[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
H.R. 4322, THE INDIAN TRUST REFORM ACT OF 2005
=======================================================================
LEGISLATIVE HEARING
before the
COMMITTEE ON RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
Thursday, December 8, 2005
__________
Serial No. 109-38
__________
Printed for the use of the Committee on Resources
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______
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COMMITTEE ON RESOURCES
RICHARD W. POMBO, California, Chairman
NICK J. RAHALL II, West Virginia, Ranking Democrat Member
Don Young, Alaska Dale E. Kildee, Michigan
Jim Saxton, New Jersey Eni F.H. Faleomavaega, American
Elton Gallegly, California Samoa
John J. Duncan, Jr., Tennessee Neil Abercrombie, Hawaii
Wayne T. Gilchrest, Maryland Solomon P. Ortiz, Texas
Ken Calvert, California Frank Pallone, Jr., New Jersey
Barbara Cubin, Wyoming Donna M. Christensen, Virgin
Vice Chair Islands
George P. Radanovich, California Ron Kind, Wisconsin
Walter B. Jones, Jr., North Grace F. Napolitano, California
Carolina Tom Udall, New Mexico
Chris Cannon, Utah Raul M. Grijalva, Arizona
John E. Peterson, Pennsylvania Madeleine Z. Bordallo, Guam
Jim Gibbons, Nevada Jim Costa, California
Greg Walden, Oregon Charlie Melancon, Louisiana
Thomas G. Tancredo, Colorado Dan Boren, Oklahoma
J.D. Hayworth, Arizona George Miller, California
Jeff Flake, Arizona Edward J. Markey, Massachusetts
Rick Renzi, Arizona Peter A. DeFazio, Oregon
Stevan Pearce, New Mexico Jay Inslee, Washington
Henry Brown, Jr., South Carolina Mark Udall, Colorado
Thelma Drake, Virginia Dennis Cardoza, California
Luis G. Fortuno, Puerto Rico Stephanie Herseth, South Dakota
Cathy McMorris, Washington
Bobby Jindal, Louisiana
Louie Gohmert, Texas
Marilyn N. Musgrave, Colorado
Vacancy
Steven J. Ding, Chief of Staff
Lisa Pittman, Chief Counsel
James H. Zoia, Democrat Staff Director
Jeffrey P. Petrich, Democrat Chief Counsel
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C O N T E N T S
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Page
Hearing held on Thursday, December 8, 2005....................... 1
Statement of Members:
Pombo, Hon. Richard W., a Representative in Congress from the
State of California........................................ 1
Prepared statement of.................................... 2
Rahall, Hon. Nick J., II, a Representative in Congress from
the State of West Virginia................................. 3
Prepared statement of.................................... 4
Statement of Witnesses:
Cason, James, Associate Deputy Secretary, U.S. Department of
the Interior............................................... 5
Prepared statement of.................................... 6
Cobell, Elouise, Blackfeet Reservation Development Fund,
Browning, Montana.......................................... 27
Prepared statement of.................................... 31
LEGISLATIVE HEARING ON H.R. 4322, THE INDIAN TRUST REFORM ACT OF 2005.
----------
Thursday, December 8, 2005
U.S. House of Representatives
Committee on Resources
Washington, D.C.
----------
The Committee met, pursuant to call, at 10:07 a.m. in Room
1324 Longworth House Office Building, Hon. Richard W. Pombo
[Chairman] presiding.
Present: Representatives Pombo, Rahall, Duncan,
Christensen, Drake, Hayworth, Inslee, Herseth, Kildee, Pearce,
and Tom Udall.
STATEMENT OF THE HON. RICHARD W. POMBO, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
The Chairman. The Committee on Resources will come to
order. The Committee is meeting today to hear testimony on H.R.
4322.
Under Rule 4[g] of the Committee Rules, any oral opening
statements at hearings are limited to the Chairman and the
Ranking Minority Member. This will allow us to hear from our
witnesses sooner and help Members keep to their schedules.
Therefore, if other Members have statements, they can be
included in the hearing record under unanimous consent.
Today's hearing is on H.R. 4322, the Indian Trust Reform
Act of 2005, a bill I introduced with the Committee Ranking
Democrat, Mr. Rahall. H.R. 4322 is a companion to S. 1439, a
bill introduced this summer by Chairman McCain and Vice
Chairman Dorgan. Our work on this issue has occurred on a
bipartisan basis and bicameral basis. I should stress that H.R.
4322 is not a done deal. It is a work in progress, and I think
it is safe to say all the other sponsors feel the same way.
As the title of the bill suggests, H.R. 4322 makes
significant reforms in managing assets and accounts held in
trust for Indians. While today's hearing concerns the entire
bill, most of the focus will be on Title I, which provides a
direct and conclusive settlement of the Cobell v. Norton
lawsuit.
This lawsuit is not anything new to the Committee. It has
been in district and appeals courts for nine years. As I have
said in a previous oversight hearing, the case has taken on
almost legendary proportions in its acrimony, which points to a
need to settle it. Having said that, I do not wish to dwell on
the judicial combat because it does not advance the goal of
writing a legislative settlement that is full, fair, and
equitable.
Two decisions in the U.S. Court of Appeals for the District
of Columbia--one on December 10, 2004, and the other on
November 15, 2005--provide us with important information on the
laws pertaining to historic accounting of individual Indian
money accounts. I expect to hear different interpretations of
these decisions from our witnesses today, and the Committee can
rest assured we will also seek briefings from neutral experts
on these developments.
But the fact remains that continuing to litigate the
accounting claims poses risk for both parties. The people at
the heart of the case, and I am talking about individual
Indians, not trial lawyers or government lawyers, still await a
conclusion after nine long years.
Before I turn to the Ranking Member for his opening
statement, I want to make one more remark. Title I contains a
blank space in the parts dealing with a settlement figure. This
is deliberate. It is one of the trickier issues to resolve. It
has to be based on a combination of legal realities stemming
from the recent Appeals Court decision, of common sense, and of
a moral obligation to Indians touched by this case.
The Chairman now recognizes the Ranking Minority Member for
any statement he may have.
[The prepared statement of Chairman Pombo follows:]
Statement of The Honorable Richard W. Pombo, Chairman,
Committee on Resources
Today's hearing is on H.R. 4322, the Indian Trust Reform Act of
2005, a bill I introduced with the Committee Ranking Democrat, Mr.
Rahall. H.R. 4322 is a companion to S. 1439, a bill introduced this
summer by Chairman McCain and Vice Chairman December 15, 2005Dorgan.
Our work on this issue has occurred on a bipartisan and bicameral
basis. I should stress that H.R. 4322 is not a done deal. It's a work
in progress, and I think it's safe to say all the other sponsors feel
the same way.
As the title of the bill suggests, H.R. 4322 makes significant
reforms in managing assets and accounts held in trust for Indians.
While today's hearing concerns the entire bill, most of the focus will
be on Title I, which provides a direct and conclusive settlement of the
Cobell v. Norton lawsuit.
This lawsuit isn't anything new to the Committee. It has been in
District and Appeals Courts for nine years. As I've said in a previous
oversight hearing, the case has taken on almost legendary proportions
in its acrimony, which points to a need to settle it. Having said that,
I don't wish to dwell on the judicial combat because it doesn't advance
the goal of writing a legislative settlement that is full, fair, and
equitable.
Two decisions in the U.S. Court of Appeals for the District of
Columbia--one on December 10, 2004, and the other on November 15,
2005--provide us with important information on the laws pertaining to
historic accounting of individual Indian money accounts. I expect to
hear different interpretations of these decisions from our witnesses
today, and the Committee can rest assured we will also seek briefings
from neutral experts on these developments. But the fact remains that
continuing to litigate the accounting claims poses risks for both
parties. The people at the heart of the case--and I'm talking about
individual Indians, not trial lawyers or government lawyers--still
await a conclusion after nine long years.
Before I turn to the Ranking Member for his opening statement, I
want to make one more remark. Title I contains a blank space in the
parts dealing with a settlement figure. This is deliberate. It is one
of the trickier issues to resolve. It has to based on a combination of
legal realities stemming from the recent Appeals Court decision, of
common sense, and of a moral obligation to Indians touched by this
case.
______
STATEMENT OF THE HON. NICK J. RAHALL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WEST VIRGINIA
Mr. Rahall. For more than a century, the Federal government
has been the trustee of funds for Indian tribes and individual
Indians. Dozens of reports over the years have documented the
Department of Interior's inability to accurately account for
trust fund money and manage the accounts on behalf of Indian
Country.
This Committee has worked with account holders and
administrations of both parties to clean up the management
problems and atone for inaccurate account balances. Frankly, we
have been impeded by the administrations of both parties and
undercut by various others who have sought to protect their own
interests in this debacle.
For some reason, the Administration, regardless of who is
in the White House, is convinced that, if they just move some
authority from one office to another, reorganize BIA, or buy
another new computer system, it will be fixed. I have watched
this happen--and fail--under every president since President
Reagan.
The Cobell v. Norton lawsuit achieves its early goals of
bringing the problem to a head and getting the attention of all
three branches of government. I fear, however, that the case
has mutated into something I barely recognize from those early
days.
The animosity between the parties is as bad as any I have
ever seen. While each side tries desperately to get the other
to bend to its will, the Indian account holders still have not
gotten a true accounting, and I have come to believe they never
will.
I greatly admire Ms. Elouise Cobell and have had the honor
of working with her on this issue since the mid-1980's. Her
tenacity for justice for Indian account holders and her
steadfast focus on correcting decades of mishandling of Indian
monies has been the driving force in drawing attention to this
issue. I believe her cause is still as genuine as it was the
day we first met. Unfortunately, I cannot say the same for all
others involved.
From my perspective, the Cobell Plaintiffs, long ago,
proved their point that the government has mismanaged the trust
fund accounts and the account holders need to be made whole.
Numerous attempts at settlement of the lawsuit have failed,
including one sponsored by myself and Chairman Pombo, along
with Senators Campbell and Inouye during the 108th Congress.
The time and money being spent on this lawsuit is affecting
every decision made at DOI with regard to Native Americans,
and, as a result, programs are suffering.
Throughout our efforts to bring about settlement, we have
been asked by several interested parties to formulate a
potential legislative settlement and reform of the management
process. In response to these requests, Chairman Pombo and I
have introduced H.R. 4322; a companion bill, S. 1439, was
introduced in the Senate by Indian Affairs Committee Chairman
John McCain and Ranking Member Byron Dorgan.
Today, we will receive testimony on Title I of the bill,
which deals solely with settlement of Cobell v. Norton. I hope
we have not lost the window of opportunity to gain
congressional support for such legislation.
I am, as always, committed to working with Chairman Pombo
and Indian account holders to bring about fair compensation to
those individuals wronged in the past and to ensure the
integrity of the system for the future.
This legislation could be an important opportunity to put
the ``trust'' back in this government's management of Indian
monies. Thank you, Mr. Chairman.
[The prepared statement of Mr. Rahall follows:]
Statement of The Honorable Nick Rahall, Ranking Member,
Committee on Resources
For more than a century, the federal government has been the
trustee of funds for Indian tribes and individual Indians. Dozens of
reports over the years have documented the Department of Interior's
inability to accurately account for trust fund money and manage the
accounts on behalf of Indian Country.
This Committee has worked with account holders and Administrations
of both parties to clean up the management problems and atone for
inaccurate account balances. Frankly, we have been impeded by
Administrations of both parties and undercut by various others who have
sought to protect their own interests in this debacle.
For some reason, the Administration, regardless of who is in the
White House, is convinced that, if they just move some authority from
one office to another, reorganize BIA, or buy another new computer
system, it will all be fixed. I have watched this happen--and fail--
under every President since President Reagan.
The Cobell v. Norton lawsuit achieved its early goals of bringing
the problem to a head and getting the attention of all three branches
of government. I fear, however, that the case has mutated into
something I barely recognize from those early days.
The animosity between the parties is as bad as any I have ever
seen. While each side tries desperately to get the other to bend to its
will, the Indian account holders still have not gotten a true
accounting, and I have come to believe they never will.
I greatly admire Ms. Eloise Cobell and have had the honor of
working with her on this issue since the mid 1980's. Her tenacity for
justice for Indian account holders and her steadfast focus on
correcting decades of mishandling of Indian monies has been the driving
force in drawing attention to this issue. I believe her cause is still
as genuine as it was the day we first met. Unfortunately, I cannot say
the same for all others involved.
From my perspective, the Cobell Plaintiffs, long ago, proved their
point that the Government has mismanaged the trust fund accounts and
the account holders need to be made whole.
Numerous attempts at settlement of the lawsuit have failed,
including one sponsored by myself and Chairman Pombo, along with
Senators Campbell and Inouye during the 108th Congress. The time and
money being spent on this lawsuit is affecting every decision made at
DOI with regard to Native Americans and, as a result, programs are
suffering.
Throughout our efforts to bring about settlement, we have been
asked by several interested parties to formulate a potential
legislative settlement and reform of the management process. In
response to these requests, Chairman Pombo and I have introduced H.R.
4322; a companion bill, S.1439, was introduced in the Senate by Indian
Affairs Committee Chairman John McCain and Ranking Member Byron Dorgan.
Today, we will receive testimony on Title 1 of the bill, which
deals solely with settlement of Cobell v. Norton. I hope we have not
lost the window of opportunity to gain Congressional support for such
legislation.
I am, as always, committed to working with Chairman Pombo and
Indian account holders to bring about fair compensation to those
individuals wronged in the past and to ensure the integrity of the
system for the future.
This legislation could be an important opportunity to put the
``trust'' back in this government's management of Indian monies.
______
The Chairman. Thank you. As I said, all other opening
statements will be included as part of the record.
At this point, I would like to turn to our first witness,
Mr. James Cason, associate deputy secretary of Interior. He is
accompanied by Ross Swimmer, the special trustee for American
Indians.
I would like to take this time to remind all of today's
witnesses that, under Committee rules, oral statements are
limited to five minutes. Your entire written statement will
appear in the record. Deputy Secretary, if you are ready, you
may begin.
STATEMENT OF JAMES CASON, ASSOCIATE DEPUTY SECRETARY, U.S.
DEPARTMENT OF THE INTERIOR; ACCOMPANIED BY ROSS SWIMMER,
SPECIAL TRUSTEE FOR AMERICAN INDIANS, U.S. DEPARTMENT OF THE
INTERIOR
Mr. Cason. Mr. Chairman, I am pleased to be here today to
discuss H.R. 4322, a bill that would attempt to resolve the
Cobell v. Norton litigation. We appreciate the time and effort
the Chairman and the Ranking Member and their staffs have taken
to sponsor the legislation in an effort to reach a full, fair,
and equitable settlement to this case and to clarify our
individual Indian trust duties, responsibilities, and
expectations. While many details remain to be negotiated and
clarified, the bill represents an important step toward seeking
closure on this matter.
On November 15, 2005, the very day this legislation was
introduced, the United States Court of Appeals vacated the
district court's order reissuing the historical accounting
injunction.
The Court said that since neither congressional language
nor common law trust principles establish ``a definitive
balance between exactitude and cost,'' the district court owed
substantial deference to Interior's plan. The Court found that
reissuance of the historical accounting injunction was ``not
properly grounded in either fact or law. What is more, the
district court completely disregarded relevant information
about the costs of its injunction.''
The Court also found that Interior's decision to use
statistical sampling was especially reasonable, and the
district court had abused its discretion by barring the use of
statistical sampling.
