[Senate Hearing 109-441]
[From the U.S. Government Publishing Office]
S. Hrg. 109-441
SETTLEMENT OF COBELL VERSUS NORTON
=======================================================================
JOINT HEARING
BEFORE THE
COMMITTEE ON INDIAN AFFAIRS
UNITED STATES SENATE
AND THE
COMMITTEE ON RESOURCES
UNITED STATES HOUSE OF
REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
ON
OVERSIGHT HEARING ON POSSIBLE MECHANISMS TO SETTLE THE COBELL v. NORTON
LAWSUIT
__________
MARCH 1, 2006
WASHINGTON, DC
__________
Serial No. 109-42
__________
U.S. GOVERNMENT PRINTING OFFICE
26-395 WASHINGTON : 2006
_____________________________________________________________________________
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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
______
COMMITTEE ON RESOURCES
RICHARD W. POMBO, California, Chairman
NICK J. RAHALL II, West Virginia, Ranking Democrat Member
Don Young, Alaska Dale E. Kildee, Michigan
Jim Saxton, New Jersey Eni F.H. Faleomavaega, American
Elton Gallegly, California Samoa
John J. Duncan, Jr., Tennessee Neil Abercrombie, Hawaii
Wayne T. Gilchrest, Maryland Solomon P. Ortiz, Texas
Ken Calvert, California Frank Pallone, Jr., New Jersey
Barbara Cubin, Wyoming Donna M. Christensen, Virgin
Vice Chair Islands
George P. Radanovich, California Ron Kind, Wisconsin
Walter B. Jones, Jr., North Grace F. Napolitano, California
Carolina Tom Udall, New Mexico
Chris Cannon, Utah Raul M. Grijalva, Arizona
John E. Peterson, Pennsylvania Madeleine Z. Bordallo, Guam
Jim Gibbons, Nevada Jim Costa, California
Greg Walden, Oregon Charlie Melancon, Louisiana
Thomas G. Tancredo, Colorado Dan Boren, Oklahoma
J.D. Hayworth, Arizona George Miller, California
Jeff Flake, Arizona Edward J. Markey, Massachusetts
Rick Renzi, Arizona Peter A. DeFazio, Oregon
Stevan Pearce, New Mexico Jay Inslee, Washington
Henry Brown, Jr., South Carolina Mark Udall, Colorado
Thelma Drake, Virginia Dennis Cardoza, California
Luis G. Fortuno, Puerto Rico Stephanie Herseth, South Dakota
Cathy McMorris, Washington
Bobby Jindal, Louisiana
Louie Gohmert, Texas
Marilyn N. Musgrave, Colorado
Vacancy
Steven J. Ding, Chief of Staff
Lisa Pittman, Chief Counsel
James H. Zoia, Democrat Staff Director
Jeffrey P. Petrich, Democrat Chief Counsel
(ii)
C O N T E N T S
----------
Page
Statements:
Bickerman, John, president, Bickerman Dispute Resolution,
PLCC....................................................... 4
Dorgan, Hon. Byron L., U.S. Senator from North Dakota, vice
chairman, Senate Committee on Indian Affairs............... 3
Eizenstat, Stuart, former ambassador, Covington and Burling.. 7
Faleomavaega, Hon. Eni F.H., U.S. Delegate, American Samoa... 20
Frazier, Harold, chairman, Great plains Tribal Chairman's
Association................................................ 28
Garcia, Joseph, president, National Congress of American
Indians.................................................... 26
George, Keller, president, United South and Eastern Tribes... 27
Johnigan, Sandra K., CPA, Johnigan, P.C...................... 12
Marchand, Mike, Affiliated Tribes of Northwest Indians and
First Vice President, Colville Confederated Tribes......... 25
McCain, Hon. John, U.S. Senator from Arizona, chairman,
Senate Committee on Indian Affairs......................... 1
Pombo, Hon. Richard W., U.S. Representative from California,
chairman, House Committee on Resources..................... 2
Appendix
Prepared statements:
Bickerman, John (with attachment)............................ 31
Eizenstat, Stuart............................................ 36
Frazier, Harold.............................................. 41
Garcia, Joseph (with attachment)............................. 45
George, Keller (with attachment)............................. 54
Johnigan, Sandra K. (with attachment)........................ 116
Marchand, Mike............................................... 134
Minthorn, Antone C., chairman, Board of Trustees,
Confederated Tribes of the Umatilla Indian Reservation..... 136
Renfrew, Charles (with attachment)........................... 31
SETTLEMENT OF COBELL VERSUS NORTON
----------
WEDNESDAY, MARCH 1, 2006
U.S. Senate, Committee on Indian Affairs, Meeting
Jointly With the Committee on Resources, U.S.
House of Representatives,
Washington, DC.
The committees met, pursuant to notice, at 9:30 a.m. in
room 106 Senate Dirksen Office Building, Hon. John McCain
(chairman of the committee on Indian Affairs) presiding.
Present from the Senate Committee on Indian Affairs:
Senators McCain and Dorgan
Present from the Committee on Resources, House of
Representatives: Representatives Pombo, Fortuno, Hayworth,
Herseth, Inslee, Kildee, Renzi, Mark Udall, Tom Udall, and
Faleomavaega.
STATEMENT OF HON. JOHN McCAIN, U.S. SENATOR FROM ARIZONA,
CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS
The Chairman. Good morning.
I welcome Chairman Pombo and Ranking Member Rahall and
other members of the House Committee on Resources to the
Dirksen Building. I want to thank you very much for agreeing to
convene this important hearing on the settlement of the Cobell
v. Norton litigation, which has been the subject of the
legislation being cosponsored by the chairman and ranking
members in both chambers.
Because of time constraints this morning imposed by the
joint meeting of Congress later this morning, I would
respectfully ask that opening statements be limited to chairmen
and ranking members. As my colleagues know, the Prime Minister
of Italy is addressing a joint session this morning.
The principal purpose of this hearing is to gather views on
approaches we might take in valuing the settlement of claims
contemplated by S. 1439 and H.R. 4322. On our first panel, we
will hear from John Bickerman, who worked as one of the two
mediators in the Cobell matter during the 108th Congress;
Sandra Johnigan, a forensic accountant who has a background in
accounting claims; and Stuart Eizenstat, who among his other
high profile positions, helped to negotiate financial
settlements of class action suits with European banks and other
entities involving accounts and other properties that were
misappropriated, stolen or otherwise lost in the Holocaust in
the years leading up to and during the Second World War.
Ambassador Eizenstat's negotiations in those cases
presented many of the same valuation problems that we are
confronted with here today. The problems of valuing accounts of
claims where documentation is either missing or has been
destroyed, where critical information is several decades old,
and where a thorough investigation of claims could cost many
millions of dollars and take many years to complete, perhaps
maybe even billions.
I look forward to hearing from our second panel of
witnesses, representatives of the Affiliated Tribes of
Northwest Indians, the National Congress of American Indians,
United South and Eastern Tribes, and the Great Plains Tribal
Chairman's Association, and getting their views and insights on
how we might approach the settlement valuation question.
Because we have tight time constraints for this hearing, I
am requesting all our witnesses to keep their statements to 5
minutes.
Finally, I would like to mention that the staff of the
Committee on Indian Affairs and House Resources Committee
recently traveled to Lenexa, KS, to tour the Department of the
Interior's underground Indian records repository. At
significant cost, the department has been gathering an enormous
volume of Indian trust and non-trust records there, logging
them into a database, and storing them in a controlled
environment for their long-term preservation.
The department employees have contracts for about 220
people at Lenexa to index millions of documents, track
thousands upon thousands of transactions in the historical
accounting process involved in the Cobell litigation. Many of
those transactions involve extremely small sums of money
derived from tiny fractional interests in land. Surely, there
is a better use for these funds in Indian country, and I look
forward to working on a bipartisan, bicameral basis to resolve
the litigation.
Chairman Pombo, I would like to thank you and Ranking
Member Rahall for the hard work you have been doing on this. I
think you would agree with me, this is one of the most
intransigent issues that we have ever faced, particularly
considering the amount of money that has been involved here,
and trying to put this thing back together. It has been one of
the most daunting challenges I think that we have faced. I want
to express my appreciation for the bipartisan, bicameral way
that we have tried to address this issue.
I think that you would agree with me, as other members on
both sides of the aisle do, that we have to get this thing
resolved and sooner rather than later. Thank you, Chairman
Pombo. If it is all right with you, after you, Senator Dorgan,
and then if Congressman Rahall was here. I guess he is not
here.
Go ahead, please.
STATEMENT OF HON. RICHARD W. POMBO, U.S. REPRESENTATIVE FROM
CALIFORNIA, CHAIRMAN, HOUSE COMMITTEE ON RESOURCES
Mr. Pombo. Thank you, Senator. I want to express my
appreciation to you for holding this joint committee hearing. I
cannot remember the last time that the two chairmen and ranking
members with jurisdiction over Indian affairs cosponsored
identical bills and then held a joint hearing on them. This
speaks to the magnitude of the problem that we are trying to
solve, and solving it depends on a bipartisan, bicameral
effort.
For years, our two committees have worked steadily in
holding hearings and facilitating mediation to try and bring a
Cobell lawsuit to a happy conclusion. Even though we have been
able to introduce settlement bills, we are not there yet. I am
disappointed that mediation did not bring about a settlement.
This is not through any fault of our mediators. If it were not
for the work of John Bickerman and Judge Charles Renfrew, we
would not have arrived where we are today.
We, and indeed Indian country, owe them a debt of gratitude
for the fine work they have quietly and patiently done, and
continue to do, in bringing about a final and fair resolution
for thousands of individual Indian account holders.
Today, we are exploring the key issue that will determine
the fate of the settlement bill. It is the settlement amount
and how it should be distributed. Unless a miracle occurs,
neither party in the lawsuit can be expected to offer an
acceptable amount to fill in the space that we left blank in
our bills. Filling in that blank space is our job, and today's
hearing should help us in that task.
If we do not do this, the case will drag through the courts
as it has dragged on for the last 10 years. The class of
plaintiffs suffers, and all of Indian country suffers because
rightly or wrongly, scarce Federal resources meant for
important tribal services are being diverted to deal with it.
While it may seem unusual for Congress to mandate a settlement,
this is a unique type of case because of Congress' power to
settle that stems from our constitutional authority over Indian
affairs.
It is clear that continuing with the litigation is not in
the best interests of individual Indian account holders and of
the taxpayers who pay the massive litigation support costs in
attorneys fees.
Again, Mr. Chairman, I am pleased we are holding this joint
hearing with the distinguished roster of witnesses. I look
forward to working with you and Senator Dorgan and Congressman
Rahall in passing a settlement bill soon this year.
Thank you.
The Chairman. Senator Dorgan.
STATEMENT OF HON. BYRON L. DORGAN, U.S. SENATOR FROM NORTH
DAKOTA, VICE CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS
Senator Dorgan. Mr. Chairman, thank you. I will be
mercifully brief.
It is interesting that we talk about the word ``trust,''
Indian trust, when we refer to these accounts. In fact,
``trust'' is an inappropriate word when we are dealing with
these accounts because that trust was violated by the Federal
Government. Report after report, investigation after
investigation shows that the Federal Government did a miserable
job in keeping the trust funds and properly accounting for
those trust funds. It is not surprising to any of us, I
suspect, that this litigation ensued.
But the Cobell litigation, if it does continue, will
eclipse almost everything. It will take years. Massive amounts
of money will be spent. I am not sure what the result will be.
To the extent that we can find a way to resolve this in an
appropriate way and a satisfactory and a fair way, it makes
sense for everybody.
Senator McCain and I and the folks in the House introduced
identical legislation to try to begin to address these issues,
to encourage the parties to become actively involved in finding
some way to reach agreement. My hope is that this hearing will
advance that goal one more step. I am really appreciative of
members of the House joining us here as well.
