Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

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

Cobell v. Norton


August 20, 2003


The opinion of the court was delivered by: Alan L. Balaran Special Master


On March 6, 2003, the Special Master, in the company of attorneys representing the Department of Justice and the Office of the Solicitor, visited the Office of Appraisal Services ("OAS") of the Navajo Regional Office ("NRO") of the Office of the Special Trustee for American Indians ("OST") located in Gallup, New Mexico and the Bureau of Indian Affairs ("BIA") Realty Office in Window Rock, Arizona. The purpose of the site visit was to determine whether individual Indian trust information concerning the appraisal of the value of rights-ofway ("ROWs")*fn1 and easements running across Navajo allotments was being preserved, maintained, and safeguarded in accordance with Court orders.*fn2

During the site visit, the Special Master examined appraisal files located in the Gallup Regional Appraisal Office and easement files located in the Window Rock BIA Realty Office. The Special Master also interviewed former Chief Appraiser Anson Baker (who was present during the Special Master's site visit),*fn3 Regional Appraiser Robert Hatfield (who was being trained by Baker at the time), and BIA Realty Officer Stephen Graham.

The site visit uncovered several problems. At the outset, Baker admitted to the Special Master that, before he transferred to the OST-OAS-Northwest Regional Appraisal Office in September 2002, he "erased" all of the appraisal information stored on his computer.*fn4 He also admitted he was unable to locate "two memoranda," which he utilized to formulate his appraisal valuations; that his appraisal workfiles lacked documentation supporting his ROW valuations;*fn5 and that based on those valuations, Navajo allottees receive payments for ROWs "much less" than those payments received by neighboring tribes and private landowners. When the Special Master asked Baker why he appraised allottee ROWs at a value lower than the amount paid for ROWs running across private and tribal lands, the Chief Appraiser responded that he did so out of concern that a valuation commensurate with the valuation of private and tribal holdings would invite protracted condemnation proceedings by Oil and Gas ("O&G") Companies.

At the Window Rock Office of the BIA, Realty Officer Graham asserted Navajo allottees do not receive "the benefit of their bargain," i.e., ROW payments comparable to those received by similarly situated private and tribal landowners. He also described a process whereby O&G Company representatives – not delegates of the Secretary – contact, negotiate with, and secure the approval of Navajo allottees to the proposed ROWs.

This Report examines these findings and representations in the context of the Court's orders and the Secretary's trust responsibilities to maintain a complete and accurate set of appraisal documentation and ensure that the Navajo allottees receive "fair market value" for ROW leases running across their lands.*fn6 For the reasons stated below, it is the conclusion of the Special Master that the failure of the Secretary's appraisal-delegates to safeguard appraisal information as required by court order, federal regulation, industry standard, and fiduciary law, has directly harmed Navajo trust beneficiaries by denying them access to information necessary to meaningfully evaluate and potentially challenge the ROW valuation process.

As context for this conclusion, it is necessary to describe the functions of the Office of Appraisal Services and the geographical area served by the Office of the Special Trustee's Regional appraisers. This report will then examine the ROW appraisal reports reviewed by the Special Master in the context of the standards regulating the appraisal industry and the fiduciary duties governing the Secretary and her appraisal-delegates. Finally, this report will focus on the practical consequences of the Secretary's failure to retain and safeguard vital individual Indian trust information.

Office of Appraisal Services

Appraisals performed by OAS are among the functions performed by the BIA Regional Real Estate Services Program ("RESP"). Under this program, BIA oversees more than 16 million acres of Tribal trust, allotted, and government-owned lands. Beginning in June 2002, RESP has operated under the authority of the Office of the Special Trustee.*fn7

In addition to the locations in Gallup, New Mexico and Window Rock, Arizona, the BIA Navajo Region maintains agency offices in Tuba City, Arizona (Western Navajo); Chinle, Arizona (Chinle Agency); Fort Defiance, Arizona (Fort Defiance Agency); Shiprock, New Mexico (Shiprock Agency); and Crownpoint, New Mexico (Eastern Navajo Agency). Although the authority of the Navajo Regional Director to administer O&G leases on Navajo allotted lands was rescinded in November 2000 and re-delegated to the Farmington Indian Minerals Office (FIMO), (see Shii Shi Keyah Association, et al. v. Hodel (Case No. 84-1622M)), the Regional Director maintains authority over all other real property transactions, including ROWs. See Memorandum from M. Sharon Blackwell, Deputy Commissioner - Indian Affairs, to the Regional Director, Navajo Region and FIMO Director (Nov. 28, 2000). (Exhibit 4.)

The Eastern Navajo Agency Real Estate Services Office, "as the trustee to the Navajo Tribe," has jurisdiction over Navajo lands located in New Mexico, Arizona, and Utah, and is charged with providing "professional and quality services in all areas of realty transactions affecting tribal and individual Indian trust lands and natural resources, through education and management." Mission Statement of ENARESO (OTRM09646).*fn8

Eastern Navajo Agency

The Navajo Nation occupies the largest Indian reservation in the United States, comprising approximately 16 million acres, or about 25,000 square miles. The Eastern Navajo Region spans approximately 2,806,632 acres of land, including reservation land, tribal trust land, tribal fee land, areas privately owned by Navajo, land belonging to the Canoncito and Alamo Bands, U.S. Government Reserve, public land (leased by the Navajo Tribe and individual Navajo Indians), public land (permitted to individual Navajo Indians by the Bureau of Land Management), New Mexico State Lands (leased by the Navajo Tribe), and individual Indian Allotments that comprise 623,354.21 acres.

