Native Americans seek billions they say Uncle Sam
Barron’s
By: Jimi McTague
April 9, 2001
African-Americans who seek reparations from the federal government for their ancestors’ work as slaves better have deep pockets and several decades’ worth of patience. That’s been the experience of Native Americans who have been battling the government for more than three decades for its mismanagement of trust funds derived from the lease of oil, minerals, and timber and grazing rights on tribal lands over a 75-year period. The Indians haven’t recovered a cent. And were it not for the determination of one woman of the Blackfeet nation, government lawyers and bureaucrats might have worn down the Native Americans by now.
The Indians’ complaint, moreover, is firmly grounded in federal law, as the government clearly is accountable for missing funds as trustee. The Indians estimate their losses at between $10 billion and $40 billion, a mere pittance compared with the $1.3 trillion some African-Americans contend they are owed. Yet the government to date hasn’t even made the Indians an offer to settle out of court.
After more than 20 years of trying to obtain an administrative fix to the trust-fund problem, the Indians in 1996 filed a class-action lawsuit in U.S. District Court for the District of Columbia accusing the Department of the Interior of breach of its fiduciary duties. The suit demanded a reform of the trust system and a full accounting of the funds ostensibly held in trust accounts by the U.S. government. In fact, Congress had passed a law in 1994 ordering the Interior Department to take basically the same steps, but the Indians claimed the bureaucrats botched the job.
Government lawyers reacted to the lawsuit like oily characters out of a Dickens novel. In the course of four years, they ignored court orders to produce documents, covered up the destruction of 162 boxes of trust-fund records by Treasury employees, misled the trial judge, and attempted to delay the trial for as long as possible by filing endless motions. Indeed, two members of former President Bill Clinton’s Cabinet — Treasury Secretary Robert Rubin and Interior Secretary Bruce Babbitt — were held in contempt in February 1999 by U.S. District Court Judge for the District of Columbia, Royce Lamberth, after their departments ignored a court order to deliver files to his courtroom. And several Treasury lawyers stand accused of ethical transgressions related to the case.
Judge Lamberth ruled in favor of the Indians last December and ordered court jurisdiction over the Indian Trust system for five years, to make sure the government is establishing a system that will prevent future errors. This was unprecedented — the judicial branch was assuming control of some operations of an executive department. The government appealed last January claiming Lamberth had overstepped his bounds. The three-judge federal appeals panel sided with Judge Lamberth on all but a few minor legal points. The Indians are now asking Lamberth to decide how much the government owes them for past mismanagement of the trust fund, a proceeding that may not get under way until next year and could take many months to conclude.
The suit’s cost to the taxpayers so far is secret, but it’s safe to assume it’s substantial. Interior spent $21 million on accountants in 1996 just to review paperwork for tribal accounts held in trust for a 20-year period from 1972 to 1992. Last year, Interior spent another $17 million to produce 159,384 relevant documents pertaining to just five of the plaintiffs in the case. This does not include the salaries and expenses of lawyers assigned to this case by the Justice, Interior and Treasury departments.
Few organizations have the budget to go toe-to-toe with the government. The Native Americans have been able to do so because of the heroic efforts of Elouise Cobell, a Blackfeet Indian woman who raised millions for the plaintiffs from charitable foundations. Over the past 30 years, she says, she has seen Native American children grow up in abject poverty and Indians die for lack of medicine that could have been purchased had the government not lost their funds.
After listening to Cobell’s story, the Otto Bremer Foundation in April 1996 authorized a grant of $75,000 and a program-related investment of $600,000 to assist Indian account-holders in correcting the management of their trusts. Cobell kept knocking on doors and telling her story in her low-key but persuasive manner.
The Northwest Area Foundation gave her $1 million. The Ford Foundation’s human rights and international unit provided an annual grant of $500,000. A private foundation founded by the late Chicago investment banker J. Patrick Lannan in 1960 became Cobell’s largest benefactor by providing the Blackfeet with $3.5 million. J. Patrick Lannan Jr., president of his family’s foundation, said his board felt that it could do tremendous good for all Indians by helping Cobell fight a terrible injustice. In 1997, Cobell received a “genius grant” from the John D. and Catherine T. MacArthur Foundation, which she used to finance the litigation.
Justice Department lawyers representing the government refused to settle the case on four separate occasions, despite admonitions from Congress to do so. Instead, the Clinton team prolonged the case and then punted to the incoming administration of George W. Bush, which was more or less blindsided by the matter.
One obstacle to a settlement is that the two sides haven’t been able to agree on a method for estimating underpayments by the government, which has shockingly incomplete records. The Indians want to use an economic model which looks at the assets over time and, based on data on leases from other sources, makes a guess at what the Indians would have been paid if their land had been properly managed. The government wants to use statistical sampling, a method that looks at the revenue flows over time for the pieces of land for which there are records, and which then assumes that all would have gotten the same amount of money. The government’s model would yield a much more conservative result than the Indians’ model.
