Ute Mountain Utes get their long-awaited checks

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It’s payback time for American Indian tribes, including the Ute Mountain Utes, whose tribal trust accounts held by the federal government under U.S. treaty law were mismanaged for decades.

The Ute Mountain Ute tribal office complex in Towaoc, Colorado. Photo by Rebecca Hammond

Following a class-action lawsuit by tribes, settlements to compensate for those losses in revenue were recently agreed to by the U.S. Department of the Interior and the U.S. Congress to the tune of $1 billion.

The Ute Mountain Utes’ share — $42 million, minus attorney fees.

How to spend the money caused some controversy for the small tribe of 2,100 members, headquartered in Towaoc, Colo.

The tribe’s council had announced plans for a public-works project or long-term investment, but the idea was met with strong resistance from tribal members who wanted the windfall to be dispersed directly to them.

The dispute led to an effort to organize a recall election of tribal chairman Gary Hayes. But last month the tribal council agreed to pay out the money to individuals. Tribal council attorney Peter Ortego would only say, “They listened to the people.”

Tribal members were given the option of taking a lump sum of $12,500, or having it paid out in installments.

On July 20, checks were distributed, causing a run on banks in Cortez. The money sparked a economic stimulus for Cortez businesses.

“We broke our one-day sales record and sold 17 cars and trucks,” reported Lino Padilla, owner of 4X4 Auto, located south of Cortez. “I have a long relationship with the Utes going back 16 years. They love my selection, and I appreciate their business.”

One customer, a Ute, said people were mostly paying off bills, and with what’s left over buying something extra.

“It’s nice to trade in an old car for a newer one,” she said.

Other retail stores reported extra sales as well. Sears reported an uptick in business.

“The settlement was really good for local businesses,” said Lisa Pierce, owner of the Cortez Sears. “We sold a lot of appliances, so they were really excited and so were we.”

Whether the money is considered taxable income by the IRS is being challenged by the Ute Mountain Tribe. If it is ruled taxable it could impact Social Security and Medicaid benefits. Ortego said the tribe does not believe the settlement money is taxable, but to be sure tribal members are covered, the tribe held back $10 million of the settlement money.

“That represents 28 percent, the highest tax rate, plus the maximum penalties the IRS could collect,” he said in an interview. “If we win the case, that money will be distributed to the tribal members and would be around $5,000 apiece.”

The U.S. government has a long history of violating its own treaties with Native tribes, and the mismanaged trust accounts, set up to provide public services for reservations, is a continuation of that dishonesty, tribal leaders say.

John E. Echohawk, an attorney and executive director of the Native American Rights Fund, a nonprofit based in Boulder, Colo., explained the settlement’s significance in a phone interview.

“The settlement is a historic development for Indian Country because the federal government has not been fulfilling its trust responsibility with the tribes and we are now in the process of resolving that,” Echohawk said.

The lawsuit, which began in the 1990s and expanded to include 44 Native American tribes, focused on the release of accounting records for tribal trust accounts, run by the Bureau of Indian Affairs. Unpaid or ignored royalty payments owed to tribal members from oil and gas revenues also factored into the massive lawsuit and settlement.

It was revealed those tribal trust accounts were poorly managed, and investigations showed the trusts set aside for reservation communities were inadequately funded to provide necessary tribal services such as roads, education, law enforcement, and public works.

“Finally the federal government is settling these cases in a fair way,” Echohawk said. “Our treaties promised assistance for tribes, and the government did not carry out their trust responsibilities. The result of inadequate funding has been poor education programs, inadequate housing and a lack of services.”

To prevent future fiscal mismanagement of tribal funds, a commission was set up to better monitor trust accounts. The Indian Trust Reform Commission is taking recommendations from tribes on how to improve the system. As a part of the settlement, the BIA must conduct accounting reviews every three months.

Ortego said the lawsuit was drawn out and complicated, but the opportunity for a settlement finally arrived.

“Under Bush, there was no progress, so we had to seize the opportunity while Obama was in office to settle and move forward because this Congress set aside money for the settlement,” he said. “People feel positive about it, tribal members are happy to have it.”

The Ute Mountain share and the total $1 billion settlement is not part of the Cobell lawsuit, another case brought by tribes against the federal government. That classaction suit, led by Elouise Cobell of the Blackfeet tribe, who recently died, claimed government fraud on the management of individual Indian trust lands and is being settled for $3.4 billion.

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From August 2012.