Challenging the Government's Multi-Billion Dollar Mismanagement of the IIM Accounts

"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 accurate accounting cannot be rendered for most of the 500,000-plus beneficiaries. It is fiscal and governmental irresponsibility in its purest form."

This quote is not from some overzealous journalist; it is from Judge Royce C. Lamberth, United States District Judge in Washington, D.C., in his December 21, 1999, ruling on the case filed by NARF in conjunction with other attorneys in 1996.

The problems surrounding the Individual Indian Money trust have been in the making for more than 100 years. Past Congresses and Administrations have ignored the problems or outright lied about them hoping they would go away, but they just kept getting worse. In order to get substantive, long-lasting results, NARF turned to the courts.

A Brief Historical Perspective.

In 1887, in an attempt to destroy tribal organization, the United States Congress enacted the General Allotment Act that called for the division of some tribal lands among individual tribal members. Imposed upon Indians without their consent, the Act gave tribal members 40, 80, 160, or 320 acre parcels. Allotted land was held in trust by the U.S., which negotiated leases--money belonging to individual Indians--on some of these lands to non-Indians for grazing, mining, and logging as well as oil and gas production. Income from these leases was supposed to be deposited in the U.S. Treasury and checks issued to landowners. This income forms the core of the IIM trust--now involving more than 500,000 present and past account holders. The historic and present mismanagement of the IIM trust is the basis for the lawsuit.

In 1934, the government repudiated the allotment policy by enacting the Indian Reorganization Act of 1934. It ended allotments, and made the individual Indian trust perpetual.

The United States is the trustee of the IIM trust. Management of the IIM trust is the responsibility of the Department of the Interior (DOI) and the Treasury. The trustee has consistently and egregiously failed to perform the most fundamental fiduciary duties and continues to do so. Over the years, the trust management system deteriorated and is essentially nonfunctional.

The government has never provided account holders an accounting. Ownership records are wildly inaccurate, so the wrong people often get paid and there is no way to accurately determine to whom income belongs. The gross mismanagement and inaccuracies are mind-boggling...

Accurate account balances cannot be provided to Native Americans who are legally entitled to this money and count on it for basic necessities.

In fiscal 1995, there were 15,599 duplicate accounts with the same number.

Innumerable accounts are routinely and arbitrarily closed.

More than 54,000 accounts containing more than $46 million were for individuals without accurate addresses or names.

In 1988, Congress held more hearings on the mishandling of the IIM trust and, in April 1992, the House Committee on Government Operations issued a report entitled Misplaced Trust: The Bureau of Indian Affairs' Mismanagement of the Indian Trust Fund. The report stated that Interior had made no genuine effort to address the extraordinary mismanagement and has willfully disobeyed congressional mandates aimed at forcing the Interior to correct trust management practices.

Based largely on the findings of this report, Congress passed the Indian Trust Fund Management Reform Act in 1994. (1994 Act) Among other things, it established an Office of the Special Trustee for American Indians within the Department of the Interior. A Special Trustee heads the Office, but was given no final decision-making authority. The Interior vigorously opposed the Act and ever since has built roadblocks to prevent the Special Trustee From instituting any meaningful reform. In addition, Congress failed to appropriate sufficient funds to properly implement the Act. No lasting changes were forthcoming...something had to be done.

The NARF Class Action Lawsuit.

On June 10, 1996, NARF in conjunction with other attorneys, filed a class action lawsuit on behalf of all present and past individual trust beneficiaries against the government for its failure to properly manage Indian trust assets. It involves more than 500,000 current Individual Indian Money account holders. Although there are also tribal trust funds, this litigation involves only the trust for individuals.

The IIM accounts had an aggregate balance of more than $450 million, with $300+ million passing through them each year. These are the main objectives of this lawsuit: (1) to require the United States to institute reforms which will enable it to properly manage all trust assets; (2) to provide an accurate and complete accounting to each beneficiary and (3) to correct accounting balances in accord with the accounting.

Elouise Pepion Cobell is the lead plaintiff. A member of the Blackfeet Indian Tribe in Montana, she helped organize and now chairs the Board of Directors of the Blackfeet National Bank. For 17 years, she served as Treasurer of the Tribe and has also served as Controller. She is now Project Director of the IIM Trust Correction, Recovery, and Capacity-Building Project of Blackfeet Reservation Development Fund, Inc.

Cobell has talked to dozens of people and over the years has heard hundreds of heartbreaking stories of people trying to get their checks--money that is theirs!

"They would beg the agents at the BIA office for their checks and routinely be turned away, told to come back next month or next year," she recalls. "People needed money to buy food, clothing and was terrible what they had to go through." [Standing Strong, Native America's magazine, Fall/Winter 2001].

