[Senate Hearing 107-782]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 107-782

                            SPECIAL TRUSTEE

=======================================================================

                                HEARING

                               BEFORE THE

                      COMMITTEE ON INDIAN AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                                   ON

 THE ROLE OF THE SPECIAL TRUSTEE WHITHIN THE DEPARTMENT OF THE INTERIOR

                               __________

                           SEPTEMBER 24, 2002
                             WASHINGTON, DC



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                      COMMITTEE ON INDIAN AFFAIRS

                   DANIEL K. INOUYE, Hawaii, Chairman

            BEN NIGHTHORSE CAMPBELL, Colorado, Vice Chairman

KENT CONRAD, North Dakota            FRANK MURKOWSKI, Alaska
HARRY REID, Nevada                   JOHN McCAIN, Arizona,
DANIEL K. AKAKA, Hawaii              PETE V. DOMENICI, New Mexico
PAUL WELLSTONE, Minnesota            CRAIG THOMAS, Wyoming
BYRON L. DORGAN, North Dakota        ORRIN G. HATCH, Utah
TIM JOHNSON, South Dakota            JAMES M. INHOFE, Oklahoma
MARIA CANTWELL, Washington

        Patricia M. Zell, Majority Staff Director/Chief Counsel

         Paul Moorehead, Minority Staff Director/Chief Counsel

                                  (ii)

  
                            C O N T E N T S

                              ----------                              
                                                                   Page
Statements:
    Campbell, Hon. Ben Nighthorse, U.S. Senator from Colorado, 
      vice chairman, Committee on Indian Affairs.................     1
    Cason, James, Associate Deputy Secretary of the Interior.....     2
    Homan, Paul M., former Special Trustee for American Indians..     3
    Slonaker, Thomas N., former Special Trustee for American 
      Indians....................................................     5

                                Appendix

Prepared statements:
    Cason, James.................................................    27
    Homan, Paul M................................................    28
    Slonaker, Thomas N...........................................    34

 
                            SPECIAL TRUSTEE

                              ----------                              


                      TUESDAY, SEPTEMBER 24, 2002


                                       U.S. Senate,
                               Committee on Indian Affairs,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10 a.m. in room 
485, Senate Russell Building, Hon. Ben Nighthorse Campbell 
(vice chairman of the committee) presiding.
    Present: Senators Campbell and McCain.

 STATEMENT OF HON. BEN NIGHTHORSE CAMPBELL, U.S. SENATOR FROM 
      COLORADO, VICE CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS

    Senator Campbell. The Committee on Indian Affairs will be 
in session.
    Senator Inouye is detained this morning and has asked me to 
go ahead and start the hearing, which I'm happy to do. We have 
just three witnesses. We're told we have a vote starting at 
10:30. I'll try and get through all of the testimony and 
perhaps a few questions before we start, but we may have to 
recess and reconvene after the single vote that we're going to 
have.
    Last week, Judge Lamberth handed down a contempt finding 
against the Secretary and Assistant Secretary. With just a few 
days left in this session, frankly I don't know what lies ahead 
of us, what we can accomplish this year or what we have to 
restart next year. I have to say, as I've said a number of 
times in the past, I'm sorry that the Secretary and Assistant 
Secretary inherited something that's been going on for a number 
of years. I know them both very well as friends and as 
professional colleagues, too, and I know that in the past both 
of them have done their very best to try to help Indian 
America. But that's something that we have to face.
    Our collective experience with the Special Trustee for 
Indian Affairs since the enactment of the 1994 Trust Reform 
Management Act has not been very good. I continue to hope it's 
going to get better, but at this point, it doesn't seen to be. 
Spanning both Democratic and Republican administrations, each 
trustee has expressed dissatisfaction with the pace and the 
direction of the trust reform effort in his respective Interior 
Department. To be candid, I think we need to answer a number of 
fundamental questions that seem to keep rolling around that we 
haven't found the answer to yet. One is what progress in trust 
reform has been made and what we can rely on for future 
legislative and funding initiatives. As you know, the task 
force has met a number of times and has given us some ideas. 
They've agreed on a number of areas and initiatives, and 
they're still pretty much dug in and locked out on several 
others.
    Two, we should ask what Congress continues to do to rely on 
the Special Trustee to be the main actor in carrying out the 
initiatives. And three, if it should, what changes do we need 
to make to the 1994 Act and if the trustee is not going to be 
the principal actor in trust reform how should we proceed and 
what will take place and what would be the function of the 
trustee.
    We'll start with the first gentleman, that will be James 
Cason, the Association Deputy Secretary of the Interior. If you 
would go ahead, Jim.

  STATEMENT OF JAMES CASON, ASSOCIATE DEPUTY SECRETARY OF THE 
                            INTERIOR

    Mr. Cason. Mr. Chairman, I have a short statement that I 
wanted to have entered into the record.
    Senator Campbell. Without objection, that will be included 
in the record.
    Mr. Cason. And I just have a very brief comment. You had 
started to talk about the efforts that we've been making with 
the Tribal Task Force. We had worked with the Indian community 
to select two regional representatives from each BIA region, a 
total of 24 plus alternates, to sit down and talk about a 
number of issues affecting how the Department of Interior 
managed its Indian trust responsibilities.
    We've had ongoing negotiations or discussions with the Task 
Force for about 8 months now. And as you said, there are a 
number of items upon which we agree and a number of items which 
we haven't agreed upon yet. We have another meeting scheduled 
for this Thursday. We're going to talk to the Task Force and 
see if we can move forward on the agenda of the Task Force. And 
we plan to keep the committee informed about our progress and 
what the implications are to the BIA and to OST and how we 
manage trust reform within the Department.
    Thank you. So I'm here to answer questions.
    [Prepared statement of Mr. Cason appears in appendix.]
    Senator Campbell. Thank you. I appreciate that. Would you 
stay at the table and let me ask Mr. Homan and Mr. Slonaker 
also to come up.
    Mr. Cason. That would be terrific.
    Senator Campbell. We have some questions we might want to 
bounce off all three of you.
    Paul Homan, and Mr. Slonaker, both former special trustees, 
come and sit down. Mr. Slonaker, you seem to have a couple of 
new appendages this morning. Sorry to see that, hope it's all 
right.
    Mr. Slonaker. It's broken but it's healing.
    Senator Campbell. You didn't do that in our State skiing, 
did you?
    Mr. Slonaker. No; nothing as dramatic as that. [Laughter.]
    Senator Campbell. All right, why don't we go ahead with Mr. 
Homan first, if you'd like to. Your complete written testimony 
will be included in the record, if you'd like to abbreviate.

STATEMENT OF PAUL M. HOMAN, FORMER SPECIAL TRUSTEE FOR AMERICAN 
                            INDIANS

    Mr. Homan. I will abbreviate my statement, but I would like 
my full statement to be included in the record. Thank you very 
much, Mr. Chairman.
    And thank you for the opportunity to appear before the 
committee. It's been some time since I've been here.
    On September 19, 1995, I was appointed the first Special 
Trustee for American Indians and served in that capacity until 
January 7, 1999, when I resigned rather than accept the 
reorganization of the Office of the Special Trustee set forth 
in the secretarial order 3208, dated January 5, 1999. The order 
was really the last of a series of departmental decisions taken 
over my tenure as special trustee to usurp the powers, duties 
and responsibilities vested in the Special Trustee by the 
American Indian Trust Reform Act of 1994.
    For all practical purposes, the cumulative effect of these 
departmental actions and policies deprived, in my opinion, the 
special trustee the independence and the authority that was 
intended by the Reform Act, and the resources, principally 
managerial resources, necessary to carry out the duties and 
responsibilities of the special trustee, the advisory board and 
the Office of the Special Trustee.
    Since the Reform Act was passed in 1994, the Department's 
record regarding the role of the special trustee and trust 
management reform demonstrates over and over again that the 
reform efforts of the Office of the Special Trustee were under-
funded, under-staffed, delayed and otherwise frustrated in 
favor of higher departmental priorities. The Reform Act was 
fundamentally flawed, in my view, in one important respect, in 
that it failed to provide the Special Trustee with the 
independence and the authority to carryout the purposes of the 
act. During my tenure, most of my powers were strictly 
oversight, which proved to be largely ineffective.
    More important, over the objections of myself the 
Department failed to address what I consider the primary cause 
of the longstanding trust management problems, the 
mismanagement and neglect inherent in the Bureau of Indian 
Affairs, the resolution of which is required before any 
meaningful reform can be implemented. The result has been a 
near complete failure to date in bringing about any effective 
reform of the Indian trust management activities of the 
Department and the Bureau of Indian Affairs.
    As noted, the primary cause of the longstanding Indian 
trust problems is lack of competent management, pure and 
simple. For over 20 years, knowledgeable and informed 
professionals have called the Bureau of Indian Affairs the 
worst managed agency in Government. Every outside study, 
indeed, most internal studies I researched as Special Trustee 
agreed with that conclusion. I agree with that conclusion.
    Judge Lamberth, in the Cobell case just last week, said 
``The Individual Indian Money Trust has served as the gold 
standard for mismanagement by the Federal Government for more 
than a century.'' It is axiomatic, in my view, in private 
sector restructuring, in which I've had a lot of experience, 
that if management is the problem, management must be removed 
and replaced if restructuring and reform is to be successful. 
Nevertheless, as well-known, clear and practical a remedy as 
this is, I also observed that in previous reform efforts over 
the last 25 years, no senior manager at the Bureau of Indian 
Affairs, to my knowledge, or department, has been removed 
because of incompetence. In addition, every reform effort in 
the last 25 years has been left largely in the hands of the 
very incompetent BIA managers who contributed to the problem in 
the first place.
    While special trustee, I became convinced, and still 
believe that the Department did not have and does not have the 
will to address the mismanagement issue and force out the 
incompetent managers, nor was and is the Department likely to 
attract competent managers willing and able to undertake a 
timely reform effort within the Department of the Interior. 
Without both, no reform effort can succeed.
    I therefore recommended to the Secretary of the Interior 
and to the Congress in the 1997 Strategic Plan that the 
Department should support the establishment of an independent 
agency outside the Department of the Interior to manage the 
Indian trust management activities and the reform effort. The 
Secretary at the time instead opted for the Department's 
historical approach to reform and decided that any reforms 
would be undertaken solely by the Department of the Interior. 
Again, in August 1997, I recommended to the Secretary that the 
reforms being considered in what later became the high level 
implementation plan not be left largely in the hands of the 
Bureau of Indian Affairs to implement. The Secretary again 
opted for the Department's historical approach, and decided in 
favor of the BIA's managing most of the reforms of the high 
level implementation plan.
    The Department currently appears to be using the same 
historical approach to reform, apparently with as little 
success as the previous administration. Recent court filings in 
the IIM litigation indicate just how unsuccessful the reform 
efforts have been. Based on these filings, just last week, 
that's September 17, U.S. District Judge Royce Lamberth held 
Secretary of the Interior Gale Norton and a senior aide in 
contempt of court for deceiving him about the agency's failure 
to reform the trust fund activities. He found:

    The agency has indisputably proven to the Court, Congress 
and the individual Indian beneficiaries that it is either 
unwilling or unable to administer competently the Trust. Worse 
yet, the Department has now undeniably shown that it can no 
longer be trusted to state accurately the status of its reform 
efforts. In short, there is no longer any doubt that the 
Secretary of Interior has been and continues to be an unfit 
trustee delegate for the United States.

    Managerial incompetence, mismanagement and neglect in the 
Department's management of the Indian Trust management 
activities are rampant, and have resulted in conditions that 
are unacceptable by any reasonable standards, and continue to 
do significant harm and damage to American trust beneficiaries. 
They have also caused permanent damage to the trust management 
systems the Government uses to manage the Indian lands and 
monies. These defective systems prevent the Government from 
meeting the fiduciary accounting and reporting standards 
required by the American Indian Trust Fund Reform Act of 1994, 
and standards of ordinary prudence applicable to all trustees, 
public and private. This serious breach of trust exposes the 
Government to liability and loss that it experienced in 
resolving some of the largest bank and thrift failures during 
the financial crisis of the 1980's and early 1990's. Until 
mismanagement issues are addressed at the Department and Bureau 
of Indian Affairs, no meaningful reform can take place, and the 
Government's exposure to loss and liability to American Indian 
trust beneficiaries will continue to escalate.
    In sum, the record shows, and I believe, the Department 
does not have the will or ability to address the mismanagement 
issues, and force out the incompetent managers at BIA and the 
Department. Nor is the Department likely to attract competent 
managers willing and able to undertake the time and reform 
effort within the Department of Interior. Without both, no 
reform effort can succeed, and in the circumstances, 
alternative reform structures managed and implemented outside 
the Department should be considered by the United States.
    Thank you very much. I'd be glad to respond to your 
questions.
    [Prepared statement of Mr. Homan appears in appendix.]
    Senator Campbell. Okay, Mr. Slonaker, go ahead.

