Missing Funds/Lost Lives

Craven, Jim jcraven at clark.edu
Tue Apr 23 09:47:03 MDT 2002


Lost Trust: Billions Go Uncounted 
Indians in Century-Old Fight to Tally Money Owed for Land Use 

By Ellen Nakashima and Neely Tucker

Washington Post Staff Writers
Monday, April 22, 2002; Page A01 

In the whispering grasslands of North Dakota, Tex Hall's family has grazed
cattle for four generations. More than a century ago, most of their land was
among Indian acreage taken by the U.S. government, held in trust and leased
to strangers. When Hall was a boy, his parents, members of the
Mandan-Hidatsa-Arikara tribes, would await the arrival of a U.S. Treasury
check each December.

Sometimes the check was for $5,000. The next year, perhaps $4,000. Another
year, another sum. His mother wondered why the amounts varied. The yellow
government envelope contained no explanation.

His father would call the Bureau of Indian Affairs. "We'll get back to
you,"the local officials said. But they never did. The frustration would

"I want an accounting!" his father would shout, startling his eight
Now the parents are dead, and, come December, it is Hall and his remaining
six brothers and sisters who await the checks. The amounts still vary, and
the Halls still have no explanation. They are among hundreds of thousands of
Indians in the West whose lands were taken into government trust -- and now
lie at the center of one of the most intractable accounting messes in U.S.

For more than a century, ranchers, miners and loggers have contracted with
the government to harvest timber, graze cattle and extract oil, gas and
minerals from Indian land; the money paid the government is supposed to be
forwarded to each landowner. But from the beginning, the government paid
little attention to which landowner was owed what. Over time, as Indians
died and land was divided among heirs, the accounting problems grew
exponentially. Tribes and individuals have never been sure they were getting
their due.

"To this day, when I get my check there is nothing that shows what tract of
land it's for," said Hall, president of the National Congress of American
Indians. "Isn't that crazy?"
Congress has tried to fix the system and failed. Accounting firm Arthur
Andersen was paid $20 million in the early 1990s to reconcile tribal
accountsand failed. The Interior Department, which oversees the BIA, tried
to fix the system. It, too, failed and ended up in court with individual
account holders. Evidence made it clear that relevant documents were
shredded and e-mails deleted. Already, two Clinton Cabinet members have been
found in contempt of court, and now Interior Secretary Gale A. Norton and 40
deputies face contempt charges.

That case -- one of the largest class action lawsuits in history in terms of
plaintiffs -- was filed six years ago to secure a reckoning of 300,000
accounts belonging to individual Native Americans. In separate litigation,
tribesare seeking similar treatment for about 1,400 tribal accounts.
The government, the Native Americans contend, still cannot provide an
accurate balance sheet for a single one.

"We call this the Indian Enron case," Hall said. Even that may fail to
capture the scope of an accounting disaster that has shaped the lives and
lands of Indians since the 1820s.

Plaintiffs in the class action, led by Elouise Cobell, treasurer of the
Blackfeet Indians in Montana, say they are owed at least $10 billion. U.S.
District Judge Royce C. Lamberth has already found the government breached
its fiduciary duty to the Indians; he is considering how the system might be
repaired and will later determine damages.

At least 18 tribal suits were filed in January and February, claiming
billions of dollars in damages and seeking an accounting of their own. But
there is no consensus on how to accomplish either an accounting dating back
more than a century or a long-term fix for the future -- or even a

Norton wants to create an agency to overhaul the trust fund -- the Bureau of
Indian Trust Asset Management (BITAM). Cobell wants the judge to appoint an
independent receiver, which would focus solely on the individual accounts. A
task force of 36 tribal leaders is considering calling for legislation that
would create a body akin to a Resolution Trust Corp., which restored the
savings and loan industry in the 1980s and which would address both tribal
and individual accounts.

Some lawmakers are proposing their own fix. Senate Majority Leader Thomas
A.Daschle (D-S.D.) and Sens. Tim Johnson (D-S.D.) and John McCain (R-Ariz.)
introduced legislation Friday to create an Interior Department position of
deputy secretary for trust management and reform to handle all trust fund
duties, and to make it easier for tribes to directly manage or co-manage
their own trust funds, which few tribes do now.

"The way these trust fund holders have been treated . . . is a national
disgrace," said Rep. Tom Udall (D-N.M.), whose district includes large
numbers of Navajo. "If 40,000 people were cut off Social Security, there
would be an uproar in Congress."

The problem dates to the early 19th century, when the government began
putting tribal land in trust. Accounting problems were cited as early as
1828. Then, with the 1887 Dawes Act, the government began breaking up
Western tribal land into allotments to individual Indians. That law was a
means of winning land for white settlers. Typically, the government would
declare land "surplus" and pay the Indians -- who often did not see land as
something that could be bought or sold -- a pittance.

