compliance people, safety and health enforcement 
officers, all on our staff.
    It is us that call in the Department of Justice. It is us 
that call in, when we find the improprieties, that find the 
thefts and the embezzlements, the scams, the cheats. It is our 
people that call in the county sheriff. We happen to be in a 
Public Law 280 State. The county prosecutor prosecutes our 
cases, most of them, for us. We have had one Federal 
prosecution which we asked the U.S. attorney to prosecute for 
us.
    So we are the ones there every day doing this, and we are 
not an exception; Viejas is not an exception. I have personally 
visited dozens of tribal gaming commissions across the country, 
and am continually impressed with the resources that the tribes 
are devoting to regulating their own facilities. These gaming 
commissions are made up of former FBI agents, former gambling 
control agents from New Jersey and from Nevada and from even 
the State of Arizona. So it is a very competent staff that are 
regulating these tribes at the tribal level.
    We have an excellent relationship with Chairman Hogen and 
the National Indian Gaming Commission. We work regularly with 
them.
    So I am not going to sit here and of course tell you that 
it is a perfect world. There are a percentage, a small 
percentage, and you heard the prior witnesses testify that it 
is a small percentage that are non-compliant. The vast majority 
are doing a good job. The exceptions that are not complying, or 
are unable or unwilling to appropriate the resources, they need 
help or they need enforcement. But there are enforcement 
mechanisms in place, and I do not think more legislation 
necessarily is the answer to gaining compliance by those tribes 
that are unable or unwilling to do so. I think NIGC has done a 
pretty good job in identifying those non-complying tribes and 
initiating enforcement proceedings.
    So that is who we are, what we do. You know, it is almost 
as if we have not existed here. All we hear about is how the 
State and the Federal regulators need to be doing more, but we 
do it. We do it every day with competent staff and we do an 
outstanding job.
    The other issue, and I know my time is very limited, that I 
would like to address is the one that was addressed earlier 
with regards to the class II gaming technological aids. I am 
privileged to sit on the Advisory Committee to the National 
Indian Gaming Commission, along with about nine other very 
talented, experienced individuals, offering advice on the 
development of regulations for these technological aids.
    If anybody would have told me 1\1/2\ years ago that bingo 
could be this complex and legally complicated, I never would 
have dreamt. But I do believe that the committee has their 
hands around this. We have made very viable recommendations on 
two parallel tracks of Federal regulations. One is the actual 
technical specifications for these aids and the other one is 
the classification of the aids, as opposed to being a class III 
device. That includes the parameters on the functionality of 
the game and how it must perform to be considered a class II 
aid as opposed to a slot machine.
    We heard testimony earlier that technology has really 
blurred this line. I would disagree. Technology has enhanced 
it. The package that you see, that you visually see on the 
floor, granted, resembles a slot machine. That is where it 
ends. It is not at all blurry to those of us who know how slot 
machines work and how the electronic bingo games are operated, 
to know what is inside of these boxes is entirely two different 
animals. The regulations that we have developed with NIGC make 
that distinction. They are consistent with IGRA and they are 
consistent with what the court has ruled on several occasions 
with regard to the classification of technological aids for 
class II games.
    I could go on. I know my time is limited. I will leave it 
at that, and be glad to answer any questions.
    [Prepared statement of Mr. DesRosiers appears in appendix.]
    The Chairman. Thank you, sir, for your testimony and thank 
you for your outstanding work and the people you represent. We 
respectfully disagree on the issue of what a class II is. There 
are very few benefits of old age, Mr. DesRosiers, but being one 
of the authors of the legislation, we envision class II to be 
the standard bingo game, the standard pull-tab, not an 
electronic device that closely resembles a slot machine, only 
it varies as to how you push different buttons.
    I believe that is has been blurred by technology and I am 
going to try to act and this committee acts so that there is a 
distinction because when we wrote the act, our vision of what 
class II gaming was, and I am one of the authors of the act, 
drastically different from what is viewed as class II gaming 
today.
    Mr. Colombe.

STATEMENT OF CHARLES COLOMBE, TREASURER, NATIONAL INDIAN GAMING 
ASSOCIATION, AND PRESIDENT, ROSEBUD SIOUX TRIBE, ACCOMPANIED BY 
                       MARK VAN NORMAN, 
                       EXECUTIVE DIRECTOR

    Mr. Colombe. Thank you and good morning Chairman McCain, 
Senator Dorgan and members of the committee.
    My name is Charles Colombe. I am president of the Rosebud 
Sioux Tribe of South Dakota and treasurer of the National 
Indian Gaming Association. With me this morning to my left is 
Mark Van Norman. He is a member of the Cheyenne River Sioux 
Tribe and also the executive director of NIGA.
    The Chairman. Welcome.
    Mr. Colombe. Thank you.
    The Indian Gaming Regulatory Act is working. Indian gaming 
is highly regulated. At the tribal, State, and Federal levels, 
more than 3,350 expert regulators protect Indian gaming. Tribes 
employ former FBI and police officers, former State regulators 
from New Jersey, Nevada and other States, military officers, 
auditors and bank surveillance officers.
    Tribes employ 2,800 regulators. State governments help 
regulate Indian gaming. States have over 500 regulators and 
police to regulate Indian gaming.
    Phil Hogen, chairman of the NIGC, is a former U.S. 
attorney. Vice Chairman Nelson Westrin is a former executive 
director of Michigan Gaming Control Commission and State deputy 
attorney general. Commissioner Chuck Choney is a former FBI 
agent. NIGC employs 80 Federal regulators. Tribal governments 
employ state-of-the-art surveillance and security equipment. 
For example, the Pequot use the most advanced high technology 
available, including facial recognition, digital cameras and 
picture enhancement technology.
    The Pequot system has more computer storage capacity than 
the IRS or the Library of Congress. The Pequots helped their 
State police after the tragic nightclub fire by enhancing a 
videotape so they could study the fire in detail. Tribes 
dedicate tremendous resources to Indian gaming regulation. Last 
year, tribes spent over $290 million nationwide on regulation. 
That breaks down as $228 million for tribal government 
regulation; $55 million for State regulation; and $12 million 
for Federal regulation.
    Indian gaming is also protected by the FBI and the U.S. 
attorneys. Tribes work with financial crimes enforcement 
network to prevent money laundering. We work with the IRS to 
collect taxes, and we work with the Secret Service to prevent 
counterfeiting. We have stringent regulatory systems. Tribes 
meet or exceed any Federal or State requirement. We have strong 
regulation because our sovereign authority government resources 
and business reputations are at stake. If you have advice on 
how to improve our systems, we will review it with tribal 
leaders.
    Now, let me tell you how regulation works in a casino. I 
say this as maybe the only former operator in the room here. I 
ran our tribe's casino. I built it. I financed it and operated 
it for 5 years under a contract with the National Indian Gaming 
Commission. At Rosebud, we have 21,000 people living on our 
reservation and 37,000 people total living in a 50-mile radius. 
In our casino and hotel, we employ approximately 200 people. We 
have 250 slots, about 8 table games, and 1 bingo hall. We are 
small and rural, but we follow the same rules and same internal 
controls that the largest casinos in the world follow.
    IGRA and our tribal-State compact dictate that our internal 
controls are at least as stringent as the State's. Ours are 
more stringent. We have 24 regulators on our Gaming Commission. 
Our commission operates a surveillance system separately and 
independently. When you enter our property, we have 180 
cameras. Everyone is on-camera full-time from the parking lot 
to the casino floor to the cage. We have three full-time 
inspectors who have full access to the casino at all times.
    South Dakota does our gaming background checks. South 
Dakota puts its State seal on our slot machines, which means we 
cannot change the payout percentage without a State regulator 
being present. We also have a slot tracking system that gives 
us full-time monitoring of coin or cash into a machine. That 
system also tells us how much money is in that machine at any 
time.
    Some would look at Little Rosebud and say, you do not need 
to do all this stuff, but we do. Our casino was built, like 
many other Indian casinos, in a time when people thought we 
were incapable of running a gaming operation. So we did an 
overkill on regulation to ensure the public that these were 
honest and fair games.
    We are a poor tribe, so no one wants our operation to be a 
success more than we do. No one wants to make sure our money 
gets to the bank more than we do. NIGA is engaged in a series 
of discussions with tribal leaders throughout the Nation. We 
invite you to our next meeting. We also invite you to come and 
visit our facilities so we can show you first-hand that our 
regulators are experts and our technology is state-of-the-art.
    In closing, we work closely with the NIGC to ensure that we 
have the most productive regulation possible, and we work to 
preserve our sovereignty. We remember what our grandfathers 
have told us as boys: Protect the land and take care of the 
people.
    Thank you again, and I am happy to answer any questions you 
may have.
    The Chairman. Thank you very much.
    Professor Washburn.

