[Senate Hearing 111-550]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 111-550
 
                 COBELL V. SALAZAR SETTLEMENT AGREEMENT

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

                                HEARING

                               before the

                      COMMITTEE ON INDIAN AFFAIRS
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                           DECEMBER 17, 2009

                               __________

         Printed for the use of the Committee on Indian Affairs


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                      COMMITTEE ON INDIAN AFFAIRS

                BYRON L. DORGAN, North Dakota, Chairman
                 JOHN BARRASSO, Wyoming, Vice Chairman
DANIEL K. INOUYE, Hawaii             JOHN McCAIN, Arizona
KENT CONRAD, North Dakota            LISA MURKOWSKI, Alaska
DANIEL K. AKAKA, Hawaii              TOM COBURN, M.D., Oklahoma
TIM JOHNSON, South Dakota            MIKE CRAPO, Idaho
MARIA CANTWELL, Washington           MIKE JOHANNS, Nebraska
JON TESTER, Montana
TOM UDALL, New Mexico
AL FRANKEN, Minnesota
      Allison C. Binney, Majority Staff Director and Chief Counsel
     David A. Mullon Jr., Minority Staff Director and Chief Counsel


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on December 17, 2009................................     1
Statement of Senator Barrasso....................................     3
Statement of Senator Dorgan......................................     1
Statement of Senator Franken.....................................    13
Statement of Senator Johnson.....................................    14
Statement of Senator Murkowski...................................    14

                               Witnesses

Cobell, Elouise, Lead Plaintiff, Cobell v. Salazar...............    17
    Prepared statement...........................................    18
Perrelli, Hon. Thomas J., Associate Attorney General, U.S. 
  Department of Justice..........................................     7
    Prepared statement...........................................     8
Salazar, Hon. Ken, Secretary of the Interior, U.S. Department of 
  the Interior; accompanied by David J. Hayes, Deputy Secretary 
  and Hilary Tompkins, Solicitor, Department of the Interior.....     3
    Prepared statement...........................................     5

                                Appendix

Jacobs, Eddie, Creek Indian Individual Indian Trust Account 
  Holder, prepared statement.....................................    25
Keel, Hon. Jefferson, President, National Congress of American 
  Indians, letter, dated December 17, 2009.......................    27
Response to written questions submitted by Hon. John Barrasso to:
    Elouise Cobell...............................................    28
    David J. Hayes...............................................   100
    Hon. Thomas J. Perrelli......................................    29
Response to written questions submitted to Hon. Ken Salazar by:
    Hon. Tim Johnson.............................................    97
    Hon. Lisa Murkowski..........................................    98
    Hon. Tom Udall...............................................    97


                 COBELL V. SALAZAR SETTLEMENT AGREEMENT

                              ----------                              


                      THURSDAY, DECEMBER 17, 2009


                                       U.S. Senate,
                               Committee on Indian Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:39 p.m. in room 
628, Dirksen Senate Office Building, Hon. Byron L. Dorgan, 
Chairman of the Committee, presiding.

          OPENING STATEMENT OF HON. BYRON L. DORGAN, 
                 U.S. SENATOR FROM NORTH DAKOTA

    The Chairman. We will now turn to the hearing. We have the 
Honorable Ken Salazar, who is the Secretary of the Interior, 
with us today.
    Secretary Salazar, while we are waiting, if you would come 
forward, and you are accompanied the Honorable Hilary Tompkins, 
the Solicitor at the Department of the Interior; the Honorable 
David Hayes, Deputy Secretary of the United States Department 
of the Interior; and the Honorable Thomas Perrelli, Associate 
Attorney General, U.S. Department of Justice.
    Let me say that we will now convene the hearing itself. The 
hearing is an oversight hearing on the subject of Cobell v. 
Salazar, and a settlement agreement of that court suit.
    Earlier this month, the parties in the longstanding Cobell 
litigation reached a settlement agreement. And we have asked 
them here today to describe that agreement. I believe the 
Cobell settlement agreement is really historic, and I know it 
has been a long and very difficult journey to get to a 
settlement.
    The case has been in court for over 13 years. It is a 
tragedy that many beneficiaries of this case have passed away 
before the case has been resolved, and they certainly will not 
benefit from the settlement.
    I have long believed that settling rather than continuing 
to litigate year after year after year is the best course of 
action. In the 109th Congress, Senator McCain and I worked very 
hard to see if we could create that settlement, and that was 
not achievable.
    The Cobell case itself was caused by a broken land 
management system developed by the Federal Government over a 
century ago. The U.S. was dividing up Indian reservations, 
allocating land to individual Indians. Remaining lands were 
sold to non-Indians. As part of these policies, the United 
States became responsible for managing Indian lands, for 
collecting and distributing revenues produced from those lands 
to individual Indians.
    The management duties became burdensome as ownership in the 
lands became fractionated. I know of parcels of land that had 
10,000 owners, fractionated ownership. But in addition to just 
the complication, the fact is a number of American Indians 
whose accounts were to be handled by the Federal Government 
found that the accounts were mishandled. They were bilked, in 
my judgment. Some were perhaps stolen. The accounts were 
mismanaged.
    What happened was a terrible blot on the Federal 
Government. And there was required to be some redress for it, 
and some people went to court to seek that redress. And as I 
indicated, the court case lasted a long, long while.
    Today, there are 150,000 Indian land allotments with 4 
million interests. And for each of these allotments, there 
could be as many as 1,000 owners. The problems is illustrated 
with 2005 date from the Fort Berthold Reservation in my home 
State. You can see on the chart that we are putting up, more 
than one third of the land parcels have between 11 and 1,000 
owners.
    Other States have similar problems on their reservations. 
Some are even much worse. The most fractionated Indian 
allotment is in Wisconsin. If Indian land generates income, 
then each owner will have a trust account and the United States 
is responsible for managing that. In Fiscal Year 2009, there 
were almost 400,000 individual Indian trust accounts.
    Now, the courts have consistently held that the United 
States failed to properly manage these accounts. But the 
question of how much the plaintiffs have been owed or are owed, 
and how to fix the problem, have remained. And I am really 
pleased that the settlement agreement compensates the 
individual Indians whose accounts I believe were mismanaged, 
and takes a significant step towards decreasing the amount of 
land fractionation in Indian Country. I think this will help 
ensure that there will not be another Cobell case in the 
future.
    The terms of the settlement require that Congress approve 
it before the end of this month. I don't know whether that will 
happen, but we hope it will happen. And if it doesn't, we 
intend to try to make it happen. If it does not happen, I hope 
the parties will agree to a brief extension of time.
    It would be an incredible disappointment to waste this 
historic opportunity, and I pledge to you that I want to try to 
find a way in these waning days to make this happen.
    I do want to say that Secretary Salazar, you came to that 
post of Interior Secretary and you perhaps more than anyone in 
a dozen years decided you were going to try to make something 
happen here that was good for everybody, that resolved a 
longstanding dispute. And I think that is called leadership. 
And I, for one, really appreciate your leadership to try to 
bring us to this day and to this table. So thank you very much.
    The Chairman. Vice Chairman Barrasso, please?

               STATEMENT OF HON. JOHN BARRASSO, 
                   U.S. SENATOR FROM WYOMING

    Senator Barrasso. Thank you, Mr. Chairman, and thank you 
for holding this hearing, a very important hearing.
    I want to extend a warm welcome to my friend, Secretary 
Salazar. I want to thank you for appearing in front of the 
Committee this afternoon. I am very interested in hearing what 
you have to say about this proposed settlement, so I will be 
brief.
    First and foremost, I think it is good that the parties in 
this dispute were able to come together and reach an agreement. 
For whatever reason, that didn't happen during the last 13 
years. That said, I believe there are still many questions that 
can and should be asked about the settlement.
    For example, I would like to know exactly how the 
settlement amount of $1.4 billion was arrived at. I would also 
like to know how the Administration arrived at the figure of $2 
billion for the fractionated land buy-back program, and how and 
where they plan to spend that money.
    Like many people, I am sure, I would like to know how much 
of this money will go to attorneys' fees; $3.4 billion is an 
incredible amount of money, and it is a lot of American 
taxpayers' money.
    So it is appropriate that we delve into the details of that 
settlement with these and other questions, but I hope the 
witnesses can give us answers to these and other important 
questions this afternoon. If that can't be done, I would like 
to receive follow-up or supplemental answers as soon as 
possible after the hearing.
    So I thank the witnesses for attending and preparing for 
today's hearing on such short notice.
    Thank you, Mr. Chairman.
    The Chairman. Thank you very much, Senator Barrasso.
    Are there others on the Committee that wish to make a 
comment prior to my calling on the Secretary?
    If not, Secretary Salazar, I will call on you for 
testimony. The testimony of all of the witnesses today will be 
entered into the record in its entirety, and you may summarize.
    Thank you so much for being here.

