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Cobell v. Norton

July 11, 2001

ELOISE PEPION COBELL ET AL. PLAINTIFFS
v.
GALE A. NORTON SECRETARY OF THE INTERIOR, ET AL. DEFENDANTS



FIRST REPORT OF THE COURT MONITOR

I. INTRODUCTION

In its decision, Cobell v. Norton, 91 F. Supp 2d 1 (D.D.C. 1999), this Court concluded that the Department of the Interior (DOI) owed plaintiffs, the Indian Trust Account Holders and Trust beneficiaries, an accounting. Specifically, "an accurate accounting of all money in the IIM trust held in trust for the benefit of plaintiffs, without regard to when the funds were deposited." Id. at 58.

Further, this Court ruled that DOI had a duty to render an historical accounting and that the Indian Trust Fund Management Reform Act, Pub. L. No. 103-412 (1994) (1994 Act), had placed the duty upon the Secretary of Interior "to account for the daily and annual balance of all funds held in trust by the United States for the benefit of...an individual Indian pursuant to the Act of June 24, 1938" Id. at 39.

To render that historical accounting, the Court directed the Interior defendants "to retrieve and retain all information concerning the IIM trust" and "to establish written policies and procedures for collecting from outside sources missing information that is necessary to render an accurate accounting." Id. at 42.

The Court, while establishing the scope of the accounting, left it to the Interior defendants to determine the "specific form" of the historical accounting. Id., fn 32 at 40.

By Order of April 16, 2001, the Court appointed the Court Monitor to review and monitor "all of the Interior defendants' trust reform activities and file written reports of his findings with the Court." Id. at 1. The Court Monitor divided the review and monitoring of DOI's trust reform activities into two phases:

1) the DOI's preparation for and conduct of an historical accounting;

2) the remedial actions regarding prospective trust operations taken to "ensure proper discharge of the trust responsibilities of the United States." 25 U.S.C. at 162a(d). This has been termed "fixing the system" and includes ensuring that the Interior defendants can provide trust responsibilities such as outlined in the 1994 Act including :

•adequate systems for accounting for and reporting trust fund balances;

•providing adequate controls over receipts and disbursements;

•providing periodic, timely reconciliations to assure the accuracy of accounts;

•preparing and supplying ... periodic statements of ... account performance" and balances to account holders;

•establishing consistent, written policies and procedures for trust fund management and accounting.

No prospective Indian Trust accounting responsibilities pursuant to the 1994 Act's requirements can be accomplished unless an accurate historical accounting is timely completed to provide the balances on which to base any future accountings for trust beneficiaries. Therefore, the Court Monitor's first review was directed at what has been done by the Interior defendants to render this court-ordered historical accounting.

The initial historical accounting review began with interviews of the senior management of the Department of the Interior (DOI) and a review of the public and DOI internal documents supplied to or located by the Court Monitor. Within several weeks of the review, it became apparent that there had been a great deal of activity by DOI officials regarding responding to the court's December 1999 order for an historical accounting. But the status of the actual accounting, with few exceptions, was, for lack of a better term, at ground zero.

While a Senior Executive Service-level project manager had been brought on board in March 2001, he was in the early stages of putting together a staff and preparing to hire an outside statistical expert to begin the historical accounting project. The proposed historical accounting was described as a statistical sampling of a limited number of IIM; perhaps as few as 350 accounts.

Discussions with those officials having involvement in or responsibility for the historical accounting project did not provide an explanation of why there had been a one and one-half year hiatus between beginning the process to determine the method of accounting and the first steps to do an accounting. DOI officials were unable to explain the decision-making process that went in-to the decision to do a statistical sampling project or explain what were the project's parameters. Some officials believed they were to do a complete statistical sampling historical accounting. Others thought the project was no more than a "pilot" project to determine the feasibility of this method of reconciliation of IIM accounts. There were no time parameters for the project and no real estimates of the cost. Initial discussions with the Special Trustee, who had been given the responsibility for accomplishing the historical accounting did not clarify why it was limited to a statistical sampling of perhaps no more than 350 IIM account holder records.

