A court official investigating the federal government's handling of billions of dollars of Indian trust funds has quit the case amid renewed allegations of widespread fraud.

Special master Alan Balaran detailed his charges in a three-page letter made public yesterday. He said the Bush administration stepped up its efforts to disqualify him after he uncovered evidence that the Interior Department "was putting the interests of private energy companies ahead of the interests of individual Indian beneficiaries."

Balaran cited his investigation into the undervaluation of land owned by members of the Navajo Nation, the largest tribe in the country. In an August 2003 report, he found that that the Bureau of Indian Affairs allowed oil and gas companies to use Navajo land for far less than market value. In some instances, non-Indians were paid up to 20 times more by the same companies.

"This report was just the beginning," Balaran told U.S. District Judge Royce Lamberth.

Following the report, Balaran sought to investigate the Minerals Management Service, the agency responsible for the annual collection of $6 billion in oil and gas royalties on federal and Indian lands. Interior's own investigators found that three MMS employees falsified data for an Indian trust audit and failed to follow professional standards. Despite these shortcomings, one employee was given a cash award for "creativity" for recreating the records.

Balaran said the Interior and Justice departments repeatedly blocked his efforts to look into this situation despite previously encouraging employees to cooperate. Last September, he was ordered to leave an MMS office in Dallas, Texas, where he said he found "chaotic record-keeping practices and missing audit files."

"The reason for this dramatic shift in policy is obvious," he wrote. "Whereas my previous investigations exposed random incidents of unprotected trust documents in remote Interior locations, my recent findings implicated the agency's systemic failure to properly monitor the activities of energy companies leasing minerals on individual Indian lands."

In a statement yesterday, Interior rejected the charges as "based entirely on innuendo, supposition and baseless speculation." The department has been seeking Balaran's recusal from the case for hiring an ex-government contractor who was critical of the BIA and for allegedly having improper contacts with the judge over dozens of current and former officials who could be held in contempt for destroying records.

Balaran said he was confident he would be cleared of any biases. But he said the government's efforts to disqualify him "would persist and accelerate" were he to stay on the case.

The resignation brought criticism from Elouise Cobell, the lead plaintiff in the lawsuit, who said "Balaran served the court with fairness and honor." "We are sorry that he felt the need to resign, and we are disturbed that the Bush administration seems determined to remove any court official critical of its handling of the individual Indian trust and this litigation," she added.

Sen. Tom Daschle (D-S.D.) also said he was disturbed the latest development. "Mr. Balaran's charges highlight once again the lack of attention that the Department of the Interior has given Indian people, and his resignation should serve as yet another wake-up call for all of us in the executive and legislative branches to finally commit the resources necessary to get to the bottom of the trust problem," he said in a statement.

Balaran is a Washington, D.C., attorney who was appointed to the case in February 1999, two days after three former Clinton administration officials were held in contempt for failing to produce documents for the five named plaintiffs in the case. He was assigned to oversee records-related issues at Interior.

Over the years, Balaran has tussled repeatedly, and sometimes bitterly, with lawyers at the Interior and Justice departments. He was always able to rebuff their efforts to limit his investigations.

The addition of another court master, Joseph S. Kieffer III, in April 2001 turned up the heat on what was then a new Bush administration. In a series of reports, Kieffer, a former military intelligence specialist, blasted the Interior's failures to live up to court orders, carry out trust reform and fulfill its responsibilities to hundreds of thousands of individual Indians, many of whom depend on oil, gas, grazing and other payments to survive.

Later that year, Balaran issued a report that proved highly embarrassing to the department. In it, he documented how court-hired hackers were able to break into computer systems that manage billions of dollars in Indian trust funds without being detected. Lamberth responded by ordering a shutdown of the department's Internet connection.

The government subsequently sought and obtained Kieffer's removal from the case last September, around the time when the government pressured Lamberth to rule on a disqualification motion affecting Balaran. Government lawyers then turned to an appeals court to have him removed.

In an order signed yesterday, Lamberth accepted Balaran's resignation "with profound regret."

Relevant Documents:
Special Master Letter | Judge Lamberth Order

Relevant Links:
Indian Trust: Cobell v. Norton - http://www.indiantrust.com
Cobell v. Norton, Department of Justice - http://www.usdoj.gov/civil/cases/cobell/index.htm
Indian Trust, Department of Interior - http://www.doi.gov/indiantrust