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77-526 PS 2002

INDIAN TRUST FUND ACCOUNTS

OVERSIGHT HEARING

BEFORE THE

COMMITTEE ON RESOURCES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

February 6, 2002

Serial No. 107-81

Printed for the use of the Committee on Resources

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house

or

Committee address: http://resourcescommittee.house.gov

(II)

COMMITTEE ON RESOURCES

JAMES V. HANSEN, Utah, Chairman

NICK J. RAHALL II, West Virginia, Ranking Democrat Member

Don Young, Alaska,

Vice Chairman

W.J. ‘‘Billy’’ Tauzin, Louisiana

Jim Saxton, New Jersey

Elton Gallegly, California

John J. Duncan, Jr., Tennessee

Joel Hefley, Colorado

Wayne T. Gilchrest, Maryland

Ken Calvert, California

Scott McInnis, Colorado

Richard W. Pombo, California

Barbara Cubin, Wyoming

George Radanovich, California

Walter B. Jones, Jr., North Carolina

Mac Thornberry, Texas

Chris Cannon, Utah

John E. Peterson, Pennsylvania

Bob Schaffer, Colorado

Jim Gibbons, Nevada

Mark E. Souder, Indiana

Greg Walden, Oregon

Michael K. Simpson, Idaho

Thomas G. Tancredo, Colorado

J.D. Hayworth, Arizona

C.L. ‘‘Butch’’ Otter, Idaho

Tom Osborne, Nebraska

Jeff Flake, Arizona

Dennis R. Rehberg, Montana

George Miller, California

Edward J. Markey, Massachusetts

Dale E. Kildee, Michigan

Peter A. DeFazio, Oregon

Eni F.H. Faleomavaega, American Samoa

Neil Abercrombie, Hawaii

Solomon P. Ortiz, Texas

Frank Pallone, Jr., New Jersey

Calvin M. Dooley, California

Robert A. Underwood, Guam

Adam Smith, Washington

Donna M. Christensen, Virgin Islands

Ron Kind, Wisconsin

Jay Inslee, Washington

Grace F. Napolitano, California

Tom Udall, New Mexico

Mark Udall, Colorado

Rush D. Holt, New Jersey

James P. McGovern, Massachusetts

Anibal Acevedo-Vila, Puerto Rico

Hilda L. Solis, California

Brad Carson, Oklahoma

Betty McCollum, Minnesota

Tim Stewart, Chief of Staff

Lisa Pittman, Chief Counsel/Deputy Chief of Staff

Steven T. Petersen, Deputy Chief Counsel

Michael S. Twinchek, Chief Clerk

James H. Zoia, Democrat Staff Director

Jeffrey P. Petrich, Democrat Chief Counsel

(III)

CONTENTS

Page

Hearing held on February 6, 2002 ......................................................................... 1

Statement of Members:

Christensen, Hon. Donna M., a Delegate in Congress from the

Virgin Islands, Prepared statement of ....................................................... 179

Cubin, Hon. Barbara, a Representative in Congress from the State of

Wyoming, Prepared statement of ................................................................ 179

Faleomavaega, Hon. Eni F.H., a Delegate in Congress from

American Samoa, Prepared statement of ................................................... 107

Hansen, Hon. James V., a Representative in Congress from the State

of Utah ........................................................................................................... 1

Prepared statement of ............................................................................... 2

Kildee, Hon. Dale E., a Representative in Congress from the State of

Michigan, Prepared statement of ................................................................ 179

Pallone, Hon. Frank, Jr., a Representative in Congress from the State

of New Jersey, Prepared statement of ....................................................... 181

Rahall, Hon. Nick J. II, a Representative in Congress from the State

of West Virginia ........................................................................................... 3

Prepared statement of ............................................................................... 4

Rehberg, Hon. Dennis R., a Representative in Congress from the State

of Montana, Prepared statement of ............................................................. 182

Udall, Hon. Tom, a Representative in Congress from the State of

New Mexico, Prepared statement of ........................................................... 45

Young, Hon. Don, a Representative in Congress from the State of Alaska,

Prepared statement of .................................................................................. 182

Statement of Witnesses:

Cobell, Elouise, IIM Trust Beneficiary ........................................................... 70

Prepared statement of ............................................................................... 73

Response to questions submitted for the record ..................................... 78

Gray, Donald T., Esq., Nixon Peabody LLP ................................................... 150

Prepared statement of ............................................................................... 151

Hall, Tex G., President, National Congress of American Indians ................ 124

Prepared statement of ............................................................................... 126

Jandreau, Michael, Chairman, Lower Brule Sioux Tribe ............................. 68

Prepared statement of ............................................................................... 69

Makil, Ivan, President, Salt River Pima-Maricopa Indian Community ...... 57

Prepared statement of ............................................................................... 59

Matt, D. Fred, Chairman, The Confederated Salish and Kootenai Tribes

of the Flathead Nation ................................................................................. 62

Prepared statement of ............................................................................... 64

Norton, Hon. Gale, Secretary, U.S. Department of the Interior ................... 5

Prepared statement of ............................................................................... 11

Response to questions submitted for the record ..................................... 22

Tillman, Charles O., Jr., Chairman, InterTribal Monitoring Association ... 110

Prepared statement of ............................................................................... 111

ITMA Position Statement submitted for the record ............................... 120

Windy Boy, Jonathan, President, Council of Large Land Base Tribes ........ 137

Prepared statement of ............................................................................... 138

Additional materials supplied:

Addison, Anthony A., Chairman, Northern Arapaho Business Council,

Statement submitted for the record ............................................................ 183

Addison, Anthony A., Chairman, Northern Arapaho Business Council,

Letter to the Department of the Interior submitted for the record .......... 185

Page

IV

Additional materials supplied—Continued

Anoatubby, The Honorable Bill, Governor, The Chickasaw Nation,

Statement submitted for the record ............................................................ 186

Assiniboine & Sioux Tribes, Counterproposal to Bureau of Indian Trust

Assets Management submitted for the record ............................................ 187

Berrey, John Lane, Osage Nation/Quapaw Tribe of Oklahoma, Statement

and memorandum submitted for the record ............................................... 101

Blackfeet Tribal Business Council, Letters submitted for the record .......... 82

Bradley, Carman, Chairman, Council of Energy Resource Tribes,

Statement submitted for the record ............................................................ 199

Bourland, Gregg J., Tribal Chairman, Cheyenne River Sioux Tribe,

Statement of the Great Plains Tribal Chairmen’s Association submitted

for the record ................................................................................................. 203

Hoopa Valley Tribe, Tribal Self-Governance Trust Reform Proposal

submitted for the record ............................................................................... 208

Mille Lacs Band of Ojibwe, Letter submitted for the record ........................ 218

Montana Wyoming Tribal Leaders Council, Resolution submitted for the

record ............................................................................................................. 220

Nez Perce Tribe, Statement submitted for the record ................................... 222

Slonaker, Thomas N., The Special Trustee for American Indians,

Statement submitted for the record ............................................................ 20

Tribal Chairmen’s Position Statement submitted for the record ................. 224

Tribal Council of the Northern Cheyenne Tribe, Resolution submitted

for the record ................................................................................................. 177

Windy Boy, Alvin, Sr., Chairman, The Chippewa Cree Tribe of the Rocky

Boy’s Reservation, Statement submitted for the record ............................ 228

(1)

INDIAN TRUST FUND ACCOUNTS: THE

DEPARTMENT OF THE INTERIOR’S RESTRUCTURING PROPOSAL AND THE

IMPACTS OF THE COURT ORDER CLOSING

ACCESS TO THE DEPARTMENT’S COMPUTER

SYSTEM

Wednesday, February 6, 2002

U.S. House of Representatives

Committee on Resources

Washington, DC

The Committee met, pursuant to notice, at 10 a.m., in room

1334, Longworth House Office Building, Hon. James V. Hansen

(Chairman of the Committee) presiding.

STATEMENT OF THE HON. JAMES V. HANSEN, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF UTAH

The CHAIRMAN. We appreciate you all being here today, and we

know there is great interest in what we are doing here. A lot of

folks are in the overflow room, and we apologize that we do not

have adequate room for everybody, but we just do not. We would

appreciate it if those in the hall would stand against the sides so

they do not clog the passageway. We are a little concerned about

fire problems. We thank everyone for being here.

We are going to limit the opening statements to myself and the

ranking member, and then we will go directly to the witnesses.

I would like to begin by welcoming our distinguished witnesses

and thank you all for coming. The Federal Government’s trust obligation to Native Americans and the Department of the Interior’s

management of tribal and individual Indian trust funds and assets

are both complex and important issues. I look forward to an informative and frank discussion with all of our witnesses.

The scope of this hearing is broad and is intended to provide an

overview of current developments in trust reform and challenges

facing the Federal Government and Native Americans in our trust

relationship. I expect our witnesses to discuss several issues, including the Department’s proposal to restructure the Bureau of

Indian Affairs, ideas to improve trust asset management, and the

impacts of the recent shut-down of the Department’s computer system and restriction to Internet access.

2

The CHAIRMAN. The Committee views the Government’s trust relationship with Native Americans to be a nonpartisan issue that

demands our sincere attention. There is no room for political posturing. I expect our witnesses to respond honestly to pointed and

direct questions, and I expect members to respect the good intentions and good faith of all of our witnesses.

We appreciate having Secretary Norton with us today. You have

inherited a complex and emotional situation. Although the current

administration is on the receiving end of the brunt of the blame for

inadequate trust management, previous administrations, dating

back decades, have largely ignored this problem.

I appreciate Secretary Norton’s direct involvement in efforts to

find a solution. The Committee recognizes, however, that all three

branches of the Federal Government are equally responsible for ensuring the integrity of the trust relationship. Congress has a critical role in providing funding and a meaningful direction. We look

to the Department and its Secretary to carry out and manage the

trust.

As recently noted by the court monitor in the Cobell v. Norton

litigation, the three branches of the Government are now united to

consider the creation of a long overdue trust organization to remedy past trust management, and the statement from the Court goes

accordingly: ‘‘One of the three branches of the Federal Government must

manage the creation of a new fiduciary trust organization whose

experienced trust officials must select, organize and train a nationwide trust staff and move forward as rapidly as possible at building

a new trust management system—not tinkering with a resurrected

crew and vessel—to properly house, maintain, and protect the

Indian Trust beneficiaries’ land, resources, and assets.’’ The Committee understands, however, that a resolution to the

trust management problem will not come exclusively from within

the government. We respect the need for tribal consultation and

input from other outside experts. We are here today to explore

ideas and possible solutions that will once and for all establish the

necessary business practices, procedures, policies, and resources

necessary for meaningful trust reform.

A notable American philosopher once said, ‘‘Those who do not remember the past are bound to repeat it.’’ I recognize there are no

easy answers to trust reform, but the Government must do everything possible to break the cycle of mismanagement that has existed for many years. Unless we identify a system to properly execute the Government’s trust responsibility to Native Americans,

the Department will remain at risk of investing in projects that do

not satisfy basic trust management requirements.

I appreciate you all being here, and I will now turn the time over

to the ranking member from West Virginia, the Honorable Nick

Rahall.

[The prepared statement of Chairman Hansen follows:]

Statement of The Honorable James V. Hansen, Chairman,

Committee on Resources

Good morning. I’d like to begin by welcoming our distinguished witnesses and

thank you all for coming. The federal government’s trust obligation to Native Americans and the Department of the Interior’s management of tribal and individual

3

Indian trust funds and assets are both complex and important issues. I look forward

to an informative and frank discussion with all of our witnesses.

The scope of this hearing is broad and is intended to provide an overview of current developments in trust reform and challenges facing the federal government and

Native Americans in our trust relationship. I expect our witnesses to discuss several

issues, including the Department’s proposal to restructure the Bureau of Indian Affairs, ideas to improve trust asset management, and the impacts of the recent shutdown of the Department’s computer system and restriction to internet access.

This Committee views the government’s trust relationship with Native Americans

to be a nonpartisan issue that demands our sincere attention. There is no room for

political posturing. I expect our witnesses to respond honestly to pointed and direct

questions and I expect Members to respect the good intentions and good faith of all

our witnesses.

We appreciate having Secretary Norton with us today. You have inherited a complex and emotional situation. Although the current Administration is on the receiving end of the brunt of the blame for inadequate trust management, previous Administrations dating back decades have largely ignored the problem.

I appreciate Secretary Norton’s direct involvement in efforts to find a solution.

The Committee recognizes, however, that all three branches of the federal government are equally responsible for ensuring the integrity of the trust relationship.

Congress has a critical role in providing funding and meaningful direction. We look

to the Department and its Secretary to carry out and manage the trust. As recently

noted by the Court Monitor in the Cobell v. Norton litigation, the three branches

of the government are now united to consider the creation of a long overdue trust

organization to remedy past trust mismanagement.

‘‘One of the three branches of the federal government must manage the creation of a new fiduciary trust organization whose experienced trust officials

must select, organize and train a nationwide trust staff and move forward

as rapidly as possible at building a new trust management system—not tinkering with a resurrected crew and vessel—to properly house, maintain,

and protect the Indian Trust beneficiaries’ land, resources, and assets.’’

The Committee understands, however, that a resolution to the trust management

problem will not come exclusively from within the government. We respect the need

for tribal consultation and input from other outside experts. We are here today to

explore ideas and possible solutions that will once and for all establish the necessary business practices, procedures, policies, and resources necessary for meaningful trust reform.

A notable American philosopher once said, ‘‘Those who do not remember the past

are bound to repeat it.’’ I recognize that there are no easy answers to trust reform,

but the government must do everything possible to break the cycle of mismanagement that has existed for years. Unless we identify a system to properly execute

the government’s trust responsibility to Native Americans, the Department will remain at risk of investing in projects that do not satisfy basic trust management requirements.

We will now hear from our first panel. Secretary Norton, please proceed.

STATEMENT OF THE HON. NICK RAHALL, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF WEST VIRGINIA

Mr. RAHALL. Thank you, Mr. Chairman.

I want to, first, thank you, Chairman Hansen, for honoring my

request to have today’s hearing. It is unfortunate, but true, that

through both Democratic and Republican administrations, as you

have said, Mr. Chairman, for decades, the Interior Department has

acted like the Enron of Federal agencies when it comes to managing Indian trust funds and Indian trust assets.

Over the years, countless investigative reports by the Congress,

the GAO, the Inspector General, and others have been issued on

the failure of the BIA to properly account for and manage Indian

trust funds. Congressional hearings have been held and millions of

dollars have been spent in ill-fated attempts to fix the system.

However, each administration has fumbled, with the succeeding administration recovering the ball, only to hand it off to the next with

4

that seemingly elusive goal of restoring faith and integrity into a

system yet to be achieved.

It is true that Secretary Norton is in contempt proceedings, but

I would observe that every Interior Secretary in modern times is

culpable to one extent or another to this situation. One of the reasons that I requested this hearing was to examine the Secretary’s

rather sudden and unexpected proposal at the time to form a new

agency within the Interior Department that would be vested with

all of the Indian trust fund responsibilities that are currently managed by the BIA and the Office of Special Trustee.

This plan was developed with no input from Indian tribes or account holders. It was a huge mistake, causing process to become

the issue instead of what really is the matter at hand, which is

whether each individual Indian and tribal account accurately reflects the amount of money that it should contain. But make no

mistake about it, there is pain and misery in Indian Country because of the failure in Federal trust responsibility.

Today’s hearing, hopefully, will shed additional light on how all

of the stakeholders, members of this Committee included, can

reach for a fair resolution of this matter in the near future.

As I told Deputy Secretary Steven Griles in my office last week,

we want to be a part of the solution, not the problem. At the same

time, in speaking for members on this side of the aisle, at least,

we will not stand idle if we see the rights and privileges of those

we are charged with a trust responsibility for are being trammeled.

I look forward to hearing the testimony today and, again, I thank

you, Chairman Hansen, for honoring my request for this hearing.

[The prepared statement of Mr. Rahall follows:]

Statement of The Honorable Nick J. Rahall II, a Representative in Congress

from the State of West Virginia

I would like to first thank Chairman Hansen for honoring my request for this

hearing.

It is unfortunate, but true, that through both Democrat and Republican Administrations the Interior Department has acted like the Enron of federal agencies when

it comes to managing Indian trust assets.

Over the years, countless investigative reports by the Congress, GAO, the Inspector General and others have been issued on the failure of the BIA to properly account for and manage the Indian trust funds. Congressional hearings have been

held. And millions of dollars have been spent in ill-fated attempts to fix the system.

However, each Administration has fumbled, with the succeeding Administration

recovering the ball only to hand it off to the next with that seemingly elusive goal

of restoring faith and integrity into the system yet to be achieved.

It is true that Secretary Norton is in contempt proceedings. But I would observe

that every Interior Secretary in modern times is culpable to one extent or another

for this situation.

One of the reasons I requested this hearing was to examine the Secretary’s rather

sudden and unexpected proposal at the time to form a new agency within the Interior Department that would be vested with all of the Indian trust fund responsibilities currently managed by the BIA and Office of Special Trustee.

This plan was developed with no input from Indian tribes or account holders. It

was a huge mistake, causing process to become the issue instead of what really is

the matter at hand, which is, whether each individual Indian and tribal account accurately reflects the amount of money it should contain.

For make no mistake about it, there is pain and misery in Indian Country because of the failure in federal trust responsibility.

Today’s hearing hopefully will shed additional light on how all of the stakeholders, the Members of this Committee included, can reach a fair resolution of this

matter in the near future.

5

As I told Deputy Secretary Steve Griles in my office last week, we want to be part

of the solution, not the problem. At the same time, and speaking for Members on

this side of the aisle at least, we will not stand idle if we see the rights and privileges, of those we are charged with a trust responsibility, for being trammeled.

I look forward to hearing the testimony of the witnesses.

The CHAIRMAN. Thank you, Mr. Rahall. Let met thank the Secretary for being with us, and, again, let me apologize. This isn’t the

room we normally use for a hearing of this size, but the other one

is going through a little restructuring right now, so we are just

going to have to get along.

Madam Secretary, we would appreciate it if you would come up

and take your place. And, Nancy, don’t run the clock on the Secretary, OK?

Maybe you would like to introduce who is accompanying you, and

we turn the time to you.

STATEMENT OF THE HONORABLE GALE A. NORTON,

SECRETARY OF THE INTERIOR, ACCOMPANIED BY NEAL

McCALEB, ASSISTANT SECRETARY OF INDIAN AFFAIRS AND

TOM SLONAKER, SPECIAL TRUSTEE, WASHINGTON, D.C.

Secretary NORTON. Thank you very much, Mr. Chairman and

members of the Committee. I am very pleased to join you today to

testify about our Indian trust programs.

I have submitted a written statement that I ask be incorporated

into the record.

The CHAIRMAN. Without objection.

Secretary NORTON. Thank you.

Before I begin my statement, I would like to introduce other officials of the Department of Interior who are here today. With me

is Neal McCaleb, who is the Assistant Secretary for Indian Affairs,

and Tom Slonaker, who is the Special Trustee for Native American

Trust.

Also, here in the room today, and I would also like to identify

them, is Jim Cason, who is the Associate Deputy Secretary, and he

is the one who has been working night and day to address our

Internet shutdown issues.

Ross Swimmer is here. He is the Director of the Office of Indian

Trust Transition.

Deputy Secretary Griles was planning to be here today, but he

is testifying in the Cobell litigation this morning.

I have asked Mr. McCaleb, Mr. Slonaker, Mr. Swimmer, and Mr.

Cason to remain for the balance of the testimony today because I

think it is important for us to hear the perspectives that are being

offered to the Committee and to continue our listening and understanding of this issue.

Last year, in my first hearing in front of Congress, I spoke briefly about the matter of Indian trust reform. At that time, I said, ‘‘As

the Trustee, I clearly recognize the important obligations of the Department to put in place those systems, procedures, and people to

fulfill our obligation to the trust beneficiaries, both individual

Indians and tribes.’’

However, I also emphasized that I have grave concerns about our

existing management systems. My experience of the past year has

certainly reinforced my feelings from last February.

6

The problems that we are trying to solve have been over 100

years in the making, and I would like to share something with you

today that well illustrates that. This is a newspaper front page

from the Philadelphia newspaper called The Press. One of the articles is headlined, ‘‘Indian Trust Fund Losses: Funds Alleged to

have been Abstracted from the Department of the Interior.’’ The other headline on this page says, ‘‘General Custer Killed.’’ This is from July 6th, 1876. Obviously, the issues have gone on for

a long time.

Congress has reviewed the issues of Indian trust asset management many times. As Representative Rahall pointed out, true reform has never been achieved. Many, many times we have come to

the point where Congress has examined the issues, where the Department of Interior has proposed reforms, where the tribes have

discussed the need for reform, and yet time after time after time,

decade after decade, we have failed to actually achieve reform.

I am perhaps unrealistically optimistic, but still somewhat optimistic that the time has arrived, that we have a strong interest,

from many different quarters, in seeing reform actually take place,

and that is what we are working to achieve.

Let me describe for you some of the issues that we face and why

this is such a complex issue. Trust asset management involves approximately 11 million acres held in trust or restricted status for

individual Native Americans. Forty-five million acres are held in

trust for the tribes. This is a total of 56 million acres managed by

the Department of Interior, and that amounts to the combined size

of the States of Maine, Massachusetts, Vermont, New Hampshire,

Connecticut, Rhode Island, Delaware, Maryland and the District of

Columbia.

This land produces income for about 350,000 individual Indian

owners and 315 tribal owners. Leasing and sales revenues of approximately $300 million per year are distributed to more than

225,000 open individual Indian money accounts and revenue of approximately $800 million per year is distributed to the 1,400 tribal

accounts.

Our management of lands for individual Indians dates back to

1887. At that time, Congress passed the General Allotment Act,

which allocated tribal lands to individual members of tribes in parcels of 80 or 160 acres. The expectation of Congress was that this

would continue for no more than 25 years, with that land being

held in trust for the individual Indians. However, Congress kept

extending that time period and ultimately made that into a permanent status.

By the 1930’s, it was widely accepted that the General Allotment

Act had failed. Congress stopped the further allotment of lands, but

the interest in the allotted lands began to fractionate, as lands

were passed from generation to generation. There are now an estimated 1.4 million fractional interests of 2 percent or less involving

58,000 tracts of individually allotted lands.

The challenges related to fractional interest in allotted lands continue. These interests expand exponentially with each new generation to the point where we now have incredibly tiny ownership interests. There is a chart that is attached to your testimony, and

that chart reflects the tiny ownership amounts that we have.

7

Here is the one I can actually read. As you will see, for example,

in the first column beyond the blackened area, this is the fraction

of lands that people hold. This is just in one little parcel of land.

We have someone who owns 1/592nd-interest in that. Some other

people own 29/77,750ths interest. These interests, obviously, are

not the entire interest in the land. This is just one page reciting

a few people’s interests in this land.

When you get over to the last column, you see the decimal places

carrying out the description of how much interest these individuals

own in this tract of land, and you get into .0003 as an interest in

this piece of land. In order to actually convert all of this to a fraction where we had a common denominator, we had to get into

228,614,400 as the least-common denominator for this.

As you can imagine, this is a complete bookkeeping nightmare,

and it is very difficult when you are talking about a tract of land

that might, perhaps, have had a $250-a-year annual income for a

grazing lease. Once this is divided down to the individuals receiving their tiny share, we have many interests where the annual income is less than a penny. These are representative of the kinds

of interests we manage, and these are not even reflective of the

smallest interests that we see.

The Department is bound by its trust obligations to account for

each owner’s interest regardless of size, even though these accounts

might generate such small revenues. Each is managed without the

assessment of any management fees and with the same diligence

that applies to all accounts. In contrast, in a commercial setting,

these accounts would be eliminated because of the assessment of

routine management fees.

The income that comes in from these tiny interests in land is

what flows into our individual Indian money accounts, and so small

interests in land lead to small accounts with small balances.

I recognize that in the last Congress you passed the Indian Land

Consolidation Act Amendments of 2000, and we appreciate you

grappling with the issue in that way. We are examining that now

as we are implementing it, and we may find that additional incentives are needed to expedite the consolidation of these interests.

I would like to now lay out some of the other pressing interests

that we see in addition to fractionation.

First, the Department is not well structured to focus on its trust

duties. Trust responsibilities are spread throughout the Department. Thus, trust leadership is diffuse. The Bureau of Indian Affairs itself has a long history of decentralized management and, as

a result, it does not have clear and unified policies and procedures

relating to trust management. Each of the 12 BIA regional offices

and 85 BIA agency offices has developed policies and procedures

that are unique to that region and to each of the tribes that are

within that region.

A second issue that we face is that planning systems relating to

trust have been inadequate. A new strategic plan needs to be developed.

Third, the Department’s approach to trust management has been

to manage the program as a Government trustee, not a private

trustee. The Department agrees that our trust duty requires a better way of managing than we have had in the past. However, the

8

current structure of the Department is not suitable for carrying out

the expectations of the tribes, the Congress or the courts. To meet

this level of expectation will require more funding and resources

than have historically been provided to the Department, and this

has led to the President’s fiscal year 2003 budget request of an ad- ditional $84 million in trust asset management funding.

Fourth, the computer software system known as the Trust Asset

and Accounting Management System, which we refer to as TAAMS,

has been inadequate. The Department had hoped to go a long way

to solving its problems, and yet this system has failed to achieve

many of its objectives. Also, our information technology security

measures associated with Indian trust data lack integrity and have

not been adequate to protect trust data or to comply with Office of

Management and Budget standards.

A current challenge that has been in the headlines is the Cobell

litigation. In 1996, five plaintiffs filed suit against the Departments

of Treasury and Interior, alleging breach of trust with respect to

the United States’ handling of individual Indian money accounts.

In the first trial, in December 1999, the Court ruled that the Department was in breach of four trust duties. The Court declared,

among other things, that the 1994 Trust Reform Act requires Interior and Treasury to provide plaintiffs an accurate accounting of all

money in their accounts without regard to when the funds were deposited and requires retrieval and retention of all information concerning the trust necessary to render an accurate accounting. This

decision was affirmed by the D.C. Court of Appeals in February of

last year.

The second trial dealing with historical accounting has not yet

been scheduled. The trial about whether Neal McCaleb and myself

should be held in contempt in our official capacities is ongoing as

we speak.

To address the problems I have mentioned, a number of actions

have been initiated in my first year as Secretary. We are developing a new strategic plan that will reflect a beneficiary approach

to trust management and service delivery. Objectives will include

maintaining comprehensive, up-to-date, and accurate land and actual resource ownership records, developing a robust accounting

system to manage financial acts and developing a plan to attract

and maintain a qualified, effective workforce.

Last July, I created the Office of Historical Trust Accounting. Its

mission is to develop a detailed plan for a comprehensive historical

accounting of trust accounts. We expect this plan will provide a

foundation for Congress to evaluate our future funding requests.

The budget unveiled this week asked for a $9-million increase for

this historical accounting. A full reconciliation of all accounts will

ultimately require considerably more money. Conducting a full

audit transaction-by-transaction will be difficult and very expensive, probably hundreds of millions of dollars. Without such an accounting, however, the plaintiffs in the ongoing litigation may continue to assert, as they have in the press, that they are owed tens

of billions of dollars.

Turning to the reorganization of the Department. We heard from

many sources, including the Special Trustee, our management consultant, EDS, the court monitor in the Cobell litigation and

9

through various budget reviews that one of the fundamental barriers to trust reform was the disorganized scattering of trust functions throughout the Department.

Our management consultant’s review, for example, called for a

single accountable trust reform executive sponsor. Last November,

we proposed the formation of a Bureau of Indian Trust Asset Management or BITAM. This option envisions consolidating most of the

trust reform and trust asset management functions throughout the

Department into a new bureau that would report to a new Assistant Secretary. Essentially, we would separate out the service functions of BIA, like education, law enforcement and so forth. Those

would remain within the Bureau of Indian Affairs.

The trust asset management functions, the financial accounting

functions, would go into the new organization. It was hoped that

that would consolidate things in a way that we could have consistent and coherent planning and the ability to have an organization dedicated to the high standards of accounting.

On November 20th, 2001, I issued an order to establish the Office of Indian Trust Transition within the Office of the Secretary,a

need shortly thereafter I appointed Ross Swimmer to be its Director. It is currently charged with developing the new strategic plan

and organizing the Department’s efforts to implement that plan.

We are currently in the process of consulting with tribes to involve them in reorganizing the Department’s trust asset management responsibilities. We have held a series of consultation meetings. To date, the tribes have expressed their dissatisfaction with

both our consultation process and with our reorganization proposal.

A task force of tribal leaders has been formed as a way of facilitating the consultation process. I have committed financial resources to support the task force and other consultation efforts.

Working with these tribal leaders, we are earnestly endeavoring to

achieve progress on trust reform.

This past weekend, we held our first meeting in Shepherdstown,

West Virginia. The tribal leaders who were present listened to us

and also presented various alternatives to our BITAM proposal. We

listened to their proposals, as well.

We are currently working through our management consultant

and the task force to evaluate all of the various proposals. Overall,

I was very encouraged by the meeting. I felt that we had begun developing a good working relationship and the interpersonal trust

necessary to tackle a tough problem together.

Now, on Sunday, as the meeting was drawing to a close, I asked

the task force members what I should say as I talked with you all

about their perspectives and about our meeting together. Well, it

was an hour-long discussion, so I can’t begin to capture everything

that was said, but I wanted to share with you some of the perspectives.

They wanted me to convey that while the tribes had rejected the

BITAM proposal, they understood that I had inherited a disturbing

problem for which no past administration had come up with a solution. They wanted you to know that there is more to understanding

this problem than ordinary trust law. There is Indian trust law.

Due to the willingness of the tribes to work together, we can address many of the longstanding problems in Indian Country. We all

10

agreed that we were excited about working together and that this

was true because of some of the breakthroughs at least in understanding that came from that meeting.

Congress must understand that the trust responsibility comes

from treaties under which tribes gave up massive amounts of their

resources. I have also learned, through the consultation process

and the task force, that, frankly, to my great surprise, the tribes

are very strong attached to the Bureau of Indian Affairs. They may

view it as dysfunctional and as a mismanaged organization, but it

is the entity to which they have invested considerable time and attention, and it is their consistent point of contact with the Federal

bureaucracy.

Because a number of the tribal leaders who participated in the

task force meeting this last weekend are actually testifying here

today, I am sure that they will also share their views of the meeting.

Let me quickly turn to our computer system, and the shutdown

of our access to the Internet. Many of you have inquired about that

and received inquiries from your constituents about that.

On December 5th, 2001, as part of the Cobell proceedings, the

Court ordered the Department to disconnect from the Internet all

of the computer systems that house or provide access to Indian

trust data. The temporary restraining order came at the request of

plaintiffs and was based on a report by the special master for the

Court prepared on the security weaknesses of information technology security.

On December 17th, the Court ordered a consent order proposed

by the Department over the objection of the plaintiffs. It establishes a process that allows the Department to resume operations

of some computer systems after providing the special master assurances that the problems he identified have been resolved and the

security meets a certain standard.

The December 17th consent order is the only mechanism under

which the Department may use some systems or reconnect them to

the Internet. Under that order, we first sought to operate the IT

systems required to make payments to individual Indians. Our initial request was to operate a key Indian system, and it was made

on December 17th, 2001. The special master concurred with our intent to operate this system recently.

On December 21st, we requested to operate another key system

that would govern mineral receipts, and that application is still

pending. It is our intent to make lease payments to individual

Indians as rapidly as we are permitted to do so.

As a rough estimate, about 90 percent of the Department of Interior is currently off-line. Several other requests have been forwarded to the special master recently. We will continue to work

with the Court to expedite the resumption of the many public service programs that depend on reconnecting to the Internet.

We have taken initial steps to prepare a long-term strategic plan

that would deal with the security of this data. We expect that the

core of this dedicated network can be installed during fiscal year

2002. There would be a phase-in of additional hardware and a shift

of data from other systems expected to take approximately 3 years.

The overall cost of the estimate for that is $65- to $70 million.

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The actions that I have taken are only the beginning of a long,

intensive effort that will be required. We will turn to Congress for

help in our endeavors.

In conclusion, let me underscore a few points. Indian trust asset

management is a very high priority for the Department. We need

to establish an organizational structure that facilitates trust reform

and trust asset management. We need to establish an ongoing effective consultation mechanism with the tribes. The Department

must improve computer support and security to ensure the integrity of Indian trust data.

We are being challenged by litigation which might require significant changes in how the trust is managed. It appears that substantial resources will be required to meet the growing expectations of tribes, the courts, and Congress. The tribes, Interior, and

Congress have to reconcile the competing principles associated with

trust responsibility and self-determination. It is important that at

the end of this process, the tribes have greater ability to govern

themselves and determine their own future.

Thank you for inviting me to testify here today, and I look forward to answering your questions.

[The prepared statements of Secretary Norton and Mr. Slonaker

follow:]

Statement of The Honorable Gale A. Norton, Secretary of the Interior,

U.S. Department of the Interior

Introduction

Thank you, Mr. Chairman and Members of the Committee, for inviting me to testify at this hearing on the Native American Trust program being administered by

the Department of the Interior, including the key elements of trust reform and trust

asset management.

Comments on the trust program were included in my first Congressional testimony as Secretary of the Interior. On February 28, 2001, I told Congress the

following: ‘‘I would like to comment on a matter of very high priority for myself and

for the Department, and that is the matter of Indian trust reform. As the

Trustee, I clearly recognize the important obligations of the Department to

put in place those systems, procedures, and people to fulfill our obligation

to the trust beneficiaries, both individual Indians and tribes. This is an

enormous undertaking in correcting the errors and omissions of many decades. Coming into this position, and so early in my tenure seeing a decision

from the Court of Appeals in the Cobell litigation, I have to say that I

have grave concerns about our existing management systems. It is

a very high priority for me that the person who comes in as Assistant Secretary of Indian Affairs and the other people who fulfill

leadership positions as to our Indian responsibilities are people

with strong management backgrounds and abilities.’’ (Emphasis

added)

My experience of the past year has reinforced the concerns I expressed last February. The problems we are working to solve have been over a century in the making. Allow me to explain the Department’s role in managing Indian trust assets, the

amount of land and accounts we hold in trust, the work entailed in managing these

accounts, the challenges we face in trust management, the work underway to address these challenges, and areas where legislative and executive action is needed.

Background

Current Holdings—An understanding of the work that lies ahead requires a recognition of the complex issues we have inherited. Trust asset management involves

approximately 11 million acres held in trust or in restricted status for individual

Indians and nearly 45 million acres held in trust for the Tribes, a combined area

the size of Maine, Massachusetts, Vermont, New Hampshire, Connecticut, Rhode Island, Delaware, Maryland, and the District of Columbia. This land produces income

from more than 100,000 active leases for 350,000 individual Indian owners and 315

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Tribal owners. Leasing and sales revenues of approximately $300 million per year

are distributed to more than 225,000 open Individual Indian Money (IIM) accounts

and revenue of approximately $800 million per year is distributed to the 1,400 Tribal accounts.

Trust Functions in Interior—Indian trust asset management involves many agencies and offices within the Department, including the Bureau of Indian Affairs, the

Office of the Special Trustee for American Indians, the Minerals Management Service, the Bureau of Land Management, the Bureau of Reclamation, the U.S. Fish and

Wildlife Service, the National Park Service, and the Office of Surface Mining.

For example, the Bureau of Indian Affairs is responsible for the leasing of trust

lands, keeping tract of land ownership, lease obligations, and appeals. The Office

of the Special Trustee focuses on the management of the actual trust accounts. The

Minerals Management Service handles royalty collection and the verification of

those payments. The Bureau of Land Management does the official surveys of

Indian trust land and tracks the status of actual lease operations on the land.

In short, these agencies must hire, train and retain personnel that:

1. Lease trust lands;

2. Conduct surveys across millions of acres to ensure leases are properly administered;

3. Keep records of leases held by hundreds of thousands of owners;

4. Record differing types of income from differing leases;

5. Review transactions within individual accounts;

6. Identify Indian heirs through complex probate proceedings;

7. Preserve trust records dating back a hundred years; and

8. Ensure the security of complex computer software housing much of this information.

This is not a simple responsibility, and there have been years of debate and litigation over how it should be carried out.

History of the General Allotment Act—One of the most difficult aspects of trust

management is the management of the individual Indian money accounts. In 1887,

Congress passed the General Allotment Act, which basically allocated tribal lands

to individual members of tribes in 80 and 160-acre parcels. The expectation was

that these allotments would be held in trust for their Indian owners for no more

than 25 years. The intention was to turn Native Americans into private landowners

and accelerate their assimilation into an agricultural society. Most Indians, however, retained their traditional ways and chose not to become assimilated into the

non–Indian society. Congress extended the 25-year trust period, but finally, by the

1930s, it was widely accepted that the General Allotment Act had failed. In 1934,

Congress, through the first Indian Reorganization Act, stopped the further allotment of tribal lands.

Interests in these allotted lands started to ‘‘fractionate’’ as interests divided

among the heirs of the original allottees, expanding exponentially with each new

generation. There are now an estimated 1.4 million fractional interests of 2% or less

involving 58,000 tracts of individually owned trust and restricted lands. The Department is bound by its trust obligations to account for each owner’s interest, regardless of size. Even though these accounts today might generate less than one cent

in revenue each year, each must be managed, without the assessment of any management fees, with the same diligence that applies to all accounts. In contrast, in

a commercial setting, these small accounts would be eliminated because of the assessment of routine management fees.

Prior Review By Congress—Over the past 100 years, Congress has reviewed the

issue of Indian trust asset management many times. In 1934, the Commissioner of

Indian Affairs warned Congress that fractionated interests in individual Indian

trust lands cost large sums of money to administer, and left Indian heirs unable to

control their own land. ‘‘Such has been the record, and such it will be unless the

government, in impatience or despair, shall summarily retreat from a hopeless situation, abandoning the victims of its allotment system. The alternative will be to

apply a constructive remedy as proposed by the present Bill.’’ The bill ultimately

led to the Act of June 18, 1934 which attempted to resolve the problems related to

fractionation, but as we now know did not.

In 1992, the House Committee on Government Operations filed a report entitled

‘‘Misplaced Trust: the Bureau of Indian Affairs’ Management of the Indian Trust

Fund.’’ That report listed the many failures of the Bureau of Indian Affairs to manage properly Indian trust funds. It pointed out that GAO audits of 1928, 1952, and

1955, as well as 30 Inspector General reports since 1982 had found fault with management of the system. The report notes that Arthur Andersen & Co. 1988 and 1989

financial audits stated that ‘‘some of these weaknesses are so pervasive and fundamental as to render the accounting systems unreliable.’’

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The House Report cites an exchange between Chairman Mike Synar and then Interior Inspector General James Richards in which Mr. Richards states:

‘‘I think the Bureau of Indian Affairs will not change until there is some

political consensus in that it must change. It is the favorite * * * target of

everyone who is shocked by ineptitude and its insensitivity. Yet when we

try to restructure it either from a Congressional sense or from an Executive

sense, there are always naysayers and there never develops a political

sense for positive change.’’

In 1984, a Price Waterhouse report laid out a list of procedures needed to make

management of these funds consistent with commercial trust practices. One of these

recommendations was considering a shift of BIA disbursement activities to a commercial bank. This set in motion a political debate on whether to take such an action. Congress stepped in and required that BIA reconcile and audit all Indian trust

accounts prior to any transfer to a third party. BIA contracted with Arthur Andersen to prepare a report on what would be entailed in an audit of all trust funds

managed by BIA in 1988. Arthur Andersen prepared a report stating it could audit

the trust funds in general, but it could not provide verification of each individual

transaction.

Arthur Andersen stated that it might cost as much as $281 million to $390 million in 1992 dollars to audit the IIM accounts at the then 93 BIA agency offices.

The Committee report states in reaction to that:

‘‘Obviously, it makes little sense to spend so much when there was only

$440 million deposited in the IIM trust fund for account holders as of September 30, 1991. Given that cost and time have become formidable obstacles to completing a full and accurate accounting of the Indian trust fund,

it may be necessary to review a range of sampling techniques and other alternatives before proceeding with a full accounting of all 300,000 accounts

in the Indian trust fund. However, it remains imperative that as complete

an audit and reconciliation as practicable must be undertaken.’’

The Committee report then moves on to the issue of fractionated heirships which

I know Congress has made several attempts to correct. The report notes that in

1955 a GAO audit recommended a number of solutions including eliminating BIA

involvement in income distribution by requiring lessees to make payments directly

to Indian lessors, allowing BIA to transfer maintenance of IIM accounts to commercial banks, or imposing a fee for BIA services to IIM accountholders. The report then

states the Committee’s concern that BIA is spending a great deal of taxpayers’

money administering and maintaining tens of thousands of minuscule ownership interests and maintaining thousands of IIM trust fund accounts with little or no activity, and with balances of less than $50.

In many ways, the problems and potential solutions remain the same as they did

when this report was published.

Current Challenges in Trust Management

As you can see, the problems we are currently facing are not new ones. I would

like to lay out some of the most pressing issues that are now before us.

Lack of Integration and Centralization of Trust Management—First, the Department is not well structured to focus on its trust duties. Trust responsibilities are

spread throughout the Department. Thus, trust leadership is diffuse. The Bureau

of Indian Affairs (BIA) itself has a long history of decentralized management and

as a result, does not have clear and unified policies and procedures relating to trust

management. Each of the 12 BIA Regional offices and 85 BIA agency offices has developed policies and procedures that are unique to its region and to the Tribes and

individuals it serves. While BIA has developed some national policies over the past

few years, its overall approach to trust management is still decentralized. The need

for such clear and unified policies remains large, but very little has been done.

Lack of a Good Strategic Plan—Second, the planning systems related to trust are

inadequate. The American Indian Trust Fund Management Reform Act of 1994 (the

1994 Trust Reform Act) required the development of a comprehensive strategic plan

for all phases of the trust management business cycle that would ensure proper and

efficient discharge of the Secretary’s trust responsibilities to Indian tribes and individual Indians in compliance with that Act. The court in Eloise Pepion Cobell, et

al. v. Gale A. Norton, et al. (the Cobell litigation), which I will discuss later in my

testimony, also requested information on the Department’s plan for remedying problems identified by the court. These two responsibilities evolved into the development

of the original High–Level Implementation Plan (HLIP) dated July 1, 1998. The

HLIP was revised and updated on February 29, 2000. The Eighth Quarterly Report

that the Department submitted to the Court on January 16, 2002 states:

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‘‘As described in prior submissions to the Court, the Department now views

the High Level Implementation Plan (HLIP), by which trust management

reform progress was measured and reported to the Court, to be obsolete. As

reflected in the introduction, HLIP milestones have become increasingly

disconnected from the overall objectives of trust reform. The HLIP is now

outdated. Many of its identified activities have been designated as being

completed; however, little material progress is evident. More fundamentally, the HLIP does not reflect an adequately coordinated and comprehensive view of the trust reform process. A continuing re-examination of ongoing trust reform is needed along with clarification of trust asset management objectives.’’ Changing Standard of Trust Management—Third, the Department’s longstanding

approach to trust management has been to manage the program as a government

trustee, not a private trustee. Today, judicial interpretation of our trust responsibilities is moving us toward a private trust model. The Department agrees that our

trust duty requires a better way of managing than has been done in the past. The

current structure of the Department is not suitable for carrying out the expectations

of the tribes, the Congress, or the courts. To meet this level of expectation will require more funding and resources than have been historically provided to the Department.

Computer Problems—Fourth, the Trust Asset and Accounting Management System software known as TAAMS, which the Department had hoped would go a long

way to solving trust problems, has yet to achieve many of its objectives. Interior

began developing TAAMS in 1998 from an off-the-shelf program, intending for it to

be a comprehensive, integrated, automated national system for title and trust resource activities. Using this software, Interior employees would record key information about land ownership, leases, accounts receivable income, and so forth. In November 2001, the Department’s contractor, Electronic Data Systems (EDS), found

that the current land title portion of TAAMS provides useful capabilities, but recommended deferring any further effort on the realty and accounting portions.

In addition, Departmental information technology security measures associated

with Indian trust data lack integrity and are not adequate to protect trust data or

to comply with Office of Management and Budget requirements. In fact, on December 5, the court ordered the Department to disconnect all computers from the Internet that housed or provided access to Indian trust data. The Department then disconnected nearly all of its computer systems from the Internet because they are

interconnected.

Fractionated Heirships—Fifth, the challenges related to fractionated interests in

allotted land continue. These interests expand exponentially with each new generation to the point where now we have single pieces of property with ownership interests that are less than .000002 of the whole interest. A stark example of the size

of some of these interests is attached to my testimony. It is a page from a redacted

1983 Title Status Report for an allotment on the Sisseton Reservation in South Dakota. Please note the ownership percentages for each individual listed on the far

right side of the sheet. The numbers speak for themselves. (See Appendix A)

Litigation

Court Decisions Related to Trust—The Supreme Court has defined the government’s trust obligations towards Indian tribes in two seminal cases—United States

v. Mitchell, 445 U.S. 535 (1980)(Mitchell I) and United States v. Mitchell, 463 U.S.

206 (1983)(Mitchell II). A guiding principle of the Mitchell decisions is that a fiduciary obligation of the kind that would support a cause of action for money damages

against the United States must be clearly established in the governing statutes and

regulations. In some recent lower court decisions, however, courts have upheld

money damage claims against the United States even where federal officials had not

violated any statutory or regulatory requirements. The Department has been working with the Department of Justice to determine how to respond to these decisions.

The Cobell Litigation—On June 10, 1996, five plaintiffs filed suit against the Departments of Treasury and Interior, alleging breach of trust with respect to the

United States’ handling of individual Indian money (IIM) accounts. The Court in

this action bifurcated the issues for trial. In the first trial, in December 1999, the

Court ruled that the Department was in breach of four trust duties. The Court declared, among other things, that the 1994 Trust Reform Act requires: (1) Interior

and Treasury to provide plaintiffs an accurate accounting of all money in their individual Indian money trust without regard to when the funds were deposited; and

(2) retrieval and retention of all information concerning the trust necessary to

render an accurate accounting. The Court also ordered Interior to file a revised

High–Level Implementation Plan (HLIP) to remedy these breaches. This decision

15

was affirmed by the D.C. Circuit Court of Appeals on February 23, 2001. The second

trial, dealing with historical accounting has not yet been scheduled.

Most recently, on November 28, 2001, the Court issued an order to show cause

why civil contempt should not lie against Assistant Secretary McCaleb and me, in

our official capacity, on four counts: • Failure to comply with the Court’s Order of December 21, 1999, to initiate a

Historical Accounting Project.

• Committing a fraud on the Court by concealing the Department’s true actions

regarding the Historical Accounting Project during the period from March 2000

until January 2001.

• Committing a fraud on the Court by failing to disclose the true status of the

TAAMS project between September 1999 and December 21, 1999.

• Committing a fraud on the Court by filing false and misleading quarterly status

reports starting in March 2000, regarding TAAMS and BIA Data Cleanup.

On December 5, 2001, the Court ordered the Department to disconnect from the

Internet all of the Department’s computer systems that house or provide access to

Indian trust data. This was followed on December 6, 2001, by a supplemental order

to show cause why Assistant Secretary McCaleb and I should not be held in civil

contempt, in our official capacity, for issues related to computer security of IIM trust

data. The contempt trial has been underway since December 10, 2001.

Tackling the Problems

To address the difficult challenges of trust reform, a number of actions have been

initiated in my first year. These include formulating a proposal to reorganize trust

management; creating a new office of Historical Trust Accounting (OHTA); and initiating development of a new strategic plan for improved trust management.

Strengthening Departmental Management—A high priority for me has been to

identify and recruit seasoned managers who can objectively assess the facts and

problems and propose practical solutions so that we fulfill our fiduciary duties to

account for the trust assets of Native Americans. The first member of my Indian

trust management team was sworn in on July 4, 2001, and the most recent member

came on board November 26, 2001. The team is engaged in a day-to-day decision

process related to trust reform and trust asset management. Those who have

worked with my new team can attest to their extraordinary work ethic, management experience, seasoned leadership and creativity in undertaking complicated

tasks. (See Appendix A)

Developing a New Trust Management Strategic Plan—As I discussed above, the

‘‘High–Level Implementation Plan’’ (HLIP), developed by the Department in 1998,

has received considerable criticism. It is a non-integrated, task-oriented set of activities related to trust reform that has failed to accomplish significant progress in improving delivery of trust management to the tribes and to individual Indian money

(IIM) account holders. We are now working to create a plan to guide future Departmental activities that will provide an integrated, goal-focused approach to managing

trust assets.

This new plan will reflect a beneficiary approach to trust management and service

delivery. Objectives will include maintaining comprehensive, up-to-date and accurate land and natural resource ownership records, and developing a robust accounting system to manage financial accounts and transactions. An integral aspect of the

plan will be the development of a workforce plan, and associated activities, to attract and maintain a qualified, effective workforce.

Creating a New Office of Historical Accounting—To better coordinate all activities

relating to historical accounting—an obligation imposed by the 1994 Trust Reform

Act and confirmed by the court opinions in Cobell—on July 10, 2001, I created the

Office of Historical Trust Accounting (OHTA) within the Bureau of Indian Affairs.

OHTA’s assignment was further guided by Congressional instructions given in the

Conference Report on the Department’s fiscal year 2001 appropriations bill which

stated the following:

’’...the managers direct the Department to develop a detailed plan for the

sampling methodology it adopts, its costs and benefits, and the degree of

confidence that can be placed on the likely results. This plan must be provided to the House and Senate Committees on Appropriations prior to commencing a full sampling project. Finally, the determination of the use of

funds for sampling or any other approach for reconciling a historical IIM

accounting must be done within the limits of funds made available by the

Congress for such purposes.’’

The Department will deliver a Comprehensive Plan to Congress to outline the full

range of historical accounting activities and to provide a foundation for Congress to

evaluate the Department’s funding requests. OHTA has already released its ‘‘BlueVerDate 11-MAY-2000 09:07 Sep 26, 2002 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6621 77526.TXT HRESOUR1 PsN: HRESOUR1
16

print for Developing the Comprehensive Historical Accounting Plan for Individual

Indian Money Accounts’’ and ‘‘Report Identifying Preliminary Work for the Historical Accounting.’’

We have requested a $9 million increase in our fiscal year 2003 Budget for this

historical accounting, but as I discussed earlier, when a full reconciliation of all accounts is undertaken considerably more money would be required. In responding to

the court’s requirement that we do a complete historical accounting of each account

by conducting a full audit, transaction by transaction, we will face challenges that

will pose great difficulty and will be very expensive. Without such an accounting,

the plaintiffs in the ongoing litigation will continue to assert, as they have in the

press, that they are owed $60 billion to $100 billion. A comprehensive historical accounting is likely to cost hundreds of millions of dollars, and still may not be viewed

as entirely satisfactory because of gaps in existing records.

Proposing a Departmental Reorganization of Trust Management—Reformation of

the Department’s trust responsibilities was, of course, mandated by Congress in the

1994 Trust Reform Act. In its 1999 opinion, the District Court in Cobell declared

that the Department had breached certain duties found in the Act. I have heard

from many sources—e.g., the Special Trustee, EDS, the Court Monitor, and through

budget reviews—that one of the fundamental barriers to trust reform is the disorganized scattering of trust functions throughout the Department. In August 2001, during our formulation of the fiscal year 2003 budget, various proposals and issues

were identified concerning the trust asset management roles of the BIA, the Office

of Special Trustee for American Indians (OST), and other Departmental entities carrying out trust functions. During the month of September, an additional issue was

identified by the Special Trustee regarding OST simultaneously performing both

operational responsibilities and providing oversight. The Special Trustee indicated

that such dual responsibilities represented an inherent conflict. Based on these and

other areas of concern, an internal working group was created.

The internal working group developed a number of organizational options ranging

from maintaining the status quo to privatizing functions to realigning all trust and

associated personnel into a separate organization under a new Assistant Secretary

within the Department. These options were evaluated based on the best method for

delivering trust services and other functions to American Indians and Tribal governments.

While this internal review was underway, Electronic Data Systems (EDS) was undertaking an independent, expert evaluation. On November 12, 2001, EDS presented its report ‘‘DOI Trust Reform Interim Report and Roadmap for TAAMS and

BIA Data Cleanup: Highlights and Concerns’’ in which it called for a ‘‘single, accountable, trust reform executive sponsor.’’

I decided to propose the formation of an organizational unit called the Bureau of

Indian Trust Asset Management (BITAM). This option envisioned the consolidation

of most trust reform and trust asset management functions located throughout the

Department into a new bureau that would report to a new Assistant Secretary. The

new Assistant Secretary would have authority and responsibility for trust reform efforts and for continuing Indian trust asset management. The proposal was reviewed

by EDS and received a supportive endorsement. I chose this option because it consolidates trust asset management, establishes a clearly focused organization, provides additional senior management attention to this high priority program and retains the program within the Department to facilitate coordination with the Native

American community. Under this proposal, BIA would focus on its other core functions and programs such as providing tribal services, helping tribes with economic

development, and education.

On November 20, 2001, I issued an order to establish the Office of Indian Trust

Transition (OITT) within the Office of the Secretary and shortly thereafter I appointed Ross Swimmer to be the Director of the OITT. The OITT is currently

charged with developing the strategic plan to replace the HLIP, and organizing the

Department’s efforts to implement that strategic plan.

Mr. Swimmer will be working with all entities within the Department involved

in trust asset management to develop the strategic plan. The immediate objective

has been for the Department to identify its resources currently being applied to

trust management and to try and focus those more carefully on the tasks with the

highest priority, as will be set out in the strategic plan.

Fulfilling our Obligations to Consult with Tribes—We are currently consulting

with Tribes to involve them in the process of attempting to reorganize the Department’s trust asset management responsibilities. To date, Tribes have expressed

their dissatisfaction with the consultation process and with Interior’s reorganization

proposal.

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The Department has held a series of consultation meetings. The first was in Albuquerque, New Mexico on December 13, 2001. Six additional consultation meetings

in different locations have been held and a seventh is scheduled. The meetings have

been very well attended.

A task force of tribal leaders has been formed as a way of facilitating the consultation process. The task force consists of two elected tribal leaders from each region, with a third tribal leader acting as an alternate. I have committed financial

resources to support the task force and other consultation efforts. Working with

these tribal leaders, we are earnestly endeavoring to achieve progress on trust reform.

This past weekend I held my first meeting with the tribal task force in

Shepherdstown, West Virginia. The tribal leaders present listened to us, and also

presented various alternative proposals to BITAM. During the course of consultation

sessions and the task force meeting, various tribal organizations presented alternatives to Interior’s BITAM proposal. We are currently working through EDS and

the task force to evaluate these proposals. My initial reaction is that: (1) the various

proposals all recognize a need for significant improvement in trust management,

and (2) the proposals contain many insightful suggestions that can potentially be

merged with portions of Interior’s reorganization proposal to achieve broader con- sensus. A number of the tribal leaders who participated in the task force meeting this

past weekend are actually testifying here today. I am sure they will share their

views of the meeting with you. On Sunday, while I was meeting with the task force,

I asked them what they would like me to convey to you about the weekend’s task

force meeting. They wanted me to convey to you several items, including: • we are confident that together we can solve problems,

• while tribes have rejected the BITAM proposal, I have inherited a problem that

is very disturbing, and for which no past administration has come up with a solution,

• there is more to understanding this problem than trust law; there is Indian

trust law,

• due to the willingness of tribes to work together, we can address many of the

long-standing problems in Indian country,

• we are optimistic that reorganization will set the direction to address many of

the issues facing us all,

• Congress must understand that the trust responsibility we all bear comes from

treaties under which tribes gave up massive amounts of their resources.

Reconnecting Departmental Computers to the Internet—As I mentioned, on December 5, 2001, as part of the ongoing Cobell v. Norton proceedings, the Court ordered the Department to disconnect from the Internet all of the computer systems

that house or provide access to Indian trust data. The interruption in service occurred when the Court issued a temporary restraining order directing the Department to disconnect computers from the Internet. The temporary restraining order

came at the request of plaintiffs and was based on a report the Special Master for

the Court had prepared on the security weaknesses of information technology security involving individual Indian trust data. The Department is committed to complying strictly with the orders of the Court. Computer systems have been completely

shut down where the Department has not yet been able to verify complete, immediate termination of access to individual Indian trust data.

On December 17, 2001, the Court entered a consent order proposed by the Department, over the objections of the plaintiffs. It establishes a process that allows the

Department to resume operations of some computer systems after providing the

Special Master assurances that problems he identified have been addressed and

that security meets a certain standard. The December 17 consent order is the only

mechanism under which the Department may utilize some systems or reconnect

them to the Internet.

The Department prioritized its requests under the Consent Order to seek first the

Special Master’s concurrence to operate the information technology systems required

to make payments to individual Indians. For example, our initial request to operate

a key Indian system was made on December 17, 2001. The Special Master concurred

with our intent to operate this system recently. Our December 21, 2001 request to

operate another key system (governing mineral receipts) is still pending. It is our

intent to make lease payments to individual Indians as rapidly as we are permitted

to do so.

To date, we have received concurrence to permit Internet service to the United

States Geological Survey and the Office of Surface Mining, Reclamation and Enforcement, along with a few isolated computers located at the National Interagency

Fire Center and the Department of the Interior Law Enforcement Watch Office. As

18

a rough estimate, approximately 90% of the Department is still prohibited to use

the Internet. Several other requests have been forwarded to the Special Master recently. We will continue to work with the Special Master to expedite the resumption

of the many public service programs which depend upon reconnection to the Internet.

The Department has taken initial steps to prepare a long-term strategic plan to

improve the security of individual Indian trust data. The Department intends to

bring relevant individual Indian trust information technology systems into compliance with the applicable standards outlined in OMB Circular A–130.

We expect that the core of the dedicated network can be installed during fiscal

year 2002, with the anticipated phase-in and shift of data from other systems expected to take approximately three years. The overall cost estimate could be $65–

70 million. The final estimate will be determined as we develop a capital asset plan.

Areas Where Interior Needs Help From Congress

These actions are only the beginning of a long, intensive effort that will be required of the Administration, Congress, and the Courts. Significant work needs to

be done.

FY 2003 Budget—The President released his fiscal year 2003 budget this week

and it includes my recommendations for $83.6 million in spending increases for

trust management and accounting. Increased spending for improved trust management is one of the major initiatives of the Department’s proposed fiscal year 2003

budget.

Trust Management Expectations—As I mentioned above, the courts expect the

Department to deliver trust services based on a very high standard. Congress must

recognize that meeting these expectations will require significantly more funding

and resources. The courts first look to Congress for its expression of intent as to

how the trust program should be managed. Congress must make clear what it envisions the responsibility of the Secretary to be, and provide the resources necessary

to carry out those responsibilities, while recognizing the other financial responsibilities and mandates of the Bureau of Indian Affairs and the Department as a whole.

Land Fractionation—The last Congress enacted the Indian Land Consolidation

Act Amendments of 2000 in order to prevent further fractionation of trust allotments made to Indians and to consolidate fractional interests and ownership of

those interests into usable parcels. As we begin to implement ILCA, we may find

that additional incentives are needed to expedite the consolidation of these interests.

Conclusion

I began this testimony by quoting from last year’s testimony. As I stated earlier,

my concerns are reinforced now that I have completed one year in office.

In conclusion:

• Indian trust asset management responsibility is a very high priority for the Department.

• The Department needs to establish an organizational structure that facilitates

trust reform and trust asset management.

• The Department needs to establish an ongoing effective consultation mechanism

with tribes.

• The Department must improve the computer support and security to ensure the

integrity of Indian trust data.

• The Department is being challenged by litigation which requires significant

changes in how the trust is managed.

• It appears that substantial resources will be required to meet the growing expectations of the tribes, the courts, and Congress.

• The tribes, Interior, and the Congress have to reconcile the competing principles

associated with trust responsibility and self-determination.

This concludes my testimony, Mr. Chairman. Thank you again for inviting me to

testify today.

19

20

APPENDIX B

THE SENIOR MANAGEMENT TEAM

J. Steven Griles, Deputy Secretary and Chief Operating Officer of the Department

of Interior, who was confirmed on July 17, 2001. Prior to his appointment as Deputy

Secretary, Mr. Griles had eighteen years of senior management experience at the

Department of Interior and with the Commonwealth of Virginia. This service included directing national programs for the management of public lands, mineral resources and collection of royalties from federal mineral leases.

Neal McCaleb took office as the Assistant Secretary for Indian Affairs on July 4,

2001. Mr. McCaleb is a member of the Chickasaw tribe of Oklahoma and the former

chairman of the Chickasaw National Bank. He is also a civil engineer by profession

who served as the Secretary of Transportation for the State of Oklahoma. Mr.

McCaleb was also a member of the President’s Commission on Indian Reservation

Economies and has served eight years in the Oklahoma State Legislature.

William Myers, the Solicitor of the Department of the Interior, took office on July

23, 2001. Mr. Myers is a former Assistant to the United States Attorney General,

Deputy General Counsel at the Department of Energy, and has been in private

practice with the law firm of Holland & Hart.

James Cason, Associate Deputy Secretary, began his service with the Department

on August 13, 2001 and serves as the principal manager of the Office of the Deputy

Secretary. Mr. Cason has 11 years of federal experience managing complex public

lands, agriculture, and mineral programs, including service as the Acting Assistant

Secretary for Lands and Minerals Management. He also has seven years experience

as the Vice President for Risk Management of an international technology company.

He is currently overseeing a range of trust management projects, including analysis

and development of the Department’s security systems for our computer and data

networks.

Ross Swimmer, appointed as Director of the Office of Indian Trust Transition on

November 26, 2001, is a former Assistant Secretary for Indian Affairs. Mr. Swimmer

is also the former General Counsel and Principal Chief of the Cherokee Nation of

Oklahoma. In addition, he has served as president of the First National Bank of

Tahlequah, Oklahoma and Chairman of the First State Bank in Hulbert, Oklahoma.

He was most recently the President and CEO of Cherokee Nation Industries, and

of counsel to the law firm of Hall, Estill, Hartwick, Gable, Golden and Nelson, PC.

Wayne Smith, appointed Deputy Assistant Secretary for Indian Affairs on October

23, 2001. Mr. Smith is the former Chief Counsel to the California Assembly Republican Caucus and served as Chief of Staff for the California Attorney General.

Phil Hogen, the new Associate Solicitor for the Division of Indian Affairs at the

Department, took office on October 25, 2001. Mr. Hogen is an enrolled member of

the Oglala Sioux tribe of South Dakota and served as the former United States Attorney for South Dakota. He has also been the Director of the Office of American

Indian Trust, and Vice Chairman of the National Indian Gaming Commission.

Bert Edwards, the director of the Office of Historical Trust Accounting (OHTA),

took office on July 10, 2001, when OHTA was created by Secretarial order. The

OHTA is charged with planning, organizing and executing the historical accounting

of Individual Indian Money (IIM) accounts. Mr. Edwards served three years as the

Chief Financial Officer for the Department of State, where he oversaw financial, accounting and budgeting operations for a $4 billion budget, 25,000 worldwide employees and 260 embassies and consulates in 130 countries. Prior to that, Mr. Edwards

had 24 years experience as an audit partner for Arthur Andersen LLP.

Bill Roselius, who became IT Systems Consultant for Indian Affairs on September

11, 2001. Mr. Roselius has a 42-year career in information technology, working for

the Oklahoma Department of Transportation, a number of hardware and software

computer firms and major corporations including IBM and Chromalloy.

[The prepared statement of Mr. Slonaker follows:]

Statement of Thomas N. Slonaker, The Special Trustee for American

Indians

Mr. Chairman, as the Special Trustee for American Indians, I am pleased to have

this opportunity to discuss with the Committee issues pertaining to the reform of

the trust responsibility within the Department of the Interior. It has now been 20

months since I was confirmed by the Senate as the Special Trustee. During that

time I have reached several conclusions that I would like to share with you regarding the capability of the Government to manage appropriately the Indian trust asVerDate 11-MAY-2000 09:07 Sep 26, 2002 Jkt 000000 PO 00000 Frm 00024 Fmt 6633 Sfmt 6621 77526.TXT HRESOUR1 PsN: HRESOUR1
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sets it holds as trustee for specific Indian beneficiaries, comprised of some 300 tribes

and nearly 300,000 individuals.

Trust reform, as well as the ongoing delivery of trust services to these individual

and tribal beneficiaries, has reached a point where radical measures need to be undertaken now.

Specifically, the Department’s discharge of its trust responsibilities, as it is now

organized, is inadequate to the demands placed upon it.

The primary problems are as follows. First, there is the need for a clear understanding of the Government’s trust obligation to the beneficiaries. Second, there is

a great need for experienced trust management. Finally, there is the need to ensure

accountability by those responsible for delivering trust services.

It is self evident that the nature and scope of the Federal Government’s trust obligations in the area of Indian affairs is complex and reflects a history dating to the

establishment of the Federal Government. The American Indian Trust Fund Management Reform Act of 1994 addresses itself to a discreet part of those Federal obligations: the physical assets the Government holds or controls as trustee for some

300 tribes and approximately 300,000 individual Native Americans. Like a private

trustee or commercial bank’s trust department, the Department is responsible for

identifiable assets, in this instance primarily land and investable cash, and is required to manage those assets, make fiducially responsible investment decisions, account for the income produced and report fully to the beneficiaries about its stewardship of these Indian trust assets. Like every other trustee, the Government

trustee is required to know at every moment what assets are held in trust, how

those assets are invested and managed and to whom the proceeds of that management belong and are to be paid. The Reform Act has erased any doubt that those

traditional trust duties are Federal trust duties.

The problems that trouble the Department are management problems. The lack

of management capability is signaled by the evident need for senior managers with

experience in delivering trust services and operating trust systems. Additionally,

there is a critical need for senior level, project management skills applicable to large

trust reform projects.

The lack of accountability refers to the need to have all staff that are charged

with trust responsibilities perform as directed by informed and responsible senior

managers.

Until a better understanding of the trust obligation, better management, and

more accountability are in place, regardless of what the trust organization looks

like—it will be difficult for the Government to come into compliance with the 1994

Reform Act.

I concur with the Secretary’s concept of a single organizational unit responsible

for the management of the Indian trust assets. That organization has the potential

of addressing the accountability concerns by placing one executive, responsible to

the Secretary, in charge of the delivery of the appropriate, required trust services

to tribes and individual Indians. I believe a single organization with its own chain

of command, that is, not diluted by intersecting other Departmental chains of command, can work better than the present arrangement. The devil, however, is in the

details, and the new organization must have the right executive direction and actually hold people accountable.

I also believe that the trust organization needs to be detached from the Bureau

of Indian Affairs and placed on its own footing.

It has been proposed by the Special Trustee’s Advisory Board on December 7,

2001, a group created by the 1994 Reform Act, that the entire Indian trust function

be removed from Interior and lodged in a self contained organization to be created

by Congress. This thought was an initiative of that Board. It is based in large part

on the Department’s inability over the many years to identify and cure its management problems, and is a suggestion that has merit.

On the other hand, I disagree with those who suggest that once the trust organization is ‘‘fixed’’ that it be returned to the Bureau of Indian Affairs. I believe that

organizations are not well motivated to make necessary changes if they know that

one day they will return to their previous owner.

I also want to comment on the role of the Special Trustee. I believe that the Special Trustee is required to provide candid and informed guidance to the Secretary

as she seeks the more effective management of the trust responsibilities under her

control. The Office of the Special Trustee (OST) will continue to focus on its oversight responsibilities. Therefore, OST must be provided appropriate resources and

pursue every opportunity to ensure that trust reform is carried out effectively and

efficiently.

For instance, the Office of the Special Trustee receives appropriations for trust reform activities, no matter where in Interior the reform project is managed. OST

22

then initiates the funding of projects when and if adequate plans and management

appear to be satisfactory. In some instances, we have found it necessary to interrupt

funding when expected project success is not being achieved. This process has proven helpful to the reform process and has given the Special Trustee a useful and

independent voice in that effort. I believe this budget control over the reform of the

trust function should continue to be a part of OST’s responsibility. The independence and informed objectivity of the OST, I believe, is essential to achieving lasting

trust reform.

Reform can be done with the right leadership, the necessary accountability, and

consequences for non-performance.

Thank you.

[The Department of the Interior’s response to questions submitted for the record follow:]

RESPONSES TO SUPPLEMENTAL QUESTIONS FROM DEMOCRATIC MEMBERS OF THE HOUSE

RESOURCES COMMITTEE

Question (1): Are you committed to full disclosure of all the problems

with Bureau of Indian Affairs management of the trust assets regardless of

any settlement that may or may not be negotiated? Please explain.

Answer: Interior is committed to the full disclosure of all problems related to the

management of Indian trust assets. The Department is equally committed to seeking out, addressing, and resolving trust asset management problems in all our relevant bureaus and organizations.

Question (2): Without a full disclosure and acknowledgement of the scope

of the problem, do you expect any proposed solution to work? Without a

full disclosure, how can you expect Indian tribes to trust the federal government?

Answer: Interior is committed to full disclosure. We will continue to search for

and disclose problems. Our disclosure and acknowledgment of the scope of the problem to date explains why we are pursuing a reorganization of trust functions within

the Department.

Question (3): Are you committed to cleaning up the backlog of incorrect

and missing data about trust assets, and doing so in cooperation with

tribes? Please explain?

Answer: Yes we are committed to the cleanup of the backlog and a major effort

is already underway. Government subject matter experts are working with Electronic Data Systems (EDS) on determining the data validation universe and priorities for corrective action. The Tribal Task Force work group will be incorporated

into this effort. It is important to recognize however, that no one expects that all

data since 1887 can be found and validated by records. Interior realizes it will need

to address how to manage the problem of missing information.

Question (4): As a possible solution to conducting a historical accounting

of trust accounts, would you be willing to grant money to tribes, rather

than the BIA, so tribes can go through the backlog?

Answer: Considerations regarding the Privacy Act and fiduciary requirements

may limit the role tribes can play in accounting or with the data validation effort,

but all options will certainly be considered in determining how to effectively and efficiently fulfill the requirements of the accounting. If tribes have access to individual

account information or have proposals for supporting such an accounting, they are

encouraged to contact the Office of Historical Trust Accounting.

Question (5): What immediate improvements do you think are needed in

the Department to properly manage tribal trust assets?

Answer: A single responsible and accountable agency or division within the Department of the Interior with a high level manager dedicated to the task of managing Indian assets is needed. This conclusion is supported by an EDS recommendation that the Secretary have a single, executive sponsor in charge of trust reform

and management. If this work continues to be one of many responsibilities within

the Bureau of Indian Affairs, we believe it will be difficult to get the attention needed for trust asset management and accountability. We are also working with IT experts and the Court to improve security of trust data. Other necessary improvements are explicated in the Status Report to the Court number Eight dated January

16, 2002.

Question (6): As you may know, the Navajo Nation Council voted on January 26 to disburse $537,000 to hundreds of financially distressed Navajo

families who have not been paid their gas and oil royalty checks by the DeVerDate 11-MAY-2000 09:07 Sep 26, 2002 Jkt 000000 PO 00000 Frm 00026 Fmt 6633 Sfmt 6621 77526.TXT HRESOUR1 PsN: HRESOUR1
23

partment of the Interior since November. Do you believe that the Navajo

Nation as well as other tribes are entitled to be reimbursed for the grants

they have distributed and will you work to see that these tribes are properly reimbursed?

Answer: Our responsibility is to make payments to the individual Indian beneficiaries. We assume that the Navajo Nation has an agreement with its members

with regard to reimbursement once the Department is able to make payments to

individuals.

Question (7): Did the Department of Interior approach Judge Lamberth

and indicate that a shut down of the computer system would create an economic hardship on those who are dependent on their royalty checks to survive? A simple yes or no answer will suffice.

Answer: A simple yes or no answer, in this case, does not suffice. The plaintiffs

filed a motion requesting that Interior disconnect systems from the Internet on the

night of December 4, 2001. At the December 5, 2001 hearing before the Court, Interior, through the Department of Justice, advised that it had not had adequate time

to assess fully the impact of disconnection. Counsel requested two days in which to

complete the assessment and report to the Court. Notwithstanding the Department’s request for additional time, the Court ordered that all computers housing

Indian data or having access to Indian data be disconnected from the Internet. Because of the interconnectedness of Interior’s systems, this resulted in an immediate

shutdown.

Under the Indian Self–Determination and Education Assistance Act tribes have

assumed responsibilities for trust management through agreements with the BIA

and are managing those assets and accounts effectively.

