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Broken Trust

In its dollar magnitude, it's almost certainly the biggest case of financial mismanagement in U.S. history. While a final tally is years away, in part because of suspiciously lost or missing documents, there's good reason to think that the dollar figures will dwarf WorldCom's $9 billion. It's a scandal that crosses partisan lines and reaches into high levels of both the Clinton and the Bush administrations. And it's got nothing to do with Wall Street.

The shameful mishandling by the federal government of the Individual Indian Money (IIM) trust fund--created to manage the proceeds from leases of Indian land--encompasses 300,000 accounts and 56 million acres, spans more than 100 years, and involves amounts of money estimated at between 10 and 100 billion dollars. The class-action lawsuit Indian landowners have filed against the Department of Interior--currently named Cobell v. Norton--has been going on for nearly seven years, though knowledge of trust-fund mismanagement dates back much further than that. Robert Rubin, Bruce Babbitt, and Gale Norton, along with assorted deputies, have all been held in contempt of court by Judge Royce C. Lamberth of the U.S. District Court for the District of Columbia. And yet, thanks to a combination of convoluted detail, media bias, and ideological blindness, most Americans have never even heard about it.

In 1887, thanks to the Dawes Act, tribal lands were broken up into individual lots (the policy was known as "allotment") and assigned to individual Indians as property. This was done in a combination of good and bad faith. Since the Founding there had been many in the American government--prominently including Thomas Jefferson--who wanted to encourage Indians to take up individual landownership as a way of increasing Indian agriculture and wealth. But, on the frontier, allotment was chiefly understood as a way to make it easier for outsiders to buy Indian lands at bargain prices.

Having carved up the land, the federal government took the authority to grant resource leases on those new lots--leasing out mining, drilling, and lumbering rights without the consent of the new landowners, who were presumed to be incapable of managing such affairs themselves. (That, and they might have had an inconvenient lack of interest in granting the leases at all.) The royalties from those leases were--and are--collected by the government. They are supposed to be paid into the relevant IIM accounts, and then paid out to individual Indians on a regular basis. The money at stake, in short, isn't government revenue. The government claims to be operating as a trustee, and to be administering a trust fund on behalf of Indian landowners.

The federal government--specifically, the Bureau of Indian Affairs (BIA) of the Department of Interior--has botched that task hopelessly for decades and admits it can't begin to provide an accurate historical accounting of who has or hasn't been paid what they're owed. It appears that for most of the trust fund's history, there was scarcely even a pretense of running it according to principles of fiduciary responsibility: Some checks came in, some checks went out. Where there should be records, there are none.

So in 1994 Congress passed legislation ordering an overhaul. And two years later, when that effort appeared to be going nowhere, Eloise Cobell of the Blackfeet tribe filed suit. Since then, BIA, Interior, and occasionally Treasury have stalled, dragged their feat, obfuscated, and self-investigated. Judge Lamberth, whose judgments are filled with strikingly sharp criticisms of government conduct and accusations of bad faith, may be drawing close to ordering a remedy. But even if, as the plaintiffs want, the IIM accounts are taken out of BIA's hands and placed into receivership, the Bureau and Interior will have to be involved in the reconstruction of the trust fund's history. That means the judiciary can't solve this problem on its own; either congressional oversight or a deliberate decision by Interior to do the right thing will be necessary.

But mustering the political pressure to make that happen will be nearly impossible. One reason is that Indian landowners and tribal governments--many of which also have lands held in trust, and which control the bulk of Indians' lobbying power--don't have quite the same interests. Individual Indians have no real reason to want any agent of the U.S. government to continue to act as their trustee, or even to continue the mandatory trusteeship at all. Given its shameful record, they certainly have no reason to want the funds managed by any part of Interior.

Tribal governments, by contrast, have an ambivalent but intimate relationship with BIA and Interior, one based on the idea that the government acts as trustee for the tribes, and one that is sure to survive the current litigation. BIA is the conduit for federal funds that go to the tribes for law enforcement, elections, and government operations; and the Bureau is in charge of the process of granting (or withholding) federal recognition of each tribe's existence and self-government rights. More importantly, though, the tribes (unlike IIM account-holders) have the legal authority to take their lands out of the trust system and handle the leases and royalties themselves; several have done so. This combination of circumstances means that the urgency of reforming the system is far lower, and the importance of the relationship with BIA much higher, for tribes than for the individual landowners. Norton tried to take advantage of this divergence of interests last year, by proposing a reform that would combine tribal and individual trust lands in a new bureau outside BIA--a move aimed at weakening tribal support for the lawsuit.

And none of this is helped by the issue's near-invisibility. While The Washington Post and some western dailies have provided pretty extensive coverage, The New York Times has run only a handful of stories since the lawsuit was filed, and broadcast coverage has been almost nonexistent. Beyond one extended piece by Sam Donaldson and one "60 Minutes" segment, there has been only the occasional two-sentence notice that cabinet secretaries were being held in contempt. In a sense the story is too big to cover; a scandal that lasts for a century isn't news. Moreover, Interior has been so slow to release documents, and the suit has dragged on for so long it's rare that there's anything fresh to say about it. And, of course, Interior--especially under Norton--has tried its hardest, with some success, to change the subject from the substance of the landowners' claims to the eye-glazing process of its own self-investigation and bureaucratic reshuffling.

But if nothing else you'd expect the right to be turning out in force on behalf of Indians in this case. Critics of government handouts, reservation governments, and intra-tribal collective ownership of property might have noticed that, this time, it was individual Indian property-owners facing a bureaucracy that was unjustly taking their royalties. Norton once counted herself among the libertarian property-rights crowd; she could have distinguished herself from Babbitt and fit property rights into compassionate conservatism by cooperating, settling the case, and getting Interior out of the money management business it does so badly. She didn't.

Nor do you hear much from the conservative and libertarian advocates of landowners' rights. The standard conservative story about Indian poverty--most recently rehearsed in a John Miller cover story for National Review--is an indictment of reservation governments, of their collective ownership of land, the barriers they put up to business formation, and their sometimes-serious difficulties sustaining an independent judiciary and other components of the rule of law. There's a great deal of truth in this story. But it's also true that, historically, the major alternative strategy to reservation governments and tribal sovereignty was ... allotment and the Dawes Act. With the mess from 1887 still unresolved, Indians have good reason not to want to go down that road again.

Jacob T. Levy is the Tomlinson Professor of Political Theory at McGill University.