The Chairman. I again would like to extend my appreciation
to the members of the House who have taken the giant leap on
the other side of the Capitol to join us today. We thank you
very much for being here, including my friends from Arizona,
New Mexico, and my old friend Dale Kildee.
We would like to begin with our first set of witnesses,
which is John Bickerman, the president of Bickerman Dispute
Resolution; Stuart Eizenstat; and Sandra Johnigan, who is a
CPA.
Mr. Bickerman, we would like to begin with you. I want to
thank you for your very hard work on this issue. We are here to
learn the benefit of your experience and your recommendations.
We thank all the witnesses for being here today.
STATEMENT OF JOHN BICKERMAN, PRESIDENT, BICKERMAN DISPUTE
RESOLUTION, PLCC
Mr. Bickerman. Thank you.
Chairman McCain, Chairman Pombo, Vice Chairman Dorgan,
Ranking Member Rahall, members of both committees, my name is
John Bickerman. I am appearing here on behalf of both myself
and Judge Charles Renfrew. Judge Renfrew regrets that he could
not be here today due to an unavoidable conflict.
With the permission of the Chair, I would just like to read
two very short paragraphs because he and I have worked on this
testimony, and it is his testimony as much as mine. I want to
make sure that I get his words right. So with your indulgence,
I am just going to read two quick paragraphs, and then
summarize the rest of my testimony.
Our assignment was to engage the parties in negotiations to
seek a resolution of all claims brought by plaintiffs in their
class action lawsuit. We were consensually chosen by the
parties. Our mission was also much broader than traditional
mediation. From the outset, both the parties and congressional
staff requested that we periodically report back to Congress
regarding our efforts and our progress.
This request was made for three reasons. First, any
resolution we achieved through negotiation would likely require
congressional action. Second, Congress wanted to know if either
plaintiffs or defendants were behaving in a dilatory manner or
otherwise negotiating in bad faith. And third and most
importantly, Congress wanted to know if a resolution was
impossible so that it could decide whether to take action.
Indeed, in October 2004, we reported back to the then-
leaders of these two committees and in fact told you that we
did not think that a successful conclusion could be made. I am
going to read again.
We continue to believe that only congressional action can
resolve this dispute for the benefit of the beneficiaries of
the IIM Trust, and allow the United States to devote its
resources to the traditional services it has provided Indian
country. If Congress takes no action, the litigation path will
take years, if not decades, to reach finality. Many deserving
beneficiaries will have died in the interim. Those
beneficiaries who are alive will not be made whole.
We also believe that the Department of the Interior's
ability to serve Indian country will be severely compromised.
So much of the policy affecting Indian country seems now to be
made through the prism of the Cobell litigation. We are
concerned that the historically beneficial trust relationship
between the Federal Government and Indian country is in
jeopardy as a result of this litigation.
Now, I will summarize the rest of our testimony.
First, there is no dispute about liability. Courts have
proven it. The plaintiffs have been successful in their
efforts, and liability is just not an issue anymore. What is an
issue and why we are here today is to try to value the
liability that the United States has. While there is no serious
question about the liability, the gulf that exists between the
parties is enormous.
Initially, the plaintiffs took the position that strict
common law fiduciary principles ought to apply. ``If you can't
show it, then you owe it.'' Based on the calculations that they
initially made, that led to a conclusion that the liability of
the United States was somewhere between $100 billion to $170
billion.
Now, we believe that those kind of statements have created
very unrealistic expectations that make this dispute even more
difficult to resolve. More recently, the plaintiffs at a
hearing in December suggested that a settlement demand of $27.5
billion, for settlement purposes, was a reasonable demand,
based on an error rate of 20 percent, assuming that 20 percent
of the funds were not paid to beneficiaries as a measure of
rough justice. But again, there is no supporting data.
Similarly, we think the United States' position is somewhat
suspect. The department has spent considerable sums tracing the
record of transactions. If you follow their testimony to its
logical conclusion, you come up with a number of less than $500
million, maybe less than $100 million. So $27.5 billion on one
side, and less than $500 million on the other side. That is
quite a gulf.
Now, if we try to analyze where the gulf is and why it
exists, we believe that there are three potential sources of
error. The first source of error is the money was not
collected. The second source of error was the money was
collected and it was deposited, but it was not properly
deposited. And the third is the money was not properly
disbursed.
Now, let's take a look at the first issue with respect to
the money not being collected. To the best of our knowledge,
the administration has not really been able to take a hard and
close look at this source of error. These missing funds, (or if
the funds were paid late and interest was due on them,) could
reflect a very, very significant amount of money. I would
describe this as ``funds mismanagement.'' In the legislation
there is an effort, to deal with this issue.
Funds mismanagement we believe would be and ought to be
covered under any settlement under title I. This is a claim
that we think belongs with the general accounting claims.
But we want to distinguish it from what we would describe
as ``lands mismanagement.'' Lands mismanagement relates to the
underlying assets--the underlying assets of an individual's
property was not let out at a fair price, or a lease was not
fairly acquired. That is a very individualized, particularized
kind of claim, and we do not believe that it is properly part
of this litigation.
The plaintiffs have never asserted it was part of this
litigation. No evidence has ever been brought to bear on this
issue, and that those sort of claims should survive whatever
you do. We believe that those kind of claims would be
individual claims that would properly be brought in the Court
of Claims, and as a result we think they should be able to be
brought.
Now, the second potential source of error is that the funds
were not properly deposited, and the administration has done a
good deal of analyzing that. We do not say anything more about
that at this time.
But I do want to talk to you about the fact that ultimately
this is an arbitrary solution. There is no right number. As
mediators, we are frequently asked to give a number. We often
say ``based on the legal merits, one number is as good as the
other.''
By way of example, I have provided at the end of the
testimony a bunch of numbers.
The Chairman. One number is as good as the other, $100
million or----[Laughter.]
Mr. Bickerman. No; not exactly. Let me be more specific.
Clearly, there is an error rate. Clearly, we know that $13
billion went through the system. Okay? The plaintiffs used a
20-percent error rate. We did some analysis and we said,
``let's assume a 20-percent error rate and an interest rate of
3 percent compounded.''
What does that lead to? And we made some assumptions. We
said, most of the money, and this is an important assumption,
that was paid through the system occurred from 1970 forward.
Obviously, money that was paid a long time ago is much more
valuable now than money paid more recently because of the
compound interest effect.
So if you assume that $3 billion was paid prior to 1970,
and only $500 million was paid prior to World War II, which we
think are reasonable assumptions, then you generate a number of
$7.2 billion. If you assume an error rate of 10 percent and an
interest rate of 4 percent, you come up with a $5.6-billion
number. But if you move that interest rate just a point, and
assume the same error rate of 10 percent and assume an interest
rate of 5 percent, then the number jumps to $9.8 billion.
What is the point of this? We are not recommending any of
these numbers. What we are saying is the thought that we can
define with precision the error rate and the interest rate, we
can't, but there is a range that the committee ought to be
looking at that could resolve this dispute. It is not the
administration's number and it is not the plaintiffs' number,
but there ought to be a number that you should be able to
determine and we do not think that a lot of time spent on
coming up with a methodology will improve the accuracy of a
number.
So our recommendation, and here I will, if I can, just read
our statement again because Judge Renfrew endorses this. On
behalf of Judge Renfrew and myself, we continue to offer our
assistance to the committee. We believe that the prompt
enactment of S. 1439 and H.R. 4322 is an imperative. It is in
the best interest of the plaintiffs, of the United States, and
we encourage the committee to schedule these bills for markup
as soon as possible.
[Prepared statement of Mr. Bickerman appears in appendix.]
The Chairman. Thank you very much.
Ambassador Eizenstat, welcome.
STATEMENT OF STUART EIZENSTAT, FORMER AMBASSADOR, COVINGTON AND
BURLING
Mr. Eizenstat. Thank you, Mr. Chairman.
Chairman McCain, Senator Dorgan, Chairman Pombo,
Congressman Rahall, and members of the joint committees, thank
you for asking me to testify. I have been asked to testify
because of my experience during the Clinton administration
where, in addition to holding a series of four international
positions, I was simultaneously the leader of the
administration's efforts to bring belated justice to Holocaust
survivors and other victims of Nazi atrocities, and to return
as much as possible their confiscated property from World War
II.
I want to make it clear at the outset that I am in no way,
underscore no way, trying to compare the Nazi genocide of 6
million Jews and millions of others to the gross mistreatment
of America's first residents, Native Americans. Each historical
event stands on its own.
But the way in which we sought to provide what I call
imperfect justice to victims of the Third Reich in a series of
negotiations from 1995 to 2001 have, I believe, some useful
lessons on how Congress might provide justice to American
Indians in the Government's mishandling of their trust fund
assets.
Congress has repeatedly found, in the words of the U.S.
Court of Appeals, that these funds were hopelessly and ineptly
managed, with the resulting chaos. And that it was not disputed
that the Government failed to be a diligent trustee. A 1992
congressional report cited the Interior Department's dismal
history of inaction and incompetence.
Despite the very different historical origins of the Indian
claims and the Holocaust claims, there are lessons from our
work that may be useful as you consider your work on these two
important bills. The class action Holocaust cases were brought
against French and Swiss banks for Holocaust-era bank accounts
never returned to their rightful owners after World War II.
Class action suits were also brought against German and
Austrian slave labor companies that employed slave-enforced
labor; against German and Austrian and other insurance
companies for unpaid insurance policies for confiscated real
and personal property and artworks never returned.
In each case, the class action suits were crucial in
highlighting the historical wrong, but were unable to resolve
it in a judicial context. In each case, the beneficiaries were
dying in the Holocaust cases at the rate of 10 percent a year,
while the class action litigation droned on. Indeed, our cases
were founded in many instances on legal quicksand, as
demonstrated by the dismissal of the two major slave labor
cases by Federal courts in New Jersey.
In the Cobell case, there appears to be a stronger legal
argument by the plaintiffs, but the case has been batted around
like a volleyball for almost a decade between the District
Court and the Court of Appeals, with no benefit to the
aggrieved Indians and at great cost to both sides.
So let me suggest the following. First, courts are not
suitable instruments for resolving historical wrongs. Class
action lawyers may be able to raise a historical wrong, but are
incapable of solving the problem themselves.
It was only the intervention of the Clinton administration,
and may I say, with the bipartisan support of the Congress, in
mediating the Holocaust cases that led to our dramatic results,
with $8 billion in settlements for victims, Jewish and non-
Jewish alone, indeed the majority non-Jews; payment of 1.5
million slave-enforced laborers; the identification of over
20,000 Holocaust-era bank accounts; payments of thousands of
life insurance policies; the return of hundreds of properties
and hundreds of pieces of looted art.
So I applaud all of you for your work on this legislation.
Legislation is absolutely essential. There will never be a
piece of legislation that will satisfy both sides, but
legislation will be infinitely preferable to the endless
prospect of uncertain litigation.
Second, the way in which you craft the legislation bears
striking similarities to the efforts we made in the Holocaust
cases. Your legislation, for example, would create a global
settlement fund which would be allocated among the claimants.
Your concept of allocating that capped amount partly by a per
capita amount and partly by a formula, taking into
consideration the flow of funds through the benefiaries' IIM
accounts, compared to the total throughput of all other
beneficiaries, is eminently reasonable.
Permit me to give you several examples from my experience.
In the Swiss bank case, we capped $1.25 billion to be divided
among an unknown, at that point, number of claimants at the
time of settlement. We simply did not know how many people
would come forward and claim bank accounts. There was a major
controversy in the Cobell case about the accounting required
and the costs of performing it.
You may wish to note that we created a committee chaired by
former Federal Reserve Board Chairman Paul Volcker, which
employed four major accounting firms and cost the Swiss banks
$200 million in audit fees to get at one million accounts
created in Swiss banks from 1938-45.
At the time of our negotiations, indeed at the time of
their conclusion, we still did not know the results of the
Volcker investigation. So while it was historically useful, and
indeed is now important in terms of claims, it did not help us
determine how to reach the $1.25-billion settlement.
