NIGC Case Involves Greater Issues than MICS Authority

by Brad Jolly, Partner
Oct 31, 2006

The D.C. Circuit's decision holding that the NIGC lacks authority to fully regulate class III gaming involves a lot more than the limited issue raised in the litigation and determined by the courts. It involves the larger issue of the NIGC's actions and structure with respect to Indian gaming - at least at the Washington level. To understand, one has to first look at the history of the entire case.

The issue started with the NIGC attempting to conduct an audit of the Colorado River Indian Tribes' ("CRIT") gaming facility. The audit included checking compliance with the NIGC's class III MICS. CRIT agreed to allow the NIGC to audit its class II compliance, but argued that the NIGC lacked authority over any questions of class III compliance because the Indian Gaming Regulatory Act ("IGRA") relegates that to the tribal-state compact process. Many of us have argued the same for years. The closest success we ever had was in preventing the NIGC's proposed regulations mandating environment, public health and safety regulations a few years ago. But, it was a small victory - the NIGC agreed that its regulations would be "guidance," but refused to accede authority over the issue.

Ultimately, the Chairman of the NIGC fined CRIT for what he considered a violation of the IGRA and NIGC regulations. CRIT appealed, once again asserting that the NIGC lacked authority to enforce its MICS with respect to class III gaming. Under the IGRA, appeals of actions of the Chairman are first heard before the entire NIGC. Under the NIGC's regulations, an administrative law judge ("ALJ") is appointed to hear the appeal and issue a recommendation to the NIGC. The NIGC can then either accept that recommendation or reject it. That decision is then subject to judicial review under the Administrative Procedure Act.

With CRIT, the NIGC proceeded as normal in appointing an ALJ from the Department of Interior's Office of Hearings and Appeals ("OHA") to hear the appeal. The ALJ heard CRIT's and the NIGC's arguments and issued a lengthy and very well-reasoned recommendation that the civil violation and fine be vacated because the NIGC lacks authority to enforce its class III MICS under the IGRA. It was an apparent victory for CRIT and all gaming tribes. However, it was short lived. Without any significant contrary reasoning, the NIGC simply rejected the ALJ's recommendation with something akin to saying "We disagree. We think we have the power, so, therefore, we do."

CRIT then sought judicial review and the District Court judge also issued a lengthy and well-reasoned decision, once again finding that the NIGC lacks authority to enforce its class III MICS. The NIGC appealed and, for the third time, was told by the D.C. Circuit that it lacks authority. The NIGC, still refusing to accept a directive of Congress that seems plain on the face of IGRA, will probably now seek review by the Supreme Court - a scary thought given many of the Justices' apparent views on the penultimate power of the Executive Branch.

Much of the CRIT case is not unique in that the NIGC routinely rejects any recommendation of appointed ALJ's that goes against it or the Chairman. ALJs have many times held that the NIGC lacks the authority to take certain actions or that certain actions were not warranted under the law. But, the rule of thumb seems to be that such recommendations are always to be rejected. In essence, the NIGC, when sitting to hear appeals of the Chairman's actions, is what most call a "kangaroo court." An appeal to the NIGC is very often a waste of time and money coupled with the prolonging of suffering when involving actions such as facility closure.

At the same time, at the Washington level, the NIGC is a horribly ineffective regulator. Like much of Washington - whether it be elected officials or agency bureaucrats - the NIGC is entirely detached from real life on the ground. Maintaining the integrity of tribal gaming operations is an interest we all share. But, unfortunately, the void between what really threatens the integrity of tribal gaming operations and the actions of the NIGC in Washington is quite vast. Often, the NIGC's actions in the name of proper regulation are actually detrimental to gaming operations, their integrity, and tribal governments.

For example, the NIGC has followed a policy of closing gaming operations whenever there is a leadership dispute involving the government of a tribe regardless of whether the dispute actually threatens the integrity of gaming on that tribe's lands. In fact, in at least one case, the NIGC closed a legal gaming facility, instantly sending more than 1300 individuals to the unemployment line, emptying county food shelves within a month, and cutting off nearly all funding to tribal governmental and social service programs, leading to further layoffs. The Chairman of the NIGC declared that the ousted Tribal Council must have control over the gaming facility even though the entire reason that Council was ousted was because of its interference with gaming regulation and the integrity of gaming (as well as its refusal to accept valid recall petitions) and regardless of the fact that the tribe's gaming commission was exercising full independent supervision and authority over regulation of the gaming operation. In other words, the Chairman closed a gaming facility because the tribe took action to protect the integrity of gaming and refused to follow the NIGC's order to return the facility to the control of those who threatened the operation. Of course, the Chairman did not have, ever receive, or ever present any evidence to the contrary - it was simply a matter of "this is what we do and, no, we are not allowed to actually think about the reality of the situation."

