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[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]

 
 CAN A PROCESS BE DEVELOPED TO SETTLE MATTERS RELATING TO THE INDIAN 
                          TRUST FUND LAWSUIT?

=======================================================================

                           OVERSIGHT HEARING

                               before the

                         COMMITTEE ON RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                              July 9, 2003

                               __________

                           Serial No. 108-37

                               __________

           Printed for the use of the Committee on Resources

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                         COMMITTEE ON RESOURCES

                 RICHARD W. POMBO, California, Chairman
       NICK J. RAHALL II, West Virginia, Ranking Democrat Member

Don Young, Alaska                    Dale E. Kildee, Michigan
W.J. ``Billy'' Tauzin, Louisiana     Eni F.H. Faleomavaega, American 
Jim Saxton, New Jersey                   Samoa
Elton Gallegly, California           Neil Abercrombie, Hawaii
John J. Duncan, Jr., Tennessee       Solomon P. Ortiz, Texas
Wayne T. Gilchrest, Maryland         Frank Pallone, Jr., New Jersey
Ken Calvert, California              Calvin M. Dooley, California
Scott McInnis, Colorado              Donna M. Christensen, Virgin 
Barbara Cubin, Wyoming                   Islands
George Radanovich, California        Ron Kind, Wisconsin
Walter B. Jones, Jr., North          Jay Inslee, Washington
    Carolina                         Grace F. Napolitano, California
Chris Cannon, Utah                   Tom Udall, New Mexico
John E. Peterson, Pennsylvania       Mark Udall, Colorado
Jim Gibbons, Nevada,                 Anibal Acevedo-Vila, Puerto Rico
  Vice Chairman                      Brad Carson, Oklahoma
Mark E. Souder, Indiana              Raul M. Grijalva, Arizona
Greg Walden, Oregon                  Dennis A. Cardoza, California
Thomas G. Tancredo, Colorado         Madeleine Z. Bordallo, Guam
J.D. Hayworth, Arizona               George Miller, California
Tom Osborne, Nebraska                Edward J. Markey, Massachusetts
Jeff Flake, Arizona                  Ruben Hinojosa, Texas
Dennis R. Rehberg, Montana           Ciro D. Rodriguez, Texas
Rick Renzi, Arizona                  Joe Baca, California
Tom Cole, Oklahoma                   Betty McCollum, Minnesota
Stevan Pearce, New Mexico
Rob Bishop, Utah
Devin Nunes, California
Randy Neugebauer, Texas

                     Steven J. Ding, Chief of Staff
                      Lisa Pittman, Chief Counsel
                 James H. Zoia, Democrat Staff Director
               Jeffrey P. Petrich, Democrat Chief Counsel
                                 ------                                

                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on July 9, 2003.....................................     1

Statement of Members:
    Baca, Hon. Joe, a Representative in Congress from the State 
      of California, prepared statement of.......................    36
    Kildee, Hon. Dale E., a Representative in Congress from the 
      State of Michigan, prepared statement of...................    78
    Pombo, Hon. Richard W., a Representative in Congress from the 
      State of California........................................     1
        Prepared statement of....................................     2
    Rahall, Hon. Nick J., a Representative in Congress from the 
      State of West Virginia.....................................     2
    Rehberg, Hon. Dennis R., a Representative in Congress from 
      the State of Montana.......................................     3

Statement of Witnesses:
    Berrey, John, Chairman, Quapaw Tribe.........................    49
        Prepared statement of....................................    51
    Cason, James, Associate Deputy Secretary, U.S. Department of 
      the Interior...............................................     4
        Prepared statement of....................................     8
    Cobell, Elouise P., Project Director, Blackfeet Reservation 
      Development Fund, Inc......................................    42
        Prepared statement of....................................    44
    Frazier, Harold, Board Member, Intertribal Monitoring 
      Association on Indian Trust Funds..........................    84
    George, Keller, President, United South and Eastern Tribes, 
      Inc........................................................    86
        Prepared statement of....................................    89
    Hall, Tex, President, National Congress of American Indians..    56
        Prepared statement of....................................    59
    Lester, A. David, Executive Director, Council of Energy 
      Resource Tribes............................................    93
        Prepared statement of....................................    95

  OVERSIGHT HEARING ON ``CAN A PROCESS BE DEVELOPED TO SETTLE MATTERS 
              RELATING TO THE INDIAN TRUST FUND LAWSUIT?''

                              ----------                              

                              July 9, 2003

                     U.S. House of Representatives

                         Committee on Resources

                             Washington, DC

                              ----------                              

    The Committee met, pursuant to call, at 3:23 p.m., in room 
1324, Longworth House Office Building, Hon. Richard W. Pombo 
(Chairman of the Committee) presiding.
    Members Present: Representatives Pombo, Cannon, Tancredo, 
Hayworth, Osborne, Rehberg, Renzi, Cole, Pearce, Bishop, 
Neugebauer, Rahall, Pallone, Inslee, Udall of New Mexico, Udall 
of Colorado, Carson, Grijalva, Bordallo, and Baca.
    The Chairman. The Committee will come to order.
    The Committee is meeting today to hear testimony on whether 
or not a process can be developed to settle matters relating to 
the Indian trust fund lawsuit. Under rule 4(g) of the Committee 
rules, any oral opening statements at hearings are limited to 
the Chairman and ranking minority member. This will allow us to 
hear from our witnesses sooner and have members keep to their 
schedules.
    Therefore, if other members have statements, they can be 
included in the hearing record under unanimous consent.
    First off, I want to apologize to our witnesses and the 
folks that are in the room for our delayed start on the 
hearing. We were detained with votes on the House floor, and I 
apologize to all of you for the delay.

  STATEMENT OF THE HON. RICHARD W. POMBO, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    The Chairman. The purpose of today's hearing is to discuss 
whether a process can be developed to settle matters relating 
to the Indian Trust Fund lawsuit. The historic Indian Trust 
Fund mismanagement by the Interior Department is one of the 
largest problems in Indian country today. Although the roots of 
this case reach back to the 19th century, it wasn't until the 
Clinton administration and now the Bush Administration that the 
government was forced to confront the problem head on.
    The trust fund mismanagement has been more than a century 
in the making. Skeptics might be excused for believing it will 
take a century before the case is brought to an honorable end. 
But I am one of those who believes that we can find a way to 
bring the case to a timely and honorable settlement, one that 
is fair and just.
    If the Social Security system had been as badly mismanaged, 
we would have found a solution years ago. We can and must find 
a fair and equitable settlement to the trust fund fiasco and 
ensure it doesn't happen again.
    Determining what the settlement might be and how we might 
reform the trust system so the word ``trust'' really means 
something should be worked out through a process of 
consultation with the Indian country. Let us start this process 
today.
    I look forward to hearing the views of our witnesses and 
look forward to having the opportunity to begin this process so 
that we can find a timely settlement to this matter.
    I would now like to recognize the ranking member of the 
full Committee, Mr. Rahall, for his opening statement.

Statement of Hon. Richard Pombo, a Representative in Congress from the 
                          State of California

    The purpose of today's hearing is to discuss whether a process can 
be developed to settle matters relating to the Indian Trust Fund 
lawsuit.
    The historic Indian trust fund mismanagement by the Interior 
Department is one of the largest problems in Indian Country today. 
Although the roots of this case reach back to the 19thcentury, it 
wasn't until the Clinton Administration--and now the Bush 
Administration--that the government was forced to confront the problem 
head-on.
    The trust fund mismanagement has been more than a century in the 
making. Skeptics might be excused for believing it will take a century 
before the case is brought to an honorable end.
    But I'm one of those who believes we can find a way to bring the 
case to a timely and honorable settlement, one that is fair and just. 
If the Social Security system had been as badly mismanaged, we would 
have found a solution years ago. We can and must find a fair and 
equitable settlement to the trust fund fiasco and ensure it doesn't 
happen again.
    Determining what this settlement might be, and how we might reform 
the trust system so the word ``trust'' really means something, should 
be worked out through a process of consultation with Indian Country. 
Let's start with this process today.
    I look forward to hearing the views of our witnesses.
                                 ______
                                 

 STATEMENT OF THE HON. NICK J. RAHALL, II, A REPRESENTATIVE IN 
            CONGRESS FROM THE STATE OF WEST VIRGINIA

    Mr. Rahall. Thank you, Mr. Chairman, and I commend you for 
having these hearings today.
    Last year, I took to the House floor and offered an 
amendment to the Interior appropriations bill to strike from 
that bill an ill-conceived provision that would have cheated 
over 300,000 Native Americans out of a full accounting of the 
money owed to them by the Federal Government. The provision in 
question would have prohibited the Interior Department from 
accounting for amounts owed to them prior to 1985 from their 
individual Indian Trust Fund accounts.
    At the time, I observed that this provision was like 
telling Americans who had placed money in a savings account all 
of their adult lives that they will have the bank tell you how 
much is in your account regardless of what your own records 
show. If your records showed you saved 100,000, but the bank 
says 50,000, that figure stands and you have no recourse. That 
provision was nothing more than and nothing less than a gag 
order on thousands of American Indians who are seeking a proper 
accounting from the Federal Government of royalties owed to 
them.
    Fortunately, a majority of the House agreed with me and 
this ill-conceived provision was removed from the bill. Yet 
here we go again.
    How long will it take for the Interior Department to quit 
with the gimmicks, the sleight of hand with these legislative 
riders that are put in the appropriation bills without any 
consultation with Indian tribes or representatives of 
individual Indian account holders? How long will it take for 
this Interior Department to step up to the plate and take 
responsibility and act responsibly in fulfilling its 
commitment, a statutory and moral commitment to these aggrieved 
parties? Apparently, we should not hold our breath waiting for 
that to happen.
    We are now faced once again with yet another Interior 
appropriations rider. As NCAI recently put it, this new 
provision, and I quote, ``is something like giving a CEO of 
Enron the authority to unilaterally settle the claims of Enron 
shareholders,'' end quote.
    To be clear, I am as frustrated with the expense and length 
of the Cobell litigation as most everyone else involved with 
this matter is. We now find ourselves in a situation where it 
appears as though every single decision made by the DOI is 
decided after being weighed against the Cobell lawsuit. We 
cannot reach agreement on bringing land into trust or expanding 
energy opportunities for Indian tribes without having to 
address issues brought to light by the suit.
    The Department will not accept responsibility for trust 
standards. A special trustee has morphed into the Indian Trust 
Fund's czar, and we in Congress are under heavy pressure to get 
involved and settle the Cobell case. But alleged solutions 
which entail having the wolf guard the henhouse are not the 
answer. Empowering the Interior Secretary to unilaterally tell 
account holders what they are owed based on a statistical 
sampling methodology devised by the Interior Secretary is not 
the answer.
    Through our witnesses today we hope they will give us the 
guidance and give us the wisdom to bring this matter to a 
proper closure.
    And I thank you for holding this hearing, Mr. Chairman, and 
certainly agree with your comments about consultation with 
those affected parties. Thank you.
    The Chairman. Thank you.
    It is the tradition of the Committee that members are 
entitled to introduce witnesses who are their constituents. 
Although she is on the second panel, Elouise Cobell is one of 
our more notable witnesses today, and I wanted to allow her 
Congressman, Mr. Rehberg, a minute to introduce her.

 STATEMENT OF THE HON. DENNIS R. REHBERG, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF MONTANA

    Mr. Rehberg. Thank you, Mr. Chairman, and let me once again 
publicly thank you for coming to Montana last week and having a 
hearing in our State, listening to our constituents. We 
appreciate you being there.
    I have another constituent in the audience today, Elouise 
Cobell, a long-time friend of mine. There are those out there 
that would believe that perhaps this lawsuit would be an 
irritant. I don't happen to be one of those, because it didn't 
seem like the problem was being solved until Elouise and a 
number of others stepped forward and made an issue of it.
    Her background is one of accounting, of being a banker, a 
civic leader and involved in community development in the State 
of Montana. So we could have no one better to speak on behalf 
of herself and the people who are most interested in solving 
the problem that literally have been around so long.
    If I remember correctly, I saw a newspaper that was 
announcing money missing from a trust fund the same day that 
Custer had been defeated at the Battle of Little Big Horn--on 
the exact same day. This is a problem that needs to be solved.
    This is a person that we need to listen to as far as the 
problem, and I thank you for having the hearing today and I 
thank you for allowing Ms. Cobell to be one of your witnesses.
    Thank you, Mr. Chairman.
    The Chairman. I would like to call up our first panel. And 
I would like welcome Jim Cason, the Associate Deputy Secretary 
at the Department of Interior.
    Before you take your seat, if I could just have you stand 
and raise your right hand. It is the tradition of the Committee 
that we swear in all of our witnesses.
    [Witness sworn.]
    The Chairman. Let the record show he answered in the 
affirmative.
    I welcome you, Mr. Cason. I know everybody is looking 
forward to the opportunity to hear your testimony and have the 
chance to ask you questions. So if you are ready, you may 
begin.

  STATEMENT OF JAMES CASON, ASSOCIATE DEPUTY SECRETARY, U.S. 
                   DEPARTMENT OF THE INTERIOR

    Mr. Cason. I would like to make a few brief comments, and 
if it will be acceptable, I'll enter our written testimony into 
the record.
    The Chairman. Your entire written testimony will be 
included in the record.
    Mr. Cason. Thank you, Mr. Chairman.
    The first thing I would like to do is just suggest to the 
members of the Committee, if you have an opportunity to read 
the Department's testimony, it provides a good summary, 
history, of this accounting issue; and it will help inform the 
Committee on the considerations that are involved here.
    Secondly, I would like to thank the Chairman for putting 
together this hearing and for the participation of the members 
that are here. This is a very important issue to the Department 
of Interior. It is probably the most important issue on the 
Secretary's docket. We spend a lot of time within the 
Department on this, and this is an issue the Department will 
not solve on its own; and it ultimately will take the 
cooperative efforts of a number of people to address this 
issue, including the members of this Committee.
    So thank you, Mr. Chairman, for your leadership in 
providing us an opportunity to come up and discuss this issue.
    I think in the comments that came first everyone would 
agree that this is a problem that has been ongoing for far too 
long and it is a problem that needs to be addressed. And what 
we have been going through recently are the steps that it takes 
to reach a conclusion about how to address this issue.
    Ultimately, the issue is, what will be fair under these 
circumstances; and the definition of ``fair'' seems to vary 
from party to party, and there are lots of parties that have 
different ideas about the extent of the accounting that the 
Department of Interior should be responsible for. And I would 
like to spend just a few minutes to make comments about that.
    Ultimately, what we have to decide collectively is what is 
a complete and accurate accounting in this circumstance for 
both DOI members and for tribes; and the issue is, how do we 
pay for it? And ultimately there are only two real parties that 
are possibilities for paying for this accounting and that is 
the Congress of the United States, where we normally get money 
to pay for this accounting, or the beneficiaries. And so far, 
over the last 100 years, the beneficiaries haven't had to pay, 
so there is only one real party that's been involved in paying 
for these kinds of activities.
    The specifications for the accounting will dictate how much 
it will cost overall, and the range is quite wide, depending on 
what kind of decisions we make about the character of the 
accounting. It can be all the way from a few tens of millions 
to do this job all the way into the billions to do an 
accounting, depending on what kind of decisions we make 
collectively.
    How long it takes will depend upon how we characterize 
this. If we go to the full extent of doing all of the 
accounting that is being asked for, it could take well into 
more than a decade, possibly two decades to do.
    And then the beneficiaries' satisfaction is an issue that 
will be dictated by how we frame the accounting. Obviously the 
more information we can provide, the more the beneficiaries 
would be satisfied, but that takes time and money to get there.
    The feedback that we have received from Congress so far, as 
we have tried to wrestle with this issue, is inconsistent. If 
you take a look at where we are with the '94 act, the Indian 
Trust Reform Act, the legislative history of that would suggest 
that, and the language of the '94 act would suggest that, this 
should be a prospective accounting. The legislative history 
suggests that we should be doing an accounting from August 1, 
'93, forward.
    However, when we have been in the U.S. District court, U.S. 
District court Judge Lamberth has decided that in order for a 
prospective accounting to be accurate, we have to do a 
historical accounting to ensure that the opening balance is 
accurate. And the historical accounting could be anywhere 
between 1 and over 100 years.
    So the issue for us is, how far back in time do we go in 
order to ensure that the opening balance is accurate?
    Currently, the technology we have available in the 
Department of Interior allows us to balance to the penny the 
accounts we have today. However, what is in question is whether 
the historic opening balance for a current accounting system is 
accurate and that is what we have to focus on right now.
    We also have feedback that says we should do limited 
efforts in doing an accounting. Last year, the Appropriations 
Committee offered a suggestion to limit the amount of 
accounting we do. The Appropriations Committee on the House 
side has done the same thing this year. We also have the 
feedback from various Members of Congress that the accounting 
should be fair and equitable. However, we haven't really been 
able to define what fair and equitable is under the 
circumstances, so we would appreciate feedback on that.
    And then last, feedback that we have gotten is, we should 
do the accounting that the plaintiffs have requested. And if I 
can characterize that--and certainly Elouise is here and she 
can characterize it more clearly--but overall it is basically 
we should do an accounting for all land, natural resources and 
funds that have passed through the trust fund since 1987 for 
all Indian generations that have occurred since then.
    That is a pretty big job. And, Mr. Chairman, I would just 
suggest that this is somewhat akin, by analogy, to challenging 
you to give me an account statement for your checking account 
for your entire life and those of your parents, grandparents 
and great-grandparents and all the properties that they've ever 
owned and then multiply that by 500,000 times. That's a pretty 
big job. It's very time-consuming and very expensive to do.
    So far we have been involved in accounting in the 
Department of Interior. The first effort the Department 
undertook to do, quote, ``historical accounting'' is with 
tribal accounts from 1972 to 1992. And in that time period we 
balanced somewhere just less than $14 billion.
    We found a very low error rate in the records that we did 
have available. As I understand it, we examined over a million 
records, and the error rate was somewhat less than 1 percent. 
There were missing documents, as you might well expect, over a 
period of 20 years in history. But of all the records we had 
which, as I understand, about 90 percent or so of the 
transactions were supported by documentation, the error rate 
was very low.
    We have also done judgment and per capita accounts for 
individual Indian money account holders. So far, we have done 
about 17,000 of those. And of that 17,000 we found essentially 
no error. The error is in interest calculation rounding, but we 
wouldn't expect to find a lot of error with those types of 
accounts.
    Finally, we have done reconciliation of the five named 
plaintiffs that are involved. Only four of the five plaintiffs 
had accounts, and out of that we examined on the order of 
13,000 transactions.
    The cost of doing this was approximately $20 million for 
all of the activities associated with it. And I would like to 
just share the conclusions--and we have shared this with 
Congress under an appropriations bill requirement, but the 
conclusions from Ernst & Young who did this reconciliation for 
the named plaintiffs was, the historical IIM ledgers were 
sufficient to allow DOI to create virtual ledgers that are 
substantially complete for the selected accounts.
    The documents gathered by DOI support substantially all the 
dollar value of the transactions in the analyzed accounts. The 
documents gathered by the Department of the Interior do not 
reveal any collection transactions not included in the selected 
accounts, with a single exception in the amount of $60.94 that 
was paid to another account holder. An analysis of relevant 
contracted payments, evidenced primarily by lease agreements, 
showed that substantially all expected collection amounts were 
properly recorded and reflected in the IIM accounts, and there 
was no indication that the accounts were not substantially 
accurate nor that the transactions are not substantially 
supported by contemporaneous documentation.
    In this particular case, for the named plaintiffs, it would 
appear that the historical accounting process used by the 
Department was reasonably accurate.
    This is not a statistically valid sample of all of the 
accounts because there are literally tens of thousands of 
accounts. Just land-based accounts were approximately 200,000 
accounts, so don't let me mislead you by suggesting that all 
accounts will turn out this way. But for all the accounting 
that we have done, the tribal accounts, the named plaintiffs, 
the judgment and per capita accounts, the results have been 
remarkably similar; and that would suggest that the accounting 
process isn't quite as bad as one might be led to believe.
    There is still a substantial amount of work that needs to 
be done if we are going to get to a point where we have covered 
a majority of the accounts, or the majority of the transactions 
and moneys that have passed through IIM accounts over history. 
So this is just an indication at this point in time. The 
Department is continuing its efforts on historical accounting 
even as we speak.
    We are continuing working on judgment and per capita 
accounts. We are involved on pilot projects and land-based 
accounts, so we are continuing the work at this time. However, 
what we are about to discuss is the majority of the job that 
needs to be done and the amounts of money that would be 
involved in doing that job, and will that satisfy all the 
parties involved?
    We do have some options on the table, Mr. Chairman, that we 
could go back and take a look at the original language 
associated with the '94 act and do a prospective accounting 
from 1993 or another date that Congress chooses to do. This is, 
however, an issue where maybe the horse has left the barn and 
it's too late to do that.
    We can take a look at the plan offered by the Department of 
Interior to Congress in July of 2002. And that plan basically 
was to do a very broad accounting, transaction by transaction, 
for all the accounts through history. The price tag on it is 
expensive, though. It is about $2.4 billion and at least 10 
years to do, and the feedback we have received is that it's too 
long and too expensive.
    We could take a look at the Department's plan, which is a 
slim-down plan that was provided to the court on January 6 of 
this year. And that plan basically said it would take $335 
million and about 5 years to do. And that plan--we took a 
narrow cross-section of account holders, essentially those who 
had funds in the IIM account as of October 25, 1994, the 
passage of the Indian Trust Reform Act. And to do an account 
for all of those account holders, approximately 230,000 or so, 
what we would do in that particular case, under that plan, 
would be to do a historical accounting back to the opening 
initial balance for each of those individual accounts and do a 
transaction-by-transaction reconciliation with a statistical 
verification for land-based accounts, where we would take 
transactions over $5,000 and go find the supporting 
documentation, and for transactions under 5,000, do a 
statistical sample for verification purposes.
    We could let the judge decide. This case has currently been 
in court for 7 years, and Judge Lamberth is a very active 
participant in evaluating what our options are. We could all 
sit back and let the judge decide, and then at that point it is 
just a matter for Congress to decide whether you are going to 
pay for it or not.
    We could do the Appropriations plan. That was designed to 
get the cost down between $100 and $200 million to do this 
work, but that short-circuits some of the things that other 
parties would like to have.
    The Senate is considering settlement legislation. As far as 
I know, they haven't written that legislation yet and so we 
don't know how much that would cost or how long it would take.
    I have seen in the press that we could settle with the 
plaintiffs, and the figure I have seen in the press is a 
settlement figure of $137 billion. That is ``billion'' with a 
B. That seems like a pretty big number. And realistically, I 
think we would be able to negotiate to a lower number. But 
realistically, I think the number is still with a B, billions, 
if that is the path we are going to go.
    Or we could choose other options, construct other options.
    One way or the other, Mr. Chairman and members of the 
Committee, I think this is a serious issue and needs a serious 
answer and a serious dialog; and this gives us an opportunity 
to come and meet with the Committee and start that dialog here 
in the House with the authorizing Committees.
    There are a number of players that are potentially involved 
in this. The major players are the authorizing Committees for 
the House and Senate, the Appropriations Committees for the 
House and Senate, U.S. district court, the court of appeals, 
the Departments of Interior and Treasury, and obviously Indian 
country, because this is a class action lawsuit, and obviously 
the taxpayers, who ultimately are likely to fund whatever we 
decide to do.
    Mr. Chairman, I appreciate your leadership in bringing this 
group together to start talking about this issue. It is an 
important one to resolve.
    Thank you.
    [The prepared statement of Mr. Cason follows:]

 Statement of James Cason, Associate Deputy Secretary, U.S. Department 
                            of the Interior

    Mr. Chairman, thank you for the opportunity to testify today on the 
issues surrounding the longstanding case that originated in 1996 as 
Cobell v. Babbitt and is now Cobell v. Norton. In your letter of 
invitation, you asked the Department to address its plan for historical 
accounting, the results of historical accountings conducted so far, the 
size of the accounts the Department holds in trust for American 
Indians, and the likelihood of an expeditious resolution of the Indian 
trust fund lawsuit.
    The Department of the Interior manages about 1,400 tribal accounts 
and over 225,000 individual Indian money (IIM) accounts. Because the 
Cobell case only involves IIM accounts, most of my testimony will focus 
on the issues related to the management of those accounts. The 
Committee should be aware, however, that 16 tribes have filed 19 
lawsuits seeking an accounting.

Background
    Trust asset management involves approximately 11 million acres held 
in trust or in restricted status for individual Indians and nearly 45 
million acres held in trust for the Tribes. This land produces income 
from more than 100,000 active leases for about 350,000 individual 
Indian owners and 315 Tribal owners. Over $862 million is typically 
collected annually from leases, permits, sales, and interest income. 
About $226 million is distributed among the IIM accounts; $536 million 
is distributed among the tribal accounts.
    One of the most challenging aspects of trust management is the 
management of the very small ownership interests, which result in many 
very small IIM accounts and land ownership interests. In 1887, Congress 
passed the General Allotment Act, which resulted in the allotment of 
some tribal lands to individual members of tribes in 80 and 160-acre 
parcels. The expectation was that these allotments would be held in 
trust for their Indian owners for no more than 25 years, after which 
the Indian owner would own the land in fee. However, Congress ended up 
extending the trust period indefinitely once it became apparent that 
the goal of making the individual Indians into farmers failed.
    Interests in these allotted lands started to ``fractionate'' as 
interests divided among the heirs of the original allottees, expanding 
exponentially with each new generation. There are now over 1.4 million 
fractional interests of 2% or less involving 58,000 tracts of 
individually owned trust and restricted lands. We have to provide a 
range of trust services--title records, lease management, accounting, 
probate--to the growing number of land owners. We have single pieces of 
property with ownership interests that are less than .000002 of the 
whole interest. The Department is required to account for each owner's 
interest, regardless of size. Even though these interests today might 
generate less than one cent in revenue each year, each is managed, 
without the assessment of any management fees, and the revenues 
generated are treated with the same diligence that applies to all IIM 
accounts. In contrast, in a commercial setting, these small interests 
and accounts would have been eliminated because of the assessment of 
routine management fees against the account. Management costs of the 
IIM accounts, as well as tribal trust accounts, are covered through the 
general appropriations process and borne by the taxpayers as a whole, 
rather than the accountholders.

Past Congressional Actions
    Over the past 100 years, Congress has reviewed the issue of Indian 
trust management many times. In 1934, the Commissioner of Indian 
Affairs cautioned Congress that fractionated interests in individual 
Indian trust lands cost large sums of money to administer, and left 
Indian heirs unable to control their own land. ``Such has been the 
record, and such it will be unless the government, in impatience or 
despair, shall summarily retreat from a hopeless situation, abandoning 
the victims of its allotment system. The alternative will be to apply a 
constructive remedy as proposed by the present Bill.'' The bill 
ultimately led to the Act of June 18, 1934, the Indian Reorganization 
Act, which attempted to resolve the problems related to fractionation, 
but as we now know it did not.
    In 1984, a Price Waterhouse report laid out a list of procedures 
needed to make management of these funds consistent with commercial 
trust practices. One of these recommendations was considering a shift 
of the Bureau of Indian Affairs (BIA) disbursement activities to a 
commercial bank. This recommendation set in motion a political debate 
on whether to take such an action. Congress then stepped in and 
required BIA to reconcile and audit all Indian trust accounts prior to 
any transfer of responsibility to a third party. BIA contracted with 
Arthur Andersen to prepare a report on what would be required in an 
audit of all trust funds managed by BIA in 1988. Arthur Andersen's 
report stated it could audit the trust funds in general, but it could 
not provide verification of each individual transaction.
    In 1992, the House Committee on Government Operations filed a 
report entitled `` Misplaced Trust: the Bureau of Indian Affairs'' 
Management of the Indian Trust Fund. '' That report listed the many 
weaknesses in the BIA management of Indian trust funds. It pointed out 
that the General Accounting Office's audits of 1928, 1952, and 1955, as 
well as 30 Inspector General reports since 1982 found fault with 
management of the system. The report notes Arthur Andersen 1988 and 
1989 financial audits stated that ``some of these weaknesses are as 
pervasive and fundamental as to render the accounting systems 
unreliable.''
    Arthur Andersen stated it might cost as much as $281 million to 
$390 million in 1992 dollars to audit the IIM accounts at the then 93 
BIA agency offices. The 1992 Government Operations Committee report 
describes the Committee's reaction:
        ``Obviously, it makes little sense to spend so much when there 
        was only $440 million deposited in the IIM trust fund for 
        account holders as of September 30, 1991. Given that cost and 
        time have become formidable obstacles to completing a full and 
        accurate accounting of the Indian trust fund, it may be 
        necessary to review a range of sampling techniques and other 
        alternatives before proceeding with a full accounting of all 
        300,000 accounts in the Indian trust fund. However, it remains 
        imperative that as complete an audit and reconciliation as 
        practicable must be undertaken.''
    The Committee report then moves on to the issue of fractionated 
heirships. The report notes that in 1955 a GAO audit recommended a 
number of solutions including eliminating BIA involvement in income 
distribution by requiring lessees to make payments directly to Indian 
lessors, allowing BIA to transfer maintenance of IIM accounts to 
commercial banks, or imposing a fee for BIA services to IIM 
accountholders. The report states the Committee's concern that BIA is 
spending a great deal of taxpayers'' money administering and 
maintaining tens of thousands of minuscule ownership interests and 
maintaining thousands of IIM trust fund accounts with little or no 
activity, and with balances of less than $50.
    On April 22, 1993, the late Congressman Synar introduced H.R. 1846. 
On May 7, 1993, Senator Inouye introduced an identical version, S. 925. 
It was in these bills that Congress first included a statutory 
responsibility to account for Indian trust funds. Section 501 was 
entitled ``Responsibility of Secretary to Account for the Daily and 
Annual Balances of Indian Trust Funds.'' Senator Inouye's bill included 
an effective date provision that stated:
        ``This section shall take effect October 1, 1993, but shall 
        only apply with respect to earnings and losses occurring on or 
        after October 1, 1993, on funds held in trust by the United 
        States for the benefit of an Indian tribe or an individual 
        Indian.''
    The Senate Committee on Indian Affairs held a hearing on S. 925 on 
June 22, 1993. Eloise Cobell in her capacity as Chairman of the 
Intertribal Monitoring Association, testified in strong support of the 
bill. The only amendment Ms. Cobell recommended in her oral statement, 
as well as her written statement, was to allow Tribes to transfer money 
back into a BIA-managed trust fund at any time if they so wanted. Ms. 
Cobell mentioned ``[W]e have amendments, and we are willing to work 
with the committee on these particular amendments. I am not going to 
devote any more of my time in my oral presentation to the provisions of 
the bill because we feel it is an excellent bill.''
    The Navajo Nation and the Red Lake Band of Chippewa Indians were 
the only tribes to submit testimony. They supported the bill, and did 
not object to the prospective application of the accounting section in 
their testimony.
    The Director of Planning and Reporting of the General Accounting 
Office also testified. He was asked if he agreed with the Arthur 
Andersen estimates I mentioned above. He stated the following:
        ``In my statement I talked about how there are a lot of these 
        accounts that maybe you don't want to audit, that maybe what 
        you want to do is come to some agreement with the individual 
        account holder as to what the amount would be, and make a 
        settlement on it. We had a report issued last year that 
        suggested that, primarily because there are an awful lot of 
        these accounts that have very small amounts in terms of the 
        transactions that flow in and out of them. Just to give you 
        some gross figures, 95 percent of the transactions are under 
        $500. One of our reports said there that about 80 percent of 
        the transactions are under $50. So in cases where you have the 
        small ones, maybe there's a way in which we can reach agreement 
        with the account holders and the Department of the Interior on 
        how much we will settle for on these accounts rather than 
        trying to go back through many many years, reconstructing land 
        records and trying to find all of the supporting material. It 
        may not be worth it.'' [page 29 of S. Hrg 103-225]
    On July 26, 1994, Congressman Richardson introduced H.R. 4833 which 
ultimately became the American Indian Trust Fund Management Reform Act 
of 1994. The House report on H.R. 4833 notes that H.R. 1846 was the 
predecessor bill to H.R. 4833. There was one legislative hearing held 
on H.R. 4833 by this Committee on August 11, 1994. There is no printed 
record of that hearing. There was no Senate hearing.
    H.R. 1846 and H.R. 4833 were similar in many places. H.R. 4833 did 
not however include the effective date provision explicitly making the 
accounting requirement prospective only. While the report notes in a 
number of places why changes were made to the H.R. 1846 provisions, it 
is silent with respect to this omission.
    It may surprise Members of this Committee to note that there is no 
mention of the costs associated with either complying with the Act, or 
completing the accounting in the Committee's report. Moreover, no 
analysis from the Congressional Budget Office was included in the 
Committee's report. The Department sent a letter on H.R. 1846 and an 
amended S. 925 that was placed in the Committee report on H.R. 4833. 
Its only mention of cost is the following sentence: ``We wish to note 
that, given current fiscal restraints, the funding for implementation 
of this legislation may necessarily have to be derived from 
reallocation of funds from other BIA or Department programs.'' Given 
the lack of cost analysis contained in the legislative history, one 
could assume that Congress in enacting the 1994 Reform Act had no idea 
it may have required a multi-million or billion dollar accounting.

Interior's Historical Accounting Plan
    Mr. Chairman, you specifically requested my testimony address the 
Department's plans for conducting an historical accounting of IIM 
accounts. The Cobell court ruled that the 1994 Reform Act requires the 
Department to provide IIM trust beneficiaries an accounting for all 
funds held in trust by the United States that are deposited or invested 
pursuant to the Act of June 24, 1938, regardless of when they were 
deposited. The D.C. Circuit Court noted that the statute does not make 
clear how to conduct such an accounting, and it is properly left up to 
the Department what accounting methods to use.
    In the Department's fiscal year 2001 Appropriations Act, Congress 
directed the Department to submit a comprehensive report to the 
Appropriations Committees as to the costs and benefits of a 
comprehensive historical accounting. That report was submitted on July 
2, 2002. It looked at the costs associated with doing a transaction-by-
transaction accounting and transaction-by-transaction verification for 
the IIM account holders. The estimate for such an accounting and 
verification was $2.4 billion, and that would take ten years to 
complete. The feedback received from various Congressional members and 
staff suggested little support for this plan given its cost, the length 
of time required, and the fact that such a huge sum of money would go 
to accountants and lawyers, not Indian people.
    In September 2002, Judge Lamberth, who presides over the Cobell 
litigation, ordered the Department to submit to the court by January 6, 
2003 a proposed historical accounting plan. He also allowed the 
plaintiffs in the case to submit their own proposed accounting plan.
    Our proposal is to compile a transaction-by-transaction accounting 
with transaction verification based in part on various statistical 
sampling verification methods. But all IIM account holders will receive 
transaction-by-transaction account histories. By using these different 
methods, we believe IIM account holders will receive their accountings 
much sooner. Interior plans to separate the historical accounting into 
three distinct types of IIM accounts.
     Judgment and Per Capita accounts
     Land-based IIM accounts
     Special Deposit Accounts
    For the approximately 42,200 judgment and per capita accounts, we 
plan to reconcile 100 percent of the transactions in each account and 
verify all transactions.
    For the approximately 200,000 land-based IIM accounts, we intend to 
reconcile 100% of transactions and verify those transactions using both 
transaction-by-transaction and statistical methods. We plan to verify 
all transactions that are equal to or greater than $5,000. For 
transactions that are less than $5,000, we will verify transactions 
using statistically valid sampling technologies. The statistically 
valid sampling methodology is expected to result in our being able to 
determine the accuracy rate of the historical accounting with 99 
percent confidence.
    For the 21,500 Special Deposit accounts, which are in effect 
holding accounts, we intend to distribute the funds to the proper 
owners and then close those accounts.
    The historical accounting described in our Plan covers all IIM 
accounts open as of October 25, 1994, the date of the Act, or opened 
thereafter. The historical accounting period ends on December 31, 2000; 
transactions occurring thereafter are addressed in current accounting 
activities. Interior engaged 14 consulting firms to assist in the 
development of this plan, including five accounting firms (four of 
which are among the five largest firms in the United States), the 
largest commercial trust operator in the United States, two historian 
firms that have specialized in Indian issues for many years, and firms 
to assist in statistical matters, trust legal matters and other areas 
pertaining to historical accounting.
    Under our plan, at the end of the historical accounting process we 
propose, we intend to be in the position to provide each IIM account 
holder with a Historical Statement of Account. This statement will 
provide information on how much money was credited to each account, and 
the disbursements made from the account. It will also provide an 
assessment of the accuracy of the account transaction history. In 
addition, we intend to be in a position to provide land-based IIM 
account holders with information regarding their land assets. This 
information will be prepared by the BIA Land Title and Records Offices 
as a separate package to be provided to IIM account holders.
    The cost of our historical accounting plan is approximately $335 
million over five years. The President's proposed fiscal year 2004 
budget for the Department of the Interior includes money for this 
accounting. Our $9.8 billion budget request is the largest in the 
Department's history, and represents a net increase of $344.1 million 
over the fiscal year 2003 enacted appropriations. Nearly one half of 
the proposed increases will fund trust reform improvements. Included 
within the total is $100 million to support the Department's plan to 
conduct an historical accounting for IIM accounts and $30 million to 
account for funds in tribal accounts.
    The court has not yet ruled as to whether it believes our 
accounting plan is adequate. Plaintiffs have argued vehemently that it 
is not. Plaintiffs argue that the 1994 Reform Act requires a full 
verification for all transactions since the 1880s, and that such an 
accounting is ``impossible'' because the historical records are not 
complete--something Congress was obviously aware of when it passed the 
1994 Reform Act. In the trial, plaintiffs have offered an alternative 
methodology, which uses various estimating techniques to approximate 
the amount they contend should have come into the IIM accounts since 
the 1880s. Their plan will, admittedly, not provide an accounting to 
even one IIM beneficiary, but will--like a damages model--come up with 
an amount of money to which plaintiffs as a class claim they are 
entitled. Press reports state that plaintiffs believe they are owed at 
least $137 billion.
    Indian country argues that the money for this accounting or any 
judicial or congressional settlement should all be new money and not 
come from Indian program money. In reality, appropriators are faced 
with funding this accounting out of the Interior allocation, and have 
openly stated that funding a multi-million, potentially multi-billion, 
dollar accounting will mean a reduction in money for other Indian 
program priorities.

