    [Senate Hearing 108-298]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 108-298

                          COBELL VERSUS NORTON LAWSUIT

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

                                    HEARING

                                   BEFORE THE

                          COMMITTEE ON INDIAN AFFAIRS
                              UNITED STATES SENATE

                          ONE HUNDRED EIGHTH CONGRESS

                                 FIRST SESSION

                                       ON

     OVERSIGHT HEARING ON POSSIBLE MECHANISMS TO SETTLE THE COBELL VERSUS
                                 NORTON LAWSUIT

                                   __________

                                 JULY 30, 2003
                                 WASHINGTON, DC

                       U.S. GOVERNMENT PRINTING OFFICE
                              WASHINGTON : 2004
    89-057 PDF

    For Sale by the Superintendent of Documents, U.S. Government Printing Office
    Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512-1800
    Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001

                          COMMITTEE ON INDIAN AFFAIRS

                  BEN NIGHTHORSE CAMPBELL, Colorado, Chairman

                    DANIEL K. INOUYE, Hawaii, Vice Chairman

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

             Paul Moorehead, Majority Staff Director/Chief Counsel

            Patricia M. Zell, Minority Staff Director/Chief Counsel

                                      (ii)

                                C O N T E N T S

                                  ----------
                                                                       Page
    Statements:
        Berrey, John, chairman, Quapaw Tribal Business Committee,
          Quapaw, OK.................................................    13
        Campbell, Hon. Ben Nighthorse, U.S. Senator from Colorado,
          chairman, Committee on Indian Affairs......................     1
        Cason, James, associate deputy secretary of the Interior,
          Department of the Interior, Washington, DC.................     2
        Echohawk, John, executive director, Native American Rights
          Fund, Boulder, CO..........................................     8
        Frazier, Harold, chairman, Cheyenne River Sioux Tribe, Eagle
          Butte, SD..................................................    17
        Gray, Esq., Donald, Nixon Peabody, LLP, San Francisco, CA....    19
        Hall, Tex, president, National Congress of American Indians,
          Washington, DC.............................................    10
        Inouye, Hon. Daniel K., U.S. Senator from Hawaii, Vice
          Chairman, Committee on Indian Affairs......................     2
        Russell, Majel, attorney, Inter-Tribal Monitoring
          Association, Albuquerque, NM...............................    17

                                    Appendix

    Prepared statements:
        Berrey, John (with attachment)...............................    33
        Cantwell, Hon. Maria, U.S. Senator from Washington...........    31
        Cason, James (with attachment)...............................    44
        Echohawk, John (with attachment).............................    62
        Frazier, Harold..............................................    72
        Gray, Esq., Donald...........................................    78
        Hall, Tex (with attachment)..................................    93
        McCain, Hon. John, U.S. Senator from Arizona.................    32

                          COBELL VERSUS NORTON LAWSUIT

                                  ----------

                            WEDNESDAY, JULY 30, 2003

                                           U.S. Senate,
                                   Committee on Indian Affairs,
                                                        Washington, DC.
        The committee met, pursuant to other business, at 10:08
    a.m. in room 216, Hart Senate Building, Hon. Ben Nighthorse
    Campbell presiding.
        Present: Senators Campbell, Inouye, and Johnson.

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

        The Chairman. We will now move to the hearing to discuss
    potential settlement of the methodologies in the 8-year-old
    Cobell Trust Fund lawsuit. In recent days, the House Committee
    on Resources has held a hearing on the Cobell suit, and days
    later a provision to establish a cash buyout to the IIM holders
    to an accounting was removed from the House Interior
    appropriations bill.
        Now, this case is entering the its year. We have all been
    involved in it, and we could probably all speak hours and hours
    on it, the nuances of it, but the bottom line is it has not
    moved forward. All the court hearings, the cabinet officials
    held in contempt, the computer shutdowns, the millions of
    dollars that have been spent, the tens of millions that will be
    spent in the future, clearly it is in everybody's best interest
    to bring this to some reasonable conclusion.
        The Indian tribes and the Indian people themselves and the
    Federal Government continue to absorb dollar costs in the tens
    of millions, opportunity costs preventing us from addressing
    core trust problems like probate and land fractionation. The
    morale costs that are driving good people out of the Department
    is also a secondary concern, but equally important. Second,
    whatever Judge Lamberth rules in the coming weeks, there are
    sure to be appeals, motions, and future court actions for
    months, and probably years, to come. And, last, no accounting
    has been rendered to the IIM account holders, and the
    Department has told us that a full historical accounting will
    cost roughly $2.4 billion and take at least 10 more years.
        So we have to collectively ask ourselves whether this
    lawsuit should continue or not. I think the situation, frankly,
    is unacceptable for everybody, and as the authorizing of any
    chairman, my goals are very simple and straightforward, and
    that is to provide equitable and timely relief to the IIM
    holders and, second, to restore to the Department some sense of
    normalcy, because this is overshadowing literally everything
    they do in the Department today. We want to look at the
    alternatives available to us other than the historical
    accounting route. We want to ask what are the costs of the
    alternatives, and are the alternatives legally and equitably
    defensible; and how we collectively should proceed in
    structuring such alternatives.
        I will ask if Senator Inouye has an opening comment.

     STATEMENT OF HON. DANIEL K. INOUYE, U.S. SENATOR FROM HAWAII,
               VICE CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS

        Senator Inouye. Thank you very much, Mr. Chairman.
        For too long this matter has been a cloud over Indian
    country, and it is about time we do something to resolve it. I
    wish to associate myself with your remarks.
        The Chairman. Thank you, Senator Inouye.
        Now we will go ahead and start with the first panel. One
    will be James Cason, the associate deputy secretary of the
    Interior for the Department of the Interior.
        Welcome, Mr. Cason.
        And, by the way, unfortunately, too many times our
    committee hearing gets interrupted by votes, and we do have
    some, at least one, maybe more, scheduled at 11:30. So I asked
    staff to bring in a light today to remind people to stay within
    some kind of a parameter of time so everyone has a chance to
    speak and that we have a chance to ask a few questions. It is
    on red, but we will turn it on green. When it goes off and red,
    you might want to conclude your testimony, but your complete
    written testimony will be included in the record and will be
    read. Thank you.

      STATEMENT OF JAMES CASON, ASSOCIATE DEPUTY SECRETARY OF THE
          INTERIOR, DEPARTMENT OF THE INTERIOR, WASHINGTON, DC

        Mr. Cason. Thank you, Mr. Chairman. I really appreciate the
    opportunity to come up and visit with the committee on this
    really important issue. I have to start off and agree with both
    of you. I couldn't agree more that this is a very serious
    problem that is tremendously impacting the Department of the
    Interior in a very adverse way. And it impacts Indian country
    in a very broad and adverse way based on the expectations of
    many, with no answers, that have been ongoing for years. So it
    is something that we need to take on and try to address.
        I wanted to take a second just to introduce Aurene Martin,
    who is the acting assistant secretary for Indian Affairs; she
    is with me. Ross Swimmer, who is the special trustee for
    American Indians, couldn't make it today; he is finishing up
    the 14th quarterly report to the court today.
        The Department of the Interior appreciates the leadership
    being shown by this authorizing committee, and we certainly
    agree that efforts need to be made toward settling this long-
    standing issue. We also appreciate the efforts on the part of
    the House, mentioned by the chairman, that the House Resources
    Committee has recently taken up the issue as well to try and
    fashion some sort of a settlement on this issue. And the
    Department also appreciates the efforts of the House
    Appropriations Committee, trying to recognize the difficulties
    associated with this issue and trying to provide some direction
    to the Department about how to settle this issue.
        I wanted to start, Mr. Chairman, with a very brief history
    of the issue that we have. And I have asked to have passed out
    a 1-page paper here that is entitled ``1994 American Trust
    Reform Act.'' And the thing that I wanted to show, Mr.
    Chairman, is the provision No. 4 under section 101, which says
    ``determine accurate cash balances,'' and then provision 102A,
    which states:

        The Secretary shall account for daily and annual balance of
    all funds held in trust by the United States for the benefit of
    an Indian tribe or an individual Indian which are deposited or
    invested pursuant to the Act of June 24, 1938.

