101 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ELOUISE PEPION COBELL, et . al. . . Plaintiffs, . Civil Action 96-1285 . v. . . Washington, D.C. DIRK KEMPTHORNE, Secretary . Monday, June 9, 2008 of the Interior, et al. . 1:37 p.m. . Defendants. . . . . . . . . . . . . . . . TRANSCRIPT OF TRIAL - AFTERNOON SESSION BEFORE THE HONORABLE JAMES ROBERTSON UNITED STATES DISTRICT JUDGE APPEARANCES: For the Plaintiffs: DENNIS GINGOLD, ESQ. Law Offices of Dennis Gingold 607 14th Street, NW Ninth Floor Washington, D.C. 20005 202-824-1448 ELLIOTT H. LEVITAS, ESQ. WILLIAM E. DORRIS, ESQ. Kilpatrick Stockton, LLP 1100 Peachtree Street Suite 2800 Atlanta, Georgia 30309-4530 404-815-6450 KEITH HARPER, ESQ. JUSTIN GUILDER, ESQ. Kilpatrick Stockton, LLP 607 14th Street, NW Suite 900 Washington, D.C. 20005 202-585-0053 APPEARANCES con't. on next page. Jacqueline M. Sullivan, RPR Official Court Reporter 102 APPEARANCES, con't. Jacqueline M. Sullivan, RPR Official Court Reporter 103 DAVID C. SMITH, ESQ. DANIEL R. TAYLOR, JR., ESQ. Kilpatrick Stockton, LLP 1001 West Fourth Street Winston-Salem, North Carolina 27101 336-607-7392 For the Defendants: ROBERT E. KIRSCHMAN, JR., ESQ. JOHN WARSHAWSKY, ESQ. J. CHRISTOPHER KOHN, ESQ. U.S. Department of Justice 1100 L Street, NW Washington, D.C. 20005 202-307-0010 JOHN STEMPLEWICZ, ESQ. Senior Trial Attorney U.S. Department of Justice Commercial Litigation Branch Civil Division Ben Franklin Station P.O. Box 975 Washington, D.C. 20044 202-307-1104 Court Reporter: JACQUELINE M. SULLIVAN, RPR Official Court Reporter U.S. Courthouse, Room 6720 333 Constitution Avenue, NW Washington, D.C. 20001 202-354-3187 Proceedings reported by machine shorthand, transcript produced by computer-aided transcription. Jacqueline M. Sullivan, RPR Official Court Reporter 104 1 P R O C E E D I N G S 2 THE COURT: Mr. Dorris? 3 MR. DORRIS: Good afternoon, your Honor. 4 THE COURT: Good afternoon. 5 MR. DORRIS: If we're ready to begin, the plaintiff 6 would call Ray Ziler. 7 THE COURT: All right. 8 COURTROOM DEPUTY: Do you solemnly swear that the 9 testimony you should give to the Court in this case now on trial 10 should be the truth, the whole truth, and nothing but the truth 11 so help you God? 12 MR. ZILER: I do. 13 COURTROOM DEPUTY: Thank you. Please be seated. 14 MR. DORRIS: Your Honor, in keeping with the way we 15 conducted examinations in Phase 1.7, if I might take a moment to 16 briefly tell you about Mr. Ziler's background and give you an 17 overview of the testimony that we hope to elicit from him. 18 THE COURT: Thank you. That would be helpful. 19 MR. DORRIS: Mr. Ziler was the lead partner for Arthur 20 Andersen on the first audit of BIA IIM trust operations in 1988 21 and then for two more years in 1989 and 1990. Mr. Ziler joined 22 Arthur Andersen in 1969 in Los Angeles and moved to help Arthur 23 Andersen's now office in Albuquerque in 1984 where he still 24 resides. After overseeing BIA's audits, he became the managing 25 partner of Arthur Andersen's Albuquerque office, and at some Jacqueline M. Sullivan, RPR Official Court Reporter 105 1 point in the early '90s he had less of a day-to-day involvement 2 with Arthur Andersen's work that continued on the tribal trust 3 reconciliation that you heard about, and we will not be going 4 into that with him. He retired from Arthur Andersen in 1999 and 5 he is now partner with a local Albuquerque accounting firm of 6 about 150 people where he heads up a fifty-person division of 7 their audit and business consulting practice. 8 We are going to ask Mr. Ziler questions in connection 9 with the audit that had to do with the internal accounting 10 controls at BIA, focusing on three primary points: the lack of 11 reconciliation between treasury and BIA regarding the IIM funds, 12 the lack of reconciliation between components of BIA's own 13 accounting systems, and then third, BIA's weaknesses in 14 accounting both for receipts and disbursements, including its 15 vulnerability to misappropriation and fraud. 16 And I would expect the direct examination of Mr. Ziler 17 to last for approximately an hour, your Honor. 18 THE COURT: All right, sir. 19 MR. KIRSCHMAN: Excuse me, your Honor. Plaintiffs in 20 their witness list identified Mr. Ziler as an expert witness. 21 I'm not clear whether he's a fact witness testifying on the 22 events he recalls from his work with Arthur Andersen. That's 23 all I heard so far. I see no grounds to qualify him as an 24 expert, and if he is, I don't know what it's on. 25 MR. DORRIS: Your Honor, we did that in an abundance Jacqueline M. Sullivan, RPR Official Court Reporter 106 1 of caution because we found when you call a C.P.A. to talk about 2 the audit, sometimes people view questions as being eliciting 3 opinion, but it was asking them about opinions that they formed 4 at the time that they did the audit. I do not plan to tender 5 Mr. Ziler as an expert, but there may be some points where he's 6 talking about the opinions that he rendered on behalf of Arthur 7 Andersen at this time. 8 THE COURT: Let's see how the Q and A goes and deal 9 with it question by question. 