U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

81–450 PDF 2002

S. HRG. 107–633

INDIVIDUAL INDIAN MONEY ACCOUNTS

HEARING

BEFORE THE

COMMITTEE ON INDIAN AFFAIRS

UNITED STATES SENATE

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

ON

THE JULY 2, 2002 REPORT OF THE DEPARTMENT OF THE INTERIOR TO

THE CONGRESS ON THE HISTORICAL ACCOUNTING OF INDIVIDUAL

INDIAN MONEY ACCOUNTS

JULY 25, 2002

WASHINGTON, DC

(
COMMITTEE ON INDIAN AFFAIRS

DANIEL K. INOUYE, Hawaii, Chairman

BEN NIGHTHORSE CAMPBELL, Colorado, Vice Chairman

KENT CONRAD, North Dakota

HARRY REID, Nevada

DANIEL K. AKAKA, Hawaii

PAUL WELLSTONE, Minnesota

BYRON L. DORGAN, North Dakota

TIM JOHNSON, South Dakota

MARIA CANTWELL, Washington

FRANK MURKOWSKI, Alaska

JOHN McCAIN, Arizona,

PETE V. DOMENICI, New Mexico

CRAIG THOMAS, Wyoming

ORRIN G. HATCH, Utah

JAMES M. INHOFE, Oklahoma

PATRICIA M. ZELL, Majority Staff Director/Chief Counsel

PAUL MOOREHEAD, Minority Staff Director/Chief Counsel

(II)
(III)

C O N T E N T S

Page

Statements:

Cason, James, associate deputy secretary, Office of the Secretary of the

Interior ........................................................................................................... 7

Causey, William F., esquire, Nixon Peabody, LLP ........................................ 19

Edwards, Bert, executive director, Office of Historical Trust Accounting,

Department of the Interior ........................................................................... 7

Inouye, Hon. Daniel K., U.S. Senator from Hawaii, chairman, Committee

on Indian Affairs ........................................................................................... 1

Slonaker, Tom, special trustee for American Indians, Department of the

Interior ........................................................................................................... 7

Williams, McCoy, director, Financial Management and Assurance, General Accounting Office, Washington, DC ..................................................... 3

APPENDIX

Prepared statements:

Cason, James .................................................................................................... 30

Causey, William F. ........................................................................................... 37

Williams, McCoy ............................................................................................... 27

Additional material submitted for the record:

Report to Congress on the Historical Accounting of Individual Indian

Money Accounts, Department of the Interior ............................................. 42

(1)

INDIVIDUAL INDIAN MONEY ACCOUNTS

THURSDAY, JULY 25, 2002

U.S. SENATE, COMMITTEE ON INDIAN AFFAIRS, Washington, DC.

The committee met, pursuant to notice, at 10:06 a.m. in room

485, Senate Russell Building, Hon. Daniel K. Inouye (chairman of

the committee) presiding.

Present: Senators Inouye and Campbell.

STATEMENT OF HON. DANIEL K. INOUYE, U.S. SENATOR FROM

HAWAII, CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS

The CHAIRMAN. I have just been informed that the cochair is involved in a very important conference meeting on energy, so I will

proceed.

The Committee on Indian Affairs will meet this morning to receive testimony on the report of the Department of the Interior

submitted to the Congress on July 2, 2002, on the historical accounting of Individual Indian Money Accounts pursuant to conference report 107–234 of the Interior Appropriations Act of fiscal

year 2002.

One of the fundamental duties of a trustee is the duty to the beneficiary to ‘‘keep and render clear and accurate accounts with respect to the administration of the trust.’’ The United States’ duty

as trustee for the funds held in trust for individual Indians and Indian tribes requires that the United States provide an accounting

to the beneficiaries.

This duty has been the subject of several House-Senate conference reports on Interior Appropriations acts, the 1994 American

Indian Trust Fund Management Reform Act and currently, in class

action litigation brought on behalf of Individual Indian Money Account holders, asserting as one of several claims against the United

States that the United States must provide the beneficiary account

holders with an accounting.

As a function of treaties and the course of dealings between the

United States and Indian tribes, the United States holds legal title

to lands held in trust for individual Indians as well as individual

Indian tribal governments. The revenues derived from trust lands

are also held in trust by the United States for the benefit of individual Indians and tribal governments. Over the last 20 years, at

the request of this committee, the General Accounting Office has

monitored the efforts of the Department to address the manage-
2

ment of funds held in trust for individual Indians and Indian

tribes.

In August 2001, the General Accounting Office reported to the

committee that an independent public accounting firm audit of Indian trust funds for fiscal year 2000 showed that the Department

of the Interior was maintaining approximately 1,400 accounts for

315 Indian tribes with assets in excess of $2.6 billion, and over

260,000 Individual Indian Money trust fund accounts with a balance of $400 million as of September 30, 2000. Receipts are deposited to these accounts primarily from land use agreements, royalties on natural resource depletion, enterprises related to trust resources, judgment awards, settlement of Indian claims and investment income.

However, the audit report noted that reliance cannot be placed

on the balances reflected in the trust fund accounts until tribal accounts are reconciled and/or resolved through negotiation and settlement and class action litigation on behalf of Indian Money Account holders is resolved.

Today we find ourselves at a critical crossroads as we consider

the Department’s report and the information it provides to the

Congress on the uncertainties associated with the conduct of an

historical accounting. First, there is the uncertainty associated

with gaps in the records and documents upon which an historical

accounting would necessarily rely. Second, there is the uncertainty

associated with the time that would be involved in conducting a

complete historical accounting.

Third, there is the uncertainty associated with the projected

costs of an historical accounting. The Department’s report projects that the total cost of an accounting would be $2.4 billion with an

error rate in the projected cost of minus 5 percent or as high as

plus 25 percent.

The Department’s report sets forth the methodology that the Department anticipates employing in conducting the historical accounting of Individual Indian Money Accounts. What the Department’s report does not address is whether there are other methodologies that might be applied and whether alternative methodologies might entail less time, less uncertainty and less cost. Some

have suggested that with all the gaps in information, the lost and

destroyed documents, it is not even possible to conduct a complete

historical accounting.

Beginning in 1995 and in subsequent testimony before this committee, the GAO suggested that the Congress consider a settlement

of claims against the United States for an accounting. We have

called upon the General Accounting Office and our third panelist

today to assist the committee in developing an understanding of

whether these matters lend themselves to a resolution through a

legislative settlement. However, even if the Congress and the interested parties were to agree that the path to settlement of claims

against the United States is the preferable path to pursue, the duty

on the part of the trustee to provide an accounting to the beneficiary remains.

These are the challenging issues that are the impetus for the

Committee’s hearing this morning. And we look forward to the testimony that will be presented.
3

May I at this time call upon the Director of the Financial Management and Assurance, General Accounting Office, of Washington,

DC, McCoy Williams. Mr. Williams, welcome, sir.

STATEMENT OF MCCOY WILLIAMS, DIRECTOR, FINANCIAL

MANAGEMENT AND ASSURANCE, GENERAL ACCOUNTING

OFFICE, WASHINGTON, DC

Mr. WILLIAMS. Thank you.

Mr. Chairman, I am pleased to be here today to summarize previous GAO work that identified gaps in information needed to reconcile Individual Indian Moneys trust accounts and the rationale

that led us to suggest, based upon our earlier work, that Interior

seek alternatives to reconciliation such as a negotiated agreement.

I am accompanied today by Mr. Koury and Mr. Jacobsen.

Before discussing our prior work, let me point out that we have

not yet had time to analyze Interior’s July 2, 2002 Report to Congress on the Historical Accounting of Individual Indian Money Accounts, evaluate its proposed methodology or discuss the report or

its proposed methodology with Interior officials. Also, we have not

done recent work to evaluate the current state of Interior’s Individual Indian Moneys records.

Nevertheless, it is clear that a reconciliation of IIM accounts is

a daunting endeavor, both in terms of the magnitude of the

project’s scope and the obstacles that are likely to be encountered.

We reported to this committee in June 1996 that based on our

work, we concluded at that time that records were not available to

support a reconciliation of the IIM accounts. In addition to missing

records, we pointed out obstacles that Interior would encounter in

pursuing an IIM account reconciliation, such as the lack of an

audit trail through Interior’s integrated records management system, which was used to maintain IIM account information and the

differences in the way the system operates at various Interior locations, which affect the consistency of the IRMS information.

Much of our previous work in the area of trust fund reconciliations relates to an earlier account reconciliation requirement and

a related Interior effort to reconstruct both tribal and IIM trust accounts. From 1992 through 1997, we monitored and reported on

various aspects of Interior’s planning, execution and reporting of

results for the reconciliation project. In our June 1992 report on Interior’s efforts to reconcile Indian Trust Accounts, we noted that efforts originally consisted of two phases. The first phase was to

cover, in addition to 500 tribal accounts, 17,000 Individual Indian

Monies accounts maintained at three agency offices.

