[Senate Report 109-261]
[From the U.S. Government Publishing Office]
Calendar No. 466
109th Congress Report
SENATE
2d Session 109-261
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INDIAN GAMING REGULATORY ACT AMENDMENTS OF 2006
_______
June 6, 2006.--Ordered to be printed
_______
Mr. McCain, from the Committee on Indian Affairs, submitted the
following
R E P O R T
[To accompany S. 2078]
The Committee on Indian Affairs, to which was referred the
bill, (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, and for other purposes, having considered the same,
reports favorably thereon with an amendment in the nature of a
substitute and recommends that the bill (as amended) do pass.
Purpose
The primary purpose of S. 2078, the Indian Gaming
Regulatory Act Amendments of 2006, is to clarify and amend
provisions of the Indian Gaming Regulatory Act of 1988, Public
Law 100-497, 25 U.S.C. Sec. 2501 et seq. (``IGRA''), applicable
to the Department of Interior (``DoI''), the National Indian
Gaming Commission (``NIGC''), and the Indian tribes. This
legislation is necessary to make amendments to the IGRA so that
Indian tribes may continue to be the primary beneficiaries of
gaming operations conducted on Indian lands, and to reaffirm
and further the original goals of the IGRA.
Background
1. Indian gaming pre-IGRA
Indian gaming began in earnest in the late 1970s with
several tribes, from New York to Florida conducting ``high-
stakes'' bingo operations. Other tribes quickly followed suit,
and by the mid-1980s over 100 tribes were conducting bingo
operations, which generated more than $100 million in annual
revenues. Some states, particularly Florida and California,
attempted to assert jurisdiction over these tribes. The tribes
resisted strenuously, citing long-standing Federal law and
policy which provided for Federal and tribal jurisdiction over
Indian lands, instead of state jurisdiction.
2. Supreme Court Cabazon decision
These legal disputes culminated in a ruling by the Supreme
Court in California v. Cabazon Band of Mission Indians, 480
U.S. 202 (1987) (``Cabazon''). In that decision, the Supreme
Court, using a balancing test between Federal, state, and
tribal interests, found that tribes, in states that otherwise
allow gaming, had a right to conduct gaming activities on
Indian lands largely unhindered by state regulation.
Specifically, the Cabazon Court held that Public Law 83-280
states with laws that regulated, but did not criminally
prohibit, all forms of gaming within their borders, could not
regulate gaming conducted by Indian tribes on Indian lands in
those states. In reaching this decision, the Court also
emphasized the Federal government's policy of Indian tribal
self-governance, including the policy of encouraging tribal
self-sufficiency and economic development.
3. IGRA
The Cabazon decision engendered a great deal of discussion
regarding the need for Federal legislation to address Indian
gaming and its regulation. Tribes, satisfied with the Cabazon
decision, saw no need for Federal legislation. States sought
Federal legislation overruling Cabazon and providing an
extension of state jurisdiction over Indian lands for gaming
regulation. Some in Congress, including current and past
members of this Committee, saw wisdom in creating a
comprehensive regulatory framework under Federal law, that
would bring some order to the complex relationship between the
Federal government, tribes and states as it related to the
conduct and regulation of Indian gaming.
The result of those discussions was the IGRA, enacted a
year after the Cabazon decision, which established a
comprehensive framework for the operation of Indian tribal
gaming across the United States. A primary purpose of the IGRA,
as stated by Congress, was ``to provide a statutory basis for
the operation of gaming by Indian tribes as a means of
promoting tribal economic development, self-sufficiency, and
strong tribal governments.''\1\ Another purpose was ``to
provide a statutory basis for the regulation of gaming by an
Indian tribe adequate to shield it from organized crime and
other corrupting influences, to ensure that the Indian tribe is
the primary beneficiary of the gaming operation, and to assure
that gaming is conducted fairly and honestly by both the
operator and players.''\2\
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\1\ Pub. L. 100-497, 102 Stat. 2467, Sec. 3 (1988).
\2\ See id.
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In enacting the IGRA, Congress expressly rejected arguments
by states for abrogating tribal sovereignty and imposing state
regulation of tribal gaming. Instead, the IGRA established
three different categories of gaming and a regulatory system
applicable to each. The IGRA also established a Federal
regulatory commission, the NIGC, to provide Federal oversight
over certain forms of tribal gaming.
The three categories of gaming established by the IGRA, and
the regulatory system for each, are:
Class I, which refers to traditional and
ceremonial games conducted by tribes, and for which the
IGRA provides exclusive regulation by the tribes;
Class II, which refers to bingo, games
similar to bingo, pulltabs, and some non-banked card
games, and for which the IGRA provides primary day-to-
day regulation by the tribes and regulatory oversight
and enforcement by the NIGC; and
Class III, which refers to all other types
of gaming, and for which the IGRA provides a unique
method of shared regulation between tribes and states
through mutually agreed upon compacts, and over which
the NIGC exercises oversight and enforcement.
The IGRA created the NIGC, a 3-member independent Federal
regulatory agency charged with oversight of Indian gaming.
Under its mandate, the NIGC is charged with approving
management contracts; \3\ conducting background investigations;
\4\ approving tribal gaming ordinances; \5\ reviewing and
conducting audits of the books and records of Indian gaming
operations; \6\ and enforcing violations of the IGRA, its own
regulations, and approving tribal gaming ordinances. \7\
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\3\ See id., Sec. 6(a)(4).
\4\ See id., Sec. 11(b)(2)(F).
\5\ See id., Sec. 6(a)(3).
\6\ See id., Sec. 7(b)(4) and Sec. 11(b)(2)(C).
\7\ See id., Sec. 14.
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Pursuant to the compact provisions of the IGRA, many Indian
tribes and states developed sophisticated regulatory frameworks
to oversee tribal gaming operations. These tribes and states
have put in place effective standards for the conduct of Class
III games, as well as financial and accounting standards for
their operations.
4. The Seminole decision
The compacting process, originally envisioned as an
opportunity for tribes and states to enter into mutually
beneficial agreements addressing legitimate issues of concern
to each, became an area of significant discord soon after
enactment of the IGRA. Several states, including Florida,
asserted legal challenges to the IGRA rather than enter into
good faith negotiations for compacts. These challenges
culminated in a decision by the U.S. Supreme Court in Seminole
Tribe v. Florida, 517 U.S. 44 (1996) (``Seminole''). In that
decision, the Court held that provisions in the IGRA which
authorized tribes to bring suit in Federal court for ``bad
faith refusal to negotiate'' were unconstitutional
infringements on the State of Florida's 11th Amendment immunity
to suit. Following the Seminole decision, the Secretary of the
Interior, using authority provided by IGRA, promulgated
regulations pursuant to which a tribe can request
``procedures'' \8\ for the regulation of Class III gaming in
states where such gaming is permissible. Several states have
challenged the constitutionality of the Secretary's authority
to issue such procedures. To date the Secretary has not issued
procedures for any tribe.
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\8\ See infra Note 1, Sec. 11(d)(7)(B)(vii).
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5. The Indian Gaming industry in 2006: A snapshot
At the time the IGRA was enacted, Indian gaming was a
relatively modest industry consisting mainly of what are now
known as ``Class II'' high-stakes bingo operations. At that
time, virtually no one contemplated that Indian gaming would
become the nearly $20 billion \9\ industry that exists today.
Indian gaming is providing tribes with much-needed capital for
development and employment opportunities where few previously
existed.
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\9\ See National Indian Gaming Commission, Press Release, July 13,
2005.
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Though gaming revenues have grown exponentially in the last
eighteen years, the IGRA has been amended only once. In 1997,
Committee on Indian Affairs Chairman Campbell introduced an
amendment that authorized the NIGC to collect increased fees
including, for the first time, fees from Class III operations,
which would fund the Commission's regulatory efforts in Indian
Country.\10\ Before the change in the fees structure, the NIGC
was funded almost exclusively with Federal appropriations, and
was barely able to keep up with the ever-growing number of
tribal gaming operations and its statutorily mandated duties
under the IGRA.
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\10\ Prior to the 1997 amendment, the NIGC budget was limited to
Federal appropriations which could match fees collected from the tribes
based on their Class II gaming revenues. The cap on those Class II fees
was set at $3,000,000.
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Since 1997, the NIGC has made significant strides in its
role as the Federal regulatory body charged with oversight in
the field of Indian gaming. It has opened five field offices
and employed additional staff to oversee tribal gaming
operations across the country and fulfill the NIGC's monitoring
responsibilities.\11\
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\11\ See e.g. Hearing to Provide Information on the Activities of
the National Indian Gaming Commission, Before the Senate Committee on
Indian Affairs, S. Hrg. 106-730, 106th Cong., at p. 3 (2000) (Testimony
of Montie Deer, Chairman, National Indian Gaming Commission). See also
Hearing on Indian Gaming Regulatory Act: Role and Funding of the
National Indian Gaming Commission, Before the Senate Committee on
Indian Affairs, S. Hrg. 108-67, Pt. 1, 108th Cong., at pp. 3-4 (2003)
(Testimony of Philip Hogen, Chairman, National Indian Gaming
Commission).
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Most recently, on May 12, 2006, the President signed Public
Law 109-221, which contained the operative provisions of S.
1295, the National Indian Gaming Commission Accountability Act
of 2005. S. 1295 was introduced by Senator McCain on June 23,
2005, to amend Section 18 of the IGRA to authorize the NIGC to
collect fees from all Class II and Class III operations at a
rate not to exceed .08 percent of the gross revenues from each
such operation. As a result, for a year in which the Indian
gaming industry has gross revenues of $20 billion, the new fee
structure provides the NIGC with potential funding of $16
million.
An Overview of the Provisions of S. 2078
On April 27, 2005, Chairman John McCain held an oversight
hearing on Indian gaming. At that hearing, Senator McCain
stated that the IGRA had not been substantively amended since
its enactment in 1988, nearly 17 years before, and expressed
his intention to conduct a series of oversight hearings into
the IGRA, its implementation and the status of the Indian
gaming industry. Subsequently, on May 18, July 27, and
September 21, 2005, the Committee held additional oversight
hearings on the IGRA, receiving testimony from the DoI, NIGC,
local government officials, local community groups, and Indian
tribes engaged in gaming.
On November 18, 2005, S. 2078 was introduced by Senator
McCain. Following introduction of the bill, the Committee held
additional oversight hearings on February 1, and February 28,
2006. On March 8, 2006, the Committee held a legislative
hearing on S. 2078.
The hearings held in 2005 provided the Committee with
significant information on much-needed updates and necessary
improvements to the IGRA. S. 2078 was drafted based upon that
information and information received from other parties. The
legislative hearing held on S. 2078 provided additional
critical feedback on the bill language. Based on this feedback,
on March 29, 2006, the Committee approved a substitute
amendment which addressed concerns raised about the bill's
language by Committee Members.
As approved by the Committee, S. 2078 provides several
amendments to the IGRA, including clarifications of the
authorities and responsibilities of the NIGC, additional
oversight over significant gaming contracts (and parties to
those contracts), and several clarifications and amendments to
the provisions providing eligibility for gaming under the IGRA
on lands acquired after 1988.
1. Amendments impacting the National Indian Gaming Commission
A. Minimum Internal Control Standards. S. 2078 amends
Sec. 7 of the IGRA to provide express authority for the NIGC to
promulgate and enforce Minimum Internal Control Standards
(``MICS'') as to Class III gaming. These standards regulate the
day-to-day operations of gaming facilities, including the rules
that designate requirements for cash handling, surveillance
over game play, and auditing procedures, among other things.
Essentially these standards insure the fairness of play for
gaming customers and the integrity of operations for the casino
owner.
The wisdom of implementing MICS in Indian gaming has long
been accepted by Indian tribes. However, consensus on what the
actual minimum standards should be was not universal.
Therefore, in 1999 the NIGC began the process of promulgating
regulations establishing MICS. A tribal advisory committee
assisted the NIGC in drafting the MICS, which were published as
final regulations in 2000. To fulfill its oversight
responsibilities the NIGC beganauditing tribal gaming
facilities for effective implementation of the MICS.
Despite agreeing substantively on the advisability of MICS,
some Indian tribes disagreed with the NIGC promulgating the
standards as regulations. They felt that establishing internal
control standards should be a regulatory role left to tribal
and state regulation through compacts and tribal law. This
disagreement came to a head when NIGC officials sought access
to the Class III gaming operations of the Colorado River Indian
Tribes to review and audit the Tribe's conformity with MICS.
The Tribe filed for an injunction in the United States District
Court for the District of Columbia (the ``District Court''),
claiming that the IGRA did not grant to the NIGC the authority
to enforce MICS on its Class III gaming operations. In an
August 24, 2005, decision the Court ruled that the Commission
did not have authority to audit the tribe for compliance with
Class III MICS.
On September 21, 2005, shortly after the District Court's
ruling, the Committee held a hearing addressing the need for
oversight of Class III gaming. Testimony at that hearing made
clear that the District Court's ruling could create a large
hole in the regulatory structure of Indian gaming. While some
states actively enforce internal control standards over Class
III, many have not exercised this authority. In fact, many
states rely on the NIGC both to issue and enforce MICS in order
to assure that, in addition to tribes, there is governmental
oversight over the flow of money in Indian casinos. Subsequent
to the hearing, the NIGC has presented evidence that some
tribes are invoking the court decision as a basis for
prohibiting NIGC from conducting oversight of their Class III
facilities. In the opinion of the Committee, these actions will
seriously detract from the strong regulatory structure created
when the IGRA was enacted and that is necessary for the
industry today.
Therefore, it is the intent of the Committee that S. 2078
clarify the IGRA to assure that the NIGC has authority to issue
and enforce Class III MICS. Section 5 of the bill amends the
authorities of the NIGC contained in Sec. 7 of IGRA to
expressly provide oversight and auditing responsibilities with
regard to Class II and III gaming operations, including
promulgation of MICS. The Committee encourages NIGC to exercise
this authority both actively and judiciously. Where tribes and
states are adequately enforcing appropriate internal control
standards, NIGC may not need to engage as actively in
enforcement. The Committee intends that the Commission will
focus its oversight energies where they are most necessary.
The Committee acknowledges that some tribes and states have
raised concerns from time to time regarding new regulatory
initiatives pursued by the NIGC that may infringe on tribal
regulatory powers or tribal-state compacts. In the opinion of
the Committee the amendments to Sec. 7 of the IGRA do not
infringe on tribal-state compacts, nor do the amendments
authorize the NIGC to regulate as to any matters within tribal
government jurisdiction that are not gaming-related activities.
While the Committee encourages the NIGC to fulfill its
statutory duties and regulatory responsibilities, including
oversight of MICS, the Committee also strongly encourages the
NIGC to respect the primary day-to-day regulatory role of
tribes and states through tribal-state compacts for Class III
gaming. It is the intent of the Committee that the NIGC, in
implementing these amendments, interpret S. 2078 consistent
with the IGRA's fundamental purpose to encourage strong tribal
governments, while protecting the integrity of the industry.