So what does this all mean? Interior is no longer obligated
to conduct an historical accounting costing billions of
dollars. Interior's more reasonable effort is entitled to
substantial deference. Interior has expended more than $100
million to date and has made substantial progress on our
historical accounting task. Today, it is abundantly clear that
the plaintiffs' public claim that $176 billion is owed is
vastly overstated, to say the least. Such assertions have
misled many individual Indians and created expectations that
are false. More recently, the plaintiffs' lawyers have offered
to settle for $27.5 billion. This figure, too, is based on
assumptions that available evidence simply does not support.
What remains to be determined is how much more accounting needs
to be done before we can resolve these claims through
administrative, judicial, or legislative means.
The accounting work done to date has identified differences
between our accounting ledgers and the supporting
documentation. These differences tend to be few. They tend to
be small. They involve both overpayments to individual Indians
and underpayments to individual Indians, and when added
together, net out with a net overpayment. That overpayment
principally involves the payment of interest to a broad range
of accounts.
Thus, the facts to date are in stark contrast to the
rhetoric that surrounds this case. While more accounting work
can be done, there is a base of substantial evidence upon which
to begin forming conclusions about the merits of the case and
the magnitude of any settlement offers that should be
considered. The Administration supports the Committee's efforts
to bring this matter to a close, provided the terms of the
settlement are objective, reasonable, and consistent with the
facts.
We stand ready to work with the Committee and the Senate
counterparts to seek comprehensive resolution of the case. We
understand that there is still risk and uncertainty for the
parts of the history that we have not examined yet and that we
would prefer, if possible, to bring a complete resolution to
this matter rather than continuing down an historical
accounting path that ultimately, in the end, will likely prove
unsatisfactory to all parties concerned.
So with that, Mr. Chairman, I would be happy to answer
questions.
[The prepared statement of Mr. Cason follows:]
Statement of James Cason, Associate Deputy Secretary, and Ross Swimmer,
Special Trustee for American Indians on the Cobell Lawsuit, U.S.
Department of the Interior
I am pleased to be here today to discuss the legislation before the
Committee that would attempt to resolve the Cobell v. Norton
litigation. We appreciate the time and effort the Chairman and Ranking
Member and their staffs, along with their Senate counterparts, have
taken to develop this legislation in an effort to reach a full, fair
and final settlement of this case and to clarify individual Indian
trust duties, responsibilities, and expectations. The introduction of
H.R. 4322 and S. 1439 is the first serious congressional effort we have
seen to comprehensively resolve the issues involved in the Cobell
lawsuit. While many details remain to be negotiated and clarified, the
bill represents an important step towards seeking closure on this
matter.
This Administration has appeared before this Committee on this
issue numerous times. The landscape for the resolution of this case and
the underlying trust challenges changes with each new court decision.
We continue to narrow the magnitude and scope of the potential
settlement terms as we learn more through our historical accounting
work. Today's effort is a critical step in providing statutory
guidance. It is important though to understand what the Court of
Appeals has done since we testified in July on the Senate bill
identical to this one.
On November 15, 2005, the very day this legislation was introduced,
the United States Court of Appeals for the District of Columbia Circuit
vacated the district court's order reissuing the historical accounting
structural injunction.
The Court noted in the opinion that the district court, in issuing
a contempt citation against Secretary Norton, disregarded ``Interior's
affirmative accomplishments on Norton's watch''.
The Appeals Court went on to note that while the American Indian
Trust Fund Management Reform Act of 1994 (1994 Act) includes an
accounting requirement, ``its text offers little help in defining the
accounting's scope.'' Even plaintiffs' counsel, the Court notes,
conceded some need for practicality when asked hypothetically about
spending $1 million in accounting expenses for a $1,000 trust. The
Court took note of the fact that in the 1994 Act ``Congress was, after
all, mandating an activity to be funded entirely at taxpayers'
expense.'' Because the Individual Indian Money (IIM) trust differs from
ordinary private trusts in a number of ways, the Court said ``the
common law of trusts doesn't offer a clear path for resolving statutory
ambiguities.''
The Court also took note of the fact that for two fiscal years in a
row, Congress limited Interior's annual expenditures for historical
accounting to $58 million, an amount that includes funding for tribal
accounting as well. If that pattern continued with the district court's
historical accounting structural injunction in place, it reasoned, the
district court's accounting would not be completed for about two
hundred years.
More importantly, the Court said that since neither congressional
language nor common law trust principles establish ``a definitive
balance between exactitude and cost,'' the district court owed
substantial deference to Interior's plan. They said that the district
court ``erroneously displaced Interior'' as the body that should work
out compliance with the 1994 Act and erred by reinstating its September
2003 injunction in February 2005 without considering the Court of
Appeals' 2003 decision and subsequent developments after 2003. The
reissuance of the injunction, according to the Court, was ``not
properly grounded in either fact or law. What is more the district
court completely disregarded relevant information about the costs of
its injunction.'' In summary, the Court said the district court acted
``on the ill-founded assumption that the 1994 Act gave it the freedom
of a private-law chancellor to exercise its discretion.''
The Court did say that this opinion was issued without prejudice to
the plaintiffs' argument on appeal that execution of the reissued
injunction is impossible or to future claims such as challenges to the
correctness of specific account balances. It also addressed the
district court's bar on using statistical sampling as part of the
accounting. The Court found Interior's decision to use statistical
sampling in its proposed plan ``especially reasonable'' because the
cost of accounting for transactions valued under $500 would exceed the
average value of those transactions. They found the district court had
abused its discretion by barring use of statistical sampling.
So what does this all mean? Interior is no longer obligated to
conduct an accounting costing billions of dollars. Interior's more
reasonable effort is entitled to substantial deference. Interior has
expended more than $100 million to date and has made substantial
progress. Today, it is abundantly clear that the plaintiffs' public
claim that $176 billion is owed is vastly overstated, to say the least.
Such assertions have mislead many individual Indians and created
expectations that were false. More recently the plaintiffs' lawyer
offered to settle for $27.5 billion. This figure is also based on
assumptions that the available evidence simply does not support. What
remains to be determined is how much more accounting needs to be done
before we can resolve these claims through administrative, judicial or
legislative means.
HISTORICAL ACCOUNTING: WHAT DO WE KNOW TO DATE?
As we have stated to this Committee repeatedly, as part of the
Cobell litigation, Interior collected over 165,000 documents for the
historical analysis of IIM trust fund activity through December 31,
2000, for the named plaintiffs and agreed-upon predecessors. Of these
documents, about 21,000 documents were used to support the
transactional histories, which dated back as far as 1914, and which
included a total of about 12,500 transactions.
Pursuant to the requirement in Section 131 of the FY 2003
Appropriations Act, on March 25, 2003, the Department of the Interior
provided Congress with a summary of the expert opinion of Mr. Joseph
Rosenbaum, a partner in Ernst & Young, LLP, regarding the five named
plaintiffs in Cobell v. Norton. This report describes the process the
contractor went through and also contains a summary of his opinions.
These conclusions included:
The historical IIM ledgers were sufficient to allow DOI
to create virtual ledgers that were substantially complete for the
selected accounts.
The documents gathered by DOI supported substantially all
of the dollar value of the transactions in the analyzed accounts.
The documents gathered by the Department of the Interior
do not reveal any collection transactions not included in the selected
accounts, with a single exception in the amount of $60.94 that was paid
to another account holder, due to a transposed account number entered
in the recording process.
An analysis of relevant contracted payments, evidenced
primarily by lease agreements, showed that substantially all expected
collection amounts were properly recorded and reflected in the IIM
accounts.
There was no indication that the accounts are not
substantially accurate, nor that the transactions were not
substantially supported by contemporaneous documentation.
This analysis, including the named plaintiffs and the selected
predecessors in interest, found both non-interest transaction
overpayments to class members (37 instances totaling $3,462) and
underpayments (14 instances totaling $244).
As of September 30, 2005, Interior's Office of Historical Trust
Accounting (OHTA) had reconciled more than 22,900 Individual Indian
Money (IIM) judgment accounts with balances totaling more than $57.6
million and 25,551 additional judgment accounts with no balance as of
December 31, 2000. This accounting effort found non-interest
overpayments (2 instances totaling $2,205) and underpayments (21
instances totaling $52).
As of September 30, 2005, OHTA had also reconciled 5,708 IIM per
capita accounts with balances of over $43.9 million and an additional
approximately 6,214 accounts with no balance as of December 31, 2000.
In this per capita accounting effort, only one individual on a tribal
roll did not receive a payment of $100.
Interest recalculations identified a particular set of IIM judgment
transactions (786 instances totaling $25,000) where principal had been
distributed without associated interest amounts (an underpayment). More
broadly, interest amounts for judgment and per capita accounts appear
to have been overpaid (a net amount approximating $365,000 on about
13,800 accounts).
Based upon the historical accounting results so far, Interior
suggests that Congress consider exempting Judgment and Per Capita funds
from any proposed legislation.
The National Opinion Research Center (NORC) at the University of
Chicago, a national organization for research and statistics, was
contracted in 2001 to assist Interior with interpreting historical
accounting data and results. On September 30, 2005, the NORC issued a
progress report entitled ``Reconciliation of the High Dollar and
National Sample Transactions from Land-Based IIM Accounts,'' looking at
land-based IIM accounts that were open on or after October 25, 1994.
The goal of the project is to assess the accuracy of the land-based IIM
account transactions contained in the two IIM Trust electronic systems
(Integrated Records Management System and Trust Funds Accounting
Systems) for the electronic era 1985-2000. Accuracy is being tested by
reconciling all transactions of $100,000 or more and a large
statistically representative random sample of non-interest transactions
under $100,000. That historical accounting initiative ended in August
2005. The NORC has found:
Over 99% of the sampled transactions needed for
preliminary estimates have been reconciled for all twelve BIA regions
as have 99% of all the transactions greater than or equal to $100,000.
A completion rate of 99% is extremely high in a sample
such as this. The report states: ``This very high completion rate for
searching and locating documentation should put to rest concerns about
the impact that the 1% remaining unreconciled transactions might have
on results.''
The reconciliation identified both overpayments (63
instances totaling $53,797) and underpayments (48 instances totaling
$62,250).
Reconciliation shows the debit difference rate to be
0.4%.
Reconciliation results show the credit difference rate to
be 1.3%.
As of September 30, 2005, OHTA also resolved residual balances in
9,452 special deposit accounts, identifying the proper ownership of
more than $47 million belonging to individual Indians, Tribes, and
private entities.
H.R. 4322, THE INDIAN TRUST REFORM ACT OF 2005
We appreciate the fact that legislation has been introduced to
attempt to address the issues in Cobell. We are pleased to see the bill
focuses on consolidation of fractionated Indian lands and supports a
more aggressive land acquisition program than the one currently under
way. We do, however, have some serious concerns with the bill as
currently drafted.
Title I. H.R. 4322 would provide a yet undetermined number of
dollars to resolve the historical accounting claims of the class
members of the Cobell litigation. However, it does not provide for
settlement of all of the elements of the Cobell litigation. In
addition, in determining what is a reasonable amount, Congress should
be aware that the $27.487 billion requested by the plaintiffs as
settlement does not include money to resolve damage claims for
potential mismanagement of trust assets that could be filed in the
future. Such a future claim may begin by plaintiffs demanding an
historical accounting. The legislation therefore should resolve or
restrict any claims that might permit the reinstatement of historical
accounting litigation comparable to the Cobell case. We also believe
that Congress should look carefully at the distribution system provided
in legislation for the settlement funds. It would be far better to
provide clear guidance as to the amounts to which individuals are
entitled, rather than leaving the decision of what individuals receive
to a formula developed by the Secretary. Congress should craft a
distribution method with as much clarity and direction as possible.
Congress should also be aware that 25 tribal trust cases involving
similar issues have also been filed.
Indian Trust Asset Management Demonstration Project Act. H.R. 4322
includes provisions allowing for a pilot project for 30 tribes to take
over management of Indian trust assets. Many Indian trust assets are
already managed by the tribes through PL 93-638 compacts and contracts.
In the legislation, it is critical to transfer the responsibility for
results along with authority and funding. We do not believe the United
States should remain liable for any losses resulting from a Tribe's
management of its trust assets under the demonstration project. This is
particularly true because the bill would allow Tribes to develop and
carry out trust asset management systems, practices, and procedures
that are different and potentially incompatible with those used by
Interior in managing trust assets. In a normal trust, this action would
be considered a merger of Trustee and beneficiary and thus end the
Trust relationship. Of course this would have no impact on the
government-to-government relationship.
We look forward to discussing further the following key aspects of
this provision. For example, if program reassumption became necessary,
how would Interior take back program responsibilities and integrate
information back into our trust asset management environment when it
has been collected and processed in different systems? What kind of
monitoring of tribal activities will Interior have to do to ensure the
tribe is living up to the standards in the bill? What performance
standard would apply: the imminent jeopardy standard associated with PL
93-638 or the ``highest and most exacting fiduciary'' standard being
required of Interior? Under the 1994 Act, Tribes are permitted to
withdraw and manage their trust funds and the Secretary is held
harmless for losses or mismanagement that may occur. A similar
provision related to other trust assets would be a logical extension of
self-governance.
Fractional Interest Purchase and Consolidation Program. The bill
also places a priority on developing an aggressive program for the
purchase of interests in individual Indian land. The President's FY
2005 budget request included an unprecedented $70 million request for
Indian land consolidation. Congress chose to appropriate $34.5 million
for the program in FY 2005. In light of this, we requested and received
$34.5 million for FY 2006.
As structured, the program in H.R. 4322 provides incentives where a
parcel of land is held by 20 or more individuals and where an
individual sells all interests in trust land. In cases where a parcel
of land of land is held by over 200 individuals, the bill provides
procedures for noticing interest holders and moving ahead with
consolidation of the interests. These provisions will greatly help
consolidate interests and reduce the costs of management of the
individual Indian trust.
Care must be given, however, to ensure that this bill does not work
as an incentive to further fractionate land so that individuals can
become eligible for the bill's incentives. So far, there has been no
lack of willing sellers. In addition, we would like to work with you
further on the criteria, thresholds and amounts included in this title.
We have some serious concerns as to the cost of the significant
premiums provided in the bill. In addition, we would like to explore
the possibilities for consolidation sale authority to reduce the
associated public financing burden of addressing the fractionation
issue. We need to analyze the costs of the new incentives, the
mechanisms for funding land acquisitions and the impact of the American
Indian Probate Reform Act on the rate of fractionation as a part of our
implementation plan.
Restructuring the Bureau of Indian Affairs and the Office of the
Special Trustee for American Indians. H.R. 4322 includes a number of
concepts that were discussed by the Joint Department of the Interior/
Tribal Leaders Task Force on Trust Reform in 2002. This task force was
formed during the period when the Department was examining ways to
restructure the trust functions of the Department in response to the
trust reform elements of the Cobell court. The task force ended in an
impasse with regard to implementing legislation on matters that were
not related to organizational alignment. In the face of no legislation,
the Department implemented a reorganization plan that could be achieved
administratively.
This title of the bill also extends the Indian preference hiring
policy to the new Office of Trust Reform Implementation and Oversight
created by the bill and abolishes the Office of the Special Trustee for
American Indians. Interior would appreciate the opportunity to discuss
these policy choices in some detail.
