Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Cobell v. Norton

May 2, 2002

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



SEVENTH REPORT OF THE COURT MONITOR

I. INTRODUCTION

This is the seventh report in a series of reports submitted by the Court Monitor pursuant to this Court's Order of April 16, 2001, to review and monitor "all of the Interior defendants' trust reform activities and file written reports of (the Court Monitor's) findings with the Court." *fn1

This report will address the Court Monitor's review of the progress of trust reform with respect to the Secretary of the Interior's actions regarding the Special Trustee and the Office of Special Trustee since her "Notice of Proposed Department of the Interior Reorganization to Improve Indian Trust Assets Management" submitted to this Court on November 14, 2001 notifying this Court of a reorganization process underway "to improve the management of trust assets" to "effectively implement trust reform and eliminate problems identified by the Court, the Court Monitor, Interior, and Interior's consultant, Electronic Data Systems Corporation ('EDS)." Id. at 1.

Secretary Gale Norton had concurred with a joint recommendation of the Special Trustee for American Indians and the Assistant Secretary - Indian Affairs, "to begin the process of reorganizing Interior's trust asset management." Id. at 2.

A "Declaration of J. Steven Griles" (Deputy Secretary of the Department of the Interior) accompanied the Notice and stated in part that:

"10. The proposed reorganization consolidates Indian trust asset management functions in a single agency separate from the OST and BIA: the Bureau of Indian Trust Assets Management. Segregating these trust functions is intended, as in the private sector, to facilitate the development of performance measures, processes, controls, and systems that are designed to meet Interior's fiduciary obligations.

11. The Bureau of Indian Trust Assets Management will report to an Assistant Secretary for Indian Trust Assets Management (BITAM). This new Assistant Secretary will have authority and responsibility for Indian trust asset management. The Special Trustee will continue to perform oversight for Interior's trust reform efforts. BIA, under the supervision of the Assistant Secretary - Indian Affairs, will continue to provide those services to Indian tribes and individuals that are not related to trust assets." Id. at 3.

In the "Sixth Report of the Court Monitor" filed on February 1, 2002, the BITAM proposal was discussed at some length. The fact was noted that it was not much more than an organizational chart devoid of details regarding the identity of the officials to lead the organization's trust reform and operations and any idea of their background in trusts, systems, or management of large government or commercial agencies involved in the provision of fiduciary trust services to hundreds of thousands of beneficiaries. See Report at 36-37.

Also, The Court Monitor addressed the proposition that, while the Deputy Secretary stated the Special Trustee would continue to perform oversight of BITAM and the Department of the Interior's (DOI) trust reform efforts, the more important questions regarding his role would be whether he would be given the resources and personnel to permit him to appropriately oversee the BITAM's development and operations, and the authority and ability to assure the Secretary and the Congress that trust reform was finally on the road to recovery and trust operations were functioning properly. Finally, the Court Monitor expressed concern regarding whether the Secretary's counselors and BITAM would follow the Special Trustee's observations and advice (if not direction) any better than DOI officials had in the past as reported in the Court Monitor's prior Reports. Id. at 36.

The Court Monitor also stated:

"The Special Trustee's observations on the proposed reorganization are not addressed within the Eighth Quarterly Report. It might be of interest to this Court and the Congress to determine what his opinion is about the reorganization's potential to meet the strict Indian Trust fiduciary obligations of the Defendants, what role he has established with the Secretary for the Office of Special Trustee regarding BITAM, and what is the position of the Defendants on supporting that future role with resources, staff and counsel. Without a strong oversight function by the Office of Special Trustee, only this Court will be able to confirm the Defendant's reports of trust reform progress through further oversight and discovery. Congress will have no ability to obtain the information the 1994 Reform Act sought by establishing a Presidential appointee as their source of oversight and control over Defendant's (sic) activities and compliance with Congress' trust reform provisions in that Act." Id. at 37. fn. 20.

The Secretary of the Interior, in her February 13, 2002 testimony at her contempt trial, responded to a series of questions from this Court addressing the Special Trustee's role in the ongoing trust reform effort regarding her announcement of the reorganization of DOI to address trust reform and involving the establishment of a separate organization outside of the Bureau of Indian Affairs (BIA) - BITAM. She was asked:

THE COURT: And what do you see the role of the Special Trustee in putting that together?

THE WITNESS: He would be one of the people involved, first of all, as part of our management team council that would be working on issues on a regular basis. Some of them are things that would involve the Special Trustee specifically. There are a lot of things in terms of the procedures that need to be followed, the avoidance of conflicts of interest, the necessary accounting standards, those types of things, where I would see the Special Trustee having particular expertise to be involved.

And we also have the Special Trustee's role that will be an oversight role, and that's something that he performs by virtue of his statutory responsibilities as well as the consistent role that we have seen for him through the reorganizational process.

THE COURT: Do you anticipate him having the same budget authority he has now about helping in the process of allocating the money out to the components, or do you see his role changing in that?

THE WITNESS: He has a statutory role in terms of certifying the budget, and obviously that would continue. There also is a significant portion of the budget that goes through his office and so that is something - - certainly in the short run our funding is allocated either to BIA or to the Office of Special Trustee, and there's no in-between for the new bureau, however that is created. And so he - - his

THE COURT: He necessarily will be involved in that funding, then?

THE WITNESS: Yes.

THE COURT: Now he had a statutory role for the development of the strategic plan. The original Special Trustee developed one that Secretary Babbitt then threw out the window. What do you see as his role now in terms of the strategic plan, and what's the difference in that strategic plan and this business plan that you're talking about? Is there a difference and why isn't his responsibility to develop it?

THE WITNESS: I think it has grown far beyond just a one-person job, and it's something in which everybody in trust reform is going to have to be involved. We're going to have to have our consultants, our BIA people, our Mineral Management Service, BLM, everybody is going to have to be involved in this process. And I see it as much more detailed than I think the kind of strategic plan that would be submitted to Congress would be.