To be clear, this is an issue with the NIGC at the Washington, D.C. level. The Regional Offices and Field Investigators are not generally plagued with this problem of separation from reality. NIGC Field Investigators actually visit gaming facilities, work with tribal regulators, understand tribal gaming operations, and can see whether or not there is an actual threat to the integrity of gaming. In the instance above, NIGC Field Investigators had been dealing with the problems of the ousted Tribal Council for some time and when they were informed that the Council had been ousted and the tribal gaming commission restored, their exact reaction was that they were glad to hear it and felt much more confident that the integrity of the operation had been restored. Thus, one can see the clear disconnect between those who deal with the realities of gaming regulation and those who only deal with it theoretically from a distance in Washington.

The NIGC has been seeking to expand its authority over gaming regulation for many years. Most of this has been in the form of self-endowing the agency with powers, as with the MICS. But, there has also been legislation repeatedly proposed in Congress to amend the IGRA to expressly grant the NIGC sweeping authority over Indian gaming. Of course, with such expanding of authority must come an increase in funding which, since the NIGC is funded by tribal gaming revenues, means taking a bigger chunk from tribal governmental funds without regard to impact on tribal governmental and social programs - something the NIGC has already achieved on one occasion.

Thus far, we have been fortunate that the legislation expanding NIGC authority has not moved through Congress. But, the D.C. Circuit's decision could change the priority of amending the IGRA, even though an amendment expanding NIGC authority is not necessary. Congress is acting under mistaken assumptions in considering giving the power-hungry NIGC more authority. Tribal gaming commissions should be the primary regulators of gaming in Indian country. The United States' current Indian policy is supposed to involve acknowledging and strengthening tribal self-government and, although usually only a matter of lip-service, support for self-determination. Tribal regulation of Indian gaming is an exercise of self-government. Greater NIGC regulation, even if useful, is paternalistic and an infringement on tribal sovereignty, self-government, and self-determination.

The Washington-level NIGC often demonstrates disrespect for tribal self-government and disrespect for tribal gaming commissions much the same way states and state gaming regulatory bodies look down on tribal gaming regulators. While many Regional Office personnel appropriately work with tribal gaming regulators as equals and even recognize that tribal gaming regulatory bodies are the primary regulators of Indian gaming to be supported and supplemented by the NIGC, this reality is often lost at the Washington level.

Regardless, there are background questions involved in even considering the expansion of NIGC authority that keep being ignored. As evidenced by the NIGC's "habit" of rejecting otherwise proper ALJ decisions when those decisions go against the NIGC, the NIGC cannot always be trusted as an honest regulator - a regulator that acts with integrity, in accordance with evidence, and with respect for the due process rights of those under its oversight. In addition, the Washington-level NIGC's detachment from the realities of gaming regulation and protecting gaming integrity suggest that it is the last body that should be granted further power over gaming regulation. This detachment has the danger of actually hurting the integrity of gaming and an expansion of NIGC authority will simply expand that danger.

While there are certainly tensions involved in shared regulation with states through the provisions of tribal-state compacts and problems with respect for tribal gaming regulatory authorities, at least the state is "there" on the ground level. As in the example of casino closure discussed above, even the state realized the insanity of the NIGC's actions - perhaps mostly because the unemployed were non-Indians and the impact on the state's treasury due to the increased provision of social services and the void of unfunded tribal services could be felt - but, ultimately showing much greater wisdom than the NIGC in Washington.

If it continues to consider amendments to the IGRA, we can only hope that Congress tries to close its own gap with reality on the ground and does not simply accept the NIGC's self-interested claims of a need for greater power in a time where expanding Executive Branch authority seems to be the current fad. If Congress choses to revisit the IGRA, they should do so in a manner which truly does assist tribes in ensuring the integrity of gaming, gives integrity to the NIGC appeal process, repairs the damage of the Supreme Court's decision in Seminole Tribe v. Florida, and re-levels the bargaining positions of tribes and states in the compacting process.

Perhaps Congress should stop and look at the facts surrounding the NIGC's exercise of regulatory authority. While there are definitely instances of valid, appropriate, and necessary regulatory action on the part of the NIGC, its self-expansion of authority has also revealed serious issues. The path of the D.C. Circuit's decision has brought those issues more into the light than they have ever been before. The decision is great for tribal self-government, but the problems the case reveals and other bad instances of the exercise of NIGC authority should not be ignored or forgotten. Congress should consider placing some independence into the NIGC appeal process and mandating that actions of the Chairman, at least with respect to closure orders, be supported by evidence or actual threats to the integrity of gaming rather than policies which demand that no one think or understand the realities of a situation. Nothing less should be allowed if the NIGC is to actually wield more authority. For if anything is demonstrated by the NIGC's attempted exercise of greater authority, it is that some check on that authority needs to be installed, else destruction can ensue.