    [Senate Hearing 109-443]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 109-443

                    INDIAN GAMING REGULATORY ACT AMENDMENTS

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

                                    HEARING

                                   BEFORE THE

                          COMMITTEE ON INDIAN AFFAIRS
                              UNITED STATES SENATE

                           ONE HUNDRED NINTH CONGRESS

                                 SECOND SESSION

                                       ON

                                    S. 2078

     TO AMEND THE INDIAN GAMING REGULATORY ACT TO CLARIFY THE AUTHORITY OF
    THE NATIONAL INDIAN GAMING COMMISSION TO REGULATE CLASS III GAMING, TO
                      LIMIT THE LANDS ELIGIBLE FOR GAMING

                                   __________

                                 MARCH 8, 2006
                                 WASHINGTON, DC

                        U.S. GOVERNMENT PRINTING OFFICE
    26-507                      WASHINGTON : 2006
    _____________________________________________________________________________
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                          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
    S. 2078, text of.................................................     3
    Statements:
        Akaka, Hon. Daniel K., U.S. Senator from Hawaii..............    43
        Bullis, Paul, director, Arizona Department of Gaming.........    49
        DesRosiers, Norman, commissioner, Viejas Tribal Government
          Gaming Commission..........................................    47
        Dorgan, Hon. Byron L., U.S. Senator from North Dakota, vice
          chairman, Committee on Indian Affairs......................    37
        His Horse Is Thunder, Ron, chairman, Standing Rock Sioux
          Tribe......................................................    44
        Hogen, Philip, chairman, National Indian Gaming Commission...    37
        McCain, Hon. John, U.S. Senator from Arizona, chairman,
          Committee on Indian Affairs................................     1

                                    Appendix

    Prepared statements:
        Akaka, Hon. Daniel K., U.S. Senator from Hawaii..............    59
        Bullis, Paul (with attachment)...............................    60
        Crooks, Stanley, chairman, Shakoppee Mdewakanton Sioux
          Community (with attachment)................................    67
        DesRosiers, Norman...........................................    81
        His Horse Is Thunder, Ron....................................    87
        Hogen, Philip (with attachment)..............................    96
        Spurr, Laura, chairwoman, Nottawaseppi Huron Band of
          Potawatomi.................................................   116

                    INDIAN GAMING REGULATORY ACT AMENDMENTS

                                  ----------

                            WEDNESDAY, MARCH 8, 2006

                                           U.S. Senate,
                                   Committee on Indian Affairs,
                                                        Washington, DC.
        The committee met, pursuant to notice, at 9:30 a.m. in room
    485 Senate Russell Office Building, Hon. John McCain (chairman
    of the committee) presiding.
        Present: Senators McCain, Akaka, and Dorgan.

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

        The Chairman. Good morning.
        In April 2006, the Committee on Indian Affairs began a
    series of hearing that have taken an in-depth look at the
    Indian Gaming Regulatory Act. IGRA was enacted in 1988,
    following the decision of the Supreme Court in the Cabazon
    case. Following the dictates of that case, Congress established
    a regulatory structure for tribes that conduct gaming on their
    lands.
        The intervening 17 years has seen an astronomical growth in
    Indian gaming, both in the amount of revenues generated and in
    the number of gaming operations established. Yet the act has
    not been amended to keep up with these changes.
        Regulators have scrambled to keep up and lessons have been
    learned about what is needed to create and maintain a fair and
    well-regulated industry. In response to the growth of the
    industry, on November 18, 2005, I introduced S. 2078, the
    Indian Gaming Regulatory Act Amendments of 2005. Essentially,
    this bill addresses three areas that I believe are in need of
    reform.
        First, the bill clarifies that the National Indian Gaming
    Commission has authority to promulgate and enforce minimum
    internal control standards as to class III gaming, a topic on
    which this committee held a hearing last year.
        Second, the bill tightens restrictions on off-reservation
    gaming. Several committee hearings have focused on this problem
    and the committee has received testimony from numerous parties
    on all sides of these issues.
        Last, the bill expands the NIGC chairman's authority over
    contract approvals to include not only management contracts,
    but also consulting, development and other significant
    contracts. Unfortunately, when IGRA was drafted we unwittingly
    tied the hands of the NIGC by requiring approval only for
    management contracts. Among the lessons learned over the past
    17 years is that in order to avoid NIGC review, some
    unscrupulous contractors have fashioned agreements as
    consulting or development contracts. That is, something other
    than management contracts that require NIGC review.
        In these cases, tribes run a risk that contractors will
    enforce unfair contract terms and tribes and patrons run the
    risk that the tribe will contact with unsuitable partners. S.
    2078 extends NIGC approval to all significant gaming operations
    related contracts, so that Indian tribes remain the primary
    beneficiaries of their gaming operations, which was and remains
    among the fundamental purposes for which IGRA was enacted.
        I am aware that some tribes are concerned that the bill
    language may overburden the NIGC and duplicate activities
    already performed by their tribal and State regulatory
    authorities. Amending IGRA to address concerns about these
    consulting contracts and contractors, while maintaining an
    efficient Federal regulatory agency, is a goal shared by all.
        I look forward to hearing from the witnesses today,
    anticipating that they will provide us a real world view of how
    to achieve this goal.
        I just want to reiterate a point. There are many Native
    Americans, particularly gaming tribes, who have approached me
    and said, we don't even need this issue reviewed, much less
    changed. Any act, any legislation that is 18 years old clearly
    needs review. And second of all, any operation that has gone
    from $500 million to $20 billion a year and continues to go up
    obviously needs to be scrutinized and looked at. Things have
    changed since 1988.
        So I steadfastly reject, steadfastly reject some kind of
    allegation that we should not be reviewing and making necessary
    changes to the Indian Gaming Regulatory Act. So this committee
    will mark up on March 29 a bill, and it will be subject to
    amendment, and we will try to move it to the floor of the
    Senate.
        [Text of S. 2078 follows:]

        The Chairman. Senator Dorgan, welcome.

      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.
        As you have indicated, this is a hearing, one of several
    where we have reviewed various provisions of the Indian Gaming
    Regulatory Act to determine whether the act needs to be
    adjusted or changed or amended in any way. Part of the stimulus
    for this comes from the Colorado River Indian Tribes decision.
    I think it raises reasonable questions.
        I have been helped enormously by these hearings because I
    have been forced to go back and take a look at what the
    original thinking was, what the history was with respect to the
    construction of these laws. Your legislation is a starting
    point. Some say that it goes too far in some areas. I share
    that view.
        On the other hand, I think to suggest that there is nothing
    going on here that needs any Federal legislation is being
    oblivious to the obvious. We do need, it seems to me, to take a
    good look at what we have and what we should do. I commend the
    chairman for stimulating this discussion. I think these
    hearings are necessary, not just worthy, but necessary.
        We have an Indian gaming industry now of nearly $20 billion
    a year. It provides needed revenue to be helpful to the tribes
    to meet their obligations and funding for some critical
    services. I want to make certain that Indian gaming is as well
    regulated as can be, to make certain that it continues to be
    able to be a generator of revenue for the tribes with which to
    do good things.
        One way to do that is for us to have these kinds of reviews
    and these hearings. So Mr. Chairman, I commend you for that. I
    look forward to working with you as we proceed to a markup in
    this matter.
        The Chairman. Thank you very much.
        Philip Hogen is the chairman of the National Indian Gaming
    Commission. Welcome back, Mr. Chairman.