While Interior is receptive to the concepts of establishing an
Undersecretary position and merging Indian programs under new
leadership, we would like to discuss the objectives of such a proposal.
In Interior's view, such an initiative is unlikely to materially alter
Indian trust performance due to the presence of other, more pressing,
structural concerns about the trust, such as the lack of a clear trust
agreement to guide responsibilities and expectations, appropriations
that do not track with all program trust responsibilities, the lack of
an operative cost-benefit paradigm to guide decision-making priorities,
the challenges of incorporating PL 93-638 compacting and contracting,
and the requirements associated with Indian preference hiring policies.
These issues have frustrated the beneficiaries, the administrators, and
a various times Congress throughout the lifespan of this trust. We
encourage Congress to speak clearly in whatever legislative direction
it chooses to write, and carefully consider the impacts the language
will have in allowing us to meet the objectives of your constituents.
It is clear that moving from today's organization into a
beneficiary services-oriented organization of excellence will demand
the highest of financial, information technology and managerial skills.
American Indians make up less than one percent of the American public.
When we restrict hiring to this small fraction of potential employees,
instead of reaching out to whomever may be most qualified, we deprive
ourselves of 99% of the available talent pool. While the Indian
preference hiring policy does permit the hiring of non-Indians, it
serves as a significant disincentive for non-Indian applicants. To
improve Indian program performance and results, we would like the
opportunity to serve Indian Country by including a broader range of
applicants so as to create an applicant pool large enough to ensure we
are hiring well qualified employees.
Audit of Indian Funds. The last title of H.R. 4322 requires the
Secretary to prepare financial statements for Indian trust accounts in
accordance with generally accepted accounting principles of the Federal
Government. The Comptroller General of the United States is then
required to contract with an independent external auditor to audit the
financial statements and provide a public report on the audit. The
Secretary is required to transfer funding for this audit to the
Comptroller General from ``administrative expenses of the Department of
the Interior'' to be credited to the account established for salaries
and expenses of the GAO. For the last ten years, the trust funds have
been audited by independent public accounting firms. In addition,
Interior encourages additional discussion to ensure that accounting is
accomplished under proper fiduciary accounting standards to avoid any
conflicts with standard fiduciary accounting practices.
In closing, I want to make it clear that we believe the November
2005 Court of Appeals decision was an extremely important one. As
Congress assesses what is a reasonable amount to provide for settlement
of the plaintiffs' claims, Congress must consider that we are no longer
looking at a $13 billion accounting cost nor are we looking at an
accounting in which statistical sampling cannot be used. Further,
Congress should also take into consideration what we have learned so
far from the more than $100 million we have spent looking at IIM
accounts to date.
Thank you. I'd be happy to answer any questions you might have at
this point.
______
The Chairman. Thank you. I will start off, Mr. Cason, and
ask, what is the Interior Department's position with regard to
reaching a settlement of the claims brought by the Plaintiff?
Is the Department prepared to support a legislative solution?
Mr. Cason. Yes, Mr. Chairman.
The Chairman. Land-based accounts represent about 75
percent of all individual Indian money accounts and hold about
half of the total balance of all such accounts. The other
accounts are judgment accounts, per capita accounts, and
special deposit accounts. Is that accurate?
Mr. Cason. Yes, Mr. Chairman, it is.
The Chairman. Can you tell me what documentation the
Department has for the transactions, including leases,
payments, and deposits, in the land-based accounts?
Mr. Cason. Mr. Chairman, we have a substantial base of
information regarding all types of accounts that we have. In
the historical accounting effort that we have done thus far, we
have accounted for around 50,000 of our judgment per capita
accounts and, in large part, have all of the information
necessary to do those. Those relatively are simple to do. They
involve a judgment or a settlement of some type that is paid to
numerous accounts from a single core event, and then it is
initially deposited in an account plus interest transactions.
Those are relatively simple.
In the case of land-based accounts, we have a substantial
record of those as well. Depending on the time period involved,
the availability of the records varies somewhat, but the
experience that we have had so far is generally we have
somewhere between 85 percent and 99 percent of the records
necessary to do the reconciliations that we are doing in our
accounting project.
The Chairman. Is the accuracy of the accounting in the
other accounts at all likely to be repeated in an accounting of
the land-based accounts?
Mr. Cason. It is my understanding, Mr. Chairman, that we do
have difference that involve both our judgment per capita
accounts and land-based accounts, but as I said in my opening
statement, they tend to be few, they tend to be small, and they
tend to net near zero when you add both overpayments and
underpayments together.
So a conclusion is there are errors or differences between
what is in our ledger and what the supporting documents say,
but there are not many of them. I have asked our Office of
Historical Trust Accounting to inquire with the firms that are
actually conducting the accounting, and it is my understanding
these represent four of the five largest accounting firms in
the country that are involved, to ask the question whether
there appears to be any evidence of systemic error in our
accounting processing system or whether there has been any
evidence of fraud or whether there has been any evidence of our
electronic data being altered by hacking or other intrusions in
our systems, and the answer to those questions so far has been
no, that what we have identified in error so far appear to be
random errors associated with just human work as opposed to any
systemic problems with our system.
The Chairman. How do you respond to the argument that a
statistical sampling analysis does not consider missing
documents? Specifically, does a statistical sampling just
confirm the existence of documents already in the possession of
the Interior Department?
Mr. Cason. Well, the way we approach the statistical
sampling process is, in our land-based accounts, we have
basically gone through a process of looking at the 1985-to-2000
tranche, which represents approximately $5.5 billion of
throughput through these accounts, and in so doing, using the
electronic information, we had a statistical accounting firm
select a statistically based set of accounts and then within
those accounts select statistically selected transactions to do
further evaluation of. In that particular tranche, we basically
identified all of the documents we needed to do the
reconciliation that we were undertaking.
It is my understanding, Mr. Chairman, that we basically had
99 percent plus of all of the documents that we sought to do
the reconciliation, and the document types that are involved
are checks, incoming checks or copies of checks; the internal
transaction documentation that we use to deposit checks and
distribute the checks to where they belong.
As an example, what I mean by that is if I have a tract of
land that is leased and has 500 different owners on it due to
fractionation, we have to have documentation of how we
distributed one common check to the 500 recipients of the
check.
We also have documentation when we are making disbursements
from accounts, and that is used as part of the reconciliation
process for looking both at the incoming and the outgoing
transactions in an account. In that particular tranche, in
land-based accounts, we have virtually all of the documents
that we needed. I think it is fair to say, if you go further
back in time, the further back you go, the more likelihood that
you will have to find that there are missing documents, and it
would be up to the statisticians in this case to make an
interpretation of how significant the missing information is.
The Chairman. Thank you. I am going to recognize Mr.
Rahall.
Mr. Rahall. Thank you, Mr. Chairman.
Deputy Secretary Cason, let me ask you, how do the error
rates that you have calculated in a judgment and the per capita
accounts compare to the error rates in other programs that are
run by the Federal government?
Mr. Cason. I am sorry, Congressman Rahall. I am not aware
that we have actually gone through an exercise of trying to
calculate error rates of program performance across the Federal
government to do that kind of comparison. When we have done the
historical accounting process, the focus has been on the
differences that we identify between ledger amounts and
supporting documentation in our historical accounting effort. I
imagine that it would be possible to cobble together some sort
of comparison to other programs, but I am not aware of that.
Mr. Rahall. Could you do any of that cost comparison?
Mr. Cason. Yes. I imagine that is possible.
Mr. Rahall. If it is not too much time and effort involved,
if you could have somebody do that and just submit it for the
record.
Mr. Cason. Sure.
Mr. Rahall. OK. Is it reasonable to assume that modern
accounting accuracy is a good proxy for what took place for the
first 50 to 75 years for the trust?
Mr. Cason. Congressman Rahall, I cannot really give you a
good answer on that. What I can tell you, we are attempting not
to speculate about what will happen in older time periods
without actually having gone to look at the them through the
accounting process.
Our experience so far in the historical accounting effort
is very limited in the older time periods, so what information
we have available right now would suggest that there is not a
materially higher rate of error for the older time periods, but
it is completely insufficient to draw an accurate, fact-based
conclusion on.
We have more information about a more current time period
that represents about $5.5 billion of the throughput, and
before we could really give you an accurate answer, we would
actually have to go do some work in that area, and we have not
done that work yet. So we are trying not to speculate one way
or the other as to what the error rate would be with older
periods.
Mr. Rahall. In your testimony, you state: ``What remains to
be determined is how much more accounting needs to be done
before we can resolve these claims through administrative,
judicial, or legislative means.''
Mr. Cason. Yes.
Mr. Rahall. My final question would be, how do we determine
how much more accounting is needed?
Mr. Cason. Congressman Rahall, I do not think there is any
one specific definition that would get there, and from our
standpoint as we are going through this, it will be a
combination of effort between what is occurring in the
judiciary system, what is occurring here on Capitol Hill, and
the discussions we have within the Administration.
What is happening right now is, if you look at where we
were four or five years ago, we basically had no historical
accounting effort or facts that had been completed at that
time, and now we are $100 million into the process. We have
done 50,000 judgment per capita accounts and found very few
errors. We have done a statistical sampling of the data base
for the last 15 years and found relatively few errors. We have
a body of evidence associated with the Arthur Andersen
accounting and tribal accounts from 1972 to 1992. So if you go
back another 15-year tranche, basically back to 1972, the error
rate associated with the tribal accounts was very, very low.
So we are having a growing body of evidence that suggests
to us we do not have, at least, so far, any appearance of a
systemic problem with our accounting system or any evidence of
systemic fraud involved with our employees who account for
these monies, and at some point in time, we will get to a point
where Congress, as an institution, will say, ``OK. I have
enough evidence to draw a conclusion,'' or the Administration
will come to Congress and say, ``We think we have enough
evidence to draw a conclusion about where this is all headed.''
We are hopeful that the efforts to settle this will
actually precede that level of accounting, that we can actually
bring this thing to close because we think it is more positive
if we can actually reach a mutually acceptable solution to this
process through legislation and bring the issue to a close. In
the absence of that, then it looks like we have years more of
accounting that we will need to do and years more of constant
to'ing and fro'ing in court.
Mr. Rahall. Thank you for your response.
Mr. Cason. You are welcome.
Mr. Rahall. Thank you, Mr. Chairman.
The Chairman. Mr. Duncan?
Mr. Duncan. Thank you, Mr. Chairman, and I appreciate and
understand and respect what you and Mr. Rahall are trying to do
because this, as I understand it, has been in the courts for
nine and a half years, and we want to bring this to some type
of conclusion. I believe that you probably feel the same way
that I do that because this does involve probably many billions
of dollars, that we need to be very careful of this
legislation. Right now, we do not have enough information on
how many legitimate claimants there are, how much they would
get per claimant, and what is the total cost of the bill. The
bill, as you said, is a work in progress, but it contains more
blanks than any bill I have ever seen. Section 103 says blank
billions on the initial deposit, also blank percentage on
attorneys' fees, blank percentage on the cost of
administration. Section 104 has blank billions on the general
distribution and share of the claim. In Section 108, blank per
hour on attorneys' fees.
That is what concerns me the most, I think, because I was a
lawyer and a judge before I came to Congress. Sadly, we have
sent so many millions of good jobs to other countries for so
many years, we have half of the kids in the country either
going to law school or thinking about it. We have such a
surplus of lawyers out there, we have really good lawyers who
would come in and work on this for $100 an hour, and yet these
Washington law firms charge just ungodly fees, and we have to
put some kind of limits on these attorneys' fees. I know, in
the early nineties, in the savings and loan scandal, there were
firms up here charging $650 and $850 an hour, and that was in
the early nineties. I hate to think what some of them might
charge now if we do not put some limits on it.
In addition, in many of the major bankruptcies, the
bankruptcy trustees and the bankruptcy lawyers have been
awarded almost all of the money in some gigantic bankruptcies
where the creditors got very little. This blank on the cost of
administration concerns me, and I think we need to put some
real strict limits on these things, or there are going to be
some scandalous ``60 Minutes,'' ``20/20,'' ``Dateline''-type
shows out of this legislation.
I do not have any questions, but I did want to, at least,
put those remarks on the record. Thank you.
The Chairman. Thank you, Mr. Duncan. I know that Mr. Rahall
and I agree with much of what you said in terms of the concerns
about the overall cost, which is why when this bill was
drafted, we did look at addressing those specific areas. I
think when we get into filling in some of those blanks,
hopefully you will be more comfortable, and I know I will be
more comfortable where we are going with the legislation, but
that is a very legitimate point you bring up.
Mr. Kildee?
Mr. Kildee. Thank you, Mr. Chairman. Thank you again for
your efforts in this very difficult question.
I have been involved in legislative attempts to bring
justice to our Native Americans for 41 years next month, and I
would like to back up just a bit for maybe some of the newer
Members here. We have been at this nine years, I think, in this
Committee here.
Generally speaking, what led to where we are today is a
combination of nonfeasance, misfeasance, and malfeasance, just
to give an historical background to the cause for this.
Mr. Cason. Well, Congressman Kildee, I would take a
different position. There is certainly lots of public rhetoric
about the lack of feasances, all three of those, within the
Department of the Interior and the implementation of this
program. I think there is a different causal factor that is
associated with this than that, and it is my sense that if you
take a look at the statutory history of this trust, there has
never been any instruction from Congress regarding what sort of
accountings needed to be done at any point prior to 1994.
So when you take a look at the operation of this trust over
time, there has not been any instruction from Congress that
said do this kind of accounting provided in this time period
and have this kind of information involved. That first happened
in 1994. Where we are with this litigation is that the
Plaintiffs have made a point with the court, and the court
agreed, that there is some inherent obligation to do accounting
that the Department had not complied with and that we have been
in nine years' worth of effort to try and define what exactly
that accounting requirement is. Even after nine years of
litigation, it is still not clear exactly what is required of
the Department to do an accounting.
What we have at this point is the Department's plan, which
we submitted to Congress and to the court, and Congress thus
far has not decided to even fund that plan. We also have the
district court's plan that has been vacated now by the Court of
Appeals twice. That was a much more expensive, much more
exacting plan that Congress equally was unwilling to fund.
So I would say the root of it is not so much malfeasance,
misfeasance of the case; it is, rather, there has not been any
clear direction over the last 100 years as to what the
expectations are, and that is one of the fundamental flaws or
problems associated with managing this trust.
Mr. Kildee. I thank you for your response, and I think,
too, also we have to recognize here in the Congress that the
trust responsibility toward the Native Americans is with the
entire Federal government.
Mr. Cason. That is correct.
Mr. Kildee.--not just the Department of the Interior. It is
the Congress also, and, therefore, we cannot dodge maybe our
nonfeasance, if that be that.
So the trust responsibility certainly is not just in the
Department of the Interior or the BIA; it is also here with the
Congress. We are trying to ferret out all of the facts and
trying to get justice in this.
Let me ask you this question. Judge Lamberth feels that the
comprehensive accounting would cost about $12 billion, and I
think the Department figures that can be done for about $335
million. How do you account for the wide disparity between
Lamberth's costs for the accounting and what you feel the cost
of the accounting will be?
Mr. Cason. That is a great question. The principal
differences that lead to the dollar figure differences: first,
is the class for whom you would do an accounting. In our case,
we basically defined the class of who we would do an accounting
for as those individuals who had an account open on or after
the date of the 1994 Act. So we would be doing around 275,000
to 300,000 accounts.
