[Senate Hearing 107-633]
[From the U.S. Government Printing Office]


                                                        S. Hrg. 107-633
 
                    INDIVIDUAL INDIAN MONEY ACCOUNTS
=======================================================================

                                HEARING

                               BEFORE THE

                      COMMITTEE ON INDIAN AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                                   ON

   THE JULY 2, 2002 REPORT OF THE DEPARTMENT OF THE INTERIOR TO THE 
   CONGRESS ON THE HISTORICAL ACCOUNTING OF INDIVIDUAL INDIAN MONEY 
                                ACCOUNTS

                               __________

                             JULY 25, 2002
                             WASHINGTON, DC






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                      COMMITTEE ON INDIAN AFFAIRS

                   DANIEL K. INOUYE, Hawaii, Chairman

            BEN NIGHTHORSE CAMPBELL, Colorado, Vice Chairman

KENT CONRAD, North Dakota            FRANK MURKOWSKI, Alaska
HARRY REID, Nevada                   JOHN McCAIN, Arizona,
DANIEL K. AKAKA, Hawaii              PETE V. DOMENICI, New Mexico
PAUL WELLSTONE, Minnesota            CRAIG THOMAS, Wyoming
BYRON L. DORGAN, North Dakota        ORRIN G. HATCH, Utah
TIM JOHNSON, South Dakota            JAMES M. INHOFE, Oklahoma
MARIA CANTWELL, Washington

        Patricia M. Zell, Majority Staff Director/Chief Counsel

         Paul Moorehead, Minority Staff Director/Chief Counsel

                                  (ii)

 





                            C O N T E N T S

                              ----------                              
                                                                   Page
Statements:
    Cason, James, associate deputy secretary, Office of the 
      Secretary of the Interior..................................     7
    Causey, William F., esquire, Nixon Peabody, LLP..............    19
    Edwards, Bert, executive director, Office of Historical Trust 
      Accounting, Department of the Interior.....................     7
    Inouye, Hon. Daniel K., U.S. Senator from Hawaii, chairman, 
      Committee on Indian Affairs................................     1
    Slonaker, Tom, special trustee for American Indians, 
      Department of the Interior.................................     7
    Williams, McCoy, director, Financial Management and 
      Assurance, General Accounting Office, Washington, DC.......     3

                                Appendix

Prepared statements:
    Cason, James.................................................    30
    Causey, William F............................................    37
    Williams, McCoy..............................................    27
Additional material submitted for the record:
    Report to Congress on the Historical Accounting of Individual 
      Indian Money Accounts, Department of the Interior..........    42


                    INDIVIDUAL INDIAN MONEY ACCOUNTS

                              ----------                              


                        THURSDAY, JULY 25, 2002


                                       U.S. Senate,
                               Committee on Indian Affairs,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:06 a.m. in 
room 485, Senate Russell Building, Hon. Daniel K. Inouye 
(chairman of the committee) presiding.
    Present: Senators Inouye and Campbell.

 STATEMENT OF HON. DANIEL K. INOUYE, U.S. SENATOR FROM HAWAII, 
             CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS

    The Chairman. I have just been informed that the cochair is 
involved in a very important conference meeting on energy, so I 
will proceed.
    The Committee on Indian Affairs will meet this morning to 
receive testimony on the report of the Department of the 
Interior submitted to the Congress on July 2, 2002, on the 
historical accounting of Individual Indian Money Accounts 
pursuant to conference report 107-234 of the Interior 
Appropriations Act of fiscal year 2002.
    One of the fundamental duties of a trustee is the duty to 
the beneficiary to ``keep and render clear and accurate 
accounts with respect to the administration of the trust.'' The 
United States' duty as trustee for the funds held in trust for 
individual Indians and Indian tribes requires that the United 
States provide an accounting to the beneficiaries.
    This duty has been the subject of several House-Senate 
conference reports on Interior Appropriations acts, the 1994 
American Indian Trust Fund Management Reform Act and currently, 
in class action litigation brought on behalf of Individual 
Indian Money Account holders, asserting as one of several 
claims against the United States that the United States must 
provide the beneficiary account holders with an accounting.
    As a function of treaties and the course of dealings 
between the United States and Indian tribes, the United States 
holds legal title to lands held in trust for individual Indians 
as well as individual Indian tribal governments. The revenues 
derived from trust lands are also held in trust by the United 
States for the benefit of individual Indians and tribal 
governments. Over the last 20 years, at the request of this 
committee, the General Accounting Office has monitored the 
efforts of the Department to address the management of funds 
held in trust for individual Indians and Indian tribes.
    In August 2001, the General Accounting Office reported to 
the committee that an independent public accounting firm audit 
of Indian trust funds for fiscal year 2000 showed that the 
Department of the Interior was maintaining approximately 1,400 
accounts for 315 Indian tribes with assets in excess of $2.6 
billion, and over 260,000 Individual Indian Money trust fund 
accounts with a balance of $400 million as of September 30, 
2000. Receipts are deposited to these accounts primarily from 
land use agreements, royalties on natural resource depletion, 
enterprises related to trust resources, judgment awards, 
settlement of Indian claims and investment income.
    However, the audit report noted that reliance cannot be 
placed on the balances reflected in the trust fund accounts 
until tribal accounts are reconciled and/or resolved through 
negotiation and settlement and class action litigation on 
behalf of Indian Money Account holders is resolved.
    Today we find ourselves at a critical crossroads as we 
consider the Department's report and the information it 
provides to the Congress on the uncertainties associated with 
the conduct of an historical accounting. First, there is the 
uncertainty associated with gaps in the records and documents 
upon which an historical accounting would necessarily rely. 
Second, there is the uncertainty associated with the time that 
would be involved in conducting a complete historical 
accounting.
    Third, there is the uncertainty associated with the 
projected costs of an historical accounting. The Department's 
report projects that the total cost of an accounting would be 
$2.4 billion with an error rate in the projected cost of minus 
5 percent or as high as plus 25 percent.
    The Department's report sets forth the methodology that the 
Department anticipates employing in conducting the historical 
accounting of Individual Indian Money Accounts. What the 
Department's report does not address is whether there are other 
methodologies that might be applied and whether alternative 
methodologies might entail less time, less uncertainty and less 
cost. Some have suggested that with all the gaps in 
information, the lost and destroyed documents, it is not even 
possible to conduct a complete historical accounting.
    Beginning in 1995 and in subsequent testimony before this 
committee, the GAO suggested that the Congress consider a 
settlement of claims against the United States for an 
accounting. We have called upon the General Accounting Office 
and our third panelist today to assist the committee in 
developing an understanding of whether these matters lend 
themselves to a resolution through a legislative settlement. 
However, even if the Congress and the interested parties were 
to agree that the path to settlement of claims against the 
United States is the preferable path to pursue, the duty on the 
part of the trustee to provide an accounting to the beneficiary 
remains.
    These are the challenging issues that are the impetus for 
the Committee's hearing this morning. And we look forward to 
the testimony that will be presented.
    May I at this time call upon the Director of the Financial 
Management and Assurance, General Accounting Office, of 
Washington, DC, McCoy Williams. Mr. Williams, welcome, sir.

STATEMENT OF McCOY WILLIAMS, DIRECTOR, FINANCIAL MANAGEMENT AND 
      ASSURANCE, GENERAL ACCOUNTING OFFICE, WASHINGTON, DC