Question (8a): How does your proposal preserve the viability and validity

of contracts and compacts negotiated to date?

Answer (a): Many Indian tribes are doing an effective job of managing trust assets

and administering federal program money. The goal of the Department is to continue extending self-determination and self-governance contracts to tribes with the

expectation that some tribes become their own resource managers to the greatest

extent possible.

The proposal for a trust asset management bureau is not intended to interfere

with any tribal contracts or compacts. Oversight and monitoring of tribal contractors

will continue through any new agency. This level of oversight is necessary because

the Secretary remains ultimately responsible under the law for trust management

and can not contract that responsibility away.

Question (8b): Given the success of tribal management of trust functions,

why does your proposal not specifically call for further technical support

and funding in order to expand tribal management of trust functions? Isn’t

this one clear example where trust management is already working effectively?

Answer: The BIA currently provides technical support and funding to tribes for

tribal management of trust functions. The Department oversees tribal management

of trust assets and functions under self-determination and self-governance agreements. Our proposal continues that support and oversight. We will consider the

need for additional technical support as tribes expand their management of trust

assets and functions.

Question (8c): What will the role of the tribes be in managing trust assets

in the future?

Answer: Management of trust assets by tribes should continue in the same manner as is currently done. Before contracting with the tribe, the Department reviews

and determines that the tribe has the ability to account for funds and assets and

has expertise in the management of trust assets. Tribal management of individual

Indian trust assets needs different consideration. Trust services for individual

Indians may be provided by a tribe, when appropriate, as long as the contracting

tribe is able to exercise the same level of fiduciary duty and maintain the same level

of service that the Secretary provides. These issues will continue to be addressed

regardless of the reorganization initiatives.

The BITAM proposal suggests that ‘‘trust’’ and ‘‘non-trust’’ functions be separated.

Question (9a): Can such functions really be separated as a matter of law

or policy?

Answer: ‘‘Trust’’ functions refer generally to assets of land, natural resources and

money. ‘‘Non-trust’’ functions refer generally to service areas such as law enforcement, health, housing, education, economic development and general welfare. Separating the two functions is not intended to diminish the importance of either. However, separation does recognize that certain assets are held by the United States for

the benefit of individuals or tribes while other items are more in the nature of servVerDate 11-MAY-2000 09:07 Sep 26, 2002 Jkt 000000 PO 00000 Frm 00027 Fmt 6633 Sfmt 6621 77526.TXT HRESOUR1 PsN: HRESOUR1
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ices or federally funded programs. While the Federal government has a trust obligation for both functions, we believe these ‘‘trust’’ and ‘‘non-trust’’ functions can be

separated for management purposes.

Question (9b): Do not all Indian programs within the BIA reflect the government’s approach to fulfilling its responsibilities under its trust relationship to the Indian tribes?

Answer: Yes

Question (9c): As a practical matter, is it not true that BIA personnel at

the local level perform a range of duties, which cut across your BITAM proposal’s dividing line between ‘‘trust’’ and ‘‘non-trust’’ functions?

Answer: In many instances, employees at all levels of the BIA and in particular

at the local levels do perform duties that cross over many functions. This can create

problems of accountability, confidentiality and conflict of interest. For the same reasons that a commercial bank and its trust department must be independent from

one another, there is value to having trust officers at the agency level who are separate from other staff.

Question (9d): By creating a new bureau, are you not duplicating the

federal bureaucracy assigned to these intertwined matters?

Answer: It is believed that there will be little duplication of effort. In fact, many

of the trust employees can be co-located at BIA Agency offices as well as some of

the Regional offices. The work performed by trust employees should complement

other activities of the BIA. Administrative overhead (such as personnel, procurement, etc.) could be shared.

The Department recently began a consultation process with tribes regarding the

restructuring of the Department’s trust account and trust asset management. Despite unanimous, unequivocal, nationwide condemnation by tribal leaders of the

BITAM proposal to restructure the Department by creating a new agency within the

Department, that proposal is still on the table.

Question (10a): Why has it not been withdrawn?

Answer: The concept of an independent bureau within the Department was developed for discussion with tribes after considerable thought and analysis. The Secretary, the Special Trustee for American Indians and the Assistant Secretary for

Indian Affairs support the concept. The concept was further endorsed by the consulting firm of EDS, which was hired to perform an analysis of the progress of trust

reform.

The Department’s proposal has not been withdrawn because it addresses the

problems identified with the way the trust functions are currently managed in the

Department. In addition, most of the criticism we have received to date has been

directed at the process of consultation rather than the proposal itself.

The Secretary appreciates tribal input and alternatives and is open to the different plans currently being submitted. At the same time, the BITAM proposal will

remain on the table as what we expect will be one of many options for the Secretary

to consider. The Department is committed to trust reform and looks forward to

working with the tribes and in particular the joint task force on BIA Trust Management Reform, on developing a reorganization that will accomplish the goal of better

trust asset management and accountability.

Question (10b): What role will the new tribal task force have in developing a plan?

Answer: The tribal task force will review all proposals and will help develop the

criteria against which all proposals will be evaluated. We have asked EDS to perform the actual evaluation according to those criteria and those results will be presented to the task force.

Question (10c): To what extent have you and your staff considered alternatives prepared by the tribes and what process will be used by the Department to consider the alternatives?

Answer: A two-day review of tribal concerns and proposals was held at the Department’s training center in Shepherdstown, West Virginia, with the tribal leaders

task force. The Secretary was in attendance during a review of tribal proposals. The

Department continues to receive input from tribes and from the tribal leaders task

force. As stated above, criteria for evaluating the various proposals will be developed

with the tribal task force, and EDS will present an evaluation of all proposals using

those criteria.

Question (10d): Will you accept an alternative to your proposal developed

by tribes if it addresses all of the underlying concerns that BITAM seeks

to address?

Answer: The Secretary has told the tribes that she would accept an alternative

proposal if it accomplishes the objective of improving accountability of trust management and satisfies the concerns that led to the development of the BITAM proposal.

25

Your consultant, Electronic Data Service (EDS), determined that no matter what

structure is implemented to handle trust management, significant resources are

needed to hire additional staff and to train existing and new staff.

Question 11: How do you propose to fund such needs?

Answer: Trust asset management is a unique function within the federal government. The Secretary has requested additional funding for the trust reform and management functions and will continue to be supportive of efforts to obtain funding

from Congress as appropriate.

Judge Lamberth in the Cobell case will be deciding sometime over the upcoming

weeks whether to appoint a receiver as the plaintiffs in that case have requested.

Question 12: How will the Department’s BITAM proposal be affected by

the appointment of a receiver?

Answer: A receivership of this kind is unprecedented. We would need to review

the type and duration of any receivership that may be created by before we can answer this question.

The President’s fiscal year 2003 budget proposal contains language that states ‘‘the statute of limitations shall not commence to run on any claim, including any

claim in litigation pending on the date of enactment of this Act, concerning losses

to or mismanagement of trust funds, until the affected tribe or individual Indian

has been furnished with an accounting of such funds which the beneficiary can determine whether there has been a loss.’’ Question (13a): Do you believe this language is adequate enough to revive

claims of tribes that might otherwise be time-barred from filing claims

against the United States for mismanagement of tribal trust funds?

Answer: No, it is the Department’s position that the language in the President’s fiscal year 2003 budget proposal does not revive claims of tribes that were or are

time-barred. The appropriations language has been read very broadly by at least

one court, which interpreted the appropriations language to revive claims that had

already become time-barred before the appropriations language was adopted, and to

apply to claims beyond trust fund claims. In other words, the appropriations language has been misconstrued to make the United States liable for claims far beyond

the claims at which it was directed.

Now that Congress has passed S. 1857, a pending enrolled bill encouraging the

negotiated settlement of tribal claims by establishing December 31, 1999, as the

date on which tribes are deemed to have received the Andersen reconciliation reports, and assuming the bill is signed into law, the appropriations language quoted

above no longer appears to be necessary. The Department believes that S. 1857 fully

addresses the tribes’ legitimate statute of limitations concerns and therefore obviates the need for the 2003 budget language. S. 1857 would allow tribes to postpone

filing claims and facilitate voluntary dismissal of those already filed, enabling the

United States to engage in negotiations concerning tribal trust accounts with interested tribes to resolve their claims.

Question (13b): Do the ‘‘Reconciliation Reports’’ conducted by Arthur Andersen and provided to tribes in 1996 constitute a full accounting of tribal

trust funds?

Answer: The reconciliation was undertaken in response to Congressional directives in 1988, 1989 and 1990, that BIA take steps to reconcile Indian trust fund accounts as accurately as possible back to the earliest practicable date. Pursuant to

these directives, BIA commenced planning and preparation for the reconciliation

project in 1990. As part of the planning process, reconciliation procedures were

agreed upon by the Department, OMB, and tribal representatives as the best approach, and incorporated into the contract with Arthur Andersen. The Department

spent over $20 million on the Andersen reconciliation of tribal accounts; however,

the Department was not able to obtain an independent certification of the work as

directed by Congress. Further accounting for the tribal accounts will be very costly

and will require that Congress provide supplemental appropriations for that purpose.

Your testimony highlights the problem of fractionation of trust allotments and

suggests the need for incentives to expedite the consolidation of these interests. The

President’s budget states that consolidation is ‘‘expected to reduce the Government’s

costs of managing Indian lands.’’ The President’s plan, however, proposes a decrease

of $3 million for the Indian land consolidation account.

Question 14: Can you identify for the Committee the increases and decreases in the President’s budget proposal for trust management programs

throughout the Department of Interior and include a description of those

programs?

Answer: The 2003 OST budget includes program increases of $50.3 million for

trust reform initiative projects, including $30.3 million for special work projects,

26

$2.0 million for breaches projects, and $9.0 million for historical accounting activities, and a one-time decrease of $3.0 million for Indian Land Consolidation activities.

Program increases for special work projects include $2.5 million for OST Data cleanup, $5.0 million for BIA Data Cleanup, $6.0 million for TAAMS, $4.0 million

for Records Management, $4.0 million for Policies and Procedures, $6.0 million for

Risk Management, $5.1 million for Trust Improvement Coordination. Increases for

breaches projects include $300,000 for Workforce Planning and $1.7 million for Systems Architecture. The increase for historical accounting includes $9.0 million for

records collection and reconciliation of IIM accounts. A $2.2 million budget reduction

is requested for training due to completion of some phases of training. The Indian

Land Consolidation program is funded at $8.0 million, a one-time reduction of $3.0

million. In addition to appropriated funds, it is expected that carryover funds will

be available in 2003 to maintain on-going program activities.

To ensure that trust management improvements are sustained, the BIA budget for 2003 includes a program increase of $34.8 million. Trust activities within BIA

focus on sound management of natural resources, accurate and timely real estate

transactions, and sound leasing decisions to preserve and enhance the value of trust

lands. Program increases include $15.8 million for trust services to provide real estate appraisals, surveys, and other services, probates, and land titles and records

processing; $4.5 million for natural resources programs to manage lands that generate revenues; $6.0 million for tribal courts and social workers; and $8.5 million

for trust reform oversight ($3.0 million) and information technology improvements

($5.5 million).

These activities are discussed in greater detail in the OST and BIA Budget Justifications that are provided to the Committee under separate cover.

Question 15: why characterize BITAM proposal as a consolidation of trust

functions when the plan really only consolidate trust function of the BIA?

Answer: All trust functions within the Department are being considered for consolidation in the new organization. This would include trust services from other bureaus such as the Bureau of Land Management, Bureau of Reclamation, Fish and

Wildlife Service, Office of the Special Trustee for American Indians, Minerals Management Services as well as BIA. The Department is seeking advice from tribal

leaders regarding the best organizational approach on how to do this. Until advice

and recommendations are received, the Department is remaining open to alternative

organizational approaches that will accomplish the goal of satisfactory trust management and accountability.

Question 16: With respect to the Department’s reprogramming request to

tap into fiscal year 1902 funds, will the Department notify the House and

Senate Appropriations committees of its ongoing dialogue with the tribal

task force?

Answer: Yes. We will make every effort to keep the Committees informed of the

status of the reorganization effort.

Question 17: Will the Department refrain from submitting future reprogramming requests regarding trust management reform until an agreement is reached with the tribal task force?

Answer: It is not known whether an agreement/consensus will be arrived at with

the task force. We are hopeful that can occur. If we cannot arrive at an agreement

the differences will be well documented. However, trust reform is also under the jurisdiction of the District Court and Court orders must be complied with as well as

acts of Congress and regulations. Reprogramming requests will be made only when

necessary to carry out the responsibilities of the Department and the tribes will be

made aware if any reprogramming requests are made.

Question 18: Can you explain how the management of an Indian trust differs from a trust in the private sector, particularly with regard to the

rights of a beneficiary?

Answer: Trusts in the private sector are managed according to the instrument establishing the trust and by state law. However, Indian trusts do not have a single

instrument that establishes the trust and provides guidance for managing it. Instead, the trust is governed by statues, treaties, and executive orders that have been

enacted over a period of time. The rights of the beneficiaries are similar in some

respects but vary in others. The rights are the same in that the trustee should manage the trust corpus with a high degree of care, skill, and loyalty. However, the

rights of the beneficiary are different when it comes to integrating the other roles

of the Secretary. For example, courts have recognized that the Department, as trustee, can represent conflicting tribes on the same issue because of her overall duties

as Secretary. Whereas, the private trustee does not have these other duties and

would not be called upon to represent two conflicting beneficiaries. Also, Congress

27

has enacted statues, such as the Indian Self–Determination and Education Assistance Act which provide specific instructions to the Secretary to allow tribes to manage the trust corpus while retaining the Secretary as the trustee to approve of commercial uses such as leasing. Finally, in determining whether the beneficiary is entitled to damages for breach of trust, courts must look to statutes to determine whether Congress intended to subject the United States to money damages for breach of

trust. Some actions which may be breach of trust in a commercial setting may not

entitle the beneficiaries to money damages against the United States.

Question 19: It is true that the Interior Department will be requesting

that a new trust asset management business model be conducted of the Department’s trust reform efforts?

Answer: Yes, EDS has been engaged to examine and document the current, or

‘‘AS–IS’’ business practices. The Department will then examine the documented AS–

IS processes and determine what future changes need to be made, or the reengineered TO–BE processes. The Department will incorporate applicable laws, regulations, and policies into the analysis. An independent validation of these reengineered processes will take place.

Question 20: Currently, how many outstanding prime contracts does the

Department have on trust reform efforts? Of these, how many are with

businesses that are Native American Indian owned Small Disadvantaged

Business Owned, 8(a), or women and Service Disabled Veteran Owned?

The Office of the Special Trustee and the Office of Historical Trust Accounting

have contracts with:

• Arthur Andersen, LLP

• Bankers Trust

• Bloomberg, Inc.

• Booz Allen Hamilton

• Chavarria, Dunne & Lamey, LLC

• DataCom Sciences, Inc.- Native American owned, 8(a)

• Deloitte & Touch LLP

• Electronic Data Systems, Inc.

• Ernst & Young LLP

• Grant Thornton, LLP

• Gustavson Associates

• Hughes and Bentzen PLLC

• Iron Mountain

• KPMG

• L R Compton—Native American owned, 8(a)

• Los Alamos Technical Associates

• Millican & Associates

• NAID, Inc.—Native American owned, 8(a), Disabled Veteran

• National Opinion Research Center at the University of Chicago

• Science Application International Corporation

• SEI Investments. Inc.

• Upper Mohawk Inc.

The Bureau of Indian Affairs currently has six trust reform contracts:

• ATS—small business.

• NATEC—Native American, woman owned

• Data Com—3 contracts which consist of data cleanup, probate file processing,

and posting and recording. These contracts are with Native American and small

business owned companies.

• NAID—Native American, Disabled Veteran, 8(a) owned.

The Minerals Management Service currently has 11 Prime Contracts:

• Accenture—One currently active contract for development, operations and maintenance of automated systems that manage and store trust asset data.

• Peregrine Systems, Inc,—One currently active contract for the management of

minerals revenue and production data submitted by revenue and production reporters. The data is associated with mineral leases on Indian Tribal and Allotted lands and Federal land.

• Cooperative Agreements with Indian Tribes—Eight currently active contracts

with Indian Tribes to conduct audit and compliance work related to mineral

revenues associated with leases located on Tribal lands. These agreements are

authorized under Section 202 of the Federal Oil and Gas Royalty Management

Act.

28

Navajo Tribe

Shoshone/Arapaho Tribes

Jicarilla Tribe

Ute Tribe

Southern Ute Tribe

Ute Mountain Tribe

Blackfeet Tribe

Crow Tribe

• Wyandotte Net Tel——One currently active contract was awarded under the

Franchise Authority of MMS to Wyandotte Net Tel on August 18, 2001. Wyandotte Net Tel is tribally owned by the Wyandotte Indian Tribe. The five year

Indefinite Delivery, Indefinite Quantity type contract has a not to exceed ceiling

of $100,000,000 and was awarded under the Small Business Administrations 8a

program. The contract is for telecommunications and information technology

supplies and services for various government agencies. White Sands Missile

Range and the Army at Ft. Monmouth New Jersey are the major users of the

contract.

• Other Agreements—One currently active Intergovernmental Personnel Act

Agreement with the Shoshone/Arapaho Tribes for a tribal auditor to work in

the Farmington Indian Mineral Office.

*Memoranda of agreement with the National Archives and Records Administration regarding the storage and inventory of records.

*Memorandum agreement between MMS and the Office of the Special Trustee (OST) under which the MMS Minerals Revenue Management provides

cost-reimbursable services to the OST.

Question 21: For the future, how does the Department plan to ensure that

it remains in compliance with the ‘‘Buy Indian Act’’, Small and Disadvantaged Business Owned Act, 8(a), and the Women and Service Disabled Veteran Owned Act?

Answer: All contracting officers within the Department are knowledgeable of the

procurement laws including those listed in the question. Every effort is made to ensure that laws and regulations are followed and this will continue to be the practice

of the Department in the future.

Question 22: Pursuant to a question from Mrs. Christensen, you agreed

to provide the Committee with information regarding the amount of money

being spent this fiscal year on the Office of Trust Transition.

Answer: The Office of Indian Trust Transition anticipates expenditures for its

planned activities will approach $200,000 by the end of the current fiscal year.

The CHAIRMAN. Thank you, Madam Secretary. We appreciate you

being here and appreciate your testimony.

This is the first time we have ever had a full hearing in this

room, so we are just asking people, as they come in, to sit down.

We are going to take the rules of the Committee, and we will recognize people as they came in, except for Mr. Rahall.

Let me caution the members to stay within your 5 minutes. This

is going to be a long hearing. I am not going to call on everyone,

but what I will do, if you want to speak, will you just raise your

hand, and then we will give you that opportunity.

Mr. Rahall, we will turn to you.

Mr. RAHALL. Thank you, Mr. Chairman. I will be very quick. I

want to thank Secretary Norton for taking the time to be here

today, along with the gentlemen on either side of her.

You mentioned that you will be leaving after your testimony, so

you will not be hearing the tribal leaders’ testimony or panels that

are coming next; is that correct?

Secretary NORTON. That is correct. Unfortunately, I need to leave

today.

Mr. RAHALL. I understand. But you will have somebody here during the whole rest of the panel?

Secretary NORTON. My top people who are involved in this will

be here to listen to the remainder of the panels.

29

Mr. RAHALL. Thank you. I must say it was very good testimony,

a good presentation of the problem here, and a good history of the

problem, and there is not much of your testimony with which I

could disagree, of course.

But the central issue, I think, is rather each individual Indian

and tribal account accurately reflects, of course, the amount of

money that it should contain. As you have said, and as we all

know, you are under a court order to conduct an historical accounting of the individual Indian money accounts. So my question is can

the Department accomplish that task? And, if not, what is the alternative to conducting such an historical accounting?

Secretary NORTON. Our Office of Historical Trust Accounting is

currently formulating a complete plan for how that might be accomplished, and it is a fairly complex task. There are some aspects

of accounting that can be done fairly quickly and in a fairly

straightforward way.

For example, some of the tribes received large payments as a result of lawsuits, and that money came in in a large amount. It has

gone out to people in specific amounts. We can trace those and

verify those in a fairly straightforward way.

There are other records that have been lost through time, that

have been destroyed, fires or other decay of records is unavoidable

when you look back over many years. Unfortunately, there are

some things we may never be able to piece together, and so we are

laying out exactly how the task would look to go back and try to

identify as much as we can. We think it’s going to be important to

present that to Congress and to seek the funding that will be necessary to do an accounting. We are moving forward with undertaking a complete accounting.

Mr. RAHALL. So you cannot categorically state here today that

you are capable of doing the historical accounting that is necessary.

Secretary NORTON. I am not sure what I have not answered here.

Mr. RAHALL. You cannot do a full historical accounting. You have

mentioned the documents that may have been burned or destroyed

for one reason or another. So the answer would be, no, you cannot

do a full historical accounting.

Secretary NORTON. We have the initial—we have, essentially, our

bank records. The Historical Accounting is essentially trying to find

external sources to verify what is in our records. So we have essentially the bank’s records. Now we are trying to find canceled checks

or invoices that would be the second check on what is in our

records, and it is the canceled checks or the external invoices, those

are the things that are the challenge in trying to piece together.

And so we have a great deal, well, we can certainly say with assurance that not every piece of paper is out there— Mr. RAHALL. And a lot is not—

Secretary NORTON. So it would be possible to find every piece of

paper because there are pieces of paper that just simply do not

exist today.

Mr. RAHALL. Some of that could be rather substantial and of

major consequence.

Secretary NORTON. At this point, I don’t know what the universe

of that is. Part of what our office is doing is just checking to see

how much of that information still exists. There are fairly extensive

30

records, for example, that cover a number of time periods. There

have been audits done in the past that are fairly complete. There

are other time periods where it is not as complete.

One of the things that we need to assess is just how much information is out there and available.

Mr. RAHALL. Thank you, Mr. Chairman.

The CHAIRMAN. Madam Secretary, Mr. Rahall talked about this

accounting thing. What period of time, to the best guess you can

give us, will this cover?

Secretary NORTON. That, Mr. Chairman, is still an unresolved

question. The Court has asked for an accounting that would cover

the funds regardless of when they were put into the system. There

is still a question as to whether there is a statute of limitations

and how that might affect the accounting, but we are proceeding

to gather documents at this point that would cover the entire

range.

The CHAIRMAN. The Committee has been under the impression

that we can go back all of the way to 1887.

Secretary NORTON. That is certainly, you know, we are trying to

acquire all of the historical documentation.

The CHAIRMAN. What kind of money are you looking at to do an

accounting reconciliation all of the way back to 1887? Have you

projected the cost of this?

Secretary NORTON. We, as part of our planning process, are trying to do some cost estimates. It is certainly in the hundreds of millions of dollars range.

The CHAIRMAN. The tribes feel that consultation was an afterthought, that you conducted it subsequent to a decision rather than

concurrent with it. Why did you send up a reprogramming request

before you even started consultation?

Secretary NORTON. Under the consultation requirements, we are

essentially to begin consultation once we have a plan that is capable of having an intelligent discussion, and we felt that we began

consultation at that point. We also sent a reprogramming request

that was fairly open-ended, that was something that would give us

the opportunity to begin the reorganization and the transition process and would allow those things to be fleshed out as time went

on.

It has been a process of learning about the consultation approach. We wanted to move forward on our proposal. We felt that

we had received fairly consistent feedback on the weaknesses within our organization. It is very important that we move forward

quickly with fairly dramatic change in order to have significant reform. We want to work with the tribes to be sure that what we are

doing is appropriate.

Although we have asked for the reprogramming, although I continue to push forward with our proposal, that is because I want to

see something actually materially achieved from this. We believe

that there is a lot we can learn. There are ways of improving our

proposal, and we are open to doing that. What we don’t want to do

is miss the opportunity to move forward quickly.

The CHAIRMAN. How will you ensure that trust management is

undertaken constructively with tribes and IIM accountholders in a

31

manner that is directed toward developing a true relationship

based on transparency and honesty?

Secretary NORTON. I think our task force has provided a good

building block for that, and it gives us the opportunity to reach out

further to tribes because of the leaders that are involved in that.

We are building our relationship with the tribes and want to obtain

input from them.

The CHAIRMAN. Thank you very much.

As this Committee knows, I normally hold my questions to the

last, but I am going to be turning this over to J.D. Hayworth in

a short time, so I wanted to ask my questions.

Now, on the minority side, those who want to speak, would you

raise your hands.

All right, we are going by who came first then. Why did I even

ask?

[Laughter.]

The CHAIRMAN. Mrs. Christensen, you were the first one here,

and then Mr. Kildee.

Mrs. Christensen, you are recognized for 5 minutes.

Mrs. CHRISTENSEN. Thank you, and I will try to be brief.

Thank you, Mr. Chairman, for this hearing. It is not the first

hearing on this issue that I have been to, and I hope that as we

leave here we are going to see more of the change that the Secretary talked about.

I want to welcome the Secretary to the hearing. We appreciated

your testimony. Like our Ranking Member Rahall, it is very complete. I have really no quarrel with it and will begin by taking you

at your word.

I have a question because there is an issue that whenever we

have hearings that involve the Native American tribes, one of the

issues that is always in question, that always seems to be at the

crux of the problem is the respect for the sovereignty of the tribes.

So I wanted to ask you, as the current Secretary, can we proceed

on the principle that your office fully respects the sovereignty of

the tribes as a principle that will guide the future deliberations on

this subject? Especially in light of the fact that consultation did not

take place as the plan was being developed?

Secretary NORTON. We certainly do respect that sovereignty, and

one of the things that led to concern on the side of the tribes was

a misperception that we wanted to take back the management of

assets that many of the tribes had already assumed. Quite the contrary. I think that it is best for the tribes to be actively involved

in managing their own assets, and I want to encourage that and

see that whatever we do is not an obstacle to the tribes’ ability and

initiative to do that.

Mrs. CHRISTENSEN. Thanks. Just two more, I think, brief questions.

How much is being spent in this fiscal year on BITAM. And related to that, there as a question that your proposal weakened the

BIA. If you would comment on that or there was some concern

about that.

Secretary NORTON. At this point, BITAM itself does not exist. We

have an Office of Trust Transition that is focusing on our strategic

planning and figuring out how we move to the future, whatever

32

that future is, and there is a lot of common work that needs to be

done, whichever course of action we take. So there is nothing specifically on BITAM in the President’s fiscal year 2003 budget request. We continue the budgeting under the Office of Special Trustee and the BIA, so we do not assume the existence of BITAM in

the President’s budget request.

Nevertheless, we are moving forward on the trust reform issues,

and I can provide you with the dollar figures.

Mrs. CHRISTENSEN. But how much is being spent in this fiscal

year?

Secretary NORTON. Let me get that information—on BITAM

itself?

Mrs. CHRISTENSEN. Yes.

Secretary NORTON. Technically, zero.

Mrs. CHRISTENSEN. On the Office of Transition? If you don’t have

those figures, if you could— Secretary NORTON. I would be happy to provide that for you.

Mrs. CHRISTENSEN. It is my understanding that some tribes receive services directly from BIA, and others manage some of the

programs through 638 contracts, and others manage them through

self-governance compacts. How does the plan for the new trust

agency affect the different styles or deliberately reduce services to

the tribes or does it not?

Secretary NORTON. One of the difficult issues we need to grapple

with, whatever the organizational structure looks like, is the sometimes conflicting issue of the standard to which the Department is

held in its trust responsibilities and our ability to have the tribes

do their own contracting through 638.

If we are held to a financial accounting standard that is the same

type of accounting standard that applies for any major financial institution, then we may perhaps also have to hold the tribes to that

standard in their own administration of their contracts. Now I

don’t know that that is what the tribes want to see, I don’t know

that that is what Congress wants to see, but that is one of the

issues that I think we need to grapple with is how we allow the

tribes to go forward with their own handling of their own affairs,

have a high standard for that, without making it so high that nobody but a huge financial institution could meet it.

The CHAIRMAN. The time of the gentlelady has expired.

Mrs. CHRISTENSEN. Yes, my time is up. Thank you.

Thank you, Mr. Chairman.

The CHAIRMAN. The gentleman from Arizona, Mr. Hayworth?

Mr. HAYWORTH. Thank you, Mr. Chairman.

Madam Secretary, welcome. Thank you for complete testimony in

a problem, if we call it vexing, that is probably the understatement

of two centuries. I recall a task force that the gentleman from

Michigan and I co-chaired back in the 104th Congress dealing with

this particular challenge. As has been pointed out by both the

Chairman and ranking member, this is something that has involved so many prior administrations. We appreciate the efforts

being made to deal with it.

I think it is important to amplify portions of your testimony. So,

for the record, let me ask you, Madam Secretary, what is the current standard of accountability for dealing with Indian trusts?

33

Secretary NORTON. It is a much more complex issue than one

might think. We have a fiduciary responsibility. The courts have

expressed it in that way. At some point, we have been held to

something that is like a profit-maximizing-type of standard. In

other ways, I think we have a standard that is too—it allows the

tribes, for example, to have self-governance to take over contracting, where it appears that what Congress wants is something

a little less than the rigorous financial management structure. It

is an evolving standard, and we have the statutory standards that

are set out. The courts have, at times, looked to common law to

amplify those statutory standards. It is also dependent upon the

treaties that we may have with particular tribes, so it is not an

easy, clear answer.

Mr. HAYWORTH. Well, following up on that, I am interested in

your perception and opinion. As we have noted, this has carried

into the third branch of Government, with the judiciary being involved, court cases continuing, you under a court order, testimony

going on today. Based on that, your training in the law and upon

your assumption of this role, as Secretary of the Interior, in your

opinion, what standard does the court believe should be applied to

managing Indian trusts?

Secretary NORTON. Well, I don’t want to reflect on the particular

litigation in which we are involved, but in general I think the

courts are moving closer to a financial accounting standard, something that would be similar to the standard for a major bank or

trust company, and that is what has come out as particular types

of issues have been litigated. That, again, depends on the individual statutes, and treaties and so forth.

Mr. HAYWORTH. Thank you, Madam Secretary.

If I could, I realize I have about a minute and a half left, just

to address a couple of questions to our special trustee, Mr.

Slonaker. I thank you for being here today with the Secretary.

Just to make it part of the record, in your role as Special Trustee, do you report directly to the Secretary?

Mr. SLONAKER. I do.

Mr. HAYWORTH. And what are your performance criteria for

progress for trust management?

Mr. SLONAKER. Basically, the 1994 Reform Act, and the accounting, and the accountabilities that are embodied within that plan.

Mr. HAYWORTH. Have you submitted a plan in this regard?

Mr. SLONAKER. Well, the first Special Trustee submitted a strategic plan, which was partially rejected by the then-current Secretary. That evolved into what I recall more of a tactical plan

known as the High-Level Implementation Plan. That evolved into

an HLIP-2, if you will. At this point, in my personal view, we see

ourselves as a Department evolving yet another plan which will be

what I recall more strategic. It will be based, in large part, not only

on the analysis of the Department itself, but also on the assistance

we have gotten from some outside consultants who have looked at

this independently.

Mr. HAYWORTH. With this evolution in plans, do you feel safe in

saying you are making progress? Are you able to gauge any type

of progress in this regard?

34

Mr. SLONAKER. I think there is progress around the edges. My

concern is that the progress that has not been made by the Department, in terms of the major systems and the major projects which

are the heart of trust reform, if you will, and the heart of our obligation as a Government to the beneficiaries, and that would encompass such things as the accounting system which the Secretary referred to earlier, it would also include the probate process, and it

would include, very importantly, what is commonly known as the

data clean-up aspects of this reform.

I don’t believe that there has been sufficient progress on those

areas which, as I say, are really the heart of trust reform.

Mr. HAYWORTH. Thank you very much.

Thank you, Mr. Chairman.

The CHAIRMAN. The gentleman from Michigan, Mr. Kildee? Mr.

Kildee has been a champion on Native American issues for many,

many years. We appreciate it.

Mr. KILDEE. Thank you, Mr. Chairman. Thank you, Mr. Hansen.

I look out, I have been here in Congress now this is my 26th

year, and I recognize the majority out there. I have worked with

some of you. Some of you have worked for me, and hopefully I am

working for all of you. But it is good to see all of you. We have

known each other for many, many years.

I cannot say, you know, who is on which side of this issue because I think we are all on the side of justice, and I think that was

we work closely together to achieve the maximum, the optimum

justice, the better we will serve the Indians who deserve this justice so much.

I read the Constitution regularly, and it says the Congress shall

have the power to regulate commerce among foreign nations, several States and with the Indian tribes. So, ultimately, Congress has

to be involved in this, and we want to be deeply involved.

You have received an order to come up with a plan, and in that

order, you were told to consult with the affected Indian Nations

and individuals. To what degree was that consultation concurrent,

as you developed the plan, and to what degree was that consultation subsequent to your development of the plan, Secretary Norton?

Secretary NORTON. In terms of our reorganization proposal, there

was nothing that specifically required us to do a reorganization. It

was in response to the need for unified management and to answer

a persistent question of who is in charge of trust reform.

We anticipated proposing an idea that was a general idea and a

general reorganization proposal, and then moving forward to flesh

out the details of that through a consultation process.

Mr. KILDEE. It seems to me, from my own unscientific methods,

that the majority of the Indian Nations and the individual Indians

do not agree with separating those fiscal trust responsibilities out

into a separate agency from BIA. That would seem to indicate that

the consultation with the Indian tribes and individuals was only

subsequent to your work, rather than concurrent with your work.

Could you comment on that?

Secretary NORTON. Our work is still in progress, and we are

learning things all the time about how we can improve our proposal. We have, essentially, two conflicting major pieces of information. One of those says that the BIA system is broken, that BIA

35

has not successfully managed these assets, and after years and

years of trying to improve the BIA management, we still haven’t

seen results.

The other aspect of it is largely coming before the tribes saying

continue to have BIA do the same thing. And so we get some very

strong indication that BIA ought to be out of the picture of doing

the management, other very strong feedback that BIA needs to continue to be at the center of this process. And, frankly, we are still

trying to figure out how we get the best of both worlds.

Mr. KILDEE. Since it is a work still in progress, how wed are you

then to the idea that you must separate out these fiscal trust responsibilities into a separate agency from BIA?

Secretary NORTON. I think that at some level we need to have

leadership separate from BIA. We need to have a system that is

going to be able to look at this in a fresh way and really move forward with reform. It needs to be outside of the old structure. Now,

whether that is a different part of BIA or whether that is a parallel

agency with BIA, there are other proposals to have it entirely outside of the Department of Interior, and those are things that you

all should consider. But, at some point, we need to have enough departure from the current organization to have real reform.

Mr. KILDEE. But it could be, as you indicated, maybe still within

the BIA as a separate entity within BIA?

Secretary NORTON. That is what a number of the tribes have proposed. I still believe that our separate organization is superior and

is more likely to bring needed change, but I have not entirely

closed my mind to the opinions I am hearing from other people.

Perhaps they can offer some way that we can get that reform. At

this point, I do still remain convinced that a separate organization

would be stronger in bringing the kind of reform that we would like

to see.

The CHAIRMAN. The time of the gentleman has expired.

Mr. KILDEE. Just one final. There is a very obscure agency in

this city, which is very important. It is called FASB, the Federal

Accounting Standards Board, which has come into prominence now

because of Enron. When you went through all of your work on

these accounts, did you follow all of the standards of the FASB, the

Federal Accounting Standards Board?

Secretary NORTON. Let me defer to Mr. Slonaker on that.

Mr. SLONAKER. I was tangentially involved with some of the

thinking on what the organization should be. I don’t believe that

FASB’s standards would apply to the creation of an organization,

unless I misunderstood your question, sir.

Mr. KILDEE. No, that was my question. So you did not necessarily apply FASB to this accounting system.

Mr. SLONAKER. Well, let us be clear on what we are talking

about here. We are really talking about two things. You are talking

about, I believe, sir, FASB accounting standards, on the one hand.

I think the Secretary and I are addressing issues having to do with

the accounting system per se. Obviously, there are certain accounting standards that will apply to accounting that is done for the

beneficiaries, but I think the thrust of the Secretary’s comment

here has to do with the organization to create and run that system,

if I am making myself clear.

36

Mr. KILDEE. Not entirely, but I will pursue that later.

Thank you.

The CHAIRMAN. Thank you.

The gentleman from Montana, Mr. Rehberg?

Mr. REHBERG. Thank you, Mr. Chairman.

I am struck by the opportunity to follow Mr. Kildee. Between us,

your 26-year tenure and my 1-year, we have 27 years between us

to solve this problem.

[Laughter.]

Mr. REHBERG. And what I have come to the conclusion, Mr. Kildee, in serving here for a year, that a lot of people support reform

as long as it doesn’t change anything, and I find that unique and

ironic that we would be talking about a problem that has existed

for so long and perhaps been on the back burner. And I thank some

of my constituents for bringing the case forward. Perhaps it takes

the Court to— Mr. KILDEE. I might say to the gentleman that, in fairness to

you, there is 26 years’ experience and that is 1 year repeated 26

times. I am not sure what I have.

[Laughter.]

Mr. REHBERG. Let me begin by asking the question of you,

Madam Secretary, you made the point that a lot of these trust responsibilities were created by treaty. Were those done by tribe, by

reservation or as a whole? And where I am leading with this is,

trying to think outside the box, is there any reason why all tribes,

it is all or nothing? Is there an opportunity within the Congress to

make a determination that if there are tribes that don’t like the

way the BIA has handled it, that they would have the opportunity

to separate themselves and go out to the private sector and have

a private sector trustee responsibility?

Secretary NORTON. I would certainly like to see the opportunity

for tribes to be able to do that. I think that that might be very beneficial for tribes, and I certainly personally would like to preserve

that option.

Our problem is essentially our needs to have a unified computer

system, for example; to have one data base where we can look to

find the information on who owns which pieces of property, what

the leases are on those property, what the accounts receivable are,

and so on and so forth, to have a basic financial accounting system

that meets 21st century accounting standards. It is almost impossible to do that, unless you have some standardization.

And so our needs, from a management standpoint, to have standardization complicate the policy goal of letting the tribes to have

their independence to chart their own way. So that is just one of

the tough issues that we have to grapple with.

Mr. REHBERG. Mr. Slonaker, you have been there for how long?

Mr. SLONAKER. I was confirmed about 20 months ago.

Mr. REHBERG. And you took Mr. Holman’s place?

Mr. SLONAKER. Yes, sir.

Mr. REHBERG. It seemed, in his prior statements, that he was

willing to consider and, in fact, recommended to the Secretary that

it be taken as one of the alternatives taken outside of the Department of Interior. Is that a position that you have tried to promote

within your responsibility as the trustee?

37

Mr. SLONAKER. The idea of taking it outside of the Department

is very appealing. I, clearly, concur with the Secretary that this

ought to be this trust function, which I would refer to as a fiduciary

function, as opposed to what I also would call the large trust obligation of the Government. In other words, I am distinguishing between the financial management of the land, on the one hand, for

income for beneficiaries, on the one hand, and the larger trust obligation, which has to do with social services, and highways, and so

on and so forth.

So I, clearly, believe and concur with the Secretary that the financial trust or the fiduciary trust, if you will, should be put on

its own footing in a separate organization. I also think the idea of

moving it entirely out of the Interior Department is a very appealing one. As you know, under the 1994 act, the act created an advisory board to the Special Trustee, and that advisory board, as a

matter of fact, has recommended just that.

But there are many alternative plans on the table here, to which

the Secretary has alluded. The central premise, I believe, is that

there has to be a single organization in Interior or outside Interior

that is responsible for the fiduciary trust obligations of the Government.

Mr. REHBERG. Let me ask you, then, between the two of you, do

you have any indication from any tribe that they would be willing

to try and be a pilot project for moving—I know you have a big bite

to chew here, but it would seem like if we took smaller bites and

maybe separated some and showed, perhaps, that there was an alternative or an opportunity for some of these tribes to move out on

their own, giving you the time to go ahead and create your own

system, but not having the responsibility for that individual entity,

that that might be a way of solving some of the problems. Again,

it is all for one or one for all. It seems a little burdensome to you

because it is so big.

Secretary NORTON. There are some tribes that are already doing

their own management, and some tribes are doing a very sophisticated job of managing their assets. Perhaps Mr. Slonaker would

like to provide some details on that.

Mr. SLONAKER. Under the 1994 act, tribes do have that option.

Very little that has happened so far, and I can’t tell you for sure

why, more hasn’t happened, but most tribes have opted to stay

within the Government’s obligation.

The CHAIRMAN. The time of the gentleman has expired.

Does the gentleman from New Jersey have questions? The gentleman is recognized for 5 minutes.

Mr. PALLONE. Thank you, Mr. Chairman.

I have to start, Madam Secretary, by being very blunt. I really

don’t believe that creating a new agency for these trust accounts

is the answer, and I think it is pretty clear that most, if not all,

of Indian Country has pretty much said the same thing.

I listened to what you said today, and I know this is, as you say,

just the beginning, but I don’t really see that you have made the

case that we need a new agency. You talked about how we need

more funds, we maybe need a change in the workforce, we need

new computers, new accounting methods, but I don’t see how that

problem is solved or necessitates creating a new agency. It seems

38

to me that you need to reform the existing agency and making

those changes within the existing agency, not just transfer everything from Hall A to Hall B.

The other problem I have is that you talked about how the, when

you had the meetings this weekend, that the tribes felt, not that

they agree with everything at the BIA, but they felt some sort of

affinity to the BIA, and I think that kind of goes to the heart of

the matter.

I think that your approach, and as Mr. Kildee said, of basically

coming up with the separate agency idea and then going later for

consultation, is a kind of a patronistic approach. That is the basic

problem here. In other words, this is money that belongs to the

Indians. This is their trust. This is their accounts.

I think that essentially what they are saying is that it should

have been left to them, at least initially, to come up with the idea

about how to go about handling this, rather than coming up with

your own idea and saying we need a new agency and then saying,

OK, we will consult with you and see if you can somehow merge

your ideas into what we are already doing.

My questions really go to the consultation process. If this task

force that has been set up now that you mentioned is really going

to be effective, it seems to me that you should just start from

scratch. You should not assume that your proposal is the way to

go and that you are just taking some ideas from them. You should

just say, look, we are starting from scratch, you know. I have this

proposal out there, but you come up with the idea, and you tell me

what you think, and then we will give our input.

I would ask you to comment on that, but two or three other

things to comment.

Second, I would say give them enough time. I mean, it is not

clear at all to me that this isn’t something you are trying to wrap

up in a few weeks or a few months. I think that this is something

that needs some time for this task force to be successful and to be

able to come up with a recommendation that is, essentially, a consensus approach.

And then the third thing I would ask you to comment on, a larger issue, is what is consultation all about? In other words, I know

there were executive orders in place under the Clinton administration that said that you had to consult. Is this administration taking

the position that those executive orders are still in effect and that

there is a requirement of consultation from the beginning on this

or even other issues?

First, why not just start from scratch, scrap everything; second,

what kind of time period are you going to give them; and, third,

comment to me about the consultation process and how this administration sees the existing executive orders or whether they need to

be repromulgated or they are still in effect on the consultation

issue.

Secretary NORTON. Those are some very good questions.

First of all, as to the idea of just sort of taking everything off the

table, and just starting from scratch and just, you know, letting

this all bubble up slowly through the process as we get consensus,

the problem is that my trust responsibility doesn’t get put on hold

for several years until we reach an end result. I have a trust reVerDate 11-MAY-2000 09:07 Sep 26, 2002 Jkt 000000 PO 00000 Frm 00042 Fmt 6633 Sfmt 6602 77526.TXT HRESOUR1 PsN: HRESOUR1
39

sponsibility that exists right now, and I need to do what I think

is best to improve our provision of services.

And the proposal we put on the table was done from my perspective as a manager. As a manager, I am convinced that the best way

and the most straightforward way of achieving an improvement in

our management would be the create a new organization, to give

clear direction, to start moving things into a process that is organized, makes sense, very directed and really oriented toward financial management.

I, also, recognize that that has been a fairly consistent theme

over decades of looking at reform proposals. Every time something

that has been put on the table that would really be a dramatic reform proposal has been offered, it has always failed to materialize

because it is not often what the tribes want to see. It is a change

that has been difficult to get.

I want to push forward to make some changes and to make

changes in a short timeframe. For those changes to be successful,

though, it is going to have to reflect the needs of the beneficiaries,

and to best get that reflection of those needs incorporated into the

process, we need to be doing very intense discussions with the

tribes. That is what we have begun to do through this task force.

Neal McCaleb has been in days and days of consultation meetings with the tribes. I have attended consultation, a couple of the

consultation sessions and spent some hours with tribal leaders discussing these issues. Clearly, we have a lot more to do, but I would

rather do that in a concentrated timeframe, to get that input, to

get those decisions made, than let this just go on, and on, and on

and not reach closure.

Mr. PALLONE. About the executive orders, do you consider those

in effect—

Secretary NORTON. Oh, I am sorry. We are abiding by those executive orders. We have been working to get our process to meet

those executive orders and to work with the tribes on that.

Mr. HAYWORTH. [Presiding] The gentleman’s time has expired.

Mr. PALLONE. Thank you.

Mr. HAYWORTH. I thank the gentleman from New Jersey.

My friend from Utah, 5 minutes.

Mr. CANNON. Thank you, Mr. Chairman.

Madam Secretary, I couldn’t help but think, as you spoke, of the

first time you appeared here before us, where I think I expressed

my approval at your appointment, and perhaps even gushing approval. I was hopeful, at that time, that you would have the ability

to come into the Department and solve some of the problems, a culture which resulted in lying to the representatives, the elected representatives of my State, before the announcement of a huge monument, the kind of culture that resulted in the planting of lynx hair

and hundreds of other problems that you have seen in that Department, but you have had some difficulties in doing that.

Our good friend, your Under Secretary, Steve Griles, was not appointed for some time. When was he actually confirmed by the Senate?

Secretary NORTON. He took office in late July, and so his appointment or his confirmation was about that time.

40

Mr. CANNON. And Cathleen Clark, who is your Director for the

BLM, finally got her confirmation when?

Secretary NORTON. Oh, just right as the Senate was leaving town

in December.

Mr. CANNON. We really do appreciate the other bodies acting on

that expeditiously before leaving town, I might point out. These are

great people, and I appreciate the quality of people that you have

chosen to surround yourself.

May I ask how much of your time are you spending on this issue

now?

Secretary NORTON. I am spending, well, certainly, more on this

issue than any other single issue. For the last few months, perhaps

more than all other issues put together.

Mr. CANNON. Like, say, 60 percent of your time; is that where

you are going?

Secretary NORTON. That would be a rough estimate, yes. I

haven’t obviously kept track of the hours, but—

Mr. CANNON. This is just ballpark.

Secretary NORTON. It is a predominant issue for us.

Mr. CANNON. It is a lot. And how much of the time of Under Secretary Griles is he spending on this issue, do you think?

Secretary NORTON. He is probably spending about 12 hours a day

on this issue, and then the rest of the Department is in addition

to that.

Mr. CANNON. So we have a something that advertises 110-percent effort, he is doing something more than 110 percent.

Secretary NORTON. About 150 percent, I think.

Mr. CANNON. And you have an Assistant Under Secretary, Jim

Cason, who is, essentially, spending full time on this issue, as I understand it.

Secretary NORTON. Full time for Jim Cason is 18-hour days. He

has been putting those in consistently. It is amazing, you know, no

matter how early you come in, no matter how late you are there,

whether it is a Saturday or a Sunday, we have those people and

some others working on our trust reform issues.

Mr. CANNON. And if I seem approving, Mr. Chairman, of the

team at Interior, it is because I worked with them when I was at

Interior, and I can attest that what the Secretary is saying probably understates the magnificence of what they are capable of

doing.

On the other hand, if I can get back to one of the issues at hand

here, a number of checks have not been mailed out to people who

depend on those checks. Do you have a sense of the number of

those checks that haven’t been mailed out or the amount of money?

Secretary NORTON. Let me see if I can get that information. We

do have some information on what has been mailed out. Neal, let

me defer to you on that.

Mr. CANNON. What I am really shooting at here, and Mr.

McCaleb, if you could help us, it seems to me that a whole lot of

people are suffering a huge amount of pain because checks are not

going out from the Department, which they have depended upon to

make their house payments, and their car payments, and to buy

groceries; is that the case or not?

41

Mr. MCCALEB. Indeed, that is true. And in response to your specific question, it is hard for me to quantify how many checks have

not been mailed out because they are not uniform each month. I

can’t tell you how many checks have been mailed out since early

January, when we began to bring some of the systems up.

Mr. CANNON. But it is fair to say that we have got a lot of people

who are suffering because they don’t have a check they depend on.

Mr. MCCALEB. Absolutely. We are not sending out any oil and

gas mineral lease checks that are the preponderance of the— Mr. CANNON. Madam Secretary, I want to just touch on another

issue before my time runs out.

You are a lawyer, and I suspect you talked with the solicitor

after you received the order that affected what information you

could have on the Internet, did you consider that and did you consider alternatives to shutting down your Internet systems?

Secretary NORTON. Our systems are interconnected. The court

order says that anything that is connected to the trust data, where

someone, an outside hacker, could gain access to trust data, has to

be shut down. As a consequence, we saw no alternative but to shut

down every aspect of our system. We are now working to bring

those things back up.

Mr. CANNON. It is hard for me to imagine how a Federal judge

could have a greater effect on slowing down the processes which

the American people elected a President, who nominated you and

who confirmed you and your fellows at the Interior Department

more than has happened here and caused such a retardation of

what I think are important issues for Americans and which are

painfully important to those individuals who haven’t gotten their

check. I hope we can get this problem resolved in a way that the

Department, and the American people and the recipients of those

checks can move forward, and we can get back—my office has a

problem and I know the Committee has a problem getting information from your Department because of your being off-line. I hope

we can get that resolved soon.

Thank you.

Mr. HAYWORTH. The gentleman’s time has expired. We thank the

gentleman from Utah.

Our friend from American Samoa, Mr. Faleomavaega.

Mr. FALEOMAVAEGA. Thank you, Mr. Chairman.

I do, also, want to welcome Madam Secretary for appearing at

our Committee this morning.

Madam Secretary, I know this position may not be considered

very important probably among your peers. It doesn’t even require

Senate confirmation or not even a top security or crypto clearance,

but, Madam Secretary, when are we going to get a Director for Territorial Affairs? It is almost one-third of this administration’s term,

and for half a million people’s needs and welfare, and we don’t even

have a point person for this within the Department.

Can you take this to President Bush? What can we do to assist

in this effort? I really think it is very disappointing that we still

do not have a Director that should oversee the needs of the territories.

Secretary NORTON. We are frustrated by that as well. We have

been in the process of trying to identify the right individual for

42

that position, and even just within the past week I have heard

some additional efforts in that regard, but we do not yet have that

final decision made.

Mr. FALEOMAVAEGA. I was told 3 months ago that the appointment was going to be made in 2 weeks. Now it is the year 2002,

and we are about ready to go to the month of March. Maybe we

might as well not even have a Director for Territorial Affairs.

I do want to second the concerns that have been expressed by the

previous members of the Committee, especially of our Chairman

and also our ranking Democrat, Mr. Rahall. This issue is not a new

issue, as you well are aware of. I believe the late Congressman

Mike Synar, from Oklahoma, for 5 years he conducted extensive

hearings, and research and study of this issue of trust funds. And

now, at this point, perhaps the only reason why we are moving on

this is because the Federal courts are on our backs now in trying

to find a solution to this.

In the 1990’s, we enacted or authorized some $20 million even

to conduct an auditing, and I guess we were not even successful in

doing that, expended $20 million just to audit the accounts. In

1994, we passed the American Indian Trust Fund Management Reform Act, hopefully, to resolve the issue. I would like to ask you,

Madam Secretary, is this law that was passed in 1994, there is no

teeth whatsoever in helping reconcile the records or whatever the

responsibilities that Mr. Slonaker is to take up?

Are we short of any enactment on the part of the Congress to

give you more authority to address the issue so we don’t have to

go to the Federal court?

Secretary NORTON. The 1994 act sets out some specific standards

that we are to meet in our trust responsibilities, and that is what

we are implementing as we go through this process, and that is

what has formed a large part of the court’s decisionmaking process

as well.

The issues have largely been ones of implementation, and clearing out the—

Mr. FALEOMAVAEGA. I would like to ask Mr. Slonaker, since he

is the Special Trustee, are there any deficiencies in the law that

we passed in 1994, Mr. Slonaker, so that we can give you the necessary authority to do what you need to do to reconcile the accounts. It seems to me that is the most fundamental problem that

we have here. I hate to make it sound simple, but if we have got

problems since we passed this last 6 years or 7 years ago, tell us

how to improve the law so we can give you more teeth in the process.

Mr. SLONAKER. Very interesting question. I don’t think the 1994

act, the way it was set up, has been terribly successful, and I guess

the problem that I perceive is that as I have looked at the whole

process of trust reform, what is really needed—which the Secretary

has alluded to—is stronger organization, and I would add one very

important thing to that, and that is stronger management.

Mr. FALEOMAVAEGA. Even from the previous administration, they

kept telling us, We are going to reorganized the BIA, we are going

to reorganize the BIA, and we never got any reorganization plans

for the BIA. So my question is: Rather than going through this exVerDate 11-MAY-2000 09:07 Sep 26, 2002 Jkt 000000 PO 00000 Frm 00046 Fmt 6633 Sfmt 6602 77526.TXT HRESOUR1 PsN: HRESOUR1
43

ecutive procedure and reorganizing the BIA, perhaps we need to

make improvements in the law that we passed in 1994.

What do you think of that, Madam Secretary?

Secretary NORTON. The court found that the Department was in

breach of the responsibilities created under that act, and so our efforts have been to cure those breaches and to move forward with

complying fully with our responsibilities.

Mr. FALEOMAVAEGA. I have several other questions, Mr. Chairman. I know my time is up. I will wait for the second round.

Mr. HAYWORTH. I thank the gentleman from Samoa.

The gentleman from California, Mr. Gallegly.

Mr. GALLEGLY. Thank you, Mr. Chairman. And I want to thank

the Chairman for calling these hearings today, and I welcome you,

Secretary Norton. I know you have some very great challenges

ahead, as has every Secretary of the Interior in my 15-plus years

here.

The mismanagement of the Indian trust funds I believe has got

to stop, and if the executive branch can’t stop it, I really believe

it is incumbent on this body to enact legislation which will do the

job once and for all.

During the 104th Congress, I had the distinct honor of chairing

a Subcommittee of this Committee which had jurisdiction over Native American legislation. At that time it came to my attention that

hundreds of thousands of individual Indian money accounts had

been mismanaged by the Interior Department.

The Resources Committee created a Task Force of Indian Trust

Fund Management. That task force held hearings in Washington,

D.C., Anchorage, Alaska, and in Phoenix. The task force heard

from all sorts of Native Americans, Government, and private witnesses.

The General Accounting Office informed us that 32,901 trust account transactions involving over $2.4 billion could not be traced in

an audit, which couldn’t even be called an audit because there

weren’t enough documents to audit. Things were so bad that the

auditors dropped the word ‘‘audit’’ and adopted the word ‘‘reconciliation.’’

The GAO has also informed us that only 10 percent of the Indian

mineral leases selected to be reconciled could even be verified as

having been acted upon. We were told of discoveries that trust

management systems did not exist, that an accounts receivable system did not exist, and that an adequate records retention or archive systems didn’t even exist.

Of course, the Bureau of Indian Affairs assured us that these

problems were being solved and that a new fancy accounting system was being put into operation and more funding was needed,

and that mismanagement of Indian trust funds would end. In May

1996, the Cobell suit was filed in the Federal district court. Next

we heard that Secretary Babbitt and his colleague at the Treasury

Department were being held in contempt of court and fined

$600,000.

Meanwhile, Congress continued to appropriate millions and millions and millions of dollars in what appears to have been a futile

effort to straighten out this mess. And now President Bush has

44

sent us a proposed budget for fiscal year 2003se 004, which includes continued funding of these activities.

I applaud the Chairman for holding the hearings. I applaud you

for being here, Madam Secretary. It is very, very hard for me to

be optimistic, even with all the words we have heard this morning.

I look forward to us moving ahead. I believe that the Native

Americans have put up with this charade long enough, and I hope

that we can do something once and for all, and I hope that if the

administration can’t do it, that the Congress will act on it.

On your plan, Madam Secretary, before implementation, is it

your intent to look for a comment from the Native American community before any form of implementation takes place?

Secretary NORTON. Yes, Congressman, we are very actively involved in getting comments and consultation and input from the

Native American community, both formally and informally. So we

are very actively engaged now in that dialogue.

Mr. GALLEGLY. How optimistic are you, Madam Secretary?

Secretary NORTON. I am fairly optimistic that we have good discussions taking place and we are getting a lot more understanding

in the last few weeks than we began with. So we have made tremendous progress, I think, in a couple of months in getting better

understanding from both sides.

On the other hand, there is a tremendous resistance to change.

As we have become more and more familiar with the management

challenges, every time we unpeel a new layer of the onion we find

more challenges. We just put out an eighth report to the court that

is a very detailed analysis of where we are, to the best of our understanding, on each of the various management issues in front of

us. And we would be happy to provide you with a copy of that. It

is a very pervasive management problem, and almost everything

that we are doing can be improved. We are just, you know, in the

process of learning how to do those improvements.

Mr. GALLEGLY. I thank you, Madam Chairman. I thank you, Mr.

Chairman. When I was first named to chair the Subcommittee on

Native American issues, I had someone come to me and say, Mr.

Chairman, a few years ago when General Custer left for Little Big

Horn, he gave the order: Don’t do anything—gave the order to BIA:

Do not do anything until I return.

There are a lot of folks that believe that that order was complied

with.

[Laughter.]

Mr. HAYWORTH. I thank the gentleman from California.

We have heard the bells ring, and we have a vote, 15 minutes

for the first vote, followed by a 5-minute vote. But I believe we do

have time to turn to my friend from New Mexico for his 5 minutes

of questions before we adjourn to walk over for the vote.

Mr. Udall?

Mr. UDALL OF NEW MEXICO. Thank you, Mr. Chairman. And welcome, Madam Secretary. Good to have you here today.

Mr. Chairman, I would ask that my statement be put in the

record.

Mr. HAYWORTH. Without objection.

[The prepared statement of Mr. Udall of New Mexico follows:]

45

Statement of The Honorable Tom Udall, a Representative in Congress from

the State of New Mexico

Mr. Chairman and Ranking Member Rahall:

In the 1800s the United States Government entered into a trustee relationship

with the Indian Nations. Over the last century, the trust relationship has developed

and has been defined, by our Constitution, statutes, federal agency rules and practices, executive orders, and through numerous court rulings. In addition, this unique

trust relationship and responsibility has helped to preserve the cultures, traditions,

values, and inherent sovereign rights which has led to support Indian tribal selfdetermination and self-governance and paved the road for the federal government

to work with Indian tribes on a government-to-government basis.

So why are we here today? We are here because for more than a century——-as

the federal government has been the trustee of funds for Indian tribes and individual Indians—–Congress, as well as previous Administrations, continue to work

on addressing the issues of the mismanagement of Indian trust fund accounts. However, the last several Administrations have put proposals on the table for discussion,

but little success has come from those discussions and the efforts to address the

problems.

Today’s oversight hearing, which I am glad to see Secretary Norton attending, will

focus on the status of individual and tribal trust fund accounts and how the Department of Interior is responding to issues raised in the class action lawsuit Corbell

v. Norton. These responses range from the Department’s restructuring proposal and

the Tribal opposition it faces to the lack of effort, on the part of the Secretary of

Interior, to work with the court and special master to stress the potential ‘‘economic’’ hardships the Internet shutdown, which holds the Indian trust data, could

create for the more than 40,000 Native Americans who receive royalty fund checks.

These funds are generated from rights and leases, including grazing, quarrying, timber, agriculture, oil, natural gas, and minerals, on lands held in trust for tribes and

individual Indians.

At issue for me and the members of the Navajo Nation, Jicarilla Apache, and

Pueblos—-from the congressional district I represent—-is that over 40,000 Native

Americans have not received any royalty checks from the federal government since

December 6, 2002, when U.S. District Judge Royce Lamberth ordered the Department of Interior to shut down its Internet links. Judge Lamberth issued the order

after he concluded that inadequate computer security left the trust accounts vulnerable to outside hackers.

Mr. Chairman, as a result of this order Native Americans from throughout our

country, who depend on and have regularly received check payments prior to December 6th, have been left out in the cold. Many Native Americans depend on these

checks to pay their rent, purchase food and clothing, as well as purchase other basic

necessities. Everyone seems to be doing something to assist Native Indians and

tribes who are waiting for their checks from the federal government. In the Navajo

Nation for example, the Navajo Nation Council voted on January 26th to disperse

over $500,000 in grants to hundreds of financially strapped Navajo families on the

east side of the reservation who have not been paid their gas and oil royalty checks

by the Department. I’d like to remind Secretary Norton that the issuance of royalty

payments to Tribes and individual Indians are done monthly, some quarterly, and

some annually. With that said, I believe that the federal government should pay

back the Navajo Nation for their efforts to help their constituents and the federal

government should also pay those who are awaiting their checks with interest.

What is an insult to the tribes across the country is the ‘‘rhetorical spin’’ that the

Department of Interior is putting out, and I quote, ‘‘Royalty payments will be made

eventually as soon as we can work out with the [court’s] special master to bring

some of our systems back up that relate to this lease information.’’ This quote appeared in a January 8th article in the Washington Post and almost a month later

we are still waiting. I believe neither the Department nor you, Madam Secretary,

realize the gravity of the situation which weighs heavily upon our tribes and individual Indians day-by-day as the Department continues to work at a snail’s pace

to get these checks out.

Mr. Chairman, I find it hard to believe that the Department did not—-nor currently has—-safe guards in place to administer the distribution of checks should the

Department’s computer system crash or go off line in the future. What I find particularly disturbing is that the Department—-realizing that without their computer

system they could not issue checks—-didn’t make a strong or convincing argument

to Judge Lamberth or the Special Master that a shutdown would create economic

hardships on those who are dependent on the checks to survive.

46

I believe that the Department needs to reassess the steps they are taking to respond to the issues raised in Corbell v. Norton. When the 193 tribes of the National

Congress of American Indians unanimously adopted a resolution opposing the Secretary’s Plan, similar to actions taken by other tribes and pueblos throughout the

country, they sent a clear message that they oppose the Department’s restructuring

plan.

I don’t think coming up with a plan, taking that plan across the country to socalled consultation meetings, asking the Congress to allow for the reprogramming

of funds to create a new Agency to handle trust assets management, and doing all

of this in haste is the right path to take. The path that the Department has taken

and which we continue to travel I have not doubt will result in a future Congress

and Administration having to address this very same issue with little to no success.

Thank you Mr. Chairman. I look forward to hearing today’s testimony from Secretary Norton and our two other panels.

Mr. UDALL OF NEW MEXICO. Madam Secretary, I think you have

done a very good job at telling us that this is a very difficult problem, but I would like to emphasize what my colleague Chris Cannon from Utah said and put a human face on this issue.

Many of my constituents are impacted enormously by these IIM

accounts. I mean, we have had chapter meetings wherein, as you

know, the Navajo reservation is very rural, and so if somebody has

to leave their piece of grazing plot and coming into a chapter meeting, it is a big deal. And when you have 400 people show up to a

chapter meeting and all of them very upset that they are not getting royalty payments, it is a huge deal. And when you look at the

human consequences, which what we are talking about is many of

these elderly people that have survived on these checks for many,

many years, and now the checks aren’t going out, as you and Mr.

McCaleb have just acknowledged.

And so I can’t quite understand how this all happened if somebody knew that this was going to be the impact, and I guess my

first question to you is—I know you are a former State Attorney

General. I know you know about representing big agencies in front

of the courts. I can’t believe that a Federal judge would enter an

order like this if he was told of the impact that this was going to

have. And what I want to know is: Did your attorneys tell the

judge in a very concrete way that constituents of mine, constituents, I think, of other members here on the panel—Mr. Cannon obviously has people in that situation—that these people weren’t

going to get check, that they were going to have some of their

homes foreclosed, that they were going to probably have cars repossessed?

This is something that is having a devastating impact on the reservation, and I don’t understand how a judge would do this. So can

you tell me that your lawyers laid this all out for him?

Secretary NORTON. The plaintiffs moved for the restraining order

and the injunction to protect the Indian trust data from hackers

who might come in and harm that data. The primary focus has

been in trying to protect that information. Obviously, the impact is

one that we are realizing more and more as time goes on.

It was my hope that we would be able to get those systems back

up online more quickly than we have been able to do so. And we

put our initial emphasis on getting exactly those systems up and

running. The first requests that we put forward were for those systems that would provide payments to Indians before any of the

47

other aspects of the Department’s Internet system, except for a few

that were critically important for public health and safety.

Other than those very small parts of our Department’s network,

the first ones we have dealt with have been the most difficult ones,

and those are the Indian financial processing aspects of the system.

So we are put that as our highest priority, and we are moving forward.

We have been compiling the impacts and presenting—you know,

putting all of that information into a report. We have been submitting that information to the special master and working with the

special master to keep him apprised of the impacts of each of those

systems.

Mr. UDALL OF NEW MEXICO. Madam Secretary, with all due respect, I don’t think you—either you didn’t understand my question

or you didn’t focus on it, and my question was not what you have

done subsequently. I know that a court order has been entered, and

I know that you and your people are very upset about it, and you

know the consequences and you have tried to take actions to remediate it.

But did your lawyers tell the judge at the time there was discussion of the plaintiffs’ order, did they say this is going to be the result and argue that vociferously? Your counsel’s job is to represent

the trust responsibility, to represent the Department, to do everything that they can to let the court know the consequences of entering an order like this. And I am mystified as to how this happened.

Mr. HAYWORTH. The gentleman’s time has expired.

Mr. UDALL OF NEW MEXICO. No, I understand, and we have a

vote on.

Mr. HAYWORTH. And I thank you. I am trying to be indulgent

with the time. If the Secretary wants to respond briefly?

Mr. UDALL OF NEW MEXICO. And I will stick around, like my colleague here, for a second round, also.

Mr. HAYWORTH. Great. If you want to respond, we can. I am trying to be accommodating to members. The gentleman from Idaho

has to be three places at once, too, and he asked to go ahead with

his questions. So I recognize him for 5 minutes.

Mr. SIMPSON. Thank you, Mr. Chairman. Thank you, Secretary.

I appreciate you being here today to testify on this, and I appreciate the fact that during your confirmation hearing in the Senate,

this is one of the issues that you brought up at that time that needed your attention. It is a difficult issue.

I have before me a press release, I guess, that is found on the

Cobell website on ‘‘Judge suggests game playing by Interior may

hurt’’—‘‘may be behind Internet shutdown.’’ And as Mr. Udall mentioned, did the plaintiffs’ attorney object to—I mean, as I understand it, you have tried to put back online those things necessary

to get the payments out to the Native Americans as quickly as possible. Has the plaintiff’s attorney objected to that?

Secretary NORTON. Yes.

Mr. SIMPSON. OK.

Secretary NORTON. It’s my—let me verify.

Yes.

Mr. SIMPSON. Thank you. On another issue, underlying your reorganizational proposal, is it driven more by the Cobell litigation

48

or is it driven by the trust fund responsibility that is entrusted to

you?

Secretary NORTON. It is twofold. The court has in many respects

provided the impetus for moving quickly. The responsibility is one

that is—as everyone has said, almost every Secretary of the Interior coming in has recognized the need for reform and has tried to

move forward with some sort of reform. But at this point, I think

having the three branches of government all focused on reform may

be a unique time period.

Mr. SIMPSON. I appreciate that. On the board that you had up here, we were looking at the administrative costs, $800,000 for

those accounts that had 20 transactions or more, $9.76 million for

those that had 20 transactions or less. Does that money come out

of the trust fund, the Native Americans trust fund?

Secretary NORTON. No. The administrative costs are entirely appropriated money.

Mr. SIMPSON. Should they come out of the trust funds?

Secretary NORTON. That is a question that Congress can look at.

Mr. SIMPSON. In the historical account proceedings, trying to recreate that, you have mentioned that it is going to cost in the hundreds of millions of dollars to do that and do it as accurately as

possible. And we all know it probably won’t be totally accurate because of the loss of records as they get older and older. The plaintiffs have indicated $60 to $100 billion in settlement

costs. Is that reasonable, or are they out of left field?

Secretary NORTON. I at this point don’t want to speculate on that

number for obvious reasons. It, I think, is worthwhile for us to

move forward on trying to more accurately look at the information

that is available to us, to look at data to assess what the real discrepancies might be.

Mr. SIMPSON. One final question. Under this, for lack of a better

term, mess that is created there, that is there in these trust fund

accounts, they are going to get worse over time, aren’t they, with

fractionalization?

Secretary NORTON. Absolutely.

Mr. SIMPSON. So, I mean, it is not only something that needs to

be dealt with from the historical perspective of making sure that

we have it right, but dealt with so that it doesn’t get worse into

the future in one way or another. And somehow we have to deal— Secretary NORTON. That is correct.

Mr. SIMPSON. —with this fractionalization and other things.

Secretary NORTON. Yes, that is correct.

Mr. SIMPSON. I thank you for your work on behalf of the Department of Interior, the people of the country, and the Native Americans. I know you are trying to do a good job, and it is a difficult

task you have got there. We look forward to working with you on

it.

Secretary NORTON. Thank you.

Mr. HAYWORTH. I thank the gentleman for is questions.

The Committee will stand in recess until the votes are completed. Then we will return.

[Recess.]

Mr. HAYWORTH. The Committee will come to order, now that the

power switch has been turned on for amplification.

49

Madam Secretary, and those who join you, we thank you for your

indulgence and spending time on this. It lends credence to your

point that you have been concentrating on this, and we thank you

very much for your patience as we continue.

A couple of notes. Some people have expressed an indication they

would like to do some follow-up questions, and we will try to get

there. But what I would stress to the Committee members, if we

can get to some new and substantive information rather than covering old ground—we understand the challenges of time and being

in so many different places because we have any number of folks

who have a variety of perspectives. But the Secretary and the Assistant Secretary and the Special Trustee have graciously said they

would remain for part of the day, and we are very appreciative of

that.

That is right. I would also point out that we can submit questions in writing as well.

With that in mind, we resume the questioning, and we turn first

to the gentleman from Oklahoma, Mr. Carson.

Mr. CARSON. Thank you so much, Mr. Hayworth. Thank you for

staying around for the continuation of this hearing, Madam Secretary. Thank you for bringing along Neal McCaleb, a great Oklahoman as well. I know we have Chief Swimmer in the back who

has a vested interest in the hearings process today as well.

Let me ask you a couple of questions. We have talked a lot about

the asset side of Indian lands and what amounts to more or less

an unalloyed fiasco over the last 100 years and accounting and for

them.

There is also in many places across the country significant liabilities associated with the exploitation of the natural resources on

Indian land. In my district alone, we have the former center of lead

and zinc mining in Ottawa County, now a massive Superfund site.

Under your proposal, with BITAM taking over responsibility for

some of the trust assets, what would happen to the BIA, for example, in that Superfund site as a PRP, a potentially responsible

party, what would happen to environmental liabilities associated

with some of the Indian land?

Secretary NORTON. Congressman, that is a level of detail that we

have not contemplated in our proposal yet.

Mr. CARSON. OK. Very good. Do you have a sense of at what

point in time whether discussion will be had on establishing those

kind of details and what kind of timeframe we can expect kind of

those details to be unveiled?

Secretary NORTON. That is an ongoing process, and we will be

working with the tribes and consulting as we go along on those

things. That is something that is obviously not at the forefront of

our financial management concerns, and so I would anticipate that

that would be something that would remain in its current posture

for quite a while. And I just am not sure that we would ever contemplate a change for that.

Mr. CARSON. One of the concerns of people who will testify subsequent to you is that asset management is an extraordinarily complicated matter, something outside the expertise of any one of those

people who are spending their lives devoted to the subject, and that

the Department of Interior and the BIA do not have adequate perVerDate 11-MAY-2000 09:07 Sep 26, 2002 Jkt 000000 PO 00000 Frm 00053 Fmt 6633 Sfmt 6602 77526.TXT HRESOUR1 PsN: HRESOUR1
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sonnel to deal with this issue, with all the latest developments with

this, that we have some very fine managers and extremely dedicated public servants, but not the level of specialized expertise it

takes to follow the funds and get to the bottom of all of this.