  STATEMENT OF THOMAS N. SLONAKER, FORMER SPECIAL TRUSTEE FOR 
                        AMERICAN INDIANS

    Mr. Slonaker. Thank you, Senator Campbell.
    I'm pleased to have the opportunity to share my thoughts 
with you and the committee on the role of the special trustee 
under the 1994 Indian Trust Reform Act. What I'd like to do is 
briefly summarize my written testimony that I've submitted for 
the record.
    I've had the privilege to serve as the special trustee for 
over 2 years, since I was confirmed in May of the year 2000. 
Let me tell you first what I think the obstacles have been to 
the special trustee and the execution of the special trustee's 
obligations as laid out in the 1994 Act. Then I'd like to 
provide you with my recommendation going forward to achieve 
trust reform and fulfill the Government's obligations.
    First, on the obstacles. There are several. I think the one 
that I would put at the top of the list would be that the 
special trustee has no line authority in this whole procedure. 
It has an oversight role, and has no line authority to ensure 
and to effect changes as they may be needed. It can only report 
on what the Department does or doesn't do to both the Congress 
as well, of course, as the Secretary and now obviously to the 
Court as well. So therefore, if the Department doesn't 
accomplish what it's supposed to do in terms of trust reform 
and accounting, there is no way for the special trustee himself 
or herself to ensure that.
    Second, there is a deep reluctance, in my opinion, within 
the Bureau of Indian Affairs, noticeably at the middle 
management levels to provide for trust reform on an effective 
and timely basis. That's been going on for, as you know, I 
think, decades.
    Third, there is no accountability demanded of those people 
within the Bureau or elsewhere within the Department of the 
Interior who have Indian Trust responsibilities that they are 
not fulfilling. There appear to be no consequences for those 
who do not fulfill those responsibilities.
    Fourth, there is no one in charge who heads a single, 
separate, clean chain of command for those people charged with 
trust duties, so that they have just one priority, just one 
type of obligation and just one chain of command to report to. 
Additionally, there appear to be additional conflicts of 
interest with some BIA positions between their current trust 
duties, the fiduciary trust duties on the one hand, and other 
responsibilities.
    Fifth, many tribal leaders appear to oppose adamantly any 
trust organization change that would separate the fiduciary 
trust function, that is the management of the assets, from 
other responsibilities within the BIA.
    Sixth, the concern for the litigation posture of the 
Department has been the first priority, in my opinion. Only 
those actions in support of trust reform that support the 
litigation position appear to be tolerated. For my candor in 
reporting as a special trustee on the status of trust reform to 
both the Congress and the Court, as required, I was considered 
not to be a ``member of the team.''
    Seventh, there has been an effort to diminish the trust 
standard, in my opinion, as well over the years that the 
Government has to both the tribes and individual Indians.
    Let me tell you what my recommendation is. There is no 
reason that the Department cannot recognize and demand 
compliance with the trust duty. There appears to be no 
political will to ensure compliance with the Government's trust 
obligation. Only a single direct line chain of command, as I 
mentioned before, for all personnel, supporting the trust 
activities, has a chance of succeeding. Only the special 
trustee with her or his legal responsibility, trust experience 
and Congressional obligation is best positioned to exercise the 
required authority on behalf of the trustee designate, but the 
special trustee's position, as I said before, doesn't have that 
line authority.
    In my opinion, the Department is incapable of executing 
trust reform. And indeed, even knowing what and how to do so, 
or to provide the experienced, competent people resources 
needed in most cases. More than being incapable there is often 
a seeming unwillingness to adhere to the trust principles of 
the 1994 Act in the Department's own manual, as well as to hold 
people accountable for their actions or consequences for poor 
performance.
    I have come to the conclusion, therefore, that it's 
important to have a strong oversight role outside the 
Department, responsible to the Congress and headed by an 
experienced trust management executive, advised by a board of 
trust experts and Indian leaders. In a sense, this is the 
Office of the Special Trustee as established by the 1994 Act, 
but placed outside the Department. This executive oversight 
position and the attendant organization need to have the 
ability to require changes when needed changes by the 
Department itself are not forthcoming.
    There are some instructive models available in the form of 
Government-sponsored enterprises that have addressed issues of 
public policy in other venues, such as the failures of many 
savings and loan institutions a few years back. Such outside 
authorities can provide for eventually returning the trust 
operations to the Department at such time as the systems, the 
procedures, the records and the leadership are ready, and the 
Department exhibits the willingness and ability to carry on 
with its fiduciary trust responsibilities.
    Thus, in my opinion, trust reform is not going to happen 
until there is an authority outside the Department that can 
compel compliance with the Government's trust duty and demand 
accountability. The most recent decision of the Washington, DC 
District Court, which stopped short of appointing a receiver, 
hopefully will enforce enactment of that trust reform. That 
solution, however, will only succeed, in my opinion, if the 
Department is actually forced to comply with needed change.
    Thank you, Senator. I'll be available for questions.
    [Prepared statement of Mr. Slonaker appears in appendix.]
    Senator Campbell. Thank you, Mr. Slonaker.
    Well, let me start by telling you that, as you probably 
remember, in the year 2000, February 2000 when I was the 
chairman, I circulated to all tribes and the Inter-Tribal 
Monitoring Association, a draft bill that would have set up an 
Indian Trust Resolution Corporation, that would have been 
somewhat patterned after the trust corporation that resolved 
the S&L mess. I think there was some miscommunication 
somewhere, because the Department opposed it at that time. I 
think many of the tribes were a little bit wary of it. So we 
didn't try to push that bill, I didn't even introduce it.
    But basically what you're saying now is, along that line, 
that maybe we need something alone that line independent from 
Government, to settle it. My thought then was that, as we've 
heard in some of the other testimony, that in some areas, some 
of the people in the Bureau are not considered competent enough 
to resolve this problem. But independent experts in money 
managing should be the direction we should go. Would you like 
to comment on that?
    Mr. Slonaker. I basically agree with that, Senator. I would 
take small exception to your next to the last sentence, I 
think. There are some very competent people in the Bureau of 
Indian Affairs who want to do a good job, and who don't always 
get the message, but want to do the job. So I think this is a, 
I wouldn't suggest that this is a solution that looks to 
outside experts necessary in its entirety at all. I think we 
can involve a lot of the people who are now involved with it. 
But it needs to be a single organization outside the Department 
that can actually force the change.
    Well, I appreciate that correction . I didn't mean to imply 
that they're all incompetent or not. Most of the people, I 
think, are very good and very hard working.
    Let me ask Jim Cason. First of all, I want to commend 
Secretary Griles and you along that line for all the work 
you've done in our past hearings and keeping the committee 
informed of your negotiations with the tribes. I certainly 
applaud you for that, too.
    Mr. Slonaker and Mr. Homan, it seems that their experience 
leads them to believe that a single, accountable unit on trust 
reform is necessary. But they go a little further, and as I 
mentioned, talk about some outside help, outside the 
Department. I would think that their combined experience over 
the last 9 years might have some real validity. Would you like 
to comment on going outside the Department?
    Mr. Cason. I would like to do that, Mr. Chairman. I guess I 
would start off that, I don't think there's a panacea that any 
one single thing is going to fix this trust problem. It's not 
one single person who's a special trustee, it's not one single 
organizational unit. It's not one single budge initiative. It's 
a very complicated problem. And it's going to lend to 
complicated solutions and a lot of work on a lot of people's 
parts.
    In this particular area, of having one single accountable 
executive, we basically agreed with that. That's been a subject 
matter of our efforts to work with the beneficiaries to 
identify a single accountable executive and that together with 
Indian tribes and the Trial Task Force, we basically identified 
the need for an Under Secretary position in the Department of 
the Interior who would have line authority within the 
Department of the Interior to manage all Indian related 
activities within the Department, so that we could accomplish 
what's been suggested this morning.
    Senator Campbell. So you would suggest that position would 
take over or absorb the Trustee's duties?
    Mr. Cason. Yes; that has been the position of the Task 
Force, that that person should have these job duties. And we 
patterned the job duties very closely after those that have 
been assigned to the Special Trustee.
    But the other element of your question was also addressed 
by the Task Force, and that's the element of taking the 
responsibilities outside the Department of the Interior. What 
we did with the Tribal Task Force is, we started with a blank 
sheet of paper, and said, let's assume there are no 
restrictions to what we would do, what are the best options for 
us to pursue. And during the course of the activities with the 
Task Force, we identified 29 different options that individual 
Indians or tribes wanted to have considered. And several of 
those options included taking the responsibility outside of the 
Department of the Interior.
    In one case, one of the options was to form a Department of 
Indian Affairs, so you would remove all the responsibilities 
out of the Department of the Interior as well as some of the 
functions from other departments and consolidate them into an 
independent Government department. There was also an 
alternative that would remove the fiduciary trust 
responsibilities from the BIA and OST and put them into an 
independent organization much like the one you were talking 
about. Let's take all those fiduciary responsibilities outside 
the Department and have them managed elsewhere and resolve the 
conflicts that are there, outside the Department of the 
Interior and all the institutional barriers that we have.
    Both of those options were evaluated by the Task Force and 
the beneficiaries, in this case, the tribal leaders on the Task 
Force, rejected those options and said, you know, they have 
some attractive elements to them, but we don't think that's the 
right way to go. And they instead went in the direction of 
favoring the Under Secretary route and keeping the 
responsibilities within the Department.
    Senator Campbell. When we floated that idea before, I think 
some of them felt that it would be a step back from trust 
responsibility if we let the Department off the hook.
    Mr. Cason. I think there's a variety of reasons why they 
rejected it. But we did have it on the table. And it was a 
potential option. But the Task Force basically didn't warm up 
to doing that.
    Senator Campbell. How many total meetings have you had so 
far, as the Task Force?
    Mr. Cason. As Task Force meetings, I think we're on the 
order of seven or eight. We've basically had them monthly since 
I think late December was the first one we had.
    Senator Campbell. And you just had another one just 
recently?
    Mr. Cason. We will have another one on Thursday.
    Senator Campbell. At our last hearing on this subject, or 
maybe it was the one before, I floated the idea of what happens 
in many class action lawsuits, that people can, there's usually 
a way they can opt out and settle individually. Was that taken 
up, or did you mention that in your last meeting with the Task 
Force?
    Mr. Cason. It hasn't been, as best I recall, a subject for 
the Task Force of having a settlement or opting out provisions 
from the Cobell lawsuit. It is an item, an option that we're 
considering how we would be able to speed up the process and 
offer alternatives to a long term historical accounting 
approach. As you recall, Mr. Chairman, we talked about that the 
last time I came to testify, that the historical accounting 
program is usually expensive, it's projected to cost $2.5 
billion and take 10 years or more to complete. You had 
suggested that we look for alternatives where we could speed 
that up through some sort of a settlement process or some sort 
of an offer to the individuals to have another alternative, 
other than the historical accounting process. So we are looking 
at that.
    Senator Campbell. Mr. Homan, Mr. Slonaker, what would you 
think of that approach?
    Mr. Homan. Well, first of all, I don't believe that the 
systems and the condition of the records relative to an 
accounting exist in the Department of the Interior. So I don't 
believe that spending a nickel or $2 billion is going to enable 
the Department to account to the American Indian trust 
beneficiaries. The Cobell case involves individuals, as you 
know. The Department has stipulated to the courts that there 
are no records, electronic records, before 1985. So how 
possibly could anyone account to those benificiaries?
    My own view, at least until I left, because I was looking 
at the IIM records almost every week, is that it's worse than 
that. The records that exist since 1985 are woefully deficient. 
Sometimes leases cannot be traced to general ledger entries. 
The Department has never had what they call a universe of 
leases, so they don't know how many there are. The Office of 
Trust Fund Management handles one aspect of that, I think well, 
and I think that is one of the things that was reformed 
correctly. It accounts for the deposits, and it disburses them, 
but it doesn't know whether the nickels it receives should be 
dimes, because the Bureau of Indian Affairs can't tell them. It 
doesn't know when it disburses it to an individual Indian 
beneficiary, whether that's the proper beneficiary that owns 
that particular asset. Again, the Bureau of Indian Affairs 
cannot keep its records up to speed.
    So I don't believe an historical accounting can be done 
correctly. I think that the Department ought to admit that. I 
said that to the Department of Justice in 1997. I said to the 
courts that. The Department should admit that it can't do an 
accounting. It has to settle with these beneficiaries. It's 
going to be rough justice, and I think that if the Congress or 
the Administration doesn't come up with a way to deal with it, 
the courts will impose a settlement that maybe no one likes.
    Second, I take umbrage with the Department's ability to 
reform itself from within for one reason. And that is that it 
is poorly managed. I'm not suggesting that every single unit in 
the Bureau of Indian Affairs is mismanaged, but even the 
competent managers there are not trained in trust. They don't 
have a trust culture. I have never met a single person, save 
one, that would qualify as a trust officer in a national bank, 
which I regulated for a number of years. So they would require 
massive retraining. And I don't think they have the experience. 
They have the experience dealing with obsolete systems that go 
back 30 and 40 years in some respects. I don't believe they can 
be brought up to speed in time to make effective anything like 
a commercially acceptable trust reform effort.
    That is the singular reason why I suggested to the 
Secretary, to the Congress, that not only do you move the trust 
management activities outside the Department of the Interior, 
in a GSE or some other agency, but that you also change out 
management, like the RTC. And I applaud you for your efforts in 
the year 2000.
    The RTC outsourced, outsourced under an oversight board to 
competent business managers, trustees, if you will, to solve 
the 2,900 resolutions of the banks that were failing at the 
time RTC went out of business in 5 years. And I think that is 
what's required here. They didn't use the management of the 
previous FSLIC, which was the insurance corporation, or the 
Home Loan Bank Board, which was the supervisor. In a sense, 