The Eastern Navajo Region, also known as the "checkerboard,"*fn9 readily lends itself to the instant discussion of missing trust information and its impact on ROW valuations and comparisons, as each pipeline crossing the region invariably runs across private, tribal, and allotted parcels of land.*fn10

ROW Approval Process on Navajo Allotted Lands

Prior to 1985, ROW transactions were processed by the BIA Realty Office in Window Rock, Arizona. In 1985, these transactions were transferred to the Eastern Navajo Agency in Crownpoint, New Mexico. All superintendent positions were later eliminated for the Navajo region,*fn11 and signature authority reverted to Window Rock, except for ROW documents which remained on file at the Eastern Navajo Agency. See Memorandum from Blackwell (Nov. 28, 2000). (Exhibit 4.) Today, as before 1985, all ROW transactions are handled by the BIA Realty Office in Window Rock.

According to Baker and Graham, an O&G Company initiating or renewing a request for a pipeline ROW over allotted land first contacts the BIA Navajo Regional Office and then the individual allottee interest holders to obtain majority approval. Once the O&G Company identifies the interest holders and obtains their consent (via signature or thumb print), it informs the BIA and provides the agency with its own appraisal report valuing the ROW.*fn12 BIA then submits the O&G Company's appraisal to the OAS for review by either the supervisor or staff appraiser. According to Realty Officer Graham, BIA does not insinuate itself in the process of advising or obtaining the approval of the interest holders.*fn13

Appraisal Files Reviewed by the Special Master

In addition to reviewing several files at the Gallup and Window Rock offices, the Special Master requested production of two ROW appraisal files. One of these files, generated in response to a request by an [unnamed] Gas Company for a nine-year renewal of a ROW crossing 55 Navajo allotments ("55 Allotment Restricted-Use Appraisal File"), contained the following documents:

(1) 56 identical (sequentially numbered) single-page "Requests For Real Estate Appraisals generated by Acting Realty Officer Genni Denetsone to the Regional Chief Appraiser;"

(2) a memorandum from Acting Realty Officer Dale Underwood to Anson Baker requesting an opinion on the [unnamed] Gas Company request;

(3) a request for appraisal dated September 30, 1977;

(4) a request for appraisal dated September 13, 1988; and

(5) 55 identical four-page "Restricted-Use Appraisal" Reports ("55 Allotment Restricted-Use Appraisal Reports") signed by Chief Appraiser Anson Baker on June 29, 2001.

(Exhibit B - Under Seal.)*fn14

The second ROW appraisal file reviewed by the Special Master contained a request for a 20-year ROW easement running across seven Navajo allotments. ("Seven Allotment Appraisal"). Attached to the request was a "Complete-Summary Appraisal Report," prepared by the requesting [unnamed] Pipeline Company (and valuing the 50-foot-wide pipeline easement at approximately $8.94 per rod*fn15) and a document entitled, "Seven Allotment Review." (Exhibit C - Under Seal.) Described as a "technical" or "desk" review, the Seven Allotment Review was purportedly generated "to determine if the appraisal report has been written in accordance with those recognized methods and techniques of appraisal that are necessary to produce a credible appraisal." Seven Allotment Review at 1.

The Special Master's review of the 55 Allotment Restricted-Use Appraisal File and the Seven Allotment Appraisal File revealed that neither contained any documentation supporting their respective valuations.*fn16 In the 55 Allotment Restricted Use Appraisal Report, for example, Baker represented that he "researched the real estate market for the comparable going rates being paid for similar right-of-way easements across Navajo Allotment lands," id. at 2, and that based on that research, "the past going rate for similar easements was $25 to $40 per rod for 20-year easements across Navajo Allotment lands," and "[t]he current going rate paid for similar easements is $25 to $40 per rod for 20-year easements across Navajo Allotment lands." Id. at 2-3. There is no documentary evidence in the appraisal file, however, substantiating that Baker's research was actually conducted, confirming past and present market conditions, or identifying the "similar easements" Baker used to formulate his comparisons.

Similarly, in the Seven Allotment Appraisal Report, Baker references his research of historical payments for ROWs across Navajo allotments as well as his "market data research" for "going rates paid." Noting that, from 1990 to the present, "the going rate paid for R/W easements across Navajo Allotments has been in the range of $25 to $40 per rod for a R/W easement with a 20-year term," Baker opined that the [unnamed] Pipeline Company's offer of $40 per rod as the market value payment for this easement "is within and [sic] acceptable rate of market value." Appraisal Review at 3. Here, too, there is no documentation in the file evidencing any "market data research," supporting Baker's assessment of the "going rates paid," attesting to the range of $25-40 paid for ROWs, or memorializing the [unmamed] Pipeline Company's offer of $40 per rod.

Whether the aforementioned supporting documentation was destroyed, erased, or misplaced is unknown.*fn17 What is known is that Baker deliberately erased all appraisal information from his computer and inadvertently misplaced at least two appraisal-related documents – all without any awareness that he had violated a Court order or breached any regulations.

As demonstrated below, whatever the cause of the missing information, its absence from the appraisal workfiles constitutes a violation of Court orders, federal guidelines, industry standards, and the Secretary's statutory and common-law obligations to maintain complete files for all transactions affecting trust beneficiaries. More significantly, its absence prejudices individual Indian beneficiaries by rendering them unable to challenge the valuation process that, according to Baker, results in their receipt of materially smaller payments than those received by similarly situated landowners.

