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Cobell v. Babbitt

December 3, 1999

ELOUISE PEPION COBELL, ET AL., PLAINTIFFS,
v.
BRUCE BABBITT, SECRETARY OF THE INTERIOR, ET AL., DEFENDANTS.



RECOMMENDATION AND REPORT OF THE SPECIAL MASTER REGARDING THE DELAYED DISCLOSURE OF THE DESTRUCTION OF UNCURRENT CHECK RECORDS MAINTAINED BY THE DEPARTMENT OF THE TREASURY

INTRODUCTION

On May 11, 1999, Senior Counsel Phillip Brooks, United States Department of Justice, Environmental and Natural Resources Division (DOJ/ENRD), informed the Special Master about "the loss of documents at the Department of the Treasury." Ex. 1 at 1. In his letter of that date, Mr. Brooks explained that, "on January 27, 1999, Treasury Department personnel stopped the destruction of an undifferentiated document collection stored in the basement of the Hyattsville [Maryland] facility of Treasury Financial Management Service (FMS)." Id. The letter also recounted that, in 1996, a box of documents was "apparently mislaid" "when documents were transferred from FMS [Financial Management Services] to the Bureau of Public Debt." Id. at 2.

Following receipt of this letter, the Court charged the Special Master with investigating the events surrounding the disposition of these documents emphasizing the reasons why the Defendants waited more than three months to inform the Court of the destruction. The following Report is the result of that investigation. *fn1

On June 3, 1999, defendants filed their Report to the Special Master Concerning the Disposition of Uncurrent Check Records Maintained by the Department of the Treasury ("Tyler Report") (Ex. 1) . *fn2 The Tyler Report revealed that, between November 23, 1998 and January 28, 1999, 162 boxes containing historical documents (i.e., government forms reflecting disbursements made by various federal agencies from the beginning of the twentieth century until approximately 1958) were destroyed at FMS' Hyattsville facility. These boxes were part of a cache of 407 boxes and ledgers stored in the basement of that facility. *fn3

Upon being apprised of the destruction of the 162 boxes, FMS attorneys, with the assistance of several FMS employees, conducted a "page by page" search of the remaining 245 boxes of material in an attempt to ascertain the nature and content of the destroyed records. This search commenced on or about February 1, 1999 and concluded on or about February 11, 1999. This search yielded two boxes worth of files which referred to any one of the five named plaintiffs, Individual Indian Monies ("IIM"), or any Native American tribe, agency or individual.

The events leading to the destruction of the 162 boxes of documents are amply detailed in the Tyler Report and need not be repeated here. In glaring contrast to its commendable level of specificity on the document destruction, however, the Tyler Report was inexplicably ambiguous in its narrative of the events which took place between January 28, 1999 - the date when FMS attorneys first became aware that documents potentially relevant to the Cobell litigation may have been destroyed - and May 11, 1999 - when the Court was finally notified of the destruction. The particular paragraph of the Tyler Report that ultimately launched this investigation reads as follows:

In February, March, and again, in April 1999, the "GAO records,"[ *fn4 ] and the results of the review of the boxes of uncurrent check records that were not destroyed, were a topic of discussion by and among counsel who were handling the Cobell litigation. These boxes were discussed by counsel from time to time in the context of the myriad of matters that have arisen in this litigation in recent months. One discussion among counsel in late February 1999 concerned Treasury's effort to ascertain the universe of documents that might be relevant or potentially relevant to this lawsuit, for the intended purpose of identifying these documents to the Plaintiffs. The responsiveness and/or relevance of the uncurrent check records at the Hyattsville facility were discussed at that time. Subsequent discussions among counsel concerned the means by which the Special Master and the plaintiffs should be informed of the disposition of the records at issue. It appears that the attorneys who participated in these discussions had differing degrees of knowledge or understanding concerning the content and purpose of the records. They also have different recollections concerning what was said or understood about the nature of the records. The attorneys also had differing opinions concerning when to notify the Special Master that these records had been destroyed and differing recollections concerning internal discussions about this subject. Ex. 1 (Tyler Report) at 15-16 (footnote 17 omitted).

As this description of events simply begged the question as to what actually transpired, I directed FMS former Deputy Chief Counsel In-grid Falanga, FMS Senior Counsel Randy Lewis, FMS Senior Counsel Daniel Mazella, FMS Attorney-Advisor James Regan, Department of the Treasury Deputy Assistant General Counsel Eleni Constantine and Department of the Treasury Assistant General Counsel Roberta McInerney to submit declarations setting out their version of the events which transpired between January 28, 1999 and May 11, 1999. Upon receipt of these declarations, I then requested, from the declarants, the Department of the Treasury and the Department of Justice, all documents that related in any manner whatsoever to the document destruction referenced in the individual declarations. Over 15,000 pages were produced.

During the last week of July 1999 and the first week of August 1999, I interviewed the aforementioned counsel concerning the events which took place between January 28, 1999 and May 11, 1999; on September 3, 1999, I interviewed then-Acting General Counsel Neal Wolin. *fn5 The focus of these interviews was to determine why Treasury delayed more than 14 weeks before disclosing the destruction of documents that were potentially responsive/relevant to the Cobell litigation. Upon completing my interviews *fn6 and reviewing the pertinent documentation, I find that the issues underlying the delay by the Department of the Treasury in reporting the destruction of the Hyattsville documents can only be understood in the context of Treasury's role in the overall litigation. Accordingly, this Report first sets out the key players in the Cobell litigation - insofar as they are relevant to the present analysis - and narrates the relationship between the various branches of the Department of the Treasury as well as that agency's role in this litigation. This Report then details the events following the discovery of the Hyattsville document destruction and sets out my findings and conclusions.

I The Persons and Agencies Involved In This Litigation.

Given the multitude of counsel representing the Defendants, in one capacity or another, whose names have surfaced in connection with this investigation, this section introduces only those attorneys who had a significant role in the Hyattsville document destruction and disclosure.

Within the Department of the Treasury, the two legal offices of particular relevance are the Office of the General Counsel, sometimes referred to as "Main Treasury," and the Office of the Chief Counsel, Financial Management Services ("FMS").

The Office of the General Counsel provides legal advice to the Department and its senior officials, including the Secretary of the Treasury. Ex. 17 at 5 (Wolin Dep.). Edward Knight was the General Counsel from September 1994 until his resignation in or around June of 1999. Id. at 4, 16. Neal S. Wolin has been the Acting General Counsel from June 12, 1999 to November 1999. Id. at 3- 4. At the time of his interview, Mr. Wolin had been nominated by President Clinton to serve as the General Counsel and, on November 19, 1999, his nomination to that position was confirmed by the U.S. Senate.

The Deputy General Counsel, who reports directly to the General Counsel, supervises the Assistant General Counsels. Id. at 4-5. Neal S. Wolin was the Deputy General Counsel from April 17, 1995 to June of 1999. Id. at 4 (Wolin Dep.).

The Assistant General Counsel for Banking and Finance, who reports to the Deputy General Counsel, supervises the Deputy Assistant General Counsel for Banking and Finance and the non- supervisory attorneys in that office. Ex. 15 at 4-5 (McInerney Dep.). The Assistant General Counsel for Banking and Finance also supervises the Chief Counsel for FMS and the Chief Counsel for the Bureau of Public Debt ("BPD"). Id. at 4. Roberta McInerney has been the Assistant General Counsel for Banking and Finance from April of 1997 to the present. Id. at 5-6. Eleni Constantine, the Deputy Assistant General Counsel for Banking and Finance, reports to the Ms. McInerney and shares with her the supervision of the non-supervisory attorneys in that office. Ex. 11 at 4. (Constantine Dep.); Ex. 3, at ¶ 5 (Constantine Decl.). Ms. Constantine has served in that capacity from April of 1998 to the present. Ex. 11, at 5 (Constantine Dep.).

