INDIAN TRUST RJND ACCOUNTS MANAGEMENT 

OVERSIGHT HEARINGS 

BEFORE THE 

TASK FORCE ON INDIAN TRUST FUND 

MANAGEMENT 

OF THE 

COMMITTEE ON RESOURCES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTH CONGRESS 

SECOND SESSION 

ON 

MANAGEMENT OF INDIAN TRUST FUND ACCOUNTS 

RELATING TO ALASKA NATIVES 

AUGUST 10, 1996-ANCHORAGE, AK 

MANAGEMENT OF INDIAN TRUST FUND ACCOUNTS BY 

THE DEPARTMENT OF THE INTERIOR 

AUGUST 20, 1996-SCOTTSDALE, AZ 

MANAGEMENT AND RECONCILIATION OF INDIAN 

TRUST FUND ACCOUNTS 

27-249 cc 

SEPTEMBER 26, 1996-WASHINGTON, DC 

Serial No. 104-95 

Printed for the use of the Committee on Resources 

U.S. GOVERNMENT PRINTING OFFICE 

WASHINGTON : 1997 

For sale by the U.S. Government Printing Office 

Superintendent of Documents, Congressional Sales Office, Washington, DC 20402 

ISBN 0-16-053966-8 
COMMI'ITEE ON RESOURCES 

DON YOUNG, Alaska, Chairman 

W.J. (BILLY) TAUZIN, Louisiana 

JAMES V. HANSEN, Utah 

JIM SAXTON, New Jersey 

ELTONGALLEGLY, Califurrua 

JOHN L. DUNCAN, JR., Tennessee 

JOEL HEFLEY, Colorado 

JOHN T. DOOLITTLE, Califorrua 

WAYNE ALLARD, Colorado 

WAYNE T. GILCHREST, Maryland 

KEN CALVERT, California 

RICHARD W. POMBO, Califorrua 

PETER G. TORKILDSEN, Massachusetts 

J.D. HAYWORTH, Arizona 

FRANK A. CREMEANS, Ohio 

BARBARA CUBIN, Wyoming 

WES COOLEY, Oregon 

HELEN CHENOWETH, Idaho 

LINDA SMITH, Washington 

GEORGE P. RADANOVICH, Califorrua 

WALTER B. JONES, JR., North Carolina 

WILLIAM M. (MAC) THORNBERRY, Texas 

RICHARD (DOC) HASTINGS, Washington 

JACK METCALF, Washington 

JAMES B. LONGLEY, JR., Maine 

JOHN B. SHADEGG, Arizona 

JOHN E. ENSIGN, Nevada 

GEORGE MILLER, Califorrua 

EDWARD J. MARKEY, Massachusetts 

NICK J. RAHALL II, West Virgirua 

BRUCE F. VENTO, Minnesota 

DALE E. KILDEE, Michigan 

PAT WILLIAMS, Montana 

SAM GEJDENSON, Connecticut 

BILL RICHARDSON, New Mexico 

PETER A. DEFAZIO, Oregon 

ENI F.H. FALEOMAVAEGA, American 

Samoa 

TIM JOHNSON, South Dakota 

NEIL ABERCROMBIE, Hawaii 

GERRY E. STUDDS, Massachusetts 

SOLOMON P. ORTIZ, Texas 

OWEN B. PICKETT, Virgirua 

FRANK PALLONE, JR., New Jersey 

CALVIN M. DOOLEY, Califorru~ 

CARLOS A. ROMERO-BARCELO, Puerto 

Rico 

MAURICE D. HINCHEY, New York 

ROBERT A. UNDERWOOD, Guam 

SAM F ARR, Califorrua 

PATRICK J. KENNEDY, Rhode Island 

DANIEL VAL KisH, Chief of Staff 

ELIZABETH MEGGINSON, Chief Counsel 

CHRISTINE KENNEDY, Chief Clerk/ Administrator 

JOHN LAWRENCE, Democratic Staff Director 

TASK FORCE ON INDIAN TRUST FUND MANAGEMENT 

J.D. HAYWORTH, Arizona, Chairman 

WAYNE T. GILCHREST, Maryland DALE E. KILDEE, Michigan 

KEN CALVERT, California PAT WILLIAMS, Montana 

RICHARD W. POMBO, Califorrua BILL RICHARDSON, New Mexico 

BARBARA CUBIN, Wyoming TIM JOHNSON, South Dakota 

DON YOUNG, Alaska (ex officio) GEORGE MILLER, Califorrua (ex officio) 

TiM GLIDDEN, Counsel 

CHRISTOPHER STEARNS, Democratic Counsel 

(II) 
CONTENTS 

Hearing held: August 10, 1996, Anchorage, AK ................................................................... . August 20, 1996, Scottsdale, AZ ..................................................................... . September 26, 1996, Washington, DC .......................................................... .. 

Statements of Members: 

Page 

1 

63 

209 

Faleomavaega, Hon. Eni, a U.S. Delegate from American Samoa ............... 64 

Hayworth, Hon. J.D., a U.S. Representative from Arizona; and Chairman, Task Force on Indian Trust Fund Management ...................................... 63, 209 

Kildee, Hon. Dale, a U.S Representative from Michigan .............................. 210 

You~;.eiH:~ ~~~eXU :" &P'~~~~ii~~ .. r;;;~ .. Ai~~k~; .. ~~d .. Ch~i~~~: 65 

Committee on Resources ............................ .... .............................. ................ 1 

Statements of witnesses: Barton, Julie, The Oneida Tribal Council .. .. .. .. .. .. .. .... .... .... .. .. .. .. .. .. .. .. .... .. .. .. .. 102 

Benedict, Mary, Treasurer, Hoopa Valley Tribe ............................................ 100 

Cobell, Elouise, Project Director, liM Correction and Recovery Project .... 18, 229 

Coh;:,etd.~e~~:;&li~~;· n~p;,;t~~~t ~r i~t~rl~; :: :::::::::::::::::::::::::: ::::::: 2n 

Davenport, Eric, Chairman, Intertribal Monitoring Association, Indian 

Trust Funds . .. .. .. ... .. . . .. . . .. .. ... .... . . .... ... . . . . .. .... .. . . . .. . . .. . . .. . . . . . .. . . .. . . .. . . . . . .. . . . . .. . . .. . .. . 5 

Prepared statement ................................................................................. 36, 24 7 

Doxtator, Deborah J., Chairwoman, Oneida Tribe of Indians of Wisconsin 

(prepared statement) . ..... .... .... ... . . .... .... . . . . . .. . . .. . . .. . . . . . .. .. . .. . . . . . . .. . . .. . . .. .. . . . . . . . .. . . . 198 

Erwin, Donna, Director, Office of Trust Fund Management, Department of the Interior ................................................................................................ 2, 66 

Prepared statement ................................................................ ... .......... .... 30, 117 

Hale, Albert, President, Navajo Nation .......................................................... 80 

Prepared statement .............................................................. .... ................. 134 

Harrison, David, Professional Staff Member, Intertribal Monitoring Association on Indian Trust Funds .... .... .. .. .. .. ...... .... .. .. .. .. .. .. .. .. .. .... .... .... .. .. .. .. .. .. . 222 

Homan, Paul, Special Trustee for American Indians, Department of the 

Interior ......................................................................................................... .. Prepared statement .................................. ................................................ . Long, Susie, Chairperson, Yurok Indian Tribe ............................................ .. Prepared statement .................................................................................. . Lupe, Ronnie, Chairman, White Mountain Apache Tribal Council ........... .. Prepared statement .............................................................. ........... ......... . Makil, Ivan, President, Salt River Indian Tribe .......................................... .. Prepared statement .................................................................................. . Old Person, Earl, Chief, Blackfeet Nation ........................ ............ ................ .. Prepared statement .......................................................... ........................ . Peregoy, Robert, Senior Staff Attorney, Native American Rights Fund ... 21, 

211 

235 

97 

192 

78 

122 

74 

128 

229 

256 

106, 232 

Prepared statement ................................ ................................................ 56, 205, 

Points, Lonnie, Accountant, Intertribal Monitoring Association, Indian 

Trust Funds ................................. .................................................. ............... . 

sim!:,es~~<b~~~m~!i~~~i'i •. t:~~~-y· ri~~~~~i n~ ·;,;t~~~i··~-:i~~t:i~~ :: :: Thomas, Edward k., President, Central Council, ~lingit and Haida Indian Tribes of Alaska ............................................. ...................................... . Prepared statement ............................................................................. ..... . Upicksoun, Alma, Assistant House Counsel, Arctic Slope Regional Corporation ....................................................... ....... ........................................... . Prepared statement .................................................................................. . 

(III) 

262 

9 

43 

211 

16 

46 

17 

49 
IV 

Additional material supplied: 

Hale, Albert: 

Request for voluntary withdrawal from the Trust Fund Program 

Resolution of the Navajo National Council ............................................ . 

ITMA's Resoultion .................................................................................... . Douglas A. Lords: 

1997 Strategic Plan Funding ................................................................... . Communications received: 

Hale, Albert: 

Letter of March 7, 1996, to Honorable Secretary Bruce Babbitt ......... . Letter of June 24, 1996, to Donna Erwin ............................................... . Hayworth, J.D.: 

Letter of September 18, 1996 to Robert Peregoy ................................... . Lords, Douglas A.: 

Letter of October 24, 1996 to Tim Glidden ............................................ . Babbitt, Bruce: 

Letter of December 11, 1996 to Hon. Don Young .................................. . Answer to Questions: 

Mooris, RuSsell D.: ................................................................................... . Calbom, Linda M.: .................................................................................... . Cohen, Edward B.: 

Phoenix Advisory Board Meeting Expenses ........................................... . Respone to Tribal Trust Fund Reconciliation Project 

Advisory Board Proposals ........................................................................ . Proposed Legislative Options .................................................................. . 

Page 

149 

145 

271 

273 

144 

138 

267 

269 

304 

275 

293 

288 

339 

305 
ALASKA NATIVES TRUST FUND ACCOUNTS 

SATURDAY, AUGUST 10, 1996 

HOUSE OF REPRESENTATIVES, COMMITTEE ON RESOURCES, TASK FORCE ON INDIAN TRUST FUND MANAGEMENT, 

Anchorage, AK. 

The task force met, pursuant to call, at 10:00 a.m. in Z.J. 

Loussac Public Library, Assembly Chambers, 3600 Denali Street, 

Anchorage, Alaska, Hon. Don Young presiding. 

STATEMENT OF THE BON. DON YOUNG, A U.S. REPRESENTATIVE FROM ALASKA; AND CHAIRMAN, COMMITTEE ON RESOURCES 

Mr. YOUNG. Good morning. I want to welcome all of you to this 

hearing being conducted by the Congressional Task Force on Indian Trust- Fund Management. A little form of explanation, the 

chairman of the task force that's actually been appointed by myself is J.D. Hayworth from Arizona, but he could not be here today, so 

as Chairman of the Full Committee, I am conducting this first 

hearing in Alaska. 

Reports and investigations of the management of Native American trust fund accounts have revealed the history of waste and 

corruption unprecedented in the Federal Government. Recently, the 

Arthur Andersen Company . reported that, in trying to reconcile 20 

years of Native American trust fund management, it could not account for $2.4 billion in account transactions. That's why I created 

the task force. I want to know what can be done to straighten the 

mess out once and for all. 

Today we will receive testimony concerning the management of 

those trust fund accounts which are owned by Alaska Natives. We 

will focus on the Alaska Native Escrow Fund as well as those Individual Indian Money or liM accounts, which are owned by individual Alaska Natives. 

We have an impressive group of witnesses today. We have Donna 

Erwin, the director of the Office of Trust Fund Management at the 

Department of the Interior; Eric Davenport, the chairman of Intertribal Monitoring Association for the Indian Trust Funds; Carl 

Charles, an Alaska resident with an astounding story to tell; Lonnie Points, an accountant with the Intertribal Monitoring Association for Indian Trust Funds, and Ed Thomas, the president of the 

Central Tlingit and Haida Business Council; Alma Upicksoun, the 

assistant house counsel for the Arctic Slope Regional Corporation; Elouise Cobell, the chair of the special trustee's advisory board; 

(1) 
2 

Robert Peregoy, representing the Native American Rights Fund, which has filed suit on the management of these funds. 

We will have two hours for these hearings. I also want to ask 

each witness possibly to limit his or her testimony to about ten 

minutes. I do believe that will be enough. I read the testimony, and 

if there is any question, I will take and give you additional time. 

Anyone in the audience or otherwise that wishes to submit testimony can send it to my office and I will see to it that it gets on 

the record. 

With that opening statement, there's no other opening statements, I will convene the first panel, and, Donna Erwin, director 

of the Office of Trust Fund Management, Department of Interior, will you please take your seat and your counsel will please be seated also. Donna, you're recognized, and proceed as you wish. 

STATEMENT OF DONNA ERWIN, DIRECTOR, OFFICE OF TRUST 

FUND MANAGEMENT, DEPARTMENT OF THE INTERIOR 

Ms. ERWIN. Thank you. I want to thank you for the opportunity 

to present the testimony on the Indian trust funds management. As you're aware, the Office of Trust Funds manages approximately $10.2 million, the Alaska Native Escrow Fund, $6.8 million in the 

27 accounts for the Alaska Native entities, and $10.6 million for 

1431 individual Alaskan residents. Now, some of those are actually managed out of the Lower 48 areas, but they are residents of Alaska currently. 

The hearings, we realize, are focusing on the trust management practices and what it may take to ensure the correction of management in the future, so each of these I'll try to discuss in turn. 

In October of 1995, the Office of Special Trustee, which is now 

referred to as OST, commenced the assessment of U.S. Government's trust management policies, procedures, practices and systems as they apply to the individual American Indians and American Indian tribal accounts. 

By February of 1996, the OST completed the preliminary assessment and produced a conceptual strategic plan to require institutional specified systems. Implementation of this plan permits and 

ensures the U.S. Government establishes appropriate policies and 

procedures, develops necessary systems and takes the affirmative 

actions necessary to provide an accurate and timely account to the 

American Indian trust beneficiaries. In this manner, the proper discharge of the Secretary's trust responsibilities can be accomplished. 

The assessment of the Phase I of the strategic plan are included 

in a document that's entitled Special Trustee for American Indians 

Assessment and Strategic Plan Principles, and it was dated February of 1996, which has been provided to Congress and we'll be 

glad to provide additional copies of that to your committee if you'd like us to do that. 

In December of 1995, the Department of the Interior, the Bureau 

of Indian Affairs, substantially completed the multi-year tribal 

trust fund's reconciliation project, which has been referred to as the 

reconciliation project, and we issued agreed-upon procedures reports for the period of July the 1st, 1972, through September 30th 
3 

of 1995. The major findings in that report are incorporated in the 

special trustee's conceptual strategic plan. 

In August of 1995, the Department of the Interior completed a 

study of the trust management systems related to the Individual 

Indian Money accounts, that are normally referred to as the liM 

accounts, and they issued a report entitled liM Related Systems 

Improvement Project Report. And if you look at the special trustee's assessment, the reconciliation project reports that I just discussed, and the liM related systems' report, which some people refer to as the Tiger team report, 

and then there's some earlier reports and some reports since then 

from the General Accounting Office, they'll all confirm that U.S. 

Government's trust management systems, policies, procedures and 

practices, coupled with the condition of the trust records and notably large numbers of missing documents, are inadequate to allow 

for a proper and accurate and timely account of trust account balances, preparation of accurate and timely reports to the trust account holders, and audits under generally accepted auditing standards, and also any further reconciliation efforts, since the cost of 

these efforts would likely substantially exceed the benefits, and at 

the same time would probably yield unsatisfactory and inconclusive 

results. 

Significant improvements have been made over the last several 

years, but the inadequacies of the trust management systems and 

the condition of the historical records and the U.S. Government's 

inability to provide an accurate and timely accountings cannot be 

remedied without the major reforms required by the reform act of 

1994. 

To address these issues, the special trustee's strategic plan identified nine initiatives, and they're all good principles designed to 

rectify the problem and"bring. trust accounting-and management up 

to commercial standards, and this .would take approximately three 

years. This, at a minimum, will involve automating, updating, integrating, coordinating and consolidating to produce a trust resource 

and asset management delivery system and accounts receivable 

data and billing system that uses lease contract and land and ownership information, a trust depository payments and delivery system for Individual Indian Money accounts, a land records and title 

recordation and certification system, a general ledger accounting 

system, a technology service system dedicated to the trust resources, and a national archives records center, a risk management 

control system and an independent structure. 

The conceptual work of this plan is completed. The next steps are 

conducting a -requirements analysis, a users need assessment and 

a comprehensive inventory of existing skills, hardware and software. We have requested in the 1997 President's budget a million 

dollars to conduct these analyses. Once the analyses are completed, 

and this is expected to take about 90 days from the funding, and 

the staff at OST is hired, the remaining elements necessary to 

produce the comprehensive plan required by the reform act can be 

completed within 90 days, or by, hopefully, March the 31st of 1997, 

if the President's budget request for 1997 is approved. 

And now I'd like to discuss a little about the total requests. The 

1997 President's budget for OST is $36.3 million, and that's a $20 
4 

million increase over the 1996 conference level, which was $16.3 

million, and this includes $13.6 million to begin the implementa- tion of the strategic plan. And this will primarily be used to up- grade not only new liM accounting systems, but also equipment needed for the tribes, as well as for the individual government entities that will be needing these. 

The $20 million requested will also reflect the high priority of the 

administration that the secretary places on the trust asset reform 

efforts. Improvement efforts are critically needed to ensure the 

Federal Government meets its fiduciary obligation to the Indian 

tribe and individual Indians. 

When we realize the Federal Government's trust responsibility is 

unique, systems and policies and practices and procedures of commercial trust operations can be applied to the Federal Government 

so that the Federal Government better fulfills its fiduciary obliga- tion. Beginning in 1997, the evolution of trust system reforms will 

be at a point where increased resources can prudently be expended. In closing, I'd like to emphasize that resolving the past presents 

a very difficult challenge for everyone involved. This includes the 

Administration, it includes Congress, the individual Indian and the 

tribes. 

The ending of the tribal reconciliation problem, which was done 

in December of 1995, represents only the beginning of an effort to 

resolve problems with U.S. Government's past trust fund management practices, and this Administration is committed to solving these longstanding problems and has made significant progress in 

strengthening trust funds operations and taking the steps necessary to ensure the highest level of fiduciary investment standards are in place, but future reforms will continue in earnest under 

the comprehensive strategic plan that we've requested funding for. 

It is required and also required by the reform act are adequate resources appropriated by Congress. 

Enactment of the President's 1997 budget request would represent a substantial step to ensuring the Indian trust fund reform 

efforts are implemented in a manner that assures fiduciary respon- sibilities of the Federal Government are made in a prudent way. This concludes my statement. 111 be happy to answer any ques- tions that you might have. 

[The statement of Ms. Erwin may be found at end of hearing.] Mr. YOUNG. How long have you been with the department? Ms. ERWIN. I've been with the department approximately four 

years. 

Mr. YOUNG. You know, your presentation is very good. The thing that concerns me, there's a lot of requests for money which we will 

probably-to fund to properly solve this problem, but in the 

amount you state, we have a $2.2 billion shortfall somewhere. Now, this is not necessarily this Administration's problem. This is the 

BIA's problem, Department of Interior's problem, or at least it goes back to different Administrations. 

I'm going to suggest to you-where are you stationed now? 

Ms. ERWIN. Albuquerque. Mr. YOUNG. Albuquerque. 

I'm going to suggest to you on a personal level that we're going 

to pursue this with Greg Megga, knowing that Mr. Kennedy is not 
5 

around, and you ought to give us a, I would say no less than a 

monthly report on where we're headed. 

I mean, somewhere along the line we're going to make sure that 

these trust funds, which were the responsibility of the United 

States government to the American Indians, those that have not 

received the money, or those that in fact have lost their money, are 

going to be not only reimbursed, but adequately awarded, so we 

have to know what you're doing as we go through with this process 

of the task force. 

We're not looking for any fall person. We just want to make sure 

that we go to the future, but where we made mistakes in the past, 

that the problem is recognized by the Congress of the United 

States, because the trust responsibility that actually comes from 

the Congress to the American Indian is one where we have let ourselves down because we let part of an agency, obviously very, very 

inappropriately, doing their duty; otherwise, we wouldn't be having 

these hearings. It's just the beginning of the process. 

So that's what I'm going to suggest, that we will-Mr. Glidden 

here and Mr. Steams and Mr. J.D. Hayworth will be in communication with you. We hope to have some reports monthly on where 

we're headed. If there's a problem, and you see a problem that we 

can be of assistance, we'll gladly administrate it. What I don't want 

are just a series of very good sounding words. 

So we will be in contact and we will be working together to hopefully solve this problem. Thanks. 

Ms. ERWIN. Thank you. 

Mr. YoUNG. Panel one, Eric Davenport, Carl Charles and Lonnie 

Points, will you please take your seat. We'll have to put the names 

up there, if you don't mind. 

I don't see our third witness. 

Mr. GLIDDEN. Carl is not here yet. 

Mr. YOUNG. He's not here yet? Well, we're moving right on time. 

That's one thing you find out about myself, I stay on time. We'll 

go ahead with Mr. Eric Davenport, chairman of Intertribal Monitoring Association, Indian Trust Funds, and Lonnie Points, accountant, Intertribal Monitoring Association, Indian Trust Funds. 

Eric, you're first up. 

STATEMENT OF ERIC DAVENPORT, CHAIRMAN, INTERTRIBAL 

MONITORING ASSOCIATION, INDIAN TRUST FUNDS 

Mr. DAVENPORT. Well, good morning, Congressman, and welcome 

home. It's great to have you back in Alaska and here with us today. 

Thank you very much also for holding this hearing here in Anchorage before the Alaska Native people. This is an important issue 

to Alaska Natives, as it is to all American Indians. 

My name is Eric Davenport. My Tlingit name is Tu La'Aan. I am 

the chairman of the Intertribal Monitoring Association on Indian 

Trust Funds and the director of business for the Central Council 

of Tlingit and Haida Indian tribes. 

This attention of the special task force on this very large and, 

unfortunately, growing issue is something that you can take great 

pride in, Congressman, and that it is more than what any of your 

predecessors have done. We have made strides in the past, but we 

do need, as you said, need to get to the bottom of this issue once 
6 

and for all, and I think the assignment of the special task force is 

certainly a very integral and positive step toward that end. 

Also, I think following in line with that is the $17 million Senate 

mark that was added to the special trustee's budget. Those are 

very necessary funds in the coming year for him to accomplish the 

task to put into place the types of systems and procedures that has 

so long been missing that should have been done years and years 

and years ago. And this is part of what's going to be needed to 

make this right, and we, hopefully, will get your support when it 

gets to conference. Unfortunately, it's going to take some dollars to 

build a system that should have been built years ago, but this is 

a start. 

Our Alaska friends need to know that it was your committee that 

passed the 1994 Trust Fund Reform Act that for the first time put 

into place some very critical and important items, such as the requirement to pay interest on accounts, the establishment of the 

special-the Office of the Special Trustee, which for the first time 

put people in place in the Department of Interior that actually 

knew something about trust fund management. It's hard to believe 

that billions of dollars in account money were being managed by 

people that really didn't have trust experience. May have had some 

investment experience, some fmance experience, but trust management is its own very special discipline. So your committee was integral in that process and it certainly was an initial step to moving 

us along here. 

And the appointment of Chairman Hayworth and the task force, 

again, is moving us forward on this issue. They, in their early hearings, have had a little bit of sticker shock so far. They will have 

some more, but the tip of the iceberg is being uncovered. The $2.4 

billion that's unreconcilable we refer to as the tip of the iceberg in 

the process, and that kind of opened some eyes in Washington when we had our first hearing there. 

Today I want to talk a few minutes about the Alaska Native 

Fund and its relationship to other trust accounts and the current 

status of that, liM accounts in Alaska and one particular case, the 

current management of trust fund accounts and what remains to 

be done, and then fmally the impact of the reconciliation on Alaska 

tribes, most particularly on the Central Council of Tlingit and 

Haida, which I can speak very directly to, of course. 

The Alaska Native Fund did not receive similar examination as 

other accounts during the reconciliation reports and activities of 

this past year, even though the Alaska Native Fund has $111 million, $111 million, of unreconciled disbursements that were supposed to go to Alaska Natives. Now, of that $2.4 billion that you referenced earlier, between eight and $900 million went out in cash 

distributions to people and entities that we don't know, and $111 

million of that was targeted for Alaska Natives. That was 14 percent of that $800 million in cash disbursements. A very significant 

number. 

Today, the Alaska accounts total significantly small-or substantially smaller amounts of the total trust fund on deposit with the 

Bureau; however, the history, because of the Alaska Native Claims 

Settlement Act, has some very historic and significant amounts 

over time. But even though the amounts may be small, to the 
7 

Central Council and to individual tribes the $7.7 million trust fund 

account that we still have, and we are growing, is very important 

to us, and even though it may not be the grandiose number, it is 

substantial in that regard. So for this reason, ATMA would like to ask you to request a GAO 

separate investigation on the Alaska Native funds, ask them to get 

to the bottom and find out about this $111 million that we cannot 

tag, and let's find out who that money went to and ensure that this 

type of activity doesn't happen again. 

liM accounts in Alaska, similar to the tribal accounts, maybe 

don't have the numbers, but they certainly have the significance to 

the individual people that do have them. And to give you an example, we have about a thousand liM accounts, Individual Indian 

Money accounts, here in Alaska, totaling about $11 million on deposit for these individual Native Alaskans. And it's my belief that 

the Alaska condition, because it is smaller, could be dealt with and 

resolved before waiting for a total global resolution. 

I mean, when the reconciliation project was done, tribal activities 

and tribal accounts were examined, the liM accounts weren't even 

looked at, and there are 300,000 liM accounts, where Alaska has 

a thousand. I think that we could address many of these issues 

very quickly and maybe not necessarily have to wait for a whole 

global resolution in order to deal with the Alaska condition. 

Unfortunately, Mr. Charles was not able to be here. I had talked 

with him this last week, and, in all honesty, 1-we are paging him 

and looking for him. He has comes from Dot Lake, he's an older 

gentleman, and I have talked with him and I have documentation 

on his case that has been released to me and I would kind of like 

to review with you this one particular case, because it examples 

some very interesting and significant issues. 

Mr. YOUNG. Go ahead. 

Mr. DAVENPORT. Mr. Charles, in 1980, decided-was approached 

to sell a parcel of land, trust land. And in so doing, the procedure is that the BIA needs to authorize and approve the sale of trust 

land, which they did. Sale price was approximately $42,000. 

$21,000 was to be made in a down payment and then two equal 

payments in the two following years was to occur. 

The deal was approved, the $21,000 was given to the BIA on behalf of Mr. Charles and put on deposit there in an liM account. 

Now, Mr. Charles asked for the money to be paid out in cash as 

soon as they could turn it over, and they did in ten days. He received the $21,000. The transaction occurred in its normal course 

over the next two years and the transaction was completed. 

In 1986, Mr. Charles got a letter from the Bureau of Indian Affairs, and in that letter it says that you've got $41,000 and some 

dollars coming to you. Mr. Charles paused and debated the issue, 

as to whether or not he should be receiving that money, and asked 

what it's for. And they said, well, it's money that is coming off of 

your account. He said, I don't have an account, I had an account 

there for ten days. And they said, well, we are closing these accounts out, it's an IMPL account, an individual Indian money proceeds of labor account, and if you want it, sign below. And so after 

two or three exchanges of information, he signed the letter and 

they sent him a check for $41,000 and change. 
8 

About three years after that the IRS called him and said you owe 

taxes, substantial taxes, interest and penalties, and you need to 

pay out. What the Bureau did not disclose was that the money that 

they were sending him was classified as interest money, and that 

interest money is taxable. Trust money is not, but interest on trust 

earnings is taxable. So Mr. Charles had been battling with the IRS 

to kind of drag him back on level ground. 

The interesting point is, that the appearance here is that $21,000 

that was on account for ten days earned $41,000 five years later. 

Mr. YOUNG. Must have been working with somebody else I know 

in the White House. I couldn't resist that. 

Mr. DAVENPORT. Well, I have asked my CPA, Mr. Points, to calculate the rate of return on that. He said he didn't have a-they hadn't figured a calculator yet that could do that. 

Mr. YOUNG. Be waiting until the year 2000 to do that. 

Mr. DAVENPORT. So that, anyway, is the gist of the story. Mr. 

Charles continues to wrestle with the IRS on this issue. I talked 

with him this last week. I wanted him to come and tell his story. 

He was willing to do that. I don't know why he was unable to be 

here today. But he did say that he was in the process, he told me 

over the phone, that he was in the process of surveying other trust 

land that he had so he could sell it to pay the taxes on this money. 

So he's going to lose more of his land in this process to cover up, and, like I said, we have the correspondence here. I've read it. It's 

not clear at all that this money was interest and that he would 

ever be taxed if it would ever be reported to the IRS. I also was able to contact the BIA staff person that was involved 

at that time with this distribution process. And I talked with her 

this last week, and her name is Salty White, who still is working with the area office out of Juneau. And I asked her about the Carl 

Charles case. 

She said, oh, I'm very familiar with it. I said, well, how could 

possibly $41,000 be distributed in the context of earnings to an individual who had an account for ten days of $21,000? She said 

what happened was that over the-during the 1960's and 1970's, 

the moneys that carne in as earnings on deposits was not following the principal of the account and that there was a court case of one 

sort of another that directed the closing of the IMPL accounts, the 

individual-or Indian money proceeds of labor accounts. They didn't know that they had a bunch of money in there, they didn't know who that money went to, and so what they did was 

that they took a point in time, which happened to be, our guess at 

this point, is the end of January of 1980, found out the number of 

who had money on account during that month, what their percent 

of the total amount on account was, because that was what they figured was their best record, gave that a percentage figure. They knew how much they had on deposit and applied that percentage 

to what was in there and distributed money, and that's how Mr. 

Charles got $41,000. 

Mr. YOUNG. Eric, wait. Donna, I want to not ask you that ques- tion, but you're writing very, very seriously there. This should 

never happen. 

Ms. ERWIN. We agree. Obviously we agree with that. 
9 

Mr. YOUNG. All right. We'll find out what happened with you as 

an example. Go ahead. 

Mr. DAVENPORT. So I asked her, I said, well, how many people 

received checks during that mass distribution? She said, without 

going back and checking the records, she wasn't sure, but her recollection was someplace around 500. Clearly people ended up getting 

money, as Mr. Charles did, that probably shouldn't have, or 

shouldn't have. Other people that maybe had taken money out on 

December 31st of 1979 didn't get any money, or people who had deposits as of February 1 of 1980, they didn't get any money. And so 

we've got a number of Alaska Natives that did not get their fair 

share of that distribution. Others are, as in the case of Mr. 

Charles, are paying some significant penalties as a result of that. 

I see that I'm out of time here. I know we've got a number of 

people, but I thought that it was important that issue got on the 

record. 

[The statement of Mr. Davenport may be found at end of hearing.] 

Mr. YOUNG. Thank you, Eric. Lonnie, and then we'll have some 

questions. Do you have any questions, any comments? 

Mr. POINTS. Oh, I have a whole page of comments. 

Mr. YOUNG. OK. Would you like to comment at this time? 

Mr. POINTS. Not on Eric's, but--

Mr. YOUNG. I take it you don't have any testimony? 

Mr. PoiNTS. Oh, yes. 

STATEMENT OF LONNIE POINTS, ACCOUNTANT, INTERTRIBAL 

MONITORING ASSOCIATION, INDIAN TRUST FUNDS 

Mr. YOUNG. Would you, please. 

Mr. POINTS. Sure. I have submitted my written testimony, Mr. 

Chairman, and I want to thank you for being here this morning. 

It's a pleasure to visit your great State. And I understand that you 

wanted to hear the other side of the story from a CPA, and I am 

a CPA from Omaha, Nebraska. We have been involved in Indian 

country back till 1979, 1980, and we have done a lot of work in Indian country, as well as working with the Intertribal Monitoring 

Association since it began in 1990. 

And because I have submitted my written testimony, what I 

would like to do is expand a little bit on what the Arthur Andersen 

report says, which we have received a copy of in 1991. And I would 

also like to preface my comments that I'm not here to badger my 

brethren or downplay the Bureau. These are things that happened 

in the past and the present people were not there then, and so if 

we would take those all in light, I'd like to just share that with 

you. 

The report that we have a copy of was issued in 1991, and it was 

a piece of an extra effort that Arthur Anderson was asked to do on 

the 1971 through 1990 Alaska Native Fund, which is the escrow 

fund that was established-actually in 1976 was the first deposits 

that were made there. 

The Alaska Native Claims Settlement Act, which was passed in 

'71, appropriated the $962 million for the Alaska Native corporations. Now, there is some confusion, but Andersen's report says 

specifically that this money was paid directly to the Alaska Native 
10 

corporations and was not included in the escrow fund. There is sup- posed to be another fund that has that money in it, but for your committee's purposes we are as confused as to how that money moved as the report says, but what Andersen's report does say is 

that it was paid directly to the Alaska Native corporations. The moneys that are in this report are the funds that were deposited from the earnings on the land that was transferred as the 

money earned-as that land earned funds, and it was eventually transferred to the Alaska Native corporations. It has approximately $42 million in deposits from the principal of the receipts. There 

was an amendment in 1980, called the Alaska National Interest 

Lands Conservation Act, that played catch up from '71 to '76, and 

$7.4 million was also deposited to this fund. That's kind of the history of the report that we're dealing with 

and we're not dealing with the $962 million. And some of the findings in the Andersen report are as follows: The Money Max system, which is the system that records the investments that the Bureau 

has, was reconciled to the finance system, which is the general ledger that records all of the transactions, as of September 30th, 1990, and as well as September '89. That-those two balances 

agreed. However, there was about $2 million that was not recorded 

on either system in that reconciliation process. There were also three months in 1989 and at September 30th, 1989, that none of the funds were invested to earn interest. The 

finance to the Treasury reconciliation was done to the extent pos- sible, and the exceptions were identified and researched to the extent possible. Andersen did look at about 69 percent of the $52 million in receipts and they looked at about 74 percent of the $42 million that has been paid out over this period of '76 to 1990. 

There was no testing on the regional corporations or the revenue 

sharing that runs through the regional corporations, and I think 

the important part of this report is the findings in the proposed adjustments. In my written testimony, I indicate that the aggregate adjustments were $10 million, but what I'd like to do this morning is tell how that $10 million gets there. 

And that's a decrease in the fund, by the way. The funds started 

with $18 million on the books of the finance system and was reduced by $10 million and there's $8 million left after the proposed adjustments. 

The first proposed adjustment was a $21 million payment to an 

Alaska Native corporation that wasn't recorded. It was sitting in an 

expense account. The important part of that was that the investment folks didn't rely on the general ledger to invest the money so 

that they didn't pretend-or didn't assume-that they had it invested or it could have been significantly more. It was only the 

principal piece. 

There was $1.2 million from a claim with MMS, which is the 

Minerals Management Services, that was not recorded in 1990. 

That's an add. And then there's a net of interest of about a million 

bucks that was thought to have been uninvested in computer treasury interest that actually was invested, and then another $832,000 that wasn't invested that should have been. That was a plus. And the books had two fund groups. There was a fund-and the 

Andersen report says that the present people that were there do 
11 

not know why they had two fund groups, but there are two fund 

groups. The second fund group had $10.5 million in cash in it, and 

it was consolidated or combined with the other fund group. And the 

report further states that the second fund group was not invested, 

and our question is what happens to the interest and was interest 

computed on that. I can't tell from the report or any findings that 

the interest was actually computed on that money to be put into 

the escrow fund. 

The other adjustment is kind of surprising. They reduced the 

cash for the unsupported transactions, and that adjustment was for 

$281,000. Even though it's a lot smaller, it's still a significant 

amount of money. And there was a receipt for $155,000 that was, 

quote, unreconciled, and this is the same kind of reconciliation 

process that Andersen went through in the five years and $20 million plus for the-most of the tribes that have trust funds. But this 

receipt for some reason was adjusted in the $281,000. 

And then the other thing was discrepancies between the ending fund balance of the accounts and the beginning fund balance of the 

accounts, makes up the difference of the $155 to the $281,000. And 

these are things that they have found on a test basis in looking at 

procedures and documentation. It's an agreed-upon procedures report, it's not an audit, even though the audit of the aggregate fund 

in 1990 is the supplemental work. 

Last, but not least, there was a reclassification entry to record 

a $213,000 certificate of deposit that was not recorded. All in all, 

the question is, in 1990, this is the last report that was issued, the 

fund had a balance of $8.8 million and to our knowledge has not 

been included in any of the reconciliation or accounting efforts that 

have been taking place after that point in time. 

So in Eric's example of the $41,000 payment, unfortunately, here 

we have things going the other direction and this is money that belongs to the Alaska Native corporations. It's in a holding pattern. [The statement of Mr. Points may be found at end of hearing.] Mr. YOUNG. You've got me clearly confused, but I appreciate it. 

It's an awful lot of figures that exist to be recited by yourself of arrears amounts of money. Where is this money, does anybody know? 

Mr. POINTS. The Alaska Native Fund is in an account in the Office of Trust Fund Management. Mr. YOUNG. In Albuquerque? 

Mr. POINTS. In Albuquerque. 

Mr. YOUNG. What I'm trying to get across, why was some funds 

reinvested to gather interest and some were not? Who controls 

that? 

Mr. PoiNTs. OTFM, the Office of Trust Fund Management, prior 

to Donna. 

Mr. YOUNG. Donna? 

Ms. ERWIN. There's a couple of things that we probably need to 

discuss with that, and Lonnie is correct in what is in his statement. Since that time, we have made the adjustments, gone back. 

One of the things that's happened, and we need to bring this out, 

is in 1995, we-in 1994, really-started correcting the tribal side, 

tribal systems, and we converted to the Omni trust system for all 

the investments and all the tribal accounts. At that time we did go 
12 

back and make all of the adjustments, follow-up, do the research. 

It will be included in the FY-96 audit, the Alaska Native escrow--

Mr. YOUNG. All right. But what I'm going to say, when that gets 

done, I'm sure Eric and Lonnie are going to be looking at this very 

carefully, and there's some money there that's not accounted for. 

Ms. ERWIN. Yes, he is correct. 

Mr. YOUNG. And I just want to know where it is and why some 

money was not invested and some money was invested. You know, 

this whole thing is a mess, if you really want to get down to it. A 

big, big mess is what we're having. But is the management of this fund reported to the Alaska corporations on a quarterly basis, does anybody know? 

Mr. POINTS. Not to my knowledge. We have had significant efforts-and, believe me, Congressman, you thought you were confused, I was confused until I read a lot of history a long, long time 

ago-but not to my knowledge. 

Mr. YOUNG. Donna, is it recorded? 

Ms. ERWIN. No, I don't believe it is. There's some, still, determinations by various people-----

Mr. YOUNG. OK. Let's put it this way: Is it reported to anyone? 

Ms. ERWIN. No. 

Mr. DAVENPORT. No. 

Mr. YOUNG. Oh, boy. 

Ms. ERWIN. This money belongs to-once the BLM, the Forest 

Service and every one makes a determination which corporations 

will this belong to, then these funds will be conveyed to those people. Right now, you do not know which percentage of those funds 

belongs to which corporations. 

Mr. YOUNG. Well, now, as we go through this process, Eric, I am 

going to ask for a JO investigation, I want to show you, for the 

Alaska part of this, and I think this is part of this process. We 

have to establish again-what I'm trying to seek here is not putting anybody in jail. I'm trying to solve the problem. I'm trying to 

figure out what we're going to do from now on. There's no excuse 

what has occurred, none. I mean, this has been going on since 

1903, and before that time. From here-I guess from 1971. And 

what we have to do-that's quite a while ago. 

What we have to do now is figure out where the money is, what 

is accounted for, and then see if there's some way that we can't 

make this system work, and then go back into the past and see 

what we can do to gain what rightfully belongs to each corporation 

or each individual. 

How many did you say belong to these individual money accounts, like Mr. Charles? 

Ms. ERWIN. 1400. 

Mr. DAVENPORT. In Alaska our figure is someplace around a 

thousand, which is fairly consistent. Donna said about 1400 liM account holders. Overall within the system the number of accounts 

is about 300,000. 

Mr. YOUNG. Now, does that person know he has that account? 

Mr. DAVENPORT. Some do, some don't. 
13 

Mr. YOUNG. OK That will be one of the questions I want to 

make sure the operation fmds out, are they notifying their account 

holders. 

The other thing I wanted to fmd out, you said-an important issue in Mr. Charles' program here, about $21,000 generates $41,000 worth of interest, that's a beautiful thing. Has the BIA in Juneau-that's where they work it through? . Mr. DAVENPORT. That's correct. 

Mr. YoUNG. Have they helped them in their or his defense to the 

IRS, or they're saying it's his responsibility? Mr. DAVENPORT. They're saying it's his responsibility. Mr. YOUNG. The BIA is saying it's interest of $41,000. Did they send a letter of explanation saying at that time it was interest? 

Mr. DAVENPORT. No. They sent him a letter-! have the letter 

here that they sent him and it does not say it is interest. It says that is IMPL proceeds. In fact, I can quote it. It says-it-I don't know if I can go right straight to it here, but what it says is that it's proceeds from his 

IMPL account. On October 11, Mr. Charles was notified by the BIA 

that he had money in the Indian money proceeds of labor, IMPL, 

escrow account and requested him to sign and return a form to 

withdraw the funds. Mr. Charles did that. And then it says this 

money was interest earned on the $21,000 payment he received for 

the sale of his land. Mr. YOUNG. This is what I'm seeking. That has got to be rectified 

by the BIA. You know, someone, very frankly probably myself, would not even understand what's occurring, and Lord lead us into 

the temptation. And I want that letter, if you don't mind, Ericsubmit it for the record. It will be a part of the record and it will 

back up what's occurring there, because it appears now you've got 

an individual who has to sell, as you mentioned, other trust lands 

to try to pay the IRS off, when in reality, it was my understanding, if it was a part of the trust lands, that's not taxable moneys. Mr. DAVENPORT. That's correct. 

Mr. YOUNG. There's something very, very wrong in this situation. 

In the Alaska Native group alone, you say Alaska has $111 million unaccounted for or is that part of the fund that is accounted 

for? 

Mr. DAVENPORT. In the reconciliation report that was published 

on January 15th, it included as a part of that $2.4 billion of 

unreconciled transactions about-more than $800 million in cash 

disbursements that were not reconciled. The composition of that 

$800 million includes $111 million that was-has been somehow 

identified as being targeted for Alaska Natives. 

Mr. YOUNG. The thing that confuses me the most, you know, we 

have $2.4 billion somewhere out there. Where can it be? I mean, is it making money, has it lost money, is it spent money, or, in 

your own opinion, I mean, where is it? 

Mr. DAVENPORT. Well, I think that's a real question, especially in the sense of the cash disbursements. I mean, that's cash paid 

out to parties whom we can't identify for sure. 

A part of my testimony I didn't get to was that the Central Council has $4.2 million of unreconciled transactions during that period of time, and you can bet that I've got accountants working on that. 
14 

And that's going to cost the tribe money to try and figure out what 

the trustee did with it. You know, we're having to spend our tribal 

money to do that. 

Mr. YoUNG. What happens, Eric, if we find out there's been malfunction in the trust office itself? Are you willing to sue or is there 

going to be a way of retribution, or how's this going to happen? Mr. DAVENPORT. The president will be here in just a few moments and Ed would probably be the best one to explain that. 

Mr. YoUNG. I will ask Ed. 

Mr. DAVENPORT. But I'm sure that we wouldn't hesitate to litigate if that proved to be the best avenue. 

Mr. YOUNG. Because, see, what concerns me, if there's $2.4 billion and the BIA, basically Department of Interior, is in charge of 

that and we can't fmd it but it is coming, guess who's going to be 

asked to appropriate it? 

Ms. ERWIN. We need to clarify that it's $2.4 billion that they cannot locate all of the documents to do a complete audit. 

Mr. YOUNG. Well, again, though, they're somewhere out there, 

and I'm saying God help the BIA if you have to come to me and 

ask for appropriations to pay off some malfeasance to do it. 

Ms. ERWIN. We agree. 

Mr. YOUNG. We're going to have some real heated discussions 

about that. You know, it's a very poor way to run a train. We're 

doing this as a process, we're setting up the different systems, to 

make sure that the train arrives on time. 

Do you have anything else to add prior to bringing up the next 

panel, Eric? Thank you, by the way. I want to thank you personally because you were very instrumental in bringing this to our attention in a period of a year-and-a-half to two years, and it's got a lot 

of interest in the Lower 48. Of course, your primary interest is 

here, and it's got a lot of interest in the Lower 48. Because, again, we're not looking for bad things. I'm trying to solve the problem because someone is not getting their just dues out here. 

Lonnie, do you have anything to add? 

Mr. POINTS. Well, I would just like to add that the $2.4 billion 

is only the reconciliation piece. There's more things out there besides the 2.4. 

Eric said that this morning, earlier, that was the tip of the iceberg, and there -are proposed adjustments in these reconciliation reports. beyond the $2.4 billion. So that's only one piece, and I think 

that's key. 

Mr. YOUNG. Lonnie, what's your role? Are you employed and is 

this part of your occupation, how did you get involved in it? 

Mr. PoiNTs. I'm a CPA from Omaha, Nebraska. I work for Bland 

& Associates, a CPA firm. We are competitors, if you will, of the 

big six, which includes the Arthur Andersen folks, and we have a 

lot of Indian tribes as clients in the Lower 48. And we got involved 

in this in September of 1990, when Donna's predecessor called a 

group together because of your Committee that said we want to 

make sure you consult with Indian tribes before you start on this 

reconciliation audit certification process. 

So I was at the very first meeting that started very well in the 

morning and by the afternoon disintegrated to you'll have to sue 

us if you want your money. 
15 

Mr. YOUNG. Well, what I'm asking, then, I'm not hitting on any- body here, but it goes for anybody who's involved in this. I listened 

to both of you, listened to all these numbers and figures, and I get 

a blank look on my face because, again, I don't know where the 

money is. I'm an old-fashioned riverboat captain; you either got the 

money in your hand or you don't. And when you say it's there, but 

it's not, I get very, very confused. 

I'm hoping that you continue to pursue whoever you're doing this 

for, following what is being accomplished and where we're headed, 

because I just don't want to see the tip of the iceberg. If there's a 

bigger part of this than the iceberg that sunk the Titanic, I want 

to see it. 

Mr. POINTS. Right. And we are. 

Mr. YOUNG. OK Eric? 

Mr. DAVENPORT. Just in closing, Congressman, when I referenced 

the tip of the iceberg, that $2.4 billion was the result of an 

unreconciled amount on $17.8 billion of non-investment transactions. 

Mr. YOUNG. The reconciliation, it was sort of a negotiated number to come up with 2.4. 

Mr. DAVENPORT. What they did was they tested non-investment 

transactions, and during that time period, their $17.8 billion, they did not test over $200 billion in investment transactions. That 

hasn't been examined yet. 

Mr. YOUNG. OK 

Mr. DAVENPORT. They've only looked at 17.9; they have not 

looked at $200 billion. 

They also do not have any accounts receivable system, they have 

not examined the oil and gas and minerals issues out there. That 

hasn't been examined. So when we talk about $2.4 billion, we're 

talking about the tip of the iceberg. Mr. YOUNG. OK Well, we'll be pursuing this, and I do thank 

both of you for bringing your testimony in. It will be submitted for 

the record in written form and your spoken word has also been 

taken down. And this is just the beginning of this process, and like 

I said, especially-! know Eric will be back in office, but, Lonnie, I want you to mark out this as it goes by to see where we're headed. 

Thank you very much. 

Mr. POINTS. Thank you. 

Mr. DAVENPORT. Thank you, Congressman. Mr. YoUNG. The next panel will be Ed Thomas, president of the 

Central Tlingit and Haida Business Council; Alma Upicksoun, Elouise Cobell, Robert-Robert, how do you say that name? 

Mr. PEREGOY. "Peregoy.n 

Mr. YOUNG. "Peregoy.n 

Mr. PEREGOY. Yes, sir. Mr. YoUNG. All right. Is that French? What is it? 

Mr. PEREGOY. French Basque. 

Mr. YOUNG. French Basque. 

Well, we will start out with Mr. Thomas. Welcome, glad to have 

you here. 

Mr. THOMAS. Thank you very much. 
16 

Mr. YOUNG. We're running just a little bit more casual, if you 

need to have a few more minutes, but, remember, you have four 

other people there, and we'll go through it. 

Mr. THOMAS. Thank you very much. I won't take a lot of time. 

I have some written testimony; I hope you've got a copy. 

Mr. YOUNG. We have a copy. Thank you. 

Mr. THOMAS. I will not be reading my written testimony, but I 

would present it for the record. 

STATEMENT OF EDWARD K. THOMAS, PRESIDENT, CENTRAL 

COUNCIL, TLINGIT AND HAIDA INDIAN TRIBES OF ALASKA 

Mr. THOMAS. I'd like to welcome this committee and this hearing 

to Alaska, and greetings from Southeast Alaska. As you know, 

Southeast Alaska is the home to Tlingit, Haida and Tsimshiam 

people. 

Uxut Duwa Sawk Tlingit Aya Xut. I'm a Tlingit. My Tlingit 

name is Tsa Xoo. I'm the president of the Tlingit and Haida 

Central Council. On the documents you have, it says it's a business 

council. There is a business manager, but we are not a business 

council, we're a central council. 

I want to continue my introduction by pointing out that I'm a 

former member of the joint Department of the Interior, Bureau of 

Indian Affairs and Tribal Reorganization Task Force. I'm currently 

the Juneau area vice-president of the National Council of Indians 

and I'm a member of the appointed advisory board to the Office of 

Special Trustee. 

I use those introductions to point out that I have been involved 

in this issue in each of these forums and we have discussed this 

issue very thoroughly at times, but oftentimes it's just to vent frustrations. But without exception, the tribes that participate in all of 

these groups and organizations and task forces agree that the issues relative to the tribal trust fund management and all the problems that have been uncovered need to be fixed and they need to 

be fixed as a high priority. 

My testimony at times gets pointed and I hope that my testimony does not insult people. I don't intend to be overcritical and 

I don't want to be overcritical of any particular Congress or even 

the Federal Government. However, I need to point out that the 

problems of the trust fund management reside primarily in one office, in the Department of the Interior, and we need to focus on it. 

And the problems in that Department need to be fixed and they 

need to be fixed a lot quicker than they are being fixed. Each day 

that the problems go by without being resolved, the problems are 

compounded. If we don't have accounts that are reconcilable, the 

earnings that should be earned by those accounts go unreconciled 

and so on and so forth. So it's very important that as we address 

the issues relative to the tribal trust fund management, that we do 

it with a degree of vigor, much more than we are at this point right 

now. 

I was very proud of Congress and the President in the manner 

and expedience in which they dealt with the problems of the savings and loan scandals. I felt that it was a fiduciary responsibility 

of the Federal Government to make sure that people investing in 

institutes across this country did not lose their savings, their life 
17 

earnings because of certain scandals relative to managing their 

money. And I think that Indian accounts need to be dealt with in the 

same manner, very direct, very straightforward, don't drag it out. 

I think that when we talk about where is the money, where did it 

go, I think those are important issues, but also as important, we 

need to identify who owns those dollars and how much they really 

should be entitled to. 

In my latest involvement as a member of the board through the 

Office of Special Trustee, I have become more convinced that we 

need to put a lot of effort into fixing the systems. If we keep dwelling on the reconciliation problem as the only solution, I think we 

will miss the boat in not making sure that the systems that are 

designed for accountability be in place. I think they need to be in place soon. I don't know if we need 

to study it too much more. I know that Paul Homan put forth a 

plan at one point where he identified a lot of things that were necessary from a banker's point of view, an investment point of view, 

how we should manage those systems. 

So I think we need to move on two tracks. Yes, we need to reconcile the accounts on a high priority, but we also need to fix the 

systems that are ongoing problems. 

I want to close by thanking you once again for being here, bring- ing this hearing to Alaska. Many times we feel like we're left out 

of the system because we don't get many hearings in Alaska, so it's 

a great honor to have the committee on this very important issue 

here in Alaska. 

I also want to thank ITMA for all the work they have done over 

the past number of years in crystallizing the problems, defining a 

manner by which we can address them directly, and I think that's 

where we are. I think we need to move forward, and, once again, 

thanks for your time. 

[The statement of Mr. Thomas may be found at end of hearing.] 

Mr. YOUNG. Thank you, Ed. I appreciate those comments. 

Alma, you're up. 

STATEMENT OF ALMA UPICKSOUN, ASSISTANT HOUSE 

COUNSEL, ARCTIC SLOPE REGIONAL CORPORATION 

Ms. UPICKSOUN. Good morning. 

Mr. YOUNG. Welcome back to Alaska. Ms. UPICKSOUN. Thank you. And I was going to welcome you 

back. It's good to be home. I, for one, know that. 

My name, for the record, is Alma Upicksoun. I serve as assistant 

house counsel to Arctic Slope Regional Corporation. I'm one of the 

over 7,000--

Mr. YOUNG. Pull that microphone a little closer. Ms. UPICKSOUN. I'm one of the over 7,000 shareholders for Arctic 

Slope Regional Corporation. Our shareholders want to thank you 

for the instigation of this task force and addressing this important 

issue. 

I, for one, as an Alaska Native and other Alaska Natives here 

recognize the work that you have done to fulfill the obligations for 

the Federal Government with Alaska Natives, and I'm sure that 
18 

we'll see the same resolve as you address this issue with the task 

force. 

This morning it's my honor to introduce to the task force Elouise 

Cobell, who's a leader from the Blackfeet tribe in Montana and 

serves as the project director for the liM correction and recovery project. And I know that she and Bob Peregoy have some solutions 

and corrections, hopefully, to this process, and welcome them here. [The statement of Ms. Upicksoun may be found at end of hearing.] 

Mr. YOUNG. Thank you, Alma, and make sure to move that mike 

over. 

Elouise, I just came up from Montana the day before yesterday with Gordon down there. Mainly what I was doing, I was traveling all over the northwest, checking out some of the responsibilities I 

have on this Committee. Welcome aboard. Welcome to Alaska. 

STATEMENT OF ELOUISE COBELL, PROJECT DIRECTOR, liM 

CORRECTION AND RECOVERY PROJECT 

Ms. COBELL. Thank you, Alma, and thank you, Congressman Young. I'll tell you, it was music to my ears when you said today that you were going to pursue this issue with great vigor-- Mr. YOUNG. Thank you. Ms. COBELL. [continuing]-because I have been pursuing this 

issue with great vigor in many capacities, initially as one of the 

ITMA former chairs, that Eric now fills the position, and as chairman of the advisory board and also as a lead plaintiff in a class 

action suit on behalf of individual Indian account holders. I am 

now heading up as project director the trust fund recovery, individual Indian trust fund recovery project. I bring you great warm greetings, and I was with our chairman 

and chief yesterday and he said specifically to give you a hello from 

Chairman Old Person. 

I am very, very encouraged because, like the Alaska Natives, there are many tribes in Montana and individual Indian account 

holders that are also victims of the great mismanagement, financial mismanagement, I think, and in my opinion is the worst financial mismanagement in the entire United States because it affects 

the poorest people in this country, and so I really appreciate the 

effort that you have put into this task force to make sure there are 

some solutions and some resolution to this problem. I guess maybe I want to talk to you a little bit about how I was 

involved. And how it came about is, I was treasurer for the Blackfeet tribe for many years. I was a young person at that time. And 

the way that I feel that the government and the Bureau of Indian 

Affairs were able to get away with this for so long is just-from the 

testimony that you heard, there was never any information that 

was provided to us. 

I started questionir.g the account statements that were coming to 

Blackfeet, and you heard Lonnie and Eric talk about the numbers 

and there were negatives posted to your summary of trust accounts, and every time you questioned the Bureau, you just got an 

entire runaround: Well, you got to go to the area office, you got to 

go to the central office. You know, it was just on and on and on, 
19 

and nobody was accountable to the tribes and to the individual Indians. 

And so finally you just had to start working together, and it was 

such a relief to be able to organize the Intertribal Monitoring Association, where we came together as a powerful group of tribes. And 

that was the only way that we got anywhere, is just being in the 

government's face every single day, because they would slam the 

doors in our face. 

Since I've been involved with the trust funds, I hear many, many 

stories from the elders at home that come to me and tell me stories 

of what has happened to them, and it is so sad. Just the other day, 

I was called over to the nursing home, the Blackfeet nursing home 

that is run by our tribe, and it's not the best care that we have 

for our elderly people, but an elderly woman told me about the stories of what they would have to do to even get some money for the 

basic living, for food, for clothes for their children, and they rode 

horses through snow banks and finally made it to Browning, the 

seat where the Bureau of Indians Affairs would be, and they would 

lock them out. They were locked out. They had to stand outside in 

the cold and wait and wait and wait to see the agent to try to get 

some of their own money. 

So this has been happening for years and years, and I really 

don't think it's gotten any better. There has been a little bit of 

progress. 

But 1et me tell you another hat that I wear is I was organizer 

of the Blackfeet National Bank. It's one of the only national banks 

located on an Indian reservation that is owned by a tribe. And if 

we were-if we ran a bank like the way that the Bureau of Indians 

Affairs has been able to run and manage our own money, we would 

probably all be in jail and definitely our bank would be closed down 

by the Federal agencies. 

And so that's what's so mind-boggling about this entire thing, is 

because the same government agencies that regulate our national 

bank that would close us down and put us in jail also have a double standard for Department of Interior that manages our money, 

so it's really important and I'm just so encouraged by your efforts 

of this task force. 

And I also like the fact that you said that you were going to be 

asking for monthly reports, because I know for a fact that if you 

don't continue to hold their feet to the fire, then it goes away, the 

urgency goes away. 

After ITMA was really involved in pushing the government to do 

something about this great mismanagement, Congressman Synar, 

and, of course, Congressman Clinger issued the mistrust-Misplaced Trust Report, and that report led to a lot of things. And I 

think the great thing that it led to was the 1994 Trust Fund Reform Act that gave tribes for the first time some teeth. It gave 

tribes the opportunity, if they did not like the way the government 

was managing their money, that they could actually pull their 

money out. 

It also put in place the special trustee, and I'll tell you as part 

of the Act. And I know many people in this room, Dan, David, Lonnie, Eric, were all involved in helping with the Trust Fund Reform 

Act, along with many congressmen. And I was just so ecstatic when 
20 

that reform act got approved. I thought, my God, we finally made 

it, we're finally going to make the government accountable to the 

poorest people in this entire country. 

Well, being from Montana and a long ways from Washington, I 

really didn't understand what really needed to happen. Well, the 

special trustee that was part of the Act, that we, the tribes, put in 

place for the very first time a very capable person that had managed banks, had turned huge banks and trust departments around. 

We finally got the person in place. Well then, Congress did not give him any money, so we're just back to square one. 

I mean, if you put the most capable person in place and you don't 

give them any moneys to fix the systems, to implement a strategic plan, then we're back to square one. So we basically are just starting all over, and I really would like to encourage the task force to 

appropriate the money that is needed to implement the strategic plan that the special trustee has put forth. 

It is my understanding, and I am-excuse me if I'm probably a 

little bit ignorant about how Congress works, but it's my understanding that the House appropriated a million dollars to do this. 

The special trustee had given the estimates that it would cost $150 

million to fix the systems over five years. Then it is also my understanding that the Senate committee bumped that up to $18 million. 

So I would encourage you, Congressman Young, to give us some 

support in making sure that we get the higher mark in order to 

start this, because if we don't have the money to fix the systems, 

every day is-we continue to lose our money. It's being stolen; who 

knows what's happening to it. We know we don't have any accounts 

receivable system. 

I just want to tell you one very quick story. Maybe being from 

Montana, you might allow me a little extra time. But we had a situation where an individual, an elder, wasn't getting any income off 

of her land, but didn't really understand what's the process you go through. You go to the BIA agency office and they don't tell you anything. 

But it just happened that somebody was driving by that land and 

saw there was a huge gravel pit on the land. So she went-and she 

didn't know where to go, where to enforce it, so she went to Tribal 

Court. And she brought it to the judges and said, you know, I have 

a problem here, people are taking gravel off of my land. And, you know, fu: the matter of the record, there's no accounts receivable 

system within the Bureau of Indian Affairs, so they never know if 

you're owed money or not. 

So she had taken this situation to Tribal Court. Tribal Court 

tried to pursue it and went to the Bureau of Indian Affairs and 

said, you know, give us a reporting, this lady is not being paid, who 

is taking the gravel. Well, it was a non-Indian that was taking the 

gravel off the land and selling it, and this lady never, ever got a 

cent. 

Well, unfortunately, she passed away before anything was resolved, and as of today, we don't think the heirs have received their 

just. But that just gives you a sampling of the individual Indian 

problems that we're having. 

I think that part of the suit, as a lead plaintiff, and Bob will be 

getting into that in much more depth, is to compel the United 
21 

States Government to fix the systems for us. And I also believe, as 

you heard many of the stories today, is that you need to make the 

wrongs right. You have to give restitution to the Natives. 

One of the areas President Thomas talked about was the advisory board and the different plans that have been submitted to the 

advisory board. And one that we felt that was very interesting and 

had some real capabilities to solve some of these problems is this 

special trustee introduced the creation of a development bank. A 

development bank would be capitalized, and maybe that would be 

the place, after Indian country was consulted, that would manage 

the trust funds and the trust assets. 

But the $2.4 billion, as you know, they don't know who that belongs to. They can identify some of the people that it belongs to. 

Eric talked about the escrow account that would belong-some of 

the money belongs there. I know that Blackfeet is owed some of the 

money, but there's some money that they just can't identify who 

that is owed to. So, you know, if we were to capitalize a development bank, it really could do some really economic development in 

Indian country, and I think that's something that we should look 

at. 

I would like to thank you, and I know that you're going to do a 

wonderful job in developing a report after you're finished with this 

task force in November. And, once again, thanks a lot for an opportunity to testify before you in Alaska. 

[The statement of Ms. Cobell may be found at end of hearing.] 

Mr. YOUNG. Welcome to Alaska. If I can tell you one thing, this 

will not dissolve in November. We hope it will continue in pursuit 

of this, I think, real serious problem. I will ask each one of you, 

though, that has been here today just in the beginning, to continue 

to track where we're going. If you have any advice or any suggestions or any ideas, we're very, very open for them. And I just want 

to get this done. 

As I said, I don't want to go into the past, but I also would like 

to solve the problem we're faced with today and seeing it doesn't 

recur, and then we'll go back for the restitution part, because I do 

believe there's been an awful lot of money lost to individuals and 

especially certain tribes and corporations that have been set forth. 

It's a loss and that wasn't what the intent was. If someone is not 

functionable in an agency, that they should be required to reimburse those moneys that were lost. 

Robert? 

STATEMENT OF ROBERT M. PEREGOY, SENIOR STAFF 

ATTORNEY, NATIVE AMERICAN RIGHTS FUND 

Mr. PEREGOY. Thank you, Mr. Chairman. I want to express my 

appreciation for being here in your great State. This is the first 

time I've come to Alaska and it's every bit more beautiful than I've 

always heard. 

Mr. YOUNG. What State did you come from? 

Mr. PEREGOY. I come from Montana and from California. I'm a 

Flathead Indian from Montana on my mother's side of the family 

and so we have-1 thought that was God's country, but I have to 

concede that this is going to give it a run for its money, but we 

won't make any--
22 

Mr. YoUNG. The only bad thing you said in the whole thing was 

California. 

Mr. PEREGOY. That's where my dad came from. I didn't have any 

control. 

Mr. YoUNG. OK. Robert, go ahead. 

Mr. PEREGOY. It's a real pleasure to be here, and I do want to 

thank you very sincerely on behalf of the Native American Rights 

Fund for taking the leadership to create this task force to resolve 

this most important issue. 

And as Elouise has suggested here this morning, Mr. Chairman, 

we view this as the largest and longest lasting financial scandal 

ever involving the United States Government, and at stake are untold millions and millions and billions of dollars of Indian tribes 

and individuals, and that's why it's so important, because the very 

trustee who is charged with the responsibility of protecting the interests of these tribes and individuals has grossly breached that responsibility. And it's time long overdue to make the situation right, 

and that's why we commend you to bring this task force together, 

to help marshal the appropriate forces to rectify this situation. 

On June lOth, Mr: Chairman, the Native American Rights Fund 

participated with other attorneys in filing a class action suit on behalf of more than 300,000 individual Indian trust beneficiaries 

whose moneys have been lost and mismanaged by the Federal Government to the point where they had no other choice but to go to 

court to compel the government to uphold its fiduciary duties. 

I want to make it very clear to the task force and on the record, 

as Ms. Cobell pointed out, this lawsuit was really a last resort. Ms. 

Cobell and others have attempted to work very closely with past 

administrations and this Administration to see if they could get 

some kind of a resolve to this ongoing matter, but they met with 

basically deaf ears, and it-in terms of the individual Indian account holders, they really had no other choice but to go to court to 

force the Administration and government to finally seriously address and resolve this matter. 

The lawsuit has three basic objectives. The first one is that we're 

asking the Court to compel the Federal Government to calculate 

the amount of money that is due to these 300,000 individuals. 

We're looking back, Mr. Chairman, at the 158-year period. We're 

not looking just at the individual trust beneficiaries who are living 

today, but we're looking at over the entire history of that liM accounting system. 

The second primary objective, which I think relates a lot to the 

testimony and what could be done immediately, is we're asking the 

Court to compel the Federal Government to fix the system, to create an accurate and reliable accounting and trust management system, because the system that exists now, as the other witnesses 

have testified, is hopelessly broken and it's really an embarrassment, I think, to the United States Government that is charged by 

law to legally handle and develop an adequate system of accounting, and they don't even have it. 

And, of course, the third goal of our lawsuit is to ask the Court 

to compel the government to restore or make restitution to the account holders in this matter. 
23 

People ask-I was talking to one lady outside here this morning from the media and she was saying that this is very confusing, what is this really all about. The way I explained it was that every 

money manager, every money manager from a 7 -Eleven to your local credit union, needs to have some kind of an accounting system 

to account for the money they collect and the money they deposit and the money they distribute, and that's what the problem is 

here. 

For a long, long time, up to the-even today, the Bureau of Indian Affairs or the Federal Government does not have an adequate accounting system, and that's why they're in such a mess that they 

are in now. 

We've heard a lot of talk, Mr. Chairman, about the $2.4 billion 

in unreconciled money. Now, it's important to keep in mind that 

those are tribal trust funds that are unreconciled and that's only for a 20-year period, from 1973 to 1992. 

Now, in the area of the Individual Indian Money accounts, we 

don't have any idea how much money is unreconciled for the very 

reason that the Arthur Andersen firm that did the tribal reconciliation projected it would cost between $108 million and $281 million 

just to do a reconciliation for those individual accounts and only for 

a 20-year period. And that even then, Mr. Chairman, after expend- ing that kind of money, Arthur Andersen could not even predict that there would be any degree of accuracy to such a reconciliation, 

because the records are either missing or in so much disarray that 

it would basically be a meaningless gesture. At that point, I think when the government learned that, they just basically stuck their heads in the sand and decided not to go forward with it, and along about that time, the Native American 

Rights Fund became involved with some other attorneys to look 

into seeing how we could compel the government to basically take 

some action on this. 

Now, Ms. Cobell is very correct in stating that through the 1994 

Act, we are very fortunate to have a very capable man in Mr. Paul 

Homan, the trustee, the special trustee, to help make some kind of 

sense and bring some justice to this deplorable situation. But the 

record shows here, Mr. Chairman, that Mr. Homan has stated on 

record that the Individual Indian Money accounts and accounting 

system are in the worst shape of all the Interior's trust systems and trust funds. 

And so basically what we hope to achieve in terms of a shortterm goal here is to, rrrst of all, stop the hemorrhaging and the 

bleeding in terms of the individual Indian accounts. And that 

means to do that, we need to establish an accounting system that 

is at an acceptable level of adequacy. The special trustee has indicated that will take $22.3 million to do, that he can do it in one 

year. The special trustee can stop the bleeding in the Individual Indian Money account system in one year with $22.3 million. 

Now, the special trustee asked the Administration for almost $50 

million this year for appropriations. The Administration reduced 

that to $36.3 million, and then when that request went to the 

House, the House reduced that by almost 50 percent, to $19.1 million. The $19.1 million can do nothing to fix the Individual Indian 

Money accounting system. It's going to take an extra $22.3 million. 
24 

And in the words of the special trustee, that will produce a 

Chevy, not a Cadillac. It's a basic kind of accounting system that 

can stop the bleeding, which means they can establish a system 

that is going to, from this day forward, at least end the Federal 

Government's mounting liability for its inability to account in these 

kind of losses. 

And that's what basically we need to respectfully appeal to you, 

Mr. Chairman, and the task force and the Resources Committee, 

is to marshal your forces and authority and all the influence and 

power that you've got, to see if you can get the House and the Senate to kick in an extra $22.3 million for this Individual Indian 

Money account system for this year, which can fix the system in 

one year. 

I know that you're smiling up there and it sounds real easy for 

me to sit here and ask these kinds of things, but we know that, 

you know, that's what needs to be done to fix this system. 

So basically what we're asking, with all due respect, is that the 

House would not only recede to the Senate appropriations committee mark, but add an extra $8.7 million to it so that the special 

trustee can have this $22.3 million that he needs to establish a rudimentary accounting system. 

And I would put it also in these terms, Mr. Chairman, that $22.3 

million, we understand and appreciate very much that the mandate 

that Congress is under in terms of the budget balancing and all of 

those issues that you all have to face, but when you think about 

300,000 individual Indians and the fact that the Federal Government has breached its trust responsibility to these people, has lost 

their money in untold millions, and that on the other hand the 

Federal Government's liability mounts every day, $22.3 million divided by 300,000 people comes out to less than $75 per person, and 

we think that is a pittance to pay to stop this bleeding, to honor 

this trust responsibility to these individuals and to, equally important, stop the Federal Government's mounting liability. 

And so we are here to respectfully ask you, Mr. Chairman, if you 

would please consider to do that, and we would be most happy to 

work with your people in that regard. 

And I do want to say one more thing, if I may, and that is that 

it's our position that it would be wrong for any such moneys to 

come out of Indian programs. It is-again, the Federal trustee is 

directly responsible for these-<:reation and continuation of the 

breaches of trust and that it just simply would not be right to ask 

individual Indians or tribes to pay for a system that basically the 

Federal Government, in the first instance, is legally obligated to 

implement. And so in that regard, we just think it would be unjust 

and unconscionable for any of these dollars to come from Indian 

programs. 

With that, Mr. Chairman, I want to thank you very much for inviting me to come to your great State, for listening to my testimony, and, again, on behalf of the Native American Rights Fund 

and our clients, we sincerely thank you and commend you for taking the very leadership that's needed to bring this sad chapter of 

Indian/Government relations to a quick end. So thank you, sir. 

[The statement of Mr. Peregoy may be found at end of hearing.] 
25 

Mr. YoUNG. Thank you, Robert. And make sure while both of you 

are here from Montana, you'll see the rest of Alaska. It's five minutes from Anchorage. Go out and see the northern part. There's 

some tremendous areas that you will not see right here in the prox- imity of this bowl. 

One thing of all of you, I'd like to ask one question-and I agree with the money for the trustee. I don't think you're going to get the 

initial 22. I think we probably will recede to the Senate with the 

amounts of money being expended, probably around $19 million. 

$19.1 million, I think that's what we'll recede. With the Senate ap- propriating and the House appropriating, probably come in with 

about, probably, hopefully, 20, 22. 

And now I want to ask the question, does the trustee work under 

the Department of Interior or is he independent? Ms. COBELL. Department of Interior. Mr. YoUNG. The thing that bothers me the most, if I had a bank 

and done what they have done, I certainly wouldn't give any more 

money to continue to do what they're doing. 

I mean, has anyone ever thought about maybe we ought to take 

the whole thing out of the BIA and send it over to another area? 

We want the-subpoena all the records, all the files on each individual money deal, every corporation, everything, and let's run this 

independently. We'll do it government funded, but get it out of that 

office. 

I mean, I'm not saying that would solve the problem. I'll tell you what I'm going to run into. With just $2.4 billion being the tip of 

the iceberg, and I hear the term $200 billion and we try to appro- priate money, this is a temporary solution. We'd have to appro- priate more money to make it work right. If that occurs, they're going to say, if there's that much money out there misappropriated, misused, not accounted for, why should we be appropriating money 

to the same agencies that did it. I'm hearing that argument already, so what do I say? Ms. COBELL. Well, I have an answer, I think, for you. You cannot 

transfer or privatize until you fix the systems. We have to have accurate account balances. No bank would take this if they didn't 

have-they thought the balances were wrong. And that's the prob- lem that I have as an individual Indian account holder and as a 

member of the Blackfeet tribe, is our account balances are not correct. 

Mr. YOUNG. OK. But let's say I'm-and I'm sure Donna is not 

going to do this-but let's say the BIA, or the Department of Interior, decides that they are in serious trouble and there is a $200 

billion account out there and that needs to be settled. You know 

how I would settle it if I were that group? I would probably not 

say and not do anything at all. 

How do we make them function to do the job correctly? Because 

you say you wouldn't take it as a bank, you couldn't privatize it 

until the records are accounted for, that means they don't have to 

take it to make it ever work. You follow what I'm saying? The best 

way to make a malfeasance effort would make no improvement. Now, we could bird-dog them, and I've wanted a monthly report, I want you to follow it, but someone along the line, you know, I'm 

hoping we see some progress because appropriating money for this 
26 

is not going to be easy if in fact you say, oh, since 1903, whatever 

it is, you say 140 years, that this amount of inactivity or mismanagement has occurred, why should we appropriate money to 

the same agency that's doing it. 

Ms. COBELL. Well, I think that they need to correct the system, 

they have to be corrected and you have to appropriate the money 

to get the systems corrected. I think that further down the road 

there should be options available. Right now, the way, you know, 

it stands now is, we can't fire them, but there should be options 

available to tribes and individuals. 

There should be options available after proper consultation with 

the Indian people, because I know exactly what's going to happen. 

If you privatize today, and say, OK, I'm whipping all this over to 

Wells Fargo Bank, immediately if I go in and I have a problem, if 

I go to the agency, they'll say that's not our problem, that's Wells 

Fargo, the bank's problem, and that'll probably give them an opportunity to destroy more records. 

So I think that we need to fix the systems first. You have to allocate the money to fix the systems first, and then let's transfer. 

Let's do it the right way. 

Mr. YOUNG. OK. Now, what happens if I can't-what happens if 

we do exactly what you're saying, we fix the system, we make it 

work. And you're saying that the tribes can take their money out. 

What about the individual money account, individual person, why 

couldn't the tribe handle that account, too? 

Ms. COBELL. Because the-I guess the way the law is written. 

Mr. YOUNG. Well, can we change the law? 

Ms. COBELL. Yeah, you can change the law. 

Mr. YoUNG. I mean, it's something to look at. 

Now, the other thing is the fact, why isn't the trustee-which 

you're talking Mr. Holman, is it? 

Mr. PEREGOY. Homan. 

Mr. YOUNG. Why isn't he independent? 

Ms. COBELL. Well, we tried to make him independent when we 

were working on the law, and I don't know, it's something within 

managing Federal employees you can't be independent, so-but I 

think it definitely is worth exploring, you know, how can we make 

him independent so he's not under the Department of Interior's 

Secretary, because we have had problems with the Secretary not 

agreeing with the plans that the special trustee has on fixing. 

Mr. YoUNG. And the Secretary is really appointed. To make this 

work, I think he'd have to be, and I know he's confirmed by the 

Senate, but-and I guess the law reads if a person is confirmed by 

the Senate, he has to be under the auspices of the appointed cabinet member-but we should be able to somehow work our way 

around where the individual has more autonomy to make this-because every four years or every minimum of eight years you have 

a new Secretary, and it depends who you get in the office. That 

could be devastating to the progress we've made. Now, you say he 

can do it in one year. I doubt if anybody can do anything in one 

year. 

Ed, the question was asked a while ago, and it goes back to your 

lawsuit, Robert, would Tlingit/Haida-would you go to court if 
27 

things didn't perk along the way you wanted, or what would you 

do? 

Mr. THoMAS. Well, let me say why we are not first. We--

Mr. YOUNG. I don't particularly like lawyers going to court, with 

all due respect to my legal friends here, but I'm just saying--

Mr. THOMAS. That is a very important part, but I also feel that 

with the kind of representation Alaska has in Congress, we are 

probably in a position where we need to not burn any bridges and 

put things in courts we don't trust. And we need to work with you 

and Ted and Frank and do the best we can. 

Furthermore, we also have less at stake, and so to confuse the 

very real issues of the individual Indian accounts with our system-our problem, which is we know how much money we have, 

we just can't reconcile our accounts, generally. Now, I'm not saying 

it's accurately. It would be very much to our benefit that we could 

reconcile our accounts and be able to have an audit done of our programs, but I feel very strongly that we probably have a better 

chance of making progress and fixing systems working with you 

and others, as well as even the Administration, than we do in 

court. 

Mr. YoUNG. OK Now, again, I'm hoping that-I have already 

said this too many times. I'm hoping all of you keep your brain 

power working, because if you think there is a way-it goes back 

to the autonomy, possibly, of the trustee. If there're ways that we 

can do it legislatively, that's our job. You can, of course, ask for the 

accounting from the Administration. 

Administrations, by the way, as I've been under six of them, and 

I have never seen any real progress under any of them under this 

program, other than we had for 1994. I think we have started to 

make progress and I hope we are. 

But this issue has to be solved. And I have been around long 

enough to know the best way not to solve an issue is to pass the 

buck back and forth from the legislative side to the judicial side to 

the Administration side to the Secretary, back to the President. 

Then you get a new President and it goes on and on and on and 

we're back for another 50 years. I don't want to see that. I want 

to see this situation rectified, I would say as rapidly as possible. 

So you all are going to have to continue to come up with some 

ideas and concepts. And I know we've been in this a long time. I 

think that's important. 

Mr. THOMAS. I think the transfer of this program out of the Bureau into another Federal agency, like banking securities or Treasury or Justice even, to me should be talked about. I don't think 

that I have enough information to say let's do it tomorrow, but I 

think it's got to be talked about, where we have systems in place 

where they can be mirrored and complement the resolution of the 

problem. 

But to leave--like what you're saying, leaving something where 

it is when everybody is confused and-without pointing fingers at 

Congress or the Administration, when we had a Democratic-controlled Congress making recommendations to a Republican Administration, they say, well, that's a Democratic issue. Now we get a 

Republican-controlled Congress making Democratic say, well, that's 
28 

a Republican issue. And so we end up getting caught into a battle 

of wits here and the problems goes on. 

Mr. YOUNG. And that's what I'm trying to avoid, and I think the 

way you could avoid that, it could be even-this sounds kind of 

strange, it could be even under the Department of the Office of 

Trust if they had total autonomy with the trustee. 

You see, instead of having it under the President and the battle 

between, like you're absolutely right, between the--I have been 

under four R's and two D's, and, you know, all this time there's 

been a D in the Congress and R's in-four in the House, but there 

is usually that argument, well, this is a position that a party takes. 

This has nothing to do with a party. This is a trust relation between the Congress and the American need. People don't understand that that's our responsibility, and until we accept that responsibility and quit passing the buck, it leaves a lot of latitude for, 

frankly, the Department of Interior to play games with a lot of 

money, and that's not the idea of this. 

I mean, that was never the reason it was set up that way. The 

reason the idea of the trust fund was set up, and I hate to be blunt, 

is you supposedly didn't have the ability to take care of your own 

money. That was why it was set up. Big Daddy was going to take 

care of you. And Big Daddy took care of it all right; nobody knows 

where it's at. 

So what we have to do is try to get outside the political arena 

and try to get into an area where Donna can be and the trustees 

can be without having to go in and respond to the set up or to the 

Administration or to the accusations. I get concerned about the 

Congress when it comes to appropriating money. I'll be right upfront with you. This is a very cheap investment to solve a big billion dollar deal. 

And I'm lecturing now. It reminds me of one thing that I'd like 

to see, and I've said this publicly and privately. After everything is said and done in Alaska, after all the preparations and the villages receive their land so they can't use that over their head, I 

think there ought to be one big lawsuit, because the moneys that 

have been used to fight the intent of the Congress in 1971 are awesome by the Federal Government. And the BIA never took the side 

of the Alaska Native. They never helped them in court. 

I knew of Park Service, BLM, Fish & Wildlife, you name it, and 

the amount of moneys that sent kids through college that belong 

to lawyers' sons and daughters is awesome. And I'm just saying that was never the intent of Congress, but the agencies in fact have 

overstepped the intent of Congress, using taxpayers' money to pay lawyers to oppose, especially the allotment program, to oppose the 

solution to a problem, the selection of lands, et cetera. 

And that has nothing to do with this issue, but it is a classic example where the responsibility never was followed through by the 

BIA to say this is our charge, this is our war, we ought to be defending them in court. Didn't happen. 

Now, I said my little speech. Anything else you'd like to add 

while we're here? 

I do appreciate you. And, again, I charge all of you to continue. 

This is the first hearing we've had in Alaska on this. We will have 

a series of hearings with J.D. Hayworth. We will be pursuing this 
29 

issue, but all of you have a responsibility to communicate with the 

Committee, and, Donna, you have a responsibility, and we'll try to 

see if we can't make progress. And we will have a backup hearing 

on this beginning in probably February, where we are, where we're 

going, and we will just continue to do it. We will get this problem solved. 

I do thank all of you, and I hope that those that have come to 

Alaska have a chance to enjoy it more than just a day. It is raining outside today, but if you go to Fairbanks, it's not raining. The fishing is good in other areas. Thank you very much, and this hearing is closed. 

[Whereupon, the task force was adjourned; and the following was 

submitted for the record:] 
30 

UD.ited. States llouse of Representatives cc-ittee 011 Reaourcea 

Task Force 011 Il>dian Trust P\md MaDag-..t 

BeariDg 011 IndiiiD Trust P\mda MauageBent 

Teati.oay of Donna B.rvin 

Director, Office' of Trust P'Und.s Manageaaent 

Anchorage, Alaska 

August 10, 1996 

Thank you for the opportunity to present testimony on Indian Trust Funds 

Man.&gement . As you are aware the Office of Trust Funds Ma.nagemeQt manages 

APPROXIMATELY $10 . 2 million in the Alaskan Native Escrow F'Wld, $6 . 8 million in 

27 accounts for Alaskan Native entities, and $10.6 million for 1431 Individual 

·Alaskan Residents . The heari~gs are focusing on trust management. practices and 

what it may take to ensure sound trust management in the future. Bach of these 

focal points is discussed in turn . 

In Octo~r 1995 , the Office of the Special Trustee for America~ I.ndians 

COST) commenced an assessment of the U. s. Government's trust management 

policies, proced~es, practices and systems as they apply to individual 

American Indian and American Indian tribal accounts. By February 1996, . the OST 

completed the preliminary assessment and produced a conceptual strategic plan 

to. acquire and institutionalize specified systems . Implementation of this plan 

will permit and ensure that the U. S . Government eatabli"shea appropriate 

policies. and procedures, develops necessary systems and takes the affirmative 

actions neCessary to provide an accurate and timely accounting to American 

Indian trust beneficiaries. In this manner the proper discharge of the 

Secretary•s trust responsibilities can be accomplished. The Assessment and 

Phase I of the Strategic Plan are included in a document entitled "Special 

Trustee for American Indians. Assessment and Strategic Plan Principles, Phase 

I, Febr11;ary 19.96 • which baa been provided to Congress. 

In December 1995, the D'. S. Department of the Interior's B\,lreau of Indian 

Affairs substantially completed a multi-year "Tribal Trust Funds Reconciliation 

Project" {Reconciliation Project) ~d issued an "Agreed- upon Procedures and 

Findings Report • for the period July 1, 1972 through September 30 , 1992 . Ita 

major findings are substantially incorporated in the Special Trustee's 

Aasesament. 
31 

In August 1995, the Department of the Interior substantially completed a 

study of the trust management systems relating to Individual Indian Monies 

(IIM) accounts and issued a report entitled "liM Related Systems Improvement 

Project Report." The findings of this report are also substantially 

incorporated in the Special Trustee's Assessment. 

2 

The Special Trustee's Assessment, the Reconciliation Project reports, the 

IIM Related System Improvement Project Report and earlier and later reports 

issued by the General Accounting Office all confirm that· the U. s. Government's 

trust management systems, policies, procedures and practices coupled with the 

condition of the trust records and, notably, large numbers of missing 

documents, are inadequate to allow for: 

1. a proper, accurate and timely accounting for trust account balances, 

collections, disbursements and investments and the maximization Of the return on investments. 

2. the preparation of accurate and timely reports to trust account holders regarding all collections, di$bursements, investments and return on investments. 

3. an audit under generally accepted auditing standards. 

4. any further reconciliation efforts, since the costs of such efforts would likely substantially exceed the benefits and at the same time would probably yield unsatisfactory and inconclusive results. 

While significant improvements have been made over the last several 

years, the inadequacies of the trust management systems, the · condition of the 

historical records and the U. S. Government's inability to provide an accurate 

and timely accounting cannot be remedied without the major reforms required by 

the Reform Act of 1994. To address these issues, the Special TrUstee's 

strategic plan identified nine ·initiatives or principles designed to rectify 

the problems and bring trust accounting and management systems up to commercial 

standards. within three years. This, at a minimum, will involve acquiring, 

automating, updating, integrating, coordinating and consolidating to produce : 

1. A trust resource/asset management delivery system. 

This will involve obtaining a new trust resource/asset management and 

delivery system for asset leasing, contracting, lending, buying and 

selling, together with standardi2ed and/or integrated asset management, 
32 

3 

credit and operating policies, procedures and practices. The system must 

be able to tie to and track from land and ownership records. 

2. An accounts receivable data and billing system that uses 

lease contract and land and ownership information . 

This will involve obtaini,.ng a new accounts receivable , billing and 

collection data system that uses lease-contract and ownership information 

for trust income verification, reconciliation, billing, payments, 

collection, accounting, disbursement, audit, asset quality review an~ 

comp~iance purposes . 

3. A trust, depository, payments and delivery system for Individuai 

Indian Money ( IIM) accounts. 

This will entail purchasing a trust, depository, payments and other 

financial services accounting and statement system and a delivery system 

to more efficiently provide current financial services and to facilitate 

new and improved financial services to individual Indians and .Tribes. 

4. A land records and title recordation and certification system. 

This will involve acquiring a new land records and title recordation and ' 

certification system~ capable of ·instantaneous linkage with -the trust 

resource asset management .• accounts receivable and trust accounting 

systems. 

5. A general ledger and general accounting system. 

This will involve_ obtaining or modifying a general ledger and general 

accounting system to accommodate a1·1 preSent and planned systema and 

accounting improvements . 

6. A technology services center dedicated to trust resource and funds 

management . 
33 

This will involve obtaining a centralized technology services center 

dedicated to trust resources, trust funds and land ownership and records 

management processes. 

7. A national archives and records center. 

4 

This will involve obtaining and centralizing a modern national archives 

and records center for trust resource , asset and funds record storage and 

retrieval. 

8 . A risk manag~ment and control system. 

This will entail obtaining a risk management and control system that will 

provide for adequate operational audits, credit and asset quality audits, 

compliance reviews, independent asset appraisals and liaison with 

outside, independent auditors . 

9. An independent institutional structure. 

This will involve consolidating trust resource, trust funds and land 

ownership and records management processes into a single , independent 

institutional unit with its own management structure to accommodate the 

restructuring and reorganization contemplated by Phase I of the strategic 

plan. ~he unit should be organized by function and dedicated exclusively 

to t·rust management . The unit should have agency or bureau status within 

the Department of the Interior or elsewhere. 

The conceptual work on the strategic plan is completed. The next ~ 

are conducting a requirements analysis, user needs assessment and a 

compre}?.ensive inventory of existing skills, hardware and software, related 

network support and facilities requirements, all of which will lead to a 

technical requirements report for RFP purposes pnd confirm or revise the cost 

data contained ·in the conceptual strategic plan. This will require the use of 

an outside contractor. The 1997 President's budget request includes $1 million 

to conduct the analyses . 

Once the analyses are completed (expectec;i to take 90 days from funding 

date) and once the staff of the OST is hired, the remaining elements necessary 
34 

s 

to produce the comprehensive strategic plan required by the Reform Act of 1994 

can be completed within 90 days or by March 31, 1997, if the President's budget 

request for FY 1997 is approved. 

The total FY 1997 request for OST is $36.3 million, a $20 million 

increase over the 1996 conference level of $16.3 million. The request includes 

$13.6 million to begin implementation of the strategic plan. The funds will be 

used primarily to upgrade and establish a new liM accounting system, which is 

long overdue. The 1997 budget requests no-year funding to allow adjustments 

resulting from re-estimates or delays in plan implementation. However, it 

should be noted that if funding for the strategic plan is delayed, the reform 

effort will be delayed. 

The $20 million requested increase in OST's budget for FY 1997 also 

reflects the high priority the Administration and the Secretary place on Indian 

Trust Asset Reform efforts. Improvement efforts are critically needed to ensure 

the Federal Government meets its fiduciary obligations to Indian Tribes and 

individual American Indians. While the Federal Government's trust 

responsibility is unique, systems, policies, practices and procedures of 

commercial trust operations can be applied to ensure that the Federal 

Government better fulfills its fiduciary obligations. Beginning in 1997, the 

evolution of trust system reforms will be at a point where increased resources 

can be prudently expended. 

In closing, I would like to emphasize that ~resolving the pastH presents 

a difficult challenge to the Administration, the Congress, and individual 

Indians and tribes. The ending of the tribal reconciliation process in 

December, 1995 represents only the beginning of an effort to resolve problems 

with the U.s. Government's past trust fund management practices . This 

Administration is committed to solving these longstanding problems and has made 

significant progress in strengthening trust .funds operations and in taking the 

steps necessary to ensure the highest level of fiduciary and investment 

standards are in place in the management of these funds. Future reforms will 

continue in earnest under the comprehensive strategic plan required by the 

American Indian Trust Fund Management Reform Act, provided that adequate 

resources are appropriated by Congress. 

Enactment of the President's 1997 Budget request would represent a 
35 

substantial step to ensuring. that Indian trust reform efforts are implemented 

in a manner that ensures the fiduciary responsibilities of the Federal 

government are met . 

6 

This concludes my stat~ment . I will be happy to answer any questions you 

may have. 
36 

STATEMENT OF ERIC R. DAVENPORT, 

CHAIRMAN, INTER-TRIBAL 

MONITORING ASSOCIATION ON INDIAN 

TRUST FUNDS 

Before the 

House Task Force on Indian Trust Fund Management, 

Committee on Resources, 

U.S. Bouse of Representatives 

Anchorage, Alaska 

10:00 a.m. 

August 10, 1996 
37 

Good Morning, Mr. Chairman, and welcome home to Alaska. With 

your permission, I believe my prepared remarks will be made a part 

of the record. 

Let me thank you again in front of our home crowd for agreeing 

to bring this important issue to the attention of our Alaska 

friends, and especially to the attention of our Alaska Native 

people, who for the most part still not have been provided the 

accounting that they have every right to expect. With this 

hearing, I believe you have provided more focused attention to the 

subject of Indian trust funds than all of your predecessors 

combined. 

I particularly want to thank you for your attention to the 

budget for this program in Fiscal Year 1997. As you l:now, the 

Senate Committee added some $17 million to the House mark for the 

Off ice of the Special Trustee and the Off ice of Tn:st Funds 

Management, and that matter will be taken up i~ the Conference. We 

hope you will continue to urge Mr. Regula to accept the Senate 

position which is in line with the President's request. 

I might point out here that the President's budget request for 

this program for FY 1997 marks the very first time in history that 

any Administration has provided the congress with a realistic 

appraisal of this program and what it is going to take to put it on 

a sound basis. And the Congress wouldn't have gotten that insight 

in this year's budget without the efforts of a Special Trustee of 

the stature of Mr. Homan. And you know, of course, that we would 

not have a Special Trustee at all, much less one of Mr. Homan's 

stature, without the dogged perseverance of the Intertribal 

Monitoring Association on Indian Trust Funds over the past sev~ral 

years. 

For our part, we know, and we want all our friends in Alaska 

to know, that your Committee deserves the credit for creating that 

position in the Indian Trust Funds Management Reform Act of 1994. 

We want to take this opportunity on our home turf to thank you for 

the leadership you have provided in creating the Congressional Task 

Force on Indian Trust FUnd Management. This really does mark the 

first time that an authorizing Committee of Congress has attempted 

to. develop a thorough understanding of this program, and I believe 

Chairman Hayworth and his Task Force members have already experienced a little •sticker shock• at what they are learning. 

But, as I said at the first hearing of the Task Force in June, what 

you have seen so far is only the tip of the iceberg. 

The Alaska Native funds administered by the government did 

not, for the most part, receive the same level of examina~ion that was provided to tribes throughout the lower 48, this despite the 

fact that almost 14l of the unreconciled disbursements, or $111 

million out of $800+ million, identi=ied by Arthur Ander~en 

involved Alaska Native accounts. 

2 
38 

This !iqure, I believe, is out ot all proportion to the 

current balances carried on OTFK's books, but it may not be so 

disproportionate it this review included all the ANCSA payments 

that were paid out over this period. Today, out of a tribal 

portfolio o! sa.e $2.1 billion, only $6.4 million are carried for 

tribal accounts in Alaska. In other words, it appears to us, 

tribal accounts in Alaska account for only three-tenths of one per 

cent of the total tribal account portfolio, but 14\ of the total 

amount ot unreconciled disbursements. In other words, in this 

cateqory of .aney-was-paid-out-but-we-can't-be-sure-to-whom, we are over-represented by a factor of 47 times. 

I believe everyone assumes that this $111 million or so is 

part of the ANCSA monies that ~ere paid out over the years, but 

that assuaption has not really been tested. So far, we haven't 

found anyone in either Arthur Andersen or the Special Trustee's 

Office who can tell us for sure just what was reviewed and what was 

not. 

It is for these reasons, Mr. Chairman, that ITMA has asked 

that you consider requesting the General Accounting Office to 

conduct a separate investigation and prepare a special report on the Alaska Native trust fund accounts. If you make such a request, 

I suggest that this co .. ittee should be very speci!ic in providing 

oversight and direction to the scope and methodology of that 

exaaination, as well as to its actual execution. 

We haven't even begun to undertake an examination of the 

individual accounts, in Alaska or anywhere else in the country. 

You will note that .uch. of the increase provided by the Senate for 

the Special Trustee's program in FY '97 is for improvements in the 

IIK systeas and adainistration. 

We have previously suggested to OTFK that the universe of 

individual accounts in Alaska, and the amount of money in these 

accounts, are sufficiently small that a detailed examination of 

these accounts aay be possible here that is not possible in other 

regions ot the country. out of some 300,000 accounts throughout 

the country vitb nearly $500 •illion in thea, we have only slightly •ore than 1,000 ot those accounts in Alaska, with only about $11 

million in thea. However, wa keep running into the Department's 

apparent preference tor a •global" approach that seems to us to 

say, •rt- can't d:» it for everybody, we won't do it for anybody." 