The confusion about and ignorance of the project's purpose and approach also cast some doubt on the overall decision process to do a statistical sampling; the decision of the former Secretary of the Interior (Secretary) to approve the statistical sampling project, and the decision of the present Secretary affirming that decision. This also called into question the legitimacy of the project itself.

The Court Monitor's review was therefore changed. It was not begun to determine the status of the Interior defendants' preparation for and conduct of the historical accounting - - there was no project in progress other than in the most primitive stages - - but to determine the reasons for the year and one-half delay in beginning an historical accounting pursuant to this court's order and in light of the representations made by the Interior defendants to this court, the Court of Appeals, and to the IIM account holders.

The following review of the history of the DOI decision-making process is divided into three parts. First, a review of the public and internal records establishing the factual background relied on by the Court Monitor to base his initial interviews of DOI officials and others. Second, a factual review and analysis of those events surrounding the historical accounting decision-making process as elicited from interviews with the participants. Third, the Court Monitor's discussion and conclusions. Finally, remarks regarding the results of the present and past administrations' actions.

II. FACTUAL REVIEW AND ANALYSIS

A. Public Record Documents

This portion of the report deals with information contained in those public records that were made available to the Court Monitor. These served, in part, as the basis for his initial review and monitoring activities regarding the Interior defendants' actions to provide an historical accounting were based.

Soon after this Court's December 21, 1999 ruling, the Interior defendants notified both this Court and the United States Court of Appeals for the District of Columbia Circuit (Court of Appeals) of their intentions regarding the historical accounting.

On January 5, 2000, the Interior defendants filed with the Court of Appeals a "Corrected Petition for Permission to Appeal Pursuant to 28 U.S. C. Sec. 1292(b)." In that petition, defendants asked for the right to appeal based in part on the argument that the district court's imposition of "new duties" (i.e.; an historical accounting and related records location and retention) contravened the limits of its authority under the APA and ignored that Congress gave Interior and not the courts the authority to flesh out the general contours of the 1994 Act, id. at 19. Defendants argued that this court went too far in determining a key parameter of the accounting -- that it must be completed without regard to when the funds were deposited, id. at 17. Counsel for the Interior defendants also noted at page 13 that:

"In addition, we have been informed by Interior that it will implement a process under the APA to meet its remaining obligations regarding reconciliation and accounting, including interpretation of the Act to specify in greater detail the nature and scope of these obligations and determination of reasonable and appropriate methods to meet them. That process will include consultation with Indian Tribes, an opportunity for comment by account beneficiaries and the public, and will commence with a notice published in the Federal Register on or before March 1, 2000"

On March 1, 2000, the Interior defendants filed their appellate brief and the draft Federal Register notice with this Court as exhibits to a "Motion for Entry of an Order Regarding a Public Administrative Process to Implement The American Indian Trust Fund Management Reform Act of 1994." They stated that they sought to initiate an administrative process "to comply with Congressional directives to determine the most reasonable methods for providing accountholders with information to evaluate their accounts and determine whether there are discrepancies due to past management practices," id. at 6-7. They went on to state that because Congress did not specify the nature of the reconciliation "DOI will pursue the administrative process described in the Proposed Notice to assist DOI in fulfilling its statutory responsibilities." Id.

The draft Federal Register notice's Summary stated in part:

"As directed by Congress, the Department is continuing development of a reconciliation process to evaluate the reliability of past account activity. This notice initiates an information gathering process with IIM account beneficiaries, and the public, to comply with Congressional directives to determine the most reasonable methods for providing accountholders with information to evaluate their accounts and to determine whether there are discrepancies due to past management practices." Id. at 1.

And further, at page 16, under Section III, Factors to Consider in Evaluating Options:

"Although the Department intends to consider the widest possible range of options for meeting the goals stated above, the Department will be guided by a number of factors in evaluating the reasonableness of each option."