The Chief Counsel of FMS reports to the Assistant General Counsel for Banking and Finance and, in turn, supervises the Deputy Chief Counsel and the non-supervisory attorneys in that office. Ex. 15, at 4 (McInerney Dep.). From 1997 to October 1998, David Ingold served as Chief Counsel of FMS. Ex. 3, at ¶ 7 (Constantine Decl.). In-grid Falanga served as the Acting Chief Counsel from October of 1998 to March of 1999. Ex. 5, at ¶ 1 (Falanga Decl.). In March 1999, Debra Diener was selected to occupy the position of FMS Chief Counsel where she currently serves. Ex. 3, at ¶ 7 (Constantine Decl.).

The Deputy Chief Counsel of FMS reports to the Chief Counsel and shares with that person the supervision of the non-supervisory attorneys in that office. In-grid Falanga was the Deputy Chief Counsel from 1994 or 1995 to May of 1999. Ex. 12 at 4-5, 10 (Falanga Dep.).

The non-supervisory attorneys in FMS who report to the Deputy Chief Counsel and who were involved in the Cobell litigation include: Steve Laughton, Randall S. Lewis, Daniel J. Mazella and James J. Regan. Mr. Lewis was hired in March of 1992 and was promoted to Senior Counsel as of February 1998. Ex. 6 at ¶ 1 (Lewis Decl.). Mr. Mazella was hired in September of 1990 and was promoted to Senior Attorney as of February 1998. Ex. 7 at ¶¶ 1-2 (Mazella Decl.). Mr. Regan was hired in February of 1993. Ex. 16 at 4 (Regan Dep.).

II Document Preservation and Production Obligations.

A. June 1996 to October 1996.

On June 10, 1996, Plaintiffs filed the instant litigation seeking declaratory, injunctive, and mandamus relief against the Secretaries of the Interior and Treasury, and the Assistant Secretary of the Interior for Indian Affairs, for the "government's alleged mismanagement of Individual Indian Money (IIM) accounts." Cobell I, 30 F. Supp. 2d at 27, 29 & nn.3-4. The five named plaintiffs were certified, on Feb. 4, 1997, as "representatives of a class consisting of all present and former beneficiaries of the IIM accounts." Id. at 28. *fn7

On June 12 and 15, 1996 - one week after this case was filed, Thaddeus Holt, Plaintiffs' attorney, corresponded with James Simon of the Department of Justice ("DOJ") and expressly requested that both the Department of the Interior and the Department of Treasury "take reasonable steps to preserve documents that may be relevant to the above action." Ex. 18 (Holt letters, June 12 & 15, 1996).

Although Mr. Simon was notified by Mr. Holt of the need to preserve documents in mid-June of 1996, Mr. Simon did not specifically notify Treasury about this until July 15, 1996 when Mr. Simon informed Ms. McInerney who, in turn, notified Mr. Laughton, about "Congress' interest on the issue of whether Treasury destroyed records relating to Individual Indian Money (IIM) account" and the need to preserve all records related to the IIM account to avoid any adverse congressional reactions. Justice believes the matter to be quite serious." Ex. 2, Attachment 00214-00215 (Laughton e-mail, July 15, 1996).

During the week prior to Mr. Simon's and Ms. McInerney's calls, Mr. Laughton had notified various management officials that Treasury was "involved in litigation in Federal District Court involving the Individual Indian Money account - 14X6039, and "that all documents, including e-mails, related to the IIM account should continue to be retained. . . . Any such documents subject to disposal . . . should be retained in hard copy form for potential use in litigation." Id. (Laughton e-mail, July 10, 1996).

In response to Mr. Laughton's correspondence, Russell Morris, a management official at FMS, inquired whether the perception that documents were being destroyed "was a mis-representation of the mass cancellation of old check records and our on-going practice of scratching files of outdated checks." Id., Attachment 00216 (Morris e-mail, July 15, 1996). Mr. Laughton reassured Mr. Morris that his "impression [wa]s correct; however, Justice is taking a very expansive view of what FMS should retain." Id., Attachment 00217 (Laughton e-mail, July 15, 1996). Mr. Laughton then stated that, "[b]asically FMS does not maintain any records related to IIM accounts," meaning individual subaccounts as opposed to the overall numbers. Id.

In the summer of 1996, "FMS counsel also instructed agency personnel to retain all documents related to the IIM account, including e-mails and accounting records such as Statements of Transactions in STAR (Treasury's central accounting system), the check issue and cancellation data in the automated Check Payment and Reconciliation (CP&R) system, and IIM trust fund investment transaction data." Ex. 2, at 11 (Tyler Report).

On August 12, 1996, David Ingold, the then-Chief Counsel, FMS, advised Andrew Eschen (DOJ) of the records possessed by FMS that "would be covered under the terms" of Plaintiffs' proposed requests for interim relief. Ex. 2, Attachment 00219-00221 (Ingold letter, Aug. 12, 1996). Mr. Ingold stated that FMS would retain Treasury checks and accounting records (monthly summaries of transactions) beyond the record retention period; that investment records are retained "for as long as the account is in existence;" and that all e-mail messages are currently being printed out and archived (pursuant to a policy issued on Jan. 19, 1996) and that those relating to IIM are also being retained electronically. Id.

B. November 27, 1996 - "First Order for the Production of Information."

On November 27, 1996, this Court entered its "First Order for the Production of Information" ("November 27 Order") *fn8 directing the "Defendants [to] furnish to Plaintiffs as soon as practicable the following information and documents," of which there were 17 specified categories (Nos. 2 and 3 were reserved). Paragraph 19 of the November 27 Order ("Paragraph 19") called for the production of "[a]ll documents, records, and tangible things which embody, refer to, or relate to IIM accounts of the five named plaintiffs or their predecessors in interest." The November 27 Order further contemplated that document production be undertaken on a rolling basis, such that "information and documents be furnished or produced as each such item is prepared or becomes available, without waiting until all such information and documents are available."

The November 27 Order referred to "Defendants" in the plural throughout, and did not distinguish between Interior and Treasury. The Order, therefore, expressly covered both Departments.

C. Subsequent Discussions Regarding the Need to Preserve Treasury Documents.

On September 23, 1998, Mr. Mazella corresponded via e-mail with FMS Assistant Commissioners and managers, "to remind the senior managers and those with responsibility for records management and litigation coordination of the requirement that FMS preserve certain records." Ex. 7, at ¶ 9 (Mazella Decl.). This e-mail, which was copied to Ms. Falanga, was drafted in the context of obtaining reimbursement for the costs of preserving documents for this litigation: "[a]s you all know, FMS has been under court order since August 1996 to preserve all documents, including e-mails concerning the Cobell litigation, which could relate in any way to IIM funds." Ex. 2, Attachment 00243 (Mazella e-mail). Mr. Mazella declared that, in October, 1998, he, Edward Gronseth (Deputy Chief Counsel, Bureau of Public Debt), and Brenda Hoffman (Attorney, BPD) coordinated "Treasury's policy to retain indefinitely Indian-related investment records." Ex. 7, at ¶ 10 (Mazella Decl.).

