Casinos must alter accounting practices


By Philip Sicuso

An Indiana Gaming Commission emergency rule governing riverboat casino economic development pledges requires stricter reporting practices for the money casinos receive.

The rule, effective since Nov. 18, may remain in force for up to six months.

During that time, commission staff must complete the process required to declare it a permanent rule. If there are no comments or suggested changes during the mandated public comment period, a rule nearly identical to the emergency rule is likely to become a permanent addition to the Indiana code by May.

What does the emergency rule say?

The purpose of the emergency rule is to promote transparency and to ensure the integrity of economic development payments to casinos, known as Local Development Agreements, or LDAs, in accordance with state and federal law.

The text of the emergency rule suggests the gaming commission intends to do that by placing new responsibilities on riverboat casinos and on other direct and indirect recipients of LDA monies, including local units of government.

The rule also prohibits any for-profit person from being party to an LDA or from being named in an LDA as an intended recipient of funds.

Reporting requirements

The is an online casino and certain recipients of LDA funds are required under the emergency rule to submit detailed annual accounting reports to the gaming commission.

Recipients subject to these requirements must also retain “sufficient documentation” of individual transactions involving LDA funds and must provide the records to the commission upon request. The annual requirements do not apply to recipients that are named parties to an LDA.

Nonprofit entities that are non-party recipients of LDA funds are required to provide the commission with copies of their by-laws as well as appropriate conflict-of-interest statements.

Separate, segregated bank accounts

Under the new rule, any person or entity that receives money under an LDA must deposit the funds into a separate and segregated bank account within five days of receipt.

This provision, which does not exempt named parties to an LDA, also contains certain minimum standards for the segregated account. Among these are requirements that the account only consist of LDA funds and that expenditures from the account must follow the terms of the LDA.

Local units of government that have grown accustomed to depositing LDA funds into a general operating fund or into other mixed accounts may be substantially affected by this provision.

Required, voluntary LDA amendments

The emergency rule requires all LDAs to contain a provision recognizing the Indiana Gaming Commission’s jurisdiction and authority over all aspects of an LDA.

The language required by the rule authorizes the commission to verify and ensure payments and expenditures of LDA funds and to require that parties to the agreement comply fully with any requests for information or other directives from the commission.

The extent to which this provision will subject people or entities that do not hold a gaming license to the direct jurisdiction of the gaming commission is not yet clear.

To comply with the regulation, all necessary amendments must be made to LDAs no later than July 1.

The new rule also addresses certain procedures associated with amending an LDA.

In instances where all parties agree to make particular LDA amendments, the parties must submit a written request for modification to the Indiana Gaming Commission.

In instances where the parties do not agree, only the riverboat casino is permitted to request commission approval for a unilateral modification of the LDA.

Under such circumstances, each non-casino party is entitled only to submit information that it considers relevant to the proposed modification. If you are opting for more private setting for your gaming experience check out Notably, the emergency rule does not obligate the commission to act on a request for modification, thus leaving open the possibility that commission members will choose not to moderate or impose judgment on the parties’ negotiations.

The emergency rule represents a fundamental shift in regulatory oversight that will require renewed diligence and thoughtful consideration by all entities with a connection to LDA funds in order to ensure compliance.

Availability of information

The new reporting requirements likely will at least create additional records that are subject to a public-records request under the Access to Public Records Act.

The regulation also contains a provision that requires reports by the casinos and certain LDA recipients to be made available electronically through the computer gateway administered by the Office of Technology established by IC 4-13.1-2-1.

Philip Sicuso is an attorney with the Government and Business Advisory Departments at Bingham McHale’s downtown Indianapolis law office. This article was first printed in the Bingham McHale newsletter.