Billions Missing From U.S. Indian Trust Fund

02-24-2004, 06:22 PM

Billions Missing From U.S. Indian Trust Fund
by Joel Dyer

John Echohawk, director of Native American Rights Fund
The U.S. has lost not millions, but billions of dollars belonging to
native Americans In his testimony before Congress, John Echohawk,
director of Native American Rights Fund, called it "yet another
serious and continuing breach in a long history of dishonorable
treatment of Indian tribes and individual Indians by the United
States government."
Arizona Senator John McCain, the chairman of the Senate Committee on
Indian Affairs, bluntly called it "theft from Indian people."

These men were describing the single largest and longest-lasting
financial scandal in history involving the federal government of the
United States.

With no other recourse left at their disposal, NARF, along with
other attorneys, filed a class action lawsuit in federal district
court on June 10 on behalf of more than 300,000 American Indians.
The suit charges Secretary of the Interior Bruce Babbitt, Assistant
Interior Secretary of the Interior for Indian Affairs Ada Deer and
Secretary of the Treasury Robert Rubin with illegal conduct in
regard to the management of Indian money held in trust accounts and
managed by the Bureau of Indian Affairs.

If the lawsuit's claims are correct, and there's an overwhelming
body of evidence that suggests they are, then the federal government
has lost, misappropriated or, in some cases, stolen billions of
dollars from some of its poorest citizens.

"The BIA has spent more than 100 years mismanaging, diverting and
losing money that belongs to Indians." The trust accounts in
question -- which hold approximately $450 million at any given time -
- aren't filled with government handouts. They contain money that
belongs to individual Indians who have earned it from a variety of
sources such as oil and gas production, grazing leases, coal
production and timber sales on their allotted lands.
Revenues from such sources are held in more than 387,000 Individual
Indian Money (IIM) accounts managed -- or according to
detractors, "mismanaged" -- by the Bureau of Indian Affairs
(BIA). "The BIA has spent more than 100 years mismanaging, diverting
and losing money that belongs to Indians," Echohawk says. "They have
no idea how much has been collected from the companies that use our
land and are unable to provide even a basic, regular statement to
Indian account holders."

Echohawk is quick to point out that the lawsuit was the very last
resort. Native Americans have long been hopeful that a governmental
remedy to the BIA'############### could be found. Finally in 1994,
after years of pressure by both Indians and legislators, Congress
enacted the Indian Trust Fund Management Reform Act and appointed
Paul Homan as the special trustee charged with straightening out the
century-old mess.

Once again there was hope. But the legislative solution proved to be
just another in a long line of toothless piles of paper generated by
government bureaucrats. Although Homan was ready and willing to
repair the system, Congress failed to provide funds to make the
changes a reality. With no other path before them, the Indians took
their fight to the courts.

In many instances it provides the only life-line for Indian families
who often make up the most impoverished sector of our society
Echohawk's claim that the BIA is completely out of touch with the
amount of revenues it collects or should be collecting has been
confirmed by countless congressional oversight hearings covering
decades.
As an example, during one such hearing -- a 1987 Appropriations
Subcommittee hearing on uncollected royalties -- then director of
the Minerals Management Service William Bettenberg told the
committee he was aware that hundreds of millions of dollars that
belonged to Indians was going uncollected from oil royalties each
year. This is in spite of the fact that MMS, a branch of the
Department of the Interior, had been made aware of the annual lost
revenue six years earlier. Bettenberg's revelation is typical of BIA
behavior.

Adding still more credence to Echohawk's claims of government
incompetence pertaining to the IIM accounts is the recent example
provided by the long overdue audit of the tribal trust funds. These
tribal funds, which are also managed by the BIA, are a collection of
approximately 2,000 tribal accounts owned by some 200 tribes. These
accounts hold about $2.3 billion at any given time and are primarily
used to finance essential tribal government services.

Several years ago, after a decade of extensive pressure from the
House Committee on Government Operations, the BIA agreed to contract
with Arthur Anderson & Co. to audit and reconcile both the tribal
accounts and a random sampling of some 17,000 IIM accounts. The
sampling of the IIM accounts was to be a precursor to a complete
reconciliation of all IIM trust accounts -- the first in history.

What happened next is truly astounding. After years of work and
millions of dollars in fees, Arthur Anderson was only able to
reconcile the 2,000 tribal accounts -- not the 17,000 IIMs -- and
only then for the relatively short period of some 20 years from 1973
to 1992.

For this 20-year period alone, the auditor noted that at least $2.4
billion in the tribal trust accounts was unaccounted for and
billions of dollars more were virtually untraceable because of the
questionable nature of the government's records.

As for the IIMs, Arthur Anderson told the feds that its trust fund
system for individuals was so screwed up that it wouldn't even try
to reconcile the accounts and estimated that it would cost $108
million to $281 million just to attempt the monumental task. The
accounting firm claimed that the government had destroyed, never
created or otherwise did not maintain the records necessary to
conduct a reconciliation. Even if the full IIM audit were performed,
the firm said the costly information would be of little or no value
when it came to providing IIM account holders with any real
assurance that their balances are correct.

