Order Code RS22343
December 8, 2005
CRS Report for Congress
Received through the CRS Web
Indian Trust Fund Litigation: Legislation to
Resolve Accounting Claims in Cobell v.
Norton
M. Maureen Murphy
Legislative Attorney
American Law Division
Summary
The Cobell v. Norton litigation has been before the courts since 1996. Cobell is a
class action lawsuit alleging federal government mismanagement of accounts held in
trust for individual Indians. To date the litigation has not been able to secure from the
Department of the Interior sufficient data in the form of an historical accounting to
determine the accuracy of the payments to individual account holders. Although a full
historical accounting is unlikely to be judicially required, the prospect that pursuit of an
accounting through litigation will be costly, protracted, and elusive has resulted in the
introduction of S. 1439/H.R. 4322 and a concerted effort by Indian representatives to
develop principles for a legislative settlement. The purpose of this report is to provide
an overview of the development of a legislative solution. Updates will occur as
warranted by legislative activity. Background information on the history, major
developments and issues in the Cobell litigation is provided in CRS Report RS21738,
The Indian Trust Fund Litigation: An Overview of Cobell v. Norton, by Nathan Brooks
and M. Maureen Murphy.
S. 1439/H.R. 4322: Background. On July 20, 2005, Senator McCain, Chairman
of the Senate Indian Affairs Committee, introduced S. 1439, the Indian Trust Reform Act
of 2005, for himself and for Senator Dorgan, the Committee’s Ranking Member. On
November 15, 2005, Representative Pombo, Chairman of the House Committee on
Resources introduced an identical measure, H.R. 4322, for himself, and for the
Committee’s Ranking Member, Representative Rahall. The legislation addresses
settlement of the Cobell v. Norton1 litigation and covers claims by individual Indian
1 Cobell v. Norton, et al. Case No. 1:96CV01285 (D.D.C.). Documents are available on the
Department of Justice website [http://www.usdoj.gov/civil/cases/cobell/index.htm] and the
Cobell plaintiff’s website [http://www.indiantrust.com/] (last visited December 2, 2005). A
recent appellate decision in the case, Cobell v. Norton, ___ F. 3d ___, 2005 WL 3041512 (D.C.
Cir. 2005), suggests that a complete historical accounting will not be judicially mandated.
Congressional Research Service ˜ The Library of Congress

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beneficiaries that funds held in Individual Indian Moneys (IIM) accounts in their names
by the Department of the Interior (DOI) have not been properly handled.2 Funds in the
IIM accounts represent receipts from the leasing of trust land held in the name of
individual Indians, or leasing of mineral rights, timber management contracts, grants of
rights of way, or other income-producing activities relative to such land. There are also
IIM accounts that represent per capita shares of tribal distributions.
In introducing the legislation, Senator McCain stated that S. 1439 would resolve the
Cobell litigation by creating a “settlement fund and direct[ing] the Secretary of the
Treasury to develop a formula for distributing the fund to the beneficial owners of IIM
accounts, in full settlement for losses, errors, and unpaid interest in their IIM Accounts,”
as well as reform the Indian trust management system, restructure the Bureau of Indian
Affairs under an Under Secretary for Indian Affairs, and phase out the Office of Special
Trustee.3
Summary of S. 1439/H.R. 4322. The legislation is premised on findings that
although Congress has appropriated tens of millions of dollars to provide an historical
accounting of funds held by the federal government in IIM accounts, some data indicates
that a complete historical accounting of the receipts and disbursements may be
impossible, cost hundreds of millions of dollars, and be incomplete at the death of many
of the elderly account beneficiaries.4 There are also findings respecting the need for a
complete historical accounting to determine losses in the IIM accounts resulting from
errors or mismanagement and the possibility that the cost of an accounting may exceed
the current balance of, total sums passing through, or the enforceable liability of the
United States for losses from the IIM accounts.5 There is also a finding that because many
of the beneficiaries would prefer a monetary settlement rather than protracted litigation,
Congress should “provide benefits that are reasonably calculated to be fair and appropriate
... in order to transmute claims by the beneficiaries of IIM accounts for undetermined or
unquantified accounting losses and interest to a fixed amount,” taking into consideration
the risks of delay and litigation to the claimants.6
Title I, entitled, Resolution of Historical Accounting Claims in Cobell v. Norton,
would provide a lump sum, the amount of which is to be determined during the course of
legislative consideration, for an Individual Indian Accounting Claim Settlement Fund, to
be administered by the Secretary of the Treasury, who is to appoint a Special Master. Of
the Fund, 80% is to be used to make payments to claimants with one portion distributed
to all claimants on a per capita basis and another to pay more to beneficiaries based on
volume passing through accounts. “Claimant” is defined to mean IIM beneficiaries living
on the date of enactment of the American Indian Trust Fund Management Reform Act of
2 The headright or mineral estates of the members of the Osage Nation are excluded as being the
subject of separate legislation. S. 1439/H.R. 4322 (as introduced), §§ 101(10) and (11).
