[Senate Hearing 109-194] [From the U.S. Government Publishing Office] S. Hrg. 109-194 INDIAN TRUST REFORM ACT ======================================================================= HEARING BEFORE THE COMMITTEE ON INDIAN AFFAIRS UNITED STATES SENATE ONE HUNDRED NINTH CONGRESS FIRST SESSION ON S. 1439 TO PROVIDE FOR INDIAN TRUST ASSET MANAGEMENT REFORM AND RESOLUTION OF HISTORICAL ACCOUNTING CLAIMS ---------- JULY 26, 2005 WASHINGTON, DC INDIAN TRUST REFORM ACT S. Hrg. 109-194 INDIAN TRUST REFORM ACT ======================================================================= HEARING BEFORE THE COMMITTEE ON INDIAN AFFAIRS UNITED STATES SENATE ONE HUNDRED NINTH CONGRESS FIRST SESSION ON S. 1439 TO PROVIDE FOR INDIAN TRUST ASSET MANAGEMENT REFORM AND RESOLUTION OF HISTORICAL ACCOUNTING CLAIMS __________ JULY 26, 2005 WASHINGTON, DC U.S. GOVERNMENT PRINTING OFFICE 22-831 WASHINGTON : 2005 _____________________________________________________________________________ For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800 Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001 COMMITTEE ON INDIAN AFFAIRS JOHN McCAIN, Arizona, Chairman BYRON L. DORGAN, North Dakota, Vice Chairman PETE V. DOMENICI, New Mexico DANIEL K. INOUYE, Hawaii CRAIG THOMAS, Wyoming KENT CONRAD, North Dakota GORDON SMITH, Oregon DANIEL K. AKAKA, Hawaii LISA MURKOWSKI, Alaska TIM JOHNSON, South Dakota MICHAEL D. CRAPO, Idaho MARIA CANTWELL, Washington RICHARD BURR, North Carolina TOM COBURN, M.D., Oklahoma Jeanne Bumpus, Majority Staff Director Sara G. Garland, Minority Staff Director (ii) C O N T E N T S ---------- Page S. 1439, text of................................................. 4 Statements: Akaka, Hon. Daniel K., U.S. Senator from Hawaii.............. 77 Cason, Jim, associate deputy secretary, Department of the Interior................................................... 78 Cobell, Elouise P., Blackfeet Reservation Development Fund... 93 Dorgan, Hon. Byron L., U.S. Senator from North Dakota, vice chairman, Committee on Indian Affairs...................... 76 Gray, Jim, chairman, Board of Directors, Inter-Tribal Monitoring Association..................................... 86 Hall, Tex, president, National Congress of American Indians.. 89 Johnson, Hon. Tim, U.S. Senator from South Dakota............ 77 Martin, James T., executive director, United South and Eastern Tribes, Inc........................................ 99 McCain, Hon. John U.S. Senator from Arizona, chairman, Committee on Indian Affairs................................ 1 Stensgar, Ernest L., president, Affiliated Tribes of Northwest Indians.......................................... 96 Swimmer, Ross, special trustee for American Indians, Department of the Interior................................. 78 Appendix Prepared statements: Akaka, Hon. Daniel K., U.S. Senator from Hawaii.............. 111 Cason, Jim................................................... 111 Cobell, Elouise P. (with attachment)......................... 218 Frazier, Harold, chairman, Cheyenne River Sioux Tribe........ 122 Gray, Jim.................................................... 125 Hall, Tex (with attachment).................................. 134 Hillaire, Darrell, chairman, Lummi Indian Nation (with attachment)................................................ 238 Marshall, Sr., Clifford Lyle, chairman, Hoopa Valley Tribe... 117 Martin, James T. (with attachment)........................... 163 Moses, Jr., Harvey, chairman, Confederated Tribes of the Colville Reservation....................................... Stensgar, Ernest L........................................... 155 Swimmer, Ross................................................ 111 INDIAN TRUST REFORM ACT ---------- TUESDAY, JULY 26, 2005 U.S. Senate, Committee on Indian Affairs, Washington, DC. The committee met, pursuant to notice, at 10:03 a.m. in room 216, Senate Hart Building, Hon. John McCain (chairman of the committee) presiding. Present: Senators McCain, Akaka, Dorgan, and Johnson. STATEMENT OF HON. JOHN McCAIN, U.S. SENATOR FROM ARIZONA, CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS The Chairman. Good morning. I want to ask the indulgence of my colleagues and the witnesses and those who have joined us today to observe this hearing. All of you know that I do not ordinarily take a lot of time for an opening statement at our hearings and that I encourage our witnesses to be brief in their testimony. I want to take a few extra minutes to share some of my perspectives on the bill before us. For the past several years, I have heard broad-based concerns from tribal leaders and members of Congress that the Cobell litigation, which has been pending for nine years, is draining resources from Indian country and creating a poisonous atmosphere for the administration of the Federal Government's trust responsibilities to Native Americans. In the 107th and 108th Congresses, I introduced legislation that was intended to try to correct some of the problems in the administration of the trust funds and assets. In those bills, the Cobell plaintiffs asked that I include a provision that would allow the litigation to continue to its conclusion. With the support of tribal leaders, I agreed to do so. In the 108th Congress, the House Committee on Resources and this committee worked with the Cobell plaintiffs and the Departments of the Interior and Justice to identify and enlist the support of two highly qualified mediators to determine if it would be possible to reach an agreement on a settlement of the litigation. I supported that effort. Unfortunately, it did not succeed and neither did any of the bills I introduced. Earlier this year, with the support of the plaintiffs and defendants in the Cobell litigation, but more importantly with the support of many in Indian country, I said I would make one good attempt at resolving the matter legislatively. If it did not succeed, there are many, many other issues that the committee can attend to. Last week, Senator Dorgan, my friend and cochairman, joined me in introducing S. 1439, a bill to resolve the historical accounting claims in Cobell v. Norton, and begin to reform the Department of the Interior's trust responsibility. We made it very clear to all parties that the bill was intended to provide a basis for discussion and review of the issues, and we welcome comment and the opportunity to improve it. However, before anyone had time to read and fully understand the bill, the lead plaintiff in the Cobell case was quoted in the press saying that the bill ``reminded me of the Baker massacre at Black Feet when they gave Heavy Runner this piece of paper. They said, `Hold it up, it will keep you safe.' '' I can certainly understand that no one would be entirely satisfied with the bill. I can even understand that many would be disappointed. That is the nature of a settlement proposal. No one gets everything they want. There are no clear winners. This bill embodies a series of proposals. It reflects extensive listening and reflecting on the views of the parties to the litigation, tribal leaders and many other stakeholders from around the country. It cannot credibly be compared to a massacre, even in a figure of speech. I hope that those who are affected most directly by the settlement of this longstanding dispute will engage constructively in the process. I am disturbed, however, by what I see as a serious misapprehension of some that settlement legislation can be enacted by being forced down the throat of either party. This simply cannot and will not happen. The idea that it might betrays a fundamental lack of understanding of the legislative process in general and the battle ahead for any legislation that would settle the Cobell litigation in particular. If all of the people testifying here today were to join hands and reach agreement on every word in the bill, the work before all of us would be just beginning. There are many members of Congress, of the public at large, and in the claimant class who will ask very hard questions about the amount of money we propose to pay in lieu of providing an historical accounting. I think the sizable sum we envision and the manner of its distribution can be defended, but it will have to be defended and unity among those here today is necessary, but by no means sufficient to do that. While they do not like to talk about it in public, the fact remains that both parties to the case face very serious legal risks if the litigation continues. Some aspects of the strong opinions of the District Court, often cited by plaintiffs, have been rejected by the Court of Appeals, which is much more selectively cited. The burden of proof that the Court of Appeals has established for the claims appears to comport with the precedent, but imposes a very real and substantial challenge to each and every claimant in the class. While the parties may not agree on how much risk each faces, they should agree that they risk facing years and years and years of litigation during which time the individual plaintiffs stand to receive nothing, save the further draining of resources away from programs such as education and public safety and towards the Office of Special Trustee. The defendants face year after year of painstaking efforts to reconstruct the past, while simultaneously trying to cope with seemingly inexhaustible demands to do more and better with limited resources appropriated by Congress. I am well aware of the hardships experienced every day by the individuals who have not been and are not being treated fairly in the administration of their trust funds and assets. I have visited them in their homes and on the lands in the Southwest, the Northwest and the Great Plains. I, too, would like to see them achieve some justice in their lifetimes, and I would like to believe that at the end of the day, the individuals who struggle through the drama of the litigation on both sides, I would like to see them made as whole as is possible in the circumstances we all confront. I understand that the plaintiffs have reacted negatively to the proposal that the settlement funds to be made available by Congress would be distributed by a special master, as opposed to having the court distribute the funds and determine attorneys fees. While the legislation does not specify a dollar amount, it does make clear that the resolution will be for billions of dollars at a minimum for the class of hundreds of thousands described in the bill. The bill proposed that each receive thousands of dollars in per capita payments alone. This is at a minimum. In addition to per capita payments, the legislation envisions that many claimants will receive much more than this in formula payments, depending on what they were likely to have lost as a result of the Department of the Interior's mishandling of their individual Indian money accounts. If the Federal Government is going to make this money available to attempt to right a wrong perpetrated over many years of mismanaging accounts, it does not strike me as unreasonable that the legislation resolve the class action for historical accountings and remove it from the court for a prompt and fair distribution to claimants. Congress did this for the families of the victims of the 9-11 attacks. It is not a flawless way to proceed, but it has been demonstrated to be fair and prompt. I look forward to hearing the witnesses' statements today. We are considering very complex issues, and S. 1439 can be significantly improved, but it must be with the agreement of both parties to the Cobell litigation and with the support of tribes from around the Nation. Although no tribe is a direct party to the litigation, it is evident to even the most casual observer that all tribes have been and are being affected by it. Let's start to put our efforts into finding a way to move forward together. We have an opportunity to try to make some genuine progress on the issues that are addressed in S. 1439. Let's all approach it with the seriousness it deserves and leave the rhetoric to others. We will not have this opportunity again anytime soon. [Text of S. 1439 follows:]STATEMENT OF HON. BYRON L. DORGAN, U.S. SENATOR FROM NORTH DAKOTA, VICE CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS Senator Dorgan. Mr. Chairman, thank you very much. Let me echo your comments about some of the more intemperate remarks that have been made about our draft proposal. It is important to point out that this litigation, the Cobell litigation, affects not just the individuals that are a party to the litigation. It will affect all Indian people all across this country. In the future, we can spend billions of dollars doing historical accounting, sending the money to accountants, legions of accountants and lawyers to do the historical accounting, or we can find some way to resolve this. But the fact is, this issue is going to affect Indian health care, Indian housing, Indian education unless we find some way to address it. Now, we drafted a piece of legislation. We said it was a start, a draft. We left the money issue blank in the larger numbers. We drafted this influenced by many of the principles developed by the work group that was organized by the National Congress of American Indians and Chairman Tex Hall and the Intertribal Monitoring Association. When we put it out there, we clearly indicated, look, this is just a step we hope in the right direction. Indian people have been cheated, bilked and defrauded over a long period of time. I understand that. I agree with that. This country needs to deal with that. It has been the case with respect to trust accounts. Senator McCain and I and other members of the committee cannot undo that. We wish we could, but we can't. So the question is, what do we do now? Well, there are two choices. We can be actively involved trying to reach some kind of legislative solution to this that is acceptable to everyone, or hopefully acceptable to most. Or we can just say, we have a lot of other things we ought to work on. You all just handle it. Let the courts handle it. We cannot pass legislation. We have too many discordant voices out there. It cannot be done, so that will not be our agenda. We will just not move legislation. Whatever the courts decide, they decide. Whatever money we have to pony up for accountants and attorneys, we will do it. But we cannot provide the leadership on something that is insoluble. That is one approach. We have chosen not to try to move down that road because we think that is counterproductive for the country, but most importantly we believe it is counterproductive for Indian people. We think for the tribes and the individuals involved in the case and for all Indians all across this country, who I think still suffer from a bona fide emergency in health care, housing and education, we need to do better. That is why we have decided to try to advance working with the working group, advance something that we think constructively could intercept and respond to this. Does anybody in this room think that spending $8 billion, $10 billion, or $12 billion for accountants and lawyers and historical accounting is the right way to address this? That is unbelievable. So we have two choices. We can either decide to proceed and work with people in a constructive way, or we can decide, don't bother us; we can't do it. And so you all go figure it out with the courts and let the lawyers and the accountants get rich and everybody else is going to suffer the consequences. I hope we choose the former, but I must say that I was not very impressed the other day reading some of the statements. There is so much shrill noise, crowd noise on some of these issues that it will make it very hard to proceed. Let me also as I conclude say that there are also some important leadership out there in Indian country as well who really feel that this needs to get resolved in the right way for Indian people. We want to work with them. This will not be easy, but Chairman McCain and I and other members of the committee have decided we have a responsibility to try. We are going to try as hard as we can to see if we cannot find a way to do this, but we can't do it without your help. Mr. Chairman, thank you very much. The Chairman. Thank you very much. Our first panel is Jim Cason, who is the associate deputy secretary of the Department of the Interior. He is accompanied by Ross Swimmer, who is the special trustee for American Indians in the Department of the Interior. Welcome to both of you, and please proceed. It is good to have you back, Mr. Cason. Mr. Cason. Thank you, Mr. Chairman. The Chairman. Excuse me, before you go. Did Senator Akaka or Senator Johnson have opening comments? STATEMENT OF HON. DANIEL K. AKAKA, U.S. SENATOR FROM HAWAII Senator Akaka. Yes, Mr. Chairman; I do have a statement. In the interests of time, I will submit my statement for the record. But before that, I want to commend you and Senator Dorgan for addressing this huge, historic problem for Indian country and all Indian people. It is something that is going to be tough, but I hope that we will all work together to try to find the best solutions to this problem over many, many centuries, not centuries, but decades that this has been a problem Mr. Chairman, I want to commend you and Senator Dorgan for introducing S. 1439 and commend you for the effort and to let you know that I will be with you in addressing this huge issue for our country. Thank you very much, Mr. Chairman. [Prepared statement of Senator Akaka appears in appendix.] The Chairman. Thank you. Senator Johnson. STATEMENT OF HON. TIM JOHNSON, U.S. SENATOR FROM SOUTH DAKOTA Senator Johnson. Yes, Mr. Chairman; I will be very brief. Thank you for holding this hearing and for your efforts with the Indian Trust Reform Act of 2005. I am still receiving comments from both tribal leaders and tribal members regarding this bill. Upon receiving more feedback from the interested parties back home, I will share their concerns with the committee. It is my hope that all concerned parties can work toward a just conclusion with a minimum of harsh rhetoric and a maximum of good faith, cooperation and consultation. I want to thank the committee staff for consulting with our tribal leaders thus far, as the committee should. My home State of South Dakota is home to a significant percentage of individual Indian money account holders and trust asset, with 26 percent of Indian money accounts from tribes in the Great Plains region, twice the number of individual accounts of any other region. I look forward to continuing to work with you as we proceed on this important issue. Frankly, I have been discouraged over the years with the Government's actions pertaining to the management and mismanagement of the tribes and individual trust assets. The Government as trustee has failed Indian country. At times, the Government has acted in bad faith. I understand that this bill was drafted with compromise in mind. It is important that efforts continue to go on to reach a reasonable consensus. While I believe that this legislation is a good start, I urge the committee, as I know you will, to continue to take a hard look at some of the pro-tribal provisions that have been omitted. Most importantly, however, I hope that we can arrive at a point where legislation will include an articulation of trust standards in the legislation itself. Finally, any settlement legislation should balance the obligations that the United States owes to the tribes and tribal claimants. We have to be mindful that this legislation does not just address the settlement of Cobell, but has a significant impact on all tribal concerns. Thank you, Mr. Chairman. The Chairman. Thank you very much Mr. Cason. STATEMENT OF JIM CASON, ASSOCIATE DEPUTY SECRETARY, DEPARTMENT OF THE INTERIOR, ACCOMPANIED BY ROSS SWIMMER, SPECIAL TRUSTEE FOR AMERICAN INDIANS Mr. Cason. Good morning, Mr. Chairman. Thank you for the opportunity to come before the committee again and discuss the Cobell v. Norton lawsuit. We have discussed the lawsuit on several prior occasions. The Department of the Interior supports the efforts of Congress as the Indian Trust Settlor to clarify our Indian trust duties, responsibilities and expectations. We particularly want to thank the chairman and vice chairman for their efforts to try to reach a full, fair, and final settlement of the issues in this case. This Congress has the opportunity to look at this issue anew, examine the facts, and move forward to a clear and consistent sense of purpose regarding the Federal Government's administration of the Indian trust. Mr. Chairman, as mentioned before, we have had a significant challenge in trying to separate rhetoric from fact involving this issue. The case is laced heavily with rhetoric. What we have done in the last 3 years is attempt to replace rhetoric with fact with our accounting efforts. I would like to synopsize basically what we have found. On the individual accounting area, the Department of the Interior spent approximately $100 million in individual accounting thus far. We have done an accounting or compiled the ledgers for the name plaintiffs and predecessors in interest. We have looked at tens of thousands of judgment and per capita accounts. We have distributed thousands of special deposit accounts. We have done a statistical evaluation of thousands of transactions involving land-based accounts. We have done all of these