In November 1996, Judge Royce C. Lamberth, the judge assigned to the case, signed an order--consented to by the government--requiring the government to produce all records pertaining to the five-named plaintiffs representing the class in the case. Although they initially said they would do so, the government refused to produce the documents and NARF filed a motion to hold them in contempt for failure to comply. A contempt hearing was held and Judge Lamberth ruled that Secretary of Interior Bruce Babbitt, Secretary of Treasury Robert Rubin, and Kevin Gover Assistant Secretary of Indian Affairs, were in civil contempt of court.

During this contempt trial it was later admitted by the government the Treasury Department was destroying 162 boxes of documents relevant to this case. They withheld this information for three months.

The First Trial--A Stunning Victory for Native Americans.

NARF and plaintiffs have won every phase of this litigation. The first phase of the trial lasted from June 10 to July 21, 1999. Thousands of pages of testimony were taken, including an admission from Secretary Babbitt that the "fiduciary responsibilities" of the U.S. are "not being fulfilled."

Judge Lamberth issued his ruling on December 21, 1999--calling the case a "stunning victory" for the Indian plaintiffs. He was severely critical of the DOI and Treasury, noting the particularly severe impact on the plaintiff class: "The United States' mismanagement of the IIM trust is far more inexcusable than garden-variety trust management of a typical donative trust. For the beneficiaries of this trust did not voluntarily choose to have their lands taken from them...[the] plaintiffs' class includes some of the poorest people in this nation. Human welfare and livelihood are at stake." The court ordered the government to take steps necessary to reform the system and retained jurisdiction for at least five years to ensure that reform is carried through.

The Government Appeals...the Ruling Is Upheld.

The government appealed almost immediately; however, on February 23, 2001, a three-judge panel of the U.S Court of Appeals for the District of Columbia Circuit unanimously upheld the lower court ruling. In a landmark ruling the appeals court upheld the court's ability to closely monitor the department's reform efforts and held that the United States does indeed have an obligation to account for every dollar from the inception of the trust.

Could Things Get Worse--YES!

During the summer of 2001, the General Accounting Office issued yet another warning that the computer systems and corresponding Internet connections that maintain the Indian trust records were lacking even minimal security and were vulnerable to hackers. Very little was done about it.

Special Master Alan L. Balaran, with the Court's permission, hired a firm to try to hack into the Trust Fund. They hacked successfully, not once but twice, the second time setting up a bogus account in Balaran's name. They proved that anyone with off-the-shelf software tools could steal money from the system and manipulate data. Moreover, any changes to the accounts were without any audit trails!

As a result, Judge Lamberth ordered, on December 5, that all Interior Departments disconnect from the Internet all access to individual Indian trust data.

This action prevented a hacker attack, because Interior overreacted and shut down all their computer systems. More than $15 million in trust fund payments to over 43,000 Indian beneficiaries were not paid just before Christmas.

In spite of the fact that Judge Lamberth issued a second order on December 17 allowing the Interior to reactivate the computer systems necessary to issue checks, the Interior played political gain in an attempt to punish and divide Indian Country.

In addition, without consulting any Native leaders, Secretary Norton announced a plan to form a new Bureau of Indian Trust Asset Management that would strip the BIA of all of its trust responsibilities. Tribal leaders denounced the plan as ill-conceived and said that if the BIA no longer manages the trust then other functions could be easily taken over by a number of different agencies.

NARF has now filed contempt charges against the current Secretary of the Interior Gale Norton and Assistant Secretary for Indian Affairs Neal McCaleb. The contempt charges center on five key areas relating to why a historical accounting project wasn't performed under a court order, the computer failures, and the filing of false quarterly reports.

From November 2001 to February 2002, the Court held a second contempt trial. This one demonstrated that secretaries Babbitt and Norton have engaged in a pattern and practice of obstruction of justice, fraud on the Court and violation of Court orders. We expect the Court's decision from this contempt trial any day now.

What's Next? More Attempted Cover-Up.

In mid-February, Special Master Alan Balaran learned of a plan by the Office of Special Trustee (OST) to transfer almost 32,000 boxes of documents containing individual Indian trust information from warehouses in Albuquerque, NM, to the Federal Records Center in Lee's Summit, Missouri. He immediately investigated, and on April 17, filed an Emergency Report of the Special Master Regarding Defendant's Proposed Relocation of Records to the Lee's Summit Federal Records Center.

In addition, the plaintiffs filed an Emergency Motion for Temporary Restraining Order. Concerns center around the facts that there are no inventories of what was going to be shipped and that once in the Federal Records Center, they might easily be destroyed through routine document destruction. The motion stated that "the Master also found that this ill-conceived and dangerous action is motivated by a desire to cover-up... present inability to properly administer trust records program."

Just one day later, on April 18, Judge Lamberth granted a temporary restraining order halting the shipment.

As this is an on-going case, there new developments almost on a daily basis. For complete updates, please visit our web site.

We must move forward to take the actions necessary to compel the government to assume its long-overdue fiduciary responsibility--to fix the broken system, maintain accurate accounting procedures, and give Indian people what is rightfully theirs.

© Native American Rights Fund's Justice spring 2002