The Failure on the Part of the Secretary's Appraisal-Delegates to Retain and Safeguard Complete and Accurate Trust Information Constitutes a Violation of Court Orders It is undisputed that Baker deliberately erased all his electronic trust information from his computer and misplaced documents upon which his valuations were based. It is similarly undisputed that the Court's orders and directives proscribe such conduct.

On August 12, 1999, the Court directed the defendants to distribute memoranda to all employees ensuring that IIM trust documents are properly preserved and maintained. Order at 2. The August 12 Order explicitly adopted the findings set out in the August 5, 1999 Recommendation and Report of the Special Master Regarding Document Preservation and Protection (August 5 Recommendation and Report), which informed the Court that,

[d]uring the past month, the parties have engaged in extensive negotiations aimed at defining the respective obligations of the Department of the Interior and the Department of the Treasury vis a vis IIM-related records.... These negotiations have resulted in an agreement between the parties, the terms of which are set out in the Order Regarding Interior Department IIM Records Retention and the Order Regarding Treasury Department IIM Records Retention to which is appended a final list of the predecessors in interest ("Proposed Orders"). These Proposed Orders.... mandate that the Department of the Interior and the Department of the Treasury direct all employees charged with maintaining custody of IIM records to retain and preserve IIM-related documents.

August 5 Recommendation and Report at 2 (emphasis added).

Following a lengthy trial that commenced on June 10, 1999, the Court, on December 21, 1999, found Interior and Treasury defendants in violation of their fiduciary obligations to individual Indian beneficiaries. In its opinion, the Court noted that "[d]ocument management is the single biggest issue that must be comprehensively addressed if plaintiffs are to be assured any practical prospective assurance that their trustee will be able to give them an accurate accounting." Cobell v. Babbitt, 91 F. Supp.2d 1, 9, 14 (D.D.C. 1999).

On this issue, the Court was unequivocal:

Clearly, the destruction of necessary trust documents will make defendants' statutory task of rendering an accurate accounting impossible. Interior must have a plan (not inconsistent with its declared duty to preserve necessary IIM-related trust documents at least until an accounting is rendered) clearly stating which documents it will keep and which it will destroy, or else plaintiffs will suffer irreparable injury because they will never be able to estimate how much of their own money is in the IIM trust. Accordingly, because a fundamental requirement of defendants' responsibilities in rendering an accurate accounting is retaining the documents necessary to reach that end, and because Congress has mandated that Interior establish written policies and procedures required to meet that goal, Interior must create and finalize a plan for the proper retention of all IIM-related trust documents necessary to render an accurate accounting.

Cobell v. Babbitt, 91 F.Supp.2d at 43.

Based on this finding, on December 21, 1999, the Court, pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201 and the Administrative Procedure Act, 5 U.S.C. §§ 702 & 706, held that "The Indian Trust Fund Management Reform Act, 25 U.S.C. §§ 162a et seq. & 4011 et seq., requires defendants to retrieve and retain all information concerning the IIM trust that is necessary to render an accurate accounting of all money in the IIM trust held in trust for the benefit of plaintiffs." Cobell v. Babbitt, 91 F.Supp.2d at 58.

By erasing, destroying, and misplacing vital ROW appraisal information, Chief Appraiser Baker violated these directives.*fn18

The Failure on the Part of the Secretary's Appraisal-Delegates to Retain and Safeguard Complete and Accurate Trust Information Constitutes a Violation of her Fiduciary Duties Beyond violating Court orders, Baker's failure, as the Secretary's appraisal-delegate, to retain and safeguard information, breached the agency's trust responsibilities toward Navajo allottees with beneficial interests in ROW lands.

It is beyond dispute that the actions of the Secretary, "who serve[s], in [her] official capacit[y], as trustee-delegate[] on behalf of the federal government," Cobell v. Norton, 240 F.3d 1081, 1085 (D.C. Cir. 2001), are measured by the same standards as those governing private trustees. United States v. Mason, 412 U.S. 391, 398 (1973). She is, as such, bound to keep "all the records and evidence," Sioux Tribe v. United States, 64 F.Supp. 312, 331 (Ct. Cl.) order vacated Sioux Tribe of Indians v. United States, 329 U.S. 685 (1946) on remand to Sioux Tribe of Indians v. United States, 78 F. Supp. 793 (Ct. Cl. 1948), respond to beneficiaries' requests for information fully and truthfully, see Restatement (Second) of Trusts § 173 (1959);*fn19 Restatement (Third) of Trusts § 171 cmt. c (2003) (recognizing a trustee's general duty to provide information), and allow beneficiaries to inspect the trust res, accounts, and related documents. See 2 Scott Law of Trusts, § 172 (3d ed. 1967); 2 G. Bogert Law of Trusts and Trustees § 970 (rev. 2d ed. 1983). See also Eddy v. Colonial Life Ins. Co., 919 F.2d 747, 750 (D.C. Cir. 1990) ("[t]he duty to disclose material information is the core of a fiduciary's responsibility, animating the common law of trusts" and, "[a]t the request of a beneficiary (and in some circumstances upon his own initiative), a fiduciary must convey complete and correct material information to a beneficiary.") (emphasis added)' Security & Exchange Comm. v. Sargent, 229 F.3d 68, 76 (1st Cir. 2000) (recognizing "fiduciary duty to safeguard information relating to" trust).

