    [Senate Hearing 109-194]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 109-194

                            INDIAN TRUST REFORM ACT

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

                                    HEARING

                                   BEFORE THE

                          COMMITTEE ON INDIAN AFFAIRS
                              UNITED STATES SENATE

                           ONE HUNDRED NINTH CONGRESS

                                 FIRST SESSION

                                       ON

                                    S. 1439

     TO PROVIDE FOR INDIAN TRUST ASSET MANAGEMENT REFORM AND RESOLUTION OF
                          HISTORICAL ACCOUNTING CLAIMS

                                   ----------

                                 JULY 26, 2005
                                 WASHINGTON, DC

                            INDIAN TRUST REFORM ACT

                                                            S. Hrg. 109-194

                            INDIAN TRUST REFORM ACT

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

                                    HEARING

                                   BEFORE THE

                          COMMITTEE ON INDIAN AFFAIRS
                              UNITED STATES SENATE

                           ONE HUNDRED NINTH CONGRESS

                                 FIRST SESSION

                                       ON

                                    S. 1439

     TO PROVIDE FOR INDIAN TRUST ASSET MANAGEMENT REFORM AND RESOLUTION OF
                          HISTORICAL ACCOUNTING CLAIMS

                                   __________

                                 JULY 26, 2005
                                 WASHINGTON, DC

                        U.S. GOVERNMENT PRINTING OFFICE
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    _____________________________________________________________________________
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                          COMMITTEE ON INDIAN AFFAIRS

                         JOHN McCAIN, Arizona, Chairman

                  BYRON L. DORGAN, North Dakota, Vice Chairman

    PETE V. DOMENICI, New Mexico         DANIEL K. INOUYE, Hawaii
    CRAIG THOMAS, Wyoming                KENT CONRAD, North Dakota
    GORDON SMITH, Oregon                 DANIEL K. AKAKA, Hawaii
    LISA MURKOWSKI, Alaska               TIM JOHNSON, South Dakota
    MICHAEL D. CRAPO, Idaho              MARIA CANTWELL, Washington
    RICHARD BURR, North Carolina
    TOM COBURN, M.D., Oklahoma

                     Jeanne Bumpus, Majority Staff Director

                    Sara G. Garland, Minority Staff Director

                                      (ii)

                                C O N T E N T S

                                  ----------
                                                                       Page
    S. 1439, text of.................................................     4
    Statements:
        Akaka, Hon. Daniel K., U.S. Senator from Hawaii..............    77
        Cason, Jim, associate deputy secretary, Department of the
          Interior...................................................    78
        Cobell, Elouise P., Blackfeet Reservation Development Fund...    93
        Dorgan, Hon. Byron L., U.S. Senator from North Dakota, vice
          chairman, Committee on Indian Affairs......................    76
        Gray, Jim, chairman, Board of Directors, Inter-Tribal
          Monitoring Association.....................................    86
        Hall, Tex, president, National Congress of American Indians..    89
        Johnson, Hon. Tim, U.S. Senator from South Dakota............    77
        Martin, James T., executive director, United South and
          Eastern Tribes, Inc........................................    99
        McCain, Hon. John U.S. Senator from Arizona, chairman,
          Committee on Indian Affairs................................     1
        Stensgar, Ernest L., president, Affiliated Tribes of
          Northwest Indians..........................................    96
        Swimmer, Ross, special trustee for American Indians,
          Department of the Interior.................................    78

                                    Appendix

    Prepared statements:
        Akaka, Hon. Daniel K., U.S. Senator from Hawaii..............   111
        Cason, Jim...................................................   111
        Cobell, Elouise P. (with attachment).........................   218
        Frazier, Harold, chairman, Cheyenne River Sioux Tribe........   122
        Gray, Jim....................................................   125
        Hall, Tex (with attachment)..................................   134
        Hillaire, Darrell, chairman, Lummi Indian Nation (with
          attachment)................................................   238
        Marshall, Sr., Clifford Lyle, chairman, Hoopa Valley Tribe...   117
        Martin, James T. (with attachment)...........................   163
        Moses, Jr., Harvey, chairman, Confederated Tribes of the
          Colville Reservation.......................................
        Stensgar, Ernest L...........................................   155
        Swimmer, Ross................................................   111

                            INDIAN TRUST REFORM ACT

                                  ----------

                             TUESDAY, JULY 26, 2005

                                           U.S. Senate,
                                   Committee on Indian Affairs,
                                                        Washington, DC.
        The committee met, pursuant to notice, at 10:03 a.m. in
    room 216, Senate Hart Building, Hon. John McCain (chairman of
    the committee) presiding.
        Present: Senators McCain, Akaka, Dorgan, and Johnson.

       STATEMENT OF HON. JOHN McCAIN, U.S. SENATOR FROM ARIZONA,
                 CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS

        The Chairman. Good morning. I want to ask the indulgence of
    my colleagues and the witnesses and those who have joined us
    today to observe this hearing. All of you know that I do not
    ordinarily take a lot of time for an opening statement at our
    hearings and that I encourage our witnesses to be brief in
    their testimony.
        I want to take a few extra minutes to share some of my
    perspectives on the bill before us. For the past several years,
    I have heard broad-based concerns from tribal leaders and
    members of Congress that the Cobell litigation, which has been
    pending for nine years, is draining resources from Indian
    country and creating a poisonous atmosphere for the
    administration of the Federal Government's trust
    responsibilities to Native Americans.
        In the 107th and 108th Congresses, I introduced legislation
    that was intended to try to correct some of the problems in the
    administration of the trust funds and assets. In those bills,
    the Cobell plaintiffs asked that I include a provision that
    would allow the litigation to continue to its conclusion. With
    the support of tribal leaders, I agreed to do so.
        In the 108th Congress, the House Committee on Resources and
    this committee worked with the Cobell plaintiffs and the
    Departments of the Interior and Justice to identify and enlist
    the support of two highly qualified mediators to determine if
    it would be possible to reach an agreement on a settlement of
    the litigation. I supported that effort. Unfortunately, it did
    not succeed and neither did any of the bills I introduced.
        Earlier this year, with the support of the plaintiffs and
    defendants in the Cobell litigation, but more importantly with
    the support of many in Indian country, I said I would make one
    good attempt at resolving the matter legislatively. If it did
    not succeed, there are many, many other issues that the
    committee can attend to.
        Last week, Senator Dorgan, my friend and cochairman, joined
    me in introducing S. 1439, a bill to resolve the historical
    accounting claims in Cobell v. Norton, and begin to reform the
    Department of the Interior's trust responsibility. We made it
    very clear to all parties that the bill was intended to provide
    a basis for discussion and review of the issues, and we welcome
    comment and the opportunity to improve it.
        However, before anyone had time to read and fully
    understand the bill, the lead plaintiff in the Cobell case was
    quoted in the press saying that the bill ``reminded me of the
    Baker massacre at Black Feet when they gave Heavy Runner this
    piece of paper. They said, `Hold it up, it will keep you safe.'
    ''
        I can certainly understand that no one would be entirely
    satisfied with the bill. I can even understand that many would
    be disappointed. That is the nature of a settlement proposal.
    No one gets everything they want. There are no clear winners.
        This bill embodies a series of proposals. It reflects
    extensive listening and reflecting on the views of the parties
    to the litigation, tribal leaders and many other stakeholders
    from around the country. It cannot credibly be compared to a
    massacre, even in a figure of speech.
        I hope that those who are affected most directly by the
    settlement of this longstanding dispute will engage
    constructively in the process. I am disturbed, however, by what
    I see as a serious misapprehension of some that settlement
    legislation can be enacted by being forced down the throat of
    either party. This simply cannot and will not happen. The idea
    that it might betrays a fundamental lack of understanding of
    the legislative process in general and the battle ahead for any
    legislation that would settle the Cobell litigation in
    particular.
        If all of the people testifying here today were to join
    hands and reach agreement on every word in the bill, the work
    before all of us would be just beginning. There are many
    members of Congress, of the public at large, and in the
    claimant class who will ask very hard questions about the
    amount of money we propose to pay in lieu of providing an
    historical accounting. I think the sizable sum we envision and
    the manner of its distribution can be defended, but it will
    have to be defended and unity among those here today is
    necessary, but by no means sufficient to do that.
        While they do not like to talk about it in public, the fact
    remains that both parties to the case face very serious legal
    risks if the litigation continues. Some aspects of the strong
    opinions of the District Court, often cited by plaintiffs, have
    been rejected by the Court of Appeals, which is much more
    selectively cited. The burden of proof that the Court of
    Appeals has established for the claims appears to comport with
    the precedent, but imposes a very real and substantial
    challenge to each and every claimant in the class.
        While the parties may not agree on how much risk each
    faces, they should agree that they risk facing years and years
    and years of litigation during which time the individual
    plaintiffs stand to receive nothing, save the further draining
    of resources away from programs such as education and public
    safety and towards the Office of Special Trustee.
        The defendants face year after year of painstaking efforts
    to reconstruct the past, while simultaneously trying to cope
    with seemingly inexhaustible demands to do more and better with
    limited resources appropriated by Congress. I am well aware of
    the hardships experienced every day by the individuals who have
    not been and are not being treated fairly in the administration
    of their trust funds and assets. I have visited them in their
    homes and on the lands in the Southwest, the Northwest and the
    Great Plains. I, too, would like to see them achieve some
    justice in their lifetimes, and I would like to believe that at
    the end of the day, the individuals who struggle through the
    drama of the litigation on both sides, I would like to see them
    made as whole as is possible in the circumstances we all
    confront.
        I understand that the plaintiffs have reacted negatively to
    the proposal that the settlement funds to be made available by
    Congress would be distributed by a special master, as opposed
    to having the court distribute the funds and determine
    attorneys fees. While the legislation does not specify a dollar
    amount, it does make clear that the resolution will be for
    billions of dollars at a minimum for the class of hundreds of
    thousands described in the bill. The bill proposed that each
    receive thousands of dollars in per capita payments alone. This
    is at a minimum.
        In addition to per capita payments, the legislation
    envisions that many claimants will receive much more than this
    in formula payments, depending on what they were likely to have
    lost as a result of the Department of the Interior's
    mishandling of their individual Indian money accounts.
        If the Federal Government is going to make this money
    available to attempt to right a wrong perpetrated over many
    years of mismanaging accounts, it does not strike me as
    unreasonable that the legislation resolve the class action for
    historical accountings and remove it from the court for a
    prompt and fair distribution to claimants. Congress did this
    for the families of the victims of the 9-11 attacks. It is not
    a flawless way to proceed, but it has been demonstrated to be
    fair and prompt.
        I look forward to hearing the witnesses' statements today.
    We are considering very complex issues, and S. 1439 can be
    significantly improved, but it must be with the agreement of
    both parties to the Cobell litigation and with the support of
    tribes from around the Nation. Although no tribe is a direct
    party to the litigation, it is evident to even the most casual
    observer that all tribes have been and are being affected by
    it.
        Let's start to put our efforts into finding a way to move
    forward together. We have an opportunity to try to make some
    genuine progress on the issues that are addressed in S. 1439.
    Let's all approach it with the seriousness it deserves and
    leave the rhetoric to others. We will not have this opportunity
    again anytime soon.
        [Text of S. 1439 follows:]

      STATEMENT OF HON. BYRON L. DORGAN, U.S. SENATOR FROM NORTH
           DAKOTA, VICE CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS

        Senator Dorgan. Mr. Chairman, thank you very much.
        Let me echo your comments about some of the more
    intemperate remarks that have been made about our draft
    proposal. It is important to point out that this litigation,
    the Cobell litigation, affects not just the individuals that
    are a party to the litigation. It will affect all Indian people
    all across this country. In the future, we can spend billions
    of dollars doing historical accounting, sending the money to
    accountants, legions of accountants and lawyers to do the
    historical accounting, or we can find some way to resolve this.
    But the fact is, this issue is going to affect Indian health
    care, Indian housing, Indian education unless we find some way
    to address it.
        Now, we drafted a piece of legislation. We said it was a
    start, a draft. We left the money issue blank in the larger
    numbers. We drafted this influenced by many of the principles
    developed by the work group that was organized by the National
    Congress of American Indians and Chairman Tex Hall and the
    Intertribal Monitoring Association. When we put it out there,
    we clearly indicated, look, this is just a step we hope in the
    right direction.
        Indian people have been cheated, bilked and defrauded over
    a long period of time. I understand that. I agree with that.
    This country needs to deal with that. It has been the case with
    respect to trust accounts. Senator McCain and I and other
    members of the committee cannot undo that. We wish we could,
    but we can't. So the question is, what do we do now?
        Well, there are two choices. We can be actively involved
    trying to reach some kind of legislative solution to this that
    is acceptable to everyone, or hopefully acceptable to most. Or
    we can just say, we have a lot of other things we ought to work
    on. You all just handle it. Let the courts handle it. We cannot
    pass legislation. We have too many discordant voices out there.
    It cannot be done, so that will not be our agenda. We will just
    not move legislation. Whatever the courts decide, they decide.
    Whatever money we have to pony up for accountants and
    attorneys, we will do it. But we cannot provide the leadership
    on something that is insoluble.
        That is one approach. We have chosen not to try to move
    down that road because we think that is counterproductive for
    the country, but most importantly we believe it is
    counterproductive for Indian people. We think for the tribes
    and the individuals involved in the case and for all Indians
    all across this country, who I think still suffer from a bona
    fide emergency in health care, housing and education, we need
    to do better. That is why we have decided to try to advance
    working with the working group, advance something that we think
    constructively could intercept and respond to this.
        Does anybody in this room think that spending $8 billion,
    $10 billion, or $12 billion for accountants and lawyers and
    historical accounting is the right way to address this? That is
    unbelievable.
        So we have two choices. We can either decide to proceed and
    work with people in a constructive way, or we can decide, don't
    bother us; we can't do it. And so you all go figure it out with
    the courts and let the lawyers and the accountants get rich and
    everybody else is going to suffer the consequences. I hope we
    choose the former, but I must say that I was not very impressed
    the other day reading some of the statements. There is so much
    shrill noise, crowd noise on some of these issues that it will
    make it very hard to proceed.
        Let me also as I conclude say that there are also some
    important leadership out there in Indian country as well who
    really feel that this needs to get resolved in the right way
    for Indian people. We want to work with them. This will not be
    easy, but Chairman McCain and I and other members of the
    committee have decided we have a responsibility to try. We are
    going to try as hard as we can to see if we cannot find a way
    to do this, but we can't do it without your help.
        Mr. Chairman, thank you very much.
        The Chairman. Thank you very much.
        Our first panel is Jim Cason, who is the associate deputy
    secretary of the Department of the Interior. He is accompanied
    by Ross Swimmer, who is the special trustee for American
    Indians in the Department of the Interior. Welcome to both of
    you, and please proceed. It is good to have you back, Mr.
    Cason.
        Mr. Cason. Thank you, Mr. Chairman.
        The Chairman. Excuse me, before you go. Did Senator Akaka
    or Senator Johnson have opening comments?

      STATEMENT OF HON. DANIEL K. AKAKA, U.S. SENATOR FROM HAWAII

        Senator Akaka. Yes, Mr. Chairman; I do have a statement. In
    the interests of time, I will submit my statement for the
    record.
        But before that, I want to commend you and Senator Dorgan
    for addressing this huge, historic problem for Indian country
    and all Indian people. It is something that is going to be
    tough, but I hope that we will all work together to try to find
    the best solutions to this problem over many, many centuries,
    not centuries, but decades that this has been a problem
        Mr. Chairman, I want to commend you and Senator Dorgan for
    introducing S. 1439 and commend you for the effort and to let
    you know that I will be with you in addressing this huge issue
    for our country.
        Thank you very much, Mr. Chairman.
        [Prepared statement of Senator Akaka appears in appendix.]
        The Chairman. Thank you.
        Senator Johnson.

     STATEMENT OF HON. TIM JOHNSON, U.S. SENATOR FROM SOUTH DAKOTA

        Senator Johnson. Yes, Mr. Chairman; I will be very brief.
        Thank you for holding this hearing and for your efforts
    with the Indian Trust Reform Act of 2005. I am still receiving
    comments from both tribal leaders and tribal members regarding
    this bill. Upon receiving more feedback from the interested
    parties back home, I will share their concerns with the
    committee.
        It is my hope that all concerned parties can work toward a
    just conclusion with a minimum of harsh rhetoric and a maximum
    of good faith, cooperation and consultation. I want to thank
    the committee staff for consulting with our tribal leaders thus
    far, as the committee should. My home State of South Dakota is
    home to a significant percentage of individual Indian money
    account holders and trust asset, with 26 percent of Indian
    money accounts from tribes in the Great Plains region, twice
    the number of individual accounts of any other region.
        I look forward to continuing to work with you as we proceed
    on this important issue. Frankly, I have been discouraged over
    the years with the Government's actions pertaining to the
    management and mismanagement of the tribes and individual trust
    assets. The Government as trustee has failed Indian country. At
    times, the Government has acted in bad faith.
        I understand that this bill was drafted with compromise in
    mind. It is important that efforts continue to go on to reach a
    reasonable consensus. While I believe that this legislation is
    a good start, I urge the committee, as I know you will, to
    continue to take a hard look at some of the pro-tribal
    provisions that have been omitted. Most importantly, however, I
    hope that we can arrive at a point where legislation will
    include an articulation of trust standards in the legislation
    itself.
        Finally, any settlement legislation should balance the
    obligations that the United States owes to the tribes and
    tribal claimants. We have to be mindful that this legislation
    does not just address the settlement of Cobell, but has a
    significant impact on all tribal concerns.
        Thank you, Mr. Chairman.
        The Chairman. Thank you very much
        Mr. Cason.

