a person who has a financial interest in the management firm has been convicted of any felony or gambling offense.

Section 8. This section gives certain powers to the Secretary to inspect and have access to certain places and

documents in order to fulfill his responsibilities under the

Act.

Mr. RICHARDSON. Mr. Udall was expected to be here for the hearing, but regrettably, he has another commitment. I would like to read two statements that Mr. Udall wishes to have in the record.

First, "The hearing today is exploratory in nature. It will help the Interior Committee determine if there are problems and concerns associated with gambling on Indian reservations which need our attention. It will also help to determine if there is any consensus on the need for legislation such as H.R. 4566."

Second, "The Federal courts, and at least two circuits, have determined that, under certain circumstances, Indian tribes may engage in or may license and regulate gambling activities on the reservations free of State licensure and regulations. H.R. 4566 does not make legal anything which is not already legal under those court decisions. The purpose of the bill is to provide some minimum Federal standards and some protection for tribes who are otherwise engaged in legal gambling activities."

I would like to welcome our first witnesses, and also would like to have them appear as a panel. We have Mr. John Fritz, Deputy Assistant Secretary for Indian Affairs, Department of the Interior, and Mr. Mark Richard, Deputy Assistant Attorney General, Criminal Division, Department of Justice.

Mr. Fritz and Mr. Richard, I wish to welcome you to this committee. I assume that you have prepared statements. I think for purposes of the hearing I would like to mention to each witness that it would help considerably if you could summarize each of your prepared statements, so that we can get into as many questions and answers as the committee might have. I assume the first witness is Mr. Fritz.

[Prepared statements of Hon. John W. Fritz; and Hon. Mark M. Richard may be found in the appendix.]

PANEL CONSISTING OF HON. JOHN W. FRITZ, DEPUTY ASSISTANT SECRETARY, INDIAN AFFAIRS (OPERATIONS), U.S. DEPARTMENT OF THE INTERIOR; AND HON. MARK M. RICHARD, DEPUTY ASSISTANT ATTORNEY GENERAL, CRIMINAL DIVISION, U.S. DEPARTMENT OF JUSTICE

Mr. FRITZ. Mr. Chairman, thank you very much for inviting us to appear today. I am pleased to present the views of the Department of the Interior on H.R. 4566, the Indian Gambling Control Act.

The Department of the Interior supports the intent of H.R. 4566. However, we recommend that action on this legislation be deferred at this time. The issues surrounding gambling on Indian reservations are extremely complex. We offer today some recommendations on technical matters. However, the more complex issues, particularly the law enforcement concerns, need serious and detailed consideration by this Department working in conjunction with the Department of Justice and the tribes.

During the past several years Indian tribes have begun to take advantage of the unique jurisdictional status of the reservation to establish bingo operations. Indian tribes view these operations as an important means of raising general tribal revenues, thereby financing tribal governmental operations and programs and provid

ing jobs for their members and members of the surrounding communities.

The legal authorities of the tribes to operate and regulate bingo enterprises free of State regulation, as you have correctly indicated, have been upheld by several courts. Two Federal Circuit Courts of Appeal have held that State bingo laws, which are regulatory in nature and not prohibitory in nature, do not apply to tribally controlled bingo games on reservations.

Today, one of our principal concerns has been that we have found it difficult to involve the Department of the Interior directly in the approval of management contracts or in the monitoring of bingo operations. Obviously, the Department cannot, nor have we, shut our eyes to the realities for potential abuse arising out of any large-scale revenue-raising efforts through an entertainment enterprise. However, an appropriate methodology for local control must be developed over both aspects of bingo operations while providing adequate safeguards against criminal activities which should be formulated, as I have stated before, among the tribes, the Department of Justice, and Department of the Interior.

We have addressed the specific concerns in my statement as the bill is currently drafted, and I would like that entered into the record.

Mr. RICHARDSON. Without objection.

Mr. FRITZ. We strongly recommend once again that action be deferred on the legislation pending resolution of our concerns surrounding law enforcement and secretarial authority. We are willing to work with members of your committee, its representatives, the Department of Justice and other appropriate parties in resolving these issues.

This concludes my statement. After Deputy Assistant Attorney General Richard finishes, we will be happy to take any questions that you might have.

Thank you.

Mr. RICHARDSON. Thank you very much.
Mr. Richard, welcome to the committee.
Mr. RICHARD. Thank you, Mr. Chairman.

Following your suggestion, I will just merely summarize my formal statement and then submit the statement for the record.

This bill addresses an aspect of Indian affairs and law enforcement concerns that has only recently assumed significance. That problem is the widespread development of major gambling operations on Indian reservations scattered throughout the United States.

The sudden growth of these operations has generated concern in the law enforcement community. The basis of the concern is the attraction that all lucrative gambling operations will have for organized criminal elements. Let me mention also that our concerns at this time are oriented toward prevention of future problems and are based on our past experience going back several decades in dealing with organized crime.

