209



                                     UNITED STATES DISTRICT COURT
                                     FOR THE DISTRICT OF COLUMBIA

                   ELOUISE PEPION COBELL,       :  Civil Action 96-1285
                   et al.                       :
                                 Plaintiffs     :
                                                :  Washington, D.C.
                           V.                   :  Tuesday, June 10, 2008
                                                :
                   DIRK KEMPTHORNE, Secretary   :
                   of the Interior, et al.      :
                                                :
                                 Defendants     :  MORNING SESSION

                                 TRANSCRIPT OF EVIDENTIARY HEARING
                                               DAY 2
                                BEFORE THE HONORABLE JAMES ROBERTSON
                                     UNITED STATES DISTRICT JUDGE

                  APPEARANCES:

                  For the Plaintiffs:      DENNIS GINGOLD, ESQUIRE
                                           LAW OFFICES OF DENNIS GINGOLD
                                           607 14th Street, NW
                                           Ninth Floor
                                           Washington, DC 20005
                                           (202) 824-1448

                                           ELLIOTT H. LEVITAS, ESQUIRE
                                           WILLIAM E. DORRIS, ESQUIRE
                                           KILPATRICK STOCKTON, L.L.P.
                                           1100 Peachtree Street
                                           Suite 2800
                                           Atlanta, Georgia  30309-4530
                                           (404) 815-6450

                                           KEITH HARPER, ESQUIRE
                                           JUSTIN GUILDER, ESQUIRE
                                           KILPATRICK STOCKTON, L.L.P.
                                           607 14th Street, N.W.
                                           Suite 900
                                           Washington, D.C.  20005
                                           (202) 585-0053

                                           DAVID C. SMITH, ESQUIRE
                                           DANIEL R. TAYLOR, JR., ESQUIRE
                                           KILPATRICK STOCKTON, L.L.P.
                                           1001 West Fourth Street
                                           Winston-Salem, North Carolina  27101
                                           (336)  607-7392

                                                                               210



                  For the Defendants:      ROBERT E. KIRSCHMAN, JR., ESQUIRE
                                           JOHN WARSHAWSKY, ESQUIRE
                                           MICHAEL QUINN, ESQUIRE
                                           J. CHRISTOPHER KOHN, ESQUIRE
                                           GLEN GILLETT, ESQUIRE
                                           U.S. Department of Justice
                                           1100 L Street, N.W.
                                           Washington, D.C.  20005
                                           (202) 307-0010

                                           JOHN STEMPLEWICZ, ESQUIRE
                                           Senior Trial Attorney
                                           U.S. Department of Justice
                                           Commercial Litigation Branch
                                           Civil Division
                                           Ben Franklin Station
                                           P.O. Box 975
                                           Washington, D.C.  20044
                                           (202) 307-1104


                  Court Reporter:          REBECCA STONESTREET
                                           Official Court Reporter
                                           Room 6511, U.S. Courthouse
                                           333 Constitution Avenue, N.W.
                                           Washington, D.C.  20001
                                           (202) 354-3249


                  Proceedings reported by machine shorthand, transcript produced
                  by computer-aided transcription.

                                                                               211



                                          C O N T E N T S

                  WITNESS                  DIRECT    CROSS     REDIRECT  RECROSS

                  DR. JAMES MILLER
                  By Mr. Levitas                      --         247       --
                                                                 255       --
                  By Mr. Stemplewicz         --       212        --        254

                  DR. BRADFORD CORNELL
                  By Mr. Gingold             261       --        --        --



                                           E X H I B I T S

                      NUMBER                                   ADMITTED


                      DEFENDANT:

                        466                                      255
                        487                                      255

                                                                               212



            1                          P R O C E E D I N G S

            2              THE COURT:  Be seated everybody, but counsel, I would

            3     like to see all counsel in chambers, all of you.  Eric will show

            4     you out through the back door, just for a few minutes.

            5              COURTROOM DEPUTY:  Civil Action 96-1285.

            6              THE COURT:  All right.  Is Mr. Miller here, Dr. Miller?

            7     Good morning, sir.  You're still under oath.

            8              THE WITNESS:  Yes, sir.

            9       (DR. JAMES MILLER, PLAINTIFF witness, having been previously

           10                    duly sworn, testified as follows:)

           11                            CROSS-EXAMINATION

           12     BY MR. STEMPLEWICZ:

           13     Q.  Good morning.

           14     A.  Good morning.

           15     Q.  Yesterday you testified about the TGA, the Treasury's

           16     General Account, and I believe you likened that to the

           17     government's bank account.  Is that right?

           18     A.  Yes.

           19     Q.  What exactly did you mean by that?

           20     A.  Well, when monies come in to various agencies, as well as

           21     directly to Treasury, they end up in the TGA.

           22     Q.  And when you say monies, you're referring to cash.  Correct?

           23     A.  Well, cash or checks or -- yeah.

           24     Q.  So how does money get out of the TGA?  How does that cash

           25     get out of the TGA?

                                                                               213



            1     A.  Well, Treasury can write checks, other agencies can write

            2     checks on the monies in the TGA.

            3     Q.  But what is required before a check can be written?  There

            4     has to be some authority to write that check.  In very general

            5     terms here, we're not getting down into real details, but in

            6     most general terms, how do you explain how a government

            7     expenditure is authorized?

            8     A.  Well, it's a matter of law.

            9     Q.  So there would have to be an appropriation of some kind.

           10     Correct?

           11     A.  Well, not really.  I mean, a lot of monies that go in the

           12     TGA and out of the TGA are pursuant to what are called

           13     entitlement spending, where the amounts of money are not

           14     appropriated each year, it's a matter of permanent authority.

           15     Q.  What about in the case of Individual Indian Monies?  What

           16     would authorize a check to be cut out of that fund?

           17     A.  I have read some of the materials, a lot of the legal

           18     language.  My understanding is that Interior has authority to

           19     cut their own checks drawing --

           20     Q.  But wouldn't there have to be -- I'm sorry to interrupt, but

           21     wouldn't there have to be an authority, or at least a balance in

           22     the fund account?  In other words, the IIM that is administered

           23     by Interior is represented by a fund account; I think you talked

           24     about Mr. Gregg's testimony yesterday and he talks about

           25     14X-6039, that being the account that's used to keep track of

                                                                               214



            1     IIM.  So wouldn't there have to be some balance in that fund

            2     to --

            3     A.  Well, my understanding is it's an aggregate account.  There

            4     are not accounts for each individual Indian in the Treasury

            5     General Account, there is in the Treasury General Account monies

            6     from IIM monies in the aggregate.

            7              And again, we need to distinguish between the money and

            8     the claim on the money.  Just like when a person has a

            9     checkbook, they have a claim on money that's in the bank, though

           10     the money in the bank is fungible and mixed with everybody

           11     else's money.

           12     Q.  It's essentially the difference between cash and funds, in a

           13     sense.  The funds account is what's used to keep track of where

           14     the cash is authorized to go?

           15     A.  I don't want to comment on the nomenclature.  I think I

           16     explained what I understand about the difference.  There is a

           17     claim, an account, a claim, and that's different from the cash

           18     in the account.

           19     Q.  When the Army pays for a tank, for example, it purchases

           20     from a manufacturer, it writes a check to pay for the tank.

           21     Doesn't that money come out of the TGA?

           22     A.  My understanding is that the Department of Defense is

           23     different in that regard.  They're different in a lot of regards

           24     with respect to budgeting.  But my understand is it doesn't come

           25     out of the TGA.

                                                                               215



            1     Q.  Okay.  Any idea where it would come out of?

            2     A.  They have their own accounts, their own deposits.  That's my

            3     understanding, subject to check.

            4     Q.  Let's go over again your understanding of the benefit to the

            5     government from having this Individual Indian Money.  I believe

            6     you testified that having that cash eliminates the need to

            7     borrow.  Is that correct?

            8     A.  Well, having the cash -- and let's define the cash.  The

            9     cash is whatever receipt -- the degree to which receipts exceed

           10     outlays to individual Indians.

           11     Q.  It's basically net cash?

           12     A.  Net cash.

           13     Q.  Okay.

           14     A.  When you have that net cash, you don't have to borrow that

           15     amount and you don't have to pay interest on what you borrowed.

           16     Q.  And you would borrow that amount to make expenditures of the

           17     government.  Correct?

           18     A.  If you didn't have the cash, you would have to borrow the

           19     money to make expenditures to the government -- for the

           20     government.

           21     Q.  And if you had surplus cash, your receipts exceeded outlays,

           22     and so at the end of a given year the government takes a look at

           23     where things stand and says, a-ha, we have a surplus this year,

           24     what are we going to do with that, normally what does the

           25     government do with that?

                                                                               216



            1     A.  Well, at every day, every hour, practically, through the

            2     year, the government is turning over dead instruments; dead

            3     instruments are becoming due, are maturing, and they have to

            4     refund the cash, give the cash back.  And so this maturing debt

            5     has to be refinanced, has to be reissued.  You have to do new

            6     borrowing throughout the year.

            7              So even if you have a surplus during the year for the

            8     end of the year -- of course, as we know, there are injections

            9     of cash and there are drawdowns of cash, and debt management has

           10     a lot to do with smoothing out those variations.  But even if

           11     you have a surplus, you're continually churning that debt and

           12     issuing new borrowing.  Or doing new borrowing.  Excuse me.

           13     Q.  So I just want to make one thing clear, that when the

           14     government benefits from Individual Indian Monies, first of all

           15     we're talking about net, net of disbursements out of --

           16     A.  Yes, sir.

           17     Q.  -- individual monies?

           18              We're also talking about net of investments that

           19     Interior or Treasury purchases with that cash to put in an

           20     investment for the individual Indian.  That wouldn't be free

           21     roaming cash that the government could then use for

           22     expenditures.  Correct?

           23     A.  That's correct.  I'm not commenting on whether they are

           24     investing it at the right interest rate or anything like that.

           25     Q.  Right.  So the government gets this benefit from the cash

                                                                               217



            1     that the plaintiffs are claiming, if it spends the money.  Is

            2     that correct?  Or I guess one other possibility --

            3     A.  It doesn't borrow to maintain this minimal cash reserve to

            4     avoid the risk of overdraft.

            5     Q.  Right.  It doesn't borrow for the sake of being able to walk

            6     around saying, I have five billion in my checking account.  It's

            7     going to spend that money?

            8     A.  No.  Let's -- I don't agree with that.  My point is that if

            9     you have an extra $100 million, that's $100 million that you

           10     don't have to borrow to maintain that $5 billion.  Today it's

           11     $5 billion, tomorrow it might be five and a half, I don't know,

           12     but to maintain whatever Treasury views as its appropriate

           13     minimum balance to avoid a risk of overdraft.

           14     Q.  Now, it's also possible, is it not, that the government

           15     could benefit from this sort of free-roaming cash by putting it

           16     in the bank itself and drawing interest, putting it, say, in a

           17     Federal Reserve account or in one of the banks it has a contract

           18     with?  And that interest that it draws on those accounts would

           19     be a benefit as well.  Correct?

           20     A.  Well, I think one of the reports that Mr. Levitas cited

           21     yesterday is one in which there's great discussion about what

           22     the federal government does in those times, even in a year in

           23     which there are substantial deficits, those times when you have

           24     revenues coming in that exceed outlays.  And at those times the

           25     government uses basically three instruments for parking money

                                                                               218



            1     overnight and earning interest on those balances overnight.

            2              MR. STEMPLEWICZ:  Could we have Attachment A, please?

            3     BY MR. STEMPLEWICZ:

            4     Q.  Could you please take a look at this screen, Mr. Miller, and

            5     tell me if you recognize this.  I'll represent to you that this

            6     was the Attachment A to the memorandum that the plaintiffs filed

            7     in support of their claim for restitution and disgorgement.  Do

            8     you recall looking at that?

            9     A.  I've seen something that looks very similar, yes.

           10     Q.  If we could go to the very end of that, the last page, you

           11     see there on column G, the nominal benefit conferred, and the

           12     total is about $4.5 billion?  Do you see that?

           13     A.  I see that.

           14     Q.  What do you understand that to be?

           15     A.  I have not -- I was not retained to analyze this data.

           16     Q.  Okay.  So as far as you're aware, there's no claim that

           17     there's 4.5 billion sitting in the Treasury somewhere, you know,

           18     sort of between the cushions that's available to be paid to the

           19     plaintiffs?

           20     A.  I'm not testifying to any particular amount.

           21     Q.  And likewise, all the way over on the right, the $58 billion

           22     figure, that would be the same.  Correct?

           23     A.  This table was prepared under certain assumptions on which I

           24     can not verify.  I do not have requisite information to verify

           25     the numbers.  I know generally what they have done here, and I

                                                                               219



            1     agree generally with the methodology that comes up with that

            2     accumulated benefit conferred column, but I can't comment on the

            3     actual data, the actual amounts, the net amounts that were

            4     retained by the government.  I do not have that knowledge.

            5     Q.  You indicated certain assumptions are behind this table.  Do

            6     you vouch for any of those assumptions?

            7     A.  I vouch for the methodology, and that is whatever the delta

            8     was, whatever the net receipts were - that is, the receipts

            9     minus the outlays - that when you take that figure, which

           10     represents a figure that the federal government does not have to

           11     borrow, and add to that the interest, and then in the subsequent

           12     year you have the same figure, the principal plus the interest

           13     that you don't have to borrow, and so you're saving that plus

           14     the interest on that, and you continue that cycle through all

           15     the years, that adds up to whatever the avoided interest -- the

           16     avoided borrowing costs would be for that year.  And then you

           17     add them over all the years, and that's what I understand that

           18     column in the right to be.

           19              MR. STEMPLEWICZ:  Can we go all the way back to the

           20     1887 figure, the first page?

           21     BY MR. STEMPLEWICZ:

           22     Q.  Again, we have this column G, the nominal benefit, appears

           23     to be the difference between the total revenues in E and the

           24     total disbursements in column F.  Correct?

           25     A.  I have not -- again, I was not asked to analyze these

                                                                               220



            1     tables, to affirm the computations contained in these tables, to

            2     confirm the assumptions made that underlie these tables,

            3     underlie these numbers.  I can tell you that the methodology, as

            4     I have been told and represented to me, I believe is correct,

            5     and that was just what I described, sir.

            6     Q.  We talked about benefit conferred under this methodology.

            7     We're looking at a hypothetical borrowing.  Correct?  In other

            8     words, what hypothetically would take place if the government

            9     did not have this cash?

           10     A.  Let me see if I can put it in my own words.  Again, you take

           11     the net monies retained, and that represents money that the

           12     federal government does not have to borrow.

