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NIGC wants to ensure tribes receive 'fair share'
Wednesday, February 2, 2005
The National Indian Gaming Commission plans to continue its review
of tribal casino deals with non-Indian investors despite a call
to show restraint by the former leaders of a key Senate committee.
At a tribal conference last week, top NIGC officials said they
are examining various agreements that tribes have made with
gaming vendors, developers and other backers.
The goal is to find out whether the deals are fair to tribes
and whether non-Indians are obtaining too much of a stake in
casino projects.
"Are we concerned that the tribes are not getting their fair share?"
said Phil Hogen, chairman of the NIGC. "That's the perspective
we are attempting to take. We sit in the shoes of the trustee."
Hogen, a Bush administration appointee whose term is up at the end
of this year, said the agency is not attempting to set any
rules in stone. The comment appeared to be directed at a letter
from retired Sen. Ben Nighthorse Campbell (R-Colorado) and
Sen. Daniel Inouye (R-Hawaii) who questioned whether the NIGC
was taking actions without tribal consultation or public comment.
"We don't want to be to too intrusive [but] when a developer
comes along to a penniless tribe and says, 'Boy have we
got a deal for you,'" he noted, "we're supposed to be the trustee
and keep an eye on it."
Penny Coleman, the agency's top lawyer, elaborated on
some of the issues being considered. She spoke of arrangements that call for tribes to share
30 percent of gross revenues from a third-party's
casino machines rather than net profits, land "gifts"
and other property-related transactions that could
tip the scales in favor of a non-Indian company.
"In many places, that can be as much as 62 to 65 percent of the tribe's
net profits," Coleman said of casino machine
agreements common in Oklahoma. "But in the industry that
we looked at at-large, we found that 30 percent is not the standard, that
it's generally much lower."
According to the Indian Gaming Regulatory Act, a tribe must
maintain a "sole proprietary interest" in a casino.
Coleman said the NIGC is trying to determine if
any of these agreements violate that standard, which
Hogen acknowledged is "not terribly precise."
The issue has gained prominence in Oklahoma as tribes there
have engaged in a rapid expansion of their gaming facilities
with the help of a non-Indian company that is the leading
supplier of Class II casino machines. Multimedia Games
(
MGAM)
requires the tribes to dedicate about 70 percent of floor
spaces to its machines and share 30 percent of gross revenues
from those machines under various lease agreements.
"Has the company developed an ownership interest in this
facility by ending up with a majority of the profit?" Coleman asked.
Multimedia also has made donations of land to at least
one tribe, the Chickasaw Nation. The property is turned over
to the tribe and held in trust but the company is maintaining
a long-term stake in it, according to a recent financial statement.
Other provisions call for the company to own the fixtures
of a casino and other equipment.
Coleman said each agreement would be evaluated on a case-by-case
basis. "These questions are very, very fact driven," she said.
In its financial statement, known as a 10K, Multimedia acknowledged the
scrutiny it is seeing from federal regulators.
"In particular, the NIGC is concerned that our development agreements,
whereby we advance development funds to our tribal customers
in exchange for allocated floor space and a share of gaming
revenue, create a 'proprietary interest' of ours in the tribes'
gaming operations," the document, filed with the Securities
and Exchange Commission on January 26 stated.
The company said it is complying with NIGC's request for more information
about the arrangement. Coleman said no decisions have been made.
The NIGC's actions drew fire from Campbell and Inouye, who were
the leaders of the Senate Indian Affairs Committee until the end of December.
They warned Hogen that the agency's review was having
a "chilling effect" on the $16 billion tribal gaming industry
"Apparently, the sole proprietary interest standard is being applied with no
notice or guidance having been published that would inform tribal governments
and the public that seeks to do business with the tribes of this new standard,"
the senators wrote on December 15.
Shares of Multimedia's stock closed a $8.82 yesterday after less
than stellar reports released last week. The company's
profits fell 31 percent during the last quarter, and executives said
they expected further declines as Oklahoma tribes begin to offer
new casino games under a Class III gaming compact.
Hogen, Coleman and Nelson Westrin, an NIGC commissioner, spoke
at the 10th annual Western Indian Gaming Conference in
Palm Springs, California, last Thursday. The event is sponsored
by the California Nations Indian Gaming Association.
Get the Letter:
Campbell-Inouye to
Phil Hogen (December 15, 2004)
Relevant Links:
National Indian Gaming Commission -
http://www.nigc.gov
Multimedia Games -
http://www.multimediagames.com
Related Stories:
NIGC agenda questioned by Senate letter
(1/26)
Shares of
Multimedia slide after games removed (01/14)
Agencies still in conflict over off-reservation
gaming (12/07)
MGAM subsidiary
buys land for Chickasaw Nation (11/29)
Schwarzenegger threatens to cut off
MGAM (11/19)
McCaleb calls Chickasaws savvy, not deceptive
(10/26)
Official tells Chickasaw
land-into-trust tactics (10/25)
Multimedia Games determined to have
Management Contract (04/23)
IGRA
amendments mired in debate over revenues (04/13)
Senate panel debates changes to Indian gaming
act (03/25)
Gaming company using
$50.3M for seven Okla. casinos (03/08)
Supreme Court move benefits gaming companies
(03/02)
Supreme Court turns down gaming
machine dispute (03/01)
Tribes giving up
revenues, exclusivity in compact (01/21)
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