THE COURT: So you see this more in terms of an operations plan?

THE WITNESS: Yes. I mean this is going to outline everything we're going to live by. It's our complete to-do list. It's our way of charting our course for the future and making sure that all of those pieces fit together." Trial Tr. at 4384-4386.

But Congress did not speak in terms of an "operations plan" for what the members wanted the Special Trustee to design. Specifically, the 1994 Reform Act stated:

"The Special Trustee shall prepare and, after consultation with Indian tribes and appropriate Indian organizations, submit to the Secretary and the Committee on Natural Resources of the House of Representatives and the Committee on Indian Affairs of the Senate, within one year after the initial appointment is made under section 302(b), a comprehensive plan for all phases of the trust management business cycle that will ensure proper and efficient discharge of the Secretary's trust responsibilities to Indian tribes and individual Indians in compliance with this Act." See 25 USC 4042, Section 303 (a) (1) et seq.

The Act went on to outline the Plan requirements that included 1) "identification of all reforms to the policies, procedures, practices and systems of the Department ...necessary to ensure the proper and efficient discharge of the Secretary's trust responsibilities in compliance with this Act;" 2) "provisions for opportunities for Indian tribes to assist in the management of their trust accounts and to identify for the Secretary options for the investment of their trust accounts, in a manner consistent with the trust responsibilities of the Secretary, in ways that will help promote economic development in their communities;" and 3) a timetable for implementing the reforms identified in the plan." Id.

The Special Trustee's "Duties" outlined by the 1994 Reform Act included:

• "The Special Trustee shall oversee all reform efforts within the Bureau, the Bureau of Land Management, and the Minerals Management Service relating to trust responsibilities of the Secretary to ensure the establishment of policies, procedures, systems and practices to allow the Secretary to discharge his trust responsibilities in compliance with this Act.

• The Special Trustee shall monitor the reconciliation of tribal and Individual Indian Money trust accounts to ensure that the Bureau provides the account holders, with a fair and accurate accounting of all trust accounts."

• The Special Trustee shall ensure that the Bureau establishes appropriate policies and procedures, and develops necessary systems ....

• The Special Trustee shall ensure that the Bureau establishes policies and practices to maintain complete, accurate, and timely data regarding the ownership and lease of Indian lands." Id.

The Act included similar duties for the Special Trustee regarding the Bureau of Land Management and the Minerals Management Service as well as the overall coordination of policies, standardization of procedures, and integration of land records, trust funds accounting, and asset management systems among agencies. The Special Trustee was assigned the responsibility for developing for each fiscal year a consolidated Trust Management program budget proposal for submission to the Secretary, the OMB, and the Congress. He was to certify the adequacy of each budget request to discharge, effectively and efficiently the Secretary's trust responsibilities under the Act.

The history of the implementation of the 1994 Act and the resulting controversy between the first Special Trustee and Secretary Bruce Babbitt will be addressed later. However, what has the present Special Trustee said about the Secretary's present plans to reorganize the DOI to address future trust reform and trust operations and create The Bureau of Indian Trust Asset Management (BITAM) out of whole cloth? In testimony to Congress, he has specified what he believes to be necessary to include in the role of the Special Trustee to fulfill his responsibilities under the Act.

On February 26, 2002, the Special Trustee submitted written testimony to the Senate Committee on Indian Affairs that addressed his views on the current state of trust reform and the continuing role of the Office of Special Trustee in exercising his Congressionally mandated duties under the new organizational plan (Tab 1).

First, with regard to the DOI's current trust reform picture, he wrote:

"Trust reform, as well as the ongoing delivery of trust services to these individual and tribal beneficiaries, has reached a point where radical measures need to be undertaken now. Specifically, the Department's discharge of its trust responsibilities, as it is now organized, is inadequate to the demands placed upon it.

The primary problems are as follows. First, there is the need for a clear understanding of the Government's trust obligation to the beneficiaries. Second, there is a great need for experienced trust management, and, finally, there is the need to ensure accountability by those responsible for delivering trust services ....

Today the Department cannot perform its trust duties at the level required by the Reform Act. Trust reform to date has not achieved an acceptable level of success, and, indeed, to speak of trust reform is misleading. The implementation of selected trust systems and data cleanup efforts is only the prelude to trust reform. It is the acquisition of the basic tools to do what needs to be done. It is selecting and buying the plow. Cutting the furrows lies far ahead. Actual trust reform must be accomplished. By properly serving the best interests of these Indian beneficiaries, the trustee - the Government - protects itself from the high risk of liability that OMB spoke to in 1980.

The problems that trouble the Department are management problems. The lack of management capability is signaled by the evident need for senior managers with experience in delivering trust services and operating trust systems in the private sector. Additionally, there is a critical need for senior level, project management skills applicable to large trust operations projects. The execution of those Federal fiduciary obligations must be rationalized.

The lack of accountability refers to the need to have all staff that are charged with trust responsibilities perform as directed by informed and responsible senior managers.

Until a clearer understanding of the trust obligation, better management, and more accountability are in place regardless of what the trust organization looks like, it will be difficult for the Government to come into compliance with the 1994 Reform Act."

I concur with the Secretary's concept of a single organizational unit responsible for the management of the Indian trust assets. That organization has the potential of addressing the accountability concerns by placing one executive, responsible to the Secretary, in charge of the delivery of the appropriate, required trust services to tribes and individual Indians. I believe a single organization with its own chain of command, that is one not diluted by intersecting other Departmental chains of command, can work better than the present organization. The devil, however, is in the details, and the new organization must have the best trust executive direction and actually hold people accountable. I also believe that the trust organization needs to be separated from other activities of the Bureau of Indian Affairs and placed on its own footing.