The Federal Register notice went on to outline the options and the possible monetary and other consequences of the choices available. These included options such as transaction-by-transaction reconciliation; limited reconciliation; sampling; analysis of current account data; and a payment formula or "rough justice" payment.

This Court, in its "Order Regarding A Public Administrative Process To Implement The American Indian Trust Fund Management Reform Act of 1994" granted the Interior defendants' motion on March 28, 2000 over plaintiffs' objection, among others, that the Notice was an artifice to delay the historical accounting the Court had required. Plaintiffs argued that the rulemaking process begun with the notice would allow the Interior defendants to delay the type of historical accounting they already knew they had to do. The Court made no ruling at the time "on any other legal question presented by the Proposed Notice." Id.

The Federal Register notice was published on April 3, 2000. The initial dates for the public meetings established in the Notice (April 24 through May 6, 2000) were not adjusted even though the Notice was delayed by over one month.

On March 27, 2000, "Defendants' Motion For Partial Summary Judgment on Plaintiffs' Claims For An Historical Accounting of IIM Accounts" was filed with this Court. Once again, the filing of the Federal Register notice was raised in argument in support of the Interior defendants' position that either the Court of Appeals or this Court should reject plaintiffs' call for an "all funds" historical accounting.

In their "Memorandum In Support of Defendants' Motion for Partial Summary Judgment on Plaintiffs' Claims For an Historical Accounting of IIM Accounts" accompanying the Motion, at page 2, the defendants again quoted their argument before the Court of Appeals stating that:

"(w)here the responsible agency has not yet addressed issues regarding the scope and methods of reconciliation and accounting to IIM account holders as required by the 1994 Act, does the APA permit a court to declare, in the first instance, that the 1994 Act requires defendants to provide plaintiffs with an accurate accounting of all money in the IIM trust 'without regard to when funds were deposited...."

The Interior defendants cited to this argument and the recent motion to begin the Federal Register notice administrative process under the APA and argued:

"These two developments put a sharp focus on one of the central issues of Phase II - the extent to which this Court can define the scope of Interior's obligation to analyze historical transactions before the agency has done so. Defendants maintain, as is set out in the Petition for Permission to Appeal (Exhibit 1), that the agency must be allowed, in the first instance, to determine matters regarding the scope of the 1994 Reform Act, including the role an historical analysis should play in its full implementation." Id.

Progress on the Federal Register notice was highlighted for the Court of Appeals in the "Opening Brief For Appellants" filed May 24, 2000:

"Therefore, after ensuring that implementation of the prospective reforms was well underway, Interior recently has begun a process of examining how and to what extent to reconcile transactions within the IIM trust which occurred prior to 1994, and has begun seeking appropriations for this administrative undertaking. See 65 Fed. Reg. 17521-02 (Apr. 3, 2000)." Id. at 17.

Later is their brief, they used the start of this Federal Register notice process in support of their argument:

"Since the scope and nature of an administrative accounting has yet to be resolved, let alone implemented, the plaintiffs' recourse is an APA action seeking to compel agency action unlawfully withheld or unreasonably delayed...." Id.. at 59.

"Just as Congress expected, Interior has proceeded by first developing new accounting systems (TFAS and TAAMS), engaging in extensive data cleanup efforts, and regularizing procedures. These efforts are designed to assure that the agency will be able to prospectively fulfill its responsibilities to account holders, and also lay the foundation for an historical reconciliation. The historical effort has recently been initiated by a Federal Register notice announcement." Id. at 59-60 (footnote citing to Federal Register omitted, emphasis added).

B. Other Relevant Public and Internal DOI Documents

Additional relevant public and DOI internal documents reviewed by the Court Monitor regarding the activities of the Interior defendants displayed in a chronological order provide a somewhat disjointed picture of the Federal Register notice information gathering process and Secretary of the Interior Bruce Babbitt's subsequent decision on a method to accomplish the requisite historical accounting. For instance, nothing more was heard of the Federal Register notice process until September 2000.