activities under the auspices of the plan provided by the Department of the Interior to Congress and the court to conduct the historical accounting. Throughout all of these efforts, we have found that there are differences between what is on the accounting ledgers within the Department of the Interior and what is in the supporting documentation. The differences tend to be few. They tend to be small. And they tend to be on both sides of the ledger. There are instances in which we have overpaid Indian account holders and there are instances in which we have underpaid Indian account holders. If you take all of the transactions and all of the interest that is associated with the transactions in total for all of the things that we have examined, we have so far overpaid Indian beneficiaries. That does not mean that the job is done. It is not. We have been concentrating on our first priority, which is to do the accounting for the accounts that had current balances as of December 31, 2000. We selected that as the priority because we have an ongoing relationship with those account holders. These accounts go beyond the period in which we were planning to do historical accounting, where they had an ongoing responsibility, and under the 1994 act we had ongoing requirements for providing periodic statements and balancing those accounts. So we set that as the priority accounts that we would do first. We have found some errors, but they do not amount to anywhere near the magnitude of error that has been asserted thus far in this case. For example, Mr. Chairman, as we have looked at the accounts for land-based accounts, which are the most problematic, the most expensive to do, the most complicated to do, and the most time-consuming to do, thus far in examining all of the thousands of transactions that we have looked at, we have a net error of about $10,000. We have an overall error of underpayments of about $48,000 and about $35,000 of off-setting overpayments. So there are some errors, but they tend to be small. They tend to be few. I would leave this synopsis with the thought that depending on the task that we are given as to how far back we account and for whom we account, there could be much, much more to be done and in that area there is risk and uncertainty. We do not know what we will find if we spend hundreds of millions or billions of dollars to go do an accounting. We may find results similar to what we have found so far, or we may find that there are in fact problems. We do not know. The plaintiffs do not know. But what we know so far is, after doing tens of thousands of accounts, we have not found any sign of systemic fraud or systemic accounting error in our systems. What I have been told by the accounting firms through our Office of Historical Trust Accounting is that the errors that we have found manifest themselves as normal human error, as opposed to the result of any systemic problem with our systems. If I can move on, Congress created the individual trust. We are hopeful that S. 1439 will resolve many of the issues that we have spent the last 9 years in court debating. From the Government's standpoint, we believe that S. 1439 should provide a full, fair, and final resolution of the entire case; provide a clear and realistic statement of the Government's historic accounting obligations for the trust funds of individuals; resolve the accounting claims of account holders and any associated funds for funds mismanagement; eliminate inefficient trust management obligations by consolidating individual Indians' lands through a land purchasing program; address any historical land assets mismanagement claims; clarify trust accounting and management responsibilities such that they are limited by available appropriations so that future claims and litigation do not arise as a result of unfunded obligations; and provide a clear statement of the government's historical accounting obligations for Indian tribes. We recognize that this is a daunting task, but I can assure you it is no more daunting than the prospect of facing many more years in court trying to find the answers to these issues. Mr. Chairman, I would like to close with a comment in support of our people at the Department of the Interior. We want to be sure that the public record reflects the fact of their extraordinary service to their country. Many of our employees past and present have faced rough sledding in the Cobell case and have been unfairly maligned. Department of the Interior employees working on the issues involved in the Cobell case, like other employees of the department, are here to serve the American public. They work hard and in good faith to implement the laws that you enact and protect the legal rights of Native Americans. We ask that our employees be treated with the dignity and respect they have earned and deserve, as we all work our way together through the difficult legal issues involved in the Cobell case. The department is encouraged by the Senate's leadership on this issue. We look forward to resolving this case so that the department and beneficiaries can move forward on a positive agenda for Indian country. Thank you for the opportunity to appear. We would be happy to answer any questions at this time. [Prepared statement of Mr. Cason appears in appendix.] The Chairman. Mr. Swimmer, do you have any additional comments? Mr. Swimmer. Mr. Chairman, I do not have specifically on the bill, but I would like to bring to the attention of the committee some of the reform items which have been a sideline to the Cobell matter in the court, in requesting that the trust be reformed. After the 2002 consultations that we had with the tribal leaders and the tribal leader task force, several things came out of that that I felt were very important. After becoming the Special Trustee, we moved forward on this agenda of reform. I would like to just let you know a few of the things that have happened. One of the most distressing things has been, I guess in the rhetoric both in the case and previous to our tenure there and that is that there seems to be a wholesale lack of records in Indian country that can establish for fact what happened in individual Indian accounts. I think at one time this was true, but it was true not because records were not available. It is because they could not be brought together. They were located in literally hundreds of different locations, Federal record centers from Fort Worth to Washington; tribes; BIA offices; and other places. One of the things that has happened is the creation of a records repository in Lenexa, KS. It is a state-of-the-art, actually the most modern records center of any in the Federal Government, as well as elsewhere. Currently, that record center is housing over 100,000 boxes of records that have been collected and approximately 250-plus million pages of records. Most of these deal with the financial accounting or management of Indian lands over the years. These have also been indexed and stored, and they are there in perpetuity. As we are able to collect additional records, they go into this repository. This has been no small effort. Approximately $20 million a year has been dedicated to this effort for the last few years to bring these records together. Since the 1994 act, beginning in the late 1990's, the trust fund has been audited annually by outside auditors, both the tribal and the individual trust fund. In addition to that, as provided in the act, quarterly statements of account have been sent to beneficiaries who are entitled to receive the statements on any funds that might be there. I might add, the quarterly statements are sent out for those who have more than $1 in their account. The 1994 act provides that those with less than $1 in their account receive annual statements, and those too are sent. We have just completed the conversion of legacy systems into what we call pilot agencies at Anadarko and Concho. These legacy systems change from 30- to 40-year-old computer systems for the title, work that is done by the Bureau of Indian Affairs to the accounting work that is done by the Special Trustee's office, and tracking the leasing and the use of land. The conversion of these legacy systems and the data in these legacy systems enable us to fulfill the requirements of the 1994 act, identifying source, type and status of funds for each individual Indian account holder. We have recently implemented at those two locations a lockbox system. This has been particularly troubling in Indian country. It is to collect the money that is owed. It is not unusual, has not been in the past, for a lessee to come in and give money to the Bureau of Indian Affairs and have it sit on someone's desk for a few days, maybe weeks. This lockbox system allows us to collect directly from the lessee, deposit the money immediately, begin generating interest on those funds, and place it in the appropriate account to avoid the special deposit account problem that we have now. One innovative thing, I think, that has been very helpful in Indian country just in the last 4 months, is a call center operation that was set up to receive calls from beneficiaries to help them identify answers to problems that they might have with their accounts or anything dealing with the trust issue. So far, we have fielded over 33,000 calls from beneficiaries at this call center with an 800 number. Over 90 percent, I think about 94 percent of the calls are able to be resolved at the time of the call, which is also important to avoid having to continually call back and try to find someone to provide an answer. For the first time in the history of the Indian trust, we now have trained trust administrators and trust officers located in the field. These are people who have come both from the private sector of trust, fiduciary trust, working in trust companies, building trust companies, to people in the Bureau of Indian Affairs who have been trained in the fiduciary trust, and then cross-trained with the Indian trust and those coming from the private trust and vice versa. Seven years ago, there was one person in the Department of the Interior that had private sector trust experience, and that is my Deputy Special Trustee Donna Erwin. Since that time, we now have over 60 people trained similarly in the trust world of fiduciary trust administering accounts and business on behalf of our trust beneficiaries. The total focus of the reform effort has been to, for the beneficiary him- or herself to provide the services that have in fact been lacking in the past. So I bring these items to your attention to let you know that there is another side to Cobell, and that has been in the reform, and we have not been waiting on things to happen, but moving forward with the support of the Congress and the appropriations, and the support of the Secretary particularly, and people like Mr. Cason. So we bring that to the attention of the Congress and thank you very much also for the efforts on the introduction of the proposed legislation. The Chairman. Thank you very much. Mr. Cason, what percentage of the total land-based accounts have you examined, roughly? Mr. Cason. The part that we have been looking at, Mr. Chairman, is the electronic-era accounts, 1985 to 2000. Our estimate is that they represent about 70 percent of the accounts that we intend to look at under our plan. The Chairman. What is the percentage of the total accounts? Mr. Cason. Total accounts since 1887? We do not know. No one knows. As far as I know, there is no list ever compiled of all the accounts over the last 118 years. No one knows. The Chairman. How much money have you spent on examining land-based accounts? Mr. Cason. I do not have a specific figure. Overall, we have spent about $100 million looking at individual accounts, broken into the efforts that I mentioned earlier The Chairman. Would you provide that for the record for us? Mr. Cason. Yes. The Chairman. How much money do you think it will cost to complete the land-based accounts? Mr. Cason. The estimate that we have in our plan that we submitted to Congress for the accounting that we intended to do was $335 million. The cost of the accounting looks like it may be a little bit more than that, but we have not revised it, pending discussions about how we resolve our accounting duties and obligations. The Chairman. Mr. Swimmer, I think it was the 108th Congress, we called for two mediators to work to try to solve this. Do you remember that? Two highly qualified individuals? What happened? Mr. Swimmer. I think what happened is that any mediation needs to work toward a middle point and you eventually get the two parties together. The information that has been generated thus far is that there could be millions of dollars in discrepancies in the Indian trust funds over 100 years. It is not evident that there was, as Mr. Cason said, wholesale fraud at the bureau level. Money came in, money went out, and that was the basis of the accounting that was ordered. Money came in and money went out. It was not for estimating what should have come in. If I leased my minerals for x dollars and I think I should have gotten X plus one, the point is, x went into your account. The plaintiffs, on the other hand, have set a number based on $13 billion that we generally both agree came into the trust. Their position is none of it went out. It never got paid. If you add interest to that over those periods of time, you come up with $170-plus billion. When you start at $170-plus billion and what could be millions that could be assessed, and you are trying to reach a middle point, I really believe that the mediators were unable to bring that together, to bring the two parties closer together than that. The Chairman. Do you have an idea as to what a lump-sum payment would be, Mr. Cason, under our proposal? Mr. Cason. No, Mr. Chairman; it would depend on the assumptions that you make. If we use the facts that we have found so far in the accounting process, the number would be very, very low. If you looked at the assumptions that Ross just talked about, the number would be very, very high. We do not think that the facts that we have thus far would support a very high number, but there is uncertainty and risk associated with, as you mentioned, Mr. Chairman, in your opening statement, that as we go further back, depending on the size of the job and how we frame the job, what exactly has to get done while we look at it. There is risk and uncertainty in a 100-years worth of activity, if that is what we have to look at. The Chairman. Finally, suppose that Senator Dorgan's and my proposal gains no traction and there is just opposition to it from all sides, so we move on to other issues. As mentioned, we have a number of other issues. It seems to me there is a great deal of uncertainty in the courts given the record of the District Court judge making certain decisions and then that being overturned by an appellate court. Then it seems to me that understandably people who are involved in litigation may want to carry it all the way to the U.S. Supreme Court, since there seems to be divisions of opinion at the lower court levels. Is that a logical sequence of events here? Mr. Cason. Mr. Chairman, in my opinion, if we are not successful with this effort it will be a great opportunity lost. We have been in court for 9 years. I do not think we are any closer to a resolution now after 9 years than we were when we started. I think you are right that there are several rounds of up and down through the District Court, Court of Appeals, and eventually the U.S. Supreme Court if we have to go down that pathway. At this point, the time and effort spent going down that pathway does not look very productive if there is another alternative, which I am hopeful this bill will provide us The Chairman. Ross. Mr. Swimmer. I would agree with Mr. Cason. I would say that based on the expenditures to date for the litigation, which exceed $100 million, we are looking at another $400 million to $500 million just in litigation expenses. So I think there is obviously some room for some value to be put on this in the legislation. The Chairman. Senator Dorgan. Senator Dorgan. Mr. Cason, to the extent that you know, what is the size of the class in the Cobell v. Norton case? Some say 200,000; some say 500,000 individuals. What is your sense of that? Mr. Cason. At this point, it is undefined. What we have from the court is a generic reference to current and former IIM account holders, but we have not had any more specific definition of that. There are some parameters, a time frame. The numbers would change if you say a statute of limitations would apply which the District Court does not say applies, or if you say, well, I want to take accounts from the 1970's or 1950's or 1930's. Some people believe that the operative date would be 1938 when the Court of Appeals referred to that date and it is also in the 1994 act, and the District Court judge says 1887. At this point, we do not have any clear definition as to who would be covered and who would not be covered. Senator Dorgan. Mr. Cason, you told me once about a particular parcel of land. You were trying to make a point about fractionated ownership, a particular parcel of land, I think maybe it was 2,000 acres at the Wahpeton-Sisseton Tribe. Can you recount that for me? Mr. Cason. I have had several examples, in particular I have one tract of land that has been pointed out to me by our staff that the smallest individual interest is one-ten- billionth of an interest. If you take a typical allotment, most of them are 40 acres or 80 acres or 160 acres. It amounts to a very, very tiny, small amount of undivided interest in a property. The point that I was making with you is that as a result of fractionation, we have huge complications in running this trust. Instead of the 100,000 allotments that we have, we have 2.5 million to 4 million ownership interests, depending on what you count, that we have to keep track of. In doing all the land title work for all of those things and the implications for leasing and the implications for probate, puts us in a position that the way the trust is currently framed for individual allotees, we end up wasting a lot of money because we have to administrative processing on interest of very low value or no value. Senator Dorgan. Interest payments of 0.1 cent or 0.4 cents. Mr. Cason. Yes. Senator Dorgan. I think you described to me a piece of land that produced, was it $2,000 worth of revenue and cost $42,000 for the yearly accounting to keep track of the fractionated ownership. Mr. Cason. Yes. Senator Dorgan. The only reason I make that point is to describe I assume how difficult historical accounting is and how time-consuming and how much money it is going to take. Mr. Swimmer, you said that if this continues through the courts to its conclusion, you think upward of $500 million of additional legal fees? Mr. Swimmer. Accounting and legal. Senator Dorgan. Accounting and legal fees. Mr. Swimmer. Accounting and legal, and most of that, well, that is what the money is going for now is to do the historical accounting and to perform the various orders of the court, as well as to pay the attorneys, both sides, for the effort that they are putting into the case. Senator Dorgan. But that would not reflect the cost of the larger historical accounting, if you were to be required, as the court seems to suggest, and go through the entire historical accounting effort, I assume that the costs are much, much higher. Mr. Swimmer. It could be. We have estimated I believe as high as in excess of $10 billion if you were do a transaction by tranaction analysis since 1887 of every single account holder. If you took the 2,000 owners of the 160-acre tract, every time that is leased you have 2,000 transactions because each owner has to have an account set up, whatever the money, if it less than one penny, it is rounded up to one penny and goes into the account, and then when that person passes on, we have to do a probate for that particular person, even though it is one-ten-billionth. So there are structural reforms that need to be done with the trust, and certainly the effort at fractionation interests that you all have worked on before I think will be helpful in the future. It has been helpful in the past. Senator Dorgan. One final point. Mr. Cason, you indicated that in some of the accounting efforts that you have made that the results show little if any error. And yet, most of us have read of just devastating anecdotal accounts of not just errors, but fraud, manipulation in various parts of the country over many years. How does that square with your assessment that you take some accounts and take a look at it and you find very little error? Mr. Cason. It doesn't. In terms of separating the rhetoric from fact, we have not found that in the accounting that we have done. I think it is also fair to say that we have not looked at all accounts everywhere. We started with a priority of doing the accounts that are relatively new that had balances. Maybe there is something different about those than the ones in the past. Where we are potentially different in how the two sides refer to this is I take the position that until I have actually done the accounting and have some indicator one way or the other as to what the actual facts are, I do not project one way or the other what I would find. Based on