Tribes sidestep
federal audits

Dec 5, 2006 5:35 AM

Federal auditors say a court ruling last month has crippled their ability to examine operations at Indian casinos, raising concerns that the $22 billion Indian gaming industry could be increasingly vulnerable to corruption, according to USA Today.

The National Indian Gaming Commission (NIGC), a regulatory panel within the Department of Interior, says its auditors have been prohibited from conducting reviews of personnel and finances at Indian casinos across the nation since the D.C. Circuit Court of Appeals ruled Oct. 20 that the commission’s regulatory authority does not extend much beyond its oversight of bingo games.

The court accepted an Arizona tribe’s argument that audits of Indian casinos — which account for about 88% of all gaming revenue in Indian Country — should be the responsibility of states and tribes.

Since the ruling, 15 federal audits of Indian casinos have been suspended and a dozen casinos have barred NIGC investigators from tribal gaming facilities in Oregon, California, Arizona, Minnesota and Oklahoma, according to the commission.

"We’ve had doors slammed in our faces," NIGC Chairman Philip Hogen said in an interview. He said federal involvement in the casino audits is necessary because some states and tribes are not able to provide enough oversight of the businesses.

He would not say which ones.

In a Nov. 8 letter to the Senate Indian Affairs Committee, Hogen said that if the court’s ruling stands, federal law enforcement would be "crippled in its effort to protect the integrity of tribal gaming operations" without the NIGC. The NIGC is weighing whether to appeal the court decision or ask Congress for more authority to regulate Indian casinos.

Randy Jackson, director of the FBI’s Indian Country unit, says the bureau is "deeply concerned" by the ruling. " Indian officials, however, call the court’s ruling a victory for tribal sovereignty and an acknowledgement that tribes and states provide adequate oversight. Ernest Stevens Jr. of the National Indian Gaming Association says tribes have 259 agreements with authorities in 22 states to regulate Indian casinos.

The NIGC "does not need duplicative federal rule-making authority over matters already addressed by tribal law and the tribal-state compact process," says Stevens, whose group represents 184 Indian nations involved in tribal gaming.

The Arizona tribe that challenged the NIGC’s authority, the Colorado River Indian Tribes, says the NIGC never had the power to regulate casinos.

"The federal court’s decision was an important and necessary victory for tribal sovereignty," says Jason Rose, spokesman for the tribe.

State regulators defended their oversight of Indian casinos. Arizona’s Department of Gaming, which helps 21 tribes oversee gaming operations that produced $1.7 billion in revenue in fiscal 2006, said the court decision would not affect casino regulation in Arizona.

"We modeled our regulatory process on the ... National Indian Gaming Commission," says Seena Simon, spokeswoman for the Arizona agency.

Simon says the agency has agreed to contribute $300,000 in each of the next five years to pay for a full-time federal prosecutor in the local U.S. attorney’s office dedicated to Indian gaming matters and to train tribal gaming authorities. "This is an agency with teeth," Simon says.

However, Thomas Heffelfinger, a former federal prosecutor in Minnesota whose office has dealt with regional tribal issues, says the court’s decision likely will "make it that much more difficult for the federal government to respond when there is evidence of misconduct."

During the past three years, the NIGC has referred more than 30 cases of suspected criminal activity related to Indian gaming operations to federal law enforcement agencies, the commission says.

Twenty-five of the cases involved casino operations, says Joseph Valandra, the commission’s chief of staff.

Last year, the NIGC was praised by U.S. prosecutors in New York for its work in a probe of alleged organized crime ties to international gambling activities with links to operations on the Tonkawa Indian Reservation in Oklahoma. The inquiry produced an 88-count indictment charging 17 defendants in a $200 million illegal gambling enterprise that involved wagering on horse races and other sports events.

Heffelfinger says the ruling could undermine partnerships between the NIGC and federal law enforcement aimed at fighting corruption in the growing Indian casino industry.

"The real losers are the tribes," he says.