We also took into account, as we have done in the insurance
cases, the interest lost over the decades since the end of
World War I by adding 10 times the amount in the bank accounts
to the actual recovery. We came to that figure by employing an
eminent economist, Henry Kaufman, who helped us determine the
basis of the plus-up.
In the German Holocaust labor cases, we employed a per
capita concept in our capped 10 billion Deutschmark, $5 billion
settlement. We estimated from records available to us that
there were around 1 million surviving laborers in Europe and
elsewhere from World War II. We divided that number into the
capped amount we negotiated. All slave laborers, and this is a
very important point on your per capita issue, all slave
laborers were paid the same per capita amount, $7,500, whether
they worked for 1 day, 1 year, the entire war; whether they
came out healthy or wrecked for life.
Likewise, forced laborers who worked under harsh, but
somewhat better conditions, received $2,500, again without any
individual hearings. It was impossible to have individual
hearings for 1 million-plus people and determine their
individual circumstances.
In the Austrian labor cases, we negotiated a $400-million
capped fund and allocated again on a per capita basis to forced
and slave laborers. We overfunded the account to assure that
each category would receive the maximum $7,500 or $2,500
figure.
In the Austrian property settlement, we agreed upon a $210-
million capped fund which we called the General Settlement
Fund. By the way, it has just been funded 5 years later, a few
weeks ago. Here again, we have an unknown number of claimants.
It appears now that there will be 19,000.
We agreed in our negotiations that there would be up to a
$2-million payment to people whose property was taken in
Austria, but that would depend on how many claims there were.
It now appears with 19,000 claims, if most of these are
validated, and I will get to that in a moment, that they will
receive less than that $2 million. So again, there is an
element of arbitrariness.
That gets to my third point. We employed a concept we
called ``rough justice'' in our determinations of the amount of
the recoveries. As you seek to fill in the blank in your
proposed global settlement amount, you might consider the same.
We recognized that there was an arbitrariness to any
figure. How do you place a value on the damage done 60 years
after a war to a slave or forced laborer? How do you determine
how much the Swiss bank should pay for their perfidy in hiding
Holocaust era bank accounts for decades from their owners, even
taking it into the profits of the bank? Indeed, how do you here
measure the injustice to Indians who misplaced their trust in
the United States?
We did our best to try to come to reasonable figures, but
in the end it was a case of getting the maximum for victims
that the offending foreign corporations were willing to pay. It
was simply a case of finding the middle ground on which the
parties could agree.
You have this unenviable task. There will be no figure that
will satisfy both sides. You labor, as I did, with an imperfect
set of historical records. Indeed, evidently the state of the
trust fund accounts is abysmal. If there is to be an
accounting, I believe there must be one that uses statistical
analysis and not cost, as the Volcker audit did, a
disproportionate amount to what is recovered. But it is far
better, as you have done in your legislation, to simply forget
the audit. It is not worth paying money to auditors. Let that
money go to the Indians.
So you should simply avoid further costly accounting on an
incomplete and poorly managed set of records, some of which are
destroyed or otherwise inaccessible. In coming to a number
which almost certainly should be in the billions, the committee
should take into account the passage of time, the lost
investment opportunities, the massive negligence or worse at
the Department of the Interior, and the fact that you are
really returning their money, not appropriating Government
money. This will have to be done for IIM beneficiaries and
individual Indians, and should be done as quickly as possible
because they will never be able to recover an adequate amount
in the courts.
You might also consider on attorneys fees what we did. In
all of our agreements, we capped attorneys fees at roughly 1
percent. By the way, in the Swiss cases, some of the leading
plaintiffs' attorneys donated their services. So the class
action lawyers did not take a disproportionately large
percentage of the ultimate recovery.
Now, here for sure, the class action lawyers have spent a
very long time and a tremendous amount of effort. They deserve
to be compensated. I am not suggesting 1 percent is the
appropriate figure here, but I do mention that is a figure that
we used.
Fourth, you might consider the institutions we created to
administer the Holocaust funds as you consider how to
administer these funds. In your legislation, there is a
significant dispute, as in the case itself, over who should
administer the funds. The plaintiff Indians, with their
rightful suspicion of the Interior Department and to a lesser
degree the Treasury Department, want the Federal District Court
to administer the funds.
I strongly suggest you not do that. Your legislation
proposes that the Treasury Department administer the funds.
There is frankly a problem in giving either Interior or
Treasury such a fiduciary role, given that they are defendants
in the cases and in light of their failure to live up to their
fiduciary responsibility since 1887.
We created administrative mechanisms. For example, in the
Swiss bank case, the claims resolution tribunal functions to
this very day under a Federal judge with a special master
helping him. The average recovery in bank accounts, by the way,
plused-up, is $100,000. In the Austrian property claims, we
created administrative tribunals with three persons, one
appointed by the Austrian Government, one by the United States
Government, the third by the other two.
In the German slave labor cases, a German controlled board
makes decisions, but the U.S. Government and the plaintiffs
have representation. Insurance claims are processed by an
organization headed by former Secretary of State Larry
Eagleburger. You might consider in your legislation,
establishing an independent administrative tribunal in the
Indian cases.
Because of the suspicion on Interior and Treasury, perhaps
they could report to the Attorney General, but I understand
that there is suspicion of the Justice Department here, so let
me make a fresh suggestion. Because of the distrust that the
plaintiffs have of all the major departments that might have a
role in administration, permit me to suggest the following, and
that is an independent executive branch commission.
You might call it the Indian Claims Settlement Commission,
which would be modeled after the U.S. Foreign Claims Settlement
Commission, which has done things like certify 5,911 Cuban
claims going back to the 1970's, but with authority to
adjudicate and pay claims, like those tribunals we created in
the German, Austrian, and French Holocaust cases. But avoid at
all costs sending this back to the Federal courts.
Sending the administration of the payments back to the
courts that have already failed for a decade to resolve the
matter is a prescription for further delay in doing justice to
Indians. The key is to make rapid decisions in the lifetime of
the majority of the claimants, the key consideration here and
with aging Holocaust victims.
The regimes we created that are individual claims-based,
like the ICHEIC process for insurance or the Swiss Bank Claims
Resolution Tribunal, are slow and laborious. It has taken more
than 7 years since the Swiss bank case was settled, and more
than 3 years after their tribunal was created, because it is a
claim by claim enterprise. The more you can do this on a per
capita basis, the more you can do rough justice; the more
people will be benefited and the more rapidly.
Fifth, I want to address legal certainty and
constitutionality. In our cases, we created a unique statement
of interest in which the U.S. Government pledged to support the
defendants, the foreign corporations, in dismissing all cases
on any valid legal ground and stating that there was a national
security interest in having the cases dismissed, and that the
negotiated settlement we reached go forward. In every single
case, Federal courts have deferred to our executive branch
statement of interest.
As I understand your proposed bill, you will extinguish
claims for mismanagement of funds, but not for improper
decisions on land management. I am going to ask you to do
something that is uncomfortable. Claims might still be made, I
understand, as John said, relating to the mismanagement of the
underlying assets. But I am sympathetic to the Department of
the Interior's concern that in any settlement, if you do not
wipe out all claims, all you are going to do is invite another
round of suits for mismanagement of the underlying assets.
As long as you are going to bite the political bullet, go
ahead and bite it. Bite it once. Make a larger sum, perhaps, to
settle all elements of the claim. You have ample protections
built into the legislation to survive constitutional challenge.
I also believe that the Department of the Interior is
correct in asserting that Congress should provide clear
guidance as to the amounts to which individuals are entitled,
rather than leaving the decision of what individuals receive to
a formula developed by the Secretary.
I urge you in the strongest terms, do not leave anything to
the discretion that you possibly can solve in the legislation.
Make it clear. Make the formula clear so that when you set up
an administrative mechanism, that administrative tribunal will
have clear rules and will not have to spend years trying to
develop a system themselves.
Our Holocaust experience demonstrated that the more precise
we could be, the fairer and speedier were the administrative
tribunals for the benefit of victims.
In conclusion, you are to be congratulated for embarking on
a politically courageous course to rectify over 100 years of
wrongs committed by our Government against individual Indians
who ceded their accounts to the Department of the Interior in
the expectation they would be properly managed. Your
legislation broadly sets the right course.
Thank you.
[Prepared statement of Mr. Eizenstat appears in appendix.]
The Chairman. Thank you very much, Ambassador. This has
been very helpful, I think, to this committee. Don't you agree?
Ms. Johnigan.
STATEMENT OF SANDRA K. JOHNIGAN, CPA, JOHNIGAN, P.C.
Ms. Johnigan. Thank you.
I am pleased to appear before the committee. I am happy
that I was requested to appear by the chairman of the
committee.
I am going to summarize my testimony that I have prepared,
and will go through the major points of my ideas and
suggestions.
First of all, though, I would like to say that the basic
reason that I believe I am here is that I am representing
myself as a forensic accountant, a CPA. I am not a lawyer. I am
not an attorney, so I will not be speaking about anything that
has to do with legal issues.
My background includes the recent settlement in principle
of one of the tribal trust cases that is in the Court of
Federal Claims, where I was the lead consultant. I am also
working with the Intertribal Monitoring Association on a
cooperative effort with the Government in trying to create a
methodology for tribal claims settlement in the 1972-92 era.
That information and background, as well as my private
trust experience, informs my thinking in what I have presented
today.
Generally, where I want to go are the kinds of things that
I would suggest if I were working with someone in terms of
trying to settle this type of a claim. I am going to go through
some of the same kinds of things that I believe are of
interest, whether or not you are talking about creating the
number in legislation or whether you are looking at the number
if you were trying to settle the amount as a set of individual
parties, because the number that you are going to put on the
table is still going to be a number in legislation that in some
level is going to have to be mutually agreed upon within
Congress and yourselves as you put the legislation forward.
So there are a couple of key things to me. First, what
questions you asked; and second, what you basically do in terms
of gaining this mutual agreement about what the process is to
come to a conclusion on a number. The questions that I think
are most important here to begin with are, what are you trying
to settle with this legislation?; what in fact were the
plaintiffs trying to resolve with the claim?
In my reading of the information and my background on this,
my understanding is the initial claim was for an accounting. I
understand there is a dispute with regard to that, as to how
that would be performed. I believe that the most important
thing in terms of asking questions about what could inform the
creation of a number is to make sure you understand the
elements of the accounting that are in fact being considered
and argued in this case.
From my perspective, those are pretty simple. I believe you
have heard some of that today already in terms of receipts and
disbursements. That is about as simple as accounting gets. What
are the receipts that came in? What are the amounts that went
out? Where I think there is some confusion from reading the
record I have to date read, is do we really even agree on the
receipts, because the number of $13 billion has been raised a
number of times in these conversations about the receipts, and
that there is some agreement.
Yet when I read testimony on this subject, as I read the
testimony from the assistant secretary, Mr. Cason, it is my
understanding that in fact the proposals that they have talked
about are regarding the statistical sampling, not necessarily
embracing the dollar amount of the receipts.
I think part of that is because of the question that was
previously raised. What are receipts beyond those that have
actually come in the door? One of the questions that has been
raised in the tribal cases and I believe will be raised in this
case is the issue of receipts that should have been received,
those moneys that should have been received, that were
contracted for, but for some reason did not make it into the
accounts. The other is what was previously again mentioned with
regard to the asset mismanagement, that the fair value of the
receipts did not come in. Those are two different kinds of
receipts.
I do not think those have been addressed in this discussion
of the $13 billion, and I do not think that they are embraced
in the statistical sampling that I have seen discussed today.
So those are some of the questions. Do the parties
generally agree with the $13 billion of total receipts? If so,
do they agree on the timing of the receipts? If there are
differences, what are the bases for the differences? Does the
$13 billion really represent all claims or all amounts, or does
it exclude the amount of receipts for that which should have
been received, but was not collected? Are there claims for
those additional receipts on fair value?
Those are some of the things that have been discussed.
Those are major open questions that have to be addressed, I
believe, as you decide what your number should be.