      STATEMENT OF PHILIP HOGEN, CHAIRMAN, NATIONAL INDIAN GAMING
                               COMMISSION

        Mr. Hogen. Good morning, Chairman McCain and Vice Chairman
    Dorgan. I am delighted to be here on behalf of the National
    Indian Gaming Commission. My fellow commissioner, Chuck Choney
    from Oklahoma, is present here as well. So the full commission
    as it stands today is here.
        Indian country owes this committee a great debt of
    gratitude for the work you did to create the Indian Gaming
    Regulatory Act. That, of course, did not create Indian gaming,
    but it created the structure that has permitted the development
    of a very powerful industry that has brought economic
    development to Indian country that languished in poverty for
    generations. It has not solved all the problems, but it has
    solved a lot of them.
        So somebody in my position, who chairs the Federal
    regulatory body that has oversight has a heavy responsibility
    to make sure, as things go forward, they go in an orderly
    fashion and they complement what is happening, not complicate
    it.
        But I certainly agree with the sentiments that have just
    been expressed that given the passage of time, the growth, the
    development of the industry, it is appropriate to look at the
    Act and to see if there are things that might be improved or
    revised.
        The two areas I want to comment on this morning are the
    clarification of NIGC's class III authority. I testified in
    September of last year about this and want to associate these
    remarks with that testimony because all of that is still true.
        The Chairman. I think we will see it is not a fine line
    between class II and class III.
        Mr. Hogen. Well, that is a significant challenge, but in my
    testimony in September I attempted to point out how we got into
    the regulation of class III to begin with. I think at the time
    IGRA was designed, many thought it will always be bingo. Well,
    it wasn't, and 80 percent of it is not bingo; 80 percent of it
    is class III gaming. That is where the money, that is where the
    action is. So to that end----
        The Chairman. These are slot machines that look----
        Mr. Hogen. Slot machines and house banked games, blackjack
    and so forth. Yes.
        So recognizing this in 1999, starting in 1998, the National
    Indian Gaming Commission developed minimum internal control
    standards. We did not invent the concept. We just adopted it
    and tried to improve it and applied it to all of Indian gaming,
    class II and class III. We said these are the rules you have to
    follow at a minimum to track the dollars as they flow through
    the gaming operation and they go to the tribe. These are the
    things you have to do to ensure that the game is fair.
        So for the first time, we had a rulebook, we had a
    yardstick, and we were able to go out and measure the
    performance of tribes' gaming operations and regulation. I
    think it worked splendidly. Most tribes probably were ahead of
    the game, were already there, but there were a lot of tribes
    that were not. So we were able to bring them up to that
    standard.
        Of course, since that time, we have gone out to look
    periodically at how those performances measure up. We have done
    nearly 40 audits of individual facilities since we adopted
    those regulations. We found a lot of violations. We found over
    2,300 violations of minimum internal control standards. That
    probably sounds like a lot. It is a lot, but it is not a lot
    compared to all of the compliance that occurs. But to say that
    nothing is wrong out there would be a misstatement.
        The average number that we would find in these
    approximately 40 MICS audits would be about 64 relatively
    serious violations at each facility. The kinds of things we
    would find is a failure of the tribe to regularly do an
    analysis of the statistical performance of their gaming. They
    should monitor each slot machine to see if it is performing as
    the specs say it should. If it is not, there are questions to
    raise, and either somebody is taking the money or something is
    wrong with the machine.
        We found ineffective key control. That is, all these
    machines and cages and so forth are locked, and not everybody
    is following the rules with respect to that. The jackpot fill
    and drop process is not always tracked the way it should be.
    Occasionally, cash variances occur and they are not always
    investigated as the controls say that they ought to be.
    Sometimes there is not the appropriate segregation of duties
    within the facilities, if the same guy is counting and doing
    the approval, and that sort of thing.
        Internal audits have not been satisfactory, they are
    getting a lot better, but there was a time when there just was
    not an appropriate internal audit effort at the facilities. One
    of these situations will not necessarily mean a disaster, but
    let me just share with you an incident that we currently are
    working with where a couple of these things combined to result
    in a significant tribal loss.
        The tribe was not monitoring the statistical analysis of
    its machines. When we did our audit, we observed this. When
    they got around to doing that, they found that there were some
    significant shortages or inconsistencies with what the dollars
    that they were counting were compared to what was projected.
        It was also discovered that there was a blind spot with
    respect to their surveillance system. When they finally put all
    of this together, it was discovered that some of the drop team
    was taking the money before it got to the cage. We do not know
    for sure how much was taken, but maybe over $250,000. Had the
    MICS been followed from day one, I think that would have been
    avoided.
        Now, does this mean that there has to be a Federal rule and
    a Federal agency to do this? Not necessarily. The tribes could
    do this on their own, but obviously they do not always do that.
    So without the ability to promulgate these rules and to apply
    them to class III gaming, instances like this are going to
    occur.
        The Chairman. And to oversight.
        Mr. Hogen. Say again?
        The Chairman. And to oversight.
        Mr. Hogen. Absolutely, yes.
        The regulation sometimes is the stepchild of the system.
    That is, it is not a revenue generating part of the business.
    So there are temptations to shortcut it. But if you have
    somebody looking over your shoulder and saying these are the
    rules you have to play by, there is less of a temptation to do
    that.
        We have an all Indian system here. That is, we have the
    National Indian Gaming Commission, the law you wrote says you
    have to have two members on that commission that are tribal
    members. Of course, they oversee, then, what the tribes who do
    the heavy lifting, who do all the day to day stuff, do. So if
    we continue to have the authority that we started with back in
    1999, as I say, I think it has worked beautifully, I think we
    can continue to ensure the integrity that the industry needs.
        People come to the tribal gaming facilities in droves and
    part of the reason they do that is they have a good reputation
    for having a fair game, for having integrity, and of course the
    fruits of the operation, building tribal communities and so
    forth. But if that starts to erode, starts to disintegrate, I
    think it bodes ill for the future of this industry.
        So I refer the committee to my testimony where I attempt to
    track the history of how we got into this, where we went, and
    why it is effective, but if we are handcuffed, if we cannot
    look over 80 percent of these revenues, I think that the
    industry will suffer.
        Also attached to my testimony is a chart, and this was also
    submitted to the committee in September, that looks at the
    tribal-State compacts that tribes enter into for class III
    gaming. Those compacts vary greatly, but many of them adopt the
    NIGC minimum internal control standards. Some unfortunately
    have no reference to internal control standards, and so if we
    are not out there, we are afraid what needs to be done will not
    get done.
        So if there is one thing we would ask for at the top of the
    list with respect to any revision of the Indian Gaming
    Regulatory Act it would be clarification of that authority. We,
    of course, have the Colorado River Indian Tribes v. NIGC case
    or decision on appeal, but we cannot predict how that will come
    out, and I think it would be better if, rather than doing that
    in a judicial forum, if Congress would say, this is what we
    intended: A Federal oversight role with respect to the dominant
    form of gaming.
        The Chairman. Mr. Chairman, when do you expect the Court of
    Appeals to rule on that case?
        Mr. Hogen. The briefing schedule is just being implemented,
    later this month, the first briefs will be filed, and then of
    course it is a 60- or 90-day schedule. You cannot predict when
    the argument will be or how long.
        The Chairman. We are talking about a minimum of 3 or 4
    months, at a bare minimum.
        Mr. Hogen. Absolutely.
        The Chairman. More likely 1 year.
        Mr. Hogen. It could well be. Of course, that is not
    necessarily the end of the line. The Supreme Court might want
    to visit the issue.
        With respect to the contracting provision, NIGC has
    complained for years that there are contracts out there that
    under the relatively narrow definition of management contracts,
    that IGRA now provides we could not adequately provide the
    oversight we think Congress intended. The committee has been
    responsive. S. 2078 expands the scope of what we might do. As
    we have studied this, we are asking ourselves, maybe we have