those employees got bypassed and fired because they didn't do 
their job. That appears to be one of the only ways to deal with 
Government employees who, in their performance evaluation 
reports, are all rated fully successful or better. How can you 
remove anybody with that type of a performance rating under the 
Government rules? And the answer is, you can't.
    This is the same issue that was discussed just this week. 
The Administration in its homeland security bill discussed said 
that only 434 employees had been removed for incompetence last 
year, out of how many thousands. So it's very difficult to deal 
with mismanagement in Government. It's an 18-month to 5-year 
process when you undertake this, and no senior manager wants to 
do that. And the Department, I think their record is clear, 
none of them have had the courage, the willingness, and maybe 
they're just frankly unable to do it.
    Therefore, I have no confidence that any type of structure, 
and the one being proposed by the Department these days is no 
different than the one proposed in 1993 by Secretary Babbitt, 
and which the Congress overrode in favor of the Special 
Trustees Reform Act. And it, as I said, is not successful.
    But I think that some alternative would be successful. 
These are basic accounting and bookkeeping issues that every 
single national bank and trust company in the United States has 
solved. There hasn't been a trust failure since the 1930's in 
the national banking system, not one. Managing Indian lands, 
Indian assets, are no different than what small commercial 
banks, small commercial trust companies manage every day 
competently for the benefit of their beneficiaries.
    So I think the Government has to face this issue.
    Senator Campbell. There might be one difference. I have a 
hunch the banking system does a much better job in record 
keeping than the Federal Government. I guess that's one of my 
basic concerns. When we talk about historical accounting, that 
leads to the assumption that there's something to account or 
there are some documents out there or something. But with this 
huge number of totally missing, gaping holes in the ability to 
document, that's why I thought, well, somewhere along the line 
we've got to cut our losses and start cutting some checks to 
people that want to opt out. Because I don't think we're ever 
going to be able to get a complete and full accounting when we 
hear stories like we did a couple of years ago of rat infested 
garbage bags full of partially eaten documents in warehouses in 
Albuquerque, things of that nature.
    Jim, did you want to comment?
    Mr. Cason. Yes; I just wanted to make a couple comments, 
Mr. Chairman, if I can.
    On the issue that you were just talking about, the 
historical accounting, clearly there are problems and obstacles 
and difficulties that we'll have at the Department of the 
Interior to do an historical accounting. There are missing 
documents. There are faults with computer systems. We've had 
generations of people accounting for monies that were paid in 
and they had different systems to use. Those systems have 
changed over time. There's been transitions of data. There's 
all kinds of reasons to point at some of the failings of the 
past as to why we would have difficulties.
    But on the other hand, we do have 15 years worth of data in 
automated systems that has millions of transactions that are 
available, and we have somewhere on the order of 500 million 
pages of admittedly poorly organized records.
    Senator Campbell. 500 million?
    Mr. Cason. That's the estimate I've seen. There's lots of 
paper around to help with the process.
    Will it be easy? No. Will it be absolutely complete on 
every case? No. But there is a lot that we can do in a ``best 
efforts'' type of approach to provide an accounting to the 
beneficiaries.
    Does that mean that we shouldn't look at a way to speed the 
process up? No . We would like to do that. We would like to see 
if there is an option where we can basically provide some sort 
of compensation to individual Indians in lieu of an accounting 
so that we don't have to broach that if we can find a good way 
to accommodate it.
    But just as an illustration, Mr. Chairman, as to where we 
are with this, we went through an exercise in the Department at 
the behest of the Court to do a virtual accounting for the five 
named plaintiffs in the Cobell lawsuit. If I remember correctly 
what the number was, we had somewhere on the order of 190,000 
documents that we prepared or were provided to do the 
accounting for just these five people, one of whom didn't have 
an account. So basically 190,000 documents for four accounts.
    So there is a lot of documentation there. But it won't be 
complete. And the best we can do is basically a best efforts 
type of an accounting in which some accounts we will be able to 
do pretty well, and some accounts probably will be poor.
    Senator Campbell. As I understand it, Judge Lamberth has 
set trial date for 2003, for the next phase of the accounting 
methods.
    Mr. Cason. That's right.
    Senator Campbell. How far are you going to be along that 
line in order to present your case before the Court?
    Mr. Cason. It's our hope, Mr. Chairman, that we will 
complete the accounting for the five named plaintiffs and that 
we will have several thousand judgment accounts done, and that 
we will have some individual accounts, land based accounts, 
done so there will be a set of options to look at in the phase 
two trial in May. And the Judge has also asked us to provide 
the accounting plan, whatever we plan to operate in January. 
That will be the basis of the trial in May.
    And I would agree with Mr. Homan, it's a tough job. There 
is a lot to do, and there are a lot of holes in the process. 
But the issue is, do we stop right now and throw up our hands 
and say, we can't do anything, and that the only option is to 
pursue some kind of settlement, or do we pursue a course of 
action to do what we can, to do the best job that we can, and 
get as many facts as we can on the table and then reconcile 
from that point.
    Senator Campbell. With that new trial date set, and the 
contempt citation, has that been somewhat demoralizing, or are 
you still able to kind of keep your focus on this problem?
    Mr. Cason. Mr. Chairman, it is demoralizing. One of the 
things that we noticed in looking at the Judge's opinion is the 
timeframe for the contempt citation was principally for 
activities that occurred prior to our Administration. But they 
were associated with the current Secretary in her official 
capacity as Secretary. So many of the things that were the 
source of the contempt findings were unrelated to the 
activities of this Administration.
    It was disheartening to find that the Secretary was found 
in contempt in that particular way. We understand it, and we 
accept and recognize the job that we have to do on trust 
reform. The Secretary, I can tell you, is no less committed 
today than she was last week to trust reform and doing the 
things that are necessary. I've been in her presence where 
she's made that abundantly clear, that we still have a job to 
do. We need to focus on that job, and we need to get on with 
it.
    That doesn't mean that what Mr. Homan says is not true. 
There are challenges for the Department. Getting the right kind 
of management in the right places is a challenge. Fixing the 
systems in the Department is a challenge. There are a number of 
things that we're working on in a pretty broad agenda to try 
and amend the current environment.
    Senator Campbell. In amending that current environment and 
that agenda, are you also considering outsourcing for some of 
the documentation?
    Mr. Cason. Well, as far as documentation, I don't know 
specifically about that. But as we look at the activities that 
we're required to do to administer the trust, outsourcing and 
the use of private contractors is an element that we consider 
in each of those. And to the extent that we can find functions 
that we can outsource, we'd be happy to do that.
    Senator Campbell. Have you done it yet?
    Mr. Cason. So far, where we've been is an assessment of the 
systems. We had an outside contractor, EDS, who did an initial 
status review of where we were with trust reform. And I think 
that's an effort that Tom arranged for, is to bring an outside 
contractor in to do an independent assessment of where were as 
a Department on trust reform. They delivered that, and we're 
also using EDS to go to the next step, which is to evaluate our 
as-is business processes. Because one of the things that led to 
the concerns about our TAAMS program was that we started with a 
commercial, off the shelf software system that didn't recognize 
the panoply of different ways of doing things among the 12 
regions of BIA.
    So we're going back to the drawing board to sort out how 
each of the regions do their business, identify a standard 
against which we can operate, and then try to automate the 
standard, instead of trying to modify software to do things 12 
different ways. So we're using contractors for that. We're 
looking at contractors for appraisal work, to augment the BIA 
team, we're looking at contractors to help with survey. Because 
right now there's too big a burden and a bottleneck with 
cadastral survey in BLM. There's a number of other areas where 
we'll look at contractors to help. Records is one of them. We 
don't have the necessary staff within the Department to deal 
with records. So we're looking at contractors there.
    One other point, if I may, Mr. Chairman. I'd like to 
respond to Mr. Homan. We looked at this issue of taking the 
responsibilities outside the Department. And certainly, the 
Department would be pleased to work with you and other members 
of Congress to critically examine that issue again. There 
hasn't been any effort on the part of this Administration to 
try and protect the job duties at the Department of Interior. 
It's been rather to recognize those are our duties for the time 
being, and we're going to do the best we can with them. But 
we'd be happy to work with Congress to look at other solutions, 
if that appears to be the course of action that's needed.
    However, I would suggest that in our efforts with the Task 
Force, we put that option on the table. And one of the 
considerations that both Congress and the Department has been 
sensitive to is, what do the beneficiaries want? What do the 
tribes want out of this process? Do you want it to be outside 
the Department? Because if they don't want it, then both 
Congress and the Administration have the option of imposing 
that solution upon the beneficiaries. And that may be 
necessary. It may not be necessary, but it's a consideration 
that we have to build in, that they have a say in this, too. 
We're managing for them.
    So this is a participatory trust. They are participants in 
the process, and somehow we have to get past that issue of what 
do you want in this process as well.
    Senator Campbell. The National Congress of American Indians 
meets in November. Do you have any further plans to meet with 
the commission before then?
    Mr. Cason. To the best of my knowledge, we're meeting this 
Thursday. We have a scheduled meeting in October in Billings, 
MT. That's an issue that we'll address on Thursday, as to 
whether we should have that meeting and what the agenda will 
be. Those two are planned before November.
    Senator Campbell. As I've mentioned several times before, 
they convene in November. I'd like to have some kind of a draft 
that they can look at, not a bill, but something for them. So I 
would appreciate any input.
    Can you all stay for a few minutes? That was our call to 
vote, and I understand Senator McCain is due to attend right 
after the vote. So if you can hang around for a few minutes, 
I'd appreciate it.
    We'll stand in recess for 10 minutes.
    [Recess.]
    Senator Campbell. The committee will reconvene. I did see 
Senator McCain over on the Floor, he is on his way over now. As 
he had originally asked for this hearing, I think we need to 
wait for him.
    Let me ask just a couple of others, though. Mr. Slonaker, 
in your testimony you mentioned several times about 
transparency being needed. What is it now that you think is not 
transparent about the process?
    Mr. Slonaker. I don't think, at least when I left the 
Department at the end of July, I still don't think there was 
quite the transparency about a lot of what I'm going to 
continue to call the sub-projects for trust reform that there 
should have been. As they have been reported in the court 
reports, I think there is a long ways to go there. The largest 
problem is finding the capable project managers, Senator, so 
that they can plan their activities, understand what it 
requires, and then to get it done, and also to report it 
accurately. I think, as Mr. Cason has already mentioned, we had 
brought EDS in and I think that effort is basically the only 
effort that's going on in trust reform right now, but it's an 
important one. Because they are doing the as-is study of trust 
systems. From there they will have make the leap to what it 
should be, what the system should be. That's going to be a 
major step to come.
    Senator Campbell. The concept that the Secretary came up 
with about 10 months ago and kind of ran into a brick wall, the 
BITAM concept, how do you view that? Do you think that's a step 
in the right direction?
    Mr. Slonaker. Yes; I endorsed that. Because what I liked 
about BITAM is that it took those people who were responsible 
for trust and put them in, a fiduciary trust, managed for the 
assets, and put them into a single organization so they could 
focus on their trust duties and have no competing priorities. 
So I like the single chain of command idea.
    The problem I have, and frankly, I feel differently about 
it now than I did 10 months ago, is that I think there is still 
lacking the will to really get the job done . So that's why I, 
as you heard me earlier, recommend that it's going to take an 
outside agency to do it.
    Senator Campbell. And that outside agency, let me ask you 
and Mr. Homan too, as you probably know, one of the 
disagreements, one of the things that's holding up some 
progress is that the tribes want an outside and independent 
group that basically, as I understand it, would have the 
authority to overrule the Secretary if they disagree with the 
decisions. The Administration has said very simply that's never 
been done in the history of the United States, that any outside 
commission has overruled a Federal agency, and they simply will 
not go with that idea.
    How do you view that, or do you have any idea about where 
we can find some kind of compromise with an outside quasi-
independent commission but would still satisfy the 
Administration's belief that they should not have veto 
authority? I'd like to hear from both of you.
    Mr. Slonaker. Let me just make two comments about that. 
First of all, I'm uneasy with the notion of a commission. A 
commission suggests a committee, and I don't know of anything 
that's been run well by a committee.
    Senator Campbell. We'll testify to that.
    Mr. Slonaker. So I think it needs to be a single executive 
director. Whether you call it a special trustee or whatever it 
is, it needs to be a single executive director who has a board, 
much as the Special Trustee has had under the 1994 Act, of 
trust experts as advisors to him or her and also prominent 
Indians, tribal leaders and people who, and representatives of 
individual Indians who understand what trust is from the Indian 
standpoint. So I'm leery to begin with, Senator, of the notion 
of a commission.
    Senator Campbell. So what you basically are saying is that 
advisors or whatever the word would be, they would work within 
the existing framework rather than be totally independent?
    Mr. Slonaker. I think the special trustee or the executive 
director, whatever you call it, needs to be outside the 
organization. I think that advisory board needs to be outside 
the Interior organization as well.
    The second part of it, though, is that I think you need to 
be able, the outside agency needs to be able to compel the 
trust reform and accounting to be done. I'm particularly 
concerned about trust reform. There is no reason that the 1994 
Act didn't work or isn't working. But it relied, unfortunately 
with 20-20 hindsight, too heavily on the will of the Department 
to get the job done. And that's the part that didn't work.
    Senator Campbell. Well, I've heard a number of times it's 
been underfunded. But as I understand it, since 1994, roughly 8 
years, we've put in between $600 million and $700 million into 
this effort. And it's roughly $85 million this year.
    Mr. Slonaker. Senator, funding is not the problem. It's the 
resources of the management people as well as the will to do 
it.
    Senator Campbell. Thank you. Mr. Homan, would you comment 
on this?
    Mr. Homan. I agree. It goes back to management. That is, or 
