Billions Missing From U.S. Indian Trust Fund

by Joel Dyer

Arizona Senator John McCain, the chairman of the Senate Committee onIndian Affairs, bluntly called it "theft from Indian people."

These men were describing the single largest and longest-lasting financialscandal inhistory involving the federal government of the United States.

With no other recourse left at their disposal, NARF, along with otherattorneys, filed a class action lawsuit in federal district court onJune 10 on behalf of more than 300,000 American Indians. The suitcharges Secretary of the Interior Bruce Babbitt, Assistant InteriorSecretary of the Interior for Indian Affairs Ada Deer and Secretary ofthe Treasury Robert Rubin with illegal conduct in regard to themanagement of Indian money held in trust accounts and managed by theBureau of Indian Affairs.

If the lawsuit's claims are correct, and there's an overwhelming body of evidence that suggests they are, then the federal government haslost, misappropriated or, in some cases, stolen billions of dollars fromsome of its poorest citizens.

Revenues from such sources are held in more than 387,000 IndividualIndian Money (IIM) accounts managed -- or according to detractors,"mismanaged" -- by the Bureau of Indian Affairs (BIA). "The BIA hasspent more than 100 years mismanaging, diverting and losing money thatbelongs to Indians," Echohawk says. "They have no idea how much has beencollected from the companies that use our land and are unable toprovide even a basic, regular statement to Indian account holders."

Echohawk is quick to point out that the lawsuit was the very last resort. Native Americans have long been hopeful that agovernmental remedy to the BIA's mismanagement could be found. Finallyin 1994, after years of pressure by both Indians and legislators,Congress enacted the Indian Trust Fund Management Reform Act andappointed Paul Homan as the special trustee charged with straighteningout the century-old mess.

Once again there was hope. But the legislative solution proved to be just another in a long line of toothless piles of paper generated bygovernment bureaucrats. Although Homan was ready and willing to repairthe system, Congress failed to provide funds to make the changes areality. With no other path before them, the Indians took their fight tothe courts.

As an example, during one such hearing -- a 1987 AppropriationsSubcommittee hearing on uncollected royalties -- then director of theMinerals Management Service William Bettenberg told the committee he wasaware that hundreds of millions of dollars that belonged to Indians wasgoing uncollected from oil royalties each year. This is in spite of thefact that MMS, a branch of the Department of the Interior, had beenmade aware of the annual lost revenue six years earlier. Bettenberg'srevelation is typical of BIA behavior.

Adding still more credence to Echohawk's claims of government incompetence pertaining to the IIM accounts is the recent exampleprovided by the long overdue audit of the tribal trust funds.These tribal funds, which are also managed by the BIA, are a collectionof approximately 2,000 tribal accounts owned by some 200 tribes. Theseaccounts hold about $2.3 billion at any given time and are primarilyused to finance essential tribal government services.

Several years ago, after a decade of extensive pressure from the House Committee on Government Operations, the BIA agreed to contractwith Arthur Anderson & Co. to audit and reconcile both the tribalaccounts and a random sampling of some 17,000 IIM accounts. The samplingof the IIM accounts was to be a precursor to a complete reconciliationof all IIM trust accounts -- the first in history.

What happened next is truly astounding. After years of work and millions of dollars in fees, Arthur Anderson was only able to reconcilethe 2,000 tribal accounts -- not the 17,000 IIMs -- and only then forthe relatively short period of some 20 years from 1973 to 1992.

For this 20-year period alone, the auditor noted that at least $2.4 billion inthe tribal trust accounts was unaccounted for and billions of dollarsmore were virtually untraceable because of the questionable nature ofthe government's records.

As for the IIMs, Arthur Anderson told the feds that its trust fund system for individuals was so screwed up that it wouldn't even try toreconcile the accounts and estimated that it would cost $108 million to$281 million just to attempt the monumental task. The accounting firmclaimed that the government had destroyed, never created or otherwisedid not maintain the records necessary to conduct a reconciliation. Evenif the full IIM audit were performed, the firm said the costlyinformation would be of little or no value when it came to providing IIMaccount holders with any real assurance that their balances arecorrect.