           13     Q.  Correct.

           14     A.  And you add to that the interest that would have been paid

           15     on that money that the government would have borrowed, and that

           16     is the cost -- that is the borrowing -- the savings for not

           17     having to borrow for that year.

           18              Now, it's hypothetical in the sense that I guess you're

           19     estimating what would have been the case had the government not

           20     had the money, and compared it to the advantages, the benefits

           21     the government derives by having withheld that money.

           22     Q.  In a way of analyzing it, you're pulling out that cash, and

           23     for purposes of the analysis assuming it's not there; what would

           24     then take place is what you would end up with a benefit,

           25     arriving at the benefit?

                                                                               221



            1     A.  The benefit, the benefit is defined as what the government

            2     would have paid had they not retained the money, and the fact

            3     they didn't pay anything for it because they had the money.

            4     Q.  So we have a borrowing of some kind that would have taken

            5     place.  Correct?

            6     A.  Let me say it in my own words.  If the government retains

            7     $100 million that otherwise should have been disbursed to the

            8     individual Indians, that is money they do not have to borrow.

            9     Q.  Now, if the government had borrowed, there would have been a

           10     principal - let's take your $100 million example - and there

           11     would have been an interest rate, hypothetical interest rate,

           12     and a hypothetical maturity for that borrowing, as there would

           13     be with any debt instrument issued by the government.  Correct?

           14     A.  I don't want to say it's hypothetical.  We know what the

           15     10-year borrowing rate was for the federal government for each

           16     of those years.  Those are data that have been scrubbed and all

           17     that, and that's a good estimate of the borrowing costs for the

           18     government for that year.  So it's not hypothetical.

           19     Q.  Well, it's hypothetical in the sense that it could have been

           20     any number of different rates, but somebody picked 10 to apply

           21     to this fictitious situation?

           22     A.  Not fictitious.  The government withheld the money.  Right?

           23     Q.  You're assuming the government withheld the money.

           24     A.  We're assuming the government withheld $100 million.  Had it

           25     not done so, it would have had to borrow on the open market that

                                                                               222



            1     $100 million, and the cost of borrowing is approximated by that

            2     10-year rate.

            3     Q.  All right.  Let me ask you this:  If the government's

            4     benefit is measured by this borrowing, this sort of constructive

            5     borrowing, if you will, at a particular rate, at a particular

            6     maturity, why, then, would not the benefit to the government

            7     terminate when that hypothetical or constructive loan is paid

            8     off?  If it's a 10-year instrument, why would the benefit

            9     continue on for 121 years if it's paid off in 10 years?

           10     A.  Because the government is still holding that cash.

           11     Q.  I see.  So we're back again to 1887.  We're up here, if you

           12     would look at Attachment A on the screen, and that $179,000 in

           13     column G is never, ever, ever paid back to the Indians, it's

           14     held forever by the government?

           15     A.  Sir, what the data -- my understanding of the use of the

           16     data is as follows:  You have a delta for '87, you have a delta

           17     for '88, you have a delta for '89.  That is, withheld funds '87,

           18     withheld funds '88, '89, and so forth.  Some of the '87 monies

           19     may be paid out in '88, but what you're looking at for the '88

           20     number is the net; that is, the difference between income and

           21     outflow, how much came in in 1988 (sic) and how much was paid

           22     out.  Some of the money paid out in '88 may have been due to the

           23     Indians from '87, but in '88 you still had a net withholding of

           24     monies belonging to the Indians.

           25              That is my understanding.  I cannot vouch for those

                                                                               223



            1     individual figures.  As I indicated, I have not been retained to

            2     evaluate the veracity of these numbers.

            3     Q.  Well, again, you have testified that you're vouching for the

            4     methodology.  Correct?

            5     A.  Yes.

            6     Q.  Now, let's assume that the methodology employed in this

            7     exhibit embodies an assumption that this 30 percent from 1887,

            8     1888, 1889, 1890, and so forth is never disbursed to the

            9     individual Indians.  You think that's a reasonable assumption,

           10     based on your experience as director of OMB?

           11     A.  I think you're mixing two things.  As I indicated, you could

           12     have monies owed the Indians that is withheld in 1887, some of

           13     which is paid back in '88, some of which is paid back in '89,

           14     and so forth.  It doesn't matter, because what you're looking at

           15     for the figure of 1888 is the net; that is, the revenues that

           16     come in minus the revenues that are going out, some of which

           17     would be to pay Indians for 1888, some to pay Indians for 1887.

           18     And through the years, the same way.

           19              Now, the assumption, I understand - and I can't vouch

           20     for it, because, you know, I haven't rigorously evaluated this

           21     data - is that the 70 percent figure is an assumption based on

           22     some evidence that I haven't reviewed, that whatever the

           23     revenues coming in in a given year, the outlays, outlays which

           24     included payments to Indians for previous years as well as the

           25     current year, was 30 percent -- there was a 30 percent

                                                                               224



            1     difference.

            2     Q.  All right.  So your testimony would be that if there's an

            3     assumption that this 30 percent year to year to year just never

            4     gets paid, that would not be a reasonable assumption?

            5     A.  I didn't say that at all.  I think it is quite reasonable.

            6     Again, based on the data I haven't reviewed, I mean, if the data

            7     is supportive of that assumption -- your point, sir, is very

            8     well taken; that is to say that monies owed to Indians in 1887

            9     might be paid, or some of it be paid in subsequent years.  But

           10     that doesn't vitiate this notion that at each subsequent year

           11     there's a shortfall.

           12              What you're looking at is the shortfall, and the fact

           13     that an 1887 outlay occurs in 1888 doesn't eliminate the

           14     shortfall, doesn't eliminate the benefit throughout all the

           15     years that the federal government, the taxpayer, the

           16     U.S. government, the United States of America is gaining

           17     throughout the whole period of time.

           18     Q.  All right.  Let's look at 2007 again, the last page of this.

           19     There we see, if we could focus in on the top half of that

           20     document, over to the right a little bit, again, the year 2007

           21     is the last year before the totals, and the difference between

           22     total revenues, which is 336.68 million, and total

           23     disbursements, 235.07 million, do you see that in columns E and

           24     F?

           25     A.  Yes.

                                                                               225



            1     Q.  So that comes up with this nominal benefit of 101 million.

            2     That's roughly your example of $100 million net that's withheld

            3     that year?

            4     A.  For that year.

            5     Q.  Right.

            6     A.  As I understand the table.  I did not prepare the table, I

            7     do not vouch for the numbers there, I do not -- I haven't

            8     reviewed that carefully, and again, I haven't analyzed the

            9     table.  But it appears that that's the case.

           10     Q.  And again, the benefit is the application of an interest

           11     rate to that amount?

           12     A.  Well the benefit is the amount they've withheld, plus the

           13     interest on that amount that looks like the 10-year Treasury

           14     rate of 6.22 percent.

           15     Q.  In making that calculation, wouldn't you want to know the

           16     relative weight of this $101 million to total government

           17     receipts?

           18     A.  No.

           19     Q.  Let's show the Treasury tables.

           20              MR. STEMPLEWICZ:  Your Honor, this is going to be

           21     marked as defense exhibit next in order 482.  If we could go to

           22     the second page of this document.

           23     BY MR. STEMPLEWICZ:

           24     Q.  Have you ever looked at one of these --

           25     A.  I've looked in my career at many, many tables.

                                                                               226



            1     Q.  You did not look --

            2     A.  Pardon?

            3     Q.  You did not look at this particular document or recent

            4     Treasury data in preparing your testimony?

            5     A.  Oh, I've seen -- from time to time on the computer I have --

            6     on the Internet I have pulled up Treasury charts.  I don't

            7     recall this particular one.

            8     Q.  If we can look at the bottom, say, third of this exhibit

            9     where it talks about fiscal year 2007, and you see there at the

           10     bottom there, total receipts, total receipts of the

           11     U.S. government for 2007?

           12     A.  Yes, sir.

           13     Q.  Do you see that number in millions?

           14     A.  That's 2,567,671,000,000.

           15     Q.  All right.  You think that's fair to ignore this figure in

           16     coming up with a calculation of whether benefit was conferred?

           17     A.  I think it's perfectly reasonable to ignore that total

           18     revenue figure.

           19              MR. LEVITAS:  Your Honor, I may be premature in

           20     entering this objection, and if so, I apologize.  But it seems

           21     to me that Mr. Stemplewicz is really impeaching his own witness,

           22     Mr. Gregg.  And since they are not able to impeach Mr. Gregg

           23     because he is the government's witness who testified under oath,

           24     it's inappropriate for the question to be whether or not you

           25     should ignore the receipts of the United States.

                                                                               227



            1              Mr. Gregg clearly testified, as was demonstrated

            2     yesterday --

            3              THE COURT:  Counsel, this is a long speaking objection.

            4              MR. LEVITAS:  Sorry, Your Honor.

            5              THE COURT:  The objection is what?

            6              MR. LEVITAS:  That this line of questioning tends to

            7     impeach the government's own witness, and that's --

            8              THE COURT:  Well, that's an interesting idea, but I'm

            9     going to overrule it until I find out what the government's

           10     witness is going to testify about.

           11              Proceed, Mr. Stemplewicz.

           12     BY MR. STEMPLEWICZ:

           13     Q.  Mr. Miller, you testified yesterday that the government

           14     targets, and I think you said again today, a $5 billion balance

           15     in the TGA.  Correct?

           16     A.  That's contained in this report of September of 2007.

           17     That's the most recent.  And the number can change from time to

           18     time.

           19     Q.  Do you happen to have any idea of the weekly amount that

           20     goes through the TGA?

           21     A.  Probably about $10 billion -- excuse me.  Weekly, multiply

           22     that by five working days, $50 billion.

           23     Q.  If it was $300 billion, that wouldn't be out of the realm of

           24     possibilities?

           25     A.  Some days, some weeks it comes in at big amounts, and

                                                                               228



            1     sometimes it comes in at little amounts, as if you will look at

            2     that chart that I think Congressman Levitas raised yesterday in

            3     asking me questions.

            4     Q.  Have you ever heard the expression CIHO?  And I don't mean

            5     the K-E-H-O-E variety, but the C-I-H-O variety.

            6     A.  No, I don't recall.

            7     Q.  What about what it means spelled out, Cash Investment Held

            8     Outside, does that term mean anything to you?

            9     A.  No, I don't recall it.

           10     Q.  If we assume that some of the Individual Indian Money was

           11     held in banks outside the Treasury, particularly in the early

           12     years of the system, would the government have any benefit from

           13     that cash?

           14     A.  Yes, it would.

           15     Q.  And how so?

           16     A.  Well, it still belongs to the government, it is still part

           17     of their reserves, it's still part of the asset base, it's still

           18     part of what they could reach if needed, in the same way that

           19     you have to have balances to avoid the possibility of overdraft.

           20     Now, you might not reach it quite as quickly, but it's still an

           21     asset base.

           22              I mean, my understanding, and part of my reading was to

           23     understand what this case was about, is that supervisors would

           24     place these monies in accounts, but the money didn't belong to

           25     the supervisor, it belonged to the United States of America.

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            1     Q.  What if the Treasury said that we don't consider cash held

            2     outside as available to us in making our borrowing decisions?

            3     Assuming that's the case, would your testimony be that the

            4     government does not benefit in that event?

            5     A.  Well, I would have to look at the context in which such a

            6     statement was made.  Because the government can always reach in

            7     and transform assets into cash.  I would just have to look at

            8     it, at what they said.

            9     Q.  Do you have any opinion or idea, based on your knowledge of

           10     government finances, that if as a result of a judgment of this

           11     court the government had to pay a sum of money to the

           12     plaintiffs, where that money would come from?

           13     A.  Do I have an idea?

           14     Q.  Yes.

           15     A.  It would come from taxpayer and also from borrowing.

           16     Q.  But what cash in the government, what fund in the government

           17     would provide the wherewithal to make that payment, do you know?

           18     A.  Well, I don't know what the name of the account would be,

           19     but the cash -- the burden for paying would ultimately be borne

           20     by taxpayer and from borrowing, which in a real sense burdens

           21     future generations, burdens taxpayers eventually.

           22     Q.  I see.  But as far as mechanically -- aside from

           23     conceptually, but mechanically, you don't know how that would be

           24     accomplished?

           25     A.  I wouldn't propose here to write the order to the federal

                                                                               230



            1     government to pay whatever the judge decides is the appropriate

            2     amount.

            3     Q.  You talked about the Troika, the Director of OMB, Secretary

            4     of Treasury, Chairman of Council of Economic Advisors.  Correct?

            5     A.  Yes.

            6     Q.  When they meet, they really don't get down into the details,

            7     the numbers, do they?

            8     A.  Well, you get into the aggregate numbers.  And the Troika

            9     meets -- I mean, a lot of the discussion is what is the

           10     employment rate likely to be, what are interest rates likely to

           11     be, what is this, that, and the other.  All of this affects

           12     total receipts to the government, the forecast of total

           13     receipts, forecast of total outlays, especially for entitlement

           14     spending, and the derivative total debt -- excuse me, the total

           15     deficit that would be run for that year.

           16              I don't want to give the impression that's all we sat

           17     and talked about.  We talked about that and we talked about

           18     other economic policy issues as well.  But in terms of talking

           19     about what you just raised, it was at a very aggregate level.

           20     We didn't sit down and talk about cash management from

           21     day to day, week to week.

           22     Q.  Right.  It was at a high level.  It was not, gee, how many

           23     billions do we need to borrow this week to have five billion in

           24     the TGA?

           25     A.  That's correct.  Though our staff did interact on those more

                                                                               231



            1     micro matters.

            2     Q.  Would you say that the debt management function that's

            3     performed by the staff is a very complicated process?

            4     A.  It's not all that complicated.  It is labor intensive,

            5     because you've got to make a lot of decisions every day; there's

            6     advisory groups that give advice, and, you know, whether you go

            7     long, go short, these kinds of things.

            8              So I don't want to oversimplify it, because it's quite

            9     labor intensive, but it's -- on the other hand, it's not beyond

           10     understanding the basic principles.

           11     Q.  I think you testified that the Financial Management Service,

           12     FMS, makes the borrowing decisions.

           13     A.  Well, they interact with the Bureau of Public Debt in

           14     deciding where to go, and they each have their advisors.  They

           15     both report to an assistant secretary for finance, for domestic

           16     finance, and up to an undersecretary and the secretary,

           17     et cetera.

           18              So, I mean, sort of a similar way of thinking; FMS sort

           19     of sets the overall parameters and the Bureau of Public Debt

           20     sort of carries it out.

