Last week, the Obama administration offered $3.4 billion to settle the long running Cobell Indian Trust lawsuit. The offer still has to be approved by Congress, but if it is, the settlement will bring both triumph (though not how you might think), and tragedy.
The suit has been a big deal in a relatively small world for more than 13 years. Full disclosure: I worked on Indian Trust issues for the Department of the Interior for two years, from 2005 to 2007. The drab truth is, the case—filed in 1996—was simply about whether the Department of the Interior could do an accounting of the individual Indian Trust funds it managed. Of course, emotionally, for those who brought the suit, it represented far more than mere accounting issues. It was also about anger and frustration, stemming from years of poverty, victimhood, decades of unfunded mandates, and a piecemeal web of legacy laws—many well intentioned at the time, but lacking much forward thinking. (Complicating matters is the fact that the “Feds” that work in Indian Country are Indian Country: 90 percent of Federal employees, including almost all senior staff, working on Indian Affairs issues are Indian; the top position in Indian Affairs has been filled by an Indian for almost 40 years.)
The real triumph of the Cobell lawsuit has nothing to do with the settlement; rather, because of the spotlight trained on the issue, since the suit began, Congress has funded, and the last few administrations have dedicated significant resources to, programs designed to vastly improve the Trust’s management. That may sound like an inconsequential side note, but there are few such labyrinthian programs in place in the world—and certainly none that are more convoluted and irrational. Nothing like the Indian Trust exists in the financial world. Bringing up-to-date systematization to the trust was no small feat.
The Indian Trust consists of about 56 million acres of land; 10 million of those belong to individual Indians, and the other 46 million acres are held in trust for tribes. On this land, Interior is responsible for more than 100,000 leases, permits, right-of-ways, and so on (think grazing permits, oil management issues, utility line permits …) About $700 million a year is collected in use fees and interest on funds in accounts, and then distributed to about 300,000 individuals.
While some trust accounts bring in tens of thousands of dollars, about 132,000 individual trust accounts have less than $15 in them; 73,000 receive less than $10 per year—most often because inheritance laws have split them up time after time among heirs, in a process known as “fractionation.” (And whether an Indian Trust account has $10 or $10,000 in it, when an Indian Trust account holder dies, Interior is responsible for the probate—at a cost to the government of approximately $5,000 per account).
When the Indian trust inheritance system was originally set up, assets were allowed to divide—over and over—among multiple heirs. Over about 15 decades, the number of land “interests,” or claims of ownership to a piece of a parcel, has exploded to an outrageous and useless extent. As of the end of September, there were 143,663 individual Indian allotments of land, and more than 4 million “fractionated” account interests. Take just one example: in 2003, Tract 1305, a 40-acre plot, was producing $2,000 in income for the year. That money was then divided among 505 owners, the majority of whom each received less than a nickel. The estimated cost to Interior to manage this plot was $42,000 per year.