<DOC> [109 Senate Hearings] [From the U.S. Government Printing Office via GPO Access] [DOCID: f:26507.wais] S. Hrg. 109-443 INDIAN GAMING REGULATORY ACT AMENDMENTS ======================================================================= HEARING BEFORE THE COMMITTEE ON INDIAN AFFAIRS UNITED STATES SENATE ONE HUNDRED NINTH CONGRESS SECOND SESSION ON S. 2078 TO AMEND THE INDIAN GAMING REGULATORY ACT TO CLARIFY THE AUTHORITY OF THE NATIONAL INDIAN GAMING COMMISSION TO REGULATE CLASS III GAMING, TO LIMIT THE LANDS ELIGIBLE FOR GAMING __________ MARCH 8, 2006 WASHINGTON, DC U.S. GOVERNMENT PRINTING OFFICE 26-507 WASHINGTON : 2006 _____________________________________________________________________________ For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512ÿ091800 Fax: (202) 512ÿ092250 Mail: Stop SSOP, Washington, DC 20402ÿ090001 COMMITTEE ON INDIAN AFFAIRS JOHN McCAIN, Arizona, Chairman BYRON L. DORGAN, North Dakota, Vice Chairman PETE V. DOMENICI, New Mexico DANIEL K. INOUYE, Hawaii CRAIG THOMAS, Wyoming KENT CONRAD, North Dakota GORDON SMITH, Oregon DANIEL K. AKAKA, Hawaii LISA MURKOWSKI, Alaska TIM JOHNSON, South Dakota MICHAEL D. CRAPO, Idaho MARIA CANTWELL, Washington RICHARD BURR, North Carolina TOM COBURN, M.D., Oklahoma Jeanne Bumpus, Majority Staff Director Sara G. Garland, Minority Staff Director (ii) C O N T E N T S ---------- Page S. 2078, text of................................................. 3 Statements: Akaka, Hon. Daniel K., U.S. Senator from Hawaii.............. 43 Bullis, Paul, director, Arizona Department of Gaming......... 49 DesRosiers, Norman, commissioner, Viejas Tribal Government Gaming Commission.......................................... 47 Dorgan, Hon. Byron L., U.S. Senator from North Dakota, vice chairman, Committee on Indian Affairs...................... 37 His Horse Is Thunder, Ron, chairman, Standing Rock Sioux Tribe...................................................... 44 Hogen, Philip, chairman, National Indian Gaming Commission... 37 McCain, Hon. John, U.S. Senator from Arizona, chairman, Committee on Indian Affairs................................ 1 Appendix Prepared statements: Akaka, Hon. Daniel K., U.S. Senator from Hawaii.............. 59 Bullis, Paul (with attachment)............................... 60 Crooks, Stanley, chairman, Shakoppee Mdewakanton Sioux Community (with attachment)................................ 67 DesRosiers, Norman........................................... 81 His Horse Is Thunder, Ron.................................... 87 Hogen, Philip (with attachment).............................. 96 Spurr, Laura, chairwoman, Nottawaseppi Huron Band of Potawatomi................................................. 116 INDIAN GAMING REGULATORY ACT AMENDMENTS ---------- WEDNESDAY, MARCH 8, 2006 U.S. Senate, Committee on Indian Affairs, Washington, DC. The committee met, pursuant to notice, at 9:30 a.m. in room 485 Senate Russell Office Building, Hon. John McCain (chairman of the committee) presiding. Present: Senators McCain, Akaka, and Dorgan. STATEMENT OF HON. JOHN McCAIN, U.S. SENATOR FROM ARIZONA, CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS The Chairman. Good morning. In April 2006, the Committee on Indian Affairs began a series of hearing that have taken an in-depth look at the Indian Gaming Regulatory Act. IGRA was enacted in 1988, following the decision of the Supreme Court in the Cabazon case. Following the dictates of that case, Congress established a regulatory structure for tribes that conduct gaming on their lands. The intervening 17 years has seen an astronomical growth in Indian gaming, both in the amount of revenues generated and in the number of gaming operations established. Yet the act has not been amended to keep up with these changes. Regulators have scrambled to keep up and lessons have been learned about what is needed to create and maintain a fair and well-regulated industry. In response to the growth of the industry, on November 18, 2005, I introduced S. 2078, the Indian Gaming Regulatory Act Amendments of 2005. Essentially, this bill addresses three areas that I believe are in need of reform. First, the bill clarifies that the National Indian Gaming Commission has authority to promulgate and enforce minimum internal control standards as to class III gaming, a topic on which this committee held a hearing last year. Second, the bill tightens restrictions on off-reservation gaming. Several committee hearings have focused on this problem and the committee has received testimony from numerous parties on all sides of these issues. Last, the bill expands the NIGC chairman's authority over contract approvals to include not only management contracts, but also consulting, development and other significant contracts. Unfortunately, when IGRA was drafted we unwittingly tied the hands of the NIGC by requiring approval only for management contracts. Among the lessons learned over the past 17 years is that in order to avoid NIGC review, some unscrupulous contractors have fashioned agreements as consulting or development contracts. That is, something other than management contracts that require NIGC review. In these cases, tribes run a risk that contractors will enforce unfair contract terms and tribes and patrons run the risk that the tribe will contact with unsuitable partners. S. 2078 extends NIGC approval to all significant gaming operations related contracts, so that Indian tribes remain the primary beneficiaries of their gaming operations, which was and remains among the fundamental purposes for which IGRA was enacted. I am aware that some tribes are concerned that the bill language may overburden the NIGC and duplicate activities already performed by their tribal and State regulatory authorities. Amending IGRA to address concerns about these consulting contracts and contractors, while maintaining an efficient Federal regulatory agency, is a goal shared by all. I look forward to hearing from the witnesses today, anticipating that they will provide us a real world view of how to achieve this goal. I just want to reiterate a point. There are many Native Americans, particularly gaming tribes, who have approached me and said, we don't even need this issue reviewed, much less changed. Any act, any legislation that is 18 years old clearly needs review. And second of all, any operation that has gone from $500 million to $20 billion a year and continues to go up obviously needs to be scrutinized and looked at. Things have changed since 1988. So I steadfastly reject, steadfastly reject some kind of allegation that we should not be reviewing and making necessary changes to the Indian Gaming Regulatory Act. So this committee will mark up on March 29 a bill, and it will be subject to amendment, and we will try to move it to the floor of the Senate. [Text of S. 2078 follows:] <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> The Chairman. Senator Dorgan, welcome. STATEMENT OF HON. BYRON L. DORGAN, U.S. SENATOR FROM NORTH DAKOTA, VICE CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS Senator Dorgan. Mr. Chairman, thank you very much. As you have indicated, this is a hearing, one of several where we have reviewed various provisions of the Indian Gaming Regulatory Act to determine whether the act needs to be adjusted or changed or amended in any way. Part of the stimulus for this comes from the Colorado River Indian Tribes decision. I think it raises reasonable questions. I have been helped enormously by these hearings because I have been forced to go back and take a look at what the original thinking was, what the history was with respect to the construction of these laws. Your legislation is a starting point. Some say that it goes too far in some areas. I share that view. On the other hand, I think to suggest that there is nothing going on here that needs any Federal legislation is being oblivious to the obvious. We do need, it seems to me, to take a good look at what we have and what we should do. I commend the chairman for stimulating this discussion. I think these hearings are necessary, not just worthy, but necessary. We have an Indian gaming industry now of nearly $20 billion a year. It provides needed revenue to be helpful to the tribes to meet their obligations and funding for some critical services. I want to make certain that Indian gaming is as well regulated as can be, to make certain that it continues to be able to be a generator of revenue for the tribes with which to do good things. One way to do that is for us to have these kinds of reviews and these hearings. So Mr. Chairman, I commend you for that. I look forward to working with you as we proceed to a markup in this matter. The Chairman. Thank you very much. Philip Hogen is the chairman of the National Indian Gaming Commission. Welcome back, Mr. Chairman. STATEMENT OF PHILIP HOGEN, CHAIRMAN, NATIONAL INDIAN GAMING