by Anne Constable
Assistant City Editor
The Santa Fe New Mexican
BLOOMFIELD, N.M. — Sam and Esther Valdez got running water at their green cinderblock house in Blanco Canyon, 40 miles from Farmington, only a year ago. And they still have no telephone line.
But less than 100 feet from their front door are wells that have been pumping oil and gas for decades.
The couple each inherited interests in land allotted to their ancestors by the government in 1887 through the General Allotment Act, also known as the Dawes Act. For more than 40 years, energy companies have leased the land to mine oil and gas from some 15 wells.
Although an American flag flies in the front yard, the Valdezes believe the U.S. government has betrayed them by mismanaging their accounts since the Individual Indian Trust system began.
During this time, crude-oil prices have averaged $21 a barrel. But the family doesn’t know how much has been produced or how much they should have been paid.
The Valdezes are among some 500,000 Indian trust-account holders who stand to benefit from a class-action suit filed nine years ago to force the government to account for billions of dollars in lost revenues from oil and gas, timber and grazing leases on Indian allotments and to reform the trust system.
Last week, Elouise Cobell, a Montana banker and the lead plaintiff in the case, toured the Valdez property with members of its legal team while on a trip to the area to brief Navajo trustees on recent developments in Washington, D.C.
“You see all the oil production, gas production, pipelines, and you see people without running water. They should be living in palaces,” said Keith Harper, an attorney with the Native American Rights Fund, which brought the suit against the government in 1996.
The plaintiffs estimate the government could owe them as much as $176 billion, although the government says its liability is much less.
The court has already ruled the trust was mismanaged, but it might still be years before there is a financial settlement. Anna Valdez, 51, is who lives with her parents, said they “want to see part of that money before they go.”
A history of disaster
The Indian trust system was established more than a century ago as part of a policy to feed the demand by non-Indians for land in the West. Thousands of Indians were allotted beneficial ownership of 80- to 160-acre parcels called Individual Indian Monies. The government took legal title to the land and responsibility for collecting and distributing revenues generated by the various leases.
From all reports, its management of the system was a disaster.
Landowners were only paid sporadically — or not at all — and often the checks they received were for nonsensical amounts.
When they asked for explanations, they were ignored.
A 1992 congressional report titled Misplaced Trust noted the scores of reports that documented failure to fully and accurately account for trust-fund money.
And as recently as July, a federal judge said the situation hasn’t changed. The Department of the “Interior’s unremitting neglect and mismanagement of the Indian trust has left it in such a shambles that recovery may prove impossible,” warned U.S. District Judge Royce Lamberth, an appointee of former President Reagan.
The government’s record is “ignominious,” he said. The Interior Department does not know the precise number of accounts it is supposed to be administering; it does not know the proper balances for each one; and it does not have sufficient records to determine their value.
“What remains is the raw, shocking, humiliating truth at the bottom: After all these years, our government still treats Native American Indians as if they were somehow less than deserving of the respect that should be afforded to everyone in a society where all people are supposed to be equal,” Lamberth wrote.
A question of trust
During a visit with the Valdez family, Cobell learned from Anna Valdez that her father had received checks for about $154 a year from his four allotments. But after a lawyer contacted the Interior Department on his behalf, payments increased to between $600 and $900 a month.
According to Esther Valdez, who speaks only Navajo, she used to get $100 a month from her leases but sometimes had to drive 200 miles round trip to the U.S. Bureau of Indian Affairs office in Crownpoint to get the money.
“I grew up on these stories like Anna’s,” Cobell said.
After becoming treasurer of the Blackfeet tribe, she repeatedly wrote the Interior Department on behalf of beneficiaries trying to reconcile their accounts. “We couldn’t get answers (from the government),” she said. “Every time we tried to ask a question, they would come back to us and say, ‘Oh, you don’t understand.’ ”
In the back of her mind, Cobell said, she thought, “if only I could let the president know, he would change this.”
After years of meeting with government representatives, Cobell was still at an impasse. She then decided that if nothing happened as a result of an appointment arranged with then-Attorney General Janet Reno, that would be the last. When Reno blew her off, Cobell was scared, she said, but she decided to sue.
“To me, I think of her as brave enough to do this. Some of us don’t dare do what she’s doing,” Anna Valdez said of Cobell. “She (really) opened our eyes.”
Dennis Gingold, a prominent Washington banking lawyer, gave Cobell the legal ground for the case. He recommended the plaintiffs charge the government with breaking a trust agreement.
This was a critical piece of advice, according to Bill McAllister, a former journalist who now works for Cobell. “Everybody in Indian Country has known since Day 1 that the trust was mismanaged. But they lacked a legal way to sue the government.”
Trust law, he explained, “puts a very heavy burden on the trustee to perform in a manner most beneficial to those he serves. The government can’t just say it’s made a payment; it has to prove it and produce evidence.”
And so far the government has had trouble doing that. Many documents have been destroyed. Some turned up in rat-infested warehouses in New Mexico and Nebraska. And in thousands of cases, the government has no addresses for the beneficiaries.
“What they’ve done is horrible, unlawful against people who can’t fight for themselves,” Cobell said. “Not only Native people should be upset. Every citizen should be upset. It’s wrong, and they know it’s wrong.”