mismanagement, I should say. That is why, I think to back up to 
your question, I don't believe the secretary of the Interior 
should have a veto power, if it's moved to a third party GSE. 
No other GSE operates under such a regime.
    Senator Campbell. The way I understand it, the tribes would 
like the veto over the Interior Department.
    Mr. Homan. I understand that, too. But I don't believe that 
any other GSE operates under that type of regime. And to the 
first question, if you move this operation to a GSE, an RTC 
type of corporation, it should have the full power of the 
delegated powers of the United States as trustee. Remember, the 
Secretary of the Interior is only a delegate trustee. In law, 
the real trustee is the United States Government. Therefore, 
you can switch from Department to Department. The Department of 
the Interior didn't have this authority until 1849. Before 
that, the Bureau of Indian Affairs existed as an independent 
agency, reporting directly to the Congress, like the bank 
regulatory agencies and particularly the Federal Reserve and 
the FDIC. They are appointed, their managements and boards are 
appointed by the President. But they operate independently and 
they report essentially to the Congress through oversight.
    But they don't have any other administrative executive 
branch, agency, with veto power. Nor should the beneficiaries 
in this case have any sort of veto power over the actions of 
the trustee. So my idea would be to move the trust activities, 
and that's not all of the activities of the Bureau of Indian 
Affairs, it's a very small part, probably less than 1,000 
people. Those trust activities are asset management, funds 
management and the land title and records. I'd move that into a 
separate agency reporting to the Congress.
    Senator Campbell. There have been a few successes and a 
number of failures in reaching a compromise. But I appreciate 
your comments, because it reinforces my belief that we need 
more help from independent entities, as outlined in your 
testimony.
    Before I ask for Senator McCain's questions, if Mr. Cason 
would like to make one more comment.
    Mr. Cason. I would like to make a brief comment. Mr. Homan 
raises the issue about beneficiaries having a veto. That 
certainly is something that we ought to talk about. In the 
course of making our proposal for BITAM, Tom is a special 
trustee and this Secretary, we're in agreement on the BITAM 
proposal. This is the right thing to do, to separate the 
fiduciary trust responsibilities out into a separate 
organization so they can be managed separately. And we 
submitted a reprogramming to Congress to ask for the ability to 
do that and basically, the Indian tribes reacted adversely and 
there was concern on Capitol Hill about us moving forward 
without the beneficiaries being part of the solution.
    So whether there is a stated veto or not, there is at least 
an implicit one that we need to try to work together with the 
beneficiaries on solutions that they also agree to before we 
move forward to deal with trust reform in this kind of a 
meaningful way.
    Second, just as a comment on the commission, the Department 
was willing to work with the tribal task force on several 
options for some kind of outside advisory body. And the 
sticking point that we ran into was the issue of lining up 
authority and responsibility and liability. And that what was 
being proposed by the Task Force members was a commission that 
would direct the Secretary to do certain things and had the 
ability to sanction the Secretary if the Secretary did not do 
those things, but had no responsibility for the results, had no 
responsibility for ensuring that resources were available to do 
those things.
    So we well could have been in a position that the 
Commission directs the Secretary to do something for which 
there were no budget resources, and if Congress chose not to 
provide those resources, then the Secretary would be sanctioned 
for failure to do things. And that was a problem.
    We had suggested in the alternative an advisory committee 
to the Secretary, an advisory committee to Congress, so 
Congress could review the results and direct the Department to 
do certain things through the normal authorizing appropriations 
process. But we didn't find a meeting of the minds at that 
point.
    Senator Campbell. I appreciate that. Thank you.
    Well, I've concluded the questions I want to ask. Senator 
Inouye may have some. He's not with us today, but he may submit 
some to you in writing, if you would answer those.
    I'd like to invite my colleague, Senator McCain, who asked 
for this hearing, if he would like to ask some questions.
    Senator McCain. Thank you, Mr. Chairman.
    Mr. Cason, did you say that you were worried that if a 
settlement was reached, or an agreement was reached between the 
tribes and the Department of the Interior that Congress 
wouldn't fund it?
    Mr. Cason. What I just stated is, if the independent 
commission that was under consideration directed the Secretary 
to do things for which the Secretary did not have budget 
resources and the Congress decided not to fund it----
    Senator McCain. If the Secretary accepted it, which 
secretaries have accepted recommendations of hundreds of 
commissions over the years that I've been here, what would make 
you think that, now, if the Secretary didn't accept it, that's 
one thing. But if the Secretary accepted it, what makes you 
think that Congress wouldn't fund it? I mean, if Congress 
didn't fund it, it would be a clear betrayal of our 
responsibilities. I don't follow your logic.
    Mr. Cason. Okay, Senator, perhaps you have a different 
perspective you'd like to explain to me.
    Senator McCain. I have the perspective of serving 20 years 
in the Congress. When a commission suggests something, and the 
stamp of approval by the Federal Government is on it, of course 
Congress funds it.
    Mr. Cason. It's just been my observation, and perhaps in 
error, that the budgetary process is one of competing 
priorities and competing resource requirements. Sometimes not 
everything gets funded.
    Senator McCain. Well, here we are, welcome back, Mr. Homan, 
welcome back, Mr. Slonaker. Here we are. Years and years, you 
know, in the words of Yogi Berra, deja vu all over again. Still 
no progress, still Native Americans that have no accounting or 
any compensation or what they deserve that they've placed in 
the trust of the Federal Government. Two Secretaries of the 
Interior held in contempt by a Federal judge. I've never heard 
of such a thing before. I don't know if Senator Campbell has or 
not.
    And Mr. Slonaker states that he resigned from his appointed 
position under pressure, following in the footsteps of the 
first special trustee, Mr. Homan, who resigned in protest of 
Secretarial actions, which Mr. Homan believed usurped his 
authority. So we've had two special trustees, both of them were 
not allowed to, at least in their view, carry out their 
responsibilities. And here we are again, with still Native 
Americans being treated in a cavalier fashion which is pretty 
remarkable. I don't know any other group of Americans that 
would be treated in this fashion, to be honest with you.
    Let me throw something up, particularly to Mr. Homan and 
Mr. Slonaker. And I'd be glad to hear your comments, too. There 
is a certain precedent for this kind of problem in treatment of 
Native Americans, and that's the issue of water in the west. We 
all know that by certain treaty, we guaranteed Native 
Americans, specifically talking of my home State of Arizona, 
certain water rights. Those rights were ignored for however 
long the life of the treaty.
    In recent years, we've entered into negotiations with 
Native Americans to settle those water rights, and we've had a 
number of agreements in Arizona. We now have a very large one 
pending. Recognizing that we can never give Native Americans 
back the water that they didn't get, it's a perishable 
commodity, most people believe that there's no way we're ever 
going to have a full and complete accounting of the trust 
funds. Most people believe that the point now is to try to 
settle this so that this practice just doesn't go on ad 
infinitum and ad nauseam.
    So trying to think a little bit outside the box, I'd be 
interested in all three witnesses' opinion, beginning with you, 
Mr. Slonaker.
    Mr. Slonaker. Let me say that there are a couple of issues 
here. One is that there is the accounting, or what is often 
referred to as the historical accounting, and that's really 
what you're alluding to specifically. I would agree with you 
that at some point, in my own personal opinion, it's probably 
going to have to be negotiated, because there isn't any other 
way. But in the meantime, it seems to me the law says that the 
Government should find out every piece of information they 
possibly can.
    Senator McCain. And we haven't done that.
    Mr. Slonaker. No; not to any meaningful extent.
    The other point, though, is that----
    Senator McCain. Could you venture an opinion as to why we 
haven't?
    Mr. Slonaker. I don't think there's been a will to do it, 
to tell you the truth. I don't think there's been a real 
interest in really exerting the effort and acknowledging the 
trust law that exists that requires it, quite frankly.
    Senator McCain. I hope the witnesses don't mind if we have 
a little dialog here. Does that mean taking it out of the 
Interior Department?
    Mr. Slonaker. Yes; I think it does. I think at least taking 
it out in the sense that it's being directed or required, 
forced, from the outside, yes.
    Senator McCain. If you were dictator, what law would you 
write tomorrow to resolve this issue?
    Mr. Slonaker. I would revise the 1994 Act and put the, call 
it the special trustee or call it something, put somebody on 
the outside in an outside agency. We've talked about a 
Government-sponsored enterprise earlier that would have the 
capability, until the accounting is done, and until the trust 
practices, procedures, records and all that, the systems are 
reformed and reconstructed, until that time, to actually 
conduct, direct the trust from the outside. The only reason I 
suggest that is that, as I said a bit ago, the 1994 Act could 
have been successful. But with 20-20 hindsight, it wasn't, 
because there's not the will to get it done. But I think there 
has to be something on the outside.
    Senator Campbell. If I might tell my friend from Arizona 
that we did float a draft to do something along this line in 
the year 2000. Unfortunately, it met with some resistance from 
both the agencies and the tribes, too. It might have been 
partly our fault, because we didn't make it perfectly clear 
that it wouldn't erode trust responsibility and it wouldn't do 
some of the things that they worried about. But it's still a 
possibility, if we can get the support to do it.
    Senator McCain. Mr. Homan.
    Mr. Homan. Yes; first of all, with respect to moving the 
trustee functions outside the Department of the Interior, I 
have long recommended that. I don't think that the Department 
is willing, and I don't think it's able, given its management 
structure, to conduct the necessary reform effort.
    Senator McCain. Maybe the Treasury Department?
    Mr. Homan. I'd move it into an RTC type environment, such 
as Senator Campbell suggested. Make it an independent board. 
But more important, like the RTC, I believe you can outsource 
the asset management to a large U.S. trust company, outsource 
the funds management function and outsource the records 
management function, which are the three trust activities that 
seem to be causing the most difficulty.
    I think that in regard to settlement, I would agree with 
you. I think what's holding up that settlement, and I'm reading 
between the lines here, or one of the things that's holding it 
up, is that the Department still is unable to account today for 
yesterday's transaction, much less an historical accounting. I 
don't believe it's able to do an historical accounting, for the 
simple fact that most of the records, particularly with respect 
to the electronic records for the IIM accounts do not exist 
before 1985. And in trust law, you almost have to go back to 
the original treaty or original date, in this case 1888, as to 
when that trust was opened. And in common law, trust practice 
imposed by the same Government, you have to keep accounts and 
records open so long as the trust is open. And these accounts 
have been open since 1888 or whenever the particular governing 
instrument, the treaty originated.
    So the Government is going to have to come to the table and 
settle at some point. One of the things that's holding that 
settlement up though is that there continues to be exposure to 
liability. If you don't have a good accounting system, a good 
record keeping system, and Judge Lamberth's ruling last week 
indicated that they still do not have that, then the 
transactions of today and tomorrow, are going to be subject to 
exposure. So how can a beneficiary say, all right, I'm willing 
to settle for, you name your amount, but I don't want to give 
up the right to sue the Government for further breach of trust, 
or a further accounting, since they're unable to do it? And 
every beneficiary has the right to sue the Government for a 
breach of trust, and for an accounting of the assets in the 
trust.
    Senator McCain. So you're the dictator now. What is the 
legislation, what actions need to be taken?
    Mr. Homan. I would model it after the RTC, which was used 
to resolve 2,900 bank and thrifts failures in the early 1990's. 
My big issue with the former Secretary was strictly management. 
You can't institutionalize reform when half or better by any 
study of your managers are so-called incompetent to the task 
and can't be retrained because of the obsolescence in their 
management systems. And so, it's very difficult to deal with 
that. The way they dealt with the same issues, with the so- 
called bankrupt FSLIC, which was the insurance corporation, and 
the Federal Home Loan Bank Board bankruptcy was that they 
eliminated those agencies and the employees, made them reapply 
for their jobs. Most of them got re-hired by the RTC. But it 
gave the Government an opportunity to start afresh with new 
management, and then outsource to the private sector a good 
many of the activities.
    Senator McCain. How much money are we talking about, in 
your estimate?
    Mr. Homan. Less than the exposure to the Government that 
mounts every day.
    Senator McCain. Do you agree, Mr. Slonaker?
    Mr. Slonaker. I do, Senator.
    Senator McCain. Mr. Cason, you just heard a proposal, 
outlines for a proposal from two former special trustees. Do 
you have any comments?
    Mr. Cason. Actually, I do, thank you. Regarding settlement, 
certainly doing a comprehensive accounting is a difficult 
challenge for the Department. We've been at this process for 
decades, well over 100 years. We've had a variety of systems, 
we've had tons of paper, made and lost, we've had various 
computer systems. There are difficulties in doing it, there's 
no question about that. The process will not be perfect, and at 
best what we'll end up doing for the $2.5 billion for our 
accounting plan that we submitted in July is a best efforts 
accounting. We can't fix the things that are missing, and we 
can't fix some of the systemic problems, so we'll do the best 
that we can. And there will be people at the end who will not 
be satisfied with that.
    With regard to settlement, we are interested in that kind 
of an option, if we can do something that's reasonable. In 
terms of defining reason, it's my understanding that the 
plaintiffs have been quoted in the press as they think that 
they're owed as much as $137 billion as a result of this 
problem. And that looks like a pretty hefty price tag. 
Certainly it would be open to negotiation and perhaps a lower 
figure. But there's a lot of money potentially at stake, or 
perceptively at stake.
    Our sense at this point is that while the accounting 
process may not be perfect, that it affords us an opportunity 
to learn much more about the specifics that are there and 
perhaps narrow the differences down so the negotiation might be 
a meaningful process in a fiscal ball park that could be 
mutually acceptable to all parties.
    With regard to your dictator question, the Department 
basically started off in much the same environment that these 
gentlemen did, which is, we needed to isolate the fiduciary 
trust responsibilities of the Department into a separate 
organization. That was our BITAM proposal. Where it differs 
from what's been suggested by the former Special Trustees is 
that the BITAM organization would be inside the Department, but 
would be separate and focused exclusively on managing our 
fiduciary trust responsibilities. But it would not have been a 
large step to move from that type of option to an outside of 
the Department RTC type organization.
    We agreed up front with our BITAM proposal that those 
duties needed to be separated into a separate organization. 
