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Scrutinizing gaming deals may be justified

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Retiring leaders of the Senate Indian Affairs Committee appear quite
concerned that the federal regulatory agency for tribal government gaming
is flexing its muscles a bit too much when it comes to scrutinizing tribal
agreements with gaming vendors, developers and other financial backers.

The National Indian Gaming Commission drew fire from former Sen. Ben
Nighthorse Campbell and Daniel Inouye, D-Hawaii, who in a Dec. 15 letter
said the NIGC's actions are having a "chilling effect" on the industry.

"As you well know, for many tribes entering the gaming arena, their only
means of providing compensation to those who are involved in the startup
and development of gaming enterprise," they wrote, "is to commit a
percentage of future net revenues to pay for these non-management

NIGC's scrutiny "is having a chilling effect on those ... who would
otherwise come forward to assist tribes in the development of their gaming
operations," they said. "Apparently, the sole proprietary interest standard
is being applied with no notice or guidance having been published that
would inform tribal governments and the public that seeks to do business
with the tribes of this new standard."

The two said they had received complaints from "a number" of tribes.

NIGC Chairman Phil Hogen told me almost two years ago that he was concerned
that the Indian Gaming Regulatory Act failed to cover onerous contractual
agreements between tribes and investors.

Anyone familiar with the hotel deal Sun International CEO Sol Kerzner cut
with the Mohegans must agree that some scrutiny may be warranted. More
recently, Oklahoma tribes have rapidly expanded Class II operations with
the help of Multimedia Games, which requires tribes to dedicate 70 percent
of floor space to its machines and share 30 percent of gross revenues from
those machines under various lease agreements. That's quite a chunk.

The exploitation of gaming tribes by unscrupulous investors was discussed
at a Senate committee hearing a year ago. And I'm sure this new policy
didn't come as a surprise to Campbell and Inouye.

The goal is to find out whether deals that don't fall under the typical
seven-year casino management contracts are fair to tribes and whether
non-Indians are obtaining too much of a stake in casino projects.

"Are we concerned that the tribes are not getting their fair share?" Hogen
asked attendees at the Western Indian Gaming Conference last month in Palm
Springs. "That's the perspective we are attempting to take. We sit in the
shoes of the trustee.

"We don't want to be too intrusive [but] when a developer comes along to a
penniless tribe and says, 'Boy have we got a deal for you,' we're supposed
to be the trustee and keep an eye on it."

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I joined with former National Indian Gaming Association Chairman Rick Hill
in condemning NIGC's intrusive regulatory policies as being an infringement
of tribal sovereignty and a violation of IGRA. But as the years go by I
find there is growing justification for the federal government to exert its
role as trustee for the tribes, particularly gaming tribes.

The intent of IGRA upon its passage in 1988 was to strengthen tribal
governments and build tribal economies. That was the grand plan some 17
years ago.

But then, 17 years ago, states were not extorting tribal gaming revenues,
violating both the intent and letter of the law as stated in IGRA.

Seventeen years ago, Interior was not approving tribal-state gaming
compacts that are taxing - yes, taxing - tribal revenues at up to 25

Seventeen years ago, tribes were not conceding their sovereign rights to
govern their own lands, beginning with side agreements with organized labor
and more recently consenting to allow non-sovereign counties and
municipalities to exert authority over economic development on tribal

Seventeen years ago, tribes were not seeking to acquire land in trust on
the ancestral lands of other tribes for the purpose of operating casinos.

It took the Nevada commercial gambling industry some 60 years to mature and
develop a responsible regulatory system. The industry still has a ways to

Tribal governments have been at the gambling business only 17 years. Many
of them are doing a fine job. Others have yet to grasp the basic concept of
an independent, efficient regulatory system.

I have nothing but respect for Campbell and Inouye as champions of American
Indians. Native people have made great strides in the past decade. The
recent Harvard University study shows both gaming and non-gaming tribes
have shared in the economic improvement on Indian lands.

But the exploitation of gaming tribes by greedy state governments,
commercial gaming companies, business investors, organized labor and
radical hate groups has occurred on their watch as leaders of the Senate
Committee on Indian Affairs.

The federal government does, indeed, have a trust responsibility for gaming
tribes struggling to rebuild their nations and governments after
generations of poverty and neglect. That includes close examination of
tribal-state compacts by the Department of the Interior and scrutiny of
investor partnerships by the NIGC.

Dave Palermo is president of Native First Communications and special
assistant to the Hopi Tribe of Arizona. He can be reached at