Recent Reconciliations and Accountings
    The Committee also asked that I address the results of accountings 
Interior has done so far. In the 1990s, the BIA contracted with Arthur 
Andersen LLP to conduct a reconciliation of Tribal trust funds from 
1972 to 1992 in accordance with certain agreed upon accounting 
procedures. More than one million records provided by BIA were examined 
in the reconciliation which concluded in 1996, but was augmented with 
additional work completed through 2001. Of the 251,432 transactions 
examined, 219,599 transactions worth $15.8 billion or 89 percent of 
total receipts and disbursements for 1972-1992 of the funds were 
reconciled. The error rate for the reconciled transactions was far less 
than one percent. For the remaining 11 percent, $1.9 billion in 
transactions shown posted in the accounts, sufficient documentation was 
not provided to reconcile the transactions.
    As part of the Cobell litigation, Interior collected over 165,000 
documents for the historical accounting of IIM trust fund activity 
through December 31, 2000 for four of the named plaintiffs and 24 of 
their agreed-upon predecessors. Of these documents, about 21,000 
documents were used to support the transactional histories, which dated 
back as far as 1914, and which included a total of about 13,000 
transactions. The accounting contractor, Ernst and Young, found 86 
percent of the transactions and 93 percent of the funds moving through 
the accounts were supported by the documentation located. The cost of 
this accounting was over $20 million
    Pursuant to the requirement in Section 131 of the fiscal year 2003 
Appropriations Act, on March 25, 2003, the Department of the Interior 
provided Congress with a summary of the expert opinion of Mr. Joseph 
Rosenbaum, a partner in Ernst and Young, LLP. ``on the historical 
accounting for the five named plaintiffs in Cobell v. Norton.'' This 
report describes the process the contractor went through and also 
contains a summary of his opinions. These conclusions included:
     The historical IIM ledgers were sufficient to allow DOI 
to create virtual ledgers that are substantially complete for the 
selected accounts.
     The documents gathered by DOI support substantially all 
of the dollar value of the transactions in the analyzed accounts.
     The documents gathered by the Department of the Interior 
do not reveal any collection transactions not included in the selected 
accounts, with a single exception in the amount of $60.94 that was paid 
to another account holder.
     An analysis of relevant contracted payments, evidenced 
primarily by lease agreements shows, that substantially all expected 
collection amounts were properly recorded and reflected in the IIM 
accounts.
     There is no indication that the accounts are not 
substantially accurate, nor that the transactions are not substantially 
supported by contemporaneous documentation.
    The Department's Office of Historical Trust Accounting has also 
performed historical accountings for 16,821 IIM judgment accounts 
established for minors or restricted account holders. These accounts 
represent $48,496,799. No errors were found regarding the collections 
and postings to these accounts. Only a few of these accountings have 
been provided to the beneficiaries or their legal representatives 
because the district court in Cobell found that sending them to 
plaintiffs is improper and has not acted on our motion for permission 
to send them to the appropriate person.

Interior Trust Reform Efforts
    The Department has developed a comprehensive plan for the 
management of Indian trust funds. The Secretary established both the 
Office of Historical Trust Accounting and the Office of Indian Trust 
Transition. The Office of Indian Trust Transition engaged in a 
meticulous process to develop an accurate, current state model to 
document trust business processes. The Department, after the most 
extensive consultation ever held with Indian country, is well down the 
road of putting in place a reorganization of trust functions in 
response to widespread criticism of the former trust management 
structure.
    We have not been sitting on our hands at Interior. Trust Reform has 
been the number one priority for the senior management of the 
Department during this Administration.
Settlement of the Ongoing Trust Fund Litigation
    Recently Senators Campbell and Inouye sent letters to the parties 
urging a fair and equitable settlement of the Cobell case. We welcome 
such a settlement. However, the parties are far apart on the issue of 
what is fair and equitable. Although I did not work at the Department 
of the Interior during the previous administration, I understand that 
the Federal Government has made a number of efforts to engage in 
settlement talks in Cobell with no success. From June 1996 to July 
1997, the Department engaged in negotiations with the Cobell plaintiffs 
on the issue of development of an acceptable accounting mechanism. The 
Department tried again in early 1999 before the July 1999 trial and 
again right before the trial. Those negotiations failed.
    After the July 1999 trial, Judge Lamberth asked the parties to work 
toward a settlement. The parties were unable to agree on an acceptable 
mediator, so the Judge appointed Stephen Saltzburg, a professor at 
George Washington University who has served as a special master in two 
class action cases in the District of Columbia District Court, and 
serves as a mediator for the U.S. Court of Appeals for the District of 
Columbia. The mediation ended with no resolution in November 1999.
    Near the end of the previous Administration, then Special Trustee 
Tom Slonaker talked directly to plaintiffs'' attorneys. While agreement 
was reached on a number of issues, other overarching issues went 
unresolved, and ultimately this effort failed. At the beginning of this 
Administration, the Department once again tried to enter into 
settlement talks in Cobell. The discussions became mired in a variety 
of issues surrounding the conduct of the negotiations. No resolution 
was reached on those issues.
    Last year, the House Appropriations Subcommittee on Interior 
included language in the Interior fiscal year 2003 appropriations bill 
that would have limited the historical accounting to the period from 
1985 forward. That language was removed by amendment on the House 
floor. The debate on that amendment, which was more extensive than the 
debate on the actual 1994 Reform Act, centered on the point that this 
matter should be addressed by the authorizers, not the appropriators. 
The appropriators urged the authorizing committees to step in and come 
up with a legislative settlement. Members of this Committee from both 
sides of the aisle spoke to the need for hearings and action on this 
issue.
    Congressman Dicks explained on the floor that it was the intent of 
the appropriators to try to resolve this issue so that the vast amounts 
of money involved could go to Indian programs instead of accountants. 
More precisely he said:
        ``This thing is broken; and somehow all the people that are 
        here today expressing their wonderful concern, there is going 
        to be a tomorrow, and we will see if anybody really wants to 
        stand up with the majority side obviously having to be involved 
        and work on this. This has to be done. We have got to get 
        something done here.'' And then later in the debate, ````What 
        we are trying to do is get them money in a reasonable period of 
        time without decimating the Interior appropriations bill every 
        single year. I want that $143 million to be used for other 
        programs that will help Native Americans. I do not want to 
        waste $1 billion in going out and trying to do accounting that 
        is not going to give us the information pre-1985.''
    He also invited the authorizers to develop a settlement 
compromise--``[N]ow if these gentlemen who have come to the floor today 
to help us, if their committees would get busy and develop a compromise 
and do a settlement on this issue, it could be coming from Congress. 
Somehow we have to resolve this, because we do not have enough money.''
    Members of this Committee committed to engage in such a process. 
Mr. Young from Alaska said:
        ``I think it is the responsibility of Congress. Because if we 
        look at the trust, if we look at what is said about American 
        Indians, the trust belongs to the Congress. We have been 
        neglectful in not pursuing and making sure that this issue has 
        been solved in previous years. So I am asking us to sit down, 
        as the gentleman mentioned before, and say, let us solve this 
        problem . . .''
    Mr. Pallone stated ``[T]here should be a hearing, or perhaps a 
series of hearings, that are being held in the Committee on Resources, 
in the authorizing committee, not here on the floor, when we are 
dealing with this larger bill.''
    Mr. Hayworth was one of the sponsors of the amendment that deleted 
the accounting limitation from the bill. He spoke the following on the 
floor:
        ``I think it offers another compelling reason why we thank the 
        appropriators, given the magnitude of the task, but reassert 
        the role of the authorizing committee, and recognize the good 
        but challenging work that has been done thus far to try and 
        deal with this problem.''
    Mr. Tom Udall echoed the views of the opponents of the 
appropriations provision by stating:
        ``This Congress should address these issues in a bipartisan 
        way, and that is what we are trying to do on the Committee on 
        Resources . . . The gentleman from Washington raises, I think, 
        a very good point when he says we need to move this case to 
        settlement. I do not think there is any doubt that we need to 
        move this case to settlement. We should be working on the 
        settlement issue, and we should let all of the attorneys know 
        we want to move towards settlement. The key issue here, the 
        committee that should be working on this is the Committee on 
        Resources . . .''
    Mr. Rahall said ``[M]r. Chairman, I perfectly agree with the 
statements that have just been said. We want to settle this. We want a 
settlement.''
    Nearly a year has passed, we are now facing another appropriations 
cycle, and there has been no movement toward a settlement of the Cobell 
case. There were no hearings held by this Committee on this issue after 
that floor debate until today. Since that time, the court has issued a 
ruling and required plans for a historical accounting to be submitted; 
we have developed a plan for our accounting and are moving forward with 
our trust reform plan; and the trial on our accounting plan as well as 
the plan to bring ourselves into compliance with our fiduciary 
obligations is wrapping up.
    The House Appropriations Committee provided $55 million less for a 
historical accounting than we have requested in our budget. The House 
appropriations bill also directs us, when doing the accounting, to use 
statistical sampling for all transactions. However, I understand the 
language allows the Secretary to provide funds to accounts from the 
claims and judgment fund once the statistical accounting is completed. 
Additionally, it prohibits any downward adjustments of accounts. Thus, 
if the sampling indicated that account holders have received more than 
their fair share of moneys, we could not recover those moneys. Finally, 
the language authorizes the Secretary to conduct a voluntary program to 
buyout accounting claims of IIM account holders.
    On April 20 2003, Eloise Cobell sent a letter to all class members 
in the Cobell case. Ms. Cobell urged them not to support any effort by 
Congress to authorize a voluntary settlement for their accounting 
claims. Ms. Cobell told them, many of whom own a minute share in one 
parcel of land and have accounts with throughputs under $15 annually, 
that the plaintiffs are about to receive ``a huge many billion dollar 
judgment in favor of us ``'' all Indian trust beneficiaries.'' The 
letter also said if the voluntary program is enacted, ``tens of 
thousands of Indian people will again be cheated by the United States 
government.'' As I mentioned above, in the press, the plaintiffs and 
their representatives have been quoted as saying they expect to receive 
over $130 billion. They say this even though they have conceded in 
court that the district court has no jurisdiction to enter such a 
judgment.
    As a result, expectations are high in Indian country. Given what we 
have seen as a result of the reconciliations and accountings done so 
far, we do not believe we can justify to the American taxpayers a 
settlement offer in the billions of dollars.
    On June 13, 2003, Senators Campbell and Inouye sent a letter to 
Tribal leaders asking for their help in tackling 3 major tasks that 
would improve the management of Indian trust:
     To stop the continuing fractionation of Indian lands and 
focus on the core problems of Indian probate by swiftly enacting legal 
reforms to the Indian probate statute.
     To begin an intense effort to reconsolidate the Indian 
land base--by buying small parcels of fractionated land and returning 
them to tribal ownership.
     To explore ``creative, equitable, and expedient ways to 
settle the--Cobell v. Norton lawsuit.
    We would like to work with you and the Senate Committee on Indian 
Affairs on all three of these tasks. Addressing the rapidly increasing 
fractionation on Indian land is critical to improving management of 
trust assets. Properly done probate reform could be essential. When 
land is leased, BIA has the responsibility to deposit receipts from the 
land into the appropriate IIM account. This involves probating estates, 
finding heirs, and holding money for unknown heirs. These tasks are all 
funded through the Department's Indian budget.
    The purchase of fractional interests increases the likelihood of 
more productive economic use of the land, reduces recordkeeping and 
large numbers of small dollar financial transactions, and decreases the 
number of interests subject to probate. The BIA has conducted a pilot 
fractionated interest purchase program in the Midwest Region since 
1999. Through fiscal year 2002, the program has acquired 47,188 
ownership interests in over 25,000 acres.
    Using the Office of Management and Budget's Program Assessment 
Rating Tool (PART), we have learned there is a high level of interest 
and voluntary participation by willing sellers and large numbers of 
owners are willing to sell fractionated ownership interests. The 
President's fiscal year 2004 budget request proposes $21.0 million for 
Indian land consolidation, an increase of $13.0 million for a 
nationally coordinated and targeted purchase program. Interior believes 
that a national purchase program can be administered in a very cost-
effective manner to target acquisitions that reduce future costs in 
trust management functions, such as managing land title records, 
administering land leases, distributing lease payments to IIM accounts, 
and processing probate actions. We are developing a strategic plan and 
necessary infrastructure to support a major expansion of this program 
in 2004. Where appropriate and to the extent feasible, the Department 
plans to enter into agreements with Tribes or tribal or private 
entities to carry out aspects of the land acquisition program.
    With respect to the third task, the settlement of the Cobell 
lawsuit, I can honestly say I don't think we can get there without the 
involvement of Congress. This does not mean we will not continue to 
try. Contrary to Ms. Cobell's letter to the class members, this case is 
not on the verge of being over. Even if the district court were to 
adopt the plaintiffs'' accounting plan--which the Administration argues 
is fundamentally improper given that this is a lawsuit ostensibly 
brought under the Administrative Procedure Act--there are more steps 
before the district court, and before other tribunals, that will be 
required before the class members receive any money. The district court 
has said that it does not have the jurisdiction to compel payment of 
money damages. It has made clear that the reason it, rather than the 
Court of Federal Claims, can hear the case is that the plaintiffs have 
stated many times that they are not seeking money damages. Without a 
settlement, considerable hurdles remain before anyone other than the 
lawyers or accountants can see any money from this suit.
    That concludes my prepared statement. Thank you again for giving me 
an opportunity to testify. I would be happy to answer any questions you 
might have.
                                 ______
                                 
    The Chairman. Well, thank you very much. I appreciate your 
testimony. I am going to recognize Mr. Hayworth for the first 
questions.
    Mr. Hayworth. Thank you, Mr. Chairman, my colleagues, 
ladies and gentlemen, thank you for being at this important 
hearing.
    Deputy Secretary Cason, I guess it was that noted 
philosopher and that great Hall of Famer Yogi Berra who talked 
about ``deja vu all over again.'' and here we are--as the 
ranking member said, here we go again.
    I can recall a task force that I co-chaired with the 
gentleman from Michigan, Mr. Kildee, as we co-chaired the 
Native American Caucus and heard disturbing news back in the 
104th Congress. And different administrations have tried to 
deal with this and indeed, as you point out, the third branch 
of government, as illustrated in the judiciary branch under the 
actions of Judge Lamberth, the judge has intervened here 
expressing dissatisfaction and added accountability. And I know 
this has been a daily concern at the Interior Department.
    I likewise know that many who join us today indeed--on the 
second panel, many folks have been active participants in 
trying to achieve a consensus. So I am not here to beat up 
anybody today, but I am very interested in gaining some 
perspective, and your testimony offers some intriguing 
possibilities.
    For the record, I have to state--and I think this 
transcends party--despite the efforts to move through Interior 
appropriations, I think the Chairman quite correctly cited the 
jurisdiction of this authorizing Committee to deal with this 
prospectively in legislation; and that is why I joined with my 
friend, the ranking member, on the floor with the amendment 
that he had sponsored the last time this came up in the 
appropriations process.
    I understand the pressures on Interior, the contempt 
citations that are out there, the frustrations of trying to 
move forward, but sparing you all a speech, let me go to some 
questions for the record.
    Have both sides in the litigation or the judge agreed as to 
how many individual Indian money accounts there are?
    Mr. Cason. Congressman, the answer to that is basically a 
time-bound one. The number of accounts basically changes--
essentially day-to-day as new accounts are opened and accounts 
are closed. So in order to answer the question, you would have 
to basically find a specific day and time as to how many 
accounts as of this date or how many accounts were opened at 
any point during a period of time.
    Generically, we are somewhere, on the average for the last 
few years, around 300,000 accounts, plus or minus a few. The 
last count that I saw, 193,000 are land-based accounts, which 
is a fairly recent account; and there are also 42,000 judgment 
and per capita accounts and about 25,000 special deposit 
accounts, which may or may not have any funds that are IIM-
related.
    Mr. Hayworth. So, Secretary Cason, one of the challenges 
you confront is, this number is fluid; it is changing daily. 
That is not the primary concern, but that adds, part and 
parcel, to the degree of difficulty in trying to solve the 
problem.
    Mr. Cason. Well, Congressman Hayworth, that is somewhat of 
an issue. But the bigger part of the issue that is related is 
having a definition of--for whom we would do an accounting, and 
that is basically a time-bound issue. If we do an accounting, 
as we suggested in the Department's plan to the court, we would 
take all of the account holders as of the date of the 1994 
Indian Trust Reform Improvement Act, and that is roughly 
250,000 accounts.
    But if you were to go back and say, I want to do all of 
their predecessors or all IIM accounts that have ever been 
opened or closed, it could be a larger number or it could be a 
much smaller number if you choose a different parameter.
    Mr. Hayworth. [Presiding.] I know that my time is running 
out, and although I have the prerogative of the Chair, I want 
my other friends here to have an opportunity to ask questions.
    Without acting in prejudice toward any option you envision 
at the Department, as I heard what I will call ``Option No. 
3,'' as you delineated what was going on there, if later in 
writing you could amplify some of those concepts to us--I know 
we have your testimony here today, but perhaps really go in-
depth of what I am going to call ``Option No. 3'' that you set 
up, because it seemed to me the classic conundrum.
    You say, it is easy to divide between the real and the 
ideal, but there's the third component and that is, what is 
practical and is that fair? And we will hear from other 
witnesses as to their points of view, but I'd appreciate, in 
writing, more amplification on what I'm calling Option No. 3.
    With that, let me turn to the ranking member, the gentleman 
from West Virginia.
    Mr. Rahall. Thank you, Mr. Chairman.
    Thank you as well for your testimony today, Mr. Cason. It 
is very obvious that you have spent a great deal of time on 
this every day, and you are to be commended for that effort.
    I would like to ask you one simple question--and hopefully 
just yes or no--and that is, does the Department of Interior 
support the settlement proposal for IIM accounts contained in 
section 137 in the House Interior appropriations bill?
    Mr. Cason. Mr. Rahall or Congressman Rahall, the Department 
hasn't taken a firm position on it one way or the other. That 
is one of the things we will be forwarding to Congress as part 
of the process in reporting on bills.
    However, I would like to say, the Department appreciates 
the effort and the interest on the part of the Appropriations 
Committee and on this Committee to look at this issue and help 
us try to address it.
    I think there are a number of different ways that we can 
approach the problem in trying to reach a resolution about what 
is fair. And when we get to that position of deciding what is 
fair in terms of providing a historical accounting, one of the 
things that we have to also come to grips with is a willingness 
to pay for that fairness.
    The Department has offered a plan to the court, and we 
asked for funds to pay for that plan. It is $335 million over 5 
years, and we asked for, in the 2004 budget, approximately $100 
million to move forward on doing individual Indian money 
accounting. And the information I have received so far is, 
neither the House nor the Senate has marked up appropriations 
bills for 2004 that would provide that level of funding.
    So one of the things we have to decide, Congressman Rahall, 
is, what is fair to do for our Indian beneficiaries; and then 
can we reach an accommodation with Congress to fund whatever 
that fairness is.
    Mr. Rahall. Who do you believe should be involved in 
determining how a fair settlement process should be developed?
    Mr. Cason. My opinion about that is, we have a collective 
group of people that need to be involved. Certainly Indian 
beneficiaries have to be on that list. Members on the 
authorizing Committees for both House and Senate have to be on 
that list; and with the involvement of this Committee and the 
Senate Indian Affairs, we have both of those, and the 
Appropriations Committees on both sides.
    And clearly Judge Lamberth is an integral player at this 
point.
    But what we have to be able to do is get to a point that 
whoever the decisionmaker ultimately is makes a decision that 
the rest of us fall in line with. And at this point, I would 
say, Congressman Rahall, that the Department of Interior is 
down at the bottom of that list. We've proffered a plan, but we 
don't have any real decisionmaking authority at this point; and 
we need the help of both the court and the Congress to reach a 
conclusion about what is fair as to an accounting and how we 
are going to pay for it.
    Mr. Rahall. You've testified that one of the big problems 
with the trust fund accounts has to do with the 
fractionalization of those accounts. And on that I am certain 
we can all agree, and I am glad that the Department sounds like 
it's now going to make consolidation a priority.
    Since you did not spend some $3 million that the Congress 
appropriated for consolidation last year, do you expect you 
will be able to spend all the money that Congress appropriated 
for fiscal year '03?
    Mr. Cason. That is our hope. We are actually accelerating 
as much as we can what we call the ILCA program, the Indian 
Land Consolidation program. We know we have a certain amount of 
funds for that, and we are doing everything that we can to line 
up fractionalized interest and attempting to buy them; and we 
are actually looking for other opportunities to utilize those 
funds productively as well.
    One of those areas is in the UB reinvestment issue. We 
would like to go to Indian owners of fractionated interest that 
were transferred to tribes as part of the UB interest and see 
if we can offer them cash for their interest to liquidate those 
as well.
    We are going through a process, Congressman Rahall, of 
looking at laying out a very clear and prioritized list of 
acquisition desires that we can share with both OMB and the 
Congress to try and accelerate that program to be much more 
robust than it is right now.
    Mr. Rahall. Do you feel you have all the authority you need 
to do the consolidation, or will you be sending Congress 
legislation to address this?
    Mr. Cason. We haven't completely come to a conclusion on 
that. I suspect, based on the conversations that we have had, 
that we have a substantial amount of authority to address the 
issue. But an area that may require some additional legislation 
is in the area of an ``unwilling seller'' involved in a 
fractionated parcel where we own the predominant interest and 
we are trying to clean up the rest.
    If I could give you an example, if we ended up owning 95 
percent of a parcel and we had an individual that owned 1/300th 
of an interest and we wanted to clean that up so we owned the 
property in fee so we could decide what to do with it, it is 
unclear at this point whether we have sufficient legislative 
authority to address a condemnation situation with an unwilling 
seller. So we may have to do that.
    Mr. Rahall. Thank you, Mr. Chairman.
    Mr. Hayworth. Turning now to my colleague from Arizona, the 
gentleman from the First District, Mr. Renzi.
    Mr. Renzi. I thank the Chairman.
    Sir, during your testimony, you used an example, ``There 
are only two entities that could possibly pay for this type of 
large amount.'' one was the U.S. Government and the other one, 
you used the word ``beneficiary.''
    Can you help me understand that?
    Mr. Cason. The ``beneficiary'' in this case is Indian 
individuals who are Indian tribes. In private sector trust law 
when you have a private sector trust, it is the beneficiary of 
the trust who pays for all the services of the trustee. And 
there is an agreement between the trustee and the beneficiary 
regarding the services to be provided and how much will be 
charged for those services. So the reference to the 
``beneficiary'' in this case is, in private sector trust law, 
the beneficiary would pay.
    The way we have structured this trust is, the government 
pays for everything; but there is another option, if Congress 
were to choose it, to ask the beneficiaries to pay for the 
accounting. And the important thing about that, Congressman, 
is, we have a phenomenon here that I think needs to be thought 
about. And the phenomenon is that we have made a long-term 
commitment to Indian country and established a long-term 
funding mechanism with Indian country that is different than 
normal trust law.
    But we are beginning to be judged on the terms of normal 
trust law, and under normal trust law the beneficiary would 
decide. And the thing that is important about that kind of 
relationship is that a cost-benefit paradigm operates.
    Mr. Renzi. I am with you. We wouldn't be in the position we 
are, though, without really the fact that we haven't met our 
trust obligation.
    Mr. Cason. Yes, absolutely.
    Mr. Renzi. So to ask the beneficiary to pay for the cost 
would be somewhat disingenuous?
    Mr. Cason. I am not suggesting that is what you have to do. 
I am making the point to the Committee that there are only two 
places to go, and ultimately the practice has been historically 
that the beneficiary doesn't pay, the Congress does.
    Mr. Renzi. I am with you.
    We talked a little bit about the accuracy to the ``penny,'' 
I think was your word, of the current system. Can you help me 
understand the current fiduciary management role as far as--I 
know there have been some contentious understandings and 
arguments over whether or not we actually provided you with 
enough money or reforms put in place. But as far as moving 
forward, what kind of shape are we in now as far as trust 
management and fiduciary obligations?
    Mr. Cason. Within the Department of Interior, the trust 
funds are managed by the Office of Special Trustee under a 
thing called the OTF. We use a private sector banking system 
called Trust 3000 that is used by a--I don't know if it is a 
majority or a significant minority of the banking industry to 
manage their funds, but the Trust 3000 system is a very robust 
system for accounting for moneys. So we feel very confident at 
this point that on a day-to-day basis that the moneys that 
enter into the Trust 3000 system we can account for to the 
penny.
    Mr. Renzi. Do the Native Americans feel confident in it?
    Mr. Cason. That is probably a better question for the next 
panel to come up.
    Mr. Renzi. Mr. Chairman, thank you.
    Mr. Hayworth. Thank you, Congressman Renzi.
    I turn to my good friend, the gentleman from American 
Samoa.
    Mr. Faleomavaega. Mr. Chairman, I appreciate the courtesy, 
but I will defer to my good friend from New Jersey, who was 
here before me, for his questions.
    Mr. Hayworth. Always the courteous gentleman from Samoa.
    I know my friend from New Jersey welcomes that opportunity.
    Mr. Pallone. Thank you.
    I just wanted to say, Mr. Cason, that I know you said the 
accounting process isn't that bad. I don't know what you meant 
by that, but I disagree. I think the Cobell court, or the 
judge, has repeatedly held the Department and the BIA and 
others in contempt. So I don't buy the idea that we don't have 
a major problem here, and I don't want to get into that with 
you. Maybe you think you fixed it, or you're on the way to 
fixing it, but I would say, I think it is a major problem.
    You mentioned one of the options is, just let the judge 
decide and sit back. That would be my view. I think after so 
many years of mismanagement, so many citations of contempt--
and, again, I don't want this to sound partisan, because I know 
that we had the same thing under the Clinton administration, 
the same thing under the Bush administration. So, please, my 
Republican colleagues, I am not suggesting this in any partisan 
way.
    But I think that the Department over the years has come up 
with so many proposed solutions that have failed that I really 
believe you should just sit back and let the judge decide, that 
that would be the best course of action.
    But the thing that bothers me the most--and I am going to 
get to the questions--is, you know, you talked about a dialog 
with the authorizing Committee, but I have to say this is the 
first time that I have even heard that the Department is 
interested in a serious dialog with the authorizing Committee. 
And one of the biggest problems that I've had is that it seems 
like the Department repeatedly goes to Appropriations and to 
the Interior Appropriations Subcommittee and either initiates 
or suggests, you know, by whispering in somebody's ear that 
this is what they should do.
    And then we end up with this language in these annual bills 
that come to the floor that we, as the authorizing Committee, 
had either no input on or certainly very little to my 
knowledge.
    You seem to suggest you are not involved in any way with 
what the Appropriations Committee comes up with every year; 
yet, I don't get that impression. I'm not going to give names, 
but I am given the impression that the Department is very much 
involved.
    Last year, when this idea came up about limiting the time 
for the '85 to 2000 or so, there were certainly strong 
indications that you were supportive of that and maybe even 
suggested it. And again this year, you said, in response to Mr. 
Rahall, you don't take a position on this, section 137 of this 
year's current bill. But there are indications from various 
people that you are very much involved in that.
    My first question is, why is it that we have been left out 
of the picture as the authorizing Committee? Why is it that we 
hear about these proposals from the Department after the fact? 
And why is it, they are always brought up in the context of an 
appropriations bill, which is not the procedure? And if you are 
going to tell me you have nothing to do with that, I find it 
hard to believe, but I would like your response.
    Why is it we don't hear about it as the authorizing 
Committee? And why does it come up in Appropriations? And do 
you have any involvement with this annual appropriations 
process, that comes up with these terrible proposals that we 
then have to try and take out on the floor?
    Mr. Cason. That sounds like a multipart question. I'll try 
to do the best I can with it.
    In terms of the involvement in this Committee, we would be 
very pleased to have the involvement of the Committee; and 
would have been pleased in the past to have had the involvement 
of the Committee, but any request or dialog that we have had 
with staffs of the Committee has not resulted in a hearing 
before today.
    So we are very much appreciative of the leadership of 
Chairman Pombo for calling the group together so that we could 
have the initial dialog on this issue.
    I have personally come up to do briefings for the staffs of 
both House and Senate Appropriations and authorizing Committees 
on a number of occasions over the last 2 years, to let the 
Committee staffs know where we are on this issue over the last 
2 years, so I know at least that much has been done, 
Congressman. And I have personally, and other members of the 
Department of Interior talked to various members of both the 
House and Senate on this issue.
    Did more need to be done? Probably. Do we need to have more 
intensive questioning? Probably we do.
    In terms of your questions relating to the House 
appropriations language, I can tell you that I personally did 
not write, did not draft, did not suggest the language being 
offered by the House Appropriations Committee either last year 
or this year. As far as I understand, the Department of 
Interior's employees haven't.
    I haven't gone to ask 70,000 employees of the Department 
whether they were involved in that, but to the best of my 
understanding, the key participants who likely would have been 
involved tell me that they were not involved in drafting the 
language. And I think--in my opinion, this is a matter that the 
Appropriations Committee and this body, the House, is concerned 
about, where we are going with this litigation and the cost 
involved in historical accounting and what the parameters of 
that are.
    And they are struggling to try to make a statement that 
says, we need to get on top of this issue, and they have 
offered a couple of options to address it. And ultimately, it 
will take a broader cross-section of Congress, including 
members of this Committee, to address what is fair and 
equitable to deal with the situation.
    If we ultimately end up defining a very broad, very long-
term historical accounting and Congress is willing to pay for 
it, great. And ultimately if we get to a very narrow, 
relatively inexpensive solution, that is fine as well. But we 
do need to come to a conclusion and so far we haven't.
    The Chairman. [Presiding.] The gentleman's time has 
expired.
    Mr. Cannon.
    Mr. Cannon. Thank you, Mr. Chairman. In deference to those 
people who came here before me, let me ask one question and one 
follow-up perhaps, Mr. Cason.
    What percentage of your time, Deputy Secretary Griles' time 
and Secretary Norton's time is now being consumed in dealing 
with this case?
    Mr. Cason. We don't keep specific records, but as an 
estimate, I would say that, for my time, it is about 95 
percent. For Deputy Secretary Griles' time, it is well over 50 
percent and for the Secretary, it is probably 25 percent or 
more.
    Mr. Cannon. Mr. Chairman, would it be appropriate to ask if 
anyone is here representing Judge Lamberth?
    Let me say, I care about these Interior issues, and it is 
just wrong to have so much of the leadership of the Interior 
Department--their time engaged in an issue when we have so many 
other issues that are just as important for the administration 
to be concerned with.
    Thank you. I yield back.
    The Chairman. Mr. Inslee.
    Mr. Inslee. Thank you. Just ball park, how much do the 
plaintiffs think they may be owed and how much does the 
Department think they may be owed, just within factors of 10? 
Give me some idea.
    Mr. Cason. Congressman, that is actually an interesting 
question.
    Mr. Inslee. If you give me numbers, I would appreciate it.
    Mr. Cason. First, in the lawsuit that we are dealing with, 
it is not supposed to be an issue about numbers. It is supposed 
to be an issue of just doing an accounting, and then 
afterwards, if the accounting actually indicates that moneys 
are owed, theoretically that is an issue that goes to the court 
of claims.
    In terms of the number of dollars that are involved, so 
far, the Department has identified very little error in the 
accounting that's been done. So if we were to develop a--based 
on the facts we have today, what kind of number would we have, 
it would be very low. What we understand from press accounts 
from the plaintiffs is that the number is $137 billion--
``billion'' with a B--and I have spoken personally to a 
representative of the plaintiffs who suggested a number in the 
20 billion range as a possibility.
    Other than that, I think it would really get down to having 
a detailed discussion with the plaintiffs, the court and any 
other party participant to really work out a number.
    Mr. Inslee. I read today's report that the government had 
proposed an accounting plan to the court that would cost about 
$335 million and 5 years to complete. Now that sounds like the 
plaintiffs are thinking somewhere between $20 and $170 billion. 
And as I understand, the plaintiffs had proposed that the 
judicial system would do this accounting because the Federal 
Government executive branch has been wholly incapable, through 
multiple generations of Presidents of both parties, to do it.
    Why isn't that a good idea when we have American citizens 
for over 6 to 7 years that have been stiffed with an abject 
failure of the executive branch of the U.S. Government to do 
its duty? Why don't we give our evidence and the records to the 
judicial branch, fund them and tell them to get this job done 
in a reasonable time and not 5 years?
    Mr. Cason. OK, that is a good question.
    The bottom line is, I think your understanding that the 
judicial branch would actually conduct the accounting is not 
accurate. The judicial branch isn't proposing to do any kind of 
accounting, and I don't think they are equipped to do an 
accounting.
    Mr. Inslee. What do the plaintiffs propose then?
    Mr. Cason. What's really at issue is the parameters of what 
accounting will be done and for whom, over what time period, 
and what kind of product would be produced.
    The Department of Interior has established an office, the 
Office of Historical Trust Accounting, so we have a separate 
office to do this. We have hired four of the five largest 
accounting firms and a number of other firms. We actually have 
14 different consulting firms that are assisting us in doing 
this work.
    The real issue is just defining how broad this accounting 
is going to be, over what time period it is going to be, how 
much it is going to cost, et cetera. And that is really what is 
before the court.
    We prepared a plan that suggested we will do the accounting 
for this group of people, which was basically all the account 
holders as of October 25, 1994, and all the moneys they had in 
the accounts from whenever they made their initial deposit, 
however far back through December 31, 2000. And that plan, to 
do it would basically cost 335 million and take about 5 years 
to do.
    That plan is much more narrow than the plaintiffs have 
asked for in the past. The plaintiffs' plan provided to the 
court basically said, we are not going to go down an accounting 
pathway, taking all the records that the Department has, as 
that is somewhere between 4- and 500 million pages of stuff 
that we would have to go through.
    So it is a huge job to go through, and the plaintiffs plan, 
instead, would adopt a model process. And as I understand the 
model--and maybe Elouise can elaborate more than I can, but as 
I understand the model, it basically says, we are going to take 
available data wherever we can find it and try to assess how 
much money should have been paid to Indians over the last 112 
years, or whatever it is, since 1887, and we will calculate an 
amount of money that should have been there. And that is where 
I think the basis of the 137 billion comes from.
    The Chairman. The gentleman's time has expired.
    Mr. Cole?
    Mr. Cole. Thank you very much, Mr. Chairman.
    Accounting can be accurate and not really measure value. 
And one of the questions I have for you:
    Let us say that land could be leased out at a certain 
price, a fair market price would be $100, just to use a figure, 
and yet was leased out for $2. An accounting might show that 
every one of those--every penny of that $2 was paid, and yet 
there still would have been an enormous theft, in effect, that 
occurred.
    Is there any mechanism that you have, or how do you 
approach that kind of problem? Because, again, we know that can 
occur, so how do you measure that? How do you measure that kind 
of thing that exists outside your numerical accounting system, 
even though it's accurate?
    Mr. Cason. Historically, what we're attempting to do is 
account through documentation for the funds that were actually 
received by the Department of Interior and placed in an 
account.
    The issue that you raised, where the number of dollars 
received and placed in the account might not be the right 
number of dollars, is a more difficult question; and in some 
cases, through the documentation and verification process, we 
would be able to identify those, but in a number of cases, we 
won't. We won't have the necessary information to actually find 
that kind of a case.
    So I guess that is a weakness, if you define ``accounting'' 
as including a reassessment of fair market value for all 
transactions that have occurred over whatever period of time we 
would look at.
    Mr. Cole. Is it the Department's position, you know, 
frankly, the costs there should have been eaten by the 
beneficiaries? That having occurred, we'd know, at least 
historically in some cases, that we should either ignore that 
or make no effort. Or is that something you would need 
legislative direction as to what you would do? Because that is 
a huge, huge difference between the parties that brought the 
lawsuit and where the Department is at in terms of their 
estimations.
    Mr. Cason. I think that is a real concern that is voiced by 
any beneficiaries, and there is certainly support for instances 
where that has been a problem in the past.
    But I think the direction of the Department of Interior is, 
we're trying to stretch very scarce resources in as many places 
as we can. And in doing that, today and now tends to take 
precedence over a revisitation of history over the last 100 
years.
    If Congress had desired us to go through that kind of a 
process, certainly the Department could undertake a special 
initiative that is funded for that purpose to go look. But 
where we are right now is, we try to prioritize the assets we 
get on annual appropriations to do annual work; and in the case 
of the historical accounting claim, it hasn't been framed as an 
asset accounting in terms of going back to relook at all the 
decisions you just talked about, but it has been framed more as 
an accounting for funds that are in IIM accounts.
    Mr. Cole. Does that put you in an untenable position? 
Because it sounds as if the Department's position is, no, we 
are not going figure out what we owe, we are going to figure 
out what we can pay. And those are two very different 
questions. Ultimately that becomes a policy question for the 
Congress in terms of what we can pay.
    If the Department has to approach it only in terms of what 
we can afford on the budget we have, I mean, you can never give 
us an accurate rendering of the size of the problem.
    Mr. Cason. Well, certainly ``untenable'' is a very good 
word for where the Department is right now on this issue, 
because clearly where we are on this accounting issue has made 
no one happy. No one is satisfied that we got it just right.
    And clearly we could do more. We could look at additional 
things over time if that is the decision of Congress or the 
court that we have to do that, and Congress is willing to fund 
it.
    One of the things that we are faced with, though, 
Congressman, there hasn't seemed to be a willingness to provide 
a lot of resources to do a very broad-scope accounting in the 
past. And we have been trying to find options to accommodate a 
relatively modest judgment.
    Mr. Cole. I suggest that that might be because we are 
afraid of what we might find if we did that broad scope.
    Mr. Cason. Fear is an interesting thing, so I am not sure.
    The Chairman. The gentleman's time has expired.
    Mr. Udall.
    Mr. Udall of New Mexico. Thank you, Mr. Chairman.
    And thank you, Mr. Cason, for coming today. I think we're 
doing a little better this time around than last year. As many 
of us remember, we had a vote on the House floor; we hadn't had 
a hearing in this Committee. There was a great deal of 
consternation in terms of dealing with these kinds of issues.
    So the first thing I would like to say is, I congratulate 
and compliment our Chairman and Ranking Member Rahall for 
exerting jurisdiction over this issue. This is our Committee's 
issue, not the Appropriations Committee issue; and at least 
this time around, we are having a hearing.
    What I find a little uncomfortable though is, Mr. Cason, 
you have incredible expertise in this area. You have lawyers 
that have been working on this for years and years. You're 
dedicating, apparently, an incredible amount of your own 
personal time, 95 percent, and the Deputy Secretary at 50 
percent, the Secretary at 25 percent; and yet the proposal that 
we're going to vote on next week in the appropriations bill 
that's going to be before the House of Representatives, the 
Department with the expertise does not have a position.
    So I hope you can tell us--between now and when we have to 
vote on this that you will have a position for us on section 
137. Can you assure us that you will at least, with all the 
great expertise you have over there at the Department, let us 
know how you feel about this provision and whether you think 
it's legal or not and if it is in compliance with all of these 
court of appeals opinions and other opinions that are out 
there?
    Mr. Cason. Yes, sir, Mr. Chairman.
    Mr. Udall of New Mexico. Well, that is a real promotion.
    The Chairman. What I want to know is what their 
recommendation is. Does that affect how you're going to vote 
one way or the other? Because if it does, we have a lot of 
recommendations.
    Mr. Cason. As I understand it, Congressman, it's just going 
through the normal process. I don't know exactly when in the 
chronological order of responding to appropriations language we 
write whatever it is we write to the Hill. I understand that we 
give observations and recommendations or findings, whatever, a 
report of our position on bills.
    I'm not sure exactly when that occurs, but it will occur 
whenever it normally occurs.
    Mr. Udall of New Mexico. Well, I just hope again to repeat 
that all of us in this Committee are going to have to vote on 
section 137, I would imagine next week. And so I hope you take 
that back to the Department and, with the time you are 
spending, carve out a little bit of time and let us know. 
Because I am not trying to put you on the spot; this is an 
enormously complicated issue.
    I mean, if you read through the report that the House 
Government Operations Committee issued in 1992, called 
``Misplaced Trust: The BIA's Mismanagement of the Indian Trust 
Fund,'' it's the behavior of the BIA and the Department that's 
absolutely appalling.
    And in that report, and I'm quoting from it, it says that 
the Indian Trust Fund, quote, ``was grossly inadequate in terms 
of numerous important respects,'' quote, ``failed to fulfill 
its fiduciary duties to the beneficiaries of the Indian Trust 
Fund.'' and it goes on and on and on.
    Mr. Tom Udall. So I think you have the expertise to be able 
to weigh in and let us know if we're voting on something that 
is later going to be overturned in the courts. I'd also like to 
associate myself with Mr. Pallone's comments on the frustration 
that we have had getting this issue before the Committee. Could 
you tell me why just letting the judge decide this and give us 
some guidance wouldn't be the right path to go?
    Mr. Cason. Congressman, I wouldn't say one way or the other 
whether that's the right way to go. That is certainly the 
pathway we're on right now. What I would suggest is as the 
important point is that whoever decides, whether it's the judge 
or it's this Committee or it's the Appropriations Committee, 
ultimately whatever is decided, we have to be clear about what 
the accounting is and how we're going to pay for it. And what 
I'm expressing to the authorizing Committee is that there is a 
uniform and broad desire to be fair and equitable in doing the 
accounting. And we have that same feeling. We would like to be 
fair and equitable and do the right kind of accounting under 
the circumstances.
    However, there's a lot of choices that need to be made in 
order to arrive at the conclusion about what is a fair and 
equitable accounting. For example, we have choices that the 
accounting could spend well over 100 years. So if we choose to 
account for activities that have spanned 100 years, it's going 
to be very expensive and very time consuming. And the feedback 
that we've gotten from Congress so far is we don't want to 
spend that much money. So ultimately, we have to get down to a 
decision about what the accounting is and how involved it's 
going to be and what its terms and conditions are, and then a 
willingness to spent the money that it takes to do that.
    Our first plan that we provided to Congress in July of 2002 
was a plan that was very broad, much closer to what the 
plaintiffs have asked for in this case, but the price tag was 
$2-1/2 billion, and the time to do it was at least 10 years. 
And the feedback that we got from Congress is too long, too 
expensive. So we looked at alternatives and based upon a 
commentary from the judge in a September 17 opinion that 
statistical sampling work would be acceptable, we actually 
revised the plan, narrowed down the number of people that we 
would do accountings for to those that actually had money in 
the accounts as of the date of the Reform Act, and we selected 
to use some statistical verification means.
    We would do transaction-by-transaction reconciliation of 
the account, but statistically based verification of 
documentation. And we got the price tag down to about 335 
million. We asked for funding to be able to do that accounting. 
And both the House and Senate markups for 2004 have taken a big 
whack out of the request.
    So the message that we're getting is that's too much money 
from the Appropriations Committee. And we're getting a message 
that your accounting needs to be broader, which is more 
expensive.
    So what we're trying to do, Congressman, is try to get all 
the parties who have a role to play, to come to grips with 
there is a big choice for us to make. And in the case back to 
your question, let's let the judge decide, that's basically 
fine if Congress is willing to fund whatever it is a judge 
tells us to do. And so far the appearances are the judge would 
ask to us do more than what is in our plan so it would be more 
expensive. But the message we're getting back is Congress is 
not willing to fund what is in our plan.
    So that is where I think the conundrum is is if you let the 
third party, in this case, the judge, choose, then part of that 
decision is are you willing to fund whatever he comes up with. 
And I think part of the opportunity for the Committee is for 
the Committee to choose what the frame of the account is going 
to be or the form of the accounting, and then work with the 
appropriations folks in the House to select an appropriate 
budget for it.
    Mr. Tom Udall. Thank you for your answer. And Mr. Chairman, 
I hope that you can work with the appropriators and make sure 
that they understand that we in this Committee want to work on 
this issue and deal with this issue and that their really I 
think forcing this thing forward without adequate attention by 
this Committee. Thank you.
    The Chairman. That message has been delivered.
    Mr. Osborne.
    Mr. Osborne. Thank you, Mr. Chairman. I'll try to be brief. 
Mr. Case on you have mentioned several times statistical 
extrapolation of some kind.
    Mr. Cason. Uh-huh.
    Mr. Osborne. What I'd like to know is how is this going to 
happen? I know you're looking at the 99 percent accuracy level. 
So let's say you have a tract of land of 160 acres. And my 
understanding is that you're going to take a limited sample but 
that would still maybe encompass 200,000 accounts; is that 
correct?
    Mr. Cason. I guess I would explain it just a little bit 
differently, Congressman.
    Mr. Osborne. OK.
    Mr. Cason. The sample in terms of for whom we would do the 
accounting is basically all IIM account holders who had an open 
account as of October 25, 1994, the date of the Indian Trust 
Reform Act. So all people, or all IIM account holders who had 
an open account as of that day we could do the accounting for. 
Then in terms of the account, it's basically we would go back 
to the original day that that account was open, whether it was 
in 1970 or 1950 or 1938 or past, because the legislation says 
where we held funds and deposited them pursuant to the Act of 
June 24, 1938, so we would go back as far as 1938 if that was 
necessary and we could do an accounting forward all the way 
through December 31, 2000, for all funds that had been 
deposited in that account, and all withdrawals that had been 
made from that account, and we would give the opening and 
closing balances for that account.
    The statistical sampling that you're referring to is in the 
area of where we would go search for supporting documentation 
for the transaction. And basically in the accounting parlance 
we have ledger sheets or ledger cards or ledger books that 
basically describe, like, your checkbook. I put so much money 
in deposit I wrote checks on it for so much and I have this 
kind of balance. We have those ledger cards and we would 
essentially assemble a statement that would include all of 
those transactions.
    And then on the statistical side, what we would be doing is 
saying for all the transactions that were over $5,000, go find 
documentation to support all of those. For transactions under 
$5,000, we would take a statistical sample of those 
transactions and go find the supporting documentation to make 
sure that what was recorded on the ledger card was recorded 
accurately.
    Mr. Osborne. OK. So what if you find that there is 
considerable discrepancy in what is recorded on the ledger 
cards? My understanding is from your testimony that 80 percent 
of the transactions are under $50.
    Mr. Cason. Umm, I don't know that 80 percent right off the 
top of my head, but it's in that ballpark, a substantial number 
of the transactions are under--very small.
    Mr. Osborne. So you would have to be doing a lot of 
extrapolating then.
    Mr. Cason. Yeah.
    Mr. Osborne. Let's assume that the ledger in your sample 
you're finding that there's a lot of discrepancy. What would be 
the recourse at that point?
    Mr. Cason. We had a substantial amount of discussion in the 
preparation of our plan for the court on this issue. And the 
position that we've taken is the Department doesn't have an 
independent authority right now to address the issue where 
there is a discrepancy, and that what our plan was if we're 
allowed to go forward to do our historical accounting plan, is 
to do all the work on the historical accounting plan, get to 
the end of the plan, and basically provide a report to Congress 
that says here is all the errors that we found in the process. 
And here's our analysis of the errors and here's our 
recommendations about how to deal with those errors. So what 
we'll likely find is, in some cases, someone will be overpaid, 
and in some cases, someone will be underpaid. And that we need 
to go out and find out by how much each of those occurred, how 
frequently they occurred, what magnitude they occurred, and 
then we would come to Congress and say here's what we think we 
ought to do about it.
    And there's obviously a number of options on how to address 
that. But ultimately, the funding the corrective action would 
be something we would have to work out with Congress.
    Mr. Osborne. So just to refresh my thinking here, you're 
proposing a plan that would take 5 years, cost 335 million?
    Mr. Cason. Yes.
    Mr. Osborne. The plaintiffs you're estimating 10 years and 
2.4 billion?
    Mr. Cason. No, that was the plan that the Department of 
Interior provided to Congress.
    Mr. Osborne. That was previous?
    Mr. Cason. Yes. It was the July 2, 2002 plan that was much 
broader than the plan that we gave to Congress.
    Mr. Osborne. All right. Thank you.
    The Chairman. The gentleman's time has expired.
    Mr. Carson.
    Mr. Carson. Thank you so much. Just a couple of questions. 
You said you did accountings for the five named plaintiffs in 
the Cobell litigation?
    Mr. Cason. Yes.
    Mr. Carson. What was the various balances for those? These 
only four had accounts, what were the balances on those?
    Mr. Cason. Yes. We've treated the balance information and 
specific information about the accounts as protected by the 
Privacy Act, so I really can't tell you.
    Mr. Carson. Very good. How far back in time did you have to 
go to ensure that the opening balance of those accounts was 
accurate?
    Mr. Cason. As I recall, a couple of the accounts went back 
to 1918.
    Mr. Carson. And do you have a sense--you estimate that 
there are 225,000 or 200,000 individual money accounts, is that 
correct?
    Mr. Cason. It's in that ballpark. Between--there's--at the 
last snapshot that we did in time, there were about 193,000 
land-based accounts that had IIM accounts attached to them and 
then there were on the order of 42,000 per capita and judgment 
accounts.
    Mr. Carson. You also said in your opening testimony that 
you estimated that a full accounting might come up to an award 
of, I think, $20 billion? Did you have a number and estimate on 
that?
    Mr. Cason. And again, just to be careful in communication, 
if the Department of Interior were giving you a projection of 
what we think should be owed, the figure at this point, based 
on the evidence we have at this point, would be very low. 
That's based on conversations that we had from the plaintiffs 
or press reports.
    Mr. Carson. What was your estimate that you have?
    Mr. Cason. We don't have a specific number. The number 
would be very low because based on what we've done so far, the 
error rate for tribal accounting was far less than 1 percent. 
It was very small. The four named plaintiffs and the 
predecessors involved, we found an error of one check for $61 
that went to the wrong place. And for judgment per capita 
accounts, we've done almost 17,000 of those and the error rate 
is basically none. There are some rounding error or interest 
calculations.
    Mr. Carson. When you're saying it's very low, you're 
implying that you have a number you're talking about. You're 
saying it's very low relative to the 150 billion the plaintiffs 
are saying?
    Mr. Cason. Relative, yes.
    Mr. Carson. It has no meaning, this term ``very low.'' so 
in what range are you talking about?
    Mr. Cason. Well, if the Department were looking at 
settlement based on error, it would be in the low, very low 
millions. If we did some kind of projection based on the error 
rates we have now spread across the class, and you would have 
to determine what part of the class you would be spreading 
into. It would be very low millions, versus billions or tens of 
millions.
    Mr. Carson. Very low millions?
    Mr. Cason. Yeah.
    Mr. Carson. So explain to me where the difference in 
valuation comes from? Plaintiffs say 150 billion, or more or 
less. You say given your rates of error, that you detected it's 
in the low millions. Explain to me where there's a divergence? 
What's the method where are there differences in method that 
explain that tremendous difference?
    Mr. Cason. Again, this is a matter that I think Elouise can 
comment on fairly extensively, but it's my understanding that 
the major divergence is in what we consider relatively to be an 
accounting, what's involved in the accounting, and how we would 
approach it. The way that the Department has been approaching 
accounting is, as we understand the litigation that's involved, 
it's an accounting for funds that were received in IIM accounts 
that were deposited in IIM accounts and invested pursuant to 
the Act of June 24, 1938. So we have that relatively narrow 
construct. And then it's a matter of did I receive money, did I 
post it in the account, did I send a check out from that 
account, what's the balance? That my understanding of where the 
plaintiffs are is that they're not doing any of that actually 
taking the records and constructing a statement and verifying 
the statement, that they are taking an entirely different 
approach, which is basically constructing a model of what they 
think should have been deposited in accounts based upon their 
research of resources activities and land ownership over time.
    Mr. Carson. If I could interrupt you. Those two things 
should equal the same in a perfect world. Is the difference in 
those what the Congressman Cole mentioned that they have a 
different valuation of what the property or the resources is 
worth?
    Mr. Cason. I think that's part of it.
    Mr. Carson. Are there other things to it than that?
    Mr. Cason. I don't have a very sophisticated understanding 
of their model, but as I understand it, when they put a model 
together to look at resource values, they are assigning prices 
to--they are calculating how much of a resource has actually 
been taken off of Indian land over time. They've calculated how 
much the price should have been for that product over time, 
what the overall value should have been for those products, 
assumed all of that was deposited in IIM accounts, assumed that 
the monies were not paid out in a timely way, therefore 
interest is owed over long periods of time for the resource. So 
that's my general understanding of the model. But they would be 
better prepared to tell you specifically how that model works 
and how they get at their numbers.
    Mr. Carson. Thank you, Mr. Chairman.
    The Chairman. Mr. Pearce.
    Mr. Pearce. Thank you, Mr. Chairman. Mr. Cason, thanks for 
testimony on a very difficult subject. On the bottom page, the 
front page of your testimony, you talk about one of the 
problems being the very small accounts.
    Mr. Cason. Yes.
    Mr. Pearce. Small interest. The GAO report that you 
reference on page 4 suggested back in 1955, that one of the 
solutions would be to have small interest owners just pay 
directly from the lessees. Was any--has that ever been put into 
effect from that 1955 report?
    Mr. Cason. Congressman, there is a mix of methods for 
paying individual lessees. In some cases, they can be paid 
under direct pay, which is this kind of an option that GAO 
talked about. That the direct pay works in some cases and there 
has actually been more contemporaneous commentary to the 
Department that the Department should be responsible for 
tracking all the direct pay situations, too. So it's not 
entirely a solution to the issue. In most cases, as I 
understand it, leases are set up by the BIA and funds are paid 
to the BIA and then disbursed.
    Mr. Pearce. Is there any reason for that, you feel like the 
recipients just don't have the capability to manage these 
accounts or why would we take--you have to account for it? I 
suspect that the office is paying these, either the oil 
companies or whatever they have to account for them, and they 
have to justify them and then they turn them loose to you, and 
you put them in a pot and you then have to rejustify them. Is 
there any reason for the feeling that the recipients can't do 
this for themselves?
    Mr. Cason. Congressman, I have personally very strong 
feelings against any of the suggestions that have been made 
throughout time that the Indians are not competent to manage 
their own affairs. I personally think they are much more 
competent to manage their affairs and much more capable of 
tracking their own interest than the Federal Government is.
    Mr. Pearce. Is there any reason that the Department 
continues not to do that?
    Mr. Cason. Yeah, I think there's a practical reason. The 
practical reason is what we refer to as land fractionation. 
That it's not unheard of for there to be tens or hundreds or 
thousands of owners in each individual allotment. So you may 
have 160 acres that has 2,000 owners. So it's not very 
practical for an oil company to try and write or distribute a 
royalty check, for example, to 2000 different owners on a 
parcel. And that over time, what's occurred is BIA has assumed 
the responsibility for making the lease, gathering up all the 
owners or making the decision to lease the property and then 
gathering the payment and taking the responsibility to 
distribute it among all the owners. So fractionation is a 
terrible problem for us.
    Mr. Pearce. I would argue the other side that the oil 
companies are exactly in charge of doing that precise thing of 
my wife gets a check for 64 cents. It was initially an acre of 
about 100-acre royalty that has been divided multiple, multiple 
times through three or four generations, so she gets a check 
for 64 cents. I think the oil companies precisely do that very 
thing. And to then put it into an accounting system, a 
bureaucratic accounting system that has no expertise in that at 
all seems to me upside down. It just--I guess my next question 
is at the point you became aware that there was significant 
problem, whether it's 55 or 94, have you begun distributing by 
a new formula so that you're not--you're not--you've got an 
accumulation of problems for the last 100 years.
    If your new disbursements are coming from that same tank, 
if we didn't put them over into a fresh new tank where the 
disbursements aren't contaminated by the last 100 years then 
every year we simply accumulate more problems into a mix that 
is unintelligible. And I wonder if, at any point, have you ever 
switched to where at least you know that since 1994 when you 
began to really focus on that, the distributions are correct or 
is it still going into the same old accounting system?
    Mr. Cason. Congressman, as I understand it, that's a good 
and interesting point that maybe we need a break like that. But 
as I understand it, it's been a process of converting from one 
kind of an accounting approach to another kind of an accounting 
approach. But no clean break to say the past is the past, now 
deal with that and the future is the future. I'm going to start 
clean at this point. There have been conversions from various 
accounting opportunities or various accounting techniques in. 
And the last one was a conversion from our IRMS system into the 
new TFAS Trust 3000 system I described earlier.
    Mr. Pearce. Thank you, Mr. Chairman. One last point then, 
you can answer if you--but if it has not been done in the past, 
at least this current group of officials in the BIA and the 
Interior Department, you all have split it out to where it's 
not continuing to flow in, or you've got a plan to split it out 
to where it's not still going in. Because to me, if we don't 
stop the accumulation of the problems, with full knowledge that 
the problems are simply building, that's unthinkable.
    Mr. Cason. Uh-huh. Congressman, we're kind of there. And 
the reason I say that is we haven't created a separate 
independent fund to channel new dollars into, but what we've 
tried to structure with our historical accounting plan is to do 
historical accounting up to December 31, 2000. And at that 
point, we had converted all of the IIM accounts to the Trust 
3000 system, which we think is a very robust accounting system. 
And so the issue at this point is we can balance to the penny 
the fund now, and what what's in question is whether the 
opening balance as of January 1st, 2001 was accurate and 
whether we needed to go back to take a look at the historical 
activity of each individual account prior to that date. So 
we're kind of there.
    The Chairman. Mr. Grijalva.
    Mr. Grijalva. Thank you, Mr. Chairman. And if I may, sir, 
just a couple of quick questions. Many of your comments to my 
colleagues have dealt with some of the other questions that I 
had. Let's talk a little bit about standards for the trust. I'm 
not sure at this point does the Secretary support or agree to a 
congressional statement of standards for the trust or is that 
still a question that the Secretary is opposed to?
    Mr. Cason. Congressman, the Department has looked at the 
issue and we actually think that we have a number of standards 
in place, which is the multiple statutes that have been 
provided to the Department of Interior directing us on how to 
management trust. And court decisions that have given us 
additional guidance on the subject. So we think we have in 
place fairly robust set of standards and direction as to how 
we're supposed to manage this trust.
    Mr. Grijalva. So if I may interpret the answer is that at 
this point, a statement of congressional--from Congress of 
standards for the trust is a viable alternative to maybe 
establishing some trust in the trust? Or is it--or is it still 
the Secretary's position to oppose a congressional statement on 
standards?
    Mr. Cason. Well, I think it would depend, Congressman, on 
what kinds of standards Congress was going to draft up and 
offer. And then I'm sure that the Department of Interior would 
have comments on whatever those standards are. If they were 
fairly consistent as a restatement of all the direction that 
has already been provided to the department, it probably 
wouldn't be much of an issue. However, if it were dramatically 
different, then certainly we would have to have discussions 
about the implications of dramatically different standards and 
whatever funding would come along with them. Because we've 
certainly had our attention raised to a very high level 
regarding the possibilities that we would be brought to court 
on breach of trust. And each time Congress gives us a dictate 
or a standard that we're unable to meet because we don't have 
adequate resources, that presents a problem. So certainly we 
would talk about it.
    Mr. Grijalva. The question is prompted by, I think, the GAO 
report of April of '99 which stated briefly until interior 
defines the logical characteristic of its business environment 
and uses them to establish technical standards and approaches, 
it will remain at risk of investing in projects that are 
redundant and incompatible and do not satisfy Indian antitrust 
management requirements for cost effectiveness.
    Mr. Cason. What was the context? I'm sorry, what was the 
context of the technical standards?
    Mr. Grijalva. The context was talking about standards and 
the context was in about the trust having not only fiduciary 
responsibility but a responsibility to deal with the Indian 
nations in a way that had some established standards that were 
verifiable and codifiable for everyone. And that's the 
reference to that report.
    Mr. Cason. Um-hmm.
    Mr. Grijalva. I don't have anything else, Mr. Chairman.
    The Chairman. Mr. Bishop. Mr. Baca.
    Mr. Baca. Thank you very much, Mr. Chairman. First of all, 
I want some clarification, and if I may, before I ask some 
additional questions, and the clarification is is the 
Department waiting for the court to make a decision on the 
Cobell litigation before implementing its reorganizational 
plan? I'm sort of, like, confused.
    Mr. Cason. No.
    Mr. Baca. No what?
    Mr. Cason. No, we're not waiting for the court to implement 
a reorganization plan.
    Mr. Baca. So you basically have gone in with the 
reorganizational plan at this point?
    Mr. Cason. We are currently in the process of implementing 
our reorganization plan.
    Mr. Baca. Was there any input from anyone in that 
reorganizational plan?
    Mr. Cason. Oh, yeah.
    Mr. Baca. OK. What was the extent of the involvement or 
native friends involvement in the organizational plan that 
actually affects them? Was there any input at all from them?
    Mr. Cason. Yes, Congressman. The Department of Interior 
hosted, if I remember right, nine field hearings, consultation 
sessions, communications sessions, whatever you would want to 
call them. We had participation collectively in those 9 of 
hundreds, if not thousands, of Indians who came to express 
opinions or be participants in the process, followed by a 
tribal task force exercise. The tribal task force took about 10 
months, had eight or nine meetings, I don't remember exactly, 
but in that ballpark. Where we had a tribal task force of 24 
Indian leaders from across the country, two from each BIA 
region. There was also a third alternate from each BIA region 
who at times would also attend.
    In large part, the meetings were open to other Indians to 
participate in and often we had dozens of other Indians who 
came to the task force meetings to participate in the process. 
So we believe that at the Department of Interior, we had an 
extensive amount of communication with Indian country regarding 
the options. During the course of the task force process, the 
task force formed subcommittees. I personally sat on the 
subcommittee to look at reorganization options. Indian country 
generated, as I recall, 29 separate options that was analyzed 
by the Task Force Subcommittee on reorganization options. And 
the approach that we took was to assemble jointly a composite 
of the best features of all of those into a recommendation that 
was shared with the task force and debated at great length. And 
that at the end of the process, the department has done as much 
as we can to formulate our reorganization proposal consistent 
with the discussions we had with Indian country.
    Mr. Baca. Thank you. Because I was a little confused. I 
assumed under the testimony that you've testified here that 
you're waiting until the courts had ruled on the litigation, 
but then you also indicated in your original written statement 
that you've implemented a plan, so I wanted to clarify which 
was it. And you have clarified that right now.
    Mr. Cason. Thank you for the question.
    Mr. Baca. Thank you. The other question that I have, as you 
know, U.S. has a trust responsibility legal obligation to 
protect tribes' assets and provide service needed to the Indian 
people. In your opinion, has the Bureau of Indian Affairs 
breached its trust responsibility in handling individual Indian 
money accounts? I want your opinion.
    Mr. Cason. In handling individual Indian money accounts 
over time, I think it's pretty clear that the Bureau of Indian 
Affairs probably could have done better over time than they 
have. And that the issue--
    Mr. Baca. Is that a yes or no?
    Mr. Cason. That's a, they could have done better over time. 
Clearly the concerns that have been expressed about the ability 
of Indian country IIM account holders to have confidence in the 
ending balances or beginning balances of their account is one 
that we take very seriously, and we think that Congress also 
take seriously and that somehow we have to come to grips with 
that. And that's the root of the historical accounting 
question, is how far back and how broadly do we do this job of 
going back to verify the transactions that have occurred over 
time so that we can provide confidence to IIM account holders 
that the balance that they have is an accurate reflection of 
the transactions in their account.
    Mr. Baca. Thank you. I appreciate of you admitting that 
they should have done a better job. And in your opinion, what 
could the Department of Interior do to fulfill their true 
obligation?
    The Chairman. The gentleman's time has expired. But I'll 
allow you to answer the question.
    Mr. Cason. Thank you, Mr. Chairman. The Department of 
Interior has fully engaged a fairly broad cross-section of 
initiatives to try and improve how we management trust. The 
reorganization effort that we had is one of those exercises 
where we're trying to line up the resources of the Department 
to do a better job of focusing on the trust. We're actively 
engaged in trying to improve our probate process, how we manage 
land title information, how we set up our computer systems. 
We're trying to recruit for better talent to come in and help 
us manage this.
    We're relooking at all the systems we use to provide 
service. We're actively engaged in reevaluating all of the 
business processes used to do trust work and try to streamline, 
integrate those processes better. I think we've put a priority 
on involving members of Indian country in the process, trying 
to solicit information from them as to how the process works, 
really in the field and how can we improve it, being sensitive 
to all the vagaries in Indian country and with the BIA and its 
12 regions.
    So there's a big job to do, and I think we're doing a lot 
of the big job. But it's not a simple process. This is a hugely 
complicated trust. One of the things that I think would be 
interesting for the Committee is going through the trial that 
we've just done, trial 1.5 in front of Judge Lamberth. We had 
an expert and it's a defendant's expert so take it with 
whatever grain of salt you want, but it was a Harvard professor 
named John Langbein who came in to talk about comparing this 
trust that we have to other private sector trusts in which he 
has a huge amount of experience.
    And the things that he had to say is basically this is a 
trust unlike any other trust in the world. It's hugely complex. 
It's very different from private sector trusts that a large 
party private sector trustee wouldn't touch this thing with a 
10-foot pole, and that's because it's very large it's very 
complicated and has some really unusual features that the 
private sector wouldn't touch.
    So when we're talking about trying to improve it, we need 
to understand that the character of this trust is far different 
than people are normally used to. And that within the confines 
of those substantial differences between this and a private 
sector trust, we're doing a lot of things to try and improve 
it.
    Mr. Baca. Thank you.
    [The prepared statement of Mr. Baca follows:]

