Statement of David Matheson from the Coeur D'Alene Tribe

10 February 1998

Statement of David Matheson,
Chief Executive Officer of Gaming
Coeur D'Alene Tribe

We welcome the opportunity today to address the facts regarding Indian Gaming and the use of the Internet. This topic deserves to be discussed free of the misinformation on the history and legal underpinning of Indian Gaming. Congress and this Committee are entitled to testimony that will illuminate these serious and important issues and aid in your thoughtful deliberation. We hope to provide that assistance today.

The facts as to the National Indian Lottery designed and operated by the Coeur d'Alene tribe with the help of our management contractor Unistar are as follows:

  1. In the 1986 Cabazon case, the Supreme Court severely restricted the authority of States over Indian gaming activities on native lands within their borders. As a result of, and in reaction to Cabazon, Congress enacted the Indian Gaming Regulatory Act (IGRA) of 1988. The IGRA defined three classes of Indian gaming, established the jurisdictional and regulatory control for each class and created the National Indian Gaming Commission (NIGC) to enforce the provisions of IGRA.
  2. Lotteries are defined as Class III gaming. Class III gaming is governed by the terms of the Tribe/State compact, the rules and regulations of the NIGC, and in our case, the Tribal Council.
  3. In 1992, the Coeur d'Alene Tribe signed a Compact with the State of Idaho. The compact specifically provides for the conduct of these National Indian Lottery games. Article 6.2.1 of the Compact authorizes the Tribe to conduct lotteries defined as "state lotteries." "State lottery" is defined by Article 4.19 to include "scratch off games," "lotto" and "pull tab games."
  4. The Compact was approved by the Secretary of the Interior on February 5, 1993 and notice thereof was published in the Federal Register.
  5. The Tribe entered a management agreement for the conduct of the National Indian Lottery. The Chairman of the NIGC properly exercised his jurisdiction in approving the management contract and the amendments thereto.
  6. By resolution, the Tribe has authorized the National Indian Lottery to be conducted under the management agreement.
  7. The Chairman of the NIGC clearly acknowledged the lawfulness of the National Indian Lottery's when he stated in a letter to counsel for MCI dated September 21, 1995, that:

In the view of the NIGC, the tribe has complied with all the requirements of the IGRA and the regulations of the NIGC with respect to its lottery proposal, Because a lottery is a class III game, the Tribe entered into the required compact with the State of Idaho, and that compact was approved by the Secretary of the Interior. In addition, the Chairman of the NIGC approved the Tribe's gaming ordinance as required by the IGRA. Finally, the Chairman approved a management contract between the Tribe and Unistar Entertainment, Inc. to conduct the tribal lottery.

In the opinion of the NIGC, the Tribe's lottery activity, which involves customers purchasing lottery tickets with a credit card both in person and by telephone from locations both inside and outside the State of Idaho, is not prohibited by IGRA.

The Coeur d'Alene Tribe has complied with IGRA and all other applicable rules, regulations and laws. We have now spent over 5 years satisfying these requirements and have spent $12 million in cash to build a state of the art computer System that permits the operation of our lottery in compliance with IGRA. Every step of the way we have faced roadblocks. Although federal law authorizes us, we have been subject to constant harassment by various states that object to our lottery. They have interfered with our ability to obtain from the long distance carriers 1-800 service. In response to this groundless interference, we sought and obtained rulings from the Tribal Court and Tribal Appellate Court validating the legality of our lottery and our entitlement to 1-800 service. Those decisions are now on appeal to the federal district court in Idaho. Actions have also been brought by the Attorney Generals of Missouri and Wisconsin -- two states who offer lotteries and scratch off games to their own citizens, as do the other 34 states and District of Columbia where the Tribe's games are available. By choice, the Tribe has elected to offer its gaming only to those persons who live in ajurisdiction where lotteries are lawful. Officials in some of these states are opposing our lawful lottery not because they oppose lotteries in their states, but because they fear competition to lotteries in their states.