10 MR. KIRSCHMAN: I appreciate the clarification, your 11 Honor. 12 MR. DORRIS: Thank you, your Honor. 13 RAY ZILER, WITNESS FOR THE PLAINTIFFS, SWORN 14 DIRECT EXAMINATION 15 BY MR. DORRIS: 16 Q. If you'd please state your name. 17 A. Raymond Ziler. 18 Q. Where do you live, Mr. Ziler? 19 A. Albuquerque, New Mexico. 20 Q. Can you adjust the microphone to where -- 21 A. That is better? 22 Q. And you heard my brief description of your background. Was 23 that accurate? 24 A. It was accurate. 25 Q. Now, are you a C.P.A.? Jacqueline M. Sullivan, RPR Official Court Reporter 107 1 A. Yes, I am. 2 Q. And how long have you been a C.P.A.? 3 A. Since 1971. 4 Q. At our request have you recently reviewed the audits and 5 various reports that Arthur Andersen issued to BIA in connection 6 with the audits for the years 1988, '89, and '90? 7 A. Yes, I am. 8 Q. And generally refreshed your memory regarding that work? 9 A. Yes, I have. 10 Q. Have you also reviewed certain of the audit Arthur Andersen 11 work papers that were generated as part of those audits? 12 A. Yes. It's a very limited portion, but yes, I have. 13 Q. Based on the work that Arthur Anderson did and as you have 14 reviewed it recently, were the accounting systems then being 15 used by BIA reliable? 16 A. No, they were not. 17 Q. And were BIA's internal controls over its accounting and 18 financial systems adequate? 19 A. No, they were not. 20 Q. Why not? 21 A. We knew going into the initial engagement just through 22 dialogue with bureau management that they exposed internal 23 weaknesses and internal controls before we ever even started the 24 work. And what we generally found after engaging in the audits 25 was pretty much in the line with what we had been told, although Jacqueline M. Sullivan, RPR Official Court Reporter 108 1 as we learned more, I think we realized that they were worse 2 than we had originally realized. 3 Q. And how did BIA's internal controls compare to other 4 systems you've seen in your almost forty years of public 5 accounting? 6 MR. KIRSCHMAN: Objection; vague. 7 THE COURT: I'll allow it. 8 THE WITNESS: I have never encountered anything quite 9 like it. You know, the bureau was so decentralized. It had 10 over a hundred operating locations with no consistency from one 11 location to the next and systems that were out of sync with each 12 other. The remote sites, the agency sites were basically 13 uncontrolled. 14 BY MR. DORRIS: 15 Q. Okay. Now, as a result of the work that Arthur Andersen 16 did, was it able to express an unqualified opinion regarding 17 BIA's financial statements of the IIM trust funds? 18 A. No. 19 Q. And so when we talk about a qualified opinion, what does 20 that mean? 21 A. The original undertaking was to audit both the tribal and 22 the IIM accounts, and they were separate. They were within one 23 financial statement, but they were separate trust funds, and 24 they were -- the audit was for the entire trust assets and the 25 trust liability for each of those pools of funds, and so we Jacqueline M. Sullivan, RPR Official Court Reporter 109 1 attempted to perform an audit on the aggregate of the accounts 2 and also on the individual accounts within the fund, and because 3 of the lack of controls over receipts or disbursements and the 4 lack of agreement by anyone that we tried to confirm information 5 with, we were unable to really establish that anything was 6 correct other than certain assets that we could either confirm, 7 like securities, or that we could observe them. We actually saw 8 the documents, the original documents of a CD or something like 9 that, so that was the only area where we were able to really 10 opine. The rest of the audit was qualified. 11 Q. When you say that was the only area you were able to opine, 12 was on the assets that you physically saw? 13 A. Yes. 14 Q. And -- 15 A. And we could not, we could not give an opinion on the 16 treasury cash account either because we could not get a 17 confirmation from Treasury as to the balance. 18 Q. Okay. So there were certain of the assets that were you 19 not able to opine about? 20 A. Correct. 21 Q. Now, in each of the three audit years, did Arthur Andersen 22 provide a report on compliance and internal accounting controls? 23 A. Yes. 24 Q. And did the BIA accept those findings and recommendations 25 in each of those years? Jacqueline M. Sullivan, RPR Official Court Reporter 110 1 A. Yes, they did. 2 Q. I want us to look at the first of these reports on internal 3 controls, and we have marked it previously as Plaintiff's 4 Exhibit 31. It's the report on compliance and internal controls 5 for the year-ending September 30, 1988. This is the only time 6 I'm faster than a computer your Honor. If you kind of blow up 7 the heading there so Mr. Ziler can confirm that this is the 8 document that I just referred to. 9 A. Correct. 