    Mr. Williams. Thank you.
    Mr. Chairman, I am pleased to be here today to summarize 
previous GAO work that identified gaps in information needed to 
reconcile Individual Indian Moneys trust accounts and the 
rationale that led us to suggest, based upon our earlier work, 
that Interior seek alternatives to reconciliation such as a 
negotiated agreement. I am accompanied today by Mr. Koury and 
Mr. Jacobsen.
    Before discussing our prior work, let me point out that we 
have not yet had time to analyze Interior's July 2, 2002 Report 
to Congress on the Historical Accounting of Individual Indian 
Money Accounts, evaluate its proposed methodology or discuss 
the report or its proposed methodology with Interior officials. 
Also, we have not done recent work to evaluate the current 
state of Interior's Individual Indian Moneys records.
    Nevertheless, it is clear that a reconciliation of IIM 
accounts is a daunting endeavor, both in terms of the magnitude 
of the project's scope and the obstacles that are likely to be 
encountered. We reported to this committee in June 1996 that 
based on our work, we concluded at that time that records were 
not available to support a reconciliation of the IIM accounts. 
In addition to missing records, we pointed out obstacles that 
Interior would encounter in pursuing an IIM account 
reconciliation, such as the lack of an audit trail through 
Interior's integrated records management system, which was used 
to maintain IIM account information and the differences in the 
way the system operates at various Interior locations, which 
affect the consistency of the IRMS information.
    Much of our previous work in the area of trust fund 
reconciliations relates to an earlier account reconciliation 
requirement and a related Interior effort to reconstruct both 
tribal and IIM trust accounts. From 1992 through 1997, we 
monitored and reported on various aspects of Interior's 
planning, execution and reporting of results for the 
reconciliation project. In our June 1992 report on Interior's 
efforts to reconcile Indian Trust Accounts, we noted that 
efforts originally consisted of two phases. The first phase was 
to cover, in addition to 500 tribal accounts, 17,000 Individual 
Indian Monies accounts maintained at three agency offices.
    However, after an initial assessment by Interior's 
contractor of the level of effort and cost needed to complete 
the various segments of reconciliation work, a decision was 
made not to reconcile IIM accounts as part of the project. In 
reporting this status, we noted that Interior and its 
contractor had determined that a full reconciliation of all 
tribal and IIM accounts was neither possible nor cost effective 
due to missing records, commingled tribal and Individual Indian 
accounting records, poorly documented accounting transactions 
and the volume of data to be reviewed.
    At that time, we recommended that Interior seek 
alternatives to the reconciliation project and develop a 
proposal for reaching a satisfactory resolution of the trust 
fund account balances with account holders. Among alternatives 
that we recommended for Interior's consideration were that 
Interior consider negotiating agreements with Individual 
Indians on balances reported on their account statements and 
request legislated settlements on all selected or accounts.
    In a number of testimonies and reports over the next 
several years, we supported the idea of Interior and tribal and 
Individual Indian money account holders negotiating a 
resolution of their issues. Interior's July 2, 2002 report 
relates directly to the American Indian Trust Fund Management 
Reform Act of 1994, which required Interior to reconcile tribal 
and IIM accounts and the ongoing class action lawsuit commonly 
referred to as the Cobell litigation, which is presently before 
the United States District Court for the District of Columbia.
    In this regard, my comments today are not intended to 
address, nor is GAO taking any position on what level of 
accounting the 1994 Act or the courts have required of Interior 
thus far, whether Interior's plan satisfies those requirements 
or if so, whether Interior's plan is the only or best approach 
for Interior to satisfy the requirements imposed on it. Those 
issues will ultimately be decided by the court.
    Having said that, we note that Interior's report recognizes 
that a number of obstacles, similar to those we have previously 
reported on, will complicate its ability to document for IIM 
account holders the amount and source of funds deposited to, 
managed in and disbursed from their IIM accounts. The Interior 
report enumerates among those obstacles known discrepancies in 
the balances at the trust fund level report by Treasury and 
Interior as well as the potential for errors in the electronic 
accounting system data, missing paper transaction records and 
missing land ownership information and revenue instruments. 
Interior's enumerations of obstacles is consistent with what 
our prior work has shown.
    Mr. Chairman, this concludes my statement. I would be glad 
to answer any questions that you may have.
    [Prepared statement of Mr. Williams appears in appendix.]
    The Chairman. In the scholarship or vocabulary of 
accounting, in which GAO has considerable expertise, what do 
the terms complete historical accounting and historical 
accounting mean?
    Mr. Williams. Mr. Chairman, those two terms are not terms 
that you would regularly see in the accounting profession. From 
the standpoint of various terms that we use, these are not two. 
What this would boil down to is this is a situation where this 
term has been coined in this particular litigation case as far 
as what the parties are looking for. And to that end, what it 
would mean in that situation is basically what all of the 
parties to the litigation would agree to as far as, are we 
satisfied that we have a complete accounting. But as far as the 
accounting profession itself is concerned, this is not a term 
that is used extensively throughout the industry, to my 
knowledge.
    The Chairman. Since you have been following and monitoring 
the case, how do you interpret those terms? How does GAO 
interpret those terms?
    Mr. Williams. From a general accounting standpoint, it's a 
process in which the agency is capable of identifying all of 
the account holders and being able to produce or prepare 
records that would show amounts of funds that are owed to all 
of the individuals, any activity that's taken place in the 
account, any disbursements that have taken place as well as the 
ending balance.
    The Chairman. Well, over the years, GAO has issued a whole 
series of reports on the Interior Department's efforts to 
reconcile these accounts. You issued one in June 1992, and in 
March 1995, the report was entitled Indian Trust Fund Accounts 
Cannot Be Fully Reconciled. Based on these and other reports, 
and as you know, we rely upon the GAO as experts in this area.
    Mr. Williams. Yes, sir.
    The Chairman. So my question is, is GAO still of the view 
that these accounts cannot be reconciled, or put another way, 
that a complete historical accounting cannot be rendered?
    Mr. Williams. Based on our previous work, and the 
information that we were able to review and analyze at that 
particular point in time, that was our position. As far as the 
current plan that the agency's putting forward, as I said in my 
statement, we have not had a chance to review that. I am not 
sure if there are any additional procedures or steps that would 
be in that plan that would make it possible. But GAO's position 
was that these accounts would not, could not be reconciled 
based on some of the gaps that had been identified and some of 
the problems that had been encountered in trying to do previous 
reconciliations.
    The Chairman. How long will GAO take to fully analyze the 
July 2, 2002 report of the Department of the Interior?
    Mr. Williams. We would put the two together and it would 
take us 1 month or so to do an analysis of it. This process 
would require from looking at the report, just giving it an 
initial read, where we got access to it last week, I received a 
copy of it last week, there were several players involved in 
putting together the document. There were cost experts, there 
were accounting experts, there were trust experts. So we would 
have to talk to those various individuals to get some input as 
far as what was the thinking in going in to put together the 
plan. Then we went through the analysis. So 1 month or 2 months 
to do a good analysis of the plan.
    The Chairman. Would it be possible for your agency to 
provide this committee with a report before the end of 
September?
    Mr. Williams. Let me provide for the record a statement on 
that. I'm not sure at this particular point in time. I need to 
discuss it. We would make every effort to put together a 
document that would lay out our initial assessments of the 
report. If it's okay with you, Mr. Chairman, we'll work with 
the staff to come up with a time that would work out as far as 
providing it possibly within that time frame.
    The Chairman. It would be most helpful, sir.
    Mr. Williams. Thank you.
    The Chairman. In prior testimony before this committee, GAO 
suggested that the Congress consider the settlement of 
beneficiaries' claims against the United States for an 
accounting. What is it, in your assessment of the process 
involved in the reconciliation of trust fund accounts, that led 
GAO to this suggestion?
    Mr. Williams. It was a combination of things that we had 
reported on. One, missing documentation, problems with the 
accounting system, just the vast number of transactions in the 
length of time that you're talking about as far as doing the 
reconciliation that goes back to the beginning of the first 
allotment. So it's a combination of those points.
    The Chairman. In your investigation and study, did you come 
to any conclusions as to the cause of the missing documents, 
how they became missing?
    Mr. Williams. No; we did not. In our review, we basically 
looked at the process of the reconciliation, we didn't get 
behind some of the root causes as far as why the documents were 
missing, et cetera. It's just that it was identified as one of 
the barriers, I guess you could call it, to completing the 
process.
    The Chairman. And at this moment, do you still believe that 
a settlement is a process the parties should explore?
    Mr. Williams. That is still GAO's position that that is one 
of the options the committee should consider.
    The Chairman. Would you envision that one fundamental 
component of a settlement is that the Department and the 
Individual Indian Money account holders would agree on a 
balance in each account that would eliminate the need for an 
historical accounting of each account?
    Mr. Williams. In our previous testimony, that was one of 
the options that we recommended. As I said, that was one of 
several options that we suggested should be given 
consideration.
    The Chairman. We have heard many suggest that there should 
be alternative methodologies. In fact, the GAO has suggested 
that. May I call upon the GAO to identify other ways to 
approach the duty of conducting an accounting or any other 
methodology that might be applied to an accounting, and tell us 
about it?
    Mr. Williams. In our previous reports, we talked about 
various options. Some of the options, well, one of the options 
I just mentioned, and that would be a process in which a letter 
would be mailed to the individual Indian stating that this is 
the balance that we're showing, do you agree or disagree. 
That's one option. The option that the agency is putting 
forward now as far as looking at all of the accounts that's 
been identified, that's another option.
    So there were several that we've identified, and those were 
just two of many ways that a reconciliation could be performed. 
And let me let Mr. Jacobson add a little bit to that.
    Mr. Jacobson. Mr. Chairman, I appreciate the question. One 
of the difficulties with answering that question is that the 
methodology you would employ is affected by what your duty is 
and what your objective is. One of the challenges Interior 
faces is characterized in their own proposal. They've offered a 
methodology which they've characterized as the broadest reading 
of the court's opinions of the 1994 act.
    The issue of what alternative methodologies might be out 
there depends on whether one accepts that broad reading of the 
1994 act or if there is some alternative reading of what their 
duty is. And that's not really a call for us to make, that is a 
legitimate question for Interior as to why they took the 
broadest reading and what alternative readings of their 
obligations might be available. In some respects, that would 
dictate what the alternative methodologies may be.
    The Chairman. If you cannot recommend alternative 
methodologies, who can?
    Mr. Jacobson. Well, I think we can talk, in responding to 
the request that you and Mr. Williams discussed earlier, we can 
certainly talk to those experts and look at and find out what 
alternatives they considered. There is some suggestion in some 
of Interior's documents that they considered other 
methodologies, but we haven't done the work to find out what 
those are. That may shed some light on the question that you've 
posed.
    The Chairman. Can GAO do the work?
    Mr. Jacobson. Do the work meaning do the reconciliation?
    The Chairman. No; identify other methodologies.
    Mr. Jacobson. We can talk with the people who worked with 
Interior and find out what else they considered. That process 
may lead us to identifying other methodologies that parties 
could consider. But until we go in and start doing some work, 
we wouldn't know at this point until we went and saw what was 
out there.
    Obviously, there are different methodologies for doing 
different forms of accounting, whether it's accounting by 
trustees or accounting of other natures. But the specific 
methodology that would be reasonable depends on what the 
objectives are. And we may, we will certainly as part of the 
effort that Mr. Williams described to you, we will talk to the 
people who have been involved in this process to see if in fact 
there are other methodologies that we'd consider.
    The Chairman. I realize that the staff in the GAO are 
foremost in the field of accounting. But would you be able to 
identify whether there are other experts in this field that we 
could consult with?
    Mr. Jacobson. We could do that.
    Mr. Williams. Yes, Mr. Chairman; we can do that.
    The Chairman. That would be most helpful to us, sir.
    And I thank you very much for your assistance.
    Mr. Williams. Thank you.
    The Chairman. And now may I call upon the second panel, the 
associate deputy secretary of the Interior, office of the 
secretary, James Cason, accompanied by Bert Edwards, executive 
director, office of historical trust accounting, of the 
Department of the Interior; and the special trustee for 
American Indians, from the Department of the Interior, Tom 
Slonaker.
    Mr. Cason.

