Give It Back

After 100 years of federal mismanagement of Indian trust money, billions of dollars owed Native Americans might acutally make their way home

By Brian Awehali

‘I’ve 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 antitrust litigation.

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 trustees.

“This 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 trust beneficiaries.”

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 landholders.

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 trust accounts.

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 imminent settlement.

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 destroyed.

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 West.

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 tribal governments.”

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.”

“It 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.

Brian Awehali is a freelance writer and the editor of LiP Magazine.