[Senate Hearing 111-776]
[From the U.S. Government Publishing Office]
S. Hrg. 111-776
INDIAN GAMING
=======================================================================
HEARING
before the
COMMITTEE ON INDIAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
JULY 29, 2010
__________
Printed for the use of the Committee on Indian Affairs
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COMMITTEE ON INDIAN AFFAIRS
BYRON L. DORGAN, North Dakota, Chairman
JOHN BARRASSO, Wyoming, Vice Chairman
DANIEL K. INOUYE, Hawaii JOHN McCAIN, Arizona
KENT CONRAD, North Dakota LISA MURKOWSKI, Alaska
DANIEL K. AKAKA, Hawaii TOM COBURN, M.D., Oklahoma
TIM JOHNSON, South Dakota MIKE CRAPO, Idaho
MARIA CANTWELL, Washington MIKE JOHANNS, Nebraska
JON TESTER, Montana
TOM UDALL, New Mexico
AL FRANKEN, Minnesota
Allison C. Binney, Majority Staff Director and Chief Counsel
David A. Mullon Jr., Minority Staff Director and Chief Counsel
C O N T E N T S
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Page
Hearing held on July 29, 2010.................................... 1
Statement of Senator Dorgan...................................... 1
Statement of Senator Franken..................................... 3
Statement of Senator McCain...................................... 31
Statement of Senator Udall....................................... 27
Witnesses
Brnovich, Mark, Director, Arizona Department of Gaming........... 21
Prepared statement........................................... 22
Hogen, Philip N., Former Chairman, National Indian Gaming
Commission..................................................... 10
Prepared statement........................................... 11
Stevens, Jr., Ernest L., Chairman, National Indian Gaming
Association; accompanied by: Mark Van Norman, Executive
Director, and Jason Giles, Deputy General Counsel.............. 15
Prepared statement........................................... 17
Stevens, Hon. Tracie, Chairwoman, National Indian Gaming
Commission; accompanied by Lawrence S. Roberts, General Counsel 4
Prepared statement........................................... 6
Appendix
Bullock, Hon. Carlos, Tribal Council Chairman, Alabama-Coushatta
Tribe of Texas, prepared statement............................. 37
Smith, Hon. Stanley ``Buck'', Chairman, Confederated Tribes of
the Warm Springs Reservation of Oregon, prepared statement..... 41
INDIAN GAMING
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THURSDAY, JULY 29, 2010
U.S. Senate,
Committee on Indian Affairs,
Washington, DC.
The Committee met, pursuant to notice, at 9:30 a.m. in room
628, Dirksen Senate Office Building, Hon. Byron L. Dorgan,
Chairman of the Committee, presiding.
OPENING STATEMENT OF HON. BYRON L. DORGAN,
U.S. SENATOR FROM NORTH DAKOTA
The Chairman. The hearing will come to order.
This is a hearing of the Indian Affairs Committee of the
U.S. Senate. Today we are having an oversight hearing on the
subject of Indian gaming.
As all of you know, we have been working very hard in this
Congress, in this Committee, on the subject of Indian health
care, and the passage of the Indian Health Care Improvement Act
in this Congress this year is a very, very significant
achievement. I am proud to say as well that this afternoon, I
believe at 4:45 today, the President will sign the Tribal Law
and Order Act, which has been a priority of this Committee, and
which originated in this Committee.
We have made substantial progress in this Congress,
unprecedented progress, really, on some very big issues during
this Congress. The one subject we have not held an oversight
hearing on is the subject of Indian gaming. And it is a very
important subject.
It is the case that Indian gaming, since the Cabazon
decision some long while ago now, has had a very substantial
impact on economic development for many tribes across the
Country. In some cases, it has been an unbelievable boon when
tribes have existed near very large population centers and have
opened some very large and very successful Indian gaming
facilities.
In other cases, tribal lands far away from population
centers have also opened gaming facilities with less success,
but still providing some amount of funding for other needs and
other priorities for the tribes.
Today we are going to hear from the Chair of the National
Indian Gaming Commission. Although Chair Stevens has been in
office only a very short time, we want to hear her priorities
and hear a discussion about what she intends to do and what she
believes the strengths and the weaknesses might be as they
currently exist. We are also going to hear from Phil Hogen, the
former Chair of the NIGC. Mr. Hogen, it is nice to see you
today. We will hear from Ernie Stevens, the Chair of the
National Indian Gaming Association, and Mark Brnovich, the
Director of the Arizona Department of Gaming. We appreciate all
four of you being here.
There are about 230 tribes that operate 419 gaming
facilities in 28 States in this Country. I mentioned that it
has been, in my judgment, a very substantial contribution to
the tribes that have successful gaming operations to provide a
stream of income for housing, for education, to address the
issue of poverty, for health issues. So I understand that this
has been very significant.
In my home State, we do have gaming facilities on
reservation land. In most cases, they are not close to
population centers, but have been quite successful. It has
provided about 1,500 jobs on the Indian reservations in North
Dakota, which is not an insubstantial benefit.
Over the past decade, gaming revenues from Indian gaming
facilities have gone from $9.8 billion to $26.5 billion. There
was a very slight decrease in the last year because of the
economic downturn. But the decrease was about $200 million out
of $26.5 billion.
It seems to me that in economic times like this, it is
essential to make certain that tribal gaming is well-regulated.
You can see the growth of gaming revenue to the various Indian
tribes across the Country on these charts. If it is going to
remain a strong economic tool for Indian tribes, then it has to
be subject to effective regulation.
The tribes, as primary beneficiaries of Indian gaming, have
the greatest interest in making sure their operations are well-
run. I fully understand that.
It is also important, I believe, and I have always
believed, that there needs to be multi-levels of regulation in
the gaming industry. In the case of Indian gaming, the multiple
levels are needed because of the importance of the industry to
the tribes, the tribal members and the local communities. We
regulate in a way that provides, number one, a requirement of
regulation by the tribe itself; and then number two, either a
very substantial State regulation or Federal regulation, so
that you have dual regulatory capabilities.
The Indian Gaming Regulatory Act was written to make sure
that multiple levels of regulation exist in Indian gaming. And
as I said, the Tribal Gaming Commission at the local tribe will
always be the first level and the most important level. But
there needs to be a second layer. All of us understand that we
have had things happen with respect to court decisions. The
Colorado River decision has had a significant impact on
limiting the effectiveness of the National Indian Gaming
Commission with respect to Class III gaming. So we will discuss
all of that today.
I want to thank the witnesses for traveling here today and
for being willing to testify. Let me call on my colleague,
Senator Franken, for an opening statement.
STATEMENT OF HON. AL FRANKEN,
U.S. SENATOR FROM MINNESOTA
Senator Franken. Thank you, Chairman Dorgan, for holding
this hearing. I would like to thank all the witnesses for being
here today. Ms. Stevens, it is good to see you again. I would
like to congratulate you on your confirmation. I am looking
forward to seeing how you manage the important work of the
NIGC.
Gaming plays a significant role in Minnesota, employing
over 40,000 people across our State. Most of these jobs employ
people living in rural areas where economic development is
often the most challenging. All 11 of Minnesota's tribes have
gaming as a source of revenue. We have major casinos operated
by the Shakopee, Mille Lacs and Prairie Island Tribes. Again,
those, as the Chairman noted, are closest to dense population
centers.
So my State has a deep interest in the work of NIGC and
making sure that it is executing its regulatory duties in an
effective, efficient manner.
When we held Ms. Stevens' confirmation hearing back in May,
we talked some about the role of the NIGC and where Ms. Stevens
envisions the agency moving during her tenure. There are
important questions to be asked about the NIGC's jurisdiction
over different classes of gaming, its efficacy in addressing
the needs of tribes and its coordination with the Department of
the Interior, the States and tribal governments. I am looking
forward to delving deeper today into these questions and
hearing the various perspectives that we have represented on
our panel. I want to thank you all for traveling here.
Mr. Chairman, thank you again for holding this hearing.
The Chairman. Senator Franken, thank you very much.
We will hear first today from the Honorable Tracie Stevens,
Chairman of the National Indian Gaming Commission. She is
accompanied by Mr. Lawrence Roberts, who is the General Counsel
of the National Indian Gaming Commission here in Washington,
D.C.
Ms. Stevens, normally I would have a separate panel and
then the other panelists following you. With your permission, I
would ask that all of the panelists join us at the table. The
reason for that is, we have a vote in about an hour and ten
minutes or so on the Floor. I wanted to try to, with some
expeditious capability, get through this hearing and make sure
everybody has the opportunity to have full testimony.
So you are brand new, if that is a way of describing it.
You have been on the case for a very short period of time. But
you have had very substantial experience in these areas. So we
are anxious to hear your testimony, your analysis of where we
are at this point, what you see ahead, what your priorities are
and what you see the Commission needing to do. Then we will
hear from the other three witnesses, and then I will ask
questions and have inquiry for all of the panelists.
Ms. Stevens, why don't you proceed. Your entire statement
will be made a part of the permanent record, and we will ask
all witnesses to summarize.
STATEMENT OF HON. TRACIE STEVENS, CHAIRWOMAN,
NATIONAL INDIAN GAMING COMMISSION; ACCOMPANIED BY LAWRENCE S.
ROBERTS, GENERAL COUNSEL
Ms. Stevens. Thank you, Chairman Dorgan and members of the
Committee, for inviting me to testify today. It is an honor to
appear before you for the first time in my capacity as the
Chairwoman of the National Indian Gaming Commission.
One month ago today, I was officially sworn into this
position. I want to thank the Committee for its expeditious
action on my nomination.
Over the past three to four weeks, I have worked closely
with Vice Chairman Steffani Cochran, Associate Commissioner Dan
Little and Commission staff to begin identifying priorities,
needs and opportunities for improvement. My first priority has
been to fill much-needed positions. Last week, I appointed
Larry Roberts, of the Oneida Tribe of Wisconsin, as the new
General Counsel. And he is here with me today. I am also in the
process of appointing a chief of staff and filling other
vacancies.
In addition to this internal work, I have also participated
in government-to-government consultations with tribes, most
recently in the Pacific Northwest. As a matter of fact,
Commissioners Cochran and Little are unable to join us today
because they are currently conducting consultations with tribes
in California. These consultations are the beginning of
fulfilling a commitment I made to this Committee and to Indian
Country to strengthen government to government relations with
tribes, through meaningful and collaborative consultation.
The Indian Gaming Regulatory Act makes clear that the
tribes, States and Federal Government each have defined and
distinct regulatory roles to fulfill. As I stated at my
confirmation hearing, it is one of my priorities to build a
strong collaborative regulatory framework and relationship
between all three regulatory bodies.
The Federal role in implementing IGRA is shared between the
NIGC and the Department of the Interior. Thus, the relationship
between these Federal agencies is very important to all of
Indian Country. It is my view that the communication and
cooperation is imperative at all levels to promote the twin
purposes of IGRA: to protect Indian gaming through consistent
and thoughtful regulation and to fulfill IGRA's goals of tribal
self-governance and economic development.
Currently, Indian gaming is being conducted in 28 States by
233 of the 564 federally-recognized tribes. Tribes have used
gaming revenue both to generate jobs and to provide fundamental
services to their communities, such as health care, housing,
basic infrastructure, and education, to name a few. As the
primary day to day regulators on the ground, 24 hours a day, 7
days a week, tribes have a vested interest in safeguarding an
industry that has greatly contributed to the invaluable
improvements to their communities. It is a testament to tribal
leadership and to the work of their dedicated employees that
Indian gaming has remained protected and stable.
In 2009, as was illustrated previously, tribal facilities
generated $26.5 billion in gross gaming revenue and $26.7
billion in 2008. With continued collaboration, NIGC will work
with tribes to ensure the continued protection and success of
the industry through diligent, professional oversight and
enforcement.
As I explained during my confirmation process, my goals for
the Commission include working collaboratively with tribes to
identify areas of improvement. I am a strong supporter of this
Administration's commitment to Indian Country in terms of
nation building, honoring tribal sovereignty and self-
determination, and engaging in meaningful consultation with
tribes.
The Commission is focused on developing a more workable and
fulfilling government to government consultation process, in
line with President Obama's November 5th, 2009 memorandum on
tribal consultation. It is through meaningful government-to-
government consultation that NIGC will be able to make well-
informed, fully-considered decisions concerning regulations and
policies.
The Commission is also committed to renewing old
relationships and building new ones. Given that all three
commissioners are new to the NIGC, there is a fresh opportunity
to work in collaboration with tribes and other regulatory
bodies to oversee and protect Indian gaming. As part of my
initial evaluation process, I plan to examine the regulatory
successes in States like my own home State of Washington to
identify best practices, determine the possibility of
replicating positive aspects of their regulatory frameworks or
perhaps fashion new approaches that may reach the same positive
result.
We will also review current regulations, examine their
effectiveness and discuss with tribes their experiences in an
effort to identify areas of improvement that would support
NIGC's oversight responsibility. Of course, successful
regulation depends upon a properly trained work force. And the
Commissioners and I view training and technical assistance as a
valuable component of NIGC's mission.
As such, we are examining ways to more effectively provide
information and training. We are asking questions such as: Are
we meeting the training needs of tribes? Does our program
correlate with audit findings and compliance issues? Are there
tribes or regions that have specific needs? A good, well-
targeted technical assistance and training program can preempt
the need for additional regulations or enforcement actions, can
reduce compliance issues and can enhance operational
performance and integrity.
Finally, we will complete a top-down review of the internal
workings of the NIGC. As you know, NIGC is funded by fees paid
by tribes engaged in Indian gaming. Being a good steward of
these tribal fees is a top priority of mine. I want to make
certain that the NIGC complies with every applicable law,
regulation, rule and executive order, so as to give this
Committee and tribes the confidence that NIGC is as concerned
with how it runs its own operations as we are about how the
tribes run theirs.
While I have only been on the job for a very short time, I
am more committed than ever to working closely with this
Committee and Indian Country to ensure the integrity of Indian
gaming. Thank you again, Chairman Dorgan and members of the
Committee, for your time and attention today. And I am happy to
answer any questions you may have.
[The prepared statement of Ms. Stevens follows:]
Prepared Statement of Hon. Tracie Stevens, Chairwoman, National Indian
Gaming Commission
Thank you Chairman Dorgan, Vice Chairman Barrasso, and members of
the Committee for inviting me to testify today. It is an honor to
appear before you for the first time in my capacity as Chairwoman of
the National Indian Gaming Commission (NIGC or Commission). One month
ago today on June 29, 2010, I was officially sworn into this position.
I want to thank the Committee for its expeditious action on my
nomination.
Over the past four weeks, I have worked closely with Vice-
Chairwoman Steffani Cochran, Associate Commissioner Dan Little, and
Commission staff to begin assessing and evaluating the agency to
identify priorities, needs, and opportunities for improvement. My first
priority has been to fill much needed key positions within the agency.
