[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]




 
       STATUS OF THE INDIAN TRUST FUND LAWSUIT, COBELL V. NORTON

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

                           OVERSIGHT HEARING

                               before the

                         COMMITTEE ON RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                      Wednesday, February 16, 2005

                               __________

                            Serial No. 109-2

                               __________

           Printed for the use of the Committee on Resources



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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
Devin Nunes, California              Mark Udall, Colorado
Henry Brown, Jr., South Carolina     Dennis Cardoza, California
Thelma Drake, Virginia               Stephanie Herseth, South Dakota
Luis G. Fortuno, Puerto Rico
Cathy McMorris, Washington
Bobby Jindal, Louisiana
Louie Gohmert, Texas
Vacancy

                     Steven J. Ding, Chief of Staff
                      Lisa Pittman, Chief Counsel
                 James H. Zoia, Democrat Staff Director
               Jeffrey P. Petrich, Democrat Chief Counsel
                                 ------                                

                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on Wednesday, February 16, 2005.....................     1

Statement of Members:
    Cubin, Hon. Barbara, a Representative in Congress from the 
      State of Wyoming, Prepared statement of....................    48
    Kildee, Hon. Dale, a Representative in Congress from the 
      State of Michigan, Prepared statement of...................     3
    Napolitano, Hon. Grace F., a Representative in Congress from 
      the State of California....................................     3
    Pombo, Hon. Richard W., a Representative in Congress from the 
      State of California........................................     1
        Prepared statement of....................................     2

Statement of Witnesses:
    Cason, James, Associate Deputy Secretary, U.S. Department of 
      the Interior...............................................     4
        Prepared statement of....................................     5
    Harper, Keith M., Attorney for the Plaintiffs, Native 
      American Rights Fund.......................................    30
        Prepared statement of....................................    32


   OVERSIGHT HEARING ON THE STATUS OF THE INDIAN TRUST FUND LAWSUIT, 
                            COBELL V. NORTON

                              ----------                              


                      Wednesday, February 16, 2005

                     U.S. House of Representatives

                         Committee on Resources

                            Washington, D.C.

                              ----------                              

    The Committee met, pursuant to notice, at 11:01 a.m., in 
Room 1324, Longworth House Office Building, Hon. Richard W. 
Pombo [Chairman of the Committee] presiding.
    Present: Representatives Pombo, Hayworth, Cubin, 
Radanovich, Gibbons, Walden, Flake, Pearce, Nunes, Gohmert, 
Faleomavaega, Pallone, Christensen, Napolitano, Tom Udall of 
New Mexico, DeFazio, Inslee, and Herseth.

    STATEMENT OF 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 the 
status of the Indian Trust Fund lawsuit, Cobell v. Norton.
    The Chairman. Under Rule 4(g) of the Committee Rules, any 
oral opening statements at the hearing are limited to the 
Chairman and Ranking Minority Member. This will allow us to 
hear from our witnesses sooner and help Members keep to their 
schedules. We have a 2 p.m. hearing today in this room, so we 
cannot make this a long hearing. Therefore, if others have 
statements, they can be included in the hearing record under 
unanimous consent.
    The purpose of today's hearing is to do a status check on 
the Indian Trust Fund lawsuit entitled Cobell v. Norton, filed 
nine years ago by Elouise Cobell, a member of the Blackfeet 
Indian Nation. The lawsuit was filed in order to force the 
government to perform an historical accounting of certain 
monies it manages on behalf of around 300,000 Indians. Although 
the defendant in this suit is currently Secretary Norton, it 
was originally filed against her predecessor, Bruce Babbitt, 
and the origins of the case stretch back to the 19th century.
    I won't use the Committee's time giving a detailed history 
of how the Department got into this mess. The story is narrated 
quite well in the written testimony of today's witnesses. 
Suffice it to say that from the late 1800s until recent years, 
the government failed to do the basic housekeeping necessary to 
maintain orderly records of individual Indian money accounts. 
Prestigious accounting firms have been hired at great cost to 
figure out the old accounting system and they can't.
    Elouise Cobell is a banker who understands the basic duty 
to provide an accounting of money. She wasn't able to get the 
government to deliver on its duty in 1996, so out of a just 
sense of frustration, she filed the lawsuit as a last resort. 
But after nine years in court, the individual Indians still 
don't have their accounting. Elders are passing away without 
knowing if their monies were properly handled. It is 
embarrassing that the first Americans are the last in line when 
it comes to speedy justice, which is not being provided in the 
court.
    Unfortunately, after nine long years, the lawsuit has taken 
on the character of a blood feud. It consumes massive time and 
resources in the Department, time and resources better spent on 
helping Indians and their tribes as well as non-Indian members 
of the public who rely on other Interior services.
    Under the supervision of myself, Ranking Member Rahall, and 
the leadership of the Senate Indian Affairs Committee, two 
mediators were appointed last year to seek a resolution. As of 
today, we are still without a resolution. So we have to ask 
ourselves, is it time for Congress to step in and legislate a 
resolution?
    I, for one, do not think there is a clear end in sight to 
the litigation and both sides must realize there is a huge 
value and time savings alone if we clear this case up this 
year.
    Before we hear from the witnesses, I want to lay a few 
ground rules. We are looking for basic information about how to 
provide a settlement this year. Neither witness is obliged to 
divulge information that is of a confidential nature or that 
might affect his position in the lawsuit. We are not looking 
for a courtroom battle, and so anything resembling such is 
strongly discouraged. This is a chance to find a constructive 
end that finally brings closure to the Department and a fair 
settlement for the class of plaintiffs. Thank you.
    I now recognize the Ranking Member, Mrs. Napolitano.
    [The prepared statement of Mr. Pombo follows:]

        Statement of The Honorable Richard W. Pombo, Chairman, 
                         Committee on Resources

    The purpose of today's hearing is to do a status check on the 
Indian Trust Fund lawsuit, titled ``Cobell versus Norton.''
    Filed 9 years ago by Elouise Cobell, a member of the Blackfeet 
Indian Nation, the lawsuit was filed in order to force the government 
to perform a historical accounting of certain monies it manages on 
behalf of around three-hundred thousand Indians.
    Although the defendant in this suit is currently Secretary Norton, 
it was originally filed against her predecessor, Bruce Babbitt. And the 
origins of the case stretch back to the 19th century.
    I won't use the Committee's time giving a detailed history of how 
the Department got into its mess. The story is narrated quite well in 
the written testimony of today's witnesses. Suffice it to say that from 
the late 1800's until recent years, the government failed to do the 
basic housekeeping necessary to maintain orderly records of individual 
Indian money accounts. Prestigious accounting firms have been hired at 
great cost to figure out the old accounting systems...and they can't.
    Elouise Cobell is a banker who understands the basic duty to 
provide an accounting of money. She wasn't able to get the government 
to deliver on its duty in 1996. So out of a just sense of frustration, 
she filed the lawsuit as a last resort.
    But after 9 years in court, the individual Indians still don't have 
their accounting. Elders are passing away without knowing if their 
monies were properly handled.
    It's embarrassing that the First Americans are the last in line 
when it comes to speedy justice, which is not being provided by the 
courts.
    Unfortunately, after 9 long years, the lawsuit has taken on the 
character of a blood feud. It consumes massive time and resources in 
the Department, time and resources better spent on helping Indians and 
their tribes as well as non-Indian members of the public who rely on 
other Interior services.
    Under the supervision of myself, Ranking Member Rahall, and the 
leadership of the Senate Indian Affairs Committee, two mediators were 
appointed last year to seek a resolution.
    As of today, we are still without a resolution. So we have to ask 
ourselves: is it time for Congress to step in and legislate a 
resolution? I for one do not think there is a clear end in sight to the 
litigation, and both sides must realize there is a huge value in time 
savings alone if we clear this case up this year.
    Before we hear from the witnesses, I want to lay a few ground 
rules. We are looking for basic information about how to provide a 
settlement this year. Neither witness is obliged to divulge information 
that is of a confidential nature or that might affect his position in 
the lawsuit. We are not looking for a court room battle, and so 
anything resembling such is strongly discouraged. This is a chance to 
find a constructive end that finally brings closure to the Department, 
and a fair settlement for the class of plaintiffs.
                                 ______
                                 

  STATEMENT OF HON. GRACE F. NAPOLITANO, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mrs. Napolitano. Thank you, Mr. Chair. I have a statement 
from the Ranking Member, Dale Kildee, and I would like to read 
it into the record. I certainly thank you for the opportunity. 
He will not be able to make it. He has apparently a markup.
    I want to thank you for scheduling this hearing today. 
Because of the complexity of the issues involved in the trust 
reform, the issues in the Cobell litigation relating to 
mismanagement and accounting of the Indian trust, and the time 
it has taken us to address the trust fund management, under 
both Democratic and Republican leadership, the appropriators 
have become very impatient with us on this issue. So I, along 
with my colleagues from both sides of the aisle, have fought 
appropriations writers. We have run out of excuses and we must 
work together to resolve the outstanding issues arising from 
the Cobell litigation.
    I want to commend Chairman Pombo and Ranking Member Rahall 
for working with the Senate Committee on Indian Affairs to seek 
a settlement agreement between the parties through a mediation 
process. I, like the rest of my colleagues, was disappointed in 
the stalemate that occurred between the parties after six 
months of negotiation and hope that today's hearing will shed 
light on the outstanding issues and that we can work together 
to resolve those issues so that we can finally offer a 
legislative solution to the trust reform management and 
settlement of the Cobell litigation and look forward to hearing 
from the witnesses.
    Mr. Chairman, I would like to enter this into the record.
    [The prepared statement of Mr. Kildee follows:]

Statement of The Honorable Dale E. Kildee, a Representative in Congress 
                       from the State of Michigan

    Good morning. Mr. Chairman, I want to thank you for scheduling this 
hearing today.
    Because of the complexity of the issues involved in trust reform, 
the issues in the Cobell litigation relating to mismanagement and 
accounting of the Indian trust, and the time it has taken us to address 
trust fund management under both Democratic and Republican leadership, 
the appropriators have become very impatient with us on this issue.
    While I, along with my colleagues from both sides of the aisle, 
have fought appropriations riders, we are running out of excuses and we 
must work together to resolve the outstanding issues arising from the 
Cobell litigation.
    I want to commend Chairman Pombo and Ranking Member Rahall for 
working with the Senate Committee on Indian Affairs to seek a 
settlement agreement between the parties through a mediation process.
    I, like the rest of my colleagues, was disappointed at the 
stalemate that occurred between the parties after six months of 
negotiations.
    I hope that today's hearing will shed light on the outstanding 
issues and that we can work together to resolve those issues so that we 
can finally offer a legislative solution to trust reform management and 
settlement of the Cobell litigation.
    I look forward to hearing from the witnesses today. Thank you.
                                 ______
                                 
    Mrs. Napolitano. I would add to that that I hope that this 
is a lesson for the agencies, the Federal agencies, to keep 
records that are required and that will help us avoid this 
turmoil and this distress. In going to court, the lawyers win, 
the people lose.
    Thank you, Mr. Chair.
    The Chairman. Thank you.
    Now I would like to introduce our first witness, Jim Cason, 
the Acting Assistant Secretary for Indian Affairs. Before he 
takes a seat, I would like to thank Mr. Cason for agreeing to 
appear this morning. He just finished testifying before the 
Senate Indian Affairs Committee. The Committee really 
appreciates how you are meeting the demands on your time.
    I will take this time to remind all of today's witnesses 
that under Committee Rules, oral statements are limited to five 
minutes. Your entire statement will appear in the record.
    Welcome to the Committee. Thanks for being here. I am just 
going to turn it over to you and let you give your opening 
statement.

  STATEMENT OF JAMES CASON, ASSOCIATE DEPUTY SECRETARY, U.S. 
                   DEPARTMENT OF THE INTERIOR

    Mr. Cason. I am going to be very brief. I think both your 
comments and those of the minority are right on point. This 
lawsuit has been around since 1996, or nine years now, and it 
is questionable about how much progress, real progress, we are 
making in resolving the issues.
    We have been in court for nine years. We have made numerous 
trips between the District Court and the Court of Appeals. We 
have had decisions from the Court of Appeals recently that put 
us right back down in the District Court. The prognosis at this 
point, if we continue down this path, is more years and years 
of continued litigation without real resolution to the issues.
    I am greatly encouraged that this committee has taken the 
leadership role of looking into this issue. You started last 
year with discussions about hiring a mediator, and I am greatly 
encouraged that Senate Indian Affairs is also continuing its 
role in trying to pursue another course of action.
    Ultimately, what we have to deal with is a matter of 
choice. We can choose collectively to go down the pathway of 
continued litigation for years and years, with a dim prospect 
for ultimate resolution of the issue to the satisfaction of the 
parties, or we can choose to evaluate whether there is any 
other options that we can pursue in Congress to try and find a 
fair and full and equitable solution to this issue, knowing 
full well that we won't satisfy all parties, but can we come up 
with an approach that is fair for all parties.
    The Department of Interior stands ready to do that. We 
would like to work with this committee and the Senate Indian 
Affairs Committee to see if we can explore the options that are 
available, and there are several, to try and approach a 
solution to this issue that is fair to all concerned. Thank 
you.
    The Chairman. Thank you.
    [The prepared statement of Mr. Cason follows:]

         Statement of James Cason, Associate Deputy Secretary, 
                    U.S. Department of the Interior

