[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
_____________________________________________________________________________
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
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.]

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


                            A P P E N D I X

                              ----------                              


              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.

[GRAPHIC] [TIFF OMITTED] T6507.001

[GRAPHIC] [TIFF OMITTED] T6507.002

[GRAPHIC] [TIFF OMITTED] T6507.003

[GRAPHIC] [TIFF OMITTED] T6507.004

[GRAPHIC] [TIFF OMITTED] T6507.005

[GRAPHIC] [TIFF OMITTED] T6507.006

[GRAPHIC] [TIFF OMITTED] T6507.007

[GRAPHIC] [TIFF OMITTED] T6507.008

[GRAPHIC] [TIFF OMITTED] T6507.009

[GRAPHIC] [TIFF OMITTED] T6507.010

[GRAPHIC] [TIFF OMITTED] T6507.011

[GRAPHIC] [TIFF OMITTED] T6507.012

[GRAPHIC] [TIFF OMITTED] T6507.013

[GRAPHIC] [TIFF OMITTED] T6507.014

[GRAPHIC] [TIFF OMITTED] T6507.015

[GRAPHIC] [TIFF OMITTED] T6507.016

[GRAPHIC] [TIFF OMITTED] T6507.017

[GRAPHIC] [TIFF OMITTED] T6507.018

[GRAPHIC] [TIFF OMITTED] T6507.019

[GRAPHIC] [TIFF OMITTED] T6507.020

[GRAPHIC] [TIFF OMITTED] T6507.021

[GRAPHIC] [TIFF OMITTED] T6507.022

[GRAPHIC] [TIFF OMITTED] T6507.023

[GRAPHIC] [TIFF OMITTED] T6507.024

[GRAPHIC] [TIFF OMITTED] T6507.025

[GRAPHIC] [TIFF OMITTED] T6507.026

[GRAPHIC] [TIFF OMITTED] T6507.027

[GRAPHIC] [TIFF OMITTED] T6507.028

[GRAPHIC] [TIFF OMITTED] T6507.029

[GRAPHIC] [TIFF OMITTED] T6507.030

[GRAPHIC] [TIFF OMITTED] T6507.031

[GRAPHIC] [TIFF OMITTED] T6507.032

[GRAPHIC] [TIFF OMITTED] T6507.033

[GRAPHIC] [TIFF OMITTED] T6507.034

[GRAPHIC] [TIFF OMITTED] T6507.035

[GRAPHIC] [TIFF OMITTED] T6507.036

[GRAPHIC] [TIFF OMITTED] T6507.037

[GRAPHIC] [TIFF OMITTED] T6507.038

[GRAPHIC] [TIFF OMITTED] T6507.039

[GRAPHIC] [TIFF OMITTED] T6507.040

[GRAPHIC] [TIFF OMITTED] T6507.041

[GRAPHIC] [TIFF OMITTED] T6507.042

[GRAPHIC] [TIFF OMITTED] T6507.043

[GRAPHIC] [TIFF OMITTED] T6507.044

[GRAPHIC] [TIFF OMITTED] T6507.045

[GRAPHIC] [TIFF OMITTED] T6507.046

[GRAPHIC] [TIFF OMITTED] T6507.047

[GRAPHIC] [TIFF OMITTED] T6507.048

[GRAPHIC] [TIFF OMITTED] T6507.049

[GRAPHIC] [TIFF OMITTED] T6507.050

[GRAPHIC] [TIFF OMITTED] T6507.051

[GRAPHIC] [TIFF OMITTED] T6507.052

[GRAPHIC] [TIFF OMITTED] T6507.053

[GRAPHIC] [TIFF OMITTED] T6507.054

[GRAPHIC] [TIFF OMITTED] T6507.055

[GRAPHIC] [TIFF OMITTED] T6507.056

[GRAPHIC] [TIFF OMITTED] T6507.057

[GRAPHIC] [TIFF OMITTED] T6507.058

                                 