On Nov. 17, 1998, a meeting was convened which was attended by Mr. Mazella, Ms. Falanga, Ms. Locks, Ms. Hyman and other FMS managers, *fn9 during which "document retention issues relating to the lawsuit were discussed." "Ms. Locks recalled that "the discussion of document retention was addressed to specifically identified documents." Ex. 2, at 12-13 (Tyler Report); see also Ex. 7, at ¶ 13 (Mazella Decl.). *fn10

On January 21, 1998, Mr. Regan (who was then assigned to this litigation) sent an e-mail to Ms. Falanga, Mr. Mazella, and other FMS management, setting forth his "synopsis of our current understanding of all Treasury records pertaining to the IIM account" and asking for their review. Ex. 2, Attachment 00237-00238A (Regan e-mail). Mr. Regan itemized these records as including (1) Investment Records; (2) Accounting Records - Summary Statements of Transactions; (3) Treasury Checks; and (4) Limited Payability Check Records. Id.

D. Defendants' Representations to this Court from December 1996 to December 1998 Regarding Document Production.

On December 20, 1996, Defendants filed their "Status Report" setting forth their progress complying with the November 27 Order. Ex. 19 (Status Report). Regarding Paragraph 19, the Defendants represented as follows:

Financial records relating to the five named plaintiffs was provided to plaintiffs on December 10, 1996. Efforts are being made to locate and produce copies of all realty records relating to assets owned by each of the five named plaintiffs, and the defendants anticipate those records will be produced within sixty (60) days. Defendants have also requested that each of the five named plaintiffs identify the type and location of any and all property that they each own to expedite the location of all relevant records. Id. at 7.

During the status calls in January and February of 1997, counsel for Defendants represented to this Court that Defendants were in compliance with this Court's November 1996 Order and that Defendants would work with Plaintiffs to resolve any remaining problems. *fn11

Specifically:

On January 21, 1997, Lewis Wiener (DOJ) represented to the Court that, although Plaintiffs had raised numerous concerns, "all of the commitments that the government made as to when it would produce documents, and the documents that would be produced, have been met. . . . We told them on December 27 th [1996] what we would produce on what dates, and as far as I know, we are on track as producing the majority of the documents to date that we committed we would produce." Ex. 20, at 8 (Transcript of Status Call).

On February 11, 1997, Mr. Wiener reiterated that Defendants "will continue to work with Plaintiffs to resolve whatever outstanding production matters remain unresolved." Ex. 21, at 5 (Transcript of Status Call).

On September 15, 1997, counsel for Plaintiffs advised this Court that Defendants failed to produce any canceled checks. Ex. 22, at 5 (Transcript of Status Call).

In their January 6, 1998 Status Report, which was submitted 14 months after the November 1996 Order, Defendants restated their objections to Plaintiffs' requests for document production relating to the Indian trust accounts. Plaintiffs then requested an informal conference to gather "all the people who are knowledgeable about the status, location, and need for the documents (including Treasury, Interior, Price Waterhouse and Arthur Andersen) and who are able to make binding commitments to produce the requested trust documents are present and can speak freely and informally . . . [which] will benefit all parties and the Court itself." Ex. 23, at 3 (Plaintiffs' Request for Informal Conference and Reply to Defendants' Status Report, Jan. 16, 1998) (emphasis in original).

During the June 16, 1998 status call, counsel for Plaintiffs reiterated their concerns that responsive documents had not been produced. Mr. Gingold stated: "we discovered that most of the documents that are related to the five named plaintiffs have not been produced . . . It's been 18 months." Ex. 24, at 3 (Transcript of June 16, 1998 Status Call).

Mr. Gingold further informed this Court that "We're also concerned about another aspect: documents that have not been turned up and are the subject of the November 27, 1996, production order . . ." Id. at 5. Mr. Gingold concluded by stating that: "[n]ot a single acknowledgment of receipt of funds for a single disbursement transaction has been produced. After 18 months and after we've been told that Treasury can produce checks in six months, not a single check has been produced. . . . notwithstanding the statements that have been made [by Defendants], there has been no true cooperation or effort in good faith to produce documents." Id. at 7. In response, Mr. Wiener claimed that "[t]hese allegations that Plaintiffs have raised in this eleventh- hour filing yesterday are half-truths, selected portions of transcripts, and do not convey the full story of what's going on here." Id. at 14. Mr. Gingold rebutted that, (1) "even with the representations made by Mr. Wiener, they are fraught with incompleteness," id. at 32, and (2) "[a]gain, not a single check has been produced by Treasury. Not a single certification for disbursement of funds has been produced by Treasury. . . . If this is an explanation of the completeness of records, then it's a very, very serious problem. And we're not even talking about the predecessor accounts here. . . . There has been no effort to produce the documents required under the order." Id. at 35.

In late August of 1998, two months later, Defendants moved to amend or modify this Court's discovery orders, and asserted that "Defendants have made good faith efforts to produce documents for the five-named plaintiffs in this case." Ex. 25, at 7 (Defendants' Consolidated Motion, Aug. 28, 1998).

On September 14, 1998, Plaintiffs filed their response to Defendants' Aug. 28, 1998 motion in which they pointed out that, "[t]he November 1996 order was a negotiated one. When the government agreed to it there was no suggestion that it could not be complied with. There was no suggestion that it was overly broad. There was no suggestion that some 'temporal' limit should be put on it." Ex. 26, at 3 (Plaintiffs' Response to Defendants' Motion, Sept. 14, 1998). Plaintiffs also cited to the Defendants' Dec. 27, 1996 Status Report [Ex. 19, supra], which had expressed no reservations about their compliance with Paragraph 19 of the Nov. 1996 Order. Id. at 4.

During the Sept. 14, 1998 status hearing, Mr. Wiener represented to this Court, regarding the status of Defendants' document production, that: "The long and short of this is . . . we will produce documents for the five named plaintiffs as part of our on- going document production." Ex. 27, at 5 (Transcript of Sept. 14, 1998 status hearing).

During the November 6, 1998 status hearing - almost two years to the day after this Court entered the November 27 Order - this Court inquired as to: "when the government can bring itself into compliance with the prior orders requiring the documents to be produced as to the named plaintiffs and again perhaps you can tell me more at the November 23rd [1998] hearing how you expect to go about bringing yourself into compliance." Ex. 28, at 5-6 (Transcript of Nov. 6, 1998 Hearing).

During the November 23, 1998 status and motions hearing, there was an extensive colloquy between counsel for the parties and this Court concerning Defendants' discovery production. *fn12 Mr. Wiener asserted that: "There are no discovery obligations that I understand we are in violation of for having not produced." Ex. 29, at 19 (Transcript of Nov. 23, 1998 hearing). Mr. Wiener also advised this Court that, "I have been advised by our witnesses that the document productions for BIA [Bureau of Indian Affairs] and Treasury will take less time than [will] the document production for the Office of Special Trustee [Department of the Interior]." Id. at 67.