COMMISSION Mr. Hogen. Good morning, Chairman McCain and Vice Chairman Dorgan. I am delighted to be here on behalf of the National Indian Gaming Commission. My fellow commissioner, Chuck Choney from Oklahoma, is present here as well. So the full commission as it stands today is here. Indian country owes this committee a great debt of gratitude for the work you did to create the Indian Gaming Regulatory Act. That, of course, did not create Indian gaming, but it created the structure that has permitted the development of a very powerful industry that has brought economic development to Indian country that languished in poverty for generations. It has not solved all the problems, but it has solved a lot of them. So somebody in my position, who chairs the Federal regulatory body that has oversight has a heavy responsibility to make sure, as things go forward, they go in an orderly fashion and they complement what is happening, not complicate it. But I certainly agree with the sentiments that have just been expressed that given the passage of time, the growth, the development of the industry, it is appropriate to look at the Act and to see if there are things that might be improved or revised. The two areas I want to comment on this morning are the clarification of NIGC's class III authority. I testified in September of last year about this and want to associate these remarks with that testimony because all of that is still true. The Chairman. I think we will see it is not a fine line between class II and class III. Mr. Hogen. Well, that is a significant challenge, but in my testimony in September I attempted to point out how we got into the regulation of class III to begin with. I think at the time IGRA was designed, many thought it will always be bingo. Well, it wasn't, and 80 percent of it is not bingo; 80 percent of it is class III gaming. That is where the money, that is where the action is. So to that end---- The Chairman. These are slot machines that look---- Mr. Hogen. Slot machines and house banked games, blackjack and so forth. Yes. So recognizing this in 1999, starting in 1998, the National Indian Gaming Commission developed minimum internal control standards. We did not invent the concept. We just adopted it and tried to improve it and applied it to all of Indian gaming, class II and class III. We said these are the rules you have to follow at a minimum to track the dollars as they flow through the gaming operation and they go to the tribe. These are the things you have to do to ensure that the game is fair. So for the first time, we had a rulebook, we had a yardstick, and we were able to go out and measure the performance of tribes' gaming operations and regulation. I think it worked splendidly. Most tribes probably were ahead of the game, were already there, but there were a lot of tribes that were not. So we were able to bring them up to that standard. Of course, since that time, we have gone out to look periodically at how those performances measure up. We have done nearly 40 audits of individual facilities since we adopted those regulations. We found a lot of violations. We found over 2,300 violations of minimum internal control standards. That probably sounds like a lot. It is a lot, but it is not a lot compared to all of the compliance that occurs. But to say that nothing is wrong out there would be a misstatement. The average number that we would find in these approximately 40 MICS audits would be about 64 relatively serious violations at each facility. The kinds of things we would find is a failure of the tribe to regularly do an analysis of the statistical performance of their gaming. They should monitor each slot machine to see if it is performing as the specs say it should. If it is not, there are questions to raise, and either somebody is taking the money or something is wrong with the machine. We found ineffective key control. That is, all these machines and cages and so forth are locked, and not everybody is following the rules with respect to that. The jackpot fill and drop process is not always tracked the way it should be. Occasionally, cash variances occur and they are not always investigated as the controls say that they ought to be. Sometimes there is not the appropriate segregation of duties within the facilities, if the same guy is counting and doing the approval, and that sort of thing. Internal audits have not been satisfactory, they are getting a lot better, but there was a time when there just was not an appropriate internal audit effort at the facilities. One of these situations will not necessarily mean a disaster, but let me just share with you an incident that we currently are working with where a couple of these things combined to result in a significant tribal loss. The tribe was not monitoring the statistical analysis of its machines. When we did our audit, we observed this. When they got around to doing that, they found that there were some significant shortages or inconsistencies with what the dollars that they were counting were compared to what was projected. It was also discovered that there was a blind spot with respect to their surveillance system. When they finally put all of this together, it was discovered that some of the drop team was taking the money before it got to the cage. We do not know for sure how much was taken, but maybe over $250,000. Had the MICS been followed from day one, I think that would have been avoided. Now, does this mean that there has to be a Federal rule and a Federal agency to do this? Not necessarily. The tribes could do this on their own, but obviously they do not always do that. So without the ability to promulgate these rules and to apply them to class III gaming, instances like this are going to occur. The Chairman. And to oversight. Mr. Hogen. Say again? The Chairman. And to oversight. Mr. Hogen. Absolutely, yes. The regulation sometimes is the stepchild of the system. That is, it is not a revenue generating part of the business. So there are temptations to shortcut it. But if you have somebody looking over your shoulder and saying these are the rules you have to play by, there is less of a temptation to do that. We have an all Indian system here. That is, we have the National Indian Gaming Commission, the law you wrote says you have to have two members on that commission that are tribal members. Of course, they oversee, then, what the tribes who do the heavy lifting, who do all the day to day stuff, do. So if we continue to have the authority that we started with back in 1999, as I say, I think it has worked beautifully, I think we can continue to ensure the integrity that the industry needs. People come to the tribal gaming facilities in droves and part of the reason they do that is they have a good reputation for having a fair game, for having integrity, and of course the fruits of the operation, building tribal communities and so forth. But if that starts to erode, starts to disintegrate, I think it bodes ill for the future of this industry. So I refer the committee to my testimony where I attempt to track the history of how we got into this, where we went, and why it is effective, but if we are handcuffed, if we cannot look over 80 percent of these revenues, I think that the industry will suffer. Also attached to my testimony is a chart, and this was also submitted to the committee in September, that looks at the tribal-State compacts that tribes enter into for class III gaming. Those compacts vary greatly, but many of them adopt the NIGC minimum internal control standards. Some unfortunately have no reference to internal control standards, and so if we are not out there, we are afraid what needs to be done will not get done. So if there is one thing we would ask for at the top of the list with respect to any revision of the Indian Gaming Regulatory Act it would be clarification of that authority. We, of course, have the Colorado River Indian Tribes v. NIGC case or decision on appeal, but we cannot predict how that will come out, and I think it would be better if, rather than doing that in a judicial forum, if Congress would say, this is what we intended: A Federal oversight role with respect to the dominant form of gaming. The Chairman. Mr. Chairman, when do you expect the Court of Appeals to rule on that case? Mr. Hogen. The briefing schedule is just being implemented, later this month, the first briefs will be filed, and then of course it is a 60- or 90-day schedule. You cannot predict when the argument will be or how long. The Chairman. We are talking about a minimum of 3 or 4 months, at a bare minimum. Mr. Hogen. Absolutely. The Chairman. More likely 1 year. Mr. Hogen. It could well be. Of course, that is not necessarily the end of the line. The Supreme Court might want to visit the issue. With respect to the contracting provision, NIGC has complained for years that