STATEMENT OF JAMES CASON, ASSOCIATE DEPUTY SECRETARY, OFFICE OF 
  THE SECRETARY OF THE INTERIOR, ACCOMPANIED BY BERT EDWARDS, 
  EXECUTIVE DIRECTOR, OFFICE OF HISTORICAL TRUST ACCOUNTING, 
 DEPARTMENT OF THE INTERIOR; AND TOM SLONAKER, SPECIAL TRUSTEE 
        FOR AMERICAN INDIANS, DEPARTMENT OF THE INTERIOR

    Mr. Cason. Thank you, Mr. Chairman. My name is Jim Cason, 
I'm the associate deputy secretary for the Department of the 
Interior. The Department has prepared one testimony for the 
panel, which I'd like to submit in its entirety for the record.
    The Chairman. Without objection, it will be made part of 
the record.
    Mr. Cason. Thank you, Mr. Chairman.
    We just have a few brief comments, and then we will take 
questions. We're pleased to be here to discuss the Government's 
trust accounting activities, in particular, those that are 
oriented towards historical accounting. The Government has 
collected and disbursed funds to Indians for over 100 years. 
Historically there has been no standard practice to provide 
regular, detailed accounting statements to Indian 
beneficiaries. That's the reason we're here.
    With the passage of the American Indian Trust Fund 
Management Reform Act of 1994, Congress required the Secretary 
to account for daily and annual balances of all funds held in 
trust by the United States for the benefit of Indian tribes or 
Indian individuals which were deposited or invested pursuant to 
the act of June 24, 1938. Subsequently, the District Court here 
in the District of Columbia required the Secretary to provide 
an accurate accounting of all money in IIM accounts, that's 
Individual Indian Money accounts, held in trust for the benefit 
of the individual Indians without regard to when the funds were 
deposited. And that gives us an historical element to our 
accounting.
    Subsequently, Congress required the Department to prepare 
and submit a report describing how the Department would proceed 
to undertake a historical accounting. And the Department's plan 
was provided to Congress in early July 2002. The report details 
an enormous and challenging undertaking. The report details a 
historical accounting for Indian beneficiaries, both for 
current and former account holders. The report delineates an 
anticipated workload management approach, and an anticipated 
cost for the accounting process.
    The report required further discussion and possible 
refinement with Congress and the Court. Congress needs to 
determine if the plan is appropriate for meeting the 
Government's trust accounting responsibilities. Congressional 
appropriations will be needed to undertake the historical 
accounting and the appropriations rate will influence the time 
schedule for completing any accounting that we undertake. The 
Department believes that the Court may provide additional 
guidance on this subject as well.
    Right now, all three branches of Government are interested 
and involved in this historical accounting effort. We need to 
work together to define and implement an approach that meets 
our trustee responsibilities to individual Indian 
beneficiaries. The report provides Congress a positive step 
forward. This hearing is another positive step forward. And Mr. 
Slonaker, Mr. Edwards and I are happy to be here to answer 
questions. Thank you.
    [Prepared statement of Mr. Cason appears in appendix.]
    The Chairman. Before we proceed, may I call upon the Vice 
Chairman.
    Senator Campbell. Thank you, Mr. Chairman.
    I have no formal opening statement. I apologize for being 
late. We were in conference on the energy bill. As you know, 
there is a section there dealing with Indian energy that I'm 
trying to have expanded. So I had an opportunity to offer that 
amendment this morning. So I'm sorry I'm late, and I'm just 
very happy to sit and listen. Thank you.
    The Chairman. May I proceed by asking the Special Trustee 
questions? In the most recent report of the Court Monitor for 
the District Court in which the Cobell-Norton litigation is 
pending, the text of several memoranda that you have 
transmitted to Mr. Edwards was printed. In your memo of April 
30, 2002, you stated:

    I do not believe an accounting as that term is generally 
understood in the established trust scholarship acceptable to 
either the beneficiaries or the Special Trustee can be 
constructed. Short of a settlement, the best that might be able 
to be accomplished is the identification of the gaps of 
information. With that, the Department could perhaps seek some 
instruction from the judge on how to proceed. I remain 
concerned, however, that I have not heard anyone in the 
Department define the characteristics of an accounting to 
include anything more than the funds actually collected by the 
Department. That of course is inadequate.

    And in your memo of May 22, 2002, you stated:

    It is evident that the long term record of the Department's 
administration of the Indian trust accounts is incomplete to 
some degree. In addition, during the past year, the Special 
Master has been able to breach the Department's electronic 
systems that house the trust data, thereby demonstrating that 
the data may not be accurate. Because it is the duty of the 
Trustee to know all the facts about the administration of the 
trusts, these flaws cause me to doubt the ability of the 
Department to show either itself or the beneficiaries in 
sufficient detail the nature and amount of the trust property 
and its administration.

    Mr. Slonaker, in your official capacity and from what you 
know of the gaps in information, do you believe that a complete 
historical accounting of the Individual Indian Money accounts 
can be achieved?
    Mr. Slonaker. Good morning, Mr. Chairman, Senator Campbell.
    No; not completely. It may be possible to reconstruct a 
good many accounts completely. Even identifying the assets and 
the flow of income from the assets, which by the way is 
something that's incumbent upon the trustee to do.
    I believe that the Office of Historical Trust Accounting, 
however, can go quite a way toward identifying what the gaps 
are in the information. As the trustee, it's crucial that every 
effort be made by the trustee to make certain that we have 
exhausted every means to identify the assets and the incomes 
that belong to the beneficiaries, and bring that accounting 
right up to date.
    The Chairman. You spoke of obstacles. In your view, what 
are the obstacles, legal or practical, that would be presented 
if the Congress were to pursue a path of settlement of claims?
    Mr. Slonaker. The obstacles to the actual accounting itself 
I think are fairly well known in terms of their type. There are 
records that we believe are probably either destroyed or lost. 
There is, as the GAO panel already has indicated, there are 
situations where the accounting was not done properly, we 
believe, in the initial instance. So there are obstacles to 
getting a full and complete accounting.
    What those obstacles are, which you termed as a gap, have 
to be further determined. They can only be estimated at this 
point in time.
    The Chairman. Everyone seems to speak of missing or 
destroyed documents. Could you tell us as to when these 
documents began to be missing or when the Government learned 
that they were destroyed?
    Mr. Slonaker. I cannot, sir. We only have, at least I only 
have anecdotal evidence of missing documents at this point. I 
think that's the point of the historical trust accounting 
report in part, and that is that these gaps have to be 
identified as to what point they started and where those gaps 
are and what the nature of the gap is.
    The Chairman. So there is no proof or data to tell us when 
the gaps began to come into existence?
    Mr. Slonaker. Not that I'm aware of, sir.
    The Chairman. So these gaps or obstacles are such that 
settlement would be extremely difficult?
    Mr. Slonaker. I think my response to that, Mr. Chairman, 
has to be that the Trustee needs to do everything in his power 
to establish what the liability of the Trustee may be. The size 
of the gaps, the nature of the gaps has yet to be discovered. 
Whether that lends itself to identifying a figure which in turn 
might lend itself to some sort of a settlement is not clear to 
me.
    Mr. Cason. Mr. Chairman, would it be okay if I make an 
addition on this? I think one of the things that we need to 
just try to keep in perspective is what the target is that 
we're after or what the job is. And there's been lots of 
speculation about whether or not the Department can do an 
accounting, cannot do an accounting, whether it's a complete 
accounting, etc. Lots of terms, lots of commentary on what we 
can do.
    I think we need to take a look at the issue from two 
perspectives. One perspective is that the job that we have to 
do, as we perceive it in the Department, is to conduct a 
historical accounting on an account by account basis. So each 
individual person, their individual account is a task for us to 
do as part of an historical accounting. And within that 
boundary, our expectation is that we do have sufficient 
information to be able to do a complete accounting on a number 
of those individual accounts. And our expectation is it's a 
significant number, we don't know exactly how many, but a 
significant number of them.
    So we think that we can move forward with the information 
we do have available to do a good, reasonable accounting for a 
large number of individual accounts. There's the other 
perspective that says, can you ensure that we have a complete 
accounting for all of the accounts. And from that perspective, 
I think everybody is in agreement that the answer is probably 
no, that we cannot, for all of the accounts, balance them 
historically from whenever funds were deposited. So I think we 
have agreement on that. And I think the issue that we need to 
have consideration on is, if we can't do the entire thing but 
we can do a good job on a lot of it, then should we go ahead 
and proceed forward to do the best that we can under the 
circumstances to do the accounting for the parts that we can 
accomplish.
    The Chairman. I think you are right on target, sir.
    Mr. Cason. Thank you.
    The Chairman. Mr. Slonaker, Section 306 of the 1994 Trust 
Management Reform Act establishes an advisory board to advise 
you on matters within your jurisdiction. Section 133 of the 
Interior Appropriations bill that was recently approved by the 
House of Representatives includes language directing you ``in 
consultation with the Secretary of the Interior and the 
tribes'' to appoint new members to the advisory board. Have you 
found the current membership to be unsatisfactory in any way, 
or unable or unwilling to provide you with the advice you need 
regarding matters within your jurisdiction?
    Mr. Slonaker. No; I have not found it unsatisfactory at 
all. Quite the contrary. It's a good sounding board for me. I 
think that there is a fair amount of frustration on that board 
and a fair amount of frustration of my own in the sense that 
they are not seeing trust reform proceed at the rapid pace that 
they want, that they don't see the stronger direction until 
perhaps more recently that they want. And I think quite 
candidly, the board is looking for a stronger role, it was 
hoping for a stronger role. They are an advisory board and 
technically just to me. But it has been helpful, sir.
    The Chairman. Do you think you need new members, as the 
House bill says?
    Mr. Slonaker. I do not.
    The Chairman. And finally, if I may ask this, under Section 
303 of the 1994 Trust Reform Act, the Special Trustee must 
certify in writing the adequacy of each budget request within 
its area of jurisdiction:

    To discharge effectively and efficiently the Secretary's 
trust responsibilities and to implement the comprehensive 
strategic plan.

