NIGC Publishes Final Rule for Tribal Self-Regulation

By Patrick Sullivan

Gaming tribes, particularly tribes conducting only Class II gaming, should take notice of the publication by the National Indian Gaming Commission (“NIGC”) of a revised final rule for Self-Regulation of Class II Gaming earlier last month.

For Las Vegas style Class III gaming, the Indian Gaming Regulatory Act (“IGRA”) divides regulatory authority between state and tribal governments. But for Class II gaming, which includes bingo, electronic bingo gaming devices, and non-house banked card games, the NIGC is the primary regulator. In January 2012, the NIGC issued a Notice of Proposed Rulemaking regarding tribal self-regulation under IGRA, and after extensive consultation, it released a final rule on April 4 to be published at 25 CFR Part 518.

IGRA’s “self-regulation” provisions at 25 U.S.C. § 2710(c) allow qualifying tribal gaming regulatory bodies to obtain a certification allowing them to take over day-to-day oversight of Class II gaming operations from NIGC and reduce their fees paid to NIGC. The seldom-discussed self-regulation provisions in IGRA are written broadly, but Indian tribes have complained that the NIGC regulations are not faithful to the statute. Many tribes voiced the same complaints in consultation: (1) the self-regulation certificate was too difficult to attain; (2) the compliance costs of self-regulation outweighed the benefits; and (3) the previous NIGC regulations clawed back the investigative power that Congress intended to return to qualifying tribes. As of today, only two Indian tribes have attained the certificate – Grand Ronde in Oregon and Menominee in Wisconsin.

IGRA Section 2710(c) allows tribes that conduct Class II gaming for three years to petition for a certificate of self-regulation. The Commission shall issue a certificate if the tribe meets a set of criteria that indicates it has operated without evidence of criminal or dishonest activity, accounted for all revenues, and has adequate systems for accounting, licensing of employees, and enforcement of tribal gaming regulators.

IGRA requires that self-regulating tribes to submit resumes for every employee “hired and licensed by the tribe.” The new regulations properly limit this requirement to the members of the tribal regulatory body. This clarification saves tribes and NIGC a huge amount of paperwork, but it does not exempt tribes from notifying NIGC of licenses issued to key employees and primary management officials as required by IGRA. Self-regulating tribes must continue to provide an annual independent audit and resumes of all employees of the tribal regulatory body.

The new regulations no longer claw back NIGC inspection powers that IGRA withdrew. Self-regulation limits the Commission’s enumerated powers to (a) monitor Class II gaming, (b) inspect gaming premises, (c) conduct background investigations, and (d) inspect tribal gaming books and accounting records. This is a substantial limitation of key NIGC functions, some of which appear to be at odds with other regulations describing investigation requirements. These ambiguities could lead to disputes between NIGC and self-regulating tribes about the remaining scope of NIGC authority.

In practice, the new regulation means that Class II gaming tribes that are able to obtain the certification can exercise more sovereignty over their gaming operations and reduce their NIGC regulation costs. Many tribal casinos have generated consistent revenue from Class II machines alone, without the burdens of state compacts and revenue sharing. As technology improves, Class II machines are becoming more profitable and less distinguishable from Class III machines. The new regulations, paired with the technological developments, may make Class II gaming more attractive than ever.

To read the full article, check out our latest edition of Gaming Legal News.

The Massachusetts Muddle: What Does it Mean for the Mashpee Wampanoag?

By Dennis J. Whittlesey

The Mashpee Wampanoag casino project planned for the town of Taunton in southeastern Massachusetts received a major setback when the state Gaming Commission voted recently to suspend the legislated tribal priority for a license in that portion of the state. The priority was part of a statewide casino plan enacted by the state legislature two years ago authorizing three casinos in the state with a preference giving an Indian tribe the rights to the license designated for the southeastern part of the state. That preference clearly was intended to benefit the Mashpee Wampanoag, which was federally recognized in the spring of 2007 through a Department of the Interior administrative process. Non-tribal casinos were authorized for two other areas of the state, and those licenses are the subject of competition among casino development teams.

The Gaming Commission action was a predictable consequence of the legislative priority itself, in that the law established timelines for the Tribe that many believed would be virtually impossible to meet. Indeed, the Tribe’s deadline to get the gaming into trust status in a timely manner has been extended to give Interior additional time in which to accept the proposed casino site into trust status for gaming.