Mr. Gingold responded by reminding this Court that "[t]o date, item 18 and item 19 of that [Nov. 1996] order remain outstanding. . . . We've received no documentation whatsoever with regard to predecessor accounts. . . . We've received no documentation whatsoever with regard to disbursements from the system." Id. at 68. Mr. Gingold further noted that "one of the problems we have had from the very beginning is what appears to be casual representations of problems and then a subsequent recognition that the problem doesn't seem to exist. Over the past year Mr. Wiener and I have had many discussions with regard to documents that have not been produced." Id. at 72. Mr. Gingold summarized by asking, "What has been done? I mean, we're talking about a year, two years ago this Court issued the first order of production, and today we are not much further ahead than we were two years ago. How many more years are we going to go?" Id. at 77.

Mr. Wiener responded: "I have put the people at the Department of Treasury at work. They have told me that they will be able to produce documents for the specific five named plaintiffs, which I will personally turn over to plaintiffs' counsel." Id. at 81. Mr. Wiener also represented to this Court that "[t]hey [Treasury] say they have no documents on predecessor accounts. The Court's order says documents for the five named plaintiffs or their predecessor accounts. It doesn't say 'and,' it says 'or.' We are producing and trying to produce, and are representing to this Court today what we are doing to produce those documents for the five named plaintiffs. If they want documents for the predecessor accounts in lieu of the documents for the five named plaintiffs, then we can talk about how we're going to produce documents for them. But we are proceeding in good faith, your honor." Id. at 82-83. *fn13

On November 24, 1998, the status conference and motions hearing before this court resumed. At that time, Mr. Wiener represented to this Court that "[t]he only documents that have not yet been produced to Plaintiffs, by our records, are the OST [Office of Special Trustee, Interior] documents." Ex. 30, at 108-109 (Transcript of Nov. 24, 1998 hearing). John Miller (Deputy Special Trustee for Policy in the Office of the Special Trustee for American Indians ("OST"), Dept. of the Interior), who testified on behalf of the Defendants, asserted that the Treasury documents will not be among those that his agency will be searching for or be able to find in their records. Id. at 122-123. Mr. Miller emphatically stated, "[n]ever Treasury" and that "[i]t will be a total accident if they're there." Id. at 123. FMS Director of Financial Processing Division Pamela Locks, testified that "[i]t is my understanding that other documents, unidentified documents, will be produced, and it could be produced in a shorter period of time [than two months]." Id. at 168-169. Mr. Wiener then corrected his previous representation as to Treasury's document production: "Your Honor, I alerted the Court before the break that I had been provided with copies of the canceled checks from the Department of Treasury. I provided them here today to our opponents. I have not yet provided a copy to my own experts. My immediate interest was in providing them to Plaintiffs first." Id. at 197-198.

At the December 15, 1998 status hearing, the Court stated to Defendants' counsel that "[y]ou haven't produced the documents relating to the five named plaintiffs yet." Mr. Wiener responded that "[w]e have produced documents for three of the five named plaintiffs as we have previously represented." Ex. 31, at 7 (Transcript of Dec. 15, 1998 hearing).

During the January 25, 1999 contempt hearing, the Defendants represented to the Court that: "I think, absolutely no question at this point, vis-a-vis Treasury, that Treasury has done everything that it could do. Because one thing is clear here, is that Treasury can't pull any of these copies of checks until they're provided with adequate information. . . ." Ex. 32, at 1490 (Transcript of Contempt Hearing). In response, this Court remarked that, "You know, that's a very troublesome point to the Court too, because I had all these statuses for two years, and I had a representative of the Treasury sitting there at the table at every one of these statuses. They went two years and never produced one single check, one single piece of paper. And they waltz in here in November [1998] and their explanation is: 'Well, nobody at Interior every gave us a name or identifying data until November of '98.' So two years later after my order, suddenly, they wake up and tell me they've never produced a thing, when they're sitting here, when representations are being made by the Department of Justice that everything's been produced. How can they sit there silently, Treasury lawyers sitting there silently while that's being told to me, and never disclose to the Court what was going on?" Id. at 1490-1491. Mr. Brooks replied that "People weren't thinking. They were thinking that it was a Department of Interior order, that the Department of the Interior had to produce the documents." Id. at 1491.

III Other Incidents of Document Destruction at the Department of the Treasury.

The Hyattsville incident was not the first time that Treasury documents which may have been related to the Cobell litigation were either lost or destroyed. On two separate occasions, Treasury attorneys failed to promptly disclose these events to the DOJ, the Plaintiffs and this Court. For contextual reasons, these earlier incidents merit discussion.

A. The 1996 Bureau of Public Debt "Missing Box."

In November of 1996, "responsibility for investment of Federal trust funds was formally transferred from FMS to BPD [the Bureau of Public Debt]." Ex. 37 (Ferrell letter to Special Master, June 4, 1999). At that time, FMS sent 28 boxes by United Parcel Service ("UPS") to the BPD facility in Parkersburg, West Virginia. Only 27 boxes were received. Id. Inquiries were made within BPD and with UPS, but the box was never traced and UPS informed BPD that the package was lost. Id. According to Mr. Ferrell, the "missing box contained either correspondence or 1081s" dating back to March of 1995, with all older records already located at the Federal Records Center. Id. However, Mr. Ferrell asserted that, since BPD "possesses a folder containing all investment/redemption requests submitted by BIA [Bureau of Indian Affairs] and confirmations for all IIM account transactions . . . dating back to March 1, 1995," the BPD "believes they are able to account for all investment documents related to the IIM account." Id.

Ms. Falanga testified that, at an unspecified time, BPD attorney Brenda Hoffman "informed me that her bureau had investment-related documents that had been lost in shipment between FMS and Public Debt. I advised her that we need to tell Ms. Constantine immediately. We did, and the issue was added to our weekly to-do list." Ex. 12 at 190-192 (Falanga Dep.). Ms. Falanga further testified that when she raised the subject of formally disclosing the missing box, "Eleni [Constantine] essentially said no," and Ms. McInerney did not comment. Id. Ms. Falanga is certain that she attempted to impress upon Ms. Hoffman the need "to notify the Court about the destruction." Id.

On May 11, 1999, after disclosing the destruction of the Hyattsville documents, the DOJ notified the Court about the BPD "missing box" problem. Ex. 1, at 2 (Brooks letter to the Special Master). The following month, a more detailed analysis of this problem was provided in which Mr. Ferrell concluded that, although the BPD cannot verify the contents of this box, the BPD "believes that they are able to account for all investment documents relating to the IIM account," and the missing records only go back to March of 1995. See Ex. 37, passim.

B. The June 1997 Destruction of Microfilms. *fn14

In July of 1997, Mr. Laughton, the FMS attorney who was principally responsible for the Cobell litigation at that time, emphasized to FMS management the need to preserve documents pertaining to Individual Indian Money records. Ex. 2, Attachment 00235 (Laughton e-mail, July 21, 1997). On that score, Mr. Laughton asserted: "I hope that is what we are doing." Id. Later that week, Mr. Laughton spoke with Jim Sturgill (FMS), who confirmed that "the representation I made to DOJ in the August 12, 1996 letter regarding FMS' retention of microfilm copies of Treasury checks beyond 6 years 7 months was being implemented." Ex. 2, Attachment 00236 (Laughton memorandum, July 23, 1997). Mr. Laughton informed Andrew Eschen (DOJ) at this time that FMS was retaining these microfilms. Id.

