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26–395 PDF 2006

S. HRG. 109–441

SETTLEMENT OF COBELL VERSUS NORTON

JOINT HEARING

BEFORE THE

COMMITTEE ON INDIAN AFFAIRS

UNITED STATES SENATE

AND THE

COMMITTEE ON RESOURCES

UNITED STATES HOUSE OF

REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

ON

OVERSIGHT HEARING ON POSSIBLE MECHANISMS TO SETTLE THE

COBELL V. NORTON LAWSUIT

MARCH 1, 2006

WASHINGTON, DC

Serial No. 109–42

(
COMMITTEE ON INDIAN AFFAIRS

JOHN McCAIN, Arizona, Chairman

BYRON L. DORGAN, North Dakota, Vice Chairman

PETE V. DOMENICI, New Mexico

CRAIG THOMAS, Wyoming

GORDON SMITH, Oregon

LISA MURKOWSKI, Alaska

MICHAEL D. CRAPO, Idaho

RICHARD BURR, North Carolina

TOM COBURN, M.D., Oklahoma

DANIEL K. INOUYE, Hawaii

KENT CONRAD, North Dakota

DANIEL K. AKAKA, Hawaii

TIM JOHNSON, South Dakota

MARIA CANTWELL, Washington

JEANNE BUMPUS, Majority Staff Director

SARA G. GARLAND, Minority Staff Director

COMMITTEE ON RESOURCES

RICHARD W. POMBO, California, Chairman

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

Don Young, Alaska

Jim Saxton, New Jersey

Elton Gallegly, California

John J. Duncan, Jr., Tennessee

Wayne T. Gilchrest, Maryland

Ken Calvert, California

Barbara Cubin, Wyoming

Vice Chair

George P. Radanovich, California

Walter B. Jones, Jr., North Carolina

Chris Cannon, Utah

John E. Peterson, Pennsylvania

Jim Gibbons, Nevada

Greg Walden, Oregon

Thomas G. Tancredo, Colorado

J.D. Hayworth, Arizona

Jeff Flake, Arizona

Rick Renzi, Arizona

Stevan Pearce, New Mexico

Henry Brown, Jr., South Carolina

Thelma Drake, Virginia

Luis G. Fortun ̃ o, Puerto Rico

Cathy McMorris, Washington

Bobby Jindal, Louisiana

Louie Gohmert, Texas

Marilyn N. Musgrave, Colorado

Vacancy

Dale E. Kildee, Michigan

Eni F.H. Faleomavaega, American Samoa

Neil Abercrombie, Hawaii

Solomon P. Ortiz, Texas

Frank Pallone, Jr., New Jersey

Donna M. Christensen, Virgin Islands

Ron Kind, Wisconsin

Grace F. Napolitano, California

Tom Udall, New Mexico

Rau ́l M. Grijalva, Arizona

Madeleine Z. Bordallo, Guam

Jim Costa, California

Charlie Melancon, Louisiana

Dan Boren, Oklahoma

George Miller, California

Edward J. Markey, Massachusetts

Peter A. DeFazio, Oregon

Jay Inslee, Washington

Mark Udall, Colorado

Dennis Cardoza, California

Stephanie Herseth, South Dakota

Steven J. Ding, Chief of Staff

Lisa Pittman, Chief Counsel

James H. Zoia, Democrat Staff Director

Jeffrey P. Petrich, Democrat Chief Counsel

(II)
(III)

C O N T E N T S

Page

Statements:

Bickerman, John, president, Bickerman Dispute Resolution, PLCC ........... 4

Dorgan, Hon. Byron L., U.S. Senator from North Dakota, vice chairman,

Senate Committee on Indian Affairs ........................................................... 3

Eizenstat, Stuart, former ambassador, Covington and Burling ................... 7

Faleomavaega, Hon. Eni F.H., U.S. Delegate, American Samoa ................. 20

Frazier, Harold, chairman, Great plains Tribal Chairman’s Association .... 28

Garcia, Joseph, president, National Congress of American Indians ............ 26

George, Keller, president, United South and Eastern Tribes ....................... 27

Johnigan, Sandra K., CPA, Johnigan, P.C. .................................................... 12

Marchand, Mike, Affiliated Tribes of Northwest Indians and First Vice

President, Colville Confederated Tribes ...................................................... 25

McCain, Hon. John, U.S. Senator from Arizona, chairman, Senate Committee on Indian Affairs ............................................................................... 1

Pombo, Hon. Richard W., U.S. Representative from California, chairman,

House Committee on Resources ................................................................... 2

APPENDIX

Prepared statements:

Bickerman, John (with attachment) ............................................................... 31

Eizenstat, Stuart .............................................................................................. 36

Frazier, Harold ................................................................................................. 41

Garcia, Joseph (with attachment) ................................................................... 45

George, Keller (with attachment) .................................................................... 54

Johnigan, Sandra K. (with attachment) ......................................................... 116

Marchand, Mike ................................................................................................ 134

Minthorn, Antone C., chairman, Board of Trustees, Confederated Tribes

of the Umatilla Indian Reservation ............................................................. 136

Renfrew, Charles (with attachment) ............................................................... 31

(1)

SETTLEMENT OF COBELL VERSUS NORTON

WEDNESDAY, MARCH 1, 2006

U.S. SENATE, COMMITTEE ON INDIAN AFFAIRS, MEETING

JOINTLY WITH THE COMMITTEE ON RESOURCES, U.S.

HOUSE OF REPRESENTATIVES, Washington, DC.

The committees met, pursuant to notice, at 9:30 a.m. in room 106

Senate Dirksen Office Building, Hon. John McCain (chairman of

the committee on Indian Affairs) presiding.

Present from the Senate Committee on Indian Affairs: Senators

McCain and Dorgan

Present from the Committee on Resources, House of Representatives: Representatives Pombo, Fortuno, Hayworth, Herseth, Inslee,

Kildee, Renzi, Mark Udall, Tom Udall, and Faleomavaega.

STATEMENT OF HON. JOHN MCCAIN, U.S. SENATOR FROM

ARIZONA, CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS

The CHAIRMAN. Good morning.

I welcome Chairman Pombo and Ranking Member Rahall and

other members of the House Committee on Resources to the Dirksen Building. I want to thank you very much for agreeing to convene this important hearing on the settlement of the Cobell v. Norton litigation, which has been the subject of the legislation being

cosponsored by the chairman and ranking members in both chambers.

Because of time constraints this morning imposed by the joint

meeting of Congress later this morning, I would respectfully ask

that opening statements be limited to chairmen and ranking members. As my colleagues know, the Prime Minister of Italy is addressing a joint session this morning.

The principal purpose of this hearing is to gather views on approaches we might take in valuing the settlement of claims contemplated by S. 1439 and H.R. 4322. On our first panel, we will

hear from John Bickerman, who worked as one of the two mediators in the Cobell matter during the 108th Congress; Sandra

Johnigan, a forensic accountant who has a background in accounting claims; and Stuart Eizenstat, who among his other high profile

positions, helped to negotiate financial settlements of class action

suits with European banks and other entities involving accounts

and other properties that were misappropriated, stolen or otherwise lost in the Holocaust in the years leading up to and during

the Second World War.
2

Ambassador Eizenstat’s negotiations in those cases presented

many of the same valuation problems that we are confronted with

here today. The problems of valuing accounts of claims where documentation is either missing or has been destroyed, where critical

information is several decades old, and where a thorough investigation of claims could cost many millions of dollars and take many

years to complete, perhaps maybe even billions.

I look forward to hearing from our second panel of witnesses,

representatives of the Affiliated Tribes of Northwest Indians, the

National Congress of American Indians, United South and Eastern

Tribes, and the Great Plains Tribal Chairman’s Association, and

getting their views and insights on how we might approach the settlement valuation question.

Because we have tight time constraints for this hearing, I am requesting all our witnesses to keep their statements to 5 minutes.

Finally, I would like to mention that the staff of the Committee

on Indian Affairs and House Resources Committee recently traveled to Lenexa, KS, to tour the Department of the Interior’s underground Indian records repository. At significant cost, the department has been gathering an enormous volume of Indian trust and

non-trust records there, logging them into a database, and storing

them in a controlled environment for their long-term preservation.

The department employees have contracts for about 220 people

at Lenexa to index millions of documents, track thousands upon

thousands of transactions in the historical accounting process involved in the Cobell litigation. Many of those transactions involve

extremely small sums of money derived from tiny fractional interests in land. Surely, there is a better use for these funds in Indian

country, and I look forward to working on a bipartisan, bicameral

basis to resolve the litigation.

Chairman Pombo, I would like to thank you and Ranking Member Rahall for the hard work you have been doing on this. I think

you would agree with me, this is one of the most intransigent

issues that we have ever faced, particularly considering the amount

of money that has been involved here, and trying to put this thing

back together. It has been one of the most daunting challenges I

think that we have faced. I want to express my appreciation for the

bipartisan, bicameral way that we have tried to address this issue.

I think that you would agree with me, as other members on both

sides of the aisle do, that we have to get this thing resolved and

sooner rather than later. Thank you, Chairman Pombo. If it is all

right with you, after you, Senator Dorgan, and then if Congressman Rahall was here. I guess he is not here.

Go ahead, please.

STATEMENT OF HON. RICHARD W. POMBO, U.S. REPRESENTATIVE FROM CALIFORNIA, CHAIRMAN, HOUSE COMMITTEE

ON RESOURCES

Mr. POMBO. Thank you, Senator. I want to express my appreciation to you for holding this joint committee hearing. I cannot remember the last time that the two chairmen and ranking members

with jurisdiction over Indian affairs cosponsored identical bills and

then held a joint hearing on them. This speaks to the magnitude
3

of the problem that we are trying to solve, and solving it depends

on a bipartisan, bicameral effort.

For years, our two committees have worked steadily in holding

hearings and facilitating mediation to try and bring a Cobell lawsuit to a happy conclusion. Even though we have been able to introduce settlement bills, we are not there yet. I am disappointed

that mediation did not bring about a settlement. This is not

through any fault of our mediators. If it were not for the work of

John Bickerman and Judge Charles Renfrew, we would not have

arrived where we are today.

We, and indeed Indian country, owe them a debt of gratitude for

the fine work they have quietly and patiently done, and continue

to do, in bringing about a final and fair resolution for thousands

of individual Indian account holders.

Today, we are exploring the key issue that will determine the

fate of the settlement bill. It is the settlement amount and how it

should be distributed. Unless a miracle occurs, neither party in the

lawsuit can be expected to offer an acceptable amount to fill in the

space that we left blank in our bills. Filling in that blank space is

our job, and today’s hearing should help us in that task.

If we do not do this, the case will drag through the courts as it

has dragged on for the last 10 years. The class of plaintiffs suffers,

and all of Indian country suffers because rightly or wrongly, scarce

Federal resources meant for important tribal services are being diverted to deal with it. While it may seem unusual for Congress to

mandate a settlement, this is a unique type of case because of Congress’ power to settle that stems from our constitutional authority

over Indian affairs.

It is clear that continuing with the litigation is not in the best

interests of individual Indian account holders and of the taxpayers

who pay the massive litigation support costs in attorneys fees.

Again, Mr. Chairman, I am pleased we are holding this joint

hearing with the distinguished roster of witnesses. I look forward

to working with you and Senator Dorgan and Congressman Rahall

in passing a settlement bill soon this year.

Thank you.

The CHAIRMAN. Senator Dorgan.

STATEMENT OF HON. BYRON L. DORGAN, U.S. SENATOR FROM

NORTH DAKOTA, VICE CHAIRMAN, COMMITTEE ON INDIAN

AFFAIRS

Senator DORGAN. Mr. Chairman, thank you. I will be mercifully

brief.

It is interesting that we talk about the word ‘‘trust,’’ Indian trust,

when we refer to these accounts. In fact, ‘‘trust’’ is an inappropriate

word when we are dealing with these accounts because that trust

was violated by the Federal Government. Report after report, investigation after investigation shows that the Federal Government

did a miserable job in keeping the trust funds and properly accounting for those trust funds. It is not surprising to any of us, I

suspect, that this litigation ensued.