These heightened responsibilities are directly implicated in the unique fiduciary relationship between the United States and individual Indian beneficiaries. On that score, this Court has held that "[t]he "misplacement" or "erasure" of trust files violates the essence of these responsibilities and constitutes a per se breach of a responsibility deemed 'undeniable'" Cobell v. Norton, 240 F.3d 1081, 1085 (D.C. Cir. 2001) (citing United States v. Mitchell, 463 U.S. 206, 225 (1983)). See also White Mountain Apache Tribe of Arizona v. United States, 26 Cl.Ct. 446, 449 (1992) (""[t]he trustee's report must contain sufficient information for the beneficiary readily to ascertain whether the trust has been faithfully carried out").

Here, the failure on the part of the Secretary's appraisal-delegates to retain and safeguard documentation vital to ROW valuations constitutes a per se breach of these "undeniable" responsibilities.

The Failure to Maintain and Safeguard Complete and Accurate Trust Information Constitutes a Violation of Agency Directives, Federal Regulations, and Industry Standards Baker's erasure, destruction, and misplacement of documentary and electronic information supporting appraisal valuations similarly contravenes the principle requiring "appraisals [] conform to established and generally recognized appraisal practices and procedures in common use by professional appraisers engaged in private practice." Real Estate Appraisal Handbook for the Bureau of Indian Affairs (52 BIAM Release 3 (7/31/1979)) ("BIA Appraisal Handbook") at § 1.3 (Policy). These practices and procedures are unequivocal, permit no deviation, and demand all appraisals be "supportable."

The importance of supportable appraisals in the context of individual Indian lands is acknowledged by the agency. On October 31, 2000, former Deputy Commissioner - Indian Affairs M. Sharon Blackwell transmitted a memoranda to all Regional Directors emphasizing the need for supportable appraisals and attaching Advisory Opinion AO-01 (promulgated by the Appraisal Technical Board) establishing "the minimum reporting formats necessary to communicate valuations or evaluations completed for various categories of trust transactions." The BIA Appraisal Handbook explains "[t]he requirement for preparation of supportable estimates of value in appraisal reports is to afford an impartial protection of the common welfare in a manner that will avoid all valid criticism, and to specifically protect the interest of the individual and the Government by presenting factual evidence of equity in all real estate transactions." BIA Real Estate Handbook (52 BIAM 1 (April 16, 1970). In keeping with that spirit, the agency instructs appraisers that valuations must guide the user "through the logical sequence of steps the appraiser completes in the process of formulating an opinion of value," and "[d]iscuss the steps followed in the appraisal analysis[,] [i]ndicat[ing] why certain approaches to value were used while others may have been excluded." Id. at 7, 8 (emphasis added).

The Code of Federal Regulations places similar emphasis on the need for supportable appraisals and directs that rental determinations of trust lands "be documented, supported, and approved by the authorized officer." 43 CFR § 2803.1-2 (e)(1) (emphasis added).

The most thorough explication, however, of the duties governing the appraisal process is assembled in the Uniform Standards of Professional Appraisal Practice ("USPAP"), promulgated by the Appraisals Standards Board of The Appraisal Foundation and authorized by Congress as the Source of Appraisal Standards and Appraiser Qualification. USPAP, which sets the minimum standards for appraisal practice in the Federal Government, has been explicitly adopted by the Department of the Interior,*fn20 and, at minimum, requires the Secretary and her appraisal-delegates to determine and communicate analyses, opinions, and advice in a manner "meaningful and not misleading,"*fn21 USPAP (Preamble), and to "prepare a workfile for each assignment" that includes "all other data, information, and documentation necessary to support the appraiser's opinions and conclusions." USPAP Ethical Rule.*fn22

Chief Appraiser Baker wholly ignored these standards. The files reviewed by the Special Master revealed no documents suggesting that a "logical sequence of steps" was undertaken and uncovered no "data, information, and documentation" supporting Baker's opinions and conclusions.

Interior Appraisers are Required to Retain a Complete Set of Supporting Documentation Regardless of Appraisal Format Baker attributed the lack of information contained in the 55 Allotment Appraisal Report to the fact that it was drafted as a "restricted-use" document – the implication being that less detail was required.*fn23 This representation is contrary, however, to federal and industry standards requiring that all appraisal reports rest on a well-maintained and thorough set of supporting information – irrespective of approach or format. USPAP Standard 2 contemplates three types of written appraisal reports: (1) self-contained appraisal reports; (2) summary appraisal reports; and (3) restricted-use appraisal reports.*fn24 The choice between formats, implies a dialogue between the appraiser and client to define the appraisal problem prior to reaching an agreement to perform an assignment. Part of the definition of the appraisal problem is a decision on which report option is appropriate for the assignment. This dialogue/decision process can be applied to a single assignment or to a series of assignments performed by an appraiser for the same client. In most situations, the client may decide which report option is appropriate for the assignment. The appraiser may agree to provide the report option suggested by the client as long as the report option is consistent with the intended use of the appraisal.

Advisory Opinion AO-12. See also 1990 BIA Appraisal Handbook at I.