I am not going to go through in this discussion things that
could be done with regard to developing information about what
should have been received. I have some of that in my written
testimony. There is a body of knowledge and approaches that are
being developed to date with work on cooperative agreements in
the tribal arena with regard to how to do that. That could
inform this process if you have an interest in delving into
that. The main thing is that there is some mutual agreement on
how you would approach that if you are in fact going to
calculate a number that includes that.
In addition, there is another question that has to be
addressed even with receipts. That is, work done to date by the
U.S. Government in the statistical work appears to be generally
from the 1985 period forward. It does not include the older
years. Work in some manner is going to need to be done, whether
it is in depth or whether it is analytical, using reports from
GAO and other types of information to inform the parties, but
something needs to be done to help someone understand how are
you going to apply the information that has been accumulated to
date, to periods where you have done no work. That is a key
issue, I think, in coming up with something that would be
considered a relevant and reliable number that you are, even if
you are doing it somewhat arbitrarily, having some bases for.
The more open question, I believe, though, however, then is
disbursements. Disbursement seems to be a widely battled issue,
if you want to call it a battle, with regard to whether or not
you need documents; whether or not there is 20 percent of the
documents that have not been collected, and therefore there is
an amount that should be applied for a claim for the tribal
members, or I should say the IIM accounts.
The other side of that is that there is statistical work
saying that documents have been found by the government in
their work, but again only from 1985 forward, as far as I can
tell from the work that has been done for land based accounts.
So there are some questions in this whole area that I think
again need to be asked. Do the plaintiffs, who then would be,
as you look at this, part of who would be receiving these
moneys, agree that the results of the study that have at least
been done by the Government for the period that it was done, is
that considered something that is acceptable? If there is some
mutual agreement there, could you use that at least for the
period where it was done?
And second, if there is agreement or not between the
parties and therefore informing you as to for the older years,
if there is no information that has been created that can be
carried back, then you begin to do the arbitrary type of work
that we are talking about or we have talked about.
I think any forensic information that is looked at over a
long period of time is going to have missing documents. My
background in private sector is informed by the fact that I
worked on a case where the State of California and all public
municipalities of the State of California had sued the Bank of
America.
One of the major issues in that had to do with the
documents. As the court in preliminary findings in that
particular case stated, you could use other means to fill the
gap for those kinds of situations where you did not have the
documents, but you had data that you could analytically fill
the gap with. I think that is important to this type of case.
So I believe in terms of looking at where you are and how
you can fill the gap, I have a number of ideas that I believe
could be applied. I do not believe that level of detail is
appropriate for this hearing today, but I will say that in
terms of finding a way to resolve a number, I think the first
step is to have the statistical work prepared by the Government
that has been prepared to date, be reviewed by an independent
party to determine how it could be used for the current period.
I think that the older periods and where there are error
rates that could be created based on true problems perceived in
periods during the older years where there are known error and
known problems, where you create a more robust error rate for
those periods. If that were applied, that would satisfy a lot
who believe that the rates that are very low for the more
current periods are not applicable to the older years.
So bottomline, from my perspective, if you cannot have
mutual agreement of the parties, when you need to have some
mutual agreement among yourselves as you are presenting it to
Congress as to what the bases would be a number beyond just
arbitrarily picking a number from zero to 100, finding
something that at least has some bases in the work that has
been done to date, and also applied with regard to some of the
errors and the problems that are known from the past.
[Prepared statement of Ms. Johnigan appears in appendix.]
Mr. Pombo. Thank you.
I do want to thank all of our witnesses.
We will begin the questions. The Senators had a vote on the
floor, and we will begin the questions, and I will begin with
the House members.
I will start with Ambassador Eizenstat. In the Holocaust
case that you oversaw, you talked about plusing-up some of the
payment accounts at a factor of 10. How did you arrive at that?
Was that, as you described it, rough justice or was that based
on a formula?
Mr. Eizenstat. Mr. Chairman, first of all, we only plused-
up those things which were tangible, for example, policies and
bank accounts. We did not try to plus-up what a worker might
have made if he or she had been paid by one of the slave labor
companies over a 10-year period.
What we did is we retained the services of economist Henry
Kaufman, and he basically took Government bond rates and then
calculated what the compound interest would be over that 50-
year period. So there was a solid statistical basis for that.
Mr. Pombo. Do you happen to remember what that interest
rate was?
Mr. Eizenstat. I can get that very easily. It was somewhere
around 3 percent, but I can get that. And there again, you do
have the issue that has been raised by my colleagues about what
time period you are talking about. So what he basically did is
just took an average over that period of time.
Now, interestingly for the French cases, the multiplier was
1.7 and the reason, and this provoked a great deal of
controversy, the reason was that there was a massive
devaluation of the French franc after the war. That was taken
into account in coming to a lower multiplier figure. I will be
glad to get those precise figures for you, Mr. Chairman.
Mr. Pombo. Thank you.
You also talked about including the land mismanagement
claims. We have gotten different advice even from this panel in
terms of that. I think in dealing with that particular issue, I
would ask Mr. Bickerman, you have suggested not including that.
Ambassador Eizenstat has suggested that we do include it. Can
you enlighten us as to why you believe it should not be
included?
Mr. Bickerman. Yes; in fact if I could rely on Ambassador
Eizenstat's testimony, I think it is key that you have clear
criteria by which to allocate the funds that you are going to
allocate. That is one of the central lessons, I think, we
learned from the experience of Ambassador Eizenstat. You can do
that with the fund based mismanagement. But the land based
mismanagement is very particularized.
Take, for example, the woman who has an oil well on her
property, it has been pumping for 40 years, and she is not
getting what she thinks would have been a fair return. Well,
the investigation would require you to take a look at the lease
that she got and the lease that other people got, and was it a
fair deal that had been struck. That is very special, specific
information.
So if you were to come up with one gross number, it would
be very hard to take that number and adequately distribute it
among individuals who believe that their assets had been
mismanaged. And that is the reason, I believe in trying to wrap
up as much as you possibly can in a settlement, but it is for
that reason that I think those claims should survive.
Moreover, I think the risk of there being a class action of
those type of lawsuits is very minimal. I think because they
are such particularized claims, and they are claims for money
damages, they have to go to the Federal Court of Claims as
opposed to the Federal District Court. That is a more proper
venue for them as a result. I also have a hunch that you are
not going to have that many claims for mismanagement, but that
is an intuition.
Mr. Eizenstat. May I comment on that, Mr. Chairman?
Mr. Pombo. Please do.
Mr. Eizenstat. In our cases, the government's involved,
Germany, Switzerland, Austria, France, et cetera, and their
companies, wanted to know if they were paying billions of
dollars, that all future claims arising out of World War II
would be covered. They called it legal peace. And that was the
essence of the settlement we reached. Once we arrived at the
figure, the U.S. Government did everything it could to make
sure that all claims arising our of World War II would be
covered. Otherwise, they would have been paying billions of
dollars and still be subject to some creative lawsuit.
Now, I take what John says seriously, about the difference
between land based claims and fund based mismanagement. But
this legislative window comes once in a lifetime. Once you have
gone through the trauma of dealing with this, you are not going
to want to take it on again, number one. So you ought to be as
inclusive as possible.
No. 2, whatever settlement comes up is going to involve a
tremendous amount of money. The government has I think a
justifiable reason to say, okay, we want to do this, but we
want to make sure that everything is included and that we do
not have to spend more money on more defenses for other claims.
No. 3, there is a way of dealing with the concern that John
mentioned, and again we did his in our cases. We created in the
property cases, again it was a capped fund, but an
individualized hearing, unlike the slave labor cases where we
could not possibly have individual hearings for 1.5 million
people and we simply said, if you are a slave laborer and we
defined it, you get $7,500; if you are a forced laborer and we
defined it, you get $2,500, regardless of circumstance.
For the property cases and the insurance cases, there are
individualized hearings. It takes longer, but there are
individualized hearings, but with a capped amount.
So I think that you could have in your legislation a
separate settlement amount that would be for these land based
claims. Again, it would be perhaps difficult to come to any
figure, but no more difficult than it will be for the fund
mismanagement claims.
So I think it is eminently doable. We created that system
in ours. Don't end up going through all this trauma and end up
with still more people going through court processes, taking
years of time, everybody's expense, when you could solve
everything at the same time.
Mr. Pombo. In that case, you had a capped amount per
individual, but you had individual hearings where whatever
their claim was, they had the ability to have their day.
Mr. Eizenstat. Yes; we did in some, like the Austrian
property claims, which are now literally being adjudicated. The
first claims are just now being heard. A $210-million cap, we
said any individual who lost property could make a claim up to
$2 million. The amount you get depends on the value of your
claim.
But in the insurance claims the insurance companies agreed
that if there is a valid policy, they will pay whatever that
face amount is plused-up in the way that I described. But in
the German and Austrian cases there was a capped overall
amount. In the Swiss bank account, of the $1.25 billion
settlement, we set aside $800 million as a cap for claims on
real bank accounts, no rough justice, real bank accounts,
proven by evidence, but only up to that capped amount.
So there are a variety of ways you can do it, but the point
is you can have a capped amount as we did with the Swiss bank
accounts. You could cap an amount here for these land based
claims. That is, I think, still far fairer to the Indian
plaintiffs than going through this whole legislative trauma and
then telling them, well, on those claims, go to the Court of
Claims or go back to Federal court and start all over again.
Mr. Pombo. Thank you.
I am going to turn this back over to Senator McCain.
The Chairman. Thank you very much, Chairman Pombo. My
colleagues came a long way, so I will be very brief in my
questions.
Mr. Bickerman, you don't believe there is going to be a
negotiated settlement. Right?
Mr. Bickerman. Never.
The Chairman. Mr. Eizenstat, from your experience with
this?
Mr. Eizenstat. I have no reason to think, given the
mediation that has been done, that there will ever be one, and
legislation is the only reasonable outcome.
The Chairman. Do you agree with that, Ms. Johnigan?
Ms. Johnigan. Yes; I do.
The Chairman. So Mr. Bickerman, as I understand it, Mr.
Eizenstat has come up with three I think strong
recommendations, and I would like your views on them. One is
the establishment of an independent administrative tribunal;
another one is the extinguish claims for mismanagement of
funds, and additionally for improper decisions on land
management; and third, that Congress should provide clear
guidance as to the amounts to which individuals are entitled,
rather than leaving the decision of what individuals receive to
a formula developed by the Secretary; Congress shall craft a
distribution method with as much clarity and direction as
possible.
Do you agree with all three of those recommendations of Mr.
Eizenstat?
Mr. Bickerman. We have just had a little colloquy on the
land mismanagement, and I am not totally in Ambassador
Eizenstat's court, but I am beginning to be convinced that if
there was enough money, we could come to a conclusion. Maybe
that is an alternative way to deal with it.
As to the other two issues, I think they are excellent
suggestions. I think the clarity of the criteria is very key,
so that the money can get distributed and distributed quickly.
The Chairman. And you also agree that whatever we come up
with, and Chairman Pombo and I do intend, after 10 years, I
believe it has been 10 years now, or 12, I am not sure, to come
up with legislation and we will be roundly criticized by all
participants.
Mr. Bickerman. I can guarantee you will be roundly
criticized, but I think the right and courageous thing to do is
to pick a number and try to end this.
Mr. Eizenstat. Tell them to read Bleak House by Charles
Dickens. [Laughter.]
Jaundra v. Jaundra, and that will be your best defense.
The Chairman. They did a magnificent job on Masterpiece
Theater, in case you missed that.
I want to thank you all very much. Again, I want to say to
everyone that reads the record of this that I intend to work
closely with Congressman Pombo and the House so that we can
come up with a solution which we are fully aware will cause us
some difficulties, but this issue has to be brought to some
kind of closure. I want to thank again Chairman Pombo, as well
as my friend Byron Dorgan and Mr. Rahall for their cooperation.
This has to be a bipartisan solution, obviously. Thank you,
Chairman Pombo.
Congressman Udall.