Last week, I appointed Larry Roberts of the Oneida Tribe of Wisconsin
as the new general counsel. I am also in the process of appointing a
new chief of staff and filling other vacancies. In addition to the
internal work, in the few short weeks on the job, I have also
participated in government-to-government consultations with many
tribes, most recently in the Pacific Northwest. As a matter of fact,
Vice-Chairwoman Cochran and Associate Commissioner Little are unable to
join us today because they are conducting consultations with tribes in
California. The Commission has scheduled additional consultations this
summer and more are anticipated in the coming year. These consultations
are the beginning of fulfilling a commitment I made to this Committee
and to Indian country to strengthen government-to-government relations
with tribes through meaningful and collaborative consultation.
The National Indian Gaming Commission--Powers, Duties, and
Responsibilities
The Indian Gaming Regulatory Act (IGRA) makes clear that the
tribes, states, and the federal government (through NIGC and DOI) each
have defined and distinct regulatory roles to fulfill. As I stated at
my confirmation hearing, it is one of my priorities to build a strong
collaborative regulatory framework and relationship between all three
regulatory bodies.
In terms of the NIGC, the powers, duties, and oversight
responsibilities of the Chairwoman and Commission are focused and
specific. I would like to take a few moments to walk through some of
the primary provisions of IGRA that frame the Commission's role. I will
also briefly discuss the relationship between the NIGC and the
Department of the Interior (DOI) in three key areas.
Section 2702 states the policy and purpose of IGRA. Among those is
``to declare that the establishment of independent Federal regulatory
authority for gaming on Indian lands, the establishment of Federal
standards for gaming on Indian lands, and the establishment of a
National Indian Gaming Commission are necessary to meet congressional
concerns regarding gaming and to protect such gaming as a means of
generating tribal revenue.''
Section 2703 defines Chairman as ``the Chairman of the National
Indian Gaming Commission'' and Commission as ``the National Indian
Gaming Commission established pursuant to section 2704 of this title.''
Section 2704 of IGRA establishes the Commission, stating in part,
``There is established within the Department of the Interior a
Commission to be known as the National Indian Gaming Commission.''
The Commission is composed of three full-time members.
The President, with the advice and consent of the Senate,
appoints the Chairman while the Secretary of the Interior
appoints the two associate commissioners.
IGRA provides that ``not more than two members of the
Commission shall be of the same political party'' and ``at
least two members of the Commission shall be enrolled members
of any Indian tribe.''
The Chairman and the associate commissioners serve three-
year terms.
Section 2705 of IGRA enumerates the powers of the Chairman, which
are subject to appeal to the full Commission. The Chairman has the
power to:
``issue orders of temporary closure of gaming activities as
provided in section 2713(b) of this title'';
``levy and collect civil fines as provided in section
2713(a) of this title'';
``approve tribal ordinances or resolutions regulating class
II gaming and class III gaming as provided in section 2710 of
this title'';
``approve management contracts for class II gaming and class
III gaming as provided in sections 2710(d)(9) and 2711 of this
title''; and
exercise ``such other powers as may be delegated by the
Commission.''
Section 2706 lists the powers of the Commission. The Chairman is
also a voting member of the Commission. Some of the Commission's powers
are not subject to delegation:
``upon the recommendation of the Chairman, to approve the
annual budget of the Commission as provided in section 2717 of
this title'';
``to adopt regulations for the assessment and collection of
civil fines as provided in section 2713(a) of this title'';
``by an affirmative vote of not less than 2 members, to
establish the rate of fees as provided in section 2717 of this
title'';
``by an affirmative vote of not less than 2 members, to
authorize the Chairman to issue subpoenas as provided in
section 2715 of this title''; and
``by an affirmative vote of not less than 2 members and
after a full hearing, to make permanent a temporary order of
the Chairman closing a gaming activity as provided in section
2713(b)(2) of this title.''
The Commission's other powers and duties under Section 2706 are
subject to delegation to the Chair. Those powers and duties include:
monitoring ``class II gaming conducted on Indian lands on a
continuing basis'';
inspecting and examining ``all premises located on Indian
lands on which class II gaming is conducted'';
conducting ``or cause to be conducted such background
investigations as may be necessary'';
``demand[ing] access to and inspect, examine, photocopy, and
audit all papers, books, and records respecting gross revenues
of class II gaming conducted on Indian lands and any other
matters necessary to carry out the duties of the Commission
under the chapter''; and
``promulgating such regulations and guidelines as it deems
appropriate to implement the provisions of this chapter.''
The federal role in implementing IGRA is shared between the NIGC
and the DOI. As a necessity, for a few years directly following the
passage of IGRA and before the Commission began to function, the DOI
regulated gaming under IGRA. This changed with the appointment of the
first Commission in the early 1990s, when the NIGC fully assumed its
share of powers, duties, and responsibilities.
The IGRA reserves three key areas to the DOI, which maintains the
sole authority to:
take land into trust;
review and approve Class III gaming compacts; and
review and approve Revenue Allocation Plans.
The relationship between the NIGC and the DOI is very important to
all of Indian country. It is my view that communication and cooperation
is imperative at all levels to promote the twin purposes of IGRA: to
protect Indian gaming through consistent and thoughtful regulation and
to fulfill IGRA's goals of tribal self-governance and economic
development.
It is evident that the role of the NIGC and the Chairwoman is
complex and embodies important oversight responsibilities. I view my
job as Chairwoman to lead the NIGC as we fulfill our duties, to live up
to our responsibilities, and to exercise our powers with integrity and
diligence. I must also provide leadership and a voice within Indian
gaming that is meaningful and has substance as the industry continues
to provide vital resources for Indian people.
The State of the Industry
Currently, Indian gaming is being conducted in 28 states by 233 of
the 564, federally recognized tribes. Tribes have used gaming revenue
both to generate jobs and to provide fundamental services to their
communities, such as health care, housing, basic infrastructure and
education, to name a few. While tribal gaming generates modest to
considerable revenues for individual tribes, tribal gaming facilities
in some regions simply provide jobs in areas otherwise suffering from
high unemployment.
As the primary day-to-day regulators on the ground 24 hours a day,
7 days a week, tribal governments and their regulatory bodies have a
vested interest in safeguarding an industry that has greatly
contributed to invaluable improvements to their communities. It is a
testament to the leadership of tribal governments and the work of their
dedicated employees that the Indian gaming industry has remained
protected and stable. In 2009, tribal facilities generated $26.5
billion in gross gaming revenue as compared to $26.7 billion in 2008.
With continued collaboration, the NIGC will work with tribal
governments and their employees to ensure the continued protection and
success of the industry through diligent, professional oversight and
enforcement. Accordingly, while collaborative results are desirable, I
commit to upholding the statutory authority and responsibilities of my
position to oversee the regulation of Indian gaming, and where
appropriate, take enforcement action.
Vision for the Agency
A fundamental policy of IGRA is ``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,'' to ensure the regulatory and statutory compliance of all
tribal gaming facilities, and to safeguard tribal gaming operations
from organized crime and corrupting influences. As I explained during
my confirmation process, my goals for the Commission include working
collaboratively with tribes to identify areas of improvement in
carrying out this policy. Some of these goals include examining ways to
improve the consultation process and the manner in which the Commission
provides technical assistance. Another component includes taking a
fresh look at the current regulations and whether there exists a need
for changes that may be appropriate to the industry today. We are also
focused on ensuring strong working relationships with tribal
governments to further facilitate statutory and regulatory compliance.
Finally, our work includes focusing on the internal operations of the
Commission to ensure that the agency is in compliance with all relevant
laws, regulations, rules, and executive orders such that our work is
appropriately transparent.
My goals are to work collaboratively with Tribes to identify areas
of improvement for the agency. I have identified the following
priorities:
1. Consultation and Building Relationships
I am a strong supporter of this Administration's commitment to
Indian country in terms of nation building, honoring tribal sovereignty
and self-determination, and engaging in meaningful consultation with
tribes. The Commission is focused on developing a more workable and
fulfilling government-to-government consultation process in line with
President Obama's November 5, 2009 Memorandum on Tribal Consultation,
which directs federal agencies to comply with Executive Order 13175,
``Consultation and Coordination with Tribal Governments.''
The NIGC will be greatly benefited by complying with this Executive
Order and is beginning a renewed outreach to tribes based on this
Administration's commitments. The NIGC will renew its government-to-
government relationship with tribes and will work together with tribes
to define and achieve the regulatory and policy goals of the agency. It
is through meaningful government-to-government consultation that the
NIGC will be able to make well informed, fully considered decisions
concerning regulations and policies.
The Commission is also committed to renewing old relationships and
building new ones. Given that all three Commissioners are new to the
NIGC, there is an opportunity to work in collaboration with tribes and
other regulatory bodies to oversee and protect Indian gaming. One
regulatory agency alone cannot do this. It must be a collective effort.
In addition to working with tribes, we also will work with other
regulatory bodies to promote the integrity of Indian gaming. As part of
my initial evaluation process, I plan to examine the regulatory
successes in states like my own home state of Washington to identify
best practices, determine the possibility of replicating positive
aspects of their regulatory frameworks, or perhaps fashion new
approaches that may reach the same positive result. By doing this, I
hope to renew these relationships in order to strengthen both the
agency and the tribes' ability to protect this viable and successful
economic development tool that has made a difference in so many lives
of Indian people. Rebuilding relationships will also greatly aid in
meeting another of my priorities, a review of NIGC's regulatory
activity.
2. Review of Past Regulations and Assess Regulatory Needs
It is my view that in previous years the NIGC could have benefitted
from additional consultation with tribes in the promulgation of
regulations. This would have enhanced tribal relationships and shifted
the focus to practical problem solving through such mechanisms as
technical assistance. Over the coming months, we will review current
regulations, examine their effectiveness, and discuss with tribes their
experiences in an effort to identify areas of improvement and any
needed changes.
Currently, we are holding regional consultations on outstanding
policies, specifically the NIGC NEPA manual, records retention policy,
and consultation processes. Before moving forward with any new
regulatory initiatives, we will consult with tribes to examine the need
for new regulations and identify areas of greatest priority that would
support NIGC's oversight responsibility for safeguarding and protecting
the industry.
3. Technical Assistance
Of course, successful regulation depends upon a properly trained
workforce, and the Commissioners and I view training and technical
assistance as a valuable component of the NIGC's mission. Further, the
Commission is statutorily required to provide technical assistance to
tribes. As such, we are examining ways to more effectively provide
information and training. I believe that an emphasis on training and
technical assistance will continue to provide a foundation that will
help to maintain the integrity and success of Indian gaming.
We are reviewing the NIGC's current technical assistance and
training program by asking questions such as:
Are we meeting the training needs of tribes?
Does our program correlate with audit findings and
compliance issues?
Are there tribes or regions that have specific needs?
Our review could indicate additional opportunities and approaches
for training. Rather than take the exceptions and make rules, the goal
is to provide assistance to exceptions in order to bring them into
compliance. A good, well-targeted, technical assistance and training
program can preempt the need for additional regulations or for
enforcement actions, can reduce compliance issues, and can enhance
operational performance and integrity.
4. Ensuring Agency Compliance
This goal will require a top-down review of the internal workings
of NIGC. As you know, the NIGC is funded by fees paid by the tribes
engaged in Indian gaming. Being a good steward of the fees paid by the
tribes is a top priority of mine. I want to make certain that the NIGC
complies with every applicable law, regulation, rule and executive
order so as to give this Committee and the tribes confidence that the
NIGC is as concerned with how it runs its own operations as we are
about how the tribes run their operations. As such, the Commission
intends to undertake a comprehensive review of its budget and spending
priorities. A guiding principle of our review and budgeting decisions
will be that the NIGC has a responsibility to use tribal resources
wisely. As such, our agency expenditures need to be both fiscally
responsible and transparent. We will strive, consistent with applicable
law, to be transparent with regard to the expenditures of tribal fees
for the accomplishment of the NIGC's statutory responsibilities. The
Commission is working to ensure that the agency is operating in a
manner that uses these tribal resources most efficiently and
effectively.
IGRA requires that NIGC comply with the Government Performance
Results Act. I will initially review past budgets as well as review the
five-year strategic plan (2009-2014). This review will be an agency-
wide endeavor that will require the development of an action plan with
appropriate timelines. We will consult with tribes as we move forward
in this review.
Conclusion
While I have been on the job for only a very short time, I am more
committed than ever to working closely with this Committee and Indian
country to ensure the integrity of Indian gaming. Thank you again,
Chairman Dorgan, Vice Chairman Barrasso and members of the Committee
for your time and attention today. I am happy to answer any questions
that you may have for me.
The Chairman. Chairwoman Stevens, thank you very much for
your testimony. We appreciate that.
Next we will hear from Mr. Phil Hogen. Mr. Philip Hogen was
previously the Chairman of the National Indian Gaming
Commission. He is now of counsel with Jacobson, Buffalo,
Magnuson, Anderson & Hogen, in St. Paul, Minnesota. Mr. Hogen,
you may proceed.
STATEMENT OF PHILIP N. HOGEN, FORMER CHAIRMAN, NATIONAL INDIAN
GAMING COMMISSION
Mr. Hogen. Good morning, Mr. Chairman. I am Phil Hogen,
Oglala Sioux from South Dakota. And I need to clarify at the
outset I am here on my own. That is, I don't represent my law
firm, I don't represent any tribes. I am here on my own nickel,
drove in, like they say out in our country, Mr. Chairman, this
cowboy came a long way to ride in this rodeo.
I am very privileged to be here with the new Chair of the
National Indian Gaming Commission. I wish Chair Stevens and the
other new commissioners the very best in leading the NIGC. They
have very important work to do. They have a good, strong,
honorable, talented staff there. If they can show strong
leadership there and work with that team, I am confident that
things will continue to go in a very good direction.
In my written testimony I made nine points that are kind of
all over the map, and they are not necessarily in any priority.
But I do want to mention those areas where I think some action
could be taken, either administratively or legislatively to
make Indian gaming stronger, safer; a better economic
development tool.
One of the problems we had with respect to doing our role
in the background investigation process for those folks that
work in and serve Indian gaming is that we couldn't send
vendors, folks that sell gaming supplies and so forth, to
tribes, their fingerprints through the FBI fingerprint process.
Now, the Indian Law and Order Act may address that. But this
would be a very useful tool if tribes could background those
folks as thoroughly as they background those that get the
regular licenses for gaming.
The NIGC, of course, has a statutory role under IGRA to
review and approve management contracts when tribes enter into
an arrangement with an outside developer to run the gaming.
There are other arrangements that don't measure up to a
management contract, but nevertheless critically affect the way
the relationship between the gaming operation and somebody they
are doing business with works. And NIGC doesn't have the
jurisdiction to look at those.
