SEMINAR INSTITUTE
Gaming Commissioner Certification Training
Level I Training Material
August 17 – 19, 2022
Santa Ana Star Casino Hotel Santa Ana Pueblo, New Mexico
Commissioner Certification Training LEVEL I AGENDA August 17 - 19
Santa Ana, New Mexico Training on MST Time
Wednesday, August 17
Indian Gaming Regulatory Act: An Introduction Liz Homer, Homer Law
9:00 AM 10:30 AM
10:30 AM 10:45 AM Break
Tribal Gaming Regulatory Agency: Purpose, Functions and Structures Liz Homer, Homer Law
10:45 AM 12:15 PM
12:15 PM 1:15 PM Lunch Break
What's the Big Deal - MICs Liz Homer, Homer Law
1:15 PM 2:45 PM
2:45 PM 3:00 PM Break
Managing a Tribal Gaming Regulatory Authority Carleen Chino, Executive Director, Acoma Gaming Commission Thursday, August 18
3:00 PM 4:30 PM
Rules of the Games – Classification of Games Liz Homer, Homer Law
9:00 AM 10:30 AM
10:30 AM 10:45 AM Break
Gaming Compacts & Compact Compliance Liz Homer, Homer Law
10:45 AM 12:15 PM
12:15 PM 1:15 PM Lunch Break
Gaming Crimes and Bad Acts. Liz Homer, Homer Law
1:15 PM 2:45 PM
2:45 PM 3:00 PM Break
Introduction to Enforcement Actions Liz Homer, Homer Law Friday, August 19 Basic Principles of Casino Accounting Ryan Burns, CPA, Partner Blue Bird CPA's
3:00 PM 4:30 PM
9:00 AM 10:30 AM
10:30 AM 10:45 AM Break 10:45 AM 12:15 PM
Auditing Financial Audits & Agreed-Upon Procedures Ryan Burns, CPA, Partner Blue Bird CPA's
Please plan to stay for the entire class on each day to get your certificate of completion. Please be on time for sessions
8/10/22
The Indian Gaming Regulatory Act: An Overview
ELIZABETH L. HOMER HOMER LAW CHARTERED
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The Rich History of Gaming
A drawing found on the wall of a burial vault in Beni Hasan, Egypt (circa 2500 B.C.E.) shows a picture of a ball hidden under one of several cups, perhaps an early game of chance.
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The first signs of a lottery trace back to Asia, where ancient Keno slips were discovered. First played in China, the lottery has helped finance major governmental projects like the Great Wall of China. Organized governmental regulation of gambling, as opposed to taxation by force, is recorded as early as 321 B.C. in India where a Superintendent of Public Games supplied dice and collected a fee of 5% of the receipts. The Principality of Monaco, a country with more millionaires per capita than any country in the world, is primarily supported by gaming revenues.
Government Gaming Abroad
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Government Gaming in the English Colonies Because the colonies had no power to tax, they were dependent on help from England. In 1612, King James I chartered the Virginia Company of London to raise revenue for the benefit and support of the Jamestown settlement. The company was authorized to conduct lotteries throughout England in order to raise money. The lotteries were relatively sophisticated and included instant winners. One colonist noted that the revenue from these lotteries were“reall and substantiall food, by which Virginia hath been nourished.” Eventually, the crown banned the lotteries because of complaints that they were viewed as robbing England of money.
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Lottery revenues were responsible for the building of much the infrastructure along the Northeast Coast. Many of the most prestigious universities, such as Harvard, Yale, and Brown, were built with lottery revenues. Lottery revenues funded many of the armaments and purchases made during the Revolutionary War.
Government Gaming and Growth
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The Johnson Act (1962)
Prohibits the manufacture, possession, use, sale, or transportation of any “gambling device, except in accordance with a state regulatory scheme.” The Johnson Act defines a “gambling device” as any: Slot machine ... and other machine or mechanical device (including but not limited to, roulette wheels and similar devices) designed and manufactured primarily for use in connection with gambling, and (A) which when operated may deliver, as the result of the application of an element of chance, any money or property, or (B) by the operation of which a person may become entitled to receive, as the result of the application of an element of chance, any money or property. Any subassembly or essential part intended to be used in connection with any such machine or mechanical device, but which is not attached to any such machine or mechanical device as a constituent part.
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Pre-IGRA Gaming
A number of tribal governments, including the Seminole, Eastern Band of Cherokee, and the Cabazon Tribe, among others, introduced high stakes bingo, which proved highly popular and lucrative In June 1984, the Interior Department presented testimony to Congress noting that 80 tribes were engaged in some form of gaming, primarily bingo, and the income from those operations was, in total, in the millions of dollars Bingo in Indian Country proved so successful in such a short time that state governments took notice States began taking the position that bingo games were illegal under state law
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The Supreme Court’s decision in California v. Cabazon and Morongo Bands of Mission Indians (1987) paved the way for the Indian Gaming Regulatory Act (IGRA), passed the following year. In Cabazon , the State of California argued that under Public Law 280, California had criminal jurisdiction over tribal lands within the state’s borders. The Cabazon and Morongo Bands argued that the state’s regulatory laws did not criminally prohibit gambling; therefore, the authority to regulate such gaming activities was outside the control of Public Law 280. The Supreme Court agreed with the tribes and ruled against California having authority to regulate or prohibit tribal gaming. Cabazon prompted Congress to adopt a federal regulatory framework for Indian gaming.