10 Q. Mr. Ziler, if at any point I show you documents there on 11 the screen that are not large enough, tell us and we'll blow up 12 those sections, okay? 13 A. Okay. 14 Q. Now, if we might turn to page -- the document as it will be 15 submitted to the Court on electronic form has page numbers one 16 through the end branded in the bottom left-hand corner, as 17 you'll see here on page one, your Honor, and we'll turn to page 18 four of the exhibit as presented to the Court, please. And if 19 you will blow that up at the top where it says "executive 20 summary" and the date, and this is an executive summary that you 21 and others at Arthur Andersen prepared and dated March 23rd, 22 1989; is that correct? 23 A. Correct. 24 Q. I want to show you some highlighted language, if we can 25 bring that up here on page four of Exhibit 31. And we are now Jacqueline M. Sullivan, RPR Official Court Reporter 111 1 looking at the first full paragraph, about the second half of 2 that paragraph. Do you see it, Mr. Ziler? 3 A. Yes. 4 Q. And it refers to that the audits were conducted with the 5 knowledge of both the bureau and of Arthur Andersen that 6 material weaknesses in internal accounting controls existed and 7 that it was likely that violations of certain regulations 8 applicable to the management of the trust firms had occurred and 9 were continuing to occur, and if you'll read the rest of that to 10 yourself for a moment. 11 A. Okay. 12 Q. And going into the audit, then what was Arthur Andersen's 13 understanding about the internal accounting controls at BIA? 14 A. They were very weak. I believe the purpose of the 15 financial statement audits were in line with discussions we had 16 had with the bureau about when you have a problem with 17 accounting records that's as long-standing as this had been, our 18 suggestion was to try to get a snapshot on a current state of 19 affairs and try to find out, you know, what the current 20 conditions of the control environment is, try to plug those 21 holes where weaknesses existed, focus on that first and then 22 back on the historical data afterwards, because the idea was to 23 try to bring the controls into a stronger environment in the 24 current period. 25 Q. Now, were there instances where BIA's various accounting Jacqueline M. Sullivan, RPR Official Court Reporter 112 1 systems did not reconcile or agree with each other with respect 2 to the IIM trust? 3 A. Correct. 4 Q. And Mr. Ziler, today when I asked you about BIA's records, 5 I understand you audited both the tribal trust funds and the 6 individual Indian money trust, correct? 7 A. Yes. 8 Q. All my questions have to do with IIM, okay? 9 A. Understood. 10 Q. Now, let's look over at page five, the next page. And down 11 toward the bottom of the page you'll see the heading Analyzed 12 Amounts Recorded by the Bureau in the trust fund's financial 13 reporting systems, and if you will take a moment and read the 14 first approximately eight lines of that paragraph to yourself. 15 A. Okay. 16 Q. As used in this report where it talks about the bureau's 17 finance system, what is that? 18 A. That's the equivalent of a general ledger and a corporation 19 that would be the summary level in which account balances were 20 kept, not to the individual beneficiary level, but just a 21 summary account, financial accounting system. 22 Q. And do you see down a little bit, and I have it 23 highlighted, where it refers to then that the finance system is 24 not reconciled with some of the subsidiary systems, including 25 the Integrated Resource Management System, or IRMS? Jacqueline M. Sullivan, RPR Official Court Reporter 113 1 A. Correct. 2 Q. Do you recall how out of balance those were during the 3 audit years that you were involved with? 4 A. First it should be understood that the reason they're out 5 of balance is they're input from different sources, so it's not 6 an integrated system. That word, integrated, is a little bit 7 misleading because it was not integrated with the general ledger 8 system, so they had different sources of input and there were 9 differences. I think the first year at the end of 1988 the two 10 systems were out of balance between $2 million and $3 million, 11 closer to $3 million, and then over time, I think in '89, that 12 number grew to something like $11 million, and by 1990 I think 13 the systems were out of balance between $19 and $20 million, so 14 the difference kept growing. 15 Q. Okay. And when we're talking about they're out of balance, 16 we're talking about two separate systems, both of them BIA 17 systems? 18 A. Yes. In other words, if you added up all of the individual 19 Indian monies accounts within the accounting system and ran a 20 total of them, they would not agree to the general ledger 21 balance. 22 Q. Should those two totals agree? 23 A. Correct, yes. 24 Q. You just told us some amounts ranging from $2 million to 25 $19, million to $20 million. Does that tell you what the true Jacqueline M. Sullivan, RPR Official Court Reporter 114 1 scope of the issue is? 2 A. No, because you don't know whether either one of them is 3 correct. We were unable to establish that either balance was 4 correct. 