04202221 - Level I Training Book

04202221 - Level I Training Book

April 2 2 – 2 2 , 20 2 1 Zoom Virtual Webinar

Commissioner Certification Training LEVEL I AGENDA April 20 - 22, 2021 ZOOM VIRTUAL TRAINING Training on PST Time

Tuesday, April 20

Please plan to stay for the entire class on each day to get your certificate of completion. Please be on time for sessions 9:00 AM 10:30 AM Indian Gaming Regulatory Act: An Introduction Liz Homer, Homer Law 10:30 AM 10:45 AM Break 10:45 AM 12:15 PM Tribal Gaming Regulatory Agency: Purpose, Functions and Structures Liz Homer, Homer Law 12:15 PM 1:15 PM Lunch Break 1:15 PM 2:45 PM Gaming Compacts & Compact Compliance Liz Homer, Homer Law 2:45 PM 3:00 PM Break 3:00 PM 4:30 PM Managing a Tribal Gaming Regulatory Authority Billy David, Bo-Co-Pa & Associates Wednesday, April 21 9:00 AM 10:30 AM Anatomy of a Gaming Machine Peter Nikiper , Director of Technical Compliance, BMM Test Labs 10:30 AM 10:45 AM Break 10:45 AM 12:15 PM What's the Big Deal - MICs Liz Homer, Homer Law 12:15 PM 1:15 PM Lunch Break 1:15 PM 2:45 PM Rules of the Games – Classification of Games Liz Homer, Homer Law 2:45 PM 3:00 PM Break 3:00 PM 4:30 PM Introduction to Enforcement Actions Liz Homer, Homer Law Thursday, April 22 9:00 AM 10:30 AM Basic Principles of Casino Accounting Ryan Burns, CPA, Partner Blue Bird CPA's 10:30 AM 10:45 AM Break 10:45 AM 12:15 PM Auditing Financial Audits & Agreed-Upon Procedures Ryan Burns, CPA, Partner Blue Bird CPA's

The Indian Gaming Regulatory Act: An Overview

Elizabeth Lohah Homer

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Gaming in Ancient Egypt

• A drawing found on the wall of a burial vault in Beni Hasan, Egypt (circa 2500 B.C.) shows a picture of a ball hidden under one of several cups, perhaps an early game of chance.

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Bible

The Bible makes many references to drawing lots as a means of communicating with God.

• Numbers 26:52-56 And the LORD spake unto Moses, saying ... the land shall be divided by lot. • Joshua 14:2 By lot was their inheritance, as the LORD commanded by the hand of Moses. • Joshua 18:6 Ye shall therefore describe the land into seven parts, and bring the description hither to me, that I may cast lots for you here before the LORD our God. • Joshua 19:51 These are the inheritances, which Eleazar the priest, and Joshua the son of Nun, and the heads of the fathers of the tribes of the children of Israel, divided for an inheritance by lot in Shiloh before the LORD.

• Joshua 21:8 And the children of Israel gave by lot unto the Levites these cities with their suburbs, as the LORD commanded by the hand of Moses. • 1 Chronicles 26:13-14 And they cast lots, as well the small as the great, according to the house of their fathers, for every gate. And the lot eastward fell to Shelemiah. Then for Zechariah his son, a wise counsellor, they cast lots; and his lot came out northward. • Nehemiah 10:34 And we cast the lots among the priests, the Levites, and the people, for the wood offering, to bring it into the house of our God. • Acts 1:23-26 And they appointed two, Joseph called Barsabas, who was surnamed Justus, and Matthias. And they prayed, and said, Thou, Lord, which knowest the hearts of all men, shew whether of these two thou hast chosen.... And they gave forth their lots; and the lot fell upon Matthias; and he was numbered with the eleven apostles.

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Government Gaming

• The first signs of a lottery trace back to Asia, where ancient Keno slips were discovered. First played in China, the lottery has helped finance major governmental projects like

the Great Wall of China. • Organized governmental regulation of gambling, as opposed to taxation by force, is recorded as early as 321 B.C. in India where a Superintendent of Public Games supplied dice and collected a fee of 5% of the receipts.

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Government Gaming

• The Principality of Monaco, a country with more millionaires per capita than any country in the world, is primarily supported by gaming revenues.

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Government Gaming in the English Colonies

• Because the colonies had no power to tax, they were dependent on help from England. In 1612, King James I chartered the Virginia Company of London to raise revenue for the benefit and support of the Jamestown settlement. The company was authorized to conduct lotteries throughout England in order to raise money. The lotteries were relatively sophisticated and included instant winners. • One colonist noted that the revenue from these lotteries were: “reall and substantiall food, by which Virginia hath been nourished.” • Eventually, the crown banned the lotteries because of complaints that they were viewed as robbing England of money.

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Early Government Gaming in the United States • Lottery revenues were responsible for the building of much the

infrastructure along the Northeast Coast. Many of the most prestigious universities, such as Harvard, Yale, and Brown, were built with lottery revenues. • Lottery revenues funded many of the armaments and purchases made during the Revolutionary War.