the areas that we have actually looked and found the facts, what we have found is a few errors, and they are small and they are both sides of the ledger, where we have overpaid the Indian account holder, underpaid the Indian account holder, and that when you net it out it is very close to zero relatively. So it suggests that we have not found any systemic fraud. We have not found any systemic accounting errors in our systems. As Ross said, we do balance our accounts daily now. So for that period of 1985 to 2000 that we are looking at principally, we have not found material problems. It is possible before that that there may be problems. Senator Dorgan. Then I think I understand the basis for your comment. The fact is, this goes back a long, long way with unscrupulous land agents and a whole series of fascinating and in some ways devastating stories. I think I understand why you say little error if you are just talking about a few accounts in a relatively short recent timeframe. Mr. Chairman, as I indicated to you, we have a series of five votes, the first of which will start in just 1 moment. When that first vote starts, I will run over and cast my vote and come back so we can continue the hearing. I think the third, fourth, and fifth votes will be 10-minute votes, but we will have to see how that goes. I just wanted to mention that when the buzzer rings for the first vote, I will leave and then come back so we can retain the hearing as scheduled. The Chairman. Thank you very much. Senator Johnson. Senator Johnson. Yes, Mr. Cason; I wonder if you and the Department of the Interior would address this specific bill, S. 1439. Have you taken a position on this legislation? And would you share any further elaboration or critique of the bill? Mr. Cason. The Administration has not provided a statement of Administration position on the bill yet. As you know, Senator, we just got it last Thursday. We have looked at the bill and given the nature of the Cobell litigation, there are lots of people in the Administration who are interested in this legislation and the prospect for resolving the issues. I would say generally for all the people that I have talked to within the Administration, people have been positive about the effort, hopeful about the leadership being shown by this committee to try and address the issue. There are a few issues which we would like to discuss further with the committee in further deliberations of the bill, but overall we have been positive. Senator Johnson. Thank you No further questions. The Chairman. Thank you very much. Thank you for appearing today. It is good to see you again. Mr. Cason. Nice to see you, Mr. Chairman. The Chairman. Thank you. Our next panel is Tex Hall, who is the president of the National Congress of American Indians; Chief James Gray, who is the president of the Inter-Tribal Monitoring Association and cochairman of the Trust Reform and Cobell Settlement Work Group; Ernest L. Stensgar, who is the president of the Affiliated Tribes of Northwest Indians of Portland, OR; James T. Martin, the executive director of the United South and Eastern Tribes of Nashville, TN; and Elouise P. Cobell, the Blackfeet Reservation Development Fund of Browning, MT. We will begin with you, Chief Gray. STATEMENT OF JIM GRAY, CHAIRMAN, BOARD OF DIRECTORS, INTER- TRIBAL MONITORING ASSOCIATION Mr. Gray. Mr. Chairman, Mr. Vice Chairman, and members of the committee, I am here in my capacity as chairman of the Inter-Tribal Monitoring Association, and as cochairman of the Trust Reform and Cobell Settlement Work Group. I also serve as principal chief of the Osage Nation. The Nation will provide its own separate written testimony about S. 1439 in light of our unique hybrid situation. The Chairman. Without objection, all written statements will be made part of the record. Mr. Gray. Thank you. Those of you have worked to establish the principles for resolving Cobell, reforming the broken Federal trust system, have strongly held convictions about solutions to this decades- old problem. We may come from different regions of the country, have varying trust resources and have different stories to tell about the harm we have suffered, but we all share the same critical and overriding objective: a meaningful settlement of the Cobell litigation that helps to both undo the damage done and ensure that it does not happen again. There is no doubt in my mind, Mr. Chairman and Mr. Vice Chairman, that we share the objective of justice for the past and certainty for the future. There can be no question that this bill represents the first and perhaps the only opportunity we will have to settle this case through discussions with the U.S. Congress, the entity that established the trust and which has preliminary, but not unlimited authority to establish the terms of the trust. As tribal leaders, we have the responsibility to make the most of this extraordinary opportunity. This bill represents the committee's commitment to this objective as well. We must be successful in this effort, for if we are not, the growing rift between Indian tribes and the United States will become an entrenched gulf. Consequently, I would like to note at the outset that one of the most positive aspects of this significant legislation is the simple fact that it has been introduced and by whom. I, for one, view the chairman's and vice chairman's commitment to this effort as evidenced by the introduction of S. 1439 to be a very positive step and pledge to work with you in a frank, pragmatic and reasonable manner to make this the best legislation it can be. You have both demonstrated true political courage and leadership in crafting a bill to address this bitterly controversial issue, and you deserve thanks and appreciation from all of us for this bold step. As to the bill you have introduced, I want to underscore in my testimony today the key element that we believe is right, and then close with a few thoughts of where we can go to improve the bill. Let me begin with the things that we believe are right in S. 1439. First, in your bill the funds for settlement do not come from programmatic funding of other Federal activities. This is a very important element of the bill that is absolutely correct. Unquestionably, funds to settle the injustice against individual Indian money account holders cannot come from Indian programs. We believe the explicit reference in S. 1439 to the judgement fund sends a clear message that there is no legitimate argument that the cost of this settlement should be charged or borne by any distinct part of the Federal Government or Federal beneficiary. Second, S. 1439 takes clear and affirmative steps toward reducing and eliminating several of the primary causes of the mismanagement mess. In particular, the bill addresses two causes: The fractionated ownership of allotted lands and the absence of clear executive responsibility for Federal trust activities. The fractionation component of the bill demonstrates your commitment to a comprehensive effort to put this sad history and allotment policy and its nefarious consequences behind us. The creation of an Under Secretary position should result in the coordination of Federal policies throughout the Department of the Interior through the focus of the Federal Government's trust obligation. The recognition of this trust responsibility underscores the legitimacy of every interaction between the Federal Government and Indian tribes and their members. These and other provisions demonstrate that this bill is concerned with both settling the past and taking steps to fix the future. Third, the bill recognizes that a fair settlement for hundreds of thousands of individuals who have suffered for years or decades will need to be resolved with a payment involving billions of dollars. With a class of claimants that includes hundreds of thousands of individuals, a settlement of even hundreds of millions of dollars would amount to nothing more than a token payment for each individual. Your bill recognizes that such a token payment will be a constitutionally questionable act of confiscation, not the legitimate act of a trustee. Even if such a patently inadequate payment might be permissible, it would neither be fair or adequate to bring the crisis to an immediate resolution we must strive to achieve. There are a number of tribal leaders like myself who look forward to developing a legislative proposal that we can recommend to Indian country. As you have heard from others today, we are not yet at that point. But both the sponsor statements upon introduction clearly demonstrated that neither the chairman or vice chairman assume that this bill was intended to be anything more than a starting point. I look forward to our dialog. In this dialog, we must face each tough issue together. There will be likely to be many, and resolve them pragmatically, but also in a manner mindful of the terrible injustice we are all committed to rectify. Ultimately, we must succeed. No amount of effort or accomplishment in any other area in this committee's jurisdiction will make up for the cost of not achieving a settlement. So where do we go from here? First, we must begin with a dialog with the sponsors and their staff to develop an understanding of whether certain provision of S. 1439 constitute mere place holders, necessary components of settlement legislation, or concessions to the legislative environment. For example, there is a great deal of mistrust of both the Departments of the Interior and Treasury within Indian country. Allowing either department to exercise the scope of discretion that would be permitted under the current version of the bill could allow the very individuals who are the most antagonistic to the objectives of this process to control most or nearly all of the elements of the distribution of a settlement fund. There may come a day when there is enough trust in Indian country to structure the settlement in this fashion, but we are not at that point today. In fact, we are far from it. If there are reasons why a judicially managed distribution is presently perceived as either unworkable or unacceptable, we need an open dialogue to analyze and address those concerns. Similarly, we must develop together a model to determine how much to compensate the victims of this injustice. We greatly appreciate the sponsors' recognition that a settlement must be measured in the billions. We must now work on how to develop a rationale for a more specific number. In this process, we must bear in mind that an insurmountable burden of accuracy measuring the precise amount of compensation is due completely to the Federal Government's mismanagement of its own records. In light of this, we believe that it may be worthwhile to work with committee staff to develop some models for calculating a fair and equitable settlement figure. One proposed model would calculate a compensation amount using an inputted error rate times account activity. Adjusted for interest and inflation, this idea has some genuine merit and together we should explore its viability. There are a number of other issues that concern ITMA members, which includes allotees. We will provide you with more detailed comments as to these in the near future. We have a meeting in Denver that is scheduled this week to address this area specifically. There is a great deal more to say and discuss. Some of these discussions will probably be somewhat heated, but we must remember that we are all working in good faith and to a common end. We represent a lot of people who have a lot of stake in this issue, but when tribal leaders get home, no one wants to know whether we won any arguments. They want to know if they will be compensated in their lifetimes for acknowledged injustices, whether their parents will get justice before they die. To the chairman and vice chairman, I thank you for giving them some hope that this will be the case. Thank you and I would be happy to answer any questions. The Chairman. Thank you. Tex Hall, welcome back. STATEMENT OF TEX HALL, PRESIDENT, NATIONAL CONGRESS OF AMERICAN INDIANS Mr. Hall. Thank you, Chairman McCain, and good morning Senator Johnson and Vice Chairman Dorgan, and members of the committee. I want to thank you for holding this hearing, Chairman McCain, on this most critical issue in all of Indian country today. I want to thank the vice chairman and members of the committee for their support and leadership on this issue. I am honored to appear before the committee today to testify on the Indian Trust Reform Act of 2005. I want to start by expressing my appreciation to the committee on behalf of the 250 member tribes of the National Congress of American Indians, for your commitment to Indian country and to the people of American Indians, and to bedrock the principles of trust which underlie the entire relationship between our sovereign Indian nations and the Federal Government. NCAI strongly shares the view of the committee that it is time for Congress to establish a fair and equitable process for settling the Cobell lawsuit. We cannot wait any longer. We also stand with the Cobell plaintiffs in seeking a full and fair adjustment of the individual Indian money trust accounts. I want to point out that as tribal leaders that are seated in the audience today, we also have the responsibility to fight for the welfare of our individual tribal members who are for the most part IIM account holders. We are accountable to them as elected tribal leaders. For that reason, as NCAI president and as a tribal chairman, I have invested months and directly used my authority to help build a national tribal initiative to resolve the Cobell case and reform the trust management system. This process resulted in the development of 50 trust principles that represent the views of Indian country and I would like have them submitted in the record, Mr. Chairman. The Chairman. Without objection. Mr. Hall. Thank you very much. [Referenced document appears in appendix.] Mr. Hall. I understand this process and response to the challenge of the committee to unite Indian country behind a bill that is both fair and comprehensive. Let me say without reservation that I remain committed to that process. I whole heartedly agree with you, Mr. Chairman and Mr. Vice Chairman, that the bill as introduced is a starting point and a solid starting point for resolving the trust. But make no mistake, the bill needs to go further. There are major changes that need to be made in order to convince all of Indian country to rally behind the bill. I know that the committee is committed to working with Indian country and I am positive that together we can agree on the right changes to the bill. As we do so, I can guarantee you that I will be working day and night to help unite Indian country behind this bill. On trust standards, the lack of trust standards, independence and enforceability are the most conspicuous omissions from the 50 principles we submitted. NCAI believes that standards and accountability are the cornerstone tenets of meaningful trust reform. There simply must be an independent body with true oversight authority, explicit trust standards, and a cause of action in Federal courts for a breach of those standards. The very absence of those provisions is why we have the Cobell lawsuit and all of the tribal trust lawsuits. Decades of trust reform efforts have borne little, if any, fruit. Why? Because the Department of the Interior believes its job is to ensure that the United States is never held liable for its failure to properly administer trust assets. For this reason, DOI has always opposed the standards in trust reform. On the settlement in title I in our 50 trust principles, we set forth the rationale we use to justify a sum of $27.5 billion. We understand that you, Mr. Chairman, believe that the settlement should be in the billions of dollars, as mentioned in the bill, but the bill before us does not specify a specific dollar amount. In order for us as tribal leaders to convince Indian country and our members that whatever figure is settled on is fair, we need to be armed with a dollar amount and a credible rationale that we can explain to our tribal members. Without that, we will be hamstrung in our efforts. I believe that the $14 billion needed for historical accounting is a starting point. That fact that the lump sum would come from the judgement fund so would no come at the expense of any other Indian programs or an account is an example we could use to rally Indian country. Under title II, the Indian Trust Asset Management and Policy Review Commission, the NCAI believes that this provision has the power to make a significant contribution to the ways our trust accounts are managed. We suggest that Congress should make all of the appointments, rather than leave a significant number up to the executive branch. Indian country is united that a commission must have teeth and a power to independently investigate the Department of the Interior. In regards to title III, NCAI strongly applauds the creation of the Indian Trust Asset Management Project. As the tribal chairman of my own reservation in the Great Plains, I support the creation of an area-wide demonstration project. I can assure you there will be a flood of tribes that will want to participate in this project and free them from the shackles of the governmental structure of the Office of Special Trustee. NCAI recognizes that this provision is an affirmation of tribal self-determination and sovereignty. Nevertheless, even for the tribes participating in this project, the bill does not go far enough. Not only should more tribes be allowed to participate, but tribes should be given the opportunity to establish clear trust standards. Furthermore, tribes should be able to immediately resolve disputes through the courts or a third party mediator such as the Federal Mediation and Conciliation Service, rather than have to exhaust departmental appeals. In regards to title IV, the fractionation, NCAI strongly supports the new incentives for voluntary sales of fractionated interests by allowing the secretary to offer more than fair market value. On the other hand, the bill has a provision for highly fractionated lands of more than 200 owners where if the secretary follows certain procedures, including notice by certified mail, the offer would be deemed accepted unless it is affirmatively rejected by the owner. NCAI understands the rationale behind this provision, but it seems grossly unfair to the landowners. Mr. Chairman, as you know, there are 50,000 addresses that are unknown today in the system. One possibility is to work with the tribes' enrollment offices in order to establish a direct communication with the IIM holders because the tribal enrollment office has every account member's enrollment number and address. NCAI strongly agrees that any payments Indians received under a land repurchase program should not be subject to State or Federal income tax, and should not affect their eligibility for Social Security and welfare. Under title V, the restructuring of the BIA and Office of Special Trustee, the new Office of the Under Secretary meets a number of the goals in our trust principles, including the elimination of the Office of Special Trustee. The creation of this position addresses a major issue that has been raised in every significant study of trust management at Interior: The lack of clear lines of authority within the department. NCAI believes the bill should go further. Nearly every agency in the Department of the Interior, not just MMS or BLM or USGS, has some significant trust responsibilities. At this time, there is no single executive within the secretary's office who is permanently responsible for coordinating trust reform efforts across all of the relevant agencies. This absence has particularly hurt the progress of those issues that cut across agencies such as the development of a system architecture that integrates trust fund accountings with the land and asset management systems of the BIA, BLM and MMS, and as required by the 1994 act. Furthermore, the BIA has never been provided with an adequate level of resources, staffing and budgeting to fulfill its trust responsibilities to Indian country. This has been a chronic neglect and this understaffing and underfunding has contributed to the dysfunctional management and financial systems at all levels of the BIA. NCAI also believes that an independent entity, perhaps the GAO, should have the job of reviewing the Federal budget for trust management and provide an assessment to Congress of its adequacy. I believe this role may be more important than ever today as the Administration moves to assess Federal budgets under the PART, the program assessment rating tool. Under title V, the audit of Indian trust funds, this section would require the Secretary of the Interior to prepare financial statements for individual Indians, tribal and other Indian trust accounts and prepare an internal control report. The section would also direct the Comptroller General of the United States to hire an independent auditor to conduct an audit of the secretary's financial statements and report on the secretary's internal controls. This title appears to meet the goals of our trust principles and I believe that the details of the audit procedures can be redefined and improved after more discussion with tribal