Finally, let me comment on the notion advanced by some parties these days that the administration of the Government's trust can be split into seemingly separate organizations, one for individual Indians and one for the tribes. I understand that litigation issues prompted this alternative. It is highly impractical in my opinion, however, to split administratively and operationally those trust responsibilities that have virtually identical characteristics of accounting, beneficiary reporting, land management (sometimes overlapping), investment management, and tribal distributions to individuals. Its only result would be to create two similar organizations that would be at odds with each other. Id. at 3-6, emphasis in original.

Addressing the need for that clearer understanding and accountability, the Special Trustee advised the Senate Committee on Indian Affairs of his view of the appropriate role of the Office of Special Trustee (OST) regarding the reorganization:

"I believe that the Special Trustee must have the opportunity to provide candid and informed guidance directly to the Secretary as she seeks the more effective management of the trust responsibilities under her control. The Office of Special Trustee (OST) will continue to focus on its oversight responsibilities. Therefore, OST must be provided appropriate resources and pursue every opportunity to ensure that trust reform is carried out effectively and efficiently.

Last July, the Secretary authorized the Special Trustee to issue written directives requiring the adoption of appropriate changes in existing policies that hinder trust reform. Although such directives can be overruled by the Secretary on appeal, the authority to issue such directives may prove a valuable tool. However, it is not as effective as active direct line authority over those in the Department who implement trust policies and practices. Also, I am concerned that the fundamentals of trust reform can be diluted by political considerations arising out of the consultation process.

Currently, the Office of Special Trustee receives appropriations for trust reform activities, no matter where in Interior the reform project is managed. OST then initiates the funding of projects when and if adequate plans and management appear to be satisfactory. In some instances, we have found it necessary to interrupt funding when expected project success is not being achieved. This process has proven helpful to the reform process and has given the Special Trustee a useful and independent voice in that effort. I believe this budget control over the reform of the trust function should continue to be a part of OST's oversight responsibility. The independence and informed objectivity of the OST is essential to achieving lasting trust reform." Id. at 4-5.

On February 25, 2002, the Special Trustee also provided the Congressional committees with oversight responsibilities for the DOI and the Secretary's trust reform efforts with a letter outlining the OST's statutory responsibilities (Tab 2). The letter had as an attachment a memorandum, dated February 4, 2002, that he had sent to his staff entitled, "Trust Reform Oversight."

The letter indicated that the Special Trustee supported the Secretary's proposal to reorganize the existing management process placing one executive in charge which would enable, in the view of the Special Trustee, the DOI to provide for the more effective management of, and accountability for, the proper discharge of the Secretary's trust responsibilities to Indian tribes and individual Indians. However, the Special Trustee characterized the effort to create a new organization as a "daunting task." Id. at 1.

The Special Trustee also described his task as one to "ensure the implementation of all reforms necessary for the discharge of the Secretary's trust responsibilities to the Indian beneficiaries no matter where those responsibilities are located with the Department." Id.

The Special Trustee stated:

"The Secretary's proposal to create a new and discrete management unit for these Indian assets is a bold and important element in the eventual successful reform needed to bring the Department into conformity with the Trust Reform Act. The work necessary to create and maintain controls, consistent written policies and procedures, appropriate staffing, supervision, and training must be aggressively pursued even as the Department and Indian Country consider the Secretary's proposed course of action. As the overseer of the Department's trust reform effort, I intend to remain focused on the direction set out for this Office in the Reform Act." Id.

The Special Trustee provided guidance and direction to the OST in his memorandum to his staff for the period during the reorganization of the management of DOI's trust responsibilities. He clarified the extent of the responsibilities and authorities held by the Special Trustee by stating:

"Line Operations: Until such time as responsibility for the Office of Trust Funds Management (OTFM), the Office of Trust Records (OTR), and other line operations for which OST becomes responsible, are transferred to the Bureau of Trust Asset Management (sic) or to another organization, the Special Trustee will be the managing official for those offices to the same degree that existed prior to the proposed reorganization ....

Background: In proposing the creation of a new Bureau, the Bureau of Indian Trust Asset Management (BITAM) in order to consolidate all Indian Trust asset management functions, and establishing the Office of Indian Trust Transition to plan and implement the transition of the Department's trust functions to BITAM, the Secretary stated `the Office of the Special Trustee for American Indians will continue to exercise oversight responsibilities for trust reform ...'. Those responsibilities have been supplemented by certain line management and operating duties by delegations to the Special Trustee in Secretarial Orders and the Departmental Manual.

As overseer for trust reform, the Special Trustee will continue to provide objective and informed oversight as the Department seeks the more effective management of its trust responsibilities to Indian tribes and individual Indian beneficiaries ....

The scope and reach of the Special Trustee's oversight role extends to all DOI Bureaus and Offices engaged in Indian trust management. While the Reform Act specifically mentions the Bureau of Indian Affairs, the Bureau of Land Management, and the Minerals Management Service, other Bureaus and Offices within the DOI are engaged in trust management and, therefore, fall within the scope of trust reform. The Reform Act also details specific duties and responsibilities regarding particular trust management functions and activities of identified Bureaus and Offices within the DOI. However, the jurisdiction of the Special Trustee is not limited to those specific management functions. Id. at 1-2.

In closing, the Special Trustee informed his staff (and Congress) that:

"In order to better ensure the continued proper discharge of our statutory responsibilities for the more detailed work of trust reform, The Special Trustee will expand, within the immediate Office of the Special Trustee, a staff with varied trust expertise. The purpose of that staff is to assist the trust reform effort in such areas as asset management and records; trust operations and systems; project designs, implementation, and management; trust policies, procedures, laws, practice, and fiduciary conduct. Other needed skills supportive of the more effective management of Indian trust assets may be identified and acquired as we proceed. Id. at 3.