The Judge Lamberth plan basically is an accounting for all
accounts that have ever been since 1887, so there is a much
wider panoply of accounts that needed to be done.
The second major driver is the approach used to do the
accounting. The big driver for money is in the land-based
accounts, and it is particularly a problem due to fractionation
of Indian individual allotments, and in that particular case,
for land-based accounts, what we had proffered to do was to use
a statistical sampling process for reconciling transactions
with the underlying supporting data. So we would not attempt to
do every transaction. We would do a statistical sample of them
to do that reconciliation. In Judge Lamberth's plan,
reconciliation way exceeds the value of the transaction. So
those are two principal drivers.
There was also a requirement to do an accounting for all
land-based transactions that occurred since 1887. That
materially added to the cost as well.
Mr. Kildee. Thank you very much, Mr. Cason.
Mr. Cason. You are welcome.
Mr. Kildee. Thank you, Mr. Chairman.
The Chairman. Mr. Hayworth?
Mr. Hayworth. Thank you, Mr. Chairman. Mr. Cason, thank you
and my colleagues. When I was listening to my good friend from
Michigan, I thought back to the Trust Fund Task Force that he
and I co-chaired nearly a decade ago, and listening to both his
comments and those of our friend from Tennessee, this challenge
of trying to get our arms around this is considerable, to say
the least, and I commend the Chairman and the Ranking Member,
as well as Senator McCain in the other body, for trying to make
order--we really cannot call it order out of chaos; it is, to a
large degree, order out of the unknown.
Mr. Cason, you pointed out, again, historically, the
difference in the assessments of Judge Lamberth, going back to
the 19th century. A point more recently as you take a look,
there is a lot to get our arms around.
Let me take something that is of great importance to a
tribe in the Fifth Congressional District of Arizona. I
represent the Salt River Pima-Maricopa Indian community as part
of what is known as the ``Section 122 tribes,'' the Tribal
Trust Reform Demonstration Project. One of the concerns the
tribe has mentioned to me is obtaining some of the funding it
is entitled to under this demonstration project. Could you give
me an update as to where the Department is with regard to
funding the Section 122 tribes?
Mr. Cason. Sure. Congressman, I, personally, meet
periodically with the 122 tribes. I think it used to be 139
tribes and 131 tribes before that because it has been going
through a succession of appropriations bills and being placed
in different sections. But we go through a periodic meeting
schedule with the tribes to talk about what is involved in
their demonstration project, what sorts of accommodations they
want from the Department of the Interior.
The principal core funding that comes to these tribes is in
the form of compacts or contracts that they get through our
Indian self-determination process, and each of these tribes is
given those funds that they are entitled to under self-
determination and have been for the last several years and
would be under 2006. We also had requirements through those
sections to do audits of each of those groups to make sure that
they were implementing their programs properly. The OST--Ross
could comment on--has done that, and, in large part, we found
that they were doing a job that was equally as proficient as
what we were doing.
So I think that the process is ongoing and that they are
getting the funding to which they are entitled, and we are
looking to ensure that there is a good, solid relationship to
facilitate and enable their ability to make more decisions for
themselves.
Mr. Hayworth. So, again, just to make sure I understand,
this is being funded through the compacts and contracts
commensurate with self-determination.
Mr. Cason. Right.
Mr. Hayworth. By and large, the audits are showing a
proficiency equal to what is transpiring.
One other question. Gosh, we are always dealing with money
up here.
Mr. Cason. It is a problem.
Mr. Hayworth. To say the least. How much funding do you
anticipate distributing to these tribes?
Mr. Cason. I am sorry. I do not know off the top of my
head. I have not added up how much that particular subset of
tribes gets. I know, overall, in our appropriations, for
instance, for 2006, we are anticipating sending out on the
order of $760 million through compacts and contracts to all
tribes that fit there, but I do not know about this particular
subset.
Mr. Hayworth. And when these Section 122 tribes are, in
fact, funded, do you intend this to be a one-time
appropriation, recurring appropriation, phased in?
Mr. Cason. The intent of the program is it is basically
recurring appropriations, as we do with a wide variety of other
tribes that are subject to Indian self-determination compacting
and contracting. So each year, we are passing out funds through
those programs.
Mr. Hayworth. All right, sir. Thank you very much.
Again, Mr. Chairman, Ranking Member, and colleagues on the
Committee, it is a challenge, to say the least, putting it
euphemistically. I thank you, Mr. Chairman.
The Chairman. Thank you. Ms. Christensen?
Ms. Christensen. Mr. Chairman, I would pass on to my
colleague to my left, if that is all right with you, and come
back later.
The Chairman. OK. Mr. Inslee?
Mr. Inslee. Thank you. There is such a sour history here, I
can understand why settlement discussions may be difficult. I
am wondering if you can suggest some positive actions to help
to increase trust, to the extent that that is possible, on
either side. What can the Federal Government and your
Department specifically do in the next 90 days that could help
restore trust with the claimants that it has not done, even if
not compelled by Congress or a court, but that you could take
on your own merits?
That is my first question, and, second, what do you think
the claimants could do in that same direction that have not
been compelled by law or statute?
Mr. Cason. A good question, and one thing I would like to
challenge just a little bit is the opening premise about the
animosity stuff. Certainly, this is a very difficult issue, and
it is very complicated and has been complicated with nine
years' worth of history in litigation and 100 years' worth of
history of the Federal government implementing our trust. There
is certainly lots and lots of rhetoric and lots and lots of
real experiences associated with how the trusts have been
implemented over time.
What I think we in the Department have attempted to do is
to not personalize the issues that are involved and to actually
be open and candid and forthright in what we are trying to do
and what we think is reasonable under the circumstances, and I
would suggest we would continue to do that. But I would also
suggest that there is a very wide gap in perception about what
is reasonable in this field.
For example, based on the facts that we have collected so
far----
Mr. Inslee. Can I interrupt you just for a second?
Mr. Cason. Yes.
Mr. Inslee. I usually do not like to interrupt, but----
Mr. Cason. No, go ahead.
Mr. Inslee.--I really am looking for a positive statement
here. When you say there is maybe not emotion on this or anger,
I want to tell you there is a lot of anger about this because I
am very angry about this. I am very angry that the Federal
government treated these people like Enron treated its
shareholders for years and decades, in a continued pattern with
a people that underwent a lot of this for centuries. And I want
to tell you, I am very angry about this, so I do not want you
to explain to me why people are not angry about this. I would
like you to explain to me what you can do to try to get this
off dead center to do more than you have done to date, if there
is anything that could possibly get this thing moving forward,
and the same thing with the claimants, and if there is nothing,
just tell us, and we will just take it from there.
Mr. Cason. OK. Well, I think the reason that we are here is
to try to find some amicable solution to this and that we in
the Department of the Interior have been active participants,
at least in this Administration while I have been involved in
the process, active participants in a variety of efforts to try
to find solutions to this. Those have not been successful so
far, not because of personal rancor but because of the
differences of opinion about what is fair and reasonable.
We have gone through a very exhaustive process during the
last four years to do historical accounting to actually build
the fact set so that we could properly inform Congress and
properly inform the Department of Justice, who is managing this
litigation, as to what the facts are.
So what I was suggesting to the panel is that we try to
divorce personal feelings about it, and I am sorry you are
angry about the process. There are lots of people in the
process who are angry for a variety of reasons on both sides of
the fence, but the anger does not solve any problem, and what
we are trying to do is be reasonably dispassionate about what
are the facts, what is reasonable under the circumstances, and
what can we find common ground on, and that is what we have
been doing, what we would continue to do, and that is what our
plan would be, to work with the Committee to try to find that
common ground.
I would suggest that the Plaintiffs have the same sort of
obligation, if we are going to bring it to settlement, because
I think there is a reasonable point in the middle somewhere,
and what we need to do is define what that reasonable point is
in a way that both Congress is willing to settle there and that
the Plaintiffs and the Administration are willing to settle
there, and that is a big, undefined area that has risk and
uncertainty for all parties. We are at the table trying to do
that, and we appreciate the fact that the Committee is at the
table trying to do that.
Mr. Inslee. I listened very carefully to what you said, and
I failed to hear a single thing suggested that you could do to
go in the directions that I requested. Did I miss something?
Mr. Cason. What direction are you requesting?
Mr. Inslee. Well, I am sorry to go over my time, Mr.
Chairman, if you would give me another minute, if that is
permissible, thank you.
What I am asking you about is, is there anything you think
that your Department could do that you have not done to date to
increase the level of trust that exists in the hopes that we
can continue this ball rolling and to ask what the claimants
could do in that direction? What could you do? What additional
thing could you do to increase the trust level of the people on
the other side of this dispute?
Mr. Cason. Do you want to comment on that?
Mr. Swimmer. If I might, I think, as Mr. Cason has stated
before, there has been a lot of disagreement in the past about
the level of responsibility in this trust and how it has been
administered. One of the things that I believe has been lacking
in that sense is what I call and we have coined as a
``beneficiary focus.''
For many, many years, this trust was treated as a program.
In the early years, it was treated as the agency, BIA, being
the banker on the reservation for individual Indian people,
collecting the money, giving them money for their house, for
their horse, for whatever it might be, and the ledger is
replete with that kind of information.
In more modern times, because of the fractionation issue,
it has been extremely difficult to have personal contact with
the beneficiaries. It is not unusual to have 200 to 300 or
1,000 owners of an 80-acre or 160-acre parcel of land. So that
distance between the manager of the trust and the beneficiary,
I think, has caused a lot of the animosity that we see today
outside from the accounting issue.
What we have tried to do, certainly in the last three
years, is, through a comprehensive study of how this trust is
administered to how it should be, how we think it should be,
administered, with the help of the beneficiaries, with the help
of lay people and lots of resources in the field, to reform the
trust and to do it with a sense of a beneficiary focus, setting
up, for instance, trust administrators and trust officers.
One of the things the court mentioned in the beginning is
that there was no one at the Department of the Interior that
had a fiduciary trust background. It is not something you would
normally find in a Federal agency unless they were dealing with
banking matters or trust matters, as such. What we have done is
made it a conscious effort to bring people into this program
with a trust background. We made a conscious effort, then, to
reach out to beneficiaries by setting up a call center where,
not unlike other trust companies, an individual can call,
identify themselves, and get information almost immediately on
whatever matter it is they want to know about: What is in my
account? When was the lease issued? When does the lease expire?
When do you expect the oil and gas payments to be made? What
about my probate? What is the status?
So we are trying to set up a mechanism where instead of
someone walking into an agency and trying to button hole
someone to get information and then being routed to a dozen
different people, they have a phone number they can call. They
have a trust officer whose sole responsibility at that agency
is to the beneficiary. That is all they have to do is work with
the beneficiaries trying to find, for instance, ``whereabouts
unknown,'' as we call them. We have 46,000 people with about
$60 million in their accounts, and we cannot locate them. We
are making a conscious effort, an extremely strong effort, with
tribes, with relatives, with newspapers, with the Internet, any
way we can, to locate those people to get that money out there.
We have made many adjustments in the way that the trust is
operated itself in bringing new software in, coordinating
systems, bringing the title systems current, working on getting
probates brought up to date, bringing a state-of-the-art
accounting system so that when a person receives their
quarterly statement, they know what they own, they know what
came in on their income, and they know what went out on their
income.
So those are the kinds of things that we are trying to do
now with the beneficiaries to make a difference, and that is
all in addition, really, to the lawsuit issue over the
accounting, and the accounting is to go back and, of course,
provide them with a history of what they have received in the
past. But going forward, it is the beneficiary focus, I think,
that is going to make a difference in how the relationship
works between the individual Indian beneficiary in the field
and the Department of the Interior.
Mr. Inslee. Thanks for your courtesy, Mr. Chair.
The Chairman. Ms. Drake?
Ms. Drake. Thank you, Mr. Chairman. Certainly, as a new
Member of Congress, I have not heard this every extended debate
on this issue, and as a representative from Virginia where we
do not have federally recognized tribes or Indian lands, my
first question, sitting here, that I really do not want you to
answer is, how in the world did we ever get here?
I thought it was interesting, Mr. Cason, when you talked
about defining the inherent obligation, since there was no
instruction from Congress, I would think that you would have an
absolute obligation to account for someone else's money,
whether it is something that is very informal like helping a
relative or something that is very formal with the Federal
government managing people's money.
So all that said, I have two questions, and the first is,
are we continuing to have problems from 1994 on, or is
everything that we are talking about now 1994 and before?
And the second question is, you have explained that you
have found very little error in what you have looked at so far,
yet this has been in court for nine years. You mentioned $176
billion in a claim and a proposed settlement of $27.5 billion.
Have you or someone in the Department reviewed why do they
think this amount of money is owed, and why do you think it is
not, and what is going on in between that the Department would
think this is probably not a lot of error, yet there are people
who receive the money who think there is, obviously, a very
glaring error. So those are my two questions.
Mr. Cason. Good questions. As you said, I won't explain the
history because it is long and complicated.
Regarding the $176 billion and why the Plaintiffs think
that is owed, they are going to be up next, so I would suggest
that you just ask them to explain.
Ms. Drake. I think that is where Mr. Inslee is coming from.
I mean, obviously, if someone thinks you owe them $176 billion,
I would have hoped you would have gone to look and say, is
there any reason for this? If someone told me I owed them a
month's rent that I had not paid them, I would go see if I made
that payment, and did they not get my check.
Mr. Cason. Yes.
Ms. Drake. So, to me, if you are not willing to look at
that question----
Mr. Cason. Well, that is exactly what we have been looking
at.
Ms. Drake. You have looked at it. We will get them to
explain why they think they owe so much.
Mr. Cason. Good.
Ms. Drake.--but, I guess, my question is, I would think, if
I were in that department, and someone thought I owed that
amount of money, and I do not think I owed it, I would at least
have an explanation why I thought there was a discrepancy in
the two numbers.
Mr. Cason. Yes. That is fine, and that is exactly what the
historical accounting process is all about. There is an
assertion that the funds that have come into the Department
have not been accurately managed. There is an assertion that
opening balances of all of the accounts that we currently have
on the books does not reflect an accurate opening balance.
The historical accounting process is basically designed to
go back and take a look at the transactions that have occurred
in those accounts to see if that opening balance carried on
from 1994 represents an accurate opening balance. So what we
have is an assertion that there is not accuracy, that the funds
have been mistreated over time. What we are doing in the
historical accounting process is basically going account by
account looking backwards and saying, ``Well, tell me about the
transactions that have occurred in this account.'' It is a
fairly complicated process in that when you take an account by
account, you find an opening balance, you find all of the
transactions that occurred in that account, both incoming
checks and outgoing checks, and you go to an ending balance,
just like your bank statement. So that is basically what we are
going through.
Our assessment of the $176 billion issue is it is entirely
specious, that the assumption, as we understand it, is that the
assertion is that $13 billion came in, never a penny was paid
out, and then you put compound interest on it for 100 years,
and that is how you get the $176 billion. I think that
completely is inconsistent with the facts. But the assertion is
there, and it is my understanding of the $27.5 billion is
instead of assuming that 100 percent of the money did not go
out, you just assume that 20 percent of the money did not go
out, and then you add compound interest on that, and that is
how you get the $27.5 billion.
What we are trying to do is get beyond the rhetoric and get
to actual accounting facts. On an account-by-account basis,
what are the facts about this account? Are there errors in this
account? Does the ending balance represent what should be in
the account? And in large part, what we have found is the
answer is yes, so far. We have not done all of the accounting.