3 151 Cong. Rec. S8565 (July 20, 2005).
4 S. 1439/H.R. 4322 (as introduced), § 101 (1) - (4).
5 Ibid., § 101(5).
6 Ibid., §§ 101(7) and (8).

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19947 and their heirs. Attorneys’ fees, administrative costs, and payments to beneficiaries
who successfully challenge to their distributions in court are also to be covered by the
fund. The legislation specifies the time limits and judicial venue for challenges and
appeals. To receive a distribution, claimants must submit a proper waiver. The
legislation specifies that the benefits provided are substituted for any other claims arising
before the date of enactment for losses resulting from accounting errors, mismanagement,
or interest owed in connection with IIM accounts. Excluded from waiver are claims
relating to trust resources management. Under the legislation, payments to claimants are
not to be subject to federal or state income tax; to be taken into account for eligibility or
for the amount of benefits under any other federal program; or to preclude courts from
entertaining tribal trust account claims.
Title II would establish a twelve-member Indian Trust Asset Management
Commission to review all DOI trust resource management laws and regulations and
practices and report on these to the Senate Committee on Indian Affairs, the House
Committee on Resources, and DOI.
Title III would establish an eight-year Indian Trust Resource Management
Demonstration Project open to all Indian tribes participating in the FY2005 demonstration
project8 and up to 30 other tribes submitting a proposed trust asset management plan and
application to DOI. If approved, a demonstration project is to be in effect for eight years
from the date of enactment, with tribes able to modify or terminate the plan annually.
Tribes would also be able to negotiate how to prioritize the trust asset management budget
for their reservations; compacting and contracting tribes participating in the demonstration
project would be able to vary their trust asset management systems, practices, and
procedures from those of DOI provided they meet the standards established in the
legislation. Among the standards provided in the legislation are: determination by the
Secretary of the Interior (SOI) that the plan meets the trust obligations of the United
States; consistency with applicable federal and tribal law; and SOI determination that the
plan will meet certain standards. These standards must include protecting trust assets
from loss, waste, and unlawful alienation; promoting the interests of the beneficial owner
of the trust assets; conforming to the beneficial owner’s preferred use unless inconsistent
with law; protecting applicable treaty-based rights to the use or enjoyment of the asset;
and requiring good faith and loyalty to the beneficial owner in carrying out any activity
under the plan. The legislation specifies that nothing in the legislation or an approved
trust asset management plan shall affect the liability of the United States or a participating
Indian tribe for any loss resulting from management of an Indian trust asset under an
Indian trust asset management plan.
Title IV would set up a Fractional Interest Purchase and Consolidation Program and
amend the Indian Land Consolidation Act’s9 pilot program for acquiring individuals’
fractional interest in land to be held in trust for tribes, under 25 U.S.C. § 2212, which
currently limits the amount that may be offered for fractional interests to fair market
7 25 U.S.C. §§ 4001, et seq.
8 This project is authorized under Section 131 of Title III, Division E of the Consolidated
Appropriations Act, 2005, P.L. 108-447, 118 Stat. 2809, 3067.
9 25 U.S.C. §§ 2201, et seq.