Regardless of the reporting format used by the appraisers, USPAP Standards Rule 2-1 requires the appraiser to: (1) "clearly and accurately set forth the appraisal in a manner that will not be misleading;" (2) "contain sufficient information to enable the intended users of the appraisal to understand the report properly," (this requirement emphasizes the need to effectively convey the results of the appraisal investigation); (3) "clearly and accurately disclose any extraordinary assumptions, hypothetical condition, or limiting condition that directly affects the appraisal and indicate its impact upon value;" and (4) "discuss the reason for selecting the approach(es) used in the value estimate as well as the reasons for rejecting any [other]." USPAP Standards Rule 2-2 contains additional specific requirements.*fn25 Foremost, appraisers are cautioned against "using data which is not clearly supported by factual evidence." USPAP Standards Rule 2-1 (emphasis added).

Baker violated each of these standards. Absent from his appraisal files are any documentation supporting the representation that he considered "fair market value by the Comparable Market Data Approach," or the "[t]he Income and Cost Approaches." 55 Allotment Restricted-Use Appraisal Report, at 2.*fn26 Despite representations that "[t]he results of []his appraisal relies [sic] upon additional data contained in this appraiser's files," id., no such data can be located.

Similarly, the appraisal files reviewed by the Special Master contain no information indicating what methodology the Chief Appraiser used to estimate "fair market value" and whether, in making such a determination, he considered "the highest and best use" of the properties and whether this use was "legally permissible, physically possible, financially feasible, and maximally productive," as required by industry standard. See USPAP Standards Rule 2-2; United States Department of the Interior, U.S. Bureau of Indian Affairs Appraisal Handbook, January 1, 1998; The Dictionary of Real Estate Appraisal, (1993) at 171.

Finally, Baker's files do not contain any documentation indicating what valuation methods the Chief Appraiser considered (or rejected) in determining "fair market value" of the 55 allotments. See 25 CFR § 169.12.*fn27 The appraisal industry employs several, including the "Across-The-Fence Method," "Reproduction Cost Method," "Liquidation Value Method," and "Alternate Route Method."*fn28 Baker's failure to document whether he accepted or rejected these alternatives, (or his destruction or misplacement of these files) calls into question his assessments of the "fair market value" of allottee ROWs.

The consequences of Baker's conduct are discussed below. The Lack of Vital Appraisal Information Obscures the Degree to Which ROW Leases Are Valued Less Than Tribal or Private Lands Both Baker and Graham admitted to Interior's practice of discounting allottee ROW valuations. The Special Master's review of OAS' ROW files reveals that Chief Appraiser Baker valuated Navajo allotted ROWs at a "market rate" of $25-40 per rod. The record before the Special Master confirms that tribes and private landowners receive considerably more.

In March 1998, for example, an [unnamed] Pipeline Company paid Pueblo I $3,688,008 (or $575 per rod)*fn29 for a 20-year renewal and option for a 40-foot-wide ROW extending over 20.034 miles and containing 97.14 acres. (Exhibit D - Under Seal.) In March 1995, [unnamed] Pipeline Company agreed to pay Pueblo II $1,010,000 for a 20-year ROW renewal for a 50-foot-wide pipeline running 14.64 miles (or more than $215 per rod). (Exhibit E - Under Seal.) In February 1998, [unnamed] Pipeline Company paid Pueblo III $140 per rod for a 20-year renewal of a gas pipeline, (Exhibit F - Under Seal); on May 10, 1995, Pueblo IV was paid $231 per rod for a 20-year natural gas pipeline ROW, (Exhibit G - Under Seal); on October 29, 1998, [unnamed] Pipeline Company paid $199 per rod to Pueblo V for a 10-year petroleum pipeline ROW, (Exhibit H - Under Seal); and on October 29, 1998, [unnamed] Pipeline Company paid $165 per rod to Pueblo VI for a 20-year gas pipeline ROW. (Exhibit I - Under Seal.) The potential range of loss to Trust beneficiaries is as much as $170-550 per rod.

A review of files at the Land Title and Records Office similarly reveals that private ROW interests yield a greater financial return than interests held by allottees – even when subjected to condemnation proceedings. In 1991, for example, an [unnamed] Pipeline Company filed a Petition for Entry Upon Land against the "Does" in the Eleventh Judicial District County of San Juan, New Mexico. The Pipeline Company sought to "acquire by condemnation the property rights and pipeline easements... for the purposes of constructing a natural gas pipeline and for all other purposes in connection with construction of the pipeline." Pipeline v. Does, 91-[case number undisclosed] (Complaint at ¶ 7).*fn30 (Exhibit J - Under Seal.) The easement at issue was 2,669.02 feet (161.76 rods) long and 50 feet wide. A six-person jury awarded the Does $70,000 or $432 per rod. Pipeline v. Does, 91- [case number undisclosed]/([month] [date] 1995).

In 1991, an [unnamed] Pipeline Company settled its claims in condemnation for $70,000 against the "Smiths" for a 153.82 rod-length pipeline ROW running across their property, also located in San Juan County, New Mexico. The Smiths received $455 per rod. (Exhibit KUnder Seal.)

Compared to allotted lands, the values accorded (as indicated by the payments received) private and tribal interests are not insignificant.*fn31 Yet Baker's ROW files contain no documentation explaining the differences in appraised value between allottee and private/tribal lands and how these differences factored into his calculation of "market rates."

