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COBELL v. BABBITT

December 21, 1999

EVERSUSLAWE PEPION COBELL, ET AL., PLAINTIFFS,
v.
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.

  I. Introduction*fn1
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.

II. Findings of Fact

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
849-50.

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.

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
  itself.
    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
  people.
  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.

Trial Tr. at 855-57.

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.

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.

B. The IIM Trust

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 (OHA).

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 transactional documentation.

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.

Also at the end of the month, Treasury reports to the agency certain summary-level accounting information. Trial Tr. at 1254 & 3309. This information consists of overall totals by account, as opposed to detailed information about individual transactions. Trial Tr. at 3299-3300. Again, because of the ALC system, Treasury keeps only summary-level accounting information; OTFM keeps the individualized accounting records. Trial Tr. at 3299-3300. OTFM uses Treasury's information to reconcile its own records. Trial Tr. at 1254. Thus, Treasury's records are important to a proper accounting of plaintiffs' trust money.

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 recipients.

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.

In response to these criticisms, Interior, through the accounting firm Arthur Andersen, conducted a study to determine whether the IIM trust and tribal trust accounts could be reconciled simultaneously. In an initial report, Arthur Andersen concluded that, within certain parameters, the tribal accounts could be reconciled, but that the IIM trust system would pose a far more difficult task, perhaps costing over $200 million. Trial Tr. at 529-30; Trial Tr. at 318-19. Even that expenditure would have yielded only a "reconciliation" of approximately eighty-five percent reliability.

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.

D. The Strategic Plan

In July 1995, President Clinton nominated Paul Homan to be
the first Special Trustee under the Act. Trial Tr. at 109; Defs.'
Ex. 106. In April 1997, the Special Trustee submitted his final
Strategic Plan to the Secretary and to Congress. The Strategic
Plan concluded that the "government increasingly was unable to
keep pace with the rapid changes and improvements in technology,
trust systems and prudential best practices taking place in the
private sector trust industry."  Pls.' Ex. 4 at 3. The Special
Trustee's Strategic Plan

called for a new Indian Development Bank and for a centralized
Indian Fiduciary Records Center, both of which would have been
substantial organizational changes and would have required
legislation.
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
& 3712.

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.

1. Data Cleanup

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; 2627; 2769.

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 starting point.

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.

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 in allotments.*fn14

3. BIA Appraisal Program

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 143-44.

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.

4. Computer Systems

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 covers.

TAAMS automatically will create a receivable and generate a
receivable ledger that gives BIA the ability to track what money
is due from leasing and permitting activities. Once payments are
received, those accounts receivables will be credited and
reconciled. After the money flows into the system, it will be put
through the income distribution function for distribution back to
the individual account holders. Trial  Tr. at 2788-89. TAAMS
will calculate interest for money collected and subsequently
disbursed. Trial Tr. at 2390; 2758-59. Further, TAAMS will
generate

payment coupons, which will permit the use of lockboxes. Trial
Tr. at 2390. TAAMS also will generate account statements for
owners showing all the owners' interest in land. Trial Tr. at
2391. TAAMS will issue reports for land holders covering all
transactions related to any leases on that landowner's property.
Trial Tr. at 2391. Further, TAAMS will track title and chain of
title. Trial Tr. at 2391.

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 1992-95.

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 3351.

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 interest.

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

Finally, plaintiffs make vague accusations about certain money purportedly kept in the "unclaimed moneys" or "miscellaneous receipts" accounts at Treasury. These allegations do not appear in plaintiffs' complaint and they were recently raised at the time of trial. There are only two important factual conclusions to be drawn from the record on these claims. First, plaintiffs have adduced no evidence of a systemic problem with Treasury's handling of plaintiffs' funds in a manner that involves either of these accounts. Second, plaintiffs provide no support for the contention that they are entitled to any prospective relief based upon one instance of improper handling of certain funds. It is undisputed that, at one point in the 1980s, there was one proved instance in which IIM trust money was improperly placed ...


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