The Billion Dollar Payback
California Lawyer Magazine
By: Daniel A. Shaw
May 1, 2001
When Kevin Gover, then head of the Bureau of Indian Affairs (BIA), silenced the agency’s 175th anniversary celebration last fall by tearfully apologizing for its abhorrent treatment of Indian people, he made history. He also made Elouise Cobell mad. Cobell, a member of the Blackfeet Nation from Montana, is lead plaintiff in the largest class action ever filed against the federal government. In 1996 she and four other Indians sued the Interior and Treasury Departments on behalf of 300,000 Indians to obtain an accurate accounting of money held by the government in individual trusts for more than a century. Over the decades records of those accounts had been routinely lost, allowed to deteriorate, or destroyed by the BIA.
Cobell wondered how Gover-himself a member of the Pawnee Nation-could apologize for the BIA’s actions and simultaneously oppose her efforts to secure a court-ordered accounting of the trusts. Just days before delivering his speech, Gover had blasted the plaintiffs in Indian Country Today for not giving him a chance to turn the trust situation around. “There are people out there who have staked their reputations on the proposition that the BIA cannot succeed,” Gover said. “They then set out to do everything in their power to prevent us from succeeding. That includes some of the plaintiffs in the Cobell litigation.”
Then Gover got personal: “These people went to that judge and asked him to take the trust functions away from the BIA,” Gover stated. “We whipped them. The judge refused to do it. But they won’t give up because they want a lot of money and because they’ve never been so important in their lives as they are as long as this litigation goes forward. While I do give them credit for creating the pressure that was necessary for trust reform, I think that they are potentially a very dangerous and destructive force.”
Cobell says she and her colitigants were never “whipped.” In fact, her lawyers embarrassed the government in February 1999 when U.S. District Judge Roye C. Lamberth held Gover and two cabinet officials-former Interior Secretary Bruce Babbitt and Treasury Secretary Robert E. Rubin-in civil contempt for delaying tactics and destroying thousands of boxes of trust documents. Cobell v Babbitt (D DC 1999) 37 F Supp 2d 6. Then, after a two-month trial, Lamberth issued a scathing opinion that granted plaintiffs much of what they had requested. Cobell v Babbitt (D DC 1999) 91 F Supp 2d 1.
A conservative Texan appointed by President Ronald Reagan, Lamberth ruled that the court would retain jurisdiction to oversee the trust system for five years and required Interior and Treasury officials to file quarterly reports on their efforts at reform. He then ordered a second phase of the trial to determine how much the federal government owes trust beneficiaries-an amount that could reach an astounding $10 billion.
The Justice Department appealed, but in late February the U.S. Court of Appeals for the District of Columbia Circuit upheld Lamberth’s ruling. Writing for a three-judge panel, Circuit Judge David B. Sentelle conceded the government had taken “significant” steps to meet its fiduciary obligations but stated that Lamberth had “heard substantial evidence that these efforts were, at best, a day late and a dollar short.” Cobell v Norton, 240 F3d 1081, 1107.
“They’ve clearly lost,” Cobell says of the two most recent rulings. “I don’t understand why they just don’t say, ‘We took their money, we took their assets, why don’t we pay up?’ This is a great opportunity for them to do the right thing.” The case is now in the hands of the Bush administration’s interior secretary, former attorney general of Colorado Gale Norton.
The great mystery of Cobell v Norton isn’t found in its appalling details but in its timing. Why has it taken so long to remedy more than a century of neglect and malfeasance by the federal government? What had changed in the past decade that permitted plaintiffs to produce such a well-organized class action? Why did this suit happen now? The answers to those questions lie deep within Indian country and have a great deal to do with the ability of Indians to raise enough money to buy justice.The BIA’s hundreds of thousands of lost trust accounts are a legacy of a deliberate policy in the late 19th century to separate Indians from their land, natural resources, and wealth. Justified as a means of assimilation, the Indian General Allotment Act of 1887 (the Dawes Act) divided tribal lands into small parcels, vesting beneficial title in the United States as trustee for individual Indians. If the tribes had proportionately more land than individual members, those tracts were designated as surplus and taken over by the trustee. After 25 years states could tax the individual parcels, and the owners could seek permission from the trustee to sell them. As a result, by the turn of the century thousands of Indians had sold their land to speculators or lost it to tax collectors. Congress ended the allotment policy in 1934, but by then, according to the district court in Cobell, about 90 million acres-or two-thirds of all Indian lands in 1887-had been transferred from Indian ownership.