Setting the Stage in Court
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Passage of IGRA
On Oct. 18, 1988, the Indian Gaming Regulatory Act (“IGRA”) was enacted by Congress IGRA divides gaming activities into three Classes – I, II, and III and establishes a regulatory framework for each category It also establishes the National Indian Gaming Commission (“NIGC”) to administer the IGRA statute It requires tribes to adopt and submit gaming ordinances for NIGC approval For Class III Gaming, IGRA requires a Tribal-State Compact approved by the Secretary of the Interior and creates an exemption from the Johnson Act for such gaming.
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Early IGRA Indian Gaming
In the period between the enactment of IGRA in 1988 and the issuance of NIGC’s first regulations in 1992, Indian Gaming was already flourishing. In those early years, a number of innovations were introduced, including the use of electronic aids in Class II gaming, particularly for bingo and pull tab games. In the beginning these innovations were relatively modest, such as the introduction of computerized random number generators for bingo games and pull tab dispensers. But very quickly we began to see machines linked together by bingo-based software programs that allowed players to compete against one another for prizes with video screens that displayed spinning reels.
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Explosive Expansion of Indian Gaming From 1988 to 2013, gross revenues from tribal gaming grew more than 280-fold, from about $100 million to around $28 billion. The number of tribal gaming operations exploded from fewer than 30 to about 450 across 31 states. In the span of only thirty years, it has become the single largest revenue-producing activity for Indian tribes. The economic gains attributed to gaming have also had positive impacts on tribal employment and many other areas of development in Indian Country.
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Sections of IGRA
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Section 2701 – Findings
Congress finds that:
Numerous Indian tribes have become engaged in or have licensed gaming activities on Indian lands as a means of generating tribal governmental revenue;
Federal courts have held that section 81 of this title requires Secretarial review of management contracts dealing with Indian gaming, but does not provide standards for approval of such contracts;
Existing Federal law does not provide clear standards or regulations for the conduct of gaming on Indian lands;
A principal goal of Federal Indian policy is to promote tribal economic development, tribal self-sufficiency, and strong tribal government; and
Indian tribes have the exclusive right to regulate gaming activity on Indian lands if the gaming activity is not specifically prohibited by Federal law and is conducted within a State which does not, as a matter of criminal law and public policy, prohibit such gaming activity.
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Gaming Classifications under IGRA One of the primary features of IGRA is its classification of gaming. IGRA divides gaming into three classes, Class I, Class II, and Class III. With these classifications, IGRA provides a general framework for the regulation of tribal gaming.
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Gaming Classifications under IGRA, cont. Class I ◦ Social games solely for prizes of minimal value or traditional forms of Indian gaming engaged in by individuals as a part of, or in connection with, tribal ceremonies or celebrations Class II ◦ Games of chance commonly known as bingo (whether or not electronic, computer, or other technological aids are used in connection therewith) and, if played in the same location as the bingo, pull tabs, punch board, tip jars, instant bingo, and other games similar to bingo. Class II gaming also includes non-banked card games, that is, games that are played exclusively against other players rather than against the house or a player acting as a bank. Class III ◦ All forms of gaming that are not Class I or Class II gaming.
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Regulations by Class
Class I ◦ Regulatory authority over Class I gaming is exclusively vested in tribal governments and is not subject to IGRA’s requirements. Class II ◦ To conduct Class II gaming, the Tribe must be located in a state that permits such gaming for any purpose and must adopt a gaming ordinance approved by the NIGC. Tribal governments are responsible for regulating Class II gaming, subject to NIGC oversight. Class III ◦ To conduct Class III gaming, the Tribe must meet the above-mentioned requirements for Class II gaming, and they must have a tribal-state gaming compact, permitting such gaming, approved by the Secretary (or under the procedures promulgated by the Secretary under circumstance identified in IGRA).
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Section 2702 – Declarations of Policy
The purpose of this chapter is: 1. To provide the statutory basis for the operation of gaming by Indian tribes as a means of promoting tribal economic development, self-sufficiency, and strong tribal governments. 2. To provide a statutory basis for the regulation of gaming by an Indian tribe adequate to shield it from organized crime and other corrupting influences, to ensure that the Indian tribe is the primary beneficiary of the gaming operation, and to assure that gaming is conducted fairly and honestly by both the operator and players; and 3. To declare that the establishment of independent Federal regulatory authority for gaming on Indian lands, the establishment of Federal standards for gaming on Indian lands, and the establishment of a National Indian Gaming Commission are necessary to meet congressional concerns regarding gaming and to protect such gaming as a means of generating tribal revenue.
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This section establishes the National Indian Gaming Commission (NIGC) as a commission within the Department of Interior. Per this section, the NIGC shall be composed of three full- time members. ◦ One Chairman who shall be appointed by the President with the advice and consent of the Senate ◦ Two Associate Members who shall be appointed by the Secretary of the Interior. One of the associate member will, after selection by the Chairman and with majority vote, be named Vice Chairman. The remainder of this section outlines the suitability and eligibility for commission members.