    STATEMENT OF JIM CASON, ASSOCIATE DEPUTY SECRETARY, DEPARTMENT
     OF THE INTERIOR, ACCOMPANIED BY ROSS SWIMMER, SPECIAL TRUSTEE
                          FOR AMERICAN INDIANS

        Mr. Cason. Good morning, Mr. Chairman.
        Thank you for the opportunity to come before the committee
    again and discuss the Cobell v. Norton lawsuit. We have
    discussed the lawsuit on several prior occasions. The
    Department of the Interior supports the efforts of Congress as
    the Indian Trust Settlor to clarify our Indian trust duties,
    responsibilities and expectations.
        We particularly want to thank the chairman and vice
    chairman for their efforts to try to reach a full, fair, and
    final settlement of the issues in this case. This Congress has
    the opportunity to look at this issue anew, examine the facts,
    and move forward to a clear and consistent sense of purpose
    regarding the Federal Government's administration of the Indian
    trust.
        Mr. Chairman, as mentioned before, we have had a
    significant challenge in trying to separate rhetoric from fact
    involving this issue. The case is laced heavily with rhetoric.
    What we have done in the last 3 years is attempt to replace
    rhetoric with fact with our accounting efforts. I would like to
    synopsize basically what we have found.
        On the individual accounting area, the Department of the
    Interior spent approximately $100 million in individual
    accounting thus far. We have done an accounting or compiled the
    ledgers for the name plaintiffs and predecessors in interest.
    We have looked at tens of thousands of judgment and per capita
    accounts. We have distributed thousands of special deposit
    accounts. We have done a statistical evaluation of thousands of
    transactions involving land-based accounts.
        We have done all of these activities under the auspices of
    the plan provided by the Department of the Interior to Congress
    and the court to conduct the historical accounting. Throughout
    all of these efforts, we have found that there are differences
    between what is on the accounting ledgers within the Department
    of the Interior and what is in the supporting documentation.
    The differences tend to be few. They tend to be small. And they
    tend to be on both sides of the ledger. There are instances in
    which we have overpaid Indian account holders and there are
    instances in which we have underpaid Indian account holders. If
    you take all of the transactions and all of the interest that
    is associated with the transactions in total for all of the
    things that we have examined, we have so far overpaid Indian
    beneficiaries.
        That does not mean that the job is done. It is not. We have
    been concentrating on our first priority, which is to do the
    accounting for the accounts that had current balances as of
    December 31, 2000. We selected that as the priority because we
    have an ongoing relationship with those account holders. These
    accounts go beyond the period in which we were planning to do
    historical accounting, where they had an ongoing
    responsibility, and under the 1994 act we had ongoing
    requirements for providing periodic statements and balancing
    those accounts.
        So we set that as the priority accounts that we would do
    first. We have found some errors, but they do not amount to
    anywhere near the magnitude of error that has been asserted
    thus far in this case. For example, Mr. Chairman, as we have
    looked at the accounts for land-based accounts, which are the
    most problematic, the most expensive to do, the most
    complicated to do, and the most time-consuming to do, thus far
    in examining all of the thousands of transactions that we have
    looked at, we have a net error of about $10,000. We have an
    overall error of underpayments of about $48,000 and about
    $35,000 of off-setting overpayments.
        So there are some errors, but they tend to be small. They
    tend to be few. I would leave this synopsis with the thought
    that depending on the task that we are given as to how far back
    we account and for whom we account, there could be much, much
    more to be done and in that area there is risk and uncertainty.
    We do not know what we will find if we spend hundreds of
    millions or billions of dollars to go do an accounting. We may
    find results similar to what we have found so far, or we may
    find that there are in fact problems. We do not know. The
    plaintiffs do not know.
        But what we know so far is, after doing tens of thousands
    of accounts, we have not found any sign of systemic fraud or
    systemic accounting error in our systems. What I have been told
    by the accounting firms through our Office of Historical Trust
    Accounting is that the errors that we have found manifest
    themselves as normal human error, as opposed to the result of
    any systemic problem with our systems.
        If I can move on, Congress created the individual trust. We
    are hopeful that S. 1439 will resolve many of the issues that
    we have spent the last 9 years in court debating. From the
    Government's standpoint, we believe that S. 1439 should provide
    a full, fair, and final resolution of the entire case; provide
    a clear and realistic statement of the Government's historic
    accounting obligations for the trust funds of individuals;
    resolve the accounting claims of account holders and any
    associated funds for funds mismanagement; eliminate inefficient
    trust management obligations by consolidating individual
    Indians' lands through a land purchasing program; address any
    historical land assets mismanagement claims; clarify trust
    accounting and management responsibilities such that they are
    limited by available appropriations so that future claims and
    litigation do not arise as a result of unfunded obligations;
    and provide a clear statement of the government's historical
    accounting obligations for Indian tribes.
        We recognize that this is a daunting task, but I can assure
    you it is no more daunting than the prospect of facing many
    more years in court trying to find the answers to these issues.
        Mr. Chairman, I would like to close with a comment in
    support of our people at the Department of the Interior. We
    want to be sure that the public record reflects the fact of
    their extraordinary service to their country. Many of our
    employees past and present have faced rough sledding in the
    Cobell case and have been unfairly maligned.
        Department of the Interior employees working on the issues
    involved in the Cobell case, like other employees of the
    department, are here to serve the American public. They work
    hard and in good faith to implement the laws that you enact and
    protect the legal rights of Native Americans. We ask that our
    employees be treated with the dignity and respect they have
    earned and deserve, as we all work our way together through the
    difficult legal issues involved in the Cobell case.
        The department is encouraged by the Senate's leadership on
    this issue. We look forward to resolving this case so that the
    department and beneficiaries can move forward on a positive
    agenda for Indian country.
        Thank you for the opportunity to appear. We would be happy
    to answer any questions at this time.
        [Prepared statement of Mr. Cason appears in appendix.]
        The Chairman. Mr. Swimmer, do you have any additional
    comments?
        Mr. Swimmer. Mr. Chairman, I do not have specifically on
    the bill, but I would like to bring to the attention of the
    committee some of the reform items which have been a sideline
    to the Cobell matter in the court, in requesting that the trust
    be reformed. After the 2002 consultations that we had with the
    tribal leaders and the tribal leader task force, several things
    came out of that that I felt were very important. After
    becoming the Special Trustee, we moved forward on this agenda
    of reform. I would like to just let you know a few of the
    things that have happened.
        One of the most distressing things has been, I guess in the
    rhetoric both in the case and previous to our tenure there and
    that is that there seems to be a wholesale lack of records in
    Indian country that can establish for fact what happened in
    individual Indian accounts. I think at one time this was true,
    but it was true not because records were not available. It is
    because they could not be brought together. They were located
    in literally hundreds of different locations, Federal record
    centers from Fort Worth to Washington; tribes; BIA offices; and
    other places.
        One of the things that has happened is the creation of a
    records repository in Lenexa, KS. It is a state-of-the-art,
    actually the most modern records center of any in the Federal
    Government, as well as elsewhere. Currently, that record center
    is housing over 100,000 boxes of records that have been
    collected and approximately 250-plus million pages of records.
    Most of these deal with the financial accounting or management
    of Indian lands over the years.
        These have also been indexed and stored, and they are there
    in perpetuity. As we are able to collect additional records,
    they go into this repository. This has been no small effort.
    Approximately $20 million a year has been dedicated to this
    effort for the last few years to bring these records together.
        Since the 1994 act, beginning in the late 1990's, the trust
    fund has been audited annually by outside auditors, both the
    tribal and the individual trust fund. In addition to that, as
    provided in the act, quarterly statements of account have been
    sent to beneficiaries who are entitled to receive the
    statements on any funds that might be there. I might add, the
    quarterly statements are sent out for those who have more than
    $1 in their account. The 1994 act provides that those with less
    than $1 in their account receive annual statements, and those
    too are sent.
        We have just completed the conversion of legacy systems
    into what we call pilot agencies at Anadarko and Concho. These
    legacy systems change from 30- to 40-year-old computer systems
    for the title, work that is done by the Bureau of Indian
    Affairs to the accounting work that is done by the Special
    Trustee's office, and tracking the leasing and the use of land.
    The conversion of these legacy systems and the data in these
    legacy systems enable us to fulfill the requirements of the
    1994 act, identifying source, type and status of funds for each
    individual Indian account holder.
        We have recently implemented at those two locations a
    lockbox system. This has been particularly troubling in Indian
    country. It is to collect the money that is owed. It is not
    unusual, has not been in the past, for a lessee to come in and
    give money to the Bureau of Indian Affairs and have it sit on
    someone's desk for a few days, maybe weeks. This lockbox system
    allows us to collect directly from the lessee, deposit the
    money immediately, begin generating interest on those funds,
    and place it in the appropriate account to avoid the special
    deposit account problem that we have now.
        One innovative thing, I think, that has been very helpful
    in Indian country just in the last 4 months, is a call center
    operation that was set up to receive calls from beneficiaries
    to help them identify answers to problems that they might have
    with their accounts or anything dealing with the trust issue.
    So far, we have fielded over 33,000 calls from beneficiaries at
    this call center with an 800 number. Over 90 percent, I think
    about 94 percent of the calls are able to be resolved at the
    time of the call, which is also important to avoid having to
    continually call back and try to find someone to provide an
    answer.
        For the first time in the history of the Indian trust, we
    now have trained trust administrators and trust officers
    located in the field. These are people who have come both from
    the private sector of trust, fiduciary trust, working in trust
    companies, building trust companies, to people in the Bureau of
    Indian Affairs who have been trained in the fiduciary trust,
    and then cross-trained with the Indian trust and those coming
    from the private trust and vice versa.
        Seven years ago, there was one person in the Department of
    the Interior that had private sector trust experience, and that
    is my Deputy Special Trustee Donna Erwin. Since that time, we
    now have over 60 people trained similarly in the trust world of
    fiduciary trust administering accounts and business on behalf
    of our trust beneficiaries. The total focus of the reform
    effort has been to, for the beneficiary him- or herself to
    provide the services that have in fact been lacking in the
    past.
        So I bring these items to your attention to let you know
    that there is another side to Cobell, and that has been in the
    reform, and we have not been waiting on things to happen, but
    moving forward with the support of the Congress and the
    appropriations, and the support of the Secretary particularly,
    and people like Mr. Cason. So we bring that to the attention of
    the Congress and thank you very much also for the efforts on
    the introduction of the proposed legislation.
        The Chairman. Thank you very much.
        Mr. Cason, what percentage of the total land-based accounts
    have you examined, roughly?
        Mr. Cason. The part that we have been looking at, Mr.
    Chairman, is the electronic-era accounts, 1985 to 2000. Our
    estimate is that they represent about 70 percent of the
    accounts that we intend to look at under our plan.
        The Chairman. What is the percentage of the total accounts?
        Mr. Cason. Total accounts since 1887? We do not know. No
    one knows. As far as I know, there is no list ever compiled of
    all the accounts over the last 118 years. No one knows.
        The Chairman. How much money have you spent on examining
    land-based accounts?
        Mr. Cason. I do not have a specific figure. Overall, we
    have spent about $100 million looking at individual accounts,
    broken into the efforts that I mentioned earlier
        The Chairman. Would you provide that for the record for us?
        Mr. Cason. Yes.
        The Chairman. How much money do you think it will cost to
    complete the land-based accounts?
        Mr. Cason. The estimate that we have in our plan that we
    submitted to Congress for the accounting that we intended to do
    was $335 million. The cost of the accounting looks like it may
    be a little bit more than that, but we have not revised it,
    pending discussions about how we resolve our accounting duties
    and obligations.
        The Chairman. Mr. Swimmer, I think it was the 108th
    Congress, we called for two mediators to work to try to solve
    this. Do you remember that? Two highly qualified individuals?
    What happened?
        Mr. Swimmer. I think what happened is that any mediation
    needs to work toward a middle point and you eventually get the
    two parties together. The information that has been generated
    thus far is that there could be millions of dollars in
    discrepancies in the Indian trust funds over 100 years. It is
    not evident that there was, as Mr. Cason said, wholesale fraud
    at the bureau level. Money came in, money went out, and that
    was the basis of the accounting that was ordered. Money came in
    and money went out. It was not for estimating what should have
    come in. If I leased my minerals for x dollars and I think I
    should have gotten X plus one, the point is, x went into your
    account.
        The plaintiffs, on the other hand, have set a number based
    on $13 billion that we generally both agree came into the
    trust. Their position is none of it went out. It never got
    paid. If you add interest to that over those periods of time,
    you come up with $170-plus billion. When you start at $170-plus
    billion and what could be millions that could be assessed, and
    you are trying to reach a middle point, I really believe that
    the mediators were unable to bring that together, to bring the
    two parties closer together than that.
        The Chairman. Do you have an idea as to what a lump-sum
    payment would be, Mr. Cason, under our proposal?
        Mr. Cason. No, Mr. Chairman; it would depend on the
    assumptions that you make. If we use the facts that we have
    found so far in the accounting process, the number would be
    very, very low. If you looked at the assumptions that Ross just
    talked about, the number would be very, very high. We do not
    think that the facts that we have thus far would support a very
    high number, but there is uncertainty and risk associated with,
    as you mentioned, Mr. Chairman, in your opening statement, that
    as we go further back, depending on the size of the job and how
    we frame the job, what exactly has to get done while we look at
    it. There is risk and uncertainty in a 100-years worth of
    activity, if that is what we have to look at.
        The Chairman. Finally, suppose that Senator Dorgan's and my
    proposal gains no traction and there is just opposition to it
    from all sides, so we move on to other issues. As mentioned, we
    have a number of other issues. It seems to me there is a great
    deal of uncertainty in the courts given the record of the
    District Court judge making certain decisions and then that
    being overturned by an appellate court.
        Then it seems to me that understandably people who are
    involved in litigation may want to carry it all the way to the
    U.S. Supreme Court, since there seems to be divisions of
    opinion at the lower court levels. Is that a logical sequence
    of events here?
        Mr. Cason. Mr. Chairman, in my opinion, if we are not
    successful with this effort it will be a great opportunity
    lost. We have been in court for 9 years. I do not think we are
    any closer to a resolution now after 9 years than we were when
    we started. I think you are right that there are several rounds
    of up and down through the District Court, Court of Appeals,
    and eventually the U.S. Supreme Court if we have to go down
    that pathway. At this point, the time and effort spent going
    down that pathway does not look very productive if there is
    another alternative, which I am hopeful this bill will provide
    us
        The Chairman. Ross.
        Mr. Swimmer. I would agree with Mr. Cason. I would say that
    based on the expenditures to date for the litigation, which
    exceed $100 million, we are looking at another $400 million to
    $500 million just in litigation expenses. So I think there is
    obviously some room for some value to be put on this in the
    legislation.
        The Chairman. Senator Dorgan.
        Senator Dorgan. Mr. Cason, to the extent that you know,
    what is the size of the class in the Cobell v. Norton case?
    Some say 200,000; some say 500,000 individuals. What is your
    sense of that?
        Mr. Cason. At this point, it is undefined. What we have
    from the court is a generic reference to current and former IIM
    account holders, but we have not had any more specific
    definition of that. There are some parameters, a time frame.
    The numbers would change if you say a statute of limitations
    would apply which the District Court does not say applies, or
    if you say, well, I want to take accounts from the 1970's or
    1950's or 1930's. Some people believe that the operative date
    would be 1938 when the Court of Appeals referred to that date
    and it is also in the 1994 act, and the District Court judge
    says 1887. At this point, we do not have any clear definition
    as to who would be covered and who would not be covered.
        Senator Dorgan. Mr. Cason, you told me once about a
    particular parcel of land. You were trying to make a point
    about fractionated ownership, a particular parcel of land, I
    think maybe it was 2,000 acres at the Wahpeton-Sisseton Tribe.
    Can you recount that for me?
        Mr. Cason. I have had several examples, in particular I
    have one tract of land that has been pointed out to me by our
    staff that the smallest individual interest is one-ten-
    billionth of an interest. If you take a typical allotment, most
    of them are 40 acres or 80 acres or 160 acres. It amounts to a
    very, very tiny, small amount of undivided interest in a
    property.
        The point that I was making with you is that as a result of
    fractionation, we have huge complications in running this
    trust. Instead of the 100,000 allotments that we have, we have
    2.5 million to 4 million ownership interests, depending on what
    you count, that we have to keep track of.
        In doing all the land title work for all of those things
    and the implications for leasing and the implications for
    probate, puts us in a position that the way the trust is
    currently framed for individual allotees, we end up wasting a
    lot of money because we have to administrative processing on
    interest of very low value or no value.
        Senator Dorgan. Interest payments of 0.1 cent or 0.4 cents.
        Mr. Cason. Yes.
        Senator Dorgan. I think you described to me a piece of land
    that produced, was it $2,000 worth of revenue and cost $42,000
    for the yearly accounting to keep track of the fractionated
    ownership.
        Mr. Cason. Yes.
        Senator Dorgan. The only reason I make that point is to
    describe I assume how difficult historical accounting is and
    how time-consuming and how much money it is going to take.
        Mr. Swimmer, you said that if this continues through the
    courts to its conclusion, you think upward of $500 million of
    additional legal fees?
        Mr. Swimmer. Accounting and legal.
        Senator Dorgan. Accounting and legal fees.
        Mr. Swimmer. Accounting and legal, and most of that, well,
    that is what the money is going for now is to do the historical
    accounting and to perform the various orders of the court, as
    well as to pay the attorneys, both sides, for the effort that
    they are putting into the case.
        Senator Dorgan. But that would not reflect the cost of the
    larger historical accounting, if you were to be required, as
    the court seems to suggest, and go through the entire
    historical accounting effort, I assume that the costs are much,
    much higher.
        Mr. Swimmer. It could be. We have estimated I believe as
    high as in excess of $10 billion if you were do a transaction
    by tranaction analysis since 1887 of every single account
    holder. If you took the 2,000 owners of the 160-acre tract,
    every time that is leased you have 2,000 transactions because
    each owner has to have an account set up, whatever the money,
    if it less than one penny, it is rounded up to one penny and
    goes into the account, and then when that person passes on, we
    have to do a probate for that particular person, even though it
    is one-ten-billionth.
        So there are structural reforms that need to be done with
    the trust, and certainly the effort at fractionation interests
    that you all have worked on before I think will be helpful in
    the future. It has been helpful in the past.
        Senator Dorgan. One final point. Mr. Cason, you indicated
    that in some of the accounting efforts that you have made that
    the results show little if any error. And yet, most of us have
    read of just devastating anecdotal accounts of not just errors,
    but fraud, manipulation in various parts of the country over
    many years. How does that square with your assessment that you
    take some accounts and take a look at it and you find very
    little error?
        Mr. Cason. It doesn't. In terms of separating the rhetoric
    from fact, we have not found that in the accounting that we
    have done. I think it is also fair to say that we have not
    looked at all accounts everywhere. We started with a priority
    of doing the accounts that are relatively new that had
    balances. Maybe there is something different about those than
    the ones in the past.
        Where we are potentially different in how the two sides
    refer to this is I take the position that until I have actually
    done the accounting and have some indicator one way or the
    other as to what the actual facts are, I do not project one way
    or the other what I would find. Based on the areas that we have
    actually looked and found the facts, what we have found is a
    few errors, and they are small and they are both sides of the
    ledger, where we have overpaid the Indian account holder,
    underpaid the Indian account holder, and that when you net it
    out it is very close to zero relatively.
        So it suggests that we have not found any systemic fraud.
    We have not found any systemic accounting errors in our
    systems. As Ross said, we do balance our accounts daily now. So
    for that period of 1985 to 2000 that we are looking at
    principally, we have not found material problems. It is
    possible before that that there may be problems.
        Senator Dorgan. Then I think I understand the basis for
    your comment. The fact is, this goes back a long, long way with
    unscrupulous land agents and a whole series of fascinating and
    in some ways devastating stories. I think I understand why you
    say little error if you are just talking about a few accounts
    in a relatively short recent timeframe.
        Mr. Chairman, as I indicated to you, we have a series of
    five votes, the first of which will start in just 1 moment.
    When that first vote starts, I will run over and cast my vote
    and come back so we can continue the hearing. I think the
    third, fourth, and fifth votes will be 10-minute votes, but we
    will have to see how that goes. I just wanted to mention that
    when the buzzer rings for the first vote, I will leave and then
    come back so we can retain the hearing as scheduled.
        The Chairman. Thank you very much.
        Senator Johnson.
        Senator Johnson. Yes, Mr. Cason; I wonder if you and the
    Department of the Interior would address this specific bill, S.
    1439. Have you taken a position on this legislation? And would
    you share any further elaboration or critique of the bill?
        Mr. Cason. The Administration has not provided a statement
    of Administration position on the bill yet. As you know,
    Senator, we just got it last Thursday. We have looked at the
    bill and given the nature of the Cobell litigation, there are
    lots of people in the Administration who are interested in this
    legislation and the prospect for resolving the issues.
        I would say generally for all the people that I have talked
    to within the Administration, people have been positive about
    the effort, hopeful about the leadership being shown by this
    committee to try and address the issue. There are a few issues
    which we would like to discuss further with the committee in
    further deliberations of the bill, but overall we have been
    positive.
        Senator Johnson. Thank you
        No further questions.
        The Chairman. Thank you very much.
        Thank you for appearing today. It is good to see you again.
        Mr. Cason. Nice to see you, Mr. Chairman.
        The Chairman. Thank you.
        Our next panel is Tex Hall, who is the president of the
    National Congress of American Indians; Chief James Gray, who is
    the president of the Inter-Tribal Monitoring Association and
    cochairman of the Trust Reform and Cobell Settlement Work
    Group; Ernest L. Stensgar, who is the president of the
    Affiliated Tribes of Northwest Indians of Portland, OR; James
    T. Martin, the executive director of the United South and
    Eastern Tribes of Nashville, TN; and Elouise P. Cobell, the
    Blackfeet Reservation Development Fund of Browning, MT.
        We will begin with you, Chief Gray.