        That is the root language that brings us here today, that
    Congress, in 1994, passed this act and gave us this direction.
    And at the time, in the legislative history, Congress was
    contemplating doing an accounting prospectively beginning
    October 1, 1993. That language didn't get incorporated into the
    final bill, but that seemed to be the discussion that was held
    in Congress as to what this provision meant and where we were
    supposed to start.
        What has happened now is the district court has looked at
    these provisions and basically interpreted it as this means a
    historical accounting, that we are to go back in time to the
    origins of individual accounts and account for the balances
    from the day they were started to the present; and that is how
    we get the term historical accounting. The underlying premise
    is that we cannot trust the balances that we have in our
    accounts, and that we have to go back from day one and recreate
    the balances of every account in order to assure that they are
    accurate. And this is the root that we need to look at in terms
    of the accounting claims that we have. This isn't what Congress
    said to begin with, but this is how the district court has
    interpreted the job, and that is what prompted the Department
    to file its historical accounting plan.
        We filed the historical accounting plan with the Congress
    in July, 2002. Mr. Chairman, as you said, that plan was a very
    comprehensive plan: Basically, all beneficiaries across all
    time, on a transaction-by-transaction basis, and the estimate
    we had to do that work was about $2.4 billion, and about 10
    years, and that is a best guess at this point. And the
    difficulty, I would like to illustrate, of trying to do this
    would be like taking, Mr. Chairman, your personal checking
    account and having you reconcile your personal checking account
    for the entire time you have had it, and every other checking
    account you have ever had, and going back and doing that for
    your father and your grandparents and your great-grandparents
    and your great-great-grandparents, and multiplying that by
    about 500,000 times. It is a huge job to do, and since we have
    about 130 years worth of potential time that we are required to
    do that, potentially under the court, we have a very sizeable
    records management issue that we have to assemble all the
    records throughout those periods of time in order to do it. It
    is a very sizeable job.
        When we submitted the plan, it was $2.5 billion in 10
    years, and the message I got back from the chairman and the
    vice chairman is that is too long and it costs too much, we
    need to do something else; that Indian country is waiting too
    long for the results of your efforts, and we need to find
    another way. And that started us down the pathway to talk about
    settlement of some sort.
        We also had a subsequent requirement from the court to
    provide a historical accounting plan to the court by January 6
    of this year. Based upon the feedback that we received from
    Congress, we constructed another plan that took less time,
    about 5 years, and less money, about $335 million, and depended
    upon the use of some statistical verification methods rather
    than doing verification on a transaction-by-transaction basis.
    And that plan is currently sitting before the court. We have
    sought funding from Congress to implement that plan. The
    funding in the 2004 budget is approximately $100 million that
    we have requested. And so far the markups on both the House and
    Senate side are about $55 million less than what we had
    requested, which sends a signal to the Department that perhaps
    the $335 million is too much, or that Congress doesn't
    necessarily agree that accounting is a solution, which may be
    driving us back to the settlement discussions.
        We have done accounting so far, and I would like to just
    take a moment to share the results that we have had so far in
    our accounting process. We have done tribal accounting as a
    result of efforts by Arthur Andersen and other accounting
    firms. We did some accounting in the late 1980's and early
    1990's, and we found that generally we could find 85 to 90
    percent of the documents that we needed to do an accounting. We
    didn't find all documents, as you might expect, because of the
    time periods that have passed. And the error rates from what we
    found were generally very low, far less than 1 percent.
        We have also done accounting for the named plaintiffs in
    the Cobell lawsuit, and we presented a report to Congress.
    Essentially that exercise cost approximately $20 million for
    all the activities associated with it, and in that effort we
    found one check for $60 that didn't go to the right place; it
    went to another IIM account holder, but it didn't go to the
    right account holder.
        We have also done approximately 17,000 judgment per capita
    funds accountings. At this point we are not able to distribute
    them because we have been embargoed by the court. But in doing
    the accountings for that, the error rate, again, is essentially
    zero.
        Those may not in total be a statistically valid sample of
    all accounts, but the point is the accounting that we have
    done, and there has been a bunch, the error rates generally
    tend to be very low.
        If we don't do accounting and we go to settlement, the
    Department suggests there are a couple basic questions that we
    need to ask as part of the process. The first is what are we
    settling. In the lawsuit we have in front of the Cobell court,
    the issue is to do an accounting, and the accounting is an
    administrative process which basically leads to a statement
    like your bank statement that says here is how many
    transactions you have had, here is the income into your
    account, here is the checks written on your account, and here
    is the balances. So the issue before the court is to do an
    accounting. However, the rhetoric that surrounds this case
    would suggest that we are looking for is reparations of some
    sort for some sort of ills, and we are not clear what would be
    on the table for settlement, and that is certainly one of the
    issues that we need to talk about.
        We need to answer the question of who we are trying to do a
    settlement for, and the who is a relatively large size issue
    based upon the rhetoric that surrounds this case as well. The
    Department has basically taken the position on who in our plan
    before the court that it should be all IIM account holders who
    had funds on deposit when the 1994 Act was passed. The
    plaintiffs are seeking a who of all current and former,
    throughout time, IIM account holders and all possible
    beneficiaries of their interest. It could be even broader,
    basically all Indians in Indian country. So one of the things
    we have to answer is who would be the recipient of whatever
    settlement we would engage in.
        And then, finally, how much would Congress pay. And this is
    a very sizeable issue that makes settlement a very difficult
    one to embrace, but one I think we nonetheless have to address.
    The size of the issue is if we approach this as a matter of
    just pure accounting and what the findings of the Department
    are, it would be in the very low millions for a very few number
    of people, based on the errors we have found. However, if you
    look at what the plaintiffs are seeking, they are essentially
    saying that they are owed $176 billion. That is billion with a
    B. That is a very large number. If you looked at the total
    amount that Congress appropriates every year to run the trust
    in the Department of Interior, that is about 350 years worth of
    appropriations.
        The premise of this, I believe, is seriously in question,
    and the premise is both the plaintiffs and the Department seem
    to agree that we have had approximately $13 billion in income
    into IIM accounts. However, the plaintiffs seem to be assuming
    that none of those funds were paid out to Indians, which I find
    to be difficult, because that would assume that we have had
    some great conspiracy over the last 100 years of generations of
    BIA employees, who are also Indians working with their friends
    and relatives, and 25 successive administrations and 25
    successive Congresses all agreeing that we would take in money
    and keep it, never pay it out. So I think one of the things we
    have to do is challenge the premise of what is owed and make
    sure that we are all clear, so that, at the end, if we have a
    settlement, everybody understands what the premise of the
    settlement is, what we are trying to solve with it, and
    everyone should be satisfied at the end.
        The Department of the Interior stands ready to assist the
    committee in any way that we can, and I am prepared to answer
    questions. Thank you.
        [Prepared statement of Mr. Cason appears in appendix.]
        The Chairman. Thank you. Well, I found your analogy to my
    checkbooks very interesting. I have had a checkbook for 50
    years, and I have to tell you if I didn't have a wife who knew
    how to balance the thing, I wouldn't remember what I did last
    month.
        Mr. Cason. I understand.
        The Chairman. So I think I understand the complication of
    going back literally, you know, decades to try to get an
    accounting. Let me ask you a couple of questions before I give
    it to Senator Inouye. Your testimony at the hearing of Mr.
    Pombo convened 2 weeks ago is that the real amount owed to the
    IIM holders totals millions of dollars, not $137 billion. You
    referenced that here today.
        Mr. Cason. Yes.
        The Chairman. What was the basis for that statement?
        Mr. Cason. The basis of the statement is if we took the
    results of the accountings done thus far, that the error rate
    has been very, very low for the ones done thus far. So if we
    based it on information we currently have available, it would
    generate a settlement amount that would be very low.
        The Chairman. How many of those hundreds of thousands of
    accounts would you say contain less than $100?
        Mr. Cason. I don't remember clearly, Senator, but it would
    be in the tens of thousands.
        The Chairman. The Department of the Interior's July 2
    report to Congress said it would take $2.4 billion in 10 years
    to do a full historical accounting. You referenced that. The
    revised estimate is $335 million over 5 years. And you did
    mention the number of years at that rate it would take to make
    some of the transactions. If we did that, do you think there
    would be a large number of errors or that would be a wise
    expenditure to put that much money in it?
        Mr. Cason. The approach that we plan to take in the revised
    plan to the court is one in which we would still prepare a
    transaction-by-transaction ledger for each individual Indian
    account holder. The principal differences between the two plans
    is that in both we were doing a statement of account on a
    transaction-by-transaction basis; however, in the first plan
    the set of accounts that we would do was much broader because
    it included all past beneficiary or IIM account holders, and
    the plan before the court anticipated a set of account holders
    who had funds on deposit at the passage of the act.
        The statistical portion is basically related to
    verification; in the verification element essentially what we
    did, if I can give an example of the post-1985 transactions,
    there were about 26.5 million transactions that occurred after
    1985, which we called the electronic era. And only about one-
    half of a million of those are over $500. So you have 26
    million out of the 26.5 million are less than $500, and you
    have millions and millions of them that are less than $1. So
    basically what we did, Mr. Chairman, is we said let us verify
    all of the transactions that are over $5,000, go get the
    supporting information to document that transaction, let us
    take a statistical sample of all of the transactions between
    500 and 5,000, and on the statistical sample go get the
    supporting information; and the same thing for the 26 million
    at the bottom, take a statistical sample and go get
    documentation to support those transactions, whether they are 1
    cent or they are $100.
        The Chairman. As you know, the cash buyout proposal was
    removed from the House Interior bill. Did your Department
    estimate how many IIM holders would have accepted a cash offer
    if that hadn't been removed?
        Mr. Cason. Not to my knowledge, we haven't done that.
        The Chairman. No estimate of what would have cost, then?
        Mr. Cason. No.
        The Chairman. Okay, thank you.
        Senator Inouye, did you have some questions?
        Senator Inouye. Yes.
        In your statement you have suggested that Congress will
    have to appropriate funds for the settlement. But is it not
    true that the settlement of claims against the United States
    are paid out of the claims judgment fund, and not out of
    appropriations?
        Mr. Cason. Senator, it is possible, depending on what sort
    of settlement we fashion and how big the number is, that the
    judgment fund may be a possible tool to use. But if we are
    talking in terms of multiple billions, that is larger than the
    judgment funds that are available, so some special dispensation
    may be needed.
        Senator Inouye. But the judgment fund has no limit, does
    it?
        Mr. Cason. I am not as familiar as I ought to be to answer
    that question. It is my understanding it normally sits at
    around $700 million of availability and get replenished. So I
    am not sure what the mechanics would be to do that for a multi-
    billion dollar settlement.
        Senator Inouye. In your testimony you have suggested that
    the difficulty that your Department faces stems from the
    enactment of the 1994 Act. Now, we note that in the 2001 court
    of appeals statement it says:

        The Indian Trust Fund Management Reform Act reaffirmed and
    clarified pre-existing duties, it did not create them, and that
    its enactment did not alter the nature or scope of the
    fiduciary duties owed by the government to IIM trust
    beneficiaries.

        Now, to what extent do you believe the Department's current
    potential liability stems solely from the enactment of the 1994
    Act?
        Mr. Cason. I don't believe that has been explored, Senator,
    in terms of allotting responsibility for the Department to do
    an accounting between the 1994 Act and any predecessor possible
    direction on performing accountings. What we do know is that
    the lawsuit was brought pursuant to the 1994 Act and the
    interpretation of these provisions as to what we should do in
    terms of the accounting. So that is where we focus our
    attention. As trustees, we recognize that there is a general
    duty to perform accounting if an individual account holder is
    interested in finding out what is in their account, and for
    years the assumption made by the Department is that an
    accounting would be one that we would respond when an IIM
    beneficiary came in and said can you tell me what is in my
    account; and then we provide it at that time, as opposed to
    doing periodic statements to everyone.
        And if you look at the history, there has been, over time,
    periods of time in which the Department provided some periodic
    statements, periods of time which it didn't and it assumed it
    would provide one if asked, and that the 1994 Act finally
    codified specific direction from Congress that there was an
    expectation to do periodic quarterly statements to IIM
    beneficiaries, and the Department started regularly to do it at
    that time.
        Senator Inouye. What is the Department's position on
    alternative dispute resolution?
        Mr. Cason. I think it is an interesting tool that can be
    used in some circumstances. In this circumstance it is also
    something we are willing to consider. However, I would suggest
    in this case that one of the things that we would all have to
    strive for if we jointly participated in an ADM process, is
    that we would have to find some basis for being in the same
    ballpark. And the difficulty we have at this point, Senator, is
    where our ballpark is in the low millions based upon what we
    know, and the plaintiffs' ballpark is $176 billion. It doesn't
    seem like we are in the same relative area to do negotiations.
        So one of the things that we will need some help and
    leadership from the Senate in is to try and set reasonable
    expectations, perhaps for both parties, as to how to go through
    this process and find a fair and equitable settlement of this
    issue.
        Senator Inouye. Would you agree that the Indian
    beneficiaries' rights in the funds and the lands held in trust
    are vested property rights?
        Mr. Cason. Yes; we hold Indian properties in trust for
    Indians, both land and cash.
        Senator Inouye. Then if that is so, how can Congress
    diminish the Government's potential liability?
        Mr. Cason. Senator, I don't know about the diminish the
    potential liability. My sense of where we are in this issue is
    we are trying to clarify what the Government's liability is.
    And we have a statutory provision that I just showed you that
    is the root of this particular issue, which, on its face,
    doesn't appear to suggest that the Department should have
    undertaken a historical accounting for all current and former
    IIM account holders; and that if we looked at the congressional
    intent in history, it appeared to suggest, both in the language
    adopted in the 1994 Act and the legislative history, a
    prospective accounting responsibility. So what we are all going
    through, both in the court and here in these discussions, is an
    attempt to clarify what the intent of Congress was and how the
    Department needs to behave with that intent to carry out what
    Congress was directing us to do. The language seems ambiguous,
    and it is being interpreted now.
        Senator Inouye. Thank you very much, sir.
        Mr. Cason. Thank you.
        The Chairman. Thank you, Mr. Cason. Appreciate your being
    here.
        And we will now proceed to the second panel, which will be
    the Tex Hall, president of the National Congress of American
    Indians; John Berrey, chairman of the Quapaw Tribal Business
    Committee; John Echohawk, the executive director of the Native
    American Rights Fund; and Harold Frazier, the chairman of the
    Cheyenne River Sioux Tribe from South Dakota.
        If you gentlemen would sit down, we will start just in that
    order, with Tex Hall first. Okay, I am going to change that and
    have John Echohawk first. And if you could also kind of observe
    a time limit so that we give everybody equal opportunity to
    speak and ask some questions, I would appreciate it.
        Go ahead, John.