           21     Q.  For example, former Commissioner Gregg, whose testimony we

           22     looked at, he was the former commissioner of FMS.  He wouldn't

           23     do the sign-off, he wouldn't be the decisionmaker on how much to

           24     borrow?

           25     A.  Well, he was a particularly good witness because he had been

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            1     head of both bureaus.  He had been head of Public Debt,

            2     commissioner of Public Debt, commissioner of FMS.

            3     Q.  But as commissioner of FMS, he did not make the decisions,

            4     or you're not sure?

            5     A.  I'm not sure of the details, but basically the two interact.

            6     Q.  So you don't know whether there's a specific committee that

            7     meets or what the number of members of that committee would be,

            8     would you?

            9     A.  I don't know those details, and it changes from

           10     administration to administration, I suspect.

           11     Q.  Would you assume that the people who make the decisions are

           12     highly qualified to do that?

           13     A.  Yes.  They're very high level professionals in Treasury, is

           14     my experience.

           15     Q.  What sort of things do they look at, would you expect, from

           16     your experience, in making the determination of what amount to

           17     borrow would be?

           18     A.  Well, what takes up the majority of their time, I would

           19     presume, is the fluctuations from day to day and how to make

           20     decisions about parking money overnight or not parking money

           21     overnight, or looking down the road a few days and having to

           22     borrow, and they issue these various bills and bonds.  I mean,

           23     it's more tactical -- what occupies their time is more tactical

           24     than strategic.

           25     Q.  Do you know what the sort of big ticket items they look at

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            1     on the receipts side would be?

            2     A.  Individual income tax returns, corporate income tax returns,

            3     excise tax returns, obviously Social Security monies withheld,

            4     and Medicare/Medicaid.

            5              MR. STEMPLEWICZ:  Could we have that exhibit again, I

            6     think it's 487, the Treasury tables?  And if we could go to the

            7     fifth page, please.

            8     BY MR. STEMPLEWICZ:

            9     Q.  All right.  We're going to try to expand the top portion,

           10     which is budget receipts, and if we could look a little bit over

           11     to the left and get that far left side in there.

           12              And you see there up on the top portion, budget

           13     receipts, and those are the kinds of categories you were talking

           14     about?

           15     A.  Yes.

           16     Q.  Now, obviously there's no category there for Individual

           17     Indian Monies.  Correct?

           18     A.  Well, I presume it comes under miscellaneous receipts down

           19     at the bottom.  There's no category for Individual Indian

           20     Monies.

           21     Q.  You're assuming it, but you don't know for sure whether it

           22     falls under miscellaneous receipts?

           23     A.  I'm assuming that.  Yes, go ahead.

           24     Q.  Do you know what phrase is used to describe the United

           25     States Treasury's debt management strategy?  I mean, you've

                                                                               234



            1     given some description about the kinds of considerations that

            2     are employed in making decisions, but have you ever heard of a

            3     specific phrase that's used to describe that process?

            4     A.  I don't recall a specific phrase.

            5     Q.  Do you ever read the Federal Reserve Bank of New York's

            6     Economic Policy Review?

            7     A.  I have read pieces from it in the past, but very, very

            8     sparse review of that.

            9     Q.  All right.  But you didn't do any research into that debt

           10     management strategy before testifying in this case.  Correct?

           11     A.  No.  That's correct.  Excuse me.

           12     Q.  Do you know whether the government ever borrows more than it

           13     has to borrow to meet its cash needs?

           14     A.  I'm sure it does in an ex post sense; that is to say that it

           15     may borrow money and then it finds out that revenues come in

           16     greater than anticipated, outlays come in less than anticipated.

           17     So after the fact you would say, well, we borrowed more than we

           18     had to.

           19              But ex ante, that is to say at the forecast level, I

           20     would be surprised if the government purposely borrowed more

           21     than it needed.

           22     Q.  Well, let's take April, when income tax receipts are coming

           23     in, and the government -- let's assume that is the most flush

           24     with cash throughout the year that the government is.  And

           25     further assume that the government does continue to borrow even

                                                                               235



            1     though it has very high levels of cash.

            2              Do you have any concept of why the government would do

            3     that?

            4     A.  Well, I mean, the government may make -- could make an

            5     informed decision that this is a good time to go in the market

            6     and secure -- to borrow.  Even though we're flush right now, we

            7     may place some money in overnight.  It's conceivable,

            8     conceivable.  I haven't reviewed the data, that you might even

            9     find situations where the short-term return to excess cash

           10     balances by parking them overnight exceeds the cost of borrowing

           11     at the margin.  And in that situation it would make sense to go

           12     ahead and borrow.

           13              But that would be a fact-based question, or to answer

           14     that question I would have to know facts.

           15     Q.  Conceivably one of the reasons could be that there's a

           16     bargain to be had here, and it's better to pay a little bit now

           17     to save a lot later.  Is that reasonable to hypothesize?

           18     A.  I think there would be rare instances.  I mean, such

           19     instances would be -- I responded to your question by saying

           20     yes, I could see a situation in which that might occur.  It's

           21     probably fairly rare that that kind of situation would occur,

           22     but it could occur.

           23     Q.  When you were director of OMB, did you have any interface

           24     with major money market centers, the big banks, Bank of America,

           25     Chase, and those sorts who buy government securities?

                                                                               236



            1     A.  I did not make presentations, to my recollection.  I made a

            2     lot of presentations where people who are in that market were

            3     there, but I didn't go hand in hand to such brokers and people

            4     who purchased government debt, plead with them or anything like

            5     that.

            6     Q.  Have you ever looked into the expectations of these money

            7     market centers in regard to the debt issuances of the

            8     United States Treasury?

            9     A.  Sir, in my tenure as budget director and my many years of

           10     teaching economics, I read a lot of things like that.  But I

           11     don't recall and I don't hold myself out as an expert on

           12     expectations about lending and about government debt finance.

           13     Q.  Is there any bigger borrower in the United States in the

           14     money markets than the United States Treasury?

           15     A.  No.

           16     Q.  And that's pretty much by a long shot, isn't it?

           17     A.  Yes.

           18     Q.  Do you know what minimum increment the government borrows

           19     at?

           20     A.  I don't know the minimum increment.

           21     Q.  I mean, would they say, we're not getting this 100 million

           22     this year from the individual Indians, so we have to go out and

           23     borrow another 100 million?  They wouldn't do that, as far as

           24     you know, or you don't know?

           25     A.  Implicitly, yes.  I mean, they don't write down, hey, we got

                                                                               237



            1     100 million from the Indians this year so we don't go borrow

            2     that.  I mean, they know what cash is on hand in the TGA, and

            3     they make decisions about borrowing based on expectations about

            4     outlays and avoiding overdraft, having overdraft protection and

            5     so forth.

            6     Q.  On a weekly basis, that 100 million that's in the table we

            7     looked at would be roughly two million.  Correct?

            8     A.  Pardon?

            9     Q.  On a weekly basis, that annual 100 million of net receipts

           10     comes to about two million, more or less?

           11     A.  Yeah, 100 divided by 56.

           12     Q.  So to the extent there's an impact, these money managers

           13     would say, well, we have another two million coming in from IIM,

           14     so we don't need to borrow X amount, you wouldn't know how that

           15     comes into the decision-making process?

           16     A.  I mean, it all goes in the fund, and they look at the total

           17     of the fund and expectations about outlays.  So they don't

           18     segregate out, well, here's two million and here's something we

           19     count or we don't count.

           20     Q.  What borrowing decisions, if any, were you personally

           21     involved in in your tenure as OMB director?

           22     A.  I was not engaged in the tactics and the daily borrowing

           23     decisions and marketing of securities and so forth.  That was

           24     not my role.

           25     Q.  And as I understand it, for the same reason, your knowledge

                                                                               238



            1     in this area wouldn't extend back 100 years before you were OMB

            2     director?

            3     A.  Hardly.  Nothing more than what I read.

            4     Q.  Is your opinion that you provided to the Court in your

            5     testimony yesterday based on anything other than an endorsement

            6     of former Commissioner Gregg's testimony from 1999?

            7     A.  I'm not sure I understand the question.  I read

            8     Commissioner Gregg's testimony, I've read the GAO reports and

            9     others.  I draw on my own personal experience at OMB, my own

           10     personal experience when I was on the Council of Economic

           11     Advisors, my own personal experience when I was teaching

           12     economics at university level and graduate students and so

           13     forth.  I mean, my expertise is broader than just having read

           14     Commissioner Gregg's testimony.

           15     Q.  Do you remember in Commissioner Gregg's testimony that he

           16     described the Individual Indian Monies as a deposit fund?

           17     A.  I think he used that term at some point.

           18     Q.  Okay.  Do you have any idea of -- I think you say one of the

           19     things you looked at in preparing your testimony was OMB

           20     Circular A-11, that thousand-or-so-page publication?

           21     A.  Right.

           22     Q.  Do you recall anything in there about deposit funds and how

           23     they're defined?

           24     A.  Yes.  And I'm not sure that Commissioner Gregg didn't

           25     misspeak there, or whether he was using the term in a generic

                                                                               239



            1     way.  I just know the money goes into the TGA, and what they

            2     look at is the base.

            3              It's like trying to distinguish between a checking

            4     account that belongs to Mary Smith and one that belongs to

            5     Sam Jones.  On the other side of the teller's window, the money

            6     is all fungible and intermingled.

            7              MR. STEMPLEWICZ:  Could we have Circular A-11?

            8              Your Honor, the exhibit next in order is an excerpt.

            9     It's Section 20, actually, from OMB Circular A-11 that

           10     Mr. Miller testified about.

           11     BY MR. STEMPLEWICZ:

           12     Q.  I'll represent to you this is not the entire thousand-page

           13     document.

           14     A.  Okay.

           15     Q.  But we don't need the rest of it, at least right now.

           16              MR. STEMPLEWICZ:  Could we go to page 39, please.

           17     BY MR. STEMPLEWICZ:

           18     Q.  You see the highlighted part there, the discussion of

           19     deposit funds.  You see where it says, "You use deposit funds to

           20     account for monies that do not belong to the government.  This

           21     includes monies held temporarily by the government until

           22     ownership is determined, such as earnest money paid by bidders

           23     for mineral leases, or held by the government as an agent for

           24     others."  Do you see that?

           25     A.  Yes.

                                                                               240



            1     Q.  And a little further down it says, about the fifth line

            2     down, "We exclude deposit fund transactions, as such, from the

            3     budget totals because the funds are not owned by the

            4     government."

            5     A.  Yes, I see that.

            6     Q.  You see that.

            7              MR. STEMPLEWICZ:  If we could go back two pages to 37.

            8     I've thrown a little curve to our technical fellow here, so it

            9     may take a minute or so.

           10     BY MR. STEMPLEWICZ:

           11     Q.  But if you recall, the deposit fund that Commissioner

           12     Gregg -- former Commissioner Gregg testified about was 14X-6039.

           13     The last four digits were 6039.  And up on the screen is another

           14     page from Circular A-11 -- and by the way, these circulars were

           15     published under the organization that you headed.  You have some

           16     at least general knowledge of what subjects they covered.

           17              And obviously to get into all the details after many

           18     years, I don't expect you to know, but certainly you can look at

           19     the bottom category there of deposit funds, and you see where it

           20     says the 6000 through 6999 series is used to record deposits and

           21     disbursements of monies not owned by the government or not

           22     donated to the government.

           23              So wouldn't that seem to indicate that if 14X-6039 is

           24     the account we're looking at here, that it is, in fact, as

           25     former Commissioner Gregg said, a deposit fund?

                                                                               241



            1              MR. LEVITAS:  Your Honor, I'm going to renew the

            2     objection I made before about impeaching his own witness.

            3              MR. STEMPLEWICZ:  Your Honor, I'm not impeaching the

            4     witness, I'm just confirming what he said.

            5              MR. LEVITAS:  If I can complete my statement and

            6     objection.  Commissioner Gregg testified that --

            7              MR. KIRSCHMAN:  Your Honor, the record speaks for

            8     itself.  This is a speaking objection.

            9              THE COURT:  Wait, wait, wait.  This is not a tag team

           10     here.  Mr. Stemplewicz will speak for the government while he's

           11     up.

           12              MR. LEVITAS:  Your Honor, Mr. Gregg testified that the

           13     IIM money, the deposit fund which Dr. Miller says may have been

           14     misidentified, is part of the Treasury, and goes into the

           15     general account, and it's not treated any differently from any

           16     of the other 1,200 accounts in the Treasury General Account.

           17              And trying to suggest that it is a different -- being

           18     treated differently goes directly against what

           19     Commissioner Gregg testified to.

           20              THE COURT:  Well, Commissioner Gregg's testimony is not

           21     before me.  I don't know whether he's impeaching or disagreeing

           22     or undercutting or whatever he's doing, but your objection is

           23     overruled.

           24              Proceed, Mr. Stemplewicz.

           25     BY MR. STEMPLEWICZ:

                                                                               242



            1     Q.  Picking up on this idea of the budget that was mentioned in

            2     your testimony yesterday, and also was mentioned in the

            3     definition of deposit funds, you said that one of your major

            4     roles as director of OMB was to translate the President's policy

            5     into a budget.  Does that pretty much sum it up?

            6     A.  Yes.

            7     Q.  In doing so, did you rely upon data provided by the Treasury

            8     Department?

            9     A.  Yes.  And other agencies as well.

           10     Q.  Did you have any reason to question the reliability of the

           11     data you received from Treasury?

           12     A.  No specific reason to question any specific data.  I would

           13     question analyses from time to time, but Treasury is very good

           14     about its data, from my experience at the time.

           15     Q.  Do you know what the term "operating cash" refers to in

           16     government financial parlance?

           17     A.  There's so many definitions, and so many of these

           18     definitions are loosey-goosey and used by different people to

           19     mean different things.  I wouldn't want to comment on that.

           20     Q.  What was your role as OMB director with regard to

           21     legislation?  How did you interface with the Congress in that

           22     regard?

           23     A.  Well, at the time, which I understand is not the prevalent

           24     mode or not the exact same mode today, the statement of

           25     administration positions on legislation all went through my

                                                                               243



            1     hands; that is to say, the OMB director's signed letters, they

            2     were signed by an auto pen, but basically sending up the

            3     Administration's position on major legislation, whether it was

            4     to a subcommittee, a full committee, to either house or to the

            5     joint committee or whatever, votes on the floor of each house.

            6     So there was that interaction.

            7              There was interaction especially with the budget

            8     committee and appropriations committee, and the Ways and Means

            9     of the House Finance Committee in the Senate, where I went up

           10     and my associates went up and met with members of Congress and

           11     with their staffs trying to work out details of budget matters

           12     and appropriations and changes in these so-called mandatory

           13     spending programs, and also in taxes.