    asked for a little too much, or maybe now that we are better
    informed, we could be a little more articulate with respect to
    just how best to address the situation.
        I think it is important first of all to distinguish what
    NIGC does, as opposed to other gaming jurisdictions with
    respect to contracts and contractors. Many established gaming
    jurisdictions are concerned about contractors, those folks that
    do business with the casinos and the bingo halls. To that end,
    they license the people that do that business. They do
    suitability determinations, background investigations, but
    thereafter they kind of let the parties do as they wish. If the
    casino wants to make a bad deal with the contractor, they are
    free to do that.
        Well, at NIGC we have an additional mandate. Not only do we
    want to make sure the folks that deal with tribes are suitable
    to do so, but that in our role as the trustee, we want to make
    sure that tribes are not taken undue advantage of. To that
    extent, we go over those management contracts that IGRA tasked
    us with with a fine-toothed comb, and we make sure that what
    IGRA says, the manager cannot get more than 30 percent of the
    proceeds, it cannot last for more than 5 years, is adhered to.
        Where we found it problematic was, as you mentioned in your
    opening statement, Mr. Chairman, agreements were written that
    were not called management contracts, but actually did get the
    third party into the management, and we were not there
    scrutinizing that. We were not making suitability
    determinations. So we asked that we have an expanded authority.
        Tribal gaming operations enter into literally thousands of
    contracts. They buy paper towels. They buy poker chips. They
    enter into consulting agreements, things like that. I think
    there is a risk that if NIGC were tasked with looking at each
    and every contract, that would be overkill. We might become a
    bureaucratic bottleneck and tribes probably know a whole lot
    more about buying paper towels than the NIGC would.
        The Chairman. Well, suggest language to us on how we can
    differentiate between what you think is correcting an abuse,
    and not installing micromanagement. Okay? Have you got an idea
    there?
        Mr. Hogen. We do, and my staff has been working with the
    committee staff to try and put together language that would
    narrow the category of gaming contracts wherein we would have a
    role. But there are instances where nefarious people have
    gotten into casinos kind of through the back door we think that
    maybe there should be a permissive category there where we
    could reach out and identify, and say we would like to look at
    this garbage disposal contract and background that firm to make
    sure organized crime is not trying to come in from another
    direction.
        So I think we can get there without becoming this
    bottleneck that I am concerned about, but clarity is required.
    We have some specifics in that connection in our testimony and
    we will continue to work with the committee staff and the
    committee to try and achieve that.
        So that fairly well summarizes what is contained in my
    statement. I ask that it be included in the record and I stand
    ready to respond to questions that might arise.
        [Prepared statement of Mr. Hogen appears in appendix.]
        The Chairman. I thank you very much for coming back, Mr.
    Chairman. I think we need to correct the Colorado River
    decision. I don't know if we can or not, but I think it is
    obvious. Many times, I do not understand judicial decisions,
    but I certainly do not understand that one because IGRA was
    framed with having in mind oversight of a commission. To deny
    them that necessity, in my view, is hard to understand. That is
    why I have some confidence in the appeals process, but we
    probably, at least in my view, have to fix it legislatively.
        I thank you, Mr. Chairman, you were very clear and
    straightforward as always.
        Senator Dorgan.
        Senator Dorgan. Mr. Chairman, could you introduce the other
    commission members? You said all of the commission members are
    here with you.
        Mr. Hogen. Both of us are here. Our three-member commission
    group is down to two.
        Senator Dorgan. Okay.
        Mr. Hogen. Commissioner Chuck Choney from the Comanche
    Tribe, a retired FBI agent, is our other commissioner.
        Senator Dorgan. Thank you very much.
        And what is the prospect of filling the third?
        Mr. Hogen. Well, I know that that is on the desk of the
    folks at the Secretary of the Interior's office and White House
    Personnel, but we have not been told more about that.
        The Chairman. How long has it been empty?
        Mr. Hogen. Nelson Westrin went home to Michigan on December
    31, so it is just a little over 1\1/2\ months.
        Senator Dorgan. I do not want to ask a lot of questions
    here. I will send you a good number of questions that relate to
    the kind of thing that Senator McCain just asked you about, how
    to tailor some of the provisions that I think might be broader
    than is advisable.
        Let me ask about the audit activity of the commission and
    the commission staff. Can you give me some sense of what kind
    of auditing goes on during the year and what those audits are
    finding?
        Mr. Hogen. Okay. We have a staff of auditors. One of the
    main things they do all day every day is go in a group, we will
    take several auditors to an individual facility. They will say
    we want to look at the records to see, (a), what your rules
    are; and (b) did you follow them?; and is there a paper trail
    there to document this? They will spend a couple of weeks,
    maybe longer depending on the size of the operation, review
    those kinds of things.
        They will work with the staff at the gaming facility, with
    the tribal gaming regulators to ask questions and make sure
    they understand what happens. At the end of that exercise, they
    will prepare a report and they will list the exceptions, the
    deficiencies that they have identified. They are auditors. That
    is their business. They go nitpicking. They look for that
    stuff, and they almost always find.
        After that is done and they send the report to the gaming
    facility, they say, will you please address each of these
    exceptions that we have identified, and give us a report. We
    are going to come back and see if those have been solved.
        Now, in some instances they will say you misunderstood; we
    were not doing that wrong; here is why we are doing it right.
    In other instances, they will say we will fix it.
        Senator Dorgan. Mr. Hogen, I would understand that to be
    the approach, but I am talking about what quantity of work is
    done relative to the number of gaming facilities across the
    country?
        Mr. Hogen. I wrote some of those numbers down.
        Senator Dorgan. You can submit that for the record if you
    wish.
        Mr. Hogen. There are nearly 400 operations and we have only
    done about 40 audits.
        Senator Dorgan. So about 10 percent.
        Mr. Hogen. Let me add that one of the things our minimum
    internal control standards require is that when this annual
    independent financial audit is done, that auditor, that CPA
    firm must also look at the tribe's compliance with the MICS,
    prepare a report, and send that to us. That, of course, helps
    us select where we are going to go with our next audit.
        Senator Dorgan. If you would, you could submit this to us.
    Do you believe that the commission should be given expanded
    authority to monitor and enforce tribal revenue allocation
    plans? Give us examples of why you believe the commission would
    need that expanded authority.
        Mr. Hogen. Okay. NIGC is responsible for taking enforcement
    action if there are violations of the Indian Gaming Regulatory
    Act, our regulations in the CFR, and that tribal gaming
    ordinance that the tribe adopts to get into gaming. If they are
    going to do per capita payments, they have to adopt a revenue
    allocation plan that is approved by the Secretary of the
    Interior.
        After the Secretary approves that plan, she has no further
    responsibility or authority to monitor its compliance or to
    take action if it is not complied with. But because it is a
    creature of the Indian Gaming Regulatory Act, I think NIGC has
    the responsibility to inquire, is it being complied with. It is
    not crystal clear in the act that that is one of our duties,
    but I think by reasonable implication that we should look
    there.
        It would be useful to know if we should do that with
    greater specificity. There have been instances where a plan has
    been approved by the Secretary of the Interior, and the tribe
    is actually distributing, and that plan typically will limit
    the percentage that can be made, for example, for per capita
    payments.
        But there have been instances where they are doing a whole
    lot more per capita payment than is set forth in the plan, and
    because of competition in the area, their revenues go down, and
    it becomes politically unpopular at the local level to say
    let's cut that per capita, and tribal programs that otherwise
    would be funded by tribal gaming revenue suffer. Nobody is
    watching the store if NIGC does not come out there and inquire
    into that.
        Senator Dorgan. All right. I will submit some additional
    questions. Mr. Hogen, it is helpful for us and for our staffs
    as well to be able to have access to you and to receive your
    recommendations and suggestions as we think through the range
    of opportunities for legislation and what we should be
    considering.
        So thank you very much for appearing.
        Mr. Hogen. Thank you.
        The Chairman. Senator Akaka.

