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COBELL v. BABBITT
December 21, 1999
EVERSUSLAWE PEPION COBELL, ET AL., PLAINTIFFS,
BRUCE BABBITT, SECRETARY OF THE INTERIOR, LAWRENCE SUMMERS, SECRETARY OF THE TREASURY, AND KEVIN GOVER, ASSISTANT SECRETARY OF THE INTERIOR, DEFENDANTS.
The opinion of the court was delivered by: Royce C. Lamberth, United States District Judge.
MEMORANDUM OPINION: FINDINGS OF FACT AND CONCLUSIONS OF LAW
This matter comes before the court after a six-week bench
trial and the submission of an administrative record, proposed
findings of fact and conclusions of law by both sides, and
responses thereto. Upon consideration of these materials and the
record in this case, the court makes the following findings of
fact and conclusions of law.
It would be difficult to find a more historically mismanaged
federal program than the Individual Indian Money (IIM) trust. The
United States, the trustee of the IIM trust, cannot say how much
money is or should be in the trust. As the trustee admitted on
the eve of trial, it cannot render an accurate accounting to the
beneficiaries, contrary to a specific statutory mandate and the
century-old obligation to do so. More specifically, as Secretary
Babbitt testified, an accounting cannot be rendered for most of
the 300,000-plus beneficiaries, who are now plaintiffs in this
lawsuit. Generations of IIM trust beneficiaries have been born and
raised with the assurance that their trustee, the United States,
was acting properly with their money. Just as many generations
have been denied any such proof, however. "If courts were
permitted to indulge their sympathies, a case better calculated to
excite them could scarcely be imagined." Cherokee Nation v.
Georgia, 30 U.S. (5 Pet.) 1, 15 (1831) (Marshall, C.J.).
Notwithstanding all of this, defendants, the
trustee-delegates of the United States, continue to write checks
on an account that they cannot balance or reconcile. The court
knows of no other program in American government in which federal
officials are allowed to write checks — some of which are known to
be written in erroneous amounts — from unreconciled accounts — some of
which are known to have incorrect balances. Such behavior
certainly would not be tolerated from private sector trustees. It
is fiscal and governmental irresponsibility in its purest form.
The United States' mismanagement of the IIM trust is far more
inexcusable than garden-variety trust mismanagement of a typical
donative trust. For the beneficiaries of this trust did not
voluntarily choose to have their lands taken from them; they did
not willingly relinquish pervasive control of their money to the
United States. The United States imposed this trust on the Indian
people. As the government concedes, the purpose of the IIM trust
was to deprive plaintiffs' ancestors of their native lands and rid
the nation of their tribal identity. The United States reaped the
"benefit" of this imposed program long ago — sixty-five percent of
what were previously tribal land holdings quickly opened up to
non-Indian settlement. But the United States has refused to act
in accordance with the fiduciary obligations attendant to the
imposition of the trust, which are not imposed by statute.
The defendants cannot provide an accounting of plaintiffs'
money, which the United States has forced into the IIM trust.
This problem, which has been handed down from administration to
administration of apologetic United States trustee-delegates to
generation upon generation of helpless beneficiaries, continues
today and is the basis for this lawsuit. It imposes far more than
pecuniary costs, although those are clear and cannot be
overstated. Plaintiffs' class includes some of the poorest people
in this nation. Human welfare and livelihood are at stake. It is
entirely possible that tens of thousands of IIM trust
beneficiaries should be receiving different amounts of money — their
own money — than they do today. Perhaps not. But no one can say,
which is the crux of the problem.
For the reasons stated below, the court finds that the United
States government, by virtue of the actions of defendants and
their predecessors, is currently in breach of certain trust duties
owed to plaintiffs. The government recently has taken substantial
steps toward bringing itself into compliance in several respects.
Nonetheless, given the long and sorry history of the United
States' trusteeship of the IIM trust, the defendants'
recalcitrance toward remedying their mismanagement despite decades
of congressional directives, and the consequences of allowing
these enumerated breaches of trust to continue, the court will
retain continuing jurisdiction over this matter. It would be an
abdication of duty for this court to do anything less.
A. History Surrounding IIM Trust Establishment
As Chief Justice Marshall noted in 1831, the United
States-Indian relationship is "perhaps unlike that of any two
people in existence" and "marked by peculiar and cardinal
distinctions which exist nowhere else." Cherokee Nation, 30 U.S.
at 16. In the early 1800s, the United States pursued the policy
of "removal" i.e., the relocation of tribal communities from their
homelands in the East and Midwest to remote locations in the newly
acquired Louisiana Purchase territory. Trial Tr. at 846. In
1824, the Bureau of Indian Affairs (BIA) was created to implement
that removal policy.*fn2 Trial Tr. at 152-53; 846. For the
majority of the Nineteenth Century, the federal government entered
into a series of treaties and agreements identifying the lands
owned by the tribes. These treaties and agreements were
frequently violated or amended to reduce Indian holdings and to
open more land to non-Indian settlers. Trial Tr. at 848-49.
During this time period, the tribes held their land communally, so
there was very little individual ownership of land. Non-Indian
land, whether communally or individually owned, could be sold
without the approval of the federal government. Trial Tr. at
By the late 1870s, the government had embarked upon the
reservation era. This era was a particularly miserable time for
the Indians because the reservation policy deprived Indians of
their traditional economy and made them dependent upon the federal
government. Trial Tr. at 851-52. During the reservation era, the
BIA became the provider of foods and goods to the tribes. Trial
Tr. at 852. Hence, by the 1870s, the government had successfully
placed Native Americans in a state of coerced dependency.
After this relationship of dependency between the United
States and the Indian people was forcibly established, the
allotment era began. Driven by a greed for
the land holdings of the tribes, Congress passed the 1887 General
Allotment Act, also known as the Dawes Act. See 25 U.S.C. § 348.