But the Cobell litigation, if it does continue, will eclipse almost

everything. It will take years. Massive amounts of money will be

spent. I am not sure what the result will be. To the extent that we
4

can find a way to resolve this in an appropriate way and a satisfactory and a fair way, it makes sense for everybody.

Senator McCain and I and the folks in the House introduced

identical legislation to try to begin to address these issues, to encourage the parties to become actively involved in finding some

way to reach agreement. My hope is that this hearing will advance

that goal one more step. I am really appreciative of members of the

House joining us here as well.

The CHAIRMAN. I again would like to extend my appreciation to

the members of the House who have taken the giant leap on the

other side of the Capitol to join us today. We thank you very much

for being here, including my friends from Arizona, New Mexico,

and my old friend Dale Kildee.

We would like to begin with our first set of witnesses, which is

John Bickerman, the president of Bickerman Dispute Resolution;

Stuart Eizenstat; and Sandra Johnigan, who is a CPA.

Mr. Bickerman, we would like to begin with you. I want to thank

you for your very hard work on this issue. We are here to learn

the benefit of your experience and your recommendations.

We thank all the witnesses for being here today.

STATEMENT OF JOHN BICKERMAN, PRESIDENT, BICKERMAN

DISPUTE RESOLUTION, PLCC

Mr. BICKERMAN. Thank you.

Chairman McCain, Chairman Pombo, Vice Chairman Dorgan,

Ranking Member Rahall, members of both committees, my name is

John Bickerman. I am appearing here on behalf of both myself and

Judge Charles Renfrew. Judge Renfrew regrets that he could not

be here today due to an unavoidable conflict.

With the permission of the Chair, I would just like to read two

very short paragraphs because he and I have worked on this testimony, and it is his testimony as much as mine. I want to make

sure that I get his words right. So with your indulgence, I am just

going to read two quick paragraphs, and then summarize the rest

of my testimony.

Our assignment was to engage the parties in negotiations to seek

a resolution of all claims brought by plaintiffs in their class action

lawsuit. We were consensually chosen by the parties. Our mission

was also much broader than traditional mediation. From the outset, both the parties and congressional staff requested that we periodically report back to Congress regarding our efforts and our

progress.

This request was made for three reasons. First, any resolution

we achieved through negotiation would likely require congressional

action. Second, Congress wanted to know if either plaintiffs or defendants were behaving in a dilatory manner or otherwise negotiating in bad faith. And third and most importantly, Congress wanted

to know if a resolution was impossible so that it could decide

whether to take action.

Indeed, in October 2004, we reported back to the then-leaders of

these two committees and in fact told you that we did not think

that a successful conclusion could be made. I am going to read

again.
5

We continue to believe that only congressional action can resolve

this dispute for the benefit of the beneficiaries of the IIM Trust,

and allow the United States to devote its resources to the traditional services it has provided Indian country. If Congress takes no

action, the litigation path will take years, if not decades, to reach

finality. Many deserving beneficiaries will have died in the interim.

Those beneficiaries who are alive will not be made whole.

We also believe that the Department of the Interior’s ability to

serve Indian country will be severely compromised. So much of the

policy affecting Indian country seems now to be made through the

prism of the Cobell litigation. We are concerned that the historically beneficial trust relationship between the Federal Government

and Indian country is in jeopardy as a result of this litigation.

Now, I will summarize the rest of our testimony.

First, there is no dispute about liability. Courts have proven it.

The plaintiffs have been successful in their efforts, and liability is

just not an issue anymore. What is an issue and why we are here

today is to try to value the liability that the United States has.

While there is no serious question about the liability, the gulf that

exists between the parties is enormous.

Initially, the plaintiffs took the position that strict common law

fiduciary principles ought to apply. ‘‘If you can’t show it, then you

owe it.’’ Based on the calculations that they initially made, that led

to a conclusion that the liability of the United States was somewhere between $100 billion to $170 billion.

Now, we believe that those kind of statements have created very

unrealistic expectations that make this dispute even more difficult

to resolve. More recently, the plaintiffs at a hearing in December

suggested that a settlement demand of $27.5 billion, for settlement

purposes, was a reasonable demand, based on an error rate of 20

percent, assuming that 20 percent of the funds were not paid to

beneficiaries as a measure of rough justice. But again, there is no

supporting data.

Similarly, we think the United States’ position is somewhat suspect. The department has spent considerable sums tracing the

record of transactions. If you follow their testimony to its logical

conclusion, you come up with a number of less than $500 million,

maybe less than $100 million. So $27.5 billion on one side, and less

than $500 million on the other side. That is quite a gulf.

Now, if we try to analyze where the gulf is and why it exists, we

believe that there are three potential sources of error. The first

source of error is the money was not collected. The second source

of error was the money was collected and it was deposited, but it

was not properly deposited. And the third is the money was not

properly disbursed.

Now, let’s take a look at the first issue with respect to the money

not being collected. To the best of our knowledge, the administration has not really been able to take a hard and close look at this

source of error. These missing funds, (or if the funds were paid late

and interest was due on them,) could reflect a very, very significant

amount of money. I would describe this as ‘‘funds mismanagement.’’ In the legislation there is an effort, to deal with this issue.
6

Funds mismanagement we believe would be and ought to be covered under any settlement under title I. This is a claim that we

think belongs with the general accounting claims.

But we want to distinguish it from what we would describe as

‘‘lands mismanagement.’’ Lands mismanagement relates to the underlying assets—the underlying assets of an individual’s property

was not let out at a fair price, or a lease was not fairly acquired.

That is a very individualized, particularized kind of claim, and we

do not believe that it is properly part of this litigation.

The plaintiffs have never asserted it was part of this litigation.

No evidence has ever been brought to bear on this issue, and that

those sort of claims should survive whatever you do. We believe

that those kind of claims would be individual claims that would

properly be brought in the Court of Claims, and as a result we

think they should be able to be brought.

Now, the second potential source of error is that the funds were

not properly deposited, and the administration has done a good

deal of analyzing that. We do not say anything more about that at

this time.

But I do want to talk to you about the fact that ultimately this

is an arbitrary solution. There is no right number. As mediators,

we are frequently asked to give a number. We often say ‘‘based on

the legal merits, one number is as good as the other.’’

By way of example, I have provided at the end of the testimony

a bunch of numbers.

The CHAIRMAN. One number is as good as the other, $100 million

or——[Laughter.]

Mr. BICKERMAN. No; not exactly. Let me be more specific. Clearly, there is an error rate. Clearly, we know that $13 billion went

through the system. Okay? The plaintiffs used a 20-percent error

rate. We did some analysis and we said, ‘‘let’s assume a 20-percent

error rate and an interest rate of 3 percent compounded.’’

What does that lead to? And we made some assumptions. We

said, most of the money, and this is an important assumption, that

was paid through the system occurred from 1970 forward. Obviously, money that was paid a long time ago is much more valuable

now than money paid more recently because of the compound interest effect.

So if you assume that $3 billion was paid prior to 1970, and only

$500 million was paid prior to World War II, which we think are

reasonable assumptions, then you generate a number of $7.2 billion. If you assume an error rate of 10 percent and an interest rate

of 4 percent, you come up with a $5.6-billion number. But if you

move that interest rate just a point, and assume the same error

rate of 10 percent and assume an interest rate of 5 percent, then

the number jumps to $9.8 billion.

What is the point of this? We are not recommending any of these

numbers. What we are saying is the thought that we can define

with precision the error rate and the interest rate, we can’t, but

there is a range that the committee ought to be looking at that

could resolve this dispute. It is not the administration’s number

and it is not the plaintiffs’ number, but there ought to be a number

that you should be able to determine and we do not think that a
7

lot of time spent on coming up with a methodology will improve the

accuracy of a number.

So our recommendation, and here I will, if I can, just read our

statement again because Judge Renfrew endorses this. On behalf

of Judge Renfrew and myself, we continue to offer our assistance

to the committee. We believe that the prompt enactment of S. 1439

and H.R. 4322 is an imperative. It is in the best interest of the

plaintiffs, of the United States, and we encourage the committee to

schedule these bills for markup as soon as possible.

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

The CHAIRMAN. Thank you very much.

Ambassador Eizenstat, welcome.

STATEMENT OF STUART EIZENSTAT, FORMER AMBASSADOR,

COVINGTON AND BURLING

Mr. EIZENSTAT. Thank you, Mr. Chairman.

Chairman McCain, Senator Dorgan, Chairman Pombo, Congressman Rahall, and members of the joint committees, thank you for

asking me to testify. I have been asked to testify because of my experience during the Clinton administration where, in addition to

holding a series of four international positions, I was simultaneously the leader of the administration’s efforts to bring belated

justice to Holocaust survivors and other victims of Nazi atrocities,

and to return as much as possible their confiscated property from

World War II.

I want to make it clear at the outset that I am in no way, underscore no way, trying to compare the Nazi genocide of 6 million Jews

and millions of others to the gross mistreatment of America’s first

residents, Native Americans. Each historical event stands on its

own.

But the way in which we sought to provide what I call imperfect

justice to victims of the Third Reich in a series of negotiations from

1995 to 2001 have, I believe, some useful lessons on how Congress

might provide justice to American Indians in the Government’s

mishandling of their trust fund assets.

Congress has repeatedly found, in the words of the U.S. Court of

Appeals, that these funds were hopelessly and ineptly managed,

with the resulting chaos. And that it was not disputed that the

Government failed to be a diligent trustee. A 1992 congressional report cited the Interior Department’s dismal history of inaction and

incompetence.

Despite the very different historical origins of the Indian claims

and the Holocaust claims, there are lessons from our work that

may be useful as you consider your work on these two important

bills. The class action Holocaust cases were brought against French

and Swiss banks for Holocaust-era bank accounts never returned

to their rightful owners after World War II.

Class action suits were also brought against German and Austrian slave labor companies that employed slave-enforced labor;

against German and Austrian and other insurance companies for

unpaid insurance policies for confiscated real and personal property

and artworks never returned.

In each case, the class action suits were crucial in highlighting

the historical wrong, but were unable to resolve it in a judicial con-
8

text. In each case, the beneficiaries were dying in the Holocaust

cases at the rate of 10 percent a year, while the class action litigation droned on. Indeed, our cases were founded in many instances

on legal quicksand, as demonstrated by the dismissal of the two

major slave labor cases by Federal courts in New Jersey.

In the Cobell case, there appears to be a stronger legal argument

by the plaintiffs, but the case has been batted around like a

volleyball for almost a decade between the District Court and the

Court of Appeals, with no benefit to the aggrieved Indians and at

great cost to both sides.

So let me suggest the following. First, courts are not suitable instruments for resolving historical wrongs. Class action lawyers may

be able to raise a historical wrong, but are incapable of solving the

problem themselves.

It was only the intervention of the Clinton administration, and

may I say, with the bipartisan support of the Congress, in mediating the Holocaust cases that led to our dramatic results, with $8

billion in settlements for victims, Jewish and non-Jewish alone, indeed the majority non-Jews; payment of 1.5 million slave-enforced

laborers; the identification of over 20,000 Holocaust-era bank accounts; payments of thousands of life insurance policies; the return

of hundreds of properties and hundreds of pieces of looted art.

So I applaud all of you for your work on this legislation. Legislation is absolutely essential. There will never be a piece of legislation that will satisfy both sides, but legislation will be infinitely

preferable to the endless prospect of uncertain litigation.

Second, the way in which you craft the legislation bears striking

similarities to the efforts we made in the Holocaust cases. Your legislation, for example, would create a global settlement fund which

would be allocated among the claimants. Your concept of allocating

that capped amount partly by a per capita amount and partly by

a formula, taking into consideration the flow of funds through the

benefiaries’ IIM accounts, compared to the total throughput of all

other beneficiaries, is eminently reasonable.