However, when we started that process, that proposal was 
uniformly objected to by Indian Country. They came here to 
Capitol Hill and made that point. We met with them in 
consultation meetings and got a uniform response to that 
effect. Since them we've been involved in a task force with 24 
tribal leaders from across the country who have uniformly 
rejected that kind of an approach.
    Senator McCain, we put on the table with them a set of 
other options that were generated by Indian country, 29 other 
options, some of which were an RTC type organization, one of 
which was a Department of Indian Affairs type organization. And 
the tribal task force leaders rejected those approaches in 
favor of keeping the job within the Department.
    There's probably a variety of reasons for doing that, but 
that has been on the table, and before you were able to join 
us, I committed to Senator Campbell that the Administration 
would be happy to work with Congress to look at that kind of an 
option to take it outside the Department if that's the will of 
Congress.
    Senator McCain. Thank you, Mr. Cason. My concern is that at 
least on this side of the room there is a lack of credibility 
about the Department of the Interior being able to carry out 
these responsibilities. I certainly don't mean that as a 
personal comment, but I think the record is pretty clear, as I 
said earlier, two Secretaries being held in contempt is an 
unprecedented activity. These two individuals left lucrative 
and pleasant surroundings in order to serve the country, both 
were pressured out of their jobs. And I participated in the 
confirmation hearing of both of these individuals, they're fine 
and upstanding and experienced Americans.
    So we have a very large credibility gap here. Now, if as 
you say, and maybe I should know this, but if as you say the 
Native Americans seem unwilling to try new ideas or a new way 
out of this besides just going to court, then they'll have my 
sympathy but not my support. Because we've got to do something 
different. If we don't do something different, in Senator 
Campbell's and my declining years, we will be back here year 
after year, perhaps with a third special trustee who has 
resigned under pressure.
    So we've got to do something different. It's time we all 
sat down at the table with the benefit of the experience of the 
two former special trustees, and in all due respect to your 
responsibilities, Mr. Cason, you have a lot of 
responsibilities. These two men solely focused on this single 
issue. And to lose their knowledge, expertise and experience I 
think would be a terrible waste, because of the time and effort 
that they put into it.
    Mr. Chairman, I suggest that we sit down with the tribes 
and sit down with everybody else and if as Mr. Cason says, the 
tribes are unwilling to do this, then it will be like the water 
issues. Water issues have been in court for 50, 75, 100 years, 
and the lawyers do very well by that. It's wonderful, these 
water issues are wonderful for lawyers. There's generations of 
lawyers that have done well financially. And if that's who the 
tribes want to listen to, and stay in court and stay in this, 
or do they want to start thinking outside the box. That's their 
choice. As Senator Campbell has mentioned, if they want to 
block it, they can block it. But I would start listening to 
their people instead of their lawyers. That's my advice to the 
Native Americans. Start listening to the people that are not 
getting the benefit here, whereas the lawyers are doing very, 
very well by doing good.
    I would just like to have any additional comments, starting 
with you, Mr. Slonaker. And before I do, I'd like to thank both 
for you for your service, for your efforts to try and help 
people that very, very badly need help. I've often said that if 
any other group of Americans had been mistreated financially in 
this way, it would be a national scandal. But it doesn't seem 
to be with Native Americans, which will be a source of 
puzzlement to me for a very long period of time. Mr. Slonaker.
    Mr. Slonaker. Thank you, Senator. I'd just make one comment 
at the end here. We tend to talk a lot about what the tribal 
leaders seem to want, and the tribal task force, which was made 
up of tribal leaders. I think we need to keep in front of us 
the fact that a significant amount, although by no means the 
majority of the assets that are in question here, these trust 
assets actually have individual Indians as the beneficiary. I 
see frankly, as a general statement, the individual Indians 
being under-represented in this whole process. And I think 
that's tragic. It's very tragic.
    And so I would add that last comment.
    Senator McCain. Thank you. Mr. Homan.
    Mr. Homan. That was one of the points I was going to make, 
that there is a large, one of the first advice I got when I 
became Special Trustee is that there is a large difference 
between individual Indians' lands, in this case about 11 
million acres, and the tribal lands. By and large, I think Tom 
would agree with me, most of the accounting, record keeping and 
other difficulties that we've discussed today come from the 
management of those 11 million acres which are scattered all 
over the United States. No one represents these individuals, 
and particularly the tribes do not represent them.
    The tribes have their own chief financial officers for the 
most part. Only 50 tribes, if I remember my statistics 
correctly, have more than $1 million at stake in their 
Government trust accounts. Therefore, the other 500 odd tribes 
do not have the same interest in trust reform as the tribes 
that have significant trust accounts. And none of them have 
really anything to do with the management of the individual IIM 
accounts, which is a whole separate operation, managed roughly 
by the same people. But the privacy rules, etc., are different.
    I beg to differ with the Department when it says Indian 
Country is against this. I just can't believe that. Certain 
tribes are against it. But I know, as Tom said, I don't think 
anyone has asked the IIM beneficiaries here who have large 
amounts of money at stake. The only people that are 
representing them today in the Federal Government seems to be 
Judge Lamberth, unfortunately.
    Senator McCain. Thank you. Mr. Cason, I'd be glad to hear 
any response that you might have. I hope you understand that 
the criticisms and frustration that we express here are not 
directed at you as an individual. I am sure you are a fine 
public servant, and we appreciate your service. But I hope you 
also understand our frustration as this Committee has a special 
responsibility to Native Americans, as you do. Please go ahead.
    Mr. Cason. Thank you, Senator, for your comment. I don't 
take any of the criticism or the questions or the intent of the 
questions personally. We understand that this has been a long 
time problem and that it needs to be worked on. It is not an 
acceptable way of doing business and it hasn't been for a long, 
long time.
    Where we are in the Department is we recognized that we 
have responsibilities and that we've taken on a number of 
initiatives to improve things. But there's a long way to go to 
get there, because a lot of the fundamental things that need to 
be there in terms of management, in terms of systems, in terms 
of funds and in terms of programs aren't there, or they need to 
be rebuilt in order to manage, like a trust. One of the issues 
is, for a long time, this program has been managed as another 
Government program, it's just another Government program and we 
go through the motions, try to do a good job with the resources 
that are available and the programs and the institutions the 
way they are.
    Now our expectation seems to me to be evolving into, this 
is actually a trust like a private sector trust and that we 
need to manage it much more like a trust. And that has a whole 
different set of expectations that we're trying to meet, which 
requires a lot more effort or a different paradigm.
    So your suggestion that we need to do things differently, 
we agree. And we would be happy to work with you and the rest 
of the members of Congress to try and work our way through what 
is that new way of doing business because the paradigm we 
operate under right now has a lot of difficulties with it. We 
need to look at other things. A couple of examples I think 
would be important is fractionation. We have an issue where 
original allotments that were granted to Indians back in the 
late 1800's or 1900's have successfully been subdivided into 
undivided interests, some as many as 900 different owners of 
one allotment.
    That brings a huge administrative burden that a private 
trust wouldn't put up with. In a private sector trust, you 
wouldn't be trying to account for 900 different owners in one 
parcel of property. It's expensive, it's counter-productive, 
you have to keep track of the title interest of all, the 
ownership interest of all. If there's a lease on it, say you 
have a $200-grazing lease, you have to divide it into 900 
different interests and keep accounts for all those. There's a 
lot of things that don't make sense about the trust that we 
need to take a look at.
    So there are fundamental systems to meet our trust 
responsibilities, and there are some things of how the trust 
has evolved over time that need to be adjusted if we're going 
to do a good job in the future. So we'd be happy to work with 
you and the other members of Congress to do that.
    Senator McCain. I appreciate your comments. I appreciate 
your willingness. But facts are facts. Someone who had your job 
before you sat in your chair and said exactly the same thing a 
number of years ago. I introduced a bill that would require a 
negotiated process with tribes in order to develop standards to 
look at an independent commission and a single line of 
authority. It was opposed by the Department of the Interior. So 
therefore, it didn't go anywhere. We couldn't even have 
negotiations because it was opposed.
    And again, this is an unusual circumstance. Twice the 
Secretary of the Interior has been held in contempt. Twice the 
special trustees have been forced out of their jobs. This 
borders on a national scandal.
    So I appreciate your willingness. Now I'd like to see some 
action. I'd like to see some specific proposals from the 
Administration. I'd like to see something that we can work on, 
either the models that have been introduced or others. 
Unfortunately, at least in the view of a Federal court judge, 
that hasn't been happening from the Department of Interior.
    Mr. Homan and Mr. Slonaker, I again want to express my 
appreciation to you for doing the job that you did on behalf of 
people who certainly needed your help. I'm sorry and apologize 
that your efforts were prevented from being successful for a 
broad variety of reasons. But it's very unfortunate and the 
people who really suffer from it are the Native Americans who 
did not receive what we had hoped would happen when both of you 
took your jobs.
    I thank you, Mr. Chairman.
    Senator Campbell. Thank you. Let me mention a couple things 
in closing. As you know, Mr. Cason, we had a bill that did pass 
to consolidate lands a few years ago, we did it as a 
demonstration project with three tribes. It was very 
successful. All the feedback we got back was that it was 
working and tribes were ready to have that expanded. There is a 
bill in now, as you probably know, to expand that. We haven't 
got it passed yet, but I'm still in hopes that we're going to 
get that done by the next two weeks. We may not. But it will be 
one of the things I will try to address when we come back in, 
because that's part of this whole picture as has been mentioned 
by all three of you.
    I was particularly interested in Mr. Homan's comments about 
maybe individuals not being represented. Of course, that was my 
thesis behind offering a way to opt out of this whole class 
action thing and settle individually, too, which has gotten 
some attention. Certainly not positive attention by the 
attorneys, because I think the attorneys for the tribes 
probably see it as somewhat of a threat and would rather keep 
it as a class action lawsuit. But there are people actually 
dying waiting for their money. I think it's time, as Senator 
McCain does, that we start cutting some checks and getting them 
the money that they own. It's their money. We haven't been able 
to do that.
    But one thing for sure, they elect their leaders just as 
our constituents elect ours. And clearly, we can't speak for 
every single constituent. In my view, you have to go with what 
you think is the right thing to do. I know that you've made a 
lot of progress with your last 12 meetings with the tribal task 
force, and hope you'll continue to make some progress too. But 
that single issue of the authority of the independent 
commission seems to be what's holding up most of the progress. 
I hope we're going to be able to find an answer to that in the 
next hearing or next meeting or two.
    Mr. Cason. Mr. Chairman, if I can comment, there were a 
couple of other issues that arose at the very end of the 
process, recently, that have been problematic. One is that our 
reorganization efforts and some of the other discussions that 
we've had with the task force have been sidetracked, perhaps, 
with some discussions about granting a private right to sue. 
And the essence of it is a request for the United States to 
waive its sovereign immunity to lawsuit and to grant private 
rights of suit. We've had discussions with the Department of 
Justice about that, and there's been some negative reaction to 
that. So we haven't found an accommodation on that point.
    Senator Campbell. On the private rights to sue, I'm not an 
expert on this, but the settlement with some of the tragic 
circumstances of 9/11 in New York, and the Government made an 
agreement to make a settlement, did they waive their rights to 
sue after they accepted the agreement?
    Mr. Cason. I'm sorry, Mr. Chairman, I don't know about 
that.
    Senator Campbell. Well, I won't pursue that. But I'd be 
interested in doing that with somebody, some expert in that 
area.
    Mr. Cason. And then there was one other item, which was to 
include in proposed legislation essentially trust standards. 
And there was some concern, again expressed by the Department 
of Justice, about having legislative trust standards at this 
point. The reason we're in court is that the Department is not 
performing up to the level of whatever the expectations are, 
and that trust standards may add another complication to that, 
in the midst of current ongoing litigation.
    So there were several items that were raised at the very 
last minute that have complicated discussions. From my 
standpoint, there have been a number of things that I think we 
can agree on between the tribal representatives and the 
Department of Interior that we could move forward if we're 
willing to move the things that we can agree on without it 
being an all or nothing proposal. And that's what we plan to 
talk about on Thursday.
    Senator Campbell. Well, I want to know what those are at 
your earliest convenience, those things you agree to. Because 
we're in hopes that we're going to be able to offer some 
options at the upcoming national meeting in November, full well 
knowing some will be for some parts and some against some 
parts. But at least we'll try to get this thing off dead center 
to get it moving again. It would be a big help if we could 
start from the things that we've already agreed to, or can get 
an agreement to by the time you meet again. So if you would 
work with our staff, we'd really appreciate it.
    Mr. Cason. We'd be more than pleased to do that. And then 
just as a final comment, Mr. Chairman, this is an opportunity 
for all of us, that we have all three branches of Government 
currently focused on the same issue. These problems have been 
here for a long time. The Department stands ready to do that. 
We will come up at any time to meet with members of Congress 
and the leadership to try and work our way through novel, out 
of the box solutions to this. So we'd be happy to do that, to 
work with the Committee.
    Senator Campbell. Thank you. And Mr. Homan, Mr. Slonaker, 
the efforts that you've put forth to try to resolve this, it 
didn't get done, but it wasn't your fault that it didn't get 
done. You both expended an awful lot of energy and probably got 
more than a few gray hairs for your work.
    I would also invite you to work with our staff, too. I know 
Senator Inouye is very interested in trying to resolve this, 
too. And if you could also have some input through staff about 
what the options that we can offer to try to get this off dead 
center, I would certainly appreciate it.
    Thank you, and thank you for appearing. This committee is 
adjourned.]
    [Whereupon, at 11:43 a.m., the committee was adjourned, to 
reconvene at the call of the Chair.]
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                            A P P E N D I X