Funding the lawsuit, however, was going to be a challenge, Cobell knew. She had a grant and a loan from a Minnesota foundation, but it would take a lot more money to fight the U.S. government.
Lannan steps in
The case was already under way when Patrick Lannan, a Santa Fe philanthropist, read a story in The New York Times in 1997 announcing that Cobell had won a MacArthur Fellowship, frequently called the genius award, a five-year, no-strings-attached prize of $300,000.
Lannan, whose family foundation had been funding projects in Indian Country since 1994, had heard about her case. Had Cobell ever applied for funding, he asked? Yes, he was told, but she had been turned down.
Lannan quickly made arrangements to meet Cobell for breakfast in East Glacier Park, Mont. He arrived with two members of his board of directors. The woman he met looked like a young grandmother. She was “kind of quiet,” he said, “but very engaging at the same time” and with a “very strong, controlled will.”
They faced each other across the table. “I didn’t know what to expect when I sat down,” Cobell said. Lannan told her he wanted to hear about the case. She talked about her own experience trying to find out what was in her family’s account. She told Lannan that some years they didn’t get a statement; one year it had a negative balance. And when she sought answers from the BIA, she was treated in an offhanded way or told she didn’t understand financial matters.
When she had finished her overview, Lannan asked her: “How much do you need and what do you need it for?”
“I was shaking so much. I didn’t know what to ask for,” Cobell recalled. She said she looked at Lannan and “hated to say it,” but told him she needed $1 million.
Before leaving, Lannan promised Cobell he would take her request under consideration, but left her with the impression he would contribute something.
Within hours, he called from the airport to say he had decided to give her what she asked. In his version of the story, he phoned other directors at the foundation to say, “This is as important as anything we do in Indian Country, but it’s high risk.” He got their unanimous consent.
Early on, one director, who is also a lawyer, pointed out that when the plaintiffs are 500,000 Indians and large amounts of money are involved, “the government is going to fight tooth and nail.”
That’s turned out to be correct. But even though the case is nearly a decade old, and the docket sheet contains over 3,000 entries, the Lannan support has never wavered.
To date, the foundation has contributed about $7 million to the Blackfeet Reservation Development Fund, primarily to pay for accounting work and expert witnesses.
“On every front, the government has tried to stall, delay, procrastinate, make new motions. If we hadn’t helped, this case would not still be around,” Lannan said.
But the potential benefits are huge if both sides ever reach a fair settlement, he believes. “If we did nothing else in the last 20 years, we would have justified ourselves. This could have more impact on human lives than anything we’ve ever done.”
Victories in court
In the nine years since the case was filed, the Indian plaintiffs have won numerous legal victories. Two secretaries of the interior and their assistants and the secretary of the treasury have been held in contempt. The Departments of the Interior and Treasury were ordered to pay penalties for delays in reporting destroyed documents.
In 1999, in his ruling on the first half of the case, the judge declared the government had breached its trust responsibilities to the Indians and ordered it to file regular reports on efforts to reform the system. The ruling was upheld in 2001 by the U.S. Court of Appeals, which said that “the magnitude of the government’s malfeasance” justifies court supervision and oversight of the trust-reform effort.
In July, the court granted the plaintiffs’ motion to require the government to give beneficiaries notice of their continuing inability or refusal to discharge their fiduciary duties.
Down to numbers
One of the reasons the Indians have been able to keep fighting is the support from the Lannan Foundation, which allowed them to hire resource accountants to estimate how much money should have flowed through the accounts.
“The government would have beaten us one more time if it hadn’t been for the Lannan Foundation,” Cobell said.
It’s an expensive and complex process, given that complete federal records are not available. For oil and gas, which is where most of the money is, the experts used a standard database showing the location of oil and gas wells in the United States. By overlaying this information with satellite maps pinpointing well locations in Indian country and allotment maps, they could estimate how much oil and gas was produced on each property year by year and its value.
They followed a similar process for timber and grazing to come up with a total of about $14 billion for the amount of money that flowed through the trusts from 1887 to 2002. The government risk-assessment contractor, using a similar model, estimated the amount at between $10 billion and $40 billion.
Some of the money has obviously been allocated to account holders over the years, but the government can’t demonstrate how much, the Native American Rights Fund’s Harper said. And under trust law, “if you can’t show it, you owe it,” he added.
Also, the judge has ruled that compound interest applies, which means, under the plaintiffs’ calculation, the government liability is as much as $176 billion.
An unacceptable bill
Meanwhile, U.S. Sens. John McCain, R-Ariz., and Byron Dorgan, D-N.D., decided to seek another solution in Congress. In July, they submitted a reform bill that recognizes the settlement will amount to billions of dollars, although it doesn’t mention a number. The bill calls for the money to come from a Claims Adjustment Fund and not the federal Treasury — a good thing. But it proposes calculating the amount of money that flowed through the trust accounts only to 1980, not the present, and puts responsibility for dispersing settlement funds in the hands of the treasury secretary and removes the court from a role in administering the trust.
Cobell calls the legislation unacceptable because it would “take away all the victories we have won in court.”
She and her team are discouraging people in Indian Country from supporting the measure in its current form. They still believe the bill could eventually lead to a financial settlement of the case, but as Harper told the Navajo account holders at the meeting in Bloomfield: “We didn’t work 10 years to get another rip-off in the end.”
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