U.S. court rules trust funds mismanaged

Page 1

Lawsuits seeking huge awards are front and centre in Indian Country these days. Those involved in the biggest cases say the government made huge mistakes in the name of assimilation or racism or politics.

The Samson Cree Nation will begin the trial phase of its civil action in Calgary this May, seeking more than a billion dollars in compensation for what it alleges was gross mismanagement of oil and gas monies held in trust by the federal government.

Six Nations of the Grand River is holding its action against the Crown - for an accounting of its lands and monies held in trust - in abeyance while Indian Affairs Minister Robert Nault tries to mediate the dispute. Billions of dollars are involved in this civil claim as well.

And Native leaders on both sides of the Canada/United States border say a Dec. 21 U.S. Federal District Court decision is a sign that the fallout of hundreds of years of irresponsible, unlawful government action can no longer be ignored or covered up.

Trial Judge Royce C. Lamberth ruled the U.S. government breached its fiduciary duty to more than 500.000 Native trust fund beneficiaries. The government has asked the U.S. Court of Appeals for leave to appeal. A decision is expected in February or March. The only step remaining in the U.S. justice system after the Court of Appeals is the Supreme Court.

The class action lawsuit, Cobell v. Babbitt, was launched at the urging of Elouise Cobell, a member of the Blackfeet tribe of Montana, who was elected as treasurer of the tribe in the early 1980s and discovered problems with the trust accounts. Cobell persuaded the Native American Rights Fund (NARF) to file the lawsuit.

John Echohawk, executive director of NARF, said the decision ill force the government to explain its actions to the trust fund owners.

"We're don't think they're going to be able to do that because of the bad condition of the trust records, so we'll be able to present evidence ourselves, based on some forensic accounting by our expert witnesses - the Price, Waterhouse, Coopers firm - and we think they will be able to demonstrate that the account balances that the government's representing are way below what they should be and that our evidence of the accounting will be accepted and then the government will have to adjust the account balances to meet the accounting that we would present. So then there will be an increase in the total account balances," he said.

There are two types of trust funds in the United States. Cobell involves only trust funds owned by individuals. Estimates of the amount of money the federal government owes those owners are close to $10 billion. Tribal government trust fund owners are watching the case carefully and may be next to file suit.

As the case proceeded, it became apparent the government was trying to stonewall attempts to make it account for the money. Two of President Bill Clinton's cabinet members were held in contempt by Judge Lamberth for failing to produce documents.

"The contempt proceedings occurred in February of '99 when the court held that the secretary of the Interior [equivalent to Canada's minister of Indian Affairs] and the secretary of the Treasury, [Canada's cabinet equivalent would be the Finance minister] together with the assistant secretary for Indian Affairs, were in contempt of court for failure to produce documents related to the trust accounts of the five main plaintiffs that they'd been under court order to produce for some time.

They'd represented to the court that those documents would be forthcoming and they never were produced and the misrepresentations that they made to the court then became the subject of the contempt proceedings. (They were) made to pay the fees for the attorneys and the expert witnesses that we used to try and get those documents produced. A total amount of $600,000 was awarded," Echohawk explained.

It has taken a lot of work by a lot of people to fund, research and argue the case, but theeffort was always seen to be worthwhile, he said.

"We've always felt the law required the government to perform these trust responsibilities," he said. "So we finally had to go to court and involve the judicial branch in enforcing these laws we know require the government to fulfill these trust responsibilities. We've felt like we've had a strong case all along and the courts are vindicating that view, so far, and we expect to prevail no matter how far up we have to go."

The Six Nations of the Grand River (Ontario) council is involved in a similar action against the Canadian government. Six Nations' Land Claim Research Director Phil Monture has overseen the court fight since1994. He toldWindspeaker his council recently struck a promising deal with Indian Affairs Minister Robert Nault.