    STATEMENT OF JOHN ECHOHAWK, EXECUTIVE DIRECTOR, NATIVE AMERICAN
                        RIGHTS FUND, BOULDER, CO

        Mr. Echohawk. Thank you, Mr. Chairman, Mr. Vice Chairman.
    My name is John Echohawk. I am executive director of the Native
    American Rights Fund. The Native American Rights Fund is co-
    counsel for the Cobell plaintiffs in the Cobell v. Norton
    litigation. We have been involved in this litigation since
    1996, and we feel like that we have made significant steps in
    determining the extent of the Federal Government's trust
    responsibilities to these individual Indian account holders. We
    have attempted, on five different occasions, to reach a
    settlement in this case with the Government, and all of those
    attempts have been unsuccessful.
        The Chairman. John, can I interrupt you for just 1 minute?
        Looking at my notes here, Donald Gray was also supposed to
    be on this committee, and I didn't call him to the table. If he
    could come up and sit here too, I would appreciate it.
        Okay, go ahead and proceed.
        Mr. Echohawk. Our attempts at settlement have not been
    successful, and so when we received the letter that you and
    Senator Inouye sent in April, suggesting a mediated settlement,
    we thought that was good because we thought maybe with your
    participation, maybe we could have some fruitful settlement
    discussions and settle this case. At that time, we began
    preliminary discussions, as you know, about this mediation
    process that you suggested. We have given that process some
    thought, and we wanted to share with you today what we think
    are some of the elements for a sound settlement process. We
    think these are elements that are a starting point for
    discussion about how this process gets put together, but we
    think that it is a process that can result in settlement of
    this long-standing problem.
        The first element is inclusion of all necessary parties. Of
    course, the Cobell plaintiffs, the Government, and as I
    mentioned, your participation, Mr. Chairman and Mr. Vice
    Chairman, is very important. I think we would also want to
    involve the chairman and vice chairman of the authorizing
    committee in the House as well, because I think that keeps the
    pressure on all of the parties to reach a settlement. In
    addition, I think to the extent that tribal interests are
    involved, and they are involved in this case to some extent,
    tribes ought to be parties to this mediation as well.
        Second, the appointment of a mediator. I think that is a
    very important element here. It has to be a person of
    significant political clout who can command the attention of
    the parties and drive us toward the settlement that we are all
    seeking.
        Third, scope of the settlement discussions. This is
    something that needs to be determined up front. There are many
    issues related to the Federal Government's trust responsibility
    to Native people, but I think the only way we are going to get
    anywhere here is if we limit the scope of this settlement
    discussion to the issues in Cobell, the Individual Indian Money
    accounts. I think it is also important to recognize the
    decisions the courts have made in this litigation, both the
    district court and the court of appeals; and that would be the
    starting point for the settlement discussions. This should not
    be an opportunity for parties to basically re-litigate issues
    that have already been decided by the courts.
        Fourth is timing. We believe this is an opportune time to
    begin this discussion because we just concluded trial 1.5 in
    the Cobell litigation, and we are filing our post-trial briefs
    next Monday. That trial will decide many significant issues I
    think that would facilitate this mediation, including the
    proper methodology to perform the accounting, the applicability
    of the statute of limitations, and the burdens of proof in a
    trust accounting case. I think with decisions on those issues,
    the remaining issues to be negotiated out would be limited and
    I think give us a real chance to reach this settlement that we
    are all interested in achieving.
        Fifth, two separate matters of resolution: We need to
    recognize that Cobell is about two issues, one is the
    accounting issue, the other is the fix-up issue, the trust
    reform issue. I think if we can keep this in mind, this would
    help the mediation process as well. Just like the court has
    done, they bifurcated those issues and dealt with them as
    separate issues. If we could do that in this mediation, I think
    it would facilitate matters.
        Sixth, continuation of legal proceedings during settlement
    discussion. It is important that the litigation not be stalled
    while this mediation process goes forward, because the party
    interested in delaying matters could simply drag out the
    settlement discussions and we would never reach a resolution.
    The litigation is the sole reason, we believe, why the Federal
    Government has begun to take these issues seriously, and
    without that pressure there is no reason for the Government to
    negotiate in good faith.
        Seventh is final resolution. We believe that that would be
    more easily achieved if certain issues are addressed up front.
    First of all, the Government should ensure that the claims
    judgment fund can be accessed to cover the cost of any
    settlement. It is not fair to appropriate from funds that
    should rightfully go to Indian country to settle this case. If
    this case is continued in litigation, we feel like any
    correction of the accounts would not be separately
    appropriated, but would be covered by the judgment fund.
        Second, any settlement must have judicial approval pursuant
    to the Federal Rules of Civil Procedure. We must bear in mind
    that this is an attempt to resolve a case in litigation.
    Moreover, it is a class action, and due process must be given
    to all class members, and that is, I think, best handled by the
    Federal district court here in Washington.
        Third, resolution of this case should be on a class-wide
    basis. It is more expedient and efficient to do it that way,
    and any attempt to break up the class through side-settling of
    claims will merely ensure more litigation and also provide less
    incentive to the Department to reach a settlement.
        And, finally, there should be no limitation on the right to
    litigate issues not resolved in this case. As I said at the
    outset, Cobell doesn't deal with all of the trust issues that
    are out there, but we need to get a start somewhere, and I
    think tackling the Cobell issues is the place to start.
        Mr. Chairman, Mr. Vice Chairman, these issues have been
    around for over 100 years, and together with your help I think
    we can finally resolve these individual Indian money account
    issues. Thank you.
        [Prepared statement of Mr. Echohawk appears in appendix.]
        The Chairman. Okay, thank you.
        Now we will proceed to Tex Hall.