    If the July 2002 report to Congress were presented to you 
in the form of a budget request, could you certify that 
carrying out historical accounting as set forth in the report 
would in fact discharge the Secretary's trust responsibilities 
effectively and efficiently?
    Mr. Slonaker. No, I could not. The plan, while it is, I 
think, a good effort, simply can't produce a full accounting as 
we've already mentioned, a complete and full accounting which 
the Trustee is obligated to provide to the beneficiaries. It 
could do, I think, the best possible, assuming it has 
sufficient resources. But the resources that would be required, 
the funding that would be required is a, I think, more of a 
best guess but not much. It's very difficult to assess the cost 
of something like this. We've had some experience in the past 
in the Department on document production and researching 
accounts which we've borrowed on for this report. But it's 
still difficult to assess the true cost of something quite this 
large.
    But beyond that, it can only be an attempt at the best 
possible research of what is due the beneficiaries. Since it 
can't produce a full accounting, I don't believe it satisfies 
the trust responsibilities and the Secretary to effectively and 
efficiently provide for that.
    The Chairman. I think as Mr. Cason has indicated, this 
would be a good step. I appreciate the candor in which all of 
you have responded to our questions.
    Before I call upon the Vice Chairman, Mr. Cason, can I ask 
a question, sir?
    Mr. Cason. Obviously.
    The Chairman. Does the Administration support the inclusion 
of language set forth in the House Interior Appropriations 
Bill, sections 131-134 regarding, first, the Ernst & Young 
report on IIM accounts of the Cobell plaintiffs, second, the 
fees of the Special Master and the Court monitor in that case, 
third, the Special Trustee advisory board established in the 
1994 Trust Reform Act, and fourth, the payment of attorneys 
fees and costs incurred in the Cobell litigation by Department 
of the Interior employees?
    Mr. Cason. Mr. Chairman, on the E&Y report, the Department 
has not taken a position one way or the other. The position 
that we're in is we're attempting to be helpful to Congress and 
to be responsive to the Court. This issue has come up once 
before, where Congress made a request for the release of the 
E&Y reports. And the Department forwarded that request to the 
Court and the Court rebuked the Department for considering that 
as an option.
    The Department is willing to continue to work with Congress 
and the Court to try to be helpful to both sides, because we 
believe that Congress is entitled to an explanation of the 
results of the money that it has invested. In this particular 
case, we've spent millions of dollars doing the reconciliation. 
So we think it's reasonable that the Court gets some sort of 
report from us on that. But at the same time, we have to 
respect the privacy rights of the individuals that were 
involved.
    So we have a job to try and find a happy medium that's 
mutually beneficial for all. So we'll do what we can to help, 
but this is an issue that's somewhat controversial.
    Regarding the second issue on the fees, the Department has 
not taken a position on this at all, and we don't anticipate 
taking a position. This is an issue that was not an initiative 
of the Department. We think this is an issue between the 
appropriations committees and the courts to solve. We'll do 
whatever we're directed to do.
    Regarding the advisory commission or advisory panel for the 
Special Trustee, the Department has not taken a position on 
this issue, either. Mr. Slonaker has taken a position. To the 
best of my knowledge, this is not an initiative of the 
Department, it's an initiative of the Appropriations Committee. 
And it's my understanding that the underlying rationale 
supplied by the Appropriations Committee is a concern about 
having one of the five named plaintiffs in the Cobell 
litigation be on the advisory panel, and it is viewed as a 
conflict of interest.
    And on the last item, the attorney fees, the Department 
would support that. We were asked in a hearing on the House 
side by Congressman Dicks to supply some information about how 
to provide for paying attorney fees for individuals who were 
named as alleged comtamnors in the Cobell litigation. 
Congressman Dicks felt that the Department is in a very 
difficult position, having a number of its employees named as 
potential comtamnors and sought some recommendations on how we 
could deal with that, and the Department has tried to respond.
    The Chairman. So in one phrase, this is not your 
initiative?
    Mr. Cason. It is not our initiative.
    The Chairman. I thank you very much, sir.
    Mr. Cason. Thank you, Mr. Chairman.
    The Chairman. Mr. Vice Chairman.
    Senator Campbell. Thank you, Mr. Chairman. I'll try to be 
brief.
    Two hundred and forty million pages of records, your 
statement says there are about 240 million pages of records 
that need to be analyzed. I'll bet you there's another 240 
million pages of testimony, documentation, written things and 
so on, and we haven't cut check one. I was interested in the 
report's conclusion that it will cost $2.4 billion and at least 
10 years to complete the historical accounting. There are a lot 
of Indian people out there that are going to die before that, 
waiting for that money, if they have to wait 10 years.
    Let me ask you, what alternatives to that document intense, 
exhaustive kind of proposal, did the Department undertake? Did 
you look at anything else?
    Mr. Cason. Yes, we did Senator; we did look at some other 
alternatives. It was a determination of the Department that any 
other alternative that we looked at appeared to us to be short 
of the complete job to provide an accounting, account by 
account, to all the Indian beneficiaries. We looked at the 
possibility of statistical accounting, we looked at a 
possibility of buyout programs and others. But we thought that 
it would be helpful to the Congress to lay out what the job 
would be to do a full accounting, to the extent that we can do 
it, and certainly there are some impediments to a complete 
accounting. But we thought that it would be helpful position to 
start first with doing a full accounting and look at 
alternatives as a second matter.
    Regarding payments to Indians, I'd like to point out that 
the accounting process is to basically go and document the 
activity in an account. And as far as I understand, there is 
nothing in that process that would hold up making payments to 
Indians that are legitimate payments through the process, that 
the payments to Indians for income that comes in and out of the 
account is an ongoing process, and that the accounting process 
we're talking about is just documenting what happened.
    Senator Campbell. I see. Well, I appreciate that you want 
to do a good job for the Indians. I think from the Indians' 
perspective, though, we're doing a job on them, not for them. 
Because we just keep going around and around with this.
    Of all the people that we owe money to, wouldn't it be 
simpler to settle with those owners that would be willing to 
settle?
    Mr. Cason. Senator, that's certainly a possibility. The 
question for us, as far as the Department is concerned, is what 
exactly are we settling on. At this point, we don't know 
exactly who has a claim. We have a class. So all Individual 
Indian money account holders are part of the class. So we have 
on the order of 250,000 to 300,000 current account holders who 
are part of that class. And as we understand it, there is at 
least the possibility that former account holders are part of 
the class. So there may be as many as 500,000 accounts. Then, 
if you break down the job or the settlement, down to an account 
level, to say, okay, you're an individual, how much do I owe 
you and why do I owe it to you, we don't have answers for that.
    That's part of the conundrum we have right now; in order to 
get to that answer, you need to do some accounting to actually 
run through the account and the activities of the account to 
see if the balance in the account is consistent with the 
activity in the account. And if you arrive at the same number, 
there's nothing to settle. If you arrive at a different number, 
then there's an issue of what you settle.
    Mr. Slonaker. Senator Campbell, may I add on to that?
    Senator Campbell. Yes, Mr. Slonaker; go ahead.
    Mr. Slonaker. I just want to raise a possible issue with 
your scenario, and that is the possibility that one beneficiary 
could be treated differently than another beneficiary. I think 
that's something that would have to be thought through very 
carefully.
    Senator Campbell. I guess if you reach some kind of a 
settlement with individuals, one may settle for a different 
amount than the other one. But if they accept it willingly, 
then what recourse would they have? That would be what they 
want, too. What's the problem?
    Mr. Slonaker. Conceivably you could be settling with some 
beneficiaries, let's say in the present day, and then 
eventually get to some other beneficiaries who you are finally 
able to reconstruct or to estimate what they're owed, and the 
funding may not be there for that money, and so they may be 
treated differently. I just raise it as an issue here.
    Senator Campbell. I understand too that your statement 
reads, I haven't read it completely, but it does have in there 
that there's a high level of uncertainty in cost estimates for 
the historical accounting and that the bulk of the costs is for 
transactional analysis. I don't know if I asked this clear 
enough at first or not, but isn't there a way we can do some 
kind of a modeling with greater accuracy and a lot cheaper than 
just exhaustive and particularly one that has a high level of 
uncertainty?
    Mr. Cason. Senator, I would say that you have two criteria 
in your question, accuracy and cost. Certainly we could do 
modeling. The modeling probably would not improve accuracy over 
doing a full accounting, it would be less accurate. However, 
modeling probably would be less costly, and you could move more 
quickly in a model scenario than you could do in a full 
accounting scenario.
    Senator Campbell. Mr. Slonaker, regarding your role in the 
historical accounting, do you interpret the American Indian 
Trust Reform Act of 1994 as requiring the Special Trustee to 
approve the methodology use to complete a historical 
accounting?
    Mr. Slonaker. The words actually in the act are monitor, I 
think it's a question of the Special Trustee being satisfied 
that the full accounting responsibility has been leached, the 
methodology is a part of that decision, yes.
    Senator Campbell. And dealing with Congress, do you believe 
that the July 22, 2002 report provides enough information for 
us to decide whether it should embark on an accounting effort 
that may cost $2 billion or more?
    Mr. Slonaker. I'm not sure that it does, Senator. I think 
there may be additional work that's required to identify the 
gaps and to better estimate the time required and the funding 
required. But I think it's a full faith effort to get it 
started and to do the full accounting that Mr. Cason was 
referring to.
    Mr. Cason. Senator, we'd be happy to supply additional 
information, too, if the committee has any questions.
    Senator Campbell. I have some further questions I'd like to 
submit in writing, if you would answer them, I would appreciate 
it. Thank you, Mr. Chairman.
    The Chairman. Mr. Cason, if I may followup on the vice 
chairman's questioning, when we speak of missing or destroyed 
documents, no one is suggesting that all of the documents are 
missing or all of the documents have been destroyed. Would you 
say that the bulk of the necessary documents are still in 
existence?
    Mr. Cason. Mr. Chairman, that would be my assessment. We 
don't really have a number to know exactly how many documents 
have been generated over the last 130 years. But the estimate 
that we have on the table right now is we have somewhere on the 
order of about 500 million pages of documents, and we have an 
assortment of computer systems that have information in them as 
well.
    So we believe that we have a lot of information that could 
be brought to bear to do a historical accounting. But we also 
realize that we don't have all of the information that may be 
needed to do a complete accounting of all accounts. So where we 
are is, we believe that we can do a reasonable accounting for a 
lot of accounts. At this point it's uncertain as to how many 
that would be. But we think that we can do a lot to move the 
process forward with what we have, and that there will be some 
part that we'll have to work on in this process where we have 
incomplete information.
    The Chairman. With the existence of relevant documents, 
that you have indicated, most of them are still in existence, 
plus the electronic equipment that you have had since 1985, do 
you not think, as the vice chairman has suggested, that certain 
accounts can be easily resolved, because they are backed up 
with necessary documentation?
    Mr. Cason. Mr. Chairman, we expect that there will be some 
accounts that can be easily resolved and addressed, and that 
there will be some that will be very difficult or impossible. 
So our plan basically envisioned a workload to try and address 