there are contracts out there that under the relatively narrow definition of management contracts, that IGRA now provides we could not adequately provide the oversight we think Congress intended. The committee has been responsive. S. 2078 expands the scope of what we might do. As we have studied this, we are asking ourselves, maybe we have asked for a little too much, or maybe now that we are better informed, we could be a little more articulate with respect to just how best to address the situation. I think it is important first of all to distinguish what NIGC does, as opposed to other gaming jurisdictions with respect to contracts and contractors. Many established gaming jurisdictions are concerned about contractors, those folks that do business with the casinos and the bingo halls. To that end, they license the people that do that business. They do suitability determinations, background investigations, but thereafter they kind of let the parties do as they wish. If the casino wants to make a bad deal with the contractor, they are free to do that. Well, at NIGC we have an additional mandate. Not only do we want to make sure the folks that deal with tribes are suitable to do so, but that in our role as the trustee, we want to make sure that tribes are not taken undue advantage of. To that extent, we go over those management contracts that IGRA tasked us with with a fine-toothed comb, and we make sure that what IGRA says, the manager cannot get more than 30 percent of the proceeds, it cannot last for more than 5 years, is adhered to. Where we found it problematic was, as you mentioned in your opening statement, Mr. Chairman, agreements were written that were not called management contracts, but actually did get the third party into the management, and we were not there scrutinizing that. We were not making suitability determinations. So we asked that we have an expanded authority. Tribal gaming operations enter into literally thousands of contracts. They buy paper towels. They buy poker chips. They enter into consulting agreements, things like that. I think there is a risk that if NIGC were tasked with looking at each and every contract, that would be overkill. We might become a bureaucratic bottleneck and tribes probably know a whole lot more about buying paper towels than the NIGC would. The Chairman. Well, suggest language to us on how we can differentiate between what you think is correcting an abuse, and not installing micromanagement. Okay? Have you got an idea there? Mr. Hogen. We do, and my staff has been working with the committee staff to try and put together language that would narrow the category of gaming contracts wherein we would have a role. But there are instances where nefarious people have gotten into casinos kind of through the back door we think that maybe there should be a permissive category there where we could reach out and identify, and say we would like to look at this garbage disposal contract and background that firm to make sure organized crime is not trying to come in from another direction. So I think we can get there without becoming this bottleneck that I am concerned about, but clarity is required. We have some specifics in that connection in our testimony and we will continue to work with the committee staff and the committee to try and achieve that. So that fairly well summarizes what is contained in my statement. I ask that it be included in the record and I stand ready to respond to questions that might arise. [Prepared statement of Mr. Hogen appears in appendix.] The Chairman. I thank you very much for coming back, Mr. Chairman. I think we need to correct the Colorado River decision. I don't know if we can or not, but I think it is obvious. Many times, I do not understand judicial decisions, but I certainly do not understand that one because IGRA was framed with having in mind oversight of a commission. To deny them that necessity, in my view, is hard to understand. That is why I have some confidence in the appeals process, but we probably, at least in my view, have to fix it legislatively. I thank you, Mr. Chairman, you were very clear and straightforward as always. Senator Dorgan. Senator Dorgan. Mr. Chairman, could you introduce the other commission members? You said all of the commission members are here with you. Mr. Hogen. Both of us are here. Our three-member commission group is down to two. Senator Dorgan. Okay. Mr. Hogen. Commissioner Chuck Choney from the Comanche Tribe, a retired FBI agent, is our other commissioner. Senator Dorgan. Thank you very much. And what is the prospect of filling the third? Mr. Hogen. Well, I know that that is on the desk of the folks at the Secretary of the Interior's office and White House Personnel, but we have not been told more about that. The Chairman. How long has it been empty? Mr. Hogen. Nelson Westrin went home to Michigan on December 31, so it is just a little over 1\1/2\ months. Senator Dorgan. I do not want to ask a lot of questions here. I will send you a good number of questions that relate to the kind of thing that Senator McCain just asked you about, how to tailor some of the provisions that I think might be broader than is advisable. Let me ask about the audit activity of the commission and the commission staff. Can you give me some sense of what kind of auditing goes on during the year and what those audits are finding? Mr. Hogen. Okay. We have a staff of auditors. One of the main things they do all day every day is go in a group, we will take several auditors to an individual facility. They will say we want to look at the records to see, (a), what your rules are; and (b) did you follow them?; and is there a paper trail there to document this? They will spend a couple of weeks, maybe longer depending on the size of the operation, review those kinds of things. They will work with the staff at the gaming facility, with the tribal gaming regulators to ask questions and make sure they understand what happens. At the end of that exercise, they will prepare a report and they will list the exceptions, the deficiencies that they have identified. They are auditors. That is their business. They go nitpicking. They look for that stuff, and they almost always find. After that is done and they send the report to the gaming facility, they say, will you please address each of these exceptions that we have identified, and give us a report. We are going to come back and see if those have been solved. Now, in some instances they will say you misunderstood; we were not doing that wrong; here is why we are doing it right. In other instances, they will say we will fix it. Senator Dorgan. Mr. Hogen, I would understand that to be the approach, but I am talking about what quantity of work is done relative to the number of gaming facilities across the country? Mr. Hogen. I wrote some of those numbers down. Senator Dorgan. You can submit that for the record if you wish. Mr. Hogen. There are nearly 400 operations and we have only done about 40 audits. Senator Dorgan. So about 10 percent. Mr. Hogen. Let me add that one of the things our minimum internal control standards require is that when this annual independent financial audit is done, that auditor, that CPA firm must also look at the tribe's compliance with the MICS, prepare a report, and send that to us. That, of course, helps us select where we are going to go with our next audit. Senator Dorgan. If you would, you could submit this to us. Do you believe that the commission should be given expanded authority to monitor and enforce tribal revenue allocation plans? Give us examples of why you believe the commission would need that expanded authority. Mr. Hogen. Okay. NIGC is responsible for taking enforcement action if there are violations of the Indian Gaming Regulatory Act, our regulations in the CFR, and that tribal gaming ordinance that the tribe adopts to get into gaming. If they are going to do per capita payments, they have to adopt a revenue allocation plan that is approved by the Secretary of the Interior. After the Secretary approves that plan, she has no further responsibility or authority to monitor its compliance or to take action if it is not complied with. But because it is a creature of the Indian Gaming Regulatory Act, I think NIGC has the responsibility to inquire, is it being complied with. It is not crystal clear in the act that that is one of our duties, but I think by reasonable implication that we should look there. It would be useful to know if we should do that with greater specificity. There have been instances where a plan has been approved by the Secretary of the Interior, and the tribe is actually distributing, and that plan typically will limit the percentage that can be made, for example, for per capita payments. But there have been instances where they are doing a whole lot more per capita payment than