On September 7, 2000, The Assistant Secretary for Policy, Management, and Budget (PMB), Department of Interior, John Berry, sent a letter to the Chairman of the House Subcommittee on Interior and Related Agencies and the same letter to the Chairman of the Senate counterpart committee notifying them that the Office of Management and Budget has approved a $27.6 million FY 2001 budget amendment to address additional trust reform needs (Tab 1). A $10.0 million component of this budget amendment was for "(c)osts associated with Individual Indian Money (IIM) accounting." Id. at 1. The following statement was made in the body of the letter at page 3:

"The Department published a Federal Register Notice on April 3, 2000, inviting comments on the most reasonable methods for providing accountholders with information to evaluate their accounts and to determine whether there are discrepancies due to past management practices. The Department can reasonably assume that the costs to publish at least two additional Federal Register notices related to the proposed plan and a final rule will be $500,000 each. The Department is also funding a small pilot study to ascertain the validity and results of a sampling methodology that has been developed for the second trial. The goal of the pilot study is to determine if it would have broad applicability for providing the historical accounting called for in the 1994 American Indian Trust Fund Management Reform Act and described in the April 3, 2000 Federal Register Notice. While the full costs associated with carrying out an IIM accounting are difficult to estimate, we believe that $9.0 million is needed to begin the statistical sampling and related efforts. Therefore, a total of $10 million is likely to be needed in FY 2001." Emphasis added.

Three weeks later, on September 29, 2000, a Congressional Conference report (Tab 2) was published providing $27,600,000 for Federal Trust programs. In discussing this appropriation, the Committee noted, at page 150, that:

"The Department of Interior has announced its intention to explore the use of sampling as the best, most cost effective approach to provide an accounting for IIM beneficiaries. While the Indian Trust Reform Act contemplated that such an accounting would sometime occur, the managers have been concerned for years about the potential cost and effectiveness of any approach that might be used. After investing $20 million over five years in a tribal account reconciliation process, there has been no resolution of issues surrounding tribal accounts. The cost of a similar accounting for the approximately three hundred thousand IIM account holders could conceivably cost hundreds of millions of dollars.

Therefore while approving the request to begin an IIM sampling approach, the managers direct the Department to develop a detailed plan for the sampling methodology it adopts, its costs and likely results. This plan must be provided to the House and Senate Committees on Appropriations prior to commencing a full sampling project. Finally, the determination of the use of funds for sampling or any other approach for reconciling a historical IIM accounting must be done within the limits of funds made available by the Congress for such purposes.

Ultimately, the managers believe that resolution of the long standing issues of the performance of the Department of Interior's management of Indian trusts is best worked out through a negotiation and settlement process, and not by spending millions of dollars for accountants to reconcile relatively small sums of funds over decades. If the sampling approach provides a reasonable basis for settlement of these claims or can provide a basis for a greater level of confidence on the part of beneficiaries about the past, this investment will be useful. Given the tremendous needs in Indian country for public services from education to health care, the managers will be extremely judicious in allocating funds for an historical accounting or sampling study." Emphasis added.

On December 21, 2000, The Special Trustee for American Indians (Special Trustee), Tom Slonaker, sent a memorandum to Secretary of the Interior (Secretary) Babbitt entitled "IIM Historical Sampling Project" attaching a memorandum by the Assistant Secretary for Indian Affairs, Kevin Gover, dated the same day, to the Special Trustee titled "Results of Federal Register process to gather information on evaluating individual Indian money (IIM) accounts (Tab 3)."

The latter memorandum addressed the results of the Federal Register notice's public meetings and requested written comments. A total of eighty-six meetings were scheduled and over one thousand participants attended eighty of the meetings. Sixty percent of these were IIM account holders. One hundred forty-six comments were received. As stated by Gover at page 4:

"eighty-one of the respondents who wrote in, and an overwhelming majority of those who voiced their preferences at the public meetings, wanted to see a transaction-by transaction reconciliation in spite of the discouraging language contained in the Federal Register Notice stating that a solution was not very likely since Congress had already dismissed such a solution." Emphasis added.