    STATEMENT OF TEX HALL, PRESIDENT, NATIONAL CONGRESS OF AMERICAN
                        INDIANS, WASHINGTON, DC

        Mr. Hall. [Remark in native tongue.]
        Thank you, Chairman Campbell, Vice Chairman Inouye, and
    Senator Tim Johnson. My name is Tex Red Tipped Arrow Hall,
    president of the National Congress of American Indians. I am
    very grateful to the committee for two very important hearings
    today, one on the settlement of the trust and homeland
    security. When we were playing basketball when we were younger,
    it was called back-to-back, so we hope we are in shape to
    testify twice today. But we are very appreciative, again, and
    looking forward to working with the committee on accomplishing
    some very important issues, and these two issues today are two
    of the most notable issues in Indian country, and we support
    the committee in getting things done, but getting things done
    right.
        NCAI supports the establishment of a process for settling
    the Cobell v. Norton litigation. The bottomline is that the
    Federal Government has not maintained a recordkeeping system
    that will allow a complete historical accounting. So we should
    seek a fair and equitable settlement of the trust accounting
    claims.
        We met with tribal leadership last week in Portland and
    discussed this issue in detail. We are seeking a commitment
    from Congress to initiate a conflict assessment to begin this
    fall, with the help of a professional mediator. This mechanism
    should be used to develop and define a settlement process that
    can be accepted by the parties.
        While tribal leaders have consistently supported the goals
    of the Cobell plaintiffs in seeking a correct trust funds
    accounting, tribes are also concerned about the impacts of the
    litigation on the capacity of the United States to deliver
    services to tribal communities and to support the government-
    to-government relationship. Significant financial and human
    resources have been diverted by DOI in response to the
    litigation, and the litigation is creating an atmosphere that
    impedes the ability of tribes and the Federal Government to
    work together to address the needs confronting Indian country.
    Continued litigation will cost many more millions of dollars
    and take many more years to reach completion, further impeding
    the ability of the Bureau of Indian Affairs and the Department
    of the Interior to carryout their trust responsibilities. We
    believe it is in the best interest of tribes and individual
    account holders that tribal leaders participate in the
    resolution of trust-related claims and the development of a
    workable and effective system for management of trust assets in
    the future.
        Congress should initiate a structured assessment to assist
    the parties in identifying the appropriate form of conflict
    resolution. In short, a mediator should work with the parties
    to design the structure of a settlement process. The assessment
    should also serve as a consultation mechanism for tribal
    governments. A structured mechanism will allow for formal
    acceptance of a settlement process by all parties and move us
    one significant step closer to a serious settlement proposal.
        Some guiding principles I would like to mention should
    include the following: No. 1, involve all necessary parties in
    convening this fall to scope and frame the settlement process.
    The House Resource Committee and the Senate Committee on Indian
    Affairs should forge an alliance to work on this issue and
    participate in meetings to keep Congress informed of progress
    and keep the pressure on for settlement. Consultation with the
    elected tribal leadership is essential in the settlement
    process. Tribes have a number of very important issues in the
    outcome, including future delivery of trust services and a
    Federal budget for tribal programs. No. 2, an independent body
    should play a significant role in the settlement process to
    ensure fairness and transparency, and that the process moves
    forward, an independent body should manage the deliberative
    process. No. 3, establish a process that will keep the pressure
    on for settlement. Firm time schedules should be established
    with periodic reporting and incentives for reaching a
    settlement. No. 4, provide for judicial review and fairness.
    Many individual Indians do not have access to legal counsel to
    review settlement documents, and, therefore, review by the
    courts is necessary to avoid any unfair settlements. Also,
    tribal native language interpreters, we feel, is necessary to
    help explain settlement offers and options to the individual
    Indians. No. 5, ensure that the settlement also addresses the
    trust systems for the future. So in addition to the account
    balances, the other major issue in the litigation is the
    functionality of the trust accounting systems in the future. It
    would be disastrous to create a settlement that would resolve
    the past liability and then allow the Federal trust reform
    efforts to relapse again.
        Tribal leaders are very supportive of the proposal from
    Chairman Campbell and Vice Chairman Inouye that we begin our
    efforts on trust reform with an attack on land consolidation
    and fractionalization. If we allow to continue
    fractionalization, this will eventually overwhelm systems of
    trust administration and exact enormous costs for both the
    Administration and tribal nations. We are very appreciative of
    the continued work on S. 550, and we urge Congress to make a
    huge investment in land consolidation programs. These will pay
    much bigger dividends than most any other fix to the trust
    systems that we see today on the table.
        But there are two other issues that Congress should take up
    at this time: Accountability and standards. It is well known
    that the Federal Government has mismanaged the Indian trust for
    decades. The real question for Congress is why decades of
    reform have produced so little in the DOI's willingness to take
    corrective action. The real answer is that the DOI and the
    Department of Justice have never been willing to establish
    standards of trust management because the standards would
    subject them to liability if they were not met. The lack of
    standards has consistently undermined the trust reform.
    Congress needs to send a clear signal to create a new culture
    of accountability for Indian trust management. We would greatly
    encourage the Committee of Indian Affairs to take up trust
    reform legislation that would hold the Federal Government to
    the ordinary standards of a trustee.
        Indian trust resource and trust fund administration
    requires accountability in three core trust systems that
    comprise the trust business cycle: title, leasing, and
    accounting. Congress should focus its efforts on these core
    systems. Correcting the DOI's performance in these areas will
    also require significant and sufficient personnel, training,
    and an adequate budget to do it. Of course, the most important
    system is the title. Currently, BIA uses 10 different title
    systems in the various land title record offices around the
    country, both manual and electronic. These systems contain
    inaccurate and inconsistent information. The inaccuracies
    result in incorrect distribution of proceeds from the trust and
    the need to make repeated corrections. Consequently, a large
    backlog of corrections have developed in many of the title
    offices, and this has compounded the delays in probate,
    leasing, mortgages, and other trust transactions.
        I can personally attest to this in witnessing last
    Wednesday in the probate of my father, which I witnessed some
    records were there that I had no idea were there. You had a
    document that was 50 pages thick on fractionalization, and you
    had 30 minutes to do the entire probate, and you had to
    determine if that should be a part of your father's estate or
    not; and they took the document back from them after they were
    done. So you had probably about 3 minutes to review 50 pages of
    records on fractionated interest.
        Congress should also address the problem with appraisals.
    We need to ensure that account holders are receiving fair
    market value for their properties.
        Finally, and very importantly, NCAI is strongly opposed to
    the current trust reform reorganization effort that the DOI is
    engaged in, and the dramatic shift in BIA funding that are
    proposed in the 2004 budget. We are asking for the assistance
    of the committee in stopping this reorganization. The
    reorganization is putting the cart before the horse. The
    organizational structure must be designed to function within a
    system that has not yet been developed. Millions of dollars
    have been invested in the as-is study of trust services, but
    the Department has only just begun to undertake the critical
    phase of re-engineering the business processes of trust
    management. By implementing a new organizational plan
    prematurely, DOI is running a great risk of wasting the
    valuable resources that the agency and tribes have already
    dedicated to understanding systematic problems. Reorganization
    should only come after the new business processes have been
    identified and remedies devised through a collaborative process
    involving tribal leadership.
        Again, we would like to thank the members of the committee
    for all the hard work you and your staffs, and the time and the
    amount of energy and your commitment for trust reform. We have
    a big opportunity in front of all of us to resolve the Cobell
    litigation, so we are looking to Congress as tribal nation
    leaders to commit to participating in the process and assisting
    a mediation team. This will be a big important step for Indian
    country, and we stand ready and willing to assist. [Remark in
    native tongue.]
        [Prepared statement of Mr. Hall appears in appendix.]
        The Chairman. Thank you.
        Now we will move to John Berrey.

      STATEMENT OF JOHN BERREY, CHAIRMAN, QUAPAW TRIBAL BUSINESS
                         COMMITTEE, QUAPAW, OK

        Mr. Berrey. Good morning. I want to thank you all for this
    opportunity, Chairman Campbell, Vice Chairman Inouye, and
    Senator Johnson. On behalf of the Quapaw Tribe, I want to
    express my appreciation for your commitment to Indian country.
    And I believe I am here to describe a few issues that I think
    need to be part of your consideration as we embark on the idea
    of settlement in this historic case, a case that has clearly
    exposed many of the horrible details related to the
    mismanagement of the American Indian Trust Estate. The Quapaw
    Tribe and its members reflect some of the most horrific
    examples of this mismanagement we have all heard stories of.
        The Department of the Interior managed the largest lead and
    zinc mines in the history of the United States on Quapaw lands.
    The Quapaw Tribe currently has a case in the Northern District
    of Oklahoma, and we also have several members that are members
    of the Cobell class. We recognize that our tribe and its
    members have suffered over time, but litigation is so costly in
    terms of cash and human resources, the Quapaw Tribe has entered
    into a formal alternative dispute resolution process with the
    Department of the Interior and the Department of Justice.
        And I want to make it clear that this is about our tribal
    claims, and I want to make a clear distinction tribal claims
    versus the Cobell claims. Tribal claims represent 90 percent of
    the trust corpus; the Cobell individual plaintiffs just
    represent 10 percent of that total trust estate. And I want to
    make that clear, and I kind of made some charts as part of my
    testimony.
        I also believe that some of the facts about the limited
    claims in Cobell need to be discussed. The Cobell claims are
    the cash collections from natural resource management, either
    oil and gas, timber, mining, agriculture, grazing, commercial
    property, and some residual trust fund holdings or judgment
    fund holdings. It is the posting of the interest, the
    investments, the distributions, the audits, and the itemization
    and reporting of all these accounting activities.
        And I think it is important to know what it is not. It is
    not the pre-lease activity; it is not the appraisals; it is not
    the fair market value; it is not the lease term negotiation
    factors of the notice and the bids, et cetera; it is not the
    lease compliance issues of the audits of the well heads, or the
    run tickets, or the load volumes, stumpage audits, footage
    audits, all the audits that are necessary to make sure that
    people are in compliance with their leases and the exploitation
    of natural resources; it is not the enforcement of trespass,
    the proper usage of land, the environmental issues and the
    reclamation issues; it is not issues of idle lands and it is
    not issues of land stewardship.
        So I think we need to concentrate that this is very narrow
    in its terms, it is just from the collections of the money to
    the distribution of the money. And there is a lot more
    liability and a lot more issues out there that I think we need
    to be cognitive of as we go through this process.
        I am concerned that the settlement of Cobell may provide or
    give the perception that it will provide some closure to all
    the claims associated with the historical mismanagement of the
    Native American trust, and I think this is totally inaccurate.
    I think the settlement can satisfy many problems and help
    provide solutions for the future, and I am very hopeful that
    the improvement of the service delivery, like Tex has talked
    about, is very much part of the outcome of any settlement. But
    a settlement in Cobell will settle only the claims related to
    the IIM accounts, and not other claims. Those claims that are
    related to the actual management are the types of claims that
    are being asserted by the Quapaw Tribe and the other 29 tribes
    that are currently in Federal litigation.
        So how do we get to a process similar to what the Quapaw
    Tribe has entered into? We believe there is a scientific tried
    and true process of alternative dispute resolution that, if
    followed, can lead us to the path of settlement, and it starts
    with an assessment of the conflict. A third party neutral is
    brought into the picture, they interview all the parties
    involved, and they make recommendations on how to go forward.
    We have experienced that in our alternative dispute resolution
    process, and it has helped set the environment for the ability
    of the tribe to work with the Justice Department and the
    Department of the Interior at the table to try to work through
    a lot of the issues that we believe are part of our claims.
        We think that there are some issues that are very necessary
    as outcomes to any settlement. One is we need to see if we
    could reduce or begin a consolidation of the fractional
    interest on individual lands. We need to promote the increase
    of a tribal land base, we need provisions for future resources
    for managing the trust estate, and we need the promotion of
    self-governance.
        The DOI takes the blame and the brunt of the complaints
    regarding the management of the assets belonging to tribes and
    individuals, but the failure of the Congress to provide
    adequate funding and resources for the management is glaring.
    In order for the United States to live up to its fiduciary
    responsibility to Native Americans, the Congress must give DOI
    the tools. When the Bureau of Land Management has $140 million
    2003 appropriations for information technology, compared to an
    $11 million IT appropriation for the BIA, there is a problem.
    Indian affairs has been terribly neglected for 150 years,
    resulting in this litigation wave that we are facing right now.
        And I think there are some things that I would like to
    point out that the DOI has embarked on, and something that I
    have been part of in terms of what is going on in the future,
    and Tex made a reference to it. It is the ``to be'' re-
    engineering project that I am very much a part of, and there
    are hundreds of people within the Department and there are
    several people in Indian country that are working very
    diligently on trying to fix some of the processes. We are
    trying to fix leasing, probate, accounting, appraisals, the
    title management systems, the ownership records management,
    surveys, and all the processes that make up the trust services,
    we are all redesigning them. The process is going to include
    the standardization of work flows and processes.
        In our as-is study we found out they managed probates or
    they do different processes in leasing in Nashville different
    than they do in Anchorage, different than they do in Phoenix
    compared to Minneapolis, and we want to try to find some
    standard methods to make this process better. We are going to
    eliminate antiquated tools and redundant business practices. We
    are going to create a new IT systems architecture. We are going
    to create policies and procedures, training, risk management,
    workforce planning, and all the tools that we believe that are
    needed in order to provide a beneficiary-centric service
    delivery for Native Americans.
        The process is going to need some help, though, from
    Congress. We are going to need the adequate resources, once we
    have identified them, for this new improved trust delivery. We
    are going to need the oversight of the Congress and make sure
    that the Department of the Interior upholds its responsibility
    as the delegate trustee for the United States. And we also
    believe there is going to have to be a collaborative process
    between Congress and the re-engineering team in order to make
    changes in legislation to make these new processes work so we
    can create a beneficiary-centric self-governance promoting
    Department of the Interior.
        In closing, I would like to encourage everyone that is
    involved. I think that we have got a long way to go, and I
    think the damage to Native Americans is obvious. But we must
    bring this case to a close and start fixing the trust system.
    You know, my tribe is suffering terribly. The money that is
    appropriate in realty is not making it to the people; the money
    is being spent on litigation, even at the local level. My
    realty officer spends so much time just working on document
    production issues. We can't get decisions on FIDA trust because
    the solicitor's office is so tied up with the litigation. So
    the people that are really suffering from this case are the
    very people that the case is about. The burden of this case is
    now on my people, and my people are suffering. We live in the
    largest Superfund site in the United States; we have leases
    that were signed by the Department of the Interior that we
    haven't had collections on. Some of them are 30 years in
    arrears in collections, and we can't get anybody to move to get
    some of these things straightened out.
        So what I am really hoping for at the very end of the day,
    when settlement is done, is not only that will give some sort
    of compensation to the people that have suffered, but will
    provide a future trust service delivery system that makes
    sense, is timely, and reduces a lot of these delays and
    suffering.
        And I have also got some letters that I am going to provide
    from members of my tribe and also I am a member of the Osage
    Tribe of people that are really interested in settling, people
    that have had huge amounts of dollars go through their IIM
    accounts, and people that want to go forward and quit looking
    back. It is important to me as a tribal leader to teach my
    children to look forward and not constantly spend all of their
    energy looking backward and trying to create a future.
        So, with that, if you have any questions, I would be happy
    to answer them.
        [Prepared statement of Mr. Berrey appears in appendix.]
        The Chairman. Do you want those letters included in the
    record that you brought?
        Mr. Berrey. Yes, please.
        The Chairman. They will be included in the record.
        [Referenced documents retained in committee files.]
        The Chairman. We will now go to Chairman Frazier. And you
    have a person with you, a resource person, Majel Russell, is
    that correct?
        Why don't you come on up to the table too, in case you are
    needed to help the chairman.
        Go ahead, Chairman Frazier.