While the missing billions from the tribal accounts aren't part of
the NARF lawsuit, the reconciliation process for these accounts does
illustrate how badly the BIA's accounting system, or lack thereof,
actually works. In June of this year, Special Trustee Homan told the
Senate Committee on Indian Affairs that the IIM account system
was "as bad or worse" than the tribal accounts. For now, NARF
lawyers are concentrating on the mismanagement of money in the IIM
accounts because in many instances it provides the only life-line
for Indian families who often make up the most impoverished sector
of our society. Echohawk told Congress that most of the IIM account
holders are so poor that they need their money just for basic
subsistence.

BIA's fiscally irresponsible behavior may prove more sinister than
mere incompetence So how did the BIA's financial house get into
such disarray and why has it been allowed to stay that way? The
truth is it has never been in order, and the reasons behind the
seemingly never-ending tolerance of the BIA's fiscally irresponsible
behavior may prove more sinister than mere incompetence. Critics of
the bureau point out that the United States has a long history of
trying to separate Native Americans from their lands and way of
life.
You can choose almost any year since the BIA's predecessor, the
Indian Department, was created in 1824 and find governments reports
describing poor management, no accounting system, missing money, no
attempt to fulfill the fiduciary duty to the Indians as promised and
required by law.

Congress has verbally demanded accountability and drastic change in
the BIA's behavior for more than 100 years. Yet as of 1996 little if
anything has actually changed. A 1992 report titled "Misplaced
Trust: The Bureau of Indian Affairs' Mismanagement of the Indian
Trust Fund" was prepared by the Committee on Government Operations.
The 66-page report contained a scathing review of the BIA and
hundreds of examples of the bureau's blundering over the years.

Among other things, the report surmised that "one hundred sixty
three years later, Schoolcraft's assessment of the BIA's financial
management still rings true. BIA's administration of the Indian
trust fund continues to make the accounts look as though they had
been handled with a pitchfork.

"Undoubtedly there is a screw loose in the public machinery at the
Bureau. Indeed, while mismanagement of the Indian trust fund has
been reported for more than a century, there is no evidence that
either the Bureau or the Department of the Interior has undertaken
any sustained or comprehensive effort to resolve glaring
deficiencies."

Unfortunately, most of what was contained in the Misplaced Trust
report was old news. Essentially the exact same findings were
embodied in the GAO's 1928, 1952 and 1955 audits of the Indian trust
fund. In fact, just since 1982, more than 30 audits have been
performed on the BIA's records. Every single one of the 30 reports
generated have noted serious accounting and financial management
problems and weak internal controls throughout the BIA.

In a tone not often heard these days in Washington, Senator McCain
cut to the chase during a June 11, 1996 oversight hearing when he
stated that "Trustees receive and disburse funds all the time for
other Americans, and if they blow it they pay. In this case it's the
Native Americans who are rightfully owed the money and the federal
government who will be forced to compensate for their loss."

Taxpayers who will have to cough up the money lost by the BIA
McCain makes a good point. But in typical politician style he
forgets to tell us that when he says it's "the federal government"
that will be forced to pay for the mishandling of the Indian trusts,
what he's really saying is it will be taxpayers who will have to
cough up the money lost by the BIA.
Every day that the BIA procrastinates on fulfilling its trust
responsibilities, the price tag to repair the damage goes up. The
1992 Misplaced Trust report clarifies the vulnerability of
taxpayers.

The report states that "Continuing mismanagement and incompetence in
the supervision and control of Indian trust funds present a clear
danger to the American taxpayer, who must bear the financial burden
of compensating trust fund account holders for BIA's breach of
fiduciary duties."

Other sections of the report contain testimony that reads like the
vision from a crystal ball. Speakers from six and 10 years ago offer
warning after warning about the potential for costly litigation at
the taxpayer's expense. The NARF lawsuit stands as harsh evidence
that the warnings fell on deaf ears at the bureau.

Guarding our pocketbooks gives everyone a reason to get involved
with the struggle to correct the injustices being perpetrated by the
BIA. But at some point we must confront the reality that there is
something more at work here than bureaucratic ineptitude.

"If this happened in Social Security, I tell you there would be a
war" When obvious and admitted abuses of a small minority of people
by a government are allowed to continue unchecked for over a
century -- with little or no outcry from the citizenry -- it most
likely means that the majority of the citizens condone the
government's behavior.
What other explanation can there be for the BIA's belligerent lack
of concern for its fiscal responsibilities to Native Americans? It
isn't that the task of properly handling the revenue is just too
daunting. Other departments of the government deal with larger and
more complicated accounting systems with comparable ease everyday.

A similar observation was made by then-Representative from Texas
Albert G. Bustamante during oversight hearings in 1990.

"We have 300,000 accounts. We have about 350 tribes in the United
States. It is really sad that these people have been misrepresented
by the BIA ... They have no real representation in Congress.

"I have a tribe that I represent in my district, but throughout the
years, most of these people have been abused by many, and you in the
BIA ought to be the ones that really look after them.

"If this happened in Social Security, I tell you there would be a
war. If we can manage Social Security, we ought to be able to manage
this."

NARF's Echohawk speculates that the reason for the government's
seemingly eternal incompetence is darker than accidental
mismanagement. "I think it comes down to race. Our people have
historically suffered abuse after abuse. We have continuous problems
with unemployment, health care and education. It just goes on and
on. We don't have any political power to change it, so the
government just continues to ignore us."

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