Gaming Regulatory Act, or the NIGC regulations, or the ordinance that the tribe passes.

I construe that to be authority over all the gaming-class II and class III. But if you comb through the act, it does not clearly say that we have authority over class III activities. Sometimes when we knock on a tribe's door, doing our oversight, and we say, “We would like to look at those records," they say, "Wait 1 minute. Those are class III gaming records. You do not have the authority to look at those." Then we end up in the court hassling about that. Someday if there is no change in the law, the court will clarify that. I think they will find that we have that authority. But with the stroke of a pen, I think Congress could clarify that and that would be of assistance to all.

I would like to move on to folks that do consulting, vending, development agreements, and so forth, for tribes. Under the current structure, we have authority to oversee management contracts. If a tribe and a developer want to set up an arrangement whereby the group manages the facility for the tribe, they send us that contract. We look at it in the role of the Federal trustee to make sure that the tribe is not being taken advantage of. We put our stamp of approval on it if it passes that review.

If, in fact, management contractors are out there and they run afoul of what they have agreed to or any of the acts we are responsible for enforcing, we can penalize them. We can suspend the contract. We can impose a fine. We think that is helpful to tribes.

There are not very many management contracts out there. There are over 300 operations but there are only 15 of those that are run pursuant to a management agreement. In the history of the National Indian Gaming Commission, only 40 management contracts have been approved. There are 21 currently in our pipeline or under consideration or review. It is easy to see that is the exception and not the rule.

I am not here to say that is a bad deal. In many cases the tribes are doing the right thing managing operations by themselves.

The CHAIRMAN. 300 are managing their own operations?

Mr. HOGEN. There are 300 total, and only 15 of those are under a management contract. There are 285 without a management contract. But of that 285, there are a large number where somebody else is really doing part of the operation—a third party consultant, a third party vendor, a third party developer. They have not entered into a classic "management contract" that we have reviewed and approved.

There are a couple of things that concern us about that. First of all, when it is not a management contract, we have no role in looking at their background. They may be perfectly suitable people, but we, at this level, have never had an opportunity to check into that like we could do if it were a management contract.

The CHAIRMAN. That means some tribes are hiring groups under a consultant capacity or some other name rather than a management group?

Mr. HOGEN. Right. I am sure one of the reasons that tribes and developers do that is that it is such an onerous process to go through our management contract review process. I am hoping we can streamline that.

There are people out there that are determining who wins and loses the bets, that handle the money, that are not under our review, and in some cases, are not even subject to even tribal background reviews.

If, in fact, those folks run afoul of the rules and run off with the tribe's money, we have no authority over them. What I would like to see is an amendment that would give us a role to do that, whether it be licensing or oversight. And, also to say that if, in fact, they do make off with the tribe's money, there would be an arrangement for them to disgorge or refund what they defrauded the tribe. We think we could clean up the industry.

We do background investigations for management contracts, but in many cases that is the cream of the crop. These people can pass muster. The people who want to sneak in under the cover of darkness would want to avoid a management contract.

Moving on to the Supreme Court's 1996 Seminole decision which said tribes cannot sue States if States refuse to negotiate in good faith, I think everybody from the tribal side would agree that has been problematic. Of course, the Secretary of the Interior is now working through procedures in a couple of situations to try to come up with rules for a compact that can occur where the States have not agreed. There are challenges and there will be continued challenges to that process.

Our concerns are twofold: First of all, we think that the playing field should be leveled again so that the States and the tribes are on the same footing. Right now the States cannot get sued, so they have an advantage.

Second, in those environments where there is obviously a question about the fairness of the State refusing to negotiate, you have gaming activities by tribes that probably enters into the class III territory. If we go out there and try to enforce against that, shut it down or whatever, if and when we get to court, the court says, "Well, it looks like these folks should be able to get a class III compact. They have not." Then this litigation comes to a standstill.

That means that you get less clarity in the regulation and the operation of gaming. If we could restore that balance, if you could perhaps give the Secretary clear authority to impose Secretarial procedures where tribes cannot negotiate a compact, that would put us back where I think Congress intended to go in the first place.