The Special Trustee attached to the memorandum to his staff another memorandum from Richard Fitzgerald, the Deputy Special Trustee for Policy, dated February 4, 2002, and entitled, "Responsibilities of the Special Trustee." Fitzgerald listed the significant responsibilities and authorities of the Special Trustee found in both the letter and spirit of the American Indian Trust Fund Management Act of 1994 (1994 Reform Act). Among those responsibilities, he listed several of significance for this Report:

"Because the Reform Act talks in terms of `the implementation of all reforms necessary for the proper discharge of the Secretary's trust responsibilities...' and places in the hand of the Special Trustee the responsibility to determine when `all reforms ...have been implemented ....' the scope of the Special Trustee's jurisdiction and the authorities of his Office are necessarily very extensive. Traditional trust principles hold that a trustee, here the Secretary trustee designate, has such powers as are necessary or appropriate to carry out the purposes of the trust and are not forbidden by the terms of the trust. Therefore, the Special Trustee's oversight role extends to all things necessary or appropriate to achieve responsible fiduciary conduct." Id. at 2, citation omitted.

After listing three pages of responsibilities, Fitzgerald discussed the Secretarial designations that had increased the Special Trustee's authority to include the authority to issue written directives requiring DOI bureaus to adopt changes in policy and practices felt appropriate by the Special Trustee. He also addressed the Secretary's stated commitment to trust reform and her placing the Special Trustee in charge of trust reform:

"Commitment to Reform - In its response to the Third Report of the Court Monitor dated October 1, 2001, and filed with the United States District Court for the District of Columbia in the Cobell litigations (sic), the Department stated that it `is committed to fulfilling its trust obligations to the American Indians by enacting trust reform as quickly as possible and will continue to work with the Court Monitor to explore all options to improve the process.' The Department also acknowledged its efforts to reform the management of the trust accounts for which it is responsible still face substantial challenges. More over, it advised the Court that it will review the task before it to determine `what additional actions or directives' may be needed to ensure that the Special Trustee has the requisite authority to perform effectively. The Secretary has clarified that the special trustee is in charge of trust reform and that if she and he believe that further authority is required within the Office of the Special Trustee Interior will work to provide it." Id. at 5.

Having stated what he viewed as the "daunting" tasks ahead of DOI and his and his office's responsibilities and authorities to help accomplish them and oversee their implementation; and having told Congress and the Secretary of his views and responsibilities, what actions has the Special Trustee taken to bring about trust reform during the reorganization? Some indication of his intended actions can be gained by the review of further memoranda.

The Special Trustee informed the Deputy Secretary of the Interior on February 19, 2002 of his responsibilities and intentions in a note (Tab 3) to the Deputy Secretary that responded to the Deputy Secretary's request that the Special Trustee join an in-house executive-level body to discuss trust reform, identify defects in the current system, and review the options for resolving them. *fn2 In that memorandum, in speaking about the new management body, he stated:

"However, it must be understood, both inside DOI and outside of it, that my offices' participation in that group's discussion does not signify my agreement or endorsement of the decisions or recommendations for trust reform it may make. I believe the role of the Special Trustee is to give informed and objective advice directly to the Secretary when needed. I believe that the independence and objectivity of this Office is an asset of value to the Secretary as she formulates the specifics of trust reform. Nevertheless, I will be pleased to share my views, opinions, and guidance with the group.

I do not intend to participate in any discussion that concerns the Cobell litigation. In my opinion, the Department's defense of those things done or left undone in the past should play no role in constructing the policies, procedures, and philosophy that will guide the proper discharge of the Secretary's trust responsibilities in the future." Id.

The Special Trustee has also recently attended the March 2002 Phoenix meeting of the Trust Management Reform Task Force (Tribal Task Force) composed of 24 Indian tribal delegates and 12 alternates for the 12 Indian Country Regions considering the Tribal proposals for an alternative to the DOI's BITAM proposal and the related activities by EDS and other DOI, BIA and OST officials to reform the systems and processes for both the Tribal and IIM trusts.

Following that meeting and the Special Trustee's presentation to the Task Force (at their request *fn3), Richard Fitzgerald again wrote the Special Trustee in a memorandum, dated March 22, 2002, entitled, "Trust Reform 2002" (Tab 4). He stated in part:

"Our recent trip to Phoenix to meet with the Advisory Board and appear before the Transition Task force was very instructive. The Board, once again expressed yours and their continuing extreme frustration with the lack of progress in trust reform. And while the Task Force is composed of serious and knowledgeable tribal leaders, discussing the wisdom and particulars of the proposal to remove trust management from the BIA will not achieve improvement in the management of the Indian trust assets within the foreseeable future. Indeed, placing that management some place else within DOI does not by itself achieve compliance with the Reform Act. It must be acknowledged that trust reform to date has largely failed.

Given parts of her testimony before the House Committee on Resources of February 6, 2002, and her article of March 8, 2002, in Writers on the Range, you and the Secretary agree that the trust reform problems that beset the Department are management problems .... Bringing more centralized management and accountability to the process requiring little more than changing the authorities delegated by the Secretary to the twelve regional offices. That should be a very easy task to achieve.

The continued failure to successfully implement the `selected trust systems improvements and data cleanup' remains an unconquered barrier to trust reform. To overcome that barrier the Department must do three essential things.

First, it must set as its first priority the creation and maintenance of a Department-wide integrated financial information trust data management system. Without such a system, the Department will never be able to manage the Indian trust assets or discharge its trust duties as required by existing law.

Second, it needs a clear and widely accepted understanding of the Government's trust obligations to these tribal and individual beneficiaries. While the litigators may continue to debate the details of US v Mitchell, 463 US 206 (Mitchell II) in order to defend the past, our notion of the trust obligation should be guided by the overall finding in that case. The Court found; `... that the United States has consented to be sued for statutory violations and other departures from the rules that govern private trustees' (emphasis added) even though none of those statutes contains any provision that expressly makes the United States liable for its alleged mismanagement of Indian trust assets (see the dissenting opinion).