leadership. So in conclusion, Mr. Chairman, on behalf of NCAI I would like to thank the members of the committee for all of their hard work and their staffs and the time they have put into this bill and the entire trust reform effort. For the most part, I also want to recognize Chief Jim Gray here as cochairman of the National Indian Working Group. Together with NCAI and ITMA and all the other tribal leaders that are here, and our membership of the 250 tribes of NCAI, and the 50 tribes of ITMA, comprising 300 Indian tribes, we will continue our Work Group to reach out to all tribes and all national and regional tribal organizations for as long as it takes. This bill is a good starting point. It is a solid starting point, but it needs to go further. We need resolution. We need to come together. We need to stay united, and I will continue as president of NCAI to call on and to work with Indian country and the committee here to come up with a bill that we can all support to provide a meaningful settlement for our elders, especially for our elders who have died in poverty without receiving justice. It is time justice comes to Indian people. They have waited too long. So thank you, Mr. Chairman, for your continuing support on this. We appreciate it. Senator Dorgan [assuming chair]. Chairman Hall, thank you very much, and Chief Gray, thank you as well. I know the two of you have worked and spent a lot of time, travel, effort and this committee appreciates that very much. Next, we will hear from Elouise Cobell. Ms. Cobell, you may proceed. Let me also just mention the Chairman has gone to cast a vote on the first vote and will return right after the second vote has started, and he will have cast a vote on that. You may proceed. STATEMENT OF ELOUISE P. COBELL, BLACKFEET RESERVATION DEVELOPMENT FUND Ms. Cobell. Good morning, Vice Chairman Dorgan and members of the committee. Mr. McCain, I will tell him good morning when he returns. I would like to thank you for inviting me here today to provide testimony to the committee on the possible legislative resolution of our 9 year old lawsuit. Although we have our strong disagreements with your initial proposal as an appropriate way to resolve the case in a fair manner, we are all united in our end goal to achieve an equitable resolution to this century-old stain on this great Nation's honor. I am here today on behalf of myself and the more than 500,000 individual Indian trust beneficiaries represented in the lawsuit we filed in the Federal court, Cobell v. Norton. I would also like to explain to you that the Blackfeet pray at the Baker massacre on a yearly basis and we pray that the Federal Government will never treat us like they treated us then. I also pray on a daily basis going to work on the Blackfeet Reservation at Ghost Ridge where 500 Blackfeet died of starvation because the Indian agent withheld rations. So I apologize to you if I hurt the committee's feelings when I explained what I felt about S. 1439, but that is the only way that I could express myself because I have to tell you that has been a very difficult task in making the U.S. Government accountable for individual Indian beneficiaries. I did not want to be in a 9-year lawsuit. I think this could have been over very quickly if the U.S. Government would admit that they could not give an accounting to individual Indian beneficiaries. We are in the 10th year of this litigation and more than 1 century of mismanagement of individual Indian trusts has already passed. Justice has been delayed for individual trust beneficiaries. Every individual trust beneficiary I have spoken with has told me that they want a fair resolution even if it takes longer. They do not want to be sacrificed at the altar of a political expediency as they have so many times before. Since 1887, members of the class have been subjected to injustice after injustice. Report after report for generations after generations have cited the rampant mismanagement and the malfeasant administration of the Individual Indian Trust. As you know, a congressional report from 1915 spoke about the scandals in terms of fraud, corruption and institutional incompetence almost beyond the possibility of comprehension. A 1989 investigative report by this committee found similar fraud and corruption. The misplaced trust report from the House Committee on Government Oversight made similar findings of malfeasance. The Court of Appeals described the disastrous historic and continuing management of individual Indian property as malfeasance, and in 2001 held the continuing delay was unconscionable. The Federal District Court Judge Royce Lamberth, who has presided over this case for nearly a decade, appropriately described the utter failure to reform the Interior Department and continued abuse of Indian beneficiaries in this way: The entire record in this case tells the dreary story of Interior's degenerate tenure as trustee delegate for the Indian trust, a story shot-through with bureaucratic blunders, flubs, goofs and foul-ups, and peppered with scandal, deception, dirty tricks and outright villainy, the end of which is nowhere in sight. By setting up the trust, the Government promised to abide by common trust laws. It has failed even the most simple of these trustee duties. The Government still cannot say how much money is in each beneficiary's account. Imagine the outrage if suddenly a major United States financial institution were to announce that it had no idea how much money was in each depositor's account. Imagine the congressional hearings, the class action lawsuits that would be filed as a result. Yet, that is exactly what has happened here. The courts have held that the Government is in breach of its trust duties. They have held that interest and imputed yields are owed beneficiaries as a class. They have held that the duty to account preexisted the 1994 Trust Fund Reform Act and that the Government has a duty to account for all funds. Time after time on major issue after major issue, the courts have made it clear that the law and the facts are on our side. I should point out that there are some aspects of the proposed legislation that are positive. First, this hearing itself is a constructive step forward to educate Congress and the American people. Additionally, the inclusion of a provision that calls for the settlement amount to come from the claims judgment fund to ensure victims are not punished also is an important positive component, as is recognition that the settlement amount is in billions. To be honest, I was deeply disappointed when I read S. 1439. It falls so short of being a good starting point to resolving the Cobell case in an equitable manner. This bill in present form is drastically in favor of the Government malfeasors position. It is not faithful to the two important sources that offer considerable guidance to any legislative resolution effort, the 50 principles for settlement that Chief Gray and Tex Hall talked about, and the numerous decisions rendered by the court in Cobell itself. We need your support to stand up for the many individual Indian beneficiaries who are relying on all of us to create a fair and equitable resolution. Like Mary Johnson, a Navajo grandmother who relies almost exclusively on a few dollars in her allotment to receive support for her family. She receives pennies of what a non-Indian is paid for gas from her land. Or Mary Fish, a 70-year-old Creek woman who cannot replace windows in her small home because she lacks the funds, yet there are five oil wells pumping constantly for decades on her land. There are so many more across every reservation, grandmothers and grandfathers and parents and children suffering from the same indignities of their forbears. I am confident that if we work together we can achieve our common objectives. There are many specific parts of S. 1439 that I believe I need to address. One of the most disturbing aspects of S. 1439 is the placing of the Secretary of Treasury, a defendant in the Cobell lawsuit and one of the parties principally responsible for the historic and continuing victimization of Indian trust beneficiaries, as the person to be in charge of the settlement funds. The Treasury Department has been Interior's partner in crime for far too long. They have been found in breach of trust. They have failed to reform. The suggestion that any settlement fund be handled by such an entity is wholly unacceptable to the beneficiary class. A second area of concern to all Individual Indian Trust beneficiaries is that under this legislation, the court would be eliminated from the picture entirely. That makes no sense for a number of reasons. Courts have the greatest institutional competence to make distributions in a fair manner. They are often called upon to do just that. Courts are armed with rule 23 and related case law that provides sound guidance for resolving difficult distribution issues. The court in Cobell has 9 years of experience of living with the facts of this case. The knowledge developed through that process is invaluable and irreplaceable. We recognize that S. 1439 places the settlement amount approximately in the billions of dollars. That, of course, is only sensible since the government's own internal risk assessment by their contractors set the liability as between $10 billion and $40 billion. In the 50 principles, the Work Group put forward a reasonable and well-founded aggregate settlement amount of $27.487 billion. This is not reparations. This is not damages, nor is it welfare. It is quite simply a return of a portion of the money that was and is being taken from us. The amount was derived by reviewing our model for each year of total proceeds from the Indian allotted lands. The Government's model of these proceeds is not far off from the plaintiffs in aggregate amount generated from these lands. For each year, plaintiffs calculate a percentage of the moneys that were, for settlement purposes, properly collected, invested and disbursed to the appropriate beneficiary. The disbursement percentages we have used are highly favorable to the Government, even though we have evidence that the Government cannot account for even 1 percent of the transactions. For purposes of the calculation we assumed that the Government could account for 80 percent. Using this percentage, we calculated how much of the yearly aggregate proceeds defendants failed to distribute properly. In this number, we add interest for a yearly calculation. We added this number together and then subtracted, again a litigation delay, a percentage-based calculation for the cost of continuing litigation. The result of this calculation is $27.487 billion. The number is further justified in my written testimony. Reform requires fundamental changes that must be made immediately in all other trusts. There are, among other things, clarity of the trust duties, clarity regarding the complete enforceability and the availability of meaningful remedies, independent oversight with substantial enforcement of authority to ensure that beneficiaries are protected. These core trust elements are not in the legislation and need to be. Congress must clarify that Indian beneficiaries will receive the same protection as all other non-Indian trust beneficiaries. The importance of keeping the courts involved cannot be overemphasized. Only when we turned to the courts was any progress made to fix the trust and establish the individual Indian beneficiaries right to an accounting. The decades of experience by the Federal courts in dealing with class action cases must not be cast aside. It is essential to resolving this case and achieving accountability. Not only has the executive branch abused us and defied the courts, it has defied you. It has repeatedly refused to comply with legislation passed by this body. It must finally be called to account. I look forward to continuing our work together and to finally and conclusively put an end to the criminal administration of our trust property. I thank you very much for this opportunity to testify. [Prepared statement of Ms. Cobell appears in appendix.] Senator Dorgan. Ms. Cobell, thank you very much. Next, we will hear from President Stensgar. STATEMENT OF ERNEST L. STENSGAR, PRESIDENT, AFFILIATED TRIBES OF NORTHWEST INDIANS Mr. Stensgar. Thank you. Good morning, Vice Chairman Dorgan, members of the committee. I appreciate the opportunity to present testimony. I have submitted written testimony and I would like it included in the record. My name is Ernie Stensgar. I am president of the Affiliated Tribes of the Northwest. I represent 54 tribes from Montana, Idaho, Oregon, Western Montana, California, and some of Alaska. Over the past several years, and after numerous court-issued declarations in the Cobell litigation, Affiliated realized that resolution of the litigation in the court system would take many years and that a settlement of the litigation would probably not result in action that would compensate the plaintiffs, along with individual Indian trust account holders to a level that would be fair and equitable. Therefore, ATNI, Affiliated Tribes of Northwest Indians, decided to focus on working cooperatively with Congress and other stakeholders in creating a legislative resolution of the Cobell litigation, while at the same time accomplishing reorganization of the Department of the Interior to fit the needs of Indian country. On April 5, 2005, Affiliated submitted Indian trust reform legislation to the Hon. Maria Cantwell to be considered on an expedited basis by the Senate Committee on Indian Affairs. The legislation essentially asked Congress to provide several provisions for the settlement of the Cobell litigation and to accomplish trust reform. The first provision sought to elevate the assistant secretary for Indian Affairs to a deputy secretary. The intent of this provision was to ensure that the principal officer assigned to fulfill the trust responsibility would have the authority over the constituent agencies that have an effect or impact on the trust responsibility. Under S. 1439, Section 503 entitled Under Secretary for Indian Affairs, there is an under secretary for Indian affairs position created that is directly subordinate to the Secretary of the Interior. Affiliated supports the creation of the under secretary for Indian affairs position within the department, along with the duties requiring management and accountability of the trust responsibility in consultation with Indian tribes. ATNI also supports section 505 of the legislation which would terminate the Office of the Special Trustee for American Indians by December 31, 2008. ATNI also sought the codification of the standards of the administration of trust duties that were adopted by Secretary Babbitt in 2000. ATNI understands that these standards have not been codified as a provision of the act, but it does not believe that this will ultimately be fatal to the legislation. Under section 503 of the act, there is the under secretary for Indian affairs that will be required to implement and account for the fulfillment of the trust responsibility to Indian tribes. The legislation also describes the duties that the under secretary for Indian affairs will be required to fulfill under section 503. ATNI asserts that if this section is holistically integrated with other provisions of the legislation, the under secretary has some guidance from Congress defining some actions and responsibilities that will be required to fulfill the trust responsibility. Specific trust standards can be finalized at a later date and in subsequent legislation. The third provision that Affiliated sought was a settlement of the Cobell litigation by the authorization of a mediator that would submit recommendations to the court on settlement issues and allow the court the ability to implement the recommendations without having to submit to a drawn-out trial process. Affiliated has reviewed the act and is in agreement with the congressional findings contained within section 101. ATNI realizes that in many cases it is impossible for the Federal Government to provide a total historical accounting of funds held in IIM accounts due to any number of factors. Affiliated supports the proposition that the settlement of the Cobell litigation must provide a fair and appropriate calculation of the IIM accounts in lieu of actually performing an accounting of the IIM accounts. ATNI lends its support for the creation of an individual accounting claims settlement fund contemplated in section 103 so that there can be closure to the plaintiffs in the Cobell litigation and other aggrieved parties. The settlement amount will obviously need to be debated and agreed upon after intense consultation with all the affected parties. The animosity that has guided previous attempts at settlement should not deter actual and honest agreement over a final settlement amount. Affiliated supports the proposition that a special master should be appointed to administer the settlement fund. However, section 103 allows the secretary the unilateral ability to appoint a special master to administer the fund without allowing any tribal input in the determination of appointing the special master. Since the settlement fund is the result of litigation between two adversarial parties, there should be the ability of the representatives of both parties to come to agreement on the appointment of a special master to administer the settlement fund. ATNI is supportive of the provisions in the legislation which recognizes the right of claimants to seek judicial review. However, provisions in sections 105, 106, and 107 are confusing and should be clarified to protect these important rights. ATNI supports the right of judicial review for claims relating to share determinations in the U.S. District Court for the District in which a claimant resides. In this instance, the claim would not be considered a waiver by the claimant of the right to receive a share under section 104. However, a claim relating to the method of valuation and a claim relating to the constitutionality of the application of this title to the claimant filed in the U.S. Court of Federal Claims would be considered a waiver by the claimant of any right to receive either the per capita share or the formula-based share under section 104. Affiliated does not support the provisions that require a waiver by the claimant of any right to an award under section 104 if the claimant files a claim seeking review. ATNI asserts its strong support for section 110. In that section, tribal government claims against the United States would not be discharged as a part of the settlement of litigation claims identified in section 102. The fourth provision sought by the ATNI was the creation of an independent legal authority that would have some oversight power over administration of the Federal trust responsibility. Title II of the act creates a commission known as the Indian Trust Asset Management Policy Review Commission that would be charged with the review of trust asset management laws and the review of the department's practices with regard to individual Indian trust assets. The commission would then have the ability to make recommendations to the secretary and to the committee for improvement of the department's laws, practices and management of the trust assets. Affiliated supports the commission as created by title II of the act since it would allow for an independent review of the department's practices and would possibly lead to recommendations that would assist the department in adopting a best practices approach to fulfillment of the trust responsibility. Indian country has shown in the past that it is willing and able to participate in crafting recommendations that will lead to an improved department as it continues to administer its trust duties. The fifth provision sought the establishment of a demonstration project that would build on the work of those tribes that have been administering their own trust programs pursuant to authority granted by the Congress in the appropriations bills. Senator Dorgan. Mr. Stensgar, I am going to have to ask you to complete your testimony, if you would. There are 2 minutes remaining on the vote on the floor of the Senate and I have to be there to vote. So if you will just finish in a sentence or two, we will then recess for 10 minutes. Mr. Stensgar. Okay. I just want to say that the Northwest tribes stand ready to proceed in the process of adopting legislation and working with this committee to further that. It is time that the tribes continue on with their other important work and we are at a standstill now. Thank you. [Prepared statement of Mr. Stensgar appears in appendix.] Senator Dorgan. Mr. Stensgar, thank you very much for your testimony. Mr. Martin, you will begin testifying when we reconvene. We expect the committee will be in recess for 10 minutes while we vote on the floor of the Senate. [Recess.] The Chairman. [Presiding] Again, I would like to extend my apologies to the witnesses because of we have five consecutive votes in a row. I apologize for any inconvenience this has caused them. I believe we are now at Mr. Martin, is that correct? Mr. Martin. Yes, sir. The Chairman. Please proceed. STATEMENT OF JAMES T. MARTIN, EXECUTIVE DIRECTOR, UNITED SOUTH AND EASTERN TRIBES, INC. Mr. Martin. Chairman McCain, Vice Chairman Dorgan and distinguished members