This has never made a lot of sense to us, and we hope we can work our way through this with Mr. Homan and Ms. Erwin, now that she 

has her job officially as the Director of OTFK, after doing it 

without tbe title for nearly three years. 

we have discovered one situation here in Alaska with respect to these individual accounts that demonstrates quite vividly the 

importance of the reforms that Mr. Homan and Ms. Erwin have 

proposed to undertake h. FY '97. Some years ago, an Alaska Native 

3 
39 

sold his allotment, and the initial pa:~ent of $21,000 was deposited into his individual account then Daintained by the Bureau 

of Indian Affairs. That money was paid out to the seller within a 

matter of days, and the remainder was paid directly to him over a period of years by ~e buyer. Some five years later, the seller 

received a check from the BIA for more than $41,000. When he tried 

to return these funds, it was explained to him that this was interest on the original $21,000. I~ was not explained to him 

that, while payment of principal for his allotment was not taxable, 

any interest earned en that principal was taxable. As a result, s.:>me years later he was forced to go into debt n:erely to pay 

federal taxes on monies he didn't even know were taxable in the 

first instance. 

While you will hear about this from the individual himself, I 

would like to point out a couple of concerns this issue raises for us. In the first place, if the principal amount were paid out to him within a matter of days, it raises a question of how it could 

have continued t~ earn in~erest over a period of five more years. 

Secondly, since this individual was, in fact, paid more than 

$41,000 five years later, money,that conceivably was not his, then 

the question arises of just whose money was he paid. In other 

words, somewhere there may be other Alaska Natives who should have 

had that money in their account drawing interest over the last 

eleven years or so. 

This is precisely the kind of thing that will in all 

likelihood never be investigated or revealed, unless this Committee 

continues to shed light on this program that has operated virtually 

in the dark for far too long. This also points out the importance 

of Congress' providing the Special Trustee with the resources to 

make the kinds of reports to account holders that ~re called for by 

the 1994 Reform Act, and which have not previously been provided. 

We want to be clear that we are not suggesting that there are necessarily any "bad" people associated with this particular 

incident. But we do suggest that these kinds of anecdot.al examples 

point out the need for the development of clearly articulated 

policies and the means for providing assurance that these policies are followed. 

This tax issue is potentially troublesome for individual 

account holders throughout the country. There is a threshold of 

interest earnings, for _instance, at which minors are catapulted 

into the marginal tax brackets of their parents. OTFM reports these earnings to the IRS, but does not always tell the account 

holder wha~ they have told the IRS. Even if this information were provided to account holders, there remain a number of significant 

policy-level issues which we do not believe have ever received the 

kind of attention ~hey deserve. For Example: Which parents' tax 

4 
rates are to be used? 

The custodial parent? 

parents? 

40 

The birth parents? The adoptive parents? 

The foster parents? What if there are no 

And reaeaber these are ainors we are talking about. Unless 

and until these issues are addressed and resolved, many minor 

Indian and Native children could be saddled with penalties and 

interest on obligations they have no way of knowing or 

anderstanding. 

Here in Alaska, there are a number of other issues that Mr. 

Homan will soon know aore about than I suspect he wants to know. 

The situation I described earlier regarding sale of an allotment is 

actually an easy one. As you know, some 10,000 applications for 

allotments have been made since 1906, and today almost 3,500 of 

those have yet even to be surveyed. Almost 6,000 parcels are still 

being worked on by BLM, and that does not include the more than 

2,000 additional Natives who may be eligible for allotments if the 

prograa is opened up for Alasl;a Native Vietnam Era veterans. At 

present, BLM hopes to coaplete the surveys for these allotments 

shortly after the turn of the century, but that will happen only if 

the Special Trustee and the Congress continue to provide the funds 

required to conduct these surveys. 

In the meantiae, we don't know how r:.any of these pending 

allotments are generating any revenues, or should be generating 

revenues. We don't know what the process is for ensuring that 

revenues that are generatee are appropriately escrowed and 

invested, and that earnings are accurately and timely posted. 

What we do know is that Indian and Native trust funds in 

Alaska have not received the kind of attention that they deserv~, 

and that our Indian and Native people have a right to expect from 

their trustee. And we know that there are a number of national 

issues which reaain to be adequately add=essed, and that these will 

also impact Alaska and Alaska Natives until they are resolved. 

Although substantial progress has been made in recent years in 

the management of the trust funds, the Department of the Interior 

still cannot provide adequate management, and the Congress still 

has not provided the appropriations necessary for system 

improvements. For example: 

• There is still not an accounts receivable 

system. 

• Reductions in appropriations have 

resulted in personnel decisions which 

undermine effective management of the 

trust funds. 

5 
41 

• There is still not a comprehensive set of 

policies and procedures for trust fund 

management. 

• OTFM lacks the personnel ancl resources to monitor Area and Agency office 

performance of reconciliation, accounting 

and loss policy implementation. 

• OTFM is unable to provide account statements which enable account holders to determine interest earnings, 

investment yields and duration to maturity on investments. 

• The backlog in land ownership 

determinations and record keeping 

continues to grow as a result of 

reductions in appropriations and the loss 

of personnel. 

• The BIA continues to distribute trust fund receipts to account holders based on unverified and incorrect land and lease 

ownership information. 

• Reductions in appropriations have 

prevented OTFM froa implementing plans to contract for investment advisory and 

custodial services. 

• The Special Trustee has not developed a strategic plan for improving trust fund 

management and lacks appropriated funds to do so. 

• The Treasury Department continues to 

regularly destroy trust fund account records as part of its records handling .procedures. While those procedures may 

be appropriate for most Treasury 

accounts, they clearly are not appropriate for trust fund accounts with 

balances which have not been agreed to by 

the account holders. 

• In the absence of timely and accurate ownership and ~ccounting information, the 

Department will continue to be unable to provide trust fund account holders with 

reliable account information. 

6 
42 

These issues are not just of academic interest to us at the 

Central C~uncil of the Tlinqit ' Haida Tribas. The report recently provided to us by the Bureau shows $4.2 million of our money 

unreconciled by the government • s cont:cactor. This is out of a total fund balance of $7 . 7 million, of which $5.6 million is 

managed by the Department of the Inte:cior. 

The government's failures in this area hurt us in ways that 

the government has never even con5idered. The Government Finance 

Officers• ~ssociation (GFOA)is a national association of municipal 

finance officers. The Central Council has applied to GFOA for 

t hei r superior Reporting Award in recognition of our financial 

reporting to our tribal members. Our application was denied 

because of an audit exception that occurs annually, but only occurs wi~h respect to that portion of our finances that are managed by 

the federal government. In all other respects, we get a clean 

audit every year, and except for this exception over which we have 

no control, our efforts would bring us this prestigious na~ional 

a10ard. 

In closing, I would like to leave you with one final though~ 

that has bothered us at ITKA for almost six years n~w. And t hat is 

the con~inued unwillingness of the Department of the Interior to be 

forthcoming about p:coblems that they know abou~. but w~~ch we have to discover through our own sleuthing. We believ•• that their 

lawyers and the lawyers at the Department of Justic e are calling 

these shots, but there will never be confidence in th~ integrity of 

this program until those charged with running it are allowed to be 

honest about it. You know, we require our publicly traded 

i nstitutions and banks to disclose their write-offs and their 

losses precisely in order to maintain customer and investor 

confidence in the integrity cf our financial ma.rkets. A ~o !. e man 

once said that sunlight is the best disinfect ant for ~overn~ent 

activities as well. Here we t.ave a program that 1s det.lply 

infected, and we urge you to continue to apply the disinfectant of 

sunlight in liberal doses until we have brought it back to health . 

We are deligh!ed that Ms. Erwin and Mr. Homan have begun to focus on these issues, and they have been responsive to our in~iries and our concerns. We are more grateful than we can say 

that you,. Mr. Chairman, have agreed to provide the leadership that 

has been lacking in this area for nearly a Century, ~nd we look 

forward to working with you and your Committee, and with the 

Department, to bring the reforms that are needed. 

Thank you, and I'll be happy to respond to any questions you 

may have. 

7 
43 

STATEMENT OF LONNIE L. POINTS, CPA 

Blaad &: Associates. P.C. 

8712 West Dodge Road, Suite 200 

Omaha, Nebraska 68114 

Beforetbe 

Bouse Tuk Fom o• IAdiu Tnat Food Muagement, 

co-iltee ... Baoorus, 

u.s. u-lllllepraelltDtiva 

Aacllenp, Alaska 

lO:OOa.a. 

Aacu& 111, 1996 
44 

~ 

Good --._ Mr. o.aa-. My - is Loaaic Points. and I am a shareholder in an 

linD in Omaha, Nelnlb.. I baw pafonDed bank llitecton' cxamioatioas for tinancial 

in$titutions in Nebraska, and I baw CUIIIiDed lndusiNI Savings and Loan Associations. Out firm 

does tbc audit work~ alllllllba- of tribes tbrougbout lbe country, and we have beea personally 

~ with the llllenribll Monilorias Aslocialiocl on Indian Trust FWids sirM;c its inc:eptioll. As 

1 n:sult at our role with ITMA. we law "-llbd 10 review the reconciliati011 repons for 1DIIIIlbcr 

of tribes. I baw also had 111 opportuaity to _..,. the lpecial pnx:edures report that AJt1wr 

.Arclrnc ct Co. pnMdcd lOr the Bureau oCJDdian Alliin in 1991 regarding the Alaska Native Fund 

~by the Ollicc at Trust FUIIds Maaqemeot. 

I Ulldcnland that the Talk Fon:e wameclto bear today 6-om the penpective of a CPA who 

hu had aa opportuaity to tab a look at the work performed in the recall reconciliation effort. I 

app~ate the~ to tbe profession that is implicit in that iovilation, but I think Mr. 

Davenport 111M 1 praty sood ~aldie sbortcomiJ18s of that effort &om a lrib&l perspective at the Task Fon:e's fin! baria&. 

I doD~ waatiO npa& wMt t. ba already put 011 the record. bull dlouabt I could share some 

t1nJaiu with you today, and theD respoad 10 my queslioDs you miibl have. The problems with the 

reeonc:ilillloa dron that ~ listed It the tint beariac arc ooa that are sband by aU of the tribes I 

have <:omUited on this issue. I mipt add here that it is never plca.sam to criticize the dons of our 

llrcdlrat in 1be pro&aion. and I do DOt intend today's n:nwla to be taken uDkindly by the people in 

either the Bureau or in Anhur Andersen, who put in incredible hours and efforts to generate the 

n:pons that wen: sent to .U tribes early this ycu. 

Wllll I would ib to do today, &om a prvfes.siotW accowdanl's pcrl(*tive. is to add a little 

bit to 10rnetbins Eric bas touc:bcd on in bis statement for today. The whole purpose of public 

accouncancy is 10 provide a basis for public confidax;e in the integrity of our firwlcial institutions and 

5)'11ems. Thlt is why 111011 accountanto' repons begin wilh a stalemCDI that they arc the product of 

"lndepcndept" public: &CCO'mi•Ns. The role of a public accounta111 gencraUy is not to prepare or to 

cons1ruct the books that he eumines, but to repon to other people, such u a board of directors or 

to sblnbaldcn. oa the inleiriiY oCibe boob aad the boo1ckeeping systems utilized by those who are 

entrusted with lbe colllrol oC other people's money. 

We baw had clif!iculty throusbout this CllliJe prvccdute with accepting the "indepcodem:e" 

of the govemma~t's m:onci6atioG CQIIIraaor. OrigiD&Uy, Anbur Andersen&. Co. was Cft811ged to 

auisl the Burea& oflDdiln AIIUs in R>COIIStiUCiiDg aad ~ the boo~<$. Aftu lb&t was done, 

it was oriJislally CCIDlanplated that tbeoe boo~<$ would then be subjected to audit procedures by 

someoac who wu indcpeDdeal of the boolcb:c:paa tbansclves. Ill our view, these: roles bccarnc 

blurred early on in this process, aad tn"bes were pruemed with financial statements that, in effect, 

were cxamiDcd by the same people who put tbem together. 

2 
45 

AU 1bae reports bepa wi1b a._ did the objective of the review wu to provide the 

tribes with n:&SCalbloo __,. tM& the-~ carried on the boob were accurate. We 

continually asked the ~ "WWIo is the ciall in tbil acn:ise?" ADd the rapoiiSC wu illvariably 

the same. The di111t wu the.,_..-, ...t1101 the_,. holdcra, 1101 the owncn of the money. 

Cansequemly, - do 11011bol did tile paiGiLill's .-.'111-reYiewed with the tlcgn>e 

of profcssioaal skqJiicilm t1at our pn6aima .-.DY demaDds of an indepeadenlaccountant. And, 

as a rc:wh. we ba'VC adYiletl II our c:liaa, ...t aB ocbcr uiba whose reporu we ba'¥C reviewed on 

beNif' oflTMA, that tbe ..,.u tbey ~ beal pnMded do 1101 provide any rasonable usurance 

that their KCOWI1 ~ ueOn tbe otbcr hind, - thousb I don\ beliew vibes in the lower 48 em take any contidence 

in lhe IIIXOUIII t.1ances lhllba"C bem .,.-ed to them, at least lbeir ·ICCOWIIS did get ~review 

in this latest, five-yar, $20+ rniJiioa aen:ile. 

I 1111 advUcd by both tbe Ollice ofTRISl Fuuds Maaapment and by Arthur Andeneft stair 

that the Aluka Native Esavw 6md - 1101 reviewal at .. ill the reconciliation project. In fairness 

to than, we sboukl poiat lllll to you that bide in 1991 Mlu ADdenen did make an examination of 

this fund li'om ila iDI:ept.iOD ill 1971 to SepcCIIIbec 30, 1990. As a rault ofth&t examinarioa, Arthur 

~proposed~ ia-oCSIO lllillioa. We CIIIIIIOt tell you wbat has been done 

since that time, if auytbing. '*-e _.._-yet found aa,_ ia the Special Tnutee's ollice, in 

the Ollicc: ofTNSt Funds~ or ill Arthur Antler-, wbo seans to know. 

We em tdl you thlr il does 1101 ..,...-tbar tbe S962,SOO,OOO ill cub pa~ autborized 

by ANCSA in 1971 MI'C ~ tllrougb dlis limd. Prslmably, tbote pa~ were made directly 

by Treasury to the~ 

What is problbly-~ b •to impress upoa you today, Mr. ChairmiJI, is that we 

ha'¥C yet to lilld III)'OIIE who is cbqed willa the c:ollec:tioa. ~ KCOIIJiting, ancl disbummen1 

of these fimds that expmses Ill'! ~ tbar all, or aay, of tbis is being done correctly, c:ven 

today. The 1991 eqmjnatimtlidiiOicw:Diooklt the issta that arise under Section 7(i) of the A<!. 

Undislributed balances held by the calcc:lias a(l6lcies were C<llliinned. but 110 eftOrt bas been made 

to determine whdbct or 1101 tbe U.... oCI.aDd ....-, the U.S. Forat Service, the Minerals 

Maoaaemeot ServKe. the Natioaal Oeaaic: ...t Alrno$pbaic Administration. the U.S. Fish and 

Wildlife Service, the CoUl Guud, or the Geaonl SuW:es AdaUistratioa are actually collec:ting 

eorm;tly. So liar u we em tell. the clllly thiDa that bas bem reviewed is whether or not !hey ba'¥C 

made any elaical ~ ill posliaa wbll they do eolloct. 

In ahort, MI-. a.-a-if'l hid aay Alaska Natiw 1f0U1Ja _,.,.my c:lienls, I would not 

advise them to take Ill'! CXIIditlcace ia .... - u ~to tt.D. rube happy to answer any questions you may haw. T1laak you. 

l 
46 

CENTRAL COUNCIL 

tllnGit ano ha10a m01an tRIB€5 o~ alaska 

ANDREW P. HOPE BUILDING 

320 West Willoughby Avenue • Suite 300 

Juneau. Alaska 99801-9983 

Testimony of 

Edward K. Thomas, President 

to the 

"Task Force on Indian Trust Fund Management" 

of the 

U.S. House of Representatives 

Committee on Resources 

Welcome to Alaska! My name is Edward K. Thomas. I am the elected President of the Central 

Council of the Tlingit and Haida Indian Tribes of Alaska, a federally recognized Tribe from 

Southeast Alaska My Tnbe has a membership of over 23,000 enrolled members. My Tribe has 

approximately $5,500,000 held in Trust by the Bureau of Irtdian Affairs (BIA). 

All Alaslcans -are honored that you have come so far to our state to hear from the people on this 

very imponant issue. I am very pleased that the United States House of Representatives (and 

particularly you, Mr. Chairman) is talcing its valuable time to look deeper into the BIA Trust Fund 

Management issue. I am honored to be invited to share with you my experiences and views on 

this very imponant topic. 

ConS!!Itation on thjs js:;ue: 

I fully realize how difficult it is to travel all the way from Washington, DC, to hold hearings in 

Alaska . . Historically, consultation with Alaska Natives on this very imponant issue has been nonexistent. In recent years there have been hearings held on this topic with lower-48 Tribes and 

their input has been· invaluable in effons to correct problems relative to managing Trust funds on 

behalf of Tribes and Individual Indians and Alaska Natives. Consultation with Alaska Native 

Tribes is just as imponant as consultation with Tribes that arc "handy" to Washington, DC. 

Unfonunately, when hearings arc held only in Washington, DC. small Tribes and individual 

Alaska Natives can not afford to participate in them. 

Problem in BIA Trust Fund Managanegt: 

The problems of BIA management of Tribal Trust Fund and Individual Indian Accounts arc longstanding. Most accounts have never been reconciled until just a few years ago. Approximately 

14% of the accounts arc not reconcilable due to the absence of records. Fund management 

systems arc out-dated and, in most cases, were never designed to properly manage these 

accounts. Personnel tum-over has been frequent and the quality of personnel recruited. at times 

6oth Annivezsa'llf - 1995 

TEL 907/586·1432 FAX 907/586-8970 
47 

Trust Fund Heorins · 2 Rt:sources Committee 

accounts. Personneltum-<lver has been frequent and the quality of personnel recruited. at times 

has been questionable. There has never been enough equipment in BIA Tribal Trust Fund 

Management Offices to do the job properly. 

Tribal joitjatjyes: 

Concerned Tribes pulled together the Inter-Tribal Monitoring Association. ITMA was 

instrumental in creating broad-based awareness of the problems in Tribal and liM accounts 

managed by the BIA. They joined forces with the Joint DOIJBIAffribal Reorganization Task 

Force and the National Congress of American Indians in making positive recommendations to 

correct uncovered problems. Even though the BIA-DOI fully recognized the seriousness of 

identified problems, they strenuously resisted the sound recommendations made to rectify the 

problems. 

Tribes were hopeful that if a "special trustee" was_ established 'outside' of the BIA administrative 

units we would be more effective in dealing with DOl in resolving the problems. We were wrong. 

The DOl did very little in the way of making the Office of the Special Trustee effective. Not only 

has the President's DOT budget request to Congress excluded funding for the recommendations of 

the Special Trustee, they did not include funding for the Advisory Council of the Office of the 

Special Trustee to meet. 

Current nm!: 

Congress was instrumental in helping us set up the Office of the Special Trustee. and for that we 

are grateful. However, now that the problems has been clearly defined and it is increasingly clear 

that it will take millions of dollan for the federal government to fix the problems uncovered. we 

have lost imponant Con~ional suppon. 

I fully understand the imponance of balancing the national federal budget within 7 years. And I 

fully understand the need for all of us to do our part in making a balanced national budget a 

reality. However, when the federal government spends private money it is managing on behalf of 

its citizens, it must replace it. More imponantly, when the federal government spends Tribal and 

individual indian money that it holds in trust their behalf, it must exercise its fiduciary 

responsibility by replacing it. 

Consjstem;y jn fedcml pgljq: 

When the savings and loan institutions across the country made bad investments and lost hundreds 

of billions of dollan of American citizens' money. the federal government did the right thing by 

appropriating enough money to make things right. This is when our nation stood proud behind its 

citizens. It is time for this nation to stand tall again on behalf of its first citizens. l do not know 

how 100ch money it will take to make these account whole but I know that it will be less than 

I 0% of what it took to make the investors of the savings and loans whole. 
48 

Trust Fund Hearing Resources Committee 

II is also critical to rebuild the Trust Fund Management system to a modern state so that funds 

can be managed in an efficient. professional and effective manner. It is my understanding that it 

will take up to $73,000,000 over the next 4 to 5 years in equipment. software and staffing to bring 

the management system up to a reasonable standard. Once the policies and management system is 

in place it will take no more than what is already in place to run a Trust Fund management system 

that we all can trust and count on. 

In conclusion, thank you very much for this opportunity to testify to this very distinguished 

committee. It is gratifying to see Congress stepping forward in an effort to do what is right. I am 

confident that this issue that is so important to so many Indian and Alaska Native people will get 

fair consideration as Congress makes its very important decisions on our nations future through 

its budgeting process. 
49 

- 1-

ALMA UPICKSOUN 

ASSISTANT HOUSE COUNSEL 

ARCTIC SLOPE REGIONAL CORPORATION 

BEFORE mE 

TASK FORCE ON INDIAN TRUST FUNDS 

RESOURCE COMMITTEE 

U.S. HOUSE OF REPRESENTATIVES 

AUGUST 10, 1996 

ANCHORAGE, ALASKA 

Chairman Young, my name is Alma Upicksoun. l am an Inupiat 

Eskimo and a shareholder in Arctic Slope Regional Corporation (ASRC). I 

am an attorney and serve as Assistant House Counsel to ASRC in our 

Anchorage office. 

On behalf of ASRC's shareholders, I want to thank you, Mr. 

Chairman, for establishing this Task Force on Indian Trust Funds. This 

problem has been ignored for too long. It has imposed huge economic and 

social costs on many of the nation's most economically disadvantaged Tribal 

governments and individual Indians. 

As an attorney I am familiar with the legal obligations trustees owe 

their beneficiaries. l am appalled at the historic failure of the BIA, the 
50 

-2-

Department of the Interior and, yes, the Federal government, to address this 

matter. 

I am thankful for the role you and the Resources Committee have 

played in recent years to address this problem. Those of us here today who 

are Alaska Natives are familiar with your resolve to make the Federal 

government fulfill its obligations to our people. The hundreds of thousands of 

our Indian friends in the Lower 48 states will, I predict, soon see this resolve 

in action on the Trust Fund management issues before the Task Force. 

Mr. Chairman, it is my pleasure to introduce to Alaska and to the Task 

Force Eloise Cabell. Ms. Cabell is a very dedicated and distinguished leader 

of the Blackfeet Tribe. She also serves as Project Director of the liM 

Correction and the Recovery Project. 
51 

TESTIMONY BEFORE mE TASK FORCE ON INDIAN TRUST FUNDS 

U.S. HOUSE OF REPRESENTATIVES 

COMMilTEE ON RESOURCES 

ANCHORAGE, ALASKA 

AUGUST 10,1!196 

SUBMITfED BY 

ELOUJSE COBELL, PROJECT DIRECTOR 

liM CORRECTION AND RECOVERY PROJECT 

My name is Elouise Cobell. I am a member of the Blackfeet Tribe and an 11M 

account holder. I am also the Official Representative on Trust Funds for the Blackfeet 

Tribe, Chair of the Special Trus~ee's Advisory Board, former chair of ITMA, the lead 

plaintiff in !he breach of trusr1aw suit filed against Federal officials on behalf of all liM 

account holders, and Projcct Dim:tor of the 11M Corm:tioas and Recovery Project. 

Thank you, Mr. Chairman, for this opportunity to testify before the Task Force. 

have been deeply involved in the trust fund reform effort for many years and in many 

capacities. I therefore want to express my persooaJ appm;ialion to you for establishing this 

Task Force because it promises to be an essential ingredient for a just and final solution to 

over I 00 years of disgraceful behavior by the United Stares Government. As discussed 

below. I believe !hat by taking certain steps, this Task Force, when it completes its task in 

November. will be able to proudly say that it has contributed significantly to the resolution of 

this crisis in !he best interests of the account bolders, the Government and the American 

taxpayers. 

I first became aware of the Interior Department's failure to account for the monies 

belonging to 200 tribes and 300,000 individual Indians about 20 years ago when I began 
52 

-2-

serving as Treasurer for the Blackfeet Tribe. At first, I could not believe this incredible 

gross mismanagement of our monies could really be occurring, much less by the United 

States Government. When I came to understand the scope and depth of the mismanagement, 

I could not believe the Federal government's indifferena. to its massive breach of trust. 

When I raised the issue, the response I received from Federal officials was basically a yawn 

and a statement to the effect that it has been going on for a long time and some day someone 

should do something about ir. 

Finally, in 1991, the Tribes organized ITMA and slowly began to get the spotlight 

focused on this problem. Congress also soua:ht to address the crisis. In a bipartisan effort, 

the late Congressman Synar and his minority counterpan, Congressman Clinger on the 

Government Operations Committee. held a series of hearings and published a damning report 

entitled ''Mispload Trust• . Cona:ressmen Yates and Regula urged the Interior 

Appropriations Committee to press the Interior Department to begin taking corrective action. 

And this Committee, in a bipartisan stand, enacted the 1994 Trust Fund Management Refonn 

Act, thereby leading to the eoacunent of the first signficant legislation on trust funds since 

1938. This landmark. remedial legislation was enacted notwithstanding sc-enuous objections 

of the Secretary of the Interior. 

These efforts over a six year period gave us what I would call a beachhead in the 

fight to correct this problem. While not solving some of the major problems, it created a 

solid foundation from which we could attack the huge issues still remaining. For example, 

the Reform Act created the position of Special Trustee, which, for the first time, put a 

person knowledgeable about trust funds in Interior headquarters directly below the Secretary. 

Congn:ss gave to the Special Trustee the I3Sk. of developing a strategic plan for correcting the 
53 

-3-

gross trust fund mismanagement problems inside Interior. Tiu: Act also brought self· 

determination 10' the truSt fund area, by giving tribes the authority 10 remove their funds from 

trust and mana:e the money themselves. While not all aibes are rady or willing to do so, 

the Act provides a procedure for those tribes !hat do wish 10. Finally, the reconciliation 

ordered by the Appropriations Committees, however flawed it may be, provided a good 

picture of both wlw can and cannot be done through standard accountin& procedures to 

determine how much money tribes and individual Indians bave lost as a result of the Interior 

Deparunent' s gross mismanagement over the years. 

Having established this beachbead, it is now time 10 slay this dragon· once and for all, 

to finally remove this ugly and embarrassing Slain on the RCOTd of the United States 

Government - a Government which monitors financial institutions to insure they meet their 

trust responsibilities to their customers ·· yet is unable to meet tbe most basic trust 

responsibilities when it is serving as trustee. I believe the weapons 10 bring this situation to 

a fair and prompt end are now available. I would like to focus my testimony on the specific 

steps that this Task Force can W.C to accomplish this now realistic: goal. 

I. Appropriations. 

First, I uree this Task Force to vi&orously lobby its colleagues to agree to the Senate 

mark for appropriations to begin fixing the trust fund systems. The President requested $18 

million in new money ro enable the Special Trustee ro prepare his stmegic: plan and begin 

making the needed improvements in tbe trust fund sysr.ems. (The total cost to fix the system 

is estimated at Sl50 million over live years.) Until these syStCmS are fixed, tbe United 

States will incur millions of dollars in liability each year, because there is so muc:h leaka&e in 
-4-

the systems. The Senate mack provided the full S 18 million which to Administration 

requested for FY 97 for improvement initiatives. However, the House provided only $1 

million, which is insufficient to even get started. We need your help to insure that when the 

Interior Appropriations -bill goes to conference, the House recedes to the Senate on this issue. 

It is both the right thing to do and the fiscally responsible thing to do, because it is costing 

the American taxpayers millions a year in the form of the restitution they will have to pay 

the Indian account holders as long as the system remains broken. 

Secondly, it is looking more and more likely that the Government will be funded in 

FY 97 through a continuing resolution. We ask your suppon to insure if Interior is funded 

through a Continuing Resolution, the CR contains the $18 million for the Special Trustee to 

begin fixing the systems. If the FY 96 appropriations is used, the Special Trustee will 

receive only $447,000 and another year will go by without any improvements and with 

continued liability. 

2. The Future 

We understand that some Interior officials have suggested that the trust fund system 

and the repairs should be privatized immediately. This is an unwise proposal. First, earlier 

effons by Interior to hand this problem off to a bank proved unworkable. Secondly, we fear 

that any effon to transfer responsibility now, while the systems are so badly broken, will 

cause enormous confusion and pain and suffering in Indian country. To borrow an analogy 

from the medical field, you do not move a badly injured patient until he has been stabilized. 

Moving the systems while they are still badly broken will, as would be the case in the 

medical situation, simply exacerbate the injuries making it harder to cure the problem. 
55 

-5-

We also fear that moving the system DOW would lead, during the confusion that 

always accompanies such transitions, to the loss of information that is critical to resolving the 

historical liability of the United States. The confusion would provide any pany who has 

been improperly laking advantage of the absence of adequate financial controls, to destroy all 

implicating information. It is our position that DO steps should be taken to move the trust 

fund functions until they are fJXecl. 

However, we also believe that a vigorous discussion needs to take place in regard to 

how the trust funds should be managed once the systems are fiXed. The Special Trustee has 

already begun this discussion by putting on the table the idea of an Indian development bank 

that, while fully retaining the Government's trust responsibility, would manage the trust 

functions in a bank environment and would work with account holders, using non-trust funds, 

to promote economic development on reservations. We therefore ask that the Task Force 

initiate a dialogue with the Indian community on this issue and, without malring any final 

decisions, include in the Task Force report a discussion of the various options that are 

available. Then, when the time comes for the Resources Committee to legislate on the future 

of the trust funds, it will have the work product of the Task Force to guide it. 

Mr. Chairman, by laking the steps suggested above, the Task Force, when it goes out 

of business in November, will be able to proudly say that it has contributed isgnificantly to 

the resolution of this crisis. Tiwlk you for your support and for this opportunity to testify. 
56 

TESTIMONY OF 

ROBERT M. PEREGOY, SENIOR STAFF ATTORNEY 

NATIVE AMERICAN RIGHTS FUND 

PRESENTED TO 

THE HOUSE TASK FORCE ON TRUST FUND MANAGEMENT 

OVERSIGHT HEARING ON 

MANAGEMENT OF INDIAN TRUST FUNDS 

ANCHORAGE, ALASKA 

AUGUST 10, 1996 

I. INTRODUCTION 

Mr. Chairman and Members of the Task Force, I appreciate the opporrunity 

to provide testimony today on this most important matter. My name is Robert 

Peregoy. I am a senior staff attorney with the Native American Rights Fund 

(NARF). I work in our Washington, D.C. office and coordinate NARF's 

Legislative and Administrative Advocacy Component, which is our governmental 

affairs division. I will summarize my written testimony, which I respectfully ask 

be included in the record. 

Mr. Chairman, before I begin my testimony, I want to commend you on 

behalf of the Native American Rights Fund for your wisdom and leadership in 

creating the Task Force on Indian Trust Fund Management. It is an 

understatement to say that the federal government's mismanagement of Indian trust 

funds has reached crisis proponions. Indeed, this monumental debacle continues 

to haunt all of us as a most sorrowful blight on this great Nation's relationship 

with the First Americans. As you know, this crisis adversely impacts over 275 

Indian tribes and more than 300,000 individual Indians who--without mincing 

words--have been ripped off in untold proponions by the very trustee charged by 

law to protect their rights and interests--the United States government. This 

mismanagement has been permitted to continue far too long--and cries out for a 

speedy and effective resolution. That is why we commend you for taking the 

initiative to establish this very imponant Task Force, which can play a key role 

in fashioning a satisfactory resolution to this sordid chapter in Indian-government 

relations. Suffice it to say that your leadership in establishing this Task Force is 

but one more indicia of your track record and commitment to protect and advance 

the fundamental rights and interests of Native Americans. For this, we thank you. 
57 

II. CLASS ACTION LAWSUIT 

As you are aware, in June of this year the Native American Rights Fund and 

other attorneys filed a class action lawsuit on behalf of over 300,000 Indians 

against the federal government to seek redress for the government's breaches of 

trust in mismanaging the Individual Indian Money (liM) accounts held by these 

individuals. By this action, these individuals--the victims of the very government 

that is required by law to protect and advance their interests--hope to compel the 

federal government to honor its word and its legal responsibilities. To this end, 

the law suit has three basic objectives: (I) require the federal government to 

complete an accurate and reliable calculation of the moneys due individual Indian 

trust beneficiaries; (2) require the federal government, panicularly the Depanment 

of Interior, to create an accounting system that is reliable and accurate; and (3) 

require the federal government to restore individual Indian account holders the 

trust funds that the federal government has lost through mismanagement or neglect. 

In this context, we seek to assure that the Special Trustee has all the tools he needs 

to fix the system--and to get the job done right--as Congress mandated when it 

enacted the Trust Fund Management Reform Act of 1994. 

We emphasize that this class action litigation was filed as a last resort. 

As the record overwhelmingly indicates, the federal government and independent 

auditors have repeatedly admitted that the current trust administration and 

management system is hopelessly broken. Numerous repons attesting to this have 

been filed by the executive and legislative branches of government, including the 

General Accounting Office (GAO), Office of Management and Budget (OMB), and 

Inspector General of the Department of the Interior, as well as the House and 

Senate, in many hearing records and repons. Successive Administrations--both 

Republican and Democrat-have recognized that the problems are serious and that 

they constitute gross mismanagement of individual Indian trust funds. In this 

sense, both the executive branch and Congress are equally responsible . 

Notwithstanding, each successive Administration--including the current one--has 

failed to resolve the problem. No Administration has ever come close to asking 

Congress for sufficient funds to fix the system--and Congress has summarily, 

routinely and drastically cut back the Administration's terribly inadequate funding 

requests. To make a long story shon, we are in coun because we have been 

unable to persuade the executive and legislative branches of government to honor 

the United States' solemn trust and legal obligation to over 300,000 individual 

Indian trust beneficiaries. 

2 
58 

I cannot overemphasize the fact that Ms. Cobell and others have attempted 

in good faith to work with Administration officials over the course of the past few 

years to reform the system. Our people have pleaded with these federal officials 

to honor their trust responsibilities. They have repeatedly explained to the 

Secretary of the Interior and his staff that the money of 300,000 Indians continues 

to be lost every single day. These efforts have fallen on deaf ears. Regrettably, 

there was no other choice but to go to court. 

III. SUMMARY OF TRUST FUND ACCOUNTS, TRUST 

RESPONSIBILITY AND BREACHES OF TRUST REGARDING 

liM ACCOUNTS 

The Task Force record contains testimony from the June 18 hearing 

regarding a description of the origin and nature of Indian trust accounts, the 

government's statutory and common law duty to manage these accounts, and the 

nature and effect of the government's breaches of trust. However, the following 

review of these important matters will provide a helpful backdrop and serve the 

interest of continuity: 

There are two major components to the trust funds, tribal trust funds and 

Individual Indian Money (liM) accounts. There are approximately 2,000 tribal 

accounts beneficially owned by more than 275 tribes with an aggregate balance of 

approximately $2.3 billion. 

There are more than 300,000 individual Indian accounts with an aggregate 

reported balance of approximately $450 million. More than $250 million flows 

through these accounts each year. The liM accounts are commingled and invested 

in common. The bulk of the funds held in trust is income derived from individual 

land allotments, including timber, oil and gas, hard rock mineral and surface 

rights. 

As of February 29, 19%, there were 1,033 liM accounts in the Juneau area 

with an aggregate balance of $10,950,953; 136 of these accounts lacked Social 

Security numbers for the trust beneficiaries. Also as of February 29, 1996, there 

were 222 special deposit accounts (temporary holding accounts) in the Juneau area 

with an aggregate balance of $1,056,629. 

In addition to tribal trust funds and liM accounts, there are several smaller 

3 
59 

accounts. For example, the Alaska Native Escrow Account was established to 

escrow income from land that was to be transferred under the Alaska Native 

Claims Settlement Act (ANCSA) to Native corporations, but final transfer was put 

on hold pending the completion of surveys and other processing. While the annual 

aggregate balance in this fund does not exceed $30 million, it is estimated that 

several hundred million dollars have flowed through the trust over the years. 

Federal law imposes trust responsibilities upon executive branch agencies 

and officials in administering Indian assets. The Supreme Court has long held that 

the federal government must discharge its fiduciary duties prudently. In the 

management and administration of Indian property, executive agencies and officials 

are required to exercise due care, and are held to the "most exacting fiduciary 

standards" and "moral obligations of the highest responsibility and trust.· Indian 

trust funds are no exception. 

With particular regard to trust fund management, executive branch agencies 

and officials owe certain legal duties and responsibilities to the account holders as 

trust beneficiaries. 'These include the duty: (a) to maintain adequate books and 

records; (b) to maintain adequate systems and controls to guard against error and 

dishonesty, including an accurate accounts receivable system and separating the 

billing and collection functions; (c) to deposit trust asset receipts and safely and 

soundly invest these funds; (d) to account regularly and accurately to the 

beneficiaries; (e) to distribute the earned income to the proper Indian beneficiaries; 

and (f) to refrain from self-dealing and benefiting from the management of these 

trust funds. 

Because it does not have an adequate accounts receivable system, and 

because so many lease documents are missing, the federal government does not 

know whether lease income has been collected from the lessees, if it has collected 

the correct amounts, or if it has been paid on time. Nor can the government 

determine whether distributions from the trust are made to the proper Indian trust 

beneficiary, or whether the amounts distributed are correct. Part of the problem 

rests with the fact that in 1987 the Department of the Treasury destroyed all of its 

records pertaining to 11M accounts, including canceled government checks. We 

are yet uncertain whether the government continues to destroy liM records on a 

systematic basis as part of its records management policy. As a result of these 

breaches, the federal government in fact has no idea how much liM money it has; 

how much liM money it should have; how much liM money it has lost; or how 

4 
60 

much liM money may be stolen daily. 

The government's trust fund system is in such disarray that the Arthur 

Andersen accounting firm would not even attempt to reconcile the liM accounts 

because federal officials had either willfully destroyed, or never created, the 

crucial documents necessary for a reconciliation. In fact, Arthur Andersen, LLP 

estimated that it would take at least $108 to $281 million just to attempt to 

reconcile the liM accounts for just a twenty year period, and that even then, it 

would likely be of no value in providing the liM account holders with assurance 

about the correctness of their account balances. Indeed, at the hearing before the 

Senate Committee on Indian Affairs on June II , 1996, Special Trustee Homan 

testified that the liM account system was "worse " than the tribal trust accounts. 

Notwithstanding, the Department of the Interior has no plans and has allocated no 

money to conduct an accounting of the liM trust, to determine how much money 

the liM trust beneficiaries have lost and continue to lose each day as a result of 

the government's neglect. 

IV. CONCLUSION AND RECOMMENDATIONS 

As the record amply demonstrates, the trust management system is 

hopelessly broken. According to the Special Trustee, the management system for 

the IIM accounts is in the "worst condition of any of Interior's trust management 

systems. " However, the Special Trustee's hands have been hopelessly tied due to 

the government's failure to provide adequate resources. We respectfully appeal 

to you and the Task Force to remedy this siruation. 

The Special Trustee determined that it would take almost $50 million in FY 

1997 to begin to correct the overall trust management deficiencies. However, the 

Administration requested only $36.3 million in appropriations. The House reduced 

this already inadequate number by nearly 50 percent to $19.126 million, pursuant 

to the Interior appropriations bill passed in June. It is significant to note that the 

Office of Management and Budget stated in a June 12, 1996 letter to House 

Appropriations Committee Chairman Livingston that the President will likely veto 

the House Interior appropriations bill, in part due to the unacceptable level of 

funds appropriated to the Office of Special Trustee . 

We emphasize that the $19.126. House appropriation can do nothin~ to 

rehabilitate the JIM trust management system. An additional $22.3 million for 

5 
61 

FY 1997 is necessary to provide the llM trust with an accounting system. As 

the Special Trustee has testified, this amount will produce within one year--"a 

Chevrolet, not a Cadillac." Without this repair. the govenunent could be paying 

substantially more in restitution for the staggering losses that more than 300,000 

individual Indian trust beneficiaries sustain every single day. 

The Senate Appropriations Committee has included the full amount of 

appropriations requested by the Administration-$36.3 million for the Office of the 

Special Trustee. This includes $13.6 million to commence implementation of the 

strategic plan. As we understand it, this amount will be used primarily to begin 

to upgrade and establish a new IIM accounting system, which is "long overdue." 

While the Senate Appropriations Committee recommendation of $13.6 million is 

a step in the right direction, it remains $8.7 million short of the $22.3 million 

necessary to fix the liM accounting system. 

We hope that the Senate will enact the Appropriations Committee 

recommendation pertaining to the Office of the Special Trustee, to start to provide 

the Special Trustee with the necessary n~sources and tools he needs to begin to 

reform the system. as Congress mandated when it passed the Trust Fund Reform 

Act of 1994. We respectfully ask you and the Task Force to work with the 

House Appropriations Committee and House Conference Managers to urge 

them to recede to and add $8.7 million to the Senate level of $36.3 million for 

the Office of Special Trustee, in order to provide the funding necessary to 

establish an adequate liM accounting system. Should it appear that Interior 

spending will be covered instead by a Continuing Resolution, we likewise ask 

that you urge the Committee to include this amount for program improvement 

initiatives of the Special Trustee. We are well aware of the funding pressures 

to reduce overall spending and to balance spending priorities within each 

appropriation measure. However, there is simply no good reason that the 

Federal government should permit the property and assets of more than 

300,000 individual Indian trust beneficiaries to wither away because of current 

budget deficits. In short, it is in everybody's best interest for the government 

to honor its legal responsibilities and provide the $22.3 million to stop the 

hemorrhaging now. One hundred and fifty-eight years of willful neglect must 

stop! 

As a final note, it is not necessary to complete the strategic plan before the 

liM accounting system is fixed. The strategic plan will address intermediate and 

6 
62 

long-term issues relative to the administration and management of the liM trust 

funds. It is neither prudent nor rational to wait until the strategic plan is 

completed to address the specific needs that have already been clearly identified 

as critical to reduce losses that occur every single day in the administration of the 

liM trust. Every manager and custodian of money, from the sole proprietor of a 

Seven-Eleven to the chief teller of your local credit union, must have a system to 

accoum accurately for funds collected. deposited and disbursed. This is what the 

Special Trustee has proposed to do with the $22.3 million--which is a critical, 

irnmediare foundation for the successful implementation of the strategic plan, as 

it relates to OM trust management. It is imperative to appropriate sufficient funds 

to permit the Special Trustee to begin to establish an adequate accounting system 

so that the government can knowledgeably address its fiduciary responsibilities 

tomorrow, not two or three years from now. Indeed, with an adequate accounting 

system in place. reliable information can be generated that can help determine the 

best strategic alternatives for the administration of liM trust funds so that these 

problems will not recur. 

In closing, we emphasize that an appropnauon of $22.3 million is a 

necessary expenditure for the federal trustee; this wiU begin to end the 

government's continuing breaches of trust and its rapidly mounting liability 

for less than $75 per each of the 300,000 individual Indians who are injured 

each day by the government's continuing neglect. What a pittance to pay for 

the federal trustee to honor its trust responsibility to these 300,000 American 

citizens. 

Fmally, we respectfully submit that it would be wrong for any part of the 

$22.3 million to come from any Indian program. To do so would be unjust and 

inequitable. The federal trustee is directly responsible for the creation and 

continuation of the OM trust management crisis as a result of its total failure to 

administer the trust prudently. This has caused individual Indians to lose untold 

millions of dollars of their money. Accordingly, it is unconscionable to compel 

any Indian to pay for the government's breach of trust. 

Thank you for the opportunity to testify. 

7 
INDIAN TRUST FUND ACCOUNTS 

MANAGEMENT 

TUESDAY, AUGUST 20, 1996 

U.S. HOUSE OF REPRESENTATIVES, TASK FORCE ON INDIAN TRUST FuND MANAGEMENT, COMMITTEE ON RESOURCES 

Scottsdale, AZ. 

The task force met, pursuant to notice, at 9:00 a.m., in the Salt 

River Community Center, 10000 E McDowell, Scottsdale, Arizona, 

Hon. J.D. Hayworth (Chairman of the Task Force) presiding. 

STATEMENT OF HON. J.D. HAYWORTH, A U.S. REPRESENTATIVE FROM ARIZONA; AND CHAIRMAN, TASK FORCE ON INDIAN TRUST FUND MANAGEMENT 

Mr. HAYWORTH. Good morning, ladies and gentlemen. Thanks to 

all of you for attending. Thanks to congressional staff for joining 

us and the ranking member of the Native American and Insular 

Affairs Committee, the delegate from American Samoa, for being here this morning, as today we continue in our series of hearings concerning the management of Indian trust fund accounts by the 

Department of the Interior. 

Earlier this month, the hearing was held in Alaska-in Anchorage, specifically-where the trust fund management problems which Alaska natives have experienced were discussed. Today we 

will focus on the experiences of various other tribes, including our 

host tribe, the Salt River Pima-Maricopa Indian community. Reports of investigations of the management of Native American 

trust fund accounts have revealed a history of waste and corruption unprecedented in the Federal Government. This may be the longest scandal in American history, dating back over a full century-in- deed, a century-and-a-half, some 158 years. Recently, the Arthur 

Andersen Company reported that in trying to reconcile 20 years of 

Native American trust fund management, it could not account for 

$2.4 billion in account transactions. No wonder that in the minds of many, BIA no longer stands for 

"Bureau of Indian Affairs." In the minds of many, it now stands for 

"Billions In Arrears." And from the viewpoint of so many Native 

Americans, "BIA" has come to stand sadly for "Bossing Indians 

Around." 

So for these and many other reasons, this task force was created. 

We want to find out what can be done to straighten out this mess 

once and for all. 

We have an impressive group of witnesses appearing before us 

today. And I would like to ask each witness to limit his or her oral 

(63) 
64 

testimony to about 10 minutes. If we do that, it is my belief that 

we'll be able to hear from everybody and cover everything that 

needs to be said. 

I would also like to announce that anyone who would like to submit testimony can send it to my congressional office, and I will personally see that it gets into our record of these proceedings. 

At this point, it is indeed my honor and privilege to recognize my 

friend and colleague, the delegate from American Samoa, the ranking member of the Native American and Insular Affairs Subcommittee, Eni Faleomavaega, for any comments he might have 

this morning. 

STATEMENT OF BON. ENI FALEOMAVAEGA, A U.S. DELEGATE 

FROM AMERICAN SAMOA 

Mr. FALEOMAVAEGA. Thank you, Mr. Chairman. I certainly would 

like on behalf of the Samoan tribe to express our appreciation for 

your hospitality and for allowing me to be here in this beautiful 

State of Arizona and to thank the chairman of the Pima tribe for 

allowing us to use this beautiful facility for this hearing this morning. 

But before going to my statement, Mr. Chairman, I would like 

to express the regrets of the gentleman from Michigan, Mr. Dale 

Kildee, for not being here. He had an emergency in his district in 

Michigan which is the reason why he was not able to be here. 

And I just want to share with the members of the Indian community how invaluable Mr. Kildee's contributions have been over the 

years, a very quiet man, but certainly, he has done a tremendousbeen a tremendous asset in the many contributions he has made 

when he was the chairman of the Post-Secondary Subcommittee on 

Education and Labor. And over the years, Mr. Kildee has always 

been very helpful in dealing with Native American issues, especially education. 

Mr. Chairman, I, too, would like to thank you for your leadership 

and for having this task force established specifically to address the 

issue of the Indian trust fund management by the Department of 

the Interior and express my gratitude for having such a good list 

of the leadership from across the country among Native American 

tribes to be here this morning to offer their suggestions on how we 

might be able to resolve this very critical issue. 

For purposes of the time, I'm just going to submit my statement 

for the record, Mr. Chairman. But a couple of observations that I 

would like to make for the record. And that is, I'm not going to reiterate again about the sins of the past and the failures of the national government in addressing the most serious issues affecting 

Native American communities throughout our country. 

But it seems to me that not only have we applied a double, but 

it seems to me, not only a triple, but a quadruple standard. It's so 

easy for us to address the issues when Chrysler needed a bail-out, 

when New York City needed a bail-out, when the savings and loans 

fiasco of $150 billion-all of a sudden, we fmd solutions. 

And here, we have been spinning our wheels for the past five 

years now. And we can't even account the fact that this was not 

the fault of the Native American tribes across the country for this 

fiasco that we're now faced with. But for some funding, approxi-
65 

mately $2.4 billion, and here we have to go through the auditing. 

We have expended $21 million for the past four years just to get 

into the accounting aspects of this mess that we're now in. 

I might also observe, Mr. Chairman, that it's not just the Bureau 

of Indian Affairs that is involved in this, it's a mixture of several 

subdivisions within the Department of Interior, the Bureau of Land 

Management, Minerals Subdivision, the Indian Affairs, just a real 

nice mix of a mess. 

And I sincerely hope that in the course of these hearings-and 

you, Mr. Chairman, again, I want to thank you for taking the leadership in this effort, hopefully, that in the spirit of bipartisanship, 

that we will be able to find solutions to this very serious problem. 

Two point four billion dollars, Mr. Chairman, I submit would go 

a long way in helping so many of the tribal needs that we find ourselves in. And I can't as an excuse say that because of restricted 

funds or the limited resources we have, that we are unable to come 

up with some kind of an accounting to the Native American tribes 

throughout the country. It could be more, it could be less, but $2.4 

billion, Mr. Chairman, I submit will be a tremendous help to the 

Indian communities throughout the country. 

And I hope that in the course of this hearing and with your leadership and other members of our Committee, that we will find a 

good solution for this problem. And I thank you for the opportunity 

of my opening statement here this morning. 

[The prepared statement of Mr. Kildee follows:] 

STATEMENT OF HON. DALE KlLDEE, A U.S. REPRESENTATIVE FROM MICHIGAN 

This is the third in our series of oversight hearings on the problem-plagued man- agement of the Indian Trust Funds by the Bureau of Indian Affairs and the Department of the Interior. 

I want to commend Chairman Hayworth for his leadership and dedication to con- tinuing the long process of righting the terrible injustice inflicted on Indian people 

by decades of mismanagement of Indian Trust Funds. It was no surprise to me that 

J.D. would come to Congress and in his first term look to tackle one of the most 

complicated, long standing messes ever created by the Federal Government. There 

is not a lot of glory in trying to clean up the trust funds problems, and I believe 

it speaks volumes that you are committed to doing so regardless. I also want to give 

you my thanks and praise for heading this task force in an open, fair and truly bipartisan manner. During the 103rd Congress, Congress enacted the American Indian Trust Fund 

Management Reform Act of 1994. This Act required that the Secretary give periodic 

account statements to Indian account holders and was intended to give tribes easier access to their funds. The Act drew to a conclusion the 5 year, $21 million reconciliation project being conducted by the BIA and required that each tribe receive a statement on the reconciliation of their accounts. Further, the Act established the 

position of Special Trustee for Indian Trust Funds and required that he develop a comprehensive plan to better manage the funds under the Department's control. 

The reconciliation reports have gone out to tribes and for the most part we are hearing that they are incomplete and in some instances not much help at all to the 

tribes. I look forward to hearing from tribes as to what they need from BIA so they can better decide future management of their accounts. 

We in Congress are sometimes criticized for traveling in the line of business, but 

I believe it is extremely important to conduct hearings such as this where the people 

most affected live. We are able to gather so much useful information by coming here 

to listen to so many who might not be able to travel to Washington, DC, to testify. 

I thank all of you for being here this morning. 

Mr. HAYWORTH. And I thank my colleague from American Samoa 

for his remarks, and I would endorse them fully as we try to get 
66 

to the bottom of what is, we can all agree, a serious, serious problem and an out-and-out mess. 

With that in mind, then, we would like to hear from our witnesses. We will begin with the director of the Office of Trust Fund 

Management within the Department of Interior, Ms. Donna Erwin. 

STATEMENT OF DONNA ERWIN, Dm.ECTOR, OFFICE OF TRUST 

FUND MANAGEMENT 

Ms. ERWIN. Thank you, Mr. Chairman. I really appreciate the opportunity to present testimony today on the Indian trust funds 

management. AB you're aware, the Office of Trust Fund Management manages approximately $422 million for 50 different tribes in 

the Phoenix area and $83 million for approximately 38,000 individual Indian accounts that are Arizona residents. 

You are aware that we have had many, many reports about the 

past problems that have occurred. When the special trustee was 

appointed in September of 1995, he began an assessment to look 

at the policies and the procedures and the systems and how do we 

correct these and what we need to do to move forward. He included 

in those the past 20-year tribal agreed-upon procedures reports 

that you referred to. 

We also included the August of 1995 Tiger team report, and that 

is a group that was put together to look at the liM systems 

throughout the Department that's headed by an MMS employee 

and that is also available in addition to those various GAO reports. 

We did interviews with tribes, with account holders, and talked to 

people who were professionals in the trust management field. 

And we have since then put together a conceptual strategic plan. 

And all of these reports were included in that strategic plan. But 

what all of these, including the special trustee's conceptual report, confirms is that the criteria that's outlined in the 1994 Trust Reform Act cannot be met currently. 

There are things that it requires, such as timely and accurate accounting for balances, accurate and timely reports to account holders, and audits under generally accepted audit standards, and further reconciliation efforts that due to the records unavailability are 

not able to be accomplished at this time. 

While significant improvements have been made at OTFM-at 

this point, we need to clarify, because there's some confusion that 

we part of OST -the Office of Trust Fund Management and the 

field staff which are the only units that currently report to the special trustee. Realty leasing is still part of the BIA, even though the 

special trustee is responsible for monitoring and correcting and 

doing reforms of the entire trust program. 

Some of the things that have been accomplished during the last 

few years are that we are online directly to the Treasury now, so 

that we now perform daily reconciliations of cash, monthly reconciliations of assets. We have a system that actually tells us when 

securities are maturing and when cash is due on any of the investments. 

We have a state-of-the-art trust system for the tribal accounts 

and all investments, and we have made additions to staff and reorganized the OTFM staff, to better enable us to perform the fiduciary duties. We have eliminated overdrafts in all the tribal ac-
67 

counts from 1993 forward, there are no recurring overdrafts. We 

have reduced in half the number of overdrafts in the liM accounts. 

We have also been out this year doing five consultation meetings with liM account holders to hear what their problems are. We have 

looked geographically where these people are located, and how dispersed they are and how can we better serve these people. We are 

also preparing work plans and target dates for the liM data cleanup. 

You've received the special trustee's strategic plan, and there's 

nine initiatives within this designed to rectify problems and bring the trust accounts up to commercial standards. And these are important enough that I would like to read those directly. One is a trust resource asset management delivery system. This 

will involve obtaining new trust resource asset management and 

delivery systems for asset leasing, contracting, lending, buying, and 

selling, together with standardized and/or integrated asset management. The system must be able to tie to and track from the landownership records. 

Number two is an accounts receivable data and billing system that uses lease contract and landownership information. Number 

three is a trust depository for payments and delivery system for individual Indian money, the liM account system I've referred to. 

This will entail purchasing a trust depository, payments, and other 

financial services and accounting and statement system. Number four is a land records and title recordation and certification system. Number five is a general ledger and general accounting system. And number six is a technology service center, a 

data center, that's dedicated to the trust resources and trust funds 

management. 

Number seven is a national archives and records center. And this 

will involve obtaining and centralizing a modem, national archives 

and records center for trust resource, asset, and funds records storage and retrieval. Number eight is a risk management control system, an internal audit program. Number nine is an independent institutional structure. And this 

will involve consolidating all the trust resource trust funds and 

landownership and records management into a single, independent institutional unit. 

AI3 stated above, the conceptual strategic plan is completed, and 

we have done the conceptual. Now what we need to do is go into 

a user's need assessment, know what the users need, what's out 

there, and that's the requirement analysis. In the 1997 President's 

budget, we requested a million dollars for that. 

This requires an outside contractor. And the reason for that is 

that the staff in current staffing at OTFM is for the day-to-day op- erations, not for the cleanup, not for the evaluations. So everyone that's there is to be able to proceed on a day-to-day basis and continue the current operations. 

It's going to take about 90 to 120 days to complete the requirements analysis and the user's need assessment once funding is received. There are many things, though, that can be done in the 

meantime. 

For instance, the liM system, the liM accounting system that we 

referred to, that is a project that can be accomplished during the 
68 

user's need assessment and the requirements analysis, and it can 

be interfaced into the overall conceptual plan and the overall conceptual systems. 

The 1997 President's budget request is for $36.3 million, which 

is a $20 million increase over the 1996 budget. And this is to be 

used for correcting liM systems--again, it's a very crucial process. 

I would like to divert for a second, because one of the things the 

committee had asked about was how could a tribe take over the 

management of their money, the management of their liM accounts. And you inquired as to how can that be accomplished. 

One of the things is that Title III of the Trust Reform Act allows 

the tribes to remove their judgment funds money. And at that 

point, the government would have no further liability. They can 

take this money out to private institutions to be managed. There 

are regulations that are being published currently that outline the 

steps to be able to accomplish that. 

There's another, self-governance. They can remove funds under 

self-governance, and that means they would take over the programs that the Office of Trust Fund Management or the Bureau 

is performing, but that the liability still would reside with the Secretary, which means that we would still need to be the monitoring 

and the auditing side and would be provided by the government. Individuals, if they are a supervised account, cannot remove 

their money right now. The supervised account means one of two 

things: it's either a minor that has not reached age of majority, or 

it's non compos mentis. Anyone else that has an account-as we're 

going out in the consultation meetings, we're saying, "If you have 

an account, if you do not reside in one of those two categories, then 

you need to be asking why." That money should be released to the 

individual. 

As we said, the liM consultations have been going on. We feel 

Like they have been very successful. We have got some very good input from the individuals around the country. One of those was 

held recently here in Phoenix. 

But in closing, the one thing that I want everyone to understand 

is, the past is going to continue to be a challenge, not only to the 

administration, but to Congress, and to the account holders. But the enactment of the President's 1997 budget request would 

represent a substantial step to ensure that Indian trust reform efforts are a top priority and implemented in a manner that will ensure that the fiduciary responsibilities of the Federal Government 

are met as they should be. This concludes my statement. I'll be 

happy to answer any questions you might have. 

[The prepared statement of Ms. Erwin may be found at end of 

hearing.] 

Mr. HAYWORTH. Director Erwin, we thank you for your statement. And we appreciate the efforts you have made to try and 

bring some order to the situation we now find. 

Just a little background, first of all, on the individual accounts. 

Geographically, are we talking coast-to-coast and beyond? Or if 

there was a way to break this down geographically, where can the 

preponderance of these accounts be found? Is it here in the Southwest, or is it just completely coast-to-coast? 
69 

Ms. ERWIN. A13 we pointed out in some of the original meetings, 

we became a very mobile society. So historically, they have been 

serviced out of agency and area offices. But through the mobility, 

everyone generation to generation, they're now found coast-to-coast, 

from Hawaii. When we do maps they're very informative to find out 

where the people are located and where they're actually serviced. 

Mr. HAYWORTH. When will these regulations that you mentioned, 

allowing tribes to take over their own accounts, be put into effect? 

Ms. ERWIN. These regulations have been published for comment, 

and we have already had a comment period. And they will be published very shortly. But we have not restricted any tribe from removing funds. They're allowed to remove their money at any time, 

even though these are still proposed regulations. 

Mr. HAYWORTH. So right now, if a tribe wanted to go ahead and 

take its funds, it would be free to do so? 

Ms. ERWIN. Right. Several things should be brought up with this, 

one, there's several requirements in the regulations, it states that 

the tribe understands that it's not only removing funds but also the 

government liability and we require this be done by resolution. 

Their constitution has to allow the governing body to remove the 

funds, that there's no further liability on the government's part. 

They need to acknowledge that. We need to see that they have 

signed agreements with their fund managers and that they will 

continue to utilize the funds in the manner they were appropriated. 

Mr. HAYWORTH. You mentioned some different costs, projections; 

for example, I believe bringing in an outside contractor here initially over 90 to 120 days at a cost of $1 million. Subsequently, the 

Administration is asking for in the next fiscal year a $20 million 

increase to $36.3 million to begin a process of trying to bring order 

to the situation we find now. 

Let me see if we can break this down a little more specifically, 

Director Erwin. How much will it cost overall to first of all set up 

an asset management system? 

Ms. ERWIN. The asset management system is not part of the 

1997 budget request-it's only the liM system module, unfortunately. The strategic plan that I referred to-and Mr. Homan's conceptual plan-has the breakdown of the conversion and the actual 

system costs-what is also involved here is bringing telecommunications equipment up to date, bringing all of the communications 

and equipment that have over the years not been properly funded 

up to the standards. 

You cannot bring the best bankers in the world in to run current 

systems and operate the office efficiently the way it should be operated. So it takes a lot to bring everything up to date so they can 

support these systems. 

Mr. HAYWORTH. With that in mind, do you know a figure, or has 

there been a breakdown for this? 

Ms. ERWIN. There is a breakdown. I would be glad to supply that 

to you. I do not have it with me today. But when we went to the 

Appropriations Committee, we said, "This is how we will start that 

process. This is how we will use that additional $20 million, which 

includes some of the systems that can be put in place immediately." 
70 

It's a stopgap so that immediate improvements can happen and 

reforms that would reduce any continuing liability. And then with 

the study completed in March or April of next year, we will be able 

then to give exact projections for how we will implement, target 

dates and how much money we will need in the future. 

Mr. HAYWORTH. So really, in terms of specific numbers, whether 

for an asset management system, the accounts receivable system, 

the land records system, the general accounting system, the audit 

system, and all the other things that would be involved in this, specific figures have been formulated, and they right now reside with 

the appropriations request? 

Ms. ERWIN. Correct. 

Mr. HAYWORTH. And what we would very much appreciate, if you 

don't have them here with you today, is that this task force receive 

those specific sums and amounts in writing. And I believe the customary period just to make sure we get this done, taking into account travel back to Albuquerque and so forth, if we could make 

sure that information is to the task force within five business days, 

that would be greatly appreciated. 

Let me return to a broader philosophical question. And I understand the challenges you face here in the Office of Trust Fund 

Management. You mentioned the fact that an outside contractor 

should be brought in at a cost of $1 million over a certain period 

of time to begin the study. Indeed, the government turned to Arthur Andersen to audit the current-and to check on the current 

problems we now have. 

Going to outside sources, it seems to beg the question, could this 

job be done more effectively in contracting out to private entities, 

still mindful of the Federal Government's Constitutional role to the 

first Americans; would it be more cost effective and more practical 

to follow the procedures that seem to be indicated at least partly 

here, reflexively, going to an outside contractor, using Arthur Andersen and others, would it be wise, frugal, and a good stewardship 

of the taxpayers' money to search for outside contractors to take on 

this very significant role? 

Ms. ERWIN. I think that will be considered in the overall conceptual plan, what can be privatized and what should not be 

privatized. One thing you need to remember, and I have more 

years than I want to talk about, 29 years of private trust sector experience. You're creating somewhat of a liability for that entity you 

transfer accounts to, because you do not have accurate account balances. 

You have 300,000 individual accounts right now that need to be 

reduced. There's some very small amounts, and that needs to be resolved. That's one of the questions we have been asking at the IIM 

consultation meetings, "What do we do with these small amounts?" 

And there's a myriad of suggestions. But people do not want checks 

for two or three cents. They don't get cashed. And in 12 months, they get posted right back to that account 

again. And so we have to resolve some of these problems. There are 

some overdrafts. There are 50,000 lost account holders that we do 

not have their address right now. They have moved. Maybe the 

grandmother had the account, grandchildren never knew that she 
71 

had an account, and she passed away, so no one knows that this 

account is even existing. And we have some large overdrafts in house accounts. So we 

need that data cleanup and the requirements analysis badly to be 

able to resolve some of these problems. Mr. HAYWORTH. In terms of overdrafts, is it possible that a tribe 

could owe the BIA funds? And if so, how might this happen? Ms. ERWIN. Yes, it is possible. There could be incorrect postings. And I believe when you talk about the $2.4 billion, it should be 

brought up that those are not missing funds. $1.1 billion of those 

are receipts that are residing in the tribes' accounts currently. There was just not the proper audit to make sure they were in the 

proper accounts, or how did they get into the accounts. 

But they are in the tribal accounts. They are being invested. 

There's about $500 million of that that's transfers from one tribal 

account into another, same tribe within the tribe's checking or savings type accounts. So that's about half a billion there. And then 

there's about $800 million in disbursements. And those are the 

ones that are of a large concern, obviously. Mr. HAYWORTH. We have been talking about the $2.4 billion and 

whatever allocation of whatever problems. There have been those 

who have come to see us, however, who maintain that this is simply the tip of the iceberg, that there may be more significant prob- lems and a far greater sum. What do you think of those assessments? 

Ms. ERWIN. That is possible. The problem with that is, due to the 

funding timeframes, all of that was done during the past reconciliations for lease that was returned to fill-the-gap, was we know the 

money was received. Does it correspond with the lease? That was 

not accomplished. As has been pointed out in testimony, there is 

not an accounts receivable-a comprehensive accounts receivable 

system for money that's due for those leases across the country. Mr. HAYWORTH. Thank you. 

Let me turn to my colleague from American Samoa. 

Mr. FALEOMAVAEGA. Thank you. Thank you, Ms. Erwin. We had the task force hearing in Alaska. 

And one of the concerns that the tribes had indicated at that hearing was the office did not notify them that the interest collected 

and the funding that was to be returned are taxable. Do you think 

that the tribes deserve that they should have this interest taxed? 

I mean, do you think maybe the Federal Government could at 

least give them that courtesy, they don't have to pay taxes for this 

interest? After all, it wasn't their fault that they got into this mess. 

Mr. ERWIN. I think that's an IRS question. IRS-there are regu- lations. They (IRS) recently this year published a new booklet on 

the taxation of Indian moneys. And the funds you are referring to 

in Alaska was called "IMPL," Indian moneys proceeds of labor 

funds. And this was back in 1985. 

The Bureau has formulated in the regulations as to how that's 

disbursed. We have since the Alaska hearing been investigating each of the areas, asking them, "Please tell by survey, "Did you submit 1099s on this or not?" And that's the question we are currently in the courts with the IRS on. 
72 

We do issue 1099s. On the customer statements, we list this 

money, "Here is your taxable income for this year. This will be reported to IRS." That was a past practice of an escrow account. 

Mr. FALEOMAVAEGA. The point here is that you do notify the 

tribes properly as to what portion of the money that's being returned that is taxable, or the interest? 

Ms. ERWIN. Yes, and that was the individual accounts that we 

were referring to. 

Mr. FALEOMAVAEGA. Is there any provision under the current law 

of the 1994 law that was passed concerning the establishment of 

the Office of Trust Fund Management-are there any provisions of 

the law that you think that ought to be amended or changed to improvement it, not only the functions of your office, but just a better 

way to streamline the operations, besides the funding that is being requested, of course? 

Ms. ERWIN. I think that's one of the things we're also going to 

look into in the requirement analysis. We are constantly streamlining, constantly finding, as we automate, more systems, better ways, 

more efficient ways. We're looking at the lock box situation. One 

of our problems is that we have been sending monthly statements 

and we're getting a lot of complaints about sending statements on 

small amounts. 

Under the current Trust Reform Act, we're required to send 

quarterly statements to all of the liM account holders. And they're saying, "For four or five cents, until we resolve this, can you send 

this only annually?" So that will be something we will be suggest- ing as a change to the Reform Act. 

Mr. FALEOMAVAEGA. It's my understanding that as of this time, 

approximately 86 percent of the accounts are somewhat being- that you've been able to accomplish the task up to 86 percent that 

you've been able to account for? Am I correct in my background reading of this? 

Ms. ERWIN. That's the past reconciliation. Those agreed upon procedure reports that Arthur Andersen presented, yes, that is a 

correct figure. And there was those amounts that could not be reconciled. You could not find proper documentation. And that is the 

$2.4 billion that we keep hearing about. We did not find all the 

proper documentation to support all of those transactions. 

Mr. FALEOMAVAEGA. So the 86 percent that is now being able to 

be accountable, that's the $2.4 billion that we're talking about, or 

is that more or less--

Ms. ERWIN. Yes. The $2.4 is the 15 or 14 percent difference that 

could not be audited in the reconciliation. And that's only tribal accounts. Bear in mind, that's only tribal accounts and only for a 20-

year period. 

Mr. FALEOMAVAEGA. The Chairman had indicated earlier about 

the fact that it's good that we also privatize or allow the private 

sector to do the accounting. My understanding from the fact that 

when we assigned Arthur Andersen to do the accounting, they couldn't do any accounting, because the records are so messed up. And here, we ended up paying them for doing this. 

Now, couldn't the office perhaps just say, "There's no sense hiring somebody in the private sector, pay them a million dollars just 
73 

to tell us what we already know"? The fact is, how can they possibly do any accounting, when there are no records to do it with? 

Ms. ERWIN. What we're looking for now is the requirements analysis and user input to be able to go forward in developing the proper systems, not to do the accounting for the past reconciliation. 

You're correct. There was a massive number of records that were 

missing. And as you noticed in the reform plan, one of the things 

that was outlined in one of the items in the initiatives, is a national archives, an Indian national archives center, so all trust 

records are centralized, and you know where they are. 

Mr. FALEOMAVAEGA. Is there anything that you feel that is most 

critical at this point in time that the Committee should absolutely 

address by way of anything in the statutes or any way by way of 

regulations that we ought to pursue with due diligence to make 

sure that you've got all the tools, that you have every means available at your disposal to make sure that you don't get obstructionists and anybody else that will be as a barrier to prevent you from 

doing your job? 

Ms. ERWIN. I think the appropriations for 1997 will be a big help 

on starting us on the right track and moving forward. 

Mr. FALEOMAVAEGA. And do you feel that the responses from the 

Indian tribes and your consultations have been positive? 

Ms. ERWIN. Yes, they have been very positive. I mean, there's 

past problems, I agree, but they have been very informative, and 

we have been very pleased with the results of how we should move 

forward. And they have suggested things including different hours 

as in banking hours, Saturday meetings. And so it has been very 

enlightening for us. 

Mr. FALEOMAVAEGA. And I would like to invite you, Director 

Erwin, please do feel free also to ask any of the members of the 

Committee, also, that we would love to work with you closely to 

make sure that we pursue this at all costs. And thank you for 

being here, and thank the Chairman for this hearing. 

Mr. HAYWORTH. I thank my colleague from American Samoa. I 

also thank you, Director Erwin, for your testimony. One final question, or perhaps it's really more of an observation. 

Even as you petition for increased funding here--and I realize 

this is not your role with the Secretary of Interior, and perhaps it's 

something I can better convey to him face-to-face--one of the concerns that I have as a Member of Congress is that historically, putting the Department of Interior, for lack of a better term, in charge 

of the affairs of living, breathing human beings who are citizens 

not only of their respective sovereign nations but also citizens of 

the United States, causes me great concern, to the extent that 

while we all want to preserve our natural resources, as I have expressed and as I have heard often, should we not hold human 

beings in greater esteem and the needs and the concerns and the 

problems they face? 

Should we not hold human beings in higher esteem than rocks 

and trees and critters? I mean, we all want to preserve our ecology. 

We all want to preserve our environment. But one thing that I will 

address personally with the Secretary in planning for the budget 

of the overall Interior Department, I would trust that he would be 
74 

a good steward of those funds and place more funding into these 

different endeavors. 

Rather than asking to generate new funds and additional funds, 

I would hope that he would take a look-and I would trust that in 

the reports that you are making to him, even recognizing that it 

is not your role to define policy, that certain points would be made 

that perhaps with the billions of dollars already allocated to the 

Department of Interior, more precedence could be given to the 

needs of humans and the very real crisis we face here. 

And with that in mind, again, I thank you very much for your testimony, Director Erwin, and appreciate the fact that we'll be 

working together in the coming days to try and reconcile this prob- lem. Thank you, ma'am, very much. 

Ms. ERWIN. Thank you. We appreciate all your efforts. 

Mr. HAYWORTH. Thank you. 

Our next panel, we would like to welcome. In fact, we'll receive 

a welcome from one of the panelists, given the protocol that goes 

on. 

Ivan Makil, who is president of the Salt River Pima Indian community; Ronnie Lupe, chairman of the White Mountain Apache Tribal Council; and our friend, Albert Hale, president of the Navajo Nation, are here. And gentlemen, we would ask you to come front 

and center now. And we would appreciate hearing from all of you. It's so good to see my friends and constituents here today to testify. And in the sporting vernacular, Ivan, we often talk about the 

home field advantage. With that in mind, since you've been so gra- cious as to open these facilities to us for this hearing, I would ask 

you to begin our time together on this panel. 

STATEMENT OF IVAN MAKIL, PRESIDENT, SALT RIVER INDIAN 

TRIBE 

Mr. MAKIL. Thank you, Congressman. First of all, welcome back 

to Arizona. You've been here for a few days or weeks, I guess, enjoying the nice weather. And we're especially pleased to have you here in Salt River, where a lot of people don't realize it, but it is 

10 degrees cooler than in the city, believe me. 

Mr. HAYWORTH. Absolutely. Mr. MAKIL. Although sometimes, it's warmer than in the city. 

Mr. HAYWORTH. Well, we always appreciate the warm welcome, 

Mr. President. 

Mr. MAKIL. And we're also glad that you chose to have the hearing here today. We're glad that we can provide the facility to have 

it here. And Mr. Faleomavaega-I'll try to get that right-it really is a pleasure to have you here and also to have the opportunity to 

personally thank you for the work that you've done in support of 

our issues across the nation. 

Tribes have been in need of it for some time, not people that just understand our issues. And for both of you to be here, both of you gentlemen here actively advocating on our behalf, I thank you for 

that, because that is something that hasn't been in the past. And therefore, issues such as we're about to deal with today can 

occur and will continue to occur without people like yourselves advocating on our behalf. 
75 

So without taking a whole lot more time, I just wanted to thank 

you and welcome all of you here, as well as the distinguished other 

panel members here, Mr. Lupe, Mr. Hale, and all the other tribal 

leaders that are here and guests. And so we thank you all for coming here today, and we hope you will be enlightened even more so 

than I know you already are by a lot of the information that will 

be presented to you. And without anything further, I'll get right to 

the testimony. 

I would like to submit for the record a formal written testimony 

to the task force. And I will just try to abbreviate those comments 

and summarize them. And I would like to really get to some issues 

that I think are of major concern to everyone here. And those are 

some thoughts about some resolutions to this issue. 

It has been several years now since legislation was passed-at 

least I know the six years that I've been involved in this issuethat this problem has been worked on. And there was a plan developed after the results were looked at, or a plan developed to look 

at this whole issue. Results were turned out by Arthur Andersen. 

And it was an atrocity. 

The results only confirmed what the tribal people always believed. And we had to go through a very costly process of proving 

what we already knew. And that's unfortunate. It's unfortunate, 

because those are a significant amount of dollars that could have 

been used and been helpful in a lot of other areas. 

But nonetheless, what the results produced was an opportunity 

for a special trustee to have and develop a plan. Now, he was given 

one year-Mr. Horn was given a year to come up with the plan. 

And within about nine months, he came up with a plan. And I was 

particularly impressed with the plan he developed. And I was really impressed with his commitment to the whole issue once he understood the issue. 

This strategic plan or conceptual strategic plan that he developed 

is a plan that is a start to beginning to understand some of what 

needs to be resolved in this issue. This plan, if initiated, will, I believe, begin to bring about not only solutions within the Department of Interior itself that need to be corrected, but also in terms 

of resolutions with tribes, which is-you know, if you think about 

the $2.4 billion that we keep talking about-and as you've already 

stated several times, it's only the tip of the iceberg. 

We don't know what really is out there with those other 300,000 

other issues that are hanging out there. We don't know what the 

cost of those might be. When this plan was developed, it was going 

to cost about $2 million to implement. 

And many of us that were-let me back up a little bit. I was 

asked to serve on an advisory board to the special trustee. And as 

tribal leaders, many of us really felt comfortable with the creation 

of this advisory board, because it allowed for tribal input. 

It allowed the voice of our people to be involved in this process, 

to have the ear of the special trustee, so that the issues or the solutions that could be developed would be real solutions, not what has 

happened in the past, where an agency develops a solution without 

good input from tribes. It is very important, and I think it's key 

in the resolution of this issue, because the potential liability that 
76 

the Federal Government has in these issues, I believe, is tremendous. We have no idea what that might be. And we won't know until-

! guess we have to get into court to get this issue resolved. So unfortunately, this $2 million that could have been reprogrammed from somewhere within the Department of Interior was not done. 

When the special trustee asked the Secretary to forward us money that could be located somewhere in the Department of Interior's 

$12 billion budget, the_y couldn't fmd $2 million. 

It seems that this $2 million to resolve a potential-not just a 

potential liability in terms of trust, but a potential-not even a po- tential-a legal liability, a legal financial liability that the Department will have that the Federal Government will have to tribes, to 

Indian people, could be so much more than $2 million. It could be 

so much more than even the $12 billion budget that it's in. 

But we can't fmd $2 million. But in the same breath, we can find 

$4 million in emergency money to fix canals, and we can propose $100 million to buy land in the Everglades. Now, that really concerns us a great deal, because we're continuing to not deal with the 

problem that needs to be resolved. 

We have to face this problem. We have to take it on. After 150 

years, we finally have someone, a special trustee, that understands 

and knows that he has a fiduciary responsibility to tribes, to Indian 

people. And that must remain. He understands what it means to 

have that fiduciary responsibility. And now, he's being subdued. 

He's being, in effect, muzzled. That can't continue if this problem is going to be resolved. 

One of the things that we know and has concerned us a great deal is the fact that while Arthur Andersen has identified $2.4 billion, that in the same breath, the Department of the Interior is 

saying that-it's almost as if they're refusing to look at the reality of this problem. 

What we're told is that there are techniques of economic modeling that make it feasible to produce valid estimates of the liability that exists and that it can hold up in court. In other words, what 

I'm saying is that a model can be created that can help us understand what that liability might be, but no one really wants to look 

at that. 

And that's what's important, because once the Federal Govern- ment then begins to understand-really and truly understandwhat the potential liability is, will they get serious about resolving the problem. Because the liability, once it goes to court, can be 

much greater than that. 

Let me get right to some suggested or proposed resolutions of 

some of these issues. One of the things as part of this proposed pro- gram-and there are several areas like that need to be dealt with. 

Not only is it in the issues of the trust fund records, but there's 

one other issue here that has been overlooked. 

And really-it really goes to the heart of how you distribute 

funds that come in from leases to the individuals, particularly to 

where tribes have a lot of lands-and that is in the records, allotted lands and how they're handled. 

Let me give you a quick example. I'll try to make this short. For 

instance, here in Salt River, we have agricultural leases. And we 
77 

have allotted lands. So we have a 10-acre parcel, for instance, that 

may have originally started with one owner when the Federal lot 

map was created. It started with one owner. 

We have situations where now and so do many other tribes, 

where that 10 acres might be owned by 300 members. And over 

time, what has happened and what the Federal Government has 

not provided for is a system by which to deal with that accurately. 

So what happens is, over the years, we lose track of all these heirs. 

And so one of the places where some of these dollars get lost is 

in trying to find these people. They can't contact them, or if the 

probate system has not been completed, which-and there will be 

people that will tell you, as did here in Phoenix earlier this summer, they have been waiting 10 years for a probate to settle. And 

that's not unusual. 

And so what happens to the money in the meantime? Well, it 

goes into the trust fund. And guess where that trust fund is? Federal Government. OK? 

One of the things that could be done to deal with some of these 

issues is that if for fiscal year 1997, 1998, and 1999, an amount 

equal to one-half of 1 percent were taken from every line item 

within the Department of Interior budget and if it were transferred 

to the trust system, it's estimated that could raise about $60 million a year, which would be enough to correct some of the problems. 

At least that's according to the budget that was created by the special trustee. Half of 1 percent of every line item. 

I mean, I don't think any department is going to fall apart losing 

1 percent of their budget or half of 1 percent. Also, if we could 

amend the Reform Act to convert the Office of Special Trustee and 

the advisory board into a control board, it would be similar to what 

Congress did when it created or it concluded that the government 

of the District of Columbia was incapable of reforming itself, and 

they created the system. 

So it's not an unusual system. The trustee and the advisory board need to have some authority to be able to resolve some of 

these problems and to really bring in the issues that are brought 

about from tribes, because the tribes and the individual Indian people are really the ones that we have to make these settlements 

with. 

The other thing, third would be to give the special trustee the 

independent authority to file suit in Federal court when it would 

be necessary to stop breaches of trust or prevent violations of the 

Reform Act. And all that is to be able to allow the trustee to intervene on the side of the account holders to really act as a trustee. 

And I wanted to also deal with an issue that I thought I heard 

being raised earlier in the prior discussion, and that is that it was 

talked about privatizing this process. I think it's also important to 

make sure that we don't remove the system from the Department 

of Interior, and let me just say for this reason. 

It should not be moved from Department of Interior until we fix 

it, because as it has already been stated, we can give them to a 

third party, but there's liabilities that go along with it. We need 

to resolve or at least come to some sort of agreement about what 

might possibly be a resolution of this before we can pass it somewhere else to be maintained. 
78 

But there are so many small things that are broken and that 

need to be fixed that it would take a long time. And these recommendations I'm making are only a small part, but at least 

they're a beginning to the resolution of this major issue that we 

have today. And I thank you. 

[The prepared statement of Mr. Makil may be found at end of 

hearing.] 

Mr. HAYWORTH. Ivan, we thank you very much for not only offering testimony but possible solutions. And we'll revisit that with 

questions in just a moment. 

Chairman Lupe, you share your thoughts with us, please, sir. 

Mr. Chairman, I'm sorry. Why don't we move the microphones 

over? Ivan, if we can put you to work as a sound technician, since 

you've already been a very gracious host. And I think that will help 

everybody out. And we should pause also to ask my former colleagues in radio if they have their microphones where they want 

them. 

Mr. Chairman, I always look out for broadcasters, having come 

from that profession. With that in mind, I believe everyone's ready 

now. And Mr. Chairman, I'm happy to hear your testimony. 

STATEMENT OF RONNIE LUPE, CHAIRMAN, WHITE MOUNTAIN 

APACHE TRIBAL COUNCIL 

Mr. LUPE. Congressman, I'm also happy to see you again. You 

have done some great job for us on my reservation, other issues 

and concerns that we have for our people on White Mount Apache reservation. I want to thank you for that. That's aside from the 

present issue that we are addressing today. 

I'm pleased today to testify before this task force committee created by Representative Don Young. The thought behind the creation of the task force is one of a big question. I've seen so many task forces come and go created by Congress or whoever in reference to Indian reservations or Indian concern, Indians collectively across the United States. 

And we seem to be on the verge of this task force disappearing, and that concerns me a little bit, due to the fact that the funds 

were withdrawn from this trust task force recently by the Interior 

Department. So here today, gone tomorrow. Again, it kind of worries me. I've seen so many of those. 

The efforts by Congress I'm sure is quite sincere to identify some 

lost money that once belonged to Indian people. But the effort 

doesn't seem to really become solid to me, whereby it seems to be 

disintegrating, bureaucracy, other red tape, other political concerns, both parties, Democrat, Republican, committees. Today, I'm 

a little bit at a loss as to the issues at hand. 

Granted, Congressman, you were one of the key people to identify that money was gone rightfully belonging to our people. We 

have a concern from the White Mountain Apache Tribe, considering 

the fact that we have resources which brings in quite a bit of 

money to the tribe since back in 1871. Our resources have been managed by the Interior Department, generated income, which was, I suppose, used by the Bureau of Indian Affairs agency on our reservation without checking with the 

owner, the White Mountain Apache Tribe. Several of these are 
79 

identified in my statement presented to you, and they are quite a 

concern to us. 

We identified certain money recently, which is $22 million in a 

trust fund, which is we call 22H. That concerns only mandated by the statute up to 1946, but there are positions beyond 1946 that 

are really unaccounted for. 

Where lies again my concern with my colleagues here making 

statements referenced to Andersen, the lawsuit that has been initiated by NARF regarding the Indian Trust Fund Management Reform Act of 1994, NARF reports that the Department of Interior 

has obstructed the special trustee for American Indians from implementing and enforcing its Trust Fund Management Reform Act. That disturbs me quite a bit, that the trustee mandate was deliberately sabotaged by the Department of the Interior. Department of the Interior returned, as I understand it, $24 million of unspent funds in 1995, which could have been reprogrammed with the ap- proval of the congressional committee and applied to the work of 

the special trustee, Andersen. 

The Department of the Interior had refused to request adequate funds for the work of the special trustee mandated by 1994 Act and 

has prevented the special trustee from preparing the strategic plan mandated by the 1994 Act, which is quite a concern to our people 

on our reservation. , Again, I've heard solutions, conclusions, and complete fix. These 

are all kind and good gestures and words, but the substance does 

not seem to exist as how to define that. The solution that I would 

suggest, of course, to take the necessary step to provide a special 

trustee the tools and resources he needs to fix the system and 

achieve justice for Indian people. 

I urge Congress to amend the Act as necessary to ensure that the 

trustee is armed with the strongest jurisdiction, subpoena power, and funding to get the job done. The court suit initiated by N.t\.RF 

may go on for years, and even if it is won, there are always appeals and appeals upon appeals, which may go into the next century. You 

and I will be long gone by that time, and the issue will have been 

gone with the wind. 

In short, without adequate funding and authority from Congress, the trustee is doomed to failure, in my personal opinion, our opin- ion from the woods. The resolution of this breach of trust tran- scends a mere accounting of Indian money. It is a joint responsibil- ity, as I've said, of Congress and the Administration and the responsibility of both political parties. 

The President and Secretary of the Interior have been aware of 

this problem for years-many, many years. And it has now just surfaced, to a point where we understand what happened. "Thank 

you," and everybody goes home. It's a kind of an itch. That itch just doesn't go away. Even though we have forgotten, we go back, and 

that itch is still there. 

Now, a resolution is to give this organization a trustee, a special 

power. Congress, if they are so desired and concerned about what 

happened to these billions of dollars, they should give this trustee 

a power, a subpoena power, an extra power, all the resources financially that it can muster, and see where it takes us. I believe that 
80 

would shorten the existence of the trustee with a complete fix solution for the worries or the constant worry of my people back home. 

I have a water rights concern, which I have instituted in my 

statement, which is also money. I am worried that the people up 

in the northern boundary of my reservation are pumping water, 

groundwater. Soon, if that is not stopped, I will soon become an endangered species. You said humans, Congressman. I am a human. 

Why is it that the people down here are pumping water underneath my reservation? They have no right to do that, and I need 

every protection for the existence of my people so that my culture 

and those that I value very much, children yet unborn, can survive 

and live and enjoy life. Thank you. 

[The prepared statement of Mr. Lupe may be found at end of 

hearing.] 

Mr. HAYWORTH. Mr. Chairman, we thank you for your comments. 

We would also note, in your very candid remarks, you said that you 

hoped-you've seen task forces come and go, and that has been a 

problem. 

Let me just note here somewhat more than parenthetically, in 

his comments in Alaska, the ex officio member of this task force, 

the Chairman, whom you thanked earlier for instituting it, Don 

Young of Alaska, says that he would like to continue this task force 

on to the next Congress to make sure that we don't simply just recognize a problem, we take actions to try and solve those problems. With that, we thank you for your testimony. Again, I would offer 

the entreaty to my colleagues in broadcasting, as Ivan as our host 

is doing double duty here as the audio engineer helping to move 

the microphones, we would ask our other friends in radio and television if they have those microphones assembled as they would like 

them. 

And as soon as the different microphones are in place, we will 

call on our good friend from the Navajo Nation, the president of the 

Navajo Nation, Albert Hale. Albert, good morning. Thank you for 

joining us this morning. And we look forward to hearing your comments, sir. 

STATEMENT OF ALBERT HALE, PRESIDENT, NAVAJO NATION 

Mr. HALE. Good morning, Mr. Hayworth. And also, good morning 

to Mr. Faleomavaega. Good morning and greetings from the Navajo Nation and the Navajo people who I represent. And it's a pleasure 

to appear before you this morning to discuss with you the critical 

issue that faces not only the Navajo Nation, but also the people of 

the United States. 

I believe that this is much more than just an Indian problem, because if the Federal Government can lose money as it has done in 

this situation, just imagine what it has done with money that has 

been entrusted to it by the people of the United States, including Medicaid, Medicare, Social Security. So it brings about a much 

greater issue than just an issue related to Indian nations and Indian people. 

I also want to express appreciation to my colleagues here, President Makil for his fine statement, and also to Chairman Lupe for 

his fine statement, and ditto to both of those statements. 
81 

Let me begin my testimony by first introducing myself. I'm the 

president of the Navajo Nation, President Albert Hale. I'm elected 

to a four-year term, and I'm in the second year of that term. And 

I represent the largest Indian nation in the country in terms of 

population and also of land base. 

I will present my testimony basically in four parts. First of all, 

to give you some background information to put this whole testimony into context; secondly, to also bring to your attention the 

problems that we have been having with regard to our dealings 

with the BIA and also the Office of Trust Fund Management regardhg our trust accounts; thirdly, our problems with the reconciliation project; and fourthly, to advise the Bureau of Indian Affairs 

and the United States Government that we will hold them liable 

for all the losses that we have incurred as a result of this misconduct and serious breach of trust responsibility. 

First, by way of background information, in 1982, $22 million of 

judgment fund was awarded to the Navajo Nation by the United 

States Government. In 1986, another $32.5 million of judgment 

fund was awarded to the Navajo Nation. In both cases, the Bureau 

of Indian Affairs was designated as the agency to act as investment 

manager and custodian. 

These assets represent what is called the Navajo Nation's 1982 

and 1986 chapter claims funds. Separately but also in 1982, $14.8 

million was awarded to the Navajo Nation for adding to the nation's scholarship fund and acquiring some more land. Once again, 

the Bureau of Indian Affairs was designated as the investment 

manager and custodian. 

Since the time of the awards, the Navajo Nation periodically 

withdrew funds from these accounts primarily to pay for various 

chapter operating expenses in the case of the 1982 and 1986 chapter claim funds, and in the case of the scholarship funds, to assist 

qualified Navajo students in pursuit of their higher education. By 

the way, "chapters," when I talk about "chapters,'' they are the 

units of local government in the Navajo governmental structure. 

As mentioned before and according to the BIA March 31, 1995, 

accounting records, the BIA manages and has custody of approximately $59.1 million of Navajo Nation money. Secondly, the problems that we have had with the BIA and also the Office of Trust 

Fund Management. First, the BIA OTFM has failed to follow Navajo Nation instructions regarding investment of trust funds. 

Because the Navajo Nation was attempting to secure a release 

of the 1982 and the 1986 claims funds, the Navajo Nation sent the 

BIA correspondence in 1992 requesting that these funds be invested in short-term securities. This request was made to ensure 

that these funds would be easily liquidated at the time of the withdrawal. 

Contrary to the Navajo Nation's instructions, the funds were invested in securities which have maturity dates several years into 

the future. The Navajo Nation will now realize a loss when thesecurities are cashed in. 

Secondly, the Navajo Nation also instructed BIA and OTFM to 

keep the rehabilitation trust funds in short-term securities of less 

than a one-year duration. 
82 

Federal law at 25 USC Section 64D-30 provides that these funds 

shall be available to the Navajo tribe with the approval of the Secretary for the sole purposes which will contribute to the continuing rehabilitation and improvement of the economic, educational, and 

social conditions of families in Navajo communities. This is part of 

the Navajo-Hope land rehabilitation efforts. 

The Navajo Nation's instruction to invest these funds on a shortterm basis in order to have them available and pursuant to Federal 

law was again ignored and these funds invested in long-term, all 

to the detriment of the Navajo Nation. 

Thirdly, in 1991, the Navajo Nation first requested that the Navajo area office of the Bureau oflndian Affairs assist the Navajo Nation in securing the release of certain judgment funds under management by the BIA for integration into the Navajo Nation investment system. Despite providing a variety of documentation and 

documents and answering many questions raised by the Bureau of 

Indian Affairs, the funds were never released. 

As outlined in the proposal and the proposed plan that we have 

accompanying this testimony, the Navajo Nation implemented a 

successful investment program in 1990. Today, the Navajo Nation 

manages 18 different funds, constituting approximately $700 million in assets. 

According to the BIA March 31, 1995, accounting records, ap- proximately $59.1 million in the claims fund and the scholarship 

funds are in the BIA custody. By resolution of the Navajo Nation 

Council, Resolution CJA-1196, the Navajo Nation requested voluntary withdrawal of the trust funds pursuant to the American Indian Trust Fund Management Reform Act of 1994. 

The request was for release of the chapter claim funds and the 

scholarship claim funds received in settlement of Docket Number 

69, Docket Number 299, Docket Number 256-69, Docket Number 

377-70, and Docket Number 588-83L. The resolution of the Navajo Nation Council and the request was transmitted to the Office of 

Trust Fund Management within the Interior Department. 

By letter dated April 12, 1996, OTFM requested the Navajo Nation to provide additional documentation to complete the applica- tion process for the voluntary withdrawal. The request for additional documentation raises issues concerning imagined discrepancies between the Congressional plan and the Navajo Nation 

plan. 

The Navajo Nation has previously addressed these concerns in 

detail with the Bureau of Indian Affairs. In 1991, former Attorney 

General Donna Christiansen explained the perceived inconsistency 

between the plans in a letter to the area director. In that letter 

dated June 24, 1996--in my letter; excuse me-l again addressed 

the concerns expressed by that office, which are essentially a restatement of the concerns previously raised. 

Please note that t:1e concerns raised are not substantive. They 

are not affecting the issue of whether the Navajo Nation is capable 

of managing the plain settlement funds. Instead, the concerns that 

are raised illustrate the worst bureaucratic tendencies of the Federal Government and lack of understanding and knowledge of Navajo Nation laws. 
83 

In addition, the OTFM has requested documentation which is not 

required by the 1994 Act and which is not relevant to the determination that the Secretary must make pursuant to the Act in assessing the Navajo Nation's proposed plan. For example, the requirement that the Navajo Nation submit a Navajo Nation Council 

resolution acknowledging that the funds once released to the Nation will no longer be in trust status is not found in the Management Act, nor any valid regulation that has been so far promulgated by the Secretary. 

Because the Act itself provides that the funds will be removed 

from trust status once released, there is no further need for the 

Navajo Nation to express such an acknowledgment. This is stated 

at 25 USC Section 4022(c). 

The Act also provides that a tribe's submission of a plan for voluntary withdrawal and that the Secretary's acceptance of that plan 

for voluntary withdrawal does not constitute an acceptance of the 

fund account balance as being accurate, nor does it waive the Navajo Nation or any Indian nation's rights to seek compensation. And 

that is stated in 25 USC Section 4027. 

The Navajo Nation has demonstrated that the request for voluntary withdrawal previously submitted to the Office of Trust 

Management is adequate for the Secretary to make a determination as to the conditions set forth in 25 USC 4022, Subsection B. 

First, by resolution of the Navajo Nation Council, the Nation 

plan for voluntary withdrawal has been approved bx the governing 

body, therefore meeting that requirement. Secondly, the Navajo 

Nation's plan is reasonable. The capability and the experience of 

the individuals and the institutions which will have management 

and custody of the trust funds and also protection against substantial loss of the principal have been demonstrated, and that is sufficient to meet the requirements of the law. 

