100 years of federal mismanagement of Indian trust money,
billions of dollars owed Native Americans might acutally
make their way home
never seen more egregious misconduct by the federal government,
said Royce C. Lamberth, the federal judge overseeing the
Individual Indian Trust reform case, which stands as the
largest class-action lawsuit ever filed against the U.S.
federal government. His comments were elicited in 1999 when
the Department of the Interior and Treasury Department announced
they had inadvertently destroyed 162 boxes of
vital trust records during the course of the trial, then
waited months to notify the court of the accident.
Filed more than seven years ago by Elouise Cobell, a member
of the Blackfoot tribe, and her legal team, and representing
more than 500,000 individual Native American landholders,
the Indian Trust case—also known as Cobell vs. Norton—is
easily one of the biggest stories of government mismanagement
and malfeasance in modern U.S. history. The case has turned
into such a nightmare for the Department of the Interior
and Treasury that the government now has more than 100 lawyers
assigned to the case—more than it employed in the Microsoft
At stake is more than $100 billion rightfully belonging
to the nation’s most impoverished people. The Interior,
Bureau of Indian Affairs and the Treasury say they have
simply “lost” the money and claim they cannot now provide
an accurate accounting of how much is owed to whom. In the
course of the lawsuit, the federal government has destroyed
vital accounting documents, filed false reports to the court
and generally conducted itself in such bad faith that a
total of 37 past and present government officials, including
current Secretary of the Interior Gale Norton and former
Secretary Bruce Babbitt, have been held in contempt of court
for their misconduct.
During the first of two trial phases, the government attempted
to limit its liability, but suffered a resounding defeat
when Judge Lamberth ordered the Interior Department to conduct
a full accounting of Indian trust assets—dating all the
way back to 1887—and imposed strict liability on government
is a landmark victory,” Cobell said of Judge Lamberth’s
Phase One decision. “It is now clear that trust law and
trust standards fully govern the management of the Individual
Indian Trust and that Secretary Norton can no longer ignore
the trust duties that she owes to 500,000 individual Indian
Elouise Cobell lives in Brown-ing, Mont., where she founded
and helps run the first tribal-owned bank in the country.
She also served as treasurer of the Blackfoot tribe from
1970 through 1983.
Growing up, Cobell’s family had no plumbing, electricity
or running water. She remembers they would often complain
about sporadic or suspiciously small checks from the government
for the land given to Cobell’s grandmother during “allotment”
at the turn of the century, land that is now leased out
by the Deptartment of the Interior and the BIA to ranchers
and timber companies.
Allotment was the policy ushered in by the Dawes Act in
1887 in an attempt to break down tribal structures and reduce
Native American land holdings. The heads of tribal households
were given up to 320 acres of land, but were forbidden actual
ownership; instead, the government forced a trust relationship,
in which the Interior and the BIA would oversee the land
and disburse all revenue from its use to the individual
The act also allowed for the sale of “surplus” land, a provision
white settlers exploited fully in their purchase of around
90 million acres—almost 65 percent of all Native American
lands—by 1932. The government stated during this period
that this trust relationship was necessary because it did
not believe Indians were capable of managing their own affairs.
Yet it’s difficult to conceive of how anyone could have
done a worse job managing the trust.
After discovering a number of anomalies in the Blackfoot
tribe’s trust, including an account drawing negative interest,
as well as a host of unauthorized transactions, Cobell began
asking questions. She claims that her initial questions
to the BIA were met with derision. “They said, ‘Oh! you
don’t know how to read the reports,’” Cobell recalls. “I
think they were trying to embarrass me, but it did the opposite—it
made me mad.”
Steadily more resolved, Cobell caught a break when a deputy
commissioner for Indian Affairs in the first Bush administration,
David Matheson, arranged for her to meet with several well-connected
government officials and banking experts. Among the group
was Dennis Gingold, eventual lead prosecuting attorney for
the case. Of his first meeting with Cobell, Gingold told
the Los Angeles Times, “From my experience, American
Indians were not involved in banking. I was looking for
a bunch of people with turbans.”
What Gingold came to learn about the case astonished him.
Each year more than $500 million comes into the Individual
Indian Trust from companies leasing Native American land
for grazing, oil, timber, coal and other natural resources.
The money is collected by the Interior and sent to the Treasury,
where it is then theoretically deposited into individual
The problem is, the Interior and BIA are widely regarded
as the worst-run agencies in the entire federal government.
Fifty thousand trust accounts don’t have names or proper
addresses. One such account has $1 million in it.
A House Committee on Government Operations in 1992 issued
a damning report titled “Misplaced Trust: The Bureau of
Indian Affairs’ Mismanagement of the Indian Trust Fund.”
Two years later, Congress passed the Indian Trust Fund Management
Reform Act, appointing a trustee to oversee the process.
This was Paul Homan, who brought with him to the job a reputation
for cleaning up problems at financial institutions. Before
being appointed the first trustee, Homan had been CEO of
four problem banks and the executive vice president of another.
No shrinking violet, Homan eventually quit in disgust, claiming
he received no cooperation from the Interior or the BIA,
or then Interior Secretary Babbitt of the Clinton administration.
Before he left, Homan reported that it was impossible to
ascertain how many people were owed money. Of the 238,000
individual trusts Homan’s crew located, 118,000 were missing
crucial papers, 50,000 had no addresses and 16,000 accounts
had no documents at all. Homan further reported that one
could assume money had been skimmed extensively from the
trust: “It’s akin to leaving the vault door open.”
Faced with the prospect of a wide-open vault door the government
seemed to have no interest in closing, Cobell was eventually
compelled to file a lawsuit on June 10, 1996, demanding
a full accounting of all IIT monies.