           14     Q.  Aside from budget type legislation, other kinds of

           15     legislation, would you be concerned in your role as OMB director

           16     that such legislation was consistent with the policies of the

           17     Administration?

           18     A.  Oh, yes.  I mean, our goal was to secure legislation

           19     comporting with the President 's policies.  From time to time we

           20     would recognize that some policy the President was pursuing

           21     would not sell on Capitol Hill, so we would compromise or we

           22     would take a different approach or something like that.  We had

           23     authority to make those initiatives.  Cabinet members, the

           24     Secretary of Treasury in particular, especially on the tax side,

           25     we would try to negotiate those matters out.

                                                                               244



            1     Q.  And if some proposed legislation emanated from a Congress

            2     rather than the Administration, again, this would be a policy of

            3     the Congress that's being proposed to be enacted into law.

            4     Correct?

            5     A.  Yes.

            6     Q.  So there would be sort of this confluence of legislative

            7     policy, executive policy.  Correct?

            8     A.  Well, let me see if I can put it in my words.  The President

            9     would propose legislation, sometimes explicitly, most of the

           10     time implicitly, in the budget proposals that he sent to the

           11     Congress at the first of every year for the fiscal year

           12     beginning October 1st of that year, and then Congress -- you

           13     know, members of Congress would introduce bills.  And those were

           14     typically ignored unless the relevant committee took them up and

           15     looked like they might move forward on some legislation.

           16              And at that point the Administration would be usually

           17     asked for its views, members of the committee or the chairman,

           18     ranking member of the committee would ask the President for the

           19     Administration's views, or ask the budget director or ask the

           20     Secretary of Commerce or whomever it might have dealt with most

           21     specifically.  But even those would go through OMB to coordinate

           22     the Administration's views on proposed legislation.

           23     Q.  Now, are you familiar with the 1994 American Indian Trust

           24     Fund Management Reform Act?

           25     A.  I read something about it.  I am not an expert on that act.

                                                                               245



            1     Q.  That was not during your tenure.  Correct?

            2     A.  That's correct.

            3     Q.  You were sitting in the courtroom yesterday when some

            4     provisions of that act were put up on the screen dealing with

            5     the requirement in that act to invest Individual Indian Monies?

            6     A.  I recall something to that effect.  I did not have my

            7     glasses, sir, with me, and I couldn't read what was on the

            8     screen.

            9     Q.  Well, how about in hearing what was said by

           10     Professor Laycock in regard to Professor Langbein's testimony,

           11     when he discussed statutes as being in effect the trust

           12     instrument for the Indian Trust?  Do you recall hearing that?

           13     A.  I recall discussion about legal principles on which I would

           14     not opine.

           15     Q.  Now, based on the experience you had as OMB director, what

           16     would you expect the kinds of considerations would be to go into

           17     whether the President would agree to sign legislation requiring

           18     the Secretary of the Interior to invest Individual Indian

           19     Monies?  Any ideas, based on your experience, how that would

           20     proceed?

           21     A.  Well, let me not comment on this particular piece of

           22     legislation, but generically, if the legislation is of really --

           23     of key importance to the President, it may be something

           24     relatively small in the scope of things but something the

           25     President is particularly interested in; it may be something

                                                                               246



            1     that has big money effects, it may be something that has effects

            2     down the road.  For whatever reason the President might have

            3     particular interest in it, the Administration's policy is

            4     whatever the President says.

            5              On the other hand, if it's an issue which doesn't rise

            6     to the level of the President's direct personal involvement,

            7     there will be views expressed by the various agencies, and OMB's

            8     role was at that time -- not necessarily now.  It's a little bit

            9     different, I understand.  But at that time was to get the

           10     parties together and discuss the issues and resolve them in some

           11     way.

           12              And if they couldn't be resolved, to raise it to a

           13     higher level; that is, typically it would be the Economic Policy

           14     Council, which was a group of cabinet officers, or the Domestic

           15     Policy Council, or the National Security Council for discussion

           16     and resolution.  And if there was a lack of resolution there, or

           17     very strong views to the contrary, raise it directly with the

           18     President.

           19     Q.  Just a few final thoughts here, Mr. Miller.  Assume that a

           20     superintendent of an agency, of the Bureau of Indian Affairs,

           21     decided that it would be a good idea to pay interest on

           22     Individual Indian Money that's held, and started doing that,

           23     started cutting checks to that effect.  Without legislation,

           24     would that individual be authorized to do that?

           25     A.  Well, I don't think an agency head could do that unless

                                                                               247



            1     there were authorizing legislation of some kind.  But I'm not --

            2     I don't know what the law is, I don't know what the relevant

            3     statutes are, so -- but just generically, no one in the federal

            4     government is empowered to write checks to people unless they

            5     have authority of some kind.

            6              MR. STEMPLEWICZ:  No further questions, Your Honor.

            7              MR. LEVITAS:  Your Honor, I have some questions on

            8     redirect.

            9              THE COURT:  All right, sir.

           10                          REDIRECT EXAMINATION

           11     BY MR. LEVITAS:

           12     Q.  First of all, Dr. Miller, I wanted to follow up on a few

           13     specific points that were brought out in your discussion just

           14     now.  One of them relates to questions about the 10-year

           15     Treasury bill.  Do you know whether the interest rate on the

           16     10-year Treasury bill is considered at the high end or the low

           17     end of the spectrum of interest-bearing securities?

           18     A.  It tends to be more in the middle.  You have a so-called

           19     yield curve; that is, the short run versus long run, et cetera,

           20     sometimes it goes up this way, sometimes it goes this way,

           21     talking about being regular, inverted, or whatever.  But for a

           22     long period of time, a 10-year bond rate is a good approximation

           23     of the cost of borrowing.

           24     Q.  Would you consider the 10-year bond rate a reasonable

           25     measure to assume in the type of calculation that you were

                                                                               248



            1     looking at?

            2     A.  Yes.

            3     Q.  The questions relating to deposit of funds in commercial

            4     banks, of IIM funds in commercial banks, were those funds

            5     available to the Treasury Department or did they belong to some

            6     third party?

            7     A.  Well, they belong -- I mean, I guess it would be a case of

            8     fraud if they were claimed by an individual rather than the

            9     federal government, because they're not individuals' money,

           10     they're federal government's money.

           11     Q.  So they are, then, available, when wanted, by the Treasury

           12     Department?

           13     A.  Yes.

           14     Q.  Let me ask you another question.  You were asked about the

           15     appropriation necessary to expend funds from the Treasury, and

           16     you commented that there are some appropriations which are

           17     permanent in nature.  Is that correct?

           18     A.  Yes.

           19     Q.  Are you familiar with an appropriation which is a permanent

           20     and indefinite appropriation known as the judgment fund?

           21     A.  I'm not familiar with it.  I mean, I have no expertise on

           22     that.

           23     Q.  The deposit account that was referred to, do you know

           24     whether the government has accounted for all IIM monies in the

           25     deposit account?

                                                                               249



            1     A.  I have not made a study of this.  I couldn't comment with an

            2     informed judgment about it.

            3     Q.  When Mr. Gregg, Commissioner Gregg, testified that the IIM

            4     funds which were held in the Treasury were treated no

            5     differently than any other funds in that account --

            6     A.  Right.

            7     Q.  -- what does that mean?

            8     A.  Well, I mean, there's a constant confusion over what is an

            9     account and what is money.  Okay?  It's like I have a deposit in

           10     the PNC bank, you have a deposit in the PNC bank, and we keep

           11     talking about our accounts, you know, but the money behind the

           12     teller's window is fungible.

           13              So Commissioner Gregg, when he talked about maybe the

           14     trust account, he's talking about whose name is on this account,

           15     but the money is behind the teller's window and it's all

           16     fungible.  It's all there, it's all accessible, it's all what

           17     the government takes into account in deciding -- making

           18     borrowing decisions.

           19              MR. LEVITAS:  I would ask that the final monthly

           20     Treasury statement be displayed, please, that Mr. Stemplewicz

           21     had asked us to look at.  And would you go to page 30 in that

           22     report, please.

           23     BY MR. LEVITAS:

           24     Q.  And if you would look at that, Dr. Miller, and in particular

           25     the left-hand column called receipts and the items that are

                                                                               250



            1     included in those calculations, you see where there are a list

            2     of government trust funds identified?

            3     A.  Yes, sir.

            4     Q.  All right.  And would you look down to the last item in that

            5     listing of the funds identified there, all other trusts?

            6     A.  Yes, sir.

            7     Q.  All other trusts?

            8     A.  Yes, sir.

            9     Q.  Now, do you know one way or the other whether that includes

           10     the IIM trust funds as well?

           11     A.  No, I do not.

           12     Q.  And the fact that the IIM trust funds are not otherwise

           13     identified in that list does not mean it is not included in that

           14     last category?

           15     A.  Absolutely.

           16     Q.  Okay.  Now, again, I want to get back to what you testified

           17     to yesterday and what you agreed with in Commissioner Gregg's

           18     testimony, that funds collected by the government on behalf of

           19     the IIM Trust beneficiaries which were not otherwise disbursed,

           20     and remain in the Treasury, constitutes a significant and

           21     quantifiable benefit to the government.

           22     A.  That's correct.

           23     Q.  And that is still your testimony?

           24     A.  It is.

           25              MR. LEVITAS:  Thank you, Your Honor.  I have no further

                                                                               251



            1     questions.

            2              THE COURT:  Dr. Miller, just to make sure that I

            3     understand some of your testimony, the last question and answer

            4     summarizes, it seems to me, your testimony, which is essentially

            5     that any money that has not been disbursed to Individual Indian

            6     Money accountholders is in the TGA and is a benefit to the

            7     government, and the methodology applied by the plaintiffs of

            8     applying an interest rate to it that the government would have

            9     had to borrow money is a proper methodology.  Right?

           10              THE WITNESS:  That's correct, sir.

           11              THE COURT:  Okay.  But you are not sure and don't know

           12     whether investments made with IIM funds, if any, are what one of

           13     the lawyers, I guess Mr. Stemplewicz, called free-roaming cash,

           14     you don't know if that money is in the TGA and should be used,

           15     should be calculated the same way?

           16              THE WITNESS:  Well, sir, my understanding is that the

           17     monies were either put directly in the TGA or they were in

           18     commercial banks, but they were still owned by the federal

           19     government and still accessible by the federal government.  And

           20     because of that, they would be considered in the decision to

           21     borrow, and for that reason, monies withheld, whether they're in

           22     the -- and I don't know how much was held in commercial banks as

           23     opposed to the TGA, but monies held in commercial banks, like

           24     monies directly in Treasury's TGA, would be considered in

           25     decisions about borrowing.

                                                                               252



            1              And so in either case, the money would be of benefit to

            2     the federal government.

            3              THE COURT:  And is it your testimony that money that is

            4     on deposit in commercial banks, which you say is available to

            5     the government when it wants it, is in fact taken into account

            6     when the day-to-day borrowing decisions are made?

            7              THE WITNESS:  I believe so.

            8              THE COURT:  What is the basis of that belief?

            9              THE WITNESS:  Because the federal government could pull

           10     those funds back into the TGA to cover checks that it is

           11     issuing.

           12              THE COURT:  Well, let's assume that it could.  My

           13     question to you is whether you know as a matter of fact, either

           14     by your own personal knowledge or because of your expertise,

           15     that when the government makes those day-to-day borrowing

           16     decisions that you've been talking about, they in fact do

           17     include in the calculus money that is on deposit in commercial

           18     banks.

           19              THE WITNESS:  Good question, judge.  I do not have that

           20     knowledge, personal knowledge of that.  It seems very reasonable

           21     that they would be considered, but I do not have such personal

           22     knowledge.

           23              THE COURT:  All right.  And the same basic question

           24     applies to this discussion of deposit funds that we've had.  You

           25     say there's a difference between funds and accounts.  Do you

                                                                               253



            1     know, either of your own personal knowledge or based on your

            2     expertise, that when the government makes those day-to-day

            3     borrowing decisions that you're talking about, that in fact they

            4     include money that is in deposit funds like this 14X-6039 when

            5     they're deciding how much money they have on hand?

            6              THE WITNESS:  I haven't -- Your Honor, I haven't talked

            7     with the people who make these day-to-day decisions.  I haven't

            8     been involved with the tactics, as I've described.  I was more

            9     at a strategic level.

           10              THE COURT:  But again, it sounds reasonable?

           11              THE WITNESS:  It sounds very reasonable.  In fact,

           12     monies that come in, the people who are looking and making these

           13     daily decisions recognize, well, you've got to pay Social

           14     Security checks -- I mean, a lot of the monies that come in in a

           15     sense are owned by other people, or they're already spoken for,

           16     and so you're looking at this total volume of funds that are

           17     available and making the decisions about how much you need to

           18     borrow.  I mean, they're day-to-day decisions about how much to

           19     borrow, and if you have extra, then you don't have to borrow

           20     that.

           21              THE COURT:  It would be fair to say, then, Dr. Miller,

           22     that your testimony is sound theoretically, it's sound

           23     economics, it's sound common sense, but you don't have any

           24     personal knowledge of the mechanics of how these day-to-day

           25     decisions are made?

                                                                               254



            1              THE WITNESS:  I do not have such personal knowledge,

            2     no.

            3              THE COURT:  Thank you, sir.

            4              MR. STEMPLEWICZ:  I have a very short recross based on

            5     Mr. Levitas' questions.

            6              Could we please go back to Circular A-11?  If we could

            7     go again to page 39, where we were talking about deposit funds.

            8                           RECROSS-EXAMINATION

            9     BY MR. STEMPLEWICZ:

           10     Q.  You remember, Dr. Miller, when we talked about deposit funds

           11     in this definition.  Now, if we went back one page to page 38 --

           12              MR. STEMPLEWICZ:  And by the way, Your Honor, this will

           13     be Defense Exhibit 483.

           14     BY MR. STEMPLEWICZ:

           15     Q.  You see down there at the bottom, trust funds is defined?

           16     A.  Well, there's a heading that says "trust funds."

           17     Q.  Right.  Now, would you think that something could be both a

           18     trust fund and a deposit fund, or you don't know?

           19     A.  They're probably categorized differently, yes, whether it's

           20     one or the other.

           21     Q.  And the table that Mr. Levitas showed you from here, I think

           22     it was Table 8 from the Treasury monthly statement, talked about

           23     trust funds, not deposit funds.  Correct?

           24     A.  I don't recall.  I accept, subject to check, although I know

           25     these terms, "trust funds," are used very generically as well as

                                                                               255



            1     in very specific ways.