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Indian Gaming

late 1970s

Largely in response to states’ offended by the decision, Congress enacted IGRA in 1988. 25 U.S.C. 2701 et seq. 1988

Taking a cue from state governments offering lotteries, several tribes exercised their sovereignty by offering high-stakes bingo in the late 1970s to generate governmental revenue.

The Supreme Court affirmed that the tribes’ retained regulatory jurisdiction over the regulation of gaming in the Cabazon decision in 1987. 1987

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Numerous Indian tribes have engaged in gaming activities as a means of generating tribal governmental revenue. Federal courts have held that section 81 of this title requires Secretarial review of management contracts, but does not provide standards for such approval. Existing Federal law does not provide clear standards or regulations for gaming on Indian lands.

Section 270. Findings

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(4) A principal goal of Federal Indian policy is to promote tribal economic development, self-sufficiency, and strong tribal government.

Findings

(5) Indian tribes have the exclusive right to regulate gaming activities on Indian lands if the gaming activity is not specifically prohibited by Federal law and is conducted within a State which does not prohibit such gaming activity.

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Section 2701 Declaration of Policy

1. To provide a statutory basis for the operation of gaming by Indian tribes as a means of promoting tribal economic development, self- sufficiency, and strong tribal government.

2. To provide a statutory basis for the regulation of gaming by an Indian tribe adequate to shield it from organized crime and other corrupting influences, to ensure that the Indian tribe is the prime beneficiary of the gaming operation .

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Declaration of Policy

3. To declare that the establishment of an independent

Federal regulatory authority for gaming on Indian lands, Federal standards for gaming, and the National Indian Gaming Commission are necessary to meet congressional concerns regarding gaming and to protect such gaming as a means of generating revenue.

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Issue temporary closure orders

Section 2705

Levy and collect civil fines

Powers of Chairman

Approve tribal ordinances or resolutions regulating Class II or III gaming

Approve management contracts for Class II and III gaming

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Section 2706 Powers of Commission

Approve NIGC’s annual budget

§ Issue subpoenas

§

§ Affirm a temporary closure order

Adopt regulations for the assessment and collection of civil fines

§

§ Issue regulations

§ Report to Congress

Establish fee rates

§

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• Class I Gaming on Indian Lands Is within the Exclusive Jurisdiction of Indian Tribes and Shall Not be Subject to the Provisions of this Chapter

Section 2710 Tribal Gaming Ordinances

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Section 2710 Tribal Gaming Ordinances • Class II Gaming Any Class II gaming on Indian lands shall continue to be within the jurisdiction of the Indian tribes but shall be subject to the provisions of this chapter.

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Section 2710 Tribal Gaming Ordinances

§ Class II, cont. An Indian Tribe may engage in Class II gaming on Indian lands, if a) Such gaming is located within a State that permits such gaming, and b) the governing body of the Indian tribe adopts an ordinance or resolution which is approved by the Chairman

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May be encompassed within the existing independent tribal audit systems

Annual Outside Audits

Will be provided to the Commission by the Indian tribe

All contracts for supplies, services or concessions in excess of $25,000 shall be subject to such independent audits

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Protection of Environment

The construction and maintenance of the gaming facility, and the operation of that gaming is conducted in a manner which adequately protects the environment and the public health and safety.

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Background investigations for primary management officials and key employees must be conducted and ongoing oversight of such persons is required

Licenses and

Background

Investigations

Tribal licenses for primary management officials and key employees must be issued

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Licenses and Background Investigations

§ Any person whose prior activities, criminal record, reputation, habits and associations pose a threat to the public interest or effective regulation of gaming or create or enhance the dangers of unsuitable, unfair, or illegal practices and methods and activities in the conduct of gaming shall not be eligible for employment.

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Licenses and Background Investigations

§ The Indian tribe must notify the Commission of the results of the background check before issuing licenses.

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Are permitted only if:

The tribe has prepared a plan to allocate revenues.

Per Capita Distribution Plans

The plan is approved by the Secretary.

The interests of minors and other legally incompetent persons are protected.

Tribes notify members that such payments are subject to Federal taxation.

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The Commission may consult with appropriate law enforcement officials concerning licenses issued by a tribe.

Issuance of Gaming License

If the Commission receives information that a primary management official or key employee does not meet the standard established, the tribe will suspend and, after notice and hearing, revoke such license.

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Secretarial Approval of Tribal-State Compacts

The Secretary may disapprove a compact only if such compact violates-

(i) Any provision of this chapter (ii) Any other provision of Federal law (iii) The trust obligations of the U.S.

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Secretarial Approval of Tribal-State Compacts

• If the Secretary does not approve or disapprove a compact 45 days after its submittal, it shall be considered approved. • The Secretary shall publish in the Federal Register notice of any Tribal- State Compact that is approved.

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Section 2711 Management Contracts

n Requirements for Chairman’s approval

1. Adequate accounting procedures 2. Access for appropriate tribal officials to daily operations 3. Minimum guaranteed payment to the tribe

4. Agreed ceiling for the repayment of development & construction costs 5. Terms not to exceed 5 years (in some cases 7 years) 6. Grounds and mechanisms for terminating the contract

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Contracts with a fee based upon a percentage of the net revenue are acceptable if the fee is reasonable in light of surrounding circumstances. Such fee shall not exceed 30 percent.