Through the allotment process established by the Dawes Act, a
delegation of American "peace commissioners" would negotiate with
the tribes for the allotment of their reservations. The tribes
were compensated for their land, and each head of household was
allotted some amount of property, usually in 40-, 80-, or 160-acre
parcels. The "surplus" lands that were not allotted to Indian
individuals were then opened to non-Indian settlement. Trial Tr.
at 852-56. Allotted land was held in trust by the United States
for the individual Indians. Therefore, the Indians could not lease,
sell, or burden their property without the approval of the federal
government. More importantly, the United States had again
successfully managed to deprive the Indian people of more land,
this time in return for the creation of a trust status. Between
1887 and 1934, 90 million acres — about sixty-five percent of Indian
land — left Indian ownership. Trial Tr. at 857-57.
The allotments were the product of the United States' effort
to eradicate Indian culture. As defendant Gover testified:
the thinking was that it was tribalism that held the Indians
back; that what they needed to do was develop the sort of
individualism that had been so beneficial for the United
States in its expansion, and allotment was the way to do
that. But . . . the things that accompanied allotment . . .
were really even more dreadful than the allotment policy
For example, there was a system of boarding schools
established, and suddenly the Indian people were subject to
these mandatory education requirements imposed by the Bureau
of Indian Affairs. These schools were run by the Bureau of
Indian Affairs, and they would take these kids away from
their families, put them in these boarding schools. They
might or might not see their parents again for years, or
ever. Train them in English. They forbade them their native
languages. They forbade them their religions. They cut
their hair, and they dressed them . . . like non-Indian kids
would be dressed, and literally tried to turn them into white
They were so confident in this assimilation policy that there
was actually a sunset in most of the allotment agreements
that said after 25 years the trust patents will be withdrawn,
you'll be issued a fee patent, each individual who owned this
land, and you will go forth and prosper. You will own the
land outright, and may do with it what you wish.
In 1934, another major shift in federal policy toward Indians
occurred. With the enactment of the Indian Reorganization Act of
1934, the federal government reversed its assimilation policy and
directed BIA to rebuild the tribal communities and government
structures. See 25 U.S.C. § 462. This new policy ended the
allotment era and authorized the Secretary of the Interior to
acquire land in trust for the tribes and for individual Indians.
The Reorganization Act also indefinitely extended the trust period
for the allotments that had already been made, which is why the
United States has a continuing duty to administer allotted Indian
lands (and the funds arising from those lands) in trust today.
Trial Tr. at 863.
Less than two decades after the Reorganization Act was
passed, in the early 1950s, congressional policy swung in a new
direction. According to Assistant Secretary Gover, "this time the
policy was called the `termination policy.' Termination basically
meant the severing of the relationship between the tribe and the
United States, and, specifically, the severing of the trust
relationship." Trial Tr. at 864. Congress directed BIA to
identify tribes that were
said to be "ready for termination, ready to be released from
federal supervision because by this point the conclusion had
been reached that the real problem with Indian affairs, and the
real reason the Indians are poor is that they're under the thumb
of the federal government." Trial Tr. at 864. Following that
direction, the United States withdrew recognition of the existence
of certain tribes and forswore any responsibility to those tribes
or their people as Indians. The tribal assets were gathered up
and either administered by a corporate entity or distributed
among the tribal members. Much like the allotment policy, this
policy devastated the tribal communities. Trial Tr. at 864-67.
The termination policy ended quickly. After the 1960s, no further
tribes were terminated. Trial Tr. at 867.
The end of the termination policy brought about the onset of
the modern era of Indian policy: self-determination and self-governance.
Beginning in the 1960s, tribal governments began to
reconstitute themselves and take over governmental programs. The
highlight of this policy was the enactment in 1975 of the Indian
Self-Determination and Education Assistance Act, which permits
tribes to assume any of the functions BIA carries out on the
reservation. Upon proper request, BIA must contract with that
tribe to conduct any such function in lieu of BIA. Trial Tr. at
867-68. BIA can refuse to grant the contract only if the tribe
does not have the proper accounting system or the proper property
management or administration capabilities to carry out the
contract. If BIA finds that the tribe does not have those
capabilities, then BIA is obligated to provide technical
assistance to the tribe in order to help it develop the capacity
to carry out the contract.
Tribes may also assume those functions performed by Office of
Trust Fund Management (OTFM) with regard to IIM trust accounts,
through a contract or compact with Interior. To date, three
tribes have compacted to manage IIM trust accounts. Trial Tr. at
309 & 1376. Under the Self-Determination Act, if BIA contracts
with a tribe to allow that tribe to perform a function, the
financial resources that BIA would use in providing that service,
including the overhead, are transferred to the tribe. In essence,
these funds, which represent almost seventy percent of BIA's
budget, just pass through BIA to the tribes. Trial Tr. at 870-71;
881-82; Defs.' Ex. 47.
As a result of the allotments made from 1887-1934 and the
Indians Reorganization Act's indefinite extension of the resulting
trust period, the United States currently holds approximately 11
million acres of plaintiffs' individual land allotments in trust.
Trial Tr. at 903-04. The United States itself is the trustee of
the IIM trust. Congress has designated the Secretary of the
Interior and the Secretary of the Treasury as the United States'
trustee-delegates for certain trust management functions. Within
Interior, several agencies perform some IIM trust function. These
agencies include the Bureau of Indian Affairs (BIA), the Office of
the Special Trustee (OST), the Office of Trust Funds Management
(OTFM), the Bureau of Land Management (BLM), the Minerals
Management Service (MMS), and the Office of Hearings and Appeals
BIA generally has responsibility for trust land management
and income collection. Almost any transaction involving IIM trust
lands must be approved by BIA. To make these approvals, BIA
maintains personnel to review the transfers of those lands and to
appraise the lands in conjunction with those transactions. There
are also income-producing activities on many of these lands,
including grazing leases, timber leases, timber sales, oil and gas
production, mineral production, and rights-of-way. Each of these
activities requires the approval of BIA. Trial Tr. at 116-17;
123; 127; 904-05. These activities are the source of IIM trust
funding. Given BIA's
role, it logically follows that it is responsible for maintaining
complete and accurate land and title records. These records, in
theory, provide the basis for IIM trust payments, which are
controlled by OTFM.
