Individual Indian Money (IIM) Accounts Cobell v. Kempthorne:
Fact Sheet for IIM Account Holders and Other Individual Indian Trust Beneficiaries
Attorney: John Echohawk
- On June 10, 1996, the Native American Rights Fund (NARF), in conjunction with other attorneys, filed a class action lawsuit against the federal government for the government's failure to properly manage Indian trust assets. The lawsuit was filed on behalf of all present and past individual Indian trust beneficiaries, including over 300,000 current Individual Indian Money (IIM) account holders.
- On February 4, 1997, the U.S. District Court for the District of Columbia certified the plaintiff class. This means that all present and past individual Indian trust beneficiaries, including over 300,000 current IIM account holders, are automatically included as plaintiffs in this class action lawsuit unless they filed separate lawsuits for mismanagement prior to June 10, 1996.
- The assets involved in this suit are not government handouts, but money that belongs to individual Indians. Most of this money has been generated from the sale or lease of natural resources on allotted Indian lands. This lawsuit addresses the government's longstanding failure to account for these individual Indian trust funds; it does not address the mismanagement of tribal trust funds, nor does it address the government's mismanagement of the underlying Indian lands and natural resources.
- In its capacity as trustee, the federal government approves all leases and sales of natural resources on Indian lands, and is responsible for collecting payments on behalf of the beneficial Indian owner of the land. Since the turn of the century, the government has collected billions of dollars from farming and grazing leases, timber sales, and oil and gas production on Indian lands B money which is supposed to have been ultimately disbursed to its rightful Indian owner. Whether this occurred or not is anyone's guess, however, because never once in over one hundred years has the government bothered to account for the Indian trust funds under its control.
- The suit charges, among other things, that the federal government has breached its legally-mandated trust responsibility to prudently manage trust assets belonging to individual Indian trust beneficiaries, and has consistently refused to fix an accounting system that it has admitted is fundamentally flawed and completely ineffective in accounting for these assets. As a result, billions of dollars belonging to individual Indians remain to this day unaccounted for.
- The suit has two basic objectives:
- To require the federal government to create and maintain an adequate system to properly manage and accurately account for the trust assets of individual Indians.
- To require the federal government to provide a full and accurate accounting to individual Indian trust beneficiaries, and to restate IIM account balances accordingly.
For purposes of trial, the case has been bifurcated into two phases which roughly correspond to these objectives.
- Despite stalling tactics by the government which resulted in contempt citations against Secretary of Interior Bruce Babbitt and then-Secretary of Treasury Robert Rubin in early 1999, the first phase trial commenced on June 10, 1999 B three years to the day after the suit was filed. During the six week trial, Secretary Babbitt admitted that the fiduciary responsibilities of the United States to individual Indian trust beneficiaries are not being fulfilled. Assistant Secretary for Indian Affairs Kevin Gover likewise admitted that the government's Indian trust asset management system is broken.
- On December 21, 1999, the court issued an opinion ruling that the United States has breached its trust responsibility to individual Indian trust beneficiaries, and that the government's belated trust reform efforts are inadequate to cure the ongoing breach of trust. Characterizing its ruling as a stunning victory for the Indian plaintiffs, the court directed the government to take adequate steps to reform the system, retaining jurisdiction for a period of at least five years to ensure that reform is carried through. The court also laid the groundwork for the second phase of the litigation, which will involve an accounting to the individual Indian trust beneficiaries.
- In January 2000, the government appealed the district court ruling, asserting that the court had overstepped its authority in requiring the government to properly manage and account for Indian trust funds. Over one year later, on February 23, 2001, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit unanimously upheld the lower court ruling, noting specifically the magnitude of government malfeasance at issue in the case. The appeals court decision represents yet another important victory for the Indian plaintiffs and sets the stage for the second phase of the case the accounting which has not yet been scheduled for trial.