Nonetheless, Gover went on to state:

"Now that the Department has fulfilled its administrative duty, it must determine how to evaluate the reliability of past account activity through a historical accounting process....To solve this issue, Departmental staff, Congress, and outside third-parties have all reviewed the question of how to perform a (sic) historical accounting. Each agrees that a complete transaction-by-transaction accounting for every account would cost hundreds of millions of dollars and take many years to complete. Moreover, to accomplish this task would require the Department to significantly increase its BIA staff and would require Congress to double BIA's current appropriation." Id., emphasis added.

After quoting the Conference Committee language, referenced above, limiting the proposed statistical sampling, he stated:

"With the administrative process complete and with the above direction from Congress, it is now up to the Department to decide on a course of action. Although the majority of comments received from the Federal Register notice preferred a complete transaction-by-transaction reconciliation, Congress has made it clear in the above language that they are unlikely to fund such a process." Id. at 5, emphasis added.

He concluded his memorandum by stating:

"I believe that through statistical sampling, we can perform a transaction-by-transaction analysis on a statistically significant portion of the total number of accounts. This approach is best, given the massive number of records, the complexity, and the condition of the records. Therefore, taking into consideration the entire Federal Records process, Congress' directive and the other critical needs of the Department, I believe that a sampling approach represents the best alternative to meeting our goals under the 1994 American Indian Trust Fund Management Reform Act." Id., emphasis added.

Special Trustee Slonaker addressed the outline of a sampling project in his memorandum to the Secretary. He stated that the memorandum reflected the conclusions reached at a meeting on August 2, 2000 after consideration of the Federal Records Notice meetings and responses. Those in attendance besides the Special Trustee were Anne Shields, Chief of Staff to Secretary Babbitt; Keving Gover, Assistant Secretary for Indian Affairs; John Berry, Assistant Secretary for Policy, Management and Budget; his deputy, Bob Lamb; Tom Thompson, Deputy Special Trustee; Tim Elliot and Edith Blackwell of the Office of the Solicitor; and Tom Gernhofer of the Office of PMB.

The Project, as it was called, would be limited to determining the accuracy of IIM accounts for the period 1952 to 1993. He further stated that he would make a determination during the process of whether an initial study "of a more limited scope in time and/or methodology (a 'pilot') may provide sufficient information to determine the efficacy of the sampling project...." Id. at 1. The time required for the Project was "unknown," id. He estimated it could take up to two years. The cost was also unknown although he gave a monetary range from $17.5 million to $70 million. In concluding, he stated at page 2:

"It is also important to understand that completion of the Project will require the allocation of adequate funds by the Department, the Office of Management and Budget, and the Congress to complete the Project timely and fully within the range of all reasonable contingencies. To the extent the funds are not in place, the Project may not be able to be pursued to completion.... Please note that the Congress has already indicated it will closely oversee our progress and will evaluate the sampling project plan before we can commence a full sampling project. Sums in addition to the $10 million recently provided by the Congress will likely be dependent upon adequate progress and reasonable costs and benefits." Emphasis added.

Secretary Babbitt's memorandum of December 29, 2000 (Tab 4), entitled "Statistical Sampling of Individual Indian Money Accounts," addressed the recommendations of both Slonaker and Gover stating:

"I concur with the recommendation of each that the Department should use statistical sampling instead of attempting a transaction-by-transaction historical reconciliation of all IIM accounts. In addition, Congress, in the Conference Report accompanying the Department's FY 2001 Appropriation, in which approximately ten million dollars was appropriated for this purpose, agreed that some form of sampling is the most cost effective approach to provide an accounting for IIM beneficiaries." Emphasis added.

