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Tangled Trust Funds Earn Wrath of Native Americans

Justice: Bureau of Indian Affairs faces lawsuit over 300,000 accounts. Case could cost U.S. billions of dollars.


BROWNING, Mont. — When fire consumed her log cabin in this reservation town, Bernice Skunk Cap knew she would have to tap into her income from a land-lease account managed by the federal government to make a down payment on a new home.

The 75-year-old Blackfeet Indian woman, who trembles from a nervous disorder and speaks little English, asked for the money. But Bureau of Indian Affairs officials said she wasn't "competent" to withdraw the entire $2,400 in her account. She took out $1,000. A few weeks later, she was told her balance was zero, with no further explanation.

Skunk Cap is just one of thousands of Native Americans who assert that their money is being mismanaged--even lost--by a BIA trust system that never had an accounts-receivable list or a complete audit and has not worked properly since Andrew Jackson was president. Officials at the BIA acknowledge that the problems are real--and deeply rooted.

Tired of waiting for reform, the Native American Rights Fund in Boulder, Colo., has filed the largest class-action lawsuit in history against the federal government on behalf of 300,000 Indians who have accounts held in trust by the BIA.

The lawsuit seeks a court order directing that the BIA's so-called Individual Indian Money trust account system be fixed. Restitution, some say, could run into billions of dollars.

"I want my money back," complained Skunk Cap, who lost her cabin in late 1994 and now lives in a tribal nursing home.

Reconciling her account may not be easy. Skunk Cap's funds are pooled for investment purposes by the BIA and Treasury Department with those of thousands of Native Americans in a 158-year-old banking system that until recently kept records in storerooms, where they were negligently destroyed or damaged by moisture and rats, the lawsuit says. According to the suit and government documents, the bulk of the funds held in trust by the government are derived from lands given to individual Native Americans and tribes until 1934.


These funds--collected, invested and disbursed to beneficiaries by the BIA--are income from lands leased for grazing or farming, the sale of timber, and the granting of oil, gas or mineral and mining rights.

In essence, the government acts as the "bank" for the trust funds, which were managed by the BIA until 1994, when a special trustee appointed by President Clinton assumed that responsibility.

The federal government currently holds about $450 million in more than 300,000 individual Native American accounts. About $250 million flows through these accounts annually.

A similar system established to manage 2,000 accounts owned by more than 280 tribes holds about $2.3 billion. Under pressure from Congress, the BIA a few years ago contracted Arthur Anderson & Co. to audit and reconcile the tribal accounts, which are not part of the class-action lawsuit.

The firm reported that 39,901 tribal trust transactions from 1973 to 1992 involving $2.4 billion could not be adequately supported by financial documents, according to Eric Davenport, chairman of the InterTribal Monitoring Assn. on Indian Trust Funds.

So far, 32 tribes have accepted that study's findings about their accounts. Forty-four have disputed the results, and 204 tribes have not yet decided.

The individual trust account system is believed to be in even worse shape.

Federal and independent reviews say the system originally designed to make Native Americans self-supporting landowners has never been able to provide accurate balances or determine exactly how much money should have been collected and credited to the accounts.

The consequences for individual Native American account holders are staggering. As of the close of fiscal 1995, there were at least 15,599 accounts filed with duplicate numbers. More than 54,000 accounts, containing a total of $6 million, lacked correct addresses. About 21,000 accounts, containing $36 million, were for people who had died. At least 15,000 accounts, containing $24 million, were being held in trust for minors until they were 18, when in fact they had already reached that age.

"We have no idea how many thousands of Native Americans have been deprived of revenues that belong to them," Sen. John McCain (R-Ariz.), chairman of the Senate Indian Affairs Committee, said in an interview. "We should be ashamed of a system that is a living example of our nation's inattention to our trust obligations to Native Americans--and this is about bipartisan neglect."

The push for the lawsuit filed in June against Interior Secretary Bruce Babbitt and Treasury Secretary Robert E. Rubin came from Elouise Cobell, a 50-year-old Blackfeet Indian banker.

"This lawsuit is an act of desperation," said Cobell, a lifelong resident of the 1.5-million-acre reservation. "They forced us to rely on a system that everybody knows doesn't work. When we complained about it to the BIA, to the Interior Department, to Congress and to administration after administration, it fell on deaf ears."

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