To foster that understanding, the Department needs a small core management group that understands `the rules that govern private trustees.' Such people know that a trustee is called upon to employ its best efforts to serve the best interest of the trust beneficiaries. Such people recognize the distinction between what is fitting, proper, and appropriate and that which is merely required by statute. It is a concept at odds with usual Government practice. It is my view that the provisions of Federal law that relate to Indians do not diminish these traditional trust rules, but rather add to them.

Third, and most importantly, there is a critical need to ensure accountability from those who deliver trust services. The active monitoring of operations and continuing evaluation of performance are fundamental management responsibilities. The apparent unwillingness of senior managers to impose appropriate consequences on individuals for continued poor performance is a serious obstacle to long-term success in trust reform. A system that refuses to acknowledge its weaknesses and avoids addressing those weaknesses through the possible use of justified sanctions is a system that cannot be properly managed. It is one thing to issue an order. It is quite another to ensure that it is implemented." Id. at 2-3, emphasis in original.

II. THE SPECIAL TRUSTEE'S MEMORANDUM TO THE SECRETARY OF THE INTERIOR

Apparently responding to his subordinate's concerns and those of others as well as his own, the Special Trustee drafted a memorandum to the Secretary that he sent to her under cover of a March 29, 2002 forwarding memorandum entitled, "Attached Draft Memorandum" (Tab 5). In the forwarding memorandum he requested a meeting with her to address his plan of action as described in the draft memorandum that he indicated he would send to her in formal form in another week. He stated in that draft memorandum in part:

"As you know, I am firmly committed to a successful conclusion to Indian trust management reform and the installation of critically needed trust management practices and systems. You have indicated that you are committed to these goals, as well. The purpose of this memorandum is to update you on my views on the current status of trust reform and to reiterate the availability of the trust and management expertise of the OST team going forward.

I support the two concepts vital to trust reform that you have espoused: First, that a single comprehensive organization dedicated to trust asset management is needed, and second, that the standard for performance of the Department's trust responsibility to Indians should conform to common law and private trust standards. In my view these two issues are pivotal to trust reform in the Department.

Beyond these basic trust policy issues, the additional keys to successful trust management going forward are:

• Executive leadership

• Accountability

• Project management

• Trust experience

• Risk management/oversight

I have previously identified these factors in discussions with you and your senior. management team, in reports to the Court, and in testimony to the Congress. I believe the critical failures in trust reform to date relate to failures in these basic management areas. Successful progress going forward is rooted in performing well in these areas.

Several key trust reform initiatives appear not to be moving forward expeditiously. For instance, while the Department has taken some steps to rationalize the implementation of what was TAAMS, repair the probate process, and begin to address the data cleanup process more efficiently, it has not dedicated sufficient resources to these core efforts beyond what OST itself established last fall. The leader of that combined project, Deputy Special Trustee Donna Erwin, has the necessary knowledge and experience to achieve success. To support her and help ensure her success, I have instructed my management team to collaborate with Donna and recruit and hire - - within OST's structure - - the additional trust experience and project management staff that she needs to be successful. To date, there has not been a concerted and disciplined effort to evaluate and make recommendations to you regarding the EDS II report of January 24, 2002. Unlike the quick response and action on the November 12, 2002, EDS report concerning TAAMS and BIA Data Cleanup, the January EDS report languishes in the face of Tribal Task Force meetings on reorganization, efforts to re-connect DOI IT systems, and Cobell litigation activities. Work on the review of the EDS report must be a high priority.

Moreover, the Department continues to focus on Cobell and Tribal litigation activities at the expense of basic trust reform. The legal advice and counseling currently provided is driven by the litigation posture, as opposed to actually fulfilling the fiduciary responsibility. It is absolutely essential that we keep our focus on establishing and improving basic trust management practices and systems.

Based on these and other considerations, l have come to the conclusion that OST needs to step beyond its oversight role and provide direction for trust reform. I have two specific recommendations to assist you going forward.

First, OST should assume responsibility for completing an action plan to implement trust reform. It is timely to `re-plan' the implementation of trust reform, but the new plan must improve on the HLIP and be properly executed. Accordingly, OST will work to develop an action plan encompassing your general goals and the objectives for the Department's performance of its fiduciary responsibility as outlined in the Reform Act. OST has both the trust expertise and the planning experience to complete this task in a reasonable time. I will supplement the existing staff with the necessary seasoned executives. Second, OST should assume line responsibility for the development and management of the trust systems including but not limited to data cleanup, probate, and policy and procedures, as well as the business processes. While design and implementation of a new trust organization is important, it is also important to ensure the necessary trust systems are put in place as soon as possible. I will need your support for dedicating some people in various parts of DOI who can provide assistance, too.

As I see it we have two goals: Establishing the trust systems needed going forward, and setting up the future organization that will house those systems. It is my opinion that OST should manage the former, which is where its expertise is grounded. OITT should manage the latter, which is where its expertise is grounded. OST's Donna Erwin is currently building the staff and contractors needed to carry forward expeditiously the basic trust operations. Without a basic trust system, DOI will never be able to discharge its trust responsibility properly. OITT is dealing with longer-term issues related to the Tribal Task Force and the shape of the future trust organization.

In summary, the advantages for the Department and trust reform of these two steps are that they:

• Place a senior political executive - - who was selected for his trust and management experience in large financial institutions - - in charge of trust reform and the development of basic trust operations.

• Draw on the trust skills on the OST senior management team.

• Provide a stronger effort for the future of trust reform within DOI" Id. at 1-4, emphasis in italics added.

Receiving no response, the Special Trustee sent the memorandum to Secretary Norton, entitled, "Going Forward on Trust Reform," in final form without change on April 8, 2002 (Tab 6).

On April 9, 2002, a day after sending the above-quoted memorandum to the Secretary in final form, the Special Trustee responded to a letter request from the Co-Chairman of the Trust Management Reform Task Force and President, National Congress of American Indians, Tex Hall, requesting that he respond to questions from the Task Force relating to the involvement of the Special Trustee in the efforts to reform the management of Indian trust assets within the DOI (Tab 7). That response was, in part, relevant to the subject of this Report:

"1. Did the Office of the Special Trustee recommend or concur with the Secretarial Order establishing the Office of the Trust Transition (OITT)?