    Mr. Chairman and members of the Committee, my name is James Cason 
and I am the Associate Deputy Secretary of the Department of the 
Interior. Thank you for the opportunity to testify today on the status 
of the Indian Trust Fund lawsuit, Cobell v. Norton. As you are well 
aware, this is a longstanding case that originated in 1996 as Cobell v. 
Babbitt. The Department appreciates the Committee's interest in this 
case and your desire to help the parties reach a solution.
    Congress designated the Department of the Interior as the trustee 
for one of the most complex and diverse governmental land trust ever 
established. The Department manages approximately 56 million acres of 
land held in trust. Over ten million acres belong to individual Indians 
and nearly 46 million acres are held in trust for Indian Tribes. On 
these lands, Interior manages over 100,000 leases for individual 
Indians and Tribes. Leasing, use permits, land sale revenues, and 
interest all of which total approximately $205 million per year are 
collected for 245,000 open individual Indian money (IIM) accounts. 
About $414 million per year is collected in 1,400 tribal accounts for 
300 Tribes. In addition, the Indian trust fund manages approximately 
$3.0 billion in tribal funds and $400 million in individual Indian 
funds. Because the Cobell case only involves IIM accounts, most of my 
testimony will focus on the issues related to the management of those 
accounts.
    Although much of what I have prepared to say today has been 
previously heard by your Committee, I believe it is vital for you to 
understand the background and facts in order to craft a pathway that 
will actually make progress for Indian Country. Mr. Chairman, you and 
your Committee stand at a crossroads in history. We need to work 
together to resolve this issue promptly and in a meaningful way, so 
that among other things we can avoid time-consuming and expensive 
litigation that ultimately is not in the best interest of the parties.
Background
    In 1887, Congress passed the General Allotment Act, which resulted 
in the allotment of some tribal lands to individual members of tribes, 
mostly in 80 and 160-acre parcels. The expectation was that these 
allotments would be held in trust for their Indian owners for no more 
than 25 years, after which the Indian owner would own the land in fee. 
However, Congress in 1934, through the Indian Reorganization Act, 
reaffirmed its commitment to tribal governments, halted the further 
allotment of tribal property, and required that the allotted lands be 
held in trust indefinitely by the United States for the benefit of the 
individual owners.
    Interests in these allotted lands started to ``fractionate'' as 
interests divided among the heirs of the original allottees, expanding 
exponentially with each new generation. One of the most challenging 
aspects of trust management is the management of the very small 
ownership interests, which result in many very small IIM accounts and 
land ownership interests. There are now over 1.65 million fractional 
interests of 2% or less involving more than 32,522 tracts of 
individually owned trust and restricted lands. The Department provides 
a range of trust services--title records, lease management, accounting, 
probate--to the growing number of land owners. We have single pieces of 
property with ownership interests that are less than .000002 of the 
whole interest. The Department is required to account for each owner's 
interest, regardless of size. Even though these interests today might 
generate less than one cent in revenue each year, each is managed, 
without the assessment of any management fees, and the revenues 
generated are treated with the same diligence that applies to all IIM 
accounts. In contrast, in a commercial setting, these small interests 
and accounts would have been eliminated because of the assessment of 
routine management fees against the account. Management costs of the 
IIM accounts, as well as tribal trust accounts, are covered through the 
general appropriations process and borne by the taxpayers as a whole, 
rather than by the accountholders.
Formation of the American Indian Trust Fund Management Reform Act of 
        1994
    In 1992, the House Committee on Government Operations filed a 
report entitled ``Misplaced Trust: the Bureau of Indian Affairs' 
Management of the Indian Trust Fund.'' That report listed the many 
weaknesses in the Bureau of Indian Affairs (BIA) management of Indian 
trust funds. It pointed out that the General Accounting Office's audits 
of 1928, 1952, and 1955, as well as 30 Inspector General reports since 
1982 found fault with management of the system. The report notes Arthur 
Andersen 1988 and 1989 financial audits stated that ``some of these 
weaknesses are as pervasive and fundamental as to render the accounting 
systems unreliable.''
    Arthur Andersen stated it might cost as much as $281 million to 
$390 million in 1992 dollars to audit the IIM accounts at the then 93 
BIA agency offices. The 1992 Government Operations Committee report 
describes the Committee's reaction:
        ``Obviously, it makes little sense to spend so much when there 
        was only $440 million deposited in the IIM trust fund for 
        account holders as of September 30, 1991. Given that cost and 
        time have become formidable obstacles to completing a full and 
        accurate accounting of the Indian trust fund, it may be 
        necessary to review a range of sampling techniques and other 
        alternatives before proceeding with a full accounting of all 
        300,000 accounts in the Indian trust fund. However, it remains 
        imperative that as complete an audit and reconciliation as 
        practicable must be undertaken.''
    The Committee report then moves on to the issue of fractionated 
heirships. The report notes that in 1955 a GAO audit recommended a 
number of solutions including eliminating BIA involvement in income 
distribution by requiring lessees to make payments directly to Indian 
lessors, allowing BIA to transfer maintenance of IIM accounts to 
commercial banks, or imposing a fee for BIA services to IIM 
accountholders. The report states the Committee's concern that BIA is 
spending a great deal of taxpayers' money administering and maintaining 
tens of thousands of minuscule ownership interests and maintaining 
thousands of IIM trust fund accounts with little or no activity, and 
with balances of less than $50.
    On April 22, 1993, the late Congressman Synar introduced H.R. 1846. 
On May 7, 1993, Senator Inouye introduced an identical version, S. 925. 
It was in these bills that Congress first included a statutory 
responsibility to account for Indian trust funds. Section 501 was 
entitled ``Responsibility of Secretary to Account for the Daily and 
Annual Balances of Indian Trust Funds.'' Senator Inouye's bill included 
an effective date provision that stated:
        ``This section shall take effect October 1, 1993, but shall 
        only apply with respect to earnings and losses occurring on or 
        after October 1, 1993, on funds held in trust by the United 
        States for the benefit of an Indian tribe or an individual 
        Indian.''
    The Senate Committee on Indian Affairs held a hearing on S. 925 on 
June 22, 1993. Eloise Cobell in her capacity as Chairman of the 
Intertribal Monitoring Association, testified in strong support of the 
bill. The only amendment Ms. Cobell recommended in her oral statement, 
as well as her written statement, was to allow Tribes to transfer money 
back into a BIA-managed trust fund at any time if they so wanted. Ms. 
Cobell mentioned ``[W]e have amendments, and we are willing to work 
with the committee on these particular amendments. I am not going to 
devote any more of my time in my oral presentation to the provisions of 
the bill because we feel it is an excellent bill.''
    The Navajo Nation and the Red Lake Band of Chippewa Indians were 
the only tribes to submit testimony. They supported the bill, and did 
not object to the prospective application of the accounting section in 
their testimony.
    The Director of Planning and Reporting of the General Accounting 
Office also testified. He was asked if he agreed with the Arthur 
Andersen estimates I mentioned above. He stated the following:
        ``In my statement I talked about how there are a lot of these 
        accounts that maybe you don't want to audit, that maybe what 
        you want to do is come to some agreement with the individual 
        account holder as to what the amount would be, and make a 
        settlement on it. We had a report issued last year that 
        suggested that, primarily because there are an awful lot of 
        these accounts that have very small amounts in terms of the 
        transactions that flow in and out of them. Just to give you 
        some gross figures, 95 percent of the transactions are under 
        $500. One of our reports said there that about 80 percent of 
        the transactions are under $50. So in cases where you have the 
        small ones, maybe there's a way in which we can reach agreement 
        with the account holders and the Department of the Interior on 
        how much we will settle for on these accounts rather than 
        trying to go back through many many years, reconstructing land 
        records and trying to find all of the supporting material. It 
        may not be worth it.'' [page 29 of S. Hrg 103-225]
    On July 26, 1994, Congressman Richardson introduced H.R. 4833 which 
ultimately became the American Indian Trust Fund Management Reform Act 
of 1994. The House report on H.R. 4833 notes that H.R. 1846 was the 
predecessor bill to H.R. 4833. There was one legislative hearing held 
on H.R. 4833 by this Committee on August 11, 1994. There is no printed 
record of that hearing. There was no Senate hearing.
    H.R. 1846 and H.R. 4833 were similar in many places. H.R. 4833 did 
not however include the effective date provision explicitly making the 
accounting requirement prospective only. While the report notes in a 
number of places why changes were made to the H.R. 1846 provisions, it 
is silent with respect to this omission.
    It may surprise Members of this Committee to note that there is no 
mention of the costs associated with either complying with the Act, or 
completing the accounting in the Committee's report. Moreover, no 
analysis from the Congressional Budget Office was included in the 
Committee's report. The Department sent a letter on H.R. 1846 and an 
amended S. 925 that was placed in the Committee report on H.R. 4833. 
Its only mention of cost is the following sentence: ``We wish to note 
that, given current fiscal restraints, the funding for implementation 
of this legislation may necessarily have to be derived from 
reallocation of funds from other BIA or Department programs.'' Given 
the lack of cost analysis contained in the legislative history, one 
could assume that Congress in enacting the 1994 Reform Act had no idea 
it may have required a multi-million or multi-billion dollar 
accounting.
Cobell Litigation
    In 1996, five IIM beneficiaries filed the Cobell v. Norton class 
action lawsuit alleging that the government had breached its fiduciary 
duty in managing the IIM accounts. In 1999, a Federal district court 
held, in a decision affirmed on appeal in 2001, that the government had 
breached its fiduciary obligations to plaintiffs. In the litigation, 
the plaintiffs have sought an accounting, rather than monetary damages, 
but their argument is that they are owed any money that the government 
collected but cannot prove was properly distributed to individual 
Indians since 1887, some of which the government cannot do because of 
the unavailability of trust records. Under the plaintiff's theory, they 
are owed as much as the total amount collected since 1887 (which is 
estimated to be $13 billion), plus interest. They calculate the amount 
to be over $176 billion.
    In September 2003, the district court ordered Interior to conduct a 
transaction-by-transaction accounting, back to 1887, of all of the IIM 
accounts that it manages or has ever managed and required that Interior 
substantially complete this accounting by the end of FY 2006. Interior 
estimates that complying with the court's order would cost between $9 
billion and $12 billion, and even then it would not be able to meet the 
court's requirements or its aggressive timeline. The government 
appealed this order.
    P.L. 108-108, enacted on November 10, 2003, provided that nothing 
in any statute or principle of common law should be construed or 
applied to require Interior to commence or continue historical 
accounting activities with respect to the IIM trust until Congress 
amended the American Indian Trust Management Reform Act of 1994 to 
delineate the specific historical accounting obligations of Interior 
with respect to the Individual Indian Money Trust; or December 31, 
2004, whichever came first.
Court of Appeals Ruling
    On December 10, 2004, the Court of Appeals addressed the district 
court's September 25, 2003 order. The ruling addressed the two main 
categories of the district court's decree: ``Historical Accounting'' 
and ``Fixing the System.'' The Court found that Historical Accounting 
was governed by P.L. 108-108 and thus vacated the district court's 
order with respect to that portion of the case. In so finding:
      The Court pointed out that Congress passed PL 108-108 
``to clarify Congress's determination that Interior should not be 
obliged to perform the kind of historical accounting the district court 
required.''
      The Court stated ``The committee ``reject[ed] the notion 
that in passing the American Indian Trust Management Act of 1994 
Congress had any intention of ordering an accounting on the scale of 
that which has been ordered by the Court. Such an expansive and 
expensive undertaking would certainly have been judged to be a poor use 
of Federal and trust resources.''
    The Court rejected the plaintiffs' argument that PL 108-108 
amounted to a legislative stay of a final judicial judgment and thus 
violated the separation of powers doctrine. The Court found a critical 
distinction between statutes that reverse final judgments for money 
damages and statutes that alter substantive obligations of parties 
subject to ongoing duties under an injunction.
    Plaintiffs also argued PL 108-108 violated the due process and 
takings clauses of the Fifth Amendment. The Court rejected this 
argument, noting that plaintiffs did not explicitly identify the 
property right being taken other than to reference the right to 
interest earned on trust accounts. The Court also pointed out that 
``Congress may provide a simpler scheme than the district court's, 
while nonetheless assuring that each individual receives his due or 
more.''
    While the second part of the Court's decision focuses on ``Fixing 
the System,'' elements of it are important to decisions relating to 
historical accounting. The Court confirmed an earlier district court 
observation that the establishment of a trust relationship does not 
mean that plaintiffs can automatically ``invoke all the rights that a 
common law trust entails.'' The Court reasserted that the government's 
duties must be ``rooted in and outlined by the relevant statutes and 
treaties...''
    The Court also focused on the government's argument that normally 
private trust expenses are met out of the trust itself, pointing out 
``[T]hus plaintiffs here are free of private beneficiaries' incentive 
not to urge judicial compulsion of wasteful expenditures.''
    In short, the Court's decision invites a discussion within both the 
Executive Branch and the Congress as to what is an appropriate 
historical accounting.
Status
    The litigation in this case continues. It has had a profound effect 
on every part of the Department. To date, many career employees have 
had the specter of contempt hanging over them. Within the last few 
weeks we have been informed that the plaintiffs' lawyers want to depose 
representatives of the Bureau of Land Management, the Fish and Wildlife 
Service, the National Park Service, the Bureau of Reclamation, and even 
the Department's Inspector General. To give you a sense of the case, as 
of February 10, 2005, the plaintiffs are seeking to depose the 
following departmental employees or former employees:
      Ethel Abeita, Director, Office of the Special Trustee for 
American Indians
      Anson Baker, Director, North West Regional Appraisal 
Office, Department of the Interior
      Brian Burns, CIO, Bureau of Indian Affairs
      Norma Campbell, Retired Director, Office of Planning and 
Performance Management, Department of the Interior
      James Cason, Associate Deputy Secretary, Department of 
the Interior
      Francis Cherry, Deputy Director, Bureau of Land 
Management
      Katheryn Clement, past Deputy Director, United States 
Geological Survey
      Robert Doyle, Deputy Director, United States Geological 
Survey
      Galvan Wendall, Records Management Specialist, Department 
of the Interior
      Jeffrey Jarrett, Director, Office of Surface Mining
      Mary Kendall-Adler, Deputy Inspector General, Department 
of the Interior
      Thomas Kerstetter, Service Center Specialist, Office of 
the Special Trustee for American Indians
      Regina Lawrence, Office of Chief Information Officer, 
Department of the Interior
      Thao Le, Chief Technical Officer, Bureau of Indian 
Affairs
      Mark Limbaugh, Deputy Commissioner, Bureau of Reclamation
      Donnie McClure, Records Management Officer, Office of 
Historical Trust Accounting
      John Messano, Director of the Office of Information 
Operations, Bureau of Indian Affairs
      Pat Moloney, Chief of the Systems Division, Bureau of 
Indian Affairs
      Donald Murphy, Deputy Director, National Park Service
      William Ragsdale, Director of the Office of Trust Review, 
Department of the Interior
      Hord Tipton, CIO, Department of the Interior
      Timothy Vigotsky, Retired Director of the National 
Business Center, Department of the Interior
      Steven Williams, Director, Fish and Wildlife Service
Historical Accounting
    Interior conducted a reconciliation for the five named Cobell 
plaintiffs and their predecessors, reviewing documents which dated back 
to 1914, and found that 86 percent of the transactions and 93 percent 
of funds moving through the accounts were properly documented. The 
review, which cost $20 million to conduct, did not reveal any collected 
transactions not included in the selected accounts (with the exception 
of one transaction posted to the wrong Indian account holder). 
Moreover, Interior conducted a reconciliation of tribal trust funds 
based on a statistical sample with certain agreed upon accounting 
principles and found that 89 percent of total receipts and 
disbursements for 1972 to 1992 were reconciled with far less that a one 
percent error rate. At that time, Interior did not have sufficient 
documentation to reconcile the remaining 11 percent.
    As of December 31, 2004, the Office of Historical Trust Accounting 
(OHTA) had reconciled more than 36,700 judgment accounts with balances 
totaling more than $53 million and reconciled 7,360 per capita accounts 
with balances of over $21.7 million. As of today, the OHTA has mailed 
over 11,000 historical statements of judgment accounts to individual 
Indian account holders and former account holders. By the end of 2005, 
OHTA will reconcile a total of 34,000 judgment accounts and 9,200 per 
capita accounts.
    Through December 31, 2004, OHTA also resolved residual balances in 
nearly 8,200 special deposit accounts, identifying the proper ownership 
of more than $38 million belonging to individual Indians, Tribes, and 
private entities. By the end of 2005, OHTA expects to resolve the 
proper ownership of approximately $51 million (cumulative) in residual 
special deposit account balances.
    The OHTA also has begun using a contractor-developed accounting 
reconciliation tool to reconcile land-based IIM transactions. In 2004 
OHTA reconciled more than 4,700 land based IIM transactions and by the 
end of 2005, OHTA will reconcile an additional 7,000. In preparation 
for completion of historical statements of account for land-based IIM 
accounts, OHTA will verify and fill any gaps in historical transaction 
data for approximately half of the BIA regions.
    The Administration proposed funding the historic accounting at $130 
million and $109 million in FY 04 and FY 05 respectively. Despite our 
request of $109 million for FY 2005, only $58 million was appropriated 
and this includes funding for tribal trust fund accounting as well. The 
FY 06 budget request for historical accounting is $135 million, an 
increase of $77.8 million over the 2005 enacted level. This amount will 
provide $95 million for IIM accounting, an increase of $50 million 
above what the Department anticipates it will spend in 2005, and $40 
million for tribal accounting, an increase of $27.8 million above what 
the Department anticipates it will spend in 2005.
    It is also not clear what will occur in the district court now that 
the provisions of P.L. 108-108 have expired. The Department has been 
involved in mediation, but no agreed-upon resolution has yet emerged.
Conclusion
    I want to thank the Committee for holding this hearing. We have a 
historic opportunity to resolve these issues which are fundamental to 
our responsibilities to our beneficiaries and to the American taxpayer. 
This concludes my statement. I would be happy to answer any questions 
the Committee may have.
                                 ______
                                 
