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Appeals cancel trust funds for Lamberth; PART ONE

WASHINGTON - A federal appeals court panel has empowered the Interior
Department to chart its own course in Indian trust funds management,
voiding lower court orders for fixing the Individual Indian Money trust.

The unanimous decision permits Interior to submit and carry out its own
plans for reform. U.S. District Court Judge Royce C. Lamberth's role is to
compel submission of a reform plan to his court, then decide whether the
plans and their execution comply with court orders in light of a 1994
reform law. Lamberth will still have substantial authority to weigh in on
the results of Interior's reforms once they are undertaken.

Instead, wrote Justice Stephen Williams for the U.S. Court of Appeals for
the D.C. Circuit, "the court has sought to make the law conform to the
court's views as to how the trusts may best be run." In the future, the
appellate court stated, Lamberth must confine himself to the established
precedent of compelling Interior to take action in compliance with the 1994
reform law of Congress, but not dictate how it shall act - "the court may
not micromanage court-ordered reform efforts ..."

The decision overthrows Lamberth's deadline of September 2007 for a
historical accounting and restores Interior's authority to pursue
statistical sampling in settling the accounts. Lamberth had banned the
accounting methodology, which samples a percentage of the accounts and
considers the results valid for them all. Also shelved is the court's
Lamberth-appointed jurisdiction over the reform effort until 2009.

The long-running class action lawsuit, colloquially known as Cobell after
lead plaintiff Elouise Cobell, pits approximately 300,000 IIM account
holders against the federal government and its delegate over the trust
funds, Interior. Congress, Lamberth and the appeals court have already
determined that Interior has breached its fiduciary duty toward the account
holders through prolonged mismanagement of the accounts. The accounts
receive and pay out again to the holders revenue derived from natural
resource royalties - gas, grazing, rights-of-way, timber - drawn from
Indian lands. Among the many issues spawned by the case, the two at issue
in the Dec. 10 ruling were whether Interior must go forward with a
court-ordered historical accounting and comprehensive "system fix."

To sum up, the appellate court vacates the "historical accounting" portion
of a September 2003 injunction. With the exception of Lamberth's order that
Interior submit a plan to fix the IIM trust accounting system to the court,
all of the "system fix" orders of the September 2003 injunction are
remanded to Lamberth "for revisions not inconsistent with this [Dec. 10]
opinion."

The historical audit Lamberth favored would have reconstructed the IIM
accounts through forensic accounting and other laborious methods.
Notwithstanding doubts that such an accounting could even be rendered,
given the incomplete state of Interior records, the estimated price tag
ranged from $9 billion to $12 billion.

Those sums got the attention of Congress. Lawmakers questioned whether the
accounting exceeded the scope of congressional intent in the 1994 American
Indian Trust Management Reform Act.

Shortly after Lamberth ordered the historical accounting, in September
2003, Congress passed a law prohibiting expenditures on a historical
accounting until Dec. 31, 2004. The law, officially Public Law 108-108 but
infamous in Indian country as a "midnight rider" that made it onto the
books through irregular channels, passed muster with the appellate court.
The provision of Congress in its sovereign power "deprives the [September
2003] decree's 'historical accounting' mandates of any legal basis," the
appellate court found, without violating separation of powers principles
because it does not alter law in light of a court decision or direct any
judicial interpretation. "We believe Pub. L. 108-108 is most plausibly read
simply to say that the Department of Interior shall not, under any statute
or common law principle, be required to engage in historical accounting in
the specified period, i.e., all statutes and common law rules requiring any
such accounting are temporarily and partially repealed or modified."

Stephens quoted from the congressional debate over the full accounting's
likely cost. "If this is a $13 billion fund, or somewhere in the
neighborhood of a $13 billion fund," asked Sen. Byron Dorgan, D-N.D., in
the appellate court's account, "would the Native Americans want us to begin
a process in which we spend up to $9 billion to hire accountants and
financial folks and others to sift through these documents? I think that is
just nuts. That doesn't make sense at all to anybody." Sen. Conrad Burns,
R-Mont., added, "If there is one thing with which everybody involved in
this issue seems to agree, it is that we should not spend that kind of
money on an incredibly cumbersome accounting that will do almost nothing to
benefit the Indian people."

But in acknowledgment of Lamberth's continuing authority in the case, the
appellate court speculated that he could reinstate the order for a
historical accounting once Public Law 108-108 lapses on Dec. 31. Such an
order would have legal validity in the absence of a current law against it
in Congress, Stephens implied. But because of the appellate decision of
Dec. 10, Lamberth would not be permitted to dictate Interior's conduct of
the accounting.

If Interior were to proceed with statistical sampling, Lamberth's court
would eventually consider whether the process complied with the 1994 reform
law.