OTFM, in conjunction with the Department of the Treasury,
performs the banking aspect of Interior's trust responsibilities.
Trial Tr. at 126. OTFM and BIA collection officers collect
payments and send them to an agency or area office for deposit in
a private bank where there is a Treasury General Account.*fn3
Trial Tr. at 1239-40. MMS deposits its collections into a
Treasury General Account and then notifies OTFM by facsimile of
the deposit. Trial Tr. at 1242. Once the deposits are posted on
the OTFM system, OTFM credits the amounts either to an IIM trust
account holder or to a special deposit account, depending upon the
information contained in work tickets prepared by the collection
officers. Trial Tr. at 1237-41.*fn4
There are over 300,000 IIM trust accounts on Interior's
system. Trial Tr. at 114-15; 542-43. Interior cannot provide the
exact number of IIM trust accounts that should be on this system.
This number could increase (assuming greater omissions than
duplicates) or decrease (assuming greater duplicates than
omissions). Plaintiffs contend that there should be approximately
500,000 IIM trust accounts. While the overall number of accounts
is quite large, it is important to note that OTFM has identified
16,700 IIM trust accounts with a stated balance below one dollar
and no activity for at least eighteen months. Trial Tr. at 320-21
& 1287. Of course, it is a farce to say that these accounts
actually contain any given amount. Although the United States
freely gives out "balances" to plaintiffs, it admits that
currently these balances cannot be supported by adequate
As mentioned above, OTFM may also credit income from allotted
lands to a special deposit account. A special deposit account is
a holding account within the IIM trust system where money is
placed for safekeeping because, for a variety of reasons, it
cannot or should not be paid to an IIM trust account holder. In
addition, special deposit accounts are quite often used to hold
performance bonds or other money subject to a contingency. Trial
Tr. at 487-89; 1045; 1242-44. Administrative fees collected by
BIA are also often put in special deposit accounts. The
administrative fees belong to BIA, not individual Indians, and
therefore the fees in these special deposit accounts is not trust
money. Trial Tr. at 1045-46; 1246-47.*fn5 Further, in many
areas, funds are placed in a special deposit account while BIA's
ownership and lease file is reviewed to make sure that it is
current. Then, in an overnight process, those funds are released
from the special deposit account into the individual IIM trust
accounts. Trial Tr. at 1245-46.
Once OTFM has credited the appropriate IIM trust or special
deposit accounts, at the end of each day several automatic
processes begin. First, overnight, funds credited to unsupervised
IIM trust accounts, if they meet a monetary threshold of $15.00
($5.00 for oil and gas), are automatically identified and a check
file is created.*fn6 The next day, Interior prints and
mails a check to the IIM trust account holder. Trial Tr. at 1250-51.
Second, also overnight, the balances in supervised accounts or in
accounts with a balance below the threshold are automatically
moved into a control account and, the next day, invested in the
Treasury overnight instrument, awaiting longer term investments.
Trial Tr. at 1247-49; 1304.*fn7 Interest earned on these
investments is credited once a month to the individual accounts or
the special deposit accounts.*fn8 Trial Tr. at 1247-49; 1304.
Other bureaus of Interior perform functions associated with
the management of the assets (i.e., the management of the trust
lands). For instance, MMS acts as the collection agent for oil,
gas, coal, and other types of royalty payments once a lease is in
effect. Trial Tr. at 122. BLM checks for environmental
compliance on trust lands and verifies certain mineral production
figures. Trial Tr. at 124-25. OHA handles the probate of wills
affecting Indian land ownership.
Treasury's IIM trust responsibilities include holding and
investing IIM trust funds at the direction of Interior, as well as
maintaining certain records related to these functions. Of
course, Treasury also performs central accounting for the federal
government and serves as the government's financial manager.
Trial Tr. at 3297-99.
Treasury maintains a single account for IIM trust funds,
known generally as the "IIM account," and does not maintain
individualized IIM trust or special deposit accounts. Trial Tr.
at 1240; 1247; 3312. This common fund is pooled for investment
purposes. The IIM trust account at Treasury, which holds funds
for OTFM prior to disbursement or investment, is maintained in the
name of OTFM. Trial Tr. at 1240; 3309-11; Pls.' Ex. 181. When
Interior deposits funds for credit to the IIM trust account, the
funds themselves go into Treasury's operating account at the
Federal Reserve Bank of New York. Trial Tr. at 2204. Like the
accounts in which money is deposited at the area or agency level,
this account is referred to as Treasury's General Account or TGA.
At the time of deposit, Interior does not tell Treasury to which
agency account the deposit should be credited. Trial Tr. at
2211-12. Rather, Interior reports deposits to Treasury by Agency
Location Code (ALC). An ALC is a code assigned by Treasury to an
agency and is used by the agency to report financial transactions.
Trial Tr. at 2209. The typical ALC used by OTFM is 4844. Trial
Tr. at 3312.
Because it covers transactions made at a higher
organizational level, the 4844 ALC covers more than just IIM trust
transactions. Trial Tr. at 732 & 2209. Each agency is responsible
for classifying its own deposits placed into the TGA and for
reporting this information on a monthly basis to Treasury.
The Treasury General Account at the Federal Reserve Bank is a
cash account, but the various agency accounts maintained at
Treasury do not actually hold funds. Trial Tr. at 3390. Instead,
amounts are debited and credited to the various agency accounts
only as accounting entries. Pursuant to standard procedures for
dual-entry accounting, a deposit of IIM trust funds ultimately
leads to offsetting accounting entries to the TGA and the IIM
trust account. Trial Tr. at 4908. Conversely, a disbursement of
IIM trust funds ultimately results in offsetting accounting
entries to these accounts. Trial Tr. at 4908-09. More precisely,
the issuance of a check (by OTFM) leads to offsetting entries to
the IIM trust account and an outstanding check liability account.