    The Chairman. I would like, if you could, to give me an 
idea in terms of resources, time, money, and personnel that the 
Department is currently spending on the lawsuit and talk about 
all the different levels of the Department and how it affects 
your ability to meet the other obligations of the Department.
    Mr. Cason. Mr. Chairman, unfortunately, the Cobell 
litigation is pervasive in the Department of Interior. It has, 
at one point or another, affected the entire Department, 
whether the pieces of the Department were involved in this 
litigation or not. For example, the District Court's order to 
disconnect from the Internet resulted in shutting off most of 
the Department from the Internet for a period of time, 
including the National Park Service, Fish and Wildlife Service, 
Bureau of Reclamation, Bureau of Land Management, and others, 
as well as Indian Affairs and OST and our office. Under that 
particular order, we still have parts of the Department that 
after three and a half years, or a little more than three 
years, are still disconnected from the Internet, and that 
includes the Bureau of Indian Affairs, the Office of Special 
Trustee, the Solicitor's Office, and our Office of Hearings and 
Appeals. These are the folks that actually have to provide 
services to Indian beneficiaries. So it has had that kind of an 
impact, where we can't use the capabilities of today's 
technology to supply services to our beneficiaries.
    It has also had an impact on budget. As you just mentioned, 
I was over with Senate Indian Affairs. The statements from both 
the Chair and the Vice Chair were very clear that this is a 
major issue in the budget structure for the Department of 
Interior. For example, our budget includes a request for $135 
million to conduct historical accounting activities. That $135 
million reflects the priority associated directly with the 
Cobell lawsuit and what we are required to do to fulfill our 
accounting obligations pursuant to our January 6 plan offered 
two years ago. There are other places that that money could be 
used if we were able to resolve this litigation and move on to 
other places.
    We have a number of our employees that are subject to 
potential contempt charges. It is dozens of employees, both 
current and former, who have that cloud hanging over them. And 
there has been a disincentive introduced into the process where 
employees don't want to be associated with anything that is 
related to Cobell for fear that it will adversely affect their 
careers.
    So there are a lot of pervasive impacts associated with the 
litigation. That is not to say that there isn't some issues 
that the Department could have done better on in the past. 
Those are clearly being made, during the course of the 
litigation, made clear. We recognize and are working very 
diligently on finding ways to improve the trust, and that is a 
benefit from the Cobell lawsuit.
    But we would like to find a way to resolve it so that we 
can establish again a positive relationship with our Indian 
beneficiaries and begin to do more positive things with our 
time and energy in the Department.
    The Chairman. What is the impact of being disconnected from 
the Internet? How does that affect the ability of people at the 
Department to do their job?
    Mr. Cason. It has a pervasive effect for the ones that are 
still disconnected. We have about 95 percent of the Department 
up and those are the parts of the Department that generally are 
not involved in Indian affairs.
    But if you can imagine in the Department, the Internet 
provides a great tool for communication. The e-mail systems or 
the capability to e-mail people within the Department, we don't 
have. So all of our beneficiaries that are involved in the 
trust cannot e-mail people inside the Department because we 
don't have that capability. But if we try to set up payments 
systems that would involve the Internet, we can't do that. If 
we try to seek information from Internet sources, we can't do 
that. Our Solicitor's Office is cutoff from the ability to use 
the Internet to do their legal research. People in the Office 
of Hearings and Appeals can't use the Internet to communicate 
the results of probate decisions.
    So there's a lot of places where the Internet would be a 
useful tool for the Department, but we are not currently able 
to use it.
    The Chairman. So in terms of communication, it is back to 
memos being sent?
    Mr. Cason. A lot of paperwork and what we call work 
arounds. We still use our computers, but we have to use them in 
isolated mode. And if we want anything from the outside world, 
we have to find other ways to get the information and bring it 
in, and we call that work around processes. So you may have to 
go home and use your personal computer to get information. Then 
you bring it into the office, or you pass disks back and forth 
across the boundaries of computer systems. So there are ways to 
try and work around it, but it is not nearly as efficient as 
having the tools available to us.
    The Chairman. Thank you.
    Mrs. Napolitano?
    Mrs. Napolitano. Thank you, Mr. Chair.
    I hate to ask. We took it for granted. We use the Internet. 
Our staffs use the Internet. And yet an agency that is not 
fully capable of being able to do its job because you are not 
functioning through the Internet or utilizing the Internet.
    Mr. Cason, I am gathering from your comments that the 
Department will welcome the Congress stepping in, am I correct?
    Mr. Cason. Absolutely. I think this is the place where the 
problem will be solved.
    Mrs. Napolitano. Then what elements do you believe need to 
be a part of the solution of this legislation that might 
emanate from this body?
    Mr. Cason. The Department has considered a number of 
pathways to possible settlement of the issue. There are 
process-oriented options and there are cash settlement-oriented 
options and each of those have permutations that are possible 
and we would be happy to work with the Committee to look at 
those.
    Ultimately, in my opinion, what we need to address is that 
there is a matter of expectations and a matter of uncertainty 
that any settlement will have to deal with, and the 
expectations that we have now is that there is a substantial 
error rate inside the accounting systems associated with the 
Indian accounts and that expectation needs to be addressed 
somehow because it is inconsistent with the findings that we 
have actually had from the accounting process we do.
    I am not planning today to argue the specifics of how we do 
accounting and who is doing accounting and exactly what the 
results are, but what we have found so far in the accounting 
that we have done is that there are errors. They tend to be 
small. They tend to be infrequent. They tend to net out close 
to zero. We haven't found, in the accounting that we have done 
so far, any signs of systematic or systemic problems or issues 
of fraud.
    Does that mean that if we continue down the pathway of 
accounting and we keep going further and further back in time 
and we look at a broader cross-section of accounts, we won't 
find one? No, it doesn't mean that, it just means that is what 
we know so far. There is certainly a huge job to do if we 
continue down the accounting pathway and there are certainly 
possibilities that we will find something. We just haven't so 
far.
    But there is an expectation that with all the reports of 
mismanagement and abuse of trust and violations in the past, 
that there is bound to be something there. So we have an 
expectation issue to try to manage, and part of it is 
uncertainty. In order to get certain about where we are, we 
would have to do all the work, to go back and do all the 
accounting. And to do the work would require hundreds of 
millions, if not billions, of dollars to try and find the 
answer.
    At this point, the Department offered a plan, our January 6 
plan from two years ago, that basically involved $335 million 
and five years of time to do and involves some statistical 
reconciliation of accounts. The District Court, on the other 
hand, offered a structural injunction that we estimated would 
cost somewhere between $6 and $12 billion to do.
    So there is a huge range of possible approaches to do this, 
some which are relatively inexpensive, some which are very 
expensive, and we are concerned at the Department that no 
matter what course of action we take on accounting, we will 
never really broach the issue of expectations and uncertainty 
to the point that everyone will be satisfied. So it is our 
thought, if there is a way that we can settle it in a fair and 
open way through Congressional legislation, that would be 
great.
    Mrs. Napolitano. What would be the right thing to do?
    Mr. Cason. Well, in terms of right, I think that is the 
right thing.
    Mrs. Napolitano. OK.
    Mr. Cason. We need to find a way to solve this problem.
    Mrs. Napolitano. Thank you. And there is no secret that the 
level of animosity between the plaintiffs and the defendants in 
this case is exceedingly high. Not blaming anybody, but 
accepting that all persons are acting in a professional manner, 
given the acrimony, how do you believe this case can be settled 
through mediation?
    Mr. Cason. We have engaged since last year when this 
committee and the Senate Indian Affairs Committee prompted both 
the Department and the plaintiffs to engage in mediation. We 
have had discussions during that past year.
    Mrs. Napolitano. How many?
    Mr. Cason. You know, I don't know--
    Mrs. Napolitano. One?
    Mr. Cason. If you counted up the times that we were 
together, plaintiffs and defendants, and the times that we met 
separately with the mediators, I would guess we probably had 
collectively dozens of times with the mediators, with the 
various parties.
    I think the issue, beyond the acrimony, and acrimony is 
kind of a reflection of accumulated frustration over nine 
years' worth of litigation, that if you get beyond the 
acrimony, part of the issue is, again, managing this issue of 
uncertainty and trying to find some solution that is fair. But 
the perceptions of what is fair are so far apart that we had to 
struggle to find common ground. So I think that is the real 
root of it, is how do we find some common ground that everyone 
can live with.
    In terms of personal relationships, I think Keith and I get 
along fine. We are able to have rational conversations between 
the two of us. But our positions are pretty far apart on how we 
think this ought to be treated.
    Mrs. Napolitano. Thank you, Mr. Chair.
    The Chairman. Mr. Hayworth?
    Mr. Hayworth. Mr. Chairman, I thank you.
    Secretary Cason, welcome. It should come as no surprise, 
with all the implications involved in this case, it ripples 
across the width and breadth of Indian country, right into the 
Fifth Congressional District of Arizona for some of my 
constituents. My concern deals with one aspect of the challenge 
everyone confronts.
    Jim, can you report of the progress on the Section 131 
Trust Demonstration Projects that allow ten tribes, including 
the Salt River Pima Maricopa Indian community in my district, 
to manage their own trust resources?
    Mr. Cason. Sure, Congressman. What used to be Section 139 
in the appropriations language, now Section 131 in the 2005 
appropriations language, is basically a demonstration project 
to facilitate additional self-governance and supportive self-
governance. Former Assistant Secretary Dave Anderson, myself, 
the Principal Deputy Assistant Secretary Ross Swimmer, we have 
met often, often in terms of probably a half-dozen times since 
Section 139 was passed, and we most recently met with the 
representative group of the 131 tribes probably not more than 
three or four weeks ago.
    So we have had a continuing dialogue with the group about 
what they would like to see happen. I think we have been 
reasonably accommodating with them, because all of us in the 
management chain are all very supportive of the concept of 
self-governance and self-determination and we are looking for 
ways to foster that. So I think it has been pretty successful 
so far.
    Mr. Hayworth. Jim, you spoke of the work arounds because of 
the court decisions.
    Mr. Cason. Yes.
    Mr. Hayworth. Given that fact, and now through this 
demonstration project, in light of some of the difficulties you 
are encountering at the Department, in your estimation, do 
these tribes do a more efficient job than the Department of 
Interior in dealing with this challenge?
    Mr. Cason. I think in some cases, there are things that we 
can learn from each other, or probably in all cases, we can 
learn from each other. Tribes who employ compacts or contracts 
to do things on their own, using their own systems, often can 
set up a way of doing business for their particular tribe that 
is very effective, and we have done an evaluation of the 131 
tribes through OST and take a look at how they are managing 
their trust responsibilities and found that, in large part, 
they were operating as effectively as any Bureau program, and 
so we found that this was a direction that we could support 
with them.
    Mr. Hayworth. Do the demonstration projects relieve the 
Department of the burden of some of the administrative costs?
    Mr. Cason. I am not sure it really removes a burden. It is 
a transfer, because ultimately, we end up in the position that 
when we are supporting self-governance, BIA and OST are still 
funding a lot of the activities, though I would say, in 
fairness to Indian tribes that engage in self-governance, that 
what I have been told by tribal leaders as we have met with 
them is that often, tribes will place some of their own money 
into the services that they are providing to supplement or 
augment the Federal appropriations they get. So they end up 
providing increased services.
    Mr. Hayworth. Are there any plans to expand the program?
    Mr. Cason. The 131 program?
    Mr. Hayworth. Yes.
    Mr. Cason. I am not knowledgeable that there is a plan to 
expand the 131 program because that has an appropriations 
route, but we are very supportive just as an internal policy of 
self-governance, self-determination, and are happy to work with 
any tribe that wants to take on more responsibility for their 
own actions.
    Mr. Hayworth. I thank you for your answers, and Mr. 
Chairman and my colleagues, at the very least, I would like to 
express a great interest in continuing this demonstration 
project. My experience has been the demonstration project 
allows the Salt River Pima Maricopa community greater self-
sufficiency. The tribe is more efficient. They are able to 
distribute checks in a more timely manner than the way we have 
seen through other vehicles. I just appreciate the time and the 
testimony, and now Madam Chairman, I--
    Mr. Cason. Just one comment. I will appreciate your 
comments on that. I am actually going out to see the Salt River 
Pima folks tomorrow.
    Mr. Hayworth. Well, you timed it pretty well. It is always 
beautiful in the Fifth Congressional District of Arizona. Next 
month with spring training might be optimal, but we are glad 
you are going.
    [Laughter.]
    Mr. Hayworth. We are glad you are going to make the 
sacrifice, Jim, and go out tomorrow.
    Mr. Cason. Thanks.
    Mrs. Cubin. [Presiding.] Thank you, Mr. Hayworth.
    Mrs. Christensen, you are the next one in line to speak.
    Mrs. Christensen. I am the next one--
    Mrs. Cubin. The Chair recognizes--
    Mrs. Christensen. Thank you, but I don't have any 
questions. I am here--this is an issue that has gone on for far 
too long. I think my Ranking Member has asked most of the 
pertinent questions and I am just going to listen this morning. 
Thanks.
    Mrs. Cubin. Mr. Faleomavaega, you are recognized for five 
minutes.
    Mr. Faleomavaega. Thank you, Madam Chairman. I do want to 
thank Mr. Cason for his testimony.
    Madam Chairman, this issue has been here as long as I have 
been a member of this committee. I know that Mr. Cason's heart 
is in the right place and we are all trying to make attempts to 
resolve this thorny issue. I don't want to risk being somewhat 
repetitive of all that has been said, but only in the sense of 
perspective for all the years that I have been listening and 
attending hearings and doing all of this, it is frustrating as 
heck.
    Mr. Cason. It is.
    Mr. Faleomavaega. Given the fact that these funds are not 
the American taxpayers' money, these funds belong to the 
American Indians and the tribes--it is their money, not ours, 
and now we are about to expend about a quarter-of-a-billion 
dollars here for the simple administration of the funds that 
belong to them in the very first place.
    I think that as a matter of historical perspective, there 
have been attempts through proposed legislation to resolve the 
matter. There was one bill that seems to have had a lot of 
support from Indian tribes. Certainly now having our 
arbitrators, hopefully, this may be another possible option. I 
remember the time in the Clinton administration, all their 
stories aside, we had a new organization as an excuse for not 
really addressing the issue. I remember that we appropriated 
initially $20 million for an attempt to conduct an audit, a 
total waste of money because when the audit was conducted, they 
said we can't even start in base one even to begin auditing. It 
was a total impossibility. But we have spent $20 million, and 
then we spent probably even more monies now than ever.
    But I want to ask Mr. Cason, I have been simplistic in my 
simple resolution, or solution. Why don't we just give them $4 
billion for starters and negotiate the rest that is where we 
have had the problems? I know there have been estimates, the 
trust fund is probably up to $8 to $10 billion. Probably when 
figures come back, they said, no, no more than $2 billion. Why 
don't we find a happy medium that says, well, let us start with 
$4 or $5 billion. My gosh, if we can afford giving $182 billion 
to fight the war in Iraq, I simply cannot understand why we 
can't give $4 billion of their money.
    This money does not belong to the American taxpayer. It 
belongs to the Indians. Why can't we just fund it from the 
Treasury. Give them $4 billion to start. Let them start 
benefiting from the money that belongs to them and negotiate 
the remaining that is in question, which seems to be the 
problem that we are having.
    I know I am being simplistic, throwing the figures around 
like that, Mr. Cason, but when you say we have to start from 
square one, my gosh, it is going to take another 100 years 
before we can find a plausible audit. It is totally impossible 
even to conduct an audit.
    So I am somewhat very puzzled on how this is going to 
continue, but we are spending $230 million-plus on a yearly 
basis to set up this whole new organization within the 
administration to operate or to do a better job and see that 
the monies are properly accounted for. So I am a little puzzled 
by all this, Mr. Cason, and maybe you could help me out. What 
exactly is the status of our 2M accounts? Where are we with 
that?
    Mr. Cason. Congressman, you offer a perfect illustration of 
the problem. Part of trying to get to a resolution of this 
issue is trying to figure out where there is a real error. The 
Department's policy, the administration's policy, I think 
everybody in government, is if we know there is a real problem 
with an individual's account or even a tribal trust account, we 
ought to be willing to step up to the plate to address that 
specific problem. But the issue goes back to what I talked 
about before, which is expectations and uncertainty. What 
exactly is it we are trying to do?
    And to illustrate on the numbers, if we took the results of 
the accounting that we have done so far, and we have four of 
the five largest accounting firms in the country hired to work 
on this using accounting standards that they have all adopted 
commonly, and they have been looking at the account, so it is 
not Interior employees looking at it, it is accounting firms 
looking at the accounts, if you take the results of that, the 
errors that we have found are few and infrequent, tend to be 
small, and tend to balance out close to zero. We have made 
overpayments to Indians. We have made underpayments to Indians. 
And there are a few errors, there is no question about that. 
But if we were projecting based on what we know so far how much 
we would be on the hook for, it would be in the relatively low 
millions.
    The plaintiffs, on the other hand, have made a bunch of 
public statements that says there is $176 billion that is owed, 
and you used the figure of $4 billion. We have heard $40 
billion, $60 billion, $2 billion, $500 million. We have used 
from time to time, well the cost of our accounting is $335 
million. Why don't we just give it to the Indians instead of 
paying lawyers and accountants to do this.
    So part of our problem is what is the magnitude of the 
error, because there is no evidence on the table that I know of 
that actually quantifies the error that is owed to the Indians, 
their money.
    Mr. Faleomavaega. Mr. Cason, if my memory serves me right, 
in briefly discussing the matter of Ms. Cobell and those who 
brought the litigation before the courts, they were not talking 
about $160 billion owed to the tribes. I think the range, as I 
recall, was somewhere between $6, $7, $8, $10 billion at the 
most. But $160 billion, now, I may be wrong, but I am saying to 
you, my recollection was that they wanted to negotiate in that 
range at least for starters. So give them at least a base to 
start benefiting from their own money.
    But now that I hear that the range has gone up to $160 
billion, this is the first time that I have ever heard that 
statement.
    Mr. Cason. These are numbers that we have seen in the 
press. Whether that is a clear reflection of actual intent or 
not, I don't know. Keith is here. You can ask him. We have just 
seen these figures--
    The Chairman. [Presiding.] If the gentleman would yield for 
just a minute, I know that--
    Mr. Faleomavaega. I apologize for the added time.
    The Chairman. I really don't want to negotiate this in the 
middle of this hearing.
    Mr. Cason. That is great.
    The Chairman. I understand Mr. Faleomavaega's frustration. 
I think we all share it. I have had the same conversations. But 
if at all possible, I really don't want to negotiate this in 
the middle of this hearing.
    Mr. Faleomavaega. Mr. Chairman, if you would yield, I was 
not trying to conduct a negotiation, but I do want to say, Mr. 
Chairman, that I really want to thank you for calling this 
hearing. It is not only appropriate, but I sincerely hope that 
in this Congress, that we will make every sense of commitment 
on our part to finally find some sense of resolution to this 
problem and I thank the Chairman for giving me more than the 
time that I requested. Thank you, Mr. Cason.
    Mr. Cason. Thank you.
    The Chairman. Mrs. Cubin, did you have questions?
    Mrs. Cubin. Mr. Chairman, I don't really have a question. I 
just want to express my frustration along with the rest of the 
Committee. This is just preposterous that this issue has gone 
on for so long and we are no closer to a solution than we are. 
I urge you to work--and Mr. Chairman, anything that could be 
done from this end, I urge us to move in that direction. Thank 
you.
    The Chairman. Ms. Herseth, questions?
    Ms. Herseth. Thank you, Mr. Chairman. I apologize for 
missing the first part of your testimony, but a couple of 
questions as it relates to the need for historical accounting. 
But let me go first to elements of the Court of Appeals 
decision.
    Although the D.C. Circuit Court of Appeals found problems 
with some of the remedies that Judge Lamberth imposed on the 
Interior Department, many of his findings still stand. In one 
of the decisions, it stated that, quote, ``It would be 
difficult to find a more historically mismanaged Federal 
program than the individual Indian money trust. It is fiscal 
and governmental irresponsibility in its truest form.''
    Was creating the Office of Special Trustee a failed 
approach, in your opinion?
    Mr. Cason. No.
    Ms. Herseth. What do you need from Congress in order to 
finally implement a real solution to the problem?
    Mr. Cason. To the historical accounting problem?
    Ms. Herseth. To be able to, as everyone that I have heard 
from thus far has indicated, the frustration that we have had 
over the number of years on a number of different elements of 
the accounting. Do you agree that an historical accounting has 
to take place and that it is critical to determining what is 
owed?
    Mr. Cason. I think it is very beneficial to gain 
information from which we can all become informed, and then 
with the information, we have a better understanding about what 
the real problems are. I think that is helpful.
    But as I mentioned earlier, I am concerned that even if we 
do a lot of accounting work and spend hundreds of millions of 
dollars on accounting work, that in the end, whatever the 
results are, they won't satisfy the expectations or concerns of 
all the parties that are involved.
    So I think it would be preferential if we can find a way to 
solve the problem in some sort of Congressional settlement to 
lay out, here is how we are going to deal with the issue. This 
will be the end of the issue. Congress is the set lord of the 
trust and Congress can lay out, here are the terms that we are 
going to manage the trust under, and I think in the end, that 
will be a preferential solution.
    If not, we can continue down the historical accounting path 
and gain more information over time that all of us will be 
better informed with.
    Ms. Herseth. Do you feel it is critical in the process?
    Mr. Cason. I think a certain amount of accounting was 
critical of the process, but I don't think it is ultimately 
going to be a solution.
    Ms. Herseth. But how do we go forward without some sort of 
accounting?
    Mr. Cason. We are actively engaged in the accounting now. 
Congress has been funding historical accounting activities for 
the last several years. We made great progress on doing 
historical accounting. We have basically gone through tens of 
thousands of accounts in the judgment per capita area. We are 
working on land-based accounts now.
    So the issue is, how exactly do you define an accounting? 
If we are doing process, how do you define exactly what an 
accounting is, because we and the plaintiffs have very 
different views, or we and the District Court have very 
different views about the level of work and effort and 
financial commitment it takes to do an accounting. So that 
needs to be resolved if we pursue a historical accounting 
process approach.
    So it is a matter for this Congress to help us decide how 
we do that, and either we are going to get that instruction in 
the form of authorizing language or we are getting the 
instruction now and through appropriations as to the level of 
effort that we can put into historical accounting.
    Ms. Herseth. In my remaining time, I would just like to 
commend, as others have done, Chairman Pombo for calling this 
hearing, but just for the benefit of everyone here, a last 
comment I would like to make. It is important to remember that 
the Cobell litigation deals only with the individual Indian 
account holders. It doesn't address the billions that the 
sovereign tribes are owed for the management of their assets 
and I think it is important going forward, as you have 
mentioned, with the authorizing language of the appropriations 
that we keep this in mind and recognize the billions of dollars 
that are owed to tribes for mismanagement and abrogation of 
responsibilities by the Federal Government under the various 
treaties with treaty tribes in South Dakota and other tribes 
throughout the country.
    Thank you, Mr. Chairman.
    The Chairman. Mr. Gibbons?
    Mr. Gibbons. Thank you very much, Mr. Chairman. I apologize 
myself for being late due to other commitments.
    I wanted to ask just one--start off with one question and 
see where it leads. I would like, Mr. Cason, for you to tell me 
why it is going to cost so much to audit all of these accounts.
    Mr. Cason. In large part, Congressman, it is due to the 
level of work that it takes to audit the accounts. If I can use 
it as an illustration of the level of work, in just the 
electronic era, 1985 to now, and that is electronic era for the 
Department of Interior, where we have managed the accounts with 
computers, that we have somewhere on the order of 55 million 
transactions that have occurred during that period of time. 
Depending on how much work you do to reconcile the accounts, if 
you go on a transaction-by-transaction basis, you have 55 
million transactions for which you have to go to the underlying 
documentation, pull all that documentation up, and ensure that 
it is all consistent with what was entered on the ledger. That 
is a very, very expensive process to do.
    If you go even further back in time, as was directed by the 
District Court decision in the structural injunction, the 
District Court basically said, reconstruct all the transactions 
back to 1887, and the further back in time you go, the more 
progressively expensive it gets and more difficult it is to 
pull records for that period of time.
    We have a substantial records data base. It is on the order 
of 600 million pages. We have over a terrabyte of electronic 
information that we can bring to bear on the problem. We have 
found that as we have done the accounting, in large part, we 
have a substantial records data base to do the accounting, but 
it is not perfect. To organize the materials and to actually do 
the accounting is a very expensive process just because of age 
and volume of the work that needs to be done.
    Mr. Gibbons. How long do you expect this process to take?
    Mr. Cason. It depends, Congressman, on the definition of 
what we have to do. If we followed the plan proffered by the 
Department of Interior, it is about $335 million and about five 
years. If we followed the District Court's structural 
injunction approach, it could well take a long time, maybe even 
decades because it is a huge volume of work to do, the way it 
was structured by the District Court.
    Mr. Gibbons. If you followed the court's direction and go 
back to 1887 or whatever timeframe they dictated to you, what 
changes in the cost or what changes in the outcome would you 
expect?
    Mr. Cason. I think the fair answer is until we actually do 
the work, we don't know, and I think that would be fair. What 
we have so far is we have spent about $100 million on 
individual accounting, and in large part, we are starting with 
current and working our way backwards. So there is the 
possibility that we find some errors that are older than where 
we have been so far. So it may end up resulting in significant 
findings of errors, but we haven't found that so far.
    The accumulation of the accounting that we have done so far 
would suggest that the systems are reasonably accurate, but it 
hasn't tested the whole range of possible options. So at this 
point, in fairness, we don't know until we do it.
    Mr. Gibbons. The answer you have given suggests that there 
has been a very poor process of accounting for all the funds, 
the trust funds, et cetera, in the timeframe going all the way 
back to what the court dictated was the time you should be 
starting your accounting from. Is that your initial 
determination so far, that there has been serious flawed 
accounting in handling of these trust funds?
    Mr. Cason. No. Actually, I think what we have found is 
that, over time, these accounts were, in large part, kept by 
fellow Indians as members of the Bureau of Indian Affairs. As 
close as I can tell so far, they were diligent in doing their 
work to try to accurately record the transactions involving 
their brothers and sisters and fathers and mothers, et cetera.
    Does it mean that there are not any errors? No. We have 
already found some errors in the process that we are doing, but 
they tend to be small and they tend to be infrequent. Is it 
possible that we will find at some point in the future some 
issue of systemic fraud in the accounting system? It is 
possible. We haven't found that yet. But we haven't arrived at 
a conclusion that despite all the public rhetoric about how bad 
the Department was or how bad Indian Affairs were, we haven't 
found that it has had a major impact to result in major issues 
of lost or stolen revenues. So we are still looking at the 
issue, but we haven't found that sort of thing.
    Mr. Gibbons. Thank you, Mr. Chairman.
    The Chairman. Mr. Udall?
    Mr. Tom Udall of New Mexico. Thank you, Chairman Pombo. I 
first just want to compliment the Chairman on holding this 
hearing because I think it is very important that we are 