The Mashpee propose to operate a $500 million destination resort casino in Taunton, although it must be noted that the Taunton site is the third identified during six years of the tribal efforts to develop a casino. The other sites were within the Town of Middleborough and New Bedford. In addition to changing proposed gaming sites, the Tribe also replaced its original development team after it had executed a comprehensive local services agreement with Middleborough in July 2007. The peripatetic search for a gaming site has consumed money and a considerable amount of time, causing delay that was cited by the Commission in its unanimous vote to allow commercial casino developers to apply for the license. Such applications will constitute competition for a license that Mashpee has viewed as its legislated entitlement.

At a recent hearing, Gaming Commission Chairman Stephen Crosby declared that the law provided for opening up the competition to non-Indian entities if it appears that Mashpee will be unlikely to obtain the federal trust status necessary for tribal gaming. While Interior officials have declared that they are “expediting” consideration of the trust application and expect a final decision sometime during 2013, the continuing delays led to the Commission’s invocation of the law’s requirement that it “must” seek commercial bids for the license if it decides that the Tribe will not get land into trust for an Indian casino.

Mashpee Chairman Cedric Cromwell urged the Commission to not approve commercial casino applications, noting that the Tribe is proposing to pay “hundreds of millions of dollars” to the state in return for the exclusive right to conduct casino gaming in the designated region. He asserted that the Tribe will continue to develop and operate its project even if the third license goes elsewhere, meaning that the Tribe will develop a fourth casino in the state pursuant to the federal Indian Gaming Regulatory Act. Part of that assertion included the statement that a federal Indian casino would make no payments into the state’s treasury. Commission Chairman Crosby responded that if the Tribe does not obtain status for the land and the third license is not issued, then the state would lose the $85 million license fee and annual tax revenue of approximately $100 million.

The Massachusetts Muddle seems to have a life of its own. Whether and how the Mashpee Wampanoag casino project will be affected by these latest developments is unknown, but events are moving quickly on Beacon Hill. It is safe to say that the overall picture is constantly changing and is likely to continue doing so.

OLG Selects Spielo G2 as its Vendor for IGaming

On August 10, 2010, the Ontario Lottery and Gaming Corporation (OLG) announced that it will be extending its brand to Internet gaming (iGaming). In determining the nature and scope of its future iGaming product, OLG focused on analyzing and enhancing best practices and security procedures adopted in other jurisdictions across Canada and Europe and committed to implementing a strong, responsible gaming program and offering increased player protections, secure transactions, and data privacy.

On April 12, 2013, OLG selected a vendor, SPIELO G2, to assist OLG with the provision of iGaming services. According to a press release by SPIELO G2, Boss Media AP, a part of SPIELO G2, was selected by OLG to be OLG’s primary service provider of online casino games, back office, and player services. The selection of SPIELO G2 is not surprising, as SPIELO G2 has figured prominently in providing iGaming solutions not only to various Canadian provincial gaming monopolies, but also to government gaming monopolies around the world.

In Canada, SPIELO G2 launched the Canadian Poker Network, the first (and only) legal poker network in North America, which allows players from British Columbia, Quebec, and Manitoba to play on the same poker network. Globally, some of SPIELO G2’s recent customers include Austrian Lotteries, Veikkaus in Finland, Svenska Spel in Sweden, and Norsk Tipping in Norway.

The iGaming website will be located at the URL http://playolg.ca. According to a press release issued by OLG, lottery and casino gaming will be available initially, followed at a later date by bingo, sports wagering, online poker, and other new products.

As noted by OLG President and CEO Rod Phillips, “moving into the Internet gaming market is an important milestone for the modernization of OLG. We are pleased to offer a safe, secure, regulated, and entertaining Internet gaming option in Ontario where profits will support those things that are important to the people of this province – health care and community infrastructure.”

SPIELO International President and CEO Walter Bugno has stated that SPIELO G2 will ensure that OLG’s entry into iGaming will allow OLG to meet OLG’s goals of becoming an innovative and sustainable organization by “providing products and services that will delight players, while adhering to the highest standards of responsible gambling and player protection.”

Ontario will be the 8^th province to offer iGaming. Canadian provinces already offering iGaming are British Columbia, Quebec, Manitoba, Nova Scotia, New Brunswick, Newfoundland, and Prince Edward Island.