B. Requiring Consultation by the NIGC. S. 2078, through the
substitute amendment approved by the Committee, requires that
the NIGC maintain a formal consultation policy. It is the
Committee's belief and intent that this provision will
encourage a level of cooperation and engagement between the
regulator, the NIGC, and the regulated, the tribal gaming
operations, that will provide the best environment for insuring
the continuing effectiveness of regulation and success for the
industry.
It is the considered opinion of the Committee that
regulatory matters affecting the industry nationwide, such as
minimum internal control standards and background checks on
major investors, should reflect consideration of the impact on
the regulated community. Consultation is the most effective
means of achieving that goal. While consultation does not mean
capitulation by the NIGC to every demand by tribes or even
necessarily agreement between the agency and tribes, opinions,
views and proposals by tribes should receive significant
consideration by the NIGC, particularly in the area of
rulemaking. Therefore, the agency must balance those
considerations with its responsibilities as the Federal
regulator in order to protect the integrity of the industry and
maintain public trust in it.
While previous Commissioners disagreed with this
Committee's views that a consultation policy was needed, the
Committee is strongly encouraged by the commitment of the
current Commissioners to consulting with affected Indian
tribes, including adoption of a Commission consultation policy.
Therefore, it is not the Committee's intent that the Commission
rewrite its current policy, only that a policy be maintained
and effectuated by future Commissioners and their
administrations.
C. Revenue Allocation Plan Enforcement. Section 7 of the
substitute amendment to S. 2078 amends Sec. 11 of IGRA by
adding a new subsection (f) requiring the DoI to provide to the
NIGC notice of approval of a revenue allocation plan (``RAP''),
including any amendments or revisions, and copies of the plan
and information used to approve the plan. The DoI Inspector
General reported to the Committee that there has been a lack of
enforcement of RAPs by DoI or NIGC.\12\ The NIGC has testified
before the Committee that it cannot effectively enforce RAPs
due to a lack of information. S. 2078 addresses this technical
challenge by requiring the DoI to provide relevant information
to the NIGC, the agency with enforcement responsibility, and
expects that the NIGC will henceforth enforce those provisions
of IGRA dealing with RAPs.
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\12\ See Oversight Hearing on the Regulation of Indian Gaming.
Before the Senate Committee on Indian Affairs, S. Hrg. 109-50, Pt. 1,
109th Cong., at p. 9 (2005) (Testimony of Earl E. Devaney, Inspector
General, Department of the Interior).
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2. Background checks on tribal gaming commissioners
Section 7 of S. 2078, as amended by the substitute
amendment, requires that tribes must conduct background checks
on tribal gaming commissioners and tribal gaming commission
employees on a regular basis, in addition to key employees and
primary management officials as required by the IGRA. This
amendment to Sec. 11 of IGRA is designed to address a key
concern regarding the operation of tribal gaming commissions:
that the regulators themselves meet substantially the same
criteria imposed on the individuals they regulate.
The Committee notes that this provision does not delegate
to either the NIGC or the Secretary of the Interior any
authority to set standards regarding tribal gaming
commissioners. This amendment requires that a tribe address the
issue of background checks for tribal gaming commissioners and
employees in its gaming ordinance. The actual standards a tribe
adopts for its tribal gaming commission remain within the
sovereign jurisdiction of the tribe. The Committee believes
that this section provides an appropriate balance between
respect for tribal sovereignty and the Congress' desire to
protect the integrity of Indian gaming. Since IGRA has been
enacted, the Committee has not received any testimony from
tribes indicating that the required background checks for
primary management and key officials have hindered tribal
sovereignty by dictating who a tribe may hire. Like that
provision, the provision in S. 2078 does not give NIGC
authority over who the tribe hires or appoints. It does not
mandate the use of tribal gaming commissions, nor does it allow
the NIGC to mandate the makeup of those commissions. The
section simply requires that tribes collect appropriate
information so that--as with primary management officials and
key employees--they know the background of potential tribal
regulators and, thus, are able to make informed decisions about
who should occupy those positions.
3. Gaming-related contracts and contractors
A. In the Beginning. When Congress enacted the IGRA in
1988, among the stated purposes of the law were to provide for
tribal economic development and create strong tribal
governments. These purposes were accomplished by providing
within the IGRA several provisions that would ensure that
tribes were the primary beneficiaries of their
gamingoperations.
At the same time, in 1988, a number of Indian gaming
operations were managed by non-Indian ``management
contractors.'' Many of these management contractors were
entrepreneurs willing to accept the risks of investing in a
very uncertain venture. For many Indian tribes, this opened a
positive avenue for capital investment. However, in some
instances, this Committee found that the contract terms were
clearly unconscionable, and given Congress' plenary power over
Indian affairs, statutory protections were needed to ensure
that Indian tribes received the primary economic benefit from
the gaming activity.\13\ These statutory protections included
mandatory management contract terms, review of the management
contracts by the NIGC, and background checks on the principal
officers and shareholders of the management contractors.
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\13\ See Senate Report 100-446, pg. 15.
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For several years, these statutory provisions had the
desired result. Eventually, however, enterprising investors
sought to avoid the scrutiny required of management contracts
and contractors by engaging in so-called consulting agreements,
development agreements or financing agreements. While these
contracts did not contain indicia of management contracts, they
still exerted significant influence over the operation of
tribal gaming facilities and provided for compensation that
equaled or exceeded that allowed for management contracts; yet
they legally escaped review by the NIGC.
B. The Need for Expanded Contract Review. During
discussions with gaming tribes and gaming industry officials,
including the NIGC, the Committee has been made aware of two
primary reasons that gaming investors have sought to avoid
having their gaming contracts reviewed by the NIGC. The first,
and most obvious reason, is that some individuals do not want
to disclose their business dealings and associations. While
reluctance to disclose private business matters does not of
itself connote criminal associations, the unique history of the
casino industry has led to the conclusion that regulatory
review and oversight of the individuals engaged in the gaming
business is the most effective manner of preventing
infiltration by organized crime and other unwanted elements.
The Committee has been informed by the Department of
Justice that, since the enactment of the IGRA, it has
discovered no evidence of systematic infiltration of organized
crime into the Indian gaming industry.\14\ The ability of
tribes to protect their gaming operations from organized crime,
in the opinion of the Committee, has been due in no small part
to the unique tripartite regulatory structure enacted in the
IGRA, including review and approval of management contracts by
the NIGC. This rigorous regime has ensured that Indian tribes
are the primary beneficiaries of their gaming operations. It
has also protected both Indian gaming customers, by ensuring
the fairness and integrity of games, and the general public, by
preventing criminal syndicates from using gaming revenues to
fund other criminal endeavors. It is the express intent of the
Committee that this rigorous protection be continued and
strengthened by S. 2078.
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\14\ See Letter from William E. Moschella, Assistant Attorney
General, Office of Legislative Affairs, U.S. Department of Justice, to
the Hon. John S. McCain, Chairman, Committee on Indian Affairs, U.S.
Senate (July 18, 2005), attachment p. 3.
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The Committee has also been made aware, however, that there
is another, purely economic reason that gaming contractors
often seek to avoid the review of the NIGC: the significant
review period allowed under the IGRA, and the even longer
review timeframes often demanded by the NIGC. The IGRA provides
for an initial 180 day review period, with an extension allowed
for up to an additional 90 days. This minimum of six to nine
months for approval of a contract, on top of the time spent
negotiating a deal, would be unacceptable in most business
environments. The Committee has been informed that some
approvals have taken as long as two years or more. A
significant number of tribes have informed the Committee that
these extremely long time frames have resulted in greatly
inflated costs for them, including higher interest rates,
increased material costs, and delays in opening facilities.
In amending Section 12 of the IGRA, the Committee has
sought to balance these two competing, but not mutually
exclusive goals: to provide the tools for the NIGC and tribes
to continue to effectively monitor the industry and exclude
unwanted elements; and to smooth or streamline the contract
review and approval process to allow for more efficient
business dealings. To effectuate these goals the Committee has
amended the definitions of contracts requiring review and
approval, and the actual review and approval process through
stricter timelines.
C. Definitions. The substitute amendment to S. 2078
approved by the Committee expands the types of contracts
requiring approval to include consulting, development,
financing, and participation contracts, as well as management
contracts. Each definition provides authority for the NIGC to
establish by regulation, categorical exclusions for contracts
that fall within the definition but do not involve either
subject matters or dollar amounts that are of significance to
the NIGC's oversight. The Committee does not believe that such
NIGC authority impairs in any way the authority of Indian
tribes, or states through compacts, to review contracts or
background checks, or to license persons doing business with
tribal gaming operations.
Management Contracts: It is the intent of the Committee
that the NIGC, upon passage of S. 2078, continue to interpret
the term ``management contract'' consistent with the use of the
term within NIGC administrative rulings, guidelines, and
regulations, as well as any federal court precedent that may be
relevant. Consistent with that intent, the definition
categorically excludes employment contracts, except those that
provide for compensation based on a share or percentage of
profits from the casino.
Consulting Contracts: In oversight hearings held by the
Committee over multiple congresses, testimony has been provided
by the NIGC regarding a growing practice by non-Indian
investors of avoiding the review and scrutiny of the NIGC by
entering into so-called ``consulting'' contracts.\15\ While the
investor would be involved in the planning, financing,
development or operation of an Indian gaming facility, and
compensated handsomely therefor, no contract would be submitted
to the NIGC because this involvement was purported to be merely
for ``consulting'' services. The NIGC would only be made aware
of such agreements after the fact, often after the gaming
facility was operational. It is the intent of the Committee
that these contracts be subjected to review by the NIGC, and
the non-tribal parties to such contracts be subjected to the
background checks required by IGRA.
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\15\ See, e.g., Senate Committee on Indian Affairs Oversight
Hearing on Indian Gaming, April 27, 2005, pg. 14.
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Development Contracts: The Committee has also been informed
that, with increasing frequency, non-Indian investors have also
sought to avoid the review and scrutiny of the NIGC by entering
into so-called ``development'' contracts. Many of these
``development'' contracts provide for the planning, financing
and construction of Indian gaming facilities. These types of
contracts may not formally involve management or consulting on
management of operations; however, compensation for these
investors is usually taken from later operations, and that
compensation is often far in excess of the market value of the
services provided. Additionally, the Committee has been made
aware that some developers, who would not be able to survive
the scrutiny of background checks, actively market their
development of ``turnkey'' facilities to other investors, for
often exorbitant compensation. While the Committee is concerned
with the involvement of these ``unsuitable'' investors in the
Indian gaming industry, it is primarily concerned that the true
loser in these scenarios are the tribes who are not receiving
the full benefit of their gaming operations.
The Committee recognizes that there are many types of
construction and other contracts that might be considered
``development'' contracts, but are tangential to gaming
activities and do not need scrutiny by the NIGC, including
professional services contracts such as the architectural and
engineering services integral to any construction project. It
is the considered opinion of the Committee that only contracts
for major gaming or gaming-related projects should be covered
by this definition, particularly those for which compensation
will be contingent upon gaming revenues derived from the new
development.
Financing Contracts. The Committee has been informed,
through media reports and various government agencies, of
concerns regarding the backgrounds and associations of some
persons that have financed the building or expansion of Indian
gaming facilities or operations. While the Committee does not
intend to restrict the ability of tribes to access investment
capital, it is concerned that tribes may unknowingly receive
funding from organized crime or other unsuitable sources.
Consistent with those concerns, the definition of financing
contract approved by the Committee in the substitute amendment
to S. 2078 is narrowly drafted to exclude contracts with
entities regulated by other arms of the Federal government,
including federally-chartered banks and companies regulated by
the Securities and Exchange Commission. Also excluded are
intergovernmental financial arrangements, either between
tribes, or between tribes and states as is provided in some
compacts. It is the intent of the Committee that the NIGC
exercise its authority to approve finance contracts primarily
with regard to private, unregulated sources of capital.
Participation Contracts. The NIGC has long raised concerns
regarding contracts for various services related to gaming
operations or facilities where the compensation is based on
receipt of a significant percentage of revenues, not on the
actual value of the services performed. While the opportunity
to participate in the success of a gaming operation via a
percentage of revenues provides increased incentives for
investors to commit capital to developing tribal casinos, it
has also long been an area easily open to exploitation. It is
the intent of the Committee that the NIGC rigorously review
contracts and background checks on investors seeking
participation contracts. The Committee expects that such
increased scrutiny will likely discourage those seeking to
obtain exorbitant profits at the expense of tribes. The
Committee does not intend that the NIGC unnecessarily seek
review of participation contracts that reflect common gaming
industry practice, so long as such agreements provide services
commensurate with the compensation provided and are in keeping
with common industry standards or practices.
D. Categorical Exclusions and Timelines. For each of the
defined gaming-related contracts, the substitute amendment to
S. 2078 provides authority to the NIGC to promulgate
regulations, in consultation with tribes, that will
categorically exclude contracts that fall within the broad
statutory definitions provided, yet do not involve either
subject matters or dollar amounts that are of significance to
the NIGC's oversight. It is the express intent of the Committee
that, in expanding the authority of the NIGC to review and
approve a broader range of gaming-related contracts, the
increased regulatory oversight necessarily accompanying such
expansion shall not overburden the industry and thereby
artificially inflate otherwise routine business expenses or
economic costs.
In order to fulfill the intent of the Committee, the
substitute amendment to S. 2078 amends Sec. 12 of IGRA by
adding a new paragraph (b)(5) which provides strict timelines
for approval by the NIGC of gaming-related contracts. The
Committee strongly encourages the NIGC to efficiently allocate
personnel and resources needed to meet these new
responsibilities and mandated deadlines. The Committee
expressly intends that the NIGC not waste its resources
unnecessarily on reviewing gaming-related contracts for which
there is no danger of exploitation by unwanted or criminal
persons, and that the NIGC, in consultation with tribes,
exercise the authority given to promulgate regulations that
will categorically exclude the more mundane types of gaming-
related contracts.
E. Review and Approval of Gaming-Related Contracts. Section
8 of the substitute amendment to S. 2078 replaces Sec. 12 of
IGRA which currently governs the review and approval of
management contracts. In updating and amending Sec. 12 to
conform to the expanded definition of gaming-related contracts
which will require review and approval by the NIGC, the basic
statutory contract requirements needed for approval in the
current law were carried forward. Similarly, the basic
standards whereby the NIGC will review the backgrounds of the
gaming-related contractors remain the same as currently
provided in IGRA. It is the intent of the Committee that the
basic procedures required of gaming-related contractors and the
NIGC under Sec. 12 will continue to be utilized, consistent
with the new timelines imposed by paragraph (b)(5) of amended
Sec. 12.
The Committee has provided the NIGC with additional
flexibility under amended Sec. 12 to better balance the twin
goals of rigorous regulatory enforcement and efficient business
practices. In particular, the Committee strongly encourages the
NIGC to utilize the authority given in new paragraphs (c)(3)
and (c)(4) of Sec. 12 to contract with Indian tribes or
establish alternative methods of determining suitability and
categorical exclusions to process background checks and approve
gaming-related contracts in a more timely and efficient manner
than past history has indicated. The Committee also encourages
the NIGC to make clear to tribes and gaming-related contractors
the information which, when provided at the beginning of the
review process, will constitute a complete submission and thus
make approval a more efficient process.