      STATEMENT OF HAROLD FRAZIER, CHAIRMAN, CHEYENNE RIVER SIOUX
    TRIBE, EAGLE BUTTE, SD, ACCOMPANIED BY MAJEL RUSSELL, ATTORNEY,
          INTER-TRIBAL MONITORING ASSOCIATION, ALBUQUERQUE, NM

        Mr. Frazier. Thank you.
        Good morning, Chairman Campbell, Vice Chairman Inouye, and
    Senator Johnson. My name is Harold Frazier. I am the chairman
    of the Cheyenne River Sioux Tribe in South Dakota. I am also an
    ITMA board member.
        Today I am honored to present testimony on behalf of the
    Intertribal Monitoring Association on Indian Trust Funds. In
    addition, I am offering specific comments on behalf of the
    Cheyenne River Sioux Tribe. I will first tell you a little bit
    about ITMA's membership and our position on the need for a
    settlement process for IIM account holders, then I will present
    the organization's suggestions for a fair and workable
    settlement plan to address the Department of the Interior's
    mismanagement of IIM accounts. Last, I will give you some
    concrete examples from back home about the kinds of problems
    our IIM account holders face everyday and explain how the
    proposed BIA reorganization will only make these problems worse
    for these individuals on our reservation.
        ITMA has long served as a watchdog over the Department of
    the Interior's management of Indian trust. The member tribes of
    ITMA hold significant trust funds and resources, and many have
    numerous IIM account holders. For example, most Great Plains
    Tribes and all the Rocky Mountain Region Tribes are members of
    ITMA. Together, our two regions hold 68 percent of tribal trust
    assets. In addition, Great Plains tribes have over 68,000 IIM
    account holders, which is the largest number of any account
    holders in all of the regions. And the Rocky Mountain tribes
    have more than 50,000 IIM accounts.
        Recently, ITMA's focus has been the protection of tribal
    government's authority over trust accounts and resources. While
    ITMA has been seriously concerned about the financial impact of
    the ongoing Cobell litigation on critical tribal program funds,
    we also question today whether continuous litigation for many
    more years is in the best interest of all the IIM account
    holders.
        We recognize that the Cobell lawsuit was necessary to draw
    attention to the Department of the Interior's serious neglect
    of the individual Indian trust accounts. However, we believe
    that the litigation may outlive some of the IIM account holders
    who have already waited many years without receiving an
    accurate statement of their accounts, much less the trust
    moneys that they may be owed. Therefore, ITMA endorses the
    development of a settlement process that IIM account holders
    may choose to utilize. For those IIM account holders who choose
    not to utilize a developed settlement process, the current
    legal remedies available should remain intact.
        The Cobell plaintiffs have argued that adequate records do
    not exist to conduct a valid accounting of IIM accounts. The
    Department has provided a plan to the court to reconstruct IIM
    account records to complete an accounting; however, the
    recreation of records for IIM accounts with inadequate records
    will take 5 years to complete, at a cost in excess of $335
    million. ITMA supports an opportunity for individuals to settle
    their IIM claims short of a complete reconstruction of accounts
    and completion of an accounting. Such a settlement opportunity
    will allow an IIM account holder to choose a financial benefit
    in a timely manner, rather than to await the reconstruction of
    records and accounting.
        The key to a viable settlement mechanism will be the
    process to value IIM account holder claims. ITMA proposes that
    accounting experts be utilized to develop a method for valuing
    IIM claims utilizing generally accepted accounting principles.
    A second key component for a settlement mechanism will be
    review and acceptance of the process to value claims. The
    approval should occur in either existing judicial forms or in a
    newly created court to specifically address IIM claims. Third,
    upon an accepted claims valuation method, a settlement may be
    offered to the IIM account holder. Account holders should be
    provided access to objective legal advice to decide upon
    acceptance of a settlement offer. The account holder can then
    make a knowledgeable decision to accept the offer or resort to
    continue litigation to obtain an accounting.
        However, if an IIM account holder chooses to accept the
    settlement offer, the settlement should be final except in
    instances of fraud, material misrepresentation, or concealment.
    In addition, adequate funding must be guaranteed for settlement
    with IIM account holders. At this point, the Cobell plaintiffs
    and the Department are extremely divergent on the cost of
    settlement. ITMA believes an amount to accomplish settlement
    remains unknown until an accounting process is developed. We
    would therefore recommend that a flexible funding mechanism be
    considered that will take this uncertainty into account. One
    option would be to make portions of the amount available over
    time as more information is gained through the agreed upon
    account valuation procedures. Some ITMA tribal members support
    an appropriation to fund these settlements, and some ITMA
    members support utilization of the judgment fund as provided by
    31 USC 1304; however, all ITMA members are adamant that
    settlement funds not deplete existing or new tribal program
    dollars.
        In summary, ITMA proposes that a settlement process be
    developed via a pilot project consisting of ITMA tribes. Those
    tribes who choose to participate will determine the scope,
    form, and process for valuation of claims and appropriate
    judicial review of the process. Upon determination of tribal
    participation, ITMA will coordinate with this committee to
    develop objectives and timeframes and a budget for this
    project. After completion of the pilot project, a process will
    be available for all tribes to utilize. ITMA believes that
    meaningful reorganization of the Department of the Interior
    cannot occur until the settlement of the Cobell lawsuit.
        Related to trust management issue, the ITMA tribal
    membership is concerned about the ongoing reorganization of the
    Bureau of Indian Affairs. ITMA respectfully requests this
    committee conduct a hearing on the reorganization in the
    immediate future. ITMA and the National Congress of American
    Indians have worked jointly for almost 1 year on the
    development of a tribal trust reform bill that ITMA has
    recently finalized. This tribal bill has been reviewed by
    various regions of Indian country, and all tribes have strongly
    endorsed the concept. The final draft of the bill has been
    provided to numerous congressional representatives for
    immediate introduction. On behalf of our tribal members, we
    urge the committee to support our efforts.
        ITMA understands that S. 175, now S. 1459, has recently
    been introduced by Senators Tom Daschle, Tim Johnson, and John
    McCain to address trust reform. The bill has also been
    introduced on the House side, H.R. 2189, by Congressmen Nick
    Rahall and Mark Udall. ITMA worked diligently with
    congressional staff to influence the rewrite of S. 175;
    therefore, ITMA believes that S. 175 is also a viable solution
    to trust reform. We strongly urge the convergence of these
    legislative efforts.
        As chairman of the Cheyenne River Sioux Tribe, I would like
    to make a few comments on behalf of our people. The Cheyenne
    River Sioux Tribe believes that the proposed BIA reorganization
    will make trust management less effective and responsive to all
    beneficiaries, including individual account holders and tribes.
    The current BIA reorganization does not benefit Indian country,
    and it does not benefit our grassroots members, who many of
    them are IIM account holders. Instead, it creates more upper
    level bureaucracy, which will in turn create more delays in the
    turnaround of our IIM account holders' payments. Also, it
    doesn't provide more resources or authority at the local agency
    level that is needed to address a lot of our grassroots
    people's concerns and issues. With the proposal of trust
    officers located at local BIA agencies, they will be
    duplicating services and wasting funding that is much needed
    for our members' needs.
        I would like to briefly share several stories about how
    this reorganization has affected our people's lives on the
    Cheyenne River Sioux Reservation.
        The Chairman. I have to tell you, Mr. Chairman, that we are
    going to have to leave and vote in 10 minutes, and we have yet
    to hear from Mr. Gray, too, and both wanted to ask some
    questions. We are well aware of how it affects people's lives,
    but you might put those in the record, if that would be all
    right.
        Mr. Frazier. Well, thank you.
        [Prepared statement of Mr. Frazier appears in appendix.]
        The Chairman. Thank you.
        Mr. Gray, why don't you proceed.

