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Debunking the myth of unregulated Indian gaming

How strictly, and by whom, is gaming at Indian-owned facilities regulated and controlled? A recently released report from the National Indian Gaming Association should serve to dispel lingering false notions of an out-of-control, corrupt industry.

Established in 1985, NIGA is a Washington, D.C.-based non-profit group whose membership is comprised of tribes from around the country that participate in gaming. The regulatory study was compiled by NIGA's Research Department and reviewed by Small Business Accountants, an independent accounting firm also located in the Washington area. Results are based on the 19-question Tribal Gaming Commission Survey distributed to gaming tribes in July 2001. Of the 204 tribes receiving questionnaires, 160, or 78 percent, responded. The resultant report was released at NIGA's late April trade show in San Diego.

Indian gaming is covered by three layers of regulation from three levels of government, federal, state and tribal. At the federal level, the primary regulator is the National Indian Gaming Commission. Created by the Indian Gaming Regulatory Act of 1988, NIGC oversees the licensing of gaming employees and management and reviews tribal gaming ordinances.

"Our primary mission is to regulate gaming activities on Indian lands for the purpose of: shielding Indian tribes from organized crime and other corrupting influences; ensuring that Indian tribes are the primary beneficiaries of gaming revenue; and assuring that gaming is conducted fairly and honestly by both operators and players," said Richard Schiff, acting chief of staff at NIGC.

To further these objectives, the commission is authorized to conduct investigations, undertake enforcement actions, conduct background investigations and audits and review tribal gaming ordinances. Enforcement may include issuing notices-of-violation, assessing civil fines and issuing closure orders.

NIGC has established minimum internal control standards for all operations related to Indian gaming, including audits, cash handling and credit granting procedures, and surveillance. The commission has also set standards for all class II and III games. Gaming tribes fund NIGC's $8 million annual budget in its entirety.

[For a current example of NIGC's regulatory oversight in action, see the related story on the closure of a casino owned by the Ponca Tribe of Oklahoma.]

In addition, both the Justice Department and Federal Bureau of Investigation are authorized to prosecute embezzlers, cheaters and others who defraud or attempt to defraud an Indian gaming operation, which are federal offenses. Just as it does at commercial casinos, the Treasury Department monitors all large cash transactions.

Provisions for state regulation are negotiated in class III gaming compacts between tribal and state governments. State regulators work closely with their tribal counterparts and often maintain offices at the casinos themselves. In New York, for example, state regulation of Indian casinos is the responsibility of the State Racing and Wagering Board. In Arizona, it is the purview of the Department of Gaming and in New Mexico, the State Gaming Control Board holds sway. Gaming tribes pay $40 million annually to the various states as reimbursement for regulatory expenses.

Under the mandate of IGRA, the tribes themselves are the primary regulators of Indian gaming. According the NIGA study, Indian tribes employ over 2800 gaming commissioners and other regulatory, audit and law enforcement personnel. "Indian tribes dedicate over $164 million annually for tribal government gaming regulation and have established world-class, state-of-the-art gaming regulatory systems with these funds," the report said.

In total, tribes contribute $212 million annually to regulate their gaming operations. By way of comparison, the NIGA study notes that the state of New Jersey spends $60 million annually to regulate its Atlantic City commercial casinos and Nevada puts up $27 million to regulate its state-wide commercial casinos. In states where riverboat gambling is legal, an annual sum of $68 million is spent on regulatory activities, the report said.

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In addition to the above-mentioned payments, gaming tribes have paid over $51 million to their neighboring local communities, i.e. cities, towns and counties, for such services as police and fire protection as well as infrastructure items like road and sewer maintenance and use.

Tribal gaming, with approximately $10.6 billion in revenue during 2000, represents 16 percent of the total gaming-industry take, $64.9 billion, the report said. This compares with state lotteries, at $17.3 billion or 28 percent, Nevada commercial casinos at $9.6 billion or 15 percent, Atlantic City commercial casinos at $6.6 billion or seven percent, and "other" commercial gaming enterprises, meaning commercial casinos in other states, at $12 billion, or 18 percent.

NIGA cited in its study a July 2001 review of crimes involving gaming in Indian country conducted by the Justice Department's Inspector General. Prepared at the request of U.S. Rep. Frank R. Wolf, R-Va., the DOJ report merits a closer look.

Officials from the Criminal Division, the Office of Tribal Justice and the FBI, DOJ components all, were among those surveyed regarding the possible penetration of organized crime into Indian gaming. All parties cited "a lack of evidence to conclude that such involvement has occurred." The FBI reported that "none of its investigations of isolated allegations of organized crime in Indian gaming has been substantiated," while the OTJ noted that "the insular nature of the Indian society which ? historically has prevented influence or control of Indian affairs by outside individuals and organizations."

The Inspector General's report revealed that between 1992 and 2000, a total of 225 criminal cases that involved gaming-related crimes in Indian country were referred to DOJ; of these cases, 70 were actually prosecuted. In 72 percent of cases prosecuted the defendants either pled guilty or were found guilty at trial. Some 22 percent of cases were dismissed, four percent were terminated for "other reasons," and in only two percent were the defendants acquitted. The majority were prosecuted under Sections 1167 and 1168, Chapter 53, Title 18 of the U.S. Code, which cover theft, by patrons and employees, respectively, from Indian gaming establishments.

In 160 of the cases referred to the Justice Department, the report said, prosecution was declined. This was due to mainly to weakness in or a lack of evidence, prosecution instead by state or tribal authorities, or minimal federal interest in pursing prosecution.

[According to the study, "there is not necessarily a relationship between cases referred, prosecuted or declined in any particular year. Cases referred may have been prosecuted or declined in a subsequent year; cases declined may include those cases referred from a prior year."]

Between October 1995 and mid-April 2001, the FBI's Indian country crimes unit investigated 88 theft or embezzlement cases on Indian reservations, which the report said constitute "the majority of gaming crimes" investigated by the bureau. The FBI also reported investigating "few crimes related to illegal gaming operations." The vast majority of such instances are handled through civil regulatory channels, the report said. The bureau is brought into such a matter only if a criminal violation occurs, such as if a tribe refuses to comply with an order from NIGC to cease an illegal gaming operation. The IG report cited the referral of only 13 such cases to DOJ, five of which were actually prosecuted under section 1166.

"Most Indian gaming crimes are resolved through civil actions taken by various regulatory bodies, such as tribal gaming commissions, states, or the [NIGC]," the IG's report said. "The Department [of Justice] only becomes involved if these measures fail."

"Although the success of the Indian gaming industry may make it a desirable target for organized crime groups, Department officials ? have not found sufficient evidence to conclude that organized crime has infiltrated the industry."

Yes, there has been some criminal activity at Indian casinos. As these two reports have shown, however, such crime has by-and-large been the result of greedy patrons and/or employees attempting to pocket embezzled or stolen proceeds. Such people can be found in all walks of life, and are certainly not confined to Indian casinos.

The three-layered system of governmental regulation, backed by the power of federal prosecution, has served Indian gaming well thus far. Criminal activity has been kept to a minimum and organized crime has no apparent presence at Indian casinos. Patrons of Indian-owned casinos can be assured of a clean, honest gaming experience in a well regulated, corruption-free environment.