However, after an initial assessment by Interior’s contractor of

the level of effort and cost needed to complete the various segments

of reconciliation work, a decision was made not to reconcile IIM accounts as part of the project. In reporting this status, we noted that

Interior and its contractor had determined that a full reconciliation

of all tribal and IIM accounts was neither possible nor cost effective

due to missing records, commingled tribal and Individual Indian

accounting records, poorly documented accounting transactions and

the volume of data to be reviewed.

At that time, we recommended that Interior seek alternatives to

the reconciliation project and develop a proposal for reaching a sat-
4

isfactory resolution of the trust fund account balances with account

holders. Among alternatives that we recommended for Interior’s

consideration were that Interior consider negotiating agreements

with Individual Indians on balances reported on their account

statements and request legislated settlements on all selected or accounts.

In a number of testimonies and reports over the next several

years, we supported the idea of Interior and tribal and Individual

Indian money account holders negotiating a resolution of their

issues. Interior’s July 2, 2002 report relates directly to the American Indian Trust Fund Management Reform Act of 1994, which required Interior to reconcile tribal and IIM accounts and the ongoing class action lawsuit commonly referred to as the Cobell litigation, which is presently before the United States District Court for

the District of Columbia.

In this regard, my comments today are not intended to address,

nor is GAO taking any position on what level of accounting the

1994 Act or the courts have required of Interior thus far, whether

Interior’s plan satisfies those requirements or if so, whether Interior’s plan is the only or best approach for Interior to satisfy the requirements imposed on it. Those issues will ultimately be decided

by the court.

Having said that, we note that Interior’s report recognizes that

a number of obstacles, similar to those we have previously reported

on, will complicate its ability to document for IIM account holders

the amount and source of funds deposited to, managed in and disbursed from their IIM accounts. The Interior report enumerates

among those obstacles known discrepancies in the balances at the

trust fund level report by Treasury and Interior as well as the potential for errors in the electronic accounting system data, missing

paper transaction records and missing land ownership information

and revenue instruments. Interior’s enumerations of obstacles is

consistent with what our prior work has shown.

Mr. Chairman, this concludes my statement. I would be glad to

answer any questions that you may have.

[Prepared statement of Mr. Williams appears in appendix.]

The CHAIRMAN. In the scholarship or vocabulary of accounting,

in which GAO has considerable expertise, what do the terms complete historical accounting and historical accounting mean?

Mr. WILLIAMS. Mr. Chairman, those two terms are not terms

that you would regularly see in the accounting profession. From

the standpoint of various terms that we use, these are not two.

What this would boil down to is this is a situation where this term

has been coined in this particular litigation case as far as what the

parties are looking for. And to that end, what it would mean in

that situation is basically what all of the parties to the litigation

would agree to as far as, are we satisfied that we have a complete

accounting. But as far as the accounting profession itself is concerned, this is not a term that is used extensively throughout the

industry, to my knowledge.

The CHAIRMAN. Since you have been following and monitoring

the case, how do you interpret those terms? How does GAO interpret those terms?
5

Mr. WILLIAMS. From a general accounting standpoint, it’s a process in which the agency is capable of identifying all of the account

holders and being able to produce or prepare records that would

show amounts of funds that are owed to all of the individuals, any

activity that’s taken place in the account, any disbursements that

have taken place as well as the ending balance.

The CHAIRMAN. Well, over the years, GAO has issued a whole series of reports on the Interior Department’s efforts to reconcile

these accounts. You issued one in June 1992, and in March 1995,

the report was entitled Indian Trust Fund Accounts Cannot Be

Fully Reconciled. Based on these and other reports, and as you

know, we rely upon the GAO as experts in this area.

Mr. WILLIAMS. Yes, sir.

The CHAIRMAN. So my question is, is GAO still of the view that

these accounts cannot be reconciled, or put another way, that a

complete historical accounting cannot be rendered?

Mr. WILLIAMS. Based on our previous work, and the information

that we were able to review and analyze at that particular point

in time, that was our position. As far as the current plan that the

agency’s putting forward, as I said in my statement, we have not

had a chance to review that. I am not sure if there are any additional procedures or steps that would be in that plan that would

make it possible. But GAO’s position was that these accounts

would not, could not be reconciled based on some of the gaps that

had been identified and some of the problems that had been encountered in trying to do previous reconciliations.

The CHAIRMAN. How long will GAO take to fully analyze the July

2, 2002 report of the Department of the Interior?

Mr. WILLIAMS. We would put the two together and it would take

us 1 month or so to do an analysis of it. This process would require

from looking at the report, just giving it an initial read, where we

got access to it last week, I received a copy of it last week, there

were several players involved in putting together the document.

There were cost experts, there were accounting experts, there were

trust experts. So we would have to talk to those various individuals

to get some input as far as what was the thinking in going in to

put together the plan. Then we went through the analysis. So 1

month or 2 months to do a good analysis of the plan.

The CHAIRMAN. Would it be possible for your agency to provide

this committee with a report before the end of September?

Mr. WILLIAMS. Let me provide for the record a statement on that.

I’m not sure at this particular point in time. I need to discuss it.

We would make every effort to put together a document that would

lay out our initial assessments of the report. If it’s okay with you,

Mr. Chairman, we’ll work with the staff to come up with a time

that would work out as far as providing it possibly within that time

frame.

The CHAIRMAN. It would be most helpful, sir.

Mr. WILLIAMS. Thank you.

The CHAIRMAN. In prior testimony before this committee, GAO

suggested that the Congress consider the settlement of beneficiaries’ claims against the United States for an accounting. What

is it, in your assessment of the process involved in the reconciliation of trust fund accounts, that led GAO to this suggestion?
6

Mr. WILLIAMS. It was a combination of things that we had reported on. One, missing documentation, problems with the accounting system, just the vast number of transactions in the length of

time that you’re talking about as far as doing the reconciliation

that goes back to the beginning of the first allotment. So it’s a combination of those points.

The CHAIRMAN. In your investigation and study, did you come to

any conclusions as to the cause of the missing documents, how they

became missing?

Mr. WILLIAMS. No; we did not. In our review, we basically looked

at the process of the reconciliation, we didn’t get behind some of

the root causes as far as why the documents were missing, et

cetera. It’s just that it was identified as one of the barriers, I guess

you could call it, to completing the process.

The CHAIRMAN. And at this moment, do you still believe that a

settlement is a process the parties should explore?

Mr. WILLIAMS. That is still GAO’s position that that is one of the

options the committee should consider.

The CHAIRMAN. Would you envision that one fundamental component of a settlement is that the Department and the Individual Indian Money account holders would agree on a balance in each account that would eliminate the need for an historical accounting of

each account?

Mr. WILLIAMS. In our previous testimony, that was one of the options that we recommended. As I said, that was one of several options that we suggested should be given consideration.

The CHAIRMAN. We have heard many suggest that there should

be alternative methodologies. In fact, the GAO has suggested that.

May I call upon the GAO to identify other ways to approach the

duty of conducting an accounting or any other methodology that

might be applied to an accounting, and tell us about it?

Mr. WILLIAMS. In our previous reports, we talked about various

options. Some of the options, well, one of the options I just mentioned, and that would be a process in which a letter would be

mailed to the individual Indian stating that this is the balance that

we’re showing, do you agree or disagree. That’s one option. The option that the agency is putting forward now as far as looking at all

of the accounts that’s been identified, that’s another option.

So there were several that we’ve identified, and those were just

two of many ways that a reconciliation could be performed. And let

me let Mr. Jacobson add a little bit to that.

Mr. JACOBSON. Mr. Chairman, I appreciate the question. One of

the difficulties with answering that question is that the methodology you would employ is affected by what your duty is and what

your objective is. One of the challenges Interior faces is characterized in their own proposal. They’ve offered a methodology which

they’ve characterized as the broadest reading of the court’s opinions of the 1994 act.

The issue of what alternative methodologies might be out there

depends on whether one accepts that broad reading of the 1994 act

or if there is some alternative reading of what their duty is. And

that’s not really a call for us to make, that is a legitimate question

for Interior as to why they took the broadest reading and what alternative readings of their obligations might be available. In some
7

respects, that would dictate what the alternative methodologies

may be.

The CHAIRMAN. If you cannot recommend alternative methodologies, who can?

Mr. JACOBSON. Well, I think we can talk, in responding to the

request that you and Mr. Williams discussed earlier, we can certainly talk to those experts and look at and find out what alternatives they considered. There is some suggestion in some of Interior’s documents that they considered other methodologies, but we

haven’t done the work to find out what those are. That may shed

some light on the question that you’ve posed.

The CHAIRMAN. Can GAO do the work?

Mr. JACOBSON. Do the work meaning do the reconciliation?

The CHAIRMAN. No; identify other methodologies.

Mr. JACOBSON. We can talk with the people who worked with Interior and find out what else they considered. That process may

lead us to identifying other methodologies that parties could consider. But until we go in and start doing some work, we wouldn’t

know at this point until we went and saw what was out there.

Obviously, there are different methodologies for doing different

forms of accounting, whether it’s accounting by trustees or accounting of other natures. But the specific methodology that would be

reasonable depends on what the objectives are. And we may, we

will certainly as part of the effort that Mr. Williams described to

you, we will talk to the people who have been involved in this process to see if in fact there are other methodologies that we’d consider.