is set forth in the plan, and because of competition in the area, their revenues go down, and it becomes politically unpopular at the local level to say let's cut that per capita, and tribal programs that otherwise would be funded by tribal gaming revenue suffer. Nobody is watching the store if NIGC does not come out there and inquire into that. Senator Dorgan. All right. I will submit some additional questions. Mr. Hogen, it is helpful for us and for our staffs as well to be able to have access to you and to receive your recommendations and suggestions as we think through the range of opportunities for legislation and what we should be considering. So thank you very much for appearing. Mr. Hogen. Thank you. The Chairman. Senator Akaka. STATEMENT OF HON. DANIEL K. AKAKA, U.S. SENATOR FROM HAWAII Senator Akaka. Thank you very much, Mr. Chairman. I want to thank you, Chairman McCain and Vice Chairman Dorgan, for holding this hearing. After hearing your testimony, I share the concern that you have and also the concern of many here with regard to considering oversight and ensuring accountability of not only gaming tribes, but also the contractors that they do business with. Although S. 2078 will have a substantial regulatory impact on tribal gaming, we cannot ignore that this legislation may impact the ability of Indian nations to exercise their sovereignty. That is a personal concern. Tribal governments have established gaming regulatory systems and have demonstrated their vested commitment to comply with the IGRA. As we move forward to address the regulatory authority of your group, the NIGC, I am hopeful that we can proceed in a manner that acknowledges and strengthens the government-to-government relationship between the United States and tribal governments. My question to you is one that has to do with oversight. Is there a schedule that you have of oversights? Mr. Hogen. We do not have a strict schedule, for example, that says every third Tuesday we will be visiting a particular facility, but we have five regional offices plus our region here on the East Coast out of the Washington, DC office, with a team of investigators and auditors at each of those regions. They visit all of the facilities in their region, hopefully several times a year. Of course, there will be facilities that have some problems that will be visited more often than that, but every year we will visit the facility, hopefully several times, and then we select a number of tribes or a number of operations each year to do a comprehensive minimum internal control standard audit. We will be able to do more of those more recently than we were able to before because we have more auditors now, and we are still hiring auditors. Ideally, we would get to maybe 20 a year, as opposed to the 10 or so that we have been able to do up to this point. But at each facility not only do we receive their records, their audits, and do we look at it that way, but we actually walk in the door, talk to the people, and discuss the operation at the site. Senator Akaka. I look forward to members of this committee having the opportunity to fully review any proposed changes in the future to this bill. Also again, my interest in having the tribal governments, giving them the opportunity to look at this legislation as well, and what impact it may have on them. Mr. Chairman, I would like to just place my statement in the record. Thank you very much. The Chairman. Without objection. Thank you very much, Mr. Chairman. We will appreciate your continued fine work, and thanks for coming back. The next panel is Ron His Horse Is Thunder, chairman, Standing Rock Sioux Tribe; Norman DesRosiers, who is the commissioner of the Viejas Tribal Government Gaming Commission; Paul Bullis, who is the Director of the Arizona Department of Gaming. Welcome. We will begin with you, Chairman His Horse Is Thunder. STATEMENT OF RON HIS HORSE IS THUNDER, CHAIRMAN, STANDING ROCK SIOUX TRIBE Mr. His Horse Is Thunder. Mr. Chairman and honorable members of this committee, my name is Ron His Horse Is Thunder. I am the great-great-great-grandson of Chief Sitting Bull. I am the chairman of the Standing Rock Sioux Tribe in North and South Dakota. I appreciate the opportunity to testify before the committee on this legislation. I have a longer written statement which I wish to submit for the record, and I will summarize our position on this legislation. The Chairman. All the written statements will be made part of the record. Please proceed. Mr. His Horse Is Thunder. Thank you. Mr. Chairman, while I appear as a representative of my tribe and our position, it is shared by 32 members of the Great Plains Indian Gaming Association covering the States of North Dakota, South Dakota, Nebraska, Iowa, and Kansas, as well as the member tribes of the Minnesota Indian Gaming Association and the six member tribes of the Montana Indian Gaming Association. These tribes are strongly opposed to the provisions of S. 2078 and in particular to the provisions conferring power on the National Indian Gaming Commission to adopt and enforce minimum control standards and other regulations on class III Indian gaming. It is important to understand that the Indian Gaming Regulatory Act did not empower tribes to engage in gaming activities. That right arises from the status of Indian tribes as sovereign nations under Federal Indian law. That right was made clear in the 1987 decision of the Supreme Court in the Cabazon case. This was, of course, before Congress passed the Indian Gaming Regulatory Act. The fact of the matter is that IGRA was a limitation imposed by Congress on that right. Most tribes were opposed to the enactment of the legislation restricting their rights to get involved in gaming activities, but the anti-Indian forces of the day were strong enough for Congress to force it to act. The few friends the tribes had in Congress had to make several compromises with anti-Indian forces. One of these compromises involved tribal class III gaming. Against the wishes of tribes, IGRA provides that class III gaming on Indian lands will be illegal without tribal-State class III compacts. This was because the States insisted that they have the right to be involved in the regulation of all class III gaming. We did not like it, but that was what we were stuck with. Even after the Supreme Court decision in the Seminole case that prohibits tribes from suing States as provided in IGRA, most Indian tribes involved in class III gaming have been able to reach some kind of compact with the States. As intended by IGRA, these compacts make provision for the regulation of tribal gaming. These compacts provide for the sharing of regulatory power between the tribe and the State. Some compacts provide for a lot of State regulation and some don't. That is a decision made by the State and the tribes. In the 1990's, NIGC, over the strong opposition of tribes, promulgated its MICS. These MICS imposed the most detailed kind of regulation on class II and class III gaming. Even though most tribes already had their own regulatory schemes under the compacts, they had to conform to the NIGC MICS by the year 2000. Finally, one tribe challenge the right of the commission to enforce its MICS. Last year, the Federal court here in Washington, DC found that the Indian Gaming Regulatory Act did not confer that power on the National Indian Gaming Commission. Now, we are faced with legislation that would overturn this Federal court victory for tribal rights, and specifically confer that right to regulate class III gaming on the commission. Mr. Chairman, we do not understand why the legislation is necessary. In the State of North Dakota, the leading Indian and non-Indian officials are satisfied with the State-tribal compact, that the compacts make adequate provisions for effective regulation of our gaming. We thought that that was what IGRA intended. In 2004, approximately $7 million was spent on regulation of tribal gaming in North Dakota alone. Over 300 personnel were assigned to this very function. For the five tribes in North Dakota, approximately 15 percent of the total gaming personnel are involved in regulatory activities. The North Dakota tribal-State compact requires that the five tribal nations, Governor and the attorney general must meet every 2 years to review and adjust any problems concerning regulatory and policy issues. These biennial reviews have taken place with both Democratic and Republican attorneys general and two different governors. There has been no major problem that has been reported concerning our tribal governmental gaming regulatory activities to date. In fact, the Attorney General on several occasions has commented on his outstanding working relations with the tribal nations of North Dakota concerning his oversight responsibilities in regards to the tribal-State gaming compact regulatory