Can you tell us if you would agree with that statement? And, second, is the BIA, is the Department of Interior under your proposals, you know, planning on hiring folks, you know, perhaps from

the private sector with the kind of expertise in these complicated

transactions that are routinely being done in the commercial world

but don’t yet seem to have infiltrated the Government?

Secretary NORTON. Having a workforce plan is part of our strategic plan to make sure that we do have the kinds of expertise that

are necessary. That is something that is still to go into our strategic plans. We don’t have the specific answers.

I have seen some of the tribes handle very sophisticated oil and

gas operations, for example, and they have done that either

through the tribes themselves or through outside contracting beyond the BIA responsibilities. And I think that has functioned very

well, and we certainly would not want to interfere with the tribe’s

ability to draw on that kind of expertise.

Mr. CARSON. Let me ask—because my time is limited, as is

yours, I know. There are two other areas I would like to inquire

about rather quickly.

First of all is the entire scandal involved in taking down the

Internet and the failures and no checks as a result of that. There

has been—it is my understanding the Department of Interior was

informed about potential security problems with the accounts years

ago and that this is something that has been long in brewing, but

is only recently coming to public attention. Could you tell us when

you were personally informed of any potential security problems

there? And also with this, there seemed to be basic problems that

do not require computer expertise to appreciate for all of us, and

that is, you had multiple vendors, there are no performance reviews being done, no routine security checks, I understand, to

make sure—see how difficult it would be to hack into the site,

things that are just standard fare for people who are operating secure systems.

Can you tell us when you were informed about this and, you

know, kind of what is being done to address—you know, what seem

to be some obvious management failures in the administration of

these accounts?

Secretary NORTON. Government computers nationwide across all

departments have received poor marks for IT security, and that is

something that has been reported on by many different audits that

have been done for many different systems.

I don’t recall when I first heard about these issues. It is something that has really been brought to a focused attention for us

much more recently. We have now recognized that we need to

make changes and need to make improvements, that our systems

were not adequate, and we are now working hard to get those up

to being adequate.

Mr. HAYWORTH. The gentleman’s time has expired. I thank the

gentleman from Oklahoma.

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The gentleman from Montana has indicated that he had a couple

of other questions. The Chair would ask for a show of hands of

those who have additional questions. Fine. We will take that into

account.

We will turn first to the gentleman from Montana.

Mr. REHBERG. Thank you, Mr. Chairman. In preparing for the

hearing today, I was reading over the briefing material and looked

with some anticipation at the report by Ernst & Young. I don’t see

it anywhere in here. Is there a problem with presenting that to

Congress? It seems like we paid for it and it has some information

that may be conducive to solving this problem. And I was hoping

that it would be made available. Can you explain where it is, how

we get it, and why it is not here today?

Secretary NORTON. The Department received requests for the

Ernst & Young report informally, and a formal request from Chairman Skeen and Ranking Minority Member Dicks of the appropriations side on November 20th.

We submitted a request through the Justice Department to have

the court release that report from a protective order. The courts

yesterday denied our request. We felt it was appropriate, given

that, to read from the letter from the Appropriations Committee:

‘‘Access to the Ernst & Young study of the five named plaintiffs is

critical to allow the Committee to evaluate how a transaction-bytransaction review was accomplished and whether it produced the

information needed to reconcile plaintiffs’ accounts and was it a

cost-effective method.’’ Skipping a few things, ‘‘It is imperative that the Committee be

provided with the Ernst & Young report in order to prepare for a

hearing in consideration of the fiscal year 2003 budget request.’’ We need to work with appropriators to obtain the hundreds of

millions of dollars necessary for a financial accounting, for a historical accounting, and our request to have the Ernst & Young report

made public was submitted to the court in that spirit.

At this point we are prevented by the court from providing that

information tot he Committee.

Mr. REHBERG. One of the best decisions I made as a youth was

not to become an attorney, so forgive me if I ask you some basic

questions. I thought I had a future, so I stayed out of the law.

Is there an appeals process? Can we get that report? You know,

as Chairman of appropriations of the Montana Legislature, the Supreme Court one time didn’t agree with something we did, and we

just cut their funding for two of their justices. We did catch their

attention. How are we going to catch the attention of this judge?

He seems to be doing everything in his power to make life miserable, as Congressman Cannon said, for people within the tribes. He

seems to make life miserable for Congress in our sincere attempt

to try and solve a problem that has been sitting around for a long

time. How do we send the message that we want this information?

We paid for it. With all due respect to his legal expertise, he is flat

out wrong.

Secretary NORTON. Let me respond to that by quoting from the

court’s order. ‘‘Either Committee of Congress is free to seek to have

this court modify its protective order to allow disclosure of this report. Should such a motion be filed, the court will be obliged to conVerDate 11-MAY-2000 09:07 Sep 26, 2002 Jkt 000000 PO 00000 Frm 00055 Fmt 6633 Sfmt 6602 77526.TXT HRESOUR1 PsN: HRESOUR1
52

sider the relevant legal questions surrounding possible release of

the report, including whether release is in the public interest.’’

So the court has invited Congress to contact it directly to seek

release of the report.

Mr. REHBERG. Mr. Chairman, through the Committee authority,

I hope we do everything we can to get the information that is relevant to solving this problem.

Mr. RAHALL. Would the gentleman yield?

Mr. HAYWORTH. The gentleman controls the time, if he will yield.

Mr. REHBERG. Certainly.

Mr. RAHALL. I appreciate it, and just to put on the record, I did

write a letter to Secretary Norton disagreeing with the request that

was made by Chairman Hansen. To me, to have this information

released to the public is like asking one to reveal their entire

checking account. And I don’t think many Americans would sit still

for a request by any bank to have their full checking account details made public. So for that reason, I view the attempt to release

this Ernst & Young report in that same vein, and I have opposed

its release, as did the court yesterday, I see.

Mr. REHBERG. Mr. Chairman, reclaiming my time, I look at prior

testimony from Madam Secretary that has quite a bit blacked out.

I would assume that same opportunity exists—is that not correct?—for receiving information that would block out the appropriate personal areas but still give us the opportunity to make a

logical decision on how to solve the problem.

Secretary NORTON. That is a possibility that might be pursued.

Mr. RAHALL. Would the gentleman yield?

Mr. HAYWORTH. The gentleman’s time has expired. If the ranking

member seeks time—

Mr. RAHALL. Just real quick to say it is my understanding that

the information blocked out to which you referred was not a part

of the request that was made by Chairman Hansen.

Mr. REHBERG. If I may take part of your time, I am just suggesting that perhaps it could be done similar to the information

that we received so we could still use that information to make decisions.

Mr. HAYWORTH. The Chair would point out there is always time

to modify and amend. That seems to be a part of the process we

have here.

The gentleman from Michigan?

Mr. KILDEE. Just briefly, Mr. Chairman.

Madam Secretary, I commend you for recommending an increase

of $84 million to remedy deficiencies in the trust management. But

I notice that the President proposes a decrease of $3 million for the

Indian land consolidation account. Can you tell us why? And can

you identify, perhaps not now but send to the Committee, identify

for the Committee the increases and decreases in the President’s

budget proposal for trust management programs throughout the

Department, and include a description of those programs? Could

you specifically tell why he has a $3 million decrease and then if

you could supply for us other increases or decreases within that?

Secretary NORTON. Yes, we would be happy to provide you with

the additional detail on that in written form.

53

The decrease in the amount of land consolidation money is because there is a carryover amount from the previous fiscal year,

and so it is anticipated that we will be carrying some money for

this year into that future year.

Frankly, however, we are looking at our approach to that land

consolidation to see if there are some things we can do to move

that along. I just had a meeting earlier this week to discuss with

my staff whether there are some things that we can do to make

that process operate more efficiently and make sure that we are acquiring as much land as possible with the funds that are available

to us.

Mr. KILDEE. Do you feel that the carryover will be sufficient to

allow you to do your job properly in that land consolidation? The

carryover amount of money from previous years will be enough, despite the $3 million decrease?

Secretary NORTON. Frankly, we are still looking at that. The initial analysis is yes, that should be sufficient. I am looking at

whether there is more that needs to be done over the longer term

to really get ahead of the curve on that problem. And so I want to

continue working with you all to see whether what we need are

some statutory changes or just more funds going into that process.

Mr. KILDEE. If you could do that, I hope that you would ask for

a supplemental, if need be, because that is very important, that

consolidation. And if you could give us a breakdown as I asked of

the various parts of the President’s budget in this area.

Thank you.

Secretary NORTON. I would be happy to do that.

Mr. KILDEE. Thank you very much.

Thank you, Mr. Chairman.

Mr. HAYWORTH. Thank you, Mr. Kildee.

From the Chair’s purview of round two, I believe the gentleman

from New Jersey had some questions.

Mr. PALLONE. Thank you, Mr. Chairman.

Madam Secretary, you mentioned that in your executive order, I

think, on November 21st with reference to this new agency, you

also mentioned that Mr. Swimmer would be the head of it. Now,

I listened before when you talked about how you needed all these

reforms and changes and you needed a separate agency. But my

understanding is that he was the BIA Director under President

Reagan for, I guess, 8 years and I guess—you know, I have two

questions. Why would you take somebody or suggest somebody

who, you know, was there before and the Director of the agency if

you are actually trying to do something very different? And, second,

to what extent—going back to the consultation issue again, to what

extent were the tribes consulted with regard to his appointment?

Secretary NORTON. Ross Swimmer proposed some changes when

he was Assistant Secretary that, had they been adopted, we would

not be in the mess we are today.

There is some disagreement with that.

Mr. HAYWORTH. The Chair would ask for the gallery and those

guests who join us to please contain themselves. We are not here

at a television show. Thank you.

Mr. PALLONE. What about the second part, though? Again, you

know, the concern was that they weren’t consulted when the idea

54

came out in the executive order on the 21st. Were they consulted

at all about him?

Secretary NORTON. No one has been consulted about the appointments process. That is just not ordinarily something that we do—

the consultation process is not well suited to having public meetings to discuss the merits of individual people who are job applicants.

Mr. PALLONE. Well, again, you know, I am not suggesting that,

you know, you would nominate him and he would be confirmed in

some way by tribal leaders. But I just think in the same way that

there wasn’t any consultation, or at least it hasn’t been mentioned,

when the proposal was made on November 21st, there should have

been some consultation as well about who would be the head of it,

or even now at this stage. I don’t understand—you know, I mean,

there is not an official agency yet, so I guess there probably hasn’t

been an official appointment yet. And that could still—you know,

I would ask that you take some input from some of the tribal members at the time when he is—you know, if at some point there is

some action here.

Secretary NORTON. Ross Swimmer is tremendously well qualified. He is a lawyer. He is a banker. He is a former tribal leader.

He is a former Assistant Secretary. He brings to this an incredible

understanding of these issues and a background that is uniquely

well suited to solving these problems. And I have been very impressed with the work that I have seen him do on these issues. He

has been part of our consultation process to listen to the tribes and

to understand their concerns.

Mr. PALLONE. Well, thank you. I don’t want to continue, Mr.

Chairman. Thank you.

Mr. HAYWORTH. Thank you, Mr. Pallone.

The gentleman from New Mexico?

Mr. UDALL OF NEW MEXICO. Thank you, Mr. Chairman. And

thank you, Madam Secretary, for staying around for an additional

round here.

Before you became Secretary, the Navajo Nation filed two lawsuits against—one against the United States and one against Peabody Coal, Salt River Project, and Southern California Edison. And

the basis of those lawsuits was that the Department breached its

trust to the Navajo Nation, and the operative set of facts involved

in those cases revolves around former employees, Ross Swimmer,

Mr. Griles. They were involved in this set of facts.

My understanding, at least I am informed that one of these cases

is already in the Court of Claims and a breach of trust has been

found. So I am asking you, have you looked into these conflict of

interest issues, the fact of having employees that are in—or future

employees that are in a lawsuit situation, have you looked into

that? Or do you intend to look into that?

Secretary NORTON. Without going into the specifics of this particular case, what you are saying is that someone who has been a

Government official in the past and has been sued should not be

a Government official in the future. And I don’t think that is really

the position that you want to be advocating.

55

Mr. UDALL OF NEW MEXICO. I don’t think that is what I am saying. I am saying that there are facts here that give rise to conflict

of interest questions, and I am asking, have you looked into them?

Secretary NORTON. I am not aware of anything that raises a conflict of interest, and so I would be— Mr. UDALL OF NEW MEXICO. Well, I think— Secretary NORTON. —happy to hear some further detail from you

and to discuss a potential conflict of interest. But I am not aware

of anything other than their previous actions as Government officials having been the subject of litigation.

Mr. UDALL OF NEW MEXICO. Subject of litigation, and one of

those suits has, in fact, found a breach of trust, hasn’t it? And they

were both a part of the facts and employees at the time.

Secretary NORTON. I would like to defer to the Solicitor’s office

to provide you with the information about that.

Mr. UDALL OF NEW MEXICO. That would be great.

As you know, for 2 months now, checks have gone out to trust

beneficiaries, individual—they have not gone out to individuals or

tribal. But we are informed that as of 12/17 the court entered an

order that allowed you to temporarily turn on computers to get

these checks out. In fact, the language of the order says on page

6, ‘‘Interior may reconnect to the Internet for specified periods any

information technology system that houses or provides access to individual Indian trust data for the limited purpose of performing

those functions necessary to receive, account for, and distribute

trust funds or appropriated funds or to provide other necessary

services.’’ Can you tell me when was the first time the Department attempted to use that temporary protocol to get checks out?

Secretary NORTON. If I can just go back through some of the

issues— Mr. UDALL OF NEW MEXICO. It entered on the 17th. When was

the first time that you attempted to utilize the power under that

order to get checks out?

Secretary NORTON. We have felt it necessary in the context of the

special master’s interpretation of that consent order to obtain the

permission of the special master before going forward.

Mr. UDALL OF NEW MEXICO. And my understanding is it was

mid-January. So you waited an entire a month before you utilized

the procedure. Is that— Secretary NORTON. That was—the action we took in mid-January

was that we obtained the special master’s permission, and so we

have not proceeded to open up any part of the Department’s computer system without the permission of the special master.

Mr. UDALL OF NEW MEXICO. What part of that order was ambiguous that I just read? I mean, it seems to me that is for a broad,

sweeping authority to the Department to hook back up and get

checks out. What was ambiguous about that order?

Secretary NORTON. It is my understanding that the special master and the plaintiffs would likely object were we to reopen parts

of our computer system without getting advance affirmative permission.

Mr. UDALL OF NEW MEXICO. But the—you know, you have heard

today from a number of members the urgency of getting checks out.

56

It would seem to me the prudent thing to do would be to move forward as quickly as possible to try to get the checks out and let the

court tell you otherwise rather than go off and negotiate with the

other side.

Mr. HAYWORTH. The gentleman’s time has expired.

Mr. UDALL OF NEW MEXICO. Could she follow up on— Mr. HAYWORTH. If she wishes to respond, she certainly can do so.

Secretary NORTON. I was going to suggest perhaps having Jim

Cason, who has been the point person on this, to respond to your

questions. I can provide his opportunity to work with you and answer your questions either privately or in front of the Committee,

whatever is your pleasure.

Mr. HAYWORTH. Well, Madam Secretary, you have been indulgent with your time. We do have other panels here, and we need

to get to those questions. I would ask my friend from New Mexico,

as is the right of all members, to put the questions in writing to

the Secretary, and those who join her, and anyone whom she might

identify and have them respond. We will hold open the hearing

record for 2 weeks to have this information included, and it will be

available in the public domain.

Mr. UDALL OF NEW MEXICO. Thank you, Mr. Chairman. Thank

you, Madam Secretary, for your appearance here today.

Mr. HAYWORTH. Once again, I thank you, Madam Secretary, Assistant Secretary McCaleb, and the Special Trustee, for coming in

and serving on this first panel. We appreciate you being very generous with your time today. We understand there are many other

things, but, again, as I said earlier, I think it provides evidence as

to your intent to try and work through the challenges we face. And

though we may not have unanimity on every jot and tiddle of public policy, I think all of us concerned appreciate your time and attention.

Thank you.

Secretary NORTON. Thank you.

Mr. HAYWORTH. The first panel is excused—or P’s and Q’s or

commas and question marks.

Mr. HAYWORTH. As we say good-bye to the first panel and invite

up the second panel, a bit of housekeeping from the Chair. In the

past, our former Chairman, Don Young, has worked with the InterTribal Monitoring Association and has made a verbal commitment

to continue a dialogue to develop, if necessary, further reform legislation to finalize the accounting problems with the IIM and tribal

accounts. It is my privilege in the chair to take the opportunity to

welcome Don Young’s Alaskan on the Board of ITMA, Bill Martin,

and to offer Mr. Young’s continued commitment to work to resolving the trust fund issue.

I turn now to my friend, the ranking member.

Mr. RAHALL. Mr. Chairman, just a housekeeping request, that all

members—a unanimous consent request—that all members be allowed to insert their opening statements, whether they were given

here today or not.

Mr. HAYWORTH. Oh, indeed. Without objection, we will continue

in that regard. As we welcome up panel No. 2, the Chair would

first turn to my friend from Montana, who has the distinction of

welcoming a couple of his constituents from Big Sky Country.

57

Mr. REHBERG. Thank you, Mr. Chairman. At this time I would

like to introduce two distinguished guests from the State of Montana. The second person, I believe, testifying today is Fred Matt,

a friend of mine, a tribal Chairman from the Confederated Salish

and Kootenai Tribe, which is in the beautiful Mission Valley of

western Montana. It is a 1.3 million acre reservation, and Fred has

got quite a reputation of being a tremendous leader, especially in

the area of forestry, and something that I want to try and present

to this Committee of having him help us perhaps in a pilot project

with timber salvage issues. If you look at what they have been able

to accomplish on their own reservation, I think you will be duly impressed. And thank you, Mr. Matt, for being here today.

The other is another friend of mine, Elouise Cobell. Elouise is a

banker, a rancher, and a member of the Blackfeet Tribe. She is

also the lead plaintiff in Cobell v. Norton. Her activity in the trust

reform issue is not her first foray into activism. She served as the

treasurer of the Blackfeet Nation and is involved in agricultural

and environmental issues in her home town of Browning, Montana,

up on the eastern border of wonderful Glacier National Park. And

thank you for being here today, Elouise, as well.

Thank you, Mr. Chairman.

Mr. HAYWORTH. I thank the gentleman from Montana. I thank

the illustrious Montanans who join us. The Chair would also welcome as part of the panel Michael Jandreau, the Chairman of the

Lower Brule Sioux Tribe. We thank you for coming, Mr. Chairman.

And last in terms of introductions, but not least because the Chair

is constrained to lavish special attention on our first witness, since

he has the great and good sense to reside in the 6th Congressional

District of Arizona, that is my long-time friend Ivan Makil, who is

the President of the Salt River Pima-Maricopa Indian Community

and tireless advocate on behalf of Native Americans and Indian

Country. Mr. President, we will let you begin with your testimony.

STATEMENT OF IVAN MAKIL, PRESIDENT, SALT RIVER PIMAMARICOPA INDIAN COMMUNITY

Mr. MAKIL. Thank you, Mr. Hayworth. I really appreciate the opportunity to be here today, and also Ranking Member Rahall and

other members of the Committee, distinguished guests.

I am Ivan Makil, the President of Salt River Pima-Maricopa

Indian Community. We are located right in the Phoenix metropolitan area, approximately 7,000 members, traditionally a farming

and resource-based community.

I am particularly pleased that Congressman Hayworth, whose

district, as he mentioned, does include our community, is tasked

with the responsibility of chairing this Committee, particularly because I know that he is very familiar, and I am impressed with the

fact that many of the Committee members are well versed with

this issue. So I won’t take a lot of time to go back and discuss some

of the history that I think we all are familiar with. But certainly

the complexity of managing Indian trusts is extremely complex and

certainly is something that you can’t just turn over to anybody, not

anybody, at least, like Arthur Andersen.

Before I propose my recommendation about this issue, I really

would like to re-emphasize the complexity of this topic, because

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managing of these trust issues is an issue that, as has been discussed already, is not just as simple as managing a portfolio of

stocks and bonds. It is necessary to understand the importance of

managing trust lands and that the land itself must be managed as

an asset.

It is also important to understand that this requires recordkeeping of land ownership as well as managing all the uses that

generate revenue. Activities that take place on these lands can rum

the gamut from resource management, agriculture, to real estate.

From the tribal perspective, there is another equally important

consideration. Tribes are tied to the land spiritually and culturally.

We are inextricably connected to it.

There is a long history to consider and fiduciary disputes that

must be resolved. Trusts to be managed not only include tribal

lands that are under the authority of the Tribal Government but

also in terms of allotted lands, which has been discussed as well.

And I could give you a lot of examples of that, but I think there

has been plenty already given.

As President for the past 12 years of my tribe, I have dealt intimately with these issues, and as to my experience not only as

Chairman but on the advisory board, I am here to recommend a

proposed solution based on that experience. I also have to say to

you that I cannot recommend the bank trust model that has been

proposed by Secretary Norton.

I think in addition it is important to say that I have yet to hear

anything substantive as to the benefits of the proposed model. In

fact, if asked, I think tribes would tell you that there is more that

potentially could be lost with that type of model.

You all know the issues and the relationships with the Federal

Government that we have, whether it is through treaties, executive

orders, or Federal statutes or other regulations. The recommendation that I am proposing maintains the role of the Bureau of Indian

Affairs and improves its effectiveness by focusing on the core issues

of trust reform.

My proposal is an independent Indian trust commission. This

independent Indian trust commission follows the lines of actually

what I believe the intent of the 1994 legislation was, in which the

commission, although it was set up under the Office of Special

Trustee and an advisory board was set up, the advisory board was

set up without any authority, only in an advisory capacity.

But this commission would develop a plan for trust reform and

could recommend legislation to Congress. This commission would

also include on the make-up of the commission tribal leaders with

experience in these areas as well as non-members with banking, finance, and other relative experience that would be necessary.

This would have to be established by legislation, and members

could be appointed in several different ways. I think the most familiar way is by the President and with the approval of Congress.

It has got to be independent or at least quasi-independent of the

Department of Interior, and it has to be able to provide transparent

regulatory oversight.

This commission would also maintain control over the budget

that would be earmarked for trust reform and would include, if

necessary, an exit strategy for the commission.

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I realize that my time has run out, and I will just make those

comments briefly, and just say that there are examples of this type

of commission. The FCC is one model, and also the RTC, or Resolution Trust Commission, offered a second model.

I thank you for the time. I realize, again, that my time is over,

and I would be happy to answer any questions.

[The prepared statement of Mr. Makil follows:]

Statement of Ivan Makil, President, Salt River Pima–Maricopa Indian

Community

INTRODUCTION

Chairman Hansen, Ranking Member Rahall, members of the committee, Secretary Norton and members of the Interior department, and distinguished guests,

I am Ivan Makil, President of the Salt River Pima–Maricopa Indian Community.

Salt River has over 7,000 members in what has traditionally been a farming and

resource-based community. While I commend the Department for undertaking this

monumental task and putting its proposal forward, I believe I have some concrete

proposals that may better serve Indian country and the federal government.

We applaud the Committee for holding this important hearing and are particularly gratified that Congressman Hayworth—whose district includes our community—has been tasked with chairing part of this hearing because of his intimate

knowledge about the Indian trust reform issue. My testimony today will focus on

five main areas: (1) the proposed restructuring plan; (2) the consultation process;

(3) the impact of the current state of affairs; (4) previous failed efforts to reform

trust; and most importantly, (5) alternative proposals.

As President of the SRPMIC for twelve consecutive years, I possess extensive personal history, knowledge, and involvement with the lost and mismanaged Indian

trust funds. At the end of my testimony, I respectfully offer my own recommendations to a solution that should, once and for all, help to facilitate a successful completion of Indian trust reform that is consistent with the federal government’s trust

duties and maintains the dignity and respect that America’s first people so richly

deserve.

PROPOSED RESTRUCTURING PLAN

As you know, Mr. Chairman, the proposed restructuring of the BIA is one of the

biggest issues facing Indian country, and it has sparked a wide range of emotion

throughout Indian country. Many tribal leaders have argued vehemently against the

newly proposed Bureau of Indian Trust Assets Management (BITAM). As a positive

and productive response, many tribes have drafted a wide variety of options that

would successfully address trust reform without creating a larger federal bureaucracy. The number of alternative options offered by tribes demonstrates their own

ability and depth in recognizing the core problems associated with Indian trust

management.

For many years, tribal leaders have specifically requested that the Department

focus on the core problems of trust asset management and to stop making politically

motivated cosmetics changes that only exacerbate the issue. Moving organizational

boxes around will not solve the problem. Unfortunately, many lives in our tribal

communities hang in the balance. We all know that solving the fundamental problems in the BIA trust management system is what must happen programmatically

regardless of changes in organizational structure.

Nevertheless, continuing the consultation process and congressional hearings are

an important step toward solving this terrible dilemma that affects the very core

of Indian country. I want to make it clear that the problem of Indian trust reform

has lingered on for too many years and for too many years the sound recommendations of Tribal leaders have fell on deaf ears. I come here today to lend a helping

hand to the members of the Committee and to the Department in solving this growing problem.

THE CONSULTATION PROCESS

As far as the consultation process is concerned, I commend the Department for

extending the original deadline for the consultation period. Only with continued consultation with the tribes will a workable solution be proposed that will truly reform

the trust fund process. It is my desire to see it extended yet again to ensure that

all of Indian country has the opportunity to participate in this important process

and propose solutions. By continuing consultation, the Department will be working

in good faith and demonstrate its desire to truly work together with Indian country.

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1The Secretary has no written plans for either the gather of missing data; no written plan

for the retention of IIM trust documents; no written architectural plan; no written plan for addressing the staffing of trust functions. 2The Tribal Self–Governance Act, P.L. 103–413 3The Indian Self-determination and Education Assistance Act (P.L. 93–638), The Indian Trust

Fund Management Improvement Act of 1994, the Federal Oil and Gas Royalty Management Act

of 1982, National Indian Forest Resources Management Act of 1995, the American Indian Agricultural Resource Management Act of 1995

Given the fact that Indian trust reform directly impacts almost every Indian tribe

in the country, it would make sense that any proposal would include the input of

the actual benefactors of the trust relationship. In this regard, it is my desire to

see the department provide some much-needed guidance regarding BITAM’s affect

on the local level before finalizing its proposal. I am also concerned that the BITAM

proposal doesn’t address the four breaches identified in the Cobell Court Orders. 1

IMPACT OF THE CURRENT STATE OF AFFAIRS

Fortunately, as a self-governance tribe 2, we were not adversely affected by the recent shutdown of the Department’s computer system. Through this status, we have

taken over many of the services from the federal government including our own

trust accounting system. While our system isn’t perfect, we can account for trust assets and we continue to issue landowner lease payments in an efficient and effective

manner. Our self-governance status also presents an interesting dilemma in terms of the

proposed creation of the BITAM office. With the BITAM, we are concerned about

what the impact will be on ‘‘638 contract’’ and ‘‘self-governance’’ tribes. I am concerned that the current BITAM proposal violates both the spirit and the letter of

numerous treaties, executive orders, secretarial orders, and federal statutes and regulations that promulgate the long standing federal policy of tribal self-governance

and self-determination. 3 I urge Congress to impress upon the Secretary the importance of protecting our treaty and trust obligations in developing any proposal regarding trust assets.

PREVIOUS EFFORTS

As you know, Mr. Chairman, there have been many failed previous trust reform

efforts. Congress most recently enacted the Trust Reform Act of 1994 to address the

many trust management shortcomings and to provide for effective administration

going forward. The ‘‘94 Act created the Special Trustee for American Indians, operating within the Department, to oversee reform efforts. It also created the Office of

Special Trustee Advisory Board. As a member of the Advisory Board to the Special

Trustee, I have a unique perspective on Indian trust fund management because I

have been working on this issue for many years.

Over the last five years, we have advised the Special Trustee and monitored the

Department’s trust reform efforts. Although the advisory committee has made some

pro-active recommendations, the Special Trustee hasn’t followed through on our proposals. The creation of a new approach may be the impetus for real reform and solutions to the lost Indian trust funds debacle once and for all.

AN ALTERNATIVE TO TRUST REFORM

There are many sound options to the proposed BITAM office that may be incorporated into the Department’s proposal. In conjunction with the Department, the

National Congress of American Indians (NCAI), has convened a tribal leaders task

force on trust fund reform. They have been meeting for several months now and

have put together various proposals to solve the trust reform issue. I would encourage Congress and the Department to carefully review and debate these and other

proposals to craft the best possible solution.

I am particularly interested in a proposal that would establish an Independent

American Indian Trust Oversight Commission. In reviewing the various proposals

circulating, it has become evident that this proposal, combined with two proposals,

could create a viable regulatory commission that would avoid the creation of additional bureaucracy. Recommendations brought forth by the Advisory Board to the

Special Trustee, the Van Ness Feldman proposal, and the Inter Tribal Timber proposal each have compatible components that are based on sound trust fund reform

principles.

The Independent American Indian Trust Oversight Commission would have the

following structure and purpose:

• It would be established by Congressional legislation

• The Commission members would be appointed by the President and approved

by Congress

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• It would be Independent or Quasi–Independent of the Department of Interior

• The Commission would develop a comprehensive plan for trust reform

• The Commission would recommend to Congress legislation to place responsibility for the reformed trust system and for implementing a reinvention of the

current archaic process

• The Commission would provide transparent regulatory oversight

• It would provide annual progress reports to the President approved by the

House Committee on Resources and the Senate Committee on Indian Affairs

• The Commission would have control over the $67 million proposed by the 2003

President’s budget request earmarked specifically for Indian Trust Reform

• The legislation would have a built-in sunset clause that will dismantle the Commission once it achieves it intended purpose

The Independent American Indian Trust Oversight Commission would act in a

similar manner to the Federal Communication Commission or the Resolution Trust

Corporation and would have the authority to effectuate real change. The Van Ness

Feldman proposal provides an interesting comparison between the success of the

District of Columbia Financial Responsibility and Management Assistance Authority

and the Indian Trust Fund Management Reform Act. Both were enacted between

1994 and 1995. Seven years later, one was a spectacular success and the other a

miserable failure. The Van Ness Feldman proposal states that, ‘‘...Congress and the

President acted on the well established management principle that a system that

is in bad-a-shape as the D.C. Government or the Indian trust system cannot reform

itself from within. Reform must be directed from outside and that outside entity

must have plenary authority to impose the reform.’’ With input and critical participation from tribes—the benefactors of Indian trust—such a proposal could meet

with similar success. Many of the other proposals have merit. All of them should

be examined to help craft the proposal that will work and resolve this lingering

headache for the federal government and Indian country.

SUMMARY

Mr. Chairman, the solution of the mismanaged Indian trust funds problem should

be seen as a unique opportunity to right the wrongs of the past and not as an attempt to dismantle the BIA. As you know, a 1998 Department of Interior report

showed that there were more than 340,000 individual Indian trust fund accounts

and that more than $300 million passes through the accounts each year. Tribal leaders and members alike have lost faith in a government that was entrusted to protect

their assets. To restore this trust, we must find a solution to this escalating and

disturbing problem. The time is now, and I stand committed to working with the

Committee, the Department, and all of Indian country to find a sound and just solution.

I believe the Department and Indian country are united in the effort to reform

the trust fund system, but we must act together to achieve our goals. Only with a

united front between Indian country and the federal government will we be able to

bring meaningful, achievable, and necessary reform to the system. Indian country

can and will work with Congress and the Department to find the solution, but the

Department must work with us too.

In conclusion, Mr. Chairman, I commend you for holding this important hearing

on one of the most pressing issues facing Indian country. I also thank Secretary

Norton and Assistant Secretary McCaleb for putting tribal consultation on the forefront of their agenda. For too long, Congress and the Administration have let this

issue drag on. With this bold initiative, Indian country is committed now, more than

ever, to finding a solution to this pressing problem. Again, I encourage the Department to extend the consultation period to ensure that all tribes are able to participate in this important process and propose viable solutions in conjunction with the

Department’s efforts. I also hope that the Department will carefully review and

scrutinize some of the alternative proposals to BITAM in the hopes of crafting the

best possible solution for Indian country. I remain committed to helping Congress

and the Department in this regard.

Thank you again, Mr. Chairman for allowing me to testify before the committee

today. I would be happy to remain here to answer any questions you or the other

committee members may have.

Mr. HAYWORTH. Thank you very much, President Makil. And the

Chair would remind the witnesses, we do appreciate the effort to

include these remarks within the 5-minute window, and even takVerDate 11-MAY-2000 09:07 Sep 26, 2002 Jkt 000000 PO 00000 Frm 00065 Fmt 6633 Sfmt 6602 77526.TXT HRESOUR1 PsN: HRESOUR1
62

ing into account that sometimes we go a little bit over, the Chair

will not try to cut things off too promptly.

Just one another note. Of course, your full testimony has been

submitted and will be made part of the record, so it gives us a

chance to have the synopsis of the bulk of your testimony. And we

are very appreciate for that.

And, with that, we turn now to Chairman Matt. Welcome.

STATEMENT OF D. FRED MATT, CHAIRMAN, THE CONFEDERATED SALISH AND KOOTENAI TRIBES OF THE FLATHEAD

NATION

Mr. MATT. Thank you, and I also will try to be brief, because, as

you pointed out, we have a more detailed copy of our testimony for

you to read at your leisure.

First of all, I would like to recognize the Committee for taking

the time to have us here, and you as Chairman, Mr. Hayworth, and

Congressman Rahall and the other members, we really appreciate

the time, as well as our Congressman from Montana, Denny. We

really appreciate the honor and the opportunity to provide such important information for you to help you decipher what is going on

in Indian Country. And I will try to be brief.

Congressman Rehberg described our reservation a little bit. We

have 1.3 million acres. We are in the northwestern part of the

State, and it is literally God’s country. When you pray at night, it

is a local call. And we have 7,000 members, and I really don’t even

know where to start. Like I said, I am glad that we have a written

statement, and I am glad most of us do, because it is such an important issue to Indian Country that I don’t even know where to

start.

But I do feel this: You know, I have spent a week here, and I

have spent some time running the Mall. I try to do exercise because that extra 20 pounds is still hanging on. And I pray during

the time that I do my exercise, and I am thinking, What can I say

that will help all of Indian Country, because we are so different.

We are so different in the ways we do business.

What we want to do at Flathead is try to convey just a little part

of what we do there, and we are very proud of it because we have

taken upon ourselves some of those responsibilities and some of

those things that the BIA has traditionally done, and I think we

will point out through my presentation that it is working. The accounting and all those other things is working.

But I also feel like that the train has left the station and we are

trying to get on it somewhere. I feel that from the rest of our tribal

leaders. You know, we rally—there are probably more tribal leaders in town than there was at the Battle of Little Big Horn. And

also, you know, I just can’t—I feel like that I am looking at you

there, you as who is going to bail us out of this, who is going to

save us. And I feel like it is the fourth quarter, and I feel like that

we are sitting back here—you might even call us the Washington

Redskins. And we are going to throw this Hail Mary pass to you,

and I hope you catch that ball, and I hope you do something for

us as Indian Country.

I am really impressed with what knowledge is up there. You go

from folks who have got 27 years of experience that has repVerDate 11-MAY-2000 09:07 Sep 26, 2002 Jkt 000000 PO 00000 Frm 00066 Fmt 6633 Sfmt 6602 77526.TXT HRESOUR1 PsN: HRESOUR1
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resented this Nation. I really appreciate that experience because,

believe me, if I spend 1 week in Washington, D.C., that is 6 days

too long.

But, with that, now I want to acknowledge one person that is in

the room that means a lot to us in Montana, and he is here for a

very specific reason. I would like to acknowledge Earl Old Chief.

He is the chief of the Blackfeet Nation, and he is—Earl, would you

please stand?

Didn’t I say Earl Old Person? OK.

Earl has been around for 30 years, and he has represented his

people for 30 years, and he has been here many times. And not

only is Earl a respected leader, but he is also named as a plaintiff

in the class action lawsuit by the Department of Interior.

It is important that all parties involved realize why Earl is here

today. He is very concerned, as I am, that the litigation that he is

a part of may well undermine the very principles of tribal sovereignty, and that he has fought so hard for to protect for so many

years.

I appreciate again the Committee holding this hearing and asking the views of Indian people on the proposed reorganization of

BIA. For many years, Salish and Kootenai Tribe knew that the BIA

management of trust resources and other trust programs were broken. And we ourselves stated the process and made some decisions

to do it ourselves. My feeling is we can do it and we can do a good

job of it. And I think we have proven that.

We have compacted or contracted virtually every function of the

BIA. We have a superintendent that we keep at the agency as a

signature authority. We call him the Maytag man. But it is just to

make a point, that we have—we have repaired dams on—we have

one of the largest irrigation projects in the State of Montana—is

my time already up? And we have a court system, we have law enforcement. And we manage our IIM accounts. We have a utility

there that services 2,200 Indian and non-Indian recipients. And we

want a health care system.

It goes on and on, and we are very proud of that, but knowing

very well that each tribe that sits behind me and that is out there

has their own way of doing business. I am not up here to say that

that is the only way. But I just think bigger is not better. I think

we, if you ask, if you give us the opportunity to offer suggestions,

offer comments, offer our solutions that we have on the ground

dealt with day in and day out, we have answers for you. We have

professional staff.

There have been reports that have been referred to, and it is

made available to all of you to go through. They have spent 20-

some-odd meetings, and there is some good stuff here. Why reinvent the wheel? Why don’t you just borrow some of the good suggestions that are in these reports and go forward? Why create a

whole new agency that might know something about balancing a

checkbook, but doesn’t necessarily know anything about trust responsibility when it comes to timber, as you mentioned, and other

natural resources.

So, with that, again, I apologize. My staff that comes with me,

Anna Sorel and Randall McDonald, they are probably thinking that

I once again have gone long-winded. But I think the real fruit of

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what I have to say today is in our prepared statement for the

record.

[The prepared statement of Mr. Matt follows:]

Statement of D. Fred Matt, Chairman, Confederated Salish and Kootenai

Tribes (CSKT) of the Flathead Nation

Chairman Hanson, Ranking Member Rahall and honored Members of the House

Resources Committee, my name is Fred Matt, and I am Chairman of the Confederated Salish and Kootenai Tribes (CSKT) of the Flathead Nation. On behalf of my

Tribal Council, I am pleased to provide these comments regarding the Department

of the Interior’s proposed reorganization of the Bureau of Indian Affairs for the purposes of Trust Reform. My comments will focus on the potential impact the proposed

reorganization may have on tribes like CSKT that have exercised the opportunities

afforded them by P.L. 93–638 the Indian Self–Determination and Education Assistance Act. I will conclude my testimony with an alternate proposal for reorganization, which addresses the concerns I have identified.

CSKT joins with other Tribes in recognizing that Individual Indian Money (IIM)

trust fund accounts have been historically mismanaged. For many years, we have

called for a complete reconciliation of trust fund accounts and continue to make that

request so that there may finally be justice for the over 300,000 IIM accountholders.

We look to the Cobell v. Norton court case to ensure that accountholders’ rights are

protected, to the fullest extent of the law. However, the future management of

Indian (including tribal and individual Indian) financial trust accounts and trust

asset management must be determined through the thoughtful development of applicable business standards and consultation with Tribes, not as a response to an

on-going court case. Many tribes, mine included, have for many years operated BIA

programs and through this experience can provide meaningful input toward effective and long-standing trust management reform. The Department of the Interior’s

proposal to create the Bureau of Indian Trust Asset Management (BITAM) does not

achieve this result. It is reform for the sake of reform and will create far more problems than it will solve.

Over a decade ago, my Tribal Council recognized that one of the primary responsibilities of tribal government was to ensure tribal self-sufficiency. Our Tribal Council has held a steadfast commitment that it is the responsibility of our government

to understand the needs of our people, and further, to ensure the needs of our

Tribes and people are met. This approach is the realization of the principles of selfdetermination and self-governance, and results in programs that match my people’s

needs in a way that programs designed in Washington D.C. could never do. The

CSKT commitment to Tribal self-sufficiency is also fulfilled through our efforts in

self-governance. We have fulfilled this responsibility by exercising the opportunities

provided in Public Law 93–638, the Indian Self–Determination and Education Assistance Act of 1975, as amended. CSKT is one of the original ten tribes selected

to participate in the Self–Governance Demonstration Project of the DOI. Since that

time, we assumed the management and operation of all of the services, programs

and functions previously provided by the Bureau of Indian Affairs at the Flathead

Agency except for the irrigation division of the Flathead Indian Irrigation Project

(FIIP). We are extremely proud of our P.L. 93–638 contract for operation of Mission

Valley Power, the power division of FIIP that provides electricity to over 22,000

Indian and non–Indian consumers throughout the reservation area. Under our administration, MVP has kept power rates low and has won numerous management

awards.

CSKT has also assumed the management of the BIA Real Estate Services including appraisals. Although this is clearly a trust function, we have developed a

streamlined approach for the Tribes to provide this function. Our Tribal appraiser

produces appraisals for review and approval by the federal official for the Region.

The Regional official reviews the appraisal to ensure that all federal standards and

requirements are met. Once the official is confident the appraisal is correct, he then

signs off on it.

There are many other examples of our quality management of federal programs.

We operate the Land Titles and Records Office (and are one of the few tribes in the

country to do so), the entire Indian Health Service health delivery system for nearly

10,000 beneficiaries and provide law enforcement within the exterior boundaries of

our 1.3 million acre reservation that includes portions of four Montana counties.

Unlike DOI accounts managed by the Federal Government, each year our Tribes’

accounting management undergoes an intensive external financial audit according

to standards developed by the Federal government. I am proud to report our Tribes’

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audits over the past years are clean with no material weaknesses identified. Furthermore, each year the Department of the Interior’s Office of American Indian

Trust conducts a trust evaluation on all BIA programs our Tribes have assumed.

Again, I am proud to report our Tribes’ operation meets or exceeds the standards

set forth in their evaluation.

The proposed DOI BITAM reorganization of the trust functions, including the

transfer of all trust programs such as natural resource and realty programs, is

alarming because it poses a threat to our Tribes’ ability to manage and operate programs. Our experience is that it is extremely difficult, if not impossible to access

programs not located in the BIA (which will include programs in BITAM if transferred). It is critical to recognize that P.L. 93–638 applies to BIA programs differently than it applies to DOI programs located outside the BIA, which are referred

to as ‘‘non–BIA programs.’’ We have experienced that non–BIA programs are zealously guarded by the agencies operating them. The effect is that Tribes have been

stymied in their endeavors to manage federal functions not located in the BIA. This

is demonstrated by the few number of non–BIA Self–Governance agreements successfully negotiated by Tribes and DOI.

For example, CSKT has attempted to manage two programs located outside the

BIA. The first is the National Bison Range. It is a refuge managed by DOI U.S. Fish

and Wildlife Service. Under federal regulation, for a Tribe to assume operation of

a non–BIA program, the tribe must demonstrate a geographic, historic and cultural

connection. In our case, CSKT clearly exceeds the burden required by the federal

regulation. First, the refuge is completely located in the heart of the Reservation,

on land taken from the Tribes after the reservation was established. Second, history

credits our late Chairman Michael T. Pablo’s family with saving the buffalo from

extinction as they raised the herd of buffalo eventually bought by the United States

government as the foundation stock on the National Bison Range. And finally, there

is clear cultural connection between bison and tribes. Yet our effort to manage the

National Bison Range under a Self–Governance agreement, which began immediately after the Tribal Self–Governance Act of 1994 (Title IV of 93–638) was enacted, has been continually thwarted by DOI.

Another CSKT experience in assuming operation of a non–BIA program was the

Financial Trust Services (FTS) including the Individual Indian Monies Program

(IIM) from the Office of Trust Fund Management (OTFM). Although the FTS program is clearly for the benefit of Indian people and formerly administered in the

BIA, it is now considered a non–BIA program and guided by the federal regulations

for non–BIA programs. Unlike Title IV regulations for the BIA, the Title IV non– BIA regulations allow the bureaucracy to determine if and how a program will

transfer to a Tribe. Unfortunately when the decision arises to transfer a federal program to the Tribes, it is the federal government that retains final authority, not the

Tribes. Faced with the non–BIA regulations in negotiating, CSKT decided to set

aside important principles of Self–Governance in order to reach an agreement to operate the FTS program locally when it became clear that OTFM would not otherwise

agree.

Since the first agreement was signed between CSKT and OTFM to operate the

IIM program, there has been a continual erosion of tribal opportunity to manage

the program. During the first years of operation, our IIM program was able to make

changes, such as address changes to the accounts. Now, all changes, including simple address changes, must be forwarded to Albuquerque, NM for processing at a

central location. Changes to accounts that require the signature of a federal official

that formerly were signed off by the Agency superintendent must now be sent to

Portland, OR and then to Albuquerque, NM. CSKT has become a paper-processing

program and any meaningful work has been transferred to the OTFM Central Office. CSKT has every reason to believe the same thing or worse will occur should

BITAM be implemented. In the name of trust reform, programs will be centralized

instead of being delegated to the local level where we have expertise in implementation. This would be devastating to our Tribes and the effective tribal operation we

have put in place.

Nowhere in Secretary Norton’s proposal to create BITAM are these concerns addressed. Representatives from my Tribal Council have attended four of the consultation meetings the DOI has conducted on this proposal. Each time the tribes in attendance have asked DOI to explain the impact this proposal will have on tribal

contracting or compacting of BIA programs, but to no avail. There is no answer because when the proposal was made this critically important question, among so

many important issues, was not considered. This is not acceptable. Assurance must

be made that federal regulations governing BIA programs for contracting and compacting purposes will remain the same. Tribes have not created this problem and

should not be punished for DOI’s mismanagement. The Cobell case should not be

66

used by either the plaintiffs or the Department to gut the great legacy left by President Richard Nixon to the Indian people: the Indian Self–Determination Act.

There are going to be major problems between the BITAM and the BIA and

Indian tribes if this reorganization is allowed to proceed. There will be finger pointing between the BITAM and the BIA unless the BITAM is given almost all jurisdiction now retained by the BIA. If that is the plan, why not simply clean up the BIA?

Merely transferring programs from one box to another will not lead to substantive

change.

I have explained our Tribes’ self-governance experience to demonstrate the capability of tribes to manage trust programs to a high standard and this must be allowed to continue.

As the Committee has requested, the Tribes have developed an alternate proposal

to BITAM even if it might be somewhat premature since BITAM has generated

more questions than answers. CSKT submits the following as one option available

to meet the objectives set forth in the EDS Report commissioned by the DOI including the primary objective to consolidate trust functions under a single individual for

accountability purposes. Our proposal uses the final Report of the Joint Tribal / DOI

/ BIA Advisory Task Force on Bureau of Indian Affairs (BIA) Reorganization, which

was chartered by Mr. Manual Lujan, Jr., Secretary of the Interior on December 20,

1990. The final Report of the Advisory Council was submitted in August 1994. The

Task Force included three tribal representatives from the 12 BIA areas, two representatives from the Department of the Interior and five BIA employees. The Task

Force met 22 times over a four-year period and throughout the United States. At

each meeting, they made an effort to incorporate the views of the tribes of the local

area into their final recommendations. All meetings were open to any tribal representative, regardless of whether they were officially on the Task Force.

We propose, as the Task Force’s final Report recommended, the creation of three

separate tiers in the BIA. The first tier is the Office of the Assistant Secretary including a number of administrative support offices. It is in this tier that uniform

standards would be developed for all trust functions. The second tier would combine

the current Central Office functions and the regional offices that would be restructured to provide integrated operational and technical services. To meet the objectives of trust reform, CSKT recommends this tier have three Branches, each headed

by a Commissioner who would be nominated by the President and approved by the

United States Senate to ensure continued Congressional involvement in this issue.

The Branches would have the following responsibilities: The first Branch would be

responsible for the Financial Trust Accounting. The second Branch would be responsible for the management of tangible trust assets that generate revenue for the

Tribes and individual allottees, such as natural resources. The third Branch would

manage all remaining programs within the BIA. Most importantly, this approach

consolidates the financial accountability under a single high-level individual, the Assistant Secretary of Indian Affairs. It is in this tier that the monitoring and evaluation of implementation of uniform standards would occur. The third tier would be

the agency / field office level where the operations according to the uniform standards would be delivered, with proper delegations of authority to fulfill the trust responsibilities of United States government.

The foundation of our proposed organization is the development of uniform standards for the delivery of trust standards. The tribes and DOI would mutually develop

these standards but in accordance with trust law principles while taking into account the uniqueness of tribal trust law and cultural concerns. All BIA services

would be provided according to these standards regardless of whether they were

provided by the BIA or contracted or compacted by tribes. Monitoring and financial

auditing will be essential components of the new delivery system. I have attached

an organizational proposal for your consideration.

Thank you for allowing me to testify and for understanding the perspective of the

Confederated Salish and Kootenai Tribes of the Flathead Nation.

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Mr. HAYWORTH. Thank you, Mr. Chairman. I wouldn’t worry too

much about that. That seems to be kind of a common affliction in

Washington, D.C., to have a bit of verbosity. I know whereof you

speak, so I appreciate the spirit in which you offer those remarks.

Chairman Jandreau, welcome. We look forward to hearing your

thoughts.

STATEMENT OF MICHAEL JANDREAU, CHAIRMAN,

LOWER BRULE SIOUX TRIBE

Mr. JANDREAU. I thought he wasn’t going to share this mike with

me.

Mr. Hayworth, Ranking Member Rahall, it is a pleasure that I

come here before you today. My name is Michael Jandreau. I am

the Chairman of the Lower Brule Sioux Tribe, and I am Chairman

of the United Sioux Tribes. I am also a member of the task force

that has been recently created. I also was a part of the original

task force for the reorganization of the Bureau back in 1990, in

that era.

I have a statement that has been submitted to the Committee,

so I will speak of some things that affect me and affect our region

of the country.

I spent a weekend with a group of people who were very intensely concerned about the problem that we have before us. I had

spent the previous week with our delegation, our entire delegation,

attempting to get a seat here to speak to you today. On Monday

morning, I was called and told my only living blood uncle had

passed away, and my family wanted me back home because I am

one of the older ones in the family.

Because of the difficulty, I wasn’t able to go right away, and so,

you know, preparations were made for me to be able to leave today

and to return home.

My uncle also served as a chairman of our tribe and as a council

member. He dealt with many of the things that I find myself dealing with today.

My statement will talk to you about our concerns, about the

many attempts to do things with the Bureau of Indian Affairs, to

make services more appropriate and more accessible to our people.

My statement will also tell you that we don’t need Committees

making decisions with the Office of the Special Trustee or anyone

else about the future of Indian Country.

My statement will also tell you about the hardships that our people are enduring, in the Aberdeen area, the highest death rate,

where diabetes and alcoholism is prevalent.

My statement will tell you that we want to be a part of the process to deliver services, that we want to be a part of the process to

correct the wrongs, to correct the inadequacies.

My statement will tell you that we want the Bureau of Indian

Affairs left intact, that we feel under the treaties that were made

with most of the tribes of my area, that those treaties created this

trust obligation.

We know that the treaties have not been honored to the extent

that they have been passed. But we know that we still believe in

the content.

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My statement will tell you that our tribes are trying to survive.

Our tribes are dealing with those resources. On an individual level,

my particular tribe has the largest irrigation project. We have a

full-blown hunting and fishing project. We are doing things with

the computer industry to create jobs. We are trying to take care of

ourselves. We believe in what we are doing, but we also believe not

only in the real but the moral responsibility that this country owes

to us, not from the point of being just a victim, but being a victim

whose real desire is to make life better for those people on our reservation and reservations.

Again, thank you very much for giving me this opportunity.

[The prepared statement of Mr. Jandreau follows:]

Statement of Michael Jandreau, Chairman, Lower Brule Sioux Tribe

I would like to thank you, Chairman Hansen, and Ranking Member Rahall for

providing me with the opportunity to testify before this committee on this extremely

important issue. My name is Michael Jandreau and I am the chairman of the Lower

Brule Sioux Tribe in South Dakota. I am here today representing the Great Plains

Region, which include the 16 tribes in North Dakota, South Dakota, and Nebraska.

Indian Country is facing many pressing issues that would be excellent topics for

a Congressional hearing. Indian health care is one example. The Great Plains Region leads the country in almost every negative health statistic available. We have

the lowest life expectancy of any group in the country, and alcoholism and diabetes

are ravaging our communities. There are also pressing economic development needs.

According to 2000 Census figures, South Dakota Indian Reservations are home to

five of the poorest counties per capita in the entire United States. We have an average unemployment rate of 75% on reservations throughout the Great Plains.

While these are issues that we look forward to working with this committee to

address, we are here today discussing BIA reorganization, trust reform, and our concern about losing the already scarce resources we have available to us at the local

government level.

The issues of trust reform and reorganization within the BIA are nothing new to

us in Indian Country. We have endured many efforts—some well intentioned and

some clearly not—to fix, reform, adjust, improve, streamline, downsize, and even

terminate the BIA and its trust activities. We have endured these efforts through

both Republican and Democratic administrations. Unfortunately, they have rarely

sought meaningful involvement from tribal leadership, nor recognized the federal

government’s treaty obligations to tribes. These are both critical if we hope to find

a workable solution to this very real problem.

The Bush Administration recently announced the latest effort to reorganize these

structures and shuffle responsibilities—this one mandated by a federal court. The

Administration responded to the demands of the court by quickly drafting a plan

to fix the trust mess. However, it did so without consulting the very people who

would be affected by such a massive restructuring—Indians. Not surprisingly, this

proposal has been met with concern, suspicion, fear, and even outrage from Indian

people across the country. BIA reorganization has become the most important issue

on our reservations.

As in the past, this proposal did not seek early input from elected Indian leaders.

In fact, we were not consulted until the Administration had devised and released

a plan. It was only in response to our unanimous rejection that a consultation process was devised and instituted.

Open listening sessions have been held across the country, and now a Tribal Task

Force has been formed to meet with Interior Department officials to discuss trust

reform and the reorganization of the BIA. I sit on that task force. This should have

been the first step in the process, not the last.

I am very concerned because the Court Monitor, Joseph S. Keiffer, III, in his most

recent report to the U.S. District Court for the District of Columbia, stated that the

Office of Indian Trust Transition (OITT) will continue to pursue trust reform activities while the consultation process continues. How can the Department of Interior

be meeting with tribal leaders to discuss the reform of the BIA, while the OITT is

simultaneously working implement trust reform measures that have not been (and

will not be) discussed with tribal leaders? Mr. Chairman, if this is consultation then

we are doomed even before we start.

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Another group, the Special Trustees Advisory Board has recommended and supported the creation of an entirely new agency to be solely responsible to manage the

federal government’s ‘‘trust responsibilities.’’ It recommends that the new agency

provide a historical accounting of assets of individual Indians and tribes, data cleanup and future management of these activities out side the BIA.

While these are not unimportant steps, they miss the bigger picture. Tribal leaders have stressed that trust responsibility goes much deeper than finding and implementing certain management tools. The federal government must act in light of the

moral obligation to tribes that it has voluntarily assumed. This obligation is reinforced by the fact that the federal government signed treaties with sovereign Indian

tribal governments, not individual Indians or members of any advisory board. During the listening sessions and other dialog, this strong belief has resonated throughout each conversation that tribal leaders have with the administration and Congress.

If we want a solution that works, I feel all of the OITT’s ongoing activity must

be stopped. Furthermore, it is not enough that a plan simply be agreed to or endorsed by the Special Trustee’s Advisory Board. Elected representatives of tribal nations must be consulted throughout the entire process, and their ideas must be incorporated into any solution. Without this, we will end up with another reform attempt that costs taxpayers millions of dollars, undermines local tribal self-determination, and does nothing to solve the problem. Let’s not forget that we are here

today because similar reform attempts have failed in the past.

It is no secret that the federal government has failed in its mission to correctly

manage the assets of our Indian people. We need an accountable entity that will

find a solution and resolve the past mismanagement problems. But any effort to find

a solution should not be at the expense of Indian people across this country. The

lives of our people are difficult on a good day. Our people must deal with poverty,

alcoholism, shortened life expectancy, inadequate housing, lack of transportation,

and other challenges. They look to tribal governments for assistance, and we look

to all levels of the federal government for the resources we need to deal effectively

with these problems. We will only be successful if the lives of these people are

bettered by the outcome of this process. We are very concerned that taking responsibilities, manpower, authority, prestige and massive resources away from the BIA,

while creating an entirely new, expensive, out of reach bureaucracy, does nothing

to better the lives of our Indian people back home on our reservations.

For these reasons, we cannot support the idea of stripping the ‘‘trust responsibilities’’ from the BIA to create a new agency. For Indian people, the BIA is synonymous with trust responsibility. We know that trust reform management must be reorganized and consolidated under one entity, but that entity should remain under

one assistant secretary within the BIA. This will drive a solution to the problem,

but will not pillage the resources that tribal governments need to govern effectively

and provide efficient services to their people.

You cannot take the heart out of a man and expect him to live. If you take away

the ‘‘trust’’ then we, as Indian people, will eventually die. That is how we are viewing the reorganization plan by this Administration. It takes our elders back to that

dark time prior to the Reorganization Act of 1934, when their land and assets were

disappearing because the government was not upholding its treaty obligations. It is

our hope that this administration does not seek to destroy the reservation system

as we know it and terminate of their treaty responsibilities to tribal governments.

I stand ready to work with this committee and with all parties who are interested

in finding a solution to this problem that will help those who need it most—Indian

people.

Thank you and I am ready to answer any questions that the committee may have.

Mr. HAYWORTH. Chairman Jandreau, we thank you very much

for your testimony here today.

Now we turn to our friend, Congressman Rehberg’s constituent,

Ms. Cobell. Welcome once again.

STATEMENT OF ELOUISE COBELL, IIM TRUST BENEFICIARY

Ms. COBELL. Thank you for this opportunity to address the Committee on the issue of reform of the Individual Indian Monies, and

I would like to state at the outset this is different from the tribal

trust monies.

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I would also like to thank Congressman Rehberg for that wonderful introduction, and I would also like to recognize members of

my tribe that are here with me today: Chairman Old Person, Councilman James Sankador, and Councilman Irvin Carlson.

The history of mismanagement of the IIM trust is long and tortured, but it boils down to three must-do’s: The IIM trust system

must be fixed; the IIM beneficiaries must be provided an accounting; restitution must be made. The true trust reform will require

a restatement of individual Indian trusts. More than $100 billion

in trust deposits, interest, and accruals remain unaccounted for. A

senior trust official testified last month in a court, stating that not

yet have the Department of Interior been at the starting gate as

far as it goes for an accounting.

Trust funds are not a handout or an entitlement program. It is

very important to keep in mind that this is our money—revenue

from leases for oil, gas, drilling, grazing, logging, mineral extractions on Indian lands. This individual Indian trust was devised by

the U.S. Government and imposed on Indian peoples more than a

century ago. As trustee, the United States and each branch of the

Federal Government has the highest legal, fiduciary responsibility

to manage the individual Indian trust in a professional manner, exclusively for the benefit of individual Indian trust beneficiaries.

Unfortunately, this has been and remains a severely broken

trust. Hundreds of thousands of American citizens, the individual

Indian trust beneficiaries, have won decisively at every stage of our

litigation. Now we are in the middle of a contempt trial for Secretary Norton and Assistant Secretary of Indian Affairs Neal

McCaleb for violating court orders and for perpetuating a fraud on

the court. I have no doubt that they will be held in contempt.

Meanwhile, tens of billions of dollars have been appropriated by

this Congress to defend the fraud, deceit, and malfeasance of the

Interior Secretary and the Treasury Secretary.

Only yesterday the judge chastised Secretary Norton for her totally improper request to circumvent a court order in order to try

to provide confidential financial information to this Committee. The

judge said, ‘‘Secretary Norton has demonstrated once again her

total inability to understand the role of a trustee in relationship to

a beneficiary by seeking release to Congress, knowing that it would

be made public, the confidential financial information of these

beneficiaries.’’ I certainly agree with Congressman Rahall that nobody of this Committee would like to have all their financial transactions provided to the general public.

Despite being ordered by Congress and the courts to reform the

trust and provide a historical accounting, testimony in the contempt trial going on now shows that the Secretary of Interior has

done nothing—nothing—to comply.

The administration’s mindless battle to prolong this case in the

face of certain defeat is an indefensible waste of judicial resources

and an assault to the Native Americans, taxpayers, and anybody

with integrity.

Mr. Chairman, the individual Indian trust beneficiaries have

asked Judge Lamberth to strip control of the trust away from the

Secretary of Interior and place it in the temporary hands of a receiver. The bottom line is that the Bush administration is under a

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court order to account for more than $100 billion in individual

Indian trust monies and as utterly refused to do so.

Judge Lamberth has appointed both a special master, Alan

Balaran, and a court monitor, Joseph S. Kieffer III, to help force

compliance with the court orders and to assess Interior’s true

progress on trust reform and the validity of its quarterly reports

to the court. Four scathing reports by the court monitor formed the

basis of four contempt charges against Norton and McCaleb. A separate report by the special master on the utter lack of computer security for IIM accounting data let the fifth court of contempt. Altogether, Mr. Kieffer has issued six reports that amount to a searing

indictment of Secretary Norton, Secretary O’Neill, and Attorney

General Ashcroft in this matter.

Secretary Norton and her inner circle of senior officials have now

proposed a drastic reorganization of trust responsibility into a new

Bureau of Indian Trust Asset Management. Because she has done

this so late in the day and suddenly and without proper consultation with tribes, as required by law, her actions appear to be a desperate attempt to stave off contempt. The proposal has met with

very strong opposition throughout Indian Country. Among its

flaws, it would merge the tribal trust with the IIM trust under one

entity, ignoring the trusts’ two distinctly different functions, constituencies, and histories. This plan will undermine not protect

tribal sovereignty. It will violate IIM account holders’ own direct

relationship with the Federal Government, established by law.

The most critical defect in the Secretary’s proposal is that it

would leave the trust in the Interior control at the mercy of the

same inept managers. Mr. Chairman, it is our hope that this Committee and Congress will terminate all appropriations needed by

Interior Secretary, the Treasury Secretary, and Attorney General

to continue their bad-faith legal defense. Instead, we ask you to

support the individual Indian trust beneficiaries’ request for appointment of a receiver under the supervision of the judiciary as

the only rational solution for the Government to fix individual

Indian Trusts. Congress has appropriated more than $614 million

for trust reform since 1996, and it has gotten virtually nothing—

no accounting of individual Indian trust monies, no rehabilitation

of a woeful system, no improvements in information technology.

As the court monitor stated, ‘‘Who within the Department of Interior will hold these officials accountable for past and present

harm caused to the IIM account holders for their unprofessional

conduct and misleading reports that covered up and hid the most

serious of their failures?’’ Apparently no one, because they remain

in leadership positions, involved with trust operations, and related

management and legal activities, or have moved on to equivalent

senior positions within the Department of Interior.

I believe strongly that further appropriations for trust reform

should be fenced in to be used by a receiver and not the failed programs of the past defense of the indefensible litigation. The individual Indian trust should be put in the intensive care of a receiver

supervised by Judge Lamberth until it has been rehabilitated fully

and restored to health.

In summary, instead of underwriting non-existent trust reform,

a skilled trustee for individual Indian trust—protected from politics

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and funded with permanent and indefinite appropriations—could

hire proficient managers desperately needed to ensure prudent

management of the multi-billion dollar trust. The goal here is simple: Stop playing politics with our money and our people.

Our litigation has exposed an ugly story about arrogance and ineptness. But with the help of this Committee, we can begin to write

a new chapter. I appreciate this chance to testify before you.

[The prepared statement of Ms. Cobell follows:]

Statement of Elouise Cobell, IIM Trust Beneficiary

Thank you, Mr. Chairman, for this opportunity to address the Committee on the

issue of reform of the Individual Indian Monies (IIM) trust.

The history of mismanagement of the IIM trust is long and tortured, but it boils

down to three ‘‘must-do’s’’:

• The IIM trust system must be fixed. The Secretary of the Interior has ignored

the will of Congress and misled Congress for decades. Since December 1996, the

Interior Secretary has ignored orders entered by Judge Royce C. Lamberth of

the U.S. District Court for the District of Columbia. Nothing has changed. Since

the Interior Secretary continues to breach the trust duties owed by the United

States government to individual Indian trust beneficiaries and Congress clearly

is unable to compel an obdurate member of the President’s Cabinet to obey the

law and discharge the trust duties conferred on her by Congress, it is time for

Judge Lamberth, with the support of Congress, to place the IIM trust in receivership.

• The IIM beneficiaries must be provided an accounting. Reportedly, at least $500

million a year in trust revenues is generated from individual Indian-owned

lands. Where is the money? The Interior Secretary has demonstrated through

the fraud she has perpetrated on the United States District Court and the

United States Court of Appeals that she no longer should be trusted to manage

or account for Individual Indian Trust funds.

• Restitution must be made. True trust reform will require a re-statement of the

Individual Indian Trust. More than $100 billion in trust deposits, interest and

accruals remains unaccounted for. We hope that this year, Judge Lamberth will

set a trial date to determine the full amount due to the individual Indian trust

beneficiaries.

Mr. Chairman, the IIM trust is supposed to be the mechanism by which revenues

from Indian-owned lands throughout the Western states are collected and distributed to approximately 500,000 current individual Indian trust beneficiaries. This

trust is a vital lifeline for Native Americans, many of whom are among the poorest

people in this country. Where I live, in Glacier County, Montana, the home of the

Blackfeet Nation and one of the 25 poorest counties in the United States, I can tell

you that many people depend on these payments for the bare necessities of life.

These trust checks are not a luxury. Trust funds are not a handout or an entitlement program. It is very important to keep in mind that this is our money—revenue

from leases for oil and gas drilling, grazing, logging and mineral extraction on

Indian lands. This Individual Indian Trust was devised by the United States government and imposed on Indian peoples more than a century ago. As trustee, the

United States and each branch of the federal government has the highest legal and

fiduciary responsibility to manage the Individual Indian Trust in a scrupulously

professional manner, exclusively for the benefit of Individual Indian Trust beneficiaries.

Unfortunately—as you and many of the members of this Committee are well

aware, Mr. Chairman—this has been, and remains, a severely broken trust. The

mismanagement of the Individual Indian Trust by the United States government for

more than 120 years is a national disgrace. The refusal of the Executive Branch to

fix it is appalling. The failure of Congress to act decisively to hold the Interior Secretary accountable for her malfeasance is disturbing and indefensible. Since we initiated class action litigation in 1996 to enforce the trust obligations owed by the

United States to individual Indian trust beneficiaries, I have said many times to our

legal team that the government’s bad faith and misconduct simply cannot get any

worse. And each time I’ve been wrong. It gets worse and worse and worse—in spite

of humiliating courtroom defeats, in spite of scathing reports by court-appointed

watchdogs and the government’s own consultants and experts, in spite of shameful

news coverage and editorials in the media, and in spite of repeated warnings and

admonitions from the Congress. The Interior and Treasury Secretaries’ malfeasance

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strains the limits of our language. The courts and Congress have used some of the

strongest rhetoric I have ever seen to describe the injustice being done to the individual Indian trust beneficiaries, and still the Secretary of the Interior, the Secretary of the Treasury and the Attorney General fight on against us and defend the

legally and morally indefensible. Why? Where has Congress been while this mugging has gone on for nearly six years a few blocks away from this hearing room?

Where is the outrage from this body? Why has Congress turned its back on Indian

people again?

Mr. Chairman, I would like to make this clear at the outset to the members of

the Committee: Hundreds of thousands of American citizens—the individual Indian

trust beneficiaries—have won decisively at every stage of this litigation. More than

two years ago—in December 1999—we won a landmark decision at the U.S. District

Court. The Justice Department appealed that decision, and we won unanimously at

the appellate level a year ago—in February 2001. Two members of President Clinton’s Cabinet—Messrs. Rubin and Babbitt—were held in contempt of court in February 1999 for violating court orders and covering up their violations, and the taxpayers paid their $630,000 fine. Now we are in the middle of a contempt trial for

Secretary Norton and Assistant Secretary for Indian Affairs Neal McCaleb for violating court orders and for perpetrating a fraud on the court, and I have no doubt

that they, too, will be held in contempt. Tens of millions of dollars have been appropriated by this Congress to defend the fraud, deceit and malfeasance of the Interior

Secretary and the Treasury Secretary.

Judge Lamberth already has ruled that the Secretary’s abject failure to provide

even minimal computer security protection for individual Indian trust data and

trust funds is contemptible on its face. She also faces charges of failing to begin to

provide an historical accounting to the individual Indian trust beneficiaries (more

than seven years after Congress ordered them to do so and more than two years

after Judge Lamberth ordered them to do so), and submitting false report after false

report to the court. Despite being ordered by Congress and the courts to reform the

trust and provide the historical accounting, testimony in the contempt trial going

on now shows that the Secretary of the Interior has done nothing—nothing—to comply. The Administration’s mindless battle to prolong this case—in the face of certain

defeat—is an indefensible waste of judicial resources and an insult to both Native

Americans, taxpayers and anyone with integrity.

Mr. Chairman, the individual Indian trust beneficiaries have asked Judge

Lamberth to strip control of the trust away from the Secretary of the Interior and

place it temporarily in the hands of a receiver. If Judge Lamberth finds Secretary

Norton in contempt, as we hope he will, it will clear the way for the judge to do

just that. The judge has said in court recently that he is proceeding carefully in this

contempt trial—giving the government all the rope it wants—because no court has

put an agency of the Executive Branch into receivership the history of this nation.

But that is exactly where we are headed. And it will be a fine day when it happens,

too. I would like to return to this subject in a moment to explain why we have asked

for receivership, why a receiver is immensely preferable to Secretary Norton’s illadvised, last-minute reorganization plan for the BIA, and why the support of Congress for receivership is important.

If the Secretary is found in contempt and the Individual Indian Trust is placed,

at last, in the competent hands of a receiver, I hope we can move to trial on the

final issue—a restatement or correction of the Individual Indian Trust balances—

before the end of the year (subject, of course, to the court’s discretion and schedule).

In 1999, Judge Lamberth and the U.S. Court of Appeals ordered the Secretaries of

Interior and Treasury to provide individual Indian trust beneficiaries with an historical accounting of ‘‘all’’ trust revenues, withdrawals and accruals. However, Mr.

Chairman, Interior has done nothing. A senior trust official testified last month that

Interior ‘‘is not yet at the starting gate’’ on an accounting. In fact, he testified that

Interior officials are still debating internally what the term ‘‘historical accounting’’

means. Secretary Norton’s most recent Quarterly Report to the court acknowledges

that her department’s trust reform master plan has been shelved. A $3 million consultant’s report to Interior advises starting over. Even if Interior and Treasury were

acting in good faith, they are unable to provide an accounting because they have

destroyed, and continue to destroy, the individual Indian trust records (making the

Enron debacle seem to be trivial in comparison). They also have spent $36 million

‘‘so far’’ on a new trust accounting computer system that does not work and will

have to be scrapped.

The bottom line is that the Bush Administration is under court order to account

for more than $100 billion in Individual Indian Trust monies and has utterly refused to do so. Judge Lamberth will decide in the upcoming trial how much of those

funds must be restored to correct the stated IIM trust balances. That figure is yet

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to be determined finally, but if we go to trial it likely will be much more than $100

billion. Despite this impending financial train wreck and continuing legal humiliation—despite the oaths that the government’s lawyers take as officers of the court— the Interior Secretary, the Treasury Secretary and the Attorney General march on,

too arrogant to enter into good-faith settlement discussions that could cut this fiasco

short, spare the court’s time and energy and somewhat soften the Executive

Branch’s dishonor.

Mr. Chairman, I believe it would be helpful at this point to summarize very briefly the history of the Individual Indian Trust and how the Executive Branch has arrived at this state of disgrace while Congress has turned its back on Indian people.

The IIM trust derives from the 1887 General Allotment Act (the ‘‘Dawes Act’’),

which, as Judge Lamberth has noted, was ‘‘driven by a greed for the land holdings

of the tribes.’’ [Judge Lamberth’s Dec. 21, 1999 decision in the Cobell case contains

a concise history of the trust. It is posted on the Cobell plaintiffs’ web site at

www.indiantrust.com, under Court Rulings.] Under Dawes, tribes were paid for

their land and each head of household was allotted property, usually 40-, 80- or 160-

acre parcels. The land left over was opened to ‘‘non–Indian’’ settlement. The allotted

lands were held in trust by the United States for the individual Indians. For more

than 120 years, the Interior Department, and specifically the Bureau of Indian Affairs, has overseen the leasing of these allotted lands on behalf of the original

allottees and their heirs. Revenues from these leases have been collected by Interior

and supposedly held, invested and disbursed to the trust beneficiaries by the Treasury Department.