   STATEMENT OF KEVIN WASHBURN, ASSOCIATE PROFESSOR OF LAW, 
                    UNIVERSITY OF MINNESOTA

    Mr. Washburn. Thank you, Mr. Chairman, Mr. Vice Chairman.
    I am going to limit my comments to some of the issues that 
have risen so far, just to hopefully have a bit of a 
conversation about some of the problems out there. I think some 
of the serious problems have been identified. Vice Chairman 
Dorgan even brought up the problem and question, really, about 
small tribes. I admire the chutzpah of the Senator from North 
Dakota raising the question about maybe some tribes being too 
small, but it is a difficult problem, perhaps, that has no real 
good solutions, no solutions that really lend themselves
    The Chairman. Maybe it has something to do with the process 
for recognition.
    Mr. Washburn. Well, it may. The problem is a lot of the 
tribes are no longer vital. Tribes did not become small 
necessarily for good reasons. We should not blame tribes for 
being small, in some ways, just like we should not blame North 
Dakota for being small. We should not perhaps try to fold North 
Dakota into South Dakota and create one big State because we 
would create political problems like how do we, who gets to be 
the Senators in that case. It is a difficult political issue.
    Senator Dorgan. Mr. Washburn. [Laughter.]
    Mr. Washburn, I would observe that North Dakota is 10 times 
the size of Massachusetts. [Laughter.]
    Mr. Washburn. Fair enough.
    Let me leave that issue aside. [Laughter.]
    It is only going to get me in trouble.
    One of the things that I would like to talk about is the 
management contract provisions. I think it is probably fair to 
say that as a regulatory matter perhaps, putting politics 
aside, as a regulatory matter the most serious failure of IGRA 
was the management contract provisions. We have 200 tribes 
engaged in gaming, doing 300 or 400 gaming operations and we 
have only had the NIGC approve 45 management contracts. It is 
not because tribes are doing this all by themselves. There are 
people involved in gaming that we do not know about. We have 
not been able to take a look at them and figure out who they 
are. That is a very serious problem.
    Senator Coburn talked about the very good and rigorous 
regulatory system that we have in Nevada for dealing with 
people who are making millions of dollars from working in the 
gaming industry. We need to have a system like that that does 
not have holes in it, just by changing the name of a contract, 
calling it a development agreement or a construction agreement.
    So I desperately believe that we need to increase the 
NIGC's authority to background investigate, to do suitability 
determinations of those people.
    The Chairman. Would that be by making the definition of a, 
quote, ``management contract'' an inclusive one?
    Mr. Washburn. Perhaps, or not even use the term.
    The Chairman. Maybe not use the term.
    Mr. Washburn. Yes, Senator; I believe that is right. I 
think we need to get at all economic relationships, significant 
ones involving tribes. Those outsiders should be background 
investigated.
    Now, what I want to encourage you to think about, though, 
is that perhaps that is where the regulatory interest stops, 
however, and that we ought not be looking at the economics of 
those deals. We can trust, as Mr. Colombe said, tribes want to 
make the most money for their people. We can trust tribes to 
strike their own economic decisions.
    The Chairman. Doctor, in light of the hearings we have had 
recently, I do not think that is the case, at least in some 
parts of Indian country.
    Mr. Washburn. That may well be true, Senator, but let me--
--
    The Chairman. You are talking about an $80-million ripped 
off. It is more than may be true.
    Mr. Washburn. Well, the problem is, Senator, is that who is 
the other option? The other option of who would be overseeing 
those economic decisions is the Federal Government, and the 
Cobell decision dwarfs
    The Chairman. I will get into this debate with you. We have 
an obligation to protect all citizens, whether Native Americans 
or not, from exploitation. This is not a laissez faire society 
where people are not protected from exploitation.
    Mr. Washburn. The problem is, Senator, is that in my view 
what we do is we do not protect them. Now and then, tribes 
strike bad deals, even tribes that have management contracts. 
What they have is an approved management contract, and even if 
it was a bad deal in hindsight, they have a Federal document 
that says that was a good deal that has been approved. Even if 
there was malpractice in entering that deal, if there was some 
bad business advice or bad legal advice in entering that deal, 
if the NIGC has approved it, then it is deemed approved and the 
tribes do not have anywhere to go to get redress for that 
wrong. I think that that is a problem.
    I think by and large that there are some problems, and 
often there is another way to get at them, fraud or those kinds 
of things that have caused tribes to enter bad agreements 
occasionally. But I think that there may well be legal ways at 
getting at those problems.
    I am not sure that the fine financial analysts at the NIGC, 
there are two of them, are the people that should be looking 
over the tribes shoulder when the tribes are represented with 
very savvy business advisers and very savvy law firms. My sense 
is that we wouldn't second guess--we would have trouble with 
the Department of the Interior second-guessing those in this 
day in age, the age of self-determination, and we would have 
trouble given the Navajo Nation case out of the Supreme Court a 
couple of years ago, the Cobell litigation. The Federal 
Government has lost its legitimacy to a great degree when it is 
involved in regulating the economic decisions that the tribes 
make. And so I would respectfully encourage the committee to 
think about placing that decisionmaking in another place, other 
than in the NIGC, and perhaps with the tribes themselves.
    Why don't I stop there and I will take questions if you 
have them.
    [Prepared statement of Mr. Washburn appears in appendix.]
    The Chairman. Do you have views on the class II, class III 
issue?
    Mr. Washburn. I do, Senator. Let me preface this with, one 
of the problems in the Indian gaming regulatory industry, 
across the board is regulatory uncertainty. That is why these 
bad actors are willing to do these other kinds of contracts 
other than management contracts. They are willing to go into 
these things. It keeps the good people out, because they say, 
boy, I do not know, that looks kind of shady to me, so I am not 
going to even bid for that work.
    The same thing happens in the class II Johnson Act kind of 
environment. Bad actors are willing to skate that line and do 
class II technological aids that arguably cover the Johnson 
Act. In light of the risk of Department of Justice prosecution, 
they are willing to do that, and so they reap the rewards of 
that. The bad actors do. The good companies, the solid people 
that have been involved in gaming for years and years, tend to 
stay out of those markets because they risk the threat of 
Federal prosecution.
    Unfortunately, the Department of Justice has not been able 
to bring successful Federal prosecutions, and it has lost in 
three Circuit Court cases. The courts seems to be generally of 
the mind that if it fits within the definition of class II, 
tribes ought to be able to do that. That ultimately could be a 
real benefit to Indian tribes because Indian tribes can make 
greater revenues.
    The problem is they are having to share those revenues with 
shady actors in the current situation. So in my view, the 
Johnson Act or the Indian Gaming Regulatory Act ought to be 
amended just to say that the Johnson Act does not apply to 
lawful Indian gaming.
    I think that that would allow good people to come into that 
industry and bid for the work. In essence, that would drive the 
prices down so Indians tribes get to keep more of the money. It 
would also allow, well, it would help to drive the bad actors 
out of Indian gaming. That is really what happened in Nevada, 
is that the background investigation process started working 
with people, and it really drove the bad actors out because 
good people could come in and do the work.
    I think that that is a good model. I think strong 
background and licensing is a really good model, and I think 
that clarifying regulatory authority is very important because 
that will make for a clearer regulatory structure.
    The Chairman. Do you agree with that, Mr. DesRosiers?
    Mr. DesRosiers. I do, Mr. Senator. I think that we have 
experienced that. Our agency and many of us are doing 
background investigations on vendors that are not required by 
IGRA; that are not required even by COMPACTS. But we have a 
very in-depth background vendor licensing program, as do many 
tribes, that exceed the requirements, and I think that is what 
has helped keep us clean and kept the bad guys out.
    The Chairman. Thank you.
    Dr. Light, welcome.

   STATEMENT OF STEVEN ANDREW LIGHT, ASSISTANT PROFESSOR OF 
  POLITICAL SCIENCE AND PUBLIC ADMINISTRATION, UNIVERSITY OF 
NORTH DAKOTA; AND KATHRYN RAND, ASSOCIATE PROFESSOR, UNIVERSITY 
                 OF NORTH DAKOTA SCHOOL OF LAW