Mr. T. Udall. Thank you, Chairman McCain. Thank you for
holding this very important hearing on a matter that is
absolutely vital to tribal members. I appreciate all of the
panel members and your testimony. I view this as excellent
testimony. I think it truly does shed light on the issue that
is before us.
Ambassador Eizenstat, one issue similar in the Holocaust
cases and the Cobell case is the uncertainty of the exact
number of account holders and where they or their heirs reside.
Many potential American Indian beneficiaries live in desolate
areas and extreme poverty. Do you have any suggestion on how we
might be able to find people once the Bureau of Indian Affairs
files are exhausted? Did you mandate advertising or other
avenues to get the word out?
Mr. Eizenstat. Thank you. First of all, I have to say there
was another Udall with whom I used to testify. It is a sign of
my age, I suppose.
Yes, what we did was particularly for the Swiss bank cases,
and for the insurance cases, we did a massive notification
process. We used the news media. We put full page ads in major
newspapers, radio advertisements. We did a full blown media
effort to try to reach account holders.
Now, in addition, we had the advantage, particularly in the
bank and insurance cases, of having names assigned to accounts,
so we actually created a website with those names. Some, by the
way, were misspelled or had German or Swiss spellings, but
still we did create a website with the names we knew existed,
and advertised that website. That is also a very useful way of
presumably, even with the sad state of the records here, there
must be some record of individual account holders or trust fund
holders.
Mr. T. Udall. Thank you.
Just one more question, Ambassador Eizenstat. Our
committees have been working with the parties of the Cobell
lawsuit and the mediators, as you are aware. As our mediators
can attest, the sides in this dispute have become bitter
enemies, with the debate often taking unhealthy and unhelpful
turns. We have been told time and time again that the animosity
between the sides is the worst that veteran lawyers and
mediators have ever seen. I am guessing that at that time you
had persons who were taking too hard a line or generally not
working in good faith to settle.
How do we get past such situations?
Mr. Eizenstat. Well, Chairman McCain alluded to this. We
would not have succeeded if we had a mediation involving
private parties, even people as eminent as Judge Renfrew and
John Bickerman. Our mediation succeeded because of a
combination of events, which do not exist here, but for which
the legislation will be a substitute.
No. 1, we had the support of the President of the United
States, who invested me with the authority to speak on his
behalf as the mediator. We had the clout of the U.S.
Government. We had the bipartisan support of everyone from Al
D'Amato to Chuck Schumer and others in dealing with this. So we
knew we spoke with the full authority of the United States.
The plaintiffs' attorneys, I mean, if you want to read my
book you can get more of this, but if you think that things
were bitter there, the plaintiffs' attorneys took out full page
ads in the New York Times and the Wall Street Journal and the
Washington Post. One that I can recount was about Bayer, the
maker of aspirin, that was also a slave labor manufacturer. The
headline effectively was, ``If you really want a headache,
Bayer, then you won't settle with Ambassador Eizenstat and his
negotiations.''
I mean, this went all the way. There were all sorts of
pressures put on. And not the least of which in the Swiss bank
cases and in the German cases, were threats by major pension
funds, including CalPERS, Congressman Pombo, in your State,
that they would withdraw funds from either Swiss banks or
German slave labor companies unless they settled.
So there were all sorts of external pressures. You do not
have that here. You do not have a Government appointed
mediator, but you have the power of the Congress. When I talked
about bipartisan support for what I was doing, you have
bipartisan support. It is remarkable, the joint hearing, the
joint bills, bipartisan. This speaks volumes and will provide I
think a very strong political message that substitutes for all
the influences we had in our Holocaust cases.
Mr. T. Udall. Thank you very much. I think that my uncle,
if he was here, who I think you alluded to testifying before
earlier, would say that you may be older, but you are probably
wiser. With that, I would like to thank you.
Mr. Eizenstat. Since there is not much levity here, in the
1976 primary campaign, all the primary candidates including
Jimmy Carter were asked the simple question, what would you do
about inflation. And everybody had 10 different answers.
Congressman Udall's was the simplest. He said, ``I would give
it to the Post Office. They can slow anything down.''
[Laughter.]
Mr. T. Udall. Thank you.
Thank you, Mr. Chairman.
The Chairman. He also said, and I steal his jokes all the
time, he also said, ``Everything that can possibly be said on
this subject has been said, only not everyone has said it.''
And that certainly applies to this issue, I think. [Laugher.]
Senator Dorgan.
Senator Dorgan. Mr. Chairman, are you referring to the
questions I might ask [Laughter.]
First of all, the chairman and I had a vote, as you know,
and we were necessarily absent for a bit. The testimony from
this panel I think has been really very interesting and very
instructive. I think the last thing that you said, Mr.
Eizenstat, is important, that the House and Senate working
together, Republicans and Democrats working together, is a very
powerful statement here.
If we do not resolve this issue, I think Mr. Bickerman
said, and perhaps all of you have said it, we are going to be
in this predicament for one-half decade, 1 decade, or probably
more. And we know already from this year's budget submission by
the President that this issue impacts most other issues as well
Native Americans.
That is why it is so important for us to do everything we
possibly can do to see if we can effect a solution here.
I am going to defer on questions. I will submit questions
to the panel, but let me again say that I think your testimony
is particularly and especially useful, given all that we have
heard at various hearings. I think that you offer some unique
judgments and perspectives about these things, and I appreciate
very much your being here today.
The Chairman. Thank you very much.
Mr. Faleomavaega.
STATEMENT OF HON. ENI F.H. FALEOMAVAEGA, U.S. DELEGATE FROM
AMERICAN SAMOA
Mr. Faleomavaega. Thank you, Mr. Chairman.
I certainly want to thank you and commend you and Chairman
Pombo for calling this joint hearing. Not only is it critical,
but most important, in all the years that I have tried to
follow it with some concern, you know, we have had this issue
now, it started off at $2 billion and then the following year
there was a bidding that went up to $8 billion to $10 billion
in question. So now we are somewhere between $13 billion and
$27 billion.
I remember years ago, Mr. Chairman, that Congress even
appropriated $20 million just to try to attempt to audit the
accounts in question, and came up with absolutely zero results.
So I really do think that the initiative that you and Chairman
Pombo have taken has been really, really, 10 years, I believe,
is long overdue in trying to provide some settlement.
I really do appreciate the testimonies that have been
shared with us this morning by Ambassador Eizenstat and Mr.
Bickerman and Ms. Johnigan. I want to ask members of the panel
just one question. Do you think it was fair for the
administration to subtract the legal fees that have been
collected over the years to cut the appropriations for the
badly needed funding that is needed by Indian country, to be
part of this?
I was under the impression this should come under the good
faith, what do you call it, clause of United States, of the
general fund. But the latest I heard, unless I heard it wrong,
whatever amount of money that is being subtracted, that it
should be going to the critical needs of current Indian
programs, to be taken out of this very issue. I have to
disagree.
But I wanted to ask the members of the panel how they feel
about this. I do not know if you are aware of the situation.
Mr. Bickerman. Yes; I am aware of it. No, I do not think it
was fair.
Mr. Faleomavaega. Well, that should answer it. Thank you
very much. [Laughter.]
I have listened with interest to the problem, as Ms.
Johnigan said earlier, about just simply the difference between
receipts and disbursements. The problem is, as simple as these
two terms may be, but it has become so complicated that we
found nothing but some real sense of bitterness between the two
parties. In fairness to both parties, I believe that Ambassador
Eizenstat's suggestions have been very, very valid, very, very
similar to the situation of the Holocaust claims.
I wondered also how Congress was able to determine what was
the capped amount that we gave to the Japanese Americans when
they also had a similar situation. Maybe lesser numbers, but
certainly it is something that we ought to look at.
Mr. Eizenstat. This was actually, members of the panel and
Mr. Chairman, this was actually a useful benchmark for us.
Congress in 1988, I believe it was, finally tried to provide
some belated justice for Japanese Americans. There again, it
was a per capita amount, no individual hearings, $20,000 per
claimant. You could have been in a camp in Washington State or
California for 1 month or for 1 year or for the whole war. You
got $20,000.
Now, obviously there is a degree of arbitrariness to that.
But there was also a degree of fairness to it, because had all
of those people had to have individual hearings and try to
prove what happened to their health and what happened to their
livelihoods, they would never have been able to recover. So
that $20,000 figure was actually a useful figure when we were
trying to determine how much was reasonable to give to a slave
and forced laborer.
Mr. Faleomavaega. I want to say to Ambassador Eizenstat,
Mr. Chairman, this also is another complication that we have
just, at least hopefully there may be legislation introduced,
and it is in reference to the plight of the Marshallese people
when they were, practically all of them, subjected to nuclear
radiation during our nuclear testing program after World War
II.
To this day, to this day the people of the Marshall Islands
still have not been properly compensated or even given proper
medical treatment by our Government, which is something that I
find very similar to the situation that we find ourselves in
among our Native American community.
Do you think, Ambassador Eizenstat and Mr. Bickerman, is it
really not the amount that is at issue. It is how we go about
in developing a formula. Like you said, we have to bite the
bullet, and some way or somehow we just cannot wait another 20
years for this issue to continue on. I get the sense that it
has got to be done legislatively because if we leave it to the
courts, it is not going to be resolved. Do I get that
impression from the members of the panel?
Mr. Eizenstat. I was asked only about 10 days ago to
testify, so I started reading some of the opinions. I mean, it
is amazing that here we are almost 10 years into litigation,
the last Court of Appeals decision just 2 months ago, the
interpretation, you know, the typical thing of the Court of
Appeals, remanded for actions not inconsistent with this
opinion. And the plaintiffs and the Government disagree after
10 years, with what the latest decision was by the court.
They have had their chance and they are not going to do it.
As I indicated, you cannot have courts settle historical
wrongs. They are not created to do that. Their expertise is on
case by case adjudication or class actions where people fall in
and you have clear evidence. They cannot handle a situation
like this where the evidence is poor, the number of claimants
is uncertain. This will be batted around between the District
Court and the Court of Appeals until all of us are gone and all
of the claimants are gone. So legislation is absolutely
essential.
The formula has to be precise; do as much on a per capita
basis as you can; and again bite the bullet. It is not totally
arbitrary. John gave you some ranges. You basically know how
much flowed in. It is not clear how much flowed out. The
Government itself by its own figures says it is about $500
million that is unaccounted for, that did not get paid out.
Even if you just plus that up over however many years you want
to do that, you couldn't do it over 120 years, but over a
reasonable period of time. You start to get into a range which
is understandable.
Mr. Faleomavaega. Thank you, Mr. Chairman.
The Chairman. Congressman Inslee.
I am sorry. Go ahead.
Mr. Bickerman. I just wanted to respond very quickly. As a
mediator, one of our occupational hazards is optimism, but when
we first started the discussions, I actually thought that the
criteria that both the administration and the plaintiff had for
the formula to allocate money was actually pretty close. I am
reasonably optimistic that if we can agree on a sum, developing
the criteria to distribute that will not be that arduous a
process.
Mr. Faleomavaega. Thank you, Mr. Chairman. Thank you.
The Chairman. Congressman Inslee.
Mr. Inslee. Thank you.
I really appreciate your thoughts. This is most troublesome
to many of us because we recognize the literary value of
Jamdyce v. Jamdyce. We also understand of not wanting to
continue this scar that so many people in our country have felt
and not being treated by their Federal Government. So it really
is a tough issue, I think.
I have kind of a general question. If we are looking for
resolution, a legislative solution, should we be thinking of
Congress picking a number? Or should we be thinking of Congress
picking a process to get to that number that should be narrowly
defined and achievable through some mechanism that might give
the parties more confidence that at least they had their day in
court and these decisions were not made just in the back rooms
of Congress? What would be the most, and is there any such
process that could actually get to a number within our lifetime
to achieve that end?
Ms. Johnigan. If I could respond to that first. Obviously,
what I was presenting was the idea that there would be a
process using what has been done to date and refining it for
those pieces that appear to be the most contentious and where
the least work has been done, and creating it in such a fashion
that it at least provides a basis for why the number was
created by Congress.