dealing with this issue at the level of the Resources Committee 
rather than having the Appropriations Committee through its 
process try to legislate. I know that the Chairman has worked 
very diligently to see that the legislation on this issue is 
done in this committee rather than Appropriations, and I very 
much appreciate that.
    Mr. Cason, thank you for being here. Let me first ask you, 
is there a solution that you can give this committee? I 
apologize for not being here earlier, but it seems to me that 
the administration, when they are in a lawsuit like this, 
should be in the position to be able to come forward and tell 
us if they think we should be doing anything legislatively in 
this committee rather than going around this committee and 
going over to the Appropriations Committee and asking for 
riders in the Appropriations Committee to do things that you 
want to do. If you have a legitimate solution, you ought to be 
willing to lay it out on the table for us, and it seems to me 
in the course of mediation, or negotiation or all the process 
that you have gone through, you have to be willing to lay it on 
the table with the plaintiffs and try to come up with a 
solution. Do you have a solution you can recommend to us?
    Mr. Cason. At this point, Congressman, we haven't 
determined a specific solution to this. We have evaluated a 
number of possible options to address this. Some of them are 
process options. Some of them are settlement options. Some of 
them are partial options and some of them are ones we call 
total peace, where we try to deal with not only this particular 
issue, but the underlying causes of the issue.
    So we have looked at a number of different ways of 
approaching this problem, but at this point, and we view this 
as a constructive dialogue opportunity with the committees of 
Congress to evaluate what the possibilities are and evaluate an 
acceptable course of action, which can either be a process 
solution or can be a settlement-type solution.
    So we stand ready, the Department of Interior, to work with 
this committee and the committee in the Senate, Indian Affairs, 
to try and discuss those possible options and see if there is 
any course of action that appears to be appropriate and 
mutually acceptable.
    There are ways to solve this problem, but it is going to 
take some decisionmaking, and what we have found so far, 
Congressman, is we in the Department of Interior, we are not in 
the decision role. It is ultimately going to be here in 
Congress, both in the form of authorizing language and in the 
form of appropriations language, that ultimately will be called 
for to solve this problem, in my view.
    Mr. Tom Udall of New Mexico. I beg to disagree with you. 
You all are litigating this case. You have the expertise. The 
Department knows where this should be headed and you should be 
up here asking us specifically, this committee, not the 
Appropriations Committee, this committee what it is you want to 
do and how you are going to work toward a solution.
    I think it is unacceptable at this point to come in and be 
saying, ``Oh, well, we are considering all of these things.'' 
This is a piece of litigation that has gone on for years and 
years and years, and as my good friend here to my right from 
American Samoa has said, the Native Americans are the ones that 
are suffering as a result of us not coming to grips with this.
    So will you promise me, rather than these patchwork, band-
aid solutions where you go to the Appropriations Committee 
rather than coming to us, will you promise me you will come to 
us, this committee, rather than doing that kind of process?
    Mr. Cason. Well, Congressman, I am here right now.
    Mr. Tom Udall of New Mexico. You are here, but I asked for 
a solution and you don't have one.
    Let me ask you about this whole issue. I know there are 
lost records, completely lost records. What is the approach of 
the administration on the lost records? If an individual comes 
forward and says, I have an account. I understand that I am 
entitled to this much money. Are you taking the approach where 
there is a lost record that the burden of proof is then on the 
government to refute; or are you actually disputing and just 
saying, ``Oh, we lost the record so we don't know anything 
about your account?'' What is your approach on that?
    Mr. Cason. I am not aware of a specific circumstance where 
an individual has come in and made a specific allegation of 
what they are owed with no records and then we have had to deal 
with it. We do have instances in which, during the normal 
accounting process that we are going through in response to the 
Cobell litigation that we do not find records, and we go 
through a process of attempting to find the records, and if 
they are not found, we simply record that as we haven't found 
the records and we don't give an implication to it one way or 
the other. We just say, the supporting documentation for this 
particular transaction, we haven't found. And so we make a 
notation of what we do find and what we don't find and we don't 
give any implication to it on one side or the other, that it is 
right or it is wrong.
    Mr. Tom Udall of New Mexico. I know my time is out, Mr. 
Chairman. Most of the time when the government loses the 
records, I think the burden should be on the government rather 
than the individual that comes forward, especially when you are 
dealing with fiduciary and trust responsibilities to Native 
Americans.
    Thank you for your courtesies, Mr. Chairman. My time is up.
    The Chairman. Before I recognize Mr. Walden, I would like 
to remind the Committee again that the purpose of this hearing 
is informational. I do not expect, and I promised the witnesses 
that we would not try and negotiate this settlement during this 
hearing. I know there is a great deal of frustration on the 
Committee, but it is unfair to the witnesses to expect them to 
negotiate a settlement in an open hearing at this time.
    Mr. Walden?
    Mr. Walden. Thank you very much, Mr. Chairman, and again, 
thank you for holding this oversight hearing on this very 
difficult and costly issue.
    Mr. Cason, thank you for your testimony and for your work 
on this, along with those inside the agency and out who 
collectively are trying to come to a fair and equitable 
solution to this problem.
    It seems to me, and I am no accounting major, but this kind 
of the equivalent of the Boston Big Dig. It just goes on 
forever, costs a fortune, and it seems like you never get to 
the bottom of the accounting problem. This accounting problem 
goes back more than 100 years, right?
    Mr. Cason. Yes.
    Mr. Walden. It just seems to me at some point, we are going 
to spend more trying to dig up all these records or recreate 
them than perhaps the settlement cost would be. Is that 
reasonable, or--
    Mr. Cason. Congressman, that will depend on what level of 
effort Congress ultimately authorizes through appropriations. 
So far on doing the accounting for tribes, we have spent about 
$20 to $30 million. So far on accounting for individuals, it is 
around $100 million. So we have had that level of effort so 
far.
    Our request in 2006 appropriations is for $135 million to 
continue our work in historical accounting. If we embraced what 
the District Court told us to do, the price tag is somewhere, 
our estimate, $6 to $12 billion to do that.
    Mr. Walden. Just to do the accounting?
    Mr. Cason. Just to do the accounting. And the estimate of 
throughput, and throughput is a concept of if you have your 
checking account for ten years, all the credits and debits you 
have had in your account, that is throughput, the estimate of 
throughput is about $13 billion in the last 100 years. The 
current balance of the account is just over $400 million. So it 
won't be very long following the current course that we have 
now that the accounting cost will exceed the balance of the 
fund, and then it will be a matter of just how much level of 
effort we put into it before it is termed to be adequate.
    Mr. Walden. Have you run a number, and maybe you said this 
earlier and I missed it, but the cost of the average claim, 
what they are owed, perhaps, versus what it costs you to get 
there? If you are an individual tribal member with a claim, 
what is that claim valued at, on average?
    Mr. Cason. Congressman, we don't have an assessment of 
value of claims because what we are going through right now is 
the administrative process of conducting an historical 
accounting, and that is a process in which we assess the 
account, the activities in the account, and draw a conclusion 
about whether the account is accurately stated. And then after 
that, if there are errors in the account, at that point, you 
could make a determination of whether a claim was appropriate 
or not.
    So the litigation principally is focused on the 
administrative process, the arriving at an accounting of our 
stewardship of Indian assets, and then after that is done, we 
can determine whether a claim is appropriate and how to address 
it.
    Mr. Walden. Maybe you can't answer this question, but I 
have tracked this e-mail issue and the judge's decision clear 
into little old Lake View, Oregon, among other places, where 
BLM and the Forest Service cohabitate in the same building and 
yet they can't communicate, or couldn't for a while. Even 
though they were next door to each other, they had to get up 
and walk around and talk instead of e-mail.
    Can you tell me what the logic of that was from the judge?
    Mr. Cason. I can tell you what the court has suggested. 
Basically, what is at issue is a concern voiced by the 
plaintiffs to the court that our IT systems that contain 
individual Indian trust data are not secure. That is the issue. 
And the judge has agreed, and the remedy the judge imposed was 
to order the Department to disconnect any system in the 
Department of Interior that contained IITD, or Individual 
Indian Trust Data, from the Internet as the means of reducing 
the risk to that data that might be used for historical 
calculations.
    Mr. Walden. How did that lead, then, to a complete shutdown 
of e-mail? Couldn't that be walled off pretty easily?
    Mr. Cason. The problem that we had is imperfect information 
at the beginning, that when we initially got the order on 
December 5 of 2001, we didn't know exactly where all Indian 
data was in the Department.
    Mr. Walden. I see.
    Mr. Cason. And so we had to go through a process--we had to 
shut everything down to comply with the order, go figure out 
where all the information was, and then progressively petition 
the court to let certain systems up that didn't represent a 
risk.
    Mr. Walden. Thank you. Thank you, Mr. Chairman.
    The Chairman. Mr. Pallone?
    Mr. Pallone. Thank you, Mr. Chairman.
    I just wanted to ask Mr. Cason--well, first, let me say 
that it continues to bother me, and I have to, before I ask my 
question, say that the idea that the Department continues to 
move forward with this BIA trust reform without really having 
any consent or consultation with Indian country, in my opinion, 
or any real input, in my opinion, from this committee is not--I 
don't appreciate that and I think it is an ongoing problem.
    But more important is the fact that it just seems to me, 
when we look at the Federal budget, that in order to fund the 
Office of the Special Trustee, we are constantly offsetting 
that funding with cuts in other Indian accounts. I am not even 
going to ask you, because you will tell me that that is not the 
case, but it is clear to me from last year's budget as well as 
this year's budget that, for example, the BIA School 
Construction Fund is being cut in order to offset, in my 
opinion, the OST funding.
    But what I wanted to ask, is the administration doing this, 
and are they increasing taking money away from these other 
existing Indian programs in order to force our hand or impose 
some kind of a settlement? I think that what is happening now 
is that the tribes are feeling very strongly that as long as 
you continue with your efforts in this reorganization, that 
less and less money is going to be available for other Indian 
accounts. I mean, is that some sort of concerted effort to tell 
us, impose a settlement, otherwise these funds are going to 
continue to be diverted? Just answer that, if you would.
    Mr. Cason. Not at all.
    Mr. Pallone. If that is not the case, I know you have given 
us some figures here, and I wasn't here before when you spoke, 
but have you indicated when this reorganization is likely to be 
completed or what the overall cost is going to be in the long 
run?
    Mr. Cason. Congressman, it is substantially complete now. 
We are still in the process of hiring a few people to fully 
staff it. This is an issue where we actually agree with the 
plaintiffs in the Cobell lawsuit that the Department had not 
done a good enough job in managing the trust with people who 
were qualified to be trustees.
    Mr. Pallone. About how much more do you think it is going 
to cost us, and when do you expect it to be done? Can you give 
us a date?
    Mr. Cason. The reorganization stuff, as I said, is 
substantially done. To the extent of my knowledge, if anything, 
there are just small items that have to be done. We are hiring, 
in some cases, deputy agency superintendents for trust, in some 
cases--
    Mr. Pallone. Another six months?
    Mr. Cason. I don't know. The personnel process is one that 
it is hard to gauge when everything will be done because you 
gain people, you lose people through normal attrition--
    Mr. Pallone. Well, give us a date. A year?
    Mr. Cason. I don't know, Congressman.
    Mr. Pallone. All right. What about--
    Mr. Cason. It is an ongoing process.
    Mr. Pallone. How much more is it going to cost us?
    Mr. Cason. I think it is built into the Congressional 
budget, the 2006 budget right now. The staffing that is 
associated with it is relatively nominal. Out of an 
organization of 10,000 people, we are talking about a relative 
handful of people that would be placed in these new positions 
that haven't been there before. And all of it, the intent is 
for us to have people who are directly focused on how we manage 
the trust, to act as a trustee.
    Mr. Pallone. I don't doubt that your intentions are proper, 
but my fear is that you run the risk of implementing this plan 
that could ultimately be rejected by the court and then you 
have wasted millions of taxpayer dollars. What is the answer to 
that? What happens?
    Mr. Cason. Well, at this point, we have an ongoing dialogue 
with the court about how we resolve this issue, and we have 
been there in that dialogue for nine years. In the course of 
this, it has been in the District Court and the Court of 
Appeals several times--
    Mr. Pallone. So you don't think there is a risk that 
ultimately you do all this and they just say, well, that is not 
acceptable, and then you wasted all this money?
    Mr. Cason. I suppose that is possible, but I guess I don't 
envision the court really stepping in to say, you know, you 
shouldn't have any trust officers involved in this business. 
Having people who actually focus on managing this like a trust 
is important. So I guess I don't really envision that being an 
issue.
    Mr. Pallone. Let me just ask one more question. I know cost 
is the fact you keep raising with this historical accounting, 
but if it wasn't for the cost, and I guess you can't really 
rule that out, but if it wasn't for the cost factor, would the 
Department be able to do an accurate historical accounting? I 
mean, are the documents destroyed? Are they there? If we just 
left out the cost for the time being, would you actually be 
able to do it, or the documents aren't there and are destroyed 
and you just couldn't do it?
    Mr. Cason. Congressman, I think that depends on your 
expectations to answer, and what I mean by that is if your 
expectation is that we have every single document ever created 
to describe what we did in the trust since 1887, no, you 
couldn't. But if your purpose is to become much more informed 
about what the Department did as a trustee over this last 100 
years, yes, we can.
    What we have found so far in the accounting, and we have 
done accounts from 1914 forward, not a lot in the older ones, a 
lot of accounts in newer accounts, we found that generally we 
have somewhere between 85 and 95 percent of the documents for 
credits and debits. There are missing documents, there is no 
question about that. There is missing information. We wish we 
had everything. We don't. But we think that we can become 
substantially informed about the activities in these accounts 
and the status of the balances in these accounts with the 
records we do have. But it is very expensive and it is very 
time consuming to do.
    We have been at this for nine years, and at the end of nine 
years, Indian beneficiaries don't have anything different than 
they had nine years ago other than we are producing pieces of 
paper that says, here is what happened in your account. And 
what we would like to see if we could do with the help of this 
committee and Senate Indian Affairs is see if there is another 
pathway we can pursue to find a settlement to this that is fair 
and equitable to everyone where Indian beneficiaries actually 
end up benefiting from the process instead of lawyers and 
accountants.
    Mr. Pallone. Thank you. Thank you, Mr. Chairman.
    The Chairman. Mr. Pearce?
    Mr. Pearce. Thank you, Mr. Chairman.
    I think the testimony of the gentleman, Mr. Harper, to 
follow declares that there are ongoing and profound 
mismanagement of the trust assets. I think your words were that 
your errors were small, infrequent, and have no systematic 
faults in them. Have you been given information that would lead 
you to believe that the attorneys on the other side have found 
this ongoing, profound mismanagement?
    Mr. Cason. Well, clearly, Congressman, as has been asserted 
often, we are in the process that, at this point, we don't know 
that it has ever been a huge mismanagement issue. It has 
clearly been asserted. It is a popular lore. But we are going 
through the accounting process and what we have discovered so 
far in accounting, we haven't found that. But the accounting 
has a long ways to go if we keep going down that path.
    Mr. Pearce. Also on that same page of the other testimony, 
it says that it is often a matter of life and death. I mean, 
this is a pretty serious allegation. Have you been given the 
information that showed you it is a matter of life and death? 
This is a very, very serious allegation.
    Mr. Cason. It is a serious allegation, Congressman, and 
what we have right now, today, is an accounting system that we 
balance to the penny. We know every day how much money is in 
each individual account. We have processes for paying out the 
money that is in the account if it is an appropriate thing to 
do. We have some restricted accounts where it is not 
appropriate to pay it out. But we get the money in and out the 
door and we send it out to beneficiaries. So to the extent that 
people are depending on the money today, we do that.
    The issue here on historical accounting is did the 
Department of Interior mismanage funds in the past sometime 
that could have potential implications to somebody today, and 
that is the issue we are exploring under that historical 
accounting program to see if we can actually find that.
    Mr. Pearce. Is there anything in your findings so far--to 
try to relate this to me personally, I don't work so well with 
numbers, but let us say that I had a $50,000 house, and if I 
wanted to equate the value of that house--I understand the 
level of trust, the IIMs that you are managing is $400 million.
    Mr. Cason. That is the relative balance, yes.
    Mr. Pearce. And the low level, the low threshold of 
solution is $13 billion to get me from $400 million, if we 
assume that 100 percent damage has been done on $400 million, 
to go from $400 million to the low level, $12 billion, requires 
a multiple of 30.
    So relating that back to my deal, if I have a house worth 
$50,000, the low-level claim is that I am going to be 
recompensed, I will be given value of $1.5 million for my 
$50,000 house. And if we move to the upper end of the 
settlement, then you would have to add a couple more zeros to 
where my $50,000 house is now worth $15 million. That tells me 
that they are accusing you of pretty dastardly things and life 
and death issues. But you say they haven't produced those for 
you.
    Mr. Cason. Well, I think the allegations are clear and they 
are pervasive. What we are attempting to do is gather the 
information, allows us to determine whether the allegations are 
substantive.
    Certainly, the thought process that BIA has mismanaged 
accounts in the past, there are allegations against Indian 
superintendents from way back when that they committed fraud. 
There is lots of stuff that you can go take a look at that 
would lead to a perception like this. And all we can do right 
now is try to get the facts and then talk about how we can 
resolve the issue in a different way.
    Mr. Pearce. Thank you, Mr. Chairman.
    The Chairman. Mr. Inslee?
    Mr. Inslee. I thank you. First, I want to thank the Chair 
for holding this hearing.
    I have two kinds of areas of inquiry. First, this issue of 
how the Department intends to pursue working with Congress on 
this issue. Last year, my perception was there was just an end 
run around the committee of jurisdiction and a last-second 
attempt to stick something in the appropriations bill as a 
rider, which I didn't think ultimately was going to be a 
successful way of doing it even if it was perfect, given the 
nature of the effort. Was the Department involved in that? What 
is your intention in the future in terms of this?
    Mr. Cason. Well, on the issue of the appropriations rider, 
I do not know--well, let me start with me. I was not involved 
in writing the rider. I do not know the Departmental employee 
that was involved in writing the rider. It is my understanding 
that was an initiative on the part of the Appropriations staff 
because we had a District Court decision that suggested that we 
needed to get a historical accounting done in three years. Our 
budget estimate is we were going to need $2 to $3 billion in 
year one in order to try to meet the court's decision and that 
the Appropriations Committee wasn't entirely convinced they had 
that amount of money laying around. So they tried to put a 
hiatus on it to see how things could work out. That is my 
understanding.
    In terms of trying to resolve the issue, it does need to be 
resolved. We have been at this for nine years and we are not 
really making real material progress. We are doing lots of to-
ing and fro-ing, but we are not making real material progress, 
and there are damages associated with taking so long to do 
this.
    So we would very much like to get it done and the real 
issue again is the level of uncertainty that is associated with 
this and the lack of information and managing expectations. So 
when the expectations are this wide, and for the record, my 
hands are way far apart, when the expectations are wide and you 
don't have what appears to be common ground, that is where we 
really need some help from Congress to lay out what would be 
fair under the circumstances, because certainly the allegations 
are there. The expectations are there. The uncertainty is 
there. And the only way we really resolve materially the 
uncertainty is plow a bunch of money into historical accounting 
and it will take a long time, which may in the end yield no 
material results.
    On the other hand, we can speed the process up with some 
kind of a settlement if we can figure out what is fair to deal 
with this issue and then try to resolve it so Indian 
beneficiaries actually benefit from the process rather than 
lawyers and accountants. That is where we are.
    Mr. Inslee. Not without this committee, you can't do it. At 
least, that is our view from this side of the table.
    Mr. Cason. That is exactly right. That is why we are here.
    Mr. Inslee. Second question, it was pointed out in 
something I was reading about the difficulty of settlement in 
taking into consideration the non-individual claims, the tribal 
claims themselves. It was pointed out that the plaintiffs in 
the lawsuit don't have authority to dismiss or release any 
claims by tribal entities themselves.
    Mr. Cason. They don't.
    Mr. Inslee. Have the tribes been involved in those 
discussions? Is there a role to bring them into the 
discussions? What is the status of that?
    Mr. Cason. If I recall correctly, Congressman, we have on 
the order of 22 or 23 lawsuits from tribes that have similar 
characteristics to the Cobell lawsuit. They are seeking a 
historical accounting or alleging historical mismanagement. 
There is a separate division of the Department of Justice that 
works on those. It is the Energy and Natural Resources 
Division. They are actively engaged in conversations with the 
tribes on their individual lawsuits. I know that the historical 
accounting budget, some of the money is designed to do 
additional accounting work for tribal accounts, just as we have 
money for the individual accounts.
    Mr. Inslee. Thank you, Mr. Chairman.
    The Chairman. Mr. Gohmert?
    Mr. Gohmert. Thank you, Mr. Chairman. I appreciate your 
giving us the opportunity to question you and be educated by 
asking questions. But I do want to echo the sentiments of Mr. 
Hayworth. To allow and encourage self-governance of the money 
by the Native American tribes themselves is a desirable 
outcome.
    But I have a number of questions, and part of it comes from 
my judicial background, as a former trial judge. First of all, 
have the claimants been allowed to do discovery of the accounts 
so they could do their own account?
    Mr. Cason. I don't know that that is the case. The 
plaintiffs have filed a class action lawsuit and there were 
five members of the representative class. As I understand it, 
one dropped out. We have four of the original members left, and 
the plaintiffs are representing the class of current and former 
account holders. So I don't know that they have tried to do any 
individual accounting on their own. I know they have done some 
modeling, and I am sure Keith, the next witness, can tell you 
about that.
    Mr. Gohmert. With regard to the funds themselves, did I 
understand you to say there are $400 million in current funds?
    Mr. Cason. The balance varies from day to day, but 
approximately, there is a balance of $400 million in the 
individual accounts.
    Mr. Gohmert. And as far as in the discussion about numbers, 
as I understood, we were talking in terms of $2 billion, $4 
billion with a ``B'', $10 billion, and possibly even up to $160 
billion, and yet you say you found nothing but small errors.
    Mr. Cason. That is what we--
    Mr. Gohmert. Where is the difference in the $400 million 
and getting up to the billions?
    Mr. Cason. Congressman, that is in the area of the 
uncertainty that we have. If you take a look at the job overall 
for historical accounting, we have an issue where the 
Department did not provide, periodically or systematically, 
accounting statements over the last 100 years. So over that 
last 100 years, you have an area of uncertainty because the 
statements weren't provided or developed, and what we are being 
tasked with now as a result of the lawsuit is to basically go 
back and recreate 100 years' worth of history, and that is very 
expensive to do. There are millions and millions of 
transactions that have occurred over that time--
    Mr. Gohmert. No, I understand all that. You covered that 
very well and I am clear with that. But as far as the 
difference between $400 million and even talking in terms of 
billion with a ``B''--
    Mr. Cason. I think that is all a reflection of uncertainty.
    Mr. Gohmert. OK. You talked in terms of litigation having 
gone on for nine years. When is trial set?
    Mr. Cason. We have been through several trials so far in 
the course of this. There has been an initial trial on 
historical accounting. We have had trials on contempt of the 
Secretary. That has gone to the Court of Appeals. We have what 
is called a 1.5 trial on how historical accounting ought to 
proceed. That went to the Court of Appeals. We had a trial on 
IT security. That went to the Court of Appeals. So we have been 
through a lot so far.
    Mr. Gohmert. But as far as a trial that will ultimately 
resolve the whole question of if there is liability and how 
much--as I understand it, that is what this is all about, 
right?
    Mr. Cason. Well, I think that is a question that Keith 
would be able to answer better as an attorney. It is my 
understanding that the issue in the District Court is basically 
an APA proceeding or a proceeding designed to get an 
accounting. The District Court is not in a position to actually 
assign damages, that that would have to go to the Court of 
Federal Claims, but Keith would be able to say that.
    And let me just correct one thing. When I say there was a 
trial on IT security, that is not accurate. We have had lots of 
to-ing and fro-ing in the court about IT security, but there 
has not been a specific trial on that, though the issue did go 
up to the Court of Appeals.
    Mr. Gohmert. Just in closing, let me just commend to you 
when government doesn't understand what fiduciary means, and I 
hope that people are being adequately educated, when it is a 
fiduciary, there is a higher duty than just the normal 
government, let us manage and get by. It is a very high duty 
that is required of them.
    You had said earlier that also there is hesitance or 
disincentive for employees to become involved with anything to 
do with this lawsuit, and I would encourage you to create an 
atmosphere and educate to the point that where there is great 
risk, there is great opportunity, and anybody who wants to move 
up in their respective positions, this is a great opportunity, 
and I hope that would be the tenor of things so that we can 
move toward a resolution and get this resolved, people can move 
up and do well to help get it resolved.
    Thank you very much for your time.
    Mr. Cason. Thank you, Congressman. I use the word 
``opportunity'' frequently, too.
    The Chairman. Mr. DeFazio?
    Mr. DeFazio. Thank you, Mr. Chairman.
    Just one question. We struggle here, I think, given the 
fact that ultimately, the government is responsible to 
understand what the potential magnitude of liability or damages 
is. There is this one number that jumps out at me in the 
testimony of Mr. Harper and I just want you to reflect on that.
    He says, this is--the pages aren't numbered, but it is in 
his testimony--``we note on this point that defendants' 
contractors have estimated their liability up to $40 billion.'' 
His footnote says SRA International, Inc., risk assessment at 
5-1, 2002. Could you give us some idea what that figure means 
to you and how you think the government, apparently an entity 
contracted by the government, got to that number?
    Mr. Cason. Yes, I can tell you what I think about it. The 
SRA was a contractor we had on board to work on our IT security 
issues and assessing BIA's computer systems. My guess is that 
they did absolutely no independent evaluation and that this was 
part of the public rhetoric that they adopted and stuck in 
their document.
    Mr. DeFazio. So the government would pay for that kind of 
shoddy contracting work, that we would just have someone who 
reads the newspaper and sticks something in a report and we pay 
them for it?
    Mr. Cason. They were a contractor at the time.
    Mr. DeFazio. And they were dismissed? Their contract 
lapsed? What--
    Mr. Cason. The services that were needed under that 
contract were completed.
    Mr. DeFazio. And were they paid in full for their services?
    Mr. Cason. I don't know that for sure.
    Mr. DeFazio. That statement is--I mean, it is carefully 
worded, I mean your response, but, I mean, that causes me 
another level of concern, that who we are contracting with to 
help get at some of these problems, if they are providing such 
shoddy services. That wasn't very helpful, but thank you, Mr. 
Chairman.
    The Chairman. Thank you, Mr. Cason. We are going to dismiss 
you. We have one vote on the floor right now. We are going to 
temporarily recess the hearing and come back and hear from our 
second witness.
    Mr. Cason. Thank you, Mr. Chairman. Thank you, Committee.
    [Recess.]
    The Chairman. The hearing is called back to order. Panel 
two is up next with one witness, Keith Harper of the Native 
American Rights Fund. He is on the attorney team representing 
the class of plaintiffs in the Cobell lawsuit.
    Mr. Harper, welcome to the Committee. It is good to see you 
back.