    Mr. Light. Thank you, Senator.
    Good morning, Mr. Chairman and Mr. Vice Chairman. We are 
very thankful to be here. As a reflection of our 
interdisciplinary research on the law and politics and policy 
of Indian gaming, Kathryn Rand and I will be testifying 
jointly, so Kathryn will begin.
    Ms. Rand. Good morning, Mr. Chairman, Mr. Vice Chairman. We 
thank the committee and its members for this opportunity to 
appear before you today. My name is Kathryn Rand, and with me 
is Steven Light. We are the co-founders and co-directors of the 
Institute for the Study of Tribal Gaming Law and Policy, a 
component of the Northern Plains Indian Law Center at the 
University of North Dakota School of Law and the only 
university-affiliated research institute dedicated to the study 
of Indian gaming.
    Our testimony today is based on our research in the field 
of Indian gaming law and policy over the last nine years, and 
on short excerpts from our two forthcoming books on the 
subject.
    Our research suggests that discussions of Indian gaming 
regulation often overlook three important points: First, that 
there currently is an elaborate web of Government agencies and 
regulatory authorities that administer the law and policy that 
applies to Indian gaming; second, that criticism of Indian 
gaming regulation often focuses on tribal regulation, but fails 
to take into account the unique status of tribes in the 
American political system; and third, that tribal regulation of 
Indian gaming plays a primary role in tribal government 
institution building, a necessary exercise of tribal 
sovereignty that serves tribal and Federal interests in strong 
tribal governments, as well as tribal self-sufficiency and 
self-determination.
    Finally, we suggest that any policy reform in the area of 
Indian gaming fundamentally should be based on accurate and 
complete information informed by tribal opinions and interests, 
and guided by the tribe's inherent right of self-determination.
    Tribal gaming is the only form of legalized gambling in the 
United States that is regulated at three governmental levels. 
Under the Indian Gaming Regulatory Act, tribal, Federal and 
State agencies and actors determine the regulatory environment 
in which tribal gaming occurs.
    IGRA's policy goals created a regulatory environment for 
Indian gaming in which the exercise of government authority 
reflects a markedly different intent than does that for the 
regulation of commercial gaming. By fostering economic 
development and strengthening tribal governments, IGRA's 
regulatory scheme promotes healthy reservation communities and 
effective and culturally appropriate tribal institutional 
capacity building, the hallmarks of tribal sovereignty and 
tribal self-determination.
    Although regulation of Indian gaming sometimes is equated 
with the National Indian Gaming Commission and its extensive 
authority, the multi-layered and complex regulatory web 
governing Indian gaming involves a number of other Federal 
agencies, along with extensive tribal and State agencies, 
actors and resources.
    To fulfill their regulatory role under IGRA, tribes 
typically create gaming commissions to implement tribal gaming 
ordinances and to ensure compliance with IGRA, tribal-State 
compacts, and other relevant tribal and Federal laws. Tribal 
regulators interact with tribal, State and Federal law 
enforcement agencies, tribal casino surveillance and security 
operations, and tribal court systems, as well as State and 
Federal authorities.
    Despite the extent and sophistication of tribal regulation, 
critics of Indian gaming frequently are dismissive of tribal 
government authority, as we will revisit in just 1 moment. 
Under IGRA, Congress authorized States, through the tribal-
State compact requirement, to regulate casino-style gaming. 
Typically, State gaming commissions are responsible for 
monitoring compliance with governing Tribal-State compacts, in 
concert with State laws as well as IGRA.
    Despite this extraordinary regulatory scheme involving 
regulators and law enforcement at three levels of government, 
critics charge that Indian gaming is under or even unregulated. 
A closer look at such criticism, we suggest, particularly as it 
is lodged against tribal regulation, reveals further 
misapprehensions about Indian gaming.
    Our research suggests that how we talk about Indian gaming 
informs how we act on Indian gaming. As you know, there is a 
lot of talk. Before allowing public discourse to set agendas 
for tribal gaming policy, policymakers should assess carefully 
the accuracy and context of criticisms of Indian gaming 
regulation.
    Tribal governments frequently are portrayed as 
untrustworthy stewards of newfound gaming wealth and political 
clout. They are variously accused of being too naive or 
inexperienced to realize their own best interests; easily 
corruptible; guilty of seeking to influence the political 
system to their own benefit; or out for revenge. Time 
magazine's 2002 expose on tribal gaming, for instance, 
acknowledged tribal regulation of Indian gaming, but added, 
``that is like Enron's auditors auditing themselves.''
    Criticism of tribal regulation of Indian gaming often is 
grounded in ignorance, purposeful or otherwise, of tribal 
sovereignty. Rather than an accurate understanding of tribal 
regulation as a reflection of tribal sovereignty and self-
determination, these critiques often rely on the assertion that 
tribal sovereignty is simply an unfair advantage or race-based 
``special rights,'' rather than the defining aspect of a 
tribe's unique status in the American political system.
    Mr. Light. Our research indicates that the exercise of 
tribal sovereignty underpins tribal self-determination and 
self-government, which are of course the goals of current 
Federal Indian law and policy. Strong institutions with the 
capacity to exert legitimate authority in the name of tribal 
members are at the heart of building healthy reservation 
communities an interest that is appropriately shared by tribes, 
States and the Federal Government.
    One of the largely untold success stories of Indian gaming, 
we believe, is the role that it has played in tribal 
institution building. Each gaming tribe has created its own 
regulatory authorities that are responsible for administering 
the myriad regulatory challenges of Indian gaming. In assuming 
responsibility for gaming regulation and for other policies, 
tribes determine the character and the capacity of their own 
governing institutions.
    Tribal governments decide how to provide essential public 
services to their members; negotiate and contract with non-
tribal commercial vendors and banks; and interact with State 
and local governments.
    We believe it is plain that there are three key 
distinctions between the regulation of commercial gambling and 
that of Indian gaming. First, a frequently expressed concern in 
regulatory administration is the evolution of what is called a 
``capture effect.'' That is, that regulatory agencies begin to 
partner with the industry to create a regulatory environment 
that maximizes the benefits to industry players. Although 
similar accusations of capture have been levied against tribal 
gaming commissions, there is relatively little evidence of this 
capture.
    Additionally, IGRA conditions how tribes can use gaming 
revenue for the benefit of tribal members. Gaming profits, 
therefore, are channeled directly into the provision of 
essential public services or community infrastructure. A profit 
motive does not in fact become the sole determinant of how 
tribal casino enterprises, tribal gaming commissions, and 
tribal governments interact.
    As our research shows, this perhaps is exemplified by the 
experiences of tribal gaming enterprises on the Great Plains, 
where we are from, where job creation is the primary impetus 
for gaming.
    Related to this first point, the policy goals of Indian 
gaming, and thus the regulatory scheme established by IGRA, are 
fundamentally different than are the goals and regulatory 
scheme governing commercial gambling. The vast majority of 
gaming tribes such as those on the Great Plains by necessity 
are in the business of job creation and economic development. 
IGRA stringently governs how gaming revenues are to be used.
    Third, critiques of Indian gaming also seem to rest 
disproportionately on the thesis that tribes themselves are 
ill-equipped to regulate their gaming operations or unwilling 
to do so. Again, there is relatively little evidence to back up 
those assertions. Subject to three levels of regulation and law 
enforcement authority, the Indian gaming industry perhaps is 
better equipped to deter or to deal with potential crime or 
corruption than is any other form of legalized gambling.
    We do not suggest that the regulation of Indian gaming is 
perfect. We do, however, encourage policymakers to critically 
assess the critiques of Indian gaming. Misapprehensions about 
tribal governments, tribal sovereignty and Indian gaming should 
not set the terms for public policy.
    One standard criticism of regulatory administration 
generally is that it stifles productivity, growth and 
innovation, and thus it dampens economic performance. We 
believe IGRA's regulatory scheme has accomplished precisely the 
opposite. The complex and comprehensive regulatory web created 
by IGRA in which tribal governments play a primary role has 