Payment of a check leads to offsetting entries to the checks-outstanding
account and to the TGA. Trial Tr. at 4908-09. No
entry is made to the TGA for an issued check until it actually is
paid. Disbursements of IIM trust funds are charged against the
IIM trust account. Trial Tr. at 3394.
When directed by Interior, funds in the IIM account are to be
invested by Treasury:
All funds held in trust by the United States and carried in
principal accounts on the books of the United States Treasury
to the credit of individual Indians shall be invested by the
Secretary of the Treasury, at the request of the Secretary of
the Interior, in public debt securities with maturities
suitable to the needs of the fund involved, as determined by
the Secretary of the Interior, and bearing interest at rates
determined by the Secretary of the Treasury, taking into
consideration current market yields on outstanding marketable
obligations of the United States of comparable securities.
25 U.S.C. § 161a(b).*fn9 When OTFM issues a check, the funds
remain in the TGA, so the United States still enjoys the benefit
of the trust money; however, until the check is cashed, the amount
is debited from the invested fund, thereby depriving the
beneficiary of any interest. Although this time lapse may be
short in the private sector, it can be much longer in the IIM
trust context because OTFM often has incorrect addresses for the
C. The Indian Trust Fund Management Reform Act of 1994
By the mid-1980s there was uniform disapproval of the manner
in which Interior was administering the IIM trust. In 1988,
Congress began to hold oversight hearings related to the handling
of government trust accounts. On April 22, 1992, the House
Committee on Government Operations issued a report entitled
Misplaced Trust: The Bureau of Indian Affairs' Mismanagement of
the Indian Trust Fund, H.R. No. 102-499 (1992) (Pls.' Ex. 1).
This thoroughly documented report concluded that Interior had made
no credible effort to address the problems in trust administration
in a "wide range of areas" and that Interior had disobeyed many
congressional directives aimed at forcing Interior to correct
trust management practices and reconcile the Indian trust
accounts. Pls.' Ex. 1.
Based largely on the findings made in Misplaced Trust,
Congress passed the Indian Trust Fund Management Reform Act. See
Pub. L. No. 103-412 (1994) (Pls.' Ex. 1). The Act recognized and
codified the trust duties of the Secretary of the Interior, as the
primary trustee-delegate of the United States, toward the IIM
trust. See 25 U.S.C. § 162a(d) & 4011 (Supp. 1999); see also
infra Part IV (listing these duties).
Because Congress recognized that Interior's pattern of
historic failures could not be allowed to continue, the 1994 Trust
Fund Management Reform Act established within Interior the Office
of the Special Trustee for American Indians. OST is headed by the
Special Trustee, who reports directly to the Secretary.
25 U.S.C. § 4042(a). To advise the Secretary and to help oversee
defendants' trust management practices, Congress limited the
availability of the position of Special Trustee to those people
with certain statutory job qualifications, which were meant to
ensure that a trust expert capable of assisting the Secretary
would fill the position. See id. § 4042(b)(1). This trust expert
was to submit his version of a "comprehensive strategic plan" that
would provide the reforms necessary to ensure "proper and
efficient discharge of the Secretary of the Interior's trust
responsibilities to Indian tribes and individual Indians." Id. §
4043(a)(1). Similarly, the Strategic Plan was to identify reforms
necessary to ensure "discharge of the Secretary's trust
responsibilities" in compliance with the 1994 Trust Fund
Management Reform Act, to provide an opportunity for Indian tribes
to assist in the management of trust accounts, and to identify a
timetable for implementing the Strategic Plan. Id. § 4043(a)(2).
Congress charged the Special Trustee with "general oversight
of reform efforts," but he was given no final decision making
authority, as that was left with the Secretary of the Interior.
Id. § 4042(a). The Special Trustee was given several duties,
including the monitoring of the "fair and accurate accounting" of
the trust accounts. Id. § 4043(b). Moreover, Congress required
the Special Trustee to submit an annual report to Congress
reporting on Interior's progress in discharging its statutory
duties. Id. § 4043(f). However, despite the wishes of several
influential legislators and the plaintiffs in this case, the Trust
Fund Management Reform Act vested the Special Trustee with largely
an advisory role. While the Special Trustee must oversee reform,
coordinate the reform efforts, and keep Congress informed, the
Special Trustee must still report to the Secretary. This limited
authority is consistent with the language of the Trust Fund
Management Reform Act and the mandate of 25 U.S.C. § 162a(d). In
that section, Congress placed many of the United States'
enumerated trust responsibilities on the Secretary of the
Interior; logically, the same person who bears the trust duties
must be given the ultimate authority to discharge them. See
Defs.' Resp. to Pls.' FF/CL at 168.
After the Strategic Plan's issuance, Secretary Babbitt met
with the Special Trustee to discuss how to handle the Indian trust
problems. The Secretary, as the official with final decision
making authority, decided to take an approach whereby those
portions of the Strategic Plan that did not require new
institutions would be implemented. Defs.' Ex. 28; Defs.' Ex. 29;
see also Trial Tr. at 331-32; 2938; 3705-06. The Secretary
called for the implementation of the following components of the
Strategic Plan: (1) acquisition/upgrade of trust systems; (2)
records "clean-up"; (3) elimination of trust asset processing
backlogs; and (4) strengthening support functions, including
records, policies and procedures, training, and internal controls.
The Secretary "deferred" three items: (1) new management and
organization structures outside Interior; (2) introducing new
trust products or services based on the prudent investor rule; and
(3) an Indian development bank. Defs.' Ex. 28; Trial Tr. at 2942
E. The High Level Implementation Plan (HLIP)
The HLIP plays a key role in this case not as Interior's plan
to reform the IIM trust, but rather as Interior's most
comprehensive plan to discharge its trust duties. The HLIP
consists of twelve "subprojects," only a few of which are central
to the court's purposes of determining the propriety of affording
plaintiffs prospective relief.