Under legislation that this Committee did consider here in
recent sessions, that would have been changed to expand that
scope. From my position at the NIGC, seven years as Chair, we
saw instances where, for example, arrangements of some smaller,
particularly rural tribes with gaming machine vendors really
didn't look fair to us. It looked like the vendor was getting a
bigger share of the pie than might be appropriate. But NIGC
didn't have any authority to inquire. I don't think NIGC should
be a bottleneck, slow down all gaming contracts. Nevertheless,
that might be useful to take a look at that.
In terms of the background investigations, when a
management contract comes in, if it is just for Class III
gaming, casino gaming, NIGC doesn't have the authority to do
that thorough background investigation on those Class III
management contractors. There is really no reason that they do
it for Class II and shouldn't for Class III. I think that is
something that could be easily and should be changed.
We developed in the late 1990s Minimum Internal Control
Standards that are kind of the rule book on how you make sure
transactions are documented, observed and so forth. Those have
to be continually updated because of the quick changes in the
technology and so forth in the industry. There are some
proposed regulations that I hope soon get adopted and enacted,
or revised and then enacted. The industry is changing; they
need those tools to keep it safe and secure, and to make it
work.
With respect to NIGC's role over Class III gaming, as you
observed, Mr. Chairman, the CRIT, Colorado River Indian Tribe
decision kind of booted NIGC out of part of that arena. And I
think there are instances where the industry would be better
served if NIGC had that authority. Not that it is not working
well in lots of places, but there are places where there could
be greater scrutiny, and NIGC could fulfill that.
The economic downturn necessarily is going to mean people
are going to have to tighten their belt. It is important that
tribes don't take shortcuts in the regulatory area, even though
those aren't viewed as revenue centers in many instances. It is
important that they fund regulation fully, even though the
dollars are shorter.
And they can't take the money out of the operation and
leave a negative cash flow in the business. You have to have
enough working capital in the businesses.
NIGC has looked at some recent instances of mis-use, abuse
of tribal gaming revenue, often by tribal leaders. Money was
not appropriately sent their way, and those are important
cases. The victims of those cases are the tribal members: the
children, the elderly, those folks that aren't running the
show. And I urge NIGC to take strong and proper action in those
instances.
I think the Department of the Interior recently attempted
to sort out who is calling the shots with respect to what are
Indian lands, where can Indian gaming occur. It is good that
there is some clarification there. But as that relationship
between DOI and the NIGC continues, NIGC was intended to have
independence, and it is important that they assert that as the
statute was written.
Finally, just for what it is worth, I think salaries are
too low for the commissioners. If you are going to attract good
people, and I don't mean a commentary on those that are there,
if you are going to do million dollar deals, regulate and
supervise them, you have to attract people used to dealing in
those areas. If a former Chairman doesn't say it, I don't know
who will, but you need to raise those salaries so that you
always get good, qualified people to serve in those positions.
I will be happy to try to respond to any questions that
might arise.
[The prepared statement of Mr. Hogen follows:]
Prepared Statement of Philip N. Hogen, Former Chairman, National Indian
Gaming Commission
Good morning Chairman Dorgan and Vice Chairman Barrasso. I am Phil
Hogen, an Oglala Sioux from the Black Hills of South Dakota, and
recently chaired the National Indian Gaming Commission (NIGC.) Thank
you for the invitation to share some of my insights about Indian
gaming, which I've picked up along the way, during my tenure as an
Indian Country United States Attorney, and a member, and then Chairman
of the National Indian Gaming Commission, over the past 20-plus years.
It's a privilege to appear on the same panel as newly appointed
NIGC Chair, Tracie Stevens. While I served on the Commission, Tracie
was a careful observer of challenges to the Indian gaming industry and
the critical role of its regulators at the Tribal, State and national
levels, and often contributed to the dialogue we held with Indian
leadership. She will bring a strong and refreshing point of view to the
NIGC, and I wish her, and Commissioners Cochran and Little the very
best as they undertake the challenge of federal oversight of the
economic engine of so many Indian nations throughout the country. I
expect that if this strong new team has not already learned, they soon
will, that while you always try to do your best, and try do what you
think would most enhance the economic development gaming offers to
Indian country, there will be times when the strictures of the Indian
Gaming Regulatory Act will limit and define some of those
opportunities, and that fidelity to that law is of critical importance
to the real and perceived integrity of the Indian gaming industry. And
as they encounter such limitations, I encourage them, as the
Commissioners I served with and I did, to offer suggestions for
improvement to this Committee. It is sometimes said in tribal circles
that we ``mustn't open IGRA.'' But during my tenure, it was amended
twice, primarily with regard to NIGC's funding, and disaster did not
befall us, and I think the industry is stronger for that. Any
consideration of IGRA amendments, of course, should be done in
consultation with the tribes that are served by it, and I know that
even now, NIGC is working to strengthen its consultation policy and
practice.
My comments today will be rather wide ranging, but I do want to
mention several areas where I think changes in law, policy and practice
might result in a stronger Indian gaming industry. There will be no
particular order or priority to my list, but I think they are worthy of
consideration.
Assistance with Criminal Background Checks
As recently interpreted, the laws and regulations relating to how
NIGC provides FBI criminal history information to tribes regarding
applicants for tribal gaming licenses has not permitted the submission
of fingerprint cards for those who are vendors of gaming supplies and
services to tribal gaming operations. This limits tribes' ability to
fully investigate the suitability of a critical sector of their
business, and makes them vulnerable to those who may have unsavory
backgrounds and connections, and exposes the tribes and their gaming
revenues and assets to unnecessary risks. If this can be changed, by
way of FBI, NIGC or other regulations, or legislation if necessary,
this gap could be closed, and the industry would be safer. I don't
think the law should say the NIGC must be involved in the backgrounding
of gaming vendors, but if asked by tribes for access to the FBI
database for this purpose, it should be permissible. It might also be
useful to design an optional ``standardized'' vendor application that
NIGC could administer, so that vendors might avoid confronting dozens
of individual and different application forms and processes, resulting
in savings to tribes and vendors.
Review of Contracts other than Management Contracts
Along the lines of NIGC's review of arrangements for services to
Indian gaming operations, IGRA, of course, dictates that management
contracts be reviewed and approved to valid. This Committee not long
ago considered an expansion of that authority to extend to all gaming
contracts. Valid concerns were raised that NIGC could become a
bottleneck that would slow down the industry, and those measures were
not enacted. While tribes most often look after themselves quite well,
while serving on the Commission I observed a number of arrangements,
often with tribes with smaller facilities, where contracts for gaming
machines extracted what appeared to be unduly high rates for what they
received, and there was no mechanism for NIGC to, as they do with
management contracts, examine those rates or apply standards, as
Congress has set forth with management contracts. A device to permit
review or examination of those arrangements when appropriate might be a
useful service, particular to smaller tribes.
Background Investigations of Outside Managers of Class III Casinos
With respect to NIGC's review of management contracts, the law
presently limits the background investigations NIGC conducts for such
contracts when they only relate to Class III, or casino gaming. NIGC
must, and it does, conduct thorough background investigations for
management contractors providing Class II or bingo-type service, but
not for those that relate exclusively to casino gaming. This
distinction doesn't seem to make any sense, and it would be very useful
to the Commission and gaming tribes if the thorough background
investigation requirement for management contractors were the same,
regardless of the type of gaming to be conducted.
Minimum Internal Control Standards
During my ten years on the Commission, I concluded that the best
tool that we developed and utilized to strengthen the Indian gaming
industry and its integrity, were the Minimum Internal Control Standards
(MICS), which, with the assistance of a tribal advisory committee, were
put together in the late 1990's.
MICS are rules that say things like the same guy who takes the
money out of the slot machine won't be the guy who counts it and takes
it to the vault--and that someone will be watching while that's done
(Documentation, separation of functions, etc.).
It was my opinion, and that of some of the NIGC staff, that before
the MICS were adopted and compliance was required, about two thirds of
the industry faced serious risks and losses, on account of gaps in
their control systems. After the MICS were implemented and accepted,
that share of the industry was dramatically reduced. It's not perfect
out there now, but it's much improved. The industry was young and
growing rapidly, of course, and the requirement of the MICS brought
most of it to maturity much faster than otherwise would have been the
case. If the National Association of Fraud Examiners estimates are to
be believed, I would estimate that tribal compliance with the NIGC MICS
has saved tribes well over $1 billion since their implementation. This
is not to say, of course, that tribes would not have taken these
important safety and security measures without the NIGC MICS, but it is
true that before the MICS many had not, and having a standard rulebook
to adhere to made this process easier and more thorough.
Given the dynamic nature of the gaming industry, with its heavy
reliance on rapidly evolving electronic technology, these standards are
always trying to keep up, and likely will always be somewhat obsolete.
Nevertheless, it is imperative that there be a continual effort to
update them and to keep pace with developments in the industry. On the
NIGC website are a set of MICS updates that were thoroughly vetted by
the NIGC staff and its tribal advisory committee, and if implemented
would bring greater clarity to the MICS system and increased security
to tribal gaming operations. With two types of commercial gaming in
Indian country--Class II and Class III--each somewhat unique in their
nature, but also sharing many common processes, it is important to
address each in a set of standards. The most recent effort would bring
clarity to these distinctions, and address newer technologies that
earlier drafts had not addressed. I expect they are not perfect, and
likely even now are dated in some respects, but if they need
improvement, that can occur in a subsequent review. I would urge prompt
implementation of those revised standards.
NIGC Regulation of Class III Gaming
As stated, the MICS address both Classes of gaming. IGRA clearly
directs NIGC to have a direct regulatory role in Class II (bingo, etc.)
regulation, and standards in this area are imperative. While the
original MICS were mandatorily applied to all Indian gaming--II and
III--the court in Colorado River Indian Tribes v. NIGC held that NIGC
could not require compliance in the Class III area, as under IGRA, that
was to be left to the tribes and the states in their Class III
compacts. So, since that decision several years ago, NIGC has stepped
back in many instances. Nevertheless, many Tribal-State compacts
reference the NIGC MICS and dictate compliance. Class III regulation by
NIGC for tribal operations have been required under Secretarial
Procedures in the absence of a compact, and a number of tribes, notably
in California, have acted to adopt and recognize the NIGC MICS in their
tribal ordinances, even though it is not Federally required. Thus,
there must be an on-going effort to update and keep current the Class
III MICS, in spite of the holding in the CRIT case. I continue to
believe that the IGRA amendment which this committee considered
following the CRIT case which would have clarified that NIGC had
authority in this area would have been useful, and that as in the past,
that NIGC would not be too intrusive under such an arrangement, but
would continue, in a cooperative way, to help protect tribal gaming
revenues and assets. In the pre-CRIT era, no NIGC enforcement actions
were taken for MICS violations, yet many problems were addressed to
bring tribal operations in compliance with the safe, secure processes
required by the NIGC MICS in the Class III area.
I believe that since CRIT, NIGC's auditors have been as busy as
they always were, but I'm not sure they have been able to focus their
efforts where they were most needed. With the pre-CRIT responsibility
and perspective, NIGC attempted to prioritize its work where the most
tribal dollars appeared to be at risk. Now audits of the tribal casino
gaming--Class III--where most of the money is, is by invitation only,
and sometimes those requests come in only after losses have been
discovered.
Impacts of the Economic Downturn
In this recent era of economic downturn, tribal gaming operations
have not been immune. While tribal gaming perhaps has weathered this
storm better than other sectors of the gaming industry, in many places
Indian gaming revenues are down. At such times, gaming operations have
to make choices as where to make cuts, or where not to fill vacancies.
Too often the regulatory sector--viewed by some as not being revenue
centers--get neglected or under funded. If a decision has to be made to
buy a new neon sign, or fill an open internal auditor position for the
tribal gaming operation, it can be tempting to short-cut the regulatory
area, but tribes do so at their peril. When times are tough, perhaps,
is when tribes need to be most watchful to assure that their dollars
don't walk out the back door.
Also, in terms of economic downturn observations, while we see some
declines in revenues, we do not always see declines in the amounts
tribes are taking from their gaming operations to fund their programs.
This can result in seriously low working capital in tribal gaming
operations that put those operations on fragile footing. It is easy to
understand that tribes will want to meet the needs of their tribal
members and tribal programs when times are tough, but they must
safeguard their economic base in the process.
Strong Oversight Regard Misuse of Tribal Gaming Revenues
Along the lines of NIGC economic oversight, we are seeing a number
of cases where the Commission has investigated instances of abuse of
the use of tribal gaming revenues--often by members of tribal
leadership. These instances seem to be seen where accountability at the
tribal level is most lax. IGRA specifically identifies the purposes for
which tribal gaming may be used, including the requirement for Revenue
Allocation Plans for per capita payments. These are very important
cases, as those who suffer and lose in these instances are the tribal
members--children, elders, those infirm--who rely on integrity at their
governmental level to assure fair dealing, but sometimes don't get it.
This was one of the important reasons IGRA created the NIGC, and it is
important that emphasis continue in this area, and that nothing gets
swept under the rug. Tribal memberships are counting on NIGC to do its
job in this area. Tribal leaders work hard to make their tribal gaming
operations successful, and they should be adequately compensated for
those efforts. But the process must be properly authorized and
transparent, and comply with tribal processes, and when it isn't NIGC
has an important role to play to bring things into account.
Indian Lands Issues and NIGC Independence
An important project which was underway during my tenure as NIGC
Chair was the building of a data base of Indian lands for which tribes
use, or may use for gaming. Where gaming is permissible under IGRA can
raise some very complicated and technical issues, and to the extent
that clarity and agreement can be fostered by a solid, reliable source
of records and information in this regard, distractions and
disagreements can be minimized, and I am hopeful that this effort will
continue.
In terms of the determinations of which lands constitute those
Indian lands which IGRA deemed eligible for gaming, during my tenure,
there were a number of instances when NIGC's office of general counsel
and the Department of the Interior's Solicitor did not agree, and those
were regrettable. To the extent that clarity has come, or can be
brought to this area, that will be useful. NIGC needs to always
appreciate that a ruling which may apply to a gaming instance may be
extended to all of Indian country, and that consistency and fidelity to
settled law and Federal Indian policy is essential. The Solicitor's
office needs to be aware of the urgency which often attends
determination of such Indian lands questions, and having served as the
Associate Solicitor for Indian Affairs, I know how over-taxed that
division is. To the extent that adequate resources can be provided to
serve these needs, I would urge this Committee to address this concern.
