Fight against regulation won’t help tribal gaming


Dangerous doors flew open when a recent federal court decision sharply limited the National Indian Gaming Commission’s regulatory powers. The decision gave a victory to a maverick tribe resisting NIGC oversight, but it could be short-lived. The D.C. Circuit Court of Appeals gave an open invitation to Congress to amend the Indian Gaming Regulatory Act, the statutory foundation for the enormously successful tribal gaming industry. In an atmosphere in which IGRA could be in flux, all of the parties that have fostered the phenomenal growth of tribal gaming, and its enormous economic contribution to Indian country, should be working together to protect it against predictable raids from outside interests.

The NIGC, an independent federal agency in the Interior Department, is an integral part of this structure. Unfortunately, many tribes – and their trade organization, the National Indian Gaming Association – have sought to restrict its reach and limit its budget. There is legitimate cause to debate the NIGC’s claims of oversight power, but too often the antagonism obscures the very real benefit that strong supervision brings to gaming operations and to the tribes and tribal members that they serve.

The cautionary example should be the savings and loan industry of the 1980s. Using grossly simplified and inappropriate free market arguments, a cabal of crooks and their bipartisan political allies fought to limit and intimidate federal supervisors. Protected by their campaign contribution recipients, such as disgraced former House Speaker Jim Wright, D-Texas, a group of “high flyers” plundered their thrifts with extravagant loans and spending. The wave of failures that followed threatened the entire financial system and was paid for by the sharp recession in the early ’90s.

The tribal gaming industry should take this lesson to heart before it gloats over the recent Court of Appeals ruling in NIGC v. Colorado River Indian Tribes. The tribes, which sometimes march to their own drum on gaming issues, filed suit against NIGC’s attempt to dictate the details of operations at its Class III casino. The NIGC has been pushing minimum internal control standards since 1999. Its comprehensive details cover more than 80 pages in the Code of Federal Regulations. The Circuit Court marveled at their thoroughness, citing the rules for washing plastic (as opposed to plastic-coated) playing cards. When the commission tried to audit CRIT’s BlueWater Resort and Casino in 2001, however, the tribe protested that the rules exceeded the commission’s legislative authority.

In a 42-page decision, U.S. District Judge John Bates agreed. The much shorter Circuit Court decision upheld him. Contrary to the NIGC’s assertions, said the courts, IGRA did not give it oversight over Class III casinos (the so-called Las Vegas variety, with cash slots and house-banked table games). Although the commission did regulate Class II (bingo-derived) gaming, IGRA set up a system of tribal/state compacts and concurrent supervision for the more lucrative Class III. Nothing in the act, said the courts, gave NIGC the authority for the comprehensive oversight contained in the MICS.

So far, the judges and CRIT have made their point. The current aggressive leadership at the NIGC does appear to have overstepped the powers granted in IGRA. But the glaring question remains whether limits on NIGC oversight are a good idea. We seriously doubt the wisdom of the industry’s attempt to hobble the federal layer of supervision.

Beyond this lawsuit, some gaming tribes and their trade association have long fought against the commission’s attempt to increase its budget. The NIGC is entirely funded by assessments on casinos, but as the industry has grown by about $2 billion a year, the commission’s budget has been capped at $12 million. This means that its fee rate has steadily dropped. At the same time, it has lacked resources to expand staff to keep up with new tribal casinos. It has begged for years to remove the budget cap and charge a flat rate that would grow as casino revenues, and the size of the industry, grows. This seems perfectly reasonable, and we have never understood why the tribal gaming lobby fought it.

We have heard rhetoric that NIGC impinged on tribal sovereignty. But the expression of sovereignty is a government-to-government relationship with the federal government, independent of the states. Why is it better for tribes to make state governments, their traditional enemies and plunderers, the primary supervisors of Class III casinos?

IGRA presently does play an important role in protecting all tribal casinos from state government extortion and predatory infiltration. Tribal/state compacts for Class III gaming have to be approved by the Secretary of the Interior. A major issue is whether the state is demanding too large a cut of revenue. (Under IGRA and any reasonable understanding of tribal sovereignty, states are not allowed to tax Indian casinos. The “revenue-sharing” provisions in many compacts are in principle a quid pro quo for an economic concession, such as a monopoly on slot machine operations in a certain area.)

Even with the limits set by the Circuit Court ruling, the commission retains authority to approve casino management contracts. It used this power to very good effect in the case of the Tonkawa Tribe in Oklahoma. The commission spearheaded an international investigation that uncovered a mob-linked money-laundering and illegal horse-race betting network that used the Tonkawa Bingo and Casino race-book operation, along with about 10 other international bet shops. This case, prompted by NIGC auditers, has been one of the main achievements of the federal task force that includes the FBI, Internal Revenue Service and other agencies focusing on tribal casino problems.

The NIGC closed the casino in February and levied the largest fine in its history, $2.6 million, against the unapproved casino manager and another $1 million against the Tonkawa Tribe. But a recent agreement with the tribe allows it to reopen its casino with proper management and an independent Tribal Gaming Commission and, with good behavior, remits half of the fine for the tribe to donate for a college-level program in casino auditing.

This is an excellent example of the ability of an Indian-led and staffed federal agency to police and improve tribal gaming. Neither tribe nor state supervisors had noticed the problem, even when wise guys from Brooklyn, N.Y., started showing up at the remote north-central Oklahoma reservation. The health of tribal gaming requires the preservation and even expansion of the commission’s oversight power.

For years, we have defended tribal gaming against the distorted argument that it is under-regulated. The investigative reporters making that claim invariably cited the understaffing at the NIGC and ignored the extensive supervision at the state and tribal level. We have not heard complaints about most of the joint state/tribal supervision, but to be most effective, the system needs a vigorous federal overseer to set minimum standards and to catch the failures of the lower levels.

The NIGC repeatedly proclaims that its mission is to protect the interests of the tribes and the tribal members. The Indian gaming industry should be seeking common ground as Congress turns to a now inevitable re-examination of IGRA.

<i>Editors’ note: The publisher of Indian Country Today, Four Directions Media, is an enterprise of the Oneida Indian Nation of New York, which operates the Turning Stone Resort and Casino and, consequently, has important issues before the NIGC. We do not know the opinion of the Tribal Gaming Commission regarding the NIGC and have not asked.