        STATEMENT OF HON. KEN SALAZAR, SECRETARY OF THE 
          INTERIOR, U.S. DEPARTMENT OF THE INTERIOR; 
  ACCOMPANIED BY DAVID J. HAYES, DEPUTY SECRETARY AND HILARY 
        TOMPKINS, SOLICITOR, DEPARTMENT OF THE INTERIOR

    Mr. Salazar. Thank you very much, Chairman Dorgan and 
Ranking Member Barrasso, Senator Murkowski, Senator Johnson, 
Senator Udall, Senator Franken and all the Members of the 
Committee who are here today.
    Let me at the outset first acknowledge your leadership, 
Chairman Dorgan, along with the leadership of others who have 
tried to wrestle with this issue for many years, including that 
of Senator McCain, who over many years worked with you to try 
to bring about a resolution to this longstanding and very 
difficult and very bitter dispute.
    Secondly, let me also say thank you to the members of the 
team who are here with me today as witnesses on the Cobell 
settlement. Tom Perrelli, the Associate Attorney General from 
the Department of Justice has worked tirelessly on this matter, 
really for almost much of his last year, along with David 
Hayes, the Deputy Secretary of Interior, who spent an enormous 
amount of time working with Hilary Tompkins, who is the 
Solicitor General for the Department of Interior. So I thank 
them for their particular efforts.
    Let me at the outset just say the history of this case has 
been a long and tortured and painful history. It was born 13 
years ago, and you on this Committee have been familiar with 
the different chapters of it. Perhaps there are two ways of 
looking at this case and the journey that it has taken.
    One of the ways it to look at it through the acrimony that 
has been created between the United States of America and the 
Indian nations around our Country, and the individual Indians 
who are represented in this class, where the issues that we are 
trying to deal with on reservations from law enforcement to 
education to economic development frankly have been hindered 
because of the fact that this has been a huge cloud over the 
relationship between the Department of the Interior and Indian 
Country.
    And so hopefully what this settlement does is it brings 
about a turn in direction relative to the relationship between 
the United States of America in carrying out its trust 
responsibilities with respect to Indian Country.
    Secondly, you can also tell the story of this journey 
through some of the numbers that have been dealt with that I 
think Dr. Barrasso, Senator Barrasso, you might know some of 
these numbers. But at some point in time, there was 
conversation about the fact that there was a claim here for 
$176 billion. There were plaintiffs' requests in 2004, they 
were public at $40 billion. There was a National Congress of 
American Indians Task Force which worked hard and had come up 
with a number of $27.4 billion.
    And then in March 1 of 2007, under President Bush's 
Administration, Attorney General Gonzalez and my predecessor, 
Secretary Kempthorne, put forth a proposal for an amount of $7 
billion to try to attempt to settle this case.
    Between that time and this time, the litigation has 
continued, and in part as a result of the decisions that have 
been made in the courts, and the leadership of the court itself 
through the efforts of Judge Robertson, we were able to arrive 
a number that is $3.4 billion. So that is significantly less 
than had been talked about in the history. So that is part of 
telling the story of this case.
    Now, what does the settlement do? I think in two broad 
ways, you should be thinking about this settlement in the same 
way that we thought about them, and Chairman Dorgan touched on 
those two things in his opening statement.
    The first is that it does deal with past wrongs. When you 
think about the past wrongs we are trying to right here, these 
past wrongs to way back to over 100 years. And so what we will 
do is correct those past wrongs so we don't have to look at the 
past anymore, and we can look to the future.
    The second thing that it does is it sets up a program so 
that we avoid the problem from occurring again in the future. 
It would do us not much good, in my view, to essentially settle 
the damages portion of this case, and not to move forward with 
a proactive effort to try to make sure that we are not back in 
the same problem five years and 10 years and 20 years from now.
    And I think some of the numbers that Senator Dorgan spoke 
about relative to fractionation is only going illustrate that 
the problem is simply going to exacerbate and become larger. 
There are now 4 million interests that we are dealing with 
here. But if the fractionation issue continues to move forward 
in the same direction that it has moved in, our projection is 
that we will be dealing with 11 million fractionated interests 
by the year 2030.
    So when we think about having to deal with this complex 
problem, it is only going to get more complex unless we are 
able to figure out away of moving forward with it. And so that 
is why the buy-out provisions on the $2 billion, Senator 
Barrasso, that you talk about will deal with that very 
substantive problem to ensure that this problem does not occur 
again.
    So it is for those reasons that I think that this is a fair 
and reasonable settlement.
    And in conclusion, as Senator Dorgan, Senator Barrasso and 
the Members of this Committee know, one of the priorities that 
I have for the Department of Interior is making sure that we 
address the problems that First Americans are facing all across 
our Country. And getting this litigation behind us will allow 
us to move forward in major efforts we have already launched to 
deal with the issues of public safety and law enforcement, to 
deal with what hopefully will be a new educational era in 
Indian Country, as well as to deal with energy development on 
Indian Country.
    So there are major issues that proactively require 
attention. This will allow us to do that.
    So I appreciate the opportunity to testify, Chairman 
Dorgan, and if you wish, I would like my colleague from the 
Department of Justice, Tom Perrelli, also to make a comment, as 
well as my Deputy Secretary for Interior.
    [The prepared statement of Secretary Salazar follows:]

Prepared Statement of Hon. Ken Salazar, Secretary of the Interior, U.S. 
   Department of the Interior; accompanied by David J. Hayes, Deputy 
  Secretary and Hilary Tompkins, Solicitor, Department of the Interior

    Good afternoon Mr. Chairman, Vice Chairman, and members of the 
Committee. Thank you for the opportunity to provide the views of the 
Department of the Interior (Department) regarding the settlement that 
has been reached between the United States and the plaintiffs in the 
Cobell class-action lawsuit and accompanying legislation, the 
``Individual Indian Money Account Litigation Settlement Act.'' The 
Cobell case, which devolved into contentious and acrimonious litigation 
over the Department's trust management and accounting of hundreds of 
thousands of individual Indian trust accounts, has hindered U.S. 
efforts to work effectively in Indian Country for more than a decade. 
During these years many members of this Committee have signaled a 
desire for the agencies involved in this litigation to find a way to 
bring the case to resolution. And this month, we have achieved an 
agreement. I am very pleased to say that the settlement we have reached 
is a fair one, a forward-looking one, and one that I am certain will 
strengthen the relationship between the Federal Government and Native 
Americans. This settlement will enable us to move ahead together and to 
focus on the many pressing issues facing Indian Country.
    The agreement is the product of good faith, arms-length 
negotiations between the United States and plaintiffs. It not only 
resolves litigation over the U.S. government's management of hundreds 
of thousands of individual Indian trust accounts, but also forges a 
solution to an ongoing--and worsening--problem. This negotiated 
agreement lays out a path for the responsible management of Indian 
trust assets in the 21st century. The agreement strengthens the trust 
relationship between the United States and our Native American 
citizens, a relationship that has at times been fraught with challenges 
but a relationship which the members of this Committee have long sought 
to develop into one of mutual respect and understanding. In this 
statement, I will briefly describe the components of the proposed 
settlement and related steps being taken by the Department to improve 
our management of Indian assets. I am accompanied today by David J. 
Hayes, the Deputy Secretary of the Department of the Interior, who led 
our negotiations on my behalf, and by Hilary Tompkins, the Solicitor 
for the Department and the first American Indian to hold that post. Ms. 
Tompkins also participated actively in the negotiations.
Accounting and Trust Administration Claims Settlement
    The first part of this settlement agreement resolves claims related 
to the class-action lawsuit brought by the plaintiffs in Cobell v. 
Salazar. The case centers around the U.S. government's trust management 
and accounting of over three hundred thousand individual American 
Indian trust accounts. The settlement would resolve not only the 
plaintiffs' claims for an historical accounting for funds that the 
government holds in individual American Indian trust accounts, but also 
all claims associated with the management of these trust funds and the 
underlying trust assets (consisting of land and resources that are held 
in trust for individual Indian members of the plaintiff class). The 
settlement addresses all existing and potential trust-related claims 
that the plaintiffs may have against the United States to date, and 
thus brings final closure to this long and difficult issue.
    Under the terms of the settlement regarding trust management and 
accounting issues, approximately $1.4 billion would be distributed to 
the class members, which consist of certain American Indians and Alaska 
Natives, as defined in the Settlement. Each class member will receive 
$1,000 for their historical accounting claims and may receive 
additional funds related to trust management claims under a formula set 
forth in the settlement agreement. By addressing alleged mismanagement 
as well as accounting-related claims, this settlement fund will fully 
resolve all potential claims by individual class members and avoid all 
further ``look-backs'' regarding prior fund accounting and trust 
management issues.

