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NIGC's Class III effort faces legal challenge

The National Indian Gaming Commission moved forward with controversial Class III regulations this week amid a lawsuit challenging the agency's authority over this critical segment of the $18.5 billion tribal casino industry.

The publication of the Minimum Internal Control Standards (MICS) in the Federal Register marks another chapter in a long-running dispute. Since the rules were first issued during the Clinton administration several years ago, Indian leaders and their advocates have criticized efforts to impose more and more regulations on tribal casinos.

"The NIGC is actively involved in destroying sovereign rights," Frank Ducheneaux, a retired lawyer and former Congressional staffer who oversaw the passage of the Indian Gaming Regulatory Act in 1988, said at an Indian law conference last month. "We're going to lose if we don't take them to the courts."

That's exactly what the Colorado River Indian Tribes of Arizona did when the NIGC sought to audit the tribe's casino books. Tribal officials said the agency had no authority, to regulate Class III gaming under the MICS or under IGRA. That realm, they said, is left to tribal-state compacts that are required for Class III gaming.

The position is at odds with NIGC officials, both Republican and Democrat, who believe the government needs to ensure tribes aren't being ripped off and that casino patrons are being treated fairly. "In my experience," NIGC Chairman Phil Hogen said in Senate testimony less than two weeks ago, "the MICS have been the single most comprehensive and effective tool the NIGC has developed to ensure consistent quality operation and regulation of gaming activity on Indian lands."

In remarks to the Senate Indian Affairs Committee on April 27, Hogen warned that the CRIT lawsuit that could "severely" curtail NIGC's regulation of Class III gaming and lead to even more intrusions on tribes. That prompted Sen. John McCain (R-Arizona), the chairman of the committee, to question the basis of the case.

"I don't understand the logic of the suit," said McCain. "The purpose of IGRA was to regulate Class III gaming."

McCain's concern could prompt Congress to strengthen the NIGC's position in the dispute. A bill that was introduced during the last session in fact clarified the agency's authority to issue the MICS. The measure, sponsored by retired Sen. Ben Nighthorse Campbell (R-Colorado), never made it to a floor vote.

For now, the dispute is proceeding in federal court in Washington, D.C., where a hearing was held last month. The tribe wants the court to declare that the MICS are beyond the NIGC's legal authority.

An administrative law judge within the Interior Department's Office of Hearings and Appeals did that in May 2002. "[T]he NIGC is not achieving the carefully orchestrated purpose of the IGRA because it impinges on the very sovereignty of the tribes and the states," the judge wrote in siding with the tribe.

But since the ruling was an administrative one, the NIGC could choose to ignore it. That's exactly what Clinton administration appointees did a month later, reasserting the agency's right to issue the rules.

Hogen, a Bush administration appointee, inherited the case and eventually settled part of it with the tribe in July 2003. The tribe agreed to pay a $2,000 fine for interrupting the NIGC audit, and agreed to an audit under certain conditions. But the tribe preserved its right to pursue the matter in court.

"Our objection to the audit is and always has been one of principle and tribal sovereignty," Chairman Daniel Eddy, Jr. said at the time.

The tribe has signed a Class III gaming compact with the state of Arizona. In an Arizona Republic article published this week, the state's top gaming official praised the agreement as one of the "strongest" in the nation. The state's Gaming Department spends $8 million a year on regulation and about $1.6 million on background checks, the article said.

The CRIT lawsuit isn't the only one facing the NIGC. A Montana tribe and a California tribe filed suit to block the agency's controversial Class II regulations. The rules are being held back to provide for more public comment but McCain at the hearing said he supported the NIGC's stance.

Relevant Links:
National Indian Gaming Commission -
Colorado River Indian Tribes -