        STATEMENT OF DONALD GRAY, ESQ., NIXON PEABODY, LLP, SAN
                             FRANCISCO, CA

        Mr. Gray. Mr. Chairman, Mr. Vice Chairman, I want to tell
    you how very much I appreciate being invited as an expert on
    trust administration and reconstruction. I think this is now my
    third appearance before this Committee, and I appreciate the
    opportunity.
        Four years ago, when I first appeared before the committee,
    I outlined three basic principles that I thought were very
    important in terms of trust reform, whether it was future trust
    reform or historic trust reconciliation. In those four years,
    in this last 4 years, there has been progress. I believe the
    progress has been more in the hearts and the minds of most of
    the players in this drama in terms of the recognition of these
    key elements. It has not been what I had hoped it would be,
    which was to be an actual trust fix, either prospectively or
    historically. That just simply has not been done. But there has
    been a change in acknowledgment of what needs to be done.
        I want to reiterate what I said some time ago, because it
    is just as applicable to the task at hand now, which is
    alternative methodologies for settlement, as it was 4 years
    ago. The first is expertise. Up until the time I testified, I
    don't think anybody took seriously the fact that there were out
    there in the real world and the commercial world people who
    fixed trusts for a living, historic, long multiple asset trusts
    that had gone wrong for many, many years. It is a small group,
    but it is a very important group to the banks in the United
    States, and it works very hard at it and it is very good at it.
    And that expertise has got to be brought to bear somehow, some
    way on this problem. I think the court now understands this, I
    believe Congress understands it, and I believe Indian country
    understands it.
        The second point I made were conflicts of interest with
    respect to the DOI. This was the theme that I have harped on a
    little bit too much, perhaps, and that is the patient can't
    cure himself. No matter how well motivated, the DOI
    historically had made the mistakes, and they cannot be fairly
    put in the position of having to correct those mistakes. Their
    conflicts of interest are also heightened by the fact that
    there is highly vicious and sometimes overly-vicious, in my
    mind, court battle going on, and nobody can do a good job at
    trust reconstruction when they are in court every day; that
    makes it very difficult.
        The third issue, related to the second issue, was
    independence. Up until the time that I testified, I am not sure
    that anybody really took into account the fact that there was
    not a truly independent body or even one that was considered to
    be injected into this process; it was the DOI defending
    themselves and it was the plaintiffs hammering on the DOI, and
    no independence. And without that independence, which was
    related to the expertise element, bringing in the expertise,
    you are never going to get the kind of information that you
    need to go forward.
        This independence, by the way, I took personally. I turned
    down representation of the DOI, or working for the DOI early
    on, and for several tribes, because I thought that the
    positions were polarized, I didn't think there was enough
    independence, I didn't think there was a body for independence,
    and, therefore, I did this for free because we weren't there
    yet; we just didn't have the independent vehicle to bring the
    expertise to bear, and nobody was going to take it seriously.
        I think there has also been progress in the last 4 years,
    especially in the last several months, in terms of reaching out
    with respect to all methodologies for IIM trust reconciliation
    and reconstruction, and for historic reconstruction, and not
    just limitations to strict accountings, and not limitations by
    statutes of limitations or other ways that DOI has sought to
    limit the way that it goes about trying to deal with historic
    accounting, including the limitation to statistical sampling.
        This process has had a lot of names attached to it, and
    broken trust has been the one that has been the most ubiquitous
    in the last 10 years. I would suggest that there is another one
    that everybody take into account. And I don't want to be over-
    dramatic about this, but there is also the light in the forest
    here. And a light in the forest is information. And the thing
    that is the most frustrating for a professional that rolls up
    his sleeves and tries to fix these kinds of trusts is that
    there has been an awful lot of organizational changes, there
    has been an awful lot of data cleanup, there has been an awful
    lot of as-is descriptions, but there has been not one
    significant step in fixing the historical problem or in putting
    together the proper architecture for a future system; and that
    is because the expertise has not been brought to bear.
        The DOI has engaged in organizational and management
    reorganizations. Maybe understandably, it has tried to limit
    the scope. And you heard Mr. Cason today talk about how they
    have tried to limit the scope of their inquiry in terms of an
    accounting. But there has been no progress at all with respect
    to the reconstruction of these accounts. None. This is a little
    bit like McClellan on the Potomac. You have got an arsenal of
    records, you have got constant troop reorganizations and
    supplements, you have got cleanup of data, but, respectfully,
    it is time to cross the river, roll up your sleeves, and do
    some work; and that means Congress and it means all the other
    people involved in this.
        There is a frustration factor in this for a professional
    who has followed this as closely as I have. You have a patient
    dying on the table. You have IIM holders who are already dead,
    literally, and who are dying, and you have a lot more who are
    living at subsistence levels; and that is untenable. It is
    untenable because the cures are scattered about the operating
    room and the cures of information are outside the operating
    room and accessible, but nobody will let the doctor in. That is
    untenable to me.
        You have choices. Here are your choices. You can spend many
    million more dollars and give the DOI time and years to do
    statistical sampling and to come up with studies that Indian
    country will not accept. You can default to the court and have
    a receiver appointed. The receiver will inherit exactly the
    same problems that you have now, and will have enforcement
    issues and constitutional issues that have not yet been looked
    at that are enormous. And what that means is that it is time
    for Congress to do something.
        The fact of the matter is Mr. Cason is right. There is a
    creative misunderstanding here about accounting. When somebody
    wants to fall back on limitation and do as little as possible,
    they talk about a strict accounting, which in real parlance
    means tracking transactional accounts very closely and
    verifying them to supporting data. That is not possible for the
    130 years of this trust, and everybody knows it, because we
    don't have the data. So in order to get to a fair and
    reasonable solution, you are going to have to use more than the
    existing data, more than statistical sampling of a minute part
    of the existing data; you are going to have to look into a
    wider circle, if there is going to be anything fair and
    reasonable done to the IIM holders.
        I am here today to talk about those alternative methods
    briefly and give you, in layman's terms, what they mean. The
    most important of the alternative methods, and when I say
    alternative, I mean alternative to the actual records that DOI
    does have right now, some of which has been claimed not to be
    good, some of which has been claimed to be okay. The most
    important is the external data that was brought out in the
    February filings by the experts for plaintiffs. They are very
    impressive filings, and in my mind they were the turning point
    in this entire process. If you look at these filings that go
    back to independent records of well production, oil and gas
    well production, grazing land production, timber production
    kept by local governments, State governments, and Federal
    governments over years.
        Mr. Cason referred to estimating techniques. Historically,
    these are not estimating techniques. This is an alternative
    valid direct evidence. It may not be part of the historic trust
    accounting system, but it is external evidence that bears
    directly upon the Indian assets.
        Now, I don't take these accounts at face value, and they
    shouldn't be. What I had hoped the DOI would do is hire their
    own experts and say that is wrong and that is right, that is
    wrong and that is right. That is how you get to a fair and
    reasonable solution. But what I do say is that the methodology
    of those mineral and asset reports as independent direct
    evidence is one of the most important alternative methodologies
    used in resurrecting any commercial trust that has multiple
    assets involved in it.
        The second important methodology or alternative is called
    modeling. And I want to defuse that in terms of it being kind
    of an esoteric concept. It is not that esoteric at all. What
    happens is that if you know that you have a well that is on
    Indian allotted lands and you know from State, Federal, local
    level exactly what was produced in that well, you have direct
    evidence. If you don't have that evidence, but you have the
    same evidence for a well or wells on the same oil reservoir or
    on similar oil reservoirs for the same time periods, and you
    have evidence with respect to what market rates were for those
    natural resources, it is fair and reasonable to use those as
    analogies; and that is done all the time in the commercial
    sector. And, in fact, if you read carefully those submissions
    that were submitted in February by plaintiffs' experts, they
    are a combination of direct evidence and modeling, they cross
    back and forth; and, frankly, they need to be countered,
    because they are not all correct, they are one-sided. The $137
    billion, the $170 billion, that is if you take everything that
    they say is totally correct and assume that nothing ever came
    out of the IIM accounts to the IIM holders, and I think that is
    wrong; I think they did, and I think there is independent
    evidence on that that needs to be used.
        The third area, and I know time is limited, but the third
    area of evidence or methodology that needs to be looked at is
    very simple, and that is an alternative way of looking at the
    existing data we have now. DOI has looked at that data, knows
    there are problems with it, thinks that a lot of it is right
    and some of it is wrong. It has used statistical sampling
    techniques to see if they can, from a small population,
    generalize to a large population. Statistical sampling
    sometimes works very well in the commercial sector, and has
    been used, but only, in my experience, when you have a single
    asset or a single problem or a single trust. When you have
    multiple assets that have a lot of variables connected to them,
    it is very, very difficult to do statistical sampling.
        One of the examples that I was struck by in Tex' testimony
    in the House was that if you do statistical sampling, it will
    pick up some variables, some mistakes or whatever. He mentioned
    that there is a real problem of overgrazing in Indian country
    and the grazing country. No statistical sampling model will
    pick up a variable like overgrazing, and unless an independent
    group goes in and uses all of these methodologies and embraces
    all of these variables that are unique to the assets, you will
    never get a fair and reasonable transactional or any kind of
    historical reconstruction of what the IIM holders should have
    gotten; and I think his example was a very telling one.
        Otherwise, what you have was statistical sampling or other
    things or quick fixes like TAAMS. And I don't want to repeat
    this too much, but more than four years ago I sat in a room and
    begged appropriators not to give money to TAAMS, because I knew
    what it was, it was an oil and gas accounts receivable system,
    and I knew it wouldn't work for other resources. It didn't. But
    the answer that I got back was we agree with you, we don't
    think it is going to work. If we don't appropriate the money,
    we will be seen as anti-Indian, and we can't withstand that. I
    don't think that would happen today, but that was a regrettable
    thing that happened in the past.
        I will be very brief. In conclusion, there are lots of
    methodologies that can be used to find the truth. I advocate
    using them all; not just one, but using them all. And if one
    doesn't work, try another one, because there are a lot of them
    out there. But there are only two conceptual approaches to
    historical fixes and trusts. One of them is agreed procedures,
    and statistical sampling is an example of that. That is where
    you get one set of data, you assume it is correct, you put one
    methodology to it and you come up with conclusions. Accountants
    love it because they are protected. They are methodology-
    limited and they are data-limited.
        The other is inelegantly called scrubbing. And what that
    means is you take your shirt off sometimes, you get down into
    the boiler room, and you find everything you can. You look at
    the historical data that the DOI has, not on a sampling basis,
    but on a holistic basis, and you look for trends that you can
    then project back into history. And you look at all of it and
    you see what people of good faith in Albuquerque and in Montana
    and other places have done or tried to do to account for these
    leases, and you project that back.
        I am a scrubber. I believe that the only way to find out
    most of these situations is to get in and look at all of this
    data, use all of these methodologies, and come up with
    something that is fair and reasonable. And I do not believe
    that you will ever have a settlement that will be based upon
    statistical sampling or quick and dirties. You are going to
    have to look at everything that is out there: extrinsic
    evidence, modeling, and a reassessment of existing data.
        There was something said about independence and how we go
    forward on this. I have a suggestion, and my suggestion is very
    simple. There does need to be an independent body. And I
    actually wrote a proposal for one, as did a number of other
    people. But this one can be very modest, and it can be a baby
    step. And what I would like to see Congress do is to put
    together a team, and that team could be led by somebody like I
    have in mind. I think William Cohen would be a terrific person
    because he knows Indian affairs and because he is well
    respected on both sides of the isle, if he is available. But
    you need professionals who are going out and getting
    information. You need a feasibility study by the best in the
    country who will, because I have talked to them, give their
    time to go out, to see whether or not, using all of these kind
    of methodologies, can you come up with a fair and reasonable
    historic reconstruction of the IIM accounts, without squabbling
    about what is an accounting or isn't an accounting, or
    limitations here and limitations there. Without that, if all
    you do is to sit around and talk again about structure, then
    Congress will be doing the same thing that the DOI has been
    doing in the last four years, which is reams of reports on
    reorganization and moving the chairs around on the Titanic, and
    not one iota of expertise applied to the data to come up with
    what the answers are.
        It is time now to get to work, and my suggestion is time-
    limited, very money-limited, but get the right people and get
    them into a feasibility study to say can it happen; can you put
    all this stuff together; can you find this evidence; is there
    enough evidence; are there too many variables; can you do it. I
    think the answer is going to be yes, you can. And then I think
    you take that same group or a similar group and use them as the
    center core of a mediation settlement process where they are
    independent, they have no outcome agenda, and the DOI comes in,
    gives its evidence, the plaintiffs come in and gives its
    evidence, whether it is extrinsic, whether it is old, whether
    it is new, wherever it comes from, and you beat it down to
    something that is fair and reasonable. It happens in the
    commercial sector all the time; it can happen here. But for the
    love of heaven, at this point on, get experts in and get