When I had the privilege of appearing before the Committee during my confirmation, I was asked, "Do I intend to consult with tribes." I do intend to do that. I think we have been doing that. We certainly intend to continue to consult with tribes as we spend their money and partner with them in the regulation of their industry.

One of the things we are working on at the present time is setting up a more formal statement of how that consultation will be conducted. I came to this job from the Department of the Interior. The Bureau of Indian Affairs, of course, has a lengthy formal consultation process. In my view, we cannot afford to do anything quite that complex. I think that is too cumbersome when commissioners only have a 3-year term to do their job. By the time you

get acquainted and then go out and start a long process like that, your term is up.

We want to come up with a more flexible, more nimble approach, but we want it to be meaningful. We are resuming this circuit riding of consultation sessions that we started when I served on the Commission as an Associate Commissioner. We are going to be heading out to Minneapolis next week, the Great Plains and Midwest Indian Gaming Trade Show will occur there.

We will follow that with a consultation session whereby we will invite all of the tribes to come to hear what we have to say and hear what they have to say. Then we will sit down with individual tribes with all the tribes that want to sign up or visit with us and hear not only about local concerns, but about their views on these big picture issues we are talking about right now.

As we do this, of course, a couple of the key subjects we want to talk about are the changes that the past Commission made in the definitions regulations relating to aids for class II gaming, as well as facsimiles that constitute class III gaming, as well as our budget and our funding.

In July we will be going out to the Northwest. The Northwest Gaming Association will be holding its meeting in Tacoma. We are going to piggyback on that, as we are doing in Minneapolis. A couple of weeks ago Commissioner Choney and I went to Oklahoma. It was short notice, but 150 tribal leaders and representatives of Indian gaming in Oklahoma showed up. We had a long, very productive discussion. We probably spent more time there talking about where you draw the line between class II and class III, and how you classify games, than we will in some of the other venues. That was a very productive session.

We are on the consultation trail. We have had meetings. We have provided budget information. We want to continue to do that. Finally, before I conclude here, I want to acknowledge the dedication and hard work of the current team that we have at the National Indian Gaming Commission. In the face of these changes in leadership and shortfalls, and the rapid growth that the industry has experienced, our staff has been extremely professional and has worked extremely hard. They have bent over backward to try to be user friendly rather than use a traffic-cop approach when they run into a problem in Indian country.

I am proud to be leading that team right now. I am also proud to say that we three new Commissioners are getting along great. We think that we each bring an unique prospective that is considered by one another as we do our job. We hope to move onward and upward.

With that, I would be happy to respond to any questions you might have. I know that Vice Chairman Westrin and Commissioner Choney would also be happy to respond to any questions. I would ask that my statement be included in the record in its entirety. Thank you.

The CHAIRMAN. Without objection, so ordered.

[Prepared statement of Mr. Hogen appears in appendix.]

The CHAIRMAN. Thank you. I am glad you are improving the relationship with tribes through consultation. As you know, we had some feedback early on from tribes that felt the Gaming Commis

sion was somewhat punitive. When you say you are hearing what they have to say, that is great, because if you do not, we are going to hear what they have to say. I appreciate your doing that.

Let me ask you a few questions particularly about California. I keep hearing about the explosive growth in California of gaming tribes. How many California tribes now are into gaming presently? What is the projection of the number of tribes that will be starting? Do you have a number?

Mr. HOGEN. In our office we know, and our field office in Sacramento could tell me in a heartbeat. There are about 60 tribes that are actively engaged in gaming right now. There are a number of them that are negotiating compacts. It is in that ballpark, I believe.

The CHAIRMAN. Some of the California tribes use the so-called "model compact" that Governor Davis negotiated. Are there variations of that in the duties that the Commission has to perform?

Mr. HOGEN. It is pretty much a standard cookie cutter compact, so to speak, for all the California operations. One tribe, Coyote Valley, is holding out and in litigation with respect to whether they have to play by those same rules. I think all of the tribes that currently are operational pretty much have the same identical compact.