                              ----------                              


              Additional Material Submitted for the Record

=======================================================================


 Prepared Statement of James Cason, Associate Deputy Secretary of the 
                                Interior

    Thank you, Mr. Chairman and Members of the Committee, for inviting 
the Department to testify today on the role of the Office of Special 
Trustee for American Indians (OST) in preparing and implementing a 
comprehensive plan for the overhaul of the management of Indian tribal 
trust funds.
    In August 2001, the Department identified various issues concerning 
the trust asset management roles of the Bureau of Indian Affairs (BIA), 
the Office of Special Trustee for American Indians (OST), and other 
Departmental entities carrying out trust functions. In response, an 
internal working group was created.
    The internal working group developed a number of organizational 
options ranging from maintaining the status quo to privatizing 
functions to realigning all trust and associated personnel into a 
separate organization under a new Assistant Secretary within the 
Department. These options were evaluated based on the best method for 
delivering trust services and other functions to American Indians and 
Tribal governments.
    While this internal review was underway, Electronic Data Systems 
(EDS) was undertaking an independent, expert evaluation of the 
Department's trust reform efforts. On November 12, 2001, EDS presented 
its report ``DOI Trust Reform Interim Report and Roadmap for TAAMS and 
BIA Data Cleanup: Highlights and Concerns'' in which it called for a 
``single, accountable, trust reform executive sponsor.''
    The Department decided to propose the formation of an 
organizational unit called the Bureau of Indian Trust Asset Management 
(BITAM). This option envisioned the consolidation of most trust reform 
and trust asset management functions located throughout the Department 
into a new bureau, BITAM. The Secretary believed this newly established 
Assistant Secretary position would have the needed authority and 
responsibility for improved trust reform efforts and Indian trust asset 
management. It became clear early in the Tribal consultation process 
however that the Tribal Leaders were opposed to BITAM.
    At a meeting held on December 13, 2001, in Albuquerque, NM, the 
National Congress of American Indians (NCAI) proposed the formation of 
a Task Force charged with providing alternative proposals to the 
Department on organizational alternatives to reorganize the management 
of trust services. This included reviewing the role of the OST. The 
proposal was that the Task Force's purpose would be to evaluate all 
available organizational options and to submit to the Department one or 
more alternatives to reform our trust management system.
    To further develop an improved reorganization plan and achieve 
broader consensus, Secretary Norton agreed to the creation of a joint 
DOI/Tribal Leaders Task Force on Trust Reform.
    The Task Force consists of two elected tribal leaders from each 
region, with a third tribal leader, from each region, acting as an 
alternate. The cochairs of the Federal team are Deputy Secretary Steve 
Griles and Assistant Secretary--Indian Affairs Neal McCaleb. They are 
joined by a number of other senior Department officials including the 
Acting Special Trustee and myself Members of the Task Force have spent 
an extensive amount of time on examining.the organizational issues 
within the Department. The Task Force has earnestly attempted to 
achieve progress on meaningful trust reform.
    The Task Force members created several generic composite options 
reflecting the best features and major elements from among the 28 
alternative proposals submitted by tribes, tribal organizations, and 
other interested parties. The Task Force agreed to initiate 
consultations on these options in early June, hold regional meetings 
throughout June and early July.
    On June 4, 2002, the Task Force presented to Secretary Norton its 
initial report containing its findings and recommendations on the DOI 
trust organization. The Report recommended that the BITAM proposal be 
replaced by one of the options advanced, which the Secretary has agreed 
to do. The report also recommends raising Indian interests to the 
highest level ever by proposing, as a possible option, the appointment 
of an Under Secretary to oversee Indian Affairs. In its report, the 
Task Force wrote that there is a real need for reform and that the 
status quo is not acceptable. We believe the current system must be 
improved.
    The Task Force presented to Secretary Norton five options for 
improving the Department's management of Indian trust assets. From 
among them, the Task Force recommended the options of creating a new 
Deputy Secretary for Indian Affairs, creating a different 
organizational subdivision at the BIA Level, and a composite of the two 
which envisions the creation of an Under Secretary of Indian Affairs 
and the grouping of BIA functions into logical units. During Task Force 
meetings, some Task Force members have expressed interest in an 
organizational structure that phases out the Special Trustee.
    The Task Force held meetings in Portland, OR, in July, and 
Anchorage, AK, in August to consider these options further. 
Unfortunately, as you are aware, we reached an impasse with regard to 
legislation implementing pieces of these options early this month on 
matters that were not related to organizational alignment.
    The effort that we have put into this consultation process is an 
indicator of its importance to the Department. The Department is firmly 
committed to finding an effective, equitable solution for improving the 
organization and management of Indian trust assets, both tribal and 
individual. Indian country deserves real reform, and the Secretary is 
committed to this goal. Any proposal we ultimately come up with will 
not have 100 percent support, but we are dedicated to improving the 
system, to fairness, and to ensuring that future generations of 
American Indians will inherit a trust management system that provides 
accountability to individuals and tribes. This concludes my statement. 
I will be happy to answer any questions the Committee may have.
                                 ______
                                 

    Prepared Statement of Paul M. Homan, Former Special Trustee for 
                            American Indians

    I am grateful to the committee for the opportunity to present 
testimony on the role of the Special Trustee within the Department of 
the Interior.
    The Failure of the Department of the Interior to Reform American 
Indian Trust Fund Management Programs and the Role of the Special 
Trustee
    On September 19, 1995 I was appointed the first Special Trustee for 
American Indians and served in that capacity until January 7, 1999 when 
I resigned rather than accept the reorganization of the Office of the 
Special Trustee set forth in Secretarial Order 3208 dated January 5, 
1999.
    The Order was the last of a series of Department of the Interior 
(Department) decisions taken over my tenure as Special Trustee to usurp 
the powers, duties and responsibilities vested in the Special Trustee, 
The Office of the Special Trustee (OST) and the Advisory Board by the 
American Indian Trust Fund Management Reform Act of 1994 (Reform Act). 
For all practical purposes the cumulative effect of these Departmental 
actions and policies deprived the Special Trustee, the Office of the 
Special Trustee and the Advisory Board of the independence and the 
authority that was intended by the Reform Act and the resources, 
principally managerial resources, necessary to carry out the duties and 
responsibilities of the Special Trustee and the Office of the Special 
Trustee.
    Since the Reform Act was passed in 1994, the Department's record 
regarding the role of the Special Trustee in trust management reform 
demonstrates over and over again that the reform efforts of OST were 
under-funded, under-staffed, delayed and otherwise frustrated in favor 
of higher Departmental priorities. The Reform Act was fundamentally 
flawed in one important respect in that it failed to provide the 
Special Trustee, the Office of the Special Trustee and its Advisory 
Board with the independence and the authority to carry out the purposes 
of the Act. More important, over the objections of the Special Trustee, 
the Department has failed to address the primary cause of the 
longstanding trust management problems: the mismanagement and neglect 
inherent in the Bureau of Indian Affairs, the resolution of which is 
required before any meaningful reform can be implemented. The result 
has been a near complete failure to date in bringing about any 
effective reform of the Man trust management activities of the 
Department and the Bureau of Indian Affairs.
    In 1997, as Special Trustee, I filed a strategic plan with the 
Secretary of the Interior (Secretary), OMB and the Congress as required 
by the Reform Act of 1994. As required by the Act, the submission was 
``a comprehensive strategic plan for all phases of the trust management 
business cycle that will ensure proper and efficient discharge of the 
Secretary's trust responsibilities.'' I wish to reaffirm a few points I 
made in testimony at the time as I believe, with a few exceptions, 
problems with the trust management systems and the prospects for reform 
are much the same today as they were then. Since my departure in 1999, 
1 have followed court filings, Congressional hearings and other public 
reports on Indian trust reform with a great deal of interest and have 
some more current observations as well.
    The Primary Problem with Trust Reform and the Government's Failure 
to Deal with It.
    The problems in the trust management systems are longstanding ones. 
Mismanagement and neglect have allowed the trust management systems, 
record keeping systems and risk management systems to deteriorate over 
a 20 to 30 year period and become obsolete and ineffective. For many of 
those years, including many years since 1990, the trust programs were 
seriously under staffed and under funded. The result was that the 
government increasingly was unable to keep pace with the rapid changes 
and improvements in technology, trust systems and prudential best 
practices taking place in the private sector trust industry. This gap 
will continue to increase until the reforms outlined in the Strategic 
Plan are funded and implemented.
    If recent filings by the Special Master and the Court Monitor in 
the IIM litigation (Cobell v. Babbitt) are indicative of the current 
situation, that gap has not been closed and the prospects for a timely 
solution are not very good.
    There are two contributing factors and one primary cause of the 
mismanagement and neglect that have contributed historically to the 
Indian trust management problems:

Contributing Factors to Trust Mismanagement and Neglect

    1. One of the historical factors impacting the trust management 
problems can be attributed to the trade-offs of financial and 
managerial resources which take place at every level of government 
between trust management activities (trust resource management, trust 
funds management and land title and records management) and other 
activities and programs of the Bureau of Indian Affairs, the Department 
of the Interior, the Administration and the Congress. History has 
consistently shown these politically expedient government tradeoffs of 
competing financial and managerial resources to be adverse and 
detrimental to the effective and proper administration and funding of 
the trust management activities.
    These trade-offs have been made and are continuing to be made even 
in the face of a long history of court cases, that have consistently 
held the trust relationship between the United States and the American 
Indians to be a distinctive one. Decisions of the Supreme Court 
reviewing the legality of administrative conduct in managing Indian 
property have held officials of the United States to ``moral 
obligations of the highest responsibility and trust'' and ``the most 
exacting fiduciary standards,'' and ``bound by every moral and 
equitable consideration to discharge its trust with good faith and 
fairness.''
    2. Another important factor contributing to trust management 
problems is the way the BIA is organized and manages trust management 
activities. The BIA's organizational alignment causes decisionmaking 
and management for Individual Indian Money (IIM) and Tribal issues to 
be an intricate and complex coordination process and an ineffective one 
at times.