Despite the fact that the proposed plan meets the requirement 

of the Act both on its face and substantively, the fund has still not 

been released to the Navajo Nation as requested. It is obviously in 

the best interests of the United States Government to release these 

funds immediately, not only because the Navajo Nation has met 

the requirements of the Act, but also for the purpose of limiting liability of the United States Government for the mismanagement of 

these funds. 

The purpose of the 1994 Act was to allow Indian nations an opportunity to manage their own funds held in trust by the United 

States Government. It also was intended to give Indian nations and 

their governments greater control over the management of their 

own trust funds. And it also is consistent with the principle of selfdetermination in working out the management of these trust funds. 

The Navajo Nation's experience thus far has demonstrated that 

the United States is willing to deny that opportunity that has been 

afforded to Congress through this Act. Instead, what it has demonstrated to the Navajo Nation is that it is willing to continue a 

bureaucracy which undermines self-determination and which has 

actually done financial damage to the Navajo Nation and also other 

Indian nations. 

From the Navajo Nation's perspective, this mindset must immediately change. The Navajo Nation has complied with its statute. 
84 

We are entitled to receive our own money and to take responsibility 

for the management of our own money. We can put this money to 

work for our nation, for our children, and for our people, for we 

desperately need additional assistance and money. 

And the Federal Government, through its recent efforts at cutting the budget, is not helping us at all. And that, again, is a separate issue that entails breach of fiduciary responsibilities and trust 

responsibility that Indian nations are owed by the United States 

Government. 

Secondly, with regard to problems that we are having with the 

reconciliation project. The Navajo Nation has been provided with 

voluminous documents concerning an attempted reconciliation of 

the trust funds administered by the BIA covering the period of July 

1, 1972, through September 30, 1992. Based upon an initial examination of the portion of the documents, it is apparent that further consultation will be necessary between the Navajo Nation and the United States contracted auditor, 

Arthur Andersen. The Navajo Nation has been advised that further 

consultation will have to be paid by the Navajo Nation. 

And in this regard, what we're being asked to do is, the money 

that we have entrusted to the Federal Government, we're asking 

you to find it for us, and you're telling us to pay for it. And that's 

absurd. This is our money. We left it in your trust, and we want 

the payment to be done by the Federal Government. 

We are dealing with activities which clearly falls within the 

scope of Federal trust responsibilities. So therefore, funds should be 

made available for the further consultation that I speak of. These 

meetings are necessary so that we can ensure that there is meaningful examination of the source documents and the working papers of the auditor. 

Based on the investment benchmarks calculated by the Arthur 

Andersen finn, the BIA's actual investment returns for the Navajo 

Nation funds underperfonn the benchmark by approximately $3.1 

million. This underperfonnance supports the Navajo Nation's position that the investment management style of BIA and OTFM is 

costing the Navajo Nation millions of dollars annually. 

This point is underscored within the Navajo Nation's application 

for withdrawal of certain judgment funds in which the Navajo Nation illustrates how simple changes in the type of security the 

funds " :.re invested in would reap several million dollars more in 

investment income to the Navajo Nation. 

Thirdly, the Navajo Nation intends to hold the United States 

Government liable for all losses which it has sustained and suffered as a result of BIA and OTFM's inadequate management of 

the Navajo Nation trust funds. Since the implementation of the 

Navajo Nation investment program in 1990, the Navajo Nation 

government has been deeply concerned about how the United 

States manages the Navajo Nation funds. 

Our internal investment program has strict guidelines which 

must be followed, benchmarks which must be met, internal controls 

to ensure that no loss of fund principal occurs-we expect no less 

from the Federal Government. However, we have learned from aggressive management of the Navajo Nation funds since 1990 that 

wise investments are the key to our financial future. Our govern-
85 

ment will not be able to function in the next century without rely- ing on the investment strategies that we have begun to pursue sometime ago. 

While the expertise which the Navajo Nation has developed has 

allowed our government to have a much better grasp on our future 

needs, this expertise has also shown us that the systems used by the United States in managing our trust fund are sadly lacking. 

Our concern is not limited to the Navajo Nation. Other Indian nations may not have the asset base that the Navajo Nation has, but 

they are not truly aware of the losses that they also suffer. 

Our concern also extends to the Federal Government itself. As 

one of our investment advisors said recently-and I'll quote here-

"If the Federal Government cannot tell us exactly what has been 

done with respect to the management of tribal trust funds where 

a special fiduciary duty exists, can you imagine the state of other 

funds managed by the Federal Government; for example, Medicare, 

Social Security, and others?" 

This is a problem which concerns all Americans and which certainly deserves the Federal Government and Congress's utmost attention. In conclusion, I reiterate that what we talk about here is 

our money. And we demand an accounting of our money. And we 

also demand compensation for those moneys that cannot be accounted for and has been lost in the system. 

We also offer one solution, and I think that has been recurrent 

in my statement. The solution that has been offered by my colleagues has been to strengthen the Office of Trust Fund Management. Our solution from the Navajo Nation based on our experience and our performance is that we can do better than that office. 

And for that reason, our solution is to give us our money back so 

we can manage it and so we can reap the benefits. We can earn 

more from those investments than has been shown by the Federal 

Government. 

We need to do this, because we have declining revenues. We're 

faced with budget cuts. And we have to explore every possibility, 

every avenue for increasing our revenues, because as we speak, the 

demand for service among my people continues to rise, while our 

revenues continue to decline. And as a result, we ask for our money 

so we can invest it for the benefit of our nation and for the benefit 

of our children and to secure our future. 

Thank you very much. Have a good day. 

[The statement of Mr. Hale may be found at end of hearing.] 

Mr. HAYWORTH. Mr. President, we thank you for your testimony. 

Indeed, I thank all three tribal leaders, again, for coming here, at 

home to talk about the challenges we face. And without betraying 

confidences, my colleague from American Samoa and I in the midst 

of the testimony were both very impressed that you have quite a 

compelling story to tell us in the experience of all three of your respective peoples. 

Let me begin, then, with what appears to be variations on a 

theme. While the Chair certainly welcomes suggestions on how to 

solve the problem, it is important to note some of the limitations 

that if they have not exacerbated the problem, then they certainly have added to the delay. 
86 

President Makil, you perhaps came up with the best term to describe what's going on when you called it "an atrocity." You also 

spoke glowingly of the special trustee's effort to solve this problem, and yet quoting now your testimony, it's your opinion that "the spe- cial trustee was muzzled." Why do you have that impression? What 

exactly led to that conclusion in your mind? 

And again, let me pause and let my colleagues in broadcasting 

move some mikes so that you can move forward here. 

Mr. MAKIL. Several statements that have been made by the spe- cial trustee in trying to bring about the facts to tribal leaders is 

that the special trustee has not been allowed to speak or has been 

suggested to him that he not speak on certain issues, which some 

of those issues get to I think the realities of what those 300,000-

just as one example--issues, unresolved issues might represent. 

In other words, also to claim and to make a statement that there 

are ways of developing and determining what that economic liability might be, that financial liability might be, he has not really been allowed to talk about that, I think, in the depth that tribes 

could hear. 

Because as was mentioned by President Hale, there are many tribes that have developed the sophistication to manage their own 

funds. But before we get our funds, we would like to develop a 

process that helps us best get to the best number that is owed to 

us, to tribes or to individuals. So that process is a process that can 

be developed. And no one has ever really talked about that. And the Secretary-or the special trustee has not been really allowed to develop that, either. It's being considered as part of a lawsuit by the individual Indian people, but other than that, it hasn't 

been allowed to be discussed. Mr. HAYWORTH. Mr. President, I noted at the outset of this hearing that problems in this area stretch back well over a century- indeed, over a century and-a-half, for what it's worth, prior to the 

current formulation of our partisan standing that is with us here 

to this day. 

And in that time, there have been many people of both parties- and my colleague from American Samoa made the point that this 

really doesn't come down to a Republican problem or a Democrat 

problem, it's a problem we have to solve. 

And yet even noting that, your testimony points up a concern as 

to the conduct of the Department of the Interior, specifically, the 

Secretary or others who fonnulate policy, either through a spoken instruction to the special trustee or in the form of memoranda or 

in a variety of unspoken ways to say "Cool it" on this problem. Is 

that a fair assessment, that something is going on currently in this 

stewardship of this Department that has led, in your terms, to the 

"muzzling'' of the special trustee? 

Mr. MAKIL. I think that's an accurate assessment. I think there's 

a lot of that. I think it relates to even the dollars, where several 

months ago, the advisory board was scheduled to have a meeting. The advisory board has met once with the special trustee. 

And you're talking about, as has been said several times, our 

money. And you have an advisory board that consists of tribal leaders across the country as part of that advisory board to bring the 
87 

views of tribes and Indian people to the special trustee. And there's 

not even an allowance to have that meeting. 

In order to represent us fairly, you have to have that input. And 

not allowing that communication between the special trustee and 

the tribes more in-depth is muzzling, at some point. Mr. HAYWORTH. I just want to make sure I understand. And perhaps it needs amplification in this testimony today. You as a tribal 

representative have met with the special trustee only once since 

last September? 

Mr. MAKIL. The advisory board has only met once. Mr. HAYWORTH. This is not a game. This is a serious question. Unfortunately, the execution of public policy from time to time, 

there are those who are very willing to play the blame game. Let 

me move past that, because this is a problem so compelling, it does 

not need the usual seasoning of partisan debate or finger-pointing. 

Let me move, Mr. President, to your suggestion for a remedy or 

at least an intermediate step in terms of remedial action that could 

be taken. And I want to make sure I understand this. It's something, an observation I made toward the end of the director's time 

with us. 

You believe one way to solve this problem is to simply say to the 

Secretary of the Interior and to all the departments that come 

under the heading of that Secretary, a multi-billion dollar Cabinet 

level agency that the flrst and most compelling step would be for 

the next three fiscal years, 1997, 1998, and 1999, an allocation of 

one-half of one percent for every line item to go into a fund to solve 

this problem. It's a painful problem. Do you believe this to be the 

most painless way to solve it? And why? 

Mr. MAKIL. It's painless because one-half of 1 percent of their 

budgets isn't going to destroy any programs or plans that I'm sure 

that any of those departments have. And again, if you considerand believe me, I don't want to make light of the environmental issues that are part of that process, because you sit here with three 

tribal leaders who are very concerned about those issues. 

But by the same token, as Chairman Lupe so eloquently stated, 

that you're talking about those kinds of issues-and as you stated 

yourself, Mr. Hayworth, that are those kinds of issues versus 

human issues. Those dollars that are available that belong to tribes 

are dollars that can be utilized to provide very basic necessities of 

life, life-sustaining things, projects, programs, needs, very simply that. 

And do you want to put those environmental issues over basic 

human issues, needs? That's a question. I don't think that is asking 

too much. I think that's very minor. 

Mr. HAYWORTH. In terms of putting a mathematical face on your 

suggestion, one-half of 1 percent of $12 billion, according to the expert calculations of those Washington staffers, knowing my problems with mathematics and summer school-but notwithstanding-one-half of 1 percent of $12 billion would total roughly $60 

million a year to go into solving this problem. 

President Makil, I want to thank you, also. I think you offer 

some compelling ideas in terms of a control board reminiscent of 

the remedy being offered within the District of Columbia. And one 
88 

thing we hear from all you gentlemen is replacing the muzzle on 

the special trustee with genuine muscle to solve the problem. 

I also appreciate, President Makil, your note of caution about privatization, in other words, saying what 1-if the Federal Government is responsible for this mess, there must be some way to clean 

it up first before we move to any other types of resolutions. 

Mr. MAKIL. If I could just clarify? 

Mr. HAYWORTH. Sure. Please. 

Mr. MAKIL. Again, I'm not opposed to the privatization. What I 

am concerned, though, about is making sure that the responsibility 

gets maintained, because it is important for that responsibility to 

be maintained so that it continues to further that overall issue of 

self-determination. 

We need to get to a point where we are accurate about amounts 

and create adequate settlements to tribes and then provide the opportunity for those tribes who have the ability and who choose to 

manage those funds themselves. It's just furthering that concept of 

self-determination. I think that it's critical, and it's a very important factor here. 

Mr. HAYWORTH. I thank you very much. 

Let me turn, then, to Chairman Lupe. Mr. Chairman, we very 

much appreciate your presence this morning and your perspective 

and your cautionary note, delivered in all candor, that given the 

tendency prior to this with task forces and subcommittee investigations, that it tends to be like one of our Desert Storms, here today, 

gone tomorrow, and maybe here in the lifespan of our history for 

only hours at a time. 

Again, I want to reassure you as I did earlier, Chairman Young 

is committed to continuing this process to make sure that we see 

this through to resolution. In referring to your testimony, the 

shorthand that I have here, Mr. Chairman, funding to the tune of 

$25 million or the efforts-! want to make sure I understand, 

again, because I went over the notes here. 

I have written down here from your testimony the quotation "deliberately sabotaged." Were you referring to the efforts of the special trustees, or funds that--

Mr. LUPE. No, the special trustee. 

Mr. HAYWORTH. The special trustee? 

Mr. LUPE. It has been rumored across Indian country that $24 

million was withdrawn from the trustee during its work by the Department of the Interior, whereby muzzling-again, is the word, for 

lack of a certain word-if it was not withdrawn, they could have 

continued with that money. 

Mr. HAYWORTH. Oh, so in other words, the money--

Mr. LUPE. That was the power that they had, and it was withdrawn. 

Mr. HAYWORTH. The money was withdrawn, and it's believed to 

be from the special trustee's agents? 

Mr. LUPE. That's correct. 

Mr. HAYWORTH. And then what became of those? Were they just 

restored to the general funds of the Interior Department, or allocated to other needs? Do you know where the money--

Mr. LUPE. I don't know where it went. It was just-1 heard that 

it was just withdrawn. Up to the present time, I understand that 
89 

they only have about a million dollars to do the job, continue the 

trustee agent. The special trust that was created with the money-

! don't remember what it was about, 40, $45 million or something 

like that. 

And then all of a sudden, they lose $25 million. And then presently, they only have about a million dollars to do their work with. And in a very short time that they have been in existence, look at 

what they have discovered. 

Congress in its intent, of course, was on a right track. You wanted to find the boondoggle of the Bureau of Indian Affairs with the 

Indian trust money. And you found it, with this special trust organization that you-this task force that was created in 1994 by Representative Young. And this was very much appreciated, as we 

heard, across the country. 

Now that that is happening, in the middle of the stream to 

change horses-"We're giving you a different horse. We gave you 

a full pledge horse. Now, we're going to unsaddle that and see what 

you can do with this," this kind of thing. We're wondering what is 

happening to the power. I speak of subpoena power, as you--

Mr. HAYWORTH. Right. I was going to follow up with that. Yes, 

please--

Mr. LUPE. And without this kind of power, the special trust that 

was created I don't think will ever have the kind of power that it 

needs, that it really does not have the basic foundation to work 

with. 

What we have in here and across the country with a limited 

amount of information that they have gathered, and then they 

have no money to really do the job with. So I look at the trust task 

force that was created to be in existence for another three years, 

and that's it. 

Mr. HAYWORTH. Could the problem be solved in that period of 

time. Because as you stated, the tragedy is, as you look at a problem that continues, we have already had this for over a century and-a-half. It would be grave, indeed, to see this continue on without some resolution through the first decade of the next century, 

knowing that it takes some time to clear this up. But if we don't 

solve it now, it will continue unabated. And that's your fear. 

Mr. LUPE. No. The Indian people across the country very much 

appreciate Congress, really, for discovering what has been known 

to have been happening across the country. Now, you have surfaced 

that, and you already have the information. That's not enough. We 

need a solution, like President Hale pointed out. We need a fix, and 

we need it now. How do we go about it? 

The Interior Department, the Bureau of Indian Affairs, we have 

worked with them for years, Congressmen. And like they become 

an investor nf Indian money. They become the manipulator of Indian money. And I don't know where it all goes to. And we from 

the Fort Apache agency, because of our noted problem over there, 

we have withdrawn some of our money from the liM account. And 

we're using our own money now with our own department. 

But there are those relationships still that Bureau of Indian Mfairs is involved, the trust agency, for instance. Our timber harvesting continues today, and our trust agent, the Bureau of Indian 

Affairs, managed by the Forestry Department, they still have their 
90 

hands on those proceeds, the 10 percent money. Years ago, the 10 

percent money went back into the general account. And we have 

stopped that. 

We use it back now for reforestations and the improvement of 

the ecosystem on the reservation. But who has that money? The 

Bureau of Indian Affairs does have it, because it is our trust agent. The special relationship that we have with the White Mountain 

Apache Tribe and the Bureau of Indian Affairs, we don't want that 

to be erased. We want our land to be in a trust status with the 

United States Government. 

Completely doing away with the Bureau of Indian Affairs would 

become a problem, but there can be a compromise. We feel that we 

have now on our reservation qualified educated tribal members 

who can handle money much better than the Bureau of Indian Affairs. 

They can still have our trust responsibility for our land, but 

when it comes to money, I believe that the White Mountain Apache Tribe can do a lot better job today than any investor across the 

country, believe me. And when Hale presented the statute, you read in those statutes, the Bureau of Indian Affairs has still quite 

an authority under those statutes regarding Indian reservations. 

We don't know what happened to our grace and fees that were 

collected back in the 1800's. The land leases, where did the money go? The Southwest Timber Company operated on my reservation, 

timber harvesting, processing for many years. What happened to 

that money? We still do not know. How much money transacted? 

How much is it? 

Now, we understand how much those timbers cost. We sell our 

timber at $400 per thousand feet presently, depending on the market outside. It goes up and down. But before that, who measured 

it before? Now, we do. So because of those problems that exist 

today, I believe that the task force should be strengthened, at least 

given some kind of power. 

And the power really comes from money. When you don't have 

money, you can't do a doggone thing. $22 million that is awarded, 

22D we call it-22H, excuse me. 22D was a land claim. 22H is an 

accounting claim that we initiated. It took us about 45 years to discover that the Bureau of Indian Affairs doesn't know what hap- pened to $6 million that was derived from our land. 

And it cost me a million dollars of my own money, White Mountain Apache tribal money, to discover that there is $6 million lost, 

my own money. Like Hale said, somebody else should be paying for 

that. 

So I could go on and on and on into my own turf in my backyard and front yard. I could go on to 1993, $1,302,000. I could go on. You 

and I would be sitting here all afternoon. Mr. HAYWORTH. Well, Mr. Chairman, we thank you for offering 

very compelling testimony and again pointing out-and I thank the 

indulgence of my colleague from American Samoa. I want to turn, as you mentioned, the experiences of the Navajo Nation, and President Hale was citing, being by no means unique, in fact, being 

some of the similar challenges that many tribes have faced. 
91 

I would simply start with the observation that supremely ironic 

to ask a sovereign people to pay a fmder's fee, in effect, to account 

for their own money. 

President Hale, you offer rather encyclopedic testimony here this 

morning and compelling testimony in terms of what has transpired 

on the Navajo Nation. I was especially concerned to hear of the 

challenges that your nation has faced in terms of investing tribal 

moneys and almost what appears to be if not a dereliction of duty, then to be charitable, a misinterpretation at best of tribal intent or 

a deliberate different direction than what the tribe intended. 

What do you see from the incidents you've described to us today in your testimony? Was this a simple misunderstanding, miscommunication, or was there deliberate intent on the part of 

government agencies to dismiss the intent of the sovereign Navajo Nation in terms of its own money? 

Mr. HALE. Well, let me put it this way. I have no evidence on 

which to articulate why there is a failure on the part of the Federal 

Government, particularly BIA and Office of Trust Fund Management, to take these actions. However, I would say that whatever 

action that is being taken, it's denying us access to our own money, and for whatever reason that action is being taken. 

And it's denying us our rights, which has been incorporated into 

law, what has been stated in speeches, and which has been posi- tions taken by Congress that Indian nation as a sovereign nation 

has to be given the opportunity to be self-determining. To me, that 

means the ability to decide how and where and when to invest our 

money. 

So that has been denied of us, regardless of why those decisions 

are being made. And whether it's deliberate in terms of circumventing the intent of Congress or otherwise, the result is that 

we still do not have access to our money. 

And the longer that happens, each day that we're denied access 

to our own money, each day we lose money, because we cannot invest those moneys at a higher return that we have already demonstrated that we have the capability of doing. So we lose money 

in that process. And that's the reason why I stated in my testimony that we will seek to hold the Federal Government liable for those 

losses. 

And also, every day that we just talk about this problem, one of 

the things that I found out when I first got into this subject waswhich was really appalling, as far as I was concerned-is that 

records are being destroyed by either the Department of the Treasury, because they are dated. 

So we're losing records that may reflect these accounting or 

where these moneys have gone or the basis for trying to account 

for these moneys. And that's appalling to me. 

Mr. HAYWORTH. If you would yield just one moment here. Again, because we heard something about this in Washington. And I 

again-! believe this needs amplification. It is your understanding that records involving trust funds are currently being destroyed either by the Treasury Department or the Interior Department? Records that would help us solve this problem may be destroyed? That is an ongoing process? 
92 

Mr. HALE. Certainly, it has been brought to my attention. That 

has been my understanding. And I think the reason why that's 

being done is that these are old records. But you will see that what 

has happened in this reconciliation project, it only covers 20 years. And my colleague here, the chairman of the great Apache Nation, 

is talking about things that have happened prior to 1972, moneys that were collected by the Bureau of Indian Affairs. What hap- pened to them? Every one of the Indian nations across the country, that has happened to them. But there is no requirement that the 

reconciliation project go even beyond 1972. If it does happen, just imagine how much more will be uncovered. 

Only the 20-year period un•;overs that there's a loss or over a billion dollars that's unaccounted for in that 20-year period that has 

been the subject of the audit and the reconciliation project. So that 

again underscores what I'm saying, which is that every day that 

we just talk about this problem, Indian nations, Indian people 

across the country are losing money. So it's imperative and critical 

that we do something about it immediately. And I'll offer a solution, which is basically that you hand us over 

that money, and we'll do a better job at it. And our performance will manifest that. 

And secondly, on a broader scale, one of the solutions that I 

think has to be seriously looked at based on your colleague from 

the American Samoa's status in Congress, it is about time that the 

United States Government considers dedicating two houses in the 

House of Representative, two houses in the Senate for Indian peo- ple, Indian nations, so that they can have a voice in that part of 

the government. 

Right now, we don't have a voice, except through you and others 

who advocate on our behalf. But there is no one in there that is 

advocating constantly on behalf of Indian nations and Indian peo- ple. And as a result, we get into these types of situations. So I would challenge the Federal Government to dedicate two 

seats in the House of Representatives and in the Senate dedicated 

to Indian people, Indian nations, so that we as Indian nations and 

Indian people across the country can send at least two representa- tives and two Senators who can have the same status as our colleague from the American Samoa. Thank you very much. 

Mr. HAYWORTH. Thank you for your observations. I would also 

note that when you repeated the concern that documents are being destroyed, my colleague from American Samoa and I heard that in 

Washington. We put together a letter to the commissioner of the 

Financial Management Service. 

We're still awaiting a formal reply as to just what is going on 

with these records, so that we get a definitive answer as to the destruction of some of these documents, which has been alleged. I 

thank you for your testimony. 

Let me turn at long last-and I thank him for his indulgence, my colleague from American Samoa. 

Mr. FALEOMAVAEGA. Mr. Chairman, thank you. I just want to say that I feel like I'm at home and to certainly thank President Makil 

and President Lupe and President Hale for their kind words in my 

presence here. 
93 

Several of my tribesmen play football for the University of Arizona and Arizona State University, and I hope that my fellow 

tribesmen here in the State of Arizona will look after them and be 

nice to them. 

One of my cousins, Joe Salavea, currently plays for the University of Arizona. Of course, there were several others, but I think 

of another relative by the name of Junior Ahyou was also with Arizona State University some years back. 

So I think in that sense, Mr. Chairman, I think I feel like I'm 

at home, where some of my tribesmen have migrated as far as 

here, to this great State of Arizona. And to thank you, the tribal 

chairmen, for your statements. 

And I will say, Mr. Chairman, that in the eight years that I've 

served as a member of this Committee, I just wish that every Member of the Congress would have heard what the statements are that 

have been presented before this committee about this critical issue 

that we're confronted with, as far as the Congress is concerned. 

Your eloquence and your understanding of the issues, I just cannot say enough in terms of how much I wish that there is a solution at last to see that these problems have existed. And I make 

this observation, Mr. Chairman. You know, it's bad enough, of 

some 350 treaties that the Federal Government has signed with 

the Indian nations, and we have broken every one of them. 

I say this in a very sad way, because this has been the legacy of how our nation has been treating Native American tribes-I say for the last 500 years. Maybe I'm going too far back. But I make 

that observation in wanting to let the gentlemen know that there 

is a sensitivity in the Congress. And I want to share this experience that I have had and the fact 

that another gentleman from the State of Arizona, Senator McCain, 

who Chairs the Indian Committee and, of course, with his colleague from the State of Hawaii, Senator Inoye-and it's a nice 

breath of fresh air to know that you, my good friend, Congressman Hayworth, that you do have a real sense of commitment in addressing these very serious issues. 

And I want to say this point-blank and in all honesty with my friends here before this committee. About six years ago, I introduced a bill to provide four delegates representing Indian nations, 

because I felt that if it was good enough for American Samoa to 

have a delegate in the Congress, a territory, it is with Guam, it is 

with the Virgin Islands, as it is true with Puerto Rico and even the 

District of Columbia, why is it that the Indian nations are not 

given that same privilege? And I still continue to raise that ques- tion, Mr. Chairman. 

When I introduced the bill, let me tell you, President Hale, there 

was about as quiet as I could ever hear from any Member ever sug- gesting that what I had proposed, I thought, what would be a reasonable effort to let this sensitivity carry on with the Members and 

to let them know that it's always a better format in the forum to 

have Native Americans themselves bring these issues to the forefront to the Members of the Congress in both houses. 

And the process continues. And I can't say, Mr. Chairman, that 

it has been a pretty one. And Chairman Lupe, I know where you're coming from. I know the task forces. They come and go. I know the 
94 

Secretary of the Interior, they come and go. Presidents come and 

go. And yet we're still with the same problems. I wish that there were solutions that we could provide in a way that these problems could be resolved in a matter of years. We 

have got a Presidential election this year. Who knows who's going to be sitting in the White House. Who knows who's going to be controlling both houses of the Congress. And I say this with all due 

respect. It's a very difficult situation. 

F!very new Congress and every two years, we have new Members, Members who have never heard of Indians, Members who 

don't even care about Indian problems, Members who won't even 

consider really seriously considering what can be done as far as the 

Congress is concerned to correct some of the problems that we're 

faced with in Indian country. I have so many questions, I don't know where to begin. But I will 

say, hopefully in my chitchat with Mr. Hayworth, that as I have 

asked previously to Ms. Erwin, if there were any provisions of the 

current law that the Office of Trust Management can offer to 

strengthen this office if it's possible-and now, I hear quite clearly from Mr. Makil and Mr. Lupe-we need to put more teeth in this 

Office of Trustee. 

But I'm faced with another dilemma to both of you gentlemen. We are adding another bureaucratic layer. It's bad enough already 

we have the Secretary of the Interior, who may never listen to the 

problems and who just passes on to another subordinate. And next 

thing you know, the problem just disappears. And so we're going to add teeth to the trustee, but the trustee still has to answer to 

the Secretary of the Interior. 

And then when it gets through the political issues, then the Secretary of the Interior says, "Well, Mr. President, what can we do?" 

Well, it's either you fix it, or don't do anything. Look how long it 

has taken just even to try to get someone to fill the position of 

trustee. We have had that difficult problem. And it's not whether 

a Democratic or Republican Administration, it's a problem. And I just wish I could answer it in a more clear way, Mr. Lupe, that I don't know what's going to be out there three months from 

now. And the problem is going to continue. 

I don't know, Mr. Chairman. I suggest-why we have basically breached this fiduciary relationship, the trust responsibility that 

the Congress has to the Indian nations, at a tune of about $2.4 billion that is out there in the Federal Treasury. It seems to me that 

the most practical thing to do-why don't we just advance the $2.4 

billion that we have already accounted for to the Indian nations 

and let them work it through some provisions of the law so that 

they can stream1ine the process? 

Now, President Hale, you mentioned something about the Office 

of Trust Management giving you a hard time. I like your statement, "Just give us our money." And I would like Ms. Erwin torespond to this. Now, did you say that the judgment fund-now, there's a specific provision in the current law where the Secretary is to work this with the tribes about judgment funds. 

Do you have any judgment funds that are still being locked up by the Office of Trust Management that you're having a hard time 

working with at this time? 
95 

Mr. HALE. Those are the ones that I referred to. It totals as of 

March 1995, it had totaled up to $59.1 million. 

Mr. FALEOMAVAEGA. 59.1? 

Ms. Erwin, I would like to request the office for a response to 

this concern that has been expressed by President Hale. 

Ms. ERWIN. Do you want it in writing, or do you want it now? 

Mr. FALEOMAVAEGA. In writing, please, for the record. 

Mr. HALE. And we have-excuse me, Mr. Chairman and members of the panel. We have already submitted letters requesting that money be transferred into our investment system. However, 

we have been confronted with--

Mr. FALEOMAVAEGA. You're getting the runaround? 

Mr. HALE. Yes. We have been confronted with, ''You have to pro- vide these documents," and that's where in my testimony, I say that even those things are not required by the legislation or by the 

law it is being required. 

We're being required to issue a statement, a legal opinion saying that the resolution that's coming from our governing body is valid. 

That, to me, is very disrespectful, because we are a sovereign nation. It's our laws. And why is another entity questioning the validity of our own law? 

Mr. FALEOMAVAEGA. Do we have current regulations, Ms. Erwin, 

that is causing this problem? 

Ms. ERWIN. The new regulations indicate much stricter requirements since when we did the consultation with the tribes. The 

tribes and many of the tribal leaders and many of the account holders were very concerned that when you remove the money, that the 

council understands that you are removing the liability from the 

government. 

Mr. FALEOMAVAEGA. Ms. Erwin, give us your best opinion. Are 

we as strict with Indian tribes as we are with State and local governments when they ask for Federal funds? 

Ms. ERWIN. What do you mean? 

Mr. FALEOMAVAEGA. In terms of regulations, are we as strict 

with Indian tribes about this transfer of funds as we are with State 

and local governments? I mean, if I wete Governor of Arizona, and 

I want my money and I'm due and I have to come up with these 

forms and applications and all these things, are we putting an 

added burden to these Indian tribes in order to justify what President Hale is concerned about? 

Ms. ERWIN. No. There are no forms to complete. It's a plan, a resolution stating that your council understands that you're not required by your law to---

Mr. FALEOMAVAEGA. That's fine. Chairman Hayworth and I will 

definitely pursue this personally. We would love to work this closely. 

I note, President Lupe, in your statement that this is the international community is recognizing the indigenous peoples and that 

both the Justice and the State Department have held recently a 

consultation supposedly two weeks ago in Washington. For your information, tomorrow, we will be holding a conference, 

also, in the East-West Center in Hawaii in pursuing this same 

issue in terms of the both legal and moral obligations that our government has toward indigenous peoples here in our nation. And I 
96 

think this is something that we ought to pursue and to sensitize 

not only the world community, but certainly our own government, 

to see that this responsibility ought not to be taken lightly. 

I sincerely hope, Ms. Erwin, that we will do all we can to help what President Hale has indicated. I mean, the last thing I want 

to hear is another bureaucratic forms and regulations and the very thing that we're trying to alleviate, that this is going on. 

I want to thank you gentlemen for your statements~ and I sincerely hope that we will find a solution to some of these serious 

problems that have now been brought before the committee. 

And President Lupe, I sincerely hope this is not just going to be 

another task force that is going to disappear, but we11 come up 

with some substance rather than just form. 

Thank you very much, gentlemen, and thank you, Mr. Chairman. 

Mr. HAYWORTH. I thank my colleague from American Samoa. We 

have worked together on many issues in the past, and we'll continue to do so. 

And to the gentlemen who lead their respective sovereign peo- ples, thank you very much for very compelling testimony. You 

raised many items we need to pursue, and more than raising items 

of concern, you do something that is oftentimes a challenge in pub- lic life, and that is, you provide the framework for possible solutions that will be a basis of discussion as days continue. 

At this juncture, I would like to say that this task force will 

stand in recess for about 15 to 20 minutes. We will reconvene at 

20 until 12:00, 11:40. 

Mr. MAKIL. Mr. Hayworth, if I could, just before we convene, it 

really is important, because you raise the issue of some of these 

problems that have been raised. And that is exactly one of the 

problems that the special trustee is dealing with. Because you bring in a special trustee who the-office of special trustee, and he 

has limited authority. 

And you have people within _the Office of Trust Fund Management that have been there for years who handle these issues. And 

the special trustee does not have the authority yet to change some 

of those things. 

And that's why that issue is really key and it's important, because it is not necessarily the special trustee, but it is the Office 

of Trust Fund Management and the regulations that exist and that 

have existed in the past and policies that have sort of done away with a don't-well, let me put it this way. 

They don't reinforce the issues of self-governance and self-determination, so that tribes can have this authority to do these things and handle these dollars themselves. And that's important, because 

you put somebody there with no authority, and he can't change that office. And you've got people that have been there for a very long time that aren't as susceptible to change as they need to be. 

Mr. FALEOMAVAEGA. Mr. Chairman? 

Mr. HAYWORTH. I would be happy to yield to my friend from 

American Samoa. 

Mr. FALEOMAVAEGA. My concern, again, Ivan, with what you've just stated, no matter who we put as far as the law's concerned but 

ultimately, as far as all Federal law is concerned, the Secretary of 
97 

the Interior is going to be the ultimate authority on all that we put 

in. 

So even if we put any special authority given to the special trustee, there's definitely going to be a conflict, because ultimately, he 

has to answer to someone else. And basically, that person is going 

to be the Secretary of the Interior. 

So perhaps what you're thinking of, maybe give the Secretary of 

the Interior more authority. But I don't know how much more authority we need to give him. He already has the authority to do 

this. And that's the only problem that I'm faced with about giving 

the trustee more teeth. 

Perhaps maybe what you're thinking of is giving the Secretary 

more teeth to do his work, because that's always his response, 

''Well, I don't have the authority." Well, maybe that's what we need 

to do. 

Mr. MAKIL. Well, that's why the suggestion, if I may, the suggestion about the control board idea, that's one of the reasons for that 

recommendation, because what that does is then it gives that board 

the authority-and again, there has been a precedent set where 

Federal Government has done that. 

Anyway, in conclusion, we do appreciate, and I want to thank 

you for being here and helping and assisting us and listening to us. 

Self-determination is a major effort in Arizona, and we do haveSalt River does have an initiative on the November ballot which we 

look forward to Congressman Hayworth's support of that in the future. 

And I know it's a difficult issue, but it's an issue of fairness, and 

it does get to self-determination not only of our tribe, but of all 

tribes in the State of Arizona. Thank you. 

Mr. HAYWORTH. Thank you very much, Ivan. I would simply say 

that we all would like to see self-empowerment and self-determination in whatever form it may take. I thank my colleague from 

American Samoa. Again, I thank you. 

And the Chair would just amend its reconvening notice. We will 

reconvene this actually at a quarter till noon. All right? Thank you. 

We stand in recess. 

[Recess.] 

Mr. HAYWORTH. Again, we thank you for coming. Panel two consists of Susie Long, the chairperson of the Yurok Indian Tribe; 

Julie Barton is here from the Oneida Tribal Council to help us with 

information involving that tribe; also, we have Mary Benedict, the 

treasurer of the Hoopa Valley Tribe; and Robert Peregoy of the Native American Rights Fund. Robert, we appreciate your presence. 

Ladies, we thank you. 

And Madam Chairman Long, if you would begin your testimony, 

we would greatly appreciate that. And once again, we have the 

challenge of moving the microphones down. We thank you for that. 

And we will start-we have the one wireless mike, which is always 

nice. Madam Chairman, please. 
98 

STATEMENT OF SUSIE LONG, CHAIRPERSON, YUROK INDIAN 

TRIBE 

Ms. LoNG. Thank you very much for this opportunity to speak with you about the Yurok Tribe's concerns on tribal trust funds issues. 

I would just like to give you a little bit of history on the Yurok 

Tribe. The Yurok Tribe, while always being federally recognized, only recently organized. We passed our Constitution in 1993. 

Currently, our tribal membership is 3,416 members. Numerically, we're the largest tribe in California. We're a self-governance tribe. We are located in Northern California. Our reservation is one 

mile on either side of the Klamath River from the Pacific Ocean up- stream 45 miles, where the confluence of the Trinity River comes 

into the Klamath River. Eighty-five percent of our land is owned by a large timber com- pany on our reservation. We previously were one single unified reservation. That was the Hoopa Valley Indian Reservation. In 1988, 

the Hoopa-Yurok Settlement Act was passed and split the reservation, divided that reservation into two separate reservations, the 

Hoopa Indian Reservation and the Yurok Reservation. 

The total acres that we hold in trust is about 3,700 acres out of 

the total reservation of 56,000 acres. The funds currently held in 

trust for the Yurok Tribe results from the splitting of the reservation, the sum which we are informed is approximately $41 million. 

Please be aware that the splitting of the reservation and forcing of the Yurok Tribe to organize pursuant to the Hoopa-Yurok Settlement Act was very insulting to our people and continues to be a 

matter of great concern to all of our members. Also please be aware 

that the splitting of the reservation issue and the dispute surrounding it is directly known to staffers of OTFM. 

We believe some of the difficulties that we have encountered are 

resulting from that personal knowledge and previous involvement 

with the Yurok and Hoopa Tribes by those staffers. 

As a chairperson and a member of the Yurok Tribal Council, it 

is expected that a full, detailed accounting of all funds held in trust 

by the Federal Government be made available to the tribal members, that all funds be fully accounted for. 

Unfortunately, with the current activities accounting by OTFM, 

this has become impossible for us. We have not been allowed to review in detail all of the records of our accounts. We have been 

promised reports and backup journals, but we have not received 

those promised items. 

Our initial meeting with OTFM was scheduled in March of 1996 

in Sacramento. What little information we did receive was provided 

on March 6th and did not contain any of the information relative 

to the larger, most significant account that we had with OTFM. 

At the meeting, OTFM staffers insisted that I had been provided all of the information and that I had better check with my staff to 

find out who had signed for the package when it was delivered by special courier. I requested then of OTFM to tell me the name of 

that staffer who had signed for it. Upon their checking, they found 

out they had not sent it to me. 

Once again, a meeting was set up with OTFM. We had an understanding that we would be provided some information. We traveled 
99 

to Albuquerque and was provided some documentation about 10 

days prior to that meeting. But unfortunately, it's not all of the detailed accounting we need. And we can't do a complete, competent review of the accounts without even having the records, what 

records they have so that we can do an accounting for-so that we 

can either accept or reject the reconciliation report. And we have been told that Congress believes that tribes don't 

have an interest, because they are not responding to either accept- ing or rejecting the reconciliation report. 

Well, traditionally, the Yurok people are going to say to you, ''Well, if you have a problem-if we have a problem, let's work it 

out, and we'll give you time to work it out." But now we're told because we're being traditional, we're being told, ''Well, then you're going to be deemed to accept," and I can't accept a report that I 

can't reconcile. 

So without the opportunity to review the pertinent records, the 

Yurok Tribe must, unfortunately, reject the reconciliation report. 

Now, I cannot begin to sreak to the difficulties we believe we will 

experience when our triba members begin to investigate their liM 

accounts. We're just too young. We haven't started-you know, we 

have only been organized-I'm the first Chair for the Yurok Tribe, 

so we're going into our third year under our Constitution. But I do 

need to say that the Yurok Tribe will every way we can assist 

those tribal members in getting a full accounting of their liM accounts. 

The action or inaction, we feel, must be considered as one of the 

most heinous crimes committed against Indian people of this land. 

And previously, I told one of the council members that's with me 

I didn't want to begin to speak of my uncle that died in war, my brother that came home in Vietnam, a husband that came home 

from Vietnam, but our people have laid their lives on the line for 

this country. You know, it's an insult to the Indian people to be 

treated this way. 

Fulfillment of the trust responsibility held to the Native American people by the United States cannot continue to be so frivolously handled as the history documents. The Yurok Tribe appre- ciates this task force's efforts to solve this difficulty faced by Indian 

people. 

The Trust Reform Act provides a good opportunity to correct the 

past, provide for the future management of trust funds for Indian 

people. Under the present posture, which provides for an advisory board to the special trustee, we believe that advisory board must 

be made into a board of directors with direct authority over that 

special trustee. Thus, this will allow for more direct input by the 

Indian people to the actions of the special trustee. 

Thank you for this opportunity to speak with you. [The prepared statement of Ms. Long may be found at end of 

hearing.] 

Mr. HAYWORTH. Madam Chairman, we thank you for your input. And now, just perhaps with the ease of moving the microphones, 

we'll simply move them down and let Mary Benedict, the treasurer 

of the Hoopa Valley Tribe, offer her perspectives. Madam Treasurer, we thank you for your attendance today. And 

if you would please offer your testimony. 
100 

STATEMENT OF MARY BENEDICT, TREASURER, HOOPA 

VALLEY TRIBE 

Ms. BENEDICT. Thank you very much. My name is Mary Benedict, and I'm the treasurer for the Hoopa Valley Tribe. I also sit 

on the board of directors for the Intertribal Monitoring Association 

on Indian Trust Funds. 

I would like to thank you first of all for your time in dealing with 

this important matter. The Indians have been victims of continued 

mismanagement of the Bureau of Indian Affairs and the Office of 

Trust Fund Management. I would like to discuss with you some 

problems that we have had with the reconciliation and the Office 

of Trust Fund Management. 

The first item I would like to bring forth is the reconciliation 

project performed by Arthur Andersen and Office of Trust Fund 

Management. And the reason I say that it was performed also by Office of Trust Fund Management is our concern regarding issue 

papers that were developed by OTFM's staff, whether it be reconciliation staff or the management staff. 

These issue papers, from what we understand, were allowed to 

change the scope of the work that originally was in the contract. 

These issue papers have not been provided to the tribes, as far as 

I know; at least they haven't been provided to Hoopa. This raises another very serious concern to us in dealing with 

conflicts of interests. People involved in the reconciliation project who are employees of Office of Trust Fund Management previously held positions at the Hoopa Tribe's agency, the Bureau of Indian 

Affairs agency office. These were high-level positions. One of them 

was a superintendent at the agency. And therefore, we believe that there's a conflict of interest, since 

those staff people were allowed to change the scope of project for 

the reconciliation with issue papers. This is a very serious concern 

to Hoopa for--one reason that we raise this concern is when 

Hoopa's accounts were done for the 20-year period, one account 

that Hoopa owned for 10 years was left out of the project. We raised this issue to Arthur Andersen and the staff people for 

the reconciliation when they came to Hoopa. And from what we understand, Arthur Andersen said that that account number was not 

provided to them as an account that was owned by Hoopa. This 

was an account that was owned in the 1980's. This was an account 

that was at the agency office at the same time that the people were 

superintendents there. 

So we discussed with them and negotiated with the staff people and Arthur Andersen, and they agreed to do limited testing on the 

account. I don't believe it was tested as much as the other accounts 

that Hoopa owned. Therefore, we believe that there needs to be further testing on that account in equality with the other accounts. 

One other concern that we raised regarding the reconciliation 

project is the Fill the Gap project, which in our case, they tested 

several timber cell leases, and during the time of negotiation with 

the Bureau of Indian Affairs, Hoopa negotiated with them and 

said, "Well, we want a test to test for unrecorded deposits," which 

is what they did not test for. 

Unrecorded deposits would be the most beneficial to tribes in locating funds that would be owed to tribes. They agreed. They pro-
101 

vided us moneys to do our own testing. We tested the same number 

of contracts, the same contracts that they tested. They did what we 

call a downstream test, and that's taking something that they already know was deposited into our account and testing it down to 

the lease, the timber cell lease, to see if it was calculated correctly 

or if there was a typographical error. 

We did what we call an upstream test. We took the same lease 

records, utilized statement of completion, which tells you how much 

should have been deposited to the account, how much was logged, and traced the amounts from the bills for collection up to the GL. 

And the results of that test indicated that the government owed us 

$4.4 million, where as their test indicated that they owed us 

around $10,000. 

So these results are of great concern to us. We believe that there 

hasn't been proper testing on the account or accounts that Hoopa owned. We are concerned that there is not an audit that was able 

to be performed. And we are also very concerned that there hasn't 

been a fraud audit performed. These are the problems that we 

bring forth to you on the reconciliation. 

I would like to address one problem that we're having currently with the Office of Trust Fund Management, and that is dealing with the liM accounts. We recently did a per capita payment to our 

membership. And when we do a per capita payment, we deposit into liM accounts for minors, adults who are mentally ill, child custody dispute cases, and adults whose whereabouts are unknown to 

us. 

The Office of Trust Fund Management now is claiming and has 

returned a check to us stating that they no longer-or it was never 

their intent to take whereabouts unknown moneys. They have 

asked us to hang onto it. Since we make the payment, we should 

try to locate the individual. We don't believe this to be true. 

We believe that the Federal Government has a trust responsibil- ity not only to the tribe but to the individual Indian and that they should maintain those accounts. What is of greater concern to us 

is that this policy was not told to us until the check was returned. It's something that we have done for several years, and the accounts that have been established will prove that we have been depositing for several years into these accounts. 

What concerns us is if that there's a policy change, there wasn't 

a consultation with us or we believe with any tribe, which raises 

another concern, because as far as we know, we haven't seen a 

"Dear Tribal Leaders" letter come out to the tribes that said, "This 

is our new policy: We're only taking minors and mentally incompetent funds for people." So therefore, it leads us to believe that 

maybe this is a personal attack on Hoopa. We don't know. 

These are the concerns that we bring to you today. In closing, I 

would like to say that I believe the Intertribal Monitoring Association on Indian Trust Funds has been a very beneficial group to 

tribes. They have provided the most information and the most rep- resentation on behalf of tribes. 

I believe that the advisory board could act in a very similar capacity in representing tribes. Many of these issues we have brought 

to the special trustee's attention and have received no assistance 

from him. 
102 

And I don't know whether that's because of politics or if it's because of-I don't know what the problem is there, but we believe 

that there should be another means for tribes to go to, and that 

could be the advisory board that could help us and assist us with 

these problems. Thank you for your time today. 

Mr. HAYWORTH. Treasurer Benedict, we thank you for your time. 

Now, we'll tum to Ms. Barton of the Oneida Business Committee 

to offer her perspective on what has transpired and the approach of her sovereign nation. 

Thank you for coming, Ms. Barton, and please begin your testimony. 

STATEMENT OF JULIE BARTON, THE ONEIDA TRffiAL 

COUNCll.. 

Ms. BARTON. Thank you. Mr. Chairman, members of the committee, my name is Julie Barton, and I'm the secretary of the Oneida 

Tribe of Indians of Wisconsin. 

I would also like to introduce Gerald L. Hill, who's our chief 

counsel, as well as Irene Martin, who is our attorney. They will be 

here to answer any technical questions you may have at the end 

of the panel. 

I'm representing our Chairwoman, Deborah Doxtator, who wishes to express her sincere apologies for her inability to be here. She 

was looking forward to this opportunity to speak before your vital 

committee, which we feel is a topic of great significance. We're also 

here to support our fellow Indian nations to address this serious 

breach of trust responsibility. Just a brief overview of Oneida. We're a federally recognized tribe located on 65,430 acres in Northeastern Wisconsin. Today, 

our nation is recognized for its success in the gaming industry, and 

we're also acknowledged as one of the most successful in addressing the basic needs of our members through sound government planning and action. 

Today, we're proud to say that we have_ progressed dramatically. We are generating jobs, moving to diversity our economy and employment opportunities for our members, and also the surrounding community also feels the effects of this. We have built a new 

school. 

Our language and culture is thriving. We have sound academic 

standards. But we're always under the threat of having our gaming 

revenues halted. And so we work to continue to maximize that 

every opportunity we have, because it's our future for our children 

and our seven-generation philosophy. 

Mr. Chairman, there's a certain irony in testifying to you today. We're here to discuss the American Indian trust fund, and candidly, the Federal Government has yet to earn our trust. Our nation was one of the first allies to the United States. In fact, the 

very existence of this nation as it is today was impacted directly by us, as we fought in the British and the French and Indian War 

and then for the colonies in the Revolutionary War. 

Even the government which evolved on this continent comes from 

us. Benjamin Franklin learned from our people, the 

Wanemeshawnee or lroquoian people, about the government of the 
103 

people, the checks and balances, and the separation of powers and 

leaders as public servants. 

In our written testimony, which is more formal, that I've submitted today, there's more detail, but the key issue is that we were 

a nation who entered into treaties with the United States, assisted 

mightily in the successful development of this country in many 

ways, and yet we were significantly among those whose land rights and resources were taken. 

This is our experience, and this is our challenge under which we 

have always existed. The trust obligations of the Federal Government under law and treaty have seldom, if ever, been maintained. 

After meeting with the representatives of the Office of Trust 

Fund Management and Arthur Andersen in January and April of 

this year, we have learned a great deal. The single most important fact we have learned is that this attempt to reconcile the funds 

held in trust by the Bureau of Indian Affairs during the period of 

1973 through 1992 cannot be audited or reconciled. The procedures 

and findings are insufficient, due to the lack of documentation 

available to back up transactions. 

During our meeting in April 1996, representatives of the Oneida 

Nation learned that the so-called reconciliation effort made by Arthur Andersen had determined that the Oneida Nation of Wisconsin owes the Bureau of Indian Affairs $15,000, in spite of the fact 

that it had not produced documentation for a staggering number of 

transactions to our account. 

Our representatives took a. closer look at the reconciliation effort 

and found even more disturbing information. The attempt to reconcile Bureau accounts has ·been severely hampered by the lack of 

documentation that exists to back up a large percentage of these 

transactions made on all tribal accounts. 

Additionally, other serious defects exist in the attempted reconciliation. These include the lack of effort to gain the input of the 

tribes whose accounts are being examined. The Oneida Tribe of Indians could have been an invaluable resource to the Bureau of Indian Affairs and Arthur Andersen during their attempts to crosscheck our accounts. 

Several of the people who have been involved in tribal affairs 

since the Oneida were awarded the Docket 75 judgment continue 

to be involved in tribal affairs today. These people could have answered questions and located documents, which would have aided 

the Bureau of Indian Affairs and Arthur Andersen in their attempts to correctly reconcile our accounts. 

During April 1996, at the meeting representatives from the Office of Trust Fund Management and Arthur Andersen spoke candidly with us regarding attempts to work with tribes to locate missing documents. And according to these statements, a decision was 

made early on in the project to work with only five tribes on a oneto-one basis. However, due to the costs incurred and the time-intensive nature of working with tribes, this practice was not expanded. 

The advisory board was specifically created to aid the special 

trustee pursuant to 25 USC Section 4046, which was never consulted regarding the Department of Interior attempts to reform 

trust fund management. In fact, President Ivan Makil reports that 
104 

their efforts to meet and to advise in departmental deliberations regarding reform were thwarted by the Bureau of Indian Affairs. 

During our regional meeting, the BIA representatives responded 

to our inquiries concerning the advisory board. We were told who 

was on board and that it was not very active. The board members 

had one meeting, and the funding ran out. The board had no further opportunity to meet and that the DOl would not allocate funds 

for the advisory board until October of 1997. 

This lack of consultation with the advisory board emphasized the 

fact that BIA made very poor efforts in consulting with Indian 

country on reconciliation of its own funds. The Bureau of Indian 

Affairs is also responsible for collecting amounts due to tribes 

through timber sales, mineral, and gas leases. 

And when we were questioned on this issue at our April 11th 

meeting, Arthur Andersen's representative stated to us that it discontinued attempts to confirm whether the amounts deposited into 

each tribe's account were, in fact, the amount due to each tribe, because they were experiencing time and budgetary constraints. 

We were told that determining the amounts due under many of 

the leases in question was complex and, therefore, costly. This procedure was explicitly referred to as the "fill-the-gap procedure" and 

is discussed in some detail in the report of the General Accounting Office to the Senate Committee on Indian Affairs submitted in May 1996. 

Also, there has been no attempt to reconcile the individual Indian money accounts. The Bureau estimates that the cost to meaningfully audit these accounts would range from $108 to $180 million. Funds held in the branch of investments for 1997 and 1973 

through 1978 were not scrutinized. We have begun our own analy- sis of this period, but we are in the most preliminary stages of our 

research. 

Based upon our other research, we expect to be able to demonstrate that had errors occurred, they too would result in findings in our favor. The most offensive aspect of the accounting provided 

to the Oneida Nation was the indication from Arthur Andersen and 

the Bureau of Indian Affairs that the Oneida Nation owes the Bureau of Indian Affairs almost $15,000. 

When questioned in detail on the subject, Andersen representa- tives stated that the reason the summary of Treasury interest recalculation results shows the net adjustment due from the Oneida 

Tribe stems from overexpenditures made by the Bureau of Indian 

Affairs to Oneida accounts. These overdrafts resulted in negative balances, the interest from which has accrued over the years and 

now approaches $15,000. 

Arthur Andersen officials also conceded that these transactions 

were entirely handled within the Bureau of Indian Affairs and that 

the Oneida Tribe did not access those accounts directly. We have 

recently turned over the responsibility for monitoring our trust 

funds to our newly created trust department. 

Its monitoring efforts of our accounts have led us to uncover discrepancies totaling more than $19,000 in our favor. This number 

is based on our scrutiny of Bureau of Indian Affairs accounting and 

examination of our treaties with the United States. This oversight stemming from the most fundamental Federal obligation would not 
105 

have been located using the methodology agreed to by the Department of Interior, the Bureau of Indian Affairs, and Arthur Andersen. 

Under this study methodology, they have not been responsible for checking the amount deposited into the Oneida account with 

the actual amount due under our agreements with the United 

States. Our inquiries have thus far restored our annuity payments based on our contribution to the establishment of this country. 

We understand that we have recently been credited for the past 

years where payment was not made. We are awaiting credit for the 

payment for 1979. For us, this was a matter of pride, a matter of 

honor, and one which underscores the unique relationship of Indian 

nations to the United States, one which many in Washington today fail to understand or recognize. 

We are presently reviewing our options and continue to monitor 

the accounts that we now hold with the Office of Trust Fund Management. An option before us is to conduct our own reconciliation 

of the accounts we have held with the Bureau of Indian Affairs in 

the past. 

We are encouraged by the changes that have occurred in the Office of Trust Fund Management and are happy with the service 

provided to us by the representative assigned to our accounts. The 

direction the Office of Trust Fund Management has taken is a posi- tive step, but stronger efforts need to be made in order to restore 

the good faith of Indian nations. · We are truly heartened that an effort is proceeding to address 

the very serious problems associated with the Bureau of Indian Mfairs' efforts on our behalf, and we are obviously of the opinion that 

there's much room for growth. Our written testimony includes our 

recommendations for future attempts to resolve these pending issues, and I will not restate them here in-depth. 

But in summary, we feel that all applicable treaties, leases, and 

sales agreements must be reviewed and information shared with 

the Indian nations, so that they may at least know how much 

money and how many obligations are held by the Interior. Absent 

that, there is no way for them to even begin to plan. We are confident that should the Bureau of Indian Affairs adapt its hardware, software into compatible formats, this will aide them 

greatly in their research. And with the proper reconciliation of the 

Indian money accounts, the credibility of the Federal Government 

will be uplifted significantly. 

Mr. Chairman, we're grateful for your conscientious role this 

committee has taken, and we hope that our thoughts have been 

helpful today. And if at any time we can provide additional information or assistance, we will be delighted to do so. Thank you. [The prepared statement of Ms. Doxtator may be found at end 

of hearing.] 

Mr. HAYWORTH. Ms. Barton, we thank you very much, and we 

appreciate your offer to help us in an ongoing process. And as has 

been noted here this morning, it is the intent of the Full Committee Chair to pursue this with the task force in the next Congress, if certain numerical contingencies hold up. And I dare say with the 

bipartisan effort, I'm sure if something were to change, that per- haps might be done, as well. So thank you very much. 
106 

Now, let's tum to our friend from the Native American Rights Fund, Mr. Robert Peregoy. Mr. Peregoy, we thank you for your attendance today, and we look forward to your testimony. 

STATEMENT OF ROBERT PEREGOY, NATIVE AMERICAN 

RIGHTS FUND 

Mr. PEREGOY. Thank you, Mr. Chairman. I appreciate the oppor- tunity to share a few brief remarks with you. I first want to thank 

you on behalf of the Native American Rights Fund for you taking the leadership of this important task force to hopefully get to the 

bottom and bring a long deserved resolve to what has become a 

huge crisis in Indian country with regard to this historical mismanagement. 

It's very refreshing to see you use the words "longest-lasting scandal," "corruption," those kinds of adjectives to describe this crisis, because certainly, that's what we sincerely believe it is. And it's 

our view that your handle on this is much appreciated, that you have a good handle on it, and we're here to help work with you to 

bring this to as speedy a resolve as possible. And I also want to thank Mr. Faleomavaega for attending and, 

of course, all of his track record and long dedicated commitment to 

native issues and particularly this one. 

I want to briefly limit my comments this morning to the over 

300,000 individual Indian money accounts and the particular issue 

and some immediate things that we think can be done to get this 

matter on track forthwith. Primarily, the-you've heard a lot of 

publicity and discussion and testimony about the real problem with 

the tribal reconciliation of the $2.4 billion being unaccounted for 

over a 20-year period. 

The Arthur Andersen firm did not even attempt to reconcile the 

individual Indian money accounts for that period, because there 

were not enough records to do the job. And here's what's real disturbing, Mr. Chairman, is that Arthur Andersen figured it would 

cost between $108 million and $281 million just to reconcile the 

liM accounts for that 20-year period from 1973 through 1992. 

And when the government realized that, I think they pretty much threw up their hands and said, ''We're just not going to be 

able to do this," because the even more disturbing thing was that 

Arthur Andersen said, "Even if you spend up to $281 million, a reconciliation's not going to do you any good. We're not going to know 

how accurate that is or what it's going to do for you." 

And so over the course of this summer, with the different-this 

is the third hearing on this issue. The special trustee and his staff 

have indicated that the individual Indian money account system in 

the Department of Interior is in the worst shape of all of Interior's 

trust fund accounting systems. 

And that is a grave problem that concerns us. That's one of the 

reasons that the Native American Rights Fund participated with 

other attorneys in filing this class action lawsuit against the government on behalf of the more than 300,000 account holders is so 

that we can compel the government-it appears that we're going to 

need the force of the courts to compel Interior to do something about this. 
107 

Now, the question that you have aptly put is, what can the task 

force and what can Congress begin to immediately do to resolve 

these problems. And the short answer is, I suppose like a lot of 

other things, is that it's going to have to put up adequate dollars 

to begin to establish an adequate accounting system for the individual Indian money accounts. 

Now, we heard Donna Erwin from the Office of Trust Fund Management testify this morning that the tribal trust accounting system is state-of-the-art. That's for, what, 200 to 275 Indian tribes, 

the government has a state-of-the-art accounting system. 

However-now, contrast that, Mr. Chairman, to 300,000 individual Indian accounts. That's a lot more than 200 tribal accounts. 

300,000 individual accounts-the liM accounting system is so far 

substandard and in shambles that it's sad. It's sick. It's a joke. 

And because of that, the special trustee has placed as a top prior- ity for this year to get adequate dollars so that he can establish a 

basic accounting system for the liM accounts to put it basically on 

par with the tribal trust system, the Omni trust system that has 

been in operation for the tribes over the past several years. 

And I want to make it very clear that the special trustee has indicated that he can establish within one year an adequate liM accounting system for $22.3 million-$22.3 million to establish an 

adequate trust accounting system for 300,000 individual Indians. 

Now, that's not going to get an accounts receivable system. What 

that's going to do is give an adequate system that once the money is collected, Mr. Chairman, then the government is going to be able 

to record the collections, the deposits, and the disbursements in an 

accurate way. That's going to stop the bleeding that's going on 

every day right now. 

Because as we speak, the Federal Government's liability for this 

mismanagement for these 300,000 accounts is increasing because 

they don't have a system to stop the bleeding. What the $22.3 million will do is to establish a basic accounting system that your 7-

11 or your local credit union manager has and any money manager 

needs to have to do a decent and adequate job of accounting. And 

here, the Federal trustee does not even have that. That's 300,000 

individuals. 

And so our basic concern here at this point, what can we do to 

get things rolling. The special trustee asked the administration this 

year-the special trustee figures, Mr. Chairman, that it's going to 

cost about $150 million over five years-$150 million over five 

years to completely fix the trust fund management system. That's 

tribal accounts, individual accounts, special accounts, accounts receivable, the whole nine yards, $150 million over five years. 

Now, this year, the special trustee asked the administration in 

his budget request to the administration for almost $50 million. 

The administration cut that back and asked for $36.3 million. Now, 

here's where we really need your help. The House of Representatives in the Interior appropriations bill that it passed in June only 

appropriated $19.1 million for the Office of the Special Trustee. 

Now, that $19.1 million is basically going to take care of existing 

staff and OTFM and what not. It's not going to provide one dollar 

for improvement initiatives in the system. In other words, not one 
108 

dollar for his priority of looking at fixing the trust fund system or 

the accounting system for the liM accounts. 

Now, you're likely aware, Mr. Chairman, that on the other side 

over on the Senate, that the Senate Appropriations Committee did 

approve $36.3 million for the Office of Special Trustee. It basically approved the President's request. However, even in approving the 

President's request-now, out of that $36.3 million, the special 

trustee figures that $13.6 million is going to go to fixing the liM 

accounting system. 

Again, please keep in mind that the special trustee figures it's 

going to cost $22.3 million-in other words, even with the Senate 

accepting the President's recommendation of $36.3, we're still $8.7 

million short to come up with a basic accounting system for the 

liM account holders to put them on par with the tribal accounts. 

And by the way-and I think that the special trustee put it very aptly in his testimony earlier on this summer, that the $22.3 million that he can fix the system within one year is going to give us 

a Chevrolet, not a Cadillac. He's not asking for anything extravagant there. 

And so we are here to respectfully ask you, Mr. Chairman, and 

the power and authority of your task force to work with the good Chairman Don Young of the Resources Committee to work with the 

House Appropriations Committee and conference managers to ask 

them, number one, to recede to the Senate level, assuming that 

goes through at $36.3 million and to add another $8.7 million to 

that so that the special trustee can get that $22.3 million he needs 

this year to fix the liM basic accounting system. And that's basically what we think that your committee can do 

at this point is to come up-because that's what it's going to take. The special trustee has testified that this problem has come about 

as a result of 20 to 30 years of neglect of not upgrading these kinds 

of systems, and it's basically time to call the question and put that 

money in there. Because if it's not put in there in terms of the liM 

system, it's going to cost the Federal Government much, much 

more money in terms of mounting liability. 

Now, look at it in this context. And we realize that you all are 

faced with appropriations politics and priorities and all of that. I 

mean, that's an understatement. 

But when you figure that this country has a fiduciary obligation 

to these 300,000 Native Americans whose money it's losing every day and can't account for, the $22.3 million to fix that system 

comes out to $75 per person of those 300,000 Indians. 

And that is a real pittance to pay in terms of doing two things. Number one, this country honoring its trust responsibility to those 

300,000 Native Americans. But maybe even more important in the 

eyes of Uncle Sam, to stop the bleeding and cut the Federal liability that's increasing every day. 

And let me close, Mr. Chairman, if I may, by saying one more 

thing that we feel is very, very important. There has been some 

discussion here this morning about ways to fund this kind of a fix 

that is going to be necessary for the government to come into compliance with the law and to meet its fiduciary duties. 

The Native American Rights Fund on behalf of our clients would 

strongly oppose any of this money coming out of Indian budgets or 
109 

programs to fix this problem. We think that it would be unfair and 

inequitable for Indian people and programs to have to pay for this 

money to fix a problem that has been caused by the Federal trustee 

itself. 

The Federal Government-the trustee-created and continues 

this ~roblem, and it would just be unconscionable to take money from Indian programs, particularly when you keep in mind that Indian programs have taken monumental hits over the course of the 

last couple of years for various reasons. And it would just simply 

be unconscionable to force Indian people to pay for this fix. 

And so we sincerely ask you, Mr. Chairman, to use the powers 

of your Chair andlour colleagues and to prevail upon them to do 

what you can. An this is where we figure that within one year 

from this day, as the special trustee has testified, if Congress puts 

that $22.3 million up, then the tribal system and the individual accounting systems are going to be on par. Your bleeding is going to 

stop, and then we have just got to go back and figure out what the 

restoration is on it. 

So I very much appreciate your patience this morning in coming 

out here. And I guess like the old farmer with his grandsons, they 

have been bailing hay all season long, and they finally get to the 

last bale. And he picks it up, and he says, "That's the one we have 

been looking for all year." So it's all over. I'm glad to provide this 

testimony and will be glad to answer any questions for you. Thank 

you very much, sir. 

[The prepared statement of Mr. Peregoy may be found at end of 

hearing.] 

Mr. HAYWORTH. Thank you very much, Mr. Peregoy. I appreciate 

it as I appreciate the testimony of all those who join us this morning. 

Let's begin, Mr. Peregoy, with a couple of points that come up. First of all, I appreciate your assessment of the situation in terms 

of the liability of the Federal Government. It almost seems as if the 

liability under the construct you offer is compounded by the 

nanosecond. With every syllable, you can attach a dollar value to 

it, almost, it can be argued. 

But your testimony begs the question in terms of the possible solution advanced by our host today. Chairman Makil in terms of 

taking a look at possible remedies-and you heard him suggest it, 

and we'll just repeat it here--for every line item in the Department 

of Interior, a $12 billion-plus enterprise, maybe closer to $13 billion 

or more allocated annually, Chairman Makil says for the next fiscal 

year and the two years thereafter, that there be an across-theboard take, if you will, of one-half of 1 percent, the theory being 

that-and believe me, fve been on the front lines fighting a lot of 

these battles in terms of Native American programs and the trust 

responsibilities of the Federal Government. 

Yet even acknowledging that, I guess the question becomes, even 

mindful of the dilemma, you state an opposition at least to touching Indian programs. Is that something that from your point of 

view should not be open to consideration at all? And I wonder why, 

because it seemed to be a very captivating policy solution. 

Mr. PEREGOY. Essentially, Mr. Chairman, that is my position, 

that to fix a problem which the Federal Government has created 
110 

and basically that constitutes a breach of its legal and moral and 

ethical duties should not be forced upon the very people who the 

Federal trustee is there by law to benefit. That, to me, would be 

wholly unconscionable. 

And according to the calculations that have been done here, I 

don't think that you need to hit into the Bureau budget to be able 

to fix that problem. If you figure one-half of 1 percent of the Interior budget's going to bring you, what $60 million a year times 

three years, that's $180 million. The special trustee figures it's 

going to take $150 million over five years or $100 million-plus over 

three years. You can get that one-half of 1 percent without going 

into the Bureau budget. And it might even be able to be done for 

a little less than one-half of 1 percent. And I would add this, if I 

may, sir. That number one, the United States Government through 

the Department of Interior primarily has a legal obligation to these 

Indian people as a trustee. 

It does not have similar obligations through other agencies in Interior, as you have aptly pointed out yourself. But we're talking 

about people. We're not talking about rocks, animals, or birds here. 

We're talking about people. And the Bureau is the only people 

agency within Interior. 

And I would suggest secondly, because of the fact, as the special 

trustee has testified, this problem, again, Mr. Chairman, is a result 

of 20 to 30 years of neglect in terms of putting the money into the 

system. Well, it seems to me that quite likely other agencies in Interior have somehow indirectly benefited over that 20- or 30-year 

period, because they perhaps got that money rather than that 

money going to fix the trust system like it should have been done. So I think that it is not unfair at all to leave the Bureau out of 

that mix. And I do applaud and recommend Mr. Makil's solution, 

with the exception, as I have testified, that it not come out of Indian programs. 

Mr. HAYWORTH. And so the amendment being, if this were actually something that we had in the form of a statute or proposed 

law, you would not be adverse to seeing it come out of Interior's 

budget in some other incremental fashion, but simply not to touch 

any program 'that deals with the very human element of the trust 

obligation to Native Americans? 

Mr. PEREGOY. Absolutely. I think it's too simple to say that Native Americans have already taken more than their fair share of 

the budget hits in the Department of Interior, compounded with 

this trust responsibility to government that would be patently unconscionable to expect the very people who are the trust beneficiaries of this government to pay for the broken trust. 

Mr. HAYWORTH. Mr. Peregoy, you mentioned the real difference 

just in terms of the multiplicity of parties affected in these individual accounts in excess of some 300,000 Native Americans as opposed to the tribal dilemma that exists. 

In previous testimony in Washington, folks from your organization have come to visit us and offered testimony-and I hope I'm 

not mixing up the people involved or their comments when I paraphrase it by saying that the problems that we see in the Arthur 

Andersen audit of $2.4 billion are just the tip of the iceberg. 
111 

You accurately point out to us 300,000 individual accounts. Do 

you have an idea of the dollar value attached yet, or that's something that still must be ascertained by the special trustee, or, given 

my former profession, Til use the analogy, can you give us a ballpark estimate? 

Mr. PEREGOY. I am very reluctant to even give you a ballpark estimate, because we simply do not know. One of the problems, as 

you know, Mr. Chairman, is that these records of these liM accounts were systematically and purposely destroyed by the Department of Treasury, including canceled checks, in 1987. 

So that to this day, the government cannot prove who was paid 

out this money out of these accounts over all of these years, and 

that in itself is a fundamental breach of any trustee. They are required to keep those records in perpetuity. We just don't have any 

idea at this point how much money we are talking about. 

And we're working with an accounting firm to try to work that 

out so that we can come up with some kind of a reliable, justifiable 

estimate. But at this point, I would not venture to even make any 

kind of a guesstimate. But I think that it is very accurate to state 

that we're looking at the tip of the iceberg here and that it behooves all of us to continue to see how much is below there. 

Mr. HAYWORTH. All right, sir. Thank yoq. very much. 

Mr. PEREGOY. Thank you. 

Mr. HAYWORTH. Let me turn to Ms. Barton. And Ms. Barton, I 

very much appreciate your testimony here today on behalf of your 

trial chairman. I wanted to-and I heard it mentioned almost parenthetically, and I think it's a point that again needs to be brought 

up, because witness after witness this morning has accurately stated-and perhaps they have not used this particular term in doing 

so-the acute nature of this problem. 

The neglect has gone on for so long that why, in your words, you 

believe that the trust responsibility, that the Federal Government 

has yet to earn the trust of your people, and I dare say that's the 

point of view of many Native Americans in this country. With this 

acute problem, growing worse by the nanosecond, I just wanted to 

amplify one piece of your testimony. 

It may have come in conversation with President Makil here 

today. He told us that the advisory board under the BIA has met 

only once since last September. Now, I want to make sure I understand your testimony accurately. There are no funds to have the 

advisory board convene again, no BIA funds available until October 

1997? Is that correct? 

Ms. BARTON. That is correct. 

Mr. HAYWORTH. 1996 or 1997? 

Ms. BARTON. 1997, but I will confer with Arlene. Is that fiscal 

year 1997? Fiscal year 1997. 

Mr. HAYWORTH. Fiscal year 1997. So this would be, again, with 

the discrepancy in the calendars, one is fiscal, one is real time; and 

so that would mean October of this year. But still, a discrepancy 

of meetings. 

Again, revisiting what you heard in the wake of the audit, your 

tribe owes the BIA some $15,000 according to the estimate, the 

audit of Arthur Andersen? Could you revisit that again, the expla-
112 

nation given for that by Arthur Andersen and the other folks involved in the audit? 

Ms. BARTON. The technical part of that, I would confer with 

Gerry Hill, our chief counsel. 

Mr. HAYWORTH. Sure. We'll defer to the chief counsel here. 

Ms. BARTON. If he could give the details on that. 

Mr. HAYWORTH. Just for the record, again, Mr. Counsel, if you would give your full name for the record, and including accurate 

spelling, that would be good, so we have an accurate record. 

Mr. HILL. Gerald L. Hill, chief counsel, Oneida Tribe, Wisconsin. 

Mr. HAYWORTH. And Mr. Hill, feel free to pull up a chair if that 

helps you out a little bit back there, make a little room for you. Mr. HILL. With regard to the audit procedures applied to the 

Oneida accounts, in response to a letter from the Office of the Spe- cial Trustee indicating the process that was used, our chairman responded on May 8th and indicated that the amount of transactions 

over the past 20 years had exceeded 2,000, of which only 12 per- cent of the transactions were supportable by documentation in our 

accounts. 

Our concern about this, of course, was with the results showing that the tribe owed money rather than being justified in any amounts that they were taking care of for us. As our secretary just testified, our own trust accounts for those same periods are showing amounts in excess of $19,000 in favor of the tribe. Clearly, there is a conflict there that needs more investigation to document 

where we are with them. 

And I think that the amounts of money that we're talking about, the Oneida Tribe, while small compared to other tribes, should be 

of concern for the committee to give the office the kind of support it needs to conduct a very thorough type of audit. So this has been 

supplied before to the office and is also included in our testimony. Mr. HAYWORTH. Mr. Hill, I thank you for offering your viewpoint 

on what exactly transpired, and Ms. Barton, I thank you for yield- ing to Mr. Hill. It almost sounds like a Yoga Berra-esque malapropos. It's seemingly an irreconcilable reconciliation afoot here. And 

I know that certainly shouldn't be the case. 

And with that in mind, let me turn to Treasurer Benedict. Because you offered in your testimony, Madam Treasurer, an interesting perspective. And having not had the benefit of the theories of 

accountancy and that type of discipline which many take on as a 

career and, indeed as a well-respected position in society, I was interested to hear of your testimony involving tests, the downstream 

versus the upstream test, and I wanted to go back to that for a second. 

I guess based on something that I never learned in journals or 

principles of accountancy but something that was in one of the first 

math workbooks !licked up as a younger guy, admittedly not too 

good in math, an that's just the principle of the commutative 

property of addition and the associative properties. There are certain ways you can add numbers, and the same totals should come 

up. 

Now, you had a very dramatic-a very dramatic discrepancy, to 

say the least. I just want to make sure I understand this. By your upstream tests, it was your finding that the government owed your 
113 

tribe $4.4 million, yet the government with its downstream ap- proach estimates that--was it your tribal government, or the government only owing you $10,000? 

Ms. BENEDICT. The government owing the tribe. 

Mr. HAYWORTH. The government owing the tribe $10,000 as op- posed to $4.4 million? 

Ms. BENEDICT. Correct. 

Mr. HAYWORTH. With your knowledge of finance, take me back 

through this again. It just kind of intrigues me. What could have 

been the situation that made the downstream so radically different 

from the upstream estimates and tests that you conducted? 

Ms. BENEDICT. Let me just explain the process again, maybe one 

more time. 

Mr. HAYWORTH. OK 

Ms. BENEDICT. What they had done was taken deposits that they knew were already in the general ledger and selected their contracts based on those deposits, because they knew the money had 

been received into the account. So they-assuming there must be 

documentation for it. 

So they take the general ledger deposit, and they trace it down 

using all of the contract documents, down to the bill for collection 

or the lease records. Basically, what we call that is a clerical accuracy test to see if somebody typed the number wrong or something like that. 

What we did was took all of the same timber saw contracts that 

they used-and in our case, it may be a little bit different, because 

we had a lot of our records-and used statement of completion to 

verify what the total contract amount should have been deposited into the accounts and traced-took the bills for collection and tried 

tracing those up into the general ledger. That's the most beneficial 

way for tribes, because it shows you what should have been depos- ited that may not have been. 

We have asked the Bureau or OTFM to research our report. We 

provided this back when they finished the reconciliation. And their 

response to us was, "Well, you'll just have to bring it to the nego- tiation table when we negotiate with your tribe, because we're not 

going to research your report. We're not going to look and see if 

maybe some of those were in there, and you just didn't catch them 

or anything of that nature." 

And at one point, our report was even told to us that it wasbecause it wasn't done by a third party, that basically, it had-it 

wasn't worth anything, I guess, to them to research and also that 

they hadn't been provided funding to do research on that, yet, though the Bureau of Indian Affairs paid for the report to be done. 

They gave us the money to do it. 

Mr. HAYWORTH. So the government in one sense offered resources for you to do that report? 

Ms. BENEDICT. Yes. 

Mr. HAYWORTH. But yet another agency within the government, in this case, the Office of Trust Fund Management, said--

Ms. BENEDICT. The Office of Trust Fund Management, specifi- cally, the reconciliation staff, provided the funds and also the peo- ple that we provided the report to. 
114 

Mr. HAYWORTH. OK. But again, some folks did not-! want to 

make sure I understand who exactly gave you the money to do the 

report and then who told you, "Sorry, we're not going to accept it"? 

Ms. BENEDICT. It would be Joe Christi and Joe Weller, who were 

reconciliation project staff. 

Mr. HAYWORTH. So staff? 

Ms. BENEDICT. I'm assuming they're Office of Trust Fund Management staff. 

Mr. HAYWORTH. But they're not responsible. They're the nutsand-bolts guys, not the folks who-and maybe I'll defer later to our 

friends from the office. They're the nuts-and-bolts folks, not the 

people who set out the philosophical parameters or the policy guidelines of the full office, to your knowledge? Ms. BENEDICT. Well, to my knowledge, these are the same persons who have the authority to issue issue papers. Mr. HAYWORTH. Well, one is tempted to talk about the right hand and the left hand here and seeing some basic disconnection, 

but perhaps this is obviously something we'll have to pursue further to understand exactly what goes on in the-and they said because there was not a third party doing the study, your findings, therefore, they would not accept? 

Ms. BENEDICT. Correct. 

Mr. HAYWORTH. Having provided the funding to do it, then they said~r someone providing the funding, and then they said, "Sorry; it's a moot point," or, ''We don't want to accept your data." 

Let me turn, then, to-! thank you for your testimony, Treasurer 

Benedict. Let me turn to the chairperson of the Yurok tribe. Chairperson Long, we again appreciate your discussion here and what 

you bring to the table here and the nomenclature of a "new" tribe, and I'll put that in quotations, given the challenge you face and 

your perspective that this is a division or a secession, if you will, that was not necessarily driven by your folks. And, indeed, you called it "insulting'' from your perspective. What is the biggest-! mean, we have gone over so much today and so many different areas of concern. If you could prioritized again through your eyes with your status as a new tribe, what is 

the greatest concern of this trust fund mystery, if you will, that you and your people have? 

Ms. LONG. Basically, what is the amount of money that's held in 

trust for us. A new tribe-! don't have the records, so let me see 

the records that you have. At least let me see the records that you have, and I'll be blunt about this. 

There has always been a dispute between the Hoopa and the 

Yurok people for years. And the Hoopa-Yurok Settlement Act settled that. We have now said, "OK, Hoopa Tribe. You have what you have. And Yurok Tribe, you have what you have. And we'll go on 

from here." It has not been easy for the Yurok people to accept that, but we have accepted it. 

And we have made very strong strides forward in our organiza- tion. We'll work with the Hoopa Tribe on any issue that we pos- sibly can. And if this is an issue we work with the Hoopa Tribe on, 

we will to solve it, because it was a joint account prior to 1988. We 

face the same problems that the Hoopa Tribe faces with this accounting, because it was a joint account. 
115 

But when they split it and they said, "OK, this is your share of 

the pie, Yurok Tribe," we need to know what made up those 

records. We need to know what made up that part of the pie. But 

I'm told, "I can't give you that, because Hoopa Tribe might not like 

it." And I'm saying, ''Wait a minute, now. It's a joint account. I can 

have it. Hoopa can have it. Why can't we have it together?" It was 

only after that we were able to try to open the door to look at the 

records. 

Mr. HAYWORTH. And you bring. up a topic that I suppose will 

take research necessary by our staff in terms of what specifically 

the action taken to make this division. To your knowledge, was 

there any statutory language, any provision within the agreement 

that certainly said, ''Well, of course there's going to be a joint sharing of information," or is that something that now needs to be provided either through statutory relief or through agreement of your 

two peoples? Do you have any knowledge of what existed in terms 

of the agreement? 

Ms. LoNG. Well, the Hoopa-Yurok Settlement Act in itself set out 

how the funds would be split, and that's fine. We understand that. 

But I need to know what made up the fund in the very beginning 

in order for them to divide it. And without seeing the records of 

what made up that fund, I can't determine what the total dollar 

is. 

We looked at one account, one account, and we held a fishing 

court for a number of years on the Yurok Reservation, which was 

because our people fished, and you got fmed for-if you violated the 

regulations. And it's $50. Some Yurok person that was allowed to 

fish had to pay a $50 fine. 

I can trace that where it goes into this account, but then I can 

see why it went over to Hoopa. Well, why should it go to Hoopa? 

I know it's only $50, but why should it go to Hoopa? It was a Yurok 

tribal member that paid it. 

If that's a fund that's sup:posed to be split, then split the $50. 

But don't just say, "OK. The $50 goes to Hoopa." There's no rhyme 

or reason of how they split those funds. So that's just one minor 

thing that we found looking at the records that we have. I don't 

know what is there. I need to look at the records to see what is 

there. 

Mr. HAYWORTH. The analogy being, in a very dark room, you at 

least need a candle or a flashlight, if not power restored, to be able 

to see what's in there so you can flick the switch and see what's 

in the room. 

Ms. LONG. You know, and of all the tribes across this nation, I 

believe the Bureau of Indian Affairs has records for the Yurok 

Tribe. They were our trustee for over 40 years, and they acted on 

our behalf, because we were one single, unified reservation. 

And because the Yurok Tribe was not organized as a separate 

government, they acted on our behalf, specifically acted on our behalf and kept those records. So they have those records. If they 

don't have it, then they destroyed it. 

And that's our problem with the same staffers. That was the superintendent at that office. He knew the interests of the Hoopa on 

the Yurok accounts, and yet he's telling me one thing, and he's not 
116 

telling that to the Hoopa people. There's a conflict of interest, a 

strong conflict of interest there. 

Mr. HAYWORTH. On that very compelling note, I want to thank 

you all for your testimony and answering questions. I indeed want 

to thank all of those who joined us today, especially the ever-intrepid, ever capable staff that made the venture forth from the 

swampland that does surround Washington, DC. 

I really appreciate the efforts of everyone here today. This obviously raises more questions for us, but I think what is especially helpful in addition is the effort by many to offer some solutions and 

a framework. And while admittedly, our interaction here on this 

planet in every human endeavor is imperfect, to say the least, 

there may be corrective actions that we can take and certainly should take to bring about some sort of satisfactory resolution of 

the problems we confront. 

So with that, I thank you witnesses. I thank also my colleague from American Samoa, who unfortunately had to leave a bit early 

to catch that plane toward the 50th State and another conference. 

And with that, this session of the task force stands adjourned. Thank you very much. 

[Whereupon, the task force was adjourned; and the following was 

submitted for the record:] 
117 

united States Bowie of Representatives cc-ittee em R.eaourcea 

Task Force 011 l:Ddi.an Trust PuDd MaDag_,t 

Bearing 011 l:Ddi.an Trust Punds MaDag_,t 

Test~y of Domla Brwin 

Director, Office Of Trust Funds Managaaent 

Phoenix. Arizona 

August 20. 1996 

Thank you for the opportunity to present testimony on Indian Trust Funds 

Management. As you are aware the Office of Trust Funds Management manages 

APPROXIMATELY $422 million for 50 tribes in the Phoenix Area and $83 million 

for 37 800 Individual Arizona residents The hearings are focusing on trust 

manageme.nt practices and what it may take to ensure sound trust management in 

the fUture. Each of these focal points is discussed in turn. 

In October 1995, the Office of the Special Trustee for American Indians 

(OST) conmenced an assessment of the U. S. Government's trust management 

policies, procedUres, practices and syst~ms as they apply to indi viduci.l 

American Indian and American Indian tribal accounts. By February 1996, the OST 

completed the preliminary assessment and produced a conceptual strategic plan 

to .acquire and institutionalize specified systems. Implementation of this plan 

will permit and ensure that the U. s. Government establishes appropriate 

policies and procedures, develops necessary systems and takes the affirmative 

actions necessary to provide an accurate and timely accounting to American 

Indian trUst beneficiaries. In this manner the proper discharge of the 

Secretary's trust responsibilities can be accomplished. The Assessment and 

Phase I of the Strategic Plan are included in a document entitled "Special 

Trustee for American Indians, Assessment and Strategic Plan Principles, Phase 

I, February 1.996" which has been provided to Congress. 

In December- 1995, the U. S. Department of the Interior's Bureau of Indian 

Affairs substantially completed a multi-year "Tribal Trust Funds Reconciliation 

Project" (Reconciliation Project) and issued an "Agreed-Upon Procedures and 

Findings Report• for the period July 1, 1972 through September 30, 1992. Its 

major findings are substantially incorporated in the Special Trustee's 

Assessment. 

In August 1995, the Department of the Interior substantially completed a 

study of the_ trust management systems relating to Individual Indian Monies 
118 

(IIM) accounts and issued a report enti tled "liM Related Systems Improvement 

Project Report." The findings of this report are also substantially 

incorporated in the Special Trustee's Assessment. 

2 

The Special Trustee's Assessment , the Reconciliation Project reports, the 

IIM Related System Improvement Project Report and earlier and later reports 

issued by the General Accounting Office all confirm that the U. s. Government's 

trust management systems, policies, procedures and practices coupled with .the 

condition of the trust records and, notably, large numbeis of missing 

documents, are i 'nadequate to allow for: 

1 . a proper, accurate and timely accounting for trust account balances, 

collections, disbursements and i n vestments and the maximization of the 

return on investments . 

2. the preparation of accurate and timely reports to trust account 

holders regarding all collections, disbursements, investments and return 

on investments. 

3. an audit under generally accepted auditing standards. 

4 . any further reconciliation efforts, since the costs of such efforts 

would likely substantially exceed the benefits and at the same time 

would probably yield unsatisfactory and inconclusive results. 

While significant improvements have been made over the last several 

years, the inadequacies of the trust management systems, the condition of the 

historical records and the U. s . Government's inability to provide an accurate 

and timely accounting cannot be remedied without the major· reforms required by 

the Reform Act of 1994. To address these issues, the Special Trustee's 

strategic p lan identified nine i nitiatives or principles designed to rectify 

the problems and bring trust accounti ng and management systems up to commercial 

standards within three years. This, at a minimum, will i nvolve acquiring, 

automating, updating, integ·rating, coordinating and consolida t ing to produce: 

1. A trust resource/asset management - delivery system . 

This will involve obta i ning a new trust resource / asset management and 

delivery s ystem for as~et leasing, contracting, l e nding, buying and 

selling, together with standardized and /or integrated asset manage ment, 

credit and operating policies, procedures and practices. The system must 

be able to tie to and track from land and ownership records. 
119 

2 . An accounts receivable data and billing system that uses 

lease-contract and land and ownership information . 

3 

This will involve o~taining a new accounts receivable, billing and 

collection data system that uses lease-contract and ownership information 

fo.r trust income verification, reConciliation, billing, payments, 

collection, accoWlting, d~sburseme.nt, audit, a sset quality review and 

compliance purposes. 

3. A trust, depository, payments and delivery system for Individual 

Indi~ Money (IIM) accounts . 

. This will entail purchas~ a trust, depository, payments and other 

financial services accounting and statement system and a delivery syStem 

to more efficiently provide current financial services and to facilitate 

new and improved financial services to individual Indians and Tribes. 

4 . A land records and title recordation and certification system. 

This will involve acquiring a new land records and title recordation and 

certification system, capable of instantaneous linkage with the trust 

resource asset management, accoun~s receivable and trust accounting 

systems. 

5 . A general ledger and general accounting system. 

This will involYe obtaining or ~ifying a general le.dger and general 

accounting system ·to accoamoda.te all present and pla"nned systems and 

accounting improvements. 

6 .. A technology services center dedicated. to trust resource and f~ds 

management. 

This will involve ~btaining a centralized technology services center 

dedicated to .trust resources, trust funds and land ownership and records 

management processes. 
120 

4 

7. A national archives and records center. 

This will involve · obtaining and centralizing a ·modern national archives 

and records center for trus t resourc e , ass et and funds record storage and 

retrieval. 

8 . A risk management and control system . 

This will entail obtaining a risk management and control system that will 

.Provide for adequate operational audits, credit and asset quality audits , 

compliance reviews, independent a sset appraisals and liaison with 

outside , independent auditors. 

9 . An independent institutio nal structure . 

This will involve consolidating trust resource, trust funds and land 

ownership and records management processes into a single , i ndependent 

institutional unit with its own management struc ture to accommodate the 

restructuring and ;eorganization contemplated by Phase I of the strategic 

plan . The unit should be organized by function and dedicated exclusive l y 

to trust management . The unit should have agency or bureau status within 

the Department of the Interior or elsewhere . 

The conceptual work on the strategic plan is completed. The next ~ 

are conducting a requirements analysis. user n~eds assessment and a 

comprehensive inventory of existing skills, hardware and software, related 

network support and facilities 'requirements, all of _ which will lead to a 

technical requir~ments report for RFP purposes and confirm or revise the cost 

data contained in the conceptual s trategic Plan . This will require the use of 

an outside contractor. The 1997 President's budget request includes $1 million 

to conduct the analyses. 

·once the analyses are completed {expected to take 90 days from funding 

date) and once the staff of the OST is hired, the remaining elements necessary 

to produce the comprehensive strategic plan required by the Reform Act of 1994 

can be completed within 90 days or by March 31 , 1997 , if the President's budget 

request for FY 1997 is approved. 
121 

s 

The total FY 1997 request for OST is $36.3 million, a $20 million 

increase over the 1996 conference level of $16.3 million. The request includes 

$13.6 million to begin implementation of the strategic plan. The funds will be 

used primarily to upgrade and establish a new IIM accounting system, which is 

long overdue. The 1997 budget requests no-year funding to allow adjustments 

resulting from re-estimates or delays in plan implementation. However, it 

should be noted that if funding - for the strategic plan is delayed, the reform 

effort will be delayed. 

The $20 million requested increase in OST's budget for FY 1997 also 

reflects the high priority the Administration and the Secretary place on Indian 

Trust Asset Reforta efforts. Iq;»rove•e1it efforts are critically needed to 

ensure the Federal Government eeets its fiduciary obligations to Indian Tribes 

and· individual American Indians. While the Federal Government's trust 

responsibility is unique, systems, policies, practices and procedures of 

commercial trust operations can be applied to ensure that the Federal 

Government better fulfills its fiduciary obligations. Beginning in 1997, the 

evolution of trust system reforms will be at a point where increased resources 

can be prudently expended. 

In closing, I would like to ~hasize that •resolving the past• presents 

a difficult challenge to the Administration, the Congress, and individual 

Indians and tribes. The ending of the tribal reconciliation process in 

December, 1995 represents only the beginning of an effort to resolve problems 

with the U.S. Government's past trust fl.Dld management practices. This 

Administration is coamitted to solving these longstanding problems and has made 

si9nificant progress in strengthening trust funds operations and in taking the 

steps necessary to ensure the highest 1eve1 of fiduciary and investment 

standards are in place ~ the management of these funds. Future reforms will 

continue in earnest under the comprehensive strategic plan required by the 

American Indian Trust Fund Management Reform Act, provided· that adequate 

resources are appropriated by Congress . 

Enactment of the President•s 1997 Budget request would represent a 

substantial step to ensuriog that Indian trust reform efforts are implemented 

in a manner that ensures the fiduciary responsibilities of the Federal 

government are 7"'.~! 

This concludes my statement . I will be happy to answer any questions you 

may have. 
122 

Executive Office of the Chsirmsn 

WHITE MOUNTAIN APACHE TRIBE 

Task Force on Indian Trust Fund Management 

Testimony of Chairman Ronnie Lupe 

White Mountain Apache Tribe of Arizona 

Oversight Hearing 

Mesa, Arizona 

August 20, 1996 

PHON£ (602) 338-1560 

fAX, (602) 338-1514 

P.O. BOX 1150 WIIITERIVER, ARIZOSA 8594 1 
123 

TESTIMONY OF CHAIRMAN RONNIE LUPE 

of the 

White Mountain Apache Tribe 

Chairman Hayworth and Members of the Task Force Oversight Committee: 

My name is Ronnie Lupe. I am Tribal Chairman of the White Mountain Apache 

Tribe. I am pleased to have the opportunity to testify today at this oversight hearing about 

my Tribe's personal experience with BIA mismanagement of tribal funds and resources. 

I am most appreciative that Representative Don Young from Alaska has created this 

task force, chaired by our own Congressman, the Honorable J.D. Hayworth, to investigate 

Indian trust fund management by the Department of the Interior and Bureau of Indian 

Affairs. I am also heartened that on the Senate side, Senator John McCain. has held 

recent oversight hearings to scrutinize the government's wrongdoing. He characterized 

the BIA's failure to properly manage Indian money as a "theft from Indian people." 

In my personal experience, I have never seen any commitment on the part of the 

D~partment of Interior or BIA to properly manage the Indian trust fund. In fact, it took a 45 

year lawsuit by my Tribe to finally get the Department of Interior to admit that it could not 

account for $6.5 million in White Mountain Apache Individual Indian Mor11es (liM) between 

1871 and 1946. How can $6.5millionvanishwithoutatraceofdocumentatiou? My Tribe 

also obtained a judgment against the United States of America, for mismanagement of my 

Tribe's grazing lands, timber and other tribal trust funds. However, we belie11e that there 

are liM and other trust funds deposited after 1946 that still remain unaccounted for. 

Although we have no allotted lands on our reservation, a great deal of money was 

collected from Tribal enterprise funds, from the sale of timber and cattle grazing permits 
124 

which was then transferred to liM accounts so that the BIA could easily appropriate our 

money-- supposedly for Tribal use, without having to go to Congress. We have never had 

a verified accounting of those monies. In fact, some 24 years after we filed suit in 1951, 

the General Accounting Office could only complete a partial accounting for the years 

before 1946, but the post 1946 years are still in question. 

I am aware that recently the Native American Rights Fund (NARF) has filed a class 

action on behalf of 300,000 Indian people to seek redress for government mismanagement 

of liM trust funds. NARF describes it as the largest and most shameful financial scandal 

ever involving the United States government. I agree. These government managed trust 

funds are in total disarray and records are hopelessly broken down according to Arthur 

Anderson, the accounting firm employed to review the Indian Trust Fund account. I am 

sure that we are amongst the 200 tribes that have tribal trust funds deposited into the 

Indian Trust Fund and that there are still liM monies unaccounted for from our earlier 

history and after 1946. I have never, as Tribal Chairman, ever received an accounting from 

the Office of Indian Trusts as to how much money my Tribe or its individual members may 

have in the Indian Trust Fund. 

The White Mountain Apache Tribe has proved that the federal government, through 

the Department of Interior and BIA, committed waste and damage of untold millions of 

dollars to our reservation. The 22 million dollar judgment is a drop in the bucket of what 

we need to restore our lands. We will soon be presenting for Congressional approval a 

judgment distribution plan to use at least 20% of that judgment for a permanent land 

restoration fund to restore our once abundant grazing lands and timber which suffered from 

2 
125 

over 100 years of BIA mismanagement, malfeasance and nonfeasance. 