      STATEMENT OF HON. DANIEL K. AKAKA, U.S. SENATOR FROM HAWAII

        Senator Akaka. Thank you very much, Mr. Chairman.
        I want to thank you, Chairman McCain and Vice Chairman
    Dorgan, for holding this hearing.
        After hearing your testimony, I share the concern that you
    have and also the concern of many here with regard to
    considering oversight and ensuring accountability of not only
    gaming tribes, but also the contractors that they do business
    with. Although S. 2078 will have a substantial regulatory
    impact on tribal gaming, we cannot ignore that this legislation
    may impact the ability of Indian nations to exercise their
    sovereignty. That is a personal concern.
        Tribal governments have established gaming regulatory
    systems and have demonstrated their vested commitment to comply
    with the IGRA. As we move forward to address the regulatory
    authority of your group, the NIGC, I am hopeful that we can
    proceed in a manner that acknowledges and strengthens the
    government-to-government relationship between the United States
    and tribal governments.
        My question to you is one that has to do with oversight. Is
    there a schedule that you have of oversights?
        Mr. Hogen. We do not have a strict schedule, for example,
    that says every third Tuesday we will be visiting a particular
    facility, but we have five regional offices plus our region
    here on the East Coast out of the Washington, DC office, with a
    team of investigators and auditors at each of those regions.
        They visit all of the facilities in their region, hopefully
    several times a year. Of course, there will be facilities that
    have some problems that will be visited more often than that,
    but every year we will visit the facility, hopefully several
    times, and then we select a number of tribes or a number of
    operations each year to do a comprehensive minimum internal
    control standard audit.
        We will be able to do more of those more recently than we
    were able to before because we have more auditors now, and we
    are still hiring auditors. Ideally, we would get to maybe 20 a
    year, as opposed to the 10 or so that we have been able to do
    up to this point. But at each facility not only do we receive
    their records, their audits, and do we look at it that way, but
    we actually walk in the door, talk to the people, and discuss
    the operation at the site.
        Senator Akaka. I look forward to members of this committee
    having the opportunity to fully review any proposed changes in
    the future to this bill. Also again, my interest in having the
    tribal governments, giving them the opportunity to look at this
    legislation as well, and what impact it may have on them.
        Mr. Chairman, I would like to just place my statement in
    the record. Thank you very much.
        The Chairman. Without objection.
        Thank you very much, Mr. Chairman. We will appreciate your
    continued fine work, and thanks for coming back.
        The next panel is Ron His Horse Is Thunder, chairman,
    Standing Rock Sioux Tribe; Norman DesRosiers, who is the
    commissioner of the Viejas Tribal Government Gaming Commission;
    Paul Bullis, who is the Director of the Arizona Department of
    Gaming.
        Welcome.
        We will begin with you, Chairman His Horse Is Thunder.

    STATEMENT OF RON HIS HORSE IS THUNDER, CHAIRMAN, STANDING ROCK
                              SIOUX TRIBE

        Mr. His Horse Is Thunder. Mr. Chairman and honorable
    members of this committee, my name is Ron His Horse Is Thunder.
    I am the great-great-great-grandson of Chief Sitting Bull. I am
    the chairman of the Standing Rock Sioux Tribe in North and
    South Dakota.
        I appreciate the opportunity to testify before the
    committee on this legislation. I have a longer written
    statement which I wish to submit for the record, and I will
    summarize our position on this legislation.
        The Chairman. All the written statements will be made part
    of the record. Please proceed.
        Mr. His Horse Is Thunder. Thank you.
        Mr. Chairman, while I appear as a representative of my
    tribe and our position, it is shared by 32 members of the Great
    Plains Indian Gaming Association covering the States of North
    Dakota, South Dakota, Nebraska, Iowa, and Kansas, as well as
    the member tribes of the Minnesota Indian Gaming Association
    and the six member tribes of the Montana Indian Gaming
    Association.
        These tribes are strongly opposed to the provisions of S.
    2078 and in particular to the provisions conferring power on
    the National Indian Gaming Commission to adopt and enforce
    minimum control standards and other regulations on class III
    Indian gaming.
        It is important to understand that the Indian Gaming
    Regulatory Act did not empower tribes to engage in gaming
    activities. That right arises from the status of Indian tribes
    as sovereign nations under Federal Indian law. That right was
    made clear in the 1987 decision of the Supreme Court in the
    Cabazon case. This was, of course, before Congress passed the
    Indian Gaming Regulatory Act.
        The fact of the matter is that IGRA was a limitation
    imposed by Congress on that right. Most tribes were opposed to
    the enactment of the legislation restricting their rights to
    get involved in gaming activities, but the anti-Indian forces
    of the day were strong enough for Congress to force it to act.
        The few friends the tribes had in Congress had to make
    several compromises with anti-Indian forces. One of these
    compromises involved tribal class III gaming. Against the
    wishes of tribes, IGRA provides that class III gaming on Indian
    lands will be illegal without tribal-State class III compacts.
    This was because the States insisted that they have the right
    to be involved in the regulation of all class III gaming. We
    did not like it, but that was what we were stuck with.
        Even after the Supreme Court decision in the Seminole case
    that prohibits tribes from suing States as provided in IGRA,
    most Indian tribes involved in class III gaming have been able
    to reach some kind of compact with the States. As intended by
    IGRA, these compacts make provision for the regulation of
    tribal gaming. These compacts provide for the sharing of
    regulatory power between the tribe and the State. Some compacts
    provide for a lot of State regulation and some don't. That is a
    decision made by the State and the tribes.
        In the 1990's, NIGC, over the strong opposition of tribes,
    promulgated its MICS. These MICS imposed the most detailed kind
    of regulation on class II and class III gaming. Even though
    most tribes already had their own regulatory schemes under the
    compacts, they had to conform to the NIGC MICS by the year
    2000.
        Finally, one tribe challenge the right of the commission to
    enforce its MICS. Last year, the Federal court here in
    Washington, DC found that the Indian Gaming Regulatory Act did
    not confer that power on the National Indian Gaming Commission.
    Now, we are faced with legislation that would overturn this
    Federal court victory for tribal rights, and specifically
    confer that right to regulate class III gaming on the
    commission.
        Mr. Chairman, we do not understand why the legislation is
    necessary. In the State of North Dakota, the leading Indian and
    non-Indian officials are satisfied with the State-tribal
    compact, that the compacts make adequate provisions for
    effective regulation of our gaming. We thought that that was
    what IGRA intended.
        In 2004, approximately $7 million was spent on regulation
    of tribal gaming in North Dakota alone. Over 300 personnel were
    assigned to this very function. For the five tribes in North
    Dakota, approximately 15 percent of the total gaming personnel
    are involved in regulatory activities.
        The North Dakota tribal-State compact requires that the
    five tribal nations, Governor and the attorney general must
    meet every 2 years to review and adjust any problems concerning
    regulatory and policy issues. These biennial reviews have taken
    place with both Democratic and Republican attorneys general and
    two different governors.
        There has been no major problem that has been reported
    concerning our tribal governmental gaming regulatory activities
    to date. In fact, the Attorney General on several occasions has
    commented on his outstanding working relations with the tribal
    nations of North Dakota concerning his oversight
    responsibilities in regards to the tribal-State gaming compact
    regulatory requirements.
        There is no scandal in North Dakota regarding our gaming.
    The rights of participants in our gaming activities are being
    effectively and adequately protected through regulations under
    our compact. Nor are we aware of any significant scandal in the
    regulation of Indian gaming in other States. We have followed
    the hearings this committee has had on this issue in the last
    year. We have not seen any record made that would justify the
    further erosion of our tribal sovereignty and the right of
    self-government.
        Mr. Chairman, we know that some have compared the amount of
    money the State of Nevada spends on regulations of its gaming
    industry with a budget of the National Indian Gaming
    Commission. I have been told that Nevada spends $80 million a
    year, while the commission spends $8 million a year. If that is
    the measure, of course it looks like Indian class III gaming is
    not being adequately regulated. However, it totally ignores the
    fact that Indian tribes spend over $200 million a year on their
    own regulatory efforts. This does not even include the millions
    that we pay to State agencies under the compacts for their
    regulatory efforts.
        To discount and disregard the millions of dollars that
    tribes spend for their own regulatory efforts is to show a
    regrettable disrespect for the ability of Indian people to
    govern their own affairs. It is to say to my Indian people that
    the non-Indian world believes that we as Indians cannot be
    trusted to regulate ourselves and to protect our participation
    in our gaming enterprises.
        Mr. Chairman, I know the hearing was to be limited to the
    class III provisions of S. 2078. However, as I noted, my tribe
    and many of the other tribes are very much opposed to the other
    provisions of the bill. These include the provisions to subject
    our day to day contracting to NIGC's control, to permit the
    Secretary of the Interior to decide if our tribal decision to
    make per capita payments is a reasonable method of providing
    for the general welfare of our members, and to eliminate the
    ability of tribal and State governments to decide if an off-
    reservation land transfer to Indian gaming is okay.
        Mr. Chairman, the tribes I represent are opposed to the
    MICS provision of S. 2078 and all of the other burdensome
    provisions. I would close my statement with a comment that this
    legislation, which is supposed to be for the benefit of Indian
    tribes, does not contain a provision fixing the problem created
    by the Seminole decision. When Congress made class III gaming
    on Indian land illegal unless done under State-tribal compact,
    it was putting tribes at the mercy of States. That is why
    Congress authorized the tribes to sue the States if they
    refused to negotiate or negotiated in bad faith.
        When the Supreme Court struck that provision down, it
    opened up Indian tribes to coercion by the States. They now tax
    us when this was prohibited by the Indian gaming regulatory
    practices.
        The Chairman. Mr. Chairman, your time has expired.
        Mr. His Horse Is Thunder. Thank you, Mr. Chairman.
        [Prepared statement of Mr. His Horse Is Thunder appears in
    appendix.]
        The Chairman. Commissioner DesRosiers, welcome.