Whether you pick a number based on that work or you set the
process for that number to be created through that work by
other parties, so that you could get the legislation through.
One way or the other, from my personal perspective, it you want
some broader based support for whatever number you are going to
create, there needs to be some process behind it besides the
arbitrary selection of some portion from the plaintiffs and
some portion from what the Government has done today.
That is not to say that I would propose a process that
would take a long period of time, but rather look at what has
been done and see what would be backfilled into that in a
process that would be more streamlined. It would not be
something that would make either party happy. It would just, I
think, create more of an informed basis for the answer.
Mr. Inslee. In your proposal, would you view that as being
a binding process, that we are going to go through this
process, the number will be generated, Congress will adopt it?
Or is this just a hearing process you are talking about?
Ms. Johnigan. I would see that as a binding process, if you
are going to finish this. I mean, you have to have a binding
process that creates a number you are going to have in the
legislation that is just the number. Because one of the things
that I have heard as people have answered questions today and
asked questions, is that there is in some ways always the
assumption that a large enough number was created, or a number
was created that would actually satisfy some of the issues.
Because two of the issues in terms of the accounting, the
amounts that should have been received that are not part of the
$13 billion throughput, and the amounts that are in dispute in
terms of what should have been received that perhaps was from
mismanagement.
There has been, as far as I can tell, no real work on that
issue at all for the IIM accounts, so that the numbers that are
being discussed are being discussed from the standpoint of only
that which is known to be received. That is a very different
calculus. As I have worked with the tribal accounts in this
area, what I have seen is that you have already some processes
in place to calculate what should have been received, but very
little has been done on the asset mismanagement where the fair
values have not been received.
So I do think there needs to be some thought about a
process that says, have we really created a number that is
sufficient enough in order to satisfy an allocation that will
be considered to be at some level, although somewhat arbitrary,
fair. I think that is a process that I highly recommend you go
through.
Mr. Bickerman. I respectfully disagree with my colleague
here. The point of my numbers that I present in my testimony
was to show that with just very small changes, these numbers
bounce all over the place. I think that a process would give
one the false sense of precision when there really isn't
precision.
There are so many missing documents. This goes back over
100 years. A process I think would just be delayed justice. I
think this has gone on for 10 years. I think it would be
infinitely more difficult to negotiate a process than it would
be to negotiate a number at this point. If you can negotiate a
number, my strong, strong recommendation is you do it.
Mr. Eizenstat. There is certainly no reason not to have a
small panel of experts as you are going through the legislative
process look at the existing data, not start recreating, doing
new audits and so forth, and giving you the best judgment they
can about the status of things. But you are not going to be
much better off at the end of that process. I think to satisfy
the fact that you exercised due diligence on the legislative
side, it is not a bad idea.
But what would be a genuinely bad idea is to go through
this legislation, leave the figure blank and then leave it to
some mythical party, a claims commission, to determine what the
amount should be. That is what legislation is for.
After all, you really do this in a sense all the time. When
you legislate, you create appropriations for amounts, you have
to make a rough estimate. How much are Katrina victims entitled
to? You appropriate a figure. You try to make the roughest kind
of calculation, and then you realize you will come back if you
have to another time, but you make the best judgment you can.
That is really what you are trying to do here.
So certainly you do not want to be totally arbitrary and
blind yourself to the work that has been done. It is probably
worth having some type of small group advise you, of looking at
the current data, giving you some sense of where that data is,
and how confused it is, and giving you the best estimate they
can of where things stand.
On the plus-up figure that Chairman Pombo mentioned, there
I think we can be much more precise. There is very clear
agreement, I think, about how you plus-up accounts over the
years. We will be glad to share the figures that we used and
the methodology that was used.
So I would really urge in the process, yes, if you want to
take a few experts and have them look at the state of things
now, fine. But do not think you can create a process that is
going to give you much more clarity than you have now. That is
the whole problem, the data does not exist.
Mr. Inslee. The only concern I would have about that
approach is this is not exactly Katrina. The hurricane was
caused by either an act of the Creator or global warming,
depending on your belief system. This situation is an
extinguishment of a property right by the entity that caused
it, which is the Federal Government.
Mr. Eizenstat. So were the Japanese claims, so were the
Holocaust claims. They were all extinguishing a right or a
theoretical right by either a legislative or a government
mediated process.
Mr. Inslee. I have made my point.
Thank you, Mr. Chairman.
The Chairman. Thank you very much.
I thank the witnesses. This has been extremely helpful to
us. Thank you.
Mr. Eizenstat. I am sure we will be more than happy to
continue to work with you during this process, Mr. Chairman.
The Chairman. Thank you. We would be pleased to do that.
Finally, we have Mike Marchand, who is with the Affiliated
Tribes of Northwest Indians and the vice president of the
Colville Confederated Tribes; Joseph Garcia is the president of
the NCAI; Keller George, who is the president of the United
South and Eastern Tribes; and Harold Frazier, the chairman of
the Great Plains Tribal Chairman's Association.
I want to apologize to our witnesses because we have to
shut down here in just a few minutes. I would like to say that
your complete statements will be made part of the record. We
appreciate your patience, and I hope you understand that we
have a joint session of Congress to be addressed by the Prime
Minister of Italy. So if you could briefly summarize and give
us your position very rapidly, we would appreciate it. I am
sure we will be meeting formally and informally again in the
future on this issue.
Mr. Marchand.
STATEMENT OF MIKE MARCHAND, AFFILIATED TRIBES OF NORTHWEST
INDIANS AND FIRST VICE PRESIDENT, COLVILLE CONFEDERATED TRIBES
Mr. Marchand. Good morning. I am very honored to be here
today.
My name is Mike Marchand. I am a councilman with the
Colville Confederated Tribes located in Washington State. We
are composed of 12 tribes on a reservation that was created in
1872, when our people were forcibly marched from their
homeland, at gunpoint in many instances.
The Chairman. Mr. Marchand, you are going to have to make
your opening statement very brief. Please proceed.
Mr. Marchand. Well, my only point was that this trust
system was imposed on our people. We did not ask for it. There
have been comparisons by the administration that this is very
much like a commercial banking operation. I would just contend
that it is not. We are doing the best we can to work with the
system.
ATNI, the Affiliated Tribes of Northwest Indians, is a
consortium of 57 tribes in the Pacific Northwest, and our
leadership in the Northwest has been discussing this issue and
watching the litigation as best we can. It is the conclusion of
most of our leaders in the Northwest that we need to come to a
settlement. The parties in the litigation do not appear to be
getting any closer to settlement. In fact, they seem to be
getting farther and farther away each day.
We believe that it is creating a lot of problems and
retaliation against tribal governments. It is creating problems
with redefining the trust relationship between our people and
the United States. We really think it is really time that we
need to draw this to a conclusion.
I would just like to say, I guess briefly, that I think it
has really caused a whole change in the climate between the
tribe and the United States relations. In the 1960s, we went
through a period of termination. Under President Nixon, I think
he turned that around to self-determination and 638
contracting. Tribes were given a large voice in their day to
day matters in life. I think we have seen a couple, two or
three decades of steady progress.
But today, I think things are kind of reversed. It seems
like we are going backward again. I think a lot of the
solutions that are being imposed on Indian people. Our voices
are not listened to anymore. I think there is a real problem
with the administration in place today. They do not seem to
have a lot of knowledge about life on reservations or how to
communicate with our people. I think it is a real problem. I
think we have gone backward.
I think a lot of that has kind of spun out of this Cobell
case because of the litigation.
[Prepared statement of Mr. Marchand appears in appendix.]
The Chairman. Thank you very much, sir. I apologize, but we
really have to move through the witnesses. I appreciate it.
Your written statements will be made part of the record and
carefully examined. I thank you and I want to apologize for
this time constraint to all the witnesses.
President Joe Garcia.
STATEMENT OF JOSEPH GARCIA, PRESIDENT, NATIONAL CONGRESS OF
AMERICAN INDIANS
Mr. Garcia. Good morning, everyone.
Chairman McCain, Chairman Pombo, Vice Chairman Dorgan,
Ranking Member Rahall, and members of the Senate Committee on
Indian Affairs and House Resources Committee, thank you, Mr.
Chairman, Chairman McCain, and Senator Dorgan for coming to our
NCAI meeting yesterday. That was very important, your presence.
We have a lot of tribal leaders here this week. I think it
is important that they hear the dialog that you provided. I
will now move on to the testimony part.
The National Congress of American Indians strongly believes
that it is time for Congress to move forward with a fair
settlement for the Cobell v. Norton litigation. Tribal leaders
throughout the country support the goals of the Cobell
plaintiffs. At the same time, tribes are concerned about the
impacts of the litigation upon the ability of the United States
to deliver services to tribal communities and to support
Federal policies of tribal importance.
As you know, hundreds of millions of dollars have been
diverted for this effort, and we continue to battle for years
and years. Continual litigation will continue to cost millions
of dollars. The continued historical accounting activities by
the department may cost billions and are very unlikely to
achieve satisfactory results.
Three years ago, NCAI passed a resolution stating that it
is in the best interest of the tribes and individual account
holders that tribal leaders participate in a Cobell settlement,
and development of an effective system for management of trust
assets in the future. Former NCAI President Tex Hall worked
very hard over the last 3 years to push for a settlement, and I
plan to continue that effort.
Earlier this year, the NCAI executive committee passed
another resolution on the settlement litigation. First, we want
to mention that NCAI supports S. 1439. We also support H.R.
4322, and the efforts of Senators McCain and Dorgan and
Congressmen Pombo and Rahall in introducing this legislation.
Second, NCAI strongly urges the Cobell plaintiffs, the
Department of the Interior and the Congress to increase their
efforts to develop a viable settlement proposal for the Cobell
litigation. Specifically, we would encourage settlement options
that will engage the participation of individual Indian account
holders. I believe that is what we are hearing today.
Third, NCAI urges the Senate Committee on Indian Affairs
and the House Resources Committee to move forward with the
markup of the legislation, based on the comments received from
Indian country, and to develop a more definitive settlement
proposal for the Cobell litigation than what is currently found
in title I. We encourage you to continue to consult Indian
country as you move forward to the markup of the bill.
Cobell litigation has had some positive effects. It has
focused attention on the important issue of trust reform.
However, there are also increasing costs and side effects that
the litigation has caused, and that is provided in the written
testimony. So we want Congress to either put a stop to these
unreasonable burdens on the tribes, or to settle the
litigation, and the settling the litigation is the thing that
we would propose as well.
I will conclude my remarks at this point, in the interest
of time. Thank you.
[Prepared statement of Mr. Garcia appears in appendix.]
The Chairman. Thank you very much.
Mr. President, we look forward to working with you, and
congratulations on your new position, as I mentioned before.
Mr. Garcia. Thank you.
The Chairman. President George.
STATEMENT OF KELLER GEORGE, PRESIDENT, UNITED SOUTH AND EASTERN
TRIBES
Mr. George. Thank you, Senator McCain, and also thank you
Chairman Pombo, Vice Chairman Dorgan, and Ranking Member
Rahall.
We thank you for this opportunity to briefly give some
insights on this case. Cobell litigation has been going on for
over 10 years. But I want to urge your committees to seize the
opportunity to settle the Cobell case now and reform the DOI's
administration of trust-related functions by acting on S. 1439
and H.R. 4322 this session.
As to the Cobell provisions of these bills, title I
includes a section that will specifically identify an amount
that will be made available to settle the case. Ideally, it
should be up to the plaintiffs and the Government to agree upon
a settlement account. Previous witnesses have said that
probably is not going to happen, but we call upon the Congress
to act very swiftly so to come to a conclusion because we know
that if it does not, it will erode the trust responsibility
that the United States Government has toward Indian tribes.