Permit me to give you several examples from my experience. In

the Swiss bank case, we capped $1.25 billion to be divided among

an unknown, at that point, number of claimants at the time of settlement. We simply did not know how many people would come forward and claim bank accounts. There was a major controversy in

the Cobell case about the accounting required and the costs of performing it.

You may wish to note that we created a committee chaired by

former Federal Reserve Board Chairman Paul Volcker, which employed four major accounting firms and cost the Swiss banks $200

million in audit fees to get at one million accounts created in Swiss

banks from 1938-45.

At the time of our negotiations, indeed at the time of their conclusion, we still did not know the results of the Volcker investigation. So while it was historically useful, and indeed is now important in terms of claims, it did not help us determine how to reach

the $1.25-billion settlement.

We also took into account, as we have done in the insurance

cases, the interest lost over the decades since the end of World War

I by adding 10 times the amount in the bank accounts to the actual
9

recovery. We came to that figure by employing an eminent economist, Henry Kaufman, who helped us determine the basis of the

plus-up.

In the German Holocaust labor cases, we employed a per capita

concept in our capped 10 billion Deutschmark, $5 billion settlement. We estimated from records available to us that there were

around 1 million surviving laborers in Europe and elsewhere from

World War II. We divided that number into the capped amount we

negotiated. All slave laborers, and this is a very important point on

your per capita issue, all slave laborers were paid the same per

capita amount, $7,500, whether they worked for 1 day, 1 year, the

entire war; whether they came out healthy or wrecked for life.

Likewise, forced laborers who worked under harsh, but somewhat better conditions, received $2,500, again without any individual hearings. It was impossible to have individual hearings for 1

million-plus people and determine their individual circumstances.

In the Austrian labor cases, we negotiated a $400-million capped

fund and allocated again on a per capita basis to forced and slave

laborers. We overfunded the account to assure that each category

would receive the maximum $7,500 or $2,500 figure.

In the Austrian property settlement, we agreed upon a $210-million capped fund which we called the General Settlement Fund. By

the way, it has just been funded 5 years later, a few weeks ago.

Here again, we have an unknown number of claimants. It appears

now that there will be 19,000.

We agreed in our negotiations that there would be up to a $2-

million payment to people whose property was taken in Austria,

but that would depend on how many claims there were. It now appears with 19,000 claims, if most of these are validated, and I will

get to that in a moment, that they will receive less than that $2

million. So again, there is an element of arbitrariness.

That gets to my third point. We employed a concept we called

‘‘rough justice’’ in our determinations of the amount of the recoveries. As you seek to fill in the blank in your proposed global settlement amount, you might consider the same.

We recognized that there was an arbitrariness to any figure.

How do you place a value on the damage done 60 years after a war

to a slave or forced laborer? How do you determine how much the

Swiss bank should pay for their perfidy in hiding Holocaust era

bank accounts for decades from their owners, even taking it into

the profits of the bank? Indeed, how do you here measure the injustice to Indians who misplaced their trust in the United States?

We did our best to try to come to reasonable figures, but in the

end it was a case of getting the maximum for victims that the offending foreign corporations were willing to pay. It was simply a

case of finding the middle ground on which the parties could agree.

You have this unenviable task. There will be no figure that will

satisfy both sides. You labor, as I did, with an imperfect set of historical records. Indeed, evidently the state of the trust fund accounts is abysmal. If there is to be an accounting, I believe there

must be one that uses statistical analysis and not cost, as the

Volcker audit did, a disproportionate amount to what is recovered.

But it is far better, as you have done in your legislation, to simply
10

forget the audit. It is not worth paying money to auditors. Let that

money go to the Indians.

So you should simply avoid further costly accounting on an incomplete and poorly managed set of records, some of which are destroyed or otherwise inaccessible. In coming to a number which almost certainly should be in the billions, the committee should take

into account the passage of time, the lost investment opportunities,

the massive negligence or worse at the Department of the Interior,

and the fact that you are really returning their money, not appropriating Government money. This will have to be done for IIM

beneficiaries and individual Indians, and should be done as quickly

as possible because they will never be able to recover an adequate

amount in the courts.

You might also consider on attorneys fees what we did. In all of

our agreements, we capped attorneys fees at roughly 1 percent. By

the way, in the Swiss cases, some of the leading plaintiffs’ attorneys donated their services. So the class action lawyers did not

take a disproportionately large percentage of the ultimate recovery.

Now, here for sure, the class action lawyers have spent a very

long time and a tremendous amount of effort. They deserve to be

compensated. I am not suggesting 1 percent is the appropriate figure here, but I do mention that is a figure that we used.

Fourth, you might consider the institutions we created to administer the Holocaust funds as you consider how to administer these

funds. In your legislation, there is a significant dispute, as in the

case itself, over who should administer the funds. The plaintiff Indians, with their rightful suspicion of the Interior Department and

to a lesser degree the Treasury Department, want the Federal District Court to administer the funds.

I strongly suggest you not do that. Your legislation proposes that

the Treasury Department administer the funds. There is frankly a

problem in giving either Interior or Treasury such a fiduciary role,

given that they are defendants in the cases and in light of their

failure to live up to their fiduciary responsibility since 1887.

We created administrative mechanisms. For example, in the

Swiss bank case, the claims resolution tribunal functions to this

very day under a Federal judge with a special master helping him.

The average recovery in bank accounts, by the way, plused-up, is

$100,000. In the Austrian property claims, we created administrative tribunals with three persons, one appointed by the Austrian

Government, one by the United States Government, the third by

the other two.

In the German slave labor cases, a German controlled board

makes decisions, but the U.S. Government and the plaintiffs have

representation. Insurance claims are processed by an organization

headed by former Secretary of State Larry Eagleburger. You might

consider in your legislation, establishing an independent administrative tribunal in the Indian cases.

Because of the suspicion on Interior and Treasury, perhaps they

could report to the Attorney General, but I understand that there

is suspicion of the Justice Department here, so let me make a fresh

suggestion. Because of the distrust that the plaintiffs have of all

the major departments that might have a role in administration,
11

permit me to suggest the following, and that is an independent executive branch commission.

You might call it the Indian Claims Settlement Commission,

which would be modeled after the U.S. Foreign Claims Settlement

Commission, which has done things like certify 5,911 Cuban claims

going back to the 1970’s, but with authority to adjudicate and pay

claims, like those tribunals we created in the German, Austrian,

and French Holocaust cases. But avoid at all costs sending this

back to the Federal courts.

Sending the administration of the payments back to the courts

that have already failed for a decade to resolve the matter is a prescription for further delay in doing justice to Indians. The key is

to make rapid decisions in the lifetime of the majority of the claimants, the key consideration here and with aging Holocaust victims.

The regimes we created that are individual claims-based, like the

ICHEIC process for insurance or the Swiss Bank Claims Resolution

Tribunal, are slow and laborious. It has taken more than 7 years

since the Swiss bank case was settled, and more than 3 years after

their tribunal was created, because it is a claim by claim enterprise. The more you can do this on a per capita basis, the more you

can do rough justice; the more people will be benefited and the

more rapidly.

Fifth, I want to address legal certainty and constitutionality. In

our cases, we created a unique statement of interest in which the

U.S. Government pledged to support the defendants, the foreign

corporations, in dismissing all cases on any valid legal ground and

stating that there was a national security interest in having the

cases dismissed, and that the negotiated settlement we reached go

forward. In every single case, Federal courts have deferred to our

executive branch statement of interest.

As I understand your proposed bill, you will extinguish claims for

mismanagement of funds, but not for improper decisions on land

management. I am going to ask you to do something that is uncomfortable. Claims might still be made, I understand, as John said,

relating to the mismanagement of the underlying assets. But I am

sympathetic to the Department of the Interior’s concern that in any

settlement, if you do not wipe out all claims, all you are going to

do is invite another round of suits for mismanagement of the underlying assets.

As long as you are going to bite the political bullet, go ahead and

bite it. Bite it once. Make a larger sum, perhaps, to settle all elements of the claim. You have ample protections built into the legislation to survive constitutional challenge.

I also believe that the Department of the Interior is correct in asserting that Congress should provide clear guidance as to the

amounts to which individuals are entitled, rather than leaving the

decision of what individuals receive to a formula developed by the

Secretary.

I urge you in the strongest terms, do not leave anything to the

discretion that you possibly can solve in the legislation. Make it

clear. Make the formula clear so that when you set up an administrative mechanism, that administrative tribunal will have clear

rules and will not have to spend years trying to develop a system

themselves.
12

Our Holocaust experience demonstrated that the more precise we

could be, the fairer and speedier were the administrative tribunals

for the benefit of victims.

In conclusion, you are to be congratulated for embarking on a politically courageous course to rectify over 100 years of wrongs committed by our Government against individual Indians who ceded

their accounts to the Department of the Interior in the expectation

they would be properly managed. Your legislation broadly sets the

right course.

Thank you.

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

The CHAIRMAN. Thank you very much, Ambassador. This has

been very helpful, I think, to this committee. Don’t you agree?

Ms. Johnigan.

STATEMENT OF SANDRA K. JOHNIGAN, CPA, JOHNIGAN, P.C.

Ms. JOHNIGAN. Thank you.

I am pleased to appear before the committee. I am happy that

I was requested to appear by the chairman of the committee.

I am going to summarize my testimony that I have prepared, and

will go through the major points of my ideas and suggestions.

First of all, though, I would like to say that the basic reason that

I believe I am here is that I am representing myself as a forensic

accountant, a CPA. I am not a lawyer. I am not an attorney, so I

will not be speaking about anything that has to do with legal

issues.

My background includes the recent settlement in principle of one

of the tribal trust cases that is in the Court of Federal Claims,

where I was the lead consultant. I am also working with the Intertribal Monitoring Association on a cooperative effort with the Government in trying to create a methodology for tribal claims settlement in the 1972-92 era.

That information and background, as well as my private trust experience, informs my thinking in what I have presented today.

Generally, where I want to go are the kinds of things that I

would suggest if I were working with someone in terms of trying

to settle this type of a claim. I am going to go through some of the

same kinds of things that I believe are of interest, whether or not

you are talking about creating the number in legislation or whether

you are looking at the number if you were trying to settle the

amount as a set of individual parties, because the number that you

are going to put on the table is still going to be a number in legislation that in some level is going to have to be mutually agreed upon

within Congress and yourselves as you put the legislation forward.

So there are a couple of key things to me. First, what questions

you asked; and second, what you basically do in terms of gaining

this mutual agreement about what the process is to come to a conclusion on a number. The questions that I think are most important here to begin with are, what are you trying to settle with this

legislation?; what in fact were the plaintiffs trying to resolve with

the claim?

In my reading of the information and my background on this, my

understanding is the initial claim was for an accounting. I understand there is a dispute with regard to that, as to how that would
13

be performed. I believe that the most important thing in terms of

asking questions about what could inform the creation of a number

is to make sure you understand the elements of the accounting that

are in fact being considered and argued in this case.

From my perspective, those are pretty simple. I believe you have

heard some of that today already in terms of receipts and disbursements. That is about as simple as accounting gets. What are the

receipts that came in? What are the amounts that went out? Where

I think there is some confusion from reading the record I have to

date read, is do we really even agree on the receipts, because the

number of $13 billion has been raised a number of times in these

conversations about the receipts, and that there is some agreement.

Yet when I read testimony on this subject, as I read the testimony from the assistant secretary, Mr. Cason, it is my understanding that in fact the proposals that they have talked about are regarding the statistical sampling, not necessarily embracing the dollar amount of the receipts.

I think part of that is because of the question that was previously raised. What are receipts beyond those that have actually

come in the door? One of the questions that has been raised in the

tribal cases and I believe will be raised in this case is the issue of

receipts that should have been received, those moneys that should

have been received, that were contracted for, but for some reason

did not make it into the accounts. The other is what was previously

again mentioned with regard to the asset mismanagement, that the

fair value of the receipts did not come in. Those are two different

kinds of receipts.

I do not think those have been addressed in this discussion of the

$13 billion, and I do not think that they are embraced in the statistical sampling that I have seen discussed today.