From the beginning, this system has fallen prey to abuse, corruption, neglect and

incompetence. As the U.S. Court of Appeals for the District of Columbia Circuit said

in its Feb. 23, 2001 decision upholding Judge Lamberth, ‘‘The trusts at issue here

were created over one hundred years ago—and have been mismanaged nearly as

long.’’ Incredibly, since 1887 the management of the IIM trust has not grown steadily better, but steadily worse. It is worse today than it was in 1996, when we filed

our lawsuit. Just to quote one brief passage from Judge Lamberth’s 136-page opinion: ‘‘It would be difficult to find a more historically mismanaged federal program than the [IIM] trust. ... The court knows of no other program in the

American government in which federal officials are allowed to write

checks—some of which are known to be written in erroneous amounts— from unreconciled accounts—some of which are known to have incorrect

balances. Such behavior certainly would not be tolerated from private sector

trustees. It is fiscal and governmental irresponsibility in its purest form.’’ The glaring mismanagement of the IIM trust was exposed (not for the first time,

or the last) by the House Committee on Government Operations, in its landmark

1992 report entitled ‘‘Misplaced Trust: The Bureau of Indian Affairs’ Mismanagement of the Indian Trust Fund,’’ which was spearheaded by the late Rep. Mike

Synar (D–OK). Citing the trust’s ‘‘appalling mismanagement,’’ Mr. Synar likened

the IIM trust to ‘‘a bank that doesn’t know how much money it has.’’

The Synar Report led to passage by the Congress in 1994 of the Indian Trust Reform Act. In an attempt to end Interior’s chronic incompetence in running the IIM

trust, the act established a Special Trustee for American Indians to oversee reform.

A Level 2 position filled by a presidential appointee who is subject to Senate confirmation, the Office of Special Trustee was expected to provide the leadership and

accountability that trust reform had been lacking. Sadly, that has not been the case.

On June 10, 1996—after years of run-arounds from Interior and the BIA, and convinced that they would have to be forced to clean up the IIM trust—we filed our

class action lawsuit against the Secretaries of the Interior and Treasury. Judge

Lamberth split our complaint into two issues—reform of the trust, and a re-statement of the accounts. On Nov. 27, 1996, the judge also ordered Interior and Treasury to preserve all existing IIM trust documents and to produce relevant documents

and records to the plaintiffs. In fact, destruction of records and documents, including

e-mails written by government lawyers in this case, has continued throughout the

life of the litigation. Secretaries Babbitt and Rubin were held in contempt by Judge

Lamberth in February 1999 for ignoring the document order, and the judge subsequently appointed a Special Master, Alan Balaran, to oversee the government’s compliance. Unknown to all of us at the time, Treasury had destroyed an additional 162

boxes of trust records during the contempt trial. Treasury and Justice Department

attorneys waited 13 weeks to inform the court.

After a nine-week trial on the first issue—how to fix the system—Judge Lamberth

ruled on Dec. 21, 1999 that the United States must provide an historical accounting

for ‘‘all’’ IIM funds. He ordered Interior and Treasury to reform the trust, and required quarterly reports from Interior on its progress.

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Testimony in the Norton–McCaleb contempt trial has shown that for more than

a year after Lamberth’s decision, officials and lawyers at Interior and Justice did

nothing about an accounting and little about trust reform. They believed that

Lamberth had exceeded his authority and hoped he would be overturned by the appeals court. What actions Interior and Justice did take were driven by their litigation strategy and in support of their appeal, with no regard for the IIM trust beneficiaries. A senior trust official, Principal Deputy Special Trustee Thomas Thompson, testified that today—more than two years after Lamberth’s decision—not a single IIM account has been certified as accurate. (‘‘It really makes you wonder why

I’m sitting here, doesn’t it?’’ said Judge Lamberth.)

On February 23, 2001, a three-judge panel of the U.S. Court of Appeals for the

D.C. Circuit unanimously upheld Judge Lamberth. The same day, a senior Interior

Department official sent a memo to the Special Trustee exposing the department’s trust reform efforts as a sham. The department’s trust reform plan, he wrote, was

based on ‘‘rosy projections’’ and ‘‘wishful thinking.’’ ‘‘Posturing for the court’’.seemed

to be the primary influence on objectives and guidelines.’’ Eventual disclosure of the

memo by the Justice Department led Judge Lamberth to appoint a Court Monitor

to assess Interior’s true progress on trust reform and the veracity of its quarterly

reports to the court.

Four scathing reports by the Court Monitor, Joseph S. Kieffer III, since his appointment in May 2001 form the basis of four contempt charges against Norton and

McCaleb. (Court-ordered trust reform, said Kieffer, ‘‘is a chimera. The trust reform

ship has been scuttled’’ A cynical observer would go so far as to say it never left

dry-dock; rotting there.’’) A separate report by Special Master Balaran on the utter

lack of computer security for IIM accounting data led to a fifth count of contempt.

(It is Balaran’s report that Judge Lamberth found to be a prima facie case for contempt.) This past Friday, Mr. Kieffer issued two more reports. They only add to the

searing indictment of Secretary Norton, Secretary O’Neill and Attorney General

Ashcroft in this matter. The Kieffer reports document a shocking pattern of misleading statements and outright lies to the court in the quarterly reports submitted

by the Interior Secretary. Starting with the 3rd Quarterly Report in late summer

of 2000, the Special Trustee, Thomas N. Slonaker, began to include his own independent comments, suspecting that project managers in the field were painting a

false picture of their trust reform progress. By the 7th Quarterly Report last fall,

Slonaker refused to verify the accuracy of the contents. Pressured by Interior lawyers to verify the report, other senior trust officials also refused because, they said,

‘‘certifying the 7th Quarterly Report would border on the foolhardy.’’ No senior DOI official would touch that report with a 10-foot pole,’’ said Kieffer,

who found that Norton had submitted to the judge ‘‘an untruthful, inaccurate and

incomplete’’ report. Judge Lamberth has since ordered Secretary Norton to sign all

future quarterly reports personally. (In her 8th Quarterly Report, submitted last

month, Norton says her signature ‘‘reflects my belief that my personal observations

in the Report are true...’’)

Balaran’s report on the lack of computer security is equally disturbing. With court

permission, he hired experts who easily hacked into the IIM trust accounting system

and created a phony account without being detected. Balaran has recommended to

Judge Lamberth that the system be placed in receivership.

With her credibility in tatters and faced with the virtual certainty of contempt,

Secretary Norton and her inner circle of senior officials have now proposed a drastic

reorganization of trust responsibilities into a new Bureau of Indian Trust Asset

Management. Because she has done this so late in the day and so suddenly—and

without proper consultation with tribes, as required by law—her actions appear to

be a desperate attempt to stave off contempt. The proposal has met with very strong

opposition throughout Indian Country. Among its flaws, it would merge the tribal

trust with the IIM trust under one entity, ignoring the trusts’ two distinctly different functions, constituencies and histories. This plan will undermine—not protect—tribal sovereignty. It will violate the IIM account holders’ own direct relationship with the federal government, established by law.

Ironically, Norton already has hired former Assistant Secretary for Indian Affairs

Ross Swimmer to head this effort. She ignores the fact that Swimmer was sharply

criticized in the Synar Report for management failures involving the IIM trust. She

ignores the fact that Swimmer—at best—has a ‘‘checkered’’ personal financial history. His BIA management included leading a misguided attempt to privatize the

IIM trust, spending $1 million on the project and getting nothing in return. ‘‘BIA

eventually paid Security Pacific [the bank intended to take over the trust] $934,512,

but according to the Assistant Secretary for Indian Affairs [Swimmer], did not obtain any benefits for the government’’.Far from ‘‘excusing’’ the waste of almost $1

million in tax dollars, the Bureau’s inept handling of the Security Pacific contract

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simply underscores the reasons why it should not have been awarded in the first

place,’’ the report concluded.

Swimmer’s hiring points up the most critical defect in the Secretary’s proposal:

It would leave the trust in Interior’s control, at the mercy of the same inept managers. It is crystal clear from the long record of IIM trust mismanagement that it

is time—past time—to remove the trust from Interior’s grasp and place it temporarily in the hands of a receiver. The IIM beneficiaries deeply deserve a trust run

by competent and experienced professionals, with commercial standards of accountability. Fixing the system is a crucial component of trust reform, and becomes even

more so as we draw closer to Trial Two and the issue of re-stating the accounts.

The two must go hand-in-hand.

Mr. Chairman, it is our hope that this Committee and the Congress will terminate all appropriations needed by the Interior Secretary, the Treasury Secretary

and the Attorney General to continue their bad faith legal defense. Instead, we ask

that you support the individual Indian trust beneficiaries’ request for appointment

of a receiver under the supervision of the judiciary as the only rational solution for

the government to fix the Individual Indian Trust. Congress has appropriated more

than $614 million for trust reform since 1996, and it has gotten virtually nothing

in return—no accounting of Individual Indian Trust monies, no rehabilitation of the

woeful system, no improvement in information technology. The court and the Congress have not even gotten the truth from the Interior Secretary, in part because

she and her advisors do not know the truth and lack the qualifications and skill

to learn the truth before they inflict more irreparable harm on individual Indian

trust beneficiaries.

The Court Monitor’s 6th Report to Judge Lamberth, which was made public last

week, captures the lack of accountability and the arrogance that the individual

Indian trust beneficiaries have experienced for decades from their government.

Kieffer said:

The Secretary’s candor in the Eighth Quarterly Report is refreshing. But

the exacerbation of the ‘‘ordinary human inclination’’ to report only good

news and ignore the bad was in the context of carrying out the highest fiduciary trust duties imaginable owed to the American Indians by the United

States government. Compare this comment on the human fallibility of DOI

and BIA officials with the realization that their reports were at the direction of and for the consideration of a United States District Court. A District Court that had previously held two Cabinet-level Secretaries and one

Assistant Secretary in civil contempt for their and their subordinates’ failure to overcome this ordinary human inclination to lie or dissemble when

bad news as well as good was required by Court order to be reported by

Defendants and their attorneys.

The Secretary’s admission that activities had been designated completed

when ‘‘little material progress is evident’’ is the most telling comment in the

entire Eighth Quarterly Report. The Secretary, in attempting to prepare an

accurate and complete quarterly report, has now found what the Court

Monitor has reported in every single Report to this Court—the reports have

been untruthful. The only problem is that nowhere can be found any indication that those who have committed or permitted these actions constituting

contempt on the Court have been or will be held accountable. No indication

whatsoever that they will be forbidden to continue in supervisory or project

manager roles in the proposed BITAM and their conduct reviewed for disciplinary action and possible dismissal from their present positions. Who

within DOI will hold these officials accountable for the past and present

harm caused to the IIM account holders by their unprofessional conduct

and misleading reports that covered up and hid the most serious of their

failures? Apparently no one, because they remain in leadership positions involved with trust operations and related management and legal activities

or have moved on to equivalent senior positions within DOI.

Where also can be found the expressions of apology and remorse by these

same executives, managers and attorneys that should now be substituted

in the Eighth Quarterly Report for the repeated arrogant stances taken by

the Defendants in the past seven false, inaccurate, and incomplete quarterly reports and their legal defenses of them before this Court?

These Indian Trust duties were no ordinary responsibilities or obligations

of the United States; no APA administrative functions; not a ‘‘no harm, no

foul’’ badminton game or walk in the park. The Secretary’s understanding

of these human failings of her subordinates may fall on deaf hears in

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Indian Country where the effect of these unreported failures has been and

is so severely felt.

Reference need only be made to the present IT Security failure and Courtordered shutdown. The resultant loss of the income stream to the most

needy IIM account holders and Indian Tribes is a perfect example of the

result of these ordinary human inclinations. Who will be held accountable

for the TAAMS’’ failures or the failure to even address the IT Security

lapses? Failures made aware to the Defendants months if not years ago by

their own paid consultants, the GAO, and the Special Master.

What also will be the human inclination of Senators and Representatives

on oversight committees regarding the appropriation of more monies for the

Defendants to try to correct this morass? And who will end up being

harmed if the Congress might—understandably—be reluctant to trust the

Defendants to perform any better in the future, further delaying trust reform until a new agency can be created and staffed? None other than those

same IIM account holders who have suffered so much for so many years

at the hands and tender mercies of the Defendants.

Candor about your subordinates’ human failings is one thing, demonstrating how you will hold people accountable for their past and future

nonfeasance, misfeasance or malfeasance is quite another. This Court and

Congress should require no less.

Now is the time for the Congress to send a clear signal that waste, fraud and malfeasance are unacceptable and that it wants honorable, fit, experienced managers

in charge of fixing this badly broken mechanism. This is a chance for all of us to

stand up for financial and professional accountability. I believe strongly that further

appropriations for trust reform should be fenced in, to be used by a receiver and

not the failed programs of the past or defense of the indefensible litigation. The Individual Indian Trust should be put in the intensive care of a receiver supervised

by Judge Lamberth until it has been rehabilitated fully and restored to health.

After the Court-appointed receiver rehabilitates the Individual Indian Trust, it is

crucial that the Individual Indian Trust remain well-managed in conformity with

the duties of a true fiduciary and, therefore, is, above all, free of politics and bureaucratic fumbling. The Individual Indian Trust already is one of the very few permanently and indefinitely appropriated funds of the United States, similar to the

FDIC, the Federal Reserve Board and the Comptroller of the Currency. Therefore,

like the Office of the Comptroller of the Currency vis-a-vis the Treasury Department, the Individual Indian Trust—after rehabilitation by crisis managers appointed by the Court—could be recast as an independent bureau within the Interior

Department. Independence within Treasury is reinforced because the Comptroller is

appointed by the President for a fixed five-year term, and the Comptroller reports

to the President, not the Treasury Secretary. And there is little doubt that the

Comptroller of the Currency model has worked well under difficult circumstances

since 1863. Instead of underwriting nonexistent trust reform, a skilled Trustee for

the Individual Indian Trust—protected from politics and funded with permanent

and indefinite appropriations—could hire the proficient managers desperately needed to ensure prudent management of this multi-billion dollar trust. The goal here

is simple: stop playing politics with our money and our people.

Our litigation has exposed an ugly story about arrogance and ineptness. But, with

the help of this Committee, we can begin to write a new chapter. I appreciate this

chance to testify and I would be happy to answer any questions.

[Ms. Cobell’s response to questions submitted for the record

follows:]

SUPPLEMENTAL ANSWERS FROM ELOUISE COBELL PROVIDED TO

THE U.S. HOUSE OF REPRESENTATIVES COMMITTEE ON

RESOURCES, WASHINGTON, DC

Q. You contend that Judge Lamberth should place the IIM trust in receivership.

Please explain the structure of the receivership you envision and how it would function.

A. Plaintiffs’ Consolidated Motion for a Receiver, filed with the Court on Oct. 19,

2001, spells out how the receivership would function. I have attached Appendix V

of the motion for your review.

Q. What effect would placing IIM trust reform in receivership have on the trust

responsibility the federal government has to IIM account holders?

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A. We would have an IIM trust that would be under court supervision, which

would give account holders honest and competent service. This type of service would

reinforce the trust relationship with the trustee and the beneficiaries. Accountability

will be a must and the court will enforce consequences if accountability is not adhered to.

Q. Would a court-appointed receiver have any responsibility to carry out consultation with account holders?

A. Not only would a receiver carry out consultation in a proper fashion with

accountholders but for the first time ever a proper relationship with the trustee and

beneficiaries would begin.

Q. If the trust functions were transferred to the court, how would the court carry

out the statutory trust duties that have been established by Congress?

A. Trust functions would be carried out in the manner that Congress had intended. The management of trust functions can only improve under the court’s supervision. Statutory trust duties rest with all three branches of Government. The

Court Monitor’s and the Special Master’s reports provide a clear and honest analysis

of the problems that exist and what is needed to fix this horrible mess.

Q. Where would the court obtain the funding to carry out trust functions and

what standard would be applied to the relationship?

A. The IIM Trust has been set up as a permanent and indefinite appropriation.

Funds that have been appropriated and will be appropriated should be utilized by

the receiver to begin the task of hiring crisis managers. Congress needs to provide

the receiver with the funding to fix this mismanaged trust.

Q. Please provide the Committee with a list of specific facts on which you base

your charge that Secretary Norton has perpetrated a fraud on the United States

District Court.

A. The six reports issued by the Court Monitor and the Special Master’s IT Security Report, along with 4,658 pages of contempt trial transcripts.

APPENDIX V

THE RECEIVER

A. Background

The Individual Indian Trust has been managed with malfeasance for 114 years.

For the past five years, to the detriment of individual Indian trust beneficiaries, this

Court has relied on material misrepresentations of the Interior defendants and their

counsel to allow them without direct Court supervision to develop and implement

trust reform remedies that they claimed would ensure prudent administration of the

Individual Indian Trust. To encourage compliance with Court orders and to verify

the accuracy of representations made by the Interior Defendants, this Court has employed such extraordinary measures as contempt and the appointment of both a

Special Master and a Monitor.

These actions have enabled this Court to understand the true nature and scope

of defendants’ deception and malfeasance; however, Interior defendants’ contemptuous conduct continues unabated and meaningful trust reform is no closer today

than when this action was brought to enforce defendants trust duties. As demonstrated conclusively by the Court Monitor and the Special Master, Secretary Norton and her counsel continue to breach the trust duties owed by the United States

to individual Indian trust beneficiaries. Accordingly, to protect the Cobell plaintiffs

from further irreparable harm, to ensure that the trust duties owed by the United

States to individual Indian trust beneficiaries are discharged prudently, and to ensure meaningful trust reform is designed and implemented, this Court should appoint a receiver for the Individual Indian Trust as follows:.

B. Qualifications

Receivers commonly are appointed by courts to oversee trusts, bankruptcies, reorganizations and other matters where senior management is incompetent,

untrustworthy, or guilty of malfeasance as is the case here. Unfortunately, the appointment of a receiver does not necessarily ensure compliance with court orders.

After appointment of some receivers, the situation is not rectified—it actually becomes worse. The temptation for some courts is to appoint an attorney or a former

government official with some general experience in subject matter of the case.

However, appointments of this nature are generally not as effective. Successful receivers, or their Court appointed deputies, tend to be turnaround and crisis management experts who specialize in assuming positions of control on short notice, take

immediate action to install management and financial controls, and commence and

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1 A judgment regarding Phase II issues will resolve the historical restatement or ‘‘correction

of accounts;’’ therefore, the appointed receiver should avoid involvement in this regard. Issues

relating to prospective management of the trust and future distributions to the proper beneficiaries will be the most problematic, and deserve the undivided attention of the receiver. 2While such sums are not insignificant, they must be viewed in light of the comprehensive,

specialized expertise that is not now available in the government. Moreover, the complexity of

this problem and the obscene, on-going waste of taxpayer monies to date ($614 million appropriated for trust reform while the Individual Indian Trust continues to deteriorate and trust assets continue to waste away) requires competence or this matter will never be resolved..

implement long term solutions for the collection and creation of reliable asset and

beneficiary data from which a trustee can prudently administer the trust.

C. Duties and Responsibilities

The duties and responsibilities of a receiver are straightforward: identify, account

for, protect, and maximize the trust income and allocate and distribute the correct

amount of trust monies to the proper beneficiaries. The mission of the receiver is

to gain control of the processes, marshal the assets and take whatever corrective

action is necessary to ensure that the collection, allocation, and distribution of funds

is accurate, complete, and accounted for fully.1

D. Authority

This Court may wish to retain the title and authority of receiver or confer this

title and authority on a court officer (e.g., the Court Monitor or Special Master).

Therefore, the appointed expert may take the title of deputy receiver. In either case,

the receiver should be vested with the authority of a chief executive officer. As a

chief executive, he should immediately employ other qualified managers, attorneys,

and other professionals. One of the most critical aspects of the receiver’s authority

is his ability to have the authority to hire and fire personnel administering the

trust. Therefore, the receiver, as trustee-delegate, should be assigned Department

of Interior personnel engaged in IIM-related trust operations on a temporary duty

basis. However, as he identifies the dishonest, weak, or unproductive senior managers, counselors, and other employees involved in the administration of the Individual Indian Trust, he must have the authority to relieve them of their temporary

duty assignment and return them to the department. The receiver must then have

authority to retain qualified professionals from the private sector who report to him

directly.

The court should hold status conferences with the receiver and plaintiffs monthly

to review most decisions post facto and justify major decisions in advance. A written

report by the receiver should follow each such meeting.

E. Contract of the Receiver

The Court should accept proposals from leading turnaround management firms.

Obviously, the lowest bidder may not be the most effective manager. Conversely, the

highest bidder may only be that—the highest bidder. Large multi-disciplinary firms,

such as the Big Five accounting firms seem to have no inhibition on amounts they

charge. Therefore, proposals should be prepared on a time and materials basis, including the hourly rates of the various levels of professionals who are anticipated

to be required for the assignment. However, with a case of this magnitude, the court

may wish to consider only accepting bids on a fixed fee per month or year. A reasonable proposal is expected to be in the range of tens of millions of dollars annually.2

The contract term should be at the pleasure of the court with a modest termination

fee. The court should also consider a success fee, which is common, to encourage

the most timely and effective rehabilitation. The goal of receivership is to protect

the trust assets, rehabilitate the trust, and, ultimately, restore management of the

trust to the executive branch. Such action should occur only after the Court determines that honest and competent trust management is in place permanently and

that all trust systems are operating properly.

F. Short Term Actions Necessary

While the appointed receiver should have great latitude in establishing his own

rehabilitation plan, several actions need to be taken expeditiously:

• Gain control of the cash inflows. Trust income is currently being received at over

100 locations. These cash flows must be identified and redirected to lock boxes

under the control of the receiver. The number of administrative cash collection

centers should be greatly limited and electronic systems must be secured or

taken off-line.

• Identify all sources of the cash flows (including a revenue generating lands), locate and validate current contracts under which rents, royalties, and other

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funds are paid, determine if other payments are due from the same vendor, and,

if so, take action to enforce such contracts.

• Identify and contract an adequate interim trust asset and accounting management system (e.g., an established operating trust service bureau.)

• Control and verify the accuracy of all allocations and disbursements.

G. Long Term Actions Necessary

Longer-term actions are also required. Identifying and locating the proper beneficiaries and their interests is the major task:

• The genealogies of original allottees must be identified and accurately traced to

the current generation. The assistance of experienced professionals from the private sector here is also essential. This process may be the most time consuming

and tedious of all tasks. As accurate information is obtained, the system should

be revised to ensure accurate payments are made to each and every beneficiary.

• All income flows from the land must be identified, tracked, collected and properly recorded to the trust, land records must be updated and corrected, and related contracts reviewed and updated. This will improve the data on the nexus

between the sources of revenues and the proper allocations and distributions to

beneficiaries.

• Identify and contract an adequate integrated permanent trust asset and accounting management system.

Long term actions may take several years.

H. Funding

• Contempt Sanctions: Inasmuch as appointment of a receiver here—similar to

the appointment of a Special Master and Court Monitor—is a sanction for, or

in lieu of, contempt, all costs associated with the operation of a receiver should

be included within the scope of financial sanctions imposed by this Court, allocated appropriately, and paid by Interior, Justice, and the contemnors, individually and collectively.

Mr. HAYWORTH. And we thank you for your testimony. The Chair

would note that a 15-minute vote is on on the floor. I will just

briefly yield to the ranking member for a unanimous consent request, and then we will recess and return.

Mr. Rahall?

Mr. RAHALL. Thank you, Mr. Chairman. I have no questions of

this panel. I just want to thank Elouise Cobell for taking the initiative that she has in seeking redress before the court. Being a plaintiff in a high-profile case of this nature is certainly not easy, and

I am sure it has taken a toll on your personal life and on your family life. But rest assured you are involved in a noble cause. You are

from Montana, but you have a friend here from West Virginia, and

I certainly commend you for what you are doing.

Ms. COBELL. Thank you.

Mr. RAHALL. Mr. Chairman, just real quickly to note the presence of an individual that has been sitting motionless and quiet all

day during these proceedings in the very midst of us, dressed in

his travel attire, Mr. James Goddard, and I ask for unanimous consent that his statement on behalf of the Blackfeet Tribe be placed

in the record at this point.

Mr. HAYWORTH. Without objection, and we welcome him as well.

Thank you for coming.

[The prepared statement of Mr. Goddard follows:]

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Mr. HAYWORTH. Thank you, Mr. Rahall, for that statement.

There are lots of questions, and we will get to them, and we

thank the panel for its indulgence.

The Committee is in recess subject to the call of the Chair after

we conclude the vote.

[Recess.]

Mr. HAYWORTH. We thank our guests on panel two for their indulgence, as well as others who join us today and the members of

the Committee, with the business afoot on the House floor. When

the bells ring, it’s kind of like school. You have got to go over there

and take care of that, and then return to our duties here in Committee.

I know a number of members have questions. Let me open with

Ms. Cobell, especially in the wake of the testimony where you advocate a court-appointed receiver and the removal of all trust functions from the Department of the Interior. Let’s amplify that a little bit. Could you tell us in a little more detail how you envision

that would work?

Ms. COBELL. Actually, it is not advocating everything out of Interior. What we are asking for is somebody to be put in charge. And

we feel it is very important to put a person in charge under the

judiciary that would report to Judge Lamberth, the receiver; a person that would have the ability to make sure accountability is

done, and make sure consequences are put in place.

That has been the issue that we have been dealing with. People

get away with not having any consequences. They are mismanaging funds. They are lying to the court and the Congress about

a big huge accounting system, TAMS. And so we are saying, put

a receiver in place that would be reportable to the judiciary, but

leave everything else in place.

Mr. HAYWORTH. So I want to really get in this concept of the receiver. It sounds to me at first blush, Ms. Cobell, that the receiver

would kind of be an extension of the role of a special trustee, because if it is accountable to the judiciary, to Judge Lamberth, how

does the receiver really differ from the special trustee?

Ms. COBELL. Well, I wish I could have answered Mr. Slonaker’s

question for him when it was asked, you know: What was wrong

with the 1994 Trust Fund Reform Act, and why did it not work,

and what do we need to do as a Congress to make it more powerful?

The problem is the 1994 Trust Fund Reform Act gave special

powers to the special trustee, but absolutely had no teeth. So as a

consequence, the special trustee had to report to the Secretary. And

as you know, Secretary Babbitt just completely ignored the plans

that the special trustee put in place to fix this system.

And so what happened is the 1994 trust fund did not really go

all the way. It should have gone all the way, and if it did at that

point in time we could have ended up with a person powerful

enough to fix the system. But we do not have that now. And so that

is why we are asking for a receive.

Mr. HAYWORTH. So the receiver would take this job and really—

And I am not trying to be cheeky about this, but the phrase almost

‘‘imperial potentate’’ comes to mind. I mean, the receiver has the

authority to get things done and be accountable to the judiciary.

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Ms. COBELL. He would bring in crisis managers. That is what

has to happen: Bring in crisis managers. Do not continue—And I

think the discussion went really well from the Congressman. It is

the fact that: Do not bring in the same old people that have been

part of the problem. Work with crisis managers. This happens

every day in the private world. It is no rocket science to fix this.

And I really want to make it clear, the receivership is for individual Indian account holders. Because I think what the Secretary

has done is try to merge these two together. It just does not fit.

Because we heard from council member Matt where they are contracting, and Ivan Makil, they are contracting, you know, and everything is working fine. But this is for individual Indian accounts.

Mr. HAYWORTH. There are some questions I would like to pursue

with President Makil. But I am just trying to nail down the notion

of the receivership, and now in terms of crisis managers.

One of the things we have to do is to come up with a plan that

outlines all of this, whether it is done legislatively or whatever

remedy that comes up. Do you envision how many crisis managers,

as you put it, would be required to make this work in conjunction

with a receiver?

Ms. COBELL. Well, I bet you could do it under $614 million. That

is for sure.

Mr. HAYWORTH. Well, I understand. I am just wondering how

many people would have to staff this, in your mind?

Ms. COBELL. Well, you know, I do not think that there would be

probably more than ten people, crisis managers, that you would

have to bring in.

Mr. HAYWORTH. So a receiver, ten crisis managers— Ms. COBELL. Well, and then you have the entire Department of

Interior. Because, you know, you keep alluding to the BIA. There

is more than the BIA involved in this. There is the Minerals Management Service and there is the Bureau of Land Management,

that all have their hands in this trust reform. That is why it is not

working.

Mr. HAYWORTH. So all of these different lines of jurisdiction. ***

start here

Ms. COBELL. Yes. And I think that Mr. Kieffer’s reports that he

has, and actually the EDS that has been hired by the Department,

all point to the same thing: Nobody is in charge. And so that is the

big issue here, is we have to put somebody in charge. And if we

do it under a judicial mechanism, then we can force it.

Mr. HAYWORTH. OK. You would like the receiver to be required

to consult with Indian tribes, right, in this restructuring?

Ms. COBELL. Well, this is individual Indians.

Mr. HAYWORTH. OK.

Ms. COBELL. Let me tell you, what I am talking about is the

court case for individual Indians. There are two separate trusts we

are talking about: the trusts that are held in common by the tribes;

and there are the individual Indian trusts. And there are two separate entities, because the individual Indians have a direct relationship with the Federal Government; the tribes have a direct relationship with the Federal Government.

Mr. HAYWORTH. Just a couple of brief things, because you

touched on it a second ago. In terms of the cost of how to do this

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and where the funds would come from, in your mind, how should

it be funded? And what type of cost would the receivership and the

crisis manager scenario—Any idea how much that would be, or

anything you would try to budget for it?

Ms. COBELL. Well, I certainly think it is going to be a lot less

money than what has been spent so far since 1996, but I really do

not have those totals. But I know that I think one area that we

discussed in our written testimony is what happens to the temporary receiver? After the receivership, what happens?

There is actually a mechanism that is already in place by law.

Individual Indian trusts have been permanently funded, like FDIC,

the Office of Comptroller of Currency. That is already on the

record.

Mr. HAYWORTH. OK.

Ms. COBELL. So I really think that in order to fix this, Congress

really has to face reality, the fact that the IIM Trust should be permanently appropriated like the OCC is permanently appropriated.

Mr. HAYWORTH. Ms. Cobell, I thank you for going into more detail and amplifying. I also thank the indulgence of my fellow Committee members, as I went a bit over time. My good friend from

Michigan has some questions.

Mr. KILDEE. I appreciate your questioning. I think it was very,

very important. It would seem to me that there is an inherent conflict in having the Secretary representing the U.S. Government,

and at the same time being the fiduciary for either tribes or individuals. There is some type of conflict, and we have to somehow resolve that conflict.

President Makil, you mentioned some type of commission, was it

you called it? Could you elaborate on that? And also—any of you

can answer this, too—elaborate on what you think of the separation of the Bureau of Indian Trusts assets and managements within the Department of Interior. Could you start with that Ivan, or

Mr. President?

Mr. MAKIL. Sure. I think it is important because of the fiduciary

responsibility to be able to have objectivity on a commission. But

also, you need the expertise. Because on the financial end, as I said

earlier in my comments, it is not just managing the revenue or the

money. It is not managing stocks and bonds. It is also the land. So

that expertise has to exist.

A separate commission that would have some authority: As also

was mentioned about the ’94 legislation, it did not have the teeth,

did not give the authority so that it could oversee and actually implement a financial accounting system or other things. All it could

do was make recommendations and if the recommendations were

not followed through, nothing happened.

So what you would do—Or at least a suggestion, one idea to

think about would be to have a commission that the Secretary was

responsible to, as well, but keeping all of those trust responsibilities together, because they do work hand in hand.

If I could, in how a receiver relates to this, my understanding is

that a receiver would be temporary, also. You still need a process

or a system to be maintained. And if you have a commission that

oversees all of this that everyone would report to and that has a

specific task, which is the management of those funds and all of

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the responsibilities along with it, that is the way to do it. And the

Secretary could be responsible to that commission, as well.

Mr. KILDEE. During the consultation which was ordered by the

Executive Order, were you consulted on anything like that? Or was

the consultation basically subsequent to their decisionmaking?

Mr. MAKIL. It was subsequent to their decision.

Mr. KILDEE. It was not at all concurrent with their decisionmaking?

Mr. MAKIL. No, it was not. And furthermore, I am on the advisory panel for the special trustee, and the advisory panel consists

of tribal leaders with experience—and not just because I am

there—but tribal leaders with experience, extensive experience, on

these issues, as well as people from different financial institutions.

So you have a good mix of experience across the board.

Virtually, our recommendations—We have been told from time to

time, or reminded from time to time, that we are just an advisory

panel.

Mr. KILDEE. Just knowing your own particular sovereign tribe,

you demonstrated your ability to handle finances very well out

there. And that expertise could very well be tapped, could it not,

by the Department of Interior?

Mr. MAKIL. There are examples across Indian country. And Salt

River, we have had a model for several years. We contract through

a self-governance compact for all of the services that the Bureau

used to provide. We do them ourselves through the compact. And

we have done it successfully.

We have offered to Interior to come look at our system, because

on our system we have been asked to demonstrate it several times

to other tribes. We maintain all of the records. We can get a payment on a lease and turn it around in two to 3 days, and make

the pay-out, and do it accurately.

We can even through our system produce maps and documents

which show where lands are located and show the fractionated interests as severely as they have been fractionated. We have that

system, and we have built it internally.

Mr. KILDEE. Let me ask one final question, and any of you can

answer. Should we let the Department do its own reform? Or do

we need additional legislation now to do some directing?

Mr. MAKIL. My opinion is that you need additional legislation,

because whether it is a commission or whatever other instrument

that might be appropriate, it needs to have the ability to take the

kind of action in an objective, fiduciary way that is intended. That

is how you are able to eliminate those conflicts of interest.

Mr. KILDEE. I thank you.

Mr. HAYWORTH. Thank you, Mr. Kildee. Would either of the

other two panelists care to respond?

Ms. COBELL. Oh, I agree that Congress has to enact legislation

to force some of these changes that we are suggesting.

Mr. HAYWORTH. How about you, Chairman Jandreau?

Mr. JANDREAU. I do not necessarily agree that the idea of forcing

anything is appropriate. I do believe that there is a commission

necessary that is empowered to do some things that are beneficial

to assuring that the Bureau is put back together in a way that is

responsive to all of the problems that have been created. Forcing

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people brings tension and rejection. I think if it is a cooperative effort, I believe it can work.

Mr. HAYWORTH. Thank you, Chairman Jandreau.

The gentleman from Tennessee joins us, and we thank him for

his time.

Mr. DUNCAN. Well, thank you, Chairman Hayworth. And I appreciate Governor Rehberg letting me go out of order here. I have an

appointment coming over here to see me in just a minute.

Miss—Is it ‘‘Co-BELL,’’ or ‘‘CO-bell’’?

Ms. COBELL. ‘‘Co-BELL.’’ Mr. DUNCAN. ‘‘Co-BELL’’? I have a first cousin who is a radiologist, Dr. Steve Becker, in Libby, which is right next to you. But let

me ask you this. In your testimony—I apologize that I was in other

hearings and was not able to hear your testimony, but you say

here, ‘‘The Interior Secretary has demonstrated through the fraud

she has perpetrated on the United States District Court and the

United States Court of Appeals that she should no longer be trusted.’’

I was a lawyer and a judge before I came to Congress, and I can

tell you, that is an extremely serious charge. In fact, I have sat

through hundreds of congressional hearings in the years since I

have been here, and I do not recall ever hearing a charge quite

that serious. Would you tell me specifically what you mean by

that? Because you are accusing the Secretary of illegality, when

you say she is perpetrating a fraud on Federal courts.

Ms. COBELL. Right. There have been several reports that validate

exactly what I said.

Mr. DUNCAN. Well, like what? I want to know the specifics.

Ms. COBELL. Well, there were several court reports that were not

right that were submitted to the court but were not full of the correct information that should have been.

Mr. DUNCAN. And you know that she is the one that specifically—When you say ‘‘perpetrated a fraud,’’ you are saying that she

intentionally either put false information in there or something to

that effect. Is that what you are saying?

Ms. COBELL. Yes, that is what—We are in a contempt of court

trial right now, as we speak, on these issues. And one of the issues,

as you probably have read in the testimony, is the fact that the

seventh quarterly report was not accurate. And the special trustee

refused to sign it and said, ‘‘This is not accurate.’’ But it went

ahead anyway. And the Secretary, it is my understanding, was

thoroughly aware of the fact that it was full of inaccuracies.

The issue that is before the court right now is the fact that—It

is not only my opinion; it is the opinion of several reports that were

inaccurate, it’s the opinion of the court monitor’s report, it is the

opinion of the special master’s report that is out there. This is serious, Congressman.

Mr. DUNCAN. Well, you know, I will say this. You cannot base

a criminal case on somebody’s opinion. You have to have facts. You

have to have specifics. And what I wish you would do is provide

to this Committee a list of the specific facts that you base that

charge on. I cannot say that you do not have those facts. I do not

know.

Ms. COBELL. Yes.

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Mr. DUNCAN. But I think it is such a serious charge that I think

you should have that, and not just be basing it on some thirdparty, hearsay type statement. You need to have that kind of

knowledge yourself, because I am not sure that you understand

how serious the charge is that you are making there. You are

charging criminal illegality.

Let me ask all of the witnesses this. In one of the briefing papers

we are told that you feel the Secretary’s proposal would weaken the

Bureau of Indian Affairs. Will you explain to me how you feel that

would occur? This is something—In fact, Ms. Cobell, you say

‘‘Where is the money?’’ And I notice that there was a GAO report

concerning this problem as long ago as 1955. This is a mess that

has been going on for many, many years. In fact, the Secretary of

the Interior had a quote from Arthur Andersen, a report in 1988

and ’89, that said that some of these weaknesses are so pervasive

and fundamental as to render the accounting systems unreliable,

and said it would cost $440 million, or as much as $440 million,

to straighten out. What do you say about that?

Ms. COBELL. Well, I think that what the Secretary herself talked

about this morning is the fact that they do not have records. They

do not even know where the records are. And so it seems to me

that the logical—

Mr. DUNCAN. But those records were lost long before she ever

came in.

Ms. COBELL. Yes, well, I know, but she went in as the Secretary

of Interior, and she is our trustee. And so I think the logical thing

to do is settle the case; sit down with both sides and settle. If you

cannot provide a historical accounting, do not pretend that you can.

Settle the case.

And Congressman, I really want—With all due respect, I want

to tell you, this is serious. This is serious. And I would not put anything in my testimony that I did not feel was accurate and correct.

You know, three of the four counts of the current contempt proceedings that are going on right now are the fraud on the court.

And so we do have all the documentation to back up what I said.

So I really want to let you know that we have all talked about

how long we have been involved with trying to reform and getting

accounting for the beneficiaries, to really have the government understand what it is that you are supposed to be providing as the

highest fiduciary standard to our beneficiaries. And this is very serious.

Mr. DUNCAN. And you do not believe the Secretary of the Interior

is trying to straighten out this mess that she inherited?

Ms. COBELL. No.

Mr. DUNCAN. OK. Thank you very much.

Mr. HAYWORTH. Thank you, Mr. Duncan.

Let us turn to the lady from the Virgin Islands.

Mrs. CHRISTENSEN. Thank you, Mr. Chairman. And I thank the

panelists for their testimony. I guess I would ask two questions,

the first one to President Makil. I think it is pretty clear that everyone on the panel agrees that the BITAM proposal would undermine the BIA, and that that is a bad proposal. I had asked the Secretary about BITAM’s impact on the 638 contracts and the self-govVerDate 11-MAY-2000 09:07 Sep 26, 2002 Jkt 000000 PO 00000 Frm 00095 Fmt 6633 Sfmt 6602 77526.TXT HRESOUR1 PsN: HRESOUR1
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erning tribes. And if I recall her answer, she said that she thought

both were compatible. But I think, President, you seem to disagree.

Mr. MAKIL. There obviously would be a concern as to how they

would do that; you know, the process they would go through. Two

things: One is the funding of it and the funding that they would

use to support BITAM, and what that means to the self-governance

process. Because the way that it looks is it would mean that it

would take away not only the financial arrangement we have

under the compact, but it would also take away the responsibility

that we handle already ourselves quite adequately. And so now we

are being asked, and that is what is even more important to us— Well, I should not say more important, but as important. It is when

you take away the responsibility that we have already demonstrated we can handle and put it in another system, just for the

sake of creating a new system to solve a problem.

Mrs. CHRISTENSEN. And I agree with my colleague, Congressman

Kildee, that the model that you have provided, as well as some others, should be able to serve as a model for us to use as we move

ahead from here.

I wanted to ask Chairman Jandreau and Ms. Cobell your opinions on the proposal that was supported by President Makil for an

independent American Indian Trust oversight commission, and to

ask how does that compare to the receivership. Ms. Cobell?

Ms. COBELL. I think that it would complement the receivership.

I think that what Chairman Makil has outlined is something that

has been discussed for quite some time with the advisory board,

that we really need to have independence. And that would bring

the independence of a commission outside of the Department, and

there would be somebody put in place, a body put in place, that the

Secretary would have to answer to.

Right now, the advisory board is ignored by the Secretary and

the Department. And I think that if we put the receivership in for

the individual Indian accounts, this will really complement what

the tribes are trying to do as an outside commission. It certainly

seems like one good idea to me, too.

I am still very hung up on the fact that we have to have a receiver put in place for the individual Indian accounts, because it is

a separate situation than the tribal accounts.

Mrs. CHRISTENSEN. OK. So it is complementary. I understand

now. Did Chairman Jandreau want to comment on that?

Mr. JANDREAU. That has been a request that has been in existence for at least the last 40 years that I am aware of, that there

be a commission or a Committee or something driving this whole

process, going back to even when the commissioner position was

there. And I believe it is necessary. I believe that if that is in place

and there is an allowance to recreate the Bureau in its entirety

with that body in place, I believe that there would be no need for

a receiver. But whatever happens will happen.

Mrs. CHRISTENSEN. Those are my questions. Thank you, Mr.

Chairman.

Mr. HAYWORTH. Thank you, ma’am.

We now recognize the gentleman from Montana.

Mr. REHBERG. Thank you, Mr. Chairman. I have been asked to

pass along the apologies of Chairman Matt. He had to catch a

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plane back to Montana. And those of us from Montana know that

if you miss that one plane, you wait until tomorrow.

[Laughter.]

Mr. REHBERG. Yes, it is like the Virgin Islands. So he has moved

along.

But I would have asked him a question about his expertise in

being able to manage the real estate services within his reservation. So I guess, perhaps, my question would be to Ms. Cobell. And

that is, are there contracts for the individual Indian trust accounts

separate from the BIA at this time, similar to what Chairman

Makil does with his contract and what Mr. Matt does with his contract?

Ms. COBELL. No, not at Blackfeet. We do not have the IIMs contracted. And I think Mr. Makil’s tribe and Mr. Matt’s are unique.

I think there are very few out there that have contracted the management of the individual Indian accounts.

Mr. REHBERG. So you are not aware of any other individual

Indian account— Ms. COBELL. I am not aware of it.

Mr. REHBERG. —separate contracts? It is all being done within

the BIA?

Ms. COBELL. Right.

Mr. REHBERG. I had wanted to ask the Secretary the question,

and did not, and perhaps you can answer the question from your

knowledge of the individual Indian accounts. Are there situations

that you know of, in looking at their numbers, where the

fractionalization of the ownership was so large that the benefit was

not anywhere close to the cost of administering that trust? How do

you propose under the receivership concept of trying to bring that

to a conclusion? Does it get to the point where you finally say,

‘‘Look, if you are 1/64th and beyond, we cannot write you a threecent check’’?

Ms. COBELL. Well, no, I think it has to start even further back

than that. I think the EDS reports and all of the other reports from

GAO indicate the fact that we have to go back to the land ownership originally. Because in the testimony through the court, we had

learned that probates were destroyed; that nobody had actually

verified the land ownership records. And I think that if you talk

to Ivan and to Fred, they actually had to go back and do a lot of

in-depth work before they could verify the ownerships.

And the real issue that we are dealing with now is ownership.

Land ownership records are wrong. And so they really cannot tell

you what should be in your account. And that is a real issue, but

it is fixable.

When we talk about crisis management, I think that is where we

are going, is finding out what should people—what do they really

own?

Mr. REHBERG. Perhaps it is not a fair question, but can you estimate the time that the receivership would be necessary? Are we

talking 5 years?

Ms. COBELL. Yes, I would think that it would probably at least

be 5 years. Five years would be my estimation. I think that there

is a lot of clean-up that has to be done. I think Mr. Kieffer, the

court monitor, identified on the data clean-up they had not even

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started. But I think that if you get it under a receivership where

you have accountability and have consequences if you do not do

your job, that it could be done in a shorter period of time.

Mr. REHBERG. President Makil, you might have said this and I

missed it. On your trust accounting system, did you design the system, did your tribe? Or do you contract with a private entity for

that system?

Mr. MAKIL. We designed it in-house, our own people.

Mr. REHBERG. And did you share that design with the Secretary

or the Department of Interior and the BIA?

Mr. MAKIL. Many times we have offered.

Mr. REHBERG. You have offered it?

Mr. MAKIL. Many times we have offered. And the last time that

I recall, I do not remember if it was ITMA or the finance directors

group of people, but we were asked to make a presentation. And

representatives of the Bureau were in attendance. They gave a

presentation on TAMS. And then when we came up to give our

presentation, they left. So they have missed it.

Mr. REHBERG. One final question, Ms. Cobell. And that is, you

know, I do not disagree with your comments and Mr. Rayhill’s comments about privacy and checking accounts and such. But I do

have a problem with not getting enough information to make the

right decisions. Is there not anything within that Ernst and Young

report that could protect the privacy but provide us the information

of the problems, and I guess more specifically with what Mr. Duncan asked, some of the fraudulent examples? Is there not a way

that we can get some of that information?

Ms. COBELL. Yes, well, the Ernst and Young is not really an accounting. And I think everybody has said that through this Committee, or at least I heard; that you cannot do an accounting. There

are lost records. You know, it ends up being just a ticking and

tacking of the debits and credits. So I really do not think that it

really shows what you want.

And I really think it is a violation, Congressman, of our privacy

rights as beneficiaries, you know. This is a trust relationship, and

I think that the information is just to go—I really feel it is not fair.

I think that we all know what is missing here is the accounting.

And this is not an accounting, Ernst and Young. And I would love

to spend more time with you to talk about that.

Mr. REHBERG. Thank you, Mr. Chairman.

Mr. HAYWORTH. Thank you.

The gentleman from New Jersey.

Mr. PALLONE. Thank you, Mr. Chairman. Let me just start out

by thanking the panel. You know, you have really been substantive

in, I think, giving us a better idea of what the problems are and

what needs to be done. And I know you have been at it for a long

time, but it was very helpful. I just wanted to stress that.

The other thing, I wanted to address a few questions to President

Makil. First of all, I wanted to say I appreciate the fact that in

your written testimony you talk about how this was an opportunity

to right the wrongs of the past, because that is kind of how I see

it. I guess I am a little bothered with Secretary Norton, because

she seems to sort of suggest that, ‘‘We are just going to try something here, and we hope it works out,’’ and I do not think really

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understands that this is really an opportunity to show that by

working with the tribes that we can really accomplish something

and build sort of trust with each other.

But I wanted to ask, you talked about extending the original

deadline for consultation, and you thought it should be extended

again. And that is kind of what I said before. I am fearful that she

is trying to wrap this up very quickly, which she kind of said. And

I was just wondering if you would initially tell us how long a period

of time do you think you need, and whether you think that the Secretary is spending enough time. And she says she is meeting with

the taskforce, but my fear is that we are not getting enough time

here and that this is going to be wrapped up very quickly. How

long do you think we need?

Mr. MAKIL. It would be a guess on my part, but I think it could

be anywhere from six to 18 months. That would be a guess. But

obviously, if there was some form of legislation enacted to create

an independent commission, then that would define a process for

consultation that would be necessary to accomplish the task.

Mr. PALLONE. Now, did you comment, have the tribes and the

taskforce looked at your proposal, and have they commented on

your proposal at this point?

Mr. MAKIL. We have not had the opportunity because, obviously,

time has been short— Mr. PALLONE. Right.

Mr. MAKIL. —to present this idea to the taskforce. I did personally present it to the western region representative, which is representing the region that we are located in. I did present this idea

to that representative. I don’t know the results of that discussion

over the past weekend, if it was presented and to what extent there

was comment.

Mr. PALLONE. You still need time, obviously.

Mr. MAKIL. Right.

Mr. PALLONE. Now, you said in your testimony, also, you talked

about how the Secretary’s current proposal violates a lot of things:

treaties, executive orders. But then you said even the Federal policy of tribal self-governance and self-determination. You mean what

she has proposed, or just the way she is going about it? Why is the

proposal a violation of sovereignty or self-governance?

Mr. MAKIL. First of all, it takes the right to decide.

Mr. PALLONE. Right.

Mr. MAKIL. For one thing. But the issue is that at least one of

the issues for us has been there are examples of models out there

that one ought to consider. If they are working, is there not something that can be developed similar to those models that will work

on a larger scale?

Now, granted, you know, our model is specific to our tribe. But

all of the components necessary to develop an adequate model that

works I believe consist or exist in that model. And so there has not

been that consideration of these models that are out there.

There also has not been—You know, it was obvious that there

was a decision made about how things should work, and then consultation following to support that. To me, that is a severe violation, when it has been the policy of the Federal Government to consult with tribes, especially when you are talking about something

96

as significant as individual Indian money accounts or trust responsibilities that the Bureau has.

Mr. PALLONE. OK. Thank you very much.

Thank you, Mr. Chairman.

Mr. HAYWORTH. Thank you, Mr. Pallone.

The gentleman from American Samoa.

Mr. FALEOMAVAEGA. Thank you, Mr. Chairman. I certainly would

be remiss if I did not express my sense of appreciation to you and

the gentleman from Michigan, Mr. Kildee, as co-chair of our Indian

Caucus. And I sincerely hope, Mr. Chairman, that not only the advent of the seriousness of this trust issue that has now come before

us, but it is my sincere hope that our caucus will also address seriously the issues affecting Indian health, education, the problem

with education, all other areas, the BIA also, in any way.

I am sorry that the Administration did not in any way at least

consult with this member and members of our caucus; and hopefully, that we could have worked together on this issue.

I do not know if it was the humorist Will Rogers, who I understand was part Cherokee, who said that the Federal Government

did a fantastic job by stealing land from Indians: They did it fair

and square. That is supposed to be a joke, Mr. Chairman.

[Laughter.]

Mr. FALEOMAVAEGA. I do want to offer my personal and highest

commendation to Ms. Cobell for her leadership, for the initiative

and the tenacity to go against an 800-pound gorilla. To think that

this issue has been in place now for some 100 years, and now we

come to a situation—And in all fairness to the current Administration, this is not something that Secretary Norton is responsible for.

The fact is that both Democratic and Republican administrations

have failed miserably in addressing the issue very seriously. And

now it has taken the Federal court to finally force the issue.

And for this reason, I have to offer my personal commendation

to Ms. Cobell and her team in making this effort. Now we are in

the square. And I wanted to ask the members of the panel, and I

had raised this issue earlier with Secretary Norton, about the 1994

Act. I think Mr. Slonaker even admitted that it does not have very

much teeth in it—really, to address the issue that has been on the

books.

The OMB, the GAO, and I thought the fantastic work that even

the late Congressman Sinar from Oklahoma—It was at his urging

that we pass the 1994 Act. I wanted to ask the members of the

panel, do you think that maybe this could be a route that Congress

could make improvements in the current law and literally put more

teeth in, as opposed to the Secretary’s proposed executive order,

and changing the landscape as far as BIA is concerned? I open it

to any members of the panel.

Ms. COBELL. I certainly think that the Trust Fund Reform Act

of 1994 could use some amendments to it to make it stronger. I feel

that you could encompass what Mr. Makil has outlined in making

a more powerful commission, but not to be reportable to the Secretary; that it has to be outside. Because that is what has failed.

If you remember, Paul Holman tried to implement change, and

was met by total—just a real not good attitude from the Secretary;

and basically took a lot of powers away from him and ended up

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having the special trustee quit. So I think it is a real opportunity

to enforce the law to what it was intended to be.

Mr. FALEOMAVAEGA. Please.

Mr. MAKIL. I would agree that it possibly could set up or continue to advance that legislation to create an independent commission. The intent, as we had discussed it, because many of us have

been doing this for a number of years and are working on this

issue for a number of years—The intent was to be able to create

the advisory board that was set up for the special trustee, having

that kind of expertise, the financial and the tribal expertise, so that

it could offer the solutions to dealing with many of these issues.

Unfortunately, it is only an advisory Committee, and does not

have any authority. That is why it is important, if it was going to

be changed, that legislatively it needs to be done to create the independent commission.

Mr. FALEOMAVAEGA. Well, I think one of the problems that we

were faced with when the court decision came out, there may be

an estimate on individual Indian accounts, monies of some $100

billion. I think this is where everything started shaking here, as

far as the Congress was concerned, as far as the Administration

was concerned. Then it became a political problem.

It did not become a problem of justice and fairness. I do not

think there is any question in anybody here, Mr. Chairman, that

the money is there. All we have to do is account for it. And I think

this is where the problem lies. The money is there, despite all the

burnings and whatever, the misplaced records, all of that. But collection continues to come into the pot in the Federal Treasury, but

we just cannot seem to make an accounting.

The estimates, Ms. Cobell, if I may ask the question, it has been

estimated that the individual Indian account monies, that there is

about $100 billion there. Has there been any estimate on the

amount of monies that were used for the leases and extraction of

minerals from tribal lands? Any estimates along those lines?

Ms. COBELL. No, I cannot answer on the tribal side. I have just

been working with the individual Indians.

Mr. FALEOMAVAEGA. How much has this litigation cost your tribe

and people that are involved in your lawsuit?

Ms. COBELL. Well, actually, I went out and fund-raised for this

litigation, and was not able to get any tribal funds committed for

it because they have their own initiative. They have to fight for

their tribal funds, tribal trust funds. That has not even come before

this Committee yet.

But I know that it has cost a lot of money. And I stated that I

hope that Congress stops this frivolous litigation on the part of the

Departments of Interior and Treasury, because it has got to stop.

You know, we have won every single way, but they are refusing to

implement the court orders. And we should not have to fight this.

And if you think about it, you know, why should we have to fight

for an accounting?

But it has cost a lot of money, and I have had to fund-raise to

fund this litigation.

Mr. FALEOMAVAEGA. I think there have been seven consultations

conducted throughout the country by Secretary Norton or her staff.

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Do you consider this to be adequate, in terms of consultations with

Indian country?

Mr. JANDREAU. No, it is not. But going back to your first question

about changing the legislation, adding to that, I think it is very important that those areas that are not able to speak but through one

representative, who control 40 percent of the account holders, who

contain 60 percent of the trust assets, that at least field hearings

in those areas—and I am talking about the Great Plains—be held

to really allow those people to speak to what kinds of changes and

what kinds of things that they would like to see happen with the

legislation to make it stronger.

And as far as the commission, I think that that is so important.

And, no, it has not been dealt with, a lot of the ideas about tribal

trust assets.

Mr. FALEOMAVAEGA. Thank you, Mr. Chairman, my time is up.

Mr. HAYWORTH. Thank you.

The gentleman from Oklahoma.

Mr. CARSON. Thank you, Mr. Hayworth.

I would associate myself with my friend from American Samoa

in his comments about the tenacity and persistence of everyone in

this room in pursuing this litigation and making this issue one that

is aware for the public, as well.

Just a couple of questions, because we have touched on a number

of issues and you have explained your thoughts and the positions

at length to a number of the other members. Ms. Cobell, let me ask

you a question. I mean, much of the debate and cause of concern

on this issue has been about the temporal scope of accounting, and

how far back you are going to do an accounting, and what is possible to reconstruct records.

In your earlier comments, you alluded to the fact that no accounting was possible. I wonder whether you would expound on

that a bit more for all of us, and tell us to what extent you think

an accounting can be done, and kind of the scope of that accounting

if it can be done.

Ms. COBELL. Well, I think we all understand as individual

Indians that we are not going to get every penny that was owed

to us from our ancestors. And from 1887 forward, there has never

been an audit, or a reconciliation, or whatever you want to call it,

to individual Indians. But I believe that the individual Indian account holders, we have come up with actual figures that we think

that we could offer in a settlement talk. But the Department and

Justice, I guess through the Justice Department, refused to sit

down and have settlement talks.

And I think that that could be very constructive. And we would

not have to continue, our Congress would not have to continue to

appropriate money to fight this case. And so I think that that is

where the resources should be spent, is sitting down and talking

about a fair settlement with individual Indian account holders.

And we have had accountants working on this from day one,

since we started this litigation, to come up with an idea of how

much is owed individual Indians.

Mr. CARSON. And what is that number that your accountants

have come up with?

99

Ms. COBELL. Well, it is above $10 billion, let me tell you that.

And we do not know exactly where we would be as far as the—I

guess I forgot about that, is that we had actually shared a model

with the Department of Interior, telling them, ‘‘This is where we

can start and where we can go, as far as what is owed individual

Indians.’’ The $100 billion comes from 1887 forward, because there has not

been an accounting. And of course, there will probably have to be

some negotiations as far as allowance for disbursements and whatever. But the figure is in the billions of dollars, and I would say

that $10 billion is a low-ball figure.

Mr. CARSON. Very good. I do not have any further questions. Let

me just ask if the other panelists would agree with that basic notion, that a settlement should be pursued in this manner, rather

than endless litigation about the proper scope of accounting?

And perhaps, let me ask our first panelist, as well, who brought

up the idea of some alternative models for accounting that you had

thrown out there, in some of the discussions on this you have

talked about a Resolution Trust Corporation style model. Tell me

how that would be reconciled with much of the concern in Indian

country about the various rights and obligations of self-governing

tribes, and the fact that we do not want to undercut the Bureau

of Indian Affairs. And in many ways, the Secretary’s proposal is

seen perhaps as the first step in dismantling the historic trust relationship that the BIA is the most obvious symbol of.

Mr. MAKIL. Sure. Because of the historic relationship, in terms

of the trust relationship, that must not be disturbed. And the reason that this makes sense is that a commission that is made up

of members that would also have some tribal representation is important, the knowledge of that is important; and also, hopefully,

that recommendations for appointment to a commission would be

done through a process that would include recommendations from

tribes or tribal governments.

One of the things that is important in this process, and I think

is possible—and it goes to even part of the discussion that occurs

when you talk about consultation—is that it is difficult to have consultation with tribes as a trustee for tribes and only speak about

the trust responsibilities, and not be able to discuss the fact that

it is not just individual Indian money accounts where there are disputes that need resolution. There are, or there will be, disputes on

tribal monies, as well.

And the Federal liability, in terms of the Federal Government

and its liability that exists out there in those types of disputes—

And it is not just one, you know. There are 557 different tribes in

the country. And maybe not all of them will have disputes, but a

lot of them will.

And so the resolution of those disputes through a commission

that, hopefully, would be objective, would be independent, a commission that would be—and I would like to believe that it is possible—not politically motivated, could deal with just the facts of the

tasks that are at hand, and try to find resolution. Because then,

on the one hand, to resolve some of these disputes you would have

the tribes on one side, and then you would have the Secretary on

the other side of the table. And so, you know, you cannot do that

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when the Secretary has that responsibility to do it. You have to do

it with someone that is independent.

Our concern about the self-governance of tribes is that if there

is something that we believe can work, and works consistent with

our ability, it does not mean that you take away what we are

doing. It may mean that you create a model that is consistent with

what we are doing. You know, because after all, the real issue here

is making sure there is a proper accounting system in place so that

it accounts not only for the financial side, but also for maintaining

land interests and activities of the land that bring in that revenue.

And the more that tribes can take on those responsibilities themselves—Not all tribes are in a position, or have the resources to do

that. But as they develop the resources to do it and there is a

model out there, whether it is a commission—And that was one of

the reasons I mentioned the possibility even of an exit strategy in

the future. Because over time, tribes will handle those responsibilities more and more themselves, I believe.

Mr. CARSON. Mr. Chairman, I see my time is up. If I could, I

would just offer, with unanimous consent, to introduce into the

record the testimony of Mr. John Berrey, an Osage and Quapaw

with significant expertise in these issues, that I would like to offer

for the record.

Mr. HAYWORTH. Without objection, so ordered.

[The prepared statement of Mr. Berrey follows:]

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Mr. HAYWORTH. Does anyone else have any questions for the

panelists?

[No Response.]

Mr. HAYWORTH. The bells have rung. We have another vote.

Just a brief question—the Chairman’s prerogative—for my constituent. President Makil, just briefly, as we listened to the receivership plan, Elouise outlined and talked some about that. And you

have another thing. This is kind of an all-purpose exam question,

just based on what you have: Compare and contrast. Are there any

commonalities of views? Because Ms. Cobell makes it very clear

that she is concerned about the individual accounts. You have done

work with your tribe on the tribal accounts, and done some things.

Just at first blush, is there any meeting of the minds on this, or

just two alternative notions here?

Mr. MAKIL. Actually, if you look at it from the larger perspective,

we are really asking for the same thing. And let me explain why.

In a receivership situation mandated by a court, it would be something that has to be done. OK? I mean, that is essentially what the

court would mandate. So a receiver has a responsibility to make it

happen. It is not left open to maybe coming up with a plan that

works. They have to come up with something that resolves the

issue.

When I ask for legislation of an independent commission, it is because we need something that is going to work. We need something

in place that is going to truly, truly represent a fiduciary, or act

as a fiduciary, or those responsibilities that fall under the broad

title of ‘‘trust,’’ on behalf of tribes.

And it is not something that we can continue to do in an advisory

capacity. Because as has been demonstrated, for the past eight, 10

years, it is that an advisory capacity does not work. It is something

that has to be mandated.

So in effect, we are asking for the same thing. Now, they are two

different situations, and they do respond to two distinct areas. But

I think that they can work in tandem.

Mr. HAYWORTH. I thank you, President Makil. Thanks to all of

the panelists. A vote is on. We will recess.

Mr. FALEOMAVAEGA. Mr. Chairman?

Mr. HAYWORTH. Yes, sir?

Mr. FALEOMAVAEGA. May I ask unanimous consent that my

statement be made part of the record?

Mr. HAYWORTH. Why, absolutely. Without objection, it will be

made a part of the record.

[The prepared statement of Mr. Faleomavaega follows:]

Statement of The Honorable Eni F.H. Faleomavaega, a Delegate to

Congress from American Samoa

The CHAIRMAN.

I want to thank you for scheduling this hearing today on the Department of the

Interior’s proposal to re-structure its management of Indian Trust Fund Accounts.

I very much appreciate the willingness of the Committee to look at this subject

again in light of recent circumstances, including a federal court order directing the

Department of the Interior to disconnect from the Internet all computer systems

through which individual Indian trust data could be obtained.

As we know, the Department of the Interior’s management of Indian trust assets

is a complex problem with a long history. The Department of the Interior has had

the trust responsibility of managing both individual Indian accounts and tribal acVerDate 11-MAY-2000 09:07 Sep 26, 2002 Jkt 000000 PO 00000 Frm 00111 Fmt 6633 Sfmt 6621 77526.TXT HRESOUR1 PsN: HRESOUR1
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counts since the 1800s. This is no small task. The trust is composed of 45 million

acres of tribal lands, 11 million acres of individually allotted lands, and $3 billion

in cash assets. Over $1 billion is received and disbursed by the Department each

year through various trust accounts.

There is general acknowledgment that these accounts are not now and have never

been satisfactorily managed in accordance with the fiduciary responsibility owed by

the government to the trustees. By saying this, I do not mean to be any more critical of the current administration than prior administrations, and I wish to acknowledge the efforts being undertaken to reconcile the accounts by this administration

and the previous administration.

Mismanagement of Indian trust funds is not a new problem. Over the years, numerous audits and reports on Indian trust funds have been published by the Interior’s Inspector General, the GAO, OMB, and Congressional Committees. Former

Representative Mike Synar conducted five years of investigations into the problems

and published a report in 1992 entitled, ‘‘Misplaced Trust: The Bureau of Indian Affairs’ Mismanagement of the Indian Trust Fund.’’ The report detailed problems associated with trust fund accounts that had never been reconciled, tribes and individual Indians who did not receive regular statements detailing the activity in their

accounts, checks not being credited to appropriate accounts in a timely manner, and

irregular bookkeeping practices. Today, ten years later, the same problems continue

to confront us.

I do not believe the executive branch of our government is solely responsible for

the mismanagement of Indian trust funds. Congress has known about this problem

for decades and could have provided additional funding and recourse to address this

problem. To its credit, however, Congress has made efforts to get this mess straightened out.

In the 1990s, Congress appropriated $20 million and instructed the BIA to reconcile the accounts. In 1994, the American Indian Trust Fund Management Reform

Act was enacted into law. This act set up new financial criteria for the accounts,

created the Office of Special Trustee within DOI, and instructed the Department of

the Interior to report to Congress with recommendations to resolve the accounts

which were not reconciled. Despite these Congressional efforts, the Department of

the Interior failed to get the accounts under control.

Now the Department has more immediate concerns. I have been following the considerable media reports on both the on-going litigation concerning mismanagement

of individual trust accounts and the Secretary’s proposed plan to improve the management of the trust assets. The reports are that many Indian tribes have spoken

out in opposition to the proposal and want to be consulted on how trust reform

might best be accomplished. Although I can understand that the Department wants

to move expeditiously toward reform, I want to clearly state for the record that I

believe the tribes must be given full input on how best to proceed.

I also hope to have the following questions answered today:

• What action is the Department taking today to reconcile Indian trust accounts?

• Are there any actions the Department would like to take to reconcile trust accounts but feels it cannot take without action from Congress?

• How many of the trust accounts have been reconciled over the past ten years?

• For the accounts which are not reconciled, when is reconciliation expected?

• Are there any accounts which the Department believes cannot be reconciled?

• If so, how does the Department propose to address this issue?

• And finally, what is the status of the on-going litigation?

Mr. Chairman, I again want to thank you for holding this hearing. I hope that

the Committee will continue to do all it can to resolve this long-standing problem

and provide the oversight necessary to ensure that the Department of the Interior

lives up to its responsibility in managing Indian trust funds.

Mr. FALEOMAVAEGA. Also, unanimous consent that the MontanaWyoming Tribal Leaders Council resolution and objection to Secretary Norton’s proposal, dated—Well, anyway, it is in there.

Mr. HAYWORTH. Right, sir.

Mr. FALEOMAVAEGA. Unanimous consent, also, for the position

statement of the InterTribal Monitoring Association to the Department of the Interior, dated December 11th, 2001.

Mr. HAYWORTH. Without objection.

Mr. FALEOMAVAEGA. Unanimous consent, that the tribal chairmen’s position statement of proposed reorganization that was preVerDate 11-MAY-2000 09:07 Sep 26, 2002 Jkt 000000 PO 00000 Frm 00112 Fmt 6633 Sfmt 6602 77526.TXT HRESOUR1 PsN: HRESOUR1
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sented to Secretary Norton—This is a tribal consultation of Indian

Trust assessment management, dated December 20, 2001.

Mr. HAYWORTH. Without objection, it is so ordered.

Mr. FALEOMAVAEGA. Unanimous consent, that the letter from the

Northern Arapaho Business Council to Assistant Secretary Neal

McCaleb, of December 18, 2001, also objecting to Secretary Norton’s proposal.

Mr. HAYWORTH. Without objection.

Mr. FALEOMAVAEGA. Unanimous consent, this statement dated

February 1, 2002, by the Assiniboine and Sioux Tribes, counterproposal to the BIA’s proposal for reorganization.

Mr. HAYWORTH. Likewise, it is so ordered.

Mr. FALEOMAVAEGA. And unanimous consent, that the trust reform recommendations by the Chippewa-Cree Tribe presented by

Alvin Windy Boy, Senior, chairman, a consultation that was conducted dated February 1, 2002.

Mr. HAYWORTH. Without objection.

Mr. FALEOMAVAEGA. And thank you very much, Mr. Chairman.

[The information submitted for the record can be found at the

end of the hearing]

Mr. HAYWORTH. And thank you. And we could tell toward the

end, I do not know if you grew misty-eyed, Mr. Faleomavaega, but

you certainly choked up there. And we are glad we got that all

worked in.

Mr. FALEOMAVAEGA. Thank you, Mr. Chairman.

Mr. HAYWORTH. We are happy to accommodate a variety of

views, as we will with panel three when we return from the vote.

So we thank you for your patience. Thanks to the second panel.

And again, if anyone has anything in writing, we have 2 weeks to

get that in.

The Committee stands in recess, subject to the call of the chair.

[Recess, 2:30 p.m.-2:50 p.m.]

Mr. HAYWORTH. The Committee will come to order. We have

asked for any documents in writing and asked for responses. And

the hearing record will be held open for those responses for 2

weeks from this date.

And so, with that, we thank panel three for hanging in. We nickname you the ‘‘Job panel,’’ because of your patience, as we approach ten till 3 Eastern Standard Time.

And again, we turn to our friend from Montana, who has the

privilege of introducing yet another constituent.

Mr. REHBERG. I thank you, Mr. Chairman. One of my colleagues

was ribbing me a bit, suggesting that perhaps nobody was left in

the State of Montana. I might point out that I do, in fact, represent

a district that spans the distance of Washington, D.C., to Chicago,

and has 902,000 residents. So the six or ten that have been here

did not even make a dent in our district.

[Laughter.]

Mr. REHBERG. But I do have the pleasure of introducing another

good friend, a long acquaintance of mine. Jonathan Windy Boy is

a member of the Chippewa-Cree if the Rocky Boy’s Reservation in

north central Montana, which is where my family originally homesteaded in 1873.

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In addition to serving as president of the Council of Large Land

Based Tribes, he is a very active member of both his local community and, on a larger scale, across Indian country. I am pleased to

welcome Mr. Windy Boy here today, and appreciate all of his efforts on behalf of his people and his community. And he is entering

into the political arena, running for the state legislature for the

first time this year. So we wish you well, Mr. Windy Boy, in that,

as well.

Mr. HAYWORTH. And we do thank President Windy Boy for joining us, along with Charles O. Tillman, Junior, the Chairman of the

InterTribal Monitoring Association; and Tex G. Hall, the president

of the National Congress of American Indians; and Donald T. Gray,

Esquire, affiliated with Nixon Peabody.

And with that, we will hear first the testimony of Chairman Tillman. Welcome.

STATEMENT OF CHARLES O. TILLMAN, JR., CHAIRMAN,

INTERTRIBAL MONITORING ASSOCIATION

Mr. TILLMAN. Thank you very much, Congressman Hayworth. It

is a privilege to be here. I did not know I was going to be first, but

I am now, so I might as well get started.

A couple of days ago, I was invited out to be one of the 24 or 36

that participated in the taskforce, and in that, Dr. Williamson, University of Colorado, speaker of the Sheperdstown, West Virginia: on

the origin of trust. And, sir, I think that that is where this all begins. We have to start at the beginning. And I was told by an old,

old-time lawyer years ago that you start at the first, and not in the

middle, or not at the last; but at the first of the thing.

And the Indians started off with treaties, trust, case law. Policies

and procedures were developed from that; and then the most important part, the accountability. Trust law appeared in 1831, under

Chief Justice Marshall, in the Cherokee Nation case. Marshall understood the treaty negotiations, and knew what the tribes were

asking for, and that was disease protection against the white race;

protection against trespass on their land; protection for their land.

That was 171 years ago, and here we are today asking for protection, and living up to what Congress said 171 years ago.

But Congress realized that tribal trust law is the most direct,

most private, and should be held at the highest standard of all

trust law.

The moral issue has been felt since the Nixon Administration

about its great importance, and hopefully to every administration

thereafter. We have not forgotten what Justice Marshall said; that

Congress was the ultimate trust holder. And I am here today to

ask Congress to flex its authority, to abide by what our forefathers

felt toward the native people of this country.

Congress needs to make sure that the trust functions are being

carried out by the trustee, which is the Bureau of Indian Affairs.

And Congress should have its own oversight Committee for this

purpose.

Congressmen, I belong to a group called the ITMA, which is the

InterTribal Monitoring Association, which was started in 1990.