We have recently started a weekly lottery with customers being able to participate by using their telephones and using their own long distance carrier to reach the computers on the Indian reservation as well as using the Internet to access and participate in gaming on the Reservation.

Our opponents mischaracterized our lottery. We are not an offshore gambling company. We are a lottery run by a sovereign nation in accordance with our laws and the laws of the Federal Government and the State of Idaho. We are no different than any of the state lotteries.

Our opponents claim we are not regulated. This is not true. We are regulated by the federal government through IGRA, the NIGC and the Department of Interior; by the State Government through our compact with the State of Idaho, and by the Tribal Government through the Coeur d'Alene Charitable Gaming Board. The employees of the lottery undergo extensive background checks including fingerprinting which is sent to the FBI. Our operation and financial information is audited and reviewed routinely and reports are submitted at least annually. Although it is not required, the Tribe has hired Arthur Andersen, one of the big six accounting firms, to conduct an annual audit of our financial results. We have also hired Arthur Andersen to be on site for each of our weekly drawings to ensure compliance with all of the procedures that have been put in place to establish a fair and honest lottery.

Our opponents offer the following baseless attacks to undermine this lawful and well-regulated gaming activity.

  1. They claim that consumers don't know who is at the other end of the connection. This is not true. We openly publicize who we are, and where we are. Anyone can visit us on the Coeur d'Alene Reservation or call us. Our reports are on record with the NIGC and available to anyone who wishes them.
  2. Our opponents claim the odds can easily be manipulated and there is no guarantee that fair payouts will occur. This is not true. Our Internet instant lotteries are established by standard statistical means, and our weekly telephone draw lottery is run under tight controls using standard pari-mutuel concepts. The methods by which we control our lotteries are the same methods used by the States. We invite any State to come visit our Reservation, review our procedures and advise us of any problems they observe with our games. Arthur Andersen audits the operation of the Tribe's games and the Tribe has hired independent testing organizations to run independent tests. We guarantee that any one who wins gets paid. We are here in the U.S. We are not running to a far off island to hide. We recognize that as the first Indian tribe to establish this operation, we are under the careful eye of the Federal Government. The FBI has visited us on a number of occasions during the time the lottery has been set up, and they have advised us of no problems. We have reviewed with computer experts from the FBI the various internal controls and the methodology used in the lottery and to the best of our knowledge they were satisfied that we have a fair and honest lottery.
  3. Our opponents claim that if a customer experiences problem in cyberspace, it will be hard to find us. Not true. We live and work on the Reservation and we have no intent nor can we move the Reservation.
  4. Our opponents claim that the contract to purchase is not being made on the Reservation as required by IGRA. We disagree. It has long been held that when contracting takes place over telephone lines, the "contract" is made where the "offeree (in this case the Coeur d'Alene Tribe) speaks the words of acceptance into the telephone transmitter." Whether by Internet or telephone the National Indian Lottery and its US Lottery are played on the Reservation. The offer is accepted on the Coeur d'Alene Reservation. The consideration is also paid on the Coeur d'Alene Reservation from the player's account previously established on the Coeur d'Alene Reservation. The gaining contract is thus made on the Coeur d'Alene reservations.
  5. Our opponents claim that it is too easy for underage minors to play our lottery whether on the Internet or by telephone, We strongly disagree. Clearly, if someone wishes to violate the law and if a minor misrepresents his age and obtains access to a credit card and unlawfully uses it, then all of our controls and all laws can be initially violated. However, once verification of the account is sent to the lawful credit card holder, this unlawful access by the minor should end. This fact was recently demonstrated when the Attorney General of Missouri in an effort to undermine the Tribe's gaming, sat a 14-year old at a computer in Missouri, told him to use the credit card of another and call and give false information to the Reservation to set up an account -- all in violation of the specific rules and regulations of the US Lottery and the laws of Missouri. All the precautions in the world cannot prevent such blatant fraud. Indeed, if the Attorney General gave a fake ID to a 20-year old, the vendor selling him beer could hardly be faulted -- any more than the vendor of catalog goods sold through the unlawful use by telephone of a stolen credit card. Nevertheless, our system does provide safeguards to prevent use by minors. Our system requires the user to have a credit card. We match the address provided on the application to the credit card before we allow access. We regularly run match tests between our database of social security numbers and other databases available to determine age ranges by generic number sequences. We require all subscribers to have a unique password. We mail all correspondence to the person and address listed on the credit card so if a minor were playing, the adult would still be the person receiving email and normal mail. We do not credit the Visa account with any winnings. The only way to receive winnings is by a check we issue and mail again directly to the mailing address on the credit card. If the states were truly interested in protecting against minors purchasing lottery tickets, they could work with us to verify drivers license numbers as an additional Check. Wouldn't we all have a better solution if the states would agree to work with us and place any additional safeguard into the system rather than trying to undermine and entrap a lawful activity.
  6. Our opponents claim that making the purchase of lottery tickets so easy and fast on the Internet or by telephone will increase problem gambling and lead to increased addiction. Again, we believe this is in error. First, we have voluntarily established that no one can lose more than $500 a month. Therefore, we have put a self-imposed credit limit on all of our subscribers. Secondly, unlike any other gambling activity, including all of the land based casinos, we maintain a record of how much someone has won or lost on the system. If the federal government wanted to pass a law that said under certain circumstances individuals should not be allowed to purchase lottery tickets we could specifically block those people from playing.