      STATEMENT OF JIM GRAY, CHAIRMAN, BOARD OF DIRECTORS, INTER-
                     TRIBAL MONITORING ASSOCIATION

        Mr. Gray. Mr. Chairman, Mr. Vice Chairman, and members of
    the committee, I am here in my capacity as chairman of the
    Inter-Tribal Monitoring Association, and as cochairman of the
    Trust Reform and Cobell Settlement Work Group. I also serve as
    principal chief of the Osage Nation.
        The Nation will provide its own separate written testimony
    about S. 1439 in light of our unique hybrid situation.
        The Chairman. Without objection, all written statements
    will be made part of the record.
        Mr. Gray. Thank you.
        Those of you have worked to establish the principles for
    resolving Cobell, reforming the broken Federal trust system,
    have strongly held convictions about solutions to this decades-
    old problem. We may come from different regions of the country,
    have varying trust resources and have different stories to tell
    about the harm we have suffered, but we all share the same
    critical and overriding objective: a meaningful settlement of
    the Cobell litigation that helps to both undo the damage done
    and ensure that it does not happen again.
        There is no doubt in my mind, Mr. Chairman and Mr. Vice
    Chairman, that we share the objective of justice for the past
    and certainty for the future. There can be no question that
    this bill represents the first and perhaps the only opportunity
    we will have to settle this case through discussions with the
    U.S. Congress, the entity that established the trust and which
    has preliminary, but not unlimited authority to establish the
    terms of the trust.
        As tribal leaders, we have the responsibility to make the
    most of this extraordinary opportunity. This bill represents
    the committee's commitment to this objective as well. We must
    be successful in this effort, for if we are not, the growing
    rift between Indian tribes and the United States will become an
    entrenched gulf.
        Consequently, I would like to note at the outset that one
    of the most positive aspects of this significant legislation is
    the simple fact that it has been introduced and by whom. I, for
    one, view the chairman's and vice chairman's commitment to this
    effort as evidenced by the introduction of S. 1439 to be a very
    positive step and pledge to work with you in a frank, pragmatic
    and reasonable manner to make this the best legislation it can
    be.
        You have both demonstrated true political courage and
    leadership in crafting a bill to address this bitterly
    controversial issue, and you deserve thanks and appreciation
    from all of us for this bold step.
        As to the bill you have introduced, I want to underscore in
    my testimony today the key element that we believe is right,
    and then close with a few thoughts of where we can go to
    improve the bill. Let me begin with the things that we believe
    are right in S. 1439.
        First, in your bill the funds for settlement do not come
    from programmatic funding of other Federal activities. This is
    a very important element of the bill that is absolutely
    correct. Unquestionably, funds to settle the injustice against
    individual Indian money account holders cannot come from Indian
    programs. We believe the explicit reference in S. 1439 to the
    judgement fund sends a clear message that there is no
    legitimate argument that the cost of this settlement should be
    charged or borne by any distinct part of the Federal Government
    or Federal beneficiary.
        Second, S. 1439 takes clear and affirmative steps toward
    reducing and eliminating several of the primary causes of the
    mismanagement mess. In particular, the bill addresses two
    causes: The fractionated ownership of allotted lands and the
    absence of clear executive responsibility for Federal trust
    activities.
        The fractionation component of the bill demonstrates your
    commitment to a comprehensive effort to put this sad history
    and allotment policy and its nefarious consequences behind us.
    The creation of an Under Secretary position should result in
    the coordination of Federal policies throughout the Department
    of the Interior through the focus of the Federal Government's
    trust obligation. The recognition of this trust responsibility
    underscores the legitimacy of every interaction between the
    Federal Government and Indian tribes and their members. These
    and other provisions demonstrate that this bill is concerned
    with both settling the past and taking steps to fix the future.
        Third, the bill recognizes that a fair settlement for
    hundreds of thousands of individuals who have suffered for
    years or decades will need to be resolved with a payment
    involving billions of dollars. With a class of claimants that
    includes hundreds of thousands of individuals, a settlement of
    even hundreds of millions of dollars would amount to nothing
    more than a token payment for each individual. Your bill
    recognizes that such a token payment will be a constitutionally
    questionable act of confiscation, not the legitimate act of a
    trustee.
        Even if such a patently inadequate payment might be
    permissible, it would neither be fair or adequate to bring the
    crisis to an immediate resolution we must strive to achieve.
        There are a number of tribal leaders like myself who look
    forward to developing a legislative proposal that we can
    recommend to Indian country. As you have heard from others
    today, we are not yet at that point. But both the sponsor
    statements upon introduction clearly demonstrated that neither
    the chairman or vice chairman assume that this bill was
    intended to be anything more than a starting point.
        I look forward to our dialog. In this dialog, we must face
    each tough issue together. There will be likely to be many, and
    resolve them pragmatically, but also in a manner mindful of the
    terrible injustice we are all committed to rectify. Ultimately,
    we must succeed. No amount of effort or accomplishment in any
    other area in this committee's jurisdiction will make up for
    the cost of not achieving a settlement.
        So where do we go from here? First, we must begin with a
    dialog with the sponsors and their staff to develop an
    understanding of whether certain provision of S. 1439
    constitute mere place holders, necessary components of
    settlement legislation, or concessions to the legislative
    environment. For example, there is a great deal of mistrust of
    both the Departments of the Interior and Treasury within Indian
    country. Allowing either department to exercise the scope of
    discretion that would be permitted under the current version of
    the bill could allow the very individuals who are the most
    antagonistic to the objectives of this process to control most
    or nearly all of the elements of the distribution of a
    settlement fund.
        There may come a day when there is enough trust in Indian
    country to structure the settlement in this fashion, but we are
    not at that point today. In fact, we are far from it. If there
    are reasons why a judicially managed distribution is presently
    perceived as either unworkable or unacceptable, we need an open
    dialogue to analyze and address those concerns.
        Similarly, we must develop together a model to determine
    how much to compensate the victims of this injustice. We
    greatly appreciate the sponsors' recognition that a settlement
    must be measured in the billions. We must now work on how to
    develop a rationale for a more specific number. In this
    process, we must bear in mind that an insurmountable burden of
    accuracy measuring the precise amount of compensation is due
    completely to the Federal Government's mismanagement of its own
    records.
        In light of this, we believe that it may be worthwhile to
    work with committee staff to develop some models for
    calculating a fair and equitable settlement figure. One
    proposed model would calculate a compensation amount using an
    inputted error rate times account activity. Adjusted for
    interest and inflation, this idea has some genuine merit and
    together we should explore its viability.
        There are a number of other issues that concern ITMA
    members, which includes allotees. We will provide you with more
    detailed comments as to these in the near future. We have a
    meeting in Denver that is scheduled this week to address this
    area specifically. There is a great deal more to say and
    discuss. Some of these discussions will probably be somewhat
    heated, but we must remember that we are all working in good
    faith and to a common end. We represent a lot of people who
    have a lot of stake in this issue, but when tribal leaders get
    home, no one wants to know whether we won any arguments. They
    want to know if they will be compensated in their lifetimes for
    acknowledged injustices, whether their parents will get justice
    before they die.
        To the chairman and vice chairman, I thank you for giving
    them some hope that this will be the case.
        Thank you and I would be happy to answer any questions.
        The Chairman. Thank you.
        Tex Hall, welcome back.

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

        Mr. Hall. Thank you, Chairman McCain, and good morning
    Senator Johnson and Vice Chairman Dorgan, and members of the
    committee.
        I want to thank you for holding this hearing, Chairman
    McCain, on this most critical issue in all of Indian country
    today. I want to thank the vice chairman and members of the
    committee for their support and leadership on this issue.
        I am honored to appear before the committee today to
    testify on the Indian Trust Reform Act of 2005. I want to start
    by expressing my appreciation to the committee on behalf of the
    250 member tribes of the National Congress of American Indians,
    for your commitment to Indian country and to the people of
    American Indians, and to bedrock the principles of trust which
    underlie the entire relationship between our sovereign Indian
    nations and the Federal Government.
        NCAI strongly shares the view of the committee that it is
    time for Congress to establish a fair and equitable process for
    settling the Cobell lawsuit. We cannot wait any longer. We also
    stand with the Cobell plaintiffs in seeking a full and fair
    adjustment of the individual Indian money trust accounts. I
    want to point out that as tribal leaders that are seated in the
    audience today, we also have the responsibility to fight for
    the welfare of our individual tribal members who are for the
    most part IIM account holders. We are accountable to them as
    elected tribal leaders.
        For that reason, as NCAI president and as a tribal
    chairman, I have invested months and directly used my authority
    to help build a national tribal initiative to resolve the
    Cobell case and reform the trust management system. This
    process resulted in the development of 50 trust principles that
    represent the views of Indian country and I would like have
    them submitted in the record, Mr. Chairman.
        The Chairman. Without objection.
        Mr. Hall. Thank you very much.
        [Referenced document appears in appendix.]
        Mr. Hall. I understand this process and response to the
    challenge of the committee to unite Indian country behind a
    bill that is both fair and comprehensive. Let me say without
    reservation that I remain committed to that process. I whole
    heartedly agree with you, Mr. Chairman and Mr. Vice Chairman,
    that the bill as introduced is a starting point and a solid
    starting point for resolving the trust.
        But make no mistake, the bill needs to go further. There
    are major changes that need to be made in order to convince all
    of Indian country to rally behind the bill. I know that the
    committee is committed to working with Indian country and I am
    positive that together we can agree on the right changes to the
    bill. As we do so, I can guarantee you that I will be working
    day and night to help unite Indian country behind this bill.
        On trust standards, the lack of trust standards,
    independence and enforceability are the most conspicuous
    omissions from the 50 principles we submitted. NCAI believes
    that standards and accountability are the cornerstone tenets of
    meaningful trust reform. There simply must be an independent
    body with true oversight authority, explicit trust standards,
    and a cause of action in Federal courts for a breach of those
    standards.
        The very absence of those provisions is why we have the
    Cobell lawsuit and all of the tribal trust lawsuits. Decades of
    trust reform efforts have borne little, if any, fruit. Why?
    Because the Department of the Interior believes its job is to
    ensure that the United States is never held liable for its
    failure to properly administer trust assets. For this reason,
    DOI has always opposed the standards in trust reform.
        On the settlement in title I in our 50 trust principles, we
    set forth the rationale we use to justify a sum of $27.5
    billion. We understand that you, Mr. Chairman, believe that the
    settlement should be in the billions of dollars, as mentioned
    in the bill, but the bill before us does not specify a specific
    dollar amount. In order for us as tribal leaders to convince
    Indian country and our members that whatever figure is settled
    on is fair, we need to be armed with a dollar amount and a
    credible rationale that we can explain to our tribal members.
        Without that, we will be hamstrung in our efforts. I
    believe that the $14 billion needed for historical accounting
    is a starting point. That fact that the lump sum would come
    from the judgement fund so would no come at the expense of any
    other Indian programs or an account is an example we could use
    to rally Indian country.
        Under title II, the Indian Trust Asset Management and
    Policy Review Commission, the NCAI believes that this provision
    has the power to make a significant contribution to the ways
    our trust accounts are managed. We suggest that Congress should
    make all of the appointments, rather than leave a significant
    number up to the executive branch. Indian country is united
    that a commission must have teeth and a power to independently
    investigate the Department of the Interior.
        In regards to title III, NCAI strongly applauds the
    creation of the Indian Trust Asset Management Project. As the
    tribal chairman of my own reservation in the Great Plains, I
    support the creation of an area-wide demonstration project. I
    can assure you there will be a flood of tribes that will want
    to participate in this project and free them from the shackles
    of the governmental structure of the Office of Special Trustee.
        NCAI recognizes that this provision is an affirmation of
    tribal self-determination and sovereignty. Nevertheless, even
    for the tribes participating in this project, the bill does not
    go far enough. Not only should more tribes be allowed to
    participate, but tribes should be given the opportunity to
    establish clear trust standards.
        Furthermore, tribes should be able to immediately resolve
    disputes through the courts or a third party mediator such as
    the Federal Mediation and Conciliation Service, rather than
    have to exhaust departmental appeals.
        In regards to title IV, the fractionation, NCAI strongly
    supports the new incentives for voluntary sales of fractionated
    interests by allowing the secretary to offer more than fair
    market value. On the other hand, the bill has a provision for
    highly fractionated lands of more than 200 owners where if the
    secretary follows certain procedures, including notice by
    certified mail, the offer would be deemed accepted unless it is
    affirmatively rejected by the owner. NCAI understands the
    rationale behind this provision, but it seems grossly unfair to
    the landowners.
        Mr. Chairman, as you know, there are 50,000 addresses that
    are unknown today in the system. One possibility is to work
    with the tribes' enrollment offices in order to establish a
    direct communication with the IIM holders because the tribal
    enrollment office has every account member's enrollment number
    and address. NCAI strongly agrees that any payments Indians
    received under a land repurchase program should not be subject
    to State or Federal income tax, and should not affect their
    eligibility for Social Security and welfare.
        Under title V, the restructuring of the BIA and Office of
    Special Trustee, the new Office of the Under Secretary meets a
    number of the goals in our trust principles, including the
    elimination of the Office of Special Trustee. The creation of
    this position addresses a major issue that has been raised in
    every significant study of trust management at Interior: The
    lack of clear lines of authority within the department.
        NCAI believes the bill should go further. Nearly every
    agency in the Department of the Interior, not just MMS or BLM
    or USGS, has some significant trust responsibilities. At this
    time, there is no single executive within the secretary's
    office who is permanently responsible for coordinating trust
    reform efforts across all of the relevant agencies. This
    absence has particularly hurt the progress of those issues that
    cut across agencies such as the development of a system
    architecture that integrates trust fund accountings with the
    land and asset management systems of the BIA, BLM and MMS, and
    as required by the 1994 act.
        Furthermore, the BIA has never been provided with an
    adequate level of resources, staffing and budgeting to fulfill
    its trust responsibilities to Indian country. This has been a
    chronic neglect and this understaffing and underfunding has
    contributed to the dysfunctional management and financial
    systems at all levels of the BIA.
        NCAI also believes that an independent entity, perhaps the
    GAO, should have the job of reviewing the Federal budget for
    trust management and provide an assessment to Congress of its
    adequacy. I believe this role may be more important than ever
    today as the Administration moves to assess Federal budgets
    under the PART, the program assessment rating tool.
        Under title V, the audit of Indian trust funds, this
    section would require the Secretary of the Interior to prepare
    financial statements for individual Indians, tribal and other
    Indian trust accounts and prepare an internal control report.
    The section would also direct the Comptroller General of the
    United States to hire an independent auditor to conduct an
    audit of the secretary's financial statements and report on the
    secretary's internal controls. This title appears to meet the
    goals of our trust principles and I believe that the details of
    the audit procedures can be redefined and improved after more
    discussion with tribal leadership.
        So in conclusion, Mr. Chairman, on behalf of NCAI I would
    like to thank the members of the committee for all of their
    hard work and their staffs and the time they have put into this
    bill and the entire trust reform effort. For the most part, I
    also want to recognize Chief Jim Gray here as cochairman of the
    National Indian Working Group. Together with NCAI and ITMA and
    all the other tribal leaders that are here, and our membership
    of the 250 tribes of NCAI, and the 50 tribes of ITMA,
    comprising 300 Indian tribes, we will continue our Work Group
    to reach out to all tribes and all national and regional tribal
    organizations for as long as it takes.
        This bill is a good starting point. It is a solid starting
    point, but it needs to go further. We need resolution. We need
    to come together. We need to stay united, and I will continue
    as president of NCAI to call on and to work with Indian country
    and the committee here to come up with a bill that we can all
    support to provide a meaningful settlement for our elders,
    especially for our elders who have died in poverty without
    receiving justice. It is time justice comes to Indian people.
    They have waited too long.
        So thank you, Mr. Chairman, for your continuing support on
    this. We appreciate it.
        Senator Dorgan [assuming chair]. Chairman Hall, thank you
    very much, and Chief Gray, thank you as well. I know the two of
    you have worked and spent a lot of time, travel, effort and
    this committee appreciates that very much.
        Next, we will hear from Elouise Cobell. Ms. Cobell, you may
    proceed.
        Let me also just mention the Chairman has gone to cast a
    vote on the first vote and will return right after the second
    vote has started, and he will have cast a vote on that.
        You may proceed.