F. New Regulatory Authority for Additional Gaming-Related
Contracts. Section 5 of the substitute amendment to S. 2078
approved by the Committee provides amendments to Sec. 7(b)(10)
of IGRA granting new substantive regulatory authority to the
NIGC to identify by regulation gaming-related contracts that do
not fall within the statutory definitions but are of concern.
The Committee determined this provision was needed to guard
against the ingenuity of gaming contractors in seeking ways to
avoid the scrutiny of NIGC regulators in the future.
The Committee expressly intends that this authority be
forward-looking, and only be exercised after regulations have
been duly promulgated for the defined gaming-related contracts
pursuant to new Sec. 26 of IGRA, as mandated by Sec. 12 of the
substitute amendment to S. 2078. The Committee further
acknowledges that this authority is far-reaching, and thus
mandated that this authority only be exercised through the
NIGC's promulgation of regulations, in consultation with
tribes.
G. Implementation. Recognizing that substantial new
responsibilities are placed on the NIGC by the expanded
definitions of gaming-related contracts contained in the
substitute amendment to S. 2078 approved by the Committee, a
second degree amendment to the substitute amendment was also
approved by the Committee during markup of the bill which added
a new Sec. 26 to IGRA which would delay enforcement of the new
gaming-related contract definitions until implementing
regulations are promulgated.
The provision provides a two-year timeframe for the NIGC to
promulgate regulations, in consultation with tribes, which will
provide needed categorical exclusions for the gaming-related
contracts definitions and persons subjected to suitability
determinations. The NIGC is required to provide a status report
back to the Committee and the House Committee on Resources
within one year of enactment on the progress in promulgating
the regulations.
The provisions express the Committee's intent that the NIGC
shall continue to review and approve or disapprove management
contracts using their current regulations until new regulations
are developed. The Committee further intends that within the
two-year timeframe, gaming-related contracts that are not
management contracts may be entered into by tribes and
contractors and will not be considered void or invalid by
reason of not being approved by the NIGC. Conversely, the
Committee does not intend to validate an otherwise void or
invalid contract by reason of paragraph (c)(2) of Sec. 26.
In addition, the Committee encourages the NIGC to carefully
consider any current regulations that do not conflict with the
amendments to IGRA embodied in the substitute amendment to S.
2078, and, where appropriate, maintain those regulations in
effect.
4. Indian lands eligible for gaming
The IGRA generally prohibits gaming on lands acquired in
trust outside of reservations after October 17, 1988, the date
of enactment. However, Sec. 20 of the IGRA contains several
exceptions to this general rule, some of which have engendered
debate and controversy. S. 2078 addresses these exceptions by
eliminating one of them, the two-part determination, and
amending three others dealing with land claims, initial
reservations and restored lands.
A. The Two-part Determination. When enacted, the IGRA
Sec. 20 included in subsection (b)(1)(A) an economic
opportunity exception to the general ban on gaming on lands
outside ofreservations. This so-called ``two-part
determination'' allows gaming on land acquired after October 17, 1988,
that is, on ``after-acquired lands'' if: (1) the Secretary finds that
gaming would benefit the tribe and not be to the detriment of the
surrounding community; and (2) the Governor of the state in which the
land is located concurs. This provision is unique in that it allows a
tribe and a state to essentially create a new reservation solely for
gaming purposes, even on lands to which the tribe may not have an
historical connection.
While the general purposes of the IGRA were to create
economic development on reservations and strong tribal
governments, this provision provided an avenue through which
tribes, unable to engage in viable gaming on their current
reservations, might have the opportunity to receive the
economic benefits of gaming off their reservations.
Unfortunately, this well-intentioned provision has caused a
great deal of controversy between tribes and states and local
communities, and even among tribes.
During the 109th Congress, this Committee held four
hearings during which witnesses raised concerns about the two-
part determination. In testimony presented at these hearings,
local governments, tribes and grassroots organizations
expressed intense frustration with the process through which
the Secretary and governors make decisions that allow tribes to
site casinos off their reservations on lands to which they have
no historical ties and that local communities and other
impacted tribes did not foresee or do not want. These groups
testified that they had insufficient input into the process of
making a two-part determination, resulting in a lack of
confidence that there were adequate limits to gaming by Indian
tribes on lands far from existing reservations.
Moreover, while the DoI testified that only three tribes
have successfully navigated the two-part determination process,
an increasing number of written requests for determinations
have been filed and even more have been hinted at by tribes and
developers. The costs to tribes, local communities, states and
the Department of the Interior in investments of time, energy
and money into these off-reservation endeavors are extremely
high. The mere threat of off-reservation gaming to local
communities and tribes that conduct gaming on their own nearby
reservations engenders its own anxiety and consequent
intangible costs.
Based on the hearing record, and substantial information
provided formally and informally from many interested parties,
the Committee concludes that, as a matter of Federal Indian
policy, there must be limits on where tribes can conduct gaming
pursuant to the IGRA. Therefore, the Committee has determined
that elimination of the two-part determination is the wisest
policy choice among several. Consistent with the Committee's
determination, S. 2078 eliminates the Secretary's authority to
make the determinations contained in existing subsection
20(b)(1)(A). This provision is not intended to affect the
ability of a tribe to conduct commercial gaming activities off
Indian lands and outside the authority of the IGRA.
While committed to eliminating the two-part determination,
the Committee is cognizant that there are some tribes that have
already spent significant time, money, and energy into
following the letter of the law to meet the two-part
determination criteria. It is not the intent of the Committee
to unfairly prevent these tribes from continuing through the
process in which they are already deeply engaged. In fact, it
is not uncommon for significant effort, resources, and time to
be spent before an application is even filed. Therefore,
Sec. 10 of S. 2078 provides a ``grandfather'' clause that
allows written requests for specific parcels of land submitted
to the U.S. Department of the Interior before April 15, 2006,
to continue to be considered pursuant to current subsection
(b)(1)(A) of Sec. 20, and in accordance with the DoI
administrative processes implementing that provision.
The Committee does expressly intend, however, that the
inclusion of the ``grandfather'' provision is in no way to be
interpreted as encouraging approval of any existing two-part
determination request. The Department of the Interior must
continue to be as rigorous in evaluating the benefits to the
tribe and detriments to the surrounding community as it has
been in the past.
B. Land claims. S. 2078 also amends the exception contained
in subsection (b)(1)(B)(i) of Sec. 20 of the IGRA addressing
land claims. Generically, ``land claims'' refer to claims by
tribes asserting legal title to real property pursuant to the
Indian Trade and Intercourse Act.\16\ Settlements for such
claims require congressional legislation. The amendment
specifies that, to be eligible for gaming under the IGRA, lands
taken into trust pursuant to a land claim must be within the
state in which the tribe's reservation or last recognized
reservation is located.
---------------------------------------------------------------------------
\16\See 25 U.S.C. Sec. 177.
---------------------------------------------------------------------------
Testimony received by the Committee during hearings on
lands taken into trust for gaming purposes through ``land
claims'' raised several concerns. Among those raised was the
concern that land claims are not being pursued in order for
tribal members to move back to the claimed lands, but solely to
establish casinos. Locating casinos out-of-state affects not
only in-state tribes, but also land owners in land-claim states
who live and work on land that they could not have foreseen
would be subject to a claim. Additionally, tribes with in-state
reservations raised concerns that out-of-state tribes will
negotiate compacts that give away governmental prerogatives and
sovereign rights at the expense of in-state tribes. These in-
state tribes seek to protect the already existing and sometimes
long-standing relationships between states and the tribes
already within their borders.
It is the considered opinion of the Committee that clear
congressional direction is needed to address many of the
concerns raised and to discourage those wishing to exploit
ambiguities in the law. Therefore, Sec. 10 of S. 2078 amends
clause (b)(1)(B)(i) of Sec. 20 of the IGRA to eliminate land
claims that have been asserted by tribes for lands that are
outside their current state, sometimes across the country, in
order to find more lucrative gaming sites. This provision does
not affect a tribe's ability to utilize lands obtained through
land claims for purposes other than gaming. S. 2078 also
codifies what has heretofore been done in practice but not
required by Sec. 20, a mandate that there be Congressional
approval of the land claim before gaming can be conducted.
C. Initial reservations and restored lands. S. 2078 further
amends clauses (b)(1)(B)(ii) and (iii) of Sec. 20 of the IGRA,
which provide exceptions to the general ban on post-1988 lands
for newly recognized or restored tribes. Clause (ii) applies to
the ``initial reservation'' of tribes that successfully
petitioned for acknowledgment through the DoI's Federal
Acknowledgment Process. Clause (iii) applies to ``the
restoration of lands for an Indian tribe that is restored to
Federal recognition.''\17\
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\17\IGRA does not define ``restore'', ``restored'' or
``restoration'', but several courts have provided guidance. These
courts have looked to the ordinary dictionary meaning such as ``to give
back, return, make restitution, reinstatement, renewal and
restitution.'' See Grand Traverse Band v.United States (III), 369 F.3d
960, 967.
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During hearings before the Committee, significant testimony
was provided regarding the potentially high impact that gaming
activities had on local communities. In their testimony,
impacted communities and other nearby tribes raised concerns
about the process whereby the DoI determines whether particular
lands should be eligible for gaming for a newly recognized or
restored tribe. Serious questions were raised regarding the
transparency of the process and whether the Secretary was
gathering sufficient information prior to making such a
determination.
Based on the hearings, several themes became clear: the
fairness exceptions should not unfairly prejudice existing
tribes; affected local communities and tribes must have a fair
opportunity to present legitimate concerns; and, significant
impacts to affected local communities and tribes should be
addressed.
To address these themes, S. 2078 significantly amends
subsection (b)(1)(B) of Sec. 20 of the IGRA. First it provides
that: (1) for initial reservations the tribe must have a
historical and geographical nexus to the land being acquired,
and (2) for restored lands for tribes restored to Federal
recognition the tribe must have the historical and geographical
nexus, plus a temporal connection must existbetween the
acquisition of the land and the date of the tribe's restoration to
Federal recognition. Second, the Secretary must consult with the tribe
and local and tribal officials, provide public notice and an
opportunity to comment and a public hearing. Third, the Secretary must
determine that a gaming establishment on the land would be in the
tribe's best interest and not create a significant, unmitigated impact
on the surrounding community.
The Committee notes that, for initial reservations, there
is no requirement that there be a temporal connection between
the land acquisition and tribe's recognition. In the view of
the Committee, the timing of that acquisition should not be
relevant when a tribe is acquiring its first land following
acknowledgment through the Federal Acknowledgment Process.
Similarly, while not directly stated in S. 2078, the Committee
is of the opinion that the DoI should consider the challenges a
tribe may have faced in acquiring land when applying the
temporal connection requirement to the tribe's acquisition of
its first restored lands following restoration.
It is the intent of the Committee through S. 2078 to
codify, for both initial reservations and restored lands
exceptions, what has been done in practice, particularly in
restored lands analyses, by requiring that tribes have a
historical nexus to the land on which the gaming will be
conducted. This nexus requirement is derived from case law on
IGRA's restored land exception which indicates that restored
lands cannot be all lands with which a tribe has had minimal
contact. Case law articulates that, for restored lands, a tribe
have a historical nexus to the land and that the restoration be
sufficiently close in time to the date of recognition.\18\ It
is the considered opinion of the Committee that codifying the
historical nexus requirement, and for restored lands, the
temporal connection requirement, will help to clarify to all
interested parties the standard that must be met for land to be
deemed eligible for gaming pursuant to these exceptions.
---------------------------------------------------------------------------
\18\See Grand Traverse Band of Ottawa & Chippewa Indian v. United
States Atty., 198 F. Supp. 2d 920, 937 (D. Mich. 2002) (``The Band has
introduced substantial and uncontradicted evidence that the parcel is
located in an area of historical and cultural significance to the Band
that was previously ceded to the United States. The Band also has
introduced uncontradicted evidence of the intent of the Band in
acquiring properties between 1988 and 1990. Finally, it has introduced
evidence supporting the temporal proximity of restoration of all
reservation holdings to the time of acknowledgment and approval of the
tribal constitution, together with the absence of any substantial
restoration of lands preceding the property at issue.''); aff'd 369
F.2d 960 (6th Cir. 2004).
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S. 2078 also amends subsection 20(b)(1)(B)(ii) and (iii) to
require that there be public input into the process of
determining whether gaming is an appropriate activity that may
be conducted on lands acquired after October 17, 1988, even if
there is a historical nexus between the tribe and the lands to
be gamed upon. The Committee is very cognizant of the
legitimate concerns raised by affected local communities and
tribes that they had no input into the determination of whether
gaming--a potentially high impact activity--should be conducted
on nearby land. With these concerns in mind, the amendments in
S.2078 require that the Secretary allow public comment and
specify that a public hearing must be held. This language
reflects the Committee's view that it is imminently fair to the
people who may be most affected by a nearby gaming operation
to: (1) be informed that a tribe is seeking to conduct gaming
on nearby land; (2) have the opportunity to comment on
significant impacts that the gaming may have on their
community; and, (3) have this input be considered by the
Secretary when making a determination that lands are eligible
for gaming.
Conversely, it is not the intent of the Committee that the
Secretary treat community opposition to a tribal gaming
operation as a veto over use of the land for gaming. Thus,
opposition to, or controversy over, a proposal to use land for
gaming does not constitute an impact. Rather, it is the express
intent of the Committee that the Secretary carefully weigh
whether the tribe can mitigate identifiable significant impacts
that the proposed gaming would have on the affected
communities. The Committee notes that this is a different
standard than the one used in the past for the two-part
determination and expects that the Secretary will interpret
this provision accordingly. The Committee intends that, for
initial reservations and restored lands, the Secretary evaluate
the efficacy of mitigation that is offered by the tribe to
lessen the impact of the gaming activity on the surrounding
community. If impacted local communities and tribes reach a
mutual agreement on mitigation, or, in the Secretary's
estimation, the tribe has offered reasonable mitigation to
identified significant impacts, the Secretary should determine
that the gaming would not ``create significant, unmitigated
impacts.''
D. Determinations Regarding Land Eligibility for Gaming. In
the past, both the Secretary and the NIGC have issued lands
opinions regarding the eligibility of lands for gaming. Based
on testimony presented during hearings on lands eligible for
gaming, the Committee is of the considered opinion that the
process of determining eligibility and acquiring land into
trust should be streamlined at one agency. Therefore S. 2078
provides that, after enactment, the Secretary and not the NIGC
is to make initial reservation and restored lands
determinations for land that has not been taken into trust or
is in the process of being taken into trust. By designating the
DoI as the agency responsible for these determinations, the
Committee also imposes a responsibility on the agency to make
these determinations in a timely manner.