C. Review of DOI Internal Documents, Management Interviews, and Analysis

The public and DOI executive level documents served as a basis for determining the status and scope of the DOI response to this Court's December 1999 ruling on an historical accounting. The following discussion addresses in as chronological order as possible the process used by the Interior defendants to come to the December 2000 decision on an historical accounting. It also addresses the issues raised by these document reviews and management interviews. Initial questions raised by the above-cited documents are briefly addressed here.

If the April 3, 2000 Federal Register notice's information-gathering process was the genesis for the Special Trustee's and Assistant Secretary of Indian Affairs' recommendations and the December 29, 2000 decision by Secretary Babbitt to approve their recommendations to do a statistical sampling, what sources were consulted other than the Indian account holders to come to the conclusion that statistical sampling was the best approach?

Was any form of a transactional record accounting even considered in response to the overwhelming position of the Indian Trust beneficiaries that they preferred a transaction-by-transaction accounting of their historical accounts and not a statistical sampling? For that matter, had the Federal Register notice's information gathering process been completed before the August 2, 2000 decision meeting?

Also, if the decision to do a statistical sampling for an historical accounting was based on the Federal Register notice meeting results but was not conclusively made by Secretary Babbitt until December 29, 2000 following a review of the results of those meetings, how could that December decision have been "announced by DOI" to Congress sometime before the Conference Committee approved the emergency appropriation for $10 million in September 2000?

And who were the "outside third parties" that Assistant Secretary Gover spoke of in his December 2000 memorandum who reviewed the historical accounting question after learning of the IIM account holders' preference? And who agreed that a transaction-by-transaction accounting would cost hundreds of millions of dollars and take years to complete?

Finally, if the appropriations process for a statistical sampling project (indicating a decision to do a statistical sampling historical accounting) started some time before the Federal Register notice's meeting process was completed, what was the purpose of the Federal Register's notice and the subsequent meetings to consult with the IIM account holders?

l. Federal Register Notice and Statistical Sampling Project

An initial question addressing the potential purpose of the Federal Register notice was brought to the attention of this Court by the plaintiffs in their opposition to the Interior defendants' request to this court to publish the notice in March 2000. In a deposition taken on March 13, 2000 of Thomas M. Thompson, Acting Special Trustee, Thompson was asked about the Federal Register rulemaking notice under consideration for publishing by this court. The colloquy is as follows at pages 16-17:

Q: Mr. Thompson, are you aware of the proposed rulemaking to determine what - I guess what an accounting is that the Interior is proposing to do?

A: Generally, I am aware of it, yes.

Q: When is the first time you heard of that rulemaking process, proposed rulemaking process?

A: Probably in the middle of January.

Q: So the first time you heard of it was after the court's December 21, 1999, opinion?

A: Yes.

Q: And who did you first hear that from?

A: I believe it was a meeting called by the Solicitor's Office, and probably Ed Cohen, Edith Blackwell, plus principals in other offices in the department met to discuss it.

Further, at pages 160 to 161:

Q: I have a few more questions here. In January 2000 meetings, the ones that you described earlier regarding the first time you had heard of the rule-making process that was being put forth, was there any discussion regarding the Cobell v. Babbitt, December 21, 1999, opinion in those conversations that you heard?

A: Yes

Q: Could you let me know what-

A: Oh, my understanding was that there was going to be an appeal filed and that in support of that appeal was going to be developed and promulgated this Federal Register notice.

Q: Okay. And did you say that the decision of rulemaking was made after those meetings, and you weren't present for the actual decision?

A: I think the decision had been made before.

Q: Oh, before. And that's when you were on vacation?

A: Yes.

Q: And how did you first hear about the rule-making decision; do you recall?

A: I don't recall. I don't think I heard about it until I came back from vacation around the 11th or 12th, or so, of January. And there were meetings being organized to talk about implementation of the judge's orders. And this came up in the context in the agenda for those meetings.

The Court Monitor interviewed Thompson about the Federal Register notice decision process. He recounted that the Office of the Solicitor drafted the language in the Federal Register notice. There was a debate over who would be tasked to publish it and hold the meetings required under it. Thompson, as the Acting Special Trustee, would not agree to be responsible for the notice project as he felt and stated that it was a foregone conclusion what the respondents would say - -do a transaction-by-transaction historical accounting.