The creation of OITT was an initiative of the Secretary to explore and identify the many details associated with the creation of a single organizational unit within the Department to be responsible for the management of Indian trust assets. I support the concept of the Secretary's proposal to consolidate the management of these assets within the Department.

2. Does OST have any input or line authority over the OITT?

OST has no line authority with respect to OITT. The (Reform Act) instructs the Special Trustee to `ensure the implementation of all reforms necessary for the proper discharge of the Secretary's trust responsibilities to Indian Tribes and individual Indians.' This duty, in my opinion, extends to and includes the oversight of OITT activities related to trust reform.

Please provide an update of OITT and OST activities and accomplishments. Explain the coordination between OST and OITT.

OITT has sought comment from OST regarding `trust strategy,' which might be called the `elements of a trust organization.' Deputy Special Trustee Donna Erwin has been working in conjunction with the three major trust reform projects, TAAMS, Probate, and BIA Data Cleanup, and coordinating her efforts with OITT. She also assisted OITT in the compilation of the eighth quarterly report to the Court.

How will your office coordinate with the OITT mandate?

OST's role is one of oversight. OST will review OITT activities (see above) to determine if they are consistent with the responsibilities of a trustee as established in the Reform Act, and to ensure that trust reform is being attained.

How are you proposing to develop the required strategic plan and what is the time frame for providing a draft to Tribes for comment?

The Reform Act requires the development of a strategic plan detailing the method of fulfilling the trust obligation of the Government. The first Special Trustee, Mr. Paul Homan, submitted the required strategic plan to Secretary Babbitt in February 1997. At that time, the Secretary chose to implement some of the recommendations contained within that strategic plan, and delayed the implementation of others. OST does not now see the need for another strategic plan. Rather, the need is for an `implementation plan; to replace and expand upon the existing High Level Implementation Plan, in order to make it more comprehensive and to provide for better integration among trust reform activities. The work of Electronic Data Systems (EDS) in reviewing the efficacy of the Department's trust reform efforts to date will assist the creation of a new implementation plan. OST would propose to provide this new implementation plan, given its trust experience, in the coming months. Id. at 1-2.

With regard to his statutory reporting responsibilities he stated:

6. What relationship or line authority exists between the office of the OST and the Deputy Secretary of Interior, now headed by Stephen Griles?

The Special Trustee reports directly to the Secretary as required by the 1994 Reform Act. Id.

The Special Trustee's penultimate paragraph addressed what specific things he could do to assist the Task Force in the development of a plan for comprehensive trust reform. Once again, he stated what he believed were his responsibilities to bring about trust reform:

"The Special Trustee and the OST staff can assist the Task Force in a number of ways including:

• Understanding the scope of the trust obligation as clarified by the Reform Act.

• Determining the elements of a trust organization that will provide for the more efficient management of and accountability for the proper discharge of the Secretary's trust responsibilities.

• Fostering an effective working relationship between the Government's trust organization and the role of the compacting/contracting tribes.

• Providing OST senior managers to assist in the identification and understanding of the issues as well as the attributes of well-managed trust functions, e.g., accounting, investments, records, and compliance (risk management).

• Determining and understanding the best alignment of trust business processes.

• Continuing the development of the systems needed to comply with the 1994 Reform Act.

• Determining what resources are available from the private sector to assist the Department in the administration of trust functions and trust reform.

• Providing an independent assessment of those trust activities currently performed in various parts of DOI." Id. at 3.

III. ANALYSIS OF THE SPECIAL TRUSTEE'S CONCERNS AND RECOMMENDATIONS

It will come as no surprise to this Court to learn of the concerns expressed by the Special Trustee to the Secretary in his April 9, 2002 memorandum for he expressed almost the exact same concerns during his testimony in the Secretary's contempt trial on January 89, 2002.

The following dialogue between plaintiffs' counsel Dennis Gingold and the Special Trustee early in his direct examination gives an example of those concerns:

Q: Do you know why the quarterly reports have consistently failed to provide this Court with a truthful, accurate, clear picture of the status of BIA data?

A: I think it's inadequate management, project management. In some instances you could say that the project was not designed well, was not managed well. Some of the lack of information I believe was simply for - - due to mismanagement of the project. In fact, as time went on, after I took over the quarterly reporting compilation, it became very evident, particularly in that subproject, that the project not only wasn't managed properly, but it didn't have - - it didn't envision - - the management didn't envision the scope of the project as it should have, and we became - - my office became increasingly restive at that situation. I believe it's fair to say that in much of this, it comes back to a lack of solid management, particularly with project management skills, and probably due to a lack of appropriate staffing.

Q: As of today, January 8t", 2002, have those problems been corrected?

A: No, I wouldn't say they have been corrected. Some moves have been made to correct them, but I think we've got a ways to go.

Q: Do you know if they will be corrected?

A: I think they have a good opportunity, given the appropriate management, the appropriate executive direction, and the appropriate accountability down the line, yes, I think they have a chance. Trial Tr. at 2222-2223.

In answer to Gingold's question regarding whether he still lack confidence in the accuracy of the Quarterly Reports he replied:

A: Yes, I do. I'm not certain where some of these subprojects really stand ....

But the long and short of this is that, to answer your question, I don't have a great deal of confidence in the subprojects and trust reform generally as I sit here right now. What we're doing is putting more monitoring effort into this and, of course, the Department and the Secretary are certainly taking moves to put more commitment and more resources and more effort behind the whole trust reform effort. Id. at 225-2226, emphasis added.

The Special Trustee addressed the experience existing within the DOI to bring about trust reform in the following colloquy:

Q: Okay. So do you believe today that the people involved in trust reform have sufficient knowledge and skill and expertise to do it?