It is possible that as we go further and further back in time,
we will find some issue of fraud or find some issue where the
accounting system was not working properly, but so far, after
$100 million worth of accounting, we have not found that. We
found a few random errors.
Ms. Drake. How about the 1994 question? That should be
easier. Are there still problems alleged, 1994 on, or is this
all before 1994, other than the account balance in 1994?
Mr. Cason. Yes. The way I would answer that is, since 1994,
we use that as how we define the class of who we would do the
accounting for, and we basically, in our plan, said we would
account for anybody that had an open account from 1994 forward.
In terms of the accounting process, we were using electronic
means to account 1994 and after, and we have actually converted
about 1999 into a new system called SEI, and they do a lot of
the trust accounting in the country, and we use their system
from 1999 forward.
So it is arguable whether there was any issue between 1994
and 1999. We have not found any material issue there, but it is
arguable. Since about the year 1999-2000, we have been putting
out periodic quarterly statements to people, and we have
balanced the accounts down to the penny every day. So we think
that there is no issue there at all.
The Chairman. Mr. Udall?
Mr. Tom Udall. Thank you, Mr. Chairman.
Secretary Cason, in the course of this case, the judge made
a ruling that shut down your computer system, and you were
unable to pay many people, and many out in my district were
hurt by that. Has that been completely resolved now? Is that
system up and running and people getting paid?
Mr. Cason. Yes, at the moment. The issue is not completely
resolved. We just finished a 59-day, evidentiary trial in the
district court. The district court judge issued a decision on
that. We appealed. The decision was basically an order for us
to disconnect from the Internet and the Intranet any computer
that housed or provided access to individual trust data. We
asked for a stay from the court, and within about 18 hours got
an administrative stay from the Court of Appeals. It is being
briefed right now in terms of getting a permanent stay, and the
appeal documents are being filed now.
So the issue is not completely resolved at this point. We
are up and running right now. We are able, with the
administrative stay, to keep our computer systems up and
collect the information necessary to actually make payments to
Indians, and we are doing that right now was a routine part of
business, but the issue itself has not been resolved.
Mr. Tom Udall. But as far as you know, the Indians are
being paid----
Mr. Cason. Yes.
Mr. Tom Udall.--on their accounts, and there is not anybody
that is not being paid.
Mr. Cason. Not that I am aware of, no.
Mr. Tom Udall. OK. Because that was a situation where many
people, as you probably know, were living on those checks on a
monthly basis, and it is very, very important to them and their
families and their livelihood and all of that, so we appreciate
you getting it up and running.
Has the Department or you taken a position on terminating
the trust?
Mr. Cason. Are you talking about on individuals or overall?
Mr. Tom Udall. Yes.
Mr. Cason. I think there is a pretty consistent opinion
within the Department of the Interior that no one is talking
about terminating the trust. There is a lot of discussion,
Congressman, about the character of the trust, that there are
elements of this trust that do not make any sense, and we would
sure like to work with Congress and continue to work with
Congress to try to amend some of those. And what I mean by that
is we have a terrible problem with fractionation, that
individual Indian allotments that passed on over time are
passed down on divided interests, and we have circumstances
where we have individual allotments that have more than 1,000
owners on them. So no one ends up with real beneficial use, and
the property gets devalued as a result of having multiple
owners. So we would like to have a better way of consolidating
those interests together so that some Indian individual would
be able to have beneficial use of their property.
Ross has circumstances where he has thousands of accounts
that have less than a dollar in them that we end up having to
pay an administrative fee to keep track of in trust on an
amount that is less than a dollar, for thousands of accounts.
That does not make any sense. In the banking world, you would
close those out through administrative fees.
So there are certain elements of the trust that do not make
a lot of sense in terms of trying to produce a dollar's worth
of benefit for a dollar's worth of invested appropriations, and
we would like to see if there is some way that we can address
some of those. But it is not a repudiation of the trust that we
are really talking about; it is more of how can we ensure that
we spend money wisely to actually produce material benefits
where we do it?
Mr. Tom Udall. Congressman Inslee asked the question about
settlement and how you were moving forward on settlement.
Mr. Cason. Yes.
Mr. Tom Udall. Is it your sense that in the next six months
or a year, you would be able to bring to us a proposal with
regard to settlement, something that will give us something to
work on and to bite into on this? Are those kinds of
discussions going on?
Mr. Cason. The discussions certainly have been going on for
quite a while, and it is our intent to work with this Committee
and the Senate counterparts, Senators McCain and Dorgan, to see
if there is some way we can actually define a common ground for
settlement. We need to develop together some sort of paradigm
of how you would actually construct a number and how you would
construct a payout from that number to get it down to the
individuals that feel like they are aggrieved in the process.
We stand ready to do everything that we can to help with
that. We have been exploring it for a long time. We have
proffered different methodologies that could be used to
approach developing a number and a settlement, but so far, we
have not found one that has actually gained traction where
everybody says, ``Oh, yeah. That is the right way.''
So we plan to work with this Committee in looking at all of
the options that the Committee would like to explore. We
certainly have ideas on it, and we would like to share those as
well.
Mr. Tom Udall. Thank you, and if you come up with
something, we would like to work with you on it.
Thank you, Mr. Chairman.
The Chairman. Ms. Herseth?
Ms. Herseth. Thank you, Chairman Pombo and Ranking Member
Rahall, for the opportunity to discuss the Indian Trust Reform
Act of 2005. This is obviously an issue of great importance for
communities within South Dakota and the entire region. Roughly
one-third of the individual Indian money account holders reside
throughout the Great Plains region.
I want to talk through a little bit with you about
grappling with this problem of fractionation.
Mr. Cason. Yes.
Ms. Herseth. Chairman Pombo had a hearing--I believe it was
either early this year or at the end of last year in which one
of my constituents, Charlie Pallone, testified about this
problem in particular, and then, in July, this Committee held a
joint hearing with the House Financial Services Committee on
improving land-grant title procedures for Native Americans, and
Mr. Arch Wells, acting director of the Office of Trust
Services, testified about DOI's efforts to modernize and
improve its trust records.
Now, in particular, he referred to an effort to clean up
data used to process title status requests in the trust asset
and accounting management system. Can you tell me this morning
how close this project is to completion, Mr. Cason?
Mr. Cason. Well, we have a plan that we are operating
against right now that it is our hope to get all of our title
records up to date in the computer system by November 30, 2007.
There is a substantial amount of backlogged information that
has not been put in the computer systems, and as Arch probably
explained to you, we have gone through a process here recently
during the last four years of moving from the legacy system,
the Land Record Information System, to a new system called
TAMS, and we have converted all of the software. It is
available to all of our regions now, so that has been done. The
data base has been converted over from ELWES to TAMS, so that
is done. What we are doing right now is basically all of the
records that have not been entered into either system that is
backlogged right now; we have a plan for bringing all of that
up to date, and the due date is November of 2007.
Ms. Herseth. And at this stage, do you feel you have
adequate funding to fully implement the system?
Mr. Cason. That is a good question. We are hopeful that the
resources we have available and that we would anticipate as
part of the 2007 budget would be adequate to get the job done.
We are actually partnering with OST and BIA together to utilize
funds in both houses to make sure that we get the resources on
the ground to do the job, and we are hopeful that those
resources will be adequate.
Ms. Herseth. And do you have any concerns that the
personnel dedicated to the conversion and implementing the plan
fully take away from the office's ability to do the accounting
under the process that you have set forth?
Mr. Cason. Well, I would say yes and no. I am sorry to be
ambiguous. We do have an issue, and that is our land title
records office is a nexus point for a number of efforts that we
have ongoing. One of those efforts is getting all of the
information into our TAMS system so that it is current. Part of
it is our probate process where we need to get records from
them to conduct probates, and we have four or five different
efforts like that that all have a nexus point, the LTROs. It is
one of the things that we are watching very closely to make
sure that we do not overwhelm the system at that nexus point,
and if we are getting to that point, we will be looking fairly
routinely at adding more resources or prioritizing the workload
so we can get the most important stuff done within that
organization.
Ms. Herseth. OK. I appreciate your responses. It is an
issue of particular concern, so I will be working with you to
monitor the progress.
If I could just switch gear with another question, I think
you replied to a question from Mr. Kildee that under the
accounting process that DOI prefers that would cost roughly the
$335 million, you are looking at accounts after 1994, and so
you would be analyzing approximately 275,000 to 300,000
accounts.
Mr. Cason. Yes.
Ms. Herseth. How many individual Indian money accounts does
the Department manage overall?
Mr. Cason. That would include all that we manage right now,
so if you pick $300,000, it includes all of the ones that we do
right now. Those would be part of the process, and then the
differentiation is we are considering the historical accounting
period to be those accounts that were open in the year 2000
plus all of the ones that had been opened as of 1994 and closed
prior to 2000. Those are in the historical accounting period.
Then we have a current accounting process that does all of the
ones that were open after 2000, and all of those individuals
get a quarterly statement routinely.
Ms. Herseth. May I follow up with one more question, Mr.
Chairman?
I will seek a little bit further clarification from you on
that. As you described the differences between the accounting
process that Judge Lamberth set forth that I understand, on
appeal, questions have been raised, but then as you described
the differences from that process versus DOI's process, the
$335 million, talking about the differences, did DOI ever
consider a more expensive accounting procedure? In other words,
when you decided upon the one that you would prefer, did DOI
examine, say, three or five alternatives and estimate what they
would cost, and where did the $335 million accounting process
fall in that category? I am just wondering the breadth of DOI's
evaluation, dealing with various factors that would be fair to
the Plaintiffs as well as the costs to DOI.
Mr. Cason. Yes, we did. If you would like, I will get you a
copy of the plan that we submitted to the Court because part of
what we looked at is what were the relative variables
associated with an accounting, and it had variables for whom do
you an accounting, over what time do you do an accounting, how
much information you would need to constitute an accounting? Do
you look at land as well as cash or cash only? So there were a
number of variables that we looked at, and the considerations
that we built into that process were things like how much will
it cost, how long will it take to reach a conclusion, what is
the relative level of accuracy that would be the output of this
product or process?
So we looked at those variables in line with the variables
of what would constitute an accounting and drew a conclusion
about what we thought was the most productive way to go about
this between cost and time and accuracy, and that is where we
ended up with the plan that we have. Clearly, it is subject to
debate. Other people who look at that have other opinions about
how it ought to be done, but that is what we were trying to get
to is a point of reasonable accuracy with reasonable time and
reasonable cost to provide an assurance that the accounting
system either was working reasonably well, or there were
systemic flaws, and we needed to do a much broader, grander
effort. So that is how we got to where we were.
Ms. Herseth. And the process is the last expensive, the one
that you----
Mr. Cason. No. I would not say it is the least expensive.
Certainly, you could find an accounting that would cost less
than $335 million, but it was one that we thought was a
reasonable plan under the circumstances. And part of it is
right now the balance for individual accounts as of that 2000
time period was $400 million, so what we were proffering as a
plan cost $335 million to assure that the opening balance of
$400 million was reasonably representative of what should have
been there.
So, at some point, when we are introducing the cost element
into it, you go, there is a balance of $400 million. How much
do you want to spend on ensuring that $400 million is an
accurate representation of what should have been there?
Ms. Herseth. I appreciate it, and, Mr. Chairman, thank you
for extending additional time. I will look forward to seeing
the document you submitted to the Court, as well as what Mr.
Rahall had requested in terms of putting together an assessment
of different error rates and different programs and processes.
So, Mr. Chairman, thank you.
The Chairman. Thank you. I want to thank the witness for
the testimony. Members of the Committee may have additional
questions. Those will be submitted to you in writing, if you
can answer those in writing so that they can be included as
part of the hearing record. I know several Members have asked
you for additional information. I am sure other Members will
have additional questions as well.
Mr. Cason. That is fine, Mr. Chairman. Thank you for the
opportunity to be here.
The Chairman. Thank you very much.
I would like to now call up our second witness. Welcome,
Elouise Cobell, a Blackfeet Indian from Montana and the lead
Plaintiff in the Cobell v. Norton litigation. She is
accompanied today by Keith Harper of the Native American Rights
Fund and a member of her legal team in this litigation.
Ms. Cobell, welcome back to the Committee. Although I think
we are all happy to see you today, I wish we were not and that
it was over with, but it is nice to have you come back. Thank
you again for giving us your time to be here. Again, I will
remind you that your entire statement will be included in the
record. If you could limit your oral testimony to five minutes,
it will help us move along. So thank you, and when you are
ready, you can begin.
STATEMENT OF ELOUISE COBELL, BLACKFEET RESERVATION DEVELOPMENT
FUND, BROWNING, MONTANA; ACCOMPANIED BY KEITH HARPER, ATTORNEY
FOR THE NATIVE AMERICAN RIGHTS FUND
Ms. Cobell. Good morning and thank you for those
statements, Chairman Pombo and Ranking Member Rahall and
distinguished members of this Committee. First, let me say how
much I appreciate the work you and your staff have done on this
important issue. I welcome your continued involvement and
leadership. We join with you in the hopes that this will point
the way toward a resolution of this, thus far, intractable
problem.
I know that I am not telling you anything new when I say
that the mismanagement of individual Indian trusts has been one
of the biggest injustices ever perpetrated by the
representatives of our government. Study after study by
Congress itself, the GAO, and many others, as well as now
nearly 10 years of judicial findings and opinions in both
district and appellate courts, confirm that the injustice is
pervasive, longstanding, and continuing and that the financial
loss to hundreds of thousands of Native Americans has been
incredibly large.
Let me read you just one statement. Secretary Norton has
admitted and urged the court to adopt the undisputed facts in
this statement: ``Indian trust data is wholly unreliable and
utterly useless as an accurate measurement of anything except
to confirm the manifest negligence and malfeasance inherent in
Indian trust management.'' I would like to just read that one
more time. ``Indian trust data is wholly unreliable and utterly
useless as an accurate measurement of anything except to
confirm the manifest negligence and malfeasance inherent in
Indian trust management.''
For the record, I have submitted a list of just some of
these studies and reports that confirm the magnitude of this
problem. I hope you agree with me that this is the time; study
and reflection is well in the past. It is time to do something.
You are well-acquainted with this injustice, and we applaud you
for moving to try to do something constructive about it. I hope
you share my frustration that the United States government has
not been similarly constructive.
In thinking about how to settle this case, we must bear in
mind certain salient considerations. First, it is the
government that has caused this problem. In a fit of
paternalism, they imposed this trust on us. They mismanaged our
assets. They lost billions of dollars. Our only role was to
suffer the consequences of their mistakes. The Cobell case is
about saying no longer will we tolerate this abuse.
Second, we must always bear in mind that this is our money,
and this is our land. This is not a Federal handout. This is
not a Federal program. We are asking for a full accounting of
our money and restitution of any of it that is missing. Over
500,000 Indians have had their assets mismanaged. In the total
amount of financial loss and the total number of victims, this
scandal dwarfs all of the corporate misdeeds we have heard so
much about. Enron, WorldCom, and others are petty crimes in
comparison.
Third, settlement is entirely possible. There is an
impediment to settlement: the Departments of Justice and
Interior. We have participated in complete good faith. They
have not. Consider this: This Committee and the Senate Indian
Affairs Committee, early in 2005, requested that Indian Country
work together to develop a comprehensive plan to resolve this
case. We did exactly that. In a united effort, we worked
closely with leaders throughout Indian Country. The product was
a detailed set of 50 principles with specific explanations for
why each is important.