all of the accounts, both current and former, and that we would 
use best efforts to try and reconcile them to the extent that 
we had information that was reliable or we could develop 
methodologies based on other information and fill information 
gaps.
    The Chairman. This question is being asked because your 
report of July 2002 suggests that the time span required may be 
10 years. And there is a question as to whether 10 years will 
be sufficient.
    Mr. Cason. That's correct, Mr. Chairman.
    The Chairman. If that is the case, if you do have 
individual accounts that are clearly resolvable at this moment, 
why have them suffer and wait the 10 plus years?
    Mr. Cason. Mr. Chairman, I would say just on the surface 
that we tried to develop a workload approach to deal with this 
issue. And we've been using the analogy within the Department 
that we have an elephant that we have to eat a bite at a time. 
And no matter where you start with this, we only have so many 
resources available in terms of time and people and money to do 
accounting.
    What we've tried to do is set some priorities in the report 
that we provide to Congress about how we would go about the 
job. What we established as priorities first is, there's a 
sizeable chunk of money that we think would be relatively easy 
to resolve in the form of judgment accounts and per capita 
deposit accounts. We've already started the process of 
reconciling those accounts. Mr. Edwards has recently completed 
about 8,000 of those accounts, and we're on the cusp of sending 
out notifications on those that have been reconciled. We have a 
few thousand more of those accounts that we already have in 
process to reconcile while we go through the debate about other 
individual accounts and the complexities that are involved in 
this process.
    Then after that, we try to set some priorities--simply, 
under Jerry Maguire saying, ``go where the money is.'' We 
basically took all the accounts to the extent that we have 
knowledge of them and tried to array them in a way that we had 
highest balance of the account with highest throughput through 
the account for the last 15 years, all the way down to the 
lowest balance and lowest throughput. And our priorities were 
to go to where we had the highest throughput and the highest 
balance in accounts, to do those first and progressively work 
our way down from most important accounts down to least 
important accounts, money as the criteria.
    So we laid out a workload process to try and get the 
biggest bang for the buck in the shortest period of time to the 
most beneficiaries we could. Certainly there's other ways of 
approaching it. but we laid it out one way. We'd be happy to 
discuss with the committee and others in Congress, if there are 
other priorities that we ought to be pursuing, other than ones 
we laid out.
    The Chairman. The vice chairman and I felt that if there 
are accounts that can be easily resolved and closed, why not 
close them and come before us 6 months from now and say, we 
have a balance of now $1 billion, we have cleaned up 1\1/2\ 
billion, or something like that? It would make you look good. 
[Laughter.]
    Mr. Cason. Looking good is a good thing. We'd like to do 
that. And actually, Mr. Chairman, we have a similar thought 
process, that the thing that is most helpful to us is actually 
show results. We've done accounting. And that's why we started 
with the judgment accounts, and we have completed a 
reconciliation on about 8,000 of those. So we are heading in 
the same direction. We want to take the ones that we think we 
can get off the ground without a lot of complication and get 
those done and off the plate, and then move on to the more 
complicated ones.
    The Chairman. The grapevine tells me that the Department 
may seek another delay.
    Mr. Cason. A delay for what, Mr. Chairman?
    The Chairman. In the Cobell case.
    Mr. Cason. I'm not aware that we're seeking any delay.
    The Chairman. Well, whatever it is, it has taken many 
years, and pursuant to a report, it will take at least another 
10 years. Are you completely satisfied that you can finish this 
accounting in 10 years?
    Mr. Cason. No; I'm not, Mr. Chairman. This is a big job. 
And this is kind of uncharted territory. To the extent that 
we've shopped around, I don't think we've found anybody that's 
ever tried to take on a job like this. Going back to do a 
historical reconciliation of accounts with a long history just 
isn't something that's pretty common for accounting firms to do 
or the Government to do. So we're in uncharted territory. We 
have significant structural issues to have to overcome.
    For example, we estimate that there's as many as 500 
million pages of documents that we're going to have to sort 
through to get the relevant information to do an historical 
accounting. We have a variety of accounting systems that have 
been employed. Some of those systems have varying degrees of 
success. We've had generations of Indian agents involved in the 
process and generations of beneficiaries. It's a difficult 
process. And there are weaknesses in the system.
    Ten years was an estimate for going through the process, 
assuming adequate funding to do the job. And if funding is 
stretched out, the job will take longer. If we run into 
impediments that we don't expect, the job could take longer. 
But we gave a best estimate, based on our feeling of how doable 
the job is with a reasonable staff size of contractors and 
departmental staff.
    The Chairman. In your statement, you indicate that the 
plaintiffs claim that the Government owes them $137 billion. 
And you counter that by saying that there is no evidence at 
this moment that would support such a claim. What do you think 
the realistic number would be?
    Mr. Cason. Mr. Chairman, we have no idea. We don't know how 
you would make that determination unless you actually go 
through some sort of an accounting process to identify where 
errors occurred in the accounting process over the last 100 or 
so years. Our best estimate of how much throughput we've had 
through these accounts since 1909 is about $13 billion, moneys 
that have come in and been disbursed through the process. We 
know that there is about $404 million in the individual account 
balances right now, and our estimates, as much as we know, is 
around $12.6 billion worth of throughput.
    We frankly don't know how we get to $137 billion of 
misappropriated funds that would be due to Indian recipients. 
And short of actually doing some accounting work, and that's 
why we've tried to prioritize--go where the money is, go to the 
highest value of accounts and work our way down, we don't know 
how we would make a determination that says we owe x number of 
dollars to this individual, because there is something wrong 
with that individual.
    To the best of my knowledge, we have little information, if 
any, regarding specific accounts in which there is a problem 
with the account. That doesn't mean that there isn't that 
information out there somewhere. If somebody believes that they 
have a problem with their account, given how many accounts 
there are in a time period, it would be entirely plausible that 
there are problems out there.
    But we don't have the specifics to operate on to 
substantiate any particular figure. That's part of the reason 
that we also went towards this full accounting process, that if 
we're going to make these determinations on an account by 
account basis, so that we can make appropriate payments, where 
the Government has not acted properly, then we need to have the 
facts to support it.
    The Chairman. In other words, the cost estimate of the 
accounting, $2.4 billion, that may also increase?
    Mr. Cason. That's entirely possible. That's our best 
estimate based on what we know now, and it involves a number of 
assumptions regarding how many older accounts there are, how 
many transactions were involved, how difficult it will be to 
assemble all the paperwork to do the accounting, etc. So there 
is a lot of assumptions that are in the process and a lot of 
best guesses in the process to derive that figure.
    The Chairman. I requested that the GAO review and analyze 
your report. Will you help them?
    Mr. Cason. We would be happy to do that, Mr. Chairman.
    The Chairman. I think that would be extremely helpful.
    Can the case proceed, or does it have to be delayed until 
the Department has completed the accounting?
    Mr. Cason. You're referring to the Cobell case?
    The Chairman. Yes.
    Mr. Cason. Mr. Chairman, I think the position that's being 
taken by the Department of Justice, and I don't know that it's 
a final position, but what's being discussed is that on the 
historical accounting portion of the case, the plaintiffs are 
interested in proceeding to trial with that portion, and I 
believe the Department of Justice is taking a position that, 
until the Department actually undertakes an accounting and 
produces results, we don't know what we're trying. I leave that 
to the lawyers to sort out how we're doing that, that's not 
really my call. But as I understand it, there is some dialogue 
as to whether this is timely for us to pursue a case or whether 
we actually need to do some accounting and base the case on the 
accountings that are produced.
    The Chairman. So it is going to take a little while longer 
possibly?
    Mr. Cason. That's my sense, Mr. Chairman.
    The Chairman. How long has the Cobell case taken so far?
    Mr. Cason. It's my understanding it's around 6 years.
    The Chairman. About 6 years.
    Mr. Cason. Around 6 to 6\1/2\ years.
    The Chairman. Well, we hope that this matter can be 
resolved as soon as possible. But I agree with you that this is 
not an easy one.
    Mr. Cason. It's not. And we would like to resolve it as 
well, Mr. Chairman. It's a difficult situation for all 
involved.
    The Chairman. So we look forward to the analysis that GAO 
will have of your report, and if you can help them I think we 
can expedite everything.
    Mr. Cason. We'd be pleased to, Mr. Chairman.
    The Chairman. Thank you very much, sir.
    Mr. Cason. Thank you.
    The Chairman. Do you have any questions?
    Senator Campbell. Mr. Chairman, I have no further 
questions. But I would like to just say something, if I can do 
this without hurting anybody's feelings on the panel. In the 6 
years that you spoke of, we've had dozens of people here as 
witnesses for the Administration. And I have to tell you, I 
wish that they could speak with the passion and urgency that 
Indians have been waiting for it.
    I'm sure that most of the people who have come over from 
the Administration in that 6 years never were raised on surplus 
Government cheese, as an example, like I know some of the 
people sitting in this audience, Tex Hall over there is an 
example, knows what that is.
    Mr. Cason. So do I, Mr. Chairman.
    Senator Campbell. Do you? Well, then, maybe you understand 
how most people feel when you tell them, well, it may be 10 
more years and some of you may die before you ever get fairness 
out of the Federal Government. It's just not right when we know 
people are out there without any income, with poor housing, 
with not enough food, with all that, and we just keep going 
around and going around, and for some reason they can't get 
their money that is owed them and is rightfully theirs, because 
we have to do more studies, we have to buy more computers, we 
have to hear from more people, we have to dot all the I's and 
cross all the T's, we've got to do every little thing and it 
just keeps going on and on.
    I just wanted to leave you with that, that it's just not 
right to keep this thing going from one Administration to 
another, from one Secretary to another, from one Trust 
Administrator to another. We just do no fairness to the Indian 
people who have waited so long. I just wanted to leave you with 
that.
    Thank you, Mr. Chairman.
    Mr. Cason. Thank you, Senator. I think that's a great 
point.
    We, too, share some of the frustration that the process 
takes so long to seemingly make any material progress. And we 
recognize that the situation has been longstanding and that it 
needs to be addressed.
    We provided a plan for full accounting. Unfortunately, 
there's a ton of work that needs to be done in order to provide 
a full accounting.
    Senator Campbell. We will never have full accounting. There 
are so many missing documents, somewhere along the line, we've 
got to cut our losses and start signing some checks. It just 
seems to me, as I mentioned and the chairman did too, that we 
ought to be trying to negotiate with the people that would be 
willing to settle. There could be disclaimers so that would be 
the only time they would be willing to settle, whatever. But we 
ought to do some kind of negotiating where we can actually 
start the process moving instead of just keep going around 
about what more we have to do within the Administration.
    Mr. Cason. Senator, we would be more than pleased to work 
with Congress on trying to structure something that would be 
fair in this circumstance.
    Senator Campbell. Thank you. Thank you, Mr. Chairman.
    The Chairman. Once again, Mr. Cason, Mr. Slonaker, Mr. 
Edwards, I thank you for your forthright responses to our 
questions. Thank you very much.
    Mr. Cason. Thank you, Mr. Chairman.
    The Chairman. Our final witness is William Causey of Nixon 
Peabody of Washington, DC.
    Welcome, Mr. Causey.