reinforced tribal sovereignty and comports with the Supreme 
Court's holding in California v. Cabazon Band of Mission 
Indians, 480 U.S. 202 (1987), and the congressional goals 
enunciated in IGRA. Providing a foundation for initiative and 
expertise, IGRA has catalyzed the dramatic growth of an 
industry, as you know, and has created opportunities for 
economic growth and development for tribal and non-tribal 
communities across the United States.
    It is in fact extraordinary that more than 200 tribes have 
benefitted from this new economic engine. It is also 
remarkable, we would note, that 30 States and myriad non-tribal 
communities have benefitted as well.
    Although by electing to open and operate gaming enterprises 
within IGRA's regulatory framework, tribes by definition have 
been forced to give up some aspects of tribal sovereignty, the 
tradeoff for many tribes has been the realization of the 
heretofore unthinkable: The creation of well-paying jobs; a 
viable revenue stream with which to provide essential 
government services; a means to leverage economic growth, 
development and economic diversification; the chance to 
revitalize culture and tradition; and the opportunity to 
strengthen the institutions of tribal governance that 
facilitate meaningful government-to-government interactions 
with the Federal Government and State governments.
    In this sense, IGRA has accomplished exactly what it was 
intended to do, and more. We would contend it therefore 
represents an unparalleled regulatory success story.
    Thank you very much.
    [Prepared statements of Dr. Light and Dr. Rand appear in 
appendix.]
    The Chairman. I want to thank the witnesses.
    On this issue of the Federal Government's role in 
regulating Indian gaming, I would remind the witnesses that 
when the Cabazon decision came down, we sought some way of 
writing legislation that would ease the relationship between 
States, the Federal Government and the tribes so that there 
could be a process for implementing the Cabazon decision 
without ending up in just endless occasions for going to court.
    When you say, Ms. Rand, that it is the only business that 
has three levels of regulation, the fact is the reason why 
Nevada cleaned up their act is because the Feds were 
investigating corruption. So it was not an initiative taken by 
the Nevada gaming industry. It was because they were about to 
be subject to some very severe scrutiny and perhaps oversight.
    When we look at Nevada, it is not nirvana, but it certainly 
is an effective way of regulating the gaming industry, which is 
multi-billion dollars. As I mentioned in my opening statement, 
we started at $100 million in your industry and it is now an 
$18.5 billion or $19 billion industry. It seems to me it is 
very appropriate for us to review the law, how it has been 
implemented, what the effects are intended and unintended, and 
we have serious questions.
    We have serious questions about people leaving the Bureau 
of Indian Affairs [BIA] and the next day working for one of the 
tribes that they played a role in affecting that tribe's 
future. We have questions about this blurring of distinctions 
between class II and class III gaming. As I mentioned to Mr. 
DesRosiers, there was no envision when we delineated class II 
and class III of these technologies which have blurred the 
distinction.
    It is not the first time technology has blurred 
distinctions in various industries. Look at the 
telecommunications industry. But it requires us to exercise 
some oversight.
    I do not want this hearing to be viewed as some attack on 
Indian gaming. It is not. As Senator Dorgan said, and even 
Senator Coburn, Indian gaming is here to stay. The question is: 
Do we protect the patrons of Indian gaming to fullest extent in 
keeping with our responsibilities?
    I think we have clearly identified some areas that need to 
be addressed, perhaps legislatively, if not in a regulatory 
fashion. I do not think that the National Indian Gaming 
Commission has enough funds. I do not believe it because I look 
at the comparable regulation of gaming in Nevada. By the way, 
every one of those casinos, Mr. DesRosiers, has very highly 
qualified, highly credentialed people who oversee the gaming 
within those casinos, just as the tribes hire people like 
yourself to regulate those. But it does not remove the 
requirement to have the Nevada Gaming Commission from 
exercising its oversight responsibilities.
    So I thank the witnesses, and I would be glad to hear any 
comments on those comments, beginning with you, Mr. DesRosiers.
    Mr. DesRosiers. Thank you. First of all, let me express my 
appreciation personally, and I think all of Indian country, for 
the efforts that you and your colleagues made in authoring the 
Indian Gaming Regulatory Act. Certainly, I realize the struggle 
in trying to balance the interests of three sovereigns. I think 
you did a remarkable job and the document has been very 
effective and worked very well for all these years.
    Are there some areas where there could be some 
improvements? I am not going to say no. There certainly are. 
The Seminole issue is one of them. But make no mistake, it has 
been a good document and we have worked well within the 
framework of that. I just appreciate the recognition of what 
tribal regulators do. I do not want it to be construed that we 
want to be totally, or expect to be totally independent.
    We have the California Gambling Control Commission that we 
work closely with; the Division of Gambling Control, and of 
course the Federal Government. I view their roles as oversight. 
I personally feel there is sufficient legislation. There is 
sufficient regulation. It is up to us to now enforce it. I have 
no objection to State regulators or Federal regulators watching 
me, coming onto our premises, looking at what we are doing, and 
letting me know whether we are in compliance or not. I fully 
recognize that as an appropriate set of checks and balances.
    I would just be very cautious of where we go with any 
contemplated future legislation. Thank you.
    The Chairman. Thank you.
    Mr. Colombe.
    Mr. Colombe. Yes; thank you, Senator.
    I think a couple of issues that I would like the 
opportunity to have further discussion on. Certainly one of 
those is the difference between the class II and class III. 
What was not here today is Justice's opinions have been 
thoroughly trounced in a number of Federal courts, I think each 
and every time. There must be some respect for what Federal 
courts do. We certainly in Indian country have to respect the 
outcome. That one, in its own right, I think needs study on the 
committee's part. I would appreciate that.
    Second, I think opening up IGRA has no merit at this time. 
Further regulation, whether it be deed of trust, all of those 
issues I think are fully covered within the act. Recently, we 
at the San Diego conference, we did a pretty strong polling on 
those people who think that IGRA ought to be reopened. 
Certainly, there are a few people that do, but I think it is 98 
percent that believe the act is working.
    I think we also could talk a little about how the National 
Indian Gaming Commission can come to the field more. If that 
costs more money, I think tribes are willing to step up to the 
plate there.
    So it is not like we are wanting to be unregulated. 
Frankly, I can show you at my reservation how we actually have 
more feet on the ground on that reservation with 250 slot 
machines than Deadwood, SD has with a number of licenses, a 
number of operators. We actually have more bodies than they do 
in the regulatory process.
    So there is a lot to be said about what Indian gaming is 
doing and the regulatory process. I think frankly you are 
always going to have people that are chasing the almighty 
dollar. If it looks easy, they are going to go after it. But I 
think, again, class II and opening the IGRA, I believe they 
need a lot of study before it happens.
    The Chairman. Do you believe we ought to look at this issue 
of the, quote, ``management contract/consultant contract'' 
issue?
    Mr. Colombe. Frankly, it is all there. I think that
    The Chairman. In other words, there are no tribes who are 
being exploited by individuals with unfair contracts?
    Mr. Colombe. Today, it would be very hard to do when you 
have the Well Fargos who are out there willing to loan money. 
Obviously, you are always going to have unsophisticated people 
being taken advantage of by very sophisticated people, but it 
is a rare deal when I can see that happening. I had a 
management contract. I know the process there. It is 
phenomenal. It is so cumbersome. Someone said there were 45 of 
these. The reason there is not more of them is most people do 
not live long enough to get one done. [Laughter.]
    The Chairman. Well, some unscrupulous people have lived 
long enough to do extremely well by doing good.
    Professor Washburn.
    Mr. Washburn. Senator McCain, I want to come back to the 
comments you ended with. There is this complex web of 
regulation in gaming. The States came to you in 1987 and 1988 
and said, we need this act; we need to have a role here.
    The Chairman. No; the States did not. We recognized that 
there was a need for it because of the relationships between 
the tribes and the State, and the decision by the U.S. Supreme 
Court drove us to a process where we thought that we had to 
