Hearing of the Committee on Indian Affiars on Indian Trust Reform
STATEMENT OF HON. JOHN McCAIN, U.S. SENATOR FROM ARIZONA, CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS
The Chairman. We will now begin our hearing on trust reform.
Our first witness is Jim Cason, who is the acting assistant secretary for Indian affairs. He is accompanied by Ross
Swimmer, special trustee for American Indians, Department of the Interior.
The subject of Indian trust management reform has been an issue of considerable issue to Congress and to this committee
for over a decade. In 1994, Congress enacted the American Indian Trust Fund Management Reform Act with the expectation of bringing order to at least one aspect of the Federal Government's trust responsibility to Indian people, the management of tribal and individual Indian moneys held in trust accounts.
About 2 years later, the Cobell case class action lawsuit was filed. In the years since then, we have all learned just
what a sorry state the trust fund management system was in. The reasons for this are manifold, I am sure, but most people would agree that for many decades the Federal Government has not been held accountable for its management practices.
This hearing is not directly about the Cobell lawsuit, although trust reform should be a component of any legislation
to resolve the case and problems that led to it. The purpose of today's hearing is to listen to the views of the Administration
and Indian country of how the system of Indian trust management, management of funds and natural resources, might be
reformed. I am interested in hearing from the Administration on what it has done to improve trust management and what
additional steps it intends to take, because it is no secret that many in Indian country are not satisfied in whole or in
part with the Administration's approach and have different views about the direction we should be going in reforming the
I also look forward to hearing what the tribal leaders and Ms. Cobell on the second panel have to say about reforming the
One more point before proceeding. Several times in recent months I have promised to make trust reform, including the
settlement of the Cobell case and related issues, a high priority during my tenure as chairman of the Committee on
Indian Affairs, but I will also repeat here that I intend to give it only one good shot. If it looks like we are not getting
anywhere, if the tribes, the Government, or other interested parties cannot come to terms on a settlement of the lawsuit and
on what trust reform should be, then I will leave that task to a future Congress and the courts and concentrate my efforts on
other important issues in Indian country.
I am hoping that the Administration and Indian country will begin working with committee staff immediately to see whether
something close to a consensus can be reached on the key components of trust reform. This will probably require an
efficient, but representative working group within Indian Country to begin helping us shape a bill that can be introduced
for review and comment by all stakeholders.
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The Chairman. Mr. Swimmer, what are the major remaining obstacles to resolving this issue, in your view?
Mr. Swimmer. In terms of the reform, the real remaining work that needs to be done is in the IT sector. We have two
other programs coming along that will replace legacy information technology systems. One of those is in what we call
the realty, which affects the leasing and managing the land, basically. That is a system that we are currently, in fact it
is scheduled for the end of March, to do a user acceptance test. Once that is done and it passes the test, we will begin
the implementation of that. That should replace what you may have heard the acronym before, the IRMS, integrated records
management system, as well as about eight other legacy sort of home-grown system RIMS, DADS, GLADS, and various others.
That is going to be a major change. What it does, it allows us then to fully comply with the Reform Act. It allows us to
give beneficiary statements with source, type, status of funds. Even though a beneficiary may have a 1/1000's of an interest in
a parcel of land or an allotment, we will list that on their statement. We will show whether there is any income received
from that. We will show the balance of their account and any other assets that they may own. On average, a beneficiary today
has about 10 interests, usually fractionated interests in land scattered in multiple States. The new title system I mentioned
gives us access to that information for the individual on a national scale without having to go region by region.
The other basic tracking systems for the appraisal program for the probate program and others that we are replacing legacy
systems. The other major component, obviously, is we are currently hamstrung by the lack of Internet access. This is of
course a court-ordered issue. We do not have any choice about it. We are kept off of the Internet. We cannot communicate with beneficiaries via the Internet. It does have a serious impact on our ability to perform a lot of these functions in a
productive manner. We are having to do a lot of work around to get there.
The Chairman. What about the resolution of claims?
Mr. Swimmer. In terms of the accounting claims, we are doing the accounting as we have explained to the committee
before. My office oversees the accounting. It is done through the Office of Historical Trust Accounting which was created by
this Secretary shortly after she came into office. That office has pursued the accounting. They have an accounting plan. They
have an accounting manual. Currently, I think that they have completed accountings or reconciliation of about 36,000
accounts, primarily judgment accounts and per capita accounts. They have ventured into the land-based accounts and are doing some of the work there on the larger transactions.
The plan, as we have described to the committee before, was a plan to do a transaction-by-transaction analysis of accounts
from a date-certain forward that would give us a full reconciliation of a person's account and then on transactions
below a certain threshold, essentially $5,000, we would do then a statistical sampling, a broad sample across the Nation to
give us an indication if in fact there appeared to be any serious issues with the account statements of the individuals.
As you know, that is a process that we started 2 years ago. We have continued to ask Congress to fund that. It is
approximately a $335-million effort. We continue to work along those lines on the plan. That was a plan submitted to the court
January 6, 2003. Recently, the Federal District Court has reinstated its structural injunction of last year that would
require an accounting in the form of a transaction-by-transaction analysis for every account from the time it ever
had money in it, which would probably be about 1895.
The Chairman. What would be the expense involved with that?
Mr. Swimmer. It has been estimated by our accounting group and other professionals that it would be somewhere between $6 billion and $12 billion.
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The Chairman. Thank you.
Out of curiosity, Mr. Cason, where would $6 billion to $12 billion come from? What is the BIA's budget?