requirements. There is no scandal in North Dakota regarding our gaming. The rights of participants in our gaming activities are being effectively and adequately protected through regulations under our compact. Nor are we aware of any significant scandal in the regulation of Indian gaming in other States. We have followed the hearings this committee has had on this issue in the last year. We have not seen any record made that would justify the further erosion of our tribal sovereignty and the right of self-government. Mr. Chairman, we know that some have compared the amount of money the State of Nevada spends on regulations of its gaming industry with a budget of the National Indian Gaming Commission. I have been told that Nevada spends $80 million a year, while the commission spends $8 million a year. If that is the measure, of course it looks like Indian class III gaming is not being adequately regulated. However, it totally ignores the fact that Indian tribes spend over $200 million a year on their own regulatory efforts. This does not even include the millions that we pay to State agencies under the compacts for their regulatory efforts. To discount and disregard the millions of dollars that tribes spend for their own regulatory efforts is to show a regrettable disrespect for the ability of Indian people to govern their own affairs. It is to say to my Indian people that the non-Indian world believes that we as Indians cannot be trusted to regulate ourselves and to protect our participation in our gaming enterprises. Mr. Chairman, I know the hearing was to be limited to the class III provisions of S. 2078. However, as I noted, my tribe and many of the other tribes are very much opposed to the other provisions of the bill. These include the provisions to subject our day to day contracting to NIGC's control, to permit the Secretary of the Interior to decide if our tribal decision to make per capita payments is a reasonable method of providing for the general welfare of our members, and to eliminate the ability of tribal and State governments to decide if an off- reservation land transfer to Indian gaming is okay. Mr. Chairman, the tribes I represent are opposed to the MICS provision of S. 2078 and all of the other burdensome provisions. I would close my statement with a comment that this legislation, which is supposed to be for the benefit of Indian tribes, does not contain a provision fixing the problem created by the Seminole decision. When Congress made class III gaming on Indian land illegal unless done under State-tribal compact, it was putting tribes at the mercy of States. That is why Congress authorized the tribes to sue the States if they refused to negotiate or negotiated in bad faith. When the Supreme Court struck that provision down, it opened up Indian tribes to coercion by the States. They now tax us when this was prohibited by the Indian gaming regulatory practices. The Chairman. Mr. Chairman, your time has expired. Mr. His Horse Is Thunder. Thank you, Mr. Chairman. [Prepared statement of Mr. His Horse Is Thunder appears in appendix.] The Chairman. Commissioner DesRosiers, welcome. STATEMENT OF NORMAN DesROSIERS, COMMISSIONER, VIEJAS TRIBAL GOVERNMENT GAMING COMMISSION Mr. DesRosiers. Thank you, Mr. Chairman, Mr. Vice Chairman. It is an honor and privilege to have been invited here to speak to you again today on behalf of my regulatory colleagues and myself. As you know, we are the ones that are going to be ultimately responsible for implementing and enforcing whatever our elected leaders enact. Based on that, first, we would like to really express our appreciation and compliment the committee on their willingness to hear from us regulators. We have commented on a number of areas that have been submitted for change in IGRA, but my comments here will focus on gaming-related contracts and contractors. Forgive me for reading those comments, but I think time constraints dictate that. We fully understand and recognize that there have been abuses in the past where unscrupulous contractors have taken advantage of tribes. We understand the desire to address this issue in amending the act. Section 2703, paragraph 11 attempts to define gaming-related contracts. Throughout that definition, there are numerous references to gaming activity. Without a very clear definition of gaming activity, this section is open to very broad interpretations which would virtually be all-inclusive of any contract that the tribes' casinos entered into, such as training or IT assistance, marketing studies, et cetera. We also believe that the tribes should be free to develop economic enterprises such as hotels, golf courses, shopping centers, et cetera, without NIGC involvement in contracts. However, a broad interpretation of the word ``ancillary'' in paragraph (b) could be argued to include all other such tribal economic enterprises. Paragraph (a)(2) of this section suggests that any contract which includes a contractor advising or consulting with a person that exercises material control over gaming activity will require NIGC approval, with suitability findings of the contractor. This is very broad and all-inclusive, and as a matter of practicality, we really feel NIGC is going to be unable to manage this. As drafted, the language would require NIGC to review and approve hundreds of contracts every year for every tribal gaming facility in the country, bringing business to a halt in many instances. The broad definition of gaming-related contracts in section 11 would encompass numerous contracts for services by contractors with no ability to significantly affect the management of the facility. Because there is no threshold, no dollar threshold mentioned in the provisions that would trigger review by NIGC of every contract, and section 11 encompasses any contract related to the operation or management of gaming activity, even a contractor or a contract for $500 worth of chairs carved by a local woodcarver for purchase in a local casino poker room would require that small vendor at his own expense to submit his contract to NIGC. Established small vendors in rural areas where many tribal gaming facilities are located, providing service such as electrical work or catering work, would be unable to afford the cost of doing business with tribes and unable to compete. Paragraph (b) of the gaming-related contract definitions suggests that development or construction contracts of $250,000 or more would require NIGC approval. We believe this dollar threshold is unreasonably low. Most gaming facilities are in constant motion with remodeling, expansion, or improvement projects that involve contracts of $250,000 or more. To require every one of these contracts to have NIGC approval and every contractor to be found suitable would be overly burdensome and impose major delays to projects which would negatively affect tribal gaming operations. Tribal casinos need to be able to quickly and immediately respond to catastrophic failures of infrastructure, structures or equipment. They would be unable to do that and go out and immediately fix things and buy the necessary equipment under contracts if they required prior NIGC review. The scope of contracts related to the construction of gaming and ancillary facilities would capture such vendors as waste water consultants, architects and environmental engineers who are critical components for keeping a casino functioning in an environmentally sound manner, but who have absolutely no control over any gaming activity. This next area, which I can personally attest to, being caught in this quagmire, I think is important. If these contracts should happen to be with publicly traded companies, an entirely new set of complexities come into play. Very often these publicly traded companies are wholly-owned subsidiaries of other publicly traded companies, and in many of these, five percent or more of the stock is held by other publicly traded investment companies. So it is easy to see how NIGC could get bogged down in backgrounding officers and directors of a myriad of different companies just for one contract with a tribe by one of those companies. I see my red light is on, so I will jump toward the end. For these reasons, we believe any Federal approval of gaming-related contracts should be submitted only that affect tribes and companies that have entered into management or consulting agreements, or finance agreements, that have their fees based on a percentage of net revenues. I think that is where most of the abuses have been in the past. Also, any contractors, of course, which exercise significant material control over the gaming facility. Again, I would like to emphasize, we understand the desire to address the issues of the contracts and contractors. It is neither our intent nor desire to appear as overly critical or as obstructionist. However, this is