5 Q. Okay. Let's look, then, over at the next page at the top. 6 I don't have it highlighted here, but could you pull that up, 7 the first full paragraph, and highlight or blow it up for us? 8 And Mr. Ziler, it says here that these errors and the 9 related adjustments result from a wide variety of procedural 10 weaknesses, some of which are material weaknesses in accounting 11 systems and internal control procedures utilized by the bureau, 12 and other problems such as inadequate training and supervision 13 of personnel and personnel shortages. It goes on in the next 14 sentence and says, Certain of these weaknesses are so pervasive 15 and fundamental as to render the accounting systems unreliable. 16 What do you mean by "unreliable"? 17 A. We concluded that the systems could not be relied upon to 18 capture the transactions they were supposed to capture or the 19 balances they were supposed to capture, and we knew of accounts 20 that were incorrect just by the fact that the trust liability 21 was a debit balance versus a credit balance, and the related 22 assets in some cases were credit balances rather than debit 23 balances, which is impossible. We knew that there were missing 24 accounts. Just the fact that they did not balance with one 25 another, a variety of issues that just did not lend credibility Jacqueline M. Sullivan, RPR Official Court Reporter 115 1 to the financial system. 2 Q. Okay. Now, I want to ask you about some of the specific 3 weaknesses or problems that are noted on this page, and let's 4 start with paragraph number two here on page six of Plaintiffs' 5 Exhibit 31. If you would look at that. 6 A. Yes. It's the one about the multiple accounting systems 7 that had various data entry points that were not in agreement 8 with each other, nor was there really an attempt for the most 9 part to reconcile the systems, and as a matter of fact, at one 10 point we asked the Bureau of Management I think the first year 11 whether they'd be able to go back and compute the original $3 12 million issue and they declined to attempt at that time. They 13 said they didn't think it was possible. 14 Q. Well, this is the problem you alluded to earlier where you 15 have multiple systems with multiple points of entry; is that 16 correct? 17 A. Correct. 18 Q. Item three, it refers in item three to accounting entries 19 being posted on a decentralized basis without adequate review. 20 When you talk about decentralized basis, what did you mean? 21 A. An entry being made at an area office or at an agency 22 office that was not subjected to any form of supervisory review, 23 either in the field or the centralized location. 24 Q. And that is a problem? 25 A. Well, yes. When information gets into a system there Jacqueline M. Sullivan, RPR Official Court Reporter 116 1 should be a review process. The document theory support should 2 be reviewed just to make sure that there's evidence that it's an 3 appropriate entry, and some of the entries being made did not 4 necessarily make sense, nor could we tell why they had been made 5 or whether anyone had ever reviewed their accuracy. 6 Q. This comes up in a couple of these items. In some places 7 in the report it talks about a lack of standardization -- 8 A. Yes. 9 Q. -- between the various offices. Can you describe what you 10 found when Arthur Andersen began this audit in terms of any 11 standardization between the various agencies and area offices? 12 A. We didn't go to every single office. I think maybe around 13 somewhere around maybe a hundred plus, I believe we went to 14 maybe 25 agency offices and maybe half the area offices. 15 Q. And there were twelve area offices? 16 A. Yes. And in that process we were looking for, you know, to 17 try to develop a standard audit program. We said, well, this 18 should be a program that we could use to audit every agency or 19 area office, and we went there. What we thought we understood 20 going in and what we could test, we either found we couldn't 21 test it because the procedure didn't exist or the documentation 22 didn't exist, or that's not what they were doing at that 23 particular office, so the audit process broke down to a large 24 extent because there was anything used as a preconceived notion 25 about what to expect it did not exist. Jacqueline M. Sullivan, RPR Official Court Reporter 117 1 Q. When you look at automated information in the accounting 2 system from one office and compare it to the other offices, did 3 this lack of standardization mean that it was difficult to 4 compare between offices at times? 5 A. Yes. 6 Q. Let me ask you to look at item number five. 7 MR. KIRSCHMAN: Your Honor, at this point I'm going to 8 raise an objection. We've listened to this line of inquiry for 9 a while and it is not relevant to the scope of this trial as you 10 set it out related to the dollar signs, and so objection; 11 relevance. 12 THE COURT: I'm going to hear it. Thank you. 13 Objection overruled. 14 BY MR. DORRIS: 15 Q. Looking at item five, if you will read that to yourself, it 16 addresses inadequate segregation of duties? 17 A. Yes. 18 Q. And it says, for example, in many locations the same 19 employees transfer assets among accounts and open new accounts 20 resulting in the opportunity for intentional or unintentional 21 misuse of resources. What's the problem that you're talking 22 about there? 