[Federal Register Volume 63, Number 151 (Thursday, August 6, 1998)]
[Rules and Regulations]
[Pages 41960-41972]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20723]
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NATIONAL INDIAN GAMING COMMISSION
25 CFR Part 518
RIN 3141-AA04
Issuance of Certificates of Self Regulation to Tribes for Class
II Gaming
AGENCY: National Indian Gaming Commission.
ACTION: Final rule.
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SUMMARY: The National Indian Gaming Commission issues this rule which
provides a process for the review and approval of petitions for tribal
self-regulation of Class II gaming. This rule implements the Class II
self-regulatory provisions of the Indian Gaming Regulatory Act and will
provide both a financial benefit and reduction in Federal regulations
for tribes that obtain certificates under this rule.
EFFECTIVE DATE: September 8, 1998.
FOR FURTHER INFORMATION CONTACT: Maria Getoff, National Indian Gaming
Commission, 1441 L Street, NW, Suite 9100, Washington, DC 20036;
telephone: 202-632-7003.
SUPPLEMENTARY INFORMATION: The Indian Gaming Regulatory Act (IGRA, or
the Act), enacted on October 17, 1988, established the National Indian
Gaming Commission (Commission). Under the Act, the Commission is
charged with regulating class II gaming and certain aspects of class
III gaming on Indian lands. On March 12, 1998, the Commission proposed
regulations for the issuance of certificates of self-regulation for
class II gaming to Tribes. 63 FR 12319-12323. The Commission requested
comments on those proposed regulations. On April 1, 1998, the
Commission held a public hearing in Portland, Oregon, on the proposed
regulations. Below is the Commission's analysis of the comments
received both in writing during the comment period, and at the public
hearing. In addition, prior to the drafting of the proposed rules, all
gaming tribes were asked to provide comments on the meaning of the
term, ``self-regulating'', which the Commission has also considered.
Below is the Commission's analysis of the comments received during the
comment period and the text of the final regulations.
General Comments
One commenter advocated for negotiated rule making in the
promulgation of these regulations. The Commission concluded that
negotiated rule making would not allow the Commission to issue these
regulations in a timely manner. However, the regulated community was
provided several opportunities to comment on both the concept of self-
regulation generally and the proposed regulations specifically. On
November 13, 1997, the Commission sent a ``Notice to Interested
Parties'' to all gaming tribes requesting comments on the meaning of
the term, ``self-regulation.'' In addition, on November 18, 1997, NIGC
Chairman Tadd Johnson addressed a gathering of tribes in Santa Fe, New
Mexico, where he discussed self regulation. Further, on January 27,
1998, members of the Commission staff met with tribal representatives
in Washington, D.C. to discuss the concept of self-regulation. In early
February 1998, Commission staff held an open meeting at the Gila River
reservation in Arizona for the purpose of discussing self-regulation
and other regulations. Then, on April 1, 1998, the Commission held a
public hearing on self-regulation in Portland, Oregon. Seven witnesses
testified, representing tribes with both large and small gaming
operations.
Another commenter stated that ``IGRA prohibits the NIGC from
regulating Class II gaming by Tribes with certificates,
[[Page 41961]]
and regulations that provide for continued NIGC regulation of Class II
gaming by certified tribes violate IGRA.'' This and other commenters
believe that, at a minimum, the regulations should spell out the powers
of the Commission that are not enforceable against certified tribes.
The IGRA does not provide for a blanket prohibition on the
regulatory power of the Commission with respect to a self regulated
tribe. The Commission will continue to maintain oversight,
investigative, and enforcement responsibilities with respect to tribes
that hold certificates of self-regulation. The IGRA does limit the
powers of the Commission with respect to self-regulating tribes, but
does so in very specific terms. It states that ``During any year in
which a tribe has a certificate for self-regulation, the tribe shall
not be subject to the provisions of paragraphs (1), (2), (3), and (4)
of section 2706(b) of IGRA.'' 25 U.S.C. 2710(c)(5)(A). Those sections
direct the Commission to monitor class II gaming on a continuing basis;
inspect and examine class II gaming premises; conduct or cause to be
conducted background investigations; and permit the Commission to
demand access to and inspect, examine, photocopy and audit all papers,
books, and records regarding revenues of class II gaming. Therefore,
while the IGRA exempts certain self regulated tribes from these
provisions, other requirements of IGRA and NIGC regulations still
apply. The Commission has added the following language to Sec. 518.9 ,
which provides that the Commission retains investigative and
enforcement authority over self regulated tribes: ``Subject to the
provisions of 25 U.S.C. 2710(c)(5)(A).''
One commenter suggested that regulations are not required to
implement IGRA's certificate of self-regulation provision. This
commenter expressed the opinion that the statute is sufficient, wherein
Congress set forth the requirements for certificates, and gave the
Commission the power to hear and adjudicate petitions.
The Commission disagrees. Section 2706(b)(10) of IGRA grants the
Commission the power to ``promulgate such regulations and guidelines as
it deems appropriate to implement the provisions of the IGRA.'' While
the statutory language in IGRA provides some guidance on Congress's
intent with respect to self-regulation, the Commission must promulgate
these rules in order to establish a system by which the Commission may
evaluate whether a tribe has met the statutory criteria for the
issuance of a certificate of self-regulation.
Several commenters suggested that the Commission should ensure that
tribes with certificates pay less fees than tribes without
certificates, and that the regulations should reflect this. These
commenters believe that because the fee rate for all class II gaming
tribes is currently set at .08%, well below the .25% maximum allowed
for a self-regulated tribe, there is no incentive to become self-
regulated.
The Commission agrees, as a general matter, that tribes with
certificates should pay a lower fee than tribes without certificates.
The IGRA provides that the Commission may not assess a fee on the class
II gaming activity of a tribe with a certificate in excess of 0.25
percent. 25 U.S.C. 2710(c)(5)(C). Therefore, the Commission plans to
establish fee rates for self-regulated tribes through the annual fee
notice which will recognize and reward self regulated status.
Another commenter suggested that the following language in the
preamble to the proposed regulations is too restrictive: ``The
regulatory entity should have no involvement in the operational or
managerial decisions of a gaming facility, except to the extent that
the regulatory body identifies violations of federal or tribal law.''
63 FR 12319, March 12, 1998.
Although this language may be broader than intended, the Commission
wanted to clarify that the tribal regulatory body should not operate or
manage the gaming facility. The tribal regulatory body should be an arm
of the tribal government, established for the exclusive purpose of
regulating and monitoring gaming on behalf of the tribe. Effective
regulatory oversight requires that there be a separation between the
regulation and operation of the tribal gaming activities. The tribal
regulatory body may monitor all operating and management functions,
consistent with its regulatory responsibilities.
Section 518.1 What Does This Part Cover?
A commenter suggested that a certificate should be issued to each
separate operation, not to the tribe as a whole. The rationale behind
this suggestion is that one tribe may have several operations which
could cause the delay of certification for all operations due to
problems with just one.
The Commission disagrees. A certificate of self-regulation issues
to the tribe, in recognition of their ability to regulate effectively.
If a tribe cannot effectively regulate some portion of its gaming
operation, it has not demonstrated that it is able to effectively
regulate all gaming operations.
Section 518.2 Who May Petition for a Certificate of Self-Regulation?
Two commenters suggested that Sec. 518.2(a) would restrict self-
regulation status to only those specific class II games actually played
by the tribe for three years prior to its petition, and would
effectively place a ban on new games.
The Commission does not intend this language to limit the
introduction of new games. The language in Sec. 518.2(a) mirrors the
language in IGRA, which provides, in relevant part, that ``Any Indian
tribe which operates a class II gaming activity and which has
continuously conducted such activity for a period of not less than
three years * * *'' may petition for a certificate of self-regulation.
25 U.S.C. 2710(c)(3)(A). Therefore, the petitioning tribe must have
operated some type of class II gaming activity for the three year
period immediately preceding the date of the petition. To interpret the
statute to mean that a self-regulating tribe could not introduce new
games that were not offered during that three year period would, as
noted by the commenter, be so impractical as to render certificates of
self-regulation useless. The Commission does not believe that Congress
intended such a result. The Commission does not believe that this
section requires any change.
One commenter stated that the word ``continuously'' in
Sec. 518.2(a) needs clarification. This paragraph requires that, in
order to petition for a certificate, the tribe has continuously
conducted the gaming activity for which it seeks self-regulation. The
commenter stated that some tribes may temporarily shut down their
gaming operations due to construction or to the seasonal nature of
their business.
The term ``continuously'' is taken directly from IGRA at 25 U.S.C.
