INTERTRIBAL MONITORING ASSOCIATION on Indian Trust
Funds
2800 San Mateo Blvd NE -
Phone:
505/247-1447 Fax:
505/247-1449 e-mail:
itma@itmatrustfunds.org
PRELIMINARY ANALYSIS
OF S. 1439
“INDIAN TRUST REFORM
ACT OF 2005”
__________________
I. SUMMARY.
As
more fully explained herein, enactment and implementation of S. 1439 would:
II. TITLES
III. TITLE I – SETTLEMENT OF LITIGATION
CLAIMS.
Litigation in this title is defined
as the Cobell case. To resolve certain Cobell claims defined in the bill, this title would create a fund
in an unspecified amount, but indicated in the double-digit billions of dollars,
as an Individual Indian Accounting Claims Settlement Fund. Sec. 103 (a) (1). The Secretary of the Treasury would establish
the fund in the Department of Treasury out the “judgment fund” appropriation,
and shall appoint a Special Master to administer it.
A. Payments to "Claimants."
At least 80 per cent of the fund would be used for payments
to “claimants” defined as "any beneficiary of an IIM account (including an
heir of such a beneficiary) that was living on the date of enactment of the
American Indian Trust Fund Management Reform Act of 1994 (25 U.S.C. 4001 et
seq.)." In some cases, claimants may
not be account holders or their heirs, but rather somebody or something else which
qualifies as a beneficiary of an IIM account or the beneficiary's heir, though
the bill doesn't specify who or what these claimants might be. Rather, the bill's definition of "claimant”
may be intended to include "remainderman" interests or a life-estate
holder of a single IIM account. The language could conceivably apply to the Red
Cross or a scholarship fund if such an entity holds a future or contingent
interest in an IIM account.
The Other 20%. Up to 12%, at the
discretion of the Special Master, of the fund could be used to pay claimants who
successfully challenge in court either the “method of distribution” or the
Constitutionality of the payment scheme set forth in the bill.
An unspecified percentage of the
fund can be used by the Treasury Secretary to administer the fund. An unspecified percentage of the fund can be
used to pay the attorneys in the Cobell
case. Assuming few will tap the 12% that
could be used for challenges that will not be brought; basically 20% of the
fund, minus whatever the Secretary uses for administration, is available for
attorney fees. As more fully discussed
below, this title also includes provisions governing a claimant’s ability to challenge
the settlement offer scheme.
B. Distribution Of Settlement Funds To
Claimants.
The Secretary of the Treasury will
take 80% of the fund and pay some unspecified amount of that 80% in per capita
payments to the “claimants. Another unspecified
amount of the 80% that is not paid out per capita will be determined to be each
claimant’s “additional share” of the 80% of the fund, according to a formula
the Secretary of the Treasury will establish by regulation. Both these payments will be made “to each claimant”
within 1 year of publishing the regulations on the formula. It cannot be discerned from the bill’s
language what portion of the 80% will be paid on a per capita basis or by
formula.
·
The Formula. The bill
requires the Secretary of Treasury to promulgate regulations that establish the
formula taking into consideration the amount of funds that have passed through
the particular IIM account from 1980 to 2005 … or such other period that the
Treasury Secretary determines to be “appropriate.” Nothing else is provided in the bill about
the formula. Presumably, this formula
is based on an assumption that those IIM accounts that have the most money go
through them have lost the most, and the formula will reflect that. In any event, within a year of establishing
the formula, the bill directs the Secretary to distribute 80% of the fund to
“claimants.”
·
To Obtain Payment. In
order for a “claimant” to get his/her/its money, a release of any claims for an
accounting under the law must be executed.
While the bill's language does not expressly provide, this requirement
will have the effect of forfeiting a claimant’s rights under the Cobell class action in seeking an
accounting. Heirs of claimants are also defined
as claimants, and will receive the same payment a claimant would have received. Multiple heirs of a “claimant’ will share
equally.
·
Payments for
Claimant whose Location is "Unknown." The
bill directs the Secretary of Interior provide the Special Master any
information and other assistance necessary to locate a claimant After doing what he can, including sending out
search parties under contract, the Special Master will set aside “for future
distribution” in another account amounts for all claimants who are entitled to
payment but cannot be located.