  STATEMENT OF WILLIAM F. CAUSEY, ESQUIRE, NIXON PEABODY, LLP

    Mr. Causey. Thank you, Mr. Chairman, Mr. Vice Chairman. 
It's a pleasure to be here.
    Thank you for giving me the opportunity to share with you 
some views about whether and how the Cobell litigation might be 
susceptible of mediation. This morning we heard testimony about 
how complicated and involved this matter is and how long this 
litigation has been going on, and everybody has expressed a 
desire to come to some kind of satisfactory resolution of this 
matter. I would like to suggest that everybody think seriously 
about some form of mediation to do that.
    Just to set the stage for this, I have been litigating in 
the U.S. District Court for over 25 years. I have tried cases 
in front of the judge that's hearing the Cobell litigation. I 
have been specially trained in the mediation of complex cases 
involving the Federal Government and private parties. And I 
have been serving as a mediator in the U.S. District Court for 
12 years. I have mediated cases involving matters that are 
pending before the judge that is currently hearing the Cobell 
litigation.
    As we all know, what I will refer to as the Indian trust 
fund problem is an enormous problem. The litigation over this 
issue has made the likelihood of a successful and satisfactory 
resolution of the problem, in my view, less rather than more 
possible. Both of you certainly know the value and efficacy of 
compromise, which is the backbone of successful mediation. And 
as someone who has mediated many cases, let me share with you 
my views on how mediation might be employed to help the parties 
in the Cobell litigation resolve that matter and perhaps bring 
this entire problem to some quick resolution.
    I think everyone will agree, and I heard this morning from 
some of the individuals who testified that everybody wants to 
see this matter resolved and would like to come to a realistic 
resolution of the problem. Certainly the investment of time, 
money, and resources and energy is Cobell draining the ability 
of the parties in the litigation to bring the matter to some 
kind of resolution.
    So how can the parties in the Cobell litigation be 
encouraged to mediate this matter? And what if anything should 
the Congress do to assist the parties in agreeing to mediate 
the issue?
    Frankly, in reading the various court decisions and all of 
the reports from all the various Federal agencies and 
departments involved, I am less than optimistic that the 
parties will come to the mediation table willingly to try and 
get this matter resolved, despite the fact that they all seem 
to say they would like to do that. I think that's unfortunate, 
but I think there are ways to encourage the parties in this 
litigation to come to the mediation table.
    When I say that I'm less than optimistic that the parties 
might be willing to mediate this matter, that is particularly 
true in my view with respect to the Government's position in 
the litigation. My experience has been that the Department of 
Justice is usually reluctant to mediate cases pending in the 
courts. And I think that's an unfortunate position for the 
Government to take. There are many in the Department of Justice 
today who are encouraging the Department to change this view 
and to be more willing to mediate matters that are pending 
before the courts. And I certainly hope and believe that this 
case is one where the Department of Justice should seriously 
think about coming to voluntary mediation.
    Even though this matter involves multiple parties, millions 
if not billions of dollars, and very complicated matters, I 
believe that if the parties are willing to be patient, 
creative, flexible and sensitive to the needs and positions of 
all concerned in the process, rules for mediation can be 
devised that will protect the interests of all the parties, 
encourage all parties and interest groups to have a say and 
participate in the structuring of a resolution of the problem, 
and will substantially reduce the level of confrontation and 
acrimony that has flowed from the Cobell litigation.
    Here is what I think needs to be done to encourage the 
parties to agree to voluntary mediation of this problem. First, 
as any basic training in mediation will reflect, there must be 
incentives to get the parties to agree to participate in 
mediation. From the viewpoint of convincing the Department of 
Justice to participate, and the list that I am going to suggest 
is certainly by no means complete and inclusive, involves many 
complicated issues. But some of the things that might be 
suggested would be giving some level of immunity to individual 
Government officials, either party or non-party individuals, so 
that they would be willing to contribute and participate in a 
search for an honest and realistic solution to the problem. 
Another thing would be finding some source of money to pay for 
existing litigation expenses of party and non-party individual 
Government officials, so we can get that part of the litigation 
behind us and move to consideration of constructive solutions 
to the underlying problems.
    Second, we might want to make sure that the parties are 
able to participate fully in deciding what the fundamental 
preliminary issues would be in any kind of mediation, such as 
who should be invited to attend and participate in the 
mediation process who may not be existing parties to the 
current litigation, such as the Court's Special Master and 
Special Monitor, or various Native American groups that have an 
interest in this matter. We also should look at to what extent 
the media should be involved in this mediation process, what 
outside experts and consultants might be necessary to assist 
the parties and a mediator or a mediation body to seek a 
resolution of the problem, and what Government and independent 
accounting records should be released and disseminated to the 
parties during the mediation process.
    Third, I think a mediator should devise a schedule and a 
mechanism for the payment of attorneys fees for the class 
represented lawyers that is not dependent on the outcome of the 
mediation. I have found that the issue of attorneys fees can 
infect and destroy the early good intentions of parties in 
mediation. And getting this issue off the table early should 
substantially increase the likelihood of getting to the 
ultimate core issues in reaching a final resolution of the 
problems.
    Finally, I think it's important to let all of the parties 
participate in the construction of the agenda of how and when 
certain more substantive issues, the real underlying issues, 
should be addressed, such as what methodology should be 
employed to do an accounting, whether certain claims can and 
should be paid now, how and to what extent should past and 
present Government officials be held accountable for the 
problems, and to what extent the Court and the Congress should 
participate in the implementation of any final resolution of 
the problem.
    If the parties are not willing to voluntarily participate 
in mediation, and voluntary participation, is the core of 
successful mediation, it might be necessary for the Congress to 
become more proactive in this matter and in some way compel 
some form of resolution of the problem. I might suggest to the 
committee, although I haven't looked at this in great detail, 
but the committee might want to consider something like the 
September 11 Victim Compensation Fund as a model for 
legislation to push the parties toward some resolution of the 
Indian trust problem.
    In short, Mr. Chairman, the time has come for everyone in 
this matter to do something to get everybody together and try 
and get this matter resolved in a friendly, constructive, 
positive way. I think some form of mediation should be 
seriously considered by the parties to bring that about.
    Thank you for giving me the opportunity to share these 
views with you, and I'll certainly be happy to answer any 
questions.
    [Prepared statement of Mr. Causey appears in appendix.]
    The Chairman. Thank you very much, Mr. Causey.
    Have you had occasion to read or study the July 2002 
report?
    Mr. Causey. Mr. Chairman, I have looked at it, I cannot 
honestly say I have studied it. But I have read it, yes.
    The Chairman. Have you reached any conclusion?
    Mr. Causey. I have not. I have approached this matter, as 
my training would suggest, as a lawyer, and I've been looking 
at some of the legal issues that arise as a result of that 
report. But I have not studied or reached any conclusions as to 
what the report intends to suggest in terms of moving along in 
the process of getting this issue resolved.
    The Chairman. Would you consider resolution time period of 
10 years to be appropriate?