            2     Q.  All right.

            3              MR. STEMPLEWICZ:  No further questions, Your Honor.

            4              I'm sorry, Your Honor, I misspoke.  This is not 483,

            5     this is already previously marked as 466.  And we would move for

            6     the admission at this time of Defendant's Exhibit 466, which is

            7     Circular A-11, and Defendant's Exhibit 487, which is the final

            8     monthly Treasury statement.

            9              MR. LEVITAS:  Your Honor, we would like that entire

           10     document.

           11              MR. STEMPLEWICZ:  Entire Circular A-11 is available on

           12     the Internet at the OMB website.

           13              THE COURT:  That's the new world we're operating in.

           14              MR. LEVITAS:  I gather that.

           15              THE COURT:  You'll get it.

           16              (DEFENDANT Exhibits 466, 487 were moved into evidence.)

           17              MR. LEVITAS:  Your Honor, I have one last question in

           18     light of a question on recross.

           19              THE COURT:  All right.  Go ahead.

           20                       FURTHER REDIRECT EXAMINATION

           21     BY MR. LEVITAS:

           22     Q.  I would request that the testimony of Commissioner Gregg be

           23     displayed, and page 3310.

           24              THE COURT:  Who are you requesting that of?

           25              MR. LEVITAS:  Antonio.

                                                                               256



            1              THE COURT:  Then I think it will probably happen.

            2              MR. LEVITAS:  I hope so.

            3     BY MR. LEVITAS:

            4     Q.  Now, Dr. Miller, let's see, 3310, lines eight through 24.

            5     Based on your reading of Commissioner Gregg's testimony, does it

            6     appear that the deposit fund account which he has referred to is

            7     any different from any of the other accounts held by the

            8     Treasury?

            9     A.  No, he's saying --

           10              MR. STEMPLEWICZ:  Objection.  Speculation.

           11              THE COURT:  Yeah, I'm not sure that Dr. Miller's

           12     analysis of somebody else's testimony is of much help to me,

           13     counsel.  I mean, the other testimony is what it is, but I --

           14              MR. LEVITAS:  I wanted to make sure that Dr. Miller

           15     agreed with the conclusion that Commissioner Gregg reached,

           16     because Commissioner Gregg says there's nothing unusual about

           17     these deposit funds account; they're treated the same way in the

           18     Treasury as any other account.  If he doesn't agree with that,

           19     then I would like to know it.  If he does, I would like to know

           20     it.

           21              THE COURT:  I think he just told me that he doesn't

           22     know mechanically how these deposit accounts are used.  If you

           23     want to pursue that question, you can, but it seems to me he's

           24     already basically disclaimed expertise on the subject.

           25              THE WITNESS:  Your Honor, with due respect, I think I

                                                                               257



            1     do have some confidence that the money goes into the Treasury,

            2     it's labeled this account.  But it's like, again, at your

            3     commercial bank you have an account, but the money goes in the

            4     back and it's commingled.  I think that's what he's saying

            5     there, I think.

            6              THE COURT:  And you think that what he's saying is

            7     correct?

            8              THE WITNESS:  I do.

            9              THE COURT:  But you still don't have any personal

           10     knowledge of exactly how the borrowing decisions are made, and

           11     whether the money that's in these accounts are used when the

           12     borrowing decisions are made?

           13              THE WITNESS:  Your Honor, I haven't been in that office

           14     and observed the meetings that take place, the descriptions.  I

           15     have recalled from being at OMB, consistent with things that I

           16     have read in preparation for this trial, and so it's all

           17     consistent with that, but I have not sat in such tactical

           18     meetings and participated.

           19              THE COURT:  Can you answer this question, which also

           20     comes from a sort of high level of generality about this

           21     process?  You're talking about the day-to-day borrowing

           22     decisions of the Treasury Department.  Right?

           23              THE WITNESS:  Well, sir --

           24              THE COURT:  Every day somebody -- I mean, and I'm sure

           25     this does happen every single day.

                                                                               258



            1              THE WITNESS:  Right.

            2              THE COURT:  Somebody looks at the situation and says,

            3     we're going to have to issue so many bonds or we're going to

            4     have to go to the market for so many dollars, and we're going to

            5     do it this Monday or next Tuesday or something like that.

            6     Right?

            7              THE WITNESS:  Uh-huh.  Yes, sir.

            8              THE COURT:  Can you tell me whether that decision is

            9     based on the amount of money that's in the pot today or on the

           10     amount of money that's in the pot today plus expected

           11     disbursements and revenues?

           12              THE WITNESS:  It's based -- I mean, a decision to go to

           13     the markets next week would be based on forecasts of what

           14     disbursements would be, what revenues would be, what the needs

           15     would be next week.  At a strategic level you're looking

           16     forward, and the further in the future that you look, the more

           17     you might characterize the policy as strategic policy rather

           18     than tactical.

           19              The persons making the decision every day are really

           20     almost going through an algorithm, a very routine kind of thing,

           21     and deciding how much to be proffered at the next offering.

           22              THE COURT:  A routine but complicated algorithm?

           23              THE WITNESS:  Yes, sir.

           24              THE COURT:  And one that nobody in this courtroom

           25     actually knows?

                                                                               259



            1              THE WITNESS:  But again, it's the difference between

            2     tactics and strategy.  The tactics are designed to meet the

            3     needs of the government, and those needs are predicated on how

            4     much -- what kind of balances the federal government should

            5     have.  That's one reason that in these publications they make

            6     the rather sweeping statement that we target $5 billion as a

            7     balance to assure -- to ensure against overdraft.  Now, that's

            8     their strategic -- how to get there is what these people do

            9     every day in making sure that they can cover that -- that the

           10     federal government maintains that kind of balance.

           11              THE COURT:  Thank you, sir.

           12              MR. LEVITAS:  Thank you, Your Honor.

           13              THE COURT:  All right, Dr. Miller.  I think that

           14     concludes your testimony.  You're excused, sir.

           15              THE WITNESS:  Thank you.

           16              MR. GINGOLD:  Your Honor, plaintiffs call Dr. Bradford

           17     Cornell.

           18                 (Oath administered by Courtroom Deputy.)

           19              MR. GINGOLD:  Your Honor, I have Dr. Cornell's CV.

           20     Would you like a hard copy?

           21              THE COURT:  Yes, please.  Hand it up.

           22              MR. GINGOLD:  Your Honor, plaintiffs are proffering

           23     Dr. Cornell as an expert in financial economics and statistics.

           24     He has a fairly lengthy CV, so I'll summarize it.

           25              His academic background is an AB from Stanford

                                                                               260



            1     University, an interdepartmental AB in physics, philosophy, and

            2     psychology.  He earned that degree in 1970 and he was phi beta

            3     kappa.  He earned an MS in statistics from Stanford in 1974, and

            4     he earned his Ph.D. in financial economics at Stanford in 1975.

            5              He is a senior consultant with CRA, and he is a

            6     visiting professor at California Institute of Technology in

            7     financial economics.

            8              He is recognized internationally as an academic in

            9     financial economics, and he is a consultant in that field.  He

           10     has been twice chairman of the finance department at UCLA, twice

           11     chairman of the Andersen School at UCLA, three-time member of

           12     the staffing and promotion committee at UCLA.

           13              He has written many books, articles, and he's provided

           14     many lectures with regard to financial economics, and he has

           15     developed many models with regard to the issues that are

           16     associated with the Cobell case.  He has developed both damages

           17     models and restitution models.

           18              Your Honor, we would like to proffer Mr. Cornell as an

           19     expert, and he will be able to speak to the model that

           20     establishes plaintiffs' belief of the award that is appropriate

           21     under the circumstances in this case.

           22              MR. WARSHAWSKY:  We have no objection, Your Honor.

           23              THE COURT:  All right.  He's certainly well qualified.

           24     You may proceed.

           25              MR. GINGOLD:  Thank you, Your Honor.

                                                                               261



            1        (DR. BRADFORD CORNELL, PLAINTIFF witness, having been duly

            2                      sworn, testified as follows:)

            3                           DIRECT EXAMINATION

            4     BY MR. GINGOLD:

            5     Q.  Dr. Cornell, or Professor Cornell, what is the purpose of

            6     your testimony in this matter?

            7     A.  To develop a restitution economic model that can be used in

            8     conjunction with data regarding receipts and disbursements of

            9     Individual Indian Monies, to estimate the benefit to the

           10     government from holding those monies at various points in time.

           11     Q.  Have you developed models of this sort before throughout

           12     your career?

           13     A.  Yes.

           14     Q.  What have you done in that regard generally?

           15     A.  Well, I worked on matters, for example, involving the

           16     Holocaust in World War II, the Armenian Holocaust.  Those are

           17     probably the most similar, where people were damaged because

           18     funds allegedly due them were withheld by an organization; in

           19     the Holocaust case, by Swiss banks.

           20              But I've worked also on many damage models, beginning

           21     with the bankruptcy of the Washington Public Power Supply

           22     System, and most recently with the bankruptcy of Enron.

           23              MR. GINGOLD:  Plaintiffs would like to call up

           24     Plaintiffs' Exhibit 4.

           25     BY MR. GINGOLD:

                                                                               262



            1     Q.  Were you in the courtroom yesterday, Professor Cornell?

            2     A.  Yes.

            3     Q.  Did you hear Professor Laycock's testimony with respect to

            4     Plaintiffs' Exhibit 4?

            5     A.  I did.

            6     Q.  I would like you to focus on the damages and restitution

            7     notes that are identified in that exhibit.

            8              Are you familiar with the terms that are used in this

            9     particular exhibit?

           10     A.  Yes.  In my professional consulting experience, I've come

           11     across these terms, restitution and damages, on numerous

           12     occasions.

           13     Q.  And with respect to a damages model, is it your

           14     understanding that the identified items are typical of what you

           15     would include in a damages model?

           16     A.  Yes.  I think Professor Laycock did a very professional job

           17     yesterday of explaining the difference between damages and

           18     restitution, and what is constituted in each.

           19     Q.  And what is your understanding of what is constituted in a

           20     damages model?

           21              MR. WARSHAWSKY:  Objection, Your Honor, to the extent

           22     he's asking for a legal conclusion.

           23              THE COURT:  Sustained.

           24     BY MR. GINGOLD:

           25     Q.  What is your understanding of what you were asked to develop

                                                                               263



            1     with respect to the model in this case?

            2     A.  In this case I was asked to develop a model that assessed

            3     the benefits to the government of having access to Individual

            4     Indian Monies.

            5     Q.  In your assessment of the benefits to the government, did

            6     you include in the model any assessment of income never

            7     collected?

            8     A.  Income never collected that should have been collected on

            9     Indian properties?

           10     Q.  That's correct.

           11     A.  No, I did not.

           12     Q.  Did you include in the model assets sold or assets leased

           13     below market value?

           14     A.  No, I did not attempt to determine whether or not

           15     transactions had been entered into at prices that were not fair

           16     to the individual Indians.

           17     Q.  Did you include mismanaged assets?

           18     A.  No.

           19     Q.  Did you include lost or stolen funds?

           20     A.  No.

           21     Q.  Did you include the consequences of failure to enforce lease

           22     terms?

           23     A.  My effort was not to.

           24     Q.  Did you include money not paid on direct pay contracts?

           25     A.  I did not.

                                                                               264



            1     Q.  Now, what did you include, generally?

            2     A.  What did I do generally?

            3     Q.  What did you include in the model generally?

            4     A.  The key items that I included were funds collected on behalf

            5     of the individual Indian accounts, and funds -- an estimate of

            6     funds disbursed on those accounts.  Those are the two key inputs

            7     to my model, along with an interest rate to reflect the cost to

            8     the United States government of borrowing funds.

            9     Q.  Generally how did you make the determination of estimating

           10     or modeling the costs of borrowing?

           11     A.  I used the 10-year Treasury bond rate.  The United States

           12     government borrows at a variety of maturities, ranging from

           13     three-month Treasury bills up to 30-year Treasury bonds.  The

           14     average rate at which they borrow is well approximated by the

           15     10-year rate, which is in the middle of that range, and in

           16     addition, data is available on the 10-year bond rate going all

           17     the way back to 1887, where other maturities, such data is not

           18     available.

           19     Q.  Do you believe that's a reasonable rate to use?

           20     A.  Yes, I believe the 10-year Treasury bond rate is a

           21     reasonable approximation of the cost of funds, on average, to

           22     the United States government.

           23              MR. GINGOLD:  Plaintiffs would like to mark for

           24     identification Plaintiffs' Exhibit 40.

           25     BY MR. GINGOLD:

                                                                               265



            1     Q.  Professor Cornell, have you reviewed this exhibit before?

            2     A.  Yes.

            3     Q.  Can you tell the Court what it is, as you understand it?

            4     A.  I forgot the exact source.  It's a government document.  But

            5     it compares rates on an IIM trust fund with 10-year

            6     U.S. Treasury rates.

            7     Q.  I would like you to pay particular attention to the

            8     highlighted portion of this document.  And we're dealing with

            9     specific dates from September 1998 to January 1999.  Do you see

           10     that, Professor?

           11     A.  I do.

           12     Q.  Do you notice whether or not there's a difference between

           13     the IIM OST rate and the 10-year Treasury rate?

           14     A.  Yes.  The IIM OST rate is significantly higher.  And that's

           15     not surprising --

           16              MR. WARSHAWSKY:  Objection, Your Honor.  With all due

           17     respect, Professor Cornell has stated he doesn't know where this

           18     document is from.  I don't think a foundation has been laid for

           19     him to testify about it.

           20              THE COURT:  Overruled.

           21              THE WITNESS:  I just couldn't -- I think I said I

           22     couldn't remember where it was from.  At one time I did know

           23     that, and I think the footnote says.

           24     A.  But to return to what I was saying, the interest rates are

           25     substantially higher during that period on the IIM OST fund, and

                                                                               266



            1     that's not surprising.  The 10-year government bond rate is one

            2     of the lowest interest rates in the economy.  The safety,

            3     liquidity, regulatory benefits and whatnot provided by Treasury

            4     securities make them typically the lowest interest rate

            5     securities of their class in the country.

            6              MR. GINGOLD:  Your Honor, just a note in response to

            7     Mr. Warshawsky's question --

            8              THE COURT:  You don't need to.  It was an objection, I

            9     overruled it.

           10              MR. GINGOLD:  But this was filed by the government in

           11     this case.

           12     BY MR. GINGOLD:

           13     Q.  Professor Cornell, if you were creating or developing a

           14     damages model, would you use the 10-year Treasury rate or the

           15     IIM OST factor?

           16     A.  Well, if I was developing a damages model, what I should use

           17     is the rate that the Indians reasonably could have earned on

           18     their funds.  And usually, any well managed fund can earn

           19     something in excess of the Treasury rate without bearing any

           20     meaningful risk, so something like the IIM OST factor would

           21     probably be a better choice in a damages model.