Right now we have 53 tribes, and those 53 tribes consist of the

largest stakeholders. They are the ones like the Osage Tribe of

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Indians. We have a 1.5 million acre reservation which has, I think

it is, 14,000 oil wells. And it is badly mismanaged.

The ITMA represents those folks, and we oppose the Secretary’s

plan for the new Bureau of Trust Management, called BITAM. We

totally, 100 percent, oppose that. The second thing we do, we oppose the reprogramming of $300

million for that purpose, and respectfully request Congress to reject

the reprogramming of that request.

ITMA suggests the following issues, and they must be addressed

and considered in improving trust reform:

No. 1. Determine the trust duties to be discharged. And that

means to me, what are the duties to be performed on accountability

of our assets? That is the main and most important thing of all.

The second thing that the ITMA would request in highlighting

some of the things is to disclose the known losses and theft that

have happened on these reservations.

The third thing is the reconciliation of settlement.

So what I am here today to do to you is to express the proposal

of the InterTribal Monitoring Association and who we represent.

We are the big stakeholders. We are the ones that we look at tribal

stakeholding, as well as IIM. So today that is the reason why I am

here.

I thank you very much for letting me testify here. I appreciate

your hearing me. But I would like to make one more comment. It

is that when we take a look at our history, and we take a look at

Enron, and we take a look at the S&Ls, what happened back in

the ’80’s, that it cost this country $88 billion to fix, then we are in

serious trouble. And what I call, this is our ugly baby. And if it is

our ugly baby, then we need to fix it. Because these infractions go

on and on and on. They are a day to day thing, Congressmen, and

we have to stop it. Thank you very much.

[The prepared statement of Mr. Tillman follows:]

Statement of Charles O. Tillman, Jr., Chairman, Intertribal Monitoring

Association on Indian Trust Funds

The Intertribal Monitoring Association on Indian Trust Funds (ITMA) is a representative organization of the following federally recognized tribes: Central Council

of Tlingit & Haida Indian Tribes, Kenaitze Indian Tribe, Metlakatla Indian Tribe,

Hopi Nation, Tohono O’odham Nation, Salt River Pima–Maricopa Indian Tribe,

Hoopa Valley Tribe, Yurok Tribe, Soboba Band of Luiseno Indians, Southern Ute

Tribe, Nez Perce Tribe, Passamaquoddy–Pleasant Point Tribe, Penobscot Nation,

Sault Ste. Marie Tribe of Chippewa Indians, Grand Portage Tribe, Leech Lake Band

of Ojibwe, Red Lake Band of Chippewa Indians, Blackfeet Tribe, Chippewa Cree

Tribe of Rocky Boy, Confederated Salish & Kootenai Tribe, Crow Tribe, Fort

Belknap Tribes, Fort Peck Tribes, Northern Cheyenne Tribe, Winnebago Tribe,

Walker River Paiute Tribal Council, Jicarilla Apache Tribe, Mescalero Apache Tribe,

Pueblo of Cochiti, Pueblo of Laguna, Pueblo of Sandia, Three Affiliated Tribes of

Fort Berthold, Turtle Mountain Band of Chippewa, Absentee Shawnee Tribe, Alabama Quassarte, Cherokee Nation, Kaw Nation, Kiowa Tribe of Oklahoma,

Muscogee Creek Nation, Osage Tribe, Quapaw Tribe, Thlopthlocco Tribal Town,

Confederated Tribes of Umatilla, Confederated Tribes of Warm Springs, Cheyenne

River Sioux Tribe, Sisseton–Wahpeton Sioux Tribe, Chehalis Tribe, Confederated

Tribes of Colville, Forest County Potawatomi Tribe, Oneida Tribe of Wisconsin,

Eastern Shoshone Tribe, and the Northern Arapaho Tribe.

ITMA is very grateful for this Committee’s invitation to share our thoughts today

on the status of Indian trust reform within the Department of the Interior. We believe we have addressed those issues on which the Committee specifically requested

our views. ITMA emphatically:

• Opposes the Secretary’s plan for a new bureau of trust management

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• Opposes the reprogramming of $300 million for that purpose

• Respectfully requests the Congress to reject that reprogramming request

ITMA suggests that the following issues must be addressed and considered in improving Indian trust reform: • Determination of the trust duties to be discharged

• Consultation with tribal governments and Indian individuals

• Continuous, diligent oversight by Congress

• Develop policies and procedures to execute acknowledged trust duties

• Develop internal controls to detect failures to follow policies and procedures

• Develop an enforcement system to preserve integrity

• Develop an appropriate system of rewards and sanctions

• Disclose known losses and thefts

• Role of lawyers and budget officials identified

• Deal in good faith

• Avoid self-dealing or double standard

• Reconciliation or Settlement

Consultation is not a gratuitous nicety

This Committee has heard much about the Secretary’s lack of consultation in developing her restructuring plan. ITMA wants to emphasize that consultation is essential to the Department’s own stated goals of wanting to improve the delivery of

trust services. This Committee asks our views. The Senate oversight committee asks

our views, the appropriations committees in both houses have consulted with us

over the years, the General Accounting Office has consulted with us over the years

in the preparation of reports for the Congress, and the press has requested our

views in reporting trust fund matters to the public. The Department of Interior

alone, charged with the principal duties of Indian trust administration, has almost

never consulted us, except to solicit our endorsement of a decision already taken behind closed doors within the Department.

Had Secretary Norton consulted us, she would have been told that her plan for

an additional Bureau of Indian Trust Asset Management would face enormous opposition if she unveiled it as a surprise. Such an announcement would violate a written agreement entered into by Mr. McCaleb’s predecessor on the issue of consultation. The Secretary recently attended one, and dispatched a team of Departmental

level officials to attend other tribal ‘‘consultations’’ throughout Indian Country to

convey the reorganization proposal. All these officials heard first hand that Indian

Country totally opposed the plan and lack of consultation.

Her first personally signed report to the Cobell court, delivered on January 16 of

this year, gives us our first indication that the present Administration just might,

after all, bring that breath of fresh air to Indian trust reform we have so long hoped

for and awaited. We are pleased with the report previously given us by her Director

of the Office of Historical Accounting that he has agreed to adopt the approach we

suggested six years ago by beginning with the judgment accounts. ITMA can be

helpful to that office in suggesting ways in which the remainder of the IIM accounts

can be similarly stratified for examination in manageable portions. In her report the

court, the Secretary announced, among other things, her intention to adopt a few

of our other long-standing recommendations to her Department.

None of this suggests that she is in a position to implement such sweeping

changes as outlined sketchily in her November 14, 2001 memo introducing the reorganization and creation of a new agency to carry out trust reform successfully. We

should not forget that the Department was just as confident in its ill-fated, if shortlived announcement that she intended to proceed with a ‘‘statistical sampling’’ of the

IIM accounts. We believe the Secretary could have avoided one of the present contempt charges, had she simply chosen to confer with us, rather than taking the ‘‘statistical sampling’’ decision behind closed doors, which is the same way her reorganization plan appears to have been conceived.

Successive Administrations going back to 1986 have announced bold, sweeping

proposals to reform Indian trust administration. None of these proposals rose to the

level that could meaningfully be called a plan. Whether the proposal was to contract

trust fund administration to Security Pacific Bank, or with Mellon Bank, or to the

Bureau of Reclamation, or to transfer it to a whole new agency as Secretary Norton

now proposes, the result was the same and was totally predictable. Indian country

rose up in outrage not merely because they were not ‘‘consulted,’’ but because they

had no idea what would happen to our money or service delivery, and no one could

tell us. Career employees whose principal contribution in retrospect turns out to

have been to buy time reaped scores of thousands of dollars in meritorious bonuses.

The failures and the losses and the national embarrassment continued. After a decade and a half, this pattern should be clear.

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Progress of ‘‘Consultation’’ on the Department’s plan for a new Indian Trust Agency

It is too early in the ‘‘consultation’’ process on the Secretary’s proposal to make

any informed observations about the results. It is not too early, however, to make

some comments on the process itself, or to offer some observations about improving

the process. In very significant measure, this particular consultation process has

been badly undermined from the beginning by both the Administration and the Congress. Tribes and their organizations both have been admonished by congressional

staff either to come up with persuasive alternative proposals or to persuade the Secretary to abandon hers. Otherwise, the Department’s current plan will almost certainly be approved when she presents it again, this advice has continued. If that

advice reflects the true situation, then the present consultation process is very probably not much more than a charade.

ITMA believes the consultation process should focus on the objectives to be

achieved in the various areas of trust administration such as leasing, rights-of-way,

extractive operations, investment, etc. These collaborative deliberations should

begin with the legal duties required of the government as trustee, and the capabilities and resources needed to perform those duties. Only when there has been some

consensus achieved on the nature and scope of those duties does it make sense to

focus on the systems and structures best suited to accomplish their performance.

Unless the Department is genuinely willing to put its opening assumptions on the

table, consultation in this matter will, indeed, be simply a gratuitous nicety, to be

endured by the Department as part of the cost of proceeding with a predetermined

course of action.

In the Eighth Quarterly report to the court, the Secretary and her contractor indicate what we hope is a commitment to return to first principles and analyze the

objectives to be achieved before turning again to the systems best suited to achieving them. We note, for instance, that in revising trust regulations, the previous Administration acknowledged the need for an accounts receivable system, but would

not acknowledge any responsibility for collecting receivables until the much vaunted

TAAMS system was operational. Now that system has been put on hold. Whether

or not that disclaimer is effective is another matter, but the example is instructive

here.

We have heartily applauded the Secretary’s apparent repudiation of that systemsdriven approach to performance of trust duties, but we point out that the very same

mistake can be made with respect to organizational structure as with respect to systems. Her predecessor’s systems-driven approach has now left Indian trust beneficiaries stuck with a regulatory regime that explicitly disclaims any responsibility

on the Department of the Interior to collect their receivables. This Secretary appears to have repudiated that systems-driven approach. Instead, she has apparently

elected to proceed with an organizational structure-driven approach, instead. If that

is the case, we predict a similar result. In both instances, the choice made represents a decision to proceed publicly amid much fanfare with activities that require

a lot of motion, transfer and expenditure of funds, and generally mesmerizing movement. This flurry of activity in the name of reform is well known to the Department

as a tried and proven formula to forestall embarrassing questions from oversight

Committees and eat up the calendar allotted to any Administration in large chunks.

Finally, we have to note that since this hearing was called, the Secretary and her

top officials have not only agreed to meet, but have spent a week-end in intensive

talks with a task force put together by tribal leadership from across the nation, and

have committed themselves to seek a mutually acceptable approach to further trust

reform efforts. ITMA believes that this approach offers greater promise than any approach previously taken, but this promise remains unrealized in these early days.

Interior Secretary Norton’s Plans for Restructuring Trust Administration

ITMA strongly opposes Secretary Norton’s plan to create a Bureau of Indian Trust

Asset Management or otherwise dividing the Bureau of Indian Affairs into two separate agencies. ITMA’s opposition does not stem from pique over not having been consulted. Rather, our opposition stems from the fact that this announcement fits the

very pattern described above. This is the current Secretary’s first sweeping proposal

for reform, and it, too, was conceived behind closed doors, and no one in the Department has been able to tell us just what it means for either our money or our other

trust assets. It has not been lost on us that the apparent architects of this proposal

were deeply involved in some of the Department’s brilliant inventions of the 1980’s,

when large meritorious cash bonuses were paid to career employees but no improvement resulted.

This proposal contains within it the same seeds of likely failure that attended the

software acquisition called TAAMS. So far as anyone in the Department has been

able to tell us, little thought has been given to the ability to state the objectives

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to be achieved, beyond the catchall term of improvement. The Secretary’s team has

not been able to tell us just what functions, positions, resources, facilities, or other

capabilities she proposes to transfer. Her team has not shared with us any of the

planning, if any, that went into this proposal, or what it portends for the remaining

agency and its capabilities. She has not been able to tell us why she thinks current

employees could perform their duties better if they were located in a new agency.

We respectfully suggest that she and her team have not given sufficient attention

to the necessary first step of determining just what those duties are.

Further, we note that the BITAM proposal contains within it the explicit assumption that determining the nature and scope of those duties is solely within her purview. ITMA categorically rejects that assumption. We are aware that the Congress

is reluctant to ‘‘tie the hands’’ of the Executive Branch officials who are charged

with discharging those duties, and that deference to agency ‘‘expertise’’ is a longstanding tradition. In the present situation, our reluctant duty is to advise this

Committee that the weight of recent history counsels against honoring either of

those traditions without carefully examining the underlying assumptions.

While we take some comfort in Secretary Norton’s candid concession that this proposal was driven in large measure by a desire to avoid interference in her administration of the trust by the federal court in Cobell, we simply find that explanation

totally inadequate for the purpose claimed, fraught with far too many uncertainties,

and more likely than not to be counterproductive even for her stated purposes. As

we have noted, this proposal offers no explanation why a realty clerk having difficulties performing his duties would be better disposed or equipped to perform those duties under a new agency than under the present one. If the person is the problem,

it is a personnel problem and not an organizational one. If the person is not receiving adequate supervision, it is a management problem and not an organizational

one. If, as we suspect, the problem is that insufficient attention has been given to

determining the nature and scope of the duties themselves, placing the person’s position in a different box or the person in a different agency will contribute absolutely

nothing to improving the situation. If that person is left in the same location, but

transferred administratively to a new agency the Department will have created an

entirely new administrative and budgetary regime that contributes absolutely nothing to achieving the original objective, which remains the delivery of realty services.

The Cobell court’s Special Monitor’s reports abound with such examples of bureaucratic shuffling that have exacerbated, rather than alleviated, problems in Indian

trust administration. A wholesale restructuring of the Department without a responsibly developed plan for what is to be achieved would be somewhat like catching air in a net. Prodigious amounts of energy can be expended. The movement can

be mesmerizing. But in the end, nothing will have been changed.

ITMA respectfully urges this Committee not to ignore the lessons of recent history

in carrying out is own oversight responsibilities to evaluate Secretary Norton’s restructuring proposal.

Impacts of Court Order to Shut Down Internet Access for Trust Activities

More than 40,000 individual Indians went through the winter month of December

and the holidays without access to their own money as a result of the court-ordered

shut down of automated systems connected to the internet. Some 43,000 individuals

did not receive checks that would otherwise have been written during that period.

ITMA hopes that the lesson in unintended consequences from this episode is not lost

on either the court or the Department, or the Congress for that matter, in considering the Secretary’s reorganization plan. We have been told by tribal leaders

throughout the country that Indians throughout the country are facing repossession

of family vehicles, telephone and other utility disruptions, harassment from creditors and collection agencies, and other indignities they are powerless to avoid simply

because their own money is not available to them. Elderly Indian people have been

evicted from nursing homes. One tribe has performed a service to the government

by issuing general assistance checks for eligible families throughout the Pacific

Northwest because the Bureau of Indian Affairs has been unable to do so. Another

tribe has drawn down hundreds of thousands of dollars of tribal money in an effort

to help families weather the shut-down period. The impacts of this shut down cannot be overstated, and they have been cataclysmic for those most directly affected.

Not one employee of the Department or the court has missed a paycheck during this

period, however.

In addition, other unforeseen consequences of this shut down period should not

be overlooked when full service resumes. We presume, for instance, that the government will pay interest to those individuals whose money it held rather than paid

out during the period of the shutdown. How will the interest be calculated, or from

where will it be paid? Was the money that was held rather than paid out invested

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as part of the entire IIM investment pool? If it was invested as part of the pool,

will others in the pool, such as minors and judgment account holders, be credited

with a portion of the interest so earned? The effect on individual Indians who went

without their only source of income during the winter months and the holiday seasons should not be lost on anyone.

This issue raises other questions that the Secretary’s proposal to separate ‘‘trust’’

and ‘‘non-trust’’ functions seems to ignore, including the connection between the

BIA’s trust services and its other service delivery responsibilities. Tribes never considered the extent to which trust service delivery has come to depend on the internet. The recent shutdown has caused us to wonder how many initial lease payments

were received, along with the administrative fees the BIA now charges. That situation would raise the question of whether the government was paying into its own

account, but not into Indians’ accounts, monies charged for the use of Indian land.

We do not know whose responsibility it is in the current situation to ensure that

all the payments that were withheld are paid, and paid in full, including interest.

All the monies withheld, together with accrued interest, should be paid immediately,

and should not take months to work through the backlog.

IIM Security

ITMA shares the concern of the Cobell plaintiffs, the court, and the Department

for security of information relating to IIM accounts. We point out in passing that

during the period of the Cobell litigation, the Pentagon, the FBI, and the Central

Intelligence Agency have been hacked into, and none of them was shut down as a

result. Nevertheless, there is probably no area of Indian trust administration that

has generated more consensus among all the interested parties than that, ‘‘The security of individual Indian trust data is inadequate,’’ in the words of the current

Associate Deputy Secretary.

This issue has received detailed attention from the Special Master appointed by

the court in the Cobell litigation and his contractors, as well as from the Department and its contractors. No doubt, the court-ordered shut down did much to focus

the Department’s attention on this matter, and this focus does appear to have resulted in a candid self-appraisal of its shortcomings in this arena.

The Department has now acknowledged, for instance, that it simply does not have

in place either the comprehensive plan for establishing and continuously improving

data integrity systems, or the staff required to develop one, as required by the Government Information Security Reform Act, and OMB Circular A–130. Both supervisory and technical support positions such as those for a Chief Information Officer

and Information Technology Specialists for security assistance and oversight remain

vacant. In the absence of an overall plan, the Department’s efforts in this area continue to be driven by its immediate needs, court orders, and contractor-identified

priorities.

ITMA does note in the area of IIM data security where the Department itself is

in trouble and the Secretary on trial for contempt of court, the Department has

adopted an approach long recommended by ITMA for the overall trust reform effort.

Because the Department is in trouble for noncompliance in performing its duties,

it has not charged ahead with either a huge systems procurement or a wholesale

reorganization of the boxes on organizational charts. Rather, the Department has

undertaken an inventory of its duties as they are found in statutes, regulations,

OMB–Circulars, court orders, treaties, and directives from Congressional appropriations Committees. In the absence of qualified staff dedicated to this effort, the Department will charge one of its contractors to develop guidance in designing business models and systems specifications to perform those duties. This is precisely the

approach ITMA has long insisted the Department adopt to achieve trust reform, and

not just data integrity in systems designed to perform historic functions more efficiently. If the Department would exercise similar care in designing trust service delivery that is given to keeping its top officials out of jail, prospects for meaningful

trust reform would be significantly improved.

ITMA Recommendations

Continuous, Diligent Oversight by Congress. ITMA believes that true reform of

the administration of the Indian trust must begin with the proposition that not this

Secretary nor any Secretary alone can be permitted to determine the scope of her

own duties. Recent history demonstrates conclusively that those tasks that appear

easy to perform will be given prominent attention, and those that will eat up large

portions of any Secretary’s term in office will be held forth as progress to shield

against continued oversight by the Congress. We recognize the natural inclination

of the Congress not to appear to be interfering with pending court proceedings, or

to ‘‘tie her hands’’ in carrying out her responsibilities.

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For the reasons that follow, however, ITMA respectfully suggests that this traditional deference has been misplaced in this context and that continued oversight by

the Congress is necessary for effective reform of Indian trust administration. Even

Judge Lamberth appears to have overlooked so far the Department’s continued intention to violate the express command of Congress in the Royalty Simplification

and Fairness Act of 1996 by implementing that Act on Indian lands, despite the

plain language of the statute that it shall not apply to Indian lands.

As we have noted, in the absence of effective oversight, the Department will determine the scope of its own duties and this alone violates the first principle of the

law of agency. Secondly, without the kind of oversight represented by this hearing,

the Secretary would already have committed some $300 million to the expensive,

highly visible, and time-consuming task of reorganizing the trust functions of the

Department without having shown any evidence that it would result in improvement.

Determination of the Duties to be Discharged. Although the Secretary cannot be

permitted to determine unilaterally the scope of her legal and fiduciary duties, no

one disputes that existing duties as set forth in treaties, statutes, and case law have

not been adequately carried out in the past. Neither is it disputed that the Secretary’s trust duties extend well beyond simply the management of physical assets.

To date, however, no significant effort been made even to identify those duties, except in the area of automated data security where the exercise appears to be motivated by the threat of a contempt citation. Notwithstanding that this underlying

failure to perform legal duties is itself the basis for the entire trust reform effort,

no one to date outside the Office of Trust Funds Management has attempted to set

forth with clarity just what those duties are. ITMA believes that any improvements

resulting from reorganization or successful automation of current practices would be

a result of sheer happenstance if those initiatives are not driven by a comprehensive

understanding of the duties to be performed. Every one of the hundreds of millions

of dollars paid in settlements and judgments over the past fifteen years has been

paid because of a failure to perform existing duties required by law. In presently

pending litigation, the Executive Branch continues to deny the existence of those

duties. Almost every conceivable avenue has been explored, except to identify them,

acknowledge them, and then to design policies, procedures, and systems to discharge

them honorably. No one is more familiar with the treaties and statutes affecting

each tribe than the tribes themselves, and ITMA believes their participation in this

effort is essential for success.

Any serious attempt to determine the duties to be performed in carrying out the

nation’s trust duties to Indian tribes and individuals will encounter early the Self– Governance Act of 1994 (P.L. 103–413). Under that law, some tribes have chosen

to undertake many of those duties themselves. ITMA is hopeful this Secretary will

find those tribes’ experiences to be useful and instructive, and will not view the selfgovernance policy embedded in our nation’s laws as simply a frustrating obstacle

to her ‘‘global’’ approach to trust reform.

Develop Policies and Procedures to Execute Acknowledged Trust Duties. Once the

duties to be discharged are determined and articulated, then the Department should

develop policies and procedures designed to facilitate and promote the discharge of

those duties. Such matters as segregation of duties, development of written policies

and desk operating procedures, and defining job qualifications, etc., can meaningfully be addressed only when the underlying duties to be performed have been identified and articulated. BIA data cleanup provides a good example of a massive undertaking that preceded, rather than followed, a clear definition of the duties to be

performed and development of policies and procedures developed to improve the performance of those duties. ITMA applauds Secretary Norton’s decision to put this initiative on hold until this kind of analysis can be conducted. This is precisely the

approach the government seems to have chosen when the matter at issue is the liberty of its executives. As a trustee, those same executives should be held to no less

stringent a standard when the matter in issue is our property for which they hold

a solemn and legal trust obligation.

Develop Internal Controls to Detect Failures to Follow Policies and Procedures.

No human enterprise is immune from failures and attempts to defraud it. Indian

trust administration is no exception. It is not the duty of the Secretary to achieve

perfection. It is her duty to recognize this reality and to design internal controls to

detect these occasional mistakes or failures and to correct them. There will be

human mistakes; there will be errors in the best of systems; and there will be the

occasional criminal attempt. Once appropriate policies and procedures are in place,

a system of internal controls should be designed to permit managers to exercise

quality control, maintain system integrity, and correct those deficiencies noted. This

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viewed travel and other reimbursement claims submitted by the highest level officials of the Bureau of Indian Affairs to protect the government from overpaying for

mileage or per diem rates. On the other hand, throughout this period, oil and timber

companies were permitted to take billions of dollars of resources from Indian lands,

and no employee was assigned to review the self-generated reports of their operations. Similarly, no one was assigned the duty of monitoring transactions in trust

accounts, as the Special Master in the Cobell case has so dramatically demonstrated

in recent months.

Develop an Enforcement System to Preserve Integrity. The present system of enforcing policies, procedures, and internal controls focuses on easily accomplished

‘‘successes.’’ The backgrounds and character of lower level employees are thoroughly

screened. Some with bad credit records are relieve of their duties. In the meantime,

thefts from trust funds are concealed. New hires are brought in at the highest levels

and given operational authority over trust reform activities with neither the civil

service review given to voucher examiners or the advice and consent of the Senate.

When defalcations or thefts are discovered, no publication invites other account

holders similarly situated to review their accounts. No auditor is asked to pay particular attention to transactions from that location. Confirmation letters are not directed to others who were equally vulnerable to the same pilferage. The current system of enforcement, insofar as there can be said to be one, is not designed to enforce

compliance, but to avoid liability.

Develop an Appropriate System of Rewards and Sanctions. As noted earlier, during much of the last fifteen years, scores of thousands of dollars have been paid to

career employees of the Department for assisting one Administration after another

to create the illusion of active reform efforts, while underlying problems were not

addressed at all. Justice Department lawyers have received publicized rewards for

the meritorious representation of the government in trust funds litigation, only to

be removed ignominiously from the case months later. The government itself has

been sanctioned or rebuked in trust litigation arising from California to New Mexico

to South Dakota to Washington, D.C., and the attorneys responsible continue the

same pattern of practice. In the Cobell case alone, the government has paid more

than $600,000 in sanctions, three Presidentially appointed officials have been held

in contempt of court, and another is presently on trial. In none of these instances

has there been an effective incentive to alter the behavior of career employees of

the Interior or Justice Departments. On the other hand, the government faces serious accusations of retiring, firing, or retaliating against employees who have disclosed failures, challenged unauthorized access, and told the truth when questioned

under oath.

A system of rewards and sanctions should be designed that will effectively discourage cover-ups, falsifying records, giving false testimony, dissembling, and otherwise providing materially misleading writings or utterances. Such a system should

reward those who discover problems and bring them to light. It should reward those

who discover and disclose losses, waste, or thefts from the trust corpus. It should

reward those who come forward with solutions. It should reward those who tell the

truth. It should reward those who place problems squarely on the table for deliberation and resolution.

Under the current system, losses from nearly a generation are tallied neatly with

accrued interest owed, but not made whole. ITMA respectfully suggests Congress

has a responsibility here as well. The Department requested $12,668,000 for fiscal

year 1996 to make good some known losses to IIM accounts, and ITMA believes the

Congress declined to provide it. No Committee of Congress has so much as made

an inquiry about it in the intervening years. After the Cobell case was filed, the Department has never again even intimated that there may have been losses to the

IIM portfolio. Institutional memory is entrusted to career employees at management

and attorney levels who reap rewards for covering up and dissembling. The entire

nation and its financial press in recent weeks have raised a huge public outcry

about the lack of transparency, the apparent dissimulation, the rewards to management while account holders suffered losses, and the failure of analysts to discern

underlying problems associated with the collapse of Enron. All those very same

issues attend the current system of Indian trust administration.

Disclose Known Losses and Thefts. Other than possibly the appearance of selfdealing, no issue arising from the travesty of the Enron collapse has received more

attention than the lack of transparency in its financial statements. ITMA firmly believes that disclosure of known losses, waste, fraud, and theft is an essential underpinning of any trust operation. When such events are discovered in a commercial

trust operation, the legitimate expectation of beneficiaries is that some honorable

individual will step forward, disclose the event, and offer to make restitution. This

attitude is conspicuously and defiantly absent in the government’s administration

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of the Indian trust estate. ITMA has discovered evidence of the theft of more than

$7.75 million in a single episode in 1984. No Secretary of the Interior and no Assistant Secretary of Indian Affairs has ever disclosed that theft to account holders.

When ITMA brought its awareness of the matter to the Department in the mid– 1990’s, the Department calculated the amount required to make good the unrecovered money plus accrued interest and requested appropriations to do so. Congress declined to provide the money, and the matter has not been heard of again.

ITMA believes the Department does maintain a running tally of the amount presently due, but only against the day when the matter may be brought to light again.

It is virtually impossible to repose trust in a system that knows, but fails to disclose

and make whole, losses it has allowed to occur. ITMA believes in the adage that

sunlight remains the best disinfectant known to the operation of government in a

free society.

Role of Lawyers and Budget Officials. ITMA believes the failure to disclose known

losses is often the result of the role of government lawyers and budget who see their

role not as officers of the court, or as protectors of the integrity of government, but

as defenders of the public fisc. Even those officers appointed by the President to run

the Executive Branch of government are often hamstrung in their efforts by the advice of career employees who effectively direct trust operations from their unseen

positions in the service of successive Administrations. ITMA believes this cloak

must be removed, and the role of these officers subjected to the same scrutiny we

give to those in front offices. Even a cursory review of the government’s record in

trust litigation over the past twenty years will convince any reviewer of the importance of this issue. But no one in a position of authority in Interior, Justice, or Congress is even aware of this record.

Deal in Good Faith. ITMA believes that neither trust reform nor consultation will

be successful unless both sides consent to deal with the other openly and in good

faith. ITMA notes the wildly varying explanations provided by the Interior Department to explain the genesis of Secretary Norton’s reorganization proposal as an example of our concern that we are not being dealt with in good faith. Department

officials have explained to us that her reorganization proposal was developed largely

out of a concerted desire to avoid court intervention in her administration of the

trust, and to avoid receivership. We understand from conferences with Congressional staff that she has made much the same explanation privately to Congress.

ITMA notes that her explanation to the court suggests an entirely different rationale and history of the development of this proposal. Consultation on this or any

other matter will be utterly meaningless unless the real reasons for her positions

are put forth straightforwardly for discussion. In this matter, ITMA notes that the

Secretary’s recent report to the court explains tribal opposition to her reorganization

proposal as centered on the consultation process itself. If she really believes that,

and that there are not substantive issues that need to be addressed, and that her

assumptions as well as ours are not on the table for discussion, then the consultation process is merely a procedural hurdle, and not a meaningful forum.

Avoid Self–Dealing or Double Standard. ITMA believes that meaningful collaboration in trust reform will require the Department to give as much attention to honorable trust administration as to protecting the government from liability for past

mistakes or keeping the Secretary out of jail. No one expects the government to operate flawlessly. We accept that everyone wants to improve the future performance

of the government in trust administration. But failures of the past that are known

or discoverable should be faced squarely and dealt with honorably. Of course, those

that are known should be disclosed. None of this is happening, however. The government to date, including Secretary Norton’s team, has admonished us to let bygones

be bygones, and to focus on the future. ITMA notes that this government has operated vigorously at the highest level and exerted pressure on dozens of governments

around the world in recent years to face honorably obligations owed as a result of

the Holocaust. ITMA notes that our government has paid some one billion dollars

in recent years in settlement of past failures in Indian trust administration. ITMA

further notes that a recent $20+ million effort to ‘‘reconcile’’ tribal trust accounts

resulted in a major accounting firm’s disclaimer of either opening or closing balances in its reports. ITMA remains convinced that the government must agree to

deal honorably with past failures, even as it focuses its efforts on future reforms,

if real reform is to have any meaning. Any other approach means that even future

obligations may be ignored with impunity.

ITMA also notes that when Secretary Norton created the Office of Historical Accounting in her office, she provided the officer in charge with 60 days merely to develop a timetable for developing a plan of operations. She further afforded him 120

days merely to determine what he thought he could do ‘‘immediately.’’ In light of

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cent abbreviated schedule for nation-wide tribal ‘‘consultation’’ on a vastly more ambitious undertaking is both an outrage and an insult. ITMA fears that this careful

and deliberative approach where she is faced with contempt proceedings, compared

to her cavalier treatment of tribes’ opportunity to proceed deliberately, reflects a

mentality of self-dealing and a double standard that is totally unacceptable.

Likewise, where she is also facing contempt proceedings in the matter of IIM data

security, she is proceeding by carefully inventorying and articulating her duties,

tracing them to treaties, statutes, case law, regulations, OMB directives, and Congressional reports. In the much larger matter of overall trust reform, however, she

proposed to make a $300 million overhaul. By at least one of her accounts, her proposal to uproot all trust functions was made within two days of receiving a list of

options, a list that did not even contain the prospect of beginning with an analysis

of the duties to be performed.

ITMA believes that the Secretary must agree to approach trust reform by giving

Indian beneficiaries the same level of consideration she is giving to her far more

personal concerns.

Reconciliation or Settlement. The Department will never be in compliance with

the 1994 Indian Trust Funds Management Reform Act until it can report accurate

account balances. In addition, it will never be able to report accurate account balances until it deals with the issue of historic balances. If the Arthur Andersen reports of the mid–1990’s demonstrate the impossibility of a global, transaction-bytransaction reconciliation of tribal accounts, then other methods must be found to

achieve ‘‘accurate balances.’’ This is neither the impossibility nor the meaningless

one-quarter billion-dollar exercise it has been presented to be. It is an exercise that

will require cooperation. It will require a willingness to accept responsibility for past

failures, a determination to deal in good faith, and to avoid self-dealing. ITMA has

suggested approaches to this matter that have been successful in litigation and negotiation for years. The Executive Branch has so far been unwilling to participate

in any substantive discussions that would require it to admit the very systemic failures that it presently acknowledges in open court. Career attorneys in the Department of Justice have been able to give effective ‘‘direction’’ to Presidential appointees in Interior to avoid even discussions on settlement proposals. ITMA continues to recommend discussions designed to achieve negotiated or stated balances

where actual reconciliation is not possible. In those instances where a full reconciliation is possible, there is no excuse for not proceeding.

Legislative Recommendations. Last month, at least three lawsuits were filed

against the government, in large part to protect the tribes against possible claims

that the Arthur Andersen reports provided nearly six years ago sufficed to end the

Congress’ tolling of the statute of limitations. Even though those reports explicitly

disclaimed the accuracy of either opening or closing balances, Justice Department

lawyers have indicated they will interpose those reports in any claim against the

government as evidence of both any accounting that might be ordered, and as evidence of account balances. The Congress should act to eliminate the possibility of

either of those uses over the objection of any tribe. A tribe that knowingly chooses

to accept the report for its own accounts, of course, should be free to do so. Congress

should also affirmatively address the statute of limitations issue by making it clear

that no tribe is barred from bringing suit until Congress has expressed its agreement that an adequate accounting has been provided. Such a provision would likely

forestall, rather than prompt, lawsuits such as those filed last month as protective

measures.

No matter what organizational structure is ultimately adopted, or what systems

acquired or developed, there are a number of areas where substantive legislation is

needed. The present method of investing IIM monies in a pool has returned hundreds of millions of dollars in increased earnings over the past generation, and

saved tens of millions in administrative costs. This method does not have affirmative authorization in law. The method of computing interest for individuals is unnecessarily complex and, in fact, has to be contracted out even by the trust accounting

systems contractor. Both these matter should be addressed in legislation. ITMA respectfully suggests that Congress consider authorizing a par value fund structure

for this pool.

The Congress should act to repeal the blanket authority presently available to the

Secretary unilaterally to impose administrative fees on Indian trust assets to recover the costs of administering the trust. This provision has never until January

of last year been incorporated into regulations, making it a duty of BIA officials now

to make two collections for every lease of Indian lands, one for the government and

one for the Indian landowner. When the Indian payment system was shut down in

December, presumably the government was paying itself, but not Indians for any

leases issued during that period. There is neither rhyme nor reason disclosed for

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the ‘‘formula’’ now contained in regulations for computing the government’s fee for

processing leases, assignments, extensions, modifications, renewals, etc. ITMA believes the Congress provides resources for the discharge of trust duties and is largely not even aware that the Department is supplementing its appropriations with

these fees. ITMA also thinks it is an outrage that a Department that is in so much

trouble for its inability to collect for Indians should take it upon itself to double the

number of transactions to be processed solely for the purpose of augmenting its Congressional appropriations. Put more bluntly, ITMA fears that the Department has

dusted off this antiquated statute and wielded it in retaliation for the embarrassments and slights it feels it has suffered in trust reform.

Restore Honor and Decency. There is a moral element in trust administration. ‘‘Not honor alone, but the punctilio of an honor the most sensitive, is the standard

of behavior for a trustee,’’ Justice Cardozo wrote. President Bush campaigned the

length and breadth of the nation on a platform to restore honor and decency to the

highest levels of government. ITMA continues to hope the moral tone he has set for

the country will filter into the administration of the Indian trust estate. We believe

that control of this effort must be wrested from the career employees who have directed it, and taken firmly in hand by those officers appointed by the President

under the watchful oversight of Congress and the beneficiaries themselves. Those

officers must set the tone for honor and decency in administering the trust.

ITMA takes no pleasure whatsoever in our government’s embarrassment. In numbers out of all proportion to our own, our men and women continue to fight for this

country whenever it sends our forces upon foreign shores. We do no particular honor

to their service when we rebuke the government they serve in the face of foreign

shot and shell. It is our government, too. It does not belong to those who occupy

its seats of power. We desperately want to be able to believe our government as

much as we believe in it. We stand ready to provide whatever assistance we can

offer the Department or this Committee in this important enterprise.

On behalf of all the 53 tribal members of the Intertribal Monitoring Association

on Indian Trust Funds who hold individual accounts, we express our profound gratitude to this Committee for its dedication to providing oversight to Indian trust reform. Thank you for affording us this voice in the operation of our government.

[ITMA Position Statement submitted for the record follows:]

Position Paper of the InterTribal Monitoring Association on Indian Trust

Funds

DECEMBER 12, 2001

POSITION STATEMENT

OF THE

INTERTRIBAL MONITORING ASSOCIATION

ON THE

DOI’S PROPOSED REORGANIZATION OF BIA TRUST FUNCTIONS

THIS DOCUMENT DOES NOT CONSTITUTE OFFICIAL TRIBAL CONSULTATION WITH DOI)

The Intertribal Monitoring Association on Indian Trust Funds (ITMA) is a representative organization of the following federally recognized tribes: Central Council

of Tlingit & Haida Indian Tribes, Kenaitze Indian Tribe, Metlakatla Indian Tribe,

Hopi Nation, Tohono O’odham Nation, Salt River Pima–Maricopa Indian Tribe,

Hoopa Valley Tribe, Yurok Tribe, Soboba Band of Luiseno Indians, Southern Ute

Tribe, Nez Perce Tribe, Passamaquoddy–Pleasant Point Tribe, Penobscot Nation,

Sault Ste. Marie Tribe of Chippewa Indians, Grand Portage Tribe, Leech Lake Band

of Ojibwe, Red Lake Band of Chippewa Indians, Blackfeet Tribe, Chippewa Cree

Tribe of Rocky Boy, Confederated Salish & Kootenai Tribe, Crow Tribe, Fort

Belknap Tribes, Fort Peck Tribes, Northern Cheyenne Tribe, Winnebago Tribe,

Walker River Paiute Tribal Council, Jicarilla Apache Tribe, Mescalero Apache Tribe,

Pueblo of Cochiti, Pueblo of Laguna, Pueblo of Sandia, Three Affiliated Tribes of

Fort Berthold, Turtle Mountain Band of Chippewa, Absentee Shawnee Tribe, Alabama Quassarte, Cherokee Nation, Kaw Nation, Kiowa Tribe of Oklahoma,

Muscogee Creek Nation, Osage Tribe, Quapaw Tribe, Thlopthlocco Tribal Town,

Confederated Tribes of Umatilla, Confederate Tribes of Warm Springs, Cheyenne

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River Sioux Tribe, Sisseton–Wahpeton Sioux Tribe, Chehalis Tribe, Confederated

Tribes of Colville, Forest County Potawatomi Tribe, Oneida Tribe of Wisconsin,

Eastern Shoshone Tribe, and the Northern Arapaho Tribe.

The Intertribal Monitoring Association on Indian Trust Funds (ITMA) unequivocally:

• opposes Interior Secretary Norton’s present proposals to reorganize Indian trust

functions within the Department,

• opposes the establishment of a new Bureau of Indian Trust Asset Management

within Interior,

• opposes the reprogramming of $300 million from appropriated funds available

in Fiscal Year 2002, for the purpose of establishing the new Bureau.

ITMA requests the appropriations Committees of Congress to reject the Secretary’s request of November 20, 2001 to reprogram $300 million for these purposes.

ITMA recommends that the Secretary agree, instead, to a meeting early in 2002

to discuss reasonable timelines to engage tribes in a meaningful consultation process for Indian trust reform. With her acknowledgment that her reform efforts will

benefit greatly from tribal participation and that the past several years of unilateral

trust reform efforts have failed, ITMA hopes that tribes and the Department might

reach some agreement on a collaborative process for trust reform to report at that

hearing. In the interim, ITMA insists that the Secretary designate an official with

authority to ensure that essential trust functions are not interrupted, and Indian

beneficiaries do not suffer unnecessarily in the name of improving services to them,

by disrupting cash flow, per capita payments, timely access to funds, and payments

for the use or disposition of Indian trust assets.

On November 14, 2001, Secretary of the Interior Gale Norton proposed establishing a separate agency, a Bureau of Indian Trust Assets Management, to address

the debacle of federal mismanagement of Indian trust assets. For the reasons that

follow, ITMA believes that such a move at this time is fraught with far more danger

and uncertainty than likely benefits.

This decision presumably followed the same-day joint recommendation of the Special Trustee for American Indians and the Assistant Secretary—Indian Affairs that

such an organization be created and headed by an additional Assistant Secretary

for Indian Trust Assets, and based in part on a report and recommendation of the

Department’s contractor, Electronic Data Systems (EDS). Unfortunately, the EDS

report cited for support of these plans is not available to tribes, and access to it is

barred by the federal court’s order to shut down the Department’s internet connections.

In the first place, ITMA believes that carving a separate agency out of the single

Interior agency now totally dedicated to Indian services would create great uncertainty because Indian tribes and individuals cannot know what either agency will

look like, or what capabilities either will have. In fact, ITMA suggests that the Department cannot at this time even identify the programs, functions, responsibilities,

or resources that would come under the new Assistant Secretary or the new agency.

ITMA insists that any such effort to identify ‘‘trust functions’’ is emphatically not

the province of the Secretary or the Department alone. There was enormous

dysfunctionality caused by separating trust funds management from the Bureau,

and those problems have not been resolved yet, notwithstanding the Department’s

promises for more than two years of an inter-agency MOU, or a BIA/OST Handbook

to resolve them.

ITMA notes that the General Accounting Office, the Department’s own consulting

contractor (EDS), the plaintiffs in the Cobell litigation, and ITMA have roundly

criticized the Department’s previous, fitful starts at trust reform because boxes have

been drawn and systems acquired before giving adequate thought to the duties to

be fulfilled or the objectives to be achieved. ITMA suggests the Secretary makes the

same mistake by proposing a new organization before giving adequate thought to

the duties to be fulfilled, or the objectives to be achieved by the new organization,

much less giving any apparent thought whatsoever to what such a move portends

for the overall delivery of Indian services from the Department of the Interior.

ITMA suggests that before any major functions are moved, budgets disrupted, reporting regimes confused, infrastructure (building, vehicles, utility systems, hard

drives, equipment and furnishings) further divided, and responsibilities shifted that

the Congressional oversight and appropriations committees should demand that all

interested parties be afforded an opportunity to provide the counsel that the Secretary indicated will ‘‘greatly benefit’’ the Department. Her view was that the Department’s ‘‘refinement’’ of the new organization would benefit from such counsel.

ITMA suggests that history, especially the Department’s recent history, coupled

with the Department’s acknowledged timing of this announcement in an effort to

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forestall court intervention, compels the conclusion that a move as startling as this

not be made precipitously or without careful scrutiny.

ITMA suggests that the Department be required to identify to the Congressional

committees precisely those functions, duties, responsibilities, programs, and resources that the Secretary proposes to transfer. ITMA further suggests that her effort to do so will result in surprisingly vigorous debate. If the Secretary wishes to

bring in a political appointee to oversee the present reform activities that are at

issue in litigation or otherwise under the supervision of the courts, ITMA does not

object to that effort. On the other hand, ITMA suggests that such a move demonstrates that the Secretary and the Department are continuing to miss the real

point of trust reform. ITMA suggests that the Department must begin with an analysis of the duties that are required to be performed in the management of those assets. Such an analysis has not been undertaken, and has, in fact, been strenuously

resisted by the Department. ITMA insists that failures of the past, including known

instances of mismanagement, loss, trespass, and theft, for instance, must be acknowledged and disclosed. It is impossible for trust beneficiaries to accept that the

Department has learned from any mistakes that it refuses to acknowledge.

Once those duties are acknowledged, and known mistakes of the past disclosed,

then the Department will be in a position to devise policies and procedures that are

designed to correct those mistakes and to effectively and efficiently discharge those

duties. Only when policies and procedures are designed to carry out acknowledged

duties can the Department and its appropriating and oversight Committees of Congress make decisions regarding the organization of the agency charged with the performance of those duties. To agree beforehand to a new agency that will under any

conceivable scenario result in enormous turmoil, without a common understanding

of what either the new agency (or the old one) will have responsibility for, is simply

to repeat the mistakes of the past dozen years. The DOI with the acquiescence of

Congress has proposed one plan after another to buy time throughout the last decade. ITMA urges in the strongest possible terms that the new Century not begin

with a similar, temporizing ruse. That is to say, ITMA urges tribes and the Congress not to accept one more bureaucratic shuffle as a substitute for intellectual

honesty and full disclosure.

ITMA suggests the trust duties to be carried out be identified, and policies and

procedures designed to achieve the performance of those duties. Then a discussion

of the organization, budget, and resources required by those policies and procedures

will be in order. ITMA further suggests that this organization will require carefully

instituted internal controls to ensure that those policies and procedures are

followed, and that the underlying duties are faithfully executed. Finally, ITMA suggests that a revised trust management regime, designed from the bottom up, beginning with the duties to be performed rather than with names in bureaucratic boxes,

must include an enforcement mechanism to ensure that violation, failures, and mistakes are timely identified and corrected. ITMA further suggests a rigorous analysis

of the Department’s trust program from the perspective here recommended will implicate broader reaches of the government and the Department than are suggested

by the Secretary’s current proposal. Decisions will be required regarding rewards

and punishments for concealing or acknowledging mistakes which reverse the historical pattern which has too often rewarded those who cover up and punish those

who disclose the truth.

Decisions regarding the ultimate lodging of authority for trust decisions must be

made that examine the current practice of allowing mid-level attorneys in the Office

of the Solicitor or the Department of Justice to give orders to those senior individuals who have been appointed by the President and his officers to run the Executive

Branch of our government. The duties of those other Interior agencies outside the

BIA presently charged with monumental Indian trust asset management responsibilities must also be critically examined. In particular, the present role of the Assistant Secretariat for Policy, Management, and Budget must be critically examined.

In addition, the Department must carefully examine the different scopes of its duties regarding direct service tribes, contract tribes, and compact tribes.

ITMA suggests that any examination of ‘‘trust assets’’ will necessarily be incomplete if conducted by even the most senior officers of government who have less than

five years of collective experience in the arena. ITMA further suggests that this examination will be even more seriously compromised if guided by career employees

of Interior and Justice who have been rewarded in the past for concealment, cover

up, dissimulation, and denial of even the existence of duties that have been repeatedly declared by the courts of our land. In short, ITMA suggests that this examination is doomed to failure without participation of the beneficiaries themselves, who

may well have the most to offer and certainly have the most to lose as a result of

these deliberations. The Congress has recognized this for more than 20 years when

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it placed such requirements into the black letter of the federal Indian laws of the

United States, beginning with the Federal Oil and Gas Royalty Management Act of

1982.

ITMA urges tribes and the Congress to impress upon the Secretary the extent to

which her current proposal violates the spirit if not the letter of such laws of the

United States as the Royalty Simplification and Fairness Act; the Indian Trust

Fund Management Improvement Act of 1994; the Federal Oil and Gas Royalty Management Act of 1982, and the Indian Self-determination and Education Assistance

Act (P.L. 93–638), as well as numerous federal regulations, Executive Orders, and

Secretarial orders. ITMA stands ready to be welcomed to the ensuing deliberations

and to a constructive engagement with the Department and the Congress in the important, and too often in the past nationally embarrassing issue of Indian trust reform.

There will be time enough in the deliberative process ITMA recommends to determine whether or not a new Bureau of Indian Trust Asset Management is appropriate, or even whether such an agency can ever succeed in the Department of the

Interior. The Secretary herself has recognized that the Department will benefit from

tribes’ participation. It is clear from discussions to date that the Department has

given no thought whatsoever to just what it means by trust assets, that it has not

considered duties attendant upon inchoate or unquantified assets such as water

rights; treaty rights to hunt, fish, gather, pass over others’ lands, rights to chose

in action against trespassers, underpaying tenants, or thieves; duties to assert or

protect rights; or any number of other trust ‘‘assets,’’ which the government has paid

billions of dollars for its failures to protect in the past. ITMA insists that any successful trust reform must begin with a collaborative effort to establish a process

along the lines suggested here.

Finally, ITMA points out that the Secretary’s current proposal, far from being the

breath of fresh air we had hoped for from the present Administration in its first

year, is simply a continuation of a long string of Secretary-level organizational proposals to buy time by rearranging boxes while leaving past wrongs uncorrected and

failing to deal with fundamental issues. In this vein, ITMA points out that the Secretary’s proposals and the current process by which she further proposes national

‘‘consultation’’ meetings within the space of two months violates the express policy

of tribal consultation negotiated and executed in writing between the Bureau of

Indian Affairs and Indian tribes less than one year ago. ITMA is obliged by its responsibilities to put these views on record in light of the Secretary’s undisclosed

plan to proceed with her plan by redirecting $300 million of appropriated funds, but

vigorously asserts that this exercise does not constitute tribal consultation in any

meaningful sense of the term.

ITMA respectfully urges the appropriate Committees of Congress to withhold

automatic consent to this far-reaching and likely permanent proposal of Secretary

Norton until it has been thoroughly examined. ITMA urges the Congress to exercise

its oversight role and not to subject the nation’s American Indian and Alaska Nation

trust beneficiaries to a unilateral determination of the Secretary as to what her

trust duties are and are not. ITMA particularly urges the U.S. House of Representatives, with an oversight hearing scheduled on trust reform on February 6, 2002, not

to agree before it begins its inquiry to a $300 million, far-reaching and permanent

plan hatched behind closed doors by the Department alone. More than 30 years of

Congressional policy dictate that these are national decisions involving the beneficiaries themselves, and not merely Secretarial ones. There are far too many of our

men and women presently on duty beyond the seas in the name of this nation for

us to take lightly our responsibilities to them and their families while they are defending us.

Mr. HAYWORTH. Thank you very much, Chairman Tillman.

One housekeeping note: Since we have the lower dais clear, and

I see some folks who are back here standing up, and maybe some

have been standing up most of the time, you are certainly welcome.

You can join us here on the lower dais. Please do not try to ask

questions or count votes.

[Laughter.]

Mr. HAYWORTH. But if you would like to come up and sit and be

a pseudo-Congress observer for the day, I cannot give you the Committee status, but we certainly are happy to have you come up. Or

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if you want to be shy, and your legs are good and strong, then you

can certainly stand in the corner.

And sure enough, just like the dance floor after some initial reticence, some folks are kind enough to come up and take chairs, and

you can continue to do that.

So with that housekeeping note, and the voice of bipartisan

agreement from my friend from Michigan, we turn now to President Hall, from the National Congress of American Indians.

Mr. President, welcome, and we look forward to your testimony.

STATEMENT OF TEX G. HALL, PRESIDENT, NATIONAL

CONGRESS OF AMERICAN INDIANS

Mr. HALL. Chairman Hayworth and Congressman Kildee, being

the co-chair of the Native American Caucus. We appreciate also all

of the members that are here remaining to hear this most important issue in Indian country.

My name is Tex Hall. My Indian name is Red Tip Arrow. I am

the president of the National Congress of American Indians, and

also the tribal chairman of the Fort Berthold Indian Reservation of

North Dakota, the Mandan, Hidatsa, and Arikara Nation. I am

also co-chair of the newly developed tribal taskforce. So I will try

to spend part of my time talking about the taskforce and some of

the work that it has done.

But I want to concur with Chairman Tillman’s points about Professor Wilkenson’s concept about starting from the beginning, and

that is trust.

And NCAI, of course, opposes the BITAM. We call it ‘‘Bite-Em.’’ And the tribes want to come up with their own plan. We want to

call it ‘‘Fight-Em.’’ So I went to all of the scoping meetings. And we feel the Secretary is not following Executive Order 13175, which mandates

consultation government-to-government. And we feel that it was

disheartening. I just want to say this, Mr. Chairman, in all due respect. It was disheartening to hear the Secretary’s comments again

trying to allude to BITAM as a preferred plan.

The tribes took the time—We have had 6 days, by the way, to

work on a tribal plan. And EDS took 60 days—or 6 months. EDS

took 6 months. And I want to reference the Committee to page 14.

This is a January 24 EDS report that talks about there must be

government-to-government, a new plan, or BITAM must be beneficiary-approached. It must be beneficiary-based. And who the

beneficiaries are are the tribal governments and the individual

Indian beneficiaries.

So again, this is their own contractor that they have contracted

and spent millions of dollars working with. And it is very disheartening, again, to not allow the tribes to come up with another plan.

The tribes have received nine proposals, and we developed a matrix. And I will forward this on to the Committee. We do have a

written testimony. But we put all of the nine tribal proposals, and

we put standards and principles, like maintaining trust, responsibility, separation of trust—which none of the tribes want to do.

And it is all here, and it is all checked off.

So this is a great start. We also want to put BITAM, and we

want to put the Cobell receivership motion on here, so we have all

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of the tribes’ plans, BITAM, and then the individual Indian money

account plaintiffs, their motion for receivership; so we have a matrix that evaluates every single plan.

I think that is a must, and it is critical. And it is in not only the

EDS report, but it is also in the January 16th eighth monitoring

report that the Secretary has to provide to the judge. So all of that

is in place.

I just want to emphasize, again, my disheartening of the Secretary’s testimony about her preferred plan. That was the whole intent of the taskforce, made up of 36 representatives, 36 tribal leaders who took the whole weekend, from Friday to Sunday. We

missed the Super Bowl, not that the Super Bowl is—It was a good

game and all that. But this issue is so critical to all of us that we

sacrificed a whole weekend to work with the Secretary. She spent

about 4 hours working with us, and talked about her commitment

to working with us. And of course, the beneficiary has to trust the

trustee. And to not have them to come back and say BITAM is a

better plan and all that, we think is totally wrong.

Let me just summarize some of the matrix and some of the tribal

plans. First of all, the taskforce is not going to be a rubber stamp

for BITAM. We will simply not be a rubber stamp, because these

are our assets, these are our monies. And if we have to come back

to Congress—Because we agree that Congress is the ultimate trustee and you have just entrusted the Secretary to carry that function

out.

But we said that, first of all, all tribes are opposed to BITAM,

but all tribes want trust reform. There is no tribe that says, ‘‘We

do not want reform.’’ I do not know where that came from, but the

Secretary’s comments said that. We all want trust reform.

We have nine proposals. The heart of the tribes’ concerns is that

they do not want land management separate from the local level,

when they have no control and daily decisionmakings are taken

away. This is critical. We want direct authority from the Secretary

on down to the local agency superintendent.

We would like to have our own accounting system. It is like a

corporation not having your CPA being right across the hall from

you. We have to have our own accounting system, our access to accountants that have CPA level in the field. We feel that most of

this money should be done on the field level.

There are some key differences in the proposals that the tribes

have submitted. And tribes, again, do not want to separate the

land, but would separate the accounting, banking, into an independent office at the local level.

And the tribes have a focus on accountability and external monitoring. That is really one of our critical points.

And we want reform, but a different kind of reform. We want

land management at the local tribal level, top-quality accounting,

and accountability. And that is the difference, Mr. Chairman. So I

think you can draw the line.

We feel we want to work with the Secretary, if she gives us the

time to work with her, in true and meaningful consultation according to 13175. But if we are not, Mr. Chairman and members of the

Committee, we may have to come back to you with our preferred

tribal plan, because you are the ultimate trustee.

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So I realize my time has run out, Mr. Chairman, but I would

refer to my written statements. And I will be happy to answer any

questions later on.

Mr. HAYWORTH. And we thank you very much, President Hall.

And it again goes without saying, your complete testimony will be

entered into the record, as you offer your synopsis in the 5 minutes

we provide.

[The prepared statement of Mr. Hall follows:]

Statement of Tex G. Hall, President, National Congress of American Indians

Mr. Chairman, members of the Committee, Tribal leaders and members of the

public: thank you for the opportunity to provide testimony to you today on issues

that Indian Tribes and Nations believe are of critical importance throughout Indian

country. My name is Tex Hall, and I am providing testimony on behalf of the National Congress of American Indians, the oldest and largest organization representing Indian Tribes and individual Indians, founded in 1944 and representing

more than 200 Tribes. I am also the Chairman of the Mandan, Hidatsa and Arikara

Nation (the Three Affiliated Tribes), a Nation with an area of approximately 1500

square miles located along the Missouri River in northwest North Dakota.

Summary

1. Tribes throughout the United States are unanimously opposed to the creation

of a separate Bureau of Indian Trust Assets Management (BITAM) within the

Department of Interior and have strongly urged the Department to withdraw

the proposal for creation of BITAM made to the court in the case of Cobell v.

Norton now pending in U.S. District Court for the District of Columbia. Tribes

believe that the proposal of DOI as filed with the Court goes far beyond what

was necessary to comply with previous Court orders and that it contradicts the

Indian Self Determination Act, including the provisions of that Act for self-governance, and that it violates Congressional intent in passing the American

Indian Trust Fund Management Reform Act of 1994. Tribes further have requested that Congress take such steps as are necessary to prevent the BITAM

from being created.

2. Tribes are in the process, through a 36 member Task Force selected by the

Tribes, of developing alternative mechanisms for ensuring effective reform of

trust asset management that will carry out the mandates of the American

Indian Trust Fund Management Reform Act of 1994 without the need for a

separate Bureau within the Department.

3. Tribes welcome the support DOI has expressed for the Task Force process, provided that any alternative mechanism for trust asset management that is developed by the Task Force and implemented by the Department must receive

the full support of all affected Tribes.

4. Tribes recognize that in order to ensure that necessary trust asset management

reforms are carried out by the Department, legislation may need to be enacted

by Congress that among other things, may provide for the establishment of

trust standards and provide for a permanent oversight mechanism to ensure

compliance by the Department with those standards.

5. Tribes urge the Congress to appropriate adequate funds to address the issues

of trust management and accounting in Indian Country. We believe that funding for tribal land repurchase programs should be seriously considered by Congress as a cost effective solution that will decrease the problems and costs related to fractionation of land title.

6. Tribes remain highly concerned about the slow progress by the Department in

installing necessary security systems on the networked computers the DOI uses

for accounting for the assets of Tribal members contained in Individual Indian

Money (IIM) accounts. We understand that some checks have begun to be processed, but a great deal of work remains to be done while individual tribal members are suffering because income from their assets upon which they depend

for everyday needs has not been paid to them since early December.

7. Tribes request that Congress pass a modest one-year extension of the statute

of limitations that arguably can be used to defeat Tribal claims against the

United States stemming from trust asset mismanagement that arise because

of the issuance in early 1996 to Tribes of the admittedly inadequate Arthur Andersen reconciliation reports required by the American Indian Trust Fund

Management Reform Act of 1994.

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Background

This Nation’s Indian Tribes have a special and unique relationship with the

United States. The relationship is one rooted in the history and rooted in the sovereign nature of the federally recognized Indian Tribes, which all possess inherent

sovereignty over their own affairs and are recognized as separate, sovereign governments by the United States through treaties and various other forms of Federal recognition. How this relationship is to be recognized and handled has been formally

recognized by the President of the United States in Executive Order 13175, outlining how the executive departments of the United States government should interact with the Tribes on the basis of a ‘‘government-to-government’’ relationship.

Because of the great sacrifice that the Indian tribes have made to the United

States of much of their homelands, by conquest, taking, or by ceding those lands

through treaties and otherwise to the United States, the United States has become

a trustee of much of the lands and assets that have been set aside for the tribes.

See, e.g., Memorandum Opinion, Cobell v. Babbitt, Civil No. 96–1285, District Court

for the District of Columbia, December 21, 1999 and the affirmance of that opinion

by the Court of Appeals for the District of Columbia, February 23, 2000 for a more

complete outline of the origin of the trust responsibility of the United States.

The trust responsibility of the United States to the Indian tribes within its borders is carried out on the basis of the statutory mandates of Congress, often guided

by opinions of the courts of the United States. In 1994, Congress explicitly recognized these fundamental trust obligations, and also recognized the government’s

failure to adequately carry out its trust responsibility to Indian tribes by passage

of the ‘‘American Indian Trust Fund Management Reform Act of 1994’’, P.L. 103–

412 (the ‘‘Act’’). That Act stated in Title I, Section 101 that the Department of Interior needed to act to carry out its responsibilities for discharging its trust responsibilities in an affirmative fashion, and described the functions the Secretary must

carry out as follows:

‘‘(d) The Secretary’s proper discharge of the trust responsibilities of the

United States shall include (but are not limited to) the following:

(1) Providing adequate systems for accounting for and reporting trust fund

balances.

(2) Providing adequate controls over receipts and disbursements.

(3) Providing periodic, timely reconciliations to assure the accuracy of

accounts.

(4) Determining accurate cash balances.

(5) Preparing and supplying account holders with periodic statements of their

account performance and with balances of their account which shall be available on

a daily basis.

(6) Establishing consistent, written policies and procedures for trust fund

management and accounting.

(7) Providing adequate staffing, supervision, and training for trust fund

management and accounting.

(8) Appropriately managing the natural resources located within the

boundaries of Indian reservations and trust lands.’’

The Act further created an Office of Special Trustee (OST) whose job it was to

develop a plan for the establishment or reform of all necessary systems for Indian

trust fund management, and to ensure that these reforms were in fact carried out

by the Secretary of the Department of Interior (DOI, or the ‘‘Department’’) who in

general has been given by Congress the responsibility to manage assets held in

trust by the United States for the benefit of Indian tribes and individuals. The Congress, since 1994, has held many hearings regarding the progress made by the OST

and by DOI, and has appropriated considerable sums to ensure that the necessary

reforms have been carried out.

Nevertheless, at least in the case of individual Indians, efforts were seen to be

inadequate and against the backdrop of the American Indian Trust Fund Management Reform Act of 1994, litigation was filed in 1996 in the U.S. District Court for

the District of Columbia by a group of individuals representing the class of all those

persons who have rights to Individual Indian Money (IIM) accounts. Their complaint

against the Department of Interior sought, among other things, an accounting of

their assets and affirmative relief against the Department to ensure the Department’s compliance with the Act. This case is known now as Cobell v. Norton, Civil

No. 96–1285, still pending in the U.S. District Court for the District of Columbia.

The Court in Cobell has issued a series of rulings and orders, and has appointed

a special Court Monitor who is required to report back to the court the progress the

Department has made in carrying out its trust reform responsibilities, particularly

in relation to the IIM accounts which is the focus of the Cobell plaintiffs’ complaint.

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In recent months, the Court Monitor has issued several reports highly critical of the

failure of the Department to complete the required reform efforts and has cited the

Department for issuing to the Court false and misleading reports about its progress

in making necessary reforms to the trust management systems.

Because of these reports, the plaintiffs in Cobell have argued to the court that

the performance of the Department in carrying out the orders of the Court, which

incorporate the requirements of the American Indian Trust Fund Reform Act, and

which have identified specific breaches of the trust responsibility, is grossly inadequate and that a receiver should be appointed to oversee trust reform efforts concerning the IIM accounts that are the subject of the litigation. The plaintiffs have

also sought to have the Secretary of Interior and several other officials, and their

attorneys, to be held in contempt of court for making false statements to the court

about the progress of trust management reform, among other things.

On November 14, 2001, attorneys from the Department of Justice (DOJ) filed on

behalf of DOI a response to the Order of the District Court for the District of Columbia in the Cobell case to show cause why the Secretary of Interior and others should

not be held in contempt of court for failing to comply with the Court’s previous Orders. The Court had particularly wanted to know why the Secretary had failed to

comply with the Court’s order of December 21, 1999 which required, among other

things, that the Department carry out its High Level Implementation Plan (HLIP)

as the Department had previously promised to the Court it would do in its filings

with the Court, and which also identified four specific breaches of the trust responsibility that should be corrected by DOI with the assistance of the Office of Special

Trustee and the Department of the Treasury, which handles distribution of earnings

from trust assets to the individual Tribal member beneficiaries.

The response outlined a planned division of the functions of the Bureau of Indian

Affairs (BIA), with a new Bureau to be created called ‘‘Bureau of Indian Trust Assets Management’’ (BITAM) to be headed by a new, as yet unnamed, Assistant Secretary of the Interior. The new Bureau would be in charge of the all trust asset

management functions of DOI now handled by the BIA and would eventually handle

those trust functions of the Office of Trust Funds Management (OTFM), as well, including management of Tribal trust assets, despite the fact that Federally recognized Indian tribes are not parties to the Cobell litigation and the fact that the

Court does not have the subject of Tribal trust assets before it. Exactly what constitutes ‘‘trust management functions’’ was not defined in the response presented to

the Court and to the Tribes.

The DOI response as filed on November 14, 2001 with the Cobell court has vast

implications for the provision of all trust services to Tribes and their members. Yet,

this response was filed without any notice to the affected Indian tribes, as required

by EO 13175. Instead, DOI indicated shortly after filing its response with the Cobell

court that it was beginning to conduct ‘‘consultations’’ with the affected Indian

tribes to get their reaction to the reorganization.

In the DOJ filing, the reorganization was not presented as a proposal. It was presented as something that the Department would be implementing as soon as possible. DOI indicated that it already had appointed someone to head a ‘‘Trust Transition Office’’, namely Ross Swimmer, a former Assistant Secretary for Indian Affairs

who served in the Reagan Administration. In other materials filed with Congress,

DOI indicated that it would have to reprogram as much as $200 million for fiscal

year 2002 in order to effectuate the transfer of the trust asset management functions to the new BITAM. It did not indicate that it needed any additional funds in

order to carry out the reorganization.

As the reason for its reorganization effort and the creation of the BITAM, the noticed filed by with the court by DOI cited a recent report from a consultant firm,

EDS, that DOI had hired to analyze its progress on implementing the HLIP. However, nothing in the EDS report had indicated that forming a new BITAM was necessary, and nothing in the Court’s previous orders had indicated that forming a new

agency was necessary.

Position of NCAI Concerning the Reorganization

At its Annual Meeting on November 25–30, 2001, in Spokane, Washington, NCAI

passed unanimously the attached Resolution, No. SPO–01–006, which opposed the

reorganization plan proposed by the Secretary on several fundamental grounds: 1)

That the Secretary of Interior has made the reorganization plan without adequate

consultation with the affected Indian tribes, in violation of EO 13175; and 2) That

the reorganization raised many questions that troubled Tribal leaders, including

whether it was authorized by law; whether it was in compliance with Court orders,

whether the proposal would do anything to help manage trust assets better, the efVerDate 11-MAY-2000 09:07 Sep 26, 2002 Jkt 000000 PO 00000 Frm 00132 Fmt 6633 Sfmt 6621 77526.TXT HRESOUR1 PsN: HRESOUR1
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fect it would have on tribes who contract or compact for trust functions, and whether it would end up reducing the services provided by the BIA to Tribes.

Beginning on December 13, 2001, in Albuquerque, New Mexico, the Secretary of

Interior began a series of meetings with Tribal leaders from throughout the United

States. Her meetings, called ‘‘consultations’’ in the Notice published in the Federal

Register were to be conducted according to a published schedule and were to allow

Tribal leaders to comment on the reorganization plan, but these meetings were only

to be held in selected regions of the United States, and did not include meetings

in all of the BIA Regions affected by the reorganization. To date, there have been

meetings, which the Assistant Secretary for Indian Affairs, Neal McCaleb, has publicly called ‘‘scoping’’ meetings, a term Tribal leaders believe is more consistent with

EO 13175, in Albuquerque, NM(12–13–01); Oklahoma City, OK (1–3–02);Rapid City,

SD (1–10–02); San Diego, CA (1–17–02); Anchorage, AK, (1–23–02), and Washington, D.C. (2–1–02).

At every meeting to date, Tribal leaders have been unanimous in their opposition

to the BITAM and the Department’s plan as presented to the Court. Tribal leaders

protested the lack of consultation, the effect the proposal would have on provision

of trust services of the BIA, the illegality of the proposal, the failure of the plan

to request more funds for its implementation, the failure of the Department to provide for security in its computer programs and its slow response in fixing the problem, the possible affect the changes would have on tribes that compacted or contracted for trust services, the failure of the plan to provide for historical accounting

of trust assets as required by the American Indian Trust Fund Management Reform

Act, the weakening of the BIA as a result of taking trust asset management from

it, the waste of time represented by such a far-reaching reorganization without establishing substantive mechanisms for reform of trust asset management, the failure of the plan to address real conflicts of interest among agencies providing some

of the trust asset management and accounting functions, and the fact that the plan

went far beyond what is required of the Department by the Cobell litigation, among

other things.

In Albuquerque, the Tribal leaders developed a position paper outlining the basic

principles that should govern any trust asset management reform effort. These principles have guided tribes as they have testified at the various ‘‘scoping’’ meetings

that have been held so far. The principles include: 1) opposition to BITAM for the

reasons stated above; 2) requiring the Department to engage in true consultation

on a government-to-government basis pursuant to EO 13175; 3) ensuring that there

are adequate resources to carry out trust reform; 4) establishing a mechanism for

determining historical account balances; 5) doing no harm to established self-determination and self-governance programs for management of trust assets; 6) providing

Tribes the flexibility to assist the Department to manage trust resources consistent

and develop different systems consistent with each Tribe’s unique resources and circumstances in such areas as grazing, timber, oil and gas, commercial real estate,

agriculture, fisheries and hunting and fishing; 7) recognition of the need for trust

assets to be managed in a way that protects and allows the continuance of each

tribe’s unique culture on a long term basis, consistent with Tribal control of the use

and development of their lands, including recognizing a strong role for enforcement

or leases by the Department.

Development of a Tribal Task Force on Trust Reform

During the initial ‘‘scoping’’ meeting in Albuquerque on December 13, 2001, and

continuing at each of the scoping meetings thereafter, Tribal leaders have developed

a Tribal Leader’s Trust Asset Management Reform Task Force, composed of 2 representatives and one alternate from each of the 12 BIA Regions in the United

States. Each of the Regions have now submitted names to the Task Force, and at

the invitation of the Department of Interior, the Task Force has held its first formal

meeting over the weekend of February 1–4, 2002 at DOI’s National Conservation

Training Center in Shepherdstown, West Virginia. The Task Force is committed to

developing in a deliberative manner an alternative approach to the BITAM developed by DOI and has requested that the Department accept the plan developed by

the Task Force instead of the BITAM. The Secretary of Interior has stated that the

Department is interested in considering the proposal developed by the Task Force.

The Task Force has elected from its members two co-chairs, including myself, Tex

G. Hall, and Susan Masten, Chairperson of the Yurok Tribe in California. The Task

Force also has developed a draft protocol of its operations

Already the Task Force has under consideration nine separate proposals for trust

asset management reform as outlined by various Indian Tribes and organizations.

As more proposals are received, further refinements will be made. Among the common themes of these proposals are: 1) keeping all trust management functions withVerDate 11-MAY-2000 09:07 Sep 26, 2002 Jkt 000000 PO 00000 Frm 00133 Fmt 6633 Sfmt 6621 77526.TXT HRESOUR1 PsN: HRESOUR1
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in the Bureau of Affairs; 2) creating an independent commission to develop trust

asset management standards and ensure compliance with those standards; 3) providing for all necessary trust asset management functions within the BIA; 4) ensuring complete and full consultation on a government-to-government basis on issues

affecting Tribes and their members; and 5) recognition and protection of Tribal sovereignty and the ability of Tribes to manage their affairs and their resources. The

Task Force has now appointed a subcommittee to review the various proposals and

I am confident that the Task Force will develop a final proposal that meets the trust

management needs of all Tribes, while at the same time satisfying the requirements

of the Cobell court and other court decisions regarding the responsibility of the

United States for trust asset management for Indian tribes and their members; the

American Indian Trust Fund Management Reform Act of 1994, and the various

trust asset management obligations imposed on the United States by Treaties and

statutes as illuminated by the common law principles of trust management.

Task Force members are aware of the need to communicate effectively their work

product to all Federally recognized Indian Tribes, and to have their meetings open

to all Tribes and their advisors so that the maximum input and ideas from Tribes

may be received. They also certainly expect that Task Force meetings will be held

in the various Regions of the United States to make their deliberations as accessible

as possible. They expect that their work will be long and difficult, and that all

Tribes will have to work hard to build consensus among them for a final proposal

to be acceptable to the Department of Interior, to the Courts, to Congress, and finally, and most importantly, to all of their members.

The Task Force members are well aware of the great responsibility thrust upon

them. They have spoken candidly to Secretary Norton at the meeting in

Shepherdstown, West Virginia this past weekend about their desire to see a Department of Interior that consults on a government-to-government basis, that takes

their concerns seriously, that fully funds trust asset management reform, that will

implement meaningful trust reform, withdraw the BITAM plan, that will honor the

Treaties and that will respect their sovereignty.

