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Bia Trust System Broken Indians Say Trust Funds Mismanaged; Class-Action Lawsuit Seeks Accounting

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 American Indians 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 American Indians in a 158-year-old banking system that until recently kept records in storerooms, where they negligently were destroyed or damaged by moisture and rats.

According to the suit and government documents, the bulk of the funds held in trust by the government are derived from lands given to individuals and tribes during the era lasting 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 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 company reported that 39,901 tribal trust transactions between 1973 and 1992 involving $2.4 billion could not be supported adequately by financial documents, according to Eric Davenport, chairman of the InterTribal Monitoring Association on Indian Trust Funds.

So far, 32 tribes have accepted that study’s findings in 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 American Indians self-supporting landowners never has 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 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 $6 million lacked correct addresses. About 21,000 accounts with $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.”

“We acknowledge that we have not managed the assets of the tribes or individual Indians as well as we should have and that we need to fix the system,” said Ed Cohen, deputy solicitor for the BIA. “If there was money lost, it ought to be repaid with interest.”

But a recent General Accounting Office report cautioned that resolving past errors in the trust fund accounts “is a challenge of tremendous magnitude.”

“Most alarming,” said McCain, “is the GAO’s conclusion that the Interior Department lacks a serious commitment across its entire organization to develop proper Indian trust-fund management policies and procedures.”

In 1994, Clinton appointed Paul Homan as the trustee to oversee the funds and reorganize financial records of both individual and tribal accounts. Homan figures the reforms - ranging from computerized record-keeping to standardized accounting procedures - will cost $150 million during the next three to five years.

The federal government never has invested sufficient funds to equip the system with up-to-date banking technology, Cohen said. Until recently switching to computers, the BIA kept track of the accounts with card files. The BIA’s trust-account offices are still managed by people with little or no formal training in accounting.

Some tribal leaders insist that the problem is greater than disputed individual accounts. And the apologies from BIA officials, they say, only make them seem detached from the consequences of their leadership.

“This situation involves collective human suffering on a monstrous scale,” said Blackfeet Indian Darrell Kipp, a Harvard University graduate and founder of a local native-language preschool.

“Obviously, something is missing in this town - money,” he said. “Maybe it wouldn’t be so bad if the federal government was taking adequate care of the trust accounts and the money was going where it was supposed to.

“Just look around,” he said, pointing out a small window in his Browning office. “The results are plain to see.”

Across the street, a dozen panhandlers huddled near a liquor store. Down the block were nests of second-hand clothing stores, fast-food stands and curio shops mostly owned by non-Indians.

Throughout the reservation, Kipp said, are American Indians afraid to question their accounts for fear the BIA could retaliate by losing lease documents.

Grumbled Elouise Cobell, a 50-year-old Blackfeet Indian banker: “We never asked for this system; it was imposed on us. Now, they are mismanaging our money - not appropriations or donations, but our own money - and we can’t fire them.

“Instead, they put us in a financial deep freeze of low-rent (Department of Housing and Urban Development) homes surrounded by high unemployment, alcoholism and a nearly hopeless future,” she said. “All that’s going to change.We are not going to let them off the hook. There has to be reform and restitution. There has to be justice.” xxxx ‘AN ACT OF DESPERATION’ The push for the lawsuit filed in June by a group of American Indians 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 here. “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.” John Echohawk, executive director of the Native American Rights Fund, said: “Proper accounting is what we are after now; only then can we see what has been lost and what is owed. “The big question is this: Once we figure out the damages, will the government repay us?” he added. “Our greatest fear is that they will try to make us pay for our own settlement by taking it out of funds allocated for the BIA and Indian health and education programs.”

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