And while the determination of Indian Lands may be on its way to
settlement, the NIGC and the Department of the Interior need to be
mindful of the independence for the Commission which IGRA's authors
intended. NIGC is not a partisan operation--it's bi-partisan by
statute--and it's dominated by Indian leadership. Gambling is a risky
business, financially and socially, and that's why it's always been
heavily regulated where legalized. And it's a sophisticated and
specialized area. The Federal Family's role in the regulation of Indian
gaming needs to rest with the NIGC, and to the extent that there are
temptations in the Department to reach into that area, those ought to
be resisted, and NIGC needs to defend the independence which was
intended for it and which this Committee has recognized. Indian gaming
will be stronger for this, and the Department will have plenty of other
things to do anyway.
Commisioner Salaries
Among those things in IGRA which may be appropriate for review
would be the salary levels for the Commission. I know it will be easy
for this comment to be misinterpreted, and I think Indian gaming has
been very fortunate in most of the choices that have been made for
these important posts. But when responsibility for the oversight of a
$27 billion+ industry at stake, the country and the tribes ought not
risk that some of those best qualified to serve in that role, decline
to consider it because of compensation. When dealing with multi-
national corporations and arrangements dealing with millions of
dollars--often the tribes' dollars--it will be important to have in
positions of authority those to whom such amounts are not unfamiliar.
In the long run, the government will get what it pays for, and the
Indian gaming industry cannot afford to be regulated on the cheap.
Conclusion
Finally, I would say to the new Commission don't lose perspective
as you do your important jobs. There is a good, strong, honorable staff
at the NIGC, show them strong leadership, and rely on their hard work
and advice. Work closely with tribal leaders, as well as those
organizations formed to advance their cause. But keep an appropriate
distance, and never forget that you are sworn regulators, not
cheerleaders, and that tribal communities throughout the country, as
well as those patrons who spend their dollars to make the industry work
are depending on you.
Good luck.
I stand ready to respond to any questions the Committee may have
for me, Mr. Chairman. I thank you for this opportunity.
The Chairman. Mr. Hogen, thank you very much.
Next we will hear from Mr. Ernest Stevens, Chairman of the
National Indian Gaming Association. Mr. Stevens, you may
proceed.
STATEMENT OF ERNEST L. STEVENS, JR., CHAIRMAN,
NATIONAL INDIAN GAMING ASSOCIATION; ACCOMPANIED BY: MARK VAN
NORMAN, EXECUTIVE DIRECTOR, AND JASON GILES, DEPUTY GENERAL
COUNSEL
Mr. Stevens. Good morning, Mr. Chairman and members of the
Committee. My name is Ernie Stevens, Jr., and I am a member of
the Oneida Nation of Wisconsin. I have the honor of serving as
the Chairman of the National Indian Gaming Association.
I am accompanied today by our Executive Director, Mr. Mark
Van Norman, and our Deputy General Counsel, Jason Giles. Thank
you for inviting me to testify today.
Let me begin by saying, Indian gaming regulation is strong
and tribes are proud of the regulatory track record in the
Indian gaming industry. In 2009, gaming generated more than
628,000 direct and indirect jobs, and $26.2 billion in gross
revenue. These revenues fund tribal government services, such
as police and fire departments, health and education services,
as well as other essential government services for our tribal
citizens.
The benefit of Indian gaming doesn't stop at the
reservation border. Indian gaming generated over $9 billion for
Federal, State and local government treasuries through sales
and payroll taxes. Tribal governments understand that none of
these benefits will be possible without solid regulation.
Tribes across the Nation have committed significant resources
to protect our customers and the integrity of our operations.
Tribal gaming operations are regulated at three distinct
levels. Tribes, States and the Federal Government all employ
more than 3,400 expert regulators and staff to protect Indian
gaming. Tribal governments directly employ approximately 2,800
tribal gaming commissioners and regulators. State regulatory
agencies employ 500 gaming personnel and law enforcement
officers that have a role in the regulation of Indian gaming.
The NIGC employs over 100 employees that help regulate tribal
gaming.
As a result of this three-tier system, Indian gaming is
subject to more oversight by more people than any other
jurisdiction that has gaming in the United States. At a time
when many tribal gaming operations across the Country have
experienced a decrease in revenues, money spent on Indian
gaming regulation continues to be a priority.
In 2009, tribal governments spent a total of almost $350
million to regulate their gaming operations. That number breaks
down as follows. Tribal governments spent approximately $250
million in direct regulatory costs to fund the tribal gaming
commissions. Tribal governments also paid over $80 million to
State regulatory agencies. In addition, tribal governments paid
$16 million in regulatory fees to fund the National Indian
Gaming Commission.
Indian Country is working to promote a positive
relationship between tribes and the NIGC as we move forward.
NIGA's member tribes look forward to working with the new
commissioners at the NIGC and have made it a priority to build
a cooperative relationship with the emphasis on government-to-
government consultation.
Against the backdrop of comprehensive regulation, Indian
gaming has developed a strong security and regulatory record.
Tribal gaming commissions and the agencies employ highly
qualified individuals from tribal, State and Federal law
enforcement agencies, and after 25 years in the Indian gaming
industry, we are now a source of our own experienced and well-
trained regulators.
As IGRA intended, tribal, State and Federal governments all
play a role in regulation of Indian gaming. Under IGRA,
Congress intended for the three sovereigns to work in
cooperation on the regulation of Indian gaming. Each regulatory
body has a distinct and supporting role for three different
classes of Indian gaming. The idea was to avoid duplication,
but to provide complete oversight. The system is costly, it is
comprehensive, and our experience in Indian Country shows that
it is working.
In conclusion, Mr. Chairman, I want to reiterate that the
tribes spend almost $350 million on regulation each year.
Tribes realize that regulation is the cost of a successful
operation and it is needed to protect our resources and our
customers.
Indian gaming's success in regulation is the result of hard
work by tribal governments and tribal leaders who recognized
the need for solid regulation and have made it their priority.
Indian gaming is working. It is rebuilding tribal economies and
providing hope for future generations of Indian people. It is
benefitting non-Indian communities by providing jobs and
promoting economic activity outside the reservation. Tribes are
proud of this record and are working hard to ensure that tribal
gaming regulation remains strong in the future.
On behalf of the leadership in Indian Country as well as
the very hard working regulators, I want to again thank you for
this opportunity to testify. That concludes my remarks, and I
have submitted a written testimony to you also, Mr. Chairman.
[The prepared statement of Mr. Stevens follows:]
Prepared Statement of Ernest L. Stevens, Jr., Chairman, National Indian
Gaming Association
Introduction
Good morning Chairman Dorgan, Vice Chairman Barrasso, and Members
of the Committee. My name is Ernest Stevens, Jr., Chairman of the
National Indian Gaming Association and a member of the Oneida Nation of
Wisconsin.
The National Indian Gaming Association (NIGA) is an intertribal
association of 184 federally recognized Indian Tribes united behind the
mission of protecting and preserving tribal sovereignty and the ability
of Tribes to attain economic self-sufficiency through gaming and other
economic endeavors.
I want to thank the Committee for this opportunity to provide our
views on the state of Indian gaming and its regulatory systems.
Indian Tribes as Governments
To place Indian gaming in proper context, I'd like to first discuss
background of the status of Indian Tribes in the United States Federal
system of government.
Before contact with European Nations, Indian tribes were
independent self-governing entities vested with full authority and
control over their lands, citizens, and those visitors to Indian lands.
The Nations of England, France, and Spain all acknowledged Tribes as
sovereigns and entered into treaties with various Tribes to establish
commerce and trade agreements, form wartime alliances, and preserve the
peace.
When the United States was established, it too recognized the
sovereign status of Tribes through treaties for these same reasons. The
United States Constitution specifically acknowledges the importance of
trade with tribal governments in the Commerce Clause, which states that
``Congress shall have power to . . . regulate commerce with foreign
nations, and among the several states, and with the Indian tribes.''
U.S. Const., Art. I, Sec. 8, cl. 3.
Tribal citizens are referred to in the Apportionment Clause
(``Indians not taxed'') and excluded from enumeration for congressional
representation. The 14th Amendment repeats the original reference to
``Indians not taxed'' and acknowledges that tribal citizens were not
originally thought to be ``subject to the jurisdiction of the United
States''. This is important because, by its very text, the Constitution
establishes the framework for Federal government-to-government
relations with Indian tribes and affirmed 100 years of treaty-making.
These treaties guarantee Indian Tribes a right to self-government.
For these reasons, the United States policy on Indian affairs in
the formative years of the new Republic was one of respect and
recognition that tribal governments were necessary allies to protecting
the Union both politically and economically.
As we sadly know, the United States policies on Indian affairs
throughout the 1800s abrogated these promises and in the 19th and 20th
Centuries, the United States destroyed traditional American Indian
economies through warfare, genocide, dispossession and theft of lands.
In an article entitled, ``Exiles in Their Own Land (2004),'' U.S. News
and World Report explained that:
The vast primeval forests that once blanketed the eastern
United States were once home to millions of Indians. But
starting in the 17th century, shiploads of European settlers
arrived in superior numbers, bearing superior weapons. By 1830,
war, genocide, and pestilence (diseases such as smallpox and
measles to which the Indians had no immunity) had conspired to
kill most Eastern Indians.
Throughout most of the 19th and 20th Century, our people endured
poverty and social dislocation because of the destruction of
traditional tribal economies. In California v. Cabazon Band of Mission
Indians and Morongo Band of Mission Indians (1987), the Supreme Court
acknowledged that Indian tribes in California were removed from their
lush agricultural lands and seaside dwellings to rocky outcroppings at
the edge of the desert. As the Court explained it, California Indians
were left with reservations that ``contain no natural resources which
can be exploited.''
Yet through these hardships, many generations of our grandmothers
and grandfathers maintained our original, inherent right to tribal
self-government. The Federal Government had a number of programs to
promote economic development on Indian lands but few worked because of
a lack of infrastructure, natural resources, and capital and remoteness
from markets.
Tribal Self-Determination and Indian Gaming
In the 1960s, Presidents Kennedy and Johnson included Indian Tribes
in federal community development programs, in the War on Poverty, and
in Civil Right legislation to strengthen tribal self-governance. In
1970, President Nixon formally announced the federal policy supporting
Indian Self-Determination, and repudiated the Termination Policy. At
the heart of the new policy was the federal government's commitment to
foster reservation economic development and helping tribal governments
to attain economic self-sufficiency. The federal government began to
make available to tribal governments a number of the programs that were
used to help state and local governments. These programs provide Tribes
with the ability to rebuild their communities, and have created new
economic opportunities throughout Indian country.
In addition, in the late 1960s, Tribes began to look for a steady
stream of tribal governmental revenue--separate from federal program or
appropriation funds. At the time, the recent rise in State government
lottery systems caused a number of Tribes to consider gaming as the
answer for their budgetary concerns.
State governments and commercial gaming operations challenged the
rights of Tribes to conduct gaming on their lands. These challenges
culminated in the Supreme Court case of California v. Cabazon Band of
Mission Indians, 480 U.S. 202 (1987). The Court in Cabazon upheld the
right of Tribes, as governments, to conduct gaming on their lands free
from State control or interference. The Court reasoned that Indian
gaming is crucial to tribal self-determination and self-governance
because it provides tribal governments with a means to generate
governmental revenue for essential services and functions.
In 1988, one year after the Cabazon decision, Congress enacted the
Indian Gaming Regulatory Act (IGRA) to promote ``tribal economic
development, tribal self-sufficiency and strong tribal government.'' 25
U.S.C. Sec. 2702. IGRA established three classes of Indian gaming with
a comprehensive framework of regulation for each class of gaming. The
Act also established the National Indian Gaming Commission (NIGC).
While there are dozens of forms of gaming in America, the NIGC is the
only Federal Commission that currently exists to regulate gaming in the
United States.
The Indian Gaming Regulatory Act is an important part of the more
than forty-year Federal policy supporting Indian Self-Determination
that acknowledges Indian Tribes as sovereign governments with authority
over their lands, members, and those who enter into consensual
relationships with their governments. In the year 2000, President
Clinton issued Presidential Executive Order 13175 on Consultation and
Coordination with Indian Tribal Governments, which provides:
Our Nation, under the law of the United States . . . has
recognized the right of Indian tribes to self-government. As
domestic dependent nations, Indian tribes exercise inherent
sovereign powers over their members and their territory. The
United States . . . work[s] with Indian tribes on a government-
to-government basis concerning Indian tribal self-government,
tribal trust resources, and Indian tribal treaty and other
rights.
On September 23, 2004, President Bush issued an Executive
Memorandum affirming Executive Order 13175. The memorandum was
addressed to the Executive Departments and Agencies on the Government-
to-Government Relationship with Tribal Governments, which explains:
My Administration is committed to continuing to work with
federally recognized tribal governments on a government-to-
government basis and strongly supports and respect tribal
sovereignty and self-determination for tribal governments in
the United States.
On November 5, 2009, President Obama issued an Executive Memorandum
directing each federal agency to submit to the Director of the Office
of Management and Budget (OMB), a detailed plan to implement the
policies and directives of Executive Order 13175. This plan was to be
developed after consultation by the agency with Indian tribes and
tribal officials as defined in Executive Order 13175. Agency heads were
also directed to submit to the OMB, within 270 days of the Memorandum
and annually thereafter, a progress report on the status of each action
included in its plan together with any proposed updates to its plan.
It is clear from the actions of the past three Presidents that
consultation between sovereigns remains the cornerstone of the Federal-
Tribal government-to-government relationship.
State of Indian Gaming
In approximately 35 years (22 years under IGRA), Indian gaming has
proven to be the most successful tool for economic development for many
Indian Tribes. Today, approximately 233 federally recognized Indian
Tribes in the lower 48 states (65 percent) have chosen to use gaming to
aid their communities. Indian gaming has helped many Tribes begin to
rebuild communities that were all but forgotten. Because of Indian
gaming, our Tribal governments are stronger, our people are healthier
and our economies are beginning to grow.
In 2009, Indian gaming is responsible for 628,000 direct and
indirect jobs nationwide and generated $26.2 billion in gross tribal
government revenues (net tribal gaming revenues are much smaller when
accounting for payroll, operating costs, overhead, and debt service).
Indian gaming is funding essential tribal government services,
including schools, health clinics, police and fire protection, water
and sewer services, and child and elderly care. Gaming revenues also
enable Tribes to diversify their economies beyond gaming. Because of
gaming, Tribes have invested in renewable energy projects,
manufacturing, and other entrepreneurial ventures.
Indian gaming also benefits Federal, State, and local governments.
In 2009, Indian gaming generated over $9 billion in added revenue for
the Federal, State and local governments. Despite the fact that Indian
Tribes are governments, not subject to direct taxation, individual
Indians pay federal income taxes, the people who work at casinos pay
taxes, and those who do business with casinos pay taxes. As employers,
Tribes also pay employment taxes to fund social security and
participate as governments in the federal unemployment system.