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

        Mr. DesRosiers. Thank you, Mr. Chairman, Mr. Vice Chairman.
        It is an honor and privilege to have been invited here to
    speak to you again today on behalf of my regulatory colleagues
    and myself. As you know, we are the ones that are going to be
    ultimately responsible for implementing and enforcing whatever
    our elected leaders enact. Based on that, first, we would like
    to really express our appreciation and compliment the committee
    on their willingness to hear from us regulators.
        We have commented on a number of areas that have been
    submitted for change in IGRA, but my comments here will focus
    on gaming-related contracts and contractors. Forgive me for
    reading those comments, but I think time constraints dictate
    that.
        We fully understand and recognize that there have been
    abuses in the past where unscrupulous contractors have taken
    advantage of tribes. We understand the desire to address this
    issue in amending the act. Section 2703, paragraph 11 attempts
    to define gaming-related contracts.
        Throughout that definition, there are numerous references
    to gaming activity. Without a very clear definition of gaming
    activity, this section is open to very broad interpretations
    which would virtually be all-inclusive of any contract that the
    tribes' casinos entered into, such as training or IT
    assistance, marketing studies, et cetera.
        We also believe that the tribes should be free to develop
    economic enterprises such as hotels, golf courses, shopping
    centers, et cetera, without NIGC involvement in contracts.
    However, a broad interpretation of the word ``ancillary'' in
    paragraph (b) could be argued to include all other such tribal
    economic enterprises.
        Paragraph (a)(2) of this section suggests that any contract
    which includes a contractor advising or consulting with a
    person that exercises material control over gaming activity
    will require NIGC approval, with suitability findings of the
    contractor. This is very broad and all-inclusive, and as a
    matter of practicality, we really feel NIGC is going to be
    unable to manage this.
        As drafted, the language would require NIGC to review and
    approve hundreds of contracts every year for every tribal
    gaming facility in the country, bringing business to a halt in
    many instances. The broad definition of gaming-related
    contracts in section 11 would encompass numerous contracts for
    services by contractors with no ability to significantly affect
    the management of the facility.
        Because there is no threshold, no dollar threshold
    mentioned in the provisions that would trigger review by NIGC
    of every contract, and section 11 encompasses any contract
    related to the operation or management of gaming activity, even
    a contractor or a contract for $500 worth of chairs carved by a
    local woodcarver for purchase in a local casino poker room
    would require that small vendor at his own expense to submit
    his contract to NIGC. Established small vendors in rural areas
    where many tribal gaming facilities are located, providing
    service such as electrical work or catering work, would be
    unable to afford the cost of doing business with tribes and
    unable to compete.
        Paragraph (b) of the gaming-related contract definitions
    suggests that development or construction contracts of $250,000
    or more would require NIGC approval. We believe this dollar
    threshold is unreasonably low. Most gaming facilities are in
    constant motion with remodeling, expansion, or improvement
    projects that involve contracts of $250,000 or more. To require
    every one of these contracts to have NIGC approval and every
    contractor to be found suitable would be overly burdensome and
    impose major delays to projects which would negatively affect
    tribal gaming operations.
        Tribal casinos need to be able to quickly and immediately
    respond to catastrophic failures of infrastructure, structures
    or equipment. They would be unable to do that and go out and
    immediately fix things and buy the necessary equipment under
    contracts if they required prior NIGC review.
        The scope of contracts related to the construction of
    gaming and ancillary facilities would capture such vendors as
    waste water consultants, architects and environmental engineers
    who are critical components for keeping a casino functioning in
    an environmentally sound manner, but who have absolutely no
    control over any gaming activity.
        This next area, which I can personally attest to, being
    caught in this quagmire, I think is important. If these
    contracts should happen to be with publicly traded companies,
    an entirely new set of complexities come into play. Very often
    these publicly traded companies are wholly-owned subsidiaries
    of other publicly traded companies, and in many of these, five
    percent or more of the stock is held by other publicly traded
    investment companies. So it is easy to see how NIGC could get
    bogged down in backgrounding officers and directors of a myriad
    of different companies just for one contract with a tribe by
    one of those companies.
        I see my red light is on, so I will jump toward the end.
        For these reasons, we believe any Federal approval of
    gaming-related contracts should be submitted only that affect
    tribes and companies that have entered into management or
    consulting agreements, or finance agreements, that have their
    fees based on a percentage of net revenues. I think that is
    where most of the abuses have been in the past.
        Also, any contractors, of course, which exercise
    significant material control over the gaming facility.
        Again, I would like to emphasize, we understand the desire
    to address the issues of the contracts and contractors. It is
    neither our intent nor desire to appear as overly critical or
    as obstructionist. However, this is a highly complex area
    requiring a great deal of thought to make it workable. We share
    the same goals as the committee, to keep undesirables out of
    Indian gaming and for tribes to be the primary beneficiaries of
    their tribal gaming revenues. At the same time, we must
    endeavor not to stifle or inhibit economic progress.
        I want to thank you again for the opportunity to speak here
    and I would be happy to answer any questions.
        [Prepared statement of Mr. DesRosiers appears in appendix.]
        The Chairman. Thank you very much.
        Mr. Bullis, welcome.