2710(c)(3)(A). The Commission will implement the common sense
definition of the term ``continuous''. Webster's Ninth New Collegiate
Dictionary defines continuous as ``marked by uninterrupted extension in
space, time, or sequence''. The Commission does not believe that
Congress intended to mean that if a gaming operation closed for one day
or one week, that the tribe would be precluded from obtaining a
certificate of self regulation. A tribe would, however, be precluded if
the operation had closed for one year. The Commission intends to look
at each situation on a case-by-case basis.
[[Page 41962]]
Several commenters stated that Sec. 518.2(b) and Sec. 518.2(d),
which require all gaming engaged in by the tribe to be legal under
IGRA, unnecessarily place a tribe's class III gaming operation under
scrutiny.
The Commission disagrees. The language of Sec. 518.2(d) is taken
verbatim from IGRA, which requires, in relevant part, that a tribe may
petition the Commission for a certificate of self-regulation if it
``has otherwise complied with the provision of this section.'' 25
U.S.C. 2710(c)(3)(B). The statutory language is clear. If Congress had
intended for a tribe to be able to petition for a class II self-
regulation certificate regardless of whether it had complied with the
law with respect to its class III gaming, it would have said so.
Section 518.3 What Must a Tribe Submit to the Commission as Part of its
Petition?
One commenter suggested that the petition should be approved by the
tribal regulatory body, not the governing body of the tribe as required
by Sec. 518.3(a)(1), because the regulatory functions of the tribal
regulatory body must be independent from the influences of the tribal
government.
The Commission agrees that the tribal regulatory body must be
independent from the tribal government. However, the tribal regulatory
body is an arm of the tribal government. The final authority and
responsibility over gaming and its tribal regulation is vested with the
tribe. The authority to establish a regulatory structure or tribal
regulatory body comes from the sovereign powers of tribal governments.
Furthermore, a tribe's qualification for certification is dependent in
part upon whether it follows procedures which are beyond the scope of
the tribal regulatory body. Therefore, the Commission does not believe,
as suggested by the commenter, that the decision to submit a petition
for a certificate of self-regulation is a decision that should be made
by the tribal regulatory body. The decision to petition for self-
regulation status is a decision to be made by the tribe. The tribe may,
however, delegate such authority to the tribal regulatory body.
One commenter stated that it was unclear whether
Sec. 518.3(a)(1)(iii), which requires a description of the process by
which positions on the tribal regulatory body are filled, applies to
positions for Gaming Commissioners and Attorneys. Another commenter
recommended that this paragraph be expanded to require job descriptions
and qualifications, as well as any disqualifying criteria.
This paragraph requires a description of the manner in which all
positions on the tribal regulatory body are filled, including staff and
higher level regulators. Therefore, this provision applies both to
those who actually sit on the regulatory body, such as the Chairman,
Gaming Commissioners or the Executive Director, and to all staff level
employees, including investigators, auditors, attorneys, etc. In order
to clarify this requirement, the Commission has revised
Sec. 518.3(a)(1)(iii) to read as follows: ``a description of the
process by which all employee and regulator positions at the
independent tribal regulatory body are filled, including qualifying and
disqualifying criteria.'' During its investigation, the Commission may
request job descriptions, but that information is not required to be
provided with the petition.
The Commission has added the following language to
Sec. 518.3(a)(1)(v): ``and, if serving limited terms, the expiration
date of such terms.''
One commenter questioned why the Commission requires a list of
current gaming operation division heads to be submitted with the
petition under Sec. 518.3(a)(1)(vi). This information will identify for
the Commission who is in charge of each division so that the Commission
will know who to contact for information during the course of the
investigation. In addition, the Commission may check this against the
information the Commission has previously received from the tribe.
One commenter noted that several paragraphs of Sec. 518.3 require
the tribe to include in its petition, or make available to the
Commission, information dating back three years from the date of the
petition. This commenter suggested that the IGRA only requires that
certificates be based on ``available information'', not new special
information designed solely for certificates of self-regulation. This
commenter raised specific concerns with respect to Sec. 518.3(a)(2)(v).
Another commenter stated that to require tribes to have reports on
internal controls is overburdensome and not required by IGRA. Both
commenters noted that the three year requirement is retroactive and
therefore places an undue burden on tribes because they will be denied
self regulation status if they are unable to produce the reports.
Another commenter stated that Sec. 518.3(a)(2)(v) should be clarified
to indicate what constitutes a ``report on internal controls based on
audits of the financial statements.'' This commenter questioned whether
this refers to compliance reviews by the tribal regulatory body, or to
responses by the operator to the annual financial audits.
The Commission believes that generally, the information required by
Sec. 518.3 is not ``new special information designed solely for
certificates'', but is information that should already be maintained in
the ordinary course of business by a ``self-regulating'' class II
gaming tribe. For instance, if a tribe does not ordinarily maintain
information on allegations of criminal activity and information on
investigation and enforcement of tribal gaming ordinance violations,
the Commission believes that such tribe is not maintaining the type of
system of records that would allow the Commission to make a
determination that such tribe is self-regulating. The Commission agrees
that tribes may not receive or produce reports on internal controls in
the ordinary course of business, and that it would be unfair to make
the existence of such reports a prerequisite to self regulation.
However, the Commission believes that if such reports do exist, they
would provide an indication that the tribe meets the criteria for self
regulation. Therefore, the Commission has removed this as a requirement
under Sec. 518.3, and has added a new section (9) to Sec. 518.4(b).
This new section provides that the Commission will consider whether
reports are received or produced by the tribe, the tribal regulatory
body, or the gaming operation based on an evaluation of the internal
controls of the gaming operation during the three (3) year period
immediately preceding the date of the petition. If such reports exist,
the Commission will review those reports in the course of its
investigation. This new language should help to clarify what
constitutes a ``report on internal controls''.
Several commenters questioned whether the language in
Sec. 518.3(a)(2) requires the tribe to list the documents in the
petition that would then be available to the Commission to inspect or
whether those documents were to be submitted to the Commission.
The Commission intends only for the petition to include a
descriptive list of the documents or record keeping systems described
in Secs. 518.3(a)(2)(i)-518.3(a)(4) and an assurance that the listed
documents and records are available for the Commission's review. (The
documents mentioned in Secs. 518.3(a)(1)(i)-(vii), however, must be
included with the petition.) Therefore, the Commission revises this
section to add ``descriptive'' before ``list'' and to replace, ``to
which the Commission shall have access'' with ``together with an
assurance that the listed documents
[[Page 41963]]
or records are available for the Commission's review.''
One commenter was concerned about Sec. 518.3(a)(2)(ii), and
indicated that tribal regulatory bodies are not ordinarily involved in
any way with a tribe's revenue allocation plan, and it is not apparent
how a tribe's revenue allocation plan bears on the Commission's
evaluation of a tribal regulatory body's qualification for
certification.
It is the tribe, not the tribal regulatory body, that is the
petitioner and the intended recipient of a certificate. For the
Commission to determine adequately whether the gaming activity has been
conducted in full compliance with IGRA, as required by
Sec. 518.4(a)(4), the Commission must be able to evaluate whether
gaming revenues are allocated in accordance with the law.
One commenter questioned whether Sec. 518.3(a)(2)(iii) requires a
description of the accounting system from the operation, the tribal
government, or both if two separate accounting systems exist.
This provision refers to the accounting systems of both the gaming
operation and the tribe. The latter is necessary to understand how the
tribe uses and accounts for the revenues received from the gaming
operation in accordance with the purposes allowed under IGRA. Because
the proposed rule may be confusing, the Commission revises the language
to read, ``A description of the accounting system(s) at both the gaming
operation and the tribe that account for the flow of gaming revenues
from receipt to their ultimate use, consistent with IGRA.''
One commenter stated that a definition of ``records'' is needed.
This commenter questioned whether, under Sec. 518.3(a)(2)(vii), a
summary of the investigation/enforcement action would be sufficient.
This and other commenters indicated that some allegations are made
outside tribal jurisdiction, and that it would be burdensome to require
the tribal regulatory body to assemble documents from third parties. A
commenter also questioned the meaning of ``records'' under
Sec. 518.3(a)(2)(vii).
The Commission recognizes that several paragraphs of
Sec. 518.3(a)(2) are confusing in terms of what information should be
provided to the Commission. First of all, the tribe is not required to
submit the actual documents, nor does the Commission intend by this
rule to require a tribe to gather records from other jurisdictions or
parties. The rule states that the documents that are to be made
available to the Commission are documents that are maintained by the
tribe. With respect to the ``records'' language, the Commission made
the following changes: to Sec. 518.3(a)(2)(vi), delete ``records of''
and add, ``a description of the record keeping system for'' before the
word ``all'; to Sec. 518.3(a)(2)(vii), delete ``records of'' and add,
``a description of the record keeping system for'' before the word
``all''; and to Sec. 518.3(a)(2)(viii) delete ``records'' and add, ``a
description of the personnel record keeping system'' before the word
``of''. Section 518.3(a)(2)(vii) includes all records maintained by the
tribe, not just by the tribal regulatory body. This would include
records maintained by the tribal prosecutor and tribal court.