         STATEMENT OF ELOUISE P. COBELL, BLACKFEET RESERVATION
                            DEVELOPMENT FUND

        Ms. Cobell. Good morning, Vice Chairman Dorgan and members
    of the committee. Mr. McCain, I will tell him good morning when
    he returns.
        I would like to thank you for inviting me here today to
    provide testimony to the committee on the possible legislative
    resolution of our 9 year old lawsuit. Although we have our
    strong disagreements with your initial proposal as an
    appropriate way to resolve the case in a fair manner, we are
    all united in our end goal to achieve an equitable resolution
    to this century-old stain on this great Nation's honor.
        I am here today on behalf of myself and the more than
    500,000 individual Indian trust beneficiaries represented in
    the lawsuit we filed in the Federal court, Cobell v. Norton. I
    would also like to explain to you that the Blackfeet pray at
    the Baker massacre on a yearly basis and we pray that the
    Federal Government will never treat us like they treated us
    then.
        I also pray on a daily basis going to work on the Blackfeet
    Reservation at Ghost Ridge where 500 Blackfeet died of
    starvation because the Indian agent withheld rations.
        So I apologize to you if I hurt the committee's feelings
    when I explained what I felt about S. 1439, but that is the
    only way that I could express myself because I have to tell you
    that has been a very difficult task in making the U.S.
    Government accountable for individual Indian beneficiaries. I
    did not want to be in a 9-year lawsuit. I think this could have
    been over very quickly if the U.S. Government would admit that
    they could not give an accounting to individual Indian
    beneficiaries.
        We are in the 10th year of this litigation and more than 1
    century of mismanagement of individual Indian trusts has
    already passed. Justice has been delayed for individual trust
    beneficiaries. Every individual trust beneficiary I have spoken
    with has told me that they want a fair resolution even if it
    takes longer. They do not want to be sacrificed at the altar of
    a political expediency as they have so many times before.
        Since 1887, members of the class have been subjected to
    injustice after injustice. Report after report for generations
    after generations have cited the rampant mismanagement and the
    malfeasant administration of the Individual Indian Trust. As
    you know, a congressional report from 1915 spoke about the
    scandals in terms of fraud, corruption and institutional
    incompetence almost beyond the possibility of comprehension.
        A 1989 investigative report by this committee found similar
    fraud and corruption. The misplaced trust report from the House
    Committee on Government Oversight made similar findings of
    malfeasance. The Court of Appeals described the disastrous
    historic and continuing management of individual Indian
    property as malfeasance, and in 2001 held the continuing delay
    was unconscionable.
        The Federal District Court Judge Royce Lamberth, who has
    presided over this case for nearly a decade, appropriately
    described the utter failure to reform the Interior Department
    and continued abuse of Indian beneficiaries in this way:

        The entire record in this case tells the dreary story of
    Interior's degenerate tenure as trustee delegate for the Indian
    trust, a story shot-through with bureaucratic blunders, flubs,
    goofs and foul-ups, and peppered with scandal, deception, dirty
    tricks and outright villainy, the end of which is nowhere in
    sight.

        By setting up the trust, the Government promised to abide
    by common trust laws. It has failed even the most simple of
    these trustee duties. The Government still cannot say how much
    money is in each beneficiary's account. Imagine the outrage if
    suddenly a major United States financial institution were to
    announce that it had no idea how much money was in each
    depositor's account. Imagine the congressional hearings, the
    class action lawsuits that would be filed as a result.
        Yet, that is exactly what has happened here. The courts
    have held that the Government is in breach of its trust duties.
    They have held that interest and imputed yields are owed
    beneficiaries as a class. They have held that the duty to
    account preexisted the 1994 Trust Fund Reform Act and that the
    Government has a duty to account for all funds. Time after time
    on major issue after major issue, the courts have made it clear
    that the law and the facts are on our side.
        I should point out that there are some aspects of the
    proposed legislation that are positive. First, this hearing
    itself is a constructive step forward to educate Congress and
    the American people. Additionally, the inclusion of a provision
    that calls for the settlement amount to come from the claims
    judgment fund to ensure victims are not punished also is an
    important positive component, as is recognition that the
    settlement amount is in billions.
        To be honest, I was deeply disappointed when I read S.
    1439. It falls so short of being a good starting point to
    resolving the Cobell case in an equitable manner. This bill in
    present form is drastically in favor of the Government
    malfeasors position. It is not faithful to the two important
    sources that offer considerable guidance to any legislative
    resolution effort, the 50 principles for settlement that Chief
    Gray and Tex Hall talked about, and the numerous decisions
    rendered by the court in Cobell itself.
        We need your support to stand up for the many individual
    Indian beneficiaries who are relying on all of us to create a
    fair and equitable resolution. Like Mary Johnson, a Navajo
    grandmother who relies almost exclusively on a few dollars in
    her allotment to receive support for her family. She receives
    pennies of what a non-Indian is paid for gas from her land. Or
    Mary Fish, a 70-year-old Creek woman who cannot replace windows
    in her small home because she lacks the funds, yet there are
    five oil wells pumping constantly for decades on her land.
    There are so many more across every reservation, grandmothers
    and grandfathers and parents and children suffering from the
    same indignities of their forbears.
        I am confident that if we work together we can achieve our
    common objectives. There are many specific parts of S. 1439
    that I believe I need to address. One of the most disturbing
    aspects of S. 1439 is the placing of the Secretary of Treasury,
    a defendant in the Cobell lawsuit and one of the parties
    principally responsible for the historic and continuing
    victimization of Indian trust beneficiaries, as the person to
    be in charge of the settlement funds. The Treasury Department
    has been Interior's partner in crime for far too long. They
    have been found in breach of trust. They have failed to reform.
    The suggestion that any settlement fund be handled by such an
    entity is wholly unacceptable to the beneficiary class.
        A second area of concern to all Individual Indian Trust
    beneficiaries is that under this legislation, the court would
    be eliminated from the picture entirely. That makes no sense
    for a number of reasons. Courts have the greatest institutional
    competence to make distributions in a fair manner. They are
    often called upon to do just that. Courts are armed with rule
    23 and related case law that provides sound guidance for
    resolving difficult distribution issues.
        The court in Cobell has 9 years of experience of living
    with the facts of this case. The knowledge developed through
    that process is invaluable and irreplaceable. We recognize that
    S. 1439 places the settlement amount approximately in the
    billions of dollars. That, of course, is only sensible since
    the government's own internal risk assessment by their
    contractors set the liability as between $10 billion and $40
    billion.
        In the 50 principles, the Work Group put forward a
    reasonable and well-founded aggregate settlement amount of
    $27.487 billion. This is not reparations. This is not damages,
    nor is it welfare. It is quite simply a return of a portion of
    the money that was and is being taken from us. The amount was
    derived by reviewing our model for each year of total proceeds
    from the Indian allotted lands. The Government's model of these
    proceeds is not far off from the plaintiffs in aggregate amount
    generated from these lands. For each year, plaintiffs calculate
    a percentage of the moneys that were, for settlement purposes,
    properly collected, invested and disbursed to the appropriate
    beneficiary. The disbursement percentages we have used are
    highly favorable to the Government, even though we have
    evidence that the Government cannot account for even 1 percent
    of the transactions.
        For purposes of the calculation we assumed that the
    Government could account for 80 percent. Using this percentage,
    we calculated how much of the yearly aggregate proceeds
    defendants failed to distribute properly. In this number, we
    add interest for a yearly calculation. We added this number
    together and then subtracted, again a litigation delay, a
    percentage-based calculation for the cost of continuing
    litigation. The result of this calculation is $27.487 billion.
    The number is further justified in my written testimony.
        Reform requires fundamental changes that must be made
    immediately in all other trusts. There are, among other things,
    clarity of the trust duties, clarity regarding the complete
    enforceability and the availability of meaningful remedies,
    independent oversight with substantial enforcement of authority
    to ensure that beneficiaries are protected. These core trust
    elements are not in the legislation and need to be.
        Congress must clarify that Indian beneficiaries will
    receive the same protection as all other non-Indian trust
    beneficiaries. The importance of keeping the courts involved
    cannot be overemphasized. Only when we turned to the courts was
    any progress made to fix the trust and establish the individual
    Indian beneficiaries right to an accounting. The decades of
    experience by the Federal courts in dealing with class action
    cases must not be cast aside. It is essential to resolving this
    case and achieving accountability.
        Not only has the executive branch abused us and defied the
    courts, it has defied you. It has repeatedly refused to comply
    with legislation passed by this body. It must finally be called
    to account.
        I look forward to continuing our work together and to
    finally and conclusively put an end to the criminal
    administration of our trust property. I thank you very much for
    this opportunity to testify.
        [Prepared statement of Ms. Cobell appears in appendix.]
        Senator Dorgan. Ms. Cobell, thank you very much.
        Next, we will hear from President Stensgar.

     STATEMENT OF ERNEST L. STENSGAR, PRESIDENT, AFFILIATED TRIBES
                          OF NORTHWEST INDIANS

        Mr. Stensgar. Thank you.
        Good morning, Vice Chairman Dorgan, members of the
    committee. I appreciate the opportunity to present testimony. I
    have submitted written testimony and I would like it included
    in the record.
        My name is Ernie Stensgar. I am president of the Affiliated
    Tribes of the Northwest. I represent 54 tribes from Montana,
    Idaho, Oregon, Western Montana, California, and some of Alaska.
    Over the past several years, and after numerous court-issued
    declarations in the Cobell litigation, Affiliated realized that
    resolution of the litigation in the court system would take
    many years and that a settlement of the litigation would
    probably not result in action that would compensate the
    plaintiffs, along with individual Indian trust account holders
    to a level that would be fair and equitable.
        Therefore, ATNI, Affiliated Tribes of Northwest Indians,
    decided to focus on working cooperatively with Congress and
    other stakeholders in creating a legislative resolution of the
    Cobell litigation, while at the same time accomplishing
    reorganization of the Department of the Interior to fit the
    needs of Indian country.
        On April 5, 2005, Affiliated submitted Indian trust reform
    legislation to the Hon. Maria Cantwell to be considered on an
    expedited basis by the Senate Committee on Indian Affairs. The
    legislation essentially asked Congress to provide several
    provisions for the settlement of the Cobell litigation and to
    accomplish trust reform. The first provision sought to elevate
    the assistant secretary for Indian Affairs to a deputy
    secretary. The intent of this provision was to ensure that the
    principal officer assigned to fulfill the trust responsibility
    would have the authority over the constituent agencies that
    have an effect or impact on the trust responsibility.
        Under S. 1439, Section 503 entitled Under Secretary for
    Indian Affairs, there is an under secretary for Indian affairs
    position created that is directly subordinate to the Secretary
    of the Interior. Affiliated supports the creation of the under
    secretary for Indian affairs position within the department,
    along with the duties requiring management and accountability
    of the trust responsibility in consultation with Indian tribes.
        ATNI also supports section 505 of the legislation which
    would terminate the Office of the Special Trustee for American
    Indians by December 31, 2008. ATNI also sought the codification
    of the standards of the administration of trust duties that
    were adopted by Secretary Babbitt in 2000. ATNI understands
    that these standards have not been codified as a provision of
    the act, but it does not believe that this will ultimately be
    fatal to the legislation. Under section 503 of the act, there
    is the under secretary for Indian affairs that will be required
    to implement and account for the fulfillment of the trust
    responsibility to Indian tribes.
        The legislation also describes the duties that the under
    secretary for Indian affairs will be required to fulfill under
    section 503. ATNI asserts that if this section is holistically
    integrated with other provisions of the legislation, the under
    secretary has some guidance from Congress defining some actions
    and responsibilities that will be required to fulfill the trust
    responsibility. Specific trust standards can be finalized at a
    later date and in subsequent legislation.
        The third provision that Affiliated sought was a settlement
    of the Cobell litigation by the authorization of a mediator
    that would submit recommendations to the court on settlement
    issues and allow the court the ability to implement the
    recommendations without having to submit to a drawn-out trial
    process. Affiliated has reviewed the act and is in agreement
    with the congressional findings contained within section 101.
        ATNI realizes that in many cases it is impossible for the
    Federal Government to provide a total historical accounting of
    funds held in IIM accounts due to any number of factors.
    Affiliated supports the proposition that the settlement of the
    Cobell litigation must provide a fair and appropriate
    calculation of the IIM accounts in lieu of actually performing
    an accounting of the IIM accounts.
        ATNI lends its support for the creation of an individual
    accounting claims settlement fund contemplated in section 103
    so that there can be closure to the plaintiffs in the Cobell
    litigation and other aggrieved parties. The settlement amount
    will obviously need to be debated and agreed upon after intense
    consultation with all the affected parties. The animosity that
    has guided previous attempts at settlement should not deter
    actual and honest agreement over a final settlement amount.
        Affiliated supports the proposition that a special master
    should be appointed to administer the settlement fund. However,
    section 103 allows the secretary the unilateral ability to
    appoint a special master to administer the fund without
    allowing any tribal input in the determination of appointing
    the special master. Since the settlement fund is the result of
    litigation between two adversarial parties, there should be the
    ability of the representatives of both parties to come to
    agreement on the appointment of a special master to administer
    the settlement fund.
        ATNI is supportive of the provisions in the legislation
    which recognizes the right of claimants to seek judicial
    review. However, provisions in sections 105, 106, and 107 are
    confusing and should be clarified to protect these important
    rights. ATNI supports the right of judicial review for claims
    relating to share determinations in the U.S. District Court for
    the District in which a claimant resides. In this instance, the
    claim would not be considered a waiver by the claimant of the
    right to receive a share under section 104. However, a claim
    relating to the method of valuation and a claim relating to the
    constitutionality of the application of this title to the
    claimant filed in the U.S. Court of Federal Claims would be
    considered a waiver by the claimant of any right to receive
    either the per capita share or the formula-based share under
    section 104. Affiliated does not support the provisions that
    require a waiver by the claimant of any right to an award under
    section 104 if the claimant files a claim seeking review.
        ATNI asserts its strong support for section 110. In that
    section, tribal government claims against the United States
    would not be discharged as a part of the settlement of
    litigation claims identified in section 102.
        The fourth provision sought by the ATNI was the creation of
    an independent legal authority that would have some oversight
    power over administration of the Federal trust responsibility.
    Title II of the act creates a commission known as the Indian
    Trust Asset Management Policy Review Commission that would be
    charged with the review of trust asset management laws and the
    review of the department's practices with regard to individual
    Indian trust assets. The commission would then have the ability
    to make recommendations to the secretary and to the committee
    for improvement of the department's laws, practices and
    management of the trust assets.
        Affiliated supports the commission as created by title II
    of the act since it would allow for an independent review of
    the department's practices and would possibly lead to
    recommendations that would assist the department in adopting a
    best practices approach to fulfillment of the trust
    responsibility. Indian country has shown in the past that it is
    willing and able to participate in crafting recommendations
    that will lead to an improved department as it continues to
    administer its trust duties.
        The fifth provision sought the establishment of a
    demonstration project that would build on the work of those
    tribes that have been administering their own trust programs
    pursuant to authority granted by the Congress in the
    appropriations bills.
        Senator Dorgan. Mr. Stensgar, I am going to have to ask you
    to complete your testimony, if you would. There are 2 minutes
    remaining on the vote on the floor of the Senate and I have to
    be there to vote. So if you will just finish in a sentence or
    two, we will then recess for 10 minutes.
        Mr. Stensgar. Okay. I just want to say that the Northwest
    tribes stand ready to proceed in the process of adopting
    legislation and working with this committee to further that. It
    is time that the tribes continue on with their other important
    work and we are at a standstill now.
        Thank you.
        [Prepared statement of Mr. Stensgar appears in appendix.]
        Senator Dorgan. Mr. Stensgar, thank you very much for your
    testimony.
        Mr. Martin, you will begin testifying when we reconvene. We
    expect the committee will be in recess for 10 minutes while we
    vote on the floor of the Senate.
        [Recess.]
        The Chairman. [Presiding] Again, I would like to extend my
    apologies to the witnesses because of we have five consecutive
    votes in a row. I apologize for any inconvenience this has
    caused them.
        I believe we are now at Mr. Martin, is that correct?
        Mr. Martin. Yes, sir.
        The Chairman. Please proceed.