"On Jan. 13, Minister Nault was here. He's agreed that we'll investigate setting up an independent tribunal to negotiate resolutions to our claim. But we require it be cabinet approved, it can't be under the INAC mandate, and he agreed. It's got to have cabinet approval by June, by the summer break, or the court case will continue," he said.

The Haldimand Deed of 1784 set aside six miles on either side of the Grand River, from its mouth to its source, for the Six Nations as a reward for loyalty and assistance to the British Crown during the American Revolution. The deed covered close to one million acres; the current reserve is about 45,000 acres and Monture's staff has researched every plot of land in the Haldimand tract. Six Nations claims that most of the alienated land was never surrendered and most of the money from the Six Nations trust fund (where payment for any land that was legally surrendered should have been deposited) is missing. Like NARF with the Cobell case, Six Nations has sued for an accounting of its assets held in trust by the federal government. Estimates vary. Former Indian Affairs minister Ron Irwin said several years ago that the Six Nations claim could cos the government close to $30 billion if it's successful.

"No doubt the fallout's big if we win so that's why [Nault's] agreed to sit down and we're going to know in the beginning of February how we'll start setting up this mediation process or tribunal," Monture said. "We're not withdrawing our claim. Remember that was the minister's big one: we won't talk to you unless you absolutely discontinue your litigation. We agreed that putting it in abeyance is OK for now."

Nault's gesture to set this process up as a way of solving the Six Nations lawsuit is a significant step forward. Monture believes it's a sign the federal government realizes they have to deal with these issues.

"I think Canada's coming to grips with the fact that these are liabilities. These are not moral liabilities, they're legal liabilities," he said. "No matter how you try to fluff it off, it's still a debt that Canada owes. So to say you've got a surplus this year, that's only a half-truth.

"It's just a matter of when it's going to happen. The best way to resolve these issues is a negotiated settlement because there's a lot of win/win scenarios if people will get the chip off their shoulders and sit down and try to resolve things as opposed to the adversarial approach that Canada and Indian Affairs has taken in the past where they said it's our money, it's our rules, you play our game or you go to hell," he said.

Montreal lawyer James O'Reilly is representing central Alberta's Samson Cree Nation in its $1.4 billion lawsuit against the federal government. O'Reilly said he's convinced that old, racist, paternalistic notions were mixed with backroom political dealing to cause the breaches of trust and fiduciary duty that his client alleges. He said the money earned by oil and gas resources on Samson Cree land were used by the government while it was being held in trust but the government did not exercise due care when it came to protecting the assets of the band. Money was poured into Indian Affars' consolidated revenue fund and was used as a government asset rather than a Samson Cree asset, he alleges.

"The problem with the consolidated revenue fund is that there's a national debt that's close to $600 billion. That means that it's a deficit account. What this involves is essentially what can be described as a IOU or a simple credit to the band and then they make an accounting entry into what they call trust accounts. But there's no physical money that's credited to the trust accounts. It's a 'call' upon the so-called consolidated revenue fund, which means it's a call upon federal finances," he explained. "But then, instead of looking after it, they say the only thing you can do is pay interest. So the federal government says 'we will only pay interest and we will determine the rate of interest.' Then they do a sleight of hand. They say 'we will pay you interest based on long-term government of Canada bonds.' But the trick is: the rates are not the rates that you would get if you bought a long-term government of Canada bond at a particular time."

Native trust account holders were always paid interest at the lowest possible rate, O'Reilly said, allowing the government to benefit from the investment income generated by money which belonged to the band. The Samson statement of claim alleges the Samson trust funds could have been two-and-a-half to three times larger than they are if government officials had invested the money prudently.

"We have to show that they didn't treat these monies as the normal, prudent person would treat them. You've got to watch the shop. Our main beef is that they weren't watching the shop and intervening when something damaging was happening."

O'Reilly said the government should have known the trust fund owners would have objected to how their assets were managed.

"The Indian Act was never designed for large amounts of money," he said. "Never. It's not meant to be a system that can properly manage large sums of money because n