23 A. Well, that kind of ties back to the journal entries that 24 are unreviewed that we just discussed previously, and what 25 happens is if a beneficiary, a beneficiary's account -- well, Jacqueline M. Sullivan, RPR Official Court Reporter 118 1 let me just say this. A beneficiary's account could be changed 2 in the field at a location without review, so if you were trying 3 to get a beneficiary some money, you just made a journal entry 4 to transfer a credit balance to their trust fund account and 5 then you would write them a check, whether they really were 6 entitled to it or not, and that lack of segregation of controls 7 is very fundamental in like any business environment you try to 8 keep the accounting versus the handling of the actual cash 9 assets separate from each other, and those were activities that 10 were being done by the same person, so they had virtually a 11 hundred percent control over what they wanted to do. 12 Q. The same person receiving the money that was also then 13 entering it into the accounting system and then would also be 14 involved in transfer between accounts? 15 A. And disbursement. 16 Q. Okay. And is that a problem that continued throughout the 17 time of these audits? 18 A. I think the bureau tried to work on it, but as I recall, 19 throughout the entire period, I mean, the problem was so, you 20 know, at so many locations I don't think they got their arms 21 around it by the time we finished our audit. 22 Q. Look at item seven dealing with data processing controls, 23 and if you would read that to yourself and then let me know I 24 want to ask you some questions about it. 25 A. Yes. Jacqueline M. Sullivan, RPR Official Court Reporter 119 1 Q. Tell us what's been addressed here to the extent you've not 2 already described this. 3 A. Certain accounting systems were centrally managed, like the 4 finance system. There were other subsystems that existed in the 5 field locations that were modified on sort of an ad hoc basis, 6 and so you could take different locations operating in the same 7 system and modifications had been made to the system so they 8 weren't standard from one place to the other so they were not 9 using the same programs and they had the ability to change them 10 on site. 11 Q. Now, looking then at the next one talking about record 12 retention and filing procedures, how is that related to a lack 13 of internal accounting controls? 14 A. When there are poor accounting records the accountability 15 requirement basically disappears because there is no way to 16 determine whether a transaction was properly documented or 17 whether it was appropriate in the first place, and when we 18 attempted to review records at the field locations often times 19 either it was evident that transactions were not originally 20 documented or that for some reason the documentation had 21 disappeared. 22 Q. Okay. Now, let me ask you, we've been talking about issues 23 just with inside BIA's own systems and in terms of lack of 24 internal controls. Do those same problems that you talk about 25 here in terms of lack of internal controls, how does that relate Jacqueline M. Sullivan, RPR Official Court Reporter 120 1 to trying to ensure that a system is not subject to 2 misappropriation or misuse or fraud? 3 A. I'm not sure I'm following the question. 4 Q. Okay. In other words, what is the purpose of having strong 5 internal controls over the accounting system? 6 A. Well, the internal controlled environment should be 7 designed. It's typically designed to ensure that upper 8 management can set parameters about how transactions should 9 occur, and those controls provide a check and balance system to 10 ensure that transactions are consistently conducted and recorded 11 and captured in the accounting system and that one employee is 12 somewhat a cross-check on another person so that they can't walk 13 away with the store. When the controls environment does not 14 exist, you have no ability to make sure that any of management's 15 assertions about how they want business conducted are actually 16 being conducted that way. 17 Q. Now, let me ask you some questions about then how BIA's 18 systems reconciled with treasury, and let's look at the top of 19 the next page. And if you'll pull up that heading in the first 20 paragraph, please, and this is on page seven of Plaintiffs' 21 Exhibit 31, and it talks about confirmed and performed other 22 verification procedures for all monetary assets, cash and 23 investments held for trust funds managed by the bureau. Do you 24 see that? 25 A. Yes. Jacqueline M. Sullivan, RPR Official Court Reporter 121 1 Q. And the first type of asset that's referred to there is 2 cash, and would you take a moment and read that paragraph to 3 yourself? 