In the intervening seven years, Cobell’s team has piled
up an impressive series of victories. In February 1999,
Judge Lamberth held Babbitt, Treasury Secretary Robert Rubin,
and Assistant Interior Secretary Kevin Gover in contempt
of court. In August 1999, Lamberth ordered the Treasury
to pay $600,000 in fines for misconduct.
And on Dec. 21 of that same year, the judge issued his Phase
One opinion (the case is divided into two phases), wherein
he found that the government had breached its trust responsibilities
to Native Americans and ordered the government to file quarterly
reports detailing its reform efforts. Lamberth also retained
jurisdiction over the reform for a period of five years.
During the first phase, the Interior seems to have bungled
things in every conceivable way. The Senate Government Affairs
Committee cited the Interior’s handling of the Indian trust
as one of its “Ten Worst” examples of federal government
mismanagement. It came to light through a report filed by
court-appointed Special Master Alan Balaran that Interior
and Justice Department lawyers were destroying e-mail messages
at the same time they were assuring the court the messages
were being preserved.
The second phase of the trial, to determine the sums owed
to Indian trustees, is now underway. As the suit nears its
conclusion, the federal government has tried every means
available, ethical or otherwise, to derail or minimize the
On Sept. 29, 2003, Special Master Balaran filed a site visit
report after being ordered to vacate the premises of the
Dallas office of the Minerals Management Service. In the
report, Balaran cited “chaotic document management, an inability
to locate audit files . . . and the unexplained presence
of an industrial shredder.”
The destruction of vital documents has continued and has
been cited repeatedly in reports to the court. Numerous
experts have testified that a true accounting of the trust
based on existing records is impossible. As a result the
plaintiffs have submitted an accounting plan employing satellite
mapping technology to estimate how much money individual
Native Americans should have received from oil leases on
their lands. Gingold explains that such methodology is necessary
when records necessary for an accounting of funds have been
Using detailed production records from every well drilled
in the West, the plaintiffs can determine how many of those
wells are on Indian reservations. With this information,
the amount of revenue those wells managed through government
leases would have produced can be estimated. The mapping
technology also includes ways of calculating for timber,
grazing and mineral leases on Native American lands in the
Trust reform is taking a heavy toll on the national treasury.
The administration has requested $554 million in the 2004
budget to reform the trust fund, an increase of $183.3 million
above the $370.2 million that was set aside in 2003. In
a recent letter from the Indian Affairs Committee, Sen.
Ben Nighthorse Campbell (R-Colo.) urged a speedy settlement
and predicted that Congress would intervene soon and negotiate
a settlement if the suit was not resolved.
Support for Cobell’s efforts in the Native American community
is far from universal, however, and this may prove the greatest
remaining obstacle to a fair and final settlement. Because
part of her team’s efforts involve removing trust responsibilities
from the BIA and Interior, some worry that this could provide
grounds for terminating the government’s trust relationship
with tribes that depend on government funding.
In March, five tribal chairmen published an article in Indian
Country Today, the nation’s leading Native American
newspaper, alleging that the Cobell suit was employing “scorched-earth”
tactics, and that “an attorney for the plaintiffs has publicly
stated that the Cobell suit has the potential to destroy
The concerns of the chairmen seem to hinge on three main
assertions: that the tactics of the Cobell legal team are
akin to “warfare,” that the Cobell team has not utilized
opportunities for diplomacy and negotiation to the fullest
extent, and that in requesting a third-party receiver to
resolve the trust’s problems (taking it away from the Interior
and BIA) without first consulting tribes, Cobell and Co.
demonstrated a disregard for tribal governments.
A reply written a week later by Cobell and John Echohawk,
the executive director of the Native American Rights Fund,
pointed out that the “consultation, communication and cooperation”
urged by the chairmen in their letter are doomed to failure
because of the Interior’s manifest, well-documented bad
faith. In defending the “warlike” decision to bring the
authority of a federal court to bear on the Interior, the
letter reasoned, “Our approach is to ensure accountability
when people mismanage Indian assets and that can no more
be described as ‘scorched earth’ than holding Enron and
Arthur Andersen executives accountable for their misdeeds.”
is curious that now, when a multi-billion dollar judgment
and accountability seems inevitable, officials within the
Interior are pushing the notion that there is ‘no end’ and
that a congressionally forced ‘settlement’ is the only solution.
Tribal leaders and Indian people must not fall for this
ploy,” the letter closed, “and must see these actions for
what they are—an attempt to get Congress to step in at the
eleventh hour and bail out the government. . . .We cannot
allow the Interior Department, their proxies, or anyone
to ‘divide and conquer us.’ The government is losing and
they are desperate. They are banking on being able to make
us war against one another. [But] what’s wrong with the
Indians winning for once instead of the cavalry?”
As the suit draws slowly to a close, the extraordinary scenario
of the Indians winning for a change seems closer and closer
to being a reality. “I’ve heard from friends that the government
thinks I’m tired and that they’ll wear me down, so that
I’ll just go away,” says Cobell.
Just outside her hometown is a marker that tells the story
of the winter of 1884, when 500 Blackfoot died of starvation
and exposure while awaiting government-promised supplies.
They were buried in a mass grave now called Ghost Ridge.
During the more difficult stages of the lawsuit, Cobell
said she visits Ghost Ridge to reflect on her ancestors
who perished in the cold almost 120 years ago, while waiting
for the government’s goodwill.
With that lesson from history firmly in mind, it seems unwise
for the government to bet on Elouise Cobell or her team
going away any time soon.
Awehali is a freelance writer and the editor of LiP Magazine.