of the Senate, my name is James T. Martin. I am an enrolled member of the Poarch Band of Creek Indians and executive director of United South and Eastern Tribes. On behalf of the 24 tribes of USET, we have closely followed the Cobell case over the last 10 years and the Department of the Interior's subsequent reorganizations. Along with President George, I represented the tribes of the Eastern Region Office in the DOI Tribal Task Force and have testified before this committee several times on trust reorganization. I thank this committee for the opportunity to testify on this issue again. For USET tribes, the Cobell litigation and the Department of the Interior's redirecting of funds to trust activities carried out by the Office of the Special Trustee has had an immediate and harmful impact for fiscal year 2005 and 2006. Funding for the BIA has reduced full-time staff for law enforcement, education and other vital programs. The Cobell litigation and DOI's interpretation of the requirements to meet court orders have absorbed resources and limited the ability to implement already under funded programs. I thank the Senators McCain and Dorgan for introducing S. 1439, which represents a critical step for trust reform and provides a solid footing for resolving the interrelated and complex problems of trust reform. Given the complexity of the trust-related issues, one piece of legislation is unlikely to solve all of the problems. This bill, however, takes on the challenge of addressing the fundamental issues of the settlement of the Cobell lawsuit, land consolidation, and prospective trust reform reorganization. USET, in response to Senator McCain's call for legislative solutions to this crisis, developed proposed trust reform legislation in April and provided that proposal to the chairman and to committee staff. The USET proposal legislation is intended to introduce measures that would increase the accountability and efficiency of DOI's administering of the United States trust responsibility, while enhancing self- determination. Upon review of S. 1439, it appears that the committee shares USET's concerns and provides similar approaches to resolving them. Additionally, USET requests that the committee further deliberate several critical issues. I am attaching USET's proposed legislation to my written testimony and request that this proposal be included in the hearing record, as it may be useful to the committee as it seeks to finalize trust reform legislation. But first, I would like to commend the committee for the recognition and incorporation of key components for trust reform and DOI reorganization. Specifically, let me mention a few of these here. Elevation of the Assistant Secretary of Indian Affairs to the position of under secretary and eliminating the OST, which the tribes have advocated for for a long time, would improve coordination of trust activities within the DOI and establish decisionmaking authority and accountability under one executive authority. USET views the commission established by title II of S. 1439 as a logical extension of the DOI Tribal Task Force. This commission is needed to conduct a thorough analytical review of laws and practices in order to make valuable recommendations for future legislative actions for trust reform. With regard to land consolidation, S. 1439 responds to Tribal Trust Reform Work Group recommendations to expand the voluntary buy-back of highly fractionated shares by providing for sums greater than fair market value shares. USET suggests, however, that the problem of locating whereabouts unknown individuals for purposes of land consolidation is a matter that should be addressed by this legislation or by the commission created by title II of S. 1439. S. 1439, with its Tribal Trust Assets Management Demonstration Project, title III, embraces a view strongly held by the USET tribes that self-determination works. USET is confident that management of trust functions will benefit from this demonstration project. Moreover, we expect it will foster an array of best practices to be utilized for the wide range of trust resources managed in Indian country. While the legislation does not itself codify tribal standards, USET recognizes that S. 1439 provides for a commission to issue recommendations on proposed Indian trust management standards, section 204(3)(c), and that the demonstration project provides for the development of trust asset management plans that meet trust standards as established by tribal law and consistent with trust responsibilities of the United States. USET recognizes the necessity of standards, yet acknowledges those standards must be developed in a manner that allows for flexibility, reflecting the diversity that exists among tribes, as well as the diversity that exists among the resources that both exist in tribes and resources, but to which the secretary has a trust responsibility. Title I of S. 1439 would resolve the complex and prolonged and costly Cobell litigation. The terms of the bill demonstrates the committee's understanding of many of the issues and considerations involved in this large class action lawsuit. Title I addresses such matters as the distribution of the settlement funds and offers a mechanism for judicial review for that distribution, including the filing of claims to challenge the share distribution, to challenge the validation of the claim, and to challenge the constitutionality of the application of the title to an individual claimant. USET encourages a fair and complete resolution to that litigation and I understand the committee will hold additional hearings to consider the views of the Cobell plaintiffs. USET urges the parties to this dispute to engage the proposed legislation in the spirit of compromise and the recognition of the unique opportunity this legislation offers. USET appreciates that tribal claims are preserved in section 110(d). USET also endorses Indian preference in hiring by the under secretary in the offices under the under secretary by section 506. USET highlights these provisions as those which are directly responding to the concerns and approaches the USET tribes and other tribal organizations have identified as critical to trust reform legislation. USET urges the committee to give additional consideration to several other considerations. First among them is for independent accountability. While the independent external audit provisions contained in title VI of S. 1439 establishes a sound approach for accounting or auditing, USET believes that DOI's management of non-monetary trust assets needs similar independent review. Additionally, the beneficiaries need a point of regress to report fraud and abuse and the day-to-day implementation of the Government's fiduciary trust responsibility. USET's proposal would create an assistant inspector general for Indian Trust to carry out investigations and audit responsibilities. We urge the committee to give greater attention to the need for this mechanism that can police the DOI's compliance reform contained in S. 1439. Second is the ineffective duplication that has been created by the DOI's stovepiping its lines of accountability and decisionmaking authority between trust and non-trust functions. We believe this is a critical issue that the trust reform legislation and the commission created by title II of S. 1439 must address. Finally, all of the reform in the world cannot get the job done without adequate funding. The number of vacancies and understaffing in the DOI has contributed to the problem. As the committee has recognized with S. 1439, trust reform requires tribally driven flexible mechanisms that reflect the diversity of tribes and the distinct types and quantities of resources that exist. Moreover, in order for trust reform to advance, the Cobell litigation must be resolved. We stand ready to work with this committee to further this legislation and other legislation that is needed to bring this issue resolution. I thank the committee and look forward to answering any of your questions, sir. [Prepared statement of Mr. Martin appears in appendix.] The Chairman. Thank you very much. All the witnesses have testified in favor of the court being the one who would be responsible for the distribution of money. In the 50 principles, you say the court would conduct a court fairness hearing. What will the court be testing the fairness of? I guess I will begin with you, Chief Gray. Mr. Gray. Part of what I think may be helpful in describing what the rationale behind the 50 principles and that particular area are certain aspects of what we consider to be the use of the resources, the land, the amount of money and activity and flew to these accounts. Obviously, you are looking at situations like, for example on my reservation, the Osage Nation, we have had over 100 years of oil and gas exploration. Through that hybrid system I referred to earlier, you also have a similar situation that occurs in the use of those lands and the resources, the surface lands that have been leased out to the allotment. To try to understand the through-put, for example, of that kind of funding that went through there certainly does create different scenarios throughout Indian country. The Chairman. So the court would decide each different tribal entity throughout Indian country? Mr. Gray. I think it is not so much a tribal entity as much as it is the use of the land, and how the resources derive from that land or how are they going to be fairly and adequately valued. The Chairman. So the court would decide in each entity that is owned by tribes as to what is fair and what is not fair? Mr. Gray. I admit, it is a head-scratcher, Senator. I really do think that what we are trying to achieve here is just trying to find the entity, or to find out a formula. Should it be congressionally driven, for example, that you have in the bill; that a formula be adequately put together that can address the specific uses of the lands and the uses of the resources and the funds as a way to determine the value of each one of the settlement accounts that are being put forward. We just came up with one proposal, and in light of the specific information that exists in the bill, there may be ways in which we might be able to approach the committee on how this could be resolved through a formula of some type. The Chairman. Tex. Mr. Hall. Mr. Chairman, I just think that in our testimony and most everybody's testimony, they feel that the court is more fair and impartial. I believe that the treasury is a named defendant, Mr. Chairman, so the impartiality is not, you know, that is the thought and it's not there. The Chairman. I understand there is profound mistrust of the Department of the Interior and the BIA, and I understand that there is great trust, at least at the District Court level and the judge, but I think you are asking a District judge to take on a task which is incredibly complex and one that I do not know if a District judge has the kind of assets to make those kinds of judgments. That is my question. I think we are all interested in fairness. Mr. Hall. We would be happy to work with you, Mr. Chairman, on something I think that we could come to agreement on. The Chairman. Mr. Stensgar, do you have any thoughts on this issue? Mr. Stensgar. The Northwest supported the special master, Mr. Chairman. We would have to look at that section about the courts and do an evaluation before we respond to that. We thought that the Special Master would address that issue. The Chairman. As you know, we have had special masters in the past. Mr. Stensgar. The special master, Mr. Chairman, we want some Indian input in respecting that. We want to make sure that the sheep dog is guarding the sheep. The Chairman. Well said. Mr. Martin. Mr. Martin. USET's position is that we support also the special master. I am a father of four boys, and when one boy does something to the other, I make the one who is the perpetrator apologize and correct the wrong. I think it is just to make sure the perpetrators correct what was wrong and make them do it fairly. I think still, though, there could be a role of the court as far as supervision and some sort of injunction-type of mechanism that if the special master or the people that are made to correct these wrongs go outside of the parameters, then there should be some sort of relief to that. The Chairman. Ms. Cobell, attorneys fees were not mentioned in the principles set forth by the working group. What dollar amount or percentage of the proposed $27.5 billion was to go to attorneys fees? Ms. Cobell. Could I answer that first question that you asked all the other witnesses, too? The Chairman. If you would like to, it would be a pleasure. Ms. Cobell. I would love to. The courts do this all the time, distributing. The Chairman. Not with this amount of money, they don't. Ms. Cobell. Yes; on a class action lawsuit, yes they do. The Chairman. No; they don't. They don't decide what is fair and unfair. Go ahead. Ms. Cobell. At least everything I read, Senator. They weigh the evidence. The Chairman. Courts also decide what attorneys fees are. Ms. Cobell. Yes; and that was my answer that I was going to tell you. The Chairman. Okay. Ms. Cobell. It is my understanding that the courts will decide the attorneys fees, and that was done as a result of a congressional act that took out the States and wanted to make sure that the Federal judge decides on what the attorney fees should be. The Chairman. Excuse me. Whenever there is a settlement proposal, they require an accounting of attorneys fees. I think the taxpayers of America would be more than entitled to know what your view is of the amount of attorneys fees that would be part of this $27.5 billion settlement. Ms. Cobell. Well, our attorney fees are submitted to the courts for reimbursement. But you know, Senator, I really have to tell you is I have been interested in what the attorney fees have been by the Federal Government in fighting this case. We cannot find out. There are hundreds who just come to the courtroom. There are hundreds of attorneys that are sitting in that courtroom day after day, and there was a rider approved by the Congress in the appropriation bill that allowed for the Government officials that were accused of this wrongdoing to hire their own attorney private firms. I see those people every single day. So vice versa. I really would like to see what the Government is spending on attorney fees. The Chairman. I would like to also, but that does not change the fact I would like to know how much of the $27.5 billion would be spent on attorneys fees. Ms. Cobell. I am sure that we could get you the figure and we could share that with you. The Chairman. I would very much appreciate that. Ms. Cobell. My attorneys have not been paid in years, let me tell you. The Chairman. Well, if there is $27.5 billion at play, I am sure they will be, Ms. Cobell. Ms. Cobell. There is no huge contingency amount that has been negotiated with attorneys, let me assure you of that. The Chairman. Let me assure you, then, there should be no problem then of telling us how much of the $27.5 billion. Ms. Cobell. Yes; I would be very happy to do that, sir. The Chairman. Thank you very much, because I am familiar with a case many years ago where Agent Orange was settled and veterans died before they got any money and lawyers got paid first. And I am not going to see that happen in whatever settlement we have of this case. Native Americans will be reimbursed first, and then attorneys, if I have anything to say about it. Again, I want to go back to this business, because there is strong disagreement, and we are trying to come to agreement with the Administration. I will again begin with you, Chief Gray. If Congress were to place billions of dollars in the court registry, how would the judge distribute the money? Would it be through, as you stated earlier, a special master would be appointed and he would be making those decisions? Is that a methodology that would be pursued? Mr. Gray. I think you said it there, methodology. Obviously, just to help clarify the previous response to your first question earlier was that obviously we need more information, I think, on basically what a formula would look like. It is not so much to say that, and certainly in our testimony, that we felt like there wasn't a suitable method in the court that is far superior to any other method out there. But the way you described this particular issue to be resolved in the bill leaves open a need for more clarification and more information, and maybe that might be where I think a starting point might be in our discussions, for finding out exactly what the formula might be in terms of how Congress might be able to distribute these funds fairly and adequately, because obviously the bill in and of itself at this point does not answer all those questions right now. Even though the question you just raised to me, I do not have a complete answer myself. So obviously, we still have a lot of work to do in this area. The Chairman. Thank you. We will have additional questions which we will submit to you as we continue through this process, as well as questions for the Administration. I want to emphasize again that we appreciate many of your long years of involvement in this issue. We are trying to come up with some way of preventing another 10, 15, or 20 years of litigation in the courts which is very uncertain. I have a personal opinion that I am a bit disturbed at some of the recent Supreme Court decisions as they affect Native Americans. I think there has been some encroachment on the principle of tribal sovereignty and government-to-government relationship. So I am not totally confident that even though you have a District Court judge that has ruled your way that if it wended its way all the way through the courts that you would get a satisfactory resolution, number one. Number two is, it still eludes me why we cannot sit down together, all of us that are involved, and come up with some reasonable resolution to an issue that, as Mr. Swimmer testified, has already been in the courts for nine years. If we are going to reach an agreement, there is going to have to be some compromise on both sides. When I talk to the previous special masters, they say that the reason why it failed, I met with them, and they say the reason why it has failed is because neither side has been willing to move in a more compromising direction. So I think that I speak for both of us when I say, and certainly Senator Dorgan is more eloquent than I am, we want to give this as hard an effort as we possibly can, but we cannot just have hearing after hearing year after year on this issue because there are needs in Indian country for education, health care, housing, et cetera. As Senator Dorgan pointed out, all of those efforts are impacted by this issue. That is why we are giving it the priority that we are. I know that all of the witnesses at this table and behind you are men and women of good faith and maybe we are going to have to ask you to exercise that to a significant degree even where it may alienate some of your constituency. I can assure you that Senator Dorgan and I have on several occasions on this one alienated part of our constituency. [Laughter.] So I want to thank you again and appreciate your involvement in your cases of many, many years. I thank the witnesses. Senator Dorgan. [Presiding] Mr. Chairman, thank you very much. First of all, let me thank all five of you. I regret that we are moving back and forth, but it is the only way we can conduct 10-minute votes and still maintain this hearing and complete it. Ms. Cobell, let me start with you. You said you are sorry if you hurt the committee's feelings. You do not hurt feelings of people involved in politics. If one's feelings are hurt easily, you do not run for the U.S. Senate. So it is not about hurting our feelings. I think, however that using a term like ``massacre'' in your description and also in just disillusionment with legislation, I worry it hurts our opportunity to find solutions. That was the only point that I was making in my statement. It is not about hurting feelings. You are a very passionate and a very articulate advocate. That is obvious from your testimony today. I understand that. I would be as well if I were sitting on that side of the table, concerned, upset, anxious, worried that this has taken far too long. I would have all those feelings because I think from your testimony, you describe descriptions of 1915 and periods back when I think literally people were stealing from Indian people. Unscrupulous people were supposed to be in charge of these assets on behalf of Indian people and there was very substantial waste and abuse and fraud, especially fraud, I think. And we need to do a better job of describing that, I think, because others say, well, we have looked at accounts in the last 10 years or something. It is a different story. This is historical and it is substantial and it is a big issue. So I just want to say that I understand your passion, but I do hope even if we disagree in the end of this process, if we cannot find agreement and this committee finally says, look, we cannot do this. You go back to the courts and whatever happens, happens in the courts and figure it all out, but it is something we cannot do. I mean, if that is the case, it won't have been because we didn't make