4 A. Okay. 5 Q. Mr. Ziler, this is talking about treasury functioning as a 6 bank and disbursing agent for the bureau. Describe that for us. 7 A. Okay. U.S. treasury was the bureau's checking account. It 8 was where the bureau received deposits and the account from 9 which it made disbursements, so all cash activity took place 10 through treasury. The problem we had, as pointed out here, was 11 that initially going in we thought that the treasury was going 12 to be able to confirm the bank account like you would when you 13 get a monthly statement from your bank on your own personal 14 account. You'd have a balance and you can reconcile your cash 15 account to it, but early into our work we came to the 16 realization that treasury said they would not be able to provide 17 a confirmation of the account, nor did they maintain that 18 information, nor had they previously maintained that 19 information, so that is a severe constraint on the bureau's 20 ability to determine that its cash balance was correct at any 21 point in time. 22 And what's more, when we talked to people at treasury 23 we were informed that all they knew of was the information that 24 went in and out of the account, all the bureau's accounts, 25 whether they were trust accounts or operating accounts or Jacqueline M. Sullivan, RPR Official Court Reporter 122 1 whatever they were. Based on the coding that the bureau 2 provided, and they did not independently check that information, 3 so the treasury's information source even to confirm activity 4 back to us was based on information that was provided by the 5 bureau itself. The bureau could only reconcile with itself, not 6 with any banker. 7 Q. And could the bureau actually even reconcile within its own 8 accounting systems? 9 A. It's not much of a reconciliation because you have no 10 independent source to verify with. 11 Q. Now, looking at the fourth line down over to the right, the 12 sentence begins: In addition to treasury's inability to provide 13 an independent verification of the cash balances held, there are 14 known instances where, one, the bureau has not provided proper 15 notification to treasury of amounts deposited, and then it goes 16 on, and I'll come back there. But this first one tells us what 17 you know about what's being referred to there as known instances 18 where the bureau didn't provide notification to treasury of 19 deposits that had been made in treasury? 20 A. Okay. One of the things we became aware of during the '88 21 audit, and then I think it was brought to our attention by the 22 bureau, was that they had not told treasury about deposits that 23 had been made, I think it was in for half a year in 1986. And 24 so treasury had no record of those deposits, and they were 25 supposed to be earning interest during that period of time, and Jacqueline M. Sullivan, RPR Official Court Reporter 123 1 I think there was a quantification of the lost interest up in 2 the millions of dollars, and there was no -- so the treasury did 3 not know they had a deposit because they weren't told they had a 4 deposit. 5 Q. Okay. Because of this is it possible for money to be 6 deposited into treasury from the IIM trust but to never be 7 accounted for by BIA? 8 MR. KIRSCHMAN: Objection; calls for speculation. 9 He's a fact witness. We established that. 10 THE COURT: I'll sustain that. Can you give me a 11 better foundation for that? Is it possible for money to be 12 deposited? 13 MR. DORRIS: Okay. 14 BY MR. DORRIS: 15 Q. As part of Arthur Andersen's internal control process are 16 checks of BIA's internal accounting controls. You've indicated 17 that you communicated with treasury and grew to have an 18 understanding of how treasury and BIA worked together with 19 respect to what you've referred to here as essentially the 20 banking relationship? 21 A. Well, within my, you know, I don't have a good view behind 22 the curtain of what goes on at treasury, but from my 23 understanding the only record of deposits into the bureau 24 account at treasury was from the bureau, and those -- the 25 treasury depended on the bureau to correctly code and enter that Jacqueline M. Sullivan, RPR Official Court Reporter 124 1 information to get it into the right accounts. If it was mis- 2 coded it could have gone into an account other than a trust 3 account and, you know, that we know for one period of time I 4 believe because the bureau found it itself. There was a 5 substantial amount of money that was deposited with treasury and 6 the treasury did not know about it until the bureau said, oops, 7 we found it, so they happened to catch it in that instance. I 8 would believe there's the potential certainly for it to happen 9 again. I can't say that it didn't. 10 Q. As part of -- 11 MR. KIRSCHMAN: Objection. We request that that 12 answer be stricken. The question elicited nothing but hearsay 13 from the witness. 14 THE COURT: Overruled. 15 BY MR. DORRIS: 16 Q. Mr. Ziler, as part of the Arthur Andersen audit, was Arthur 17 Andersen able to get independent verification from treasury that 18 would indicate what the full amount of the IIM trust funds had 19 been deposited into treasury? 