·
Payments not
to affect other benefits. The bill expressly provides that payments to
claimants made under this title are not be subject to federal or state income
taxes and cannot be used in determining eligibility for other benefit programs.
C. Claimants Who Decide To Challenge The
Settlement Offer.
The bill contemplates several ways in which claimant
might challenge the Special Master's settlement offer. Section 105 provides that any “claimant” who
disagrees with the “amount” of payment offered under the per capita and the
formula provisions can seek judicial review within 6 months of receiving notice
that settlement payment offer in exchange for the claimant's release of
accounting claims. This review will be
in the federal district court of the district in which the claimant
resides. All appeals from these
federal district courts will be to the U.S. Court of Appeals for the
For the opportunity to seek judicial review of the
payment offer, any claimant who pursues such a court action will give up the
basic per capita and formula payments provided in the bill. The relief sought under these challenges
would be in lieu of any settlement offers made pursuant to the general payment
scheme, and would be limited to payments relating to the “method of
distribution” and Constitutionality challenge issues. It is unlikely that potential claimants
challenging a proposed offer would understand the purpose or process for
bringing these types of challenges. Therefore,
few if any claimants are likely to bring these challenges, and any payments awarded
will likely be de minimus.
Moreover, this section does not specifically address other
issues in the litigation. For instance,
the bill specifies the types of challenges that are barred from being a part of
any class action, but does not prohibit the availability of class actions to
seek redress for challenges not relating to methodology or constitutionality
issues. With respect to the amounts of
the offers, for instance, claimants who are aware of specific embezzlement that
occurred by an agency (because someone pleaded guilty to doing it) could
bring a class action to challenge the amount offered. Similarly, while the bill would require other
challengers to forfeit their right to the basic payment offered, the language
does not apply such a limitation on those claimants who challenge the “amount”
of payment offered.
Section 106 provides that a “claimant” who challenges
the “method of distribution” of a payment under the per capita and formula
plans can seek judicial review of the proposed settlement offer. Filing any suit challenging the methodology
of distribution will have the effect of forfeiting the basic payment that was
offered to the claimant, and will leave the claimant in a nothing-at-all position
in court. No claim under this section
can be a class action, and presumably then, no such lawsuit can affect the
other payments that are being made under the same “method” being attacked in
court. In other words, it is extremely
unlikely that claimants will individually pursue this type of challenge. If that does happen, though, such a challenge
can only be brought in the U.S. Court of Federal Claims.
Section 107 addresses other claimants who seek to challenge
the constitutionality of applying this payment/buyout scheme in reaching the
settlement offer. This type of challenge
cannot be part of a class action, and can only be brought in the
However, the very next subsection provides that the only
money that can be used to satisfy such a judgment is whatever the Special
Master might have set aside in his discretion under the funding pots authorized
by the bill. In other words, it again
is unlikely that these types of challenges will be pursued and if so, the relief
will be limited to discretionary amounts available in the fund. Again, any claimant bringing such a claim
forfeits any right to the payment that was offered as part of the initial
settlement offer. In summary, the
challenge provisions in the bill will like have the effect of discouraging any
claimant who may decide to challenge the proposed settlement scheme or actual
offer.
D. Attorneys’ Fees.
The section on attorney fees contemplates a cap on
the hourly rate that the Special Master will pay the Cobell attorneys for their costs and fees up to the date of
enactment of this Act, provided they have not already been paid under court
order. The bill provides the Special
Master the authority to make this determination and this payment.
E. Residual or "Left-over" Money.
After paying successful challenges and paying
attorney fees, the Special Master will distribute any remaining money that had
been set aside for these purposes to the “claimants.”
F. Effect on Cobell Lawsuit.
This bill provides that the benefits of this
settlement scheme are “in lieu” of any claims existing prior to passage of the bill
for losses through accounting errors, mismanagement of funds, or interest
associated with an IIM account. With the
exception of accounting claims relating to resources that never became money in
an IIM account before the bill’s enactment, this language will effectively bar
any claimant from suing for an accounting in any court of law.