Correcting Fractionation
    The second part of this settlement contains provisions designed to 
address the daunting problem called ``fractionation.'' This problem 
consists of the continued proliferation of new trust accounts as land 
interests held in trust for individual American Indians continue to 
subdivide (or ``fractionate'') through inheritance processes. The 
settlement and legislation provide for a $2 billion fund for the buy-
back and consolidation of fractionated land interests. The land 
consolidation fund addresses an historic legacy of the General 
Allotment Act of 1887 (the ``Dawes Act'') and other related allotment 
statutes, which divided tribal lands into parcels of between 40 and 160 
acres in size, allotted them to individual Indians, and sold off 
remaining unallotted Indian lands. As original allottees died, their 
intestate heirs received equal, undivided interests in the allottees' 
lands. Today, it is not uncommon to have hundreds of Indian owners for 
one parcel.
    The result of the continued proliferation of thousands of new trust 
accounts caused by the fractionation of land interests through 
succeeding generations is that millions of acres of land continue to be 
held in such reduced ownership interests that only a small percentage 
of the individual owners derive a meaningful financial benefit from 
their ownership. Indeed, as of September 30, 2009, there were 143,663 
individual Indian allotments and more than four million fractionated 
interests. It has been estimated that these four million interests will 
expand to eleven million interests by the year 2030 if the actions 
contemplated in this settlement are not taken. This situation creates 
more harm than good for the individual owners, the tribes and the 
Federal Government. In too many instances, tribes find economic 
development efforts stymied by their inability to utilize heavily 
allotted tracts of land for much needed energy, commercial and 
agricultural development.
    Under the provisions of the settlement for land consolidation 
efforts, the Department would use a $2 billion fund for the buy-back of 
fractionated land interests. The Department would use existing programs 
and law to make these acquisitions, with additional authority that 
would be provided under the proposed settlement legislation for the 
conveyance of interests held by persons who cannot be located after 
engaging in extensive efforts to notify them and locate them for a 
five-year period. As part of the class notice process that will notify 
individuals of this settlement, the Department will notify individuals 
of the opportunity to convey their interest. The $2 billion fund will 
cover administrative costs to undertake the process of acquiring 
millions of fractionated interests.
    The fund will also cover up to $60 million that will be contributed 
to an existing non-profit organization for the benefit of educating 
American Indians and Alaska Natives. In addition to consolidating and 
preserving tribal homelands, settlement parties desired to connect with 
the next generation of Indians. Under the settlement terms, the sale 
and release of fractionated interests are directly linked to 
education--an overall benefit to Indian country. With each acquisition 
of an interest, an additional amount will be contributed to the 
educational Indian scholarship based on the value of the interest. For 
instance, for an interest worth $500 or more, five (5) percent of the 
value will be contributed to the scholarship fund.
    The settlement implementing legislation would authorize the $2 
billion fund to be established in the U.S. Treasury and the transfer of 
a portion of this fund to the non-profit organization for Indian 
education scholarship purposes, and also authorize the conveyance of 
interests held by persons who cannot be located after five years, as 
described above.

Long-term Trust Reform
    To address the future of Indian trust management, on December 8, 
2009, I signed a Secretarial order to establish a five-member national 
commission to evaluate ongoing trust reform efforts. The commission 
will make recommendations on the future management of individual trust 
account assets and the need for comprehensive auditing of these 
operations. While the Department has made significant progress in 
improving and strengthening the management of Indian trust assets, our 
work is not over. The Commission will make recommendations regarding 
how to improve trust management services on a going-forward basis, such 
as recommendations regarding the appropriate roles of various Interior 
agencies including the Office of Special Trustee and the Bureau of 
Indian Affairs.
Conclusion
    I hope you will help us to secure swift enactment of the necessary 
legislation. As the members of this Committee are aware, this 
settlement is a starting point, not an ending point. It is time now to 
move beyond the litigation and to commit to working cooperatively with 
American Indian and Alaska Native communities to address education, law 
enforcement, and economic development challenges. With this settlement 
we will turn the page on a dark chapter in Indian Country and begin to 
move forward, together, towards our common goals.
    Thank you for the opportunity to appear before you today. I look 
forward to answering your questions.

    The Chairman. All right. Mr. Perrelli, you may proceed. 
Thank you so much.
    And thank you, Secretary Salazar.

   STATEMENT OF HON. THOMAS J. PERRELLI, ASSOCIATE ATTORNEY 
              GENERAL, U.S. DEPARTMENT OF JUSTICE

    Mr. Perrelli. Thank you, Chairman Dorgan and Vice Chairman 
Barrasso, and the other Members of the Committee.
    This Committee is quite familiar with the litigation now 
called Cobell v. Salazar, and has worked over the years with 
the Department of Interior to address it. And I think you have 
observed over time how this has drained Federal resources from 
Indian Country and has created a poor atmosphere for the 
administration of the Federal Government's trust 
responsibilities in Indian Country.
    And you, as well as the courts, have encouraged parties to 
settle the litigation, and at times have directly supported 
efforts to mediate it.
    Built in great part on direction that Members of the 
Committee have provided over the years, on December 7, we 
signed a settlement agreement that hopes to turn the page on 
that history. As previously indicated, the settlement does 
require legislative and judicial approval to become effective, 
but we believe it is fair to the plaintiffs, is responsible for 
the United States and provides a path forward to the future.
    The settlement contains many of the elements that Members 
of this Committee have sought to include in prior efforts to 
resolve the matter. First, the settlement resolves plaintiffs' 
claims for an historical accounting, and will result in cash 
payment to class members and will bring the government and each 
holder of an individual Indian money account into agreement on 
the balance of each account, something that has been contested 
since this litigation began. Those payments are $1,000 a 
person, and will be in conjunction with other payments under 
the settlement.
    Second, the settlement resolves what are called trust 
administration claims. Those are claims based on allegations 
that the government may have mismanaged hundreds of thousands 
of acres of land and millions of dollars, including proceeds 
from those lands it holds in trust for individual Native 
Americans.
    Now, to date, few of those claims have been brought, but 
they remain a threat to rebuilding a long-term relationship 
with the Department of Interior and Native Americans, because 
there has always been concern that if the Cobell case were to 
settle, it would simply be followed by mismanagement cases that 
would continue the acrimony.
    Under the settlement, the plaintiffs will amend their 
complaint to add these claims, which will then be resolved. And 
each and every plaintiff of that class will receive an 
additional payment based on a formula to be approved by the 
court. Those payments, which are in addition to the accounting 
class payments, will start at $500 and go up from there, and 
for certain plaintiffs who hold valuable assets, will result in 
very significant amounts.
    The total of those two class resolutions will be $1.4 
billion approximately.
    And then lastly, as Secretary Salazar mentioned, the 
settlement provides an important framework for the Department 
of the Interior to address one of the principal factors that 
has led us down this path, the problem of fractionation.
    The legislation required to implement this settlement 
accomplishes a number of things, some of which I think are 
relatively technical. But the primary substantive provisions, 
much like the bill that Senators Dorgan and McCain put forward 
in the 109th Congress, authorizes the Secretary to administer 
the land consolidation program that is critical to the 
settlement.
    We think this is a successful resolution for Native 
Americans and for all Americans, and hope that we are able to 
obtain the approvals we need so that we can move forward. Thank 
you to the Committee for its support over the years.
    [The prepared statement of Mr. Perrelli follows:]

   Prepared Statement of Hon. Thomas J. Perrelli, Associate Attorney 
                  General, U.S. Department of Justice

    Good afternoon and thank you to Chairman Dorgan, Vice-Chairman 
Barrasso, and the other members of the Committee. The litigation that 
is today known as Cobell v. Salazar has lasted thirteen years, and for 
nearly as long, members of this Committee have taken a keen interest in 
it. Members have worked with the Department of the Interior to address 
the challenges at issue in it. They have observed that the litigation 
has drained federal resources from Indian Country, and has created a 
poisonous atmosphere for the administration of the Federal Government's 
trust responsibilities in Indian Country. They have encouraged the 
parties to settle the litigation, and at times have directly supported 
efforts to mediate it.
    That interest is well-placed, as Cobell v. Salazar is one of the 
largest class actions ever brought against the U.S. government. What 
began in 1996 has seen 7 full trials constituting 192 trial days; has 
resulted in scores of judicial decisions; has been up to the Court of 
Appeals ten times; and has been the subject of intense, and sometimes 
difficult, litigation.
    Thanks in large part to the direction and support that the members 
of this Committee have provided over the years, on December 7, Mrs. 
Cobell's attorneys and the United States signed a settlement that would 
turn the page on that history. The settlement, which will require 
legislative and judicial approval to become effective, is fair to the 
plaintiffs, is responsible for the United States, and provides a path 
forward for the future.
    The settlement contains many of the key elements that members of 
this Committee have sought to address in prior efforts to resolve this 
matter. First, the settlement resolves the plaintiffs' claims for an 
historical accounting. The resolution on this issue, like other aspects 
of the settlement, is important both for the past and the future. It is 
important for the past, because it will result in a $1,000 check being 
sent to each member of the class. And it is important for the future, 
because it brings the Government and each holder of an Individual 
Indian Money account into agreement on the balance of each account--
something that has been contested since this litigation began.
    Second, the settlement resolves what have been called the ``trust 
administration'' claims. Such claims allege that over the years, the 
Government has mismanaged the hundreds of thousands of acres of land 
and millions of dollars--including proceeds from those lands--that it 
holds in trust for individual Native Americans. Although to date few 
such claims have been brought, allegations of trust mismanagement have 
remained a possible threat to rebuilding the long-term relationship 
between the Department of the Interior and Native Americans. There has 
always been concern that, even if the Cobell case settled, it would 
simply be followed by a slew of mismanagement cases that would continue 
the acrimony. Under the settlement, the plaintiffs will amend their 
complaint to add these claims, which will then be resolved. Each and 
every plaintiff in this class will receive a payment, based on a 
formula to be approved by the Court. And the Department of the Interior 
will know that it has put those trust administration claims, too, 
behind it.
    Between the accounting claims and the trust administration claims, 
the plaintiff class will be receiving approximately $1.4 billion.
    Finally, the settlement provides a framework through which the 
Department of the Interior can address one of the principal factors 
that has led down this path. The trust system that the Government 
manages has become increasingly complex over the years, as lands that 
were jointly owned by a small handful of individuals many decades ago 
are now often owned by several times that number, as the individual 
owners have passed away and left those interests to be divided among 
their heirs. Much of this land, divided up among sometimes hundreds of 
owners, has severely limited economic potential.
    To address this problem of fractionated lands, the settlement 
contributes additional funds to a land consolidation program that 
provides critical benefits to every party. For individuals who own a 
fractional amount of land and wish to sell it, it will put money 
directly into their hands. The tribes that will ultimately own these 
newly consolidated interests will have productive assets that they can 
finally put to beneficial economic use. And over time, the Department 
of the Interior will reduce the hundreds of thousands of small accounts 
that it has been managing at a highly disproportionate cost.
    As I mentioned, this settlement is not final. It requires 
authorization from Congress and approval from the court. We hope that 
both will happen quickly.
    The legislation that is required to implement this settlement 
accomplishes a number of things. Among other things, it ensures that 
the United States District Court for the District of Columbia, which 
has been handling the litigation, can continue to assert jurisdiction 
over it after the plaintiffs amend their complaint. The legislation 
also sets up two funds within the Treasury of the United States, 
permits the court to certify a single class of trust administration 
claims, and--much like the bill that Senators Dorgan and McCain put 
forward to resolve Cobell in the 109th Congress--authorizes the 
Secretary to administer the land consolidation program that is critical 
to the settlement. We believe that Congress should move forward with 
this legislation as quickly as possible.
    The settlement also requires approval from the court. Once 
legislation has passed, the parties will present their proposed 
settlement to the court, and will begin the process of explaining it to 
class members across the country. Those individuals and others will 
have an opportunity to review the settlement and express their views on 
it, and the court will ultimately decide whether it represents a fair 
resolution of the claims.
    Throughout our discussions with the plaintiffs, we have been guided 
by two principles. First, we wanted true peace for the parties. We 
wanted to turn the page on history. The resolution of the accounting 
and trust administration pieces of this litigation will do that. And 
second, we wanted to put Interior on a new path for the future, and 
give it tools to address some of the underlying conditions that have 
contributed to its challenges. The land consolidation program will do 
that.
    This settlement is a successful resolution for Native Americans, 
and for all Americans, and I hope that it will receive swift approvals 
so we can bring the litigation fully to an end. We appreciate the 
Committee's support over the years, and I look forward to any questions 
you may have.

