Q-and-A with Phil Hogen

Phil Hogen is the chairman of the National Indian Gaming Commission, the federal regulatory agency that oversees tribal gaming nationwide. The NIGC is struggling to deal with a court ruling won by the Colorado River Indian Tribes of Arizona nearly two years ago. The so-called CRIT decision removed the NIGC’s ability to enforce minimum internal control standards (MICS) on Indian casinos. These are the standards and systems used to monitor the fairness and honesty of gaming.
Hogen–also a member of the Sioux Tribe–was in Sacramento this week to speak at a hearing of the Assembly Governmental Organization Committee on the CRIT case. Afterward, he sat down with the Capitol Weekly in a room in the I Street Federal Building, surrounded by decommissioned slot machines.

You seemed to have one interpretation of minimum internal control standards, and Dean Shelton seemed to have a somewhat different view.

In terms of the standards themselves, the handling of the dollars, the rules of the game, the fairness of the play and so forth, I think we have a similar vision. Dean is faced with the rules that have to be followed to get any rules written that the state can enforce. It sounds as though the state has a view that if the NIGC approach fails, they still have the authority to go forward. That I’m not going to get address. That’s up the tribes and the state.

You’ve written about ensuring the “suitability” of those engaged in gaming. Could you talk about some of what Nevada went through?

There was a time in Nevada’s history of legalized gaming when all you had to do is walk up to the county courthouse and pay a fee. That, Nevada discovered, wasn’t a good practice because they were licensing people that had connections with organized crime. Finally, they said we better look into the backgrounds of these people. That lesson has been learning internationally now. Where there’s legal gaming, for the most part there’s regulation. There’s three legs to that stool: suitability of the owners, follow the dollars and play of the game.

To what extent do you think California has problem with people who should not be engaged in gaming?

I think it’s minimal compared to what Nevada was facing. We, NIGC looks at every background investigation report of anyone who’s licensed. The tribes aren’t going to approve someone they think we’re going to reject. They want honest people working in their facility.

The Indian community has been a downtrodden, economically deprived group because of the reservation system, because of federal Indian policy and it’s failures. You see people who were challenged with substance abuse, alcoholism. You’ve got people with vehicular homicide convictions on their record, DUIs, who finally have found their way. There will be individuals like that who will be conditionally licensed. It’s the guy was selling illegal slot machines in states where they weren’t supposed to be used who we’re worried about.

So where do the slot machine actually come from, and who actually touches them? Many of the activists like to talk about tribes who lease machines and even hire outside management.

There are a handful of major gaming-device manufacturers that dominate the industry. They’re very cautious about who they sell their machines to. They also go through rigorous testing by groups like Gaming Laboratories International to see if the machine does what it says it will.

You don’t want the guy who sweeps out the service station messing around inside the cabinet. The management of the gaming–here’s the game and how much it will pay–has to be done by the tribe itself or someone they have contracted with to run their facility. I have to approve those management contracts. If the tribe is just standing there getting the money, that’s inappropriate.
But there’s certainly nothing wrong with leasing the equipment. This equipment can be obsolete in nine months. The industry is going from standalone machines to server-based gaming, where they’ll be linked together in a computer system.

Have you seen inappropriate management structures among California gaming tribes?

No, I don’t have any examples to cite. A place where have greater concerns would be Oklahoma. We’ve got 39 tribes that are just next door to neighbors. There’s some really aggressive competition.

Are you expecting anything different out of this Congress?

Our paramount concern is getting CRIT fixed. We lack this authority we had been exercising–I think quite successfully–for six years. Tribes here wouldn’t be fighting this lack of regulation battle if the CRIT case hadn’t been lost to begin with. Does that mean this tribes will be more supportive of a fix? I think some of them will be supportive, and others won’t be as vocal in their opposition.

If you ask a tribe who would you rather have looking over their shoulder, the federal government of the state government, they’d choose the federal government. In that light, I’d get the California delegation to lead the charge to get a CRIT fix, to give the NIGC the authority it had prior to the CRIT
decision. It’s not within the power of the over the California Legislature.

Do you have an estimate of what percentage of revenues tribes end up spending enforcing MICS?

The National Indian Gaming Association published on their Web site how much tribes spend for their regulation. The first column will show how much they spend hiring their gaming commission, their gaming inspectors, the amount they pay for their surveillance system and so forth. The next column will show how much they reimburse the state. The third column will how much they pay to the NIGC in fees, because we are solely supported by fees that gaming tribes pay us.
It costs a lot to regulate gaming. These casinos with 2,000 slot machines spend a lot of money, and they’ve attracted some crackerjack regulators.

Given the amount of uncertainty this has caused, what advantage did this tribe get out of this decision?

Tribes, very appropriately, jealously guard their sovereignty. When Congress passed the Indian Gaming Regulatory Act, they took away of little of their sovereignty. The tribes didn’t like that, but it’s worked out pretty good. They’ve developed an industry that’s like nothing they had before. But there’s that reaction; they’ve got to defend their sovereignty.
The best way to protect your sovereignty is to have the wherewithal to control your own destiny. I think I’ve got a $23 billion industry to point to and say “some pragmatism helped them get there.”

To what extent have you seen Indian gaming changing the political landscape within states that have a lot of it?

There are a number of states where Indian gaming was the dominant issue for several legislative sessions–Minnesota, New Mexico, Oklahoma. The state of Kansas just decided to get into the gambling business themselves. They probably would not have considered that had it not been for the tribal gaming that got it started in the first place.

That’s been a concern that I’ve had. If the tribes get too greedy, to opposed to state intervention, they state may say “Let’s let everybody do it.” Who’s going to drive out to the reservation if you can do it in downtown Los Angeles?

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