Primary Cause of Trust Mismanagement and Neglect

    The primary cause of the longstanding trust management problems is 
lack of competent managerial resources to manage effectively and 
efficiently the trust management responsibilities to American Indian 
beneficiaries. Managers and staff of the Department and the BIA have 
virtually no effective knowledge or practical experience with the type 
of trust management policies, procedures, systems and best practices 
that are so effective, efficient and prevalent in private sector trust 
departments and companies. The BIA area and field office managers do 
not have the background, the training, the experience, and the 
financial and trust qualifications and skills, necessary to manage the 
Federal Government's trust management activities according to the 
exacting fiduciary standards required in todays modem trust 
environment. Thus, and through no fault of their own, and even assuming 
adequate financial and retraining resources were made available, they 
are not capable of managing effectively and efficiently the Federal 
Government's trust management activities on a par with that provided by 
private sector institutions to their trust customers.
    The lack of trust managerial competence and the lack of financial 
trust orientation and focus throughout the BIA and the Department of 
the Interior have been institutionalized over many years and are now 
inherent in the BIA organizational culture. It is the reason in large 
part:
    A. Why the BIA has never originated meaningful reforms of the trust 
management processes in the last 30 years.
    B. Why the BIA has resisted and ultimately failed to implement 
nearly all of the meaningful reform efforts attempted in the last 30 
years.
    C. Why a new organizational structure, new management and massive 
retraining are necessary for the future management of the Federal 
Government's trust responsibilities to American Indians and the 
management of the implementation of the reforms identified in the 
Reform Act of 1994.
    For over 20 years knowledgeable and informed professionals have 
called the Bureau of Indian Affairs the worst managed agency in 
government. Every outside study, indeed, most internal studies I 
researched as Special Trustee agreed with that conclusion.
    My own research while Special Trustee led me to conclude that the 
vast majority of upper and middle level management at the Bureau of 
Indian Affairs were incompetent and could not be retrained to manage 
the trust management activities on a par with that provided by private 
sector institutions to their trust beneficiaries. It was also my 
conclusion that the natural starting point for any reform effort 
designed to address mismanagement and neglect should be the removal of 
incompetent middle and upper management at the BIA and at the 
Department. It is axiomatic in private sector restructuring that if 
management is the problem, management must be removed and replaced if 
restructuring and reform is to be successful. This formula was used 
successfully in all five of the financial institution resolutions I 
participated in and managed while in the private sector. The formula is 
used over and over again in the restructuring and resolution of 
countless public and private institutions in ``extremis''. Surely, no 
objective observer can doubt that the Bureau of Indian Affairs has been 
in ``extremis'' for sometime. Nevertheless, as well-known, clear and 
practical a remedy as this is, I also observed that in previous reform 
efforts over the last 25 years, no senior manager at the Bureau of 
Indian Affairs or Department had been removed for incompetence. In 
addition, every reform effort in the last 25 years had been left 
largely in the hands of the very same incompetent BIA managers who 
contributed to the problem in the first place.
    While Special Trustee, I became convinced and still believe that 
the Department did not and does not have the will to address the 
``mismanagement'' issues and force out the incompetent managers, nor 
was and is the Department likely to attract competent managers willing 
and able to undertake a timely reform effort within the Department of 
the Interior. Without both, no reform effort can succeed. I therefore 
recommended to the Secretary of the Interior in the 1997 Strategic Plan 
that the Department should support the establishment of an independent 
agency, outside the Department of the Interior, to manage the Indian 
trust management activities and the reform effort. The Secretary 
instead opted for the Department's historical approach to reform and 
decided that any reforms would be undertaken solely by the Department 
of the Interior. Again, in August 6, 1997, I recommended that the 
reforms being considered in what later became the High Level 
Implementation Plan not be left largely in the hands of the Bureau of 
Indian Affairs. The Secretary again opted for the Department's 
historical approach and decided in favor of the BIA's managing most of 
the reforms of the High Level Implementation Plan.
    The Department currently is using the same basic historical 
approach to reform, apparently with as little success as the previous 
Administration. Recent court filings in the IIM Litigation indicate 
just how unsuccessful the High Level Implementation Plan and successor 
reform plans have been. Based on these filings, just last week on 
September 17, 2002, U.S. District Judge Royce C. Lamberth held 
Secretary of the Interior Gale A. Norton and a senior aide in contempt 
of court for deceiving him about the agency's failure to reform the 
trust fund activities. He found four instances where Secretary Norton 
and Neal McCaleb, assistant secretary for Indian affairs, had committed 
fraud on the court, and the judge held them in contempt for failing to 
abide by a 3-year old court order to begin major reform of the trust. 
Just a few findings from Judge Lamberth's 267 page opinion reinforce 
and support some of the points I made above but in much stronger and 
more eloquent terms:
    ``The agency has indisputably proven to the court, Congress, and 
the individual Indian beneficiaries that it is either unwilling or 
unable to administer competently the trust,''
    ``Worse yet, the department has now undeniably shown that it can no 
longer be trusted to state accurately the status of its trust reform 
efforts. In short, there is no longer any doubt that the secretary of 
the Interior has been and continues to be an unfit trustee-delegate for 
the United States.''
    ``the Individual Indian Money trust has served as the gold standard 
for mismanagement by the Federal Government for more than a century. As 
the trustee delegate of the United States, the Secretary of the 
Interior does not know the precise number of IN trust accounts she is 
to administer and protect, how much money is or should be in the trust, 
or even the proper balance for each account.''

Circumstances Warrant an Alternative Structure Outside the Department 
    of the Interior to Reform BIA and the Indian Trust Management 
    Programs.

    Managerial incompetence, mismanagement and neglect in the 
Department's management of the Indian trust management activities are 
rampant and have resulted in conditions that are unacceptable by any 
reasonable standards and continue to do significant harm and damage to 
American Indian trust beneficiaries. They have also caused permanent 
damage to the core trust management systems the government uses to 
manage the Indian lands and moneys. These defective systems prevent the 
government from meeting the fiduciary, accounting and reporting 
standards required by the American Indian Trust Fund Management Reform 
Act of 1994 and standards of ordinary prudence applicable to all 
trustees, public or private. This serious breach of trust exposes the 
government to liability and loss that compare to the exposure and 
losses the government experienced in resolving some of the largest bank 
and thrift failures during the financial crisis of the late 1980's and 
early 1990's. Until ``mismanagement'' issues are addressed at the 
Department and Bureau of Indian Affairs, no meaningful reform can take 
place and the government's exposure to loss and liability to American 
Indian trust beneficiaries will continue to escalate.
    The record shows and I believe that the Department does not have 
the will or ability to address the ``mismanagement'' issues and force 
out the incompetent managers at BIA, nor is the Department likely to 
attract competent managers willing and able to undertake a timely 
reform effort within the Department of the Interior. Without both, no 
reform effort can succeed. In the circumstances, alternative reform 
structures managed and implemented outside the Department 8 of the 
Interior should be considered by the United States, the ultimate 
trustee of the American Indian trusts.
    In their present circumstances and condition, if the Indian trust 
management activities managed by the Department and the Bureau of 
Indian Affairs were housed in and managed by a private sector financial 
institution, that institution would be declared ``bankrupt'', 
management and staff would be removed and replaced and a responsible 
successor trustee would be appointed by the same government that is 
allowing the Indian breach of trust to continue. While considered 
``extreme'' by some, this is a common public and private sector remedy 
for bankrupt institutions and one that should be considered in 
reforming the bankrupt Bureau of Indian Affairs.
    The U.S. Government itself used this so-called ``extreme'' remedy 
over and over again from 1980 through 1994 when the financial 
institution crisis resulted in 2,912 failed or assisted financial 
institutions. The FDIC and/or Resolution Trust Corporation (RTC) gave 
government assistance in resolving each of these institutions, such 
that over 99 percent of depositor beneficiaries (insured and uninsured) 
received 100 percent of their deposit balances in cash. In every major 
case, the government required senior management and staff of the failed 
or assisted institution to resign before it provided government 
assistance to depositors, creditors and successor financial 
institutions. The government's exposure to liability and loss as a 
result of its continued breach of trust in managing the American Indian 
trusts is at least equal to the exposure to loss created by many of the 
largest bank and thrift failures and should be addressed with the same 
urgency that the government used in resolving the financial institution 
crisis of the early 1990's.
    The BIA's mismanagement of the Indian trusts, particularly as 
regards records management, asset management and accounting have 
exposed the government to liability and loss, the magnitude of which 
also compares to losses and accounting deficiencies at WorldCom, Global 
Crossing, Enron and Arthur Andersen. Management has been fired at each 
one of those bankrupt institutions and most of the staff will lose 
their jobs. None will survive their bankruptcies with a structure 
anything like their pre-bankruptcy structure.
    It is time for the Federal Government to consider a reform 
resolution for the Department and BIA along the lines used to reform 
failed financial institutions or large bankrupt corporations, 
especially in light of the fact that the Department has failed to 
reform from within. As a result, such a so-called ``extreme'' remedy 
seems warranted for the BIA before the government's exposure to loss 
escalates further as a result of the continued breach of trust.

Recommendation

    The history of numerous Indian trust reform efforts over the last 
30 years has shown that the Department of the Interior is unwilling and 
unable to implement the types of reforms and management changes 
necessary to manage the Government's trust management activities 
according to the exacting fiduciary standards required in todays modem 
trust environment. It is for this reason that I recommended in the 1997 
Strategic Plan and to the Secretary in 1997 and recommend now that 
Congress consider establishing an independent government sponsored 
enterprise to manage the U.S. Government's trust management 
responsibilities to American Indians and American Indian Tribes for 
trust resource management, trust funds management and land title and 
records management according to the most exacting fiduciary standards 
and moral obligations of the highest responsibility and trust.

History and Performance of the Office of the Special Trustee

    From the inception of OST in September 1995, neither the Special 
Trustee nor the Office of the Special Trustee had direct authority 
under the Reform Act of 1994 to initiate reforms or to implement those 
trust management reforms that were approved following the filing of the 
Special Trustee's strategic plan in April 1997. Nor did the Secretary 
elect to vest the Special Trustee and the OST with the direct authority 
to implement the reforms except at the Office of Trust Funds Management 
(OTFM) that has reported to the Special Trustee since February 1996. 
Instead, the Special Trustee and the OST were limited to oversight of 
the vast majority of the reform efforts that were to be implemented in 
the same manner as previous unsuccessful reform efforts, i.e., directly 
by the Bureau of Indian Affairs (Bureau) and other affected units. .
    During the 1996 to 1999 period, the record shows a dramatic 
difference between the very successful reform results achieved by OST 
directly at OTFM; the minimal results achieved through oversight of the 
Bureau's reform efforts; and the negative results achieved through 
oversight of the Department's record keeping reform efforts.
    On July 31, 1998 the Secretary of the Interior approved the High 
Level Implementation Plan (BLIP) which, in his view, provided the 
structure through which the Department could accomplish the successful 
resolution of the many decades-old Man Trust Funds problems. Of 13 sub 
projects, OST had direct line responsibility for only 2 sub projects: 
Individual Indian Money (MA) and OST data cleanup and the trust funds 
accounting system (TFAS) used for both IIM and tribal accounts. OST had 
started planning for these two tasks in 1996 and was able to begin 
implementation in 1996 and 1997 despite the limited managerial and 
financial resources which were made available by the Department. When 
Congress approved significant funding for 1998, OST and OTFM were able 
to show excellent results as reflected by the BLIP progress reports 
that have been made public.
    The implementation of the trust funds accounting system by OST also 
was a successful reform effort. After being held up by the Department 
for over 1 year, OST in 1998 obtained all necessary approvals, awarded 
a TFAS contract, conducted a successful pilot and had implemented the 
system ahead of schedule. It is the only trust accounting system to 
have had any success in the reform of the Indian trust management 
systems.
    On the other hand, concerns over the BIA's data cleanup and systems 
efforts were relayed in writing to the Secretary by OST as early as 
July 1998 and for this reason the Special Trustee did not recommend 
approval of the Bureau's part of the HLIP. Public and litigation 
filings to date show that the seven sub projects that were to be 
implemented principally by the Bureau of Indian Affairs were not 
implemented by the Secretary's imposed deadline of year-end 2000. The 
Department still has not been successful in bringing about material 
reform. Records cleanup has been inadequate. Systems design and 
implementation of asset management and ownership systems plans 
substantially failed. The Bureau's record to date in this reform effort 
mirrors its historical failures to manage and implement meaningful 
reform. The Department is now estimating that it will take at least 
until 2005 to implement still another reform plan being proposed by the 
Department. Given its historical record, I have no confidence that any 
reform effort managed by the Department will be successful.
    An even larger threat to the overall reform effort is the 
Department's continued inability or unwillingness to address the 
fundamental trust record keeping problems and systems that account for 
the vast majority of the Indian trust management operating and 
accounting problems. For this reason, during my tenure as Special 
Trustee, the Special Trustee and OST, in their oversight capacity, 
presented several comprehensive plans to bring the Department's trust 
account records management function up to the standards that would 
govern a commercial trustee. None of these efforts were accepted and 
the HLIP gave no definitive guidance on the issue. For this reason the 
Special Trustee noted to the Secretary on July 31, 1998:

        Since a joint Indian trust records management solution is 
        fundamental to the successful implementation of the other Sub-
        Projects of the high level implementation plan and since all 
        affected Bureaus have not yet agreed on a solution, the high 
        level implementation plan being presented for surname and your 
        approval will not in my opinion enable the Department to comply 
        with the Reform Act and the Secretary's Agreement dated August 
        22, 1997.