    The Chairman. Mr. Perrelli, thank you very much.
    We will now hear from Mr. David Hayes.
    Mr. Hayes?
    Mr. Hayes. Thank you, Mr. Chairman.
    I want to just add a few brief comments about the 
operational aspects of this settlement in terms of the 
Department of Interior's plans, if approved, for moving out on 
the land consolidation program and also the trust reform 
efforts that are part of the settlement, actually part of a 
separate secretarial order that grew out of our discussions in 
the settlement.
    In terms of the land consolidation program, the $2 billion, 
we believe, will make a huge dent in the problem that you 
identified, Mr. Chairman. We will be targeting tracts that have 
20 or more interest holders. Those tracts contain 84 percent of 
the total number of interests. That is of 4 million interests 
total, 84 percent of them are in tracts that have 20 or more 
interest holders. That is 37,000 tracts, with a total acreage 
of almost 5 million acres.
    We believe that, based on fair market value estimates, that 
our $2 billion will take a huge chunk out of that problem, and 
diminish the extrapolation of interests that the Secretary 
referred to.
    I would also like to say that in addition to streamlining 
our trust obligation by reducing the number of individual trust 
holders through this land consolidation program, we will save a 
significant amount of money going forward in our trust efforts. 
By putting a close to our historical accounting efforts, we 
expect to save about $250 million going forward. We are 
spending $25 million a year. We expected to have to continue to 
do that until 2019 if we were not able to resolve and end the 
historical accounting dispute with individual account holders.
    And in addition, while we have not done a complete 
calculation of how much money we will save by virtue of having 
a smaller number of trust accounts to account for, we have 
examples of one 40-acre parcel, for example, that has 500 
owners and that, produces only $2,000 in income. It is valued 
at $22,000. The administrative costs each and every year to 
administer these 500 individual trust accounts is over $42,000 
a year for a parcel that is worth $2,000.
    So if we can diminish the number of individual trusts, as 
we expect to do, we expect enormous savings going forward in 
administering the program. And, of course, we expect, as the 
Secretary said, to be able to take better care of the accounts 
that we are following.
    The final point I will make is in terms of trust reform. An 
important part of the effort here is the secretarial order that 
the Secretary signed that will establish a commission upon 
approval of the settlement to look at organizationally how we 
should go forward in terms of administering the trusts, to do a 
full audit of the function as we start fresh without having to 
look backwards, and instead looking forward.
    Thank you very much, Mr. Chairman.
    The Chairman. Mr. Hayes, thank you very much.
    Would you just for purposes of illustration go over again 
the paragraph in which you described the single parcel of land, 
I think, worth $20,000? Describe that again because it so aptly 
describes the dilemma that we have all inherited here.
    Mr. Hayes. Certainly. This was a tract identified in 2003. 
We can get you the specifics of exactly where it is, but it is 
a 40-acre tract. There are 505 individual owners for that 
tract, meaning we have to undertake an accounting of individual 
trusts for 505 owners for that 40 acres. That 40-acre parcel is 
producing $2,000 in income annually. So we have to take that 
$2,000 and divide it appropriately into individual accounts and 
follow that money.
    The 40-acre parcel is valued at $22,000. The administrative 
costs for the accounting that we have to do was estimated in 
2003 by us at $42,800 a year, annually.
    The Chairman. Well, that pretty well--although I must say 
you are a pretty expensive accountant.
    [Laughter.]
    The Chairman. Five hundred accounts and $42,000. But I 
think it really well describes the dilemma here of this 
fractionated ownership, and I appreciate your doing that.
    Let me call on the Vice Chairman for comments or questions.
    Senator Barrasso. A couple of questions, Mr. Chairman, if I 
may.
    First, Mr. Secretary, I know reaching this settlement was 
no easy matter, and there have been many attempts over the past 
number of years. I am going to submit some detailed questions, 
but based on what you know, two quick questions for you, Mr. 
Secretary. Based on what you know about the case and the issues 
that would be resolved by this settlement, is this settlement 
fair to the Indian account holders and the landowners?
    Mr. Salazar. The answer to that is yes. And at the end of 
the day, because of the litigation and its history, I can tell 
you that the plaintiffs and the United States did not come 
together under the leadership of Judge Robertson to get to this 
settlement if it hadn't been a fair and reasonable compromise. 
So it is a fair and reasonable compromise that does reach that 
objective.
    Senator Barrasso. And that is the second question. Is it a 
good settlement for the United States and the American 
taxpayer?
    Mr. Salazar. Absolutely.
    Senator Barrasso. And if I could go to Mr. Perrelli, if you 
wouldn't mind. As my background is a physician, I would like to 
ask about attorneys' fees.
    [Laughter.]
    Senator Barrasso. The settlement agreement provides that 
the amount to which plaintiffs are entitled for attorneys' fees 
is, I believe, ``within the discretion of the Court in 
accordance with controlling law.'' How much in attorneys' fees 
do you expect the plaintiffs to request from the court?
    Mr. Perrelli. Well, let me take a quick step back. As the 
Committee knows, this is a historic settlement, and ultimately 
we had to make a decision; even if we couldn't ultimately come 
to agreement on attorneys' fees, was this a settlement that was 
in the interests of the United States? And we decided that it 
was.
    I think we share your concern about attorneys' fees, in 
particular in this case where every dollar of attorneys' fees 
actually will come not from the United States, but every dollar 
of attorneys' fees will actually come out from individual class 
members' distribution, will come out of the $1.4 billion.
    We also had to balance, in considering this issue, the fact 
that if this case were litigated for another 3, 5, 10 years, at 
the end of that, we would likely be facing a substantial 
petition for attorneys' fees in that context. And even though 
at that point we might well have very strong arguments against 
it, it was something we had to balance.
    We didn't ultimately reach agreement on fees. There are a 
few things, a few agreements that I think are worth informing 
the Committee about.
    First of all, as I indicated, the funds do come out of the 
$1.4 billion, so there is no additional outlay by the U.S. 
Treasury. Second, the court will decide the ultimate fee award, 
based on existing law. The parties, however, also agreed that 
they would litigate within a range. That wouldn't bind the 
court. It wouldn't bind individual class members as to what 
arguments they could make regarding fees. But they would 
litigate in a range between $50 million and $99.9 million in 
attorneys' fees.
    When you look at that in the overall context of the 
settlement, if you were to take that as a ratio of over $1.4 
billion, if the court were to determine that were the 
appropriate fund to look at, you are looking at between 3.5 
percent and 7 percent.
    Senator Barrasso. So if the attorneys' fees are awarded as 
a percentage of the final amount, that was what the percentage 
would be, in that range, if you stay between $50 million and 
$100 million.
    Mr. Perrelli. If you use the $1.4 billion as the 
denominator. If you use the $3.4 billion, the numbers change.
    Mr. Salazar. If I may, Senator Barrasso, may I, Mr. 
Chairman, make a quick comment on that issue because I know it 
is central to your thinking?
    Having served as Attorney General of my State for six years 
and having watched what happened in other circumstances, 
including the tobacco litigation, this was a central issue of 
concern for us as we drove down to the final goal line on 
reaching this settlement.
    For those of you who know how contingency case litigation 
and costs are paid out, at $1.4 billion in the damages part of 
this case, one third of that would have been about $500 
million. Okay? And so what we were able to do because of the 
very concern that I knew that Chairman Dorgan and the Members 
of this Committee would have, we were basically able to come 
about the bracketing of these amounts in what I think is a very 
reasonable amount.
    Senator Barrasso. And then, Mr. Hayes, if I could ask you, 
could you explain to me how the Administration decided that $2 
billion is the appropriate amount of money to spend on buying 
back fractionated land? And then maybe where most of that money 
is going to be spent? And then, specifically, if any of that is 
going to be used on the Wind River Indian Reservation in 
Wyoming?
    Mr. Hayes. Yes, Senator. A lot of work had been done by the 
prior Administration in connection with some of the work with 
this Committee in evaluating potential land consolidation 
programs on a grand scale. And we had the advantage of having 
estimates of land values broken down by parcels and 
fractionated interest numbers.
    In order to truly resolve this entire problem, we estimate 
it would cost $6 billion to $8 billion, frankly. But the 
largest problem are the highly fractionated shares, and as I 
mentioned in my brief comments before, we think that $2 billion 
has the potential to clear out as much as 80 percent of the 
number of interests overall held.
    And frankly, as you get into parcels that have fewer 
owners, where they are earning income, you don't tend to have 
the fractionation problem because those owners are thinking 
about their future and their children's futures, and so you 
don't have that issue.
    In terms of how we are going to target within this, we are 
essentially going to have a rolling process that targets, first 
of all, those fractionated lands that have 20 or more 
interests. We will start with lands that do not have mineral 
interests because those mineral interests are harder to value, 
frankly.
    And within the 37,000 parcels of land that have more than 
20 owners, there are 20,000 parcels that don't have mineral 
interests, that look like they are easier to value, and in fact 
we have already valued more than half of those.
    So there are a number of parcels throughout Indian Country 
that fall in this first tranche, including some in the Plains, 
and we would be happy to go over with you and your staff, 
Senator, the situation in terms of the Wind River tribes in 
particular.
    Senator Barrasso. Thank you, I would appreciate that.
    Thank you, Mr. Chairman.
    The Chairman. Thank you very much.
    Senator Franken indicated he has to leave and has one 
question. With the help of my colleagues, I will call on him 
for one question, and then come back to our colleagues.