Statement of Hon. Joe Baca, a Representative in Congress from the State 
                             of California

    First, let me thank all of our panelists for coming here today. I 
look forward to hearing your testimony and asking important questions 
on how we can settle this matter of Indian trust fund mismanagement.
    Over ,the past couple of years, we have witnessed a number of 
corporate scandals-Enron, Tyco, Health South just to name a few. But 
the fact that the U.S. government has mismanaged Native American trust 
funds for over 100 years makes Enron Executives look like pick-pockets. 
I understand that we don't have any one responsible party-any Enron-
like Executives-in the room here today. But, I understand that this is 
an injustice that has snowballed for a century or more without a fair 
solution.
    I think we all know that the United States has a trust 
responsibility-a legal obligation--to protect tribes' assets and to 
provide services needed to the Native American people. This trust 
obligation is legally binding. As members of Congress, we must take 
this legal obligation seriously! The victims in this case, our First 
Americans, are the ones who should tell us the best way to right this 
wrong. And I am interested in listening to the tribes' input on (1) how 
these funds can best be settled, and (2) how trust management can be 
reformed. I am concerned that the input of the tribes has not been 
considered enough-and even purposely left out of the equation.
    Congress is obligated to see that Native Americans won't end up 
paying for the government's mistakes out of their own pockets. This is 
why I am especially interested in hearing the Department of Interior 
answer tough questions on how they will clear their debt to the tribes 
fair and square. This is billions of dollars that belong to the Tribes! 
This is billions of dollars that could boost the Native American 
economy, build infrastructure, pave roads, renovate schools and send 
their children off to college.
    Let's not let generations of Enron accounting, the destroying of 
documents and other crimes keep this government from fulfilling its 
trust responsibility any longer!
                                 ______
                                 
    The Chairman. Mr. Faleomavaega.
    Mr. Faleomavaega. Thank you, Mr. Chairman. I want to thank 
Secretary Cason for his testimony this afternoon. It's my 
understanding there's some 60,000 people that work for 
Secretary Norton downtown. I just wanted to ask Secretary Cason 
if I were to raise any issues about this matter that we're 
discussing this afternoon, would it be safe for me to say that 
you are the No. 1 man to go to?
    Mr. Cason. Well, I spend a substantial amount of my time on 
it and depending on the issue, if it wasn't me, I would take it 
to either the deputy secretary or the secretary for resolution.
    Mr. Faleomavaega. The issue is the trust fund. Would it be 
safe for me to say you're the man to go to if we really have 
some concerns or problems with the administration's position on 
this?
    Mr. Cason. For what it's worth, Congressman, we try as much 
as possible to manage as a team. And within the team--
    Mr. Faleomavaega. My time is running out. I got you. Team 
effort.
    I think Senator McCain could not have said it better when 
he stated that this whole matter is a national disgrace. 10 
years now and we're still plodding, going here and there. We 
still have not found a solution to the problem. Now, I know you 
say that this is a very complicated issue. I'm not an 
economist, but I don't know, I kind of like to think that this 
is the Department of Interior and these are the funds to be 
held in trust for some 500,000 native Americans. Over the 
years, whether it be 2 billion or $10 billion, I'm surprised to 
say that there's no money in the pot. The money's there, these 
are not hand-outs. These are not entitlements. This is the 
money that our government is responsible to keep on behalf of 
the native American people.
    I just wanted to ask you, Mr. Cason, why are we so 
reluctant to say, hey, give them what is owed them? My 
understanding, the letter that I noted here from Mr. Echohawk 
to Senator Campbell that the plaintiffs wanted, five times they 
wanted, to negotiate in good faith. The administration has just 
been unwilling to negotiate in good faith. Can you respond to 
that?
    Mr. Cason. Well, a couple things, Congressman. First, when 
you're talking about the money in the cup, to the extent that 
we're talking about individual Indian resources, there is no 
objection in the Department of Interior for giving Indians what 
is theirs. You know that's the entire purpose of the trust and 
there has never been any argument about whether that's the 
case. So we're not fighting against some issue of we want to 
take Indian resources and make it ours.
    Secondly, when you talk about a settlement, I guess there 
is probably other perspectives as to why five previous attempts 
at settlement have not succeeded. And I would suggest that one 
of the possible things that this Committee needs to consider is 
that the definition of a reasonable settlement is probably 
pretty far apart.
    And that the Department of Interior's point of view--
    Mr. Faleomavaega. I appreciate your explanation, but I also 
noted in your statement that there's a media report that the 
Indians were asking for $137 billion. How ridiculous can this 
be?
    Mr. Cason. I'm sorry?
    Mr. Faleomavaega. How ridiculous can this be? Is this 
really what they requested?
    Mr. Cason. All I can say, Congressman, is that's what we've 
seen in the press. And in a very limited conversation I had 
with a representative, the number of 20 billion was used. And 
certainly, I think in fairness, that if we actually had a sit-
down session with serious parties to negotiate a settlement to 
this issue, the number would be more reasonable. But the 
question still is probably not as reasonable--
    Mr. Faleomavaega. You mentioned that the Department of 
Interior has scarce resources. I'm not talking about scarce 
resources. The money's in the bank.
    Mr. Cason. Well--
    Mr. Faleomavaega. It hasn't been stolen. Nobody has taken 
it. The money's there. Now there's a question of saying well, 
let's settle it and how should we pay it. But there's no 
question of having there's no money in the kitty. The money's 
there. Why can't we just negotiate in good faith a settlement 
with these plaintiffs, whom our government owes? My 
understanding is on a yearly basis, the Interior collects about 
$500 million. Are we accounting for that on a yearly basis?
    Mr. Cason. Congressman, we actually for individual Indian 
money accounts, we collect less than 500 million. Probably 
somewhere in the order of 150 to 300 million depending on land 
sales. For tribal accounts we probably do about 800 million a 
year. We do account for those funds. Generally they're pass-
through funds as a result of leasing activities or land sales. 
Congressman, we do keep track of the money that we believe is 
owed to Indians. They are in individual accounts and tribal 
accounts. And if the individuals want them, we'd be happy to 
give them. Typically we pay out most of the money we have on a 
routine basis, either monthly or quarterly as soon as an 
account balance comes up to $15. And most of the residual that 
we have, approximately $400 million in the account for 
individuals, is a result of minor accounts or restricted 
accounts for one reason or another.
    Mr. Faleomavaega. Mr. Chairman, I'll wait for my second 
round. Thank you.
    The Chairman. The gentleman's time has expired. Another--do 
any of the members have additional questions that they would 
like to ask at this time?
    Mr. Cole, did you have any additional questions?
    Mr. Cole. No, I'm fine. Thank you, Mr. Chairman.
    The Chairman. Mr. Pallone.
    Mr. Pallone. Briefly because I know we want to get to the 
second panel. Mr. Cason, the problem I have is you suggested 
that the tribes had input into the trust reform, that the 
Department is now implementing that I guess came out in 
December or January, my understanding is just the opposite. I 
would like to you comment on it. My understanding is that these 
task forces, a lot of them, under the auspices of NCAI, met 
several times over last year, but by October or November, 
essentially there were no more meetings and they were totally 
dissatisfied with what the Department was doing.
    And the negotiations or dialog just was cutoff by the 
Department essentially. And then when you came out with your 
proposal in December or January, it was not, in fact, what the 
task force from Indian country had recommended, particularly 
that they wanted an independent commission, in part, to be 
reviewing these trust funds. They didn't want an internal 
reorganization within the BIA or the Department of Interior. 
Since you came up with this proposal there's been no 
opportunity for the tribes or Indian country to comment on it 
or say they like it or don't like it at all. So I don't know 
how can you say that this is a product in some way of those 
consultations of those task force. They're telling me just the 
opposite. How can you say that that's a product of those 
consultations with Indian country?
    Mr. Cason. Congressman, we had, I would say, very extensive 
conversations with tribal representatives and through the 
course of nine or so consultation meetings or communication 
meetings prior to the task force with lots of other Indians, we 
got lots of perspectives. Clearly when we received 29 separate 
proposals about how we ought to do reorganization, there is no 
uniform position in Indian country about how the Bureau of 
Indian Affairs should be structured. There's lots of people 
with lots of ideas. I think it would be very hard for you to 
find particular Indians who had variety of ideas about how we 
should be organized.
    My commentary is that where we started off is a proposal 
that the Indian communities referred to as buydown of the 
Bureau of Indian trust assets management. The senior management 
of the Department felt that given where we were with litigation 
in this case, that we would be better off segmenting the assets 
that are under trust into a separate organization and making 
that organization charged specifically with managing those 
assets and have no other task or other competing interest. We 
advanced that to Indian country, and Indian country suggested 
that they didn't like that very much. In fact, I haven't found 
a single Indian that wants to stand up and say I do like it.
    So where we ended up is dramatically different than the 
buydown proposal. We ended up there precisely because we ended 
up having extensive conversation with Indian country about what 
they liked and didn't like. It doesn't mean we have uniform 
agreement with Indian country about where we ended up. We ended 
up having extensive discussions about what would be preferable, 
and we tried to act on the feedback that we got. You will still 
find Indians that don't like where we are. I think the 
preference of Indian country as far as the organization of BIA 
is we do nothing. That we stay exactly where we are. But we 
don't feel like we have the luxury to stay right where we are 
because we're under the Cobell litigation on individual side, 
we have another 22 lawsuits on tribal side. And the message 
we're getting is we're not doing a good enough job. You need to 
figure out how to get your resources more focused on doing this 
job and improving the results. And that's what we're trying to 
do.
    Mr. Pallone. Thank you.
    The Chairman. Mr. Faleomavaega.
    Mr. Faleomavaega. Just one quick question, Mr. Chairman. 
Mr. Secretary, over the years there has always been discussion 
about reorganizing the BIA, and there were attempts even by the 
previous administration. Am I to understand that it is also the 
effort of the current administration to do a revamp or 
reorganization of the BIA?
    Mr. Cason. There is some reorganization, Congressman, of 
BIA and the Office of Special Trustee. And that essentially, if 
you boil down what the reorganization does is it attempts to 
lineup the field structures of both organizations to facilitate 
communication on trust, our fiduciary trust responsibilities. 
So if you look at it overall, the same people are in BIA, 
they're, in large part, doing the same jobs, the same resources 
in BIA the same thing for OST. We are planning to add some 
trust officer resources in the Office of Special Trustee and 
get them lined up with their counterparts in BIA to assure that 
we have a clear focus on managing our fiduciary 
responsibilities.
    Mr. Faleomavaega. So it's more of a selective 
reorganization.
    Mr. Cason. It's a grouping issue rather than a major 
reorganization.
    Mr. Faleomavaega. Thank you, Mr. Chairman.
    The Chairman. Mr. Cason, just to kind of summarize this 
before we excuse you, no matter how we look at this, we're 
talking about a lot of money.
    Mr. Cason. Yes.
    The Chairman. And one of the major differences that we have 
is between the monies that were actually deposited into the 
trust account and a model of what is believed to have been the 
true market value of those leases or monies that should have 
come in. So it's not just a matter of the money being in the 
cup, so to speak, as it is, there's a possibility that there 
were monies that should have been collected that didn't. Is 
that accurate?
    Mr. Cason. That's a way I would characterize what I think 
the differences are. The accounting plan we proffered to the 
court is one of accounting for the funds we actually received 
and placed into IIM funds. And I believe, based on the reading 
that I've made of the plaintiff's materials, is the model 
basically calculates what should have been done, what should 
have been received, and the assumption is made that it was 
received but it's not accounted for.
    The Chairman. Well, I would just say to my colleagues that 
I hope you listened to the answers as well as asked the 
questions because a big part of the responsibility here is 
ours. And you know, we like to throw rocks at the 
administration, whether it's this one or the previous one, but 
the truth is a big part of the problem is us and what we've 
done or failed to do over the years. And in terms of a 
resolution of this, it's going to fall on our shoulders. And to 
the Department of Interior, Mr. Cason, I'll tell you, if there 
is a resolution to this, a legislative resolution, it will be 
done in this Committee and it will not be done in the 
Appropriations Committee.
    I am very appreciative that the Appropriations Committee in 
the past has been willing to take up this issue and have been 
willing to put dollars behind an effort to try to come to a 
settlement, but this is within the jurisdiction of this 
Committee. And it is all of the hours that they put in this 
these hearings and in trying to educate themselves to 
understand these issues, that's why we have authorizing 
Committees. And I feel very strongly that any solution that 
will come out of this will come out of this Committee. I want 
to tell you that I really appreciate the work that you've done, 
the effort that you put in this answering all of the questions 
that the members have.
    Obviously, this is an extremely complicated issue that we 
are going to spend time figuring out exactly where we're going 
to go. And any solution, any settlement, any legislation that 
comes out of Congress will have to not only work for the 
Department of Interior, but it's also going to have to work in 
Indian country. As I've told you in the past and I've told 
others, that solution--we have to have confidence that it's 
going to work. That it's fair and equitable and it takes care 
of future problems. You have to have that confidence, we have 
to have that confidence as Congress.
    And those that are the beneficiaries of the trust have to 
have confidence that it's going to work into the future. And I 
will work with you, the members of this Committee will work 
with you as well as with those beneficiaries of the trust in 
order to make that happen.
    I'm sorry that in the past that Congress has not stepped up 
to the plate and taken care of this. But that's changing. And 
under this Committee, you will have a different era. And we 
will work with you. And I don't want the next Secretary of 
Interior to go through what this Secretary of Interior has had 
to go through. I think it's a shame that we have gone through 
this over the past several years here. And it's a shame that 
those in Indian country have had to go through this. And I will 
work with you. I appreciate what--everything that you've put 
into this so far and hopefully, hopefully we can come up with a 
settlement so you're not spending 95 percent of your time 
trying to deal with this issue in the future.
    Mr. Faleomavaega. Would the Chairman yield?
    The Chairman. I'm going to excuse Mr. Cason and bring up 
the next witnesses. I apologize, Mr. Carson, but our next two 
panels have been waiting for over 2 hours. And I don't think 
it's fair to them to keep them any longer. I will say, Mr. 
Cason, that there will be additional questions that members 
have. They will be submitted to you in writing. If could you 
answer those in a timely manner so they can be included in the 
Committee hearing. Because I know Mr. Cole and Mr. Carson and 
others have additional questions.
    Mr. Cason. We'd be happy to, Mr. Chairman. And we too at 
the Department of Interior would be very happy to work with the 
Committee, very in a detail way, to address this issue. It's 
very important and we would--we too would like to come to a 
fair and equitable resolution of this issue. Because it's not a 
good position for the Department to be managing the BIA affairs 
and the Indian trust when there's so little trust in the 
process. So we too would like to resolve this in a way that 
restores that trust.
    The Chairman. Thank you.
    Mr. Faleomavaega. Mr. Chairman.
    The Chairman. Mr. Faleomavaega.
    Mr. Faleomavaega. This is not posing a question, but I 
certainly want to commend you for your statement because this 
is a very profound statement in terms of how this Committee is 
going to continue to act, especially when dealing with native 
American issues. I want Mr. Cason to know this is not in any 
way trying to be partisan. We've always tried to work on a 
bipartisan basis. Please understand that this is nothing 
personal. This is just as much as failure of the previous 
administration in addressing this issue. I do want to let you 
know, Mr. Chairman, I'm sure those of us on this side of the 
aisle are more than happy to work with you closely on this 
issue, and work with the administration officials so we can 
find a resolution to this problem. Thank you, Mr. Chairman.
    Mr. Cason. I can't take any of it personally, this issue 
has been here for 100 years. And it has been through successive 
Congresses and successive administrations of both parties. It's 
not a partisan issue. We collectively need to get on top of 
that issue. With your help and leadership, Mr. Chairman, I 
think we can do that. I would also suggest that perhaps for the 
Committee time may be of the essence because right now the ball 
is in the court of the U.S. District Court. So it may be we 
would be willing to work with the Committee on an expeditious 
review and consideration of these issues. Thank you very much.
    The Chairman. Thank you. I'd like to call up our next panel 
consisting of Elouise Cobell, John Berrey and Tex Hall if you 
would join us at the witness table, please. And before you take 
your seat, I'll have you take the oath. So please join us.
    If I could have you raise your right hand.
    [witnesses sworn.]
    The Chairman. Let the record show they all answered in the 
affirmative. Apologize for the length of the hearing, but I 
know that some of you have been waiting years to have the 
opportunity to do this. So I welcome you.
    The Chairman. I welcome you here today. Mrs. Cobell, we are 
going to begin with you. I will just say that your entire 
written testimony will be included in the record of the 
hearing. If you could try to contain your oral testimony to 5 
minutes. There are lights in front of you. The green light is 
to talk. The yellow light is to hurry up. And the red light is 
to stop. Just like a traffic light. So, Mrs. Cobell, if you're 
ready, you may begin.