Section 2704 – National Indian Gaming Commission
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The Chairman, on behalf of the Commission, has the power to: • Issue orders of temporary closure of gaming activities • Levy and collect civil fines • Approve tribal ordinances or resolutions regulating Class II and Class III gaming • Approve management contracts for Class II and Class III gaming • Any other powers as may be delegated by the Commission
Section 2705 – Powers of the Chairman
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The Commission itself is empowered to: • Approve the NIGC annual budget • Adopt regulations for the assessment and collection of civil fines
Section 2706 – Powers of the Commission
• Establish fee rates • Issue subpoenas • Affirm a temporary closure order • Issue regulations • Report to Congress
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Class I gaming on Indian lands is within the exclusive jurisdiction of the Indian tribes. Class II gaming on Indian lands shall continue to be within the jurisdiction of the Indian tribes but is subject to the provisions of this section. ◦ An Indian tribe may engage in Class II gaming is such gaming is located within a State that permits such gaming and the governing body of the Indian tribe adopts an ordinance or resolution which is approved by the Chairman of the NIGC.
Section 2710 – Tribal Gaming Ordinances
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Section 2710 – Tribal Gaming Ordinances:
• May be encompassed within the existing independent tribal audit systems • Will be provided to the Commission by the tribe • All contracts for supplies, services, or concessions in excess of $25,000.00 shall be subject to such independent audits
Annual Outside Audits
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Section 2710 – Tribal Gaming
The construction and maintenance of the gaming facility, and the operation of that gaming is conducted in a manner which adequately protects the environment and the public health and safety.
Ordinances: Protection of the Environment
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Background investigations for primary management officials and key employees must be conducted and ongoing oversight of such persons is required Tribal licenses for primary management officials and key employees must be issued Any person whose prior activities, criminal record, reputation, habits and associations pose a threat to the public interest or effective regulation of gaming or create or enhance the dangers of unsuitable, unfair, or illegal practices and methods and activities in the conduct of gaming shall not be eligible for employment. The Indian tribe must notify the Commission of the results of the background check before issuing licenses.
Section 2710 – Tribal Gaming Ordinances: Licenses and Background Investigations
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Section 2710 – Tribal Gaming
The Commission may consult with appropriate law enforcement officials concerning licenses issued by a tribe. If the Commission receives information that a primary management official or key employee does not meet the standard established, the tribe will suspend and, after notice and hearing, revoke such license.
Ordinances: Issuances of
Gaming License
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Section 2710 – Tribal Gaming Ordinances: Per Capita Distribution Plans
Such plans are only permitted if: • The tribe has prepared a plan to allocate revenues • The plan has been approved by the Secretary • The interests of minors and other legally incompetent persons are protected • Tribes notify members that such payments are subject to federal taxation
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Section 2710 – Tribal Gaming
The Secretary may disapprove a compact only if such compact violates- • Any provision of this chapter • Any other provision of Federal law • The trust obligations of the U.S. If the Secretary does not approve or disapprove a compact 45 days after its submittal, it shall be considered approved. The Secretary shall publish in the Federal Register notice of any Tribal-State Compact that is approved.
Ordinances: Approval of Tribal-State Compacts
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Section 2711 – Management Contracts
Requirements for Chairman’s approval: • Adequate accounting procedures • Access for appropriate tribal officials to daily operations • Minimum guaranteed payment to the tribe • Agreed ceiling for the repayment of development & construction costs
• Terms not to exceed 5 years (in some cases 7 years) • Grounds and mechanisms for terminating the contract
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Section 2711 – Management
Contracts with a fee based upon a percentage of the net revenue are acceptable if the fee is reasonable in light of surrounding circumstances. Such fee shall not exceed 30 percent. Upon request of a tribe, the Chairman may approve a contract with a fee that exceeds 30 percent but not 40 percent.
Contracts: Approval of Fees
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The Chairman shall have the authority to levy and collect appropriate civil fines, not to exceed $25,000 per violation, against the tribal operator of an Indian game or a management contractor for any violation of any provision of this chapter, any regulation prescribed by the Commission, or tribal regulations, ordinances or resolutions approved under section 2710 or 2712 of this title.
Section 2713 – Civil Penalties
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ELIZABETH L. HOMER HOMER LAW CHARTERED 1730 RHODE ISLAND AVE., N.W. SUITE 501
END
WASHINGTON, D.C. 20036 PHONE: (202) 955-5601 FAX: (202) 955-5605 WWW.HOMERLAW.COM
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Understanding the System: Purposes, Roles, & Functions
Elizabeth L. Homer Homer Law Chtd.
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Authority of Tribal Governments • Doctrine of Tribal Sovereignty • Pursuant to U.S. Constitutional Law, Indian Tribes are Political Entities, Possessing Inherent Sovereign Powers • Federal Indian law flows from the legal premise that Indian tribes retain a certain "nationhood" status, which pre-dates the establishment of the United States, and includes inherent powers of internal self-government.