The CHAIRMAN. I realize that the staff in the GAO are foremost

in the field of accounting. But would you be able to identify whether there are other experts in this field that we could consult with?

Mr. JACOBSON. We could do that.

Mr. WILLIAMS. Yes, Mr. Chairman; we can do that.

The CHAIRMAN. That would be most helpful to us, sir.

And I thank you very much for your assistance.

Mr. WILLIAMS. Thank you.

The CHAIRMAN. And now may I call upon the second panel, the

associate deputy secretary of the Interior, office of the secretary,

James Cason, accompanied by Bert Edwards, executive director, office of historical trust accounting, of the Department of the Interior; and the special trustee for American Indians, from the Department of the Interior, Tom Slonaker.

Mr. Cason.

STATEMENT OF JAMES CASON, ASSOCIATE DEPUTY SECRETARY, OFFICE OF THE SECRETARY OF THE INTERIOR, ACCOMPANIED BY BERT EDWARDS, EXECUTIVE DIRECTOR, OFFICE OF HISTORICAL TRUST ACCOUNTING, DEPARTMENT

OF THE INTERIOR; AND TOM SLONAKER, SPECIAL TRUSTEE

FOR AMERICAN INDIANS, DEPARTMENT OF THE INTERIOR

Mr. CASON. Thank you, Mr. Chairman. My name is Jim Cason,

I’m the associate deputy secretary for the Department of the Interior. The Department has prepared one testimony for the panel,

which I’d like to submit in its entirety for the record.
8

The CHAIRMAN. Without objection, it will be made part of the

record.

Mr. CASON. Thank you, Mr. Chairman.

We just have a few brief comments, and then we will take questions. We’re pleased to be here to discuss the Government’s trust

accounting activities, in particular, those that are oriented towards

historical accounting. The Government has collected and disbursed

funds to Indians for over 100 years. Historically there has been no

standard practice to provide regular, detailed accounting statements to Indian beneficiaries. That’s the reason we’re here.

With the passage of the American Indian Trust Fund Management Reform Act of 1994, Congress required the Secretary to account for daily and annual balances of all funds held in trust by

the United States for the benefit of Indian tribes or Indian individuals which were deposited or invested pursuant to the act of June

24, 1938. Subsequently, the District Court here in the District of

Columbia required the Secretary to provide an accurate accounting

of all money in IIM accounts, that’s Individual Indian Money accounts, held in trust for the benefit of the individual Indians without regard to when the funds were deposited. And that gives us an

historical element to our accounting.

Subsequently, Congress required the Department to prepare and

submit a report describing how the Department would proceed to

undertake a historical accounting. And the Department’s plan was

provided to Congress in early July 2002. The report details an

enormous and challenging undertaking. The report details a historical accounting for Indian beneficiaries, both for current and former

account holders. The report delineates an anticipated workload

management approach, and an anticipated cost for the accounting

process.

The report required further discussion and possible refinement

with Congress and the Court. Congress needs to determine if the

plan is appropriate for meeting the Government’s trust accounting

responsibilities. Congressional appropriations will be needed to undertake the historical accounting and the appropriations rate will

influence the time schedule for completing any accounting that we

undertake. The Department believes that the Court may provide

additional guidance on this subject as well.

Right now, all three branches of Government are interested and

involved in this historical accounting effort. We need to work together to define and implement an approach that meets our trustee

responsibilities to individual Indian beneficiaries. The report provides Congress a positive step forward. This hearing is another

positive step forward. And Mr. Slonaker, Mr. Edwards and I are

happy to be here to answer questions. Thank you.

[Prepared statement of Mr. Cason appears in appendix.]

The CHAIRMAN. Before we proceed, may I call upon the Vice

Chairman.

Senator CAMPBELL. Thank you, Mr. Chairman.

I have no formal opening statement. I apologize for being late.

We were in conference on the energy bill. As you know, there is a

section there dealing with Indian energy that I’m trying to have expanded. So I had an opportunity to offer that amendment this
9

morning. So I’m sorry I’m late, and I’m just very happy to sit and

listen. Thank you.

The CHAIRMAN. May I proceed by asking the Special Trustee

questions? In the most recent report of the Court Monitor for the

District Court in which the Cobell-Norton litigation is pending, the

text of several memoranda that you have transmitted to Mr. Edwards was printed. In your memo of April 30, 2002, you stated:

I do not believe an accounting as that term is generally understood in the established trust scholarship acceptable to either the beneficiaries or the Special Trustee

can be constructed. Short of a settlement, the best that might be able to be accomplished is the identification of the gaps of information. With that, the Department

could perhaps seek some instruction from the judge on how to proceed. I remain

concerned, however, that I have not heard anyone in the Department define the

characteristics of an accounting to include anything more than the funds actually

collected by the Department. That of course is inadequate.

And in your memo of May 22, 2002, you stated:

It is evident that the long term record of the Department’s administration of the

Indian trust accounts is incomplete to some degree. In addition, during the past

year, the Special Master has been able to breach the Department’s electronic systems that house the trust data, thereby demonstrating that the data may not be

accurate. Because it is the duty of the Trustee to know all the facts about the administration of the trusts, these flaws cause me to doubt the ability of the Department to show either itself or the beneficiaries in sufficient detail the nature and

amount of the trust property and its administration.

Mr. Slonaker, in your official capacity and from what you know

of the gaps in information, do you believe that a complete historical

accounting of the Individual Indian Money accounts can be

achieved?

Mr. SLONAKER. Good morning, Mr. Chairman, Senator Campbell.

No; not completely. It may be possible to reconstruct a good

many accounts completely. Even identifying the assets and the flow

of income from the assets, which by the way is something that’s incumbent upon the trustee to do.

I believe that the Office of Historical Trust Accounting, however,

can go quite a way toward identifying what the gaps are in the information. As the trustee, it’s crucial that every effort be made by

the trustee to make certain that we have exhausted every means

to identify the assets and the incomes that belong to the beneficiaries, and bring that accounting right up to date.

The CHAIRMAN. You spoke of obstacles. In your view, what are

the obstacles, legal or practical, that would be presented if the Congress were to pursue a path of settlement of claims?

Mr. SLONAKER. The obstacles to the actual accounting itself I

think are fairly well known in terms of their type. There are

records that we believe are probably either destroyed or lost. There

is, as the GAO panel already has indicated, there are situations

where the accounting was not done properly, we believe, in the initial instance. So there are obstacles to getting a full and complete

accounting.

What those obstacles are, which you termed as a gap, have to be

further determined. They can only be estimated at this point in

time.

The CHAIRMAN. Everyone seems to speak of missing or destroyed

documents. Could you tell us as to when these documents began to

be missing or when the Government learned that they were destroyed?
10

Mr. SLONAKER. I cannot, sir. We only have, at least I only have

anecdotal evidence of missing documents at this point. I think

that’s the point of the historical trust accounting report in part,

and that is that these gaps have to be identified as to what point

they started and where those gaps are and what the nature of the

gap is.

The CHAIRMAN. So there is no proof or data to tell us when the

gaps began to come into existence?

Mr. SLONAKER. Not that I’m aware of, sir.

The CHAIRMAN. So these gaps or obstacles are such that settlement would be extremely difficult?

Mr. SLONAKER. I think my response to that, Mr. Chairman, has

to be that the Trustee needs to do everything in his power to establish what the liability of the Trustee may be. The size of the gaps,

the nature of the gaps has yet to be discovered. Whether that lends

itself to identifying a figure which in turn might lend itself to some

sort of a settlement is not clear to me.

Mr. CASON. Mr. Chairman, would it be okay if I make an addition on this? I think one of the things that we need to just try to

keep in perspective is what the target is that we’re after or what

the job is. And there’s been lots of speculation about whether or not

the Department can do an accounting, cannot do an accounting,

whether it’s a complete accounting, etc. Lots of terms, lots of commentary on what we can do.

I think we need to take a look at the issue from two perspectives.

One perspective is that the job that we have to do, as we perceive

it in the Department, is to conduct a historical accounting on an

account by account basis. So each individual person, their individual account is a task for us to do as part of an historical accounting. And within that boundary, our expectation is that we do have

sufficient information to be able to do a complete accounting on a

number of those individual accounts. And our expectation is it’s a

significant number, we don’t know exactly how many, but a significant number of them.

So we think that we can move forward with the information we

do have available to do a good, reasonable accounting for a large

number of individual accounts. There’s the other perspective that

says, can you ensure that we have a complete accounting for all of

the accounts. And from that perspective, I think everybody is in

agreement that the answer is probably no, that we cannot, for all

of the accounts, balance them historically from whenever funds

were deposited. So I think we have agreement on that. And I think

the issue that we need to have consideration on is, if we can’t do

the entire thing but we can do a good job on a lot of it, then should

we go ahead and proceed forward to do the best that we can under

the circumstances to do the accounting for the parts that we can

accomplish.