Notwithstanding that S. 2078 clarifies that the Secretary
has sole responsibility for making Sec. 20 determinations, the
Committee is aware that there are instances when the NIGC must
make a determination, to meet its regulatory responsibilities,
whether a given parcel of land is Indian land such that the
agency has jurisdiction over the gaming activity on it. The
Committee does not intend to preclude the NIGC from determining
whether lands are Indian lands for the purposes of determining
its jurisdiction.
E. Prior Determinations. S. 2078 includes a provision
stating that the amendments to Sec. 20 shall not affect the
validity of any determination already made by the Secretary or
Chairman. This is intended to preserve already-issued
determinations by the Secretary or Chairman regarding
eligibility of gaming on trust lands. The Committee does not
intend the Secretary or Chairman to reconsider decisions they
have already made. On the other hand, the Committee anticipates
that opinions for restored lands and initial reservations that
are pending at the time of enactment of S.2078 will in fact be
subject to the amended subsection.
Legislative History
S. 2078 was introduced on November 18, 2005, by Senator
McCain and was referred to the Committee on Indian Affairs.
Subsequent to introduction, hearings were held February 1,
2006; February 28, 2006; and March 8, 2006.
On March 29, 2006, at a business meeting duly noticed, the
Committee considered S. 2078. During the business meeting
Senator McCain introduced a substitute amendment. In addition
to the substitute amendment, Senator McCain and several other
Members of the Committee offered stand-alone amendments to the
substitute amendment.
By voice vote, the Committee adopted an amendment to the
substitute amendment by Senator McCain changing the cut-off
date for considering written requests for determinations under
the two-part determination set forth in the existing Act at
Section 20(b)(1)(A). Senator McCain's amendment changed the
date in the substitute amendment from June 1, 2006, to March
29, 2006. After discussion during which several senators
expressed concern that tribes have an opportunity after the
date of mark-up to submit requests for two-part determinations,
Senator Dorgan offered a second degree amendment extending the
time to file a request until April 15, 2006. Senator Dorgan's
second degree amendment was adopted by a voice vote.
A second amendment to the substitute amendment was offered
by Senators McCain and Dorgan to add a new Section 26 to S.
2078 providing that, after consultations with tribes and no
later than two (2) years after the section's enactment, the
Commission must promulgate regulations implementing the bill's
definitions. The amendment also provides that, with respect to
gaming-related contracts other than management contracts, the
contracts section of the bill will not take effect until the
Commission promulgates regulations. New Section 26(c)(2) would
additionally provide that nothing in the contracts section of
the bill affects the validity or invalidity of contracts
already entered into prior to the effective date of this this
new section. The amendment was adopted unanimously by voice
vote.
An amendment was offered by Senator Inouye which would
amend Section 7(2) of Senator McCain's substitute amendment by
imposing a time limit of 180 days on the Secretary's duty to
prescribe procedures for Class III gaming. Following a
discussion among the Members, a roll call vote was taken. With
six (6) senators voting aye and six (6) voting nay, the
amendment was not adopted.
Senator Coburn offered an amendment inserting into Section
5 of the substitute amendment the requirement that once a year
the Commission submit to the Secretary a report, for
publication, describing all revenues from Indian gaming for
each Indian tribe engaged in gaming. Following discussion among
the Members, Senator McCain offered a second degree amendment
to clarify that the disclosures required by the amendment would
only be provided to members of such tribe. The second degree
amendment was adopted, and then the Coburn amendment was
adopted by voice vote.
Having considered all amendments offered to the substitute
amendment, the Committee adopted the substitute amendment. The
Committee then approved S. 2078, as amended, and agreed that
the bill would be forwarded for consideration by the full
Senate, with a favorable recommendation that the Senate pass
the bill.
Section-By-Section Analysis
Section 1. Short title
The act may be cited as the ``Indian Gaming Regulatory Act
Amendments of 2006''.
Section 2. Definitions
The bill amends Section 4 of the Indian Gaming Regulatory
Act (``IGRA'') by adding several definitions needed for
amendments made to operative sections of the IGRA, including:
``Gaming-Related Contract''; ``Gaming-Related Contractor'';
``Consulting Contract''; ``Development Contract''; ``Financing
Contract''; ``Management Contract'' and ``Participation
Contract''. The definitions of ``Consulting Contract'';
``Development Contract''; ``Financing Contract''; ``Management
Contract'' and ``Participation Contract'' expressly authorize
the National Indian Gaming Commission (NIGC), by regulation, to
provide categorical exclusions of certain contracts from the
broader definition.
Section 3. National Indian Gaming Commission
The bill makes technical amendments to Section 5 of the
IGRA to clarify how NIGC vacancies are filled, and authorizing
the Vice Chairman to act in the absence or disability of the
Chairman.
Section 4. Powers of the Chairman
The bill amends Section 6 of the IGRA by adding to the NIGC
Chairman's authority the power to approve gaming-related
contracts, and to conduct a background investigation and make a
suitability determination as to any party to a gaming-related
contract. The bill also makes technical amendments to Section 6
of the IGRA to clarify how the NIGC Chairman may delegate
authorities to individual Commissioners.
Section 5. Powers of the Commission
The bill amends Section 7 of the IGRA to clarify the NIGC's
oversight and auditing responsibilities with regard to Class II
and III gaming operations. It also directs the NIGC to
promulgate and enforce Minimum Internal Control Standards as to
Class III gaming. This authority was recently called into
question by a decision of the United States District Court for
the District of Columbia.
The NIGC is also directed to develop regulations
determining other categories of contracts for goods and
services directly related to tribal gaming activities that will
require NIGC approval and background checks.
The bill also requires that the NIGC submit to the
Secretary of the Interior, at least once each year, a report
describing aggregate revenues of each tribe's gaming
activities. The Secretary shall develop regulations governing
the provision of this information to individual tribal members.
Section 6. Commission staffing
The bill makes technical amendments to Section 8 of the
IGRA to update the statutory rates of pay for NIGC
Commissioners, staff and temporary services to comport with the
current Federal Executive and General Schedule pay rates.
Section 7. Tribal gaming ordinances.
The bill amends Section 11(b)(2)(F) of the IGRA to require
that tribal gaming ordinances provide that background
investigations will be conducted for tribal gaming
commissioners and key tribal gaming commission employees;
primary management officials and other key employees of the
gaming enterprise; and persons that provide goods or services
directly relating to the tribal gaming activity. The bill
clarifies that the background checks required on tribal gaming
commissioners will not also require licenses (since the tribal
commissioners issue these licenses, and it is unnecessary for
them to license themselves).
The bill further amends Section 11 by requiring the
Secretary of the Interior to share information relating to
approved tribal revenue allocation plans with the NIGC
Chairman.
Section 8. Gaming-related contracts
The bill substantially amends section 12 of the IGRA by
extending the NIGC Chairman's authority to approve all gaming-
related contracts (defined in the bill as management,
consulting, development, financing, participation, and other
contracts as further defined by NIGC regulation). Gaming-
related contracts that are not approved by the NIGC Chairman
under the bill would be void ab initio.
The bill further requires that gaming-related contractors
must be deemed ``suitable'' by the Chairman after conducting an
appropriate background check. Under the bill, the Chairman is
required to make the required suitability and contract
determinations within specified timeframes: 30 days for
consulting and financing contracts and 90 days for all other
gaming-related contracts.
The bill retains the same basic substantive requirements
for contract approvals and background checks as are currently
provided in IGRA; however, the Chairman is provided new
flexibility to utilize alternative licensing or suitability
findings, or categorically exclude certain persons or entities
that are already licensed by government agencies or
professional associations. The bill further requires the
Commission to establish and maintain a registry of suitability
determinations made by the Chairman and tribes.
The bill also provides the Chairman authority to waive any
requirement under this section for reasons of emergencies or
imminent danger to the public health and safety.
Section 9. Civil penalties
The bill amends Section 14 of the IGRA, which provides for
civil penalties, to give NIGC authority to issue complaints and
levy penalties against any individual or entity, not just
against tribes or management contractors, that violate IGRA or
federal regulations.
Section 10. Gaming on later-acquired land
The bill amends Section 20 of the IGRA to further restrict
tribes' ability to game on lands acquired after 1988 and to
provide members of the local community more input into the
process for allowing gaming on tribal lands.
The bill eliminates the Secretary's authority to take land
into trust pursuant to the so-called ``two-part determination''
contained in subsection 20(b)(1)(A) after the date of enactment
of this bill, while ``grandfathering'' for consideration
written requests to have lands deemed eligible for gaming that
are submitted by tribes to the Secretary of the Interior by
April 15, 2006. The bill further amends subsection 20(b)(1)(B)
of IGRA by specifying that, to be eligible for gaming, lands
taken into trust as part of a land claim must be approved by
congressional action and cannot be outside of the state in
which the tribe is located. The bill requires that lands taken
into trust as part of an initial reservation have a historic
and geographical nexus to the tribe, and that the Secretary of
the Interior determine, after consultation with the tribe and
appropriate local and tribal officials, and after providing
public notice and an opportunity to comment, that a gaming
establishment on that land would be in the best interest of the
tribe and would not create significant, unmitigated impacts on
the surrounding community.
Lands taken into trust as part of a restoration of lands
would, under the bill, have to meet the same requirements as
lands taken into trust as part of an initial reservation, and
there would have to be a temporal connection between the
acquisition of the land and the date of restoration of the
tribe.
The bill does not affect the validity of any determinations
made by the Secretary of the Interior or NIGC Chairman prior to
enactment of the bill regarding the eligibility of land for
gaming.
Section 11. Consultation policy
The bill requires the NIGC to establish and maintain a
consultation policy in accordance with the Federal trust
responsibility and the government-to-government relationship
with Indian tribes.
Section 12. Implementation
The bill requires the NIGC to develop, no later than 2
years from the date of enactment, rules and regulations
implementing the definitions, authorities, responsibilities and
restrictions set forth in the bill. The regulations are
required to be developed in consultation with Indian tribes,
and the NIGC must provide the Senate Committee on Indian
Affairs and the House Committee on Resources with a report on
the status of the regulations no later than one year after the
date of enactment of the bill. The bill delays the effective
date of the new provisions relating to gaming-related contracts
until the date on which the NIGC promulgates rules and
regulations implementing those provisions. The bill makes clear
that current law regarding management contracts remains in
effect until the NIGC promulgates rules and regulations
implementing the new provisions relating to gaming-related
contracts.
The bill also validates otherwise legal gaming-related
contracts entered into before the date of enactment of the
bill.
Section 13. Conforming amendments
The bill will amend Public Law 105-83, the Department of
the Interior and Related Agencies Appropriations Act of 1998,
by striking subparagraph (C). It also clarifies that all tribes
are subject to the NIGC's fee structure if they conduct gaming.
Committee Recommendation and Tabulation of Vote
On March 29, 2006, the Committee, in an open business
session, considered S. 2078, approved a substitute amendment
and three additional amendments to the bill, and ordered S.
2078, as amended, favorably reported to the full Senate with a
recommendation that the bill do pass.
Cost and Budgetary Considerations
The cost estimate for S. 2078 as calculated by the
Congressional Budget Office, is set forth below:
U.S. Congress,
Congressional Budget Office,
Washington, DC, May 17, 2006.
Hon. John McCain,
Chairman, Committee on Indian Affairs,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed estimate for S. 2078, the Indian Gaming
Regulatory Act Amendments of 2006.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Matthew
Pickford (for federal costs), Marjorie Miller (for the impact
on state, local, and tribal governments), and Craig Cammarata
(for the impact on the private sector).
Sincerely,
Donald B. Marron,
Acting Director.
Enclosure.
S. 2078--the Indian Gaming Regulatory Act Amendments of 2006
Summary: S. 2078 would amend provisions of the Indian
Gaming Regulatory Act (IGRA) to clarify and expand the
authority of the National Indian Gaming Commission (NIGC) to
regulate and oversee Indian gaming. In addition, S. 2078 would
restrict off-reservation gambling. CBO estimates that
implementing S. 2078 would not have a significant impact on the
budget. Enacting the bill could affect revenues, but CBO
estimates that any such effects would not be significant.
Enacting the bill would not affect direct spending.
S. 2078 contains intergovernmental mandates as denied in
the Unfunded Mandates Reform Act (UMRA) because it would limit
the ability of tribes to operate gaming on land put in trust
after 1988 and increase federal regulation of tribal gaming
operations. While the impact of these changes on tribes with
such operations is very uncertain, CBO estimates that the
aggregate costs probably would not exceed the annual threshold
established in UMRA ($64 million in 2006, adjusted annually for
inflation) in the next five years. Enacting this bill would
impose no other significant costs on state, local, or tribal
governments.
S. 2078 would impose a private-sector mandate, as defined
in UMRA, on certain contractors in the Indian gaming industry
by making them subject to federal regulation of Class II and
Class III gaming-related contracts. Based on information from
industry and government sources, CBO estimates that the
aggregate direct costs associated with complying with the
mandate would fall below the annual threshold established by
UMRA for private-sector mandates ($128 million in 2006,
adjusted annually for inflation).
Estimated cost to the Federal Government: The NIGC is
authorized to collect and spend annual assessments on the
revenues of tribal gaming operators. The NIGC is currently
authorized to collect and spend up to 0.080 percent (80 cents
per $1,000) of all tribal gaming revenues subject to NIGC
regulation. Based on information from NIGC, CBO estimates that
the agency's current collection and spending authority would be
sufficient to accommodate the additional costs under the bill.
Enacting S. 2087 could affect federal revenues because the
legislation would amend civil penalties related to Indian
gaming. Collections of the civil penalties are recorded in the
budget as revenues. CBO estimates, however, that any change in
revenues that would result from enacting the bill would not be
significant.
Estimated impact on state, local, and tribal governments:
S. 2078 contains intergovernmental mandates as defined in UMRA
because it would limit the ability of tribes to operate gaming
on land put in trust after 1988 and increase federal regulation
of tribal gaming operations. While the impact of these changes
on tribes with gaming operations is very uncertain, CBO
estimates that the aggregate costs probably would not exceed
the annual threshold established in UMRA ($64 million in 2006,
adjusted annually for inflation) in any of the next five years.
Enacting this bill would impose no other significant costs on
state, local, or tribal governments.
Off-Reservation gaming
The bill would amend section 20 of the Indian Gaming
Regulatory Act to further restrict the ability of tribes to
establish gaming operations on lands taken into trust after the
IGRA was enacted. That section generally prohibits gaming on
lands placed into trust after October 17, 1988. It includes a
number of exceptions to that rule, but this bill would further
narrow those exceptions. First, the bill would eliminate the
exception for a tribe that receives a special determination
from the Department of the Interior and approval of the state's
governor (referred to as two-part determinations) for all but
those tribes that had an application pending before April 15,
2006. Second, it would add new conditions to the exceptions for
newly created or restored tribes.
These changes would have limited impact on the ability of
tribes to open gaming operations. Eliminating two-part
determinations probably would affect few, if any, tribes in the
next few years because, according to government officials, most
tribes that had any plans to seek such a determination filed
applications before the April 15 deadline. Further, the
Department of the Interior has approved only three applications
for two-part determinations since IGRA was enacted. The new
conditions affecting newly created or restored tribes generally
reflect those already imposed administratively by the
Department of the Interior.