Within 50 years, Native Americans lost more than 135,000 square miles of
land -- roughly the area of Maryland, Virginia, West Virginia,
Pennsylvania,Rhode Island and the District of Columbia combined. The
remaining 57 million acres, 47 million of which is tribal land, has been
held in trust by the government.

Companies or individuals who want to extract the oil or minerals from the
property or graze cattle on it sign leases with the local BIA superintendent
and pay the Office of Trust Fund Management in Albuquerque, which manages
the accounts. The accounts pay interest, though investments are limited to
government securities.

Over the decades, the government gave the accounts low priority, spreading
records across dozens of poorly kept warehouses across the country, where
fires, floods and insects destroyed them. Compounding the problem is the
fact that most Indians die without wills, leaving a probate court or
administrative law judge to divide the land among the heirs. The number of
accounts has increased exponentially with each generation, while each
owner's share of the land has become correspondingly smaller.

Today, there is a backlog of more than 20,000 probate cases. Property
inspections are not done on time or not done at all. Appraisals are figured
on a computer in a regional office, often without a site visit. Surveys are
sometimes based on traditional boundaries, as in "Go to the old oak tree."
There is no way to ensure that account holders are receiving the highest
value for their leases, no way to know when money is owed an account
holder,no central location to get information on a single account.

"You have to talk to the Bureau of Indian Affairs to find out what's going
on with the land management and the lease," NCAI attorney John Dossett said.
"To find out how much money is in your account, you have to talk to the
Office of Trust Fund Management. . . . One office supposedly knows how much
is to come in. The other office is supposed to know how much actually came
in." And in most cases, he said, they don't know either.

In 1972, the BIA announced it had lost the ability to reconcile the tribal
trust accounts. In the early 1980s, the General Accounting Office, the
Interior Department's inspector general and Price Waterhouse issued reports
urging reforms. Interior created the Branch of Trust Fund Accounting in 1985
to handle all trust accounting duties. Then in 1991, the department created
the Office of Trust Fund Management to oversee all trust fund investment and
accounting duties. The next year, Congress issued a report urging reform,
and in 1994, it passed the American Indian Trust Reform Management Act,
setting up a special trustee within Interior to develop a new management

Reports gathered dust. The bureaucracy expanded. Still, there was no broad
By 1996, Cobell had had enough. She sued to force the government to account
for all royalties due since 1887 to individual Indians and their heirs.
Norton said her department is developing a long-term plan to improve the
security of individual Indian trust data. In February, she told Congress
that the agency would upgrade individual trust fund technology systems by

"Indian trust asset management responsibility is a very high priority for
the department," Norton said. "The tribes, Interior and the Congress have to
reconcile the competing principles associated with trust responsibility and

But the government's lack of progress over the past six years has infuriated
Judge Lamberth. He has found that government lawyers have misled the court
so often that he held Interior Secretary Bruce Babbitt and Treasury
Secretary Robert E. Rubin in contempt during the Clinton administration and
placed the individual trust system under his oversight for five years.

In December, Lamberth ordered the Interior Department to shut down Web sites
that linked to the trust funds after discovering computer security was so
lax that the accounts could be hacked into. The department responded by
yanking all its Web sites, even for vacationers making camping reservations
in Yellowstone and other parks.

Five months later, checks are still not going out to tens of thousands of
Indians. The BIA's Land Records and Information System (LRIS), which records
all probate and lease changes, remains off-line, blocking new transactions
and "choking" the Indian economy, as Hall puts it.

A series of lawsuits filed over the last decade hints at the scale of lost
Indian income. In Minnesota, the Red Lake Band of Chippewa won $80 million
in two cases for underpayment of forestry land fees. After the Jicarilla
Apache nation sued over the handling of its oil and gas leases and began
auditing its own leases, royalties rose more than $53 million over 10 years.

Cobell said that if all royalties due for individual accounts since 1877
were totaled, they would amount to more than $100 billion in current
dollars. Even if the government could account for 90 percent of that, at
least $10 billion would still be missing, she said.

Some former government officials doubt the plaintiffs can prove losses in
that range or that the government would pay that much. "Any settlement is
not going to be $10 billion," said Kevin Gover, a Pawnee Indian and former
assistant secretary for Indian affairs, who was held in contempt in 1999.
"It's not going to be a lot of money, and you're going to see a lot of
extremely unhappy people."

It would not be impossible to fashion a reckoning, Cobell said. "Go back to
the original allotment and come forward," she said. "Determine who the heirs
are. This is not hard to do. Hire crisis managers. They do it every day in
the outside world."

© 2002 The Washington Post Company 

James Craven
Professor and Consultant, Economics
Clark College, 1800 E. McLoughlin Blvd.
Vancouver, WA. 98663
(360) 992-2283; Fax: (360) 992-2863
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