Mr. Chairman, a specifically stated goal of IGRA is "to promote tribal economic development, tribal self-sufficiency, and strong tribal governments The Coeur d'Alenes take our responsibilities to our members seriously and have established the lottery to accomplish self-sufficiency just like the government of any state. Already, the lottery is bringing newjobs and better education to the Reservation. Our people are moving into a new era and for the first time with the aid of technology we are able to participate even though our Reservation is not located near any of the population centers of this country. For the first time we have an opportunity to use our creativity and commitment to work hard to help ourselves and build a future for our children. We have committed to provide economic help to non-gaming tribes. To the best of our knowledge and belief, we are the only gaming Tribe to voluntarily share its profits with non-gaming tribes. We do not seek relief from regulation. It is undisputed that the Coeur d'Alene Tribe's gaming is regulated fully. The legitimate fears and concerns raised by gaming that occurs beyond U.S. shores and outside the jurisdiction of the federal, state or local governments of this country simply have no application to the lawful and fully regulated gaming activities of our Tribe. We agree that disreputable, fraudulent and unregulated gambling cannot be tolerated and this body must take reasonable steps to protect the American public, but we urge you not to penalize those who abide by the federal law, are authorized to engage in gaming and who have done so responsibly and in compliance with all federal, state and local requirements.

We are not part of the problem that the Goodlatte bill in its current form seeks to solve. The amendments to the wire act proposed in a companion bill in the Senate (S. 474) which specifically seems to single out our lottery will not solve the issues. We stand ready, willing and able to cooperate with you and any federal agency to work together to fashion a regulatory framework that satisfies the legitimate concerns presented by unregulated gaming.

Mr. Chairman, we have suffered long and hard on our Reservation. The Congress of the United States in passing IGRA has provided Indian Tribes the means and opportunity to pull themselves out of the cycle of poverty and despair. We want to be independent and productive. We want our children to be educated, healthy, and contributing members of our society. We are a proud people with a strong heritage. We ask that you do nothing that will deny us the rights and opportunities now provided by existing law. We ask once more that the U.S. Government honor its commitment to us as we have honored your laws by complying fully with all of its requirements. We come here as citizens of the United States and as citizens of Indian country. We are a lawabiding people and wish to be treated with the dignity and respect we deserve. We ask for your help today.

Thank you for the opportunity to present our position to you today.

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