    STATEMENT OF JAMES T. MARTIN, EXECUTIVE DIRECTOR, UNITED SOUTH
                        AND EASTERN TRIBES, INC.

        Mr. Martin. Chairman McCain, Vice Chairman Dorgan and
    distinguished members of the Senate, my name is James T.
    Martin. I am an enrolled member of the Poarch Band of Creek
    Indians and executive director of United South and Eastern
    Tribes.
        On behalf of the 24 tribes of USET, we have closely
    followed the Cobell case over the last 10 years and the
    Department of the Interior's subsequent reorganizations. Along
    with President George, I represented the tribes of the Eastern
    Region Office in the DOI Tribal Task Force and have testified
    before this committee several times on trust reorganization. I
    thank this committee for the opportunity to testify on this
    issue again.
        For USET tribes, the Cobell litigation and the Department
    of the Interior's redirecting of funds to trust activities
    carried out by the Office of the Special Trustee has had an
    immediate and harmful impact for fiscal year 2005 and 2006.
    Funding for the BIA has reduced full-time staff for law
    enforcement, education and other vital programs. The Cobell
    litigation and DOI's interpretation of the requirements to meet
    court orders have absorbed resources and limited the ability to
    implement already under funded programs.
        I thank the Senators McCain and Dorgan for introducing S.
    1439, which represents a critical step for trust reform and
    provides a solid footing for resolving the interrelated and
    complex problems of trust reform. Given the complexity of the
    trust-related issues, one piece of legislation is unlikely to
    solve all of the problems. This bill, however, takes on the
    challenge of addressing the fundamental issues of the
    settlement of the Cobell lawsuit, land consolidation, and
    prospective trust reform reorganization.
        USET, in response to Senator McCain's call for legislative
    solutions to this crisis, developed proposed trust reform
    legislation in April and provided that proposal to the chairman
    and to committee staff. The USET proposal legislation is
    intended to introduce measures that would increase the
    accountability and efficiency of DOI's administering of the
    United States trust responsibility, while enhancing self-
    determination.
        Upon review of S. 1439, it appears that the committee
    shares USET's concerns and provides similar approaches to
    resolving them. Additionally, USET requests that the committee
    further deliberate several critical issues. I am attaching
    USET's proposed legislation to my written testimony and request
    that this proposal be included in the hearing record, as it may
    be useful to the committee as it seeks to finalize trust reform
    legislation.
        But first, I would like to commend the committee for the
    recognition and incorporation of key components for trust
    reform and DOI reorganization. Specifically, let me mention a
    few of these here. Elevation of the Assistant Secretary of
    Indian Affairs to the position of under secretary and
    eliminating the OST, which the tribes have advocated for for a
    long time, would improve coordination of trust activities
    within the DOI and establish decisionmaking authority and
    accountability under one executive authority.
        USET views the commission established by title II of S.
    1439 as a logical extension of the DOI Tribal Task Force. This
    commission is needed to conduct a thorough analytical review of
    laws and practices in order to make valuable recommendations
    for future legislative actions for trust reform.
        With regard to land consolidation, S. 1439 responds to
    Tribal Trust Reform Work Group recommendations to expand the
    voluntary buy-back of highly fractionated shares by providing
    for sums greater than fair market value shares. USET suggests,
    however, that the problem of locating whereabouts unknown
    individuals for purposes of land consolidation is a matter that
    should be addressed by this legislation or by the commission
    created by title II of S. 1439.
        S. 1439, with its Tribal Trust Assets Management
    Demonstration Project, title III, embraces a view strongly held
    by the USET tribes that self-determination works. USET is
    confident that management of trust functions will benefit from
    this demonstration project. Moreover, we expect it will foster
    an array of best practices to be utilized for the wide range of
    trust resources managed in Indian country. While the
    legislation does not itself codify tribal standards, USET
    recognizes that S. 1439 provides for a commission to issue
    recommendations on proposed Indian trust management standards,
    section 204(3)(c), and that the demonstration project provides
    for the development of trust asset management plans that meet
    trust standards as established by tribal law and consistent
    with trust responsibilities of the United States.
        USET recognizes the necessity of standards, yet
    acknowledges those standards must be developed in a manner that
    allows for flexibility, reflecting the diversity that exists
    among tribes, as well as the diversity that exists among the
    resources that both exist in tribes and resources, but to which
    the secretary has a trust responsibility.
        Title I of S. 1439 would resolve the complex and prolonged
    and costly Cobell litigation. The terms of the bill
    demonstrates the committee's understanding of many of the
    issues and considerations involved in this large class action
    lawsuit. Title I addresses such matters as the distribution of
    the settlement funds and offers a mechanism for judicial review
    for that distribution, including the filing of claims to
    challenge the share distribution, to challenge the validation
    of the claim, and to challenge the constitutionality of the
    application of the title to an individual claimant.
        USET encourages a fair and complete resolution to that
    litigation and I understand the committee will hold additional
    hearings to consider the views of the Cobell plaintiffs. USET
    urges the parties to this dispute to engage the proposed
    legislation in the spirit of compromise and the recognition of
    the unique opportunity this legislation offers.
        USET appreciates that tribal claims are preserved in
    section 110(d). USET also endorses Indian preference in hiring
    by the under secretary in the offices under the under secretary
    by section 506.
        USET highlights these provisions as those which are
    directly responding to the concerns and approaches the USET
    tribes and other tribal organizations have identified as
    critical to trust reform legislation. USET urges the committee
    to give additional consideration to several other
    considerations.
        First among them is for independent accountability. While
    the independent external audit provisions contained in title VI
    of S. 1439 establishes a sound approach for accounting or
    auditing, USET believes that DOI's management of non-monetary
    trust assets needs similar independent review. Additionally,
    the beneficiaries need a point of regress to report fraud and
    abuse and the day-to-day implementation of the Government's
    fiduciary trust responsibility.
        USET's proposal would create an assistant inspector general
    for Indian Trust to carry out investigations and audit
    responsibilities. We urge the committee to give greater
    attention to the need for this mechanism that can police the
    DOI's compliance reform contained in S. 1439.
        Second is the ineffective duplication that has been created
    by the DOI's stovepiping its lines of accountability and
    decisionmaking authority between trust and non-trust functions.
    We believe this is a critical issue that the trust reform
    legislation and the commission created by title II of S. 1439
    must address.
        Finally, all of the reform in the world cannot get the job
    done without adequate funding. The number of vacancies and
    understaffing in the DOI has contributed to the problem. As the
    committee has recognized with S. 1439, trust reform requires
    tribally driven flexible mechanisms that reflect the diversity
    of tribes and the distinct types and quantities of resources
    that exist.
        Moreover, in order for trust reform to advance, the Cobell
    litigation must be resolved. We stand ready to work with this
    committee to further this legislation and other legislation
    that is needed to bring this issue resolution.
        I thank the committee and look forward to answering any of
    your questions, sir.
        [Prepared statement of Mr. Martin appears in appendix.]
        The Chairman. Thank you very much.
        All the witnesses have testified in favor of the court
    being the one who would be responsible for the distribution of
    money. In the 50 principles, you say the court would conduct a
    court fairness hearing. What will the court be testing the
    fairness of? I guess I will begin with you, Chief Gray.
        Mr. Gray. Part of what I think may be helpful in describing
    what the rationale behind the 50 principles and that particular
    area are certain aspects of what we consider to be the use of
    the resources, the land, the amount of money and activity and
    flew to these accounts. Obviously, you are looking at
    situations like, for example on my reservation, the Osage
    Nation, we have had over 100 years of oil and gas exploration.
    Through that hybrid system I referred to earlier, you also have
    a similar situation that occurs in the use of those lands and
    the resources, the surface lands that have been leased out to
    the allotment.
        To try to understand the through-put, for example, of that
    kind of funding that went through there certainly does create
    different scenarios throughout Indian country.
        The Chairman. So the court would decide each different
    tribal entity throughout Indian country?
        Mr. Gray. I think it is not so much a tribal entity as much
    as it is the use of the land, and how the resources derive from
    that land or how are they going to be fairly and adequately
    valued.
        The Chairman. So the court would decide in each entity that
    is owned by tribes as to what is fair and what is not fair?
        Mr. Gray. I admit, it is a head-scratcher, Senator. I
    really do think that what we are trying to achieve here is just
    trying to find the entity, or to find out a formula. Should it
    be congressionally driven, for example, that you have in the
    bill; that a formula be adequately put together that can
    address the specific uses of the lands and the uses of the
    resources and the funds as a way to determine the value of each
    one of the settlement accounts that are being put forward.
        We just came up with one proposal, and in light of the
    specific information that exists in the bill, there may be ways
    in which we might be able to approach the committee on how this
    could be resolved through a formula of some type.
        The Chairman. Tex.
        Mr. Hall. Mr. Chairman, I just think that in our testimony
    and most everybody's testimony, they feel that the court is
    more fair and impartial. I believe that the treasury is a named
    defendant, Mr. Chairman, so the impartiality is not, you know,
    that is the thought and it's not there.
        The Chairman. I understand there is profound mistrust of
    the Department of the Interior and the BIA, and I understand
    that there is great trust, at least at the District Court level
    and the judge, but I think you are asking a District judge to
    take on a task which is incredibly complex and one that I do
    not know if a District judge has the kind of assets to make
    those kinds of judgments. That is my question. I think we are
    all interested in fairness.
        Mr. Hall. We would be happy to work with you, Mr. Chairman,
    on something I think that we could come to agreement on.
        The Chairman. Mr. Stensgar, do you have any thoughts on
    this issue?
        Mr. Stensgar. The Northwest supported the special master,
    Mr. Chairman. We would have to look at that section about the
    courts and do an evaluation before we respond to that. We
    thought that the Special Master would address that issue.
        The Chairman. As you know, we have had special masters in
    the past.
        Mr. Stensgar. The special master, Mr. Chairman, we want
    some Indian input in respecting that. We want to make sure that
    the sheep dog is guarding the sheep.
        The Chairman. Well said.
        Mr. Martin.
        Mr. Martin. USET's position is that we support also the
    special master. I am a father of four boys, and when one boy
    does something to the other, I make the one who is the
    perpetrator apologize and correct the wrong. I think it is just
    to make sure the perpetrators correct what was wrong and make
    them do it fairly.
        I think still, though, there could be a role of the court
    as far as supervision and some sort of injunction-type of
    mechanism that if the special master or the people that are
    made to correct these wrongs go outside of the parameters, then
    there should be some sort of relief to that.
        The Chairman. Ms. Cobell, attorneys fees were not mentioned
    in the principles set forth by the working group. What dollar
    amount or percentage of the proposed $27.5 billion was to go to
    attorneys fees?
        Ms. Cobell. Could I answer that first question that you
    asked all the other witnesses, too?
        The Chairman. If you would like to, it would be a pleasure.
        Ms. Cobell. I would love to.
        The courts do this all the time, distributing.
        The Chairman. Not with this amount of money, they don't.
        Ms. Cobell. Yes; on a class action lawsuit, yes they do.
        The Chairman. No; they don't. They don't decide what is
    fair and unfair. Go ahead.
        Ms. Cobell. At least everything I read, Senator. They weigh
    the evidence.
        The Chairman. Courts also decide what attorneys fees are.
        Ms. Cobell. Yes; and that was my answer that I was going to
    tell you.
        The Chairman. Okay.
        Ms. Cobell. It is my understanding that the courts will
    decide the attorneys fees, and that was done as a result of a
    congressional act that took out the States and wanted to make
    sure that the Federal judge decides on what the attorney fees
    should be.
        The Chairman. Excuse me. Whenever there is a settlement
    proposal, they require an accounting of attorneys fees. I think
    the taxpayers of America would be more than entitled to know
    what your view is of the amount of attorneys fees that would be
    part of this $27.5 billion settlement.
        Ms. Cobell. Well, our attorney fees are submitted to the
    courts for reimbursement. But you know, Senator, I really have
    to tell you is I have been interested in what the attorney fees
    have been by the Federal Government in fighting this case. We
    cannot find out. There are hundreds who just come to the
    courtroom. There are hundreds of attorneys that are sitting in
    that courtroom day after day, and there was a rider approved by
    the Congress in the appropriation bill that allowed for the
    Government officials that were accused of this wrongdoing to
    hire their own attorney private firms. I see those people every
    single day.
        So vice versa. I really would like to see what the
    Government is spending on attorney fees.
        The Chairman. I would like to also, but that does not
    change the fact I would like to know how much of the $27.5
    billion would be spent on attorneys fees.
        Ms. Cobell. I am sure that we could get you the figure and
    we could share that with you.
        The Chairman. I would very much appreciate that.
        Ms. Cobell. My attorneys have not been paid in years, let
    me tell you.
        The Chairman. Well, if there is $27.5 billion at play, I am
    sure they will be, Ms. Cobell.
        Ms. Cobell. There is no huge contingency amount that has
    been negotiated with attorneys, let me assure you of that.
        The Chairman. Let me assure you, then, there should be no
    problem then of telling us how much of the $27.5 billion.
        Ms. Cobell. Yes; I would be very happy to do that, sir.
        The Chairman. Thank you very much, because I am familiar
    with a case many years ago where Agent Orange was settled and
    veterans died before they got any money and lawyers got paid
    first. And I am not going to see that happen in whatever
    settlement we have of this case. Native Americans will be
    reimbursed first, and then attorneys, if I have anything to say
    about it.
        Again, I want to go back to this business, because there is
    strong disagreement, and we are trying to come to agreement
    with the Administration. I will again begin with you, Chief
    Gray.
        If Congress were to place billions of dollars in the court
    registry, how would the judge distribute the money? Would it be
    through, as you stated earlier, a special master would be
    appointed and he would be making those decisions? Is that a
    methodology that would be pursued?
        Mr. Gray. I think you said it there, methodology.
    Obviously, just to help clarify the previous response to your
    first question earlier was that obviously we need more
    information, I think, on basically what a formula would look
    like. It is not so much to say that, and certainly in our
    testimony, that we felt like there wasn't a suitable method in
    the court that is far superior to any other method out there.
    But the way you described this particular issue to be resolved
    in the bill leaves open a need for more clarification and more
    information, and maybe that might be where I think a starting
    point might be in our discussions, for finding out exactly what
    the formula might be in terms of how Congress might be able to
    distribute these funds fairly and adequately, because obviously
    the bill in and of itself at this point does not answer all
    those questions right now. Even though the question you just
    raised to me, I do not have a complete answer myself. So
    obviously, we still have a lot of work to do in this area.
        The Chairman. Thank you.
        We will have additional questions which we will submit to
    you as we continue through this process, as well as questions
    for the Administration.
        I want to emphasize again that we appreciate many of your
    long years of involvement in this issue. We are trying to come
    up with some way of preventing another 10, 15, or 20 years of
    litigation in the courts which is very uncertain. I have a
    personal opinion that I am a bit disturbed at some of the
    recent Supreme Court decisions as they affect Native Americans.
    I think there has been some encroachment on the principle of
    tribal sovereignty and government-to-government relationship.
        So I am not totally confident that even though you have a
    District Court judge that has ruled your way that if it wended
    its way all the way through the courts that you would get a
    satisfactory resolution, number one.
        Number two is, it still eludes me why we cannot sit down
    together, all of us that are involved, and come up with some
    reasonable resolution to an issue that, as Mr. Swimmer
    testified, has already been in the courts for nine years. If we
    are going to reach an agreement, there is going to have to be
    some compromise on both sides. When I talk to the previous
    special masters, they say that the reason why it failed, I met
    with them, and they say the reason why it has failed is because
    neither side has been willing to move in a more compromising
    direction.
        So I think that I speak for both of us when I say, and
    certainly Senator Dorgan is more eloquent than I am, we want to
    give this as hard an effort as we possibly can, but we cannot
    just have hearing after hearing year after year on this issue
    because there are needs in Indian country for education, health
    care, housing, et cetera. As Senator Dorgan pointed out, all of
    those efforts are impacted by this issue. That is why we are
    giving it the priority that we are.
        I know that all of the witnesses at this table and behind
    you are men and women of good faith and maybe we are going to
    have to ask you to exercise that to a significant degree even
    where it may alienate some of your constituency. I can assure
    you that Senator Dorgan and I have on several occasions on this
    one alienated part of our constituency. [Laughter.]
        So I want to thank you again and appreciate your
    involvement in your cases of many, many years. I thank the
    witnesses.
        Senator Dorgan. [Presiding] Mr. Chairman, thank you very
    much.
        First of all, let me thank all five of you. I regret that
    we are moving back and forth, but it is the only way we can
    conduct 10-minute votes and still maintain this hearing and
    complete it.
        Ms. Cobell, let me start with you. You said you are sorry
    if you hurt the committee's feelings. You do not hurt feelings
    of people involved in politics. If one's feelings are hurt
    easily, you do not run for the U.S. Senate. So it is not about
    hurting our feelings.
        I think, however that using a term like ``massacre'' in
    your description and also in just disillusionment with
    legislation, I worry it hurts our opportunity to find
    solutions. That was the only point that I was making in my
    statement. It is not about hurting feelings.
        You are a very passionate and a very articulate advocate.
    That is obvious from your testimony today. I understand that. I
    would be as well if I were sitting on that side of the table,
    concerned, upset, anxious, worried that this has taken far too
    long. I would have all those feelings because I think from your
    testimony, you describe descriptions of 1915 and periods back
    when I think literally people were stealing from Indian people.
        Unscrupulous people were supposed to be in charge of these
    assets on behalf of Indian people and there was very
    substantial waste and abuse and fraud, especially fraud, I
    think. And we need to do a better job of describing that, I
    think, because others say, well, we have looked at accounts in
    the last 10 years or something. It is a different story. This
    is historical and it is substantial and it is a big issue.
        So I just want to say that I understand your passion, but I
    do hope even if we disagree in the end of this process, if we
    cannot find agreement and this committee finally says, look, we
    cannot do this. You go back to the courts and whatever happens,
    happens in the courts and figure it all out, but it is
    something we cannot do. I mean, if that is the case, it won't
    have been because we didn't make an honest, as aggressive as
    possible effort, because we felt it was necessary to try to
    solve it.
        But it is not solvable without all the stakeholders. It
    will not, cannot ever be solved in the context of the kind of
    discussion we are having, without having all the stakeholders
    being interested in solving it. If all the stakeholders are not
    interested, it is very easy, in my judgement, to up-end any
    agreement or any negotiation.
        And then it just goes back to the courts and perhaps
    another $500 million in legal expenses and maybe $6 billion, $8
    billion, $10 billion in accounting fees to try to figure out
    who the thousands of people are that own a fractionated
    interest in 200 acres of land someplace so that we can send
    them a penny or two pennies. None of this comes together unless
    we find a thoughtful way for reasonable people to come together
    and say, let's figure this out and solve it and address the
    abuses.
        Let me just finally ask a couple of questions. Tex Hall,
    your organization, I believe, because you and Chief Gray have
    traveled a lot, used a lot of personal time to try to work
    through this, I assume you are committed to seeing if you can
    find a legislative solution.
        There are other solutions, but Senator McCain and I are
    both talking now about some kind of a negotiated legislative
    solution. Is that what you would prefer and is that what you
    are committed to trying to find?
        Mr. Hall. Mr. Chairman, there is no question about it that
    NCAI and I know ITMA, as well as working with the Cobell
    plaintiffs, are totally committed. When you were raising the
    question about in the past, 1915, and the fraud, it made me
    think of an elder that passed on, Carol Young Bear. Carol had
    diabetes. This was 2 years ago.
        She asked me for help to get her IIM account checked. There
    was a delay in getting the checks paid out. All she wanted was,
    she only gets $200, not too much, in her IIM account. She just
    wanted a used van with a hydraulic lift because she had her
    legs amputated. All she wanted was to expedite her check so she
    could get a used van and go play bingo. It was sad to not be
    able to help because we could not get the check and she passed
    on.
        So it is elders like her that make me get criticized at
    home for traveling too much. My constituents want me to work at
    my tribe, but as NCAI President I have to travel to try to
    bring unity to get this done. So I am further committed because
    of the elders like Carol, to get this legislation, find common
    ground, find a way to do that.
        I know with the gentlemen sitting next to me and all the
    people at this panel, these five people I know we are committed
    to doing that. We started this in February and I know that he
    has probably caught heck at home, too, for being gone from his
    tribe in Osage, because he is a chief at his tribe. But it is
    an issue that affects all of us, Mr. Chairman, so that is why
    we are further committed and we are optimistic because, and I
    want to publicly thank you for your leadership, for
    cosponsoring S. 1439, Senator Dorgan. That, to me, is the key,
    is that bipartisan leadership and you stepped forward and you
    signed onto this bill. So that tells me that you are committed,
    and if you are committed we have to be committed as well.
        So to me, it is a team effort and we are totally committed,
    and further committed after hearing the words that I heard from
    you and Chairman McCain and members of the committee today.
        Senator Dorgan. Chief Gray.
        Mr. Gray. Yes; like Chairman Hall said, when we set out the
    effort to respond to this call for input from Indian country,
    we knew what we were getting into in terms of the commitment
    that it was going to take. I want to specifically say that we
    would not have done it if we did not think that you all were
    genuinely sincere in trying to do this.
        I think that what we have tried to do is try to bring all
    the parties together and have these meetings both region-wide
    and tribal-wide and significantly address some of the specific
    resources out there. When we formulated our principles last
    June and presented them to the committee, we felt like that,
    too, was a good start.
        Although there is going to have to be that kind of
    necessary give and take with the Administration and the
    committee regarding these areas where we have broad enough
    agreement to go forward, I just want to let you know that ITMA
    and the tribes that make up this organization, as well as the
    Osages, are going to be committed to the process.
        Senator Dorgan. Mr. Martin, I was not here when you
    testified, but I have been able to look at your testimony. You
    testified that there are a number of vacant positions and
    understaffing at the Department of Interior and the BIA. How
    does that impact your member tribes?
        Mr. Martin. This year in the 2006 budget and coming in the
    2007 budget, they allude to a crisis in law enforcement where
    money is needed for law enforcement elsewhere, so therefore the
    staffing, and only six staff people exist in our District Six
    office. It is proposed to be cut down to one. Due to the
    absorption of trust-related functions, there has been less
    money to be able to go to non-trust related functions like law
    enforcement, education and other programs like that.
        Also, you will find, then, the (2)(B) and the re-
    engineering, if you look at the reorganization and the work of
    the OST, a lot of areas when they go in there with their trust
    officers, and they have made improvement. I have to give credit
    where credit is due. They have made improvements in the trust
    office, but you will find in some regions they do not have the
    staff to do the work for the trust officers to review and sign-
    off on. You find that there are places in the BIA across Indian
    country that are understaffed, that you have good working
    people, but not enough warm bodies to get the work done.
        Senator Dorgan. Ms. Cobell, words have meaning and I
    understand the story you told about the history of your tribe
    and the suffering of your people, and understand the way you
    used words in your description of this. The draft legislation
    that Senator McCain and I have issued, we did when we issued it
    say this is a draft, a starting point.
        For some people in negotiations, ``no'' means it is an
    opening position; for other people, ``no'' means never under
    any condition. You never know exactly what it means from
    certain people until you begin negotiating. I am wondering what
    negotiations would mean to you here in terms of your very
    strong feelings about this. You have given us, I think, helpful
    testimony today. We appreciate that. Beyond that which you
    recited orally today, you have described in some detail certain
    provisions that you think need to be changed and how they
    should be changed.
        But it is much easier to oppose than propose. It just is.
    Mark Twain was once asked if he would get involved in a debate
    and he said, sure, as long as I can take the opposing view. And
    they said, we have not told you what the subject is. It doesn't
    matter, he said, the opposing view will not take any time to
    prepare. It is so much easier to oppose than propose.
        So the question I ask you, you have heard Chairman Hall and
    Chief Gray and others talk about the need to be involved in
    trying to construct some sort of legislative approach that
    might address these issues or solve these issues. Do you feel
    this is achievable in a legislative arena? Is this the manner
    in which it should be addressed? And do you feel you would want
    to be a continuing part of negotiations in an attempt to
    address it?
        Ms. Cobell. Of course. I definitely would like to be
    involved in the continuing negotiations. I would like to
    clarify just a couple of areas after listening to the testimony
    today, is that when the mediation took place, we put proposals
    on the table. The department did not. So we are not the bad
    guys in this entire game. We are the ones that are fighting,
    that have fought and won major victories in court.
        That is what I saw about the legislation is these major
    victories were not implemented into the legislation, and I was
    really concerned about that, especially we won. And I think it
    is important to clarify that the Court of Appeals has largely
    affirmed the District Court.
        When I heard Senator McCain talking about just the District
    Court, he was not referring to the Court of Appeals. The Court
    of Appeals has affirmed the District Court on jurisdiction, on
    standards, on the application of the trust law, on the scope of
    the accounting, that the accounting scope is from 1887 forward.
    The appellate court has upheld the District Court in all of
    these arenas, and those are very important areas to cover in
    this legislation.
        So I just want to make sure that, you know, I worked on the
    1994 Trust Fund Reform Act. Let me tell you, we gave. We
    compromised. And look what happened? It didn't work. And that
    is what I feel about. The Office of the Special Trustee is not
    working. You heard from the testimony today that that is an
    area that does not seem to be working.
        So, you know, I compromise. I am not the bad person in
    this. I am just wanting accountability for individual Indian
    beneficiaries. If we can do it in the ways that satisfy
    individual Indian beneficiaries, then I am willing to sit at
    the table, but I think there are certain victories that have
    happened in the court that need to be part of this legislation.
        Senator Dorgan. Well, we will stipulate that our feelings
    are not hurt and you are not the bad person. [Laughter.]
        You and others have every right to seek redress in the
    courts. You have done that. You have been successful at many
    different levels. So I understand that you are not coming to
    this in bad faith at all. You have used the system of justice
    in this country to address wrongs.
        So the question at the moment is, we find ourselves at kind
    of an intersection here. One road, I think, leads us to spend a
    lot of money on things that detract from the needs of Indian
    people in a way that will probably never get us a good
    solution. Another road might be for all of us to understand
    that we really are forced to negotiate something that is fair
    and just and equitable in order to put the past behind us,
    address the needs of people who have been victimized, and then
    from here forward, trying to straighten all this out and make
    certain this does not happen again.
        Let me again say on behalf of Chairman McCain and myself,
    we and our staffs have worked very hard on this and we will
    continue to do that. What we would like to do is use this
    hearing as an opportunity, and many of you have brought ideas
    to this hearing as well. Chairman McCain said, and he is
    absolutely correct, we cannot just go on and have hearing after
    hearing after hearing. We are not going to take this next year
    and a half in this Congress and decide that we are going to
    have 10 more hearings on trust reform because we cannot do
    that. But we can, it seems to me, make this a major priority
    from now forward as we negotiate to see if we can find a
    solution. If by the end of this year, in the next 3 or 4 or 5
    months, if we could find our way through this, that would seek
    a solution that all of us think is just and fair, I think it
    would be the best news in the world for Native Americans, for
    the First Americans who have seen their rights violated and who
    ask not just the courts, but ask the Congress now to intervene
    in a way that redresses those wrongs.
        So that would be my hope. The reason I asked Ms. Cobell,
    your name is on the litigation, obviously, and others of you.
    All of us have interests here. I just wanted to make sure
    everybody is really interested in pursuing this approach that
    Senator McCain and I have tried to initiate.
        I am hopeful, as a result of your response and the response
    of all of you, and I think Senator McCain will not be able to
    return because we will have another vote I believe that has
    perhaps just started on the defense authorization bill, so I
    will have to go cast that vote as well.
        On behalf of the Chairman and myself and other members of
    the committee, I thank all of you for taking the time to come
    to Washington, DC today and to participate in this hearing and
    give us I hope a renewed starting point with the legislation
    that we have introduced and the opportunity to continue working
    with you and talking with you about this important issue.
        This hearing is adjourned.
        [Whereupon, at 4:15 p.m., the committee was adjourned, to
    reconvene at the call of the Chair.]