Fee Based on Percentage of Net Revenues

Upon request of a tribe, the Chairman may approve a contract with a fee that exceeds 30 percent but not 40 percent.

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Section 2713

Civil Penalties

Fines.

The Chairman shall have the authority to levy and collect appropriate civil fines, not to exceed $25,000 per violation, against the tribal operator of an Indian game or a management contractor for any violation of any provision of this chapter, any regulation prescribed by the Commission, or tribal regulations, ordinances or resolutions approved under section 2710 or 2712 of this title.

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Section 2713

Civil Penalties

Right to Appeals and Hearing.

By regulation, the Commission will provide an opportunity for an appeal and hearing on fines levied and collected by the Chairman.

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Section 2713 Civil Penalties

• Temporary and Permanent Closure Orders

The Chairman has the Power to Order the Closure of an Indian Game for Substantial Violation of the Provisions of this Chapter, Tribal Regulations, Ordinances, or Resolutions Approved under Section 2710 or 2712 of this Chapter.

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Not later than 30 days after the issuance of a temporary closure order, the tribe or management contractor will have a hearing before the Commission.

Section 2713 Civil Penalties

Not later than 60 days following such hearing, will the Commission decide, by

no less than 2 votes, whether to order a permanent closure.

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Section 2713 Civil Penalties

• Appeals to Federal District Court A final decision by the Commission to levy a fine or order a permanent closure is appealable to the appropriate Federal district court.

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Section 2713 Civil Penalties

• Tribal Regulatory Law

Nothing in this chapter precludes an Indian tribe from exercising regulatory authority provided under tribal law if such regulation is not inconsistent with this chapter or with any rules or regulations adopted by the Commission.

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END

Homer Law, Chartered 1730 Rhode Island Ave., N.W. Suite 501 Washington, D.C. 20036 (202) 955-5601 (202) 955-5605 (fax)

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Understanding the System: Purposes, Roles, & Functions

Elizabeth L. Homer Homer Law Chtd.

Authority of Tribal Governments • Doctrine of Tribal Sovereignty • Pursuant to U.S. Constitutional Law, Indian Tribes are Political Entities, Possessing Inherent Sovereign Powers • Federal Indian law flows from the legal premise that Indian tribes retain a certain "nationhood" status, which pre-dates the establishment of the United States, and includes inherent powers of internal self-government.

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Authority of Tribal Governments • Tribes have been characterized as domestic dependent nations retaining all powers of government not extinguished by an express act of the Congress or inconsistent with their dependent status. See, Worcester v. Georgia , 31 U.S. (6 Pet.) 515 (1832); Cherokee Nation v. Georgia , 30 U.S. (5 Pet.) 1 (1831); Talton v. Mayes , 163 U.S. 376 (1896); United States v. Wheeler , 435 U.S. 313 (1978). • As a general principle, the United States Congress has exclusive authority over Indian Affairs, which preempts the assertion of power over tribes by states, unless expressly authorized by Congress. Williams v. Lee , 368 U.S. 217 (1959). • The exclusive power of the United States to oversee Indian affairs is Constitutional in origin and traces to Art. I, Sec. 8, cl. 3, the Indian Commerce Clause. See, Kagama v. United States, 118 U.S. 375 (1886).

Inherent Powers of Tribal Self- Government Ø Make and form their own government Talton v. Mayes , 163 U.S. 376 (1896). Ø Establish membership Santa Clara Pueblo v. Martinez , 436 U.S. 49 (1930)

Ø Make and enforce laws, civil and criminal Ex Parte Crow Dog , 109 U.S. 556 (1983).

Ø Tax

Merrion v. Jicarilla Apache Tribe , 455 U.S. 130 (1982).

Ø Engage in commercial activity

Brendale v. Confederated Tribes of Yakima Indians , 492 U.S. 408 (1989).

Ø License, zone, and regulate

Merrion v. Jicarilla Apache Tribe , 455 U.S. 130 (1982).

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Authority of Tribal Governments

• The establishment of Regulatory Agencies comes within the inherent governmental authority of tribal governments • With respect to gaming, the Indian Gaming Regulatory Act (IGRA) mandates that a tribal governments must provide an adequate system for the regulation of tribal gaming activities. 25 U.S.C § 2710 (b)(F).

Tribal Governments: Governmental Responsibilities • Separation of Powers Doctrine • Legislative Branch • Enacts law • Executive Branch • Executes Law • Judicial Branch • Interprets Law

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Dual Functions

Governmental Functions • Enact Law • Administer Law • Enforce Law • Interpret Law • Regulate Activities • Tax Activities • Provide Governmental Services

Corporate Functions • Own Enterprises • Operate Enterprises • Manage Enterprises • Invest Capital • Provide economic goods & services

Competing Interests

• Corporate and Governmental Structures Differ Significantly by Design because each Serve Distinct Interests • Governmental Bodies are Political in Nature Requiring Deliberative Processes, which inevitably are slower and less efficient. Haste in a political environment invites conflict, turmoil, and sometimes instability • Corporate Bodies operate in a completely different environment – the marketplace – which flows at a much swifter pace and where decisions are not based on political considerations, but rather are profit driven. Inefficiency in a corporate environment results in lost opportunity, reduced profitability, and sometimes failure.