As set forth in numerous congressional reports and the HLIP
itself, Interior has had significant data quality and backlog
problems during its tenure as the United States' primary trustee-delegate
for the IIM trust. See Defs.' Ex. 45, at 10. These
problems have largely caused the systemic flaws that survive to
this date. Document management is the single biggest issue that
must be comprehensively addressed if plaintiffs are to be assured
any practical prospective assurance that their trustee will be
able to give them an accurate accounting. As the Acting Special
Trustee testified, "[t]he records are the base for the entire
trust operation." Trial Tr. at 3164.
a. OST Trust Fund Records Data Cleanup
Under the HLIP, OST data cleanup focuses on one discreet data
issue — deriving the beneficiaries' vital information, such as
names, addresses, and Social Security numbers.*fn10 This
information is to be gathered, in theory, by taking all the paper
documentation contained in the administrative files, which should
contain all the necessary vital statistical information, and
reconciling that information with the data contained on the
"legacy" electronic data bases: the Integrated Records Management
System (IRMS) and the Land Record Information System
(LRIS).*fn11 This process is to take place before loading the
correct vital information into the new Trust Fund Accounting
System (TFAS). Trial Tr. at 1258. Because of document
mismanagement by Interior, achieving this basic goal involves
several steps. First, OST will acquire the records, jacket
folders, and unfiled documents from OTFM's IIM trust offices
across the country. Trial
Tr. at 1262; Defs.' Ex. 62 at 12.*fn12 Second, OST will establish
inventory control of the files. Third, OST will inventory the
documents for inactive or closed accounts.*fn13 Fourth, the
data-cleanup team will move on to verifying certain data and
reviewing active accounts. Specifically, Data Com Inc., Interior's
contractor, will look at the physical file folders and verify
that OTFM has the most current address, Social Security number,
and back-up documentation by comparing that data to the information
contained in the computer system. If a discrepancy exists between
the papers in the file and the information on the computer, then
Data Com will refer the discrepancy to OTFM, with a recommended
change. Trial Tr. at 1270-72.
To guide this process, OTFM has created a policy on mandatory
documents. A mandatory document is something that OTFM must have
to properly manage that account (such as the certificate of Indian
blood and social security number). Trial Tr. at 1273-75; Defs.'
Ex. 63. If any of the mandatory documents are missing during file
review, the contractor at the completion of cleanup will contact
other agencies in an attempt to gather copies of the missing
documents. Trial Tr. at 1276-77.
Once OST, through Data Com, completes this initial vital-information
cleanup of files, the BIA area offices will be ready
for TFAS to be installed. Even after TFAS is installed in a
particular location, however, OTFM will still need to locate and
file additional vital documentation. Trial Tr. at 1293. Data
cleanup, as that phrase refers to the jacket files, is continuing
post-deployment. OTFM, aided by its contractor, will visit BIA
agencies, contact tribal offices, and write to IIM trust account
holders to confirm or correct vital information. OTFM will also
attempt to locate account holders for whom it does not have
current addresses by contacting agencies and tribal officials,
publishing lists of such account holders, and posting these lists
on OTFM's World Wide Web Internet site. Trial Tr. at 1277-78;
1322; 1398-99; 1810. Once the vital documentation is completed,
the files will be imaged so that they can be reviewed by
authorized users at any BIA location in the country. After the
documents are imaged, the hard copies are sent to the central
records center. Trial Tr. at 1293.
In short, Interior's data-cleanup project addresses two
problems that have been allowed to accumulate up to this point — the
unknown identities of the beneficiaries, to whom defendants should
be sending (their own) money, and the "whereabouts unknowns"
(i.e., lack of correct addresses) for the mailing of these
payments. That defendants need to undertake such a sophisticated
plan just to identify that which they should already know speaks
volumes about the current state of IIM trust management.
b. BIA Trust Asset Records Data Cleanup
Pre-deployment data cleanup strictly involves validating the
data already contained in the two legacy systems. This process is
accomplished with the help of an automated tool that compares the
data in IRMS and LRIS and "kicks out" anomalies. These anomalies
are not eligible for migration to the TAAMS system; instead, they
will be analyzed and resolved by a team of Data Com and BIA staff
and then encoded into TAAMS. Trial Tr. at 1083-85; 2278; 2307-08;
The pre-deployment BIA document cleanup is narrowly focused.
The pre-deployment phase does not address the problem of missing
data. Similarly, this phase will not catch errors unless the two
legacy systems contain inconsistent information. As long as the
systems are similarly incorrect, no validation of data will be
made at this point, despite the admitted unreliability of the
legacy systems' data. Nonetheless, this narrow focus is a logical
Given the pre-deployment phase's purpose, data cleanup must
continue after the implementation of TAAMS (i.e.,
"post-deployment"). Post-deployment data cleanup for BIA includes
the continued processing of paperwork backlogs in each BIA office.
Pls.' Ex. 238 at 7.
Making the two (correct) assumptions for the moment that
defendants owe plaintiffs an accurate accounting and that
defendants are missing a share of necessary documents to reach
that end, then it follows that defendants must retrieve documents
from outside sources, also referred to as third-party documents.
Defendants currently have no written plan for doing so.
Interior's most specific plan for BIA data cleanup is Plaintiffs'
Exhibit 238, a draft "Data Clean Up Subproject Plan," created no
earlier than May 1, 1999. As described above, the plan contains
five document clean-up phases, two of which are the already
described pre-and post-deployment phases. The fifth and final
phase is entitled "Verification and Audit." Pls.' Ex. 238, at 26.
While this phase sounds like a sterile accounting exercise, it is
truly the most important and challenging phase. Due to the
backloaded construction of the BIA document clean-up plan, because
no previous phase includes a plan for retrieving all of the
missing data required to give plaintiffs an accurate accounting,
this last phase encompasses the only hope for a planned retrieval
of missing data from third-party sources.
It is not clear, even at the highest level of planning,
whether Interior intends to gather these third-party documents,
which are necessary to support an accounting. For example,
Interior's fifth phase includes the following:
After TAAMS has been populated with BIA data, the records in
TAAMS need to be verified to ensure that they are complete
and accurate to the greatest extent practical. This task is
scheduled to be performed subsequent to the conversion to
TAAMS, and will involve verifying the data in TAAMS against
hardcopy records, other hardcopy sources, and available
reliable sources of information.