Congressional Assistance

There are a number of steps Congress can take to assist the Department of Interior and the various Indian Tribes in this Nation achieve real trust asset management reform.

1. Congress should ensure that no funds are reprogrammed during fiscal

year 2002 for the BITAM proposal and that for fiscal year 2003, all funds

aimed at trust asset management reform remain within the Bureau of

Indian Affairs and the Office of the Special Trustee.

This is critical because DOI has already notified Congress of it intent to reprogram funds to implement the BITAM plan. Tribes are unanimously opposed to the

BITAM proposal and know it will not work because it so radically changes the way

services are provided to Tribes. There is no reason to spend money on a planned

reorganization that does not serve the interests of the affected Indian Tribes.

Congress should also make it clear to the DOI that it would prefer that their

BITAM proposal be withdrawn and that a new alternative acceptable to Tribes be

developed. DOI has committed to making the Task Force process work, but that

must include an adequate commitment to ensure the opportunity for participation

in the process by all Tribes, through regular communication, a sufficient number of

meetings and sufficient resources devoted to this effort for it to meet all of the Task

Force objectives.

2. Congress should be prepared to assist Tribes to develop meaningful

legislation that will likely, among other things, establish enforceable trust

asset management standards that allow the needs of all Tribes to be met

consistent with each Tribe’s unique resources; that will establish a mechanism for oversight of compliance with the standards; and that will provide

a structure for trust asset management that balances the needs of Tribes

to be involved with trust asset management with the overall trust asset

management responsibilities of the United States.

Tribes, including the Tribes represented on the Tribal Leaders Trust Reform Task

Force, are working hard to develop a proposal, or perhaps proposals, that will provide a superior alternative to the BITAM plan already advanced by the Department.

Exactly what is to be contained in that proposal is not yet clear, but almost certainly the proposal will have a legislative component to it to ensure that the Department will enact meaningful trust asset management reform. The elements of such

legislation may include the establishment of trust asset management standards and

an independent commission or other mechanism to ensure compliance with those

standards. This legislation must also respect the individual and unique needs of

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each Tribe, consistent with the ability of Tribes and their members to manage their

own assets and affairs through such things as self-governance compacts and selfdetermination contracts. Finally, the legislation must recognize the need for meaningful government-to-government consultation as the legislation is implemented by

the Department.

3. Congress should be willing to pass legislation extending any potential

statute of limitations that would affect the filing of lawsuits against the

United States by the Tribes for trust asset mismanagement.

The issue of a statute of limitations defense that could be raised by the United

States in any lawsuit brought by Tribes against the U.S. for trust asset mismanagement arises because of the requirements of the American Indian Trust Fund Management Reform Act of 1994 that reconciliation reports be completed by the Department of the Interior. The Department contracted with Arthur Andersen, one the big

five accounting firms, to prepare the overall report and the reports for each tribe

with trust funds under management of the Office of Trust Funds Management

(OTFM), for the years 1972–1992. Arthur Andersen concluded that the Department

lacked the necessary records and systems for a complete review and accounting of

Tribal trust accounts, a fact generally acknowledged by the Department.

However, the reports were issued to Tribes beginning early in 1996, and the Department made offers of reconciliation to Tribes based on those reports. Tribes universally rejected the vast majority of these offers as being inadequate because of the

inadequacy of the accounting by Arthur Anderson. To the extent the reconciliation

reports provide a basis for a lawsuit being commenced by any particular tribe

against the United States, the receipt of such reports by any particular tribe may

start the statute of limitations on tort related lawsuits against the United States

to run for that tribe. The statute of limitations can, and should be extended for at

least one year for several reasons:

1) The Arthur Andersen reconciliation reports are woefully inadequate,

cover a limited period of time, and do not form a good basis for indicating

the extent of mismanagement of Tribal trust assets by the Department;

2) Extending the statute of limitations may well induce settlement discussions between Tribes and the United States for past mismanagement of

Tribal trust assets, and may well spur discussion in Congress for settlement

options;

3) The number of possible lawsuits that may be filed by Tribes is quite

large and the burden on the courts and the Department of Justice will become larger than necessary.

The proposed legislation for which we would request consideration is similar to

S. 1857, now pending in the United States Senate.

The Computer Shut–Down Problem

Just after DOI announced its BITAM plan by filing it with the Cobell court on

November 14, 2001, the Court Monitor in the Cobell case issued a scathing report

concerning computer systems security issues. The report indicated that DOI’s computer systems could be breached, or ‘‘hacked’’, and that records of trust asset management, including the financial records of IIM account holders, could be altered by

‘‘hackers’’ relatively easily.

The Court issued an order that required the Department to fix the security problem on its computers before using the system again. The Court subsequently allowed the Department, on application to the Court Monitor, to use its computer systems for the purpose of issuing checks to IIM account holders representing the proceeds of their trust assets as managed by the BIA, but that process has not yet occurred and there is still no firm date when IIM account holders will receive their

checks.

This situation is totally unacceptable to the Tribes and their members. While we

are aware and appreciate that DOI officials are working very hard to fix this problem which was many years in the making, we also know that prior to the special

effort of the Court Monitor to ‘‘hack’’ the system, checks had been sent out using

the computer accounting system for IIM accounts for a number of years without significant incident. We are still hopeful of getting the checks issued very soon. We

urge Congress to devote such resources as are necessary to make sure the problem

is completely fixed and to ensure that the IIM account holders receive the funds

they are owed, including interest, as soon as humanly possible. The Department and

the Court Monitor must work together to find an acceptable and immediate solution

to this problem.

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Summary

NCAI fully supports the implementation of meaningful trust asset management

reform. In rejecting the BITAM approach NCAI and its members Tribes, and indeed,

Tribes nationally, are not rejecting the effort needed to make trust reform to happen. NCAI’s leaders look forward to working with the Department of Interior to develop a true alternative to the BITAM proposal that meets the needs of all Tribes,

is acceptable to all Tribes, and which will truly bring about the many needed

changes to the Department of Interior for trust asset management reform.

We also pledge to Congress to ensure that in every way possible for us, Tribes

and their leaders will be made aware of the trust asset management reform process

as it goes forward. The only way a proposal for trust reform can be implemented

is for it to receive broad support from Indian country.

We also urge the Congress to assist us as we develop our alternative proposal the

BITAM approach, especially as we more fully develop any legislation that will be

needed to fully implement the proposal. We believe that this year very well could

be the year that true trust reform is put into place and this issue can begin to be

brought to closure. Finally, we would ask Congress to pass legislation that will extend the statue of limitations for Tribal lawsuits that allege mismanagement of

trust assets by the United States. Masehgedataz (Thank you).

[A resolution attached to Mr. Hall’s statement follows:]

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Mr. HAYWORTH. President Windy Boy, welcome, and we appreciate hearing your testimony.

STATEMENT OF JONATHAN WINDY BOY, PRESIDENT, COUNCIL

OF LARGE LAND BASED TRIBES

Mr. WINDY BOY. Thank you very much, Chairman Hansen.

[Speaks in Indian language.]

Thank you very much, members of the Committee. Thank you for

giving me this opportunity to come before you. I thank all of the

members and the people that have traveled many distances and all

of the people who have traveled throughout Indian country and the

seven areas to follow this dog-and-pony show.

First of all, I would like to point out something, and keep this

in mind. The first thing I want you to keep in mind is in the last

week we have been watching the Enron hearings on TV. The Enron

hearings have been mismanaged. Billions of dollars. We have the

IIM account holders over here with the tribes. Billions of dollars

over hundreds of years, monies in exchange for resources that we

have that we have given up as Indian people. There are billions of

dollars that are owed to our people because of this.

On the other hand, you take the Enron case. It is a big scandal.

People are going to prison for it. More likely, they probably will

not. On the other hand here, what is the difference? Billions of dollars on the left hand; billions of dollars on the right hand unaccounted for. The only difference here that I see between Enron and

the IIM account is the Indians did not gamble their money. It is

still owed to us. And as soon as that time comes when my people

will receive their checks in the mail, then we can talk about fairness.

And one of the many things that we have been talking about, two

things that I see come across the country in these hearings. No. 1,

all of the tribes are opposing BITAM. BITAM is a proposal that has

been devised that has been pushed on us. The specifics have not

been brought out, have not been explained.

We are talking about different areas of the laws that are being

impacted here. We are talking about the laws that are already in

place. And those laws that we talk about are the Indian Self Determination Act. We talk about the Act of ’94. We are talking about

the Indian Self Determination Act. These are already acts and laws

that you have already put in place to assure the tribes that we

have this opportunity to come to the table to present our case to

you.

There are many things that are in question here, as far as the

tribes and our abilities on a local level. The tribal nations throughout this country, all 578 tribes across the United States are subject

to the Single Audit Act. So you cannot tell me that each of these

tribes does not have that ability to take care of our own back yard,

because that is a farce, if that has ever been brought to our attention.

Another thing about the thing is we are talking about IIM receivership. And the gentleman behind me, Mr. McCaleb, I asked this

question specifically to him when he met with us in December in

Billings, Montana. On IIM, these individual accounts, what percent

of the total trust accounts for that?

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And you can correct me if I am wrong, Mr. McCaleb, but it

amounted to 11 to 12 percent of the total trust. So if you take 11

to 12 percent of the total trust of the whole issue that we are talking about, what is going to happen to the other 88 percent?

There are a lot of things when I say these two issues, why I impress upon you the importance of keeping the IIM individuals and

the IIM accounts and the trust accounts of the tribes separate.

And another thing, too, in the same sentence there, since December a lot of my people in my area have been being held—All of

their checks have been held from them. Why do we have to make

them suffer, when they are the receivers, they are the ones who

have had this coming for 2 months? And there is no telling how

much longer that the court case is going to be moving forward.

Why can’t they just get something that is due them?

And I know that my time is up here, but I am more than willing

to be here. And I also have a lot of my other tribes who were not

present for the comment on the record, and there are others.

Two things, also, I would like to make as recommendations. I

recommend that all the proposals from the tribes be considered on

this reform, be recommended from the consultations, to be submitted for congressional record as a matter of congressional record.

And furthermore, to field hearings on all tribal policy; not just

this trust issue. Because our issues are broad. Our issues are broad

because the administrations change every 4 years—every 8 years,

sometimes. But the policies change. And we are always the ones

that are always holding the bag here.

So with that, I, too, will be available for questions. Thank you.

[The prepared statement of Mr. Windy Boy follows:]

Statement of Jonathan Windy Boy, President,

Council of Large Land Base Tribes

Good morning, Chairman Hansen and honorable members of the House Committee on Resources. My name is Jonathan Windy Boy, Business Committee Member, Chippewa Cree Tribal Council and I am testifying today in my capacity as

President of the Council of Large Land Base Tribes. The Council of Large Land

Base Tribes was formed in 2001 to advocate on behalf of a number of Indian tribes

that have trust, allotted lands and other lands in the states of Montana, Wyoming,

Arizona, New Mexico and Utah. The Council member tribes govern approximately

60% of the roughly 54 million acres in Indian Country. The members of the Council

of Large Land Base Tribes express their appreciation to the honorable Chairman

and members of the House Committee on Resources for this opportunity to address

the Committee.

I am here today to address the following matters, trust management reform, the

Cobell litigation, the plan of the Department of the Interior to establish a new Bureau of Indian Trust Assets Management (BITAM) and the associated hardships

which Indian tribes are now experiencing because of the current shutdown of the

systems within the Department of the Interior for payment of oil and gas allotment

revenues and interest to the members of Indian tribes. These matters are causing

extreme distress and hardship for members of all Indian tribes, including those

Indian tribes that are members of the Council of Large Land Base Tribes. See Appendix A, Statistics on Trust Resources for the Rocky Mountain Region.

The Council of Large Land Base Tribes agrees wholeheartedly with Judge Royce

Lamberth in the Cobell litigation that the Department of the Interior has failed dismally in its fiduciary responsibilities to Indian tribes and individual Indian

allottees. Trust management by the Department of the Interior has largely been a

sorry history of negligent, and in some cases, intentional trust mismanagement that

has resulted in the loss of billions of dollars to Indian tribes and individual Indian

allottees. However, the Council is extremely concerned with the current actions of

the Department of the Interior to perform a radical reorganization of the Bureau

of Indian Affairs through the establishment of the BITAM. See Appendix B, affected

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full time equivalent positions (FTEs) in the Rocky Mountain Region. The Council

is concerned that the proposed BITAM does not address the five breaches of trust

already found by Judge Lamberth and is not designed in a manner which will lead

to the effective reformation of the trust management system. Further, the Council

is not convinced that the harm now confronted by individual Indian allottees are

being effectively addressed by the Department of the Interior.

The Council of Large Land Base Tribes by its Resolution CLLBT–08–01, attached

as Appendix C, has supported the concept of trust reform. However, the Council

does not support the BITAM. Sometime in November 2001, the Department of the

Interior developed BITAM entirely without consultation with the Indian tribes and

individuals who are the beneficiaries of the trust obligations. The Department of the

Interior has never provided a detailed description or plan for the BITAM, other than

a single sheet organizational chart. The Indian tribes have traveled from Spokane,

to Albuquerque, Minneapolis, Oklahoma City, Rapid City, San Diego, Anchorage,

and finally, Washington D.C. in pursuit of information which has never been provided.

Without consultation with Indian tribes, on November 20, 2001, the Department of the Interior submitted a request for reprogramming of $300 million to Congress

in order to establish BITAM. The Council, in Resolution CLLBT–08–01, rejected the

BITAM and requested that Secretary Norton withdraw her request for the reprogramming of $300 million that was intended for the immediate establishment of

BITAM.

The Senate Committee on Appropriations responded to Secretary Norton’s request for reprogramming of $300 million by its letter of December 20, 2001 signed by

Chairman Robert C. Byrd and the Honorable Conrad Burns. The Committee declined approval of the reprogramming, in spite of its recognition of the need for trust

management reform. The Committee ‘‘wholeheartedly approved the Department of

the Interior’s announced plans for full consultation’’ with Indian tribes. In doing so,

the Committee acknowledged that ‘‘an open and positive dialogue with those most

directly affected by this reorganization is fundamental’’ to the success of the consultation process. The Committee recognized that ‘‘[q]uestions concerning the exact

structure of the new Bureau, the ramifications of a reorganization on the remaining

functions of the Bureau of Indian Affairs, and potential outyear costs of the reorganization are of special interest to many Senators.’’ The Committee expected that the

Department of the Interior would incorporate ‘‘additional information, conclusions

and recommendations’’ of both the Department of the Interior and the Indian tribes

in any further reprogramming request.

In Resolution CLLBT–08–01, the Council also requests that a number of principles be embraced by the Department of the Interior in proceeding with trust management reform. The Council requests that any trust reform effort preserve, enhance, and in no way diminish the trust responsibility that the United States owes

to Indian tribes and individuals. Any trust reform effort shall affirm and support

tribal sovereignty, self-governance, and self-determination as recognized in treaties,

statutes, executive orders and regulations. Trust reform shall encompass all aspects

and functions that the United States performs on behalf of the Indian tribes.

The Council requests that any reform implement the goals of decentralization,

flexibility for each reservation or service area to tailor programs to the needs of individual Indian tribes, and the creation of well-defined duties of each federal official

and employee relative to trust management. Centralized record-keeping systems

should track information needed on a nationwide basis. But these records must be

maintained in a manner consistent with trust responsibilities and managed in a

manner which will avoid their destruction or loss, and ensure that they are available to the federal government, the tribal government, and the affected individual

Indian allottees. The Council requests that Indian hiring preference be applied in

all trust reform activities.

The Council requests that any cost savings generated by any proposed reorganization go directly to increase direct services at the local level, including those provided

by direct federal services, self-determination contracts and grants, and self-governance compacts. Rather than being driven by perceptions of administrative convenience at the central level, increased funding for trust reform should be designed to

address the need to improve services at the reservation level. No funds should be

expended for trust reform or payment of damages in a manner that would detract

from the quality or quantity of services currently provided to Indian tribes and individuals.

With regards to the need to compensate Indian individuals or tribes for trust mismanagement, the Council requests that assessment of damages determined in the

Cobell or any other litigation for past mismanagement of trust resources be separately funded and proceed on a parallel track to funding for trust reform. The CounVerDate 11-MAY-2000 09:07 Sep 26, 2002 Jkt 000000 PO 00000 Frm 00143 Fmt 6633 Sfmt 6621 77526.TXT HRESOUR1 PsN: HRESOUR1
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cil supports the extension of any statute of limitation which might be argued to

apply to any and all past mismanagement of trust assets, to allow all efforts to be

exhausted to identify all past mismanagement of trust resources, including but not

limited to physical trust assets and financial resources derived from such sources.

It is notable that in each of the scoping meetings held by the Department of the

Interior in Spokane, to Albuquerque, Minneapolis, Oklahoma City, Rapid City, San

Diego, Anchorage, and Washington D.C. the Indian tribes attending the meetings

unanimously rejected the proposal for establishment of the new BITAM. The rejection by the Indian tribes of the Department’s proposal for the establishment of the

BITAM were based on unanswered questions by the Indian tribes relative to the

proposed structure of the BITAM, the impacts of the creation of the BITAM on the

remainder of the BIA, the affect of the proposed reorganization on the delivery of

direct services to members of Indian tribes, including services provided by federal

agencies, and by the Indian tribes through self-determination contracts and grants,

as well as self-governance compacts. As well, the Indian tribes questioned the decision of the Department of the Interior to place its BITAM transition activities in

the control of Ross Swimmer and Steven Griles, Deputy Secretary of the Interior,

both long-time Department of the Interior officials whose lack of leadership and effectiveness in trust management have been instrumental in the continued mismanagement of individual and tribal Indian trust assets.

However, the Indian tribes remain dedicated to effective trust management reform. In this effort, member tribes of the Council of Large Land Base Tribes, including The Chippewa Cree Tribe of the Rocky Boy’s Reservation, The Confederated Salish and Kootenai Tribes of the Flathead Nation, and The Navajo Nation participated last weekend, February 1—3, 2002, in a meeting of tribal leaders at the National Conservation Training Center in Sheperdstown, West Virginia. This meeting

was scheduled and hosted by Secretary Norton, who visited briefly with the group

of tribal leaders late on Friday and late on Sunday afternoon.

The group of tribal leaders who met at Sheperdstown last weekend was not an

inclusive meeting. The National Conservation Training Center was managed as a

secured federal facility, accessible only to certain named individuals through a security gate. Only two representatives, and one alternate, from each of the twelve BIA

Regions were included in the group of tribal leaders. While the group was initially

planned to have included technical representatives from ten organizations in which

Indian tribes are members, including the Council of Large Land Base Tribes, these

technical representatives were later excluded from the group. There were tribal

leaders from over one hundred Indian tribes who were not provided the opportunity

to participate in that retreat at Sheperdstown. They were left behind at the Hyatt

Regency Crystal City to wonder what the Department of the Interior and the small

group of tribal leaders might decide, on behalf of the entirety of all 575 Indian

tribes, during that one weekend of closed meetings. The tribal leaders who were

closed out of the meeting did not have that crucial opportunity to be included in

an open and positive dialogue with the Department of the Interior. This failure

must not be repeated in future meetings of the tribal leaders group.

The tribal leaders from the Council of Large Land Base Tribes who were admitted

to the Sheperdstown retreat as representatives from the twelve BIA Regions reported back about the discussions held there. There were nine alternative proposals

to BITAM that were received and subjected to preliminary review, including proposals from The Chippewa Cree Tribe of the Rocky Boy’s Reservation, The Confederated Salish and Kootenai Tribes of the Flathead Nation, The Cheyenne River

Sioux Tribe, The Oglala Sioux Tribe, and The Hoopa Tribe. There were also proposals submitted by the Intertribal Timber Council, the United Southern and Eastern Tribes, and the Van Ness Feldman Law Firm. All of these alternative proposals

address matters that would be significant improvements over the BITAM proposal.

Although the tribal leaders discussed the proposals and internal organizational

issues, they were unable to reach a consensus by the end of the weekend. The tribal

leaders have agreed to three committees who have set a meeting next week in Portland, Oregon to perform an in-depth analysis of these proposals, along with others

that may be submitted by tribes and other organizations, and to discuss the internal

organizational issues.

There are a number of general guiding principles that were common to the alternative proposals. There was strong support within the group to keep BIA as a viable

agency, to provide a mechanism for establishment of trust standards that can be

tailored by Indian tribes to their individual needs and values, for the establishment

of a trust management system that is consistent with principles of self-determination and self-governance, and for the provision of resources and expertise at the

local tribal, BIA Regional and Agency levels. While these general guiding principles

must be incorporated into any trust reform plan, there obviously must be much

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more work performed with open and full consultation with all Indian tribes prior

to the determination of a plan for real, sustained, and effective trust asset management reform.

This is not a process that can or should be conducted in haste or in secret. The

Congress passed the Indian Self–Determination and Educational Assistance Act, the

Self–Governance Act of 1988, and the American Indian Trust Fund Management

Reform Act of 1994 following extensive hearings and consideration of the concerns

and interest of the Indian trust beneficiaries. The proposal of the Department of Interior to establish the BITAM, as understood by the Council, would administratively

amend these laws without action by the United States Congress. The Council is concerned about such a process and believes that laws passed by the United States

Congress should not be undermined by administrative actions. The gains made by

Indian tribes in the areas of self-determination and self-governance compacts should

not be reversed or jeopardized by an administrative reorganization which is contrary

to the spirit, if not the letter, of the law.

I would like to emphasize that the crucial matter of trust asset management reform must not be driven by the current exposure of the Department of the Interior

or the Secretary of the Interior to sanctions in the Cobell litigation. These matters

must be separated, to the maximum extent, from the much larger matter of trust

asset management reform in order for the interests of both the Individual Indian

Money (IIM) account holders and Indian tribes to be effectively and adequately addressed. The IIM account holders who have had their primary or sole income halted

by the Department of the Interior computer shutdown are being harmed, physically,

emotionally, and spiritually, as well as financially. They are unable to buy food,

shelter, clothing, and other household items. They are unable to make payments on

vehicles, houses, and business equipment. All of these harms are a direct result of

the failure of the Department of the Interior to make payments to these IIM account

holders from funds earned from their own allotted lands. The Department of the Interior must be required to make estimated payments to these IIM account holders,

based on historical payments, in order to decrease the unnecessary suffering and

harm that they are sustaining.

In its 2002 Winter Session, the Navajo Nation Council had to appropriate over

$527,000 to assist Navajo IIM account holders whose lives have been disastrously

affected by the failure of the Department of the Interior to issue checks for income

due to them. This is only the latest instance wherein the trust beneficiary Indian

tribes have been forced to undertake significant financial detriments because of the

failure of the Department of the Interior to adequately address its trust responsibilities. The Council of Large Land Base Tribes requests that this Committee assist

its members, and all Indian tribes and peoples to correct this deplorable situation.

Thank you, Mr. Chairman.

[Appendices A, B, & C attached to Mr. Windy Boy’s statement

follow:]

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Mr. HAYWORTH. And we thank you very much, President Windy

Boy.

Mr. Gray.

STATEMENT OF DONALD T. GRAY, ESQ., NIXON PEABODY LLP

Mr. GRAY. Thank you, Mr. Chairman and members of the Committee.

My name is Donald Gray. I am a forensic trust expert. And what

that means in simple language is, I fix broken trusts. And I have

done so for about 26 years with some of the nation’s and world’s

largest financial institutions.

I think I am the token private-sector person on these panels.

[Laughter.]

Mr. GRAY. I also have followed this problem intensely for about

10 years, and have testified before Senate Committees, and have

helped draft legislation—without a client. Which makes me the

closest thing you will ever see to an altruistic lawyer.

I do care about this issue, and I do have some very definite ideas

that I bring from the private sector, and I hope they are helpful.

The first is expertise. Secretary Norton talked a lot. Actually, I

think it was Mr. Carson who asked a very direct question about,

‘‘Do you have the expertise to do it?’’ And there was an answer

about, ‘‘There will be training programs that will go on.’’ In all fairness, having followed this and read everything about it for 10

years, that is the blind leading the blind.

There is no expertise of the caliber that is required for trust processing, forensic fixes, land asset management, conceptual architecture, systems architecture, trust consolidation, modeling, and all of

the things that have to go in—and I am now speaking about the

IAM accounts—that will have to go into any kind of historic fix,

much less a fix of the systems to go forward.

They do not have the expertise. And that is one of the reasons

that prior administrations have never been able to grapple with

this problem, even though they spent over $500 million in the process of doing it. And just a change of management inside the DOI

does not do a thing. You have to have the expertise. And I will

speak in a moment about how you get that expertise.

The second thing is conflict of interest. You have—and I think

any lawyer will see this—you have an incredible conflict of interest,

in having the BIA fix this problem. I want to give you an example

from the private sector.

When we are asked to go into a bank and fix a 30-year-old trust

problem that may involve 20 or 30 billion dollars, we take the trust

staff that has administered that for the last five or 6 years, and

we separate them. And we immunize them, unless they have done

something criminal. And we say, ‘‘You are going to sit on the sidelines. We are going to fix this. And we are going to come to you

and we are going to ask you a lot of questions. And you are going

to help us. And at the end of the day, you are going to look like

heroes, we are going to look like heroes, and the bank is not going

to get sued.’’

But the first thing you do is to separate the people who have

been working on these accounts from trying to fix the accounts, because they are going to run across mistakes they made, their father

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made, their brother made, or someone else. And that is a terribly

unfair thing to do to anybody in the BIA. And it is not done in the

private sector.

The other thing that is admitted by Ms. Norton is that leaving

accounting outcome to a defaulting agency does not make any

sense at all. I mean, what the court has done is say, ‘‘Give us an

accounting.’’ They are the ones who are on the defensive. They are

the ones that cannot come up with the accounting. How in the

world are they going to come up with an accounting that is fair and

reasonable and that takes into account the interests of the Indian

beneficiaries?

The people who have worked on this—Ernst and Young; and

Pricewaterhouse (which was an expert for the plaintiffs.) I have

worked with both of those on numerous bank fixes. They know how

to model. And what I mean by ‘‘model’’ is, when you have a 30-year

gap in records, you go back in and you see what somebody else did;

you stitch it together; and you come up with the best guess you

can. And that was the basis of beginnings of settlement talks that

the government wanted no part of.

The third thing is independence, which is related to conflicts of

interest. If you do not have independence from a DOI who is heavily conflicted, then you will never get this problem fixed.

Whether it is a receivership or a GSE, this problem has got to

come out of the DOI. Or you will put another few hundred million

dollars into absolutely nothing. It has got to come out.

I would suggest to you that there is a sub rosa agenda here by

Judge Lamberth. The judge is begging the Congress to offer a solution. He does not want to appoint a receiver. He has had enough

trouble with trying to correct the problems of the past in accounting, much less a receiver with respect to how to go forward. And

they are intimately linked, if you are a trust fixer. He is absolutely

begging the Congress to come in there and do something; which is

why I believe that some kind of GSE/receivership is the answer.

In fact, if you combine Ms. Cobell’s testimony with President

Makil’s testimony, you will see that there is an answer here that

Congress can implement to solve this problem.

But it will never be solved by the DOI. The judge is begging Congress to get into it. You need expertise. It does not have to last forever. It can be three to 5 years. But you have got to create an agency that has the money to hire the expertise and get the problem

done.

And at the same time, train BIA people whom you have set aside

as trust experts. At the end of the day, they will be able to be trust

experts in Indian land banks or in commercial banks. So it is not

leaving the BIA behind. And after that time, give it back to the

BIA, because it is fixed.

I have gone over my time, and I apologize.

[The prepared statement of Mr. Gray follows:]

Statement of Donald T. Gray, Nixon Peabody LLP,

San Francisco, California

My name is Donald Gray. I am a partner with the law firm of Nixon Peabody

LLP in San Francisco. For 26 years, I have specialized in matters concerning commercial trust and institutional fiduciaries. I appreciate the opportunity to testify beVerDate 11-MAY-2000 09:07 Sep 26, 2002 Jkt 000000 PO 00000 Frm 00155 Fmt 6633 Sfmt 6621 77526.TXT HRESOUR1 PsN: HRESOUR1
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fore you, and to bring what I hope is a helpful and fresh perspective to the Indian

Trust Fund reform effort.

For many years, my practice—and the practice of Nixon Peabody’s Trust and Financial Rehabilitation Group (the ‘‘Group’’)—has centered on working with institutional trustees and other professionals in establishing, administering, reconciling

and rehabilitating long-term complex trusts. My work has given me extensive exposure to active asset management, trust administration and operations, investment,

complex cash flow and risk control problems of trusts involving billions of dollars

of managed assets of every variety. Our Group, which I lead, has represented some

of the nation’s largest financial institutions in these matters. One example of our

work is our recent representation of a major money-center bank concerning trust

funds of over one thousand governmental agencies, and hundreds of millions of dollars of claims relating to unclaimed trust monies, recordkeeping, investment and

fees dating back many years. Simply put, our business is largely devoted to ‘‘fixing’’

broken trusts.

Although my experience is predominately in the commercial sphere, I have also

been involved in trusts that touch both the public and private sectors. For example,

in the mid–1980’s, I authored the series of master and subsidiary trust agreements

implementing the settlement between the United States Department of Commerce

and the Native American corporations representing the Pribilof Islands of Alaska.

Those trusts helped form the basis of the Islands’ new economy, as it emerged from

more than a century of U.S. Government oversight.

I was pleased to accept Chairman Hansen’s invitation to testify on trust funds

management by the Department of the Interior (DOI). I believe I bring a perspective

which, except for the significant efforts of Mr. Homan during his tenure as Special

Trustee, seems to be completely lacking in the current process. That is, the perspective of an independent person or group with significant private sector trust and financial institutions expertise. The key concepts here, and throughout my comments

are ‘‘independence’’ and ‘‘expertise.’’

INTRODUCTION

The problems facing Indian Trust Fund reform are admittedly multi-faceted. Understandably, there are micro-economic, institutional, political, cultural and emotional concerns involving the DOI and the American Indian people, which have and

will continue to manifest themselves throughout the process. I am not an expert on

Indian affairs, nor on the intricate workings of the governmental agencies with responsibilities in these areas. I am a trust lawyer. But after significant research, I

have reached the inescapable conclusion that the Indian Trust Fund reform effort

cries out for the kind of detached, independent expertise that exists among professional trust administrators, accountants, lawyers and other professionals in the private sector. These are persons who have spent most of their careers dealing with

trust problems comparable to those addressed in the GAO Report No. B–280950.

I reach this conclusion because the Indian Trust Fund problems are, first and

foremost, financial trust problems based on issues frequently encountered by private

sector trust institutions, such as inadequate policies and procedures and poorly

planned systems conversions resulting in ineffective recordkeeping. It appears to me

that, if the Indian Trust Fund problems are to be effectively dealt with, the resolution process needs to be removed from the vestiges of 150 years of U.S. Government/

American Indian relations, with solutions fashioned primarily through the prism of

historic structures and viewpoints. In my view, effective reforms will never be accomplished until the fiduciary and financial reporting aspects of Indian Trust Fund

management is separated from the DOI’s other role in overseeing the social and economic development and political concerns inherent in the U.S. Government/American Indian relationship. These latter concerns, which are an important aspect of

DOI’s mission, and the persons responsible for such matters, must, in my opinion,

be separated completely from the management of the Indian Trust Funds with the

latter function placed in the hands of persons with commercial and financial trust

expertise who can identify and implement the systems and resources essential to

real trust reform. I am convinced that without such independence and expertise, the

affected American Indian people will be deprived of the same high level of money

and asset-management services, as well as legal protections, that are available to

every citizen of the United States, who puts his or her financial affairs in the hands

of another.

THE GAO REPORT

The GAO extensively studied one aspect of the DOI’s High Level Implementation

Plan (HLP)—the planning and acquisition of a new trust asset and accounting management system (TAAMS). The GAO concluded that the DOI had not developed an

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overall information systems architecture for the entire business cycle of the trust

funds functions—including land ownership and appraisal, utilization and income

management, trust fund accounting, investment, custody and records control, and

disbursements. Without this architecture, there can be no assurances that isolated

systems purportedly providing one function will interact and interconnect properly

with systems developed for all other important trust functions. The GAO also found

that the DOI, by purchasing the TAAMS off-the-shelf software, had not done enough

to assure that all aspects of asset management data (involving complex oil and gas,

timber, crop, fishing and other asset pricing, leasing and money flow information)

would be accommodated.

The DOI acquired TAAMS, at a reported cost of $60 million, without regard to

the GAO’s warnings of the need for overall information systems architecture in correspondence with the DOI in 1997 concerning the Special Trustee’s Strategic Plan

issued in compliance with the American Indian Trust Fund Management Trust Reform Act of 1994 (‘‘1994 Act’’), and in its general guidelines on systems architecture

development issued in 1992. The DOI also seemed to ignore the highly integrated

approach for trust fund clean-up, rehabilitation and implementation recommended

by the Special Trustee in his April 1997 Strategic Plan issued in compliance with

the 1994 Act. Similarly, the DOI appears to have overlooked the specific directives

of that statute (the governing document for all trust reform) to accomplish all aspects of reform in an integrated, coordinated and properly interactive process. The

DOI also seems not to have heeded the advice of Macro International Inc., consultants to the Office of Special Trustee (OST), which found in 1997, after significant

research into the personnel and training deficiencies of DOI’s reform effort, that any

implementation of a technologies infrastructure to solve the manifold trust problems

first required the foundation of well thought-out practices and procedures relating

to overall integrated reforms that would assure a comprehensive output consistent

with commercial standards. In other words, without accurate data collection and

input, no software system, even the most sophisticated, can achieve the required objective of providing accurate financial reporting.

As an outside trust expert, I must question why the DOI staff would apparently

ignore the GAO, a highly qualified finance expert, former Special Trustee Homan,

outside consultants, and finally, the governing statute, by purchasing an off-theshelf system, at enormous expense, without any clear assurance that it will be

integratable with other key aspects of trust reform, or even that it will be able to

process all data variables inherent in the vast array of Indian Trust Fund assets.

One theory is that such an extraordinary action is a symptom of a larger problem.

The symptom, which I have seen in the commercial context, is the almost frantic

attempt, when existing procedures fail, to grasp for a quick fix, even if the fix merely creates the appearance of a solution.

As explained below, any asset management system must be extremely agile and

have the ability for constant modification to accommodate all the data variables inherent in the IIM assets. I believe it has been convincingly demonstrated that the

TAAMS system is a failure in this regard and there are serious questions as to the

compatibility of the system with other systems, or its consistency with an overall

architecture, which does not yet exist.

The larger, and much more fundamental problem, is that the DOI and its internal

Bureaus are encumbered by serious conflicts-of-interest, although not of their own

making. It is highly probable that such extreme conflicts-of-interest will inevitably

drive the DOI, its captive OST, and the Bureau of Indian Affairs (BIA) to actions

that are not directed solely at rehabilitating and correcting accounting for all trust

assets properly creditable to the Individual Indian Monies (IIM) accounts, the only

true goal of the 1994 Act. The very essence of trustee status and integrity, and of

fiduciary responsibility, is the absence of conflict-of-interest.

WHAT IS SYSTEMS ARCHITECTURE?

If I may be permitted a small digression, I suspect that some of the Committee

members may be a bit confused with the overly technical jargon used by the DOI,

the GAO and, admittedly, trust professionals like me. It may be helpful to decipher

what ‘‘systems architecture’’ means, at least to me.

When professional trust experts approach the original set-up or historic reconciliation of a complex income asset/money flow/investment trust, they first start with

a comprehensive listing of all possible data input, incorporated into a conceptual

diagram of how that data must flow through each and every phase of the trust accounting system (appraisal, leasing, accounts receivable, accounts payable, any special cash flow allocations like reserves, posting to proper accounts, investment accounting, account ownership records and disbursements). In addition, assessments

are made of the personnel expertise needed to keep track of, analyze and control

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all such information. Finally, there is a narrative conceptualization of how information/technology (i.e., computer) systems can facilitate the above processes as well as

an identification of so-called ‘‘inflection points,’’ where one technical system’s data

is downloaded to people for analysis and re-uploaded to other systems, or where two

technical systems can and should interface to transmit critical data. This process

must be substantially complete before any one automated system is specified or purchased.

Put another way, seasoned trust professionals in the commercial context first

apply simple common sense to the problem. This sounds obvious and easy, but it

is far from it. In a trust rehabilitation context, this foundational process involves

what we call in the industry ‘‘scrubbing.’’ That is, the architects of a workable system must roll up their sleeves, review thousands of potential data input variations

(past and future), conceptually design how trust data flows through a multi-phase

system, perform calculations on trust data and explain what people should do, and

what computer hardware and software should do, to implement the system.

This is some of the hardest work in professional trust management and requires

expertise in all facets of commercial trust accounting and, typically, legal interpretation of trust instruments and governing laws. First and foremost, administrators

must resist the sometimes inexorable urge to look at computer systems as panaceas

for any complex problem. Computer systems do not think. Hopefully, they are designed by people who do think, and who are intimately familiar with processes and

calculations which are being automated. They gain this knowledge by working intimately with such a multi-disciplinary trust team for countless hours. After

flowcharting the desired processes or calculations, they write or procure a software

program (or package of programs) embodying them. If the software is designed and

programmed well, a computer system can then perform such processes and calculations in bulk and at great speed.

Also, computer systems do not self-correct and expand themselves to create new

capabilities for handling information/data with which they were not designed to

cope. I have seen highly sophisticated trust and asset management commercial systems that do a splendid job with 90% of complex data or analysis, but utterly fail

to accommodate, or be modified to accommodate, 10% of the required data or analysis. Unfortunately, 90% correctness for millions or billions of dollars of managed

assets does not sit well with investors and other beneficiaries.

Although seemingly reasonable to the lay person, the former DOI Secretary’s comments concerning the selection of a ‘‘near enough’’ off-the-shelf asset management

system, by selecting a system developed not for the IIM trust reform, but for an

‘‘analog’’ problem, is a bit frightening to a trust professional.

As the GAO report indicates, instead of the ‘‘intricate and complex coordination

process’’ of all facets of the reform effort called for by the former Special Trustee

in his Strategic Plan, the DOI’s HLP leaves the IIM effort with a disjointed, potentially non-integratable mish mash of project initiatives, and the occasional ‘‘big

splash’’ computer system for one element of the task that may work only for highly

selective data. But the current trust reform effort, as evidenced by the DOI’s HLP,

contains features far more troublesome than a potential functionally deficient, or

non-integratable TAAMS product.

INDEPENDENCE, EXPERTISE AND AN INTEGRATED APPROACH

Although both the HLP and the Special Trustee’s Strategic Plan admittedly contain similar, and undeniably necessary, tasks essential to account clean-up, reform

and new systems building (including data clean-up, records retention and proper

custody, workable trust accounting and asset management procedures, investment,

accounts and land title, appraisal and probate clean-up), these are no more than

static descriptions of jobs to be performed on a coordinated basis. What is of ultimate importance is the philosophy, mission goal and the resulting and overriding

‘‘how’’ to attack all these deficient areas. Respectfully, while the former Secretary

plucked out independent projects that are undeniably important to trust reform, he

specifically and dramatically gutted the Special Trustee’s Strategic Plan of its two

essential cornerstones for such an overriding mission and goal—independence and

expertise. Without these elements, which create both a reform environment and give

it its essential tools, meaningful trust reform will not occur.

The Special Trustee’s Strategic Plan, in its first two pages, could not have been

clearer on this all-important ‘‘how.’’ First, with some courage, Mr. Homan called for

a completely independent and neutral body, a Government Sponsored Enterprise

(GSE), to take over the trust rehabilitation process, under the supervision of government agencies expert in commercial finance and modern trust procedures. He continually cites the ongoing conflict within the DOI in failing to separate its special

trust reform fiduciary goals from its general responsibilities in education, housing,

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law enforcement and a multitude of other welfare programs and other American

Indian services provided by the DOI and its Bureaus. In short, Mr. Homan concluded that, in the competition for the limited funds appropriated to DOI, when a

choice must be made between a department’s general responsibilities and trust fund

reform, the latter program would inevitably suffer.

What is also obvious from the HLP’s allocation of responsibility for its 13-category, piecemeal approach to reform, is that there is at least an unconscious attempt

to employ the other internal Bureaus of the DOI, especially the BIA, in these processes, regardless of a proven lack of expertise, since only two of the projects are reserved to the OST. This foreshadows two very negative results. First, it displays a

lack of appreciation for the expertise, and long-term training required for trust rehabilitation and administration, and suggests that involving these internal DOI Bureaus is of greater importance than solving the trust fund problems. The DOI’s loyalty to one of its Bureaus, the BIA, is laudable, but completely inappropriate in the

IIM trust reform process. Second, the misguided piecemeal methodology of the HLP

permits agency employees, no matter how much they may wish to act in good faith,

to attempt to solve the trust fund problems by purchasing an expensive new software system, creating the impression that by do doing they are attempting to obscure past mistakes with an easy, but ineffective fix. This is not intended to be an

indictment of such personnel, it is simply a recognition that human beings, no matter how fair-minded and well-intentioned, should never be asked single-handedly, in

isolation and without expert advice to rehabilitate a process which has gone seriously awry during their historic involvement in the process.

For a commercial trust practitioner, deeply involved in the activities of bank trust

departments, and a veteran of dealing with the Office of the Comptroller of the Currency (OCC), and other federal agencies, state banking authorities, accountants and

rating agencies in connection with audits of trust and fiscal agency procedures, the

equally apparent inability of the DOI staff to appreciate the level of expertise required for the rehabilitation and modernization of a trust problem as vast as the

IIM accounts issues is surprising to me. I cannot put this any more clearly than

former Special Trustee Homan did in his Strategic Plan, and I fully concur with his

conclusions. Regarding the lack of trust managerial resources within the DOI, and

the BIA specifically, Mr. Homan states:

Managers and staff of the BIA have virtually no effective knowledge or

practical experience with the type of trust management policies, procedures,

systems and best practices which are so effective, efficient and prevalent in

private sector trust departments and companies. The BIA area and field office managers do not have the background, the training, the experience, the

financial and trust qualifications and skills, necessary to manage the

Federal Government’s trust management activities according to the exacting fiduciary standards required in today’s modern trust environment.

Thus, and through no fault of their own, and even assuming financial resources were made available, they are not capable of managing effectively

the Federal Government’s trust management activities on a par with that

provided by private sector institutions to their customers. . .—[emphasis

added]

If your or my bank or trust company were to handle our assets with completely

unqualified personnel, in a manner that can be described metaphorically as a ‘‘shoe

box’’ approach to accounting, we would be in court, or at the steps of the OCC or

other appropriate regulator the next morning. That was one of the great lessons of

the financial institution crises of the 1980’s.

The independent contractors, Macro International Inc., Larson Slade Associates,

LLC and Arrowhead Technologies, in cooperation with project resource firms (such

as Riggs Bank, NationsBank and State Street Bank and Trust) echoed Mr. Homan’s

conclusions after hundreds of DOI personnel interviews. Their goal was, in part, to

identify any gaps between the current Indian trust systems and trust departments

in the commercial sector. These consultants concluded in 1997 that the accepted

legal and procedural standards of fiduciary responsibility to manage trust assets

and accurately report on their status to beneficiaries were not being met. Without

properly trained personnel, and without a ‘‘single-point management responsibility’’

like a GSE, the current system falls far short of commercial trust standards. What

is needed, these consultants found, is a single trust organization, with complete control over both resource and financial assets utilizing tried and true commercial applications. Finally, they concluded that all of these tasks will fail to improve the

Indian Trust Fund reform process unless an effective and efficient staff is able to

carry out the tasks.

A quick look at previous DOI budgets demonstrates with clarity the Agency’s historic opinion of these expert findings. Although these numbers have since been inVerDate 11-MAY-2000 09:07 Sep 26, 2002 Jkt 000000 PO 00000 Frm 00159 Fmt 6633 Sfmt 6621 77526.TXT HRESOUR1 PsN: HRESOUR1
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flated, the previous Administration’s HLP, for combined fiscal years 1999 and 2000,

called for a budget for computer software ‘‘systems’’ of $51.1 million. For the same

years, this budget for ‘‘training’’ is a meager $7 million, and even that relates solely

to on-the-job training for BIA officials (which the consultants found generally ineffective) rather than for the hiring of experienced commercial trust administrative

staff. So much for expertise.

With the growing complexity of investment vehicles, asset-backed securitizations

and their correspondingly complex cash flows (not unlike the IIM accounts), modern

trust administration requires a level of financial and technical expertise that was

unheard of twenty years ago. What once required a few accounting courses and onthe-job bond payment training, now frequently requires advanced degrees in money

management, fiduciary standards and laws, complex cash flow analysis techniques

(called ‘‘analytics’’ or ‘‘modeling’’), dexterity on PC-based spreadsheet and database

systems, a complete understanding of permitted investments, overnight ‘‘float’’ investments, special cash accounting systems and the use of complex computer programs. Even with this training, and with the constant support of expert supervisors,

tax specialists, accountants and attorneys, it takes years to develop the intuitive expertise to perform proper trust accounting. To my knowledge, not one person from

the commercial sector with such a background is presently on the staff of the DOI.

Again, I must ask why the DOI has completely ignored the critical need for such

independence (i.e., lack of conflicts-of-interest) and expertise. One might guess that

this answer would be the very ‘‘special’’ nature of U.S. Government/American Indian

relations, and the ultra-sensitivity the BIA and the other DOI Bureaus bring to this

special problem. But from the outside this rather looks more than suspiciously like

institutional self-perpetuation, obfuscation of past mistakes, and at worst, the kind

of paternalism that should have gone with the wind many years ago.

A PROFESSIONAL TRUST APPROACH

How would a team of commercial trust experts approach a problem like IIM reform, and how does the DOI’s course of action compare to such a commercial approach?

Although admittedly a long time in the making, commercial trust entities have

tackled efforts just as daunting as the IIM problem, especially when they have inherited active asset trusts which have been mismanaged.

An overview of a typical step-by-step approach to a major ‘‘fiduciary fix’’ of a private sector trust organization follows:

Step 1. Assemble a Team.

The first step is to assemble a team consisting of highly experienced trust professionals, accountants who specialize in detail analysis of trust accounts, cash flows,

investments and control procedures, legal experts knowledgeable about the governing law, documents and the practical general industry practices, and computer

systems analysts, specifically trained to translate conceptual architecture developed

by the other team members into software systems requirements. We are not talking

about hundreds or even dozens of people. Although they may all require expert staff

assistance, at the core, we are talking about four to six trained professionals. I and

my colleagues in the industry have worked successfully with many such teams.

Step 2. Assure the Project Team’s Independence.

The next step is to establish the absolute independence of the project team. As

I have mentioned to many interested people on the Hill during the past three years,

establishing independence for the team responsible for either fixing a broken trust,

or creating an entirely new trust system for a complex array of assets, money flows

and beneficiary variables, is essential. That team would initially meet with personnel historically involved in the trust, or trust asset process. Those people will be

separated and protected in the trust fix process. By this I mean that there will be

the immediate recognition that those involved in a historic process where mistakes

have been made, whether or not they personally have made them, are exactly the

wrong people, at least at the initial phases, to be actively engaged in rehabilitation

or designing replacement systems. The natural urge of all of us is to mitigate, gloss

over and in extreme cases, hide past mistakes, and that urge can frequently take

precedence over sound reform efforts. And yet these people, in this case DOI personnel, must be protected. Their institutional historic knowledge of problems, where

data is to be found, what external pressures have been brought to bear at the expense of proper functioning, and a multitude of other essential information, resides

in the memories of these people. If they are told that they will not be fired or otherwise punished for human errors and mistakes (short of criminal self-dealing, which

I doubt is a serious concern here), they can be of tremendous help. But if they are

left alone to fashion all reforms, they are being required to do the impossible—proVerDate 11-MAY-2000 09:07 Sep 26, 2002 Jkt 000000 PO 00000 Frm 00160 Fmt 6633 Sfmt 6621 77526.TXT HRESOUR1 PsN: HRESOUR1
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tect themselves and their families while being asked to single-mindedly protect the

interest of IIM beneficiaries. Again, all efforts, at all levels, must be employed to

eliminate such fatal conflicts-of-interest.

Step 3. Establish Document Custody and Control.

The next step of the team is to establish the strictest document custody and security measures possible. Every piece of historic data that is contaminated or disappears diminishes the integrity of any reconstruction effort, and eliminates data

variables, and potential problems that may likely recur, and therefore should be collected, solved and input into a system that can accommodate all data variables and

similar problems in the future. Past reports by the Department of Justice and the

Special Master in the class action litigation regarding BIA document destruction

and general substandard condition of trust record maintenance make this step an

obvious priority.

Step 4. Identify Data Elements.

Next, the data elements relevant to all phases of the trust business cycle must

be identified, whether relating to land records/ownership, asset management or

trust accounting functions of proper crediting, investment and disbursement. Further, an analysis of how that data has, and may change over time is critical. Systems, especially automated systems, do not usually adapt well to data changes. Significant experience, knowledge and creativity in the ever-changing nature of land

resource exploitation, investment parameters and ownership variables are required

at this stage.

Step 5. Develop a Schematic Diagram.

Then comes the hardest part, the development of a narrative, logical but highly

complex non-automated schematic diagram (which could cover the walls of this

hearing room), demonstrating how all collected data must move, interface, inter-relate and be re-analyzed, recalculated and otherwise re-assessed to assure that all

functions of a highly integrated lease-to-beneficiary disbursement system will, at

least conceptually, work. For lack of a better term, this is the conceptual model, or

overall architecture of any complex trust problem. In the end, if an experienced commercial trust administrator, with the aid of only an HP or a simple PC-based

spreadsheet system, cannot track financial data from lease billing to beneficiary disbursement, throughout all the intervening trust business functions, then all the

elaborate personnel task forces and isolated pieces of systems software, no matter

how sophisticated, will be worthless. All the functional elements of the business

cycle must be analyzed simultaneously and interactively at this conceptual architecture phase, or hundreds of millions of dollars in ‘‘magical fix’’ systems will be purchased, and ultimately wasted.

Step 6. Design Architecture.

Next, experienced trust systems analysts, capable of fully comprehending the conceptual architecture, and fully knowledgeable about the universe of commercial offthe-shelf (COTS) trust accounting systems and custom applications providers, can

begin to design an interactive systems architecture to accommodate all functions.

This does not mean such an expert independently develops separate, or fully integrated software components. What is does emphatically mean is that one person,

or a group of extraordinary trained people, is fully cognizant of both the overall

goals and the intricate conceptual plan based on actual data and the universe of

automated solutions that might be brought to bear to facilitate the conceptual design. Then, and only then, are requirements developed, and systems pre-tested and

finally purchased, and then only with extensive warranties, retrofitting and modification undertakings and extensive service, support and back-up packages.

Step 7. Recruit Permanent Trust Administration Staff.

Automated systems are only as good as data input performed by skilled trust administrators. Further, if multiple automated systems are used, such administrators

must constantly monitor whether the systems are correctly interfacing and exchanging information, since this is an area of frequent difficulty given the ever-expanding

universe of data variables and money calculations which flow through those systems. This requires knowledge of the basic functions these systems perform. Data

variables, and sometimes simple automated systems breakdowns (or ‘‘crashes’’), or

failures due to viruses, require trust administrators to constantly test the validity

of systems calculations, usually by ‘‘shadow’’ calculations mimicking the essential

tasks of any automated systems, performed on single stand-alone spreadsheet PC

systems. This is painstaking work, and requires significant experience.

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I have read the Special Trustee’s Strategic Plan, the HLP, the GAO report referred to above and countless preceding GAO reports, hundreds of pages of court

transcripts and Congressional testimony, outside consultants reports, and press releases and studies of the DOI and its internal Bureaus. And yet, I am far from an

expert on all IIM reforms to date. However, I respectfully ask the DOI, the former

Special Trustee, the Advisory Board established by the 1994 Act, the members of

this Committee—what kind of a report card would you give to the DOI during the

past few years based upon the above model of a well thought-out, rehabilitation approach?

The following hypothetical, admittedly from a different but similar context, may

help to put the current state of affairs in perspective. After growing up through the

New York City public school system in the 1950’s and 1960’s, this hypothetical has

meaning to me, and hopefully to others present.

Suppose a blue-ribbon group of local merchants, professionals and workers in an

inner-city environment decided to establish a multi-faceted urban redevelopment

project, aimed at dramatically improving the lives of the low income majority living

in the area. The group engages the help of health professionals to set up clinics,

educational professionals to establish remedial programs and vocational education

to augment a perpetually underfunded public school system, artists and musicians

to establish creative centers as counters to drugs and crime and off-duty police to

assure an atmosphere of security rather than fear. Assume the group also sets out

to develop an investment and asset management program to help the populace invest their hard-earned savings, budget their household funds to maximize the best

life style, and to manage income-producing property that belongs to individuals or

civic associations. Suppose this group over time, through successes, attracted local,

state, federal and private non-profit funding to facilitate its programs.

Now, assume five solid years of demonstrable success. The streets are safer, drug

use among the young is down, educational achievement and job retention is higher,

and health benefits have reached homes never reached before. But also assume that

the organizing group, simply due to lack of time and resources, neglected the asset

management and investment functions with respect to potentially millions of dollars

of poor people’s money. Records were literally kept in shoe boxes, or lost, pending

the engagement of financial professionals, or deposits in regulated financial institutions, that the group always intended to do, or to make, but simply failed to do

given the enormity of the task it had undertaken. The result is millions of dollars

of unrecoverable losses for citizens, and no adequate program in-place to manage

the assets or invest the money, assuming the group even knows or can locate current balances.

As a citizen, or a state regulator, what would you do? Would you, out of anger

and frustration, seek to punish the individuals who had formed the redevelopment

project, or end the project itself? I doubt it. But would any sane person, in their

wildest dreams, allow the control persons, who are now heavily conflicted and who

lack any financial expertise, to continue to manage the assets and money out of the

shoe boxes, and to spend fabulous amounts of other people’s money to buy computer

systems, with grand but empty promises to solve all problems? I do not believe so.

Any responsible person would take what money they could find and deposit it in

a bank, and transfer what assets they could find to a bank trust department. Then,

under proper regulatory guidance, true experts would be employed to reconstruct

proper balances, probably on a modeled test case basis given the paucity of records,

and true reform would begin.

Why should the American Indian beneficiaries of the IIM accounts be treated with

any less reasonableness and fairness?

CONCLUSIONS AND RECOMMENDATIONS

The leaders of the DOI and the BIA, and the rank and file of those entities in

Washington and in the field, no matter how well-intentioned, are seriously conflicted

in the process of Indian Trust Fund Reform. If fiduciary integrity means anything,

it means the absence of such conflicts-of-interest posed by concerns of job security,

political survival, institutional longevity and self-protection against blame for historic errors. People of good faith can argue about the meaning of the prudent investor rule, or other high fiduciary standards of care. But after a professional lifetime

of attempting to reconcile textbook standards of care for trustees with real work capabilities of human beings like you and me, I (along with many courts, bank regulators and the Federal Securities Acts) have concluded that professional fiduciaries

must, at the very minimum, be trained in state-of-the-art money management, completely free from conflicts-of-interest, and must treat the assets of others in their

care as though they were the personal assets of the trustee, his or her spouse, and

children. When the former Secretary of the Interior chose to backburner Mr.

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Homan’s concerns about trust standards of care, along with the Special Trustee’s concerns about independence and expert staffing, in the HLP, it became clear that

the only governing standard would simply be the best the DOI/BIA could do, hampered as they are by a void of necessary expertise and in the face of serious conflicts. This is not a fiduciary standard. This is capitulation to the status quo, with

a correct accounting for the IIM accounts at best only a secondary or tertiary concern. I strongly believe that the only viable answer to the present trust reform problems is the creation of a neutral body, independent of the DOI, with both public and

private support and input. The GSE suggested by the former Special Trustee

Homan in his Strategic Plan is one such vehicle. The Indian Trust Management Reform Authority recommended by the Chairman of the Intertribal Monitoring Association on Indian Trust Funds could also serve such a purpose.

Ideally, such an independent body would be sponsored by, or have some connection with a banking or other financially sophisticated federal regulatory or quasigovernmental body. Obvious candidates would include the OCC or, perhaps, one of

the federally sponsored entities, such as Ginnie Mae or Freddie Mac (or its related

entity, the Federal Housing Finance Board), which are intimately familiar with complex active asset/cash flow trusts. It is also essential, in my mind, that oversight

be retained by this Committee as well as the Senate Committees on Indian Affairs

and the Energy and National Resources Committee.

The structure of the neutral body need not be complex. In its simplest form, it

would be administered by a financially sophisticated person with experience dealing

with inter-governmental agency issues. In addition to government financial input,

such an entity must have the ability to engage trust experts from the private sector,

representing the disciplines referred to above in connection with a proper commercial approach to solving the IIM trust problems. It is my belief that such an entity

would be able to obtain the services of highly qualified trust administrators, accountants, lawyers and systems experts who would be willing to work on this problem. Believe it or not, there are many people in the private sector who understand

how important this problem is, and would be willing to devote extraordinary effort

to help forge a real solution.

The budget for such an enterprise could be a fraction of the DOI’s expected Indian

Trust Fund reform requests. Its mission would be to develop the critical conceptual

and systems architecture described above, and called for by the GAO, in order to

assure that future spending is actually aimed at viable solutions. No input would

be ignored. The cognizant Congressional Committees, the GAO and the DOI/BIA

would be consulted on an ongoing basis. The entity should be task specific, and

should have a sunset timeline coordinated with trust reform progress, although

some viable means of continuing trust supervision, or progressive privatization,

would be required. Such a small, well-controlled, highly dedicated and expert group,

if given the cooperation of the DOI, could not only accelerate implementation of a

properly integrated trust function for the entire IIM business cycle, but would also

go a long way to relieve the unhealthy pressure that has built up around the historic approach to this problem.

A few years ago, the head of the BIA cited a concern about potential independence

for the IIM trust function that is very telling. He voiced a serious concern that

wresting this problem from the BIA might spell the end of that Bureau as a viable

governmental body. Although his concern has nothing to do with the Trust Reform

Act’s primary purpose of assuring IIM trust reform for the Indian beneficiaries, one

can certainly be sympathetic with a concern that hundreds of people, many of whom

are American Indians, may not have viable work in the future. But I would respectfully suggest that the kind of neutral body I and others are recommending might

present an opportunity of a lifetime for many American Indians, within and outside

the BIA. With the tremendous growth of retirement assets and the use of complex

trust structures as investment vehicles, this country needs more qualified trust administrators. Given the increasingly high qualifications required for such professionals in the private sector, many move on quickly to other financial positions, such

as investment banking. The staff of any neutral body would constantly be interfacing with many of the BIA staff who are currently working on the problem, and

who would continue to do so in cooperation with the neutral body. The opportunities

for real, commercial level trust administration training is obvious. Whether an affected BIA staff person chose to use such training in government service, or in working with Indian-owned independent banks or any independent bank or trust company, his or her prospects for the future could be far brighter than continuing to

work on any single-purpose project.

The most important observation I can make, as a dispassionate outside professional, is for all major players in this process—including the DOI, the American

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Indian groups, the U.S. Congress and the Federal courts, to take advantage of the

opportunities inherent in the present state of affairs.

This problem has been a long time in the making. The present staff of the DOI

did not make the problem, and, in fact, have made some valiant efforts to solve it.

But the DOI has already lost control of the process. This is because the historical

accounting, reconstruction and rehabilitation of the IIM accounts is currently in the

hands of the Federal courts, and will be played out in some kind of court-mandated

accounting, a receivership or a consensual settlement process, in each case requiring

outside trust professionals to determine how history is to be reasonably reconstructed. I can state with some assurance that in a trust problem of this magnitude,

the validity of the systems designed to take care of future trust and asset accounting will depend in large part on what is learned in that historic accounting and reconstruction process, even if that process is accomplished largely on a sample modeling basis. Simply put, most if not all of the variables involved in complex asset

leasing and accounting, in beneficiary succession and in custody problems have already presented themselves in the protracted history of the IIM accounts. Those

data variables are the building blocks for any future systems or procedural architecture. The intricacies of leasing potato land in Idaho, as opposed to oil and gas deposits in Oklahoma, and what has gone wrong in the respective accounts payable/accounts receivable histories of such leasing, is vital information for any new asset

management system.

What I am suggesting is that the two processes—historic accounting/reconstruction and future systems development are irrevocably linked. The experts of any

independent body charged with future asset and trust accounting design, unless

they are to duplicate effort, must talk with the experts involved in the reconstruction process. Ideally, at some point those processes should be combined. But the

point is that one portion of the ‘‘fix’’ process, historical accounting, is already in the

hands of a neutral body, the court. It makes little sense, then, since both aspects

of the fix must be irrevocably linked, to leave the largely derivative portion, new

systems, to a governmental agency, steeped in the knowledge of Indian welfare, but

devoid of any trust expertise and heavily conflicted. This makes even less sense

since the entity currently working on the future systems fix, the DOI, is in a legally

adversarial posture in the current Federal court proceedings where the historical fix

is being played out.

When the recommended independent body is formed, serious consideration should

be given to combining any court-mandated accounting or receivership reconstruction

effort with new systems development tasks of that neutral body.

Politics and institutional self-preservation aside, it is time for the DOI to let go,

to the extent it has not already been forced to do so by the pending class action

litigation.

I would also hope that all those involved, given the nature of the interests of the

American Indian beneficiaries at stake, would take a strictly non-partisan approach

to the trust reform process.

Finally, and briefly, I would like to remark on past published statements reportedly made by DOI officials in defense of their various reform efforts. Purported

statements branding constructive critics of the DOI’s efforts as ‘‘anti–Indian’’ are very regrettable. So are suggestions that anyone opposing the DOI/BIA reform effort, and the proposed additional funding for that process, are simply motivated by

a desire to keep money from the Indians.

As a seasoned business lawyer, I am unfortunately inured to even to this kind

of name calling. People say unfortunate things when they are on the defensive. If

these labels are put on me because of my testimony, so be it.

EXHIBIT A

TESTIMONY OF DONALD T. GRAY BEFORE THE SENATE COMMITTEE ON INDIAN AFFAIRS

REGARDING INDIAN TRUST FUND MANAGEMENT

FEBRUARY 26, 2002

My name is Donald Gray. I have testified as an expert previously before this Committee, and I appreciate the opportunity to do so again. I have also recently testified

before the House Resources Committee on the same topic. I bring what I hope is

a helpful and fresh independent perspective to the Indian Trust reform effort at a

time when I believe real change is possible.

I am a partner in the law firm of Nixon Peabody LLP. For 26 years I have specialized in working with institutional trustees and other financial institutions in establishing, administering, reconciling and rehabilitating long-term complex trusts and

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other money flow arrangements involving billions of dollars of managed assets. Simply put, my business is largely devoted to ‘‘fixing’’ broken trusts in the private sector. The clients of Nixon Peabody’s Trust and Financial Rehabilitation Group, which

I helped found, include some of the largest money-center banks in the world. I am

also an international logistics and shipping expert, and in this area am well-known

to the Alaska and Hawaii Congressional delegations as well as all government agencies with jurisdiction in the area.

When I testified previously in July of 1999, the atmosphere for potential change

was very different, and not nearly as positive as I believe it is today. Yet, because

there has been so little progress in the intervening time on trust reform, much of

my prior testimony, especially concerning the precise methods and architecture for

true trust rehabilitation in the IIM accounts, remains relevant. Therefore I re-submit that testimony, with minor updating revisions, as Exhibit A hereto.

In short, after following this process for many years and reading all relevant DOI,

GAO, outside expert reports and court transcripts, and while I do not claim any

panacea for one of this nation’s most vexing problems, I believe for the first time

there is a light in the forest. There is hope for a truly viable IIM trust fix.

I summarize the reasons for that belief, and the organizational methodology I believe to be essential to the trust fix below:

1. The Need for an Independent Body. What has been missing since the passage

of the American Indian Trust Fund Management Reform Act of 1994 is the essential

trust fix expertise within the DOI, with the exception of Mr. Homan, whose efforts

were consistently thwarted by DOI officials. The other irreconcilable obstacles to

trust reform have been the flagrant conflicts-of- interest within the BIA in attempting to fix a broken system it has helped to perpetuate. My conclusion, and the only

conclusion I believe a private sector expert can come to, is that the fix must be

under the auspicious of a body independent of the DOI and the BIA. The issues of

lack of expertise, crippling conflicts-of- interest and the need for an independent

body for the required trust fix are discussed in detail in Exhibit A. My suggestions

for the form such an independent body should take—a time- limited, governmentsponsored entity (‘‘GSE’’)—and its Congressional mandate, are set forth below.

2. The Continuing Role of the DOI and the BIA. Before continuing to outline an

alternative structure, I want to be clear about the positive role the DOI and the BIA

can play in this process. With the exception of the highest-ranking DOI officials of

the previous Administration, I do not believe any DOI or BIA employee has deliberately bogged down the process, obfuscated with respect to critical records, or intentionally wasted vast sums on computer systems that were ill-conceived and did

not work. There is still a very important job for these BIA officials and employees

to do.

The key here is to separate the trust ‘‘fix’’ problem from the day-to-day administration of trust funds. The BIA still needs to perform the basic collection and trust

allocation and payment functions as best they can, while trust fixes are developed

by the independent body and made a part of the existing trust function over time.

However, the BIA employees can no longer be put in the impossible position of attempting to fix a system they and their parents have helped to create and perpetuate, especially since they lack the specific expertise to effect the fix.

In addition to day-to-day administration, such BIA employees would be available

to the independent body suggested below, since they possess valuable information

about past and present asset management and trust payment procedures. Their

input is critical, especially in a case like this where some records have been lost

or destroyed. As fixes are developed by the independent body, these employees

would be essential in putting them into effect. The law changes required to establish

the independent body must permit the full and open participation of these employees in the fix process, as mandated by the independent body, and must protect these

employees from internal retribution and/or legal actions for good faith mistakes

made in the past.

The interaction of the independent body and its professionals with the BIA trust

employees in the fix process also offers a unique training opportunity for the BIA

personnel involved. The BIA would learn the new system and proper trust functions

from the best experts in the field. Such training can be used by the BIA employees

in the years to come within the BIA, in connection with the IIM accounts or other

similar trust functions in which the BIA is involved, or in the private sector, as they

choose.

3. Inter–Branch Governmental Cooperation. The reason I believe there is hope for

a true trust fix now has to do with what I perceive to be the posture of the major

participants at this point. Most importantly, both houses of Congress appear willing

to take dramatic action on a non-partisan basis. That did not appear to be the case

three years ago. Also, despite the characterization of the current DOI officials in the

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Cobell litigation and the press, it does not appear to me that they (unlike Mr. Babbitt and his top aides) are bent on obstruction, nor dead-set against external, independent assistance in reaching a trust fix. Respectfully, Secretary Norton’s internal

reorganization plan, although well- intentioned, will not work, and pouring another

$200 million into that reorganization rather than a fix by real experts is a very

great mistake. This is the only sound conclusion that I can reach after watching the

waste of hundreds of millions of dollars over the past eight years on internal reorganization and inept systems, and assessing the lack of proper DOI expertise that Secretary Norton apparently admitted recently in her testimony in the Cobell litigation.

Again, without the proper expertise, lack of conflicts-of-interest, and independence,

an internal reorganization will do nothing. But the DOI’s participation in an independent body structure, like the one outlined below, through Mr. McCaleb or another reform- minded DOI official, is essential.

Finally, there is the court. I cannot imagine that anyone would take the position

that the heroic efforts of Ms. Cobell, and the tenacity of Judge Lamberth and his

assistants, have not been an essential ingredient in shining light on, and narrowing

the issues concerning the historic trust defalcations. But, as a purely practical matter, a court-appointed receiver does not appear to be the best answer as to future

trust reform. For instance, how will that receiver be paid? How will proper trust

fix experts be made available to the receiver? Will that receiver obtain the proper,

timely and essential input and cooperation of the BIA officials and employees currently engaged in the trust administration function? As to these matters, I would

hope the court and Congress would both seek to find a way to cooperate on the establishment of an independent body charged with that fix.

4. The Independent Body. I believe the best vehicle for effecting a viable trust fix

is the creation of a GSE, with a mandate and structure as outlined below. However,

except for the independence of this entity, which is essential, there is nothing magic

about any part of the following structure. I would invite the Committee, and all interested parties, to suggest structural alternatives if they can be shown to better

reach a trust fix in a timely fashion.

a. The GSE would have three levels of participants. This structure would be very

lean, and would leverage on outside professionals on an ‘‘as- needed’’ basis.

At the top, all trust fix policies and procedures would be the ultimate responsibility of a ‘‘blue ribbon’’ board of Commissioners drawn from specific public and private sector sources. At least two Commissioners would ideally be acting officials in

federal financial institution agencies or bodies, specifically a Governor of the Federal

Reserve, a senior official of the Office of Comptroller of the Currency or the Federal

Deposit Insurance Corporation. These agencies have a great deal of trust and related financial expertise, as well as regulatory oversight responsibility for the private banking sector. There should also be a representative of the IIM beneficiaries

who is viewed in Indian County as financially sophisticated and completely trustworthy. In addition, given the extent of cooperation required between the GSE and

the DOI (including the Special Trustee and the BIA), the board should include a

high-ranking DOI official acceptable to the other Commissioners and Indian County.

The Assistant Secretary for Indian Affairs would, in my judgment, be a likely candidate for this position. Finally, if the mandate of the GSE were broad enough to

include Tribal trust issues, a representative approved by the various Tribal organizations should be a Commissioner.

The Commissioners would meet regularly, and should be paid for their time and

expenses, but with recognition that they are serving as a very active board of directors, who have primary jobs and responsibility elsewhere. The Commissioners would

have the direct and continuing oversight of the Senate Committee on Indian Affairs

and the House Resources Committee.

The next level of the GSE would be an Executive Director (‘‘ED’’), with as lean

a support staff as possible. This person should have ‘‘hands on’’ trust or other financial fix expertise, such as a former RTC official. The ED would manage professionals, be the liaison between such professionals and the Commissioners on all aspects of reform (e.g., document and records custody and control, identifying and

maintaining critical data elements, developing a schematic diagram and design architecture for all aspects of the assets/trust systems, developing and implementing

a systems design), be responsible for liaison with BIA trust administrators, and be

a ‘‘plain language’’ interpreter for the oversight committees on what will be at times

complex procedures employed by the professionals.

The last element would be trust professionals who work constantly in detailed

trust accounting and reconciliation, cash flows, investments, control procedures,

computer system analysts and implementators. This would include legal trust fix experts, trust administrators, forensic accountants and computer specialists, all of

whom have worked on trust reformation and fixes in the past. It would be imposVerDate 11-MAY-2000 09:07 Sep 26, 2002 Jkt 000000 PO 00000 Frm 00166 Fmt 6633 Sfmt 6621 77526.TXT HRESOUR1 PsN: HRESOUR1
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sible, and economically prohibitive, to have all such specialists on staff. They may,

for periods, be used intensively, but only on an ‘‘as-needed’’ basis. Ideally, there

would be a lead professional who would help the ED choose and coordinate the efforts of all other professionals to avoid overlap and promote efficiency.

b. The mandate of the GSE would be to design and implement a viable trust accounting and reporting system inclusive of the entire cycle, from resource leasing

to IMM account-holder payments. The GSE would have authority to implement new

systems and procedures, if possible on a progressive, partial basis. The GSE would

have authority over BIA trust administrators for implementing the fixes and training BIA employees and officials as to proper implementation and maintenance.

c. The GSE would be time-limited. It is suggested that a initial life of five years

would be adequate, with authority in Congress to extend this sunset provision, if

necessary.

d. Ideally, the GSE would be able to coordinate its efforts with any trust professionals used by the Cobell court, or by the parties litigant therein, in accomplishing

an accounting or reaching a settlement on past trust practices. As explained in Exhibit A, reconciliations, modeling and findings regarding past practice and mistakes

are usually part and parcel of any future trust fix because the latter gleans so much

information on proper (and improper) trust accounting from the former. Also, having

worked with the plaintiffs’ accounting professional on other significant large, historic trust and similar financial fixes, their input, if possible, into designing a suitable program for the future is almost indispensable.

In conclusion, it is ironic and telling that just such an GSE was recommended by

Special Trustee Homan in his report (contested by then DOI officials) after several

years of frustration in attempting to accomplish an IIM trust fix within the DOI.