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                                A P P E N D I X

                                  ----------

                  Additional Material Submitted for the Record

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

           Prepared of Hon. Daniel K. Akaka, U.S. Senator from Hawaii

        I thank Chairman John McCain and Vice Chairman Byron Dorgan for
    holding this hearing today and for introducing S. 1439, the Indian
    Trust Reform Act of 2005. In addition, I thank the witnesses who will
    testify before the committee for their participation today.
        For decades, the United States has been trying to resolve the
    accounting problems for both the individual Indian money and Indian
    tribal accounts. As a result, for 10 years now, litigants for
    individual Indian money account holders who filed a lawsuit in 1996
    against then Secretary of Interior Bruce Babbit and now against
    Secretary of the Interior Ann Norton, have been waiting for an accurate
    and complete accounting of their individual trust accounts. However, to
    this day, after contempt of court findings against cabinet officials
    and expenditures by both the Government and litigants, a historical
    accounting of the individual Indian money accounts still has not been
    rendered. On February 23, 2005, Judge Royce Lamberth issued another
    structural injunction requiring the Department of the Interior to admit
    to Individual Indian Money trust account holders that its accounting
    may be unreliable. It also provides specific requirements for the
    Department as it completes its accounting. Still, I am not certain the
    Department will be able to fully comply with Judge Lamberth's latest
    Memorandum and Order.
        Mr. Chairman, for this reason, I am pleased that you and Senator
    Dorgan have introduced S. 1439. While I commend the chairman and vice
    chairman for their efforts to bring forth this legislation to address
    the Government's responsibility to provide an accurate and complete
    accounting of the individual Indian money accounts, I wish to ensure
    that this legislation is a balanced and fair approach that will be
    acceptable to the plaintiffs and the Department of the Interior. It is
    imperative that Congress ensures that this legislation does not
    diminish the government's trust responsibility with Indian country. I
    agree with the intent of S. 1439, but I have some concerns and I look
    forward to working with Senators McCain and Dorgan on addressing them.
    Mr. Chairman, again, I thank you for holding this important hearing.
                                     ______

    Prepared Statement of James Cason, Associate Deputy Secretary, and Ross
      Swimmer, Special Trustee for American Indians on the Cobell Lawsuit.

        Thank you for the opportunity to come before this committee again
    and discuss the Cobell v. Norton lawsuit. As we have discussed on
    several prior occasions, the Department of the Interior supports the
    efforts of Congress, as the Indian trust settlor, to clarify Indian
    trust duties, responsibilities, and expectations.
        Allow me to emphasize that the Administration strongly supports
    protecting the rights of Native Americans under the law and that is an
    important objective of the Department of the Interior. Everyone
    involved the Cobell lawsuit--the Government, the Indian plaintiffs, and
    the judges in the district court and the appeals court--shares, we
    believe, that objective. But the protracted and painful litigation that
    has occurred does not serve that objective as well as would a
    settlement reached by agreement of the parties. It may not be easy for
    the Government and the Indians to reach a settlement, but it is well
    worth the effort for all concerned to engage in a good faith effort to
    resolve the matter. It is, of course, important that any settlement
    have the support of the Congress, as a settlement could not be
    implemented without appropriation of the necessary funds.
        We particularly want to thank the chairman and the ranking minority
    member for their efforts in trying to reach a full, fair, and final
    settlement of the issues in this case. This Congress has an opportunity
    to look at this issue anew, examine the facts, and move forward with a
    clear and consistent sense of purpose regarding the Federal
    Government's administration of the Indian trust.
        The Cobell litigation has been pending for too long. It is clear
    that after 9 years of litigation, the courts have not reached a
    resolution that is broadly supported by Congress. Interior's annual
    appropriations make it clear that Congress has not and does not support
    the kind of accounting effort required by the District Court.
        While Congress recently took actions to forestall the
    implementation of the District Court's structural injunction regarding
    historical accounting, the introduction of S. 1439 is the first serious
    Congressional effort we have seen to comprehensively resolve the issues
    involved in the Cobell lawsuit. While many details remain to be
    negotiated and clarified, the bill represents an important step toward
    bringing the parties together for a meaningful effort to seek closure
    on this matter.
        Congress is the Indian trust settler, that is, the creator of the
    trust and hence the party that defines its terms. Congress provides
    statutory direction to guide the management of assets held in trust for
    Indians and Congressional appropriations are provided to fund trust
    operations.
        Congress began its involvement with the passage of the General
    Allotment Act. That act authorized the allotment of tribal lands to
    individual Indians with the hope individual Indians would take up
    farming and assimilate themselves into the non-Indian society and
    culture. The act provided that the Secretary would hold the lands as an
    allotment in trust for 25 years. After 25 years, Indians would be free
    to sell or encumber their lands as they saw fit.
        In 1934, Congress passed the Indian Reorganization Act and extended
    the trust for individual Indian allotments in perpetuity. By then, many
    of these lands had already started to fractionate into many undivided
    interests and have continued to do so exponentially over the next 71
    years. The interests have become so small in many cases that heirs do
    not bother to claim their inheritances and interest holders in many
    cases fail to inform the BIA of their whereabouts. Keeping track of
    family deaths, missing relatives, and moving interest-holders is a full
    time job for many employees at BIA.
        The 1994 Reform Act was intended to further define the Department
    of the Interior's obligations regarding the management of IIM funds. In
    particular, the 1994 Reform Act defined several prospective accounting
    duties and a requirement to provide Indian beneficiaries with periodic
    account statements. In reading the legislative history of the 1994
    Reform Act, one will recognize that Congress had known for years about
    the condition of the trust accounts. However, it also seems apparent
    that Congress did not expect the Act to set the stage for what is now
    claimed to be a multi-billion dollar historical accounting liability on
    the part of the United States. The District Court has directed Interior
    to account for every land and cash transaction since 1887, even with
    regards to beneficiaries who had died and whose trust account was
    closed before 1994. The Court of Appeals seems to have identified a
    historical accounting requirement beginning in 1938.
        In 1996, the Cobell plaintiffs filed a lawsuit seeking an
    accounting of IIM account funds. Although Congress had not directed
    Interior to prepare periodic accounting statements or consistently
    funded such a requirement in the past, the Court of Appeals has ruled
    that a historical accounting for IIM accounts is required, ostensibly
    to ensure that the current balances of IIM accounts are accurate.
        The plaintiffs' lawyers have said they do not want handouts; they
    do not want reparations; they do not want welfare. They just want what
    is rightfully owed to them--in other words, they want money that was
    collected for them, but which they believe has not been distributed. In
    Court, the plaintiffs seek a historical accounting but are now working
    hard to prevent that accounting from occurring. In Congress, they argue
    against providing funding for that accounting; in Court, they argue
    that the accounting is impossible. Instead of an accounting, they want
    a lot of money. The plaintiffs have been quoted by the press as
    asserting that the Government has failed to pay individual Indians $176
    billion. Recently, the plaintiffs and tribal leaders have offered to
    settle the historical accounting claims of individual Indians for
    $27.487 billion. In the recently proposed S. 1439, the Senate left
    blank the amount of the proposed settlement, but with an indicator that
    the figure should be in the billions.
        Before we speak to the provisions of S. 1439, we would briefly like
    to address the list of 50 principles the committee has before it from
    the Trust Reform and Cobell Settlement Workgroup, which included the
    Cobell plaintiffs. The principles recommend a lump sum payment to the
    plaintiffs of $27.487 billion.
        This $27.487 billion payment will not necessarily resolve the
    Cobell litigation. In addition, it does not settle any other claims
    individuals might have against the United States related to funds
    management or to their lands. The $27.487 billion is intended to cover
    only the historical accounting claim. Principles 48-50 State clearly
    that the individuals should be allowed to continue to seek redress for
    Federal mismanagement claims. Federal mismanagement, the principles
    say, should be treated as a matter of national interest and, under
    principle #48, Congress is urged to provide a fair offer to individuals
    to compensate them for mismanagement in addition to the $27.487
    billion.
        To achieve a full, fair and final settlement to the potential
    claims being raised by individual Indians (and separately, by tribes)
    it is important to consider carefully four key components:

       \\\\\\Any requirement to conduct historical accounting
            activities should be eliminated. In exchange for a settlement
            payment, the account holder must relinquish any claim to an
            accounting and accept as accurate the balance of the account
            when closed or at the date of settlement. In addition,
            permitting a significant number of account holders the option
            of pursuing an accounting will undermine the cost effectiveness
            of a settlement program.