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Competing Objectives

• Politically Driven • Open & Transparent • Collective Decision making

• Financially Driven • Proprietary & Confidential • Hierarchical

Inescapable Factors

• A Tribal Enterprise is owned by a Political Entity • Tribal Enterprises Serve a Public Rather than a Private Interest • In the context of Tribal Enterprise, it is impossible to achieve complete separation between political and business considerations

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Successful Tribally-Owned Enterprises

• Are built on structures that achieve a proper balance between competing interests and governed by laws that designed to achieve a balance between: • Efficiency and Accountability • Autonomy and Oversight • Business Objectives and Tribal Objectives

Step 1: Structure

• Designing a Structure that: • Balances & Harmonizes Competing Interest

• Regulatory Structure • Enterprise Structure

• Fosters Accountability and Profitability • Works within the Overall Institutional Framework of the Tribal Government

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Step 2: Making the System Work

• Understanding the System • Respecting the System

• Committing to the System • Complying with the Law • Operating within the System • Respecting the Respective Roles of each Component of the System

Tribal Gaming Regulatory Agencies • Instrumentalities of Tribal Government • Possess and exercise powers delegated by the legislative body of the tribal government • Typically, are delegated broad regulatory powers, including the authority to: • Promulgate rules and regulation • License • Enforce and sanction violations • Adjudicate

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Tribal Gaming Regulatory Agencies • Indian tribes have the exclusive right to regulate gaming activities on Indian lands if the gaming activity is not specifically prohibited by Federal law and is conducted within a State which does not prohibit such gaming activity. Congressional findings and Statement of Policy, Indian Regulatory Act, 25 U.S.C. § 2701; see also, Cabazon Band of Mission Indians v. National Indian Gaming Comm’n, 827 F. Supp. 26, 31 (D.D.C. 1993); aff’d, 14 F.3d 633, 635-36 (D.C. Cir. 1994).

Agency Authority & Functions, Duties, and Responsibilities • Typically, an Tribal Gaming Regulatory Agency is Delegated Broad Authority to: • Interpret & Implement the Law through the Promulgation of Regulations (Quasi-Legislative Power) • Monitor Compliance and Enforce the Law (Quasi-Executive Power) • Apply the Law to Facts to Determine whether the Law has been Offended and Assess Sanctions (Quasi-Judicial Power)

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Tribal Gaming Regulatory Agencies • Promulgate Regulations • Issue Opinions, Guidelines and Policy Statements • Develop and Implement Plans • Issue Licenses & Permits • Prepare Technical Documents & Reports • Conduct Studies, Fact Findings, & Investigations • Bring Enforcement Actions

• Adjudicate and Make Decisions • Assess Fines and Other Sanctions

Tribal Gaming Regulatory Agencies • Interpret, implement, administer, monitor, and enforce statutory law within the limits of its delegated authority – the scope of this authority will vary from one tribal government to another

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Tribal Gaming Enterprises

• Own, Operate, & Manage • Make Business Decisions • Supervise Staff • Allocate Resources • Operate Collateral Business Activities

Tribal Court

Tribal Council

Legislates

Appeals

Commission Rulemaking, Enforcement, Licensing, Hearings

Enterprise Board

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TGRA

Council Legislates

Hearing & Appeals

Enforcement Licensing & Enforcement

Enterprise Board

Tribal Court

Council Legislates

Enforcement

Licensing

Enterprise Board

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Enterprise Board

Food/Beve rage

Casino

Retail

Enterprise Board

Casino

Food/Beve rage

Retail

Hotel

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What Happens When Respective Are Roles Not Respected? • CONFLICT • TENSION • STRESS • LOSS OF FOCUS • ACRIMONY • INSTITUTIONAL INSTABILITY • POLITICAL CRISIS

What Can Regulators Do? • NOTHING -- In a Perfect World Because Everyone Would: • Know the Law and Regulations by Heart • Obediently Comply • Seek out the Regulator’s Advice and Guidance • Eagerly Await the Regulator’s Visits • Enthusiastically Adopt the Regulator’s Recommendations • View the Regulator with Utmost Respect and Appreciation • Always Agree with the Regulator’s Viewpoint • Welcome an Enforcement Action as an Opportunity to Improve

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In the REAL World: Rule 1 is to Know Thyself An Independent Regulatory Agency is a governmental instrumentality created to interpret, implement, administer, monitor, and enforce statutory law within the limits of its delegated authority and to act and make decisions based on law and legal considerations ---

NOT POLITICAL CONSIDERATIONS

The Rest of the Rules • Understand Your Responsibilities, Duties, Obligations as well as the Agency’s Functions under the Law • Act within the Scope of Authority Delegated • Fairly and Objectively Apply the Law • Exercises Good Judgment • Be Ethical, Reasonable, and Fair • Maintain a High Work Ethic • Exercise Discretion • Ensure that Subordinates are held to the Same Standards of Conduct