To further clarify that the information required under
Sec. 518.3(a)(2) is to be provided by way of a list instead of the
actual documents, the Commission has removed, ``including the name,
title, and licensing status of each employee'' from
Sec. 518.3(a)(2)(viii). The tribe is required, under this paragraph, to
provide a description of its personnel record keeping system, and is
not required to specifically provide the names, titles, and licensing
status of each employee. This is information that the Commission will
gather when it visits the tribe to conduct its investigation, or will
request at a later date.
Additional clarification was made to Sec. 518.3(a)(2)(vi) and
Sec. 518.3(a)(2)(vii). In Sec. 518.3(a)(2)(vi), the language ``for the
three (3)-year period immediately preceding the date of the petition''
was removed from the beginning of the paragraph and inserted after the
word, ``activity''. In Sec. 518.3(a)(2)(vii), the language ``for the
three (3)-year period immediately preceding the date of the petition''
was removed from the beginning of the paragraph and inserted after the
word ``regulations.'' These changes were made to clarify that the three
year period refers to the records that the Commission will have access
to, and not to the description of the record keeping system.
With respect to Sec. 518.3(a)(2)(viii) one commenter noted that
while the IGRA requires a tribe to license certain key employees there
is no requirement that it maintain records of all employees as required
by Sec. 518.3(a)(2)(viii). This commenter believes that to require a
tribal regulatory body to gather this information if it does not have
it distorts the Commission's evaluation, in that the Commission will
not know if this information is normally known to the tribal regulatory
body, as it should be, or whether it was gathered in preparation for
the petition.
The purpose of this rule is to allow the Commission to evaluate
whether the tribal gaming operation maintains an adequate personnel
system with records of all employees, as well as whether the tribe has
complied with IGRA and NIGC regulations which require the tribe to
submit to the Commission employee applications and background
investigation reports for all key employees and primary management
officials. The Commission must be able to check the records of all
current employees against the employee applications and background
investigation reports submitted to the Commission to determine whether
the tribe has complied with IGRA. Although only key employees and
primary management officials must be investigated and licensed under
IGRA, the Commission believes the tribal gaming operation should
maintain an adequate system of records for all employees, and the tribe
may license other employees not specifically required to be licensed
under IGRA.
One commenter pointed out that Sec. 518.3(a)(3), which requires the
tribe to submit a copy of the public notice references an incorrect
citation to the provision which requires the public notice.
The Commission agrees. The reference to the public notice
requirement should read ``25 CFR 518.5(d)'' instead of ``25 CFR
518.5(e).'' The Commission will make this change. In addition, the
Commission has removed the requirement that the tribe, upon publication
of the notice, submit a copy of the notice. The final regulation has
been revised to require the tribe to submit an affidavit of publication
in lieu of a copy of the publication.
One commenter stated, in regard to Sec. 518.3(a)(4), that federal
regulations governing the audit of tribal general funds and federal
funds do not require the auditor to express an opinion on compliance
with 25 U.S.C. 2710(b)(2)(B), and the proposed rule does not expressly
contain a new substantive requirement for tribal audits. In addition,
such a requirement could only be imposed prospectively.
The Commission agrees, and has removed this paragraph from
Sec. 518.3(a)(4). However, 25 U.S.C. 2710(b)(2)(B) requires that tribal
gaming revenues be put to specific purposes. Therefore, the Commission
adds a new paragraph to the section which describes the documents that
should accompany the petition. The new paragraph is
Sec. 518.3(a)(1)(vii), and states ``A report, with supporting
documentation, including a sworn statement signed by an authorized
tribal official, which explains how tribal net gaming revenues were
used in
[[Page 41964]]
accordance with the requirements of 25 U.S.C. 2710(b)(2)(B).''
Supporting documentation would include copies of pages from tribal
accounting books which record the flow of money from the gaming
operation to its ultimate use. One commenter questioned why the
Commission would need to have access to the tribal audit under
Sec. 518.3(a)(2)(xi) in order to evaluate a tribe's qualification for
certification. Because the new paragraph at Sec. 518.3(a)(1)(vii)
serves to inform the Commission of information it intended to glean
from the tribal government audits, and because the Commission does not
believe it necessary to review audits prepared of the tribal regulatory
body, the Commission has removed Sec. 518.3(a)(2)(xi) in its entirety.
Section 518.4 What Criteria Must a Tribe Meet To Be Issued a
Certificate of Self-Regulation?
Several commenters pointed out that the proposed regulations state
that the Commission ``may issue a certificate of self-regulation * * *
.'' whereas IGRA provides that the Commission ``shall issue a
certificate if the petitioning tribe meets the requirements.
The Commission recognizes this error and has changed the language
in Sec. 518.4(a) from ``may issue'' to ``shall issue''.
One commenter questioned the use of the words ``honest'' and
``dishonest'' in Secs. 518.4(a)(1)(i)-(iii), and stated that, by this
language, the Commission was creating a subjective criteria. This
commenter questioned whether the Commission would look at actual
criminal charges, or rely on mere word of mouth.
The language of this paragraph was taken verbatim from IGRA at 25
U.S.C. 2710(c)(4)(A). The Commission has created, by these regulations,
a system for the evaluation of these and other statutory criteria.
Section 518.4(b) provides several methods for establishing, by
supporting documentation, that a tribe operates its gaming in a manner
that satisfies the statutory criteria, including the ``honesty''
requirement mentioned in the statute.
One commenter recommended that the language of Sec. 518.4(a)(2) be
changed from ``Adopted and is implementing adequate systems'' to
``Adopted and has implemented adequate systems * * *'' This commenter
believes that a gaming operation that has been in operation for three
years should be required to have implemented the adequate systems, not
be in the process of doing so.
The language the Commission used in Sec. 518.4(a)(2) was taken
directly from IGRA at 25 U.S.C. 2710(c)(4)(B). IGRA requires that the
tribe has conducted its gaming for at least three years, and further
requires that the tribe has adopted and is implementing adequate
systems for accounting of revenues, investigation of violations, etc.
Therefore, it only makes sense that those systems must have been in
operation for at least three years, and that the tribe continues to
implement those systems. The Commission does not read the language of
the statute to mean that the tribe can qualify for a certificate if it
is merely in the process of developing and implementing adequate
control systems.
One commenter suggested that Sec. 518.4(a)(4) could be construed to
suggest that a tribe may not qualify as a result of a single minor
violation, even if tribal authorities took prompt remedial action.
The Commission agrees that the language of proposed
Sec. 518.4(a)(4) creates an unreasonably high standard. Therefore,
``full'' has been deleted from this paragraph to allow the Commission
the authority to determine whether or not violations are sufficiently
serious to prevent a determination that a tribe is self-regulating.
One commenter suggested that the language of Sec. 518.4(b)(1)
should be read to mean that the tribally adopted minimum internal
control standards do not necessarily have to be at least as stringent
as Commission standards, or those of Nevada or New Jersey. This
commenter believes that the test for receiving a class II certificate
focuses on whether a tribe has achieved substantive compliance with
IGRA, not on whether the Tribe's internal controls are at least as
stringent as an externally promulgated standard adopted by the
Commission. This commenter further believes that interim reliance on
New Jersey or Nevada standards is flawed because those states did not
adopt their minimum internal control standards based on IGRA's
requirements for self-regulation.
The Commission disagrees with the commenter and believes that
uniform standards are necessary for the industry. Minimum internal
control standards commonly address categories of games and specific
operational functions of gaming operations. Therefore, there is no
immediate requirement for MICS based on standards that are specifically
designed with IGRA in mind. The Commission has chosen the Nevada and
New Jersey MICS as interim MICS because both have been in existence for
a number of years and are regarded as comprehensive and effective
standards. We note, however, that the State of Nevada is exempt from
the currency transaction reporting required by the Bank Secrecy Act.
Therefore, if Tribes adopt the Nevada MICS, they must modify them to
comply with that Act. Furthermore, Commission regulations adopting MICS
are currently being developed and promulgated by the Commission.
Another commenter suggested that the NIGC should include the
minimum internal control standards provided to the NIGC by the National
Indian Gaming Association (NIGA) as standards that a tribe may use
until the Commission promulgates its own standards.
NIGA and the National Congress of American Indians have certainly
set the standard for promoting the concept of internal controls and
uniform MICS. The Commission commends them on the work done thus far in
drafting uniform MICS. Those MICS, however, are still evolving and have
not been adopted in final form. Therefore, the Commission believes it
would be inappropriate to rely on those MICS at this time.
