Long before a federal appeals court last fall threw out operating rules designed to protect the integrity of Indian casinos nationwide, the legal outcome had been forecast by nearly everyone who had studied the matter.
"No court seems to have struggled with this issue," agreed Kathryn Rand, a law professor and co-director of the Institute for the Study of Tribal Gaming Law and Policy at the University of North Dakota.
Nonetheless, the Schwarzenegger administration did not factor the apparent regulatory void in negotiations last year on five new agreements that would permit a major expansion of tribal gambling in Southern California.
As a result, the lack of federal oversight has become a major stumbling block in the push for ratification of those long-term deals — multi-billion-dollar compacts that would run through the end of 2030.
On Monday, an Assembly committee will convene a hearing on the matter. Lawmakers are expected to ask administration officials why they did not insert the operating rules into the compacts, which is where the courts say such issues should be resolved.
A spokeswoman for the governor said the legal landscape was not defined until last fall and may still be changed by Congress. The administration also prefers to deal with the issue in a way that applies to all gaming tribes, spokeswoman Sabrina Lockhart said.
"Even if this were addressed in the pending compacts, it wouldn’t affect all tribes," Lockhart said. "We want to have uniformity."
The federal courts, in a lawsuit filed by the Colorado River Indian Tribes of Arizona, invalidated what are widely known as "minimum internal control standards." The comprehensive guidelines were developed by the National Indian Gaming Commission in consultation with tribes.
The rules set the basic standards for the internal security that protects the integrity of casino operations. They cover cash handling and counting, cage and credit operations, internal audits, surveillance and the games — from technical requirements to how often decks of cards should be changed.
In 37 audits conducted since the standards were introduced in January 2001, the federal commission found more than 2,355 violations — an average of 64 per casino. Six audits of California casinos uncovered 410 violations. From the total violations, more than 30 cases of suspected criminal activity were referred to law enforcement agencies.
The federal rules were not in place long, however. A U.S. District Court already had issued a decisive ruling against the standards by the time the Schwarzenegger administration reopened negotiations last spring with the Sycuan tribe of El Cajon, Pechanga of Temecula, Agua Caliente of Palm Springs, Morongo of Riverside County and San Manuel of Highlands, near San Bernardino.
In August, Gov. Arnold Schwarzenegger agreed to deals that would more than triple the number of slot machines the five tribes have — from 10,000 collectively to 32,500. Two months later, a federal appeals court upheld the earlier ruling.
Both courts concluded the National Indian Gaming Commission had little, if any, authority to regulate Nevada-style Indian casinos. Congress deliberately gave that power to tribes and states, the courts ruled.
California believed its tribal gaming agreements rested on a three-legged regulatory platform, with the responsibility shared by tribes, the state and the federal government, said Assemblyman Alberto Torrico, a Fremont Democrat and chairman of the Governmental Organization Committee, which will hold today’s hearing.
"We’ve lost one of those legs," Torrico said this week. "The federal government is now out of the game of regulating slot machines of any tribe in America."
Torrico and other Assembly Democrats have suggested the five big compacts should be renegotiated to deal with the regulatory question and other perceived shortcomings. The administration and the tribes want a final vote on the deals, which already passed the Senate.