codify the relationship. It was not the States coming to us. It 
was the realization that there was a need for some kind of 
process that would legitimize this decision. So you are wrong. 
The States did not come to us. We saw that there was a problem 
and we acted, and it was a long and difficult process.
    Go ahead.
    Mr. Washburn. Mr. Chairman, I have reviewed some of the 
testimony, and whether they came to you or you guys identified 
the problem, one of the things that the States said in the 
hearings in 1987 and 1988 was that they need a regulatory hook. 
They need to be able to help regulate these problems because 
they realized what casinos posed, but did not show regulatory 
problems.
    The Chairman. Well look, I am not going to argue history 
with you, but after we passed the law, the Association of 
National Attorneys General strenuously objected to it, and 
wanted it changed, and wanted it improved dramatically. We had 
numerous meetings with them. So I am not going to argue with 
you history, sir, but I am part of it so I am going to object 
to your interpretation of something that I was part of.
    Go ahead.
    Mr. Washburn. I am sorry, Mr. Chairman. Let me get to my 
point. My point is, if there was some concern that the States 
were going to be involved in Indian gaming regulation, with the 
exception of your State and now California, States did not 
really show up. Most States are not doing very much regulation 
of Indian gaming. What that tells me is that we need to have an 
independent entity doing that regulation. I think it is 
probably the NIGC.
    So given that many State regulators have not taken the role 
that they could have taken under their tribal-State compacts, 
we need to locate strong regulatory power somewhere. I think 
that that is probably within the NIGC. So in addition to giving 
them more funding, I think you may need to give them much more 
substantial regulatory authority, too.
    The Chairman. For example?
    Mr. Washburn. Clarifying their authority over class III, 
for example, so that we do not run into this minimum internal 
control standards problem. You know, this problem, businesses 
do not like to be regulated. We see the exact same debate going 
on in Sarbanes-Oxley right now, the financial reporting issues 
in Sarbanes-Oxley. Everybody is saying, we do not want to have 
internal controls about our financial reporting. That is what 
the financial industry is telling us.
    Well, Indian casinos, some of them, Colorado River Indian 
Tribe is saying we do not want, you know, the Feds imposing 
internal controls on our class III gaming. Internal controls 
are a good idea, and there ought to be clear authority for them 
to be imposed.
    The Chairman. I thank you, Professor Washburn. I take it 
you have written some other treatises on this issue?
    Mr. Washburn. I have written a little bit, and I will write 
further.
    The Chairman. Would you send us what you have already 
written? I think you have some very interesting perspectives 
and I think it would be very helpful in this process.
    Mr. Washburn. I will inform my tenure committee. 
[Laughter.]
    The Chairman. Thank you very much. We appreciate your being 
here.
    Professor Rand or Professor Light, either one?
    Ms. Rand. Thank you, Mr. Chairman.
    We certainly understand why the committee would want to 
hold a hearing on Indian gaming regulation. I think that you 
are absolutely right that there are issues that are worthy of 
the committee's consideration. We certainly did not mean to 
suggest otherwise.
    We would simply want the committee to bear in mind that 
Indian gaming serves a purpose that is very different than 
commercial gambling. Its regulatory scheme similarly serves a 
purpose that is very different from the regulatory scheme of 
commercial gambling. Part of that, of course, is because of the 
overarching context of tribal sovereignty, as well as the goals 
and the purposes of Federal Indian law and policy.
    So we would simply ask the committee to bear those contexts 
in mind as it weighs its own policy options.
    Mr. Light. I would certainly support the idea of additional 
gathering of accurate information. We have heard the Senators 
this morning ask for additional information, which is 
absolutely appropriate in thinking about the regulation of 
Indian gaming, as it would be for the regulation of the 
commercial gambling generally.
    We feel that there is somewhat of a dearth still remaining 
in terms of accurate and complete information. We feel that 
hearings like this are able to fill in some of those gaps. So 
we know that policymakers like yourselves on the Committee are 
always looking for the best available information with which to 
possibly legislate.
    So in the context of possible amendments to IGRA, whether 
they are technical amendments or more substantive, we think it 
is absolutely invaluable to acquire the best information 
possible. In that regard, it is also important to bear in mind 
the considerations that Professor Rand was speaking of, but the 
input also of tribes and tribal members. We are sure that the 
Committee would absolutely be doing that.
    In that context, the idea of tribal self-determination is 
always a theme that is going to be running through these kinds 
of hearings.
    The Chairman. I thank you, and I am very grateful for the 
witnesses' testimony today.
    Senator Dorgan.
    Mr. Van Norman. Mr. Chairman? Could I add something?
    The Chairman. Sure.
    Mr. Van Norman. Thank you. I am Mark Van Norman, the 
executive director of NIGA.
    I just wanted to say a couple of things. I was up visiting 
the Mashantucket Pequot Tribal Nation on Monday. One of the 
things that their gaming commission emphasized was that they 
are different in operating a tribal government agency than it 
would be in a commercial agency in a commercial gaming facility 
where it is run by the operator. They have their regulators 
right on staff, and that is a distinction and a strength of 
Indian gaming that is not present in commercial gaming.
    I think it is also important to point out that the class II 
industry is a legitimate industry; that we have multimedia 
gaming as the largest company in class II gaming. They are 
publicly traded, regulated by the SEC. We also have the largest 
publicly traded company in gaming. IGT is in the class II 
market.
    So I think it is important to bear that in mind as we think 
about class II.
    The Chairman. Thank you very much.
    Senator Dorgan.
    Senator Dorgan. Mr. Chairman, thank you very much.
    I think I am not going to ask a lot of questions. I think 
most all of this has been covered. I think that it is important 
to point out that the purpose of this hearing is not to cast 
aspersion on tribal regulation of gaming. For example, Mr. 
DesRosiers and Mr. Colombe, you described your regulatory 
system in some great detail with great pride. I do not know the 
specifics of it, but it certainly sounds impressive to me. I am 
sure there are other tribes that have similar systems that they 
feel very strongly represent and protect the interests of the 
tribal members.
    There may well be, with all of the tribal gaming, 
circumstances where that does not exist with certain tribes. I 
do not know that either. There is actually precious little 
research that is available to us, and for that reason I think 
Dr. Light and Ms. Rand, I hope you will focus some of the 
research on some of the questions that have been raised today.
    Having said that, I think it is just natural that when you 
have an industry that has grown within the time that it has to 
$18 billion a year now, that there will be those who want to 
break out of the boundaries and the restraints. Mr. Washburn 
said it correctly. No one likes regulation. You know, people 
chafe at regulation. So the Colorado suit, the decision to try 
to break out of the restraints here.
    Regulation I think is critically important to protect, to 
protect Indian gaming in the long term. Sovereignty is very 
important to me and to Indian tribes, but so, too, is 
regulation of this industry. It needs to be done, done right, 
done effectively at several different levels.
    So Mr. DesRosiers, I could tell the pride with which you 
conduct your activities, and the pride with which you describe 
your employees and the processes. This hearing is not an 
attempt to diminish or denigrate in any way what you and many 
others are doing. But it is an attempt to try to determine, are 
there holes in this fence? We develop a fence. I mean, that is 
what this is about. Because we raised horses, I used to check 
the fence a lot. You know, that is a simple way of describing 
what we are trying to do here today, to understand what is 
happening.
    Mr. Washburn, having a Minnesota lawyer describe North 
Dakota as small is----
    [Laughter.]
    Senator Dorgan [continuing]. Is an affront that I shall 
overcome. [Laughter.]
    But not soon. [Laughter.]
    More seriously, I think all of the witnesses today, 
including this panel, have contributed a lot to our 
understanding and given us some food for thought on how to 
proceed.
    Thank you very much.
    The Chairman. I thank the witnesses. This has been a very 
helpful hearing. I appreciate all of you being here today.
    This hearing is adjourned.
    [Whereupon, at 11:34 a.m., the committee was adjourned, to 
reconvene at the call of the Chair.]