an honest, as aggressive as possible effort, because we felt it was necessary to try to solve it. But it is not solvable without all the stakeholders. It will not, cannot ever be solved in the context of the kind of discussion we are having, without having all the stakeholders being interested in solving it. If all the stakeholders are not interested, it is very easy, in my judgement, to up-end any agreement or any negotiation. And then it just goes back to the courts and perhaps another $500 million in legal expenses and maybe $6 billion, $8 billion, $10 billion in accounting fees to try to figure out who the thousands of people are that own a fractionated interest in 200 acres of land someplace so that we can send them a penny or two pennies. None of this comes together unless we find a thoughtful way for reasonable people to come together and say, let's figure this out and solve it and address the abuses. Let me just finally ask a couple of questions. Tex Hall, your organization, I believe, because you and Chief Gray have traveled a lot, used a lot of personal time to try to work through this, I assume you are committed to seeing if you can find a legislative solution. There are other solutions, but Senator McCain and I are both talking now about some kind of a negotiated legislative solution. Is that what you would prefer and is that what you are committed to trying to find? Mr. Hall. Mr. Chairman, there is no question about it that NCAI and I know ITMA, as well as working with the Cobell plaintiffs, are totally committed. When you were raising the question about in the past, 1915, and the fraud, it made me think of an elder that passed on, Carol Young Bear. Carol had diabetes. This was 2 years ago. She asked me for help to get her IIM account checked. There was a delay in getting the checks paid out. All she wanted was, she only gets $200, not too much, in her IIM account. She just wanted a used van with a hydraulic lift because she had her legs amputated. All she wanted was to expedite her check so she could get a used van and go play bingo. It was sad to not be able to help because we could not get the check and she passed on. So it is elders like her that make me get criticized at home for traveling too much. My constituents want me to work at my tribe, but as NCAI President I have to travel to try to bring unity to get this done. So I am further committed because of the elders like Carol, to get this legislation, find common ground, find a way to do that. I know with the gentlemen sitting next to me and all the people at this panel, these five people I know we are committed to doing that. We started this in February and I know that he has probably caught heck at home, too, for being gone from his tribe in Osage, because he is a chief at his tribe. But it is an issue that affects all of us, Mr. Chairman, so that is why we are further committed and we are optimistic because, and I want to publicly thank you for your leadership, for cosponsoring S. 1439, Senator Dorgan. That, to me, is the key, is that bipartisan leadership and you stepped forward and you signed onto this bill. So that tells me that you are committed, and if you are committed we have to be committed as well. So to me, it is a team effort and we are totally committed, and further committed after hearing the words that I heard from you and Chairman McCain and members of the committee today. Senator Dorgan. Chief Gray. Mr. Gray. Yes; like Chairman Hall said, when we set out the effort to respond to this call for input from Indian country, we knew what we were getting into in terms of the commitment that it was going to take. I want to specifically say that we would not have done it if we did not think that you all were genuinely sincere in trying to do this. I think that what we have tried to do is try to bring all the parties together and have these meetings both region-wide and tribal-wide and significantly address some of the specific resources out there. When we formulated our principles last June and presented them to the committee, we felt like that, too, was a good start. Although there is going to have to be that kind of necessary give and take with the Administration and the committee regarding these areas where we have broad enough agreement to go forward, I just want to let you know that ITMA and the tribes that make up this organization, as well as the Osages, are going to be committed to the process. Senator Dorgan. Mr. Martin, I was not here when you testified, but I have been able to look at your testimony. You testified that there are a number of vacant positions and understaffing at the Department of Interior and the BIA. How does that impact your member tribes? Mr. Martin. This year in the 2006 budget and coming in the 2007 budget, they allude to a crisis in law enforcement where money is needed for law enforcement elsewhere, so therefore the staffing, and only six staff people exist in our District Six office. It is proposed to be cut down to one. Due to the absorption of trust-related functions, there has been less money to be able to go to non-trust related functions like law enforcement, education and other programs like that. Also, you will find, then, the (2)(B) and the re- engineering, if you look at the reorganization and the work of the OST, a lot of areas when they go in there with their trust officers, and they have made improvement. I have to give credit where credit is due. They have made improvements in the trust office, but you will find in some regions they do not have the staff to do the work for the trust officers to review and sign- off on. You find that there are places in the BIA across Indian country that are understaffed, that you have good working people, but not enough warm bodies to get the work done. Senator Dorgan. Ms. Cobell, words have meaning and I understand the story you told about the history of your tribe and the suffering of your people, and understand the way you used words in your description of this. The draft legislation that Senator McCain and I have issued, we did when we issued it say this is a draft, a starting point. For some people in negotiations, ``no'' means it is an opening position; for other people, ``no'' means never under any condition. You never know exactly what it means from certain people until you begin negotiating. I am wondering what negotiations would mean to you here in terms of your very strong feelings about this. You have given us, I think, helpful testimony today. We appreciate that. Beyond that which you recited orally today, you have described in some detail certain provisions that you think need to be changed and how they should be changed. But it is much easier to oppose than propose. It just is. Mark Twain was once asked if he would get involved in a debate and he said, sure, as long as I can take the opposing view. And they said, we have not told you what the subject is. It doesn't matter, he said, the opposing view will not take any time to prepare. It is so much easier to oppose than propose. So the question I ask you, you have heard Chairman Hall and Chief Gray and others talk about the need to be involved in trying to construct some sort of legislative approach that might address these issues or solve these issues. Do you feel this is achievable in a legislative arena? Is this the manner in which it should be addressed? And do you feel you would want to be a continuing part of negotiations in an attempt to address it? Ms. Cobell. Of course. I definitely would like to be involved in the continuing negotiations. I would like to clarify just a couple of areas after listening to the testimony today, is that when the mediation took place, we put proposals on the table. The department did not. So we are not the bad guys in this entire game. We are the ones that are fighting, that have fought and won major victories in court. That is what I saw about the legislation is these major victories were not implemented into the legislation, and I was really concerned about that, especially we won. And I think it is important to clarify that the Court of Appeals has largely affirmed the District Court. When I heard Senator McCain talking about just the District Court, he was not referring to the Court of Appeals. The Court of Appeals has affirmed the District Court on jurisdiction, on standards, on the application of the trust law, on the scope of the accounting, that the accounting scope is from 1887 forward. The appellate court has upheld the District Court in all of these arenas, and those are very important areas to cover in this legislation. So I just want to make sure that, you know, I worked on the 1994 Trust Fund Reform Act. Let me tell you, we gave. We compromised. And look what happened? It didn't work. And that is what I feel about. The Office of the Special Trustee is not working. You heard from the testimony today that that is an area that does not seem to be working. So, you know, I compromise. I am not the bad person in this. I am just wanting accountability for individual Indian beneficiaries. If we can do it in the ways that satisfy individual Indian beneficiaries, then I am willing to sit at the table, but I think there are certain victories that have happened in the court that need to be part of this legislation. Senator Dorgan. Well, we will stipulate that our feelings are not hurt and you are not the bad person. [Laughter.] You and others have every right to seek redress in the courts. You have done that. You have been successful at many different levels. So I understand that you are not coming to this in bad faith at all. You have used the system of justice in this country to address wrongs. So the question at the moment is, we find ourselves at kind of an intersection here. One road, I think, leads us to spend a lot of money on things that detract from the needs of Indian people in a way that will probably never get us a good solution. Another road might be for all of us to understand that we really are forced to negotiate something that is fair and just and equitable in order to put the past behind us, address the needs of people who have been victimized, and then from here forward, trying to straighten all this out and make certain this does not happen again. Let me again say on behalf of Chairman McCain and myself, we and our staffs have worked very hard on this and we will continue to do that. What we would like to do is use this hearing as an opportunity, and many of you have brought ideas to this hearing as well. Chairman McCain said, and he is absolutely correct, we cannot just go on and have hearing after hearing after hearing. We are not going to take this next year and a half in this Congress and decide that we are going to have 10 more hearings on trust reform because we cannot do that. But we can, it seems to me, make this a major priority from now forward as we negotiate to see if we can find a solution. If by the end of this year, in the next 3 or 4 or 5 months, if we could find our way through this, that would seek a solution that all of us think is just and fair, I think it would be the best news in the world for Native Americans, for the First Americans who have seen their rights violated and who ask not just the courts, but ask the Congress now to intervene in a way that redresses those wrongs. So that would be my hope. The reason I asked Ms. Cobell, your name is on the litigation, obviously, and others of you. All of us have interests here. I just wanted to make sure everybody is really interested in pursuing this approach that Senator McCain and I have tried to initiate. I am hopeful, as a result of your response and the response of all of you, and I think Senator McCain will not be able to return because we will have another vote I believe that has perhaps just started on the defense authorization bill, so I will have to go cast that vote as well. On behalf of the Chairman and myself and other members of the committee, I thank all of you for taking the time to come to Washington, DC today and to participate in this hearing and give us I hope a renewed starting point with the legislation that we have introduced and the opportunity to continue working with you and talking with you about this important issue. This hearing is adjourned. [Whereupon, at 4:15 p.m., the committee was adjourned, to reconvene at the call of the Chair.] ======================================================================= A P P E N D I X ---------- Additional Material Submitted for the Record ======================================================================= Prepared of Hon. Daniel K. Akaka, U.S. Senator from Hawaii I thank Chairman John McCain and Vice Chairman Byron Dorgan for holding this hearing today and for introducing S. 1439, the Indian Trust Reform Act of 2005. In addition, I thank the witnesses who will testify before the committee for their participation today. For decades, the United States has been trying to resolve the accounting problems for both the individual Indian money and Indian tribal accounts. As a result, for 10 years now, litigants for individual Indian money account holders who filed a lawsuit in 1996 against then Secretary of Interior Bruce Babbit and now against Secretary of the Interior Ann Norton, have been waiting for an accurate and complete accounting of their individual trust accounts. However, to this day, after contempt of court findings against cabinet officials and expenditures by both the Government and litigants, a historical accounting of the individual Indian money accounts still has not been rendered. On February 23, 2005, Judge Royce Lamberth issued another structural injunction requiring the Department of the Interior to admit to Individual Indian Money trust account holders that its accounting may be unreliable. It also provides specific requirements for the Department as it completes its accounting. Still, I am not certain the Department will be able to fully comply with Judge Lamberth's latest Memorandum and Order. Mr. Chairman, for this reason, I am pleased that you and Senator Dorgan have introduced S. 1439. While I commend the chairman and vice chairman for their efforts to bring forth this legislation to address the Government's responsibility to provide an accurate and complete accounting of the individual Indian money accounts, I wish to ensure that this legislation is a balanced and fair approach that will be acceptable to the plaintiffs and the Department of the Interior. It is imperative that Congress ensures that this legislation does not diminish the government's trust responsibility with Indian country. I agree with the intent of S. 1439, but I have some concerns and I look forward to working with Senators McCain and Dorgan on addressing them. Mr. Chairman, again, I thank you for holding this important hearing. ______ Prepared Statement of James Cason, Associate Deputy Secretary, and Ross Swimmer, Special Trustee for American Indians on the Cobell Lawsuit. Thank you for the opportunity to come before this committee again and discuss the Cobell v. Norton lawsuit. As we have discussed on several prior occasions, the Department of the Interior supports the efforts of Congress, as the Indian trust settlor, to clarify Indian trust duties, responsibilities, and expectations. Allow me to emphasize that the Administration strongly supports protecting the rights of Native Americans under the law and that is an important objective of the Department of the Interior. Everyone involved the Cobell lawsuit--the Government, the Indian plaintiffs, and the judges in the district court and the appeals court--shares, we believe, that objective. But the protracted and painful litigation that has occurred does not serve that objective as well as would a settlement reached by agreement of the parties. It may not be easy for the Government and the Indians to reach a settlement, but it is well worth the effort for all concerned to engage in a good faith effort to resolve the matter. It is, of course, important that any settlement have the support of the Congress, as a settlement could not be implemented without appropriation of the necessary funds. We particularly want to thank the chairman and the ranking minority member for their efforts in trying to reach a full, fair, and final settlement of the issues in this case. This Congress has an opportunity to look at this issue anew, examine the facts, and move forward with a clear and consistent sense of purpose regarding the Federal Government's administration of the Indian trust. The Cobell litigation has been pending for too long. It is clear that after 9 years of litigation, the courts have not reached a resolution that is broadly supported by Congress. Interior's annual appropriations make it clear that Congress has not and does not support the kind of accounting effort required by the District Court. While Congress recently took actions to forestall the implementation of the District Court's structural injunction regarding historical accounting, the introduction of S. 1439 is the first serious Congressional effort we have seen to comprehensively resolve the issues involved in the Cobell lawsuit. While many details remain to be negotiated and clarified, the bill represents an important step toward bringing the parties together for a meaningful effort to seek closure on this matter. Congress is the Indian trust settler, that is, the creator of the trust and hence the party that defines its terms. Congress provides statutory direction to guide the management of assets held in trust for Indians and Congressional appropriations are provided to fund trust operations. Congress began its involvement with the passage of the General Allotment Act. That act authorized the allotment of tribal lands to individual Indians with the hope individual Indians would take up farming and assimilate themselves into the non-Indian society and culture. The act provided that the Secretary would hold the lands as an allotment in trust for 25 years. After 25 years, Indians would be free to sell or encumber their lands as they saw fit. In 1934, Congress passed the Indian Reorganization Act and extended the trust for individual Indian allotments in perpetuity. By then, many of these lands had already started to fractionate into many undivided interests and have continued to do so exponentially over the next 71 years. The interests have become so small in many cases that heirs do not bother to claim their inheritances and interest holders in many cases fail to inform the BIA of their whereabouts. Keeping track of family deaths, missing relatives, and moving interest-holders is a full time job for many employees at BIA. The 1994 Reform Act was intended to further define the Department of the Interior's obligations regarding the management of IIM funds. In particular, the 1994 Reform Act defined several prospective accounting duties and a requirement to provide Indian beneficiaries with periodic account statements. In reading the legislative history of the 1994 Reform Act, one will recognize that Congress had known for years about the condition of the trust accounts. However, it also seems apparent that Congress did not expect the Act to set the stage for what is now claimed to be a multi-billion dollar historical accounting liability on the part of the United States. The District Court has directed Interior to account for every land and cash transaction since 1887, even with regards to beneficiaries who had died and whose trust account was closed before 1994. The Court of Appeals seems to have identified a historical accounting requirement beginning in 1938. In 1996, the Cobell plaintiffs filed a lawsuit seeking an accounting of IIM account funds. Although Congress had not directed Interior to prepare periodic accounting statements or consistently funded such a requirement in the past, the Court of Appeals has ruled that a historical accounting for IIM accounts is required, ostensibly to ensure that the current balances of IIM accounts are accurate. The plaintiffs' lawyers have said they do not want handouts; they do not want reparations; they do not want welfare. They just want what is rightfully owed to them--in other words, they want money that was collected for them, but which they believe has not been distributed. In Court, the plaintiffs seek a historical accounting but are now working hard to prevent that accounting from occurring. In Congress, they argue against providing funding for that accounting; in Court, they argue that the accounting is impossible. Instead of an accounting, they want a lot of money. The plaintiffs have been quoted by the press as asserting that the Government has failed to pay individual Indians $176 billion. Recently, the plaintiffs and tribal leaders have offered to settle the historical accounting claims of individual Indians for $27.487 billion. In the recently proposed S. 1439, the Senate left blank the amount of the proposed settlement, but with an indicator that the figure should be in the billions. Before we speak to the provisions of S. 1439, we would briefly like to address the list of 50 principles the committee has before it from the Trust Reform and Cobell Settlement Workgroup, which included the Cobell plaintiffs. The principles recommend a lump sum payment to the plaintiffs of $27.487 billion. This $27.487 billion payment will not necessarily resolve the Cobell litigation. In addition, it does not settle any other claims individuals might have against the United States related to funds management or to their lands. The $27.487 billion is intended to cover only the historical accounting claim. Principles 48-50 State clearly that the individuals should be allowed to continue to seek redress for Federal mismanagement claims. Federal mismanagement, the principles say, should be treated as a matter of national interest and, under principle #48, Congress is urged to provide a fair offer to individuals to compensate them for mismanagement in addition to the $27.487 billion. To achieve a full, fair and final settlement to the potential claims being raised by individual Indians (and separately, by tribes) it is important to consider carefully four key components:
