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Kinder & Gentler

A year into a three-year journey, the members of the National Indian Gaming Commission talk about their efforts so far

Kinder & Gentler

The relationship between every regulated industry and its regulator is usually adversarial. Whether it’s the stock market and the Securities and Exchange Commission, the broadcasting industry and the Federal Communications Commission or the pharmaceutical industry and the Food and Drug Administration, there is always a healthy tension between the parties.

So maybe it wasn’t unusual that the relationship between the tribal government gaming industry and the National Indian Gaming Commission had gotten a bit testy during the final years of the Bush administration. Then-Chairman Phil Hogen had insisted on establishing a “bright line” between Class II and Class III gaming machines, and his consultations with tribes on that definition got fairly contentious at times. But Hogen worked in an administration that was, by some accounts, hostile to Indian Country, and he claimed his policies were driven by a need to protect tribal casinos by making Justice Department intervention and prosecution unnecessary.

But since the advent of the Obama administration, with its overtly friendly relationship with Indian Country, the new National Indian Gaming Commission is more understanding about the relationship between the regulated and the regulators.

Consultation Connection

During the year that the current commission has been confirmed, members of the NIGC have traveled the country to meet with gaming—and non-gaming—tribes in an effort to understand how the NIGC can regulate such a diverse and far-flung industry.

Tracie Stevens, the chairwoman of the commission, explains that she and the other members agreed on four core goals even before taking office.

“We were very clear about what we wanted to do during our terms,” she says, “and we came to those conclusions together, and we’ve been working feverishly to move the ball down the field on every one of those fronts: consultation and relationship building, technical assistance and training, regulatory review and agency operations. It doesn’t sound like much—just four things to do—but they are really big things, very all-encompassing.”

Stevens recognizes the tribes may not be so trusting of the NIGC.

“On the first goal—and there are reasons it was No. 1,” she says. “It wasn’t just chosen arbitrarily—we knew that we walked into an agency that had strained relationships with the tribes. So we issued a draft consultation policy and we got comments back from tribes. So we hope to have our consultation policy in place and in order over the next several months.”

But even the structure of those meetings has changed from a format where the commissioners would address the issues and their views, and invite the tribes to comment.

“We’re conducting our consultations differently than in the past,” says Stevens. “We’re having roundtable discussions where tribal leaders and representatives can have exchanges with us so they understand the full scope of the issues out there. Hopefully, we can come to some sort of compromise or resolution that will be acceptable to all the tribes it would affect. This is a big achievement since we all knew that this was an issue.”

Stephanie Cochran, the commission vice-chairwoman, says the NIGC is listening more than talking.

“This particular initiative crosses over so many of the policies and procedures that we’ve initially identified as important,” she explains. “First and foremost, we’ve asked the tribes what they need from us. If we’re going to provide you training, where do you need it the most?

“We also spent some time internally on how we approached training. How did we decide what was needed and important, as a federal agency? We were able to go back and see how training had been conducted and the make sure we were using the most effective methods. We’re also interested in doing partnerships. We’re not the experts in every area that gaming touches, so we need to bring that expertise to the table, whether it’s collaborations with tribes or our sister federal agencies. The end objective is to avoid non-compliance issues because we do believe that training and technical assistance will help us prevent some of it. We’re finding that is panning out and tribes have been very receptive.”

Stevens says she wants to know how new or changed regulations will impact tribes and wants to be careful that the effects are not detrimental to the success of tribal government gaming.

“How things work on the ground is different for every tribe,” she says. “(The members of the commission) have some experience working for tribes or tribal operations and we need to know the practical implications of decisions and rules—especially rules—before we make them. We don’t want to have an adverse effect.

“Really true consultation has to be a two-way street. It has to be meaningful. It has to be a discussion. If it’s just one way, it’s not really a consultation. It’s me telling you what to do. We want to make fully considered decisions. We want to be informed and deliberative and we want to know how our decisions affect the regulations. Our end goal is that the industry is protected.”

Head of the Class?

At an August hearing of the Senate Indian Affairs Committee, testimony returned attention to the five-year-old court decision in which the Colorado River Indian Tribes challenged the commission’s ability to impose Class III minimum internal control standards (MICS) on the tribe’s casinos and won. The decision threw into question whether the NIGC even had authority to regulate Class III gaming, an authority not clearly delineated in the Indian Gaming Regulatory Act of 1988, which set up the commission and outlined its powers.

Stevens admits that the commission’s authority is a bit sketchy, but says that doesn’t mean that Class III gaming is unregulated.