Additional oversight of tribal gaming
Several provisions in S. 2078 would increase the National
Indian Gaming Commission's role in regulating tribal gaming
operations and so would impose further mandates on tribes. The
bill would broaden existing requirements for NIGC review of
tribal contracts and would require additional background checks
of tribal gaming commissioners and contractors. It also would
clarify the Commission's authority to oversee tribal gaming
establishments that fall within Class III (generally, slot
machines and other casino games) and to establish minimum
standards for internal controls exerted by tribes over such
operations. The impact of these new mandates is very uncertain
and would depend to a great extent on the NIGC's implementing
regulations.
Some of the new requirements in this bill focus on
oversight of gaming-related contracts and contractors. The law
already requires that NIGC review contracts for managing tribal
gaming operations, but S. 2078 would broaden the existing
requirement to cover other types of gaming-related contracts
and would make these additional contractors subject to NIGC
background investigations. While these new requirements fall on
both the tribes and businesses as parties to the covered
contracts, the direct cost of these changes would fall
initially on the businesses that contract with tribes. The
direct costs incurred by tribes could include legal costs and
delays in implementing new contracts. The tribes could also
bear a substantial part of the costs initially incurred by
contractors, however, if those costs are passed through under
the terms of these contracts.
Other requirements would fall entirely on the tribes with
gaming operations. For example, the bill would require tribes
to conduct background investigations of tribal gaming
commissioners and key commission employees. CBO estimates that,
even if tribes conduct relatively extensive background checks,
the total cost of this mandate would not exceed $5 million per
year, and the costs could be much less. The bill also includes
explicit authority for NIGC to establish minimum standards for
tribes' internal controls. Such standards have already been
established by the NIGC under current law, but its authority to
do so is currently under litigation. This provision would
settle those legal challenges. While CBO cannot predict the
outcome of the current litigation, we would not expect the cost
of this provision to be significant in any case because most
tribes have substantially adopted the standards. Finally, the
bill would require all tribes with gang operations to pay fees
to the NIGC, and remove an existing exception for certain
tribes. This would not change the total amount of fees paid by
tribes but would slightly reallocate the burden of those fees.
Impact on the private sector: S. 2078 would impose a
private-sector mandate, as defined in UMRA, on certain
contractors in the Indian gaming industry by making them
subject to federal regulation of Class II and Class III gaming-
related contracts. Based on information from industry and
government sources, CBO estimates that the aggregate direct
costs associated with complying with the mandate would fall
below the annual threshold established by UMRA for private-
sector mandates ($128 million in 2006, adjusted annually for
inflation).
S. 2078 would clarify and broaden the National Indian
Gaming Commission's authority to regulate all Class II and
Class III gaming-related contracts. Currently, the Commission
regulates all management contracts for Class II and Class III
Indian gaming. The bill would expand the Commission's authority
to regulate additional types of Class II and Class III
contracts, including, but not be limited to: consulting
contracts; development contracts; financing contracts; and
participation contracts. By regulating the terms of such
contract, the bill would impose a mandate on certain private
contractors.
The bill would require new gaming-related contracts and any
changes in existing contracts to be approved by NIGC. Such
gaming-related contracts would have to meet certain minimum
standards outlined in the bill to be eligible for approval by
the Commission. In approving such contracts, NIGC would have to
determine if contractors or subcontractors are suitable to
engage in business with Indian tribes. In addition, in the case
of a change in a contract, the bill would require contractors
to provide a notice to the NIGC if there is any change in the
information they reported during a suitability determination.
The bill would exclude from the suitability determinations any
contractor that is either regulated, by the Securities and
Exchange Commission (SEC) or wholly or partially owned by an
entity regulated by the SEC.
The cost of the mandate would be the incremental
expenditures incurred in meeting the new requirements on
gaming-related contracts. The bill would require that gaming-
related contractors pay the costs of any investigation
activities carried out during the suitability determination.
According to government sources, such activities would include,
but may not be limited to, FBI background checks and
fingerprinting procedures. Currently, NIGC only requires
management officials and other key employees of gaming
enterprises of Class II and Class III Indian gaming to be
subject to background checks and fingerprinting. CBO estimates
that the incremental costs associated with the additional
background checks and fingerprinting for those entities would
be minimal.
Estimate prepared by: Federal Costs: Matthew Pickford.
Impact on State, Local, and Tribal Governments: Marjorie
Miller. Impact on the Private Sector: Craig Cammarata and Tyler
Kruzich.
Estimate approved by: Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis.
Regulatory and Paperwork Impact Statement
Paragraph 11(b) of rule XXVI of the Standing Rules of the
Senate requires that each report accompanying a bill evaluate
the regulatory and paperwork impact that would be incurred in
carrying out the bill.
S. 2078 would require additional parties seeking to do
business with Indian gaming operations to submit their gaming-
related contracts to the NIGC for approval, and requires the
parties to these contracts to undergo background
investigations. The bill would also require tribal gaming
commissioners and key commission employees to undergo
background checks. These reviews could impose paperwork
requirements on these parties to gaming-related contracts.
S. 2078 provides that gaming-related contractors are to pay
the cost of their background investigations. As for the cost to
NIGC of reviewing additional contracts, the Committee
anticipates that the NIGC will recover this through fees
assessed on all Class II and III tribal gaming operations.
Because of the fast turn-around times for reviews specified in
the substitute amendment adopted by the Committee, the
Committee does not expect the new regulatory requirements to
result in significant indirect costs, such as loss of contract
opportunities or increased costs of capital.
The Committee believes that the regulation of additional
parties seeking to do business in Indian gaming, and the
attendant paperwork burden, is necessary, consistent with IGRA,
to protect the integrity of Indian gaming operations and ensure
that tribes are the principal beneficiaries of them.
Executive Communications
The Committee has received the following communications
from the Executive Branch regarding S. 2078.
National Indian Gaming Commission,
Washington, DC, March 28, 2006.
Re Regulation of Indian Gaming.
Hon. John McCain, Chairman,
Hon. Byron Dorgan, Vice-Chairman,
Committee on Indian Affairs, U.S. Senate, Hart Office Building,
Washington, DC.
Dear Senators: As the Senate Indian Affairs Committee
prepares to mark up S. 2078 the NIGC observes that much of the
information in the public and some in the testimony before the
Committee does not portray a complete picture of Indian gaming.
This letter is an attempt to give facts and examples, some of
which has been previously provided to the Committee, that will
help create a more comprehensive view of the opportunities and
challenges facing Indian gaming.
IGRA, in effect, anticipated the wide range of regulatory
structures in the various Tribal-state compacts through the
establishment of the NIGC as an independent federal regulatory
authority for gaming on Indian lands. With respect to NIGC's
regulatory oversight responsibilities, IGRA authorized the
Commission to penalize violations of the Act, violations of the
Commission's own regulations, and violations of the Commission-
approved tribal gaming ordinances by the way of imposition of
civil fines and orders for closure of tribal gaming facilities.
IGRA mandates that Tribes may conduct Class III gaming only
in states where such activity is permissible under state law,
and where the tribes enter into compacts with states relating
to this activity, which compacts require approval of the
Secretary of the Interior. Compacts might include specific
regulatory structures and give regulatory responsibility to the
tribe, to the state, or to both in some combination of
responsibilities. Since the passage of IGRA, 232 tribes have
executed 249 Class III compacts with 22 states, and the
allocation of regulatory responsibility, if addressed at all,
is as diverse as the states and Tribes that have negotiated
them.
Typically, the regulatory role a particular state
undertakes in its compact was taken from and modeled on that
state's experience with the regulation of its own legalized
gaming at the time the compact was negotiated. Where such
states develop effective regulatory programs, the need for NIGC
oversight is greatly reduced. For example, in states where the
tribal-state compacts call for regular state oversight,
institute technical standards and testing protocols for gaming
machines and establish internal control requirements, the
NIGC's oversight role will be limited; such as in the case of
Arizona. Some states, however, have assumed a minimal
regulatory role, such as Michigan and North Dakota. In some
cases compacts have become little more than a revenue sharing
agreement between the state and the Tribe. Further, some
compacts establish ineffective remedies for major violations.
Consequently, under circumstances where the states do not have
a significant regulatory presence, the NIGC must undertake a
range of oversight activities.
The oversight responsibilities of the NIGC give it a unique
view from which to report the variety of challenges confronting
Indian gaming in terms of regulatory violations and enforcement
actions taken. It must be said that the primary responsibility
for meeting these challenges ought to be on the shoulders of
the Tribes. The NIGC encourages strong Tribal regulation and
applauds the resources that Indian gaming currently applies to
regulation and other oversight activities. As Indian gaming
continues to grow and the sophistication of operations expands
and as the levels of the revenues increase accordingly,
regulation must stay ahead of this growth if the integrity of
the industry is to be protected. It is in this context that the
following examples of the numbers and types of violations the
NIGC has uncovered are offered.
Minimum Internal Control Standards
The NIGC has compiled the following review of Minimum
Internal Control Standards (``MICS'') Compliance Audits--
January 2001 to February 2006. The number of tribal gaming
operations is taken from those reporting financial information
to NIGC.
Gaming Operations................................................. 367
Number of NIGC Audits............................................. 37
Total MICS Violations............................................. 2,355
Average MICS Violations........................................... 64
In the past year the NIGC has completed 11 MICS
audits with 559 violations.
Findings common to most compliance audits:
Lack of statistical game analysis;
Ineffective key control procedures;
Failure to secure gaming machine jackpot/fill system;
Failure to effectively investigate cash variances/
missing supporting documentation for the cage
accountability/failure to reconcile cage accountability
to general ledger on a monthly basis;
Inadequate segregation of duties and authorization of
players tracking system account adjustments;
Ineffective internal audit department audit programs,
testing procedures, report writing and/or follow-up;
Deficient surveillance coverage and recordings;
Noncompliance with Internal Revenue Service
Regulation 31 CFR Part 103;
Failure to exercise technical oversight or control
over the computerized gaming machine systems, including
the maintenance requirements for personnel access;
Failure to properly document receipt and withdrawal
transactions involving pari-mutuel patrons' funds and a
lack of a comprehensive audit procedure of all pari-
mutuel transactions;
Failure to adequately secure and account for
sensitive inventory items, including playing cards,
dice, bingo paper and keno/bingo balls; and
Failure to adopt appropriate overall information
technology controls specific to hardware and software
access to ensure gambling games and related functions
are adequately protected.
Although the NIGC identified the above violations, it is
impossible to accurately determine the financial losses the
tribes incurred because of not maintaining the minimum internal
controls required by the NIGC standards. These violations show
that certain tribes are not adequately protecting their gaming
assets.
Suitability of Key Employee and Primary Management Officials
Since the inception of the NIGC we have encountered 178
instances where Tribes licensed key employees or primary
management officials over NIGC objections.
Regulatory Violations
In the year the NIGC has identified the following
violations:
Fee Submissions................................................... 92
Audit Submissions................................................. 30
MICs Report Submissions........................................... 24
Background Violations............................................. 20
Managing Without an Approved Contract--Investigations Pending..... 10
Misuse of Gaming Revenues--Investigations Pending................. 6
Health and Safety Violations...................................... 16
Referrals of Possible Illegal Activity............................ 25
______
Total....................................................... 207
Breakdown in Tribal Regulation
The NIGC oversight regularly uncovers serious breakdowns in
regulation at Class II and Class III tribal gaming operations
throughout the country. This is true even where there is
apparent adequate tribal regulation and control is in place.
Examples of instances where tribal gaming
operational and regulatory efforts have been found deficient
include the following:
During the course of investigations and MICS
compliance audits, NIGC investigators and auditors
discovered that an extraordinary amount of money was
flowing through two off track betting (OTB) operations
on two reservations. The amount of money was so high in
comparison to the amount that could reasonably flow
through such OTB operations that our investigators
immediately suspected money laundering or similar
activities. These two operations were the first
referrals to the FBI's working group in which we
participate. The FBI investigations found they were
part of a wide spread network of such operations with
organized crime links and several federal criminal law
violations. Unfortunately, the tribes' gaming
management allowed them to gain access and operate as
part of their Class III tribal gaming operations, and
the tribes' gaming regulators completely failed to take
any action against these illegal OTB operations.
There are also examples where tribes continued to
operate, without modification or correction, a gaming
facility that had long been identified as a serious
fire hazard; permitted gaming activities to be
conducted by companies owned by individuals with known
criminal associations; distributed large amounts of
gaming revenues without requisite approved revenue
allocation plans or the financial controls necessary to
account for them; knowingly operated gaming machines
that were plainly illegal; and appointed gaming
commissioners and regulatory employees and licensed and
employed gaming employees whose criminal histories
indicated that they were unsuitable and serious risks
to the tribes' gaming enterprise. An accurate
assessment of Indian gaming regulation must also
reflect the unfortunate examples of tribes that are so
politically divided that they are unable to adequately
regulate their gaming activities, as well as instances
where tribal officials have personally benefited from
gaming revenues at the expense of the tribe itself. In
addition, there have been many instances where apparent
conflicts of interest have undermined the integrity and
effectiveness of tribal gaming regulation. In all of
these troubling situations it was necessary for the
NIGC to step in to address the problems.
The above examples illustrate that Indian gaming has many
regulatory challenges that without comprehensive well informed
oversight and enforcement the integrity of the industry would
be in jeopardy.
The NIGC has compiled a list of potential risks to Indian
gaming if strong oversight is not maintained:
Risk of not catching misuse of gaming revenues by
tribal officials;
Risk of not catching employee embezz1ement;
Risk of not catching manipulations and/or theft from
gaming machines;
Less direct ways to investigate allegations of
criminal activity or the presence of organized crime
influence;
Unable to determine whether third parties are
managing the gaming facility without an approved
contract;
Unable to determine whether imminent jeopardy exists
with regard to the safety of employees and patrons of
the gaming establishment;
Unable to determine whether individuals other than
the recognized tribal government are asserting
authority over the gaming operation;
Unable to determine whether outside investors have
unduly influenced tribal decision-making or made
improper payments to tribal officials;
Unable to perform operational audits, which track the
movement of money throughout the casino;
Risk that tribal surveillance and gaming commission
funding could decrease rapidly, as these are expensive
and are not seen as increasing the casino bottom line.
Potential Impact of CRIT Decision
Tribes argue that the CRIT decision should be read broadly.
This interpretation may impact on the ability of the NIGC to
enforce its regulations as follows:
------------------------------------------------------------------------
Activity Impact
------------------------------------------------------------------------
Bingo..................................... Unchanged.
Pull-Tabs................................. Unchanged.
Card Games................................ Unchanged.
Keno...................................... No enforcement.
Pari-Mutuel Wagering...................... No enforcement.
Table Games............................... No enforcement.
Gaming Machines........................... No enforcement.
Cage...................................... Scope limited--Bingo/Pull-
Tab/Card Game Inventory
Items.
Credit.................................... Scope limited--Bingo/Pull-
Tab/Card Game Inventory
Items.