One commenter suggested that while several paragraphs of
Sec. 518.4(b)(3) indicate that the tribal regulatory body should be
adopting and establishing a variety of standards for the operation of
the gaming activity, some tribal regulatory bodies do not adopt these
types of standards, but that such responsibility lies with the tribal
council. This commenter suggested adding the language, ``if it does not
already exist in the tribe's gaming ordinance'' to each subsection of
Sec. 518.4(b)(3) that indicates that the tribal regulatory body would
be the entity to adopt or establish standards.
The Commission generally believes that the responsibility for the
adoption and establishment of rules and standards for the operation of
the gaming activity should be a function of the tribal regulatory body.
Such responsibility would be evidence that the tribal regulatory body
was functioning independently of the tribal council. In most
governmental systems, regulatory agencies promulgate their own rules.
However, the Commission will not deny a petition solely because a
tribal council is responsible for the adoption of gaming rules, so long
as there is evidence that the tribal regulatory body is nonetheless
functioning independently. Because this paragraph deals with
``indicators'' that a tribe has met the self-regulation criteria, and
not requirements, the Commission believes that revision is unnecessary.
One commenter noted that while Sec. 518.4(b)(3)(iv) suggests that
the tribal regulatory body performs routine audits
[[Page 41965]]
of the gaming operation, some tribal regulatory bodies may not perform
financial audits independently of the annual audit required by IGRA,
but may perform operational audits on a periodic basis. This commenter
suggested adding ``operation or other'' after the word ``routine''.
The Commission agrees, and made the following change: The
Commission has added ``operational or other'' after ``routine''.
One commenter suggested that some tribes do not require non-gaming
employees to be licensed, and that the use in Sec. 518.4(b)(3)(ix) of
the language, ``all employees of the gaming activity'', suggests that
all employees must be licensed, regardless of whether they work
directly with the gaming activity. This commenter suggested that the
language be amended to reflect that only those employees required to be
licensed under IGRA or tribal law should be required by the tribal
regulatory body to be licensed.
The Commission disagrees. Section 518.4(b) makes clear that the
paragraphs that follow describe ``indicators'' that the Commission may
evaluate to determine whether a tribe has met the criteria for self-
regulation. These are not requirements that must be met in every
instance. That said, the Commission would prefer that a tribal
regulatory body, of its own accord, require licenses for all employees
involved in the gaming activity, not just the key employees and primary
management officials required by IGRA.
Vendor Licenses
A commenter suggested that Sec. 518.4(b)(3)(xii) could be read to
mean that the Commission would consider whether the tribal regulatory
body issues licenses to all vendors that it deals with, including
vendors of non-gaming related services, equipment and supplies. This
commenter proposed amending this paragraph to add, ``on matters that
may affect the honesty and integrity of the gaming activity'' after the
word, ``operation.''
The Commission disagrees. Corrupting influences, which the IGRA was
designed to prevent from infiltrating Indian gaming, and which can
negatively affect the honesty and integrity of the gaming activity, can
get a foothold through various vendor/vendee relationships. The
Commission will consider, therefore, the extent to which the tribe
investigates and issues licenses or permits to the people or
organizations it does business with. This should not be read to mean
that the tribe must be in the practice of issuing licenses to each and
every entity it deals with, such as utility companies, but should have
reasonable vendor licensing standards in place.
Posting of Rules of Games
A commenter stated that Sec. 518.4(b)(3)(xiii), which provides that
the Commission will consider whether the independent tribal regulatory
body establishes or approves, and posts, rules of games, it too
stringent. First, it does not recognize that some tribes require the
gaming operation, not the regulatory body, to post rules, and second,
that some game rules are too lengthy to post, but may be made available
upon demand.
The Commission agrees with the first comment, and has revised the
language to read, ``establishes or approves, and requires the posting
of, rules of games.'' With respect to the second comment, the
Commission believes that all rules should be posted, regardless of
their length. However, because the posting of rules of the game is an
indicator of self regulation, and not a requirement, the fact that a
tribe does not post all rules, but makes some lengthy rules available
upon demand, will not necessarily result in the denial of a
certificate.
Video Surveillance
A commenter stated that with respect to Sec. 518.4(b)(3)(xvi) some
small operations may not require video surveillance, and that this
paragraph should be amended to read, ``where video surveillance is
required.''
As indicated earlier Sec. 518.4(b) sets forth indicators that the
Commission will consider when evaluating a petition. The Commission
recognizes that operations vary in type and size, and a rigid set of
rules would be unworkable. While the Commission favors the use of video
surveillance, the small size of an operation, and its ability to
otherwise effectively regulate the gaming activity, may mitigate
against its use of video surveillance. The Commission will evaluate the
need for video surveillance on a case-by-case basis.
Dispute Resolution Procedures
One commenter suggested that Sec. 518.4(b)(3)(xviii), which
provides that the Commission will consider whether adequate dispute
resolution procedures exist, would require a tribe to waive its
sovereign immunity. Another commenter suggested that a regulation
requiring dispute resolution is not appropriate at this time.
The Commission disagrees. The Commission is not requiring that a
tribe consent to be sued in order to obtain a certificate. The
Commission will, however, consider whether there is an adequate system
of dispute resolution. This could involve mediation or arbitration, in
addition to a process for hearings before the tribal regulatory body,
and a process for appeals to tribal court. Tribes are already required
by 25 CFR 522.2(f) to have a description of procedures for resolving
disputes between the gaming public and the tribe or the management
contractor. Disputes between gaming employees and tribes has been an on
going concern in Congress and in the public. This provision will
enhance the perception that the gaming operation is run fairly and
honestly. A dispute resolution process in no way imperils the sovereign
immunity status of a tribe. Furthermore, there are certain times when a
waiver of sovereign immunity may be warranted. For example, the United
States has waived its immunity from suit under the Federal Tort Claims
Act for suits against tortious acts of federal employees and tribal
employees employed under the Indian Self-Determination Act.
Financial Stability
A commenter stated that Sec. 518.4(b)(6), which provides that the
Commission will consider the financial stability of the operation, is
unworkable. This commenter believes that financial stability is not a
useful measure of a tribe's ability to self-regulate because it may
reflect only fluctuations in the market or changes in tribal policy to
achieve legitimate governmental objectives, such as providing jobs for
the community.
The financial stability of the operation is one of several
indicators the Commission will evaluate. The Commission recognizes that
the economic impact of tribal gaming operations can accrue to a tribe
in various ways. While in many cases the primary economic benefit may
be profits generated for the support of the tribal purposes specified
in IGRA (25 U.S.C. 2710(b)(2)(B)), such as further economic development
or the general welfare of the tribe, in other instances employment
generated for tribal members by the gaming operation may be the primary
economic benefit. Notwithstanding the extent of the operation's
profitability, the operation must be adequately funded, by gaming
revenues or other infusions the tribe may elect to provide, so that all
required safeguards are maintained and standards are met. While the
temporary fluctuation of some market conditions will be taken into
consideration, in instances where financial instability poses a long-
term threat to compliance with required
[[Page 41966]]
standards, self regulation certification will be withheld.
Clarification of Sec. 518.4(d)
The Commission has added the language, ``During the review of the
petition, `` to the beginning of Sec. 518.4(d) to clarify when the
provisions of this paragraph apply.
Section 518.5 What process will the Commission use to review petitions?
One commenter suggested a peer review process for the evaluation of
petitions, with a team of people including those with Indian gaming
regulatory experience, Commission staff, and outside auditors and
consultants.
A peer review process may be an appropriate mechanism for
evaluating petitions. The regulations do not have to mandate such a
process, however, before the Commission can implement it. Furthermore,
The Commission anticipates that it can, with the expansion of staff in
the near future, adequately evaluate petitions for self-regulation. If
the Commission finds it necessary and economical to contract for
outside assistance or expertise to assist the Commission, it will do
so.
A commenter stated that the NIGC should provide consultation and
technical assistance to tribes to help them through the process.
The Commission intends to assist tribes in understanding and
complying with all Commission regulations.
Establishment of Office of Self Regulation
To stream line the review process, the Commission has created an
``Office of Self Regulation'' (OSR). The Chairman of the Commission
shall appoint one Commissioner to administer this office. The OSR will
be responsible for the review and investigation process and will issue
a report of its findings to the tribe. It will also issue certificates
of self regulation, conduct hearings and issue decisions following
those hearings. Those decisions will then be appealable to the full
Commission, which shall decide the appeal based on the record. The
tribe may request reconsideration by the full Commission of a denial of
a petition. This process differs somewhat from the process described in
the proposed rule. However, it provides an additional opportunity for
tribes to challenge adverse decisions. The proposed rule provided for
all determinations to be made by the Commission after an opportunity
for a hearing, with the full Commission issuing a final decision on the
petition. That decision was then subject to reconsideration. The
process in these final regulations provides for initial decisions to be
made by the Office of Self Regulation, after the opportunity for a
hearing. Those decisions are then appealable to the full Commission,
whose decision is then subject to reconsideration. Therefore, the tribe
has the benefit of three levels of scrutiny of their petition instead
of two.