Given the size of the estimated claimants whose whereabouts
are unknown, this bill will not completely eliminate all aspects of the lawsuit. There are literally tens of thousands of “whereabouts
unknown” account holders to constitute a sizeable “class” for a class action,
even if every claimant who can be found signs up for his share of the
settlement fund and signs the “waiver and release,” as the bill calls it, or
“opts out” of the Cobell case. Moreover, the bill provides that:
IN GENERAL. –
Except as otherwise provided [for individual trust asset claims and tribal
claims] in this title, no court shall have jurisdiction over a claim filed by
an individual or group for the historical accounting of funds in an IIM account
on or before the date of enactment of this Act, including any such claim that is
pending on the date of enactment of this Act.”
Section 110(a) (3) (A).
Although this language is clearly intended to dispose
of the historical accounting claim in Cobell,
may not accomplish its intended result. There
are a number of trust reform and contempt like issues (i.e., disconnection from
the internet, notices to account holders, retaliation against employees,
appraisal and resource management issues, etc.) that have consumed a
considerable part of the litigation. Many
of these issues are slated for future trial and will not be affected by making
payments to claimants for accounting errors.
Even if accepting payments has the effect of “opting out” of the Cobell class, there will remain a
sizable “class” which falls under the court's class certification even after these
payments have been made and accepted.
G. Acceptable Objectives of the Title.
This title would provide money payments to IIM
account holders and their heirs, something the Cobell lawsuit does not promise at this point. In 1998, Judge Lamberth, with the
plaintiffs’ consent, struck from the complaint before him any language that
suggested this lawsuit sought an “infusion of cash” into IIM accounts, and that
issue has not been revisited by him nor has it been considered by the appeals
court. The bill also provides some
certainty in this resolving some of the issues in the lawsuit by disposing of
potential setbacks. For instance, this
bill puts money on the table without risking rejection by the Lamberth court;
without being subject to court challenge by the Department of Justice; without
risk of being reconsidered by the Department of Treasury or by an appeals court
ruling that it lacks jurisdiction over the offer; and without having to
establish a disbursement regime through the court that would be challenged at juncture
by the Justice Department. The bill
could be viewed as creating a payment regime that might just be acceptable to
some claimants if the payments are reasonably generous.
Moreover, implementing a legislative settlement
scheme within the Executive Branch may avoid rendering the bill vulnerable as "veto
bait." It establishes a pot of money from the judgment
fund which will not be “scored “against Indian program money. While the bill does not turn that pot of money
over to Judge Lamberth as proposed by the Cobell
plaintiffs, it does not leave the money and decisions on disbursement with the Department
of the Interior, either. It puts the
money in the Department of Treasury, and directs the distribution among IIM account
holders and their heirs and the plaintiffs’ attorneys. As explained about, there may be collateral
payments to schools, churches, and charities who qualify as
"beneficiaries" of claimants. In addition, creditors of Indians will likely get
some of it as soon as it hits the Indians’ hands. At least, the Department of Treasury, is
accustomed to handling large pots of money, and writing hundreds of thousands
of checks, and has a time limit for doing it.
This bill does seem to divest Judge
Lamberth of jurisdiction to order a historical accounting of all IIM accounts,
an effort that is prohibitively expensive, impossible to achieve, and to date
has been the catalyst for appropriations committees to meddle in the lawsuit
and divert funds from Indian programs.
H. Outstanding Issues.
The bill does not provide the amount
of money that will be part of the settlement fund. If the Cobell
plaintiffs and Indian country accept the bill's approach which vests
significant discretion in the Department of Treasury and the Special Master, this
may leave the plaintiffs at the mercy of these officials who develop and
implement the formula. On the other
hand, rejecting a legislative approach may risk additional adverse policy and
legal decisions to the unfriendly congressional appropriators and the
Administration who will seek to cut off funding for the historical accounting.