20 A. No. 21 Q. And then looking at the last sentence in this paragraph, it 22 says because the treasury's inability to independently confirm 23 balances and the bureau's history of known instances of 24 accounting errors that resulted in overinvestment and 25 underinvestment available cash balances, it was not possible to Jacqueline M. Sullivan, RPR Official Court Reporter 125 1 verify cash balances. And is that what you described earlier, 2 that you weren't able to verify certain assets, including the 3 cash balances? 4 A. Correct. That's what we've been talking about, yep. 5 Q. Now, if we'll look down the page at the next heading, and 6 two paragraphs under that. We probably can get them together. 7 These address a confirmation process that you're talking about. 8 With respect to the IIM audit, would describe briefly what the 9 results of the confirmation -- first of all, what the 10 confirmation process is. 11 A. Okay. Well, an audit, where possible, constitutes 12 confirming balances with third parties so that you have some 13 evidence that there's a meeting of the mind between the parties, 14 either treasury or the account beneficiaries, so in connection 15 with the IIM audit, there being somewhere around 300,000 16 accounts, we didn't attempt to send what we call a positive 17 confirmation account holder, a positive account -- 18 Q. A positive confirmation? 19 A. Confirmation request consists of sending a balance or the 20 statement to the party with a letter requesting to confirm their 21 agreement back to us, and in that -- we call it a positive 22 confirmation because we're asking them to confirm the request, 23 whether they agree or disagree, and what we did, because there 24 were so many accounts, we picked only the accounts that were 25 over $50,000 each, and there were, I don't know, some -- I'm Jacqueline M. Sullivan, RPR Official Court Reporter 126 1 trying to remember the number, but it was somewhere around five 2 hundred accounts that had balances of that size, so we sent 3 those confirmations out, and then to everyone else that received 4 a statement, I believe at the time statements were being sent 5 out theoretically every six months. We had the I.T. group that 6 was printing out the statements print a confirmation request on 7 the statement itself saying that if the beneficiary did not 8 agree with the balance to please contact Arthur Andersen, so we 9 sent both of those type of requests. 10 Q. Okay. At the second paragraph under this heading indicates 11 a significant portion of the confirmation requests were not 12 returned to us, and in addition, the confirmation requests which 13 were returned to us indicated both disagreements in certain 14 instances and simply apply an inability to confirm cumulative 15 balances and/or activity in many instances. Describe for us, if 16 you can, summarize for us, what was your view as an experienced 17 C.P.A. when these confirmation requests started coming in? 18 A. I guess I'd use the term "alarming." Out of, say, five 19 hundred positive confirmations, we received responses that 20 indicated agreement of only about seventy accounts, I think it 21 was, and in '88, in 1988, so that was like one out of every six 22 or seven beneficiaries agreed with their account balance. The 23 rest of them either didn't respond or in many cases provided 24 confirmations that said that they really didn't agree with what 25 was on the statement. Jacqueline M. Sullivan, RPR Official Court Reporter 127 1 Q. Was this a concern to you and Arthur Andersen? 2 A. Yeah. It's very rare to have this kind of a confirmation 3 result. I audited a number of banks and on those banks we 4 rarely get back an exception on a confirmation other than 5 something that's a timing difference. A long draft was taken 6 out at a point in time that created a reconciling difference, 7 and in those cases we generally try to verify that they were 8 just timing differences and thereby validate the confirmation 9 process. In these cases, just so many statements that they just 10 didn't agree, or they could see the statement but the checks 11 that were shown that they were supposed to be receiving, they 12 never received them, so we had a lot of exceptions that were 13 very concerning and ultimately concluded that we could not give 14 any comfort that the individual IIM account balances were 15 accurate. 16 Q. As part of this report and the other reports that were done 17 in 19 -- for the year ending September 30, 1989 and 1990, did 18 Arthur Andersen report on BIA's compliance with applicable 19 regulations and codes? 20 A. Yes. 21 Q. And in this document there are seventeen such noncompliance 22 items. I want to ask you to look at four of them very briefly, 23 three dealing with disbursements and one dealing with receipts. 24 The first disbursement issue, let's look at page 22, which is 25 page 8 of the report on noncompliance, and do you see up at the Jacqueline M. Sullivan, RPR Official Court Reporter 128 1 top where it talks about lack of documentation for IIM 2 disbursements? 3 A. Yes. 4 Q. If you'll take a look at that first paragraph. 