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Educate with Infinite Patience • Licensing screens out the people most likely to cheat and steal and keeps them out of tribal casinos and away from tribal cash • Internal Controls operate to ensure that casino managers and employees follow the procedures necessary to prevent fraud, theft & waste of tribal dollars • Monitoring serves to keep the staff honest • Auditing serves to keep management honest • Enforcement signals that the Tribe means business when it comes to safeguarding its assets • Regulations clarify the meaning of the statutory law and establish the standards of conduct that must be met • Hearing and Appeals ensure fairness and protect people from abuses of power Efficiency & Economy Serve the Interests of the Casino Efficiency & Effectiveness Serve the Interests of the Regulator Accountability and Integrity Serve the Interests of the Tribe, but So Too Does Efficiency, Economy, and Profitability

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END

Elizabeth L. Homer Homer Law, CHTD. 1730 Rhode Island Ave., N.W. Suite 501 Washington, D.C. 20036 (202) 955-5601

(202) 955-5605 Fax www.homerlaw.com

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Tribal State Gaming Compacts

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A compact is an intergovernmental agreement between an Indian tribe and a state government that governs the conduct of Class III gaming

What is a Tribal- State Compact?

Once approved, the Compact becomes part of the law of the Tribe and becomes enforceable with respect to the Tribe’s Class III gaming activities

Compacts primarily address 2 issues: Scope of gaming allowed in the state

Terms of regulation of gaming activities

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Congress intended to balance state and tribal interests through negotiated and shared state and tribal regulation and jurisdiction over Class III gaming IGRA gives states a role in Class III gaming by requiring tribes and states to negotiate compacts before a tribe may offer Class III gaming IGRA details the procedures that states and tribes must follow in negotiating compacts and includes possible negotiation subjects

Compacts Under IGRA

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ž IGRA requires states to negotiate in “good faith” › IGRA authorizes tribe to bring action against state in federal court to compel good faith negotiations, but this requirement is unenforceable as a result of the Supreme Court Decision in Seminole Tribe of Fla. v. Florida , 517 U.S. 44 (1996). › The Supreme Court held that Congress does

Compact Negotiations

not have the power under Article I Indian Commerce clause to abrogate the States' Eleventh Amendment immunity to permit suits to enforce rights under the Federal Indian Gaming Regulatory Act.

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Application of tribal and state criminal and civil laws and regulations in relation to the licensing and regulation of Class III gaming

Allocation of criminal and civil jurisdiction between the Indian tribe and the state

Possible negotiation

Assessments by the state to defray the costs of regulation

subjects include:

Remedies for breach

Standards for the operation of Class III gaming

Any other subjects directly related to the operation of Class III gaming activities

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No compact is valid until approved by the Secretary of the Interior

•IGRA, •Any other provision of Federal law that does not relate to jurisdiction over gaming on Indian lands, or •The trust obligations of the United States to Indians.

The Secretary may only disapprove a compact if it violates:

Once approved by the Secretary, the compact becomes the law of the Tribe and the State governing class III gaming activities.

To date, approximately 250 tribes have entered into compacts with their respective states

Compact Approval

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Compact terms can vary greatly from state to state

Duration of the Compacts

Differences Between Tribal-State Compacts

• Ranges from short 2-4 years to unlimited terms Revenue Sharing Payments • Some tribes have agreed to make additional payments usually based on a percentage of net gaming revenue • Tribal payments can run into the hundreds of millions

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ž Authorized Class III Games

› An Arizona Compact authorizes Gaming Devices, Keno, lottery, off-track pari-mutual wagering, pari-mutual wagering on horse racing and dog racing. › A Kansas compact states that: “The Tribe may not conduct pari- mutual wagering, off track betting, sports betting, club keno or state-wide lottery gaming.” › Covered games under the Oklahoma Model Tribal-State Compact include electronic bonanza-style bingo games, electronic amusement games, and electronic instant bingo games, but excludes dice games.

Differences Between Tribal- State Compacts

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ž State Regulation

› Some compacts provide for the State to be heavily involved in regulatory issues such as licensure. Arizona compacts require state certification of certain gaming licenses › Others adopt a more “hands- off” approach and defer almost entirely to the tribal gaming regulatory agency › And others, such as the Oklahoma Model Tribal-State Compact, strike a middle- ground approach

Differences Between Tribal-State Compacts

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Internal Controls • Some compacts adopt or use the NIGC MICS as guidance Technical Standards • Some states have required the adoption of additional technical standards for Class III games • These standards then become part of the Tribe’s gaming laws

Differences Between Tribal-State Compacts

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• Other Compact Topics:

Differences Between Tribal-State Compacts

• The sale of alcoholic beverages • The extension of credit • The resolution of tort and/or prize claims • Number of gaming machines • The hours of operation

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Submission of Compact by either Party 25 C.F.R. § 293.6 after execution 25 C.F.R. § 293.7

Documents to be Included in Submission:

• At least one original compact or amendment executed by both the tribe and the State; • A tribal resolution or other document, including the date and place of adoption and the result of any vote taken, that certifies that the tribe has approved the compact or amendment in accordance with applicable tribal law; • Certification from the Governor or other representative of the State that he or she is authorized under State law to enter into the compact or amendment; • Any other documentation requested by the Secretary that is necessary to determine whether to approve or disapprove the compact or amendment.