=======================================================================


                            A P P E N D I X

                              ----------                              


              Additional Material Submitted for the Record

=======================================================================


Prepared Statement of Earl E. Devaney, Inspector General, Department of 
                              the Interior

    Mr. Chairman, I want to thank you and the members of the committee 
for inviting me here today to talk about the regulation of Indian 
gaming.
    Over the last decade, my Office has conducted a number of audits on 
issues directly related to Indian gaming regulation such as the 
implementation of the Indian Gaming Regulatory Act [IGRA], the 
financial management activities of the National Indian Gaming 
Commission [NIGC] and, more recently, tribal gaming revenue allocation 
plans and the taking of land into trust. In addition, we have 
investigated and prosecuted numerous individuals for theft and/or 
embezzlement from Indian gaming establishments, investigated 
allegations surrounding the Federal recognition process and we are 
currently working with our Federal law enforcement partners on several 
criminal investigations related to the Indian gaming industry.
    All of these audits and investigations, coupled with my personal 
observations and background as a Federal law enforcement professional 
for over 30 years, lead me to believe that it is time to seriously 
consider regulatory enhancements and potential legislative changes to 
reflect the realities of this $18.5 billion burgeoning industry. My law 
enforcement experience and intuition also tell me that when there is 
this much money involved, bad guys will come. To think otherwise, or to 
imagine that Indian gaming will somehow escape the evils faced by non-
hidian gaming, equates to the proverbial ostrich sticking its head in 
the sand. The gaming industry in Las Vegas estimates that all casinos I 
typically lose 6 percent of their revenues to fraud and theft. Applying 
that same percentage, Indian gaming operations potentially lost $1.1 
billion in 2004.
    While the investigations we have conducted into allegations 
involving particular tribal recognitions made by the Department have 
rarely uncovered any improper behavior, we are nevertheless troubled by 
the invariable presence of wealthy individuals and companies invested 
heavily in the recognition outcome for seeming one reason only--that 
is, to ultimately fund and then reap the financial benefits of a new 
gaming operation.
    As this committee well knows, one of IGRA's primary purposes was to 
ensure that the proceeds from tribal gaming were used to fund tribal 
operations, economic development and the general welfare of its 
members. Therefore, any loss of gaining revenue as a result of criminal 
behavior will obviously negatively impact the ability of the tribes to 
provide vital services such as health care, law enforcement, housing 
and education.
    IGRA envisioned a regulatory scheme where tribes, States, and NIGC 
would all play a vital role. Since my office has never actually 
evaluated the capacity or the effectiveness of tribes and states to 
implement IGRA's vision in this regard, I will confine my comments 
today to the role the NIGC and Federal law enforcement play in this 
regulatory scheme.
    Our audits of IGRA and the NIGC, dating back as far as 1993, 
chronicle the lack of Federal resources available to effectively 
oversee Indian gaining. For instance, in our 1993 audit report, we 
reported that the NIGC only had a staff of 24 and a budget of $2 
million dollars to oversee the 149 tribes which had already initiated 
296 gaming operations. When we recently took a snapshot of NIGC we 
found the Commission with a budget cap of $11 million, and only 39 
auditors and investigators tasked with overseeing more than 200 tribes 
with over 400 gaming. By contrast, in 2003 the Nevada Gaming Commission 
had a budget of $35.2 million dollars with 279 auditors and 
investigators to oversee 365 gaming operations with total reported 
revenues of $19.5 billion.
    One also has to consider the fact that today's Indian gaming 
operations range from a 30-seat bingo parlor in Alaska to a tribal 
operation in Connecticut with 6 separate casinos, nearly 7,500 slots, 
388 table games, 23 restaurants and three hotels. A giant step forward 
was achieved in 2002 when NIGC promulgated the Minimum Internal Control 
Standards [MICS] which established minimum standards and procedures for 
Class II and Class III gaming. However, the MICS also placed a 
training, guidance and monitoring burden on an already beleaguered 
NIGC. In our opinion, the NIGC needs additional resources to fulfill 
their expanding role commensurate with the escalating growth of the 
Indian gaming industry.
    As the members of this committee also may recall, the National 
Gambling Impact Study Commission's report, issued in June 1999, 
encouraged Congress to assure adequate NIGC funding for the proper 
regulatory oversight of the industry's integrity and fiscal 
accountability.
    While we support additional resources for the NIGC, we continue to 
be concerned with the dual role that NIGC civil investigators perform. 
One is to act as NIGC's liaison to the gaming tribes. In this capacity, 
the investigators consult with gaming tribes and provide compliance 
training regarding IGRA's statutory requirements and NIGC regulations. 
On the other hand, these same investigators issue preliminary violation 
notices against the tribes for civil gaming violations and refer 
criminal matters to the FBI. While I understand that the NIGC does not 
see this as a conflict, our view is that these dual roles are wholly 
incompatible and contrary to advancing compliance in Indian gaming. Put 
another way, it is hard to wear a white hat on Monday and Tuesday and 
switch to a black hat on Friday and Saturday.
    Historically, Federal law enforcement has been severely challenged 
to address crime in Indian Country. Violent crime alone consumes most 
of the available resources. As a result, white collar crime relating to 
Indian gaining has, regrettably, often gone unattended. Recently, 
however, under the direction of the Attorney General's Indian Country 
Sub-Committee, and specifically under the leadership of Tom 
Heffelfinger, the U.S. Attorney for the District of Minnesota, various 
law enforcement entities came together to form the Indian Gaming 
Workgroup. We are proud to be part of this effort. None of the Federal, 
State or local law enforcement members of this Workgroup, alone, has 
the resources to address the potential crime in the Indian gaining 
industry. Leveraging our investigative resources in a common alliance 
not only makes perfect sense to us but, I would submit, is the kind of 
good government action that the American public would expect us to 
take.
    Mr. Chairman, my greatest fear is not that the integrity or 
accountability of Indian gaming will be compromised from inside the 
actual Casinos, but rather by the horde of paid management advisors, 
consultants, lobbyists and financiers flocking to get a piece of the 
enormous amount of revenues being generated by Indian gaming. I would 
now like to briefly mention a number of obstacles and challenges that 
we have identified over the years that hinder effective monitoring and 
enforcement in Indian gaining.
    When gaming tribes enter into management contracts for the 
operation of gaming activities, those contracts are submitted to and 
approved by the Chairman of the NIGC. Included in NIGC's review is a 
background investigation of the principles and investors. Some tribes 
have circumvented the review and approval process by entering into 
consulting agreements which, although called by a different name, do 
not differ significantly in substance from management contracts.
    As a result, the terms of these consulting agreements, including 
the financing and compensation, are not subject to review and approval 
by the NIGC, nor are the backgrounds of the consultant's principles and 
investors scrutinized. Ancillary agreements related to gaining 
operations (such as construction, transportation, and supplies) are 
also ripe for abuse.
    This has resulted in the management and operations of some tribal 
gaming enterprises under financial arrangements unfavorable to those 
tribes. It has also opened the window for undesirable elements to 
infiltrate the operations and management of tribal casinos. During a 
recent FBI-sponsored conference on investigations of crime in tribal 
gaining, it was the consensus of those law enforcement officials in 
attendance that if they could only change one element of IGRA, it would 
be to ensure that gaming consultants are subject to the same 
requirements as management contractors.
    Another obstacle we have identified is the Federal statue that 
carves out an exception to the usual recusal period for departing 
Department of the Interior officials 25 U.S.C. Sec. 450 (j) permits 
former officers and employees of the United States to represent 
recognized Indian tribes in connection with any matter pending before 
the Federal Government. The statute requires only that the former 
Federal employee advise the head of the agency with which he is dealing 
of his prior involvement as an officer or employee of the United States 
in connection with the matter at issue.
    This exemption was enacted because Indian tribes, at the time, 
lacked effective representation in front of Federal agencies. When the 
provision was enacted in 1988, virtually the only persons with 
expertise in Indian matters were Federal employees. Today, that dynamic 
has changed. Indian law experts (attorneys and lobbyists) are much more 
widely available to represent tribal interests.
    Having outlived its original intent, this statutory exemption now 
perpetuates a ``revolving door'' where Federal employees who leave the 
government, after handling sensitive tribal issues in an official 
capacity, go on to represent the very same tribes on the same or 
similar issues before the government. Without the exemption, this would 
be a violation of the criminal conflict of interest laws that apply to 
all other departing Federal employees.
    IGRA prohibits gaming on trust lands acquired after October 17, 
1988 unless the lands meet specific statutory exemptions. BIA and NIGC 
share responsibility for reviewing applications for converting trust 
land use to gaming.
    Our recent evaluation of the process of taking land into Federal 
trust status for Indian gaming found 10 instances in which tribes 
converted the use of lands taken into trust by the Bureau of Indian 
Affairs after October 17, 1988 from non-gaining purposes to gaming 
purposes without approval of BIA or NIGC. We determined that neither 
the BIA nor NIGC has a systematic process for identifying converted 
lands or for determining whether the IGRA exemptions apply. Therefore, 
unless a tribe abides by the rules and applies for approval, conversion 
of trust lands to gaming purposes goes essentially unchecked. Neither 
the Department nor NIGC has a way to ensure that Indian gaming is being 
conducted only on approved lands.
    In another OIG audit report issued in 2003, we discovered that 
neither the BIA nor the NIGC was monitoring Indian tribes to determine 
whether gaming tribes comply with BIA-approved revenue allocation plans 
[RAP] or whether tribes are making per capita distributions of gaming 
revenues without an approved plan.
    IGRA provides that tribes may make per capita payments of net 
gaming revenues only after BIA's approval of their RAP. IGRA provides 
the NIGC authority to enforce RAP requirements, but does not provide 
either BIA or NIGC the authority to monitor. Absent a process for 
systematic monitoring of tribal revenue distributions, BIA's approval 
authority and NIGC's enforcement authority serve little practical 
purpose.
    To illustrate this problem, we conducted a review of the per capita 
distribution of the Table Mountain Rancheria Tribe of California at the 
request of BIA. BIA was responding to complaints by tribal members. We 
determined that the Rancheria had significantly exceeded their 
authorized per capita distribution and referred the matter to NIGC. In 
reply to NIGC's letter citing the tribe with violating IGRA, the 
Rancheria said the problem was caused by prior leadership and they 
would comply with the plan. Without authority to do so, NIGC has been 
unable to make any further verification.
    Finally, some Indian casinos and financial institutions are 
particularly vulnerable to becoming the victims of financial fraud. 
Gaming tribes' new-found wealth has only added to that dynamic, and 
unfortunately, many tribes have little experience managing or dealing 
with financial operations that are particularly vulnerable to a myriad 
of fraud schemes.
    Because Indian casinos are a cash-rich enterprise, they are, in our 
opinion, particularly attractive to money launderers. In this example, 
criminals would use casinos to cash in illegal proceeds for chips, 
tokens, or coins in amounts that do not trigger reporting requirements. 
The criminals then game for short periods of time to redeem ``clean'' 
money.
    The failure to provide background investigations on all individuals 
involved in tribal gaming is a serious weakness in the regulatory 
system. For example, in January 2005, a gaming regulator from the Santa 
Ynez Band of Chumash Indians was convicted for a felony offense. The 
offense occurred in November 2004. Rather than receiving notice from 
the tribe, the NIGC became aware of the conviction as a result of an 
article in the Los Angeles Times.
    Tribal financial institutions without Federal or State charters, 
and attendant regulation, are also particularly vulnerable to 
manipulation. In 1992 and 2001, the U.S. Reservation Bank & Trust 
[USRB&T], an Indian-controlled banking institution, was granted 
business licenses by the Rosebud Sioux Tribe in South Dakota and the 
Salt River Pima-Maricopa Indian Community in Arizona. Although 
represented as a bank to other financial institutions and investors, 
USRB&T is alleged to have been a financial institution established 
solely to execute a ``Ponzi'' scheme. $20 million was seized by the 
Federal Government in Arizona shortly before the operators of USRB&T 
intended to wire the funds to an off-shore account.
    Absent sound regulation, these Indian casinos and financial 
operations remain extremely vulnerable to criminal exploitation. As 
this committee so recently demonstrated, greater care must be exercised 
by gaming tribes when they are approached by unsavory Indian gaming 
lobbyists promising imperceptible services for astonishing fees.
    Mr. Chairman and members of the committee, as you can see, Federal 
regulators and law enforcement personnel face a host of challenges in 
their effort to protect the interests of individual Indians and tribes 
that emanate from Indian gaining operations and proceeds.
    My office has been reviewing our audit and investigative 
authorities in Indian country to determine whether we can establish an 
even more vigorous presence in the gaming arena. In the meantime, we 
have had the opportunity to review the proposed technical amendments to 
IGRA advanced by NIGC. Overall, we support NIGC's effort in regard to 
funding flexibilities and regulatory enhancements, particularly the 
provisions that extend background checks to a broader category of 
individuals working in the Indian gaming industry.
    The Office of Inspector General will continue to explore 
opportunities to identify weaknesses and gaps in the Federal oversight 
and regulation of Indian gaming, and formulate recommendations to 
correct these shortcomings. We will also continue to conduct 
investigations into allegations of crime that adversely affects tribes 
and gaming establishments. Should this committee have specific issues 
of concern that might benefit from an audit, evaluation or 
investigation by the Office of Inspector General, I stand ready to 
assist the committee in any way I can.
    Mr. Chairman, members of the committee, thank you for the 
opportunity to testify here today. I am happy to answer any questions 
you may have.