That lawsuit cost my Tribe over one million dollars in attorney and expert witness 

fees. The Department of Interior fought us every inch of the way. I am not surprised that 

the Native American Rights Fund claims that the Department of Interior has deliberately 

destroyed records and has obstructed implementation of the Indian Trust Fund 

Management Reform Act of 1994. NARF reports that the Department of Interior has 

obstructed the Special Trustee for American Indians from implementing and enforcing the 

Trust Fund Management Reform Act, and further, that the Trustee's mandate was 

deliberately sabotaged by the Department of Interior; DOl returned $24 million of unspent 

funds in 1995 which could have been reprogrammed with the approval of Congressional 

committees and applied to the work of the Special Trustee; DOl has refused to request 

adequate funds for the work of the Special Trustee mandated by the 1994 Act and has 

prevented the Special Trustee from preparing the strategic plan mandated by the 1994 Act. 

A solution to this shameful situation is for Congress to take the necessary steps to 

provide the Special Trustee the tools and resources he needs to fix the system and 

achieve justice for Indian people. I urge Congress to amend the Act as necessary to 

insure that the Trustee is armed with the strongest jurisdiction, subpoena power and 

funding to get the job done. The Court suit initiated by NARF may go on for years and 

even if it is won, there are always appeals and appeals of appeals. In short, without 

adequate funding and authority from Congress, the Trustee is doomed to failure. 

The resolution of this breach of trust transcends a mere accounting of Indian 

monies. It is a joint responsibility of Congress and the Administration and the responsibility 

3 
126 

of both political parties. Presidents and Secretaries of Interior have been aware of th is 

problem for years. It has become a matter of national conscience and moral turpitude . 

I have seen many task forces come and go, I can only hope that this one will see 

the matter through and provide the Special Trustee with all the powers and funding 

necessary to once and for all make the Department of Interior accountable under the 1994 

Indian Trust Fund Management Reform Act. The international community in this declared 

year for Aboriginal Peoples Rights is watching how the United States honors its legal and 

moral obligations to its Native peoples. 

I have one final point to make in respect to trust obligations of our Trustee the 

United States of America. Currently, the White Mountain Apache Tribe is involved in a life 

and death struggle for the preservation of its aboriginal homeland because of threats to our 

aboriginal ground water and surface water on our reservation. I am told that I must spend 

$500,000.00 during the next two years to document the dramatic effect that geologists and 

hydrologists have already advised is taking place due to unregulated pumping of the water 

from beneath our reservation by off-reservation sources. No different from liM monies, 

protection of our water assets is a trust responsibility of the Department of Interior and the 

United States. I need federal assistance to protect these sacred life sustaining waters from 

being mined from beneath our reservation. For many years, we have had to draw upon 

limited Tribal resources to finance the employment of attorneys and expert witnesses to 

protect our rights. I am told there is federal money for negotiation but not for litigation, but 

how can you negotiate when you do not even have the money to investigate the water 

resources that you have or to investigate the many claims opposing you? Other Tribes 

4 
127 

across the country are in the same position, especially in the semi-arid southwest. I am 

now faced with an environmental debacle of untold magnitude, no different than the past 

destruction of our grazing and timber lands. Willi be appealing to another Task Force five 

years from now when Congress finally pays attention to the theft of our water? Will my 

Tribe be paid a pittance for the wrongful taking of our water? Will my land once abundant 

become parched - its springs and rivers run dry before we obtain relief? 

Thank you again for this opportunity to speak on this important matter. 

White Mountain Apache Tribe 

5 
128 

Testimony on Indian Trust Funds Issues 

Before The 

Task Force on Indian Trust Fund Management 

United States House of Representatives 

By 

Ivan Makil 

President 

Salt River Pima-Maricopa Indian Community 

Scottsdale, Arizona 

August 20, 1996 
129 

TESTIMONY ON INDIAN TRUST FUND ISSUES BEFORE 

THE TASK FORCE ON INDIAN TRUST FUND MANAGEMENT 

UNITED STATES HOUSE OF REPRESENTATIVES 

August 20, 1996 

Submitted by 

IVANMAKIL 

Chairman and members of the Committee, I appreciate the opportunity to testify on this 

important issue. My name is Ivan Makil. I am President of the Salt River Pima Maricopa 

Indian Community. I am also a member of the Special Trustee's Advisory Board and a 

named plaintiff in the class action law suit filed on June I 0, 1996, on behalf of the 

300,000 liM accountant holders against Secretary Babbitt and Assistant Secretary Deer 

for breach of their obligations as trustees of Indian trust funds. 

In the Fall of 1995, I agreed to serve as a member of the Special Trustee Advisory 

Board because of my high hopes that the Trust Fund Reform Act, which this Committee 

spent two years working on, would finally correct the largest and longest-running 

violation of trust law in the history of our country. In June of this year, I agreed to be a 

plaintiff in the litigation because I was frustrated by the Secretary's effort to undermine 

that Act, cover-up the extent of the Department's breach, and stifle the Special Trustee 

and the Advisory Board. 

Below, after documenting these serious charges, I propose some solutions to this 

problem. They are radical remedies, but we are facing a very serious crisis. It is a crisis 

not just for Indian people but for all Americans. If the Executive Branch of the Federal 

Government is incapable of correcting violations of law by its own officials, if it takes a 

Federal court to compel an agency of the United States to cease violating its legal trust 

responsibility, then the United States Government will have lost its moral authority to 

compel banks, labor unions, securities firms and all other entities that hold money of the 

American people in trust,- to comply with the law. 

A. The Secretary's Failure to Support the Trust Fund Reform Act 

When I agreed to serve on the Special Trustee's Advisory Committee, I was impressed by 

Mr. Homan's credentials and experience. After working with him for the past nine 

months, I am equally impressed by his commitment to correcting this problem, his 

honesty and his quick grasp of the steps needed to correct this problem. On November 

14, 1995, after being in office for less than two months, Mr. Homan published his outline 

of the strategic plan for bringing the Interior trust systems into compliance with trust 

standards. Tbe plan is mandated by that the Reform Act and is due by September 1996, 

one year after Mr. Homan took office. Despite the fact that he had no staff and no 
130 

funding, he brought more clarity and direction to solving the trust fund problem in two 

months than the entire Interior Department had done previously in the six years that I 

have been involved in this issue. 

The cost of turning the outline into the detailed strategic plan required by the Reform Act 

was estimated at $2 million. The Special Trustee asked the Secretary to locate $2 million 

that could be reprogrammed from somewhere in the Department's $12 billion budget to 

enable him to complete the plan by the deadline. Despite the fact that the plan was 

mandated by statute and is the necessary first step to ending the Department's breach of 

trust, the Secretary said he was unable to find any portion of the money needed. As a 

result, the Special Trustee has not been able to do anything further on the strategic plan 

since November and he will be at least a year late in meeting the deadline set in the 

Reform Act for his plan. It is ironic that the Secretary was so concerned about meeting 

his obligation to report to Congress by May 31st on the reconciliation that his staff 

repeatedly contacted this Committee about the deadline. Yet, he appears to show no 

concern about the much more important Strategic Plan report deadline, the report that is 

necessary to end the violations of the law and end the millions of dollars in liability the 

United States in accruing every month the system remains in violation of the law. 

More recently, the Special Trustee asked the Secretary for $15,000 to hold a meeting of 

the Advisory Board. Again his request was rejected. Except for our organizational 

meeting in December, the Advisory Board has had no meetings and will have no 

meetings for at least the rest of this Fiscal Year. As a result, the Indian community is 

completely excluded from whatever deliberations are occurring within the Department 

about trust fund reform. 

Yet, during this same period that he could find no money for trust fund reform, the 

Secretary went on television to announce that he would find $4 million in emergency 

money to fix the C&O canal and to announce that he would be including $100 million in 

new money in the FY 97 budget to purchase land in the Everglades. I am not opposed to 

these environmental activities. But as a public official, I know that I must meet my legal 

obligations before I chase after the programs that meet my personal and political agenda. 

Not only has the Secretary failed to make coming into compliance with the law his 

highest priority, he has placed it far below his personal and political agenda. 

B. Muzzling the Special Trustee 

In order to insure outside pressures do not force him to move trust funds higher up on his 

priority list, the Secretary and his staff have sought to keep the Special Trustee from 

speaking frankly to his beneficiaries or taking steps to insure the full scope of this 

problem is fully understood by the account holders and the public. 
131 

Those of us on the Advisory Board have suspected for some time that the Secretary was 

muzzling the Special Trustee. Any doubt was removed last month at a meeting of tribal 

officials, when Mr. Homan responded to question after question by saying, "I have a 

personal and professional opinion on that issue, but I have been instructed not to say 

anything on that subject." Since the Special Trustee reports only to the Secretary, only 

the 

Secretary has the authority to instruct him not to speak. After 150 years, we finally have 

someone in the Interior Department who knows something about trust fund management 

and who is committed to carrying out a trustee's duties, and he is muzzled by the 

Secretary. 

C. Cover-up 

The third n~ason I decided to become a plaintiff in the law suit is that it became 

increasingly clear that the Secretary was trying to cover-up the full extent of the 

Government's liability to the account holders as a result of Interior's mismanagement. It 

is well known that the $2.4 billion identified as unreconcilable by Arthur Andersen is just 

the lip of the iceberg regarding the Federal government's liability. For example, Arthur 

Andersen did not address the losses the account holders suffered because the Government 

never installed an accounts receivable system and therefore cannot tell an account 

holder if a lessee paid what was due under the lease. 

Yet when we sought to raise the issue of the larger liability with Interior, through our 

attorneys, we were told that the problem is too big and the Government simply does not 

know how to deal with it. In other words, Interior's position is that Government has made 

such a mess out of the trust fund records that it should now be let off the hook because it 

will be too difficult to calculate the losses suffered by the account holders. 

The proof that this was nothing but an attempt at a cover-up became clear when the 

plaintiffs in the law suit approached Price-Waterhouse with the same issue. We were told 

that the techniques of economic modeling make it feasible to produce valid estimates of 

the liability that will hold up in court, and can be done at a cost that is only a fraction of 

what Interior paid Arthur Andersen for looking at the tip of the iceberg. In other words, 

it was not that the Government could not figure out how to determine its liability, it 

simply did not want to and made no effort to see how it could be done. In my book, this 

is called a cover-up. Fortunately, it is not a successful one, because Price-Waterhouse 

will be presenting the calculations Interior said could not be done in court during the 

evidentiary portion of our law suit. 
132 

In sum, the Secretary has made meeting his legal obligations a low priority, has 

undermined the Special Trustee, and has tried to cover-up the full extent of the 

Government's liability. However, to make clear that this is not a personal attack on 

Secretary Babbitt, I want to emphasize that, with some minor changes in the facts, these 

same charges could be leveled against former Secretary Lujan when he was in office, 

former Secretary Andres when he was in office, and every other Interior Secretary 

for the past I 00 years. They all knew they were in breach of trust, they all made, at best, 

token efforts to correct the breach, and they all worked to bury the problem until they 

could pass it on to their successor. The message is clear -- the Secretary of the Interior, 

institutionally, is incapable of solving this problem. 

PROPOSED SOLUTIONS 

I have several proposed solutions, all of which require Congressional action. However, 

while I believe the Secretary is incapable of leading the refonri effort, I will not 

recommend that the trust functions be removed from the Interior Department at this time. 

To the contrary, I strongly oppose any effort to relocate the trust functions at this time. I 

do so for two reasons. First, in emergency medical care, when a person has many broken 

bones, they teach you to stabilize the patient before you move him. The trust fund 

program is broken and it should not be moved until the new systems are put in place 

(systems that will be needed wherever the trust functions ultimately end up). Otherwise, it 

will cause enormous dislocation for the thousands of Indians who rely on their trust 

money for survival. It will also likely destroy much of the evidence needed to finally 

determine the scope of the losses suffered by the account holders over the years. 

Secondly, moving it now would violate this Committee's commitment to selfdetermination and the policy it has set forth in S. 814. That bill says that the 

reorganization of the BIA will be put into the hands of the tribes, at the local, area and 

national levels. That same principle needs to be applied to trust funds management. The 

future of that program should not be dictated from Washington out of frustration at the 

problems I discussed above. During the three years it will take to stabilize the program, 

the Special Trustee, the Advisory Board, and others should be tasked with the 

responsibility of initiating a dialogue with the tribal and individual account holders on the 

future of that program. At the end of the three year period, the Indian community should 

be asked to produce a reorganization plan for that program's future. This is no different 

from what S. 814 provides for other BIA programs. 
133 

To insure the program does get fixed during the three year period while its future is being 

debated by the Indian community, I have three recommendations. They are as follows: 

I. That for FY 97, 98 and 99, an amount equal to 1/2 of 1% 

should be taken from every line item in the Interior Department 

budget and transferred from that line item to a fund to correct 

the trust systems. This will raise $60 million a year, which 

will be enough to correct the problems, using the budget prepared 

by the Special Trustee. The loss of 1/2 of I% of its budget will 

not seriously hurt any agency in the Department, while it will 

take the Department out of its present status as the largest 

trust violator in legal history. 

2. Amend the Reform Act to convert the Office of Special 

Trustee and the Advisory Board into a control board similar to 

what Congress created when it concluded that the government of 

the District of Columbia was incapable of reforming itself. The 

trust fund control board would have the authority to compel 

action and to approve all trust related activities by every 

Interior official. The Secretary would have no authority over 

the <.ontrol board. There is precedent for a part of a federal 

agency to not be subject to the authority of the Secretary. For 

example, the Comptroller of the Currency is not subject to the 

Treasury Secretary's authority. 

3. Amend the Trust Fund Reform Act to give the Special 

Trustee the independent authority to file suit in Federal Court 

when necessary to stop breaches of trust or to prevent violations 

of the Reform Act. This will permit the: Trustee to intervene in 

our law suit on the side of the account holders, or at least as 

an aid to the court. Without it, he will be treated as an 

employee of the defendant, where he will be kept silent by the 

Justice Department attorneys, thereby denying the court the 

valuable insights 'and expertise he has. 

Conclusion 

Only by removing the Secretary from a position of authority over the trust functions, 

compelling the Department to produce the money to correct the violations, and giving the 

Special Trustee the independent authority to go to court, will the problems I discussed 

above -- the low priority for trust reform, the muzzling of the Special Trustee and the 

Secretary's cover-up and stonewalling -- be effectively corrected. 

I am available to assist the Committee to develop these proposals into legislation. Thank 

you for the opportunity to testify. 
134 

TESTIMONY OF NAVAJO NATION PRESIDENT ALBERT HALE 

CONCERNING MANAGEMENT OF INDIAN TRUST FUND ACCOUNTS 

I. Problems which the Navajo Nation has had concerning the Bureau 

of Indian Affairs' ("BIA") and Office of Trust Funds 

Management ( "OTFM") management of the Nation' s trust fund 

accounts. 

A. The BIA/OTFM has failed to follow Navajo Nation 

instructions regarding investment of the "1982 and 1986 claims 

settlement funds (•Judgment Funds") . The BIA/OTFM has f ailed to 

follow Navaj o Nation instructions regarding investment of t rust funds. Because the Navajo Nation was attempting to secure a 

release of 1982 and 1986 claims funds, the Navajo Nation sent the 

BIA correspondence in 1992 requesting that those funds be invested 

in short-term securities. This request was made to ensure t hat 

those funds would be easily liquidated at the time of withdrawal. 

Contrary to the Navajo Nation's instructions, the fund were inves ted in securities which have maturity dates several years into 

the future. The Navajo Nation will now realize a loss when the 

securities are cashed in. 

B. Failure to follow Navajo Nation instructions 

regarding investment of Rehabilitation Trust Funds. The Navajo 

Nation also instructed the BIA/OTFM to keep the Rehabilitation 

Trust Funds in short-term securities of less than o ne year 

duration. Federal law, at 25 USC Section 640d-30, provides that 

these funds "shall be available to the Navajo Tribe , with the 

approval o f the Secretary, solely for purposes which will 

contribute to the continuing rehabilitation and improvement of the 

economic, educationa l a nd social condition of families and Navajo 

communities" that have been affected by the Navaj o-Hopi land 

dispute: The Navajo Nation's instruction to invest these funds 

short-term, in order to ensure their availability pursuant to federal law, was also ignored and those funds have been invested 

long-term, to the detriment of the Navajo Nation. 

C. Failure to release the 1982 and 1986 Claims Funds and Scholarship Claims Funds. In 1991, the Navajo Nation first 

requested that the Navajo Area Office of the Bureau of Indian 

Affairs assist the Navajo Nation in securing the release of certain 

judgment funds under BIA management f or integration into the Navajo 

Nation investment system . Despite providing a variety of documents 

and answering many questions raised by the Bureau, the funds were 

never released . 

As outlined within the Navajo Nation's proposed plan, the 

Navajo Nation implemented an investment program in 1990 which has 

been extremely successful. Today, the Nation manages 18 different 

funds containing approximately $700 million in a ssets. According to the BIA's March 31, 1995 accounting records, approximately $59 . 1 

million in 1982 and 1986 Claims Funds and Scholarship Funds are in 

the BIA's custody. 
135 

By resolution CJA-11-96, the Navajo Nation Council 

approved a "Request for Voluntary Withdrawal From the Trust Fund 

Program" pursuant to the American Indian Trust Fund Management 

Reform Act of 1994 . The Request asks for release of Chapter Claims 

funds and Scholarship Claims funds received in settlement of 

Dockets 69 and 299, 256-69 and 377-70 and 588-83L. The resolution 

and request were transmitted to the Office of Trust Funds 

Management within the Department of Interior. 

By letter dated April 12, 1996, the Office of Trust Funds 

Management requested that the Navajo Nation provide additional 

documentation to complete the "application" for voluntary 

withdrawal. The request for additional documentation raises issues 

concerning imagined discrepancies between the Congressional Plan 

and the Navajo Nation Plan . The Navajo Nation has previously 

addressed these concerns in detail with the Bureau . In 1991, 

former Attorney General Donna Christensen explained the perceived 

inconsistencies between th!;, Congressional Plan and the Navajo 

Nation Plan to the Area Director. In a letter to the Office of 

Trust Funds Management dated June 24, 1996, I again addressed the 

concerns expressed by that Office, which are essentially a 

restatement of the concerns previously addressed. Please note that 

the concerns raised are not substantive; they do not affect the 

issue of whether the Navajo Nation is capable of managing the 

claims settlement funds . Instead, the concerns raised illustrate 

the worst bureaucratic tendencies of the federal government and a 

lack of acknowledgement of Navajo law. 

In addition, the OTFM has requested documentation which 

is not required by the 1994 Act and which is not even relevant to 

the determinations which the Secretary must make pursuant to the 

1994 Act in assessing a tribe's proposed plan. For example, the 

requirement that the Navajo Nation submit a Navajo Nation Council 

resolution acknowledging that the funds, once released to the 

Nation, will no longer be in trust status, is not found in the 

American Indian Trust Fund Management Reform Act or any valid 

regulations promulgated by the Secretary. Because the Act itself 

provides that the funds will be removed from trust status once 

released, there is no need for the Nation to expressly acknowledge 

a portion of the law' s contents . 25 U.S.C . §4022(c ). The Act also 

provides that a tribe's submission of a plan for voluntary 

withdrawal and the Secretary's acceptance of a plan for voluntary 

withdrawal does not constitute acceptance of the fund account 

balance as accurate, nor as a waiver of the tribe's r.ight to seek compensation. 25 U.S . C. §4027. 

The Navajo Nation has demonstrated that the request for 

voluntary withdrawal which was previously submitted to the Office 

of Trust Funds Management is adequate for the Secretary to make the 

determination that the conditions set forth within 25 U.S.C. 

§4022(b ) have been satisfied in that : 

2 
136 

1. the Nation's plan for voluntary withdrawal has been 

approved by the tribe's governing body by 

resolution; and 

2. t he Nation • s plan is reasonable considering relevant 

factors such as the capability and experience of 

the individuals or institutions that will be 

managing the trust funds and that there is adequate 

protection against substantial loss of principal. 

Despite the fact that the proposed plan meets the 

requirements of the 1994 Act, both on its face and substantively, 

the funds have still not been released to the Navajo Nation. It is 

obviously in the best interests of the United States to release 

these funds immediately, not only because the Navajo Nation has met 

the requirements of the 1994 Act, but also for the purpose of 

limiting its liability to the Navajo Nation for mismanagement of 

these funds. 

The purpose of the 1994 Act was to allow tribes an opportunity to manage tribal funds currently held in trust by the 

United States, consistent with the trust responsibility of the 

United States, in a manner which would : 

1. 

2. 

give Indian tribal governments greater control over 

the management of such trust funds; or 

otherwise demonstrate how the principles of selfdetermination can work with respect to the 

management of such trust funds, in a manner 

consistent with the trust responsibility of the 

United States. 

The Navajo Nation's experience, thus far, has 

demonstrated that the United States is willing to deny the 

opportunity which Congress has created in order to continue to 

serve a bureaucracy which undermines self-determination and which 

has actually done financial damage to the Navajo Nation. From the 

Navajo Nation's perspective, this mindset must immediately change . The Navajo Nation has complied with the statute. We are entitled to receive our money and to take responsibility for its management, 

so that we can put it to work for the Navajo People. 

II. Problems with the OTPM Reconciliation Project 

A·. The Navajo Nation has been provided with voluminous 

documents concerning an attempted reconciliation of tribal trust 

funds administered by the BIA for the period July 1, 1972 through 

September 30, 1992 . Based upon an initial examination of a portion 

of the documents, it is apparent that further consultation will be 

necessary between the Navajo Nation and the United States• contract 

3 
137 

auditor, Arthur Andersen. The Navajo Nation has been advised that 

further consultation will be at the Navajo Nation's expense. 

Because we are dealing with activities which clearly fall within 

the scope of the federal government's trust responsibilities, there 

should be funds made available for all affected tribes to conduct 

further meetings with the contract auditors in order to ensure a meaningful examination of the source documents and working papers. 

B. Based upon the Investment Benchmarks calculated by 

the Arthur Andersen firm, the BIA's actual investment returns for 

Navajo Nation funds underperformed the benchmark by approximately 

$3.1 million . This underperformance supports the Navajo Nation's 

position that the investment management style of the BIA and OTFM 

is costing the Navajo Nation millions of dollars annually . This 

point is underscored within the Navajo Nation's application for 

withdrawal of certain judgment funds, in which the Nation 

illustrates how simple changes in the types of securities the funds 

were invested in would have reaped several millions more in 

investment income to the Navajo Nation. 

III. The Navajo Nation intends to hold the United States liable for 

all losses which it has suffered as a result of the BIA's and 

OFTM's inadequate management of Navajo Nation funds. 

Since implementing the Navajo Nation's investment program 

i n 1990, the Navajo Nation government has been deeply concerned 

about how the United States manages Navajo Nation funds. Our 

internal investment program has strict guidelines which must be 

followed , benchmarks which must be met and internal controls to 

ensure that no loss of fund principal occurs. We expect no less 

from the federal government. We have learned, from aggressively 

managing Navajo Nation funds since 1990, that wise investments are 

the key to our financial future. 

Our government would not be able to function in the next 

century without relying on the investment strategies that we began 

pursuing some time ago. While the expertise which the Navajo 

Nation has developed has allowed our government to have a much 

better grasp on our future needs, this expertise has also shown us 

that the systems used by the United States in managing tribal trust funds are sadly lacking. our concern is not limited to the Navajo 

Nation; other tribes which may not have the asset base of the 

Navajo Nation may not be truly aware of the losses which they have 

suffered . Our concern also extends to the federal government 

itself-- as one of our investment advisors said recently, "If the 

federal government cannot tell us exactly what has been done with 

respect to the management of tribal trust funds, where a special 

fiduciary duty exists, can you imagine the state of other funds 

managed by the federal government, for example, medicare, social 

security, etc.? 11 This is a problem which concerns all Americans 

and which certainly deserves Congress' utmost attention. 

4 
ALBERT A. HALE PRESIDRNT 

THE 

NAVAJO 

NATION 

138 

June :a, 1996 

THOMAS E. ATCITTY 

VtcE PftE81DENT 

Donna Erwin, Acting Director 

Office of Trust PUDda Kanag-..nt 505 Marquette, N.W., Suite 1000 

Albuquerque, New Mexico 87102 

U: Reqaeat for Parther noc-tation Conce=U>g 

Jra.,...jo .. uon Reqaeat for Vo1Uiltary Withdrawal 

Dear Ms. Ervin: 

By Resolution CJA-11-96, tha Navajo Nation Council, by a vote of 58 in favor, 0 oppoaed, 0 abataining, requeated to 

voluntarily withdraw the Jlation' a funda fr0111. the Trust Fund Program. This resolution waa approved in order for th~ Navajo 

Nation to obtain releaee of the 1982 and 1986 Claima Settl .. ent 

Funds pursuant to the -rican l:Ddian Trust Pund Manag .. ant Reform Act of 1994, 25 u.s.c. 14001, et aeq. Aa you know, the Navajo 

Nation has sought to take over re~aihility for the investment 

and management of theae fund& froa the Bureau of Indian Affairs . 

since 1991 . 

In reaponae to the Navajo Jlation•a Requeat for Voluntary 

Withdrawal, the Office of Truat PuDda Management, by letter datad 

April 12, 1996, advised the Navajo Nation that additional 

documentation would be required to c~lete the application for voluntary withdra-1 with reapect to the 1986 Claima Funds, to wit: 

1.. a Navajo Ration COUDcil resolution ackz:lowledging 

that the funds, once withdrawn pursuant to federal 

law, will no longer be held in trust atatua by the United State& and acknowledging that the United Stataa will have no further liability or re&pOD8ibility for the fund& once withdrawn; and 

2 . clarification aa to how the Diviaion of Community 

Devel.,_t will act.iniatar the funda, aa aet forth in the Uae and Diatribution Plan approved by the Secretary of the Interior or document& indicating that the Use Plan haa been amended to clarify this ieaue; and 
139 

Donna Erwin, Acting Director 

Office of Truat Punda Management 

RB: Requeet for Purther ~tation Concerning 

Navajo Nation Requeat for VolUDtary Withdrawal 

June 24, 1996 

Page 2 

3. a legal opinion atating that: 

a. reaolution CJA-ll-96 waa enacted purauant to the procedure& eatabliahed by the tribe's 

organic document& or oral tradition; 

b. the tribal governing body haa tha legal 

authority to withdraw funda from truat status; 

withdrawal does not require a referendum vote or other procedure beyond a tribal council 

reaolution; and 

c. the tribe' a plan for the management of the 

withdrawn funds meeta the requirement& of the 

approved usa and diatribution plan. 

The Navajo Nation Investment Committee met with you and 

your staff on June 19, 1996. At that meeting, the Committee 

advised you that the Navajo Nation haa complied with the 

requirements of the American Indian Truat Fund Management Reform 

Act of 1994 (•Act•). You indicated that the Office of Truat Funds 

Management would not releaae the funda unleaa the Nation complied 

with a propoaed, but aa yet unpromulgated, regulation requiring the 

submisaion of a Navajo Nation Council reaolution acknowledging that 

withdrawn funds are no longer held in truat statue . Pleaae be 

advised as follow&: 

1. The Act doea not require that the Navajo Nation 

Council enact a reaolution providing auch an acknowledgment. The 

Navajo Nation Council, by Reaolution CJA-11-96 , has complied with 

25 U.S.C. 54022 (b) (1), which at-ply requires a resolution from the 

tribal governing body approving the tribe's plan to withdraw some or all funda held in trust for such tribe . The insistence that the 

Navajo Nation Council enact a resolution •expressly acknowledging 

that the funds, once withdrawn in accordance with P.L. 103-412, 

will no longer be held in . trust status by the United States, and 

that we [United States] have no further liability or responsibility 

for the fUnds·• is uncalled for in that: 

a. the ·Act itaelf, at 25 p.s.c. 14022(c) already 

provides for dissolution of trust re11ponaibility once funda are withdrawn 

pursuant to tha Act and expressly provides, at 25 u.s.c. 14027, that by auhmitting or approving a plan under the Act, •neither the 

tribe nor the Secretary shall be deemed to 
140 

Donna Erwin, Acting Director 

Office of Truat Punda llan&g-t 

U: Requeat for Purtlaar ncx:-taticm. CancerniDg 

Navajo Raticm. Requaat for Vol.Uiltary Withdrawal. 

June 24, 1996 

Page 3 

have accepted the account balance as accurate 

or to have waivad any right• regarding such 

balance and to aeek coapanaation•; 

b. the Navajo Ration eati.JIIatea that had the 

Bureau of Xndian Affaire aa inatructed by the 

Navajo Ration inveated and JIIIU1aged the 1986 

Clat.. Settl.ement Punda in a JIIIUlnar conaiatent 

with Navajo Nation inveatment policies, the 

Nation would have experienced additional 

earning& for the period 1991 through 1995 aa 

aet forth in the docuaentation transmitted to 

you within the Nation's request for 

withdrawal; 

c. the Office of Trust Punda Management has 

acknowladgad that it failed to follow the 

Navajo Ration' a Inveatment Policy Regarding 

Navajo Nation Punda Bald by the Bureau of 

Indian Affaire, tranamitted by letter dated 

October 23, 1992; reaulting in loaaea to the 

Nation. 

Given theae facta, I find your demand for a Navajo Nation 

Council resolution d ... aning and highly diareapectful to the 

Natiori. You then additionally requested that the Nation's Attorney 

General issue an opinion declaring the validity of Navajo Nation 

Council resolution CJA-11-96. The Navajo Nation declines to 

produce any additional Navajo Nation Council reaolutiona because 

such resolutions are not required by the Act and for fear that your 

Office will simply continue to obatruct the Nation•a effort• to obtain custody of its own funda for JIIIUl&gement within the Nation's 

investment aystem, which haa been proven far superior to yours. 

The Nation does not wish to participate in thia vicioua cycle of 

your requiring the enactment of reaolutiona and then demanding that 

the Attorney General opine aa to the validity of thoaa reaolutions. 

2. With reapect to your queation of whether the Navajo 

Nation• a plan for JIIIU1ag-t of the withdrawn funda meets the 

requirements of the approved uae and distribution plan, please note the following: 

a. in preparing the uae and distribution plan 

(•Congresaional Plan"), the Secretary waa 

obligated to receive and conaider any 

reaolution or communication, together with any 
141 

Donna Brwi~. Acting Director 

Office of Trust Punda Management 

U: Requ-t for Parther ~tatiOD. CcmcerniDg 

Ravajo Raticm. Request for Vo1untary Withdrawal. 

June 24, 1996 

Page 4 

suggested use and distribution p1an, which any 

affected Indian tribe -y wish to submit to 

him. 25 tJ .S.C. 11.403 (a) (1) . The Navajo 

Nation approved such a use plan ("Navajo 

Nation Plan•) on December 12, 1986, by 

resolution CD-67-86. This plan provided that 

the Chapter Govermaent Nation Buil.ding program 

wou1d have •administrative responsibil.ity for 

distribution of the ninety-five percent (95\) 

share of Fund income to certified Chapters.• 

CD-67-86, Exhibit "A, • Section 5 (c). This 

provision accuratel.y describes the method used 

by the Navajo Nation for distribution of fund 

income to Chapters. This provision does not 

concern administration of the investment fund, 

which is the reaponsibil.ity of the Navajo 

Nation Investment Coaaittee, Budget and 

Finance Committee and Division of Finance. 

b. The sentence within the second paragraph of 

the Congressional Plan; wb:l.ch-states that •the 

investment plan shall be -de for the Trust 

Fund for Chapter Government Nation Building in 

accordance with accepted tribal procedures for 

the investment and administration of trust 

funds• accurately describes the current 

system. The phrase •accepted tribal 

procedures• includes the investment and 

management of the funds by the Investment 

Coaaittee, Budget and Finance COIIIIIli.ttee and 

Division of Finance and the distribution of 

the 95\ of fund income to the Chapters by the 

Chapter Government Nation Building program. 

The •accepted tribal procedures• in place at 

the time of publication of the Congressional 

Plan in the Federal Register .on August 2, 

1988, included the Navajo Nation Code 

proviaions concerning the Trust Fund for 

Chapter Government Nation Buil.ding adopted 

purauant to CD-67-86 and codified at 12 N.N.C. 

11151, et .!!.!lll· 

3. The Navajo Nation, by memorandum dated November 18, 

1991, from former Attorney General Donna Chriatenaen to former 

Navajo Area Director Walter Milla adequately clarified how the 
142 

Donna Erwin, Acting Director 

Office of Trust Funds Management 

RB: Request for Purther Doc:u.mltation Ccmcm:ning 

Navajo Ration Request for Vo1untary Witbdrawa1 

June 24, 1996 

Page 5 

Division of Community Development will administer the funds. Your 

staff has a copy of this memorandum. 

4. The Office of Trwot Fund Management's continued 

insistence on either amendment of the Navajo Nation Plan or changes 

to our system to accomodste your Office's preoccupation with a 

phrase in the Congressional Plan which the Nation has always 

interpreted in a manner consistent with the intent of the judgment 

funds a prerequisite to the release of 1986 Claims Settlement Funds 

is inappropriate and contrary to the provisions of 25 u.s.c. 11401, 

et ~· (distribution of judgment funds), 25 U.S.C. 54001, ~ ~· 

(American :Indian trust fund management reform, and President 

Clinton's memorandum of April 29, 1994 to the Heads of Executive 

Departments and Agencies concerning Government to Government 

Relations with Native American Tribal Governments. The Navajo 

Nation has never construed the term •administer• to include the 

authority to manage investments. 

5. The authorities of the Navajo Nation Council are set 

forth within the Navajo Nation Code. :I am taken aback by the 

request fQ~ a legal ·opinion of the Navajo Nation Attorney General 

in that the provision of such an opinion is not a requirement of 

the Act, is not a requirement of Navajo law, and appears to be 

indicative of either the Office's ignorance of the provisions of 

the Navajo Nation Coda concerning the authorities of the Navajo 

Nation Council, or simply your Office's refusal to acknowledge the 

existence of these laws. 

6. Lastly, :I note that the Secretary is obligated to approve the plan within ninety days if he determines the plan to be 

"reasonable.• The request for withdrawal which the Navajo Nation 

has submitted to the Office of Trust Funds Management pursuant to 

CJA-ll-96 includes documentation of the loas in fund income of 

several million dollara which the Navajo Nation baa experienced as a result of the Bureau of :Indian Affaira• management of the 1982 

and 1986 Claims Settlement Funds. This information alone supports a conclusion that the provisions of 25 U.S.C. S4022(b)(2)(B) 

(protection against substantial loss of principal an appropriate 

factor in det.rmining reasonableness of tribal plan) requires an 

~ediate release of the funds before further losses are incurred. 

Your Office has no valid reaaon to delay the release any longer. 

Given the :Int•rior .Department• s familiarity with the 

Navajo Nation• s investment system and the. documents transmitted 

within the Navajo Nation's request for voluntary.withdrawal sent to 
143 

Donna Brwin, Acting Director 

Office of Truat Punda Management 

U: Reque•t for FUrther Docuaentation Concerning 

-vajo •tion Request for Voluntary Withdrawal 

June 24, 1996 

Page 6 

the Secretary on March 7, 1996, there is no question that the 

Navajo Nation plan ia reasonable and that the funds must be 

released without further delay . 

If there are any further question• or eoncerna regardi ng 

this matter, please contact Herb Yazzie of the Office of the 

Attorney General at (520) 871-6345. 

xc: Bruce Babbitt, Secretary 

Department of the Interior 

Paul Homan, Special Trustee for American Indiana 

Office of the Special Truatee 

Bobby J. White, Chairman 

Navajo Nation Investment Committee 

Herb ·Yazzie, Attorney General 

Office of the Attorney General 

Navajo Nation Department of Juatice 
THE 

NAVAJO 

NATION 

144 

P. 0 . BOX 9000 WINDOW ROCK. ARIZONA 8651S 

ALBERT A. HALE .......,..... 

The Honorable Secretary Bruce Babbitt 

U.S. Depanment of the Imc:rior 

1849 C. Street. N.W. 

Washington. D.C. 20240 

Man:h 7. 1996 

(602) 871-6000 

THOMAS E. ATCITTY 

YtcEP'IItaS~NT 

RE: Withd,..wal of Nanjo Natio• J•d&-.. 1 ,......, Punuaat to the "American Indian 

Trust Fund Muqemeat Rd'onoa Ad .r 1994" (P.L 11a-412) 

Honorable Secretary Babbin: 

Pursuant to Public Law 103412 cited u the "Ameriam IDdiiD Tl'lllt Flllld Management Refbnn Act 

of 1994', the Navajo Na!ion Council (The Navajo Nation's Gcmoming Body) has approved enclosed 

resolu1ion CJA-11-96 entitled Appmyjna the "'lm'"' fiJr Vglunwy Wtthdrawal from the Trust 

Fund Program' which includes the Sllte!!!e!Jl o(Objectjya IIIII Inygqnent Policy Guidelines for the 

Chaoter Claims Funds and the SchoJmbjp Qaipn Fypd Chylmnmt Furu!s) for the Pumose of 

implementing the wjthdrawa! of.!udmncm funds lipm the Jluray oflndjan Affairs Pursuant to the 

American Indian Trust Fund MI!WICIIIC!I! Reform Ad of 1994. 

It is the understanding of this office that the af01aDallioned Ad lllthorizes the Secretary of Interior 

to approve the enclosed plan for the withdrawal of Navajo Nllion Judgement Funds held by the 

Secretary and the Secretary shall approve the ...ac-1 plm within ninety (90) days of receipt. 

The Navajo Nation therefore rcspectfu11y req.-. your _.,a, of the enclosed plan involving .-.-ONMpN_J __ T;:;Ji~ 

lL/B* 

Pn:sidelol • 

r.J..__.,....T,__,..,..._...._ om-flllplllliiiiT-.~cl- .... 

o-.f.twia,~~ oma....,. .. ,...~ 
145 

ll!!!rp'riM tM .....,...t for yolpptary YltJ!4rpa1 rroa tl!t 

ftU1; 1'111111 lnaz:gOO ftipll 1pplp4u Dt 11jagagt; pf Ob1tqt;iua 

ap4 IUMt-Pt; 19l.ipy lbli4tliatt for t;U C!aapt;v ClaiM lllp4 

ap4 tM lal!plAriJI!J.a ClaiM llpMJ l.Jl!4put; llgMJal for t;l!t 

IN a• of IW.,_.a. t;M Wit''T!Yft1 gf JWiput. liiiMJ• frow 

tM lhlrMP 9f 1p4tpp arcatu. br8Midi t;o til• Mviau xptig zrp.t rpp4 ••a•,...t ••rara Act or ,,,. 

YIIDJiall 

1. ~t to 2 N.T.C. 5102 (a), the Navajo Nation 

council is the governing body of the Navajo Nation; and 

2 . Pursuant to 2 N.T.c. 5372 (1), the Budget and 

Finance eo..itt:ee of the Navajo Nation Council has a.ong ita stated 

purposes to coordinate, over ... and requlate the fiacal, financial, 

inveataent, contracting and audit policitl of the Navajo Nation; 

and 

3. ~t to 2 N.T.C. 5372 (3), the Budget and 

Finance co.aittee of the Navajo Nation council is authorized to reca..end to the Navajo Nation Council the adoption of legislation desiqntd to .trenqthen the fbcal and financial position of the 

Navajo Nation and to pra.ote the efficient uae of the fiacal and 

financial resources of the Navajo Nation; and 

•. Pursuant to the Aaerican Indian Trust Fund Manage~~ent Refora Act of 1994 Stction 202 (a) "IN GENERAL. An 

Indian tribe aay, in accordance with thia aection, aumait a plan to 

withdraw ao.e or all funds held in trust for such tribe by the 

United states and aanaged by the Secretary through tht Bureau"; and 

5. The Navajo Nation's Investaent Advisor has aaaiated 

in the clevel~t of the attached plan titled "Request for 

Voluntary Withdrawal fro. the Trust Fund Proqra." attached hereto as Exhibit "B" vbich includes the Statuent of Objectives and 

Inveataent Policy Guidelines for the Chapter Claimt Fund and the 

Scholarship Claiaa Fund (Judqatnt Funds); and 

6. BY Retolution BFJA-12-!16, the Navajo Nation 

Investaent ec-ittee and tht Budget and Finance co-ittee have 

revievecl and rec:c..ended approval by the Navajo Nation Council the 

"Request for Voluntary Withdrawal Fro. the Trutt Fund Proqr .. • attached hereto as Exhibits "1" IPld "A" respectively,. and includes 

the state.ent of Objective• and Inveataent Policy Guidelines for 

the Cbapter Claiaa Fund and the Scholarahip Claiaa Fund (Jud~nt 

Funds). 
146 

The Navajo Nation Council hereby approves the "Request 

for Voluntary Withdrawal Proa the '!'rust Fund ProqraJD" which 

includes the state.ent of Objectives and Investment Policy 

Guidelines for the Chapter Clat.s Pund and·the Scholarship Claims 

Fund (Judgment Funds) attached hereto as Exhibit "B" for submittal 

to the se=etary of Interior in order to carry out the 

implementation of withdrawinq funds froa the Bureau of Indian 

Affairs for manageaent by the Navajo Nation, pursuant to the 

American Indian Trust Fund Manaqa.ent Refor.s Act of 1994. 

I hereby certify that the foregoing resolution was duly considered by the Navajo Nation council at a duly called meeting at 

Window Rock, Navajo Nation (Arizona), at which a quorum was present 

and that·same waa passed by a vote of 58 in favor, 0 opposed and 0 

abstained, this 19th day of January 1996. 

Motion: Young Jeff Tom 

Second: Larry Noble 

ACTION BY '1'IIB BZBCU'lZVK ~: 

1. 

2. Pursuant to 2 N.T.C. Section 1005 

(c) (10), I hereby veto the foregoing legislation this day of 

1996 for the-re.son(s) -=e"'xp=r:-:e:-:s:-:s:-:e:-:d.--l.:r:n the attached ~etter 

to the Speaker: 

Albert Hale, Presl.dent 

Navajo Nation 

~Speaker Navajo N t on Council 

~o-=z.a__qw ate S1qned 
147 

USOIDnOif OF 1'BE 

80DCil!'1' AHD FDrAXa: w,;;.......,,.,n.... = ... oF '1'BE MVlWo NAnOif cowen. 

~'th bi ~' g.'' ...,...u-9, 

.. ,,. ""' -1· '"'" ,..,u . .,..P..t ttf "'fly "'114 ..__. ,. .,.lMM" a•"'"'! rzw VII '"" rpp« bM&•" .~. !pplMX pe 'tctnnt ., '*'MUD! .. II!DwtMpt 

!91ift .... ,... ,. pe,.,.. S'''",.. ... '" IRM1a£1Jlip 

c;Jeiee ,... Cj!lllp t; Dnf•l Car t;M IWMet pf pp1-&iasr 1jllt 

UtMre!eJ pf J11M & nrC• ftM t;M IREMP af J.,ip Ntai,ra 

!PJ=nMS t;e t;M 'MEt- Tattea '"S ,... ••• ,_, ••«•n '" •' 

.uu 

WBDD81 

1. ~ to 2 •• 'l'.C. 5372(1), the Bud9et and Finance 

Ccmaittee of tbe H&vajo H&tion ca.mci1 baa .-miJ ita atated 

~to coordi.Jiata, CJVm'8M and r.gulata ttl& fiacal, 1'inancial, in~, CODtrect.iDv and audit policiu of ttla Navajo Nation; 

and 

2. ~to 2 •• '!'.C. 5372(3), the Bu49et and Finance 

Ca.aittee of tbe .. vajo •ation CDallcil ia alltbori&ed to rae~ 

to ttle H&vajo .. tion Qlmlcil the adoption of levialation d .. i9ft&d 

to atr&JI9tbeft tbe fiacal and fiDanc:ial poaition of ttla Navajo 

Nation and to pr-e. the .rtici&Dt -ue of ttl& fiacal and financial reaoun::u of tbe .. vajo .. tion; and 

3. ~ to ttl& .._rican XJI4ian orru.t P1mcS lllanaq.-nt reton. Act of 1t•4 Section 202 (a) •IJI-c:EIIDAl.. -An lJidian trUI& 

may, in ·~ vittl tbia .action, .wait a plan to vitbcSrav some or all funds bald in truat for auch trUI& by ttl& tlnitu statu 

and aanaqad by ttl& Secretary thr0119h ttl& Bureau•; and 

4. Tba Navajo Ration'• Inveat.ant Adviaor baa aaaiatacS 

in the davalop.ent of ttl& attached Plan 'l'itled •-.quaat for 

Voluntary Witbdraval rr.. t.b& '!'rust P1mcS Proqraa• attacbacS hereto 

as Exhibit •a• vbicb includu ttl& Stat.-nt of Ohjactivu and 

Investaant Policy Guidalinaa for the Chapter C:le~ Fund and the 

Scholarship Cla~ PWid (.1ws.,-nt l'lmds); and 

5. ~ to Jteaolution JOaC:S-Ol-t5, attacbacS berato as Exhibit •1•, tbe •avajo H&tion Inveataant co.aittH baa reviavad 

and rec~ approval by the Budqat and Finance co.aittH and the 

Navajo RatiOII <:aaDcil the ·~ tor Voluntary Withdrawal P'rTbe orru.t P'lmd ~· vbicb includ- the StateMnt of Objective& 

and In~ Policy Guidalinu far t.b& Olaptar C:laiaa P1mcS and 

the Scbolarahip Cla~ P1mcS (.1udq-t Pwlda). 
148 

- ~ .. D' aaoL'OD ~· 

'1'he JIUd9et and !'~ c:-1~ bu'eby nc-nct• to the 

Jlavajo .. u- CDimci1 qpftJft1 of tba Plaa ~ far Volmstary 

WitlldraV&l ~ tba ~ PDIId hOfiu• 1lbicb 1Dcludu tbe sta~ of Objecti- and z-tzz t Jo~ Gaidel.inea far tbe 

c:tuaptar Claiaa PDIId and tba ~ Claiaa Pmld (Jud9-.nt 

Plmds) e1;1:al:b84 ~ u llldlibit ..,.. far .w.itt&l to tbe 

se=etary of ZDteriar ill CIZ'Mr to a.ft7 .at tba Ulpl-.ntation of 

vitbdraviDIJ fUDda trt. tba aar-u of Illll1ml Affain far .anav-.nt 

by the Ravajo .. ticm pars1J&Dt to tba ~ic:an lDd.iu TrUst Fwld 

MaDav-.nt Jtafora Act of 111114. 

cmBU%~ 

I hereby certify that tba farevoinv naolution vu duly 

conaiclencl by tbe BudiJet and !'~ c-ittee of tbe Ravajo Ration 

council at a duly called ~ at Willcl- Jtock, Navajo Nation 

(Arizona), at vhi.cb a quarga vu ~ and that - vu paaaecl 

by a vote of 7 ill favar, o ~o , tbia 1ttb clay of January, 1tt6. 

Vice 

Motion: John Perry, Jr. 

Second: E:rneat Bubbal.l 

INdiJat and !'iDariCe c:-aittH 
149 

Exhibit "e" 

BBQUBST FOR VOWNTAR'Y WJTIIDRAWAL 

FROM THE Tll.UST FUND PROGRAM 

BY TBENAfAIO NAUQN 

~*' l7N A...ma I .... TrutFIIIUI M-·--lll/tltM Act II/ DH) 
150 

Table tf'Cntng 

SKtiD 

I A Introduction 

B. Background ofTbe N&Yijo Nlllioo IDvatmcal Mmtpnwtt 

Sttucture and Proceu 

C. Disawion oftbe 8urau ofbldim A&in-Held ~ 

D. The Proposed Plan 

E. Conclusion 

n Budget and FiDallce Committee~ BF0-61-90- Slllallall 

oflpycmncnt Po!jcjes ll!d Qvidclina fur tbc Own!! Amp ofTbe 

9 

13 

15 

Navaio Nation 16 

m 1982 & 1986 Chapter Clljma Fugl"""""'"' "+i= II!C! r.Mctirr 25 

IV 1982 Scbo!anbjp Clajms Fu!!d """"""""' PfJfirire 11M1 g.rjclcfun 34 

Aopgdg 

I . The Navajo Nation's Eateraally Hired Pl......_.IDYIItmalt 

Organizations 43 

2A. Navajo Nation Council RaolutiaD CD-33-13 - Ampyjlw Plan for U1C 

ape! Djstributjon of S22 2 Mjlljm lkqjypl b 1l!c Nmjo Tribe's 

Claims CueSctt!emcm.. J)nr,krt Numtw 3Sl 

28. Navajo Nation Counc:il RaolutioD CD-67-16- Ampyjlw a Ute Plan 

for !be $32 500 000 Clljma Sd'!cnrr' fuMa 

3. Navajo Nation Council RaolutioD CAP-lS-12 - Iljr«qjpp d!c Secnaary 

oft!Je lmcrjw to Us tbe $13 3 MjDjm lltq:jyn! fipm d!c Nmjo Tribe 

lapel CJajms Cues Sm'mm for 1nqg;ps d!c Nmjo Trib!ll ScboJmbjp 

Truss Fupd UM! for l.agl Ar.qpjljtjgp 

4. Budget and FDIIIICe Committee llaolutioD BFN-52-91 - Apprpyjgs an 

Jnyestmmt pg!jcy Jlcprdj!w Nmjo Netjm fuMa Held bv the Burpu 

of Ipdjap Aftijn 

S. October 23, 1992 Letter of Cone~~~ c -.u &am INN c-aller to 

the BIA re: lpyatmcpl Po!jcy llgardjga Nmjo Nlljm fuMa Ha!d 

bytheBIA 
.j l 

ltd ~ti f 

[1 

1 f ,. r i'' ~ ! r-11~ ! 

. . I ;~ I 

r 11 .. .'1 g· ~ ,, ~ II ~ f . 

.§! g· ~ ~ f 

. ~ ~ f !ii 

!! ~ lr lr 1 ,1~ i li 1I h ! fil 

•I If J' J I 'I ! t I '- K ,. 8 ~ I H ;~ · th !J 1 

. ~ (; 11 f I~ 

1t 1 

! I :()1 It! h ! 

rt. ·: 

11 ' f 

1' J 

1r u ~ ~ ::t . ··~ I I I I~ ~ . ~ g· ~ ~ ~ ~ i f . t ~~ i I I 

. ~. !: "g. l i . .'1 I a = 1!1 ~ r ~ lf - .'1 

:::: ,, f 

en 

a g' 

-

.... C11 

.... 
• rw~ ~~i !(§I •Iii' l ~~~ !i·. ifD il!il I I ~~~rf['( tlfr fi[ 1 ~ zf~i r ~~ "tel' r ~,~IItl~~ lrii Jiil-i ~ r&t~H til~ ')' ' l ll

_tiJ:(' lltf f i,r f: 

!- 'J 

J-rJJ 'iiJr I ~i ·iJ Jt' IIJti ~ iS 

Jl~~~ · fJtl t~r 1 I 

~l'i~~' rtist ~i~ II I 

s .·'rllli 'aar I 

!~!IIi 

~~~1 

i~r~ 1 

~~~~~~ ;ttt g;~r 1 ~ ~ ~ - ! ~~. ~ 
153 

Sedioa I 

B. Bd;pmmd 

The Navajo Nllian mUIIBiDia vr:ry ~ IJICI orpnimd prwaa in implemenring ils 

ill-.catprvar-

_ De Naglq Nebln-mt Mm.._& J!1g!r Qert 

I ,.,.,..af,.Nonjo- J 

l_ 

I ,......,.._~ I 

I J!uMw._ ...... I I ~._-a-as,-. I I Jooloiol ....... Cloioflullico 

I I I 

..... & ...... c::-

I -..-Aidilolr t-------- IDolopll.....,..,tlloc-11 ...... 

~- ~IIJ'IIoo ........... Diaooil 

: I ' ' --a-.- ' 

' ,... Oooaollor(~ ' ' ' ~a-.. ' ' llooitwa.- ' ' llodiiiiAII"-~a.a- : 

' ' .......... ~ 

' 1 ' ' ' I ' I t-----------~ '?"-'i...JTI- l· -1 --·~ I ,. ........... ~ 

~llilooll -------------- (1llloniiiJ..:; 

-· ... & ....... ' ' ' : 

L-------------------1 =~ ~----------------------) 

All u.jor a.-palidel ~ .,_.t byTNN'II'Im::llmcal Commial:lc ..a die Budp& "fi-Cammileeoot• Navt,io Nllial CouacU. se~~~e Gtlho~ ac1 timl:licml or 

eadl pllliciJIIIIt in 'DIN' a br•-pnlpllllB JUcbliJI*d be1aw IIIII deabd in mort dclai.l 

in 1be S1ISaDI:Dt Gl "lnYalmi:Dt Policies IIIII OuideJinel (Rao1adcxi BfO.fil-90) in Seclilla D of 

Ibis dOCIIIIIellt 

s 
... 

., 

1r r 1 it iJJ ~ ! if HJ1 f r If r . i r t 

t

1i !!( I~~ !J rl![. 'f I f. . 1j.i 

- hh ~•! Uhi' . · ln

1Ulr 11• t11 

~~~~ 

i~l 

. llltlt·l (''Uhf . I[ ~1 f I!! ! 1 1 r I ~th i! ~ a 1 1 · 1· : 

llfl i[ Jt

11l!l i~ti!J!l ft tl ~ 

ll i:!: t .u ,. t IJ ! I A. fJ t II ~ i t I· 

1t1 h ~~~ , rir 

ri · rr . fi 

~iii 

ii •t!IJli ti!tfJt !I If 

1111, rf rll· ~ llllt!• i~, il f ~ l . l §. '<e 8f ~~ ~ I - r 1 
155 

wilbin the DniiDI orna--a wilh the CoalroiJa' ill lqiCirliq ro the ~nva~mau 

Commillae 1m a....,. .... aad ID the Badpt4 na-Oammiace aad TNN'1 Council 

llpllllnlqllelt. 'l'llelclllplllll~the- til all the filllac:ialUIIIIIIIc:ioaPIID TNN 

dlc:reby....,.... .......... illij • • fmllllkiq cla:ilicmL 

Them-Advilar ia • CDIDilly binld ilnc:AWCIIIIIallaat dill provide. aa obje;:live 

and cmaaiDc jl&li ••• ~ «'IWN'• iDveolua:ut ....... Qllllplilul:e moaiiDring 

til the iu--.. -aenrellliwe 1D _.Ni*d pideliDel aad objeclivel. aad c:cJIIIIIbiDg 

..tvice em....,_--~ Adcfiricmlty, the .Ad¥ilarwillllllllertaDUICt allocaDon 

llllllirs forTNN'sWrioal flail aad llllill thelavCIIDiiiill ea-.;a.... wilh coadactia& 

ilm:laneal_,cr ~or.-a 1 ~m• IIi•! .ada. Ala miDimam. the 

Advisor- wilh the--C}!mmiale Clllaqanaiy baiL 

Ea:ndy llinld illfCIIIWIIIIIIIpll iiMil theflmda C1D bellllf rJlTNN .,._r 1D 'IWN'1 

policir:a aad pidelias .. r • «far the CIWillll iawiiaW JIIOPD&I wdla Old! 

._...., ... ,....., ·-polic:ia, pideliDel .... ~ Tbey lllpCII'liD the 

IIM:Iaw c._.,_ ill wriliDa GD a qaaa:dy bail aad in perazcm a JaDi-aDDull basis. 

The ~is lliJecki&aMIIy -a ia -ny dlolnlll diYilioa «a major IIICIIle)'· 

OCIII8 .... n.ir,aa.y t.aaiCIIliiiD baldinCIIIUidy d the -mea dill cadi« the 

iavCIIDiiiill -.---.iii tllirparl(aliaa. The c:aaDdia ~a IDIIIIIbly RpCJR 

delmliDithe-m.•" ,..._~clmiq btlllllllllaa wdlaalilliqtllthe 

...u:r..ma .... _., tlllliaill dlepanfalio.a --of adlllllllllh. 

The ---prvridel·-·· ........ a vui&alioa or d die-ill TNN'I iatc:Aieul 

propma. 

lu itJda:l 1D die~ II&Yioe providcn, alboroap aad c:a-cfaliCftlCIIia& ia Cllllduclrd Md 

Je¥iewed for lpiiiVY&I bJ all of'IWN'a ilneAJeuii-IOVemiu& boclia p.ca ~ Some or 1be 

ailma lblt all all:lllllpufewialiil utplliZIIka.s-iiBl iaciJJdc: spfficut CIJ • II 'C ill 

edl of lbeir iadulaiellllll willllliiliillr . ,., ,. el cticat faJids; qallified IIIII ft:IJICII*lCI 

pofeuicwb wutiq for 'IWN's ~ IIIII fillllly, a net ncard fur 1bal orpailalioD dial 

7 
.. 

IJJ1fl~~11 fli(!llll(lll! ~~~~~ i;i!!l1!11 j·i~~~fiilf!'(lif1 liilt 

t~~~~ ~~~ • h~ ~~ r A~~~ ~·~~ 

ftltliitl ~liiiif11!11ti if ! :

e~~~~~~ 

l ~~~~k~il~~l~l~ i~~~ r . • -~~~j,[ 1 ~~·rf ~~~it :

11

. ~..:~ -~ i 

lria~~~ 

f ~*rJhE riJ ~ IJI 

llrltJiJ! ili 1l!filiiir 

1

1

&11 

'Jilf!ili i~ill!l~liljf! 1.ili 1! J r 'J f · !"'(fa. 

f. r j I· I 1~I · r f s fa.~ . u-IJ! . nill . If . ~~ ... ~ i!, . ~B!I '. g j; ~ l ~ ~!f!f • 1 < 
157 

Sedianl 

C. Himty gt !he RIA-HcJd Apm 

In 1982. S22 mJ1ion gf jadpneat faads WU awmlai ID '1111: ~ Nalion by lbe U.S. 

Gowamneot <- Appcadix 2A). In 1986.---$32..5 mJ1ion ere~ faads- awmled 

10 TNN (- Appeudix 28). In bodlc:ua.lbe B-ofllldia Affain (BIA) was daipalllld as 

the acaaeY 1D ICt u m-nem DEap ltld CUIIDdian of lbae Ullell.. 1bele aueGiqllaCDt 

what is c:a1kd '11111 NIY&jo N.licm'a 19821Dd 1916 Cbapll::r C1ims Fund. 

Sepcatdy, but also in 1982, $14.8 .mJliaD was awarded 1D TNN for 8dding ID '11111 Nation's 

Scholarship Fund and ~~~:QUiring - Wid (-Appendix 3). Ollce apin. lbe BIA was 

designata~ as the investmlw Jtlllllla" llld custDdim. 

Since the lime of 1be awmb, TNN bu paiodically wilbdrawn faads from lbe BIA primarily 10 

pay for the varioas c:bapll:rs' opc:nting c::xpemc:a in lbe cue of lbe 1982 It 1916 Olaptr:r Caims 

Fund. and in lbe cue of lbe Sc:llolclblp Fad. ID &llilt qlll1ified ltDdeatJ of Navajo delcalt in 

lhc:ir pursuit of bipcredacllioa. AI mc:mioacd before llld aa:ordiq to lbe RIA's Mm:h 31, 

1995 accounting leCOJ'ds. 1be BIA muages IDII CIIIIDdies ~y $59.1 minion for tbcae 

two funds. 

lnyc:mnmt Bc;mjGtjpns af the BlA 

The BIA m-t propmt baJ.IIIIIiln.,..s to pre~~ne capial ow:r lhott periods of lime by 

investing in abort 1D iD1amediale a:zm U.S. ~beads. The BIA bu ondly 

COIIII1IUIIical to TNN FiaaDc:ial Scrvica officials 1bat the BIA is requiRd by the U.S. 

Govt.nunrm to follow w:ry latlic:tM: iDveltmeat piddinea apec:ially as it rdalca ID lbe 1'IIIF of 

investable securities. The BIA maaaps faads witb "ptur=iuu of priDI:ipal" as 1be main 

invesanent objeclil'l:; and tbaefore. bPc investmcm guidelines tbat are mare restrictive in tr:mlS 

of c:rcdit quality, c,pe of ICCIIIity llld matllrit:y. In fiCt. lbe BIA may be prohibited by their own 

inranal 

~ 

policies Uld guiddiDel from iDvaliD& in bjpc:r relllnliJII aecariliea (loq-a:zm 

..s c:orJICII'III= bcmdl) ..s !liper ftiiBIIin&- c:1a-. (aach u -IIIK:b) 

which would m:ll'e dutll ~ lbe fuad'a priacipa1 from inflazioa ow:r long lime periods. This 

c,pe of restriction leYady c:radcllbe income opporamitica available to TNN over loqer lime 

paiods. By c:antinuing witb lbe BIA' 1 J'ellriaians.lbe FUIIdJ' prinl:ipal will not grow without 

exuma1 conttibalions, Uld intlaliCII will Meat into" the principal and ew:nlllllly reciii!Z 1be valuc of 

the inc:ome Stn:ml. 

Through Raolution BFN-53-91 <- Appcadix 4), Ammrinr "'Jnyppg;n• Pp!k;,y Rc;pplinr 

NaYJio NGgn funds Held by d!e Byn;ap gr Jwti•n Affejn_ wbidl was appi'CMld by lbe Bud,a It 

Financ:e Commitlec, an inVCitllleiU poliey was -10 lbe BIA reprdin& bow '11111 NIY&jo Nalion 

wished 1D lrUIIfcr aD faads ~the BIA's imalmaltc:oatroiiD TNN's ilrvalmelltCOIIIIUL 

9 
ll:f~l 1-!1 -= ; ,; ,~~~~ Ill ~~ ,. ·i I li!IJ'l II 11 1& 11111 . 't· t J rflf r ·rf f. ~~li't i: . •i 'I t.~ ~I : . ~~~~~~~ ~~ tl lr 1 j I f 0 •lr I ~ 1111 f 0 .ta~l I! r~ i; i ~ ~ i 1' ; · r : ' . I · ~ I ~ · r ~I· iJ 1 i ' r's I . • ' IJ I s I ~ fl($ ~ !a 

1ltJj I ~ I ~ 11 I i f ~~~ U~· l ai i )! rj ! 1~ I I 

11 1 

f i 1 ~~~ ! J1! ~ 1~ .If I . t , ..t. I I ~ ,~,,,,~, ~ =·! lf.J fl it I f I J·U~~~-~ l I! '• ~ 0 I ' a ~ i l t 0 t I' f I i r ~ &' ~I l jl> I I ., I A: • ~ 81 !I ~~ li (, i 

1

1 1 ~ r nu 1! 1 

- ~ i h t I I i UJ! f il 

.. 
159 

8IA .. 111e .... NIIIan Adlwlt._..lt ............... PafuiiiiM .. 

(Jl/1--·---~ _,.CI: 

Ptw-·W!elgt• IIWI1 --.(11·- .. ,. - - -- - - ., .. 1 

----

--~_,- -- ---.,.,.. -., .... -·-·- -ILll1 IUIZ IWZ1 

T .... _ .,_ ., .... .,.. - --

_........,._ ~ 111.1111 .... ,., 

-'J .. IIA ... 1 .... ... _...,..._ 

-,-. ... QPI ... 1 .... ... -- aa L"' aa 

~~-~ ............... ,.. ....... - !!!!!!! !e!! !!.!!! 

- ....... --..,-. .. - ... --1-J'n.-· .,,_ ..... ..__14 ___ 

aa ..... -u.r. 

_.,...,. ............... !Z.!IJ! -- !2.!17 

"-- -----"-- ~..., ...... "- 111 ... I1UD 

--~-.. --...... - ..... -- ____ .... .....,, 

~..,.. ............. -- ••m IZ.2l! 

·-- -----"--

(11tl.---~ ...... -- 111 .. 17 __ ., __ ..,..,_ ... - -- aa tu!to-..... --1--1--...... 

Ellnt. ~CI!!!!!I!Let· .. ...,. .... !!U!!! 1!!,7 .. ) 12,171 

.. ., ... 

--

&W 

...... - ·-lila 

.., IZI,IID 

... 11UII 

.... .... 11!!! 111!!Z 

II. NO 127-'1 

.... ..,.. 

!!1'1 rpe 

- -- ""' ..., 

- !!,!!!) 

11.110 D1-

1ft 7oft 

!!!!!! !7J!!) 

II 
JBfii 

J.f(Jlfl 'ittf tl[ t .. ! t II 

. ff; :J at ltl 

i • J}!II f! 1';.1· H lh r· ·I 

1 · .

1.t l·t. !I 1 1 .r 

r•h li1 nl r · II 111 i f1!' $ 

lti 

t 8 1 . 11 A. r} I JJ' [ tl; 1 10 I r . A. • r 11 1 JB: fltl 

l I 't2r> t 

&: " 'Jl It ltl 1 ·II. l I A. II" I ':'" rl I I 

·1 fr ;((l iJI· ( 111fti JiJ f " !I II "I wr !rJ!r Ill h e r. 
l(flift f 

ct. e l. H 

'"'·lfl i' 1. i l . a· r B f I i !I r i t a" s_ i r' • l ft: l f"ll . il= II ! I f i; ! ·,en t i I r 1 i r i 1! ! .. 1 ·I.I{E.L.f 'it rl 

If jf .. 2. If·( · r .. 1 .r. 

a· .!! .11 

.sa. 1 .a. l1 1 .1f. .1 li•· :-r&.rl"'f. 

i.j lr . ·g ·J}l .. l ·i 

... flf. -1.( 

•· .. 

. rill 'IJr'l I·.. . J· J . hi· 

Jii

1 IIIII 

. f 

.... 

0) 

.... 
0: 

. Cl!!~li ~SI III~i lli IJ~IJI~ II 

~~~~~~· f ~·i a~! - ·tlral !1· ~! !tff llltl!ift l!i~l(f ~~ • ~if r A. A. , I~ i Pl r. 1 I ~ 

1.1 i' 

2· •r s ., f ~~· j 11 A.! f lti

1ll illr!l]if ;lrtlll !r f!h;r hrl[! 1rllil 1-lrl lf ~~~~~~ lJl(iiJlr. ~11 rf 1l ~ ij!- 8 f i.J•It.'f· iJ: ~~ !JJ.~~ t 8 ~ l r 11 I s. .. 11 r J 1· J i. J Of1 · ~ f•~r~Jl 1 ,r:ar rr~~~~ I tlil F· rl II

··· f. ;~~g sl ~~!ltfJl fl~r II ! 

[ : ~~l~ . • ! ~'II} a· ·~~~~~ iJfli!!l~ 

fit·~~~~~ f f h=rl 'l I hi# i' . n i f fil'r 1 r 1· ·s- . 
163 

Sectioal 

E. l)g;ftlljgn 

Hopdally, the Sec:m.y flldle ...._._ ..-..s -lllll.t Wida...tiD& lboal Tile Navajo 

Naaion'a..,...,.c:h 10 dleir -n -..........,._,._....,Ibis docamaiL TNN bu 

ll1lde alipificant u:umill1lall ill-fll Iiiii: _. -10 prade:ad)' .....,c Iiiii crvenee 

their fiii&IICill-. Tile, .......... c • die ...... -'aliaa JIUDF Jll'IXUI, 

diem--auaelec:lima ..-. ... tlleclifllnlltp f .............. orpniutinns 

lhatlbeyhaftJa.iDa!IDIIdpdilllll hs!M-... il 1 'Jlie.-111-dlepurfaar 

filcal ~ill~. Wllllld ...... dlll111e Navajo Nalima liu beea well-nwmled far their 

diliaau cffans. 

It is wilbin lhia frlnewcat dill 'I1Ie Navajo Nalima ia pvpllliq10 YOI.amlrily wilbdraw their 

judpneau .-a bdd by tbc Sec:m.y fll.._IIIIIIID t1i1aaP die B.-GlllllliaD Afbin. TNN 

inialds 10 llllinllin-,..,_ .................. ~ f1illda bal die aaly 

clif&:ralce wwld lie .... ...,. -..seo --~.._,_. wilb alaepr -pcupeaiwc. From----_., c •• • ... tile .. . aiiD¥c, ... Sec:nazy lboald fiad IIIia 

Clle &lilllll' IDf '-,......, ... _ ..... "' ... BIA.., 'I1Ie Navajo Nllioa &ad 

Ulow 'INN 10 iDcarpclr&.t -.---......... ....., .. Njtlwl illvCIIIMil 

JIRIIIaL Failift 10 do ., Wllllld IJCiW'IIdy aadl: ... ---CifPGitaailici ll¥lilable 10 'I1Ie Navajo 

Nalion iD die fulure. 
164 

Section II 

11tE NAVAJO MAnoN 

INVESTIIENT PQUCIES AND PAQCEPUBES 

(RMolullon B~-90, Adopted October 5, 1990) 

~ 

I. GENERAL OBJECTIVES AND RESPONSIBILITIES .•.• -······-·············· 17 

II. FUND CLASSIFICATION. •••••••••••••••••• -················-································ 18 

Ill. INVESTMENT MANAGEMefT APPROACH..·-·-·······-······-·············· 20 

IV. ASSET CATEGORY DEFlNITIONS ••••••••• ·-·····-······-············-·············· 21 

V. FUND OBJECTIVES·---·--··········································-····················· 22 

VI. OTHER MATTERS ••• ·-·-··-·········· .. ·······················-······························ 23 

16 
165 

THE NAVAJO NAnON 

IHVESTIIENTPOuaES AND PROCEDURES· 

I. GENERAL OB.IEC'IlVES AND BESPQN$!BILDlES 

The Investment Polc:ies and Procedures (Poicies) of the Navajo Nation (TNN) 

provide management per10nnel with poUcy guidance for investing TNN's 

financial resources. The poic:ieS provide the framework for TNN's execution of 

Its fiduciary responsibility to tribal members, employees, and other beneficiaries 

of Tribal funds. 

Policy makers, management and professionals hired by TNN to develop and 

implement the poicies will act with care, skill, prudence and diligence that a 

prudent person acting In a liQ c:apiiCity and tamllar with auch matters would 

U88. 

Theae polcies wiD be nMew8d and reaffirmed or modified as appropriate on an 

annual basis. Responsibility for adoption, reaffirmation, modification and 

administration of the polcies win be as follows: 

BydQat and Finance Comm!ttae 

Pursuant to Navajo Tribal Council Resolution CD-68-89, the Budget and Finance 

Committee is authorized to coordinate, oversee and ragulate fiscal, financial, 

lnvestmflnt, Contracting and Audit poicies of the Navajo Nation. As such, the 

Budget and Finance Committee (8 & F) will IIPPRMI theae policies as initially 

developed and will annually reaffirm the policies or approve the moclfied 

policies. B & F approval may a11o be required to modify Section Ill; IV (D); and 

Vat any time befol8 the next annual review. 

lnyestmtnt Comm!ttae 

• The Investment Committee should consist of: 

(1) 

(2) 

(3) 

(4) 

(5) 

Controller; pursuant to 12 N.T.C. Section 203, the Controller shall 

aerve as Chairman of the Investment Commitlae. 

Attorney General 

Auditor General 

P18sident's Appointee 

Chairman, Budget & Finance Committee 

17 
166 

• The lnvab••ll Conlnlllle (Cornrnlaee) wiiiiiPPftiY8 theae poicies as 

initially edafDd 8ftd wiiiPPI'D¥'8 d mocltalions to these poic:ies prior 

to the next ...... I'WView; 

Dewlop and menage a Funding lmplementlllion Plan: 

• Selecl the 111V81tm811t Advisor and llflPI'CMI the Advisor's Contract: 

• Accapt or ..;ect the Advilor's r.cammendllions tor money managers and 

CUitodians n 11PPft1Y8 .-:1'1 money manager 8ftd custoc1a1 contract: 

• Receive quan.rty rwports from the Advisor l8g8I'Cing the pelformance of 

money managers and I8CIIMt reports from i~ money I'I'I8Nig8r& 

perioclc:ally; 

• Receive quen.ty rwports from the Controller, which ntconclles to the 

Advilot's AlpOC1, AlgMillg the -of .-:1'1 fund's Investment; and 

Controller 

• The Controler il 1111p01llible tor the phylic:al tranmr of usets ~n 

. the vMous QlllticW -=counts: - . 

• ~ng the cash ecpva1ent porttolio& as dii'8CIIId by the Committee; 

• Reconciling the boc*&, CUIIDCial ..cords and money manager 1'8C0rd& on a monthly bail; 

• Accaunling tor eecil W. own811hip of commingled iliYIISimllnt pools; 

• Monitoring ~ICII 8ftd tees llgllilllt ~~;and 

• P~ a quartelty IWPO'I to the Committee which outlines the lt8IUS 

of .-:1'1 fund's ~riwia•- and whic:tl 1'8C0ncilel to the Advisor's ntpon. 

II. FUND g '"'f'NDON 

A. Following .. the Investment tunc1 cialllficetions for" purposes of the 

irMIStm8ill policies: 

II 
167 

Colh Marwwnwnt • Fundll'llqlftd for day-to-day operations or which 

must otherwila be irnmeclmBly awllable; 

[)eclcllwd fun$ • Funds which provide ongoing nmtnues for specific 

operlllion or IOdal progrwns; 

Bandt Plans • Fundi held on behalf ol Tribal employHs; and 

P!rnw•m fund(l)- Funds• aside for 1111 unspedled use generally tar 

Into the fulln. 

B. TNN tundl.,.lnltidy claalfied u follows: 

Cgh Ma"""""" · The o.r-.1 Fund, the Bu1inea lndultrial 

O.W.Iopment Fund, the ..... Dam &crow Fund, the lquidlty 

component ol the R8lnment Fund and the Work8r'1 Cornpet1181ion 

Fund. 

£'lestc;etest Fundi - Thll 1982 Cllima Fund - Schouhip, The 1982 

Cllllma Fund· C'-PtW, The 1886 C!Mna Fund, the Scholarwhlp Fund, 

Handicapped Servlcu Fund, Senior CltiZIIna Fund, Vocational Education 

Fund and Navajo Academy. 

· Banaf!t Plana • "The Aellntrrwnt Fund ancf. The Worker's Compensation 

IDIIRIICe Fund. 

Ptmnnm Fyodfl) • The Permanent Trust Fund. 

C. Funds Not Clulllllld 

The Nlhlbalo Allllntment Fund (401 (K) Plan) is not lncludlld within the 

lalpe otu- polclea tleca. plan ~-lelklntct their 

invatmems. 

The Def8rntd Compenaalion Fund is not included wllhin the scope ol 

thel8 polcles becaule a aeparal8 committee has complete owrsight 

fMPOIIIibllty for the program. 

D. Addlllonal Fundll 

From time-to-time TNN l8la aide tlnanclal1'810Uroes into new funds. All 

such funds wll be clallltled into one ol the four categories defined above 

19 
168 

or a new cal8gOiy H approprilla. Such daulficalion wiU be 

IWCOnliiletDd by the Conlrollllr and llppriMKI by the Commitlee. 

Betw8en the time a new fund II c:rNied end the Investment clulification 

of the fund iii!PP"Md by the eornrr..a... the new fund will be tnlatad as a Cash .... ....,.,. fund. 

E. Each Fund clllalficalion will be IMrlllg8d as an lnclvldual pool, unless 

they spedblly c:.nnot be commingled. Acconingly, all funds within a 

clas&licldion wm sh8nl equally In the ntiUII of the pool's irMistment 

actMty. Funds which cannot be commingled wll be managed aaparately. 

The Controller may, at hil dilcntlion, ..a.bilh mont than one cash 

llllll'l8giiiTI fund Iince the irMit!MnlntUII of pratM8ionally ITIIIn8Q8d 

cash equivUnts portfolios should not clftllr lignlficantly and the coat of 

alloc.aing the commingled ....,.. nay outw8igh the bendtl of identical 

rwtum. 

Ill. lrtyES'IIIEifT N"4 IIF"f!!I APPROACH 

Trtbaii!MIIItmeniS wll be ll8lllged by I)IOfllliDnal II10II8y man~Qer& except to 

the extent the CommitiM IP8Ciflcdy ..._.. irMIIIm8nl .uthortty for Cash 

Management portfolios to the Rnancial Serviols o.partment. 

The Commllt8e wll conduct a H8ldl for, and ~~~~g~~ge, an 111¥'811ment Advisor 

(Advisor). The Advilor will haYe the tollowing ntSpOnllblltia: 

• Conduct a ...rc:n tor prullalaual money m&r~~~gerl for the lrwatment 

funds (a • tonh In theaa inlllal pollciel) • lnclvlduall8lacliona will be 

approved by the Comrnlttea; 

• Negc6de tee anw~gerM~U end aa.r coru.:t t8mll with the money ~-vera on .....,oiTNN (I~ money...,...,.........,... wiU ba IIPPIUv.d by the Comrnlltil8); 

• Provide the CornmlllBe with quar1llrly performanca evaluation~ for each 

money~ 

Negotiat8 and arrange for bi.,. and custodial 18MCIII • Individual 

sellc:tions wll be ~ by the Comrnlttea; 

• Mak8 I'IICIOIIIIII8n ntgll'dng ntaffinnalion and moclfication of th818 

policies on at 1ea1t an annual bail; and 

20 
169 

• Handle certain OCher 11181181S, primarily reporting, as deacrlbad elsewhere 

In 1tl8l8 poic:iaL 

IV. ASSET C61EGORY DEF!NriiONS 

lnY81tments na11t ba made in -=cordance wittlaccaptad institutional investment 

pracllceL lnvestmaniS must be of lllgh qualty and -a dMIIBifiad. Managers 

must exercila prudence in all rndllrs and lnY8at 10laly for tha banatlt of tha 

Navajo Nation. 

A. C8sh Equivalants • Interest baarlng 18CUI'IIIe8 which maximize liquidity 

and l8l8ly of prlnctpal. Tha following cuh equivalants .,. spaclfically 

authorlzad lnvatments: 

• Caf1lllciDs of Depollt which .,.100% t.dardy lnlunld or collala1111izad 

with gcMIIMIIInt or ~mnwnt ~~gency MCUrllin with a rnark8t vakJa of 

at .... 102% of tha f8C8 .mount of the certlllcelll. Prwlet8nce pr.camant 

in Certllical8s of Depollls may be granted to thole Financial Institutions 

who are supportiv8 of tha Navajo Nallon'a Flacel objacliYH (i.e. loans, 

leasalpurchua &gl'88nwnt, chack cashing faa waiver, ate.) 

• United States Trauury Bills; 

• · Rapurchala Ag!Hrnants acqulr8d undara COmmlttaa approved maatar 

agreamant; 

Comman:ial Paper of tha higtlllst three grades as rated by a nationally 

recognizad ndlng agency; and 

Commercial Bank Trust Oapartmant comminglad liquidity funds 

spacifically appnMid by tha Commlttaa. 

• Malurllias should ba short enough that funds can ba lquidahld with no 

loss of principia. 

• Domestic Equllias • common and preferred stocks 

B. Tha emphalis of the common stock portfolo wiU be on high quality 

companies which off8r llbcMI -r-oe rv1ums as a protection against 

inftallon. Securities should ba pubicly owned and tnlded acliYely enough 

to insurelquldlty of tha holdings without lignltlcantly advef88 atf8ds on 

21 
170 

price. ~In .ny one corporldion lhall not 8XCINid 5% ot the 

equity portfolio c 1h8 time of purdlue, 8nd will be IOid 10 prwent the 

pe~ from UCMdiiiG 7% c nwUt valullion. Investment in any one COipOrldiol1 .. nat elal88d 5% of 1h8 OUIIIanding lhares of that 

col'fl(nlion. 

c. Domelllc FiDd Income- lrMIIIm8nt gra, ~debt 18a.lnties. 

Includes Celtllcldil5 of Depollt Dftr one,_,., U'*-d Stees Trauury 

,.._, I..Jnl..s 81-. Aoerte'/ (or SponloMd) ..._ (FNMA. Federal 

Land Bank, GNM, Fedlnl F.m er.clt, Federal Home Loan Bank. 

Student Loan Merlalting), MortNe e.cMd Securtttn, and Corporate 

Bondi. Minimum !plllly is BAA with a mulmum of 100% In this 

clallfication c time of purchae. MaluriiiM should be maintained in an 

inhlnneciCe ruga 10 mininize lilk price declines. 

D. Prohlblt8d tnv.tn...a- TNN funds wiU not bel11¥81118d in nNII utale, 

aCipt .. iip8dlelly ~by .... Comrnii!M. options, tutures, 

commoclllel.,.,... c:.pltlll b1dl, prtv.- pllamenls dlbii8CUrities, or 

equity eecullies nat nd8d on al'lllllonaiiiiiChange or il'll8mali0nal 

aecurllies. 

V. EUNQS OBJEC1'JVES 

It is underatood that tnv.stn•• ..uns are afr.a.d by many economic and 

poltic:al fllciDra and~ from ,..,.10 ,..,. .. It • impoltant 10 ... 

inwstmetd ~ .. goaiiiO be ,.... Dftr ttne 10 five yurs, but not 

necesaallly in ..:h ,..,.. 

A. CASH MANAGEMENT 

• MiMnlza "'*"' ••• d ....... 

• lrnmecl-. 8VIIIIIbllty of funds wllhout ri8k 10 princ:ipllt 

• Low credit filk 

B. GENERAL FUND INVESTMENTS 

• Earn...-.. IMn cah equivalent.-. on funds in excea of those 

l'l88ded lor opelllling purpoees. (The cuh equivalents lllqllired for 

22 
171 

opending purpGI8I will be datennllllld by 1he Controller on a quanerty 

balls.) 

• MlnlrniD prlncipm volldlllly. 

C. DEDICATED FUNDS 

Insure teal rwturn 10 meet thl following objacllvas: 

• Remln IUfllc:ient lrttrtlltiMI'It .-urn wlltlln 1he fund 10 offlet the effects of 

lntlallon ow.~' time; 

• Maintain 1qu1c1ty of IIMIStm8nts 10 meet the budgeted program cash 

tlowii;Md 

D. BENEFIT PLANS 

• Ensure tMI sulllc:ient llqulclty exists 10 fund benefits as they become . payable; Md 

• Subject 10 prudent lmlll of rllk. mulmize long-tenn Investment returns to 

minimlzllthe costa of funding thel8 ernployM benefits in the long run . 

. E. PERMANENT FUND 

• Since thMe fundi w11 not be uud for 1510 20 yuns the objectives 

should be 1D maxlrniD growth through high quality lmastments which are ctv.rlltied 10 tMIIP8Cific rilk is minimizlld. VolaiiUty must be controlled 

within IIC~ IIMtll. 

VI. OTHER MATTERS 

A. PROHIBITEQ SECURmES 

23 
172 

1. TNN .. nat lnftllln a carnpM)' with which It il ~ In ltigalion or a 

ma10r connc:IU8I ciiiX*· The A1lomer General will provldlalistlng of 

IUCtl oompw• to the Adwlaor ana~ bals. The Advisor will be 

,... ... fDr pnMdlng theist to thernon.y 11181~ 

2. TNN prahlblla lrMIImenllln ~-which darM ~nue from the 

mm.daclunl ar dllrllulion of alcoholic~ 

B. CORPQBAIE ISSUE$ 

The rnon.y .-~may wee~ otlmeiiM companies as they 

dNm appiiup._. On a quMMty bail, .. Advlaar will report an proxy 

vot.a to .. CornmlnM. The CommltiM will rnerw ill right to exercile 

Its proxy righla when It ., c:hooees. 

Money .. lllgei'S .. torWII'd cap. of .. ann.! 11811ementa of II8Ch of 

.. ~~to lliMp anile ... Conlrolel's office. 

Manllgera .. UIIID tll'oDrs who provldlthe belt Ml cost (1rD 

Ueculion and COhlliuiOh tee) fDr their IIWII&'Iiol._ 
BJNPD'P£· 

I. GENERAL 

173 

Section Ill 

111E NAVAJO NA110N 

STA'IEMENT OF OBJECJ1VES AND 

INVESTMENT POLICY GUlDELINES 

191211986 CJmpla' a.ims Faad 

Bridly,dlc 191211916 a.p. Climl flalwu rmhlj""ed u a Jalllt of ,iudim=t funds 

a-*d 1D Tile Navajo Nlliaa ia 1!112 IIIII ia 1986 (U.S. c-t '!f a.ims Doc:ket Nos. 

6011111299,256-6911111377-70,511-131..111111 353). 1be Faad'a parpose is to pay for the 

opaalillc _.. uldlc Y11iaas cblplln dllt ~ lbe NlliaiL N pc:r Raolalian C>-

67-16 uldlc Navajo~ c-D: 

"a) l'iir:lj"fift ~ <951') ullbe Faad iDI:ame nay be clillril.el -ny to 

cadi allifial Navajo a.,. ..... - ....... YalaD. EICb a...,. lhlll 

....... - ............ - ...... naiwd; pmridlllllbat Ill Faad ... -be 1ar die- ball=& of~_..... IIIII far lbe paaal, 

llll:ial_. -.ic clewkipu&a of111c kx:al c:lllplas, IIIII Ollpler apcnliD& IIIII 

· ~ _. pmridllll dllt eapeadiaae is ,.._ to m IIIIIUal 

a..--'-'F appnMd by 1llc YOiia& maaban of lbe a...,.. 

b)" me~ (511.)-of 111c FIBI iDI:ame lid be ~ill lbe Faad to cover 

lbe .. ulilllllliml ... ., pmride far._... Faad pvwdL" 

Tllis l'alicJ CllidllliK il illaldlld ID pmride --abjDI:Iiwl aad pideliDIII for 1be 

Navajo NlliaO 191211!116 ~ Climl FIBI. AI ada, il il Rbject 1D Ill pmvilioas 

uf Tile Navajo ........ I M Palicillllllll Proc:eduaea adaplrld by Raol1lliaa of lbe 

Badp:t ... F--.zC Bfl0.61·911. 

Tile NBajD ...... ('DiN), 1llc ........ F-.ce c--. (U:F), 1llc ---

Cmniane (0-niMe), IIIII Sid' line fillllcary rapalllibililiel u delcpllld by 1be 

Trillal c-:il willl llllpiiCIID lbe ia-of lbe Faad. 1be ,.........."ljtjrs illdude 

cEwtapilta. s-Ill Objec:lives llllllav-Policy for lbe Faad ..smillilla'ed by 

'JliiN ... BA:F. 

IL PURPOSE 

This-Ill ilwei1ueaat Clbjrai9cs IDd policicl is - fodb iD anler !bat: 
trf;l(ie Jl: p • I I} fa ri Ill rf 'l!ffi i "It I iJ h . j tH H I i .1 J t · •. e... , rJ 'I' · f .. r•• 1 t f;tll liflfiii · (rl iJ}Ill I• l .1 If fl t· f f I r ! hidrl . ,if h' I · tlf!H 

1li

1! iiijltli t:.l i !} It f I Ill .. f f I i' . • II i 'I'' •[ ill; a l iJJ; I 'lit!.! h I ' lhj II! I l I, ffr sf . a, . 
175 

AD .....-s ftlliiiDd 111 i1MS die - will be firms wilb at lrut fM Jan of 

iu ; · ..t ....... _. .-Jaoeaueat AdYilaa' Act of 19110. Prior 

111 .._ ...... b.r 1k......,......., • -.n' -11111111ne OUipUfuiu&d a 

• ..,.. ·ue p111r...., fll c6lr iau • -.=a ..S iiJIPIOj&i& beaclaact 

..... ....... ......... iu .. ~ fll • ...... NDau 111111 ill Ollllide 

-- - apeciDd Ill be *illld - ~ at JIIIIRiial ClliUpllliaM - ..... -.-... llpialllaqa ·we pe~rfirua..tldBvldi lwft:buwk iudillcs. 

1be palicy ~ .., be ciiiDpd faam time Ill lime b.r die Caaumii:IDc after 

..... •· • fll lllc ~ ..t 10 •• "Hi•• flldle Qwm!tent, ~. ll!d/ar 

Olhcn.. AD palicy ~.-be iu wdw:e wid! die Galaalluwlaelllllt Policy of 

die NaYajo NlliaL AIm rr •ri • fJl palil:y pidr:liDea ..t objec:liwa will be ill wriling 

... D&-1 b.r - 0 • .. - ... .. Ill .... ~ Capiea of Ill)' 111111 Ill 

I f"C •• IN Ill tluil ---will be tar..ded Ill die ~.... 111111 Maqcr, llld 

alhcr~.-trarJIIdia. 

Dfl RiAD<If (I' Alll'fiJlD"J 

• ~)will be ........... - Dllkil& .u ~ deciliaas repnliD& 

__, ...... ..tlimilal fll pllldlaacl ...... fJl F-s .-mt;ect Ill die ~ 

paiddiaB flllbc ................ duiiF.MI, ... will be I( ....... fvr die objec:liwa 

iuclic..s liln:iD widl-aa:pliaD fllld)' .,a::ific lidlillliaas - furlh illlbia clacamcaL 

• Rlllill ...... ia • - ....... f..s Ill aft.- die dfecu at iDfllliaalimE; 

• ......_liquaidity fJl iau •aiD IIIIlS .-bllllpiDd JII'D..-u cab flows; 111111 

• Miliullia li*ID ia Jllial!l:ii-L 
!ill 

1

1

1! ttllf lll!ii l I 

!rl1 'i'•'r' ' !1 

a· r & r •fJI r a. I l a. 

.. r . II . . r t(h! Hl 'I " s I IJ ils I f II - •I· lttl a•r ., s rJII I t'. '11·1·., ,,1. 111' IJI' l.t. f 

; ,I U! . 1 H! 11 r i II(J r tl r 

· · 1 · '!·1Jr4 ·fl t 

lit llil lJ!

1I I I Jll l 

(HU

1Ijl r ., 

f 

Il&ra. Itt 

!!t illt ... 

1 
177 

liN-cit "fj •• ia caa- willl die ialalt Ill miailllize die lilt of-.: laul:l 

Ill die Ft.l. 0-f*Wiy, die 1aa1 panfaliD will be COIIIIIUCIId by die iDdiYidlll1 f-s 

a-.-~~~-- ...... ciw ·r ,. • willlnpnl 111 die~ of lloldiap in 

iDdiwidllll ~ ClllpCIIIDDal ..U. iDdalllies. To - ldeq1l8lle ~Don oo 

._...- willllold - diD n. at -a:t valac of ils ponion of die TOIIl Fuad in my 

.mp ..nty. No - 1bD 1., IX die F-s _,. be br:ld ill -mea of my one 

'*I · • · n acepcfarU.S.Gc-lwwawSecarilics. 

yovJ1l.UY . 

CcJosi.- willl die cbft far _... diw:nifi af • die imaanr:Dt policy is bued on 

die • • ......... die "WIIIIililJ of die CXIIIibiiwd padfaliGI will be limillr Ill dial of tbc 

n.aa oppcaliiiil) Nflillllle 111 i · · .,., ~ will! limillr mum objecliw:s.. 

0 .... ..,. it il CllllfJI*Id dill die 90IIIilily .. die 111111 ponfolio. in agreple. will be 

.-..illy c:be Ill die "WIIIIililJ ........... ...a,lild CXIIIIpCIIilc .. die appraprWe 

n..tll:l indilza. far Cllllllple. SAP 500 Jadr:l( fur IIDCb llid Salomall Brodicn Broad 

llldelt for boads. CIC. 

uoumnx 

The Cllllllalk:r willrewn c:as11 0uw jiiOjeQiau CiiJ a periodic bail. The Commilla: will 

nMew die pmjac:IDd c:asll4low teqllia..-atleal-ny. 

Bcnricw oflpe I f Q!irnjm 

The adL: • !X die IWII'I--abjecliw:l will be le¥iewed 01J ao ~bail. 

'l1lia --- will --- die ---iwlibilil:y .. ldliiMac die Clb,jDcliwlllid die ~...... .Xdleil: pali:J.Itil-~lllatdle•in" ~·-­ policy will ... ~ ill plllii:Uir, Ilion-tam cbqa iD die m:.a.J a.b:a .._.........,_ ..... _...,_.dleiiM:IIIwpolicy. 

Bcnricw Clflpt ••• Mnmfsl 

Tbe .... • .-...<•> ...... cli8cUrp dleir ,.._;t.litjes ........ respect to !bat 

ponioD .. Tbe ~ - ... dleir _.,_.. ill ICCCil1laoce with l'elpOIIIible 

f'illacUiy pw::lices. 

l9 
178 

Elcb J111MF IbiD be JM:a die ,.....;t.•my to .tvUe die ~ of any -w 

diiDF ill ~ m-nmt llnllqy or Cllbcr peniDc:lll infarmD:m poauially 

lflecliDc pufwnw ..... 

'l1le Cammialle will nMew-- of .0 -... al ... CfiiiRidy. ,_ ftl¥iews will 

t-aa: 

• c:omplli.- of~·-qllillsl faads llliDJiiilnimr JUiddjnes (in lamS of 

die IIDCkJbaad lalio, cli¥cnificlliaa valllilily .llylc. CC.); 

• mlll:liiJ ct.ps ill die -.en' '*I . f Dill, llldl IS pbilolopiW:al IIIII 

pa-.1 ~ ecquisjrim•CII" .loaa of IDijal"-. eu:. 

SIDCb purdlaed ear die eqaily J11111fo1io an be ..._ of bi&b qaality. Clllllplllia w11o1e 

lhara uadc in -*I- "VUianle to ~ Jiqaidily. Mainan holdiq in any one 

campeny lllllll be Jimiled., ·~.--..... 

filial iDcame ~an be limilaiiD ll+ih I tW -=amiD iaued llr a--1 IS to 

principii and inlrnlt bJ die U.S. Ill" c.udiaa .,........a or 1111 llpacia or 

iDIIrDmecwllili dlereaf or 1D Ci111J1G1* iiiDel of die faar (AAA lilrDaP BAA) qaalily 

pldes as .... $ bJ - ar - of 1M ..._., NCOjliizal baad DliD& ICIVia:a. 

MonpJe ........... - ml!eMpljwt ... ahljpricww ..., be lleld. Ill pmicallr. 

enn-ljwt .._... Olllipliaa ....._. ... _. CIIIIJ ol_..... I • ""' 

bJ die fall &itb and aedil rt1 die us Goow ,.. • ..-:y lhereof and sbillil price 

Wlilllilily and liqai:lily llimiJ.r 1D CO • *"I of die ~ Manpac 8-=bd Socarilic:s 

Index. 

In no ew:nt, oo-w:r.IID!Id lbe debt -=amiD of any one privale COIJIOraDOD eza:ed 5~ 

11 COil and lO'It • ...m oflbe Flal'a- aadr:r ~ No mare dian 10'1> Ill 

111e baad parlfolio an be below A qlllliiJ. 

Damion of lbe baad panfolio is 111 be 110 mare lban 6 JIIDDibs Jonaer liwl lbe Salomon 

Brolben Bro.d .Index. 

30 
179 

· CM!''*'Y'! 

Calli IIIII call eqllft hn - &.1 illcaaiB _.. --, ill 360 ca,. or las. 

HoldiDp ...... ~ ..,_._ .-IIIII far............., cljMrj!Mtjms '-

die ...... Ia ...... widl ............ , • ..-r-... .... a..ediiCI'eliaa to iaval 

ap ID IK al--- . • I ill call ........ .._ diCy dean lppnlpriall=. 

~;dieM..,.. .... ew.a-1 ..... llleir peas 011 die jliiiWIIIW of 101111 

faads ..-dleir dina a • 

Fiml illl:alae -.a_, ldlliellllr-ill lban -a, -as u loa& a 

die 1111111 pard"aliodlaliaa ....... --...... 