The Compact Approval Process

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Compacts are submitted directly to the BIA’s Office of Indian Gaming

The Compact Approval Process

The Secretary must approve or disapprove a compact or amendment within 45 calendar days after receiving the compact or amendment.

The Secretary will notify the Indian tribe and the State in writing of the decision to approve or disapprove a compact or amendment.

If the Secretary neither affirmatively approves nor disapproves a compact or amendment within the 45-day review period, the compact or amendment is considered to have been approved (“deemed approved”), but only to the extent it complies with the provisions of the Indian Gaming Regulatory Act.

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Typically, compacts are approved, or

Allowed to go into effect by operation of law (45 days after submission if no affirmative approval, or

Disapprovals are Relatively Rare

Allowed to go into effect by operation of law with comment.

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• Most commonly are based on: • Revenue Sharing Provisions • Impermissible Subject Matter

Disapprovals

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Except for fees to defray the cost of regulatory activities, IGRA specifically prohibits States from imposing any tax, fee, charge, or other assessment upon an Indian tribe or upon any other person or entity authorized by an Indian tribe to engage in a class III activity. IGRA further provides that: No State may refuse to enter into the compact negotiations based upon the lack of authority in such State, or its political subdivisions, to impose such a tax, fee, charge, or other assessment.

Prohibition on Tax Assessments

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Because IGRA prohibits states from levying fees, taxes, or other assessments, revenue sharing provisions are highly scrutinized

There must be a “meaningful concession”

•The State is giving something it is not required to give, and •The Tribe is receiving a substantial economic benefit proportional to the amount of the revenue share In order for a revenue sharing provision to be lawful, the 9 th Circuit has held that “a revenue sharing provision is lawful IF the provision is •For uses directly related to the gaming activity; •Consistent with the purposes of IGRA; and •Not imposed because it is bargained for in exchange for a meaningful concession.” • Rincon v. Schwarzenegger , 602 F3d. 1019 (9 th Cir. 2010)

Revenue Sharing

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Importance of Understanding Your Compact

Tribal gaming regulators are responsible for enforcing gaming laws, including the Tribal- State Compact

Tribal regulators must be knowledgeable of the provisions of the Compact

Compacts generally identify the tribal gaming regulatory agency as the entity responsible for carrying out regulatory duties

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END

Elizabeth Lohah Homer Homer Law Chartered 1730 Rhode Island Ave NW Suite 510 Washington, DC 20036

[email protected] (202) 955-5601

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§ Billy David, Owner § Chairman of Tribal Gaming Regulatory Commission 12 Years § NIGA Certified Gaming Commissioner § NIGA Certified Gaming Commissioner Trainer § NTGCR Presenter

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§ If I say something offensive please accept my apologies, it is not my intention to be offensive or discourteous.

§ This is a very open presentation and I encourage you to ask me questions at anytime during the presentation.

§ If you are not comfortable asking questions during class please feel free to ask me after class, I will be available at the Conference/Tradeshow throughWednesday.

§ I am available by email, cell phone or at the Sting Surveillance booth.

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§ The majority of all TGRA’s are set up one of two ways

Gaming Commissioners (1,3,5 Commissioners)

Or

Gaming Commissioners with an Executive Director

Ø Many Tribes use one of these set ups of the Tribal Gaming Commission Ø This is authorized by the Tribal Gaming Ordinance Ø Commissions normally look something similar to this: Ø One Commissioner : in charge of all regulatory or administrative functions of the TGRA Ø Three Commissioners : usually there is a “lead/Chair person” who is ultimately in charge of the TGRA Ø Five Commissioners : Much like the three commissioners system there is one Commissioner who is ultimately responsible for the administrative functions of the Gaming Commission

Ø Executive Director who answers to an Gaming Commission: the E.D. is normally responsible for all regulatory and administrative functions of the Gaming Commission

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§ First and foremost the Tribal Gaming Regulatory Agency is responsible for COMPLIANCE

§ But, many times the administrative processes take more time to deal with.

§ 5 Signs of a successful Regulatory Management organization

1. Fully developed regulatory documents :Many times our governing documents are outdated. 2. Fully DevelopedTraining ProgramFor All Positions in theTGRA : Identify the weak areas in your organization and get training.Many times the area need to get the most training is Technology (the management and use of technology). 3. A Developed Regulatory Management Plan : It is a trend right now that many TGRAs are operating in conjunction with the Casinos Business Plan.The Regulatory Management Plan should agree with the direction of the business plan. 4. Stable Funding : It is well known that the Commission does not generate any revenue, but it is necessary to have stable funding.Think about developing“value added reporting”processes. 5. Use of Tools :Many times we purchase many tools to help us be good at our jobs, but unfortunately those“tools”don’t end up getting used.