       STATEMENT OF PAUL BULLIS, DIRECTOR, ARIZONA DEPARTMENT OF
                                 GAMING

        Mr. Bullis. Thank you, Mr. Chairman. Good morning, Mr. Vice
    Chairman.
        My name is Paul Bullis. I am director of the Arizona
    Department of Gaming. We are the State agency which, along with
    Arizona's Indian tribes and the National Indian Gaming
    Commission, oversees Indian gaming in Arizona. Thank you for
    the opportunity to speak today.
        I would like to address some of the provisions of S. 2078
    from the perspective of a State regulator. More importantly, I
    speak from the perspective of a State regulator where the State
    and tribes have developed a successful partnership for the
    effective oversight of Indian gaming. That partnership between
    sovereign governments has as its cornerstone our tribal-State
    compact. Although the compact is the cornerstone of our
    partnership, what makes that partnership work is communication,
    discussion, engagement and a process for resolving issues.
        My overall message is that when considering amendment to
    the Indian Gaming Regulatory Act, the committee should take
    into consideration success stories such as Arizona.
        Senator Dorgan. Mr. Bullis, can you pull that microphone a
    bit closer?
        Mr. Bullis. Yes; I am sorry, Senator Dorgan.
        I would hope and request that any amendments would be
    crafted to not disrupt those successes.
        I will first address those provisions of S. 2078 that deal
    with the National Indian Gaming Commission's role in approving
    gaming-related contracts and determining suitability of gaming-
    related contractors. These provisions would create overlap
    between the activities of the Arizona Department of Gaming and
    the NIGC. Let me discuss the role of the Arizona Department of
    Gaming in this area.
        Under our tribal-State gaming compact, the Arizona
    Department of Gaming certifies all persons other than regulated
    lending institutions that provide financing to tribes for
    gaming facilities, all management contractors engaged by a
    tribe to assist in the management or operation of the gaming
    facility, all manufacturers and distributors of gaming devices,
    and all persons providing gaming services in excess of $10,000
    in any 1 month.
        Our certification process involves a determination of
    suitability. Each company, each principal of a company, and
    each individual providing gaming services must undergo a
    thorough background investigation. This includes a criminal
    history, credit history, financial background, regulatory
    history, and other pertinent information.
        Manufacturers and distributors of gaming devices and other
    items used in the play of class III games undergo a
    particularly rigorous investigation, including site visits and
    face to face interviews. Tribal regulators are also required to
    license each of these persons and companies.
        The universe of persons required to be certified by the
    Arizona Department of Gaming I believe is larger than and
    includes the universe of gaming-related contractors defined by
    S. 2078, which would also have to be approved by the NIGC. This
    is the area of overlap where both the Arizona Department of
    Gaming and the NIGC would be approving the same gaming-related
    contractors.
        There is, though, a role laid out for the NIGC under S.
    2078 in this area where there is no overlap. That is the area
    of review and approval of gaming-related contracts. The Arizona
    Department of Gaming reviews only the suitability of the
    vendors. We do not review the terms of the agreements
    themselves, nor do we approve those agreements. That would be
    solely within the purview of the NIGC.
        In that area of overlap where the Department of Gaming does
    play a role, we would hope that the intent of Congress would
    not be to preempt our role, especially where we have performed
    it effectively, nor to preempt the efforts of other States that
    are also performing effectively.
        I would also like to address the proposal contained in S.
    2078 to clarify the NIGC's authority to promulgate minimum
    internal control standards. Governor Janet Napolitano has
    previously addressed this issue in her letter of October 4,
    2005 to this committee. Let me summarize Governor Napolitano's
    position. When the State and tribes were negotiating the
    current compact, the NIGC's minimum internal control standards
    applying to class III gaming were in effect.
        The State and tribes recognized the importance of internal
    controls in the operation and regulation of casinos, and so
    incorporated the NIGC's MICS in one of the appendices to the
    compact. If the NIGC had not issued its minimum internal
    control standards, which had to be complied with by the tribes
    in any event, I am quite certain that our compact would not
    contain comparable controls.
        The point to be made is that the existence of the NIGC's
    MICS issued under the NIGC's presumed authority at the time was
    instrumental in making Arizona's compact as strong as it is in
    terms of protecting the integrity of gaming. We therefore
    support language in S. 2078 clarifying that the NIGC has
    authority to issue minimum internal control standards governing
    Class III gaming.
        Thank you.
        [Prepared statement of Mr. Bullis appears in appendix.]
        The Chairman. Thank you very much.
        I want to thank the witnesses for being here.
        Mr. DesRosiers, I am somewhat unclear on your testimony
    regarding so-called participation agreements between tribes and
    slot machine manufacturers. You indicate that requiring the
    slot machine manufacturers to have background checks would
    change the way the industry does business. Is that correct, in
    your testimony?
        Mr. DesRosiers. That is not what I intended. We already
    background all the machine manufacturing companies and license
    them. Every contract, though, there are contracts, hundreds of
    them, with participation agreements which require a percentage
    of each machine in these wide area progressive banks to be
    paid. For every one of those contracts, which I personally
    review, but to have to go to NIGC would be overly cumbersome.
        The Chairman. Do you acknowledge there may be a need for an
    expanded NIGC authority? If you were making changes, what area
    would you address, perhaps expanded authority for the NIGC?
        Mr. DesRosiers. I am not sure where I would put that. We
    support the notion of, and I do not speak for all tribes and
    tribal regulators, our tribe supports the notion that they
    should have authority over Class III minimum internal controls,
    to preserve the public perception of the integrity of Indian
    gaming. As Chairman Hogen already testified, virtually all the
    tribes are there anyway. I mean, we are already complying with
    those MICS.
        In the past, in years past, not in this testimony, I would
    have liked to have had NIGC to have the authority to help me on
    my request, not to be mandated to be in charge of it, but to
    assist me in backgrounding some contracts and contractors.
    There are occasions where companies that are so large think
    that they do not need my tribe's business and don't want to be
    bothered with the attempts that we make to background and
    license them.
        The Chairman. And do you agree that there have been cases
    of unscrupulous individuals or companies coming in and signing
    these contracts and basically exploiting the Native American
    tribes by taking too much money from them. Would you agree with
    that?
        Mr. DesRosiers. I would have to agree. I have seen that
    first hand.
        The Chairman. Mr. Bullis, would you agree with that?
        Mr. Bullis. Yes; Senator McCain.
        The Chairman. Mr. Bullis, this legislation calls for the
    NIGC to perform background investigations and make suitability
    determinations on a wide range of persons. Your background and
    your experience is pretty important. Can you share your
    experience with us? For example, how long a process is it for
    your agency to do a background investigation and make a
    determination?
        Mr. Bullis. Certainly. It is important to recognize that
    our agency divides up the different kinds of vendors and
    contractors. The most significant types are those vendors that
    provide equipment that is used in the play of Class III games.
    In Arizona, there are about 70 in that category right now. We
    have about 460 vendors that provide goods and services that are
    otherwise used in casinos. They do not receive the same depth
    and degree of scrutiny. Clearly, those vendors that are
    providing equipment used in the play of class III games get the
    much more in-depth level of scrutiny.
        In terms of the time period that it takes us to do those
    types of investigations, it certainly varies in terms of any
    issues we find and the type of provider. What we do have in
    place, though, to kind of mitigate those concerns are, first of
    all, within 20 days if we have identified within the first 20
    days no concerns about the vendor and upon request of the
    tribal gaming office, we will issue a temporary certification
    allowing that vendor to do business with the tribe. That allows
    us whatever time is necessary to continue our in-depth
    investigation.
        The Chairman. But things are going well in Arizona?
        Mr. Bullis. I believe so. I believe so.
        The Chairman. Thanks to the compact that was entered into
    between the State and the tribes.
        Mr. Bullis. The strength of the compact, as well as the
    communication and the partnership that we have developed with
    the tribes. I will tell you, when I first got on the job about
    three years ago, I thought the most important thing was getting
    together, reaching agreement on issues, and moving on. I have
    learned that the most important thing is not that we reach
    agreement on items, on issues, but how we go about doing that,
    how we interact with each other, how we communicate regularly.
        The Chairman. Mr. Chairman His Horse Is Thunder, since your
    statement said that this legislation is based on anecdotal
    anti-Indian press reports on Indian gaming, the overblown issue
    of off-reservation gaming, and pin the blame on the victim
    reaction to the Abramoff scandal, I have no questions. We are
    too far apart in our views of what this committee is trying to
    do in the 20 some years that I have been involved on behalf of
    Native Americans.
        Senator Dorgan.
        Senator Dorgan. Chairman His Horse Is Thunder, on the issue
    of class III gaming, let me say I share the chairman's thoughts
    about that. That is a statement that does not at all compare to
    the facts. This committee has worked very hard to receive
    comments and opinions and suggestions from a wide range of
    interests, including many Indian tribes from across the
    country.
        While I think the chairman's bill is broader than it should
    be, for example, in the area of contracts and so on, I also, as
    you know, having visited with you and the other tribal chairmen
    in our region, I also believe that class III gaming ought to be
    subject to regulation by the National Indian Gaming Commission.
        So we have approached this very carefully, very
    thoughtfully, and I do not share the sentiments in your
    testimony that were expressed. They should not certainly be
    attributed to any actions or any attitudes by the current
    chairman or the members of this committee. I think we have
    approached this very carefully.
        Now, let me say this as well. My view, and let me just take
    class III for a moment, my view of class III is this. It is not
    believable to me that the construct of establishing a
    commission for the purpose of providing both investigatory
    capabilities and enforcement capabilities would have
    anticipated that we would not do that for class III gaming. I
    mean, it is just not believable to me. The Colorado decision I
    think needs to be addressed. I believe this committee will
    address it. I do not know whether the full House or the full
    Senate will address it, but I believe this committee should
    address it.
        There are other portions of the legislation that the
    chairman has offered that we will I believe change and alter
    and amend as we get additional testimony and thoughts from
    tribes and the commission and so on.
        This is a $20-billion industry. In North Dakota, for
    example, the only State for which I have a great deal of
    information, although I have some about Arizona and some other
    States, in North Dakota, the State enforcement is by two part-
    time people working at the attorney general's office. That is
    not, with all due respect, enforcement.