In an attempt to halt the complete disappearance of Indian country, Congress passed the Indian Reorganization Act of 1934. The act promised to return surplus Indian lands to tribal ownership, but it also extended indefinitely the trust period for lands already allotted to individuals. The BIA retained fiduciary obligations to administer the trusts and the revenue they generated from leases for grazing, timber, mining, oil, and natural gas.
By then, however, the “fractionated” method of land inheritance imposed by the Dawes Act had produced an accounting nightmare. Under provisions of the 1887 law, individual parcels of land could be passed down but not divided. For instance, if two Indian siblings inherited a 50-acre parcel, they owned 50 percent of 50 acres-not 25 acres each. Over the years, the number of owners grew exponentially, as did the amount of money owed to the families. Almost from the beginning the BIA was overwhelmed by the record keeping. It didn’t help that during much of its history the agency has been regarded as a bureaucratic backwater and, during some administrations, corrupt.
In the 1980s Congress twice tried to clarify the BIA’s responsibility to its individual trustees. Both attempts were prompted by allotment holders in Oklahoma who complained they were being shortchanged by oil and gas companies then making a fortune in the state. The Indian Land Consolidation Act of 1983 would have prohibited inheriting ownership of less than 2 percent of a parcel of land. In those instances, the land would pass to the tribe. But the U.S. Supreme Court struck down the law, ruling that it violated the Takings Clause of the Fifth Amendment. Hodel v Irving (1987) 481 US 704. In 1984 Congress amended the act, but that, too, was struck down by the Court. Babbitt v Youpee (1997) 519 US 234.
Although the reforms failed, congressional focus on the trusts exposed the BIA’s miserable attempts at administering them. Late Congressman Mike Synar (D-OK) held hearings in the early 1990s that led to the publication of a landmark report-Misplaced Trust: The Bureau of Indian Affairs’ Mismanagement of the Indian Trust Fund. HR Rep No. 102-499 (1992). That report provided the groundwork for another statute, the American Indian Trust Fund Management Reform Act of 1994. The act established a special trustee within the Interior Department with a mandate to submit to Congress a comprehensive management plan. But the trustee produced few tangible results. By 1996 interest was growing in Indian country for a different approach: a class action lawsuit.One of those places was Broken Arrow, Oklahoma, where attorney Marcella Burgess Giles once represented individual trust beneficiaries in futile actions against the government. “The underlying dishonesty and injustice is incomprehensible,” says Giles. Born and raised in Broken Arrow, she graduated from Georgetown Law School and worked on Indian issues at both the Justice Department and the Department of Interior before heading home to become attorney general first of the Muscogee (Creek) Nation and then of the Seminole Nation. “Right on the horizon is one of the best opportunities this country has ever had to make good on a promise,” Giles says. “It would be an unparalleled moment in our history.”
Elouise Cobell was having similar thoughts on her ranch in the Blackfeet reservation east of Glacier National Park. For years relatives had grumbled about the BIA’s record keeping and minuscule trust account checks, but Cobell couldn’t do much about it. Later she took bookkeeping and accounting classes at Montana State University and, in the late 1970s, became treasurer of the Blackfeet Nation. In 1987 Cobell and local organizers founded Blackfeet National Bank, the first bank established by Indians on a reservation. Cobell later chaired the Intertribal Monitoring Association on Trust Funds to lobby Congress for trust accounting reforms.
In 1995 Cobell met with officials of the BIA and the Office of Management and Budget on trust fund issues, this time accompanied by Dennis M. Gingold, a Washington, D.C., banking lawyer then working as counsel to the Blackfeet National Bank. The meeting changed both of their lives. “I advised Elouise that unless she had several lifetimes, the only way she was going to fix the system was to sue,” Gingold says.
Cobell then decided to visit John E. Echohawk, executive director of the Native American Rights Fund (NARF) in Boulder, Colorado. NARF had been the nation’s leading Indian civil rights and legal organization for 30 years. Its stucco headquarters, perched on a grassy knoll a few blocks from Boulder’s historic downtown, was ground zero for legal battles to win federal tribal recognition, recoup Indian land and water rights, and maintain tribal sovereignty.