So those are some of the questions. Do the parties generally agree with the $13 billion of total receipts? If so, do they agree on

the timing of the receipts? If there are differences, what are the

bases for the differences? Does the $13 billion really represent all

claims or all amounts, or does it exclude the amount of receipts for

that which should have been received, but was not collected? Are

there claims for those additional receipts on fair value?

Those are some of the things that have been discussed. Those are

major open questions that have to be addressed, I believe, as you

decide what your number should be.

I am not going to go through in this discussion things that could

be done with regard to developing information about what should

have been received. I have some of that in my written testimony.

There is a body of knowledge and approaches that are being developed to date with work on cooperative agreements in the tribal

arena with regard to how to do that. That could inform this process

if you have an interest in delving into that. The main thing is that

there is some mutual agreement on how you would approach that

if you are in fact going to calculate a number that includes that.

In addition, there is another question that has to be addressed

even with receipts. That is, work done to date by the U.S. Government in the statistical work appears to be generally from the 1985

period forward. It does not include the older years. Work in some

manner is going to need to be done, whether it is in depth or
14

whether it is analytical, using reports from GAO and other types

of information to inform the parties, but something needs to be

done to help someone understand how are you going to apply the

information that has been accumulated to date, to periods where

you have done no work. That is a key issue, I think, in coming up

with something that would be considered a relevant and reliable

number that you are, even if you are doing it somewhat arbitrarily,

having some bases for.

The more open question, I believe, though, however, then is disbursements. Disbursement seems to be a widely battled issue, if

you want to call it a battle, with regard to whether or not you need

documents; whether or not there is 20 percent of the documents

that have not been collected, and therefore there is an amount that

should be applied for a claim for the tribal members, or I should

say the IIM accounts.

The other side of that is that there is statistical work saying that

documents have been found by the government in their work, but

again only from 1985 forward, as far as I can tell from the work

that has been done for land based accounts.

So there are some questions in this whole area that I think again

need to be asked. Do the plaintiffs, who then would be, as you look

at this, part of who would be receiving these moneys, agree that

the results of the study that have at least been done by the Government for the period that it was done, is that considered something that is acceptable? If there is some mutual agreement there,

could you use that at least for the period where it was done?

And second, if there is agreement or not between the parties and

therefore informing you as to for the older years, if there is no information that has been created that can be carried back, then you

begin to do the arbitrary type of work that we are talking about

or we have talked about.

I think any forensic information that is looked at over a long period of time is going to have missing documents. My background

in private sector is informed by the fact that I worked on a case

where the State of California and all public municipalities of the

State of California had sued the Bank of America.

One of the major issues in that had to do with the documents.

As the court in preliminary findings in that particular case stated,

you could use other means to fill the gap for those kinds of situations where you did not have the documents, but you had data that

you could analytically fill the gap with. I think that is important

to this type of case.

So I believe in terms of looking at where you are and how you

can fill the gap, I have a number of ideas that I believe could be

applied. I do not believe that level of detail is appropriate for this

hearing today, but I will say that in terms of finding a way to resolve a number, I think the first step is to have the statistical work

prepared by the Government that has been prepared to date, be reviewed by an independent party to determine how it could be used

for the current period.

I think that the older periods and where there are error rates

that could be created based on true problems perceived in periods

during the older years where there are known error and known

problems, where you create a more robust error rate for those peri-
15

ods. If that were applied, that would satisfy a lot who believe that

the rates that are very low for the more current periods are not applicable to the older years.

So bottomline, from my perspective, if you cannot have mutual

agreement of the parties, when you need to have some mutual

agreement among yourselves as you are presenting it to Congress

as to what the bases would be a number beyond just arbitrarily

picking a number from zero to 100, finding something that at least

has some bases in the work that has been done to date, and also

applied with regard to some of the errors and the problems that

are known from the past.

[Prepared statement of Ms. Johnigan appears in appendix.]

Mr. POMBO. Thank you.

I do want to thank all of our witnesses.

We will begin the questions. The Senators had a vote on the

floor, and we will begin the questions, and I will begin with the

House members.

I will start with Ambassador Eizenstat. In the Holocaust case

that you oversaw, you talked about plusing-up some of the payment accounts at a factor of 10. How did you arrive at that? Was

that, as you described it, rough justice or was that based on a formula?

Mr. EIZENSTAT. Mr. Chairman, first of all, we only plused-up

those things which were tangible, for example, policies and bank

accounts. We did not try to plus-up what a worker might have

made if he or she had been paid by one of the slave labor companies over a 10-year period.

What we did is we retained the services of economist Henry

Kaufman, and he basically took Government bond rates and then

calculated what the compound interest would be over that 50-year

period. So there was a solid statistical basis for that.

Mr. POMBO. Do you happen to remember what that interest rate

was?

Mr. EIZENSTAT. I can get that very easily. It was somewhere

around 3 percent, but I can get that. And there again, you do have

the issue that has been raised by my colleagues about what time

period you are talking about. So what he basically did is just took

an average over that period of time.

Now, interestingly for the French cases, the multiplier was 1.7

and the reason, and this provoked a great deal of controversy, the

reason was that there was a massive devaluation of the French

franc after the war. That was taken into account in coming to a

lower multiplier figure. I will be glad to get those precise figures

for you, Mr. Chairman.

Mr. POMBO. Thank you.

You also talked about including the land mismanagement claims.

We have gotten different advice even from this panel in terms of

that. I think in dealing with that particular issue, I would ask Mr.

Bickerman, you have suggested not including that. Ambassador

Eizenstat has suggested that we do include it. Can you enlighten

us as to why you believe it should not be included?

Mr. BICKERMAN. Yes; in fact if I could rely on Ambassador

Eizenstat’s testimony, I think it is key that you have clear criteria

by which to allocate the funds that you are going to allocate. That
16

is one of the central lessons, I think, we learned from the experience of Ambassador Eizenstat. You can do that with the fund based

mismanagement. But the land based mismanagement is very particularized.

Take, for example, the woman who has an oil well on her property, it has been pumping for 40 years, and she is not getting what

she thinks would have been a fair return. Well, the investigation

would require you to take a look at the lease that she got and the

lease that other people got, and was it a fair deal that had been

struck. That is very special, specific information.

So if you were to come up with one gross number, it would be

very hard to take that number and adequately distribute it among

individuals who believe that their assets had been mismanaged.

And that is the reason, I believe in trying to wrap up as much as

you possibly can in a settlement, but it is for that reason that I

think those claims should survive.

Moreover, I think the risk of there being a class action of those

type of lawsuits is very minimal. I think because they are such particularized claims, and they are claims for money damages, they

have to go to the Federal Court of Claims as opposed to the Federal

District Court. That is a more proper venue for them as a result.

I also have a hunch that you are not going to have that many

claims for mismanagement, but that is an intuition.

Mr. EIZENSTAT. May I comment on that, Mr. Chairman?

Mr. POMBO. Please do.

Mr. EIZENSTAT. In our cases, the government’s involved, Germany, Switzerland, Austria, France, et cetera, and their companies,

wanted to know if they were paying billions of dollars, that all future claims arising out of World War II would be covered. They

called it legal peace. And that was the essence of the settlement

we reached. Once we arrived at the figure, the U.S. Government

did everything it could to make sure that all claims arising our of

World War II would be covered. Otherwise, they would have been

paying billions of dollars and still be subject to some creative lawsuit.

Now, I take what John says seriously, about the difference between land based claims and fund based mismanagement. But this

legislative window comes once in a lifetime. Once you have gone

through the trauma of dealing with this, you are not going to want

to take it on again, number one. So you ought to be as inclusive

as possible.

No. 2, whatever settlement comes up is going to involve a tremendous amount of money. The government has I think a justifiable reason to say, okay, we want to do this, but we want to make

sure that everything is included and that we do not have to spend

more money on more defenses for other claims.

No. 3, there is a way of dealing with the concern that John mentioned, and again we did his in our cases. We created in the property cases, again it was a capped fund, but an individualized hearing, unlike the slave labor cases where we could not possibly have

individual hearings for 1.5 million people and we simply said, if

you are a slave laborer and we defined it, you get $7,500; if you

are a forced laborer and we defined it, you get $2,500, regardless

of circumstance.
17

For the property cases and the insurance cases, there are individualized hearings. It takes longer, but there are individualized

hearings, but with a capped amount.

So I think that you could have in your legislation a separate settlement amount that would be for these land based claims. Again,

it would be perhaps difficult to come to any figure, but no more difficult than it will be for the fund mismanagement claims.

So I think it is eminently doable. We created that system in ours.

Don’t end up going through all this trauma and end up with still

more people going through court processes, taking years of time,

everybody’s expense, when you could solve everything at the same

time.

Mr. POMBO. In that case, you had a capped amount per individual, but you had individual hearings where whatever their claim

was, they had the ability to have their day.

Mr. EIZENSTAT. Yes; we did in some, like the Austrian property

claims, which are now literally being adjudicated. The first claims

are just now being heard. A $210-million cap, we said any individual who lost property could make a claim up to $2 million. The

amount you get depends on the value of your claim.

But in the insurance claims the insurance companies agreed that

if there is a valid policy, they will pay whatever that face amount

is plused-up in the way that I described. But in the German and

Austrian cases there was a capped overall amount. In the Swiss

bank account, of the $1.25 billion settlement, we set aside $800

million as a cap for claims on real bank accounts, no rough justice,

real bank accounts, proven by evidence, but only up to that capped

amount.

So there are a variety of ways you can do it, but the point is you

can have a capped amount as we did with the Swiss bank accounts.

You could cap an amount here for these land based claims. That

is, I think, still far fairer to the Indian plaintiffs than going

through this whole legislative trauma and then telling them, well,

on those claims, go to the Court of Claims or go back to Federal

court and start all over again.

Mr. POMBO. Thank you.

I am going to turn this back over to Senator McCain.

The CHAIRMAN. Thank you very much, Chairman Pombo. My colleagues came a long way, so I will be very brief in my questions.

Mr. Bickerman, you don’t believe there is going to be a negotiated settlement. Right?

Mr. BICKERMAN. Never.

The CHAIRMAN. Mr. Eizenstat, from your experience with this?

Mr. EIZENSTAT. I have no reason to think, given the mediation

that has been done, that there will ever be one, and legislation is

the only reasonable outcome.

The CHAIRMAN. Do you agree with that, Ms. Johnigan?

Ms. JOHNIGAN. Yes; I do.

The CHAIRMAN. So Mr. Bickerman, as I understand it, Mr.

Eizenstat has come up with three I think strong recommendations,

and I would like your views on them. One is the establishment of

an independent administrative tribunal; another one is the extinguish claims for mismanagement of funds, and additionally for improper decisions on land management; and third, that Congress
18

should provide clear guidance as to the amounts to which individuals are entitled, rather than leaving the decision of what individuals receive to a formula developed by the Secretary; Congress

shall craft a distribution method with as much clarity and direction

as possible.

Do you agree with all three of those recommendations of Mr.

Eizenstat?

Mr. BICKERMAN. We have just had a little colloquy on the land

mismanagement, and I am not totally in Ambassador Eizenstat’s

court, but I am beginning to be convinced that if there was enough

money, we could come to a conclusion. Maybe that is an alternative

way to deal with it.

As to the other two issues, I think they are excellent suggestions.

I think the clarity of the criteria is very key, so that the money can

get distributed and distributed quickly.

The CHAIRMAN. And you also agree that whatever we come up

with, and Chairman Pombo and I do intend, after 10 years, I believe it has been 10 years now, or 12, I am not sure, to come up

with legislation and we will be roundly criticized by all participants.

Mr. BICKERMAN. I can guarantee you will be roundly criticized,

but I think the right and courageous thing to do is to pick a number and try to end this.

Mr. EIZENSTAT. Tell them to read Bleak House by Charles Dickens. [Laughter.]

Jaundra v. Jaundra, and that will be your best defense.

The CHAIRMAN. They did a magnificent job on Masterpiece Theater, in case you missed that.