Similarly missing from the ROW files is any documentation supporting Baker's theory that potential condemnation actions would result in a devaluation of beneficiary ROWs. Baker admitted discounting allottee ROWs appraisals for fear that O&G Companies would initiate condemnation proceedings. At the same time, however, that Baker valued allottee ROWs at $25-40 per rod, the "Smiths" and "Does" (whose land was also subject to condemnation) were being compensated at a rate of $400-per-rod. And while Baker's condemnation theories are not wholly devoid of merit,*fn32 industry standards and fiduciary principles demand that he "state all assumptions, hypothetical conditions, and limiting conditions that affect the analyses, opinions, and conclusions" and that "they be included in the appraisal reports." USPAP Standards Rule 2-2. See also BIA Appraisal Handbook at 11 (an appraiser must "[d]efine assumptions, expectations, and beliefs used in applying factual data and judgments which are believed appropriate and plausible but cannot necessarily be expected to change before the "effective date" or completion of the transaction." (emphasis in original)). This, Baker did not do.

Not only does this policy of automatically discounting ROW valuations runs afoul of the Secretary's obligation to ensure that allottees are "justly compensated," see 25 U.S.C. § 325 ("No grant of a right-of-way shall be made without the payment of such compensation as the Secretary of the Interior shall determine to be just"), but also it is exacerbated by the fact that the valuations are undocumented and unsupportable.

In short, Baker was obligated to document the suppositions behind his valuations in the ROW appraisal files where they could be scrutinized.*fn33 Navajo allottees are unable to ascertain whether their property has been discounted by a factor of 20, 50, or 200 when compared to similarly situated tribal and private holdings.

It is to avoid this exact result that appraisers are cautioned, in the first instance, "to avoid assumptions and limiting conditions that are clearly the appraiser's own conclusions" Uniform Appraisal Standards for Federal Land Acquisitions, Section A-7. See also BIA Appraisal Handbook at 11 ("Avoid assumptions and limiting conditions that are the conclusion of the appraiser"). It is also for this reason that the Court entered the August 12, 1999 Order. This loss of supporting appraisal documentation added to Baker's admission to the Special Master (again, in the presence of Department of Justice and Office of the Solicitor) that, in his more than 20-year tenure as a BIA appraiser, he recalled no instance where Navajo allotted land had actually been condemned, renders his valuation of allottee ROWs, suspect.

The Failure to Retain and Preserve Appraisal Documentation Describing Pipeline Variations Precludes Individual Navajo Beneficiaries From Receiving "Fair Market Value"

In addition, the loss of supporting documentation and computer files obscures the variations between one allotment and renders it impossible to determine whether one allotment should be receiving a greater dividend than another. For example, each one of the 55 Allotment Restricted-Use Appraisal Reports is identical and contains the same description of the pipelines ROWs: "The outer diameter of the natural gas pipelines which will utilize the approximate 30 easements under appraisal range in size from 4 ½ inches to 10 3/4 inches. The width of the right-of-way corridors are either 45 feet wide or 60 feet wide." Restricted Use Appraisal (55 allotments) at 2.

Missing from the 55 Allotment Appraisal File, however, is any documentation revealing features distinguishing one allotment from another – such as width of the ROW per parcel or length that each ROW crosses each allotment. There is nothing in the file, for example, identifying those allotments over which the pipeline ROW was 45-feet wide and those over which it was 60-feet wide. Without this documentation, it is impossible to assess whether Baker considered the fact that "[e]ach burdened property is unique" and that "[a]n easement across one property will probably reflect a different impact when compared to the impact of an easement acquisition on the subject property." Albert N. Allen, The Appraisal of Easements, Right of Way, November/December 2001, at 45.

One easement, for example, "may involve a 50-foot right-of-way compared to only 30 feet for the subject easement. Another easement may extend diagonally across one property unlike the subject easement that may extend along the property boundary." Id. Baker was obligated to consider factors such as pipeline length and width when comparing various "units" along the corridor with sales from other properties. Charles F. Seymour, The Continuing Evolution of Corridor Appraising (Back to the Basics), Right of Way, May/June 2002, at 17.*fn34 See also William R. Lang and Brett A. Smith, Setting Value on a Gas Pipeline Easement, Right of Way, September/October 1998, ("compensation for a typical easement was based on a percent of the fee simple market value, or on a cost-per-lineal-rod basis[*fn35].... if the size of gas pipeline being put in were small, compensation would be 50 percent of fee value. However, if it is larger, as in the case with a 36-inch line, compensation should be higher or 75-100 percent of fee value") (quoting Carl Meyer, Chair of the International Right of Way Association's Pipeline Committee and Supervisor of the Land and Right of Way Department for ARCO Pipeline Company).*fn36

By Baker's measure, all allotments receive the same dollar amount per lineal rod regardless of variation in width and length. The failure to generate or preserve documents specifying these variations or revealing the "formula" used by Baker to average the allotment values, renders it impossible for allottees to distinguish the amounts owed on each parcel and to determine whether they are being "justly compensated."

Automatically Discounting Allottee ROWs Without Adequate Supporting Documentation Denies Individual Indian Beneficiaries "Just Compensation" and Maximum Financial Return

Before the Special Master is a record of allottees, simply by virtue of their beneficiary status, receiving a lesser return for ROWs (and other leases) encumbering their property than other landowners receive.*fn37 For pipeline ROWs running across land across the San Juan Basin, Navajo allotted land is valued at $25-40 per rod; tribal land between $140-$575 per rod; and land belonging to private individuals, between $432 and $455 per rod. By allowing this disparity to continue unchecked (especially in the absence of all documentary support), denies Navajo allottees not only "just compensation" pursuant to 25 U.S.C. § 325, but a maximization of financial reward from their leasehold interests.