Echohawk-like Gover, a Pawnee Indian and a graduate of the University of New Mexico’s Indian law program-had pursued many of those claims since 1970 and was well aware of the trust scandal. “We’ve always known this case was out there,” says Echohawk, whose father was an allotment holder. “We’ve all grown up with it.” But Echohawk says he believed the BIA’s management would improve when President Clinton appointed Bruce Babbitt as Secretary of the Interior. Clinton was the first sitting president since Franklin D. Roosevelt to visit an Indian reservation, and Babbitt had a history of supporting Indian interests when he was governor of Arizona. Trust reform, however, proved not to be a priority in Washington. “We’re at the bottom of the barrel in the appropriations process,” Echohawk says. “We just don’t have the political power.”
Cobell, Gingold, and Echohawk decided to file a class action. “Elouise convinced me that she could help raise the money we would need over a multiyear period,” Echohawk says. “And so far, we’ve raised a lot of money for the case.” Although NARF receives considerable support from Indian gaming tribes, Echohawk emphasizes that most of the funding for Cobell has come from private foundations, including the Ford Foundation, the Northwest Area Foundation in Minneapolis, and the Lannen Foundation in Santa Fe, New Mexico.
Echohawk assigned Keith M. Harper, a member of the Cherokee Nation who had spent several years in NARF’s Washington, D.C., office, to the Cobell suit. Harper came to Indian law through a slightly different door than many of his colleagues. He grew up in San Francisco and, after graduating from New York University Law School, was hired as a litigator at Davis Polk & Wardwell. After clerking for a judge at the Second U.S. Circuit Court of Appeals, Harper joined NARF through a fellowship program funded by Skadden Arps Slate Meagher & Flom.
The plaintiff’s team decided to file the case in U.S. district court rather than the Court of Federal Claims, which traditionally is a friendly forum for government. “Many tribes have brought suits before, but these have always been brought to seek money damages from the Court of Federal Claims,” Harper says. “So from the get-go, we said the trusts are creatures of equity. Ordinarily and appropriately, the forum to bring a trust suit is a court of equity. And the district court, rather the Court of Federal Claims, is that court.”
Cobell’s team constructed the case around three relatively simple propositions: (1) the trust management system is broken, and the government must fix it; (2) there needs to be an accounting-a common law, black-letter trust accounting-of the trust monies; and (3) the accounts must be corrected.
“Suppose you have a lease on grazing that pays ten dollars a year,” Harper says. “Our case is not about saying you should have negotiated a better lease. We’re just asking, ‘Did you get that ten dollars, did you invest that ten dollars, and did you disburse that ten dollars?’ Collect, invest, disburse-the three fundamental elements of a trustee’s duties to managing funds. And we’re saying the government did not do those things adequately.”In 1997 the MacArthur Foundation awarded Cobell one of its celebrated “genius” grants, a five-year fellowship for her work promoting Indian economic development. Cobell used that money to pay expenses while she sought grants to hire top-level attorneys, both Indian and non-Indian. The resulting team included Lorna K. Babby, Harper’s colleague at NARF; Mark Kester Brown, a sole practitioner from Los Angeles who has represented Anna Nicole Smith and other high-profile plaintiffs; Thaddeus Holt, a seasoned litigator who retired as partner at Breed, Abbott & Morgan in New York; and Washington, D.C., attorney Elliott H. Levitas, a former congressman from Georgia. The non-Indians in particular refused to pigeonhole Cobell in civil rights terms. “This is not a social justice case,” says lead attorney Gingold. “This is a financial case.”
Brown, who serves as special counsel to Shapiro, Borenstein & Dupont in Los Angeles when he’s not in Washington, D.C., says Cobell has opened his eyes to the way the government has treated Indians over the centuries. “It’s been a real learning experience. No other racial minority would be treated this way in this country.”