a highly complex area requiring a great deal of thought to make it workable. We share the same goals as the committee, to keep undesirables out of Indian gaming and for tribes to be the primary beneficiaries of their tribal gaming revenues. At the same time, we must endeavor not to stifle or inhibit economic progress. I want to thank you again for the opportunity to speak here and I would be happy to answer any questions. [Prepared statement of Mr. DesRosiers appears in appendix.] The Chairman. Thank you very much. Mr. Bullis, welcome. STATEMENT OF PAUL BULLIS, DIRECTOR, ARIZONA DEPARTMENT OF GAMING Mr. Bullis. Thank you, Mr. Chairman. Good morning, Mr. Vice Chairman. My name is Paul Bullis. I am director of the Arizona Department of Gaming. We are the State agency which, along with Arizona's Indian tribes and the National Indian Gaming Commission, oversees Indian gaming in Arizona. Thank you for the opportunity to speak today. I would like to address some of the provisions of S. 2078 from the perspective of a State regulator. More importantly, I speak from the perspective of a State regulator where the State and tribes have developed a successful partnership for the effective oversight of Indian gaming. That partnership between sovereign governments has as its cornerstone our tribal-State compact. Although the compact is the cornerstone of our partnership, what makes that partnership work is communication, discussion, engagement and a process for resolving issues. My overall message is that when considering amendment to the Indian Gaming Regulatory Act, the committee should take into consideration success stories such as Arizona. Senator Dorgan. Mr. Bullis, can you pull that microphone a bit closer? Mr. Bullis. Yes; I am sorry, Senator Dorgan. I would hope and request that any amendments would be crafted to not disrupt those successes. I will first address those provisions of S. 2078 that deal with the National Indian Gaming Commission's role in approving gaming-related contracts and determining suitability of gaming- related contractors. These provisions would create overlap between the activities of the Arizona Department of Gaming and the NIGC. Let me discuss the role of the Arizona Department of Gaming in this area. Under our tribal-State gaming compact, the Arizona Department of Gaming certifies all persons other than regulated lending institutions that provide financing to tribes for gaming facilities, all management contractors engaged by a tribe to assist in the management or operation of the gaming facility, all manufacturers and distributors of gaming devices, and all persons providing gaming services in excess of $10,000 in any 1 month. Our certification process involves a determination of suitability. Each company, each principal of a company, and each individual providing gaming services must undergo a thorough background investigation. This includes a criminal history, credit history, financial background, regulatory history, and other pertinent information. Manufacturers and distributors of gaming devices and other items used in the play of class III games undergo a particularly rigorous investigation, including site visits and face to face interviews. Tribal regulators are also required to license each of these persons and companies. The universe of persons required to be certified by the Arizona Department of Gaming I believe is larger than and includes the universe of gaming-related contractors defined by S. 2078, which would also have to be approved by the NIGC. This is the area of overlap where both the Arizona Department of Gaming and the NIGC would be approving the same gaming-related contractors. There is, though, a role laid out for the NIGC under S. 2078 in this area where there is no overlap. That is the area of review and approval of gaming-related contracts. The Arizona Department of Gaming reviews only the suitability of the vendors. We do not review the terms of the agreements themselves, nor do we approve those agreements. That would be solely within the purview of the NIGC. In that area of overlap where the Department of Gaming does play a role, we would hope that the intent of Congress would not be to preempt our role, especially where we have performed it effectively, nor to preempt the efforts of other States that are also performing effectively. I would also like to address the proposal contained in S. 2078 to clarify the NIGC's authority to promulgate minimum internal control standards. Governor Janet Napolitano has previously addressed this issue in her letter of October 4, 2005 to this committee. Let me summarize Governor Napolitano's position. When the State and tribes were negotiating the current compact, the NIGC's minimum internal control standards applying to class III gaming were in effect. The State and tribes recognized the importance of internal controls in the operation and regulation of casinos, and so incorporated the NIGC's MICS in one of the appendices to the compact. If the NIGC had not issued its minimum internal control standards, which had to be complied with by the tribes in any event, I am quite certain that our compact would not contain comparable controls. The point to be made is that the existence of the NIGC's MICS issued under the NIGC's presumed authority at the time was instrumental in making Arizona's compact as strong as it is in terms of protecting the integrity of gaming. We therefore support language in S. 2078 clarifying that the NIGC has authority to issue minimum internal control standards governing Class III gaming. Thank you. [Prepared statement of Mr. Bullis appears in appendix.] The Chairman. Thank you very much. I want to thank the witnesses for being here. Mr. DesRosiers, I am somewhat unclear on your testimony regarding so-called participation agreements between tribes and slot machine manufacturers. You indicate that requiring the slot machine manufacturers to have background checks would change the way the industry does business. Is that correct, in your testimony? Mr. DesRosiers. That is not what I intended. We already background all the machine manufacturing companies and license them. Every contract, though, there are contracts, hundreds of them, with participation agreements which require a percentage of each machine in these wide area progressive banks to be paid. For every one of those contracts, which I personally review, but to have to go to NIGC would be overly cumbersome. The Chairman. Do you acknowledge there may be a need for an expanded NIGC authority? If you were making changes, what area would you address, perhaps expanded authority for the NIGC? Mr. DesRosiers. I am not sure where I would put that. We support the notion of, and I do not speak for all tribes and tribal regulators, our tribe supports the notion that they should have authority over Class III minimum internal controls, to preserve the public perception of the integrity of Indian gaming. As Chairman Hogen already testified, virtually all the tribes are there anyway. I mean, we are already complying with those MICS. In the past, in years past, not in this testimony, I would have liked to have had NIGC to have the authority to help me on my request, not to be mandated to be in charge of it, but to assist me in backgrounding some contracts and contractors. There are occasions where companies that are so large think that they do not need my tribe's business and don't want to be bothered with the attempts that we make to background and license them. The Chairman. And do you agree that there have been cases of unscrupulous individuals or companies coming in and signing these contracts and basically exploiting the Native American tribes by taking too much money from them. Would you agree with that? Mr. DesRosiers. I would have to agree. I have seen that first hand. The Chairman. Mr. Bullis, would you agree with that? Mr. Bullis. Yes; Senator McCain. The Chairman. Mr. Bullis, this legislation calls for the NIGC to perform background investigations and make suitability determinations on a wide range of persons. Your background and your experience is pretty important. Can you share your experience with us? For example, how long a process is it for your agency to do a background investigation and make a determination? Mr. Bullis. Certainly. It is important to recognize that our agency divides up the different kinds of vendors and contractors. The most significant types are those vendors that provide equipment that is used in the play of Class III games. In Arizona, there are about 70 in that category right now. We have about 460 vendors that provide goods and services that are otherwise used in casinos. They do not receive the same depth and degree of scrutiny. Clearly, those vendors that are providing equipment used in the play of class III games get the much more in-depth level of scrutiny. In terms of