Technical Changes
The Commission has combined the provisions of proposed
Secs. 518.5(e) and (f) into a new section 518.5 (e)(1) and (2) and
renumbered the subsequent subsections. In addition, the Commission has
added language to Sec. 518.5(e)(1) which clarifies that, if the Office
of Self Regulation determines that the tribe has satisfied the
criteria, it shall so indicate in its report and shall issue a
certificate.
The Commission has also inserted ``from the date of service of the
report'' into Sec. 518.5(e)(1) after ``the tribe shall have 60 days''.
This relates to the deadline for submission of the tribe's written
response, and clarifies when the 60 day time period starts.
Commission Deadlines
Several commenters requested express deadlines imposed on the
Commission to complete the certification process. Commenters felt that
IGRA does not give the Commission unlimited time to act upon a
petition, and to be consistent with IGRA, regulations should impose
meaningful restrictions on the time allowed the agency to decide
petitions. A commenter also feels that the regulations should provide
for a tribe to request a hearing at the time of the petition. One
commenter suggested that the hearing should be scheduled for within 30
days of the request for a hearing, while another commenter suggested
that the hearing should be held within 60 days of the date the
Commission acknowledges the request for a hearing. One commenter
suggested that Sec. 518.5(i) should impose a deadline of 30 days
following the hearing for the Commission to issue its decision, while
another commenter suggested a 60 day deadline, and that if the
Commission does not issue a decision within 60 days, the petition
should be deemed approved. Without such a provision, the commenter is
concerned that the Commission will not have incentive to complete its
review in a timely manner.
While time frames can sometimes assure a more timely decision, the
self-regulation process is a new, unique, and very important process.
Thus, the Commission is not prepared to determine that 30-60 day time
periods would be reasonable.
Timing of Request for Hearing
With respect to the right to a hearing, the regulations provide
that the hearing can be requested at the time of a tribe's submission
of its response to the Commission's report, instead of at the
submission of the petition. The Commission designed the process this
way because if the Commission issues a report that is favorable and
indicates that it will issue a certificate, a hearing would be
unnecessary. It is only after the Commission's report is issued that
the need for a hearing will be evident. In the interest of time and
expense for both the tribe and the Commission, the Commission will only
honor a request for a hearing after the issuance of the Commission's
report.
Information From Interested Parties
Two commenters suggested that Sec. 518.5(c), which provides that
the Commission may consider any evidence submitted by interested
parties, could elicit a variety of inaccurate or incomplete responses
from third parties. Both commenters further stated that any information
obtained must be available for review by the Tribe, which should also
have an opportunity to respond and to correct inaccurate or incomplete
information before the Commission makes a final decision on the
petition.
An important part of the process of determining a tribe's ability
to self-regulate is the evaluation of information provided by
individuals and entities in addition to information provided by the
Tribe. The Commission will fully investigate any negative information,
and will afford the Tribe a timely opportunity to respond to all such
information on which it relies in making a determination. Therefore,
the Commission has added the following language to Sec. 518.5(c), ``The
Commission shall make all such information on which it relies in making
its determination available to the Tribe, and shall afford the Tribe an
opportunity to respond.''
Public Notice Requirement
One commenter stated that negative backlash could result if the
Tribe is required to publish the notice required by Sec. 518.5(d) in a
non-tribal newspaper.
This paragraph implements 25 U.S.C. 2710(c)(4)(A)(ii), which
requires the Commission to determine if the Tribe has conducted its
gaming in a manner which has resulted in a reputation for safe, fair,
and honest operation of the gaming activity. To determine reputation,
the Commission must
[[Page 41967]]
consider public opinion. The Commission understands the concern raised
by this commenter and will give each response to the public notice its
due weight. Sweeping criticism of Indian gaming will not be considered
by the Commission in making its determination. The Commission is only
interested in comment on specific issues relative to the Tribe's
reputation for providing a safe, fair, and honest gaming environment.
Another commenter suggested that a better source of information
would be the local United States Attorney for the district where the
tribal gaming is operated, the Federal Bureau of Investigation, local
police and the State's gaming regulatory agency.
The Commission agrees that these agencies may have information on
the effectiveness of a particular Tribe's gaming regulation. During the
course of its investigation of the petition, the Commission may confer
with these agencies. Nonetheless, it is important for the general
public to be aware of the Tribe's petition and to afford the public an
opportunity to comment.
Final Agency Action
One commenter stated that Sec. 518.5 should state expressly that
the decision of the Commission to approve or deny a petition is a final
agency action under 25 U.S.C. 2714.
The Commission agrees that the decision to approve or deny a
petition is a final agency action, and that the decision to deny a
petition is appealable under 25 U.S.C. 2714. The Commission therefore
adds a new section 518.5(j) which states, ``The decision of the
Commission to approve or deny a petition shall be a final agency
action. A denial shall be appealable under 25 U.S.C. 2714, subject to
the provisions of Sec. 518.12. The Commission decision shall be
effective when the time for the filing of a request for reconsideration
pursuant to Sec. 518.12 has expired and no request has been filed.''
Section 518.6 When will a certificate of self-regulation become
effective?
Several commenters have argued that to require tribes to wait until
the beginning of the next year for a certificate is unfair. Several
commenters have argued that certificates should be made effective
immediately, and one commenter has suggested a 30 day effective date.
Another commenter suggested that certificates should become effective
on the first day of the next quarter following the date the petition is
granted. Still another commenter suggested that the Tribe should be
permitted to choose which date their certificate becomes effective. One
commenter points out that IGRA provides that ``during any year in which
a Tribe has a certificate of self-regulation'' it is not subject to 25
U.S.C. 2706(b) and, in addition, the Commission may not assess a fee in
excess of one quarter of one percent. This commenter believes that the
proposed regulations directly contravene this language.
The Commission has concluded that the approach most clearly aligned
with the statute is to provide for a January 1st effective date, with
all benefits inuring to the tribe from that date forward. Self
regulation status confers two types of benefits upon a tribe that holds
a certificate; financial and a reduced regulatory role for the
Commission with respect to that tribe. IGRA provides that ``during any
year in which a tribe has a certificate'' it shall reap those benefits.
25 U.S.C. 2710 (c)(5). This language is ambiguous, as the reduction in
the Commission's regulatory role can only apply prospectively, whereas
the financial benefit is capable of retroactive application. The
Commission powers apply only prospectively because the Commission will
have already taken action before the determination on self regulation
was made. Those actions can not be undone. Although the ``during any
year'' language can be interpreted to mean ``for the entire year'',
which would support an argument in favor of retroactive application of
the financial benefits, it does not make sense to intepret the statute
one way with respect to regulatory authority and another with respect
to the financial incentive. Furthermore, the establishment of a January
1st effective date is consistent with Commission regulations and does
not create an undue financial burden on tribes. For example, if a tribe
applies in 1999 and a certificate is issued and made effective January
1, 2000, fee payments made by the tribe in 1999 would have been based
on 1998 revenues pursuant to Commission regulations. Current fee
regulations provide that fees are calculated based on the previous
year's revenues. See 25 CFR 514.1(c)(5)(ii).
Furthermore, the establishment of a January 1st effective date is
the most practical approach for the Commission to take. Fees are paid
to the Commission quarterly based on the prior year's revenues. It
would be impractical for the Commission to determine, on a case by case
basis, what each self regulating tribe owes for the part of the year in
which it was not self regulating, and how much it owes for the part of
the year that it is self regulating. In addition, the Commission's
budget is determined each year based on the amount of fees collected.
If fees already paid were rebated based on a retroactive application of
the statute, the budgetary process would be in a constant state of
flux. This would make it difficult for the Commission to determine the
amount of money available at any point in time to carry out its
statutory duties.
The Commission has established a schedule for the submission of
petitions that should ease the process and provide guidance to tribes.
The process is as follows: To be considered for issuance of a
certificate the following January, complete petitions are due no later
than June 30 (Pursuant to Sec. 518.5(b), the Commission shall notify a
tribe, by letter, when it considers a petition to be complete.);
petitions will be reviewed and investigated in chronological order
based on the date of receipt of a complete petition; and the Commission
will announce its determinations on December 1 for all those reviews
and investigations it completes. This process encourages submission of
petitions early in the calendar year to afford the Commission enough
time to review and investigate the petition and to make a determination
by December 1.