STATEMENT OF KEITH HARPER, ATTORNEY FOR THE PLAINTIFFS, NATIVE 
                      AMERICAN RIGHTS FUND

    Mr. Harper. Good morning, Chairman Pombo. Initially, I want 
to just thank you for having this hearing and to accept our 
oral testimony on what we believe is one of the most critical 
issues facing Indian country and especially our clients, 
500,000 individual Indians, individual Indian Trust 
beneficiaries. On behalf of those individuals and Elouise 
Cobell, I want to express my deepest gratitude for your sincere 
interest in efforts to explore a prompt and fair resolution of 
the Cobell litigation.
    I am a member of the Cherokee Nation of Oklahoma and a 
senior staff attorney at the Native American Rights Fund and I 
represent the plaintiff class in this lawsuit. The case is 
presently before The Honorable Royce C. Lamberth, appointed to 
the bench by President Ronald Reagan in the District Court of 
Washington, Washington, D.C.
    First, Mr. Chairman, I want to be absolutely clear on one 
point. There is nothing that Elouise Cobell, the other named 
plaintiffs, and plaintiffs' counsel would like more than an 
immediate and fair resolution of the Cobell case. A resolution 
to this century-old problem is long overdue. We are committed 
to finding a prompt resolution, one that is fair given the 
extraordinary mismanagement of Indian trust assets.
    Again, Mr. Chairman, since inception, we have used every 
possible method to obtain relief for the class in the most 
expeditious fashion. We have pursued vigorously the case in 
every forum, including the courts and before the Congress of 
the United States. The record is clear that we have not been 
the source of delay. Simply put, plaintiffs have no interest in 
prolonging this litigation.
    Mr. Chairman, I have far more extensive remarks in my 
written testimony and I am just going to take a couple of those 
and highlight a couple of those for the Committee, in 
particular, start with the litigation and where we are.
    The plaintiffs are in the process presently of implementing 
the two recent Court of Appeals decisions in this case, decided 
on December 3 and December 10, 2004. These decisions have 
provided important guidance as to the appropriate manner in 
which we are to pursue from here on out. I want to discuss a 
couple of critical points in that regard.
    Importantly, the Court of Appeals held on the broad 
question of whether the District Court has authority to order 
appropriate relief to myriad specific identified breaches of 
trust, the decision held emphatically yes. The Court of Appeals 
categorically rejected the government's attempt to have the 
case dismissed on the flimsy ground that the case had, quote-
unquote, lost its moorings. At the same time, the December 3 
decision did vacate the trial court's injunction addressing the 
massive IT security problems, but on narrow procedural grounds, 
that the court did not have an evidentiary hearing prior to 
entering the injunction.
    I want to say a couple of things about IT security because 
there have been many questions from members of the Committee. 
It is important to bear in mind that this problem has been 
admitted to by the Department repeatedly. In an order that they 
asked the court to sign that I have here, December 17, 2001, 
and which the court did enter, they provide--this is Interior 
defendants' statement--``Whereas Interior defendants recognize 
significant deficiencies in the security of information 
technology systems protecting individual Indian trust data, 
correcting these deficiencies merit Interior Department's 
immediate attention.''
    It is not a matter of whether or not there are IT security 
problems. They have admitted that in the record of the case. 
They created a Hobson's choice for the court. There is no audit 
trails. Anybody from anywhere around the country could go into 
the Internet and get onto these computer systems, change 
information, create their own accounts. That is what the report 
of the Special Master demonstrated.
    At that point in time, the court had to ask itself, do I 
take measures to protect this data that is absolutely critical 
to ensuring integrity of the system, or do I leave it open? 
That Hobson's choice was created by the malfeasance of the 
defendants. So you have to put in context why the court acted 
as it did, and these admissions, I think, demonstrate the 
concern that we had in that regard.
    I want to just touch on a couple of additional points. Mr. 
Cason talked about the fact that there were small errors in 
their assessment. The plaintiffs originally filed the motion to 
go to trial on the only basis for those, quote-unquote, ``small 
errors,'' which is the Ernst and Young report. We don't believe 
it is in accounting. We believe it is riddled with errors. The 
appropriate way to address that is through a trial.
    I just close by saying this. I end my written testimony 
with the 1915 report, and that report documents and talks about 
fraud, corruption, and institutional incompetence almost beyond 
the possibility of comprehension. In 1915, a report before 
Congress on this issue. There is a long record of mismanagement 
and malfeasance. We have the opportunity now to resolve it. We 
would like to work with this committee to do so. Thank you.
    The Chairman. Thank you.
    [The prepared statement of Mr. Harper follows:]

      Statement of Keith M. Harper, Native American Rights Fund, 
          Counsel for the Plaintiff Class In Cobell v. Norton

                            I. INTRODUCTION

    Good morning, Chairman Pombo, Ranking Member Rahall and Members of 
the Committee. My name is Keith Harper, I am a member of the Cherokee 
Nation of Oklahoma, a senior staff attorney for the Native American 
Rights Fund, a non-profit law firm, and counsel for the plaintiff class 
in Cobell v. Norton, Civ. No. 96-1285 (RCL).
    First and foremost, on behalf of Elouise Cobell and all our 
clients--500,000 individual current Indian trust beneficiaries of the 
Individual Indian Trust (``Trust'') (and all past beneficiaries), who 
are the owners of all the assets managed, administered and controlled 
by the government, we want to thank you for your sincere interests and 
efforts to explore a prompt and fair resolution of the Cobell 
litigation. Further, we are gratified that you have asked us to provide 
oral testimony on this critical issue facing Indian Country and it is 
our deepest hope that we can continue to work with you and your 
dedicated staff to ensure a just and fair resolution of this matter.
    Before we discuss the subject of the oversight hearing--namely an 
update on the Cobell case--I wanted to make the Cobell plaintiffs' 
position on one critical issue unmistakably clear: There is nothing 
Elouise Cobell, the other named plaintiffs and plaintiffs' counsel want 
more than an immediate and fair resolution of the Cobell case. It is a 
matter of record that the government has mismanaged this trust for over 
a century. Cobell v. Norton has shed light on the gross mismanagement 
of this Trust and has raised this serious problem from the deepest and 
most secluded shadows of government bureaucracies to the light of day, 
where everyone can see the extraordinary injustice and abuse. A century 
of mismanagement is far, far too long. 1 A century with no 
accounting of trust assets is unconscionable and unprecedented. A 
century of harm to hundreds of thousands of this nation's poorest 
citizens is inexcusable. And the harm done to the plaintiff class every 
day is unquantifiable and our clients suffer without abatement. This is 
often a matter of life and death. A resolution is long past due. We 
will work with whomever is capable of achieving a fair resolution. 
Moreover, we want to emphasize that this is not a new position. From 
inception, plaintiffs have sought expeditious resolution of this case. 
We continue to do so. We have been and presently continue to be willing 
to participate in any process that is reasonably calculated to lead to 
resolution of this case in an expeditious and fair manner--whether that 
be working with Congress for acceptable legislation, mediation, 
arbitration or continuing litigation. Simply put, plaintiffs have no 
interest in prolonging these proceedings.
---------------------------------------------------------------------------
    \1\ See, e.g., Cobell v. Norton, 240 F.3d 1081, 1086 (D.C. Cir. 
2001) (``The trusts at issue here were created over one hundred years 
ago through an act of Congress, and have been mismanaged nearly as 
long.'').
---------------------------------------------------------------------------
    While we are steadfast in our commitment to a prompt resolution of 
this case, we have an unconditional ethical obligation to ensure that 
any settlement is fair. We will, of course, vigorously resist 
``settlement'' that allows pennies on the dollar to the beneficiary 
class and that fail to address meaningful on-going and profound 
mismanagement of their trust assets. It is our obligation as counsel to 
the class to work towards immediate settlement, while at the same time 
forcefully resisting any resolution that would further harm the 
beneficiary-class.
    This hearing, as I understand it, is to update this Committee on 
developments in the Cobell case and to resume discussions on how best 
to achieve resolution and finality. Accordingly, I will provide this 
Committee an overview of developments in two separate components of 
this matter: litigation and mediation. In addition, I will discuss our 
views as to how to determine the most appropriate ways to find an 
acceptable settlement of the Cobell case.