The CHAIRMAN. I think you are right on target, sir.

Mr. CASON. Thank you.

The CHAIRMAN. Mr. Slonaker, Section 306 of the 1994 Trust

Management Reform Act establishes an advisory board to advise

you on matters within your jurisdiction. Section 133 of the Interior

Appropriations bill that was recently approved by the House of

Representatives includes language directing you ‘‘in consultation
11

with the Secretary of the Interior and the tribes’’ to appoint new

members to the advisory board. Have you found the current membership to be unsatisfactory in any way, or unable or unwilling to

provide you with the advice you need regarding matters within

your jurisdiction?

Mr. SLONAKER. No; I have not found it unsatisfactory at all.

Quite the contrary. It’s a good sounding board for me. I think that

there is a fair amount of frustration on that board and a fair

amount of frustration of my own in the sense that they are not seeing trust reform proceed at the rapid pace that they want, that

they don’t see the stronger direction until perhaps more recently

that they want. And I think quite candidly, the board is looking for

a stronger role, it was hoping for a stronger role. They are an advisory board and technically just to me. But it has been helpful, sir.

The CHAIRMAN. Do you think you need new members, as the

House bill says?

Mr. SLONAKER. I do not.

The CHAIRMAN. And finally, if I may ask this, under Section 303

of the 1994 Trust Reform Act, the Special Trustee must certify in

writing the adequacy of each budget request within its area of jurisdiction:

To discharge effectively and efficiently the Secretary’s trust responsibilities and

to implement the comprehensive strategic plan.

If the July 2002 report to Congress were presented to you in the

form of a budget request, could you certify that carrying out historical accounting as set forth in the report would in fact discharge

the Secretary’s trust responsibilities effectively and efficiently?

Mr. SLONAKER. No, I could not. The plan, while it is, I think, a

good effort, simply can’t produce a full accounting as we’ve already

mentioned, a complete and full accounting which the Trustee is obligated to provide to the beneficiaries. It could do, I think, the best

possible, assuming it has sufficient resources. But the resources

that would be required, the funding that would be required is a,

I think, more of a best guess but not much. It’s very difficult to assess the cost of something like this. We’ve had some experience in

the past in the Department on document production and researching accounts which we’ve borrowed on for this report. But it’s still

difficult to assess the true cost of something quite this large.

But beyond that, it can only be an attempt at the best possible

research of what is due the beneficiaries. Since it can’t produce a

full accounting, I don’t believe it satisfies the trust responsibilities

and the Secretary to effectively and efficiently provide for that.

The CHAIRMAN. I think as Mr. Cason has indicated, this would

be a good step. I appreciate the candor in which all of you have responded to our questions.

Before I call upon the Vice Chairman, Mr. Cason, can I ask a

question, sir?

Mr. CASON. Obviously.

The CHAIRMAN. Does the Administration support the inclusion of

language set forth in the House Interior Appropriations Bill, sections 131–134 regarding, first, the Ernst & Young report on IIM accounts of the Cobell plaintiffs, second, the fees of the Special Master and the Court monitor in that case, third, the Special Trustee

advisory board established in the 1994 Trust Reform Act, and
12

fourth, the payment of attorneys fees and costs incurred in the

Cobell litigation by Department of the Interior employees?

Mr. CASON. Mr. Chairman, on the E&Y report, the Department

has not taken a position one way or the other. The position that

we’re in is we’re attempting to be helpful to Congress and to be responsive to the Court. This issue has come up once before, where

Congress made a request for the release of the E&Y reports. And

the Department forwarded that request to the Court and the Court

rebuked the Department for considering that as an option.

The Department is willing to continue to work with Congress

and the Court to try to be helpful to both sides, because we believe

that Congress is entitled to an explanation of the results of the

money that it has invested. In this particular case, we’ve spent millions of dollars doing the reconciliation. So we think it’s reasonable

that the Court gets some sort of report from us on that. But at the

same time, we have to respect the privacy rights of the individuals

that were involved.

So we have a job to try and find a happy medium that’s mutually

beneficial for all. So we’ll do what we can to help, but this is an

issue that’s somewhat controversial.

Regarding the second issue on the fees, the Department has not

taken a position on this at all, and we don’t anticipate taking a position. This is an issue that was not an initiative of the Department. We think this is an issue between the appropriations committees and the courts to solve. We’ll do whatever we’re directed

to do.

Regarding the advisory commission or advisory panel for the

Special Trustee, the Department has not taken a position on this

issue, either. Mr. Slonaker has taken a position. To the best of my

knowledge, this is not an initiative of the Department, it’s an initiative of the Appropriations Committee. And it’s my understanding that the underlying rationale supplied by the Appropriations

Committee is a concern about having one of the five named plaintiffs in the Cobell litigation be on the advisory panel, and it is

viewed as a conflict of interest.

And on the last item, the attorney fees, the Department would

support that. We were asked in a hearing on the House side by

Congressman Dicks to supply some information about how to provide for paying attorney fees for individuals who were named as alleged comtamnors in the Cobell litigation. Congressman Dicks felt

that the Department is in a very difficult position, having a number of its employees named as potential comtamnors and sought

some recommendations on how we could deal with that, and the

Department has tried to respond.

The CHAIRMAN. So in one phrase, this is not your initiative?

Mr. CASON. It is not our initiative.

The CHAIRMAN. I thank you very much, sir.

Mr. CASON. Thank you, Mr. Chairman.

The CHAIRMAN. Mr. Vice Chairman.

Senator CAMPBELL. Thank you, Mr. Chairman. I’ll try to be brief.

Two hundred and forty million pages of records, your statement

says there are about 240 million pages of records that need to be

analyzed. I’ll bet you there’s another 240 million pages of testimony, documentation, written things and so on, and we haven’t cut
13

check one. I was interested in the report’s conclusion that it will

cost $2.4 billion and at least 10 years to complete the historical accounting. There are a lot of Indian people out there that are going

to die before that, waiting for that money, if they have to wait 10

years.

Let me ask you, what alternatives to that document intense, exhaustive kind of proposal, did the Department undertake? Did you

look at anything else?

Mr. CASON. Yes, we did Senator; we did look at some other alternatives. It was a determination of the Department that any other

alternative that we looked at appeared to us to be short of the complete job to provide an accounting, account by account, to all the

Indian beneficiaries. We looked at the possibility of statistical accounting, we looked at a possibility of buyout programs and others.

But we thought that it would be helpful to the Congress to lay out

what the job would be to do a full accounting, to the extent that

we can do it, and certainly there are some impediments to a complete accounting. But we thought that it would be helpful position

to start first with doing a full accounting and look at alternatives

as a second matter.

Regarding payments to Indians, I’d like to point out that the accounting process is to basically go and document the activity in an

account. And as far as I understand, there is nothing in that process that would hold up making payments to Indians that are legitimate payments through the process, that the payments to Indians

for income that comes in and out of the account is an ongoing process, and that the accounting process we’re talking about is just documenting what happened.

Senator CAMPBELL. I see. Well, I appreciate that you want to do

a good job for the Indians. I think from the Indians’ perspective,

though, we’re doing a job on them, not for them. Because we just

keep going around and around with this.

Of all the people that we owe money to, wouldn’t it be simpler

to settle with those owners that would be willing to settle?

Mr. CASON. Senator, that’s certainly a possibility. The question

for us, as far as the Department is concerned, is what exactly are

we settling on. At this point, we don’t know exactly who has a

claim. We have a class. So all Individual Indian money account

holders are part of the class. So we have on the order of 250,000

to 300,000 current account holders who are part of that class. And

as we understand it, there is at least the possibility that former account holders are part of the class. So there may be as many as

500,000 accounts. Then, if you break down the job or the settlement, down to an account level, to say, okay, you’re an individual,

how much do I owe you and why do I owe it to you, we don’t have

answers for that.

That’s part of the conundrum we have right now; in order to get

to that answer, you need to do some accounting to actually run

through the account and the activities of the account to see if the

balance in the account is consistent with the activity in the account. And if you arrive at the same number, there’s nothing to settle. If you arrive at a different number, then there’s an issue of

what you settle.

Mr. SLONAKER. Senator Campbell, may I add on to that?
14

Senator CAMPBELL. Yes, Mr. Slonaker; go ahead.

Mr. SLONAKER. I just want to raise a possible issue with your

scenario, and that is the possibility that one beneficiary could be

treated differently than another beneficiary. I think that’s something that would have to be thought through very carefully.

Senator CAMPBELL. I guess if you reach some kind of a settlement with individuals, one may settle for a different amount than

the other one. But if they accept it willingly, then what recourse

would they have? That would be what they want, too. What’s the

problem?

Mr. SLONAKER. Conceivably you could be settling with some

beneficiaries, let’s say in the present day, and then eventually get

to some other beneficiaries who you are finally able to reconstruct

or to estimate what they’re owed, and the funding may not be there

for that money, and so they may be treated differently. I just raise

it as an issue here.

