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Sens. McCain, Dorgan, and Inouye, p. 3 February 1, 2005

through enforcement actions. Therefore, any agreement that violates IGRA's sole proprie- tary interest requirement places the tribe at risk of fines and closure of its casino.

That said, a complete &scussjon of the Commission's review of gaming-related contracts - agreements for the development and construction of casinos, loan agreements, gaming equipment leases, etc. - also requires a brief discussion of management contracts. As sum- marized above, the Commissi(~n' review of contracts for sole proprietary interest violations has long been part of a voluntary compliance program, namely the voluntary submission of management contracts by tribes and their contractors for a determination by the Commis- sion that the contracts do not: offend IGRA's stringent requirements. The Commission en- courages this review in order to both advance IGRA's purposes and ensure compliance. Specifically, the Commission's review ensures that Inlan tribes are the primary beneficiaries of their casinos and that enforcement actions for IGRA violations are avoided.

As you are aware, tribes and heir contractors submit to me, as Chairman, all contracts for the management of Indian ca.sinos, together with any collateral agreements, i.e. any agree- ment related to a management contract, or to the rights, duties, and obligations that a man- agement contract creates. 25 U.S.C. $2711(a); 25 C.F.R. $ 553.2; 25 C.F.R. $ 502.5.

IGRA has many strict requirements for the approval of management contracts, and a list of them is unnecessary here. Suffice it to say that a management contract that I have not ap- proved is void, and management of a casino under a void agreement has a number of unde- sirable consequences. The tribe is subject to fines and the closure of its casino in an en- forcement action; the contractor has to vacate the casino; the tribe has to run the casino by itself; and the contractor is subject to legal action to dlsgorge to the tribe the proceeds of the contract.

The history of the Commission's voluntary contract review

Given IGRA's restrictions on management contracts, and the consequences for managing without an approved contract, the Commission had, by 1993, received a number of requests for gutdance on whether specific agreements were, under IGRA, management contracts that require approval and background investigations. Accordingly, on July 1, 1993, the Cornmis- sion issued Bulletin 93-3, "Submission of Gaming-Related Contracts and Agreements for Review," which invited tribes and their conttactors to submit what the December 15 letter calls "non-management contracts" - again, gaming equipment contracts, development agreements, loan agreements, ~etc.- to the Commission for review in order to determine if they were management contrac:ts.

On October 14, 1994, the Commission issued Bulletin 94-5, "Approved Management Con- tracts v. Consulting Agreements (Unapproved Management Contracts are Void)," which provided additional guidance on the issue. Noting that what distinguishes a management contract from other gaming contracts "depend[s] on the specific facts of each case," the Commission restated its willingness to provide voluntary review. Tribes and their contractors d ~ not hesitate to accept the Commission's offer. SinceJuly 1993, the Commission has re- ceived some 440 requests to review contracts.

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