                         II. LITIGATION UPDATE

    The Cobell case was filed on June 30, 1996. It is brought on behalf 
of all past and present individual Indian trust beneficiaries. 
2 The Courts have rendered over eighty published decisions 
since the inception of this case. Because of the sheer volume of the 
record, plaintiffs present update necessarily will be truncated and 
discuss only the most critical decisions on the merits of the case 
essential to give a satisfactory overview of the litigation.
---------------------------------------------------------------------------
    \2\ The class was certified on February 4, 1997.
---------------------------------------------------------------------------
    Plaintiffs seek a full accounting of our trust assets for the 
entire period that such assets have been held in trust--since 1887. 
After all, trustees, without exception, have a duty to provide accurate 
and complete statement of accounts to each beneficiary at regular 
intervals and a complete and accurate accounting upon demand. Yet, the 
United States has never provided an accounting to individual Indian 
trust beneficiaries. It has never provided beneficiaries accurate and 
complete statement of accounts. In addition, plaintiffs seek that the 
account balances of the Trust be corrected, restated and distributed to 
the correct beneficiary in the correct amount. Finally, plaintiffs seek 
reform of the trust management and accounting system, such reform will 
ensure that trust duties are discharged prudently and the government's 
liability does not continue to increase exponentially.
    Plaintiffs have prevailed on the merits throughout this litigation. 
For the first five years, the government argued, among other things, 
that it did not have a duty to provide a full accounting of trust 
assets in conformity with generally applicable trust law. The 
government's position was repudiated by the district court on December 
21, 1999. 3 The Court held that the government is in breach 
of the trust duties it owes the plaintiff class and must render a 
complete and accurate accounting of ``all funds.'' 4 
Defendants' attempt to limit the accounting to some ``subset'' of 
assets was expressly rejected by the district court. 5
---------------------------------------------------------------------------
    \3\ Cobell v. Babbitt, 91 F. Supp.2d 1 (D.D.C.1999).
    \4\ Id. at 41. (``Congress directed that the Secretary of the 
Interior account for all funds. The court cannot put a finer point on 
it than that.'').
    \5\ Id.
---------------------------------------------------------------------------
    The government appealed this decision arguing that they could 
decide the nature and scope of the duty to account owed to individual 
Indian beneficiaries and that, in any event, the duty only required an 
accounting of funds in the trust as of 1994, when Congress enacted the 
American Indian Trust Fund Reform Act of 1994, 25 U.S.C. 
Sec. Sec. 162(a) & 4001 et seq. On February 23, 2001, the Court of 
Appeals rejected these arguments and affirmed in all material respects 
the district court's order. 6 The Court of Appeals explained 
that the normal deference shown to administrative agencies did not 
apply because this case involved a trust. 7 The Court 
further held that the duty of the United States to account was not 
created in 1994. Rather the duty ``inheres in the trust relationship 
itself'' and therefore ``preexisted'' and was not dependent on the 
enactment of the 1994 Trust Fund Reform Act. 8 Thus, the 
accounting must be of all funds ``irrespective of when they were 
deposited.'' 9 Finally, the Court held that because of the 
``magnitude of government malfeasance and potential prejudice to the 
plaintiffs' class,'' the district court had commensurately greater 
latitude to order appropriate relief for the identified breaches of 
trust and to ensure that the government was brought into compliance 
with its fiduciary duties. 10 The United States did not 
appeal further this decision. Accordingly, the February 21, 2001 
decision is a final decision.
---------------------------------------------------------------------------
    \6\ Cobell v. Norton, 240 F.3d 1081 (D.C. Cir. 2001).
    \7\ Id. at 1101 (``While ordinarily we defer to an agency's 
interpretations of ambiguous statutes entrusted to it for 
administration, Chevron deference is not applicable in this case.'').
    \8\ See, e.g., id. at 1103 (``Not only does the 1994 Act plainly 
reaffirm the government's preexisting duty to provide an accounting to 
IIM trust beneficiaries, but it is plain that such an obligation 
inheres in the trust relationship itself.''); id. at 1102 (``The 1994 
Act reaffirms the government's preexisting fiduciary duty to perform a 
complete historical accounting of trust fund assets.'' (Emphasis 
added)).
    \9\ Id. at 1102.
    \10\ Id. at 1109.
---------------------------------------------------------------------------
    Despite the clarity of the district court and appellate court's 
rulings, defendants have continued to resist providing plaintiffs the 
complete and adequate accounting to which the each beneficiary is 
entitled. Defendants have refused to take affirmative steps to bring 
themselves into compliance with their trust duties. Indeed, at every 
turn defendants have obstructed the proceedings and attempted to escape 
their plain legal obligations. It is because of this resistance and 
refusal to discharge their legal obligations that this case now 
approaches the end of its ninth year in the Courts.
    Two recent Court of Appeals decisions further define the nature and 
scope of this case, and clarify the critical role of the Court in 
ordering appropriate remedies for the plaintiff class. In both 
instances, the government appealed injunctions entered by the district 
court. The first appeal, decided December 3, 2004, addressed the 
astonishing internet security deficiencies of the Interior Department 
computer systems that house and give access to critical information of 
the Trust. 11 The second was decided on December 10, 2004 
and addressed a ``structural injunction'' that the district court had 
entered intended to compel the defendants to provide a historical 
accounting and commence true trust reform. 12 In the 
appeals, the government had sought outright dismissal of the Cobell 
case. Defendants argued, among other things, that trust reform was not 
part of this case at all, and that the case had ``lost its moorings.''
---------------------------------------------------------------------------
    \11\ Cobell v. Norton, 391 F.3d 251 (D.C. Cir. Dec 03, 2004)
    \12\ Cobell v. Norton, 392 F.3d 461 (D.C. Cir. Dec 10, 2004)
---------------------------------------------------------------------------
    While in both cases the appellate court vacated the trial court's 
injunctions, it did so on narrow, largely procedural, grounds. More 
importantly, the appellate court categorically rejected the 
government's argument that the Court improperly exercised jurisdiction 
over all aspects of the case. In addition, the Court rejected the 
government's contentions that the highly deferential review standards 
of administrative law controls this case and that the district court 
could not grant appropriate relief for identified mismanagement and 
malfeasance.
    Plaintiffs believe that these two decisions, taken together, 
provide a solid legal foundation to attain the relief we seek in this 
case and provide important guidance for the Congress as well. Certain 
principles emerge from these decisions that are important 
considerations in analyzing the current posture of this litigation and 
the potential ways to resolve the case. They will be discussed 
individually below.
1. This Is a Trust Case and is Not Controlled by Administrative Law
    One of the government's central arguments in these appeals was that 
the district court erred by applying trust law standards in a case that 
the government believed was controlled by the highly deferential review 
standards of the Administrative Procedures Act. In its December 3rd 
decision, the Court vacated the injunction on the narrow procedural 
ground that the Court should have instituted another evidentiary 
hearing prior to issuing the injunction. 13 But on the wider 
question of whether the decisional law for the Cobell case was trust 
law or administrative law, the appeals court, quoting its 2001 
decision, held: ``Contrary to the Secretary's view, ``[w]hile the 
government's obligations are rooted in and outlined by the relevant 
statutes and treaties, they are largely defined in traditional 
equitable terms, and the narrower judicial powers appropriate under the 
APA do not apply.'' 14 The Court further explained:
---------------------------------------------------------------------------
    \13\ Cobell v. Norton, 391 F.3d 251, 256 (D.C. Cir. 2004). This 
injunction addressed the longstanding failure of the government to 
fix--in the Court of Appeals' words--``gross computer security 
failures.'' And contrary to some of Interior officials public comments, 
they have conceded the extraordinary deficiencies in of their easily 
accessible IT systems. During the same timeframe when the Court ordered 
disconnection of certain IT systems from the internet, Interior 
conceded that there were ``significant deficiencies in the security of 
information technology systems protecting individual Indian trust data. 
Correcting these deficiencies merits Interior Defendants' immediate 
attention.'' Defendants' Proposed ``Consent Order regarding Information 
Technology Security'' at 4. A couple of months later, Secretary Norton 
testified before this Committee and confessed in unequivocal terms that 
the ``Departmental information technology security measures associated 
with Indian trust data lack integrity and are not adequate to protect 
trust data....'' Testimony of Gale A. Norton, Secretary of the 
Interior, before the Committee on Resources, U.S. House of 
representatives, February 6, 2002, on Native American Trust Issues and 
the Ongoing Challenges, at 5 (emphasis added).
    \14\ Id. at 257 (emphasis added).
---------------------------------------------------------------------------
        The district court, then, retains substantial latitude, much 
        more so than in the typical agency case, to fashion an 
        equitable remedy because the underlying lawsuit is both an 
        Indian case and a trust case in which the trustees have 
        egregiously breached their fiduciary duties. Id. at 1099, 1109. 
        The Secretary's suggestion that the appropriate role for the 
        district court was confined to retaining jurisdiction and 
        ordering periodic progress reports, as in In re United Mine 
        Workers of America International Union, 190 F.3d 545, 556 (D.C. 
        Cir.1999), ignores these salient considerations. 15
---------------------------------------------------------------------------
    \15\ Id. at 257-58 (emphasis added).
---------------------------------------------------------------------------
    In short, the appellate court resolved in plaintiffs' favor that 
because this was an Indian case and a trust case, the court had far 
broader authority than in ordinary cases to remedy identified 
mismanagement and government breaches of trust. The December 10th 
decision of the Court of Appeals also noted ``the availability of the 
common law of trusts'' but stated that trust law could not ``fully 
neutralize the limits placed by the APA.'' 16 As a result, 
the Court refused to vacate the injunction in its entirety, but only 
those aspects that, in the Court of Appeals' words, constituted an 
order ``to obey the law in managing the trusts.'' 17
---------------------------------------------------------------------------
    \16\ Cobell v. Norton, 392 F.3d 461, 473 (D.C. Cir. Dec 10, 2004)
    \17\ Id. at 475.
---------------------------------------------------------------------------
    In sum, the Court of Appeals had narrow disagreements with the 
district court's decisions regarding process, rather than broad 
disagreements over the district court's authority. The appellate 
decisions recognized that the APA's ``narrow judicial powers'' were not 
applicable and indeed, the trial court possessed ``substantial 
latitude'' to order appropriate relief to remedy identified breaches. 
Further, the Court of Appeals upheld Judge Lamberth's broad authority 
to grant relief for the beneficiary class when specific breaches and 
management deficiencies are found and ``ordering specific relief for 
those breaches.'' 18 Moreover, the district court was 
empowered to rachet-up its remedial effort if there was further delay: 
``Interior's malfeasance is demonstrated to be prolonged and ongoing, 
more intrusive relief may be appropriate.'' 19
---------------------------------------------------------------------------
    \18\ Id. at 477.
    \19\ Id. at 478.
---------------------------------------------------------------------------
2. There Exist Important Limits on Congressional Power to Interfere in 
        This Litigation
    Mr. Chairman, as you are well aware, in the late fall of 2003, the 
Congress enacted the Interior Appropriations Act, P.L. 108-108. That 
law included a provision, commonly called the ``Midnight Rider'' that 
you and many members of this Committee opposed. The Midnight Rider was 
so dubbed because it was not a provision vetted through the authorizing 
committee of jurisdiction, this Committee, rather it was hastily snuck 
in to a conference committee report directly prior to enactment by the 
Appropriations Committee. The Midnight Rider is a prime example of why 
legislating on an appropriations bill is folly. While one of the stated 
purposes of the Rider by its sponsors was to provide a ``time out'' so 
the appellate court could review the trial court's decision requiring a 
historical accounting be performed, the actual effect was to negate the 
appellate court's ability to review the historical accounting part of 
the structural injunction decision altogether. Specifically, the 
December 10th appellate decision held that the Midnight Rider 
temporarily ``removes the legal basis for the historical accounting 
elements of the injunction.'' 20 By Congress doing so, the 
appellate court could not review the trial court's historical 
accounting duty until after the Rider expired on December 31, 2004.
---------------------------------------------------------------------------
    \20\ Id. at 465.
---------------------------------------------------------------------------
    Rather than expedite resolution of this case, the Midnight Rider 
caused serious and irreparable delays. It is not an overstatement to 
suggest that the Midnight Rider delayed this case and relief for the 
plaintiff class for no less than three years.
    There are a couple of important lessons that can be gleaned from 
this experience with the Midnight Rider. First, when Congress acts it 
must do so carefully. Hastily drawn riders without proper review 
through appropriate committees and hearings can have unintended 
consequences that dramatically impact the lives of people--here, 
500,000 individual Indians. Second, while the Court of Appeals 
clarified that the Midnight Rider was constitutional, that was so only 
because of the temporary nature of the rider. Had the Rider completely 
eliminated the duty to account, it would have violated the Fifth 
Amendment Takings clause. 21 Third, and perhaps most 
importantly, the appellate court acknowledged that Congress had some 
authority to address the accounting issue through legislation, but that 
it was obligated to ``assur[e] that each individual [beneficiary] 
receives his due or more.'' 22 Put another way, any 
legislative alteration of the accounting duty that does not provide 
each beneficiary ``his due or more'' would necessarily be a taking of 
that individuals' property and, hence, constitutionally infirm.
---------------------------------------------------------------------------
    \21\ Id. at 468.
    \22\ Id.
---------------------------------------------------------------------------
3. The Government Owes Beneficiaries Interest and Imputed Yields
    In upholding the Midnight Rider, the Court of Appeals held that the 
provision did not constitute an impermissible taking because any delay 
would necessarily be compensable by the payment of interests or imputed 
yields. Specifically, the court held: ``As trust income beneficiaries 
are typically entitled to income from trust assets for the entire 
period of their entitlement to income, and for imputed yields for any 
period of delay in paying over income or principal, see G.G. Bogert & 
G.T. Bogert, Law of Trusts and Trustees Sec. 814, pp. 321--25 (rev.2d 
ed. 1981)....'' 23
---------------------------------------------------------------------------
    \23\ Id.
---------------------------------------------------------------------------
    The December 10th holding settles a longstanding dispute between 
then parties. Any money demonstrated not to have been properly credited 
to a beneficiary would require a correction of accounts for both 
``interest'' and ``imputed yields.'' As a result a resolution of this 
litigation must be developed with consideration that this critical 
issue has now been resolved with finality. 24
---------------------------------------------------------------------------
    \24\ Parenthetically, we note that the district court has already 
held that plaintiffs' accounting is not limited by the statute of 
limitations, since it is well-settled that limitations do not begin to 
run until the trustee provides an accounting or repudiates the trust. 
See Cobell v. Norton, 260 F. Supp.2d 98, 107 (D.D.C. 2003) (applying 
general principle that ``the statute of limitations does not commence 
running for a beneficiary's equitable claim to enforce the obligations 
of the trustee until the trustee has repudiated the beneficiary's right 
to the benefits of the trust'').
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4. Where Do We Go From Here?
    Mr. Chairman, it is important to bear in mind that this litigation 
has gone on now for nearly nine years and a resolution is something we 
should all strive to achieve. But these nine years have not passed 
without substantial progress. Many of the most critical issues in this 
case have been resolved and in plaintiffs' favor. There is a duty to 
account for all funds irrespective of when deposited back to 1887. 
Statute of limitations does not limit our claim. The government, as 
trustee, has been found to have breached its fiduciary duties. The 
Court can order remedies for specific breaches of trust identified 
through evidentiary proceedings. This is a trust case and therefore the 
``judicial powers appropriate under the APA do not apply.'' We note too 
that more still would have been decided but for the unfortunate 
intervention of Congress in the form of the Midnight Rider.
    This progress sets a critical foundation for plaintiffs' continuing 
attempt to achieve equitable relief through the judicial process. Based 
on the decisional law in this case, we are presently pursuing two 
litigation avenues of which this Committee should be cognizant.
    Mr. Chairman, as you are well aware, a central dispute between the 
parties is what is a fair amount for the aggregate restatement of 
accounts. We note on this point, that defendants contractors have 
estimated their liability at up to $40 billion. 25 
Plaintiffs believe that the number is well north of that figure. The 
government's public position, however, is that they owe very little. 
They base this claim almost exclusively on the so-called ``Ernst & 
Young Report.''
---------------------------------------------------------------------------
    \25\ SRA International Inc. ``Risk Assessment'' at 5-1 (2002).
---------------------------------------------------------------------------
    The government has long asserted that the Ernst & Young Report is a 
full accounting of the trust funds belonging to four of the five named 
plaintiffs and their predecessors in interest. Further, they allege, 
that because few errors were found by their so-called ``accounting,'' 
there should be a presumption that--despite the well-documented record 
of mismanagement and malfeasance--most funds reached the correct 
beneficiary. For years now, despite overwhelming evidence in the record 
showing the spectacular deficiencies of the Ernst & Young Report, the 
government has insisted it is an accounting.
    For example, Associate Deputy Secretary James Cason testified, 
under oath, that the ``E & Y Report'' is an accounting:
        As part of the Cobell litigation, Interior collected over 
        165,000 documents for the historical accounting of IIM trust 
        fund activity  through December 31, 2000 for four of the named 
        plaintiffs and 24 of their 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 13,000 transactions. The 
        accounting contractor, Ernst and Young, found 86 percent of the 
        transactions and 93 percent of the funds moving through the 
        accounts were supported by the documentation located. The cost 
        of this accounting was over $20 million. 26
---------------------------------------------------------------------------
    \26\ Transcript of Oversight Hearing on ``Can a Process be 
Developed to Settle Matters Relating to the Indian Trust Fund 
Lawsuit?'', July 9, 2003 at 12 (Prepared Statement of James Cason).
---------------------------------------------------------------------------
Furthermore, under questioning from former Representative Brad Carson, 
Mr. Cason unequivocally confirmed the government's view that the 
``Ernst & Young Report'' is an accounting:
        Mr. Carson: ... You said you did accountings for the five named 
        plaintiffs in the Cobell litigation?

        Mr. Cason: Yes. 27
---------------------------------------------------------------------------
    \27\ Id. at 29.
---------------------------------------------------------------------------
    The Secretary herself has similarly claimed the ``Ernst & Young 
Report'' is an accounting in trial before the district court:
      Q. Ms. Norton, I've asked you this question twice and I would 
like to see if I can get a clear answer to the question. Is it your 
understanding that the Ernst & Young report discharges the duty to 
provide an accounting to the five named plaintiffs  and their 
predecessors in interest?
      A. My understanding is that is a huge amount of documentation of 
their accounts and I'm not aware of any way in which it is less than 
what would be considered meeting the appropriate standards. So I would 
have to answer that in saying yes, that would satisfy the level of 
scrutiny, and, you know, there may still be a reporting back to them 
has not formally been done. 28
---------------------------------------------------------------------------
    \28\ See Plaintiffs' Exhibit 1 (emphasis added) (February 13, 2002, 
Norton Contempt Trial Transcript at Tr.4330:12-24).
---------------------------------------------------------------------------
    Since the government has claimed that the ``Ernst & Young Report'' 
is an accounting, plaintiffs filed a motion on December 30, 2004 
seeking a trial that would determine whether that accounting is 
adequate. Plaintiffs would like to test the validity of the 
government's claim that this is an ``accounting,'' or as we have 
alleged, comes nowhere close to discharging their fiduciary duty to 
account. Trials are the ordinary manner to address such factual 
disputes.
    But tellingly, defendants have opposed our motion. They now argue 
in their opposition to our motion that the ``Ernst & Young Report'' is 
not an accounting at all, but merely an ``expert report.'' Interior 
officials do not want the Court or anyone to make specific findings as 
to whether the ``Ernst & Young Report'' is an adequate accounting. The 
reason is self-evident. If there are judicial findings after the 
weighing of specific evidence that the ``Ernst & Young Report'' is not 
an accounting, the government would lose its main basis for claiming 
they owe little. The motion is fully briefed 29 and 
plaintiffs await a decision by the district court.
---------------------------------------------------------------------------
    \29\ Plaintiffs' briefs are attached to this testimony.
---------------------------------------------------------------------------
    The Ernst & Young trial would be helpful for another reason. The 
Report cost $23 million dollars for four beneficiaries. Thus, to do an 
Ernst & Young type ``accounting'' for the entire class would, by per 
capita calculation, cost hundreds of billions of dollars--an amount 
that is plainly ridiculous and excessive. Once plaintiffs establish 
that the Ernst & Young Report is not an adequate accounting--despite 
the excessive costs--the conclusion will be clear: An accounting is 
impossible. Therefore, as we have long stated, alternative methods 
consistent with trust law should be utilized to correct and restate 
account balances.
    In addition, Mr. Chairman, plaintiffs have recently filed a request 
for a status conference to discuss with the Court how to proceed to an 
evidentiary hearing regarding IT security. Independent evaluations of 
the present IT systems of the Department of Interior continue to show 
that they are woefully inadequate to protect individual Indian trust 
data. Plaintiffs believe that addressing these issues requires 
immediate attention. The Court of Appeals has made clear that Judge 
Lamberth cannot act to protect this data through an appropriate 
injunction without an evidentiary hearing. Plaintiffs have asked the 
Court to expedite that process to ensure this critical data is 
protected. This request too has been fully briefed and awaits a 
decision by the district court.
    A final word on litigation. As plaintiffs' counsel we fully 
comprehend that litigation can be a slow and tedious process. But it 
also has great value in settling rights with certainty. In this case it 
is a sluggish march towards righting longstanding wrongs. This 
government has long been aware of the habitual and extraordinary nature 
of the mismanagement of Indian trust assets, as well as the devastating 
impact such malfeasance has on Indian people throughout this Nation. 
Yet, they did nothing about it except pay lip service. Elouise Cobell 
and many others pled with them to reform. But they only made promises 
that they then routinely broke. This was the painful reality for trust 
beneficiaries, until now--until the Cobell case. This case is primarily 
responsible for this festering problem to be addressed after a 117 
years of abusive treatment by our trustee. Although frustratingly slow 
at times, let us not forget the great value of this case and let us not 
seek to stop it until the underlying mismanagement--so long standing 
and so long neglected--has been cured.