           22     Q.  And why is that?

           23     A.  Because it represents what they could have earned and what

           24     they lost if they did not earn that rate.

           25     Q.  And you developed this model as a restitution model.  Is

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            1     that correct?

            2     A.  I did.

            3     Q.  And what did you use?  During this period of time, for

            4     example, September 1998 to January 1999, did you use the

            5     identifiable 10-year Treasury rates that are included in this

            6     schedule?

            7     A.  Yes.  What I'm looking for is savings to the government by

            8     avoiding borrowing, and therefore I want to use the rate at

            9     which the government borrows.  And as I said earlier, I felt a

           10     fair approximation of that was the 10-year Treasury rate.

           11     Q.  Is it your view that the difference in rate is significant?

           12     A.  During those five months that you've highlighted?

           13     Q.  Correct.

           14     A.  Well, if I were an investor, yes, I would consider 200 basis

           15     points to be an important difference.

           16     Q.  Generally over time, the rates do change, though, don't

           17     they, through your review of this particular schedule?

           18     A.  All interest rates change over time, as do these, and as

           19     does the relationship between them.

           20              MR. GINGOLD:  Plaintiffs would like to identify

           21     Exhibit 41, Attachment A, analysis of benefit to the government.

           22     BY MR. GINGOLD:

           23     Q.  Did you prepare this attachment, Professor Cornell?

           24     A.  I did.

           25     Q.  I would like you to explain it generally and then we'll go

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            1     into the details.

            2     A.  Okay.  Let me start at the highest level and explain how the

            3     mechanics work, and then we can go back and, like I say, fill in

            4     the details.

            5              MR. WARSHAWSKY:  Excuse me, Your Honor.  May we have a

            6     copy?  This is not identical to the one the plaintiffs filed in

            7     their brief.

            8     A.  Okay.  There are three key columns to understanding the

            9     mechanics of this chart, and I want to focus on those, and then

           10     I can explain the details of how you get to those.  And those

           11     three are column E, corrected revenues; column F, disbursement;

           12     and column H, the 10-year Treasury bond rate that we've spoken

           13     of.  All the other columns are fundamentally computed from those

           14     three.

           15              So let me explain how it works, starting right at the

           16     top.  If you begin in 1887, there is no accumulated benefit at

           17     that point.  The account is just starting.  In the first year,

           18     column E shows corrected revenues of .59 million and

           19     disbursements of .41.  Assuming that those numbers are correct,

           20     that is a nominal benefit to the government of .18 million.

           21     Those are funds brought in, held in accounts to the benefit of

           22     the U.S. government, and not disbursed to individual Indians,

           23     and therefore, the benefit that year is .18 million to the

           24     U.S. government.

           25              Now, there's no interest that year because that's the

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            1     first year.  So to see how the interest enters in, let's go

            2     forward.

            3              The following year, the government still has that

            4     benefit of that $180,000.  In addition, the following year there

            5     are corrected revenues of 1.09 million and corrected

            6     disbursements of .76.  The difference between those two is .33.

            7              So if we want to get the total benefit to the

            8     government through the end of year two, there are three numbers

            9     to add up, the .18 from the previous year, the .33 from this

           10     year, and what is called the accrued benefit annual, which is

           11     just the interest rate applied to the .18.

           12              So the government gets three benefits; it gets funds

           13     from last year, funds from this year, and not having to pay

           14     interest on the funds from last year.  You add those all

           15     together and you get .52.

           16              Now let me do one more year, and I think the rest

           17     follows logically.  The next year the government still has the

           18     .52, plus there are corrected revenues of 1.73 million,

           19     disbursements of .96.  That's .41.  So the three items that go

           20     into the total accumulated benefit are .41, .52, and interest of

           21     .02 on the .52, for a total accumulated benefit of 0.95.

           22              And then you can just roll the thing forward year by

           23     year, the calculation just proceeds.  And if you get to the

           24     end -- why don't we go to the last page, because there's

           25     something I need to explain.  Suppose -- and I think this

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            1     hypothetical helps you understand how the math works.  Suppose

            2     that all those differences between revenues and disbursements

            3     were just dumped into a bank account.  None of the money was

            4     taken out of the bank, it was just put in there and allowed to

            5     accumulate interest, like a savings account for a child going to

            6     college, but a very long life child.

            7              THE COURT:  Or a very dumb child.

            8              THE WITNESS:  Yeah.

            9     A.  And if that account was never invaded, and if the interest

           10     rate was about equal to the 10-year bond rate, then by 2007,

           11     that account actually would have accumulated to about

           12     $58 billion.

           13              Now, the reason I point this out, when I roll the

           14     entire thing forward, I get as the accumulated benefit at the

           15     very end $58,237,000,000, but I have to offset that with

           16     whatever is actually in the reported account, the trust balance,

           17     which is 423 million.  Why is it 423 million and not 58 billion

           18     in the trust account?

           19              The reason is that funds apparently have flowed out of

           20     that account, but they have not flowed out, as far as plaintiffs

           21     have been able to determine, to the benefit of individual

           22     Indians.  Had there been no outflows, that account would be

           23     about 58,237,000,000, there would be a one-for-one offset, there

           24     would be no benefit to the government, and the government could

           25     simply disburse that account now to individual Indians.  But the

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            1     fact that the account is so much smaller means that funds have

            2     flowed out somehow other than the disbursements that are taken

            3     account of in column E.

            4     Q.  Did you assume a disbursement rate in your model at all?

            5     A.  Well, the word "assume" is not quite right.  I did some

            6     analytical work to attempt to compute a disbursement rate; I

            7     would not, however, call it a detailed final study, but not a

            8     raw assumption, either.  It's somehow in the gray area between

            9     those two.

           10     Q.  Are you familiar with the CP&R data?

           11     A.  Yes.

           12     Q.  What is your understanding of the CP&R data?

           13     A.  Well, one of the things that plaintiffs asked for were

           14     detailed records of checks drawn on account, I think it's 4844,

           15     related to Individual Indian Monies.  And by analyzing those

           16     checks, you can get an estimate of the relationship between

           17     disbursements and revenues.

           18     Q.  In column F, you have a disbursement category.  Correct?

           19     A.  Yes.

           20     Q.  And what is the source of those disbursements?

           21     A.  Well, actually, the disbursements are a calculated number.

           22     We probably have to go back and do revenues first.  Because the

           23     disbursements are computed as 69.82 percent of revenues, based

           24     on the CP&R data that you spoke of, and the revenues in turn are

           25     calculated from other sources.

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            1     Q.  Do you know whether or not the revenues in the CP&R data

            2     have been -- is there evidence of the actual revenues -- or

            3     sorry, disbursements from the trust in the CP&R data?

            4     A.  The CP&R data does not show revenues; actually, it shows

            5     disbursements.  And it's actual checks written, and some checks

            6     not cashed, but the majority then cashed and the funds

            7     disbursed.

            8     Q.  Do you know what period of time that includes?

            9     A.  Yes.  I have an exhibit that shows the CP&R data that I

           10     analyzed, and it's, I believe, 1988 through 2002.

           11     Q.  We'll get to that in a moment.

           12              With regard to the Attachment A, however, did you use

           13     data to support your calculations in this model?

           14     A.  Yes.  I used various data sources to estimate both column E,

           15     what I've called corrective revenues, and column F, which I've

           16     referred to as disbursements.

           17     Q.  Did you have complete data for each year?

           18     A.  No.

           19     Q.  Do you recall for what particular years you had data?

           20     A.  Well, if we go back to the first page of Attachment A, what

           21     I've tried to do here to make it easier to read Attachment A is

           22     highlight in yellow a number where it came from underlying

           23     documents or data sources, and leave in white a number where

           24     there was at least a partial calculation on my part.

           25              So if we look at the revenue numbers in column B, you

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            1     can see that I have some data in the early years, and then if we

            2     page forward, then you can continue to just look at column B and

            3     see what's in yellow.  There's not much data in the middle

            4     years.

            5              Can we go one more page?  And then as we get into the

            6     later years, you'll start to see a lot more data.  If you page

            7     one more forward, you see a lot of yellows in the later years

            8     under revenues, and that comes from what's been referred to as

            9     AR-171.  But I think I need to be clear.  Apparently there's

           10     been a proliferation of AR-171s.  This is from the original

           11     October 2007 AR-171 that I was given when I began work on this

           12     assignment.

           13     Q.  Let's call up the original AR-171.  Is this the AR-171 that

           14     you're referring to and that you used in the model?

           15     A.  Yes, it is.  And if you want to foot the revenues that I

           16     have on my chart to this, they should be the revenues earned on

           17     Indian properties, not any interest paid on account balances.

           18     Because I'm taking account of the interest in my restitution

           19     model as a benefit to the government.  I can't double count it.

           20              So, for example, if you go to year 2000 and you want to

           21     foot what's on my chart, you would take the Osage QTR annuity,

           22     the judgment per capita, the Tribal IIM, and the other receipts,

           23     you add those up, and now if you go back to Attachment A and

           24     scroll forward to year 2000, the number under column B, 215.3,

           25     would be the sum of those three items that I spoke of.

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            1              And all the yellow numbers in column B are from

            2     schedule AR-171, October 2007 version, computed in that fashion.

            3     Q.  With regard to --

            4              MR. GINGOLD:  I would like to go back to the first page

            5     on Attachment A.

            6     BY MR. GINGOLD:

            7     Q.  On page one of Attachment A, highlighted in yellow in

            8     column B for revenues is a 1909 number.  Correct?

            9     A.  Yes.

           10              MR. GINGOLD:  Plaintiffs would like to identify (sic)

           11     for purposes of identification Plaintiffs' Exhibit 42.

           12     BY MR. GINGOLD:

           13     Q.  Professor Cornell, this is a report of the Commissioner of

           14     Indian Affairs to the Secretary of Interior for the fiscal year

           15     ended June 30, 1909.  Is this the report that you used for the

           16     number or figure in 1909 for revenues in Attachment A?

           17     A.  Yes.  One of the things that I had asked my staff at the

           18     beginning of this assignment was that we do all we can to find

           19     and use actual historical data.  And this is one of the

           20     documents that we were able to find showing revenue data prior

           21     to the inception of AR-171.

           22     Q.  I would like to turn your attention to a page of this

           23     document, and it's page 104, as identified in the document

           24     itself.  Do you see the highlighted figures on this page?

           25     A.  Yes.

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            1     Q.  What do they mean to you?

            2     A.  What these highlighted documents --

            3              MR. WARSHAWSKY:  Pardon me, Your Honor.  The copy you

            4     gave us didn't have all the pages.

            5              THE COURT:  It's on your screen.

            6              MR. WARSHAWSKY:  Is it just the fifth page?

            7              MR. GINGOLD:  It's just the fifth page.

            8     BY MR. GINGOLD:

            9     Q.  Go ahead, Professor.

           10     A.  What these highlighted documents show are sources of funds,

           11     IIM funds, in the year 1909.  And again, I don't want to double

           12     count interest, so I excluded.  But there were three

           13     non-interest sources of funds all shown in yellow; add those

           14     together and you get $8.9 million, or thereabouts.  And if you

           15     go back real quickly to Attachment A --

           16              MR. GINGOLD:  Page one of Attachment A.

           17     A.  You can see that 1909, the first yellow one, that foots to

           18     the 8.9.

           19              MR. GINGOLD:  Plaintiffs would like to mark for

           20     identification Exhibit 43.

           21              THE COURT:  Would you go back to the page that you were

           22     just showing us?

           23              MR. GINGOLD:  That's Attachment A?

           24              THE COURT:  Yeah, with the highlighted numbers that

           25     footed to -- no, the page from the 1909 report from the

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            1     Commissioner to the Secretary that you just showed to

            2     Professor Cornell.

            3              MR. GINGOLD:  It's Plaintiffs' Exhibit 42, page five.

            4              THE COURT:  There you go.  $12,983,000 on hand and

            5     received.  This 3,992,000 that is part of that total is money

            6     that was in the hands of disbursing officers and in bonded banks

            7     to the credit of individual Indians.

            8              How, if at all, does that amount of money fit into your

            9     calculation?  Is that part of the accumulated sum of money on

           10     which interest has been calculated for years previous to 1909 in

           11     your model?

           12              THE WITNESS:  Yes, that would represent, if you like,

           13     the equivalent to the balance in your checking account at the

           14     beginning of the year, and that would reflect income from

           15     previous years and disbursements from previous years, and any

           16     interest earned.  And then the 8.9 million reflects the receipts

           17     during that year.  So before any disbursements, the balance

           18     would be 12.98.

           19              But the only number I actually used from this data set

           20     was the receipts.

           21              THE COURT:  No, I understand that.  The only number you

           22     used was the receipts, but this 3.9 million also works its way

           23     into your calculation because it's accumulated from previous

           24     years.

           25              THE WITNESS:  It would have been accumulated from

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            1     previous years, yes.

            2              THE COURT:  And if it's in bonded banks to the credit

            3     of individual Indians, presumably it's earning interest in those

            4     banks.

            5              THE WITNESS:  I would presume so, though any data on

            6     what rate and so forth is unavailable.

            7              THE COURT:  Okay.  Go on.

            8     BY MR. GINGOLD:

            9     Q.  But Professor, to the extent you're aware of any interest,

           10     you backed the interest out of your calculations.  Correct?

           11     A.  Correct.  To the extent that there is any interest earned on

           12     the Indian funds held in the accounts, that will lead those

           13     accounts to be bigger, and ultimately lead the 423 million that

           14     I net out to be larger.  So I can't double count that interest

           15     as a receipt.

           16     Q.  And to the extent that evidence is presented that interest

           17     was earned and that it is included in these totals, you would be

           18     able to back that interest out and revise the calculation.  Is

           19     that correct?

           20     A.  Yes.

           21              MR. GINGOLD:  Plaintiffs would like to turn to

           22     Exhibit 43.

           23     BY MR. GINGOLD:

           24     Q.  This is a report of the Commissioner of Indian Affairs to

           25     the Secretary of the Interior for the fiscal year ended June 30,

                                                                               278



            1     1910.  Have you reviewed this document, Professor?

            2     A.  Yes.

            3     Q.  Is this a document that you used for your revenue

            4     information in Attachment A for 1910?

            5     A.  Yes.  My staff located references to Indian revenues in this

            6     document.

            7     Q.  I would like to turn to the fourth page of this document.

            8     Do you see the identified or the highlighted figures on this

            9     page?