Calli~- 111111 a..e cplitJ aliDp al A-1. P-1 or JqiB by at leu! oae 

laldiDa mliDcaa-:Y· 

'J1Ie fallowilr& n:aio:licwlpply •• iria1110 -·paldaial: • TNN wil .. ..._ ill c:aa...- widl ..a il il iiMihal ill lilipliaa or lllljgr 

.._..,. ~ 'l1le /ttaal:f ac.-1 wll pvride .SIIIIilaiD a lilt of IAICh 

• • • · TNN lalar~~s __ ...., ,...._ iaw• ia ~ wbic:b clcrM-

• 

&..file ar~allllcalallic--.._ 

Odapallibilldaia· "' --iaclalk: -----.-.,.:ifil:llly ......... by1llclaW.WC)!nnjtorp,; 

apaa., ........... . ..S-.uclity -.:II; 

Sllan--.-.iw or_,.....,...,......, "'"-,._ dllll---. ..-,--. .. adDd 011 a U.S. IIDCt 

~ar..-.... ilir""e--11; ..._._,......-*•ail.eaor•· • w ts 

1..--aradlar- a· ad...-,.---.; ............... Ia lddiliOII .. ... ilu ia irlhidal --. pl1lp:udJ diwnilld . .. ~ 

f...as ..t adlar poalad ... panloliaa - ..,..._ iDSCIDDIIIl Wlbicle&. AD 

- · I' • a-. -a r.dl or adlar poalad .. Jllldful* amt COIIfunD to die 

31 
180 

-uy lellliciUIIIS let ._ wid! the follawiDc CIIAX:plian - the lnw:llrnalt Cammi1lrJe 

1111)' CIICOIIriF llllllaiiD of pooled or cuad»pd funds to ldopt The: Navajo Nllian 's 

prubillilimll of--fll !lpDCifie c:arparaaiaAa; a.o-cr. il il Jla)pimd dlllldbc:rax:e 

111 .._ naiccialll ilia pooled we • wllick _,liCit • pclllibk. 

The: most~ pcafww nprration il the ~allall of investment JaiJlts lhat 

- COIIIilll!llt wid! The Faad'J invLAtdll policy --. A IDn& llliii avcn&e IIIIIIlll 

i'CIID'il of 3.2 ,. lbo¥c c.a.....::r Price ladBit is a .-ble eqwnrian Paftnr~~DCe 

will• IIIOI'illnd apitllla-illdcK illlde !II' Ill 17,. s.tP !500, 13,. Salcmon BIOid 

IDdex and apiliSI a llllivax of Balaaced Faud&. Tolal Fund pafonnancc should 

olllpafarm the llfwaoemiuued c:asiDIIl iDda at lcasl by the atiiDUIIt of tnlllqaiiCIIt fees. 

Equity pcafwuw llbould IICbimlm the foDawiDc pafarmatlce objeaiYca over a marltct 

c:ycle. whidl is de:f'iDed as a time period over wilidl a broad IIIIrla:t index. such as the S&P 

!500, falls from a hiP point to a low paiDI.IIId !act ID a biP poilU. or the revene. 

• Be JiaiCi" rblll S&P soo by 1 .. 

• Be J1"Q1a" rb111 SEI Equity Oaly Median 

· • Be Jia~Cr4ait the .tOih pacclllile far~ Style. 

Eiv:d jncgrnc 

Fixed income petfonnlllce lhoald achieve the fallowiDg perfotmance objectives over a 

ltilltl:t cycle: 

• Toral filial iacame llbould ~ the median SEI band fund on a total 

flllld i'CIIIIIII bail far parlfaliDs of limil.r IMDity. 

• Be..-rblll the Salonat llrocbc:rs Bmld IDdex by 0.5'1> 

Volllility for the panfotias lbould not c:xaed 1lw of the relevmt india:s. 

While tbele IIUdanls lhoald .. Kbir:wd - • cunplellc IIIIrla:t cyde, the Investment 

Commiae will also IIDiilDr pafattnaDiz over sbonl:r periods of lime. 

32 
181 

IV. BEJIORDi 

......... ,..,.. ......,. .......... ~ DiYiliml ol'INN ......... by 

'INN..twillle~---......, 0 

.,.,._._ lf......-L 

v. PBOXII!S 

Ia•-...,as •-,.aa. iliac wilwr willa 'INN~ Nil:irlllld 

Ptoaaduaci. v.-. w1111e •• ... -.... o1111e....., Nlliaa. A~ o1 vacia& 

will lie · · bJ 111e -.r ..s ...-s .....-,. 'l1le IDHoaw Caamila:le fll 

'INN_ .... .,IIIIRiiriiiJII'IKJiipllwllaailiD~ 

VI. UO!Cf!AQE 

,......_ i V a_..lllellatiiiCDIID"'n•rri-( ·,;,aplns 

G11C11i1a CDII). Slllject ., 111i1 . TNN _, dila:t _,.a 10 1llilile CIINill 

bn*aap ........ .-.:cF..a..--. 

33 
BJNDTYPE· 

1. OENJ!ltAL 

182 

Section IV 

1HENAVAJONAnON 

STATEMENT OF OBJECTIVES AND 

IN\'I!S'nmNT POLICY OUIDI!LINES 

Bridly, the Sc:bDimbip Faad _, """"i""'d a a Jaall of jadpal f1mds awmlcd to 

111e Navajo NaDaa ill 1912. n.: Faad'a PIIIJII* is 10 aaill *-ml'er boaad ll1!deniS 

of Navajo dea:al dial -- cc;"lliD --- czilll:il ... nqairc --- aaillaDce II:ICIII'diJI& 10 a.11a1iaD CAP-25-Il...S Nmip Netjpp Uc 1'11111 fpr Jbe Jgdrmr.pJ AWJid 

1Jw!rr Qmn ct Oejms And l)ns*rt Ng 229. A1ID, -=II mlier p.dalle is !ll1dr:r a 

manl obliplim!IO naa10 the Naftjo NlliaD 10 pnMde ~ ICIYil:eL 

1bia Palil:y ~is ....... ID pnMde ........ abjDc:ti¥ea ad piddiaa far 11le 

Navajo ......... Her! .... ..... ,.. ... il is llllija:l• • ,__... ol 'l1le Naw,jo 

Naliaa lav_... l'lllil:ill ..S Pnic:edaaca adapiDd bJ • ......, of the Wpl IIIII 

FiDDce C)wnrnjM: Bf10.61-90. . 

11le Navajo Naa (1lfN). the ........ Filllal:c Qwmri!w (U:F), the llncaan=t 

Cammilllle ({)wm!jwp:), ...... 5adf !awe lidal:illy ,.......lj!jrs .. deiDpllld by the 

Trit.J Caaac:il wilb J'IIIIICICliD the ia,_. of the Faad.. 'l1le IWpOD!Iibffitia iDcludc 

diMiopiq • s-at Objel::liwa ..s ....,__ Palicy far the Faad adnlilli.-.l by 

TNN...SBAF. 

n. "lRPOSE 

11lis-of··-ab,jec:liw8- policies islet fanh iD onb that: 

I. 11lln iaad.r .... ....., oldie ........,.ljojn oldie 1'liW Caaal:i1. Ba:F, 

the,..,...._, the Sa&. -.ypcr-. ar ,_.. ol,._llilwd 1D ct ill a-ny 

ldlaiaa a ...,. · • c:apKi&J,III:ac:iiillfla rcland 10 a Maaapr(a).lllld 

aay.,._ ar .-..o~...-llinld 10 actiaa~ Clf!Kily,lllniDaf'lll' 

l'dillmiiOaOnrbm • ...,.,...,thcill r Npalicy..Sobjeaivcaof 

the Scbula*ip Faad oi'INN. lllac:iull'a:a rdeaed 10 u '1111: Faad. 

2. 11le ~·>-p. pidwwJct'limilw..S flllly ......... is . apa:llld ol them iD Ille-r 1 n-ol tile- ol'111e Faad. 
183 

3. The c:-m- bas 1 balis fur evalaaliat tbc ia\<CIIIOCIIt peafcanw of The Faad 

IIIII iii _,as. 

It is tbc ialalt of Ibis ..._. 10 ..... I fl-wcat -var pbiJalapby wbidl wiD 

pide tbc M..,.:r --.1 die per' e dlllind. ll ii.....S dill tbc CJbjec:IMs be 

IUffic:ieady lpiCi6c 1D be . pal bat lllllil:ialdy &dlle .. ., be )IDCiiall. 

The m--t c-aiaae at Sid widldelepal ....,......ljria fur ._IS nay. 

frcan time to time, illld il ...-y 1D dinlcc lawaaw Mlaapn. ill wriliq. 10 follow 

more --141M ......_ l!tpldill& tbc ia---. 11lis caald iBclude lhc 

.__ period. tbc a,pea .of ian.,... C&' Olbcr faaan c:oaaideted JaltiRI)' to 

~tbcfaadL 

Ba:F is dllqed by ... widl tbc 1111111 .... , far tbc ~ of tbc - of Tbe 

FtnL ~ BAF ._ delepal 1IIB •• • · ... of die iavea- to 111e 

lavCIIIOCIIt Qwmnitw - ·-c-w- .. dilc::llqe lbeir claliea ill tbc a-e. of die Nll¥ajo NaDaa ..s far lilt Cllll:luift ,..,_of (a) __,.. !be parpoia; 

oftbc IW. ... (b)dafii:Jill ....... ~ of•• . . De The Fad. They wiD 

dildiiiF lbeir dalicl willllllt-. *ill, pndall:e. ..S .._. _. tbc eiaGu•w m 

tbca pn:vdiu& dial ....... paDI ... ill • lib CIIJ*:ilY ... tlmililr willl IUCb 

1111111en wvald 111t iD CIIIUIIIct of • -..-of alike c:bmclrz IIIII willllib: limL 

The CammiiiDe is IUIIIalm.l ..S ,...._. 1D CIIIIIB tbc .mea of C&le or more 

~wilD,_ lilt~ 11 . h 4 -.:11 t.:ililia IIIII tiled 111111p1JM:r 

10 - 111ee iavaawlllljel:lna ..s pideJiDcL AnxerfinaiJ, 111e CclmaliaDc Rlqllires 

lhc ~ 10 llllcft 10 1IIB ~-... .-a:~~ Nllioile&' Fedeal Laws as -·ariD tbc '-. lppiJ 1D lilt iaw of~ r:.d. 

All lllllllpD II:IMiuad ., .... lilt - .. be .. widl .... tM ,_. of 

invt:laiW e if •we ..S lfliiBed _...lilt •-Adwilaa' lv:l. of 1940. Priar 

10 ... Jlllliaed by 11le Nll¥ajo Nlliml. .. .-.-· - .... line OGipClfwned • 

1qa •iw peer pvup of Olbcr iii .-,a ..S IJIIIi'CIIIIWe baoclawk 

iDdaL .....,_ l'lllliued, ill llle ~ of 11le Nll¥ajo Nllioil IIIII ill Ollllidc 

inwaw -..,.._...,1M: mild ..s Clfllllc of ...-.me C11111pC1iM 

- .... -.--............ 'vepecr&a...S...,_buw:lwwk iadicea. 

11le palic)' ........ _, 1M: ...... ra- ... 1D .. by llle c-niDee .. 

CCIIIIidlnlioa of llle llhice ..S .., of llle c-nm, ~. lllldlor 

Olbcrs. All palicy ........ --ill_ ...... widl tbc <iellcnllavairnalt Pulicy af 

35 
184 

!be Navajo Naliaa. All mocfificoriCM!S of plliey JlliddjDes Uld objcc:liws will be in wrilillg 

Uld lipcd by !be Carnlnil-.: u an MICIIdmml to Ibis c1ocumau. Copies of 111JY Uld all 

lllllllific:IIICM!S to Ibis cloc:anal will be for'wmded lO !be Cousullallt. and M.maac:r. and 

olber iDtl:rciiiDd J11RY or~ 

QE!.EGA]]QN OF AlTTHORTO' 

The Managcr(s) will be held raponsiblc for ll1lkDig all inveslmalt decisions ~eprding 

.:arity telec:lioa and limiDI of·pan:bues Uld als of Fand ._ mbject to the policy 

pDdeliDes of !be Navajo NlliaD _. Ibis Fand. _. will be -hie for !be Clb.jeciMs 

indiciJal belein wi1b !be c::x.cepliall of Ill)' lpCICific limilalioas let fanb in Ibis docamenL 

STATEMENT OF OB.JEC1l\IES 

• Retain lldiK:ialt ~-willliD !be faad 10 af&et !be effa:ls of iDtlalion cm:r 

linE; 

~ 

Finmcill objcc:liws of !be Fand bnc been Clllblisbed ill canjuDc:Uon wilh a 

M¥iew ot'lbe' c:amm md projec:led"'lalia lam finlnc:ill ltCjai:ttlbCIIIS of 

The Fund. The urJtiti1 re of n:mm is 3.2'6 u-e !be CDammer PrK.e Jncb. While 

lbele cannot be Clllllplae .-ace lbal !be dSmed objcc:liws wiD be realized, it is 

believed lballbe litdihood of lbeir lellliZIIioD is~ biP, bucd on !be invalmcnt 

policyoflbeFands. 

It is !be Cclmmiuee's bdid' lbal !be .- a11ca1ioD DDpS lpiiCified ill Ibis policy 

sta~Cmeftt wiD cllieve !be ID1til objccliveL The ~ raliza dw mutet 

peafwnwaz Yllial fmD periDd 10 paiud. AaxlldiDIIY. niiiiM peafwuw bendliit•ts 

for the fiiUI&FD ale-fartb ill alae .aiCIII emitled Coalml Pl:uc:edwes. 

ASSET A' lllCADQN 

It shall be !be policy of !be Fand to imat ils --. ill IIXmllance wilh !be muimum and 

minimmn Ja111C far c:a:h .-c:laa u liiUiid below: 

36 
Jfll'l J'IIPI i·J·J 

8 : : · I r Jj:1 1.1. 

1, •• l . J r · .•. r 8 .f r; 'I ;.J·I· 

.. ,. J.ll 1'1' i' }.' Jlii.O' II' !iuli 1.11 arll"'' 

li.Hl !! 1h ·r-fs 

(J;r I&JI' i ii 1 Jl(• !JHI •j! I Jf i 

fr I tg•if IJ.·Irr I l fl f II f II. ..r .1 11 . · th1

1, ·1 !. u.r 

1 . 1 (il! f &rl •. .,. I 111( J•r .f rJBI . 

t·• . fll :1."' ·

IJ:r 111· l.t 'I r ; rl fl!, rt!r•l i r frlj jlrf'r t· ·ll . !· wrl ·fl 

111 JfiJ f ill rirl 

(X) 

1:.11 
186 

mmkEl illdiccs, fur c:umplc, S&P SOO lndclt fur IIOCb a Salomon Brothers Broad 

lndclt for bonds, eu:. 

UOJDQITY 

The ComroJicr will Je¥iew cub flow pnljecliaas 1111 • pc:riodic buis. The CamrniDee will 

reviBw die pmjecled cub flow n:qaiaa-lt leulaana.lly. 

m. CONnOL PBOCEDJJRES 

The .::~Jie.<anwt of die F.ad'a m-nwt objec:IMa will be IWicwal an m &llllllal buis. 

This Je¥iew will focus 1111 die ~ falibilily of .:bimaa die objec:IMa - die 

c:omiDued lpiii"IIJiriala of die ilr.-nwt policy. h is DOt apec:liDd lbat tile iiMiaralt 

policy will clanF flapiady; in pllliculm", llbort-a:nn c:bulpa in die liDmciaJ markels 

shaald JGIID)ly DOtmqaire m llljPPment in die ilftamlllllt policy. 

The imalmalt JIIIDIICI(a) abll1 c1i1cb1rJe lbl:ir mpnnaitPJm... wilh 1apa:t to lbat 

panian of The Faad'l - llllllcr lbl:ir -I"'""" in &IIIXIIdmce wilh I"CipCIIIIible 

fiducWy pnaia:s. 

EldJ IJIUIIIU lh1lll be pen 4bc l"'p""Phljoy to IIMie die Cammitlrlc of my lllllaial 

chmF in ~ m-nwt llnle&Y or Olbcr pa1inwt iafannatiaa poadially 

afli:oclin& pafcanaac. 

The CommiDI:e will review reaala of lll~~~a~~ap:n at leul quanaly. Tbele reviews will 

focus on: 

e 1he -a-' dlr:ralce ID die policy pideliDa; 

• c:ompmi-. of IJIUIIIUI' - apiaat f1IDds usia& llimimr pideliaes (in lamS of 

1he IIIICkJboad Jalio, clivasificlliCIII, YOIIIilily .sty~ eu:.); 

• mo:rial cbmps in die __,_. capniz•riOIII, IUCb u pililosophK:al -

pcrmand c:bmps, lajllisitiona ar Ia-. of majcx" IQ:OUJlta, eu:. 

38 
187 

hMP"&'Mwrr.,...... 

~ 

SIDI:b ~ lwdle eqgily Jlllll(aliD .-a~..._~ llilla cplily, -.mes whole 

m.a nde ill _.. 1llllllale 111 ~ liqaidily. MaiaaD lloldin& in •Y oae 

c:ompmy llbd ~ limiled ID IIJI, at .-bl val& 

Fiml ~ ~ a.J1 ~Jiraillld Ill i!Ml •ali --. illaal« pamlieed IS to 

)lrial:ipll 

~ 

..t .._ bf die U.S. • CllldiD .,...... ... .., 8piiCics or 

..__ ... ., c:arpare ._~die ra. (AM dlraa&b BAA) qllllily 

plllea IS 7 !"a!• t bf - ... - ~ die .-..:ty • DC • t ballll alia& ICnims. 

Morlpac ,_ 171: :cJ' I ..t miLe &sd dl!lt 1 sl • 11111 ~ 7lll7d. ID pmialla, 

Canwn;;-; M11rtpp 0b7ip1iaa 7laPdillp 117111 _. aa1J ~-..a JRIAidDed 

by die fll!lfllidl ... Cltldit ~die us a...-.-..-:7--- cdli7lil price volllitily ... 7iqaidiiJ llilllk Ill • ~die~ ....... Bdld Sec:arilia 

7Ddex. 

ID no~--. ...... dledl!lt--.~ay-pa..cmpaaliaD--s SIJI, 

at COlt .mJOIJI, ---~dleFt.l'l- ..... __ • No-..... J()IJI, of 

the ballll panfalio 171171 ~ llduw A ..,ay. 

Dlnaiaa ~die blat Jlllll(aliD iiiD ~--... 6 ...... -.r I7IID die s.ra.-

Brocbrn ......... 

Cuh.mQib..-.7 _..,...__........,ill360daysora 

Ho!diap ....... ~ ........... ..,_._............ . 14i•i .. "lfram 

die flllld. ........ willa ... ,.. ,.., • ...., ......... !iM clill::nlilia 1D .._. 

ap Ill IOIJI, ~ ... _.. il Cilia a;wis 'rm .._ t7ley deaD .wwUjllia&. 

Howewr.dle ......... ~ ...................... j&buw ol..U 

ta.ia -..lr:rdlllirdincU I RP" 

fiml ~ ....... IIIIJ 7lllld .... - ill lban -sy--. IS IDq IS tbe..U parl(alilldeDiiaa _____ .... 

Cub eqaiftlml- 171117 line CJ1111i1J Jalillp ~ A-1, P-1 • 7qlp:r by at Peuc oae 

bdiDa .... ap:ICJ. 
188 

Rcm:istjQM 

• TNN will DOt iiMil ill ~ widl wbidl it is involwd in liliplioa or major 

amaactua1 cliJpale.. 1bc AtiDmey Genenl will provide IIIII mainllin a list of IIICh 

compaDics. 

• · TNN lmleslment Policy prdlibits inveamalt in am.,uDes which dr.rive revenue 

from die maJIII&c:ulrcr or disUibutDr of alcoholic bevc:nges. 

• O!bc:r probibilal inYcsancms include: 

Real-- ca:ept a spccifically approved by lbc lnves~~~~e~U Commiaee; 

Opciolll. wannu. falalel. WIJDDDdibes IIIII c:ommodity COIID'ICIS; 

Sbon ales. JM11in nmKiions cr uy lcwnpd invellmems; 

Priwu: pbl:anem debt securities, equily a:arilies not IJ'adcd on a U.S. stock 

eu:bm&e. or- Clpilal iiM::IIDtiiU; 

NaDnl reiOIII1le pupalies such a oil. ps or limbr.rllllds; 

J..r:aec or Giber IIIRJillaal equity scx:urilics; 

lnlaDalioaalleCIIIilies. 

Non !ndjyjdual Sa:mitic:s 

In addition to dim:! inYalmatt in individual securities, properly diversified IXIiilii1inglcd 

funds IIIII olhcr pooled IISIC1 portfolios .-e ~ invaani:Dt vdJicles. All 

aJIIIIIIinBicd lniiiS, Da.1 flmdl or Giber pooled auet ponfolios liiJIIl c:oafcml to die 

security leSiriaioas let above widl die followiq r:xa:ption - die lnvatment Ccmmia= 

may CIICXIIIIqe 111111qa1 of pooled or aJim1iDalcd faDds to ldopt 1bc Navajo Nalion' s 

probibiticm of -ma of specific c:orpanlioas; ~. it is R:COpizallhatldha-eDce 

to t11e.e ll:llricliaaa iD a pooled invaa-ftiJicle may DOt be paaiblc. 

1bc most~ pc:rimuliiiiiCC c:xpc:cta1ion is die achievement of inveslmllllt results that 

.-e ~ wiiii'Ibc Flllld'J invaanr:nt policy -.m. A 1oac laiD awnae -w ret11n1 of 3.2 IJ. llbu¥e. c-taner Pril:e JDde:l[ is 1 ~ ezpecmim PafcauliiiiiCC 

will be IIIOIIiiDnd apiaa 1 CIIIIDm index tmde ap of 17'J. 8a:P 500, 83'J. Salcmon Bit*! 

JDde:l[ &ad apiDit 1 --. of Balaal:ed FaadL Tolill Fad pedwnaace lboald 

oUipC:rform die afOJaileilliOIIellcuaom index u leal by lbe lmOUill of riiiJIIFiftlllt fees. 
189 

Eqaily pafannauce llalld .:biew: !be fol1owiDa pafcamiiil:e objec:ti'ves OWl' a market 

~ wbida ia clefiaed • a lim!: period OWI'wbicb a bru.l aartet iDdl=x. IIICb a !be S&P 

500, f.ns flam a biP poiDt 10 a low paim. ad bKk 10 a biP point. or !be rever& 

• Be peaaer 11W1 S&P 500 by 1 .. 

• Be peaaer IbiD SEI Equity Only Mcdim 

• Be peaaer lbllllbe 40ih paa:ntile fCJC MIDqer Style. 

Fixed iDcmle pafGnw ihould .:biew: !be followiJ!c pafannauce objc:aives over a 

market cycle: 

• Total fiml iDcmle ·lboald eliCtBid !be lllllllilll SEI boad fimd on a tora1 

fmld relllm IIIIis for panfolios of limiiBr Dlllllrity. 

• Be grea~er IbiD !be Salomon Brolhers Broad lDdex by 0.5 .. 

V oWility fCJC the panfolios should not eliCtBid that of tile JehMmt indices. 

While these lllllduds should be achifM:d over a c:cmplele market cycle, !be lmesuncnt 

Commiuee will aiao rnoai1ur performance over sbonrz periods of lime. 

IV. REPQRIS 

Manqers will provide manlbly n:pans 10 !be Filw DiviliaD or TNN as reques11111 by 

lNN iiill will be pepma!IO IIIID qamr:rly Jll'*"""iaaJIO !be Oxnrnjgrz if reqaeJIIIld. 

v. f.B.OXIES 

lnveslment Jn~~~&ge~S will VOle pmxies in .a:orduce wilh TNN lnveslment Policies ad 

Procedara. VOlin& will be in !be best iDiaat of !be Navajo Nation. , A record of voting 

will be mainlaiDed by the ll1llllpr ad reponed ~y. 'l1le lmleltmatt Colm1islee of 

lNN n:acnalbe rigllt 10 ~ill JIIUXY riJ1us wt.1 il., ~ 

41 
190 

VI. BROICEBMjf 

Mmqas-n:apciDiibk far_.., 1be bat aet COlt far lriDDCiiaas (conmission plas 

CIICICIIIiall COlt). SaiJject., dlis ,..,..UDLid, TNN may diniCl IIIIIIIFS to atilizc catain 

baakaqe firms in aadc:r 1D aalal:c Mal ezpeues. 

42 
191 

Appendix 1. 

SEl Clpilll a--bind ia 199110-u The Navajo Nlli011's m-nent 

AdvUar. 11ley ..-c: beiidrpw&od ia w.,_, PA ...S employ IMir 1.200 people 

aaaiaawidc. The- crf lelliar _..,.,-wmk with 'INN ..-c:localed in their s.n 

FruciKD cdlil:c. Nmmwid£, SID Wlllb will! - 300 difl'aall piiD IJIOIIImS iDcludina 

milemem pllns. mtuww ,._, ...S lapial poala crf-with .-IDU!ina over 

$300 billiGD. SEI pnmdei'INN will! ilnCIImelll CXIIIIIIIIia& ICIYica OD.U 18 f1lllds 

._.m•a 'INN' a iaveaaw JII1IPUIL 

Ipycpmm• Mncm 

v- ..... • 1MHI:We .... ~ill ~ 

Orminrjrr !....-.. ~ ~ !Ill& IUiil .d.Ditl flllllll:l .Sial! 

Slllilh BINey N.Y. 11!13 SUB 61 lSI v.-~~q. S3AB 1912 

Newtlald's Pllila. 1M3 SUB 22 1.91 v.-~~q. SUB 1912 

Olancellar N.Y. 1- S21B 1113 695 a-dlllq. SI.6B 1912 

BmowH.-1. 0.0. 1979 S16B loa 1.91 PIISIL Nat. S409M 191S 

ScMu RidL.VIt. 1m- ·sz.A B 6 1.91- . Fiudllc. S2.2B 1!116 

f.QIIilic:a - The N8vajo Naliaa binld Smilb Bmley ...S Newbold' a ia 1991 u lqe QP 

· value manqas farlbeir ~ cil1. Ill 199S, 'INN bind ClaaceUor 

CapiiU Maqanall 10 divalify 1bc eqaily panfalio ia liiml crf eqaity IIWIIplllllllt 

styles. 

llladl- Sovnu aad a-ltlaley-bind ia 199110 _,e 'INN' a baad panfolio 

in a shan 10 ialiiu&dille llllllllity Jlllllliale. 

The Nanbcm Tnast Co. ia Olicqo- bind ill 1990 by 'INN 10 QISIOdy die aaivdy 

manapd -- Nanbl:m wmb with- 100 c:1icms ...s CUIUidia-$66.1 biiiiOD. 

43 

tCiws 

illlmlllla 

Sl 

201 

160 

10 

40 
192 

Testimony of Susie L. Long, Chairperson 

Yurok Tribe 

For The Task Force 

On Indian Trust Fund Management 

August 20, 1996 

9:00 am 

The Yurok Tribe appreciates the opportunity to provide 

testimony to the Task Force on Indian Trust Fund Management 

regarding the Tribal Trust Fund Accounts. 

I would like to provide some information that highlights the 

experiences the Yurok Tribe has had since receiving the 

"Agreed Upon Procedures and Findings Report". In our attempt 

to determine if we had enough information to dispute or 

accept the report as a full and complete accounting we have 

encountered serious road blocks in obtaining the information 

necessary to make AnY determination. Our first major problem 

was not receiving the report and back-up journals in time 

f o r thorough review . Our regional meeting was March 19th in 

Sacramento and we received our information on Ma rch 6th. We 

had difficulty using the compact disk and when we finally 

started our review of the documents we discovered that 

records of our most significant trust accounts were not 

included. In fact, we had only received information on one 

of the Yurok Tribe's accounts. This account had a balance of 
193 

$220,000.00. The account that we~~ receive information 

on has a balance of $41,000,000.00. 

Additionally, at the regional meeting Mr. Christi insisted 

that we had received all of the information and called 

Albuquerque to verify this. It was discovered that the Tribe 

had not in fact received any of the disputed information. 

Thus, we were not able to conduct our meeting during the 

scheduled time. Mr Christi promised the information would be 

mailed to the Tribe immediately and the Bureau would pay for 

the Tribal Council members and staff to go to Albuquerque to 

complete the meeting we were to have in March. In 

preparation for this meeting we were to receive the journals 

for the other accounts immediately. The Albuquerque meeting 

was set for June 24-25. We received only a partial set of 

journals approximately 10 days before the Albuquerque 

meeting. There were reconciled account statements missing 

from the package as well as other incomplete information. 

point out that these documents contain key information the 

Tribe must have to determine if their account balances are 

correct. While in Albuquerque we were able to view documents 

on CD-ROM that clearly show that Tribal funds had been 

posted to the account of another Tribe. To date however, the 

Yurek Tribe has not received these account statements or 

journals. 

2 
194 

- At the March 19th meeting there were 8 issues discuss ed 

which required follow up response from O.T.F.M . . To date 

we have not received a response to these issues. 

- At the June 24-25 meeting in Albuquerque there was another 

list of questions presented and we were promised the 

balance of the reports and journals. We have not had a 

r e sponse to these issues nor have we received the reports 

or journals. 

The Trust Fund Reform Act requires each tribe to either 

'dispute' or 'accept' the reconciliation report" .. . as full 

and complete accounting as possible to the earliest possible 

date". In light of this requirement, the Yurok Tribe could 

not summarily reject or accept the report due to the 

governments' failure to provide and disclose all of the data 

and information that was needed. Further, I reiterate that 

O.T.F.M. had committed to providing this missing information 

on two prior occasions. 

We now understand that our decision to defer 'dispute' or 

'acceptance' of the report is being r epresented by O.T.F.M. 

as disinterest by the Yurok Tribe. Nothing could be further 

from the truth. The Yurok Tribe summarily rejects the Trust 

Fund report as presented by O.T.F.M. The Yurok Tribe could 

not, in good faith, take a position on the report without 

being able to review the pertinent documents which have not 

3 
195 

been provided. It appears that the Yurek Tribe and the other 

tribes who deferred a decision on their respective reports 

have been deemed to have no interest, thereby being wrongly 

perceived as being uninterested in the reconciliation 

effort. This assumption is symptomatic of the serious 

internal flaws in the reconciliation process. It flaunts the 

concept of a 'trustee' and totally undermines the 

credibility of the O.T.F.M. and the intent of the Trust Fund 

Reform Act. 

Current reports from O,T.F.M.; 

The Tribe is currently receiving monthly reports on funds 

held in Trust by O.T.F.M. We are pleased to receive current 

information. However, there are entries in these reports 

that our Representative has not been able to explain; 

Specifically, Income Transferred from I.I.M. account on 

9-20-95 of $5,058.93. This is not an I.I.M. account and 

should not contain this type of entry. On the same report 

there were deductions from the account entitled "per capita 

and other payments to Indians". To date the Tribe has not 

received an explanation of these entries. 

From the above examples you can see that there is much more 

to do to resolve the old Trust Fund accounting issues. Also, 

we must continue to make improvements that will provide a 

system that is equivalent to Commercial Trust Departments 

for all Tribes and I.I.M. account holders. 
100 

To meet Commercial Tryst Qepartment Standards· 

1. Funds must be appropriated by Congress to continue to 

upgrade O.T.F.M.'s accounting and computer systems. 

2. O.T.F.M. must be immune to the "reduction in force 

process" so they may retain staff that have been 

trained in the special procedures necessary t o handle 

trust funds . 

3. Accounting must be provided to I . I.M . account holders 

on a regular basis, and when quest i ons arise they need 

t o prompt and professional response. 

4. Standards must be established that mirror private trust 

fund standards and policies and procedures need to be 

developed for management and investment of trust funds. 

5. Technical assistance funds are needed to implement the 

Trust Fund Reform Act provisions which offer Tribe s the 

opp~rtunity for self-determination in the mana g e ment of 

their trust funds and trust assets . This should include 

the management of I.I.M. accounts. 

Onc e again we thank you for the opportunity to prese nt this 

testimony. We wish to impress upon you that this is a very 

important issue to the Yurek Tribe. 

5 
197 

TESTIMONY OF THE HONORABLE DEBORAH J. DOXTATOR 

CHAIRWOMAN OF THE ONEIDA TRIBE OF INDIANS OF WISCONSIN 

BEFORE THE 

U.S. HOUSE OF REPRESENTATIVES COMMITTEE ON RESOURCES 

Good morning, Mr. Chainnan and members of the Committee. My name is 

Deborah Doxtator, and I am the Chairwoman of the Oneida Tribe of Indians of 

Wisconsin. I am once again pleased to have the opportunity to speak before this 

vital committee on a topic of great significance. 

Mr. Chainnan, the Oneida Tribe of Indians of Wisconsin is a federally-recognized 

treaty tribe located upon a 65,430 acre reservation in Northeastern Wisconsin. 

Today our nation is recognized for its success in the gaming industry, but more than 

that, it is acknowledged as one of the most successful in addressing the needs of its 

members through sotmd governmental planning and action. 

Not long ago in the memories of our people, our nation was impoverished by every 

measure but pride. With $40,000 for an annual budget, nearly 1/3 of our roads 

unpaved, 1/3 of our people living in substandard homes ( defmed as having no 

electricity, no plumbing, or both), a 55% unemployment rate, and an 8th grade 

average educational attainment level there was little that would hint to our future 

success. These statistics from only 25 years ago would have suggested that our 

communities were hopeless. We had a BIA agent attend every meeting of our 

Council to inform us of what we could not do, and that was the visible extent of the 

BIA's fiduciary responsibility. 

In my testimony today, I will cover several issues. First, I will share a brief 

overview of Oneida history in relation to the federal government and trust For you 

to appreciate our frustration around the Trust Funds Reconciliation Project, I feel 

compelled to place our situation in an historical context I wish for you to truly 

understand the contributions and sacrifices that we have made and the way in which 

the United States has carried out its obligations. I will next address the 1973-1992 

period targeted in the Bureau reconciliation effort. I will close with how this 

reconciliation affects Indian Country and propose some solutions to solve the 

dilemma now faced by the Bureau oflndian Affairs, Office of trust Funds 

Management 

On"yo?tea.ka (Oneida), People of the Standing Stone, learn from our traditions that 
198 

the Creator placed us upon this land known as Turtle Island. From time 

immemorial, our people lived on this land. In 1532, F. Franciscus de Victoria, the 

Father of International Law, formally pronounced what we have always known: 

Indian nations held the same inherent rights over their lands as did the European 

nations. Under international law, there were two ways in which the land could 

change hands, by either a "just war," or by mutual consent (treaty). Nearly all of 

America was acquired by treaty ... agreements that included quid pro quos. America 

seldom kept its word. War, however, was something that America understood. 

While treaties were often broken, one might suspect that the concept of spoils going 

to the victors would certainly be a concept understood by Europeans and ultimately 

American patriots. Beyond peace treaties with the Indian nations, some agreements 

among the fledgling United States and Indian nations were those borne of military 

alliances. The alliances struck between us and the British resulted in our fighting on 

behalf of the British in the French-Indian War. At the time of the Revolution, our 

nation broke from the Iroquois Confederacy to fight on behalf of the Colonies. 

When the colonists refused aid to Washington's army at Valley Forge, it was our 

people bringing corn and other foodstuffs which preserved them. Our men, serving 

as officers and soldiers in this army helped secure the success of the fledgling 

nation. George Washington observed, that "were it not for the aid of the Indians, 

the War would have been lost." 

A grateful President Washington guaranteed Oneida's scorched ancestral lands in 

New York to the people and their descendants' and extended monetary and other 

compensation for services2

. His commitment lasted until the 1820's when the 

American mind set was altered by the Jeffersonian "Removal Policy" and the 

evolving concept of"Manifest Destiny." The majority of our people were forced to 

Wisconsin where we reside today. We, as victors and allies of this new nation 

were, like most other nations, victimized by an America that did not stand up to its 

word. 

It was during this period of relocation Oneida entered into a treaty with the 

Menominee tribe which granted the Oneida a Y, interest in Menominee holdings in 

1 Treaty with the Six Nations, 1794 (Treaty of Canandaigua), 7 Stat. 44, November II, 

1794. 

2 Treaty with the Oneida, etc., 1794, 7 Stat. 47, December 2, 1794. 
199 

the future State ofWisconsin.

3 The Menominee later ceded much of this land, 

without the consent of the Oneida, to the United States in the Stambaugh Treaty.''" 

Oneida eventually made a claim with the Indian Claims Commission for the loss of 

the Y2 interest that was conveyed to the U.S. by the Menominee.' This claim, 

known as Docket 75, and the award was ratified by Congress on September 27, 

1967.

6 

Pursuant to Congressional direction, the money remaining after payment of costs 

and attorney fees was to be apportioned by the Bureau of Indian Affairs. Any 

money expended from the accounts of the Oneida Tribe of Indians of Wisconsin 

required the approval of the Secretary of the Interior.' 

The money awarded from the Docket 75 claim was placed in trust at the Bureau of 

Indian Affairs, were it was managed by the Division of Trust Responsibility, Branch 

of Investments from 1967 untill989. At that time our nation took control of the 

monies and transferred them to our own accounts where we have since managed 

them. The Oneida Nation withdrew the majority of its funds upon secretarial 

approval for the express purpose of making annual per capita payments to tribal 

members aged 65 years and older. 

The Oneida Nation made the decision to take control of its funds in response to a 

growing distrust among our membership in the ability of the Department of the 

Interior, Division of Trust Responsibility, to manage our money. Our apprehension 

appears to have been valid. 

3 Treaty between the Oneida, Stockbridge, St. Regis, Tuscarora, and Munsee (the "New 

York Indians") and the Menominee, September 23, 1822. 

'Treaty with the Menominee, 1831 , 7 Stat. 342 (February 8, 1831). 

' Emigrant New York lndia11s, ex. Rei. Julius Danforth, Oscar Archiquette, Sherman 

Skena11dore, Mamie Smith, Arvid E. Miller a11d Fred Robinson, the Oneida Tribe of l11dians of 

Wisco11sin and the Stockbridge-Munsee Community v. United States of America, Indian Claims 

Commission, Docket 75, November I, 1957) 

6 Public Law 90-93, September 27, 1967, codified at 25 U.S.C. §§1141, et. seq. 

7 25 U.S.C. §§ 1144 & 1145. 
200 

The American Indian trust Fund Management Reform Act' and the 

Tribal Trust Funds Reconciliation Project 

Today the Oneida tribe holds minimal funds with the Bureau of Indian Affairs, 

Office of trust Funds management. Self determination has been and continues to be 

our philosophy regarding the management of our funds. We are attempting to make 

our investments grow and increase our capacity to contribute to the needs of our 

elderly Tribal members. 

Mr. Chairman, I am sure you are well aware of the American Indian Trust Fund 

Management Reform Act of 1994 and the attempted reconciliation made by Arthur 

Andersen, L.L.P. I am not confident, however, that you have been comprehensively 

informed on how this reconciliation affects the individual tribes who were involved. 

The Oneida Nation of Wisconsin held the bulk of its assets in Branch of Investments 

from the period of 1967 through 1978. It was our initial hope that we would receive 

confmnation that the funds we withdrew from the Bureau of Indian Affairs 

management could be conclusively determined to have been either correct or 

incorrect. 

However, after meeting with the representatives of the Office of Trust Funds 

Management and Arthur Andersen, L.L.P., in January and April of this year, we 

have learned a great deal. The single most important fact we have learned is that 

this attempt to reconcile the funds held in trust by the Bureau of Indian Affairs 

during the period of 1973 through 1992 cannot be audited or reconciled. The 

procedures and findings are insufficient due to the lack of documentation available 

to back up transactions. 

During our meeting in Aprill996, representatives of the Oneida Nation learned that 

the so-called reconciliation effort made by Arthur Andersen had determined that the 

Oneida Nation of Wisconsin OWES the Bureau of Indian Affairs $15,000, in spite 

of the fact that it had not produced documentation for a staggering number of 

transactions to our account! 

Our representatives took a closer look at the reconciliation effort and found even 

more disturbing information. The attempt to reconcile Bureau accounts has been 

1 25 U.S .C. 4001, et seq. 
201 

severely hampered by the lack of documentation that exists to back up a large 

percentage of the transactions made on all tribal accounts. Additionally, other 

serious defects exist in the attempted reconciliation. These include: 

1. The lack of effort to gain the input of the tribes whose accounts were being 

examined. The Oneida Tribe of Indians could have been an invaluable resources to 

the Bureau of Indian Affairs and Arthur Andersen, L.L.P. during their attempts to 

cross check our accounts. Several of the people who have been involved in Tribal 

affairs since the Oneida were awarded the Docket 75 judgement continue to be 

involved in the tribal affairs today. These people could have answered questions 

and located documents which would have aided the Bureau of Indian Affairs and 

Arthur Andersen in their attempts to correctly reconcile our accounts. During our 

April 11, 1996 meeting with representatives from the Office of trust Funds 

Management and Arthur Andersen, Arthur Andersen representatives spoke candidly 

with us regarding attempts to work with Tribes to locate missing documents. 

According to their statements, a decision was made early on in the project to work 

with only five tribes on a one-to-one basis. However, due to the costs incurred and 

the time intensive nature of working with tribes, this practice was not expanded. 

2. The advisory board, which was specifically created to aid the Special trustee 

pursuant to 25 U.S.C. sec 4046, was never consulted regarding Department of 

Interior attempts to reform trust funds management. In fact, a respected Indian 

leader, Ivan Makil, reports that their efforts to meet and to advise in departmental 

deliberations regarding reform were thwarted by the Bureau of Indian Affairs9

. 

During our regional meeting the BIA, representatives responded to our inquiries 

concerning the advisory board. We were told who was on the board and that it was 

not very active. The board members had one meeting and the funding ran out. The 

board had no further opportunity to meet and that the DOl would not allocate funds 

for the advisory board until October, 1997. This lack of consultation with the 

advisory board emphasized the fact that the BIA made very poor efforts in 

consulting with Indian country on reconciliation ofiTS own funds. 

3. The Bureau of Indian Affairs is also responsible for collecting amounts due to 

Tribes through timber sales, as well as mineral and gas leases. When we questioned 

this issue at our April 11, 1996 meeting, Arthur Andersen, L.L.P. representatives 

stated to us that it discontinued attempts to confirm whether the amounts deposited 

' Testimony on Indian trust Fund Issues before the Senate Committee on Indian Affairs 

submitted by Ivan Makil, June II, 1996. 
202 

into each tribe's accounts were in fact the amount due to each tribe because they 

were experiencing time and budgetary constraints. We were told that determining 

the amounts due under many of the leases in question was complex and therefore 

costly. This procedure was explicitly referred to as the "Fill-the-Gap Procedure." 

and is discussed in some detail in the report of the General Accounting Office to the 

Senate Committee on Indian Affairs submitted in May 1996. 

4. There has been no attempt to reconcile the Individual Indian Money Accounts. 

The Bureau estimates that the costs to meaningfully audit these accounts would 

range from $108 to $280 million. 

5. Funds held in the Branch of Investments from 1973 through 1978 were not 

scrutinized. We have begun our own analysis of this period, but we are in the most 

preliminary stages of our research. Based upon other research, we expect to be able 

to demonstrate that had errors occurred, they too would result in findings in our 

favor. 

The most offensive aspect of the accounting provided to the Oneida Nation was the 

indication from Arthur Andersen and the Bureau of Indian Affairs that the Oneida 

Nation owes the Bureau of Indian Affairs almost $15,000. When questioned in 

detail on the subject, Andersen representatives stated that the reason the Summary 

of Treasury Interest Recalculation Results shows the net adjustment due from the 

Oneida Tribe stems from overexpenditures made by the Bureau of Indian Affairs to 

Oneida Accounts. These overdrafts resulted in negative balances, the interest from 

which has accrued over the years and now approachs $15,000. Arthur Andersen 

officials also conceded that these transactions were entirely handled within tl1e 

Bureau of Indian Affairs and that the Oneida Tribe did not access those accounts 

directly. 

We have recently turned over the responsibility for monitoring our trust fimds to our 

newly created Trust Department. Its monitoring efforts of our accounts have led us 

to uncover discrepancies totaling more than $19,000 in favor of the Tribe. This 

number is based on our scrutiny of Bureau oflndian Affairs accounting and 

examination of our treaties with the United States. This oversight, stemming from 

the most fimdamental federal obligation, would not have been located using the 

methodology agreed to by the Department of the Interior, Bureau of Indian Affairs 

and Arthur Andersen, L.L.P. Under their study methodology, they have not been 

responsible for checking the amount deposited into the Oneida account with the 

actual amount due under our agreements with the United States. 

Our inquiries have thus far restored our annuity payments based on our 
203 

contributions to the establislunent of this country. We understand that we have 

recently been credited for the past six years where payment was not made. We are 

awaiting credit of the payment for 1979. For us this a matter of pride, a matter of 

honor, and one which underscores the unique relationship of Indian nations to the 

United States-one which many in Washington today fail to understand or recognize. 

We are presently reviewing our options and continue to monitor the accounts that 

we now hold with the Office of Trust Funds Management. An option before us is to 

conduct our own reconciliation of the accounts we have held with the Bureau of 

Indian Affairs in the past. We are encouraged by the changes that have occurred in 

the Office of Trust Funds Management and are happy with the service provided to 

us by the representative assigned to our accounts. The direction the Office of Trust 

Funds Management has taken is a positive step, but stronger efforts need to be made 

in order to restore the good faith of Indian nations. 

When the reconciliation efforts were first undertaken, I believe that all of Indian 

Country held hope that the reconciliation would uncover what we have known all 

along--that the Bureau oflndian Affairs has not fulfilled its responsibility to the 

Indian Nations. Unfortunately, the attempted reconciliation has not been detailed 

enough and there has been no investigation into the issues that really matter to 

Indian Nations. 

Future attempts to address this issue must include the following: 

1. Any reconciliation attempt must include a review of all applicable treaties, 

leases, and sales agreements which place an obligation on either the United States 

or third parties to pay monies to the Bureau of Indian Affairs on behalf of Indian 

tribes. The reconciliation is meaningless to Indian nations unless they know the 

amounts the Bureau oflndian Affairs is responsible for handling on their behalf. 

2. As I stated earlier, we are heartened by the progress that has been made by the 

Office of Trust Funds Management. However, the Bureau of Indian Affairs must 

also make changes that allow its information systems to communicate to each other. 

It is my understanding that the computer progranuning for the separate functions of 

the Bureau of Indian Affairs is incompatible. Additionally, there is no Accounts 

Receivable system. Until these changes are made, the United States will not be 

meeting its trust responsibility to the Indian Nations with whom it has these 

obligations. 

3. The Individual Indian Money accounts must be properly reconciled. While I 

realize that this will be an overwhelming challenge, some type of solution must be 
204 

fashioned using input from Indian country and the private sector. 

I recognize the tremendous support the Committee has given to Indian country 

regarding this issue in the past. Your efforts have allowed us to begin this journey 

to uncover the past. However, we have only begun. I encourage you to continue 

your support and strengthen your efforts to demand the full truth. 

I believe that a fair and equitable resolution can ultimately be reached in these 

matters. I urge all parties involved, Indian Nations, the Bureau of Indian Affairs, 

and the private sector entities, to all be part of the solution. We must all work 

together to fashion a solution to a problem that has literally existed for over two 

hundred years. 

On behalf of the Oneida Tribe of Indians of Wisconsin, I would like to thank the 

Committee for its invitation to speak today. I appreciate all the support you have 

shown and I am willing to make any effort necessary to effect change. I am here 

because my nation has made it possible for me to be here. As I am certain you 

appreciate, there are many other Indian nations whose conditions do not permit them 

to join us. Their voices must also be heard. Their legitimate legal rights and the 

honor of the United States is once again at question. 

I will be pleased to answer any questions you may have at this time. 
205 

STATEMENT OF 

ROBERT M. PEREGOY, SENIOR STAFF ATTORNEY 

NATIVE AMERICAN RIGHTS FUND 

BEFORE THE 

HOUSE TASK FORCE ON INDIAN TRUST FUND MA.t~AGEMENT 

COMMITTEE ON RESOURCES 

U.S. HOUSE OF REPRESENTATIVES 

SCOTTSDALE, ARIZONA 

AUGUST 20, 1996 

Native American Rights Fund 

1712 N Street, N.W. 

Washington, D.C. 20036 

(202) 785-4166 
206 

STATEMENT OF ROBERT M. PEREGOY 

AUGUST 20, 1996 

Chairman Hayworth and Members of the Task Force, appreciate the 

opportunity to provide testimony on this most important matter. My name is 

Robert Peregoy. I am a senior staff attorney with the Native American Rights 

Fund (NARF). I work in our Washington, D.C. office. 

Mr. Chairman, before I begin my testimony, I want to express appreciation 

to you on behalf of the Native American Rights Fund for your leadership in 

chairing this important Task Force. The government's mismanagement of Indian 

trust funds has been permitted to continue for far too long. This crisis cries out 

for a speedy and effective resolution. We believe this Task Force can play a key 

role in fashioning a satisfactory resolution to this sordid chapter in Indiangovernment relations. And the Native American Rights Fund looks forward to 

working with you in this regard. 

As you are aware, in June of this year the Native American Rights Fund and 

other attorneys filed a class action lawsuit on behalf of over 300,000 Indians 

against the federal government to seek redress for the government's breaches of 

trust in mismanaging the Individual Indian Money (liM) accounts held in trust for 

the exclusive benefit of these individuals. We have previously testified about the 

specifics of this litigation, which we again emphasize was filed as a last resort. 

As the record amply demonstrates, the trust management system is 

hopelessly broken. According to the Special Trustee, the management system for 

the liM accounts is in the "worst condition of any of Interior's trust management 

systems." However, the Special Trustee has been unable to fix the liM accounting 

system because his hands have been hopelessly tied as a result of the government's 

failure to provide adequate resources. Our immediate purpose--on behalf of more 

than 300,000 individual Indian trust beneficiaries--is to seek adequate 

appropriations to fix the liM accounting system. 

The Special Trustee determined that it would take almost $50 million in FY 

1997 to begin to correct the overall trust management deficiencies. However, the 

Administration requested only $36.3 million in appropriations. The House reduced 

this already inadequate number by nearly 50 percent to $19.126 million, pursuant 

to the Interior appropriations bill passed in June. It is significant to note that the 

2 
207 

Office of Management and Budget stated in a June 12, 1996 letter to House 

Appropriations Committee Chairman Livingston that the President will likely veto 

the House Interior appropriations bill, in part due to the unacceptable level of 

funds appropriated to the Office of Special Trustee. 

We emphasize that the $19.126 million House appropriation can do 

nothin:: to rehabilitate the liM trust management system. An additional $22.3 

million for FY 1997 is necessary to provide the liM trust with an adequate 

accounting system. This amount will provide the liM trust beneficiaries with 

an accounting system equal to the OmniTrust System, which is in operation 

for the tribal trust and its more than 275 tribal trust beneficiaries. As the 

Special Trustee has testified, the $22.3 million will enable him to fix the liM 

accounting system within one year--by creating "a Chevrolet, not a Cadillac." 

Without this repair, the government cannot possibly expect to minimize the losses 

caused by its failure to administer the liM trust prudently for more than 300,000 

individual Indian trust beneficiaries every single day. 

The Senate Appropriations Committee has included the full amount of 

appropriations requested by the Administration--$36.3 million for the Office of the 

Special Trustee. This includes $13.6 million to commence implementation of the 

strategic plan. As we understand it, this amount will be used primarily to begin 

to upgrade and establish for the first time a reliable liM accounting system. While 

the Senate Appropriations Committee recommendation of $13.6 million is a step 

in the right direction, it remains $8.7 million short of the $22.3 million necessary 

to repair this part of the problem. 

We hope that the Senate will enact the Appropriations Committee 

recommendation pertaining to the Office of the Special Trustee, to start to provide 

the Special Trustee with the necessary resources and tools he needs to begin to 

reform the system, as Congress mandated when it passed the Trust Fund Reform 

Act of 1994. We respectfully ask that your Task Force work with Resources 

Committee Chairman Don Young, the House Appropriations Committee, and 

the House Conference Managers to urge them· to recede to and add another 

$8.7 million to the Senate level for a total of $45 million for the Office of 

Special Trustee. Should it appear that Interior spending will be covered 

instead by a Continuing Resolution, we likewise ask that you urge that this 

amount be included for program improvement initiatives of the Special 

Trustee. We are well aware of the funding pressures to reduce overall 

3 
208 

spending and to balance spending priorities within each appropriation 

measure. However, there is simply no good reason that the Federal 

government should permit the trust funds of more than 300,000 individual 

Indian trust beneficiaries to wither away because of current budget deficit 

concerns. In short, it is in everybody's best interest for the government to 

honor its legal responsibilities and provide the funding to stop the 

hemorrhaging now. One hundred and fifty-eight years of willful neglect must 

stop! 

In closing, we emphasize that an appropriation of $22.3 million is a critical 

expenditure for the federal trustee; this will begin to end the government's 

continuing breaches of trust and its rapidly mounting liability for a modest 

cost of less than $75 per each of the 300,000 individual Indians who are 

injured each day by this continuing neglect. What a pittance to pay for the 

federal trustee to honor its trust responsibility to these 300,000 American citizens. 

Finally, we respectfully submit that it would be wrong for any part of the 

$22.3 million to come from any Indian program. To do so would be unjust and 

inequitable. The federal trustee is directly responsible for the creation and 

continuation of the IIM trust management crisis as a result of its total failure to 

administer the trust prudently. This has caused individual Indians to lose untold 

millions of dollars of their money. Accordingly, it is unconscionable to compel 

any Indian to pay for the government's breach of trust. 

Thank you for the opportunity to testify. 

4 
MANAGEMENT AND RECONCILIATION OF 

INDIAN TRUST FUND ACCOUNTS 

THURSDAY, SEPTEMBER 26, 1996 

HOUSE OF REPRESENTATIVES, 

TASK FORCE ON INDIAN TRUST FuND MANAGEMENT, 

COMMI'ITEE ON RESOURCES, 

Washington, DC. 

The Task Force met, pursuant to call, at 10:09 a.m., in room 

1334, Longworth House Office Building, Hon. J.D. Hayworth (Chairman of the Task Force) presiding. 

STATEMENT OF BON. J.D. HAYWORTH, A U.S. REPRESENTA· 

TIVE FROM ARIZONA AND CHAIRMAN, TASK FORCE ON IN· 

DIAN TRUST FUND MANAGEMENT 

Mr. HAYWORTH. Good morning, ladies and gentlemen. Today the 

Task Force on Indian Trust Fund Management is holding its fourth 

and final hearing. The subject of this hearing will be possible legis- lative solutions to the many problems which continue to plague the 

management of Indian trust fund accounts. 

In order to focus our witnesses, as well as the members of our 

Task Force, on legislative solutions, I have requested each member 

to comment upon and answer ten questions in his or her testimony. Let me hasten to add that these questions are not J.D. Hayworth's legislative solutions. Instead, these are proposals which the Task 

Force has encountered during its consideration of Indian trust fund 

account management problems, proposals which some or all members of the Task Force may not agree with but proposals which 

should be commented upon for the record. Here are the ten questions which we hope to ask of each witness. (1) Should the Federal Government continue to be in the business of administering liM accounts? 

(2) Would you support having DOl contract out the operation functions of managing Indian trust fund accounts to either A, a private trust management company, orB, another department of the 

Federal Government such as the Department of the Treasury so 

long as the United States retains its related trust responsibility? (3) Would you support DOl charging administrative fees to trust 

fund account holders to defray the cost of improving its trust fund 

management systems. 

(4) Would you support legislation which would disburse all funds 

in existing liM accounts to appropriate account owners, would then 

terminate those liM accounts and would provide that in the future 

whenever possible revenues would be forwarded directly to account 

holders by check without going first through a trust fund account? 

(209) 
210 

(5) What do you think should be done about (A) fractionated 

heirship problems, and (B) the thousands of inactive liM accounts 

which have no known beneficiary? Inactive account funds could be 

transferred to the Federal Government or to the tribe of the last 

known beneficiary or to some form of Federal and/or tribal escrow 

account held for some designated use. 

(6) Assuming the tribal accounts cannot be reconciled any further, what settlement process do you support which would fairly 

compensate the tribes and would terminate any liability which the 

Federal Government might have for any breach of trust respon- sibility which might have taken place regarding the management of tribal accounts in the past? (7) Assuming that liM accounts cannot be fully reconciled, what 

settlement process do you support which would fairly compensate 

account holders and would terminate any liability which the Federal Government might have incurred for any breach of trust responsibility which might have taken place regarding the management of liM accounts in the past. (8) What changes in existing law would facilitate the administration of tribal trust fund accounts? 

(9) What is your opinion of the proposed phase one of the Special Trustee's strategic plan issued in February 1996? 

( 10) What changes in existing law relating to the management of Indian trust fund accounts other than those mentioned above 

would you suggest be considered by the Congress of the United 

States? 

As we have commented before in these Task Force hearings, it 

is disturbing to note that many believe that the letters BIA now 

stand not for Bureau of Indian Affairs but for billions in arrears. 

It is equally disturbing that by some accounts what we have uncovered through audits and forensic accounting is in the words of some 

who have testified before us just the tip of the iceberg. This is a 

problem that has confronted administrations of both parties. It is 

a problem which we are dealing with in a bipartisan fashion, for 

our purpose here is to be cognizant of the trust responsibilities vested in the U.S. Government, its trust obligations in the wake of 

treaties with several sovereign Indian nations. I would like to thank the minority for its involvement in this 

Task Force. And I would turn to my distinguished friend from 

Michigan, the Ranking Minority Member, Mr. Kildee, for any comments he might have this morning. 

STATEMENT OF BON. DALE E. KILDEE, A U.S. 

REPRESENTATIVE FROM MICHIGAN 

Mr. KILDEE. Thank you, Mr. Chairman. Thank you for having these hearings in the really nonpartisan way in which they have 

been conducted. I think the sovereignty of the tribes, which I believe in very, very strongly as a fact, the sovereignty of the tribes 

and the trust responLibility of the U.S. Government move us to discover the facts that have brought us to the present situation and 

to explore possible courses of action. And I think that this is what 

this committee hopes to be able to do, suggest we need input from 

you. I think the ten questions which you have proposed will be very helpful to us. And I look forward to the responses to the questions. 
211 

Mr. HAYWORTH. I thank the gentleman from Michigan for his remarks. And let us begin, then, with the Special Trustee for American Indians from the Department of the Interior, Paul Homan. Mr. Homan, good to have you with us this morning. We would be interested in your opening remarks and then addressing some of the 

questions that we have put on the table. Mr. HOMAN. Thank you, Mr. Chairman. 

Mr. HAYWORTH. And if I could intervene and if you would yield 

for just 1 second, if you would also introduce the individuals who 

accompany you this morning to testify. 

Mr. HoMAN. I will. Thank you, Mr. Chairman. We are pleased 

to be here representing the Department of the Interior. With me 

today is Ed Cohen, who is the Deputy Solicitor in the Department 

of the Interior, and Jim Simon, who is the Deputy Assistant Attorney General with the U.S. Department of Justice. I will give the 

opening remarks and all of us will be available to answer any questions the committee may have. I will make a brief statement, but 

I would like to request that my full statement be included for the 

record, and I wish to note that my strategic plan and assessment 

has been previously provided for the record in a previous hearing. 

Mr. HAYWORTH. Yes, sir, your full statement will be included in 

the record without objection. We thank you for it. 

STATEMENT OF PAUL HOMAN, SPECIAL TRUSTEE FOR AMERICAN INDIANS, DEPARTMENT OF THE INTERIOR; ACCOMPANIED BY ED COHEN, DEPUTY SOLICTOR, DOl, AND JIM 

SIMON, DEPUTY ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF JUSTICE 

Mr. HoMAN. Thank you, Mr. Chairman. The hearings are focusing on legislative solutions to trust management practices and 

problems. I would first like to present a brief report on my assessment of the trust management systems and the conceptual strategic plan which my office has derived to deal with some of these 

longstanding problems affecting the Federal Government's trust 

management system. Of course, this will involve a number of legislative initiatives if the strategic plan is to be implemented successfully, including the answers to some of the questions that the committee has under review. 

My overall assessment concludes that the undeniably poor quality of the trust management systems and the condition of the historical records effectively preclude the Federal Government from 

providing an accurate and timely accounting to American Indian 

trust beneficiaries. This can be demonstrated quantitatively. The 

reconciliation project in January 1996 disclosed some $2.4 billion 

(32,000 transactions) for which source documentation could not be 

located. 

The point here is that these records should not be missing and 

would not be missing had the Federal Government followed conventional trust recordkeeping practices. Of particular concern is about 

$575 million in unreconciled disbursements. 

Another concern is some $4.1 billion of so-called reconciled disbursements which did not have complete disbursement voucher 

packages, and notably over $2 billion in large disbursement vouch-
212 

ers to tribes in care of third parties, which did not have both tribal 

and other governmental signed authorization. 

The reconciliation ' project also confirmed what the GAO calls a 

lack of. a known universe· of transactions and leases. This stems 

from the' Federal Government'i 1ack of an ability accurately to 

trace a collection to a source lease or contract. This in turn results 

from a lack of a consolidated accounts receivable billing system and 

a master lease system which at present defies auditing. 

At the end of 1994, there was also a 2-year backlog in bringing key landownership and records up to date. It was estimated at that 

time to take 104 staff years to eliminate this backlog, but instead 

BIA reduced its realty staff by some 29 percent from 126 staff 

members to 90 presently during 1995 and 1996, continuing the 

backlog. 

Turning to the liM problems, there are 54,921 liM accounts with 

$44.9 million for individuals with no address or an incorrect address. There are 15,234 liM accounts with $21.8 million held for 

individuals who were formerly minors, the vast majority of which 

should have been dispersed when the age of majority was reached. 

There are $42.2 million in overdraft interest clearing accounts resulting from interest mispostings prior to 1993. These are essentially non-earning assets which deprive current liM account holders annually of over $2 million in income. There are further general ledger differences of some $28 million which should be cleared 

from the general ledger. There is a continued maintenance problem of over 153,000 small accounts, some of which are the subject of 

this hearing, with balances less than $10 which we have to run at 

a significant operating cost to the taxpayer. And finally, there are 

over 130,000 missing social security numbers for account holders 

with over $175 million in their accounts. 

Mr. Chairman, these conditions are unacceptable by any reasonable standards and continue to do significant harm and damage to 

the American Indian trust beneficiaries. They are caused by the inherent defects in the core trust management systems the government uses to manage the Indian moneys. These defective systems effectively prevent the government from meeting the fiduciary accounting and reporting standards required by the American Indian 

Trust Management Reform Act of 1994 and standards of ordinary 

prudence applicable to all trustees, public or private. 

The Special Trustee's conceptual strategic plan addresses each of 

these issues and identifies nine initiatives designed to rectify the 

problems and bring trust accounting and management systems up 

to commercial standards within 3 years. What is needed first is a 

complete overhaul of the four basic trust management systems. We 

must acquire a new trust resource asset management delivery system. We must acquire a new accounts receivable data and automated billing system that uses lease contract and land and ownership information. We must acquire a new trust depository payments and delivery system for liM money accounts, and we have 

started this initiative with Fiscal 1997 moneys. And finally we 

must upgrade our land records and title recordation and certification system. 

Along with these overall core systems must come improvements 

to our general ledger system, record keeping and archiving, risk 
213 

management, our technology center and our organizational structure. I have estimated in my plan that implementation of this plan 

will cost $100 million over 3 years. And I wish to note that the 

President's budget contains $14 million to that effect for 1997. 

In closing let me just say that the problems in the trust management systems are longstanding ones. If mismanagement or negligence occurred, it stemmed principally, in my view, from allowing 

the trust management systems, record keeping systems and risk 

management systems to deteriorate over a 20- to 30-year period 

and become obsolete and ineffective. 

For many of those years, including many years since 1990, the 

trust programs were seriously understaffed and underfunded. The 

result was that the government increasingly was unable to keep 

pace with the rapid changes and improvements in technology, trust 

systems and prudential best practices taking place in the private 

sector industry. 

This gap continues today and will continue to increase until the 

reforms outlined in the strategic plan are funded and implemented. 

That is why they should be funded and implemented, in my view, 

immediately regardless of if and when the strategic plan called for 

in the Reform Act of 1994 is completed and approved. Each day the 

trust management systems remain status quo, the Federal Government's exposure to claims of mismanagement and liability will continue to grow and is another day the Federal Government cannot 

meet its trust responsibilities to the American Indians. 

The comprehensive strategic plan is scheduled for completion by 

March 31, 1997. It will address in depth many of the issues and 

concerns raised by this committee at its hearings today and in previous hearings. 

Included in my full statement are our initial answers to the committee's questions. Further research and analysis will be required 

over the coming months to arrive at sound legislative solutions to 

these longstanding trust management problems, and we look forward to working with the committee in that regard. 

Mr. Chairman, that concludes my statement. My colleagues and 

I would be happy to answer the questions that you outlined for us 

in more detail or any other questions you may have. 

[The prepared statement of Paul M. Homan may be found at end 

of the hearing.] 

Mr. HAYWORTH. Mr. Homan, we thank you for your efforts as the 

Special Trustee at the Interior Department. We also thank you 

again for your testimony this morning. We put before you ten questions. And we appreciate your response and very thoughtful inclusion of the questions and answers on your prepared testimony. Let 

me in a general sense, before I get to some of the specific notions 

outlined in those ten questions and your ten responses, ask you, 

sir, in a perfect world, and admittedly this has been on of gross imperfection with reference to what has happened to these special accounts, if you were to design the perfect system, what would you 

be most interested in doing? If you had to rank the different legislative alternatives or what your solution would be, what would you 

rank first? 

Mr. HoMAN. Well, I would rank first the accurate accounting to 

the American Indian beneficiaries of their account balances, the 
214 

moneys the government handles from start to finish starting with 

the leasing of the land, collection of the proceeds off those leases, investments and finally disbursements. And to do that I believe 

that eight of my nine strategic plan initiatives will address that. 

It will bring, essentially, the banking part of the Bureau of Indian 

Affairs up to commercial standards within 3 years. And that is no different than, in my view, trying to go to the 

bank across the street. Every single commercial bank and trust 

company in the United States has a system which is capable of pro- ducing 100 percent accounting. And that is essentially the place to 

start. 

Now in a perfect world, as trustee for the American Indian, my plan also contemplates a system with a common set of policies and 

procedures, a common set of accounting standards, a common system which is run by the government and a common set of laws by which the trustee can effectively downstream or delegate the oper- ating authority to Indians themselves under self government prin- ciples, to third parties, or in certain instances because of affordability problems and others, to be continued with the Bureau of Indian Affairs. However, as long as the U.S. Government remains in 

the trustee capacity, it must have a way in to determine whether 

the operators of the Indian trust lands are doing their job. Mr. HAYWORTH. Sir, I can recall your previous testimony here before this Task Force when you talked about your own resume and 

your rather extensive experience. Indeed, in your response to me 

just now you mentioned the situation which exists with commercial 

banking with an ability to account for 100 percent of the money deposit holders possess and the status of those accounts. It seems, Mr. Homan, that it begs the question if commercial banks can do 

this, taking into account even the legitimate trust obligations that 

this Federal Government has, and perhaps because of those trust 

obligations would it not be more cost effective to tum to an outside 

entity to provide this service? And could an outside entity, a financial house or some financial institution, do this job more effectively and more cheaply than your projection of, what, $100 million over 

3 years to completely overhaul the accounting system? Mr. HOMAN. Well, certainly, Mr. Chairman, outsourcing some of 

these activities is not only possible, but may be desirable. And at 

a certain point in the future, providing the government is satisfied 

it can do the correct risk management; i.e., auditing of whoever 

that third party is that is performing the trust function, provided that is satisfied, then I think that is quite possible. And it can be 

done. I don't think it can be done for less than $100 million. And 

I think the $100 million has to be spent to first fix the system. I am told that there have been attempts in the past to turn over 

a good part of these operations to private sector large banks that 

have this cash management and trust capacity, but the question has always been affordability. It has always been more than the 

government has been willing to pay, first. And second, there has 

not been a full accounting, as we all know, of these trust balances. 

A private institution taking over the administration of these accounts would probably ask for indemnification from the Federal 

Government for past practices or for errors and omissions and the 

lack of a full accounting. So that has been an impediment. 
215 

I believe before we could even consider outsourcing it we have to 

fix the system first. The $100 million will get there. Mter that, it 

is an operating expense of less than $20 million a year, which 

might be affordable. 

Mr. HAYWORTH. Sir, I have taken a look at your written responses, and we put before all our witnesses today a variety of different alternatives that some have mentioned to us. I am concerned 

about the response to question three, would you support DOl 

charging administrative fees to trust fund account holders to defray the cost of improving its trust fund management systems. You respond that administrative fees might be charged to defray the cost. 

The Department is researching the issue of whether fees should be 

charged account holders with large balances or activity. Do you view this as a viable policy alternative? Is it something that would 

be, in fact, under active consideration to charge the account holders? 

Mr. HOMAN. Yes, I think it is under active consideration. My per- sonal view on this, and I don't think it differs with the Depart- ment's views, is first that the question addresses whether administrative fees should be charged to defray the cost of improving the 

trust systems. I don't believe personally that should be the case. 

These systems have been in disrepair for a number of years and 

to ask current account holders to pay for the past errors and omissions in terms of staffing and funding for these systems, I don't believe is a way to approach it. 

But going forward, I think that for the larger accounts we might charge an administrative fee much like a bank would charge. We 

are in a monopolistic circumstance here, so I don't believe we 

should charge anything more than a comparable commercial trust 

company would charge for these same services for large accounts. 

Second, a good many of these accounts are very small, and we 

deal with tribes that are very poor. And I think questions of affordability come into question, and I think there ought to be an exemp- tion for tribes with small accounts or for tribes which simply can't 

afford to pay the type of administrative and trust fees that are 

common in the American private sector trust business. So with 

those caveats, I think we should charge. 

Third, there is a large category here that runs through some of 

these questions of over 150,000 accounts with balances less than 

$10. Now these are caused by our having to deal with fractionated 

shares where sometimes we keep track of less than a penny due 

on certain of these properties to certain of the property owners. 

That is an enormous operating cost. The realty people tell me in 

our suggested fractionated interest legislation that it costs something like $33 million, or about half their annual budget, just to 

keep track of these small fractionated interests. 

We have the same problem in keeping track of them at OTFM. 

These are largely dormant and inactive accounts. The government has not found a way to get rid of them, and normally a bank would 

escheat these accounts to the State or service charge them, you know, appropriately. And I believe that a service charge in our case 

might be doable. 

There are questions of constitutional taking which came up in a 

9th Circuit case in connection with the Indian Land Consolidation 
216 

Act in the mid-1980's and which is now pending before the Supreme Court. So we have to be very careful in terms of how we go 

about administering these trust fees. But I think in that case we 

should. It is costing the American taxpayer probably five or six 

times in operating costs what it costs to maintain those small accounts, and I don't believe a $10 account is worth much of anything 

to any American Indian. I think they would like to get rid of the 

problem as well. 

Mr. HAYWORTH. Mr. Homan, you will be pleased to note that in 

taking these hearings outside the beltway to the 6th District of Arizona we met with many tribal leaders, and many of them have 

lauded your efforts. Even as they have lauded your efforts, they 

have lamented what they believe to be some deficiencies in your 

purview of being able to really complete your strategic plan. And 

I am just curious. Has the Department ever told you why it has 

been unable to reprogram funds to your office so that you could 

complete your strategic plan? 

Mr. HoMAN. Well, During my confirmation hearings before the 

Senate last year in September I was asked what it would cost, essentially, to complete my strategic plan within the timeframe of 1 

year that the law gave me. And I indicated at that time that it was 

$3.5 million and that I would ask the Department for that money 

for Fiscal 1996. Now unfortunately, the Fiscal 1996 budget got tied 

up, as you all know, with continuing resolutions all last year. It 

never changed, for whatever reason, from the $447,000 that was 

actually given to me for 1996. With that amount of money, I could 

not complete my strategic plan and I could not hire the staff that 

would have made it possible. I requested the Department to reprogram moneys, but for whatever reason the priority was not, apparently, high enough for them to make that change last year. 

Mr. COHEN. Mr. Chairman, if I may just add one point. The 

question had come up in one of the prior hearings, and I checked 

with our budget people, and what I am told is that the Office of 

the Secretary did not have the authority to reprogram, money to 

the office of special trustee. Because of the way the accounts are 

set up, a reprogramming would have required coming back to Congress. Mr. Homan's office is a separate budgetary unit. We can provide additional information to the Task Force on that point if you 

would like. I am not a budget expert, but that is my understanding. 

With regard to funding of the rest of the plan, the administration, as Mr. Homan indicated, asked for $36 million in 1997, of 

which I believe $16 million goes to the implementation of the strategic plan. We are hopeful that Congress will respond positively to 

that. And each progressive budget submitted by the administration 

will include significant sums, I suspect, for the implementation of 

the strategic plan as it is completed and approved by Congress. 

Mr. HAYWORTH. Well, I thank you for adding those remarks, because it does seem to raise a new specter here, and we have 

touched on it previously. In a department which has an annual appropriation of some $12 billion, again without the accounting expertise, it would simply seem that common sense would dictate 

that the Secretary has a broad purview over discretionary spending. 
217 

And as I have said before, I think whoever sits at 1600 Pennsylvania Avenue in the years to come working with the Congress 

has to reconsider the way in which we have treated the first Americans, for we have Native Americans categorized in the Department 

of the Interior, which seems to betray to me some sort of antiquated notion. And I think somehow we get lost in the translation 

that we are taking the lives of human beings and their destinies, 

and we are putting them in the back seat as opposed to rocks and 

trees and critters. Now I would be the first to say we need to preserve our precious environment, but we must also honor our commitments to the first Americans. And that is what gives me pause. 

So I would like to see further quantification from the budgeters 

and the folks at Interior and find out, given the nature of this problem and now the urgency that the forensic accounting reveals, why 

the Secretary or whoever has not offered more or served more as 

a catalyst with discretionary funds to help complete that mission. 

Mr. CoHEN. If I could add a little more detail, and I don't want 

to belabor the point. I wish our budget was $12 billion. It isn't. I 

think it is-I can't tell you exactly what it is, but I know it isn't 

in that range, maybe in the seven billion dollar range. 

Second, I think that as has become clear through these hearings, 

this is going to take a partnership between the administration and 

the Congress to solve 'this problem. It is going to cost a lot of 

money. The President's request was $36.3 million. The House appropriated $19.1 million for Mr. Homan's office, the Senate $36.3 

million, and we are hoping that whatever comes out will be, obviously from our vantage point, closer to the Senate number. 

But you are quite right. I think this is going to require an effort 

of both the Executive and the Legislative Branch to get this problem solved. 

Mr. HAYWORTH. I think we can both agree that the budget for 

the Interior Department is certainly bigger than a billion dollar 

bread box. There is a significant sum of money there, and I again 

think we do need to look, though, and see with whatever powers 

of discretion the Secretary has, given the urgent nature of this 

problem, given the fact now that there are pending court cases and 

civil action has been taken, it would seem to suggest to me some 

urgency to say well, here are billions of dollars appropriated and 

yes, a number of different priorities, what would prevent this from 

moving higher on the priority list. But you are quite right. We 

would hope to continue a productive dialog with the administration 

and with the Executive Branch, whomever may head it in the years 

to come. 

Let me tum to my distinguished colleague, the Ranking Minority 

Member of the Task Foree, Mr. Kildee. 

Mr. KlLDEE. Thank you very much, Mr. Chairman. When I first 

came to Congress, Gerald Ford was President. At that time we 

achieved the point where we had reached our first billion dollar 

Congress. I remember Gerald Ford mentioned that in the State of 

the Union message. And perhaps one good way to find the $36 million is to look at our own budget and find some dollars there. 

This is, to my mind, a question of real justice, and my primary 

goal is to achieve justice for the Indian nations and tribes and people in this country. That has been my primary goal as I have been 
218 

in the Congress in this area. It is incredible that this has hap- pened. I happen to really appreciate the Chairman's tenacity, because this is a complicated area to explore. Every time you look at 

it you find more complications, but I appreciate your tenacity on 

this. 

Let me ask this question. I am not even sure I can ask it in the 

right way. You are the expert on this, but while trying to achieve 

justice for Native Americans, can we or should we at some point 

achieve or declare closure on a number of the unreconciled accounts while trying to fix the system for the future? I am not sure 

that question is phrased that well or not, but if you can take that 

and try to respond. 

Mr. HOMAN. Well, I think at some point we must come to a closure with the harm and damage claims that have arisen out of the 

deficiencies in the trust management systems. And one way to do 

that is to fix the systems so that at least you can stop the bleeding, 

so to speak, because our current systems for the most part are no 

different than they were in 1992 when the reconciliation project concluded. So as my staff is wont to say, we may be in the fourth 

year of a new reconciliation project. 

And I am here to say that based on my observations if we did 

another reconciliation project today for the last 4 years, we would 

find similar exceptions, similar deficiencies, similar amounts of 

missing records that we did with the 20-year reconciliation project which we concluded last year based upon the end of 1992. 

So one way to bring closure to the past is to assure that going forward we can provide the accurate accounting which is required by the Reform Act. Then you can separate it as a bank would into 

the institution going forward and the institution in the past and 

work down these exceptions. The 154,000 accounts that have no 

known address, for example, we have made significant progress in 

working some of those accounts down. However, the minute we 

stop, we get more over the transom, so to speak, coming in the door 

because the current systems have not been modernized. And this 

is basically in its simplest form a recordkeeping problem. And if we 

fix the recordkeeping problem, then we will be able to deal with 

both the past and the future in a sensible way. 

Mr. KILDEE. To achieve closure which contains justice, would 

that require legislation on the part of the Congress? 

Mr. HoMAN. Yes, I would like to have our representative from 

the Department of Justice answer that, and also if Ed would like 

to chime in on that. 

Mr. SIMON. Congressman, thank you. I would refer you respect- fully to some of the issues you raised the last time we were here. 

I believe that was at the beginning of the summer. And we reported that the Interior Department was making information available to all of the tribal account holders from the reconciliation and 

would be asking the tribes to attest as to whether or not they had 

an objection and if so what their objection was and that we would 

report back to Congress by November 15 as to what the objections and exceptions made by the tribes were, and that we would then 

try to analyze those exceptions and try to work with Congress on 

the solution. 
219 

I think we are all interested, as you say, Congressman, in achieving justice. I think we are all interested in doing it in a way which 

is expeditious, which doesn't squander money or time in needless 

litigation or dispute. And I think that what we have in mind is to 

gather the information from the tribes as to what they think the 

exceptions are and then work with them and with Congress and try 

to craft a solution. That may involve legislation. It is too early to 

say. 

Mr. KILDEE. So it may require some action outside the executive 

branch of government to bring some type of just closure to this, 

some type of closure that contains justice, then? 

Mr. SIMON. It very well may, sir. I think that we hope to know 

a little bit more in November, and we will report to you and we 

will be pleased to work with you, sir. 

Mr. KILDEE. Mr. Chairman, I am just wondering what would 

happen if in the State Department we were running through the 

foreign aid accounts and found such a situation. There really would 

be probably some heads rolling over there. And we are not dealing 

with foreign aid here. We are dealing with the first Americans. It 

just seems incredible that has drawn up. But I think we-that has 

already happened. I think we have to say now what can we do now. 

And I am certainly happy, Mr. Homan, that you are doing what 

you are doing. I think you have to be funded. I think that this is 

a very serious problem. You have to have the adequate funds so 

you can carry out your mandate. Thank you very much. 

Mr. HAYWORTH. I thank the gentleman from Michigan for his 

point of view. Gentlemen, before we dismiss, any other comments 

from any of you? 

Mr. CoHEN. Mr. Chairman, if I could, I would like to address an 

issue that you haven't raised but I see that Mr. Old Person raises 

it in his testimony. And because he is coming after us, I would like 

to address his comments. 

He indicates in his statement that a meeting he attended of the 

Advisory Board in Phoenix was abruptly canceled at which Mr. 

Homan was going to consult with the tribes on settlement issues. 

And without boring you with all the details, let me outline briefly 

what happened, because I think Mr. Old Person is justifiably upset. 

And I think he and the Native American community is owed both 

an explanation and an apology. 

The meeting was scheduled for, I believe, a week ago Monday. 

And the purpose of it, as I indicated, was to discuss settlement options. Now as you know, there are two categories of trust fund 

claims that we are looking at. One category is the so-called liM accounts, and the second are the tribal accounts. We had some concern about the extent to which settlement would be discussed with 

the Advisory Board, to which Mr. Old Person refers, for a couple 

reasons. 

First of all with regard to the liM accounts, there is litigation 

pending. A class action suit was filed in midsummer, and at this 

point, counsel for the plaintiffs and counsel for the United States 

in the form of the Justice Department have been meeting, and I 

think somewhat productively, to try to scope out an approach toresolving the issues. 
220 

Mr. Kildee, when you asked your question about how are we 

going to resolve this, it is quite possible that the liM accounts will 

be resolved, or at least the framework for resolving them, could 

evolve from the litigation depending upon how successful we are at 

working out an approach. 

Those discussions are in a very sensitive State and we were quite concerned about having discussions by anyone other than counsel 

for the parties going on. 

With regard to the tribal accounts, Mr. Homan has been conducting discussions with the advisory board and we had no problems with that. But I did send him a memo immediately prior to his 

meeting that made two poin • ..:. . One was that with regard to the 

liM accounts he shouldn't discuss settlement of the litigation. The 

second point that I made with regard to the tribal accounts was 

that to the extent that he has confidential and privileged information by virtue of his being an employee of the Department of the 

Interior, he should steer clear of revealing or discussing that in the 

context of his meeting. For whatever reason, whether the memo 

wasn't written clearly or whatever, what he read was not what I 

thought we had written. He interpreted the memo as saying that 

he could not discuss any settlement issues. That was not in any 

way, shape or form what was intended to be communicated with 

respect to the tribal accounts. Unfortunately when he read the 

memo he concluded, as I indicated, that he could not discuss settlement issues and that portion of his meeting was terminated. 

I want to apologize to the Advisory Board members, the tribal 

leaders who traveled to Phoenix to participate in that meeting. That confusion should not have happened and I think it is a departmental wide issue that should have been resolved prior to the 

meeting. I just wanted to bring that up and again apologize to Mr. 

Old Person and apologize to the tribal leaders. 

Mr. HAYWORTH. Mr. Cohen, I appreciate you raising this, but it 

does not offer absolution. Indeed, it raises an entirely new specter of a very disconcerting problem here. We have just finished hearing testimony about how acute and how badly needed resources are to 

solve this problem, and yet now we are reminded of a non-meeting taking place in my home State, presumably with folks journeying nationwide or across the continent to attend the meeting and then 

having it abruptly terminated for a misunderstanding or whatever. 

This is-it is a waste of money. It is the very thing we lament in 

the entire process. 

And you bring to mind something else when you talk about the 

advisory group that I really-before I bid you adieu this morning I want to get into. And let me discuss this with Mr. Homan. Recalling the testimony of Ivan Makil, the Chairman of the Salt River 

Pima Indian community in my district, I believe he is a part of that 

special advisory council. But as I understand it now, that group will not meet with you again until well into 1997, at least according to the testimony he presented to us in Arizona. Why the delay in that, Mr. Homan? 

Mr. HoMAN. I believe Mr. Makil probably meant Fiscal 1997. 

There was no money allocated last year to fund advisory board 

meetings, so we have met essentially over the phone. We had one 

organizational meeting in December of last year, and this was in 
221 

connection with settlement options and other criteria having to do 

with the reconciliation project. So we are scheduled to meet again 

in December of this year with a follow-up meeting in February to 

discuss the final stages of my strategic plan. 

Mr. HAYWORTH. Thank you for clearing that matter up for me. 

One thing I would request also in writing if it can be provided, the 

cost, the expenditure of transport of government officials to Phoenix, Arizona, for a meeting that could not take place. I would like 

to know what that cost the taxpayers of this nation, and I would 

like to see again more detail. You said you didn't want to bore me 

with the details, and I will respect that this morning; but I would 

like in writing, please, an explanation of exactly why this was terminated. I am sure the American people appreciate the apology, 

but I don't believe they easily excuse what can only be described 

as a waste of funds. 

Mr. HoMAN. Mr. Chairman, we will be glad to provide that for 

the record. I would like to say a few words about that meeting myself. When I received the advice from the Department of Justice, 

I conferred with my staff and we felt-all of us felt-that it precluded me, restrained me, if you will, from discussing the settlement options with not only the tribal members present, of which 

there were representatives from 15 tribes, but also with the advisory board itself because by definition the advisory board members, 

five of them, had to be members from tribes with tribal accounts. 

So with that I felt I had no choice-! didn't want to put my staff 

in jeopardy-but to call off the meeting. I have since received another memo indicating, as Ed indicated, that I may have misunderstood that memorandum, but that memo was given to me yesterday. My staff and my reading is still that I am restrained from 

doing any type of consultation on legislative settlement options 

with my advisory board. They have offered along with the Department of Justice to work with me in trying to clarify certain aspects 

of that latest advice and I will be doing that over the next week 

or two. 

Mr. HAYWORTH. Well, we certainly appreciate that and I am sure 

you share the regret of having to travel and for whatever reason 

having the meeting abruptly canceled. And one is tempted to try 

and comfort you saying well, it must happen all the time, but that 

is exactly the problem we tend to have in this government that has 

grown so vast and so encyclopedic in its endeavors that thewhether it is the right hand or the left hand or whatever analogy 

we want to use, somehow we don't seem to be able to coordinate 

and we end up spending taxpayer's dollars needlessly or in vain, 

as I think was indicated in this episode. 

Mr. HoMAN. Mr. Chairman, one final comment. The meeting was 

a general meeting on not only the reconciliation project but specific 

issues for each of the tribal members present. We did discuss those 

items in a general forum, so the settlement option proposal and 

settlement option discussion was only one part of the meeting, so 

it wasn't a complete waste of the government's money. However, 

the principal purpose of the conference was to discuss the settlement proposal and settlement options. 
222 

Mr. HAYWORTH. Well, gentlP.men, I thank you very much. If you 

have nothing further to add, we will thank you for your time this 

morning and we will be in touch. 

Mr. HoMAN. Thank you, Mr. Chairman. 

Mr. HAYWORTH. Now the Task Force will welcome the Chairman 

of the Intertribal Monitoring Association for Indian Trust Funds, 

Eric Davenport, to the witness table. And, Mr. Davenport, we appreciate your attendance this morning even as we bid farewell to 

our first panel. 

Yes, sir, welcome. Would you state your name and your role. 

STATEMENT OF DAVID HARRISON, PROFESSIONAL STAFF 

MEMBER, INTERTRffiAL MONITORING ASSOCIATION ON INDIAN TRUST FUNDS 

Mr. HARRISON. Yes, Mr. Chairman, I am David Harrison. I am 

part of the professional staff of the Intertribal Monitoring Association on Indian Trust Funds. Our chairman, Mr. Eric Davenport, 

who is the business manager for the Central Council of Tlingit and 

Haida tribes in Southeast Alaska, is stormbound in Juneau and the 

planes are not flying. And he deeply regrets that he can't be here, 

but he asked us to express his very great appreciation for the leadership that this Committee and this Task Force have shown on this 

very important subject. And he has asked me to elaborate on his 

prepared statement that was delivered to the committee in advance 

of today's hearing. 

And while we did, Mr. Chairman, address each of the ten questions that the Committee put forward in our prepared statement, 

I would like to focus a little bit on just a couple of those in our discussion this morning. And then, of course, we will be happy to respond to any questions that you or members of the Task Force may 

have. 

With respect to one of the questions about settlement, and it 

goes, I think, to a question that Mr. Kildee asked of Mr. Homan 

about what might be done in that arena to facilitate settlement, we 

would like to associate ourselves entirely with the remarks of Mr. 

Homan that we think there are very definitely things that can be 

done and should be done to use his words. And I am not sure he 

hasn't borrowed them from us in previous meetings, but to stop the 

bleeding, to begin to put into place some of the systems and some 

of the controls that are definitely and desperately needed in order 

to protect the government from the future liabilities that he has described, and in order to protect the Indians from future losses of 

the kind and the magnitude that they have suffered in the past. 

Some of these, we think, are already on his list, and we simply 

urge this Task Force and the Congress to continue to support him 

in an effort to put some of those into place, some kind of an accounts receivable system so that the entire system won't simply be 

triggered by what comes over the transom every morning when 

people come to work in 85 or 90 different places around the country; some kind of a system so that the more than 50 million acres 

of land and timber and grazing land and farm land and irrigated 

pasture and crop land and oil and gas and coal and phosphate and 

copper mines that are operating out there are put on some kind of 

a basis so that there is a regular and routine procedure for seeing 
223 

that those activities on Indian lands are paying what they should 

pay and paying it in a timely fashion. 

Some of the other things that you suggested or asked in your 

questions we have long urged be undertaken, and we understand 

they also are on the list. That is in terms of outsourcing some of 

the activities that are going on now. We have urged for years that 

there be some form of centralized custodial services that probably 

should be done by a private contractor, by a commercial institution 

for the more than $2 billion of securities that are held by that office 

on a daily basis. 

We talk about the size of this portfolio as being a$2-1/2 billion 

portfolio, but with investments being made on a daily basis, with 

previous investments maturing on a daily basis, the actual volume 

of transactions conducted by that office is in the scores of billions 

of dollars a year of our money. And right now those securities that 

represent that couple billion dollars are scattered in 100 different 

institutions from coast to coast and border to border. And it is not 

unknown for some of those to go missing for periods of time. Even 

during the current-the recently completed reconciliation project a 

$12 million TVA bond that had been called some 2 years earlier 

was discovered not to have been carried correctly on the books. So, 

for that kind of activity which increasingly, as Mr. Homan described, even private sector institutions, even commercial banks 

themselves are increasingly turning to each other and to specialized institutions for those kinds of needed services and are being 

outsourced. 

We also would urge this Committee to see to it that there is 

some kind of an annual audit of these activities. We have recently 

concluded an effort at what we call a balance sheet audit for Fiscal 

Years 1995 and 1996; but we have gone from 1991 to 1995, the 

very period in which we were spending 4 years and $20 million to 

reconstruct the books; we didn't bother to audit them at all, and 

notwithstanding what appears to us to be the requirements of both 

the Chief Financial Officers Act and the Trust Fund Reform Act, 

we think we definitely need to get this program on a scheduled 

basis of routine annual independent audits. And we need to enable 

the Office of the Trustee to develop an inventory of the leases and 

agreements that generate these funds and enable him to conduct 

the kinds of daily reconciliations that Mr. Homan says we would 

demand of even the smallest commercial bank in the country. We 

would demand that kind of daily reconciliation and we haven't provided the capability for our own government to do it for us. 

And then finally the other thing I would like to really focus on 

a bit is in response to your invitation to discuss some changes in 

the law that we think might be needed. We are very grateful, as 

we have indicated to you in the past, for the position of the Trustee 

and for the presence in that position of Mr. Homan, but we know 

he is not always going to be in that position. And as grateful as 

we are for him there now, we think that the position itself perhaps 

merits a little bit of attention now. We would like to see some 

measure of increased independence for that position for the veryso we could avoid the very thing you were just discussing that happened in Phoenix last week. If this man is good enough for the 

President and he is good enough for the Senate of the United 
224 

States to be put in charge of this problem, he ought to be allowed 

to at least talk to the people whose money it is. And so we think 

some measure, greater measure of independence in the conduct of 

that office, is probably in order. 

However, we remember the teachings of our youth that power 

corrupts and absolute power corrupts absolutely. And so we are not 

saying that we think Mr. Homan or anybody in that position 

should be made a unilateral czar. 

But then we ask well, what kind of oversight should there be 

available? Well, we think maybe he comes from the place where 

that oversight should reside. Perhaps the Comptroller of the Currency, the same officer, the same agency that provides oversight 

and direction to all of these other commercial institutions that we 

are holding up as an example could also be asked to provide that 

kind of annual review, examination, oversight of these activities. 

We don't think that the other routine oversight bodies in either Interior or Justice or even the GAO would be as suitable for that purpose as the OCC. 

We invite the Task Force to make their own inquiries of those 

other agencies in that regard, but I believe you will be told that 

as well. So we need, we think, some measure of oversight for that 

office, and we think that the Office of Special Trustee within that 

general oversight should be given the flexibility and independence 

to do the job that he was brought in to do. 

And along those lines of legislation that we might suggest to the 

Task Force, any commercial bank today is required by law to do 

something that these guys would go to jail for if they did do, and 

that is to correct their own mistakes. As I mentioned with the TV A 

bond, and as we know again during the course of this $20 million 

reconciliation effort, we accepted the guilty pleas from a couple of 

government employees for pilfering some of these funds. A commercial bank when faced with its own mistakes recognize them, acknowledges them, fesses up to them and uses their own equity or 

reserve accounts to make them whole. We really must figure out 

a way to give this officer the authority to correct the mistakes that 

he knows about. And whether that is to create a reserve account 

for him for that purpose or to authorize him the same way that 

people in litigation now can enter into stipulated agreements for 

access to the judgment fund, that could work-there are a number 

of ways that might work, but it doesn't do any good to give him 

all the tools in the world to do his job right and to find his own 

mistakes, and there will be mistakes. Wells Fargo makes mistakes, 

but if he can't fix them when he finds them, we really haven't profited much by the exercise. 

So with that, Mr. Chairman, I would be happy to respond to any 

questions you may have. And thank you once again for your time 

and leadership in this important matter. 

Mr. HAYWORTH. Mr. Harrison, we thank you for coming this 

morning to testify in the stead of Mr. Davenport. And we understand that the snow is falling in a variety of places, not only in our 

49th State, but within the contiguous borders of the United States. 

So we appreciate you coming in to shed more light on Mr. Davenport's testimony, which will, of course, be included in the record 

as it was prepared. 
225 

[The prepared statement of Eric Davenport may be found at the 

end of the hearing.] 

Mr. HAYWORTH. In fact, before we return to the very intriguing 

notions that you offer here, let me first note that our friend from 

Michigan was-his presence was required in another hearing this 

morning, so we welcome our good friend and colleague from Montana, Mr. Williams, to the Task Force hearing this morning. 

I understand here, and I think we need to get this in the record, 

that the perception of the Intertribal Monitoring Association is that 

the $2 billion figure that has been bandied about as a result of the 

audits and the forensic accounting that has gone on is just the tip 

of the iceberg, as I mentioned earlier and as we heard in testimony 

from people in our opening hearing. The testimony of Mr. Davenport, which I would like you to expound upon if you could, 

please, Mr. Harrison, is this assertion over $200 billion in investment transactions were excluded and are left unreconciled. Now to 

people who may just be hearing of these problems, this exponential 

increase is nothing short of astounding, over $200 billion left 

unreconciled. What is the rationale that you offer for that assertion? 

Mr. HARRISON. The efforts by the contractors, like everything 

else you have heard here this morning, constrained by both time 

and money and where they were going to put the effort that was 

available to them, chose early on to focus on the money coming in 

and going out of the system, what basically we call collections and 

disbursements. And there was nearly $18 billion of those kinds of 

transactions, what you hear referred to as the non-investment 

transactions. Well, that $18 billion that came in and out of the system over that 20-year period was very largely scrubbed. And those 

are the numbers that you have heard Mr. Christie describe to you 

in terms of the high percentages of both numbers and dollars that 

were scrubbed. What did not get that kind of a scrub, although it 

did get some, in our view, little more than perfunctory evaluation 

were the more than $200 billion of transactions that took place with that money while it was in the system. Those are what we 

call the investment transactions. 