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Authority of Tribal Governments • Tribes have been characterized as domestic dependent nations retaining all powers of government not extinguished by an express act of the Congress or inconsistent with their dependent status. See, Worcester v. Georgia , 31 U.S. (6 Pet.) 515 (1832); Cherokee Nation v. Georgia , 30 U.S. (5 Pet.) 1 (1831); Talton v. Mayes , 163 U.S. 376 (1896); United States v. Wheeler , 435 U.S. 313 (1978). • As a general principle, the United States Congress has exclusive authority over Indian Affairs, which preempts the assertion of power over tribes by states, unless expressly authorized by Congress. Williams v. Lee , 368 U.S. 217 (1959). • The exclusive power of the United States to oversee Indian affairs is Constitutional in origin and traces to Art. I, Sec. 8, cl. 3, the Indian Commerce Clause. See, Kagama v. United States, 118 U.S. 375 (1886).
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Inherent Powers of Tribal Self- Government Ø Make and form their own government Talton v. Mayes , 163 U.S. 376 (1896). Ø Establish membership Santa Clara Pueblo v. Martinez , 436 U.S. 49 (1930)
Ø Make and enforce laws, civil and criminal Ex Parte Crow Dog , 109 U.S. 556 (1983).
Ø Tax
Merrion v. Jicarilla Apache Tribe , 455 U.S. 130 (1982).
Ø Engage in commercial activity
Brendale v. Confederated Tribes of Yakima Indians , 492 U.S. 408 (1989).
Ø License, zone, and regulate
Merrion v. Jicarilla Apache Tribe , 455 U.S. 130 (1982).
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Authority of Tribal Governments
• The establishment of Regulatory Agencies comes within the inherent governmental authority of tribal governments • With respect to gaming, the Indian Gaming Regulatory Act (IGRA) mandates that a tribal governments must provide an adequate system for the regulation of tribal gaming activities. 25 U.S.C § 2710 (b)(F).
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Tribal Governments: Governmental Responsibilities • Separation of Powers Doctrine • Legislative Branch • Enacts law • Executive Branch • Executes Law • Judicial Branch • Interprets Law
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Dual Functions
Governmental Functions • Enact Law • Administer Law • Enforce Law • Interpret Law • Regulate Activities • Tax Activities • Provide Governmental Services
Corporate Functions • Own Enterprises • Operate Enterprises • Manage Enterprises • Invest Capital • Provide economic goods & services
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Competing Interests
• Corporate and Governmental Structures Differ Significantly by Design because each Serve Distinct Interests • Governmental Bodies are Political in Nature Requiring Deliberative Processes, which inevitably are slower and less efficient. Haste in a political environment invites conflict, turmoil, and sometimes instability • Corporate Bodies operate in a completely different environment – the marketplace – which flows at a much swifter pace and where decisions are not based on political considerations, but rather are profit driven. Inefficiency in a corporate environment results in lost opportunity, reduced profitability, and sometimes failure.
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Competing Objectives
• Politically Driven • Open & Transparent • Collective Decision making
• Financially Driven • Proprietary & Confidential • Hierarchical
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Inescapable Factors
• A Tribal Enterprise is owned by a Political Entity • Tribal Enterprises Serve a Public Rather than a Private Interest • In the context of Tribal Enterprise, it is impossible to achieve complete separation between political and business considerations
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Successful Tribally-Owned Enterprises
• Are built on structures that achieve a proper balance between competing interests and governed by laws that designed to achieve a balance between: • Efficiency and Accountability • Autonomy and Oversight • Business Objectives and Tribal Objectives
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Step 1: Structure
• Designing a Structure that: • Balances & Harmonizes Competing Interest
• Regulatory Structure • Enterprise Structure
• Fosters Accountability and Profitability • Works within the Overall Institutional Framework of the Tribal Government
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Step 2: Making the System Work
• Understanding the System • Respecting the System
• Committing to the System • Complying with the Law • Operating within the System • Respecting the Respective Roles of each Component of the System
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Tribal Gaming Regulatory Agencies • Instrumentalities of Tribal Government • Possess and exercise powers delegated by the legislative body of the tribal government • Typically, are delegated broad regulatory powers, including the authority to: • Promulgate rules and regulation • License • Enforce and sanction violations • Adjudicate
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Tribal Gaming Regulatory Agencies • Indian tribes have the exclusive right to regulate gaming activities on Indian lands if the gaming activity is not specifically prohibited by Federal law and is conducted within a State which does not prohibit such gaming activity. Congressional findings and Statement of Policy, Indian Regulatory Act, 25 U.S.C. § 2701; see also, Cabazon Band of Mission Indians v. National Indian Gaming Comm’n, 827 F. Supp. 26, 31 (D.D.C. 1993); aff’d, 14 F.3d 633, 635-36 (D.C. Cir. 1994).