Michigan Gaming Control Board Approves Athens Acquisition Transaction

By Robert W. Stocker III

At its April 9 monthly meeting, the Michigan Gaming Control Board (“MGCB”) approved Athens Acquisition LLC’s acquisition of a majority interest in Greektown Superholdings, Inc., the parent company of Greektown Casino, L.L.C. Dan Gilbert, the founder of the Quicken Loans home lending empire and Chief Executive Officer of Athens Acquisition, whose companies include the majority owner of the Cleveland and Cincinnati casinos as well as a casino being developed in Baltimore, made a PowerPoint presentation at the MGCB meeting that emphasized his commitment to development of economic corridors in downtown Detroit.

Gilbert’s companies have been very active in buying commercial buildings in downtown Detroit as part of a comprehensive redevelopment program designed to energize the economic core of Detroit. Gilbert and Matt Cullen, the President and Chief Operating Officer of Rock Gaming LLC, emphasized their commitment to make Greektown Casino a dynamic destination in furtherance of the implementation of Gilbert’s Detroit revitalization efforts. Gilbert emphasized that his plans for downtown Detroit are consistent with his focus on development of urban cores in metropolitan Cleveland, Cincinnati, and Baltimore. Cullen advised the MGCB that Athens Acquisition anticipates completing the acquisition of a majority interest in Greektown Superholdings in the next few weeks.

Detroit Casinos’ March Revenues Slightly Decrease from Same Month Last Year

By Ryan M. Shannon

The Michigan Gaming Control Board (“MGCB”) released the revenue and wagering tax data for March 2013 for the three Detroit, Michigan commercial casinos. The three Detroit commercial casinos posted a collective 0.42% decrease in gaming revenues compared to the same month in 2012. Aggregate gross gaming revenue for the Detroit commercial casinos increased, however, by approximately 21.1% compared to February 2013 revenue figures, continuing the increase in revenues between February and March in prior years.

MGM Grand Detroit posted lower gaming revenue results for March 2013 as compared to the same month in 2012, with gaming revenue decreasing by 5%. MGM Grand Detroit continued to maintain the largest market share among the three Detroit commercial casinos and had total gaming revenue in March 2013 of approximately $54.3 million.

MotorCity Casino had monthly gaming revenue approaching $45.8 million, with revenues increasing by nearly 5.1% in March 2013 compared to March 2012. Greektown Casino posted a 0.25% increase in revenues for March 2013 compared to the same month in 2012. Greektown had gaming revenue of nearly $34.7 million for March 2013.

The Resuscitation of the Duwamish Recognition Effort

By Dennis J. Whittlesey

A federal judge has just given new life to the efforts of the descendants of Chief Seattle to gain federal recognition for his tribe, the Duwamish Tribe of Washington. Specifically, Judge John Coughenour has vacated a negative determination of tribal status by the Department of the Interior and remanded the file to the Department with direction to reconsider the tribal Acknowledgement Petition under all applicable regulations, rather than only half of them.

This order reversed one of the most controversial actions in the history of the Department of the Interior’s frequently criticized administrative tribal recognition process managed by the Office of Federal Acknowledgment (“OFA”), and it validated actions of former Acting Assistant Secretary for Indian Affairs Michael Anderson, who had written a positive determination for Duwamish over OFA’s objections and proposed negative order in the final hours of the Clinton Administration on January 19, 2001. The Bush Administration withdrew the Anderson Final Determination prior to its publication in the Federal Register and subsequently replaced it with a final negative determination some nine months later.

The principal dispute concerned Interior’s reliance on one set of acknowledgement regulations published in 1978 and Anderson’s reliance on subsequent regulations published in 1994. The Duwamish claimed that the Department violated the Administrative Procedure Act and their equal protection rights by failing to evaluate the Duwamish petition under both the 1994 and 1978 regulations, despite having evaluated a similarly situated Washington tribe’s petition under both sets of regulations at the same time.

Anderson hand-edited the OFA’s proposed negative determination, reversed its ultimate conclusion, and signed the hand-edited copy just before departing the Department late on Friday, January 19, with instructions for OFA to retype the document to reflect his edits. However, he had not executed all of the necessary documents because they apparently were not given to him by OFA personnel. OFA summoned him back to the Department on the following Monday to execute the additional documents, an action curiously conducted outside the Department since Anderson’s federal credentials had expired and OFA did not authorize clearance for him to enter the building. At some subsequent point, the file became the subject of a formal investigation that resulted in Anderson being cleared of any suggested impropriety.