The Commission recognizes that under this schedule, the earliest a
certificate will be effective is January 1, 2000. However, the
Commission will accept petitions for the June 30, 1999 deadline
starting immediately, and once these regulations become effective, the
Commission will begin the process of reviewing and investigating
petitions. Furthermore, it is unlikely, based on the extent and nature
of these regulations, that the Commission would complete its review and
investigation of a petition in time for a January 1, 1999, effective
date. In addition, this schedule does not require tribes to wait an
extra year for the financial benefit of self regulation because fees
are calculated each year based on the prior year's revenues. Even
though tribes must wait until January 1, 2000, for the first
opportunity to obtain a certificate, any fees paid in 1999 will be
based on 1998 revenues.
Section 518.7 If a tribe holds a certificate of self-regulation, is it
required to report information to the Commission to maintain its self-
regulatory status?
One commenter stated that IGRA does not require certified Tribes to
repeatedly demonstrate that they are self-regulating. This commenter
believes that such a requirement would be so onerous as to make a
certificate not worthwhile. Another commenter stated that the report is
as complex as the
[[Page 41968]]
original petition, and suggested the requirement of an annual report
that only documents a change in status.
The Commission agrees that IGRA does not affirmatively require
certified tribes to repeatedly demonstrate that they are self-
regulating. However, IGRA vests the Commission with the power to remove
a certificate. 25 U.S.C. 2710(c)(6). This power would be rendered
meaningless unless the Commission is routinely informed that the tribe
is continuing to meet the criteria for self regulation, particularly in
light of the several powers of the Commission which are abrogated by
the issuance of a certificate. (See 25 U.S.C. 2710(c)(5)(A)). The
Commission does, however, share the concerns of the commenters that the
reporting requirement may be unduly onerous and has therefore removed
the language, ``with supporting documentation'' after ``such report
shall set forth information''. By removing the requirement that the
tribe submit supporting documentation with its annual report, the
Commission intends to make the process of completing and submitting the
report less onerous. While not requiring that the tribe supplement its
annual report with documentation supporting each self regulation
criteria, the Commission may require the tribe to supply supporting
documentation if necessary. The Commission plans to provide guidance on
how to prepare the report. In addition, the Commission has added ``and
shall include an annual report, with supporting documentation, signed
by an authorized tribal official, which shows that tribal net gaming
revenues were used in accordance with the requirements of 25 U.S.C.
2710(b)(2)(B)'' after ``approval requirements of Sec. 518.4''. This is
the same type of report the Tribe must submit with its petition under
Sec. 518.3(a)(1)(vii).
Section 518.8. Does a tribe that holds a certificate of self regulation
have a continuous duty to advise the Commission of any information?
One commenter stated that the requirement that a tribe advise the
Commission of circumstances that may negatively impact on the tribe's
ability to self regulate could be subject to wide-ranging
interpretation as to what may be a negative impact. This commenter
suggested that this section require a tribe to advise the Commission of
any circumstances that may reasonably impact the tribe's ability to
continue to self regulate.
The Commission generally agrees with this commenter. Therefore,to
clarify that the tribe has a continuing duty to advise the Commission
of circumstances that may cause the Commission to review the tribe's
certification, and to clean up unnecessary language, the text of
Sec. 518.8. has been modified slightly. The following changes were
made: delete ``at all times after the receipt of a certificate of self-
regulation''; delete ``negatively impact on the tribe's ability to
continue to self-regulate'' after ``may'' and add, ``reasonably cause
the Commission to review the tribe's certificate of self regulation';
and delete ``may undermine a tribe's ability to effectively regulate''
after ``factors that'' and add ``are material to the decision to grant
a certificate of self regulation.'' This change clarifies that the
Commission expects to be notified of any significant circumstances that
may affect a tribes certificate of self regulation.
Section 518.9 Are any of the investigative or enforcement powers of the
Commission limited by the issuance of a certificate of self-regulation?
One commenter suggested that the language of Sec. 518.9 is
misleading because it does not take into account the language of IGRA
at 2710(c)(5)(a) which states that certain provision of IGRA do not
apply to self-regulated tribes.
The Commission agrees, and therefore adds the following language to
the beginning of Sec. 518.9, `` Subject to the provisions of 25 U.S.C.
2710(c)(5)(A),''
Section 518.10 Under what circumstances may the Commission remove a
certificate of self-regulation?
One commenter stated that this paragraph should indicate that a
decision to remove a certificate is appealable to Federal District
Court.
The Commission agrees and adds to Sec. 518.10 the following: ``The
decision to remove a certificate is appealable to Federal District
Court pursuant to 25 U.S.C. 2714.''
Section 518.12 May a tribe request reconsideration by the Commission of
a denial of a petition or a removal of a certificate of self-
regulation?
One commenter suggested that Sec. 518.12 should state that a
request for reconsideration reopens the matter before the Commission,
and that until action on the request is complete, the prior decision of
the Commission is not a final agency action.
The Commission has clarified this paragraph by adding Sec. 518.5
(j) which provides that if a request for reconsideration has been filed
within 30 days of the denial or removal, the Commission's original
decision is not final agency action.
The Commission has further clarified Sec. 518.12 because it was not
clear whether the Commission would decide within 30 days whether to
grant the request for reconsideration, or whether the Commission would
decide the request on its merits. Therefore, the Commission has added
the word, ``final'' before the word, ``decision and has removed the
language, ``with regard to any request for reconsideration'' from the
second to last sentence. The Commission will make its final decision
within 30 days.
One commenter stated that the failure of the Commission to issue a
decision on reconsideration within 30 days should result in the
automatic approval, not disapproval, of the request. This commenter
suggests that the automatic disapproval provision discourages the
timely resolution of requests for reconsideration.
The Commission disagrees. By allowing for reconsideration of a
decision to deny a petition or remove a certificate, the Commission is
affording a Tribe a second opportunity to make its case. There is no
statutory right to reconsideration, and therefore no prescribed
deadline for such decision. The Commission has, however, provided for a
30 day deadline. If no decision issues within 30 days, the Tribe will
know by the 31st day that the request was not approved. There is,
therefore, no real threat of continued inaction by the Commission.
Several grammatical changes were made to the proposed regulations.
These changes have no substantive effect.
Regulatory Matters
Paperwork Reduction Act
On May 2, 1998, the Commission received notice that the Office of
Management and Budget approved its information collection system, and
assigned it number 3141-0008. This approval expires on May 31, 2001.
Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility Act, 5 U.S.C. 601 et seq.,
the Commission has determined that this rule will not have a
significant economic impact on a substantial number of small entities.
Because this rule is procedural in nature, it will not impose
substantive requirements that could be deemed impacts within the scope
of the Act.
National Environmental Policy Act
The Commission has determined that this rule does not constitute a
major Federal action significantly affecting the quality of the human
environment and
[[Page 41969]]
that no detailed statement is required pursuant to the National
Environmental Policy Act of 1969.
List of Subjects in 25 CFR Part 518
Administrative practice and procedure, Gambling, Indians--lands,
Indians--tribal government, Reporting and recordkeeping requirements.
For the reasons stated in the preamble, the Commission amends 25
CFR chapter III by adding part 518 to read as follows:
PART 518--SELF REGULATION OF CLASS II GAMING
Sec.
518.1 What does this part cover?
518.2 Who may petition for a certificate of self-regulation?
518.3 What must a tribe submit to the Commission as part of its
petition?
518.4 What criteria must a tribe meet to receive a certificate
of self-regulation?
518.5 What process will the Commission use to review petitions?
518.6 When will a certificate of self-regulation become
effective?
518.7 If a tribe holds a certificate of self-regulation, is it
required to report information to the Commission to maintain its
self-regulatory status?
518.8 Does a tribe that holds a certificate of self-regulation
have a continuous duty to advise the Commission of any information?
518.9 Are any of the investigative or enforcement powers of the
Commission limited by the issuance of a certificate of self-
regulation?
518.10 Under what circumstances may the Commission remove a
certificate of self-regulation?
518.11 May a tribe request a hearing on the Commission's
proposal to remove its certificate?
518.12 May a tribe request reconsideration by the Commission of
a denial of a petition or a removal of a certificate of self-
regulation?
Authority: 25 U.S.C. 2706(b)(10), 2710(c)(3)-(6).
Sec. 518.1 What does this part cover?
This part sets forth requirements for obtaining, and procedures
governing, the Commission's issuance of certificates of self-regulation
of class II gaming operations under 25 U.S.C. 2710(c). When the
Commission issues a certificate of self-regulation, the certificate is
issued to the tribe, not to a particular gaming operation; the
certificate will apply to all class II gaming operations operated by
the tribe that holds the certificate.
Sec. 518.2 Who may petition for a certificate of self-regulation?