During the January 11, 1999 contempt hearing, Mr. Sturgill testified that the Department of the Treasury destroys microfilms on a monthly basis: "As it aged, typically, on the beginning of every month, they would destroy the oldest month of microfilm." Ex. 32, at 57 (Transcript of contempt hearing). The Court then asked Mr. Sturgill, "And what you discovered when you went down there was that no one had ever communicated to the people who were actually destroying the microfilm your prior agreement not to destroy it?" to which he replied, "That's correct." Id. Mr. Sturgill testified that the instructions prohibiting the destruction of documents "were given orally to one of the supervisors to contact Johnson Controls," the contractor in charge of destroying old documents. Id. at 58. Mr. Sturgill asserted that, regarding his knowledge of this Court's November 1996 Order, "No, I wasn't aware of that order." He similarly claimed not to have "any knowledge" of Treasury's compliance with this Order. Id. at 60.

Mr. Mazella and Ms. Falanga each testified that they did not learn until early 1998 of the June 1997 destruction of the microfilm checks. Once aware of the destruction, Mr. Mazella and Ms. Falanga informed Mr. Eschen (DOJ) by telephone "that we didn't have all of the microfilm," and they subsequently sent him an inventory in April of 1998. Ex. 14, at 46-49 (Mazella Dep.).

Ms. Falanga recalled that "sometime in - between January and March of '98" she "discovered that [the microfilm check records] had just been destroyed." Ex. 12, at 24-25 (Falanga Dep.). She testified that James Brake (FMS) had told her "they had just destroyed a bunch of microfilm. And since I knew this was contrary to our agreement, I immediately called Justice to let them know and talked to Andy Eschen, and I left voice mails for Pam Locks [FMS] and told her we needed to talk immediately." Id.

Ms. Falanga further recounted that "[s]he then met with the client and the assistant commissioner for that area [Mitch Levine] to essentially read them the riot act," since the destruction of the microfilms was contrary to the Mr. Laughton's representation that such documents would not be destroyed. Id. at 29. Ms. Falanga concluded her testimony on this event by stating that she advised Mr. Ingold to inform Ms. McInerney, "because the records indicated that Roberta McInerney had been involved in the original agreement to preserve the microfilm." Id. at 31-32. However, Ms. Falanga had no independent knowledge as to whether Mr. Ingold actually reported this destruction to Ms. McInerney. Id.

In early February 1998, the FMS attorneys and staff took affirmative steps to ensure that no further destruction of any microfilms would occur. Mr. Regan sent an e-mail to Ms. Falanga and Mr. Mazella informing them that he had spoken with the FMS management in charge of these records, and "reiterated that FMS should not destroy ANY microfilm copies of negotiated Treasury checks UNTIL FURTHER NOTICE given the matters at issue in Cobell." Ex. 2, at 11 and Attachment 00239 (Regan e-mail, Feb. 5, 1998) (emphasis in original).

James Sturgill (FMS) then sent an e-mail to Ms. Locks, Ms. Falanga, Mr. Mazella, and others, stating that FMS will complete its inventory of the microfilm checks in storage and the dates covered. Id., Attachment 00240 (Sturgill e-mail, Feb. 9, 1998). Mr. Sturgill then emphasized that: "Make sure WE DON'T DESTROY anything! I'd suggest Pam [Locks] put out a memo to this effect." Id. (emphasis in original.)

Ms. Locks then informed FMS attorneys that the microfilm inventory had already been completed. Id., Attachment 00241 (Locks e-mail, Feb. 9, 1998). Ms. Locks wrote that "I personally spoke with Herb [Taylor] last Friday to inform him not to destroy ANYTHING until further notice." Id. James Brake (FMS) then informed the outside contractor, who had destroyed the microfilms, that this was to stop: "This memorandum is a follow-up for you not to destroy any more microfilm until further notice." Id., Attachment 00242 (Brake memorandum, Feb. 10, 1998).

Mr. Mazella recalled that, in March and April of 1998, he and Andrew Eschen (DOJ) drafted the declaration of Ms. Locks regarding these microfilm records. Ex. 14, at 52-53 (Mazella Dep.). Mr. Mazella testified that Mr. Ingold "asked me or directed me to make sure that the disclosure of how much microfilm was left was contained in the declaration of Ms. Locks." Id. However, Mr. Mazella testified that the final version reflected the input of Messrs. Ingold and Eschen, since it mentioned what was left, and did not mention that microfilms had been destroyed. Id. Noting his discomfort with this disclosure, "[b]ecause I was unsure that that was really a complete disclosure," Mr. Mazella admitted that Ms. Locks' declaration omitted the fact that certain microfilms had been destroyed. Id. at 54.

Mr. Mazella testified that, in retrospect, he believed that Ms. Locks' declaration did not suffice to satisfy what he considered to be his duty to notify the Court about the microfilm destruction. Id. at 56-57. Mr. Mazella believed "that the Department of Justice should have made a more complete disclosure of the destruction of the microfilm," id. at 57, as Ms. Locks' declaration "was drafted in a way so that it would not give a complete picture of what happened." Id. at 61.

Mr. Mazella remembers informing Ms. Falanga of the failure to disclose the destruction of the microfilms in Ms. Locks' declaration, and "that she was uncomfortable with that, also, but that was Mr. Ingold's decision." Id. at 56.

Mr. Mazella testified that, in late November 1998, he and Ms. Falanga informed Ms. Constantine and Ms. McInerney, for the first time, "that this destruction [of microfilms] had occurred" in 1997, and "so all of us . . . felt that disclosure should be made complete, and that was done so . . . in the Defendants' response to the show cause motion." Ex. 14, at 54-55 (Mazella Dep.).

Ms. Falanga also testified that, in late November 1998, Ms. Constantine and Ms. McInerney were informed of the microfiche destruction. Ex. 12, at 93-94 (Falanga Dep.). Ms. Falanga informed them "that I had talked to Susan Cook [DOJ/ Environment & Natural Resources Division ("ENRD")]

who had been added to the case, and after I had reported the destruction of the microfilm, . . . Justice did not report to the court. What Justice did, with the agreement of the chief counsel [Mr. Ingold] and I wasn't involved, I was out at that period, they finessed the issue. They made an affirmative statement about the amount of microfilm we had, rather than say, we destroyed." Id. at 93-94. Ms. Falanga testified that she believed that this statement was in Ms. Locks' affidavit. Id. Ms. Falanga admitted that while she had raised her concerns with the Locks affidavit and the microfilm destruction with DOJ, these issues were not reported to this Court until the January 1999 contempt hearing, "and it was finessed in a motion to dismiss." Id. at 98.

Ms. Constantine testified that when Mr. Mazella and Ms. Falanga informed them, in late November of 1998, about the July 1997 destruction of the microfilms, that she "was quite concerned. I think Roberta [McInerney] was too. We felt that we immediately had to tell the General Counsel about this problem. This was a level of problem that had to go up right away." Ex. 11, at 57 (Constantine Dep.); see also Ex. 3, at ¶ 9 (Constantine Decl.).

Ms. McInerney testified that she "can't remember when I learned about that," Ex. 15, at 49 (McInerney Dep.), and that as of late 1998, she "wasn't so much involved even in the details like the microfiche. I was hardly even aware of the microfiche destruction. I was just wasn't that involved in the case." Id. at 75. Ms. McInerney also testified that "I don't remember being aware, to be honest, of the microfiche destruction until much later when we were talking about . . . . the summary judgment motion." Id. at 100.