        I am not suggesting the attorney general is not doing his
    job. That is not my suggestion at all. I am just suggesting
    there is not an aggressive enforcement mechanism at the State
    level. They have not funded it and it just does not exist.
        I believe with a $20-billion industry, the way to preserve
    and protect this industry to be able to provide the resources
    and the income stream in the long term for the tribes that have
    gaming, is to make sure that we do not have scandals, and that
    we have adequate management, and that we have enforcement of
    standards.
        One final point I wanted to make. My understanding of the
    North Dakota compact is that the North Dakota compact on gaming
    includes the minimum internal control standards that were
    established by the National Indian Gaming Commission. Is that
    true, Mr. Chairman?
        Mr. His Horse Is Thunder. I believe so.
        Senator Dorgan. And if that is the case, why on earth would
    we not have the National Commission be enforcing that standard
    and auditing that standard? If we have in fact adopted that
    standard, would we want to fall short of the enforcement of
    that standard?
        Mr. His Horse Is Thunder. No; we would not, sir.
        Senator Dorgan. And so, I guess, that makes my point. I
    know there is strong feeling out there about a lot of things.
    Some of it I think stems, Mr. Chairman, from anger and concern
    about the lack of resources for health care, the lack of
    resources for housing, and education. There is a lot of strong
    feeling.
        But that ought not replace good commonsense when we try to
    evaluate what to do about gaming and what to do to make sure
    that we have enforcement that is adequate. As I understand it,
    we have several levels of enforcement at the present time: the
    tribe, and Mr. DesRosiers, you are a compliance officer for a
    tribe. You have worked there for, is it 14 years, I believe?
    Right?
        Mr. DesRosiers. Yes, sir.
        Senator Dorgan. You have an enforcement mechanism for the
    tribe itself.
        Mr. Bullis, you represent a State. I think that perhaps
    Arizona has the most aggressive, if you simply measure it by
    people, you probably have more people and are spending more
    money on enforcement than most other States, so you have a
    legitimate mechanism at the State level. And some of the tribal
    chairs will say, well, if we have the tribal enforcement, you
    have State enforcement, you do not need triplicate levels of
    enforcement. But the honest fact is, most States do not have an
    aggressive State enforcement mechanism and they are not funding
    it. That is just the honest facts.
        That is why I come to a conclusion different than you, Mr.
    Chairman, and the other chairmen of the tribes in the Northern
    Great Plains. I really believe it is in the interests of Indian
    tribes, as the other two witnesses have suggested, for this
    Congress to proceed with some legislation.
        Now, having done that, or preparing to do that, at least,
    let me make a couple of other observations. Contracts, I think,
    Mr. DesRosiers, you and Mr. Bullis have both pointed out that
    the contracting provision in the proposed legislation probably
    should be altered. And I think also the commission chairman
    suggested the same thing. I happen to feel the same. My guess
    is that the offering of the chairman, well I know this to be
    the case, was an attempt to put something out there and then
    let's evaluate how you make some changes to it in a way that
    makes some sense.
        Obviously we do not need to have some sort of national
    scrutiny for somebody providing linens for a gaming facility in
    Northern South Dakota, for example. So I think the testimony
    you have given today about that is very helpful. I think not
    only that, but in three or four other areas, background checks
    and other things, are helpful.
        One thing that I would like to ask about is the number of
    vendors. You indicated there are some 400 vendors, Mr.
    DesRosiers, providing gaming machines. Are those national or is
    that just in Arizona?
        Mr. DesRosiers. No; I am sorry. I don't know where you came
    up with that.
        Senator Dorgan. How many different vendors, let's assume
    that you want to buy new slot machines. How many vendors would
    you look to and how many vendors exist in this country from
    which you might make that purchase? And you are going to want
    to know about suitability?
        Mr. DesRosiers. Right. I would say typically, just slot
    machine type vendors, and I think Paul would agree, there are
    40 to 50 of those. And then other gaming equipment vendors,
    whether it be bingo or card games and that kind of thing, there
    are probably another 30 or so vendors.
        In our facility, we have 260 backgrounded and licensed
    vendors, but those include anybody that is doing any business
    with the casino of $25,000 or more. But just if you limit it to
    machine manufacturers and suppliers and gaming equipment, I
    think as Paul said, they have somewhere in the neighborhood of
    80 such vendors. That is about right.
        Senator Dorgan. Mr. Bullis, you could probably have been
    expected to come here and suggest that there is no need for the
    NIGC to take a look at class III because you probably have the
    resources and you feel like you have the capability. So why
    have you not come to tell us that? Why do you believe that
    class III enforcement is appropriate for the commission?
        Mr. Bullis. Senator Dorgan, as I mentioned 1 moment ago, I
    know that the fact that the NIGC had issued its MICS allowed
    the State of Arizona in its compact to incorporate that MICS
    into our compact and make it stronger. I think it benefits
    Indian gaming, certainly in Arizona and nationally as well.
        I think the importance is to strike the proper balance in
    each particular State between the State, the Federal and the
    tribal regulators, and to allow each of those regulatory legs
    of the stool to devote resources and to apply resources as
    necessary. I think in Arizona we have struck a proper balance
    among all the different jurisdictions.
        Senator Dorgan. Chairman His Horse Is Thunder, how
    important is gaming to your tribe? Your tribe is a North Dakota
    and South Dakota tribe. You are a former college president. You
    have just been elected as a new tribal chair. You inherit a
    tribe that has enormous challenges, as do most of our tribes in
    the Northern Great Plains. You have a gaming facility. I
    believe one facility, is that correct?
        Mr. His Horse Is Thunder. We have two, one in North Dakota
    and one in South Dakota.
        Senator Dorgan. And tell me how important is that gaming
    facility and the revenue from it for the social services and
    other revenue needs that the tribe has?
        Mr. His Horse Is Thunder. It is absolutely imperative,
    given the budget constraints that we are under today. It
    provides necessary services that otherwise would go unmet.
        Senator Dorgan. If this committee and this Congress
    proceeds to enact legislation that addresses the Colorado
    decision, and gives the commission authority over class III
    gaming, along with some other issues, what is your response to
    that?
        Mr. His Horse Is Thunder. I would agree with you, Senator,
    that the MICS are important. They are. We do believe that the
    rest of the provisions go too far in constraining tribes.
        Senator Dorgan. Do you see any risk at all in us doing
    nothing, a risk that would attend to circumstances where there
    is not sufficient tribal regulation, there is virtually no
    State regulation, and we have dealt the commission out of class
    III gaming, which is the one that would attract probably the
    greatest area of abuse, if there were to be abuse by some? Do
    you see any risk at all?
        Mr. His Horse Is Thunder. Senator, given your hypothetical
    that there is lack of tribal regulation, lack of State
    regulation, then I think at that point in time there needs to
    be some oversight, but again, that is where I think the MICS
    are appropriate, but the rest of it goes too far.
        Senator Dorgan. Mr. Chairman, I think we are getting a lot
    of good information from people. One of the things that you and
    I have both talked a lot about is consultation. I think we
    should, as we proceed to a markup, we should keep open a record
    and seek to receive consultation from any tribal leaders that
    wish to offer that consultation in the form of written
    statements, so that we can have as broad a consultation as is
    possible from the tribes.
        I think that is needed on the contracts and background
    checks, and a whole range of things. But I do want to say that
    consultation to me includes a strong feeling on my part that we
    as a committee should proceed to address the issue of class III
    gaming and the jurisdiction of the National Indian Gaming
    Commission. That is not anti-tribe. That is, in my judgment, in
    the long term the very best interests of Indian tribes in this
    country, and the maintaining of the economic opportunity that
    exists with gaming facilities in the long term.
        So I hope we will perhaps write to tribes, invite them to
    provide us information, and then use that information, because
    there are a number of variances of how we do three or four
    areas of this bill, that we can, should and perhaps will change
    as a result of this consultation.
        So I think this hearing has been very important. I
    appreciate all three witnesses. Let me also say that Chairman
    His Horse Is Thunder is a new chairman. He has inherited the
    leadership of a tribe with a lot of challenges. I look forward
    to working with him on those challenges as well, in dealing
    with housing, health care and education.
        Thank you very much to all three witnesses.
        The Chairman. Thank you.
        I want to thank the witnesses. We have gotten some good
    advice and recommendations on narrowing the definition of
    gaming-related contract. We certainly do not want to create
    bottlenecks, Mr. DesRosiers. I think we can put some parameters
    around it. Obviously, we are trying to eliminate an obvious
    evil that was a loophole in the original bill. I think most
    people acknowledge that, that there have been contracts where
    management or something entered into by the tribes which have
    really caused them to suffer enormous financial burdens which
    they never should have. It certainly was not the intent of the
    legislation.
        So I think that is very helpful, and your other
    recommendations are.
        Mr. Bullis, I do not often tout what we do in our State. It
    is kind of a waste of time sometimes. Everybody knows what kind
    of a wonderful place we live in. But the process that we went
    through in Arizona of proposing a compact, negotiating with the
    tribes, and then submitting it to the voters of our State for
    ratification was an open process.
        I meet quite frequently with Arizona tribal chairmen, both
    gaming and those who have difficulty in gaming because of the
    remoteness of their location. I think this sharing revenue,
    sharing the slot machines has been a marvelous thing for tribes
    that have not been able to take advantage of the large
    population areas.
        Everything I can see is that things work very well. Is that
    your view?
        Mr. Bullis. Absolutely, Senator McCain. I think things are
    working well. I think the relationship, I hope, between the
    State and the tribes in the area of gaming is a successful
    partnership, and we strive to make it that way.
        The Chairman. That might serve as a model in the future
    because the people of Arizona were allowed to vote, to decide
    whether we wanted to enter this compact or not, both Indians
    and non-Indians. And a majority of them, a significant
    majority, decided they wanted that. I think that that has been
    a beneficial part of the process.
        Senator Dorgan. Mr. Chairman, might I just observe that
    part of your population this time of the year are Dakotans.
    [Laughter.]
        If you would like to take some credit, we would like to
    receive some of the credit for all those Dakotans that bring
    some commonsense to the Southwest.
        The Chairman. And we are very, very grateful for them
    coming and spending the winter with us. They are notoriously
    cheap, but other than that we are always pleased to have those
    wonderful people come down and spend time with us, as many of
    us enjoy in the summer months to come and visit your beautiful
    State, and its Indian reservations. [Laughter.]
        So it is a nice reciprocal relationship we have.
        I thank the witnesses.
        The hearing is adjourned.
        [Whereupon, at 10:45 a.m., the committee was adjourned, to
    reconvene at the call of the Chair.]