There are other remaining issues
relating to the reasons why the specific judicial review challenges were
crafted. As explained above, the bill
does not include an explanation of why lawsuits challenging “amounts” of
settlement offers are vested in local district courts, while lawsuits challenging
the “methodology” are limited to the Court of Federal Claims, and while other
lawsuits challenging the constitutionality of the settlement scheme are limited
to the D.C. District Court. Other issues
not addressed specifically addressed or explained in the bill include the
actual methodology that will be employed, language or the process that
specifically ends to the lawsuit, and data security issues.
IV. TITLE II – INDIAN TRUST ASSET POLICY
REVIEW COMMISSION.
Title II creates a 12-member commission to review the
laws, regulations, and Interior Department practices regarding trust asset administration
and requires the
Commission to make a report to the Secretary of Interior and to Congress. Four of these members would be appointed by
the President, four by the majority leaders of Congress, and four by the
minority leaders. One member would be
the “beneficial owner of an IIM account.”
Members of the Commission may also be federal employees. Six members must represent Tribes with trust
resources, and four must have some knowledge or expertise about Indian trust
resources, financial asset management, investments, and Indian law and policy. The members will choose their own
chairperson, and seven will constitute a quorum.
The bill empowers the Commission to hire staff, hold
hearings, and requires that is consult with Department of the Interior. The Commission will have access to federal
employees and records. The Commission
will hold its first meeting within five months of the bill’s enactment, and
requires that it consult with Tribes, Interior Secretary, and organizations of
individual Indian owners (but not specifically tribal organizations). The bill directs the Commission to develop
recommendations for making changes to the laws and practices of Indian trust
asset management, and to propose “standards” for administering trust assets
“consistent with the law that is applicable.”
The Commission is required to issue its final report within two years of
its first meeting.
The Commission lacks substantively
independent enforcement authority demanded by Indian Country, and from a plain reading
of the language, will not directly provide the trust reform priorities
identified by ITMA. On the other hand, we should keep in mind that Congress created a Policy
Review Commission 40 years ago, we should be mindful that this Commission
brought forth a report that led to the Indian Finance Act, the Indian Health
Care Improvements Act, the Indian Elementary and Secondary Education Act, and
the Indian Self-Determination and Education Assistance Act -- the model for
self-governance today.
V. TITLE
This title would create a demonstration project for
Tribes on a first-come, first-served basis.
This project would last 8 years from date of enactment of the bill. Interested Tribes would have to formally
make an application to the Secretary of the Interior meeting specific criteria
set forth in the bill. Tribes selected
by the Secretary for participation in the project would be required to enter
into an agreement with the Department on a plan for tribal management of those
Indian trust assets identified in the plan, both monetary and
non-monetary. A Tribe contracting or
compacting under the Self-Determination/Self-Governance laws could develop
systems, practices, and procedures that are different than those used by the
government so long as they meet certain enumerated laws, standards, and
responsibilities, including “good faith and loyalty to the beneficial owner of
the trust asset.”
The bill would require the Secretary to make a
determination that a Tribe’s plan is “consistent with the trust responsibility
of the
Most of this title deals with the administrative
processes involved in applying for participation and timelines for entering
into management plan agreements, and deals little with the substance of the
plans except that they must comply with federal laws and other applicable and
relevant authorities, including tribal laws.
This title does not authorize individual Indian land owners any redress
against tribal management decisions.
VI. TITLE
IV – FRACTIONAL INTEREST PURCHASE
This title would add amendments to the Indian Land
Consolidation Act and, among other things, provide a line of credit for the
Secretary from the Treasury to purchase fractionated interests in trust
land. It also provides for basically a
land condemnation program for individual interests in land.
If the Secretary determines that a tract of land has
fewer than 20 owners, he can offer any one of them a bonus of up to $350 over
“fair market value” as an incentive to sell.
If any individual offers to sell all his trust interests to the
Secretary, then the Secretary can add up to $2,000 to the “fair market value”
offer for all the individual’s interests to reflect the savings to the
government from having to put the purchased interests through probate.
If the Secretary determines that a tract has more
than 200 owners, he is authorized to make an offer of up to four times the
“fair market value” of all the interests.