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Agency Authority & Functions, Duties, and Responsibilities • Typically, an Tribal Gaming Regulatory Agency is Delegated Broad Authority to: • Interpret & Implement the Law through the Promulgation of Regulations (Quasi-Legislative Power) • Monitor Compliance and Enforce the Law (Quasi-Executive Power) • Apply the Law to Facts to Determine whether the Law has been Offended and Assess Sanctions (Quasi-Judicial Power)
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Tribal Gaming Regulatory Agencies • Promulgate Regulations • Issue Opinions, Guidelines and Policy Statements • Develop and Implement Plans • Issue Licenses & Permits • Prepare Technical Documents & Reports • Conduct Studies, Fact Findings, & Investigations • Bring Enforcement Actions
• Adjudicate and Make Decisions • Assess Fines and Other Sanctions
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Tribal Gaming Regulatory Agencies • Interpret, implement, administer, monitor, and enforce statutory law within the limits of its delegated authority – the scope of this authority will vary from one tribal government to another
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Tribal Gaming Enterprises
• Own, Operate, & Manage • Make Business Decisions • Supervise Staff • Allocate Resources • Operate Collateral Business Activities
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Tribal Court
Tribal Council
Legislates
Appeals
Commission Rulemaking, Enforcement, Licensing, Hearings
Enterprise Board
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TGRA
Council Legislates
Hearing & Appeals
Enforcement Licensing & Enforcement
Enterprise Board
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Tribal Court
Council Legislates
Enforcement
Licensing
Enterprise Board
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Enterprise Board
Casino
Retail
Food/Beverage
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Enterprise Board
Casino
Retail
Food/Beverage
Hotel
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What Happens When Respective Are Roles Not Respected? • CONFLICT • TENSION • STRESS • LOSS OF FOCUS • ACRIMONY • INSTITUTIONAL INSTABILITY • POLITICAL CRISIS
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What Can Regulators Do? • NOTHING -- In a Perfect World Because Everyone Would: • Know the Law and Regulations by Heart • Obediently Comply • Seek out the Regulator’s Advice and Guidance • Eagerly Await the Regulator’s Visits • Enthusiastically Adopt the Regulator’s Recommendations • View the Regulator with Utmost Respect and Appreciation • Always Agree with the Regulator’s Viewpoint • Welcome an Enforcement Action as an Opportunity to Improve
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In the REAL World: Rule 1 is to Know Thyself An Independent Regulatory Agency is a governmental instrumentality created to interpret, implement, administer, monitor, and enforce statutory law within the limits of its delegated authority and to act and make decisions based on law and legal considerations ---
NOT POLITICAL CONSIDERATIONS
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The Rest of the Rules • Understand Your Responsibilities, Duties, Obligations as well as the Agency’s Functions under the Law • Act within the Scope of Authority Delegated • Fairly and Objectively Apply the Law • Exercises Good Judgment • Be Ethical, Reasonable, and Fair • Maintain a High Work Ethic • Exercise Discretion • Ensure that Subordinates are held to the Same Standards of Conduct
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Educate with Infinite Patience • Licensing screens out the people most likely to cheat and steal and keeps them out of tribal casinos and away from tribal cash • Internal Controls operate to ensure that casino managers and employees follow the procedures necessary to prevent fraud, theft & waste of tribal dollars • Monitoring serves to keep the staff honest • Auditing serves to keep management honest • Enforcement signals that the Tribe means business when it comes to safeguarding its assets • Regulations clarify the meaning of the statutory law and establish the standards of conduct that must be met • Hearing and Appeals ensure fairness and protect people from abuses of power Efficiency & Economy Serve the Interests of the Casino Efficiency & Effectiveness Serve the Interests of the Regulator Accountability and Integrity Serve the Interests of the Tribe, but So Too Does Efficiency, Economy, and Profitability
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END
Elizabeth L. Homer Homer Law, CHTD. 1730 Rhode Island Ave., N.W. Suite 501 Washington, D.C. 20036 (202) 955-5601
(202) 955-5605 Fax www.homerlaw.com
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What’s the BIG DEAL? Threats and Vulnerabilities in a Cash Intensive Industry
Elizabeth Lohah Homer
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Governments have used gaming as a source of revenue for millennia.
Government Regulation of Gaming
Fraud in gaming began at the same time.
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• One notable example was a private lottery passed by Congress in 1823 for the beautification of Washington D.C. • Unfortunately, the organizers absconded with the proceeds and the winner was never paid. • The Supreme Court held the Government liable for the winnings. Clark v. City of Washington , 25 U.S. 40 (1827)
Government Regulation of Gaming
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To much of the public, this incident illustrated that the lotteries of that time were crooked. This ultimately led to the widespread restriction of gaming in the 1830s and 1840s.
Government Regulation of Gaming
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•The use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets.
Occupational Fraud:
Fraud & Money Laundering
• A financial transaction scheme that aims to conceal the identity, source, and destination of illicitly-obtained money.
Money Laundering:
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Money Laundering
• Because of the cash-intensive nature of casinos, criminals may try to use them to launder money. • Tools:
• Bank Secrecy Act, MICS, & TICS require reporting of all significant transactions.
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By working to eliminate theft and fraud.
Robust Gaming Regulation Protects Tribal Resources
By ensuring public perception of honesty & integrity.
By protecting the Gaming Enterprise from civil penalties imposed for failing to comply with the Bank Secrecy Act.
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IGRA’s Declaration of Policy: • Shield the Indian tribe from organized crime and other corrupting influences.