Indian Tribes also made over $100 million in significant charitable
contributions to other Tribes and their non-Indian neighbors. In short,
Indian gaming is not only helping rebuild Indian communities, but it is
also revitalizing nearby communities and has become a vital piece of
the national economy.
As this Committee has highlighted over the past several years,
Indian country still has a long way to go. Too many of our people
continue to live with disease and poverty. Indian health care is
substandard, violent crime is multiple times the national average, and
unemployment on Indian reservations nationwide averages 50 percent.
However, Indian gaming has proven to be one of the best available tools
for Tribal economic development, and tribal governments are committed
to protecting and preserving the industry through a strong system of
regulation and oversight.
Regulation and Responsible Gaming
As noted above, Congress, through the Indian Gaming Regulatory Act,
established three classes of gaming, the National Indian Gaming
Commission, and a comprehensive regulatory system to oversee each form
of Indian gaming.
Class I games are social or traditional and cultural forms of
Indian gaming, conducted for minimal prizes or in connection with
ceremonies or celebrations, and is solely regulated by the tribes.
Class II Indian gaming is defined as bingo and related games played
as well as non-banking card games, if those games are otherwise lawful
within the states where tribes conduct those activities. Class II
gaming is regulated by the National Indian Gaming Commission and Tribal
Gaming Commissions (TGC) established and operated by tribal
governments.
Class III Indian gaming is defined as all forms of gaming that are
neither class I nor class II. Class III games are commonly referred to
as casino or ``Las Vegas'' style gaming. Class III games regulated
according to the terms of compacts negotiated between tribal and state
governments.
As you can see, it takes coordination and cooperation of three
sovereigns to make this comprehensive regulatory system work. The
tribal, state, and the federal governments must all work hand-in-hand
to ensure the effective regulation of Indian gaming.
Tribal governments have dedicated tremendous resources to the
regulation of Indian gaming. Tribes spent over $345 million last year
nationwide on tribal, state, and Federal regulation:
$250 million to fund tribal government gaming regulatory
agencies;
$80 million to reimburse states for state regulatory work
under the Tribal-State Compact process; and
$16 million for the NIGC's budget.
At the tribal, state, and Federal level, more than 3,400 expert
regulators and staff protect Indian gaming:
Tribal governments employ former FBI agents, BIA, tribal and
state police, New Jersey, Nevada, and other state regulators,
military officers, accountants, auditors, attorneys and bank
surveillance officers;
Tribal governments employ more than 2,800 gaming regulators
and staff;
State regulatory agencies assist tribal governments with
regulation, including California and North Dakota Attorney
Generals, the Arizona Department of Gaming and the New York
Racing and Wagering Commission;
State governments employ more than 500 state gaming
regulators, staff and law enforcement officers to help tribes
regulate Indian gaming;
At the Federal level, the NIGC employs more than 100
regulators and staff.
Tribal governments also employ state-of-the-art surveillance and
security equipment. For example, the Mashantucket Pequot Tribal Nation
uses the most technologically advanced facial recognition, high
resolution digital cameras and picture enhancing technology. The
Pequot's digital storage for the system has more capacity than the IRS
or the Library of Congress computer storage system. In fact, the Nation
helped Rhode Island state police after the tragic nightclub fire by
enhancing a videotape of the occurrence, so state police could study
the events in great detail.
Indian gaming is also protected by the oversight of the FBI and the
U.S. Attorneys. The FBI and the U.S. Justice Department have authority
to prosecute anyone who would cheat, embezzle, or defraud an Indian
gaming facility--this applies to management, employees, and patrons. 18
U.S.C. 1163. Tribal governments work with the Department of Treasury
Financial Crimes Enforcement Network to prevent money laundering, the
IRS to ensure Federal tax compliance, and the Secret Service to prevent
counterfeiting. Tribal governments have stringent regulatory systems in
place that compare favorably with Federal and state regulatory systems.
No one has a greater interest in protecting the integrity of Indian
gaming than tribes. As noted above, Indian gaming provides the best
opportunity for tribal communities to attain economic self-reliance in
generations. Under IGRA, Tribal Gaming Commissions are the day-to-day
front line regulators of Indian gaming.
The National Indian Gaming Commission (NIGC) plays a leading role
in monitoring the regulation of Indian gaming at the Federal level. The
Commission is comprised of a Chairman and two Commissioners, each of
whom serve on a full-time basis for a three-year term. The Chairman is
appointed by the President and must be confirmed by the Senate. The
Secretary of the Interior appoints the other two Commissioners.
The NIGC has authority to approve tribal ordinances or resolutions
regulating class II gaming and class III gaming as provided in section
2710 of IGRA. The NIGC also is vested with authority to approve
management contracts for class II gaming and class III gaming. In
addition, the NIGC adopts regulations for the assessment and collection
of civil fines for regulatory violations.
With regards to Class II gaming, the NIGC has direct authority to
monitor class II gaming on Indian lands on a continuing basis and has
full authority to inspect and examine all premises on which class II
gaming is being conducted.
However, in support of the regulatory framework established by the
Tribal-State Compact process under IGRA, the NIGC has a background role
in overseeing Class III gaming. When a Tribe and State have a valid
compact:
NIGC reviews and approves Class III tribal gaming regulatory
laws;
NIGC reviews Class III tribal background checks and gaming
licenses;
NIGC receives independent annual audits of tribal gaming
facilities, including Class III gaming and all contracts for
supplies and services over $25,000 annually are subject to
those audits;
NIGC approves management contracts; and
NIGC works with tribal gaming regulatory agencies to ensure
proper implementation of tribal gaming regulatory ordinances.
Conclusion
The Indian Gaming Regulatory Act has worked well to promote
``tribal economic development, self-sufficiency, and strong tribal
governments,'' as Congress intended, and as discussed above, Indian
gaming is a Native American success story--and indeed, a true American
success story for the Nation as a whole, as many Native Americans begin
to see the promise of the American dream of a job and economic self-
sufficiency.
In short, Indian Country is proud of its gaming regulatory history
and we are working hard to ensure that tribal gaming regulation remains
strong into the future.
The Chairman. Mr. Stevens, thank you very much.
Finally, we will hear from Mark Brnovich, the Director of
the Arizona Department of Gaming in Phoenix, Arizona. Mr.
Brnovich?
STATEMENT OF MARK BRNOVICH, DIRECTOR, ARIZONA DEPARTMENT OF
GAMING
Mr. Brnovich. Thank you very much, Chairman Dorgan, members
of the Committee. Thank you for providing me this opportunity
to discuss the regulation of gaming in Indian Country.
I was appointed the Director of the Arizona Department of
Gaming in April of 2009. I am fortunate to have inherited an
agency where my predecessors have placed a great emphasis on
cooperating on a daily basis with our tribal partners to ensure
the integrity of gaming in Arizona.
Prior to my appointment, I served as an Assistant United
States Attorney for the District of Arizona. I have a lot of
familiarity with prosecuting crimes in Indian Country,
especially those involving gaming enterprises. Accordingly, I
believe I provide a unique perspective on the current
regulatory environment.
Although in Arizona we had to overcome many initial
hurdles, tribal governments in the State of Arizona entered
gaming compacts in the early 1990s. At that time, neither the
State nor the tribes had much experience in regulating gaming.
The voter initiative process in 2002 in Arizona led to our
current gaming compact and current regulatory structure. Each
of these compacts have 10-year terms with an automatic 10-year
renewal period when there is substantial compliance. In
Arizona, the compacts define the scope, the nature and the size
of tribal gaming.
For example, there are restrictions on the types of games,
wagering limitations, allocations of devices and the location
of facilities. They also create responsibilities for tribal and
State regulators, including the licensing and certification of
employees and vendors, as well as the inspection of Class III
devices.
Currently, there are 14,511 Class III gaming devices in
Arizona's 22 tribal gaming facilities. There are 219 poker
tables, 274 blackjack tables and 6 facilities providing live
Keno games. This amounts to a $2 billion a year industry in
Arizona alone. To ensure the integrity and viability of such
enterprises, it is essential that operations are well-
regulated. Based upon my experience, I would submit the
following needs to be incorporated in any effective regulatory
system.
First, a recognition of each respective tribe in the State
that gaming is a unique industry, it is in the best interest of
all parties that it is well-controlled. Gaming is a cash-
intensive industry where there is not an exchange of goods or
services between a vendor and a purchaser, but instead, cash is
the commodity.
Historically, the nature of the business attracted criminal
elements, including organized crime, crimes of opportunity and
other corrupting influences. For example, in my experience as
an AUSA, I have prosecuted casino-related crimes involving
thefts ranging from $5,000 to more than $600,000, to more than
half a million dollars. I was co-counsel in the successful
prosecution of four individuals who attempted to rob an armored
van that was refilling ATM machines at tribal casinos.
While no amount of controls can stop every crime, I believe
a recognition that such events can occur in the gaming
environment is an important step in ensuring successful
investigations and prosecutions.
Second, it is vital for tribal and State regulators to
develop a working relationship that fosters a spirit of
cooperation. This requires regular interaction with the tribal
gaming offices and the gaming enterprise. For example, tribal
gaming agents have a constant presence in the gaming operation
and State gaming agents visit the tribal facilities on a
regular basis, sometimes daily for the urban facilities.
This occurs even if there are no major incidents or issues.
But I believe this frequent interaction allows both tribal and
State gaming agents to foster a good working relationship. In
other words, the State and the tribes shouldn't be having
discussions or exchanging information only when necessary, but
they should do so without need.
I also believe it is very important for the Department that
employees be cognizant of their compact requirements and to be
respectful of the tribal gaming environment. Additionally, I
believe it is important to share best practices. Information
sharing is especially important because cheats or criminals
frequently move from one facility or even one State to another.
So therefore, it is important to gather and disseminate
intelligence information between the tribal communities as well
as between States.
One method in Arizona that we share information by is via
the Indian Gaming Working Group. The Indian Gaming Working
Group was created by the Department of Justice to address
tribal gaming issues. Our working group meets on a regular
basis and includes members of the FBI, IRS and NIGC and the
Department of the Interior.
Furthermore, the Department works very closely with the
Arizona Tribal Gaming Regulators Association to conduct
training on a regular basis. And the Department co-sponsors a
training academy for all new tribal agents.
Third, the necessary resources must be committed to
ensuring the integrity of gaming. This includes a checks and
balances approach that has served us well. For example, the
tribal gaming operation is independently audited on an annual
basis to ensure Class III net win is correctly reported. The
State has access to this information and the ability to
communicate with the auditors. Furthermore, the Department has
its own audit unit with ten employees, including two CPAs. They
conduct both financial and compliance audits on a regular
basis. Our machine compliance unit inspects every machine
before those go into play on the gaming floor.
In summary, I believe this approach, a recognition, a
communication and cooperation between the tribes and the
States, and a commitment to committing necessary resources will
ensure the integrity of tribal gaming and ensure the continued
public support for such operations. Thank you and I am
available to address any questions.
[The prepared statement of Mr. Brnovich follows:]
Prepared Statement of Mark Brnovich, Director, Arizona Department of
Gaming
Chairman Dorgan, Vice-Chairman Barrasso, and members of the
Committee, thank you for providing me the opportunity to discuss the
regulation of gaming in Indian Country. I was appointed the Director of
the Arizona Department of Gaming in April, 2009, and I'm fortunate to
inherent an agency where my predecessors had placed on emphasis on
working together with our tribal partners to ensure the integrity of
gaming in Arizona. Prior to my appointment, I served as an Assistant
United States Attorney for the District of Arizona, where I prosecuted
casino related crimes. Accordingly, I believe I can share a unique
perspective on the current regulatory environment.
Although we had to overcome some initial hurdles, the tribal
governments and the state of Arizona began entering gaming compacts in
the early 1990's. At that time, neither the state nor the respective
tribal governments had much experience in regulating gaming. The voter
initiative process in 2002 enacted our current regulatory structure and
the state began entering gaming compacts with each respective tribe in
2003. While each compact holds a term of 10 years, there is an
automatic 10 year renewal provided substantial compliance.
In Arizona, the gaming compacts define provisions regarding the
scope, nature, and size of tribal gaming. For example, there are
restrictions on the types of games, wagering limitations, allocation of
devices, and the location of facilities. They also create
responsibilities for tribal and state regulators, including the
licensing and certification of employees and vendors, as well as the
inspection of class III gaming devices.
Currently, there are 14,511 class III gaming devices in Arizona's
22 tribal gaming facilities. There are 219 poker tables, 274 blackjack
tables and 6 facilities providing live keno games. This amounts to a $2
billion a year industry in Arizona.
To ensure the integrity and viability of such enterprises, it is
essential that gaming operations are well regulated. Based upon my
experience, I would submit that any system needs to incorporate the
following:
First, a recognition by each respective tribe and the state that
gaming is a unique industry and it is in the best interest of all
parties that it is well controlled. Gaming is a cash intensive industry
where there is not an exchange of a good or service between a vendor
and purchaser, but instead cash is the commodity. Historically the
nature of the business has attracted criminal elements, including
organized crime, crimes of opportunity, and other corrupting
influences.
For example, in my experience as an AUSA, I have prosecuted casino
related cases involving employee thefts ranging from $5,000 to over
half a million dollars. I was also co-counsel in the successful
prosecution of 4 individuals who attempted to rob an armored van that
was refilling ATM machines at a tribal casino. While no amount of
controls can stop every crime, I believe a recognition that such events
can occur in a gaming environment is an important step in ensuring
successful investigations and prosecutions that will serve as a
deterrent to further criminal activity.
Second, it is vital for tribal and state regulators to develop a
working relationship that fosters a spirit of cooperation. This
requires regular interaction with the tribal gaming offices and the
gaming enterprise. For example, tribal gaming agents have a constant
presence at the gaming operation and state agents visit on a regular
basis, sometimes daily for urban facilities. Even if there are no major
incidences or issues to discuss, this frequent interaction allows both
tribal and state gaming agents to foster a better working relationship.
In other words, the state and tribe shouldn't be having discussions or
exchanging information only when necessary, but should do so without
any need. I also believe that it is very important for Department of
Gaming employees to be cognizant of their compact requirements and
duties and to be respectful of the tribal gaming environment. For
example, every department employee notifies the tribal gaming office
when they enter a facility and our machine technicians try to minimize
the disruption to gaming operations by conducting inspections during
slow times of the day.
Additionally, it is important to share information and best
practices. Information sharing is especially important because cheats
frequently move from one facility to another. By attempting to gather
and disseminate intelligence information throughout the state, it
confirms that we all have an interest in ensuring the integrity of
gaming. Another method by which information can be shared is via an
Indian Gaming Working Group. Created by the Department of Justice to
address tribal gaming issues, our working group meets on a quarterly
basis and includes members of the FBI, IRS, NIGC, and the Department of
the Interior. Additionally, we work closely with the Arizona Tribal
Gaming Regulators Association and co-sponsor a training academy for new
agents.