Information Technology.................... Scope limited--Bingo/Pull-
Tab/Card Game Related
Software and Hardware.
Complimentary Services and Items.......... Scope limited--Bingo/Pull-
Tab/Card Transactions.
Drop and Count............................ Scope limited--Bingo/Pull-
Tab/Card Game Cash, Cash
Equivalents and Documents.
Surveillance.............................. Scope limited--Bingo/Pull-
Tab/Card Game Areas.
Internal Audit............................ Scope limited--Bingo/Pull-
Tab/Card Game Transactions.
------------------------------------------------------------------------
The above examples illustrate that the regulation of Indian
gaming is.. a complicated matter. At the Tribal level it can
often be impacted by internal politics that may lead to uneven
enforcement or at times little effect regulation regardless of
overall intention. It is nevertheless clear that Tribes have a
very strong interest in assuring that their operations are
adequately regulated.
Lack of Independent Tribal Regulations
Some gaming commissions are not sufficiently independent of
the tribal governments or the managers that operate the gaming
operation. In this connection the history of Nevada's
regulatory structure may be instructive. Effective gaming
regulatory authority in Nevada was a process that evolved over
a forty year period and is continuing to improve and respond to
change today. Only after creation of a separate gaming
regulatory authority did oversight of the industry have an
effective champion. Beginning in the late 70's, significant
progress was made into the identification and removal of
individuals and entities intent upon exploitation and
corruption. Although many factors contributed to corruptive
influences in Nevada, one aspect was key. At the time gaming
was legalized in Nevada, the state and local governments were
in a rather deprived financial position therefore the
governmental agencies charged with regulatory oversight were
also dependent, albeit desperate, for the potential revenues
this growing industry could provide. The Nevada experience
demonstrates a critical policy question when gaming regulations
are considered: that as the government charged with regulation
becomes increasingly dependent upon the profitability of the
industry being regulated; the effectiveness of the regulatory
effort may diminish.
Generally, in tribal gaming, the tribal council is the
ultimate governmental authority responsible for ensuring the
gaming operation generates the greatest return on investment
and that, in doing so, is effectively regulated. Such an
organizational structure has challenges because the motivations
lack congruity. Inevitably, from time to time, one objective
may be foregone in pursuit of the other and, many times it is
the oversight function. Although some tribes have recognized
the organizational weakness and have installed procedures to
counteract its effect, others have not and, as a result, the
effectiveness of their regulatory processes is significantly
diminished.
In conclusion, for the many reasons stated above and the
continued dramatic growth in Indian gaming (see Attachment #1),
it seems to be abundantly clear that Indian gaming needs broad
and effective oversight in order to continue growing and
benefiting Indian communities.
We appreciate your consideration of the above information
and hope you find it helpful as the Committee marks up S. 2078
preparing it for further consideration. We wish to thank you
for your considerable hard work and leadership on all of these
issues. We will remain available to you and your staffs
regarding Indian gaming.
Sincerely,
Philip N. Hogen,
Chairman.
Attachment #1
Overview of Indian gaming
Indian gaming has been the most effective economic
development tool ever brought to Indian country. It is
recognized that since the passage of the Indian Gaming
Regulatory Act in 1988 the diversity and dramatic growth of
Indian gaming is unprecedence. Indian gaming has grown from
revenues $5.4 billion in 1995 to today over $20 billion in
gross gaming revenues today.
Revenue generation, of course, is not the only objective or
benefit for tribes. In many instances, even small, rural tribal
gaming operations have brought employment opportunities to
tribal members where none existed before. For many, these
employment opportunities were the first long-term jobs they
ever held or had the prospect to hold.
This gaming is conducted on Indian lands throughout the
country by approximately 225 tribes. The diversity among these
operations is dramatic. With this diversity in mind, it is
instructive to examine how gaming revenue is distributed among
the 367 tribal gaming operations reporting financial
information to NIGC. The following chart gives the complete
picture.
----------------------------------------------------------------------------------------------------------------
Gross Percent of Median gross
Number of Percent of gaming total gross gaming
Gross gaming revenue ranges operations total revenues gaming revenues
operations (billion) revenues (million)
----------------------------------------------------------------------------------------------------------------
Over $100 million........................... 55 15.0 $13.47 69.5 $178.7
$25 million to $100......................... 93 25.3 $4.38 22.6 $43.5
$5 million to $25 million................... 103 28.1 $1.37 7.1 $1.32
Under $5 million............................ 116 31.6 0.17 0.9 $.98
-------------------------------------------------------------------
Total................................. 367 100.0 $19.41 100.0 ..............
----------------------------------------------------------------------------------------------------------------
As this demonstrates, a relatively small number of Tribes
have very large gaming revenues, while a large number of Tribes
have relatively small gaming revenues.
At the time of IGRA's passage, the primary Indian gaming
activity was bingo generally and high stakes bingo in
particular, it would not be surprising if those in Congress
that supported IGRA envisioned such Class II gaming to remain
the dominant activity that would be conducted under IGRA. As we
all know this has not been the case--over 80% of Indian gaming
is now Class III.
Changes in Existing Law
In compliance with subsection 12 of rule XXVI of the
Standing Rules of the Senate, changes in existing law made by
the bill S. 2078, as ordered reported, are shown as follows
(existing law proposed to be omitted is enclosed in black
brackets, new matter is printed in italic, existing law in
which no change is proposed is shown in roman):
Public Law 100-497
AN ACT To regulate gaming on Indian lands
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
* * * * * * *
[DEFINITIONS
[Sec. 4. For purposes of this Act--]
SEC. 4. DEFINITIONS.
In this Act:
* * * * * * *
[(6)] (3) The term ``class I gaming'' means social
games solely for prizes of minimal value or traditional
forms of Indian gaming engaged in by individuals as a
part of, or in connection with, tribal ceremonies or
celebrations.
[(7)] (4) (A) The term ``class II gaming'' means--
* * * * * * *
(E) Notwithstanding any other provision of
this paragraph, the term ``class II gaming''
includes, during the 1-year period beginning on
the date of enactment of this subparagraph
[enacted Dec. 17, 1991], any gaming described
in subparagraph (B)(ii) that was legally
operated on Indian lands in the State of
Wisconsin on or before May 1, 1988, if the
Indian tribe having jurisdiction over the lands
on which such gaming was operated requested the
State, by no later than November 16, 1988, to
negotiate a Tribal-State compact under section
11(d)(3)[ of the Indian Gaming Regulatory Act
(25 U.S.C. 2710(d)(3))].
* * * * * * *
[(8)] (5) The term ``class III gaming'' means all
forms of gaming that are not class I gaming or class II
gaming.
[(3)] (6) The term ``Commission'' means the National
Indian Gaming Commission established pursuant to
section 5 of this Act.
(7) Consulting contract.--The term `consulting
contract' means any contract or subcontract between an
Indian tribe and a gaming-related contractor, or
between a gaming-related contractor and a
subcontractor, that provides for advising or consulting
with a person that exercises management over all or a
significant part of a gaming operation, subject to such
categorical exclusions as the Commission may establish,
by regulation.
(8) Development contract.--The term `development
contract' means any contract or subcontract between an
Indian tribe and a gaming-related contractor, or
between a gaming-related contractor and a
subcontractor, that provides for the development or
construction of a facility to be used for an Indian
gaming activity, subject to such categorical exclusions
as the Commission may establish, by regulation.
(9) Financing contract.--
(A) In general.--The term `financing
contract' means any contract or subcontract
between an Indian tribe and a gaming-related
contractor, or between a gaming-related
contractor and a subcontractor--
(i) that is not a management
contract, a consulting contract, a
development contract, or a
participation contract;
(ii) pursuant to which a gaming-
related contractor or subcontractor
provides services or property of any
kind, or financing of any nature, to be
used for an Indian gaming activity; and
(iii) for compensation (including
interest and fees), denominated in any
manner--
(I) of more than $250,000
during the term of the contract
or subcontract (as periodically
adjusted for inflation in
accordance with rules adopted
by the Commission); and
(II) that is provided by--
(aa) loan;
(bb) lease; or
(cc) deferred
payments.
(B) Exclusions.--The term `financing
contract' does not include--
(i) a contract or agreement between
an Indian tribe and--
(I) a federally-chartered or
State-chartered bank;
(II) another Indian tribe;
(III) another Indian tribe,
or a State, pursuant to a
Tribal-State compact; or
(IV) an entity that is--
(aa) regulated by the
Securities and Exchange
Commission; or
(bb) wholly owned,
directly or indirectly,
by an entity that is
regulated by the
Securities and Exchange
Commission;
(ii) a contract or agreement that is
subject to the Securities Exchange Act
of 1934 (15 U.S.C. 78a et seq.); or
(iii) any other agreement or contract
that the Commission, by regulation,
determines should be categorically
excluded from consideration as a
financing contract.
(10) Gaming-related contract.--The term `gaming-
related contract' means any management contract,
consulting contract, development contract, financing
contract, participation contract, or other agreement
determined by the Commission pursuant to a rulemaking
under section 7 to be subject to the requirements of
section 12, and any collateral agreement related to any
of the foregoing.
(11) Gaming-related contractor.--The term `gaming-
related contractor' means an entity of person,
including an individual who is an officer, or who
serves on the board of directors, of an entity, or a
stockholder that directly or indirectly holds at least
5 percent of the issued and outstanding stock of an
entity, that enters into a gaming-related contract
with--
(A) an Indian tribe; or
(B) an agent of an Indian tribe.
[(4)] (12) The term ``Indian lands'' means--
* * * * * * *
[(5)] (13) The term ``Indian tribe'' means any Indian
tribe, band, nation, or other organized group or
community of Indians which--
* * * * * * *
(14) Management contract.--
(A) In general.--The term `management
contract' means any contract or subcontract
between an Indian tribe and a gaming-related
contractor, or between a gaming-related
contractor and a subcontractor, that provides
for the management of all or a part of a gaming
operation, subject to such categorical
exclusions as the Commission may establish, by
regulation.
(B) Exclusions.--The term `management
contract' does not include a personal
employment contract under which compensation is
not based on a percentage of the revenues or
profit increases of an Indian gaming activity
or a prospective Indian gaming activity.
[(9)] (15) The term ``net revenues'' means gross
revenues of an Indian gaming activity less amounts paid
out as, or paid for, prizes and total operating
expenses, excluding management fees.
(16) Participation contract.--The term `participation
contract' means any contract or subcontract between an
Indian tribe and a gaming-related contractor, or
between a gaming-related contractor and a
subcontractor, under which compensation to the gaming-
related contractor or subcontractor is based, in whole
or in part, on a percentage of the revenues or profit
increases of an Indian gaming activity or a prospective
Indian gaming activity, subject to such categorical
exclusions as the Commission may establish,by
regulation.
[(10)] (17) The term ``Secretary'' means the
Secretary of the Interior.
* * * * * * *
NATIONAL INDIAN GAMING COMMISSION
Sec. 5. * * *
[(c) Vacancies occurring on the Commission shall be filled
in the same manner as the original appointment. A member may
serve after the expiration of his term of office until his
successor has been appointed, unless the member has been
removed for cause under subsection (b)(6).]
(c) Vacancies.--
(1) In general.--Except as provided in paragraph (2),
a vacancy on the Commission shall be filled in the same
manner as the original appointment.
(2) Vice chairman.--The Vice Chairman shall act as
Chairman in the absence or disability of the Chairman.
(3) Expiration of term.--Unless a member of the
Commission is removed for cause under subsection
(b)(6), the member may--
(A) serve after the expiration of the term of
office of the member until a successor is
appointed; or
(B) be reappointed to serve on the
Commission.
* * * * * * *
(e) The Commission shall select, by majority vote, one of
the members of the Commission to serve as Vice Chairman. The
Vice Chairman shall serve as Chairman during meetings of the
Commission in the absence or disability of the Chairman.
* * * * * * *
POWERS OF THE CHAIRMAN
Sec. 6. (a) The Chairman, on behalf of the Commission,
shall have power, subject to an appeal to the Commission, to--
* * * * * * *
(3) approve tribal ordinances or resolutions
regulating class II gaming and class III gaming as
provided in section 11; [and
(4) approve management contracts for class II gaming
and class III gaming as provided in sections 11(d)(9)
and 12]
(4) approve gaming-related contracts for class II
gaming and class III gaming under section 12; and
(5) conduct a background investigation and make a
determination with respect to the suitability of a
gaming-related contractor, as the Chairman determines
to be appropriate.
* * * * * * *
(c) Delegation of Authority.--
(1) In general.--The Chairman may delegate any
authority under this section to any member of the
Commission, as the Chairman determines to be
appropriate.
(2) Requirement.--In carrying out an activity
pursuant to a delegation under paragraph (1), a member
of the Commission shall be subject to, and act in
accordance with--
(A) the general policies formally adopted by
the Commission; and
(B) the regulatory decisions, findings, and
determinations of the Commission pursuant to
Federal law.
POWERS OF THE COMMISSION
Sec. 7. * * *
(b) The Commission--
(1) shall monitor class II gaming and class III
gaming conducted on Indian lands on a continuing basis;
(2) shall inspect and examine all premises located on
Indian lands on which class II gaming or class III
gaming is conducted;
(3) shall conduct or cause to be conducted such
background investigations as may be necessary;
(4) may demand access to and inspect, examine,
photocopy, and audit all papers, books, and records
respecting gross revenues of class II gaming and class
III gaming conducted on Indian lands and any other
matters necessary to carry out the duties of the
Commission under this Act;
(5) may use the United States mail in the same manner
and under the same conditions as any department or
agency of the United States;
(6) may procure supplies, services, and property by
contract in accordance with applicable Federal laws and
regulations;
(7) may enter into contracts with Federal, State,
tribal and private entities for activities necessary to
the discharge of the duties of the Commission and, to
the extent feasible, contract the enforcement of the
Commission's regulations with the Indian tribes;
(8) may hold such hearings, sit and act at such times
and places, take such testimony, and receive such
evidence as the Commission deems appropriate;
(9) may administer oaths or affirmations to witnesses
appearing before the Commission; and
[(10) shall promulgate such regulations and
guidelines as it deems appropriate to implement the
provisions of this Act.]
(10) shall promulgate such regulations and guidelines
as the Commission determines to be appropriate to
implement this Act, including--
(A) regulations addressing minimum internal
control standards for class II gaming and class
III gaming activities; and
(B) regulations determining categories of
contracts for goods and services directly
relating to tribal gaming activities that shall
be--
(i) considered to be gaming-related
contracts; and
(ii) subject to the requirements of
section 12.
* * * * * * *
COMMISSION STAFFING
Sec. 8.(a) The Chairman shall appoint a General Counsel to
the Commission who shall be paid at the annual rate of [basic
pay payable for GS-18 of the General Schedule under section
5332 of title 5, United States Code] pay payable for level IV
of the Executive Schedule under chapter 11 of title 2, United
States Code, as adjusted by section 5318 of title 5, United
States Code.
