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Sens. McCain, Dorgan, and Inouye, p. 5 February 1,2005

tors also insisted on preferential payments, 2.e. payments from the mbe before all obligations other than operating expenses, and thus create the possibility that the tribe is left with very little or is left in debt to the contractor.

Contractors have attempted to safeguard their financial interests by arrogating to themselves sipficant management respomsibhties, whlle at the same time claiming that the "consulting agreement" is not a managem-entcontract and not subject to my approval. Those manage- ment responsibihties have included such things as appointing the casino's general manager, who has direct supervisory aurhority over all casino departments and employees; developing the casino's internal controls; tieveloping the casino's budget; deciding whlch games to offer; and betting casino marketing and advertising.

As the Commission's review and analysis developed, it prevented this lund of contract from ever t a h g effect, or allowed tribes to renegotiate such contracts if they had already been signed. As a result, the tribes have remained in control of, and have remained the primary beneficiaries of, their casinos. When notified that such agreements appeared to be manage- ment contracts that did not meet IGRA's h t a t i o n s on payment from net revenues, or other of its stringent requirements, tribes were able to negotiate more favorable financial arrangements and realized savings of millions. In addtion, contractors were prevented from managing Indlan casinos without first undergoing the necessary background checks and suit- abhty determinations. 25 U.S.C. § 2711(e). The Commission's review has thus advanced another of IGRA's essential purposes. It has ensured that casinos, and those who manage them, are free from corrupting influences. 25 U.S.C. § 2702(2).

As contractors realized that th.ey were no longer able to circumvent management contract review by c a h g a contract a "consulting agreement" or a "development agreement," they began eliminating provisions that allowed them to control the day-to-day operations of casi- nos. In other words, they began to look for other ways to extract large sums of monky fiom tribes without takmg on responsibilities that would raise red flags in a review for manage- ment contracts.

This change in approach led the Commission to realize that some contractors were appar- ently receiving an ownership interest in tribal casinos because they were certainly not provid- ing services worth the enormous sums of money they were receiving. By reviewing contracts for sole proprietary interest violations as well as management contract violations, the Com- mission has saved tribes many more d o n s of dollars.

In one agreement, for example:,the tribe had a 10-year obligation to pay its contractor 35% of its net gaming revenues each month as so-called "rent" for gaming equipment and the casino building, all of which the tribe had alteady paid for in filll within the first 6 months of the 10-yearterm.

In an even more egregous example, the tribe had a 5-year obligation to pay rent equal to all of the developer's costs, plus interest, plus an addtional "rent" of 75% of net revenue. Fol- lowing that, the tribe had a 10-year obligation to pay 16% of gross revenue, an amount

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