Third, the necessary resources must be committed to ensuring the
integrity of gaming. This includes a ``checks and balances'' approach
that has served us well. For example, the tribal operation is
independently audited on an annual basis to ensure Class III net win is
correctly reported. The state has access to this information as well as
the ability to communicate with the auditors. Furthermore, the
Department's audit unit is comprised of 10 employees, including 2 CPAs.
They conduct both financial and compliance audits on a regular basis.
We also have a machine compliance unit that inspects every machine
before it enters play at the facility as well as conducting random
machine inspections.
I believe that this approach--recognition, communication and
cooperation, and committing the necessary resources, will ensure the
integrity of tribal gaming and ensure the continued public support for
such operations. Thank you for your time and consideration.
The Chairman. Mr. Brnovich, thank you very much. We
appreciate your testimony.
Ms. Stevens, let me ask some questions of you to try to
understand what you intend to do with the NIGC, what
directions, what plans and so on. First of all, let me ask
about Class III gaming in the Colorado River decision. What is
your sense of the impact these decisions have on the oversight
or regulatory capability of the NIGC to believe there is
effective regulation? Is there a need for legislation? Is there
a need for other actions to address the Colorado River
decision, in your judgment?
Ms. Stevens. Thank you, Chairman Dorgan, for that question.
What I will say is that I recognize the Colorado River Indian
Tribe decision did clarify the authority of the NIGC when it
comes to Class III MICS enforcement. I understand that there
are areas where there is strong tribal-State regulatory, Class
III regulatory authority. My personal experience is from
Washington, but I was happy to hear Mr. Brnovich's testimony,
because it is very, very familiar to the State of Washington.
But I also understand that there are areas where there are
gaps. We are, as I mentioned in my confirmation process, and I
will tell you today, and it was submitted in my testimony, I am
undertaking a comprehensive review of not just the regulations
and how the NIGC is working, but of this particular issue,
because I know it is of concern to you and members of this
Committee.
I have begun that process and have tasked the NIGC staff to
begin to look into and assess, review and examine the status of
Class III regulatory oversight. Until I have more information
and facts in front of me, I really wouldn't be able to say what
needs to happen, whether it is legislation or what we can do at
the NIGC.
The Chairman. The jurisdiction here is very important. So I
will be anxious to receive the results of your review. Some
feel very strongly that there is a void as a result of the
Colorado River decision and there should be legislative actions
to respond. Others feel differently.
How many auditors does the NIGC have? In the matter of the
jurisdiction, how many auditors does the NIGC have to audit the
419 tribal gaming operations?
Ms. Stevens. I don't know the exact answer to that right
now.
The Chairman. Is there staff with you that would know?
Ms. Stevens. Let me check with my staff here.
Approximately 20, but we can get you an exact answer later.
The Chairman. I guess that raises the question in my mind
of, what kind of audit capability is necessary for the NIGC?
Mr. Brnovich says that for the State of Arizona alone, he has
10 people in an audit unit to audit 22 gaming facilities, is
that correct?
Mr. Brnovich. Chairman Dorgan, that is correct.
The Chairman. Does that audit unit include the folks you
discussed toward the end of your testimony that were looking at
the more complex financial transactions?
Mr. Brnovich. Chairman Dorgan, the way that the Department
of Gaming is organized in Arizona is we have several units. One
of them is an audit unit that does conduct regular audits of
financial records within the tribal casino, as well as
conducting an annual compact compliance review audit as well,
to make sure the compact is being complied with. So those are
their primary focus and responsibilities, separate from our
machine unit, which conducts machine random inspections and
everything else.
The Chairman. Give me the gross number, not just audit, but
the folks that are going out checking machines and so forth.
How many people do you have?
Mr. Brnovich. Chairman Dorgan, there are approximately 110
employees at the Arizona Department of Gaming. Of those 110, 35
of them are sworn peace officers. Many of them are retired
Phoenix and Department of Public Safety personnel. So we have
an investigation unit. Those folks regularly go out to
facilities, usually in teams, forge those one on one
relationships at the tribal gaming offices. We have a machine
compliance unit with approximately 10 individuals. They are the
folks that do the regular machine inspections. Then we also
have an audit unit.
The Chairman. So you have a pretty robust group of people.
Coming back to Ms. Stevens, at the National Indian Gaming
Commission we have roughly 400 tribal gaming operations. I
think you said roughly 20 auditors.
At a prior Committee hearing, we were told that the NIGC
was carrying a $10 million reserve fund. And actually, I don't
know what it is now, if your staff would know, the funding for
the NIGC is through fees assessed by the tribal gaming
facility, or to the tribal gaming facility. So one would expect
that the NIGC might have some carry-over funds. But a $10
million balance seemed excessive to me.
What is the status of the reserve fund, do you know?
Ms. Stevens. Thank you for that question, and I have
actually heard the same thing from tribes. I recall that it was
a question that has come up previously during my confirmation
process, at which time I committed I would look into that. I am
in the process of doing that right now. I have had one budget
meeting with our comptroller to try to identify those funds and
find the source of those funds and evaluate that going forward.
Certainly as I find out information I will be happy to work
with you and members of this Committee to further understand
those funds.
The Chairman. Report to this Committee on that.
I am going to ask two additional questions, then I will
call on my colleagues.
Mr. Stevens, Mr. Brnovich describes what we have already
known to be a robust State regulatory approach, which means you
have a dual approach in Arizona. You have the tribal approach,
they are very serious as well, and as I understand it, Mr.
Brnovich, the tribes are doing well. Then you have an
aggressive State approach.
It is the case, however, that in a number of States, they
have a part-time person, perhaps at the Attorney General's
office, or maybe one person designated to take a look at what
the compact provides and what the gaming facilities are doing.
So that to me doesn't really represent the kind of capability
you have in Arizona. You have only the tribal regulatory
authorities and then kind of an after-thought by some States.
Do you think in those cases, where the State doesn't have
what I am told Arizona and California and some others have, do
you think there needs to then be more authority for the NIGC to
be involved in that separate regulatory oversight? If you want
to chat about that just for a second, I will ask Mr. Hogen the
other question. Why don't you go ahead and I will ask Mr. Hogen
the other question.
Mr. Hogen, you were Chair of the NIGC for how long?
Mr. Hogen. Seven years.
The Chairman. You heard the question I asked Ms. Stevens
about the number of auditors available, number one, and number
two, the regulatory authority, particularly with respect to
post-CRIT decisions on Class III gaming. Do you feel there is a
legislative requirement here to address the CRIT decision? And
is there a need to further boost the strength of auditors,
number of auditors and investigators at the NIGC?
Mr. Hogen. I think there is a need for a legislative CRIT
fix. I know how appropriately and jealously tribes guard their
sovereignty. And this undoubtedly would be an infringement.
But the way this happened was, when IGRA was passed,
Congress decided, well, casino gaming is complicated, and the
only people that know how to do that are the States. They were
thinking, I think, for there were only a couple of States to do
that, Nevada, and New Jersey had just started.
Well, it turned out more States than they thought actually
permitted casino gaming. So that is where Indian gaming went.
And those States didn't have experience like Nevada did to do
that regulation. Arizona is the shining example of how a State
regulatory body can look over and work with tribes.
But North Dakota, South Dakota, Minnesota, are places where
there just really isn't a State presence. There are other
States where there is kind of a presence. But mainly what they
are worried about is, are they getting their share of the
revenue, under the revenue-sharing arrangements. They really
don't regulate the gaming.
When NIGC had the authority, which they exercised before
the court decision, it was working beautifully, I think. We
weren't infringing, we weren't intrusive. We never closed
anybody for not following our MICS and so forth.
But there was the principle of the thing. And that is what
the case was decided upon. If I were going to say what the
priorities are, I would clarify that NIGC needs and has that
authority. And where States are there, NIGC should back off.
In terms of the numbers of auditors, NIGC has good, strong
auditors. They could always use more, I expect. They are
staying busy now, but they are not staying busy where they
really need to be. If they can go where the identified revenue,
and it is in Class III, 90 percent of the gaming is Class III,
that is where they should be. They are busy, but I don't think
focusing on the appropriate priorities.
The Chairman. Mr. Stevens, I am going to ask you to hold
your answer, because I have gone way over my time. I want to
make sure that my colleagues have adequate time. So I will come
back and ask you that question.
Senator Udall?
STATEMENT OF HON. TOM UDALL,
U.S. SENATOR FROM NEW MEXICO
Senator Udall. Chairman Stevens, you just heard the
discussion with Mr. Hogen. Could you comment on that? What he
was saying, is what your priorities are going to be? He talked
about having those auditors focus in particular areas. What are
your thoughts on what he just said?
Ms. Stevens. Thank you, Senator Udall. One of the things I
do want to clarify is that tribes have duplicative auditing
reviews. Many tribes have auditors within their own operation.
Their regulatory bodies may have auditors. And then on top of
it, the NIGC requires an outside audit, and many States require
an independent audit on top of that.
I think if we talk about duplication of services, as
Chairman Hogen had mentioned earlier in his testimony, we want
to stay away from that, again being mindful of how we use the
tribal resources.
What I will say is that my priorities are to review this
particular situation and have an informed considered decision
about how to address Class III regulatory oversight and if
there are any innovative ways that we can draw from States like
Arizona and Washington and others, certainly to take that on.
But before I make any decisions or take any actions in that
direction, I want to gather information.
Senator Udall. You had a great deal of experience in
working with casinos before you came into the job you are in
now. Based on that experience, are there any immediate changes
that you made or you would like to see? You probably dealt with
the National Indian Gaming Commission on a number of occasions.
Have you already made changes as a result of what you saw
dealing with them on the outside?
Ms. Stevens. Thank you again for that question. I am in
that review process, both externally and when I say externally,
I mean dealing with tribes and regulations and what our primary
statutory responsibilities are. That is going to be a
comprehensive review.
But internally, there are a number of issues that I am
still in the process of assessing. One of them is the budget
and fee systems. Having come from an environment in management,
I want to gather these facts before I make decisions, although
it is a priority of mine to make sure that we are using these
fees properly and that we are meeting our statutory
responsibilities.
Senator Udall. Thank you.
Mr. Hogen, in your testimony you speak quite a bit about
background checks and background investigations of outside
managers and other individuals. In your experience, what has
been the extent of the problems that have emerged as a result
of the limitations in the ability of tribes to access criminal
records and the limitations on NIGC's ability to conduct
background investigations? What is the extent of opportunities
for bad actors to work their way into tribal gaming facilities?
Mr. Hogen. To their credit, tribes do a very good job of
licensing the folks that are going to work on the floor and so
forth. But they also do business with the vendors, people
selling Pepsi-Cola, Coca-Cola, paper towels and gaming
supplies, machines and equipment. When those folks aren't
licensed but are just a vendor, then they can't do the same
thorough investigation of those backgrounds.
And so occasionally, there were instances where they found
out they were doing business with crooks. And there were other
instances where they said, well, we are not going to do
business with these folks because we can't do the investigation
and maybe they missed a good deal with an honest vendor. So I
think you could broaden that opportunity to do a more thorough
background investigation. You would make the industry more
secure.
I think the vendors would go for it. If they know somebody
is going to look at their background, they are not going to
come in with a dirty record, probably. They will stay away. And
that would be good for the industry.
Senator Udall. Thank you very much.
Thank you, Chairman Dorgan. I appreciate it.
The Chairman. Thank you very much.
Mr. Stevens, the question I asked was generally about the
different levels of enforcement, the multi-layers of
enforcement that most of us believe are necessary and what
exists, for example, in Arizona, but perhaps would not exist in
some of the smaller States. And therefore, the NIGC would be
required to have more enforcement authority there. Your
assessment of that?
Mr. Stevens. I can't really speak about how that State
angle works. But we talk about Arizona being the shining
example. And I agree with that 100 percent. But I think Indian
Country's regulators are a shining example also. They work with
local and municipal law enforcement agencies, with the State
Attorney General's office to make sure that all laws are
adhered to.
In my State of Wisconsin, as a result of our work in
gaming, we have a multi-jurisdictional conference that we
worked, brought tribes together with law enforcement from
throughout the State. That has even become a national
conference.
So I think that again, tribes are the shining example here.
They work hard, and they work cooperatively with the States. I
think they are doing a good job and I really can't speak to
where there might be shortcomings on the State side. I think
that tribes are working with the States, and I think that they
are the shining example in this regulatory situation.
The Chairman. Yes, the question is not meant to disparage
tribal enforcement at all.
Mr. Stevens. No, I don't think that.
The Chairman. I think most tribes understand that without
effective enforcement, you run a very substantial risk of
ruining the very opportunity that is available through Indian
gaming. That opportunity didn't exist for a long, long, long
time, until the Cabazon decision. At that point, it opened up
this new opportunity.
So I am well aware of the effective efforts of many tribes
across the Country to regulate.
As you know, gaming is not available in the States unless
there is a compact with the State. So the States have the
ability to determine, first of all, whether gaming will exist,
and then second, they have a requirement, once they decide it
will exist, to provide some oversight. But it is the case I
think in a number of States that that oversight is kind of an
afterthought, and in other States it is not at all. It is a
very significant priority.
Let me also ask about Mr. Hogen's notion of contractors.
Ms. Stevens, Mr. Hogen's contention kind of runs into this area
of tribal sovereignty and decision-making and so on. He is
raising questions about when should the NIGC be able to take a
look at contracts and contractors. Mr. Hogen mentioned that
when you go in and you see a contractor with gaming equipment
itself that is taking too large a portion, and the NIGC has the
capability to get that and see it, and then take action, should
the NIGC have that capability?
Mr. Hogen, I think you are saying it does not now have the
capability. Should the NIGC have that capability and if so, how
extensive should it be? He is raising a whole series of
questions about the ability of the NIGC to review contracts.
Pushback by tribes that say, wait a second, that is our
business, not the NIGC's business. Do you have an assessment of
that at this point? Are you looking at that?
Ms. Stevens. There are management contract regulations in
place, and I will be looking at those as part of the
comprehensive review. But I will say that the NIGC does have
authority to approve or disapprove management contracts. There
are detailed definitions about what management provisions are,
not necessarily that they are labeled management contracts, but
provisions. Those provisions may not necessarily always exist
in what we would deem as management contracts.
We have seen in recent incidents lately that if there are
provisions in lending agreements, the NIGC does need to approve
or disapprove those. Tribes are, and in response, and maybe
since Phil's departure, the NIGC has been responding to tribes
submitting various types of contracts to us for management
provisions.
The concern is if there are management provisions in any
contract, whatever vehicle or label they might have, there is a
possibility that those might not be valid. So what we are doing
is in response to tribes requesting review of lending
agreements, other types of contracts for management provisions,
we have been providing, the general counsel's office will
provide opinions about provisions in those types of contracts
or agreements.