(b) The Chairman shall appoint and supervise other staff of
the Commission without regard to the provisions of title 5,
United States Code, governing appointments in the competitive
service. Such staff shall be paid without regard to the
provisions of chapter 51 and subchapter III of chapter 53 of
such title relating to classification and General Schedule pay
rates, except that no individual so appointed may receive pay
in excess of the annual rate of [basic pay payable for GS-17 of
the General Schedule under section 5332 of that title] pay
payable for level IV of the Executive Schedule under chapter 11
of title 2, United States Code, as adjusted by section 5318 of
title 5, United States Code.
(c) The Chairman may procure temporary and intermittent
services under section 3109(b) of title 5, United States Code,
but at rates for individuals not to exceed the daily equivalent
of the maximum annual rate of [basic pay payable for GS-18 of
the General Schedule] pay payable for level IV of the Executive
Schedule under chapter 11 of title 2, United States Code, as
adjusted by section 5318 of title 5, United States Code.
* * * * * * *
TRIBAL GAMING ORDINANCES
Sec. 11. * * *
(b)(1) An Indian tribe may engage in, or license and
regulate, class II gaming on Indian lands within such tribe's
jurisdiction, if--
(A) such Indian gaming is located within a State that
permits such gaming for any purpose by any person,
organization or entity (and such gaming is not
otherwise specifically prohibited on Indian lands by
Federal law)[, and] ; and
(B) the governing body of the Indian tribe adopts an
ordinance or resolution which is approved by the
Chairman.
A separate license issued by the Indian tribe shall be required
for each place, facility, or location on Indianlands at which
class II gaming is conducted.
(2) The Chairman shall approve any tribal ordinance or
resolution concerning the conduct, or regulation of class II
gaming on the Indian lands within the tribe's jurisdiction if
such ordinance or resolution provides that-- * * *
(F) there is an adequate system which--
[(i) ensures that background investigations
are conducted on the primary management
officials and key employees of the gaming
enterprise and that oversight of such officials
and their management is conducted on an ongoing
basis; and]
(i) ensures that background investigations
and ongoing oversight activities are conducted
with respect to--
(I) tribal gaming commissioners and
key tribal gaming commission employees,
as determined by the Chairman;
(II) primary management officials and
other key employees of the gaming
enterprise, as determined by the
Chairman; and
(III) persons that provide goods or
services directly relating to the
tribal gaming activity; and
(ii) includes--
(I) tribal licenses for [primary
management officials and key employees
of the gaming enterprise with] the
individuals and entities described in
subclauses (II) and (III) of clause
(i), including prompt notification to
the Commission of the issuance of such
licenses; * * *
(4) * * *
(B)(i) The provisions of subparagraph (A) of this
paragraph and the provisions of subparagraphs (A) and
(B) of paragraph (2) shall not bar the continued
operation of an individually owned class II gaming
operation that was operating on September 1, 1986, if--
(I) such gaming operation is licensed
and regulated by an Indian tribe
pursuant to an ordinance reviewed and
approved by the Commission in
accordance with section 13 [of the
Act,];
(II) income to the Indian tribe from
such gaming is used only for the
purposes described in paragraph (2)(B)
[of this subsection,];
(III) not less than 60 percent of the
net revenues is income to the Indian
tribe[, and]; and
(IV) the owner of such gaming
operation pays an appropriate
assessment to the [National Indian
Gaming] Commission under section
18(a)(1) for regulation of such gaming.
* * *
(d)(1) Class III gaming activities shall be lawful on
Indian lands only if such activities are--
(A) authorized by an ordinance or resolution that--
(i) is adopted by the governing body of the
Indian tribe having jurisdiction over such
[lands,] lands;
(ii) meets the requirements of subsection (b)
[, and]; and
(iii) is approved by the Chairman[,];
(B) located in a State that permits such gaming for
any purpose by any person, organization, or entity[,
and]; and
(C) conducted in conformance with a Tribal-State
compact entered into by the Indian tribe and the State
under paragraph (3) that is in effect.
(2)(A) If any Indian tribe proposes to engage in, or to
authorize any person or entity to engage in, a class III gaming
activity on Indian lands of the Indian tribe, the governing
body of the Indian tribe shall adopt and submit to the Chairman
an ordinance or resolution that meets the requirements of
subsection (b).
(B) The Chairman shall approve any ordinance or resolution
described in subparagraph (A), unless the Chairman specifically
determines that--
(i) the ordinance or resolution was not adopted in
compliance with the governing documents of the Indian
tribe[, or]; or
(ii) the tribal governing body was significantly and
unduly influenced in the adoption of such ordinance or
resolution by any person identified in section
12(e)(1)(D).
Upon the approval of such an ordinance or resolution, the
Chairman shall publish in the Federal Register such ordinance
or resolution and the order of approval.
* * * * * * *
(D) * * *
(iii) Notwithstanding any other provision of this
subsection--
(I) any person or entity operating a class
III gaming activity pursuant to this paragraph
on the date on which an ordinance or resolution
described in clause (i) that revokes
authorization for such class III gaming
activity is published in the Federal Register
may, during the 1-year period beginning on the
date on which such revocation ordinance or
resolution is published under clause (ii),
continue to operate such activity in
conformance with the Tribal-State compact
entered into under paragraph (3) that is in
effect[, and]; and
(II) any civil action that arises before, and
any crime that is committed before, the close
of such 1-year period shall not be affected by
such revocation ordinance or resolution.
* * * * * * *
(7) * * *
(B) * * *
(ii) In any action described in subparagraph
(A)(i), upon the introduction of evidence by an
Indian tribe that--
(I) a Tribal-State compact has not
been entered into under paragraph (3)[,
and]; and
(II) the State did not respond to the
request of the Indian tribe to
negotiate such a compact or did not
respond to such request in good faith,
the burden of proof shall be upon the State to
prove that the State has negotiated with the
Indian tribe in good faith to conclude a
Tribal-State compact governing the conduct of
gaming activities.
(iii) If, in any action described in
subparagraph (A)(i), the court finds that the
State has failed to negotiate in good faith
with the Indian tribe to conclude a Tribal-
State compact governing the conduct of gaming
activities, the court shall order the State and
the Indian Tribe to conclude such a compact
within a 60-day period. In determining in such
an action whether a State has negotiated in
good faith, the court--
(I) may take into account the public
interest, public safety, criminality,
financial integrity, and adverse
economic impacts on existing gaming
activities[, and]; and
(II) shall consider any demand by the
State for direct taxation of the Indian
tribe or of any Indian lands as
evidence that the State has not
negotiated in good faith.
* * * * * * *
(vii) If the State does not consent during
the 60-day period described in clause (vi) to a
proposed compact submitted by a mediator under
clause (v), the mediator shall notify the
Secretary and the Secretary shall prescribe, in
consultation with the Indian tribe,
procedures--
(I) which are consistent with the
proposed compact selected by the
mediator under clause (iv), the
provisions of this Act, and the
relevant provisions of the laws of the
[State, and] State; and
(II) under which class III gaming may
be conducted on the Indian lands over
which the Indian tribe has
jurisdiction.
(8)(A) The Secretary is authorized to approve any Tribal-
State compact entered into between an Indian tribe and a State
governing gaming on Indian lands of such Indian tribe.
(B) The Secretary may disapprove a compact described in
subparagraph (A) only if such compact violates--
(i) any provision of this Act[,];
(ii) any other provision of Federal law that does not
relate to jurisdiction over gaming on Indian lands[,
or]; or
(iii) the trust obligations of the United States to
Indians.
* * * * * * *
[(9) An Indian tribe may enter into a management contract
for the operation of a class III gaming activity if such
contract has been submitted to, and approved by, the Chairman.
The Chairman's review and approval of such contract shall be
governed by the provisions of subsections (b), (c), (d), (f),
(g), and (h) of section 12.]
* * * * * * *
(f) Provision of Information to Chairman.--Immediately
after approving a plan (including any amendment, revision, or
rescission of any part of a plan) under subsection (b)(3), the
Secretary shall provide to the Chairman--
(1) a notice of the approval; and
(2) the plan, and any information used by the
Secretary in approving the plan.
[MANAGEMENT CONTRACTS
Sec. 12(a)(1). Subject to the approval of the Chairman, an
Indian tribe may enter into a management contract for the
operation and management of a class II gaming activity that the
Indian tribe may engage in under section 11(b)(1), but, before
approving such contract, the Chairman shall require and obtain
the following information:
(A) the name, address, and other additional pertinent
background information on each person or entity
(including individuals comprising such entity) having a
direct financial interest in, or management
responsibility for, such contract, and, in the case of
a corporation, those individuals who serve on the board
of directors of such corporation and each of its
stockholders who hold (directly or indirectly) 10
percent or more of its issued and outstanding stock;
(B) a description of any previous experience that
each person listed pursuant to subparagraph (A) has had
with other gaming contracts with Indian tribes or with
the gaming industry generally, including specifically
the name and address of any licensing or regulatory
agency with which such person has had a contract
relating to gaming; and
(C) a complete financial statement of each person
listed pursuant to subparagraph (A).
(2) Any person listed pursuant to paragraph (1)(A) shall be
required to respond to such written or oral questions that the
Chairman may propound in accordance with his responsibilities
under this section.
(3) For purposes of this Act, any reference to the
management contract described in paragraph (1) shall be
considered to include all collateral agreements to such
contract that relate to the gaming activity.
(b) The Chairman may approve any management contract
entered into pursuant to this section only if he determines
that it provides at least--
(1) for adequate accounting procedures that are
maintained, and for verifiable financial reports that
are prepared, by or for the tribal governing body on a
monthly basis;
(2) for access to the daily operations of the gaming
to appropriate tribal officials who shall also have a
right to verify the daily gross revenues and income
made from any such tribal gaming activity;
(3) for a minimum guaranteed payment to the Indian
tribe that has preference over the retirement of
development and construction costs;
(4) for an agreed ceiling for the repayment of
development and construction costs;
(5) for a contract term not to exceed five years,
except that, upon the request of an Indian tribe, the
Chairman may authorize a contract term that exceeds
five years but does not exceed seven years if the
Chairman is satisfied that the capital investment
required, and the income projections, for the
particular gaming activity require the additional time;
and
(6) for grounds and mechanisms for terminating such
contract, but actual contract termination shall not
require the approval of the Commission.
(c)(1) The Chairman may approve a management contract
providing for a fee based upon a percentage of the net revenues
of a tribal gaming activity if the Chairman determines that
such percentage fee is reasonable in light of surrounding
circumstances. Except as otherwise provided in this subsection,
such fee shall not exceed 30 percent of the net revenues.
(2) Upon the request of an Indian tribe, the Chairman may
approve a management contract providing for a fee based upon a
percentage of the net revenues of a tribal gaming activity that
exceeds 30 percent but not 40 percent of the net revenues if
the Chairman is satisfied that the capital investment required,
and income projections, for such tribal gaming activity require
the additional fee requested by the Indian tribe.
(d) By no later than the date that is 180 days after the
date on which a management contract is submitted to the
Chairman for approval, the Chairman shall approve or disapprove
such contract on its merits. The Chairman may extend the 180-
day period by not more than 90 days if the Chairman notifies
the Indian tribe in writing of the reason for the extension.
The Indian tribe may bring an action in a United States
district court to compel action by the Chairman if a contract
has not been approved or disapproved within the period required
by this subsection.
(e) The Chairman shall not approve any contract if the
Chairman determines that--
(1) any person listed pursuant to subsection
(a)(1)(A) of this section--
(A) is an elected member of the governing
body of the Indian tribe which is the party to
the management contract;
(B) has been or subsequently is convicted of
any felony or gaming offense;
(C) has knowingly and willfully provided
materially important false statements or
information to the Commission or the Indian
tribe pursuant to this Act or has refused to
respond to questions propounded pursuant to
subsection (a)(2); or
(D) has been determined to be a person whose
prior activities, criminal record if any, or
reputation, habits, and associations pose a
threat to the public interest or to the
effective regulation and control of gaming, or
create or enhance the dangers of unsuitable,
unfair, or illegal practices, methods, and
activities in the conduct of gaming or the
carrying on of the business and financial
arrangements incidental thereto;
(2) the management contractor has, or has attempted
to, unduly interfere or influence for its gain or
advantage any decision or process of tribal government
relating to the gaming activity;
(3) the management contractor has deliberately or
substantially failed to comply with the terms of the
management contract or the tribal gaming ordinance or
resolution adopted and approved pursuant to this Act;
or
(4) a trustee, exercising the skill and diligence
that a trustee is commonly held to, would not approve
the contract.
(f) The Chairman, after notice and hearing, shall have the
authority to require appropriate contract modifications or may
void any contract if he subsequently determines that any of the
provisions of this section have been violated.
(g) No management contract for the operation and management
of a gaming activity regulated by this Act shall transfer or,
in any other manner, convey any interest in land or other real
property, unless specific statutory authority exists and unless
clearly specified in writing in said contract.
(h) The authority of the Secretary under section 2103 of
the Revised Statutes (25 U.S.C. 81), relating to management
contracts regulated pursuant to this Act, is hereby transferred
to the Commission.
(i) The Commission shall require a potential contractor to
pay a fee to cover the cost of the investigation necessary to
reach a determination required in subsection (e) of this
section.]
SEC. 12. GAMING-RELATED CONTRACTS.
(a) Approval by Chairman.--
(1) Gaming-related contracts.--To be enforceable and
valid, a gaming-related contract must be approved by
the Chairman under subsection (b).
(2) Gaming-related contractors.--Each gaming-related
contractor shall be subject to a suitability
determination by the Chairman under subsection (c).
(3) Failure to approve.--For any gaming-related
contract that is not approved by the Chairman under
subsection (b)--
(A) the gaming-related contract shall be void
ab initio; and
(B) any party to the gaming-related contract
shallbe subject to such civil penalties as the
Chairman determines to be appropriate under section 14.
(b) Contract Review.--
(1) Minimum contract requirements.--A gaming-related
contract under this Act shall provide, at a minimum,
provisions relating to--
(A) accounting and reporting procedures,
including, as appropriate, provisions relating
to verifiable financial reports;
(B) the access required to ensure proper
performance of the gaming-related contract,
including access to--
(i) the daily operations of the
gaming activity;
(ii) real property relating to the
gaming activity;
(iii) equipment associated with the
gaming activity; and
(iv) any other tangible or intangible
property used to carry out the gaming
activity;
(C) assurances of performance by each party
to the gaming-related contract, as the Chairman
determines to be necessary;
(D) the reasons for, and method of,
termination of the gaming-related contract; and
(E) such other provisions as the Chairman
determines to be necessary to ensure that the
Indian tribe will receive the primary benefit
as the sole proprietor of the gaming activity.
(2) Term.--
(A) In general.--Except as provided in
subparagraph (B), the term of a gaming-related
contract shall not exceed 5 years.
(B) Exceptions.--
(i) Extraordinary circumstances.--
Notwithstanding subparagraph (A), a
gaming-related contract may have a term
of not more than 7 years if the
Chairman determines the term is
appropriate, taking into consideration
any extraordinary circumstances
relating to the gaming-related
contract.
(ii) Financing contracts.--The terms
described in subparagraph (A) and
clause (i) shall not apply to a
financing contract.