  STATEMENT OF ELOUISE C. COBELL, PROJECT DIRECTOR, BLACKFEET 
               RESERVATION DEVELOPMENT FUND, INC.

    Ms. Cobell. Thank you and good afternoon everyone. Chairman 
Pombo and Chairman--Mr. Rahall, members of the Committee, I 
would like to thank you for inviting me here today to address 
the Committee on the critical issue of Indian Trust Funds. And 
I would like to thank you, Mr. Chairman, for your outspoken 
opposition to Section 137 of the House Interior Appropriations 
bill which is also being called the Mandatory Account 
Adjustment Directive or MAAD. MAAD is the most repressive 
measure designed to destroy the rights of Indian beneficiaries 
and steal from us the victories that we have achieved through 7 
years of litigation. MAAD is a blatant violation of the 
Separation of Power Doctrine, which seeks to change the 
judicial rules in midstream by massive legislative intrusion 
into a court case that has been going on for 7 years. Further, 
if enacted, it would be an unconstitutional taking of our 
Fifth-amendment-protected property rights. I will discuss MAAD 
further in a moment.
    I am pleased to come here today to provide testimony on the 
virtually important, timely question posed by this hearing. Can 
a process be developed to settle matters relating to the Indian 
Trust Fund lawsuit. I want to make our position very clear. 
Plaintiffs are now, and we have been since the commencement of 
this litigation, prepared to engage in a fair settlement 
process and resolve these longstanding trust mismanagement 
issues. Mr. Chairman, as you know, these Trust Funds are not a 
handout or an entitlement program. It is imperative to keep in 
mind that this is our money. It is our property. That is the 
reason I brought this lawsuit 7 years ago. We tried to work 
with government for over a decade to resolve the mismanagement 
of the IIM Trust. Even after the misplaced Trust Report was 
unanimously issued in 1992 under the leadership of Congressmen 
Mike Synar and Bill Clinger, nothing changed. But the report 
led to the passage of the Congress of the Trust Reform Act of 
1994. After enactment, however, still no progress. As a last 
resort, and with reluctant resignation and deep frustration, I 
asked my attorneys to bring the Cobell lawsuit. First and 
foremost, the lawsuit is about establishing an effective IIM 
Trust management system. Second, the lawsuit seeks an equitable 
accounting for individual Indian trust beneficiaries.
    The Congress, GAO and Interior's own Inspector General, 
Interior's contractors, including PriceWaterhouse and Arthur 
Andersen, have all concluded that a full accounting is 
impossible. It is our position that any moneys spent on this 
type of accounting is a waste. Since defendants will not admit 
what all objective observers have already concluded, we must 
establish by judicial findings that there are not sufficient 
documents or reliable data for defendants to discharge their 
trust responsibilities to account. Yesterday, I attended the 
closing argument after a 44-day-long trial before the district 
court, a trial where one of the central issues before the court 
is whether defendants can ever complete a fair and full 
accounting given the unreliability of their data and 
destruction of documents. The lawsuit is not about money 
damages, rather it is about the restatement of our IIM accounts 
based on a fair accounting. The parties expect a decision 
within the next few months. That decision will set forth the 
appropriate parameters to proceed on the remainder of the case, 
including how to reach corrective account balances. Those same 
parameters will also provide a helpful basis for launching 
settlement discussions. A central stated justification for 
Section 137, the appropriators' MAAD proposal is the mistaken 
notion that there is no end in sight for the Cobell lawsuit. 
This is simply not true. The court could hold its final trial, 
the equitable accounting trial, as early as this fall. Mr. 
Cason says in his testimony that the court does not have the 
jurisdiction to restate account balances. The law is otherwise. 
And the court has held otherwise. The truth is that this is 
precisely because the court is approaching a judgment sooner 
than later that Interior is now desperate for Congress to enact 
MAAD. This case has taken as long as it has because of the 
obstructionist behavior of the government, counsel and 
officials for which they have been held in contempt of court 
twice. We, the IIM beneficiaries, on the other hand, have 
pursued expedient resolution of this case. We want resolution 
because each and every day trust beneficiaries are dying 
without receiving justice. Some have disputed this notion and 
have suggested that plaintiffs want this case to last forever 
because class counsel is getting rich. One politician said, my 
lawyers were making millions of dollars. That is totally 
untrue. I have not paid my lawyers a dime for 4 years. Each day 
that passes is a day that they are not getting paid. My lawyers 
have worked day and night at great personal sacrifice without 
compensation, hardly a sound approach to getting rich. We want 
resolution more than anyone, especially for the plaintiffs' 
class who have for the last century not seen a working trust 
system.
    The MAAD proposal is not a sound proposal and will not 
achieve the justice this case demands. MAAD is a bald-faced 
attempt at taking the property of individual Indian 
beneficiaries by eliminating their judicially established 
rights. I want to comment very quickly on the House 
Appropriations Report which attempts to justify MAAD that there 
is a wild assertion that is intended to benefit individual 
account holders. The U.S. Court of Appeals has already held 
that the beneficiaries have the right to have all items in 
trust accounted for by the Department of Interior. The U.S. 
District Court has rejected and discredited statistical 
sampling as a methodology for accounting of the IIM trust 
embraced by MAAD. MAAD, in its own terms, will also delay 
resolution and spawn further litigation. On their Ernst & Young 
report that was talked about with the previous witness, I would 
like to clarify a few issues. It is clear from the Interior 
Subcommittee's report on fiscal year 2004 appropriations, a 
major driving force of the MAAD proposal is the insupportable 
notion that the accounts of IIM Trusts are substantially 
accurate. This notion is based on the absurdly inaccurate Ernst 
& Young report. In sworn testimony, the Department of 
Interior's lead expert at the trial admitted that the Ernst & 
Young report is not an accounting after the Interior spent $22 
million. Just last week, another expert testified at the trial 
that the Ernst & Young report was riddled with errors. Ernst & 
Young did not independently verify a shred of evidence and 
refused to sign and certify their report. I made the comment 
that anybody that would agree to that $60 was missing over 100 
years, I have a lot of beads to trade him for some land. In 
conclusion, I would like to close today by thanking the many 
members of this Committee who stood by Indian beneficiaries and 
supported Mr. Rahall's amendment last term that stripped 
another hostile anti-Indian rider from the Interior 
Appropriations bill. The Rahall amendment prevailed with 
bipartisan support by a final vote of 281 to 144 and was a 
historical victory for Indian Country and justice. We are glad 
to hear the support of both you Mr. Chairman and Mr. Rahall and 
so many others on the Committee to ensure that MAAD will never 
become law. The disaster of the IIM Trust has stood as a blight 
on this great Nation for too long, the national disgrace in the 
words of Senator McCain, has too long been allowed to exist. It 
has outlived many heros, including Mike Synar and Mildred 
Cleghorn.
    So I welcome this Committee's intention to be involved in 
the fair resolution of this case. The plaintiffs are committed 
and we have been from the beginning to achieving justice for 
all individual Indian beneficiaries. And we look forward to 
working with you on this goal. Thank you.
    The Chairman. Thank you.
    [The prepared statement of Ms. Cobell follows:]

Statement of Elouise C. Cobell, Class Representative - Cobell v. Norton

    Good afternoon, Chairman Pombo, Mr. Rahall, Members of the 
Committee - thank you for inviting me here today to address the 
Committee on the critical issue of Indian trust funds. I would like to 
begin by taking this opportunity to personally thank you Mr. Chairman - 
for your outspoken opposition to Section 137 of the House Interior 
Appropriations bill - which is also being called the ``Mandatory 
Account Adjustment Directive'' or MAAD.
    As you are aware, MAAD is a most repressive measure designed to 
eviscerate the rights of Indian beneficiaries and steal from us the 
victories we have achieved through seven years of litigation. MAAD is 
touted by its proponents as a sound, reasonable and fair process for 
``settling'' the on-going Indian trust fund case, Cobell v. Norton. But 
in reality, it is neither sound, nor reasonable, nor fair. Rather, MAAD 
is a draconian provision that would involuntary extinguish the claims 
of trust beneficiaries and eliminate their right to seek redress from 
the courts for the uncontested century of mismanagement of our trust 
funds. Put simply, MAAD is bad federal Indian policy. I will discuss 
its implications and the misinformation that supports it in greater 
detail in a moment. MAAD is a blatant violation of the Separation of 
Powers doctrine which seeks to change the judicial rules in midstream 
by a massive legislative intrusion in to a court case that has been 
going on for seven years.
    I am pleased to come here today to provide testimony on the vitally 
important and timely question posed by this hearing: ``Can a process be 
developed to settle matters relating to the Indian Trust Fund 
Lawsuit.'' The Cobell plaintiffs believe that the answer to that 
question is self-evident: Of course, such a process can be developed. 
Moreover, I want to be make our position on one matter unmistakably 
clear: We are now - as we have been since the commencement of this 
litigation - prepared to engage in a fair settlement process and 
resolve these longstanding trust mismanagement issues. The key word is 
of course, is ``fair.'' On behalf of over 500,000 plaintiffs of the 
Cobell class, I am here to offer our support for a fair process to 
settle the Cobell case and offer some suggestions to aid this Committee 
in its deliberations on this issue.
    In order to better understand how to develop a process, I think its 
important to start with an overview on why we are where we are. Why, 
after a century, is the Interior Department still - by its own 
admissions - mismanaging our assets and monies? Why has Federal 
District Court Judge Royce C. Lamberth held two successive Secretaries 
of Interior - Babbitt and Norton - in contempt of Court? Why are some 
in Congress seeking resolution of Cobell by doing injustice to 
beneficiaries?

Cobell Overview
    Mr. Chairman, when I last appeared before the Committee on February 
6, 2002, I described the compelling nature of the lawsuit. The 
Individual Indian Money (IIM) trust is supposed to be the mechanism by 
which revenues from Indian-owned lands throughout the Western states 
are collected and distributed to approximately 500,000 current 
individual Indian trust beneficiaries. This trust is a vital lifeline 
for Native Americans, many of whom are among the poorest people in this 
country. Where I live, in Glacier County, Montana, the home of the 
Blackfeet Nation and one of the 25 poorest counties in the United 
States, I can tell you that many Indian people depend on these payments 
for the bare necessities of life.
    As you know, these trust funds are not a handout or an entitlement 
program. It is imperative to keep in mind that this is our money - our 
property - revenues generated from leasing and sales of our land and 
resources, including oil and gas, grazing, farming, logging and mineral 
extraction on our lands. The IIM Trust was devised by the United States 
government, imposed on Indian people more than a century ago, without 
our consent. As trustee, the United States and each branch of the 
federal government has the highest legal duty and fiduciary 
responsibility to properly manage the IIM trust. Unfortunately - as you 
and many of the members of this Committee are well aware, Mr. Chairman 
- there is no one that disputes that this has been and remains, a 
severely broken trust.
    That is the reason I brought this suit seven years ago. We tried 
working with the government for over a decade to resolve the 
mismanagement of the IIM Trust. Even after the Misplaced Trust Report 
was unanimously issued in 1992 under the leadership of Congressmen Mike 
Synar (D) and Bill Clinger (R), nothing changed. But the report led to 
the passage by Congress of the Trust Reform Act of 1994. After 
enactment, however, still no progress was realized. Administration 
after administration, both parties simply ignored us and continued to 
lose hundreds of millions of dollars of our money each year. As a last 
resort and with reluctant resignation and deep frustration, I asked my 
attorneys to bring the Cobell case.
    We brought the case to achieve certain simple goals relevant here. 
First and foremost, this lawsuit is about establishing an effective IIM 
trust management system. The only way to accomplish this reachable goal 
is through sound planning and competent management, two ingredients 
that have been missing for far too long. The Interior Department has 
tried to blame Congress, saying that you have not devoted sufficient 
funds to reform. But resources have been available - indeed, close to 
$1 billion - has been appropriated for trust reform with little to no 
success. Resources are not the main problem.
    Second, this lawsuit seeks an equitable accounting for the 
Individual Indian Trust beneficiaries. At least $500 million dollars a 
year in trust revenues is generated from individual Indian owned lands. 
Where is this money? The United States as Trustee, as the Court of 
Appeals has held must account for all ``deposits, accruals and 
withdrawals'' to and from the IIM Trust. That is the government's 
fundamental fiduciary obligation. The problem is a massive and 
unquantifiable amount of documents and data have been lost or 
destroyed. As a result, defendants cannot discharge their duty to 
account. The Congress, GAO, Interior's own Inspector General, 
Interior's contractors, including Price Waterhouse and Arthur Andersen, 
have all concluded that a full accounting is impossible. Still, the 
defendants will not admit that fundamental fact. So Interior says that 
an historical accounting requires Congress to appropriate hundreds of 
millions, possibly billions, of dollars to do an accounting that will 
not discharge their duties. It is our position that any money spent on 
that type of an accounting is a waste, because it will not lead to a 
result satisfactory to the courts, Congress of individual Indian trust 
beneficiaries.
    So why spend the money? The Department of the Interior says because 
the Court has required them to do an accounting - but that is only 
because Interior refuses to admit that such an accounting is 
impossible. If Interior did so, then Interior officials fear an 
alternative approach would be used for the Court to formulate an 
equitable decree to correct the account balances in lieu of the 
accounting and finally do justice for individual beneficiaries. But 
this would end the delays and legal wrangling and require the 
government to finally address 100 years of abuse and malfeasance in the 
near term, something they do not want to do.
    Since defendants will not admit what all objective observers have 
already concluded, we must establish by judicial findings that there 
are not sufficient documents or reliable data for defendants to 
discharge their trust responsibility to account. Yesterday, I attended 
closing argument for a 44 day long trial before the District Court - a 
trial where one of the central issues before the Court is whether 
defendants' can ever complete a fair and full accounting given the 
unreliability of their data and destruction of documents. Plaintiffs 
will ask the Court to hold that they cannot and an alternative 
mechanism, consistent with principles of trust law, should be used to 
determine accurate account balances.
    The parties expect a decision within the next few months. That 
decision will set forth the appropriate parameters to proceed on the 
remainder of the case including how to reach corrected account 
balances. Those same parameters will also provide a helpful basis for 
launching settlement discussions.

Timing and Settlement
    A central stated justification for Section 137, the appropriators' 
MAAD proposal is the mistaken notion that there is no end in sight to 
the Cobell v. Norton lawsuit. That is simply not true. In point of 
fact, as mentioned, we have just concluded a trial that will decide 
many of the remaining disputed issues. The Court could hold its final 
trial - the equitable accounting trial - as early as this fall. The 
truth is that it is precisely because the Court is approaching a 
judgment sooner rather than later that Interior is now desperate for 
Congress to enact MAAD.
    It is important to note that this case has been in litigation over 
seven years. It is a matter of record that time and time again the case 
has been unconscionably delayed as a result of government litigation 
misconduct. Put another way, this case has taken as long as it has 
because of the obstructionist behavior of the government counsel and 
officials for which they have been held in contempt of Court - twice.
    We, the IIM beneficiaries, on the other hand have pursued expedited 
resolution of this case. We have vigorously contested each and every 
government-sponsored delay tactic. That is the record of this case. We 
want resolution because each and every day trust beneficiaries are 
dying without receiving justice.
    Some have disputed this notion and have suggested that plaintiffs 
want this case to last forever because class counsel is getting rich. 
One politician said my lawyers were making millions of dollars. That is 
patently untrue. In fact, Mr. Chairman, I have not paid my lawyers a 
dime for over four years. They are not getting rich; in fact, each day 
that passes is a day that they are not getting paid. The fact is, my 
lawyers have worked day and night at great personal sacrifice without 
compensation. Hardly, a sound approach to getting rich.
    We want resolution more than anyone, especially for the plaintiffs' 
class who have, for the last century, not seen a working trust system 
or justice. So, I would welcome an opportunity to reach a fair 
settlement of the Cobell case and we welcome the involvement of this 
Committee and the Senate Committee on Indian Affairs in determining a 
sound process.
    In fact Mr. Chairman, as you know, by letter dated April 8, 2003, 
Senators Campbell and Inouye expressed their ``strongly held belief 
that the parties to this case should pursue a mediated resolution 
rather than the current course of continued litigation'' (copy 
attached). The Senators encouraged the parties ``to engage the services 
of an enhanced mediation team that will bring to bear trust, 
accounting, and legal expertise to develop alternative models that will 
resolve the Cobell case fairly and honorably for all parties.''
    By letter dated May 23, 2003 John Echohawk on behalf of the 
plaintiffs' class responded affirmatively to the Senators' proposal. I 
have included a copy of this letter with my testimony. A recitation of 
some of Mr. Echohawk's response is quoted below and demonstrates our 
commitment to resolving this case:
        First and foremost, on behalf of the 500,000 individual Indian 
        trust beneficiaries we express our gratitude for your sincere 
        interest in the Cobell litigation and your willingness and 
        desire to see that it is resolved fairly and expeditiously. Be 
        assured that the Cobell plaintiffs are now, and always have 
        been, willing to engage in frank and honest discussions for a 
        fair resolution of this case. However the executive branch - 
        with the exception of Treasury - has been steadfast in its 
        unwillingness to negotiate such a resolution. Without your 
        direct and active participation in the settlement process, we 
        have no hope that the Administration will discuss these matters 
        in good faith.
        On five previous occasions, we have engaged the executive 
        branch in fruitless settlement discussions. Each time, 
        government officials broke promises they had made to the Cobell 
        plaintiffs and rejected settlement of matters that the 
        negotiators had resolved. And, they have never made a good 
        faith offer to resolve the accounting matter.
        [P]laintiffs are skeptical that Interior and Justice are 
        prepared to resolve the Cobell case in good faith and in a fair 
        manner. Nevertheless, with your involvement, we hope that it is 
        possible. As a firm commitment to resolve this case as soon as 
        possible, we hereby pledge to you that we are now - and we have 
        always been - open to a resolution that ensures our clients are 
        treated fairly and justly. For this reason, we welcome your 
        efforts to begin a resolution process before the close of this 
        year.
Letter from Echohawk to Senators Campbell and Inouye, dated May 23, 
2003.
    I understand that Interior has not responded in writing to the 
Senators. Mr. Chairman, the Individual Indian trust beneficiaries stand 
ready to participate in a fair settlement process with this Committee, 
in conjunction with the Senate Committee on Indian Affairs. Given past 
history, plaintiffs are not optimistic that a resolution can be 
reached, but we are willing to try. It is not clear to us how to ensure 
that the Interior Department will take settlement seriously. Our hope 
is that with the involvement of the authorizing committees there will 
be sufficient pressure brought to bear to ensure a good faith 
negotiation and perhaps a successful resolution to the Cobell case.

The MAAD Proposal
    The MAAD proposal obviously is not a sound proposal and will not 
achieve the justice this case demands. After a century of 
mismanagement, MAAD is a bald-faced attempt at taking the property of 
individual Indian beneficiaries by eliminating their judicially 
established rights. After a century of mismanagement of their property, 
MAAD adds insult to injury and we are glad so many members of this 
committee have rejected it as unfair and unsound.
    The MAAD proposal is based not on truth and fact and the record of 
this case. Instead, it is based on myths and falsehoods. We will 
discuss these in turn.
    In the House Appropriations Report which attempts to justify MAAD, 
there is a wild assertion that it is intended to benefit individual 
account holders. The U.S. Court of Appeals has already held that the 
beneficiaries have the right to have all items held in trust accounted 
for by the Department of the Interior. The U.S. District Court has 
rejected and discredited statistical sampling as a methodology for the 
accounting of the IIM Trust embraced by MAAD. So how does it help 
beneficiaries by allowing the government to get away with a lesser 
standard rejected by the Courts?
    Equally important, the individual Indian trust beneficiaries have 
also clearly rejected the very statistical sampling approach MAAD would 
purport to impose on them. In 2000, the Department of the Interior 
published a Federal Register notice requesting comments from the 
beneficiaries whether they wanted a full ``transaction-by-transaction'' 
reconciliation or a ``statistical sampling.'' Within the notice, the 
Department clearly pushed for the statistical sampling approach by 
stating, among other things, that it would be quicker for beneficiaries 
to get paid. To their dismay, officials at the Department were forced 
to report back that ``an overwhelming majority . . . wanted to see a 
transaction-by-transaction reconciliation in spite of discouraging 
language contained in the Federal Register Notice stating that such a 
solution was not very likely . . ..''1 Account beneficiaries 
presented with the choice rejected the MAAD approach. Make no mistake 
about it - the truth is that MAAD severely diminishes rights of 
individual Indian trust beneficiaries to enforce their rights through 
the courts and forces statistical sampling down their throats.
---------------------------------------------------------------------------
    \1\ Memorandum of Kevin Gover, Assistant Secretary Indian Affairs 
to Lisa Guide, Acting Assistant Secretary PMB, et al., December 21, 
2000 at 4 (attached).
---------------------------------------------------------------------------
    Furthermore, MAAD's proponents also say it is intended to limit 
protracted litigation. What is clear, however, is that MAAD, by its own 
terms will delay resolution and spawn further litigation. MAAD provides 
for an initial one year delay for Interior to develop a process and 
seek to force settlements of claims. Then it allows for an additional 
four years for Interior to implement the process. At the end of that 
process, Interior will deal with the inefficient process of 
individualized IIM claims for the many people who will undoubtedly 
challenge the unfair ``adjustments'' to their IIM accounts.
    In addition, MAAD is most likely unconstitutional as it denies 
Indian beneficiaries fundamental due process rights and would 
constitute an unconstitutional taking of their 5th Amendment-protected 
property. It also contravenes the separation of powers doctrine as 
Congress is attempting to dictate the outcome in a judicial proceeding. 
I will assure you that if Section 137 passes, we will challenge it at 
every juncture. In short, MAAD, rather than limit litigation, will 
actually lead to additional protracted litigation, thus increasing the 
costs to the United States and delaying justice to the individual 
Indian trust beneficiaries.
    Another persistent myth is that MAAD somehow offers a ``voluntary'' 
settlement process. But MAAD is about as voluntary as holding a gun to 
someone's head and telling them to sign away their rights. MAAD allows 
- at the Secretary's discretion - for a ``settlement'' process prior to 
the Department's implementation of statistical sampling. If the 
individual Indian trust beneficiaries do not ``agree'' to settle, then 
the Secretary can unilaterally determine the appropriate ``adjustment'' 
to their accounts based on judicially-rejected ``statistical sampling'' 
and force them to accept Interior's findings. If the individual Indian 
trust beneficiaries want to challenge the findings, MAAD materially 
limits judicial review to a determination if Interior acted ``arbitrary 
and capricious.'' All such appeals must be filed with the U.S. Court of 
Appeals for the D.C. Circuit within 60 days. Hardly a fair and 
voluntary settlement process.
    Equally important to bear in mind, MAAD eliminates the generally 
applicable federal court protections for members of a plaintiff-class. 
When a defendant in a class action lawsuit seeks to ``side settle'' 
claims with individual members of a class, they are required to have 
the court review and authorize the communication. This judicial check 
is to ensure that the individual members are making their decision 
based on good information and not based on the ``spin'' of the 
defendant. The danger of not having this protection is that a person 
might ``consent'' to settlement based on false or misleading 
information. MAAD eliminates critically important due process 
protections for individual Indians and give the Secretary unbridled 
discretion to coerce settlements and ultimately force unfair 
``adjustments'' on 500,000 Indian beneficiaries.
    In addition, as is clear from the Interior Subcommittee's report on 
fiscal year 2004 Appropriations, a major driving force of the MAAD 
proposal is the insupportable notion that the accounts of the IIM Trust 
are ``substantially accurate.'' This notion is based on the absurdly 
inaccurate, Ernst & Young Report. In sworn testimony, the Department of 
the Interior's lead expert at trial, Dr. Lasater, admitted that the 
Ernst & Young report is ``not an accounting'' - after Interior spent 
over $22 million. Just last week, another expert, testified at trial 
that the Ernst & Young Report was ``riddled with errors.'' More telling 
still, the report itself states that it ``assumes'' all information is 
accurate and Ernst & Young did not independently verify a shred of 
evidence and refused to sign or certify it. The truth is that the 
Report is so riddled with errors, unreliable and insupportable that it 
is in fact a sham and cannot serve as the basis of any sound decision-
making.

Conclusion
    I would like to close today, by thanking the many members of this 
Committee who stood by Indian beneficiaries and supported Mr. Rahall's 
Amendment last term that stripped another hostile-anti-Indian rider 
from the Interior Appropriations bill. The Rahall Amendment prevailed 
with bipartisan support by a final vote of - 281 to 144 - and was a 
historic victory for Indian Country and justice. We are glad to hear 
the support of both you Mr. Chairman and Mr. Rahall and so many others 
on this Committee to ensure that MAAD will never become law.
    The disaster of the IIM trust has stood as a blight on this great 
nation for too long. This ``national disgrace'' in the words of Senator 
John McCain, has for too long been allowed to exist. It has outlived 
many heroes - including Mike Synar and Mildred Cleghorn.
    And so I welcome this Committee's intention to be involved in fair 
resolution of this case. The plaintiffs are committed, as we have been 
from the beginning to achieving justice for all individual Indian 
beneficiaries - we look forward to working with you on that most 
commendable goal.
    Thank you.
                                 ______
                                 
    [Attachments to Ms. Cobell's statement have been retained 
in the Committee's official files.]
    The Chairman. Mr. Berrey.
    Mr. Berrey. Good afternoon. Mr. Chairman, my name is John 
Berrey, I am the Chairman of the--
    The Chairman. If the gentleman would suspend. I wanted to 
recognize Mr. Carson to introduce our next witness.
    Mr. Carson. Well, thank you Mr. Chairman. I won't take 
long, other than to say that Chairman Berrey is a proud 
constituent of northeastern Oklahoma. He is Chairman of the 
Quapaw Tribe that has a very vested interest in this issue. A 
visionary young leader in Indian Country and someone who is 
also part Osage, and I think Chief Gray of the Osage Nation is 
here too. Very active in a variety of issues dealing with 
reform of the Department of Interior; something vitally needed 
and something that everyone in this room would agree is 
hopefully going to come sooner rather than later. So it is a 
pleasure to have Chairman Berrey here today, who is also vice-
chairman of the Inter-Tribal Monitoring Association, which has 
worked extensively on this issue.
    So, John, welcome. Thank you for being here.

        STATEMENT OF JOHN BERREY, CHAIRMAN, QUAPAW TRIBE

    Mr. Berrey. Thank you very much.
    I would also like to acknowledge Congressman Cole, a fellow 
Oklahoman and a member of a sister tribe, the Chickasaw Nation. 
I am the Chairman of the Quapaw tribe, vice-chairman of ITMA.
    The Quapaw Tribe is one of the many tribes that currently 
has litigation in Federal courts for mismanagement or claims of 
mismanagement to the DOI. We also claim and we are disputing 
the 1996 reconciliation report by Arthur Andersen that was 
discussed by Mr. Cason. We are also asking for an accounting of 
the natural resource management, which was discussed by Mr. 
Cole. And we are also asking for a management accounting, 
because we have the largest superfund site in the United States 
on our tribal lands. But one thing I would like to say, and I 
am very proud to announce, is the Quapaw Tribe is the only 
tribe in the United States that is currently going through 
formal alternative dispute resolution processes with the 
Federal Government. We have been working with the Department of 
Interior, Department of Justice and the Department of Treasury 
to try to work outside of litigation to come to terms with our 
claims, and we feel like we are making a lot of progress and we 
are very proud of that and we appreciate the hard work that the 
Department of Interior has put toward this process.
    Also, I am a member of the Osage Nation as Mr. Carson 
acknowledged. My immediate and extended family are very much 
stakeholders in this process. We have had millions of dollars 
go through our IIM accounts due to the large Osage mineral 
estate. And there are a lot of us that are concerned and want 
to come to a settlement.
    Also, the members of my tribe were the owners of one time 
the largest lead and zinc estate in the history of the United 
States. I have also personally sponsored or been part of the 
promotion of two key National Congress of American Indian 
resolutions. One that I sponsored last year in San Diego was 
against a similar appropriation bill that we have talked about 
earlier. And I worked this year in Phoenix on a resolution that 
came out in support of Senator Campbell and Senator Inouye's 
efforts in the process to lead to an end of this endless 
litigation. I have had the great fortune to be part of the 
Department of Interior's effort to identify and detail the 
business processes that they used to deliver trust services 
today. We spent over a year last year traveling across Indian 
Country and identified how those processes are managed, the 
problems within them, and I am glad to be part of a new process 
called the ``To Be'' reengineering, which is how we are going 
to fix the system in the future. To answer some of you all's 
questions earlier, I believe we can fix it. I believe working 
with Indian Country, the Department of Interior and our trustee 
and a lot of hard work, we can fix the process for the future.
    I have got the added responsibility to be the Chairman of 
the--vice-Chairman of ITMA, and I support all the testimony you 
will hear from them today. First of all, I am very grateful for 
Ms. Cobell here. She and her attorneys have done an excellent 
job of bringing this terrible historical mismanagement to light 
that has been plaguing Indian Country for years. Many of the 
things that she has described are some of the things we are 
trying to fix today in terms of accounting, mismanagement, 
enforcement, compliance, all of the issues that are related to 
the Trust service delivery to the Indian beneficiary.
    As a tribal leader, I have become very frustrated with the 
direction of the case. The scorched-earth tactics of the 
attorneys from both sides of the case have created tremendous 
hardships on the very beneficiaries both sides represent. The 
dollars allocated for tribal services are being used to produce 
endless data calls, insane computer security and the failure of 
the solicitor's office to take action on day-to-day business 
resulting in the fact that the burden of this case is now 
squarely on the shoulders of the tribes and the individual 
tribal members. In the last quarter at my agency, 80 percent of 
the full-time equivalent (FTE) in realty was spent on 
litigation document production, directly affecting the agency's 
ability to perform much needed realty services such as leasing, 
rent collections, and lease enforcement for Quapaw Tribal 
members.
    The court has broadened the scope of this case so wide that 
it is impossible to describe the case as it was originally 
intended. All parties involved are working on business 
processes such as fee-to-trust, resource management planning 
and leasing, title management, and appraisals, the very types 
of activities that are typically DOI/Tribal government-specific 
issues, not related to IIM accounting. We now have a court that 
is involved in these activities that threaten tribal governance 
and self-determination. And I am afraid that a case that about 
10 percent of the trust corpus is threatening the 90 percent of 
the Trust Corpus that is not part of the court's jurisdiction. 
It is very obvious that the people are tired and weary of this 
case that has lingered on for eight long years remember 
resulting in the destruction of many dedicated peoples' 
reputations, careers, and ultimately the delay in payments to 
needy Indian families. I lost seven IIM account holders 2 weeks 
ago in my tribe. We are losing people everyday and we need 
resolution now. The result has been the burning down of the 
house of the very trustee delegated to provide services to the 
Indian beneficiary. You know it bothers me. Gale Norton gets 
paid. The attorneys for the Department of Justice are getting 
paid. Judge Lambreth is getting paid. But the members of the 
class, the American Indian and their tribes are suffering.
    The time is now to stop this endless insane method of 
resolving a series of claims that needs to be settled in a fair 
and collaborative way. The success of any dispute resolution is 
embedded in the very process used to resolve the conflict. I 
appreciate the appropriators' attempt in finding a resolution, 
but the Section 137 of the Appropriations bill falls terribly 
short in terms of process. There has been no consultation with 
the plaintiffs, with the plaintiffs' counsel or tribal 
leadership. The entire issue of settlement must be process 
driven. Instead of predetermining any settlement structure, the 
focus must be on process, process and process. It's a proven 
method of dealing and resolving conflicts and issues and allows 
the stakeholders a voice in the outcome. I'm sure that an 
effectively managed collaborative process will work in a very 
timely way if allowed to happen. I am asking and pleading for 
Congressman Pombo and Congressman Rahall to work with Senator 
Campbell and Senator Inouye quickly in a joint effort to 
resolve this litigation using a collaborative process that 
includes IIM account holders, tribal leaders, plaintiffs' 
counsel and the Department of Interior. Please allow this 
process to begin. Require a time line and hold all parties 
accountable, but please allow a fair and collaborative method 
to settle this mess. The time is right. The method of 
collaborative dispute resolutions are proven and the process 
must be given an opportunity. As a tribal leader, I am 
determined to come to grips with the past. It's not fair for me 
to teach my children and my grandchildren to constantly be 
looking backwards. The time has come. We got to teach them to 
look to the future and focus on the feature. And I appreciate 
your time.
    The Chairman. Thank you.
    [The prepared statement of Mr. Berrey follows:]

            Statement of John Berrey, Chairman, Quapaw Tribe

    Mr. Chairman and distinguished members of the committee thank you 
for the invitation to speak to you today. My name is John Berrey, I am 
the Chairman if the Quapaw Tribe of Oklahoma and Vice-Chairman of The 
Inter-Tribal Monitoring Association (ITMA). The Quapaw Tribe is one of 
the Thirty Tribes currently involved in litigation in federal court 
claiming Trust mismanagement by the Department of the Interior (DOI). 
The Quapaw Tribe's membership are individual class members represented 
in the Cobell v. Norton litigation, as a result of the largest lead and 
zinc mines in the history of the United States that were managed by the 
DOI. I am very pleased to also tell you that the Quapaw Tribe is the 
only Tribe that is currently pursuing a formal alternative dispute 
resolution (ADR) process outside of our litigation. We are very pleased 
with the progress and successes we have achieved working with the DOI, 
Department of Justice (DOJ) and Department of the Treasury (Treasury) 
attempting to settle Tribal and Individual claims. I am also a member 
of the Osage Nation. My immediate and extended family may represent 
some of the individuals in the Cobell class with the very most at stake 
in terms of settlement because of the millions of dollars from the 
Osage mineral estate that moved through these Individual Indian Money 
accounts (IIM).
    I personally sponsored or helped promote the two most recent 
settlement related resolutions passed by The National Congress of the 
American Indian (NCAI). The first, SD-02-099, approved and passed last 
year in San Diego against a similar appropriations rider to the one 
currently in the DOI appropriations legislation, that rider proposed 
creating a poorly conceived voluntary buyout plan. Most recently, PHX-
03-040, a resolution passed a few weeks ago in Phoenix, supports 
Senator Ben Nighthorse Campbell and Senator Daniel K. Inouye's efforts 
to begin a process that would lead to a fair and equitable solution to 
the endless litigation.
    I have had the great fortune to be part of a DOI effort to identify 
in detail the business process problems that created in part the claims 
in the Cobell v. Norton litigation called the ``As Is'' business model. 
I am part of a team that is tasked with reengineering these processes 
to eliminate any future claims called the ``To Be'' reengineering team. 
These efforts have allowed me the opportunity to travel throughout 
Indian Country interviewing nearly two thousand individuals directly 
involved in the management of Native American Trust assets.
    I have the added responsibility to be the vice chairman of the 
Inter Tribal Monitoring Association (ITMA), an organization whose very 
existence revolves around monitoring DOI Trust management. I support 
the ITMA testimony that you will hear today. It is these experiences 
that have led me here to discuss these pressing settlement matters.
    First, I am very grateful to Eloise Cobell and the attorneys 
involved in the Cobell v. Norton litigation. The efforts of these 
individuals have brought to light the terrible historic mismanagement 
of Indian Beneficiary Trust Assets. Many of the described problems 
relating to the DOI management have created the current reengineering 
that I am involved with. With the efforts of the Office of the Special 
Trustee (OST), the Bureau of Indian Affairs (BIA) and Tribal 
representatives, we will create better business processes for the DOI 
Trust Management service delivery to the Native American Beneficiary.
    As a Tribal leader I have become very frustrated with the direction 
the case and the decisions the court has taken. The scorched-earth 
tactics of attorneys from both sides of the case have created 
tremendous hardships on the very beneficiaries both sides represent. 
The dollars allocated for tribal services are being used to produce 
endless data calls, insane computer security, and the failure of the 
solicitors office to take action on day-to-day business resulting in 
the fact that the burden of the case is now squarely on the shoulders 
of Tribes and Individual Tribal members. In the last quarter at my 
agency, the Miami Agency, eighty percent of the full time equivalent 
(FTE) in realty was spent on litigation document production, directly 
effecting the agencies ability to perform much needed realty service 
such as leasing, rent collections and lease enforcement for Quapaw 
Tribal members.
    The court has broadened the scope of this case so wide that it is 
impossible to describe the case as it was originally intended. The 
court and both parties have become involved in business processes such 
as; fee-to-trust applications, resource management planning and 
leasing, title management and appraisals, the very types of activities 
that are typically DOI/Tribal issues and not specific to IIM 
accounting. We now have a court that is involved in activities that 
threaten Tribal governance and self-determination, and I am terrified 
that a case about ten percent of the Trust Corpus is threatening the 
ninety percent that should not be part of this courts jurisdiction. It 
is very obvious that many people are tired and wary of this case that 
has lingered for eight long years resulting in the destruction of many 
dedicated peoples reputations, careers, and ultimately the delay in 
payments to needy Indian families. The result has also been the burning 
down of the house of the very trustee delegated to providing services 
to the Indian beneficiary. Gale Norton, the attorneys from the DOJ, 
Judge Lambreth and the attorneys for the class are getting paid while 
Native American Indian people and Tribes are suffering.
    The time is now to stop this endless, insane method of resolving a 
series of claims that need to be settled in a fair and collaborative 
way. The success of any dispute resolution is imbedded in the very 
process used to resolve the conflict. I appreciate the appropriators'' 
attempt at finding a resolution in section 137 of the DOI 
appropriations bill, but it falls terribly short in terms of process. 
There has been absolutely no consultation with any of the plaintiffs, 
plaintiff's council or Tribal leadership. The entire issue of 
settlement must be process driven, instead of predetermining any 
settlement structure the focus must be on process, process, and 
process. This is a proven method of resolving complex issues and allows 
all the stakeholders a voice in the outcome. I am sure that an 
effectively managed collaborative process will work in a very timely 
way if allowed to happen. I am here to ask and to plead to Congressman 
Richard W. Pombo and the Congressman Nick J. Rahall II to work with 
Senator Ben Nighthorse Campbell and Senator Daniel K. Inouye quickly in 
a joint effort to resolve the Cobell v. Norton litigation using a 
collaborative process that will include IIM account holders, Tribal 
leaders, plaintiff's council, and DOI officials in a timely way. Please 
allow this process to begin, require a timeline and hold all parties 
accountable, but please allow a fair and collaborative method to settle 
this mess. The time is right, the methods of collaborative dispute 
resolution are proven and the process must be given the opportunity to 
work. As a Tribal leader I am dedicated to coming to terms regarding 
issues of the past. It is not right for me to teach my children to 
constantly look backwards, when I must teach them to focus on the 
future. Thank you for your time.
                                 ______
                                 