Then Senators McCain and Dorgan introduced their settlement
bill. We continued to work in good faith. We provided specifics
on what we liked and what we needed to be revised. We have
engaged the Senate and presented detailed comments on its
draft. We regularly met with the staff. We have come forward
with proposed settlement numbers.
The government's response to your effort stands in stark
contrast. Oh, they certainly pay lip service to cooperating,
but what proposals have they put on the table? They have never
said, not once, what they believe specific terms and their
acceptable settlement amounts. They have refused to take a
position on the bill.
Members of the Committee, if you wish to exert leadership,
you must call the government to account. Do not allow their
foot dragging to continue. Call them to task. Demand that they
participate in the legislative process. Demand that they inform
you of the specific contours of a settlement they will support.
If there is hope for a legislative settlement, they must no
longer be allowed to simply sit back and say no to all
settlement offers without members of this Committee denouncing
their objections. If not, a legislative settlement will never
occur.
Use your influence to raise the profile of this issue to
call their continued delays what they are, a continuing slap in
the face to Indians and to innate sense of justice of all
Americans. That magnifies the underlying wrongdoing. By failing
to acknowledge the problems and refusing to work to resolve it,
government officials continue the more than century-old
tradition of kicking the problem to the future as victims die
off. Meanwhile, beneficiaries who have been mistreated their
entire lives do not see a resolution as even possible in their
lifetime. Many have given up hope after so many false starts.
As you proceed, I cannot, in good conscience, fail to
remind you that the government's behavior in this matter has
gone well beyond delay and obstruction. It includes a sad
history of misrepresentation and deceit. That sorry record
includes a glossy progress report put out this summer that is
deceptive, misleading, and inaccurate from beginning to end.
Sworn testimony before the courts and Congress and, more
recently, a complete misrepresentation of the Cobell XVII
decision; after 10 years of litigation, we have been forced to
the sad conclusion that the word of the government officials is
not trusted. The government has seized on some language in
Cobell XVII that is not relevant to the issue at hand, and,
more importantly, not controlling in this case.
They will not tell you about something called ``the first-
in-time rule.'' This rule, a very basic rule in the D.C.
Circuit and virtually all other circuits, says that when there
is discrepancy between the language of appellate panels, the
first in time controls. The rulemakes clear that Cobell VI,
Cobell XII, and Cobell XIII remain the controlling law in this
case and that the words that the government has so fondly
seized upon and that we heard so much from Mr. Cason are not
important. This is a legal matter I have covered more
thoroughly in my written testimony. More importantly, it would
be a serious mistake for the members of this Committee or
anyone else to be persuaded by government officials who have
been repeatedly cited by the courts for misrepresenting
judicial decisions that anything in Cobell XVII lessens by one
penny the government's huge liability in this case.
I want to talk about H.R. 4322 as a starting point. We are
encouraged that you have said that H.R. 4322 is a starting
point and a placeholder and that dialog, discussion, and
negotiations are encouraged. I hope that we will be able to
begin a constructive dialog with this Committee similar to the
one we have engaged in with Senator McCain and Senator Dorgan.
I believe there are some critical shortcomings to the bill
as presently drafted. There are two sources of guidance that
should inform any appropriate legislative settlement: first,
the 50 Principles for Settlement, which present a consensus
roadmap to resolution from Indian Country; second, the decision
that the courts have issued in Cobell litigation over the past
nine and a half years, which must be honored. We believe the
bills should better reflect the ideas and legal concepts
encapsulated in these two sources. We appreciate that you are
actively soliciting our input on the bill.
With that in mind, we offer a number of additional specific
comments on the bill in our written testimony. I would like to
highlight three of the most important. The Treasury Department
should not be in charge of the settlement funds. It is one of
the historic wrongdoers in the case, and putting it in charge
of the settlement is like letting the fox guard the hen house.
Treasury is not only a Defendant but has also been held in
contempt of court for violating court orders. Moreover, it has
routinely and intentionally destroyed trust records to hide its
malfeasance. In one documented instance, the Treasury
Department destroyed 162 boxes, untold millions of pages of
irreplaceable data. Simply put, it cannot be trusted any longer
and should not be involved in any way with the distribution of
funds.
The courts have the greatest institutional competence to
make distributions in a fair manner and are the appropriate
institution to do so. Importantly, the Indian Land Working
Group, the largest national association of allottee groups, has
specifically said that they do not want Treasury involved. As
we do, they have endorsed the Federal courts as the appropriate
body to handle any distribution.
The Cobell case is far more than the past mismanagement. It
is also about the trust lands and monies of Indian people and
how it will be managed in the future. Quite obviously, a
settlement of this case requires cessation of the persistent
and continuing wrongdoing; in other words, a real trust reform.
My written submission has detailed what we believe it must
include. The settlement that Native American leaders proposed
is a good deal, especially for taxpayers. The proposed amount
of $27.5 billion is a large number, but large crimes incur
large consequences. Moreover, it is a bargain for a government
that has acknowledged its responsibility for a 118-year-old
mess.
First, it would resolve a dispute that Members of Congress
have said has run too long and cost too much. It is estimated
that the government alone has spent more than $100 million on
this lawsuit. Those expenses grow every single day. The
government's liability is growing. The courts have declared
that Indian trust beneficiaries are entitled to both the
principal amounts that should have been recorded in their
accounts plus compounded interest. A fundamental principle of
trust law confirmed by the Court of Appeals is that the
government is liable for any funds that it cannot prove with
appropriate and competent evidence that it paid to the
beneficiaries.
Since both sides agree that the government should have paid
roughly $13 billion into the individual Indian trusts since
1887, that means that the government must be able to prove each
of those transactions. Any amount not proven to have been paid
plus interest is what is owed. This puts potential liability of
the Federal government well in excess of $100 billion.
The historical accounting will continue to be costly. The
Interior Department is now telling you that it will cost at
least $12 billion to try to reconstruct those records. That is
far too expensive for an accounting. Well before the Court of
Appeals reached that conclusion, we were saying that in court.
A 2002 study conducted by the Interior Department and made
public in our lawsuit places the liability for the government
on trust accounts at anywhere between $10 billion and $40
billion. These are the government's own experts. That is why
Indian Country's $27.5 billion proposal is a bargain. I would
argue that it is far better for the taxpayers to be spending
this money directly on giving Indian account holders what is
rightfully theirs than wasting money on what we and the courts
regard as a highly questionable accounting and delaying
exercise.
We have put out a settlement number in good faith for all
to see. We encourage the government and the Congress to do the
same.
On a final note, the Court of Appeals recently remanded the
case of the district court, as we had requested. The court made
clear that the district court was well within its authority to
hold a trial on whether it is impossible for the government to
perform an accounting required by law. We will now proceed to
ask for an evidentiary hearing on the impossibility of doing an
accounting. We believe that this will lead to a more expedited
resolution than we had previously expected.
Make no mistake about it: We think a settlement will be
good for everyone, but if this process of looking for a just
settlement fails, we will continue the litigation, and we will
expect to win and prevail. Any statements to the contrary by
the government are nothing more than wishful thinking.
Finally, I would like to say that I do not just speak for
myself; I speak for a class of 500,000 victims of this
travesty. The largest allottee group, the Indian Land Working
Group, specifically endorses the decisions I have made and
trusts my judgment and that of my team. I have attached the
Indian Land Working Group's recent resolution of support to the
written submission, and I ask that it be made part of the
record. I also ask that my total written statement be made part
of the record at this time.
I would like to thank you very much for your leadership on
this important issue, and we look forward to working with you
in the coming weeks. Thank you.
[The prepared statement of Ms. Cobell follows:]
Statement of Elouise C. Cobell,
Lead Plaintiff in Cobell v. Norton
The Trust Debacle has Gone on for Too Long
Good morning, Chairman Pombo, Ranking Member Rahall, and
distinguished Members of the Committee on Resources. First, let me say
how much I appreciate the work you and your staffs have done on this
important issue. I welcome your continued involvement and leadership.
We join with you in the hopes that this will point the way towards a
resolution of this, thus far intractable, problem.
The mismanagement of the Individual Indian Trusts has been one of
the biggest injustices ever perpetrated by representatives of our
government. As the Court of Appeals has said, ``the trusts at issue
here were created over one hundred years ago through an act of
Congress, and have been mismanaged nearly as long.'' Study after study
by the Congress itself, the GAO, and now nearly ten years of judicial
findings and opinions in both the district and appellate courts confirm
that the injustice is pervasive, longstanding, and continuing--and the
financial loss to hundreds of thousands of Native Americans has been
incredibly large. For the record, I'd like to submit a list of just
some of these studies and reports that confirm the magnitude of this
problem. (See Appendix A.) It truly is amazing how many times and for
how many years there has been a recognition of this massive problem,
going back to the very inception of the Trust, in 1887. ``Fraud,
corruption and institutional incompetence almost beyond the possibility
of comprehension'' is how one bipartisan report characterized it. I
hope you agree with me that the time for study and reflection is well
past. It is time to do something about it. You and your staffs are well
acquainted with this injustice, and we applaud you for moving to try to
do something constructive about it. I hope you share my frustration
that the U.S. Government has not similarly been constructive.
Quite the contrary. The U.S. Government is responsible for this
outrage. Lands and resources--in many cases the only source of income
for some of our nation's poorest and most vulnerable citizens--have
been grossly mismanaged. The Government forced this trust on Indian
peoples in 1887 because it thought it knew better than we how to manage
our own property. Adding injury to insult, the Government then
completely failed to faithfully discharge even the most basic trust
responsibilities. A couple of examples are helpful. Although since the
late 1970s, reports from all corners--including internal auditors--have
stated that a lack of an accounts receivable system is an intolerable
material weakness, even now, decades later, Interior has not even
instituted this most basic reform. Further, they cannot tell
beneficiaries how much they have in their accounts. Indeed, they cannot
even produce an accurate list of beneficiaries. The Government itself
is responsible for bringing us to this sorry state by failing to
maintain and even destroying records. What is even worse, government
now utilizes every possible mechanism of bureaucratic and legalistic
delay, obfuscation and misrepresentation to prevent the wrong it did
from being made right. This is shocking behavior, and as long as we
work on this issue, none of us should ever lose sight of that fact. It
is one thing to look at the sorry state of the trust and think that
this is a wrong from the past. It is quite another to see that the
wrong persists up to the present day and is magnified and perpetuated
by the government's continued failure to do the right thing.
If you went to your personal bank to ask how much you had in your
account, and the bank could not tell you how much money you had, what
interest you were owed, what would you do? How would you feel? And if
you were to find that the bank itself had deliberately destroyed the
records of your account and continued to destroy your records even
after you had asked for an accounting, and if your bank then tried to
duck responsibility because of lack of records, what would you do?
That's just what has happened for over a hundred years. We have come to
the courts and to you, our elected representatives, to seek justice.
Over 500,000 Indians have had their assets mismanaged. In total
amount of funds mismanaged, this scandal--and lets call this what it
is--a scandal--dwarfs all of the corporate misdeeds we've heard so much
about. Enron, WorldCom, and others in the headlines are truly petty
crimes next to the magnitude of this century-long and continuing
injustice.
Yet the Government has not been constructive at all in trying to
find a fair and final resolution. Time after time in the litigation,
they have proven to be obstinate, difficult, and foot-dragging. But
don't take my word for it--the Court of Appeals has criticized:
[the] ``record of agency recalcitrance and resistance to the
fulfillment of its legal duties'' and ``intransigent'' conduct.
Cobell v. Norton, 391 F.3d 251, 255, 257 (D.C. Cir. 2004).
Time and again, both the district court and the appellate court
have called out the government for its bad behavior. When anyone
complains that this process has gone on too long and been too complex,
they have only to look at these unfortunate tactics pursued by the
Government in this case to see why this has been so.
A mediator was appointed to try to find common ground and work
toward a settlement of this case. Our side worked in good faith with
the mediator for a year and a half. In that time, the Government did
not make one proposal for resolving the case. Not one: not even a
counter-offer. Ultimately, the mediation process collapsed under the
weight of the Government's arrogance and intransigence.
Now, as committees of jurisdiction in both houses of Congress have
taken up the matter, the Government is still actively countering
progress. We have done our part in furthering this legislative
settlement effort. We worked with Indian Country to develop 50
Principles for settling the case--including specifics on the amount of
a fair resolution. After the settlement bill was introduced in the
Senate, our side continued in good faith. We made clear what we agreed
with as well as our concerns. We came to the table to negotiate and
discuss. We have heard nothing from the Government that suggests it
will approach this process any more constructively than it has
approached the litigation and mediation. They have not provided any
specific suggestions whatsoever. They have yet to say specifically what
a fair number for resolving the historical accounting is or what they
believe is an acceptable amount. In short, they have taken no position
and offered no guidance.
Members of the Committee, if you wish to exert leadership in
bringing this terrible injustice to an end, you must call the
Government to account. Do not allow their foot-dragging to continue.
Call them to task. Demand that they participate in the legislative
process. Demand that they inform you of the specific contours of a
settlement they will support. If there is hope for a legislative
settlement, they should no longer be allowed to simply sit back and say
``no'' to all settlement offers without members of this committee
denouncing their recalcitrance. If not, a legislative settlement will
never occur. Use your influence to raise the profile of this issue to
call their continued intransigence what it is--a continuing slap in the
face to Indians that magnifies the underlying wrongdoing. For by
failing to acknowledge the problem and working to resolve it, they
continue the more than a century old tradition of kicking the problem
to the future with no justice for anyone in sight. Meanwhile,
beneficiaries who have been mistreated their entire lives do not see a
resolution as even possible in their lifetimes. Many have given up hope
after so many false starts in the past.
H.R. 4322 is a Starting Point, But More Work is Needed
We are encouraged that you have said that H.R. 4322 is a starting
point and a placeholder and that dialogue, discussion and negotiation
are encouraged and welcomed. We have been engaging in a very
constructive dialogue with Sen. McCain and Ranking Member Morgan on
their bill, and we look forward to a similarly constructive process
with you, Chairman Pombo and Ranking Member Rahall.
We are encouraged by some aspects of this preliminary bill. The
fact that any settlement would be paid out of the Claims Judgment Fund
is indeed necessary so that fixing this problem will not diminish the
Interior Department's budget. This would further punish the victims by
reducing funding for vital Indian programs.
We are also encouraged that the bill recognizes that the settlement
amount must range in the billions of dollars, although we also believe
it is time for those in Congress to put forward a specific proposed
settlement amount.
Further, since any settlement would be a return of the victims' own
money, we are pleased that the bill insures that beneficiaries will not
be disqualified from any other benefit for which they are eligible and
that it will not be treated as taxable income.
However, I believe there are some critical shortcomings to the bill
as presently drafted. There are two sources of guidance that should
inform any appropriate legislative settlement. First, the 50 Principles
for Settlement which present a consensus roadmap to resolution from
Indian Country.
The 50 Principles for Settlement represent an unprecedented coming
together of Indian Country at the request of both the leadership of
this Committee and the Senate Indian Affairs Committee to offer
guidance. The result was an extraordinary product that set out detailed
principles and the rationale for each Principle. No longer can it be
said that Indian Country does not--in the main--agree on the proper
approach to fixing this century of malfeasance and mismanagement. To
the extent that a resolution followed the roadmap set out by the owners
of the land and assets in question, it would be a success.