While the missing billions from the tribal accounts aren't part of the NARF lawsuit, thereconciliation process for these accounts does illustrate how badly theBIA's accounting system, or lack thereof, actually works. In June ofthis year, Special Trustee Homan told the Senate Committee on IndianAffairs that the IIM account system was "as bad or worse" than thetribal accounts. For now, NARF lawyers are concentrating on themismanagement of money in the IIM accounts because in many instances itprovides the only life-line for Indian families who often make up themost impoverished sector of our society. Echohawk told Congress thatmost of the IIM account holders are so poor that they need their moneyjust for basic subsistence.

problems" align="right" border="2" height="75" width="100"">You canchoose almost any year since the BIA's predecessor, the IndianDepartment, was created in 1824 and findgovernmentsreports describing poor management, no accounting system, missingmoney, no attempt to fulfill the fiduciary duty to the Indians aspromised and required by law.

Congress has verbally demanded accountability and drastic change in the BIA's behavior for more than 100 years. Yet as of 1996little if anything has actually changed. A 1992 report titled "MisplacedTrust: The Bureau of Indian Affairs' Mismanagement of the Indian TrustFund" was prepared by the Committee on Government Operations. The66-page report contained a scathing review of the BIA and hundreds ofexamples of the bureau's blundering over the years.

Among other things, the report surmised that "one hundred sixty three years later, Schoolcraft's assessment of the BIA's financial managementstill rings true. BIA's administration of the Indian trust fundcontinues to make the accounts look as though they had been handled witha pitchfork.

"Undoubtedly there is a screw loose in the public machinery at the Bureau. Indeed, while mismanagement of the Indian trust fund has beenreported for more than a century, there is no evidence that either theBureau or the Department of the Interior hasundertaken any sustained or comprehensive effort to resolve glaringdeficiencies."

Unfortunately, most of what was contained in the Misplaced Trust report was old news. Essentially the exact same findingswere embodied in the GAO's 1928, 1952 and 1955 audits of the Indiantrust fund. In fact, just since 1982, more than 30 audits have beenperformed on the BIA's records. Every single one of the 30 reportsgenerated have noted serious accounting and financial managementproblems and weak internal controls throughout the BIA.

In a tone not often heard these days in Washington, Senator McCain cut to the chase during a June 11, 1996 oversight hearing when he statedthat "Trustees receive and disburse funds all the time for otherAmericans, and if they blow it they pay. In this case it's the NativeAmericans who are rightfully owed the money and the federal governmentwho will be forced to compensate for their loss."

Every day that the BIA procrastinates on fulfilling its trustresponsibilities, the price tag to repair the damage goes up. The 1992Misplaced Trust report clarifies the vulnerability of taxpayers.

The report states that "Continuing mismanagement and incompetence in thesupervision and control of Indian trust funds present a clear danger tothe American taxpayer, who must bear the financial burden ofcompensating trust fund account holders for BIA's breach of fiduciaryduties."

Other sections of the report contain testimony that reads like the visionfrom a crystal ball. Speakers from six and 10 years ago offer warningafter warning about the potential for costly litigation at thetaxpayer's expense. The NARF lawsuit stands as harsh evidence that thewarnings fell on deaf ears at the bureau.

Guarding our pocketbooks gives everyone a reason to get involved with the struggle to correct the injustices being perpetrated by the BIA.But at some point we must confront the reality that there is somethingmore at work here than bureaucratic ineptitude.

What other explanation can there be for the BIA's belligerent lack of concern for its fiscal responsibilities to NativeAmericans? It isn't that the task of properly handling the revenue isjust too daunting. Other departments of the government deal with largerand more complicated accounting systems with comparable ease everyday.

A similar observation was made by then-Representative from Texas Albert G. Bustamante during oversight hearings in 1990.

"We have 300,000 accounts. We have about 350 tribes in the United States. It isreally sad that these people have been misrepresented by the BIA ...They have no real representation in Congress.

"I have a tribe that I represent in my district, but throughout the years, most of these people have been abused by many, and you in the BIAought to be the ones that really look after them.

"If this happenedin Social Security, I tell you there would be a war. If we can manageSocial Security, we ought to be able to manage this."

NARF's Echohawk speculates that the reason for the government's seeminglyeternal incompetence is darker than accidental mismanagement. "I thinkit comes down to race. Our people have historically suffered abuse afterabuse. We have continuous problems with unemployment, health care andeducation. It just goes on and on. We don't have any political power tochange it, so the government just continues to ignore us."