                 STATEMENT OF HON. AL FRANKEN, 
                  U.S. SENATOR FROM MINNESOTA

    Senator Franken. Thank you, Mr. Chairman, and I would like 
to thank my colleagues.
    What I am interested in is that for Indians to receive 
money in the settlement, I guess they would have to know about 
the settlement and whether they are entitled to it. So my only 
question really is what is the plan to let people know that 
they are entitled to part of this settlement?
    Mr. Salazar. There is an exact process that has been 
formulated, and I will have the Associate Attorney General 
respond to the process.
    Mr. Perrelli. Certainly, Senator.
    There is a notice process that will include the Department 
of Interior, working with the plaintiffs and a contractor who 
does notice professionally to, among other things, translate 
notice into appropriate languages. We will send notice to all 
the addresses that we have, so hundreds of thousands of pieces 
of mail, as well as publication notice and appropriate papers.
    I think we will also work with individual tribes to ensure 
publication on reservations, and I think a number of other 
steps as well.
    The Chairman. Senator Johnson?

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

    Senator Johnson. Welcome, Secretary Salazar.
    How many IIM account holders in South Dakota will be 
affected by this settlement? Do you have any idea, or could you 
get me that number?
    Mr. Salazar. Deputy Secretary Hayes?
    Senator Johnson. Yes?
    Mr. Hayes. We can get you that number, and will, Senator. 
There are over 300,000 total and a number are in South Dakota. 
And it is being handed to me right now: 19,811 individual 
accounts held in your State.
    Senator Johnson. In South Dakota, several of the tribes 
purchased land in the 1970s and 1980s using loans from the 
Department of Agriculture. Some of those tribes are so heavily 
impacted by this debt. Will these tribes be able to use the 
settlement money to pay down the debt on those loans, since 
they were used for land acquisition, including fractionated 
land?
    Mr. Salazar. I am not certain of that. Let me see if either 
David or Tom or Hilary have a response to that question.
    Mr. Hayes. I think, Senator, there is no restriction on how 
individual account holders getting their settlement money will 
use their money. They will have complete discretion to use it 
as they see fit. I assume that would include the ability to pay 
down loans that they may owe, but we would be happy to follow 
up and confirm that.
    Senator Johnson. Yes.
    Mr. Perrelli, this settlement covers individual claims. Are 
there remaining lawsuits filed by the tribes? Is so, how many?
    Mr. Perrelli. There are approximately 99 cases brought by 
tribal governments against the United States raising similar 
types of claims. There are a small number of those that have 
been settled, and I think the Department of Interior and the 
Justice Department are very committed to working on trying to 
find resolution of those matters as well.
    Senator Johnson. I have no further questions.
    The Chairman. Thank you.
    Senator Murkowski?

               STATEMENT OF HON. LISA MURKOWSKI, 
                    U.S. SENATOR FROM ALASKA

    Senator Murkowski. Thank you, Mr. Chairman.
    And nice to see you back in the Committee here, Mr. 
Secretary, and I appreciate your leadership on this settlement 
and the opportunity to ask a few questions.
    The questions that I have this afternoon are probably more 
technical in nature, so I don't know whether they are directed 
to you, Mr. Perrelli, or perhaps you, Mr. Hayes, or to Ms. 
Tompkins, but they are as the settlement may relate to Alaska 
Natives.
    The first one is regarding the settlement as it pertains to 
the land administration's claim, and the minimum payment of 
$500 per claimant, assuming that the settlement is approved. 
The question is whether every owner of an Alaska Native 
allotment will be eligible for these minimum payment amounts, 
assuming that they choose to not opt out of the class and are 
willing to forego their land administration claims relative to 
past conduct of the Federal Government. So will the Native 
allottees be eligible for these payments?
    Ms. Tompkins. Senator Murkowski, yes they will. There are 
class members who are Alaska Natives, and some of them do hold 
allotments, and so they will be eligible for payment under the 
trust administration portion of this settlement.
    Senator Murkowski. Okay, that is good to hear.
    The second question, then, is similar to what Senator 
Johnson asked about the individual Indian money accounts. And 
Mr. Hayes, it looks like you must have the list there, and I 
would be curious to know how many Alaskans have individual 
Indian money accounts and whether or not there is any 
indication in terms of how much each might expect to receive if 
the settlement is approved.
    Mr. Hayes. Senator, I do have information about the number 
of accounts, and there are 5,365 individual accounts held by 
Alaska Natives. I don't have the information about the funds, 
although they presumably will get the basic allocation, $500, 
and then there is a formula that applies depending upon the 
amount of transactions and essentially the money flow through 
those accounts with the account holders that are on land that 
is being more productive, being awarded more funds.
    Senator Murkowski. Okay. Thank you.
    Another question involves the scholarship funds and whether 
or not Alaska Natives will be eligible to apply for these 
scholarship funds. And also, whether you think that there is 
going to be any particular blood quantum that will be applied 
as a form of eligibility cutoff.
    Mr. Salazar. Senator Murkowski, this is an important part 
of the settlement that creates an incentive for individual 
Indians to participate in the fractionation buy-back program. I 
am going to have Solicitor Tompkins report on exactly how that 
would work.
    Ms. Tompkins. Senator Murkowski, under current existing 
law, the Alaska Native communities are not eligible for buy-
backs under the land consolidation program under current 
existing law. However, the scholarship fund, which will be a 
part of that program under the settlement agreement, will be 
administered by a nonprofit entity. And presumably that entity 
would provide scholarships to Alaska Natives, as well as other 
Native Americans. That is one of the criteria we have in the 
settlement agreement.
    Senator Murkowski. I appreciate that answer. You mentioned 
that Alaska is not part of the Indian Land Consolidation Act 
and it doesn't apply there. So am I correct in assuming that 
the Department of Interior will not be acquiring Native 
allotments within the State for donation to tribe using the 
proceeds of the land consolidation program?
    Ms. Tompkins. That is correct. We are working within the 
current legal framework that exists.
    Senator Murkowski. I appreciate that. Thank you for the 
responses.
    And again, Mr. Secretary, thank you for your leadership on 
this issue.
    Thank you, Mr. Chairman.
    The Chairman. Senator Murkowski, thank you very much, and 
thanks for your work on these issues as well, along with 
Senator McCain and myself over a long period of time.
    Secretary Salazar, let me thank you and your team, and the 
Solicitor as well. Thank you for coming today to explain to us. 
Our Committee, of course, is the Committee of jurisdiction and 
we wanted to, prior to Congress taking action, have an 
opportunity to query you and those who were involved in the 
negotiations. We will hear as well from Ms. Elouise Cobell 
today, and we appreciate very much her being here.
    So do you have other things to say before you leave, Mr. 
Secretary?
    Mr. Salazar. If I may, Mr. Chairman, just in conclusion. 
Again, I want to thank you and the bipartisan leadership here 
in the U.S. Senate on this Committee who have worked so hard on 
this issue. It truly has been a herculean effort to get to 
where we are today, and it truly is a historic effort.
    I also want to thank President Obama for his support of 
this effort, and Senator Murkowski, who actually came to the 
White House Tribal Conference with the President a few weeks 
ago.
    The issues that we are facing for Alaska Natives and for 
Native Americans are huge and they are real. And all of you 
have shown a great amount of interest in helping this move 
forward and help us address those issues, so I want to thank 
you.
    And finally, I also want to thank Elouise Cobell because 
she raised issues that were important, which had been 
unresolved for a very long time, and has brought us to this 
point in history where we are in front of this Committee today 
presenting what we all believe is a fair and reasonable way 
forward.
    Thank you.
    The Chairman. Well, Mr. Secretary, thank you. Having met 
many, many times with Ms. Cobell, she has a backbone of steel, 
I can tell you, and we invited her to testify today as well.
    So let me thank you and your team, and we will excuse you 
and have Ms. Cobell come to the table.
    Good luck to you, Mr. Secretary.
    Ms. Cobell, Elouise Cobell, is the lead plaintiff in the 
Cobell v. Salazar class action. Ms. Cobell is from Browning, 
Montana. She is accompanied by Mr. Keith Harper, who is the 
Class Counsel and Partner, Kilpatrick Stockton, LLP, 
Washington, D.C.
    Ms. Cobell, thank you very much for being here today. It 
has been a long and difficult road, I know, and we are anxious 
to hear your perspective about the settlement that is the 
subject of this hearing. Your entire statement will be made a 
part of the permanent record, and you may summarize. You may 
proceed.