The CHAIRMAN. I see. You mentioned the fee assessments are about 59 cents per thousand dollars. Do you have any evidence that that fee level, that assessment level, has caused any hardship to tribal operations?

Mr. HOGEN. As far as I know, there are a number of tribes that are late in paying their fees, or have not paid their fees. But ordinarily that is an oversight. It is not because they did not have the money to do that.

The first $1.5 million generated by every operation is not subject to the fee. If you have a really small operation, they get our service but they do not have to pay any fee. In the scheme of things, I do not think that is overly burdensome.

But in the same breath I want to say that Indian gaming's regulation is probably less efficient than some other gaming regulation in that we necessarily have these three levels. You have the tribes that do basically all the work on the floor, on the ground. The States partner in that. Then we provide oversight.

A reason for that is, there is a perception by some, that if the tribe regulates its own gaming, it is the fox watching the hen house. I think tribes should be trusted to do that. But to give them credibility, we can come up here and say, "We have been out there. We looked at it. We know it is squeaky clean." We think that strengthens what they do.

But they also have the luxury of looking just at one or two operations very intensely. They are not looking at the number of facilities that the Nevada Gaming Commission would have. It is going to be a little expensive, but we think it has been worth that investment so far.

The CHAIRMAN. You also get $2 million in reimbursement costs. You mentioned the fingerprinting and background checks. First of all, could those activities be outsourced?

Mr. HOGEN. Well, with respect to the fingerprint activity, that is probably a critical role for us to play in that the FBI is quite selective with whom they do business.

The CHAIRMAN. How about doing background checks and things of that nature?

Mr. HOGEN. Well, we get reimbursed. If Bally's Gaming comes to us and says, "We want to do a management contract

The CHAIRMAN. If you are reimbursed for that, does that need to be part of your budget needs?

Mr. HOGEN. We put that in a separate category. It pays for itself. You are right about that. We do not need to get more money to do that because it is pay-as-you-go. It is the other stuff that we need the money for.

The CHAIRMAN. For a number of years, the tribes and the Committee have not received information that we think needs to be provided to the Committee and the tribes. We have mentioned this a couple of times in the past when you have been in here.

You did mention your trying to improve your consultation with tribes. Do you have a policy of consultation?

Mr. HOGEN. We have been doing it tribe-by-tribe, but Vice Chairman Westrin has taken upon himself the task to propose for us a consultation process. I learned when I was at the Department of the Interior the lesson of BITAM. Secretary Norton came out with the plan. The tribes said, "We are not talking about that. You did not talk with us first."

This is one of the things that we are going to talk with the tribes about when we go to Minneapolis and when we go to Tacoma to get their input before we put it in bold type and say, "Here it is." The CHAIRMAN. The Departments should all learn from BITAM. In some parts of the country, particularly Oklahoma, I think you mentioned there is a lot of litigation regarding the use of technological aids for class II gaming and the application of the Johnson Act. In your opinion, are the class II definitions in need of change or modernizing? Did the action taken by your predecessors sufficiently clarify the definition?

Mr. HOGEN. I think it did bring considerable clarity to that. In two recent Court of Appeals decisions-Santee Sioux v. National Indian Gaming Commission decision of the Eighth Circuit on New Year's Eve of last year, and the recent decision of the Seneca Cayuga case-found that devices that used spools of pull tabs, although they had electronic card readers and video displays, were class II.

In those decisions, they addressed the new regulations of the Commission. In other words, they said:

This brings some clarity to this. The Commission is in the business of regulating gaming. They are entitled to some deference.

This gives us a brighter line.

Yes; I think the regulation has considerably helped clarify the picture. What we need to continue to remind ourselves is that given the advance of technology, this is a dynamic area. I do not think we can ever sit back and say that we do not ever have to change that again.

The CHAIRMAN. Thank you. We are still dealing with the Seminole decision. Basically it stripped the tribes of any leverage they