As USET member tribes, we will stand with you in your
efforts to seek a resolution of the Cobell lawsuit and to
implement needed reforms to DOI's administration of trust
functions. The choice we face today is clear. Millions more can
be spent on litigation and an accounting that likely will tell
us little more than we already know, while the trust
relationship continues to erode, or legislation can be enacted
that settles the lawsuit in a fair and equitable manner, and
implements much-needed reform on DOI's management of trust
resources.
USET member tribes strongly believe that the second choice
is far better an option.
Thank you.
[Prepared statement of Mr. George appears in appendix.]
The Chairman. Thank you very much.
I believe Congresswoman Herseth would like to acknowledge
the next witness.
Ms. Herseth. Thank you, Mr. Chairman.
I thank you and my good friend from North Dakota, Mr.
Dorgan, as well as my Chairman on the House Resources
Committee, Mr. Pombo, for this opportunity. I appreciate the
opportunity to introduce Chairman Harold Frazier, also a good
friend, chairman of the Cheyenne River Sioux Tribe, whose
members predominantly reside in North Central South Dakota. I
am working with Chairman Frazier not only in his capacity as
chairman of the Cheyenne River Sioux Tribe, but also as
chairman of the Great Plains Tribal Chairman's Association.
I would commend his testimony to you as someone who has
been focused and tenacious in his efforts, as well as
approaching settlement negotiations in the Cobell lawsuit in
good faith, in working hard to meet the objectives that I know
you have, that Ranking Member Dorgan has, that Chairman Pombo
and Ranking Member Rahall have. But that any settlement really
reflect to the best interests of Indian country.
So I appreciate the opportunity to introduce him to you
today.
The Chairman. Thank you very much.
Welcome, sir.
STATEMENT OF HAROLD FRAZIER, CHAIRMAN, GREAT PLAINS TRIBAL
CHAIRMAN'S ASSOCIATION
Mr. Frazier. Thank you, Congresswoman Herseth.
I want to begin by thanking Senators McCain and Dorgan and
Congressmen Pombo and Rahall for having this joint hearing. I
will get right to the points.
I think it is essential that a settlement amount comes from
a claims judgment fund and not from the BIA budget or any other
Federal program or budgets that serve Indian people. Section
102, this section would bar tribal landowners and heirs from
any recovery from claims prior to 1994. It is important that
the settlement only, that we go beyond. There have been a lot
of issues that have been done to a lot of our people in the
past, especially the ones who have served our country in wars
and protecting our rights and our freedom.
It is also important that the settlement only addresses
individual accounting claims, and not any land based or asset
claims. Our concerns are for Congress to protect the budgets of
the tribal programs from being robbed to pay attorney fees.
All the regulations resulting from this act may be subject
to negotiated rulemaking. That will ensure that a bureaucratic
process is not used to misconstrue the provisions of the act.
We urge congressional leaders to write the appeal section
to streamline the appeal process and allow class action appeals
and allow the claimant to appeal in local courts and
consolidate the appeal claims.
Again, we strongly urge congressional leaders to be crystal
clear in section 110(d) that tribal trust accounts are
inclusive of tribal IIM accounts. This clarification would
avoid any misinterpretation that tribes should not be
considered claimants for purposes of settlements.
I thank you for this opportunity and I urge you to maintain
the principle of inclusive decision making when addressing all
areas of trust reform. It is important that tribal leaders
should be at the table when trust reform is being discussed. We
are the ones who have the most to lose.
Thank you.
[Prepared statement of Mr. Frazier appears in appendix.]
The Chairman. Thank you very much.
Chairman Pombo.
Mr. Pombo. Mr. Chairman, any questions I have I will submit
in writing to our panel. Thank you.
The Chairman. Senator Dorgan.
Senator Dorgan. Mr. Chairman, I will do that, too. Let me
just say that as has always been the case with us on the
Committee on Indian Affairs, and I am sure our House
counterparts, consultation is really important. Consultation is
critical. I think the witnesses today have provided some
excellent statements. We are sorry for the brevity, but we
intend to continue to be involved with you and to consult
closely with you as we try to resolve these issues.
So thank you very much for being here.
The Chairman. Mr. Faleomavaega.
Mr. Faleomavaega. Mr. Chairman, just shortly, to commend
members of the panel for their testimony. I would like to make
emphasis again in the spirit of bipartisanship, that this
should really not be a politicized issue, and I sincerely hope
and look forward to working with you and our Chairman Pombo and
Mr. Rahall on our side, and Mr. Dorgan. Hopefully in this
Congress we will make some form of a settlement in this
legislation.
Thank you, Mr. Chairman.
The Chairman. Thank you.
Congressman Inslee.
Mr. Inslee. I have no questions. I just want to say, of all
the times we have ever had an obligation to have close
relationships with the tribes and an open dialogue, this is the
time. I hope that we will all fulfill that obligation.
Thank you.
The Chairman. Thank you.
Congresswoman Herseth.
Ms. Herseth. I also will submit my questions for the
record, but just thank the panel of witnesses for their
leadership and for their willingness to offer their insights on
the pending legislation.
The Chairman. I want to thank the witnesses. I want to
thank the members who came to this important hearing. We will
be moving forward. Chairman Pombo and I have agreed, as we have
already, that a bipartisan, bicameral piece of legislation will
be moving forward soon on this issue. As we go through this
process, we would very much appreciate your continued
participation and input. I can assure you, you will not like
the outcome.
Mr. Garcia. Mr. Chairman.
The Chairman. Go ahead.
Mr. Garcia. Mr. Chairman, if I can make one more statement.
I would like the panel to know, as well as the Congressmen
to know that the statements that were made earlier with Mr.
Bickerman and Mr. Eizenstat, I think the formula and the ideas
they presented are very, very, very good, and that will help
focus on the settlement. And so we would support those efforts.
The Chairman. You know, that means a lot to us, Joe, and I
thank you, because we think they gave us a very good framework
to work on, and we are very grateful for your conditioned
approval. Thank you.
This hearing is adjourned.
[Whereupon, at 11:10 a.m., the committee was adjourned, to
reconvene at the call of the Chair.]
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A P P E N D I X
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Additional Material Submitted for the Record
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Prepared Statement of Charles Renfrew and John Bickerman
Chairman McCain, Chairman Pombo, Vice Chairman Dorgan, Ranking
Member Congressman Rahall, members of the Senate Committee on Indian
Affairs, and the House Resources Committee, my name is John Bickerman
and I appear here today on behalf of myself and Charles Renfrew. Judge
Renfrew regrets that he cannot be here today due to an unavoidable
conflict but wants to assure the committee that the comments I am about
to deliver are his as well. We have worked on this testimony together
and they accurately reflect our joint views.
First, I would like to provide some background about our role, for
it has not been the traditional role in which mediators normally serve.
Two years ago this month, the staff of your committees contacted both
of us to inquire about our interest in assisting the parties in the
Cobell v. Norton dispute reach a consensual settlement. We were
interviewed separately by the plaintiffs' counsel and senior officials
from the Departments of the Interior and Justice, but with the strong
encouragement by the committee's staffs that the parties should engage
in mediation. Soon thereafter both the plaintiffs and the
administration chose us to help them. Funding for our services was
provided by the Department of Justice, but we were assured we would
have complete independence in our actions and, indeed, we have enjoyed
the traditional independence and neutrality that neutral mediators
require. Although we had not met prior to this assignment, Judge
Renfrew and I have worked together seamlessly and have been in complete
accord with respect to all aspects of the mediation and the testimony
we present today.
Our assignment was to engage the parties in negotiation to seek a
resolution of all claims brought by plaintiffs in their class action
lawsuit now pending in the United States District Court for the
District of Columbia. But our mission was also broader than traditional
mediation. From the outset, both the parties and Congressional staff
requested that we periodically report back to Congress regarding our
efforts and our progress. This request was made for three reasons:
first, any resolution we achieved through negotiation would likely
require Congressional action; second, Congress wanted to know if either
the plaintiffs or the defendants were behaving in a dilatory manner or
otherwise negotiating in bad faith; and third, Congress wanted to know
if a resolution was impossible, so that it could decide whether to take
action. In most mediations, confidentiality of the negotiations is a
bedrock principle. In this case, very little of the content of our
discussions remained confidential. Indeed, we were expected to
periodically disclose our conclusions to Congress.
Although we are both experienced in mediating complex, high
conflict public disputes, neither one of us could have predicted the
difficult task we were about to face. Never before had we seen the
level of acrimony or the inability to agree on even the simplest of
logistical or procedural matters. We could not even get the parties to
sign a mediation agreement that set out basic ground rules for the
parties' conduct. Although we made some small progress, especially in
the area of developing a model to resolve the information technology
disputes regarding the security of Individual Indian Money [IIM] Trust
data, within 6 months, we realized that a negotiated resolution was
impossible.
In October 2004, we met with the leaders of the two Congressional
authorizing committees to report our conclusions and urge that Congress
take the lead in crafting a resolution. We continue to believe that
only Congressional action can resolve this dispute for the benefit of
the beneficiaries of the IIM Trust and allow the United States to
devote its resources to the traditional services it has provided Indian
country. If Congress takes no action at this time, the litigation path
will take years if not decades to reach finality. Many deserving
beneficiaries will have died in the interim. Those beneficiaries who
are alive will not be made whole. We also believe that the Department
of the Interior's ability to serve Indian country will be compromised.
So much of the policy affecting Indian country seems now to be made
through the prism of the Cobell litigation. We are concerned that the
historically beneficial trust relationship between the Federal
Government and Indian country is in jeopardy as a result of this
litigation.
There is no dispute that the historical conduct of the United
States in managing and accounting for the IIM Trust has been flawed.
The Federal District Court of the District Columbia has so held and its
judgment has been affirmed by the Court of Appeals. Indeed, Congress
recognized the problem when it passed the Indian Trust Fund Management
Reform Act, P.L. No. 103-412, 108 Stat. 4239 (codified as amended at 25
U.S.C. Sec. 162a et seq. & Sec. 4001 et seq.) in 1994. More than 10
years later, the problem persists. Substantial sums have been spent
trying to fix a system that, without legislative changes, may be beyond
repair. The pending legislation will go a long way toward addressing
the underlying structural problems and compensating IIM beneficiaries
for the Government's past negligence by restating the account balances
for individual beneficiaries. Without legislation to fix the system,
the problem will grow exponentially. However, we confine our testimony
to title I and, specifically, how to value the Plaintiffs' Claim.
While there is little serious dispute over the question of
liability, the gulf that divides the parties over the magnitude of the
liability is enormous. The most vexing problem facing your committees
is properly valuing the claims and assigning a number that adequately
compensates the IIM beneficiaries for the discrepancies between what is
in their trust accounts and what should have been there. This is a hard
task for which good, reliable data may not readily exist. But the
difficulty and the imprecision of deriving a figure should not deter
Congress from making a decision now and advancing the very fine
legislation that your committees have drafted.
As mediators we are accustomed to seeing the validity of the
arguments of both sides to a dispute. This case is no different. We
believe that the arguments of both the administration and the
plaintiffs regarding the amount of adjustment that needs to be made are
both partially correct and partially flawed.
Initially, we understood the plaintiffs' position to be that strict
common law fiduciary principles ought to apply. Absent the United
States showing that funds were collected and paid to beneficiaries, the
Government was obligated to restate the IIM individual accounts to the
full amount in dispute plus interest. They said, ``If you can't show
it, you owe it.'' In public statements in Indian country plaintiffs'
counsel and the lead plaintiff have told beneficiaries that the amount
that they are entitled to receive exceeds $100 billion and is in the
range of $170 billion. We believe that these statements have created
unrealistic expectations that have complicated efforts to resolve this
dispute. More recently, the plaintiffs presented a settlement demand of
$27.5 billion, assuming for settlement purposes, a 20-percent rate of
funds not paid to beneficiaries as a measure of ``rough justice,'' but
without data supporting this rate. Testimony of Elouise C. Cobell
before the House Committee on Resources Hearing on H.R. 4322, Indian
Trust Reform Act of 2005, December 8, 2005, at 7. As we show later in
this testimony the choice of assumptions regarding the distribution of
unpaid funds over the course of the trust fund, the ``error rate,'' the
rate of interest used, and whether the interest is compounded annually
dramatically impact the settlement value. The values chosen by the
plaintiffs appear to us to be without foundation.