A: I think there are people who are very capable who are trying to learn a great deal about the obligations of a trustee in a big hurry and are very sincere about it. Do they come from trust backgrounds? I don't believe so, other than some of the people on my staff. Id. at 2249.

And on cross-examination by the government, with regard to executive leadership, the Special Trustee had the following dialogue with the defense counsel and the Court:

Q: What's your take on the reorganization realignment? Have you supported that idea?

A: I have supported it in concept, because I think somebody does need to be in charge. I think it probably makes sense to take the organization away from the rest of Interior and make it a separate, freestanding equivalent of a commercial trust department.

Q: Gong back to the Secretary's - -

A: Could I continue?

Q: Oh, sure.

A: Excuse me just for a minute. But what I wanted to add to that is the devil is in the details, because as others have said before me, possibly, a lot of this can amount to nothing more than moving around the chairs on the deck of the Titanic. What's really important is to have strong executive leadership and accountability and consequences for non-accountability down the line. That's the secret ingredient. It's no secret, I mean it's just good management.

THE COURT: And how does that occur?

THE WITNESS: It's difficult in the present environment. People are not doing the job are moved to other jobs that are of the same grade, and there's no real penalty. There's no consequence. And other people who should be leading are not leading. Id. at 2406-2407, emphasis added.

And with regard to his role in trust reform, the Special Trustee had the following comments in response to the government's questions:

Q: Now - you talked about the notion of having somebody directly in charge. The Secretary's June 10`", 2001 orders, one of those set up a different structure, correct, to by its terms put you in charge of trust reform? Correct?

A: Not really.

Q: Why do you say not really? Because as I understood the order, you were given the same authority as the Secretary, meaning the ability to direct members of the Department, of the Bureau of Indian Affairs, unless a specific order was appealed to the Secretary. So that's a fairly broad authority, isn't it?

A: Not really. What I really wanted was to have line authority. This is what came out of that. The problem with what I've got now, which I have used once and I may use again fairly soon, is that it is appealable. I believe the Secretary will back me up, frankly, but nevertheless the effectiveness of something like this is often in the eyes of the beholder who may be the person who wants to get away with something or not do the job properly. And the right of appeal undercuts a large part of this. Id. at 2407-2408, emphasis added.

The Special Trustee's discussed his not being given line authority by the Secretary over those Bureaus engaged in trust reform:

Q: What did you convey to him (Deputy Secretary Griles) about that?

A: I told him that somebody needed to be in charge, and had to have clear line control, and probably should be an organization that's separated away from the rest of the Department.

Q: Did you express your view that you didn't think that you should be the person that has that ultimate authority?

A: No, I told him I should.

Q: You thought you should?

A: Yes.

THE COURT: But your preference would have been that organization would be under you.

THE WITNESS: Yes.

THE COURT: The Special Trustee.

THE WITNESS: I think it makes some sense to put it under the Office of Special Trustee.

THE COURT: And was there something in the statutory scheme contrary to that or why do you think that was rejected?

THE WITNESS: I was told it was rejected because I would have a conflict in my role of Special Trustee in oversight. I don't agree with that, but that's what I was told.

BY MR. HARRIS:

Q: Who said that?

A: Mr. Griles. Id. at 2410-2411, emphasis added.

Continuing on later under re-direct examination with the same dialogue about the decision to place the Deputy Secretary in charge of trust reform rather than the Special Trustee, the following colloquy took place:

Q: And is it correct that Mr. Griles has now assumed both personal and official responsibility for ensuring that trust reform is implemented effectively?

A: That appears to be the case, yes.

Q: Mr. Griles felt it would be a conflict for you, for the Office of Special Trustee, to have a let's say a restructured operation under you that would be operating in the trust area? Is that a fair statement?

A: Yes.

Q: Isn't OTFM, the Office of Trust Funds Management, under the Office of the Special Trustee?

A: Yes, it is.

Q: And isn't the Office of Trust Funds Management substantively involved in the processing of all financial information regarding the - - at least the individual Indian trust?

A: Yes.

Q: Well, why is it a conflict for you to have the restructured operations and not a conflict for you to have OTFM?

A: My view of that is that it's not a conflict under the law for the Special Trustee to have responsibility for all of trust improvement as well as oversight of trust generally. I am, on the other hand, uncomfortable, frankly, with the - - with having a portion of the trust operation - - you named OTFM. I could also name the Office of Trust Records. I could also name the Office of Trust Risk Management. All three of those are under the Special Trustee - - to have those units separated out and be under the Special Trustee for the simple reason that the Special Trustee can be perceived as playing favorites in his or her oversight responsibility. This is treating his own units more favorably than he would treat some other unit in some other part of the Department.

Q: And as a matter of fact, the Act specifically contains imperative language in that the trustee, Special Trustee, shall ensure that trust reform get done; correct?

A: That's correct.

Q: And it would certainly be a lot easier, would it not, if you had the operating divisions under you and you would have the responsibility and the accountability to ensure it gets done under those circumstances?

A: Well, I don't think it has a conflict with the Act.

THE COURT: That's why you suggested you should have the line authority.

THE WITNESS: Yes. Id. at 2446-2448, emphasis added.

The Special Trustee has been as consistent in his written statements about his concerns and recommendations regarding trust reform as presently being carried out as he was at trial. What can be gained from these written statements in the way of a picture of the progress of the Secretary's and the Deputy Secretary's trust reform activities through the eyes of a senior executive highly experienced in trust fiduciary operations from the private sector? Quoting from his past statements in this Report gives this Court a sense of his view of trust reform - 2002 - and what needs to be done about it that is not being done.

With regard to trust reform progress:

"Trust reform, as well as the ongoing delivery of trust services to these individual and tribal beneficiaries, has reached a point where radical measures need to be undertaken now. Specifically, the Department's discharge of its trust responsibilities, as it is now organized is inadequate to the demands placed upon it.