And that is what I alluded to earlier when I said while we have 

a $2-112 billion portfolio we conduct scores of billions of dollars of 

transactions every year. Now that we are largely out of the commercial certificates of deposit and more into strictly Treasury 

paper, we don't have the level of investment transactions that we 

used to have, but I would guess we are still at a $50 to $60 billiona-year level of investment transactions. Those are the transactions 

that did not get the kind of scrub that the collections and disbursements got. And we say that we think that is where a number of 

errors were likely to have been found that weren't found because 

they simply weren't looked for. 

As I mentioned, even while this exercise was going on we lost 

track of a $12-112 million bond for a couple of years. In an enterprise this size, there are going to be mistakes. And to their credit, 

they found this one. We didn't find it for them. They found it themselves through doing improvements that they had made in their 

procedures. But we know that those procedures were not in place 

for the last 20 years and we very strongly believe that-and we 
226 

know a number of tribes that say to us we think this money lay 

uninvested for 6 months when it should have been invested, we 

think this money was not reinvested when it matured the way it 

should have been. And so that is why we say that other $200 billion of transactions did not get the scrub that we wish it had, and 

we have no doubt there would have been a good deal many more 

errors and omissions found and reported had that happened. 

So that is what we mean when we say the $2 billion that we so 

cheerfully tell you about in our view really does represent only the 

tip of the iceberg. · Mr. HAYWORTH. Mr. Harrison, you also mentioned perhaps in the 

tale of the bond or in some other episode a documented case, an 

example of someone within the Federal Government, someone vested to take care of these trust responsibilities, I believe your term 

was pilfering some of the proceeds. Is this a unique example or do 

you have documentation of other actions taken by those who have 

been entrusted with the care of these moneys to be less than 

straightforward? 

Mr. HARRISON. We have at least one other documented example 

that we know of where an individual in the position of A, access, 

and B, trust, was in the agency handling these moneys, have 

helped themselves. In one case it was a man and in one case it was 

a woman, so we are gender neutral here. I might say that we have 

discussed another documented case in which it was not a government agent at all but a bona fide crook that swindled over $8 million out of the agency's trust funds under the guise-he set up a 

bogus institution and bid on the money and got it. The government 

caught him and recovered most of the money. The President's 

budget for this very fiscal year included a $14 million request to 

make whole that loss. And the Congress has not seen fit this year 

to make that whole, but that is a known, documented loss that the 

President's own budget officers have quantified and submitted to 

the Congress to be made whole. 

Which goes to one of our other points, Mr. Chairman, if I just 

could press my own point a little about the authority that is needed 

for these people to correct their known mistakes. It is not a crime 

to make-! guess it shouldn't be a crime to make a mistake. It 

should be a crime to cover it up and it should be a crime not to 

make it right. And those are the two areas where we find real fault 

and where we take great issue and where we suggest that nothing 

less than the integrity of the Nation is at stake when it comes to 

covering them up and not making them right. 

Mr. HAYWORTH. And you offer an intriguing policy initiative or 

action that we can perhaps take legislatively when you talk about 

the role of the Special Trustee and increased independence for that 

trustee. I would like to revisit that and get your thoughts about 

that a little bit more, then I will defer to my colleague from Montana. 

Are you saying the Special Trustee, just to understand this, 

should come really under the auspices of the Office of the Comptroller of the Currency, there should be that transfer there, or 

would the Trustee take on a status not unlike what we have seen 

in the whole area of Indian gaming? Or if you, Mr. Harrison-in 

the world according to David Harrison, if you were offering the sug-
227 

gestion of to how best increase the independence of the Special Trustee but at the same time have that genuine accountability, what do you perceive to be the best course of action? 

Mr. HARRISON. I think that today-and by the way, let me say when I say that I think that today just like with Mr. Homan's strategic plan, we are all for the first seven or eight steps he has laid 

out today, but we expect to get smarter as this process goes on. 

And so we are not saying that we think we have got the final answer all figured out in advance. But if I were to design it today, I would go more along the second alternative that you suggested. I did not have in mind and I don't mean to suggest that he should 

be transferred to or in any way become a part of the OCC, but 

rather that is the kind of oversight body and agency that already exists. If it is good enough for 290 million other Americans and 

their money, maybe it would work for the million or two of us that 

have money in this system too. 

But I have thought maybe more along the lines you suggested with the gaming commission that is a part of the Interior Department. Their budget is a part of the rest of that $12 billion that Mr. 

Cohen wasn't too sure where you got the number. Well, part of it 

goes to that guy, part of it goes to other what your budget people call Interior and its related agencies. But the gaming commission 

operates independently. It has its own professional staff. It has its 

own-I believe it even has its own legal counsel, and it operates under the terms and the direction and the guidance provided by the Congress and oversees an operation that is bigger than this 

trust fund business by a considerable order of magnitude. That is 

probably a $6 or $8-billion business that is overseen by that agency. And it seems to be working and it doesn't put the people that 

are charged with the oversight of that enormous and expanding industry subject to the same kinds of personnel rules and requirements. 

We had a situation in trust funds just recently where people that 

we had spent $20,000 in training were busted out of the system by 

a reduction in force and replaced by people that-according to the 

Federal personnel rules, an accountant is an accountant is an accountant and any one of them could bump in and knock out the 

guys that we had just spent $20,000 training in accounting for and 

recording amortizations and accretions and interest fiduciary accounting. And we get people coming in who have been used to 

counting fence posts for the Rains Project, but if they could count 

a fence post people think they can count securities. 

And so that is the kind of problem that we think Mr. Homan 

needs to be freed up from to the best we can make it happen so 

that he can get on with his rat killing. And there is plenty for him 

to do without having to fight these other bureaucratic problems. Mr. HAYWORTH. Well, I appreciate your observations, especially the notion that you offered in response talking about, perhaps, the 

role of the OCC in this, saying if it is good enough for the majority of Americans why would there be a separation there. I think we 

always want to be mindful of the special trust and treaty obliga- tions that exist between this government and the several sovereign Indian nations, but I think that is a very valid point and I thank 

you for those observations. 
228 

With that, let me turn to my good friend from Montana, Mr. Williams, for his comments and questions. 

Mr. WILLIAMS. Thank you, Mr. Chairman. This issue, as you 

know, Mr. Harrison, has been very troubling for the Congress, both 

Members of the House and Senate, for a number of years. And fully 

recognizing the enormous complexities that are involved in trying 

to find solutions to the problem, nonetheless a great many of us 

have joined America's tribal governments in impatience about what 

we perceive to be the on-again, off-again stuttering progress or nonprogress that is being made. I do want to note that after very close 

scrutiny of this issue for quite a long time many of us have faith 

in the work of the Special Trustee, in Mr. Homan personally, and 

are hopeful that he will not only be continuing to pursue this but 

allowed to do so in an aggressive and appropriate manner. 

In your testimony for the Association, you say, quoting now, 

"First, we believe that it is very important to increase the independence of the Special Trustee." Would that include support of 

legislation in the Congress to set a term certain for the Special 

Trustee, grandfathering in the current trustee to that term? Am I 

clear? Do you--

Mr. HARRISON. Yes, sir, you are clear. And it is my belief sitting 

here today that our organization and most of the tribes would support that kind of legislation. That is not a particular question I 

have put to any of them, so that is my speculation on the subject. 

But we think it would do a couple of things. It would give-this 

guy may not be-we may not be able to stand him after he gets 

through listening to us say all these nice things about him, but 

barring that, we think we like the sense that the guy that is in the 

job now would be given, really given an opportunity to get that job 

done. We also think the kind of term certain that you suggest, Mr. 

Williams, would also go somewhat toward increasing his sense of 

independence and make him-and whether it is Mr. Homan or anybody else in that position, perhaps a little less sensitive to the 

every-other-November concerns that seem to affect everybody in 

this town. And he could go about his job of being an honest banker 

and worry less about what kind of press his boss is going to get 

in tonight's or tomorrow's news. 

Mr. WILLIAMS. I want to note for the record as well as bring to 

the attention of all the interested parties, there is active consideration in the Congress to try even at this late time to enact laws 

that would further stabilize and guarantee the independence of the 

Special Trustee. Our difficulty, of course, particularly on the House 

side given our rules, is to try to get anything of that nature included in any of these couple of year-end vehicles that, you know, 

might lend themselves to it. It may be that the Senate, given their 

rules different than ours, would be better able to include something 

in one of the omnibus bills. 

But I know from talking to members on both sides of the aisle, 

and as all of the witnesses have recognized and every Member of 

Congress recognizes, this Task Force under the good leadership of 

the Chairman has adhered strictly to bipartisanship. And I have 

found . Members on both sides of the aisle in both the House and 

Senate who are expressing enormous concern about the stability of 

the office of the Special Trustee under the able person of Mr. 
229 

Homan. If we aren't able to get legislation passed, I have the clear 

sense that a number of us on both sides of the aisle may want to 

make it very clear in communications to both the President and 

Mr. Babbitt, Secretary Babbitt, that we have these concerns, and 

particularly while the Congress is out of session we would object 

strenuously to any changes in the status of the Special Trustee. 

Well, we appreciate you being here on short notice and thank you 

for coming. 

Mr. HARRISON. Thank you, Mr. Williams. Thank you, Mr. Chairman. 

Mr. HAYWORTH. And again, Mr. Harrison, we thank you for your 

point of view and we will continue to take into account your advice 

and your very unique perspective on what we may do to work on 

this problem. Thank you very much, sir. 

Mr. HARRISON. On my way out, may I assume that the record 

will be open to receive a resolution adopted by the tribes comprising this Intertribal Monitoring Association with respect to Mr. 

Homan's role and the comments Mr. Williams has made? 

Mr. HAYWORTH. Indeed commensurate with the rules and the life 

span of the Task Force, the record will remain open for 2 weeks. 

So that is the due date, Mr. Harrison. Thank you. 

Mr. HARRISON. OK, well, we have it in town. I just don't have 

it in hand, but thank you. 

Mr. HAYWORTH. That is quite all right. 

Mr. HARRISON. OK, thank you. 

Mr. HAYWORTH. We appreciate you coming in this morning, sir, 

and thank you very much. 

And now it is our privilege on this Task Force to call to the witness table the Chief of the Blackfeet Nation, Earl Old Person. 

Mr. WILLIAMS. Mr. Chairman, if I may. 

Mr. HAYWORTH. I would be happy to defer to my colleague from 

Montana. 

Mr. WILLIAMS. Thank you. Earl Old Person and I are old friends, 

and I am always honored to be in a committee when the Chairman 

and Chief of the Blackfeet Tribe comes to testify. Earl is no stranger to the Congress, and the Congress has always enjoyed and benefited from our relationship with all Native Americans, and I would 

add most particularly our old pal Chairman Earl Old Person. Earl, 

it is always good to see you, sir. 

Mr. OLD PERSON. 'l'hank you, Chairman Hayworth and Congressman Pat Williams. 

Mr. HAYWORTH. And, Chief Old Person, before you get into your 

comments, sir, sorry to interrupt, but if you would also take the 

time to introduce the lady who accompanies you to the witness 

table. 

STATEMENT OF EARL OLD PERSON, CHIEF, BLACKFEET 

NATION; ACCOMPANIED, BY ELONISE COBELL 

Mr. OLD PERSON. Yes, I must. With me is Elouise Cobell, who 

is a member of the Blackfeet Tribe and was involved in this particular issue that is being discussed right from its beginning. 

What I want to say today in the beginning is that I am not an 

expert in anything, but I am here representing the Natives and in 

particular the Blackfeet Tribe. We have two laws that we go by. 
230 

First we have a spiritual law, and we have a person that we have 

to make it right with on those laws. Then we have the law of the 

natural law that we have within this world and within the government. I am sure that my people in the past have done their best 

to uphold these laws that we have. 

It was mentioned about treaties here. Our people-those treaties 

that were made by our ancestors, the agreements, our people held 

them sacred. They believed in them, and to those that they made 

the agreements with and treaties with they felt that they felt the 

same way and should treat them likewise. In the beginning I want to say that although that-it has been 

said at times that we come from somewhere else, but as far as our 

ancestors is concerned and according to our ancestors we were 

here. We can't help it. And we are going to be here so long as our 

leadership is with that strength and continues. 

We have done everything to the best. Even our people in the past 

have done everything to abide ·by the things that they were directed to abide by. We were asked-our people were asked to attend schools, education. Sometimes it was very severe for them but 

yet they done their best to abide by those laws, even at that time. 

And they didn't dwell on those things that happened to them at 

that time. They were forbidden not to do certain things in their Indian way of life while they were at school, but they didn't use that 

to hold back their children from receiving education, because they 

felt that this was very important. After they began to analyze the future, they foretold us many 

things. The lands that we have, although it said that they are reservations, they are reserved for us, but I say they are lands that 

our people are able to keep for us. These lands are our homeland 

and we try to maintain them, preserve them, develop them to the 

best that we can. Our populations are increasing rapidly, and it is 

making our reservations become smaller, not in size, but because 

of the population it is difficult to accommodate everybody. But to 

those that are on the reservations today, the lands that we have 

we try to use them so that we can help one another. 

This particular issue that we are talking about, had it not been 

for someone back in May 1991 or even before then finding and seeing that there is something wrong, we wouldn't be here today. This 

thing will go on and on. Our people are always careful in the things 

that they do. Sometimes we are referred to as people that really 

don't know too much, but in our Indian way of life our ancestors, 

our people, even the people that !-elders that I started my career 

with as tribal leader taught me many things. And they taught me 

that you must first go according to the laws that are before you. 

I got on the council in 1954 and I have been on it since, became 

chairman in 1964, so a lot of things have happened and I saw a 

lot of changes and a lot of things. People come to me in many ways many times. And our people, they know when there is something wrong. They will bring it to 

our attention. I talked to another group the other day here. I said 

some of our young leaders, some of our leaders in the past, not too 

long, they refer to our elders as we don't need them anymore, but 

after our elders passed away they realized that they lost something 

and they begin to say I wish those elders were still here because 
231 

they are the people-they are the background and they are the peo- ple that gave us some directions. 

The Federal Government has given us help. There are Federal 

funding that comes to the Indian reservations, and we are very careful in how we handle that kind of money. The minute that we 

do not send in the kind of reports that the government wants, the 

minute that they fmd that there is something wrong within the 

Federal funding that they send, right now we are notified of it, 

right now they want us to correct it, and we do everything to correct whatever the problem may be. And I believe that is all that 

we are asking today, that if there is that wrong that has been 

done, let us correct it, how can we correct it, how can we satisfy the minds of the people that is directly the victims of this particu- lar wrongdoing or mismanagement, nothing else. 

I am not about to answer any of these questions that are being asked, because I think there is something that needs to be fixed 

first. Then I think we can begin to say all right, let us handle it 

this way, let us do this. I have my leaders back home myself. I am 

speaking of just the Blackfeet. Other tribes have their leaders that 

they have to come together with to decide what do we see as the 

best way of handling these kinds of things that we see that has 

been wrong. This is the only thing that my people have is these 

lands, whatever it is derived from. And it is our own. We are not 

asking the government-it is not a government money funding that 

we are asking to be corrected. It is our own money that we are hop- ing that can be corrected. 

If I might say a little bit about the individual money accounts, 

a lot of our people back home, that is the only thing that they depend on, is what money they get off of those lands. We have some 

people back home that are the victims. We have people back home 

that are on fixed income that they have some hardship. Many peo- ple don't know. We don't--we have no argument whatsoever 

against our government helping other foreign countries, foreign people that is in need, but we also have people right here in the 

United States that are just as much in need but we don't come out 

asking. 

And so today this particular issue that we are talking about, we 

have some direct experiences. I have had people come to me that 

I am basing my arguments, my concerns on. Our government has 

asked the tribe a few years ago to set up an accounting system, which again we abided-we done everything to set up an accounting system for the tribe. And I asked one of the government employees do you folks have a system? They says no, but yet they 

were asking us to set up a system of that kind when they did not 

have it themselves. 

And so as I have said, we have done everything that we can to 

help within our own government, within the government that we 

deal with, the Federal Government and any government that we 

work with. And we feel that-and we try to do the right thing. And 

this is the thing that I think brings down our people, especially our 

elders when they hear about these things. They wonder what is 

going on. And with all the technical things that is taking place, the 

technical system that we have today, we shouldn't have anything 

wrong. We should be able to keep up with things. 
232 

And so this morning all I ask that there is a person or persons that are concerned, have their concern for us. I certainly appreciate 

you people for allowing us and allowing me to be here and to be 

able to express my thoughts and how I see it and my understanding of this particular situation. But I agree that I hope that this 

person that is trying to remedy the thing that is wrong will be 

given that chance to help us out, and through you people you are 

the power. We ask that you folks help us out. I am not telling you 

that we want something new, but just correct and give us some direction so that we would not have this in the future. And again I want to say that I am speaking on behalf of the 

Blackfeet people, and I am sure I am speaking on behalf of all Indian people who are involved in this particular case. It is true we 

were hurt in Phoenix. I think somebody should have known ahead 

of time unless they were totally ignorant of the purpose of the 

meeting. They should have told us that this may not go on. That 

is the reason I went down there, is because we were going to talk 

about, discuss settlement, but it was very disappointing to be 

told-and like you stated, it is a hardship on us. We don't have the 

money to travel all over. We have to sacrifice what little we have 

because it is important to us. These kinds of discussions are important to us. It is the future for our people in the upcoming generation. 

And so with that, I will just say I want to thank you and I want 

to ask you to do what you can, because we still exist and we are 

still looking forward in using that what we have and still work 

with everyone that we are to work with and we can work with. 

Thank you. 

[The prepared statement of Earl Old Person may be found at the 

end of the hearing.] 

Mr. HAYWORTH. Chief, we would like to thank you very much for 

your comments. You may have heard the bells sound. There is a 

vote on, and I guess we have about 7 minutes to get over to the 

floor to vote. Let me--we have a series of five votes. With that in 

mind, do you have any questions? 

Mr. WILLIAMS. No. 

Mr. HAYWORTH. No questions. We will take into account what 

you have had to say to us. Recognizing the fact, Chief, that you correctly point out this is money belonging to the first Americans, this 

is not the government's money, we look forward to working with 

you and Ms. Cobell in the days ahead. We thank you for what you 

offer in this testimony here. And thank you for your time. Mr. OLD PERSON. Thank you. 

Mr. HAYWORTH. Let me call on briefly a gentleman who has appeared before us before from the Native American Rights Fund, 

Mr. Robert Peregoy. Mr. Peregoy, given the fact that you are well 

skilled in summarizing arguments and mindful of the responsibilities we have on the floor, could you briefly outline what you believe to be the course of action we should take legislatively? 

STATEMENT OF ROBERT PEREGOY, NATIVE AMERICAN 

RIGHTS FUND 

Mr. PEREGOY. I most certainly will, Mr. Chairman, and thank 

you for allowing me to testify today. I appear on behalf of 300,000 
233 

individual Indians who comprise the putative class in the class action litigation Cobell v. Babbitt to compel equitable redress for the 

government's gross mismanagement of these trust funds over the 

course of the last 158 years. And in summary fashion and in response to the questions that 

you have posed to us here, we are not in a position to answer a 

number of those because they are intimately tied up and interwoven with the litigation which is now under the jurisdiction of the 

court and the supervision of the court. And so in my written testimony, which I have submitted for the record, I have asked that we 

must respectfully decline to answer a number of those questions by 

way of reason of the litigation. 

I think it is very important for this Committee to know that the 

litigation is on a fast track. The court has scheduled regular status 

conferences. We are meeting cooperatively with officials from the 

Department of Justice and the Depa1tment of the Interior and we 

hope that we can move to an expeditious resolve of these issues. 

And as other witnesses testified this morning, Mr. Cohen, et cetera, 

as the litigation proceeds and as the strategic plan becomes final, 

some of these questions that you put to us will become a little bit 

clearer in terms of response; but the main thing that we have 

heard this morning, I think, from everybody that is our point is 

that what needs to be done is to fix the system now. And Congress 

needs to put up the money to do that. 

The Special Trustee has indicated it will cost about $147 million 

over a 5-year period. This is a drop in the bucket with the amount 

of liability that we are looking at with the Federal Government's 

breaches over the course of the last 158 years. That is the price 

that it will take for the government to finally live up to its trust 

responsibility, and it is very incumbent on all of us, particularly 

the administration and Congress, to work in bipartisan fashion to 

put up those dollars so that those breaches of trust will cease and 

so that the government can finally start honoring its trust respon- sibility. 

I think that to look at other future-oriented questions is a bit 

premature while the system remains broken. And I think that is 

the message, that we need to fix the system and Congress needs 

to put the money up to do it. And basically that would summarize 

my testimony, Mr. Chairman. 

[The prepared statement of Robert Peregoy may be found at the 

end of hearing.] 

Mr. HAYWORTH. Mr. Peregoy, we thank you for the brief summation of your remarks. Your entire testimony will be included in the 

record. We are mindful of the fact that there is pending legal action. Indeed, we have been reminded of that a few times this morning with a variety of different inquiries. So with that we thank you 

for addressing the problem. We will continue to stay in touch with 

you as the Task Force continues its duties and its obligations to the 

first Americans. And we thank you for your time and attendance 

this morning and at all the other sessions that this Task Force has 

held publicly. Thank you very much, sir. 

Mr. PEREGOY. Thank you, Mr. Chairman, and we express our appreciation to you for your leadership and would also like to state 

for the record to thank Chairman Don Young for his critical sup-
234 

port this past week in urging House appropriations committee leaders to concur with the Senate appropriation mark of $36.3 million. 

That is the administration's request and that is the kind of bipartisan cooperative work that we need to get this job done and fix the 

system. So thank you very much. 

Mr. HAYWORTH. Thank you, sir. And mindful of that fact, I would 

just let you know that we are working very hard, Chairman Young, 

Chairman of the Full Committee, working in a bipartisan fashion 

to accommodate that request and to move forward with that. And 

with that, I thank you very much for your time, sir, and would like 

to thank those in attendance this morning, the staff members of 

both sides of the aisle for their help throughout the course of these 

hearings. And with that, the Task Force hearing stands adjourned. 

[Whereupon, at 11:49 a.m., the Task Force was adjourned; and 

the following was submitted for the record.] 
235 

PREPARED STATEMENT Of PAUL M. H OMAN 

United Stataa Bouse oE Representatives 

Committee on Resources 

Taak rorce on Xndian Trust Fund Managem.nt 

Bearing on Indian 'l'ruat Fund.s Management 

Te • tilllony o~ Paul. N. Boman 

Special. Truat.e ~or -ri.can Indi.ana 

September 26, 1gg5 

Thank you for the opportunity to present testimony on Indian Trust Funds 

Management. The hearings are focusing on legislative solutions to trust 

manaqement problems. 

Special 'l'rustee' a ~•••amant and Strateqic Plan and What It May Take to Ensure 

Sound 'l'rust Mana~nt in the ruture 

In October 1995, the Office of the Special Trustee for American Indians 

(OST) commenced an ·assessment of the U. s. Government's trust management 

policies, procedures, practices and syst~ as they apply to individual 

American Indian and American Indian tribal accounts. By February 1996, the OST 

completed the preliminary assessment and produced a conceptual strategic plan 

to acquire and institutionalize specified systems. Implementation of this plan 

will permit and ensure that the u. s. Government establishes appropriate 

policies and procedures, develops necessary systems and takes the affirmative 

actions necessary to provide an accurate and timely accounting to American 

Indian trust beneficiaries. In this ~nner the proper discharge of the 

Secretary's trust responsibilities can be accomplished. The Assessment and 

Phase I of the Strateqic Plan are included in a document entitled "Special 

Trustee for American Indians, Aasessment and Strategic P1an Principles, Phaae 

I, February 1996• which was previously provided to the Committee. 

The principles are conceptual in nature. The Special Trustee will 

continue to receive input from ITMA, the Advisory Board, affected bureaus 

within the Department, Departmental staff offices, tribes and tribal members, 

and the Office of Management and Budget as the conceptual plan is transfor.med 

into a detailed strategic plan as required under the American Indian Trust Fund 

Manaqement Reform Act. 
~6 

2 

In December 1995, the u. s. Department of the Interior's Bureau of Indian 

Affairs substantially completed a multi-year "Tribal Trust Funds Reconciliation 

Project" (Reconciliation Project) and issued an "Agreed-Upon Procedures and 

Findings Report" for the period July 1, 1972 through September 30, 1992. Its 

major findinqs are substantially incorporated in the Special Trustee's 

Assessment. 

In August 1995, the U. s. Department of the Interior substantially 

completed a study of the trust management systems relating to Individual Indian 

Monies (liM) accounts and issued a report entitled "IIM Related Systems 

Improvement Project Report." The findings of this report are also 

substantially incorporated in the Special Trustee's Assessment. 

The Special Trustee's Assessment, the Reconciliation Project reports, the 

IIM Related System Improvement Project Report and earlier and later reports 

issued by the General Accounting Office all confinm that the U. s. Government's 

trust management systems, policies, procedures and practices coupled with the 

condition of the trust records and, notably, large numbers of ~ssing 

documents, are inadequate to allow for: 

1. a proper, accurate and timely accounting for trust account balances, 

collections, disbursements and investments and the maximization of the 

return on investments. 

2. the preparation of accurate and timely reports to trust account 

holders regarding all collections, disbursements, investments and return 

on investments. 

3. an audit under generally accepted auditing standards. 

4. any further reconciliation efforts, since the costs of such efforts 

would likely substantially exceed the benefits and at the same time 

would probably yield unsatisfactory and inconclusive results. 

While significant improvements have been made over the last several 

years, the inadequacies of the trust management systems, the condition of the 

historical records and the u. s. Government's inability to provide an accurate 

and timely accounting cannot be remedied without the major reforms required by 

the Reform Act of 1994. To address these issues, the Special Trustee's 
237 

3 

strategic plan identified nine initiatives or principles designed to rectify 

the problems and bring trust accounting and management systems up to commercial 

standards within three years. This, at a minimum, will involve acquiring, 

automating, updating, integrating, coordinating and consolidating to produce : 

1. A trust resource/asset management delivery system. 

ThiS will involve obtaining a new trust resource/asset management and 

delivery system for asset leasing, contracting, lending, buying and ~ 

selling, together with standardized and/or integrated asset management, 

credit and operating policies, procedures and practices. The system must 

be able to tie to and track from land and ownership records. 

2. An accounts receivable data and billing system that uses 

lease-contract and land and ownership information . 

This will involve obtaining a new accounts receivable, billing and 

collection d~ta system that uses lease-contract and ownership information 

for trust income verification, reconciliation, billing, payments, 

collection, accounting, disbursement, audit, asset quality review and 

compliance purposes. 

3. A trust, depository, payments and delivery system for Individual 

Indian Money (IIM) accounts. 

This will entail purchasing a trust, depository, payments and other 

financial services accounting and statement system and a delivery system 

to more efficiently provide current financial services and to facilitate 

new and improved financial services to individual Indians and Tribes. 

4. A land records and title recordation and certification system. 

This will involve acquiring a new land records and title recordation and 

certification system, capable of instantaneous linkage with the trust 

resource asset management, accounts receivable and trust accounting 

systems. 

5 . A general ledger and general accounting system. 

This will involve obtaining or modifying a general ledger and general 

accounting system to accommodate all present and planned systems and 

accounting improvements. 

6. A technology services center dedicated to trust resource and funds 

management. 

This will involve obtaining a centralized technology services center 

dedicated to trust resources, trust funds and land ownership and reco rds 

management processes. 

7 . A national archives and records center. 

This will involve obtaining and centralizing a modern national archives 

and records center for trust resource, asset and funds record storaqe and 

retrieval. 

8. A risk management and control system. 

This will entail obtaining a risk management and control system that will 

provide for adequate operational audits, credit and asset quality audits, 

compliance reviews, independent asset appraisals and liaison with 

outside, independent auditors. 
4 

9. An independent institutional structure. 

This will involve consolidating trust resource, trust funds and land 

ownership and records management processes into a single, independent 

institutional unit with its own management structure to accommodate the 

restructuring and reorganization contemplated by Phase I of the strategic 

plan. The unit should be organized by function and dedicated exclusively 

to trust management. The unit should have agency or bureau status within 

the Department of the Interior or elsewhere. 

The conceptual work on the strategic plan is completed. An independent 

contractor was hired for the purpose of determining approximate costs 

associated with the development of the comprehensive syste~ overhaul just 

mentioned. Out of an abundance of caution, however, a requirements analysis, 

user needs survey and inventory must be completed before cost estimates can be 

completely validated and the comprehensive strategic plan completed . 

The next step is therefore a requirements analysis, user needs assessment 

and a comprehensive inventory of existing skills, hardware and software, 

related network support and facilities requirements, all of which will lead to 

a technical requirements report tor RFP purposes and confirm or revise the cost 

data contained in the conceptual strategic plan. This will require the use of 

an outside contractor. The 1991 President's Budget request includes $1 million 

to conduct the analyses. 

Once the analyses are completed (expected to take 90 days from funding 

date) and once the staff of the OST is hired, the remaining elements necessary 

to produce the comprehensive strategic plan required by the Reform Act of 1994 

can .. be completed within 90 days or by March 31, 1997, if the President's budget 

request for FY 1997 is approved. 

The total FY 1997 request for OST is $36.3 million, a $20 million 

increase over the 1996 enacted level of $16.3 million. The request includes 

$13.6 million to begin implementation of the strategic plan. The funds will be 

used primarily to upgrade and establish a new liM accounting system, which is 

long overdue. The 1997 budget requests no-year funding to allow adjustments 

resulting from re-estimates or delays in plan implementation. However, it 

should be noted that if funding for the strategic plan is delayed, the reform 

effort will be delayed. 

The $20 million requested increase in OST's budget for FY 1997 also 

reflects the high priority the Administration and the Secretary place on Indian 
239 

Trust Asset Reform efforts. Improvement efforts are critically needed to 

ensure the Federal Government meets its fiduciary obligations to Indian Tribes 

and individual American Indians. While the Federal Government's trust 

responsibility is unique, systems, policies, practices and procedures of 

commercial trust operations can be applied to ensure that the Federal 

Government better fulfills its fiduciary obligations. Beginning in 1997, the 

evolution of trust system refor.ms will be at a point where increased resources 

can be prudently expended. 

I would like to emphasize that "resolving the past" presents a difficult 

challenge to the Administration, the Congress, and individual Indians and 

tribes. The ending of the tribal reconciliation process represents only the 

beginning of an effort to resolve probl~ with the U.S. Government's past 

trust fund management practices. The problems in trust fund management have 

long been recognized by GAO, the Department's Inspector General, OMB, and 

others in Congress. This Admdnistration is committed to solving these 

longstanding problems and has made significant progress in strengthening trust 

funds operations, in conducting a massive reconciliation effort and in taking 

the steps necessary to ensure the highest level of fiduciary and investment 

standards are in place in the management of these funds. Future reforms will 

continue in earnest under the comprehensive strategic plan required by the 

American Indian Trust Fund Management Refo~ Act, provided that adequate 

resources are appropriated by Congress. 

Enactment of the President's 1997 Budget request would represent a 

substantial step to ensuring that Indian trust refor.m efforts are implemented 

in a manner that ensures the fiduciary responsibilities of the Federal 

government are met. 

Queationa o~ the C~ttee 

5 

Development of the comprehensive strategic plan is scheduled for 

completio~ by March 31, 1997. It will address many of the issues and questions 

raised by the Committee at this hearing. The following answers are the 

Department's initial response to the Committee's questions. Further research, 
240 

6 

analysis and consultation with Americ an Indians and the Congress will be 

required over the co~ng months to arrive at sound legislative solutions to the 

longstanding trust management problems. It is anticipated however, that in 

some cases that legislation will not be necessary. Rather, establishment ~nd 

enforcement of consistent policies, practices, and procedures could solve some 

of the problems. 

The Department of the Interior looks forward to working with the 

Co~ttee in this regard. 

(1) Sho~d th• Fedar&1 government continua to be in th• buainaaa o~ 

admdniatering I~ accounta? 

The American Indian Trust Fund Management Reform Act of 1994 added the 

following new subsection to 52 Stat. 1037, Chapter 648; 25 u .s . c . l62a : 

(d) The secretary's proper discharge of the trust responsibilities of the 

United States shall include (but are not li~ted to) the following: 

(1) Providing adequate systema for accounting for and reporting 

trust fund balances. 

(2) Providing adequate controls over receipts and disbursements. 

(3) Providing periodic, timely reconciliations to assure the 

adequacy of accounts. 

(4) Dete~ning accurate cash balances. 

(5) Preparing and supplying each account holder with--

(A) periodic statements of the account performance of the 

account holder; and 
241 

(B) a balance of the account of such account holder, which 

shall be available on a daily basis. 

(6) Establishing consistent, written p o lic ies and procedures for 

trust fund management and accounting . 

(7) Providing adequate staffing, supervision, and training for 

trust fund management and accounting. 

7 

(8} Appropriately managing the natural resources locat ed within the 

boundaries of Indian reservations and trust lands . 

~1 of these requir~ents have a dire ct bearing on the administration of 

IIH accounts. As long as the Federal government continues to have trust 

responsibility to liM account holders, it will have to ensure , directly or 

indirectly, that the trust responsibilities, including those listed, are met. 

Under self-governance principles, it is conceivable that at some time in the 

future most of the trust management functions presently being administered, 

managed and delivered by the Department or the Bureau of Indian Affairs could 

be delivered and manaqed by the Tribes or by other third parties, provided the 

trustee retains sufficient direct and indirect authority and oversight capacity 

to ensure that the trust responsibilities t o account benefici aries are being 

met . 

(2) Wou1d you support having DOI contract out the operational functions of 

manaqinq Indian trust fund accounts to either (a) a private tn\st management 

company, or (b) another department of the Federal government such as the 

Department oC the Treasury, so long aa the Un1ted States retains ita related 

~1 of these options ~ght be alternatives worth pursuing. However, 
242 

8 

ex.tensive research and analysis will be necessary before the Department will be 

in a position to propose these or siDdlar options to the American Indians 

through the consultation process and to the Congress for consideration . The 

feasi bility of such options will also be in doubt, if the government is unable 

to state with some degree of certainty the correctness of the account balances 

transferred. 

(3) Would you support DOI cba.rqinq &dminiatr&tive feea to truat fund &ccount 

ho~dera to defr&y the coat of improving ita truat fund management ayatcma? 

Administrative fees might be charged trust account holders to defray the 

cost of operating trust management systems, providing such do not exceed 

private sector fees for comparable trust services and provided appropriate 

consideration is given to certain account holders who may not be able to a fford 

such fees . Whether charges for systems improvements a r e appropriate is less 

certain . The Department is researching the issue of whether fees should be 

charged tribal and IIM account holders with large balances or activity, dormant 

accounts, minor accounts, accounts with no known address o r an incorre~t 

address and the like . Further research and analysis will be necess ary before a 

proposal can be produced for presentation to the American Indians through the 

consultation process and to Congress for considerati on. 

(4) wou~d you support ~egia~&tion which would disburse u~ fur.da in existing 

accounts to appropriate accoUDt OW'Iler•, woul.d then terminate thoae XDC 

accounta, and wo~d provide that in the ~uture , whenever possible, revenue• 

wi~l be ~orvarded directly to account bolder• by check without going through a 

trust ~und account? 

There are three critical parts to the trus t management process: trust 

resource management, trust funds investment and management , and land and 

ownership records management. None are mutually e xclusive as all are integral 

parts of the trust management process. Terminating IIM a ccounts along the 
243 

lines indicated by the question would still leave the Federal trustee with 

legal trust responsibilities, but the trustee would have an incomplete ability 

to carry out its responsibilities to determine whether the amounts being 

collected on behalf of the beneficiary were consistent with the terms of the 

lease or contract or to determine whether income to the beneficiary was being 

maximized. In addition, the trustee might not be able to determine whether 

direct payments were going to the correct account holder. 

9 

Certainly, there will be accounts for which this approach would be 

entirely appropriate and consistent with the Federal trust responsibility. 

Decisions about the proper management of individual accounts or categories of 

accounts should be flexible and open to negotiation. The options provided to 

tribes remove their trust funds from federal management might serve as a model 

for liM account holders. Given these constraints and conditions, more research 

and analysis is necessary for the Department to consider an appropriate 

proposal. 

Just as important, there are approximately 48,219 accounts with balances 

of about $201.3 million which are held for minors and other account holders 

requiring assistance in managing their affairs. Another 5,183 accounts with 

balances of $80.9 million are controlled for various reasons as determined by 

BIA personnel. These accounts could not be closed and paid out unless 

substitute trustees and guardians could be arranged. 

(51 What do you think ahould be done about (&I Cract~onated he~rsh~p prob1ema 

and (b) the thou.anda oC .inacti.ve account. vh:1ch have no bene:f:1c:1ary? (Xnactive 

account :f~ coul.d be transf"erred to the Federal. government or to the Tribe of" 

the ~ast known benef".ic.iary or to some :form of" Feder&~ or Tribal escrow account 

held for some designated use.) 

There is no question that a complete resolution of the trust management 

problems will not be possible unless the fractionated heirship problems are 

addressed. Toward that end the Department has under consideration a draft 

proposal for legislation to resolve the fractionated heirship issues which has 
244 

as its principal purposes: 

(A) The consolidation of existing fractional interests. 

(B) The prevention or substantial reduction of further 

fractionation. 

10 

The proposed legislation will be forwarded to the Congress as soon as it 

is finalized . 

Inactive account balanr-es (dormant accounts) and acc o unts withou t an 

address or with a~ incorrect address have been segregated by the Offic e of 

Trust Funds Management . At the present time a clean- up effort is underway to 

reduce the number of the larger accounts in these categories to the e xtent 

practical. The clean-up effort will extend into FY 1997. At the c o nclusion of 

this effort, a permanent solution to these troublesome accounts will have to be 

found consistent with prudential and efficient trust fund management policies 

and practices and Constitutional taking considerations . The Department will 

work with the Conqre~s in pursuing these objectives . 

(6) A8auminq that tri..))&l accounta C&D not be reconc.i~ed any :further, what 

aett~~nt proceaa do you support whicb vo~d :fair~y compensate the tr~a and 

would ~rmina~ any liability whicb tbe redar&1 qovernmant miqht have ~or any 

breach of truat reapona~i1ity which ~gbt have taken place regarding the 

managamant of' tribal accounts in the paat? 

S ubsection 3 of Section 304 of the American Indian Trust Fund Management. 

Reform Act of 1994 requires "a statement by the Secretary with regard to each 

account balance disputed by the account holder outlining efforts the Secretary 

will undertake to resolve the dispute . " The Secretary of the Interior has 

advised the Senate Committee on Indian Affairs and the House Committee on 

Resources that he will provide a final report on the account holders' 
245 

11 

attestations by November 15, 1996 . The Department is awaiting those 

attestations from the tribes, and will address this issue in its report to 

Congress. Following a series of regional and individual meetings with account 

holders this spring and summer, the Department on August 26, 1996, sent a 

letter to each tribal account holder with an enclosed attestation form. The 

Department requested that the focms be completed and returned by September 27 , 

1996. The information provided will serve as a basis for the November 15, 

1996, report to the Congress on the efforts the Secretary will undertake t o 

resolve any disputes as required by Section 304 of the Refor.m Act. 

(7) Aaa~nq the I~ accounta can not be fully reconciled, what settlement 

proceaa do you •upport which vou1d fairly compensate account ho1dera and would 

tenDinate any ~iabi~ity whJ.ch the Federal. govarm.nt might have incurred for 

any breach of trust responsibi~ity vhJ.ch might have taken p1ace regarding the 

manaq-nt of" IIM accounta i.n the paat? 

On June 10, 1996, a class action lawsuit captioned Elouise Pepion Cabell 

et al . v . Bruce Babbitt et al. was filed on behalf of all IIM account holders. 

Counsel for plaintiffs and the United States have been engaged in comprehensive 

discussions about a process to settle that litigation. As that litigation is 

currently pending, it would be inappropriate to discuss potential settlement 

options. 

(8) What chan~• in existing ~aw wou~d faci1itate the administration of triba~ 

truat f"und. accounts? 

(10) What cbanqea in .Uati.nq law relating to the management of I.nd.ian truat 

~und accounts, other than those mentioned above , would you suggest be 

conaidared by Conqreaa? 

Any major reform of the trust management systems, including many of the 
246 

12 

improvements under review by the C~ttee, will require changes in existing 

law. The initiatives outlined in the Special Trustee's conceptual strategic 

plan will require some changes to existing law as well. The final comprehensive 

strategic plan and other Department initiatives will likely contain even more 

suggestions for change in existing law to accommodate improved trust management 

initiatives. At this time, however, it is premature for the Department to be 

proposing specific changes to existing law for consideration by Congress. With 

respect to tiM accounts, the Department supports changes to existing law to 

resolve fractionated heirship problems. For further discussion, please see the 

answer to Question I 5 above. 

(~) What ia your opiniou of th8 propoaed Ph&Jie I of th8 Special. Truatee• • 

atrateqic plan iaaued iD rehruary of lg''? 

Please see the Special Trustee's Assessment and Strategic Plan 

presentation portion of this statement. 

This concludes my statement, I will be happy to respond to any questions 

the Committee may have. 
247 

PREPARED STATEMENT OF ERIC R. D AVENPORT 

TESTIMONY 

OF 

ERIC R. DAVENPORT, CHAIRMAN 

INTERTRIBAL MONITORING ASSOCIATION ON INDIAN TRUST 

FUNDS 

BEFORE THE 

HOUSE RESOURCES COMMITTEE 

TASK FORCE ON INDIAN TRUST FUND MANAGEMENT 

SEPTEMBER 26, 1996 

WASHINGTON, D.C. 

Mr. Chairman and Members of the Task Force: 

Thank you for the opportunity to appear before you today. My name 

is Eric R. Davenport. I am the Chairman of the Intertribal Monitoring 

Association on Indian Trust Funds (ITMA). On behalf of the members of 

ITMA I want to once again thank you for your leadership on this issue and 

your commitment to seek solutions to the past mismanagement of the trust 

funds and ensure the proper management of those funds in the future. 

The Task Force has asked ITMA to respond to ten specific questions 

in today's testimony. I will take those questions in the order in which they 

were asked. 

(1) Should the Federal government continue to be in the business of 

administering liM accounts? 

We believe that the answer is an unequivocal Yes. 

We obviously do not base this answer on the past performance of the 

federal government. Little in the way of positive information about past 

performance is available. We do know that Arthur Andersen LLP has 

advised both the Bureau of Indian Affairs and this Congress that these 

accounts appear to be in such a state of disarray that it would take well in 

excess of $200 million to perform the most basic reconstruction and partial 

reconciliation of the accounts. This assessment is consistent with the 
248 

information we have been able to gather from individual account holders 

from around the nation. 

Our answer to this question is based on fundamental moral and legal 

grounds. The funds in the llM accounts are derived from lands held in 

trust or are the result of payments made to individuals for settlement of 

breach of trust claims. The federal government established the allotment 

system which led to these individual accounts. In many instances these 

accounts are now administered for the benefit of minors. In virtually all 

instances, they are comprised of revenues derived from trust resources 

over which the federal government exercises substantial authority and 

control. We see no way to separate the administration of the funds from 

the resources at the present time. 

There is no federally regulated financial institution in the nation 

which could undertake the administration of these accounts at the present 

time. Any attempt to do so would cause the appropriate federal regulatory 

bodies to take action against the institution seeking to do so. This is 

understandable since no one seems to know how much is really in these 

accounts or how much should be in them. Existing federal law would not 

permit a financial institution serving the general public to assume 

responsibility for such accounts. 

(2) Would you support having DOl contract out the operational 

functions of managing Indian trust fund accounts to either (a) private trust 

management company, or (b) another department of the Federal 

government such as the Department of the Treasury, so long as the United 

States retains its related trust responsibility? 

In the appropriate circumstances ITMA does support arrangements 

of the type contemplated by either part (a) or (b) of this question. 

We believe that any transfer of the operational functions is not 

possible at the present time for the very basic reason that no one can 

establish with any degree of certainty what is in these accounts and what 

should be in these accounts. For the reasons noted in my answer to the 

first question, a private institution would immediately confront federal 

regulatory action were it to undertake the management of these funds. A 

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249 

federal agency might be able to avoid the regulatory action, but we do not 

see how it would be in any better position to know what the balances 

actually are or should be on the day that it assumes responsibility for the 

account. We do not know of any federal agency which is presently 

disposed or prepared to assume OOI's responsibility for these funds. 

It is possible that the custodial services component of the investment 

function for these accounts could be contracted to a private institution 

without the need for certainty as to overall account balances. We would 

favor such an arrangement, but only if it provided the flexibility necessary 

to allow Indian tribes to exercise the option provided in Title II of the 

Trust Fund Reform Act to directly administer their trust funds. 

(3) Would you support DOl charging administrative fees to trust 

fund account holders to defray the cost of improving its trust fund 

management systems? 

We would not support such fees. 

In our view, the account holders have long ago prepaid any and all 

fees. We know of no instance where an account holder has not given 

substantial value for whatever funds have been paid into these accounts, 

That value has been given both to the United States government and to its 

non-Indian citizens. 

The gross mismanagement of the trust funds has already added a 

surcharge to these accounts which has not been calculated and may not be 

capable of calculation. To suggest that the account holders should now or 

at any time in the future bear the responsibility for the cost of establishing 

the adequate system which both the Congress and the courts long ago 

decreed to be required defies fundamental fairness and common sense. 

(4) Would you support legislation which would disburse all funds in 

existing liM accounts to appropriate account owners, would then 

terminate those liM accounts, and would provide that in the future, 

whenever possible, revenues will be forwarded directly to account holders 

by check going through a trust account? 

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250 

We would not favor such a system. 

As we have noted in our answers to previous questions, there is not 

even any certainty as to the balances of these accounts. In fact, the record 

shows that there is not even any certainty as to the number of these 

accounts. Until there has been a fair and impartial determination on these 

matters, we see no basis for the action proposed by this question. The 

disbursement of all funds in the absence of this information will only make 

an already complicated situation worse for both the account holders and 

the federal government. It does not take much imagination to understand 

the potential for additional federal liability if funds are disbursed to 

improper parties or in improper amounts. 

We believe that the Special Trustee's proposal to transfer these 

accounts to the Development Bank and consolidate them through stock 

issuance and acquisition merits serious consideration by the Congress and 

the Administration. This proposal holds promise both for resolution of 

some of the problems in the administration of the liM accounts and the 

consolidation of fractionated allotments. 

(5) What do you think should be done about (a) fractionated heirship 

problems and (b) the thousands of inactive liM accounts which have no 

known beneficiary? (Inactive account funds could be transferred to the 

Federal government or to the Tribe of the last known beneficiary or to 

some form of Federal or Tribal escrow account held for some designated 

use.) 

As noted in my answer to question 4, ITMA supports careful 

consideration of the Special Trustee's recorrunendation for a Development 

Bank to resolve these issues. 

We also note that this question may suggest that the inactive liM 

accounts in fact have no known beneficiaries. We believe that such an 

implication is hasty, given what is generally understood about the lack of 

accurate record keeping with regard to these accounts. Transferring the 

balances of the accounts with no "known" beneficiary to others may add 

to the problem rather than resolve it. What is the liability of the federal 
251 

government when the "unknown" beneficiary appears and seeks 

restitution for the wrongful taking of his or her account? 

(6) Assuming that tribal accounts cannot be reconciled any further, 

what settlement process do you support which would fairly compensate 

the tribes and would terminate any liability which the Federal government 

might have for any breach of trust responsibility which might have taken 

place regarding the management of the accounts in the past? 

ITMA does not agree that the reconciliation is complete. Arthur 

Andersen LLP refuses to state that it is complete. Even a casual review of 

the national and tribal specific reconciliation reports reveals that only a 

small fraction of the accounts have been reconciled. Among the identified 

deficiencies of the report are the following: 

• It failed to disclose known limitations in the 

methodology and scope. 

• Procedures included in the reconciliation contract 

were not performed or could not be completed. 

•Changes included in 9 contract modifications and 

more than ISO issue papers were never explained to 

the account holders. 

• The universe of leases was unknown and 

undisclosed substitutions were made to the original 

lease sample. 

•Over $200 billion in investment transactions were 

excluded and are left unreconciled. 

•The Special Trustee cannot meet his statutory 

duty to attest to the fairness and completeness of 

the reconciliation as an accounting of trust fund 

balances. 

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252 

• Arthur Andersen LLP was essentially hired as the 

bookkeeper, we have never seen and will never see 

an audit of their work by an independent CPA. The 

only thing that Arthur Andersen did do was to 

analyze whether the BIA made any errors in 

posting what the BIA collected. Neither Arthur 

Andersen's recommendations nor the BIA's 

responses have been examined by a qualified 

independent auditor. 

We understand completely why many Tribes believe that it is not 

possible to begin meaningful discussion of settlements in these 

circumstances. Would any citizen of this nation agree to resolve a dispute 

over the balance in their checking or savings accounts in similar 

circumstances? We think the answer is obvious. No. 

When most, or a substantial number of Tribes have indicated a 

willingness to discuss settlements, ITiviA suggests that the Congress give 

very careful consideration to an approach which recognizes that each 

Tribe has unique circumstances. We do not believe that one form of 

settlement will fit the circumstances of the mismanagement of each Tribe's 

funds and the equities of an adequate settlement based on those 

circumstances. We urge the Congress to consider an approach which will 

provide for several alternatives from which tribes may choose based on 

their individual situations. 

At the present time, all of the parties lack the information necessary 

to make informed decisions. ITMA will work with the Tribes, the 

Congress and the Administration to find reasonable solutions to this lack 

of information. 

(7) Assuming that liM accounts can not be fully reconciled, what 

settlement process do you support which would fairly compensate account 

holders and would terminate any liability which the federal government 

might have incurred for any breach of trust responsibility which might 

have taken place regarding the management of liM accounts in the past? 

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253 

As noted in my answer to Question 6, ITMA believes that a proper 

reconciliation must be completed before it is possible to enter into 

meaningful settlement discussions. A reconciliation of the liM accounts 

has not even been attempted. ITMA does not favor a discussion of 

settlement options until there is greater certainty about the account 

balances for the liM accounts. We continue to believe that many liM 

accounts are can be successfully audited. 

As noted in the answer to Question 4, we also think that the Special 

Trustee's recommendation for a Development Bank merits careful 

consideration as a means for providing an equitable settlement of liM 

claims. 

(8) What changes in existing law would facilitate the administration 

of tribal trust fund accounts? 

ITMA supports several changes in existing law to improve the 

administration of tribal trust fund accounts. First, we believe that it is very 

important to increase the independence of the Special Trustee. The 

Special Trustee cannot be expected to fulfill his duties to the beneficiaries 

of the trust if he is continually asked to serve the political objectives of the 

Secretary or the Administration. At the same time, we believe that the 

Special Trustee should be subject to oversight by an official who is well 

versed in finance and money management. We urge the Congress to be 

mindful of Lord Acton's dictum: Power corrupts, and absolute power 

corrupts absolutely. We do not support unfettered independence and 

authority for the Special Trustee. 

Second, we believe that it is critical that the Congress appropriate 

the funds necessary to provide for the proper administration of the trust 

funds. In this regard we believe that the funding proposals being 

advanced by the Special Trustee are generally sensible and will move the 

administration of the trust funds in the proper direction. 

Third, we believe that the Congress should authorize the Special 

Trustee to correct mistakes in the account balances when they arise. On 

several occasions mistakes have been made and acknowledged. Thefts of 

trust funds have been successfully prosecuted. For the 1997 Fiscal Year the 

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254 

President's budget requested an appropriation of $12 million to repay 

losses incurred in 1984. Today, more than 12 years later that loss is still on 

the books and accruing interest. Even with the improvements which have 

been instituted by Special Trustee Homan and Ms. Erwin, mistakes will 

happen in the coming months and years. We believe that common sense 

suggests that the Special Trustee should be given some authority to 

correct known errors before they languish for years and multiply into 

seven digit numbers. 

Fourth, we believe that mandatory disclosure of known errors is 

essential. The account holders have the right to know how their trust 

funds are being handled. They also have the right to expect that simple 

mistakes will be corrected and that criminal misconduct will be vigorously 

prosecuted. 

(9) What is your opinion of the proposed Phase 1 of the Special 

Trustee's strategic plan issued in February of 1996? 

ITMA is generally supportive of the direction which is established in 

the first eight points of Phase I of the proposed strategic plan. We believe 

that flexibility will be required as these initiatives are implemented, but we 

also believe that these initiatives will move the process toward the 

improvements which are necessary to ensure full accountability in the 

management of the Indian trust funds. ITMA has not endorsed point nine 

in Phase I of the proposed strategic plan. It is clear to us that the Tribes 

have not had an adequate opportunity to consider the implications of this 

initiative and to express their views on it. We urge the Congress and the 

Special Trustee to work very closely with the Tribes on any proposal for 

the consolidation of all trust functions in the Office of the Special Trustee. 

(10) What changes in existing law relating to the management of 

Indian trust fund accounts, other than those mentioned above would you 

suggest be considered by Congress? 

ITMA urges the Congress to consider changes in the federal 

personnel laws which will ensure that the personnel of OTFM have the 

proper qualifications for their positions. The recent experience of OTFM 

has shown that sound efforts to improve employee qualifications and 

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255 

performance can be lost to the whims of the appropriations process and 

the mandates of federal personnel laws. We cannot often afford to have 

OTFM absorb marginally qualified employees and let well trained, highly 

qualified employees go. 

We also believe that the personnel in OTFM should be placed in a 

special status which would afford the Director of the Office and the 

Special Trustee greater flexibility in the management of the office based on 

factors such as employee performance. Such authority appears to be 

necessary if we are to achieve an adequate level of administration of the 

trust funds. 

Mr. Chairman, this concludes my testimony. I want to once again extend 

my gratitude to you, the members of the Task Force and to Chairman 

Young for your efforts on this issue. I am particularly gratified by the 

moral tone which you and the members of the Task Force have set on this 

issue. We appreciate the fact that this has been approached as an issue of 

right and wrong rather than from the perspective of partisanship. Wrongs 

clearly have occurred. We look forward to continuing to work with you 

and the other members of the Task Force to set them right. 

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256 

PREPARED STATEMENT OF EARL OLD PERSON 

TESTIMONY BEFORE THE INDIAN TRUST FUND TASK FORCE 

OF THE 

HOUSE COMMITIEE ON RESOURCES 

SEYI'EMBER 26, 1996 

SUBMITrED BY 

EARL OLD PERSON, CHIEF 

BLACKFEET TRIBE 

Mr. Chairman and Members of the Task Force, I appreciate the opportunity to appear 

here today. I am accompanied by Elouise Cabell, Project Director of the Individual Indian 

Monies Trust Correction and Recovery Project. As you know, this project is an initiative of 

the Blackfeet Reservation Development Fund. 

I want to thank Congressman Young, Chairman Hayworth, CongressiiWI Pat 

Williams, and the other Members of the Task Force for their efforts to develop mtaningful 

answers to these longstanding trust fund issues. I also want to commend the Special Trustee 

for his leadership and for his efforts to address the facts and the history of grossly inadequate 

management of individual American Indians trust fund accounts. 

One of the major purposes underlying the creation of the Special Trustee was to lay a 

basis for resolving this matter and reforming trust fund management. True to his IIWidate, 

the Special Trustee has brought a sense of purpose and urgency to the issue. He has put 

together an outline of a strategic plan. He is ready to make significant improvements as soon 

as funding is made available. He has tried to open up a discussion with tribal leaders on 

how the government and the tribes can settle the $2.4 billion problem identified by the 

Arthur Andersen report. 
257 

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The Special Trustee deserves the suppon of the Interior Department, the Clinton 

Administration, the Congress, and all those who live in Indian Country. Together with other 

Tribal leaden who went to Phoenix last week to hear the Special Trustee's views on 

settlement options, I was disappointed that our meeting was canceled on shon notice. We 

were told that the Solicitor's office had, at the last minute, decided it would be inappropriate 

for Mr. Homan to discuss his views on Tribal settlement terms and options. This 

cancellation was apparently based upon the fact that after generations of improper 

management of individual Indian trust funds, a law suit had been filed by myself and othen 

on June 10, 1996 in Federal Court on behalf of liM accounts, but not addressing the Tribal 

issues. 

Many of the ten tribal leaden came away from the canceled Phoenix meeting angry 

and frustrated. Time and money had been wasted. No progress had been made on 

developing a basis and terms for an honorable Tribal settlement. And meanwhile, inadequate 

JtW~~gement of all of the Trust accounts continues. 

After the meeting was canceled, the tribal leaden met to discuss how we should 

proceed in light of the Department's actions. We agreed that Special Trustee Homan was 

critical to the fair and timely resolution of the trust fund problem. We agreed to suppon 

legislation to strengthen his position so he can accomplish the goals Congress set out when it 

enacted the Trust Fund Reform Act two years ago. This is the same view that was reached 

at the Task Force's August 20th hearing on the Salt River Reservation, where the members 

of the Task Force and the tribal leaden agreed that the Special Trustee needed greater 
258 

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operational independence. This latest episode removes any doubt about this. If the Special 

Trustee cannot air the critical issues of trust responsibility and discuss them with the 

beneficiaries -- the account holders -· then the purpose of the legislation will have been 

defeated. 

To give the Special Trustee the full powers and independence he needs will require a 

thorough overall of the Act. I recognize that it is too late in this session for that to happen. 

I do, however, urge the Task Force to include a proposal for such an overhaul in the Task 

Force Report that is to be issued in November. 

In the interim, I request that the members of the Task Force and other interested 

Congressmen and Senators communicate to President Clinton and Secretary Babbitt their 

support for the Office of Special Trustee and how important it is for the Secretary to work 

cooperatively with Special Trustee Homan if this problem is ever going to be resolved. 

Second, I request the members of the Task Force encourage the House Interior 

Appropriations Committee to recede to the Senate Appropriations Committee mark on 

funding for the Office of the Special Trustee. 

Third, I request that the Task Force take the lead in trying to enact some minor 

amendments to the Trust Fund Reform Act before Congress adjourns. They would give the 

Special Trustee some additional power so he can maintain forward progress until Congress 

can do the major overhaul next year. I have three specific proposed amendments attached to 
259 

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my testimony. I am not asking Congress to break any new ground here. Each amendment 

is based on provisions of the Indian Gaming Regulatory Act. 

Thank you for your deep commitment to trust fund reform. I hope you and the other 

members of the Task Fon:e will be able to push through some amendments in the last days 

of the session. 

Finally, I will be soon providing answers to the specific questions you asked in your 

invitation letter to witnesses. I apologize for not iddressing them in this testimony, but we 

concluded that it was critical for me to focus my testimony on recent events and the need to 

maintain continuity and support the efforts of Special Trustee Homan. 
260 

PROPOSED AMENDMENTS TO 

THE TRUST FUND MANAGEMENT REFORM ACT 

TO STRENGTHEN THE omCE OF THE SPECIAL TRUSTEE 

I. Establishing a fixed four year term for the Special Trustee (retroactive to the date Mr. 

Homan took office) and prohibiting the President from removing him before the end 

of his term except for cause. (The language on removal only for cause is taken 

directly from the Indian Gaming Regulatory Act.) 

PrOl!Oscd New subsection 4042((b)(3): 

• (3) Term of Office.-- The Special Trustee shall serve for a term of four years, 

(unless the Office of Special Trustee is terminated, pursuant to the provisions of section 

4042(c)(3), prior to the completion of the term.) For purposes of the incumbent in that 

position on the effective date of this Act, to whom this provision applies, the term shall be 

deemed to have commenced on the day he assumed the office. The Special Trustee may 

only be removed from office before the expiration of his term by the President for neglect of 

duty, or malfeasance in office, or for other good cause shown. • 

II. Giving the Special Trustee his own legal counsel 

Presently, the Special Trustee is represented by the Solicitor of the Department of the 

Interior. There is an inherent conflict of interest, since the Special Trustee's sole loyalty is 

towards the Indian beneficiaries, while the Secretary and his staffs loyalty is to the entire 

department, which necessitates choosing and balancing among the different parts of the 

Department. The proposed language would give the Special Trustee his own general counsel 

(the language is taken directly from IGRA). 

Proposed Lane;ua&e for a New section 4045Cc): 

• (c) General Counsel.--

The Special Trustee shall appoint a General Counsel to the Office who shall be paid 

at the annual rate of basic pay payable for GS-18 of the General Schedule under section 5332 

of Title 5. 
261 

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III. Staffing 

Presently the Special Trustee is bound by regular OPM hiring procedures and 

requirements when hiring staff. Given the Special Trustee's need to be able to hire quickly 

once funds become available and his need to select people with the skills and experience 

needed, the OPM process is extremely burdensome. The proposed amendment would give 

the Special Trustee the same special hiring authority that was given to the National Indian 

Gaming Commission by IGRA, language that permits him to hire without regard for the civil 

service laws. 

PrQposed Lan~maae Gjving the Special Trustee Hiring Authority that js not Subject to 

the Civil service ProcedUres 

Section 4045(a) is amended by repealing everything after the heading ("(a) Staff") and 

replacing it with the following: 

"(a) Staff. 

"The Special Trustee shall appoint and supervise other staff of the Office of 

Special Trustee without regard to the provisions of Title 5 regarding appointments in the 

competitive service. Such staff shall be paid without regard to the proVisions of chapter 51 

and subchapter III of chapter 53 of such title relating to classification and General Schedule 

pay rates, except that no individual so appointed may receive pay in excess of the annual rate 

of basic pay payable for GS-17 of the General Schedule under section 5332 of that title. 
262 

PREPARED STATEMENT OF RoBERT M. Pi'; KT:COY 

STATEMENT OF ROBERT M. PEREGOY 

NATIVE AMERICAN RIGHTS FUND 

SEPTEMBER 26, 1996 

Congressman Hayworth and Members of the Task Force, I appreciate the 

opportunity to provide testimony on this most important matter. My name is 

Robert Peregoy. I am a senior staff attorney with the Native American Rights Fund 

(NARF). I appear today on behalf of 300,000 individual Indian trust beneficiaries 

who comprise the putative class in the lawsuit filed in federal district court here in 

Washington on June 10, 1996 against the federal government. As you know, this 

class action litigation was filed to compel equitable redress for the federal 

government's gross mismanagement of their Individual Indian Money (liM) 

accounts. 

First, I want to express appreciation to you and Members of the Task Force 

for your commitment and hard work to carry out the mandate of Chairman Don 

Young in establishing this important Task Force. I also want to commend and 

thank Chairman Young for his timely and critical support this past week in urging 

House Appropriations Committee leaders to concur with the Senate Appropriations 

Committee mark for the Office of the Special Trustee in the FY 1997 Interior 

spending measure. 

In preparation for my testimony, the Task Force has asked me to answer ten 

written questions, which I have attached to my written statement for the record. 

Several of these questions relate specifically to tribal trust fund matters. Such 

questions are beyond the purview of the liM attorneys since our representation is 

limited to individual Indian trust beneficiaries. We are therefore not in a position 

to respond to such questions, and respectfully decline to do so. Rather, we defer 

to the tribes and their representatives to address them as they deem appropriate. 

The Task Force has also asked me to answer several written questions related 

to the future status, treatment, disbursement of funds and termination of liM 

accounts, as well as fair compensation of liM account holders, termination of 

federal government liability for any breach of trust regarding liM account 

management, and related settlement processes. Questions of this nature raise 

equitable and legal issues that are now under the jurisdiction of the United States 

district court here in Washington pursuant to the liM class action lawsuit in Cobell 

v. Babbitt. Because these questions have been properly committed to the judicial 
263 

branch of government, we are ethically obligated to address them in that forum. 

I must therefore respectfully decline to testify in that regard. 

Notwithstanding, suffice it to say that the litigation is currently proceeding 

on a fast track. The court has scheduled regular status conferences with the liM 

and government attorneys, and we are meeting with officials from the Department 

of the Interior and Department of Justice in a joint cooperative effort to move to 

an expeditious resolve. To speak to the issues outside this context may undermine 

the process and interfere with the court's supervision of this case. Equally 

important, such could compromise the rights and position of over 300,000 

individual Indian trust beneficiaries whom we represent in this matter. 

At this juncture, I want to restate part of the testimony of John Echohawk, 

NARF's .executive director, given before this Task Force on June 18, 1996. 

Neither the lawyers involved in this class action litigation, nor the accounting firm 

we have retained, Price Waterhouse LLP, currently contemplate accepting 

contingency fees available in a case like this. Fully, 100 percent of the recovery 

in this class action lawsuit is expected to go to the individual Indians who lost and 

continue to lose their money daily at the hands of the federal government. The 

lawyers and experts are currently retained by the Individual Indian Trust Correction 

and Recovery Project of the Blackfeet Reservation Development Fund, and private 

funds are currently being used to support this effort. 

With regard to the Task Force's written question whether we would support 

the Department of the Interior charging administrative fees to trust fund account 

holders to defray the cost of improving its trust fund management system, the 

answer is no. Simply put, trust beneficiaries do not pay for the establishment or 

improvement of trust fund management systems. In the private sector, fiduciaries 

are responsible for establishing and maintaining adequate management systems to 

perform trust functions. There is simply no justification for the federal government 

to compel Indian trust beneficiaries to pay for an adequate trust management system 

that the government has been required to establish for more than for 158 years; and 

the government's failure to do so continues to cause Indian people to suffer huge 

losses of their own money every day. 

The Task Force also asked us to answer other written questions concerning 

what the federal government should do in the future with regard to the 

administration of liM accounts. These questions range from querying whether the 
264 

Federal government should continue to be in the business of administering liM 

accounts, to whether the Department of the Interior should contract the operation 

and management of Indian trust accounts, either to a private trust management 

company or to another department of the federal government. However, discussing 

what the federal government should or should not do in the future with regard to 

its existing legal responsibility to manage and administer liM trust funds is not the 

issue. The relevant, compelling question at this time is what the government needs 

to do now to fulfil its legal obligation and trust responsibility to Indian trust 

beneficiaries to fix a trust management system that has been broken for 158 years. 

Our collective job now--that of Congress, the Administration and those of us who 

represent Indian trust beneficiaries--is to work together to assure that the federal 

government for the first time in history begins to honor its fiduciary obligation to 

these people who continue to lose untold millions of dollars each year as a result 

of the government's continuing serious breaches of trust. To speculate what the 

federal government should be doing in the future when it is not doing the job now 

is to put the cart before the horse. When the system is fixed, we will all be in an 

informed position to knowledgeably evaluate and discuss these future-oriented 

questions in purposeful fashion. 

The real question immediately confronting all of us--Congress, the 

Administration and liM account holders alike~-is how we can correct this 158 yearold problem, and equally important, how we can make sure that it does not happen 

again. Congress took a giant step to correct the problem by passing the Indian 

Trust Fund Management Reform Act of 1994. Pursuant to this remedial legislation, 

the President appointed the Special Trustee and the Senate confirmed him--with the 

endorsement of many Indian tribes, groups and individuals. By all accounts, the 

Special Trustee, Mr. Paul Homan, is highly qualified and exceptionally competent. 

This is the first time in the history of the Department of the Interior that a person 

of such eminent qualifications and capabilities has been placed in the critical role 

of carrying out the Nation's trust responsibility to Indian tribes and individuals with 

respect to trust funds. Congress has statutorily mandated that he establish and 

administer a trust fund management system that will enable the United States to 

meet its fiduciary duties and responsibilities to Indian tribes and individuals. For 

this the Special Trustee is responsible and accountable. Without adequate funding, 

he will not be able to do the job Congress mandated under the 1994 Act. We have 

a mutual obligation to support the Special Trustee's important work. If Congress 

does not appropriate adequate dollars, the 1994 Act cannot be implemented. 

Moreover, individual Indians and tribes will continue to incur huge losses every 
265 

single day, and the federal government may continue to incur huge financial 

liability for its daily breaches of trust. 

These continuing breaches of trust, concomitant losses, and mounting 

liabilities that would be borne by U.S. taxpayers are precisely the reasons that 

Congress must appropriate adequate dollars to fix the entire trust fund management 

system. The Special Trustee's Strategic Plan is a 3-5 year plan designed to carry 

out the mandates of the Trust Fund Reform Act of 1994. It is an action oriented 

plan charted to fulfill the United States' trust responsibility to tribes and individual 

Indians in trust fund management. The Strategic Plan is expected to cost 

approximately $147 million over a five-year period to implement. It is incumbent 

upon Congress and the Administration to work cooperatively in bi-partisan fashion 

to assure that Phase I is fully funded so that the Special Trustee can produce an 

adequate Indian trust management system. Such cooperation and funding will 

enable the federal government to begin to honor its fiduciary obligation and legal 

responsibilities to individual Indian and tribal trust beneficiaries. 

We fully support the Special Trustee and Phase I of the Strategic Plan. We 

need to move forward with implementation as rapidly as possible. It is in this spirit 

that we commend Chairman Young for his leadership in urging the House to 

concur with the Senate Appropriation Committee's mark of $36.3 million for the 

Office of the Special Trustee for FY 1997--which is the amount the Administration 

requested. While the Administration's request of $36.3 million for the Office of 

the Special Trustee is approximately $13 million below the amount that the Special 

Trustee recommended for FY 1997, it is a significant step in the right direction to 

provide the Office of the Special Trustee with the funding to begin to carry out the 

requirements Congress mandated when it passed the American Indian Trust Fund 

Management Reform Act of 1994. 

As you are aware, the Senate Committee mark includes $18 million to begin 

implementation of the Strategic Plan by initiating critical Indian trust management 

improvements, particularly as it relates to the liM accounting system. The Special 

Trustee has determined that it will cost $22.3 million to establish an adequate liM 

accounting system, and that such can be done in one year. While the $18 million 

for improvement initiatives includes $13.6 to begin that task, it remains $8.7 

million below the amount the Special Trustee has determined is needed to do the 

job right, and which he recommended that the Administration include in its budget 

request to Congress. 
266 

Nevertheless, to begin sincere system reform, it is critical that Congress 

approve the Senate Appropriations Committee mark for the Office of the Special 

Trustee. Unfortunately, the House version of the Interior Appropriations bill does 

not contain any funding to begin to implement any systemic reforms in the Indian 

trust management program. Therefore, under the House version, the Special 

Trustee cannot comply with the Congressional mandate pursuant to the 1994 Trust 

Fund Management Reform Act. Only with adequate funding can the Special 

Trustee move expeditiously to implement Phase I of the Strategic Plan and begin 

to reform a miserably failed system. And only then can the federal government 

begin to end the government's breaches of trust and mounting liability which 

increases every single day that money is lost because the system remains broken. 

In closing, we respectfully urge Congress to fund the Administration's 

request for $36.3 million for the Office of the Special Trustee for FY 97 and to 

work cooperatively in bi-partisan fashion with the Administration to fully fund the 

Special Trustee's Strategic Plan during FYs 1998-2001. We pledge to work with 

you in this regard on behalf of the 300,000 individual Indian trust beneficiaries 

whom we represent in this most important matter affecting their fundamental rights-

-and their money. 

Thank you for the opportunity to testify. 
267 

0ol'l YOU, G, C HAIRM AN 

11.~. ll\)out of l\tprt5tntattbt5 

(:ommitttt on ~t~ourc~ 

lllaJI.Jington, ~It 20515 

Robert Peregoy 

Native American Rights Fund 

1712 N. Street, N.W. 

Washington, D.C. 20036 

September 18, 1996 

.. 

., 

. I l ' J 

. J.(; . 

The Task Force on Indian Trust Fund Management has scheduled its final hearing on 

Indian trust fund management problems for Thursday, September 26th at 10:00 am. 

The purpose of this letter is to request that you present testimony to the Task Force 

concerning the matters listed below. The hearing will be held as follows: 

Room 1334 Longworth House Office Building 

Washington, D.C. 

10:00 p.m. 

Thursday, September 26th, 1996. 

The subject of this hearing will be legislative solutions to the many problems which 

continue to plague the management of Indian trust fund accounts. We request that you 

comment upon and answer the following questions in your testimony: 

(l) Should the Federal government continue to be in the business of administering liM 

accounts? 

(2) Would you support having DOl contract out the operational functions of managing 

Indian trust fund accounts to either (a) a private trust management company, or (b) another 

department of the Federal government such as the Department of the Treasury, so long as the 

United States retains its related trust responsibility? 

(3) Would you support DOl charging administrative fees to trust fund account holders 

to defray the cost of improving its trust fund management systems? 

(4) Would you support legislation which would disburse all funds in existing liM 

accounts to appropriate account owners, would then terminate those liM accounts, and 
268 

would provide that in the future, whenever possible, revenues will be forwarded directly to 

account holders by check without going through a trust fund account? 

(5) What do you think should be done about (a) fractionated heirship problems and (b) 

the thousands of inactive liM accounts which have no know beneficiary? (Inactive account 

funds could be transferred to the Federal government or to the Tribe of the last know 

beneficiary or to some form of Federal or Tribal escrow account held for some designated 

use.) 

(6) Assuming that tribal accounts can not be reconciled any further, what settlement 

process do you support which would fairly compensate the tribes and would terminate any 

liability which the Federal government might have for any breach of trust responsibility 

which might have taken place regarding the management of tribal accounts in the past? 

(7) Assuming that liM accounts can not be fully ri!COnciled, what settlement process 

do you support which would fairly compensate account holders and would terminate any 

liability which the Federal government might have incurred for any breach of trust 

responsibility which might have taken place regarding the management of liM accounts in the 

past? 

(8) What changes in existing law would facilitate the administration of tribal trust 

fund accounts? 

(9) What is your opinion of the proposed Phase I of the Special Trustee's strategic 

plan issued in February of 1996? 

(10) What changes in existing law relating to the management of Indian trust fund 

accounts, other than those mentioned above, would you suggest be considered by Congress? 

The rules adopted in the 104th Congress require that you submit 75 copies of your 

testimony to 1522 Longworth House Office Building at least 48 hours prior to the hearing. It 

is requested that your oral testimony be limited to ten minutes; however, additional written 

testimony or other materials may be submitted for the record. 

For additional information please contact Tim Giidden of the Resources Committee at 

202-226-739 . 
0 

269 

United States Department of the Interior 

OFFICE OF TiiE SPECIAL TRUSTEE FOR AMERICAN INDIANS 

Office of Trust Funds Management 

SOS Marquette N.W. Suite 1000 

Albuqua"que, New Mexico 87102 

Mr. Tim Glidden OCT 2 4 l!>Q) 

Native American and Insular Affairs 

1522 Longworth House Office Building 

Washington, DC 20515 

Dear Mr. Glidden: 

During Ms. Donna Erwin's testimony in Phoenix, Arizona on August 20, 1996, Congressman 

J.D. Hayworth requested an update on the status of the Navajo Nations request to withdraw funds 

under the "Trust Fund Reform Act of 1994". The following is a chronology of what has 

transpired to date: 

February, 1996 

March II, 1996 

March 25, 1996 

Aprill2, 1996 

On clock: 

May 17,1996 

June 12, 1996 

June 14, 1996 

Office of Trust Funds Management (OTFM) contacted by Tribal 

Controller, advising that the Council had authorized the development of a 

plan to withdraw their funds, and asking for copy oflatest draft regs. Regs 

were provided same day. 

Original application to withdraw funds received at OTFM. 

· OTFM acknowledgment letter sent. 

First OTFM letter to Navajo Nation requesting additional information, 

documentation and clarification. 

32 days 

OTFM Customer Service calls Navajo staff to discuss response. (How it's 

progressing, need help, etc.) Navajo Nation staff advise that they are 

working on, making progress. 

OTFM Customer Service calls Navajo Nation staff (Marty Ashley) who 

advised that all documents ready to mail except their statement regarding 

"no further U.S. liability" after funds withdrawn. Ashley believed that the 

Council would address this at the upcoming council session scheduled for 

the following week. 

OTFM letter to Navajo Nation to remind that "clock is not running" while 

OTFM awaiting response, and offering assistance. 
June 20, 1996 

June 27, 1996 

270 

OTFM Director, Acting Deputy Director, Trust Services staff, and Liaison 

Officer meet with the Navajo Nation Investment Committee in 

Albuquerque at their request to diseuss investments in general, and the 

Apri112 letter regarding withdrawal. 

Response letter received from Navajo Nation. None of the requested 

information was provided with the response, letter makes charges of 

demeaning demands made by OTFM, and demands release of funds. 

July-August-September, 1996 

OTFM staff review and diseuss situation, letter drafted , redrafted, 

discussed with Solicitor (Dave Moran) regarding the minimum 

requirements the U.S. needs to document due diligence in releasing the 

funds. 

September 19, 1996 Paul Homan letter to Navajo Nation to approve withdrawal pending 

receipt of signed management contracts, custodial contracts, and a 

complete copy of a resolution which was incomplete in the application 

package at OTFM. 

October 7, 1996 Navajo Nation response to last request received in OTFM. Meets all 

requirements. 

*October 18, 1996 OTFM letter to Navajo Nation confirming approval for withdrawal and 

requesting written instructions as to delivery of cash or securities. 

*This is. an anticipated date, if this date is not met the letteoc will definitely go out the week of 

October 21, 1996. 

If any further information or clarification is need please call me at (505) 248-5723. 

cc: Marie Howard Fabrizio 

Democratic Legislative Staff 

Committee on Resources 

U.S. House of Representatives 

509 O'Neill Building 

Washington, DC 20515 

Sincerely, 

(_p+·D-~ Dooglas A Lords, Acting Deputy 

Director, Office of Trust Funds Management 
271 

ITMA~kaion 

l95JIS Allaual Mectiuc 

Aladdin Hotel; La Veps, NCVIIda 

liMA '• Pmirion m tho fh&ie' Tnptp; 

~ 

WHEREAS. the ImcrTrhl MoDiiOI'iai A.ocilltion on Judiao Trllll FIIDdl (ITMA) is 11n 

of3S Tribes who law w~ joiaed ITMA; 

WHEREAS, D'MA is commiltcd 10 wmkiDg with the CoJwr- m:l the Office of the 

Spa:ill Tnlllee 10 conect imdcq..sc I)'ICm. ued to~ lDdiaD trust fimdl..t tru1t ..-s 

IIIII the llliult tnut ~of the bowficilaiea oflbia tru1t; 

WHEREAS, Paul H.o111111. lb: eun'CIIt Spceial Tl'llllce, ilthe lDt a.ecutM C!ll1'k>yae in 

tk Dq81maJt ofiDb:rior willa profeAioDal trust -ae:nnt aperillace; 

WHEREAS, 1he f"eda-.J.ao~ ha lldmiltcd 10 owlatl1he lodivid.uallndilll A=IIDit 

(11M)~ pool over $14 miUioa, ..t cllldo.d tlat ilc.mot recoucile lila. $2.4 billioD 

..rrrilal .._. .... _,. tr..-ions ~durin& 1he period fiom tm"' t992; 

WHEREAS, a lllalalory re.poaaibiliry of the Special Trllllee il to c:oJISilll with Tribc:s, the 

beaeficiaties of1he trust fimd IIQCOIIID; 

WHEREAS, JTMA bikes axceptioD IIDd objects in the stronsest t.enn1 to the Department 

oflm:rior'• order to lb: Spocial Tn~~~« prollibilq him fiom complete COIIIIIbtiDn reprdina 

tk .-ncillltiDn ...S potsbi..Uiemeut opliolll with Triles; 

TIIJiRBFORE BE IT RESOLVED THAT ITMA QOIIdemas lilY dlbrt to probilit 1he 

Spa:ial Tn~~~« fiom tbly ~ ID llllluiOI)' dutiea; 

AND BE IT FUR.111ER.RESOL VED 1liAT ITMA Ill its --.IJIICICtiaa Clllllonca the 

work ofr.l H-. Special T-. 

~.111'-~ • ...:~..n- .--1 DJI 'J'bonday, !lqltllmber 19, 195JIS, by a voice wtc ofthe 

.a,"'lf:lflf~~~MA AIDial MadiDs, -tis attested to by: 

&1~~rtb:._--.-~by~~ 
0 . 

. INUPLYl!Fli.TO: 

272 

United States Department of the Interior 

OFFICE OF TilE SP1laAL 111.US'JEE FOR AMERICAN INDIANS 

011ioeofT--~~ 

SOS Monpao N.W. Saik: 1000 

A1buqucnpac, New Me:Uta 87102 

NJJ 3 0 l!Qj 

Native American and Insular Affairs 

Attention: Tim Glidden 

1522 Longworth 

Washington, DC 20515 

Subject: Task Fon:e on Indian Trust Fund Management 

Dear Mr. Glidden: 

Enclosed is a copy of information requested by 1be Task Force. If! can be of any further 

assistance, please call me at (505) 248-5123. 

Enclosure 

Douglas A. Lords, Acting Deputy Director 

Office of Trust FWlds Management 
273 

PY 1997 STRATEGIC PLAN rtJNDING 

Upgrade of hardware and software for 400 existing 

workstations at an estimated coat of $100 per 

workstation. $40,000 

Purchase of 60 new PC workstations at an estimated cost 

of $2,500 per workstation 150. 000 

.. tabliah telecommunications links with 99 aitea/87 

agency locations during FY 97 . Annual estimated cost is 

$1,223,500 968,000 

Trust Management/Individual Account System. Obtain a 

contract with a c~rcial source for a master trust and 

beneficiary accounting ayat ... Batimate is based on 

200,000 accounts at a coat of $2 per month per account . 4,800,000 

Provide end-user training . 353,000 

External professional services from industry consulting 

groups to provide expertise in particular client/server 

areas. 1, 000,000 

Data conversion and imaging for XIX data conversion. 500. 000 

Syat ... integration and i.pl ... ntation: Coats 

.. aociated with integrating OTPM diverse software 

applications, customising vendor aoftware to JDeet OTFM 

unique requirements, and training end-users on 

apecialized software ayatem. -- separate and apart from 

Dlf-related products. 1,250,000 

Rewrites of all operating and leg-al manuals. 2 , 000 , 000 

Pile scrub and data • document check before conversion. 2 , 000,000 

All overall technical strategic plan manager to oversee 

above and to oversee specific action plana and budgets 

to i:llpl ... nt the strategic plan. 500. 000 

Total FY 1997 l'unding $13 , 561,000 
274 

AUI:i z 1 ~996 DEPARTMENT OF THE TREASURY 

FINANCIAL MANAGEMENT SERVICE 

WASHINGTON. D.C. 20Z27 

August 18, 1996 

Dear Mr. Chairman: 

This is in response to your July 25, 1996, letter regarding the 

Financial Management Service's handling of both the Individual 

Indian Money account and the Indian Tribal Fund account. 

Enclosed please find our responses to your questions. 

Please do not hesitate to contact us on (202) 874-7000, if we can 

be of further assistance. 

The Honorable J.D. Hayworth 

Chairman 

Sincerely, 

Russell D. Morris 

Task Force of Indian Trust Fund Management 

Committee on Resources 

U.S. House of Representatives 

Washington, D.C. 20515 

Enclosure 

I 

"I 
1. How does FKS account for tha XIX and XTF monies? 

The Financial Management Service (FMS), as the Federal 

Government's financial manager, manages the Federal Government's 

central accounting and reporting systems that track the Federal 

Government's monetary assets and liabilities. FMS tracks some 7,500 separate accounts based on approximately 1,200 Federal 

agencies' monthly submission of summary statements of 

transactions. FMS also is responsible for the investment of the 

Federal Government's multibillion-dollar trust funds. 

FMS' duties with regard to the Individual Indian Money (IIM) and 

the Individual Tribal Fund (ITF) accounts are limited to 

performing certain accounting and investment functions. 

Specifically, the Bureau of Indian Affairs (BIA) submits monthly 

summary statements of transactions for the IIM and ITF accounts, 

that reflect the net receipts and disbursements out of each 

account. (Attachment 1). FMS then enters the data into the FMS 

centralized accounting system database (STAR). 

BIA maintains individual and discrete tribal subaccounts 

reflecting monies owed to each individual Indian out of the IIM 

account and to each tribe out of the ITF account. FMS does not 

maintain any such subaccount information. 

With regard to investing, FMS statutorily is required to invest 

funds in the IIM and ITF accounts upon the request of the 

Secretary of the Interior. 25 u.s.c. § 16la. Operationally, FMS 

i .. ediately invests IIM and ITF monies upon receipt of oral 

instructions from BIA, which follows-up in writing with an "Investment Confirmation Letter.• (Attachment 2). 

2. What are PHS' record retention practicesfpolicies regarding 

the XIX and XTF accounts? 

FMS policy is to retain permanently all IIM and ITF account 

investment records. These records are maintained either within 

FMS or at a Federal Records Center. With regard to the summary 

statements of transactions entered into STAR, FMS policy is to 

retain all such data for approximately 7 years. currently, FMS 

retains such data for the IIM and ITF accounts for the years 1990 

through 1996. The data for 1989 is retained at a Federal Records 

Center. 
276 

3. Has either tbe Treasury Departaent or FMS ever intentionally 

destroyed any Indian trust fund accounting records? 

Neither FMS nor Treasury, to the best of my knowledge, have ever intentionally destroyed discrete Indian trust fund accounting 

records. However, as indicated in my response to questi~n 2, FMS 

periodically destroys accounting information received from 

Federal agencies, which includes suamary data submitted by BIA 

for the IIM and ITF accounts. Notwithstanding that all such 

accounting records are generated and received from BIA, I have 

instructed my staff to retain all such records. 

4. Under what autbority does FMS cancel Treasury Department 

checks payable out of either IIM or ITF accounts? 

FMS cancels Treasury checks under Title X of the Competitive 

Equality Banking Act of 1987, Public Law 100-86. Title X 

informally is referred to as "Limited Payability." The 

provisions of Limited Payability apply to all Treasury checks, 

including Treasury checks payable out of the IIM and ITF accounts. ~ 31 u.s.c. § 3334. 

5. How does FMS apply the proceeds from the cancellation of 

such Treasury checks? 

If a Treasury check issued on or after October 1, 1989, is not negotiated within 12 months after the date of issuance, FMS 

cancels the check and generates a cancellation report to the 

appropriate Federal agency. FMS also will credit the Federal 

agency's budget clearing account with the proceeds of the 

canceled Treasury check. ~ 31 u.s.c. §§ 3328 and 3334; 

31 C.F.R. §§ 240.3 and 240.4. The Federal agency then is 

responsible for ensuring that the appropri ate agency account is 

credited. For example, if FMS cancels a BIA payment, FMS will 

report the cancellation and remit the proceeds to the BIA budget 

clearing account. Because FMS cannot determine whether a specific BIA payment was an liM or some other type of payment, 

BIA then is responsible for determining whether the proceeds are to be credited to the IIM or so•e other BIA account. BIA 

accomplishes this through its monthly summary statement of 

transactions. 
~7 

6. When the law requires FMS to cancel Treasury Depart.ent checks, payable to individual Indians, is the Federal 

governaent released of the underlying trust obligation to those individual Indians? 

No. Under Limited Payability, the mere fact that a Treasury check is canceled does not affect the underlying obligation. ~ 

31 u.s.c. §§ 3328(a)(3) and 3334(c). Treasury regulations provide that upon receipt of a claim concerning the cancellation 

of a Treasury check, the authorizing Federal agency may make a new payment. 31 C.F.R. § 245.5. Specifically, where FMS cancels a BIA payment, BIA's underlying obligation to the payee remains, 

and BIA may make a new payment. 

we also note 

liquidate in 

payees whose 

Payability. 

that congress had appropriated $3,000,000 to BIA to part its obligations to tribal and individual Indian 

checks were cancelled as a result of Limited 

Pub. L. No. 102-381, 106 Stat. 1374, 1391 (1992) 
278 

l'"ttachment 1 

STATIJIEHT Of T~AHStltllOKS(SF·~~~ :::= ::;oc:ec ac:;;::::.=.::::;; ::::: ::::::~:~::: :: 

DEPARTKE!if or THE IHTERIDR BURO!U OF lHDUti AFF:\IP:S OIYIUDH DF Atl:DIJIITJHG KAHAGOCEIIT AtcDUHlS PAY, BlE SO:t . 4TTH' M. Gllii*K P- o. BOX ~0~2 

"AlBUQliEJUlUE, NH ~7103 

llf>f'R • • FUHO Oil RECEIPT ACCOUHT Cil 

1099 

Hl435 l~:X2UO 

14121110 

1.1'42?.100 U32UO 1~~zua 

!~52111 

l~'~lU 

14l/ZZ1GG 

142/JZIIO 

l431<2UI 

1'43/52100 

l~VS2 0G 

)45162110 146172UO 

l4X2ZO< 

1~K<ltl 

14X2303 L4~3G9 

14623&9 

1~2419.1 

1<xz623 

1452G27 

lti426U 

1452628 

l-462523 

1~3220 

J4F3878. 20 HF38&D . 21 14X4409 

I~X~ 41 D 

ACCT. 41--- > 

SECTJOII I 

lt£C.£ tPTS Al1D AEVOLVlHG 

FUHD REPAYitEHT <2> 

969. 23 8&9 .56 

o. ao C. Do o. oo o. oo 11 - Go a. o1 o.oo 

a. to o. oo O. IQ 

a.oa 

a.u 0. 10 0.01 

O- De 

e.ea 

•••• •••• •••• 9&.47CR 

~.ao 

a.oa 

0.011 

o.oa 

fi . OI ~·\,7S0 6l 

D- OD o.o. 711. 244 . 21 t • .tiGJ, su. aa 

14200699 

lolfZOD699 

1(:.20-0699 /J0/96 

HE7 DI SBURSEMENT$ (Jl 

A 16 
279 

!ACCT. ~- > 14200699 

Hcr TOTAL.stCTIOH I 

o.aa 

0.110 

o.ao 

o~oo 

o.ao S21,803.Zl U,GG 

o.eo l8l,MC:,Q00-00 s.ns.l~t.tl 

89,99'i-S~ 

0.~0 

50.852.~~ 

Q.GO 

D,IO 

19S,072,IOO.OO G,ll0,9'iS-13 78,19S.Oe o.ao 

o.oo 

O.IID 

v.oo 

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o.oo 

o.oo 

Q.GO 

o.oo 

o.oo 

o:.no 

35S.OS3,3B~.o~ 

SEC:TIDti II 

1. ,:1.00 PA.YHE!'!T TIVtHStr.CTI OH'S tttCOtiPU SHED: 

THIS KOtiTH PRIOR 1-IOHTH (l31'3G PRIOR HOHTH 02/96 PRIOR !!OHTH 01196 ~lOR KtiHTH 12/SS TOTA.L PAVl'iEHTS 

a. DEDUCT COLLECTICHS RE:C(IV£0 

). HE"f TOTAL SECTION II 

ACCT. fi--> 

SECTIOH lll 

l. BALAHC£ OF UHOEPOSIT[Il C!JLLECTIOHS, CLOSE VF PR!..C£0H\G }iOHTH 

A 16 

450,436.68 

ti76, l.lZ.. OGCh lOC,l52'.2lCR 1 ,Sl!O.OOCR '4'2.3,795-b3 · o.ao - c.Jl&:esiL3l 16S.ZJ2.nnc.oo O.CIIl 

o.oo 

o.oo 36,451.49 o.oo J,G30,Tll.58 

193,9llt,DOC.tl0 G.U 

o.oo 

a.oo S,<:lS.OOCR 36,'192, S9G.lDC:R 9,3ti8.9Q 

t.tz~.Jn.e• 

lo4l~ 74(1.1(4 

6~,27l.DC 

),lJO.ZD 7.527,!!8.41 38,3!2.00 179.162, tna. O~CR 

J7b.884,r:IOO.Dif 

81,957-69 

soa.~lll.:no.zo 

ll.S,9l&,S26.J6 

l2S,3l9.536#3D St7S9.313.8E. 97,533'.82 

Q3.&39.JCCR 

3,63G-95 131.136,301 #55 

12,2l9,-i5S.J9 

11$,91£;.92_6.16 

o.co 

B 16 
\ACCT. i--> 

I . BALAKC( OF UKOEPOSITE~ COllEtTlQHS, 0.0$[ OF PRECI:DIHG KQHTH 

~. AOO: COlLECTlOHS lltCElVEO THIS HOI!Tll 

280 

3. OEIIUCT OI:PDSITS PII(SEI!TED OR HOIL£0 TD I!AIOC 

THIS HDHTII PRIOR HOKTH 1~196 

PiUm:t JIJQNTH GZ/96 PAIDR "OHTII 11/9& PAlO!! KOKTll IZ/95 PAlDR "QifTii ll/!S TOTAL DEPOSITS PR£SOOEO OR "AilED TO I!AHK 

~. KET TDTALoSECTIOH Ill 

Dt.TE: SIGHATUREITlTLE 

#--> 

o. oo 

l¥! 219,'\S.S.l9 

11.768.698-72 «1.2~0 12 

~26 23 

u.~35.1~A 

l,2.33-97CA 

23#359.~4 

12.219,~55 39 

o.oo 

B 16 

c 1_(, 
281 

SF 1220 STATEMENT OF TRANSACTIONS 

DlSBURSING OFFICER DEPARTMENT OF INTERIOR BUREAU OF INDIAN AFFAIRS 

APF'R. FUND DR 

RECEIPT ACCOUNT 

( 1} 

l4X~l97 

jl4XB365 

V 14XB3b:l 

Jl4X8365 

COLUMNAR TOTALS 

RECEIPT AND REVOLVING FUND REPAYMENTS 

i2) 

(1.01) 

0~00 

0 .00 

O.QO 

o.•)O 

NET TOTAL - (REPORT ON LINE 4.10 OF SF ~219l 

CONTACT' HAROLD REDHOUSE TELEPHONE' (505) 248-5771 

0000lol2 

ACCOUNT! NG F'ER I 0 

4 /01/96 4/:5.0/9. 

NET D I 5BURSEMENT: (3) 

-1 ,270 ,~45.3 . 