Senator CAMPBELL. I understand too that your statement reads,

I haven’t read it completely, but it does have in there that there’s

a high level of uncertainty in cost estimates for the historical accounting and that the bulk of the costs is for transactional analysis.

I don’t know if I asked this clear enough at first or not, but isn’t

there a way we can do some kind of a modeling with greater accuracy and a lot cheaper than just exhaustive and particularly one

that has a high level of uncertainty?

Mr. CASON. Senator, I would say that you have two criteria in

your question, accuracy and cost. Certainly we could do modeling.

The modeling probably would not improve accuracy over doing a

full accounting, it would be less accurate. However, modeling probably would be less costly, and you could move more quickly in a

model scenario than you could do in a full accounting scenario.

Senator CAMPBELL. Mr. Slonaker, regarding your role in the historical accounting, do you interpret the American Indian Trust Reform Act of 1994 as requiring the Special Trustee to approve the

methodology use to complete a historical accounting?

Mr. SLONAKER. The words actually in the act are monitor, I think

it’s a question of the Special Trustee being satisfied that the full

accounting responsibility has been leached, the methodology is a

part of that decision, yes.

Senator CAMPBELL. And dealing with Congress, do you believe

that the July 22, 2002 report provides enough information for us

to decide whether it should embark on an accounting effort that

may cost $2 billion or more?

Mr. SLONAKER. I’m not sure that it does, Senator. I think there

may be additional work that’s required to identify the gaps and to

better estimate the time required and the funding required. But I

think it’s a full faith effort to get it started and to do the full accounting that Mr. Cason was referring to.

Mr. CASON. Senator, we’d be happy to supply additional information, too, if the committee has any questions.

Senator CAMPBELL. I have some further questions I’d like to submit in writing, if you would answer them, I would appreciate it.

Thank you, Mr. Chairman.

The CHAIRMAN. Mr. Cason, if I may followup on the vice chairman’s questioning, when we speak of missing or destroyed docu-
15

ments, no one is suggesting that all of the documents are missing

or all of the documents have been destroyed. Would you say that

the bulk of the necessary documents are still in existence?

Mr. CASON. Mr. Chairman, that would be my assessment. We

don’t really have a number to know exactly how many documents

have been generated over the last 130 years. But the estimate that

we have on the table right now is we have somewhere on the order

of about 500 million pages of documents, and we have an assortment of computer systems that have information in them as well.

So we believe that we have a lot of information that could be

brought to bear to do a historical accounting. But we also realize

that we don’t have all of the information that may be needed to do

a complete accounting of all accounts. So where we are is, we believe that we can do a reasonable accounting for a lot of accounts.

At this point it’s uncertain as to how many that would be. But we

think that we can do a lot to move the process forward with what

we have, and that there will be some part that we’ll have to work

on in this process where we have incomplete information.

The CHAIRMAN. With the existence of relevant documents, that

you have indicated, most of them are still in existence, plus the

electronic equipment that you have had since 1985, do you not

think, as the vice chairman has suggested, that certain accounts

can be easily resolved, because they are backed up with necessary

documentation?

Mr. CASON. Mr. Chairman, we expect that there will be some accounts that can be easily resolved and addressed, and that there

will be some that will be very difficult or impossible. So our plan

basically envisioned a workload to try and address all of the accounts, both current and former, and that we would use best efforts

to try and reconcile them to the extent that we had information

that was reliable or we could develop methodologies based on other

information and fill information gaps.

The CHAIRMAN. This question is being asked because your report

of July 2002 suggests that the time span required may be 10 years.

And there is a question as to whether 10 years will be sufficient.

Mr. CASON. That’s correct, Mr. Chairman.

The CHAIRMAN. If that is the case, if you do have individual accounts that are clearly resolvable at this moment, why have them

suffer and wait the 10 plus years?

Mr. CASON. Mr. Chairman, I would say just on the surface that

we tried to develop a workload approach to deal with this issue.

And we’ve been using the analogy within the Department that we

have an elephant that we have to eat a bite at a time. And no matter where you start with this, we only have so many resources

available in terms of time and people and money to do accounting.

What we’ve tried to do is set some priorities in the report that

we provide to Congress about how we would go about the job. What

we established as priorities first is, there’s a sizeable chunk of

money that we think would be relatively easy to resolve in the form

of judgment accounts and per capita deposit accounts. We’ve already started the process of reconciling those accounts. Mr. Edwards has recently completed about 8,000 of those accounts, and

we’re on the cusp of sending out notifications on those that have

been reconciled. We have a few thousand more of those accounts
16

that we already have in process to reconcile while we go through

the debate about other individual accounts and the complexities

that are involved in this process.

Then after that, we try to set some priorities—simply, under

Jerry Maguire saying, ‘‘go where the money is.’’ We basically took

all the accounts to the extent that we have knowledge of them and

tried to array them in a way that we had highest balance of the

account with highest throughput through the account for the last

15 years, all the way down to the lowest balance and lowest

throughput. And our priorities were to go to where we had the

highest throughput and the highest balance in accounts, to do

those first and progressively work our way down from most important accounts down to least important accounts, money as the criteria.

So we laid out a workload process to try and get the biggest bang

for the buck in the shortest period of time to the most beneficiaries

we could. Certainly there’s other ways of approaching it. but we

laid it out one way. We’d be happy to discuss with the committee

and others in Congress, if there are other priorities that we ought

to be pursuing, other than ones we laid out.

The CHAIRMAN. The vice chairman and I felt that if there are accounts that can be easily resolved and closed, why not close them

and come before us 6 months from now and say, we have a balance

of now $1 billion, we have cleaned up 11⁄2 billion, or something like

that? It would make you look good. [Laughter.]

Mr. CASON. Looking good is a good thing. We’d like to do that.

And actually, Mr. Chairman, we have a similar thought process,

that the thing that is most helpful to us is actually show results.

We’ve done accounting. And that’s why we started with the judgment accounts, and we have completed a reconciliation on about

8,000 of those. So we are heading in the same direction. We want

to take the ones that we think we can get off the ground without

a lot of complication and get those done and off the plate, and then

move on to the more complicated ones.

The CHAIRMAN. The grapevine tells me that the Department may

seek another delay.

Mr. CASON. A delay for what, Mr. Chairman?

The CHAIRMAN. In the Cobell case.

Mr. CASON. I’m not aware that we’re seeking any delay.

The CHAIRMAN. Well, whatever it is, it has taken many years,

and pursuant to a report, it will take at least another 10 years. Are

you completely satisfied that you can finish this accounting in 10

years?

Mr. CASON. No; I’m not, Mr. Chairman. This is a big job. And

this is kind of uncharted territory. To the extent that we’ve

shopped around, I don’t think we’ve found anybody that’s ever tried

to take on a job like this. Going back to do a historical reconciliation of accounts with a long history just isn’t something that’s

pretty common for accounting firms to do or the Government to do.

So we’re in uncharted territory. We have significant structural

issues to have to overcome.

For example, we estimate that there’s as many as 500 million

pages of documents that we’re going to have to sort through to get

the relevant information to do an historical accounting. We have a
17

variety of accounting systems that have been employed. Some of

those systems have varying degrees of success. We’ve had generations of Indian agents involved in the process and generations of

beneficiaries. It’s a difficult process. And there are weaknesses in

the system.

Ten years was an estimate for going through the process, assuming adequate funding to do the job. And if funding is stretched out,

the job will take longer. If we run into impediments that we don’t

expect, the job could take longer. But we gave a best estimate,

based on our feeling of how doable the job is with a reasonable staff

size of contractors and departmental staff.

The CHAIRMAN. In your statement, you indicate that the plaintiffs claim that the Government owes them $137 billion. And you

counter that by saying that there is no evidence at this moment

that would support such a claim. What do you think the realistic

number would be?

Mr. CASON. Mr. Chairman, we have no idea. We don’t know how

you would make that determination unless you actually go through

some sort of an accounting process to identify where errors occurred in the accounting process over the last 100 or so years. Our

best estimate of how much throughput we’ve had through these accounts since 1909 is about $13 billion, moneys that have come in

and been disbursed through the process. We know that there is

about $404 million in the individual account balances right now,

and our estimates, as much as we know, is around $12.6 billion

worth of throughput.

We frankly don’t know how we get to $137 billion of misappropriated funds that would be due to Indian recipients. And short of

actually doing some accounting work, and that’s why we’ve tried to

prioritize—go where the money is, go to the highest value of accounts and work our way down, we don’t know how we would make

a determination that says we owe x number of dollars to this individual, because there is something wrong with that individual.

To the best of my knowledge, we have little information, if any,

regarding specific accounts in which there is a problem with the account. That doesn’t mean that there isn’t that information out

there somewhere. If somebody believes that they have a problem

with their account, given how many accounts there are in a time

period, it would be entirely plausible that there are problems out

there.

But we don’t have the specifics to operate on to substantiate any

particular figure. That’s part of the reason that we also went towards this full accounting process, that if we’re going to make

these determinations on an account by account basis, so that we

can make appropriate payments, where the Government has not

acted properly, then we need to have the facts to support it.