                        III. UPDATE ON MEDIATION

    Mr Chairman, as you know, over the last year or so, with the urging 
of you, Mr. Rahall and the leadership of the Senate Indian Affairs 
Committee, the parties in the Cobell suit have participated in a 
mediation process. From the beginning, plaintiffs were thoroughly 
dedicated to seeking alternative resolution, but expressed concern as 
to whether such another such process would be successful. Lead 
plaintiff Elouise Cobell testified at a hearing before this Committee 
entitled ``Can a process be developed to settle matters relating to the 
Indian Trust Fund Lawsuit?'' stated without reservation: ``The Cobell 
plaintiffs believe that the answer to this question is self-evident: Of 
course, such a process can be developed.'' However, she further stated:
        It is important to note that this case has been in litigation 
        over seven years. It is a matter of record that time and time 
        again the case has been unconscionably delayed as a result of 
        government litigation misconduct. *** We, the IIM 
        beneficiaries, on the other hand have pursued expedited 
        resolution of this case. We have vigorously contested each and 
        every government-sponsored delay tactic. That is the record of 
        this case. We want resolution (more than anyone) because each 
        and every day trust beneficiaries are dying without receiving 
        justice.
    After over a year in this mediation process, I can affirm that 
plaintiffs feel very much the same as we did when Ms. Cobell made that 
statement. We appreciate the great effort made by the leadership of 
this Committee and that of your dedicated staff over the last year. We 
are poised to mediate a resolution. But the fact is we cannot settle 
with ourselves. The government when they come to the table must do so 
with reasonable proposals or at a minimum address the settlement 
proposals we have sent them. That has not happened. Nor did it happen 
in the seven previous occasions when plaintiffs have participated in a 
settlement process.
    To further elucidate this point, I would like to discuss briefly 
some of our experiences over the last year. We cannot discuss all 
aspects of mediation in this public forum, because we are constrained 
by certain confidentiality requirements. But we can say the following.
    Initially, we note that plaintiffs have made substantive proposals 
in a good faith effort to resolve each of the three principal issues 
presented in this litigation: 1) IT security; 2) historical accounting, 
and 3) institutional trust reform--the Government has not responded or 
initiated any meaningful discussion of these issues. Plaintiffs' 
proposals, and the Government's continuing failure to address these 
issues, are addressed in Sections 1-3 below.
1. IT Security
    Remedying the serious deficiencies in the security of Interior's 
computer systems housing or accessing Individual Indian Trust Data is a 
matter of critical importance to Trust management, as the Court of 
Appeals has recently recognized. 30 Defendants acknowledged 
the magnitude of this problem three years ago, when they urged the 
District Court to enter an order providing that Interior 
``immediately'' take steps to achieve compliance with the governing 
federal standard for computer security (OMB Circular A-130, Appendix 
III).
---------------------------------------------------------------------------
    \30\ Cobell v. Norton, 391 F.3d 251 (D.C. Cir. 2004) (``It is 
indisputable that the Secretary has current and prospective trust 
management duties that necessitate maintaining secure IT systems in 
order to render accurate accountings now and in the future.'').
---------------------------------------------------------------------------
    Defendants have fallen far short of achieving this objective. In 
February 2004, Interior informed the District Court that only 4 of the 
62 computer systems housing Trust Data--less than seven percent--had 
been certified and accredited as meeting the OMB standard.
    In the pre-mediation protocol which the parties negotiated on 
February 20, 2004--with critical assistance from staff of this 
Committee--it was agreed that the ongoing IT security problem would be 
the first issue mediated. After the mediation got underway in April of 
last year, however, defendants refused for more than three months to 
authorize the funds needed for the mediators to retain technical 
consultants to help them evaluate this issue. 31 As a 
result, an agreement allowing for the mediators' retention of an IT 
consulting firm (Red Cliff) to assist them was not reached until July 
20, 2004.
---------------------------------------------------------------------------
    \31\ For example, in a joint mediation session on June 10, 2004 
defendants agreed ``in principle'' to allow the mediators to retain an 
IT security expert subject to a monetary ``cap'' of $25,000. Plaintiffs 
objected to the transparent attempt to preclude meaningful evaluation 
of Interior's IT insecure systems; and another six weeks passed before 
the funding issue was finally resolved.
---------------------------------------------------------------------------
    In September 2004, Red Cliff submitted a ``seven phase'' proposal 
for the assessment of Interior's computer systems. At a meeting called 
by the mediators on September 22, 2004, we were informed that while 
defendants had agreed to allow Red Cliff to proceed with Phases 1 and 2 
(involving the consultants' review of OMB Circular A-130 and other 
relevant security requirements), Interior was unwilling at that time to 
commit to any of the remaining phases of the Red Cliff proposal 
(including the actual testing and other assessment of Interior's 
systems). We were further informed that Interior's decision whether to 
go forward with Phases 3-7 of the Red Cliff proposal would hereafter be 
made on a piecemeal, ``one phase at a time,'' basis.
    Of even greater concern, we understand that six months into this 
process, defendants have made no commitment to address whatever 
deficiencies Red Cliffs' review of their insecure systems may reveal. 
Nor has any proposal been made to us regarding how Interior intends to 
protect irreplaceable Trust Data from further corruption or loss until 
such time as its computer systems are finally secure.
    In our view, it is in the shared interest of the parties to resolve 
this ``first-up'' mediation issue amicably. If mediation of this issue 
is ultimately unsuccessful plaintiffs will have a duty to report that 
development to the District Court. 32 Until that time, 
plaintiffs will continue to look to this process for resolution of the 
IT security issue.
---------------------------------------------------------------------------
    \32\ By order dated March 15, 2004, the Court allowed the voluntary 
withdrawal of Plaintiffs' then pending ``show cause'' motion based on 
the plaintiffs' representation that they were doing so at defendants' 
insistence and as a pre-condition to the parties mediating this and 
other Cobell case issues.
---------------------------------------------------------------------------
2. Historical Accounting
    As indicated in the mediators' report, the Government has not 
responded to the proposal plaintiffs made seven months ago to resolve 
this issue. Nor have they presented us with any form of counter-offer.
    At the mediators' request, we presented plaintiffs' specific 
proposal to resolve the historical accounting issue in this litigation 
during a joint mediation session on July 20, 2004. Representatives of 
Interior, Treasury and the Justice Department attended that meeting, 
and we provided them with a detailed explanation of the factors 
considered in formulating plaintiffs' proposal, addressed their 
questions and invited defendants' response.
    When several weeks then passed without further communication from 
the other side, we authorized the mediators to share a July 16, 2004 
letter we had given them outlining plaintiffs' proposal and the reasons 
supporting the proposed settlement amount.
    During our September 23, 2004 meeting with the mediators, we were 
told that while they had no firm proposal from the Government to 
convey, they believed upwards of $10-15 billion could be made available 
to settle the historical accounting issue presented by our case along 
with two other issues of purported concern to the Government--land 
consolidation and the prospective release of all claims of Trust 
management. We responded by saying (as we had on a number of prior 
occasions) that while we were willing to listen to the Government's 
proposals regarding such unrelated issues, we represented the class of 
500,000 Trust beneficiaries with respect to the historical accounting 
and IIM trust reform issues only. We explained that we were therefore 
not in a position to bind our clients with respect to issues that we 
had not been certified to resolve on their behalf, and that we would be 
violating our ethical duties if we urged plaintiffs to accept less than 
the fair and just monetary resolution of the historical accounting 
issue in exchange for defendants' promise to pay a ``premium'' to 
resolve other issues outside the scope of the Cobell litigation.
    That remains our position. Eighteen months ago, Congress directed 
the parties to make a good faith effort to resolve the issues presented 
in this case, and we believe that is enough of a challenge without 
burdening this process with such unrelated matters. Certainly we can 
accept no solution which would unfairly impinge upon our clients' 
rights to the prompt restatement of IIM trust balances that we believe 
to be warranted due to Trustee-Delegates' continuing breaches of 
fiduciary duty.
3. Institutional Trust Reform
    No progress has been made on this front, despite the fact that ``
      A decade ago, Congress enacted reform legislation 
requiring fundamental changes in Trust management--changes the 
defendants have yet to accomplish.
      Five years ago, the District Court ruled following the 
Phase One trial that defendants were in breach of their trust duties 
and remanded the case to the Trustee-Delegates to allow them to rectify 
such problems--a decision the Court of Appeals unanimously affirmed on 
February 23, 2001.
      This past week the district court reaffirmed that the 
accounting claim is a ``live'' claim in this case and with it comes a 
requirement that defendants reform the ``the processes by which records 
and other documentation of transactions involving trust assets and the 
actions of the trustee-delegate are created, stored, preserved and so 
forth.'' 33
---------------------------------------------------------------------------
    \33\ Cobell v. Norton, slip op. at 15 (D.D.C. February 8, 2005). In 
the same opinion the Court invited plaintiffs to amend the Complaint to 
include asset management and other types of trust reform. Id. at 23-24. 
Also, the Court made clear that the processes associated with the APA, 
such as limited discovery, do not control this case. Id. at 47-50.
---------------------------------------------------------------------------
    Two weeks into the mediation process, we were informed that 
Interior would never agree to the appointment of a receiver to assume 
responsibility for rehabilitating the Individual Indian Trust until 
long-standing breaches of Trust duty had been rectified.
    We therefore conveyed a proposal (via the mediators) on July 20, 
2004 that Interior's co-Trustee Delegate, Treasury, assume 
responsibility for certain additional functions related to the 
financial management of the Trust. In making this proposal we believed 
the transfer of such functions to Treasury would go a long way towards 
responsibly resolving the serious problem with IT security (by 
transferring Trust Data to Treasury's more secure IT systems) and also 
other key areas of Trust management.
    We since have been informed by the mediators that plaintiffs' 
proposal in this regard is ``unacceptable.'' No explanation has been 
provided to us for defendants' rejection. Moreover, as with the 
historical accounting issue, no counter-proposal has been made.
    Furthermore, when the mediators met with us on September 23, 2004 
to discuss settlement ``concepts,'' the only solution to the critical 
reform issue they presented for our consideration after months of 
deliberation was the creation of a ``blue ribbon'' commission to 
further study the trust reform issue and report to Congress on what 
needed to be done.
    Of course, the creation of yet another panel, without more, to 
again re-confirm the existence of unresolved Trust management issues is 
wholly inadequate when plaintiffs are being asked in exchange to 
dismiss their trust reform claims and forego remedies achieved in the 
course of this protracted litigation. Fundamental changes in trust 
management clearly must be made to discharge the Trustee's declared 
fiduciary duties. Alternatively, in the event meaningful reform remains 
nothing more than a hollow promise, a fixed amount, equivalent to 
``liquidated damages'' should be paid annually to our clients until 
such time as Interior's IT systems are finally secure and the 
Individual Indian Trust is finally being administered prudently.
    In short, the history of this mediation raises certain salient 
considerations that should be noted. Plaintiffs have been more than 
willing to show our cards. We have identified time and again specific 
ways to address all the elements of this case. We stand at the ready to 
explore alternative avenues for resolution, but we cannot do this 
alone. The government must respond to proposals and explain why they 
are not satisfactory. That type of dialogue may lead to exploring new 
possibilities. It is not reasonable to simply dismiss proposals without 
giving any reason why they are objectionable.
    We believe if both parties are compelled to come to the table and 
act reasonably than this case can be mediated to resolution. The 
leadership of this committee and your staff have considerable ability 
to play a vital role in this respect and we urge you to do so. You are 
peculiarly positioned to bring your authority to bear on the parties 
and compel reasonableness. We understand that this is a resource drain 
on already taxed resources of this committee. But plaintiffs believe we 
have an extraordinary opportunity to resolve this case with your 
continuing aid.

                   IV. ELEMENTS OF A SOUND RESOLUTION

    We understand that this Committee is prepared to look at ways to 
settle the Cobell case. Plaintiffs are not prepared at this juncture to 
present specific proposals. But we did want to share with you a few 
items that we believe are important elements of a sound resolution of 
this matter.
1. The Proposal Must Be Fair
    Any proposal must ensure that the rights of beneficiaries are not 
sacrificed on the altar of expediency. Section 137 of the House 
Interior Appropriations bill for FY 2004 failed because it gave 
authority to one party--the defendants--to decide the case unilaterally 
with only minimal judicial review. Such gerrymandering of the judicial 
system is plainly unacceptable, as well as unconstitutional.
    Another consideration of fairness is the obligations of the United 
States as already determined by the Courts. Here, as defendants readily 
admit they owe a legal obligation to the plaintiff class which will 
cost multi-billions of dollars to fulfill. If a settlement proposal 
relieves the defendants of this legal obligation to perform an 
accounting, the saved resources should be considered in the settlement 
amount.
    There are other considerations of fairness. In a class action, the 
beneficiaries are protected by due process, rules of procedure and 
defined rules of ethics. There must be assurance that these protections 
exist in any alternative process. Moreover, if the consent of 
beneficiaries is necessary, any legitimate and constitutionally 
permissible process must ensure that the consent was knowing and 
voluntary.
    Fairness and the protection of beneficiary rights must form the 
basis of any sound proposal. After all, these are the victims of a 
century of government mismanagement and should not be victimized again 
through an unfair resolution process.
2. The Claims Judgment Fund Should be Used for Any Resolution
    This case should not be settled by utilizing funds that would 
otherwise be used to benefit American Indians and tribal communities. 
That would add insult to injury. Victims of the government's 
mismanagement should not be victimized again by stripping them of 
desperately needed and limited resources to pay for a settlement of 
this case. Accordingly, we believe it important to access the Claims 
Judgment Fund, 31 U.S.C.1301 et seq. to pay all the costs of any 
settlement of this matter.
3. The Proposal Must Expedite Rather than Delay Resolution
    To have a prompt resolution of this case, the structure of the 
resolution must ensure that the Cobell claims are resolved as a whole. 
Piecemeal resolution will not be expeditious and will make it difficult 
for beneficiaries to make fully informed and knowledgeable decisions 
regarding their rights. It is important to note that if the government 
believed that it could make fair offers to beneficiaries to buy out 
their claims, they could approach the Court with a proposal without any 
additional legislation. Such proposals would be analyzed to determine 
that they do not make any false or misleading assertions. The need for 
such due process protections are self-evident. The only thing 
legislation could possibly do is diminish these protections, which we 
believe is ill-advised.
    Furthermore, Congress must recognize that its actions can lead to 
delay rather than expedition of resolution. As mentioned earlier, the 
Midnight Rider is a principle example of this. It did not advance this 
case at all, but rather undermined the ability of the Courts to 
determine issues central to this litigation.
4. The Proposal Should Not Be a Forum to Re-litigate Settled Issues
    Any resolution should strive not to reconsider issues already 
resolved through the litigation. Over the last eight and one-half 
years, the District Court and Court of Appeals have decided numerous 
issues and defined the nature and scope of the obligations owed to 
beneficiaries. An appropriate approach is to use the Court's decisions 
to govern which methodologies are appropriate and consistent with law 
and the rights of beneficiaries as judicially established and 
confirmed.
5. The Proposal Must Be Consistent with Trust Law
    Any resolution should be grounded in the basic and elementary 
principles of trust law including, without limitation, that all 
inferences are against the trustee and for the beneficiary. For 
example, if the trustee does not have documentation, then trust law 
says that one presumes whatever is best for the beneficiary (e.g. if 
the trustee has inadequate records to support a disbursement, then it 
is presumed the disbursement was not received by the beneficiary and 
should be credited to the account). We believe it appropriate that 
settlement proposals must have this principle at their core or, by 
definition, they will undermine the well-settled rights of beneficiary 
class.
6. The Proposal Must Be Constitutional
    It should go without saying that any proposal to resolve this case 
must past constitutional muster. With on-going litigation, particularly 
where the Court's have already made final unappealable decisions about 
the rights of a party, as here, any resolution that does not achieve 
full participation by the parties and informed consent to the 
settlement process is fraught with material constitutional infirmities. 
The interests that Individual Indian Trust beneficiaries have in their 
trust assets is protected by the Fifth Amendment Due Process and 
Takings Clauses. 34 Indeed, not only the actual ``interest'' 
in the asset but also any cognizable claim (i.e. the accounting) is a 
5th Amendment protected property interest. 35 In short, any 
legislatively imposed resolution which alters the claim in order to 
limit the United States' liability for the breaches of trust would 
necessarily violate the Constitution.
---------------------------------------------------------------------------
    \34\ See Babbitt v. Youpee, 519 U.S. 234 (1997) (individual trust 
interest protected by Fifth Amendment even if de minimis); Hodel v. 
Irving, 481 U.S. 704 (1987).
    \35\ See, e.g., Logan v. Zimmerman Brush Co., 455 U.S. 422, 428-29 
(1982) (Noting that Supreme Court struck down in Mullane v. Central 
Hanover Bank & Trust Co., 339 U.S. 306 (1950), a state law that 
terminated the ``rights which beneficiaries would otherwise have 
against the trust company...for improper management of the common trust 
fund...[because it] worked to deprive the beneficiaries of property by, 
among other things, cut[ting] off their rights to have the trustee 
answer for negligent or illegal impairments of their interests.'' 
(emphasis added; internal quotes and citations omitted)).
---------------------------------------------------------------------------
                             V. CONCLUSION

    Mr. Chairman, let me conclude by reiterating the plaintiffs 
commitment to resolving this case. We have vigorously pursued 
litigation because we want resolution. We do not care if achieving 
fairness and stopping abuse of individual Indian beneficiaries comes 
through litigation, mediation or a settlement act, or arbitration for 
that matter. The means are unimportant. What is important is that we do 
so quickly and fairly.
    I will leave you with the following passage from a report 
commissioned and prepared for Congress some years ago:
          In the first place the machinery of government has not been 
        adapted to the purpose of administering a trust.
          On the other side, behind the sham protection which operated 
        largely as a blind to publicity, have been at all times great 
        wealth in the form of Indian funds to be subverted; valuable 
        lands, mines, oil fields, and other natural resources to be 
        despoiled or appropriated to the use of the trader; and large 
        profits to be made by those dealing with trustees who were 
        animated by motives of gain. This has been the situation in 
        which the Indian Service has been for more than a century--the 
        Indian during all this time having his rights and properties to 
        greater or less extend neglected; the guardian, the Government, 
        in many instances, passive to conditions which have contributed 
        to his undoing.
          And still, due to the increasing value of his remaining 
        estate, there is left an inducement to fraud, corruption, and 
        institutional incompetence almost beyond the possibility of 
        comprehension. 36
---------------------------------------------------------------------------
    \36\ ``Business & Accounting Methods, Indian Bureau,'' Report of 
the Joint Commission of the Congress of the United States, 63rd Cong. 
3d Sess., at 2 (1915).
---------------------------------------------------------------------------
    As you can see from the citation, this is a report from 1915. They 
knew back then of the ``fraud, corruption, and institutional 
incompetence almost beyond the possibility of comprehension.'' I can 
show you similar findings in reports from the 1920s, 30s, 40s 50s, all 
the way up to present. When and how will this nightmare administration 
of our trust property end?
    We have a chance right now to stop this ``fraud, corruption, and 
institutional incompetence.'' With help from this Committee, we can 
make sure that the abuse present in 1915 is not still present in 2015.