I want to thank you all very much. Again, I want to say to everyone that reads the record of this that I intend to work closely with

Congressman Pombo and the House so that we can come up with

a solution which we are fully aware will cause us some difficulties,

but this issue has to be brought to some kind of closure. I want to

thank again Chairman Pombo, as well as my friend Byron Dorgan

and Mr. Rahall for their cooperation. This has to be a bipartisan

solution, obviously. Thank you, Chairman Pombo.

Congressman Udall.

Mr. T. UDALL. Thank you, Chairman McCain. Thank you for

holding this very important hearing on a matter that is absolutely

vital to tribal members. I appreciate all of the panel members and

your testimony. I view this as excellent testimony. I think it truly

does shed light on the issue that is before us.

Ambassador Eizenstat, one issue similar in the Holocaust cases

and the Cobell case is the uncertainty of the exact number of account holders and where they or their heirs reside. Many potential

American Indian beneficiaries live in desolate areas and extreme

poverty. Do you have any suggestion on how we might be able to

find people once the Bureau of Indian Affairs files are exhausted?

Did you mandate advertising or other avenues to get the word out?

Mr. EIZENSTAT. Thank you. First of all, I have to say there was

another Udall with whom I used to testify. It is a sign of my age,

I suppose.

Yes, what we did was particularly for the Swiss bank cases, and

for the insurance cases, we did a massive notification process. We
19

used the news media. We put full page ads in major newspapers,

radio advertisements. We did a full blown media effort to try to

reach account holders.

Now, in addition, we had the advantage, particularly in the bank

and insurance cases, of having names assigned to accounts, so we

actually created a website with those names. Some, by the way,

were misspelled or had German or Swiss spellings, but still we did

create a website with the names we knew existed, and advertised

that website. That is also a very useful way of presumably, even

with the sad state of the records here, there must be some record

of individual account holders or trust fund holders.

Mr. T. UDALL. Thank you.

Just one more question, Ambassador Eizenstat. Our committees

have been working with the parties of the Cobell lawsuit and the

mediators, as you are aware. As our mediators can attest, the sides

in this dispute have become bitter enemies, with the debate often

taking unhealthy and unhelpful turns. We have been told time and

time again that the animosity between the sides is the worst that

veteran lawyers and mediators have ever seen. I am guessing that

at that time you had persons who were taking too hard a line or

generally not working in good faith to settle.

How do we get past such situations?

Mr. EIZENSTAT. Well, Chairman McCain alluded to this. We

would not have succeeded if we had a mediation involving private

parties, even people as eminent as Judge Renfrew and John

Bickerman. Our mediation succeeded because of a combination of

events, which do not exist here, but for which the legislation will

be a substitute.

No. 1, we had the support of the President of the United States,

who invested me with the authority to speak on his behalf as the

mediator. We had the clout of the U.S. Government. We had the

bipartisan support of everyone from Al D’Amato to Chuck Schumer

and others in dealing with this. So we knew we spoke with the full

authority of the United States.

The plaintiffs’ attorneys, I mean, if you want to read my book

you can get more of this, but if you think that things were bitter

there, the plaintiffs’ attorneys took out full page ads in the New

York Times and the Wall Street Journal and the Washington Post.

One that I can recount was about Bayer, the maker of aspirin, that

was also a slave labor manufacturer. The headline effectively was,

‘‘If you really want a headache, Bayer, then you won’t settle with

Ambassador Eizenstat and his negotiations.’’

I mean, this went all the way. There were all sorts of pressures

put on. And not the least of which in the Swiss bank cases and in

the German cases, were threats by major pension funds, including

CalPERS, Congressman Pombo, in your State, that they would

withdraw funds from either Swiss banks or German slave labor

companies unless they settled.

So there were all sorts of external pressures. You do not have

that here. You do not have a Government appointed mediator, but

you have the power of the Congress. When I talked about bipartisan support for what I was doing, you have bipartisan support. It

is remarkable, the joint hearing, the joint bills, bipartisan. This

speaks volumes and will provide I think a very strong political
20

message that substitutes for all the influences we had in our Holocaust cases.

Mr. T. UDALL. Thank you very much. I think that my uncle, if

he was here, who I think you alluded to testifying before earlier,

would say that you may be older, but you are probably wiser. With

that, I would like to thank you.

Mr. EIZENSTAT. Since there is not much levity here, in the 1976

primary campaign, all the primary candidates including Jimmy

Carter were asked the simple question, what would you do about

inflation. And everybody had 10 different answers. Congressman

Udall’s was the simplest. He said, ‘‘I would give it to the Post Office. They can slow anything down.’’ [Laughter.]

Mr. T. UDALL. Thank you.

Thank you, Mr. Chairman.

The CHAIRMAN. He also said, and I steal his jokes all the time,

he also said, ‘‘Everything that can possibly be said on this subject

has been said, only not everyone has said it.’’ And that certainly

applies to this issue, I think. [Laugher.]

Senator Dorgan.

Senator DORGAN. Mr. Chairman, are you referring to the questions I might ask [Laughter.]

First of all, the chairman and I had a vote, as you know, and we

were necessarily absent for a bit. The testimony from this panel I

think has been really very interesting and very instructive. I think

the last thing that you said, Mr. Eizenstat, is important, that the

House and Senate working together, Republicans and Democrats

working together, is a very powerful statement here.

If we do not resolve this issue, I think Mr. Bickerman said, and

perhaps all of you have said it, we are going to be in this predicament for one-half decade, 1 decade, or probably more. And we know

already from this year’s budget submission by the President that

this issue impacts most other issues as well Native Americans.

That is why it is so important for us to do everything we possibly

can do to see if we can effect a solution here.

I am going to defer on questions. I will submit questions to the

panel, but let me again say that I think your testimony is particularly and especially useful, given all that we have heard at various

hearings. I think that you offer some unique judgments and perspectives about these things, and I appreciate very much your

being here today.

The CHAIRMAN. Thank you very much.

Mr. Faleomavaega.

STATEMENT OF HON. ENI F.H. FALEOMAVAEGA, U.S.

DELEGATE FROM AMERICAN SAMOA

Mr. FALEOMAVAEGA. Thank you, Mr. Chairman.

I certainly want to thank you and commend you and Chairman

Pombo for calling this joint hearing. Not only is it critical, but most

important, in all the years that I have tried to follow it with some

concern, you know, we have had this issue now, it started off at

$2 billion and then the following year there was a bidding that

went up to $8 billion to $10 billion in question. So now we are

somewhere between $13 billion and $27 billion.
21

I remember years ago, Mr. Chairman, that Congress even appro- priated $20 million just to try to attempt to audit the accounts in

question, and came up with absolutely zero results. So I really do

think that the initiative that you and Chairman Pombo have taken

has been really, really, 10 years, I believe, is long overdue in trying

to provide some settlement.

I really do appreciate the testimonies that have been shared with

us this morning by Ambassador Eizenstat and Mr. Bickerman and

Ms. Johnigan. I want to ask members of the panel just one question. Do you think it was fair for the administration to subtract the

legal fees that have been collected over the years to cut the appropriations for the badly needed funding that is needed by Indian

country, to be part of this?

I was under the impression this should come under the good

faith, what do you call it, clause of United States, of the general

fund. But the latest I heard, unless I heard it wrong, whatever

amount of money that is being subtracted, that it should be going

to the critical needs of current Indian programs, to be taken out

of this very issue. I have to disagree.

But I wanted to ask the members of the panel how they feel

about this. I do not know if you are aware of the situation.

Mr. BICKERMAN. Yes; I am aware of it. No, I do not think it was

fair.

Mr. FALEOMAVAEGA. Well, that should answer it. Thank you very

much. [Laughter.]

I have listened with interest to the problem, as Ms. Johnigan

said earlier, about just simply the difference between receipts and

disbursements. The problem is, as simple as these two terms may

be, but it has become so complicated that we found nothing but

some real sense of bitterness between the two parties. In fairness

to both parties, I believe that Ambassador Eizenstat’s suggestions

have been very, very valid, very, very similar to the situation of the

Holocaust claims.

I wondered also how Congress was able to determine what was

the capped amount that we gave to the Japanese Americans when

they also had a similar situation. Maybe lesser numbers, but certainly it is something that we ought to look at.

Mr. EIZENSTAT. This was actually, members of the panel and Mr.

Chairman, this was actually a useful benchmark for us. Congress

in 1988, I believe it was, finally tried to provide some belated justice for Japanese Americans. There again, it was a per capita

amount, no individual hearings, $20,000 per claimant. You could

have been in a camp in Washington State or California for 1 month

or for 1 year or for the whole war. You got $20,000.

Now, obviously there is a degree of arbitrariness to that. But

there was also a degree of fairness to it, because had all of those

people had to have individual hearings and try to prove what happened to their health and what happened to their livelihoods, they

would never have been able to recover. So that $20,000 figure was

actually a useful figure when we were trying to determine how

much was reasonable to give to a slave and forced laborer.

Mr. FALEOMAVAEGA. I want to say to Ambassador Eizenstat, Mr.

Chairman, this also is another complication that we have just, at

least hopefully there may be legislation introduced, and it is in ref-
22

erence to the plight of the Marshallese people when they were,

practically all of them, subjected to nuclear radiation during our

nuclear testing program after World War II.

To this day, to this day the people of the Marshall Islands still

have not been properly compensated or even given proper medical

treatment by our Government, which is something that I find very

similar to the situation that we find ourselves in among our Native

American community.

Do you think, Ambassador Eizenstat and Mr. Bickerman, is it

really not the amount that is at issue. It is how we go about in developing a formula. Like you said, we have to bite the bullet, and

some way or somehow we just cannot wait another 20 years for

this issue to continue on. I get the sense that it has got to be done

legislatively because if we leave it to the courts, it is not going to

be resolved. Do I get that impression from the members of the

panel?

Mr. EIZENSTAT. I was asked only about 10 days ago to testify, so

I started reading some of the opinions. I mean, it is amazing that

here we are almost 10 years into litigation, the last Court of Appeals decision just 2 months ago, the interpretation, you know, the

typical thing of the Court of Appeals, remanded for actions not inconsistent with this opinion. And the plaintiffs and the Government disagree after 10 years, with what the latest decision was by

the court.

They have had their chance and they are not going to do it. As

I indicated, you cannot have courts settle historical wrongs. They

are not created to do that. Their expertise is on case by case adjudication or class actions where people fall in and you have clear

evidence. They cannot handle a situation like this where the evidence is poor, the number of claimants is uncertain. This will be

batted around between the District Court and the Court of Appeals

until all of us are gone and all of the claimants are gone. So legislation is absolutely essential.

The formula has to be precise; do as much on a per capita basis

as you can; and again bite the bullet. It is not totally arbitrary.

John gave you some ranges. You basically know how much flowed

in. It is not clear how much flowed out. The Government itself by

its own figures says it is about $500 million that is unaccounted

for, that did not get paid out. Even if you just plus that up over

however many years you want to do that, you couldn’t do it over

120 years, but over a reasonable period of time. You start to get

into a range which is understandable.

Mr. FALEOMAVAEGA. Thank you, Mr. Chairman.

The CHAIRMAN. Congressman Inslee.

I am sorry. Go ahead.

Mr. BICKERMAN. I just wanted to respond very quickly. As a mediator, one of our occupational hazards is optimism, but when we

first started the discussions, I actually thought that the criteria

that both the administration and the plaintiff had for the formula

to allocate money was actually pretty close. I am reasonably optimistic that if we can agree on a sum, developing the criteria to distribute that will not be that arduous a process.

Mr. FALEOMAVAEGA. Thank you, Mr. Chairman. Thank you.

The CHAIRMAN. Congressman Inslee.
23

Mr. INSLEE. Thank you.

I really appreciate your thoughts. This is most troublesome to

many of us because we recognize the literary value of Jamdyce v.

Jamdyce. We also understand of not wanting to continue this scar

that so many people in our country have felt and not being treated

by their Federal Government. So it really is a tough issue, I think.