    [An attachment to Mr. Berrey's statement follows:]

               THE NATIONAL CONGRESS OF AMERICAN INDIANS
                         RESOLUTION PHX-03-040

Title:. Supporting Tribal Leaders' Involvement in a Congressional 
        Process to Settle Trust Claims; Strongly Opposing the 
        Department of Interior's Indian Trust Reform Reorganization 
        Plan and Related fiscal year 2004 Budget Report; Creating a 
        Tribal Leaders Workgroup to Address Both Issues
WHEREAS, we, the members of the National Congress of American Indians 
of the United States, invoking the divine blessing of the Creator upon 
our efforts and purposes, in order to preserve for ourselves and our 
descendants the inherent sovereign rights of our Indian nations, rights 
secured under Indian treaties and agreements with the United States, 
and all other rights and benefits to which we are entitled under the 
laws and Constitution of the United States, to enlighten the public 
toward a better understanding of the Indian people and their way of 
life, to preserve Indian cultural values, and otherwise promote the 
health, safety and welfare of the Indian people, do hereby establish 
and submit the following resolution; and

WHEREAS, the National Congress of American Indians (NCAI) was 
established in 1944 and is the oldest and largest national organization 
of American Indian and Alaska Native Tribal governments; and

WHEREAS, the federal government has a longstanding comprehensive trust 
responsibility to Indian tribes based on treaties, the United States 
Constitution, federal statutes, executive orders, and judicial 
decisions; and

WHEREAS, the issue of whether the federal government has violated its 
trust responsibility to Individual Indian Money account holders has 
been in litigation since 1996, under what is now named the Cobell v. 
Norton case; and

WHEREAS, as one means of dealing with the issues in Cobell v. Norton, 
the Department of Interior (DOI) has developed and is implementing a 
reorganization plan which attempts to diminish and limit the nature of 
the federal government's trust responsibility; and

WHEREAS, the DOI reorganization plan creates a top-heavy bureaucracy 
which will divert desperately needed funding and resources from 
regional offices and local agencies, . strip important decision-making 
authority from those offices and agencies, and negatively impact trust 
fund and trust resource management programs at the local level; and

WHEREAS, the DOI has incorrectly asserted that segments of its 
reorganization plan have the approval of Tribal leaders; and

WHEREAS, the DOI plan in fact ignores and rejects Tribal leaders' core 
consensus positions, developed at great expense of Tribal time and 
resources, that trust reform must not negatively affect BIA programs, 
that it must recognize the comprehensive trust responsibility of the 
DOI/BIA with enforceable standards for meeting that responsibility, 
that the BIA must not be arbitrarily split between ``trust'' and so-
called ``non-trust'' programs, as every BIA function is a trust 
function; and that decision-making must take place at the ``lowest'' 
(agency/region) level possible rather than in Washington, DC; and

WHEREAS, the DOI reorganization plan lacks substance and details in the 
areas of management and delivery of trust services; does not describe 
the new or improved business processes that will be implemented; lacks 
any recognition of enforceable standards that will guide the 
implementation of such processes; does not provide accountability to 
Congress, the courts, Indian tribes and their members; does not provide 
for a trust oversight mechanism; and fails to provide any details on 
how service delivery will be improved at the regional and local levels; 
and

WHEREAS, DOI's fiscal year 2004 budget makes improper requests, and in 
likely violation of federal law, consolidates authority and funding in 
OST at the expense of Tribal programs: DOI seeks a $123 million 
increase for OST, nearly doubling its funding, while, at the same time, 
seeking a $63 million cut to BIA construction, including a $32 million 
cut for school construction, as well as an $8 million cut to Indian 
Water and Claims Settlement funding. Equally disturbing, DOI is seeking 
a less than one percent (0.3%) increase for Tribal Priority 
Allocations, funding that flows directly to Tribes for trust programs; 
and

WHEREAS, this attempted reorganization is premature because the ``To-
Be'' reengineering study on how to fix the trust management apparatus 
has not been completed; and

WHEREAS, Tribal leaders strongly oppose the reorganization for the 
reasons herein described; and

WHEREAS, Senators Ben Nighthorse Campbell and Daniel K. Inouye, 
Chairman and Vice-Chairman of the Senate Committee on Indian Affairs, 
have written to all Tribal leaders asking for their participation in 
helping to settle the Cobell v. Norton case and ``reforming the Federal 
trust management apparatus''; and

WHEREAS, the continued litigation will cost many more millions of 
dollars and take many more years to reach completion, further impeding 
the ability of the Bureau of Indian Affairs and the Department of 
Interior to carry out their trust responsibilities to Indian tribes; 
and

WHEREAS, it is in the best interests of Tribes that Tribal leaders 
participate in the resolution of trust related claims and the 
development of a workable and effective BIA reorganization plan which 
incorporates the core consensus positions earlier articulated by Tribal 
leaders; and

WHEREAS, Tribal leaders are willing to discuss the Senators' proposal 
to achieve a settlement of trust claims and related issues because it 
focuses on land consolidation, development of settlement legislation, 
continuation of the effort to reengineer trust management processes, 
and the reorganization of the BIA in true and meaningful consultation 
with Tribal leadership;

NOW THEREFORE BE IT RESOLVED, that the NCAI does hereby strongly oppose 
the DOI's Indian Trust Reform Reorganization Plan and its related 
fiscal year 2004 Budget Request; and

BE IT FURTHER RESOLVED, that the NCAI calls upon Congress to 
immediately halt the reorganization of the Bureau of Indian Affairs 
until the concerns of Tribal Leaders are fully addressed by a workable 
and effective reorganization plan, and until the ``To Be'' process, 
developed through true and meaningful consultation with Indian Tribes, 
is completed; and

BE IT FURTHER RESOLVED, that the NCAI hereby (1) opposes the fiscal 
year 2004 proposed $123 million budget increase to OST, (2) supports 
the restoration of funding for BIA Construction and Indian Water and 
Claims Settlements, and (3) supports a substantial increase, of at 
least 4%, for TPA funding; and

BE IT FURTHER RESOLVED, that the NCAI requests a series of hearings 
before the Senate Committee on Indian Affairs and the House Resources 
Committee on the BIA reorganization and the DOT's fiscal year 2004 
budget request, and that the Tribal Leader witnesses represent direct 
service, contracting and compacting tribes, all regions, and Tribes 
with diverse trust holdings; and

BE IT FURTHER RESOLVED, that the NCAI supports the efforts of Senators 
Campbell and Inouye to help reach a settlement of trust claims and to 
effectively reform the federal trust apparatus, and encourages the 
participation of Tribal leaders, individually and through a Tribal 
Leaders Workgroup, in both these crucial processes; and

BE IT FURTHER RESOLVED, that the President of the NCAI is hereby 
authorized to take all actions necessary to fulfill this Resolution; 
and

BE IT FINALLY RESOLVED, that this resolution shall be the policy of 
NCAI until it is withdrawn or modified by subsequent resolution.

CERTIFICATION
    The foregoing resolution was adopted at the 2003 Mid-Year Session 
of the National Congress of American Indians, held at the Sheraton Wild 
Horse Pass Gila River Indian Community, in Phoenix, Arizona on June 18, 
2003 with a quorum present.

Tex Hall, President

ATTEST:

Juana Majel, Recording Secretary

    Adopted by the General Assembly during the 2003 Mid-Year Session of 
the National Congress of American Indians, held at the Sheraton Wild 
Horse Pass Gila River Indian Community, in Phoenix, Arizona on June 18, 
2003.
                                 ______
                                 
               THE NATIONAL CONGRESS OF AMERICAN INDIANS
                         RESOLUTION #SD-02-099

Title: Opposition to Legislative Rider to Authorize a Settlement 
        Process for Extinguishment of Individual Trust Accounting 
        Claims
WHEREAS, we, the members of the National Congress of American Indians 
of the United States, invoking the divine blessing of the Creator upon 
our efforts and purposes, in order to preserve for ourselves and out 
descendants the inherent sovereign rights of our Indian nations, rights 
secured under Indian treaties and agreements with the United States, 
and all other rights and benefits to which we are entitled under the 
laws and Constitution of the United States, to enlighten the public 
toward a better understanding of the Indian people and their way of 
life, to preserve Indian cultural values, and otherwise promote the 
health, safety and welfare of the Indian people, do hereby establish 
and submit the following resolution; and

WHEREAS, the National Congress of American Indians (NCAI) was 
established in 1944 and is the oldest and largest national organization 
of American Indian and Alaska Native tribal governments; and

WHEREAS, the Department of Interior has drafted legislative language 
that would create a settlement process for extinguishment of individual 
Indian landowner trust accounting claims; and

WHEREAS, NCAI supports the discussion and development of settlement 
processes for such processes; and

WHEREAS, the NCAI desires the continual promotion of full and 
meaningful Tribal consultation in matters pertaining to the government-
to-government relationships Tribes maintain with the United States; and

WHEREAS, the NCAI desires full hearings before bills that would 
substantially alter tribal rights or status are considered by Congress 
in any form; and

WHEREAS, the NCAI opposes legislative riders that would avoid 
substantive dialogue and tribal input; and

WHEREAS, the NCAI opposes the limitation of the rights of individual 
Indian account holders; and

WHEREAS, the NCAI opposes legislation that limits the ability of tribes 
and individual Indians to seek court review; and

WHEREAS, the NCAI opposes legislation that would potentially takes 
advantage of the vulnerable and elderly; and

WHEREAS, accurate information on the scope of a potential claim is 
required before the rights of beneficiaries are altered; and

WHEREAS, it is not in the best interest of IIM account holders or 
Indian tribes to support legislation that is in the form of a last 
minute appropriations rider due to the negative history of bill 
language introduced in this manner.

NOW THEREFORE BE IT RESOLVED, that the NCAI hereby opposes the 
introduction or passage of any appropriations rider language settling 
or extinguishing individual Indian account holder rights, also called 
the ``voluntary incentive program''; and

BE IT FURTHER RESOLVED, that the NCAI supports discussion of settlement 
options and encourages the Department of Interior and Congress to enter 
into full and meaningful consultation with tribes to ensure that the 
rights of individual Indians are not detrimentally affected; and

BE IT FINALLY RESOLVED, that this resolution shall be the policy of 
NCAI until it is withdrawn or modified by subsequent resolution.

CERTIFICATION
    The foregoing resolution was adopted at the 2002 Annual Session of 
the National Congress of American Indians, held at the Town and Country 
Convention Center, in San Diego, California on November 10-15, 2002 
with a quorum present.

Tex Hall, President

Juana Majel, Recording Secretary

    Adopted by the General Assembly during the 2002 Annual Session of 
the National Congress of American Indians, held at the Town and Country 
Convention Center, in San Diego, California on November 10-15, 2002.
                                 ______
                                 
    [Additional attachments to Mr. Berrey's statement have been 
retained in the Committee's official files.]
    The Chairman. Mr. Hall.

STATEMENT OF TEX HALL, PRESIDENT, NATIONAL CONGRESS OF AMERICAN 
                            INDIANS

    Mr. Hall. [Short statement given in Native language.]
    Thank you, Chairman Pombo, and members of the Committee. I 
am very honored to be here to speak about this very important 
issue in Indian Country. I would like to thank you and Chairman 
Pombo and ranking member Rahall for inviting the National 
Congress of American Indians to testify. I would like to thank 
you for your words this afternoon, your initiative in 
demonstrating the leadership by calling this hearing. Also, I 
would like to thank Chris Fluhr and Marie Howard of the staffs 
for their hard work in putting this together.
    Just briefly, I would like to mention, not only am I 
President of National Congress of American Indians, also a 
tribal chairman and also an IIM account holder. And Mr. 
Chairman and members of the Committee, I really believe this is 
a very good opportunity for us to talk today frankly and 
honestly. And it is very important that we have these kind of 
dialogs because listening to all of the information previously, 
there are some gaps in our information. One of the gaps I heard 
was on consultation. We haven't been consulted for a long, long 
time. And so I have submitted for the record my testimony, 
resolution from Phoenix PHX-03-040 which opposes the 
reorganization for lack of consultation and for various other 
reasons that I have submitted.
    So let me get to my testimony. I will speak basically on 
two issues in the testimony. First is on the 137 rider, which 
we really feel is definitely wrong. And second I want to talk 
about the general question of what can be done to settle 
Cobell. First, again, I want to make it perfectly clear that 
NCAI is 100 percent opposed to the Section 137 rider. And the 
basic issue is fairness and what is fair to the individual 
beneficiaries, and as an IIM account holder, and a pretty 
substantial holder of land and minerals, and that represents, I 
think, a lot of people that are in the same situation. To have 
Section 137 go forward without consultation or without letting 
the court continue its proceedings would be stepping in and 
denying property owners their right to fairness. And I think 
that's wrong. And 137 imposes a unilateral and unfair 
settlement on Indian plaintiffs. And remember, the only goal of 
the plaintiffs is to get their money back, money that the 
United States has lost. And I want to preface what I heard 
earlier that this is not taxpayers' dollars, this is Indian 
Trust Asset management money. So the entire purpose of the 
lawsuit is to hold the United States accountable as a trustee. 
So instead, the 137 rider authorizes the Department of Interior 
to offer cash payments to willing individual Indian Money 
account holders and for those not settled after a year, the 
Department would be allowed to use statistical sampling, a 
method overwhelmingly rejected in Indian individual 
beneficiaries. I would point out to the Committee that it was 
just only a few years ago that the House led the fight to 
reject the use of statistical sampling in the 2000 census. And 
if I recall, it was speaker Dennis Hastert who said that the 
administration should abandon its illegal and risky polling 
scheme and start preparing for a true headcount. I say if 
statistical sampling was a bad idea for the country 3 years 
ago, it's a bad idea today. I would point out that we were 
talking about accountability in a cup that was up there. And I 
would also mention that there are approximately 45,000 IIM 
account holders whose addresses are unknown. So where is that 
cup for each of those 45,000. Where is that money going and are 
they getting their fair share. When will they get their fair 
share and will there be interest on top of that. I would like 
to point out that letting the government settle its own case is 
unfair. As I have said before, this legislation is somehow like 
giving the CEO of Enron authority to unilaterally settle the 
claims of Enron shareholders. Lambreth wrote last year that the 
agency has undisputedly proven to the court, Congress and the 
individual Indian beneficiaries that it is either unwilling or 
unable to administer competently the Indian Trust. If that is 
the case, then how can Congress give them the power to settle 
the lawsuit by themselves with Section 137. So we can see a 
distinct and frightful parallel that is happening here. And we 
can't repeat the mistakes of the past.
    Last year, Congress overwhelmingly rejected similar 
legislation. If anything, we now have a better idea that true 
damages that a trust scandal has caused Indian Country can be. 
Congress cannot afford to let the government off the hook. It 
was a bad idea then, and it's a bad idea today. As I mentioned 
a resolution from NCAI Phoenix 040, and I would also like to 
mention Resolution 02-099 clearly states NCAI's opposition to 
any rider that settles or extinguishes account holders' rights 
such as Section 137.
    Let me just get to the point about the settlement 
principles. Second part of my testimony has to do with these. 
NCAI has taken approach that Congress should look at these 
issues in two parts. First, should a process be developed to 
settle matters relating to the Indian Trust Fund lawsuit. And 
second, can an equitable process be established. Our answer is 
yes to both of those.
    First, tribal leaders have consistently supported the goals 
of the Cobell plaintiffs in seeking to correct the trust fund 
accounting. At the same time, tribes are very concerned about 
the impacts of this litigation. And from the beginning, the 
Department of Interior has operated with the primary goal of 
protecting itself from liability. This litigation posture has 
had a direct effect on the Department's ability to provide 
proper land management services that are desperately needed in 
Indian Country. Even more troubling, the litigation process 
created an atmosphere of mistrust and has affected the ability 
of tribes and the Department to work together on a government-
to-government basis. Continued litigation will cost many more 
millions of dollars and may take years to final completion. 
Therefore, NCAI takes the position that settlement is an 
ultimate goal and should be accomplished as soon as possible. 
Settlement can't come at any cost. We know, Mr. Chairman, there 
are many sides and many issues on settlement. First of all, any 
process must have the full participation of Indian plaintiffs 
and Indian tribes.
    Second, the settlement process must be fair and honest.
    Third, we must take the time to do it right. We can't 
afford mistakes again. It has taken over 100 years to create 
this mess, and it can't be cleaned up overnight.
    Fourth, the process must be structured so as to put 
pressure on the parties. Without a structured process to 
support settlement discussions, settlement talks will likely 
fail. Thus, Congress must be involved. And the Resource 
Committee and Indian Affairs Committee in the Senate should 
take the lead as this issue clearly falls within your 
jurisdiction.
    Fifth, the settlement plan must fix the trust systems for 
the future so we don't make the mistakes of today. The record 
shows the Interior Department only moves forward when prodded 
by the court or prodded by Congress. It would be disastrous to 
approve a settlement that would resolve the past liability and 
then lapse into future mismanagement ignoring trust 
responsibilities.
    Sixth, an independent body should play a significant role 
in the settlement process. This will create trust on both sides 
and will help ensure fairness.
    Seventh, one size does not fit all. There is a great deal 
of diversity among account holders. Some have large land-based 
resource based accounts. Others have fractionated interest 
worth less than a dollar. Any settlement must accommodate the 
different classes of accounts and interest.
    Eighth, account holders should have an opportunity to 
negotiate or make that choice if they want to or not. No one, 
neither Congress nor the courts, should be able to force a 
settlement without the individual Indian property owner's 
consent. Fairness requires that the account holders should have 
the ability to negotiate at arms length based on reasonable 
knowledge and understanding of the underlying facts and 
circumstances.
    Ninth, bring relief for the old people, for the elders. 
Many of our elders deserve quick relief. For that reason, once 
a solid process is in place, there should be no foot dragging 
or holding out by the government as we have seen in the Navajo 
case in order to ensure an unfair agreement.
    Tenth, do not allow the process to prey on the most 
vulnerable. This means that all account holders should be able 
to get the basic information on their accounts and property. 
They should have access to that information, legal assistance 
and language translation if they are traditional language 
speakers. This has to be apart of the basic trust obligation.
    Eleventh, and I just got 12, funds for settlement must not 
deplete funding--or you can cut me off, Mr. Chairman, if you 
want to--must not deplete funding for Federal Indian programs. 
You cannot rob Peter to pay Paul. The settlement funds should 
come from the judgment funds, but should not have to be 
replaced from future Interior Appropriations.
    And finally, twelfth, consider the impact on Tribal Trust 
Fund claims. In most instances, tribal claims are separate and 
involve different issues. Many are currently pending. The 
settlement process for the individual claims will have a direct 
impact on tribal claims and Congress should be aware of it as 
it moves forward. NCAI will convene a meeting on July 24 in 
Portland to discuss trust reform and discuss a settlement 
process. In Resolution 040, it talks about that and lays out a 
tribal work group to continue negotiations for this settlement 
issue. Contrary to what has been said and been said over and 
over, tribes want change. Tribes want the government to be 
accountable and tribes want to be involved and are 
sophisticated and look forward to working with the Committee on 
this very important issue.
    [Short statement given in Native language.]
    [The prepared statement of Mr. Hall follows:]

  Statement of Tex G. Hall, President, National Congress of American 
         Indians and Chairman Mandan, Hidatsa & Arikara Nation

Introduction
    Chairman Pombo, Representative Rahall, and members of the 
Committee, thank you for your invitation to testify today. On behalf of 
the member tribes and individuals of the National Congress of American 
Indians, I would like to express our appreciation to this committee for 
its commitment to Indian people and to upholding the trust and treaty 
responsibilities of the federal government.
    The Question posed before this hearing should perhaps be broken 
into two parts: (1) Should a process be developed to settle matters 
related to the Indian trust fund lawsuit?; and (2) Can an equitable 
process be established?
    The answer to the first question is yes. Tribal leaders have 
consistently supported the goals of the Cobell plaintiffs in seeking to 
correct the trust funds accounting fiasco that has lingered for too 
long at the Department. At the same time, tribes are concerned about 
the impacts of the litigation. From the beginning, the DOI has operated 
with the primary interest of protecting itself from liability rather 
than complying with its statutory duties. See, e.g., Cobell v. Norton, 
226 F. Supp. 2d at 11 (citing attempts by the DOI to cover up failures 
to comply with the Court's orders ``through semantics and strained, 
unilateral, self-serving interpretations of their own duties''). This 
litigation posture has had a direct impact on the BIA's ability and 
willingness to provide the land management services that are so vital 
to tribes and individuals. Significant financial and human resources 
have been diverted by DOI machinations in response to the litigation. 
The BIA has become extraordinarily risk averse and slow to implement 
the policies, procedures and systems to improve its performance of its 
trust responsibility to Indian tribes and individual Indians. Perhaps 
most significantly, the contentiousness of the litigation is creating 
an atmosphere that impedes the ability of tribes and the DOI to work 
together in a government-to-government relationship to promote tribal 
self-determination and address other pressing needs confronting Indian 
country.
    Continued litigation will cost many more millions of dollars and 
take many more years to reach completion, further impeding the ability 
of the BIA and the DOI to carry out their trust responsibilities. 
Because of this, NCAI believes that it is in the best interests of 
tribes and individual account holders that tribal leaders participate 
in the resolution of trust related claims and the development of a 
workable and effective system for management of trust assets in the 
future. See NCAI Resolution PHX-03-040, attached.
    The answer to the second question is also yes, an equitable process 
for settlement can be developed, but it is not the one provided for in 
Section 137 of the House Interior Appropriations Bill. We are very 
pleased that the Resources Committee understands the need to develop a 
process that would lead to settlement, rather than trying to settle a 
complicated and contentious matter of historical accounting in one fell 
swoop. The bottom line is that the DOI has not maintained a record 
keeping system that will allow a complete historical accounting, and 
the two parties to the Cobell litigation are very far apart in their 
views of what the Department's responsibilities should be. The goal 
should be to develop a good process of consultation that will lead to 
the development of a settlement proposal. If a good process is 
developed, then the end result will have legitimacy--and that is the 
larger goal--to compensate the account holders fairly and put the issue 
behind us so that Indian Country, the DOI, and Congress can move 
forward with the continuing progress of Indian people and tribal self-
determination.
    I serve as the President of NCAI, and the organization has not yet 
come to a position on what a settlement process should look like. I 
know that good ideas will come forward from Indian country, and the 
very beginning (as well as the middle and the end) of the process 
should include consultation with the tribes and the individual Indian 
account holders. NCAI is convening a meeting among tribal leaders on 
July 24 in Portland, Oregon to discuss this issue, and I know we will 
be scheduling additional meetings on the same topic, working 
collaboratively with the Intertribal Monitoring Association on Indian 
Trust Funds. We must develop a timetable, and I would suggest that we 
consult on this issue through the summer and fall, and develop a 
proposal by the end of February 2004.
    In order to initiate discussion I would like to suggest a number of 
principles that I believe should be taken into account in developing 
any settlement process:
    1) LTake the time to do it right. NCAI has witnessed the trust 
reform efforts since the 1980's as one quick fix after another has been 
proposed, implemented, and eventually fallen to the wayside. We have 
wasted over 20 years looking for a quick fix. Developing a lasting 
solution is going to take time and resources. We should recognize that 
now and commit to doing it right.
    2) LEstablish a process that will keep the pressure on for 
settlement. It is my understanding that the parties to the litigation 
have tried several times resolve the case but have been unsuccessful in 
reaching agreement. I believe that this has been due in large part to a 
failure to establish a structured process to support settlement 
discussions. Firm time schedules should be established with periodic 
reporting and incentives for reaching a settlement. While settlement 
deliberations are in process, I believe the litigation should continue 
until the historical accounting has been settled, and the Department 
has successfully implemented the necessary reforms to ensure sound 
trust management in the future. I would like to offer three specific 
suggestions for consideration:
        a. LCongress should be involved in developing a settlement 
        process. I believe that the House Resources Committee and the 
        Senate Committee on Indian Affairs should forge an alliance to 
        work on this issue and convene meetings to consult with the 
        parties to the litigation and with the tribes and the allottee 
        associations. Out of these consultations, which could take 
        place this summer and into the fall, we should develop a 
        proposal for a settlement process.
        b. LSeparate historical accounting from current accounting 
        systems. Ensure that settlement also fixes trust systems for 
        the future. The historical record has shown that DOI will only 
        move forward in improving Indian trust systems if there is 
        exterior pressure from the courts or from Congress. There are 
        two critical issues here that need to be addressed: (i) the 
        establishment of account balances (historical accounting); and 
        (ii) the functionality of accounting systems. It would be 
        disastrous to create a settlement that would resolve the past 
        liability and then allow the DOI to relapse into ignoring its 
        responsibilities for Indian trust management and accounting.
        c. LAn independent body should play a significant role in the 
        settlement process. The parties to the litigation have a 
        significant financial stake in the outcome. The tribes and the 
        IIM account holders will distrust any process where the 
        Secretary of Interior is in control of all aspects of the 
        settlement. To ensure fairness and transparency, an independent 
        body should play a significant role. One function would be to 
        ensure that the settlement offer has an objective basis to 
        ensure legitimacy and fairness. At a minimum, each account 
        holder is entitled to an accounting, and if the federal 
        government cannot provide that, they should receive the value 
        of an accounting. In addition, the account holder should have a 
        clear understanding of what property and funds are involved and 
        what kind of revenues should have been received--whether this 
        information is from actual records, or a comparison and 
        analysis of similar properties and accounts. The account 
        holders should have unimpeded and cooperative access to work 
        with the local BIA Agency Superintendent to gather information 
        about their holdings and comparative information about similar 
        holdings.
    3) LOne size will not fit all. There is a great deal of diversity 
among account holders. Some have large stakes in very valuable natural 
resources, such as oil, gas, or timber. Others have only a small 
fractionated interest that is worth less than a dollar. Any settlement 
process must be able to deal with different classes of accounts and 
interests.
    4) LAccount holders should have the opportunity to negotiate and 
make a choice. You cannot force a ``settlement.'' In today's world, the 
hallmark of fairness is the ability to negotiate an arms length 
agreement based on a reasonable knowledge and understanding of the 
underlying facts and circumstances. Indian account holders must also 
have this ability.
    5) LMove quickly to bring relief to elder account holders. Many of 
our elders have suffered extreme economic deprivation throughout most 
of their lifetimes. They should have an opportunity to improve their 
financial conditions without delay.
    6) LDo not allow the settlement process to prey on the most 
vulnerable. Many Indian people are not in a good position to evaluate 
whether or not they are receiving a fair settlement. They do not have 
good information about their property or the activities that took place 
on it. Many are economically impoverished or are traditional language 
speakers and could be wrongly encouraged to simply accept any offer of 
a settlement--no matter how unfair.
    7) LFunds for the settlement must not deplete funding for federal 
Indian programs. The resources for fixing the broken system must not 
come from reprogramming the budget away from other vitally needed BIA 
services. This is one area where we agree with Section 137. The 
judgment fund is the right source of federal money to settle Indian 
trust claims, so long as the DOI is not required to reimburse the 
judgment fund.
    8) LConsider the impact on tribal trust fund claims. It must be 
clearly understood that the Cobell litigation involves only the 
individual Indians claims for trust fund accounting. The tribal trust 
fund claims are separate and involve very different issues and will 
have to be resolved on a separate basis. At the same time, any 
settlement process will set precedents for the tribal claims and this 
should be kept in mind as the process moves forward.
The Views of One IIM Account Holder on Information Needed to Settle
    I am a cattle and buffalo rancher, an owner of trust land within 
the Mandan, Arikara & Hidatsa Nation Reservation, and also an IIM 
account holder. I believe it might be instructive to share my own 
personal views on what information I believe would be necessary for me 
to consider a settlement for my trust fund accounting claims. Although 
there certainly are Indians with much more valuable lands than my own, 
I own a significant amount of trust land that is in various uses and is 
in some ways a microcosm of issues you will find in developing a 
process for settlement.
    I am the sole owner of seven different parcels of trust land which 
total slightly over 1000 acres, and I own fractionated interests in 
another seven or eight parcels, although I am never certain of these 
fractionated interests. I directly manage three of the larger units of 
land in my ranch operation, so these funds do not go through my IIM 
account. However, the other four units of land are managed by the BIA 
and grouped together with other trust land to form grazing ranges that 
are permitted to other cattle ranchers for an annual grazing fee. The 
BIA has leased some gravel mining on these lands.
    I also know that the one parcel of land that I inherited from my 
mother's side has had significant oil development in the past. The 
northwest corner of our reservation had a lot of oil development and 
oil leasing beginning in the 1950's and continuing through the 1980's. 
Up to 1980, my mother was receiving significant oil revenues from her 
lands - which have now passed to me. Today they are considering some 
new oil development up there, so it could be that this property will be 
in production once again.
    My concern with BIA accounting is that I occasionally receive a 
trust funds check in the mail, but I never receive any information 
about which property the funds were received from. It could be from any 
one of the four full allotments, or from the fractionated interests, or 
from some combination. I don't know what leases have been let out, or 
what rate they received, or whether the full amount was correctly 
collected, invested and distributed. All I get is a check in the mail. 
I am supposed to trust the BIA that everything was accounted for 
correctly. My mother had the same concerns with her oil lease. She 
would simply receive a check from the BIA with no indication about how 
many barrels or the market rate at which they were sold.
    Let's consider the unlikely scenario that one day the Secretary of 
Interior showed up on my doorstep, checkbook in hand, and said ``Tex 
Hall I would like to settle your IIM accounting claims, how much do you 
need to make your claim go away?'' Well I would be extremely surprised, 
and then grateful for so much attention from the Secretary, but then I 
would have to invite her inside for a cup of coffee and explain that I 
will need some information before I am able to settle my claim.
    First, I would need a listing of all the tracts of land in which I 
have an ownership interest, and this includes my share in the 
fractionated lands where I have never received clear information on 
exactly what I own. Second, I need to know what activities and leases 
have taken place on those lands - is it grazing or gravel or coal or 
oil? Of course I would want to have a full accounting. I want copies of 
all the leases. I want records of exactly how much was distributed in 
the past, to me and to my parents. I want to see the accounts 
receivable and the accounting ledger to see if the lease payments were 
properly collected, invested and distributed.
    But let's say that the Secretary responds that records are missing 
and a full accounting is not possible. I would want to know what 
records are available and what is missing but even this, she responds, 
would be very expensive and time consuming--so she would like to see if 
we can settle with somewhat less information than that.
    Even in the lack of a full accounting, I could see my way clear 
toward a settlement if I had some other kinds of information to make an 
educated estimation. I would still need to know exactly what property I 
own and have a good general sense of what activities took place on 
those properties. For this I believe I would need to have access to the 
BIA Agency Superintendent and the realty office personnel. Our local 
BIA people have a lot of information and I generally trust them to be 
truthful with me. I believe that having a cooperative and open 
relationship with the local BIA would facilitate settlements much more 
readily that the current adversarial approach.
    If we were considering the oil property, I would want to have a 
professional and independent opinion about how much property such as my 
mother's should have produced. This could be done with a direct study 
of any available records and analysis of prevailing market rates, or it 
could be done by comparison to similar properties at the same period of 
time. For the grazing land, I would want a different expert, and there 
could be any number of valid methods used to calculate the value of 
grazing land.
    Once I gained a general sense of how much should have been received 
from each property, then the burden would be on the Secretary to 
demonstrate how much had actually been distributed to me or to my 
predecessors. I know that the Department must have some records, but 
then the Secretary may tell me once again that these records would be 
too expensive to produce, so she would like to rely on a statistical 
sampling of the average rate of accounting error for similar accounts. 
I would want to know a great deal more about the method she proposed to 
use, and whether it considered the types of errors and omissions that 
can occur in all phases of the trust business cycle, including title 
maintenance, probate, surveys, appraisal, sales procedures, 
collections, enforcement of lease terms, verification of resource 
quantity and value, accounting, investment, distribution and reporting. 
If all of these things were included, then I would want to know that it 
was tailored to my region of the country and the types of natural 
resources that are found on my lands.
    I will give you an example. In my part of the country the most 
common use of land is for grazing, and the BIA has never had adequate 
staff to enforce on overstocking--where a permittee will put more 
cattle on a piece of ground than allowed under the permit. After a 
couple of years this hurts the grazing resource, and next thing you 
know its carrying capacity has been cut in half. The Indian landowner 
is receiving only half of the value of the resource because the BIA did 
not properly carry out its responsibilities. This is a common problem 
on my reservation and I have seen it on other reservations throughout 
the country. Will the problems of lack of grazing enforcement in the 
Great Plains be factored into the methodology that the Secretary uses 
to determine the settlement offer? That is the kind of information I 
would need.
    At some point, it would come down to what kind of number the 
Secretary had to offer. I would want to have the ability to accept or 
reject her offer based on my own understanding of what is fair and 
reasonable after I considered the properties involved and the 
activities on those properties. I would like to be able to make a 
counter-offer, and I may want to be able to divide up the different 
kinds of resources. I may feel comfortable with the analysis of grazing 
values, but I may want to go back and study the oil issues some more. 
At the end, I want to feel that I was treated fairly by the Secretary 
of Interior. Indian people have been so abused and mistreated by the 
federal government, we are not willing to let it happen again.
    Finally, I would like to note that this is only my own personal 
view of what might be necessary to settle my claims. Other account 
holders are in very different situations and might feel differently 
about what kind of information they need. One property owner might know 
that they have only a small interest in relatively low value land, so 
they would quickly accept a fixed offer. Another person might have 
extremely high value oil property and good reason to believe that 
royalties have gone uncollected. They may want much more research and 
investigation before they are willing to settle. This all goes back to 
the principal outlined above that one size will not fit all, and any 
settlement process will have to find ways to accommodate different 
classes of trust land ownership.

Opposition to Section 137 of House Interior Appropriations Bill - 
        Forced Settlement of Indian Trust Funds Accounting
    The context of this hearing is very important. In Congress there is 
an increasing frustration with respect to the seemingly inability of 
the Administration to resolve Indian trust accounting claims. The 
Senate Committee on Indian Affairs has corresponded with DOI, the 
Cobell Plaintiffs, and Tribal leaders on this topic; and has also 
scheduled a hearing. Another significant reflection of this desire is 
the fiscal year 04 Interior Appropriations bill, which includes 
legislation, Section 137, that would give the Secretary of the Interior 
the authority to unilaterally settle all claims relating to the 
accounting or the balance of any individual Indian money account. Under 
this proposal, the Secretary would adjust the balances in Indian trust 
accounts according to a statistical sampling methodology. The 
adjustments would be final and judicial review would be severely 
constricted.
    Section 137 would be extraordinarily unfair to the Indian account 
holders. The Department of Interior is essentially acting as a bank for 
Indian trust accounts. This legislation would give the bank (Interior) 
complete authority to end all disputes over account balances under a 
methodology of its own choosing. It would absolve the Department of 
claims based on failed collections or inaccurate starting balances from 
predecessor accounts. All other claims would be limited to reviewing 
only the statistical sampling under a standard that is the most highly 
deferential to the Secretary. The legislation would presumably bar 
Cobell v. Norton outright. Tribes expect that federal government 
accounting for Indian trust funds be marked by transparency and high 
legal and moral standards--not designed to allow the federal government 
to absolve itself of accountability for its failures to manage Indian 
resources and funds in a manner consistent with the duties demanded of 
a trustee.
    Moreover, no hearings have been held on this proposal, and there 
has been no consultation with tribes or with individual Indian account 
holders. Tribal leaders are interested to begin dialogue on settlement 
options for trust claims, but the process must be fair and respectful 
of the interests of tribal governments and individual Indian account 
holders. We are deeply appreciative of Chairman Pombo's opposition to 
Section 137, and would urge all of the members of the Committee to 
oppose it as well.

