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Sens. McCain, Dorgan, and Inouye, p. 6 February 1,2005

roughly equal to 50% of net revenue, and all of these payments were to be made long after the developer ceased providmg services of any h d .

These agreements, and others hke them, violate IGRA's sole proprietary interest requirement because the developer's comp'ensation is paid from the casino's profits, and it is paid in such a way and in such quantity as t:o bear little or no relationshp to the value of the services pro- vided or to the risk assumed. Rather, profits are dstributed to the developer as to one with a fractional ownership interest -- a proprietary interest - in an enterprise and its profits. The Commission's review has enabled tribes to avoid such dlegal and unconscionable agreements and has thus assured that they are the primary beneficiaries of their casinos.

Results of the Commission's contract review continued: Enforcement actions are unnecessary

The Commission's review of gaming-related contracts, again, whether for management con- tract or sole proprietary interest violations, is sound regulatory practice with a number of other straightforward, benefic~aeffects. By identifying IGRA violations before they occur, enforcement actions are not required, nor are the fines of up to $25,000 per day or the clo- sure of casinos. 25 U.S.C. $ 2713(a)-@).By identifyingviolations in contracts soon after exe- cution, we are often able to negotiate resolutions without the need for enforcement actions. Whenever violations may be tliscovered, by proceeding in this way, the parties are able to avoid the uncertainty and loss of business occasioned by formal action taken against tribes for contracts executed in violation of applicable law.

Due process

Finally, the Commission's review does not infringe upon the rights of tribes or their contrac- tors. My authority is explicit jn IGRA. Without limitation, I am empowered to bring en- forcement actions against all I<;RA violations. 25 U.S.C. $2713.

Again, however, one of the purposes of contract review is to eliminate IGRA violations and thus to avoid enforcement acrions whenever possible. Doing so by means of an advisory opinion in response to a voluntary request for review violates no one's rights.

I want to stress again that our review is informal and voluntary. The parties are not obliged to seek review, nor are they obliged to heed our advisory opinion if they do. Indeed, in the rare instances when the Commission has reached out and asked to review contracts, the re- quest is, of necessity, std volurltary. We have no jurisdiction over the contractors to compel theit compliance, and we have 1~roughno enforcement actions against the tribes pursuant to which we might compel them to submit contracts. The tribes and their contractors are free to decline our request, just as they are free not to seek an advisory opinion in the first place. As such, our review is an inflormal, prophylactic exercise that seeks negotiated solutions rather than formal enforcement. In other words, our review simply does not implicate the parties' statutory or constitutional rights.

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