In his view the Federal Register notice was not a legitimate effort to determine the means to conduct an historical accounting. He would not agree on behalf of the OST to take responsibility for the project. The outcome was obvious.

When he asked why the Solicitor's attorneys were considering this Federal Register notice process when it was evident what the outcome would be, the Solicitor's attorneys responded that it was the "price of an appeal" which would not be pursued by DOJ and, more specifically, the Solicitor General's office without DOI conducting a Federal Register rulemaking process.

Thompson's understanding of the involvement of DOJ in the DOI decision to do a Federal Register notice is confirmed to some extent by a contemporaneous note made on January 24, 2000 by Thompson's deputy, Richard Fitzgerald, and attached to a discussion draft for the outline of the Federal Register notice (Tab 5). He wrote:

"SOL 1 pm 1/24/2000

• Federal Register Notice Project

• DOJ wants to "serve" on Court 5 days before publication in PR...

• Purpose of consultation is to request/evaluate options to "an accounting"

2 issues 9:30 - 12:30p

1. 1994 and forward...

2. What's an 'accounting.' " Id, emphasis in original.

Thompson cautioned the Solicitor's attorneys that the Indian IIM account holders would not support this approach and, if its true purpose was revealed to the Court, DOI would be put under supervision. The Bureau of Indian Affairs (BIA) was eventually tasked to carry out those activities associated with the notice. The Assistant Secretary for Indian Affairs, Kevin Gover, took responsibility for the meetings and compiling the results.

Toward the end of February 2000, Thompson objected to his name being listed as a participant in the Federal Register notice process on the Solicitor's drafts of the notice . Ed Cohen, Deputy Solicitor, asked him for a memorandum supporting his decision. Before submitting a memorandum to Cohen, he met with Secretary Babbitt's Chief of Staff, Anne Shields to object to his office's inclusion as a signatory on the notice.

Using a draft memorandum regarding his reasons for refusing to allow the OST to be so listed, along with two pages of his handwritten notes (Tab 6), as a talking paper, he explained to her that, among other reasons for opposing this project, he believed it was premature. Once the process of collecting the trust records and the data contained in them was complete, DOI would be in "the best position to determine the proper method to conduct the required reconciliation." Id. at 1.

Further, he was "not prepared to fully support a process that did not review all available and existing data." Id. He also quoted from his notes that the Federal Register notice process was only being done to support the appeal and DOI had no plans beyond March 3, 2000 on what to do about an historical accounting. Shields allowed him to withdraw his name and office from the notice.

This rendition of events surrounding the withdrawal of the OST from participation in the Federal Register notice is supported by the testimony of two of Thompson's principal deputies at the time, John Miller and the aforementioned Richard Fitzgerald. Both remember the discussions and arguments with the Solicitor's attorneys over the purpose and usefulness of the Federal Register notice. They had participated in one or more of the meetings with the Solicitor's attorneys and had expressed their own reservations.

Fitzgerald had taken contemporaneous notes of Thompson's decision not to sign the notice, which he attached to his copy of the draft of Thompson's memorandum to Shields (Tab 7) in which he stated:

"2/29/00 T.T. says he will not sign Fed Reg Notice -- Ed Cohen asked for a memo to support that decision -- Draft memo shared with Shields during TT's meeting with her at 5:00 PM. Final version of memo not needed." Id.

He also had noted his thoughts about the Federal Register notice on a February 2, 2000 discussion draft of the notice for a meeting on February 3, 2000 (Tab 8). He wrote in part:

"Consultation - It is passing strange that the trustee would ask the beneficiary to give the beneficiary less than complete and accurate account info." Id. at 1.

He wrote on the back of the last page of the draft notice:

"I would be concerned that starting an open end consultation process will be viewed as only a stalling tactic -- Only DOI is in a position to know what records can be accessed and the best method to access them under current and historic record management systems - - Lets just do it. RVP 2/3/00." Id. at reverse of 9.