 STATEMENT OF ELOUISE COBELL, LEAD PLAINTIFF, COBELL V. SALAZAR

    Ms. Cobell. Thank you, Chairman Dorgan. And once again, I 
am here representing the class of over 500,000 individual 
Indians as the lead plaintiff in this case initially entitled 
Cobell v. Babbitt, and now referred to as Cobell v. Salazar, 
you know, pending in the United States Court for the District 
of Columbia, presently being presided over by Judge James 
Robertson.
    Since inception more than 13 years ago, this Committee and 
this House Committee on Resources have taken keen interest in 
this litigation and key objectives reforming individual Indian 
trusts, ensuring a full accounting, and correcting and 
restating each individual's account balances, and other trust 
assets.
    I have been here numerous times, and on each occasion I 
have emphasized my willingness to explore settlement of this 
case. Resolution takes two parties willing to come to the table 
to negotiate in good faith and attempt to reach what might be 
an equitable settlement that would set the foundation for 
improved trust management and accountability in the future.
    The President showed great leadership during the campaign 
when he committed to seeking fair resolution to this case. And 
when elected, he followed through and charged Secretary Salazar 
and Attorney General Holder with carrying out this commitment.
    Having been through seven failed settlements before, I was 
not optimistic of these negotiations and that we would reach 
agreement. But we sat down in good faith with the 
Administration. The issues to discuss and resolve were gravely 
challenging, and I repeatedly felt we had reached an impasse. 
But both my team and the government continued on, knowing that 
resolution was the best thing for all individual Indian trust 
beneficiaries, and for a healthier foundation of trust 
relationships for the future.
    The settlement, from my perspective, is not perfect. But 
after months of discussion, I am here to testify that we have 
reached an agreement and that I support this agreement. It is 
time to look forward, not backward. We must never forget the 
past. The settlement can move us forward together as it 
represents the best resolution we can hope for under the 
circumstances and is a partial atonement for historical 
mismanagement of individual Indian trusts.
    Although we have reached an historical settlement totaling 
more than $3.4 billion, there is no doubt this is far less than 
the full amount to which each individual Indians are entitled. 
We could prolong our struggle, fight longer, and perhaps one 
day know down to the penny how much every individual Indian is 
owed. Perhaps we could even litigate long enough to increase 
the settlement amount. But we are compelled to settle now by 
the sobering reality that our class grows smaller each year, 
each month and every day as our elders and infirm class members 
die, forever preventing them from receiving which is theirs.
    We also face the uncomfortable unavoidable fact that a 
large number of individual Indian trust beneficiaries are among 
the most vulnerable people in this Country, existing in sheer 
poverty.
    Now that the Cobell case has brought heightened attention 
to this matter, I am optimistic that this settlement will lay 
the foundation for genuine and meaningful reform of the trust. 
I am hopeful that the commission that Secretary Salazar has 
announced with this settlement will ensure that additional 
critical reforms are made and that we set the underlying for 
the safe and sound management of our assets in the future.
    I know that Assistant Attorney General Perrelli has talked 
about the settlement, so I will skip that detail. But I am 
particularly pleased about the incentive program that is part 
of the land consolidation effort. This will create post-
secondary academic and vocational scholarships for Indian 
youth.
    When Indian parents and grandparents talk to me about our 
litigation, they always commit to use any money recovered from 
this case to improve their children's and their grandchildren's 
lives. These funds can establish a great legacy for our Indian 
children and grandchildren, providing them the education 
necessary to break the cycle of poverty that has held too many 
Indians in grips for generations.
    I think the settlement will do a lot of good. It will get 
more than $3 billion in the hands of beneficiaries. It will 
provide monies for land consolidation. It will create the $60 
million scholarship fund. Moreover, there will be a secretarial 
commission to recommend additional trust reforms.
    When I embarked on this settlement process, I was skeptical 
that this result could be achieved, but we were able to reach a 
resolution. I now ask Congress to swiftly enact the necessary 
implementing legislation so we can start on the challenges of 
distribution without further delay. Hundreds of thousands of 
individual Indians have waited patiently for far too long. It 
is time that they see the proceeds of their efforts.
    Thank you, Mr. Chairman.
    [The prepared statement of Ms. Cobell follows:]

Prepared Statement of Elouise Cobell, Lead Plaintiff, Cobell v. Salazar

    Good afternoon, and thank you Chairman Dorgan, Ranking Member 
Barrasso, and members of the Committee. I am here today once more 
representing a class of over 500,000 individual Indians as the lead 
plaintiff in the case initially entitled Cobell v. Babbitt and now 
referred to as Cobell v. Salazar, pending in the United States District 
Court for the District of Columbia and presently presided over by Judge 
James Robertson. Since virtually its inception more than 13 years ago, 
this Committee and the House Committee on Resources have taken keen 
interest in this litigation and its key objectives--reforming the 
Individual Indian Trust (``Trust''), ensuring a full accounting, and 
correcting and restating each individual's account balance and all 
other Trust assets.
    By any measure, this litigation has proven exceptional and 
extraordinary. Not only is it one of the largest class actions ever 
brought against the United States as it addresses over 120 years of 
mismanagement of Indian trust assets and involves over 500,000 
individual Indians, but the litigation has been intense and 
contentious. Moreover, there have been more than 3,600 docket entries 
in the district court and over 80 published decisions, including ten 
appeals--the most recent appellate opinion is referred to as Cobell 
XXII.
    I have been before you numerous times, and, on each occasion, I 
have emphasized my willingness to explore settlement of this case. But 
of course, resolution takes two parties willing to come to the table to 
negotiate in good faith and attempt to reach what might be an equitable 
settlement that would set the foundation for improved trust management 
and accountability in the future. Until very recently, however, we did 
not have such a willing partner on the other side. The President showed 
great leadership during the campaign when he committed to seeking a 
fair resolution to this case and, when elected, he followed through and 
charged Secretary Salazar and Attorney General Holder with carrying out 
this commitment.
    Having been through seven failed settlement efforts before, I was 
not optimistic at the outset of these negotiations that we would be 
able to reach agreement. Over the past few months though, we sat down 
in good faith and so did the Administration. Associate Attorney General 
Tom Perrelli, Interior Deputy Secretary David Hayes, and Interior 
Solicitor Hilary Tompkins were involved in the day-to-day negotiations. 
The issues to discuss and resolve were gravely challenging, and I 
repeatedly felt we had reached impasse. But both my team and the 
government soldiered on, knowing that resolution was the best thing for 
all individual Indian trust beneficiaries and for a healthier 
foundation of the trust relationship for the future.
    Reaching agreement was certainly not easy, and the settlement from 
my perspective is not perfect. But after months of discussion, I am 
here to testify that we have reached agreement and that I support this 
agreement. It is time to look forward, not backward. And though we must 
never forget the past, this settlement can move us forward together as 
it represents the best resolution we can hope for under the 
circumstances and, resolving past claims, is a partial atonement for 
the historical mismanagement of the Individual Indian Trust.
    Although we have reached an historical settlement totaling more 
than $3.4 billion dollars, there is little doubt this is far less than 
the full amount to which individual Indians are entitled. Yes, we could 
prolong our struggle, fight longer, and, perhaps one day, know--down to 
the penny--how much individual Indians are owed. Perhaps we could even 
litigate long enough to increase the settlement amount. But we are 
nevertheless compelled to settle now by the sobering reality that our 
class grows smaller each year, each month, and every day, as our elders 
and infirm class members die, forever prevented from receiving that 
which is theirs. We also face the uncomfortable, but unavoidable fact 
that a large number of individual Indian trust beneficiaries are among 
the most vulnerable people in this country, existing in the direst of 
poverty. This settlement can begin to provide hope and a much needed 
measure of justice.
    In addition, now that the Cobell case has brought heightened 
attention to this matter, I am optimistic that this settlement will lay 
the foundation for genuine and meaningful reform of the Trust. There 
remains considerable room for improvement, as Secretary Salazar and 
Deputy Secretary Hayes have recognized. I am hopeful that the 
Commission that Secretary Salazar has contemporaneously announced with 
this settlement will ensure that additional critical reforms are made 
and that we set the underpinning for safe and sound management of our 
assets in the future.