I have kind of a general question. If we are looking for resolution, a legislative solution, should we be thinking of Congress picking a number? Or should we be thinking of Congress picking a

process to get to that number that should be narrowly defined and

achievable through some mechanism that might give the parties

more confidence that at least they had their day in court and these

decisions were not made just in the back rooms of Congress? What

would be the most, and is there any such process that could actually get to a number within our lifetime to achieve that end?

Ms. JOHNIGAN. If I could respond to that first. Obviously, what

I was presenting was the idea that there would be a process using

what has been done to date and refining it for those pieces that appear to be the most contentious and where the least work has been

done, and creating it in such a fashion that it at least provides a

basis for why the number was created by Congress.

Whether you pick a number based on that work or you set the

process for that number to be created through that work by other

parties, so that you could get the legislation through. One way or

the other, from my personal perspective, it you want some broader

based support for whatever number you are going to create, there

needs to be some process behind it besides the arbitrary selection

of some portion from the plaintiffs and some portion from what the

Government has done today.

That is not to say that I would propose a process that would take

a long period of time, but rather look at what has been done and

see what would be backfilled into that in a process that would be

more streamlined. It would not be something that would make either party happy. It would just, I think, create more of an informed

basis for the answer.

Mr. INSLEE. In your proposal, would you view that as being a

binding process, that we are going to go through this process, the

number will be generated, Congress will adopt it? Or is this just

a hearing process you are talking about?

Ms. JOHNIGAN. I would see that as a binding process, if you are

going to finish this. I mean, you have to have a binding process

that creates a number you are going to have in the legislation that

is just the number. Because one of the things that I have heard as

people have answered questions today and asked questions, is that

there is in some ways always the assumption that a large enough

number was created, or a number was created that would actually

satisfy some of the issues. Because two of the issues in terms of

the accounting, the amounts that should have been received that

are not part of the $13 billion throughput, and the amounts that

are in dispute in terms of what should have been received that perhaps was from mismanagement.

There has been, as far as I can tell, no real work on that issue

at all for the IIM accounts, so that the numbers that are being discussed are being discussed from the standpoint of only that which
24

is known to be received. That is a very different calculus. As I have

worked with the tribal accounts in this area, what I have seen is

that you have already some processes in place to calculate what

should have been received, but very little has been done on the

asset mismanagement where the fair values have not been received.

So I do think there needs to be some thought about a process

that says, have we really created a number that is sufficient

enough in order to satisfy an allocation that will be considered to

be at some level, although somewhat arbitrary, fair. I think that

is a process that I highly recommend you go through.

Mr. BICKERMAN. I respectfully disagree with my colleague here.

The point of my numbers that I present in my testimony was to

show that with just very small changes, these numbers bounce all

over the place. I think that a process would give one the false sense

of precision when there really isn’t precision.

There are so many missing documents. This goes back over 100

years. A process I think would just be delayed justice. I think this

has gone on for 10 years. I think it would be infinitely more difficult to negotiate a process than it would be to negotiate a number

at this point. If you can negotiate a number, my strong, strong recommendation is you do it.

Mr. EIZENSTAT. There is certainly no reason not to have a small

panel of experts as you are going through the legislative process

look at the existing data, not start recreating, doing new audits

and so forth, and giving you the best judgment they can about the

status of things. But you are not going to be much better off at the

end of that process. I think to satisfy the fact that you exercised

due diligence on the legislative side, it is not a bad idea.

But what would be a genuinely bad idea is to go through this legislation, leave the figure blank and then leave it to some mythical

party, a claims commission, to determine what the amount should

be. That is what legislation is for.

After all, you really do this in a sense all the time. When you

legislate, you create appropriations for amounts, you have to make

a rough estimate. How much are Katrina victims entitled to? You

appropriate a figure. You try to make the roughest kind of calculation, and then you realize you will come back if you have to another time, but you make the best judgment you can. That is really

what you are trying to do here.

So certainly you do not want to be totally arbitrary and blind

yourself to the work that has been done. It is probably worth having some type of small group advise you, of looking at the current

data, giving you some sense of where that data is, and how confused it is, and giving you the best estimate they can of where

things stand.

On the plus-up figure that Chairman Pombo mentioned, there I

think we can be much more precise. There is very clear agreement,

I think, about how you plus-up accounts over the years. We will be

glad to share the figures that we used and the methodology that

was used.

So I would really urge in the process, yes, if you want to take

a few experts and have them look at the state of things now, fine.

But do not think you can create a process that is going to give you
25

much more clarity than you have now. That is the whole problem,

the data does not exist.

Mr. INSLEE. The only concern I would have about that approach

is this is not exactly Katrina. The hurricane was caused by either

an act of the Creator or global warming, depending on your belief

system. This situation is an extinguishment of a property right by

the entity that caused it, which is the Federal Government.

Mr. EIZENSTAT. So were the Japanese claims, so were the Holocaust claims. They were all extinguishing a right or a theoretical

right by either a legislative or a government mediated process.

Mr. INSLEE. I have made my point.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you very much.

I thank the witnesses. This has been extremely helpful to us.

Thank you.

Mr. EIZENSTAT. I am sure we will be more than happy to continue to work with you during this process, Mr. Chairman.

The CHAIRMAN. Thank you. We would be pleased to do that.

Finally, we have Mike Marchand, who is with the Affiliated

Tribes of Northwest Indians and the vice president of the Colville

Confederated Tribes; Joseph Garcia is the president of the NCAI;

Keller George, who is the president of the United South and Eastern Tribes; and Harold Frazier, the chairman of the Great Plains

Tribal Chairman’s Association.

I want to apologize to our witnesses because we have to shut

down here in just a few minutes. I would like to say that your complete statements will be made part of the record. We appreciate

your patience, and I hope you understand that we have a joint session of Congress to be addressed by the Prime Minister of Italy. So

if you could briefly summarize and give us your position very rapidly, we would appreciate it. I am sure we will be meeting formally

and informally again in the future on this issue.

Mr. Marchand.

STATEMENT OF MIKE MARCHAND, AFFILIATED TRIBES OF

NORTHWEST INDIANS AND FIRST VICE PRESIDENT,

COLVILLE CONFEDERATED TRIBES

Mr. MARCHAND. Good morning. I am very honored to be here

today.

My name is Mike Marchand. I am a councilman with the Colville

Confederated Tribes located in Washington State. We are composed

of 12 tribes on a reservation that was created in 1872, when our

people were forcibly marched from their homeland, at gunpoint in

many instances.

The CHAIRMAN. Mr. Marchand, you are going to have to make

your opening statement very brief. Please proceed.

Mr. MARCHAND. Well, my only point was that this trust system

was imposed on our people. We did not ask for it. There have been

comparisons by the administration that this is very much like a

commercial banking operation. I would just contend that it is not.

We are doing the best we can to work with the system.

ATNI, the Affiliated Tribes of Northwest Indians, is a consortium

of 57 tribes in the Pacific Northwest, and our leadership in the

Northwest has been discussing this issue and watching the litiga-
26

tion as best we can. It is the conclusion of most of our leaders in

the Northwest that we need to come to a settlement. The parties

in the litigation do not appear to be getting any closer to settlement. In fact, they seem to be getting farther and farther away

each day.

We believe that it is creating a lot of problems and retaliation

against tribal governments. It is creating problems with redefining

the trust relationship between our people and the United States.

We really think it is really time that we need to draw this to a conclusion.

I would just like to say, I guess briefly, that I think it has really

caused a whole change in the climate between the tribe and the

United States relations. In the 1960s, we went through a period of

termination. Under President Nixon, I think he turned that around

to self-determination and 638 contracting. Tribes were given a

large voice in their day to day matters in life. I think we have seen

a couple, two or three decades of steady progress.

But today, I think things are kind of reversed. It seems like we

are going backward again. I think a lot of the solutions that are

being imposed on Indian people. Our voices are not listened to anymore. I think there is a real problem with the administration in

place today. They do not seem to have a lot of knowledge about life

on reservations or how to communicate with our people. I think it

is a real problem. I think we have gone backward.

I think a lot of that has kind of spun out of this Cobell case because of the litigation.

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

The CHAIRMAN. Thank you very much, sir. I apologize, but we

really have to move through the witnesses. I appreciate it. Your

written statements will be made part of the record and carefully

examined. I thank you and I want to apologize for this time constraint to all the witnesses.

President Joe Garcia.

STATEMENT OF JOSEPH GARCIA, PRESIDENT, NATIONAL

CONGRESS OF AMERICAN INDIANS

Mr. GARCIA. Good morning, everyone.

Chairman McCain, Chairman Pombo, Vice Chairman Dorgan,

Ranking Member Rahall, and members of the Senate Committee on

Indian Affairs and House Resources Committee, thank you, Mr.

Chairman, Chairman McCain, and Senator Dorgan for coming to

our NCAI meeting yesterday. That was very important, your presence.

We have a lot of tribal leaders here this week. I think it is important that they hear the dialog that you provided. I will now move

on to the testimony part.

The National Congress of American Indians strongly believes

that it is time for Congress to move forward with a fair settlement

for the Cobell v. Norton litigation. Tribal leaders throughout the

country support the goals of the Cobell plaintiffs. At the same time,

tribes are concerned about the impacts of the litigation upon the

ability of the United States to deliver services to tribal communities and to support Federal policies of tribal importance.
27

As you know, hundreds of millions of dollars have been diverted

for this effort, and we continue to battle for years and years. Continual litigation will continue to cost millions of dollars. The continued historical accounting activities by the department may cost billions and are very unlikely to achieve satisfactory results.

Three years ago, NCAI passed a resolution stating that it is in

the best interest of the tribes and individual account holders that

tribal leaders participate in a Cobell settlement, and development

of an effective system for management of trust assets in the future.

Former NCAI President Tex Hall worked very hard over the last

3 years to push for a settlement, and I plan to continue that effort.

Earlier this year, the NCAI executive committee passed another

resolution on the settlement litigation. First, we want to mention

that NCAI supports S. 1439. We also support H.R. 4322, and the

efforts of Senators McCain and Dorgan and Congressmen Pombo

and Rahall in introducing this legislation.

Second, NCAI strongly urges the Cobell plaintiffs, the Department of the Interior and the Congress to increase their efforts to

develop a viable settlement proposal for the Cobell litigation. Specifically, we would encourage settlement options that will engage

the participation of individual Indian account holders. I believe

that is what we are hearing today.

Third, NCAI urges the Senate Committee on Indian Affairs and

the House Resources Committee to move forward with the markup

of the legislation, based on the comments received from Indian

country, and to develop a more definitive settlement proposal for

the Cobell litigation than what is currently found in title I. We encourage you to continue to consult Indian country as you move forward to the markup of the bill.

Cobell litigation has had some positive effects. It has focused attention on the important issue of trust reform. However, there are

also increasing costs and side effects that the litigation has caused,

and that is provided in the written testimony. So we want Congress to either put a stop to these unreasonable burdens on the

tribes, or to settle the litigation, and the settling the litigation is

the thing that we would propose as well.

I will conclude my remarks at this point, in the interest of time.

Thank you.

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

The CHAIRMAN. Thank you very much.

Mr. President, we look forward to working with you, and congratulations on your new position, as I mentioned before.

Mr. GARCIA. Thank you.

The CHAIRMAN. President George.

STATEMENT OF KELLER GEORGE, PRESIDENT, UNITED

SOUTH AND EASTERN TRIBES

Mr. GEORGE. Thank you, Senator McCain, and also thank you

Chairman Pombo, Vice Chairman Dorgan, and Ranking Member

Rahall.

We thank you for this opportunity to briefly give some insights

on this case. Cobell litigation has been going on for over 10 years.

But I want to urge your committees to seize the opportunity to settle the Cobell case now and reform the DOI’s administration of
28

trust-related functions by acting on S. 1439 and H.R. 4322 this session.

As to the Cobell provisions of these bills, title I includes a section

that will specifically identify an amount that will be made available to settle the case. Ideally, it should be up to the plaintiffs and

the Government to agree upon a settlement account. Previous witnesses have said that probably is not going to happen, but we call

upon the Congress to act very swiftly so to come to a conclusion

because we know that if it does not, it will erode the trust responsibility that the United States Government has toward Indian

tribes.