Mr. Cason. The BIA budget right now, including education, is about $2.2 billion. How much we spend on implementing the
trust for both tribes and individuals is somewhere on the order of $500 million a year. So clearly, the Department does not
have a funding base that could accommodate this.
The Chairman. I thank you very much. I am sure we will be seeing more of each other.
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The Chairman. Thank you very much.
If you do not require an accounting, what is the alternative?
Mr. Harper. We propose one alternative in our January 6, 2003 plan. What that requires is that the Government and us
actually agree on an essential point, that within a certain given time period, approximately, we differ slightly but approximately $13 billion was generated from this trust. That is not counting interest, but the point is this, if you take that $13 billion and you figure out how much of that money actually reached the correct beneficiary, the difference is what is owed.
The Chairman. How do you figure that out?
Mr. Harper. Well, you have to look at certain transactions. They can, for example, produce any disbursement records that
actually show cancelled checks.
The Chairman. But they do not have the records. Mr. Harper. They do not have the records on a lot of
things, and to the extent that they do not, then you have to use whatever alternative methods are available.
The Chairman. I go back to my original question. What is the alternative?
Mr. Harper. The trust law answer is this. The trust law answer is that if you cannot show it, you owe it. And if the
Government cannot show that it paid out to a specific beneficiary, then to that beneficiary it owes the money that it
said it paid out but never did.
The Chairman. And if you went to that alternative, have you got an estimate of how much that would cost?
Mr. Harper. That alternative would mean the $13 billion plus interest, minus any kind of disbursement that they show.
We do not know what the disbursements that they can show are.
The Chairman. The interest starting to accrue when?
Mr. Harper. When the moneys were deposited.
The Chairman. So we would be talking about the late 1800's, early 1900's?
Mr. Harper. That is correct.
The Chairman. We must be talking about $100 billion.
Mr. Harper. Over $100 billion is they cannot show specific transactions. That is what trust law provides. What the
Government's alternative is, Mr. Chairman, is to say let's change that. Let's change the normal way we figure out these
problems and find that there is a lesser duty.
The Chairman. I think they are saying that, Mr. Harper, because nobody knows where we are going to come up with $100
Mr. Harper. I understand that, and that is why we have been at the mediation table. We are working with this committee and
others to find a settlement solution. If they cannot do it, then let's resolve it by agreeing to a sum certain that is fair. We are not saying that no money reached the beneficiaries, but they cannot make hardly any demonstration of that. Their present accounting plan is essentially absurd. We just have to go to something that works, and that does not.
The Chairman. Thank you.
Chief Gray, a statement has been made that the, quote, ``Administration'' has not been communicating or has not been
listening. Is there anyone more highly regarded than Mr. Swimmer? Mr. Swimmer, have you attended a lot of these
meetings? Go ahead.
Mr. Gray. Well, specifically in my opinion, I believe that what Mr. Swimmer represented the U.S. Government at these
meetings. To many of these beneficiaries, and specifically in the North Dakota region where he did attend the meeting in the
Three Affiliated Tribes area, that was the first time a presidentially appointed official had ever visited the reservation to listen to the concerns. I think that was a great starting point for actually having the opportunity to look some of these beneficiaries right in the eye and explain to them why your appraisal did not get done, and why it got moved to OST, and then they have to explain what OST is, and then they have to explain why it has taken so long.
I think one of the big problems is that that needed to happen, Senator. I really do believe that. I think those discussions needed to happen, just for the sheer complexity of the work that has been done up here on this very issue, you still have to distill it to a point where it is deliverable in the sense that people can understand it and have some faith in it.
Part of the problem that I saw was a great disconnect because many of the discussions that you have heard today are
in the abstract, but to the folks back home this could not be more real. So what ITMA proposed to do was to continue to hold
these listening conferences. We may not get complete satisfaction out of every meeting, but we know that over time, I know Mr. Swimmer can probably attest to this to a degree, that the more exposure he got to Indian country, the more he was able to really address some of their concerns because he was there. I think that was a great starting point.
You know, as far as I am concerned, no matter if the committee decides to take on trust reform legislation or not,
there is still going to have to be a very important communication component to all this to the beneficiaries.
The Chairman. Chairman Hall, in your testimony you state a position that I have many times before: The need for clear
trust management standards for the Department's trust management functions. At the same time, I have heard that the
imposition of standards without sufficient funding for the Department to live up to those standards is a formula for further litigation and claims against the Federal Government.
I guess my question is, is NCAI willing to work with the committee and staff and with the Administration to see if in
the context of comprehensive trust reform, there is some way we can find common ground here?
Mr. Hall. I think so, definitely, Mr. Chairman, because as you are looking at a trust fix, we obviously have to have a
standard for those standards. But there needs to be a time period where there can be no litigation as the trust fix is
being developed with the standards, and that might be two years down the road. We do not know. We will not know until this
thing shakes out.
So obviously, in Indian country we understand that. In establishing that relationship, we do not just want to go back
the next day if we do a settlement and sue. Instead, we want to work with the committee on resolving the standards, whatever
those standards might be.
The Chairman. I would just like to mention to the witnesses, the main reason why Senator Dorgan and I sought to
try to achieve some resolution on this issue is that if it is left up to the courts, we could be looking at a minimum of 10
to 15 years before we could possibly get something done. A lot of Native Americans are not going to be with us 10 or 15 years
from now. That is why we want to give this a very, very high priority and do the best we can to reach some kind of
legislative fix or facilitate an agreement without legislation, although I am not sure that that is possible.
We intend to do everything we can to encourage the Administration to be forthcoming. This may be probably the most
difficult issue that I have encountered, not only as far as Native American issues are concerned, but in the Congress, and
I thank all the witnesses for their involvement.