The Settlement
    The settlement is rather straightforward. There shall be set aside 
$1.412 billion for the resolution of the accounting, trust 
administration and mismanagement claims. These funds will be 
distributed as follows. Each individual Indian trust beneficiary who 
has an account open on government systems as of October 25, 1994, will 
receive $1,000.00 as a payment in lieu of the government providing an 
historical accounting. The remainder of this settlement fund, less the 
cost of settlement implementation, shall be distributed pro rata, 
calculated on the transactional activity in a beneficiaries' trust 
account over a designated period of time, with a baseline minimum 
payment of $500.00. Accordingly, the vast majority of beneficiaries 
will receive at least $1,500.00 from this settlement, and many will 
receive considerably more than that.
    In addition, the agreement addresses the longstanding challenge of 
the increasing fractionation of individual Indian lands. The Interior 
Department repeatedly has acknowledged that managing these small 
interests--many of low monetary value--is one of the problems causing 
the Trust's mismanagement. The amount of $2 billion is set aside to 
purchase lands from willing sellers. This will provide additional funds 
to individual Indians and can establish a more stable foundation for 
prospective management.
    I am particularly pleased about the incentive program that is part 
of the land consolidation effort. This will create post-secondary 
academic and vocational scholarships for Indian youth. When Indian 
parents and grandparents talk to me about our litigation, they 
passionately explain that they would use the money we recover to 
improve their children's and grandchildren's lives. I am confident this 
will prove an important incentive for land consolidation. More 
importantly, these funds should establish a great legacy for our Indian 
children and grandchildren, providing them the education necessary to 
break the cycle of poverty that has held too many Indians in its grip 
for generations.
    I think this settlement will do a lot of good. It will get more 
than $3 billion in the hands of beneficiaries. It will provide monies 
for land consolidation. It will create a $60 million scholarship fund. 
Moreover, there will be a Secretarial Commission to recommend 
additional trust reforms that are needed. And there is an agreement to 
perform an audit of the Trust. No audit has ever been done of this 
Trust. To heal the division between individual Indian trust 
beneficiaries and the government and to establish greater confidence 
that the IIM Trust is managed in accordance with trust law, 
transparency is essential. Too many records have been destroyed. Too 
much deception has occurred. Importantly, this settlement will allow 
individual Indians to look forward and work collaboratively with their 
trustee to ensure a better tomorrow.
    We know this settlement does not solve all of the serious 
underlying problems plaguing this Trust. We know that reform cannot 
stop here. We will continue our efforts to ensure accountability. We 
have had to spend too much time looking backwards, trying to address 
the terrible wrongs of the past. Now my hope is that we look forward to 
ensure that in the future individual Indian trust beneficiaries finally 
receive that which rightfully is theirs.

Conclusion
    When I embarked on this settlement process, I was skeptical that 
this result could be achieved. But we were able to reach a resolution. 
I now ask Congress to swiftly enact the necessary implementing 
legislation so we can begin to distribute our trust funds without 
further delay. Hundreds of thousands of individual Indians have waited 
patiently for far too long. Time is of the essence.

    The Chairman. Ms. Cobell, thank you very much.
    And as I have indicated, you have been very patient, but 
very resolute throughout this. You and I have had a number of 
discussions, and you have always been particularly generous in 
being willing to sit down with anybody at any time and try to 
talk through and discuss this case. And I have always been 
appreciative of that.
    I want to ask a couple of questions. You talk about the 
incentive program and its ability to improve children's and 
grandchildren's lives. Give me a little better description of 
that. How do you see this incentive program investing in 
children?
    Ms. Cobell. Many of the individual Indians that we 
represent in this case are living in poverty. They don't have 
any means to send their children to school. And I think that 
has been the driving force of my work on this case as the lead 
plaintiff is to better and improve the lives of our children. 
And it is the place that we need to start.
    So many times that I have been in meetings with elders and 
individual Indians, it is always for my children, if I can have 
this for my children, if I can better the lives for my 
grandchildren. And I am always under the impression that if we 
can get our young people educated, this will never happen 
again. We can never allow the United States Government to 
behave like this and treat individual Indians the way that they 
have treated individual Indians. And I feel that if educating 
our young people, this will be the opportunity, that we can 
hold people accountable.
    The Chairman. You are the lead plaintiff, but of course, 
there are many plaintiffs. Tell me about the reaction of the 
other plaintiffs in the class. I assume there are differences 
of opinion. How significant are those differences?
    Ms. Cobell. Well, I think out of every 10 people that I 
hear from, you know, maybe one that is negative. But they have 
a little confusion of what does this really mean? What does 
this mean to us? Does it mean our tribal trusts?
    So there is a lot of confusion that has to be, you know, 
described to them, that this is as a result of the Allotment 
Act or the Dawes Act.
    Everybody has been ecstatic, let me tell you. At my home, I 
go into the grocery store and everybody runs and shakes my hand 
and thanks me for fighting for justice for them. Because, you 
know, $1,000 means a lot, and people don't understand that I 
think maybe living in the D.C. area, you know, what is $1,000? 
Well, $1,000 will buy, you know, maybe two or three months 
groceries for your family out where I am from.
    And so, I think that the $1,000 means that maybe the 
government, for once in their lives, will pay up, will be 
honest to them; will actually, you know, have the ability to 
say, we did wrong and let's move forward, and so here is a 
first payment. But under the distribution plan, many 
individuals will receive a lot more money.
    The Chairman. The historical accounting that the court 
would have required would be long, arduous and very, very 
expensive to do. And yet I understand why some would probably 
want that because there is evidence in the late 1800s and the 
early 1900s, there is evidence of Indians and tribes being 
completely bilked by representatives of the Interior who 
claimed that their land was producing no income, when in fact 
it was. And so there is such a shameful history here.
    And I guess the question I have is I have the greatest 
respect for Secretary Salazar. We served with him here in the 
United States Senate. He is an extraordinary man. And he has 
committed himself, I know, to try to reach a settlement. He has 
also committed this Interior Department to a future that is 
vastly different than the past.
    Tell me your feelings about viewing the Interior 
Department's actions going forward. Do you feel like you have 
extracted sufficient protections here that we are not going to 
see 50 years from now another lead plaintiff come to a table 
and say, we were wronged?
    Ms. Cobell. Well, you know, I have to believe that they are 
going to correct this trust. I was very encouraged by the fact 
that the secretarial order was coming out that would establish 
a commission. And I worried about the fact that, you know, will 
that change if the Administration changes? How do we make sure 
that it continues on?
    And I think it is something that we can't leave out of our 
sight, is that we will have to continue to watch and monitor 
and make sure that the commitments that have been made, and 
this Committee, I think, will have to continue to monitor, to 
make sure that we get trust reform. We can't let this happen 
again. We can't.
    And, you know, I don't know, the sadness that I have, every 
single day that I go back to Black Butte is seeing another 
person die and another person die without their money. You 
know, we talked about fractionated heirship lands, and my 
feeling is that if these systems weren't broken in 1887, you 
know, we would have been able to account for the different 
types of land that was being inherited by other people.
    You know, if it was done properly, but have broken systems 
and they don't change overnight. And we have to make sure that 
the Secretary is held accountable on this commission. And I 
compliment the Secretary and the Administration for taking this 
head-on because it is the first time that we have really seen 
this type of cooperation.
    The Chairman. What is your understanding of the time of 
distribution of these funds, provided that Congress meets the 
end of the year deadline?
    Ms. Cobell. Well, my understanding if they met the 
deadline, and I am hoping that we are still able to do that. I 
am, you know, I am a little concerned about going back home and 
telling everybody again, well, sorry, we are going to be 
delayed again. You know, people just get tired of that.
    And so I think by the fall that there would be distribution 
that would, you know, that would take place, that we would be 
able to have proper notice and a fairness hearing, and there 
could actually be money distributed by the fall of 2010.
    The Chairman. Well, Ms. Cobell, I support the decision. I 
think it is a wise choice, probably not an easy choice, but 
nonetheless a wise one, and one that I think will provide 
substantial benefits to those who have been injured.
    My hope is, and I certainly commit as the Chairman of this 
Committee, to continue to hold oversight hearings to make sure 
that when we start fresh now and begin anew, that we not allow 
to happen in the future what happened in the past.
    And I think the fact that you and others in the class, you 
as the lead in this class, have brought action against the 
Interior Department was entirely appropriate. As you know, the 
courts have spoken in the publishing of a lot of material over 
some years now about what happened in the Interior Department, 
and it is a sad chapter. But it needn't continue, and I think 
this suit and the subsequent settlement of the suit is an 
admonishment that things must change and will change. And as I 
said, I have great confidence in the Secretary and applaud him 
for the conclusion of these settlement negotiations.
    Well, I want to thank you for flying to Washington, D.C. to 
testify. As the Committee of jurisdiction, we wanted to have, 
even though it was on short notice, we wanted to have a 
hearing, a formal hearing with the Secretary here, and invited 
you to be present as well. And we will now do all that we can 
to see that the terms of the settlement are carried out by the 
Federal Government.
    Do you have additional comments, Ms. Cobell?
    Ms. Cobell. I just want to thank you, and I appreciate the 
fact that you will continue to have oversight hearings to make 
sure. And I just pray that you do everything in your power to 
make this legislation happen by the end of the year. And I will 
be available to do any way that we can to help.
    And I would like to ask maybe Keith Harper if he would like 
to have a closing statement.
    Mr. Harper. The only thing I can add, Senator, is that from 
the legal team, that we also thank the leadership of this 
Committee. The Committee has been a staunch supporter of this 
litigation and has urged the parties to see resolution. And we 
strongly believe that that has led the parties to reach this 
settlement.
    It was, again, across the table, very difficult, took 
months. But we are here and we do ask that you continue that 
leadership to get this legislation enacted for those 
beneficiaries out in Indian Country.
    Thank you.
    The Chairman. When you say before the end of the year, it 
certainly appears to me we will be here until the end of the 
year.
    [Laughter.]
    The Chairman. Let me also note that former colleague, 
Elliott Levitas, former Member of the House of Representatives 
is here, I believe a part of the team that was involved.
    Elliott, it is nice to see you. Thank you very much for 
being here.
    This hearing is adjourned.
    [Whereupon, at 3:34 p.m., the Committee was adjourned.]