In this case, the Secretary will include a rejection form with the offer
and advise the individual receiving the offer that it will be considered
“accepted,” unless a rejection is put in the mail within three months. Further, this title provides that the law,
once this bill is enacted, will consider the offer to be accepted unless it is
rejected in writing within 90 days. Any
person accepting an offer, or deemed by law to have accepted an offer, will be
given written notice that the offer received has been accepted and an
additional 30 days to withdraw the acceptance.
Any person who receives an offer may also make an administrative
appeal regarding the number of co-owners, or the “fair market value” determined
by the Secretary, or the effective dates relating to the conclusive presumption
of an agreement to sell. The title does
not provide for a challenge to the presumptions themselves.
The Secretary can have access to the U.S. Treasury to
make these types of purchases for Tribes and will be required to keep a
separate set of books to account for the retirement of the debt associated with
any particular purchase or tract.
Payments received by any individual will not be taxable, and will not
count as offsets to eligibility for any federal assistance program.
Under this title, the Secretary of the Interior will
also be authorized to make settlements to an individual (but not to a Tribe) of
any claim arising from trust land, except with respect to claims for a
historical accounting. The bill does not
address the source of funds to make these settlements and, therefore, money for
these settlements presumably will come from Interior appropriations and not
from the judgment fund. In order to
accept such a settlement of a known claim (otherwise it would not have been
claimed), an individual will have to sign a release of all claims, known and
unknown.
·
What this
Title does. This title authorizes the Secretary of the
Interior to settle claims of individuals arising from their trust lands. It authorizes payment for land consolidation
purchases above the traditional “appraised value,” to reflect something of the
value to the purchaser, thereby providing greater incentive and fairness to
sellers. It also authorizes credit
access to the Department of Treasury for land consolidation purchases, subject
to some unspecified cap on the credit line.
It further insulates individuals from having federal assistance
eligibility threatened by accepting proceeds from selling their fractionated
interests back to the government. And,
finally, it authorizes forced sales of individual interests in trust lands.
·
What this
Title does not do. This title does not correct the wasteful practice of
requiring the Secretary to keep a separate set of books to reflect the
repayment schedule of land purchases. Continuation
of this practice takes time away from Indian trust administration for
unnecessary government bookkeeping, and ensures that formerly fractionated
lands will remain uneconomic parcels and will continue to be a drain on federal
budgets even after they are purchased because they are a drain on the federal
budget. This title does not identify a source of funds
for the Secretary of the Interior to make settlements for claims arising from
individual lands. There is no principled
reason for not permitting such settlements arising from tribal lands as
well. If such settlements come from
Indian program appropriations, then Indians are paying themselves for the
government’s failures. These funds, too,
should come from the judgment fund. If
the Justice Department has a problem with that, the Committees need to stand up
and be counted here.
·
Other
Equitable Policy Considerations. Authorizing the Secretary of Interior to settle
claims arising from individual Indian lands is a good thing. However, forcing individuals to execute a
release of all unknown claims in order to accept a settlement of known claims
is problematic. Consider the following
as an analogy: The National Park Service
would like to acquire land neighboring national parks and owned by
non-Indians. A proposed federal law
would authorize the Park Service to issue offers to buy the land that will be
enforceable as a contract of sale unless it is rejected within a specified time
on a specified piece of paper. This
scenario would certainly be considered a threat to individual property rights
and would not be tolerated on any level.
There is no policy or equitable difference in principle between that
scenario and what is proposed here for individual Indians. No one in this country should be deprived of a
birthright simply by virtue of someone else’s making an offer for it. This is a proposal that would not be
tolerated for non Indians, and it should not be suggested as “good enough for
Indians.”
VII. TITLE V – RESTRUCTURING BUREAU OF
INDIAN AFFAIRS
This title creates a new position within Interior of
an Under Secretary for Indian Affairs who would report directly to the
Secretary and carry out “any activity relating to trust fund accounts and trust
resource management of the Bureau, except for those activities carried out by
the Special Trustee before the Office of the Special Trustee is eliminated on
December 31, 2008.”