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value. It would permit DOI to offer from $100 up to $350 over fair market value for
interests in tract of land having 20 or more fractional interests. Another provision would
permit the SOI to pay up to $2,000 to any individual owner of trust or restricted interests
who agrees to sell all such interests owned by that individual to the SOI, who would
thereby avoid the cost to the United States of probate. Another provision allows SOI to
make payments to individual owners of trust or restricted land to settle claims not covered
in Title I, against the United States. There is also a special provision applicable to tracts
owned by 200 or more individuals. It sets up a procedure permitting SOI to offer not less
than four times fair market value to every owner of such tracts. Such offers will be
deemed to have been accepted should the owner not respond to the offer by returning a
notice of rejection included in the certified mail packet making the offer. To fund this
program, the legislation authorizes SOI to borrow from the Treasury amounts to be
approved in annual appropriations to be backed by SOI-issued obligations in amounts and
carrying interest rates to be determined by the Secretary of the Treasury, subject to an
aggregate limitation yet to be specified in the legislation, with repayment of principal and
interest by SOI to flow from the revenues derived from land restored to tribes under this
program. The legislation would require the Secretary of the Treasury to determine that
the revenue stream from the purchased lands is sufficient to meet the repayment of the
obligations; there is also authorization of appropriations in every year following a
shortfall to meet the amount of the shortfall between what SOI repays to the Treasury and
what was required.
Title V establishes in DOI an Under Secretary for Indian Affairs and an Office of
Trust Reform Implementation and Oversight. Functions of the Assistant Secretary for
Indian Affairs would be transferred to the new position, which would also have oversight
over the new office and broad responsibility over DOI activities, including those relating
to Indian affairs carried out in various DOI offices. The Office of Special Trustee for
American Indians would be terminated and all functions transferred to the Under
Secretary as of December 31, 2008.
Title VI requires SOI to prepare financial statements for individual Indian, Indian
tribal, and other Indian trust accounts each fiscal year in accordance with generally
accepted accounting principles of the federal government. Concurrently, the SOI is to
prepare an annual internal control report establishing responsibility for maintaining
internal control and procedures for reporting under this legislation and assessing the
effectiveness of such procedures for the preceding fiscal year. The Comptroller General
of the United States is to contract with an independent external auditor to prepare an audit
report, funding for which is to be transferred to Government Accountability Office from
DOI at the request of the Comptroller General.
“Principles for Legislation” of the Trust Fund Reform and Cobell
Settlement Workgroup. The Trust Reform and Cobell Settlement Workgroup
(Workgroup) was organized by National Congress of American Indians (NCAI) President
Tex Hall and Inter-Tribal Monitoring Association Monitoring Association (ITMA)
Chairman Jim Gray. It includes the Cobell plaintiffs, tribes, individual Indian allottees,
and Indian organizations. It was formed in response to a request “to provide a set of
principles that would guide the lawmakers’ drafting of legislation to provide a prompt and
fair resolution of the trust issue,” from the Chairmen and Ranking Members of the Senate
Indian Affairs Committee and the House Resources Committee, the Senators McCain and
Dorgan and Representatives Pombo and Rahall; and it released “Principles for

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Legislation” on June 20, 2005.10 There are 50 Principles, each of which is accompanied
by a “Rationale.” These Principles are divided into four groups. The first is “Historical
Accounting and Individual Indian Trust Accounts.” It calls for a lump sum settlement
amount of $27.487 billion, which is seen as justified, among other things, in terms of the
level of mismanagement of the IIM accounts and the potential cost of an accounting. It
requires that the sum be agreed to by class representatives and distributed by the district
court. Also included in this section is a requirement for separate legislation to address the
Osage Tribe headright issue.
Another group of Principles, “Reforming the Individual and Tribal Trust Systems,”
includes standards for administering trust funds and lists16 specific duties which should
be made applicable.11 It calls for an independent Executive Branch entity, headed by a
Presidential appointee with a five-year term, to oversee DOI’s trust administration and to
ensure proper audits of trust accounts.12 It recommends a Deputy Secretary of Interior for
Trust Management, sunsetting the Office of Special Trustee, and expansion of tribal
resource management rights within self-determination contracts.
The “Indian Land Consolidation” Principles advocate further legislation to promote
consolidation of franctionated interests in land and specify various practices, including
those designed to assure that adequate notice is provided to land owners, assistance is
given to promote practices that will lead to land consolidation, and tribal government
purchase of fractionated lands is fostered.