As a matter of law, Navajo allottees, like all beneficiaries, are entitled to receive the "maximum benefit" and return from leases encumbering their land. See Jicarilla Apache Tribe v. Supron Energy Corp, 728 F.2d 1555, 1568 (10th Cir. 1984) (subsequently adopted by the majority of the Tenth Circuit sitting en banc, Jicarilla Apache Tribe v. Supron Energy Corp., 782 F.2d 855 (10th Cir. 1986) (en banc) (per curiam) (in the context of the Indian Mineral Leasing Act, the Secretary "is to ensure that Indian tribes receive the maximum benefit from mineral deposits on their lands") (emphasis added).*fn38

Indeed, the proposition that, "[a]s trustee of a trust fund, the United States government undertakes a duty to maximize the trust income," Ute Indian Tribe of Uintah and Ouray Reservation, Utah v. Hodel, 673 F. Supp. 619, 621 (D.D.C. 1987) (emphasis added), enjoys considerable support. See Fort Berthold Reservation v. United States, 390 F.2d 686, 690 (Ct. Cl. 1968) ("just compensation is understood to mean fair market or full value") (emphasis added); Klamath & Modoc Tribes v. United States, 436 F.2d 1008, 1015, (1971) ("[T]he criterion is whether Congress in disposing of the property has made a good faith effort to realize its full value for the Indians, whether it has in effect performed the trustee's traditional function of transmuting property into money.") (emphasis added); Cheyenne-Arapaho Tribes of Indians of Oklahoma v. United States, 512 F.2d 1390, 1394 (Ct. Cl.1975), reversed for other reasons, Cheyenne-Arapaho Tribe of Indians of Oklahoma v. United States, 5 Cl.Ct. 79 (1984) (The United States is "obligat[ed] to maximize the trust income by prudent investment") (emphasis added).*fn39

Yet notwithstanding the foregoing body of precedent, ROWs running across Navajo allotted lands are valued at a rate "much less" than ROWs crossing tribal and private lands. And there is no documentation in any of the files reviewed by the Special Master explaining this discrepancy.

The Failure to Preserve and Retain Vital Appraisal Documentation Precludes Navajo Allottees from Being "Knowledgeable" and "Well Informed" Participants in the ROW


The missing information in OAS' files and computers also impacts Navajo allottees by denying them the information necessary to inform their decisions to accept, reject, or seek advice with respect to solicitations by the O&G Company representatives dispatched by the BIA. Foreclosing access to this information is, foremost, anathema to the fiduciary principle requiring a trustee to disclose "material facts affecting [his or her] interest" when the trustee (1) knows the material facts subject to disclosure; (2) knows that the beneficiary is unaware of those material facts; and (3) determines that the beneficiary should be aware of the information for the beneficiary's own protection. The Restatement (Second) of Trusts, on that score, admonishes a trustee,

to communicate to the beneficiary material facts affecting the interest of the beneficiary which he knows the beneficiary does not know and which the beneficiary needs to know for his protection in dealing with a third person with respect to his interest. Thus, if the beneficiary is about to sell his interest under the trust to a third person and the trustee knows that the beneficiary is ignorant of facts known to the trustee which make the interest of the beneficiary much more valuable than the beneficiary believes it to be the trustee is under a duty to the beneficiary to inform him of such facts. Restatement (Second) of Trusts § 173 cmt. d (1959).

Beyond this, the loss, erasure, misplacement or failure to generate pertinent appraisal information effectively vitiates the ability of Navajo allottees to meaningfully "consent" to payments being offered and, arguably, renders any agreement they make with the O&G Companies a nullity. This follows from the well settled proposition that "fair market value" transactions require, at their core, "knowledgeable parties."

The Bureau of Land Management, for example, in its Economic Evaluation of Oil and Gas Properties Handbook H-3070-2 (May 27, 1994), cites one of "the salient features of fair market value" as "an arms-length transaction between a knowledgeable buyer and a knowledgeable seller."*fn40 See also Dictionary of Real Estate Appraisal (3d ed. 1993) (one of the "fundamental assumptions and conditions" defining "fair market value" is that both "buyer and seller are well-informed and are acting prudently"). Id. at 222.

With respect to the valuation of pipeline corridors, market value is considered "[t]he price which a well-informed buyer acting intelligently, voluntarily and without necessity is justified in paying and which a well-informed seller, acting intelligently voluntarily and without necessity is justified in receiving for the property as of the date of the appraisal." Charles F. Seymour, CRE, MAI, The Continuing Evolution of Corridor Appraising (Back to the Basics), Right of Way, May/June 2002, at 15 (emphasis added). (Exhibit 10.) See also ("market value" is "[t]he most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, and knowledgeably and assuming the price is not affected by undue stimulus.... both parties are well informed or well advised, and each acting in what he considers his own best interest") (emphasis added).

According to the International Association of Assessing Officers, market value is "[t]he most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus [and where] [b]oth parties are well informed or well advised, and acting in what they consider their best interests"). See 20pages/ def_market_value.html. (Emphasis added.)

With respect to ROWs running across their lands, Navajo allottees are not "knowledgeable," "well informed," or "well advised."