We are disappointed that the vast majority of the Principles have
not, at this point, been included in this bill and request that you
take another look at this historic document and the ideas it puts
forward.
The second source of guidance for an appropriate settlement is the
rulings in the Cobell case itself. Plaintiffs have waged a long and
hard battle against difficult odds, and have achieved a remarkable
record of success. The plaintiffs cannot accept a settlement that fails
to honor the many victories won at the District Court and the United
States Court of Appeals.
We appreciate that you are actively soliciting our input on the
bill before us. Candidly, we believe the bill needs a lot of work. We
are heartened by your commitment to this process and also by your
comments that this bill is intended to mark a starting point on a
possible road to resolution. With that in mind, we offer these specific
comments on the bill. These are not intended nor should they be
construed as a comprehensive list of the areas of concern. But these
are the areas of greatest concern and require serious consideration and
modification.
Any Settlement Should not be Overseen by One of the Wrongdoers
One of the most disturbing aspects of H.R. 4322 is the placing of
the Secretary of Treasury--a defendant in the Cobell lawsuit and one of
the parties principally responsible for the historic and continuing
victimization of Indian trust beneficiaries--as the person in charge of
the settlement funds. While it is certainly true that the Treasury
Department is better than the Interior Department as far as failed
trustee-delegates, frankly, that is not saying much. The Treasury
Department has been Interior's partner in crime for far too long. It
has been found in breach of trust. It has failed to reform. Is it
reasonable, given the history of this case, to ask trust beneficiaries
to accept their victimizer as the entity to provide for a fair
distribution? Of course not.
To make matters worse, the Department of Treasury has had a record
of bad faith in the Cobell litigation. In February 1999, after a three
week trial, the Secretary of Treasury along with the Secretary of
Interior was held in contempt of Court for flouting Court orders,
orders that they had consented to. See Cobell v. Babbitt, 37 F.Supp.2d
6 (D.D.C. Feb 22, 1999). Adding insult to injury, the plaintiffs and
the district court learned months afterwards than during the contempt
trial itself, Treasury Department employees, in violation of court
orders and in contradiction of representations made to the Court,
destroyed 162 boxes of disbursement related documents--including untold
numbers of IIM account related information. Treasury Department lawyers
waited over three months to report the destruction to the Court. See,
e.g., Cobell v. Babbitt, 91 F.Supp.2d 1, 60 (D.D.C. Dec 21, 1999)
(determining that the destruction of the 162 boxes and the government's
failure to report the incident ``misconduct'').
Simply put, the Treasury Department has a record of cover-up,
malfeasance, breach of trust, lack of candor with the Courts,
spoliation of evidence and contempt of Court. The suggestion that any
settlement fund be handled by such an entity cannot be acceptable to
the beneficiary class.
I routinely go out to Indian Country to speak with members of the
beneficiary class. Virtually every time, I am asked whether we will
agree to have the government--meaning the Executive Branch--handle the
monies when we prevail. Always, I promise, we will never agree to that
to cheers from the allottees I speak with. I can say with confidence
that an Executive Branch entity will not be acceptable to the
beneficiary class.
Equally infirm is the appointed Special Master who answers to the
Administration. Bear in mind that Indian Country has considerable
experience with this Administration appointing individuals that are to
serve a salutary function on behalf of the Indian Trust. Take by way of
example the experience with the 1994 Indian Trust Fund Reform Act.
Mr. Chairman, I along with many other Indians sought for nearly a
decade legislation to remediate the government's failure as trustee for
our assets. We worked hand-in-hand with both the Houses--in particular,
Representative Mike Synar and his distinguished colleague Bill Clinger
and the Senate. Finally, in October of 1994, the Trust Reform Act was
enacted. One of the core aspects of the law was to establish the Office
of the Special Trustee. Indian Country representatives wanted the
Special Trustee to be independent. But the Interior Department
vigorously objected to that. So the Act was watered down and the
Special Trustee reported to the Secretary of Interior. That was the
first problem--inadequate independence. One of the principal rationales
for supporting the establishment of the OST was to get proper direction
and guidance in the management from individuals with considerable
applicable reform and trust experience. Also, it was to keep people who
did not know what they were doing--like Ross Swimmer who was so
disastrous as Assistant Secretary for Indian Affairs for
beneficiaries--as far away from our money as possible.
Then to my utter dismay, in 2003, Secretary Norton fired then
Special Trustee Thomas Slonaker and replaced him with none other than
Ross Swimmer. Imagine all our hard work just to have our trust, our
assets, and trust reform put in the hands of a person universally
recognized by Indian Country as hostile to Indian interest and a failed
trustee-delegate. That, of course, is not the only example. After all,
Jim Cason as we speak is acting as Assistant Secretary for Indian
Affairs.
It is with these considerations in mind that we analyze whether it
makes sense to work hard for nearly a decade to get a settlement and
then have the settlement put under the control of a person appointed by
an Administration that has put Mr. Swimmer in charge of trust reform.
Under what rationale would that make sense to us? I struggle to
comprehend why anyone would think it would.
Worse than who the Bill empowers--namely Treasury Department and
the Special Master appointed by Administration--is who the Bill
disempowers--the Court. Over the century of mismanagement, one entity
has stood up for trust beneficiaries--the Court. Even detractors from
our lawsuit--Steven Griles, Jim Cason, Kevin Gover, Bruce Babbitt and
many others--have admitted under oath that this lawsuit has been the
impetus for any improvements that have been made. Under this
legislation, the only ameliorative entity--the Court--would be
eliminated from the picture entirely.
That makes no sense for a number of reasons. Courts have the
greatest institutional competence to make distributions in a fair
manner. They are often called upon to do just that. Courts are armed
with Rule 23 and related case law that provides sound guidance in
resolving difficult distribution issues. Courts are best at providing
an opportunity to be heard and other due process protections to the
beneficiary class and weighing the evidence presented to it through
well-settled rules of procedure and evidence. More importantly, unlike
the ``political branches'' (i.e. the Executive Branch and Congress),
Courts make judicial and not political determinations. A court sitting
in equity--like the Cobell court--is charged with considering the
evidence and acting equitably in fashioning appropriate remedies. That
is precisely the type of institution that should be figuring out how to
divide the funds among the beneficiary class. It is the most competent
to do so.
And what possible justification is there to eliminate the Court's
role? Because the Executive Branch doesn't like this Court? The
Administration has no legitimate interest in dictating how the
settlement funds are distributed. None. If there is a settlement, their
liability for the agreed-to period for the accounting claim would
cease. Who gets what after that is an issue for the beneficiary class
and the court to determine. Nobody wants the involvement of the
malfeasor in that process; they have done quite enough damage in their
century of mismanagement.
At bottom, this is an issue of trust. We cannot trust the people
who have abused us for a century. We can trust the courts and the
judicial process.
Importantly, the Indian Land Working Group, the largest national
association of allottee groups has specifically said that they do not
want Treasury involved. Specifically, they have said that they
``support the named representatives of the class and their counsel in
making decisions on what is a fair settlement and a fair manner to
distribute the funds.'' As we do, they have endorsed the federal courts
as the appropriate body to handle any distribution. (See Appendix B)
A Settlement Must Include Real Trust Reform
The Cobell case is far more than merely about the mismanagement of
our assets in the past. It is also about the future--how the trust
lands and monies of Indian people will be managed in the future. Quite
obviously then, a settlement of this case requires cessation of this
persistent and continuing wrongdoing, in other words, real trust
reform. If the underlying problems with administration of the trust are
not corrected, then much of our effort to ensure that our children will
not suffer the same indignities and abuse as their parents and
grandparents will have been for naught.
I have called for the appointment of a receiver during the period
of reform. I continue to think that is the most effective way to make
sure that the needed changes are made, and we don't all find ourselves
with a trust problem needing your attention again in a few years and
additional lawsuits in the future.
I understand that the government has resisted the receivership
approach. While we will continue to press for a receivership in the
litigation, I believe that some other measures may be sufficient for
reliable and meaningful trust reform. Chief among them is to codify in
statute the trust duties and standards, provide for enforceability in
courts of equity with meaningful remedies against a trustee breaching
its responsibilities, and independent oversight with substantial
enforcement authority to ensure that beneficiary rights are protected.
Right now, the Individual Indian Trust is missing all of these
elements, and that is part of the reason that this problem has
persisted for so long. These missing elements of accountability are the
sole germane distinctions between this trust and all other trusts
throughout this nation that are safely and soundly managed. Without
these elements, there is no accountability. If Congress truly wants to
fix this problem once and for all, it must fundamentally reform the
trust. Anything less will invite the same problems and abuses we are
all too aware of.
Without a resolution of these three issues, there is no use in
moving forward with settlement negotiations, since these three
positions are critical to the beneficiary class who are counting on me
to make sure this problem gets resolved in a full and fair manner.
A Fair and Just Settlement for Taxpayers and Indians
We have supported the 50-point settlement proposal that was
developed by Native American leaders this summer for several reasons.
First, we believe it is in the best interests of all Americans to
resolve this dispute. Secondly, we would like to end this unhappy
chapter in our history in a spirit of compromise. Third, we want to see
the trust reorganized now to prevent a continuation of this massive
failure.
Our lawsuit has dragged on for almost 10 years, largely because of
the government's policy of delaying any resolution. In truth, we stand
ready to end this costly litigation with the fair and just settlement
proposed by Indian Country. Simply put, too many of our Trust
beneficiaries are dying while this case remains in the courts. I want
to get them access to their money--or at least a portion of it--now--in
their lifetimes.
The settlement the Native American leaders proposed is a good
deal--especially for taxpayers. While the price tag comes to nearly
$27.5 billion, it is a bargain for a government that has acknowledged
its responsibility for this 118-year-old mess.
Here's why:
First, it would resolve a dispute that Members of Congress have
said has run too long and cost too much. It is estimated that the
government alone has spent more than $100 million on this lawsuit.
Those expenses will only grow as Attorney General Gonzales presses
ahead with plans to hire even more lawyers for trust litigation.
Secondly, the government's liability is growing. That's because the
courts have declared that Indian Trust beneficiaries are entitled to
both the principal amounts that should have been recorded in their
accounts--plus compounded interest on that money.
A fundamental principle of trust law, confirmed by the court of
appeals, is that the government is liable for any funds that it cannot
prove with appropriate and competent evidence that it paid to the
beneficiaries. Since both sides agree that the government should have
paid roughly $13 billion into the individual Indian Trust accounts
since 1887, that means that the government must be able to prove each
of those transactions. And amount not paid plus interest on what is
owed. This puts potential liability of the federal government well in
excess of $100 billion.
The historical accounting will continue to be costly. The Interior
Department is now telling you that it will cost at least $12 billion to
reconstruct those records. That's far too expensive for an accounting.
Well before the court of appeals reached that conclusion, we were
saying that in the district court.
A 2002 study conducted for the Interior Department--and made public
in our lawsuit--places the liability for the government on trust
accounts at anywhere between $10 billion and $40 billion. That's their
internal number.
That's why Indian Country's $27.5 billion proposal is a bargain.
After all, I would argue that it is a far better bargain for the
taxpayers to be spending this money directly on making Indian account
holders than wasting money on what both we--and the courts--regard as a
highly questionable accounting.
The proposed settlement makes a generous assumption on behalf of
the government. It assumes for purposes of calculation that the
government has enough records to prove that it accurately made 80
percent of the payments it was supposed to have made to trust
beneficiaries and that it made them on time. That's an exceedingly kind
estimate considering that independent assessments of the
``accountings'' the government has completed to date plainly
demonstrate that in actuality they can account or prove less than 1% of
the transactions that have occurred. In other words, while they, as
trustee-delegate, have the unconditional obligation to prove each
transaction, they can prove almost none of them, yet our proposal still
would presume they made the vast majority of them properly.
Moreover, these funds would not have to be appropriated. They would
come from the Treasury Department's Judgment Fund. The funds would be
disbursed by the courts over several years based on provisions and
guidance set forth in the settlement bill..
Remember, too, this is not welfare, a social program, or
reparations for past abuses and discrimination. This is money that all
along belonged to the individual Indians. It was never properly
recorded to their accounts because of the government's continuing
inability to serve as a proper trustee. The government repeatedly has
acknowledged this failure and that failing has been documented in
scores of reports. Now, the government has a chance to settle this
issue for all time and at a price that is far less than the account
holders are entitled to by law.
Government Has Repeatedly Acted in Bad Faith
It is especially regrettable that the government's unwillingness to
deal in good faith with the courts, the Congress, mediators, and the
plaintiffs has been matched by a continuing, persistent pattern of
deception and misrepresentation. Two recent examples are worthy of this
committee's attention.
Last month, the Court of Appeals granted a request from both sides
of the Cobell case that a structural injunction requiring a detailed
accounting methodology be set aside. We also requested that the case be
returned to the district court for further proceedings including the
district court considering the issue of ``impossibility'' of doing a
traditional and fair accounting, and determining an alternative
equitable restitution methodology. The Court of Appeals, in its recent
decision, opens the door to just such a determination.
In essence, the Court of Appeals recognized that it is appropriate
for the district court to adjudicate whether the loss and willful
destruction of records by government officials has made an historical
accounting impossible. For years, we have consistently argued for and
the government has vigorously opposed such a determination. This
appellate mandate has set the table for an early and fair resolution of
the Cobell case by the district court. With the weight of an
uncontested record of evidence and the government's admissions that a
complete and fair accounting is futile, impossibility will be
conclusively demonstrated. At that point an alternative to an
historical accounting must be selected to decide what is a fair
equitable restitution. We will be seeking such a proceeding at the
proper time.
The government however, would have you believe that this decision
was a victory. It has seized on some comments or ``dicta'' from Judge
Williams to suggest that this decision has a favorable legal impact on
procedural matters not even at issue before this court. As you know,
commentary, not necessary to the holding of the court on issues before
it is not binding on the district court or indeed any court. This
dicta, as lawyers call it, has no precedential impact. Moreover, where,
as here, the judicial commentary contravenes the decisions of prior
appellate panels, it is entitled to no weight whatsoever. The clear
rule in this and almost every other federal judicial circuit is that
when there is a conflict between panels of the circuit, the decision of
the panel that first decided the issue prevails over the later
decision. This ``first-in time rule'' applies with great force in this
matter since the language upon which Interior Defendants rely directly
contravenes at least three prior appellate panel decisions. To
illustrate what this means, we submit the following:
[GRAPHIC] [TIFF OMITTED] T5102.001
[GRAPHIC] [TIFF OMITTED] T5102.002
For further illustration of this point, see Appendix C. At the
proper time, we intend to seek a ruling from the court that will make
this explicit. In short, don't believe what you may be hearing from the
government about their legal victory. Like so much else that they have
said to the Courts, the Congress, and the public, it is simply not the
truth.
``Progress Report'' is No Progress
The second example is equally stark. In September, the government
put out a self-congratulatory ``progress report'' on its handling of
trust issues. I am sure it was made available to members of the
Committee. It is deceptive, misleading and inaccurate from beginning to
end. It would have you believe that the management of Indian Trust
accounts has been and is satisfactory, availability of financial
records is good, and losses suffered by Indians insignificant. None of
that is true. Hundreds of reports, findings, and studies from the
Congress, the GAO, Inspectors General, Federal Courts, and the
Government's own experts have concluded that the handling of these
accounts has ranged from incompetent to fraudulent. And, the damage to
Native Americans has been massive.
