John Echohawk, director
of Native American Rights Fund
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170 YEARS OF PROBLEMS
1828: "The arrangements in the fiscal affairs of the
Indian Department are in the extreme. One would think that appropriations had
been handled with a pitch fork. ... There is a screw loose in the public machinery
somewhere." - H.R. Schoolcraft
1955: "The deficiencies include disbursements of individual
Indian moneys without adequate support, deficiencies in accounting for cash and bonds
and in computation and distribution of interests income and other weaknesses in
internal procedures." - U.S. General Accounting Office report
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1991: "The Bureau's management of Individual Indian Monies
(IIM) and Tribal Trust Funds is inadequate to properly maintain and administer the
2-billion-dollar fund, for which it has responsibility. The BIA's management of tribal
and Individual Indian Trust Funds lacks effective management/internal controls, reliable
systems and management information. Tribal and individual accounts lack credibility and
have never been reconciled in the entire history of the trust fund." - Secretary of the
Interior's Annual Statement and Report to the President and Congress
1996: "It's bewildering that the Department of the Interior
cannot even offer a full accounting for the manner, in which it administers this
important fund and refuses to address the numerous allegations of fraud, waste and
abuse." - Rep. Don Young, chairman of the House Committee on Resources
In his testimony before Congress, John Echohawk, director of Native American
Rights Fund, called it "yet another serious and continuing breach in a long history
of dishonorable treatment of Indian tribes and individual Indians by the United States
government."
Arizona Senator John McCain, the chairman of the Senate Committee on Indian
Affairs, bluntly called it "theft from Indian people."
These men were describing the single largest and longest-lasting financial
scandal in history involving the federal government of the United States.
With no other recourse left at their disposal, NARF, along with other attorneys,
filed a class action lawsuit in federal district court on June 10 on behalf of more,
than 300,000 American Indians. The suit charges Secretary of the Interior Bruce Babbitt,
Assistant Interior Secretary of the Interior for Indian Affairs Ada Deer and Secretary
of the Treasury Robert Rubin with illegal conduct in regard to the management of Indian
money held in trust accounts and managed by the Bureau of Indian Affairs.
If the lawsuit's claims are correct and there's an overwhelming body of evidence
that suggests they are, then the federal government has lost, misappropriated or in some
cases stolen billions of dollars from some of its poorest citizens.
The trust accounts in question - which hold approximately $450 million at any
given time - aren't filled with government handouts. They contain money that belongs
to individual Indians, who have earned it from a variety of sources such as oil and
gas production, grazing leases, coal production and timber sales on their allotted
lands.
Revenues from such sources are held in more, than 387,000 Individual Indian
Money (IIM) accounts managed - or according to detractors "mismanaged" - by the Bureau
of Indian Affairs (BIA). "The BIA has spent more, than 100 years mismanaging, diverting
and losing money that belongs to Indians," Echohawk says. "They have no idea how much
has been collected from the companies that use our land and are unable to provide even
a basic, regular statement to Indian account holders."
Echohawk is quick to point out that the lawsuit was the very last resort. Native
Americans have long been hopeful that a governmental remedy to the BIA's mismanagement
could be found. Finally in 1994, after years of pressure by both Indians and legislators,
Congress enacted the Indian Trust Fund Management Reform Act and appointed Paul Homan as
the special trustee charged with straightening out the century-old mess.
Once again there was hope. But the legislative solution proved to be just another
in a long line of toothless piles of paper generated by government bureaucrats. Although
Homan was ready and willing to repair the system, Congress failed to provide funds to make
the changes a reality. With no other path before them, the Indians took their fight to the
courts.
Echohawk's claim, that the BIA is completely out of touch with the amount of revenues
it collects or should be collecting, has been confirmed by countless congressional oversight
hearings covering decades.
As an example, during one such hearing - a 1987 Appropriations Subcommittee hearing
on uncollected royalties - then director of the Minerals Management Service William Bettenberg
told the committee he was aware that hundreds of millions of dollars, that belonged to Indians,
was going uncollected from oil royalties each year. This is in spite of the fact that MMS,
a branch of the Department of the Interior, had been made aware of the annual lost revenue
six years earlier. Bettenberg's revelation is typical of BIA behavior.
Adding still more credence to Echohawk's claims of government incompetence pertaining
to the IIM accounts is the recent example provided by the long overdue audit of the tribal
trust funds. These tribal funds, which are also managed by the BIA, are a collection of
approximately 2,000 tribal accounts owned by some 200 tribes. These accounts hold about
$2.3 billion at any given time and are primarily used to finance essential tribal government
services.
Several years ago, after a decade of extensive pressure from the House Committee
on Government Operations, the BIA agreed to contract with Arthur Anderson & Co. to audit
and reconcile both the tribal accounts and a random sampling of some 17,000 IIM accounts.
The sampling of the IIM accounts was to be a precursor to a complete reconciliation of all
IIM trust accounts - the first in history.
What happened next is truly astounding. After years of work and millions of dollars
in fees Arthur Anderson was only able to reconcile the 2,000 tribal accounts - not the
17,000 IIMs - and only then for the relatively short period of some 20 years from 1973
to 1992.
For this 20-year period alone the auditor noted that at least $2.4 billion in the
tribal trust accounts was unaccounted for and billions of dollars more were virtually
untraceable because of the questionable nature of the government's records.