the time period that it takes us to do those types of investigations, it certainly varies in terms of any issues we find and the type of provider. What we do have in place, though, to kind of mitigate those concerns are, first of all, within 20 days if we have identified within the first 20 days no concerns about the vendor and upon request of the tribal gaming office, we will issue a temporary certification allowing that vendor to do business with the tribe. That allows us whatever time is necessary to continue our in-depth investigation. The Chairman. But things are going well in Arizona? Mr. Bullis. I believe so. I believe so. The Chairman. Thanks to the compact that was entered into between the State and the tribes. Mr. Bullis. The strength of the compact, as well as the communication and the partnership that we have developed with the tribes. I will tell you, when I first got on the job about three years ago, I thought the most important thing was getting together, reaching agreement on issues, and moving on. I have learned that the most important thing is not that we reach agreement on items, on issues, but how we go about doing that, how we interact with each other, how we communicate regularly. The Chairman. Mr. Chairman His Horse Is Thunder, since your statement said that this legislation is based on anecdotal anti-Indian press reports on Indian gaming, the overblown issue of off-reservation gaming, and pin the blame on the victim reaction to the Abramoff scandal, I have no questions. We are too far apart in our views of what this committee is trying to do in the 20 some years that I have been involved on behalf of Native Americans. Senator Dorgan. Senator Dorgan. Chairman His Horse Is Thunder, on the issue of class III gaming, let me say I share the chairman's thoughts about that. That is a statement that does not at all compare to the facts. This committee has worked very hard to receive comments and opinions and suggestions from a wide range of interests, including many Indian tribes from across the country. While I think the chairman's bill is broader than it should be, for example, in the area of contracts and so on, I also, as you know, having visited with you and the other tribal chairmen in our region, I also believe that class III gaming ought to be subject to regulation by the National Indian Gaming Commission. So we have approached this very carefully, very thoughtfully, and I do not share the sentiments in your testimony that were expressed. They should not certainly be attributed to any actions or any attitudes by the current chairman or the members of this committee. I think we have approached this very carefully. Now, let me say this as well. My view, and let me just take class III for a moment, my view of class III is this. It is not believable to me that the construct of establishing a commission for the purpose of providing both investigatory capabilities and enforcement capabilities would have anticipated that we would not do that for class III gaming. I mean, it is just not believable to me. The Colorado decision I think needs to be addressed. I believe this committee will address it. I do not know whether the full House or the full Senate will address it, but I believe this committee should address it. There are other portions of the legislation that the chairman has offered that we will I believe change and alter and amend as we get additional testimony and thoughts from tribes and the commission and so on. This is a $20-billion industry. In North Dakota, for example, the only State for which I have a great deal of information, although I have some about Arizona and some other States, in North Dakota, the State enforcement is by two part- time people working at the attorney general's office. That is not, with all due respect, enforcement. I am not suggesting the attorney general is not doing his job. That is not my suggestion at all. I am just suggesting there is not an aggressive enforcement mechanism at the State level. They have not funded it and it just does not exist. I believe with a $20-billion industry, the way to preserve and protect this industry to be able to provide the resources and the income stream in the long term for the tribes that have gaming, is to make sure that we do not have scandals, and that we have adequate management, and that we have enforcement of standards. One final point I wanted to make. My understanding of the North Dakota compact is that the North Dakota compact on gaming includes the minimum internal control standards that were established by the National Indian Gaming Commission. Is that true, Mr. Chairman? Mr. His Horse Is Thunder. I believe so. Senator Dorgan. And if that is the case, why on earth would we not have the National Commission be enforcing that standard and auditing that standard? If we have in fact adopted that standard, would we want to fall short of the enforcement of that standard? Mr. His Horse Is Thunder. No; we would not, sir. Senator Dorgan. And so, I guess, that makes my point. I know there is strong feeling out there about a lot of things. Some of it I think stems, Mr. Chairman, from anger and concern about the lack of resources for health care, the lack of resources for housing, and education. There is a lot of strong feeling. But that ought not replace good commonsense when we try to evaluate what to do about gaming and what to do to make sure that we have enforcement that is adequate. As I understand it, we have several levels of enforcement at the present time: the tribe, and Mr. DesRosiers, you are a compliance officer for a tribe. You have worked there for, is it 14 years, I believe? Right? Mr. DesRosiers. Yes, sir. Senator Dorgan. You have an enforcement mechanism for the tribe itself. Mr. Bullis, you represent a State. I think that perhaps Arizona has the most aggressive, if you simply measure it by people, you probably have more people and are spending more money on enforcement than most other States, so you have a legitimate mechanism at the State level. And some of the tribal chairs will say, well, if we have the tribal enforcement, you have State enforcement, you do not need triplicate levels of enforcement. But the honest fact is, most States do not have an aggressive State enforcement mechanism and they are not funding it. That is just the honest facts. That is why I come to a conclusion different than you, Mr. Chairman, and the other chairmen of the tribes in the Northern Great Plains. I really believe it is in the interests of Indian tribes, as the other two witnesses have suggested, for this Congress to proceed with some legislation. Now, having done that, or preparing to do that, at least, let me make a couple of other observations. Contracts, I think, Mr. DesRosiers, you and Mr. Bullis have both pointed out that the contracting provision in the proposed legislation probably should be altered. And I think also the commission chairman suggested the same thing. I happen to feel the same. My guess is that the offering of the chairman, well I know this to be the case, was an attempt to put something out there and then let's evaluate how you make some changes to it in a way that makes some sense. Obviously we do not need to have some sort of national scrutiny for somebody providing linens for a gaming facility in Northern South Dakota, for example. So I think the testimony you have given today about that is very helpful. I think not only that, but in three or four other areas, background checks and other things, are helpful. One thing that I would like to ask about is the number of vendors. You indicated there are some 400 vendors, Mr. DesRosiers, providing gaming machines. Are those national or is that just in Arizona? Mr. DesRosiers. No; I am sorry. I don't know where you came up with that. Senator Dorgan. How many different vendors, let's assume that you want to buy new slot machines. How many vendors would you look to and how many vendors exist in this country from which you might make that purchase? And you are going to want to know about suitability? Mr. DesRosiers. Right. I would say typically, just slot machine type vendors, and I think Paul would agree, there are 40 to 50 of those. And then other gaming equipment vendors, whether it be bingo or card games and that kind of thing, there are probably another 30 or so vendors. In our facility, we have 260 backgrounded and licensed vendors, but those include anybody that is doing any business with the casino of $25,000 or more. But just if you limit it to machine manufacturers and suppliers and gaming equipment, I think as Paul said, they have somewhere in the neighborhood of 80 such vendors. That is about right. Senator Dorgan. Mr. Bullis, you could probably have been expected to come here and suggest that there is no need for the NIGC to take a look at class III because you probably have the