So we are being proactive in response to incidents that
have happened of late. It doesn't have to necessarily be
labeled a management contract for us to review it for
management provisions or approve or disapprove.
The Chairman. Mr. Brnovich, you said you are a former U.S.
Attorney?
Mr. Brnovich. Yes, that is correct.
The Chairman. From your perspective now, as a State
regulator, give me your assessment of the Federal law that
establishes and provides the jurisdiction for the NIGC. Are
there areas where you believe there are shortcomings? If so,
what are they?
Mr. Brnovich. Chairman Dorgan, once again, I believe the
folks at NIGC would probably be in the best position, and I
know that former Chairman Hogen was a United States Attorney.
So he probably has a very good perspective on this as well.
I do believe that the mechanism, the gaming compact we have
in place in Arizona addresses many of the issues or the
concerns that folks generally start talking about when they
talk about any form of gaming, whether it is Indian or other
commercial establishments. And that is the need to have a
vigorous structure in place that fosters that communication,
that fosters those background investigations, certifications.
In Arizona, our compacts provide that any provider of
vendors and gaming devices, manufacturers, have to be
certified. Gaming services over a certain threshold, they have
to be certified. So there are a lot of those checks that are
meant to prevent this from coming in.
But I do know, based on my experiences as a former Federal
prosecutor, that no matter what system you have in place, in
any cash-intensive industry, folks are going to be tempted.
They are going to try to, whether it is through the front door,
trying to rob, make a theft from an armored car, or whether it
is employee thefts, crimes of opportunity where people maybe
manipulate gaming tickets, voucher tickets, there are going to
be those opportunities and people will try to take advantage of
them.
I do know of one case that I had where an employee had
stolen hundreds of thousands of dollars from a tribal gaming
facility. He was ultimately caught because there was MICS,
there was minimum internal control standards, in place via our
State compact that required dual signatures. And he was
creating falsified jackpot slips. And he was falsifying and
signing them with one signature. Someone at the cage said, wait
a minute, aren't there supposed to be two signatures on this?
Told the supervisor and that ultimately led to the unraveling
of him, for a year and a half period, of having submitted false
jackpot slips. And it was done because someone at the cage,
someone who was fairly new, who was just trained, said, wait a
minute, there are supposed to be two signatures on this, why
isn't there?
So I do think it is important to have controls and
standards in place in order to not only prevent things from
happening, but once they are happening, once they happen, to
ensure that those crimes are not only detected but successfully
prosecuted. That serves as a deterrent.
The Chairman. And those minimum internal control standards
are standards that Mr. Hogen, you testified about previously,
before this Committee on Indian gaming, particularly with
respect to Class III gaming, I believe, did you not?
Mr. Hogen. Yes. Under the CRIT decision, the Class III MICS
are basically advisory only, although a number of States
incorporate or adopt the NIGC MICS. And in a couple of cases,
secretarial procedures have been implemented where compacts
couldn't be obtained. And NIGC has been tasked to do some Class
III regulation. You need Class III MICS for that. And
particularly in California, a number of tribes, to try and push
the State back a little bit, have invited the NIGC in, adopted
the NIGC MICS. For that reason, they need to be kept current. I
think it works best when those are the rules.
The Chairman. This is a really important set of issues. Mr.
Brnovich said it appropriately, that when you have a cash-
intensive industry, in this case $25 billion, $26 billion
dollars, there are a lot of interests that want to find their
way and put their fingers into that industry.
Senator McCain, welcome. I said at the start of this
hearing, we have really focused in this Congress on the Indian
Health Care Improvement Act, which is now law, the Tribal Law
and Order Act, which will be signed at the White House this
afternoon. We have had great success on a couple of really big
issues. But we have not focused on Indian gaming. I wanted to
have an oversight hearing today, at least to begin a process of
this discussion.
Mr. Hogen, who left as Chair of the NIGC, counseled an
agenda during Senator McCain's chairmanship in which we had a
number of hearings on these issues, on the CRIT fix issues and
others. I appreciate, Senator McCain, your being able to come
by. Let me now call on Senator McCain for inquiry.
STATEMENT OF HON. JOHN McCAIN,
U.S. SENATOR FROM ARIZONA
Senator McCain. Thank you, Mr. Chairman, and thank you for
your stewardship of this Committee and the many successes and
accomplishments under your chairmanship. It has been a great
honor and privilege for me to have had the opportunity to serve
with you on addressing a number of important issues to Indian
Country and the Nation.
Chairman Hogen, maybe you could just give the Committee,
for the record, an assessment of what you think, in your view,
the record of the Indian Gaming Commission's original charter,
as you understood it, and intervening events to how effective
do you think that the Indian Gaming Commission can be today?
Mr. Hogen. They were writing on a blank slate when they
started back in, they actually got going, I think, in 1992. And
it was a real challenge and a real adventure. But they
undertook it with dispatch and put together an effective
regulatory organization that has good relationships with tribes
for the most part, and States, and have fostered the dramatic
growth of the Indian gaming industry. That doesn't mean it is
perfect.
I think the most effective thing that happened in the
relatively early days was the adoption and development of
Minimum Internal Control Standards, a handbook that casinos and
bingo halls could follow to say who takes the money out of the
slot machine and who takes it to the vault and who counts it,
that sort of thing. That brought all of Indian gaming up to a
more professional level and saved a lot of dollars from going
out the back door. That was a dramatic development and an
improvement.
At the time they were adopted, there was the argument,
well, do you really have the authority to do this for the
casino gaming for Class III, isn't that supposed to be left to
the States and the tribes under the compacts? NIGC said, no, we
have that authority. But the court agreed with the tribes. So
we were kind of unceremoniously booted out of the oversight of
much of the Class III gaming.
Senator McCain. Which has had what effect?
Mr. Hogen. Well, in places like Arizona, it had little
effect, because Arizona has a good, strong, effective State
regulatory group, pursuant to their compact, that is they are
there all day, every day. In many other States, there isn't any
State presence, primarily because they don't have any
experience in regulating casino gaming, because they don't
otherwise do it.
So I think tribal gaming regulators do a better job if
somebody is looking over their shoulder. I know I sure do when
I am doing something.
Senator McCain. Is there sufficient authority for the
Indian Gaming Commission to do that?
Mr. Hogen. Under the CRIT decision, not with casino or
Class III gaming, 90 percent of the gaming.
Senator McCain. Does that concern you?
Mr. Hogen. Yes, it does. Yes. Not to say that it is bad out
there every place. Absolutely not. Most places it is great. But
there are soft spots, and they can't and won't be effectively
addressed, I think, unless or until that authority is restored
or clarified.
Senator McCain. So it is your view that Congress should act
legislatively to clarify that situation?
Mr. Hogen. That was my view when the Congress had that
legislation before it, and that is still my view, yes, Senator.
Senator McCain. And is that view shared by Indian Country?
Mr. Hogen. Well, some in Indian Country. It is not
universally held, no. They jealously guard sovereignty, as they
should. And they view that as an incursion. But you need to
protect that resource, and I think this is the best way to do
it in this complex environment.
Senator McCain. So does that open it to problems such as
the situation that happened with Mr. Ivy Ong and the Seminole
Nation?
Mr. Hogen. Well, that was back in the days when NIGC still
could do Class III gaming.
Senator McCain. I guess my question is, because of the CRIT
decision, has this made it more or less likely that corruption
can creep into Indian gaming?
Mr. Hogen. I am afraid more likely. One of our auditors was
telling me shortly before I left about when he was at a
training conference. A tribal auditor came up to him and said,
we have found that we have variances between what the meters
say that machine takes in and what the actual count is. Our
manager says, just rely on the actual count. Don't worry about
that. Should we be concerned?
Well, of course they should be concerned, because that is
the basic tool you use to verify is the equipment working, is
somebody stealing the money. But NIGC didn't have the
authority, because it was Class III. Those kinds of things are
unfortunate but they happen. If NIGC had that Class III
authority, they could go there when asked or when they observed
it.
Senator McCain. Are you concerned that many tribes, that
there is no separation between the Gaming Commission and the
tribal authorities?
Mr. Hogen. There needs to be independence of regulation.
That is not always true.
Senator McCain. Mr. Chairman, I have been worried ever
since the Colorado River decision. I don't believe that it is
an infringement on tribal sovereignty when the majority of the
patrons of Indian gaming operations are non-Indians. If it were
strictly an Indian operation, I would be less inclined to try
to repair this loophole that has been created by the CRIT
decision. I appreciate your having this hearing.
I think we need to stay on top of this, because there are
many experts on gaming that believe that there will be some
scandals because of the kind of oversight and regulation that
exists in the State of Nevada. I have always used that as an
example of how we can prevent corruption from creeping into
gaming operations. And even in Nevada, it is a day to day
operation.
So as a strong supporter of the Cabazon decision and one
who believes in Indian sovereignty, I remain deeply concerned.
I thank you for holding this hearing, Mr. Chairman.
The Chairman. Senator McCain, you used the word scandal. I
was just thinking, you and I know a fair amount about that,
having chaired the hearings. You chaired, and I was the Ranking
Member of the hearings on the Abramoff issue that related to
the theft from Indian tribes. That was an important body of
work by this Committee, and I appreciated your leadership
there.
I said when you came in that when you were Chairman, you
held a number of hearings on the gaming issue. I just described
to Mr. Stevens, there is no notion by me that tribal
authorities don't take seriously their responsibility for
oversight and regulation. I do think there needs to be
effective dual oversight capability. Arizona is an awfully good
example of that; a serious, thoughtful, sizeable agency that
pays a lot of attention to it.
There are some Sates where there is a half-time person in
the Attorney General's office that is tasked with doing it.
That is not effective.
What we wanted to do was put on the record today a
discussion about this. Mr. Hogen, you said you drove here. Is
that really true?
Mr. Hogen. Yes, it is.
The Chairman. From St. Paul, Minnesota?
Mr. Hogen. I drove in from the Black Hills of South Dakota.
I stopped to see my grandson, my three-month old grandson in
Minnesota and wrote my testimony in a Denny's in Indiana.
[Laughter.]
The Chairman. We appreciate your accepting the invitation
as a former Chair to come to this hearing. You know there are
airplanes that are available.
[Laughter.]
Mr. Hogen. Thank you.
The Chairman. But it is nice to see the Country as you go
along. I appreciate very much your willingness to be here.
We have a vote starting in about five minutes. Senator
McCain, do you have anything?
Senator McCain. Mr. Chairman, could I just ask Chairwoman
Stevens, what does she think of this exchange that Mr. Hogen
and I just had? Do you share those same concerns that he has?
Ms. Stevens. Thank you, Senator McCain. I am actually
really glad that we are having this hearing early on, so I can
hear your concerns. I really appreciate former Chair Hogen's
assessment and his concerns, something that I certainly can
learn from. The aftermath of the CRIT decision is of concern to
me. I was mentioning to the Committee earlier that the top
priority is to review this situation so I can get a better
understanding.
Senator McCain. Do you have any understanding so far?
Ms. Stevens. I am in the process of working through this
regulatory review.
Senator McCain. Do you have any understanding so far?
Ms. Stevens. I do in areas like Washington State, that has
something equivalent to the State of Arizona. And I know that
they do work in some areas. I know that as you have mentioned,
and Chairman Dorgan has mentioned, there are areas that need
improvement. I want to know what those are.
It is complicated, because there are 28 States with
different, varying compacts. And I want, as much as you do, an
assessment of the post-CRIT world in Indian Country.
Senator McCain. I hope you will give us some
recommendations when you reach some conclusions.
Mr. Stevens, you probably disagree with some of my
assertions there.
Mr. Stevens. Mr. Chairman, we are happy to convene the
leadership of Indian Country. In the past discussions around
this matter, we convened probably 16 national tribal leaders in
conjunction with working with the National Congress of American
Indians. We continue to assert, and I said earlier in my
testimony, it is in my submitted testimony, $350 million to
regulate this industry. That is the kind of money that is paid
through our industry. Our people, our leaders and our
regulators have made it our top priority.
And we are doing, I believe, more. We talked about the
MICS. Ninety-five percent of that exists in Indian Country at
that level if not stronger. And as far as looking over our
shoulder, Phil talks about looking over our shoulder, we have
our tribal constituents looking over our shoulder. We have the
State. We have local law enforcement looking over our shoulder.
And we answer to the leadership in our tribes. Our tribes
are very efficient at this level. After 25 years, we believe we
are doing a good job. At the same time, with no disrespect to
your feelings, we would be happy to convene the NIGA-NCAI task
force to reevaluate this issue. But again, we are concerned
about the strength of tribal sovereignty as we move forward.
Senator McCain. Thank you. But I am not comforted by the
knowledge that local authorities are looking over your
shoulder. Because as you just asserted, tribal sovereignty does
not allow local authorities to oversight.
Mr. Brnovich, what have you learned?
Mr. Brnovich. Chairman Dorgan, Senator McCain, thank you.
We are fortunate in Arizona that our gaming compacts
specifically provide that the Minimum Internal Control
Standards must be incorporated and must be followed by the
tribes. So we are in a little bit of a different situation than
some other folks in Indian Country, because we have those
Minimum Internal Control Standards, and we have a vigorous
compact that provides for various layers of protection,
everything from certification of vendors, employees,
surveillance requirements.
So we are in a different situation. I feel uncomfortable
commenting generally on the MICS. I just know that they work in
Arizona. And I think that because gaming is such a cash-
intensive industry, you do have to have that regulation and
oversight, because there are going to be constant attempts at
penetration by either organized or even unorganized criminal
elements.
Senator McCain. Mr. Stevens, I suggest that you and the
NCAI and NIGA have a look at what we have achieved in Arizona
by virtue of agreements that were freely entered into, which I
think has been of significant beneficial effect and provides, I
think, some confidence on the part of all of us that there are
significant safeguards against corruption. And Mr. Stevens, the
fact is that wherever money is exchanged in the way that it is
in gambling, it is open to corruption. It is just one of the
realities of life. The more oversight and cooperation we can
have between State and local government and tribal authorities,
the better off we are, and the more success, I think, will
accrue to Indian gaming.
I thank you, Mr. Chairman.
The Chairman. Senator McCain, thank you very much.
Let me just finally say, Ms. Stevens has been in office
only one month. I recognized when I invited her that we were
not going to be able to have someone here that would give us a
full complement of new policies she has developed.
But I also wanted her to be here to give us her
impressions. I invited Mr. Hogen for a very specific purpose.
He has been in this position for seven years, has seen the
substantial growth of Indian gaming. And I appreciate very much
not the fact that you wrote your testimony at a Denny's, but I
appreciate very much your driving here from the Black Hills of
South Dakota and giving us, once again, the benefit of your
experience.