    [NOTE: Attachments to Mr. Harper's statement have been retained in 
the Committee's official files.]
                                 ______
                                 
    The Chairman. A couple of questions that have come up. One 
is that in your prepared testimony, you suggest what the 
liability to the Department may be. I have read, along, I 
believe, with everybody else, reports in the press as to how 
much is owed on this.
    I guess my question is that no one really knows what the 
liability is at this point and I am not sure that it is wise to 
be throwing numbers out there that no one can substantiate. 
Could you comment on that?
    Mr. Harper. Thank you, Mr. Chairman. Yes. I think it is 
important to recognize what those numbers represent. The 
parties agree on certain fundamental issues. One of the issues 
is that approximately $13 to $14 billion, in that range, was 
produced between about 1909 and the year 2000 from the 
individual Indian trust monies. Now, those are broad 
approximations and it is within a couple hundred million, but 
it is still a pretty good agreement on such an important issue.
    When you take that amount and you say that no money was 
ever paid, right, that amount would include the numbers that we 
are talking about, in the hundreds of billions. That is not to 
say, and we fully recognize that there has been money that is 
paid to beneficiaries, the point being is that it is the 
trustees' obligation to demonstrate which monies were paid to 
the beneficiaries.
    Now, the only evidence we have so far that the trustees, 
the trustee delegate in performing its accounting is the Ernst 
and Young report. That is riddled with errors. It doesn't have 
any support. We want to go to trial on that issue.
    The bottom line is this, Mr. Chairman. We believe that 
accounting is impossible and spending a dime on performing an 
accounting is wasting a dime. That is clear as day, that the 
resolution has to come from figuring out an alternative 
methodology consistent with trust law principles--that is a 
vital part of it--and those trust law principles include that 
the evidence is presumed to be with the trustee for the 
beneficiary.
    We are at the table. We are willing to look at whatever 
proposals there are. Part of the frustration on our end is that 
we haven't seen any proposals from the government. We have put 
forward ones and we haven't gotten counteroffers, and so we 
await that process where we can see a proposal from the 
government.
    The Chairman. Based on that response, would it help to 
speed a resolution of the lawsuit if Congress defined the 
method of accounting that must be done?
    Mr. Harper. It seems to me that the methodology for doing 
an accounting is well settled. Trust law provides the answers 
to all these questions. When accounting is impossible, then 
there are certain ways for the court to look at the available 
evidence and correct the account balances and restate those 
account balances, you conform it to your trust law. We have 
proposed one methodology to do that in our January 6, 2003, 
plan. I could certainly submit that for the Committee if you 
are interested.
    The point being that we don't think it is--from the first 
instance, that we should depart from those generally prescribed 
notions well settled in law. One of the things that we strive 
to do in this litigation is to establish a simple principle, 
that just because the beneficiaries here are Indians and just 
because the trustee is the United States does not mean we have 
some lesser standard of care, does not mean that we have some 
lesser duty to account, that the government owes us the same 
duty to account, and that duty prescribed in law requires that 
when the accounting is impossible, that alternative methods 
consistent with trust law be used.
    And so I guess to answer your question, we think that 
Congress--the other last point I would make is this, that the 
recent December 10 decision in the Court of Appeals made clear 
that whatever Congress does, it must be sure that each 
beneficiary gets, and this is a quote, ``his due or more.'' And 
I think that that is very important. So whatever methodology it 
is, it has to be consistent with that principle.
    The Chairman. I understand what you are saying, but I think 
some of the facts that you state or some of the opinions that 
you give is what is the heart of the case, if that is what is 
in dispute. That is part of the problem.
    Let me ask you this. If we were to move forward with 
looking at legislation on this, are you prepared to work with 
us, with this committee and with the Senate committee, to try 
to come up with a fair and equitable settlement on this?
    Mr. Harper. Without any reservation. You are here to do 
that. We want to work with you closely to find resolution. I 
mean, part of this problem is this. There are so many lost 
documents that nobody knows when you have that many lost 
documents what happened to those transactions. The best way 
sometimes to figure that out is a rough justice approach. That 
may be what is required here through some type of an agreement, 
and we would want to work with you in developing how that gets 
done.
    The Chairman. If we ultimately move forward with this, 
which at this point I believe we will, who has the authority to 
sign off on a settlement, to sign off on an agreement?
    Mr. Harper. For matters that are within the confines, the 
parameters of the Cobell litigation, ordinarily, Rule 23 of the 
Federal Rules of Civil Procedure, which is the rule that 
governs class actions, allows for the main plaintiffs to 
initially sign off. That does not mean for due process concerns 
that there may not be a--take a hearing where objections can be 
heard. But as far as that initial sign-off, it is generally 
allowed to be done through the main plaintiffs.
    The Chairman. And that is who you represent?
    Mr. Harper. Precisely, yes.
    The Chairman. All right. Thank you.
    Mr. Faleomavaega?
    Mr. Faleomavaega. I want to thank Mr. Harper for appearing 
this morning in the Committee. I have just a couple of 
questions.
    I was somewhat caught off guard in Mr. Cason's earlier 
statement saying that the Department of Interior is not in a 
decision role making agency in this whole thing, and then I 
don't know if I totally agree with the gentleman in this 
assessment of this situation. You know that last year, on a 
bipartisan basis, the Chairman of the Senate Indian Committee 
and Mr. Inouye and our own Chairman, Mr. Pombo, and our Ranking 
Member, Mr. Rahall, initiated what was then known as a 
mediation effort to see if the parties would come to the table 
and come to agreement. Obviously, this didn't work.
    Could you give us some concerns as to why the offered 
mediation effort also collapsed? I know there was acrimony. 
There was a lot of animosity, I suppose, between the plaintiffs 
and the administration. But can you give us your perspective as 
to why the many efforts at mediation just did not work?
    Mr. Harper. Sure. Thank you. Yes. I think I would refer to 
my written testimony which details a number of these things, 
but a couple of salient points on that.
    The mediation, I think, as I understand it, is continuing, 
and we are continuing in that process and we are engaged on 
that process. So I don't think it is at that point where we 
would think it is at an end. In fact, in some ways, it never 
really began. We had mediators, but as far as the types of 
substantive discussions that would lead to a resolution, I 
think it got off track on many procedural issues, the hiring of 
experts and things of that nature.
    On the substantive questions of settlement, we had put 
forward proposals on all three of the main issues in this case: 
Trust reform, IT security, and historical accounting. Those 
were never answered and no counteroffer was never given. And so 
we are sort of wrecked at the table. We have to ask the 
question--obviously, we cannot settle with ourselves. We are 
looking for any partner in this process, in whatever process it 
might be. Is it through arbitration? Is it through settlement 
legislation? Is it through mediation? Whatever the case may be, 
we are there and we are prepared to work to resolve this 
quickly, this issue for our beneficiary class.
    Mr. Faleomavaega. So it was on the procedural aspects of 
the mediation that things just didn't work out very well in 
terms of your efforts.
    There was also an earlier statement by Mr. Cason about the 
concern about the personal liability of Department of the 
Interior officials, should they be found--I really don't think 
that these people purposely would steal the money, maybe 
because they didn't know how to manage the funds. What is the 
plaintiffs' position on this? Is this also what you are 
pursuing, to find liability on these--personal liability on 
these Department of Interior officials for not doing their job?
    Mr. Harper. Let me put the question in some context, 
because we are not seeking liability for individuals for 
stealing or something of that nature. What we are seeking 
accountability for is to tell the truth to courts, simple 
propositions like that.
    When a person comes and is a witness before a court and 
files a document, they have an obligation to tell the truth, 
and when they don't do that, it is our obligation as counsel 
for the plaintiffs to point that out to the court and make sure 
they are held accountable.
    A number of years ago, a former Republican Senator said 
that if this trust were managed by anybody else, people would 
be in jail, and that is true. One of the major problems in this 
trust is that there is absolutely no accountability, and one of 
the ways that we have to ensure accountability is that taking 
measures to hold people accountable when they file reports to 
the court, when they file briefs with the court. Those things 
are critical to ensuring that we have a--we can move forward on 
trust reform.
    Mr. Faleomavaega. Is there ever any question of the part of 
the administration, because I notice in your statement that it 
seems that there is some clear legal differences of opinion 
about this whole aspect of the trust funds. I believe your 
submission to the court or before the court was that this is a 
trust responsibility that has been violated by the Federal 
Government, as opposed to the defendants saying, no, this is 
just an administrative problem that we had here. Therefore, we 
have no trust responsibilities. What exactly is the court's 
ruling now, even up in the appellate level, on this case? Is it 
a violation of the trust responsibility of the Federal 
Government, or are we still doing around with the fact that it 
is an administrative procedure problem that has caused this?
    Mr. Harper. I appreciate the question because it is 
something that I wanted to clarify. The fact is that the Court 
of Appeals said on December 3 that this is a trust case and 
this is a Indian case, and those, quote-unquote, salient 
considerations make it different from the normal administrative 
law case. So the courts have spoken on this issue, and we 
believe spoken quite clearly.
    When you have a fiduciary responsibility, you are treated 
as a fiduciary. You have to manage that property and you are 
judged based on fiduciary standards. That is the way. And that 
is what we have here. The courts have also concluded that there 
is a strict duty to account, that that duty to account is 
similar to every other trust beneficiary's--excuse me, 
trustee's duty to account, and that responsibility also hasn't 
been fulfilled and that there has been a breach of trust.
    So all these are things that have been decided in the 
courts, and I understand the frustration. Believe me, none of 
us gives nine years, day to day, having this grind, going out 
to Indian country, visiting people, for example, on the Navajo 
reservation, Navajo Arapees that I see. We are building on one 
of the largest natural gas reserves in the world and they are 
living in huts. They should be living like Saudi Arabians, but 
they are living in huts. Now, that is a breach of trust. That 
is mismanagement. That has to stop.
    So we are as frustrated as anybody to get this problem 
fixed, but it has to be done in the right way and it has to be 
done not for pennies on the dollar but for an amount consistent 
with what these beneficiaries are owed.
    Mr. Faleomavaega. On the basis of your lawsuit, just on 
this issue alone of trustee responsibility, and I notice the 
defendants filed a lawsuit to dismiss the whole case 
altogether, that it had nothing to do with trust responsibility 
between the Indian country and the Federal Government. That 
really, in my own mind--and I am sorry, Mr. Chairman, I am 
taking a little time, if it is all right with you--and I 
sincerely hope that maybe the only other option now is to 
provide some kind of a Congressional legislation, which I 
sincerely hope that my Chairman will seriously consider this 
possible option.
    I would like to ask you, Mr. Harper, if the Congress should 
decide that maybe this is the only possible settlement, is by 
legislation, what would be your recommendations in terms of 
some of the things that ought to address this proposed 
legislation, if it should come to that level with the members 
of the Committee and our good Chairman?
    Mr. Harper. It is a great question and I think I can point 
to a couple of things. One is that we believe it would be 
problematic to take any monies used to settle the Cobell case 
from appropriations that would ordinarily go to Indian country, 
ordinarily go to the Interior Department. And so we hope that 
this committee would look to the Claims Judgment Fund, for 
example, as a source for funding any resolution. We believe 
that that is a way to get the settlement but not have it such 
that we also have the inequity of taking from Indian country to 
pay for the resolution of this mismanaged trust.
    I think that one of the ways that we would hope to explore 
resolution is to start talking about reasonable dollar amounts. 
We know how much went through the trust. We know the parameters 
of how much could potentially be owed. And I think it is a 
matter of figuring out what is a reasonable settlement amount 
based on those parameters, and we look forward to working with 
the Committee on figuring that out.
    I would also just mention that we also have to do something 
about figuring out how we reform the trust. Just because you 
have a resolution of the historical accounting looking back, 
you still have the issue of reforming the trust, and we look 
forward to working with the Committee on that, as well.
    Mr. Faleomavaega. You are agreeing with what the 
administration is trying to do in reorganizing the structure of 
the BIA to have this trust, or whatever it is, to make sure 
that these funds should be better accounted for and making sure 
that individuals as well as tribes are properly given the 
compensation that they deserve for the leases and all of that?
    Mr. Harper. No.
    Mr. Faleomavaega. Here is my problem. We are about to pay, 
what, $200 million a year just to administer, and then we 
haven't even paid you one cent yet after nine--actually, it is 
more than nine years, Mr. Harper. We started this since 1990. I 
remember this distinctly with Congressman Richardson, trying to 
work this whole thing. It started also with $20 million to 
provide some kind of accounting, which turned out to be zero. 
It didn't have any impact on this thing.
    I am just concerned if by way of restructuring the 
administration that this might be a help, and like you 
suggested about reforming the BIA in such a way that there is 
better accounting of the leases and whatever is owed to the 
Indian people.
    Mr. Harper. To answer your question, no we don't agree with 
the reorganization. We believe that it is a waste of resources. 
We believe it is money not well spent. It doesn't address the 
fundamental problems in the system. It doesn't address, for 
example, the fact that in many places, there is no accounts 
receivable system. It doesn't address the negotiation of leases 
for less than fair market value. There are so many problems 
that it does not address.
    But what you can say about it, you can analogize and 
basically say it is rearranging the deck chairs on the Titanic, 
and we think that that is an appropriate analogy for what the 
reorganization is doing. We don't think it is going to move 
ultimately to a reformed trust. We think fundamental changes 
have to occur that are quite distinct from what is going on in 
the Department right now.
    Mr. Faleomavaega. I know we have to be very careful on 
this, as my chairman had cautioned me about some kind of a 
settlement. We are throwing all kinds of numbers and I just 
wanted to--and I suspect you probably don't want to throw out 
any numbers, as well. I think this tends to be the heart of the 
problem for the members of the Committee, as well.
    What are we looking at in terms of round-about figures? 
Since now there is no accountability, I mean, the 
accountability is impossible to--I get the sense from Mr. Cason 
that every penny should be accounted first before giving the 
funds. I am really puzzled here in terms of what are we really 
looking at. I hate to suggest $160 billion, but what is 
something that is more realistic in terms of all the nine years 
that you have expended your time and effort in looking over the 
records, talking to the Indian communities, and all of this?
    As I said, the last time when I talked to Ms. Cobell, at 
least as an initial thought, there was somewhere between zero 
to $13 billion, and Mr. Chairman, I am not trying to resolve 
the settlement issue right here, but I am just trying to figure 
out what numbers are we looking at, basically.
    Mr. Harper. Well, through the mediation process, we did 
present the government with a specific number, but because of 
the nature of that process, I am not sure it is appropriate to 
divulge that in this public forum. We would, of course, be--we 
want to work with the Committee to figure out what that number 
is, and I think it would be inappropriate at this early 
juncture, where we are exploring what are the best avenues, to 
come out with a specific number or even a range of numbers.
    Mr. Faleomavaega. I want to say, Mr. Chairman, I cannot 
thank you enough again for your leadership and initiative in 
calling this hearing, and I sense very well that we will 
continue to pursue this issue that we have not been able to 
find a resolution for 15 years now. I look forward to working 
with you and see if we can find a resolution to this.
    Thank you, Mr. Chairman, and thank you, Mr. Harper.
    The Chairman. I want to thank Mr. Harper for his testimony. 
If there are further questions, they will be submitted to you 
in writing, if you can answer them in writing so that they can 
be included as part of the hearing record.
    Mr. Harper. Of course.
    The Chairman. I realize that this is an ongoing case and it 
makes it difficult sometimes to answer questions. I appreciate 
you making the effort to be here and enlighten the Committee as 
much as you did. Thank you for that.
    Mr. Harper. Thank you, Mr. Chairman.
    The Chairman. If there is no further business before the 
Committee, I again thank the members of the Committee, thank 
our two witnesses today, and the Committee stands adjourned.
    [Whereupon, at 1:06 p.m., the Committee was adjourned.]

    [A statement submitted for the record by Mrs. Cubin 
follows:]

Statement of The Honorable Barbara Cubin, a Representative in Congress 
                       from the State of Wyoming

    Mr. Chairman:
    My state serves as the home to two Indian tribes, the Eastern 
Shoshone and the Northern Arapaho. Together, they share the Wind River 
Reservation, which lies in west-central Wyoming. As is the case in most 
of Wyoming, these large land based tribes have been blessed with a 
substantial amount of natural resource interests--particularly oil and 
gas production--which gives them substantial financial interests in the 
outcome of the lawsuit we will revisit today.
    For more than a century the federal government has been the trustee 
of funds for Indian tribes as well as individual Indians. These trust 
funds, generated from rights and leases, have become a significant 
source of funding for many Indian tribes all across the nation. 
Unfortunately, every year--every day--that this court case remains 
unresolved, we run the dual risk of continued mismanagement of these 
trust funds and an overburdening of staff and resources at the U.S. 
Department of Interior.
    While the appointment of co-mediators last year was an encouraging 
step in the right direction, I am curious to hear today what, if any, 
progress has come of that process. I am also hopeful that our two 
witnesses will help bring clarity to this issue regarding what is the 
next step forward and what role this body should take in finding a 
solution soon.
    Thank you, Mr. Chairman for your continued focus on this important 
issue and I yield back the balance of my time.

                                 
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