resources and you feel like you have the capability. So why have you not come to tell us that? Why do you believe that class III enforcement is appropriate for the commission? Mr. Bullis. Senator Dorgan, as I mentioned 1 moment ago, I know that the fact that the NIGC had issued its MICS allowed the State of Arizona in its compact to incorporate that MICS into our compact and make it stronger. I think it benefits Indian gaming, certainly in Arizona and nationally as well. I think the importance is to strike the proper balance in each particular State between the State, the Federal and the tribal regulators, and to allow each of those regulatory legs of the stool to devote resources and to apply resources as necessary. I think in Arizona we have struck a proper balance among all the different jurisdictions. Senator Dorgan. Chairman His Horse Is Thunder, how important is gaming to your tribe? Your tribe is a North Dakota and South Dakota tribe. You are a former college president. You have just been elected as a new tribal chair. You inherit a tribe that has enormous challenges, as do most of our tribes in the Northern Great Plains. You have a gaming facility. I believe one facility, is that correct? Mr. His Horse Is Thunder. We have two, one in North Dakota and one in South Dakota. Senator Dorgan. And tell me how important is that gaming facility and the revenue from it for the social services and other revenue needs that the tribe has? Mr. His Horse Is Thunder. It is absolutely imperative, given the budget constraints that we are under today. It provides necessary services that otherwise would go unmet. Senator Dorgan. If this committee and this Congress proceeds to enact legislation that addresses the Colorado decision, and gives the commission authority over class III gaming, along with some other issues, what is your response to that? Mr. His Horse Is Thunder. I would agree with you, Senator, that the MICS are important. They are. We do believe that the rest of the provisions go too far in constraining tribes. Senator Dorgan. Do you see any risk at all in us doing nothing, a risk that would attend to circumstances where there is not sufficient tribal regulation, there is virtually no State regulation, and we have dealt the commission out of class III gaming, which is the one that would attract probably the greatest area of abuse, if there were to be abuse by some? Do you see any risk at all? Mr. His Horse Is Thunder. Senator, given your hypothetical that there is lack of tribal regulation, lack of State regulation, then I think at that point in time there needs to be some oversight, but again, that is where I think the MICS are appropriate, but the rest of it goes too far. Senator Dorgan. Mr. Chairman, I think we are getting a lot of good information from people. One of the things that you and I have both talked a lot about is consultation. I think we should, as we proceed to a markup, we should keep open a record and seek to receive consultation from any tribal leaders that wish to offer that consultation in the form of written statements, so that we can have as broad a consultation as is possible from the tribes. I think that is needed on the contracts and background checks, and a whole range of things. But I do want to say that consultation to me includes a strong feeling on my part that we as a committee should proceed to address the issue of class III gaming and the jurisdiction of the National Indian Gaming Commission. That is not anti-tribe. That is, in my judgment, in the long term the very best interests of Indian tribes in this country, and the maintaining of the economic opportunity that exists with gaming facilities in the long term. So I hope we will perhaps write to tribes, invite them to provide us information, and then use that information, because there are a number of variances of how we do three or four areas of this bill, that we can, should and perhaps will change as a result of this consultation. So I think this hearing has been very important. I appreciate all three witnesses. Let me also say that Chairman His Horse Is Thunder is a new chairman. He has inherited the leadership of a tribe with a lot of challenges. I look forward to working with him on those challenges as well, in dealing with housing, health care and education. Thank you very much to all three witnesses. The Chairman. Thank you. I want to thank the witnesses. We have gotten some good advice and recommendations on narrowing the definition of gaming-related contract. We certainly do not want to create bottlenecks, Mr. DesRosiers. I think we can put some parameters around it. Obviously, we are trying to eliminate an obvious evil that was a loophole in the original bill. I think most people acknowledge that, that there have been contracts where management or something entered into by the tribes which have really caused them to suffer enormous financial burdens which they never should have. It certainly was not the intent of the legislation. So I think that is very helpful, and your other recommendations are. Mr. Bullis, I do not often tout what we do in our State. It is kind of a waste of time sometimes. Everybody knows what kind of a wonderful place we live in. But the process that we went through in Arizona of proposing a compact, negotiating with the tribes, and then submitting it to the voters of our State for ratification was an open process. I meet quite frequently with Arizona tribal chairmen, both gaming and those who have difficulty in gaming because of the remoteness of their location. I think this sharing revenue, sharing the slot machines has been a marvelous thing for tribes that have not been able to take advantage of the large population areas. Everything I can see is that things work very well. Is that your view? Mr. Bullis. Absolutely, Senator McCain. I think things are working well. I think the relationship, I hope, between the State and the tribes in the area of gaming is a successful partnership, and we strive to make it that way. The Chairman. That might serve as a model in the future because the people of Arizona were allowed to vote, to decide whether we wanted to enter this compact or not, both Indians and non-Indians. And a majority of them, a significant majority, decided they wanted that. I think that that has been a beneficial part of the process. Senator Dorgan. Mr. Chairman, might I just observe that part of your population this time of the year are Dakotans. [Laughter.] If you would like to take some credit, we would like to receive some of the credit for all those Dakotans that bring some commonsense to the Southwest. The Chairman. And we are very, very grateful for them coming and spending the winter with us. They are notoriously cheap, but other than that we are always pleased to have those wonderful people come down and spend time with us, as many of us enjoy in the summer months to come and visit your beautiful State, and its Indian reservations. [Laughter.] So it is a nice reciprocal relationship we have. I thank the witnesses. The hearing is adjourned. [Whereupon, at 10:45 a.m., the committee was adjourned, to reconvene at the call of the Chair.] ======================================================================= A P P E N D I X ---------- Additional Material Submitted for the Record ======================================================================= Prepared Statement of Hon. Daniel K. Akaka, U.S. Senator from Hawaii Thank you Mr. Chairman and Mr. Vice Chairman for holding this important legislative hearing. I share the concern of many present here today, with regard to ensuring accountability of not only gaming tribes, but also the contractors they do business with. Although, S. 2078 will have a substantial regulatory impact on tribal gaming, we cannot ignore that this legislation may impact the ability of Indian nations to exercise their sovereignty. Tribal governments have established gaming regulatory systems and have demonstrated their vested commitment to comply with the Indian Gaming Regulatory Act [IGRA]. As we move forward to address the regulatory authority of the National Indian Gaming Commission, I am hopeful that we proceed in a manner that acknowledges and strengthens the government-to-government relationship between the United States and tribal governments. Due to the complex nature of the issues raised in this committee, there has been a long tradition of operating in an inclusive and bipartisan manner. I look forward to members of this committee having the opportunity to fully review proposed changes to this bill. I also firmly believe that it is in the best interest of the committee to consider the concerns raised by some tribal governments that this legislation may adversely impact them. I thank the witnesses here today and look forward to their testimony. 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