-13' 380' (lc-) 4. 7 : 

140,b85.11 

- 250,515.1 1 

-32,760,479.91 

32 ,76 ~479.9. 
282 

SiATEHEHt Of 1R SA ~tOHS[ 224 l =~ ;;; :::::=::::::::::: :: :::: ::': ':':::::.:: ::::: :: :: :;;.,-

DEPAFill1£1fT OF THE' Ilff(RIOR 8UREAU OF IHD!AH •ffURS DIVISIOK Of ~CtiiUHTIIIG IIAilacatEHT 

ACCU.JI'fTS PIIYABL£ SEt. ATTH: " · r;ORPUI.t~ 

P. o. e~~ ~·~ z 

1\LB\JOUEROUE, HH "71DJ 

APPR. ,F\lHD OR RECEII"T ACCOlJI!T Cll 

HI099 

141435 

I~XliGG 

1412180 

~~~~IOU I4lau• 

l4421GI 

1452UD 

1462100 

H0/12.100 

l'flJ'Z2100 

1421321DO 

HJ/12100 

IcB'ISZlOO 

H<IS21GO 

1~51&2100 

146172100 

l'iX22D4 

l4X23Dl 

1G)(230~ 

1<323G9 

1452369 

t432.6~8 

1<4262& 

1452628 

14i62628 

1'~322D 

14F3&78. 2 D }<:;F3880.?.0 

J'f~GS 

t<Q(••t• 

1<l<111S 

A C t--> 

t GS ) 14X'f"il S. 

l~ 'i'\16 

H XSOSl l~X l. 1 1t;)($<G0 

( 88) llfXS2'ill 

( 91H 14XS21i n l ~X5240 .l 

14X52''i0 .2 

14XS2ii<: 

).;K5.2-'?. 1 

SECTION I 

REt£IPTS AHD REVOI.VIHG 

fttm REPAYIOEHT 121 

2,650 .$0 l.Sl~ 41 

a.n 

o. to G.ltl 

c. oo D. U 

••• 1) 

e.oo IJ . DO D. OO II.DD 

0. 111 o. oo o. oc o.oo O. DG o.·u o.oo LI!O 

IL II4 

t . eo :) . 10 [1 . 00 

v.oa .il . CO 

7l7.<itJ. OC c.oo 

(l ll~ 

$7S,D'13.QD 

16.6Z3-S6 c.u 

14200699 

o. ao 8 . 00 {l. OO 

53 2.0"10 . j7 

c . C;o Q. (. Q 

2'ie.<:'37 ,U1!- to ,1 6'3 ,'H':!-~7 

Cc..<J '2 ':1 1'.. ~ 

c: . 4 n 

l<t2006S9 

l'i-2.D- 0699 513 119& ----

NET OISBU•sEHEl!TS (Jl 

L 15 

2.316, 2ZS. 7SCR 13 0, 2 0&. 1 SCR SQO, (.Ja. . 67 0 .03 19£.,60l . 03CR 2Sl . &"1t" GOC.DO DO 

o.co 

o.co 
283 

!ACCT. i--> r:i4zoo699 

. 

(65)HX.tt'ilS 

l'iX4itl6 

I~XSISI 

1~051.1 

l<IXSZ~D 

<6tUl~SZ.ttO 

t98lH><S2<0 

l'iXS!."D.l 

14XS2U.Z 

l~~ 

14X!ie<2-1 

HXS&~ 

U58J!~G"i! 

(5aJ 1Cil<564~ 

14X5G'I8.1 

---n~m-2 

- r~xGS?S:zo 

l~lZXl\05 20 

1<1~1119.20 

141<;>(1120.20 

1<1&6017<. 20 141Glt<017i.2D 

1416415017<.20 

l46!llllOBJ.2D 

!05615119.20 

147S41S!S.21 

147551515.20 

2GX0822.S& 

20)(&822.5& 

20XG822-S7 

l'iXI618 

TOTI\LS 

KET TOTAL. SECTIO)i I 

o.oo 

o.oo 

0.10 532.040-31 c. uo c.n: 2,a,.2.sr.ooo.oa 2., Ui9.939.67 

24S,2S6 • ..,D o.oo 39,SSS.lti o.aa 

o.oo l<JS.IS4,1HIO.OO 

2,. 6lS, 91!2- 75 167.416-97 o.oo 

o •. ao 0.&11. 

O.GI 

o.ou 

o.oa 

o.uo 

O.'QO 

o.oo 

Q.DO 

D.QO 

o.oo 

0. 10 

o.to o.oo 

n.n 

o;su. sao. nn. or 

SECTIOK II 

1. 1100 PAYM[HT TRAH3ACTICHS ACtDHPLISHEO: 

THIS KOHTH PRICll "OHTH 64196 PR!!m •llHTH 031" PRIOR "DHTH 02/96 PRIOft "OHTH 0119G TOTAL PAYHEHTS 

z, OOJIICT COLLE.CTIONS RECUVEO 

l. ~ET TOTAL SEafOH fl 

ACCT. #--> 

SECT!OH 1 ~I 

2, >16, 225.7SCR UD,:2D8.1SCR 

5110,678.67 O.Qo 19&,003. DlCR ZSJ, Dli&, OOQ. 0(1 

o.oo 

O~DG 

~.ea 

'tillo52'Z.65 a.ao 3,86Z,!0,.53 19<t,t5't.GI)D.QIJ Q.QQ 

o.oa 

O..QO 

L 

ll7.39CA ~.120,2.7'1~ 17. ' 

U!:,S26. \3 I.S21.17l.17 

2.301.656.9& u.ooo.oe &all.ID &fi,Qjlfi . (IQ 

n,32,,S!D.7l l6D,162.0D 

!,~st.o• 

100,712. 08 4461 GDD , ODD.08CR .. ,.'51,010.00 

204,&17 -82 (5.187. 61 

S~;i2.Sli),6DO.l6 

111.929.811.09 

12D.la9.H6.~9 

lo'12.0t34i\.t;l 17i,S(!(S.-e7 

9.990.!0CA 360.579.!;1:0 122.355,515.68 

lO.,lt2$,ftM.S9 

111,9~.&17 . ug 

H 
284 

SECTIOI< Ill 

). e•LAHCE OF UHD~PDSITED CDl.lF.CTIDHS. CLO~E OF P~ECEOI HG ftDHTH 

2. ADD: COLlECTrOHS ~EC£1VCO THIS .OHTH 

3. DE!lUCT DEPOSITS PI\I:SEKTED DR HUlED TO BAH~ 

THIS Homlt PRIOII MOIITH D~/9G 

PRIOR MHTii 0319& PRIOf< KOKTII QZ/gS PRIOR HDKTH U/96 PRIOR KOHli! 121~5 

TOTAL DEPOSITS PRES£HTED OR "AILED TO 8A"k 

~. HET TOTAl,SECT!OH [I! 

DATE Sl GHATURE/Tl TLE 

Q. 00 

lD,Ci 2.5 ,608-S'9 

a.oa 

--------........................... ------------ -~-----

ACCT. #--> N 15 
285 

SF 122c> STATEMENT OF TRANSACTIONS 

DISBURS ING OFFICER 

DEPARTMENT OF INTERIOR 

BUREAU OF lNOIAN AFFAIRS 

AF'PR. FUNh OR 

RECEIPT ACCOUNT 

(J) 

[~ OLUI'li\IAR TOTALS 

RECEIPT AND REVOLVING FUND REP.,YMENTS 

(2 ) 

0.00 

0.00 

0.00 

0.0(1 

(1.00 

NET T01"AL - ( REPORT ON LINE 4 .. !0 OF SF 1 21 9) 

CONTACT : HAROLD REDHOUSE 

TELEPHONE: (505) .248-5771 

( u)<)Gl4 2 

ACCOUNTING F'ER .lP 

5 / 01 / 96 5 /3!/ 9 

NE:T 

DISBURSEMENT ('"_'l; ) 

-5 ~~:.1 98. 3 

69 2, 774.3 

7 2 7,8:-!.8.5 

- 2 5l,B71.1 

3::5 68~20~.1 

33~ 968 5. 1 
286 

, .... ..,c=~cr .. u~:NT C:oNFtRfJATIOff l..._;TER 

......._..... ~ d tha l"r~~·li'Y 

VOO~-'Wuliltt ;hwl.y 

Aoom&f'QG~11 

Attachment H,-..a~V~Jl$.Md'211132. 

lRANSAcnON D~IE; 

TRANSACTION "IYPE: (cneck ana) 

00 lfiVESTMENT 

Pnanc:~8?'40'77o 

FAX!~ft'JC8;;44. 

1 4r-rr·_(_I"-~Y.,_.?,__ __ 

FUND NAME & SYMBOL 

0 cocHm WETFlELOS 1~186 0 FIE!.IEF OF INDIGENT INDIANS 

0 TRIBAl. ECON. RECOV. RJNO 14X511J7 0 N. CHEYENNE WATEI'I RIND 

0 IRI'IIGATION 1.ax5ll40 0 TRIBAL RJNCS 

0 POWER 1Cl3648 0 PAPABO CO.OP 

.oo INCMDUAl ~ MCIIEV 1~ 0 NAV/UO FIEHJIB 

0 AlASKA NATIVE ESCROW 1AlC8140 0 CONTRIB!JT1io RJN0S 

MARKET BASED SECURITY! (c:heck aoo) 

~Celflllcama Monntly Pate: 

Bille U•QirityDOJe: -----::------- Extendocl data: 

14XI!OGO 

14X8327 

14:1;1!365 

14Xfi366 

I4XIl38S 

14XI!56J 

Nol$0 Faco Rata; >. F?ri; MallllityDile: 

lol&turtydallo: 

/1-J)- :leo) 

-. Ft100 Rate: -----------

AMOUNT: (liH in one) A-..tarfn-ent: ------------

-far fledempiJon: 

F-: "'.)~ O§JO'-'·-------

CONFIAMATION INFORMA.110tl: 

~ R.Fieed l1.F. SpuR R.Zalom>wslti 

---~~~-~,~-~~~-~9~~~~~~------------

TI'BU\Jry COnlad: (clodo ane) 

Ct;R,'tlF1CAT10N ~ 

I c:a111fy thalli» llarn8- ebawo~~re eorrea and AlftO<K1tS 

to b& k1w$1Bd ate cr..tlted to the GeMrat A.c:(::::Ouo( of the U.S 

Trea.~Nry and a.wilablefot ~b1"thc Treuuty. 
287 

United States Department of the Interior 

OFFICE OF THE SOLICITOR 

Washington, D.C. 20240 

OCT 311996 

October 29, 1996 

Hon . J. D. Hayworth, Chairman 

House Resources Task Force on Indian Trust 

Fund Management 

U. S. House of Representatives 

Washington, D.C. 20510 

Dear Mr. Chairman: 

At the conclusion of our testimony on September 26, 1996, I 

referenced a matter associated with the Office of Special Trustee's 

Advisory Board's meeting in Phoenix. You had requested for the 

record a summary of the costs of that meeting. Attached is a list 

of the expenses and the names of the meeting participants. 

As we indicated at the hearing, while discussion of the 

settlement recommendations did not occur, the remaining items on the Advisory Board's agenda for that meeting were discussed and 

acted on . Moreover, the previous work of the Advisory Board on settlement options was finalized and has now been submitted to the 

Secretary. 

Please contact me should you have any additional questions. 

Sincerely, 

d.~ 

·- r; {, vf\----

Edward B. Cohen 

Deputy Solicitor 
288 

PHOENIX ADVISORY BOARD MEETING EXPENSES 

SUMMARY: 

1. TRAVEL ESTIMATED COSTS: 

OFFICE OF THE SPECIAL TRUSTEE STAFF AND 

ADVISORY BOARD MEMBERS 

TRIBAL REPRESENTATIVES 

TRUST FUND RECONCILIATION STAFF 

2. OTHER EXPENSES: 

MEETING ROOM RENTAL, COMPUTER RENTAL, 

FILM, PAPER, OFFICE SUPPLIES, ETC. 

TOTAL 

$9,475.38 

$27,814.59 

' $2,559.36 

$2,983.23 

$42,832.56 
Name Organization Estimate Cost Actual Cost Airline Fare 

I Judy Kessler Advisory Board Representative 855.00 281.00 

2 Ed Thomas Advisory Board Member 1359.00 1014.00 

3 Michael Patriarca Advisory Board Member 739.00 119.00 

4 William Snider Advisory Board Member 399.00 140.00 

5 Elouise Cobell Advisory Board Member 1116.00 664.00 

6 Larry Hartwig Advisory Board Member 912.00 363.00 

co 

7 John Miller Office of the Special Trustee 1100.00 400.00 

8 Paul Homan Office of the Special Trustee 1100.00 300.00 

9 Cheryl Jodoin Office of the Special Trustee 1050.38 304.00 

10 Bernita Joyce Office of the Special Trustee 845.00 360.00 

Total 9475.38 
' I 

Cudholder Name: 

Date 

Ordered: 

PATSY A. ANTONIO 

$2,983.23 

I.M.P.A.C. LOG (FOR OBLIGATION ONLY) 

l.M.P.A.C. DCN: 

KOOS899-6 

Vendor: 

WalMart 

Computer for Rent 

The Pointe HUton 

Resort at Sauaw Peak 

Period Start/End Dates: 

09/11/96- 9/ 18 / 96 

Brief Dc1cription: 

Packing tapes 

Computer rental 

Meeting room 

rental 

Credit Due: Credit Received: 

Pag-: 

1 of I ~ 
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

29 

30 

ADVISORY BOARD TO THE SPECIAL TRUSTEE FOR AMERICAN INDIANS 

MEETING IN PHOENIX, ARIZONA 

SEPTEMBER 15 - 18 

ATTENDEES LIST 

NAME TRIBE I ORGANIZATION ESTIMATE COST 

CALEB SHIELDS ASSINIBOINE & S OUX I I FT. PECK 604 00 .

MARY J. PAVEL ASSINIBO NE I & SIOUX I FT. PECK 409 00 .

EARL OLD PERSON BLACKFEET TRIBE 484.00 

MERRIL BURKE CONFEO TRIBES . & BANOS OF YAKAMA NATION 404 00 .

JOE PAKOOTAS CONFEDERATED TRIBES OF COLVILLE 474 00 .

DEBRA ROSENBAUM CONFEDERATED TRIBES OF COLVILLE 474 00 .

A. DAV D I LESTER COUNCIL OF ENERGY RESOURCE TRIBES 564.00 

VERNON HILL EASTERN SHOSHONE TRIBE 424 00 .

JOHN SCHUMACHER EASTERN SHOSHONE TRIBE 424 00 .

FERRELL SECAKUKU HOPI TRIBE 546 75 .

DANIEL HONAHNI HOPI TRIBE 548.75 

JERRY KING J CARILLA I APACHE TRIBE 733 00 .

ALBERT HALE NAVAJO NATION 776 00 .

BOBBY WHITE NAVAJO NATION 424 00 .

RICHARD BRANNAN NORTHERN ARAPAHOE TRIBE 584 00 .

DAVID CLARK NORTHERN ARAPAHOE TRIBE 584 00 .

CHARLES TILLMAN OSAGE TRIBE OF OKLAHOMA 893.00 

JOE TRUMBLEY OSAGE TRIBE OF OKLAHOMA 893 00 .

ROLAND E JOHNSON PUEBLO OF LAGUNA 434 00 .

WILLIAM ROCHE PUEBLO OF LAGUNA 404.00 

BOBBY WHITEFEATHER REO LAKE BAND OF CHIPPEWA 1276.00 

RONALD EISCHENS RED LAKE BAND OF CHIPPEWA 404.00 

GARYQUIGNO SAGINAW CHIPPEWA TRIBE 742.50 

VAL ULMER SAGINAW CHIPPEWA TRIBE 742.50 

JERRY HANEY SEM NOLE I NATION OF OKLAHOMA 434 00 .

THOMAS MCGEISEY SEMINOLE NATION OF OKLAHOMA 449.00 

MARK FOX THREE AFFILATEO TRIBES OF FT. BERTHOLD 958.00 

DAV D I BRENOSEL THREE AFFILATED TRIBES OF FT. BERTHOLD 958 00 .

EDWARD MANUEL TOHONO O OOHAM ' NATION 458 40 .

GLORIA RAMIREZ TOHONO O ODHAM ' NATION 433 60 .

SUB-TOTALS 17935.50 

TOTALS 

ACTUAL COST AIRLINE FARE 

650 00 .

320 09 .

650 00 .

398.00 

346 00 .

348 00 .

140 00 .

499 00 .

499 00 .

0 

0 

338 00 .

0 

341 00 .

96 00 . ~ ..... 

96 00 .

449 00 .

449 00 .

84 00 .

346 00 .

652 00 .

655 00 .

298 50 .

298.50 

237 00 .

237 00 .

524 00 .

524 00 .

0 

0 

9879.09 

__ .27114~59 -
NAME 

1 JOE CHRISTIE 

2 DONALD GRAY 

3 SHELLY FARMER 

4 PATSY ANTONIO 

5 FRED WELLER 

8 NEAITA EAGLE TAIL 

SUB-TOTAL 

TOTALS 

OST • OTFM STAFF 

(ALBUQUERQUE) 

ESTIMATE COST ACTUAL COST 

288 98 .

434 00 . 210 80 .

434 00 . 478 42 .

434 00 . 338 48 .

434 00 .

409 00 . 308 90 .

2145 00 . 2051.38 

2559.36 

AIRLINE FARE 

84 00 .

84 00 .

84 00 .

84.00 

84.00 

84.00 

504.00 ~ 
GAO United States 

General Accounting Office 

Washington, D.C. 20548 

Accounting and Information 

Management Division 

B-275522 

December 10, 1996 

293 

The Honorable J. D. Hayworth 

Chairman, Task Force on Indian 

Trust Fund Management 

Committee on Resources 

House of Representatives 

Dear Mr. Chairman: 

This letter responds to your October 29, 1996, request that we provide 

information for the record on Indian trust fund settlement issues raised at the 

Task Force's September 26, 1996, hearing. You asked for information on 

various questions that relate to the following three topics that were discussed 

by witnesses at the hearing: 

- administration of Individual Indian Money (liM) accounts, 

- options for trust fund settlement, and 

- progress on the Special Trustee's strategic plan. 

Enclosed are our responses to the questions contained in your letter. We 

obtained comments on a draft of our responses from officials in the Department 

of the Interior's Office of Special Trustee for American Indians and the Bureau · 

of Indian Mfairs' Office of Trust Responsibilities. Overall, they concurred with 

our responses to the questions, and we have incorporated their comments 

where appropriate. 

GAO/AIMD/OGC-97-23R Indian Trust Fund Q&As 
294 

B-275522 

I hope that this information is helpful. If you have further questions, or would 

like to discuss any of the issues in more detail, please contact me at (202) 

512-9508 or Gayle Fischer, Assistant Director, at (202) 512-9577. 

Sincerely yours, 

Linda M. Calbom 

Director, Civil Audits 

Enclosure 

2 GAO/AIMD/OGC-97-23R Indian Trust Fund Q&As 
295 

ENCLOSURE ENCLOSURE 

RESPONSES TO QUESTIONS CONTAINED IN OCTOBER 29 1996 LETTER 

Following are questions asked by the Chairman of the House Task Force on Indian Trust 

Fund Management and GAO's responses. 

liM ACCOUNTING ISSUES 

Question 1: Under what authority did the government begin maintaining 

Individual Indian Money (liM) accounts? 

GAO Response: According to our research, no distinction was made between tribal and 

individual funds until 1918.

1 Prior to that time, Indian funds were handled on a tribal 

basis. The Secretary of the Interior had long had authority under treaties with individual 

tribes to invest tribal funds, and did so routinely. 

In 1918, the Congress directed the Secretary" to segregate the common funds of any 

Indian tribe, which were susceptible to segregation, and to credit an equal share to each 

member of the tribe. This was the first recognition of individual Indian monies. 

Question 2: What is the government's current system for administering those 

accounts? 

GAO Response: As of September 30, 1996, Interior's Office of Trust Funds Management 

(OTFM) was administering almost 317,000 liM accounts, according to information 

provided by OTFM officials. Although the aggregate value of the liM accounts was 

reported by OTFM to be almost $470 million on that date, the ml\iority of the JIM 

accounts had low balances. Almost 185,000 (over 58 percent) of the liM accounts had 

balances of $10.00 or less as of September 30, 1996, according to OTFM. OTFM maintains 

JIM accounts as separate accounts similar to demand deposit accounts. The cash 

balances in the accounts are combined and invested as a pool primarily in U.S. Treasury 

and U.S. agency securities. The IIM accounts earn interest at a rate based on the 

earnings of all the pooled investments. Trust fund accounting staff and, in some cases, 

Interior's Office of Trust Responsibilities (OTR) realty staff, at about 60 Bureau of Indian 

Affairs (BlA) Agency Offices, perform the administrative duties, including accounting, 

'See generally, White Mountain Aoache Tribe of Arizona v. United States, 20 CI. Ct. 371, 

37S-80 (1990). 

2

Public Law 6&-159, Sec. 28, 40 Stat. 59!" (Act of May 25, 1918), which was eventually 

codified at 25 U.S. C. l62a. 

GAO/AIMD/OGC-97-23R Indian Trust Fund Q&As 

3 
296 

ENCLOSURE ENCLOSURE 

billing, collecting, and depositing nonmineral3 lease receipts, and preparing related 

accounting records. 

BIA's subsidiary liM accounting system generates quarterly account statements that 

OTFM mails to account holders from its Albuquerque, New Mexico, headquarters. OTFM 

sends account statements for minors and noncompetent account holders to their 

designated guardians. For some minors and noncompetent account holders, BIA Agency 

Office superintendents are the designated guardians, and they receive the statements for 

those account holders. BIA Agency Office superintendents also receive account 

statements for any liM account holders for which OTFM has no valid address. These 

statements are to be placed in the account holders' liM files. ' 

Because BIA's current accounting system does not have an accounts receivable 

component, BIA Agency Office staff use inconsistent manual procedures for billing and 

collecting lease revenue. The system also lacks a complete lease master file. In our June 

1996 testimony,' we reported that an accounts receivable system and an accurate, 

complete lease master file are needed to ensure that all lease revenues are being billed 

and collected. 

Question 3: How is the administration of the accounts complicated by 

fractionated heirship problems and inactive accounts? 

GAO Resnonse: The fractionated heirship problem arises from the large number of 

fractional land and lease ownership interests that currently exist, the substantial increase 

in such interests over time, and the administrative burden associated with maintaining an 

increasing number of small accounts to record fractionated interest income. Over time, 

fractionation has resulted in hundreds of thousands of tiny fractional interests in federal 

Indian land allotments and in the trust income derived from those allotments. We 

reported in February 1992,' that over 20 percent of the 83,000 land tracts at 12 

reservations we reviewed were characterized by fractionated ownership with at least one 

small ownership interest of one-fiftieth or less. 

3

Except for the Osage Tribe, Interior's Minerals Management Service (MMS) collects 

royalty payments on Indian mineral leases and transfers the proceeds to OTFM through 

the Treasury for deposit in tribal and liM accounts. 

'Financial Management: Interior's Management of the Indian Trust Funds (GAOff-AIMD96-111, June 18, 1996). 

5

Indian Programs· Profile of Land OwnershiP at 12 Reseryations (GAO/RCED-92-96BR, 

February 10, 1992). 

GAO/AIMD/OGC-97-23R Indian Trust Fund Q&As 

4 
297 

ENCLOSURE ENCLOSURE 

Currently, according to OTR, calculation of fractionated lease ownerships may result in a 

fractional denominator that exceeds 26 digits. Depending upon the amount of lease 

income to be distributed, it is possible that trust income may have to be collected for 

several years before sufficient income is collected to entitle an account holder to even 1 

cent. 

Some administrative complications that result from fractionated ownerships include the 

following. 

Detailed accounting records must be maintained for all transactions regardless of sizesometimes as little as $0.03 may be distributed among seven account holderscomplicating the accounting. 

In most.cases," OTFM policy does not permit funds to be disbursed to the account 

holders until balances reach $15, thus increasing the number of JIM accounts that 

require interest posting and other account maintenance activities. 

- Funds sometimes remain in special deposit (suspense)' accounts for long periods, 

according to OTFM, pending OTFM's receipt of ownership information from OTR's 

Land Title and Records program staff and realty staff. 

Currently, OTR maintains official federal Indian land title and beneficial (lease) ownership 

information. OTR's Land Title and Records program staff are responsible for determining 

ownership and encumbrance for each federal Indian tract of land and for certifying for 

the federal government that such ownership and encumbrance is accurate for all legal, 

title, and evidentiary purposes. However, due to continuing increases in fractionation, 

inadequate staffing, and inadequate systems, OTR has almost a 2-year backlog in land title 

and lease ownership determinations and recordkeeping. 

Each time ownership changes, OTR's Land Title and Records program staff must perform 

time-consuming manual determination and documentation of ownership interests. This is 

because OTR's Land Records Information System (LRIS), as designed, is not capable of 

performing automated chain-of-title calculations and it does not store chain-of-title or 

calculated ownership information. LRIS system improvements have been delayed for the 

6

For oil and gas leases, OTFM policy allows funds to be disbursed to account holders 

when balances reach $5. 

'These special deposit accounts are intended to be suspense accounts with short tumaround times. 

GAO/AIMD/OGC-97-23R Indian Trust Fund Q&As 

5 
298 

ENCLOSURE ENCLOSURE 

past 2 years due to reductions-in-force and budget cuts. In addition, LRIS is not 

integrated with OTFM's trust fund accounting systems. 

Because official ownership information may be significantly out-of-date, OTFM has relied 

on unofficial ownership data in BIA's Integrated Resources Management System (IRMS). 

IRMS ownership information is periodically updated by OTR realty staff located in BIA's 

Agency Offices based on preliminary information that they have developed for use in 

probate determinations. However, unlike LRIS information, it is not verified or certified. 

As a result, OTFM cannot ensure that income is distributed to the proper account holder. 

Inactive liM accounts, which are defmed as accounts with no transactions for 18 months, 

also increase the administrative burden for liM accounts. Accounts may become inactive 

because they are in suspense status or because probate decisions are pending. As of 

September 30, 1996, OTFM reported that there were approximately 60,823 inactive liM 

accounts. According to information provided by OTFM, these are generally low balance 

accounts. Administrative costs associated with inactive accounts include 

- the cost of computer processing time; 

- the administrative cost and responsibility of safeguarding the accounts; and 

- the cost of preparing, printing, and mailing quarterly account statements. 

Question 4: Are there private trust management companies, or other federal 

agencies, that could perform operational functions under contract 

with the Department of the In~erior? 

GAO Resoonse: The government can contract with the private sector for trust 

management and land records and systems planning services as long as the Secretary of 

the Interior, as the fiduciary, maintains management responsibility, including the exercise 

of judgment and discretion. For example, our September 1994 report8 stated that there 

are numerous private-sector title and land records companies, many of which use systems 

and technologies that can be useful to BIA. We also suggested that private-sector firms 

could assist BIA and OTFM in selecting and integrating trust system packages. In 

addition, we reported that OTFM could contract for banking or financial management 

services. However, because of the Secretary's fiduciary responsibility, Interior would 

need to establish policies and provide instructions on matters such as the following: 

8

Financial Management: Focused l&adership and Comprehensive Planning Can Improve 

Interior's Management of Indian Trust Funds (GAO/AIMD-94-185, September 22, 1994). 

GAO/AIMD/OGC-97-23R Indian Trust Fund Q&As 

6 
299 

ENCLOSURE ENCLOSURE 

- how liM accounts would be maintained, that is, as investments or as checking and 

savings accounts; 

- whether the fmancial institutions would collect oil and gas, grazing, timber, and other 

revenues; 

how ownership and income distribution formulas would be determined; 

whether account maintenance fees would be required from account holders; 

- how supervised accounts for minors and incompetents and accounts restricted due to 

child support or other requirements would be handled; 

how reporting requirements to account holders and BIA management would be met; 

and 

how the financial institutions would relate to account holders. 

Because administration and reporting for over 300,000 liM accounts would be costly, we 

suggested that in developing plans to transfer account maintenance responsibilities for 

liM accounts, OTFM would benefit from 

- developing a strategy to resolve problems associated with small fractionated interests; 

reviewing liM accounts to first identify and close any inactive accounts; 

- cleaning up "hold" accounts;' 

- correcting account holder address information; and 

considering alternative ways of handling royalty distributions, which are generally 

withdrawn and do not remain in the accounts, thus contributing to the number of low 

balance accounts. 

These suggestions have been considered by OTFM, and while some actions have been 

taken, progress to date has been slow due to limited fmancial resources. 

"Hold accounts are a general category of liM accounts for which distributions cannot be 

made without some form of approval. They include supervised accounts for minors and 

noncompetent account holders and accounts that are subject to probate court decisions. 

GAO/AIMD/OGC-97-23R Indian Trust Fund Q&As 

7 
300 

ENCLOSURE ENCLOSURE 

TRUST FUND SEITLEMENT ISSUES 

Question: Assuming that tribal accounts cannot be reconciled any further and 

that liM accounts cannot be fully reconciled, what settlement process 

do you support which would fairly compensate the Tribes and liM 

account holders and would terminate any liability which the federal 

government might have for any breach of trust responsibility which 

might have taken place regarding the management of tribal and liM 

accounts in the past? 

GAO Response: We have long raised serious concerns about the ability to reconcile 

tribal and liM accounts. Our May 1996 report 10 stated that tribal accounts could not be 

fully reconciled or audited due to missing records and the lack of an audit trail in BIA's 

systems. In addition, because BIA did not know the universe of transactions or leases, it 

was not able to determine the total amount of receipts and disbursements that should 

have been recorded, further impeding a complete reconciliation. We also reported that 

due to cost considerations and the potential lack of supporting documentation, 

reconciliations for individual Indian accounts were not performed, and no alternative 

procedures were developed to verify these account balances. We concluded that if 

follow-up meetings with tribes do not resolve concerns about account balances, the 

legislated settlement process, which we recommended in our September 1995 letter," 

could be used as a framework for resolving disagreements about account balances. We 

also concluded that since any attempt to reconcile individual Indian accounts would be 

costly and the results would be limited, these accounts could be included in the 

settlement process. 

Our September 1995 letter provided draft settlement legislation for discussion purposes. 

The draft legislation would provide for a mediation process and, if mediation does not 

resolve disputes, a binding arbitration process. The proposed process draws on advice 

provided to us by the Federal Mediation and Conciliation Service and the rules of the 

American Arbitration Association. Both of these organizations have extensive experience 

in the use of third-party facilitators to provide alternative dispute resolution. The 

proposed process offers a number of benefits. Because of the informal nature of the 

process, the third-party facilitator can permit the parties, in the presentation of their 

cases, to deviate from the more structured rules that generally govern other forms of 

adjudication. Further, because the decision of the arbitrators would be binding and could 

10

Finandal Management: BIA's Tribal Trust Fund Account Reconciliation Results 

(GAO/AIMD-96-63, May 3, 1996). 

"Indian Trust Fund Settlement l&gjsJation (GAO/AIMD/OGC-95-237R, September 29, 1995). 

GAO/AIMD/OGC-97-23R Indian Trust Fund Q&As 

8 
301 

ENCLOSURE ENCLOSURE 

not be appealed, it offers a fmal resolution of the dispute. In addition, arbitration has 

generally been found to be less costly than litigation. 

STRATEGIC PLAN ISSUES 

Question 1: What is your opinion of the proposed Phase I of the Special Trustee's 

strategic plan? 

GAO Resooose: The American Indian Trust Fund Management Reform Act of 1994 

established a Special Trustee for American Indians and required the Special Trustee to 

develop a comprehensive strategic plan for trust fund management. As envisioned in the 

act, a comprehensive strategic plan for Indian trust fund and asset management would 

reflect the requirements of Interior, BIA, the Bureau of Land Management (BLM), MMS, 

OTFM, and other Interior agency Indian trust programs. It would also address the 

interrelationships of the strategic plans for each of these entities, including information 

resource management, policies and procedures, and automated systems. In addition, a 

comprehensive strategic plan would address various trust fund related systems options 

and alternatives and their associated costs and benefits. 

The Special Trustee's February 1996 proposed Phase I strategic plan consisted of a 

strategic planning concept paper. The concept paper represents progress in that it 

provides an initial assessment of the problems that need to be addressed in a strategic 

plan. However, as stated in our June 1996 testimony, 12 the concept paper, which has not 

yet been revised or expanded into a strategic plan, focuses on one potential system 

solution for addressing critical OTFM and BlA financial management information 

requirements and does not address the costs and benefits of other alternatives as a basis 

for selecting one approach over another. Also, the concept paper focuses on OTFM and 

related LRIS system improvements, and it does not address all needed improvements or 

other Interior agencies' Indian programs. 

In addition, the concept paper does not explain the rationale for many of the assumptions 

that support the $147 million estimate to implement the specified improvements. For 

example, the concept paper proposes acquiring new trust fund general ledger and 

subsidiary accounting systems but, unlike a strategic plan, it does not analyze the costs, 

benefits, advantages, and disadvantages of enhancing OTFM's current general ledger and 

investment accounting system, leasing a new commercial off-the-shelf system that would 

12Financial Management: Interior's Management of the Indian Trust Funds (GAO!I'-

AIMD-96-111, June 18, 1996). 

GAO/AIMD/OGC-97-23R Indian Trust Fund Q&As 

9 
302 

ENCLOSURE ENCLOSURE 

include accounts receivable or lease ownership components, or contracting for accounting 

services instead of improving or acquiring systems. 

Since 1992, our reports and testimonies have recommended that the Secretary of the 

Interior require a comprehensive review of the entire trust fund operation, including those 

functions outside the control and responsibility of OTFM, in order to determine how, and 

by whom, the trust funds can best be managed. Our September 1994 report stated that to 

develop a comprehensive strategic plan 

Interior, BIA, BLM, and MMS managers would first need to analyze the Secretary's 

overall trust fund management mission; 

the managers would need to identify all the activities needed to fulfill this mission, 

including any critical activities that are not being performed, activities that may be 

unnecessary, and any current problems in performing current activities; 

managers would need to identify internal and external improvement options and the 

feasibility of each as a means of developing a comprehensive strategic plan; and 

Interior, BIA, BLM, and MMS managers would need to establish priorities and 

milestone dates for completing corrective actions. 

We have not yet seen this level of coordination in lntertor's trust fund strategic planning 

efforts. 

The Special Trustee told us that during fiscal year 1996, he lacked the resources to 

adequately plan for needed trust fund system improvements. He said that he will use 

about $1 milllon of his fiscal year 1997 approprtation to contract for a requirements 

analysis that will provide him with information on systems integration alternatives and 

electronic equipment needs. In October 1996, the Special Trustee issued a request for 

proposals for contractor assistance in this requirements analysis, including 

identifying the internal and external users of Indian trust fund data, 

determining the needs and requirements of internal and external users, 

identifying training and equipment needs of internal and external users, 

- identifying the business events in the day-to-day trust business and the relationships 

among those events, 

GAO/AIMD/OGC-97-23R Indian Trust Fund Q&As 

10 
303 

ENCLOSURE ENCLOSURE 

compiling an inventory of equipment currently in use, and 

- analyzing the needs and requirements for a new system or systems to achieve the 

eight elements outlined in the strategic planning concept paper. 

The Special Trustee told us that he hopes to use the results of the requirements analysis 

to complete his strategic plan and submit it to the Secretary of the Interior by March 31, 

1997. However, we are concerned that the analysis is primarily a user needs study and 

does not include an assessment of alternatives for trust fund administration nor fully 

consider the feasibility and the costs and benefits of alternative improvement options. 

Question 2: Will implementation of this plan allow the federal government to 

properly discharge its trust responsibilities and provide an accurate 

accounting to American Indian trust beneficiaries in the future? 

GAQ Resoonse: As noted in the above responses, the Special Trustee's February 1996 

concept paper has not yet been revised or expanded into a strategic plan. In addition, the 

concept paper does not address programs across Interior agencies. The American Indian 

Trust Jo'und Management Reform Act of 1994 gives the Special Trustee responsibility for 

oversight of reforms relating to the management and discharge of the Secretary's trust 

responsibilities to Indian tribes and individual Indians, including the reform of policies, 

practices, procedures, and systems in BIA, BLM, and MMS. However, the concept paper, 

which does not address how this broad oversight function will be achieved, focuses 

primarily on OTFM, with some focus on OTR. 

Until the Special Trustee revises and expands the February 1996 concept paper into a 

comprehensive strategic plan, there is no way to determine whether implementation of:;;· 

that plan would allow the federal government to provide an accurate accounting to 

American Indian trust beneficiaries in the future. Furthermore, even with an adequate 

plan, future results will be dependent upon sufficient resources and oversight and will 

require effective coordination and implementation of Indian trust programs across 

Interior, including OTFM, BIA, BLM, and MMS. 

(913800) 

GAO/AIMD/OGC-97-23R Indian Trust Fund Q&As 

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304 

THE SECRETARY OF THE INTERIOR 

WASHINGTON 

Honorable Don Young 

Chairman, Commillee on Relourcea 

House of Representatives 

Washington, D.C. 20S1S 

Dear Mr. Chairman; 

DEC I I Ql6 

I am pleased to tranamit to Congreaa the Department of the Interior's Proposed Legislative 

Options in Response to the Tribal Trut Fund Reconciliation Project Results. This submission is 

made as required by Section 304 of the Indian Trust Funds Management Reform Act of 1994 (25 

U.S.C. § 4044), which provides that the Secretary sball outline efforts he will undertake to 

resolve disputed Tribal trust fund account balaDces. 

This report marks a milestone in the Federal Government's efforts to address longstanding 

inadequacies in the management of Tribal trust accowus. Having completed a five-year study of 

Tribal account transactions for the period 19n-1992, we now turn to the task of working in 

collaboration with Congreas and the Tribea to address wbalto do about our findings. As our 

report indicates, we believe a legUialive seu1ement is the most effective, expeditious, economical 

and equitable way to go. While this report begins to define our views on what form that 

legislation might take, we bave more work to do. We will be consulting with Tribes in the 

weeks to come to solicit their views on various settlement options, particularly with respect to 

claims based on the unreconciled tranaaclions and claims that may arise outside the time period 

and scope of the 2~year reconciliation period. We plan to submit our final recommendations in 

Aprill997. 

The issues that Congreas, the Tnlles and the Administration must confront in constructing a 

settlement are not easy; there are no clear BDSWen. Our overriding objective for this settlement 

process must be to achieve fairness, rec:ogoizing the limitations of what bas occurred in the past. 

Our efforts must be principled and uDdortaten in good faith, paying those to whom money is 

owed with due regard to our fiduciary obligation, while protecting the taxpayers where little or 

no reasonable likelihood of acwal loss exists. 

The Office of M3Jia&CDICIII and J3ud&et advises that there is no objection to the presentation of 

this report from the standpoint of the Administration's program. 

We look forward to working with you in developing this settlement proposal. An identical letter 

is being sent to Senator Jobn McCain. 

Sincerely, 

cc: Honorable George Millec, Ranting Minority 

75~~~ Member 
305 

PROPOSED LEGISLATIVE OPTIONS IN RESPONSE TO 

TRIBAL TRUST FUND RECONCILIATION PROJECT RESULTS 

I. EXECUTIVE SUMMARY 

For more than a century, the federal govermnent has been the trustee of 

funds for Indian Tribes and individual Indians. Currently, the Secretary of the 

Interior, through the Office of the Special Trustee (OST), maintains approximately 

1,500 accounts for 280 Tribes with assets in excess of $2.5 billion. Each year, 

more than $802 million passes through the Tribal trust funds system. In addition, 

the Secretary, through the OST, maintains over 300,000 individual Indian money 

(liM) trust fund accounts with a current balance of $450 million. Each year, $300 

million passes through the liM system. 

Concerns have been expressed for a number of years in Indian country, 

various Quarters of the Executive branch, the General Accounting Office and 

Congress that the trust funds management and accounting systetns .have not kept 

pace with technological developments in the private sector. Questions have been 

raised about whether assets were being properly managed and funds accounted for. 

'There have been calls for accountings of both Tribal and 11M funds and for 

additional investment by the federal govermnent to upgrade its systems. 

In response to these concerns and the direction of Congress, the Department 

coottacted with Arthur Andersen, LLP to perform .a reconciliation of the Tribal 

trust fund accounts. The five-year project covered transactions for the twentyyear period from 1972 to 1992, and cost $i1 million to complete. The objective 

of the project was to reconstruct tribal accounts to the extent possible, to provide 

some assurance of the accuracy of transactions, reasonableness of investment 

earnings, and propriety of income collected. The results of the reconciliation 

project and the Department's approach to developing a settlement of disputed 

account balances are described in more detail below. In brief, the basic 

reconciliation portion of the project examined $17.7 billion in non-investment 

transactions, of which $15.3 billion-- about 86 percent-- were reconciled. For 

the reconciled transactions, approximately $1.87 million in transactions were in 

error- an error rate of .01 percent. 

The remaining 14 percent of transactions - amounting to $2.4 billion --
306 

were deemed by Arthur Andersen to be "unreconciled," meaning that the Office 

of Trust Funds Management (OTFM) was unable to locate source documents to 

verify the accuracy of the general ledger entry for the transactions. For example, 

the general ledger might list a receipt of $1,000 to a Tribal account in connection 

with a mineral lease of trust property; however the underlying documentation 

necessary to verify its accuracy could not be located with the time and resources 

available. While this does .!lQt mean that the $2.4 billion is lost or missing, it does 

mean that the poor condition of the records and systems did not allow the federal 

government to conduct an audit or provide the level of assurance to account 

holders that should be expected. 

In addition, almost half of the unreconciled $2.4 billion related to 

transactions involving receipt of funds by the government on behalf of a Tribal 

account from third parties. An additional half billion dollars of unreconciled 

transactions involved transfers between different accounts of the same Tribe. With 

respect to these two categories of transactions, where the receipts or transfers to 

a particular Tribe's accounts were posted to the general ledger, it is likely that the 

Tribe had use of the funds even if it they were posted to the wrong account of that 

Tribe. Deducting these amounts from the $2.4 billion in unreconciled transactions, 

and based on other supplemental data, we believe the legislative settlement options 

to address.umeconciled transactions should focus on the remaining $575.1 million 

(excluding interest). 

This report reflects a milestone in the federal government's efforts to address 

these longstanding inadequacies. As described more fully below, the report 

contains our preliminary proposals for settling the disputed balances in the Tribal 

trust fund accounts based on the results of the five-year, $21 million reconciliation 

project. These concepts are provided in accord with the American Indian Trust 

Fund Management Reform Act of 1994, which provides that the Secretary shall 

outline efforts be will undertake to resolve disputed Tribal trust fund account 

balances. In addition, pursuant to the Act, the Special Trustee is making 

recommendations to implement improvements to trust management policies, 

practices, procedures and systems Department-wide. Some reforms already have 

been instituted, including conversion to a core trust accounting and investment 

system for tribal funds, publication of standardized procedures for the management 

of liM accounting operations and reconciling all cash activity on a· daily basis for 

both Tribal and 11M accounts. OTFM has published regulations providing 

procedures for Tribes to withdraw and manage their own funds should they so 

2 
307 

choose. Between 1990 and the present, staffing of the OTFM has been increased 

five fold. Finally, the Administration has included in its budgets for 1996 and 

1997, and will include in the outyears, funding to implement trust reform efforts. 

We believe that legislation ultimately will be required to provide a settlement 

that will be fair to account holders. This report contains the Department's specific 

recommendations for addressing claims based on transactions where documentation 

indicates that errors were made. We refer to these as "Type I claims," and we 

recommend that where errors occurred to the detriment of Tribes, the government 

reimburse the account with simple interest computed at the Tribal benchmark rate. 

With respect to the Type 1 claims where errors inured to the benefit of the Tribe, 

the Department recommends netting those amounts against any amounts owed to 

the Tribe, and forgiving any remaining amount owed by the Tribe after netting is 

applied. 

Where Tribes have additional documents to contest their account balance (we 

refer to these as "Type 2 claims"), we recommend that Tribes have an opportunity 

to present those claims to the Department. In the event the Department disagrees 

with the Tribe's position, the Tribe may request that the matter be submitted to a 

mediator who would be empowered to recommend a resolution of the claim. 

There are two additional types of claims for which consultation with Tribes 

is necessary before we can develop any settlement recommendations. First, there 

are claims based on the $2.4 billion of unreconciled transactions, which we refer 

to as "Type 3 claims." Although we may be able to locate some documents, it is 

not possible to determine whether the Tribes suffered money losses as a result of 

the Bureau of Indian Affair's (BIA) management and acco~tin8-'practices. We 

believe that resolution of these questions by litigation would be time-consuming, 

expensive and not in the iriterest of either the government or the Tribes. 

Accordingly, we are sqliciting Tribal input on how best to address these claims in 

settlement. 

Second, some Tribal representatives assert that they are entitled to some 

form of redress for management and accounting practices involving transactions 

outside the scope and duration of the 20-year study. They argue that they will be 

unable to agree on a final account balance unless these issues are addressed in the 

settlement process. 

3 
308 

The report outlines several possible "total" settlement options as a point of 

departure for our further discussions on these broader claims and the Type 3 

claims. While the govenunent does not endorse any of these specific proposals -

and those described in this report by no means constitute all of the possible 

approaches - we nonetheless would like to consider Tribal views with respect to 

these and other proposals. 

Our overriding objective for this settlement process is to achieve fairness and 

justice with respect to Tribal trust account balances. We are committed to doing 

the best job we can, recognizing the limitations of what has occurred in the past 

and the available information, to restore funds to Tribal trust accounts that have 

suffered losses as a result of inadequacies in the Department's management and 

accounting systems. The effort must be ·principled and undertaken in good faith, 

paying those to whom money is owed, with due regard to fiduciary obligations, 

while, at the same time, protecting the public fisc where little or no reasonable 

likelihood of loss exists. 

We considered the following objectives in formulating the proposals and 

options for the proposed legislation: 

. , achieve a settlement that is fair 

. , achieve the most resource-efficient settlement of claims (in terms of 

conserving federal government and Tribal time, money, and staff, 

including attorneys' and expert witness fees) 

• encourage settlement by providing incentives to settle and by 

providing disincentives to litigation 

• use the most informal settlement processes available rather than 

litigation to encourage Tribal participation 

• obtain funding for the settlement without reducing appropriations for 

the BIA budget and Tribal programs 

• achieve final agreement on account balances through September 30, 

' 1995, as required in the Act, as an agreed-upon starting point for the 

future 

4 
309 

When the consultation process is complete, the Department will submit a 

final set of recommendations to Congress. Funding sources also will need to be 

identified. In order to provide time for consultation with Tribes, we plan to 

submit those recommendations to Congress in April 1997. 

D. BACKGROUND 

A. Overview 

The Secretary of the Interior has· the responsibility to ensure the proper 

accounting, investment and financial reponing of over 300,000 Indian Tribal and 

individual Indian money (liM) trust fund accounts. The authority for management 

of Indian trust funds was delegated to the Assistant Secretary, Indian Affairs, and 

re-delegated to the BIA. Since February 1996, this authority has been delegated 

to the Office of the Special Trustee (OST) through the transfer of authority over 

the Office of Trust Funds Management (OTFM). 

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

directs the Secretary of the Interior to prepare a repon to Congress by May 31 , 

1996, to include a description of the procedures used for reconciliation of the 

·Tribal trust fund accounts and a statement outlining effons the Secretary will 

undertake to resolve disputes regarding Tribal account balances. 1 The 

reconciliation was carried out by the Bureau of Indian Affairs (BIA) in an effon 

called the Tribal Trust Funds Reconciliation Project (the Project). This repon 

identifies for Congress the general approaCh the Secretary is contemplating for 

resolving account balance disputes and ·includes specific recommendations to 

resolve known errors. The Department will consult with the Tribes by circulating 

this repon to Tribal account holders and seeking their comments on the various 

approaches to settlement and to the specific questions raised herein. 

1 llc:clu.sC JJKJ.r Tribes did DOl have IUfficient time to review their reconciliation reports and inform the 

DqJonmoat wbcdlor !bey disputed their IICCOUDl balaDces (JaJOwn as "attestation responses" ) as of the May 31 

deadliue. !be Sea<aly submined to Congress an iDlerim repon describing the rcconciliaJion procedures on May 

31 , aad se1 a deadJiue of Sepcember 27, !996, for submission of attestation nsponses. With the extension of 

!be - fa< submittiD& alteSlation nsponses, the Secrcwy inclicaud that be would submit a supplemental 

repon to Congress. ·including proposed legislative opcions to address disputed aa:ount balances laJer iD the year. 

5 
310 

This analysis incorporates many of the settlement recommendations of the 

Special Trustee's Advisory Board, which was created by Section 306 of the Act 

(hereinafter the "Advisory Board"). The Advisory Board's settlement proposals 

were submitted to the Secretary on September 24, 1996, and were the result of a 

series of consultations between the Special Trustee, his Advisory Board and several 

Tribes. As requested by the Special Trustee, the Advisory Board's 

recommendations are appended to this paper. In our recommendations, we 

describe where we agree and where we disagree with the Advisory Board's 

recommendations. 

B. Tribal Accounts Versus Individual Indian Accounts 

_ There are two general types of accounts which are administered by the 

OST. 2 First, there are Tribal trust fund accounts maintained on behalf of 301 

account" holders. Second, there are 11M accounts, maintained on behalf of over 

300,000 individual Indians. The options outlined in this analysis address 

approaches for resolving account balances of Tribal accounts only, because Section 

304 of the Act requires a report on only those accounts. While this report does 

not address resolution of 11M account balances, on June 10, 1996, a class action 

lawsuit, captioned Cobell v. Babbitt, was filed in U.S. District Court on behalf of 

the liM account holders. Settlement discussions are proceeding between attorneys 

for the plaintiffs and the United States to attempt to resolve claims by the liM· 

account holders. · Unlike the Tribal trust accounts, no historical reConciliation of 

the 11M accounts has been performed because of the inordinately high costs -

estimated in 1992 to be in the $108 million to $281 million range-- of conducting 

such a reconciliation. The settlement process in the litigation, if successful, may 

provide a more efficient means of estimating liability, if any. 3 Some components 

' All Indian truSl runiliCCOWIIJ were hislorically admiDiaaed by lbe Bweau of Indian Affairs ('BIA "). In 

February 1996, the Scc:rcwy rc-dclcgaled lbe n:sponsibility for IIIIIII&CID"DD of Indian trust fund accounts to the 

·Office of the Spci:W Trustee, through lbe tnasfcr of audlorily ova- lbe Office of Trust Funds Management 

(OTFM). 

' Tlie Advisory Hoard ~Iccted die sllit miUioll amount simply bocawe it was the upper end of an early 

estimate of Arthur Andenen L.L.P., for Wlllcl1akiDg a ,....;(iorim of lbe 11M accounts similar to the 

r=nciliation already conducted for tribal a::aJUIIIJ. The Advisory Hoard reasoned that rather than spending 

this sum "to produce wbat is likdy to be m UIWIIisfaaory result, • 1llai amount sbould be "used to compensate 

liM account beneficiaries for any barm, damace or loss arisina 0111 of lbe government's inability to provide an 

acc:urate and timely aalOUil1ing to 11M truSt aa:ow11 boldcn. • lD our view. there is no demonstr.lble 

relationship berwecn the "barm, dan>age or loss" thalllM accuuDl boldon may have suffered and the cost to 

prnduce a reconciliation of the liM aa:oUDIS. Moreover. die Advilory Hoard's recommeudations do not make 

6 
311 

of the Tribal settlement legislation outlined in this report may also be appropriate 

for settling components of the liM claims as well at issue in the ~ litigation. 4 

C. Legislation Versus Liti&ation 

We believe that legislation rather than litigation would provide an orderly 

and efficient mechanism for resolution of the disputes over account balances 

arising out of the Project. The proposed iegislative approach described here 

responds to the statutory directive that the Secretary outline efforts to resolve such 

disputes in his report to Congress. It would address only those claims arising from 

the Project, not individual Indian accounts or other funds. Case-by-case litigation 

would be wasteful, expensive and time-consuming. Given the inadequacy of the 

available records and the historiCal deficiencies in BIA's accounting and 

management systems, additional reconciliation efforts that would. accompany 

litigation would, at best, produce only marginally more refined data. Moreover, 

some elements of a settlement policy, including forgiveness and offset of claims, 

might be desirable and legislation could define the parameters of the Department's 

authority to implement them. Legislation also could address funding sources for 

the settlement. 

D. Past Versus Future 

This report addresses options for a legislative resolution of problems from 

the past- the Tribal trust fund account" balance disputes. On a separate track, the 

Secretary and the Congress, through the efforts of the Special Trustee, are 

evaluating approaches for comprehensive reform of the Department's management 

of trust systems for the future. The Special Trustee has completed an assessment 

of trust management policies, procedures, practices and systems as they apply to 

both liM and Tribal accounts. He has produced a conceptual strategic plan to 

acquire and institutionalize new trust accounting and management systems. 

Thfough additional analysis and consultation with both Tribal and federal interests, 

clc:a:r' bow liM acccJI.m1 bolden _would aaree that the paymeut was in full satisfaction of their individual claims. 

• The sealemoat n:commeodatioDs of the AdviJory Boanl include a proposal for sealing liM accounts 

wbic:b' was devdopal prio£ 10 the filin& of the Q13D litigation. The Advisory Boanl proposed, among other 

lhiacs. a poyma11 of S2Jil million 10 be deposited in the 11M .lnvestmclll Pool and subsequently inveslcd for !he 

beDcfit of 11M aa:ount holders. The payment would be a permanent fund, generating interest for JIM account 

holden, and also would serve as a tts<rVe 10 pay claims s=fully brought by individual account holders. 

7 
312 

the conceptual plan will be transformed into a strategic plan as required by the Act 

and submitted to Congress. The President's annual budget requests for the 

Department include funds earmarked for implementing the Special Trustee's 

strategic plan. 

5 

E. Structure of this Report 

Part Ill of this repon describes in detail the Department's role with respect 

to Tribal and liM trust funds, deficiencies in the records concerning trust accounts 

and balances, and the Project which studied Tribal trust fund investment 

transactions for a 20-year period. 

Part IV presents some options for settling Tribal claims based on errors, 

incomplete documentation or inaccurate accounting of trust funds during the 

reconciliation period, 1972-1992.6 As noted, the Department needs to consult 

funher with Tribes and with others in the Administration to develop an appropriate 

settlement proposal. This part of the analysis does not address issues relating to 

the individual Indian money accounts held by the United States on behalf of 

indJvidual Indians or Tribal claims outside the scope of the Project. 

. Part V outlines options for Congress. to structure any future litigation 

concerning ,Tribal claims based on alleged trust fund losses. While the idea behind 

the settlement proposal being developed by the Department is to encourage 

settlement through means other than litigation, we also envision that it will be 

necessary to provide those Tribes that choose not to settle a fair process to litigate 

their claims. 

Pan VI presents the concept of a "total settlement" that would resolve claims 

' The Advisory Boanl propo.ted S 147 million fur impi..,.,..;oo of the stra~egic plan as a componeot of a 

joint settlemau for 11M aDd TnlJaiiCCOUDI bolckft. This liiiiDUIII is based oo preliminary estimates, aod 

includes approximall:ly $20 million in aooual opentins coots over live. yean, and $47 million of one-time 

equipment aDd infnstructure costs. The Dc:partmr:D1 proposc:o to ODDlinue to reqw:st funding of implemeowion 

costs as part of its aooual budgets. The emcted FY 1997 Jotaior and Relaled Agencies Appropriations Act 

included $15,726,000 for implementation of the Spocial TI'USiee's suategic plan, including funding for 

immediate office staffing and the Advisory Boord. Furure DepartmoDtal requests will be based on the fUJal 

approved strategic plan being developed by the Spocial TI'USiee in 1997. 

6 There is potcDtial overlap betw..., settlement options for the Tribal claim> and the claim> in the Cobell 

litigation. CetUinly, Congress could consider a broader seulemau package whicb addresses both Tribal and 

liM claims. · 

8 
313 

beyond the scope and time frame of the Project and any claims that may relate to 

historical mismanagement of trust assets. Undertaldng additional reconciliation 

efforts or litigating these claims could be particularly expensive. With the Tribes 

and Congress, and after further consultation within the Administration, we would 

like to explore possibilities for legislative resolutions that would resolve disputes 

on behalf of all or virtually all Tribes, and that would provide final account 

balances for Tribal trust funds as of September 30, 1995. 

At this stage, the Department is merely exploring whether a "total 

settlement" is warranted and whether it would be fair to all concerned. We do not 

endorse at this time the concept of a "total settlement" or any of the specific 

alternatives presented for comment. As a result of additional consultation, other 

ideas could emerge which might produce a more equitable result for all involved. 

We also have tried to identify important questions about these options; many of 

these questions do not have obvious or easy answers. 

m. RECONCILIATION EFFQRTS FOR TRIBAL TRUST FUND 

ACCOUNTS 

A. The Project 

Over the past decade, operational reviews and financial audits have identified 

weaknesses in the control and oversight of Indian trust funds . . A primary concern 

was the failure to reconcile the trust fund accounts regularly and to assure that 

account balances were accurate. Consequently, in 1988, 1989 and 1990, Congress 

directed BIA to take steps to reconcile Indian trust fund accoun~ as accurately as 

possible back to the earliest possible date. The FY 1990 appropriations language 

further required that "the results of such reconciliation [be] certified by an 

independent party as the most complete reconciliation of such funds as possible. " 

Pursuant to these directives, BIA commenced its Project in 1990. In the fall 

of 1990, an ad hoc Tribal advisory group7 worked in conjunction with the BIA, 

the General Accounting Office (GAO) and the Department's Inspector General to 

develop a request for proposal for the reconciliation contract. In May 1991, the 

contract was awarded to a national accounting firm, Arthur Andersen, LLP. 

' The ad boc: group CODStiiUICd itself as the lnlertribal Monitoring Associa1ion (ITMAJ. 

9 
314 

Phase I of the contract was intended to determine what records were 

available, what procedures would be necessary, and the cost of a complete 

reconciliation for both Tribal trust and liM accounts. This work was performed 

from June 1991 through January 1992. The results of Phase I disclosed that not 

all supporting documents could be located, but to the extent they could be located, 

they could be examined, and that some BIA trust policies, procedures, and systems 

had deficiencies. As a result, it was agreed, through discussions involving the 

Department, the Office of Management and Budget (OMB), Congress, and the 

Intertribal Monitoring Association (ITMA), that a conventional financial audit was 

not likely to produce meaningful results. 

In view of this, the Department of the Interior, in consultation with OMB 

and ITMA, considered alternative methodologies and approaches with the goal of 

producing as accurate an accounting as practicable. As a result, the BIA modified 

the Arthur Andersen contract to incorporate the methodological procedures agreed 

upon by the Department, OMB and Tribal representatives. While the procedures 

do not constitute an audit in accordance with generally accepted auditing standards, 

they were deemed to be the best available approach and were therefore used to 

reconcile the Tribal trust fund accounts for the period July 1, 1972 through 

September 30, 1992. The year 1972 was selected as the starting point because it 

coincided with the date on which BIA assumed sole responsibility for Tribal trust 

fund accounting and recordkeeping to the account level. Prior to that time, the 

Department of the Treasury had accounts for individual Tribes listed within its 

systems, although BIA may have reported the amounts to be placed in the accounts 

(in contrast to the current practice where there is one combined account for all 

Tribes at Treasury). 

In accord with the Congressional Iilandate that the Tribal trust fund 

reconciliation be certified by an independent third party, the BIA awarded a 

contract to perform the certification to Coopers and Lybrand .in September 1993. 

Due to a projected cost that far exceeded available resources, BIA terminated the 

contract in October 1995, before the certification was completed. At BIA's 

request, Coopers and Lybrand provided a close-out letter summarizing the work 

performed prior to termination. In the letter, Coopers stated that it noted errors 

in certain aspects c:if Arthur Andersen's reconciliation work under the BIA 

contract, and that some, but not all, of these errors wei:e reported to Arthur 

Andersen and BIA. The letter further stated, however, that no conclusions could 

be drawn from the preliminary information reported because Coopers did not 

10 
315 

complete the certification work. Arthur Andersen investigated and cleared the 

reported errors and a record of these activities are on file at Arthur Andersen's 

office. 

In 1994, .while the Arthur Andersen reconciliation efforts were ongoing, 

Congress passed the American Indian Trust Fund Management Reform Act of 

1994, 25 U.S.C. §§ 4001-4061, which established the Office of the Special 

Trustee for American Indians. Under this legislation, the Special Trustee is 

responsible for oversight, reform, and coordination of the policies, procedures, 

systems and practices used by various Departmental agencies in managing Indian 

trust assets.• The statute required that the Secretary transmit to Congress by May 

31, 1996, a report that describes the methodology and results of the trust fund 

reconciliation process, includes Tribal attestations as to disputed account balances, 

and outlines efforts the Secretary will undertake to resolve such disputes. As 

noted, that report was submitted to Congress with a commitment to provide this 

supplementli report on the Secretary's recommendations for resolving account 

balance disputes. 

in January 1996, the Department released a report to 301 Tribal trust fund 

account holders summarizing the results of its Project. The agreed-upon 

procedures used iii. the Project were intended to accomplish the following: (1) 

verify that oon,investment financial . transactions posted to the BIA's official 

accounting records are in agreement with.supporting financial source documents; 

(2) assess the accuracy of investment income posted to Tribal accounts; (3) 

recalculate the U.S. Treasury interest earnings; (4) reconcile general ledger 

transactions with U.S. Treasury transactions;·(5) verify that fmancial transactions 

posted to the aa:ouudng records are in ilgreemCnt with the. originating lease or sale 

agreements, permits, or contract terms (not completed for alltHDsaetions); arid (6) 

determine the timeliness of the deposit of receipts (for informational purposes 

only). The J;lroject report indicates that of the $17.7 billion (absolute value)9 in 

non-investment transactions, $15.3 billion of transactions were reconciled, while 

$2.4 billion (absolute value) were unreconciled (that is, as of the time the Project 

was completed, financial source documents could not be located to support the 

' Wbile Tille m of 1be Att oa11 lhis respoasibility in the. Special Trustee, the Act further provides !hat the 

Spa:ial TIUII<Ie "sblll report dim:!IY 10 lbe Sccrewy. • Seaion 302(a), 2S U.S.C. § 4042(a). 

• Tbe -..revalue of inia.:tioas moaas disleganling the positive and negative values of the transactions. 

11 
316 

accuracy of these transactions as entered on BIA's general ledger). For example, 

the general ledger might show a receipt of $1,000 to a Tribal account in 

connection with a mineral lease of trust property; however, the underlying 

documentation necessary to verify its accuracy could not be located. (See pages 

21-22 for a more complete description of these unreconciled transactions). 

The reconciliation procedures and the proposed adjustments to account 

balances are detailed in the Project report, and were explained to the Tribes at a 

national meeting on February 14 and 15 in Albuquerque, New Mexico. More 

detailed individual consultation was provided to account holders at a series of 

regional meetings held through July 1996. In August 1996, the Special Trustee 

sent out a request for all Tribes to submit attestations as to acceptance or dispute 

of their account balances on or before September 27, 1996. 

As of November 1, 1996, the OST received attestation responses from 79 

of 301 Tribal trust fund account holders. 33 Tribal account holders accepted the 

account balances as reflected in the Project, and 46 account holders disputed the 

balance. 49 account holders ·requested additional time for their response. 173 

account holders filed no attestation response. Among the reasons given by those 

account holders which disputed their account balances were that the reconciliation 

procedures were inadequate, that they needed additional time; and that the records 

were inadequate. Other comments were more specific in nature and did not fall 

into one of these categories. Some account holders identified more ~ one 

reason for disputing their account balances. 

Despite five years of effort and the expenditure of $21 million, the Project 

provides a less than complete accounting of the state of the Tribal trust funds. The 

inadequacy ·of the Department's trust management systems, policies, procedures 

and practices, the condition of the trust records, the fact that a substantial number 

of docuinents.relating to the 20-year period could not be located as of the time the 

Project was completed, and funding constraints all contributed to the Department's 

inability to verify the accuracy of Tribal account balances. 

The Project did identify specific errors which resulted in underpayments. to 

Tribal trust fund account holders. These must be corrected and options to do so 

are outlined below. The Project also uncovered errors which resulted in 

overpayments to Tribes. Whether and how to recover these amounts is also 

discussed below. The most difficult issues, however, relate to ( 1) the unreconciled 

12 
317 

transactions where there were no records located to support $2.4 billion of noninvestment transactions for the 20-year period of the Project; and (2) those 

transactions outside the scope and period of time covered by the Project. 

B. Tyoes of Claims 

For purposes of this analysis, the three basic types of potential claims that 

may arise from the Project results are referred to as Type 1, Type 2, and Type 3 

claims: 

• Type 1 claims are based on errors specifically identified in the Project 

for which there was a documented loss to the Tribe or the 

government. Type 1 claims involve two types of circumstances; 

either funds are owed by the government to a Tribal account, or the 

Tribal account was overpaid and it owes funds to the government. 

• Type 2 claims are those where a Tribe disputes its account balance 

from the Project based on additional documentation produced by the 

Tribe. Because no Tribes responded to a letter sent to them in 

January 1994, requesting any records in their possession relating to 

transactions on the general ledger, there may be few Type 2 claims. 

Nevertheless, there is a need to offer a means for addressing these 

claims, should they arise. 

• Type 3 claims arise from unreconciled transactions, where neither the 

Tribe nor BIA could locate source documentation to support the 

account transactions or to support a conclusion that those transactions 

are in error. This is by far the largest category. 

There also are claims arising from transactions that were outside the scope 

of the Project, or outside the 20-year period covered by the Project. It is 

impossible to estimate the amount of those claims or to identify the specific Tribe 

or account to which money may be owed. Should Congress conclude that it wants 

to address these types of claims, ·this analysis outlines several different approaches 

for doing so, in the form of "total settlement" options. 

IV. OPTIONS FOR SETTLEMENT OF SPECIFIC CLAIMS 

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A. Detailed Discussion of Options for Le;islatiou 

We are considering the following framework for legislation and options to 

settle the three types of Tribal claims: 

1. Payment of Tyoe 1 Claims 

• Payment of All Claims Type 1 claims are those where the Arthur 

Andersen Project report indicates that there has been an error. Because the 

Department has an obligation to correct its known errors, Tribes would be paid in 

full without regard to the Tribe's willingness to settle any other claims. The 

Department recommends that the government pay the Tribe any principal amounts 

owed, plus interest as defined below. 

Three types of claims fall within this category. First, of the amounts 

reconciled in the Basic Reconciliation portion of the Project, approximately $1.87 

million in transactions (excluding interest) were found to be in error -- an error 

rate of about .01 percent. An additional $25.2 million (absolute value) in 

proposed adjustments were identified in the entire Project. 10 These known errors 

include both underpayments and overpayments to Tribal trust fund account holders. 

Second, some Tribes claim that interest is owed due to the lag time between 

when funds were paid to the BIA and when they were deposited. While we agree 

that interest should be paid, there is a question as to when interest should begin to 

accrue. For example, interest could begin to accrue after 1-3 days, 4-6 days, 7-10 

days, 11-30 days or over 30 days. The Department believes it is entitled to a 

commercially reasonable time to ·deposit checks in Tribal accounts (due to mailing, 

processing, check clearance, etc.), but that time should be limited and Tribes 

should receive interest only after that period has passed. We recommend that 

interest be paid to Tribes beginning after six (6) days, whether or not the funds 

have actually been deposited. 

11 In addition, there are interest claims relating to lag 

time from when money was received by the Minerals Management Service (MMS) 

10 The $1.87 million does not include adjUSimtiii.Sof less Ibm $1,000 thal wen: accepted without 

further research, which are referred to as "scoped adjUSUIIt:DIS. • Tbooe scoped adjusuneots would also be 

considered known errors and would be paid as Type I claims. 

11 llccausc reservations tend to be IOCOICd in isoUred md remocc ama, rdiau<:c on mailing is typical. 

During the 1972-1992 reooociliatioo period, appmximllldy ooe-third of 1be paym<ms were made electronically. 

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319 

and when it was actually credited to the accounts by BIA. The Department 

believes that interest should be paid on these claims from the date the funds were 

received by MMS. If Congress adopts this policy for the reconciliation period, the 

government would owe $1.7 million in back interestY 

The third type of Type I claims involve so-called "rollover amounts." 

These amounts result from end-of-accounting period balances in Tribal trust 

accounts in BIA's general ledger that do not always equal the balance recorded in 

the general ledger for the beginning of the subsequent accounting period. The 

Advisory Board proposes to forgive $26.1 million in principal plus interest in cases 

where an account balance increased, and to pay Tribes $17.5 millionin principal 

plus interest where a Tribe's account balance decreased. These amounts assume 

netting of rollover increases against rollover decreases at the account level; and no 

netting of rollover adjustments against known errors. 

These rollover discrepancies result from accounting entries that change the 

beginning balance of a Tribe's account for an accounting period. Although a 

transaction history does not show up in the BIA general ledger, the entries should 

appear in the BIA's monthly journal of transactions or other supporting documents. 

Because of time constraints imposed on the Project, research necessary to support 

these transactions could not be performed prior to the issuance of the final 

reconciliation reports to the Tribes. 

The OST has recently begun an effort to research rollovers where a tribe's 

balance decreased from one accounting period to the next. To date, $5.2 in 

rollover decreases have been verified by the OST staff. OST will continue this 

research effort. To the extent that the Department is unable to reconcile rollover 

decreases, the Department agrees with the Advisory Board's proposal to pay 

Tribes principal plus interest in cases where account balances have decreased. tl 

However, the Department proposes that these amounts be netted against known 

errors inuring to a Tribe's benefit.t4 · 

11 $1.4 million is attributable to the BJA deposits and $.3 million is attributable to .the MMS deposits. 

" It should be noted that while the Depanment is proposing that unexplained rollover decreases be 

paid to Tribes, it has not been determined that an error, in fact, occurred in these instan<:eS. 

14 The Depanment does not agree with the Advisory Board's classification of rollover increases as 

amounts thai need to be "forgiven. • In order to determine whether rollover increases actually represent 

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• Interest policy. An issue that must be resolved is how interest should be 

paid on amounts owed to Tribes. There are two considerations in that regard: 

whether simple or compound interest should be paid, and what rate of interest 

should be used. 

The Advisory Board proposes that interest payments be determined by 

computing compound interest at a blended Tribal benchmark rate. 15 While the 

Tribal benchmark rate is skewed somewhat on the high side by a number of longterm instruments held in one account, it nevertheless has the advantage of being 

easily determined. Against this is balanced the fact that the compound rate is 

greater than what a Tribe could likely recover in litigation; courts generally limit 

the interest on government trust funds to simple interest on principal only. 

16 

Accordingly, the Department recommends that simple - not compound - interest 

be paid at the blended Tribal benchmark rate. 

• Forgiveness and netting policy. The Project results indicate that in some 

cases, BIA errors resulted in overpayments or erroneous payments to a Tribe or 

to a particular Tribal account. As a result, some Tribes owe the government 

money. When interest is included, the amounts owed by Tribes to the federal 

government can be significant, and repayment would be a particular burden for 

Tribes with limited financial resources. The Department has considered whether 

it should recommend to Congress that some or all of the amounts owed by Tribes 

to the government should be forgiven. Although a policy of forgiving amounts 

overpaymeniS 10 Tribes. it would be necessary to perform raean:h oo !be Ulldcrlying transactions recorded in 

BIA's monthly journal of transactions or other supportiDa doc:umalls. At.m this wort being performed, it 

cannot be concluded !hal tbcsc rollover increases rcprcocul ""orpoymtDIS to Tribes. However, to ensure !hal 

the issue of rollover increases is resolved by the seul-. !be D<porunatt c:oaremplares th2l seulemcnt 

legislarion will provide thai unreconcilcd rollover increases to a Tlibe's aa:oums be deemed accurate 

transactions. 

" The Tribal benchmark rarc is the average llllllual yield of invCSICd Tribal ttusl funds. 

" It .is well seulcd J(w the Tribal owW:r of inlerest-bearing trusl funds thai an: improperly disbwscd 

by the federal government can recover only the OIIIOUIIIS dishurscd plus simple inrcresl annually thereon (al the 

rate prescribed by statute to be paid on tbcsc funds). ~ ~ Ugi!ed S!a!q v. Gila River Pi!!!li-Maricopa 

Indian Community. 586 F .2d 209. 2!6 (Ct. Cl. !978); Whjte I\I!!!"""M Apw;bc Tribe of Arizopa v. United 

. 20 Cl. Ct. 371 , 377 (!990). And. when: a SUitltc oc ttal)' provick:s for the payment of simple interest, 

compound interest is not recoverable. United SWq v. Mesca!cm Apacbc Tribe, SIB F.2d 1309. !33!-33 (Ct. 

Cl. !975), ~. 425 U.S. 91! (1976). In COitlniSt, compotmd inlerest is frequently awarded in private 

sector litigation. 

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owed from Tribes to the United . States would deny the government potentiai 

revenue, forgiveness of a debt does not require the further expenditure of funds. 

Congressional authorization would define the parameters of the Department's 

authority to forgive the repayment of obligations due the government. 

The Advisory Board believes that amounts owed by Tribes to the 

government as a result of errors should be forgiven, for the following reasons: 

A. These are known and admitted errors of the U.S. Government. Even 

though the Tribes apparently benefitted by these overpayments, they should 

not be asked to repay amounts which arose out of the U.S. Government's 

inability to provide an accurate and timely accounting. 

B. These admitted errors were made over a period of twenty years. The 

usual and customary standards for clearing similar exception items in the 

private sector is one accounting period, usually ninety days or less. 

17 

C. The overpayments were identified for reconciled items only. Had a full 

accounting been possible for the $2.4 billion in unreconciled non-investment 

transactions, or had a full accounting been possible verifying financial 

transaction to source documents (such as land leases and contracts), or had 

the Project covered different time periods, the net result for a particular 

Tribe may have been different. 

D. Tribes should not be asked to reimburse the government unless the 

governrnent can document that no subsequent correcting entry was made. 

There are various forms that a forgiveness policy could take. For example, 

amounts that are owed to and from a particular Tribal account, or to and from a 

particular Tribe (as explained below, some Tribes have several different accounts), 

could be offset against each other, or "netted. • How the netting policy is 

structured has significant financial ramifications. It also could have important legal 

implications that would require a legislative resolution. 

" While there may be regulaiOt)' requimnents that exception items be cleared in ooe accounting period 

for regulatory or accounting purposes. this does not necessarily mean that a private sectOr institution would 

forgive an error in the customer's·favor. Such practices vary by institution, amount at issue. type of customer 

and other relevant circumstances. 

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The Department maintains two basic categories of funds for Indian Tribes: 

Judgment funds and Indian Money Proceeds of Labor funds. Within these two 

major categories, various accounts may exist. For example, within the Judgment 

category there are accounts for specified purposes, such as education, economic 

development, burial, etc. Within the Proceeds of Labor category, there are 

accounts for the proceeds from various tribal resources, such as grazing, mineral 

leasing, and forestry . If a netting policy authorizes or requires offset or netting 

of funds among accounts of different types, then funding for the specified purposes 

of the accounts may be altered. The interests of specific classes of beneficiaries 

~ .• all Tribal members, minors) in particular accounts would be altered. The 

Department believes that Congressional authorization may be required for such 

alterations. 

There are several different options for netting discussed below. The 

estimated cost to the Treasury for each is based on the government paying Type 

1 claims using the assumptions described above (simple interest based on the 

Tribal benchmark rate) and does not include adjustments for rollover amounts. 

Under a no-netting approach, the government would forgive all amounts that 

were overpaid to Tribes and pay all amounts owed to Tribes, plus interest. This 

approach would require the greatest expenditure and forgiveness of public funds 

to pay claims, with actual payment of $13.1 million in principal and $11 million 

in interest, and forgiveness of $14.0 million in principal and $9.4 million in 

interest. 

Netting to the Tribal level would provide for adding or subtracting of all 

amounts owed to or from a Tribe for all accounls owned by that Tribe ~·, 

payment was made to one account of the Tribe when it should have been made to 

another, or payment was made in the wrong amount to a Tribe's account). In 

other words, all plus and minus adjustments for all of a Tribe's accounts would be 

netted together to arrive at a net amount due to or from a Tribe. Interest would 

also be netted to arrive at a net amount due to or from a Tribe. If this process 

resulted in a net amount (principal and interest) due to a Tribe, the government 

would pay that amount. If it resulted in a net amount (principal and interest) due 

from a Tribe, the government would forgive that amount. Netting to the Tribal 

level would result in the government paying $3.5 million in principal and $4.0 

million in interest, and forgiving $4.4 million in principal and $2.2 million in 

interest. 

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Netting to the Tribal account level would provide for netting all amounts 

within one account owned by a Tribe, but would not net all accounts of that Tribe 

against each other. For example, if netting all amounts due to and from a Tribe's 

settlement fund accounts resulted in a net amount due to the Tribe, the government 

would pay that amount plus interest to the settlement fund accounts. If this method . 

showed a net amount due from the Tribe, the government would forgive that 

amount. This approach would require payment of $10.7 million in principal and 

$9.5 million in interest, and forgiveness of $11.6 million in principal and $7.7 

million in interest. 

Even with a netting policy, a Tribe still may be found to owe the 

government money. If no additional forgiveness of the debt is granted, Tribes 

would be required to reimburse the government. Under the recently enacted Debt 

Collection Improvement Act, 31 U.S.C. § 3711, et seq. (DCIA), the government 

may offset payments to satisfy delinquent debts. Applied here, the DCIA could 

require the government to offset any funds that the government may pay the Tribe 

in the future against amounts owed by the Tribe to the govermilent. 18 If additional 

forgiveness is granted, however, a Tribe whose debts are forgiven will have been 

treated more·generously than a Tribe who did not need the additional forgiveness, 

simply because the amount owed by the Tribe to the government happened to be 

greater than the amount owed to the .Tribe by the government. 

The Departtnent envisions that a forgiveness and netting policy should.apply. 

We also anticipate that the settlement legislation should include provisions for 

netting at the Tribal level. Although the Advisory Board proposed netting at the 

Tribal account level, that approach fails to recognize that the Tribe already had the 

benefit of the funds, albeit not necessarily for their original intended purpose. Any 

legal infirmity due to the inadvertent mixing of funds among accounts would be 

remedied by the legislation authorizing the settlement. For example, to the extent 

payments are made to a Tribe, the legislation could authorize Tribes to direct the 

funds be allocated within their various accounts as the Tribes deem appropriate. 

11 Under the DCIA, any federal agency that is owed by a ~ a past due legally enforceable debe 

(other than taxes) that is over 180 days delinquent is required to notify the Secretary of the Treasury.. The 

Secretary offsers the debe against cenain amounts thai may be owed to that person. Historically, the BIA bas 

not considered an Indian Tribe to be a 'person,' although the Department bas not yet reached a conclusion 

under the DCIA. If, however, a Tribe is deemed to be a 'person' under the Act, the offset provisions would 

apply, subject to provisions of the DCIA prohibiting use of administrative offset for debts over ten yean 

delinquent. · 

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After the netting policy is applied, if a Tribe still owes the government 

money, the Department recommends that the debt be forgiven. This forgiveness 

policy would nullify application of the DCIA because there would no longer be a 

valid and legally due debt owed to the United States. 

• Waiver/Review. We believe that Tribes which accept payment of Type 

I claims under this settlement process should be required to waive bringing any 

Type I claims as part of any subsequent litigation i·nvolving claims encompassed 

in the scope and time period of the Project. Therefore, we propose that legislation 

specify that Tribes choosing not to settle their Type l claims pursuant to the Type 

I claims procedures will not be entitled to the favorable standards governing 

netting interest rate or forgiveness that may ultimately be applied under the 

settlement procedure. In other words, we propose offering favorable rules on 

netting, interest rate, and forgiveness as an inducement to settle and avoid further 

litigation. 

2. Evaluation of Type 2 Claims 

• · Evaluation/Guidelines. Type 2 Claims involve one of two circumstances. 

First, there may be disputes about an account balance based on additional 

documentation in the Tri~'s possession. The Department would evaluate those 

claims pursuant to the reconciliation standards employed by Arthur Andersen in 

the Project.

19 Second, there are so-called "passed adjustments" - transactions 

" In lhe course of lhe Project, approximately $6.03S billion iu disbursement transactions wen: 

categorized as reconciled. Of this am.ounl, abour a thin:l- $1.925 billioa in U'a:IISaCtions- were reconciled 

based on complete voucher packages. The balance - $4.110 billioo iu mmactioDs - wen: recoociled based on 

disbursement voucher packages which may not have iDcluded, or may ..,. have t-1 required to iuclude, all lhe 

supporting documentation described below. A complm clisbunemo:m ~ oould iDclude a series of 

transactional documents, including a signed Form SF-1166 (AUiborizaiooto Disburse); au accomplished copy, 

endorsed by lhe Treasury Department, of tha1 same Form SF-1166: a Form SF-1034 (Requeot for 

Disbursement); and an accompanyiug Tribal resolution Or Oilier Trt'bal aulborizalion, eilher aulhorizing a 

particular signatory for lhe SF-1034, or merely requestiug paymtlll of !be fimds. The Advisory Board 

concluded !hat "[b)ecause some degree of proof of payment exists aDd bcaDse !be Tribes now have access to 

the images and lhe documenwion for all lhese tl'liDSaCiions. !be - of bringing a claim should fall on lhe 

Tribes.· The Board estimated !hat lhe probability of a loss from incompleu: disbursement voucher packages is 

most likely less than 10 percent. The Board proposed an~ seokml:ot of $400 million (about 10 percent 

of total incomplete disbursement packages), $200 million of wbic:b would be used 

as part of the initial capital of an Indian Development banlt: (dc:stribed below), aDd S200 million of which would 

be used to satisfy specific claims brought by lhe Tribes, wilh iudividua1 aa:oums capped a1 S percent of total 

incomplete disbursement packages for lhat Tribe. The ~ disagnxs wilh tru.. proposal because lhese 

transactions have been reconciled pursuant to the procedures aod staDdards of cbe Project. 

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which were deemed to be reconciled even though BIA and Arthur Andersen 

disagreed <~.bout the adequacy of the documentation to support the transaction. 

Claims based on passed adjustments would be handled by submitting them directly 

to the negotiation/mediation process described in the foilowing paragraphs. 

• Process. The Department, through the OST, would be authorized to 

negotiate with Tribes in good faith in an effort to resolve Type 2 claims. If the 

Department agrees that an adjustment should be made, resolution would be 

strucrured under the provisions for Type 1 claims (including interest rate, 

forgiveness, netting, etc.). If the new documentation is insufficient under the 

guidelines to categorize the claim as a Type 1 claim, the claim would be handled 

under the procedures adopted for Type 3 claims as described' below. 

In · the event the Department and the Tribe are unable to agree on the 

disposition of a Type 2 claim, the Tribe could request that the matter be submitted 

to a mediator. The Federal Mediation and Conciliation Service would be 

requested to appoint a mediator skilled in dispute resolution who would seek to 

resolve the issue using alternative dispute resolution mechanisms. Resolutions 

could include categorizing the claim as a Type 1 or Type 3 claim to be settled 

under the legislated settlement process, proposing a cash settlement or concluding 

that the claim lacks merit. Mediation would be non-binding. 

• Timing. The legislation should provide that Type 2 claims be submitted 

to the Department within a specified period --perhaps two years. It is possible 

that a Type 2 claim would be recategorized as Type 1 ·after consideration by the 

Department or a mediator. If this could be done promptly enough, ail Type 1 and 

Type 2 claims could be settled simultaneonsly. However, because the Tribes have 

no incentive to submit Type 2 claims in instances where they will owe the 

government money, and because the Department believes that it is important to 

resolve the Type 1 claims as promptly as possible, the Department would attempt 

to handle Type 1 and Type 2 claims togetlier wherever possible, but sees no reason 

to delay resolution of the Type 1 claims until the Type 2 process is complete. 

3. Settlement of Tyoe 3 Claims 

During the course of the Project, 32,901 transactions totaling $2.4 billion 

(in absolute terms) were identified for which supporting documentation was not 

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located. 

20 The Department estimates that the maximum potential claims against the 

government amount to approximately $575 million for the following reasons. Of 

the total $2.4 billion, $1.123 billion were transactions involving receipt of funds 

by the government on behalf of a Tribal account from third parties. The 

government can demonstrate that the unreconciled receipts were posted . to the 

general ledger accounts of a particular Tribe. Accordingly, it is likely that those 

Tribes benefited from receipt of the funds and the chance of loss is relatively low. 

(While there is a possibility of a posting error, the Project demonstrated that 

posting errors in reconciled transactions for the basic reconciliation were extremely 

low - approximately .01 percent). If errors did occur, such as the funds being 

credited to the wrong Tribe or Tribal account, there is no way to determin~ which 

Tribe or account should have received the money and therefore, no way to direct 

a corrective deposit. 

Similarly, $479.6 million of the unreconciled transactions were transfers of 

funds within different accounts of the same Tribe. For example, funds may have 

been erroneously credited to a Tribe's education account which should instead have 

gone to its burial account: In order to rectify the situation, the funds must be 

debited from the education account, and then credited to the burial account. In 

such a situation, there would be no net change in the amount of funds held for the 

Tribe's benefit. While there is no way to determine whether damage occurred to 

particular beneficiaries of specific accounts as a result of unreconciled transfers, 

it is clear that members of the intended Tribe benefited from these transfers even 

if they were placed in the wrong accounts. 

Finally, there were $808.6 million in disbursement transactions for which 

there was no supporting documentation. Of that amount, $73.6 million are 

positive disbursements Q.&., receipts) where even had there been an error, it would 

have benefited the Tribe. An additional $40.5 million was for attorney and expert 

witness fees and $119.5 million were disbursements of settlement funds to Alaska 

Regional Corporations. It is reasonable to presume that attorneys, expert 

witnesses, and the Alaska Regional Corporations would have filed claims had the 

· "' It is ilnponant to DOte that the lack of supponing documeD!alion for S2.4 billion in transactions does 

no< mean the money was lost, stolen, or otherwise misappropriated. It means that the BIA was unable to loeate 

documents to suppon the aiXIU1IC)' of transactions reflected in the general ledger. An analogy in the general 

commercial banking sector would be if a bank were unable to loeate copies of cancelled checks. 

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payments not been made .

11 

As a result, deducting the positive disbursements, attorney fees, expert 

witness fees and Alaska Regional Corporation disbursement transactions, the 

Department believes that the settlement options should focus on the remaining 

$575 .1 million of undocumented disbursements. 

• Settlement of claims. Developing an equitable settlement for potentiai 

Type 3 claims is not a simple task. On the one hand, guidelines governing the 

Project indicated that a transaction would not be categorized as reconciled without 

certain documentation to support that funds were handled as reflected in the 

general ledger. On the other hand, there was no indication during the course of 

the Project that Tribal or liM funds have been misappropriated, misdirected or 

lost, although the Project did not specifitally examine fraud. And, as noted above, 

for the 86 percent of transactions which were reconciled, the error rate was 

extremely low -- .01 percent. 

The Department intends to consult with Tribes on their recommendations on 

how to address Type 3 claims. We have no preconceived approach as we enter 

these consultations, 

The Advisory Board proposes that with respect to undocumented 

disbursements, a · total payment of $300 million would be distributed 

proportionately to all Tribes with trust accounts, based on the product of the 

percentage of the Tribe's unreconciled disbursements plus interest and the total of 

all unreconciled disbursements plus interest. According to the Advisory Board, 

this award equals 52 percent of total unreconciled disbursement exposure or 15.5 

percent of total unreconciled disbursement exposure plus compound interest (it 

would be 23 percent based on simple interest). In addition, the Advisory Board 

proposed a general settlement amount of $300 million to be used to help capitalize 

a proposed Development Bank for American Indians, in settlement of unreconciled 

receipts, transfers and disbursements (not otherwise addressed in the settlement). 

Under the Advisory Board's proposal, half of the amounts paid in settlement 

would be Tribe-specific, while the balance would go to the proposed Bank, for a 

" The General Accounting Office =tly coiDID<DCOd m invesrigation to detennine if the Alaska 

Regional Corporations suffered losses with respect to these unreconciled disbunc:IDCill transactions. 

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total amount of $600 million. It is not clear, however, that the $600 million bears 

any relationship to any actual government liability for the unreconciled 

disbursement transactions; it should be noted that an unreconciled transaction does 

not necessarily mean that there was a loss. 

The Department requires additional consultation on how to address the Type 

3 claims before it makes a specific proposal to Congress. Among the issues on 

which we will seek the views of the Tribes are the following: 

On what basis does the Department compute the aggregate value of any 

settlement of Type 3 claims? 

Do Tribes want the settlement of Type 3 claims to be paid directly to 

individual Tribes, to go towards some type of total settlement option 

such as the proposed Bank, or a combination approach such as the 

one proposed by the Advisory Board? 

If claims are to be paid directly to Tribes, on what basis should the 

claims be valued? Should different types of claims be valued 

differently? How? 

If claims are to be paid through some type of total settlement option aifTI!!d 

at benefitting Tribes generally, what options should be considered? (J'he 

issues raised by total settlement options are discussed on pages _.) 

What procedures should apply to settling the Type 3 claims? 

How should the proposed settlement be affected in the event that some Tribes 

choose not to participate in the settlement? 

How should the total amount of the settlement be determined? 

What type of waiver of claims should be required of Tribes that opt to 

participate in the Type 3 settlement process? 

What percentages should be used to calculate settlement amounts? 

To the extent that compensation is paid for transactions for which no 

24 
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documentation exists, how should it be distributed among the Tribes? 

V. LITIGATION 

Tribes that do not settle their claims under the settlement procedure outlined 

above may wish to litigate those claims in court. In the past, similar litigation has 

often proved extremely costly and time-consuming for all the litigants. Given this 

history, we specifically want to avoid any litigation process that would resemble 

the Indian Claims Commission proceedings of years past. To avoid this result, we 

believe that legislation establishing the settlement procedures· also must establish 

certain parameters for judicial litigation of claims of non-settlers. Such parameters 

are necessary to ensure that litigation proceeds in an orderly and efficient manner, 

to ensure that the beneficiaries of the claims, as opposed to their attorneys and 

accountants, are the persons who benefit from any amounts recovered in litigation, 

and to encourage settlement of as many claims as possible. The Department is 

considering several parameters including the following: 

• Statute of Limitations: All claims for the period preceding September 

30, 1995,22 must be brought within two years of the date of enactment of the 

legislation or 90 days after the conclusion of the Type 2 claims process, whichever 

is later. · 

• BUrden of Proof: The Tribal account holder will bear the burden of 

proof on damages, under applicable fiduciary standards, The burden of going 

forward will first be on the account holder, to present a prima facie case on 

liability. If that burden is satisfied, the burden of going forward then would shift 

to the government, to show that the Tribe's accounts are correct by some 

predetermined quantum of evidence appropriate in the circumstances. The account 

holder would then have the opportunity to produce evidence to respond . to that 

showing. 

" Allbaugh the Reconciliation Project covaod die 1972·1992 time period. the Aa provides that lbe 

Secretary's report shall identify for each Tribal bUSt fund oa:outll, a balaDa: r=aciled as of September 30. 

1995. ID response, OTFM has been internally recouciliD& Tnl>ol bUSt fund aa:ounts and providing statem<Dts 

to Tribal trust fund account holders since 1992. ID order 10 bring some closure 10 the litigation proceSs, we 

propose that all claims for the period preceding September 30, 1995, must be brought by Tribes who choose to 

litigate . 

25 
330 

• . Waiver: At the conclusion of any such litigation, the court would 

adjudicate and declare as final the balance in the accounts which are the subject 

of the litigation as of September 30, 1995. Any claims of mismanagement of the 

underlying trust assets also would have to be brought simultaneously or would be 

barred. 

The purpose of these parameters is to achieve a final balance in Tribal 

accounts as of September 30, 1995, much like the Indian Claims Commission 

legislation, which also established a baseline date from which to look forward. 

VI. TOTAL SElTI..EMENI ALTERNATIVES 

The settlement process outlined above concerns resolution of claims arising 

within the scope and period of the Project. It does not address claims that Tribes 

may have arising from the period preceding or subsequent to the reconciliation 

period, or for claims related to deficiencies in other aspects of the Department's 

trust asset management outside the scope of the · Project (including management of 

the underlying trust assets). 

In order to arrive at settlement that would truly put to rest all trust 

management and accounting issues predating September 30, ·1995, Congress may 

also want to address all of these other potential claims through what we refer to 

as a "total settlement" approach. A settlement of this type conceivably could 

encompass 11M claims as well. In many respects, developing an equitable 

approach to a total settlement is even more challenging than crafting ;_t resolution 

of Type 3 claims. There has been no methodical analysis of the nature and scope 

of deficiencies, if any, that would be addressed in a total settlement approach, 

although Tribes have long criticized various aspects of the Department's 

management of their assets. 

Moreover, assuming that some type of programmatic settlement is adopted, 

a number of issues arise, including: criteria for participation (should participation 

be limited to Tribes-whose claims meet specified criteria, or be available to any 

Tribe with Tribal accounts); what form participation would take (U.. if an 

education fund were established, would each Tribe be eligible for a one-time 

payment in a certain amount for educational purposes, or would Tribal members 

be entitled to apply for scholarships); how participation in this component would 

26 
331 

fit in with the payment of individual Tribe's specific claims ~ .• would this 

replace or be in addition to payments to settle specific claims, would there be 

offsets, cumulative limits to the settlement, etc.); what is the rehitionship between 

access to the benefits of the programmatic settlement and the amount of potential 

claims a Tribe may have ; and the source of funding. 

Yet, the prospect of achieving some degree of finality on trust asset issues 

is attractive for both the Department and Tribes alike. It will allow us to focus on 

prospective reforms that will result in more accurate and productive management 

of Tribal resources. Moreover, a total settlement option could encourage further 

the settlement of claims based on the Project, and settle claims relating to trust 

issues that fall outside the scope or time ·period of the Project. This approach 

would only be successful, however, if most Tribes agreed to participate in the 

program and specifically agreed to waive all Tribal trust claims through September 

30, 1995. 

As with Type 3 claims, the Department has not adopted a position on 

whether a total settlement approach is either in the public interest or is workable. 

Moreover, it endorses no particular approach to a total settlement option should 

we decide to recommend a total settlement component. Both matters will be the 

subject of further consultations with the Tribes. However, for purposes of 

discussion arid illustration only, we outline several possible approaches for Tribal 

consideration. These generally are intended to advance economic development in 

Indian country and are structured to meet the policy objectives of the Tribes 

themselves, rather than those of the government. Moreover, these are not the only 

possible total settlement options. Over the next several months, as we engage in 

Tribal consultations, we will be considering other initiatives that may serve as an 

appropriate mechanism. 

A. Advisory Board Proposal - DeveloPment Bank 

One option proposed by the Advisory Board consists of the establishment of 

a development bank for American Indians with certain capital and assurances 

provided by the United States Government. 1be Advisory Board proposal 

envisions the United States forming and capitalizing a federal Development Bank 

for American Indians to serve as a nationwide financial institution providing a 

dependable source of lending to American Indians and Tribes and a dependable 

source of funds for investment in American Indian enterprises. The Advisory 

27 
332 

Board would allow all liM and Tribal account holders to participate in the Bank, 

in settlement of all potential claims arising out of the Project not covered by the 

other components of the Advisory Board's settlement proposal, as well as any past 

potential liability for trust management practices in general. Under the Advisory 

Board's approach, the Bank would be partially capitalized by the proceeds of two 

general settlement components for all Tribes with trust accounts, to address all 

unreconciled transactions arising from the Project ($300 million) and some 

potential liability for all reconciled disbursements with incomplete disbursement 

voucher packages ($200 million). Shares would be distributed to all federally 

recognized Tribes on some equitable basis set forth in the legislation. In total, the 

United States would provide the following capital and guarantees for the Bank: 

Equity Capital 

Borrowing Capacity 

guaranteed by U.S. 

Initial Borrowing from U.S. 

$500 million 

10 times equity capital 

$3 billion for 30 years 

at 30-year Treasury Rate 

The Bank would provide access to long-term loans and investments for 

economic development and would provide access to low interest rates on loans, 

made possible by the Bank's tax-free status and its access to funding in the 

Nation's capital markets at rates commensurate with those paid· by the U.S. 

Governrnent. The Bank would be a for-profit financial institution and would not 

receive appropriated funds for operating expenses. It would receive appropriated 