The Under Secretary would be a Presidential
appointee, subject to the advice and consent of the Senate, and would have
direct authority over Indian trust issues, including those under the
jurisdiction of the Bureau of Land Management, the Minerals Management Service,
and the Bureau of Reclamation. The Under
Secretary would be directed over the next three years to coordinate with the
Special Trustee to prepare for assuming all the functions of OST in 2009.
The bill recites that this title “is to ensure” more
effective and accountable discharge of the Secretary’s duties for providing
services to Indians. In addition to
assuming responsibility for all the functions of the current Assistant
Secretary, the Under Secretary would be directed to “develop and maintain an
inventory of Indian trust assets and resources,” including data security.
Most of this title is devoted to the administrative
protocol for transferring budget authority, personnel, and furniture, fixtures
and equipment to the Under Secretary.
Job positions and salary levels of current personnel in OST and the Assistant
Secretary’s staff are given limited protection for one year after being transferred
to the Under Secretary. One of the Under
Secretary’s first duties would be to recommend within six months legislation to
clean up the statute books on the personnel positions and lines of authority
associated with administering Indian affairs within the Department.
·
What this Title
does. It creates by statute another Presidential
appointee in the Department (besides the Secretary herself) who would have authority
for a very large portion of Indian affairs administration within the
Department. It transfers the assistant
secretary’s functions, puts a date certain on phasing out the Office of Special
Trustee, and puts the functions of that office in another office outside the
Bureau of Indian Affairs. It devotes
several pages to administrative and other types of bureaucratic
provisions. It also provides for Indian
preference in any hiring under the authority of the Under Secretary.
·
What this Title
does not do. It does not provide any statutory direction
to the administration of Indian trust functions besides requiring an inventory
of assets and resources. Nor does it provide
any strict fiduciary standards for Indian trust administration. It does not expressly vest the Under
Secretary with the same authority over the Fish and Wildlife Service or the
Office of Surface Mining and Enforcement that he has over other agencies with
respect to Indian trust issues. It does
not provide for Indian preference in hiring at OST or anywhere else it has been
eliminated until the year 2009.
VIII. TITLE VI – AUDIT OF INDIAN TRUST FUNDS .
This title would require the Secretary of Interior to
prepare financial statements for individual Indian, Indian tribal, and other
Indian trust accounts in accordance with generally accepted accounting
principles of the Federal Government. Concurrently,
the title would require the Secretary of Treasury to prepare an internal
control report which sets forth his responsibility for (i) establishing and
maintaining an adequate internal control structure and procedures for financial
reporting, and, (ii) assessing the effectiveness of said internal control
structure and procedures for financial reporting during the preceding fiscal
year.
This title would also require the Comptroller General
of the
·
What this Title
does. This
title requires that the annual audit will be made public, and requires
disclosure of the internal controls report.
It requires that the outside auditor be hired by someone other than the Department
of the Interior.
·
What this Title
does not do. This title does not appear to substantively add
any significant audit requirements in the 1994 Act. To the extent that the duties enumerated here
regarding audits are less expansive than those in the 1994 Act, this title
might even relax current audit requirements.
Except for the internal controls report, this title does not appear to add
anything along the lines recently adopted by the government for auditing public
companies. Furthermore, this title does
not address audit rotation, does not make public the communications between the
auditor and the agencies being audited, and does not require, or even
encourage, more extensive audit coverage than is presently provided by existing
law, regulation or other requirements.
IX. RECOMMENDATIONS.
Given the scope and impact of this bill, as described
herein, ITMA may want to consider pursuing the following recommendations:
·
Continue to be engaged and make sure that both the
Senate and House authorizing Committees are willing to make changes to address
ITMA concerns and priorities.
·
Reconnect with former Congressional allies and be
prepared to mobilize these forces.
·
Be flexible in the Tribal demand for the entire packages
of “principles” offered by the workgroup, i.e., pick and choose important
principles to be enacted now, and not put off.
·
Make the Commission a statutory creature as proposed
in the ITMA draft bill.
·
Support a comprehensive resolution of the Cobell lawsuit in a manner that is fair,
equitable and provides justice to the IIM account holders.
·
Be respectful of individuals’ concerns.
·
Be mindful of the various interests at play among the
Administration, the Congress and the Indian stakeholders.