Mr. Chairman, we have called on the government to allow the Court
to examine this document for accuracy. They have, thus far, refused.
And, there is good reason for their reluctance. Ask government
officials who come before you if they are prepared to swear to the
truthfulness of this document in a court where sanctions for perjury
are available.
We have prepared a brief rebuttal to the Government's brochure and
I would like to make it part of the record. (See Appendix D.) It
clearly demonstrates that the ``Progress Report'' is just one more
attempt to deceive the Congress and the public. If the Government wants
to test their report against our rebuttal, we would welcome it. Let's
see who is telling the truth.
Conclusion
Thank you very much for this opportunity to testify and your
leadership on this important issue. We look forward to working with you
in the coming weeks to address these concerns and remain hopeful that a
legislative settlement can be reached that will best serve the
interests of the government, the American people, and the beneficiaries
who have been victimized for far too long. But, we remain mindful that
should a legislative settlement that is fair to the beneficiaries not
be reached, we must and we will continue to press our case in the
courts and we fully expect that we will, in time, prevail.
NOTE: Attachments to Ms. Cobell's statement have been retained in
the Committee's official files.
______
The Chairman. Ms. Cobell, the recent appeals court ruling
explicitly acknowledged the Department's right to conduct an
audit using a statistical sampling. Should the Department have
a chance to complete that accounting?
Ms. Cobell. No. The Department knows it cannot do an
accounting. There are too many missing documents, and the
procedure that was described by Mr. Cason today is not an
accounting, and you have to understand that. I think that the
Department continues to mislead Congress by saying that the
recent decision by the appellate court does not provide for
them to do an historical accounting. As I explained in my oral
testimony, first-in-time rule prevails, and in Cobell VI and
Cobell XII and Cobell XIII, the government is obligated to do
an accounting from 1887 forward.
If the government feels that it can actually do an
accounting, then we ought to go to Court and let them prove it.
The Chairman. Can you describe the method by which you
calculated the amount of money that should be restored to the
individual money account holders, and what is the data you used
to arrive at that number?
Ms. Cobell. Well, both the Plaintiffs and the government
agree that $13 billion flowed through these accounts. The
appellate court ruling provided that compounded interest has to
apply. If you take that into consideration, that brings us up
to $176 billion.
What we did in calculating the $27.5 billion is that we
assumed, just assumed, and gave the government the benefit of
the doubt that they had paid out 80 percent of that particular
amount of money, and taking that into calculation and then
actually deducting certain issues such as waiving the taxes
that would be applied on this particular amount of payment and
making sure that people's payments, such as Social Security,
were not affected by this payment--so taking all of those
calculation into effect, we came up with $27.5 billion.
Let me tell you that the appellate court ruling where
compounded interest applies is very important because the $176
billion continues to grow. The liability of the government
continues to grow. So taking in that particular discounted
amount and why we discounted it is why we came up with $27.5
billion. I think maybe Keith might want to add something.
The Chairman. Before he does, just so I understand this,
the $176 billion is making the assumption that none of the
money was paid out, and then you add interest on top of that.
The $27 billion is based on 80 percent of it was paid out and
20 percent was not, and you add the compounded interest on
that.
Ms. Cobell. That is correct. We have to remember that the
Ernst & Young report, the only accounting report that has been
made public, verifies that 99 percent of the transactions
cannot be verified at all. They cannot account for 99 percent
of the transactions. So we could actually go up to 99 percent,
but we gave them the benefit of the doubt of 80 percent.
The Chairman. But none of that is based on any kind of
accounting of the actual accounts.
Ms. Cobell. Yes, it is. It is based on the amount of money
that has flowed through those accounts.
The Chairman. Wait a minute. You are confusing me even
more.
Ms. Cobell. OK.
The Chairman. If 99 percent of the accounts--maybe I have
misunderstood you, but if 99 percent of the accounts, they have
no records for, then how do you come up with a number?
Ms. Cobell. Well, we came up with the number of the amount
of money that flowed through those accounts. OK? In Trial 1.5,
we presented an alternative method of accounting which
reflected $13 billion that flowed through those accounts. The
government's estimate was $13 billion, so we agreed on that.
The Chairman. So there was agreement on how much money
should have gone in. There is no agreement on how much was
actually paid.
Ms. Cobell. Yes. They do not know how much is actually paid
because their own accountants cannot verify 99 percent of the
transactions, and that is the issue here because there are so
many documents that are destroyed, it is impossible, and we
have known that it has been impossible to do an accounting. So
you take an alternative method of an accounting. That is what
we did, and what went through those accounts, the compounded
interest, and then giving the government the benefit of the
doubt that they paid out 80 percent of the money, and we came
out with the discounted amount of $27.5 billion.
The Chairman. But you do not know whether they paid out 50
percent of the money or 90 percent of the money.
Ms. Cobell. They are the trustee.
The Chairman. But nobody knows.
Ms. Cobell. Nobody knows. Nobody knows what they paid. They
do not know what they paid. They destroyed so many documents,
they do not know what they paid. The Ernst & Young report that
they talked about in their testimony where only there is a
small amount missing; that report basically said that they
could not account for 99 percent of the transactions.
The Chairman. Now, as far as dealing with my colleagues on
what the cost of this is, your numbers are an educated guess as
to what you think would be owed. Interior's number is an
educated guess on what they think should be owed or what is
owed on this, and we are somewhere in that ball park.
Ms. Cobell. Well, I guess I would say that theirs is a
total guess; ours is more right on. And you have to understand
that the government experts themselves say that 10 to $40
billion of liability exists here. We bring the amount of $27.5
billion. Ours is not an educated guess; it is based on our
methodology that we presented in our Trial 1.5.
The Chairman. Well, I am not disputing that at all. I
understand that, but you really do not know how much was paid
out because they do not know how much was paid out. You are
making the assumption that 80 percent was.
Ms. Cobell. And it could be a lot less that was paid, yeah.
We are giving the government the benefit of the doubt. Probably
there are many beneficiaries that would like to see the total
liability of $176 billion paid out because according to common
trust law standards, it is that you have to account for every
single document. I am a banker. I understand this. Every single
document has to be accounted for. You do not get away with
saying, ``Oh, well, maybe we can find 50 percent of the
records, or maybe we can find 80 percent.'' You cannot do that.
So what we did is we gave the government the benefit of the
doubt, if we want to come to a settlement amount, in saying
that they distributed 80 percent of the money, and I think that
is more than fair.
The Chairman. Thank you. Mr. Rahall?
Mr. Rahall. Thank you, Mr. Chairman. Elouise, in your
testimony, you indicate that the Plaintiffs have ``achieved a
remarkable record of success.'' You also say the recent ruling
in the Appeals Court for the D.C. Circuit has ``set the table
for an early and fair resolution of the Cobell case by the
district court.''
So my question would be, do you consider the November 15,
2005, Appeals Court decision to be a victory for the
Plaintiffs, and, if so, do you still welcome a legislative
settlement?
Ms. Cobell. Yes, I do. I welcome a legislative settlement,
but we do feel that Cobell XVII, the November 15th ruling was
in our favor. It basically vacated the structural injunction
that the judge laid out for a way that the accounting was to be
done which would have taken up until 200 years to accomplish,
just by our calculations. But the judge did that because the
government was not responding to any of the other decisions of
the court to do an accounting.
So it basically took it back to the district judge that
will now hear a trial on the accounting that has to be done,
and we look forward to that. We look forward to the Department
of the Interior getting up and telling us how they plan on
doing an accounting before a judge because we know it is
impossible.
Mr. Rahall. How do you respond to, and do you accept, last
year's Appeals Court for the D.C. Circuit when they said that
the Department's trust duties are grounded in statute, not in
the common law?
Ms. Cobell. I think I am going to refer to Keith. He is
more an expert on----
Mr. Harper. Congressman Rahall, the question goes back to a
number of the different appellate court decisions. One thing
that is absolutely clear, and this comes from Cobell VI--there
are now 17 of these decisions, so they get a bit confusing, but
Cobell VI, February 23, 2001, very clearly articulated the
general principle, which is that although the duty must be in
statute, it does not have to be express in statute. It can be
implicit in the trust relationship itself that is created by
that statute. So once the statute creates the trust
relationship, then it is inferred from that that all of the
normal trust duties, common law trust duties, are applicable to
this trust, and that has been the consistent rule in all of the
appeals.
One of the things that Elouise touched upon a little
earlier is what is called the ``first-in-time rule.'' Cobell VI
being the first appellate decision, is the one that has
precedential value. Any later decisions, including to the
extent Cobell XVII, the most recent decision, is inconsistent
with that prior one, that has no legal effect. That is the rule
of the D.C. Circuit as well as all of the other circuits.
Mr. Rahall. Thank you. I appreciate that.
With respect to our legislation and who distributes a
settlement, this bill, of course, is a work in progress, as I
am sure you recognize. Elouise, you have stated your position
as far as having Treasury in charge, and I am sure that will be
something we will consider, but I, quite frankly, do not see
giving this job to the district court. So if I am correct, what
ideas would you have for managing a settlement and
distribution? You do not want Treasury in charge. Right?
Ms. Cobell. Yes. Thank you, Congressman Rahall. It is
important to understand----
Mr. Rahall. You mean, no, you do not want Treasury in
charge.
Ms. Cobell. It is important to understand that we do not
want Treasury. They are one of the defendants. They have been
held in contempt of court, and so we do not want them in charge
of the distribution. I think that the settlement funds have to
be given to the court, and I do have to tell you that Judge
Lamberth has probably been one of the most fairest [sic] people
in the history of the United States in regard to making sure
that we get true justice on this horrible mismanagement mess.
So if it is distributed in his court, you know, that is fine. I
do not know any other specifics on how other than that it
should be addressed. Maybe Keith can add to that. I am only
familiar with the district court.
Mr. Harper. Congressman Rahall, we believe that the
district court or a court in general is the appropriate place
to do a distribution, and that is because they have the
institutional competence to hear evidence, to waive various
issues, and to make determinations that are appropriate in
light of the evidence that they receive, and how that
distribution gets done is very important to our class members.
We, as representatives of that class, have a fiduciary
obligation to make sure absentee class members are fairly
represented, and we think that the most appropriate entity, the
one with the highest competence to do that, are the courts.
Also, they are not a political branch. They apply legal rules,
which, for us, and given the history of this litigation, they
have been the solace in a history of mismanagement, and so, for
us, it really is the courts which are in the best posture to do
this.
Could I just mention one other thing because I think that
there has been an implicit--well, there has been a campaign--
let us just put it out there--there has been a campaign in some
quarters against this judge, and Elouise, I think, said it
quite fairly. I do not know what the complaints are. If you are
a Federal judge, and you get lied to, and you call people out
for it, is that a bad judge? If you have a malfeasance that the
Court of Appeals says is unconscionable--``malfeasance,'' that
means evil doing--and you are a Federal judge, a district court
judge, and you call them out on that, is that a bad judge? What
makes this judge problematic other than to make something that
has been nonaccountable for a century have some accountability?
So I caution a little bit the notion that this judge is
somehow misguided in his approach. Yes, this is a very
complicated case, and there have been individual legal issues
that have gone to the Court of Appeals, and they have disagreed
with him, but there have been many that they have agreed with
him, and they have affirmed him in toto in the most important
of the decisions, Cobell VI.
So I just put that out there because I want to counter the
perception or the attempt out there to paint this judge as some
kind of rogue. We do not believe that is the case. We think
that the record is plain that what he has done is to treat the
parties fairly.
Mr. Rahall. I appreciate you laying that on the record. I
did not mean to join that campaign or cast any aspersions when
I said what I did about the D.C. court. That was not my
intention whatsoever.
Thank you both your testimony, and, Elouise, again, as I
said in my opening comments, I certainly applaud your tenacity
and your determination and your persistence, and you are
certainly a driving force for a fair and equitable settlement
here. Thank you.
The Chairman. Mr. Pearce?
Mr. Pearce. Thank you, Mr. Chairman. Ms. Cobell, has the
trust relationship outlived its usefulness overall?
Ms. Cobell. I think that if the trust relationship was
implemented properly, according to standards that were spelled
out in the 50 Principles, that it could work well for Indian
people.
Mr. Pearce. I am asking, do the Indian people need that
trust relationship to represent them?
Ms. Cobell. Well, there are certainly certain issues that
we have to take into consideration that have to be solved
before any change is made, and that is that people have to have
an accounting of their trust assets.
Mr. Pearce. I am saying, once we clear the accounting up,
has the trust relationship outlived its usefulness? Do the
Native Americans need someone to oversee their affairs?
Ms. Cobell. I think, Congressman, that once we have this
resolved, that Indian people can be provided options, and we
could take a good look at those options.
Mr. Pearce. Thank you, Mr. Chairman.
The Chairman. Mr. Kildee?
Mr. Kildee. Thank you, Mr. Chairman, and thank you, Ms.
Cobell.
Abraham Lincoln referred to Harriet Beecher Stowe as the
lady who started the Civil War that freed the slaves, and I
think you have jump started this pursuit of justice for
Indians, and while you are not seeking it, your name will go
down in history. It is a very quantum leap that you started for
justice for Indians, and if I can play some small role in
helping you achieve that justice and a remedy for the
injustice, I feel I will have accomplished an important mission
here in Congress.
I thank you for your courage. It is not that easy to put
your name out there and get both praise but a lot of stones,
and I personally appreciate it. I have known your name for a
number of years now, and some people might not agree with you,
but I think that you have had the courage to really take on a
gross injustice that occurred toward the Indians in this
country, and I deeply appreciate what you are doing. The trust
responsibility does lie with the entire U.S. Government,
including this Congress here, and we want to make sure that we
are sensitive to really having as much justice as we can
achieve, and I, frankly, think your proposal, how you have
figured the 80 percent, is modest and reasonable and certainly
not outlandish at all. I just want to commend you.
I do not think I can ask any question that you have not
answered already. I have read much of what you have said
before. I have followed you and just commend you, keep up the
work, keep us informed, and keep us aware of our responsibility
to that trust that we have.
Now, the trust responsibility really came in not as a
patronizing trust. The trust responsibility came in very often,
and this is not the case here because this is the Federal
government abusing the Indians--the trust responsibility came
into being, to a great extent, to protect you from the state
government, and the Federal government is supposed to be the
great protector, to protect you against intrusion by state
government. I know my own State of Michigan intruded upon
Indian rights. But when the protector who was in that trust
responsibility not only abdicated the role of protection but
abused the Indians, then we really have to find a solution for
that, and I think you have started this on a path that
hopefully will arrive at full justice for the Indians, as much
justice as we, in our frailty, can put together. But I think
you have acted in a very determined, tough, and reasonable way.
Thank you very much. God bless you.
Ms. Cobell. Thank you very much, Congressman Kildee. Your
words mean a lot to me.
The Chairman. Well, thank you to our witness. Ms. Cobell,
there may be additional questions that Members have. Those will
be submitted to you in writing, if you can answer those in
writing so that they can be included in the hearing record.
I know this is something this Committee has been dealing
with for a long time. It has gone on way too long, and I think
we are at the point where, both in the House and the Senate, we
want to deal with this, and hopefully we will not be doing a
lot more of these hearings. So thank you very much for being
here.
Ms. Cobell. You are very welcome.
The Chairman. If there is no further business before the
Committee, I again thank our witnesses and the members of the
Committee. The Committee stands adjourned.
[Whereupon, at 11:57 a.m., the Committee was adjourned.]