The Treasury attorneys, during a December 1998 meeting with the DOJ/ ENRD attorneys, headed by Assistant Attorney General Lois Schiffer, "also advised DOJ of the inadvertent destruction of the microfiche checks and recommended immediate disclosure of this destruction to the Court, with which DOJ agreed." Ex. 3, at ¶ 12 (Constantine Decl.). Mr. Wolin testified that he attended this meeting, which occurred on or around December 28 or 29 of 1998, during which, he believed that the microfiche destruction was mentioned. Ex. 17, at 54-55 (Wolin Dep.).

Mr. Wolin testified that when he learned of the destruction of the microfiches, he "absolutely" expected Ms. Falanga and Mr. Mazella would have reported this destruction to him immediately, and this would have resulted in "a direct report to counsel at Justice and in turn to the court, absolutely." Ex. 17, at 56 (Wolin Dep.). Mr. Wolin testified that it was this event that made him realize there was a need for better oversight from Main Treasury, and he therefore assigned Ms. Constantine to this litigation for that purpose. Id. at 58-59.

In its Opinion holding then Secretary Rubin in contempt, this Court held that the destruction of these microfiches, contrary to the preservation order, "is attributable to poor instruction from management level officials" and, therefore, "is indicative of the [Treasury Department's] overall performance in this litigation." Cobell II, 37 F. Supp. 2d at 28.

IV The Hyattsville Documents.

A. The January 28, 1999 Discovery of the Destruction.

1. Ms. Locks Discovers a Folder with Indian-Related Documents on Her Chair and Reports This to Mr. Mazella Who Orders Her to Stop the Destruction of These Documents.

According to the Tyler Report, on January 28, 1999, Ms. Locks "found a folder on her office chair which contained a reference to IIM accounts. After making some inquiries, Ms. Locks learned that the files had been pulled from the boxes in the basement, which were in the process of being destroyed. Concerned about the reference in the records to IIM, Ms. Locks interrupted a meeting attended by FMS Senior Attorneys Dan Mazella and Randy Lewis. Ms. Locks showed Mr. Mazella the file folders, and indicated that the files were currently being destroyed. Ms. Locks inquired whether the documents might be relevant to the Cobell litigation. Seeing the reference to IIM, Mr. Mazella immediately instructed Ms. Locks to stop the disposition of the documents. No additional disposal took place following the order to stop." Ex. 2, at 10 and Attachments 00051-00053 (Tyler Report and Jan. 28, 1998 e-mails).

Mr. Mazella declared that Mr. Lewis and he "were conducting witness preparation . . . when Ms. Locks informed us of the existence of the boxes in the basement at Hyattsville and that the documents were being destroyed. One of the files that Ms. Locks showed me had a listing of IIM checks which appeared to have been outstanding and canceled and included the names of payees. Two other files . . . were clearly from disbursing officers from Bureau of Indian Affairs agency or area offices. I told Ms. Locks to go downstairs and stop destroying documents, which was done." Ex. 7, at ¶ 15 (Mazella Decl.). Mr. Mazella expounded upon this during his deposition when he testified that when he saw the "document which had the individual Indian money and it had listings of payments and it had people's names on it, and that they were being destroyed, I was shocked." He recalled that "Ms. Locks told [him] that she had these documents which were clearly potentially relevant to the litigation that were being destroyed. And I told her to stop destruction immediately. To go downstairs and stop." Ex. 14, at 126-128 (Mazella Dep.).

2. Mr. Mazella Reports the Document Destruction to Ms. Falanga.

According to the Tyler Report, "[i]mmediately following the discovery of the material from the basement referencing IIM accounts on or about January 28, 1999, Attorney Mazella contacted In-grid Falanga who was at a FMS meeting in Charlottesville, and she informed the FMS commissioners . . . and apprised her of the situation." Ex. 2, at 14 (Tyler Report). Until that time, Mr. Mazella claimed that "he was unaware of the existence of the Hyattsville boxes and/or their contents (as well as the ledgers and other materials since discovered in the Hyattsville basement) until Ms. Locks brought the files to my attention." Id.

Ms. Falanga confirmed that she "first learned of the Hyattsville records" when Mr. Mazella told her about their destruction. Ex. 5, at ¶ 4 (Falanga Decl.). Ms. Falanga recalled that "Mr. Mazella informed me that he had immediately ordered everyone to stop the destruction of any and all documents. Mr. Mazella also informed me that he had learned from Doris Hyman, an FMS employee, that these boxes probably had Indian-related documents in them. I also believe that Mr. Lewis informed me at this time that these appeared to be GAO documents." Id. Ms. Falanga testified that, at the time, she "considered them GAO documents" and not Treasury documents, which would have "a different implication to me" for the Cobell litigation; *fn15 she recognized that subsequently "there was a decision that they were, in fact, Treasury documents." Ex. 12, at 42-44 (Falanga Dep.). Ms. Falanga further testified that Mr. Lewis "informed me at the time that these appeared to be GAO documents," but she was still concerned because Mr. Mazella said that Ms. Hyman had told him that "these boxes probably had Indian-related documents in them," which alerted her that "we had another crisis in Cobell." Id. at 58.

Specifically, Ms. Falanga testified that even though she thought they were GAO documents, she was still concerned "first of all, because they were in our facility. Secondly, because they were from disbursing officers, which meant that they involved payments. They were related to Indians, which meant that they were related to Cobell or potentially related to Cobell and they had been destroyed." Id. at 59.

Ms. Falanga testified "that our client had screwed up again and we would have to tell the court" and that this was "related to Cobell." Id. at 111-112. Ms. Falanga informed the FMS commissioners at the Charlottesville meeting about the destruction, and that these boxes may have related to Cobell and the Indian documents. Id. Ms. Falanga does not recall Mr. Mazella telling her why he thought they were Indian documents, "only that they were." Id.

3. Ms. Falanga and Mr. Mazella Inform Ms. Constantine and Ms. McInerney About the Document Destruction.

According to the Tyler Report, "[a] conference call was then conducted with Mr. Mazella, Ms. Falanga, Eleni Constantine [] and Roberta McInerney []. The attorneys discussed the discovery of the boxes in the basement, the need to determine the nature of the records and the quantity of records disposed of, and the need to issue a mandate to preserve all records." Ex. 2, at 14 (Tyler Report).

Mr. Mazella declared that Ms. Falanga (who was in Charlottesville) and he "called Ms. McInerney and Ms. Constantine late that afternoon to inform them of the destruction of the boxes and the nature of the materials we had seen. I told Ms. McInerney and Ms. Constantine that I had been shown a file of what appeared to be listings of outstanding checks, labeled as IIM payments, which contained people's names. [They] instructed us . . . to have FMS attorneys search through the remaining boxes to see if any documents were responsive to the court's November Order." Ex. 7, at ¶ 16 (Mazella Decl.). Mr. Mazella testified that at the time he understood that these documents could be responsive to the November 27 Order, "and the fact that it had people's names meant that, you know, it was potentially responsive to the court's November Order" since it had names which might have "information about a named plaintiff" or their "predecessors in interest." Ex. 14, at 130 (Mazella Dep.). Mr. Mazella testified that, during this conference call, either Ms. Constantine or Ms. McInerney "said, do you mean to tell me that we have destroyed potentially responsive documents? And my answer was, yes." Id. at 133.

