By Producer
NBC News
updated 8/2/2006 3:41:11 PM ET 2006-08-02T19:41:11

For Elouise Cobell, a Native American landowner who launched a class-action lawsuit in 1996 against the U.S. government, there may be reason to be optimistic.

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The battle over the Indian Trust Fund has been going on unofficially for more than a century, encompassing Indian lands dating back to 1887. Wednesday, the chairman of the Senate Indian Affairs Committee said a settlement is within reach.

Sen. John McCain, R-Ariz., had two high level visitors to his Capitol Hill office Tuesday morning. Attorney General Alberto Gonzales and Interior Secretary Dirk Kempthorne came to talk with McCain about trying to settle the long-term dispute.

The Interior Department manages Cobell's property and that of about 500,000 other Native Americans, leasing the oil, timber, mining and grazing rights, and collecting the money in trusts and distributing it to the owners. Cobell contends the government owes Indians more than $50 billion.

Gonzales and Kempthorne spoke with McCain and Sen. Byron Dorgan, D-N.D., the ranking Democrat on the committee, a day before both were to offer a bill that would have suggested a settlement of close to $8 billion to compensate Indian land owners.

The bill never made it. McCain says he was willing to listen to what the government had to offer and hold off with legislation until the Senate comes back from its month-long summer recess in September. "I won't agree to anything unless Cobell feels it's OK," McCain told NBC News.

‘A historic opportunity’
In a letter to McCain, Interior Secretary Kempthorne writes: "There is both an atmosphere and positive attitude in the Administration to find a settlement solution. I believe we have a historic opportunity to embrace constructive solutions to long-standing trust management concerns held by generations of Indians."

Cobell feels this is a positive move, her spokesman Bill McAllister said, though she is disappointed the administration "does not seem ready to resolve this quickly." Last week, when McCain was drafting his bill, she said, "It would be foolish to ignore political realities while our people continue to go without the basic staples of life. That is why I and the other representative plaintiffs are considering this settlement offer." But Cobell reiterated, "I have been quoted as saying that an $8 billion dollar settlement amount for the historical accounting claims of 500,000 individual Indian trust beneficiaries is 'equitable.' That is not what I said. That is not what I believe."

For the past 10 years the court battle has been a messy, protracted affair. Cobell has won a series of victories. U.S. District Judge Royce Lamberth held Interior Secretaries Bruce Babbitt and Gale Norton in contempt and ordered the Interior Department to disconnect its computers from the Internet to secure Indian trust data.

Indian trust documents were once scattered throughout all 50 states, some in federal facilities, others jammed into barns, attics and even storage sheds. Nobody was even sure what was out there. Lamberth ordered the Interior Department to collect boxes full of Indian records from across the country and have them trucked to Lenexa, Kansas. National Archives workers then file the documents in boxes. So far, there are more than 145,000 boxes there, 300 million documents with new shipments arriving weekly.

Feds get judge pulled from case
But those victories ended last month when the government won a major battle by removing Judge Lamberth from the case, who had repeatedly vowed to expose the Department of Interior, whose "spite," he said, has led it to turn its "wrath" on trust beneficiaries and engage in "willful misconduct," "iniquities," "scandals," "dirty tricks" and "outright villainy."

The U.S. Court of Appeals for the District of Columbia Circuit, siding with the government, removed Lamberth. The appeals court found that Lamberth had lost his objectivity. "We conclude, reluctantly, that this is one of those rare cases in which reassignment is necessary," the judges wrote. The court ordered the case reassigned to another judge. The appeals court said, "Our ruling today presents an opportunity for a fresh start ... We expect both parties to work with the new judge to resolve this case expeditiously and fairly."

Repeated federal reports have exposed corruption and mismanagement in the Indian Trust system -- no one has ever attempted a complete accounting. Cobell, a Blackfoot Indian from Montana, asked the court to find out what no one else could. She asked, "How much money has the government earned on tribal lands from leases for oil and mineral and timber and grazing?" By law, that money is meant for the Indian Trust Fund.

But the appeals court concluded that Lamberth went too far, "on several occasions the district court or its appointees exceeded the role of impartial arbiter." The Court wrote that Lamberth believed that racism at Interior continued, quoting a Lamberth ruling in which he states the department is "a dinosaur -- the morally and culturally oblivious hand-me-down of a disgracefully racist and imperialist government that should have been buried a century ago, the last pathetic outpost of the indifference and anglo-centrism we thought we had left behind."

Court: Agency’s record ‘deplorable’
Recognizing the harm done to Indian tribes by the mismanagement of the trust fund, the appeals court wrote: "This case serves as an appalling reminder of the evils that result when large numbers of the politically powerless are placed at the mercy of institutions engendered and controlled by a politically powerful few. It reminds us that even today our great democratic enterprise remains unfinished. And it reminds us, finally, that the terrible power of government, and the frailty of the restraints on the exercise of that power, are never fully revealed until government turns against the people."

The appeals court also issued a stern warning to the government, that it has, "an obligation to rise above its deplorable record and help fashion an effective remedy."

In their letter Tuesday to McCain, Interior Secretary Kempthorne writes: "If we can define a legislative settlement consistent with our collective goals, I believe, together, we can determine what financial consideration and level of funding for improved beneficiary services would be provided to Indian Country."

McCain warned that establishing a monetary settlement won't be easy. "The OMB will be involved," he said. The Office of Management and Budget, McCain intimated, was not happy even with the $8 billion number he had suggested in his legislative draft.

The chief judge of the District Court, Thomas Hogan, has 30 days from the appeals court ruling to appoint a new judge to hear this case.

McCain said he didn't think that Congress or the Indian land-owners could wait another 10 years mired in litigation to resolve the issue.

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