The attraction that high stakes gambling has for criminal elements should be readily apparent. It involves a large number of fast-moving transactions. The opportunities for skimming and laundering are enormous. Employees and managers can be corrupted

into dishonest manipulations. Large-scale gambling operations require significant support services, such as security, food, cleaning, sanitation, and transportation. Every one of these fringe operations can be lucrative and can attract racketeers who preserve their competitive edge by violence and intimidation.

This has been the experience of legal gambling elsewhere. It has necessitated the creation of boards and commissions with pervasive supervisory authority, and even that has not always proved effective. If Congress is going to put its stamp of approval on gambling activities, it should safeguard against crime and corruption.

This bill would establish Federal standards and regulations for gambling in Indian country. The Department endorses appropriately crafted standards and regulations for gambling activity. Although the Department of Justice has reservations about H.R. 4566, the bill suggests a framework for shielding such operations from infiltration by criminal elements, the danger that has caused the Department of Justice concern.

The proposal also represents an attempt to achieve a compromise between Indian and local interests. It preserves some substantial measure of tribal authority and recognizes that totally unregulated gambling raises legitimate law enforcement concerns to both the Indians and to persons living in areas surrounding reservations.

Finally, the proposal will safeguard a significant source of tribal revenue. By stating a clear congressional policy in accord with those decisions legalizing high stakes gambling, the bill will serve to protect the tribes from the risk of adverse decisions in other courts of appeals or in the Supreme Court.

However, we cannot fully endorse the bill as drafted. From a law enforcement perspective, it does not go far enough. Our concerns are that the bill simply does not provide for the degree of supervision and auditing to safeguard against skimming, laundering, kickbacks, manipulation, and other criminal activity. Although the tribes are recognized as governments, they do not have the authority or resources to police these types of activities.

For example, the 25-member Gabazon Band or the 106-member Sioux Tribe at Prior Lake near Minneapolis cannot adequately deal with the influx of hundreds of players. Even larger tribes that could be said to be analogous to counties do not have access to subpoena power or State criminal records, just two of the many prerequisites to effective screening and auditing of a gambling operation. Indian courts do not have jurisdiction over non-Indians who commit offenses on reservations. Altercations, robberies, driving offenses, and disorderly conduct will cause problems for local and Federal authorities that they are not prepared to deal with.

It is the view of the Department of Justice that there are many problems related to having the Department of the Interior play the role of a supervisory gambling commission. To be reasonably effective as a deterrent to the infiltration of corrupt and criminal influences, a regulatory body functioning in the fields of gambling must be well staffed with sophisticated auditors and investigators, have readily available compulsory process, be based on or near the center of the operations, and have the power to establish and enforce regulations covering the entire gamut of matters associated with running a gambling operation.

Even then, as we have repeatedly seen with respect to well-regulated State operations, criminal infiltration still rears its ugly head. The Interior Department, in our view, is in no position to assume the needed regulatory role, which in many respects would be inconsistent with its mission and function. An alternative mechanism for regulating gambling on Indian reservations must be devised.

While the Department has yet been unable to come up with a satisfactory alternative mechanism for dealing with Indian gambling, we hope, in conjunction with the Department of the Interior, to do so in the near future.

Contained in the formal statement, Mr. Chairman, are some technical observations regarding specific provisions of the bill which, with your permission, I will not go into at this time.

In conclusion, let me say that the Department of Justice views this bill as a very important beginning. We have been working with the Department of the Interior for over a year to come up with a workable solution that would generally be agreeable to all concerned. I hope that I have conveyed to this committee a sense of our deep concern lest this well-intended piece of legislation be enacted without necessary safeguards.

Thank you, Mr. Chairman.

Mr. RICHARDSON. I wish to thank both witnesses.

Mr. Richard, I take it from your testimony that you support the thrust of the bill but you don't think it goes far enough. Second, you are opposed to having the Department of the Interior handle the regulatory aspects of the bill.

I guess my question is, you mentioned the Department of the Interior has failed to develop an internal mechanism to oversee this piece of legislation. Could I get you to expand a little more on that? What specifically do you mean? Do you mean a new agency? Do you mean some kind of ad hoc group?

Mr. RICHARD. Let me clarify my remarks regarding the role of the Interior Department.

What I was suggesting was that at the present time Interior certainly is not capable of playing a supervisory role in this area, in our judgment. Moreover, conceptually, I do not think it's the appropriate body to play that role, even when you set aside the resource concerns that are there.

I do not have an ideal solution, Mr. Chairman, by way of a regulatory mechanism for this problem.

Mr. RICHARDSON. You also said the Department of Justice should be excluded.

Mr. RICHARD. We are not a regulatory body. The most analogous body that I can refer to is the State gaming commission. And yet, even that concept is really not totally analogous to the problem we have when we're dealing with gambling on Indian reservations.

Mr. FRITZ. Mr. Chairman, if I might, Deputy Assistant Attorney General Richard and representatives from his staff, as well as representatives from my staff and myself, have been involved in trying to-

Mr. RICHARDSON. Excuse me, Mr. Fritz. It seems that a number of people in the audience are straining to hear you. Perhaps you could bring your microphone a little closer.