Mr. HAYWORTH. Mr. Gray, we thank you for that testimony. And

as is the case with all of the testimony, it leads to some questions.

Amplify a bit what you were saying, Mr. Gray. You believe there

should be created a governmental agency. This could not be, for example, farmed out to a private entity, in your mind? This needs to

be a new type of agency, but it has to be outside of the Department

of the Interior?

Mr. GRAY. No, I think total privatization has its own problems,

in terms of oversight. I think that Congress has the responsibility,

and the ability, to oversee some kind of limited commission or GSE.

And I think Elouise was the one who actually told you who the

members of that ought to be.

The members ought to be representative of the Indian community, definitely; forensic trust experts; land management experts;

systems analysts; architectural analysts. I have watched this thing

for 10 years, and I have watched them pour in over $500 million

into mainly computer software. No one has ever come up with the

conceptual—not computer—conceptual architecture of what are all

of the tasks, from land leasing, to the check to the beneficiary.

What are they? Just write them on the wall. No one has ever done

it.

They do not even know what conceptual architecture is. And

until they know that, it is not a panacea for this problem. This

problem has at least 80 different parts to it. It could not work. And

what I got back from a very sympathetic Appropriations Committee

about 3 years ago was, we have no choice. If we do not appropriate

the money, we will be called anti-Indian.

Mr. HAYWORTH. If it were up to you, Mr. Gray, in your mind, the

numbers of people needed, the cost, any ballpark figures?

Mr. GRAY. Yes, I do. I do. I mean, Arthur Andersen, when they

first tackled this problem in the late 1980’s, they came up with,

and this is fairly typical of Arthur Andersen. I am not just picking

on them because they are down, but it is somewhat typical in my

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experience. They were paid 20-something million dollars to say that

we really need another $500 million to solve the problem, and I do

not think that is true.

I do think that it would take—it would take the $150 million

that will be, and I promise you it will be, appropriated this year

simply to set up this, what do they call it, ‘‘bite em.’’ That is a

great acronym.

[Laughter.]

Mr. GRAY. To set that up, to defend the lawsuit that they have

already lost 20 times and to do whatever else they are going to do,

they will get, through direct and supplementals this year, at least

$150 to $175 additional million. If you took that money and you

had a commission that had six to seven people who were national

experts on the issue, including tribal and IMM members who really, at the land level, really know what they are talking about, what

would happen is that those people would not do all the work. At

various stages in the process, they would go out and they would

hire maybe 30 or 40 professionals to say, all right, here is the stuff.

Now, here are the important things we need from it. Go through

it and get it out, and they would do that.

So it is not a case that you have got ten people working 24 hours

a day. You would have ten people who had the access and the

knowledge, and there are two accounting firms already in this process who are absolute, dead-on experts at doing this thing. I have

worked with both of them and gotten some very large banks out

of some very bad situations.

Mr. HAYWORTH. One final question, just going back for the

record, under a commercial trust, what is the normal input that

beneficiaries have?

Mr. GRAY. Well, they have a lot of input, and it is usually in the

sense of an accounting, an action for an accounting. I mean, it

would take—everybody here has already admitted, including, I

think, the Department of Interior, that a trustee has a higher

standard of care than just a bank does with a depository account,

which is true under U.S. law, commercial law. If you add to that

the increased standard of care under U.S. Indian aspects of history,

you have one of the highest standards of care in the world.

When there is a breach of trust or somebody thinks there is a

breach of trust, they file a breach of trust action. I do not know of

any State anywhere where that breach of trust action would not be

heard on an expedited basis within six to 8 months because it is

a trustee action, and it would be resolved one way or the other.

This has been going on forever and nothing is resolved.

Mr. HAYWORTH. Just one final note here, to follow up on it. How

would the Department, and again, taking into account what you

are saying, but just take a look at the record, if the Department

still had involvement, how would it even have to change its current

trust relationship to make it operate more like a commercial trust,

or is that even desirable?

Mr. GRAY. At this point, it is not desirable. What is very desirable is that the BIA stick to their knitting and what they really

know, and what they really do know is social services and welfare

and other things. What they do not know is anything about fixing

a trust that is this bolloxed up, and not because they bolloxed it

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up but because it has been messed up for years and years. First,

they stick to the things that they really know well.

Second, they are delegated by whatever law you hopefully can

put together on this thing, they are delegated the responsibility to

cooperate with the Commission so that —A) they are immunized in

a fair way; B) they can get information so people can really get at

things, because if you go out to Billings, Montana, and get

stonewalled, nothing is going to happen; and C) they are trained,

they are trained in forensic trust.

This used to be a small industry. Twenty years ago, when the financial industry was nothing but stocks and bonds, a high school

graduate could go out and be a trust officer. Now, what you have

are the most complex securities that you have ever imagined, derivatives on top of derivatives, I mean, just things that would boggle most people’s minds that flow through trust offices. They are

MBAs; the first jobs that most MBAs have are trust officers for

these large banks because these things are so complicated, and the

training opportunity for people in the BIA who have a financial

proclivity, I think is one of the missed opportunities of all time.

Now, all they are doing is running around trying to hide mistakes and worried that if they are a whistleblower, they are going

to get punitive action. If they try to do the right thing or they are

told what they are to do, they do not know whether they are doing

something that is right or whether it is wrong. I mean, they are

working in a total vacuum of knowledge. It is not their fault. It is

not what they were trained to do.

Mr. HAYWORTH. Thank you, Mr. Gray.

Let me turn to the gentleman from Michigan.

Mr. KILDEE. Thank you, Mr. Chairman, and thank all the witnesses. Today, I was called upon to attend two different hearings.

I serve on two Committees, Education and Labor, and we take care

of pensions over there and they are having hearings on Enron, and

then I had this responsibility over here on Indians and I figured

there was a lot of attention being paid to Enron right now and not

enough to Indians, so I spent the day over here.

I really appreciate your testimony. You would think that the

public relations of the Department of the Interior would have

thought through that new acronym, BITAM, before they changed

that.

[Laughter.]

Mr. KILDEE. They did not run it by public relations, but maybe

it was a Freudian slip over there.

Mr. Tillman, you mentioned that this trust responsibility is the

oldest trust responsibility in the U.S. Government. As a matter of

fact, it antedates even the Constitution. The Northwest Ordinance

clearly specifies our responsibility, and it is not a trust as I think

some people through the years have thought, a trust for minors. It

is a trust for people, for tribes who have a civilization and a language and a land. Very often, they were treated as if these were

minors they were taking care of, and they should take care of

them, too, but very often, it has been a certain patronizing role,

which is unfair. That is one of the reasons I established the Native

American Caucus, because of some of the unfairness I hear.

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It is rooted in, as I say, our responsibility to you. It is in the Constitution. Your sovereignty is not given to you in the Constitution,

it is only recognized in the Constitution, right. It is a retained sovereignty, but Article I, Section 8, talks about it.

Mr. TILLMAN. Right.

Mr. KILDEE. It is a retained sovereignty, and it is rooted in the

fact that the loss of so many of your assets taken by the Federal

Government and promises made.

When I first got elected to the State legislature back in 1964, I

read the Treaty of Detroit and read what was promised to the Ottawa and the Chippewa and the Potawatomi in Michigan and was

not delivered. So it is well rooted. It is very well established and

we have an obligation, and that trust responsibility, and I preach

this all over, resides with the entire U.S. Government. It is not just

with the Interior Department. It is with the Congress. It is with

the courts, the entire U.S. Government, and we have a responsibility. That is why we are having these hearings today. We passed

a bill in 1994 which is not working well enough.

I have 12 tribes in Michigan. We used to have about five. We got

some of their sovereignty recognized. They have been dropped from

the rolls, even their sovereignty. You could not even keep the trust

responsibility of who is a sovereign tribe. They were dropped from

the rolls and we have had legislation. So we have an injustice out

there and we have to respond to that injustice.

Let me ask you this question, and I will ask it of all of you, the

courts are involved now, and very often the courts and the Congress will act when the executive branch is not acting properly. If

we amend or scrap and start over again the 1994 law and really

try to address this well, will we in any way be interfering in a negative way with what the court progress may be now? Maybe I will

ask Mr. Gray that question.

Mr. GRAY. I think you are at a real historic moment. Up to this

point, I would have said yes, because what the court’s mandate was

was past foul-ups, and what always bothered me about a forensic

fixer was how in heaven’s name do you put together a future fix

if you do not know what has gone wrong in the past, and that future fix was left with TAAMS and with the Interior.

Now, they have come together. Judge Lamberth is a very intelligent man and he looks at this down the road, not just one motion

to the next. He had the historic problem and now he has ordered

an accounting. Second, he had an opportunity to take jurisdiction,

which can be challenged, but he took jurisdiction over the current

fix because of the security problem. So now he has brought those

two ends together, but I believe in my heart and with my legal reasoning that he believes he has done what he can do and he really

needs the help of Congress.

Before this point, it would have been inter-meddling. I think it

would have been seen as inter-meddling because there was not

enough information out. Now he has seen all the information he

can stand. But at this point in time, I really believe that the judiciary which is involved in this would really welcome Congress’s participation and maybe cooperation. Maybe you have a receiver who

is cooperating with a special purpose entity.

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I do not have the magic bullet. I would love to write it for you,

because it is coming together in my mind. But the fact of the matter is, I think it is a historic moment to do that, and I also believe—I went through 8 years with a Secretary of Interior, and I

am an Independent, but I have to tell you, the former Secretary of

Interior deserves the reputation for arrogance and stonewalling, period. I do not believe that Secretary Norton has been in the job long

enough to deserve those epithets and I think she is trying to grapple with this problem the best way she can.

And frankly, I think if it were taken out with her advise and consent, I mean, she would be part of the process of saying, I want

the BIA involved, I want my people trained, I want you to get the

accurate information—you do not have many situations come together like this right now, but somebody has got to act and I think

it is the Congress.

Mr. KILDEE. Maybe we can find some way we can mesh the two,

because the executive branch of government for over 100 years has

not done a good job. We are where we are because of the executive

branch of government of both parties. So maybe we can mesh well

our gears between the judicial branch and the legislative branch.

The 1994 law, which I voted for, probably passed virtually by a

landslide, maybe unanimously—the 1994 law was written not on

Mount Sinai but on Capitol Hill, right, so it is not perfect. We

know it is not perfect. We see the imperfections. I am willing to

work with particularly this group right here, because the three of

you, along with your counsel here, represent groups of sovereign

nations, so you can speak with great authority when you talk to

this Committee. I would like to work with you to see what we can

do to really resolve this, because justice delayed we know is justice

denied, and this has been delayed and delayed and delayed and delayed. People have died who could have lived much better had this

government kept its trust responsibility.

I am talking too much, but Chippewa Cree, are they related to

the Chippewas in the Midwest?

Mr. WINDY BOY. Actually, they got lost.

[Laughter.]

Mr. WINDY BOY. That is where I come from. I would like to respond to that, if I may.

Mr. KILDEE. OK.

Mr. WINDY BOY. You know, you are talking about reforming or

amending the 1994 law. There are a couple of things I would like

to keep in mind here. No. 1, you are the trustee as the U.S. Government. No. 2, when we are having these government-to-government consultations as far as governments, my interpretation of a

government is a tribal leader as chairman and tribal leaders sit up

here as you sit up there and are considered as heads of state, and

we are the ones that have been elected by our people to move forward and make decisions that are going to affect them positively

to make their lives better. That is why we are here.

And if anything is going to come forward as far as any amendments toward that law, there should be a consultation. That is why

I recommend this to you. Have these hearings, not just on trust,

on all policy, because our policy that is going to be considered in

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the White House right now is going to have great impact on the

Indian country right now as we see it.

Mr. KILDEE. Thank you.

Mr. HAYWORTH. I see one more comment here, and then we need

to let the other members go.

Mr. TILLMAN. I would like to say one thing about what Congressman Kildee had to say about the three groups that represent the

total assets of Indian country, and we do. The InterTribal Monitoring Association has 53 tribes in it that are large stakeholders.

The National Congress of American Indians has a certain amount

of tribes that are stakeholders. And the Council of Large Land

Based Tribes have also a great asset of millions and millions of

acres.

So not only this diversification of assets, which include oil, gas,

timber, millions and billions of board feet of timber, but fisheries

and land-based tribes and leases and grazing, this goes on and on

to when you line up all these assets, you are going to have a tremendous amount of assets to look after.

Now, how do you do that? The Osage Tribe at one time in 1992

hired Cooper Lybrand to come to the Osage Agency, which is a single-tribe agency, to assess that agency because they thought that

they were the Cadillac of all of oil and gas operations. We hired

Cooper Lybrand at a large amount of money to come to that agency

to do that work for us, and they did.

And after their report was given to the tribal council that they

were operating back in the 1950’s and 1960’s, in 1996, we spent $50,000 more and brought the same company back in to check it

and to make sure that we knew what we were talking about. They

came back and told us the same thing, that, yes, they have new

equipment, yes, they have this, yes, they have that, but they are

still operating back in the 1960’s.

So here we are in 2002 and we are sitting here at this plateau

today and we are sitting down here in the Bureau of Indian Affairs.

Now, how do you bring that back up to standard? I am not talking

about above standard, but just standard.

The Osage Tribe has 1,600 tank batteries that exist on its reservation. Those tank batteries consist of 5,000 tanks. Those tanks

are being purchased every day as they fill up with oil. Do you know

how many gaugers that the Osage Tribe has? Four. We have four

to see over that asset.

Now, that is why I say that this is very critical to us today. It

was an honor to be here today to tell you the horror stories that

are going on out there. Yes, the trust responsibility that Congress

has, is the ultimate trust holder, is true and that is why I came

here. I came 1,400 miles to tell you that, that you can oversee the

Bureau of Indian Affairs. You have the authority to oversee, to create a commission or a Committee made up of us people to overlook

the BIA and become part of that, to make sure that our asset is

being well taken care of. Thank you very much.

Mr. KILDEE. Thank you. Let me say to Chief Windy Boy, with my

Michigan accent and Chippewa, I’ll say, ‘‘Migwich’’ [ph.].

[Laughter.]

Mr. HAYWORTH. Thank you, Mr. Kildee.

The gentleman from New Jersey.

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Mr. PALLONE. Thank you, Mr. Chairman. I have to apologize. I

missed most of this panel’s testimony because I was at the Enron

hearing and then I had to go to the floor on a bill that I had sponsored, but I wanted to say this.

My concern throughout today has been that the Secretary is just

going to move forward with this proposal that she has, and even

though she is saying, and there has been some consultation now at

the late stage, that she wants to wrap this up fairly quickly and

move on, I am not really asking this question, but at least there

seems to be in her mind that she has the authority to set up a separate agency and not have to wait for Congressional action to do

so. There might be some legal question there about whether she

can do that and maybe you might want to comment on that. But

she seems to think that she can do it on her own.

So I keep trying to push, and I guess my question is what you

think maybe we need to do as Congressmen or as a Committee to

try to make sure that that does not happen. In other words, we

need to press for more time, we need to raise the issue of whether

it can be legally done.

I understand that President Hall said in his testimony today that

you were somewhat concerned about this meeting that was held

over the weekend with the task force. She obviously told us that

there was a split of opinion. Some were in favor of her proposal,

others were not. That is, at least, the way I think she said it, and

yet you seem to think that really nobody is in favor of it.

So I just wondered what you think we should be doing short of

legislation, because that takes time, to press to make sure that this

does not just pass by without proper input.

Mr. HALL. Thank you, Congressman. Just a couple of points. I

appreciate your coming back.

In all of the plans, and I am sure Mr. Gray has the expertise as

being a forensic trust expert, but no matter who it is, it has to be

tribally driven. The tribes on our task force put together a matrix.

Here are all the proposals, nine tribal proposals in lieu of BITAM,

and here are the standards that we want to adhere to. We want

to include BITAM and the individual plaintiff Cobell on this. But

the task force had 6 days. Secretary Norton had 6 months with

EDS and spent millions of dollars. And so that way, the computer

system matches up with the records of the land, just like Mr. Gray

was indicating, so we do not have another TAAMS fiasco.

So that is what we are saying, is that there is an executive order.

If tribes are sophisticated, as we heard many of the speakers today,

they have got great models that they are utilizing already, if given

the time, the tribes will come up with—if the Secretary is not going

to listen to the tribes, we will come up with our own plan and we

welcome and we want to work toward legislation. Our task force

does not want to be a rubber stamp.

It is really disheartening to spend a whole weekend, 30 hours

from Friday to Sunday, trying to gain a trust with the Secretary

and the 36 tribal leaders represent Indian country, and then we

have to go back and sell that to Indian country, and we are committed to do that, but we have to have the trust of the Secretary

that she is going to abide with consultation and with her word.

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We told the Secretary before we went in, because a lot of tribes

did not want to go in there because they did not trust the Secretary

and her word, but we said, no, let us begin this relationship. Let

us go in with an open mind and an open heart. Let us go in and

work with our trustee and establish a relationship. She wants to

be involved with the task force. She supports the task force. Let us

sit down and see if she will consult with us throughout and let us

come up with an alternative plan, because she knew we opposed

BITAM.

It was in every seven consultation meetings. We opposed BITAM.

She knew that. So we went in and we said, let us come up with

an alternative tribal plan to BITAM. And then to hear that the

Secretary may want to continue with BITAM and to say that some

supported her plan, no tribe supported her plan in Shepherdstown,

West Virginia, over the last week.

And so I am very disheartened by it, but I do see light at the

end of the tunnel. I think there can be some merger here. If tribes

will—if we are given the time to come up with our own preferred

alternative, because we feel BITAM separates trust and is a potential breach of trust and we would not want to support a concept

or a model that potentially breaches trust all over again.

We do not want to go back into litigation. We want to come back

and find a solution. But in the report, again, it must be beneficiarybased approach plan, and to leave out the beneficiary, either tribal

or individual, and just, no offense to Mr. Gray, but let a commercial

expert do it, it could again breach a trust responsibility that Congress has to Indian tribes.

So I think I am confident that the tribes can get there because

we want reform, and whoever says we do not want reform and

want the same old BIA as it is is completely wrong. That is false,

Congressman. We do want reform. We just, because it is our assets

and money, we want to be at the table to help be a solution to it

and to have the resources to come up with it, and I really like the

examples that were made.

President Makil talked about the independent review commission. I think that is an excellent example. As a matter of fact, the

task force is starting to consider that. We want external auditing.

We want to consider that. And we want to look at, again, a tribaldriven plan that can put the focus at the local level, not in Washington but at the local level so that the tribal government and its

IM account holders has the resources right in the field as they are

looking to leasing for grazing, looking for appraisals, oil and gas,

all of that. We need to have those accounting experts. We need to

have those people and those resources right there, and I think it

can happen, but we are going to need the assistance of Congress,

clearly. I think there is no question about it.

Mr. PALLONE. Thank you. Thank you, Mr. Chairman.

Mr. WINDY BOY. Can I respond? My response to that is simple.

The point that you brought up, all of the above should be adhered

to, should be pursued. Make sure that it is legal. No. 2, in order

to put a stop to this, make a reprogramming request. How can the

Department make any moves without any money? How can you operate a Department without any money? It is simple.

Mr. GRAY. That is simple.

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[Laughter.]

Mr. GRAY. Do that, and I have a slightly more moderate suggestion, and that is if this Committee, in connection with and in tandem with the Senate Energy and Senate Indian Affairs Committee,

were to send a letter to the Secretary and say that these hearings

have brought to light issues that call into question her plan and

that before she implement that plan, it is important for you to hear

more from her as to the—or to answer the questions that have

been here today about the viability of that plan as a trust fixer and

also the legality of creating a new bureau within an agency.

I do not know the answer to that, but it would give the Committees time to look to their counsel to get a handle on that. It would

put some pressure on them to come up with their legal reason for

it. And it would also have a substantive basis, which is we have

heard enough to really question whether or not that makes a whole

lot of sense.

I was here for 8 years, but I never considered myself a Washington lawyer, so you know how things work and I do not, but I

have worked with those Committees and one of the things that is,

having come 3,000 miles for this little adventure, I can tell you

that I am amazed at the bipartisan approach of these Committees

toward this issue. I mean, I really am and it is a credit to everybody in this room and it is a credit to the Senate side, because I

know those Committees very well.

I think it is time to take some action. Ms. Cobell may do it anyway, but having done that under the umbrella of a perfectly reasonable request from Congress, that would be a bold act, indeed.

Mr. PALLONE. Mr. Chairman, maybe the Chairman and the ranking member and we could look into that more and see if maybe

they would be willing to do something like that.

Mr. HAYWORTH. I think there are a variety of things, and the

chair would just point out something here today. There have been

some differences of opinion, honestly expressed, but I think I would

be remiss if I did not point out that the Assistant Secretary and

the Associate Deputy Secretary have stayed here the entire time.

This was not a cameo appearance. This was not, oh, gee, we have

got to run off somewhere else.

I can speak from personal experience with the bipartisanship or

the nonpartisanship. When I first came to the Congress, there was

inherent distrust of one of the new guys coming in, and when we

finally get past this, and yes, the philosophers who say, is it not

a shame that youth is wasted on the young, and to a certain degree

we can say, is it not a shame that policy is not always related to

politics.

But in fairness, I think we ought to be compelled to say that

stepping into a difficult situation, the Secretary of the Interior deserves the benefit of the doubt and honest and open and unbridled

and unvarnished criticism, and that is going on today, but let us

try to deal with this in a positive manner, and whether it is written communication or whether it is transmitted face-to-face or

taken back by her representatives, I think there is a chance to

build trust based on this type of hearing and the constructive

things we can do.

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So we can take a look at letters, but I just want to point out for

the record, I appreciate very much the fact that Mr. McCaleb and

others have stayed here for the entire hearing to take into account

what is being said. I think we can move forward in a positive, constructive way. It will not mean there will not be differences of opinion down the road. Consensus differs from unanimity. But I think

we can hammer this out, and so I appreciate the suggestion you

offered, Mr. Pallone, and we will see where we can go.

Of course, the gentleman from Michigan and I, as co-chairs of the

Native American Caucus, have done a number of things, and I

want to work proactively with everyone in here. So I appreciate the

spirit of that remark.

I see my good friend from American Samoa who has been here

who has worked with us on so many of these issues and I know

he may have some questions or thoughts.

Mr. FALEOMAVAEGA. Thank you, Mr. Chairman. I think some of

the people have raised the question, why am I interested in the

issues dealing with Native Americans? I consider myself as a member of the Samoan tribe. I do not know if some of our Native American friends here have ever heard of Samoans. We are very small

numbers, although we do have 16 that play in the NFL right now.

[Laughter.]

Mr. FALEOMAVAEGA. I keep asking my good friend, Windy Boy,

when are we going to get one of Sonny Six Killers and the famous

Jim Thorpes. I do have a very strong feeling for Native American

people because I think there is a cultural relationship with those

of us who come from the islands.

I do want to offer my personal welcome to my good friend, Jonathan Windy Boy, President of the Council of Large Land Based

Tribes, and certainly Mr. Hall, this is the first opportunity I have

had in meeting you, President of the NCAI, and Mr. Tillman and

Mr. Gray.

I think there has been no question, Mr. Chairman, and I do

thank you in all sincerity, in our efforts in trying to work this on

a bipartisan basis. Over the years, you and I have known that it

has been very difficult even to have a Subcommittee on Indian Affairs established. I wish we could have taken the tack and the initiative that the Senate has taken and now the Senate Committee

on Indian Affairs is a full standing Committee. It is a very difficult

situation, and not taking anything away, the sincerity of all the

members that want to do for their constituents, but this has always

been the problem.

And whether we like it or not, what Ms. Cobell has done really

has now forced the issue before the Congress and before the administration to resolve the issue. As you said, Mr. Chairman, and I

could not agree with you more, Secretary Norton and members of

her staff have taken on the responsibility. It has only been a year.

I would be the last person to pass judgment in terms of what she

has tried in her attempts to resolve this very difficult problem.

It is always easy for us to look at hindsight and to say what we

have done to the S&L and the $87 billion that we were able to

focus and how sad it is that here we have the issue with Enron and

just about every major media company, television and all the networks are focusing on this issue, which is before three or four ComVerDate 11-MAY-2000 09:07 Sep 26, 2002 Jkt 000000 PO 00000 Frm 00176 Fmt 6633 Sfmt 6602 77526.TXT HRESOUR1 PsN: HRESOUR1
173

mittees. I do not even see C-SPAN taking an interest in this $10

billion debacle on issues involving the needs of some four million

Native Americans. I think there is no question where our hearts

are and how we feel about the needs of our Native American brothers and sisters.

Mr. Gray, you made a very provocative statement about the situation. You say BITAM. I would say ‘‘chew it and spit it out.’’ [Laughter.]

Mr. FALEOMAVAEGA. But with all respect to what Secretary Norton is trying to do, I certainly do not want to second-guess her efforts in wanting to do this, but I sincerely hope that before implementation, and I doubt very much that she can implement it anyway because she cannot get the authorization or even any funding

allocated for doing this. I think she was wanting $300 million and

I think the Appropriations Committee from the Senate side did not

approve this request.

So there is a question of structure and how we are going to fund this $300 million effort to address the issue. Mr. Gray, I want to

ask you, you made it very clear that this issue should not even be

involved—BIA should not even be in it. You suggested a third

party or whatever organization that we put up, a trusteeship, a receivership, whatever it is. In your honest opinion, this is probably

the best procedure that we can go about in resolving this 100-yearold issue once and for all?

Mr. GRAY. Yes, I think it is, but with a qualification on that. I

think that when people think about GSEs, they think about a

bunch of government officials, some of them very good. I mean, if

you look at the D.C. Commission and the enormous job that they

did, I mean, that was really a wonderful job, but that is not really

what I am talking about.

I am talking about a commission, whatever you call the name,

I am talking about a group that is made up of Native American experts on this, because one of the things that you never hear when

the Department of Interior talks about this thing is where it all

starts, and that is what is happening with the land and whatever

the natural resource is that is being leased. Historically, I know it

has been mismanaged horribly, but I just wonder, now, other than

when it is in the hands of the actual beneficiaries themselves and

they know what they are doing, I just wonder about that.

I think that Indian participation on that commission, direct participation, is absolutely essential. I think that well-respected government officials who have—I am sorry, I have forgotten her name

now, but the person from the Fed who ran the D.C. program for

a long time, but there are people in government who are highly respected who could be on this, with financial backgrounds, people

from finance-type agencies who understand, I think, not only the

business aspect of it but who are sympathetic to the fact that you

have got a major cultural sovereignty issue here. So it would be an

unusual body, but if you do not get agreement among those people

about what you want to do, then it is not going to go anywhere.

The second thing I would say is I do not think the BIA should

be left totally out of this. I think the BIA is an enormous resource

for this, but to ask them to fix a problem where they are inherently

conflicted and have no expertise is absolutely insane. I mean, if you

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did that in the commercial sector, they would blow you right out

of court. You would be in jail. I mean, you cannot do that. It does

not make any common sense, much less legal sense.

But if they are there and they are protected, they are a wealth

of information. You cannot do it without them. You could even consider having them on the commission. I mean, I have not come up

with a perfect fix on this thing, but have somebody—I think the

Special Trustee has done a remarkable—the new Special Trustee

has done a remarkable job at keeping his independence within an

agency that can slap him down at any time. I think Mr. Holman

showed disarming restraint in not walking out of the door the second year he had the job. He held onto it for a long time in the face

of much more demonic opposition than Secretary Norton is capable

of.

So I would not take them out of the process. I am just saying you

need an independent group that is ultimately responsible to the

Congress of the United States and the courts that brings these people together. I am not for division here. The idea is to bring them

together and say, you have got to fix this, and we are going to give

you the resources to hire the professionals who can. It is not that

hard.

Eloise Cobell told you the truth. She is a banker and a good one.

It is not that hard to fix. I am not sure I would agree with her that

it is not brain surgery, because I like to kind of think of it that

way, but she is right. If you get the right professionals, you can fix

it.

Mr. FALEOMAVAEGA. Mr. Windy Boy—I am sorry, I think the

time is— Mr. WINDY BOY. I would like to have a slight difference of opinion of that as far as receiverships. I think when you are talking receiverships, you have got to keep in mind, though, that there has

got to be the difference of the individual and tribal, because the individual accounts are separate, and that is what this whole litigation is based upon. And then we are talking about the trust assets

on the tribal side, that is where the tribal leaders have control,

with the tribes within themselves of the land within the boundaries

of their nations. That is why I say this issue has got to be separate.

Mr. GRAY. By the way, I agree with that. Most of my comments— all of my comments are directed to the IIM accounts. It is not the

tribal accounts. I am not an expert on that.

Mr. HALL. Congressman, can I just add one point on what has

been made here? There is a unique situation, though, oil and gas,

for example. Chief Tillman comes from oil and gas. Many times, a

tribe will own the mineral but an individual will own the surface.

So there is an interweaving here. There is an interweaving because

the tribes and individuals still have to go back to the same agency,

the same department, when it comes to leasing, appraisal, grazing,

and oil and gas extraction. So to totally separate, now, that is going

to take some work here to do that. And there are some tribes, also,

that have some IMM accounts.

So just to say there is total separation is not quite true. So there

is going to have to be some strategy and to get with some experts

to look at those unique situations where a tribe owns the oil and

gas, an individual owns the surface, and the tribes own some—

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some, not a whole lot, but some IMM accounts. I just wanted to

clarify that.

Mr. GRAY. I think you need representatives of both on a commission like this.

Mr. WINDY BOY. Then you get into more issues there, when some

tribes have a lot of water rights issues. So there are a lot of things

here, I think, whole complexities.

Mr. HAYWORTH. President Windy Boy, I think we are finding just

how, again, just how interrelated and how challenging this may be.

My good friend from Michigan had a final note.

Mr. FALEOMAVAEGA. Mr. Chairman, I just want to say again to

thank Mr. McCaleb for his patience in being here with us all day

and thank you for your patience and the gentleman from Michigan.

I sincerely hope that this is not the end of this whole process and

I sincerely hope that our Indian Caucus could perhaps collaborate

with our friends from the Department of the Interior and with as

many of our Indian tribal organizations. Let us see if we can consult and see if we can do anything by way of legislation or help

Secretary Norton beef up or improve whatever she started in her

proposal at this point in time.

But I sincerely want to thank you and thank the gentleman from

Michigan for your diligence in pursuing this on behalf of our caucus. Thank you.

Mr. HAYWORTH. The gentleman from Michigan?

Mr. KILDEE. Just one comment. President Hall, your point was

very good that we have to recognize that in solving these things,

we have to deal with sovereign-to-sovereign, and that is very, very

important. That is fundamental to this. Whether it be Congress,

whether it be the Secretary, they have to recognize that you are

chief executives of sovereign nations and that status is very important.

Let me tell you just one quick story on that. Several years ago,

I helped three tribes in Michigan get their sovereignty recognized

and reaffirmed, not given, it is retained sovereignty. So I asked

President Clinton to have a bill signing ceremony in the Oval Office for that. So we went over there to the Oval Office and we had

the three chairmen of the tribes whose sovereignty has just been

reaffirmed. And President Clinton after the signing likes to wander

around the Oval Office, talking. The office was filled.

And I turned to the three chairmen of the sovereign tribes that

had just had their sovereignty reaffirmed. I said, ‘‘Sit down in the

President’s chair.’’ And there was a U.S. Senator there and he said,

‘‘Dale, I do not think we can do that.’’ I said, ‘‘That is right, we cannot do that, because we are not chief executives of sovereign nations, but these guys are.’’

[Laughter.]

Mr. KILDEE. So they all three sat down in the President’s chair,

because they were co-equal with the sovereign.

Mr. HAYWORTH. That is a good story.

Mr. KILDEE. As a matter of fact, on the way out, I turned to

Frank Ettawageshik, who was the Chairman of the Little Traverse

Bay Band of Odawa, and I said, ‘‘Frank, you know, all I have ever

had in that chair was my eye.’’ [Laughter.]

176

Mr. HAYWORTH. Thank you, Mr. Kildee.

Ladies and gentlemen, we thank all of you, those who came to

testify today, those who have joined us to pay close attention to

what is transpiring here, the aforementioned friends from the Department of Interior. Many things have been said and I just thank

everyone for making what I hope will be, I do not know if this is

so Churchillian, the beginning of the end so we can bring this to

a conclusion and working closely with everyone concerned.

Mr. KILDEE. One more unanimous consent, to put something

from the Tribal Council of the Northern Cheyenne Tribe in the

record.

Mr. HAYWORTH. Without objection, it is so ordered.

[The resolution of the Tribal Council of the Northern Cheyenne

Tribe follows:]

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Mr. HAYWORTH. This hearing is adjourned.

[Whereupon, at 4:05 p.m., the Committee was adjourned.]

[The opening statements of Members submitted for the record

follow:]

[The prepared statement of Mrs. Christensen follows:]

Statement of The Honorable Donna M. Christensen, a Delegate in Congress

from the Virgin Islands

Thank you, Mr Chairman.

I appreciate your holding this hearing, but we have all been at hearings on this

issue before and are not any closer to a resolution of the problem of the trust. As

a matter of fact, at one of the last hearings which was a joint one for the Senate

and the House, for the better part of the hearing, I was the only member present.

So I am here today and I may or may not have a lot of questions because this

is an over 120 year problem. Looking at how long it has gone unaddressed, despite

investigations, reports and acknowledgments of the travesty that it has been, I have

already concluded that we, as a country, do not have the requisite will to fix it.

Is it that we do not in our hearts do not believe that Native Americans should

get this kind of money ( and trust me as a member from a territory we have been

there, so we know it happens and we know how it feels)?

The other possible conclusion is that no matter what the law says, many states,

and even our federal government still does not fully respect the sovereignty of the

recognized tribes.

This country owes the first Americans a debt we can never repay. Even in health

care, which is my field, we see glaring disparities in the health of all of the indigenous peoples of this country. Just as in African Americans they are an outcome of

long term neglect, so the issues that have yet to be rectified are many—not just this

trust fund.

My maternal grandmother was part Chocktaw, and even though I don’t know my

Native American family or if her tribe or my ancestors have lands or money in this

trust, I come to this hearing on her and their behalf.

Today we need to go beyond the hearing stage to action. It is long overdue and

only right that we pay up.

[The prepared statement of Mrs. Cubin follows:]

Statement of The Honorable Barbara Cubin, Chairman, Subcommittee on

Energy and Mineral Resources

For more than a century the federal government has been the trustee of funds

for Indian tribes as well as individual Indians. These trust funds, generated from

rights and leases, have become a significant source of funding for many Indian

tribes all across the nation.

This is especially the case on the Wind River Reservation, which lies within the

borders of my state of Wyoming. Wyoming has two resident tribes, the Eastern Shoshone and the Northern Arapaho. As is the case in most of Wyoming, these large

land based tribes have been blessed with a substantial amount of natural resource

interests, particularly oil and gas production. Because of their substantial financial

interests in how the federal government resolves this issue, and because of concerns

regarding Internet accessability, I too have a great interest.

I would like to emphasize in my previous statement the phrase, ‘‘how the federal

government resolves this issue,’’ because the responsibility to find a workable solution is borne not only by the Department of Interior, but by the Administration, Judiciary and Congress. It is essential that each branch work together to find the fair

and equitable solution that has eluded Indians for well over 100 years. I pledge my

energy to this effort and highly encourage my colleagues to do the same.

[The prepared statement of Mr. Kildee follows:]

Statement of The Honorable Dale E. Kildee, a Representative in Congress

from the State of Michigan

Good morning. Mr. Chairman, as a senior member of the Resources Committee

and as Co–Chair of the Congressional Native American Caucus, I am pleased to

have the opportunity to speak to the issue of Indian trust funds. I remain deeply

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concerned that the government is not living up to the high standards the law demands of the Federal trusteeship over Indian and tribal trust funds. The Interior

Department is legally bound to manage and prudently invest individual Indian and

tribal income from judgments, grazing and farming leases, timber sales, oil and gas

royalties, mineral leases and investments from Indian lands.

For more than a century, Interior has done a poor job maintaining trust fund

records. This issue dates back to more than 180 years when the Federal Government first began its policy of holding tribal funds. It has managed funds for individual Indians since the passage of the 1887 General Allotment Act. Allotment laws

were designed to break up tribal lands by providing 40, 80, and 160 acre tracts to

individual Indians. Congress stopped the allotment process in 1934, after a loss of

millions of acres of tribal lands and hundreds of thousands of acres that were lost

to taxes that Indians did not know they owed. Unfortunately, these injustices of the

past still remain as the problems of today.

Because of the allotment policy, Indian allotees face the complex problem of owning fractionated interests in allotted land. Today, it is common for hundreds of owners to hold an interest in one tract of land. These owners are heirs of the original

allotment holder whose land can become more fractionated as the number of beneficiaries increases. This means that hundreds of beneficiaries could own shares in

income derived from one tract of land. This situation has added to the complexity

of this problem and has served to undermine reform efforts.

In 1994, Congress passed a law to reform the management of trust funds for individual Indians and tribes. The law was intended to rectify many bureaucratic practices that had stalled the proper administration of these accounts and to restore

what rightfully belonged to Indian people. Sadly, the Interior Department has yet

to restore old land records and the income derived from the land.

in 1996, Congressman J.D. Hayworth and I led the Resources Committee’s Task

Force on Indian Trust Fund Management. The result was that the Committee held

four hearings on the issue in 1996. That same year, Elouise Cobell, a beneficiary

of an Individual Indian Money (IIM) account and a witness at today’s hearing, filed

a class-action lawsuit against the Secretary of Interior on behalf of approximately

300,000 IIM account holders seeking an accounting of the money owed to the account holders and to bring permanent reform to the trust fund system.

During the previous administration, a U.S. District Court judge found Interior

and Treasury officials in contempt of court for their failure to produce trust documents for IIM account holders. In the current administration, Interior and other officials face contempt charges in the Cobell v. Norton case. With respect to tribal

trust funds, Interior cannot reconcile $1.9 billion in tribal trust funds because of

missing documents.

On November 14, 2002, in response to the Cobell v. Norton case, the Department

of Interior developed a reorganization plan. Interior’s plan would strip the BIA of

all its trust functions and consolidate those functions into a new Bureau of Indian

Trust Assets Management (BITAM). Overseeing this new agency would be a new

Assistant Secretary who would report directly to the Secretary of Interior.

Interior began its tribal consultation sessions subsequent to the reorganization

proposal rather than create a plan concurrently with the tribes. In addition, Interior

submitted a $300 million reprogramming request to the House and Senate Appropriations Committee to fund the reorganization proposal. Both the House and Senate appropriators agreed, however, to put the request on hold until Congressional

hearings and tribal consultation sessions were conducted.

Another issue stemming from the litigation includes a computer shutdown at the

Department of Interior that has prevented tribal and thousands of individual trust

beneficiaries from receiving payments. This situation is simply unacceptable. The

notion that the Federal Government cannot do its job sends the clear message that

Native Americans are considered to be second-class citizens.

Decade after decade, this problem has plagued both Democratic and Republican

administrations, but none more than the Indian people and tribes. Indian people

and tribes have the right to know about all transactions and ownership interests

in their land. These trust beneficiaries also have the right to create a plan concurrent with the administration to address the issues raised in the Cobell litigation and

to develop an alternative plan to the Department’s reorganization plan. I strongly

urge the Department of Interior to continue its dialogue with the tribal task force

on trust reform.

In the end, we would all do well to remember that those in Indian country who

are caught in this web of mismanagement are not asking for any privileges or handouts. This money belongs to them. The Federal Government’s involvement was

meant to give legal and technical support only. There is no doubt that, up to this

point, the government has failed. The only question is whether or not we will now

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rectify these accounts for the future and in the process restore some dignity to the

past.

I look forward to hearing the testimony today. Thank you.

[The prepared statement of Mr. Pallone follows:]

Statement of The Honorable Frank Pallone, Jr., a Representative in

Congress from the State of New Jersey

The United States Government committed to a trustee relationship with the

Indian Nations. Defined by treaties, statutes and interpreted by the courts, the trust

relationship requires the federal government to exercise the highest degree of care

with tribal and Indian lands and resources. At first, the federal trust responsibility

served to protect tribal lands and tribal communities from intrusion.

However, in a push to acquire tribal land and turn Indians into farmers, the

federal government imposed reservation allotment programs pursuant to the General Allotment Act of 1887. Under these policies, the selling and leasing of allotted

lands and inherited interests became primary functions of the Bureau of Indian Affairs. Tribes lost 90 million acres and much of the remaining 54 million acres was

opened to non–Indian use by lease. In sum, the federal government took the trust

responsibility for Indian land upon itself in order to gain the benefit of vast tribal

lands and resources that were guaranteed by treaty, Executive Order, and agreements for exclusive use by the tribes.

It is widely known that the BIA has grossly mismanaged the remaining tribal

lands and has squandered billions of dollars worth of resources that should have

gone to the benefit of often impoverished American Indians. Today, the Secretary

of the Interior is faced by a mandate from Congress to clean up the accounting and

management of Indian trust funds, and by a lawsuit alleging a great failure of the

Secretary’s trust responsibility for Indian lands. In response, the Secretary has proposed a plan to create a new Bureau of Indian Trust Asset Management and remove

the trust functions from the Bureau of Indian Affairs.

This proposal will profoundly effect the BIA’s management of 54 million acres of

Indian lands, the administration of trust funds derived from those lands, and nearly

every aspect of economic development, agriculture, and land management within

Indian Country.

I am greatly concerned that this plan is repeating the failures of the many past

trust reform efforts. Recently, 193 Indian tribes unanimously adopted a resolution

opposing this reorganization and transfer of the responsibilities of the Bureau of

Indian Affairs. I strongly believe that this reorganization effort cannot go forward

until the Department consults with Indian tribes in the development of a business

processes plan for trust reform—a clear plan for performing the basic trust functions

of accounting, collections, record keeping, inspections, enforcement and resource

management. The plan must include policies, procedures and controls. The fundamental and consistent criticism of the Department’s trust reform efforts over the

last decade has been the failure to develop a plan for these business operations of

trust management. Instead, the DOI has a well-documented record of making shortterm cosmetic changes in response to court imposed deadlines or Congressional inquiries.

It is notable that this criticism, a lack of structural foundation, is exactly the

same as has been leveled against the Department’s development of the Trust Asset

and Accounting Management System. All tribal leaders strongly support trust reform and want to work constructively with the Department and with Congress to

ensure sound management of tribal assets. In fact, it is the tribes that have the

greatest interest in ensuring that tribal assets and resources are properly managed.

To complete my statement, I just want to raise concerns regarding today’s hearing. Similar to Mr. Rahall, I do not concur in the request made by Chairman Hansen to Secretary Norton of the Department of the Interior, by letter dated January

15, 2002, to submit to the Committee a report compiled by the auditing firm Ernst

& Young that is under seal by the Court as part of the Cobell v. Norton lawsuit.

Striving to maintain the integrity of the federal government’s trust responsibility

of Indian tribes, and thereby tribal assets, is a commitment that the United States

first made as part of the Cherokee Nation v. Georgia lawsuit in 1831. Making the

individual trust accounts a matter of public record is not adhering to the spirit of

the federal trust responsibility. Ironically, if such account records were opened, the

public would have more information about the monetary balances of Indian accounts

than the actual Indian account holders themselves. Trust responsibility to the indiVerDate 11-MAY-2000 09:07 Sep 26, 2002 Jkt 000000 PO 00000 Frm 00185 Fmt 6633 Sfmt 6621 77526.TXT HRESOUR1 PsN: HRESOUR1
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viduals in question requires that this report not be placed into the public domain

unless they concur.

The Tribal Leaders Task Force on Trust Reform, comprised of 24 appointed tribal

leaders from throughout the United States and Alaska, convened here in Washington this past weekend to discuss the trust reform issues. Indian tribes and their

representatives are continuing to interface between their separate governments in

order to put forth their recommendations for Indian trust reform. Proper consultation between Indian tribes and the federal government must occur to ensure that

decades of Indian trust mismanagement ends.

In conclusion, I do not believe—and I think much of Indian country would agree

with me—that creating a new agency to manage existing Indian trust accounts is

the solution for government reform. Especially given that proper consultation between the federal government and Indian tribes did not occur. I am disappointed

with the Department of Interior concerning this government reform issue and believe that DOI needs to do a better job in exercising the trust responsibility to

Indian tribes and Alaska Natives.

[The prepared statement of Mr. Rehberg follows:]

Statement of The Honorable Dennis R. Rehberg, a Representative in

Congress from the State of Montana

Thank you Mr. Chairman. I would like to join my colleagues in thanking the Committee for holding this very important hearing. Indian Trust Reform has been on

the back burner long enough.

The more I learn about this issue, the greater appreciation I have for the complexity of the situation. Montana is proudly the home to seven tribes. I know that

in my experience the needs of different tribes can be very specific and diverse in

nature. Several representatives from Montana’s tribes have traveled far to be in attendance. I am privileged to have three Montanans here to testify—each in different

capacities. Their respective roles here today are representative of the various needs

of tribes across our nation. I would like to take this opportunity to let the tribes

in my state know that I admire their commitment to work together on proposals

for trust reform, and I look forward to assisting them in their efforts.

I appreciate the efforts of the Secretary on this issue. Many have come before her

and despite their efforts they failed to produce meaningful reform. I know there are

a lot of concerns relating to the BITAM. Regardless of what you think of the plan,

Secretary Norton should be applauded for her commitment and willingness to tackle

this issue. I know she is committed to working with stakeholders to come up with

the best final product possible.

I know this will not be easy. Trust management reform is severely overdue. The

circumstances that brought us to this crisis situation are nothing we can be proud

of, but I hope that the final product—of what promises to be the result of a lot of

hard work—is something we will be proud of.

Thank you all for being here and I look forward to a productive hearing.

[The prepared statement of Mr. Young follows:]

Statement of The Honorable Don Young, a Representative in Congress from

the State of Alaska

I would like to thank Chairman Jim Hansen for scheduling this oversight hearing

on the Trust Fund accounts of American Indians and Alaska Natives. Since the

l980’s, I have been an active member on this Committee with Trust Fund reform

and am pleased to see that Chairman Hansen has set a high priority to try and

resolve this issue in this Congress.

For more than ten years, Congress has given the Department of the Interior (DOI)

the funding and the flexibility to try to resolve the problem with the DOI’s accounting of IIM and tribal accounts. Obviously this has not worked. While I believe that

this current Administration should be given the opportunity to try to resolve the

problem, it has always been my belief that tribes need to be consulted to help find

a resolution to the problem with the accounting of their IIM and Tribal account

funds. I am hopeful that the consulting process will continue with Tribes and that

the DOI will take their recommendations seriously and implement some of these

recommendations in the effort to finally resolve the Trust Fund issue.

In the past, I have worked with the InterTribal Monitoring Association (ITMA)

and have made a verbal commitment to continue a dialogue to develop, if necessary,

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further reform legislation to finalize the accounting problems with the IIM and Tribal accounts. I would like to take this opportunity to welcome my Alaskan on the

board of ITMA, Bill Martin, and to offer my continued commitment to work to resolving the Trust Fund issue.

The following information was submitted for the record:

• Addison, Anthony A., Chairman, Northern Arapaho Business

Council, Statement submitted for the record

• Addison, Anthony A., Chairman, Northern Arapaho Business

Council, Letter to the Department of the Interior submitted for

the record

• Anoatubby, The Honorable Bill, Governor, The Chickasaw

Nation, Statement submitted for the record

• Assiniboine & Sioux Tribes, Counterproposal to Bureau of

Indian Trust Assets Management submitted for the record

• Bradley, Carman, Chairman, Council of Energy Resource

Tribes, Statement submitted for the record

• Bourland, Gregg J., Tribal Chairman, Cheyenne River Sioux

Tribe, Statement of the Great Plains Tribal Chairmen’s

Association submitted for the record

• Hoopa Valley Tribe, Tribal Self-Governance Trust Reform

Proposal submitted for the record

• Mille Lacs Band of Ojibwe, Letter submitted for the record

• Montana Wyoming Tribal Leaders Council, Resolution

submitted for the record

• Nez Perce Tribe, Statement submitted for the record

• Tribal Chairmen’s Position Statement submitted for the record

• Windy Boy, Alvin, Sr., Chairman, The Chippewa Cree Tribe of

the Rocky Boy’s Reservation, Statement submitted for the

record

[A statement submitted for the record by Mr. Addison follows:]

Statement of Anthony A. Addison, Chairman, Northern Arapaho Business

Council

The Northern Arapaho Tribe wishes to express its concerns with respect to the

proposed reorganization of the Department of the Interior, removing trust-related

responsibilities from the Bureau of Indian Affairs and placing them in a proposed

Bureau of Indian Trust Assets Management. Let there be no doubt: the Northern

Arapaho Tribe fully supports trust reform. As a land-based Tribe with substantial

natural resource interests ‘‘’’ most notably oil and gas production ‘‘’’ the Northern

Arapaho Tribe would undoubtedly benefit from a reformed and fully functioning

trust system.

However, the Northern Arapaho Tribe is deeply concerned about the manner in

which the current attempt at reform has been put forth. Foremost among the Northern Arapaho Tribe’s concerns is the lack of meaningful consultation between the

United States and any sovereign Tribe ‘‘’’ particularly the Northern Arapaho Tribe.

Although both you and the Secretary were present for the consultation meeting in

Albuquerque on December 13, 2001, this meeting can hardly be considered meaningful consultation. First, the failure of the Department of the Interior to be more

forthcoming with information about the proposed Bureau made it impossible for any

Tribal leader to make meaningful and insightful suggestions or comments. Second,

the after-the-fact nature of the event itself created considerable resentment among

many of the attendees, effectively eliminating the possibility of meaningful dialogue.

At a breakfast meeting with the Council of Large Land Based Tribes, Deputy Assistant Secretary Wayne Smith represented that the Albuquerque meeting would be

nothing more than a ‘‘listening session.’’ The Northern Arapaho Tribe respectfully

suggests that meaningful government-to-government consultation requires actual

dialogue between governments, not one government listening in silence to the grievances of another.

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That stated, the Northern Arapaho Tribe believes Secretary Norton can and

should undertake reform of the current trust system. However, such reform can only

work if undertaken in a deliberate and comprehensive manner. Second, Secretary

Norton must agree that not only will any trust reform in no way diminish the current trust obligations owed by the United States to Tribes and individuals, but will

also preserve and enhance that trust relationship. Third, trust reform should affirm

and support Tribal sovereignty, self-government and self-determination, and should

not undermine any treaties or executive orders between Tribes and the United

States. Fourth, in any trust reform, the concerns of the present and the future need

to take precedence over the failures of the past. The Northern Arapaho Tribe is confident that Secretary Norton is mindful of these basic principles, and will diligently

observe them in any trust reform she undertakes.

As stated above, trust reform is impossible without consultation. So far, the Secretary’s attempts at consultation have been unsatisfactory. However, this is not to

say that meaningful consultation cannot be accomplished. The first step in a meaningful consultation process is to give all concerned parties a common base of information. This means that the Secretary needs to tell Tribes ‘‘’’ specifically the Northern Arapaho Tribe ‘‘’’ exactly what she intends to do with respect to trust reform,

including how this proposed reform will result in measurable improvements over the

services currently in place on the Wind River Reservation Without specific information, the meaningful dialogue between sovereigns embodied in government-to-government consultation simply cannot be accomplished.

Additionally, as the Committee and Secretary Norton are both undoubtedly

aware, Congress tasked the Department of the Interior with trust reform in 1994.

Although the Northern Arapaho Tribe understands that many of the problems facing the Secretary now with respect to trust reform were inherited from past administrations, we would like to know why the requirements and recommendations made

pursuant to the 1994 Act have not been implemented, or if implemented, have not

been successful. The Northern Arapaho Tribe requests that the Secretary publish

an account of why each of the reforms proposed in 1994 has failed, either in implementation or effect. We are confident that the Secretary agrees that without a frank

and thorough examination of the failures of the recent past, no progress can be

made in trust reform.

With respect to the actual effect of trust reform, the Northern Arapaho Tribe

strongly recommends the Secretary consider the following: any reform of the Bureau

of Indian Affairs should increase the ability of each reservation or service area to

tailor programs and services to the specific needs of that reservation or service area;

any cost savings realized from trust reform in any way should go directly to increased services to the trust beneficiaries themselves; any system implemented to

track trust activity needs to be flexible enough to both provide necessary trust accountability and meet the unique needs of specific geographical areas; trust reform

should not come at the expense of any services or programs currently provided to

Tribes or individuals; and Indian hiring preference of qualified personnel must be

continued in any trust reform. Finally, while the mistakes of the past should not

prevent trust reform, neither can they be ignored. Trust reform should not preclude

any recovery of damages by Tribes or individuals for past trust mismanagement, nor

should it create a statute of limitations or other bar to recovery for such mismanagement.

In closing, the Northern Arapaho Tribe is committed to meaningful trust reform,

and as a large, land-based Tribe with extensive natural resources would benefit

from such reform. Secretary Norton is certainly correct in recognizing the problem

with the current trust system; however, without further details of her current plan

for reforming this system, she cannot engage in meaningful, government-to-government consultation and dialogue with Tribes. Any group or committee called upon

by the Department of Interior for consultation must be comprised of elected Tribal

leaders.

Additionally, it is extremely important that any reorganization— whether it be

within the BIA, or through the development of a new agency—it is important that

it be clearly established that all aspects of the Federal Government’s responsibilities

to Indian Tribes are trust responsibilities. It is just as important that members of

the Northern Arapaho Tribe receive adequate health care, for example, as it is that

their land and minerals be properly administered. However the reorganization occurs, it cannot be emphasized to greatly that all aspects of the Federal Government’s duties be properly classified as trust responsibilities.

It is also important that the Indian preference be continued within any agency

that has trust responsibilities to Indian Tribes. Just as it is critical that there be

government-to-government communications between Tribes and the Federal Government, it is also critical that qualified Indian people fill the jobs that have the most

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interaction with Indian Tribes. Additionally, no monies can be taken from existing

programs to fund any new or reorganized agencies. Almost all programs on the

Wind River Reservation are presently under funded, and any further reductions

would be devastating.

The Northern Arapaho Tribe would like to engage in discussion with the Secretary and provide whatever assistance possible in furthering meaningful trust reform, but first the Secretary must let us know what we would discuss.

[A letter submitted for the record by Mr. Addison follows:]

December 18, 2001

The Honorable Neal McCaleb

Assistant Secretary for Indian Affairs

U.S. Department of the Interior

1849 C Street NW

Washington, D.C. 20240

Dear Assistant Secretary McCaleb,

This letter is to express the strong concerns of the Northern Arapaho Tribe with

respect to the proposed reorganization of the Department of the Interior, removing

trust-related responsibilities from the Bureau of Indian Affairs and placing them in

a proposed Bureau of Indian Trust Assets Management. Let there be no doubt: the

Northern Arapaho Tribe fully supports trust reform. As a land-based Tribe with

substantial natural resource interests—most notably oil and gas production—the

Northern Arapaho Tribe would undoubtedly benefit from a reformed and fully functioning trust system.

However, the Northern Arapaho Tribe is deeply concerned about the manner in

which the current attempt at reform has been put forth. Foremost among the Northern Arapaho Tribe’s concerns is the lack of meaningful consultation between the

United States and any sovereign Tribe—particularly the Northern Arapaho Tribe.

Although both you and the Secretary were present for a purported consultation

meeting in Albuquerque on December 13, 2001, this meeting can hardly be considered meaningful consultation. In the first place, the failure of the Department of the

Interior to be more forthcoming with information about the proposed Bureau made

it impossible for any Tribal leader to make meaningful and insightful suggestions

or comments. In the second place, the after-the-fact nature of the event itself created considerable resentment among many of the attendees, effectively eliminating

the possibility of meaningful dialogue. At a breakfast meeting with the Council of

Large Land Based Tribes, Deputy Assistant Secretary Wayne Smith represented

that the Albuquerque meeting would be nothing more than a ‘‘listening session.’’

The Northern Arapaho Tribe respectfully suggests that meaningful government-togovernment consultation requires actual dialogue between governments, not one

government listening in silence to the grievances of another.

That stated, the Northern Arapaho Tribe believes Secretary Norton can and

should undertake reform of the trust current trust system. However, such reform

can only work if undertaken in a deliberate and comprehensive manner. This means

first and foremost that Secretary Norton must withdraw—if not already withdrawn—the request before Congress to reprogram funds for the proposed Bureau.

Second, Secretary Norton must agree that not only will any trust reform in no way

diminish the current trust obligations owed by the United States to Tribes and individuals, but will also preserve and enhance that trust relationship. Third, trust reform should affirm and support Tribal sovereignty, self-government and self-determination, and should not undermine any treaties or executive orders between Tribes

and the United States. Fourth, in any trust reform, the concerns of the present and

the future need to take precedence over the failures of the past. The Northern Arapaho Tribe is confident that Secretary Norton is mindful of these basic principles,

and will diligently observe them in any trust reform she undertakes.

As stated above, trust reform is impossible without consultation. So far, the Secretary’s attempts at consultation have been unsatisfactory. However, this is not to

say that meaningful consultation cannot be accomplished. The first step in a meaningful consultation process is to give all concerned parties a common base of information. This means that the Secretary needs to tell Tribes—specifically the Northern Arapaho Tribe—exactly what she intends to do with respect to trust reform, including how this proposed reform will result in measurable improvements over the

services currently in place on the Wind River Reservation. The Northern Arapaho

respectfully request this information, in writing, no later than January 15, 2002.

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Without specific information, the meaningful dialogue between sovereigns embodied

in government-to-government consultation simply cannot be accomplished.

Additionally, as you and Secretary Norton are both undoubtedly aware, Congress

tasked the Department of the Interior with trust reform in 1994. Although the

Northern Arapaho Tribe understands that many of the problems facing the Secretary now with respect to trust reform were inherited from past administrations,

we would like to know why the requirements and recommendations made pursuant

to the 1994 Act have not been implemented, or if implemented, have not been successful. The Northern Arapaho Tribe requests that the Secretary publish, by February 1, 2002, an account of why each of the reforms proposed in 1994 has failed,

either in implementation or effect. We are confident that the Secretary agrees that

without a frank and thorough examination of the failures of the recent past, no

progress can be made in trust reform.

With respect to the actual effect of trust reform, the Northern Arapaho Tribe

strongly recommends the Secretary consider the following: any reform of the Bureau

of Indian Affairs should increase the ability of each reservation or service area to

tailor programs and services to the specific needs of that reservation or service area;

any cost savings realized from trust reform in any way should go directly to increased services to the trust beneficiaries themselves; any system implemented to

track trust activity needs to be flexible enough to both provide necessary trust accountability and meet the unique needs of specific geographical areas; trust reform

should not come at the expense of any services or programs currently provided to

Tribes or individuals; and Indian hiring preference of qualified personnel must be

continued in any trust reform. Finally, while the mistakes of the past should not

prevent trust reform, neither can they be ignored. Trust reform should not preclude

any recovery of damages by Tribes or individuals for past trust mismanagement, nor

should it create a statute of limitations or other bar to recovery for such mismanagement.

In closing, the Northern Arapaho Tribe is committed to meaningful trust reform,

and as a large, land-based Tribe with extensive natural resources would benefit

from such reform. Secretary Norton is certainly correct in recognizing the problem

with the current trust system; however, without further details of her current plan

for reforming this system, she cannot engage in meaningful, government-to-government consultation and dialogue with Tribes. The Northern Arapaho Tribe would like

to engage in discussion with the Secretary and provide whatever assistance possible

in furthering meaningful trust reform, but first the Secretary must let us know

what we would discuss.

Sincerely,

Anthony A. Addison,

Chairman,

Northern Arapaho Business Council

[A statement submitted for the record by Governor Anoatubby

follows:]

Statement of Chickasaw Nation Governor Bill Anoatubby submitted for the

record

It is a pleasure, on behalf of the Chickasaw Nation, to provide this written testimony to the U.S. House of Representatives Resources Committee on the topic of

trust funds management reform. This is a topic of much concern throughout Indian

Country, and it is one which has the potential to affect every single Native American in this country.

The Chickasaw Nation is strongly in support of trust funds management reform.

For far too long, assets of tribes and private citizens have been relegated to a ‘‘back

room’’ of accounting. The tribes have entrusted the federal government with those

funds for safekeeping. That trust has been violated over and over again, compounded by the federal government’s inability to account for those dollars—dollars

which rightfully belong to the tribes and to their citizens. Reforming the system of

management of those funds is not only a necessity, it is a moral obligation which

should be addressed thoroughly and as efficiently as possible.

We ask the Committee’s understanding in stating that we oppose any court-appointed receiver in the matter of accounting for and/or managing individual trust

funds accounts. It has always been the obligation of the U.S. Department of the Interior, through the Bureau of Indian Affairs, to manage and account for these funds.

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It should remain that way, in order that a clear and extant line of responsibility

remain in place for the monumental task which lies ahead.

The process for correcting the current situation while satisfying the concerns of

the federal court, should be independent of the Department of the Interior, conducted by independent advisors with private-sector expertise in financial trust rehabilitation. We most impressed with the testimony before the Committee of Donald

Gray, Esq., who has over 25 years experience in reconciling and rehabilitating longterm complex trusts and other money flow arrangements involving billions of dollars

of managed assets with some of the most prestigious financial institutions in this

country. The Department of the Interior simply lacks this kind of expertise. We recommend and advocate a legislative solution.

Further, we wish to affirm our support for tribal consultation in this process. As

one of two representatives to the task force for Oklahoma, I am keenly aware of

how vital tribal consultation is to the success of this process. Tribes must have a

role in the administration of the new sovereignty and the study of restructuring

trust asset management.

We urge the Congress to take expeditious and decisive initiative to propose a plan

for revamping federal accountability for individual Indian trust monies. The process

for management of tribal trust funds should not be disturbed.

We appreciate being given the opportunity to provide these comments, and wish

the committee every success in its deliberations.

[A counterproposal submitted for the record by the Assiniboine &

Sioux Tribes follows:]

Assiniboine & Sioux Tribes Counterproposal to Bureau of Indian Trust

Assets Management (BITAM); BIA Reorganization Advisory Group, Draft

12/12/01

In response to the reform proposals submitted by the Department of the Interior

and Bureau of Indian Affairs Advisory Group, the Assiniboine and Sioux Tribes submits the following counterproposal which is designed to achieve a lasting and comprehensive trust reform in the management of Indian trust assets.

The counterproposal includes infusion of additional resources where they are

needed to provide true lasting trust reform—at the reservation level. It is the level

and location where protection and management of trust assets occur. It is also

where the Bureau of Indian Affair’s legal responsibilities on behalf of the Federal

government for accountability and responsibility originates.

This counterproposal does not create additional levels of bureaucracy that do

nothing to enhance or improve the quality of fiduciary performance but rather provides the professional staff, facilities, and equipment where all documents and

transactions originate which enhances the quality of fiduciary performance. It also

returns those functions which have been fractured from the Bureau of Indian Affairs—OST, OTFM, MMS—to one entity control.

It maintains the basic structure of the Bureau of Indian Affairs by retaining a

Central Office operation in oversight, legislative, and management assurance facets

but requires meaningful consultation with the local levels prior to any legislative

proposals. In this reorganization image, regional offices are virtually expendable

with professional staffing and funding resource reassigned to the field offices at the

agency level. Central Office operations remain with policy and regulation functions,

however direct contact with the field offices are envisioned for clear working principles and impacts prior to any formal proposals being adopted.

In support example, currently 62 positions at the Fort Peck Agency consists of 50

full time and 12 career seasonal positions. The funding support for these positions

totals $2,202,958 with $122,019 agency operational costs for over 15 baseline program functions handling approximately 2,112,000 trust acres with an estimated

$11,100,000 annual trust fund disbursement. Of the 50 full time positions at Fort

Peck, only 12 are professional level with a surprising gap in professional accounting,

information and records management and technology, let alone not considering the

various specialized fields required at the agency level management of trust assets.

Professional services were to be provided by regional/central office staff for any

problem areas in field operations, a cumbersome unworkable procedure that has resulted in enormous delays in all services, including long term management dysfunctions.

The following proposal envisions the Assiniboine and Sioux Tribes’ full service

Agency operations only. As such, it is intended to be a blueprint for further developVerDate 11-MAY-2000 09:07 Sep 26, 2002 Jkt 000000 PO 00000 Frm 00191 Fmt 6633 Sfmt 6621 77526.TXT HRESOUR1 PsN: HRESOUR1
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ment in other levels of operations as well as use by other Tribes to develop as their

unique operations require.

FORT PECK AGENCY REFORM PROPOSAL

FUNCTIONAL REORGANIZATION STATEMENT

The Fort Peck Agency is located at Poplar, Montana. The Agency jurisdiction lies

in the northeast corner of the State of Montana. It is responsible for the delivery

of all Bureau of Indian Affairs programs, administration and management services

(1) to the tribal government, individual tribal members, and trust resources of the

Assiniboine and Sioux Tribes of the Fort Peck Reservation; (2) to the trust resources

owned by individual tribal members of the Turtle Mountain Tribe of Chippewa

Indians in North Dakota which are located in northeastern Montana outside of the

external boundaries of the Fort Peck Reservation; and (3) individual Indians who

are members of other tribes but reside in the Fort Peck Agency jurisdiction.

Two separate tribal groups, the Assiniboine and the Sioux, have maintained a single tribal government entity on the Fort Peck Reservation since its establishment

in 1888. The two tribes rejected the Indian Reorganization Act of 1934 but operate

under a constitution approved by the Commissioner of Indian Affairs in 1960. Tribal

business is conducted through an Executive Board comprised of a Chairman, Vice–

Chairman, Sergeant-at Arms, and twelve Members. All are elected at large in elections held in odd numbered years. Although a single joint tribal membership roll

is maintained, each tribe exercises control and supervision over its own enrollment.

Members of the Turtle Mountain Tribe of Chippewa Indians in North Dakota own

trust land allotments situated outside of the boundaries of the Fort Peck Reservation in northeastern Montana which are administered and managed by the Fort

Peck Agency. These Indian landowners are not affiliated with or represented by the

Assiniboine and Sioux Tribes. Their business is transacted individually directly with

the Fort Peck Agency staff.

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1Misplaced Trust: The Bureau of Indian Affairs Mismanagement of the Indian Trust Fund,

Committee Reports 102d Congress, House Report. 102–499. 2Minerals Management Service 2000 Year End Report.

[A statement submitted for the record by Mr. Bradley follows:]

Statement of Carman Bradley, Chairman, Council of Energy

Resource Tribes

On behalf the Council of Energy Resource Tribes (‘‘CERT’’) I extend my appreciation to the Resources Committee and Chairman Hansen and Ranking Member Rahall for providing CERT the opportunity to submit testimony on Indian trust management reform. My name is Carman Bradley and I am Chairman of CERT and

also Chairperson for the Kaibab Paiute Tribe.

CERT was formed in 1975 by twenty-five energy resource-owning Tribes who

shared the philosophy that collectively Tribes could manage and responsibly develop

their natural resources in a manner that reflects Tribal priorities and values. Tribes

owning energy resources collaborated to rewrite the federal law and policy with respect to Indian minerals and royalty accounting with the Indian Mineral Development Act of 1982 and the Federal Oil and Gas Royalty Management Act. Tribes

themselves have developed sophisticated capabilities in resource management and

development as well as in revenue accounting and auditing that in many cases exceed those of private industry and government agencies charged with similar responsibilities for public resources. Each CERT member Tribe’s chief elected official

sits on the CERT Board of Directors. Because of vast resource ownership and sizable

income generated from energy minerals, each Tribe individually, and Tribes collectively in CERT, has a great stake in trust management reform.

The Bureau of Indian Affairs, Office of Trust Fund Management, states that 77

percent of the Fund assets are held by 8 percent of the Tribes 1. CERT member

Tribes own vast quantities of oil, coal, natural gas mineral resources and vast quantities of land and other natural resources that contribute the greatest part of the

income flow through the tribal trust fund accounts. Energy mineral production from

Indian lands in 2000 was 9.3 million barrels of oil, 299 billion cubic feet of gas and

21.4 million short tons of coal. Energy minerals from Indian lands remain significant at greater than 10% of total federal on shore production 2. Any trust reform

measures taken by the Department of the Interior (DOI) will significantly impact

CERT member Tribes. The trust income goes to support the discharge of Tribal governmental responsibilities from education to law enforcement and from resource

management to economic development. For many of the energy resource Tribes, this

income represents the majority of their non-federal income for investing in their

own social and economic development.

CERT applauds Secretary Norton’s desire to address trust management reform

within the DOI. However, CERT has grave concerns about the procedure that Secretary Norton has followed in development of a reform plan and the Department’s

proposal to transfer fiduciary trust services to a new Bureau in an attempt to separate fiduciary trust responsibilities from other trust services provided by the Bureau

of Indian Affairs (‘‘BIA’’). CERT strongly opposes the DOI’s Bureau of Indian Trust

Assets Management (‘‘BITAM’’) reorganization proposal and the reprogramming of

BIA Fiscal Year 2003 appropriations to support the development of the Department’s proposal.

The DOI’s proposal is incomplete and does not address critical elements that prevent the Department from enacting effective trust management reform. CERT contends that the Department must work with all stakeholders including Tribes, Tribal

organizations, Indian individuals, and Congress, to develop a comprehensive, transparent trust management reform plan. Participatory methodologies in roundtable

style, open dialogue, collaboration and problem solving on a regional level will ensure full Tribal participation. CERT suggests that the Bureau define the regional

areas according to Tribal regions and not confined to BIA administrative regions.

The role of Tribal organization should be recognized by the Bureau as a valuable

information source providing important subject matter expertise to supplement, but

not replace the important Tribal work at the regional level.

The atmosphere between the DOI and Tribes is poisoned with distrust and suspicion. The Secretary of the Interior will fail in her attempts to bring positive

change until she and the Department as a federal institution addresses the lack of

faith and confidence with their Tribal constituencies. ‘‘No government policy toward

Indians can be fully effective unless there is a relationship of trust between the

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3 Nixon, Special Message to Congress on Indian Affairs, July 8, 1970.

4 Nixon, Special Message to Congress on Indian Affairs, July 8, 1970.

5 Joel Dyer, ‘‘Billions Missing From U.S. Indian Trust Fund.’’

Federal government and the Indian people.’’ 3 Recent actions taken by Secretary

Norton and her senior officials at the DOI reduce the little confidence Tribes hold

in the DOI. Secretary Norton must answer how she intends to establish the conditions necessary for the Department and the Tribes to work together to solve the crisis that their mismanagement of their responsibilities to the Indian Trust created.

CERT challenges the Secretary’s testimony presented to the Resources Committee

on February 6, 2002 in which she states that Tribes are opposed to change and

would like to see the BIA continue with the current trust management practices.

Tribes support trust management reform to ensure Tribes are getting paid on time,

at fair market value, royalty payments; and the Department develop an accurate

accounting system that will interface with Tribal computer systems. Tribes have

unified in a single voice to oppose the Secretary’s BITAM proposal for reform. Tribal

opposition to the Department’s reorganization plan should not be, and cannot be,

misconstrued for opposition to trust management reform.

Inadequacies of BITAM Proposal

The BITAM proposal is fatally flawed as it fails to address several barriers that

have prevented the Department from successful trust management reform. CERT

does not support any proposal that does not address the issues outlined below.

• DOI Secretary’s Conflict of Interest as Trustee

The Federal Government’s trust responsibility includes the protection of

Indian lands and natural resources, provision of social, medical, and education and other essential services necessary for survival of Tribal members, and protection of Tribal political and territorial integrity. The DOI is

to act on behalf of Tribal interests in conflicts and disputes that arise from

the protection and the development of Tribal lands and natural resources.

Former President Nixon recognized this conflict of interest on behalf of the

United States. He said, ‘‘[T] he Federal government is faced with an inherent conflict of interest. The Secretary of the Interior and the Attorney General must at the same time advance both the national interest in the use

of land and water rights and the private interests of Indians in land which

the government holds as trustee.’’ 4

The conflict of interest described by President Nixon cannot be more evident than in the Department’s handling of the Cobell litigation and its response to the demand that it reform its management of the Indian trust.

The Department of Justice represents the Department of the Interior and

the Department of Treasury on behalf of the federal government against

the Indians with whom it has a trust obligation. Litigation in the trust mismanagement debacle seems to be driven by DOJ’s desire to minimize the

government’s liability to its trust beneficiary. Management reform has been

frustrated even after an act of Congress mandated its reform.