    To my knowledge there is still no records retention policy that 
meets commonlaw trust standards, a condition precedent for any adequate 
trust records management system. Nor is there a records management 
system to retain trust documents, keep records and furnish information, 
sufficient to provide an accounting to the beneficiaries or to meet the 
accounting, accuracy and reporting requirements of the Reform Act of 
1994. The Department's failure to address and resolve the trust record 
keeping problems jeopardizes the entire reform effort. Without the 
accurate records required by the Reform Act and commonlaw standards, 
systems improvements planned for trust fund accounting, asset 
management and land title and records will be ineffective and will not 
permit the Department to comply with the accounting, reporting and 
accuracy standards required by the Reform Act of 1994.
    In 1999 the Department was criticized and sanctioned for ongoing 
mismanagement and neglect of the Indian trust records. The Secretary 
and the Assistant Secretary in charge of the Bureau of Indian Affairs 
were held in civil contempt of an U.S. District Court's document 
production orders. The case (Cobell v. Babbitt) underlying the contempt 
proceeding is essentially a trust administration action in which the 
Indian beneficiaries seek an accounting. The court has not to this 
point in the case addressed the detailed statutory and commonlaw trust 
duties owed by the government as trustee to the individual Indian 
beneficiaries. Nonetheless, the court noted ``it is basic hornbook law 
that the trustee has the duties of retaining trust documents, keeping 
records, furnishing information to the beneficiary, and providing an 
accounting.'' The court further noted: ``the court will appoint a 
special master to oversee discovery, document production, and related 
matters and to effectuate compliance with this court's orders. The 
defendants simply cannot be trusted to do this job themselves.'' If 
recent filings (2001 and 2002) by the Special Master and by the Court 
Monitor in the IIM Litigation are indicative of the present situation, 
the Department still cannot be trusted to do this job.

The Performance of the Office of the Special Trustee

    The recent record of the Department and the Bureau of Indian 
Affairs in planning and implementing trust management reform is only 
the most recent demonstration of their historical failures to bring 
about meaningful trust management reform. There has been some success, 
notably the progress of OST and OTFM in cleaning up the IIM records, in 
implementing a new trust funds accounting system and in the 
administration of OTFM. These modest successes demonstrated that 
significant reform is possible when an office has the responsibility, 
the authority, the independence and the financial and managerial 
resources to carry out the reform. An noted, The Reform Act of 1994 
called for a Special Trustee and an OST to oversee the reform effort 
but with no direct authority to ensure that the purposes of the Act 
were carried out. The Act was flawed in that respect. Despite 
aggressive oversight activities by the Special Trustees and OST over 
the last several years, the oversight efforts proved largely 
ineffective in ensuring that the Department complied with the Act. In 
this respect, the OST can be chalked up as another failed reform 
vehicle. On the other hand, the OST's lasting contributions were in 
further exposing the Department's Indian trust management deficiencies, 
in keeping these issues before the Congress, the Judiciary and the 
public and in proposing permanent, practical solutions to these 
longstanding problems. In addition, OST was often the only voice in 
government representing the interests and concerns of the American 
Indian trust beneficiaries who are entitled to and deserve the best 
possible management of the Indian trusts by the trustee. If such 
efforts eventually lead to the substantial resolution of the Indian 
trust management issues, OST can be counted a success.
                                 ______
                                 

 Prepared Statement of Thomas N. Slonaker, Former Special Trustee for 
                            American Indians

    Thank you, Mr. Chairman and members of the committee.
    I very much appreciate the opportunity along with Mr. Homan, the 
first Special Trustee for American Indians, to discuss with you the 
issues that have impacted the Special Trustee since the position was 
created pursuant to the 1994 American Indian Trust Fund Management 
Reform Act (``1994 Act'').
    The Senate confirmed me in late May 2000 as the second Special 
Trustee. I served through the end of the Clinton administration and was 
held over by President Bush. I then served briefly as the Acting 
Secretary of the Interior until Secretary Norton was herself confirmed 
and continued thereafter as the Special Trustee until I was asked by 
her to resign in late July of this year. I had left retirement 
following 36 years of private sector trust and banking experience to 
undertake the Special Trustee's responsibilities.

The Government's Indian Trust Obligation

    It is important to note that the nature and scope of the Federal 
Government's overall obligations in the area of Indian affairs is 
complex and reflects a history dating nearly to the establishment of 
the United States. The 1994 Act, however, addresses a discrete part of 
those obligations, the Indian trust assets, as that term is defined in 
the Secretary's Principles for Managing Indian Trust Assets. As trustee 
the government holds assets (mostly land) for some 300 tribes and 
approximately 250,000 individual Indians assets for identifiable 
beneficiaries. Like every other trustee, the Government trustee is 
required to know at every moment what assets are held in trust, how 
those assets are invested and managed, and to whom the proceeds of that 
management belong and are to be paid.
    The Government's fiduciary duties with respect to the Indian trust 
assets it holds are separate and apart from the government's treaty 
obligations to the numerous individual tribes. The Secretary's 
fiduciary relationship exists directly between the Secretary as 
trustee-designate and the tribal or individual beneficial owner. The 
Secretary's trust responsibility, as set forth in the Mitchell II 
decision of the Supreme Court as well as the 1994 Act itself, is 
essentially equivalent to the role of a private trustee, and is guided 
by the ``rules that govern private fiduciaries''. The trust 
responsibility of the government requires the use of a system of 
motivating concepts and principles very different from those used in 
the discharge of political, statutory or contractual obligations.

The Role of the Special Trustee

    In essence, the 1994 Act provides that the Special Trustee would 
monitor the historical accounting and oversee the reform of the trust 
process for the benefit of tribal and individual Indian beneficiaries. 
In doing so, the Special Trustee would be responsible to the Secretary 
of the Interior and at the same time provide reports to the Congress on 
the progress of these efforts. Essentially, the Act requires the 
Special Trustee to provide the transparency necessary for the benefit 
of the Congress as well as for the Secretary.
    The Cobell class action litigation subsequently led to court-
mandated reporting to it by the Secretary on the progress of trust 
reform. As part of that effort, the Special Trustee--who for a while 
compiled the report on behalf of the Secretary and the Department--also 
provided his observations on the progress of trust reform for the 
benefit of the court. Both Congress and the court, therefore, have 
looked to the Special Trustee to provide that transparency for 
measuring progress toward trust reform.

Obstacles to the Special Trustee in Carrying out His Duties Under the 
    Act

    The Special Trustee was not provided under the law with any direct, 
line management of the trust reform. An exception to this was the 
transfer by then Secretary Babbitt in 1996 of the Office of Trust Funds 
Management (OTFM) from the Bureau of Indian Affairs (BIA) to the Office 
of the Special Trustee (OST). In my view and that of others, OTFM 
became the model for a fully functioning organization among those trust 
reform projects the Department has undertaken.
    The Special Trustee sought line authority over all aspects of trust 
reform and, therefore, over those fiduciary trust activities spread 
across the BIA and parts of the Minerals Management Service, the Bureau 
of Land Management, and other organizations within Interior. Instead, 
in mid-2000 Secretary Norton provided the Special Trustee with 
``directive'' powers, that is., an ability to order changes for trust 
reform where needed change was not being made by organizations within 
the Department. The directive power granted by the Secretary, when 
used, was subject to an appeal to the Secretary by the affected trust 
individual or organization, but worse, as witness a directive issued by 
the Special Trustee last year, subject to prolonged bureaucratic delay. 
This was not a workable answer for effective organization change.
    The Bureau of Indian Affair's middle management ranks, along with 
some tribes, are seemingly adamant in their opposition to a separate 
organization, even a separate chain of command, to promulgate the 
government's fiduciary responsibilities. Interestingly enough, the 
current Secretary late in 2001 proposed a plan (named BITAM) whereby 
the entire trust responsibility of the Government would be placed into 
a new and separate organization within Interior, withdrawing and 
consolidating fiduciary trust functions from the BIA, OST and other 
parts of the Department. The Special Trustee applauded that proposal as 
potentially achieving the separate chain of command and the requisite 
accountability for properly carrying out the trust responsibility. I 
testified on February 6, 2002, before the House Resources Committee on 
the Secretary's proposal as follows:

        I concur with the Secretary's concept of a single 
        organizational unit responsible for the management of the 
        Indian trust assets. That organization has the potential of 
        addressing the accountability concerns by placing one 
        executive, responsible to the Secretary, in charge of the 
        delivery of the appropriate, required trust services to tribes 
        and individual Indians. I believe a single organization with 
        its own chain of command, that is, not diluted by intersecting 
        other Departmental chains of command, can work better than the 
        present arrangement. The devil, however, is in the details, and 
        the new organization must have the right executive direction 
        and actually hold people accountable. (Emphasis added)

    You cannot continue to assign the task for overhauling trust reform 
to the same people and organizations that have failed in that 
assignment before.
    The tribes often can be an obstacle to trust reform: In the lengthy 
tribal consultation process that followed the Secretary's proposal 
announcement, it became quite clear that the tribes--themselves 
beneficiaries of the Trust--did not want the fiduciary trust function 
removed from the BIA at all. Nor did they even want the regional 
directors and agency superintendents removed from the fiduciary trust 
chain of command--an essential separation to eliminate potential 
conflicts of interest with the trust beneficiaries and assure 
dedication to the trust obligation.
    The consultation meetings also highlighted another often-
misunderstood aspect of the Indian trust responsibility: The trust 
responsibility is really two categories of responsibilities. One can be 
labeled as the ``fiduciary'' trust responsibility that refers to the 
duty to account for the trust assets (land and moneys primarily) that 
in turn provide income to the beneficiaries. The other trust 
responsibility is a broader one derived from treaty and law, and is the 
obligation of the government relative to providing social services, 
education, roads, police protection, etc. to Indian tribes and 
individuals--the non-fiduciary trust duties, if you will. The fear on 
behalf of the tribes appears to be that the BIA may be gutted by 
withdrawal of the fiduciary responsibilities and, thus, somehow the 
honoring of the broader trust responsibility may be jeopardized.
    Thus, the dilemma facing the Secretary is this. On the one hand, in 
order to accomplish fiduciary trust reform, the strong management and 
accountability that are required are best accomplished by a separate 
organization for fiduciary trust within the Department, or even better, 
outside the Department altogether. On the other hand, such separation 
of trust responsibilities appears to be alien to many tribes. As-is 
often heard, the tribes seem to have trouble living with the BIA, but 
are reluctant to be without it. It is also apparent, incidentally, that 
to date individual Indian beneficiaries don't have much of a voice in 
the consultations nationally.
    The Special Trustee should be embraced by the Secretary to assist 
him or her to direct reform and effect change. Surprisingly that has 
not happened. The reason for that resistance by the Secretary appears 
to be the reluctance to tolerate the transparency of actual trust 
reform progress, presumably because such candor may complicate the 
Secretary's effort to defend against the current ``show cause'' 
litigation in the contempt trial. Furthermore, the Special Trustee has 
not been perceived as ``a part of the team'' when he has been obligated 
to respond honestly on the state of trust reform to Congress--and the 
Court. In fact, the Special Trustee in at least recent months has often 
been excluded from trust reform meetings with the Secretary and most 
senior Department officials. It appears, instead, that the intent of 
the Department management is to isolate the Office of the Special 
Trustee.
    Another obstacle to trust reform and to the Special Trustee has 
been the attempt to diminish the standard of the government's trust 
duty itself. For whatever reason--litigation or otherwise--there 
appears to be considerable reluctance in both the last and the present 
administrations to acknowledge the high standard of trust duty required 
of the government as the Trustee under various laws and Supreme Court 
decision--even to include the Secretary's Trust Principles in the 
Department's manual. In testimony to this Committee this year, the 
administration has not defined the government's trust responsibility 
when requested and instead looks to the possible weakening of the trust 
duty by the Supreme Court with the two trust cases before it now.

Recommendation

    There is no reason that the Department--with the Secretary's 
leadership--cannot recognize and demand compliance with the trust duty. 
There appears to be no political will to ensure compliance with the 
government's trust obligation.
    Only a single, direct line chain of command for all personnel 
supporting the trust activities has a chance of succeeding. Only the 
Special Trustee with her/his legal responsibility, trust experience and 
Congressional obligation is best positioned to exercise the required 
authority on behalf of the Trustee-designate, but the Special Trustee's 
position doesn't have that line authority.
    In my opinion, the Department is incapable of executing trust 
reform and, indeed, even knowing what and how to do so, or to provide 
the experienced, competent people resources needed in many cases. More 
than being incapable, there is often a seeming unwillingness to adhere 
to the trust principles of the 1994 Act and the Department's own 
manual, as well as to hold people accountable for their actions with 
consequences for poor performance.
    I have come to the conclusion, therefore, that it is important to 
have a strong oversight role outside the Department, responsible to the 
Congress, and headed by an experienced trust management executive 
advised by a board of trust experts and Indian leaders. In a sense, 
this is the Office of the Special Trustee as established by the 1994 
Act--but placed outside the Department. This executive oversight 
position and the attendant organization need to have the ability to 
require change when needed changes by the Department itself are not 
forthcoming.
    There are some instructive models available in the form of 
government-sponsored enterprises that have addressed issues of public 
policy in other venues such as the failures of many savings and loan 
institutions a few years back. Such outside authorities can provide for 
eventually returning the trust operations to the Department at such 
time as the systems, procedures, records, and the leadership are ready 
and the Department exhibits the ability to carry on with the fiduciary 
trust responsibilities.
    Thus, in my opinion, trust reform is never going to happen until 
there is an authority outside the Department that can compel compliance 
with the government's trust duty and demand accountability. The most 
recent decision of the DC District Court, which stopped short of 
appointing a receiver, hopefully will enforce the enactment of trust 
reform. That solution will succeed only, in my opinion, if the 
Department is forced to comply with needed change.
    Thank you, Mr. Chairman and members of the committee, for the 
opportunity to present these remarks today.

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