From the beginning, however, Cobell’s lawyers encountered hostility from the Department of Justice and its lead attorney on the case, Assistant Attorney General Lois J. Shiffer. The stance was puzzling because the Clinton DOJ had paid more attention to Indian issues than any Justice Department in memory. It had, for instance, forced major oil companies to reimburse hundreds of millions of dollars to tribes to settle claims for underpayment of oil royalties. Also, Attorney General Janet Reno was an outspoken advocate of Indian drug courts, domestic violence programs, and tribal law-enforcement agencies.
But Cobell was different. “One thing I didn’t understand when I came into the government was how the lawyers worked,” the BIA’s Gover says. “There’s a tug and pull within the Justice Department between policy people and litigators, and between Justice and the agencies they represent.”
Two years after the plaintiffs filed Cobell, the Department of Justice attempted to have it removed to the Court of Federal Claims, which is unable to grant equitable relief. And, just months later, Judge Lamberth blasted the government for ignoring court orders to produce documents. “The federal government here did not just stub its toe,” Lamberth wrote in his 1999 civil contempt ruling. “It abused the rights of these plaintiffs to obtain these trust documents, and it engaged in a shocking pattern of deception of the court. I have never seen more egregious conduct by the federal government.”
Lamberth opened his 76-page ruling in December 1999 with these words: “It would be difficult to find a more historically mismanaged federal program than the Individual Indian Money (IIM) trust. The United States, the trustee of the IIM trust, cannot say how much money is or should be in the trust. As the trustee admitted on the eve of trial, it cannot render an accurate accounting to the beneficiaries, contrary to a specific statutory mandate and the century-old obligation to do so.
Still, despite intense negotiations during the final days of the Clinton administration, the Department of Justice refused to settle. “We negotiated in good faith with the Department of Interior for more than two months,” says Harper. “We reached a tentative agreement last October and submitted it to the DOJ for approval. But it was quashed.
As one of his final official acts, Secretary Babbitt then proposed a “statistical sampling” of the remaining trust account records as an alternative means of estimating the value of the Indian trusts. Congress allocated $10 million to jump-start the accounting process and also publicly urged the DOJ to settle the case. The D.C. Circuit’s opinion noted that the issue of statistical sampling expressly remained to be resolved but sternly warned the Department against taking “steps so defective that they … delay” the accounting.
The government’s position was further undermined by a court-appointed investigator’s finding of “sufficient evidence” to support charges that an employee at a BIA document depository in New Mexico had been subjected to retaliatory action for cooperating with requests by plaintiffs attorneys. The report, submitted to Judge Lamberth for further action, could result in additional sanctions against Gover, Babbitt, and the treasury secretary.
“I think it’s a different game since the two court decisions,” Harper says. “People don’t fold when they’ve only seen their top two cards. But when they’ve seen six or seven cards, and all they’ve got is slop, it’s time to fold.”
Echohawk adds, “The Bush administration has a chance to really be heroes. I’m hopeful about [Interior Secretary] Norton. She had good relations with the tribes in Colorado. Everyone’s hoping that she will be supportive of Native American issues.”
In her first appearance before the Senate Indian Affairs Committee, however, Norton embraced statistical sampling as a means of estimating the amount due to allotment holders. Her testimony stunned Cobell’s lawyers, who say it shows the secretary does not fully grasp the situation. “We think statistical sampling is totally defective and unworkable because so many documents have been destroyed,” says Mark Brown. “We hope Norton is just learning the ropes and felt compelled at the hearing to address the issue prematurely.”
Gover left the BIA in January for a position with the prestigious Indian law program at Steptoe & Johnson in Washington, D.C. He and Echohawk remain good friends. Coming from a family of allotment holders, Gover is regarded by some on the plaintiffs side as an almost tragic figure. But Gover won’t hear of it. “I don’t feel like I was stuck in the middle,” he says. “I put myself there.” Although he, too, wants economic self-sufficiency for Indian people, he insists that Cobell’s demands are unreasonable. “Sixty percent of the trust accounts are worth less than $25 a year,” he says. “It’s not as if Indian country would be prosperous if all the money had been paid. A settlement is not going to change the way the reservation Indians live.”
Cobell, still a banker and community development director, believes the money can make a real difference. “What [the government] forgets is that there are humans tied to these trust funds,” she says. “They forget that somebody’s being robbed of his quality of life every time they stall. Now the government has court orders to respond to, and we’re not going to allow them a lot more time.”
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