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§ Many times the TGRA is so busy “”putting our fires” you inadvertently leave some gaps in the governing documents.

o Keep it a priority to update the Tribal governing documents (timeline depends on the need of the Commission): 1. Tribal Rules and Regulations 2. Tribal Internal Controls 3. Tribal Processes 4. Require management to provide you a workable timeframe for approval when they are implementing something that is new and has not been previously approved by the TRGA

§ When developing training programs consider the following:

1. Make sure the trainer is knowledgeable and can actually train others, 2. Make sure the training is up to date an current, 3. Seek trainers who are affordable, 4. Consider in house training programs: I. The gaming commission should have their ideas of what they want from staff II. In house training programs can save the Tribes thousands each year III. Develop formal processes for certification of each training process developed

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§ In this plan is should encompass the following:

1. Enforcement Processes, 2. Governing Document Reviews, 3. Technology Updates, 4. Trainings, 5. Compliance: Ø Define how compliance will be achieved, Ø What tools will be needed to achieve compliance including updates to technology,

§ Known to many Regulators funding is not stable and is very volatile

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Recommendations to secure and/or justify your budget

Ø Value Added Reports! Offer the budget approval authority good and direct information

1. How much money is your TGRA saving the casino/Tribe? I. Liability protection II. Theft detection III. Monetary errors reporting IV. Asset protection 2. Are your sub-departments set up to write value added reporting?

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§ What tools should the TGRA have at their finger tips?

1. Properly trained staff 2. Properly trained Gaming Commissioners/Executive Director 3. Technology Ø Surveillance Systems Ø Slot Accountability Systems Ø Supporting technology systems i.e.. Point of Sales tracking systems 4. Experience of staff

Ø Outside of the Regulatory management that you are required to perform you also are also the administrative director of the organization

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§ What 10 things you need to know to successful operate a Gaming Commission

1. Understand theTribal budgeting process :Make sure you understand how your TGRA is funded, does it come from the casino in the way of licensing fee’s? does it come out of the Tribes general fund?What restrictions does your budget operate under? 2. Understand theTGRA’s/Tribes Policy and Procedures : If the TGRA’s are to strictly follow the Tribes Policy and Procedures manuals it could possibly contradict how the TGRA operates. 3. Be knowledgeable of the hiring processes :Many time the positions within the TGRA is a specialty position and need to be hired as soon as possible.Make sure that the hiring process is something that is agreeable to the TGRA. 4. Management and Non-Management Positions : Know the differences between the two positions.This is important. 5. Office Protocols : how does the office operate with its office equipment and staff. What are the forms, documents and vendors that your office uses.

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5. Purchasing Procedures : Does the TGRA purchase through the Casino,Tribe or through the TGRA’s own purchasing processes. 6. Accountability of Funds : who tracks the TGRA’s funds, the Tribe or the TGRA.The Casino should never be the one responsible to track the TGRA’s funds. 7. Supervising staff :Make sure you completely understand how to supervise the staff that you are responsible for. 8. How to handle personnel matters : whether we like it or not we will HAVE to deal with personnel matter. Understand your responsibilities as well as the staffs responsibilities. 9. Organization Employment Benefits : Know how to answer and deal with the benefits package the Tribes/TGRA offers, it any. 10. Administrator : Lets face it you are more of an administrator then an regulator. Learn how to manage both successfully.

Head of TGRA

Regulatory Responsibility

Administrative Responsibility

Daily Duties

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§ Scenario:

Ø You show up to work ready to tackle the day but right away there issues that need your immediate attention. Ø You have a report form the surveillance department stating that there was large possible internal theft in the cage last night and they believe that the staff person is still on duty. Ø At the same time you are reading the surveillance report you hear two of your staff arguing.

Ø Understanding that both matters need and demand your attention, what matter do you address immediately?

§ The Tribes revenue are down and your commission is faced with a considerable reduction in their budget. § The Tribal leadership request from you to show how your desired budget can be justified

§ What do you need to do when presented this task?

§ discussion?

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§ Bo-Co-Pa & Associates Joe “Billy” David, Owner P.O. Box 421 Chiloquin, Oregon 97624 PH: 541-810-0700 Email: [email protected]

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Anatomy of a Slot Machine March 2017

company confidential

Anatomy • Discuss the following parts, and why they are important – Hardware • Cabinets • Logic Boxes

• Machine peripherals • External peripherals • Operating System • Main Programs • Game Programs • Other software

– Software

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Cabinet

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Cabinets • Why are cabinets important?

– Regulations govern the materials used – Provide security for the device – Provide shielding from electromagnetic interference, static, etc. – Should prevent player injuries

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Logic Boxes / Areas

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Processors

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Logic Areas • Why is the logic area so important?