The CHAIRMAN. In other words, the cost estimate of the accounting, $2.4 billion, that may also increase?

Mr. CASON. That’s entirely possible. That’s our best estimate

based on what we know now, and it involves a number of assumptions regarding how many older accounts there are, how many

transactions were involved, how difficult it will be to assemble all

the paperwork to do the accounting, etc. So there is a lot of as-
18

sumptions that are in the process and a lot of best guesses in the

process to derive that figure.

The CHAIRMAN. I requested that the GAO review and analyze

your report. Will you help them?

Mr. CASON. We would be happy to do that, Mr. Chairman.

The CHAIRMAN. I think that would be extremely helpful.

Can the case proceed, or does it have to be delayed until the Department has completed the accounting?

Mr. CASON. You’re referring to the Cobell case?

The CHAIRMAN. Yes.

Mr. CASON. Mr. Chairman, I think the position that’s being

taken by the Department of Justice, and I don’t know that it’s a

final position, but what’s being discussed is that on the historical

accounting portion of the case, the plaintiffs are interested in proceeding to trial with that portion, and I believe the Department of

Justice is taking a position that, until the Department actually undertakes an accounting and produces results, we don’t know what

we’re trying. I leave that to the lawyers to sort out how we’re doing

that, that’s not really my call. But as I understand it, there is some

dialogue as to whether this is timely for us to pursue a case or

whether we actually need to do some accounting and base the case

on the accountings that are produced.

The CHAIRMAN. So it is going to take a little while longer possibly?

Mr. CASON. That’s my sense, Mr. Chairman.

The CHAIRMAN. How long has the Cobell case taken so far?

Mr. CASON. It’s my understanding it’s around 6 years.

The CHAIRMAN. About 6 years.

Mr. CASON. Around 6 to 61⁄2 years.

The CHAIRMAN. Well, we hope that this matter can be resolved

as soon as possible. But I agree with you that this is not an easy

one.

Mr. CASON. It’s not. And we would like to resolve it as well, Mr.

Chairman. It’s a difficult situation for all involved.

The CHAIRMAN. So we look forward to the analysis that GAO will

have of your report, and if you can help them I think we can expedite everything.

Mr. CASON. We’d be pleased to, Mr. Chairman.

The CHAIRMAN. Thank you very much, sir.

Mr. CASON. Thank you.

The CHAIRMAN. Do you have any questions?

Senator CAMPBELL. Mr. Chairman, I have no further questions.

But I would like to just say something, if I can do this without

hurting anybody’s feelings on the panel. In the 6 years that you

spoke of, we’ve had dozens of people here as witnesses for the Administration. And I have to tell you, I wish that they could speak

with the passion and urgency that Indians have been waiting for

it.

I’m sure that most of the people who have come over from the

Administration in that 6 years never were raised on surplus Government cheese, as an example, like I know some of the people sitting in this audience, Tex Hall over there is an example, knows

what that is.

Mr. CASON. So do I, Mr. Chairman.
19

Senator CAMPBELL. Do you? Well, then, maybe you understand

how most people feel when you tell them, well, it may be 10 more

years and some of you may die before you ever get fairness out of

the Federal Government. It’s just not right when we know people

are out there without any income, with poor housing, with not

enough food, with all that, and we just keep going around and

going around, and for some reason they can’t get their money that

is owed them and is rightfully theirs, because we have to do more

studies, we have to buy more computers, we have to hear from

more people, we have to dot all the I’s and cross all the T’s, we’ve

got to do every little thing and it just keeps going on and on.

I just wanted to leave you with that, that it’s just not right to

keep this thing going from one Administration to another, from one

Secretary to another, from one Trust Administrator to another. We

just do no fairness to the Indian people who have waited so long.

I just wanted to leave you with that.

Thank you, Mr. Chairman.

Mr. CASON. Thank you, Senator. I think that’s a great point.

We, too, share some of the frustration that the process takes so

long to seemingly make any material progress. And we recognize

that the situation has been longstanding and that it needs to be

addressed.

We provided a plan for full accounting. Unfortunately, there’s a

ton of work that needs to be done in order to provide a full accounting.

Senator CAMPBELL. We will never have full accounting. There are

so many missing documents, somewhere along the line, we’ve got

to cut our losses and start signing some checks. It just seems to

me, as I mentioned and the chairman did too, that we ought to be

trying to negotiate with the people that would be willing to settle.

There could be disclaimers so that would be the only time they

would be willing to settle, whatever. But we ought to do some kind

of negotiating where we can actually start the process moving instead of just keep going around about what more we have to do

within the Administration.

Mr. CASON. Senator, we would be more than pleased to work

with Congress on trying to structure something that would be fair

in this circumstance.

Senator CAMPBELL. Thank you. Thank you, Mr. Chairman.

The CHAIRMAN. Once again, Mr. Cason, Mr. Slonaker, Mr. Edwards, I thank you for your forthright responses to our questions.

Thank you very much.

Mr. CASON. Thank you, Mr. Chairman.

The CHAIRMAN. Our final witness is William Causey of Nixon

Peabody of Washington, DC.

Welcome, Mr. Causey.

STATEMENT OF WILLIAM F. CAUSEY, ESQUIRE, NIXON

PEABODY, LLP

Mr. CAUSEY. Thank you, Mr. Chairman, Mr. Vice Chairman. It’s

a pleasure to be here.

Thank you for giving me the opportunity to share with you some

views about whether and how the Cobell litigation might be susceptible of mediation. This morning we heard testimony about how
20

complicated and involved this matter is and how long this litigation

has been going on, and everybody has expressed a desire to come

to some kind of satisfactory resolution of this matter. I would like

to suggest that everybody think seriously about some form of mediation to do that.

Just to set the stage for this, I have been litigating in the U.S.

District Court for over 25 years. I have tried cases in front of the

judge that’s hearing the Cobell litigation. I have been specially

trained in the mediation of complex cases involving the Federal

Government and private parties. And I have been serving as a mediator in the U.S. District Court for 12 years. I have mediated

cases involving matters that are pending before the judge that is

currently hearing the Cobell litigation.

As we all know, what I will refer to as the Indian trust fund

problem is an enormous problem. The litigation over this issue has

made the likelihood of a successful and satisfactory resolution of

the problem, in my view, less rather than more possible. Both of

you certainly know the value and efficacy of compromise, which is

the backbone of successful mediation. And as someone who has mediated many cases, let me share with you my views on how mediation might be employed to help the parties in the Cobell litigation

resolve that matter and perhaps bring this entire problem to some

quick resolution.

I think everyone will agree, and I heard this morning from some

of the individuals who testified that everybody wants to see this

matter resolved and would like to come to a realistic resolution of

the problem. Certainly the investment of time, money, and resources and energy is Cobell draining the ability of the parties in

the litigation to bring the matter to some kind of resolution.

So how can the parties in the Cobell litigation be encouraged to

mediate this matter? And what if anything should the Congress do

to assist the parties in agreeing to mediate the issue?

Frankly, in reading the various court decisions and all of the reports from all the various Federal agencies and departments involved, I am less than optimistic that the parties will come to the

mediation table willingly to try and get this matter resolved, despite the fact that they all seem to say they would like to do that.

I think that’s unfortunate, but I think there are ways to encourage

the parties in this litigation to come to the mediation table.

When I say that I’m less than optimistic that the parties might

be willing to mediate this matter, that is particularly true in my

view with respect to the Government’s position in the litigation. My

experience has been that the Department of Justice is usually reluctant to mediate cases pending in the courts. And I think that’s

an unfortunate position for the Government to take. There are

many in the Department of Justice today who are encouraging the

Department to change this view and to be more willing to mediate

matters that are pending before the courts. And I certainly hope

and believe that this case is one where the Department of Justice

should seriously think about coming to voluntary mediation.

Even though this matter involves multiple parties, millions if not

billions of dollars, and very complicated matters, I believe that if

the parties are willing to be patient, creative, flexible and sensitive

to the needs and positions of all concerned in the process, rules for
21

mediation can be devised that will protect the interests of all the

parties, encourage all parties and interest groups to have a say and

participate in the structuring of a resolution of the problem, and

will substantially reduce the level of confrontation and acrimony

that has flowed from the Cobell litigation.

Here is what I think needs to be done to encourage the parties

to agree to voluntary mediation of this problem. First, as any basic

training in mediation will reflect, there must be incentives to get

the parties to agree to participate in mediation. From the viewpoint

of convincing the Department of Justice to participate, and the list

that I am going to suggest is certainly by no means complete and

inclusive, involves many complicated issues. But some of the things

that might be suggested would be giving some level of immunity

to individual Government officials, either party or non-party individuals, so that they would be willing to contribute and participate

in a search for an honest and realistic solution to the problem. Another thing would be finding some source of money to pay for existing litigation expenses of party and non-party individual Government officials, so we can get that part of the litigation behind us

and move to consideration of constructive solutions to the underlying problems.