Another example of DOI and DOJ’s conflict of interest is evident in their

use of the Arthur Andersen report. The BIA contracted Arthur Andersen

to reconcile both the Tribal accounts and a random sampling of some 17,000

IIM accounts. Arthur Andersen was only able to reconcile the 2,000 Tribal

accounts for a short time period from 1973 to 1992. For this 20-year period

alone, the auditor noted that at least $2.4 billion in Tribal trust accounts

was unaccounted for and billions of dollars more were virtually untraceable

because of the questionable nature of the government records. Arthur Andersen was unable to reconcile any of the IIM accounts and further estimated that to begin such a process would cost upwards of $281 million.

‘‘The accounting firm claimed that the government had destroyed, never

created or otherwise did not maintain, the records necessary to conduct a

reconciliation. Even if the full IIM audit were performed, the firm said the

costly information would be of little or no value when it came to providing

IIM account holders with any real assurance that their balances are correct.’’ 5 Although the Arthur Andersen report plainly illustrates difficulties

to full trust fund reconciliation, the Department of Justice has indicated

their intention to enter a motion for the Arthur Andersen report marking

the starting point for statute of limitations for Tribes and individuals to file

claims for damages against the Department of the Interior. And yet, it is

the Department of Justice that should litigate against the Department of

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the Interior on behalf of the Tribes and Indian individuals for damages

against the DOI.

The inherent conflict of interest creates an ethical impediment for the Secretary of the Interior to unilaterally develop and implement a plan for reforming the management of Indian trust resources in ‘‘good faith’’. The Secretary must demonstrate that her plan resolves this inherent conflict of interest. • Basic Standards for Trust Management Reform

First Principles of the Federal Indian Trust

• Trustee deals in good faith.

• Trustee cannot engage in self-dealing. The Trustee cannot have a conflict

of interest with the beneficiary of the trust nor can it place its administrative convenience before the trust.

• The Trustee makes FULL DISCLOSURE of all known losses, thefts, and

errors past and present.

• Tribal resource information is proprietary, not public information, and is

not subject to freedom of information disclosure.

• To assure that the Trustee is adhering to the reform systems principles

and that the systems continue to have integrity over time and that there

is oversight by an Independent Regulatory Body.

• That the Trust management and accounting system is based on the terms

of the organic documents that give rise to the fiduciary trust responsibility.

Requirements that a new management system must exhibit:

• Legal documents from which the trust arises—treaties, statutes, executive

orders, purchases and documents that created the trust lands—from the

foundation for the information systems;

• Agreed upon land/resource management responsibilities are accounted for;

• Tribal and individual land description records are integrated;

• Surface and subsurface resources are integrated in the data base;

• Contracts, leases, rights-of-way agreement terms and conditions are used

in the system;

• Monitoring of activities such as mineral production to assure compliance

to terms of the agreements, applicable regulations and environmental

standards are integrated;

• Accounting based on legal requirements created by court decisions, statutes, regulations and contract terms are adopted;

• All Tribal resources management ordinances, zoning, and land use that

affect Tribal resources management, protection and development are integrated into the system; and,

• Management and information systems design are compatible with local

Tribal administration.

Violation of Executive Order 13175—Consultation and Coordination with Indian

Tribal Governments

Secretary Norton did not follow guidance for consultation with Indian Tribal Governments on Departmental actions that affect Indian Tribes. By not consulting with

Tribes, the DOI was unable to completely develop their plan and therefore announced BITAM with only a skeleton sketch of the new Bureau and its functions.

The DOI cannot completely answer or fill in the blank spaces of the plan without

seeking advice from Tribes. Again, this dilemma was anticipated by President Nixon

when he said, ‘‘The Federal government needs Indian leadership if its assistance is

to be effective in improving the conditions of Indian life.’’ Secretary Norton forgot

this important advice from past leadership of her Party who knew in 1970 that only

with Tribal support and advice could effective policy be developed. It seems that she

also forgot that the basis of democracy is that government can only govern with the

consent of the governed. CERT advocates that DOI consult with all Tribes on a government-to-government basis. CERT does not recognize the series of meetings DOI

is currently convening around the country as ‘‘government-to-government’’ consultation.

Implementation of Cost Analysis for BITAM

The BITAM proposal cannot be seriously analyzed. One undisputable factor that

can be substantiated is that implementation of BITAM will be very expensive, confusing and will cripple BIA and Tribal operations beyond current inconveniences.

The major objective of the Norton plan is to establish, through consolidation of management responsibilities of Indian trust assets, a single Office responsible for trust

management. The BITAM plan does not explain how adequate funding and staff reVerDate 11-MAY-2000 09:07 Sep 26, 2002 Jkt 000000 PO 00000 Frm 00205 Fmt 6633 Sfmt 6621 77526.TXT HRESOUR1 PsN: HRESOUR1
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sources will be made available to the Special Trustee and the new management;

how another, separate and distinct Bureau will be adequately funded to complete

all of its assigned duties; how duties between the field BIA employees will be separated and reassigned with minimum confusion and loss of services to Tribal members. The very real risks to not only the Trust beneficiaries but to entire Tribal communities associated with the new Bureau far outweigh any potential benefit BITAM

might provide.

Full Review of DOI’s Implementation of The American Indian Trust Fund

Management Reform Act of 1994

CERT calls on Congress to conduct a thorough review of DOI’s implementation

of The American Indian Trust Fund Management Reform Act of 1994 (PL 103–412)

and the failure of the Office of Special Trustee to bring about the necessary measures within the Department for trust management reform. CERT asserts that Secretary Norton has not closely analyzed the problems of implementing the Reform

Act of 1994. In some respects, the idea behind the OST and BITAM are similar in

theory, however the OST has been largely unsuccessful in any reform measures for

the accounting systems or implementing policy change within the involved Bureaus

for accurate accounting or reconciliation of the IIM or Tribal accounts. The Secretary has not been responsive to the Special Trustee and OST has never been adequately funded or staffed to perform the required duties under law. Neither the Secretary nor her predecessor ever vested any authority to the Special Trustee preventing the Special Trustee from implementing policy change in a timely manner.

This failure must be explained.

Perceived Threat of Termination of the Bureau of Indian Affairs

Tribes across the Nation have expressed concern about a hidden agenda of the

Secretary to terminate the BIA after BITAM has been completely established. The

DOI perceives BIA programs and funding that are not directly related to the fiduciary trust obligations as ‘‘services’’ to Indian people based upon the concept that

Tribes cannot function without federal government help, or in short, welfare for the

Indians. All functions of the BIA are trust obligations and are integral to the

Federal Indian Trust as services to Indians because of Indian status. Since the

1970s with the advent of Indian Policy based on Tribal Self-determination, the Executive and Legislative Branches of government have acknowledged that the trust obligations are based upon agreements and solemn obligations between the United

States and Tribes. Tribes surrendered claims to vast tracts of land and submitted

to forced lifestyle changes in exchange for essential services such as health, education and public safety to ensure a quality of life enjoyed by other Americans. BIA

services such as education, construction, environmental permitting, and recent congressional laws such as Indian gaming, Indian Child Welfare Act, and environmental regulatory authority and others are based upon the U.S. constitution, treaties and court decisions affirming that the federal trust obligation includes a social

contract, protection of political autonomy as well as a fiduciary responsibility.

While the responsibility for land, resources and revenues derived from them make

the fiduciary the more tangible of the three trust obligations and, in theory the easier to fulfill and to fix, the fiduciary trust obligation is inseparably linked to the social contract and political protection aspects of the trust obligation. Any proposal for

trust reform that does not recognize the full federal obligation to Tribes will fail and

perpetrate the specter of termination of federal trust obligation to Indian people.

Separating the fiduciary trust obligation from the other trust responsibilities will

not bring about trust management reform. The Secretary has not addressed how the

Minerals Management Services and the Bureau of Land Management fiduciary

trust management services will be integrated into the BITAM proposal. Tribes are

validated in their concerns of DOI dispelling their all trust responsibilities not related to the fiduciary trust obligation. CERT asks Congressional support to ensure

that all trust obligations are preserved and honored.

Alliance with the Intertribal Monitoring Association on Indian Trust Funds

CERT has a long history and close working relationship with the Intertribal Monitoring Association on Indian Trust Funds (‘‘ITMA’’). Many of CERT member tribes

are also members of ITMA. CERT has worked with ITMA on trust management reform efforts and will continue to support their recommendations and position on

trust management reform.

Conclusion

The Council of Energy Resource views Secretary Norton’s decisive action to fix the

trust management problems as an opportunity to reform the Trust to fulfill the

federal government’s fiduciary obligation and bring the concept of Trust Protection

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Responsibility into the twenty-first century based upon modern American ideals of

a government-government relationship with Tribal control over Tribal trust resources and funds and away from the eighteenth century concepts of Federal control

over Indian. CERT looks forward to working with the Resources Committee to develop legislation that will meet this goal.

[A statement submitted for the record by the Great Plains Tribal

Chairmen’s Association follows:]

Statement of the Great Plains Tribal Chairmen’s Association to the Senate

Committee on Indian Affairs on Management of Indian Trust Funds,

February 26, 2002

Mr. Chairman, Honorable Committee Members, and others present. Thank you

very much for allowing us this opportunity to testify today on the very important

matter of Trust Fund Management Reform. The Great Plains Tribal Chairman’s Association consists of sixteen tribes in three states that include: The Cheyenne River

Sioux Tribe, The Crow Creek Sioux Tribe, Three Affiliated Tribes, Spirit Lake Tribe,

Lower Brule Sioux Tribe, Oglala Sioux Tribe, Rosebud Sioux Tribe, Sisseton–

Wahpeton Sioux Tribe, Standing Rock Sioux Tribe, Turtle Mountain Band of Chippewa, Omaha Tribe, Santee Sioux Tribe, Winnebago Tribe, Yankton Sioux Tribe,

Ponca Tribe of Nebraska, and the Flandreau Santee Sioux Tribe.

According to federal statistics, the Great Plains Region accounts for almost half

of the total Native American land-base and over half of the total trust accounts. Additionally, the Great Plains Region accounts for the majority of the tribal trust

funds, with the largest being the Sioux Nation Trust Fund of over six hundred million dollars, and several tribal settlement funds or JTAC funds, with hundreds of

millions of dollars.

As the majority of these trust funds are managed by the Bureau of Indian Affairs

(BIA) and the Office of the Special Trustee (OST), we in the Great Plains Region

have a very large interest in the outcome of federal trust management reform.

HISTORY

The majority of the tribes in the Great Plains Region are treaty tribes. These

tribes have been promised by the United States Government that their interests and

assets would be protected. We were promised that our money and assets would be

safeguarded and that the federal government would provide us with full fiduciary

and trust services.But history has shown that the exact opposite has been true. Native American money has been squandered, misspent, stolen, and mismanaged while

Native American assets have been lost, swindled, and mismanaged by the federal

government. Trust is the predominant job of the Bureau of Indian affairs since it

was conceived over 150 years ago. But, unfortunately, they have a long and sordid

history of mismanaging that trust for Native Americans and their resources and assets.

For many years tribes, tribal members, and organizations have been reporting

these facts to the Department of Interior, the Bureau of Indian Affairs, and Congress. We have heard many promises. As a result, organizations like the Inter-tribal

Monitoring Association on Tribal Trust Funds (ITMA) have made it their mission

to bring to the attention of Congress, the Administration, and the world, this federal

mismanagement of tribal assets and funds.Congress took charge and began to investigate the allegations against the federal government of this mismanaged trust. In

1992, Congress mandated that a reconciliation and audit of select trust fund accounts be done. A CPA firm, Arthur Anderson & Company, was hired for this very

daunting task. The outcome was as ITMA had expected. The BIA could not account

for over two billion dollars of Native American tribal trust money.

This was not even counting all of the trust fund accounts in the BIA, nor the IIM

(Individual Indian Money) accounts. And the reconciliation only went back a few

years. Estimates are that the total unaccounted for in Indian Trust Money’s could

be in the billions of dollars. And that is not even including the trust lands and assets that have been taken from us.In late 1993 ITMA put together the Indian Trust

Fund Reform Act in hopes of the Federal government truly reforming the federal

trust program. Instead, after much opposition by the Department of Interior, Native

America was given half- hearted legislation in the Indian Trust Fund Reform Act

of 1994. And since then, Native America has faced opposition from the Department

of Interior at any meaningful attempt at true trust management reform.

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1This information is available on the Internet on the DOI website.

2This information is also available on the Internet at the DOI website.

3Tab A..Nov. 14, 2001 Memo from McCaleb and Slonaker to Norton, included Tab B

4Tab A..Nov. 14, 2001 Memo from Norton to McCaleb and Slonaker

5Federal Court filing: Declaration of Steven Griles

Congress thankfully did attempt to make the Department of Interior improve

Indian trust asset management and provide basic fiduciary services to trust beneficiaries in the 1994 Indian Trust Fund Reform Act.

A new department within Interior was created, as a result of this act; the Office

of Special Trustee. A Special Trustee for American Indians was hired. An investment banker by the name of Paul Homan took this job. Under Mr. Homan, the Office of Trust Fund Management was transferred over to OST. The BIA kept all

other trust functions.

Mr. Homan also instituted a new plan for trust, called the High Level Implementation Plan (HLIP). This HLIP included several major components, two of which are

the most controversial; TAAMS (Trust Asset Accounting Management System) and

TFAS (Trust Fund Accounting System). TAAMS is under the BIA and TFAS under

the OST.

But, then Secretary of Interior Babbitt continually interfered and undermined his

efforts. Mr. Homan resigned as a result of the negative politics and constant interference from the Department of Interior.

Additionally, as a result of the consistent failure on the part of the Department

of Interior, Eloise Cobell of the Blackfeet Nation filed a class action lawsuit on behalf tribal allottees in United States Federal Court. This has resulted in a huge

amount of media attention to the issue. And the previous Secretary of Interior, Secretary of Treasury, and Assistant Secretary of Indian Affairs were all held in contempt of court for failing to protect native trust and records.The current Special

Trustee for American Indians, Mr. Tom Slonaker, has tried unsuccessfully to get the

HLIP in working order. There have been many problems in TAAMS. This led Secretary Norton, to do an independent study of the HLIP and trust reform efforts in

June 2001. The Department of Interior contracted with EDS (Electronic Data Systems Corporation) to conduct this study. EDS was to do an assessment of TAAMS

and the BIA Data Cleanup Project. (A project that would ensure that only good

clean data was inputted into the system).

EDS published a ‘‘confidential’’ report titled: DOI Trust Reform, TAAMS/BIA Data

Cleanup Recommendations: ‘‘For Comments’’ Report dated October 31, 2001. 1 Concurrently in Federal Court DOI Secretary Gayle Norton was on the verge of being

declared in contempt of court.

As a result, the Department of Interior put pressure on EDS to publish their interim report on TAAMS and BIA Data Cleanup. As stated on page seven of that

report: ‘‘Subsequent to the release of the ‘‘Recommendations: For Comments Report’’, the DOI asked EDS to accelerate the development and publication of a roadmap.’’ What this means is DOI was worried about the Court and hurried EDS to

get their report out so they could use it as a means for filing in court.

In collaboration with the DOI, EDS shortened the comment period that was to

be provided to tribes on the October 31st report and prematurely published the report entitled ‘‘Interim Report and Roadmap for TAAMS and BIA Data Cleanup,’’

dated November 12, 2001. 2 This report said, and I quote:

‘‘The EDS Report contains the following key Recommendations for improving

Indian trust asset management:

• Immediately appoint a single, accountable Trust Reform Executive Sponsor

• Develop an overarching trust operations business model

• Adopt an overall business and computer systems architecture

• Adopt a consistent information systems acquisition strategy

• Implement consistent technology frameworks, methods, and tools

• Establish a trust program management center

• Execute comprehensive staffing plans for all participating organizations.’’

This report led the Special Trustee, Tom Slonaker, and the Assistant Secretary

of Indian Affairs, Neal McCaleb, to immediately issue a joint memo to Secretary

Norton recommending, ‘‘a dramatic change in organization and management structure for Indian trust reform and trust operations.’’ 3 (See Tab A) Secretary Norton

concurred with their recommendations and directed Interior staff to begin the process of reorganizing DOI’s Indian trust asset management systems. 4 (See Tab A)

This prompted Steven Griles, Deputy Secretary of DOI, to immediately file in

Federal Court a document outlining the reorganization on November 14, 2001. 5 This

reorganization would, in Griles own language:

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6 Reorganization to Improve Indian Trust Asset Management

7 1–8–02 Keith Beartusk..includes: Draft memo 12–12–01 Version 6.1

‘‘consolidate/s Indian trust asset management functions in a single agency

separate from the OST and BIA: the Bureau of Indian Trust Assets Management. Segregating these trust functions is intended, as in the private

sector, to facilitate the development of performance measures, processes,

controls, and systems that are designed to meet Interior’s fiduciary obligations.

The Bureau of Indian Trust Assets Management will report to an Assistant

Secretary for Indian Trust Assets Management. This new Assistant Secretary will have authority and responsibility for Indian trust asset management, The Special Trustee will continue to perform oversight for Interior’s trust reform efforts. BIA, under the supervision of the Assistant Secretary

- Indian Affairs, will continue to provide those services to Indian tribes and

individuals that are not related to trust assets.’’ (Griles court filing–DOI– 11/14/01)

The Department of Interior goes on to say:

‘‘The proposed reorganization impacts many interested parties. Interior has

begun consultation with Indian tribes and with Congress. Appropriate notification to departmental employees and union representatives will occur on

November 15, 2001. Also, candidates for the Assistant Secretary and the

Bureau Director must be found. The Assistant Secretary must be nominated and confirmed.

Trust reform activities will continue during this transition process. The

final organization structure will depend upon the results of the consultation

process. Implementation will progress as soon as it becomes final. In the

meantime, three key subprojects (TAAMS, BIA Data Cleanup, and Probate)

will be supervised by Ms. Donna Erwin, previously Deputy Special Trustee

for Trust Systems and Projects, under a newly created Office of Trust Transition in the Office of the Secretary. Planning for the transfer of the remaining subprojects is underway. Project resources needed in the short

term are being identified and work with EDS to develop a business model

is underway.

Meanwhile, OHTA (Office of Historical Trust), created by Secretarial Directive on July 10, 2001, has proceeded on its announced schedule with its

task of planning, organizing, directing and executing the historical accounting of EM accounts. On September 10, 2001, OHTA issued a ‘Blueprint for

Developing the Comprehensive Historical Accounting Plan for Individual

Indian Money Accounts,’ which sets forth a description and timetable for

completion of all steps necessary to staff and develop the plan for the historical accounting.

On November 7, 2001, OHTA issued its ‘Report Identifying Preliminary

Work for the Historical Accounting.’ It identifies work that is underway and

work that can begin immediately to constitute an historical accounting and

pilot test possible methods and assumptions about how to conduct the historical accounting, among other tasks. In the, proposed reorganization,

OHTA will be a line organization under the new Assistant Secretary.’’ On November 15th, 2001 the Department of Interior released a document entitled ‘‘Reorganization to Improve Indian Trust Asset Management’’. 6 This was the closest

thing to a plan that they had at that point. In December 2001, the National Congress of American Indians passed a resolution in Spokane, Washington asking for

consultation with Native America and also asking for the creation of a task force

to study the proposed reorganization by an overwhelming unanimous vote.

On January 8th, 2002, Keith Beartusk, BIA Rocky Mountain Regional Director,

sent an email that had a draft alternative proposal from the BIA Regional Director

Reorganization Advisory Group. This document makes clear that the BIA will not

be able to survive if all trust functions are taken away from it. 7

Since mid–December, Secretary Norton and Assistant Secretary McCaleb have

convened ‘‘consultation’’ meetings around the country and have heard overwhelming

opposition from Tribal Nations and Tribal people to the creation of BITAM.

21OPPOSITION TO BITAM

First it is important to understand that we support trust management reform.

But, not under these circumstances! Trust reform should be for the sake of Native

America, not for the sake of Department of Interior Secretary Gayle Norton! On November 14th, 2001, Secretary Norton introduced to the Federal Court the concept

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8See Nov. 14, 2001 EDS Interim Report and Roadmap for TAAMS and BIA Data Cleanup

Page 31–33

of creating the Bureau of Indian Trust Asset Management. This was in response to

a threat from the court to be held in contempt. The Department of Interior used

as its excuse the Electronic Data Systems Corporation report of November 12th,

2001.

It is very clear as to the intent of Secretary Norton. Take all trust functions away

from OST and BIA and create BITAM. Do it with little consultation from the tribes,

BIA, OST, Congress or anyone else. And keep in mind that this is not for the sake

of Indian Country. No, it is purely being done for her sake. And why is this being

done? Has the Interior Department suddenly decided it was time to ‘‘fix’’ 150 years

of mishandled Native American trust? No, it is in response to the Cobell court case.

If Secretary Norton did not respond as she had, the Court may have taken this trust

authority and placed it under a receivership. And of course there was still the contempt of court charge hanging over her head.

And by doing this, Secretary Norton is able to shift attention from the fact that

TAAMS has been a scandalous nightmare for the BIA, having spent tens of millions

of federal dollars on a system that does not work. They have misled the Court,

Tribes, and Congress about the ‘‘success’’ of TAAMS knowing full well it does not

do the job it was intended to do. 8

And finally, by creating a new agency, there is also the possibility that the BIA

could be completely gutted and have to compete with the new agency for valuable

resources. It has also been proposed that all contracting and compacting functions

be placed under BITAM. This may make the ‘‘638’’ contracting of Roads, Social Services, Education, Police, Courts, etc. very difficult as they would stay under the BIA.

Additionally Assistant Secretary Neal McCaleb said at the Spokane NCAI meeting that the DOI was going to transfer all trust functions from the BIA over to

BITAM. He said that all ‘‘empowerment’’ programs like roads, welfare, law enforcement, etc. would stay with the BIA. This potentially could have a critical impact

in years to come as these programs may be declassified as ‘‘trust’’ programs by the

Federal government.But, in fact, all trust functions do not transfer over to BITAM.

The Minerals Management Service, BLM, and other federal agencies within the Department of Interior remain intact and free to continue their mismanagement of Native American Trust while not being placed under BITAM.

And Secretary Norton has yet to provide Native America with a sufficient plan

or ‘‘Trust operations business model’’. In contrast she has declared that the HLIP

was obsolete, when in fact it has never been implemented to any sufficient degree.DOI has yet to prove that their computer nightmare, TAAMS and TFAS, can

ever interface with a myriad of other DOI ‘‘Trust computer systems’’. The DOI has

failed to adopt a ‘‘consistent information systems acquisition strategy’’, implement

consistent technology frameworks, methods and tools, and ‘‘establish a trust program management center’’.

As a blunt matter of fact, all the DOI has done is to shuffle existing federal employees around, while bringing in ex-federal officials who were part of the problem

to begin with. A far cry from executing a ‘‘comprehensive staffing pattern’’ as suggested by EDS.

SOLUTION

The Solution is simple and to the point. Keep in mind that the DOI is basing this

reorganization and creation of BITAM on the EDS report, and the EDS report says:

• Immediately appoint a single, accountable Trust Reform Executive Sponsor;

• Develop an overarching trust operations business model;

• Adopt an overall business and computer systems architecture;

• Adopt a consistent information systems acquisition strategy;

• Implement consistent technology frameworks, methods, and tools;

• Establish a trust program management center; and

• Execute comprehensive staffing plans for all participating organizations.

BITAM cannot do this because it does not consolidate all trust activities under

a ‘‘single trust reform executive sponsor’’. The intent of DOI Secretary Norton is to

take all trust functions away from OST and BIA and create BITAM, thereby giving

this new agency those functions, but the Secretary’s plan does not transfer any authority from MMS, BLM nor any other agency of the DOI. This in itself falls far

short of the EDS report.

The Great Plains Tribal Chairman’s Association respectfully requests the United

States Senate, through the Senate Committee on Indian Affairs, to consider the

following recommendations for trust management reform:

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• Consolidate all trust activities from within DOI such as OTFM, MMS, and others under the Bureau of Indian Affairs;

• Place all above activities under the existing Director of Trust or a like agency

within the BIA;

• Allow tribes input into the architecture of the High Level Implementation Plan.

(Trust Operations Business Model);

• Implement the High Level Implementation Plan under the newly consolidated

trust management program under the Director of Trust in the BIA;

• Implement all other EDS recommendations as per the report;

• Amend the Indian Trust Reform Act to authorize the Office of the Special Trustee to act as a separate agency apart from the Department of Interior, with the

responsibility of oversight over all trust activities within the BIA.

• Authorize the Office of Special Trustee the power to impose sanctions on any

government agency or department that fails in it’s responsibility for proper administration of Native American trust programs; and

• The Office of Special Trustee should report to Congress and Native America of

all trust activities.

While the solution is simple and to the point, it allows the full EDS recommendations to be carried out. We see this as the simple, cost effective solution to trust

fund reform. It keeps the BIA totally intact while strengthening the BIA’s trust

management capability. It allows for the creation of one centralized system under

the BIA for Trust Fund Management. And it ensures that the BIA will be held accountable.

CONCLUSION

We also feel that the ultimate solution would be to create a Department of Indian

Affairs. The above structure could be placed under this department. It is long overdue for Native American to have it’s own cabinet level position. It is our hopes and

prayers that your honorable Committee and honorable Senators will find the power

and the will to convince the President to implement a plan to establish a Department of Indian Affairs.Until then, prompt passage of our recommendations would

be appreciated.

We thank you for your time and consideration of this testimony.

Written by:

Gregg J. Bourland

Tribal Chairman, Cheyenne River Sioux Tribe

[A statement submitted for the record by the Hoopa Valley Tribe

follows:]

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Statement of the Hoopa Valley Tribe submitted for the record

SGPROP–03

TRIBAL SELF–GOVERNANCE TRUST REFORM PROPOSAL

BACKGROUND.

The origin of federal trust responsibilities to Indian tribes began when the United

States began negotiating and entering into treaties and agreements with sovereign

Indian nations. Those treaties and agreements accomplished a number of key goals,

including: 1) allowing for the transfer of billions of dollars worth of assets, rights

and territories to the United States, 2) providing provided for a number of guaranteed programs and services available to tribes in exchange for lands and rights

ceded, and 3) providing for the preservation of inherent tribal self-governing powers.

The Federal trust responsibilities to individual Indians began with the enactment

of the General Allotment Act in 1887. Since then, many laws and court cases have

further defined those responsibilities, including clarifying management standards

and agreeing to pay liabilities when those standards are breached. It is this legal

and political framework that mandates that tribes and the Federal Government will

conduct their affairs in a government-to-government like fashion. Many federal officials do not seem to understand or possibly appreciate the fact that treaties and

agreements are two party contracts, between tribes and the Federal Government.

And today, now more than 2 centuries later, the Federal Government still struggles

to define what these responsibilities really consist of.

When the U.S. Congress passed laws that authorized the sale, use or disposition

of resources being held by the U.S. for the benefit of a tribe or individual Indians,

they also imposed management responsibilities on the agency that carries out that

function. For example, when the BIA forestry branch sells tribal or allotment timber, they must incorporate land management practices that will ensure that the

tribe’s or Indian’s lands will remain productive. This requirement is what creates

the federal forest management standards that apply to tribal and Indian lands.

Similar standards have been developed for land leasing, grazing permits, water

uses, roads, etc. Likewise, when a Federal agency is charged by law with the responsibility to ‘‘manage’’ tribal and Indian money accounts that were generated from

the sale or use of resources, or from breach of trust lawsuits and the like, then the

Federal Government is responsible for carrying out the prudent management requirements of those accounts. When applying standards to ‘‘trust responsibility’’, the

courts have defined the United States’ responsibilities as being similar to ‘‘how a

prudent person would manage their own resources’’. Basically, this means that if

the BIA or another agency, or their employees would not in their course of doing

business destroy, diminish the value of or otherwise improperly use their own assets, then neither should they do so with tribal or individual Indian resources and

funds that they are charged with overseeing.

Interior Secretary Norton recently announced a proposal to reform the manner in

which the Department of the Interior manages trust assets that are being held for

the benefit of individual Indians and Indian tribes. The Secretary’s proposal includes the establishment of a new Assistant Secretary for Trust Assets Management

and the transfer of all activities presently being managed by the BIA to this new

bureau. Obviously, undertaking the process of developing a new bureau within any

Federal agency will be expensive, time consuming, difficult to staff and ‘‘carving

out’trust related functions from the existing BIA offices may prove to be a quite

complex undertaking. Furthermore, the Self–Governance tribes believe that other

options should also be considered that will accomplish the same level, if not more,

of the intended objectives outlined for the trust reorganization proposal. Therefore,

the Self–Governance Tribes offer the following approaches to addressing the Department’s trust reform concerns:

BITAM—WHAT IS IT?—SCENARIOS A & B—APPENDIX 1.

In November, 2001, Secretary Norton proposed a plan to create a new Bureau of

Indian Trust Asset Management (BITAM). The proposal is reported to be an effort

to transfer all trust related functions presently being carried out by the BIA to the

new BITAM agency. Since the announcement of the BITAM proposal, Tribal leaders

have also been asked to comment of the plan, which is yet to be defined or explained

with any level of detail. Without anything to analyze, input on the BITAM proposal

seems fruitless. Therefore, in an effort to provide constructive analysis of the concept, Appendix 1 attached hereto contains Scenarios A and B of what BITAM could

be. Each scenario also contains an impact analysis of the concepts outlined therein.

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These scenarios also provide a baseline proposal from which alternatives can be

analyzed.

INDIAN TRUST VS. COMMON TRUST.

Since development of the Trust Management Improvement Project, an issue at the

heart of the trust reform effort has been how to establish a process that integrates

both the common law principles of financial management with the unique and fundamental principles of Indian trust law. Within the arena of management of Indian

affairs today, both common law and Indian trust law principles are critical and necessary parts of successful implementation of any trust reform plan. Under common

law standards, courts have ruled that the U.S. must manage trust assets and financial accounts in a prudent manner as if an official were to be managing their own

assets and accounts. This is an essential and fundamental part of the U.S.’’ management of tribal and individual financial accounts. Obviously, the courts would hold

the U.S. liable if they were to manage tribal and individual Indian accounts in a

manner that is not consistent with banking industry standards. However, when

dealing with the management of tribal and individual Indian trust asset management, the emphasis naturally must shift to employing the fundamental principles

of Indian trust law.

Under Indian trust law principles, tribal and individual Indians must be an integral part of both setting standards and carrying out the management activities related to their trust assets. In fact, without such direct involvement, the legal and

political framework of tribal self-government and the U.S/Tribal government-to-government relationship is rendered meaningless. It has been consistently upheld in

case law and Congressional and Administration policy that one of the most fundamentally important inherent principles of tribal self-government is for tribes to

be able to exercise authority to plan and administer activities related to their territorial jurisdiction, including being directly involved with the management of their

trust assets. A similar inherent authority is retained by individual Indians that are

the owners of trust assets that were acquired under the authority of the General

Allotment Act.

Therefore, any trust reform effort of the U.S. must necessarily integrate the principles of both common law and Indian trust law if it is to be successful. Anything

less will result in reversing more than 200 years of laws, policies and principles

upon which the U.S./Tribal government-to-government relationship is based.

PART I

TRIBAL SELF–GOVERNANCE TRUST REFORM PROPOSAL

IMPROVEMENTS IN TRIBAL/FEDERAL RELATIONS AND TRUST ASSET

MANAGEMENT UNDER SELF–GOVERNANCE AND SELF–

DETERMINATION.

The Indian Self–Determination Act was inspired from tribal dissatisfaction of the

Federal Government’s management of Indian affairs. Following decades of Federal

agencies disregarding tribal concerns and priorities regarding the management of

their treaty-protected properties, resources, and other Indian programs, in 1974,

Congress enacted the first Indian Self–Determination and Education Assistance Act.

The Act was designed to establish legal contracting obligations on Federal agencies

charged with carrying out Indian functions to contract with interested tribal governments and transfer those functions to tribes to carry out. The Act also allowed the

Tribal Governments to plan, prioritize and administer many of the programs to

which their members were the intended beneficiaries. Throughout the years, the

provisions contained in the Act has been expanded and to where today, most Indian

programs of the BIA and IHS are being carried out by tribes under Self–Governance

compacts and 638 contracts. In effect, the Indian Self–Determination Act have been

always been in the forefront of federal trust reform efforts and have been demonstrated to be possibly the most cost effective and efficient means for the Federal

Government to carry out functions that benefit Indians.

Self–Governance and Self–Determination Acts has resulted in broad Tribal assumption of trust-related programs from the BIA under the Tribal for more than

the last decade. One of the most fundamental basis for these efforts is to design an

evolving process whereby the Tribes could continue to assume and carry out trust

related activities with the greatest degree of flexibility at the reservation level

while, at the same time, the Federal Government could effectively carry out its fiduciary trust obligations to tribes and individual Indians that are required under treaties, agreements, statutes and regulations.

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Under Self–Governance and Self–Determination agreements, tribes have become

integral parts of the federal system to fulfil the U.S.’’ fiduciary and legal obligations

to Indian Tribes. It is most unlikely that any federal trust reform efforts will ever

be successful unless they fully incorporate the philosophies and ideals of the Tribes

and individual Indians, the true intended beneficiaries of the Federal/Indian relationship. Anything less that full integration of Self–Governance and Self–Determination objectives in trust reform will simply not be consistent with the government-to-government relationship between Indian tribes and the U.S., upon which

the trust responsibilities are based.

SELF–GOVERNANCE/FEDERAL AGENCY STRUCTURE.

An important part of the Self–Governance Act is the ability of tribes to negotiate

with Federal agencies for the transfer of all non–Inherent Federal Functions to tribal agreements. This provision has served as a very useful means for tribes and

Federal agencies to establish positive working relationships at both the reservation

and agency levels. Under Self–Governance, many tribes have assumed broad trust

and not-trust functions, which in turn has transferred most of the program administrative functions to tribal governments. In other cases, tribes have agreed to leave

functions to be carried out by the agency. In all cases, Self–Governance has created

a method for tribes and federal agencies to establish meaningful working relationships, including for activities involving trust resources and other programs, including the ability for tribes to negotiate to determine the administrative level that the

agency will use to carry out various federally-retained functions.

A part of the Federal/Tribal working relationships include developing agreements

on how trust transactions are processed, the types of supporting records that will

be required to complete a trust transaction, how a trust activity will be monitored,

and how annual trust evaluations will be carried out. Since Self–Governance was

implemented in 1990, not a single unresolved trust problems within any trust programs assumed by a Self–Governance tribe has been identified. Further, the number of breach of trust complaints against the U.S. by Self–Governance tribes and

those of individual Indians that associated with Self–Governance tribes has been

significantly reduced since Self–Governance was initiated in 1990.

Therefore, the ability of Federal agencies and tribes to resolve longstanding trust

management concerns has been significantly strengthened under the Tribal Self–

Governance Act. In addition, even though tribes have assumed responsibilities for

trust programs as a lower funding level that was even utilized by the BIA when

they administered the trust program, Self–Governance has demonstrated the dedicated commitment of tribes to address difficult and complex trust issues by the Act’s

authority to consolidate, redesign and prioritize programs activities to address the

needs and concerns of the true beneficiaries of the trust functions at the reservation

level.

TRUST MANAGEMENT STANDARDS.

There can be no ‘‘one size fits all’’ approach to management of trust assets around

the Country because each tribe may have a number of individual issues, concerns

or trust obligations that must be address in carrying out trust transactions. For example, Douglas Fir timber may have one monetary value on one reservation because

a tribe has a sawmill and will recover a higher return on sales after processing,

while another tribe may not and seeks only the highest monetary return on the logs

being sold. Another example may be that a tribe may allow the use of tribal lands

for land leases to members for virtually no monetary return while still requiring

nonmembers to pay fair market commercial value for a lease. Each of these trust

transactions can create a federally-managed trust account which has a specific monetary return based on a tribally-defined ‘‘beneficial use’’ for each trust asset.

Under Self–Governance, the Tribe and BIA can develop agreements whereby the

management standards for trust assets can accommodate both the requirements of

25 C.F.R. or other appropriate Federal statutes and regulations. As a result, each

tribe, as beneficiary of the trust relationship can work with the BIA to develop trust

management standards on a resource-by-resource basis that will also be used in approving trust transactions. In cases where tribal management standards have not

been developed, a tribe and BIA utilize applicable federal standards for trust transactions. In the event of a potential conflict between tribal and federal trust management standards, the tribe and BIA meet to develop mutually-acceptable methods for

resolving the conflict. In areas where ongoing statutory and regulatory concerns

may be required, such as compliance with the Endangered Species Act and Clean

Water Act, both Self–Governance tribes and the BIA work with other tribes to develop mutually-acceptable management standards that are applicable to each effected trust transaction.

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TRUST RECORD KEEPING.

Under Self–Governance, tribes carry out many governmental functions in addition

to those that are required for BIA trust transactions. Therefore, all records developed by a tribe that are not needed for BIA approval of a trust transaction are the

property of the Tribe. However, all documents developed and submitted by the Tribe

for BIA approval of a trust transaction become the property of the BIA and recorded

on the title, as appropriate. Under Self–Governance, it is the responsibility of the

BIA to ensure that all records necessary to approve and monitor a trust transaction

are secured and maintained by the BIA. Under this arrangement, the Tribe is free

to developed internal centralized files for BIA and non–BIA activities, while also

providing the BIA with the necessary records to ensure its trust obligations to the

tribe and individual Indians are carried out. Under Self–Governance, the responsibility to approve all trust transactions is maintained with the BIA, as required by

the Self–Governance Act.

TRUST FINANCIAL ACCOUNTING.

Self–Governance tribes and the BIA continue to work cooperatively with the Office of Trust Funds Management (OTFM) in the financial accounting of all trust

transactions, however, it is necessary for OTFM expand its activities to include program experts who will provide oversight in the programmatic accounting of all trust

accounts. It will be the responsibility of OTFM to work with the BIA and appropriate Self–Governance tribes to ensure that all necessary documents are provided

to assure the proper accountability of trust transactions.

There is a need for OTFM, the BIA and tribes to work out procedures to ensure

that proper and efficient management or trust transactions and their resultant trust

financial accounts are reconcilable. Self–Governance tribes believe this is best

worked out during the typical negotiations between the Tribe and BIA. For example,

if a tribe compacts an OTFM activity, then that tribe would be required to develop

and maintain the required internal procedures and checks and balances that are required in its Self–Governance agreement. Monitoring of this requirement can be incorporated into the annual trust evaluation process that is required by the Self–

Governance Act.

SUMMARY.

There are many reasons that led to the situation that the Federal Government

finds itself in today in the Cobell litigation, many of which stem from the inherent

problems that exist solely within the confines of its own infrastructure. Attempts

to simply move the same or similar functions from one office to another, or from

one agency to another, quite often do not achieve the intended results. Furthermore,

no agency shuffling efforts result in creating one of the greatest tools necessary to

guarantee success, which is establishing a vested interests in the activity to be performed. However, it is ‘‘tribal vested interest’’ that has been the fuel that has made

Self–Governance both successful and effective in addressing longstanding problems

that the Federal Government has experienced in managing Indian programs for

over 200 years. Likewise, Tribal Self–Governance is the fuel that is necessary to

make trust reform both successful and effective in the future.

PART II

SELF–GOVERNANCE TRUST REFORM IMPLEMENTATION AND

ORGANIZATION PLAN

The following contains detailed proposals and organizational structures, as well

as their supporting justifications, for implementing trust reform activities within the

Department of the Interior.

FOUR COBELL BREACHES.

The Cobell Court has identified the following four breaches of the Courts Orders,

as described by the BIA Regional Director: Reorganization Advisory Group (Memorandum of 12–12–01)

A. The Secretary has no written plan to gather missing data;

B. The Secretary has no written plan for the retention of IIM trust documents;

C. The secretary has no written architecture plan; and

D. The Secretary has no written plan addressing the staffing of trust functions.

INTERIOR AGENCIES INVOLVED IN TRUST REFORM AND THEIR PURPOSE.

The following are brief descriptions of Interior agencies that are involved in trust

reform and their purposes:

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1. Office of Special Trustee. The Office of Special Trustee (OST) was established

under Title III of P.L. 103–412, the American Indian Trust Fund Management Reform Act of 1984. Under Section 302 (c) of the Act, OST is designed as a temporary

agency that is to be phased out after the components of trust reform are developed

and implemented. Under the Act, OST is to provide oversight and coordination of

trust reform activities which are being carried out by the Bureau of Indian Affairs,

Bureau of Land Management and Mineral Management Services.

2. Bureau of Indian Affairs. The BIA is one of the primary agencies of the Federal

Government that is empowered to specifically carry out the U.S.’’ trust obligations

to Indian tribes and individual Indians, which includes those associated with both

trust resources and other legal obligations. The BIA, through Regional, Agency and

Sub–Agency offices work with Indian tribes and individual Indians to implement the

U.S. obligations that are protected by treaties, Executive orders and federal statutes.

3. Office of Self–Governance. The Office of Self–Governance is charged with implementation of the Tribal Self–Governance Act, P.L.103–413, the Tribal Self–Governance Act, as amended. The OSG typically functions in an oversight role ov er Tribal/

Federal Self–Governance negotiations and is responsible for implemented Self–Governance agreements once the are completed.

AUTHORITY OF P.L. 103–412 TO RESTRUCTURE THE BIA.

Questions have arisen about whether implementation of federal trust reform

measures require the creation of a new trust agency within the Federal Government. This Implementation and Organization Plan is based in part on provisions

contained in P.L. 103–412 that specifically provides that improvements are to be

made in the systems of the Bureau of Indian Affairs and other Interior agencies.

Relevant parts of the Act relating to improvements in the BIA trust-related systems

are as follows:

Sec. 202(a)—...held in trust by the United States and managed by the Secretary

through the Bureau [of Indian Affairs].

Sec. 202(b)—...the Director of Office of Trust Funds Management within the Bureau [of Indian Affairs].

Sec.301(2)—...and that reforms of policies, practices, procedures and systems of

the Bureau [of Indian Affairs]...

Sec.303(a)(2)(A)—Identification of all reform to the policies, procedures, practices,

and systems of the Department, the Bureau [of Indian Affairs]...

Sec. 303(b)(1)—The Special Trustee shall oversee all reform efforts within the Bureau [of Indian Affairs]...

Sec. 303(b)(2)(A)—...trust accounts to ensure that the Bureau [of Indian Affairs]...

Sec. 303(b)(2)(B)—The Special Trustee shall ensure that the Bureau [of Indian Affairs]...

Sec. 303(b)(2)(C)—The Special Trustee shall ensure that the Bureau [of Indian Affairs]...

Sec. 303 (c)(1)(A)—...the policies, procedures, practices, and systems of the Bureau

[of Indian Affairs]...

Sec. 303 (c)(2)—The Special Trustee shall ensure that the Bureau [of Indian Affairs]...

Sec. 303 (c)(3)—...and that they are adequate to support the trust funds investment needs of the Bureau [of Indian Affairs].

Sec. 303 (c)(4)(A)—...the land records system of the Bureau [of Indian Affairs]...

Sec. 303 (c)(4)(B)—...interface with the appropriate asset management and accounting systems of the Bureau [of Indian Affairs]...

Sec. 303 (c)(4)(B)(i)—...and disburse to the Bureau [of Indian Affairs]...

Sec. 303 (c)(4)(B)(ii)—...the Bureau of Land Management and the Bureau [of

Indian Affairs]...

Sec. 303 (c)(5)(A)—...with the advice of program managers of each office within

the Bureau of Indian Affairs...

Sec. 303 (d)—...and in implementing reforms to Department, Bureau [of Indian

Affairs]...

Sec. 303 (f)—...each year on the progress of the Department, Bureau [of Indian

Affairs]...

ORGANIZATIONAL STRUCTURE.

Attached is a proposed organizational structure to implement trust reform within

the BIA and other Interior Agencies that is based on the legal framework outlined

in P.L. 103–412. The trust reform functional components of the organization are

briefly outlined as follows:

Chart—Bureau of Indian Affairs—Office Organization.

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Office of Special Trustee. The Office of Special Trustee is provided oversight capability, which is to be phased out once trust reform is successfully completed. In addition, responsibility for oversight of implementation of the the Cobell Court’s four

breaches has been assigned to OST.

Assistant Secretary–Indian Affairs/Central Office. The Assistant Secretary–Indian

Affairs is also assigned responsibility of implementing the Cobell Court’s four

breaches. A Division of Trust Accounting (see separate chart) is incorporated as a

subordinate office of the Assistant Secretary–Indian Affairs so that direct oversight

and control can be assured over this new Division.

Regional/Agency Offices. Within each Regional Office, a new Deputy Director of

Trust management is established whose responsibilities include implementation of

trust reform at the Regional, Agency and Sub–Agency levels, as well as responsibility to implement the four Cobell Court breaches. As has been carried out by the

Pacific Regional Office for decades, the Regional Office Appraisal functions are

under the direct control and oversight of the Deputy Director of Trust Management.

This structure will ensure that the integrity of the Appraisal Office is maintained

by segregating their functions from those of Real Estate Services. Also as contemplated in P.L. 103–412, the Division of Trust Accounting (possibly a Regional Office counterpart to OTFM) is made part of the responsibilities of the Deputy Director of Trust Management. This structure will ensure that proper and timely accounting and reconciliation of trust functions and trust accounts takes is maintained.

Another important part of the proposed organizational structure if the ability to

coordinate, through the Regional Director, the functions of both the Deputy Director

of Indian Programs with those of the Deputy Director of Trust Management. The

objective of this structure is to streamline the administrative functions of both offices so that important BIA services, such as economic development and road maintenance and construction, each of which must necessarily be coordinated to be successful, has the greatest opportunity of providing the intended benefits to Indian

Country.

SINGLE ADMINISTRATIVE OFFICIAL RESPONSIBLE FOR TRUST REFORM.

In their critique of trust reform, EDS stated that significant problems have been

encountered in both developing the trust reform measures and implementing them

because there has not been a single authority charged with trust reform improvements. While this has been a problem within the BIA for years, it has been compounded with the creation of the Office of Special Trustee under P.L. 103–412 in

1994. Since then, trust management has in effect been divided between two separate agencies. This Self–Governance proposal addresses this problems, consistent

with the provisions of P.L. 103–412 by establishing a clear line of authority from

the Secretary of the Interior, through the Assistant Secretary of Indian Affairs, the

BIA Regional Directors and to the Deputy Regional Director for Trust Management.

The Deputy Regional Director for Trust management is directly responsible for the

actions of all Regional, Agency and Subagency personnel. Under this streamlined

structure, an understandable process is established whereby each progressive line

of authority can monitor and evaluate the actions of their subordinate official (See

attached organizational charts).

MECHANISM TO ESTABLISH TRUST VALUATION STANDARDS.

Important events always lead up to the filing of breach of trust cases against the

U.S. by Indian tribes and individual Indians. Also, systems such as TAAMS and

federal trust record keeping systems are less useful if they do not also contain information that helps all parties concerned to understand the reasons why various components were included, or not included in a specific trust transaction. Again, many

of these ‘‘unknowns’’ can result in a breach of trust claim against the U.S.

To address this situation, the Department of the Interior, through the BIA Regional Office structure, should develop a plan to work with tribes and individuals

to establish formal management standards for each trust asset and money account.

This process would entail conducting an inventory of all trust assets and accounts

that would need to be managed under these standards. Each BIA Regional office

would be charged with the responsibility to work with each tribe and individual

Indian owner to establish formal management standards for those resources and assets.

For areas where the BIA and Tribe/individual Indian do not develop formal management standards, the BIA shall only process a trust transaction under the control

of an ‘‘Informed Decision Process’’ (IDP. The IDP would consist of a checklist of required questions that must be affirmatively answered before the BIA can proceed

with completing a trust transaction. The questions would include such things as,

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was the owner informed of the resource value, does the owner agree with the values

included in the trust transaction and were any difference explained, were they provided copies of support documentation (appraisals, timber cruises, gas and oil estimates, market values, etc). The IDP documentation will be made part of the BIA

decision making process for the trust transaction.

Timefames and funding will be provided to the BIA and tribes/individual Indians

to complete this process.

RECONCILIATION OF TRUST ACCOUNTS.

Questions continue to be raised regarding how the U.S. will reconcile the trust

accounts held by the Federal Government with the trust transaction that crated the

account, then ultimately reach agreement with the tribe or individual owner(s) of

the account.

To address this, the Department of the Interior should sponsor legislation that

would allow an individual tribe or Indian account holder to select an option for conducting an accounting. These options could include:

a. A transaction-by-transaction accounting;

b. A random accounting of selected accounts; or

c. A process for selecting existing accounting information.

Each option have specific timeframes and costs assigned. Under the accounting

process, the BIA and tribe/individual Indian could negotiate how the accounting

process would be completed, including the option for tribes to contract/compact that

function.

Once the accounting is completed, either the Federal Government or tribe/individual Indian could contest the accounting results in a forum established for that

purpose.

PROS AND CONS OF PROPOSAL.

Pros:

• More timely and less expensive to implement

• Has broad support among Tribal and the BIA

• Doesn’t require federal employee union or GSA involvement to implement

• Is consistent with both the Trust Reform Act and Tribal Self–Governance/Self–

Determination

• Facilitates resolution of potential conflicts between Tribal and Federal trust

asset management standards which led to Cobell and other breach of trust

cases

• Responds to the Cobell Court issues in a timely manner

• Does not require a second restructuring plan for BIA retained function that

would follow BITAM implementation

• Integrates Tribal and BIA directly into Federal trust reform efforts

Cons:

• Does not address perceptions that BIA cannot do the job

• Requires legislation to implement Cobell related reconciliation issues

• Will require re-integration of OST functions back into BIA structure

• Reconciliation process would require added work to resolve Federal/Tribal/individual Indian reconciliation related issues

APPENDIX NO. 1

BITAM—WHAT IS IT?—SCENARIOS A & B..

In November, 2001, Secretary Norton proposed a plan to create a new Bureau of

Indian Trust Asset Management (BITAM). The proposal is reported to be an effort

to transfer all trust related functions presently being carried out by the BIA to the

new BITAM agency. Since the announcement of the BITAM proposal, Tribal leaders

have also been asked to comment of the plan, which is yet to be defined or explained

with any level of detail. Without anything to analyze, input on the BITAM proposal

seems fruitless. Therefore, in an effort to provide constructive analysis of the concept, Appendix 1 attached hereto contains Scenarios A and B of what BITAM could

be. Each scenario also contains an impact analysis of the concepts outlined therein.

These scenarios also provide a baseline proposal from which alternatives can be

analyzed

BITAM ORGANIZATION—SCENARIO A

Assumption.

A. That the BIA consists of approximately 50% trust asset related activities and

50% other programs.

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B. That all trust-related staff of the BIA personnel of the Central, Regional,

Agency, and Field Offices will be physically relocated and reassigned to

BITAM.

C. That there will be established a comparable (mirror) structure under BITAM

as existed under the BIA.

Implementation Impacts.

1. Employee related impacts- Existing BIA trust related employees would need to

be offered a job at the BITAM office at a different location. For employees who

choose not be relocate, there would have to be severance pay provided. For each

BIA employee who did not relocate, a new employee would have to be hired and

trained. This scenario would entail working with the federal employee union

and effected employees to implement. All administrative manuals of the BIA

would need to be revised.

2. Facilities and equipment impacts: Before the BITAM could be implemented, the

General Services Administration would need to negotiate and enter into a facilities agreement for the Agency. At least 2 options could be involved, including:

a. Establishing BITAM offices in each pervious BIA location. This concept

would entail ‘‘duplicating’’ the BIA offices and staff in each of the separate Central, Regional, Agency and Subagency locations. In addition to

office space negotiations and agreement, this concept would require that

office equipment and other support functions also be relocated and/or

purchased.. Also, there would be a need to remove all trust related files,

records and manuals from the BIA to be relocated to the new BITAM offices; or

b. Consolidate BITAM offices in locations different from the BIA offices.

This concept would probably require all of the activities identified in ‘‘a’’ above, but would also require significant additional consultation with

tribes and BIA employees regarding where and how to select the locations for the new BITAM consolidated offices.

Implementation Timeframes Impacts.

Scenario A will likely take the longest amount of time and will be the most costly

to implement. This scenario will likely take more that a year, even under the best

of circumstances, to implement (assuming that tribes and the Congress give up their

objections to BITAM). Given the pressures of the Cobell Court for Secretary Norton

and Assistant Secretary McCaleb to get something done, this scenario will not meet

the needs of DOI.

BITAM ORGANIZATION—SCENARIO B

Assumption.

1. That the BIA consists of approximately 50% trust asset related activities and

50% other Indian programs.

2. That all trust-related staff of the BIA personnel of the Central, Regional,

Agency, and Field Offices will be retained in the existing BIA offices but reassigned to BITAM.

3. That there will be established a comparable (mirror) structure under BITAM

as existed under the BIA.

Implementation Impacts.

A. Employee related impacts- Existing BIA trust related employees would need

to be offered a job in the BITAM offices. For employees who choose not be reassigned, there would have to be severance pay provided. For each BIA employee

who did not agree to be reassigned, a new employee would have to be hired

and trained. This scenario would entail working with the federal employee

union and effected employees to implement. Additionally, it is conceivable that

each of the Central, Regional, Agency and Subagency offices will need to hire

separate BITAM department heads, regional directors, agency superintendents

and subagency directors in order to effect a ‘‘separation’’ of BIA functions from

those of BITAM. One must assume that this action must be undertaken in

each of the 12 Regional, 58 Agency, 1 Subagency, 28 Field Station and 3 Irrigation Project Offices, which would probably require around 125 new federal positions.

b. Facilities and equipment impacts: Under Scenario B, it is assumed that the

same BIA offices will be utilized for BITAM, however, it is probable that some

equipment that is presently being shared within BIA offices will have to be replaced in order to physically separate the different agency functions. All existing administrative manuals of the BIA would need to be revised to separate

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the trust-related functions from the BIA. Supervision of BIA vs. BITAM personnel would be interesting because ‘‘co-mingled staff’’ would be working for

completely different agencies. At least conceptually, there may have to be

‘‘green’’ doors and lines on the floor for BITAM personnel and ‘‘red’’ door and

lines on the floor for other Indian program staff. Also, there would be a need

to move all trust related files, records and manuals from the BIA to the new

BITAM offices.

Implementation Timeframes Impacts.

Scenario B will be easier to implement that Scenario A, but is still required hiring

a significant number of new BITAM and other support needs. Because of the increased implementation costs, it is unlikely that this concept can be implemented

in less than a year. In both Scenarios A and B, the most limiting factor that will

negatively impact the implementation schedule will be finding personnel who are

familiar with Indian trust and related requirements. The difficulties in implementing Scenario B is also likely to strain the patience of the Cobell Court.

[A letter submitted for the record by the Mille Lacs Band of

Ojibwe follows:]

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[A resolution submitted for the record by the Montana Wyoming

Tribal Council Leaders follows:]

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[A statement submitted for the record by the Nez Perce Tribe

follows:]

Position of the Nez Perce Tribe Opposing Transfer of Trust Asset Management Responsibilities to the ‘‘Bureau of Indian Trust Asset Management’’ in the Absence of Tribal Consultation and a Comprehensive

Reorganization Plan

The Nez Perce Tribe has serious concerns with the decision of the Department

of the Interior to create a new federal agency, the Bureau of Indian Trust Assets

Management (BITAM), and remove certain trust responsibilities from the Bureau

of Indian Affairs (BIA). To strip the BIA of its core trust responsibilities and transfer them to an entirely new agency casts into doubt over 100 years of well-established Tribal-federal policy.

Beginning with the passage of the Indian Self–Determination and Education Assistance Act (25 U.S.C. § 450 et seq.) and subsequent legislation, the United States

government has repeatedly recognized the need to work closely with Tribes on a

government-to-government basis and to support tribal self-determination and selfgovernance. In 1968, President Lyndon B. Johnson stated that ‘‘Indian must have

a voice in making the plans and decisions in programs important to their daily

lives,’’ so that the relationship between Tribes and the federal government would

be one of the ‘‘full partnership—not dependency.’’ Two years later, President Richard

Nixon reaffirmed this policy stating that ‘‘the time has come . . . for a new era in

which the Indian future is determined by Indian acts and Indian decisions. After

similar statements from Presidents Regan and Bush, this process culminated with

Executive Order 13175 which required all federal agencies to consult with Tribes

prior to formulating and implementing policies or other actions which may have a

substantial affect on a Tribe or tribal resources. In a letter sent to the Nez Perce

Tribe in August 2000, then–Governor George W. Bush recognized and reaffirmed

the unique government-to-government relationship that exists between our two sovereign nations and promised to work with Tribes to strengthen the federal trust relationship.

Despite these mandates and promises, and in violation of the consultation Executive Order, Secretary Norton released a decision to reorganize the BIA without prior

consultation between the Department of the Interior and Indian Tribes. The failure

of the Department to consult with Tribes prior to announcing this decision represents a complete abdication of the federal trust responsibility and a refusal to

abide by the unique government-to-government relationship that exists between

Tribes and the federal government. As the primary agency dealing with Tribes on

a daily basis, any BIA reorganization plan will immediately impact Tribes. Considering that the proposed reorganization will remove a core group of BIA’s trust responsibilities, the need for early, meaningful consultation could not be greater. For

Tribes to find out about this reorganization through the Washington Post is simply

unacceptable. Moreover, the decision to reorganize was made without input from

BIA regional management, further undermining the reorganization proposal. Consultation is not a process you endure before moving forward with predetermined

plans.

The proposed reorganization will not, in itself, solve the numerous problems of

trust reform. The proposal, as outlined to date, is vague and incomplete, and raises

more questions than answers as to the future of trust reform and the tribal-federal

relationship. These are complex problems which require well-reasoned thoughtful

plans. Absent consultation with affected parties, the proposed action by the Department will fail to resolve the problems with Individual Indian Money (IIM) accounts.

The Nez Perce Tribe, nearly two months after the decision to reorganize the BIA

was announced without regard to the dramatic impact the reorganization would

have on trust asset management and the entire trust relationship itself, has neither

received any detailed substantive information about the proposed reorganization,

nor any guarantees that, like the BIA, the BITAM will honor the government-togovernment relationship, Indian preference, or other fundamental principles of

Indian self-determination. In order to obtain additional information, the Nez Perce

Tribe recently filed a Freedom of Information Act request with the Office of the Secretary and the BIA to obtain any documents describing the process and procedure

for trust reform and BIA reorganization. The Nez Perce Tribe strongly believes that

the reorganization effort cannot go forward until all Tribes have participated in

meaningful consultation to develop a comprehensive plan for trust reform, including

clear policies, procedures, and controls.

It is widely known that the BIA has grossly mismanaged tribal trust assets since

the inception of the Bureau. It is clear that the Secretary of the Interior is faced

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with a mandate from Congress, dating back to the 1994 Indian Trust Reform Act,

to clean up the accounting and management systems of Indian trust accounts. It is

also clear from the Cobell v. Norton litigation that the Secretary has failed to meet

the mandates that Congress established for her. In fact, the report contracted for

by DOI from EDS which serves as the basis for the trust reform proposal freely admits these failures. Without a doubt, a comprehensive, sweeping response is needed;

however, the proposed reorganization of the BIA is not the answer.

The proposed reorganization of the BIA will profoundly effect the BIA’s management of 54 million acres of Indian lands, the administration of trust funds derived

from those lands, and nearly every aspect of economic development and land management within Indian Country. The Nez Perce Tribe is greatly concerned this proposal is simply repeating the failures of many past trust reform efforts by providing

a short-term cosmetic fix to a much more serious problem. Trust reform must not

come as a response to court imposed deadlines or Congressional inquiries. Trust reform must be based on a long-term, well-reasoned plan, complete with comprehensive policies, procedures, and guidelines which will truly reform the trust management system. Without this type of proposal, the scheduled consultation meetings are

no more than initial scoping meeting which does not and cannot qualify as meaningful consultation. A good faith effort must be made to include Tribes and IIM account

holders in the reform effort.

Creating a new agency does not create trust reform. The proposal to create the

BITAM would strip a majority of the BIA’s trust responsibilities, leaving the Bureau

to function as a social service agency. The responsibility for billions of dollars of

trust assets would be handed over to a new office, with no congressional authorization, no appropriations, and at present, no support from Tribes. The same understaffed and undertrained employees will not be able do for BITAM what they could

not do for the BIA. Moreover, a proposal to artificially divide ‘‘trust’’ from ‘‘services’’ is simply unworkable. While it is often criticized, the BIA is only voice for Indian

issues in the Executive Branch, and is critical to the functioning of our governmentto-government relationship. Stripping the BIA of trust responsibilities would de-emphasize the importance of these relationships.

The proposal is also too broad and unmanageable. The reorganization plan goes

far beyond the situation in Cobell where solely Individual Indian Money accounts

are involved. The proposed formation of BITAM goes decidedly beyond the management of funds at issue in the trust fund litigation to reach all trust assets, including

those belonging solely to tribal governments. If the BIA cannot properly manage the

accounts that were under their control, what makes the Secretary believe that the

BITAM can take on an even greater responsibility—one that should rest with the

Tribes that control those resources. Trust reform must focus solely on the four trust

breaches identified by the Cobell court.

Over the past twelve years, the Department of the Interior has paid more than

a billion dollars on judgments and settlements for its repeated failures to protect

and properly manage trust assets. The costs of continued failure will far outweigh

the costs of finally fixing the system. Trust reform must cease to be reactive. Therefore, the Nez Perce Tribe also opposes any reprogramming of monies within the fiscal year 2002 BIA budget to fund the proposed BITAM until Congress and Tribes

have had an opportunity to review the final trust reform proposal. Funneling monies will not provide accountability and will only threaten those programs which remain under BIA oversight.

The future of trust management must include increased protection and tribal control over Indian lands and resources, and a federal system that provides technical

assistance and trust oversight—not additional federal bureaucracy. This system,

driven by self-determination rather than a paternalistic regime, must meet the

unique needs of individual Tribes in each part of the country. The role of the federal

government as trustee is to protect the long tern viability of tribal lands and resources and to ensure that any action is consistent with tribal control and tribal

needs. The current BIA reorganization plan encompasses none of these goals.

The Nez Perce Tribe is not opposed to trust reform. In fact, the Tribe strongly

supports the need to make major changes to the trust asset management system.

However, Secretary Norton’s plan is not the answer. Therefore, the Nez Perce Tribe

urges the Department of the Interior to withdraw the proposed reorganization plan

until full meaningful consultation has occurred with Tribes and urges Secretary

Norton to redefine the goals of trust reform to better meet the needs of Tribes and

Indian people without sacrificing the federal trust relationship.

[A position statement submitted for the record by the Tribal

Chairmen follows:]

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TRUST REFORM COMMENTS AND RECOMMENDATIONS BY THE CHIPPEWA

CREE TRIBE

PRESENTED BY

ALVIN WINDY BOY, SR., CHAIRMAN

ON BEHALF OF THE CHIPPEWA CREE TRIBE OF THE ROCKY BOY’S RESERVATION

TRIBAL CONSULTATION ON INDIAN TRUST ASSET MANAGEMENT

FEBRUARY 1, 2002

WASHINGTON, D.C.

I. INTRODUCTION

Trust reform is nothing new for Indian Country. This is particularly true for Self– Governance tribes since our efforts began with our frustration of the BIA’s mismanagement with carrying out Bureau programs on our respective reservations.

The Chippewa Cree Tribe supports trust reform, however tribes need to play a substantial part in defining, developing and delivering any meaningful attempt at trust

reform within the Bureau of Indian Affairs (BIA).

We believe the first thing we need to do is not buy into this ‘‘divide and conquer’’ mentality of the current administration. We need to strategize with our friends in

Congress to slow this ‘‘court-driven’’ trust reform effort by the current administration and strategize with our legal people so that the Cobell litigation cannot be used

by the Department as this driving force for their trust reform efforts. In order to

do this we need to operate on parallel tracks and continue with the trust reform

efforts which are currently incomplete:

1. CONGRESSIONAL INTERVENTION

1. House Resource Hearing (2/6/02)

2. Senate Indian Affairs Committee Hearing (2/26/02)

3. Legislative initiative:

a. trust reform legislation

b. appropriations rider to prohibit DOI fiscal year 2002 or 2003 funds to be

used for the BITAM proposal

2. LEGAL INTERVENTION

1. Tribal Leaders Task Force file a statement or notice to Judge Lamberth

regarding the Task Force’s support of the litigation and concerns with

the DOI’s proposed reorganization plan and its potential impacts on tribal trust reform

2. Amicus brief in Cobell litigation; and

3. Tribal trust mismanagement lawsuits

3. DEVELOPMENT OF A TRIBALLY–DRIVEN TRUST RESOURCE AND

ASSET MANAGEMENT REFORM PLAN

II. KEY ISSUES IN TRUST REFORM

The Chippewa Cree Tribe supports trust reform, however tribes need to play a

substantial part in defining, developing and delivering any meaningful attempt at

trust reform within the Federal Government, in particular within the Department

of the Interior (DOI), Bureau of Indian Affairs (BIA). As such, we need to ask ourselves two (2) very important basic questions:

a. WHAT IS TRUST REFORM?

i. Trust reform concerns both TRIBAL TRUST RESOURCES AND TRIBAL TRUST ASSETS and the reform is the management of the trust resources and trust assets by the FEDERAL GOVERNMENT (DOI) and

the TRIBES.

ii. And within TRIBAL TRUST RESOURCES AND TRUST ASSETS are

INDIVIDUAL TRUST RESOURCES AND TRUST ASSETS and the reform is the management of the individual trust resources and trust assets by the DOI and the Tribes.

iii. Trust reform will concern many aspects in the management of both tribal trust and individual trust resources and assets. The key will be to

reconcile the roles of DOI and the TRIBES in the management of the

trust resources and assets while taking into consideration the INDIVIDUAL’S interest in context of the larger tribal interests.

iv. A key issue will be reconciling the roles of the FEDERAL GOVERNMENT (DOI), The TRIBAL GOVERNMENT (TRIBES) and the INDIVIDUALS in the management of the trust resources and assets. Our

tribe is not an allotted reservation so we do not have many of the issues

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other allotted reservations have, however we do have IIM accounts for

our people as well as the Tribe.

v. We believe that key to successful trust reform will be between the FEDERAL GOVERNMENT and the TRIBES. This is because the TRIBES

govern over the INDIVIDUAL trust resources and to a limited extent

over the management of the trust assets as well.

vi. In summary, tribal trust resources and assets are the larger of the pie,

if you will, containing approximately 89% of the pie while individual

trust resources and assets contain 11% of the pie. We have a classic case

of the tail wagging the dog, so to speak, when INDIVIDUAL TRUST

RESOURCE AND ASSET MANAGEMENT is leading the charge as in

the COBELL litigation. This is fine and trust reform still needs to occur,

however we need to understand that trust reform must first occur at the

TRIBAL TRUST RESOURCE AND ASSET level.

1. Tribal trust resource and asset management (89%)

2. Individual trust resource and asset management (11%)

b. HOW DO WE ACHIEVE TRUST REFORM?

1. Once everybody is on the same page on what is trust reform, then need

to agree on a process to achieve trust reform. We have seen many tribes

and organizations propose organizational structures and reform measures. This is great and we need to incorporate all recommendations and

other relevant information into our process for trust reform.

i. The process as we understand is to work with the Tribal Leader’s Task

Force and develop a trust reform plan that is conducive to Indian

Country’s needs. And in order to do this we need set the agenda and

gather the necessary information and technical resources.

ii. Right now, the process is being driven by the litigation. This is okay

because sometimes litigation is necessary to stimulate the parties to do

something. In fact, the litigation has brought all the interested parties to

the table to achieve trust reform because prior to this DOI hired EDS to

tell them how to achieve trust reform. Now we have the necessary parties

at the table and now we can go forward and take EDS recommendations

into consideration with all the other relevant information and

recommendations as well.

iii. Next, we need to gather and distribute all the necessary information and

recommendations from everyone including:

a. Treaties, statutes, agreements, and anything else which delineates a trust responsibility or trust duty upon the federal government to the tribes;

b. Tribal recommendations; and

c. All other DOI information such as HLIP (old and new), EDS reports and any

other relevant reform plans and initiatives.

III. COBELL V. NORTON—IIM TRUST MANAGEMENT REFORM

We agree with the Dear Tribal Leaders Letter, dated January 5, 2002 from the

Native American Rights Fund (NARF) which expresses concerns with the DOI proposed reorganization plan. Basically, the NARF letter states that

‘‘DOI’s proposal to reorganize is not a good faith effort to improve trust

management, but rather a last minute and poorly thought out attempt to

convince the Court (Judge Royce C. Lamberth) that appointment of a receiver to reform the IIM trust in unnecessary.’’

Unfortunately, the DOI’s legal strategy is to conquer and divide tribes over the

IIM litigation. We agree that Tribes definitely have a concern with the impact of

the appointment of a receiver for the IIM accounts and the trust reform efforts by

the DOI in relation to IIM trust resources and trust assets. However, we must keep

in mind that the Cobell litigation concerns issues related to IIM funds.

IV. DOI TRUST REFORM REPORTS

The Tribal Leaders Task Force should take the EDS reports under advisement

and consider how reliable they are and the separately analyze issues reviewed by

EDS. This will require EDS to present their findings and recommendations to the

Task Force and allow Task Force members to ask questions in regards to the reports and outcomes by EDS. In addition, the Task Force should consider other trust

reform efforts in the past such as the report generated by the 1990 BIA Reorganization Task Force.

a. TAAMS & BIA DATA CLEANUP ASSESSMENT

b. TRUST REFORM ASSESSMENT

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V. RECOMMENDATIONS TO INCLUDE IN TRIBAL TRUST REFORM EFFORTS

The Chippewa Cree Tribe recommends the following outline as a start to true,

meaningful trust reform of the BIA. We firmly believe that no reorganization of the

BIA can take place until we have reviewed all previous trust reform efforts which

have occurred in at least the last ten (10) years and thoroughly evaluated the impacts of these efforts on our trust resources and trust assets.

Here are our recommendations to include in the process of achieving an alternative trust reform plan to present to the Secretary rather than the overhaul of the

BIA which is currently be proposed by the Department.

A. TRIBAL SOVEREIGNTY, SELF–GOVERNMENT AND TRUST RESPONSIBILITY

1. SECRETARY OF INDIAN AFFAIRS TO HAVE CABINET STATUS

2. DELEGATION OF AUTHORITIES TO TRIBAL/AGENCY LEVEL

3. NO REDUCTION OF CURRENT FUNDING LEVELS AND EXEMPTION

OF ANY BUDGET REDUCTIONS BY OMB

4. ANY SAVINGS DUE TO TRUST REFORM WHICH RESULT IN

REDUCTIONS TO EITHER CENTRAL OR REGIONAL OFFICES MUST

BE TRANSFERRED TO TRIBAL/AGENCY LEVEL

B. ORGANIZATIONAL REFORM

1. RE–EVALUATE THE OFFICE OF SPECIAL TRUSTEE SINCE THE

OFFICE HAS BEEN INEFFECTIVE SINCE ITS INCEPTION

2. RE–EVALUATE THE OFFICE OF TRUST FUNDS MANAGEMENT

3. BRING AS MUCH RESOURCES AND RESPONSIBILITIES TO THE

TRIBE/REGION/AGENCY LEVEL

4. CONSIDER MOU’S BETWEEN TRIBES AND BIA IN THE

MANAGEMENT OF TRIBAL TRUST RESOURCES AND TRUST ASSETS

C. REGULATORY REFORM

1. DEVELOP TRIBAL TRUST RESOURCE AND TRUST ASSET

MANAGEMENT STANDARDS

2. FORMULATE TRIBAL TASK FORCE TO IDENTIFY TRUST

FUNCTIONS (INHERENT AND NON–INHERENT) AND FUNDING

ASSOCIATED WITH SPECIFIC TRUST FUNCTIONS

3. IDENTIFY COMPACTABLE TRUST FUNCTIONS ASSOCIATED WITH

TRUST RESOURCE AND TRUST ASSET MANAGEMENT

4. APPROVE TITLE IV AMENDMENTS

D. BUDGET REFORM

1. COMPLETE TRIBAL SHARES PROCESS INCLUDING CENTRAL

OFFICE SHARES

2. TRIBAL MEANINGFUL PARTICIPATION IN BUDGET FORMULATION

3. BUDGET REQUESTS BASED ON UNMET NEEDS

4. EXEMPTION FROM MANDATORY BUDGET REDUCTIONS

Æ