Ms. Falanga declared that Mr. Mazella and she "left an urgent message" for Ms. Constantine and Ms. McInerney and "when we reached Ms. McInerney and Ms. Constantine later that same day, we told them everything we knew about the situation . . . . we agreed that we would try to establish . . . whether there were any responsive documents in the remaining boxes." Ex. 5, at ¶¶ 5-6 (Falanga Decl.). Ms. Falanga testified that she informed Ms. McInerney and Ms. Constantine that these documents "were Indian-related documents," although Ms. Falanga did not actually say to them that these documents were related specifically to Cobell. Ex. 12, at 115 (Falanga Dep.). Ms. Falanga stated that Ms. McInerney, Ms. Constantine and she agreed that they would determine whether there were any documents responsive to "any discovery order" in the Cobell litigation. Id. at 117. Ms. Falanga admitted that she did not discuss with Ms. McInerney and Ms. Constantine whether the destroyed documents should be disclosed to the court, and she had no discussions with FMS counsel regarding disclosure to the court, since "[o]ur focus at that time was trying to figure out what was there, what had been destroyed, and who did what, so that when we did articulate it, we could reasonably articulate what had happened." Id. at 136-137.

Ms. Constantine testified that she believed that Ms. Falanga was the first person to inform her about the documents, and that her reaction was: "[w]hat are these documents. . ." Ex. 11, at 81 (Constantine Dep.). When Ms. Falanga said she didn't know, Ms. Constantine then responded, "Well, wait a sec. We're in the middle of a very contentious litigation. We're in the process of trying to find all of the relevant documents that are out there, and we discover that people are just throwing away unknown documents. This is bad. We shouldn't have this situation." Id. at 81-82. Ms. Constantine declared that neither she nor Ms. McInerney "were aware of the nature of the documents that had been destroyed nor of the period over which the destruction had occurred." Ex. 3, at ¶ 18 (Constantine Decl.). Ms. Constantine insisted that: "if I or any Treasury counsel had known that the documents were potentially responsive, we would have immediately reported their partial destruction to the [DOJ and the Court], as we had done with the microfiche." Id.

Ms. Constantine testified that Ms. Falanga "told me they were GAO documents . . . she said something like probably more summary level accounting documents and that nobody knew what they were." Ex. 11, at 88 (Constantine Dep.). Ms. Constantine maintained that if she had known that these documents included specific references to either Indians or IIM accounts, she would have reacted differently: "[a]bsolutely. I believe I would have thought that those are responsive documents. . . . I believe I would have viewed those as responsive documents that we had to, you know, immediately, right away, inform the Court . . . that there was the potential that they had been destroyed," although she then elaborated that "We would have asked DOJ to inform the Court," instead of Treasury informing the Court directly. Id. at 88-89.

Ms. McInerney declared that "I recall having a telephone conference call with In-grid Falanga, Eleni Constantine, and Dan Mazella during which Ms. Falanga and Mr. Mazella informed Ms. Constantine and me that a number of boxes of documents had been discarded at the FMS Hyattsville facility." Ex. 9, at ¶ 3 (McInerney Decl.). She recalled that "[t]he documents were generally described (by either In-grid Falanga or Dan Mazella, I can't recall which one) as being old GAO records stored in the basement of FMS's Hyattsville facility about which the FMS lawyers had no prior knowledge. The documents were also described generally as non-Treasury documents that were not on any Treasury document retention schedule. Ms. Constantine and I asked Ms. Falanga . . . [to search] to determine what the documents were, whether they were responsive to any outstanding document production order in the Cobell litigation . . ." Id.

Ms. McInerney was confident that she was not informed about the specific nature of the documents, beyond Mr. Mazella having described them "as old GAO records, not even Treasury records, undifferentiated government-wide accounting records." Ex. 15, at 80 (McInerney Dep.). Accordingly, "[h]er clear impression after the conversation was that they were summary level accounting documents. That's what they seemed to be." Id.

4. Messrs. Wolin and Knight are Informed About the Document Destruction.

Ms. Constantine and Ms. McInerney both recalled briefing Messrs. Knight and Wolin about the document destruction shortly after they learned about it. Ms. McInerney stated that "I recall that both Messrs. Knight and Wolin were very concerned about this issue . . ." Ex. 9, at ¶ 3 (McInerney Decl.). Ms. Constantine similarly declared that "after talking with Ms. Falanga together we immediately notified Mr. Wolin and Mr. Knight about the destruction." Ex. 3, at ¶ 18 (Constantine Decl.). Ms. McInerney testified that she told Messrs. Knight and Wolin "that it looked like we were probably okay here but we're nonetheless doing a search of the documents to make sure," based upon the representations made by FMS counsel. Ex. 15, at 118-119 (McInerney Dep.).

Mr. Wolin testified that he was not told that the Hyattsville boxes contained Indian-related documents until either when he read the Tyler Report, or in early May when Ms. Constantine "came to finally tell me that there were materials in these boxes that were potentially responsive to the court's orders." Ex. 17, at 62-64, 70 (Wolin Dep.). Mr. Wolin emphasized that had he been so informed in late January, "I would have wanted to get the Justice Department on the line right away." Id. at 67.

Regarding what should have been the correct procedure, Mr. Wolin was clear: "as soon as any Treasury lawyer was aware of information that there -- was of the belief or had any reason to believe that there was material in those boxes that was potentially responsive to the court's orders, discovery orders in this case, my view is they had an obligation to report it up their line, their chain, and probably in any case to report it to the Justice Department lawyers with whom they were having not a small amount of interaction on other matters." Id.

V Events Following the Document Destruction.

A. The February 1, 1999 Order for Document Preservation.

Ms. Constantine testified that, during the January 28, 1999 meeting, FMS counsel informed Ms. McInerney and herself, "for the first time that there had not been any formal order regarding the preservation of documents relevant to the litigation . . . and we determined that such an order should be issued immediately." Ex. 3, at ¶ 18 (Constantine Declaration). *fn16 Accordingly, Mr. Mazella drafted a memorandum for FMS Commissioner Richard L. Gregg's signature, alerting the FMS Assistant Commissioners regarding document production and preservation protocols. Ex. 12, at 118 (Falanga Deposition). Ms. Falanga testified that she reviewed and edited this memorandum, id., as did Ms. Constantine. Ex. 3, at ¶ 19 (Constantine Declaration).

B. Review of the Remaining Hyattsville Documents.

During or after the January 28, 1999 telephone conference between FMS and Main Treasury, Ms. Falanga "assigned James Regan . . . to review the remaining boxes of documents in Hyattsville." Ex. 5, at ¶ 8 (Falanga Declaration). Ms. Falanga testified that she ordered Mr. Regan to oversee the document search "because he had prior involvement with the case," because he was familiar with the scope of Paragraph 19, and "knew that we were looking for documents related to Cobell or to IIM accounts." Ex. 12, at 130-131 (Falanga Deposition).

On January 29, 1999, Messrs. Mazella, Lewis and Regan met with several FMS staff members at the Hyattsville facility to conduct a preliminary review of the remaining boxes. Ex. 6, at ¶ 5 (Lewis Declaration); Ex. 10, at ¶ 4 (Regan Declaration). Mr. Lewis declared that he personally "helped review one or two of the remaining boxes" at Hyattsville and that he understood that they were to search for the five named plaintiffs, but that he "did not find any documents relating to the five named plaintiffs. Ex. 6, at ¶ 5 (Lewis Declaration). Mr. Lewis further declared as to his understanding "that a second purpose was to search the remaining boxes for any files which logically could be linked to the Department of the Interior, in general, or the Individual Indian Monies trust fund, in particular, because we would have to review the remaining files again once we received the names of predecessors in interest from the Department of the Interior;" for that reason, Mr. Lewis pulled any file that pertained to Interior or Indians. Id.