[GRAPHIC] [TIFF OMITTED] T0956.001

[GRAPHIC] [TIFF OMITTED] T0956.002

[GRAPHIC] [TIFF OMITTED] T0956.003

[GRAPHIC] [TIFF OMITTED] T0956.004

[GRAPHIC] [TIFF OMITTED] T0956.005

[GRAPHIC] [TIFF OMITTED] T0956.006

[GRAPHIC] [TIFF OMITTED] T0956.007

[GRAPHIC] [TIFF OMITTED] T0956.008

[GRAPHIC] [TIFF OMITTED] T0956.009

[GRAPHIC] [TIFF OMITTED] T0956.010

[GRAPHIC] [TIFF OMITTED] T0956.011

[GRAPHIC] [TIFF OMITTED] T0956.012

[GRAPHIC] [TIFF OMITTED] T0956.013

[GRAPHIC] [TIFF OMITTED] T0956.014

[GRAPHIC] [TIFF OMITTED] T0956.015

[GRAPHIC] [TIFF OMITTED] T0956.016

[GRAPHIC] [TIFF OMITTED] T0956.017

[GRAPHIC] [TIFF OMITTED] T0956.018

[GRAPHIC] [TIFF OMITTED] T0956.019

[GRAPHIC] [TIFF OMITTED] T0956.020

[GRAPHIC] [TIFF OMITTED] T0956.021

[GRAPHIC] [TIFF OMITTED] T0956.022

[GRAPHIC] [TIFF OMITTED] T0956.023

[GRAPHIC] [TIFF OMITTED] T0956.024

[GRAPHIC] [TIFF OMITTED] T0956.025

[GRAPHIC] [TIFF OMITTED] T0956.026

[GRAPHIC] [TIFF OMITTED] T0956.027

[GRAPHIC] [TIFF OMITTED] T0956.028

[GRAPHIC] [TIFF OMITTED] T0956.029

[GRAPHIC] [TIFF OMITTED] T0956.030

[GRAPHIC] [TIFF OMITTED] T0956.031

[GRAPHIC] [TIFF OMITTED] T0956.032

[GRAPHIC] [TIFF OMITTED] T0956.033

[GRAPHIC] [TIFF OMITTED] T0956.034

[GRAPHIC] [TIFF OMITTED] T0956.035

[GRAPHIC] [TIFF OMITTED] T0956.036

[GRAPHIC] [TIFF OMITTED] T0956.037

[GRAPHIC] [TIFF OMITTED] T0956.038

[GRAPHIC] [TIFF OMITTED] T0956.039

[GRAPHIC] [TIFF OMITTED] T0956.040

[GRAPHIC] [TIFF OMITTED] T0956.041

[GRAPHIC] [TIFF OMITTED] T0956.042

[GRAPHIC] [TIFF OMITTED] T0956.043

[GRAPHIC] [TIFF OMITTED] T0956.044

[GRAPHIC] [TIFF OMITTED] T0956.045

[GRAPHIC] [TIFF OMITTED] T0956.046

[GRAPHIC] [TIFF OMITTED] T0956.047

[GRAPHIC] [TIFF OMITTED] T0956.048

[GRAPHIC] [TIFF OMITTED] T0956.049

[GRAPHIC] [TIFF OMITTED] T0956.050

[GRAPHIC] [TIFF OMITTED] T0956.051

[GRAPHIC] [TIFF OMITTED] T0956.052

[GRAPHIC] [TIFF OMITTED] T0956.053

[GRAPHIC] [TIFF OMITTED] T0956.054

[GRAPHIC] [TIFF OMITTED] T0956.055

[GRAPHIC] [TIFF OMITTED] T0956.056

[GRAPHIC] [TIFF OMITTED] T0956.057

[GRAPHIC] [TIFF OMITTED] T0956.058

[GRAPHIC] [TIFF OMITTED] T0956.059

[GRAPHIC] [TIFF OMITTED] T0956.060

[GRAPHIC] [TIFF OMITTED] T0956.061

[GRAPHIC] [TIFF OMITTED] T0956.062

[GRAPHIC] [TIFF OMITTED] T0956.063

[GRAPHIC] [TIFF OMITTED] T0956.064

[GRAPHIC] [TIFF OMITTED] T0956.065

[GRAPHIC] [TIFF OMITTED] T0956.066

[GRAPHIC] [TIFF OMITTED] T0956.067

[GRAPHIC] [TIFF OMITTED] T0956.068

[GRAPHIC] [TIFF OMITTED] T0956.069

[GRAPHIC] [TIFF OMITTED] T0956.070

[GRAPHIC] [TIFF OMITTED] T0956.071

[GRAPHIC] [TIFF OMITTED] T0956.072

[GRAPHIC] [TIFF OMITTED] T0956.073

[GRAPHIC] [TIFF OMITTED] T0956.074

[GRAPHIC] [TIFF OMITTED] T0956.075

[GRAPHIC] [TIFF OMITTED] T0956.076

[GRAPHIC] [TIFF OMITTED] T0956.077

[GRAPHIC] [TIFF OMITTED] T0956.078

[GRAPHIC] [TIFF OMITTED] T0956.079

[GRAPHIC] [TIFF OMITTED] T0956.080

[GRAPHIC] [TIFF OMITTED] T0956.081

[GRAPHIC] [TIFF OMITTED] T0956.082

[GRAPHIC] [TIFF OMITTED] T0956.083

[GRAPHIC] [TIFF OMITTED] T0956.084

[GRAPHIC] [TIFF OMITTED] T0956.085

[GRAPHIC] [TIFF OMITTED] T0956.086

[GRAPHIC] [TIFF OMITTED] T0956.087

[GRAPHIC] [TIFF OMITTED] T0956.088

[GRAPHIC] [TIFF OMITTED] T0956.089

[GRAPHIC] [TIFF OMITTED] T0956.090

[GRAPHIC] [TIFF OMITTED] T0956.091

[GRAPHIC] [TIFF OMITTED] T0956.092

[GRAPHIC] [TIFF OMITTED] T0956.093

[GRAPHIC] [TIFF OMITTED] T0956.094

[GRAPHIC] [TIFF OMITTED] T0956.095

[GRAPHIC] [TIFF OMITTED] T0956.096

[GRAPHIC] [TIFF OMITTED] T0956.097

[GRAPHIC] [TIFF OMITTED] T0956.098

[GRAPHIC] [TIFF OMITTED] T0956.099

[GRAPHIC] [TIFF OMITTED] T0956.100

[GRAPHIC] [TIFF OMITTED] T0956.101

[GRAPHIC] [TIFF OMITTED] T0956.102

[GRAPHIC] [TIFF OMITTED] T0956.103

[GRAPHIC] [TIFF OMITTED] T0956.104

[GRAPHIC] [TIFF OMITTED] T0956.105

[GRAPHIC] [TIFF OMITTED] T0956.106

[GRAPHIC] [TIFF OMITTED] T0956.107

[GRAPHIC] [TIFF OMITTED] T0956.108

[GRAPHIC] [TIFF OMITTED] T0956.109

[GRAPHIC] [TIFF OMITTED] T0956.110

[GRAPHIC] [TIFF OMITTED] T0956.111

[GRAPHIC] [TIFF OMITTED] T0956.112

[GRAPHIC] [TIFF OMITTED] T0956.113

[GRAPHIC] [TIFF OMITTED] T0956.114

[GRAPHIC] [TIFF OMITTED] T0956.115

[GRAPHIC] [TIFF OMITTED] T0956.116

[GRAPHIC] [TIFF OMITTED] T0956.117

[GRAPHIC] [TIFF OMITTED] T0956.118

[GRAPHIC] [TIFF OMITTED] T0956.119

[GRAPHIC] [TIFF OMITTED] T0956.120

[GRAPHIC] [TIFF OMITTED] T0956.121

[GRAPHIC] [TIFF OMITTED] T0956.122

[GRAPHIC] [TIFF OMITTED] T0956.123

[GRAPHIC] [TIFF OMITTED] T0956.124

[GRAPHIC] [TIFF OMITTED] T0956.125

[GRAPHIC] [TIFF OMITTED] T0956.126

[GRAPHIC] [TIFF OMITTED] T0956.127

[GRAPHIC] [TIFF OMITTED] T0956.128

[GRAPHIC] [TIFF OMITTED] T0956.129

[GRAPHIC] [TIFF OMITTED] T0956.130

[GRAPHIC] [TIFF OMITTED] T0956.131

[GRAPHIC] [TIFF OMITTED] T0956.132

[GRAPHIC] [TIFF OMITTED] T0956.133

[GRAPHIC] [TIFF OMITTED] T0956.134

[GRAPHIC] [TIFF OMITTED] T0956.135

[GRAPHIC] [TIFF OMITTED] T0956.136

[GRAPHIC] [TIFF OMITTED] T0956.137

[GRAPHIC] [TIFF OMITTED] T0956.138

[GRAPHIC] [TIFF OMITTED] T0956.139

[GRAPHIC] [TIFF OMITTED] T0956.140

[GRAPHIC] [TIFF OMITTED] T0956.141

[GRAPHIC] [TIFF OMITTED] T0956.142

[GRAPHIC] [TIFF OMITTED] T0956.143

[GRAPHIC] [TIFF OMITTED] T0956.144

[GRAPHIC] [TIFF OMITTED] T0956.145

[GRAPHIC] [TIFF OMITTED] T0956.146

[GRAPHIC] [TIFF OMITTED] T0956.147

[GRAPHIC] [TIFF OMITTED] T0956.148

[GRAPHIC] [TIFF OMITTED] T0956.149

[GRAPHIC] [TIFF OMITTED] T0956.150

[GRAPHIC] [TIFF OMITTED] T0956.151

[GRAPHIC] [TIFF OMITTED] T0956.152

[GRAPHIC] [TIFF OMITTED] T0956.153

[GRAPHIC] [TIFF OMITTED] T0956.154

[GRAPHIC] [TIFF OMITTED] T0956.155

[GRAPHIC] [TIFF OMITTED] T0956.156

[GRAPHIC] [TIFF OMITTED] T0956.157

[GRAPHIC] [TIFF OMITTED] T0956.158

[GRAPHIC] [TIFF OMITTED] T0956.159

[GRAPHIC] [TIFF OMITTED] T0956.160

[GRAPHIC] [TIFF OMITTED] T0956.161

[GRAPHIC] [TIFF OMITTED] T0956.162

[GRAPHIC] [TIFF OMITTED] T0956.163

[GRAPHIC] [TIFF OMITTED] T0956.164

[GRAPHIC] [TIFF OMITTED] T0956.165

[GRAPHIC] [TIFF OMITTED] T0956.166

[GRAPHIC] [TIFF OMITTED] T0956.167

[GRAPHIC] [TIFF OMITTED] T0956.168

[GRAPHIC] [TIFF OMITTED] T0956.169

[GRAPHIC] [TIFF OMITTED] T0956.170

[GRAPHIC] [TIFF OMITTED] T0956.171