As for the IIMs, Arthur Anderson told the feds that its trust fund system for
individuals was so screwed up that it wouldn't even try to reconcile the accounts and
estimated that it would cost $108 million to $281 million just to attempt the monumental
task. The accounting firm claimed that the government had destroyed, never created or
otherwise did not maintain the records necessary to conduct a reconciliation. Even if
the full IIM audit were performed, the firm said the costly information would be of
little or no value, when it came to providing IIM account holders with any real assurance
that their balances are correct.
While the missing billions from the tribal accounts aren't part of the NARF
lawsuit, the reconciliation process for these accounts does illustrate how badly the
BIA's accounting system or lack thereof actually works. In June of this year Special
Trustee Homan told the Senate Committee on Indian Affairs that the IIM account system
was "as bad or worse", than the tribal accounts. For now NARF lawyers are concentrating
on the mismanagement of money in the IIM accounts, because in many instances it provides
the only lifeline for Indian families, who often make up the most impoverished sector
of our society. Echohawk told Congress that most of the IIM account holders are so poor
that they need their money just for basic subsistence.
So how did the BIA's financial house get into such disarray and why has it been
allowed to stay that way? The truth is it has never been in order and the reasons behind
the seemingly never-ending tolerance of the BIA's fiscally irresponsible behavior may
prove more sinister, than mere incompetence. Critics of the bureau point out that the
United States has a long history of trying to separate Native Americans from their lands
and way of life.
You can choose almost any year, since the BIA's predecessor, the Indian Department,
was created in 1824 and find governments reports describing poor management,
no accounting system, missing money, no attempt to fulfill the fiduciary duty to the Indians,
as promised and required by law.
Congress has verbally demanded accountability and drastic change in the BIA's
behavior for more, than 100 years. Yet as of 1996 little, if anything has actually
changed. A 1992 report titled "Misplaced Trust: The Bureau of Indian Affairs'
Mismanagement of the Indian Trust Fund" was prepared by the Committee on Government
Operations. The 66-page report contained a scathing review of the BIA and hundreds
of examples of the bureau's blundering over the years.
Among other things the report surmised that "one hundred sixty three years later
Schoolcraft's assessment of the BIA's financial management still rings true. BIA's
administration of the Indian trust fund continues to make the accounts look, as though
they had been handled with a pitchfork.
"Undoubtedly there is a screw loose in the public machinery at the Bureau. Indeed,
while mismanagement of the Indian trust fund has been reported for more, than a century,
there is no evidence that either the Bureau or the Department of the Interior has undertaken
any sustained or comprehensive effort to resolve glaring deficiencies."
Unfortunately, most of what was contained in the Misplaced Trust report was old
news. Essentially the exact same findings were embodied in the GAO's 1928, 1952 and 1955
audits of the Indian trust fund. In fact, just since 1982 more, than 30 audits have been
performed on the BIA's records. Every single one of the 30 reports generated have noted
serious accounting and financial management problems and weak internal controls throughout
the BIA.
In a tone not often heard these days in Washington, Senator McCain cut to the chase
during a June 11, 1996 oversight hearing, when he stated that "Trustees receive and disburse
funds all the time for other Americans and if they blow it, they pay. In this case it's the
Native Americans, who are rightfully owed the money and the federal government, who will be
forced to compensate for their loss."
McCain makes a good point. But in typical politician style he forgets to tell us that
when he says it's "the federal government" that will be forced to pay for the mishandling of
the Indian trusts, what he's really saying is, it will be taxpayers, who will have to cough
up the money lost by the BIA.
Every day that the BIA procrastinates on fulfilling its trust responsibilities,
the price tag to repair the damage goes up. The 1992 Misplaced Trust report clarifies
the vulnerability of taxpayers.
The report states that "Continuing mismanagement and incompetence in the supervision
and control of Indian trust funds present a clear danger to the American taxpayer, who must
bear the financial burden of compensating trust fund account holders for BIA's breach of
fiduciary duties."
Other sections of the report contain testimony that reads like the vision from a
crystal ball. Speakers from 6 and 10 years ago offer warning after warning about the
potential for costly litigation at the taxpayers' expense. The NARF lawsuit stands as
harsh evidence that the warnings fell on deaf ears at the bureau.
Guarding our pocketbooks gives everyone a reason to get involved with the struggle
to correct the injustices being perpetrated by the BIA. But at some point we must confront
the reality that there is something more at work here, than bureaucratic ineptitude.
When obvious and admitted abuses of a small minority of people by a government
are allowed to continue unchecked for over a century - with little or no outcry from
the citizenry -, it most likely means that the majority of the citizens condone the
government's behavior.
What other explanation can there be for the BIA's belligerent lack of concern for
its fiscal responsibilities to Native Americans? It isn't that the task of properly handling
the revenue is just too daunting. Other departments of the government deal with larger and
more complicated accounting systems with comparable ease everyday.
A similar observation was made by then-Representative from Texas Albert G. Bustamante
during oversight hearings in 1990. "We have 300,000 accounts. We have about 350 tribes in the
United States. It is really sad that these people have been misrepresented by the BIA ...
They have no real representation in Congress. I have a tribe that I represent in my district,
but throughout the years, most of these people have been abused by many and you in the BIA
ought to be the ones that really look after them. If this happened in Social Security, I tell
you there would be a war. If we can manage Social Security, we ought to be able to manage
this."
NARF's Echohawk speculates that the reason for the government's seemingly eternal
incompetence is darker, than accidental mismanagement. "I think it comes down to race.
Our people have historically suffered abuse after abuse. We have continuous problems with
unemployment, health care and education. It just goes on and on. We don't have any political
power to change it, so the government just continues to ignore us."
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