As USET member tribes, we will stand with you in your efforts

to seek a resolution of the Cobell lawsuit and to implement needed

reforms to DOI’s administration of trust functions. The choice we

face today is clear. Millions more can be spent on litigation and an

accounting that likely will tell us little more than we already know,

while the trust relationship continues to erode, or legislation can

be enacted that settles the lawsuit in a fair and equitable manner,

and implements much-needed reform on DOI’s management of

trust resources.

USET member tribes strongly believe that the second choice is

far better an option.

Thank you.

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

The CHAIRMAN. Thank you very much.

I believe Congresswoman Herseth would like to acknowledge the

next witness.

Ms. HERSETH. Thank you, Mr. Chairman.

I thank you and my good friend from North Dakota, Mr. Dorgan,

as well as my Chairman on the House Resources Committee, Mr.

Pombo, for this opportunity. I appreciate the opportunity to introduce Chairman Harold Frazier, also a good friend, chairman of the

Cheyenne River Sioux Tribe, whose members predominantly reside

in North Central South Dakota. I am working with Chairman

Frazier not only in his capacity as chairman of the Cheyenne River

Sioux Tribe, but also as chairman of the Great Plains Tribal Chairman’s Association.

I would commend his testimony to you as someone who has been

focused and tenacious in his efforts, as well as approaching settlement negotiations in the Cobell lawsuit in good faith, in working

hard to meet the objectives that I know you have, that Ranking

Member Dorgan has, that Chairman Pombo and Ranking Member

Rahall have. But that any settlement really reflect to the best interests of Indian country.

So I appreciate the opportunity to introduce him to you today.

The CHAIRMAN. Thank you very much.

Welcome, sir.

STATEMENT OF HAROLD FRAZIER, CHAIRMAN, GREAT PLAINS

TRIBAL CHAIRMAN’S ASSOCIATION

Mr. FRAZIER. Thank you, Congresswoman Herseth.

I want to begin by thanking Senators McCain and Dorgan and

Congressmen Pombo and Rahall for having this joint hearing. I will

get right to the points.
29

I think it is essential that a settlement amount comes from a

claims judgment fund and not from the BIA budget or any other

Federal program or budgets that serve Indian people. Section 102,

this section would bar tribal landowners and heirs from any recovery from claims prior to 1994. It is important that the settlement

only, that we go beyond. There have been a lot of issues that have

been done to a lot of our people in the past, especially the ones who

have served our country in wars and protecting our rights and our

freedom.

It is also important that the settlement only addresses individual

accounting claims, and not any land based or asset claims. Our

concerns are for Congress to protect the budgets of the tribal programs from being robbed to pay attorney fees.

All the regulations resulting from this act may be subject to negotiated rulemaking. That will ensure that a bureaucratic process

is not used to misconstrue the provisions of the act.

We urge congressional leaders to write the appeal section to

streamline the appeal process and allow class action appeals and

allow the claimant to appeal in local courts and consolidate the appeal claims.

Again, we strongly urge congressional leaders to be crystal clear

in section 110(d) that tribal trust accounts are inclusive of tribal

IIM accounts. This clarification would avoid any misinterpretation

that tribes should not be considered claimants for purposes of settlements.

I thank you for this opportunity and I urge you to maintain the

principle of inclusive decision making when addressing all areas of

trust reform. It is important that tribal leaders should be at the

table when trust reform is being discussed. We are the ones who

have the most to lose.

Thank you.

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

The CHAIRMAN. Thank you very much.

Chairman Pombo.

Mr. POMBO. Mr. Chairman, any questions I have I will submit

in writing to our panel. Thank you.

The CHAIRMAN. Senator Dorgan.

Senator DORGAN. Mr. Chairman, I will do that, too. Let me just

say that as has always been the case with us on the Committee on

Indian Affairs, and I am sure our House counterparts, consultation

is really important. Consultation is critical. I think the witnesses

today have provided some excellent statements. We are sorry for

the brevity, but we intend to continue to be involved with you and

to consult closely with you as we try to resolve these issues.

So thank you very much for being here.

The CHAIRMAN. Mr. Faleomavaega.

Mr. FALEOMAVAEGA. Mr. Chairman, just shortly, to commend

members of the panel for their testimony. I would like to make emphasis again in the spirit of bipartisanship, that this should really

not be a politicized issue, and I sincerely hope and look forward to

working with you and our Chairman Pombo and Mr. Rahall on our

side, and Mr. Dorgan. Hopefully in this Congress we will make

some form of a settlement in this legislation.

Thank you, Mr. Chairman.
30

The CHAIRMAN. Thank you.

Congressman Inslee.

Mr. INSLEE. I have no questions. I just want to say, of all the

times we have ever had an obligation to have close relationships

with the tribes and an open dialogue, this is the time. I hope that

we will all fulfill that obligation.

Thank you.

The CHAIRMAN. Thank you.

Congresswoman Herseth.

Ms. HERSETH. I also will submit my questions for the record, but

just thank the panel of witnesses for their leadership and for their

willingness to offer their insights on the pending legislation.

The CHAIRMAN. I want to thank the witnesses. I want to thank

the members who came to this important hearing. We will be moving forward. Chairman Pombo and I have agreed, as we have already, that a bipartisan, bicameral piece of legislation will be moving forward soon on this issue. As we go through this process, we

would very much appreciate your continued participation and

input. I can assure you, you will not like the outcome.

Mr. GARCIA. Mr. Chairman.

The CHAIRMAN. Go ahead.

Mr. GARCIA. Mr. Chairman, if I can make one more statement.

I would like the panel to know, as well as the Congressmen to

know that the statements that were made earlier with Mr.

Bickerman and Mr. Eizenstat, I think the formula and the ideas

they presented are very, very, very good, and that will help focus

on the settlement. And so we would support those efforts.

The CHAIRMAN. You know, that means a lot to us, Joe, and I

thank you, because we think they gave us a very good framework

to work on, and we are very grateful for your conditioned approval.

Thank you.

This hearing is adjourned.

[Whereupon, at 11:10 a.m., the committee was adjourned, to reconvene at the call of the Chair.]
(31)

APPENDIX

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

PREPARED STATEMENT OF CHARLES RENFREW AND JOHN BICKERMAN

Chairman McCain, Chairman Pombo, Vice Chairman Dorgan, Ranking Member

Congressman Rahall, members of the Senate Committee on Indian Affairs, and the

House Resources Committee, my name is John Bickerman and I appear here today

on behalf of myself and Charles Renfrew. Judge Renfrew regrets that he cannot be

here today due to an unavoidable conflict but wants to assure the committee that

the comments I am about to deliver are his as well. We have worked on this testimony together and they accurately reflect our joint views.

First, I would like to provide some background about our role, for it has not been

the traditional role in which mediators normally serve. Two years ago this month,

the staff of your committees contacted both of us to inquire about our interest in

assisting the parties in the Cobell v. Norton dispute reach a consensual settlement.

We were interviewed separately by the plaintiffs’ counsel and senior officials from

the Departments of the Interior and Justice, but with the strong encouragement by

the committee’s staffs that the parties should engage in mediation. Soon thereafter

both the plaintiffs and the administration chose us to help them. Funding for our

services was provided by the Department of Justice, but we were assured we would

have complete independence in our actions and, indeed, we have enjoyed the traditional independence and neutrality that neutral mediators require. Although we had

not met prior to this assignment, Judge Renfrew and I have worked together

seamlessly and have been in complete accord with respect to all aspects of the mediation and the testimony we present today.

Our assignment was to engage the parties in negotiation to seek a resolution of

all claims brought by plaintiffs in their class action lawsuit now pending in the

United States District Court for the District of Columbia. But our mission was also

broader than traditional mediation. From the outset, both the parties and Congressional staff requested that we periodically report back to Congress regarding our efforts and our progress. This request was made for three reasons: first, any resolution we achieved through negotiation would likely require Congressional action; second, Congress wanted to know if either the plaintiffs or the defendants were behaving in a dilatory manner or otherwise negotiating in bad faith; and third, Congress

wanted to know if a resolution was impossible, so that it could decide whether to

take action. In most mediations, confidentiality of the negotiations is a bedrock principle. In this case, very little of the content of our discussions remained confidential.

Indeed, we were expected to periodically disclose our conclusions to Congress.

Although we are both experienced in mediating complex, high conflict public disputes, neither one of us could have predicted the difficult task we were about to

face. Never before had we seen the level of acrimony or the inability to agree on

even the simplest of logistical or procedural matters. We could not even get the parties to sign a mediation agreement that set out basic ground rules for the parties’

conduct. Although we made some small progress, especially in the area of developing a model to resolve the information technology disputes regarding the security
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of Individual Indian Money [IIM] Trust data, within 6 months, we realized that a

negotiated resolution was impossible.

In October 2004, we met with the leaders of the two Congressional authorizing

committees to report our conclusions and urge that Congress take the lead in

crafting a resolution. We continue to believe that only Congressional action can resolve this dispute for the benefit of the beneficiaries of the IIM Trust and allow the

United States to devote its resources to the traditional services it has provided Indian country. If Congress takes no action at this time, the litigation path will take

years if not decades to reach finality. Many deserving beneficiaries will have died

in the interim. Those beneficiaries who are alive will not be made whole. We also

believe that the Department of the Interior’s ability to serve Indian country will be

compromised. So much of the policy affecting Indian country seems now to be made

through the prism of the Cobell litigation. We are concerned that the historically

beneficial trust relationship between the Federal Government and Indian country

is in jeopardy as a result of this litigation.

There is no dispute that the historical conduct of the United States in managing

and accounting for the IIM Trust has been flawed. The Federal District Court of

the District Columbia has so held and its judgment has been affirmed by the Court

of Appeals. Indeed, Congress recognized the problem when it passed the Indian

Trust Fund Management Reform Act, P.L. No. 103–412, 108 Stat. 4239 (codified as

amended at 25 U.S.C. § 162a et seq. & § 4001 et seq.) in 1994. More than 10 years

later, the problem persists. Substantial sums have been spent trying to fix a system

that, without legislative changes, may be beyond repair. The pending legislation will

go a long way toward addressing the underlying structural problems and compensating IIM beneficiaries for the Government’s past negligence by restating the

account balances for individual beneficiaries. Without legislation to fix the system,

the problem will grow exponentially. However, we confine our testimony to title I

and, specifically, how to value the Plaintiffs’ Claim.

While there is little serious dispute over the question of liability, the gulf that divides the parties over the magnitude of the liability is enormous. The most vexing

problem facing your committees is properly valuing the claims and assigning a number that adequately compensates the IIM beneficiaries for the discrepancies between

what is in their trust accounts and what should have been there. This is a hard

task for which good, reliable data may not readily exist. But the difficulty and the

imprecision of deriving a figure should not deter Congress from making a decision

now and advancing the very fine legislation that your committees have drafted.

As mediators we are accustomed to seeing the validity of the arguments of both

sides to a dispute. This case is no different. We believe that the arguments of both

the administration and the plaintiffs regarding the amount of adjustment that

needs to be made are both partially correct and partially flawed.

Initially, we understood the plaintiffs’ position to be that strict common law fiduciary principles ought to apply. Absent the United States showing that funds were

collected and paid to beneficiaries, the Government was obligated to restate the IIM

individual accounts to the full amount in dispute plus interest. They said, ‘‘If you

can’t show it, you owe it.’’ In public statements in Indian country plaintiffs’ counsel

and the lead plaintiff have told beneficiaries that the amount that they are entitled

to receive exceeds $100 billion and is in the range of $170 billion. We believe that

these statements have created unrealistic expectations that have complicated efforts

to resolve this dispute. More recently, the plaintiffs presented a settlement demand

of $27.5 billion, assuming for settlement purposes, a 20-percent rate of funds not

paid to beneficiaries as a measure of ‘‘rough justice,’’ but without data supporting

this rate. Testimony of Elouise C. Cobell before the House Committee on Resources

Hearing on H.R. 4322, Indian Trust Reform Act of 2005, December 8, 2005, at 7.