[GRAPHIC] [TIFF OMITTED] T0956.172

[GRAPHIC] [TIFF OMITTED] T0956.173

[GRAPHIC] [TIFF OMITTED] T0956.174

[GRAPHIC] [TIFF OMITTED] T0956.175

[GRAPHIC] [TIFF OMITTED] T0956.176

[GRAPHIC] [TIFF OMITTED] T0956.177

[GRAPHIC] [TIFF OMITTED] T0956.178

[GRAPHIC] [TIFF OMITTED] T0956.179

[GRAPHIC] [TIFF OMITTED] T0956.180

[GRAPHIC] [TIFF OMITTED] T0956.181

[GRAPHIC] [TIFF OMITTED] T0956.182

[GRAPHIC] [TIFF OMITTED] T0956.183

[GRAPHIC] [TIFF OMITTED] T0956.184

[GRAPHIC] [TIFF OMITTED] T0956.185

[GRAPHIC] [TIFF OMITTED] T0956.186

[GRAPHIC] [TIFF OMITTED] T0956.187

[GRAPHIC] [TIFF OMITTED] T0956.188

[GRAPHIC] [TIFF OMITTED] T0956.189

[GRAPHIC] [TIFF OMITTED] T0956.190

[GRAPHIC] [TIFF OMITTED] T0956.191

[GRAPHIC] [TIFF OMITTED] T0956.192

[GRAPHIC] [TIFF OMITTED] T0956.193

[GRAPHIC] [TIFF OMITTED] T0956.194

[GRAPHIC] [TIFF OMITTED] T0956.195

[GRAPHIC] [TIFF OMITTED] T0956.196

[GRAPHIC] [TIFF OMITTED] T0956.197

[GRAPHIC] [TIFF OMITTED] T0956.198

[GRAPHIC] [TIFF OMITTED] T0956.199

[GRAPHIC] [TIFF OMITTED] T0956.200

[GRAPHIC] [TIFF OMITTED] T0956.201

[GRAPHIC] [TIFF OMITTED] T0956.202

[GRAPHIC] [TIFF OMITTED] T0956.203

[GRAPHIC] [TIFF OMITTED] T0956.204

[GRAPHIC] [TIFF OMITTED] T0956.205

[GRAPHIC] [TIFF OMITTED] T0956.206

[GRAPHIC] [TIFF OMITTED] T0956.207

[GRAPHIC] [TIFF OMITTED] T0956.208

[GRAPHIC] [TIFF OMITTED] T0956.209

[GRAPHIC] [TIFF OMITTED] T0956.210

[GRAPHIC] [TIFF OMITTED] T0956.211

[GRAPHIC] [TIFF OMITTED] T0956.212

[GRAPHIC] [TIFF OMITTED] T0956.213

[GRAPHIC] [TIFF OMITTED] T0956.214

[GRAPHIC] [TIFF OMITTED] T0956.215

[GRAPHIC] [TIFF OMITTED] T0956.216

[GRAPHIC] [TIFF OMITTED] T0956.217

[GRAPHIC] [TIFF OMITTED] T0956.218

[GRAPHIC] [TIFF OMITTED] T0956.219

[GRAPHIC] [TIFF OMITTED] T0956.220

[GRAPHIC] [TIFF OMITTED] T0956.221

[GRAPHIC] [TIFF OMITTED] T0956.222

[GRAPHIC] [TIFF OMITTED] T0956.223

[GRAPHIC] [TIFF OMITTED] T0956.224

[GRAPHIC] [TIFF OMITTED] T0956.225

[GRAPHIC] [TIFF OMITTED] T0956.226

[GRAPHIC] [TIFF OMITTED] T0956.227

[GRAPHIC] [TIFF OMITTED] T0956.228

[GRAPHIC] [TIFF OMITTED] T0956.229

[GRAPHIC] [TIFF OMITTED] T0956.230

[GRAPHIC] [TIFF OMITTED] T0956.231

[GRAPHIC] [TIFF OMITTED] T0956.232

[GRAPHIC] [TIFF OMITTED] T0956.233

[GRAPHIC] [TIFF OMITTED] T0956.234

[GRAPHIC] [TIFF OMITTED] T0956.235

[GRAPHIC] [TIFF OMITTED] T0956.236

[GRAPHIC] [TIFF OMITTED] T0956.237

[GRAPHIC] [TIFF OMITTED] T0956.238

[GRAPHIC] [TIFF OMITTED] T0956.239

[GRAPHIC] [TIFF OMITTED] T0956.240

[GRAPHIC] [TIFF OMITTED] T0956.241

[GRAPHIC] [TIFF OMITTED] T0956.242

[GRAPHIC] [TIFF OMITTED] T0956.243

[GRAPHIC] [TIFF OMITTED] T0956.244

[GRAPHIC] [TIFF OMITTED] T0956.245

[GRAPHIC] [TIFF OMITTED] T0956.246

[GRAPHIC] [TIFF OMITTED] T0956.247

[GRAPHIC] [TIFF OMITTED] T0956.248

[GRAPHIC] [TIFF OMITTED] T0956.249

[GRAPHIC] [TIFF OMITTED] T0956.250

[GRAPHIC] [TIFF OMITTED] T0956.251

[GRAPHIC] [TIFF OMITTED] T0956.252

[GRAPHIC] [TIFF OMITTED] T0956.253

[GRAPHIC] [TIFF OMITTED] T0956.254

[GRAPHIC] [TIFF OMITTED] T0956.255

[GRAPHIC] [TIFF OMITTED] T0956.256

[GRAPHIC] [TIFF OMITTED] T0956.257

[GRAPHIC] [TIFF OMITTED] T0956.258

[GRAPHIC] [TIFF OMITTED] T0956.259

[GRAPHIC] [TIFF OMITTED] T0956.260

[GRAPHIC] [TIFF OMITTED] T0956.261

[GRAPHIC] [TIFF OMITTED] T0956.262

[GRAPHIC] [TIFF OMITTED] T0956.263

[GRAPHIC] [TIFF OMITTED] T0956.264

[GRAPHIC] [TIFF OMITTED] T0956.265

[GRAPHIC] [TIFF OMITTED] T0956.266

[GRAPHIC] [TIFF OMITTED] T0956.267

[GRAPHIC] [TIFF OMITTED] T0956.268

[GRAPHIC] [TIFF OMITTED] T0956.269

[GRAPHIC] [TIFF OMITTED] T0956.270

[GRAPHIC] [TIFF OMITTED] T0956.271

[GRAPHIC] [TIFF OMITTED] T0956.272

[GRAPHIC] [TIFF OMITTED] T0956.273

[GRAPHIC] [TIFF OMITTED] T0956.274

[GRAPHIC] [TIFF OMITTED] T0956.275

[GRAPHIC] [TIFF OMITTED] T0956.276

[GRAPHIC] [TIFF OMITTED] T0956.277

[GRAPHIC] [TIFF OMITTED] T0956.278

[GRAPHIC] [TIFF OMITTED] T0956.279

[GRAPHIC] [TIFF OMITTED] T0956.280

[GRAPHIC] [TIFF OMITTED] T0956.281

[GRAPHIC] [TIFF OMITTED] T0956.282

[GRAPHIC] [TIFF OMITTED] T0956.283

[GRAPHIC] [TIFF OMITTED] T0956.284

[GRAPHIC] [TIFF OMITTED] T0956.285

[GRAPHIC] [TIFF OMITTED] T0956.286

[GRAPHIC] [TIFF OMITTED] T0956.287

[GRAPHIC] [TIFF OMITTED] T0956.288

[GRAPHIC] [TIFF OMITTED] T0956.289

[GRAPHIC] [TIFF OMITTED] T0956.290

[GRAPHIC] [TIFF OMITTED] T0956.291

[GRAPHIC] [TIFF OMITTED] T0956.292

[GRAPHIC] [TIFF OMITTED] T0956.293

[GRAPHIC] [TIFF OMITTED] T0956.294

[GRAPHIC] [TIFF OMITTED] T0956.295

[GRAPHIC] [TIFF OMITTED] T0956.296

[GRAPHIC] [TIFF OMITTED] T0956.297

[GRAPHIC] [TIFF OMITTED] T0956.298

[GRAPHIC] [TIFF OMITTED] T0956.299

[GRAPHIC] [TIFF OMITTED] T0956.300

[GRAPHIC] [TIFF OMITTED] T0956.301

[GRAPHIC] [TIFF OMITTED] T0956.302

[GRAPHIC] [TIFF OMITTED] T0956.303

[GRAPHIC] [TIFF OMITTED] T0956.304

[GRAPHIC] [TIFF OMITTED] T0956.305

[GRAPHIC] [TIFF OMITTED] T0956.306

[GRAPHIC] [TIFF OMITTED] T0956.307

[GRAPHIC] [TIFF OMITTED] T0956.308

[GRAPHIC] [TIFF OMITTED] T0956.309

[GRAPHIC] [TIFF OMITTED] T0956.310

[GRAPHIC] [TIFF OMITTED] T0956.311

[GRAPHIC] [TIFF OMITTED] T0956.312

[GRAPHIC] [TIFF OMITTED] T0956.313

[GRAPHIC] [TIFF OMITTED] T0956.314

[GRAPHIC] [TIFF OMITTED] T0956.315

[GRAPHIC] [TIFF OMITTED] T0956.316

[GRAPHIC] [TIFF OMITTED] T0956.317

[GRAPHIC] [TIFF OMITTED] T0956.318

[GRAPHIC] [TIFF OMITTED] T0956.319

[GRAPHIC] [TIFF OMITTED] T0956.320

[GRAPHIC] [TIFF OMITTED] T0956.321

[GRAPHIC] [TIFF OMITTED] T0956.322

[GRAPHIC] [TIFF OMITTED] T0956.323

[GRAPHIC] [TIFF OMITTED] T0956.324

[GRAPHIC] [TIFF OMITTED] T0956.325

[GRAPHIC] [TIFF OMITTED] T0956.326

[GRAPHIC] [TIFF OMITTED] T0956.327

[GRAPHIC] [TIFF OMITTED] T0956.328

[GRAPHIC] [TIFF OMITTED] T0956.329

[GRAPHIC] [TIFF OMITTED] T0956.330

[GRAPHIC] [TIFF OMITTED] T0956.331

[GRAPHIC] [TIFF OMITTED] T0956.332

[GRAPHIC] [TIFF OMITTED] T0956.333

[GRAPHIC] [TIFF OMITTED] T0956.334

[GRAPHIC] [TIFF OMITTED] T0956.335

[GRAPHIC] [TIFF OMITTED] T0956.336

[GRAPHIC] [TIFF OMITTED] T0956.337

[GRAPHIC] [TIFF OMITTED] T0956.338

[GRAPHIC] [TIFF OMITTED] T0956.339

[GRAPHIC] [TIFF OMITTED] T0956.340

                                 

      