As Anderson was being vindicated, the Duwamish were losing. The Interior Solicitor rendered a new final determination that fall restoring the OFA denial, and the file seemed closed for a tribe that essentially had exhausted all available funding with which to continue the effort. Nonetheless, the tenacious Duwamish team kept their hopes for status clarification alive. A legal challenge was filed and prosecuted by a Seattle law firm to its successful conclusion long after most tribal supporters had given up hope.

Interior now has to go back and retrace Anderson’s steps, which is to assess the Duwamish Petition under both sets of regulations rather than relying solely on the one that admittedly was unfriendly to the Duwamish situation. Anti-Duwamish bias at OFA is being watched by a lot of people this time, including one very involved federal judge.

DISCLOSURE: The author was the Duwamish attorney for the acknowledgment effort, a multi-year effort that concluded in the Anderson tribal recognition of January 19, 2001.

Negotiating Dispute Resolution with Indian Tribes: Don’t Do It Alone

By Patrick Sullivan

Indian tribes enjoy sovereign immunity from civil suits arising from contractual relationships, even if the contracts are made, paid, or performed entirely off the reservation. Tribally owned corporations generally enjoy sovereign immunity from suit as well.

Savvy attorneys know that a well-executed waiver of sovereign immunity is a green light to conduct profitable business with an Indian tribe. Tribes regularly execute these waivers, but most transactional attorneys may only see one or two of these in their careers. While those attorneys can be forgiven for not having deep Indian law experience, they should not be forgiven for failing to bring in an expert. Here are some aspects of doing business with tribes that an experienced Indian law attorney will know how to handle.

Waiver Language is Negotiable

Most Indian tribes doing business want to be fair and maintain mutually beneficial and lasting relationships, but they have a legitimate interest in protecting against the risk that the Tribe’s coffers will be emptied by a large judgment award. To that end, Tribes are accustomed to executing limited waivers. In our experience, an overzealous tribal attorney may open negotiations with a waiver so limited that it offers no real recourse and present it as “boilerplate” language that can’t be revisited. Of course, this is nonsense. To prevent the dispute resolution negotiations from souring the relationship, make it clear early on that you expect a process that will lead to a fair resolution for the parties and that you are prepared to walk away from a deal without a process that protects the interests of both parties.

Cover Your Regulatory Bases

One especially dangerous pitfall is that even a validly executed waiver of sovereign immunity in a contract can fall away if that contract is deemed void for lack of agency approvals required in certain transactions with tribes. For example, contracts encumbering Indian land for seven years or more are void absent sign-off from the Department of Interior, and more than one non-Indian business has been left with no recourse when an unapproved lease was deemed void because the waiver of immunity was not severable from the voided lease.

Similarly, some gaming contracts require review and approval of the National Indian Gaming Commission and are void absent that approval. Investors have found out the hard way that their sovereign immunity waivers fell with their voided contracts, and courts held that they were without recourse to recover millions of dollars in investment.

Your agreement may provide for alternative dispute resolution that may include informal preliminary conferences with the tribal council, mediation, binding or nonbinding arbitration, or outright litigation in court. It should specify which law will govern, which courts will have jurisdiction, and whether tribal remedies must be exhausted before proceeding to state or federal court.

A tribe may desire and even require that its own tribal court has jurisdiction. Despite a common misperception that tribal court always rule for the tribe, it is possible for nonmembers to recover in tribal court. But not all tribal courts are created equal, and an Indian law expert can help you determine if a particular forum offers your clients a reasonable chance at a recovery. And, many tribes have agreed to adjudication in non-tribal courts.

Simply put, these are dangerous waters. At the mouth of the Columbia River, even the most experienced captains of colossal ocean freighters gladly yield command of their vessel to a local pilot to navigate the narrow channel. Likewise, smart attorneys bring in an Indian law expert to establish profitable relationships with Indian tribes and ensure that the deal will not run aground.

To learn more about negotiating dispute resolutions with Indian Tribes, read the full article in the latest edition of Gaming Legal News.