Cobell plaintiffs defend $58B claim in trust fund trial

Cobell

Wednesday, June 11, 2008

The landmark Indian trust fund trial continued on Tuesday as the plaintiffs sought to back up their claim to billions of dollars of restitution.

Witness Bradford Cornell testified at length about an economic model he developed to determine how much money should be in the Individual Indian Money (IIM) trust. Based on the benefits obtained by the federal government on funds that were never disbursed to beneficiaries, he said the account is worth $58 billion.

"The government could simply disburse that account now to individual Indians," said Cornell, a professor from California whose firm, CRA International, was hired by the plaintiffs to develop the model.

The model goes all the way back to 1887, the inception of the IIM trust. Due to a lack of government data, Cornell estimated some of the revenues for the early years of the system.

But Cornell was able to rely on reports from the Commissioner of Indian Affairs to document the money that flowed into the trust for some years in the early 1900s. And from 1972 onward, the government data is more complete though the plaintiffs claim it is not accurate.

During opening statements on Monday, plaintiffs' attorney Dennis Gingold said "the disbursement records of the government are wholly unreliable."

The economic model includes a separate tally of trust revenues earned by members of the Osage Nation of Oklahoma. The tribe supplied its own data to the plaintiffs, who said it was more accurate than the government's.

Cornell assumed 70 percent of the money that flowed into the system was properly distributed to Indian beneficiaries. To calculate the benefit obtained by the government on the amount that wasn't disbursed, he applied a 10-year Treasury bond rate to that amount for each year, from 1887 to 2007.

"If that account was never invaded, and if the interest rate was about equal to the 10-year bond rate, then by 2007, that account actually would have accumulated to about $58 billion," Cornell testified.

During cross-examination, Department of Justice attorney John Warshawsky questioned Cornell's methodology and the assumptions behind the model. Among other arguments, Warshawsky said the Osage revenues should be excluded because the government appears to be claiming that they are not individual Indian trust funds.

Cornell acknowledged that the Osage figures might not belong in the IIM trust. If that is the case, up to 20 percent of the total revenues used for the model would have to be taken out, he said.

"If the monies never flowed into the IIM trust, then they should not be in my calculations," Cornell said of the Osage revenues, which represent a significant chunk of the Indian trust.

Warshawsky also challenged the assumption that only 70 percent of the trust funds were distributed every year. During opening statements on Monday, the government claimed it has properly disbursed 99 percent of payments to Indian beneficiaries since 1887.

Cornell said his model can be changed to reflect new data supplied by the government. "I'm trying to operate at a very high-level," he told Judge James Robertson.

Robertson, who plans to put a dollar amount on the case later this summer, in particular was interested in learning how the plaintiffs' $58 billion claim is affected by a change in the disbursement rate. During a lunch break in testimony, Cornell calculated some new figures to demonstrate how the model responds.

Robertson also asked whether the disbursement rate takes into account money that was returned to unsuccessful bidders for leases and other activity on Indian lands. According to the government, up to 30 percent of the data for certain years was never actually taken into the IIM trust.

If that is the case, "then you're way off, aren't you," Robertson told Cornell. "It would still take a big chunk out of it," the witness responded.

Cornell and James C. Miller III, who served as director of the White House Office of Management and Budget during the Reagan administration, were the only two witnesses heard yesterday. Miller went under cross-examination in the morning after government attorneys on Monday complained about the fast pace of the trial.

Robertson will return to court this afternoon to hear from Don Pallais, the next witness for the plaintiffs. Testimony is only being heard Mondays through Thursdays.

Trial Transcripts:
June 9 AM | June 9 PM | June 10 AM