    Mr. Causey. I would not. I do not think that getting to a 
resolution of this problem should take 10 years.
    The Chairman. How long do you think it should take?
    Mr. Causey. Mr. Chairman, that's difficult to say. If the 
parties were willing to sit down and participate in good faith 
mediation of this matter, I think this matter could be resolved 
within 1 year.
    The Chairman. I realize that this is a class action case 
and there are thousands involved. But there are many thousands 
who have not responded, who are not party to this litigation. 
How would you resolve their problems?
    Mr. Causey. Well, of course, class action litigation is a 
representative process, in that the named plaintiffs in the 
litigation represent the identified class. I think we would 
have to ascertain how many potential claimants are not 
participating or are not members of the class, have the parties 
come to some means to try and identify those individuals, 
communicate with those individuals, see if there is some way 
for them to participate in the resolution process, not 
necessarily through the formal process that is employed in 
litigation in the court, but to come up with some means to 
identify these individuals and have them participate.
    That's one of the great values of mediation, is that it is 
very flexible. The parties can be very creative, they are not 
bound by established rules and procedures that may restrict 
parties in seeking satisfactory resolution of problems. I think 
that issue could be one of the many issues placed on the table 
for the parties to try and voluntarily agree to solve and 
figure out some way to identify and reach those individuals who 
are not represented in the class.
    The Chairman. As one who is an expert in matters of this 
nature, such as mediation, would you consider resolving the so-
called easy cases, the cases that have been fully documented 
and can be resolved without much conflict, would you do that?
    Mr. Causey. Mr. Chairman, as I said, I think there are a 
number of preliminary issues that the parties should look at in 
structuring a mediation process for this problem. I think one 
of the preliminary issues that should be looked at is whether 
there are identifiable claimants who can be paid money now. And 
if that is possible, let's figure out a way to get them paid 
and get that issue off the table, so that we can then get to 
what I think is probably the much more complicated issue of 
identifying the source of money, the availability of records, 
the methodology for doing an accounting for those individual 
claims whose claims we cannot precisely identify and pay at the 
present time.
    I don't know what the numbers would represent, whether 
we're talking about 5 or 10 or 20 percent of the potential 
claimants. But I think that is an issue that can be looked at 
in the early phases of mediation and try and get that resolved 
and settled, and then move on to the more complicated issues.
    The Chairman. In your opinion, can this matter, this class 
action, be resolved with finality by your process, or would it 
take involvement of the Congress of the United States?
    Mr. Causey. Mr. Chairman, that's a good question, and I'm 
not sure I have an answer. I think a lot would depend on how 
the mediation progresses, what are the issues that can be 
easily resolved, and what are the issues that are more 
difficult to resolve. I suspect that there would be some need 
for the Congress and the court participate in this process in 
some way. I just don't know to what extent and what the nature 
of that participation would be.
    I certainly believe that there would be some need for the 
Congress to help the parties figure out some way to implement 
and perhaps pay for the implementation of a resolution, and 
there's got to be some mechanism for the court to formally 
bring to conclusion the litigation. So I think there would be 
need for the court and the Congress to participate. But at what 
level and what stage and to what extent is difficult to tell 
right now.
    The Chairman. May I ask Mr. Williams one more request?
    Mr. Williams. Yes.
    The Chairman. If you believe that the Congress should 
involve itself in the final solution, can you tell us the 
nature of that involvement? Not now, but in your report.
    Mr. Williams. Yes; we will do that, Mr. Chairman.
    The Chairman. I thank you very much, sir.
    Mr. Vice Chairman.
    Senator Campbell. Thank you, Mr. Chairman.
    A few years ago, it seems like we were in the same 
quandary, and we talked a little bit about, in fact, I remember 
we did circulate a bill that had a section in it that required 
some mediation being done in the private sector.
    Let me ask you just a couple of questions. Can an 
individual opt out from a class action lawsuit and settle 
individually?
    Mr. Causey. There are procedures for individuals to opt out 
of the class, but the question of whether that individual who 
decides to opt out can settle individually is a far more 
complicated question. I think in the structure of mediation, 
that could be defined and implemented. I think it would be much 
more difficult to do that under the Federal Rules of Civil 
Procedure that restrict the parties to what they can do and 
can't do in the court litigation.
    But that's certainly an issue that I think a mediator 
should and could explore in the process.
    Senator Campbell. There's a trust fund task force, as you 
know, that's been meeting a number of times that hasn't dealt 
with this problem, but they've dealt with a number of others, 
and we've been trying to frame up a bill based on the 
agreements that they made with the Administration. There are 
still a lot of places where they don't agree. But it's coming 
along, we're going to do a hearing very shortly on that. I am 
frankly personally interested in putting something in that bill 
that requires some mediation commission to be established.
    Would you be willing to work with the committee to give us 
some ideas on how that should be structured if we proceed with 
that?
    Mr. Causey. Certainly. I'd be delighted.
    Senator Campbell. The committee has been told that if 
Congress refuses to pay for the accounting because it believes 
it's just a futility, then Cobell can still proceed. But if 
Congress refuses to pay for it because it believes it's too 
expensive, then the Unites States may have to move to dismiss 
the case. Are you aware of that and could you maybe describe 
the difference between the two to a layman like me?
    Mr. Causey. Senator, I am aware of the Department of 
Justice suggesting that position. Frankly, I'm a little 
dismayed by the position that they're suggesting. I'm not sure 
what would be the argument that they could put before the court 
to say that the litigation which has gone on now for six years 
and has gone through numerous opinions and court of appeals 
review can come to an end simply because there's no money to 
pay a judgment. I don't think the court is going to be very 
receptive to that argument, but I certainly don't know. It's a 
perplexing position, from my analysis.
    Senator Campbell. Thank you. What's the present value of 
$2.4 billion over 10 years? If we have settlements like Agent 
Orange or September 11 or so on, we knew we couldn't get to an 
exact figure. How can we structure a reasonable settlement when 
you talk about a 10-year timeframe?
    Mr. Causey. There are actuaries who can do the computations 
and come up with the number. But you have to have an agreement 
on what the numbers are that go into the calculation. Certainly 
the present value of $2.4 billion over 10 years would be more 
than sufficient to pay for mediation of the Cobell lawsuit.
    Senator Campbell. What happens if a person, an account 
holder who has a legal right, dies within 2 years? What 
recourse do his heirs have?
    Mr. Causey. I don't know, Senator. I think that may be a 
complicated question. That question likely would be controlled 
by estate law in the various States. I just don't know the 
answer to that.
    Senator Campbell. We don't, either.
    Thank you, Mr. Chairman.
    Thank you for your testimony, and I look forward to your 
working with us to help us frame up something for that bill I 
was speaking of.
    Mr. Causey. I look forward to it.
    Thank you
    The Chairman. I wish to thank all the witnesses for their 
participation. I wish that this could be resolved in the very 
near future. If not, the situation could worsen, in light of 
what the Supreme Court has said.
    With that, I thank you all very much. This hearing is 
adjourned.
    [Whereupon, at 11:40 a.m., the committee was adjourned, to 
reconvene at the call of the Chair.]
=======================================================================