Mr. Stevens, thank you very much, and Mr. Brnovich, thank
you very much for coming. Chairwoman Stevens, thank you very
much for your work.
This hearing is adjourned.
[Whereupon, at 10:43 a.m., the Committee was adjourned.]
A P P E N D I X
Prepared Statement of Hon. Carlos Bullock, Tribal Council Chairman,
Alabama-Coushatta Tribe of Texas
Introduction
Mr. Chairman and members of the Committee, thank you for the
opportunity to provide testimony. My name is Carlos Bullock and I am
the Tribal Council Chairman of the Alabama Coushatta Tribe of Texas.
Today, we request that you correct a drafting error in our Restoration
Act such that, consistent with Congressional intent, we are to be
treated the same as other federally-recognized Indian tribes with
respect to gaming on our reservation. It is unfortunate that we have to
make such a request; but, the courts have told us that, regardless of
how sympathetic they may be to our position, we must ask Congress to
correct the problem.
Brief History
Our Tribe is known to be traditional and religious. We still speak
our native language and practice our traditional ways. Our reservation,
once vast, is now about 7,000 acres of largely forest area. We are
excellent stewards of our resources and have won awards for our
forestry conservation program.
We also have a long, rich history in Texas. The Alabama and
Coushatta were originally separate tribes, both of whom migrated from
Louisiana to east Texas in the early 1800s. Both participated in the
Mexican War of Independence from Spain. The Coushatta Tribe, in
particular, rendered valuable service to Sam Houston during the Texas
War for Independence. They served as guides for Houston's army on its
way to victory at San Jacinto and slaughtered their cattle to feed
starving women and children fleeing Santa Anna's army.
Because of this service, within less than a year after Texas won
its independence at San Jacinto in April 1830, the Republic of Texas
enacted its first Indian bill. An Indian agent for the Coushatta and
Alabama Tribes was established and appropriation was made to cover the
cost. In 1840, the Fourth Congress of the Republic of Texas authorized
President Lamar to set aside land located in rural east Texas for each
of the Coushatta and Alabama Tribes.
Establishment as a Federally Recognized Tribe
By 1928, the United States authorized the Secretary of the Interior
to purchase land for the benefit of both the Alabama and Coushatta
Tribes in Polk County, Texas, resulting in the initial federal
recognition of the Alabama and Coushatta Tribes. Because the land was
deeded to both the Alabama and Coushatta Tribes, the name ``Alabama and
Coushatta Tribes of Texas'' was used to describe the Tribes and the
name was, thereafter, used for federal recognition purposes.
In 1934, Congress passed the Indian Reorganization Act, also known
as the Wheeler-Howard Act. The Act authorized tribes to organize for
their welfare and to exercise local self-governance. Pursuant to the
Act, the Alabama and Coushatta Tribes organized as one tribe under a
constitution and bylaws approved in 1938. However, as described below,
our government to government relationship with the Federal Government
was cut short as a result of federal policies designed to assimilate
and terminate tribes, such as ours.
Termination of Federal Status and Transfer of Trust Responsibility to
State of Texas
As a result of the federal termination policies of the 1950s, our
Tribe's status as a federally-recognized Indian tribe was terminated in
1957. Unlike most termination actions in the 1950s, rather than simply
terminating the federal government's trust responsibilities, Congress
transferred that responsibility to the State of Texas. In 1953, Texas
Governor Allan Shivers wrote a letter to the Assistant Secretary of the
Interior, Orme Lewis, stating that both the Alabama and Coushatta
Tribes of Texas wanted trust responsibility for their lands transferred
to the State of Texas and that the Texas Legislature had agreed to
accept the trust responsibility. In fact, in 1954, President Eisenhower
signed Public Law 627, 83d Cong.(68 Stat. 768), terminating the trust
relationship between the Tribe and the United States and transferring
all trust responsibility for the Tribe to Texas.
From 1954 through 1983, Tribal affairs were administered by the
Texas Board for Texas State Hospitals and Special Schools. Although
monies appropriated for the benefit of the Tribe were subject to
fluctuation, we were able to survive and we continued to live on our
lands in east Texas.
The trust relationship with Texas lasted only until 1983 when the
Texas Attorney General, Jim Mattox, issued an opinion that the trust
relationship violated the Texas Constitution. The fallout from that
opinion was swift and devastating. The State Comptroller of Public
Accounts, Bob Bullock, began imposing State severance taxes on Tribal
oil and gas royalties. The Appraisal Districts of Polk County issued
notices of appraised value on reservation trust lands. Later, the Texas
Legislature cut off appropriation of all State funds to our Tribe.
As State Comptroller Bob Bullock described the resulting situation
in Texas, ``These Indian chiefs better get over to the A.G.'s office
and light up their peace pipe if they want to keep getting this wampum,
because Mattox is holding the tomahawk now.''
The Restoration Act
Fortunately, in 1984, Congressmen Charlie Wilson and Ronald Coleman
introduced legislation to restore the Tribe to federal recognition.
Congressman Wilson stated that ``the principal purpose of this
legislation is to give the Alabama-Coushatta the same status as other
Indian tribes in the United States.'' It took several years, but
finally, in 1987, when our Tribe was on the brink of losing all its
assets to the State of Texas, Congress restored our status as a
federally-recognized Indian tribe. The passage of the Yselta Del Sur
Pueblo and Alabama Coushatta Indian Tribes of Texas Restoration Act,
Pub. Law No. 100-89, August 18, 1987 (the ``Restoration Act'') was
seemingly a huge victory for our Tribe.
It was not until later that we would see that, due to a drafting
error in the Restoration Act which was compounded by mistaken court
decisions by the Fifth Circuit Court of Appeals interpreting our
Restoration Act, we would not be able to enjoy the same rights and
privileges as other federally-recognized Indian tribes with respect to
gaming.
This result is particularly disturbing as the record demonstrates
that it was intended that when Congress restored our federal status
that we would achieve full status as a federally-recognized tribe.
Indeed, Congress intended to provide us with the authority to govern
gaming on our lands consistent with the landmark Supreme Court
decision, California v. Cabazon Band of Mission Indians, 480 U.S. 202
(1987), which was issued just months before the language of the bill
was being finalized. Yet under the precedent created by erroneous court
decisions issued by the Fifth Circuit, we are now somehow less of a
tribe--similar to a second-class citizen.
Today, the situation on the reservation is one of desperation. The
average median household income for tribal members is about $10,000 per
year. Only one in three people are gainfully employed and only one out
of every 100 members has been able to pursue and attain a college
degree. Diabetes is rampant, affecting more than 50 percent of our
Tribe and access to health care is extremely limited. Every summer, our
I.H.S. funding runs out. This July, we went on ``priority one'' status,
meaning that our tribal members can only see a doctor if their illness
or injury is potentially fatal. We urgently need to improve our
situation and provide a better quality of life for our members. We know
we can do so by offering gaming on our tribal lands.
Further, despite its claims to the contrary, the State of Texas is
a gaming state. The State itself operates one of the largest and most
progressive state lotteries. There is commercial bingo, horse racing,
dog racing, cruises to nowhere and carnival nights. Also, the Kickapoo
Tribe of Texas conducts gaming in Texas. Yet, due to a quirk in federal
law, the Alabama Coushatta may not engage in the same activities as the
State or the Kickapoo Tribe. With this Texas stands alone where
federally-recognized tribes within the same state are treated
differently for gaming.
Notably, we are not seeking additional rights or more advantageous
rights to game. We are not attempting to conduct off-reservation
gaming. We are simply asking for the same rights and privileges as any
other federally-recognized tribe under the Indian Gaming Regulatory
Act. We believe it is the fair thing to do given the facts of our
situation. Moreover, we recognize that our gaming will be regulated
under the Act and we accept that regulation.
It should also be noted that our Tribe's attempts to seek
restoration were initiated long before the arrival of Indian gaming and
occurred in direct response to the State's oppressive policies that
sought to destroy our way of life. In fact, when the initial bill, H.R.
6391, seeking to restore the Alabama-Coushatta Tribe (and another tribe
in Texas, the Ysleta del Sur Pueblo), was introduced in 1984, it made
no mention of our right to conduct gaming activities.
In 1985, Congressmen Ronald Coleman and Charlie Wilson reintroduced
the Restoration Act as H.R. 1344 and again, there was no mention of
gaming. Indeed, Congressman Wilson stated that ``the principal purpose
of the legislation is to give the Alabama-Coushatta Tribe the same
status as the other Indian tribes in the United States.'' During this
period, most tribes were not engaged in any gaming activities other
than a few tribes that had bingo operations, and our Tribe was not
engaged in any gaming activities.
However, in late 1985, State Comptroller Bullock, whose office
regulated charitable bingo in Texas, became concerned that our Tribe
might, in the future, operate unregulated bingo and demanded changes to
the bill. He employed scare tactics, stating, ``If this bill passes
like it's written, we might as well get the highway department to put
up a sign at the state line that says `Gangsters Welcome.' ''
In 1986, faced with deteriorating financial conditions and
increasingly desperate to pass the Restoration Act, we provided a
Tribal resolution to Congress not to operate gaming. Again, at that
time, the Supreme Court had not decided the Cabazon case, detailed
below, so the only thing we thought we may be giving up was bingo.
In February of 1987, the Supreme Court decided the case of
California v. Cabazon Band of Mission Indians, holding that tribes have
a federal right to govern gaming activities on a tribe's Indian lands,
consistent with State public policy. Thus, under Cabazon, the Alabama-
Coushatta would be allowed to engage in gaming activities because Texas
allowed bingo at that time, and now allows horse racing, dog racing and
a state lottery.
After the Cabazon decision, the Restoration Act (then H.R. 318) was
significantly amended to codify the rationale and holding of Cabazon;
see Testimony of Alex Skibine, 133 Cong. Rec. H6972-75. The House
concurred with the Senate's amendments to H.R. 318.
Significantly, at all times during the consideration of the
Restoration legislation (H.R. 318), Congressman Morris K. Udall was the
Chairman of the Committee on Interior and Insular Affairs of the U.S.
House of Representatives, which had general jurisdiction over Indian
legislation and affairs and had exclusive jurisdiction over H.R. 318
and all Indian gaming legislation. All Committee reports on bills,
including those on H.R. 318, were prepared under the supervision of,
and approved by, Chairman Udall; and as I am sure the members of this
Committee are aware, he was very well-respected and highly regarded and
his remarks should have carried great weight.
When Congressman Udall asked for and received unanimous consent for
House concurrence with the Senate's amendments, he confirmed that our
Tribe, like all other tribes, would have the benefit of the ruling in
the recent Cabazon decision:
The Senate amendment makes changes to Sections 107 and 207 of
the Bill. These sections deal with the regulations of gaming on
the respective reservations of the two tribes. It is my
understanding that the Senate amendments to these sections are
in line with the rationale of the recent Supreme Court decision
in the case of Cabazon Band of Mission Indians v. California.
This amendment, in effect, would codify for these tribes the
holding and rationale adopted in the Court's opinion in the
case.
133 Cong. Rec. H6975.
The pertinent language from the Restoration Act is as follows:
Section 207. GAMING ACTIVITIES.
(a) IN GENERAL.--All gaming activities which are prohibited by
the laws of the State of Texas are hereby prohibited on the
reservation and on lands of the tribe. Any violation of the
prohibition provided in this subsection shall be subject to the
same civil and criminal penalties that are provided by the laws
of the State of Texas. The provisions of this subsection are
enacted in accordance with the tribe's request in tribal
resolution No. T.C. 86-07 which was approved and certified on
March 10, 1986.
(b) NO STATE REGULATORY JURISDICTION.--Nothing in this section
shall be construed as a grant of civil or criminal regulatory
jurisdiction to the State of Texas.
(c) JURISDICTION OVER ENFORCEMENT AGAINST MEMBERS.--
Notwithstanding section 736(f) of this title, the courts of the
United States shall have exclusive jurisdiction over any
offense in violation of subsection (a) of this section that is
committed by the tribe, or by any member of the tribe, on the
reservation or on lands of the tribe. However, nothing in this
section shall be construed as precluding the State of Texas
from bringing an action in the courts of the United States to
enjoin violations of the provisions of this section.
Indian Gaming Regulatory Act, 25 U.S.C. Sec. 737.
Though the intent of Congress was to allow the Tribe the same
rights as other tribes to operate gaming, ambiguity exists in the
Restoration Act because the 1986 Tribal resolution not to operate
gaming was mistakenly retained within the Act, which otherwise codified
Cabazon. Professor Alex Skibine, then the principal Indian Affairs
Committee staff member who was assigned to the bill and who is now a
professor of federal Indian law at the S.J. Quinney College of Law at
the University of Utah, has testified that the Tribe's resolution was
mistakenly left in the final draft and should have been omitted.
Because of this mistake, the Fifth Circuit Court of Appeals has
held that our Tribe is not covered by the 1988 Indian Gaming Regulatory
Act, but, rather, gaming for the Tribe is governed by the Restoration
Act and that gaming on our lands is illegal. The Court relied largely
on the 1986 pre-Cabazon tribal resolution to overcome the more general
Cabazon language and barred the Tribe from gaming. In other words, the
Court ignored the intent of Congress.
Because of the failure of the Court to follow the law, the Court's
opinion has been criticized by legal scholars and those with personal
knowledge of the facts surrounding the passage of the Restoration Act:
It would seem to be a clear case of judicial activism in which
the courts have effectively undermined the intent of Congress
and even the authority of Congress under the Commerce Clause to
determine Indian law and policy. Only the Congress can correct
the court's errors.
Testimony of Virginia W. Boylan before the Senate Committee on
Indian Affairs, June 18, 2002.
Most egregious in the Fifth Circuit opinion is the concept that a
court can somehow alter the rights granted by Congress to tribes and
create different classes of Indian tribes. The Court, in this case,
undermined the intent of Congress and severely impacted the rights that
we would otherwise enjoy as a federally-recognized Indian tribe,
resulting in a severe injustice that should not be left uncorrected.
Conclusion
We request that language be added to Section 207 of the Restoration
Act clarifying that it was not the intent of Congress to treat the
Alabama-Coushatta differently, and that the Tribe should have the same
rights, and be regulated in the same manner, as other federally
recognized tribes under the Indian Gaming Regulatory Act.
Accordingly, in the interests of fairness, we ask for your help in
correcting this injustice and allowing us the opportunity, as Congress
intended, to be restored fully to federal recognition and to have the
same status, rights and obligations as do all federally-recognized
Indian tribes, as it pertains to gaming and all other forms of economic
development.
Thank you for your time.
______
Prepared Statement of Hon. Stanley ``Buck'' Smith, Chairman,
Confederated Tribes of the Warm Springs Reservation of Oregon
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