\\\\\\Any requirement to conduct historical accounting activities should be eliminated. In exchange for a settlement payment, the account holder must relinquish any claim to an accounting and accept as accurate the balance of the account when closed or at the date of settlement. In addition, permitting a significant number of account holders the option of pursuing an accounting will undermine the cost effectiveness of a settlement program. \\\\\\Claims regarding funds mismanagement, including but not limited to accounts receivable issues, funds handling and deposit, investment decisions, etc. must be addressed. \\\\\\Appropriate mechanisms for the mitigation of fractionated interests must be provided. For example, the authority to conduct ``consolidation'' sales of highly fractionated lands would be helpful. \\\\\\Congress must decide whether separate resource mismanagement claims will be permitted, and if so, what remedies will be made available by Congress. If the legislation does not resolve those claims, Congress should ensure that these claims do not provide an opportunity to seek a sweeping historical accounting similar to that sought in the Cobell litigation. In determining how much money the Federal Government should provide to settle individual Indian claims, Congress should consider what work Interior has done so far and what we have found. 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 the named plaintiffs and 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. 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 Joseph Rosenbaum, a partner in Ernst & Young, LLP, regarding 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 were substantially complete for the selected accounts. \\\\\\The documents gathered by DOI supported 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, due to a transposed account number entered in the recording process. \\\\\\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. \\\\\\There was no indication that the accounts are not substantially accurate, nor that the transactions were not substantially supported by contemporaneous documentation. This analysis, including the named plaintiffs and the selected predecessors in interest, found both non-interest transaction over payments to class members (37 instances totaling $3,462) and under payments (14 instances totaling $244). As of June 30, 2005, Interior's Office of Historical Trust Accounting [OHTA] had reconciled more than 21,847 Individual Indian Money [IIM] judgment accounts with balances totaling more than $56.3 million and an approximately 15,000 additional accounts with no balance as of December 31, 2000. This accounting effort found non-interest overpayments (2 instances totaling $2,205) and under payments (21 instances totaling $52). As of June 30, 2005, OHTA had also reconciled 3,995 IIM per capita accounts with balances of over $28.1 million and an additional approximately 4,000 accounts with no balance as of December 31, 2000. In this accounting effort, no overpayment or underpayment discrepancies were identified. Interest recalculations identified a particular set of IIM judgment transactions (786 instances totaling $25,000) where principal had been distributed without associated interest amounts (an underpayment) and, more broadly, interest amounts for judgment and per capita accounts that appeared to have been overpaid (a net amount approximating $377,000 on about 25,842 accounts). The National Opinion Research Center [the Center] at the University of Chicago, a national organization for research, has contracted to assist Interior with interpreting historical accounting data and results. It has recently completed a draft progress report entitled ``Reconciliation of the High Dollar and National Sample Transactions from LandBased IIM Accounts,'' looking at land-based IIM accounts that were open on or after October 25, 1994. The goal of the project is to assess the accuracy of the land-based IIM account transactions contained in the two IIM Trust electronic systems (Integrated Records Management System and Trust Funds Accounting Systems) for the electronic era 1985-2000. Accuracy is being tested by reconciling all transactions of $100,000 or more and a large statistically representative random sample of non-interest transactions under $100,000. The historical accounting initiative is scheduled to end in August 2005. To date, the Center has found: \\\\\\Over 98 percent of the sampled transactions needed for preliminary estimates have been reconciled for all 12 BIA regions. \\\\\\A completion rate of 98 percent is extremely high in a sample such as this. The draft report states: ``This very high completion rate for searching and attendant reconciliations should put to rest most concerns about the impact that the few remaining reconciled transactions might have on results.'' \\\\\\Of land-based IIM account transactions exceeding $100,000, 1,730, of 1,737 were reconciled [99 percent]. The reconciliation identified both over payments [34 instances totaling $34,053] and under payments [24 instances totaling $47,168]. For the sampled land-based transactions of less than $100,000, fewer differences were found among the 4,134 out of 4,162 transactions reconciled, with over payments to beneficiaries [15 instances totaling $506] and under payments [6 instances totaling $516]. \\\\\\Reconciliation shows the debit difference rate to be 0.3 percent. \\\\\\Reconciliation results show the credit difference rate to be a little over 1 percent. Based upon the historical accounting results so far, Interior suggests that Congress consider exempting Judgment and Per Capita funds from any proposed legislation. Regarding the findings from the IIM land-based accounting thus far, the net difference [under payments-- over payments] would be about $10,000. Just under payments, without regard to offsetting over payments, equal less than $48,000. Notwithstanding the facts, all parties need to be mindful of the cost, risks and uncertainties associated with continued accounting efforts involving the remaining as yet unreconciled accounts. Through December 31, 2004, OHTA also resolved residual balances in nearly 8,200 special deposit accounts, identifying the proper ownership of more than $38 million belonging to individual Indians, tribes, and private entities. By the end of 2005, OHTA expects to resolve the proper ownership of approximately $51 million [cumulative] in residual IIM Special Deposit account balances. Consistent with Interior's historical accounting plan, the Administration proposed funding the historic accounting at $130 million in fiscal year 2004, Congress appropriated $45 million. We requested $109 million for fiscal year 2005; only $58 million was appropriated and this includes funding for tribal trust fund accounting as well. The fiscal year 2006 budget request for historical accounting is $135 million. This amount would provide $95 million for IIM accounting and $40 million for tribal accounting, however initial indications from House and Senate passed appropriations bills suggest approximately $58 million will be provided. As a result of the lower appropriations amounts provided, the pace of completing Interior's planned historical accounting effort is slower, and the anticipated completion date will move further into the future. To date, Interior has spent in excess of $100 million to obtain the historical accounting results indicated above. We are pleased to have an opportunity to review S. 1439, the ``Indian Trust Reform Act of 2005.'' This bill was just introduced late last week so our comments today are preliminary ones. We will provide more detailed comments after an in-depth review of the bill. First, we appreciate the fact that legislation has now been introduced to attempt to address the issues in Cobell. We are pleased to see the bill focuses on consolidation of fractionated Indian lands and supports a more aggressive land acquisition program than the one currently under way. We do, however, have some serious concerns with the bill as currently drafted. Title I. S. 1439 would provide a yet undetermined number of billions of dollars to resolve the historical accounting claims of the class members of the Cobell litigation. However, it does not provide for settlement of all of the elements of the Cobell litigation. In addition, in determining what is a reasonable amount, Congress should be aware that the $27.487 billion requested by the plaintiffs does not include money to resolve potential mismanagement of trust fund and asset claims. In deciding upon the amount to provide for a resolution, the Congress should carefully consider all potential liabilities with respect to the individual Indian trust. The legislation should resolve or restrict any claims that might permit the reinstatement of historical accounting litigation comparable to the Cobell case. Congress should also realize that 25 tribal trust cases have been filed involving sums of money far greater than those involved in the individual Indian trust. Indian Trust Asset Management Demonstration Project Act. S. 1439 includes provisions allowing for a pilot project for 30 tribes to take over management of Indian trust assets. However, it is critical to transfer the responsibility for results along with authority and funding. Thus, we do not believe the United States should remain liable for any losses resulting from a tribe's potential mismanagement of an Indian trust asset. This is particularly true because the bill would allow tribes to develop and carryout trust asset management systems, practices, and procedures that are different and potentially incompatible with those used by Interior in managing trust assets. In a normal trust, this action would be considered a merger of Trustee and beneficiary and thus end the Trust. Of course this would have no impact on the government-to-government relationship. We look forward to further discussing the following key aspects of this provision. For example, would Interior need to develop expertise in 30 different trust asset management systems sufficient enough to ensure that everything a tribe is doing under that system is in keeping with Interior's trust responsibility? If program reassumption became necessary, how would Interior take back program responsibilities and integrate information back into our trust asset management environment when it has been collected and processed in different systems? What kind of constant monitoring of tribal activities will Interior have to do to ensure the tribe is living up to the standards in the bill? What performance standard would apply: the imminent jeopardy standard associate with Public Law 93-638 or the ``highest and most exacting fiduciary'' standard being required of Interior? Fractional Interest Purchase and Consolidation Program. As we stated above, we are pleased to see that the bill places a priority on developing an aggressive program for the purchase of interests in individual Indian land with the intent of restoring those interests to the tribes, we are not prepared to take a detailed position on the specific provisions in the bill until we have done further analyses. The President's fiscal year 2005 budget request included an unprecedented $75 million request for Indian land consolidation. Congress chose to appropriate $34.5 million for the program in fiscal year 2005. In light of this, we requested $34.5 million for fiscal year 2006. As structured, the program in S. 1439 provides incentives where a parcel of land is held by 20 or more individuals and where an individual sells all interests in trust land. In cases where a parcel of land of land is held by over 200 individuals, the bill provides procedures for noticing interest holders and moving ahead with consolidation of the interests. These provisions will greatly help consolidate interests and reduce the costs of management of the individual Indian trust. Care must be given, however, to ensure that this bill does not work as an incentive to fractionate land so that individuals can become eligible for the bill's incentives. So far, there has been no lack of willing sellers at appraised values. In addition, we would like to work with you further on the thresholds and amounts included in this title. We have some serious concerns as to the cost of the significant premiums provided in the bill. In addition, we would like to explore the possibilities for consolidation sale authority to reduce the associated public financing burden of addressing the fractionation issue. Further, we need Congressional clarification regarding the seemingly apparent public policy of retaining individual Indian land within Indian Country ownership versus the trust responsibility to obtain fair market value for each land interest. We need to analyze the costs of the new incentives, the mechanisms for funding land acquisitions and the impact of the American Indian Probate Reform Act on the rate of fractionation as a part of our implementation plan. Restructuring the Bureau of Indian Affairs and the Office of the Special Trustee. S. 1439 includes a number of concepts that were discussed by the Joint Department of the Interior/Tribal Leaders Task Force on Trust Reform in 2002. This task force was formed during the period when the department was examining ways to restructure the trust functions of the department in response to the trust reform elements of the Cobell court. The task force ended in an impasse with regard to implementing legislation on matters that were not related to organizational alignment. In the face of no legislation, the Department implemented a reorganization plan that could be achieved administratively. We will review this new title with respect to the reorganization just completed and provide you with our comments in our comprehensive report on the bill. This title of the bill also extends the Indian preference hiring policy to the new Office of Trust Reform Implementation and Oversight created by the bill and abolishes the Office of the Special Trustee for American Indians. Interior would appreciate the opportunity to discuss these policy choices in some detail. While Interior is receptive to the concepts of establishing an undersecretary position and merging Indian programs under new leadership, we would like to discuss the objectives of such a proposal. In Interior's view, such an initiative is unlikely to materially alter Indian trust performance due to the presence of other, more pressing, structural concerns about the trust, such as the lack of a clear trust agreement to guide responsibilities and expectations, appropriations that do not track with all program trust responsibilities, the lack of an operative cost-benefit paradigm to guide decisionmaking priorities, the challenges of incorporating Public Law 93-638 compacting and contracting and the requirements associated with Indian preference hiring policies. These issues have frustrated the beneficiaries, the administrators, and a various times Congress throughout the lifespan of this trust. We encourage Congress to speak clearly in whatever legislative direction in chooses to write, and carefully consider the impacts the language will have in allowing us to meet the objectives of your constituents. It is clear that moving from today's organization into a beneficiary-services-oriented organization of excellence will demand the highest of financial, information technology and managerial skills. American Indians make up less than 1 percent of the American public. If we unduly restrict hiring to this small fraction of potential employees, instead of reaching out to whoever may be most qualified, we deprive ourselves of 99 percent of the available talent pool. While the Indian preference hiring policy does permit the hiring of non-Indians, it also may serve as a significant disincentive for non-Indian applicants. We would like the opportunity to serve Indian Country to appeal to a broader range of applicants so as to create an applicant pool large enough to ensure we are hiring well qualified employees. Let me be clear. Indian people who are the best or equally well- qualified should be given preference. This allows us to ensure our organization understands the unique issues of Indian country. However, when better qualified individuals are not even considered or given reasonable promotion potential, a reality exists that organizational performance suffers. Audit of Indian Funds. The last title of S. 1439 requires the secretary to prepare financial statements for Indian trust accounts in accordance with generally accepted accounting principles of the Federal Government. The Comptroller General of the United States is then required to contract with an independent external auditor to audit the financial statements and provide a public report on the audit. The secretary is required to transfer funding for this audit to the Comptroller General from ``administrative expenses of the Department of the Interior'' to be credited to the account established for salaries and expenses of the GAO. Congress created the individual Indian trust. We are hopeful that S. 1439 will resolve many of the issues that we have spent over 9 years in court debating. From the Government's standpoint, we believe S. 1439 should---- \\\\\\provide for a full, fair, and final resolution of the entire case; \\\\\\provide a clear and realistic statement of the government's historic accounting obligations for the trust funds of individuals; \\\\\\resolve the accounting claims of the account holders and any associated funds mismanagement claims; \\\\\\eliminate inefficient trust management obligations by consolidating individual Indians' lands through a land purchasing program and address any historic land assets mismanagement claims; \\\\\\clarify trust accounting and management responsibilities such that they are limited by available appropriations, so that future claims and litigation do not arise as a result of unfunded obligations; and, \\\\\\provide a clear statement of the Government's historic accounting obligations for Indian tribes. We recognize this is a daunting task. But I can assure you, it is no more daunting than the prospect of facing many more years in the court system trying to find the answers to these issues. Mr Chairman, I would like to close with a comment in support of our people at the Department of the Interior. We want to be sure that the public record reflects the fact of their extraordinary service to the country. Many of our employees past and present have faced rough- sledding in the Cobell case and have been unfairly maligned. Department of the Interior employees working on the issues involved in the Cobell case, like the other employees of the department, are here to serve the American public. They work hard, in good faith, to implement the laws you enact and protect the legal rights of Native Americans. We ask that our employees be treated with the dignity and respect they have earned and deserve as we all work our way together through the difficult legal issues involved in the Cobell case. The department is encouraged by the Senate's leadership on this issue. We look forward to resolving this case so that the department and beneficiaries can move forward on a positive agenda for Indian country. Thank you for the opportunity to appear. We would be happy to answer any questions you might have at this time. ______ Prepared Statement of Clifford Lyle Marshall, Sr., Chairman, Hoopa Valley Tribe We thank you for the opportunity to submit testimony on S. 1439, the Indian Trust Reform Act of 2005. The Hoopa Valley Tribe, one of the original self-governance tribes, a section 131 tribe and member of California Trust Reform Consortium and ATNI, commends Chairman McCain and Vice Chairman Dorgan for their dedication to resolving the issues arising from the Cobell v. Norton case, the Department of the Interior's reaction to that case, and the future of tribal and individual Indian trust assets management. The Hoopa Valley Tribe appreciates the time and energy spent on the development of S. 1439 and is pleased with the outcome. We support the effort and look forward to working with the committee on improving the bill as it moves through the legislative process. S. 1439 presents a plan for remedying the wrongs of the past while proposing a structured approach for future trust management. It seeks to ensure that problems surrounding the Federal management of trust assets and resources, which have, afflicted Indian country, for so long, will not plague us in the future. The bill supports the government-to-government relationship