The Senate Site: Navajo Trust Fund Suit Settled

NEWS RELEASE
For Immediate Release
January 5, 2010

NAVAJO TRUST FUND LAWSUIT TENTATIVELY SETTLED FOR $33 MILLION

After nearly 18 years of litigation, a tentative agreement has been reached to settle a federal lawsuit filed against the state of Utah over its management of a trust fund for Navajos living in San Juan County. Under the proposed settlement, Utah would pay $33 million to the Utah Navajo Trust Fund over the next four years.

“This settlement was a fair way to get funds directly to help San Juan County Navajos and put an end to spending hundreds of thousands of dollars for interest and ongoing legal and accounting costs,” says Utah Attorney General Mark Shurtleff. “This agreement is in the best interest of the citizens of Utah and will bring money to the most impoverished area of our state.”

Pelt v. Utah, a class action lawsuit filed in 1992 asked that Utah account for its management of a trust fund created in 1933 by the federal government. The trust was to provide for “the health, education and general welfare” of approximately 8,000 Navajos living in San Juan County. The trust’s funding came from 37 ½ % of royalties from oil found on lands in Utah added to the Navajo reservation in 1933. Utah was appointed to act as trustee.

“While a trial might have meant different results, that would have been years from now and at great additional expense to all involved. Settlement of the case means an end to litigation but more importantly it means money more quickly into the trust to aid the beneficiaries,” says Brian Barnard, one of the attorneys for Navajo beneficiaries. “The eight individuals who brought this class lawsuit look forward to the help the increased fund can bring to San Juan County Navajos in the future.”

Litigation over management of the oil royalties first started in 1960. This most recent 1992 suit claimed the trust fund was mismanaged, kept inadequate records and either lost or spent money improperly. Under the law of trusts, a trustee can be held personally liable for losing money and failing to keep complete records.

Beginning in June of this year, attorneys for the Navajo beneficiaries and the state of Utah began meeting with a court-appointed mediator to see if a settlement could be reached. United States Court of Appeals Senior Judge William C. Canby oversaw the discussions.

Although Utah could account for the money it spent directly, the state could not fully account for royalty money sent to the Utah Navajo Development Counsel (UNDC), a non-profit that was supposed to spend on behalf of the Navajos; and Utah Navajo Industries (UNI), which received more than $11 million and ran some ill advised businesses. Nearly $20 million is for interest because the events happened so long ago.

The lawsuit followed a 1991 legislative audit that alleged mismanagement and accounting deficiencies with the trust. In response to the audit, the legislature passed the Utah Navajo Trust. No allegations of mismanagement or failure to account for funds have surfaced after the 1992 act was passed.

The proposed settlement would provide $1 million on July 15, 2010, $5 million in 2011, $13.5 million in 2012 and $13.5 million in 2013. After payment of court approved attorney fees, expenses and court costs incurred on behalf of the beneficiaries the balance of the settlement would go directly into the trust fund to aid all beneficiaries. No individual beneficiary will directly receive any money from the settlement.

The agreement is tentative and must be approved by Governor Gary Herbert and the Utah Legislature, which would also have to appropriate the funds during the 2010 session. Once that occurs U.S. District Judge Tena Campbell is expected to order that notices explaining the settlement be provided to class members.

In the meantime, plaintiffs’ counsel plan to travel to San Juan County to discuss the settlement with the Navajo beneficiaries. “We will make detailed presentations to beneficiaries and the Court on the reasonableness of this compromise and then seek final approval,” says Barnard.

The parties expect that a hearing seeking Judge Campbell’s final approval of the settlement will occur next Spring. Assistant Attorneys General Philip Lott and David Sonnenreich represented Utah in the settlement discussions.

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