“I think in certain circumstances, we (have oversight of) Class III and the minimum internal control standards. We have some tribes in California that have written us into their ordinances so that we can enforce Class III MICS there.

“Since our first hearing, we have found that there are 24 states that have Class III compacts with tribes. All of those have internal control standards for Class III. So it affects every tribe differently. Remember, there are other sovereigns at the table in addition to the federal government. You’ve got the tribes and you’ve got the states. These entities have negotiated in their compacts how they are going to handle Class III.”

What does the post-CRIT world look like? Stevens says it’s a patchwork that works at every level.

“We found that the regulations over Class III in the tribal-state compacts come in varying different sizes and shades,” she says. “As we went forward, we asked tribes what they did in relation to Class III. We found that every tribe has internal controls and most states require it. But how we proceed is going to have to be a hybrid approach. We’ve got a number of circumstances where tribes and states don’t need Class III standards, and they’ve been very clear they don’t need it. Other tribes have it written into their compacts, with some reference to NIGC oversight. And other tribes have it written into their ordinances. So a blanket approach probably is not going to work. We are studying this further to see how we can apply Class III MICS in a way that respects the rights of all three sovereigns.”

At the Senate hearing, Senator John McCain (R-Arizona) was critical of Stevens and the time the commission was taking to clarify how they planned to handle the Class III confusion.

“I asked you when you appeared before us seven months ago, and I’ll ask it again,” began McCain. “Do you believe there needs to be a legislative fix for this CRIT decision?”

Stevens referred to her opening statement to the committee chairman, Senator Daniel Akaka (D-Hawaii), in which she said that she could not comment on any bill since no legislation is proposed.

“I can’t respond to language I don’t see,” said Stevens.

McCain said that was not what he asked.

“There’s a problem here,” said the former presidential candidate. “The NIGC doesn’t have access to the records to do the investigative work that was envisioned when IGRA was passed. As the co-author of that legislation, I’m concerned.”

Stevens said the NIGC was currently consulting with tribes on what to do about the decision. McCain asked her how much longer it would take before she would decide upon the need for a legislative fix. When Stevens said it would take six more months, McCain exited the hearing, with a dismissive comment.

“So it will be 13 months since I first asked you that question?” he said. “That is really remarkable. Your predecessor (Hogen) had a strong opinion that there should be a legislative fix. This is just another incredible waste of taxpayers’ dollars.”

Stevens says she doesn’t believe legislation is necessary.

“We’re dealing with this administratively since we are an administrative agency,” she said. “We believe that is the correct course of action. Having just one way to do it may not work for everyone.”

She also believes that some of the NIGC’s critics are operating with incorrect data.

“There is some misinformation out there about just how much internal control each tribe has,” she says. “All tribes are required to have internal control standards when they report to us. After the CRIT decision, there was some fear that there was going to be a void. There is no void. That’s an issue we can dispel. The second issue is who enforces it. Whether it’s the state or the NIGC is outlined in the state compacts. We know there are internal control standards for Class II gaming. We enforce that. And someone is always enforcing Class III MICS, whether it’s us or the state. We don’t want to upset that apple cart, either.”

Scope of Authority

The economic downturn that has slammed the commercial casino industry has not spared the tribal casinos. While bankrupt commercial casinos can be turned over to the lenders, that solution is not possible in Indian Country because of the specific nature of the ownership of the casino and the sovereign nature of the tribes.

Several instances of financial distress for tribal casinos have been resolved by agreements between the tribes and the lenders, the most recent being a deal struck between the Mashantucket Pequot tribe and the lenders for its Foxwoods casino in Connecticut. It’s resolutions between the parties that have kept the commission out of any such disputes so far.

“We’ve been pretty consistent with this issue,” says commissioner Dan Little, who has worked for the Pequots as a government affairs executive. “The tribes know what they have to do if they get into debt problems. They need to have access to capital and they understand the industry and the market. They’re going to work things out in a way that is best for their own particular situations,” which has been the case up until today.

That doesn’t mean that the commission is totally uninvolved.

“We do see financing agreements coming through,” says Stevens. “Usually, it’s the lending institutions that want us to look at it in relation to management agreements. So we take them case by case because there surely is no ‘one-size-fits-all’ solution for these issues.”

There are still some situations out there that have yet to be resolved and a total default is still possible. But Stevens says it has not come to that point yet, so the commission hasn’t needed to address that issue.