– Contains the Central Processing Unit (CPU) – Contains the Program Storage Media – Communications – Random Number Generator – Responsible for Game Determination – Responsible for Self Authentication – Responsible for Accounting – Responsible for Event tracking and logging – Responsible for Game History – … – Basically, the brain and heart of a machine

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Peripherals • Bill Validators

– Reads tickets & Bills – Checks for counterfeits – Checks for cheating techniques – Places redeemed notes in stacker – Securely stores tickets & bill until drop – Sensors detect placement & movement – Made of high strength plastic or metal – Keyed separately of other components

• Stackers

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Peripherals • Printers

– Tickets / Vouchers – Coupons – Jackpot Receipts

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Peripherals

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Peripherals • Progressive Controllers & Meters/Displays • Bonus equipment • Slot System Player Interfaces • Slot System Interfaces • Secondary System Interfaces

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Operating Systems

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Operating Systems • Can be part of the Main Program or separate • Usually an embedded version of Microsoft Windows or Linux (BusyBox) • Allows for the manufacturers Main Program and Game Software to interact with the hardware of the gaming device • Can be controlled if it contains manufacturer code

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Main Software • The Main Software provides a framework for the Game Software to use. • Responsible for accounting / metering • Responsible for event tracking and reporting • Responsible for Random Number Generator • Responsible for Communication to Systems • Responsible for accepting money and printing tickets • Contains authentication code

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Game Software • Game Software controls the theme and play of the game. • May contain the sounds and graphics or could be separate • Responsible for use of the RNG output • Responsible for the Math and payouts • Responsible for bonuses

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Other Software • Progressive Controllers • Player Interface or Service Windows

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What’s the BIG DEAL? Threats and Vulnerabilities in a Cash Intensive Industry

By: Elizabeth Lohah Homer

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Government Regulation of Gaming

• Governments have used gaming as a source of revenue for millennia. • Fraud in gaming began at the same time.

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• One notable example was a private lottery passed by Congress in 1823 for the beautification ofWashington D.C. • Unfortunately, the organizers absconded with the proceeds and the winner was never paid. • The Supreme Court held the Government liable for the winnings. Clark v. City ofWashington , 25 U.S. 40 (1827)

Government Regulation of Gaming

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• To much of the public, this incident illustrated that the lotteries of that time were crooked. • This ultimately led to the widespread restriction of gaming, nationwide in the 1830s and 1840s.

Government Regulation of Gaming

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• By working to eliminate theft and fraud

Robust Gaming Regulation Protects Tribal Resources:

• By ensuring public perception of honesty & integrity

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• IGRA’s Declaration of Policy:

• Shield the Indian tribe from organized crime and other corrupting influences • Ensure that the Indian tribe is the prime beneficiary of the gaming operation • Assure that gaming is conducted fairly and honestly by both the operator and players [25 U.S.C. 2702(2)]

Indian Gaming Commissions: Purpose and Functions

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Importance of Effective Regulation • Cash intensive environment intensifies temptation to steal • A cash intensive environment without good internal controls significantly increases the likelihood of theft and fraud • Increasing the probability of discovery decreases the probability that theft or fraud will succeed

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Ensuring thatTribes are the Primary Beneficiaries of Gaming Revenues

THE FACTS: } Fraud and Abuse Cost American Business More than $400 Billion Annually. } Approximately 6% of the Annual Revenues of an Average American business will be lost to Fraud, Theft, and/or Abuse. } Nearly 60% of the Total Loss is Attributable the Absence of Good Internal Control Systems. } Nearly 50% of all Incidents Involve Cash

Source: Study on Fraud, Association of Certified Fraud Examiners

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Casino Fraud

Cash Non-Cash

• Cash is targeted 90% of the time

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• Because of the cash-intensive nature of casinos, criminals may try to use them to launder money • Tools

Money Laundering

• Bank Secrecy Act, MICS, &TICS require reporting of all significant transactions

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CommonTypes of Fraud

► SIMPLE THEFT

Crime of Opportunity

► CORRUPT SCHEMES

Planning and Abuse of Position

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Common Types of Fraud: Simple Theft • Simple Theft • Skimming • cash stolen before it’s recorded on the books and records – 32% of cases • Cash Larceny • Cash stolen after it’s been recorded on the books and records – 8.9% of cases

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CommonTypes of Fraud: Corrupt Schemes

► Billing Schemes ► Payroll Schemes ► Expense Reimbursement Schemes ► Check Tampering ► Register Disbursement Scheme ► Kickbacks ► Fraudulent Statements

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• Billing Schemes • Payroll Schemes • Expense Reimbursement Schemes • Check Tampering • Register Disbursement Scheme • Kickbacks • Fraudulent Statements

CommonTypes of Fraud: Corrupt Schemes

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CommonTypes of Fraud: Corrupt Schemes • Billing Schemes

• Phony Invoices • Inflated Invoices • Personal Use Invoices

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• Payroll Schemes • False Claims

Common Types of Fraud: Corrupt Schemes

• Ghost Employees • Inflated Payroll Checks • Commonly found in casinos

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• Expense Reimbursement Schemes • Inflated Claim for Reimbursement • False Claim for Reimbursement

Common Types of Fraud: Corrupt Schemes

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CommonTypes of Fraud: Corrupt Schemes • Check Tampering

• Check Forging • Check Altering • Theft of a Legitimate Check

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• Register Disbursement Scheme

• Falsification of Entries on a Cash Register to Conceal the Removal of Cash or Currency.

Common Types of Fraud: Corrupt Schemes

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• Kickbacks

• Wrongful Use of Authority or Influence in a Business Transaction for the Purpose of Securing Personal Enrichment. • Average loss of over $500,000 per case • Accounts for approximately 13% of all occupational fraud schemes

Common Types of Fraud: Corrupt Schemes

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