                            A P P E N D I X

  Prepared Statement of Eddie Jacobs, Creek Indian Individual Indian 
                          Trust Account Holder

    Mr. Chairman and members of the Committee, I am a member of the 
present Cobell plaintiff class. I would also be a member of both 
proposed plantiff classes which this legislation would authorize the 
U.S. District Court for the District of Columbia to bind as a matter of 
law in settlement of the Cobell litigation. For several years I have 
sought to intervene in this litigation and have been opposed at every 
turn by the plaintiffs' attorneys. In addition, I have been advised by 
representatives of defendants' Special Trustee that they cannot address 
my claims directly with me because I have become a ``represented 
party,'' represented by plaintiffs' counsel. I have been locked out of 
all deliberations and out of all consideration. And now I am advised 
that all my claims, including those that have never been part of this 
litigation, are to be resolved by this proposed ``settlement,'' which 
is manifestly unfair to me and to individual Indians in my situation.
    I urge the members of this Committee to reject those portions of 
the proposed legislation which would authorize settlement of matters 
that are not and never have been a part of the underlying litigation. 
This Committee's long-standing interest in settlement of this 
litigation is well known, but never before has this Committee proposed 
to sell out claims that are not part of the litigation in order to 
settle those matters that are actually before the court.
Class Members Have Been Assured They Will Be Paid Before Attorneys
    In addition, Senator McCain has stated in public hearings on an 
earlier settlement proposal that no settlement would be approved by 
this Committee that does not provide for actual payment to the Indians 
before payment of untold millions of dollars to the attorneys in this 
matter. Under this proposal, not only the attorneys but also the named 
plaintiffs would be paid scores, or perhaps hundreds, of millions of 
dollars before any other class member would receive a dime.
Per Capita Payment Neither Fair nor Equitable
    The per capita payment proposed for the Historical Accounting Class 
will treat individuals who inherited minuscule shares of Indian trust 
estates as recently as September 2009 the same way as Indians like 
myself who have been entitled to 100 percent of the revenue from my 
trust lands that have been significantly underpaid for many years. I 
have personally assisted other Indian trust landowners in collecting 
several thousands of dollars in partial payment of what they were owed 
for oil and gas production from their lands. By any standard of 
fairness these individuals should receive a greater payment than those 
whose interests can only be expressed by fractions with seven- or 
eight-digit denominators. A ``Claims Administrator'' should be 
permitted to make payments based on some reasonable estimate or 
evidence of loss and not on an across-the-board basis that will provide 
a huge windfall to some account holders while grossly underpaying those 
who have truly suffered significant losses through the years.
Payments Should Take into Consideration Shares of Ownership Interests
    For owners of divided interests in trust land, the per capita 
payments will pay to an owner of a very small interest in a tract of 
land the same amount that is paid to the single owner of 75 percent or 
more of the very same tract. In my case, I am the owner of 100 percent 
of the land allotted to my father, and my payment will be the same as 
the payments to neighboring landowners whose ownership interests can 
only be expressed in numbers with seven or eight digits to the right of 
a decimal point. There is no fairness, equity, or otherwise sensible 
basis for such a settlement arrangement. My payment for losses should 
certainly reflect my 100 percent ownership interest in all the revenues 
generated and paid into the IIM system by my 100 percent ownership 
interest. It is not enough to say that these losses are to be 
compensated by payments to the second class of payees this proposed 
settlement would create. My losses for revenues generated in past years 
are indisputably included in the Historical Accounting Class that will 
be compensated in the initial round of per capita payments. My losses 
on 100 percent of the revenues generated by my land over many years 
cannot reasonably be compared to those suffered by someone who only 
inherited a small interest in an already divided account as recently as 
three months ago.

Pro Rata Payments Based on Receipts, not on Losses
    Ms. Cobell has spoken eloquently throughout this litigation of her 
concern for those Indians like myself who have actually suffered losses 
as a result of the government's failures to administer the Indian trust 
appropriately. This proposed settlement makes a mockery of those 
expressions. Under this proposal, those individuals who have already 
sold their land, some several years ago, would receive higher payments 
than those of us who have maintained our trust landholdings and have 
actually suffered the losses that Ms. Cobell claims to redress. Those 
of us who have been deprived of income we were entitled to receive 
would receive smaller payments for the very reason that we have been 
underpaid in the past.

Proposed Land Consolidation Fund Benefits Only Attorneys, not Indians
    In an earlier hearing, Senator McCain asked Ms. Cobell to disclose 
the terms under which her attorneys would be compensated, and she 
agreed to provide that information for the record. I do not believe 
that information was ever provided to the Committee. Under this 
proposal, according to news releases, the proposed $2 billion Land 
Consolidation Fund is considered part of the settlement. In fact, no 
part of that money will be used to settle any loss that any Indian has 
ever suffered for anything. The only Indians who will receive any part 
of that money are those who agree to part with their birthrights in the 
future. On the other hand, if the attorneys are paid on any contingency 
fee basis that is calculated on a ``settlement'' that includes this 
Fund, the result will be that the initial $1.4 billion payment for 
Indians will be further reduced by taking the attorneys' percentage of 
the Land Consolidation Fund out of that portion of the settlement 
designated as the Historic Accounting Settlement. In other words. if 
the attorney fees are calculated at only one percent (1.0 percent), the 
Land Consolidation Fund will generate another $20 million in attorney 
fees, which will have to be taken from the $1.43 billion intended to 
compensate Indians. If the attorney fees are even capped at ten per 
cent, the result will be to reduce the money available to pay the 
Indians by a staggering $200 million which will go to the attorneys 
instead. At the very least, I urge this Committee to shed some light on 
this part of the settlement. The $2 billion Land Consolidation Fund 
should not be considered any part of a ``settlement,'' for purposes of 
reducing the amount available to pay the Indians.

Cobell is not Afghanistan, nor Health Care; Time is Not of the Essence
    There are two only conceivable reasons for the urgency presented by 
this proposal. One is to prevent anyone from fully examining or 
understanding it The schedule presented by the settlement and this 
legislation makes a mockery of any pretense of consulting with class 
members, or even permitting the Congress to consider the consequences 
of its actions. The other conceivable reason is that the attorneys and 
named plaintiffs need relief. If the attorneys and the named plaintiffs 
are in desperate need of an immediate cash infusion, the Administration 
could arrange a bridge loan, or Congress could consider a private 
relief bill for them that would not involve selling out the very 
Indians that this settlement claims to benefit.

Recommendation
    If the Committee is determined to act on this proposed settlement, 
common decency demands that Indians such as myself not be sold out just 
to appease the named plaintiffs who collectively have not shown losses 
amounting to a single, $1,000 per capita payment under this proposal, 
much less the estimated $15 million they will share in incentive 
payments. If the Congress is determined to act, then I respectfully 
recommend that the Claims Administrator should be authorized to review 
the documents and actual claims of individuals in the second-tier 
(Trust Administration) class which will be created by this settlement, 
and to make settlement payments based on some evidence of actual claims 
and actual losses rather than just on the amount that has gone through 
the accounts. Otherwise, those who have been the most mistreated in the 
past will be the most mistreated and least compensated in the 
settlement.
    Thank you for this opportunity to present my views, and I am 
willing to work with the Committee in any way possible to make any 
settlement of this litigation truly honorable.
                                 ______
                                 
                                 
                                 
                                 
                                 
                                 ______
                                 
    Response to Written Questions Submitted by Hon. John Barrasso to
                             Elouise Cobell



                                 ______
                                 
    Response to Written Questions Submitted by Hon. John Barrasso to
                        Hon. Thomas J. Perrelli











Attachments































































































































                                 ______
                                 
      Response to Written Questions Submitted by Hon. Tom Udall to
                            Hon. Ken Salazar



                                 ______
                                 
     Response to Written Questions Submitted by Hon. Tim Johnson to
                            Hon. Ken Salazar



                                 ______
                                 
   Response to Written Questions Submitted by Hon. Lisa Murkowski to
                            Hon. Ken Salazar





                                 ______
                                 
    Response to Written Questions Submitted by Hon. John Barrasso to
                             David J. Hayes









                                  
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