Both men had been brought in to work in OST by Paul Homan, the first Special Trustee. Both are lawyers and Fitzgerald had been Chief Counsel to the Office of Comptroller of the Currency and, more relevant, was an experienced trust attorney; the only one within the DOI associated with trust reform. Both men had counseled Thompson to withdraw from participation in the Federal Register notice. Thompson did so and told the Secretary's Chief of Staff why.

In interviews with attorneys Tim Elliot and Edith Blackwell of the Solicitor's office who, with Ed Cohen, had supervised the Federal Register notice process, they recounted a different story. There were many projects that had to be staffed to address the Court's opinion and order. There was a need for a new High Level Implementation Plan as well as a new requirement to submit Quarterly Status Reports and four Breach reports to the Court. The Solicitor's office, having to ensure the court's orders were followed, hosted meetings to assign projects to various departments.

One of the projects they discussed was what to do about the historical accounting which, even though the Court's decision was being appealed, had to be addressed. This was not a new issue for anyone and certainly not the Solicitor's office. They had been intimately involved in the Cobell litigation and trial. They had participated in many discussions and projects to arrive at a viable statistical-based Tribal records accounting for the Congress. The most recent discussions with DOJ prior to the Court's December 1999 decision had addressed reviving the use of experts on statistical sampling to prepare for the Phase II "accounting" trial.

The participants at the Solicitor's office meetings thought that some new approach should be tried for arriving at a decision on an historical accounting. Someone mentioned that in past litigation with the Indian gaming cases a process for determining what could be done to satisfy the needs of the parties was to put out a Federal Register notice to engender a discussion of the possibilities for whatever issue needed to be addressed.

DOI officials and the Solicitor's office reached a consensus that putting out a notice to the IIM account holders, the public, and private industry using the Federal Register might offer some guidance on what to do for an historical accounting. This discussion resulted in the plan for a Federal Register notice and was assigned for execution to Assistant Secretary for Indian Affairs Gover.

Ms. Blackwell was adamant that the decision to publish a Federal Register rule-making notice was not prompted by the litigation or in support of it except to the extent a method to do an historical accounting had to be addressed due to the Court's opinion. She did not believe it was a fruitless exercise even in light of the anticipated response from the IIM account holders as the Solicitor's office also expected to hear from private industry and other parties on methods that they may not have thought of to accomplish an accurate accounting.

Whether or not the Federal Register notice was solely to support the Interior defendants' appeal and summary judgment motions, nothing more was heard of it until the decision-making process for an historical accounting later heated up in the July to August 2000 timeframe. But before addressing the history of those meetings, other developments were taking place regarding a statistical sampling appropriation.

On June 16, 2000, Assistant Secretary John Berry, Office of PMB, sent a letter to the Director, Office of Management and Budget (Tab 9) transmitting an urgently needed FY 2001 budget amendment request for the DOI. At unnumbered page 3 under the heading "Cobell Trial Two and Federal Register Notice Costs ($16.7 million)," he states:

"In addition to the costs to mitigate the Court-identified breaches in FY 2001, the Department estimates a cumulative shortfall of $16.7 million for trial two litigation activities and costs for a statistical accounting stemming from the Federal Register Notice process." Emphasis added.

He went on to state on the next page:

"The Department can reasonably assume that the costs to publish at least two additional Federal Register notices related to the proposed plan and a final rule will be $500,000 each. The costs associated with carrying out the statistical sampling proposal are difficult to estimate. Consultants will likely need to be hired at an estimated cost of $9 million to develop and carry out the proposal. The Department anticipates needing a total of $10 million in contingency funds for the Federal Register Notice costs." Emphasis added.

Mr. Berry, who became involved in DOI's trust reform efforts at Secretary Babbitt's request after the departure in January 1999 of the first Special Trustee, identified the need for a statistical sampling or statistical accounting project stemming from ...


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