           10     A.  Yes.

           11     Q.  Could you explain your understanding of what they are?

           12     A.  I interpreted all of those to be sources of receipts to

           13     Indian accounts.  So I summed them, but netted out the interest.

           14     Q.  And the interest category is approximately $176,000.  Is

           15     that correct?

           16     A.  Yes.  So the net looks like it's going to be net of the 176,

           17     about $10.4 million.  So if you go back to Attachment A, and if

           18     I'm remembering everything right, that will foot.  Yes, there it

           19     is, 1910, $10.4 million.

           20     Q.  I would like to go back to Plaintiffs' Exhibit 43, the

           21     fourth page.  If you go look immediately above the highlighted

           22     figures and you see other figures which are identified as on

           23     hand July 1, 1909, do you see that?

           24     A.  Yes.

           25     Q.  With respect to what Judge Robertson asked you as to the

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            1     previous exhibit, what is your understanding of these numbers

            2     and how are they used in your model, if they're used at all?

            3     A.  Well, that's the building up of the bank accounts in Indian

            4     names, or for the benefit of Indians.  And it's not explicitly

            5     used, but it would be part of what eventually ends up to be the

            6     current balance of 423.

            7     Q.  I would like to turn back to Attachment A, please.  Now, the

            8     next revenue number that you've identified as a source,

            9     specifically sourced data point, is for 1911.  Correct?

           10     A.  Correct.

           11              MR. GINGOLD:  Plaintiffs would like to mark for

           12     identification Exhibit 44, which is identified as reports of the

           13     Department of Interior for the fiscal year ended June 30, 1912.

           14              Your Honor, it's identified as 1912, but it covers

           15     inside of this document the fiscal year 1911.

           16     BY MR. GINGOLD:

           17     Q.  I would like you to turn your attention to the third page of

           18     this document, or page number seven of the report itself.  And

           19     there are highlighted portions of this document.  Do you see

           20     that, Professor?

           21     A.  Yes.  It's another thing my staff located.  There was 7.88

           22     million received, and 272,000 of interest earned, so I netted

           23     the interest out against the receipts to get a total revenue

           24     from the Indian properties during that year.

           25     Q.  For purposes of clarification, Professor Cornell, with

                                                                               280



            1     regard to the $272,948 in interest, do you see that?

            2     A.  Yes.

            3     Q.  Do you see the year that this refers to in that sentence?

            4     A.  1911.

            5     Q.  And at the bottom of the page, I would like to note, do you

            6     see the year that the 7,881,800 was considered to have been

            7     received?

            8     A.  Yes.

            9     Q.  And there's a balance stated.  Is that correct?

           10     A.  Yes.

           11     Q.  What year is that balance stated for?

           12     A.  Well, that was the beginning of the fiscal year 1911.

           13     Q.  Now I would like to turn back to Attachment A, please.  So

           14     does the revenue number identified in B track the plaintiffs'

           15     exhibit that we just -- Plaintiffs' Exhibit 44?

           16     A.  I believe it does, but we're on the wrong page.  You have to

           17     go back a page.

           18     Q.  Page one?

           19     A.  Well, it shows 1916 to '44.  There's 1911, 7.61.  That's

           20     7.88 minus .27.

           21     Q.  Now, the next few years in Attachment A, you do not have the

           22     revenue figures highlighted, do you?

           23     A.  No.

           24     Q.  And what is the reason for that?

           25     A.  Couldn't find any data.

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            1     Q.  You did put a data or revenue number in, though, didn't you?

            2     A.  Yes.

            3     Q.  How did you make that determination?

            4     A.  Well, all the white numbers I needed to, quote, fill in the

            5     blanks, and I worked with some statisticians at CRA to examine

            6     various methods for filling in the blanks, linear regression,

            7     nonlinear regression, logarithmic models.  And I found that

            8     simple linear interpolation between the missing points seemed to

            9     work as well as any of the more sophisticated methods, and it

           10     actually led to a smaller final number, and in that sense, I

           11     felt was conservative.

           12              So for the results that I've reported here, I've used

           13     simple linear interpolation between the missing end points.

           14     Q.  Is that a reasonable approach, under these circumstances, in

           15     your opinion?

           16     A.  I think that you have to use some meaningful statistical

           17     method for filling in the blanks, and, like I say, I looked at a

           18     large variety, and I think the simple, direct one is reasonable

           19     in light of the work that I've done.

           20     Q.  With respect to fiscal year 1915, again you have a

           21     highlighted yellow number.  Correct?

           22     A.  Yes.

           23              MR. GINGOLD:  Plaintiffs would like to mark for

           24     identification Exhibit 45.

           25     BY MR. GINGOLD:

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            1     Q.  This is identified as a report from the Commissioner of

            2     Indian Affairs in 1915, as of June 30th, 1915.  Have you

            3     reviewed this document before, Professor?

            4     A.  Yes.

            5     Q.  I would like you to take note of the highlighted portions of

            6     this report.

            7     A.  They're on a number of pages.

            8     Q.  Let's start with page one.  With regard to page one, do you

            9     see the highlighted numbers?

           10     A.  Yes.

           11     Q.  Okay.  What do they mean to you?

           12     A.  They're proceeds from land sales during that period, is the

           13     way I interpret it.

           14     Q.  Are there two different categories of land sales here?

           15     A.  Yes.

           16     Q.  What are they?

           17     A.  There are so-called non-competent sales and inherited land

           18     sales.

           19     Q.  Did you use these proceeds numbers in your model?

           20     A.  Yes.  They're two of the elements that I summed to get my

           21     final 1915 number.

           22     Q.  I would like to turn to the next page, please.  Do you see

           23     the highlighted number on this page?

           24     A.  Yes.

           25     Q.  What does this refer to?

                                                                               283



            1     A.  Income from leased land.

            2     Q.  And did you use this number in your calculation in your

            3     model?

            4     A.  I did.

            5     Q.  I would like to turn to the next page, please.  And again,

            6     there's a highlighted number on this page as well, and what is

            7     your understanding of that number?

            8     A.  Again, income from leases.  This may be, I don't recall

            9     specifically, mineral leases, but it's further lease income.

           10     Q.  I would like you to note at the top of the page, the table

           11     identifies this is grazing lands.

           12     A.  Oh, yes, okay.

           13     Q.  And did you use this income total in your calculation for

           14     fiscal year 1915?

           15     A.  I did.  I added that in.

           16     Q.  I would like to turn to the next page, please.  There are

           17     three items highlighted here, aren't there?

           18     A.  Yes.  These are royalty payments, and I think this one is

           19     related to minerals, oil and gas.

           20     Q.  Yes, that is referred to in the description at the top of

           21     the table.  Is that correct?

           22     A.  Yes.

           23     Q.  And did you use this revenue information in your calculation

           24     for 1915 in your model?

           25     A.  Yes, I summed the three yellow items.

                                                                               284



            1     Q.  I would like to turn to page two of Attachment A.  You have

            2     additional highlighted revenue numbers, don't you, Professor?

            3     A.  Yes.

            4     Q.  And the next one we have is 1916.  Is that correct?

            5     A.  Yes.

            6              MR. GINGOLD:  Plaintiffs would like to mark for

            7     identification Exhibit 46, which is a report from the

            8     Commissioner of Indian Affairs for fiscal year ended June 30,

            9     1916.

           10     BY MR. GINGOLD:

           11     Q.  Professor, on page one of Plaintiffs' Exhibit 46, do you

           12     notice specific proceeds or revenue numbers in this report?

           13     A.  Yes.  In fact, just to make following this simpler, there's

           14     five years, I believe, where we have reports, and they're all

           15     the same.  So for those five years, I think it's -- or six

           16     years, 1915 through 1920, I went through and picked out exactly

           17     the same lines.

           18              So as we walk through this, it will be similar to the

           19     one we just did.  You'll have first the land sales , then you'll

           20     have the two leases --

           21     Q.  This is on page two of Plaintiffs' Exhibit 46.  Correct?

           22     A.  Yes.  You'll have a lease income number there.

           23     Q.  And then page three of Exhibit 46?

           24     A.  You'll have another lease income.

           25     Q.  And then the last page of the exhibit?

                                                                               285



            1     A.  Is the minerals, oil and gas, with the three numbers that I

            2     summed.

            3     Q.  And then you employed all of these revenue numbers in your

            4     model for 1916.  Correct?

            5     A.  I add them up, and that's the number that will foot to

            6     revenue for 1916.

            7     Q.  So if you calculated those numbers, they would be equal to

            8     $13.61 million.  Correct?

            9     A.  Yes.

           10     Q.  With respect to 1917, did you do the same thing?

           11     A.  Exactly the same thing.

           12              MR. GINGOLD:  Your Honor, we have -- I can go through

           13     these if you like.  Let's go to Plaintiffs' 47.

           14              THE COURT:  It's your nickel, Mr. Gingold.

           15     BY MR. GINGOLD:

           16     Q.  Let's go to Plaintiffs' 47.  You see the highlighted revenue

           17     or proceeds numbers in this document, which is fiscal year

           18     January 30, 2017 (sic) document from the Commissioner of Indian

           19     Affairs?

           20     A.  I do.

           21     Q.  What do they mean to you?

           22     A.  As I just stated, we can march through this, we'll have the

           23     land sales, two leases, and then the minerals, oil and gas.  And

           24     if you sum all those highlighted numbers, you'll get the number

           25     on Attachment A.

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            1     Q.  And they're exactly what you've described, but they're

            2     different numbers, correct, for this fiscal year?

            3     A.  Yes.  Exactly the same schedule, just different numbers for

            4     the more recent years.

            5              MR. GINGOLD:  Plaintiffs would like to mark for

            6     identification --

            7     BY MR. GINGOLD:

            8     Q.  And that, Professor, is with respect to 1917, correct, in

            9     your Attachment A?

           10     A.  Excuse me?

           11     Q.  These numbers are the numbers you used --

           12     A.  Yes.

           13     Q.  -- to calculate the revenue number in Attachment A for 1917.

           14     Correct?

           15     A.  That's correct.  The sum foots to the revenue for 1917.

           16              MR. GINGOLD:  Plaintiffs would like to mark for

           17     identification Exhibit 48.

           18     BY MR. GINGOLD:

           19     Q.  This is a fiscal year ending June 30, 1918 document, a

           20     Commissioner of Indian Affairs report.  Professor, are these the

           21     same proceeds and revenue numbers for 1918, same categories that

           22     you used in your previous calculations --

           23     A.  Yes.

           24     Q.  -- for each fiscal year?

           25     A.  Exact same categories, same relation on the pages.  Add them

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            1     all up, you'll get the 1918 number.

            2     Q.  And that's on page one, page two, page three, and page four

            3     of this report.  Correct?

            4     A.  That is correct.

            5     Q.  And that number should track the number in 1918.  Correct?

            6     A.  It does.

            7     Q.  Which is $21.02 million?

            8     A.  Yes.  I checked all these last night to be sure that they

            9     did indeed foot.

           10              MR. GINGOLD:  Plaintiffs would like to mark for

           11     identification Exhibit 49.

           12     BY MR. GINGOLD:

           13     Q.  This is a Commissioner of Indian Affairs report for fiscal

           14     year ended June 30, 1949.  Professor, once again, did you use

           15     the proceeds or revenue numbers --

           16     A.  I think you said 1949.

           17     Q.  Sorry, 1919.  I'm sorry.  It's at Plaintiffs' Exhibit 49.

           18     A.  Yes.

           19     Q.  So you used these, the highlighted numbers, starting page

           20     one?

           21     A.  You know, I think that there was a number that should have

           22     been highlighted that was not, if we go back and make it a

           23     little bigger, like you did.

           24              MR. GINGOLD:  Page one, please highlight.

           25     A.  Yes.  I think the 1,224,000 under proceeds, non-competent

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            1     sales, should be highlighted.

            2     BY MR. GINGOLD:

            3     Q.  And what number is that, Professor?

            4     A.  The one they are now highlighting, that one.

            5     Q.  Okay.  And that number was included in your calculation for

            6     1919, was it not?

            7     A.  That's my recollection, yes.

            8     Q.  Let's go to the next page.  There's a highlighted number on

            9     this page under "total income."  Did you include that number --

           10     A.  Yes.

           11     Q.  -- in your calculation?

           12              I would like to go to the next page.  Once again, we

           13     have a total income category.  Do you see that?

           14     A.  I do.

           15     Q.  And once again, you included that in your calculation for

           16     1919, didn't you?

           17     A.  Yes.

           18     Q.  And finally, the next page has revenue numbers for three

           19     different categories.  Correct?

           20     A.  Yes.

           21     Q.  And did you include those numbers in your calculation for

           22     the revenue figures for 1919?

           23     A.  I did.

           24              MR. GINGOLD:  Plaintiffs would like to mark for

           25     identification Exhibit 50.  This is again a Commissioner of

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            1     Indian Affairs report for fiscal year ended June 30, 1920.

            2     A.  Yes.

            3     BY MR. GINGOLD:

            4     Q.  On page one, we have a highlighted number in total income.

            5     Do you see that?

            6     A.  Yes.

            7     Q.  Did you include that number in your calculation for the

            8     revenues for 1920?

            9     A.  Yes.

           10     Q.  The next page, total income, this is with respect to leased

           11     grazing lands.  Did you include that number in your total for

           12     your calculation of your 1920 revenues?

           13     A.  I did, yes.

           14     Q.  I would like to go to the next page.  With respect to sales

           15     of allotted lands, did you include the number under proceeds in

           16     your calculation for 1920?

           17     A.  Yeah, I believe both numbers under proceeds should be

           18     highlighted once again, so we would include the non-competent

           19     sales and the inherited land sales.

           20     Q.  And finally on this document I would like to go to the next

           21     page.  You again have three items or three proceeds identified

           22     under revenue.  Did you include those numbers in your

           23     calculation?

           24     A.  I did, yes.

           25     Q.  And once again, using these numbers should allow you to come

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            1     to the conclusion that your revenue for 1920 is $38.64 million.

            2     Is that correct?

            3     A.  Correct.

            4              MR. GINGOLD:  Plaintiffs would like to mark for

            5     identification Exhibit 51.  This is a report of the Commissioner

            6     of Indian Affairs, fiscal year ended June 30, 1923.

            7     BY MR. GINGOLD:

            8     Q.  I would like to point your attention to the next page of

            9     this document.  Do you see the highlighted numbers on this page?

           10     A.  I do.

           11     Q.  What do they mean to you?

           12     A.  Rather than the breakout, we only had the descriptive text

           13     in this year, and it shows the amount deposited in the banks,

           14     35 million, which I interpreted to be the receipts, and then it

           15     mentions interest of 1.425 million, which I took to be interest

           16     in addition.  So I did not add that in, I just used the amount

           17     deposited.