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                                A P P E N D I X

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                  Additional Material Submitted for the Record

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

      Prepared Statement of Hon. Daniel K. Akaka, U.S. Senator from Hawaii

        Thank you Mr. Chairman and Mr. Vice Chairman for holding this
    important legislative hearing. I share the concern of many present here
    today, with regard to ensuring accountability of not only gaming
    tribes, but also the contractors they do business with.
        Although, S. 2078 will have a substantial regulatory impact on
    tribal gaming, we cannot ignore that this legislation may impact the
    ability of Indian nations to exercise their sovereignty. Tribal
    governments have established gaming regulatory systems and have
    demonstrated their vested commitment to comply with the Indian Gaming
    Regulatory Act [IGRA]. As we move forward to address the regulatory
    authority of the National Indian Gaming Commission, I am hopeful that
    we proceed in a manner that acknowledges and strengthens the
    government-to-government relationship between the United States and
    tribal governments.
        Due to the complex nature of the issues raised in this committee,
    there has been a long tradition of operating in an inclusive and
    bipartisan manner. I look forward to members of this committee having
    the opportunity to fully review proposed changes to this bill. I also
    firmly believe that it is in the best interest of the committee to
    consider the concerns raised by some tribal governments that this
    legislation may adversely impact them.
        I thank the witnesses here today and look forward to their
    testimony.

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