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Treasury under fire in trust funds class action

WASHINGTON - Indian plaintiffs in the ongoing class action lawsuit against the federal government over individual Indian trust accounts have asked a federal judge to impose sanctions against U.S. Treasury Secretary Lawrence Summers for his attempt to persuade the court to seal a potentially embarrassing internal investigation report outlining misconduct by Treasury Department lawyers.

The request was filed as part of Cobell vs. Babbitt 96-1285, a lawsuit initiated in 1996 by a group of Indian plaintiffs seeking to force the federal government to account for billions of dollars in unreconciled tribal trust funds and individual Indian monies.

Secretary Summers had filed the internal investigation report with the U.S. District Court Nov. 2, along with a request to keep the report under seal. However, Dow Jones & Co. Inc., publisher of the Wall Street Journal and Indian plaintiffs then took legal action and filed a motion in U.S. District Court seeking public access to the report's contents.

Treasury initially launched the internal investigation after a court-appointed special master concluded "that attorneys representing the Treasury Department has failed to adequately protect certain documents from destruction; had failed to inform their superiors, the Department of Justice and the Court of that destruction in a timely manner, and had made false or misleading representations to the Court," read a motion filed by Dow Jones.

The motion also identified six individual attorneys at Treasury who engaged in some form of culpable conduct and made public their identities. It criticized Treasury's supervision and management of the Cobell litigation.

"The sealed documents are judicial records subject to the well-organized common law right of public access," Dow Jones said.

Although Secretary Summers has since changed his initial decision and acknowledged that the court is free to make the documents public, the report still remains under the court's consideration and has not been released.

In their request for sanctions, the plaintiffs charge that Summers acted in bad faith, changing his legal argument "in an almost comical about-face."

Legally, they say, the Privacy Act provides an exception for all materials provided to a court, " and to the parties before the court, including plaintiffs." They also note that none of the six lawyers for Treasury covered by the report was seeking Privacy Act protection.

Dennis Gingold, lead attorney for the plaintiffs, says his clients are demanding that Treasury identify sanctions the agency took against Treasury lawyers who were aware of document destruction in the case.

"I think the report is going to be nothing but a whitewash," Gingold said. "There has obviously been a history here of destroying vital documents and more than has been reported."

Treasury had assured the court throughout the case that documents had been protected. However, Treasury workers destroyed 162 boxes of documents between November 1998 and January 1999.

Federal officials then waited until May 1999 to inform the court of the destruction, after Judge Royce C. Lamberth had found Interior Secretary Bruce Babbitt, then-Treasury Secretary Robert Rubin and Assistant Secretary Kevin Gover in contempt of court.

Gingold says they need all the records so that they can reconstruct the mismanaged accounts and estimate the actual level of losses.

The federal government currently holds approximately $450 million in nearly 500,000 individual trust accounts. There reportedly are no records for more than $100 million of those funds. In tribal trust accounts overall, $2.4 billion remains unreconciled. The General Accounting Office (GAO), the Inspector General of the Department of the Interior, as well as private accounting firms have all issued various reports detailing how the federal government failed to perform its fiduciary duties and breached its trust responsibility to the beneficiaries of these accounts.

The Cobell class action seeks to force the Interior and Treasury departments to account for gross mismanagement of individual Indian trust accounts dating back to the 1800s.