U.S. Agrees to $3 Billion Deal in Indian Trust Suit

By CHARLIE SAVAGE
Published: December 8, 2009
WASHINGTON — The federal government announced on Tuesday that it intends to pay $3.4 billion to settle claims that it has mismanaged the revenue in American Indian trust funds, potentially ending one of the longest and most complicated class-action lawsuits ever brought against the government.

The tentative agreement, reached late Monday between Obama administration negotiators and lawyers for some 300,000 individual American Indians, would resolve a 13-year-old lawsuit over trust accounts established in the 19th century.

“This is an historic, positive development for Indian country and a major step on the road to reconciliation following years of acrimonious litigation between trust beneficiaries and the United States,” said Ken Salazar, the Interior Department secretary.

For the agreement to become final, Congress still needs to enact legislation and the federal courts must then sign off on it. Administration officials said they hoped those two steps would be completed in the next few months.

The dispute arises from a system dating to 1887 under which the government set up trusts to manage tens of millions of acres of land owned by individual American Indians and by tribes. The acreage is scattered across the country with the heaviest concentration in Western states.

The Interior Department manages leases on the land for activities like mining, livestock grazing, timber harvesting and drilling for oil and gas. It then distributes the revenue raised by those leases to the American Indians.

The lawsuit accuses the federal government of mismanaging the trusts for generations. As a result, the value of the trusts has been unclear, and the American Indians contend they are owed far more than what they have been paid.

Under the settlement agreement, the government would pay $1.4 billion to compensate the Indians for their claims of historical accounting irregularities and any accusation that federal officials mismanaged the administration of the trust assets over the years.

Each member of the class would receive a check for $1,000, and the rest of the money would be distributed according to the land owned. In addition, lawyer fees, to be determined by a judge, would be paid out of those funds.

In a statement, President Obama hailed the agreement as an “important step towards a sincere reconciliation” between American Indians and the federal government. He noted that as a presidential candidate, he had pledged to American Indians that he would work to resolve the lawsuit if he were elected.

The proposed settlement also seeks to resolve an ever-growing headache created by the trust system: the original tribal members who were granted parcels of Indian land have many heirs, which has “fractionalized” the ownership interests.

For example, one 40-acre parcel of land today has 439 owners, most of whom receive less than $1 a year in income from it, said David J. Hayes, the Interior Department deputy secretary. The parcel is valued at about $20,000, but it is costing the government more than $40,000 a year to administer those trusts.

In an effort to resolve such problems — and prevent them from growing worse with subsequent generations — the settlement would establish a $2 billion fund to buy fractional interests in land from anyone willing to sell. The program would consolidate ownership in parcels of land and turn them over to tribes.

Over the years, the plaintiffs have contended that they were owed tens of billions of dollars, while the government has at times taken the position that it owed them nothing.

Elouise Cobell, the lead plaintiff who filed the class-action lawsuit in 1996, said she believed that the American Indians were owed more than the settlement, but that it was better to reach an agreement that could help impoverished trust holders rather than spending additional years in litigation. She said she had originally expected the litigation to last only two or three years.

“We are compelled to settle by the sobering realization that our class grows smaller each day as our elders die and are forever prevented from receiving just compensation,” Ms. Cobell said.

Attorney General Eric H. Holder Jr. described the litigation as intense and difficult. He noted that it had engendered seven full trials covering 192 trial days, generated 22 published judicial opinions, and that issues arising from the lawsuit had been brought before a federal appeals court 10 times.

“The United States could have continued to litigate this case, at great expense to the taxpayers,” Mr. Holder said. “It could have let all of these claims linger, and could even have let the problem of fractionated land continue to grow with each generation. But with this settlement, we are erasing these past liabilities and getting on track to eliminate them going forward.”

Mr. Salazar said he would also establish a commission to handle trust account issues in the future.