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Sens. McCain, Dorgan, and Inouye, p. 2 February 1,2005

The Commission's review of contracts, whch are voluntarily submitted by the par- ties, attempts to identify potential IGRA violations before they occur, and thus avoid both the necessity of enforcement acaons against tribes and the myriad problems that can arise when pa.rties suddenly dtscover that tht:ir operating agreement was exe- cuted in violation of a.pplicable law. When our review identifies IGRA violations in contracts already in effect, tribes are often able to renegotiate them without our hav- ing to bring enforcement actions and interrupting casino operations.

The Commission's review is not a new exercise, nor does it apply new standards, previously undtsclosecl. Since 1993, Indtan tribes and their contractors have, at the Commission's encouragement, submitted some 440 contracts for review, specifically for a determination that they are not subject to, or that they comply with, IGRA's requirements for management contracts. The review for sole proprietary interest vio- lations became part o'f this review about 6 years ago as the Commission became more and more concerned about contracts that included egregious terms benefiting contractors rather than tribes. Before that, the issue had lain dormant since January 1993, when the Com~issionin adopting regulations on tribal ordmances, provided a formal statement on s.ole proprietary interest in the Federal Register and indicated that it would provide further guidance in individual cases.

The Commission's review does not infringe on the rights of Indan tribes or their contractors. The Comnission is charged with IGRA's enforcement, and I may bring enforcement actions for all IGRA violations, incluhg the requirement that a tribe, in all of its contractual undertakings, maintain the sole proprietary interest in, and re- sponsibihty for, all gaming activity. T h s is so whether or not the parties have submit- ted their contracts for review. For every alleged IGRA violation, the parties are enti- tled to administrative review before the full Commission under the Adrmnistrative Procedures Act and to subsequent judicial review if they are still aggrieved.

A more detailed legal and factual discussion follows.

Legal background

To begin with, IGRA requires, as one of the necessary conditions for a tribe to open and operate a casino, a gaming ordinance approved by me, as the Commission Chaitman. 25 U.S.C. §$ 2710@)(B); 2710(d)1:1)(A).For approval of a gaming ordinance, IGRA requires, among other things, that "the Indan tribe will have the sole proprietary interest and respon- sibihty for the conduct of any gaming activity." 25 U.S.C. $ 2710@)(2)(A).The Commission therefore adopted regulations providing that tribal gaming ordinances include a provision to that effect. 25 C.F.R. $ 522.4@:)(1).

As such, should a tribe and a contractor execute an agreement that gives to the contractor some proprietary interest in the gaming operation, the agreement violates both the tribal gaming ordinance and IGRA, which empowers me to correct those, and all other, violations

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