Second, we might want to make sure that the parties are able

to participate fully in deciding what the fundamental preliminary

issues would be in any kind of mediation, such as who should be

invited to attend and participate in the mediation process who may

not be existing parties to the current litigation, such as the Court’s

Special Master and Special Monitor, or various Native American

groups that have an interest in this matter. We also should look

at to what extent the media should be involved in this mediation

process, what outside experts and consultants might be necessary

to assist the parties and a mediator or a mediation body to seek

a resolution of the problem, and what Government and independent accounting records should be released and disseminated to the

parties during the mediation process.

Third, I think a mediator should devise a schedule and a mechanism for the payment of attorneys fees for the class represented

lawyers that is not dependent on the outcome of the mediation. I

have found that the issue of attorneys fees can infect and destroy

the early good intentions of parties in mediation. And getting this

issue off the table early should substantially increase the likelihood

of getting to the ultimate core issues in reaching a final resolution

of the problems.

Finally, I think it’s important to let all of the parties participate

in the construction of the agenda of how and when certain more

substantive issues, the real underlying issues, should be addressed,

such as what methodology should be employed to do an accounting,

whether certain claims can and should be paid now, how and to

what extent should past and present Government officials be held

accountable for the problems, and to what extent the Court and the

Congress should participate in the implementation of any final resolution of the problem.

If the parties are not willing to voluntarily participate in mediation, and voluntary participation, is the core of successful mediation, it might be necessary for the Congress to become more
22

proactive in this matter and in some way compel some form of resolution of the problem. I might suggest to the committee, although

I haven’t looked at this in great detail, but the committee might

want to consider something like the September 11 Victim Compensation Fund as a model for legislation to push the parties toward some resolution of the Indian trust problem.

In short, Mr. Chairman, the time has come for everyone in this

matter to do something to get everybody together and try and get

this matter resolved in a friendly, constructive, positive way. I

think some form of mediation should be seriously considered by the

parties to bring that about.

Thank you for giving me the opportunity to share these views

with you, and I’ll certainly be happy to answer any questions.

[Prepared statement of Mr. Causey appears in appendix.]

The CHAIRMAN. Thank you very much, Mr. Causey.

Have you had occasion to read or study the July 2002 report?

Mr. CAUSEY. Mr. Chairman, I have looked at it, I cannot honestly

say I have studied it. But I have read it, yes.

The CHAIRMAN. Have you reached any conclusion?

Mr. CAUSEY. I have not. I have approached this matter, as my

training would suggest, as a lawyer, and I’ve been looking at some

of the legal issues that arise as a result of that report. But I have

not studied or reached any conclusions as to what the report intends to suggest in terms of moving along in the process of getting

this issue resolved.

The CHAIRMAN. Would you consider resolution time period of 10

years to be appropriate?

Mr. CAUSEY. I would not. I do not think that getting to a resolution of this problem should take 10 years.

The CHAIRMAN. How long do you think it should take?

Mr. CAUSEY. Mr. Chairman, that’s difficult to say. If the parties

were willing to sit down and participate in good faith mediation of

this matter, I think this matter could be resolved within 1 year.

The CHAIRMAN. I realize that this is a class action case and there

are thousands involved. But there are many thousands who have

not responded, who are not party to this litigation. How would you

resolve their problems?

Mr. CAUSEY. Well, of course, class action litigation is a representative process, in that the named plaintiffs in the litigation represent the identified class. I think we would have to ascertain how

many potential claimants are not participating or are not members

of the class, have the parties come to some means to try and identify those individuals, communicate with those individuals, see if

there is some way for them to participate in the resolution process,

not necessarily through the formal process that is employed in litigation in the court, but to come up with some means to identify

these individuals and have them participate.

That’s one of the great values of mediation, is that it is very

flexible. The parties can be very creative, they are not bound by established rules and procedures that may restrict parties in seeking

satisfactory resolution of problems. I think that issue could be one

of the many issues placed on the table for the parties to try and

voluntarily agree to solve and figure out some way to identify and

reach those individuals who are not represented in the class.
23

The CHAIRMAN. As one who is an expert in matters of this nature, such as mediation, would you consider resolving the so-called

easy cases, the cases that have been fully documented and can be

resolved without much conflict, would you do that?

Mr. CAUSEY. Mr. Chairman, as I said, I think there are a number

of preliminary issues that the parties should look at in structuring

a mediation process for this problem. I think one of the preliminary

issues that should be looked at is whether there are identifiable

claimants who can be paid money now. And if that is possible, let’s

figure out a way to get them paid and get that issue off the table,

so that we can then get to what I think is probably the much more

complicated issue of identifying the source of money, the availability of records, the methodology for doing an accounting for those individual claims whose claims we cannot precisely identify and pay

at the present time.

I don’t know what the numbers would represent, whether we’re

talking about 5 or 10 or 20 percent of the potential claimants. But

I think that is an issue that can be looked at in the early phases

of mediation and try and get that resolved and settled, and then

move on to the more complicated issues.

The CHAIRMAN. In your opinion, can this matter, this class action, be resolved with finality by your process, or would it take involvement of the Congress of the United States?

Mr. CAUSEY. Mr. Chairman, that’s a good question, and I’m not

sure I have an answer. I think a lot would depend on how the mediation progresses, what are the issues that can be easily resolved,

and what are the issues that are more difficult to resolve. I suspect

that there would be some need for the Congress and the court participate in this process in some way. I just don’t know to what extent and what the nature of that participation would be.

I certainly believe that there would be some need for the Congress to help the parties figure out some way to implement and

perhaps pay for the implementation of a resolution, and there’s got

to be some mechanism for the court to formally bring to conclusion

the litigation. So I think there would be need for the court and the

Congress to participate. But at what level and what stage and to

what extent is difficult to tell right now.

The CHAIRMAN. May I ask Mr. Williams one more request?

Mr. WILLIAMS. Yes.

The CHAIRMAN. If you believe that the Congress should involve

itself in the final solution, can you tell us the nature of that involvement? Not now, but in your report.

Mr. WILLIAMS. Yes; we will do that, Mr. Chairman.

The CHAIRMAN. I thank you very much, sir.

Mr. Vice Chairman.

Senator CAMPBELL. Thank you, Mr. Chairman.

A few years ago, it seems like we were in the same quandary,

and we talked a little bit about, in fact, I remember we did circulate a bill that had a section in it that required some mediation

being done in the private sector.

Let me ask you just a couple of questions. Can an individual opt

out from a class action lawsuit and settle individually?

Mr. CAUSEY. There are procedures for individuals to opt out of

the class, but the question of whether that individual who decides
24

to opt out can settle individually is a far more complicated question. I think in the structure of mediation, that could be defined

and implemented. I think it would be much more difficult to do

that under the Federal Rules of Civil Procedure that restrict the

parties to what they can do and can’t do in the court litigation.

But that’s certainly an issue that I think a mediator should and

could explore in the process.

Senator CAMPBELL. There’s a trust fund task force, as you know,

that’s been meeting a number of times that hasn’t dealt with this

problem, but they’ve dealt with a number of others, and we’ve been

trying to frame up a bill based on the agreements that they made

with the Administration. There are still a lot of places where they

don’t agree. But it’s coming along, we’re going to do a hearing very

shortly on that. I am frankly personally interested in putting something in that bill that requires some mediation commission to be

established.

Would you be willing to work with the committee to give us some

ideas on how that should be structured if we proceed with that?

Mr. CAUSEY. Certainly. I’d be delighted.

Senator CAMPBELL. The committee has been told that if Congress

refuses to pay for the accounting because it believes it’s just a futility, then Cobell can still proceed. But if Congress refuses to pay for

it because it believes it’s too expensive, then the Unites States may

have to move to dismiss the case. Are you aware of that and could

you maybe describe the difference between the two to a layman like

me?

Mr. CAUSEY. Senator, I am aware of the Department of Justice

suggesting that position. Frankly, I’m a little dismayed by the position that they’re suggesting. I’m not sure what would be the argument that they could put before the court to say that the litigation

which has gone on now for six years and has gone through numerous opinions and court of appeals review can come to an end simply

because there’s no money to pay a judgment. I don’t think the court

is going to be very receptive to that argument, but I certainly don’t

know. It’s a perplexing position, from my analysis.

Senator CAMPBELL. Thank you. What’s the present value of $2.4

billion over 10 years? If we have settlements like Agent Orange or

September 11 or so on, we knew we couldn’t get to an exact figure.

How can we structure a reasonable settlement when you talk about

a 10-year timeframe?

Mr. CAUSEY. There are actuaries who can do the computations

and come up with the number. But you have to have an agreement

on what the numbers are that go into the calculation. Certainly the

present value of $2.4 billion over 10 years would be more than sufficient to pay for mediation of the Cobell lawsuit.

Senator CAMPBELL. What happens if a person, an account holder

who has a legal right, dies within 2 years? What recourse do his

heirs have?

Mr. CAUSEY. I don’t know, Senator. I think that may be a complicated question. That question likely would be controlled by estate law in the various States. I just don’t know the answer to that.

Senator CAMPBELL. We don’t, either.

Thank you, Mr. Chairman.
25

Thank you for your testimony, and I look forward to your working with us to help us frame up something for that bill I was

speaking of.