Answers to Questions Commonly Asked by Individual Indian Trust Beneficiaries
Q. Why is this suit being brought now? Why not earlier or later?
For years, the federal government has acknowledged the need for comprehensive reform of its Indian trust fund management system. Administration after administration has promised to fix the system, but failed to keep those promises. Congress recommended Indian trust fund management reform as early as the 1960's, and beginning in the mid-1980's, issued a series of explicit directives to that effect. Fed up with the Interior Department's continued disregard for these repeated recommendations and directives, Congress passed the American Indian Trust Fund Management Reform Act in 1994. The Act reaffirmed the government's duty to account for Indian trust funds, and appointed a Special Trustee to oversee comprehensive reform of the trust management system. Even after the Act was passed, however, the government made little or no effort to commence systematic reform and to account for its management of individual Indian trust funds. This lawsuit was brought because it was abundantly clear by June 1996 that the system would remain broken unless the government was forced to fix it, and that individual Indians would never be provided with an accounting unless a Federal Judge ordered it.
Q. If the federal government has mismanaged my trust funds, why have I never heard about such mismanagement before this suit?
The fact that many individuals were unaware of the mismanagement of their trust funds is not surprising given the government's complete lack of accountability. Despite decades of mismanagement, the government has never informed its individual Indian trust beneficiaries that their IIM account balances are unreliable. During a six week trial beginning in June 1999, Interior Secretary Babbitt admitted that this information has been intentionally withheld in order to reduce the risk of lawsuits.
Q. What do I, as an individual Indian trust beneficiary, have to do to be part of this law suit?
The lawsuit was certified as a class action by the court on February 4, 1997. Accordingly, if you are an individual trust beneficiary and did not file a separate lawsuit regarding mismanagement of trust assets prior to June 10, 1996, you are automatically included as one of the class plaintiffs in this lawsuit, and are represented by counsel.
Q. If I have already filed a lawsuit regarding IIM accounts that is currently pending or being litigated, will this class action lawsuit impact my claim?
Not necessarily. The court's February 4, 1997 order certifying the class action excludes individual trust beneficiaries who filed lawsuits prior to June 10, 1996 on their own behalf for mismanagement of trust funds. However, the court order certifying the class action allows these excluded beneficiaries to join the class action by filing notice of their decision to join the class with the federal District Court for the District of Columbia, and by notifying the attorneys representing the class.
Q. If I once had an IIM account that is now inactive or non-existent, does this suit affect me?
It could. The mismanagement of individual trust funds has gone on for over one hundred years. Thus, many former IIM account holders may well have been victims of past mismanagement. The court order certifying the class action specifically includes all present and past individual Indian trust beneficiaries.
Q. Where does the money managed by the United States come from?
The IIM trust contains funds from numerous sources, including funds distributed per capita to individual tribal members for successful land claims and other judgment awards. The most common source of IIM trust funds, however, is income derived from individual Indian allotments. In many instances, such allotments produce income from farming and grazing leases, timber sales, or oil and gas production.
Q. Who is currently holding these trust funds?
The funds are held in trust by the federal government, specifically by the U.S. Department of Treasury. The funds are pooled into a single account and invested until such time as they are disbursed to the rightful Indian beneficiary.
Q. How much money are we talking about?
The federal government currently holds over $500 million in approximately 500,000 separate IIM accounts. Additionally, more than $400 million flows through these accounts each year. Because the government has failed for over one hundred years to account for Indian trust funds, it remains at this point impossible to estimate with any accuracy the amount by which any particular IIM account has been misstated. However, to give some perspective, we can look to similar mismanagement of tribal trust accounts. A report prepared by the Arthur Andersen accounting firm following a limited effort to reconcile the tribal accounts revealed that $2.4 billion could not be accounted for just for the twenty-year period from 1973 through 1992.
Q. Assuming a court-ordered accounting reveals that the individual Indian trust has been similarly mismanaged by the government, what will this mean for me?
We simply do not know the answer to this question. The court has considerable discretion in formulating fair and appropriate relief, and it is too early to predict how the court might fashion relief for the individual plaintiffs.
Q. Does this lawsuit seek to eliminate the government's role in trust management?
No. This lawsuit seeks to compel the government to carry out its fiduciary duties to individual Indian trust beneficiaries in accordance with the law, including the most fundamental duty of every trustee the duty to account.