Federal Government Misplaces Billions of Dollars From Indian Trust Fund

By National Center for Public Pol... | July 7, 2008 | 8:21 PM EDT

(Editor's Note: The following is the 42nd of 100 stories regarding government regulation from the book Shattered Dreams, written by the National Center for Public Policy Research. CNSNews.com will publish an additional story each day.)

The Blackfeet Nation Indian tribe in Montana has only seen a fraction of the billions of dollars owed to its members by the federal government, thanks to what Federal District Court Justice Royce C. Lamberth called the "most egregious misconduct by the federal government" he has ever seen.

In 1887, through the General Allotment Act, Congress essentially decided that American Indians could not be trusted to manage their own land. Government authorities seized Indian land and placed it under the control of the federal Bureau of Indian Affairs (BIA). The BIA was put in charge of leasing tribes' land for oil, timber and agricultural uses. The profits generated by leasing the land were to be held in Individual Indian Monies (IIM) trusts to be distributed to the various Indian families.

Instead, according to reports in the Washington Post, the federal government has spent the last century mismanaging and misplacing the Indians' money. For example, the Indian families were never told to whom and for what price their land was being leased. They were also randomly mailed checks with no explanations of the amounts.

On June 10, 1996, Elouise Cobell, a Montana banker and member of the Blackfeet Nation tribe, filed a class action lawsuit, representing more than 500,000 IIM shareholders in U.S. District Court against the Departments of the Interior and the Treasury. The suit demanded that the federal accounting system be fixed and that the current accounts be adjusted to reflect the true amounts owed to the Indians.

As a result, Judge Lamberth ordered the two departments to provide financial records showing the money owed to the specific Indian families. According to media reports, the two departments instead shredded 162 cartons filled with records about uncashed checks that never reached their intended recipients.

In 1997, Judge Lamberth held former Interior Secretary Bruce Babbitt and former Treasury Secretary Robert Rubin in contempt of court for failure to properly manage the Indian trust fund. Current Secretary of the Interior Gale Norton could face the same charge. On August 10, 1999, Judge Lamberth again ruled in favor of the tribe and fined Babbitt and Rubin a total of $685,000 - a fine that was ultimately paid with U.S. tax dollars - to go toward the Indians' legal fees. On December 21, 1999, the Interior and Treasury departments were ordered to file quarterly reports to the court showing actions being taken to reform the current trust system. An attempt by the Justice Department to appeal the decision was unanimously rejected by a federal appeals court in February 2001.

Finally, in July 2001, Secretary Norton established the Office of Historical Trust Accounting within the Interior Department to ensure the prompt and accurate restoration of the Indian accounts. Quarterly reports have been filed, and Judge Lamberth has assigned a court monitor to oversee the process.

On July 5, 2002, Assistant Secretary of the Interior for Policy, Management and Budget Lynn Scarlett released a report entitled "Report to Congress on the Historical Accounting of Individual Indian Money Accounts," which said the Interior Department will only be able to calculate the amounts owed to IIM shareholders since 1985 - when the Department's information was computerized. This is not acceptable to Cobell. The Interior Department also said it is unable to provide accurate information about the leasing of tribal lands because between 60 to 75 percent of the leases were never recorded at all.

On September 17, 2002, Judge Lamberth ruled Norton in contempt of court. He ordered Interior officials back into court in May 2003 as a result of other accounting errors uncovered by the contempt case.

Sources: Elouise Cobell, Washington Post, Department of Interior

Copyright 2003, National Center for Public Policy Research