First, there is the need for a clear understanding of the Government's trust obligation to the beneficiaries. Second, there is a great need for experienced trust management, and, finally, there is the need to ensure accountability by those responsible for delivering trust services ....

Today, the Department cannot perform its trust duties at the level required by the Reform Act. Trust reform to date (February 26, 2002) has not achieved an acceptable level of success, and, indeed, to speak of trust reform is misleading. The implementation of selected trust systems and data cleanup efforts is only the prelude to trust reform.

Until a clearer understanding of the trust obligation, better management, and more accountability are in place regardless of what the trust organization looks like, it will be difficult for the Government to come into compliance with the 1994 Reform Act." Tab 1 at 3-6, emphasis in original.

With respect to the Special Trustee's role:

"I believe that the Special Trustee must have the opportunity to provide candid and informed guidance directly to the Secretary as she seeks the more effective management of the trust responsibilities under her control.

Last July, the Secretary authorized the Special Trustee to issue written directives requiring the adoption of appropriate changes in existing policies that hinder trust reform. Although such directives can be overruled by the Secretary on appeal, the authority to issue such directives may prove a valuable tool. However, it is not as effective as active direct line authority over those in the Department who implement trust policies and practices. Also, I am concerned that the fundamentals of trust reform can be diluted by political considerations arising out of the consultation process .

...I believe this budget control (by the Special Trustee) over the reform of the trust function should continue to be a part of OST's oversight responsibility. The independence and informed objectivity of the OST is essential to achieving lasting trust reform." Id. at 4-5.

And further:

"...I have come to the conclusion that OST needs to step beyond its oversight role and provide direction for trust reform. I have two specific recommendations to assist you going forward.

First, OST should assume responsibility for completing an action plan to implement trust reform ....

Second, OST should assume line responsibility for the development and management of the trust systems including but not limited to data cleanup, probate, and policy and procedures, as well as business processes.

In summary, the advantages for the Department and trust reform of these two steps are that they:

• Place a senior political executive - - who was selected for his trust and management experience in large financial institutions - - in charge of trust reform and the development of basic trust operations.

• Draw on the trust skills on the OST senior management team.

• Provide a stronger effort for the future of trust reform within DOI" Tab 6 at 1-4.

And as stated to this Court:

Q: What did you convey to his (Deputy Secretary Griles) about that?

A: I told him that somebody needed to be in charge, and had to have clear line control, and probably should be an organization that's separated away from the rest of the Department.

Q: Did you express your view that you didn't think that you should be the person that has that ultimate authority?

A: No, I told him I should.

Q: You thought you should?

A: Yes.

THE COURT: But your preference would have been that organization would be under you?

THE WITNESS: Yes

THE COURT: The Special Trustee.

THE WITNESS: I think it makes some sense to put it under the Office of Special Trustee. Trial Tr. at 2410-2411.

Why did the Special Trustee come to this conclusion and recommendation that he take over authority for trust reform? His views on the management of trust operations and trust reform within the DOI as submitted to the Senate Committee on Indian Affairs on February 26, 2002 are informative:

"The problems that trouble the Department are management problems. The lack of management capability is signaled by the evident need for senior managers with experience in delivering trust services and operating trust systems in the private sector. Additionally, there is a critical need for senior level, project management skills applicable to large trust operations projects .

...

The lack of accountability refers to the need to have all staff that are charged with trust responsibilities perform as directed by informed and responsible senior managers." Tab 1 at 3, emphasis added.

And, with regard to meeting with an executive level in-house body to discuss trust reform he told the Deputy Secretary the following:

"I do not intend to participate in any discussion that concerns the Cobell litigation. In my opinion, the Department's defense of those things done or left undone in the past should play no role in constructing the policies, procedures, and philosophy that will guide the proper discharge of the Secretary's trust responsibilities in the future." Tab 3 at 5.

And as described by his Deputy in a memorandum sent to him:

"...The apparent unwillingness of senior managers to impose appropriate consequences on individuals for continued poor performance is a serious obstacle to long-term success in trust reform. A system that refuses to acknowledge its weaknesses and avoids addressing those weaknesses through the possible use of justified sanctions is a system that cannot be properly managed. It is one thing to issue an order. It is quite another to ensure that it is implemented." Tab 4 at 3, emphasis added.

And finally, in his April 9, 2002 memorandum to the Secretary:

"Several key trust reform initiatives appear not to be moving forward expeditiously. For instance, while the Department has taken some steps to rationalize the implementation of what was TAAMS, repair the probate process, and begin to address the data cleanup process more efficiently, it has not dedicated sufficient resources to these core efforts beyond what OST itself established last fall .... To date, there has not been a concerted and disciplined effort to evaluate and make recommendations to you regarding the EDS II report of January 24, 2002. Unlike the quick response and action on the November 12, 2001, EDS report concerning TAAMS and BIA Data Cleanup, the January EDS report languishes in the face of Tribal Task Force meetings on reorganization, efforts to re-connect DOI IT systems, and Cobell litigation activities. Work on the review of the EDS report must be a high priority.

Moreover, the Department continues to focus on Cobell and Tribal litigation activities at the expense of basic trust reform. The legal advice and counseling currently provided is driven by the litigation posture, as opposed to actually fulfilling the fiduciary responsibility. It is absolutely essential that we keep our focus on establishing and improving basic trust management practices and systems.

Based on these and other considerations, I have come to the conclusion that OST needs to step beyond its oversight role and provide direction for trust reform." Tab 6 at 1-2, emphasis added.

Slightly over a year since the former TAAMS and BIA Data Cleanup project manager, Dom Nessi, sent a memorandum to the Special Trustee stating that trust reform was "imploding," the Special Trustee has now written the Secretary of the Interior that he views trust reform in significant peril for the same or similar reasons expressed by Nessi. He captured his reasons in his April 9, 2002 memorandum by listing the keys to successful trust management:

• Executive leadership

• Accountability

• Project management

• Trust ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.