funds for lifeline financial services and other specific programs as approved by 

Congress. The Bank would be authorized to invest up to 25 percent (initially $125 

million) of its permanent capital in eligible Indian businesses and projects. 

The Bank would also be allowed to invest up ·to $300 million in the 

purchase, holding, financing and sale of fractionated realty interests in Indian 

allotted lands. According to the Advisory Board, such purchases and financing 

would be made on "prudential terms" to eligible individuals and Tribes. 

Fractionated heirship activities would be governed by rules in the legislation to 

resolve the fractionated heirship problem, and would be administered to achieve 

the consolidation of existing fractional interests and to prevent or substantially 

reduce future fractionation. The fractionated heirship problem is discussed more 

fully below on pages 30-31. 

28 
333 

As with any total settlement option, the Advisory Board Development Bank 

proposal would have the advantage of finally resolving all claims arising out of the 

United States' management of Tribal trust funds (other than those which Tribes 

choose to litigate). The Advisory Board recommends extending the Bank 

settlement option to resolve liM claims as well. It is unclear whether smaller 

Tribes or individuals would be likely to support or take advantage of the 

Development Bank settlement option; their interests might be better served by 

providing more direct access to funding for other purposes. It also is unclear 

whether the Advisory Board proposal would provide access to the Development 

Bank to non-Indian 11M account holders. 

There are many unanswered questions about the Advisory Board's proposal 

for a Development Bank, including the relationship between the Bank and nonIndian liM account bolders, how membership in the Bank should be determined, 

mechanisms for accountability and control of the Bank and the status of Tribes 

which choose to litigate rather than settle their claims. Moreover, as a general 

policy, the Treasury Department strongly opposes Federal entities having authority 

to borrow in the credit markets. In short, the Department has many questions 

about this . proposal and, at this point in time, specifically does not ·endorse it. 

However, the Advisory Board's proposal warrants consideration and has been 

included in this report ·to generate additional thought and discussion. 

B. General PrOJWUD for. Trust Resource Manitument or · 

Other Activities 

A second option for a total Settlement. of claims would be some type of 

general settlement grant or other program providing access to funds for Tribal 

economic development purposes. The terms and conditions for such a program 

would be defined in authorizing legislation and would conform to longstanding 

federal financial policies. The intention would be to provide a source of funding 

for types of initiatives for which no other funding is readily available. 

For example, in settlement of all potential outstanding Tribal trust 

management claims, legislation could establish a permanent or temporary grant or 

other program to provide Tribes with access to financial support for Triballyowned businesses or other Tribal economic development projects. Administration 

of the program could be performed by the Secretary of the Interior, the Attorney 

29 
General, or other appropriate official. 1be program could be financed and made 

available to all federally recognized Tribes on an ongoing basis, with criteria 

governing eligibility, appropriate projects, the amount available to each Tribe in 

a given year or time period, total funding available, repayment obligations, etc . 

This approach would provide Tribes with direct access to funding to undertake and 

support American Indian· businesses and projects, as opposed to the ability to 

borrow money to pursue these concerns provided in the Advisory Board's 

Development Bank proposal. Alternatively, a fund could be established and claims 

would. be niade against the fund, with acceptance of payments considered to be in 

full satisfaction of any claims on behalf of a Tribe, similar to the claims procedure 

used in other restitution funds administered by the United States. A Tribe's 

acceptance of such a total settlement proposal would extinguish all of its 

outstanding Tribal trust fund claims. 

C. Fractiooated lleirshig Land Acguimjon Promm 

A third option for a total settlement of claims would be an initiative to 

address the fractionated heirship problem, which is a major cause of the difficulties 

in the administration of the BIA's trust fund management systems and BIA's 

inability to obtaiJ,t more productive returns for the use of trust landS. As noted 

above, the Advisory Boald's Developinent Bank proposal would direct some funds 

toward resolving this issue. It could, however, be 3ddressed in any number of 

ways, with or without the existence of the Bank. · 

Fractionated heirship is an indirect result of the 1887 General Allotment Act, 

which directed the division of TnlJal lands and allotment of them to individu81 

Indians. Allotted or individually-oWned trust lands comprise approximately 11 

million acres. As originally envisiOned, anotments were to be held in trust by the 

United States for their IDdian owners for no longer than 25 years, after which the 

land would be conveyed in fee simple to the lndi3n owners. Many allottees died 

without wills during the 25-year trust period, and it also became evident that many 

allottees' land continued to need federal trust protection. Consequently, Congress 

enacted limited probate laws and authorized the President to extend the trust period 

for those individuals who were not competent to manage their lands. The 

presumption was, ho1vever, !bat at some point in the then-foreseeable future the 

lands would be conveyed to their Indian owners free of federal restrictions. 

Nevertheless, Congress conlinued to extend the period of trust protection but did 

not amend the probate laws. Under the Indian probate laws, as individuals died 

30 
335 

without wills, their property descended to their heirs as undivided fractional 

interests in the allotment. As the years passed, fractionation has expanded 

geometrically to the point where there are hundreds of thousands of tiny fractional 

interests in Indian Trust property. Without action, this problem will become even 

more severe. 

Congress attempted to address the fractionation problem with passage of the 

Indian Land Consolidation Act (ILCA) in 1984. The ILCA authorized the buying, 

selling and trading of fractional interests. Most importantly, it provided for the 

escheat to Tribes of interests of less than 2 percent. Although over 55,000 of the 

2 percent-or-less fractional interests have escheated since 1984, the fractionation 

problem continues to worsen. Maintaining heirship and land records and 

administering the land is inordinately expensive, and the administration of the 

records pertaining to the moneys earned by each individual . allottee is equally 

expensive and difficult. This is a major cause of the problem with maintaining 

individual Indian trust accounts. 23 Equally important, utilization and conveyance 

of the fractionated property by the numerous owners is difficult because of the 

need to secure the numerous consents required . 

. The Department believes that legislation which would consolidate the large 

number of existing fractionated interests and prevent further fractionation would 

benefit the Tribes by promoting self-determination, and by removing a significant 

obstacle to the efficient administration of Indian trust funds. 24 The legislation 

would have ·to specify the criteria for participation, whether the Department would 

commit to buying a certain number of interests for each Tribe, whether there 

would be cumulative limits to the settlement funding, and other issues. The 

fractionated heirship land acquisition proposal could comprise or be a portion of 

a broader total settlement proposal to resolve all Tribal trust fund claims. 

D Over 170,000 11M aa:ouniS- about S5 pcn:em of all aocoiiDIS ,. have a balance of less lhan $10. 

,. We recogni2e that fractionatioo is one major cause of the current state of trust funds I!Wiagemcnl. 

In order to preveot funher fractionation, it will be necessary to change inheritance laws relating to Indian 

allotments. Cum:ntly, however, the constitutionality of the indian Land Consolidation Act (25 U.S.C. § 2206) 

is before the Unitecl Scates Supreme Coun in the case or Babbitt v. Youpee, Case No. 95·1595. In~ 

!!Alll!il!. 67 F .Jd 194 (9th Cir. 1995) the appe!We coun held that the 1LCA violates the right of certain Indians 

to convey their allotment interests ·freely. We anticiparc that the Supreme Coun's resolution of this case. whieb 

was argued earlier this !IIOllth, wiD provide Deeded insight into the best means for balancing the need to control 

fractionation with the inheritance rights of individual Indians. 

31 
336 

D. Consultation 

Because of the complexity of these proposals, the need to generate near 

universal support among Tribes in order for the total settlement approach to be 

successful, and the Administration's policy on government-to-government relations 

with Tribes, the Department believes additional consultation on all these ideas is 

required. The Department intends to circulate this analysis to all Tribes and 

interested parties who-may have Tribal trust fund claims to solicit their ideas for 

a total settlement initiative and explore their willingness to waive their own claims 

if one were to be implemented. The Department will submit a supplemental report 

to the Congress in Aprill997, with its findings and additional recommendations. 

VII. QTHER TRusr FUNDS ISSUES 

A. RestoratiOn of Overclnft Interest Clearing Accounts and 

Settlement of Miscellapeogs Losses 

There are two additional issues that might be addressed by legislation. 

These issues relate to the restoration of overdraft interest clearing accounts (which 

apply only to 11M accounts) and settlement of miscellaneous losses (which apply 

to both Tribal and 11M accounts). 

In the course of reviewing 11M accounts, OST staff determined that there is 

$42.2 million in unidentified Overdraft Interest Clearing accounts in the detailed 

IIM subsidiary ledger. Overdraft interest clearing accounts are control accounts 

that are used when interest is posted to the underlying individual accounts. When 

interest is credited to the underlying accounts, the control account is debited. 

When interest is funded the control accounts are credited. The amounts debited 

and credited, in theory, should be equal. The current debit balances in these 

accounts are likely the result of either the non-posting of interest in the liM 

subsidiary ledger that was funded, or interest credited to individual account holders 

in excess of what was actually earned/funded. Research on these accounts is 

continuing. 

The Advisory Board proposes that $42.2 million be appropriated to restore 

these accounts, as the practical effect of these overdrafts is that current liM 

account holders are deprived of approximately $2 million in interest income 

32 
337 

aiUlually. This assertion is not entirely accurate, as · the total assets actually 

invested in the liM account pool exceed the balance in the 11M subsidiary ledger. 

The Department agrees that these discrepancies .need to "investigated, and if 

necessary, rectified. However, it is not clear at this time how much funding, if 

any, is needed. 

The review also identified $28.3 million in other miscellaneous losses, 

broken down as follows: 

Loss and associated interest 

To bring subsidiary (IRMS) and Control 

Account (OMNI) into balance 

Budget suspense accounts 

(millions of dollars) · 

$10.0 

Clean-up remaining General Ledger Accounts 

10.8 

1.0 

~ 

To~ $28.3 

The Advisory Board proposes that $28.3 million be restored to the liM accounts. 

Although the Department agrees that these discrepancies need to be rectified, 

it is not clear how much funding is necessary to do so. in some cases, simple 

accounting adjustments might be sufficient. Over the next several months, the 

OST will prepare a detailed analysis of all accounts in the trust fund general ledger 

and subsidiary ledgers which (1) explains how the accounts correspond to the 

actual underlying assets and liabilities; . (2) quantifies the resultant deficiency I equity 

of the trust fund as a whole; and (3) explains the efforts that have been undertaken 

to rectify these variances. The Department also recommends that legislation 

provide general authority to clear trust fund subsidiary and general ledger account 

discrepancies. This authority could be exercised after reports on the nature of the 

discrepancies and descriptions of efforts taken to resolve those discrepancies are 

submitted to and approved by the Office of Management and Budget. 

B. Fundin& of the Settlement Le&islation 

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338 

The Advisory Board proposes that claims be paid from the Judgment Fund25 

although it does not identify a specific reason for this position. 

Any of these proposals would require the government to pay significant 

amounts of money. Some Tribes have pointed out that to the extent that settlement 

would be funded from Departmental funds and scored against the BIA budget, the 

settlement would effectively be funded from programs for which the Tribal 

beneficiaries are otherwise the intended beneficiaries. Tribes with small or no 

trust fund claims also might conclude that they are helping to fund payment of 

claims to other Tribes through the reduction in funding of the programs that are 

intended to benefit them. Tribes with trust funds could also claim that they lost 

twice: initially through the incorrect management of their trust funds, and a 

second time by a reduction in programs and services to the Tribes and their 

members that a reduction in BIA funding would necessarily entail. Moreover, 

some Tribes have pointed out that similar major liability claims against the 

government, such as those arising from the failure of federally insured savings and 

loan institutions, were not scored against a particular agency. 

If these claims were to be settled through litigation. rather than legislation, 

judgments would likely be paid through the Judgment Fund. In enacting settlement 

legislation, we urge that the Congress take steps to ensure that any payments to 

resolve these areas of difference not be made in a manner that would jeopardize 

current levels of service to Tribes and individuals who, collectively, have 

experienced the lowest level of economic recovery of any group in the Nation and 

for whom the government has pledged a special trust relationship emanating from 

treaties and compacts entered into on a government-to-government basis: The 

Department's fmal recommendations will address a source of funding for the 

settlement. 

" The Judgm<:Dt FUDd is administeml by tbo: Secmary of tbo: Treasury. and is funded by a pertnaD<lll, 

indefinite appropNlion. · 

34 
339 

Advisory Board PrQposa1s In Response to Tribal Trust Fund 

Reconciliation Project 
340 

PROPOSED LEGISLATION 

IN RESPONSE TO TRIBAL TRUST FUND RECONCU..IATION RESULTS 

AND TO ADDRESS SOLUTIONS TO THE MAJOR TRUST MANAGEMENT 

PROBLEMS 

INTRODUCTION AND PURPOSE 

This paper presents a proposal for legislation in response to the Bureau of Indian Affairs' 

(BIA) Tribal Trust Fund Reconciliation Project (Reconciliation Project), to major problems 

affecting American Indian trust management and to the statutory requirements of the American· 

Indian Trust Fund Management Reform Act of 1994 (Reform Act of 1994). 

The Reform Act of 1994 provides that the Sccretmy of the Interior (Secretary) shall 

prepare a report which must include a description of the procedures used for reconciliation of the 

Tribal trust fund accotmts and a Slalemcnt outlining efforts the Secretary will undertake to 

resolve disputes regarding TribaiiiQ;()IJI]t balances arising out of the Tribal trust fund 

reconciliation prciccss. The Sccmary provided an interim report to Congress on May 31, 1996. 

As the Secretary's Report indic:atcs, commencing in January 1996, each tribal account 

holder was provided a report on the reconciliation of its accotmts along with account statements 

that show account balances, reconciled tnmsactions, and proposed adjustments. Subsequent to 

the distribution of the m:oDCiliation report and account statements, a national meeting, to which 

all account holders - invited, was beld in Albuquerque, New Mexico, to explain the 

reconciliation methodology and lbe report and IICCOIIDt statement format, content and 

tcnninology. A series of five (S) rqionaiiiiCieting$- also scheduled during the spring and · 

summer of 1996 to work directly with each account holder to address questions and issues on its 

specific report and account slatm!ents · 

Through April30, 1996, seventy-seven (J7) of the 280 tribes involved in the 

reconciliation project have tapODded. .Specifically, two (2) account holders have accepted and 

three (3) account holders have disputed lbeir account balanccs. Because by the end of May all of 

the scheduled meetings had DOt beat beld to receive and discuss account holder issues and 

comments and sinCe many account holden had not communicated lbeir acccptance or dispute of 

their account balan<:cs, oDI:y 1111 infcrim report on the account holders' ancstations was provided 

in the Secretary's Report. The Depoutmcot of the Interior (Department) testified in June that it 

will be in a position to propose a mcdumism to IC!Oive any disputes sometime during the fall of 

1996 and that a final report on IICCOIIDt holdc:r aucstations and a mcchaniSD! to resolve any 

disputes will be submitted to the Coogress by November 15, 1996. The mcchaniSD! to resolve 

any disputes will almost cedllinly me the form of proposed legislation. Legislation would 

provide an orderly and cfficiem me.:fvmism for resolution of the disputes over account balances 

arising out of the Tribal trust fimd account recoDCiliation process. would respond to the statutory 

directive that the Secretary oudinc efforts to resolve such disputes and because claims arising out 

of the Reconciliation Project will probably substarrtjally exceed the Department's financial 

resources. 
341 

Need for a Comprehensive Settlement and Solution to Trust Management Problems 

This proposal presents a comprehensive set of settlements and initiatives which are 

designed to compensate American Indian trust beneficiaries for damages from past trust 

management practices and assure an accurate and timely accounting to trust account holders in 

the future. 

. In October 1995 the Office of the Special Trustee for American Indians (OS1) 

commenced an assessment of the U. S. Government's trust management policies, procedures, 

practices and systems as they apply to individual American Indian and American Indian tribal 

accounts. 

By February 1996 the OST completed the preliminary assessment and produced a 

conceptual Strategic Plan to acquire md institutionalize specified systems. Implementation of 

this plan will pennit and ensure that the U. S. Government establishes appropriate policies and 

procedures, develops necessary systems and takes the affirmative actions necessary to provide an 

accurate and timely accounting to American Indian trust beneficiaries. In this manner the proper 

discharge of the Secretary's trust responsibilities finally can be accomplished. The Assessment 

and Phase I of the Strategic Plan are attached ina document entitled "Special Trustee for 

American Indians, A.ssessmcnt and .Strategic Plan Principles, Phase I, February 1996" (Special 

Trustee's Assessment or Special Trustee's Strategic Plan). 

In December 1995 the Department's Bureau of lndiaD AfliUrs (BIA) substantially 

completed a multi-year "Tribal Trust Funds Reconciliation Project" (Reconciliation Project) and 

issued an "Agreed-Upon Procedures and Findings Report" for the period July I, 1972 through 

September 30, 1992. 

In August 1995 the Department substantially completed a study of the trust management 

systems relating to Individual Indian Monies (DM) accounts and issued a report entitled "liM 

Related Systems Improvement Project Report. • The findings of this report are substantially 

incorporated in the Special Trustee's Assessment. 

The Special Trustee's Assessment, the Reconciliation Project reports, the liM Related 

System Improvement Project Report and earlier reports issued ·by the General Accounting Office 

all confirm thal the U. S. GoVCIIUIDCOt's trust management systems, policies, procedures and 

practices coupled with the condition of the trust records and, notably, large numbers of missing 

docwnents, effectively prevent: 

I. a proper, accurate and timely accounting for trust account balances, collections, 

disbursements and investments and the maximization of the return on investments. 

2. the preparation of accurate and timely reports to trust account holders regarding all 

collections, disbursements, investments and return on investments. 

2 
342 

3. an audit under generally accepted auditing standards. 

4. any further reconciliation efforts, since the costs of such efforts would substantially 

exceed the benefits and at the same time would probably yield unsatisfactory and 

inconclusive results. 

The past and present undeniably poor quality of the trust management systems, the 

condition of the historical records and the U. S. Government's inability to provide an accurate 

and timely accounting prevent any reasonably accwate determination of the extent ofharm, 

damage or loss to American Indian trust beneficiaries. For example, the Reconciliation Project 

disclosed there were no records located to support $2.4 billion out of$17. 7 billion for the twenty 

year period (1972 -tm) for one category of transactions (non-investment transactions). In 

addition, it appears that the condition of the records and the quality of the trust management 

systems were much worse for periods prior to 1972. Therefore, it is reasonab!e to assume that 

several billion dollars more in unlocated documents and substantially more harm, damage and 

loss would have been disclosed had a full reconciliation or full accounting been possible for 

periods prior to 1972. · 

It is undeniable that some compensation is due the American Indian account beneficiaries 

for the U. S. Government's inability to provide an accwate and timely accounting and such 

compensation could be justified in the billions of dollars. But, even if the damages could be 

reasonably estimated, there would remain the question of which American Indians were harmed 

and damaged? There is no complete answer to that question and since there is not, any . 

settlement of claims, present and prospective, arising out of the U.S. Government's inability to 

render an accurate and timely aa:01mting or the R=lnciliation Project or both, necessarily must 

start with the settlement of known and quantifiable harm, damage and loss and proceed to a 

subjective, common sense settlement process for the other harm, damage and loss which may 

have accrued to trust account holders over many, many years. 

Any settlement process would also be inadequate unless it addressed the root causes of 

the Government's inability to provide an accwate and timely accounting to American Indian trust 

beneficiaries. That is why the Special Trustee's Strategic Plan is an integral part of the 

settlemeni process. Implementation of this plan will ensure that the U. S. Government 

establishes appropriate policies and procedures, develops necessary systems and takes the . 

affirmative actions oecessary to provide an accwate and timely accounting to American Indian 

trust beneficiaries in the future. In tbis manner the proper discharge of tlie Secretalys trust 

responsibilities finally can be accomplished. 

Consistent with the general approach just described, the following pages describe specific 

settlement terms and amounts, the criteria to be used and the rationale for each general 

settlement. 

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II. BACKGROUND 

The Secretary of the Interior has been designated by Congress as the trustee of the funds 

held by the federal government for Indian Tribes and individual American Indians. Therefore, 

the Secretary has a responsibility to ensure the proper accounting, investment and financial 

reporting of approximately 300,000 Tribal and liM trust accounts. 

Accordingly, the Department of the Interior through the Bureau of indian Affairs and the 

Office of the Special Trustee for American Indians has a responsibility to ensure that the trust 

accounts are properly maintained and invested in accordance with applicable laws; and that 

accurate and complete accountings and reports are periodically provided to fund owners. 

Over the past decade, operational reviews and financial audits have identified weaknesses 

in the control and oversight of indian trust funds. A primary concern was the failure to reconcile 

the trust fund accounts regularly. Accordingly, in 1988, 1989 and 1990, Congress directed BIA 

to take steps to reconcile Indian trust fund accounts as accurately as possible back to the earliest 

practical date. The FY 1990 appropriations language further specified the requirement that "the 

results of such reconciliation have been certified by an independent party as the most complete 

reconciliation of such funds as possible." 

Pursuant to these directives, BIA commenced its reconciliation project in 1990. ·In the 

fall of 1990, an ad hoc Tribal advisory group worlced in conjunction with the General 

Accounting Office (GAO) and the Department's Inspector General to develop a request for · 

proposal for the reconciliation contriu:t. In May 1991, the contract was awarded to a national 

accounting firm, Arthur Andersen, L.L.P. The ad hoc group constituted itself as the Intertribal 

Monitoring Association (ITMA). 

Phase I of the contract was intended. to dctcrminc what records were available, what 

procedures would be necessary, and what was the cost of a complete reconciliation for both the 

Tribal trust and liM accounts. This worlc was performed from June 1991 through January 1~2. 

The results of Phase I disclosed that all supporting docmnents could not be located, but to the 

extent they could be located, they could be examined. Because some records could not be 

located, it was resolved that an audit would not produce meaningful results. 

In view of this, the Department of the Interior, in consultation with the Office of 

Management and Budget (OMB) and ITMA, considered alternative methodologies and 

approaches with the goal of producing as accurate an accoWiting as pnicticable. As a result, the 

BIA modified the Arthur Andersen contract to incorporate the agreed-upon J)rocedures 

methodology, which does not constitute an audit in accordance with generally accepted auditing 

standards but was used to reconcile the Tribal trust fund accounts back to 1973. 

The Reconciliation. Project did not address liM accounts because it was determined that a 

similar reconciliation effort for liM accounts would cost S I 08 to $281 million. 

4 
344 

In accord with the Congressional mandate that the Tribal trust reconciliation be certified 

by an independent third party, the BIA awarded a contract to perform the certification to Coopers 

and Lybrand in September 1993. Due to difficulties with the contractor and a projected cost for 

completion of the certification that far exceeded initial estimates, BIA terminated the contract in 

October 1995, before the certification was completed. At BIA's request, Coopers and Lybrand 

provided a close-out letter summarizing the work performed prior to termination. In the letter, 

Coopers states that it noted elTOrs in certain aspects of Arthur Andersen's reconciliation work 

under the BIA contract, and that some but not all of these elTOrs were reported to Arthur 

Andersen and BIA. The letter further states, however, that no conclusions can be drawn from the 

preliminary information reported because Coopers did not complete the certification work or 

finalize the results. 

While the BIA reconciliation efforts were ongoing, in 1994, Congress passed the 

American Indian Trust Fund Management Reform Act, 25 U.S.C. 4001-4061, which established 

the Office of the Special Trustee for American Indians. The Special Trustee, who reports 

directly to the Secretary, is responsible for oversight, reform, and coordination of the policies, 

procedures, systems and practices used by various Depamnental agencies in managing Indian 

trust monies. The statute also required that the Secretary transmit to Congress by May 31, 1996, 

a report that describes the methodology and results of the trust fund reconciliation process, 

includes Tribal attestations as to disputed account balances, and outlines efforts the Secretary 

will undertake to resolve such disputes. 

In January 1996, OTFM released to approximately 280 Tribes a report summarizing the 

results of its Tribal Trust Funds Reconciliation Project The agreed-upon procedures used in the 

reconciliation were intended to accomplish the following: (1) verify that financial transactions 

posted to the accounting records aft: in agreement with the originating lease or sale agreements, 

pennits, or contract terms (not completed for all transactions); (2) determine the timeliness of the 

deposit of receipts (for informational purposes only); (3) verify that non-investment financial 

transactions posted to the BIA's official accounting records are in agreement with supporting 

financial source documents; (4) assess the reasonableness of investment income posted to Tribal 

accounts; (5) assess the reasonableness of U.S. Treasury interest calculations; and (6) reconcile 

accounting systems and general ledger balances with U.S. Treasury balances. The report 

indicated that there were some $2.4 billion in tmreconciled noo-inveslment transactions 

(transactions for which supporting financial source documents cannot be located). The 

procedures and the proposed adjustments to account balances are detailed in the Reconciliation 

Report, and were explained to the Tribes at a national meeting on February 14 and 15 in 

Albuquerque, New Mexico. More detailed follow-up was provided at a series of regional 

meetings with individual Tribes. 

As noted, the Depamnent bas indicated it will be in a position to propose a mechanism to 

resolve any disputes sometime during the fall of 1996 and that a final report on account holder 

attestations and a mechanism to resolve any disputes will be submitted to the Congress by 

November 15, 1996. 

5 
345 

m. lYPES OF CLAIMS AND SE'ITLEMENTS 

For purposes of this paper, the two basic types of potential claims that may arise from the 

Reconciliation Project or otherwise are referred to as Type I or Type 2 claims. 

Type I claims are claims based on exceptions or errors for which the government has 

adequate documentation and agrees that either funds are owed to a Tribal account or that funds 

are owed from a Tribal account to the government These claims are described in the 

Reconciliation Project Reports or otherwise as set forth in the legislation. 

Type I claims also include claims where a Tribe disputes its account balance from 

reconciliation and brings a claim which can be negotiated, mediated or arbitrated. These claims 

can be based on additional documentation produced by the Tribe or the government in 

addressing Reconciliation Project issues, other claims of a similar nature or certain reconciled 

disbursement transactions without complete disbursement packages which can be quantified to . 

some extent and examined for reasonableness. 

Type 2 claims are claims arising from all other circumstances and include unreconciled 

transactions, where neither the Tribe nor BIA can locate adequate source .documentation to 

support the account transactions or balance or to support a conclusion that those transactions or 

balances are in error. Type 2 claims would address not only those claims arising from BIA's 

Tribal trust fund reconciliation, but would include claims and settlement amounts arising from 

other trust managanent issues that need to be addressed and resolved. These include claims 

arising from the 11M accounts for all periods up to settlement and from the Tribal accounts 

outside the 20-year tribal reconciliation period. a,s well as issues pertaining to the Department's 

existing trust management practices and the OSTs reform efforts. 

Settlements involve payment for both specific and general claims and deficiencies. 

Settlement proceeds include direct distribution to Tribes or 11M account holders where specific 

settlements can he reasonably supported based on the factual situation. Where damages cannot 

he reasonably estimated for particular individuals or Tribes, settlement proceeds are distributed 

to remedy trust managanent deficiencies or to provide for other initiatives which will benefit 

substantially all trust beneficiaries. · 

IV. PROPOSALS FOR SETILEMENT OF SPECffiC CLAIMS 

A. General Fl'lllllework 

The generalli:amework for resolution of claims arising from the reconciliation must he 

legislative. The legislative options described below would provide for the expedited payment of 

claims from the J~ Fund or otherwise as specified for particular settlements. 

All agreed Type I claims would he paid in full with interest, and with forgiveness of any 

amounts that may he owed by Tribes, and without regard to the settlement of Type 2 or any other 

6 
346 

claims. Payments would be made promptly after the legislation takes effect in accordance with 

procedures and guidelines set forth in the legislation. 

Type 2 claims would be settled and paid based on specific and general settlements.and 

guidelines set by the legislation. 

Tribes that settled their Type 2 claims pursuant to the legislative procedure would waive 

all claims related to Tribal trust funds administered by the BIA for the period prior to September 

30, 1995. Account balances, adjusted by the agm:d claim amounts, would be accepted as of 

September 30, 1995 and would be used as the basis for future accountings. The government 

subsequently would not be required to perform further accountings or reconciliation exercises for 

periods prior to September 30, 1995. Nor would the government be liable for past damages 

arising from trust management practices prior to September 30, 1995. Tribes that did not resolve 

their claims pursuant to the legislative procedure would be able to bring their claims in court; 

consistent with certain parameters for those claims set out in the legislation but would not be 

able to participate in the Type 2 settlements. Settlement for 11M damages or losses would be as 

of a certain date specified in the legislation with 11M balances deemed tc be accepted as accurate 

as of that date. Such a date would be used as a basis for future accountings. 

B. Detailed Di.KtWion of Proposed Settlement for Legislation 

It is clear from an examination of existing authorities regarding settlement of claims, 

forgiveness and offset of claims, payment ofinrcrest and available funding that a legislative 

solution is necessary to address Tn"bal claims arising from the reconciliation results and other 

trust management issues. The following framework should be considered to settle the two types 

ofTribal claims: 

General Payment Policies 

Payment of AU Agreed Claims. All agm:d claims will be settled under policies and 

guidelines where the government agrees to pay specific settlement amounts to the Tribes. 

These include all Proposed and Scoped Adjustments. Roll-forward Adjustments and 

interest on deposits due to lag times between collection and deposit as set forth in the 

Reconcilialion Projeet Reports. Other agm:d Type I claims which have been settled by 

negotiation, mediation or arbitration will also be paid directly to the Tribes. Also 

included will be specific payments to beneficiaries with umeconciled disbursements as 

set forth in the legislation. All agm:d settled claims should be paid promptly within a 

specified period of time set forth in the legislation. The government would pay the Tribe 

any principal amounts owed, plus interest, compouoded from the date of the error to the 

date the payment is made or otherwise as set forth in legislation. 

Interest Policy. There are various ways to compute interest. The t'aiRst method with 

parallels in the private sector would determine inrcrest payments by computing 

compound interest at a blended Tn"bal benchmarlc rate. This interest payment would be 

7 
347 

greater than wbat a tribe could likely recover in court, because the courts have limited the 

interest amo1111t on trust funds to simple interest on principal only, and because the Tribal 

benchmark rate is skewed somewhat by a number of long-tenn instruments held by one 

tribe. Other market indexed rates may also be used for certain time periods and in 

particular circumstances. 

Forgiveaess Policy. The reconciliation results indicate that in some cases errors resulted 

in overpayments or erroneous payments to a tribe or a particular Tribal account. One 

option is to requin: tribes to reimburse BIA for amounts erroneously credited to their 

accounts, with or without interest. However, forgiveness of the entire amount is 

proposed for the following reasons: 

A. These are known and admitted errors of the U.S. Government. Even though 

the tribes apparently benefitted by these overpayments, they should not be asked 

to repay arno1111ts which arose out of the U.S. Government's inability to provide 

an accurate and timely accounting to tribal trust account beneficiaries. 

B. These admitted errors were made over twenty years. The usual and customary 

staadanls for clearing similar exception items in the private sector is one 

acc:olmling period. usually ninetY days or less. After ninety days, private trust 

companies usually do not charge their customers for errors committed by the trust 

companies even though the customers may have benefitted from such errors. The 

U. S. GovcmmCnt should not adopt a lower standard for itself by seeking 

restitution from the tribes for these overpayments. · 

C. The overpayments were identified reconciled items, only. Had a full 

acc:oiDtling been poss1"ble for the over $2.4 billion in unreconciled non-investment 

transactions (documentation which could not be located), or had a full accounting 

been poss1"ble in verifYing financial transactions to source documents (such as 

land leases and contracts), or had the Reconciliation Project covered different 

time periods, the net results for particular tribes might have been different. Errors 

such as overpayments for particular tribes might have been offset in whole or in 

part by emms resulting in amounts due to the same tribes had a full accounting 

been possible or had the Reconciliation Project used different time frames. 

D. Overpayments or other exceptions resulting in an amount due from tribes 

were DOt =heel fully to detennine whether a subsequent correcting entry was 

made by the BIA. Tribes should not be asked to reimburse the government for 

these arno1111ts unless the government can document that no subsequent correcting 

entry was made. 

8 
348 

Given the conditions which have prevented the U.S. Government from rendering an 

accurate and timely accounting, the U. S. Government should not seek restitution for 

admitted errors which apparently benefited certain trust beneficiaries which ale based on 

results from a Reconciliation Project with undeniable shortcomings. 

No appropriated money will be required for this settlement. 

Netting Policy. A significant policy consideration that would affect any of the 

settlement options described above is how the Department should account for amounts 

owed to a tribe based on the reconciliation results for one or more accounts versus 

amounts due the United States based on the reconciliation results of one or more different 

accounts of the same tribe. 

Under a no-netting approach. the Department would forgive all amounts that were 

overpaid to tribes and pay all amounts owed to Tribes plus interest. This approach would 

require the greatest amount of funds to pay claims. 

Under a netting to the tribal level approach, adjustments for all accounts of the same tribe 

would be netted against each other to arrive at the net amount due to or owed by a tribe. 

While the least costly approach from the government's point of view, this approach has 

the distinct disadvantage of netting accounts which may have been set up with a specific 

purpose in mind{e.g., general tribal funds and judgment funds) or which benefit a 

specific class ofbencficiaries (e.g., all tribal members, specific tribal members, minors) 

against accounts of the same tribe with a diffi:rent purpose or which benefit a different 

class ofbencficiary. 

The proposed approach would net all amounts owed to a tribe against all amounts due 

from a tribe for each accoimt of the tribe, but would not net adjustments for all accounts 

of the same tribe against each otbcr. This is obviously the fairest way to proceed in 

arriving at the net amount due to or owed by a tribe. 

Waiver/Review. Tribes that III:C:ept payment of Type 2 claims under this settlement 

process would waive bringing any further claims as part of any subsequent litigation. 

Funding/Cost. All claims should be paid from the Judgment Fund. 

1. Payment of Type 1 Claims 

Type 1 claims ale those where the Department agrees to a specific settlement amount. 

These include all Proposed and Scoped Adjustments. Roll-forwanl Adjustments and interest on 

deposits due to lag times between collection and deposit as set forth in the Reconciliation Project 

Reports. Because the government has an obligation to correct its known errors, all such claims 

should be paid promptly within a specified period of time as set forth in legislation. The 

government would pay the tribe any principal amounts owed, plus compounded interest from the 
349 

date of the error to the date the payment is made or otherwise as set forth in legislation. The 

following is a summary and estimate of Type I claims and settlement estimates. In accordance 

with the geoeral policy Type I claims due from tribes would be forgiven. 

10 
350 

Type I Claims 

Settlement Estimate 

(S millions) 

Type I Seulement Category Principal Interest Total 

1-1. Due From Tribes: Forgiven 

1-IA. Proposed Adjustments 11.6 11.6 23.2 

l-IB. Rollover Amounts 22.1 ll.U ill.,Q 

Total Forgiven 37.7 128.5 166.2 

Note: Total Forgiven amount docs not require 

appropriations or paymcul from tbe 

Judgment Fund. 

1-2. Due to Tribes 

1-2A. Prpposed Adjustments 10.6 14.5 25.1 

1-2B. Rollover Amounts l.U w .l.Q2.2 

Sub-total 28.1 106.6 134.7 

1-2C. Interest on Deposits Due to Lag Tuues 

Between Collection and Deposit (BIA) 8.2 82 

1-20. Interest on Deposits Due to Lag Tuues 

Between Deposit at Treasury and Credit 

to Account of Beneficiary (MMS) ___.i ___.i 

Sub-Total Due to Tribes under Settlemcut 1-2 28.1 115.3 143.4 

11 
351 

2. Evaluation and Payment of Type l Claims Resulting From Disputes 

Evaluation/Guidelines and Payment of Agreed Claims. The Department would 

evaluate any Type I claims where the tribe disputes the account balance. The Tribe would be 

required to initiate a claim based on additional Tribal documentation the tribes may have. To the 

extent practical such documentation should be pursuant to the reconciliation standards employed 

by Arthur Andersen in the Reconciliation Project. Claims could also be initiated based on an 

analysis of reconciled disbursements without complete disbursement voucher packages. Type I 

claims could include challenges to "Passed Adjustments" contained in the Reconciliation 

Project Reports and other challenges to the Reconciliation Report findings. 

The Department shall negotiate in good faith with any account holder who initiates a 

Type I claim in an attempt to reach agreement on the account balance and any adjustments prior 

to a mediator being appointed. If agreement is reached, the agreed claim would be settled under 

the general payment policies and procedures for Type I claims, including interest, forgiveness, 

netting, funding, ete., as set forth above. 

Negotiation/Mediation/ Arbitration. The Department shall enter into mediation with 

any account holder wbo disputes the balance of the account holder's account as reconciled and 

reported in the Reconciliation Report and any other Type I claim. The Department shall 

negotiate in good filith with the account holder to reach agreement on the balance of the account 

holder's account Negotiating sessions may take place at any site agreed upon by both the 

Department and the account holder. If agreement cannot be reached within a reasonable period 

oftime,.upon notification from the Department, the Director of the Federal Mediation and 

Conciliation Service shall appoint a mediator to mediate the dispute. The time and frequency of 

negotiating sessions shall be determined by agreement of the Department, the account holder, 

and the mediator. Six months from the date mediation commences, the Department shall record, 

and the account holder and any other party of interest shall accept, as the balance accurate as of 

September 30, 1995, for any accounts submitted to negotiations under mediation, the account 

balance reported by the Secretary to the Congress in the Reconciliation Report under section 

304 of Public Law 103-412, 108 Stat. 4239,4248 (1994), unless: 

l. The Department and the account holder enter into an agreement, prior to that date, 

stipulatiilg the correct balance of the account and any agreed adjustments to the account; 

or 

2. The account holder or his agent, prior to or on that date, notifies the Department and 

the mediator that he has decided to submit the dispute to binding arbitration for resolution 

or has decided to litigate the matter. 

lfbinding arbitration is chosen, both the Department and the account holder must agree 

to it. The Department must not unreasonably withhold its consent to binding arbitration. Any 

arbitration proceeding shall be conducted by a panel of three arbitrators under rules established 

by legislation. 

12 
352 

The panel of arbitrators, in resolving an account holder's dispute, shall decide the 

appropriate balance of the account holder's account, and shall award amounts to either party as 

necessary to adjust the balance of the account holder's account. Awards may be limited by 

type, by aggregate amount, by individual tribe or otherwise as set forth by the Congress in 

legislation. Any payment to the account holder by the United States as a result of the decision 

shall be paid from the Judgment Fund and may be enforced by a federal district court. 

The government should pay the expenses of mediation and arbitration for both parties 

under terms and conditions set forth in the legislation.. 

Treatment and Limitations on Claims based on Reeonciled Disbursements Without 

Complete Disbursement Voucher Packages 

The Reconciliation Project Reports sent to each tribe contains a summary of the basic 

reconciliation disbursement transaction results for each tribe. Codes were assigned to reconciled 

disbursement transactions indicating the level of supporting documentation. In the aggregate 

approximately $6,035 million were categorized as "Reconciled" transactions. Of this amount, 

only S 1 ,925 million were in the category in which the complete disbursement voucher package 

was reconciled. $4,110 million involved reconciled transactions with incomplete disbursement 

voucher packages. Some of these incomplete disbursement packages may not constitute "proof 

of payment" as that term is understood in the private sector. As a result claims may be pursued 

by individual tribes seeking restitution for these poorly documented transactions. Because some 

degree of proof of payment exists and because the tribes now have access to the images and the 

documentation for all these transactioDS, the burden of bringing a claim should fall on the tribes. 

In addition, most of these transactions are supported by at least one valid authorizatioo; The 

probability that the tribes suffered a loss or other damage from these incomplete disbursement 

voucher packages, while significant, is most likely less than 1 0"/o. 

An aggregate settlement of S400 million seems appropriate. This is approximately 10% 

of the $4,110 million in reconciled transactions with incomplete disbursement packages. In 

addition, if an accounting were ordered to establish "proof of payment" for all reconciled 

transactions without complete disbursements paclcages, the government might have to spend 

similar amounts in the accounting alone. It is proposed that $200 million be eamwked as a 

general Type 2 claim settlement with the proceeds to be used as part of the initial capital of the 

development bank proposed as part of the Type 2-7 A claims settlement proposal. $200 million 

should be eamwked to satisfy any individual claims brought by Tribes based on these 

transactions. Individual awards to a Tribe agreed to by the Department or compelled by the 

Arbitration process for Type 1 claims of this nature should be limited to no more than 5% of the 

total reconciled transactions with incomplete disbursement packages for that Tribe. 

Timing. Evaluation of Type 1 claims would occur simultaneously With calculation of the 

Type I settlement amount, so that if a tribe presented adequate documentation to merit an agreed 

adjustment, that adjustment and other Type 1 claims could be included as part of the settlement 

of its Type I claims. However, payment of agreed Type 1 claims should not be delayed for 

13 
353 

those tribes choosing to bring a claim under the procedures established for other Type I claims. 

In keeping with general policy, Type I claims due from tribes for Passed Adjustments would be 

forgiven. 

1bc following table is a summary of Type I Claims and Settlements arising from 

disputes. 

14 
354 

Type I Claims 

Settlement Estimalc 

($millions) 

Type I Settlement Category Principal Interest Total 

1-3. Due From Tribes: Forgiven 

Passed Adjustments: 

Principal . 

lnla"est 

Total 

1-4. Due To Tn"bes: 

Passed Adjustments: 

Principal 

Interest 

Total 

7.6 

lli 

33.0 

3.4 

u 

9.1 

1-5. Disputed Claims Based on Additional Tn"bal Ilocumc:olmioo 

and Due To Tn"bes Based on Nepialion, Medialioa aad 

Arbitration 

1-6. Reconciled Disbursements with Incomplete 

Disbursement Voucher l'ackajp 

I-6A .. General Settlement of aD polmliallilbilily for all reconciled 

disbursements with incomplete disbunemart -.chcr pacbaes. 

Proceeds will be used to capita!Qe partially tbiO Development 

Bank (See Settlement 2-7). 

1-68. Reconciled Disbursemenls wid! ~ Disbunement 

V oucber Packages and Due To Tribes Based on Negotiolion, 

Mediation and Arbitration. 

Principal 4,110 

TotalType2Exposure 

(I) (I) 

(I) (I) 

(I) & (2) (I) &(2) 

(I) None unless tn"bes dispute the IICCOWlt balance and bring successful action and receive settlements 

based on negotiation, mediation or arbitndion. 

(I) 

(I) 

200 

400 

(2) It is proposed thai the legislalion cap tbiO polmlialliabilily tor Type 1-68 claims at $200 million. 

Individual awards to a tribe wiD be c:apped at 5% of the total reconciled transactions with incomplete 

disbursement packages for thai tribe. The unused portion oftblo $200 million pool will be used to pay 

other Type I claims with any remainingbalaoce...atin&1Dtbl0 U.S. Treasury. General Settlement 1-6A 

for $200 million will be used to capita!Qe the developmall bmlk dcscnbed in Settlement 2-7. 

IS 
355 

· 3. Settlement of Type 2 Claims 

Th= are two approaches to settlement of Type 2 claims. Under the first approach, an 

amoWlt would be paid that reflects a Congressionally-determined amoiUlt for the specific Type 2 

claims described below. A second approach provides for a general settlement ofType 2 claims 

with all or most IIM: accoiUlt holders and Tribes for all other covered issues and claims defined 

in the legislation. 

The following section discusses the rationale and the terms and conditions for each 

proposed settlement of Type 2 claims. 

16 
356 

SPECIFlC TYPE 2 CLAIMS SETTLEMENTS 

Type 2-1: 11M Account Holden Settlement Proposal 

Settlement 2-1: 1. S281 million 

2. Tax Free Status for 11M Accounts 

This amount of money would be used to compensate llM account beneficiaries for any 

harm, damage or loss arising out of the government's inability to provide an accurate and timely 

accounting to llM trust account holders. 

Rationale: 

A full discussion and assessment ofllM trust management systems are contained in the 

report entitled "llM Related Systems Improvement Project Report" and in the Special Trustee's 

Assessment. Generally, both reports point to: 

I. the poor condition of the llM data bases and the lack of integrated and adequate 

systems. 

2. the dependence on outdated manual systems and inconsistent automated systems. 

3. the lack of documelitation supporting subjective management decisions. 

4. failures to address adequately large and unacceptable numbers of suspense items; 

accounting and reconciling errors and exceptions; accounts with no address or an 

inco~ address; duplicate accounts; retention of funds for minors over 18 years of age; 

dormant special accounts; and undistributed closed estates. 

5. poor internal controls and inconsistent policies and practices. 

6. a lack of appropriate audit trails. 

7. an. inability to trace deposits and collections to source documents. 

8. large numbers of missing documents. 

9. systems and processes which are not capable of establishing up-to-date and 

accurate land title records, necessary to the lease management process . 

. I 0. no accounts receivable system to assure that all income due is collected or that it is 

collected in a timely manner. 

II. an organizational alignment which is ineffective at times. 

17 
Balance aa of 2/96 

1. Problems 

357 

A. 54, 921 accounts without a known address Whereabouts Unknown over 7 years 

B. 15,230 accounts for fOrmer minors over 21 

308' 000 

C. Overdraft Interest Clearing Accounts 

(NonMearning assets which deprive current IIM account holders of over $~ million annually) , as of 8/29/96 . 

D. 1,493 closed estates not distributed to heirs over 4 years 

E . 55\" of accounts (170,262) have balance 

less than $10 which are maintained 

at significant coat to taxpayer. 

F. 36, 917 accounts have had no activity 

c!uring last eighteen montb.a and are maintained at aign.i:ficant coat to taxpayer. 

G. At OTFM there are $28.3 million in general ledger 

differences, suepenae diff•rencea, balancing 

differences, overdraft losses and miscellaneous losses which have not bean cleared,aa of 8/'29/96. 

' 

t.i.abil.i ty 

m=;u 

$509 million 

$ 44 . 9 million Unknown 

$ 1 .a million Unknown 

$21.8 million unknown 

$42 . 2 million $2million/yr 

$0 . 419 million Unknown 

Taxpayer Cost 

Taxpayer Coat. 

$21 . 3 million 

2. Interest owed to IDf account ~ldera for 1980' a thrift. loaaea $13 million 

3. coat to reconcile IZM accounta:Contractor'a 1992 eatimate:$101 to $281 million 

4. Risk of court ordered accounting/reconciliation 

5. Past IMPt. exposure 

6 . Other: 

Missing social Security N\lllbera OVerdrafts IDf 

Special Deposit Accounts special Deposit Accounts o Balance Special Depooit OVerdraft• 

Special Deposita M No Activity last 2 yra. J Accounts over 18 J Accowts over ll 

Whereabouts Unknown: 

$0 Balatice $0 to 50 

50 to 100 

100 to 1, 000 

1,000 to 5,000 

Over $5,000 

130,833 

300 

l6, 087 9. 954 

45 

s.~4s 

23,494 

15, l36 

4, 286 

:26.066 

4,409 

14,382 

3, 982 1, 785 

$174,975,472 

319,358 

135,987' 085 

120, 786 2, 149,707 

25,563.216 

21,842,120 

0 

381,100 

322,013 5,74!1 , 547 8 , 536,362 

30,004 , 307 
358 

Trust lllliDBgement system deficiencies and the poor condition of the records prevent a proper, 

accurate and timely accounting of 11M account balances, collections, deposits, disbursements, 

investments and return on investments. 

Further, to conduct a reconciliation of the 11M accounts similar to that undertaken for tribal 

accounts during the recently completed Reconciliation Project would require between S I 08 million 

and S281 million according to estimates made by the Reconciliation Project primary contractor in 

1992. This compares to approximately $20 million which was spent for the twenty year tribal 

Reconciliation Project The reason the costs to reconcile are so much larger for 11M accounts is due 

to the large number of accounts and the fact that the 11M trust management systems and the 

condition of the 11M records are generally considerCd to be much worse than the systems and records 

applicable to tribal trust accounts. For example, subStantially all of the 11M electronic financial 

records are missing prior to 1985. Therefore, even if a reconciliation effort were initiated for 11M 

accounts, it is unlikely that it would produce satisfactory or conclusive results or amount to an 

accounting sufficient tQ aid in the determination of harm, damage or loss to 11M account holders. 

Rather than spend S I 08 million to S281 million to produce what is likely to be an 

unsatisfactory result, it is proposed that the larger amount or $281 million (Settlement 2-1) be 

specifically used to compensate 11M account beneficiaries for any harm, damage or loss arising out 

of the government's inability to provide an ·acc:urate and timely accounting to 11M trust account 

holders. This figure is not submitteci as nor is it to be considered an appraisal of the actual damage 

and harm suffered by these account holders. This figure is based on the probable amount it would 

cost the trustee to produce an •msatisfactory reconcilement of these accounts. The actual damage 

figure may be 1118lCrially di1feralt. 

Since there is not a practical way equitably to allocate the settlement amount to individual. 

account holders, past and pre:sem, it is proposed that all $281 million in principal be deposited in the 

11M Investment Pool and subscqucudy invatecl for the benefit of liM account holders. This would 

be a permanent fund and would also act as a rescrw to pay claims sua:essfully brought by 

individual account holders. PriDcipel could not be withdrawn ftom the 11M Investment Pool, except 

to pay for individual claims succcssfully brougb1 by 11M holders through litigation or otherwise. 

Current and future 11M IICCOUDt holders would benefit by receiving the earnings on the 

permanent fund in the form of an increued. yield on 11M account balaDces. 

To further cnbllllce their opportunity for higher yields on savings, to encourage savinp and to 

allow previous 11M account holden an opportunity to participate, all liM accounts will be converted 

to trust savings accounts with a cbeclr::iDg account feature. Such accounts wolild retain all current 

account features, including the fi:ature which pamits clisburscmalt of 11M deposits. 11M ac:c:ount 

holders would continue to rccei"Ve all eligible disbursements as they do now or could elect to save all 

or a part of 11M monies to cam the CXIIa yield provided by the $281 million permaDCDt settlement 

fund. Voluntary deposits would be accepted from all current or past 11M account holders. Former 

11M account holders could re-open accounts and deposit their savings to cam the higher yield as 

well. In addition all inlen:st received by 11M ac:c:ount holders would be free of federal taxes by Act 

of Congress. 

19 
359 

Type l-l: Restoration of 11M Thrift Industry Losses 

Settlement l-l: $13 million, more or less. 

This amount of money woUld restore to the DM account holders $12.8 million, more or less, in 

interest that was not earned on over $5 million in principal that was lost as a result of failed 

investments by the BIA in the 1980s and not restored until recently. 

Rationale: 

The documentation for this settlement amount is contained in the Department'ofthe Interior 

(Department) FY 1996 BUdget Submission to Congress,. wherein the Department requested 

appropriations of$12,668,000 to be used to restore interest that was not earned for DM account 

holders because of principal that was lost as a result of investments fnim the DM Investment Pool in 

uninsured obligations of failed credit unions and savings and loan associations. 

The 12,668,000 is for the period from FY 1984 through FY 1995 and continues to increase at 

an amount of approximately $53,000 a month or about $636,000 annually. 

Type l-3: Restoration of Overdraft Interest Clearing Aeeouob 

Settlement 2-3: $42.2 million. more or leu. 

Specific Settlement to restore $42.2 million in unidentified Overdraft Interest Clearioi 

Accounts to the liM Pool. Amount is equivalent to oon-arning assets which deprive current liM 

account holders of over $2 million in annual income. 

Type l-4: Settlement ofMlsceUaoeoos Losses at Offiee of Trost Fuocb Management 

Settlement 2-4: S 28.3 mUUoo: 

Losses and auodated Interest $10.0 

To bring subsidiary (IRMS) and Control Aeet (Onmi) loto balanee 10.8 

Budget Suspeue Aeeb 1.0 

To.elean-11p aU remalnlog General Led&er Aeeta ___M 

Approximate Total $28.3 

$28.3 million will clear known losses, aged suspense accounts, unreconciled general ledger 

entries and other accounting errors of the past which cannot be recovered. 

The "Approximate Total" of $28.3 million is the best estimate of the f\mds that would be 

requimi to wipe the slate clean as of 8/29/96. This liability has accrued over numerous years and 

various accounting systems and conversions (from manual systems to automated systems). Just to 

reiterate this is the best estimate of the potential liability that continues to grow, and was derived 

20 
360 

from numerous accounting systems that at best an: very suspect as to their accuracy. 

Type 2-5 11M and Tribal Ac:connt Holden Joint Settlement on Systems Improvements 

Implementation of tbe Special Trustee's Strategic: Plan 

Settlement 2-5: $147 million. 

11M account beneficiaries would s1we with tribal beneficiaries in the $147 million proposed 

by the Special Trustee to bring trust management policies, procedures, practices and systems up to a 

commercial standard within three years. 

Rationale: 

As noted, in February 1996 the OST produced a conceptual Strategic Plan to acquire and 

institutionalize specified systems. Implementation of this plan wiU ensure that the U. S. 

Government establishes appropriate policies and procedures, develops necessary systems and takes 

the liffinnative actions necessary to provide an accurate and timely accounting to American Indian 

trust beneficiaries in the future. In this IIUIIIIICr the proper discharge of the Secretary of the Interior's 

trust responsibilities finally can be accomplished. The Strategic Plan (attached) reads in part: 

Phase I of the Strategic Plan is designed to bring the trust accounting and management 

·systems up to commcrcial stsndards within three yean. This, at a minimum. wiU involve acquiring. 

automating, updating, integratiDg, coordinating and consolidating to produce: 

I. A trust resourc:elasset managemeol delivery system. 

2. An accounts receivable data and billing system that uses lease-contract and land and 

owneabip infurmalion. 

3. A trust, depository, payments and delivery system for Individual Indian Money (11M) 

accounts. 

4. A land records and title recordation and certification system. 

5. A general ledger and general ledger accounting system. 

6. A teclmology services center dedicated tD trust resource and funds management. 

7. A national archives and reeords center. 

8. A rislc II1BDII&ement and control system. 

9. An independent institutional structure. 

1bis wiU involve consolidating trust resources, trust funds and land ownership and records 

management processes into a single, independent institutional unit with its own management 

21 
361 

structure to accommodate the restructuring and reorganization contemplated by Phase I of the 

Strategic Plan. The unit should be organized by function and dedicated exclusively to trust 

management. The unit should have agency or bureau status within the Department of the Interior or 

elsewhere. · 

The details are contained in the attached Special Trustee's Strategic Plan. 

The details of the costs to implement the Strategic Plan are also in the attachment. The 

summary costs are as follows: 

22 
1996 1997 1998 

3,000 49,682 32,706 

362 

Cost of Special Trustee's Strategic Plan Phase I 

( $ in thousands) · 

1999 

20,389 

2000 

20,586 

2001 

20,585 

Total 

146,948 

The implementation of the OST Strategic Plan will provide with reasonable assurance an BQ;Uiate 

and timely accounting of the liM and tribal trust account balances, collections, deposits, 

disbursements, investments and return on investments. For this reason, the OST Strategic Plan 

implementation and costs are an integral part of both the liM settlement proposals and the tribal 

settlement proposals. · 

2-': Settlement for Reconciliation Project Unreconciled Transactions 

Settlement i-'A: $300 million 

This is a general settlement of potCmial damages for allllllm:Onciled transactions arising 

from the Reconciliation Project. Proceeds of this genaa1 settlement will be used to partially 

capitalize the Development Bank contemplated by Settlement 2-7. 

Settlement l'-6B: $300 lllillioa 

This is a specific settlement.for the fuuowing 32,9011Iansactions for which supporting 

documentation could not be locatal during the RecoDciliation Project.($ millions, absolute value): 

Receipts: 

Transfers: 

Disbursements 

Total 

Actual Disbursement Exposure can be computed as: 

Unreconciled ($ million, absolute value) 

Less: Positive DisbursemcDts 

Attorney IIDd Expert WitDess Fees 

Alaska Regional Corporations 

Principal Disburxmem Exposure 

Interest on Principal 

Total Disbunement Exposure 

1,123.3 

479.6 

ll!M 

~ 

808.6 

(73.6) 

(40.5) 

lW 

575.1 

.1..l2U 

.Lm.2 

$300 million will be disbursed to individual tribes with known llllm:Onciled disbursements. 

The settlement for each tribe Would equal the product of the percentage of each tribe's llllm:Onciled 

disbursements plus interest (date of inception through 12131/95) to totalllllm:Onciled disbursements 

23 
363 

plus interest on the total times the settlement amount of $300 million. The excess principal and 

interest potential liability to the tribes will be considered satisfied by the 2-6A general settlement 

and by the 2-7 general settlement. 

Rationale: 

These aggregate settlements are to be awarded to tribal trust account beneficiaries based 

generally on the $2.2 billion ofunreconciled non-investment transactions (excluding positive 

transactions and payment of attorney's and expert witness fees and expenses and certain other 

exclusions for which reasonable proof of payment exists) identified by the Reconciliation Project. 

The disbursement errors and exceptions are of particular importance and concern since they 

represent known amounts which were charged against known tribal accounts, but for which the · 

payee could not be determined during the Reconciliation Project. Therefore, proof of who benefitted 

from these disbursements cannot be established by the federal government. The unreconciled 

disbursements expose the government to the greatest potential liability and are treated accordingly in 

the allocation of the settlement amounts, both specifically to tribes and in the general settlement as 

well. 

$575.1 million is a net amount representing unreconciled disbursements as defined above. 

Compounded interest from the date of the errors through December 31, 1995 is $1,361.8 million. 

Distribution is based on the reasons stated below. 

Settlement 2-6A: $300 million 

It is proposed that this amount be distributed to all tribes with trust accounts in a general 

way. The proceeds will be used to provide part of the initial capital for the Development Bank 

described in Type 2-7. 

The rationale for Settlement 2-6A is as follows. Had a full accounting been possible for the 

$575.1 million in unreconciled disbursements or had the Reconciliation Project covered previous or 

different reconciliation periods, different results might have occurred and tribes other than those 

covered in Settlement 2-6B might have suffered harm, damage or loss. Also, those tribes covered in 

Settlement 2-6B might have had different levels of harm, damage or loss as well. The general 

settlement is intended to cover any damages which may have occurred as a result. 

In addition, it appears that the condition of the records and the quality of the trust 

management systems were much worse for periods prior to 1972. Therefore, it is reasonable to 

assume that substantially more unreconciled receipts, transfers and disbursements would have been 

exposed had the Reconciliation Project covered periods prior to 1972. Any harm or damage 

resulting is intended to be covered by the 2-6A general settlement of$300 million and general 

settlement 2-7. 

The general settlements also compensate trust beneficiaries that may have been harmed as a 

24 
result of mis·posted receipts and transfers which may have occurred in the universe of urueconciled 

receipts and disbursements. Receipts are mostly deposits. The government can demonstrate that the 

wueconciled receipts wen: posted to the general ledger accounts of particular tribes, so those tribes 

benefitted by the transactions and are unlikely to bring a claim as a resull The same is true, 

generally, for unreeonciled transfers between accounts of the same tribe. There is no evidence of 

damage to these tribes, but if transfers were mis-posted and should have been posted to the account 

of a different tribe, damage to the other tribe may have resulted. Then: is simply no way to 

determine whether damage occurred to particular beneficiaries as a result of the unreconciled 

receipts or transfers, nor who these harmed beneficiaries were. The general settlements, however, 

are intended to cover any such unidentified harm or damage. 

To partially compensate all eligible tribal trust account holders for the harm and damage 

which might have occurred as a result of the unreeonciled transactions, $300 million will be 

awarded. The proceeds will be used to capitalize in part the Development Bank which will benefit 

all tribes. 

Settlement 2-6B: $300 million. It is proposed that this amount be distributed to individual 

tribes with known unreconciled disbursements since these items represent the highest potential for 

actual harm and damage having occurred for Tribal trust beneticiaies. 

The settlement for each tribe would be equal to the product of the percentage of each tribe's 

unreconciled disbursements plus inten:st (calculated from date of the transaction through December 

31, 1995) to total unreconciled disbursements plus interest on the total unreconciled disbursements 

times the settlement amount of $300 million. While this may not cover all the potential damage 

which may have resulted from these unreconciled disbursements, the total award to the tribes covers 

52% of total unreconciled disbursement exposure and 15.5% of total unreconciled disbursement 

exposure plus interest on tho!S<' transactions from inception. Excess damage, if any, is intended to be 

covered by settlement 2-6A and by the general settlement 2· 7. 

Type 2-7: Genenl Settlement for OM and Tribal Account Holders 

Establishment of a Development Bank for American Indians 

Settlement 2-7: Eatablisbment oh Development Bank for American Indians 

with the following capital and gaarantees to be provided by the 

U.S. Government: 

2-7 A. Equity Capital 

2-78. Borrowing Capacity 

2-7C.Initial8orrowing from U.S. 

$500 million 

10 x Equity Capital 

S3 billion for 30 yrs 

at 30 year T Rate 

Settlement 2-7 is intended to settle all other potential claims arising out of the reconciliation 

project not covered by Type I claims and other Type 2 claims and past potential liability for trust 

mismanagement practices in general. A full explanation of the rationale on this settlement and 

25 
365 

details on the Development Bank can be found in Appendix I. 

General Settlement 2-7 involves the creation of a federal Development Bank for American 

Indians (D-Bank) which will be formed and capitalized by the federal government and will be a 

nationwide financial institution providing a dependable source of lending to American Indians and 

American Indian Tribes and their communities and a dependable source of investing in American 

Indian Enterprises. 

D-Bank will provide access to long-term loans and investments for economic development, 

consistent with principles of self-determination, self-governance and self-sufficiency and will 

provide access to low interest rates on loans, made possible by D-Bank's tax free status and its 

access to funding in the nation's capital markets at rates commensurate with those paid by the U. S. 

Government and Agencies of the U.S. Government. 

D-Bank will also be allowed to invest up to $300 million in the purchase, holding, financing 

and sale of fractionated realty interests in Indian allotment lands. Such purchases and financings 

will be made on prudential terms to eligible individuals and tribes. Such activities will be regulated 

by rules set forth in legislation to =olve the fractionated heirship issues and will be administered to 

achieve the consolidation of existing fractional interests and the prevention or substantial reduction 

of further fractionation. 

D-Bank will be a for-profit financial institution and will not receive appropriated funds for 

operating expenses. It will receive appropriated funds for lifeline financial services and other 

specified programs as approved by Congress. 

D-Bank will be authorized to invest up to 25% (initially $125 million) of its permanent 

capital in eligible individual Indian and Indian Tn"be businesses and projects which will aid 

economic development of the American Indian communitieS. These investments include common 

and preferred stock and long-term subordinated draft investments in: 

A. Infrastructure Acquisition and Development Activities 

B. Project Financing 

C. Venture Capital Businesses 

D. Established Business 

26 
366 

(),Bank's capital and funding will be provided by the federal government in the following 

amounts: 

2-7A. Equity Capital: 

Initial Equity Capital of$500 million will be provided by 

the federal government as part of Settlement l-6A ($200 

Million) and 2-6A ($300 million). Shares will be 

distribulcd to all federally recognized tribes on some 

equitable basis set forth in legislation. 

2-78. Loans from U.S. Government: 

$3 billion in direct long-term loans will be provided to 

D-Banlt for thirty yean at the U. S. Treasury rate for 

30 year obligations. 

2-7C. U. S. Govemment Guaranteed Obligations 

Future funding of up to I 0 times equity capitalliom the 

sale ofboDds and no11:s in the nation's capital markets by 

D-Bank will be guaranteed by the fiill filith and c:redit 

500 

3,000 

5,000 

. of the United Slides. Loans from the United States Government 

of$3 billion~ iDcludcd in Ibis amouut. 

27 
367 

The following is a SUl1lllUII)' of Type 2 Claims and Settlements: 

Type 2 Settlement Category 

Type 2 Claims 

Settlement Estimate 

($millions) 

2-1 : llM Account Holders Settlement Proposal 

Specific Settlement of Past~ to DM Holders 

I. Amount is equal to estimated n:conciliation costs 

for 11M Accounts. Amount will be invested in 11M 

pool for benefit of all account holden, past, present 

and future who will receive a higher yield as a result 

2. Settlement al!o includes tax fRe status for future 

DM accounts. 

2-2: Restoration of liM Thrift Industry Losses 

Specific Settlement to Jatore interest lost by llM account 

holders because ofprinciJI'I that was lost as a result of liM 

Pool investments in obligalions of Wled thrifts in 1980s. 

2-3: Restoration ofOvenbaft Interest Clearing Accounts 

Specific Sett1cment to restore $42 million in unidentified 

Overdraft Interest Clearing A1:cuuuts io the DM Pool. 

Amount is equivalent to non-eamina IISXIs which deprive 

current DM account holders of ova- S2 million in annual 

income. 

2-4: Miscellaneous OTFM General Ledgu Losses 

Specific Settlement to clear $283 million in general ledger 

differences, suspense amounts, balaDcing differences, 

overdraft losses and other losses. 

28 

Total 

281 

Tax Free Status 

13 

42.2 

28.3 
368 

Type 2 Claims Settlemeat Estimate (Smilliooa) (continued) 

Type 2 Settlement Category 

2-5: liM and Tribal Account Holders Joint Settlement for Systems 

IIDprovements 

Specific Settlement to bring trust management systems up to 

commercial stalldards. Amount is the estimated cost 

to implement the Special Trustee's Sllalegic Plan over five 

years. Implementation will ensure that the government takes 

the actions ncccssuy to provide an accura1c and timely 

accounting to American Indian trust beneficiaries in the 

future. In this manner the proper disclwgc of the Secretary's 

trust responsibilities finally can be accomplished. 

2-6: Settlement for Reconciliation Project Unrcconcilcd Transactions 

2-6A. General Settlement of potential damages for all unrcconcilcd 

transactions arising from the R.cconcilialion Projccl Proceeds 

of General Settlement will be used to partially capitalize 

Development Bank (Sec Settlement 2-7) 

2-6B. Specific Settlement for the following 32,901 transactions for 

which supportilig documentation could not be located during 

the R.cconcililition Project ($ million, absolute value): 

Receipts: 

Transfers: 

Disbursements 

Total 

Actual Disbursemcnl Exposure can be computed as: 

Unrcconcilcd (S million, absolute value) 

Less: Positive Disburscmcnts 

Attomey and Expert Witness Fees 

Alaska Regioaal Corporations 

Principal Disbursement Exposure 

Interest on Principal 

Total Disbursement Exposure 

1,123.3 

479.6 

12M 

~ 

808.6 

(73.6) 

(40.5) 

.l.l.2.i 

575.1 

.l.ill.! 

.1.m.2 

Total 

147 

300 

300 
369 

Type l ClaimJ Settlement Estimate (Smillioas) (continued) 

Type l Settlement Category 

$300 million will be disbursed to individual tribes with known unreconciled 

disbursements. lhe settlement for each tribe would equal the product of the 

percentage of each tribe's unreconciled disbursements plus interest (date of 

inception through 12131/95) to total unreconciled disbursements plus interest 

on the total times the settlement amount of$300 million. The excess 

principal and interest potential liability to the tribes will be considered 

satisfied by the 2-6A general settlement aod by the 27 7 general settlement. 

2-7: General Settlement for DM aod Tn"bal Account Holders 

Settlement 2-7 is intended to settle all other potential claims arising 

out of the reconciliation project DOt c:owml by Type I claims and 

other Type 2 claims aod all past. potential liability for trust 

mismanagement to be defined by the legislation through the effective 

date of settlement set by legislation. 

Oeneral Settlement 2-7 involves the creation of a federal 

Development Bank for Amt:rican Indians (D-Bank) which will be 

~and capitalized by the fcdaal government and will be a 

nationwide fiDancial. iDslitulion provicliDg a dependable source of 

lending to American Indians aod American Indian Tribes and their 

communities aod,a dependable soun:e of investing in American 

Indian Enterprises. 

D-Baak will provide access to long-tam loans and investments for 

ecoDomic development. consislait with principles of selfdetermination, self-govemancc aod self-sufficiency and will provide 

access to low interest rata on loans, made possible by D-Bank' s tax 

free status and its access to funding in the natiOn's capital markets at 

rates commensurate with those paid by the U. S. Government and 

Agencies of the U.S. Govcmment. 

D-Bank will also be allowal to invest up to $300 million in the 

pun:hase. holding, fillancing aod sale of fiactionated realty interests 

in Indian allotment lands. Such pun:bllses aod financings will be 

.Dade on prudential tams to eligible individuals and tribes. Such 

. actiVities will be regulated by tules.set forth in legislation to resolve 

the fiactionated heirship issues aod will be administered to achieve 

the consolidation of.existing fiactional interests and the prevention 

or substantial reduction of fiuther fiactionation. 

30 

Total 
370 

Type 2 Claillis Settlement Estimate (Smillions) (continued) 

Type 2 Settlement Category 

D-Bank will be a for-profit financial institution and will not receive 

appropriated funds for operating expenses. It will receive 

appropriated funds for lifeline financial services and other specified 

programs as approved by Congress. 

D-Bank will be authorized to invest up to 25% (initially $125 million) of its permanent capital in 

eligible individual Indian and Indian Tribe businesses and projects which will aid economic development of 

the American Indian communities. These investments include common and preferred stock and long-term 

subordinated draft investments in: 

A. Infrastructure Acquisition and Development Activities 

B. Project Fmancing 

C. V entun: Capital Businesses 

D. Established Business 

D-Bank's capital and funding will be provided by the federal government 

in.the following amounts: 

2-7 A. Equity Capital: 

Initial Equity Capital of $500 million will be provided by 

the federal government as part of Settlement l-6A ($200 

Million) and 2-6A ($300 million). Shares will be 

distributed to all federally recognized tribes on some 

equitable basis set forth in legislation. 

2-7B. Loans from U.S. Government: 

$3 billion in dim:t long-tenD loans will be provided to 

D-Bank for thirty years at the U. S. Treasury rate for 

30 year obliptions. 

2-7C. U. S. Government Guanmteed Obliptions 

Futun: funding of up to 10 times equity capital from the 

sale ofbonds and notes in the nalion's capital11181kets by 

D-Bank will be guaranteed by the full faith and credit . 

of the United States. Loans from the United States Government 

of $3 billion ue included in this amount 

31 

500 

3,000 

5,000 
371 

Type 2 Claims Settlement Estimate ($millions) (continued) 

Type 2 Settlement Category 

Total Type 2 Claims: 

I. Direct Settlement Obligations: Settlements 2-1 through 2-7 A 

2. Loans from U.S. Govei~U~ent: Settlement 2-7B 

3. U. S. Government Guaranteed Obligations of $5 billion, 

net of$3 billion Loan: Settlement 2-7C 

Total Type 2 Claims 

V. WAIVERS AND LmGATION 

Total 

1,611.5 

3,000 

6,611.5 

If a tribe accepts payment ofits Type 2 claims under the legislation's settlement process, the 

acceptance would constitute a full discharge of the United States with respect to all claims regarding Tribal 

trust fund accounts for the period prior to September 30, 1995. Settlements under the statute would not be 

reviewable in court. If a tribe did not accept settlement under these provisions, the tribe could litigate its 

claims, but none of the guidelines pertaining to the value of its claims would be applicable, nor would the 

tribe be able to participate in the Type 2 settlements. 

Tribes that do not settle claims under the settlement procedure outlined above may seck to litigate 

those claims in court; however, such litigation is usually extremely costly and tirne..:onsuming for all the 

litigants. For these reasons, the Department has specifically rejected any litigation process that would 

resemble the Indian Claims Commission pnx:ccdiugs of years past, and bclieves that the legislation 

establishing the settlement procedures also must establish certain parameters for litigating the claims of nonsettlers. Such parameters arc necessary to cmurc that litigation proceeds in an orderly and efficient manner, 

to ensure that the beneficiaries of the claims, as opposed to their attorneys and accountants, arc· the persons 

who benefit from any amounts recovered in litigation, and to encowage settlement of as many claims as 

possible. The Department may seck to establish parameters for the litigation of claims for those who do not 

avail themselves of the settlement opportunities in the legislation. Such parameters could address and 

resolve, for example, issues relating to statute of limitations, burdens of proof, standards of accounting, 

limitations on attorneys fees and forgivenessrmtcn:st policies. Congress should also consider requirements 

forcing the trustee (U.S. Government) to negotiate, litigate and arbitrate in good faith. 

The liM and tribal accolint balances will be set as of September 30, 1995, subject to individual changes as 

result of court procedures, enor co=tions, etc. 

32 
372 

APPENDIX! 

ESTABLISHMENT OF A DEVELOPMENT BANK FOR AMERICAN INDIANS 

Establishment of a Development Bank for American Indians with the following capital and 

guanntees to be provided by the U. S. Government: 

Equity Capital 

Borrowing Capacity 

Initial Borrowing from U. S. 

SSOO million 

10 x Equity Capital 

53 billion for 30 yn 

at 30 year T Rate 

The American Indian Trust Fund Management Reform Act of 1994 requires, in part: 

"(B) Provisions for opportunities for Indian tribes to assist in the management of their trust accounts 

and to identifY for the Secretary options for the investment of their trust accounts, in a manner 

consistent with the trust responsibilities of the Secretary, in. ways that will help promote economic 

development in their communities." 

The Special Trustee is considering a phase two to the comprehensive strategic plan which will 

include a Development Bank for American Indians. 

A Developnient Bank (I)-Bank) will be formed and capitalized by the federal government. D·Bank 

will be a nationwide financial institution providing a dependable source of: 

A. Lending to American Indians and American Indian tribes and their communities. 

B. Investing in American Indian Enterprises. 

D-Bank will provide the following principal benefits to American Indians and Indian tribes: 

A. Access to long-term loans and investments for economic development, consistent with principles 

of self-determination, self-govemance and self-sufficiency. 

B. Access to low inten:st rates on loans, made possible by D·Bank's tax free status and its access to 

funding in the nation's capitalllllllkets at rates commenswate with those paid by the U. S. 

Government and Agencies of the U. S. Government. 

0-Bank: 

A. will be an instnunentality of the federal government and will be backed by the full faith and 

credit of the U. S. Government. 

B. will be examined, supervised and regulated by an Agency of the U.S. Government, existing or to 
373 

be. formed for this purpose. 

C. will lend to and invest in various American Indian enterprises, infrastructure projects and other 

projects of a developmental nalUI'e. 

D. will facilitate and implement efforts and initiatives to make individual American Indians and 

American Indian tribes economically more self-sufficient under established. principles of selfdetermination and self-governance. 

E. will be a for-profit financial institution and will not receive appropriated funds from the Federal 

Government for operating expenses. It will receive appropriated funds for lifeline banking services 

and other specified programs as approved by Coiii!JCSS. 

F. may be used to facilitate the disbwsement of appropriated funds for other governmental programs 

for American Indians and their tribes and communities. · 

G. will have a nationwide delivery network: with branch offices located in or near major American 

Indian communities. The delivery system will also employ a state of the art telecommunications and 

electronic delivery system. 

!)..Bank's capital and funding will be provided by the federal government in the following amounts: 

I. $500 million in equity contributions from appropriated or judgment funds. 

2. $3 billion in direct, loog-tcnn loans from the federal government for thirty years at the U. S. 

·Treasury interest rate on thirty year obligations. 

3. Futuic funding ofupto 10 times equity capital from the sale ofbonds and notes in the nation's 

capital markets, guarant=l by the full faith and =dit of the United States. 

D-Bank's initial capital stock will be distributed to federally recognized American Indian tribes in 

proportion to the number of American Indians living on or near reservations as determined 'by the latest 

census information or by some other acceptable means. This permanent capital cannot be sold, traded or 

withdrawn. Each share will be vested with one voting right for purposes of electing D-Bank's Board of 

Directors or for voting on other corporate 111atte1s requiring shareholder approval. 

Each borrower of !)..Bank will genemlly be required to invest in capital stock or participation 

certificates ofD-Bank, generally at the rate of two percent of the loan. 

Dividends and patronage payments may be authorized by D-Bank's Board of Directors, subject to 

regulations that establish minimum at-risk capital standards. 

D-Bank will have a corporate structure patterned after banks belonging to the Farm Credit System 

and will be an instrumentality of the federal government with the full faith and credit backing of the United 

States. 

2 
374 

D-Bank's Board of Directors will consist of I 0 to 20 members, the majority of whom must be 

American Indians. 1be Board will be diversified by tribe, area of the country, borrowing relationships and 

will include members from the public at large. 

D-Bank's executive management and employees will be qualified bankers and will be exempt from 

federal government employment requirements. Compensation will be detennined by the Board of Directors 

after taking into account general compensation and benefits schedules of the Farm Credit System banks. 

D-Bank's lending, leasing, investment and financial services will be dedicated and restricted solely 

to making loans, leases , investments and financial services available to eligible and qualified American 

Indians and American Indian tribes and their communities in all areas of the country. Prudential, safe and 

sound lending and investment policies and practices will be strictly followed and enforced. 

D-Bank will charge appropriate fees and interest rates for its financial services and products, 

sufficient to cover funding, operating and administrative expenses and to provide a reasonable return on 

shareholder's equity. 

D-Bank will provide a full range of commercial, real estate and consumer loans to eligible American 

Indians, tribes and their communities. 

Investment in Community Development and American Indian Businesses: $125 million 

D-Bank will be authorized to invest up to 25% (initially, $125 million) of its permanent capital in 

eligible individual Indian and Indian tribe business ventures and projects which will aid economic 

development of the American Indian communities. These investments will include common stock, 

preferred stock and long-term subordinated debt investments in: 

A. Infrastructure Acquisition and Development Activities 

B. Project Financing 

C. Venture Capital Businesses 

D. Established Businesses 

Investment in Fractionated Realty Interests: $300 million 

D-Bank will be allowed to invest up to $300 million in the purchase, holding, financing and sale of 

fractionated realty interests in Indian allotment lands. Such purchases and financings will be made on 

prudential terms to eligible mdividuals and tribes. Such activities will be regulated by rules set forth in 

legisiation to resolve the fractionated heirship issues which has as its principal purposes: 

A. The consolidation of existing fractional interests. 

B. The prevention or substantial reduction of further fractionation. 
375 

D-Bank will be required to have an annual audit and report from an independent and qualified 

accounting firm. 

D-Bank will be exempt from all federal and state taxes. 

D-Bank's pro-forma balance sheet is as follows: 

4 
ASSETS 

376 

D-BANK PRO-FORMA BALANCE SHEET 

BANKING OPERATIONS 

($millions) 

*UABILITIES 

Cash, Securities and Liquid Assets 500 Demand Deposits 

Savinp&CDS 

Official Checks 

Loans: 2,500 

Commercial 

Consumer 

Real Estate 

Infrastructure 

Fnetionated Realty Holdings: 300 Long-term Debt: 

Loans to Facilitate Note to u; S. Treasury 

Investment Holdlnp 30 yn.; 30 yr. T Rate 

Development Investments: ll5 Other Debt: 

Infrastructure Acquisition & Limited to 10 x Equity Capital, 

Development lndudlng long-term debt 

Project Finandnc 

Venture Capital to New 

B'llliDeaes 

Capital for Established 

Baslnesses 

Other 75 Equity Capital 

Total Assets 3,500 Total Liabilities and Capital 

• AU deposits and liabilities guaranteed by the United States 

5 

0 

0 

0 

3,000 

~ 

500 

3,500 
377 

D-BANK SUMMARY OF FINANCIAL SERVICES 

LOANS AND LEASES: 

Commercial: Small Basinas 

Consumer: Credit Cud 

MobUeHome 

Real Estate: Sincle Family 

Acqaisitioa 

Infrastructure: Acquisition 

FRACTIONATED REALTY HOLDINGS: 

Parehues 

DEVELOPMENT INVESTMENTS: 

Project Iafrastracture 

Financing Acqllilitioa & 

Developmeat 

DEPOSITORY SERVICES: 

Demand Deposits Saviap DeposiD 

OTHER SERVICES: 

ATMAceess Cull Maaaa-eat 

Payments Dilbanemeats 

Official Cbeeks ()yerdraft 

Proteetioa 

Insurance Sales Aaaaity Sales 

Middle Market 

Home Equity 

Penoual 

Multiple Family 

Developmeot 

Developmeot 

Veatare Capital 

N-Basilleues 

Otller Deposits 

Accoaatiag 

W'are Traasfer 

Dilcoaat 

Brokerage 

6 

Agriculture 

A a to 

Commercial 

Coastruction 

Project Financing 

LoaDs to Facilitate: 

llldividual & Tribal 

Capital to Existing 

Basilleues 

Certificates of Deposit 

Statealeats & Reportiag 

Money Orden 

Mutual Faad Sales 
378 

O~CEOFTRUSTFUNDSMANAGEMENT 

PRO-FORMA BALANCE SHEET AND TRUST SERVICES 

($millions) 

TRUST OPERATIONS: 

Assets: 

Cash, SKurities and Liqnid Assets 

TRUST SERVICES: 

Managed Accounts 

Statements & Reporting 

Resource, Asset & Leue 

Management 

11M Deposits 

Liabilities: 

2,500 Trust Accounts: 

Tribal 2,000 

Individual Indian 500 

2,500 2,500 

Agency Accounts 

Ac:c:onnting 

Cash Muagement 

Laod Records & Owuenbip 

Muagement 

7 

Custodial Accounts 

Paymeli.ts/Disbnnements 

Investment Servic:es 

Collections 
379 

SE1TLEMENT PROPOSAL SUMMARY 

Type 1 Claims 

Scedemeat Estimate 

(S millioas) 

Type 1 Settlemeat Category Prillcipal Interest Total 

1-1. Due From Tribes: Forpvaa 

1-1A. Propoled Adiut-fs 11.6 11.6 23.2 

1-18. RollanrAa...a ZiJ. ill.2 WJl 

Total Forpvaa 37.7 128.5 166.2 

Note: Total Forpvaa _.does aet req1lire 

approp~ ... ,.,_.,_ dte 

Jadpalat Fad. 

1-l. Due to Tribes 

1-lA. Pros-ed AdJ-t-ts 10.6 14.5 25.1 

1-lB. Rollanr Aa...a w w .1ll2.i 

Sub-total 28.1 106.6 134.7 

1-lC. latenlt oa Depolils Owe To lAc T1aaa 

Betweea Colledioa ad Depelit 8.l 8.l 

1-lD. latenlt oa Depolils Owe tD lAc T1aaa 

Betweea Depodt AtT-.y ad Credit 

To Accolutt ofP .......5. .......5. 

SubTotal Due tD Tribes SeH'•aat IIJlder 1-l 28.1 115.3 143.4 
380 

r .. ~t ( bims 

S.111o-l Esllmale 

(S miDioas) 

Type 1 Se111omeat Catetory Priacip2l lalerat Total 

1-3. Due From Tribes: Fot"llvea 

Pu.sed Adj-eaiS: 

Prla<lpal 

lalenst 

Total 

1-4. Dae To Tribes: 

Pu.sed Adj-oaiS: 

Prla<lpal 

Iarenst 

Total 

7.6 

w 

33.0 

3.4 

~ 

9.1 

1-S. Dlspaled Clalars Bated oa Addldoat Tribal Docaraoatatloa 

atld Due To Tribes Baed oa N01olilltloa, Modlltloa atld 

Arlritratloir 

1~. Rec:ollCiled Dllllranoaeats w1tJr ~pieR 

DllbaneDWII Vorrc:bor Pacbceo 

1~A. Geaenl Sotdemeat or aB pateatlal U.bllil)' ror aD rocoD<Iled dllbanemoats wltb laeoaploR dlsbaneraeral Yo .. ber pacbcos. 

Procoods will be aaod to .. pllalize partially tloo Development 

Baak (See Setllo.letlt l-7). 

1.QI. Roooadlod Dlobusemerots wltb lacomploto Dllbanemoat 

Voacber hckqeo atld 0. To Tribes llated oa N01odatloa, 

Medlatloa- ArllllratioL 

(I) (I) 

(I) (I) 

4,110 

Total Type 1 Eapoaaro Artllroc From Dllpatl:l 

!J.l.Ji.al !llAill 

. (1) &: (l) (1) &:(l) 

(I) 

(1) 

(l)lOO 

(1) Noee aodea Tribes dloporto-tloo -•t-atld briwes-ratactloh aad receive awards bued oa 

aqodatloa, modlatloa or arbllratloL 

(1) Ills propoaod tbat-doo lqldatioa .. p tloo potntlalllablllty ror Type 1-6B clalms at 5100 mUUoa. ladlvldaal 

.... refs to I tribe will be capped at S% or 1bo ~ .-adlod ~ctloas wltb IDcomplete dlsbanemoat paebges ror 

tbat tribe. no .. - portloa or die 5100 mlllloa pool will be DSOd to pay olber Type 1 elatms witb aay romalalac 

balaace rwerdac to lbe U. S. T ...... ry. C..ral Setdometlt 1~A ror 5100 miDioa will be used to eapitallze tile 

dovelopmoat baak (See Senlollleat l-7). 

2 
Type 2 Settlement Category 

381 

Type 1. Claims 

Settlement Estimate 

(S millioru) 

2-1: 11M Account Holders Settlement Proposal 

Specific Settlement of Past Damages to 11M Holden 

1. Amount is equal to estimated reconciliation costs 

for 11M Accounts. Amount will be invested in 11M 

pool for benefit of aU account holden, past, present 

and future who will receive a higher yield as a result. 

2. Settlement also includes tax free status for future 

11M accounts. 

2-2: Restoration of liM Thrift Industry Losses 

Specific Settlement to restore interest lost by 11M account 

holden because of principal that was lost as a result of 11M 

Pool investments in obligations of failed thrifts in 1980s. 

2-3: Restoration of Overdraft Interest Clearing Accounts 

Specific Settlement to restore $42 million in unidentified 

Overdraft Interest Clearing Accounts to the 11M PooL 

Amount is equivalent to non-earning assets which deprive 

current 11M account holden of over $2 million in annual 

income.. 

2-4: MisceUaneons OTFM General Ledger Losses 

Specific Settlement to clear $28.3 million in general ledger 

differences, suspense amounts, balancing differences, 

overdraft losses and other losses. 

3 

Total 

281 

Tax Free Status 

13 

42.2 

28.3 
382 

Type 2 Claims Settlement Estimate (Smi!lhm\ '~""tinu~.n 

Type 2 Settlement Category 

2-5: 11M and Tribal Account Holden Joint Settlement for Systems 

Improvements 

Specific Settlement to bring trust management systems up to 

commercial standards. Amount is the estimated cost 

to implement the Special Trustee's Strategic Plan over fiVe 

yean. Implementation will ensure that the government takes 

the actions necessary to provide an accunte and timely 

accounting to American Indian trust beneficiaries in the 

future. In this manner the proper discharge of the Secretary's 

trust responsibilities fmally can be accomplished. 

2-6: Settlement for Reconciliation Project Unreconciled Tnnsactions 

2-6A. General Settlement of potential damages for all Unreconciled 

Tnnsactions arising from the Reconciliation Project. Proceeds 

· of Genenl Settlement will be used to partially capitalize 

Development Bank (See Settlement 2-7) 

2-6B. Specific Settlement for the following 32,901 transactions for 

which supporting documentation could not be located during 

the Reconciliation Project: 

Receipts: 

Tnnsfen: 

Disbunemenu· 

Total 

1,123.3 

479.6 

808.6 

2.411.5 

Actual Disbunement Exposure can be computed as: 

Unreconciled (S million, absolute value) 

Less: Positive Disbursemenu 

Attorney and Expert Witness Fees 

Alaska Regional Corporation 

Principal Disbunement Exposure 

Interest on Principal 

Total Disbunement Exposure 

4 

808.6 

(73.6) 

(40.5) 

~ 

575.1 

!.lliJ! 

1.936.9 

Total 

147 

300 

300 
383 

Type 2 Claiou Settlement Estimate (Smillions) (continued) 

Type 2 Settlement Category 

$300 million will be disbuned to individual tribea with known 

unreconciled disbunements. The settlement for eacb tribe wonld 

equal tbe product of the percentage of eacb tribe's nnreconciled 

disbunements plus interest (date of inception throngb 12131/95) to 

total unreconciled disbunements pins interest on the total times tbe 

settlement amount of $300 million. The excesa principal and 

interest potential liability to tbe tribes well be considered satisfied 

by tbe 2-6A general settlement and by tbe 2-7 general settle10ent. · 

Type 2-7: General Settlement for 11M and Tribal Account Holden 

Establishment of a Development Bank for American lodians 

Settlement 2-7: Establishment of a Development Bank for American lodians 

with the foUowing capital and gnarantees to be provided by the 

U. S. Government: 

2-7 A- Equity Capital 

2-78. Borrowing Capacity 

2.7C.Initial Borrowing from U.S. 

$500 million 

10 x Equity Capital 

S3 billion for 30 yrs 

at 30 year T Rate 

Total 

Settlement 2-7 Is lotended to settle aU other potential claims arillng ont of the reconciliation project 

not covered by Type 1 clahu and other Type 2 clahu and paat poteatial liability for trnst mismanagement 

practices in general A fnll explanation of the rationale on this settlement and details on the Development 

Bank can be fonnd 1o Appendix 1. 

General SeulemeDt 2-7 lavolves the creation of a federal Development Bank for American lodians 

(D-Bank) wbicb will be formed and capitalized by the federal government and will be a nationwide financial 

lastitntion providlag a dependable source of lendlag tn American Indians and American Indian Tribes and 

their commnnities and a depmdable sonrce of lavestiag Ia American Indian Enterprises. 

D-Bank will provide accesa to long-term loau and iDvestmeDts for economic development, consistent 

with principles of aelf-detennlaation, self.goveraance and aelf .. ufflciency and will provide access to low 

interest rates on loans, made possible by D-Bank's tax free statns and its access to fandlag Ia the nation's 

capital markets at rates commensurate with those paid by the U.S. Government and Agencies of the U.S. 

Government. 

D-Bank will also be allowed to lavest up to $300 million Ia the pan:base, boldlag, fiaanclag and sale 

of fractionated reatty interests in lndiaD allotment laads. Sacb pnrcbaseo aad finaacinp will be made on 

prudential terms to eUgible individuals and tribes. Sacb activities will be regulated by rules set forth in 

legislation to resolve the fractionated beinbip issnes and will be admlaistered to achieve the consolidation of 

emting fractional laterests and the prevention or substantial rednction of further fractionation. 

s 
384 

D-Bank wiU be a for-profit finan<ial institution and will not reeeive appropriated fL<mh fur prnnn~ 

"<pt' ~ !] . p ,.:n receive appropriated ~·- .. _ r-=-:-:-·!ifeJioe fi:-:: "'-'""' "'' 1""' 7,~ t •• ; :-;ifitd pronams a." 

;.-, ... ·,--:.by Concress. 

D-Bank will be authorized to invest up to 25"/o (initially $125 million) of its permanent capital in 

eligible-individual Indian and Indian Tribe bouinesses and projects which will aid economic development of 

tbe Ameriean Indian communities. These investments include common and preferred stock and long-term 

subordinated draft investmenb in: 

A. lnfnutructure Acquisition and Development Activities 

B. Project Financing 

C. Venture Capital Businesses 

D. Established Bouiness 

D-Bank's capital and funding wiD be provided by tbe federal government in tbe foUowiDg amounb: 

~-7 A. Equity Capital:. 

Initial Eqnity Capital of SSOO million wiU be provided by 

tbe federal covernment u part of Settlement 1-6A ($200 

Million) and 2-6A ($300 million). Shares wiD be 

dim'ibuted to aU fede.,.lly recognized Tribes on some 

eqnitable buis set forth in legislation. 

2-7B. LoaDs from U.S. Government: 

$3 billion Ia direct lone-term loOJU will be provided to 

D-Bank for thirty yean at tbe U. S. Treunry rate for 

30 year obllpdonl. 

2-7C. U.S. Government Gnaranteed Obligations 

Fittnre fnndiag of ap to 10 time1 eqnity capital from tbe 

sale of bonds-and notes Ia tbe utlon'aeapitalmarkels by 

D-Bank will be paranteed by tbe fall faitb and credit 

of tbe United Statet. Loant from tbe United Stata Government 

of $3 billion are iadnded Ia tblt amoant. 

Total Type 2 Clainu: 

Direet Settletneat Obliptlona: Settlemenb 2-1 tbrougb 2-7 A 

Loans from U.S. Government: Settlement 2-7B 

U.S. Government Gnaranteed Obligations of $5 billion, 

net of S3 billion Loan: Settlement 2-7C 

Total Type 2 Clainu 

500 

3,000 

5,000 

1,611.5 

3,000 

6,611.5 
385 

Summary of Type I and Type 2 Claims Settl~!!" ~~ .,. ... ~lt~ · 

($millions) 

Settlement Catecory Principal 

1·1. Due From Tribes: Forcivea 

I· IA.. Proposed Adj-eats 11.6 

I· IB. Rollover A-•ts H.! Total Foflivea (Doa aot require appropriations) 37.7 

1-:Z. Due To Tribes: 

1·1A.. Proposed Adjustmeats 10.6 

1·18. Rollover Allaouats 17.5 

I-1C. Interest Oil Deposits Due to Lag r ..... 1-2D. lllterest Oil Deposits Due to Lag Times (MMS) 

SubTotal Type 2 Claims Settlemeat 28.1 

1-J. Dae From TJi1>es: Fofllvea Pusecl Adjustmeats 

1-4. Due To Tribes: Pusecl Adj-ts (I) 

1·5. Dtspaled Clillu Settled by NegodatioD or Arbilnlioa (1) 

1-6. Recoa<lled Dlsba..-ts willllllcomplete Pllckqa 

I-6A.. Geaeral Settlooaeat. Proeeecb 1o D-Baak 

1-68. Payable lo Tnbes after Negatlalioo!Arbilratioa .ill 

SubTotal Type 1-3 lbrougb 1-6 Claims Settlemeats 

:Z.I. 11M Ac:aMIDI Holden SettleoMat Propoal 281 

2-2. Ratonlioa ofDM nrift ladutry Laaes 

2-3. Ratontloa of O.onlraft lateral CleariDI Aecouats 42.2 

2-4. ~OTPM c.eral Lodpr Loaa 28.3 2-5. UM aad Tribal Aeco .. t Holden Jolllt Settlemeat for 

llllplementadcnl af Spedat Tnstee's Stntec!e Plaa 147 

2-6. Settlement~rUa~T~ 

2-6A. Geaeral Settlooaeat. Proeeecb 1o D-Baak JOO 

2-68. Payable to llldlvldaal Tribes. Capped at SJOOIIL JOO 

l-7. GeaeraiSettlaaeatforDMaad TrlbaiAC<OIIat Holden 

:Z.7A. EqallyCapltai~Dev....,_tBaak 

provided by SettleoMats I-6A &: 2-6A 500 

:z.?B. Loa• r.ro.-u. s. eo.. ........ t · J,OOO 

2-7C U. S. Gaana- obllpliou ofD-Baak 

of S5 biBioa, aet of$3 bDiloa loaa t.w!! 

Total Type 2 Clabas Settlement 6,598.5 

Total AU Claims-.. 

I. Fofllvea ~~~ 

2. A. Total Type load Type 1 Claims Settlement Direct ObllplioDI, net Of$500 

- eapltal for D-Baak wtoleb was doable coaated (See Settleaoeats 

1-6A.l-6A&: l-7A) &: aetofU. S. Loaas&:GuanateaofS5 bWioa 

B.· LoaDS $3,000 aad gaanatea Sl,OOO fro• U.S. 

Total Claims~~~ bodadflll Foflivea Amouats 

Interest 

11.6 

!.1M 

118.5 

14.5 

9:1.1 

8.l 

~ 

115.3 

(1) 

(1) 

..ill 

IJ 

13 

(I) Noae ••las tribes dllptrte aecoaat balaace aad briDes-fa! aegodaliolllarbltralioa ac:doa. 

0 

Total 

13.2 

!ill! 

166.2 

15.1 

109.6 

8.l 

~ 

143.4 

(l) 

(1) 

200 

11! 

400 

281 

IJ 

42.2 

28.3 

147 

JOO 

JOO 

500 

J,OOO 

t.w!! 

6,611.5 

166.2 

1,654.9 

~ 

6,821.1 


ISBN 0-16-053966-8 

9 8016