Id. at 15. First, it can be readily seen that this statement does
not explicitly provide for missing data to be retrieved if BIA
does not already have it. Only the records
"in TAAMS" will be verified and audited, and no previous phase
calls for TAAMS to be "populated" with outside information. Id.;
see also Defs.' Ex. 45 ("Data Clean Up Defined. The Data Clean
Up Sub projects within OST and BIA are aimed at ensuring data
housed in existing or new systems are accurate and timely, and
at eliminating transaction processing backlogs. . . ." (emphasis
added)). Second, what the language gives, it also takes away.
The records "in TAAMS" will be verified to ensure that they are
"complete," but only "to the greatest extent practical." Pls.'
Ex. 238, at 15. Similarly, this approach "will involve verifying
the data in TAAMS" against "other" records, but plaintiffs are
left with only the promise that "roughly 30% of all BIA hardcopy
records will be reviewed," and that 30% will be "at least partially"
reconciled to the TAAMS information. Id. On the other hand, the
plan does include a review of "other hardcopy sources and available
sources of information." Id.
It is clear that Interior has no intention of beginning to
gather necessary third-party documentation, if at all, until the
fifth phase of document cleanup (except for "vital information"
and anomalies in the legacy systems). If this process is to occur
at all, then it is not scheduled to begin before January 2001.
See id. at 30 (showing that there are no Phase Five beginning or
ending deadlines through December 31, 2000). Even at that point,
Interior's intent to gather third-party documents is dubious, and
hedged at that. Therefore, it can be fairly stated that Interior
has no written plan to gather this necessary missing information
required to render an accurate accounting. Indeed, it does not
even have a discernable intent to do so.
2. BIA and OHA Probate Backlog
BIA has a probate backlog of approximately 12,000 cases.
These probates affect the land interests in the IIM trust; in
turn, land interests are determinative of the proper payment
amounts that must be made to each affected beneficiary. Thus, the
probate backlog has a direct effect on the proper administration
of the IIM trust and must be eliminated. The HLIP currently
contains no formal plan to deal with the probate backlog.
However, a "re-invention team" has developed a plan that will be
formally included in the HLIP revision. That plan has several
components including: (1) hiring additional staff working on
probate at the area level; (2) using skilled "SWAT" teams to go
area by area to reduce the backlog; (3) asking Congress for an
amendment to the authorizing statute to increase the size of the
estate that can be probated administratively to avoid an
automatic-hearing right in the Office of Hearings and Appeals; and
(4) designing an automated tracking system. Trial Tr. at 984-85.
In addition to these anticipated improvements, BIA is taking other
steps to address the problem of fractionated Indian land interests
Appraisals are important for evaluating whether the trustee
is managing the underlying assets prudently. While asset
management is not part of this lawsuit, appraisal backlogs affect
the processing of leases, which in turn affects the ability to
render an accounting. The most recent number given to the court,
which was derived by the former Special Trustee, states that there
were approximately 212,000 title defects that needed to be
addressed through reducing the appraisal backlog. Trial Tr. at
Interior plans to reduce some of the appraisal backlog by re-defining
when appraisals are required as a matter of Interior
policy. This re-definition has lead to two fundamental appraisal
changes. First, BIA has determined that a single appraisal before
a lease is entered is sufficient, as opposed to appraising the
property on a yearly basis. Trial Tr. at 1020-21. Second, because
BIA is not required to provide appraisals on properties not held
in trust, BIA has eliminated its practice of providing appraisals
of properties held in fee. Trial Tr. at 1010-11; Defs.' Ex. 56;
Defs.' Ex. 57. BIA has begun to implement a computer-generated
modeling technique to value fractional land interests. In so
doing, Interior hopes to achieve some balance between the need to
value the very small interests in these allotments versus the cost
of performing full-fledged appraisals on those same small
interests. Trial Tr. at 1016-17.
Both Secretary Babbitt and the Special Trustee agreed that
the government has fallen behind in maintaining the technical
capabilities necessary to track trust resources and that the
upgrade of these systems had to take foremost priority. Trial Tr.
at 3707-10. For this reason, Interior committed to the
acquisition and implementation of the two new systems — TFAS and
TAAMS. Defs.' Ex. 28; Defs.' Ex. 45.
a. OST Trust Fund Accounting System (TFAS)
TFAS is a commercial-off-the-shelf (COTS) trust fund
financial management, as opposed to asset management, system.
Plaintiffs' own expert testified that TFAS is a major improvement
over the present system. Trial Tr. at 4271-72. In fact, in terms
of the software and hardware itself, plaintiffs do not appear to
quarrel with TFAS or its capabilities per St. Assuming that
complete and correct information is retrieved and loaded onto
TEAS, and further assuming that TFAS can properly integrate with
the other necessary computer and business systems, then it should
allow Interior to bring OTFM's financial management practices up
to commercial standards. With these two assumptions made — which is
a huge leap given the current state of documentation and planning
TFAS will accurately track disbursements, receipts, and
securities; handle the pricing or evaluation of securities;
produce accurate account statements; keep and update correct names
and addresses; reconcile accounts; provide for direct deposits;
provide effective internal controls, including a routine file
maintenance audit trail; and enforce internal controls through the
use of passwords.
b. BIA Trust Asset and Accounting Management System (TAAMS)
BIA still maintains much of its data relating to IIM trust
accounts on two separate electronic database systems: LRIS, which
stores information on certified title for allotted lands, and
IRMS, which stores data regarding IIM trust account transactions.
Some BIA offices use these systems, some use modified versions of
these systems, some use their own "in-house" electronic databases,
and others continue to use manual paper systems. Trial Tr. at
1490-91; 2310; 4572; Pls.' Ex. 238, at 9. Thus, the systems used
in any given area or agency BIA office vary, which is one
significant cause of the current trust management problem.