Principles under the heading, “Individual Indian Resource Management Claims,”
propose that Congress “provide a fair offer to individual Indians for decades of federal
mismanagement of their trust resources.”13
Reaction. In introducing S. 1439, Senator McCain presented it as a preliminary
step rather than an unalterable legislative package. He thanked plaintiff’s representatives
and various Indian organizations, but cautioned them and other “stakeholders” that:
... they may have issues with certain aspects of the bill as it is now written.... I do not
think that there is any provision in the bill that is immutable, closed to debate or
negotiation. Hopefully the stakeholders will remain engaged and continue to provide
me with information and suggestions to make it a better bill, a bill that brings
10 “Settlement Principles. Elouise Cobell and Indian Leaders Join to Announce Settlement
Principles for the Individual Indian Trust Litigation.” [http://www.indiantrust.com/index
.cfm?FuseAction=PDFTypes.Home&PDFType_id=15&IsRecent=1] (last visited December 2,
2005).
11 These include the duty of loyalty and candor; duty to keep and render accounts; duty to
exercise reasonable care and skill; duty to administer the trust; duty not to delegate; duty to
furnish information; duty to take & keep control; duty to preserve the trust property; duty to
enforce claims and defend actions; duty to keep trust property separate; duty with respect to bank
deposits; duty to make trust property productive; duty to pay income to beneficiaries; duty to deal
impartially with beneficiaries; duty with respect to co-trustees; and duty with respect to persons
holding control. Ibid., p. 4.
12 Ibid., p. 5.
13 Ibid., p. 9.

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substantial improvements to the administration and management of Indian trust
assets.14
Testifying at a Senate Indian Affairs Committee Hearing on July 26, 2005, were
representatives of various Indian interest groups; Elouise C. Cobell, the named plaintiff
in Cobell; and DOI officials. All praised the fact that the process of looking to a
legislative resolution had begun. DOI took the position that any legislative solution
should: (1) eliminate any requirement for historical accounting; (2) address all claims
related to funds mismanagement; (3) include methods of ameliorating fractionated
interests; and (4) address the issue of resource mismanagement claims.15 Elouise C.
Cobell voiced a mixed response to the legislation, comparing it unfavorably with the
“Principles,” but resolving to continue working with the Committee and expressing hope
for the ultimate resolution of the issue. She endorsed the bill’s provisions requiring the
use of the Judgment Fund instead of DOI program funds and indicating that the settlement
amount could be expected to be in the billions of dollars. On the other hand, she
criticized the bill for: (1) placing the administration of the settlement fund within the
Executive Branch and eliminating judicial oversight over the distribution process; (2) not
setting an actual amount for the settlement fund; and (3) failing to provide a
thoroughgoing reform for the trusts held for individual Indians through clear definition
of: trust duties, enforcement by the courts, remedies for breach, and independent
oversight. She also questioned: (1) the definition of “claimant,” as too narrow; (2)
limiting the high-volume distribution segment of the settlement fund to transactions in the
accounts since 1980 as opposed to 1887; (3) not defining the records upon which
distribution decisions are to be made; and (4) the inadequacy of the “Findings” section of
the legislation.
Like the named plaintiff in Cobell, Tex G. Hall, NCAI President, and Jim Gray,
ITMA President, had some criticism of S. 1439 and praise for the effort. They provided
general endorsement of certain provisions of the bill. For instance, NCAI President Hall
had praise for the trust asset management demonstration project provisions and the
fractional interest purchase and consolidation program. They found the provisions
restructuring BIA and the Office of Special Trustee to comport with the “Principles.”16
14 151 Congressional Record S28565 (July 20, 2005).
15 Statement of James Cason, Associate Deputy “Secretary, and Ross Swimmer, Special Trustee
for American Indians on the Cobell Lawsuit,” before the Senate Committee on Indian Affairs,
at 4-5 (July 26, 2005), at [http://indian.senate.gov/2005hrgs/072605hrg/cason.pdf] (last visited
December 2, 2005).
16 Testimony of Tex G. Hall, President, National Congress of American Indians and Chairman,
Mandan, Hidatsa & Arikara Nation, before the United States Senate Committee on Indian
Affairs Oversight Hearing on S. 1439, the Indian Trust Reform Act of 2005, at 4 (July 26, 2005).
[http://indian.senate.gov/2005hrgs/072605hrg/072605wit_list.htm] (last visited December 2,
2005).

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