Indian Gaming Commissions: Purpose and Functions
• Ensure that the Indian tribe is the prime beneficiary of the gaming operation. • Assure that gaming is conducted fairly and honestly by both the
operator and players. • See 25 U.S.C. 2702(2)
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Understanding Vulnerabilities:
• Cash intensive environment intensifies temptation to steal. • A cash intensive environment without good internal controls significantly increases the likelihood of theft and fraud. • Increasing the probability of discovery decreases the probability that theft or fraud will succeed.
Importance of Effective Regulation
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Ensuring that Tribes are the Primary Beneficiaries of Gaming Revenues
• Occupational Fraud and Abuse is Projected to Cost Businesses Worldwide Nearly $4.7 Trillion Annually. • Approximately 5% of the Annual Revenues of an Average business will be lost to Occupational Fraud. • Frauds lasted a median of 12 months before being detected, resulting in a median loss of approximately $100,000.
Source: 2022 Report to the Nations on Occupational Fraud and Abuse, Association of Certified Fraud Examiners (2022 Report).
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Anti-Fraud Controls
• The presence of anti-fraud controls is associated with lower fraud losses and quicker fraud detection. • Nearly HALF of fraud cases occurred due to lack of internal controls (29% of cases) or override of existing controls (20% of cases).
• Following the discovery of fraud, 81% of victim organizations modified their anti-fraud controls.
Source: 2022 Report to the Nations on Occupational Fraud and Abuse, Association of Certified Fraud Examiners (2022 Report).
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Occupational Fraud and Abuse
Asset Misappropriation
Financial Statement Fraud
Corruption
Occupational Fraud Classification System
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Corruption
Conflicts of Interest
Economic Extortion
Bribery
Illegal Gratuities
Occupational Fraud Classification System
Financial Statement Fraud
Asset/Revenue Overstatements
Asset/Revenue Understatements
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Asset Misappropriation
Inventory and All Other Assets
Cash
Theft of Cash on Hand
Theft of Cash Receipts
Fraudulent Disbursements
Misuse
Skimming
Larceny
Cash Larceny
Occupational Fraud Classification System
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How is Occupational Fraud Committed?
Data Source: 2022 Report to the Nations on Occupational Fraud and Abuse, Association of Certified Fraud Examiners (2022 Report)
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Common Types of Fraud: Fraudulent Disbursements
Billing Schemes
Shell Company
Non-Accomplice Vendor
Personal Purchases
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Common Types of Fraud: Fraudulent Disbursements
Payroll Schemes
Ghost Employees
Falsified Wages
Commission Schemes
Commonly Found in Casinos
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Common Types of Fraud: Fraudulent Disbursements
Expense Reimbursement Schemes: Mischaracterized Expenses Overstated Expenses Fictitious Expenses Multiple Reimbursements
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Common Types of Fraud: Fraudulent Disbursements
Check Tampering: Forged Maker Forged Endorsement Altered Payee Authorized Maker
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Common Types of Fraud: Fraudulent Disbursements
Register Disbursement Scheme: • False Voids • False Refunds
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Common Types of Fraud: Corruption Wrongful Use of Authority or Influence in a Business Transaction for the Purpose of Securing Personal Enrichment: • Conflicts of Interest • Bribery • Illegal Gratuities • Economic Extortion
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Median loss of over $250,000 per case
Common Types of Fraud: Corruption
Accounted for approximately 38% of all occupational fraud cases in 2018 Report.
Accounted for approximately 36% of all occupational fraud cases in 2018 Report
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Conflicts of Interest: Purchasing Schemes Sales Schemes
Common Types of Fraud: Corruption
Bribery: Invoice Kickbacks Bid Rigging
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Common Types of Fraud: Financial Statement Fraud • Falsification of an organization’s financial statements to conceal the misappropriation of funds. • Involve a falsification of financial statements. • This is the most costly form of occupational fraud with a median loss of $800,000 in 2018 Report.
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• Cash is targeted the majority of the time. • Collusion between employees and patrons is common. • Top Behavioral Flags of Perpetrators of Fraud include:
Casino Fraud
• Living Beyond Means • Financial Difficulties • Unusually Close Association with Vendor/Customer
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Common Types of Fraud: Theft of Cash Skimming • Cash stolen before it’s recorded on the books and records. Cash Larceny • Cash stolen after it’s been recorded on the books and records. Theft of Cash on Hand • Cash stolen from cash kept on hand on premises.
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External Vulnerabilities
• Player frauds,
cheats, and scams. • Other unscrupulous third parties.
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Crimes committed by officers, employees, or licensees of a Gaming Operation are punished more severely. • Theft of $1,000 or less is punishable by up to 5 years in prison, a fine of $250,000, or both. • If more than $1,000 is taken, the maximum punishment increased to a maximum of 20 years in prison and/or a fine of $1,000,000. Stealing $1,000 or less from a Gaming Operation is punishable by up to a year in prison, a $100,000 fine, or both. For theft of an amount over $1,000, penalties increase to up to 10 years in prison and a fine of $250,000.
Criminal Enforcement of IGRA
18 U.S.C. § § 1167 (a),(b); 1168
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Understand Vulnerabilities.
Protecting Tribal Gaming Revenues
Institute Quality Internal Control Systems.
Train and Educate Employees.
Regularly Monitor and Evaluate Effectiveness of ICS.