    information on the table. No more restructuring. No more
    reorganization. You have got to get to the data and you have
    got to have somebody you trust turn around and say this is
    viable, this can be verified, we can do it, or say you can't;
    but find out. And that is my modest suggestion.
        One part of my written testimony that I would ask people,
    when they have time to take a look at, is entitled ``What Is
    Going On At The DOI?'' because I have a lot of respect for a
    lot of people at the DOI, especially in this Administration. I
    am not one that looks back and visits all the problems of the
    past, especially during the bad years on this Administration. I
    don't think that is fair, I don't think it is reasonable. I
    think there are a lot of good people who are trying to do the
    right thing, but something is wrong, because they are
    stumbling. Instead of joining the issue that was put forward by
    the plaintiffs in these really telling expert testimonies, they
    simply fell back on limited records, statistical sampling,
    statutes of limitations. They keep falling back on that. Why
    are they doing that? Is it because they don't get it? Is it
    because they don't understand that Indian country wants more? I
    don't think so. I think they get it. Is it because they are
    worried about losing jurisdiction? Yes, I think in part it is.
    I think that they don't want an independent body involved in
    this because they think they will lose jurisdiction. The
    independent body issue is what brought the task force to its
    knees. The task force worked terribly hard, solved a lot of
    problems, identified a lot of problems, but the DOI never, in
    my mind, when it got down to the hard question of independent
    monitoring, intended for there to be any kind of independent
    monitoring, and that is what brought it to its knees.
        I want to compliment Mr. Cason on something because he went
    to the third issue of the DOI. First of all, in terms of losing
    jurisdiction, I don't believe that is a problem. In fact, for a
    while the DOI will lose jurisdiction if you have independent
    trust fixers, but I have always maintained that this is the
    biggest Government in-house training program of all time. If
    you have the best commercial people in the world come in and
    fix this problem and train trust officers within the BIA, you
    are doing them a great favor for their future and you are
    preserving their jobs. This is not taking away jurisdiction.
    And sooner or later this problem is going right back to the BIA
    to administer. The problem is they don't know how to fix this
    problem. They don't have the expertise. You look in their
    reports to see if they are going to get it; you can't find it.
        Two other things real quickly, because I do not want to
    overstep my time. This is a common sense fix. I read Tex'
    testimony in the House only a few weeks ago, and he had a
    hypothetical colloquy with Senator Norton on grazing land, and
    Norton was saying, look, we don't have the records, how can we
    reconstruct this. And Tex kept pushing and saying, well, if you
    don't have the records, then maybe we look back at independent
    oil and gas records. If you don't have that, maybe we look at
    estimations based upon existing records. If you look at his
    testimony carefully, he has said exactly what I have said. I am
    an independent trust fixer, but his commonsense approach to how
    you use a holistic study of all of these methods to get to the
    end result, if you don't have the records, is far more eloquent
    than anything I said today or I have said in writing. And I
    would invite you to look at his testimony, because I think it
    is important.
        My last statement has to do with something that the
    chairman averted to, and that is the moral cost. You know, it
    is very hard to get involved in a situation like this and not
    have your soul affected by it. There is a moral cost to this,
    and especially if it keeps going on business as usual, where we
    are just restructuring things and we are moving people around
    and we are getting new flow charts and we are not going
    anywhere in terms of fixes. One of them is that good people of
    good faith who really are first-class people, in the context of
    a vituperative litigation, like the Cobell litigation, get
    savaged. The day that Neil McCaleb resigned was one of the
    saddest days for me in the last 4 years. That should not have
    happened, because he would have been one of the first, I think,
    internally in the DOI to champion the kind of holistic approach
    for reconstruction that I am talking about. So that moral cost
    is not a joke, that is high, and it is hurting the integrity of
    the entire process.
        Sorry to rush through all that. I know time is short. I
    know you have votes, and I apologize for talking so fast, and I
    really appreciate the opportunity to be here.
        [Prepared statement of Mr. Gray appears in appendix.]
        The Chairman. Well, they haven't called us yet, so we can
    go on for a couple of minutes.
        I was particularly interested in your statements. I read it
    before we came to the committee, but listening to it, too, was
    really interesting. As you know, in the past, some of us on
    this committee have been saying for the last three or 4 years
    that we didn't think the Department of the Interior had the
    expertise to fix the problem, and I, for one, had recommended
    that we look to the private sector somewhere for people who
    have the skills in fixing trust problems or managing money. But
    it was opposed pretty much by the Administration, both the
    Clinton administration and the Bush administration, and opposed
    by the tribes too. And I think what has happened is that both
    sides, very frankly, have been polarized to some extent, have
    dug in, and it is making it very difficult to reach any kind of
    a consensus. Too many issues when we deal with it, when we have
    hearings or debates, we rehash the same problems, we retell the
    same stories, we restate the same thing, we deal with, you
    know, the same structural problems we faced in the past, and
    not enough people who come before the committee, frankly, look
    forward to how we find a solution. And, from my standpoint, it
    doesn't do any good, just keep flogging the thing. Somewhere we
    have got to get out of that and move forward to some kind of
    creative way of thinking so that we can find a consensus
    between tribes and the Administration. And I frankly think that
    no matter what we actually end up with, it is not going to
    satisfy everybody; someone will always feel that they were
    cheated or taken advantage of, or something of that nature.
        But I guess one of the reasons I was really interested in
    your comments is because you don't really have a dog in this
    fight; you don't have a client in it, you don't have any
    particular vested interest, you are not a person that is
    worried about jurisdiction turf to protect or anything of that
    nature. And maybe that is what we need more of, people that can
    step back, have a more objective viewpoint, that aren't
    emotionally involved in it quite so much, because I think it
    gives us some opportunity to get some fresh air in this system
    and some new ideas in this system.
        Mr. Gray. Can I reply to two things that you just said,
    because I think they are important? It is not just me. There
    are people who have been doing this for years and years in the
    private sector who are very, very good at what they do, and I
    have talked to them, and they are more than willing to get into
    this process, because they think it is important.
        The Chairman. No; I know they are.
        Mr. Gray. Because they spend their days saving money for
    banks. They would kind of like to do something for the American
    Indians.
        The Chairman. Sure. Well, that is what I and several other
    people have suggested, but, as I mentioned, it met with some
    resistance by tribes.
        Mr. Gray. But that is the second point I want to make. When
    I said that there was a paradigm shift or a completely
    different explosion, if you will, in this case, it was when, in
    February and March of this year, the plaintiffs filed those
    expert reports. You can listen to an expert like me from the
    commercial sector about how this is done commercially until the
    cows come home, and, quite frankly, I don't think anybody is
    going to take it terribly seriously until they see the results
    of it, but they won't let me in to do the work to see the
    results. But the plaintiffs, on their own, commissioned studies
    on almost every natural resource, and I am not saying that
    every one of those things is correct, but they are extremely
    compelling, and that lets the light in. And that is the first
    time that anybody in the process, a stakeholder, has said,
    look, there are other ways to find out how to do this, and I
    think that that ought to be taken seriously. I am sorry the DOI
    didn't join it head-on; it needs to if there is going to be a
    legitimate settlement. And that is exactly what the independent
    people need to key off of if you can do it.
        So I think there has been progress, Senator.
        The Chairman. Well, I do too. In hearing the comments of
    Mr. Berrey and Mr. Echohawk and Tex Hall and Mr. Frazier, the
    suggestion that we use a mediator, that hasn't been factored in
    in the past either. I mean, that is a little akin to what some
    of us have said all the time; we need some outside people
    involved in this. So maybe we are moving, and I certainly hope
    so. But today is certainly the beginning of searching for that
    settlement. We are going to proceed through August into the
    fall, and I hope we are really going to be able to find a
    solution to this.
        Let me yield to Senator Inouye if he had some comments.
        And by the way, I am going to submit most of my questions
    in writing because I know we are going to run out of time
    before I can ask a lot of questions.
        Go ahead, Senator Inouye.
        Senator Inouye. Mr. Chairman, this has been a very
    important hearing, and, regretfully, I must leave because I
    have another hearing. But may I request that some of my
    prepared questions be submitted?
        The Chairman. Absolutely. Yes, if you would submit yours. I
    am going to submit my prepared questions too.
        Senator Inouye. And I would like to thank all of you. I
    thought I was back in law school again. I learned a lot.
        Mr. Gray. Well, send me some questions.
        Senator Inouye. Can you tell me that if all the things that
    you wanted fell in place, how long would this process of
    mediation take?
        Mr. Gray. Step by step. I think the first step is the
    feasibility study. You don't want to just assume you can do
    this thing. I think you have to have the neutrals that don't
    have agendas in terms of outcome. I think you have to put
    together the team, which is not hard to put together. I think
    you have to put at the head of the team somebody who is
    politically acceptable on both sides of the isle. I do think
    you need that. And then I think they are charged with going out
    and looking at the existing data, whether it is at DOI or
    anyplace else, and saying, look, do we have enough; is there
    enough to project out.
        Look, it is a little bit like if you have ever looked at
    paleontology things on the Discovery Channel, where, if you
    have existing data on one-tenth of a human or a pre-human
    skull, from that experts are able to construct almost exactly
    what that entire skull looks like. That can happen here, on the
    basis of information we already have. I can't tell you that as
    a surety because you really need to do a feasibility study.
    That could take as little as 6 months. It could be a very tight
    one in terms of money. Sooner or later you are going to have to
    pay some people for their time, but they are not trying to get
    rich on this situation. But I think that feasibility study
    could take up to 6 months.
        I think the mediation process, if both sides are coming to
    the table in good faith with their own experts, and you have a
    mediation panel that isn't just a mediator, but you have
    experts on natural resources, Indian rights, forensic
    accounting, and fixes like I am involved in, accountants, trust
    administrators from the largest banks in the world, you know, a
    panel of four or five people who are listening to this, I think
    that process of information gathering and the counter-
    information in the adversarial process, you know, here are my
    experts, here are your experts, now let us winnow them out and
    find out what is right and what is wrong, I am not going to
    tell you that that is either cheap or quick. What Tex said is
    correct. It has taken a long time to get here. Let us not cut
    the process short. But I do think you are talking about a
    process of no more than a couple of years. You are not talking
    about 10 years; you are not talking about a litigation that
    will drag on forever.
        Everybody thinks the panacea in this thing is an
    appointment of a receiver, and I have to tell you as soon as
    that poor person, whoever it is, is appointed, they start from
    scratch and with not a whole lot of power, and it is going to
    be the same thing all over again. And you and I have talked
    about this before, we are going to be here 10 years from now,
    if we live that long, and nothing is going to happen.
        So to answer your question, I think it is a 6-month plus
    very intensive 2-year, at most, could be less, process. It
    could be less if the plaintiffs and the defendants do their
    job, and that is get your experts together, put your evidence
    on the table. The plaintiffs have already done it; the
    defendants have not. Put it before us, let us see if we can
    winnow it out, you know, what is good, what is bad. One of the
    things that I think frightens the DOI legitimately is that it
    is much easier to use extrinsic evidence to show what should
    have gone into an IIM account than it is to get extrinsic
    evidence to show what went out. And what Mr. Cason said is
    absolutely right. Unless there was a massive conspiracy, you
    would have billion dollar balances somewhere, unless it was a
    massive conspiracy and people were stealing money. So money did
    go out, and there are extrinsic ways to find that out. We have
    to help DOI do that. We have to help them get the experts to
    show that. We have to help them use existing data to project
    back that money did go out. So it is a fair and reasonable
    process.
        Long answer to short question, I think we are talking about
    a timeframe within that. You know more about Government money
    than I do, but I think we are talking about tens to maybe $100
    million of a process, frankly, a very small fraction of 10
    years of an accounting that everybody knows is not going to
    yield an answer. Or what is worse in my mind, 10 years of a
    continued litigation with one side beating in the heads of the
    other, but still no resolution.
        Senator Inouye. May I ask John Echohawk have you discussed
    a mediation process with all the parties involved?
        Mr. Echohawk. No; we haven't, Senator Inouye.
        Senator Inouye. Now, assuming that all parties agree to it,
    do you believe that the Congress have to enact a law
    authorizing mediation?
        Mr. Echohawk. Well, as I understood the letter that you and
    Senator Campbell sent, it was an offer for the Congress to fund
    a mediation process. And I think that is what we are talking
    about here. As I mentioned in my testimony, we have tried to
    talk settlement with the Government several times in the past
    during this case, and it hasn't been successful. And we could
    again try to do that somehow without a congressional mediation
    effort, but I don't know whether it would do any more good now
    than it has done in the past without this congressionally
    funded mediated effort.
        The Chairman. And if I might interject too, Senator Inouye,
    it is my understanding that we don't have to pass a law; that
    the Committee can do the appointment of a commission. But we do
    have to find the money to be able to finance it, and we would
    have to deal with the Appropriation Committee for that.
        Senator Inouye. Once again, thank you all very much, but I
    must leave.
        The Chairman. And we will submit questions from other
    colleagues. Senator Johnson probably had some and had to leave
    too.
        Thank you very much for appearing. I appreciate it.
        This committee is adjourned.
        [Whereupon, at 11:54 a.m., the committee was recessed, to
    reconvene at 2 p.m. the same day.]
    =======================================================================