Admitted inadequacies of LRIS and IRMS, which are still
operational and used to issue IIM trust checks, include: (1)
inconsistent data, making it difficult to identify the appropriate
owners of allotments or beneficiaries' appropriate land interests
therein; (2) inconsistent use of the legacy systems; (3)
significant backlogs in the certification of title; (4) the
absence of important information, such as the schedules for
payments due on leases; (5) the absence of an adequate general
ledger system; (6) the nonexistence of a master list of leases and
assets; and (7) insufficient internal controls and audits of the
systems. Trial Tr. at 120-22; 148; 152-55; 409-13; 416-18;
420-21; 435; 441-42; 622; 1153-54. The government admits these
fundamental flaws in the systems, and it admits that these systems
are used to manage and disburse IIM trust funds today. However,
the government has purchased a new system that is currently in the
pilot stages of implementation, specifically in the Billings Area
BIA office. Like TFAS, TAAMS is not yet operational or
implemented and therefore is not used to issue IIM trust payments
or manage IIM assets.
Like TFAS, in pure software and hardware terms, TAAMS appears
to be an adequate asset management system as modified to fit BIA's
needs. Also like TFAS, however, the ultimate success of TAAMS
depends on complete and accurate data and a proper interface with
the other trust management business and computer components. With
these assumptions made, TAAMS, when implemented, will allow BIA to
administer trust assets, generate timely bills, identify
delinquent payments, track income from trust assets, and
distribute proceeds to the appropriate account holders. The key
features of TAAMS that will support these functions are a billing
and accounts receivable subsystem and a collection subsystem.
TAAMS also will have a major module for administering land title
records, a sub-module for probate tracking, and a tickler system
that will notify BIA employees of upcoming important events, such
as when leases are about to expire, when it is time to advertise
leases, and when collections are due. Trial Tr. at 1150 & 2390.
TAAMS will generate title status reports and modern title
documents (such as used by title insurers). Trial Tr. at 2319.
Specifically, TAAMS will pull all tracts of land owned by a single
individual nationwide. Trial Tr. at 2810. Conversely, the tract
mechanism in TAAMS will provide information on who actually owns
the land and the legal description of the tract. In addition,
TAAMS will provide all the documents associated with a tract of
land or, conversely, will identify the land that a document
5. OST/BIA Records Management
As defendants admit, a coherent plan for the proper retrieval
and management of trust documents is critically important to the
discharge of the United States' continuing trust obligations. OST
and BIA, especially, must function seamlessly with regard to
document management. On February 11, 1998, Interior created a
records management group to set up a framework to: (1) formalize
the transfer of the financial trust records from BIA to OST; (2)
prepare a mutual budget for BIA and OST for records management
operations; (3) draft, for BIA and OST headquarters' approval, a
memorandum of agreement between BIA and OST covering trust records
and operational matters, including joint procedures of records
management; and (4) develop and submit for departmental and
National Archives Records Administration (NARA) approval records
control schedules. Defs.' Ex. 41; Trial Tr. at 575-76. Thus,
five years after the Trust Fund Management Reform Act, the trustee
has planted the seed for responsible document management.
Ken Rossman moved to Interior from the State Department and
now heads the HLIP records management sub-project. Trial Tr. at
1044; 1872; 2181. Rossman's high-level records management plan
was approved by the Acting Special Trustee and Assistant Secretary
for Indian Affairs.*fn15 Trial Tr. at 1044; Defs.' Ex. 58.
Rossman's plan contains several action items for records
management improvements, including: (1) program management,
addressing staffing and oversight responsibility for the records
management program; (2) day-to-day records operations, including a
process for setting the records retention period for trust related
records, daily use of historical records, and
clearing the backlog of stored documents; (3) integrated training
program, including classroom training and training in the form
of publications and guidance; (4) management of electronic records;
(5) further development of the records management coordination
between OST and BIA; and (6) document production for this litigation.
Trial Tr. at 1043-44; 1886-87. Under the approved high-level records
management plan, BIA and OST will share a unified records
management program with joint procedures on access to records.
Trial Tr. at 2118. The unified records management staff will
promulgate new record retention schedules for approval by the
National Archives and Records Administration (NARA). Trial Tr. at
1977-85. This will allow Interior to resume the normal NARA
process of moving records from local offices to Federal Records
Centers, Archives, or, when appropriate, disposing of unneeded
records. Resumption of the orderly NARA process is a critical
step in resolving document storage problems. Trial Tr. at
F. Facts Pertaining to Plaintiffs' Interference Claims
Beyond their claims centering on the trust management systems
put in place by the United States, plaintiffs have alleged that
defendant Babbitt has obstructed the Special Trustee's discharge
of his statutory duties under the Trust Fund Management Reform Act
in two ways. First, plaintiffs contend that the Secretary failed
to make budget requests sufficient to address the Special
Trustee's needs. Trial Tr. at 167-68. Second, plaintiffs argue
that defendant Babbitt acted contrary to law when he reorganized
the OST without the approval of Congress or consultation with the
Special Trustee. Although pages could be dedicated to Robert
Lamb's testimony on the budget process and the context of the
budgeting for OST, it suffices to note that the facts are largely
undisputed on this first claim. The Indian Trust Fund Management
Reform Act did not appropriate any funds for the operation of OST.
Trial Tr. at 3496. Defendant Babbitt did not request inordinate
sums of money to fund OST, especially during OST's infancy. For
example, Interior requested only $447,000 for OST funding in
Interior's fiscal year 1996 budget, compared to the $3.5 million
request that the Special Trustee had made to fund the operations
necessary to produce his Strategic Plan. Even the modest funding
that defendant Babbitt did request, however, was slashed by the
Office of Management and Budget. The federal government during
this period of time was undertaking severe budget cuts and was
operating on a series of continuing resolutions rather than a
budget approved by Congress. This conservative fiscal philosophy
and resulting round of continuing resolutions undoubtedly had an
impact on the actual funding and funding requests made for OST.