The Secretary's failure to provide individual Navajo allottees with vital appraisal information is exacerbated by her failure to retain trained personnel to negotiate with O&G companies on behalf of individual Indian beneficiaries. According to BIA Realty Officer Graham, economic constraints prevent Interior from retaining appropriate personnel to negotiate directly with O&G Companies. This cost-saving measure, however, results in the Secretary's failure to "obtain and advise the landowners of the appraisal information to assist them (the landowner or landowners) in negotiations for a right-of-way or renewal." 25 CFR § 16 9.12. See also 45 Fed. Reg. 45910 (1980) (adding the requirement "that the landowners be advised of the valuation information prior to the commencements of negotiations which goes without saying that this is also prior to the obtaining of consents by the prospective grantee of the easement"). Indeed, allowing the O&G Companies to negotiate directly with non-English speaking allottees to avoid the expense of hiring Navajo-speaking mediators, places the Secretary "in a position where it would be for h[er] own benefit to violate h[er] duty to the beneficiaries"). Bussian v. RJR Nabisco, Inc., 223 F.3d 286, 294-95.*fn41

In sum, the Secretary abdicated her fiduciary responsibilities when her appraisal-delegate destroyed, erased, misplaced, or failed to generate in the first instance, vital appraisal documents. This, coupled with her forcing beneficiaries to negotiate directly with O&G representatives, renders the allottees unable to meaningfully "consent" to the ROW terms offered by O&G Companies, fully appreciate the degree to which they are receiving "much less" than tribal and individual ROW landowners, and, ultimately, challenge those terms.

As a Result of the Secretary's Appointment of Incompetent Appraisers Individual Indian Beneficiaries Do Not Receive "Fair Market Value" for ROWs Running Across Their Land

Finally, the appointment of Chief Appraiser Baker raises independent concerns. It is settled that "the Secretary [i]s obligated to act in good faith" in the appointment of commissioners who, in turn, "were obligated to act in good faith in appraising and selling [] lots" on Indian lands. Creek Nation v. United States, 97 Ct. Cl. 602 (1942). Good faith in this context requires nothing less than obtaining full value for Indian land through the imposition of an adequate, competent, and impartial appraisal system. Fort Berthold Reservation v. United States, 390 F.2d 686, 690 (Ct. Cl. 1968). The appraisal system of the Navajo Office of Appraisal Services meets none of these criteria.

The record reveals that Baker: (1) failed to populate appraisal files with necessary supporting documentation; (2) destroyed electronic trust information supporting trust appraisals; (3) misplaced appraisal memoranda; and (4) devalued allottee lands based on unsubstantiated and undocumented assumptions.*fn42

Courts have found trustees in breach of their fiduciary responsibilities for less egregious conduct.*fn43

In Chippewa Indians of Minnesota v. United States, 91 Ct.Cl. 97 (1940), for example, the Court held that timber sold on the basis of appraisals rendered by 35 inexperienced and incompetent appraisers appointed by the Secretary violated the terms and provisions of the Act of January 14, 1889, 25 Stat. 642, requiring the examination of trust lands be "careful, complete, and thorough" and made by "a sufficient number of competent and experienced examiners." Similarly, a disparity of 33 1/3 percent was held to be an actionable violation of "fair and honorable dealings" under the Indian Claims Commission Act, Nez Perce Tribe v. United States, 176 Ct. Cl. 815 (1966), while a disparity between a $1.24 payment and a $3 value per acre was deemed a breach of fiduciary obligation which "may obviously involve conduct less than arbitrary, capricious, or fraudulent by an official charged with the position of trust," Sac & Fox Tribe v. United States, 167 Ct. Cl. 710, (1964), and a realization of only 38 percent of market value, Miami Tribe v. United States, 150 Ct. Cl. 725 (1960) and the transfer of funds from an account paying 5 percent interest to one earning 4 percent interest were held a breach of fiduciary responsibility. Menominee Tribe of Indians v. United States, 59 F. Supp. 137, 140 (Ct. Cl. 1945).


At the core of the Secretary's trust responsibilities lies the duty to ensure that individual Indian beneficiaries are justly compensated for ROW leases running across their lands. At the heart of this duty lies the obligation to ensure that the appraisal process is conducted in a manner both competent and beyond professional reproach. For the reasons stated above, the Special Master finds the Secretary and her delegates have abrogated these responsibilities. In derogation of Court order, fiduciary duty, federal regulations, and industry standards, the Office of Appraisal Services has erased, deleted, and misplaced trust information vital to the valuation of ROWs running across Navajo allotted lands.*fn44 It is doubtful, as a result, whether Navajo allottees are receiving "fair market value" for leases encumbering their land. It is certain they are denied the information necessary to make such a determination.

On August 12, 1999, the Court, with the consent of both parties, ordered that, "in the event that the Special Master determines that IIM Records are not being protected from destruction or threatened destruction, he may recommend to the Department that it take reasonable steps to protect IIM Records found to be in jeopardy of destruction. He may also recommend to the Court such remedial action as he deems appropriate pursuant to Rule 53, Federal Rules of Civil Procedure." The first option, in the view of the Special Master, is of no utility.

The Special Master, with considerable urgency, recommends the Court intervene and order an immediate formal investigation into Interior's appraisal services and, based on those findings, fashion an appropriate remedy.

Respectfully submitted,


It is hereby ORDERED that the attached Site Visit Report of the Special Master to the Office of Appraisal Services in Gallup, New Mexico and the Bureau of Indian Affairs Navajo Realty Office in Window Rock, Arizona be filed in the public record of this case. It is further ORDERED that all attachments to the above-named report shall be filed under seal.


Royce C. Lamberth United States District Judge

Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

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