The position of the United States is also suspect. The Department
of the Interior has spent considerable funds to trace the record of
transactions in the IIM system to determine if the payment made to the
accounts of trust fund beneficiaries accurately reflects what should
have been paid. The possible outcomes include both underpayments and
overpayments. The preliminary results of this investigation are that
the observed error rate is very small. Testimony of James Cason,
Associate Deputy Secretary and Ross Swimmer, Special Trustee for
American Indians on the Cobell Lawsuit, before the House Committee on
Resources Hearing on H.R. 4322, Indian Trust Reform Act of 2005,
December 8, 2005, at 3-5. Indeed, taken to its logical conclusion,
Department of the Interior estimate of a settlement value would be far
less than $500 million. This calculation may also be based on arbitrary
and false assumptions.
We believe that there are three potential sources of error in the
IIM system: (1) money was not collected; (2) money was not properly
deposited; and, (3) money was not properly disbursed. With respect to
the money that was not collected, funds due IIM beneficiaries either
never made it into the system in the first place or may have been
collected late. The missing funds or the interest due beneficiaries for
late payments could reflect a significant amount of money. This is
particularly true in the land-based IIM accounts.
We would designate this type of error as ``funds mismanagement.''
We believe fund mismanagement is sufficiently related to the claims in
the pending litigation that it should be resolved under title I of the
proposed legislation. But, fund mismanagement should be distinguished
from ``land mismanagement.'' By contrast, land mismanagement would
encompasses claims by individual beneficiaries over the failure of the
United States to negotiate a fair compensation for their oil, mineral,
grazing, real estate, or other assets that have been held in trust by
the United States. We do not believe that these land mismanagement
claims should be part of the resolution of the Cobell litigation. These
claims have never been asserted by plaintiffs and are much more
susceptible to individualized proofs and thus capable of being more
accurately evaluated.
The second potential source of error is that once in the system,
the funds were not properly deposited in the beneficiaries' trust
accounts. This has been the focus of the efforts of the Department of
the Interior to value the plaintiffs' claim. While analyzing the
administration of funds that have been received by the Department is a
good start, it is not sufficient. Moreover, the Government appears not
yet to have included in its analysis the land-based accounts where
logically many more of the errors should arise. Because the analysis by
the Office of Special Trustee only considers the second step of the
process and does not analyze land-based accounts, we believe its
estimates significantly understate the true exposure of the United
States.
The third source of error is whether beneficiaries actually
received the disbursements that they were intended to receive. Did the
beneficiaries get their checks and cash them? We have been advised by
the Department of Treasury that the amount of checks that go un-cashed
is relatively small. Nonetheless, there is no way of knowing whether
these checks reached the intended payees.
Frequently, as mediators we are asked to value a settlement in a
dispute. In many instances the value of a case may depend on the
litigation risk or the probability of a party prevailing at trial. What
seems certain to us is that there will not be a quick end to this
litigation. If Congress does not act, we believe that there will be
many more rounds of appeals. Inevitably, one of the parties will
petition the Supreme Court for review. By then, many of the IIM
beneficiaries will be dead.
There is no perfect or ``night'' number. Especially, as in this
case, where missing documents may make an accurate assessment
impossible, an arbitrary number may be the best path to a settlement.
Consequently, we do not favor an extended effort to develop and apply a
methodology to arrive at a number. We do not believe that it is worth
the time and expense of such an effort because, at best, a methodology
will only give the appearance of precision. It is our opinion that
there are too many unknown and unknowable pieces of information that
would be needed to support an analysis of a settlement value.
What we do know is this: The parties seem to agree that
approximately $13 billion should have been paid to beneficiaries over
the time the IIM trust has been in existence. Neither side disagrees
that a portion of these funds was indeed paid to the IIM beneficiaries.
Where there is disagreement is in calculating the amount still owed
trust beneficiaries. Other factors influence greatly the calculation of
a settlement. Because of the time-value of money, moneys not paid a
long time ago can greatly increase the total liability calculation.
However, the Department of the Interior reports that the vast bulk of
funds that went through the IIM system did so in the last 30 years.
This seems like a reasonable conclusion that has been supported by
verifiable data.
By way of example and for illustrative purposes only--we want to be
clear that we are not recommending a specific settlement value--we
calculated the amount that the IIM Trust would need to be restated
using various assumptions. According to the Department of the Interior
figures, $10 billion of the $13 billion in IIM Trust receipts were
realized after 1970. We further assumed that only $500 million of Trust
Fund assets moved through the IIM Trust prior to World War II. Assuming
a 20-percent error rate, a 3-percent compound interest rate, the fund
would need to be restated by $7.2 billion. If we change our assumptions
and consider a 10-percent error rate and a 4-percent compound interest
rate, the restated balance is $5.6 billion. Raising the compound
interest rate to 5 percent, but holding the error rate at 10 percent
yields a value of $9.8 billion. The point of this exercise is not to
recommend a settlement but to show the significant fluctuations in
value with small changes in assumptions, especially the compound
interest rate. Parenthetically, we note that the use of a compound
interest rate is a hotly contested issue between the parties. If simple
interest was used, these values would fall. Indeed, what these
calculations show is that a final settlement is extremely arbitrary
depending on the assumptions one uses. We do not believe that more time
and analysis will yield a result that is more precise or less
arbitrary.
An alternative approach would be to look at the avoided costs
associated with the Office of Special Trustee. Since 2001, the Office
of Special Trustee has received more than $3 billion. If this
litigation is not settled, how much more will Congress spend to comply
with its legal obligations to perform an accounting? We believe that
these funds would be better directed to the IIM beneficiaries.
On behalf of Judge Renfrew and myself, we continue to offer our
assistance to both committees in whatever roles you see fit for us to
serve. We believe that the prompt enactment of S. 1439 and H.R. 4322 is
an imperative and we encourage the committees to schedule these bills
for markup as soon as possible.
Thank you again for the opportunity to testify today. I will be
pleased to answer any questions the committees may have.
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Prepared Statement of Mike Marchand, First Vice President, Affiliated
Tribes of Northwest Indians
Chairman McCain, Chairman Pombo, Senator Dorgan, Representative
Rahall, and members of the Senate Committee on Indian Affairs and the
House Committee on Resources, my name is Mike Marchand, I am the First
Vice President of the Affiliated Tribes of Northwest Indians [ATNI] and
a member of the Colville Tribal Council. On behalf of ATNI, I thank you
for your leadership on the trust reform issue and this hearing today.
We are grateful for the work that has gone into S. 1439 and H.R. 4322,
the Indian Trust Reform Act of 2005. ATNI supports enactment of this
legislation and we are hopeful that the Congress will act on it this
year.
I am delighted to be here today with Keller George, the president
of the United South and Eastern Tribes [USET]. USET has been in the
forefront of tribal efforts to bring about meaningful reform of the
management and administration of the Federal trust responsibility. For
the last several months, ATNI and USET have been working together to
develop recommendations for amendments to S. 1439 and H.R. 4322. We
hope to be able to forward to the committees our joint proposals for
amendments in the next few weeks. We look forward to working with the
committees to help ensure enactment of legislation this year.
We are very pleased that the committees are examining ways to place
a value on the claims in the Cobell v. Norton case. Even though the
case seeks an accounting for the IIM funds and the Federal District
Court is powerless to award damages to the plaintiffs, everyone who is
familiar with the case has known for years that funds will be required
to settle the case. This understanding is reflected in title I of S.
1439 and H.R. 4322 and by this hearing today. The plaintiffs have
estimated the value of the claim to be somewhere between $27.8 billion
and $170 billion. The Departments of the Interior, Justice, and
Treasury have not been willing to openly state an estimate of value for
the claims.
The Department of the Interior has indicated that it might cost as
much as $10 to $12 billion to do an itemized accounting for the IIM
funds. That estimate led ATNI, among others, to suggest that an
appropriate value for the claim might be in the range of $14 billion on
the premise that it would be far better to provide the funds that would
otherwise be paid to accounting firms to the account holders
themselves. And to further complicate the search for a solution, the
November 15 decision in the U.S. Court of Appeals for the Washington,
DC Circuit held that the Department of the Interior can use statistical
sampling to determine what is owed, which has led some to estimate the
cost for the accounting problem to be around $350 million.
We do not know what the correct method is for valuing the claims in
the Cobell case, nor do we know the value of those claims. What we do
know is to date:
(A) there has been no success in getting the parties together to
negotiate a compromise settlement figure.
(B) that if the present course is left unchanged it is not at all
likely that the IIM account holders will receive any compensation
during the lifetime of many, especially those who need it most.
(C) we will continue to see an erosion of the gains that tribal
governments have made under the policies of self-determination and
self-governance.
We understand that it will be necessary for the committees to place
a value on the settlement of the plaintiff's claims in order to move S.
1439 and H.R. 4322 through the legislative process. We do not know
which method would be best in the Cobell case, but we will work with
the committees to assess the options. We trust the committees to be
fair in their evaluation of those options.
We note with interest that the Congress has appropriated over $3
billion since 2001 to provide for the defense of the Cobell case and
the reform and restructuring of the administration of the trust funds
and assets by the Department of the Interior. Most of this money has
been provided to the Office of Special Trustee--an office that was
created in the Trust Reform Act of 1994 and was intended to be
temporary. That is a lot of money to spend in a short period of time,
particularly when it is provided in the absence of a defined plan and
for poorly understood purposes. It is clear that the tribes have not
supported or requested these appropriations because in most instances
they involve the reallocation of funds that are desperately needed for
education, law enforcement, and for fighting epidemics of alcohol and
substance abuse. It has been more than a little difficult to get the
administration and the Congress to focus on these areas in light of the
significant commitment of appropriations to the Department's response
to the Cobell case.
We are also seeing the very nature of the trust responsibility
redefined by the Department in response to the Cobell case. In some
instances the changes that have been made or that are underway run
directly counter to the Congressional policies of self-determination
and self-governance and undermine the huge investment of fiscal
resources that the Congress has made in those policies since 1975. In
effect the Cobell litigation has come to hold the tribes and the
Congress hostage to the Department's assessment of what it must do in
order to comply with the real or anticipated orders of the Federal
District Court. We are weary of policies that are developed in the
context of advancing an adversarial position in the Cobell litigation
and are concerned of the implications if this is allowed to continue
any longer.
There has been some improvement in the day-to-day administration of
trust funds and trust assets by the Department. Those changes are
welcome, even if the cost benefit ratio is not. At the same time, we
are mindful of the fact that those who were supposed to be served by
the Cobell litigation have received little. IIM account holders who
have been told that they are owed tens of billions, or hundreds of
billions of dollars are no closer to being made whole today than they
were the day before the Cobell case was filed 10 years ago. Scores of
account holders have died since the case was filed. Without a
settlement the litigation is likely to go on for another decade or
more. And, even if the plaintiffs prevail, the Federal District Court
cannot make the account holders whole.
Only the Congress or the U.S. Court of Federal Claims can provide
financial relief to the account holders. Only the Congress can provide
the direction for the real reform that is needed to ensure the proper
management of the trust funds and assets. And, only the Congress can
ensure that the tribal governments have the opportunity to assume the
day-to-day responsibility for the protection and enhancement of the
corpus of the trust.
It has been 10 months since this legislation was first introduced
and this is its third hearing. To date the administration and the
Department have had ample opportunity to lead or be an active
participant but have done next to nothing to work with the plaintiff's
tribes or the committees to find a workable solution. We stand prepared
to work with the committees to arrive at a value for the Cobell claims
and to work for the prompt enactment of S. 1439 and H.R. 4322. We ask
that the committees schedule these bills for markup in the next 30
days.
Thank you again for the opportunity to testify today. I will be
pleased to answer any questions the committees may have.
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