Another sticking point is that the Interior Department’s Bureau of Indian Affairs doesn’t know the precise number of trust accounts that it is supposed to be administering. The Interior Department says it has 300,000 accounts. The Indians claim that the number of accounts should exceed 500,000.
This case is too much like a Hollywood movie ever to be made into one. Think Erin Brockovich, with a genteel, soft-spoken Indian woman in the lead instead of a foul-mouthed office worker. Cobell is one of nine children raised on the Blackfeet Reservation in Montana in a house with no running water or television. As a child she often heard her father and neighbors talk about the mismanagement of the Blackfeet’s trust fund by the Bureau of Indian Affairs and how the missing monies reduced them to subsistence. The Indians suspected that the Treasury illegally used their funds for non-Indian programs.
Cobell witnessed first-hand how white bureaucrats stonewalled Indians who had questions about their trust-fund accounts when she worked one summer as a student intern in a BIA office. “There was a tiny waiting room with a hard bench, no restroom, and a single window with iron bars,” she recalls. The agent sometimes left for coffee breaks when the waiting room was full, would keep people waiting for no apparent reason — or take a nap.
Cobell obtained an associate’s degree in accounting from Montana State University, then worked for a bank. Having more financial experience than most people on the reservation, she was elected the Blackfeet’s treasurer in the late 1970s, a post she held for 13 years. Her proficiency with finances helped them charter their own national bank in 1987.
The Blackfeet did not know it at the time, but by naming Cobell treasurer, they set in motion one of the largest lawsuits ever against the U.S. government: “When I became tribal treasurer, I saw that the trust statements didn’t make any sense. They were accruing deficit interest. Yet under the law, the funds only could be invested in guaranteed government securities. So there was no way that we should have been losing money.”
Her letters of complaint to the BIA received no replies. At a BIA meeting of tribal governments, she stood up and said she could not make sense of the government’s financial statements. “They tried to belittle me and intimated that I was a dumb Indian,” she says. Rather than being intimidated, Cobell, whose great-great-great-grandfather was among the Blackfeet nation’s fiercest warrior chiefs, became more resolute. She formed a working group of Blackfeet treasurers and began to press members of Congress for some action. They found a champion in the late Democrat Rep. Mike Synar of Oklahoma. His hearings, which began in 1988, severely criticized the Interior Department for mishandling the trust accounts. Partially as a result of these hearings, Congress, in 1994, passed a law instructing the Interior Department to properly discharge its trust responsibilities. Congress also appointed a special master to ride herd on the bureaucrats.
Nothing seemed to happen. In fact, the special master, a respected banking regulator named Paul Homan, resigned after two years, claiming Babbitt’s Interior Department was stonewalling him. It was about this time that lawyer Dennis Gingold, who had been advising Cobell since 1992 as a favor for former partner Leonard Garment (best known as President Nixon’s counsel during the Watergate hearings), suggested a class-action suit. Gingold told Cobell that the government would talk the Indians to death if they did not take legal action. A suit required the Indians to spend heavily on accountants and other expert witnesses, to bolster their claim that the government had mismanaged the funds for 75 years. Using contacts she had made while on the board of Women in Philanthropy, Cobell obtained interviews at the foundations.
Gingold, a former college tennis champion whose puckish sense of humor masks an intense competitiveness, filed the suit on June 10, 1996. He took on the Interior Department and Babbitt instead of either the Treasury Department or the U.S. Government. He anticipated the Justice Department’s natural-resources legal team would mount Interior’s defense. The environmental lawyers, unfamiliar with trust matters, would be lost in the woods, so to speak.
Gingold didn’t expect an easy victory, however. He and fellow lawyer Thaddeus Holt, a courtly litigator from Clear Port, Alabama, had both worked for and against the government in the past. Gingold began his career with the Comptroller of the Currency. He eventually entered private practice and battled government opposition to several financial innovations that cleverly exploited loopholes in federal law.
Holt was deputy undersecretary of the Army from 1965-1967, specializing in intelligence and counterintelligence. In private practice he often represented private interests against the federal government in contract disputes. While they anticipated a protracted legal battle, neither anticipated it would drag on for almost five years. Says Holt, “I’m disappointed that they fought tooth and claw at every ditch and hedge merely to postpone the inevitable.”
Gingold has this advice for aggrieved African-Americans: “Hire lawyers who know the law and have the tenacity and will to fight waves of government lawyers for five years or more, seven days a week, 52 weeks a year. Make sure sufficient resources are available to retain the best experts to support counsel. What is most important, however — never sue the federal government unless you are willing and able to maintain the litigation through its ultimate end. Understand complex litigation against the federal government is the equivalent of war.”
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