Cobell prepares for court battle on accounting

Wednesday, May 30, 2007  

The plaintiffs in the billion-dollar Cobell trust fund lawsuit filed their first brief on Tuesday in preparation for a landmark historical accounting trial.

The brief seeks to address some of the issues surrounding the Bush administration's accounting of the Individual Indian Money (IIM) trust. According to the plaintiffs, the Interior Department's project will leave out hundreds of thousands of Indian beneficiaries.

"To be adequate, 'Interior must perform an accounting of all funds deposited or invested in the IIM trust fund since the passage of the General Allotment Act in 1887,'" the brief states, citing the December 1999 ruling that ordered the accounting.

Among those who won't receive an accounting: "direct pay" beneficiaries whose lease payments are deposited into their bank accounts; deceased beneficiaries and their hers; beneficiaries whose IIM accounts were closed before October 25, 1994, the date of the passage of the American Indian Trust Fund Management Reform Act.

Additionally, the project will only go as far back as June 24, 1938, the date of another Indian trust law. Some accounts, according to Interior officials, go back to the late 1800s.

Despite the exclusions, Interior has defended its right to define the scope and nature of the accounting. According to a recent brief, the court's role in overseeing the plan is limited to determining whether it is arbitrary or capricious under the Administrative Procedures Act (APA), or whether it will "delay rather than accelerate" the final accounting.

"Although this case has had many detours between 2001 and the present time, Interior has been and is continuing to perform the accounting referenced by the D.C. Circuit," the May 11 brief stated. In February 2001, the D.C. Circuit Court of Appeals affirmed the duty to accounting for the IIM trust.

Judge James Robertson in Washington, D.C., will have to sort out these conflicting views as he prepares for the October 10 trial. He held the first status hearing May 14 and said both sides will have to make concessions.

"The plaintiffs are going to have to get used to much more modest goals for this October trial, and the defense is going to have to get used to much more ambitious goals for this October trial than either side has thought about," Robertson told the parties.

Robertson acknowledged the accounting won't be anywhere near complete by the time of the trial. "It's a subset because you're not finished, and you won't be finished by October," he said.

But he appeared to reject the idea that the trial won't go into the nuts and bolts of the accounting plan, as the administration suggested in its brief. "Much too much water has flowed under the dam or over the bridge ... to make this a straight up, old-fashioned APA document review of a record," he said.

"It can't be done that way," he added. "There's going to have to be testimony, probably by experts."

The plaintiffs view the trial as a way to prove, once and for all, that the Interior Department and the Treasury Department won't be able to complete an accounting. They hope it will lead Robertson to restate the account balances of the IIM trust.

But Interior officials say the plaintiffs can't prove widespread mismanagement of the trust. According to their efforts, the error rate in the accounts amounts to a restatement in the low millions.

"Interior's accounting experts have uncovered no evidence or history of fraud or systemic error in the handling of historic individual Indian accounts," a report delivered to Congress this month stated. "The few errors that have been found are generally small in monetary value, and fall on both sides of the ledger."

At the same time, the Bush administration has proposed to spend up to $7 billion to resolve the Cobell case and more than 200 tribal trust lawsuits, and to pay for trust reform. Half of the settlement would be used to end the Cobell historical accounting and to eliminate future damages lawsuits based on mismanagement of the IIM trust.

With Congressional support for the proposal extremely weak, the plaintiffs and the government will spend the summer battling over the trial. Robertson's next status hearing is set for June 18.

Recent Briefs:
Cobell Plaintiffs (May 29, 2006) | Bush Administration (May 11, 2006)

Historical Accounting Report:
Office of the Special Trustee for American Indians Report to Congress (May 2006)

Court Order:
Cobell v. Kempthorne (April 20,2007)

Settlement Letter:
Kempthorne-Gonzales to SCIA (March 1, 2007)

Relevant Documents:
Alberto Gonzales Testimony (March 1, 2005) | SCIA Views and Estimates (March 1, 2007)

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