As we show later in this testimony the choice of assumptions regarding the distribution of unpaid funds over the course of the trust fund, the ‘‘error rate,’’ the rate of

interest used, and whether the interest is compounded annually dramatically impact

the settlement value. The values chosen by the plaintiffs appear to us to be without

foundation.

The position of the United States is also suspect. The Department of the Interior

has spent considerable funds to trace the record of transactions in the IIM system

to determine if the payment made to the accounts of trust fund beneficiaries accurately reflects what should have been paid. The possible outcomes include both underpayments and overpayments. The preliminary results of this investigation are

that the observed error rate is very small. Testimony of James Cason, Associate

Deputy Secretary and Ross Swimmer, Special Trustee for American Indians on the

Cobell Lawsuit, before the House Committee on Resources Hearing on H.R. 4322,

Indian Trust Reform Act of 2005, December 8, 2005, at 3–5. Indeed, taken to its

logical conclusion, Department of the Interior estimate of a settlement value would
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be far less than $500 million. This calculation may also be based on arbitrary and

false assumptions.

We believe that there are three potential sources of error in the IIM system: (1)

money was not collected; (2) money was not properly deposited; and, (3) money was

not properly disbursed. With respect to the money that was not collected, funds due

IIM beneficiaries either never made it into the system in the first place or may have

been collected late. The missing funds or the interest due beneficiaries for late payments could reflect a significant amount of money. This is particularly true in the

land-based IIM accounts.

We would designate this type of error as ‘‘funds mismanagement.’’ We believe

fund mismanagement is sufficiently related to the claims in the pending litigation

that it should be resolved under title I of the proposed legislation. But, fund mismanagement should be distinguished from ‘‘land mismanagement.’’ By contrast,

land mismanagement would encompasses claims by individual beneficiaries over the

failure of the United States to negotiate a fair compensation for their oil, mineral,

grazing, real estate, or other assets that have been held in trust by the United

States. We do not believe that these land mismanagement claims should be part of

the resolution of the Cobell litigation. These claims have never been asserted by

plaintiffs and are much more susceptible to individualized proofs and thus capable

of being more accurately evaluated.

The second potential source of error is that once in the system, the funds were

not properly deposited in the beneficiaries’ trust accounts. This has been the focus

of the efforts of the Department of the Interior to value the plaintiffs’ claim. While

analyzing the administration of funds that have been received by the Department

is a good start, it is not sufficient. Moreover, the Government appears not yet to

have included in its analysis the land-based accounts where logically many more of

the errors should arise. Because the analysis by the Office of Special Trustee only

considers the second step of the process and does not analyze land-based accounts,

we believe its estimates significantly understate the true exposure of the United

States.

The third source of error is whether beneficiaries actually received the disbursements that they were intended to receive. Did the beneficiaries get their checks and

cash them? We have been advised by the Department of Treasury that the amount

of checks that go un-cashed is relatively small. Nonetheless, there is no way of

knowing whether these checks reached the intended payees.

Frequently, as mediators we are asked to value a settlement in a dispute. In

many instances the value of a case may depend on the litigation risk or the probability of a party prevailing at trial. What seems certain to us is that there will not

be a quick end to this litigation. If Congress does not act, we believe that there will

be many more rounds of appeals. Inevitably, one of the parties will petition the Supreme Court for review. By then, many of the IIM beneficiaries will be dead.

There is no perfect or ‘‘night’’ number. Especially, as in this case, where missing

documents may make an accurate assessment impossible, an arbitrary number may

be the best path to a settlement. Consequently, we do not favor an extended effort

to develop and apply a methodology to arrive at a number. We do not believe that

it is worth the time and expense of such an effort because, at best, a methodology

will only give the appearance of precision. It is our opinion that there are too many

unknown and unknowable pieces of information that would be needed to support an

analysis of a settlement value.

What we do know is this: The parties seem to agree that approximately $13 billion should have been paid to beneficiaries over the time the IIM trust has been

in existence. Neither side disagrees that a portion of these funds was indeed paid

to the IIM beneficiaries. Where there is disagreement is in calculating the amount

still owed trust beneficiaries. Other factors influence greatly the calculation of a settlement. Because of the time-value of money, moneys not paid a long time ago can

greatly increase the total liability calculation. However, the Department of the Interior reports that the vast bulk of funds that went through the IIM system did so

in the last 30 years. This seems like a reasonable conclusion that has been supported by verifiable data.

By way of example and for illustrative purposes only—we want to be clear that

we are not recommending a specific settlement value—we calculated the amount

that the IIM Trust would need to be restated using various assumptions. According

to the Department of the Interior figures, $10 billion of the $13 billion in IIM Trust

receipts were realized after 1970. We further assumed that only $500 million of

Trust Fund assets moved through the IIM Trust prior to World War II. Assuming

a 20-percent error rate, a 3-percent compound interest rate, the fund would need

to be restated by $7.2 billion. If we change our assumptions and consider a 10-percent error rate and a 4-percent compound interest rate, the restated balance is $5.6
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billion. Raising the compound interest rate to 5 percent, but holding the error rate

at 10 percent yields a value of $9.8 billion. The point of this exercise is not to recommend a settlement but to show the significant fluctuations in value with small

changes in assumptions, especially the compound interest rate. Parenthetically, we

note that the use of a compound interest rate is a hotly contested issue between

the parties. If simple interest was used, these values would fall. Indeed, what these

calculations show is that a final settlement is extremely arbitrary depending on the

assumptions one uses. We do not believe that more time and analysis will yield a

result that is more precise or less arbitrary.

An alternative approach would be to look at the avoided costs associated with the

Office of Special Trustee. Since 2001, the Office of Special Trustee has received more

than $3 billion. If this litigation is not settled, how much more will Congress spend

to comply with its legal obligations to perform an accounting? We believe that these

funds would be better directed to the IIM beneficiaries.

On behalf of Judge Renfrew and myself, we continue to offer our assistance to

both committees in whatever roles you see fit for us to serve. We believe that the

prompt enactment of S. 1439 and H.R. 4322 is an imperative and we encourage the

committees to schedule these bills for markup as soon as possible.

Thank you again for the opportunity to testify today. I will be pleased to answer

any questions the committees may have.
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PREPARED STATEMENT OF MIKE MARCHAND, FIRST VICE PRESIDENT, AFFILIATED

TRIBES OF NORTHWEST INDIANS

Chairman McCain, Chairman Pombo, Senator Dorgan, Representative Rahall, and

members of the Senate Committee on Indian Affairs and the House Committee on

Resources, my name is Mike Marchand, I am the First Vice President of the Affiliated Tribes of Northwest Indians [ATNI] and a member of the Colville Tribal Council. On behalf of ATNI, I thank you for your leadership on the trust reform issue

and this hearing today. We are grateful for the work that has gone into S. 1439

and H.R. 4322, the Indian Trust Reform Act of 2005. ATNI supports enactment of

this legislation and we are hopeful that the Congress will act on it this year.

I am delighted to be here today with Keller George, the president of the United

South and Eastern Tribes [USET]. USET has been in the forefront of tribal efforts

to bring about meaningful reform of the management and administration of the Federal trust responsibility. For the last several months, ATNI and USET have been

working together to develop recommendations for amendments to S. 1439 and H.R.

4322. We hope to be able to forward to the committees our joint proposals for

amendments in the next few weeks. We look forward to working with the committees to help ensure enactment of legislation this year.

We are very pleased that the committees are examining ways to place a value on

the claims in the Cobell v. Norton case. Even though the case seeks an accounting

for the IIM funds and the Federal District Court is powerless to award damages to

the plaintiffs, everyone who is familiar with the case has known for years that funds

will be required to settle the case. This understanding is reflected in title I of S.

1439 and H.R. 4322 and by this hearing today. The plaintiffs have estimated the

value of the claim to be somewhere between $27.8 billion and $170 billion. The Departments of the Interior, Justice, and Treasury have not been willing to openly

state an estimate of value for the claims.

The Department of the Interior has indicated that it might cost as much as $10

to $12 billion to do an itemized accounting for the IIM funds. That estimate led

ATNI, among others, to suggest that an appropriate value for the claim might be

in the range of $14 billion on the premise that it would be far better to provide the

funds that would otherwise be paid to accounting firms to the account holders themselves. And to further complicate the search for a solution, the November 15 decision in the U.S. Court of Appeals for the Washington, DC Circuit held that the Department of the Interior can use statistical sampling to determine what is owed,

which has led some to estimate the cost for the accounting problem to be around

$350 million.

We do not know what the correct method is for valuing the claims in the Cobell

case, nor do we know the value of those claims. What we do know is to date:

(A) there has been no success in getting the parties together to negotiate a compromise settlement figure.

(B) that if the present course is left unchanged it is not at all likely that the IIM

account holders will receive any compensation during the lifetime of many, especially those who need it most.

(C) we will continue to see an erosion of the gains that tribal governments have

made under the policies of self-determination and self-governance.

We understand that it will be necessary for the committees to place a value on

the settlement of the plaintiff’s claims in order to move S. 1439 and H.R. 4322

through the legislative process. We do not know which method would be best in the

Cobell case, but we will work with the committees to assess the options. We trust

the committees to be fair in their evaluation of those options.

We note with interest that the Congress has appropriated over $3 billion since

2001 to provide for the defense of the Cobell case and the reform and restructuring

of the administration of the trust funds and assets by the Department of the Interior. Most of this money has been provided to the Office of Special Trustee—an office that was created in the Trust Reform Act of 1994 and was intended to be temporary. That is a lot of money to spend in a short period of time, particularly when

it is provided in the absence of a defined plan and for poorly understood purposes.

It is clear that the tribes have not supported or requested these appropriations because in most instances they involve the reallocation of funds that are desperately

needed for education, law enforcement, and for fighting epidemics of alcohol and

substance abuse. It has been more than a little difficult to get the administration

and the Congress to focus on these areas in light of the significant commitment of

appropriations to the Department’s response to the Cobell case.

We are also seeing the very nature of the trust responsibility redefined by the Department in response to the Cobell case. In some instances the changes that have

been made or that are underway run directly counter to the Congressional policies
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of self-determination and self-governance and undermine the huge investment of fiscal resources that the Congress has made in those policies since 1975. In effect the

Cobell litigation has come to hold the tribes and the Congress hostage to the Department’s assessment of what it must do in order to comply with the real or anticipated orders of the Federal District Court. We are weary of policies that are developed in the context of advancing an adversarial position in the Cobell litigation and

are concerned of the implications if this is allowed to continue any longer.

There has been some improvement in the day-to-day administration of trust funds

and trust assets by the Department. Those changes are welcome, even if the cost

benefit ratio is not. At the same time, we are mindful of the fact that those who

were supposed to be served by the Cobell litigation have received little. IIM account

holders who have been told that they are owed tens of billions, or hundreds of billions of dollars are no closer to being made whole today than they were the day before the Cobell case was filed 10 years ago. Scores of account holders have died since

the case was filed. Without a settlement the litigation is likely to go on for another

decade or more. And, even if the plaintiffs prevail, the Federal District Court cannot

make the account holders whole.

Only the Congress or the U.S. Court of Federal Claims can provide financial relief

to the account holders. Only the Congress can provide the direction for the real reform that is needed to ensure the proper management of the trust funds and assets.

And, only the Congress can ensure that the tribal governments have the opportunity

to assume the day-to-day responsibility for the protection and enhancement of the

corpus of the trust.

It has been 10 months since this legislation was first introduced and this is its

third hearing. To date the administration and the Department have had ample opportunity to lead or be an active participant but have done next to nothing to work

with the plaintiff’s tribes or the committees to find a workable solution. We stand

prepared to work with the committees to arrive at a value for the Cobell claims and

to work for the prompt enactment of S. 1439 and H.R. 4322. We ask that the committees schedule these bills for markup in the next 30 days.

Thank you again for the opportunity to testify today. I will be pleased to answer

any questions the committees may have.
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