As for defendant Babbitt's re-organization of OST, the facts
again are largely not in dispute. Defendant Babbitt claims to
have reorganized OST to reflect its current operational structure,
placing an operational deputy beneath the position of Special
Trustee. Defendant Babbitt reassigned the Special Trustee's head
records expert, Joe Christie, to another Senior Executive Service
position within Interior. Christie's duties are now carried out
by Ken Rossman, who has already been discussed. Defendant Babbitt
did not discuss any of these radical changes of the Special
Trustee's office with the Special Trustee. The Special Trustee
resigned shortly after the Secretary told him of these changes,
after the changes had already been ordered. Defendant Babbitt
proclaims that he has the authority to do all of this under the
applicable laws and regulations.
G. The Department of the Treasury
1. Time Lapse in Availability of Deposited Funds
Treasury makes deposited funds available to Interior for
investment or disbursement on behalf of the account holders as
soon as the funds are available to Treasury. Trial Tr. at
2225-26. Funds are available to Treasury when the funds are
transferred to Treasury's General Account at the Federal Reserve
Bank of New York. Trial Tr. at 2205 & 3396.
Treasury has designed an accelerated system for collecting
and making deposits available. Trial Tr. at 2206-07. The latest
that deposited funds are made available to Interior is, in the
case of deposits by check, the next business day after deposit.
Trial Tr. at 2225. In the case of electronic funds transfers,
funds are available on the day of deposit. Trial Tr. at 2225.
The extra day in the case of check deposits is needed to allow
time for the collection of funds through the banking system and
the transfer of those funds to Treasury's operating account at the
Federal Reserve Bank of New York. Trial Tr. at 2205-06 & 2226.
With regard at least to check deposits, OTFM acts to invest or
disburse deposited IIM trust funds the day after the funds are
deposited, or as soon as they are available to be invested or
disbursed. Trial Tr. at 1249 (explaining that investment and
disbursement is an "overnight process"). The cutoff time for
investment at Treasury is 3:00 p.m. Eastern time. Trial Tr. at
The common situation arises in which deposited funds become
available to Interior only after 3:00 p.m. Such a situation is
most likely to occur with electronic payments, which may settle
late in the day after the cutoff time. See Trial Tr. at 2224
(noting that wire transfers can be received by the Federal Reserve
Bank in New York as late as 6:30 p.m.). In this situation, the
funds may be available to Interior, but as a result of Treasury's
cutoff, Interior may be unable to invest them through Treasury
until the next day. To address this problem, Treasury has agreed,
in the July 6 stipulation, to allow Interior to invest such funds
as if the funds had been invested "as of" the prior business day.
Defs.' Ex. 103 ¶ 7; Trial Tr. at 3350-51. Indeed, the July 6
stipulation allows Interior to invest any available funds omitted
from its overnight investment request as if they had been invested
the previous business day.*fn16 Trial Tr. at 3351. This
agreement enables OTFM "to sweep as much money into that overnight
investment account as possible for that day's activities," Trial
Tr. at 3351, and thereby to "maximize . . . the amount of
investment that's available to OTFM." Trial Tr. at 3351.
2. Loss of Interest on Issued Checks
Plaintiffs specifically challenge the way in which Treasury
treats invested funds at the time of IIM trust check issuance.
The facts pertaining to this claim are relatively clear and
largely undisputed. When IIM trust deposits of plaintiffs' money
are made by OTFM into Treasury, Treasury keeps the funds in a
Treasury General Account, which is available for the United
States' daily financial needs. Although the money itself resides
in that account, a
number of other operations take place, mainly in the forms of
accounting entries and investment. The United States admits that
the IIM trust funds are invested, when requested by Interior,
until IIM trust checks are issued. When a check is issued to a
beneficiary, the money is debited from the investment account,
which earns interest, and is placed into a non-interest bearing
account until the time the check is negotiated and the funds
leave Treasury. Thus, between the time that a check is issued
and presented for payment, plaintiffs' IIM trust money earns no
During the course of the trial, Treasury agreed to conduct a
study of its IIM trust check negotiation practices. Defs.' Ex.
103 ¶ 8; Trial Tr. at 3352. Specifically, Treasury has agreed to:
undertake a study, which it anticipates completing within one
year . . . to determine the average time between the date of
OTFM check issuance and the date of presentation of those
checks to the Federal Reserve for payment.
Defs.' Ex. 103 ¶ 8. Aside from agreeing to study the issue, which
in itself does not alter the current practice, Treasury has done
nothing to address this issue.
3. Illegal Document Retrieval and Retention Policies
Plaintiffs' most significant prospective claim in terms of
receiving an accounting deals with IIM-related trust records
retention and destruction policies. Specifically, plaintiffs
challenge Treasury's policy, enacted pursuant to the destruction
schedule promulgated by the National Archives and Records
Administration, of destroying all documents after six years and
seven months. Treasury historically has followed this policy.
Trial Tr. at 142. Treasury cannot, under its current system,
segregate IIM trust checks or records from any other type of
record. Thus, before the onset of this litigation (and during the
litigation for some time), Treasury's documents pertaining to the
funds, including canceled checks, went to the shredder despite the
admission that the IIM trust is nowhere close to being reconciled.
Treasury has partially addressed these issues in the long
term through its stipulation. Treasury has agreed to implement a
system that will allow IIM trust checks to be retrieved by payee
name, which is currently an unavailable function. With regard to
the document destruction allegations, Treasury has agreed to work
with Interior to propose a new, yet to be determined record
retention schedule for trust documents. There is some issue,
however, as to whether this new record disposition schedule would
change the policy for all IIM-related trust documents or simply
IIM trust account documents.*fn17 See supra II(B) (discussing
the "IIM account" at Treasury as one of several accounts involved
in Treasury's IIM trust-management process). In the short term,
Treasury and plaintiffs have reached an agreement for the
retention of IIM trust documents for the purposes of this
litigation. See Stipulated Order of Aug. 12, 1999.
4. The Sweeping of Money into the Unclaimed Moneys and Miscellaneous
Receipts Accounts at Treasury