“We have not had that discussion,” she says. “You have to remember that these are contracts between parties and we’re not a party to them. Usually these things get worked out, so we have not had to consider this scenario.”

Stevens also won’t comment on some current “Notice of Violations” that have been issued or may be issued because they could involve ongoing investigations. But overall, she says the commission must be on solid legal grounds before they issue these documents.

“No two are exactly alike,” she explains. “In some cases, we have to coordinate with other state and federal agencies, so it’s a case-by-case basis.”

Even though some want quick action when tribes like Michigan’s Bay Mills or a branch of New York’s St. Regis Mohawks open casinos with no state compact or NIGC agreement, Stevens says the commission must act deliberatively.

“We can’t act quickly without proof because we’re going to have to defend our decision,” she says. “It’s a final agency action that can be appealed and can go all the way to the courts. We need to have all our ducks in a row before we take action.”

One issue that the commission is pleased to have avoided in the Class II vs. Class III technical standards for gaming machines.

“The previous commission made that Class II determination and we see no reason to revisit it,” she says. “They issued Class II technical standards for Class II bingo games, and I think that addressed the issue. They put that to bed before our arrival. Our concern is only that the machines are playing bingo and the manufacturers have something to go by when they’re building the machines. That’s an issue we have not had to address.”

At the August Senate Indian Affairs Committee meeting, the issue of online gaming was brought up and some witnesses recommended possible regulatory authority for tribal participation in the activity being handled by the NIGC. While Little appreciates the confidence in the commission, he believes there is nothing to go on right now.

“It’s premature for us to even think about internet gambling,” he says. “Any of the legislation that has even been suggested in Congress does not have a role for the NIGC. We’re not even mentioned. Roles for the departments of Treasury, Commerce and Justice have been discussed, but not the NIGC. So until there is some concrete legislation in Congress, there’s really not a place for us to comment.”

Still, because of the views of the witnesses, Little believes their current role as regulator must be working for the tribes.

 “I guess our consultation and relationship building is working because this is one of the first times I’ve ever heard the tribes ask us to regulate something that isn’t specifically stated in IGRA,” he laughs.

Future Shock

While some criticize the current cozy relationship between the NIGC and the tribes it regulates, Stevens maintains that her goal is to build an effective and efficient NIGC that will mean fewer disputes between tribal casinos and the regulators.

“The initiatives we have undertaken move us toward more effective regulation of the industry,” she says. “With consultation we can get practical input before we make policy changes, regulatory changes, technical assistance and training where we are trying to prevent problems before they arise, thereby allowing tribes to stay in compliance.

“We’re also looking at agency operations so our work flow and communication can help us together regulate this industry. All of our initiatives are designed to create a strong and effective NIGC.”

Cochran says more communication and training between the NIGC and tribal regulators will significantly reduce issues of non-compliance.

“Once we publish the change in regulations, we’ll spend some time with tribal regulators about how to interpret it. So we’ll be providing assistance up front,” she says.

But even if a tribe is found to be out of compliance, she says the NIGC will work with the regulatory agencies to reverse that problem.

“You have to remember that non-compliance findings aren’t necessarily a criminal issue,” she says. “It could be a training issue or a resource issue that needs to be addressed.”

Stevens says the commission needs to stick to its responsibilities and authority that is outlined in IGRA.

“We have to be mindful of the statute and our statutory authorites, otherwise we wind up with (court) cases that make it very clear what our authority really is,” she says. “The act makes it clear that the tribes are the primary regulators, and we are just one of three regulatory bodies. It’s not just the NIGC. We did a rough count, and there are something like 600 regulators in tribal gaming with the tribes, the states and the NIGC. There’s a lot of regulation going on.”

Roger Gros is publisher of Global Gaming Business, the industry's leading gaming trade publication, and all its related publications. Prior to joining Global Gaming Business, Gros was president of Inlet Communications, an independent consulting firm. He was vice president of Casino Journal Publishing Group from 1984-2000, and held virtually every editorial title during his tenure. Gros was editor of Casino Journal, the National Gaming Summary and the Atlantic City Insider, and was the founding editor of Casino Player magazine. He was a co-founder of the American Gaming Summit and the Southern Gaming Summit conferences and trade shows. He is the author of the best-selling book, How to Win at Casino Gambling (Carlton Books, 1995), now in its fourth edition. Gros was named "Businessman of the Year" for 1998 by the Greater Atlantic City Chamber of Commerce, and received the Lifetime Achievement Award from the American Gaming Association in 2012.

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