Mr. Regan testified that Mr. Mazella's briefing of the participants at the beginning of this search was his "first . . . hearing or exposure to paragraph 19" of this Court's November 1996 discovery order. Ex. 16, at 86 (Regan Deposition). After a preliminary review of the boxes during this search, the FMS counsel "concluded that a page by page search of all of the remaining Hyattsville records was necessary because . . . a smaller number of documents referenced individual payees." Ex. 10, at ¶ 4 (Regan Declaration).

On February 1, 1999, the two-week review of the boxes and ledgers remaining at FMS Hyattsville commenced. Ms. Locks notified her staff, including Tom Fisher and Check Reconciliation Branch Accountant Brent Weaver, that Mr. Regan would meet with them this morning, "before we start the 'basement excursion.'" Ex. 2, Attachment 00054 (Tyler Report). At this meeting, Mr. Regan briefed the search team of the need for the page-by-page search "because Treasury was under Court order to produce all documents and records relating or referring to the IIM accounts of the five named plaintiffs or their predecessors in interest." Ex. 10, at ¶ 6 (Regan Declaration). The search team was directed to search for any documents referencing IIM or any Indian tribe, agency, or individual name. Id. *fn17 Mr. Regan testified that he himself set "the search parameters [which] were designed to look for the five named plaintiffs." Ex. 16, at 171 (Regan Deposition). Mr. Regan testified that he "wrote down the names of the five main plaintiffs, which people copied." Id. at 87-89. Mr. Regan supervised this search for the rest of this week; Carolyn Talley (another FMS attorney) did so the following week, while Mr. Regan was away. Ex. 10, at ¶ 7 (Regan Declaration).

Mr. Regan noted that "during the search I concluded in my own mind that they were potentially responsive," but he did not share this conclusion with the other FMS attorneys until February 25, 1999. Ex. 16, at 166-167 (Regan Deposition).

Ms. Falanga testified that, as of early February 1999, she was aware "that there were Indian- related documents that had payee names on them," and that these were potentially responsive documents. Ex. 12, at 119 (Falanga Deposition). Ms. Falanga further testified that although she was not personally involved with the search, she did examine one file and had "no doubt in my mind" that it was potentially responsive, because it was Indian related. Id. at 124-125. Ms. Falanga agreed that Mr. Regan also did not have "any doubt about" these documents were somehow related to Cobell. Id. at 138-139.

The search and review of the boxes and ledgers were completed by February 11, 1999. According to the Tyler Report, "[t]wo boxes worth of materials consisting of 114 files were culled during the page-by-page search of the 245 boxed records in accordance with the established search criteria . . . . No documents identifiable to the five named plaintiffs or their IIM accounts were found during this search of the 245 boxes." Ex. 2, at 15 (Tyler Report).

Mr. Regan testified that 114 files were "pulled in accordance with the criteria outlined in the search [meeting]," and asserted that the search criteria were in conformity with the November 27 Order: "[i]n my opinion, they were potentially responsive, and the results of the search were given to Ms. Falanga and Mr. Mazella." Ex. 16, at 101-103 (Regan Deposition). Mr. Regan admitted, however, that although they were subsequently able to rule out certain files as not being Indian-related, at that time (i.e., as of February 11, 1999), every file was potentially responsive to Paragraph 19, "because, let's see, most of them would have referenced individual[s]." Id. at 105.

C. Preparation for the February 11, 1999 Briefing of Mr. Knight.

On or around January 29, 1999, Ms. Constantine instructed Mr. Mazella "to draft a summary of the Cobell litigation discovery status" for Mr. Knight, the General Counsel. Ex. 7, at ¶ 20 (Mazella Declaration). According to Mr. Mazella, "Ms. Constantine asked me by telephone to include . . . the number of times that FMS Office of Chief Counsel staff had sought confirmation that documents were being preserved. Ms. Constantine told me that Mr. Knight wanted to have that information in order to be assured that the FMS' failure to preserve the Hyattsville boxes was not the lawyers' fault." Id. On February 8, 1999, Mr. Mazella and Ms. Falanga met with Ms. McInerney and Ms. Constantine to provide them with the requested information, i.e., the occasions on which the FMS attorneys sought confirmation that documents were being preserved. Id. Mr. Mazella and Ms. Falanga revised their summary in accordance with Ms. Constantine's and Ms. McInerney's comments. Id.

On February 11, 1999, *fn18 Ms. Constantine, Ms. McInerney, Ms. Falanga, Messrs. Mazella and Knight (and possibly Mr. Wolin) met to discuss the aforementioned document that was to be used to brief the Secretary of the Treasury regarding Treasury's discovery responses. Ex. 4, at ¶ 1 (Constantine Supplemental Declaration). According to Ms. Constantine, "Mr. Knight asked what the result of the review of the GAO documents had been. FMS counsel [Ms. Falanga and/or Mr. Mazella] responded that the review was still ongoing and that so far nothing significant had turned up." Id. Ms. Constantine testified that the purpose of this meeting was "to go over the charts of the document" which Mr. Knight was to use to brief the Secretary on the document production. Ex. 11, at 118 (Constantine Deposition). According to Ms. Constantine, "[w]e went over the chart, and Mr. Knight raised the question of, 'Well, weren't there those -- some documents that we heard about, the GAO documents, nobody knew what they were? What happened about them?' And the FMS counsel [Ms. Falanga] responded that they were looking at the documents, and they were thoroughly reviewing them, and we would, you know, we would get back [to him]." Id. Ms. Constantine testified that Ms. Falanga's representation to Mr. Knight was "erroneous," since the search was completed and responsive documents had been uncovered. Id. at 119-120.

Ms. Falanga testified that she told Ms. McInerney and Ms. Constantine that nothing responsive to Paragraph 19 had yet been found, "because we weren't finding any names in [of] the five named payees." Ex. 12, at 140-141 (Falanga Deposition). However, Ms. Falanga, who acknowledged that Paragraph 19 included the predecessors in interest and that the Hyattsville documents were "potentially responsive," admitted that she did not relay that conclusion to the other Treasury attorneys. Id.

Mr. Mazella declared that, at this meeting with Mr. Knight, "all of us discussed the revised discovery summary, which included a brief discussion of FMS' progress in reviewing the boxes and ledgers in the Hyattsville basement." Ex. 7, at ¶ 20 (Mazella Declaration). Mr. Mazella admitted that he agreed with the statement that, as of this date, both he and Ms. Falanga "knew that the destroyed boxes potentially contained potentially responsive and/or potentially relevant documents." Ex. 14, at 180-181 (Mazella Deposition). Mr. Mazella further admitted that he did not recall that anyone told Mr. Knight about the destroyed boxes and their potential relevance: "I don't recall that we said that to him" and "No, I don't recall saying that to him directly" and no one else did so, either. Id. at 181. Mr. Mazella asserted that at this meeting, Ms. Constantine and Ms. McInerney already knew about the relevance or responsiveness of the GAO boxes, since he had told them this on January 28, 1999. Id. at 183.

Mr. Wolin testified that, had he known that potentially responsive documents had been pulled at that time, "he would have called Justice right away. . . . To tell them about that and to make it clear to them that, you know, together we needed to approach the court ...


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