Additional Perspectives on Trust Reform
    I would also like to take this opportunity to provide the Committee 
with some additional perspectives on trust reform to take into 
consideration during its deliberations.
    The United States has a trust responsibility for Indian resources 
and the income produced from those resources. This responsibility was 
extended towards individual Indians as a result of the forced allotment 
of Indian reservation lands that began in the 1800's. The complexity of 
managing and accounting for these individual trust holdings and 
accounts increase with each passing generation and result in idle 
resources and loss of income to already impoverished tribal 
communities. It is well documented that the BIA has grossly mismanaged 
Indian trust funds and billions of dollars worth of resources through 
leasing, sale, and management of the natural resources on Indian lands, 
such as agriculture, grazing, timber, coal, minerals, and oil & 
gas.1
---------------------------------------------------------------------------
    \1\ See Misplaced Trust: The Bureau of Indian Affairs' 
Mismanagement of the Indian Trust Fund, H.R. Rep. No. 499, 102ND Cong., 
2ND Sess. 1992, 1992 WL 83494 (Leg.Hist.), and, Financial Management: 
BIA's Tribal Trust Fund Account Reconciliation Results (Letter Report, 
05/03/96, GAO/AIMD-96-63).
---------------------------------------------------------------------------
    The 1994 American Indian Trust Funds Management Reform Act directed 
the Department of Interior and the Department of Treasury to complete a 
historical accounting of Indian trust funds and create a process to 
improve trust funds accounting in the future. Because the Departments 
have not met this Congressional mandate, a group of individual Indian 
account holders developed a class action lawsuit against the federal 
government. The Cobell v. Norton litigation has been in the federal 
court for over seven years, and because of the protracted refusal of 
the federal government to comply with its responsibilities under the 
statute, the federal judge has held numerous federal officials in 
contempt of court, and is now considering whether a structural 
injunction is necessary to direct the historical accounting as well as 
the future reforms for trust administration.
    NCAI has a strong interest in the Cobell litigation and any 
proposed settlement process. NCAI is the oldest and largest national 
organization representing Indian tribal governments and individuals, 
with a membership of more than 250 American Indian tribes and Alaska 
Native villages and thousands of individual Indian members. The tribal 
leaders of NCAI are the elected tribal representatives of their members 
who are individual Indian account holders, and as such have a direct 
concern about the management of individual IIM accounts held in trust 
by the federal government for the individual beneficiaries. As I noted, 
I am an IIM account holder and most of my constituents on the 
reservation are IIM account holders, and they look to me to speak on 
behalf of their concerns.
    In addition, NCAI and tribal leaders have a direct interest in any 
decisions that may affect the ability of the Department of Interior as 
an institution to fulfill its broader obligations towards Indian 
tribes. These obligations encompass not only the responsibility to 
manage the resources that comprise the tribal estate, but also extend 
to the protection and advancement of tribes' inherent powers of self-
government and rights to self-determination. The federal government 
also has treaty and trust obligations to provide education, health care 
and promote the general welfare of Indians, and to protect fishing, 
hunting and water rights and the integrity of the reservation 
environment. This obligation was underscored in the historic Message to 
Congress from President Nixon, H. Doc. No. 91-363, reprinted in Cong. 
Rec. 23258, July 8, 1970:
        Termination [of the trust relationship] implies that the 
        Federal government has taken on a trusteeship responsibility 
        for Indian communities as an act of generosity toward a 
        disadvantaged people and that it can therefore discontinue this 
        responsibility on a unilateral basis whenever it sees fit. But 
        the unique status of Indian tribes does not rest on any premise 
        such as this. The special relationship between Indians and the 
        Federal government is the result instead of solemn obligations 
        which have been entered into by the United States Government. 
        Down through the years, through written treaties and through 
        formal and informal agreements, our government has made 
        specific commitments to the Indian people. For their part, the 
        Indians have often surrendered claims to vast tracts of land 
        and have accepted life on government reservations. In exchange, 
        the government has agreed to provide community services such as 
        health, education and public safety, services which would 
        presumably allow Indian communities to enjoy a standard of 
        living comparable to that of other Americans. This goal, of 
        course, has never been achieved. But the special relationship 
        between the Indian tribes and the Federal government which 
        arises from these agreements continues to carry immense moral 
        and legal force.
    Finally, the amounts the Department of Interior (DOI) holds in 
trust for tribes ($2.6 billion) far exceeds the $400 million held in 
individual Indian trust accounts. The tribal interests in trust land 
and natural resources are physically intermingled and recorded in the 
same title and ownership systems as the individual interests. In fact, 
in many instances, tribes and individuals hold undivided property 
interests in the same parcel of land. Sometimes individuals own the 
surface rights, and tribes own the subsurface rights under the same 
parcel. Additionally, tribal and individual resources are often managed 
and leased in large units under the same leasing or contractual 
agreements. In short, with respect to land and natural resources, 
tribal governments have a keen financial and management interest in the 
decisions that may affect the functioning of the common Indian trust 
systems.

Opposition to Current BIA Reorganization Efforts
    As I noted above, consideration of a settlement process is a very 
positive step but it cannot be considered in a vacuum. Perhaps even 
more important than the historical settlement is the trust reform fix 
for the future. My mother's oil property may soon be in production 
again, and it is not in anyone's interest to allow the kinds of trust 
accounting failures of the past to be repeated in the future. I would 
like to devote the rest of this written testimony to explaining NCAI's 
position on other trust reform efforts that are underway within the 
Department of Interior.
    NCAI is strongly opposed to the current trust reform reorganization 
effort that the DOI is engaged in, and to the dramatic shifts in BIA 
funding that are proposed in the fiscal year 04 budget. We would like 
the assistance of the Committee in stopping this process. NCAI 
Resolution PHX-03-040 regarding this issue is attached.
    Tribal leaders understand better than anyone that the Bureau of 
Indian Affairs needs to change, that it has significant difficulty in 
fulfilling its responsibilities in management of trust funds, and that 
some of the problems relate to the way that the Bureau is organized. We 
want to see successful change and improvement in the way the BIA does 
business. We are not opposed to reorganization per se; we simply want 
to do it right. We cannot afford to squander the opportunity we have 
before us.
    In our view, effective organizational change to effectuate trust 
reform must contain three essential elements:
    (1) LSystems, Standards and Accountability--a clear definition of 
core business processes accompanied by meaningful standards for 
performance and mechanisms to ensure accountability
    (2) LLocally Responsive Systems--implementation details that fit 
specific contexts of service delivery at the regional and local levels 
where tribal governments interact with the Department
    (3) LContinuing Consultation--an effective and efficient means for 
on-going tribal involvement in establishing the direction, substance, 
and form of organizational structures and processes involving trust 
administration.
    These elements are lacking in the current proposal of the 
Department of Interior (DOI) for reorganizing the BIA.
    The organizational charts which accompanied the DOI's plan show the 
establishment of newly created Trust Officers, potentially placed at 
every BIA local Agency Office. These Trust Officers are to be funded 
under the Administration's budget request for fiscal year 2004 for a 
significant initiative to increase funding for trust management within 
the Office of Special Trustee (OST). OST would receive a $123 million 
increase--to $275 million--which is partially offset by a $63 million 
cut to the BIA Construction and an $8 million cut to Indian Water and 
Claims Settlements.
    Of BIA Construction accounts, Education Construction will lose $32 
million--despite a terrible backlog of new school construction needs 
that everyone agrees must be addressed. Tribal leaders have repeatedly 
emphasized that funding needed to correct problems and inefficiencies 
in DOI trust management must not come from existing BIA programs or 
administrative monies. It is critical that the DOI request additional 
funding from Congress to correct the internal problems created through 
administrative mistakes rather than depleting existing, insufficient 
BIA program dollars for these purposes. Increased funding for trust 
reform has the potential to be money well spent but it is an empty 
promise if it comes at the costs of diminished capacity to deliver 
services to tribal communities, and is implemented without clear 
standards for federal accountability, a plan to put the money at the 
local level where it is most needed, and consultation with the tribes 
and individuals whose accounts are at stake.
    We are extremely concerned that the lack of definition of the 
responsibilities and authorities of new OST offices will cause serious 
conflicts with the functions performed by the BIA Agency 
Superintendents and/or Indian tribes. The authority and role of the 
proposed Trust Officers need much more explanation. Moreover, we 
believe that the funding and staff needs to flow directly to the agency 
and regional levels not just to new Trust Officers--to address long-
standing personnel shortages needed to fully carry out the trust 
responsibility of the United States. Before DOI begins the process of 
establishing an entire new mini-bureaucracy, the financial and 
management impact of such an action must be thoroughly examined by the 
Congress and by affected tribal governments.
    We believe that any attempt by DOI to implement its proposed 
reorganization without addressing the three essential elements we have 
identified above for trust administration will prove to be ill advised, 
premature, and ultimately disastrous. We fear that the DOI is on the 
verge of repeating the classic mistake that has ruined the majority of 
its efforts to reform trust administration in the past--a small group 
of executives get together and simply draw up a new organizational 
chart. The preoccupation with moving or creating boxes on a chart is 
the antithesis of how effective organizational change can and should be 
brought about.
    We also firmly believe that this reorganization is putting the cart 
before the horse. Organizational structures must be aligned with 
specific business processes and they must be designed to function 
within a system where services are provided by the DOI and tribal 
governments. DOI has not yet figured out its new business processes. 
Millions of dollars have been invested in an ``As-Is'' study of trust 
services, but the Department has only just begun to undertake the 
critical ``To-Be'' phase of reengineering the business processes of 
trust management. By implementing a new organizational plan 
prematurely, DOI is running a great risk of ignoring the findings of 
its own study and wasting the valuable resources that the agency and 
tribes have already dedicated to understanding systemic problems. DOI 
will most likely refer to the recent ``consultation'' sessions that 
have occurred throughout the regions. I would note the tribal leaders 
strongly object to these so-called ``consultations,'' as the DOI 
representatives were informing the tribes about how the re-organization 
would proceed, and not discussing whether it adequately addresses 
tribal concerns regarding meaningful trust reform.
    Reorganization should only come after the new business processes 
have been identified and remedies devised through a collaborative 
process involving both BIA employees and tribal leadership. We must 
include the input of tribes and BIA employees so that the great numbers 
of people who must implement changes in trust administration understand 
and support necessary reforms. Only then, as a final step, can we 
design an organizational chart to carry out the functions of trust 
management without creating conflicting lines of authority throughout 
Indian country. The history of trust reform is filled with failed 
efforts that did not go to the heart of the problem and do the 
detailed, hard work necessary to fix a large and often dysfunctional 
system.

Developing an Alternative Approach to Reorganization of the Bureau of 
        Indian Affairs
    Tribal leaders very much agree with the goal of the proposed 
reorganization to ensure accountability for trust management throughout 
all operational levels. However we have a great concern that a ``stove 
piped'' reorganization, such as the current proposal, will sharply 
separate the ability to make decisions on trust resource management and 
trust services at the local level, and will put an unbearable level of 
bureaucracy into a system that is already overloaded with bureaucratic 
requirements. In short, tribal leaders want to ensure that decision-
making and resources are placed at the local level. Tribes believe that 
the Department must maintain a single point of decision making 
authority at the local level to deal with issues that cut across both 
trust resource management and other trust services.
    Reservations are active, developing communities that are very 
dependent on trust property, and need decisions made on routine matters 
at the local level in a reasonable time frame. For example, all of the 
major infrastructure activities like housing, roads, irrigation, 
drinking water, telephone service, etc. take place on trust land. There 
are also quite a number of important daily relationships at the local 
level regarding the provision of social services to elders and minors, 
and the management of their IIM accounts. Social workers, medical 
professionals and Superintendents work together to set up restricted 
accounts and approved spending plans for the protection of their trust 
funds. BIA and tribal law enforcement also must regularly deal with 
activities that take place on trust lands, deal with trust resources, 
or relate specifically to leasing activities. Examples of such 
circumstances include problems of trespassing cattle and the remedies 
under a grazing lease for impoundment or fees, timber theft and timber 
leases, violations of irrigation and water rights, eviction of a tenant 
for nonpayment on a lease, etc.
    All of these types of decisions require strong coordination and 
decision making at the local level on matters that affect both a trust 
resource interest and the broader trust responsibility to provide 
services. These make up the routine kinds of decisions local BIA 
officials make that often never reach the central office level.
    Imagine having to get central office approval every time there is a 
disagreement over a housing lease approval or construction of an 
irrigation ditch--this is something tribes don't want and we don't 
think the DOI wants either. Central office decisions take a long time--
and this means more business deals go stale, more financing dries up, 
projects don't move forward, and the cycle of missed opportunities for 
Indian country is badly exacerbated.
    We believe that trust reform reorganization can be effective in 
improving administrative accountability while still allowing for local 
decision making on routine matters that cut across trust resource 
management and trust services. We generally agree with the DOI that it 
would be valuable to group the trust funds management and the trust 
resource management activities at the local level, with clear lines of 
responsibility and staffing. However, we do not believe that the 
individuals responsible for these functions should be under a separate 
administrative authority from the staff responsible for performing 
other trust services. Rather, the BIA Regional and Agency office 
authorities should remain as the primary focal point of contact with 
individual tribes, preserving local control of functions and programs 
to support tribal self-determination. Accountability is not going to be 
assured through any organizational structure, but we believe it can be 
achieved in part with the following improvements:
     Identification of duties
     Adequate funding, staffing and training to perform those 
duties
     Policies, procedures, standards
     Internal controls
     External audits (performance and financial)
     Transparency (basis for decisions is clearly stated and 
evident)
     Adequate staff training with performance standards
     Focus on responsiveness to beneficiaries
     DOI/BIA staff committed to change and improvement of 
trust activities
    In broad terms, tribal leaders have supported the idea of creating 
a structure that would have three major operational divisions under the 
Assistant Secretary for Indian Affairs: 1) Trust Funds and Trust 
Resources Management; 2) Trust Services (such as law enforcement, 
social services, roads, etc.); and 3) Indian Education. An 
administrative services section to handle such functions as budget, 
personnel and information systems would support these three divisions. 
Central office functions within these divisions could include: (1) the 
establishment of standards, procedures, protocols, internal controls 
for accountability, and program priorities; (2) delegations of 
authority to regional offices; (3) technical assistance; (4) reporting 
and troubleshooting; and (5) development of budgetary needs. The tribal 
leaders who participated in a Trust Reform Task Force with DOI 
suggested that the Office of Trust Funds Management and other offices, 
which are currently or prospectively under the administrative control 
of the OST, would be phased back into the BIA in order to have 
integrated beneficiary services. This is essential to maintain 
accountability; by having these offices report to the OST, the OST is 
placed in the tenuous and untenable position of overseeing itself.
    At this time, Congress should prevent the DOI from proceeding with 
its proposed reorganization plan and focus instead on funding land 
consolidation that will in time reduce the cost of trust 
administration, and on developing good systems for the core trust 
business processes: land title, leasing and accounting. Without 
adequate land title, leasing and accounting systems, reorganization, 
especially as proposed by DOI, does little to effectuate true trust 
reform and the cost of reform of trust administration will continue to 
escalate.

Land Consolidation
    Addressing fractionation is critical to improving the management of 
trust assets. Fractionation promises to greatly exacerbate problems 
that currently plague the DOI's efforts to fulfill its trust 
responsibilities, diminish the ability to productively use and manage 
trust resources, and threaten the capacity of tribes to provide secure 
political and economic homelands for their members. If allowed to 
continue unabated, fractionation will eventually overwhelm systems for 
trust administration and exact enormous costs for both the 
Administration and tribal communities.
    Reduction of fractional interests will increase the likelihood of 
more productive economic use of the land, reduce record keeping and 
large numbers of small dollar financial transactions, and decrease the 
number of interests subject to probate. Management of this huge number 
of small ownership interests has created an enormous workload problem 
at the BIA. Given this, we do not understand why the fiscal year 2004 
Administration request proposes a $123 million increase for OST, but 
only a $13 million increase (to total funding of only $21 million) for 
the land consolidation program. Congress needs to put funding directly 
on the problem, and we believe that an investment in land consolidation 
will pay much bigger dividends than most any other ``fix'' to the trust 
system, including reorganizing the BIA.

Core Business Systems - What are We Trying to Fix?
    Over the decades, Indian tribes have witnessed a multitude of trust 
reform initiatives, reorganizations, plans, meetings, summits, work 
groups, task forces, computer systems, software, outsourcing contracts, 
and other efforts to fix the problems with management of Indian trust 
funds. To date, none of these efforts have proven successful. The DOI 
has failed to correct fundamental deficiencies in core systems that are 
essential to trust funds accounting and trust resource management. NCAI 
believes that this Congress should focus its oversight efforts on these 
core systems to ensure that reform efforts meet requirements for 
fiduciary trust fund administration.
    Indian trust fund administration requires accountability in three 
core systems that comprise the trust business cycle: 1) Title; 2) 
Leases/Sales; and 3) Accounting. These core systems must be accurate 
and integrated, timely, and be subject to credible standards and 
oversight. Pursuant to the 1994 American Indian Trust Funds Management 
Reform Act, these are exactly the systems that the Special Trustee 
should address. The Secretary must be able to provide to the 
beneficiaries an accurate and timely statement of the source, type and 
status of the funds; the beginning balance; gains and losses; receipts 
and disbursements; and the ending balance. 25 U.S.C. Sec. 4011. 
Correcting the DOI's performance in these core functions will also 
require the DOI to employ sufficient personnel, provide staff with 
proper training, and support their activities with adequate funds.
    Title - The title and ownership system is the most fundamental 
aspect of the trust system. DOI cannot accurately collect and 
distribute trust funds if it does not have correct information about 
the owners of the trust assets. This is the starting point for any 
effort to fix the trust system.
    Maintaining accurate ownership information is made exceedingly 
difficult by the ever-expanding fractionated ownership of lands divided 
and redivided among heirs. Today, there are approximately four million 
owner interests in the 10 million acres of individually owned trust 
lands, and these four million interests could expand to 11 million 
interests by 2030. Moreover, there are an estimated 1.4 million 
fractional interests of 2 percent or less involving 58,000 tracks of 
individually owned trust and restricted lands. There are now single 
pieces of property with ownership interests that are less than 0.000002 
percent of the whole interest.
    Currently, the BIA is using ten different title systems in the 
various Land Title Record Offices around the country, both manual and 
electronic. These systems contain overlapping and inconsistent 
information. The systems are largely ``stand alone'' in that they do 
not automatically reconcile the ownership information in the agency 
offices, in tribal records, or in the lease distribution records that 
are used for daily operations. Because records management standards and 
quality control procedures are lacking, there is no assurance that 
title records are accurate. These inaccuracies result in incorrect 
distribution of proceeds from trust resources, questions regarding the 
validity of trust resource transactions, and the necessity to 
repeatedly perform administrative procedures such as probate.
    Consequently, a large backlog of corrections has developed in many 
of the title offices, and this has compounded the delays in probate, 
leasing, mortgages, and other trust transactions that rely on title and 
ownership information. In turn, each of these delays compounds the 
errors in the distribution of trust funds. See, Draft As-Is Model 
Preliminary Findings, Electronic Data Systems, December 20, 2002. 
Cleaning up the ownership information and implementing an effective 
title system that is integrated with the leasing and accounting systems 
is a primary need for the Indian trust system. NCAI encourages this 
Congress to ensure that expeditious reforms are made to the title 
system. The reorganization proposal, which is focused on developing 
oversight capacity at OST, appears to do little to address this most 
fundamental problem at the BIA.
    Leasing -- Most Indian trust transactions take the form of a lease 
of the surface or subsurface of an allotment, permits to allow the 
lessee to conduct certain activities in return for a fee, or a contract 
for the sale of natural resources such as timber or oil. Although 
leasing records are vital to ensure accurate collection of rents or 
royalties, there are no consistent procedures or fully integrated 
systems for capturing this information or for accurately identifying an 
inventory of trust assets. Currently, BIA has no standard accounts 
receivable system and many offices have no systems to monitor or 
enforce compliance, or to verify and reconcile the quantity and value 
of natural resources extracted with payments received. The accounting 
system most often begins with the receipt of a check that is assumed to 
be accurate and timely. Implementing an effective lease recording 
system that is integrated with the title and accounting systems is a 
primary need for the Indian trust system, but the BIA has only recently 
begun to investigate possible technologies for this effort. NCAI urges 
Congress to ensure that the information management and administrative 
systems put in place are organized to provide accurate and timely 
information regarding the trust resource transactions that produce the 
income that is deposited into trust fund accounts.
    Accounting - The 1994 Act requires the Secretary to account for 
``the daily and annual balance of all funds held in trust by the United 
States for the benefit of an Indian tribe or an individual Indian ... 
.'' 25 U.S.C. Sec. 4011. The DOI needs to develop accounting systems 
that will integrate and verify information from one function into 
another (from title to leasing to accounting). The DOI should also set 
out what oversight capabilities are planned into the system 
(verification and audit) as well as a plan for document retention and 
ease of access to facilitate audit and internal verification 
procedures. Furthermore, the DOI system needs a built-in crosscheck 
between BIA entries to its control account and Treasury's entries to 
its control account. This system should automatically produce a daily 
exception list that would be examined and remedied in a timely manner.
    By its own representations, the Government makes clear that it 
still lacks a cohesive, integrated strategy for fulfilling this 
fiduciary duty to accurately account for trust funds balances. Rather 
than focusing attention and energy on a reorganization, Congress should 
ensure that DOI develops the core trust systems--title, leasing and 
accounting--to ensure that those systems provide accurate information 
regarding the trust corpus as well as trust resource transactions that 
produce income that is deposited into trust funds on behalf of 
individual and tribal beneficiaries. Once these processes have been 
developed, an organizational structure can be developed to ensure their 
proper implementation.

Accountability and Standards
    It is well known that DOI has mismanaged the Indian trust for 
decades. The real question for Congress is why decades of reform 
efforts have produced so little change in DOI's willingness to take 
corrective actions, to reconcile accounts, and to put adequate 
accounting and auditing procedures and policies in place.
    The real answer to this is that the DOI and the Department of 
Justice have always viewed their primary role as ensuring that the U.S. 
is not held liable for its failure to properly administer trust assets. 
For this reason, they have never been willing to put any standards into 
regulations to govern the management of Indian trust assets, and the 
lack of standards has consistently undermined any effort to take 
corrective action on trust reform. What is needed is a clear signal 
from Congress to create a new culture of transparency and 
accountability for Indian trust management. Once the DOI understands 
that mismanagement will no longer be tolerated, the system will change 
and true reform will begin. In effect, the DOI is acting as a bank for 
Indian trust funds--and just like every other bank in the U.S., the DOI 
must be subject to standards and accountability.
    Beyond the issue of reorganization, we believe that it is critical 
for Congress to substantively address the underlying issues of 
transparency and accountability in fixing the trust system. We would 
greatly encourage the Committee to take up trust reform legislation 
that would hold the DOI to the ordinary standards of a trustee, and we 
would be pleased to work with you in developing that legislation.

Continuing Involvement of Tribal Governments
    Tribal governments must be substantively and continuously involved 
in trust reform efforts, working in partnership with Congress and the 
Administration. Trust Administration goes to the heart of government-
to-government relationships and to the capacity of tribal governments 
to exercise their sovereign powers and ensure that the rights and 
interests of its members are protected and well served. Tribal 
governments have a great deal at stake in developing effective 
mechanisms for trust administration within unique political-legal-
economic relationships with the United States. We urge Congress to make 
every effort to ensure that tribes are ``at the table'' when critical 
decisions regarding trust reform are being made.
Conclusion
    On behalf of NCAI, I would like to thank the members of the 
Committee for all of the hard work that they and their staffs have put 
into the trust reform effort. If we maintain a serious level of effort 
and commitment by Congress, the Administration, and Tribal Governments 
to work collaboratively together to make informed, strategic decisions 
on key policies and priorities, we can provide the guidance necessary 
to bring about true reform in trust administration.
                                 ______
                                 
    [Resolutions submitted by Mr. Hall were also submitted by 
Mr. Berrrey and can be found at the end of Mr. Berrey's 
statement.]
    The Chairman. Thank you, and I thank the entire panel for 
your testimony.
    The Chairman. Mr. Hayworth.
    Mr. Hayworth. Thank you, Mr. Chairman. Let me thank all 
three panelists again for your patience today, and let me turn 
to the President of the National Congress of American Indians, 
my good friend Tex, since we are on a first name.
    I can recall everybody getting together out in Phoenix, you 
know, in an effort to try and achieve consensus. And this has 
been to say the least, a very difficult problem to deal with. 
You just cited 12 goals of what you would like to see done. 
Boy, sometimes, you know, it's like when I get on this Capitol 
over here. The Architect of the Capitol gave the elevator 
operators around here 16 rules. And the God Lord only gave us 
10 commandments. But I don't look askance at your evaluation of 
this because I am reminded that President Wilson had 14 points 
that he dealt with in post World War I. And perhaps the number 
of principles you bring to the table just encompasses how much 
of a challenge we have to get our hands around. Having said 
that, Mr. President, was there anything in the preceding 
scenario offered by the Assistant Under Secretary from the 
Department of Interior, anything that you could hang your hat 
on; anything there that you see is common ground to arrive at 
some consensus?
    Mr. Hall. I believe there is, Mr. Hayworth. Congressman 
Hayworth, I believe there is. I believe reform is one 
initiative. There needs to be the appropriate staff. There 
needs to be training. There needs to be appropriate staff, and 
I think we all agree on that, the tribes and the DOI and BIA. 
As I mentioned earlier to some members of the Committee, and I 
believe I mentioned it briefly to Chairman Pombo, if there are 
not appropriate staff out in the field, out in the reservation 
to manage the assets, if it's grazing land, oil, timber or 
fishery, if there's not appropriate staff, there could be an 
abuse of that resource. And if there's abuse of that resource, 
that's a short change check to that beneficiary. We agree that 
additional staff, trained and efficient staff, if it's oil, 
grazing or timber, must be on a reservation level.
    Mr. Hayworth. Let me offer another scenario. And I'll start 
again with you President Hall, but I would like our other two 
witnesses to offer their thoughts on this, too. So often, and 
this has happened in so many court cases, there is an 
appointment of a special trustee. And we have been around the 
bend with this in the previous administration in trying to deal 
with getting our arms around this challenge. But if memory 
serves--we can go back in the record--I can recall a gentleman 
who came in who was a trust expert, who testified before this 
Committee in the last Congress, gentleman from California, I'm 
sorry I don't remember his name, but he warned us from his 
purview in the private sector and being involved--and forgive 
me if it's not the correct term, I believe the term ``forensic 
accounting'' can apply to this--the investigative work. He 
wanted to stress that this was highly specialized work. And the 
implication for me in hearing him was the suggestion that 
perhaps this was not the domain of DOI or, with all due 
respect, necessarily the domain of a tribal consensus. So let 
me offer this scenario that I really don't think has been 
articulated today. Is there any interest, for lack of a better 
term--and I am not trying to go with a court concept--but with 
that concept of special trustee--and I know in existing law we 
already have some of that designation, and I guess I will go a 
step further. Should we look outside government to someone in 
the private sector who has had considerable experience in 
forensic accounting and enlist their help in getting their arms 
around this? And I'm curious to see if you think that might be 
one course of action that might be viable.
    Mr. Hall. Just one comment. I think it is. In 1980 or 1982 
in my neck of the woods, in North Dakota, there was a huge oil 
and gas sale. And I know my mother received a substantial check 
for her allotment, but it wouldn't show the number of barrels. 
It wouldn't show the number of barrels and how much she 
received for that. It was a check for an oil lease for this 
many mineral acres, but it was inconclusive. So I would that if 
an individual or a tribe are looking to settlement, you would 
want to have an expert there to say, well, what would that have 
generated; how many mineral acres were leased; what was a 
comparative sale off the reservation for that price of oil; 
what was the comparative sale for that grazing land, and let's 
see if it has fair market value; and let's go backward and 
let's let the forensic accountant do it. I would think an 
individual or a tribe would want to have that information to 
make a reasonable response to say, yes, I want to proceed to 
settlement, or no, I don't think I have enough facts.
    Mr. Hayworth. Elouise and John, I know my time's up, but 
just your brief comments on that concept.
    Ms. Cobell. I would say I agree, and that's what we have 
submitted as the plaintiffs to the court is that a receiver be 
brought in. And I believe that someone made the point that 
earlier one Congressman stating the court does it all the time. 
They appoint special masters. Special masters can come in with 
the special expertise that you're talking about and they can do 
the accounting, contrary to Mr. Cason's answer. I'd also like 
to say that, contrary to Mr. Cason's testimony, that both 
parties have agreed that approximately $13 billion has been 
generated by these trusts. We have agreed. That was stated in 
court yesterday without the accrued interest. So I want to make 
that clear. You know, the accuracy--I think that the--what the 
government and what I can determine from the Department of 
Interior is they don't want to admit that they can't do an 
accounting. And we understand that there is missing data and 
the documents have been destroyed and so you can't do an 
accounting. Two courts have proved that statistical sampling 
won't work. So what you're suggesting makes sense. And it is 
basically the methodology that we have presented to the court 
in our plan is going out and determining through experts the 
amount of money that's in the trust that we have determined was 
$13 billion and what I heard yesterday was the Department of 
Interior was not disputing that. They also thought it was $13 
billion, but the accrued interest is what they have not agreed 
to.
    Mr. Berrey. I personally would caution against designing a 
vehicle of settlement. I think you have to back up a little bit 
and define a process. And I think the process is in front of us 
right now. Senator Campbell and Senator Inouye and this 
Committee is committed to try to work on a settlement. That's 
the start. And then you bring the parties together and you use 
people that are practiced in the profession of alternative 
dispute resolution to design the vehicle collaboratively . I 
think the idea needs to be let's come together, let's create 
some parameters and let's look at a time line and then let's 
assess where we're at through conversations with all the 
parties. We may not need an accounting. We may just want to go 
right to the nut of--you know, let's create a settlement. I 
think and I caution instead of trying to design a vehicle, you 
just let the process take place and it works. It's working well 
with our tribe. We're going through a process. We have had it 
assessed and we're having conversations and we are narrowing 
quickly to where both sides want to go. So I think you should 
try to work on creating a process instead of designing a 
vehicle.
    The Chairman. Thank you. Mr. Faleomavaega.
    Mr. Faleomavaega. Mr. Chairman, I'll defer to my good 
friend from New Jersey.
    Mr. Pallone. I am going to try to get in one question to 
each of you. If I can get each of you to answer a different 
question. With regard to Tex Hall, you heard what Mr. Cason 
said. He sort of implied that Indian Country and the NCAI Task 
Force, if I could call them that, were really consulted and 
supportive of the BIA reorganization. And then later he sort of 
suggested on my question that that wasn't completely the case. 
But I just--my understanding is that the task force has 
essentially ceased functioning with the BIA sometime last 
October, November, because you didn't think the BIA was really 
willing to listen to what you had to say. And you know since 
that time after January, there really was no more consultation 
after they come up with this proposal and that the two key 
issues which were no standards and no independent commission 
were the main reason why you were opposed to this. And if you 
could just briefly--because I want to get to the other two 
comments on that.
    Mr. Hall. Thank you, Congressman Pallone, and you described 
it quite correct. And as I mentioned Resolution 040 lays that 
out, that historical perspective. We were working, I thought 
very well, as a task force in Indian Country and represented 
all the 12 regions of the United States and had 24 members and 
the alternates were a total of 36. So the whole country was 
covered. And we were working in Committees, and I thought just 
started a great process. And then when it got to standards, 
when it got to oversight, negotiations stopped. And it's hard 
to get a clear answer from the response of DOI or BIA. The 
response I hear most often is that the task force lived out its 
time, and it served its purpose, and it's over. And I never had 
settlement talks with anybody from DOI or BIA as well.
    Mr. Pallone. I appreciate it, and I am trying to move on, I 
apologize.
    Mr. Berrey my understanding, and you clarify this, is 
you're against the 137, the MAAD that we are going to have to 
deal with in the next few weeks, but you're in favor of the BIA 
organization that's been proposed or was proposed since 
January. And I'm going to try to ask you not to take this in 
the wrong way, but there have been some reports in the Indian 
media that you're in favor of the BIA reorganization because 
you are on the Federal payroll in some way. And I mention this 
mainly to give you an opportunity to comment on it because is 
it the case that you're for the BIA reorganization but against 
137? And if you want to comment on the suggestion that somehow 
you're on the Federal payroll with the trust reform.
    Mr. Berrey. I am against 137; that's correct. I am not on 
the Federal payroll. I actually work for the United South and 
Eastern tribes, which Keller George is the president of. And I 
get paid for my work on trying to not only identify the trust 
processes, but to design and reengineer those processes. So, 
you know, sticks and stones may break my bones, but I am trying 
to fix it when everybody wants to sit around and complain about 
it.
    Mr. Pallone. What about the BIA reorganization?
    Mr. Berrey. I have problems with the reorganization. I 
think it's the cart before the horse. I think what we ought to 
be doing is concentrating on the reengineering of the processes 
of trust management. Get those in line and then follow it with 
an organizational package that fits it. But in our as-is study, 
there were tremendous line authority problems within Interior. 
And I think part of the response of the reorganization was to 
address those problems in the line authority. You had regions 
all across the United States following the same regulations in 
a different interpretation. So there is an extreme variety of 
the way the management is delivered throughout Indian Country 
and it was apparent that there needed to be some sort of a 
change to try to polarize and align those things together. So 
I'm for better line authority, better processes, but I really 
believe that the reengineering of the trust service processes, 
accounting, leasing, title, probate, the day in and day out 
activity that's worked on everyday at the grass-roots level in 
Indian Country needs to be fixed first and foremost.
    Mr. Pallone. I know there is almost no time, Mrs. Cobell, 
we are going to have a difficult time next week in trying to 
get rid of 137? And hopefully the Rules Committee will make it 
in order, and Mr. Pombo will have an amendment, and we will be 
able to fight and take it out. If you could give us any kind of 
written follow-up on what you said because we need as much 
ammunition as possible going into the next week or whenever 
this comes up to make the case against 137. I know you tried to 
outline that, but if you could follow up and give us whatever 
follow-up you can on what you said, so we have those arguments 
that we can send out to our colleagues and make the arguments 
on the floor, because it's going to be a hard-fought fight in 
my opinion. And maybe with the permission of the Chair, we 
could ask her to give us some follow-up about what she said on 
137 that we can use, if that's OK?
    Mrs. Cobell. I certainly will. And I had much more to give 
you today but the red light went on, but we will follow up with 
additional information for you.
    The Chairman. We'll give her an opportunity to submit, in 
writing, further testimony. Mr. Renzi.
    Mr. Renzi. Thank you all for your patience and your 
testimony today. Mr. Hall, thanks. Good seeing you again. I 
wanted to ask, and I guess I am not afraid to show my 
ignorance, you spoke during your testimony about the threat or 
the delay that the Navajo Nation had incurred and the 
possibility of that same tactic being a threat to this. Could 
you help me in understanding.
    Mr. Hall. I was referring to the Supreme Court case of the 
Navajo Nation. It was delayed, delayed and delayed, and no 
decisions were made when I thought decisions for possible 
settlement could have been made before. But there never were 
and so the ruling in the Supreme Court went against them. So as 
a result they don't have any money for that loss. We believe at 
least--they would say for their mineral resource and that being 
coal. So I would think that any settlement process, there 
shouldn't be any delays. If a willing party is willing to 
settle, there should be a timeframe of when that happens from 
the government side.
    Mr. Renzi. Ms. Cobell, I read your testimony this afternoon 
and going through it, I notice that you talk about the 
alternative models. And it was interesting to hear Congressman 
Hayworth talk about that new--asking for more information on 
the third option as he described it, kind of a blended model. 
And just your thoughts on whether this new blended model--I 
think what it does is it combines not only the transaction by 
transaction reconciliation process but some statistical 
sampling below the 5,000 level. Is that something--
    Ms. Cobell. We're certainly against the statistical 
sampling basically because of the fact that nobody knows how 
much is in those accounts.
    Mr. Renzi. I realize that, but I think what we're talking 
about here, and maybe my coach can help me here, are we talking 
about a blended third option?
    Ms. Cobell. What we had proposed is a modeling methodology 
where we use experts that--the oil and gas experts. We know 
where every single oil well was drilled in this country, 
including the dry holes, and using the technology that's 
available from third parties which the government has never 
attempted to do, and using information that's out there 
concerning what should be in those accounts. And I think 
Congressman Cason said or Carson said that--he was right on. 
You know, if you use that type of technology you can really 
come up to near what the amount should be in the account, and 
that is what we have determined. And we have determined that 
$13 billion should have flowed through these accounts without 
the interest. The interest, of course, would have to be plus 
that.
    Mr. Renzi. That relates specifically to oil?
    Ms. Cobell. It relates to all of the different resources 
that are out there, agricultural leases, grazing, timber, all 
of the resources that are derived on what's on top and what's 
underneath the property.
    Mr. Renzi. And that would fit in also to the idea of having 
processed an alternative dispute resolution? It would fit into 
the idea that you would gain that substance or you would gain 
those factors as a part of the mediation process?
    Ms. Cobell. Exactly. It definitely can be used for the 
basis of settlement negotiations.
    Mr. Renzi. Again, thank you all.
    Mr. Hayworth. [Presiding.] And thank you, Congressman 
Renzi. One of the great congressional ironies is we just heard 
from Congressman Renzi from the First District of Arizona. And 
we turn now to a gentleman who was born within the parameters 
of what is now the First District of Arizona, but represents 
the State of Oklahoma, Mr. Carson.
    Mr. Carson. Standing on the corner in Winslow, Arizona.
    Mr. Renzi. Eagles in concert this weekend.
    Mr. Carson. Mrs. Cobell, I am still trying to get to what 
is a fairly basic question that there is some confusion on in 
the earlier panel. $13 billion without interest is now the 
amount that you assert are the damages owed to the plaintiff 
class?
    Ms. Cobell. Not damages, but the money--revenues that 
should be in the account.
    Mr. Carson. That should be in the account. And with 
interest, what would that be today?
    Ms. Cobell. I believe that amount is in excess of $140 
billion.
    Mr. Carson. That is how we get to the $140 or $150 billion 
that was being bandied about earlier. Mr. Cason, in his 
testimony, and the approach they're using is largely not to do 
what it seems like Mr. Hall was suggesting being done in his 
North Dakota mineral lease, which is to say he is looking at 
how much was paid into the account and how much is there and 
the difference between those in calculating the several million 
dollars or low millions of dollars in lost dollars or amount 
owed to IIM account holders. You're asserting to get that $13 
billion number that having a forensic accountant or having all 
these experts go in and say, look even if money was paid into 
the account, it may have been not at the fair market value, 
there may have been fraud involved or there was fraud 
involved--is that correct? I mean the assertion is that the $13 
billion is how much should have been paid in there and you are 
asserting that money could have paid into those accounts but it 
was less than what the fair market value could have been?
    Ms. Cobell. No. We're not talking about the fair market 
value. This is the amount of money that should have gone into 
those accounts based on the information from third party 
information and technology. We are not assuming that this 
particular lease did not create this amount of money, you know, 
what was the basis for that at that particular time for 
instance on agricultural leases, what were they paying during 
that era of time and that is how it is calculated into the 
model.
    Mr. Carson. That would be the fair market value. For 
example, Congressman Cole's example earlier, let's say the 
lease was worth $100, but only $2 was being paid into it. 
That's what the lease holders negotiated. That would be a 
breach of fiduciary duty and all of those kind of things, but 
there would be money being paid into the IIM account. It wasn't 
that it was lost or never paid into it. It is that the amount 
that should have been paid into it under a fair and arms-length 
negotiation was not being paid into it. Am I making myself 
clear about the distinction?
    Ms. Cobell. Actually, the government is not that far from 
what we say, that $13 billion went into those accounts. That's 
what should have been generated by the revenues that went into 
that account and basically the government is saying the same 
thing, that $13 billion was generated.
    Mr. Carson. How do you get to the $13 billion though. You 
don't have the actual records. You're looking at how much a 
mineral lease was going for in North Dakota in 1910, 1950 or 
1970, and you are saying we have records as to how much the 
going rate was and this is how much this IIM account holder 
should have been getting, and then we project it from there; is 
that correct?
    Ms. Cobell. That's correct.
    Mr. Carson. Is there a sense that there was fraud involved, 
that people weren't being paid the fair market value?
    Ms. Cobell. Oh, yeah. The exhibits that we are going to be 
sharing that we didn't have available from the court, there are 
certain--like the Ernst & Young report is so riddled with 
errors, they used documentation that didn't even relate to that 
particular IIM account holder. There were situations where 
canceled checks were signed by the superintendent that went 
into the superintendent's account. So even though that they're 
saying this disbursement might have been made and who was it 
made to, who was the verification made to.
    Mr. Carson. Right. One last question on this as my time is 
running out. Mr. Cason said that their analysis showed that 
statistical sampling, 99 percent of the records were more or 
less accurate, you know--I think that's a rough paraphrase. 
He's shaking his head that that is not what he said. Do you 
assert the statistical sampling is not an effective way of 
verifying the amount in there and why not.
    Ms. Cobell. Statistical sampling will not work because 
there isn't accurate data. The Bureau of Indian Affairs, they 
do not have accurate data, and there is too many missing 
documents that have been willfully destroyed and they cannot 
find. There are hundreds of thousands of documents that they 
haven't even indexed yet that it will take a process that will 
be much more my lifetime that you could ever try to get some 
sort of information on the account. There's no way you can do 
an accounting the way the Department of Interior is proposing.
    Mr. Carson. My time is up.
    The Chairman. [Presiding.] Mr. Cole.
    Mr. Cole. Thank you very much--
    The Chairman. If the gentleman would suspend for a minute. 
We have a vote going on the floor, so you guys can silence your 
beepers.
    Mr. Cole. Thank you very much, Mr. Chairman, and first I 
was remiss earlier for not thanking you for holding this 
hearing and asserting the authority of this Committee. I 
appreciate it very, very much. So little time, so many 
questions. If I may I would like to pose a three-part question 
and then start with you, Ms. Cobell, and go to the others.
    First in your respective opinions, what would you see as 
a--describe for me a fair settlement process, not an outcome, 
just the process that you think that would be fair, that would 
render a decision at the end that the people would regard as 
legitimate? Second, a fair accounting process, because that's 
clearly part of this, too. You have to have some set of numbers 
on which people can agree. And I would--and I agree very much 
that we have a rigged numbers game going on here. And then 
third, do you think the process at this time is better left to 
the court or congressional action?
    Ms. Cobell. First of all, on the process, I think that we 
have to go out into the field and meet with IIM beneficiaries 
and get their input on a fair process for settlement. I think 
that that's very crucial. Second of all, the second question 
was the--
    Mr. Cole. Accounting process.
    Ms. Cobell. First of all, the government just has to 
admit--why are they spending millions and millions of dollars 
and telling you that they need $300 plus millions of dollars to 
do an accounting, when they know they can't do an accounting. 
They have to admit that they can't do an accounting, and then 
we would be on the same page. And third, on the courts versus 
Congress, of course, you know my answer is let the judicial 
process and stop the end run around the judicial process that's 
going forward right now.
    Mr. Cole. Every now and then we throw you a softball.
    Mr. Berrey. First, on how the process works, I think there 
is a proven productive science that is growing widely today 
that is called alternative dispute resolution. You bring the 
parties together, you describe the claims, you interview the 
parties and you start working through the issues one by one. 
And when you are in a nonlitigation type environment and you 
let down your guard, the answers start falling in line. I know 
it sounds impossible, but it works. It's working for us. And 
our claims are much more complex than the claims that are laid 
out in this Cobell lawsuit. Ours are more broad than just an 
accounting claim for IIM accounts. Ours are way more broader 
and we're getting somewhere because we decided to put our guns 
away and try to sit down and forge a way through it and I think 
it can be done. Second, I think an accounting is ultimately 
going to be a waste of time. We need to draw a line in the sand 
and say let's fix the future and let's make a cut at the best, 
because I don't want to see a bunch of money spent on 
accountants. And ultimately, Congress, I believe, is only going 
to allow so much money. Why do we have to go all the way around 
the world to get to the place where we'll end up anyway. Why 
don't we start now. Why don't we figure out what the people, 
the citizens, the taxpayers are willing to pay and let's make a 
cut and go on down the road and let's start looking forward. I 
think Congress needs to step in. I think the court has gone too 
broad. They're not limiting their efforts to just an IIM 
accounting. They're getting into issues that are specific to 
tribal governance and self determination and I think the impact 
it ultimately erodes those two things that we're so proud of 
and hold so dearly. So my wish is that the Congress steps in, 
that the House Resources Committee, God, and the Senate Indian 
affairs Committee sit down together, and let's begin this 
alternative dispute process and make it work.
    Mr. Hall. Thank you for the question, Congressman. I think 
everybody has to be at the table, the property owners, the 
individuals and the tribes have to be at the table. Tribes are 
willing. We have NCAI resolution now that supports a work group 
to be developed. I believe that this will happen with the 
involvement. Without the involvement, it won't happen. And I 
believe the information. We have to be frank, we have to be 
honest. I believe maybe some facilitation from some neutral 
parties have to be involved. Congress has to be involved 
because the funding for this has to happen. And as far as the 
accounting is concerned, I think you raise--and I had the same 
thought you did when you mentioned what's in the system versus 
what's not been entered. That has to be factored in the 
settlement process because many of the IIM account holders will 
say, you know, last year or 5 years ago I got this much check 
for my resource, but this year I got a lot less and there is no 
explanation with that check as to why. Now, when you go back to 
1887, that's even going to be 10-fold. And the local staff, the 
local BIA office is very critical. Some people worked there 20, 
25, 30, 40 years they have worked in those offices. They have a 
lot of the historical information on who the families are and 
the IIM account holder has to have access to that information 
not so much from Washington but from local, because that's 
where those accounts have been generated locally at that agency 
office out on that particular reservation.
    So we're ready. Want to get engaged and our first meeting 
is in Portland July 24.
    The Chairman. Thank you. We have a series of votes on the 
House floor. We have four votes right now for the Members. We 
are going to recess the Committee. Probably going to take 30 
minutes to go through all the votes, maybe a little bit longer 
than that. As soon as the votes are completed, we will 
reconvene the hearing and return. I apologize, but we can't 
control the votes on the floor, so Committee is in recess.
    [Recess.]
    The Chairman. We're going to call the hearing back to order 
if I could have our witnesses come back.
    Call the hearing back to order. I want to thank our 
witnesses. I'm going to start with Mr. Faleomavaega for his 
questions.
    Mr. Faleomavaega. Thank you, Mr. Chairman. Before 
proceeding I'd like to request unanimous consent that the 
statement of our co-chair of our American Indian Congressional 
Caucus, Mr. Dale Kildee from Michigan, be made part of the 
record.
    The Chairman. Without objection.
    [The statement of Mr. Kildee follows:]

