August 10, 2001

Politics & Policy

Babbitt Misled Judge About New System
For Indian Trust Funds, Report Alleges

By JOHN J. FIALKA 
Staff Reporter of THE WALL STREET JOURNAL


WASHINGTON -- Former Interior Secretary Bruce Babbitt and officials who 
worked under him misled a federal judge when they testified in 1999 that 
a new computer system would solve the agency's longstanding problems 
managing billions of dollars in trust funds for American Indians, a 
special court monitor said.

The often-blistering, 130-page report asserts that Mr. Babbitt and other 
department witnesses gave U.S. District Judge Royce Lamberth information 
that was "at best misleading and at worst false" about the new computer 
system, called the Trust Assets and Accounting Management System, or 
Taams. Despite two years of repair efforts, the $40 million system has 
so many problems that "it may not be salvageable," wrote special monitor 
Joseph S. Kieffer III, an investigator chosen by Judge Lamberth to 
examine the Interior Department's reform efforts.

The long-festering case, brought by Indians demanding that the federal 
government give a full accounting of activity in the trust accounts, has 
already resulted in one contempt-of-court citation against Mr. Babbitt in 
February 1999 for repeatedly failing to provide records in the case. At 
that time, Mr. Babbitt was represented by Justice Department lawyers, and 
the financial penalties involved were paid by the Interior Department. 
If he's held in contempt again, the legal expenses and any resulting 
penalties may have to come out of his own pocket.

Dennis Gingold, a lawyer representing the Indians, said he will request 
another citation against Mr. Babbitt next week.

The report said unnamed "senior managers" knew the system had repeatedly 
failed tests and faced long delays before department officials praised 
the system to Judge Lamberth in December 1999. The officials, it said, 
made "every effort ... to show progress and positive events and suppress 
negative results."

Mr. Babbitt, who told the judge that Taams "was really right on," now 
practices law for Latham & Watkins in Washington. A secretary said he 
was traveling and not immediately available for comment. Kevin Gover, 
the former head of the Bureau of Indian Affairs who had touted Taams, 
was also traveling outside the country and was unavailable, according to 
his law firm, Steptoe & Johnson.

David Orr, senior vice president for Applied Terravision Systems Inc., a 
Dallas-based company that developed Taams, said the system experienced 
repeated difficulties handling trust-fund records, but asserted they were 
slowly being fixed. "In Mr. Babbitt's administration they wanted a quick 
fix to try and get the pressure off. That wasn't a very good idea," he 
said.

Nedra Darling, a spokesman for the Bureau of Indian Affairs, which 
manages the trust accounts, said the Bush administration is currently 
"streamlining the trust-reform process" and its management structure. 
The trust funds are used to track and store income from land sales, 
grazing rights, rents and other Indian activities. They are part of a 
banking system set up by Congress in the 19th century to handle banking 
needs on Indian reservations. They now process some $500 million a year 
in transactions. Since the mid-1990s, Congress has spent $614 million to 
reform the system, plagued by decades of sloppy accounting and missing 
records.

The stakes could be substantial. In an earlier trial, Judge Lamberth 
found that the U.S. government had breached its duty of trust toward the 
Indian accounts. A second trial, planned for next year, will attempt to 
measure how much money Indians have lost from the mishandled accounts. 
The Interior Department has asserted that provable losses are minimal. 
Mr. Gingold, the lawyer, argues they could run as high as $10 billion.

Problems with the computer system and the apparent overstatements made 
about it to the judge emerged in February, shortly after Mr. Babbitt 
and the Clinton administration left office.