       \\\\\\Claims regarding funds mismanagement, including but
            not limited to accounts receivable issues, funds handling and
            deposit, investment decisions, etc. must be addressed.

       \\\\\\Appropriate mechanisms for the mitigation of
            fractionated interests must be provided. For example, the
            authority to conduct ``consolidation'' sales of highly
            fractionated lands would be helpful.

       \\\\\\Congress must decide whether separate resource
            mismanagement claims will be permitted, and if so, what
            remedies will be made available by Congress. If the legislation
            does not resolve those claims, Congress should ensure that
            these claims do not provide an opportunity to seek a sweeping
            historical accounting similar to that sought in the Cobell
            litigation.

        In determining how much money the Federal Government should provide
    to settle individual Indian claims, Congress should consider what work
    Interior has done so far and what we have found.
        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 the named plaintiffs and agreed-upon
    predecessors. Of these documents, about 21,000 documents were used to
    support the transactional histories, which dated back as far as 1914,
    and which included a total of about 13,000 transactions.
        Pursuant to the requirement in section 131 of the fiscal year 2003
    Appropriations Act, on March 25, 2003, the Department of the Interior
    provided Congress with a summary of the expert opinion of Joseph
    Rosenbaum, a partner in Ernst & Young, LLP, regarding the five named
    plaintiffs in Cobell v. Norton. This report describes the process the
    contractor went through and also contains a summary of his opinions.
    These conclusions included:

       \\\\\\The historical IIM ledgers were sufficient to allow
            DOI to create virtual ledgers that were substantially complete
            for the selected accounts.

       \\\\\\The documents gathered by DOI supported substantially
            all of the dollar value of the transactions in the analyzed
            accounts.

       \\\\\\The documents gathered by the Department of the
            Interior do not reveal any collection transactions not included
            in the selected accounts, with a single exception in the amount
            of $60.94 that was paid to another account holder, due to a
            transposed account number entered in the recording process.

       \\\\\\An analysis of relevant contracted payments, evidenced
            primarily by lease agreements, showed that substantially all
            expected collection amounts were properly recorded and
            reflected in the IIM accounts.

       \\\\\\There was no indication that the accounts are not
            substantially accurate, nor that the transactions were not
            substantially supported by contemporaneous documentation.

        This analysis, including the named plaintiffs and the selected
    predecessors in interest, found both non-interest transaction over
    payments to class members (37 instances totaling $3,462) and under
    payments (14 instances totaling $244).
        As of June 30, 2005, Interior's Office of Historical Trust
    Accounting [OHTA] had reconciled more than 21,847 Individual Indian
    Money [IIM] judgment accounts with balances totaling more than $56.3
    million and an approximately 15,000 additional accounts with no balance
    as of December 31, 2000. This accounting effort found non-interest
    overpayments (2 instances totaling $2,205) and under payments (21
    instances totaling $52).
        As of June 30, 2005, OHTA had also reconciled 3,995 IIM per capita
    accounts with balances of over $28.1 million and an additional
    approximately 4,000 accounts with no balance as of December 31, 2000.
    In this accounting effort, no overpayment or underpayment discrepancies
    were identified.
        Interest recalculations identified a particular set of IIM judgment
    transactions (786 instances totaling $25,000) where principal had been
    distributed without associated interest amounts (an underpayment) and,
    more broadly, interest amounts for judgment and per capita accounts
    that appeared to have been overpaid (a net amount approximating
    $377,000 on about 25,842 accounts).
        The National Opinion Research Center [the Center] at the University
    of Chicago, a national organization for research, has contracted to
    assist Interior with interpreting historical accounting data and
    results. It has recently completed a draft progress report entitled
    ``Reconciliation of the High Dollar and National Sample Transactions
    from LandBased IIM Accounts,'' looking at land-based IIM accounts that
    were open on or after October 25, 1994. The goal of the project is to
    assess the accuracy of the land-based IIM account transactions
    contained in the two IIM Trust electronic systems (Integrated Records
    Management System and Trust Funds Accounting Systems) for the
    electronic era 1985-2000. Accuracy is being tested by reconciling all
    transactions of $100,000 or more and a large statistically
    representative random sample of non-interest transactions under
    $100,000. The historical accounting initiative is scheduled to end in
    August 2005. To date, the Center has found:

       \\\\\\Over 98 percent of the sampled transactions needed for
            preliminary estimates have been reconciled for all 12 BIA
            regions.

       \\\\\\A completion rate of 98 percent is extremely high in a
            sample such as this. The draft report states: ``This very high
            completion rate for searching and attendant reconciliations
            should put to rest most concerns about the impact that the few
            remaining reconciled transactions might have on results.''

       \\\\\\Of land-based IIM account transactions exceeding
            $100,000, 1,730, of 1,737 were reconciled [99 percent]. The
            reconciliation identified both over payments [34 instances
            totaling $34,053] and under payments [24 instances totaling
            $47,168]. For the sampled land-based transactions of less than
            $100,000, fewer differences were found among the 4,134 out of
            4,162 transactions reconciled, with over payments to
            beneficiaries [15 instances totaling $506] and under payments
            [6 instances totaling $516].

       \\\\\\Reconciliation shows the debit difference rate to be
            0.3 percent.

       \\\\\\Reconciliation results show the credit difference rate
            to be a little over 1 percent.

        Based upon the historical accounting results so far, Interior
    suggests that Congress consider exempting Judgment and Per Capita funds
    from any proposed legislation. Regarding the findings from the IIM
    land-based accounting thus far, the net difference [under payments--
    over payments] would be about $10,000. Just under payments, without
    regard to offsetting over payments, equal less than $48,000.
    Notwithstanding the facts, all parties need to be mindful of the cost,
    risks and uncertainties associated with continued accounting efforts
    involving the remaining as yet unreconciled 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
    IIM Special Deposit account balances.
        Consistent with Interior's historical accounting plan, the
    Administration proposed funding the historic accounting at $130 million
    in fiscal year 2004, Congress appropriated $45 million. We requested
    $109 million for fiscal year 2005; only $58 million was appropriated
    and this includes funding for tribal trust fund accounting as well. The
    fiscal year 2006 budget request for historical accounting is $135
    million. This amount would provide $95 million for IIM accounting and
    $40 million for tribal accounting, however initial indications from
    House and Senate passed appropriations bills suggest approximately $58
    million will be provided. As a result of the lower appropriations
    amounts provided, the pace of completing Interior's planned historical
    accounting effort is slower, and the anticipated completion date will
    move further into the future. To date, Interior has spent in excess of
    $100 million to obtain the historical accounting results indicated
    above.
        We are pleased to have an opportunity to review S. 1439, the
    ``Indian Trust Reform Act of 2005.'' This bill was just introduced late
    last week so our comments today are preliminary ones. We will provide
    more detailed comments after an in-depth review of the bill.
        First, we appreciate the fact that legislation has now been
    introduced to attempt to address the issues in Cobell. We are pleased
    to see the bill focuses on consolidation of fractionated Indian lands
    and supports a more aggressive land acquisition program than the one
    currently under way. We do, however, have some serious concerns with
    the bill as currently drafted.
        Title I. S. 1439 would provide a yet undetermined number of
    billions of dollars to resolve the historical accounting claims of the
    class members of the Cobell litigation. However, it does not provide
    for settlement of all of the elements of the Cobell litigation. In
    addition, in determining what is a reasonable amount, Congress should
    be aware that the $27.487 billion requested by the plaintiffs does not
    include money to resolve potential mismanagement of trust fund and
    asset claims. In deciding upon the amount to provide for a resolution,
    the Congress should carefully consider all potential liabilities with
    respect to the individual Indian trust. The legislation should resolve
    or restrict any claims that might permit the reinstatement of
    historical accounting litigation comparable to the Cobell case.
    Congress should also realize that 25 tribal trust cases have been filed
    involving sums of money far greater than those involved in the
    individual Indian trust.
        Indian Trust Asset Management Demonstration Project Act. S. 1439
    includes provisions allowing for a pilot project for 30 tribes to take
    over management of Indian trust assets. However, it is critical to
    transfer the responsibility for results along with authority and
    funding. Thus, we do not believe the United States should remain liable
    for any losses resulting from a tribe's potential mismanagement of an
    Indian trust asset. This is particularly true because the bill would
    allow tribes to develop and carryout trust asset management systems,
    practices, and procedures that are different and potentially
    incompatible with those used by Interior in managing trust assets. In a
    normal trust, this action would be considered a merger of Trustee and
    beneficiary and thus end the Trust. Of course this would have no impact
    on the government-to-government relationship.
        We look forward to further discussing the following key aspects of
    this provision. For example, would Interior need to develop expertise
    in 30 different trust asset management systems sufficient enough to
    ensure that everything a tribe is doing under that system is in keeping
    with Interior's trust responsibility? If program reassumption became
    necessary, how would Interior take back program responsibilities and
    integrate information back into our trust asset management environment
    when it has been collected and processed in different systems? What
    kind of constant monitoring of tribal activities will Interior have to
    do to ensure the tribe is living up to the standards in the bill? What
    performance standard would apply: the imminent jeopardy standard
    associate with Public Law 93-638 or the ``highest and most exacting
    fiduciary'' standard being required of Interior?
        Fractional Interest Purchase and Consolidation Program. As we
    stated above, we are pleased to see that the bill places a priority on
    developing an aggressive program for the purchase of interests in
    individual Indian land with the intent of restoring those interests to
    the tribes, we are not prepared to take a detailed position on the
    specific provisions in the bill until we have done further analyses.
        The President's fiscal year 2005 budget request included an
    unprecedented $75 million request for Indian land consolidation.
    Congress chose to appropriate $34.5 million for the program in fiscal
    year 2005. In light of this, we requested $34.5 million for fiscal year
    2006.
        As structured, the program in S. 1439 provides incentives where a
    parcel of land is held by 20 or more individuals and where an
    individual sells all interests in trust land. In cases where a parcel
    of land of land is held by over 200 individuals, the bill provides
    procedures for noticing interest holders and moving ahead with
    consolidation of the interests. These provisions will greatly help
    consolidate interests and reduce the costs of management of the
    individual Indian trust.
        Care must be given, however, to ensure that this bill does not work
    as an incentive to fractionate land so that individuals can become
    eligible for the bill's incentives. So far, there has been no lack of
    willing sellers at appraised values. In addition, we would like to work
    with you further on the thresholds and amounts included in this title.
    We have some serious concerns as to the cost of the significant
    premiums provided in the bill. In addition, we would like to explore
    the possibilities for consolidation sale authority to reduce the
    associated public financing burden of addressing the fractionation
    issue. Further, we need Congressional clarification regarding the
    seemingly apparent public policy of retaining individual Indian land
    within Indian Country ownership versus the trust responsibility to
    obtain fair market value for each land interest. We need to analyze the
    costs of the new incentives, the mechanisms for funding land
    acquisitions and the impact of the American Indian Probate Reform Act
    on the rate of fractionation as a part of our implementation plan.
        Restructuring the Bureau of Indian Affairs and the Office of the
    Special Trustee. S. 1439 includes a number of concepts that were
    discussed by the Joint Department of the Interior/Tribal Leaders Task
    Force on Trust Reform in 2002. This task force was formed during the
    period when the department was examining ways to restructure the trust
    functions of the department in response to the trust reform elements of
    the Cobell court. The task force ended in an impasse with regard to
    implementing legislation on matters that were not related to
    organizational alignment. In the face of no legislation, the Department
    implemented a reorganization plan that could be achieved
    administratively. We will review this new title with respect to the
    reorganization just completed and provide you with our comments in our
    comprehensive report on the bill.
        This title of the bill also extends the Indian preference hiring
    policy to the new Office of Trust Reform Implementation and Oversight
    created by the bill and abolishes the Office of the Special Trustee for
    American Indians. Interior would appreciate the opportunity to discuss
    these policy choices in some detail.
        While Interior is receptive to the concepts of establishing an
    undersecretary position and merging Indian programs under new
    leadership, we would like to discuss the objectives of such a proposal.
    In Interior's view, such an initiative is unlikely to materially alter
    Indian trust performance due to the presence of other, more pressing,
    structural concerns about the trust, such as the lack of a clear trust
    agreement to guide responsibilities and expectations, appropriations
    that do not track with all program trust responsibilities, the lack of
    an operative cost-benefit paradigm to guide decisionmaking priorities,
    the challenges of incorporating Public Law 93-638 compacting and
    contracting and the requirements associated with Indian preference
    hiring policies. These issues have frustrated the beneficiaries, the
    administrators, and a various times Congress throughout the lifespan of
    this trust. We encourage Congress to speak clearly in whatever
    legislative direction in chooses to write, and carefully consider the
    impacts the language will have in allowing us to meet the objectives of
    your constituents.
        It is clear that moving from today's organization into a
    beneficiary-services-oriented organization of excellence will demand
    the highest of financial, information technology and managerial skills.
    American Indians make up less than 1 percent of the American public. If
    we unduly restrict hiring to this small fraction of potential
    employees, instead of reaching out to whoever may be most qualified, we
    deprive ourselves of 99 percent of the available talent pool. While the
    Indian preference hiring policy does permit the hiring of non-Indians,
    it also may serve as a significant disincentive for non-Indian
    applicants. We would like the opportunity to serve Indian Country to
    appeal to a broader range of applicants so as to create an applicant
    pool large enough to ensure we are hiring well qualified employees.
        Let me be clear. Indian people who are the best or equally well-
    qualified should be given preference. This allows us to ensure our
    organization understands the unique issues of Indian country. However,
    when better qualified individuals are not even considered or given
    reasonable promotion potential, a reality exists that organizational
    performance suffers.
        Audit of Indian Funds. The last title of S. 1439 requires the
    secretary to prepare financial statements for Indian trust accounts in
    accordance with generally accepted accounting principles of the Federal
    Government. The Comptroller General of the United States is then
    required to contract with an independent external auditor to audit the
    financial statements and provide a public report on the audit. The
    secretary is required to transfer funding for this audit to the
    Comptroller General from ``administrative expenses of the Department of
    the Interior'' to be credited to the account established for salaries
    and expenses of the GAO.
        Congress created the individual Indian trust. We are hopeful that
    S. 1439 will resolve many of the issues that we have spent over 9 years
    in court debating.
        From the Government's standpoint, we believe S. 1439 should----

       \\\\\\provide for a full, fair, and final resolution of the
            entire case;

       \\\\\\provide a clear and realistic statement of the
            government's historic accounting obligations for the trust
            funds of individuals;

       \\\\\\resolve the accounting claims of the account holders
            and any associated funds mismanagement claims;

       \\\\\\eliminate inefficient trust management obligations by
            consolidating individual Indians' lands through a land
            purchasing program and address any historic land assets
            mismanagement claims;

       \\\\\\clarify trust accounting and management
            responsibilities such that they are limited by available
            appropriations, so that future claims and litigation do not
            arise as a result of unfunded obligations; and,

       \\\\\\provide a clear statement of the Government's historic
            accounting obligations for Indian tribes.