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

    Good afternoon. Mr. Chairman, as a Member of the Resources 
Committee and as Co-chair of the Congressional Native American Caucus, 
I am pleased to have the opportunity to speak on the issue of Indian 
trust funds.
    For more than a century, Interior has done a poor job maintaining 
trust fund records.
    The Federal government has managed funds for individual Indians 
since the passage of the 1887 General Allotment Act.
    Allotment laws were designed to break up tribal lands by providing 
tracts of land to individual Indians. Congress stopped the allotment 
process in 1934, after a loss of millions of acres of tribal lands and 
hundreds of thousands of acres that were lost to taxes that Indians did 
not know they owed. Unfortunately, these injustices of the past remain 
as the problems of today.
    Because of the allotment policy, Indian allotees or heirs of the 
original allotment holder face the complex problem of owning 
fractionated interests in allotted land.
    It is common for hundreds of owners to hold an interest in one 
tract of land. This situation has added to the complexity of this 
problem and has served to undermine reform efforts.
    In 1994, congress passed a law to reform the management of trust 
funds for individual Indians and tribes. The law was intended to 
rectify many bureaucratic practices that had stalled the proper 
administration of these accounts and to restore what rightfully 
belonged to Indian people.
    Sadly, the interior department has yet to restore old land records 
and the income derived from the land.
    In 1996, Congressman J.D. Hayworth and I led the Resources 
Committee's task force on Indian trust fund management. The result was 
that the committee held four hearings on the issue in 1996.
    That same year, Eloise Cobell, a beneficiary of an individual 
Indian money (IIM) account and a witness at today's hearing, filed a 
class-action lawsuit against the secretary of interior on behalf of 
500,000 IIM account holders seeking an accounting of the money owed to 
the account holders and to bring permanent reform to the trust fund 
system.
    In phase one of the case, the federal judge found that the 
government breached its trust responsibilities to the Indian 
beneficiaries.
    The judge requires quarterly reports of the department's efforts to 
reform the trust fund system.
    Mr. Chairman, I am troubled by efforts to develop trust reform 
plans without consulting with the authorizing committee, Indian tribes, 
or individual account holders.
    In November 2002, the department of interior unilaterally developed 
a reorganization plan. Interior's plan would have stripped the BIA of 
all its trust functions and consolidated those functions into a new 
bureau of Indian trust assets management (BI TAM).
    Interior submitted a $300 million reprogramming request to the 
House and Senate Appropriations Committee to fund the reorganization 
proposal.
    Both the house and senate appropriators agreed, however, to put the 
request on hold until Congressional hearings and tribal consultation 
sessions were conducted.
    This committee held an oversight hearing on Indian trust funds last 
year and we heard strong opposition to the plan from tribes and the 
individual account holders. The Department abandoned that proposal.
    During the December 2002 holiday recess, the House and Senate 
Appropriators approved a $5 million reprogramming request by the 
Department so that it could implement a comprehensive trust reform 
plan. The Department failed to provide this Committee and Indian tribes 
with the critical details of what the reprogrammed funds would be used 
for, or how the reorganization plan would fix the broken trust.
    Simultaneous to these reform efforts by the Department is the 
Appropriations Committee's unilateral effort to limit the legal 
obligation of the Department to provide a full historical accounting of 
Indian trust funds. Last year, in the fiscal year 2003 interior funding 
bill, the appropriators tried to limit the historical accounting from 
the period of 1985 to 2000. The House voted down that plan.
    While we gather here today to discuss whether a process can be 
developed to settle matters relating to the Cobell litigation, we must 
be mindful of our responsibility to work concurrently with all 
interested parties in developing a thoughtful and participatory 
solution to reform the management of trust funds.
    I look forward to hearing the testimony today. Thank you.
                                 ______
                                 
    Mr. Faleomavaega. Thank you. And I do want to thank our 
witnesses for testifying this afternoon--or early evening, if I 
might say.
    I think it goes without saying that I certainly would like 
to offer my personal and highest commendation to Ms. Cobell for 
the work that she has done over the years and acknowledge 
without any question the amount of pain and suffering and the 
problems that she may have attended to while trying to bring a 
solution to this problem. It's quite obvious that there was a 
failure on the part of our government to find a settlement and 
this is the reason why we are now in court.
    I wanted to ask Ms. Cobell, in her best judgment. It's 10 
years now, and we're still running here and there and trying to 
find a solution to this. I wanted to ask you, do you have any 
sense of what would be a reasonable timetable that you see the 
possibility of a settlement of this issue?
    Ms. Cobell. I think that the judicial process will not take 
as long as some think. I believe that by the fall, that we 
could have the accounting portion of the trial completed. And 
you know, within a year we could be at a point of entering into 
judgment.
    Mr. Faleomavaega. In your best opinion, do you think that 
there is still a chance, an opportunity, for you and your 
associates and the plaintiffs that you represent with the other 
of your associate plaintiffs, for settlement of this issue 
outside of the court?
    Ms. Cobell. Yes, I believe that that there is. And we've 
always wanted to sit down and settle. Like I provided in the 
testimony, it was not always met with good faith on the other 
side. So, yes we've always been willing to settle.
    Mr. Faleomavaega. Of course, in fairness to the current 
administration, you also found resistance with the previous 
administration?
    Ms. Cobell. That's correct.
    Mr. Faleomavaega. So it's not a Republican or Democratic 
issue, it's just the fact that somehow, some way, our friends 
downtown just don't seem to be cooperative at all.
    There was a mention of Secretary Cason's statement, of some 
media report. I don't know why we're making this such a big 
issue. Maybe for purposes of clarification, in regards to this 
$137 billion price tag. There may have been some media reports 
on what would be considered a settlement of the issue. Can you 
elaborate on that, Ms. Cobell, if you have an understanding of 
this?
    Ms. Cobell. I'd be very happy to. The 137 billion amount 
comes from the point where it's my understanding, too, that the 
Department of Interior has basically said has flowed into--
revenues that have flowed into the trust is $13 billion. That's 
what we have determined, too, is $13 billion. So I don't know 
where Mr. Cason got off on there is only a few million dollars 
or 300 million or--I don't know what the amount was, because 
that is totally inaccurate. That's not what they're saying in 
court.
    And the $13 billion, of course, interest has to be paid. 
It's a law that interest has to be paid. So the amount of 
interest that would be accumulated or accrued would be 
approximately around 137 billion to 157 billion. So that's 
where that figure comes from. Without any disbursement. So we 
understand that there has to be a way that we determine what 
are the disbursements that have gone out of that account.
    Mr. Faleomavaega. Was this estimate made by the Department 
of Interior or by non-administration officials? I'm concerned 
about this, because the problem is once you start dangling this 
$137 billion price tag, you're going to scare the heck out of 
the Members, and Congress is not going to take this very 
lightly. That's the reason why I want to make sure that we have 
factual data and make sure that we stick with the right figures 
so that we don't get into this problem of inflating the 
numbers, if you will.
    Ms. Cobell. The $13 billion was from both sides. The $13 
billion was our experts--our resource experts, the best in this 
country, have come up with the figure of $13 billion flowed 
from revenues into the trust. The Department, at least in their 
testimony in court, said the same thing; $13 billion went into 
those accounts. And so if you add the interest part, then you 
end up in the billions. But that's taken into consideration 
that there's no disbursement. So we know that there are 
disbursements that came out of that account. But that pretty 
much gives you the one side of it, $13 billion that went into 
the revenues, that went into the account, plus the accumulated 
interest. But we know that disbursements have been made from 
that account. It's up to the government to determine what those 
disbursement were.
    Mr. Faleomavaega. But this cumulative interest is what I'm 
trying to figure out--how you came out with this $137 billion 
figure. I want to make sure this is not coming from the 
administration, this is coming from some other source, so that 
we can have a better understanding so that people don't get the 
idea that this is the actual figure. This is what I'm concerned 
about.
    Ms. Cobell. Right. Well, the interest is something that the 
government, of course, is not really wanting to put within the 
amount that is owed. But by law, the interest has to be 
calculated. I believe it's calculated at the 4 percent long 
bond rate. And I don't know if I'm still getting at your 
question, let me ask Keith if you have--do you have anything to 
add?
    Keith Harper is one of our attorneys and he might be able 
to add and make it clear.
    Mr. Faleomavaega. Because of the time, you know, just a 
minute. For the record, if you would. Just wanted to get for 
the record that this is not a media hype or some kind of a 
story going around saying that this is what Indian country is 
demanding. This is what concerns me. I'm sorry. My time is up.
    Ms. Cobell. Our information is based on the modeling that 
our experts has done, but also the government has also said 
that $13 billion had to flow.
    Mr. Faleomavaega. I'm sorry I didn't have a chance to ask 
Mr. Berrey and Mr. Hall. But, Mr. Chairman, I'll wait for the 
second round.
    The Chairman. Mr. Cannon.
    Mr. Cannon. Thank you, Mr. Chairman. I'd like to first of 
all apologize for not having been here. I had a markup in 
Judiciary with lots of votes. I have had to stay down there to 
some degree.
    But if I could, Ms. Cobell, I'd like to follow up on what 
Mr. Faleomavaega has been asking and just take it to the next 
step. You've got an agreement from your side and from the 
Department's side that 13 billion has gone into the funds. Do 
you have any sense of how much has come out? In other words, 
how much has been paid out?
    Ms. Cobell. No, we don't have that information.
    Mr. Cannon. Do you have a ballpark? Has 98 percent been 
paid out?
    Ms. Cobell. No, I don't know what it would--we would have 
to make sure however it was paid out, that it went to the right 
person. You know, that's a big issue that Ernst and Young I 
think uncovered, is many of the checks were not given to the 
proper people. They were given to the superintendent.
    Mr. Cannon. Were they like--they were given to the 
superintendent who then went and cashed them and got drunk or 
something?
    Ms. Cobell. The superintendent?
    Mr. Cannon. I'm sorry, I don't mean to be--
    Ms. Cobell. I'm sure there's a lot of fraud involved. I 
mean, there's--it could be anything, anything; all of the 
above. Because if you don't have any type of audits, nobody 
monitoring, no oversight for 100-plus years, you could have a 
little bit of everything.
    Mr. Cannon. But a little bit of everything is not the 
same--we got to have a sense that half or three-quarters, there 
has got to be some level at which plaintiffs are going to 
acknowledge has gone out and to the right person without fraud.
    Ms. Cobell. I'm sure that that will come. I don't know if 
I'm ready to give you the percentage right now. I'm not 
prepared on the amount, the percentage that actually has come 
out from those accounts.
    Mr. Cannon. Do either of our other two witnesses have any 
sense of what the order of magnitude is that is at risk or at 
stake here?
    Mr. Berrey. No, sir.
    Mr. Cannon. I mean, it's clear where Mr. Faleomavaega was 
going was that the 137 billion is the total amount there could 
be if no dollars went anywhere, and yet that becomes highly 
misleading in the process.
    You said that Mr. Cason was inaccurate. I didn't quite 
catch it. What was it you were saying he was inaccurate on?
    Ms. Cobell. Well, Mr. Cason talked about that there were 
millions, just millions of dollars. And that's not right. I 
mean, that's not what they're saying in court.
    Mr. Cannon. Millions as opposed to 13 billion.
    Ms. Cobell. Yeah. Yeah. I mean, that's what I heard anyway, 
was that there were millions versus the 13 billion.
    Mr. Cannon. But for purposes of this discussion now, we can 
talk about 13 billion as the whole corpus of the amount of 
money that is out there that we're looking at the distribution 
on.
    You as a named plaintiff, you've--a lot of accounting has 
been done on your account. Have you seen that accounting?
    Ms. Cobell. Well, I know that the Ernst and Young report 
that you're referring to on the four named plaintiffs that they 
said that they did an accounting is riddled with errors. We 
actually have the exhibits that show that the virtual ledger 
didn't even tie into the right source documents. And so--
    Mr. Cannon. I don't care so much about the particular 
defects that might have happened there. But in your life, how 
much have you had and how much error do you think there is in 
just in your lifetime since have you received payments from the 
trust fund?
    Ms. Cobell. I really wish I knew. And that's the big 
problem.
    Mr. Cannon. Can you tell me the total amount, more or less, 
that you've had?
    Ms. Cobell. No, I don't have that figure available.
    Mr. Cannon. Can do a little ballpark, you know, what is the 
monthly check times 12, times the number of years more or less?
    Ms. Cobell. How much in my account? Well, I don't know 
that, and that's one of the issues that we have because our 
ancestors are--my relatives that I am supposed to inherit the 
proper land holdings has not ever been disclosed to me so I 
can't answer your question.
    Mr. Cannon. The question is how much have you actually had 
paid to you over time? That's probably in the record. I just 
don't have that in front of me right now.
    Ms. Cobell. During my lifetime, what kind of ballpark 
figure? Probably--it's very hard. You know, could have been up 
to 100,000.
    Mr. Cannon. Well, 100,000 for one individual means a lot of 
money has come out. I mean, I can't do the math. How many 
people have been--do we have alive today that are getting trust 
disbursement?
    Ms. Cobell. We don't know those answers. I mean that's--
    Mr. Cannon. We got to have an order of magnitude. You have 
a class of people out there that you have communicated with, 
have you not?
    Ms. Cobell. Well, most of them say they're not getting 
their money. Most of the individual Indians are saying they're 
not getting their money.
    Mr. Cannon. Oh. I guess it's just a matter--I need to 
follow up on that one just by looking at a couple--
    Ms. Cobell. If we all knew, then we wouldn't have to do an 
accounting, but that is the issue.
    Mr. Cannon. But I think it's not unfair to say that if you 
were sitting here with $100,000 disbursements, there's a lot of 
other people in the ballpark of $100,000 disbursements. It 
doesn't take very many people over a very long period of time 
to get $13 billion.
    Ms. Cobell. Well, Congressman, when you asked the question, 
I didn't quite understand. You said, how much money do you 
think you've--and then you said ``disbursed'' afterwards. I 
don't know. I feel that I probably should have had 100,000. I 
don't know the amount that has been disbursed to me.
    Mr. Cannon. But--and I thought I was asking you--I'm sorry, 
Mr. Chairman, I have gone beyond. But if I can just clarify 
this question. What I thought I was asking is how much money 
have you received in your lifetime as just a guess. So I take 
it you're saying that you guessed you should have received 
$100,000. Can you give us an idea of how much you have actually 
received in your lifetime?
    Ms. Cobell. No, I can't.
    Mr. Cannon. Thank you, Mr. Chairman. I yield back the 
balance of my time.
    The Chairman. Were there any further questions for this 
panel?
    Mr. Pallone. Just briefly, if I could.
    The Chairman. Mr. Pallone. We do have another panel.
    Mr. Pallone. Maybe you can give it to me in writing. But 
you said in the beginning--and I'm just trying to get this as 
preparation for when we have to deal with this section 137. You 
said, Mrs. Cobell, that 137 was oppressive, it was a blatant 
violation of separation of powers, an intrusion into the court 
case and unconstitutional taking of property.
    If you could just give us some more information, you know, 
about why you think that is true. Because I think we need--I 
mean, that is really valuable material. If a lot of Members of 
Congress understood that, I think they would not be supportive 
of section 137. So I know you're going to give us some written 
follow-up--if could you go into that a little more, because I 
think that's a pretty strong case to be made against it.
    Thank you, Mr. Chairman.
    The Chairman. I'm not going to take all of my time to ask 
questions because I know everybody has been here for a long 
time today. But I just in dismissing this panel, I think it's 
important that you work with us on this, because this Committee 
will take up this issue. And in working in concert with our 
counterparts on the Senate side, we will take on this issue and 
try to come to some kind of an equitable conclusion to this.
    But I would just remind you that we need 218 votes in the 
House and 60 votes in the Senate to pass it. And so the 
pressure is on us to come up with something not only that you 
believe is fair and equitable and that the Department feels is 
fair and equitable, but that 218 of our colleagues feel is fair 
for the taxpayers and for their constituents. So it's a matter 
of trying to put together something that is not only fair and 
equitable in your minds but also a political document that we 
can pass and get onto the President's desk. So it's a process 
that we have to go through.
    So I'll just ask you to keep that in mind as we enter into 
this process and try to work through it, because I do think 
that this is something we can do, but we need your help in 
order to achieve that. So thank you very much for your 
testimony and your patience in sticking with us today.
    Mr. Hall. Thank you, Mr. Chairman. We accept the challenge.
    The Chairman. I thank all of you very much.
    I'm going to call up our third panel. We have Harold 
Frazier, Keller George, and A. David Lester. If you could 
approach the witness table. If I could just have you gentlemen 
stand and raise your right hand.
    [Witnesses sworn.]
    The Chairman. Let the record show that they all answered in 
the affirmative. I want to thank you for your extraordinary 
patience in sticking with us today. I know this has been an 
extremely long hearing, but I think you will all agree with me 
it has been a very important hearing. I think all of our 
panels, we could spend hours discussing this case and the point 
of view that all of you have. So I want to thank you for being 
here today.
    The Chairman. I'm going to start with Mr. Frazier. You may 
begin.

    STATEMENT OF HAROLD FRAZIER, BOARD MEMBER, INTERTRIBAL 
          MONITORING ASSOCIATION ON INDIAN TRUST FUNDS

    Mr. Frazier. Thank you.
    Mr. Chairman, Mr. Vice Chairman, and members of the 
Committee, my name is Harold Frazier and I'm the chairman of 
the Cheyenne River Sioux Tribe in South Dakota. I want to shake 
your hand, your good heart.
    I am honored to present testimony today on behalf of the 
Intertribal Monitoring Association on Indian Trust Funds. ITMA 
believes that a process can be developed to settle matters 
relating to Indian trust fund law--to the Indian trust fund 
lawsuit. Before I get into the details of ITMA's testimony I 
would first like to briefly mention ITMA's activities and in 
particular the trust issues that affect my area.
    ITMA has served as a longstanding watchdog over the 
Department of Interior's management of Indian trust. The member 
tribes of ITMA are holders of significant trust funds and 
resources. Also their membership consists of many IIM account 
holders.
    The member tribes of ITMA are holders of significant--I'm 
sorry. For example, most tribes from the Great Plains and all 
the tribes within the Rocky Mountain region are members of 
ITMA. Together these two regions hold 68 percent of tribal 
trust lands and represent a great number of IIM account 
holders. Tribes of the Great Plains have over 68,000 IIM 
accounts, which is the largest number of accounts within all of 
Indian country. And Rocky Mountain has more than 50,000 account 
holders. This example just tells you a little bit of what's at 
stake in our two regions and shows how crucial it is that all 
stakeholders be represented in this process.
    While the recent focus of ITMA efforts in the arena of 
trust reform has been to protect tribal sovereign governmental 
rights, ITMA has also been concerned about the financial impact 
of the ongoing Cobell litigation on critical program funds.
    While recognizing that the Cobell lawsuit was critical to 
effectuate exchange within the Department of Interior and to 
draw attention to the serious neglect of the United States in 
the management of Indian trust, ITMA believes that continuous 
litigation for several more years may not be in the best 
interest of all IIM account holders. ITMA is concerned that the 
litigation may outlive many IIM account holders who are waiting 
for financial relief from the management of their accounts.
    ITMA believes that an opportunity for individual Indians to 
voluntarily settle IIM trust fund claims would benefit many 
account holders who have waited several years to resolve trust 
fund-related disputes with the Department of Interior.
    However, ITMA does not support the current legislative 
rider that has developed as a result of IIM claims. First, 
tribal governments were not consulted. Further, the House 
language contains several restrictions that would unfairly 
resolve these claims for the IIM account holders. Given ITMA's 
vast experience with these issues, ITMA should be involved and, 
further, supports the involvement of respective tribal 
governments who have a heightened interest to ensure fairness 
and justice for the members who have IIM accounts. First and 
foremost, any settlement proposal must allow for voluntary 
participation by IIM account holders with preservation of 
current legal rights to seek recovery through litigation for 
those account holders who choose not to participate.
    ITMA does not support a process like that proposed in the 
current rider to the Interior appropriations bill that would 
authorize the Secretary to establish error rates in an IIM 
account and then propose settlements that the account holders 
cannot refuse. Account holders must be allowed to voluntarily 
accept a settlement offer after a judicial review for fairness. 
If an account holder chooses not to accept the settlement 
offer, his or her current right to seek redress in the courts 
of law must be maintained. Further, no limitation should exist 
to prevent compensation to an account holder if later 
investigations reveal the account holder is entitled to 
additional funds.
    ITMA disagrees with the establishment of a cap for 
settlement funds. Setting a cap before determining the amounts 
due to the account holders via an agreed-upon accounting method 
is illogical. Further, a source to fund settlement should be 
considered after the determination of a range of the 
mismanagement liability.
    Some ITMA members support utilization of the judgment fund, 
as provided by 31 USC 1304, only if the use of the judgment 
fund would not result in a depletion of existing funds of 
tribal government operations. Other ITMA member tribes support 
a specific appropriation with new moneys to fund settlements. 
Again, only if such appropriations will not result in a 
depletion of existing funds for tribal government organizations 
or funding of current BIA reorganization efforts.
    ITMA members believe that proposed limitation of liability 
for any IIM account prior to October 25th, 1994, is completely 
unacceptable. The time period of account liability must extend 
to the establishment of the current accounts, including 
predecessor accounts. Further, the process must include claims 
for uncollected amounts and inaccurate starting balances. Any 
limitations to claims must be determined by the parties 
developing the settlement process.
    ITMA believes that judicial review should be assured beyond 
just a historical accounting method. If current legal remedies 
available for account holders remain intact, then expanded 
review language within the process would be unnecessary. 
However, judicial review of actual settlements for each IIM 
account may be necessary to ensure the settlement is fair to 
the account holder. Without an effective judicial review of the 
settlement terms, individual Indians cannot be assured of the 
fairness of their agreement. Many individual Indians will not 
have access to legal counsel to review settlement documents, 
and therefore its trustee should promote a judicial review to 
ensure protection of the beneficiary's rights.
    In summary, ITMA believes the time has come for the 
affected parties to coordinate a concerted effort to develop a 
viable mechanism for IIM account holders to consider and 
utilize as a means to resolve trust fund-related claims. ITMA 
stands ready to assist in a meaningful capacity in the critical 
efforts.
    And as the chairman of Cheyenne River Sioux Tribe, I would 
like to make a few comments. One of the things I respectfully 
ask from the Chairman and your Committee members is to have a 
hearing on the BIA reorganization. The current BIA 
reorganization does not benefit our grass-roots people, does 
not benefit our IIM holders. This reorganization creates more 
upper-level bureaucracy which will in turn create more delays 
in the turnaround of IIM account holders' checks. It doesn't 
provide more resources or authority at the local agency level 
that is needed to address a lot of our grass-roots people's 
concerns and issues.
    I guess with that, I want to thank you for the opportunity 
to be here. Thank you.
    The Chairman. Thank you. Mr. George.

STATEMENT OF KELLER GEORGE, PRESIDENT, UNITED SOUTH AND EASTERN 
                             TRIBES

    Mr. George. Thank you, Mr. Chairman, for this opportunity 
to testify before you today. I currently serve as president of 
the United Southeastern Tribes and also am a member of the 
United Indian Nation of New York.
    The Cobell case is widely perceived as being the catalyst 
which first started trust reform. It is now making Members of 
Congress impatient and less likely to have an open ear 
regarding trust issues.
    One example of that is the House Appropriations Committee 
rider Section 137 that was introduced June 25th of this year. 
We believe this is an effort to curtail the Cobell litigation. 
An attempt was made by the DOI and the tribal trust reform to 
work through many of the current reorganization issues and home 
consultation meetings with tribal leaders regarding suggestions 
from the task force. This has since failed due to a number of 
roadblocks in that negotiating process. The DOI officials have 
stated that they have consulted with tribes on various 
reorganization issues that are being instituted. However, this 
is not totally true. Consultation is not throwing out an idea 
in the Indian country and seeing a negative response and moving 
toward with ideas regardless. Consultation is listening to 
tribal concerns and taking these concerns and comments into 
account.
    Two main points the tribe wanted to address was the Under 
Secretary position and Trust Principals. Tribes stated from the 
beginning of this process that the two items that must be 
incorporated into any reorganization efforts in order to 
establish a sense of accountability within the BIA. Tribes are 
still waiting to see these very important priorities given 
attention.
    It all comes down to the issues that tribes must be 
reengaged if the reform process is going to be successful. 
Tribes are receiving confusing information about reorganization 
activities, which is extremely frustrating. Tribes must be 
involved in the entire process, not just shown the end product. 
We fear that without meaningful consultation and clear 
information that a new reorganized structure will be perceived 
in the same negative light that has plagued the BIA for years.
    Reform reorganization versus general BIA operation. USET 
agrees that the trust and other functions need to be separated. 
However, in the BIA's reorganization structure there seems to 
be two complete--competing organizations have been developed. 
The Office of Special Trustee and the Bureau of Indian Affairs 
must compete against each other for authority, resources and 
manpower. This struggle will always exist unless certain issues 
are addressed. Tribes have made it clear that the DOI should 
not use program dollars to help fund the mistakes of the 
administration. Tribes have stressed that the BIA's funding 
should not be diminished in order to fund the trust efforts of 
the OST. The BIA is in dire straits and have additional funds--
and must have additional funds in order to accomplish a truly 
successful reorganization. Limited funding could be extremely 
detrimental to the efficiency of processes within the BIA's new 
organization.
    Trust principles. Recent Supreme Court decisions have 
concluded that the Federal Government has avoided fiduciary 
trust responsibilities and operated with bad faith in its 
business relationship with Indian tribes. The tribal leadership 
of the Trust Reform Task Force which I was a member of made a 
concerted effort to get DOI to incorporate a list of general 
trust principles that could be used as a reference point for 
all trust activities. This suggestion was adamantly opposed by 
the DOI members of the task force.
    Both White Mountain Apache and the Navaho Nation cases have 
had opinions written and both reaffirm now more than ever the 
need for a standardized set of trust principles.
    Indian country should not be held at bay any longer by 
pending cases in the Supreme Court. The time is now for the 
Federal Government and the Secretary of the Interior to be held 
accountable for their trust responsibility. It is critical that 
the continually--that continuity and accountability be 
established as a cornerstone of reorganization efforts. There 
can be no oversight of the trust relationship without standards 
set of general trust principles in place. Indian country must 
have a way to hold their trustees accountable for actions taken 
that may be contrary to the advancement of Indian people.
    The Under Secretary position. USET Tribes has stressed from 
the beginning of the process the need to have Indian Affairs 
authority elevated to the Secretary level within the Department 
of Interior. There is a strong need for an Under Secretary of 
Indian Affairs position to be established in order to remedy 
the ambivalent attitude toward Indian Affairs that has been so 
apparent within the DOI.
    Through legislation USET feels that the creation of an 
Under Secretary could be greatly beneficial to Indian people. 
Once again, USET stresses that trust principles and oversight 
must be a part of the establishment of an Under Secretary for 
Indian Affairs. This is the only way that Indian issues will 
receive the attention, resources and respect they deserve from 
the trust relationship.
    Many hypotheses are circulating through Indian country as 
how the regional reorganization of the Bureau affairs will 
actually work. There has been little direct discussion between 
the Federal Government and tribal leaders regarding this level 
of reorganization despite repeated requests from Indian 
country. The new Department manual once again is unclear as to 
all of the multiple and complex relationships expected at the 
regional level and below. USET has spent countless hours 
analyzing the new Department manual and the Cobell report to 
the court and the relationship between the OST employees and 
the BIA employees. The BIA employees at the regional level 
should be responsible for service delivery to the tribes while 
the OST trust officers should be responsible for ensuring the 
trust responsibilities of the Federal Government are held. 
Trust positions should also be able to provide beneficiaries 
with resources concerning trust issues and look at any 
complaints of mismanagement by the BIA.
    The Cobell litigation is widely perceived as being the 
catalyst which first started trust reform discussions and 
exposed the gross mismanagement of Indian trust assets by the 
Department of Interior and the Bureau of Indian Affairs. USET 
recognizes the need of the Cobell plaintiffs to seek resolution 
and attain an adequate remedy of law. The litigation, however, 
is reaching into a dangerous point where the court has 
threatened to appoint receivership over the BIA assets. The 
plaintiffs have argued that while they appreciate tribal input, 
Cobell is an individual Indian plaintiff case. If receivership 
is appointed and it then becomes everybody's case, receivership 
could negatively affect numerous Indian programs and service 
delivery to all tribes.
    It is time to introduce legislation that will bring a fair 
settlement to the ongoing litigation and work with Congress to 
develop a resolution of the case. Congress should appoint a 
body of legal and financial scholars, such as Mr. Thomas Gray, 
who is the expert that testified before this Committee a couple 
of years ago.
    A fair and reasonable settlement litigation. The Cobell 
litigation is a drain on the Federal Government and is 
depleting funding that could go to other Indian programs or to 
enhance reorganization effort. We must get beyond Cobell in 
order to realize a true and lasting trust reform.
    And in conclusion, there is not a simple answer to the 
question, can a process be developed to settle matters relating 
to the Indian trust fund lawsuit? Fulfillment of the government 
trust responsibility to Indian tribes and individual Indians is 
complex.
    USET tribes support reform and understand that 
reorganization is necessary for the government to fulfill its 
new fishery responsibility. Many tribes feel that efforts to 
this point have been futile and the DOI is moving with their 
own agenda. USET recognizes the urgent need for tribes to be 
actively engaged in the reform and reorganization. Future 
generations of Indian people are depending on tribal leaders to 
take a stand and approach reform with a united voice. It is 
time to have that voice heard through legislation being 
developed and true consultation with the administration. The 
process has become stagnant over the past several months, but 
now is the time for Congress, tribes, and the administration to 
be actively involved.
    I thank you for this opportunity and I would be willing to 
answer any questions.
    The Chairman. Thank you.
    [The prepared statement of Mr. George follows:]

Statement of Keller George, President, United South and Eastern Tribes, 
                 and Member of the Oneida Indian Nation