A tribe may submit to the Commission a petition for self-regulation
of class II gaming if, for the three (3) year period immediately
preceding the date of its petition:
(a) The tribe has continuously conducted the gaming activity for
which it seeks self-regulation;
(b) All gaming that the tribe has engaged in, or licensed and
regulated, on Indian lands within the tribe's jurisdiction, is located
within a State that permits such gaming for any purpose by any person,
organization or entity (and such gaming is not otherwise specifically
prohibited on Indian lands by federal law), in accordance with 25
U.S.C. 2710(b)(1)(A);
(c) The governing body of the tribe has adopted an ordinance or
resolution that the Chairman has approved, in accordance with 25 U.S.C.
2710(b)(1)(B);
(d) The tribe has otherwise complied with the provisions of 25
U.S.C. 2710; and
(e) The gaming operation and the tribal regulatory body have, for
the three years immediately preceding the date of the petition,
maintained all records required to support the petition for self-
regulation.
Sec. 518.3 What must a tribe submit to the Commission as part of its
petition?
(a) A petition for a certificate of self-regulation under this part
shall contain:
(1) Two copies on 8-1/2'' X 11'' paper of a petition for self-
regulation approved by the governing body of the tribe and certified as
authentic by an authorized tribal official, which includes:
(i) A brief history of each gaming operation(s), including the
opening dates and periods of voluntary or involuntary closure;
(ii) An organizational chart of the independent tribal regulatory
body;
(iii) A description of the process by which all employee and
regulator positions at the independent tribal regulatory body are
filled, including qualifying and disqualifying criteria;
(iv) A description of the process by which the independent tribal
regulatory body is funded and the funding level for the three years
immediately preceding the date of the petition;
(v) A list of the current regulators and employees of the
independent tribal regulatory body, their titles, the dates they began
employment, and, if serving limited terms, the expiration date of such
terms;
(vi) A list of the current gaming operation division heads; and
(vii) A report, with supporting documentation, including a sworn
statement signed by an authorized tribal official, which explains how
tribal net gaming revenues were used in accordance with the
requirements of 25 U.S.C. 2710(b)(2)(B);
(2) A descriptive list of the documents maintained by the tribe,
together with an assurance that the listed documents or records are
available for the Commission's review for use in determining whether
the tribe meets the eligibility criteria of Sec. 518.2 and the approval
criteria of Sec. 518.4, which shall include but is not limited to:
(i) The tribe's constitution or other governing documents;
(ii) If applicable, the tribe's revenue allocation plan pursuant to
25 U.S.C. 2710(b)(3);
(iii) A description of the accounting system(s) at both the gaming
operation and the tribe that account for the flow of the gaming
revenues from receipt to their ultimate use, consistent with IGRA;
(iv) Manual(s) of the internal control systems of the gaming
operation(s);
(v) A description of the record keeping system for all allegations
of criminal or dishonest activity for the three (3)-year period
immediately preceding the date of the petition, and measures taken to
resolve the allegations;
(vi) A description of the record keeping system for all
investigations, enforcement actions, and prosecutions of violations of
the tribal gaming ordinance or regulations, for the three (3)-year
period immediately preceding the date of the petition, including
dispositions thereof;
(vii) A description of the personnel record keeping system of all
current employees of the gaming operation(s);
(viii) The dates of issuance, and criteria for the issuance of
tribal gaming licenses issued for each place, facility or location at
which gaming is conducted; and
(ix) The tribe's current set of gaming regulations; and
(3) A copy of the public notice required under 25 CFR 518.5(d) and
a certification, signed by a tribal official, that it has been posted.
Upon publication of the notice in a local newspaper, the tribe shall
forward an affidavit of publication to the Commission.
Sec. 518.4 What criteria must a tribe meet to receive a certificate of
self-regulation?
(a) The Commission shall issue a certificate of self-regulation if
it determines that the tribe has, for the three years immediately
preceding the petition:
(1) Conducted its gaming activity in a manner that:
(i) Has resulted in an effective and honest accounting of all
revenues;
(ii) Has resulted in a reputation for safe, fair, and honest
operation of the activity; and
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(iii) Has been generally free of evidence of criminal or dishonest
activity;
(2) Adopted and is implementing adequate systems for:
(i) Accounting of all revenues from the activity;
(ii) Investigation, licensing and monitoring of all employees of
the gaming activity; and
(iii) Investigation, enforcement and prosecution of violations of
its gaming ordinance and regulations;
(3) Conducted the operation on a fiscally and economically sound
basis; and
(4) The gaming activity has been conducted in compliance with the
IGRA, NIGC regulations in this chapter, and the tribe's gaming
ordinance and gaming regulations.
(b) Indicators that a tribe has met the criteria set forth in
paragraph (a) of this section may include, but are not limited to:
(1) Adoption and implementation of minimum internal control
standards which are at least as stringent as those promulgated by the
Commission, or until such standards are promulgated by the Commission,
minimum internal control standards at least as stringent as those
required by the State of Nevada or the State of New Jersey;
(2) Evidence that suitability determinations are made with respect
to tribal gaming regulators which are at least as stringent as those
required for key employees and primary management officials of the
gaming operation(s);
(3) Evidence of an established independent regulatory body within
the tribal government which:
(i) Monitors gaming activities to ensure compliance with federal
and tribal laws and regulations;
(ii) Promulgates tribal gaming regulations pursuant to tribal law;
(iii) Ensures that there is an adequate system for accounting of
all revenues from the activity and monitors such system for continued
effectiveness;
(iv) Performs routine operational or other audits of the gaming
operation(s);
(v) Routinely receives and reviews accounting information from the
gaming operation(s);
(vi) Has access to and may inspect, examine, photocopy and audit
all papers, books, and records of the gaming operation(s);
(vii) Provides ongoing information to the tribe on the status of
the tribe's gaming operation(s);
(viii) Monitors compliance with minimum internal control standards
for the gaming operation;
(ix) Adopts and implements an adequate system for investigation,
licensing, and monitoring of all employees of the gaming activity;
(x) Maintains records on licensees and on persons denied licenses
including persons otherwise prohibited from engaging in gaming
activities within the tribe's jurisdiction;
(xi) Inspects and examines all premises where gaming is conducted;
(xii) Establishes standards for and issues vendor licenses or
permits to persons or entities who deal with the gaming operation, such
as manufacturers and suppliers of services, equipment and supplies;
(xiii) Establishes or approves, and requires the posting of, rules
of games;
(xiv) Inspects games, tables, equipment, cards, and chips or tokens
used in the gaming operation(s);
(xv) Establishes standards for technological aids and tests such
for compliance with standards;
(xvi) Establishes or approves video surveillance standards;
(xvii) Adopts and implements an adequate system for the
investigation of possible violations of the tribal gaming ordinance and
regulations and takes appropriate enforcement actions;
(xviii) Determines that there are adequate dispute resolution
procedures for gaming operation employees and customers, and ensures
that such system is adequately implemented; and
(xix) Takes testimony and conducts hearings on regulatory matters,
including matters related to the revocation of primary management
officials and key employee licenses;
(4) Documentation of a sufficient source of permanent and stable
funding for the independent tribal regulatory body which is allocated
and appropriated by the tribal governing body;
(5) Adoption of a conflict of interest policy for the regulators/
regulatory body and their staff;
(6) Evidence that the operation is financially stable;
(7) Adoption and implementation of a system for adequate
prosecution of violations of the tribal gaming ordinance and
regulations, which may include the existence of a tribal court system
authorized to hear and decide gaming related cases;
(8) Evidence that the operation is being conducted in a safe
manner, which may include, but not be limited to:
(i) The availability of medical, fire, and emergency services;
(ii) The existence of an evacuation plan; and
(iii) Proof of compliance with applicable building, health, and
safety codes; and
(9) Evidence that reports are produced or received by the tribe,
the tribal regulatory body, or the gaming operation based on an
evaluation of the internal controls of the gaming operation during the
three (3) year period immediately preceding the date of the petition.
(c) The burden of establishing self-regulation is upon the tribe
filing the petition.
(d) During the review of the petition,--the Commission shall have
complete access to all areas of and all papers, books, and records of
the tribal regulatory body, the gaming operation, and any other entity
involved in the regulation or oversight of the gaming operation. The
Commission shall be allowed to inspect and photocopy any relevant
materials. The tribe shall take no action to prohibit the Commission
from soliciting information from any current or former employees of the
tribe, the tribal regulatory body, or the gaming operation. Failure to
adhere to this paragraph may be grounds for denial of a petition for
self-regulation.
Sec. 518.5 What process will the Commission use to review petitions?