                            A P P E N D I X

                              ----------                              


              Additional Material Submitted for the Record

=======================================================================


 Prepared Statement of McCoy Williams, Director, Financial Management 
        and Assurance, General Accounting Office, Washington, DC

    Mr. Chairman and members of the committee:
    I am pleased to be here today to summarize previous General 
Accounting Office [GAO] work that identified gaps in information needed 
to reconcile Individual Indian Moneys [IIM] trust accounts, and the 
rationale that led us to suggest, based upon our earlier work, that 
Interior seek alternatives to reconciliation such as a negotiated 
agreement.
    Before discussing our prior work, let me point out that we have not 
yet had time to analyze Interior's July 2, 2002, Report to Congress on 
the Historical Accounting of Individual Indian Money Accounts, evaluate 
its proposed methodology, or discuss the report or its proposed 
methodology with Interior officials. Also, we have not done recent work 
to evaluate the current state of Interior's IIM records. Nevertheless 
it is clear that a reconciliation of IIM accounts is a daunting 
endeavor, both in terms of the magnitude of the project's scope and the 
obstacles that are likely to be encountered. As to the scope, certainly 
tens of millions, and perhaps over 100 million, of IIM transactions 
have occurred in the more than 100 years since the first Indian 
allotment act. Further, the supporting documentation that must be 
examined to reconstruct the account transactions must first be located 
by searching more than 100 offices, warehouses, records centers, and 
archives.
    Regarding the obstacles that Interior is likely to encounter, we 
reported to this committee in June 1996\1\ that, based on our work, we 
concluded at that time that records were not available to support a 
reconciliation of the IIM accounts. In addition to missing records, we 
pointed to the lack of an audit trail through Interior's Integrated 
Records Management System [IRMS], which was used to maintain IIM 
account information, and differences in the way IRMS operates at 
various Interior locations, which affect the consistency of the IRMS 
information, as obstacles that Interior would encounter in pursuing an 
IIM account reconciliation.
---------------------------------------------------------------------------
    \1\ U.S. General Accounting Office, Indian Trust Fund Testimony Q's 
and A's, GAO/AIMD-96-125R (Washington, DC: June 24, 1996).
---------------------------------------------------------------------------
    Much of our previous work in the area of trust fund reconciliations 
relates to an earlier account reconciliation requirement and a related 
Interior effort to reconstruct both tribal and IIM trust accounts. From 
1992 through 1997, we monitored and reported on various aspects of 
Interior's planning, execution, and reporting of results for the 
reconciliation project. First let me discuss the tribal portion of that 
earlier Interior effort.
    The Congress established an Indian trust fund account 
reconciliation requirement in the Supplemental Appropriations Act of 
1987. That requirement was in response to tribes' concerns that (1) 
Interior had not consistently provided them with statements on their 
account balances, (2) their trust fund accounts had never been 
reconciled, and (3) Interior planned to contract with a third party for 
management of trust fund accounts.
    The 1987 act required that the accounts be audited and reconciled 
before the Bureau of Indian Affairs [BIA] transferred funds to a third 
party. Interior's fiscal year 1990 appropriations act added a 
requirement that the accounts be reconciled to the earliest possible 
date and that Interior obtain an independent certification of the 
reconciliation work. The American Indian Trust Fund Management Reform 
Act of 1994 subsequently required the Secretary of the Interior to 
provide tribes with reconciled account statements as of September 30, 
1995.
    Interior contracted with two major independent public accounting 
firms, one to reconcile the trust accounts and the other to do an 
independent certification to indicate that the reconciliation resulted 
in the most complete reconciliation possible. Following a preliminary 
assessment in March 1992 by Interior's reconciliation contractor, 
Interior decided to have the contractor reconcile the tribal accounts 
for fiscal years 1973 through 1992. Subsequent to this decision, 
Interior also had BIA reconcile the tribal accounts for fiscal years 
1993 through 1995 to comply with the 1994 act's requirement that 
Interior provide tribes with reconciled account statements as of 
September 30, 1995.
    The tribal portion of Interior's Indian trust fund account 
reconciliation project was completed and Interior reported the results 
to tribes in January 1996. During the reconciliation project, Interior 
spent about $21 million for contract costs over a 5-year period in a 
massive effort to locate supporting documentation and reconstruct 
historical trust transactions, as well as to perform other 
reconciliation procedures, in its attempt to validate tribal account 
balances.
    During a February 1996 meeting at which Interior officials and the 
reconciliation contractor summarized the reconciliation project 
results, tribes raised questions about the adequacy and reliability of 
the reconciliations results. In May 1996, we reported\2\ on 
shortcomings of Interior's reconciliation project. The shortcomings 
consisted of procedures that were not completed due to missing records, 
systems limitations, or time and cost considerations.
---------------------------------------------------------------------------
    \2\ U.S. General Accounting Office, Financial Management. BIA's 
Tribal Trust Fund Account Reconciliation Results, GAO/AIMD-96-63 
(Washington, DC: May 3, 1996).
---------------------------------------------------------------------------
    In May 1997, we reported\3\ to this committee that, as of May 6, 
1997, Interior had provided reconciliation reports to 310 tribes, of 
which 51 tribes had disputed, and 41 had accepted, the reconciliation 
results. Of the remaining 218 tribes, 47 had requested more time to 
consider the results, and 171 had not responded to the reconciliation 
results. In summary, although Interior made a massive attempt to 
reconcile tribal accounts during its reconciliation project, missing 
records and systems limitations made a full reconciliation impossible.
---------------------------------------------------------------------------
    \3\ U.S. General Accounting Office, Indian Trust Funds: Tribal 
Account Holders' Responses to Reconciliation Results, GAO/AIMD-97-102R 
(Washington, DC: May 23, 1997).
---------------------------------------------------------------------------
    Now, let me turn to the IIM portion of Interior's earlier account 
reconciliation effort. In our June 1992 report\4\ on Interior's efforts 
to reconcile Indian trust accounts, we noted that the effort originally 
consisted of two phases. The first phase was to cover, in addition to 
500 tribal accounts, 17,000 IIM accounts maintained at three agency 
offices. However, after an initial assessment by Interior's contractor 
of the level of effort and cost needed to complete the various segments 
of reconciliation work, a decision was made not to reconcile IIM 
accounts as part of the project. In reporting this status, we noted 
that Interior and its contractor had determined that a full 
reconciliation of all tribal and IN accounts was neither possible nor 
cost-effective due to missing records, commingled tribal and individual 
Indian accounting records, poorly documented accounting transactions, 
and the volume of data to be reviewed.
---------------------------------------------------------------------------
    \4\ U.S. General Accounting Office, Financial Management BIA Has 
Made Limited Progress in Reconciling Trust Accounts and Developing a 
Strategic Plan, GAO/AFMD-92-38 (Washington, DC: June 18, 1992).
---------------------------------------------------------------------------
    At that time, we recommended that Interior seek alternatives to the 
reconciliation project and develop a proposal for reaching a 
satisfactory resolution of the trust fund account balances with account 
holders. Among alternatives that we recommended for Interior's 
consideration were that Interior consider negotiating agreements with 
individual Indians on balances reported on their account statements and 
request legislated settlements on all, or selected accounts. In a 
number of testimonies and reports over the next several years,\5\ we 
supported the idea of Interior and tribal and IIM account holders 
negotiating a resolution of their issues.
---------------------------------------------------------------------------
    \5\ U.S. General Accounting Office, Financial Management Native 
American Trust Fund Management Reform Legislation, GAO/T-AIMD-94-174 
(Washington, DC: Aug. 11, 1994). U.S. General Accounting Office, 
Financial Management Indian Trust Fund Accounts Cannot Be Fully 
Reconciled, GAO/T-AIMD-95-94 (Washington, DC: March 8, 1995). U.S. 
General Accounting Office, Indian Trust Fund Settlement Legislation, 
GAO/AIMD/OGC-95-237R (Washington, DC: Sept. 29, 1995).
---------------------------------------------------------------------------
    Interior's July 2, 2002 report relates directly to the 1994 act and 
the ongoing class action lawsuit commonly referred to as the Cobell 
litigation, which is presently before the U.S. District Court for the 
District of Columbia. In this regard, my comments today are not 
intended to address, nor is GAO taking any position on what level of 
accounting the 1994 act or the courts have required of Interior thus 
far, whether Interior's plan satisfies those requirements, or, if so, 
whether Interior's plan is the only or best approach for Interior to 
satisfy the requirements imposed on it. Those issues will ultimately be 
decided by the court.
    Having said this, we note that Interior's report recognizes that a 
number of obstacles, similar to those we have previously reported on, 
will complicate its ability to document for IIM account holders the 
amount and source of funds deposited to, managed in, and disbursed from 
their IIM accounts. The Interior report enumerates among those 
obstacles known discrepancies in the balances, at the trust fund level, 
reported by Treasury and Interior, as well as the potential for (1) 
errors in the electronic accounting system data, (2) missing paper 
transaction records, and (3) missing land ownership information and 
revenue instruments. The report further states that ``It is certain 
that gaps in documentation will be encountered during the historical 
accounting. Such gaps may range from a single missing lease to an 
entire time period of missing documentation for some or all IN account 
holders served by a specific BIA agency.'' Interior's enumeration of 
obstacles is consistent with what our prior work has shown.
    Mr. Chairmen, this concludes my statement. I would be glad to 
answer any questions from you or other members of the committee.
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