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A Cash Intensive Environment Intensifies Temptation to Steal.
A Cash Intensive Environment WITHOUT Good Internal Controls Significantly Increases the Likelihood of Theft and Fraud.
Understanding Vulnerabilities
Increasing the Probability of Discovery Decreases the Probability that Theft or Fraud will Succeed.
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Standards (NIGC MICS; Tribal Internal Controls).
Effective Internal Control Systems Require:
Methods and Procedures for Implementation.
Cooperation and Commitment at All Levels.
Compliance Monitoring.
Enforcement.
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Tools for Gaming Regulation:
• Management Contract Review • Licensing • Background Checks • Monitoring • Financial Audits • Operational Audits
• Enforcement • Surveillance • Security • SOUND INTERNAL CONTROL STANDARDS
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Be written
Specifically spell out the procedures to be followed
Implementing Policies and Procedures Should:
Address standards of conduct
Contain standards of performance
Clearly state consequences for non- compliance
Check against external threats
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The internal control standards
The procedures that pertain to their specific role and function
All Managers and Personnel Should Understand:
How the overall system works
Their individual responsibilities
What constitutes unacceptable behavior
The consequences for non-compliance
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• Cage • Internal Audit • Complimentary Items • Drop and Count • IT • Cash Transaction Reporting • Bingo • Slots & Electronic Gaming Machines
• Card & Table Games • Pull Tabs • Credit • Promotions • Surveillance • Accounting Standards • Kiosks
Internal Control Essentials:
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END
Homer Law Chartered 1730 Rhode Island Ave., N.W. Suite 501 Washington, D.C. 20036 (202) 955-5601
•
(202) 955-5605 (fax)
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Managing a Tribal Gaming Regulatory Agency
NIGA Commissioner Certification Training
SANTA ANA CASINO HOTEL
AUGUST 17, 2022
BIOS
Ms. Carleen Chino and Ms. Darla Vallo are enrolled tribal members of the Pueblo of Acoma in New Mexico; located 65 miles west of Albuquerque off I- 40, we have “Sky City Casino”; We both have accumulated over 20 years of Indian Gaming experience; Former Executive Director of The Navajo Nation Gaming Regulatory Office and the Former/Current Executive Director of the Pueblo of Acoma Gaming Commission; Darla has worked in Slots Operations before employment in the Gaming Commission as the Administrative Assistant then to Gaming License Administrator and temporary Executive Director At times we have had the opportunity to be trainers for NIGA NIGC, and other Regulator trainings; we both have served in various administrator capacities in New Mexico’s Tribal Gaming Regulatory Associations & Committees
NIGC Tribal Advisory Committee Member in Year 2012
SKY CITY CASINO HOTEL
Suggestions on the Management of a Tribal Gaming Regulatory Agency
Overview of Gaming Authority Class II Gaming Commission Responsibility Commissioner Establishment
Class III Gaming Commission Staffing & Budget Commission Departments Licensing Internal Audit Surveillance Compliance Integrity, Communication
Authority
INDIAN GAMING
The NIGC Chairman shall approve a tribal ordinance or resolution concerning the conduct, or regulation of Class II/III gaming on the Indian lands within the tribe's jurisdiction if such ordinance or resolution provides that-- (A) the Indian tribe will have the sole proprietary interest and responsibility for the conduct of any gaming activity; (B) net revenues from any tribal gaming are not to be used for purposes other than – (i) to fund tribal government operations or programs; (ii) to provide for the general welfare of the Indian tribe and its members; (iii) to promote tribal economic development; (iv) to donate to charitable organizations; or (v) to help fund operations of local government agencies;
REGULATORY ACT (IGRA)
NIGC (federal regulatory authority) TRIBE – Gaming Ordinance Class II Class III – Gaming Compact
An Indian tribe may engage in, or license and regulate, class II gaming on Indian lands within such tribe's jurisdiction, if —
(A) such Indian gaming is located within a State that permits such gaming for any purpose by any person, organization or entity (and such gaming is not otherwise specifically prohibited on Indian lands by Federal law), and (B) the governing body of the Indian tribe adopts an ordinance or resolution which is approved by the Chairman .