Mr. CAUSEY. I look forward to it.

Thank you

The CHAIRMAN. I wish to thank all the witnesses for their participation. I wish that this could be resolved in the very near future. If not, the situation could worsen, in light of what the Supreme Court has said.

With that, I thank you all very much. This hearing is adjourned.

[Whereupon, at 11:40 a.m., the committee was adjourned, to reconvene at the call of the Chair.]

(27)

1 U.S. General Accounting Office, Indian Trust Fund Testimony Q’s and A’s, GAO/AIMD–96–

125R (Washington, DC: June 24, 1996).

APPENDIX

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

PREPARED STATEMENT OF MCCOY WILLIAMS, DIRECTOR, FINANCIAL MANAGEMENT

AND ASSURANCE, GENERAL ACCOUNTING OFFICE, WASHINGTON, DC

Mr. Chairman and members of the committee:

I am pleased to be here today to summarize previous General Accounting Office

[GAO] work that identified gaps in information needed to reconcile Individual Indian Moneys [IIM] trust accounts, and the rationale that led us to suggest, based

upon our earlier work, that Interior seek alternatives to reconciliation such as a negotiated agreement.

Before discussing our prior work, let me point out that we have not yet had time

to analyze Interior’s July 2, 2002, Report to Congress on the Historical Accounting

of Individual Indian Money Accounts, evaluate its proposed methodology, or discuss

the report or its proposed methodology with Interior officials. Also, we have not done

recent work to evaluate the current state of Interior’s IIM records. Nevertheless it

is clear that a reconciliation of IIM accounts is a daunting endeavor, both in terms

of the magnitude of the project’s scope and the obstacles that are likely to be encountered. As to the scope, certainly tens of millions, and perhaps over 100 million,

of IIM transactions have occurred in the more than 100 years since the first Indian

allotment act. Further, the supporting documentation that must be examined to reconstruct the account transactions must first be located by searching more than 100

offices, warehouses, records centers, and archives.

Regarding the obstacles that Interior is likely to encounter, we reported to this

committee in June 19961 that, based on our work, we concluded at that time that

records were not available to support a reconciliation of the IIM accounts. In addition to missing records, we pointed to the lack of an audit trail through Interior’s

Integrated Records Management System [IRMS], which was used to maintain IIM

account information, and differences in the way IRMS operates at various Interior

locations, which affect the consistency of the IRMS information, as obstacles that

Interior would encounter in pursuing an IIM account reconciliation.

Much of our previous work in the area of trust fund reconciliations relates to an

earlier account reconciliation requirement and a related Interior effort to reconstruct

both tribal and IIM trust accounts. From 1992 through 1997, we monitored and reported on various aspects of Interior’s planning, execution, and reporting of results

for the reconciliation project. First let me discuss the tribal portion of that earlier

Interior effort.

The Congress established an Indian trust fund account reconciliation requirement

in the Supplemental Appropriations Act of 1987. That requirement was in response

to tribes’ concerns that (1) Interior had not consistently provided them with statements on their account balances, (2) their trust fund accounts had never been rec-
28

2 U.S. General Accounting Office, Financial Management. BIA’s Tribal Trust Fund Account

Reconciliation Results, GAO/AIMD–96–63 (Washington, DC: May 3, 1996). 3 U.S. General Accounting Office, Indian Trust Funds: Tribal Account Holders’ Responses to

Reconciliation Results, GAO/AIMD–97–102R (Washington, DC: May 23, 1997). 4 U.S. General Accounting Office, Financial Management BIA Has Made Limited Progress in

Reconciling Trust Accounts and Developing a Strategic Plan, GAO/AFMD–92–38 (Washington,

DC: June 18, 1992).

onciled, and (3) Interior planned to contract with a third party for management of

trust fund accounts.

The 1987 act required that the accounts be audited and reconciled before the Bureau of Indian Affairs [BIA] transferred funds to a third party. Interior’s fiscal year

1990 appropriations act added a requirement that the accounts be reconciled to the

earliest possible date and that Interior obtain an independent certification of the

reconciliation work. The American Indian Trust Fund Management Reform Act of

1994 subsequently required the Secretary of the Interior to provide tribes with reconciled account statements as of September 30, 1995.

Interior contracted with two major independent public accounting firms, one to

reconcile the trust accounts and the other to do an independent certification to indicate that the reconciliation resulted in the most complete reconciliation possible.

Following a preliminary assessment in March 1992 by Interior’s reconciliation contractor, Interior decided to have the contractor reconcile the tribal accounts for fiscal

years 1973 through 1992. Subsequent to this decision, Interior also had BIA reconcile the tribal accounts for fiscal years 1993 through 1995 to comply with the 1994

act’s requirement that Interior provide tribes with reconciled account statements as

of September 30, 1995.

The tribal portion of Interior’s Indian trust fund account reconciliation project was

completed and Interior reported the results to tribes in January 1996. During the

reconciliation project, Interior spent about $21 million for contract costs over a 5-

year period in a massive effort to locate supporting documentation and reconstruct

historical trust transactions, as well as to perform other reconciliation procedures,

in its attempt to validate tribal account balances.

During a February 1996 meeting at which Interior officials and the reconciliation

contractor summarized the reconciliation project results, tribes raised questions

about the adequacy and reliability of the reconciliations results. In May 1996, we

reported2 on shortcomings of Interior’s reconciliation project. The shortcomings consisted of procedures that were not completed due to missing records, systems limitations, or time and cost considerations.

In May 1997, we reported3 to this committee that, as of May 6, 1997, Interior had

provided reconciliation reports to 310 tribes, of which 51 tribes had disputed, and

41 had accepted, the reconciliation results. Of the remaining 218 tribes, 47 had requested more time to consider the results, and 171 had not responded to the reconciliation results. In summary, although Interior made a massive attempt to reconcile tribal accounts during its reconciliation project, missing records and systems

limitations made a full reconciliation impossible.

Now, let me turn to the IIM portion of Interior’s earlier account reconciliation effort. In our June 1992 report4 on Interior’s efforts to reconcile Indian trust accounts,

we noted that the effort originally consisted of two phases. The first phase was to

cover, in addition to 500 tribal accounts, 17,000 IIM accounts maintained at three

agency offices. However, after an initial assessment by Interior’s contractor of the

level of effort and cost needed to complete the various segments of reconciliation

work, a decision was made not to reconcile IIM accounts as part of the project. In

reporting this status, we noted that Interior and its contractor had determined that

a full reconciliation of all tribal and IN accounts was neither possible nor cost-effective due to missing records, commingled tribal and individual Indian accounting

records, poorly documented accounting transactions, and the volume of data to be

reviewed.
29

5 U.S. General Accounting Office, Financial Management Native American Trust Fund Management Reform Legislation, GAO/T-AIMD–94–174 (Washington, DC: Aug. 11, 1994). U.S. General Accounting Office, Financial Management Indian Trust Fund Accounts Cannot Be Fully

Reconciled, GAO/T-AIMD–95–94 (Washington, DC: March 8, 1995). U.S. General Accounting Office, Indian Trust Fund Settlement Legislation, GAO/AIMD/OGC–95–237R (Washington, DC:

Sept. 29, 1995).

At that time, we recommended that Interior seek alternatives to the reconciliation

project and develop a proposal for reaching a satisfactory resolution of the trust

fund account balances with account holders. Among alternatives that we recommended for Interior’s consideration were that Interior consider negotiating agreements with individual Indians on balances reported on their account statements and

request legislated settlements on all, or selected accounts. In a number of testimonies and reports over the next several years,5 we supported the idea of Interior

and tribal and IIM account holders negotiating a resolution of their issues.

Interior’s July 2, 2002 report relates directly to the 1994 act and the ongoing class

action lawsuit commonly referred to as the Cobell litigation, which is presently before the U.S. District Court for the District of Columbia. In this regard, my comments today are not intended to address, nor is GAO taking any position on what

level of accounting the 1994 act or the courts have required of Interior thus far,

whether Interior’s plan satisfies those requirements, or, if so, whether Interior’s

plan is the only or best approach for Interior to satisfy the requirements imposed

on it. Those issues will ultimately be decided by the court.

Having said this, we note that Interior’s report recognizes that a number of obstacles, similar to those we have previously reported on, will complicate its ability to

document for IIM account holders the amount and source of funds deposited to,

managed in, and disbursed from their IIM accounts. The Interior report enumerates

among those obstacles known discrepancies in the balances, at the trust fund level,

reported by Treasury and Interior, as well as the potential for (1) errors in the electronic accounting system data, (2) missing paper transaction records, and (3) missing land ownership information and revenue instruments. The report further states

that ‘‘It is certain that gaps in documentation will be encountered during the historical accounting. Such gaps may range from a single missing lease to an entire time

period of missing documentation for some or all IN account holders served by a specific BIA agency.’’ Interior’s enumeration of obstacles is consistent with what our

prior work has shown.

Mr. Chairmen, this concludes my statement. I would be glad to answer any questions from you or other members of the committee.
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107

Æ