        We recognize this is a daunting task. But I can assure you, it is
    no more daunting than the prospect of facing many more years in the
    court system trying to find the answers to these issues.
        Mr Chairman, I would like to close with a comment in support of our
    people at the Department of the Interior. We want to be sure that the
    public record reflects the fact of their extraordinary service to the
    country. Many of our employees past and present have faced rough-
    sledding in the Cobell case and have been unfairly maligned. Department
    of the Interior employees working on the issues involved in the Cobell
    case, like the other employees of the department, are here to serve the
    American public. They work hard, in good faith, to implement the laws
    you enact and protect the legal rights of Native Americans. We ask that
    our employees be treated with the dignity and respect they have earned
    and deserve as we all work our way together through the difficult legal
    issues involved in the Cobell case.
        The department is encouraged by the Senate's leadership on this
    issue. We look forward to resolving this case so that the department
    and beneficiaries can move forward on a positive agenda for Indian
    country. Thank you for the opportunity to appear. We would be happy to
    answer any questions you might have at this time.
                                     ______

      Prepared Statement of Clifford Lyle Marshall, Sr., Chairman, Hoopa
                                  Valley Tribe

        We thank you for the opportunity to submit testimony on S. 1439,
    the Indian Trust Reform Act of 2005. The Hoopa Valley Tribe, one of the
    original self-governance tribes, a section 131 tribe and member of
    California Trust Reform Consortium and ATNI, commends Chairman McCain
    and Vice Chairman Dorgan for their dedication to resolving the issues
    arising from the Cobell v. Norton case, the Department of the
    Interior's reaction to that case, and the future of tribal and
    individual Indian trust assets management. The Hoopa Valley Tribe
    appreciates the time and energy spent on the development of S. 1439 and
    is pleased with the outcome. We support the effort and look forward to
    working with the committee on improving the bill as it moves through
    the legislative process.
        S. 1439 presents a plan for remedying the wrongs of the past while
    proposing a structured approach for future trust management. It seeks
    to ensure that problems surrounding the Federal management of trust
    assets and resources, which have, afflicted Indian country, for so
    long, will not plague us in the future. The bill supports the
    government-to-government relationship between tribes and the United
    States, adheres to the Federal Government trust Responsibility to
    tribes, and furthers the principles of self-governance and self-
    determination. Unlike past short-sighted trust management approaches of
    the United States, that gave rise to the breach of trust claims, S.
    1439 is a balanced approach to addressing the immediate issues of
    Cobell and the Federal Government's management of trust assets.
    Importantly, S. 1439 also preserves the rights of tribes, as inherent
    sovereign governments, to participate in the management and protection
    of their territories and resources. It recognizes that the United
    States must be held accountable for past wrongs and also that true
    reform is needed for proper trust management in the future. We believe
    S. 1439 is the vehicle for that for that reform.
        Below, we discuss three overarching points of the bill and then
    provide brief comments on certain provisions. Specifically, we believe
    S. 1439 rightfully refocuses trust reform to the original objectives
    and intent of the 1994 Trust Fund Management Reform Act, blunting the
    United States' recent policy of micromanaging trust issues in light of
    Cobell which has caused duplication and bloated bureaucracy. Further,
    we believe S. 1439 protects self-governance and the rights and
    abilities of tribes to participate in trust management. Finally, it
    appears S. 1439 frees up substantial funds that could be used on the
    ground to address the many issues in Indian country.
    Refocusing Trust Reform

        We believe S. 1439 correctly refocuses trust reform back to the
    original mission of the American Indian Trust Fund Management Reform
    Act of 1994, 25 U.S.C. Sec. Sec. 4001-4061. The Hoopa Tribe agrees with
    the goals and principles of the 1994 act. We also believe in the need
    for the Office of Trust Fund Management [OTFM] to operate within the
    BIA. The 1994 act established the Office of Special Trustee [OST] to
    oversee and coordinate reforms in the Department of the Interior's
    [DOI] practices relating to the management and discharge of the
    secretary's trust responsibility to tribes and individual Indians.
    Under the act, the OST is to ensure that policies, procedures,
    practices and systems of the DOI's bureaus related to the discharge of
    the trust responsibility are coordinated, consistent and integrated. It
    is clear under the Act that OST is meant to be an oversight and
    coordinating entity.
        In light of Cobell, however, the OST in recent years has used the
    1994 act to leverage unnecessary control and micromanage trust issues.
    It has moved away from its intended role as a coordinating oversight
    entity to become an entity engaged in the delivery of trust services, a
    role originally reserved for the BIA. This has resulted in a
    fragmentation of appropriations for Indian programs, a dismantling of
    the Indian service delivery system and unnecessary duplication and
    bloating of bureaucracy. This is in direct contradiction to tribes'
    longstanding desire to keep the BIA system intact while repairing
    resource management problems that need fixing. The purpose of the 1994
    act was to provide oversight, not create a new agency focused on
    protecting itself from liability.
        We do not need additional bureaucracy, nor can we afford it,
    particularly in today's budget environment. OST has been operating
    under a ``bright line'' philosophy under which it attempts to develop
    an arbitrary separation between Indian assets and the people
    themselves. Indian people and their assets, however, cannot be
    conveniently separated simply by dividing programs and functions and
    moving trust program management from a single line of authority to
    multiple lines of decisionmakers at different agencies. Any bright line
    plan that has a basic framework to separate trust assets from Indian
    communities will necessarily be in conflict with the goals of economic
    development, providing adequate services, and reducing poverty in
    Indian country.
        Under the existing BIA structure, each Regional and Agency Office
    has established internal trust personnel to oversee the management of
    trust assets at every point in the delivery of trust services. The OST
    has also established trust officers to serve in the Regional and Agency
    Offices. Under the combined BIA and OST restructured trust programs,
    there are nearly 1 dozen Federal employees carrying out what was done
    by less than One-half in previous years. We do not believe this is what
    was intended by the 1994 act.
        The Hoopa Tribe supports S. 1439, in part, because title V takes
    bold steps to restructure the BIA and the OST. Title V seeks to ensure
    a more accountable administration of the secretary's duties with
    respect to providing services and programs to Indians and tribes,
    including the management of trust resources. Title V creates the
    position of under secretary for Indian Affairs, who reports directly to
    the Secretary of the Interior, and provides for the phasing out of the
    OST by December 31, 2008. The termination of the OST is specifically
    intended by the 1994 act. S. 1439's clear sunset of the OST protects
    against the possibility that the OST will become permanent, regardless
    of its efforts in bureaucracy building and assuming the responsibility
    for delivering certain trust services.
        The Hoopa Tribe supports S. 1439's creation of the position of
    Under Secretary and the transfer of the duties and functions of the OST
    and the Assistant Secretary for Indian Affairs to this new position. We
    think the plan will streamline the process for carrying out trust
    functions. Moreover, with the emerging trust issues regularly surfacing
    in other bureaus and agencies of the DOI, we believe the creation of
    the under secretary position will help resolve trust problems tribes
    face due to the lack of coordination or understanding of the issues by
    those other agencies/bureaus. Having one direct line of authority will
    assist in the coordination of the various aspects of trust management.
    Further, we support the effective merger of OST functions back into
    Indian programs of the BIA, under the under secretary. This would
    prevent the duplication of services and the overgrowth of bureaucracy,
    and foster progress in the delivery of services to Indian people.

    S. 1439 Protects self-governance and the ability of tribes to manage
        their own resources

        As a self-governance tribe and participant of section 131, we are
    grateful that Congress recognizes the benefits of the section 131
    Demonstration Project and has included the Indian Trust Asset
    Management Demonstration Project Act in Title III of S. 1439. The Hoopa
    Tribe is honored to participate in the section 131 project with the six
    other tribes in the California Trust Reform Consortium (Karuk, Yurok,
    Cabazon, Big Lagoon, Redding, and Guidiville) as well as the Salt River
    Pima Maricopa Indian Community, the Confederated Salish--Kootenai
    Tribes and the Chippewa Cree of the Rocky Boys Reservation. Section
    131, to date, has been successful. Accordingly, we strongly support the
    Demonstration Project in S. 1439 and will assist in any manner to
    address areas of concern that Congress or the Administration may have.
        The motivation behind section 131 [section 139 in its initial year]
    was multi-fold. For the California Trust Reform Consortium, we sought
    protection of our then-existing Operating Agreement for trust resources
    management that we entered into with the BIA Pacific Regional Office
    [PRO] and protection of our relationship with the PRO in the face of
    uncertainty in the direction of trust reform efforts. We did not want
    the imposition of the restructured OST and DOI to alter our tried and
    true successful means of managing our trust resources. It is our
    position that trust reform should focus on what is broken and preserve
    what is working. Section 131 tribes have systems and practices for
    trust management that work. In fact, pursuant to section 131 each
    participating tribe underwent an evaluation by the OST and received a
    determination that it is capable of performing compacted trust
    functions under the same fiduciary standards to which the secretary is
    held. Hoopa was even cited as ``an excellent example of trust
    administration, in furtherance of tribal self-determination.''
        Section 131, we also believe, is an appropriate way to showcase
    successful models of trust management that not only demonstrate to the
    United States how trust management can be implemented, but also
    encourage tribes to participate in the management of their resources.
    It stands as an example that local decisionmaking and combined efforts
    with the BIA can result in significant trust management improvements.
    Tribes can properly implement trust management even though they may use
    different practices and methods than the DOI. Title III of S. 1439
    maintains and encourages this concept by preserving the ability of
    tribes to continue their own successful trust resource management.
        The S. 1439 Demonstration Project builds upon and encourages self-
    governance and self-determination, which are proven successful policies
    for building growth in capability and infrastructure in tribal
    governments. We believe that the Demonstration Project under title III
    will provide a useful model for how tribal governments can assist the
    United States with properly managing trust assets and create an
    understanding on the part of the Federal Government of the differences
    between our respective values and expectations when managing trust
    assets within our tribal territories. We also believe that all tribal
    governments, regardless of whether they are direct service tribes or
    operating pursuant to self-governance or self-determination agreements,
    should be a part of the management of trust assets within their
    jurisdictions. Active participation by tribal governments in the
    management of trust assets not only creates positive results, but
    reduces the chance of conflicts or breach of trust claims. Again, we
    support the concept of the Demonstration Project and are committed to
    working with the committee to find ways for tribal governments of any
    fashion of service delivery to engage in the management of their trust
    assets.
        One concern we do have with the Title III Demonstration Project is
    that the default action under section 304(b)(3) is to deny approval of
    a tribal applicant's demonstration project plan if the secretary does
    not act within a certain timeframe. We believe this standard should be
    reversed so that a plan is approved unless specifically denied by the
    Secretary. This approach would be mindful of the fact that tribes are
    always at a disadvantage when the secretary has the ability to obstruct
    the negotiation process.

    Under S. 1439, substantial amounts of money will be available for use
        on the ground to address the many issues in Indian country.

        It appears that under S. 1439 a substantial amount of funds
    currently being used for litigation costs by the DOI in the Cobell case
    as well as reorganization efforts of the OST would be available to be
    used for on-the-ground initiatives in Indian country to address the
    many needs of tribes and their members.
        We have previously estimated that the costs of implementing the To-
    Be Model, Records Policy and Trust Examination Handbook nationwide
    would be approximately $1 billion. While we support the continuing
    requests of tribal leaders to provide adequate funding for trust
    resource programs, we do not support the concept that creating new
    multi-million dollar centralized bureaucracies located thousands of
    miles away from where the resources need to be managed is the best way
    to accomplish trust improvements. To the contrary, we strongly believe
    that meaningful and cost effective trust improvements occur when there
    is support and funding provided at the local level. S. 1439 appears to
    recognize this principle by encouraging self-governance and the
    integration of tribal government action with a local decisionmaking
    focus in trust management. S. 1439 appears to streamline trust
    management rather than expand Federal bureaucracy. With this, moneys
    that would have been put toward centralized bureaucracies, it appears,
    would be available for spending at the local level on trust
    improvements. This, in turn, will further tribal economic development
    and the effort to reduce poverty among tribal members.

    Titles I, II, IV, and VI of S. 1439

        The Hoopa Tribe is in support of a timely and fair resolution of
    the Cobell case. The importance of the United States' obligations to
    Indian people can never be diminished. Further, Indian people should
    not suffer from inaction on their claims. The Hoopa tribe has had
    experience with claims that take far too long to resolve. Such delay
    does not do justice to Indian people. A fair and timely resolution is
    needed so Indian people can move forward. We look forward to hearing
    the comments that will be forthcoming with regard to the proposal
    outlined in title I.
        The Hoopa Tribe previously has not supported the concept of a
    commission because we do not want it to become another level of
    overreaching bureaucracy. However, as title II is written, it seems the
    Trust Asset Management Policy Review Commission [Commission] might
    provide some benefit in reviewing the laws and practices of the DOI
    with respect to trust asset management, and recommending improvements
    to those laws and practices to the Secretary and Congress. The manner
    in which Indian trust services has been staffed, funded and carried out
    has left many of us with a strong sense of frustration and
    disappointment. The commission concept may help ensure that the
    problems which plagued us in the past will not plague us in the future.
    It is absolutely necessary, however, to ensure that there is no risk
    that the Commission will take on a life of its own, by extending its
    reach beyond reviewing and making recommendations. It cannot duplicate
    efforts of the agencies nor can it drain critically needed funds from
    Indian programs or wield any authority over how tribal governments
    address individual issues relating to trust management, The manner in
    which Title II is drafted appears to protect against such short-sighted
    policies and additional bureaucracy that would only complicate the
    problems. We recommend, however, that the commissioners selected from
    Indian country consist of a balance between direct service and self-
    governance tribes.
        The Hoopa Tribe strongly supports resolving the problem of
    fractionated interests. We, however, reserve comments on title IV
    regarding the Fractional Interest Purchase and Consolidation Program
    until we have had the opportunity to hear from the Indian Land Working
    Group and other appropriate entities that have an interest in this
    matter.
        We believe the concept in Title VI, Audit of Indian Trust Funds, is
    necessary to ensure adequate checks and balances of financial trust
    functions within the Federal Government. The requirement for an
    independent audit will lend necessary credibility to the overall
    management of trust funds by the Federal Governments.
        We want to express our appreciation for Chairman McCain's and Vice
    Chairman Dorgan's leadership demonstrated through the introduction of
    S. 1439. Trust mismanagement problems have afflicted tribes and Indian
    people for too long. Allowing these problems to remain unresolved for
    much longer will only create more injustices, conflict and delays in
    the services the United States is obligated to provide Indian people.
    It is time to act. We believe that S. 1439 is a solid foundation for
    such action, and we look forward to working with the committee, the
    House Resources Committee and the Administration to move meaningful
    legislation through the process as expeditiously as possible.
                                     ______

    Statement of the Harvey Moses, Jr., Chairman Confederated Tribes of the
                              Colville Reservation

        The Confederated Tribes of the Colville Reservation [Colville
    Tribe] would like to express its thanks to Chairman McCain and Vice
    Chairman Dorgan for introducing S. 1439, the ``Indian Trust Reform Act
    of 2005,'' and would like to take this opportunity to provide initial
    thoughts and comments on the bill. Although such an important
    legislative initiative will undoubtedly generate a wide range of
    reactions, the Colville Tribe generally supports the legislation and
    believes that it is a crucial first step in resolving the Cobell v.
    Norton litigation and implementing meaningful trust reform in the
    Department of the Interior.
        While the statements contained herein are based only on a
    preliminary review of the bill, the Colville Tribe is pleased to see
    that title V of S. 1439 would help rectify one of the more unfortunate
    recent developments in Federal Indian policy--the rise and gradual
    domination of trust issues by the Office of Special Trustee [OST]. The
    Colville Tribe has long made known its opposition to OST, as have many
    of our sister tribes in the Pacific Northwest and around the country.
    Our opposition to OST and our desire to see the transfer of OST
    functions back to the Bureau of Indian Affairs [BIA] are based on our
    own experiences with OST and on the detrimental impact continued
    funding of the OST bureaucracy has had on the funding levels of
    critical Indian programs.
        The Colville Reservation comprises over 1.4 million acres of trust
    and allotted lands in north central Washington State. With lands that
    include timber, agricultural and water resources, our tribe and our
    tribal members necessarily depend on a smooth working relationship with
    our local BIA agency office to ensure that land transactions and other
    BIA supervised activities are completed in a timely manner. For
    decades, the Colville Tribe has generally enjoyed such a relationship.
    Certain activities undertaken by the OST, however, have resulted in
    periods of extended delays in completing land sales by and between our
    people. OST has gone so far as to impound our tribe's probate records
    from our agency office in Nespelem, WA [where they had been secure for
    decades], and moved them to Albuquerque, NM. We understand that since
    the move, OST cannot account for all of the records. To say the least,
    these actions have dealt a serious setback to our tribe's ability to
    conduct business and are not in keeping with a healthy and constructive
    Federal-tribal relationship.
        Also, as we noted in statements previously submitted to the
    committee in connection with its March 9, 2005, oversight hearing on
    trust reform, continued funding of OST at the expense of the BIA means
    that OST diverts critical funding and personnel away from agency
    offices. Our tribal members are the beneficiaries of these agency-level
    services and are the very people who need the assistance most and who
    can least afford to suffer bureaucratic folly. Indeed, every new fiscal
    year brings with it another increase in OST funding and a corresponding
    reduction in BIA funding for critical health and safety programs.
    Returning these functions to a single administrative entity, as
    proposed by S. 1439, would reverse this trend.
        While we believe a need exists for independent oversight of the
    BIA's delivery of trust services, OST has morphed far beyond this
    oversight function. As proposed, title 11 of S. 1439 would establish a
    trust management policy review commission that would provide policy
    oversight, while title VI would give the Government Accountability
    Office a key role in overseeing how the Department safeguards its trust
    responsibility. While these titles could use some fine tuning, the
    Colville Tribe believes that these are steps in the right direction.
        The Colville Tribe also agrees with the intent of title III--which
    would establish the Indian Trust Asset Management Demonstration
    Project--that tribes that so choose should have an opportunity to
    prioritize funding and management of their trust resources based on
    their own needs. Although we have questions on how the proposed project
    will be implemented and are interested in seeing the details of how
    tribes and the Department would negotiate a ``trust resource management
    plan,'' these issues can surely be resolved later.
        Title I of the bill proposes a voluntary claims resolution regime
    to settle the accounting claims of the hundreds of thousands of
    Individual Indian Money [IIM] account holders currently embroiled in
    the Cobell v. Norton litigation. While the specific dollar amount is
    left undetermined in S. 1439, the tribe is very encouraged that funds
    to resolve the IIM accounting claims will come from the Judgment Fund
    and not from the annual Indian program appropriation. The tribe is also
    supportive of the availability of judicial review for claimants to
    challenge their settlement amount or, indeed, challenge the
    methodologies used to arrive at a settlement amount. We are mindful of
    the complexities involved in trying to settle the Cobell case, and are
    fully aware that many questions need to be answered, but applaud the
    committee for taking the initiative to bring this 9-year old litigation
    to a fair and final conclusion.
        The Colville Tribe supports a comprehensive legislative approach
    such as the one set forth in S. 1439. The legislation would clarify the
    Department's trust obligations and ensure that services provided by the
    BIA are not jeopardized because of a competing office within the
    department.
        Again, the Colville Tribe thanks the committee for the opportunity
    to present its preliminary views on this critical legislative proposal.
    The Tribe looks forward to working with the committee on this important
    subject.

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