(a) The Chairman shall appoint one Commissioner to administer the
Office of Self Regulation. The Office of Self Regulation shall
undertake an initial review of the petition to determine whether the
tribe meets all of the eligibility criteria of Sec. 518.2. If the tribe
fails to meet any of the eligibility criteria, the Office of Self
Regulation shall deny the petition and so notify the tribe. If the
tribe meets all of the eligibility criteria, the Office of Self
Regulation shall review the petition and accompanying documents for
completeness. If the Office of Self Regulation finds the petition
incomplete, it shall immediately notify the tribe by letter, certified
mail, return receipt requested, of any obvious deficiencies or
significant omissions apparent in the petition and provide the tribe
with an opportunity to submit additional information and/or
clarification.
(b) The Office of Self Regulation shall notify a tribe, by letter,
when it considers a petition to be complete.
(c) Upon receipt of a complete petition, the Office of Self
Regulation shall conduct a review and investigation to determine
whether the tribe meets the approval criteria under Sec. 518.4. During
the course of this review, the Office of Self Regulation may request
from the tribe any additional material it deems necessary to assess
whether the tribe has met the requirements for self-regulation. The
tribe shall provide all information
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requested by the Office of Self Regulation in a timely manner. The
Office of Self Regulation may consider any evidence which may be
submitted by interested or informed parties. The Office of Self
Regulation shall make all such information on which it relies in making
its determination available to the Tribe and shall afford the Tribe an
opportunity to respond.
(d) The tribe shall post a notice, contemporaneous with the filing
of the petition, advising the public that it has petitioned the
Commission for a certificate of self regulation. Such notice shall be
posted in conspicuous places in the gaming operation and the tribal
government offices. Such notice shall remain posted until the
Commission either issues a certificate or declines to do so. The tribe
shall also publish such notice, once a week for four weeks, in a local
newspaper with a broad based circulation. Both notices shall state that
one of the criteria for the issuance of a certificate is that the tribe
has a reputation for safe, fair, and honest operation of the gaming
activity, and shall solicit comments in this regard. The notices shall
instruct commentors to submit their comments directly to the Office of
Self Regulation, shall provide the mailing address of the Commission
and shall request that commentors include their name, address and day
time telephone number.
(e) After making an initial determination on the petition, the
Office of Self Regulation shall issue a report of its findings to the
tribe.
(1) If the Office of Self Regulation determines that the tribe has
satisfied the criteria for a certificate of self regulation, it shall
so indicate in its report and shall issue a certificate in accordance
with 25 CFR 518.6.
(2) If the Office of Self Regulation's initial determination is
that a tribe has not met the criteria for a certificate of self
regulation, it shall so advise the tribe in its report and the tribe
shall have 60 days from the date of service of the report to submit to
the Office of Self Regulation a written response to the report. This
response may include additional materials which:
(i) The tribe deems necessary to adequately respond to the
findings; and
(ii) The tribe believes supports its petition.
(f) At the time of the submission of its response the tribe may
request a hearing before the Office of Self Regulation. This request
shall specify the issues to be addressed by the tribe at such hearing,
and any proposed oral or written testimony the tribe wishes to present.
The Office of Self Regulation may limit testimony.
(g) The Office of Self Regulation shall notify the tribe, within 10
days of receipt of such request, of the date and place of the hearing.
The Office of Self Regulation shall also set forth the schedule for the
conduct of the hearing, including the specification of all issues to be
addressed at the hearing, the identification of any witnesses, the time
allotted for testimony and oral argument, and the order of the
presentation.
(h) Following review of the tribe's response and the conduct of the
hearing, the Office of Self Regulation shall issue a decision on the
petition. The decision shall set forth with particularity the findings
with respect to the tribe's compliance with standards for self-
regulation set forth in this part. If the Office of Self Regulation
determines that a certificate will issue, it will do so in accordance
with 25 CFR 518.6.
(i) The decision to deny a petition shall be appealable to the full
Commission. Such appeal shall be received by the Commission within
thirty (30) days of service of the decision and shall include a
supplemental statement that states with particularity the relief
desired and the grounds therefor. The full Commission shall decide the
appeal based only on a review of the record before it. The decision on
appeal shall require a majority vote of the Commissioners.
(j) The decision of the Commission to approve or deny a petition
shall be a final agency action. A denial shall be appealable under 25
U.S.C. 2714, subject to the provisions of Sec. 518.12. The Commission
decision shall be effective when the time for the filing of a request
for reconsideration pursuant to Sec. 518.12 has expired and no request
has been filed.
Sec. 518.6 When will a certificate of self-regulation become
effective?
A certificate of self-regulation shall become effective on January
1 of the year following the year in which the Commission determines
that a certificate will issue. Complete petitions are due no later than
June 30. No petitions will be considered for the following January 1
effective date that have not been received by June 30 of the previous
year. Petitions will be reviewed and investigated in chronological
order based on the date of receipt of a complete petition. The
Commission will announce its determinations on December 1 for all those
reviews and investigations it completes.
Sec. 518.7 If a tribe holds a certificate of self-regulation, is it
required to report information to the Commission to maintain its self-
regulatory status?
Yes. Each tribe that holds a certificate of self-regulation shall
be required to submit a self-regulation report annually to the
Commission in order to maintain its self-regulatory status. Such report
shall set forth information to establish that the tribe has
continuously met the eligibility requirements of Sec. 518.2 and the
approval requirements of Sec. 518.4 and shall include a report, with
supporting documentation, including a sworn statement signed by an
authorized tribal official, which explains how tribal net gaming
revenues were used in accordance with the requirements of 25 U.S.C.
2710(b)(2)(B)''. The annual report shall be filed with the Commission
on April 15th of each year following the first year of self-regulation.
Failure to file such report shall be grounds for the removal of a
certificate under Sec. 518.8.
Sec. 518.8 Does a tribe that holds a certificate of self-regulation
have a continuing duty to advise the Commission of any information?
Yes. A tribe that holds a certificate of self-regulation has a
continuing duty to advise immediately the Commission of any
circumstances that may reasonably cause the Commission to review the
tribe's certificate of self-regulation. Failure to do so is grounds for
removal of a certificate of self-regulation. Such circumstances may
include, but are not limited to: a change in management contractor;
financial instability; or any other factors that are material to the
decision to grant a certificate of self regulation.
Sec. 518.9 Are any of the investigative or enforcement powers of the
Commission limited by the issuance of a certificate of self-regulation?
No. Subject to the provisions of 25 U.S.C. 2710(c)(5)(A) the
Commission retains its investigative and enforcement powers over all
class II gaming tribes notwithstanding the issuance of a certificate of
self-regulation. The Commission shall retain its powers to investigate
and bring enforcement actions for violations of the Indian Gaming
Regulatory Act, accompanying regulations, and violations of tribal
gaming ordinances.
Sec. 518.10 Under what circumstances may the Commission remove a
certificate of self-regulation?
The Commission may, after an opportunity for a hearing, remove a
certificate of self-regulation by a majority vote of its members if it
determines that the tribe no longer
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meets the eligiblity criteria of Sec. 518.2, the approval criteria of
Sec. 518.4, the requirements of Sec. 518.7 or the requirements of
Sec. 518.8. The Commission shall provide the tribe with prompt notice
of the Commission's intent to remove a certificate of self-regulation
under this Part. Such notice shall state the reasons for the
Commission's action and shall advise the tribe of its right to a
hearing under Sec. 518. 11. The decision to remove a certificate is
appealable to Federal District Court pursuant to 25 U.S.C. 2714.
Sec. 518.11 May a tribe request a hearing on the Commission's proposal
to remove its certificate?
Yes. A tribe may request a hearing regarding the Commission's
proposal to remove a certificate of self regulation under Sec. 518.10.
Such a request shall be filed with the Commission within thirty (30)
days after the tribe receives notice of the Commission's action.
Failure to request a hearing within the time provided by this section
shall constitute a waiver of the right to a hearing.
Sec. 518.12 May a tribe request reconsideration by the Commission of a
denial of a petition or a removal of a certificate of self-regulation?
Yes. A tribe may file a request for reconsideration of a denial of
a petition or a removal of a certificate of self-regulation within 30
days of receipt of the denial or removal. Such request shall set forth
the basis for the request, specifically identifying those Commission
findings which the tribe believes to be erroneous. The Commission shall
issue a final decision within 30 days of receipt of the request. If the
Commission fails to issue a decision within 30 days, the request shall
be considered to be disapproved.
Authority and Signature
This Final Rule was prepared under the direction of Tadd Johnson,
Chairman, National Indian Gaming Commission, 1441 L. St. N.W., Suite
9100, Washington, D.C. 20005.
Signed at Washington, D.C. this 29th day of July, 1998.
Tadd Johnson,
Chairman.
[FR Doc. 98-20723 Filed 8-5-98; 8:45 am]
BILLING CODE 7565-01-P