(3) Fees.--
(A) In general.--Except as provided in
subparagraph (B), the fee provided pursuant to
a gaming-related contract shall not exceed an
amount equal to 30 percent of the net revenues
of the gaming operation that is the subject of
the gaming-related contract.
(B) Exceptions.--
(i) Extraordinary circumstances.--The
fee provided pursuant to a gaming-
related contract may be in an amount
equal to not more than 40 percent of
net revenues of the gaming operation
that is the subject of the gaming-
related contract if the Chairman
determines that such a fee is
appropriate, taking into consideration
any extraordinary circumstances
relating to the gaming-related
contract.
(ii) Financing contracts.--The
limitations described in subparagraph
(A) and clause (i) shall not apply to a
financing contract.
(4) Requirements for disapproval.--The Chairman shall
disapprove a gaming-related contract under this
subsection if the Chairman determines that--
(A) the gaming-related contract fails to meet
any requirement under paragraph (1), (2), or
(3);
(B) a gaming-related contractor that is a
party to the gaming-related contract is
unsuitable under subsection (c);
(C) a gaming-related contractor or
beneficiary of the gaming-related contract--
(i) unduly interfered with or
influenced a decision or process of
tribal government relating to the
gaming activity; or
(ii) deliberately or substantially
failed to comply with a tribal gaming
ordinance or resolution;
(D) the Indian tribe will not receive the
primary benefit as the sole proprietor of the
gaming activity;
(E) a trustee would not approve the gaming-
related contract because the compensation or
fees do not bear a reasonable relationship to
the cost of the goods or benefit of the
services provided; or
(F) a person or an Indian tribe would violate
a provision of this Act--
(i) on approval of the gaming-related
contract; or
(ii) in carrying out the gaming-
related contract.
(5) Timelines.--
(A) Submission of gaming-related contracts.--
To be approved under this subsection, a gaming-
related contract shall be submitted to the
Chairman by the appropriate Indian tribe by not
later than 30 days after the date on which the
gaming-related contract is executed.
(B) Determination of chairman.--
(i) In general.--Subject to clause
(ii), the Chairman shall approve or
disapprove a management contract, a
development contract, a participation
contract, or other gaming-related
contract designated by the Chairman
under section 7 by not later than 90
days after the date on which such a
contract is submitted under
subparagraph (A).
(ii) Financing contracts and
consulting contracts.--The Chairman
shall approve or disapprove a financing
contract or a consulting contract by
not later than 30 days after the date
on which such a contract is submitted
under subparagraph (A).
(iii) Extensions.--The Chairman may
extend a deadline under clause (i) or
(ii) on approval of the Indian tribe
that is party to the applicable
contract.
(6) Additional factors for consideration.--In
determining whether to approve a gaming-related
contract under this subsection, the Chairman may take
into consideration any information relating to the
terms, parties, and beneficiaries of--
(A) the gaming-related contract; and
(B) any other agreement relating to the
Indian gaming activity, as the Chairman
determines to be appropriate.
(7) Modifications.--Notwithstanding an approval of a
gaming-related contract under this subsection, or a
determination of suitability of a gaming-related
contractor under subsection (c), if the Chairman
determines, based on information that was not disclosed
at the time of the approval or determination, that a
gaming-related contract violates this Act, or that a
determination of suitability should not have been made,
the Chairman, after providing notice and an opportunity
for a hearing, may--
(A) require any modification of the gaming-
related contract that the Chairman determines
to be necessary to comply with this Act;
(B) suspend performance under the gaming-
related contract;
(C) revoke a determination of suitability
under subsection (c); or
(D) void the gaming-related contract.
(c) Suitability Determinations.--
(1) In general.--Subject to paragraph (4), a gaming-
related contract shall not be approved under subsection
(b) unless, on receipt of an application for a
determination of suitability, the Chairman determines
under this subsection that each applicable gaming-
related contractor is suitable.
(2) Standard.--The Chairman, by regulation, shall
establish a suitability standard under which a gaming-
related contractor shall not be considered to be
suitable under this subsection if, as determined by the
Chairman--
(A) the gaming-related contractor--
(i) is an elected member of the
governing body of an Indian tribe that
is a party to an applicable gaming-
related contract;
(ii) at any time, was convicted of
any felony or gaming offense; or
(iii) (I) has knowingly and willfully
provided materially important false
statements or information to the
Commission or the Indian tribe under
this Act; or
(II) has refused to provide
information requested by the Commission
under this Act;
(B) the prior activities, criminal record (if
any), reputation, habits, or associations of
the gaming-related contractor--
(i) pose a threat to--
(I) the public interest; or
(II) the effective regulation
of gaming; or
(ii) create or enhance the risk of
unsuitable, unfair, or illegal
practices, methods, or activities with
respect to--
(I) a gaming activity; or
(II) the operation of a
gaming facility.
(3) Agreements with indian tribes.--In carrying out
this subsection, the Chairman may enter into a contract
with any Indian tribe--
(A) to conduct a background investigation of
a gaming-related contractor;
(B) to assist in determining the suitability
of a gaming-related contractor; or
(C) to facilitate tribal licensing of a
person that provides goods or services directly
relating to the tribal gaming activity or a
gaming-related contractor in accordance with
the standards established under paragraph (2).
(4) Alternative determinations and exclusions.--The
Commission, by regulation, may establish, as the
Commission determines to be appropriate--
(A) alternative methods of determining
suitability; and
(B) categorical exclusions for persons or
entities that are subject to licensing or
suitability determinations by--
(i) a Federal, State, or tribal
agency; or
(ii) a professional association.
(5) Registry.--The Chairman shall establish and
maintain a registry of--
(A) each suitability determination made under
this subsection; and
(B) each suitability determination of an
Indian tribe provided under section 11.
(6) Responsibility of gaming-related contractor.--A
gaming-related contractor shall--
(A) pay the costs of any investigation
activity of the Chairman in carrying out this
subsection; and
(B) provide to the Chairman a notice of any
change in information provided during an
investigation on discovery of the change.
(d) Conveyance of Real Property.--No gaming-related
contract under this Act shall transfer or otherwise convey any
interest in land or other real property unless the transfer or
conveyance--
(1) is authorized under law; and
(2) is specifically described in the gaming-related
contract.
(e) Contract Authority.--The authority of the Secretary
under section 2103 of the Revised Statutes (25 U.S.C. 81)
relating to contracts under this Act is transferred to the
Commission.
(f) No Effect on Tribal Authority.--This section does not
expand, limit, or otherwise affect the authority of any Indian
tribe or any party to a Tribe-State compact to investigate,
license, or impose a fee on a gaming-related contractor.
(g) Appeals.--The Chairman, by regulation, shall provide an
opportunity for an appeal, conducted through a hearing before
the Commission, of any determination of the Chairman under this
section by not later than 30 days after the date on which the
determination is made.
(h) Emergency Waivers.--The Chairman may promulgate
regulations providing for a waiver of any requirement under
this section because of--
(1) an emergency; or
(2) an imminent threat to the public health or
safety.
* * * * * * *
[Civil Penalties
Sec. 14.(a)(1) Subject to such regulations as may be
prescribed by the Commission, the Chairman shall have authority
to levy and collect appropriate civil fines, not to exceed
$25,000 per violation, against the tribal operator of an Indian
game or a management contractor engaged in gaming for any
violation of any provision of this Act, any regulation
prescribed by the Commission pursuant to this Act, or tribal
regulations, ordinances, or resolutions approved under section
11 or 13.
(2) The Commission shall, by regulation, provide an
opportunity for an appeal and hearing before the Commission on
fines levied and collected by the Chairman.
(3) Whenever the Commission has reason to believe that the
tribal operator of an Indian game or a management contractor is
engaged in activities regulated by this Act, by regulations
prescribed under this Act, or by tribal regulations,
ordinances, or resolutions, approved under section 11 or 13,
that may result in the imposition of a fine under subsection
(a)(1), the permanent closure of such game, or the modification
or termination of any management contract, the Commission shall
provide such tribal operator or management contractor with a
written complaint stating the acts or omissions which form the
basis for such belief and the action or choice of action being
considered by the Commission. The allegation shall be set forth
in common and concise language and must specify the statutory
or regulatory provisions alleged to have been violated, but may
not consist merely of allegations stated in statutory or
regulatory language.]
SEC. 14. CIVIL PENALTIES.
(a) Penalties.--
(1) Violation of act.--
(A) In general.--Except as provided in
subparagraph (B), an Indian tribe, individual,
or entity that violates any provision of this
Act (including any regulation of the Commission
and any Indian tribal regulation, ordinance, or
resolution approved under section 11 or 13) may
be subject to, as the Chairman determines to be
appropriate--
(i) an appropriate civil fine, in an
amount not to exceed $25,000 per
violation per day; or
(ii) an order of the Chairman for an
accounting and disgorgement, including
interest.
(B) Application to indian tribes.--
Subparagraph (A)(ii) shall not apply to any
Indian tribe.
(2) Appeals.--The Chairman shall provide, by
regulation, an opportunity to appeal a determination
relating to a violation under paragraph (1).
(3) Written complaints.--
(A) In general.--If the Commission has reason
to believe that an Indian tribe or a party to a
gaming-related contract may be subject to a
penalty under paragraph (1), the final closure
of an Indian gaming activity, or a modification
or termination order relating to the gaming-
related contract, the Chairman shall provide to
the Indian tribe or party a written complaint,
including--
(i) a description of any act or
omission that is the basis of the
belief of the Commission; and
(ii) a description of any action
being considered by the Commission
relating to the act or omission.
(B) Requirements.--A written complaint under
subparagraph (A)--
(i) shall be written in common and
concise language;
(ii) shall identify any statutory or
regulatory provision relating to an
alleged violation by the Indian tribe
or party; and
(iii) shall not be written only in
statutory or regulatory language.
[(b)(1) The Chairman] (b) Temporary Closures._
(1) In general.--The Chairman shall have power to
order temporary closure of an [Indian game] Indian
gaming activity, or any part of such a gaming activity,
for substantial violation of the provisions of this
Act, of regulations prescribed by the Commission
pursuant to this Act, or of tribal regulations,
ordinances, or resolutions approved under section 11 or
13 [of this Act].
[(2) Not later than thirty] (2) Hearings._
(A) In general.--Not later than 30 days after
the issuance by the Chairman of an order of
temporary closure, the Indian tribe or
[management contractor] party to a gaming-
related contract involved shall have a right to
a hearing before the Commission to determine
whether such order should be made [permanent]
final or dissolved. [Not later than sixty]
(B) Determination of commission.--Not later
than 60 days following such hearing, the
Commission shall, by a vote of not less than
two of its members, decide whether to order a
[permanent] final closure of the gaming
operation.
[(c) A decision] (c) Appeal of final determinations.--A
determination of the Commission to give final approval of afine
levied by the Chairman or to order a permanent closure pursuant to this
section shall be appealable to the appropriate Federal district court
pursuant to chapter 7 of title 5, United States Code.
[(d) Nothing] (d) Effect on Regulatory Authority of Indian
Tribes.--Nothing in this Act precludes an Indian tribe from
exercising regulatory authority provided under tribal law over
a gaming establishment within the Indian tribe's jurisdiction
if such regulation is not inconsistent with this Act or with
any rules or regulations adopted by the Commission.
* * * * * * *
[GAMING ON LANDS ACQUIRED AFTER ENACTMENT OF THIS ACT
Sec. 20. * * *
(b)(1) Subsection (a) will not apply when--
[(A) the Secretary, after consultation] (A)(i) before
April 15, 2006 an Indian tribe has submitted to the
Secretary a written request to have land deemed
eligible for gaming under this subparagraph; and
(ii) the Secretary, after consultation with
the Indian tribe and appropriate State and
local officials, including officials of other
nearby Indian tribes, determines that a gaming
establishment on newly acquired lands would be
in the best interest of the Indian tribe and
its members, and would not be detrimental to
the surrounding community, but only if the
Governor of the State in which the gaming
activity is to be conducted concurs in the
Secretary's determination; or
(B) lands are taken into trust as part of--
(i) a settlement of a land claim[,] under
Federal statutory law, if the land is within a
State in which is located--
(I) the reservation of such Indian
tribe; or
(II) the last recognized reservation
of such Indian tribe;
[(ii) the initial reservation of an Indian
tribe acknowledged by the Secretary under the
Federal acknowledgment process, or]
(ii) the initial reservation of an Indian
tribe acknowledged by the Secretary pursuant to
the Federal acknowledgment process, if--
(I) the Indian tribe has an
historical and geographical nexus to
the land, as determined by the
Secretary; and
(II) after consultation with the
Indian tribe and appropriate local and
tribal officials, and after providing
for public notice and an opportunity to
comment and a public hearing, the
Secretary determines that a gaming
establishment on the land--
(aa) would be in the best
interests of the Indian tribe
and members of the tribe; and
(bb) would not create
significant, unmitigated
impacts on the surrounding
community; or
[(iii) the restoration of lands for an Indian
tribe that is restored to Federal recognition.]
(iii) the restoration of land for an Indian
tribe that is restored to Federal recognition,
if--
(I) the Indian tribe has an
historical and geographical nexus to
the land, as determined by the
Secretary;
(II) a temporal connection exists
between the acquisition of the land and
the date of recognition of the tribe,
as determined by the Secretary; and
(III) after consultation with the
Indian tribe and appropriate local and
tribal officials, and after providing
for public notice and an opportunity to
comment and a public hearing, the
Secretary determines that a gaming
establishment on the land--
(aa) would be in the best
interests of the Indian tribe
and members of the tribe; and
(bb) would not create
significant, unmitigated
impacts on the surrounding
community.
* * * * * * *
(4) Effect of subsection.--Nothing in this subsection
affects the validity of any determination regarding the
eligibility of land for gaming made by the Secretary or
Chairman before the date of enactment of this paragraph.
* * * * * * *
SEC. 25. CONSULTATION POLICY.
In promulgating rules and regulations pursuant to this Act,
the Commission shall establish and maintain a policy of
consultation with Indian tribes in accordance with the Federal
trust responsibility and the government-to-government
relationship that exists between Indian tribes and the Federal
Government.
* * * * * * *
Public Law 105-83
Making appropriations for the Department of the Interior and related
agencies for the fiscal year ending September 30, 1998, and for other
purposes
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
* * * * * * *
Sec. 123. Assessment of Fees. (a) Commission Funding.--
Section 18(a) of the Indian Gaming Regulatory Act (25 U.S.C.
2717(a)) is amended--
(1) in paragraph (1), by striking ``class II gaming
activity'' and inserting ``gaming operation that
conducts a class II or class III gaming activity''; and
(2) in paragraph (2)--
(A) in subparagraph (A)(i), by striking ``no
less than 0.5 percent nor'' and inserting
``no''; and
(B) in subparagraph (B), by striking
``$1,500,000'' and inserting ``$8,000,000''[;
and].
[(C) nothing in subsection (a) of this
section shall apply to self-regulated tribes
such as the Mississippi Band of Choctaw.]
* * * * * * *