[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


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                          WASHINGTON : 2004
89-057 PDF

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                      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.]
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                            A P P E N D I X

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              Additional Material Submitted for the Record

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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.

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