Albion Monitor /News

Billions Missing From U.S. Indian Trust Fund

by Joel Dyer

John Echohawk
John Echohawk, director of Native American Rights Fund

The U.S. has lost not millions, but billions of dollars belonging to native Americans


The Stolen Billions (2000)

Bush and the Missing Billions (2001)

Bush and the Missing Billions, Part II (2001)

Interior Secretary Held in Contempt (2002)

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 BIA has spent more than 100 years mismanaging, diverting and losing money that belongs to Indians."

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.

In many instances it provides the only life-line for Indian families who often make up the most impoverished sector of our society

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 life-line 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.

BIA's fiscally irresponsible behavior may prove more sinister than mere incompetence

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.

170 years of problems 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."

Taxpayers who will have to cough up the money lost by the BIA

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 six and 10 years ago offer warning after warning about the potential for costly litigation at the taxpayer's 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.

"If this happened in Social Security, I tell you there would be a war"

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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Albion Monitor August 15, 1996 (

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