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Let the Games Begin - National Indian Gaming Commission woes highlight 2006

Indian gaming continued to grow as an economic engine in 2006, strengthening tribal governments and fueling fiscal growth in adjacent off-reservation areas. As the more active gaming tribes continued to pull in greater shares of the public’s gaming dollars, outside scrutiny of and attacks against the industry grow more intense.

A number of important issues faced the industry this past year, one of which concerned congressional attempts to restrictively amend the Indian Gaming Regulatory Act. In the end, the proposed legislation failed to become law; the idea, however, is not dead and will certainly resurface in 2007.

It seems that this year, the most important Indian gaming news stories did not surface until fall.

<b>To regulate or not to regulate</b>

The National Indian Gaming Commission, ostensibly the industry’s federal regulatory body, had its authority drawn into serious question by a federal court decision that threatens the integrity of the industry’s three-tiered regulatory regime.

In October, the U.S. Circuit Court of Appeals in Washington, D.C., ruled that NIGC does not possess the statutory authority to actually accomplish its regulatory mission. A careful reading of the text of the Indian Gaming Regulatory Act seems to contradict this ruling – there are several phrases in IGRA that speak to the commission’s regulatory authority in the sense that it is deemed responsible for issuing gaming licenses, approving tribal gaming ordinances and management contracts, and the like.

One clause, found at Title 25, Chapter 29, Section 2709, titled “Interim authority to regulate gaming,” explicitly states that the secretary of the Interior Department will oversee Indian gaming “until such time as the Commission is organized and prescribes regulations. The Secretary shall provide staff and support assistance to facilitate an orderly transition to regulation of Indian gaming by the Commission.”

In one layman’s opinion, this provision seems to state that once NIGC is up and running, which it has been for well over a decade, the agency indeed possesses the proper Congressional authority to in fact perform its regulatory mission.

Nonetheless, the federal courts have decided otherwise. In a recent article in the San Diego Union-Tribune, NIGC Chairman Philip Hogen, Oglala Sioux, said that NIGC “has asked the appeals court to reconsider its sweeping language,” but added that “he did not expect the commission appeal to go to the U.S. Supreme Court.” Instead, he asked for congressional intervention.

The case in question stems from 2001 when the Colorado River Indian Tribes challenged NIGC’s authority to oversee the flow of money through tribal casinos. Any exercise of tribal governmental sovereignty is welcome and encouraged, particularly at a time when state capitols are aggressively seeking larger slices of the Indian gaming pie.

But it is also important to ensure that tribal casinos remain corruption-free. Likewise, the public perception that tribal casinos offer a legitimate, clean and fair gaming experience is vital to the industry’s continued success. It is imperative that the federal regulator’s role and purpose be determined in a way that both guarantees tribal sovereignty while also providing proper oversight.

<b>The end of Class II?</b>

In early November, NIGC proposed regulations that could change the face of Indian gaming as we now know it. In its ongoing attempts to clarify the distinction between classes II and III, NIGC proposes to require longer time periods in which Class II games are to be played. The practical effect of this would be fewer games played and thus less revenue for the owner/operator of that game.

Tribes offering both Class II and Class III machines will not likely be affected, as they can simply eliminate Class II and add more Class III games as appropriate under their compacts.

But tribes operating in states that prohibit Class III will be left holding the bag. One estimate puts the total revenue loss for tribal governments operating only Class II machines at $142.7 million. Tribes in such states may have little recourse other than to bite the bullet. If states won’t negotiate Class III compacts in good faith, a tribe may always appeal to BIA; how quickly and effectively this overburdened agency will respond is anyone’s guess.

<b>New commissioner</b>

On Dec. 6, Interior Secretary Dirk Kempthorne proposed to appoint Norm DesRosiers, a non-Indian, as the third NIGC commissioner, filling a vacancy created when Nelson Westrin resigned in November 2005. If the appointment stands after a period of public comment, DesRosiers, current commissioner of the Viejas Band of Kumeyaay Indians’ gaming commission and former executive director of the San Carlos Apache Tribal Gaming Commission, will join Hogen and Cloyce Choney, Comanche, on the commission in mid-January.

Finally bringing NIGC back to its full complement of three commissioners is a step in the right direction. NIGC’s regulatory authority and status must be delineated, by Congress or the courts, as soon as possible to preserve the industry’s regulatory integrity.

Casino follies

Could the end be in sight for the “Great New York State Casino Follies”? Since 2001, attempts to site, construct and open tribally owned casinos in New York’s Catskill Mountains have became Indian gaming’s longest-running and perhaps most frustrating escapade. But one nation, the St. Regis Mohawk Tribe, recently made a monster leap forward.

On Dec. 14, Interior approved an environmental impact review of the Mohawks’ proposed $600 million gaming resort adjacent to the privately owned Monticello Gaming and Raceway in Sullivan County. While several other tribal governments, based in New York and other states, have thrown their names into the proverbial hat in hopes of a potentially lucrative Catskill casino, it is the Mohawks who have progressed the furthest since the state Legislature approved three Indian casinos for the region in late 2001.

Hurdles still to overcome include gaining approval from Democratic Governor-elect Eliot Spitzer. The Mohawks must also get the OK from Interior for a land-trust transaction on the 30-acre site – given the strong nationwide opposition to off-reservation casinos, this could be tricky. To have any chance of success, such approval will likely have to come before Congress can amend IGRA or pass other restrictive legislation.

Spitzer, the former state attorney general notorious for prosecuting corrupt Wall Street executives, is largely an unknown quantity when it comes to Indian affairs, although he has stated that he intends to force New York’s tribes to collect state sales taxes. It remains to be seen what effect, if any, he’ll have on facilitating the opening of a Mohawk-owned casino in the Catskills.