    Good morning, Mr. Chairman and Honorable members of the House 
Committee on Resources. Thank you for taking time to listen to 
testimony from tribal leaders regarding Indian Trust Reform and 
particularly posing the question, ``Can a process be developed to 
settle matters relating to the Indian Trust Fund Lawsuit?'' My name is 
Keller George, and I am appearing this morning on behalf of the United 
South and Eastern Tribes, Inc.(USET). I am a member of the Oneida 
Indian Nation's Men's Council and have served as USET's President for 
eight years. As you know, USET is an inter-tribal organization 
comprised of 24 federally-recognized Indian Tribes. USET is dedicated 
to assisting its member tribes, through epitomizing the highest ideals 
of Indian leadership, in dealing effectively with public policy that 
affect Indian people; and serving the broad needs of Indian people. 
USET serves a population in excess of 60,000 Indian people in twelve 
different states.
    The USET member Tribes feel strongly that they must work for the 
advancement of Indian people while maintaining a strong sense of self-
determination. Because of this strong belief, USET has been actively 
involved in the Trust Reform and Re-organization efforts from the very 
beginning. I served as a representative of the USET Tribes, along with 
James T. Martin, USET Executive Director and Peter Schultz, Vice-
Chairman of the Mohegan Tribe of Connecticut, on the initial Department 
of Interior/ Tribal Trust Reform Task Force. USET spent many hours 
analyzing the various issues of re-organization and trust reform in an 
effort to provide insight and tribal perspective on the changes that 
are currently taking place and those that are forecast in the years to 
come. I believe that the experience gained through this process has 
produced valuable knowledge that can be used by all parties to forge 
the Bureau of Indian Affairs into an agency that operates more 
efficiently.
    Today's hearing is posing the question, ``Can a process be 
developed to settle matters relating to the Indian Trust Fund 
Lawsuit?'' That question can not be posed without addressing the 
broader issues of overall trust reform. USET will address six areas of 
concern regarding trust reform: Continuing Litigation, Consultation 
with Tribes, Reform/Re-organization vs. General BIA Operation, 
Incorporation of Trust Principles, Creation of an Under-Secretary 
Position, and Regional Level Re-organization relationships.
Continuing Litigation
    The Cobell litigation is widely perceived as being the catalyst 
which first sparked trust reform discussions and exposed the gross 
mismanagement of Indian Trust Assets by the Department of the Interior 
(DOI) and the Bureau of Indian Affairs (BIA). USET recognizes the need 
for the Cobell plaintiffs to seek resolution and obtain an adequate 
remedy of law. The litigation, however, is reaching a dangerous point 
where the court has threatened to appoint receivership over the BIA and 
trust assets. The plaintiffs have argued that while they appreciate 
tribal input, Cobell is an Individual Indian Plaintiff's case. If a 
receivership is appointed, it becomes everyone's case. Receivership 
could negatively affect numerous Indian programs and service delivery 
systems to Indian tribes.
    The Cobell case is also making members of Congress impatient and 
less likely to have an open ear regarding this issue. Most recently, 
the Interior Appropriations Bill passed by the full House 
Appropriations Committee on June 25, 2003, contains an anti-Indian 
rider, Section 137. Section 137 is an effort to curtail the Cobell v. 
Norton litigation. In short, Section 137 would call on the Secretary of 
the Interior to conduct a ``statistical sampling'' of trust fund 
accounts in a manner that the Secretary alone deems feasible and 
appropriate given the availability of records. Under this proposal the 
Secretary would adjust the balances in Indian trust accounts. These 
adjustments would be final and judicial review would be severely 
constricted. Section 137 is problematic from an Indian policy 
standpoint. It is another effort by the House Interior Appropriations 
Subcommittee to determine the substantive legislative course of Federal 
Indian policy. It is improper for the Appropriations Committee to 
legislate on these important issues without proper consultation with 
tribal governments. USET objects to Section 137 and any other 
Appropriation riders that bypass the government-to-government 
consultation with tribal governments. This is clearly legislating on an 
Appropriations Bill in violation of House Rule XXI 2.(b). No hearings 
have been held on this proposal, and there has been no consultation 
with tribes or with individual Indian account holders. Tribal leaders 
have expressed interest in beginning dialogue on settlement options for 
trust claims, but the process must be fair and respectful of the 
interests of tribal governments and individual Indian account holders.
    It is time to introduce legislation following proper consultation, 
that will bring a fair settlement to the ongoing litigation. USET is in 
favor of such legislation and working with Congress to develop a 
resolution to the case. The Cobell litigation is a drain on the federal 
government and is depleting funding that could go to other Indian 
programs or to enhance the re-organization effort. Even if the Cobell 
case is decided in favor of the plaintiffs, Congress would be hard 
pressed to appropriate the large settlement that would be due them. A 
large settlement to the plaintiffs would inevitability hurt the rest of 
Indian country during these hard economic and budget restricted times. 
We must get beyond Cobell in order to realize true and lasting trust 
reform. USET believes that any legislation that will achieve buy-in of 
the concerned parties must contain a Congressionally authorized and 
appointed committee to assist the DOI in conducting the components and/
or processes that the intent of Section 137 wishes to bring about.
Consultation with Tribes
    An attempt was made by the DOI/Tribal Trust Reform Task Force to 
work through many of the current re-organization issues and hold 
consultation meetings with tribal leaders regarding suggestions from 
the Task Force. This has since failed due to ``road blocks'' in the 
negotiating process. The DOI officials have stated that they have 
consulted with the tribes on the various re-organization issues that 
are being instituted, however, this is not totally true. Consultation 
is not throwing an idea out into Indian country, seeing a negative 
response, and moving forward with the idea regardless. Consultation is 
listening to tribal concerns and taking those comments into account. 
Lately the DOI has made consultation into a mere ritual they must go 
through in order to push the DOI's agenda. Negotiation is an essential 
part of consultation and while you may not be able to please everyone, 
the majority opinion should prevail in the end.
    Some aspects of the re-organization efforts do reflect tribal 
views, but the two main points tribes wanted addressed, the Under-
Secretary position and Trust Principals, remain untouched. Tribes 
stated from the beginning of the process that these two items must be 
incorporated into any re-organization efforts in order to establish a 
sense of accountability within the BIA. Tribes are still waiting to see 
these very important priorities given attention.
    It all comes down to the issue that the Tribes must be re-engaged 
if the reform process is going to be successful. Tribes are receiving 
ambiguous and confusing information about the re-organization 
activities, which is extremely frustrating. Tribes must be involved in 
the entire process, not just shown the end product. The Department of 
the Interior and Bureau of Indian Affairs are not holding to their 
policy of meaningful consultation with tribes. We fear that without 
consultation and clear information the new re-organized structure will 
be perceived in the same negative light that has plagued the BIA for 
years.
Reform/Re-Organization vs. General BIA Operation
    The first issue that has become a byproduct of the reform process 
is the struggle between the establishment of an organization that 
upholds the fiduciary trust responsibility on the one hand, while 
maintaining general operations on the other. This internal struggle has 
become obvious in the past several months as the re-organization 
process has been pushed into its initial phase. USET agrees that trust 
and other functions need to be separated, however, in the BIA's re-
organization structure two competing organizations have developed. The 
OST and the BIA must compete against each other for authority, 
resources, and manpower. This struggle will always exist unless certain 
issues are addressed.
    From the beginning of the Trust Reform process, Tribes have made it 
clear that the DOI should not use program dollars to help fund the 
mistakes of the Administration. Tribes have stressed that the BIA's 
funding should not be diminished in order to fund the trust efforts of 
the OST. The BIA is in dire straits and must have additional funds in 
order to accomplish a truly successful re-organization. USET tribes 
fear that the majority of trust funding will be directed to the OST 
where the BIA will have to request the use of funds for trust 
activities. This makes the BIA subordinate to the funding needs of 
another organization and the employees of the BIA dependant upon two 
sources of direction for performing tasks. This could be extremely 
detrimental to the efficiency of processes within the BIA's new 
organization.
    USET is committed to trust reform and the much needed re-
organization of the Bureau of Indian Affairs. The mismanagement and 
trust issues are escalating problems that must be dealt with 
immediately for the sake of future generations. The Land Consolidation 
and Fractionation problems alone, if solved today, would take years to 
organize and properly manage. There are numerous unmet needs in Indian 
country in addition to Trust Reform which cannot be ignored. Programs 
such as Law Enforcement, Welfare, Social Services, and Education should 
not be ``taxed'' in order to pay for the mismanagement of the federal 
government's trust responsibility to tribes. New funding must be 
provided to the BIA for this re-organization process, while other 
programs should operate as intended without interference from budget 
restraints due to re-organization.
Trust Principles
    Recent Supreme Court decisions have concluded that the federal 
government has avoided fiduciary trust responsibilities and operated 
with ``bad-faith'' in its business relationships with Indian tribes. In 
United States v. Navajo Nation, the Supreme Court stated that the
    Mitchell and Mitchell analysis must focus on a specific right-
creating or duty-imposing statute or regulation. In this case, the 
Court held against imposing a trust obligation on the Government. It 
reasoned that the existence of a trust relationship alone is not 
sufficient to support a claim for damages under the Indian Tucker Act 
(28 U.S.C. Sec. 1505). Conversely, in United States v. White Mountain 
Apache, the Court acknowledged the statute at issue did not expressly 
subject the Government to fiduciary duties of a trustee. Nonetheless, 
the Court determined that the Fort Apache property was expressly 
subject to a trust. In so doing, the Court drew a ``fair inference'' to 
find an obligation on the part of the Government to preserve the 
property as a trustee, and determined that its breach of trust was 
enforceable by damages.
    From these cases, we have learned that unless a statute or 
regulation imposes a specific fiduciary obligation on the part of the 
Government toward tribes and their resources, the Court will look 
unfavorably on the imposition of such a duty. We have also learned that 
trust principals must be clearly defined in order for the Government to 
be held accountable for a breach of trust duties. In a sense, Indian 
country was fortunate that the Court felt compelled to infer a trust 
obligation in the White Mountain Apache decision; Indian country was 
not so lucky in Navajo Nation. The dichotomy of rationales created by 
these decisions indicates that without clear guidelines and definition 
of trust principles, the Court will continue to infer-or ignore as the 
case may be-the Government's fiduciary responsibility towards Indian 
tribes. Indian tribes must be allowed to hold their trustee accountable 
for mismanagement of their resources. We must begin by defining trust 
principles that create consistency in application across all trust 
activities. Tribes should no longer be forces to find remedy through 
the courts.
    The tribal leadership of the Trust Reform Task Force made a 
concerted effort to get the DOI to incorporate a list of general Trust 
Principles, that could be used as a reference point for all trust 
activity, into the re-organization efforts. This suggestion was 
adamantly opposed by the DOI members of the Task Force, as they wanted 
to wait until the Supreme Court had provided decisions in both White 
Mountain Apache and Navajo Nation. These two cases have had opinions 
written and both re-affirm, now more than ever, the need for a 
standardized set of trust principles.
    Indian country should not be held at bay any longer by pending 
cases in the Supreme Court. The time is now for the federal government 
and the Secretary of the Interior to be held accountable for their 
trust responsibility. It is critical that continuity and accountability 
be established as a cornerstone of the re-organization efforts. There 
can be no oversight of the trust relationship without a standardized 
set of general trust principles in place. Indian country must have a 
way to hold their trustee accountable for actions taken that may be 
contrary to the advancement of Indian people.

Under-Secretary Position
    USET tribes have stressed from the beginning of the reform process 
the need to have Indian Affairs authority elevated to a Secretariat 
Level within the Department of Interior (DOI). Many tribes feel that 
the DOI overlooks the needs of the BIA , consequently tribal issues are 
pushed to the bottom of the list of DOI priorities. There is a strong 
need for an Under-Secretary of Indian Affairs position to be 
established in order to remedy the ambivalent attitude toward Indian 
affairs that has been so apparent within the DOI.
    Through legislation, USET feels that the creation of an Under-
Secretary could greatly benefit Indian people. Both tribal leaders and 
federal officials on the Trust Reform Task Force reached general 
consensus on creation of the new position. This common ground shows 
that both Indian country and the administration support the elevation 
of Indian affairs within the Administration. Tribes envision the Under-
Secretary as having direct contact with the Secretary of the Department 
of the Interior regarding all Indian issues, as well as exercising 
authority over other bureaus within the DOI in regard to their Indian 
trust responsibilities. Currently other DOI bureaus report to the 
Secretary of the Interior and there is little communication or 
collaboration among the different bureaus regarding Indian trust 
issues. It is vitally important that all bureaus understand the 
importance of the federal government's trust obligation. An Under-
Secretary could instill this trust responsibility across the bureaus 
and within the BIA, whereas the Assistant Secretary of Indian Affairs 
does not have any authority over other bureaus. This is the most direct 
way to ensure that Indian issues receive the attention, resources, and 
respect they deserve and to assure successful trust reform.
Regional Level Re-Organization
    Many hypothesis are circulating throughout Indian country as to how 
the regional re-organization of the Bureau of Indian Affairs will 
actually work. There has been little direct discussion between the 
federal government and tribal leaders regarding this level of re-
organization despite repeated requests from Indian country. The new 
Department Manual once again is unclear as to all of the multiple and 
complex relationships expected at the regional level and below. Tribal 
leaders are confused and need clarification. Will there be Trust 
Officers at every regional office? Who will they answer to directly? 
What will be their relationship with other BIA regional staff? What 
will the relationship be like between the Trust Officers and BIA 
officials? Who will have final determination authority? These are the 
types of questions that Tribes need answered in order to understand the 
complexity of the situation.
    USET has spent countless hours analyzing the new Department Manual, 
the Cobell reports to the court, and the relationships between OST 
employees and BIA employees. USET believes these regional position 
interactions are based on an oversight (OST employees) and work product 
(BIA employees) relationship. The BIA employees at the regional level 
should be responsible for service delivery to the tribes, while the OST 
Trust Officers should be responsible for ensuring the trust 
responsibilities of the federal government are upheld. Trust positions 
should also be able to provide beneficiaries with resources concerning 
trust issues and look into any complaints of mismanagement by the BIA.
    Furthermore, there is confusion as to how the OST Trust Officers 
will perform these oversight functions. In past discussions, the idea 
of Memorandums of Agreement (MOA) between the OST and the BIA were 
suggested. These MOA's would allow the BIA regional and agency level 
offices to ``contract'' the trust responsibility from the OST. The OST 
would then be free to focus totally on the oversight issues of ensuring 
that trust obligations are upheld by the BIA. If there are going to be 
two ``stovepipe'' organizations established to handle trust, one must 
be in charge of the implementation while the other organization must 
focus on oversight and standards of service.
    These interactive relationships as described are merely speculative 
and based on USET's analysis of the DOI Department Manual. There are 
many grey areas in the Department Manual that need further 
clarification. However, if USET's analysis is correct, the new 
structure could be a viable tool to reaching greater efficiency within 
the BIA.

Conclusion
    There is not a simple answer to the question, ``Can a process be 
developed to settle matters relating to the Indian Trust Fund 
Lawsuit?'' The fulfillment of the government trust responsibility to 
Indian tribes and individual Indians is complex. USET Tribes support 
reform and understand that re-organization is necessary for the 
government to fulfill its fiduciary responsibilities. Many tribes feel 
like efforts to this point have been futile and the DOI is moving 
forward with their own agenda. USET recognizes the urgent need for 
tribes to be actively engaged in the reform and re-organization 
processes. Future generations of Indian people are depending on tribal 
leaders to take a stand and approach reform with a united voice. It is 
time to have that voice heard through legislation being developed and 
true consultation with the administration. The process has become 
stagnate over the past several months, but now is the time for 
Congress, Tribes, and the Administration to be active and involved.
    In closing, I would like to emphasize the great importance of 
proper trustee accountability and the federal trust obligation. 
Efficiently operated trust programs could benefit Indian country 
greatly, but we all know the chaos that a poorly operated trust system 
can produce in Indian country. Indian people have given so much to the 
federal government based on the promise of adequate management of 
assets through the Trustee relationship. That relationship has been 
severely damaged, and must be mended.
    Mr. Chairman and Honorable Committee Members, USET stands ready to 
assist in the processes of mending the relationship, establishing 
accountability of trust, and re-organization of the BIA. USET tribes 
have the experience and knowledge to work through these issues, all we 
need is someone to tap into those valuable resources. Thank you for 
taking the time to listen to tribal comments and take them into 
consideration. USET looks forward to working with Congress to reach 
lasting solutions and I would be pleased to answer any questions you 
may have regarding the USET testimony.
                                 ______
                                 
    The Chairman. Mr. Lester.

 STATEMENT OF A. DAVID LESTER, EXECUTIVE DIRECTOR, COUNCIL OF 
                     ENERGY RESOURCE TRIBES

    Mr. Lester. Thank you, Mr. Chairman. I am A. David Lester, 
Executive Director for the Council of Energy Resource Tribes, a 
position I've held since 1982. Our chairman, Darrell Martin, 
who is also the Vice President of the Fort Belknap, Assiniboine 
and Gros Ventre Tribes of Montana, asked me to provide 
additional perspective to the written statement that has been 
submitted under his name.
    I want to make it very clear first off that CERT, the 
member tribes, are unequivocally opposed to the settlement of 
the Cobell case through the appropriations process. It is 
patently unfair and deprives literally hundreds of thousands of 
American citizens of due process.
    I really appreciated your opening remarks, Mr. Chairman, 
speaking for equity justice and fairness. And I think the No. 1 
job that the government faces and probably has faced since day 
one with Indian country is the gaining and the retaining of the 
trust and confidence of the people that, in fact, the agencies 
were created to serve.
    The question of trust and confidence is not to cast 
aspersions on the character of the current incumbents. I've 
known Secretary Norton for some time. She was the Secretary 
of--I mean she was the Attorney General of Colorado, and I'm a 
resident of Colorado, and I've known her and her dealings with 
the tribes in Colorado. And I know her to be a just person and 
a fair person.
    But the issue of confidence and trust really is the at the 
heart of the institutional relationship between Indian peoples, 
tribal governments, and individual Indian account holders and 
the institution of the Department of Interior. And in the 
discussions about how much can we afford to pay, it seems 
somewhat ironic that the question really seems to me to be, is 
the taxpayer dollar more sacred than the Indian trust dollar? 
And that's a question that has to be answered.
    With respect to the account holders paying for the 
administration of the trust, it must be remembered that the 
trust was imposed upon us. It didn't come as a voluntary 
democratic process. Abraham Lincoln remarked in his debates 
with Senator--I mean Stephen Douglas--that when the white man 
proposes to rule himself, that's democracy; when he proposes to 
rule other people, that's tyranny. And in the 19th century, 
that's in fact what America did to the Indian nations, proposed 
to rule us, and in some respects that legacy persists in the 
Department of Interior.
    Some of the problems that I've observed in trying to come 
to settlement, both on reorganization as well as the Cobell 
case, is that the Department insists on being in charge of the 
process. It's like a burglary has occurred in my home and I 
call the police, and the burglar shows up to investigate the 
burglary. How much trust and confidence can I have in a fair 
process when that occurs?
    Cobell is not the problem, it's a symptom of the problem. 
Cobell has insisted that a process be put into place to correct 
the systematic management problems. When that process is 
undertaken, then it brings more than just those involved in the 
lawsuit. And that involves the tribal government who own the 
bulk of the trust lands and whose lands base have been growing 
in recent years. And it's quite correct that the volume of 
dollars flowing through the accounts is predominantly tribal 
dollars and the larger share of those dollars come from the 
energy leases, oil, natural gas, methane and coal. And so CERT 
was formed to address those kinds of issues.
    In 1982 the Congress, with our working with the Congress, 
passed two important reform bills that I think really need to 
be looked at: the Indian Mineral Development Act and the 
Federal Oil and Gas Royalty Management Act. The Federal Oil and 
Gas Royalty Management Act for the first time provided 
transparency to the collection of Indian mineral royalties. As 
the tribes began to see what was occurring in the management--
collection and management of the royalties, they began to be 
concerned deeply about how the trust funds were managed and 
they began looking at that. They joined with the timber tribes 
and the agriculture tribes to form ITMA. And that is why CERT 
continues to look to ITMA as the lead tribal organization in 
the resolution of the tribal trust fund's accounts and the 
overall reform of the trust process management of the 
Department of Interior.
    Thank you.
    [The prepared statement of Mr. Lester follows:]

  Statement of A. David Lester for Darrell Martin, Chairman, Board of 
     Directors, Council of Energy Resource Tribes, Denver, Colorado

    Thank you, Chairman Pombo and Members of the House Resources 
Committee, for giving the Council of Energy Resources Tribes the 
opportunity to testify today. The issue before the Committee is whether 
Tribes and the Congress can formulate a process to resolve the federal 
court case of Cobell v. Norton that involves accounting for hundreds of 
thousands of Individual Indian Money (IIM) account.
    We understand the Committee's objective today is to see whether 
there might be a way to avoid continued expensive, time-consuming and 
often acrimonious litigation in a manner that is fair and equitable to 
the plaintiffs in the case. CERT Tribes would of course like to 
participate in developing an alternative process but does not have a 
formal position on what such a process would be like or how it might be 
structured. What we offer today are simple insights and suggestions 
that might be a starting point for achieving such a process. CERT 
Tribes have some experience and wisdom that would be useful if there is 
a will to move forward with a settlement process.
    Let me begin by telling the Committee a bit about CERT. It is an 
organization comprised of 52 Tribes, each of which has significant 
energy resources. The Tribes use CERT to come together to discuss 
common problems and to share solutions to problems that impact the 
development of tribal renewable and non-renewable energy resources. Our 
Mission is to support the development of viable, diversified self-
governed Tribal economies through the prudent protection, management 
and development and use of Tribal energy resources according to each 
Tribe's own values and priorities. The energy Tribes that direct and 
govern CERT have not given CERT portfolio to engage in issues involving 
individual Indian allotted trust lands.
    Tribes with significant energy resources normally have Tribal Trust 
Accounts held by the Bureau of Indian Affairs into which funds earned 
from leases of land and minerals are deposited. This is not unlike the 
system using to make deposits into the accounts of individual Indians 
on whose lands there are grazing leases, timber leases, mineral leases 
and the like. The BIA collects the money from the lessee and deposits 
the funds in the IIM accounts and into Tribal Trust Accounts.
    Unlike most individual Indians, tribal governments have some 
ability to track the money that is deposited into tribal accounts and 
to monitor lease activity on tribal lands. CERT is an active 
participant in the Intertribal Trust Funds Monitoring Association 
(``ITMA'') that consults with the BIA about tribal trust funds issues. 
There is substantial cross membership between CERT and ITMA due to the 
significant cash flow through the Tribal Trust Accounts from energy 
mineral leases. But ITMA does not, however, have any oversight or 
responsibility for individual Indian trust funds. It is unclear whether 
expansion of its mission to include IIM accounts would be a conflict of 
interest. According to the Judge in the IIM lawsuit, the Department of 
Interior's accounting system for individual accounts is in shambles. 
The situation appears to have reached ridiculous proportions. The same 
accounting systems that have allowed for individual Indian monies 
accounts to be mismanaged is the same system that is used to account 
for Tribal accounts.
    The Tribes with energy minerals resource leases along with Tribes 
with substantial timber and agricultural resource lands formed ITMA 
because they discovered serious problems in the management of the 
leases and of the income produced from the leases as well as problems 
in properly managing the Trust accounts themselves. There are many 
remaining issues between the Department of Interior and the Tribes over 
these issues but Tribal organizations under the direction of their 
governing bodies have consistently avoided intervening in the issues 
relating to IIM accounts.
    We think a brief history on how we got here probably would probably 
be helpful to Committee members, particularly to those who are new to 
Indian country issues. Only when we know where we have been can we 
begin to see how to get where we want to go.
    Historically there have been five major eras defining federal 
Indian policy; some contributed heavily to the current trust failure. 
The ``Treaty-making era'' began in colonial times and ended with a 
statute announcing the end of treaties with tribes in 1871. In the 
treaty era, promises made by the United States after adoption of the 
Constitution in 1780 were paid in accordance with the terms of the 
treaties. Most treaties, as we know, were broken. There was a 
significant effort to resolve Tribes'' treaty accounting and land 
claims under the Indian Claims Commission Act of 1946. The Indian 
Claims Commission, established by the Act, expired in the early 1978 
and residual claims were shifted to the Court of Claims for resolution. 
The deadline for filing a claim was August 13, 1951. These cases 
resolved tribal claims, not individual Indian claims because treaty 
promises generally went to the Tribes, not to Indian individuals 
directly.
    The ``Allotment Era'' or the ``Assimilation period'' began in 1887 
with enactment of the General Allotment Act, commonly known as the 
Dawes Act, when Congress initiated the policy of allotting tribal lands 
to individual Indian members, generally in quarter sections of 160 
acres and sometimes more. The intent, based on the Jeffersonian vision 
of America as a nation of gentlemen landowners, was to make farmers of 
Indians and to break the communal ties that bound individual Indians to 
their Tribal cultures and values that perpetuated the existence of 
Tribes as separate political communities. The intent of the Indian 
reformers of that day was to free the Indian from the slavery of 
tribalism as they had freed the African Americans from slavery itself. 
Though history shows that the Dawes Act was well intended by its 
authors who believed it would benefit Indian country, those good 
intentions ended in disaster. Under the Act, the United States held the 
individual land in trust for 25 years after allotment. When that period 
elapsed, the land was subject to taxation by state. Most of the land 
lost by individual Indians after the expiration of the 25 years was for 
tax foreclosures. Nearly 100 million acres of Indian land passed from 
Indian ownership as a result.
    Much of the land held by the Tribe as a collective owner that was 
not allotted to members was declared surplus Indian land and was opened 
up for homesteading by non-Indian settlers. The remaining lands are 
still in tribal ownership. In addition, the United States deeded 
alternating sections of land throughout some reservations in the West 
to railroads. Thus came into being the term ``checkerboard'' 
reservation. Most of the jurisdictional disputes we see today between 
Tribes and states trace directly to the allotment policy and to the 
railroad deeds.
    In 1934, 47 years after the Dawes Act, the Allotment Era ended when 
Congress passed the Indian Reorganization Act (``IRA''). The IRA 
ushered in the ``Reorganization Period'' and, among other things, ended 
the policy of allowing Indian land to be taxed after the 25-year 
period. The intention of the new trust policy of the United States was 
to keep in Indian ownership those Indian lands that had not yet been 
lost and to restore lost tribal lands to Tribes. The Congress was 
prompted to enact the IRA when it became aware that over 90 million 
acres of Indian land had gone out of Indian ownership because of the 
policies of the Allotment Era. It was a social and economic disaster to 
Indian country.
    In the 1953, some not so very well intentioned Members of Congress 
caused the enactment of H.Con.Res.108, the infamous ``termination 
resolution.'' Under that resolution, the ``Termination Era'' began 
during which over 20 Tribes were terminated by the United States and 
the Tribes'' land and resources were sold, mostly to non-Indians. 
Congress has now restored all of these terminated Tribes to federal 
recognition but of course very little of their former lands have been 
restored. The Menominee and Klamath Tribes, both with vast timber 
holdings, were very big losers during the Termination Era. Hundreds of 
thousands of acres of land were lost to the Tribes.
    In 1975, the Congress passed the Indian Self-Determination and 
Education Assistance Act (P.L. 93-638), an Act that had been espoused 
by former President Nixon and endorsed by every President since. This 
was the beginning of the modern era of federal Indian policy, the 
``Self-Determination Era'', the federal policy of Self-determination 
and the recognition of Tribal rights to self-governance has is 
supported by every Indian Tribe in the United States and is the policy 
upon which Tribal economic and social development success of recent 
years is built. For these reasons we hope that this policy remains the 
hallmark of federal policy.
    Under self-determination, tribal governments manage and operate 
programs that had previously been the responsibility of the United 
States. Tribes operate housing, education, health, roads, welfare, 
justice and other programs under contract with the BIA, IHS and other 
agencies under the 638 contracting process. The management skills and 
the technology transferred to the Tribes have empowered Tribes to 
engage in competitive economic activities using Tribal human and 
natural resources to advance more diversified Tribal economies.
    At the beginning of the Allotment Era in the late 1887, the United 
States assumed for itself the responsibility for ``managing'' both 
individual and tribal land. Under leasing laws and other statutes, the 
BIA would sign leases for logging, for grazing, for farming, for oil 
and gas development and for other uses permissible by law. The funds 
from the lessees were to be placed in appropriate accounts for use 
either by the landowners or by the Tribe. It may well be that the 
management of trust accounts was marred from the beginning in part 
because non-Indians believed the Tribes would cease to exist as 
organized communities and that the Indian allottees would, in fact, be 
assimilated within a generation or two. That being the case, the actual 
collection of monies and accounting for them it appears was something 
of an afterthought. The United States is now completely unable to 
account for the monies received for these individuals (and maybe even 
the Tribes) and whether the monies due the Indian landowner from 
private parties were even placed in the accounts. This may be due in 
part to the way Indian land devolved through probate to fractionated 
interests of miniscule amounts, and in part because the United States 
just did not set a high priority on tracking interests in land or 
income from land. The Allotment Policy was reversed but its authorizing 
statutes were not repealed or amended to make clear the on-going Trust 
obligations were of the highest priority.
    Individuals Indians were concerned for years about the funds in 
their accounts (or funds not in their accounts, as the case may be) and 
could find no relief. This forced Ms. Eloise Cobell and other 
plaintiffs to bring suit to secure an accounting of the funds from the 
United States. The genesis of the problem is clear and the reason for 
the lawsuit is completely justifiable. However, the question now is 
whether we leave the federal courts to unravel the issues and demand a 
true accounting or whether Congress can step in to create an atmosphere 
for settlement. At the outset, we need say that section 137 of the 
House Interior Appropriations bill for fiscal year 2004 is not the 
answer.
    Section 137 is relatively simple. It applies to any claim against 
the United States arising out of any obligation of the United States or 
any person of instrumentality thereof ``relating to the conduct of an 
accounting, or the balance of, and individual Indian money account 
arising prior to December 31, 2000.
    Subsection (b) then provides that the Secretary of Interior shall 
formulate, and within four years complete, a ``statistical sampling 
evaluation'' of all covered IIM accounts ``in a manner that the 
Secretary deems feasible and appropriate given the availability of 
records, data, and other historic information, and shall estimate, so 
as to achieve a ninety-eight percent confidence level, the rate of past 
accounting error ``.'' As the language indicates, the Secretary has 
nearly unfettered discretion in determining the manner in which such 
sampling is conducted, and is only required to ``estimate'' the rate of 
past accounting error.
    Once the statistical evaluation is complete, the Secretary must 
certify the sampling and publish such certification in the Federal 
Register. Within 180 days following such certification, the Secretary 
must adjust all IIM accounts covered by the certification, provided 
that the Secretary may not adjust an account downward.
    Judicial review by an IIM account holder is extremely limited. As 
set forth in subsection (f), judicial review is limited to filing an 
Administrative Procedure Act style action with the U.S. Court of 
Appeals for the District of Columbia. Any such petition must be filed 
within 60 days of the date the Secretary adjusts the respective 
account. Such review would accordingly be limited to the ``arbitrary 
and capricious'' standard of review and would therefore be limited to 
the administrative record. Also, nothing in subsection (f) or in 
Section 137 requires the Secretary to personally notify the respective 
account holders that their account has been adjusted. Without such 
notification and given the short 60-day window, it is foreseeable that 
most account holders would not have an adequate opportunity to 
challenge the Secretary's adjustments to their IIM accounts. This 
judicial review provision is exclusive and applies retroactively to 
``any litigation filed before, on, or after the date of enactment of 
this section,'' and would necessarily include the plaintiff class 
members in the Cobell litigation.
    Subsection (g) of Section 137 provides that the balance of any 
account as determined under Section 137 ``shall conclusively constitute 
the new balance of the account--and shall not be subject to any further 
adjustments ``.'' Section 137 also allows the Secretary, in her 
discretion, to voluntary settle any claims directly with IIM account 
holders. Account holders who settle are not entitled to any further 
adjustment to their account balances.
    Because Section 137 retroactively affects pending causes of action 
and potentially affects the amount of damages recoverable under such 
actions, it may well violate the constitution, specifically the Due 
Process and Takings Clauses of the Fifth Amendment to the U.S. 
Constitution. If held to be constitutional, Section 137 would eliminate 
the Cobell case and any other cases related to the mismanagement of IIM 
accounts to the extent those accounts existed prior to December 31, 
2000. It essentially gives the Secretary nearly unlimited discretion to 
resolve any IIM accounts discrepancies without meaningful judicial 
review.
    The foregoing analysis moves us to say what a true settlement would 
definitely not look like. It would not look like Section 137. In fact, 
Section 137 looks remarkably like Justice Department's dream resolution 
of the Cobell case.
    In focusing on what a settlement process would look like, common 
sense and fairness dictates that there needs to be complete agreement 
on the part of the plaintiffs to participate in such a process. And the 
option of returning to the litigation if the process fails must be 
absolute. As for how such a process might look, one possibility is that 
Congress could take a nugget from history on how it has resolved 
similar issues involving non-Indian account holders along the lines of 
what was done in the Thrift Savings resolution. In that case the US 
even protected account holders who had balances above the government's 
insured levels to maintain the integrity of the banking system and the 
trust and confidence of the American citizens affected by the crisis. 
Those two standards, establishment of a system that has internal 
integrity and that is accountable to a regulatory authority and the re-
establishment of trust and confidence of the Indian account holders, 
should be included in the fundamental principles that guide the 
resolution of the trust funds crisis as well.
    If in the agreed upon process for resolution of the crisis the 
Indian account holders are willing to consider the idea of a 
statistical error rate that would adjust accounts upward but not 
downward, that error rate could be determined but not at the cost to 
the plaintiffs that is envisioned in Section 137.
    Congress could also establish an accounting organization to do the 
historical accounting work and then certify unpaid or underpaid IIM 
accounts to Treasury for payment. There are probably dozens of ways for 
Congress to wrap its arms around the IIM accounting (and damages) 
claims. But one thing is certain. Any method or process will cost 
money. Justice to Indian account holders should not be subjected to a 
bureaucratic cost benefit analysis. If that had been applied to the 
freeing of the slaves or to the processes of American self- governance 
itself they would have failed the test. But a fair process agreed to by 
the stakeholders to resolve the accounting, we believe it will save 
millions over the long haul in legal costs and in damage claims.
    Indian money was collected by the government acting as Trustee for 
the Indian landowner but did not create a system by which the money 
could be properly accounted and a system that has not been accountable 
to any external review to assure its integrity. This is the reason the 
problem developed early in the history of allotted Indian lands. The 
unaccountable accounting system persisted because no one could imagine 
that a federal agency acting as trustee would ever create such a mess 
in the first place and Indian people placed a great deal of trust in 
the integrity of the Department of Interior and its Bureau of Indian 
Affairs to do the right thing. Is there any other group of American 
citizens or a single citizen any where whose monies had been mismanaged 
by an agency of the federal government who would think Section 137 
would be a fair process to achieve settlement? We think not.
    Fair resolution of the Trust Funds scandal cannot revolve around 
the cost benefit analysis. What price is Congress willing to pay to 
restore National honor and regain the trust and confidence of the 
hundreds of thousands of Indian account holders who trusted in the 
integrity of their federal trustee? The Founding Fathers pledged 
``their lives and their sacred honor'' in establishing the American 
Republic of which Indian Tribes and individual Indian landowners are 
now a part. The Department of Interior has not only breached its Trust 
obligations to Indians it has cast a shadow on the ``sacred trust'' 
that was bequeathed to all Americans, our trust in the fairness and in 
the integrity of our own government. That is what is at issue!
                                 ______
                                 
    The Chairman. Thank you. We just were called to another 
series of votes on the floor, but in all fairness I'm not going 
to make you guys sit here through another thing like that. If 
any of the members have a particular burning question that they 
would like to ask of the panel at this time, I will yield to 
them. One. One short one.
    Mr. Pallone. Thank you, Mr. Chairman. I just--I ask it of 
Keller George, but I guess Mr. Frazier could answer, too. But 
Keller, you mentioned that there has been little discussion 
with the tribal leaders about the BIA's trust reform proposal. 
I'm assuming this is the new one that they started with in 
January. And then you talked about, you know, regional offices 
and the possible Under Secretary for Trust Reform.
    I just wondered if you could tell me briefly, you know, the 
question, there really has been no consultation since this came 
out. If would you answer that. And second, has USET--
    The Chairman. I said one.
    Mr. Pallone. Forget that then. Has USET or the ITMA, have 
either of you, collectively or separately, come up with a 
proposal of what you would like us to do? I'm not sure if you 
have, but I seem to have heard that one or both of you have 
some kind of proposal.
    Mr. George. USET, in the beginning when we were first 
established, the DOI Tribal Task Force had a proposal--there 
were 29 proposals in the beginning, but in the course of our 
negotiations they were dwindled down to two. And I think that 
USET and other regions took the best parts out and made these 
two proposals. And I think we even got it further, we could 
agree on one specific proposal.
    To answer the question about the Under Secretary, we were 
in agreement, the DOI and the USET tribes--I mean the task 
force was in agreement that there was a need for an Under 
Secretary. But the tribes of the task force needed the trust 
principles and oversight along with it, where the DOI only 
wanted our support to get legislation passed that would 
establish an Under Secretary.
    When we refused to do that, that's when the wheels fell off 
of the whole process and we never had a meeting since that 
particular time. Everything fell apart because we would not 
agree to an Under Secretary without trust principles and some 
oversight. And that was the danger.
    And yes, we do have a plan that we have. And in addressing 
the lack of consultation, we had a meeting yesterday with the 
Assistant Secretary of Indian Affairs and Mr. Swimmer from the 
OST, the Office of Special Trust. It was the first time that we 
asked the question, Well, when are you going to begin 
reorganization? He said, it's already going as we speak. The 
Secretary signed off on a new BIA manual a while ago. And we're 
not here in consultation, but we're here to tell you about the 
roll-up of the new BIA.
    So that was really on that point, there was really no 
consultation. We thought we were here yesterday for a 
consultation. But as it turned out we were told this is not 
consultation, we're here telling you that the roll-out has been 
begun and we've been meeting at various locations and that was 
the extent of it. So to answer the question, were we consulted 
on this since January on trust? No.
    Mr. Pallone. OK. Thank you.
    The Chairman. Mr. Faleomavaega.
    Mr. Faleomavaega. I don't have a question, but I just want 
to commend the gentlemen for their testimonies. Realizing, I 
think, we've come up with at least two or three major issues 
that I certainly would like to offer my recommendation to you, 
Mr. Chairman, that we need more oversight hearings, especially 
on this reorganization that we keep hearing about. With that, 
Mr. Chairman, again I want to thank Mr. Frazier, Mr. George and 
Mr. Lester for traveling such long distances to be with us in 
this hearing.
    Thank you, Mr. Chairman.
    Mr. Frazier. Can I respond to Congressman Pallone real 
quick on his question?
    The Chairman. Mr. Cole, did you have--
    Mr. Cole. In deference to time, that's fine.
    The Chairman. Mr. Carson?
    Go ahead.
    Mr. Frazier. The tribe, we don't believe that we have been 
truly consulted. I know that I have been, back in December of 
2000 when they had a big meeting down in Albuquerque and there 
was probably 3- or 400 tribal leaders down there. One of the 
things that sticks out in my mind at that particular meeting 
that everybody said no to this reorganization, and several 
months later they come up into Rapid City in the Great Plains 
area and all the tribes there said no.
    And just lately, like what Mr. George mentioned, they've 
been going out and doing some series of meetings. And everybody 
I talk to, they all said the same thing, is no. And I don't 
think there has really been any true consultation.
    That task force, I think they utilize that, you know, as a 
ploy in calling the consultation. Like I mentioned, this 
reorganization, if you look at it, will not benefit Indian 
country. There is nothing coming down to the local level in the 
area of resources, authority or anything.
    I think that the solutions are out there in Indian country. 
And you heard Mr. Cason say there was 29 proposals, but 
unfortunately he didn't take time to look at every one of them, 
because if he had, maybe we would have a solution today, 
because out there we live and breathe it.
    In the area of ITMA, we got a trust reform legislation and 
we are in town tomorrow to look for some sponsorship from the 
House side. And this legislation was drafted in coordination 
with a lot of tribes, you know. And ITMA is also going to be 
having a meeting in Portland on July 21st. But for the record, 
the Rocky Mountain Tribes and the United Sioux Tribes in South 
Dakota are in support of this legislation.
    So, thank you.
    The Chairman. Thank you very much. I apologize to this 
panel. I know that the members have a number of questions that 
they would like to ask. But I want to thank you for your 
patience. I want to thank you for your testimony and being 
here.
    There will be additional questions that will be submitted 
to you in writing. I know I have a number of questions that I 
wanted to ask. But at this time they will be submitted to you 
in writing. If you would answer those in writing for the 
Committee so that they can be included in the Committee record.
    I want to thank this panel and the previous panels for your 
testimony. I know this is an extremely important issue. And 
myself, Mr. Rahall, and the rest of the members of the 
Committee look forward to working with you hopefully to come to 
a solution of this on as quick a basis as we possibly can.
    So thank you very much. The hearing is adjourned.
    [Whereupon, at 7:10 p.m., the Committee was adjourned.]

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