           18     Q.  And did you use the $35 million figure as the revenue figure

           19     for --

           20     A.  Let's go back.  I want to be sure.

           21     Q.  Go back to the Attachment A?

           22     A.  Yes, please.

           23     Q.  First page -- or second page?

           24     A.  Yes.  You'll see in 1923 the $35 million.

           25     Q.  And if the government presented evidence that the

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            1     $35 million included $1,425,000 dollars in interest, you would

            2     be able to back that out of your model, wouldn't you?

            3     A.  Yes.  In fact, if the government presented any detailed

            4     information on any of these numbers of revenues and

            5     disbursements, this schedule could be adjusted.

            6              MR. GINGOLD:  Plaintiffs would like to mark for

            7     identification Exhibit 52.

            8     BY MR. GINGOLD:

            9     Q.  This is a document that is identified as Institute For

           10     Government Research, the Office of Indian Affairs, and it's

           11     dated 1927.  Do you see that on the cover?

           12     A.  Yes.

           13     Q.  I would like you to go to the second page.  Do you see the

           14     highlighted portion of the sentence on the second page?

           15     A.  Yes.

           16     Q.  Do you see this is identified as fiscal year 1926?

           17     A.  I do.

           18     Q.  Now, there are receipts identified for fiscal year 1926 with

           19     regard to Individual Indian Money.  Do you see that?

           20     A.  Yes.

           21     Q.  What is that number?

           22     A.  $22.75 million.

           23     Q.  Let's go back to Attachment A, page two.  Did you use the

           24     number from Plaintiffs' Exhibit 52 to identify the number in

           25     fiscal year 1926 under revenues?

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            1     A.  Yes.  There it is, actually rounded up to 22.76.

            2              THE COURT:  And what does the disbursement column show

            3     over there?  Because what you just showed us has a --

            4              THE WITNESS:  Well, the disbursement column is actually

            5     going to be 70 percent of what I call the corrected revenues.

            6              THE COURT:  Yeah, but go back to what you just showed

            7     us.

            8              MR. GINGOLD:  Let's go back to Plaintiffs' Exhibit 52.

            9              THE COURT:  Yeah.

           10              MR. GINGOLD:  The second page.  I think the middle of

           11     the paragraph --

           12              THE COURT:  It says the disbursements totaled

           13     35 million, and you've got a number of 20 something million,

           14     which is a calculated number.

           15              THE WITNESS:  Correct.

           16              THE COURT:  So you're buying one half of this equation

           17     but not the other half.  Why?

           18              THE WITNESS:  There is very sparse and incomplete

           19     data -- are you asking him or me, Your Honor?

           20              THE COURT:  You.  You.

           21              THE WITNESS:  Very sparse and incomplete data on

           22     disbursements.  I felt that the best data I had on disbursements

           23     was the CP&R data, and I applied that throughout.

           24              But I'm sensitive to the fact that there may be a

           25     better way to do disbursements, and if there is, I'm more than

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            1     willing to go back and change my disbursement numbers to

            2     whatever is most appropriate.

            3              THE COURT:  Well, in this particular case the

            4     disbursement number is 35.4 million, and what does it show on

            5     your table?

            6              MR. GINGOLD:  Let's go back to Attachment A, page two.

            7              THE COURT:  23 million.

            8              THE WITNESS:  Correct.

            9              THE COURT:  So there's a $12 million difference there.

           10     That's pretty stark.

           11              THE WITNESS:  Well, there are other years, too, where

           12     you will see the same thing, and some years where you have this

           13     patchwork data going the other way.

           14              THE COURT:  But this disbursement column is a

           15     calculated column --

           16              THE WITNESS:  It is a calculated --

           17              THE COURT:  -- 69.8 percent?

           18              THE WITNESS:  Yes.

           19     BY MR. GINGOLD:

           20     Q.  Indeed, Professor, with regard to the other fiscal years

           21     that we've been talking about through the exhibits that you have

           22     been testifying to, and that's 1909, 1910, 1911, 1915, 1916,

           23     1917, 1918, 1919, 1920, and 1923, did you observe in those

           24     particular reports reports of disbursements?

           25     A.  Occasionally.  I can't say that there was one every year.

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            1     Q.  So is there a reason you did not use the actual reported

            2     disbursements instead of the calculated disbursements for those

            3     years?

            4     A.  Well, like I say, the disbursement data was particularly

            5     patchwork and not very clearly described, so I felt between two

            6     tough choices, I would project the CP&R data backward in time.

            7     I felt that was more reasonable, but I recognize that there

            8     could be further refinement that might be better than either

            9     simple approach.

           10     Q.  And depending on what the government presents as evidence,

           11     you can adjust your disbursement numbers up or down.  Correct?

           12     A.  Yes.  Ultimately it was explained to me that the proving up

           13     of the disbursements would be the job of the government, and the

           14     government was going to present evidence.  And when I've had a

           15     chance to see that evidence, I can respond accordingly.

           16     Q.  Let's talk about the other categories we have on

           17     Attachment A.

           18              THE COURT:  Just for interest, and as a way of trying

           19     to figure out what is the sensitivity of this model, is there

           20     any quick or easy -- is this spreadsheet loaded on anybody's

           21     computer here?  I mean, an active --

           22              THE WITNESS:  You mean like an Excel, so you can change

           23     numbers?

           24              THE COURT:  Yeah, yeah.

           25              THE WITNESS:  We can make sure that it is after lunch.

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            1              THE COURT:  I'm considering what would happen, just for

            2     the sake of interest, if you adjusted that single year

            3     disbursement number from 23 to 35 million, what would be the

            4     bottom line after 70 or 80 years?

            5              MR. GINGOLD:  Your Honor, we could do this over lunch

            6     for you and can give you a precise explanation for it.

            7              THE COURT:  I'm just interested in the sensitivity of

            8     this model, that's all.

            9              MR. GINGOLD:  My understanding, Your Honor, is that any

           10     particular year will not have a material effect on a conclusion,

           11     it's a buildup, and adjustments over a series of years could

           12     have a material effect downwards or upwards, Your Honor.

           13              THE COURT:  Okay.  Let's test that proposition over

           14     lunch.

           15              MR. GINGOLD:  We shall do that, Your Honor.

           16              THE COURT:  All right.

           17              THE WITNESS:  I can do the back of the envelope in my

           18     head, too.

           19              THE COURT:  You've got a pretty good head if you can

           20     figure that one out.

           21              MR. GINGOLD:  Your Honor, he has a very good head.

           22     BY MR. GINGOLD:

           23     Q.  Let's do that, Professor.

           24     A.  The way you would do that is it's a $12 million difference,

           25     and then you just run it forward at the compounded interest

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            1     rate.  What year is that $12 million difference?

            2              THE COURT:  1926, I think, something like that.

            3              MR. GINGOLD:  1926.

            4     A.  So you're looking at 80 years of interest at an average of

            5     about five percent.  That's going to be a 10 to 20 times factor.

            6     Let's take the upper bound and say 20 times, so 12 times 20

            7     would be 240 million.  It would reduce the final number I think

            8     by about 240 million.

            9              (Speaking from audience.)

           10              MR. WARSHAWSKY:  I don't think that person is sworn in,

           11     Your Honor.

           12              THE COURT:  He's got a different envelope he's done it

           13     on.

           14              MR. GINGOLD:  I think there's cash in that envelope,

           15     Your Honor.

           16              THE WITNESS:  We'll get the exact number after lunch.

           17              MR. GINGOLD:  Your Honor, we'll get the exact number

           18     and explain the effects that it has.

           19     BY MR. GINGOLD:

           20     Q.  I would like to turn your attention to Plaintiffs'

           21     Exhibit 53, and I would like to go to page three of

           22     Attachment A, please.

           23     A.  Okay, I'm there.

           24     Q.  You're there, we're not.

           25     A.  I'm on the cover page, I guess.

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            1     Q.  No, we're going to Attachment A again.

            2     A.  Oh, excuse me.  Okay.

            3     Q.  Page three of Attachment A.  In 1955 you've identified what

            4     number as revenues, Professor?

            5     A.  66.81 million.

            6     Q.  Let's go back to Plaintiffs' Exhibit 53.  I would like to

            7     turn to the fourth page of this exhibit.  If we can focus on the

            8     left-hand side of the page, do you see an item that's underlined

            9     on the page, Professor?

           10     A.  Yes.

           11     Q.  Do you know what that is?

           12     A.  66.81 million.  That's the total collections.

           13     Q.  And that's a total collection for fiscal year 1955.

           14     Correct?

           15     A.  Yes.

           16     Q.  Let's go back to Attachment A once more, please, and it's

           17     the third page of Attachment A.  And that number is the number

           18     you used, correct, in your revenue calculation?

           19     A.  Correct.

           20              THE COURT:  Hold it.

           21              MR. GINGOLD:  1955, Your Honor, 66.81.

           22              THE COURT:  Yeah.  And again, disbursements in that

           23     same document say something like 66 million, and here it says

           24     52 million.

           25              THE WITNESS:  Correct.  Disbursements mentioned in that

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            1     document are larger.

            2              MR. GINGOLD:  So Your Honor, we will factor that in

            3     during lunch as well.

            4              Plaintiffs would like to mark for identification

            5     Exhibit 54.  Exhibit 54 is the United States Department of

            6     Interior Official Office of Survey and Review Audit Operations.

            7     It's dated March 1969.

            8     BY MR. GINGOLD:

            9     Q.  I would like to turn your attention to the fourth page of

           10     this report.  Excuse me, before we go to the fourth page, let's

           11     go to the third page.  I would like to focus in on the middle of

           12     the third page.

           13              This confirms that this review was performed during the

           14     period June through November 1968?

           15     A.  Yes.

           16     Q.  I would like to now turn to the fourth page.  The fourth

           17     page, there's a paragraph with the number one.  Do you see that?

           18     A.  Yes.

           19     Q.  What is that?

           20     A.  $121 million.

           21     Q.  $121 million in what?  What does it represent?

           22     A.  It represents the total receipts.

           23     Q.  Let's go back to Attachment A, the third page in

           24     Attachment A.  Do you see 1968 and the revenues there,

           25     Professor?

                                                                               299



            1     A.  I do.

            2     Q.  And what number is that?

            3     A.  $121 million.

            4     Q.  Now, Professor, we now have over the next two pages or three

            5     pages of the attachment all highlighted revenue numbers.  Do you

            6     see that?

            7     A.  Those are AR-171, as I described earlier in my testimony.

            8     Q.  Let's bring back AR-171.  Could you explain, Professor, once

            9     again, how you used the information in AR-171 to calculate --

           10     A.  I summed column C, D, E, and F, which I interpreted to be

           11     revenues related to Indian lands, but excluding interest on

           12     deposits.

           13     Q.  And what is column C?

           14     A.  Column C is something called the Osage Quarterly Annuity.

           15     Q.  And what is --

           16     A.  In my Attachment A I called it Osage Government Calculated.

           17     Q.  And column D in A-171?

           18     A.  Judgment Per Capita.

           19     Q.  And column E?

           20     A.  Tribal IIM.

           21     Q.  And then F, you have Other Receipts.  Correct?

           22     A.  Correct.

           23     Q.  What does that mean?

           24     A.  Everything else I interpreted that to be, everything else

           25     the government accounted for.

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            1     Q.  And do you have any understanding of where AR-171 is

            2     sourced?

            3     A.  I knew it.  I don't remember off the top of my head.  I

            4     believe -- I can't remember if there's a footnote on this one or

            5     not.  But it came from the government.  I don't recall the

            6     precise source from which they got it.

            7     Q.  So none of the revenue numbers or disbursement numbers are

            8     numbers that are your numbers.  Correct?

            9     A.  Correct.  This is a government document.

           10     Q.  Plaintiffs would like to mark for identification Exhibit 55.

           11     Professor Cornell, what is Exhibit 55?

           12     A.  This is simply a graphical representation of the revenue

           13     data points that we've been through, the individual years that

           14     we've gone through up through 1968, I think it is, and then the

           15     AR-171 data after that.

           16     Q.  So is this actual data that you --

           17     A.  This is all the actual data.

           18     Q.  I would like to turn to the second page of this exhibit,

           19     which is identified as part of Plaintiffs' Exhibit 55,

           20     Attachment B.2.  Now, what does this reflect?  This is

           21     identified as "Annual IIM Trust Revenue, 1887 to 2007, Derived

           22     From Government Data, Missing Data Estimated Using Linear

           23     Interpolation."

           24     A.  This is a plot of the data with the blanks filled in by

           25     linear interpolation.  So to get a missing observation, it would

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            1     be the point on the blue line for any particular year.

            2              And in Attachment A, those numbers are shown without

            3     the yellow highlighting.

            4     Q.  The numbers reflected in the blue line as opposed to the red

            5     dots are reflected without the yellow highlighting.  Correct?

            6     A.  Yes.

            7     Q.  Is this a reasonable approach to estimate missing data, in

            8     your view?

            9     A.  I think it is.  Like I said before, it's consistent with

           10     more sophisticated approaches, and when you look at the plot, it

           11     seems to be largely consistent with what you would expect, given

           12     the observations that we do have.

           13              THE COURT:  Except for that big spike in the late '70s

           14     and early '80s.  Where does that come from?

           15              THE WITNESS:  You know, my guess, and it's only an

           16     educated guess, is that's the first oil boom, and you get a lot

           17     of oil revenues when the oil prices spike.  But I can't say that

           18     for sure.

           19              The linear interpolation ends where the blue line ends,

           20     and it's all government data after that.

           21              THE COURT:  After that it's all --

           22              THE WITNESS:  All actuals.

           23     BY MR. GINGOLD:

           24     Q.  So whether it's right or wrong, you took that from actual

           25     government data.  Correct?

                                                                               302



            1     A.  Yes.

            2     Q.  And to the extent there is better data proved up in this

            3     case, you can adjust it appropriately.  Is that correct?

            4     A.  Yes.

            5              MR. GINGOLD:  Plaintiffs would like to mark for

            6     identification Exhibit 56, which is identified as Attachment C,

            7     Individual Indian Trust Disbursement Calculation.

            8              THE COURT:  Can we get into that after lunch?

            9              MR. GINGOLD:  Yes, Your Honor.

           10              THE COURT:  We'll be in recess for an hour for lunch.

           11     Thank you.

           12              (Recess taken at 12:28 p.m.)

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            1                 CERTIFICATE OF OFFICIAL COURT REPORTER

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            3              I, Rebecca Stonestreet, certify that the foregoing is a

            4     correct transcript from the record of proceedings in the

            5     above-entitled matter.

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            9     _______________________________              _________

           10     SIGNATURE OF COURT REPORTER                  DATE

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