                                A P P E N D I X

                                  ----------

                  Additional Material Submitted for the Record

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

    Prepared Statement of Hon. Maria Cantwell, U.S. Senator from Washington

        Mr. Chairman, thank you for this opportunity for the committee to
    examine the problem of trust fund mismanagement and recent efforts
    toward its reform. Trust fund mismanagement marks a significant failure
    of the U.S. Government's trust responsibility toward tribes and
    individual account holders. As the chairperson of the Colville Tribes
    from Washington State framed it, ``One of the saddest chapters in
    American history is the long-term mismanagement of trust resources''
    which were intended for the benefit of Indians and tribes.
        Most recently, the class action lawsuit, Cobell v. Norton, has
    brought renewed urgency to the need to reform trust fund mismanagement.
    I share the dissatisfaction of the court in the failure of the U.S.
    Government's trust responsibilities, and I echo its calls to reform
    trust management. However, it is critical that this reform be done with
    careful calculation and in a way that affirms, not diminishes, trust
    responsibilities, tribal self-determination, and self-governance.
        Numerous tribes from Washington State have expressed serious
    concerns about the Department of the Interior's proposal to create a
    new Bureau of Indian Trust Assets Management, and I share these
    concerns. In fact, several tribal leaders from Washington State are in
    attendance today, and I would like to thank them for their leadership
    on this issue.
        The tribes agree that there is significant room for improvement in
    the management of trust functions; however, they are concerned about
    both the merits of Interior's plans to create a new Bureau and the fact
    that tribes were not consulted prior to the development of its
    proposal. Indeed, tribes and individual Indians are the beneficiaries
    of trust assets, and the United States' has responsibility to honor the
    government-to-government relationship its has with tribes. Therefore,
    it is absolutely critical that tribes play a central role in any
    successful trust management reform.
        Representatives from Interior have advised the committee that trust
    fund management would be improved by removing all trust management
    duties from BIA, therefore keeping the services BIA provides to Native
    Americans and trust management completely separate. Washington State
    tribes have expressed their serious concern that removing trust
    functions from the BIA would effectively dismantle the agency, which
    has been the foothold for tribes in the Federal Government. For
    example, many tribes have partnerships with BIA in the execution of
    several trust responsibilities, such as natural resource management,
    and tribes do not want to see their role in the management of their
    resources diminish if these trust functions are taken out of the BIA. I
    will ask the witnesses to speak to these concerns today.
        I understand that we will have the opportunity today to learn about
    a few of the proposals for trust reform designed by tribal
    organizations. In addition, the Tribal Task Force is reviewing these
    proposals and several others that have been tribally generated.
        It is my hope that Interior will seriously consider the concerns,
    suggestions, and proposals from the tribal community and also take
    advantage of the wisdom and insight from the leaders who are working
    hard to create a viable plan for reform. Again, any successful attempt
    at rectifying this complex and centuries-long problem must include the
    experience of the tribes.
        Again, thank you Mr. Chairman, and I would also like to thank the
    witnesses and the representatives from Washington State for being here
    today. I look forward to hearing the testimony and learning more about
    what we can do to assist in the effort of meaningful trust management
    reform.
                                     ______

       Prepared Statement of Hon. John McCain, U.S. Senator from Arizona

        Mr. Chairman, thank you for scheduling today's hearing as part of
    the continuing oversight of this committee on issues associated with
    the Federal Government's management of individual and tribal trust
    funds accounts.
        Today's hearing topic is one that is a source of considerable
    controversy, which involves a discussion of alternatives to an
    historical accounting of individual trust funds in order to settle the
    class action lawsuit filed on behalf of 300,000 individual Indian money
    trust account holders. Essentially, we're being asked to consider the
    fundamental question of whether the Congress should override a
    previously legislated mandate of a full and accurate accounting of all
    individual trust funds, as required by the 1994 American Indian Trust
    Funds Management Reform Act.
        As history and the current court case have demonstrated, the
    Department of the Interior has flagrantly failed to fulfill its trust
    duties. Hundreds of millions of dollars have been spent on failed
    efforts to either identify reconciliation efforts, or spent on
    consultants to evaluate the extent of the Federal Government's
    liability for mismanagement. Despite these efforts, we are still
    without a reasonable solution.
        Mr. Chairman, as I have stated before, this Indian trust funds
    mismanagement debacle is one of the worst I have ever seen. And, I can
    see no end in sight. If this type of egregious action had been
    inflicted on any other ethic group, there would have been a tremendous
    public outcry.
        I'm continually frustrated that, no matter how many hearings we
    schedule, or how much money is appropriated to the Department, there is
    no clearly identified solution that is possible for a fair
    reconciliation, nor is there one that is truly supported by the tribes.
    I'm not sure what the solution is, however, if there are mechanisms
    which can be identified, they can and should be considered. And, most
    fundamentally, these options must be identified with the full and
    active participation of the affected beneficiaries--the Native American
    beneficiaries.
        However, any potential settlement solution is only a partial answer
    to a larger problem. Even if the Cobell case can be settled, the
    Interior Department still retains a trust responsibility to ensure that
    tribal trust accounts and trust assets are appropriately managed.
        My colleagues, Senators Daschle and Johnson, and Representatives
    Udall and Rahall in the House, have introduced revised trust reform
    legislation to address the tribes' highest priority areas to improve
    trust funds and trust assets management. I urge the committee to
    consider this bill as part of the overall need for legislative reforms
    and to schedule a hearing as soon as possible.
        This committee is the appropriate forum to consider such
    legislative proposals. The recent attempt by the House Appropriations
    Committee to include legislative provisions in the fiscal year 2004
    Interior appropriations bill was another failed effort to override the
    Indian beneficiaries and impose a quick remedy. As with any legislative
    rider to an appropriations measure, I opposed this language, not only
    on principle but also to object to the clear intent to circumvent an
    open legislative process.
        If the Indian plaintiffs in the Cobell case wish to pursue a
    legislative settlement, I would not object. However, I would object to
    one that is imposed upon them without their consent.
        It is long past time for the Interior Department to own up to its
    responsibilities and work with the Congress on meaningful steps to
    return rightfully owed money to Native American beneficiaries and
    concentrate Federal resources on lasting reforms, not on litigation and
    expensive lawyers, so the Federal Government can truly work toward
    improving the lives of Indian people.

    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]
    [GRAPHIC] [TIFF OMITTED]