Class II Gaming
NIGC Regulations/Tribal Regulations Promulgate, adopt and enforce regulations, internal controls 543 MICS for Class II Gaming 547 MICS Technical Standards for Class II Gaming Class II Gaming – Bingo & Gaming Devices Operation Policies & Procedures
NIGC Inspections Corrective Action Plans to Non-Compliance Violations
Commission Responsibility
to provide a statutory basis for the operation of gaming by Indian tribes as a means of promoting tribal economic development, self-sufficiency, and strong tribal governments; to ensure that the tribe is the primary beneficiary; to assure that gaming is
to provide a statutory basis for the regulation of gaming by an Indian tribe adequate to shield it from organized crime and other corrupting influences Bribery, Fraud, Embezzlement etc … Banned/Excluded Patrons Reporting of Suspicious Activity/Transactions
conducted fairly and honestly by both the operator and players; Issue a gaming facility license for each place,
facility, or location at which class II/III gaming is conducted;
Commission Responsibility
Posted along side the facility license is a suggested Standards of Conduct as a patron to the facility:
Why We REGULATE? To protect the assets of the Tribe as they relate to gaming To protect the internal controls system – which ensures the accountability of funds and prevents theft and fraud To protect sovereignty- to limit the presence of Federal and State regulators To enforce health and
No Panhandling No guns, knives Ask for Courtesy to
each other as patrons
Children left unattended Have a Process for Patron Disputes Medical/Law
safety – to protect the health and safety of patrons and employees
Enforcement Response Procedures
Commission Responsibility
Responsible for NIGC and State inspections (if applicable) and following up on corrective action plans Responsible for providing compliance with the External, Independent Audit which may include: Title 31 MICS AUP Audit Financial Audit Submission of NIGC Regulatory Fees Submission of Revenue Sharing and Regulatory Fees to the State according to your Gaming Compact
levy and collect civil fines for criminal/civil violations; Develop the Commission Budget & Staffing accordingly to the needs of the gaming facility; establish license fees and/or structure of gaming license fees for vendors and employees; issue gaming vendor and facility licenses; employee gaming licenses
Commission Responsibility
issue subpoenas & orders for hearing procedures or disciplinary proceedings; Deny, Suspend, Revoke and Approve Gaming Licenses; conduct gaming license hearings; Issue temporary closure
To supervise, manage and train gaming regulatory staff; Issue non- compliance/regulation violation letters; issue disciplinary actions/fines Protect CHRI information as required in New Standard Operating Procedures; Amend/Update your
order to a gaming operation; Covid Pandemic;
Gaming Ordinance, Regulations and TICS
Commission Responsibility
Management
Facility License:
Contracts – NTE 5 years, NIGC & its
the construction and maintenance of the gaming facility, and the operation of that gaming is conducted in a manner which adequately protects the environment and the public health and safety; (Regulations: Sanitation, Food, Hazardous Waste/Chemicals, etc..)
General Counsel must review and approve all management contracts
Consider Ethics &
Conflict of Interest Policies for decision makers
Health, Safety
Inspections (I.H.S., Fire Dept., dry runs on Evacuations, Active Shooter Plans/Drills)
Subcontractors: Alcohol, Liability Coverage;
Commission Responsibility
That Net revenues from any class II gaming activities conducted or licensed by any Indian tribe may be used to make per capita payments to members of the Indian tribe only if – (A) the Indian tribe has prepared a plan to allocate revenues according to the IGRA;
the interests of minors and other legally incompetent persons who are entitled to
receive any of the per capita payments are
protected and preserved and covered under a plan approved by the Secretary and the governing body of the Indian tribe;
that the per capita payments are subject to Federal taxation and tribes should notify members of
(B) the plan is reviewed and approved by the NIGC and/or Interior Secretary as required;
such tax liability when payments are made
Commission Establishment
No individual commissioner shall be eligible for any appointment to, or to continue service on, the Commission, who - (A) has been convicted of a felony or gaming offense; (B) has any financial interest in, or management responsibility for, any gaming activity; or (C) has a financial interest in, or management responsibility for, any management contract approved pursuant to section 2711 of IGRA;
The Tribe may establish a Commission or Commission staff based on the tribe’s requirements that may be identified in its ordinance;
Independent organization with direct reporting to President, Governor or Tribal Council;
The tribe may select Tribal members from areas of the tribe and/or individuals as
recruited, volunteers, appointments, and/or employed or contracted;
Three at minimum to aid in meeting quorum requirements if applicable; May establish By-Laws, if applicable, to establish meeting requirements or commissioner service; Simple job description may be appropriate
Commission Establishment
A commissioner should meet the Standard of Licensure:
Members of the Commission may be employed or reimbursed in accordance with your Ordinance for travel, subsistence, and other necessary expenses incurred in the performance of their duties;
“prior activities, criminal record, if any, reputation, habits, or associations that may pose a threat to the public interest or to the effective regulation of gaming on Indian lands” Financial obligations, credit score
Stipends
Employment contract FT/PT
A Commissioner may be removed from office before the expiration of the term of office for neglect of duty, or malfeasance in office, or for other good cause according to their by-laws with support or by the Tribe
Integrity
Ethics
Credibility
Confidentiality
Accounting, Attorneys, Business Professionals
Class III Gaming – Tribal/State Compact
Any State and any Indian tribe may enter into a Tribal-State compact governing gaming activities on the Indian lands of the Indian tribe, but such compact shall take effect only when notice of approval by the Secretary of such compact has been published in the Federal Register; Any Tribal-State compact negotiated may include provisions relating to-- (i) the application of the criminal and civil laws and regulations of the Indian tribe or the State that are directly related to, and necessary for, the licensing and regulation of such activity; (ii) the allocation of criminal and civil jurisdiction between the State and the Indian tribe necessary for the enforcement of such laws and regulations
Class III Gaming – Tribal/State Compact Any Indian tribe having jurisdiction over the Indian lands upon which a Class III gaming activity is being conducted, or is to be conducted, shall request the State in which such lands are located to enter
into negotiations for the purpose of entering into a Tribal-State compact governing the conduct of gaming activities.
Upon receiving such a request, the State shall negotiate with the Indian tribe in good faith to enter into such a compact.
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