[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
22-831                      WASHINGTON : 2005
_____________________________________________________________________________
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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

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       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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