between tribes and the United States, adheres to the Federal Government trust Responsibility to tribes, and furthers the principles of self-governance and self- determination. Unlike past short-sighted trust management approaches of the United States, that gave rise to the breach of trust claims, S. 1439 is a balanced approach to addressing the immediate issues of Cobell and the Federal Government's management of trust assets. Importantly, S. 1439 also preserves the rights of tribes, as inherent sovereign governments, to participate in the management and protection of their territories and resources. It recognizes that the United States must be held accountable for past wrongs and also that true reform is needed for proper trust management in the future. We believe S. 1439 is the vehicle for that for that reform. Below, we discuss three overarching points of the bill and then provide brief comments on certain provisions. Specifically, we believe S. 1439 rightfully refocuses trust reform to the original objectives and intent of the 1994 Trust Fund Management Reform Act, blunting the United States' recent policy of micromanaging trust issues in light of Cobell which has caused duplication and bloated bureaucracy. Further, we believe S. 1439 protects self-governance and the rights and abilities of tribes to participate in trust management. Finally, it appears S. 1439 frees up substantial funds that could be used on the ground to address the many issues in Indian country. Refocusing Trust Reform We believe S. 1439 correctly refocuses trust reform back to the original mission of the American Indian Trust Fund Management Reform Act of 1994, 25 U.S.C. Sec. Sec. 4001-4061. The Hoopa Tribe agrees with the goals and principles of the 1994 act. We also believe in the need for the Office of Trust Fund Management [OTFM] to operate within the BIA. The 1994 act established the Office of Special Trustee [OST] to oversee and coordinate reforms in the Department of the Interior's [DOI] practices relating to the management and discharge of the secretary's trust responsibility to tribes and individual Indians. Under the act, the OST is to ensure that policies, procedures, practices and systems of the DOI's bureaus related to the discharge of the trust responsibility are coordinated, consistent and integrated. It is clear under the Act that OST is meant to be an oversight and coordinating entity. In light of Cobell, however, the OST in recent years has used the 1994 act to leverage unnecessary control and micromanage trust issues. It has moved away from its intended role as a coordinating oversight entity to become an entity engaged in the delivery of trust services, a role originally reserved for the BIA. This has resulted in a fragmentation of appropriations for Indian programs, a dismantling of the Indian service delivery system and unnecessary duplication and bloating of bureaucracy. This is in direct contradiction to tribes' longstanding desire to keep the BIA system intact while repairing resource management problems that need fixing. The purpose of the 1994 act was to provide oversight, not create a new agency focused on protecting itself from liability. We do not need additional bureaucracy, nor can we afford it, particularly in today's budget environment. OST has been operating under a ``bright line'' philosophy under which it attempts to develop an arbitrary separation between Indian assets and the people themselves. Indian people and their assets, however, cannot be conveniently separated simply by dividing programs and functions and moving trust program management from a single line of authority to multiple lines of decisionmakers at different agencies. Any bright line plan that has a basic framework to separate trust assets from Indian communities will necessarily be in conflict with the goals of economic development, providing adequate services, and reducing poverty in Indian country. Under the existing BIA structure, each Regional and Agency Office has established internal trust personnel to oversee the management of trust assets at every point in the delivery of trust services. The OST has also established trust officers to serve in the Regional and Agency Offices. Under the combined BIA and OST restructured trust programs, there are nearly 1 dozen Federal employees carrying out what was done by less than One-half in previous years. We do not believe this is what was intended by the 1994 act. The Hoopa Tribe supports S. 1439, in part, because title V takes bold steps to restructure the BIA and the OST. Title V seeks to ensure a more accountable administration of the secretary's duties with respect to providing services and programs to Indians and tribes, including the management of trust resources. Title V creates the position of under secretary for Indian Affairs, who reports directly to the Secretary of the Interior, and provides for the phasing out of the OST by December 31, 2008. The termination of the OST is specifically intended by the 1994 act. S. 1439's clear sunset of the OST protects against the possibility that the OST will become permanent, regardless of its efforts in bureaucracy building and assuming the responsibility for delivering certain trust services. The Hoopa Tribe supports S. 1439's creation of the position of Under Secretary and the transfer of the duties and functions of the OST and the Assistant Secretary for Indian Affairs to this new position. We think the plan will streamline the process for carrying out trust functions. Moreover, with the emerging trust issues regularly surfacing in other bureaus and agencies of the DOI, we believe the creation of the under secretary position will help resolve trust problems tribes face due to the lack of coordination or understanding of the issues by those other agencies/bureaus. Having one direct line of authority will assist in the coordination of the various aspects of trust management. Further, we support the effective merger of OST functions back into Indian programs of the BIA, under the under secretary. This would prevent the duplication of services and the overgrowth of bureaucracy, and foster progress in the delivery of services to Indian people. S. 1439 Protects self-governance and the ability of tribes to manage their own resources As a self-governance tribe and participant of section 131, we are grateful that Congress recognizes the benefits of the section 131 Demonstration Project and has included the Indian Trust Asset Management Demonstration Project Act in Title III of S. 1439. The Hoopa Tribe is honored to participate in the section 131 project with the six other tribes in the California Trust Reform Consortium (Karuk, Yurok, Cabazon, Big Lagoon, Redding, and Guidiville) as well as the Salt River Pima Maricopa Indian Community, the Confederated Salish--Kootenai Tribes and the Chippewa Cree of the Rocky Boys Reservation. Section 131, to date, has been successful. Accordingly, we strongly support the Demonstration Project in S. 1439 and will assist in any manner to address areas of concern that Congress or the Administration may have. The motivation behind section 131 [section 139 in its initial year] was multi-fold. For the California Trust Reform Consortium, we sought protection of our then-existing Operating Agreement for trust resources management that we entered into with the BIA Pacific Regional Office [PRO] and protection of our relationship with the PRO in the face of uncertainty in the direction of trust reform efforts. We did not want the imposition of the restructured OST and DOI to alter our tried and true successful means of managing our trust resources. It is our position that trust reform should focus on what is broken and preserve what is working. Section 131 tribes have systems and practices for trust management that work. In fact, pursuant to section 131 each participating tribe underwent an evaluation by the OST and received a determination that it is capable of performing compacted trust functions under the same fiduciary standards to which the secretary is held. Hoopa was even cited as ``an excellent example of trust administration, in furtherance of tribal self-determination.'' Section 131, we also believe, is an appropriate way to showcase successful models of trust management that not only demonstrate to the United States how trust management can be implemented, but also encourage tribes to participate in the management of their resources. It stands as an example that local decisionmaking and combined efforts with the BIA can result in significant trust management improvements. Tribes can properly implement trust management even though they may use different practices and methods than the DOI. Title III of S. 1439 maintains and encourages this concept by preserving the ability of tribes to continue their own successful trust resource management. The S. 1439 Demonstration Project builds upon and encourages self- governance and self-determination, which are proven successful policies for building growth in capability and infrastructure in tribal governments. We believe that the Demonstration Project under title III will provide a useful model for how tribal governments can assist the United States with properly managing trust assets and create an understanding on the part of the Federal Government of the differences between our respective values and expectations when managing trust assets within our tribal territories. We also believe that all tribal governments, regardless of whether they are direct service tribes or operating pursuant to self-governance or self-determination agreements, should be a part of the management of trust assets within their jurisdictions. Active participation by tribal governments in the management of trust assets not only creates positive results, but reduces the chance of conflicts or breach of trust claims. Again, we support the concept of the Demonstration Project and are committed to working with the committee to find ways for tribal governments of any fashion of service delivery to engage in the management of their trust assets. One concern we do have with the Title III Demonstration Project is that the default action under section 304(b)(3) is to deny approval of a tribal applicant's demonstration project plan if the secretary does not act within a certain timeframe. We believe this standard should be reversed so that a plan is approved unless specifically denied by the Secretary. This approach would be mindful of the fact that tribes are always at a disadvantage when the secretary has the ability to obstruct the negotiation process. Under S. 1439, substantial amounts of money will be available for use on the ground to address the many issues in Indian country. It appears that under S. 1439 a substantial amount of funds currently being used for litigation costs by the DOI in the Cobell case as well as reorganization efforts of the OST would be available to be used for on-the-ground initiatives in Indian country to address the many needs of tribes and their members. We have previously estimated that the costs of implementing the To- Be Model, Records Policy and Trust Examination Handbook nationwide would be approximately $1 billion. While we support the continuing requests of tribal leaders to provide adequate funding for trust resource programs, we do not support the concept that creating new multi-million dollar centralized bureaucracies located thousands of miles away from where the resources need to be managed is the best way to accomplish trust improvements. To the contrary, we strongly believe that meaningful and cost effective trust improvements occur when there is support and funding provided at the local level. S. 1439 appears to recognize this principle by encouraging self-governance and the integration of tribal government action with a local decisionmaking focus in trust management. S. 1439 appears to streamline trust management rather than expand Federal bureaucracy. With this, moneys that would have been put toward centralized bureaucracies, it appears, would be available for spending at the local level on trust improvements. This, in turn, will further tribal economic development and the effort to reduce poverty among tribal members. Titles I, II, IV, and VI of S. 1439 The Hoopa Tribe is in support of a timely and fair resolution of the Cobell case. The importance of the United States' obligations to Indian people can never be diminished. Further, Indian people should not suffer from inaction on their claims. The Hoopa tribe has had experience with claims that take far too long to resolve. Such delay does not do justice to Indian people. A fair and timely resolution is needed so Indian people can move forward. We look forward to hearing the comments that will be forthcoming with regard to the proposal outlined in title I. The Hoopa Tribe previously has not supported the concept of a commission because we do not want it to become another level of overreaching bureaucracy. However, as title II is written, it seems the Trust Asset Management Policy Review Commission [Commission] might provide some benefit in reviewing the laws and practices of the DOI with respect to trust asset management, and recommending improvements to those laws and practices to the Secretary and Congress. The manner in which Indian trust services has been staffed, funded and carried out has left many of us with a strong sense of frustration and disappointment. The commission concept may help ensure that the problems which plagued us in the past will not plague us in the future. It is absolutely necessary, however, to ensure that there is no risk that the Commission will take on a life of its own, by extending its reach beyond reviewing and making recommendations. It cannot duplicate efforts of the agencies nor can it drain critically needed funds from Indian programs or wield any authority over how tribal governments address individual issues relating to trust management, The manner in which Title II is drafted appears to protect against such short-sighted policies and additional bureaucracy that would only complicate the problems. We recommend, however, that the commissioners selected from Indian country consist of a balance between direct service and self- governance tribes. The Hoopa Tribe strongly supports resolving the problem of fractionated interests. We, however, reserve comments on title IV regarding the Fractional Interest Purchase and Consolidation Program until we have had the opportunity to hear from the Indian Land Working Group and other appropriate entities that have an interest in this matter. We believe the concept in Title VI, Audit of Indian Trust Funds, is necessary to ensure adequate checks and balances of financial trust functions within the Federal Government. The requirement for an independent audit will lend necessary credibility to the overall management of trust funds by the Federal Governments. We want to express our appreciation for Chairman McCain's and Vice Chairman Dorgan's leadership demonstrated through the introduction of S. 1439. Trust mismanagement problems have afflicted tribes and Indian people for too long. Allowing these problems to remain unresolved for much longer will only create more injustices, conflict and delays in the services the United States is obligated to provide Indian people. It is time to act. We believe that S. 1439 is a solid foundation for such action, and we look forward to working with the committee, the House Resources Committee and the Administration to move meaningful legislation through the process as expeditiously as possible. ______ Statement of the Harvey Moses, Jr., Chairman Confederated Tribes of the Colville Reservation The Confederated Tribes of the Colville Reservation [Colville Tribe] would like to express its thanks to Chairman McCain and Vice Chairman Dorgan for introducing S. 1439, the ``Indian Trust Reform Act of 2005,'' and would like to take this opportunity to provide initial thoughts and comments on the bill. Although such an important legislative initiative will undoubtedly generate a wide range of reactions, the Colville Tribe generally supports the legislation and believes that it is a crucial first step in resolving the Cobell v. Norton litigation and implementing meaningful trust reform in the Department of the Interior. While the statements contained herein are based only on a preliminary review of the bill, the Colville Tribe is pleased to see that title V of S. 1439 would help rectify one of the more unfortunate recent developments in Federal Indian policy--the rise and gradual domination of trust issues by the Office of Special Trustee [OST]. The Colville Tribe has long made known its opposition to OST, as have many of our sister tribes in the Pacific Northwest and around the country. Our opposition to OST and our desire to see the transfer of OST functions back to the Bureau of Indian Affairs [BIA] are based on our own experiences with OST and on the detrimental impact continued funding of the OST bureaucracy has had on the funding levels of critical Indian programs. The Colville Reservation comprises over 1.4 million acres of trust and allotted lands in north central Washington State. With lands that include timber, agricultural and water resources, our tribe and our tribal members necessarily depend on a smooth working relationship with our local BIA agency office to ensure that land transactions and other BIA supervised activities are completed in a timely manner. For decades, the Colville Tribe has generally enjoyed such a relationship. Certain activities undertaken by the OST, however, have resulted in periods of extended delays in completing land sales by and between our people. OST has gone so far as to impound our tribe's probate records from our agency office in Nespelem, WA [where they had been secure for decades], and moved them to Albuquerque, NM. We understand that since the move, OST cannot account for all of the records. To say the least, these actions have dealt a serious setback to our tribe's ability to conduct business and are not in keeping with a healthy and constructive Federal-tribal relationship. Also, as we noted in statements previously submitted to the committee in connection with its March 9, 2005, oversight hearing on trust reform, continued funding of OST at the expense of the BIA means that OST diverts critical funding and personnel away from agency offices. Our tribal members are the beneficiaries of these agency-level services and are the very people who need the assistance most and who can least afford to suffer bureaucratic folly. Indeed, every new fiscal year brings with it another increase in OST funding and a corresponding reduction in BIA funding for critical health and safety programs. Returning these functions to a single administrative entity, as proposed by S. 1439, would reverse this trend. While we believe a need exists for independent oversight of the BIA's delivery of trust services, OST has morphed far beyond this oversight function. As proposed, title 11 of S. 1439 would establish a trust management policy review commission that would provide policy oversight, while title VI would give the Government Accountability Office a key role in overseeing how the Department safeguards its trust responsibility. While these titles could use some fine tuning, the Colville Tribe believes that these are steps in the right direction. The Colville Tribe also agrees with the intent of title III--which would establish the Indian Trust Asset Management Demonstration Project--that tribes that so choose should have an opportunity to prioritize funding and management of their trust resources based on their own needs. Although we have questions on how the proposed project will be implemented and are interested in seeing the details of how tribes and the Department would negotiate a ``trust resource management plan,'' these issues can surely be resolved later. Title I of the bill proposes a voluntary claims resolution regime to settle the accounting claims of the hundreds of thousands of Individual Indian Money [IIM] account holders currently embroiled in the Cobell v. Norton litigation. While the specific dollar amount is left undetermined in S. 1439, the tribe is very encouraged that funds to resolve the IIM accounting claims will come from the Judgment Fund and not from the annual Indian program appropriation. The tribe is also supportive of the availability of judicial review for claimants to challenge their settlement amount or, indeed, challenge the methodologies used to arrive at a settlement amount. We are mindful of the complexities involved in trying to settle the Cobell case, and are fully aware that many questions need to be answered, but applaud the committee for taking the initiative to bring this 9-year old litigation to a fair and final conclusion. The Colville Tribe supports a comprehensive legislative approach such as the one set forth in S. 1439. The legislation would clarify the Department's trust obligations and ensure that services provided by the BIA are not jeopardized because of a competing office within the department. Again, the Colville Tribe thanks the committee for the opportunity to present its preliminary views on this critical legislative proposal. The Tribe looks forward to working with the committee on this important subject. 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