Court investigator faults Federal Reserve
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APRIL 19, 2001

The court-appointed investigator in the billion dollar trust fund lawsuit on Tuesday faulted a number of Federal Reserve banks for destroying records related to the trust assets of an estimated 300,000 American Indians throughout the country.

In a report filed with Judge Royce Lamberth, Special Master Alan Balaran said that 29 out of 37 branch offices in the Federal Reserve system have reported destruction of records related to the five-year old Cobell v. Norton lawsuit. Despite a 1999 court order requiring the Department of Treasury to preserve trust documents, banks have destroyed records as recently as March.

But the Treasury Department has been trying to avoid being blamed for the oversight. In a motion filed with the court, the Treasury said it had no control over the actions of the Federal Reserve and therefore shouldn't be faulted for the destruction.

Balaran agreed. He isn't letting the government off the hook, however, and is faulting the Federal Reserve instead.

"Given the center stage that issues concerning document retention and preservation have occupied in this litigation, this lack of oversight is profoundly troubling," said Balaran of the Fed.

Balaran called the Reserve's overall record of protecting the documents of American Indians "abysmal."

While the Federal Reserve provides services to the Treasury, it is not a party to the Cobell lawsuit. The Federal Reserve is the central banking system of the US government but is not an agency of the Treasury, who has a trust responsibility to account holders.

Still, the Treasury isn't challenging that it has failed to inform properly agents of the Federal Reserve who provide services to the department. As a result, Federal Reserve officials authorized document destruction on the "erroneous" belief they weren't required to preserve them.

For two years now, document preservation has been one of the key sticking points in the five-year-old lawsuit. Secretary of Interior's trust fund records office is currently being investigated for its policies on preserving records.

Some of the documents date back to the late 1800s, when the government created the trust accounting system. It has failed to properly manage them since then, said Lamberth in a landmark December 1999 ruling.

Elouise Cobell, the Blackfeet Nation of Montana banker who is the lead plaintiff in the case said the Special Master's findings validate yet another in a long line of complaints they have lodged against the government.

"Saying the government's actions are 'profoundly troubling' is putting it politely," said Cobell. "Indians -- we're the bottom of the barrel."

Relevant Links:
Federal Reserve -
Trust Management Improvement Project -
Indian Trust: Cobell v. Norton -

Only on Indianz.Com:
The Trust Fund Fiasco (Smoke Signals 1999)

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