5 A. Okay. 6 Q. And what was the problem here? 7 A. Well, there's certain documentation, as I mentioned 8 earlier, that's required for disbursement, just to demonstrate 9 that it was for the legitimate purpose it was supposed to be 10 for, and we in many instances or a certain number of instances, 11 we're citing here, I don't know how many that was, we're saying 12 that no such documentation existed. 13 Q. Okay. Let's look now toward the bottom of the page, and 14 that's dealing with IIM disbursements from minors' accounts made 15 to unauthorized persons, and if you'll look at that. 16 A. Okay. 17 Q. This is a similar situation where disbursements were being 18 made without the proper authorization forms being signed? 19 A. Yes. It's a little different situation. Here you have 20 children and someone who are beneficiaries, that someone in 21 their custody is supposed to be looking out for their best 22 interest in making sure that they authorize the payments for the 23 minor's benefit, and in a number of cases we saw disbursements 24 coming out of these accounts that didn't have any identifiable 25 relationship with the individual or their guardian. Jacqueline M. Sullivan, RPR Official Court Reporter 129 1 Q. Okay. And so this is then where a disbursement was going 2 to someone that wasn't even on the account? 3 A. There could have been a legitimate purpose, but we weren't 4 able to establish it. 5 Q. Okay. The last disbursement issue I want to ask you about 6 in terms of noncompliance is over on page 26, the bottom half of 7 that page. As it comes up you'll see that it has to do with 8 inadequate safeguarding of treasury checks. Would you read that 9 paragraph to yourself? 10 A. Okay. 11 Q. This was talking about treasury checks at BIA. Can you 12 explain how that happens? 13 A. Well, I believe every area office and agency had some 14 ability to write checks on site using treasury check stock, and 15 they kept stacks of them sitting around. In some cases they 16 were unprotected, and we apparently noticed instances when we 17 went to one agency office here that's cited where they opened 18 the vault, left it open. All the employees had the combination, 19 but they left the safe open all day long unguarded and 20 unprotected so that check stock, you can just pick up a stack of 21 it and take it. 22 Q. Okay. And were there other safeguards in place regarding 23 the treasury checks? 24 A. I think part of the problem is if you think about your own 25 personal checking account you can say, well, last one I wrote Jacqueline M. Sullivan, RPR Official Court Reporter 130 1 was 5641, so darn, I forgot to enter it, so you'll go back and 2 you'll look to see where it was and you try to keep track of 3 them in sequence, and with a hundred different locations issuing 4 checks, keeping track of the check stock and the used checks in 5 sequence was a virtual impossibility. 6 Q. Okay. Now, let me ask you, I want to look at an instance 7 of noncompliance that deals with -- 8 THE COURT: Before you leave this check question, what 9 does the check thing have to do with the cash in this case? I 10 mean, if somebody took a check out of an unprotected safe, an 11 original office, and wrote a check to himself, would the money 12 come out of an IIM account or would it come out of the treasury 13 general account? 14 THE WITNESS: It would come out of both because the 15 check was on the treasury account but typically they were -- 16 there was -- there were carbon copies to the check, and those 17 got submitted to the central office, so in the instances where 18 we'd seen the person didn't just walk off with the check and 19 there was no accounting for it. What we typically saw, we have 20 some instances of this where the individual that stole the money 21 dummied up the carbon copies, sent them in to the bureau, 22 because they weren't really probably that aware of how closely 23 they were being watched. I'm not sure they were being watched 24 that closely, but I guess you're right, money could be taken and 25 not accounted for at all, and that came out of treasury, but Jacqueline M. Sullivan, RPR Official Court Reporter 131 1 more likely than not from what we saw the money was taken and 2 charged to somebody's account or a special deposit account where 3 it was really difficult, there was no one person that could say, 4 hey, where did the money go, because it was sort of a commingled 5 account, so we saw more of that than we did that we had any 6 awareness of checks being taken and not being accounted for in 7 the system. 8 Q. How many did you see? Was it ever processed? 9 A. Some was. 10 Q. In what sorts of amounts? 11 A. I believe we are going to get -- 12 Q. Go ahead. 13 A. -- into a discussion about that, but we had hearsay of a 14 number of instances of fraud, but the only one that I had, have 15 any documentation on, was in the first quarter in '91. The 16 Crown Point area office had a complaint from an accountholder 17 and we got engaged to go out and take a look to see what was 18 going on, and then that particular instance a lady -- there were 19 about 13,000 accounts at the Crown Point agency, so that's a lot 20 of IIM accounts. It's like four percent of the total, and there 21 was apparently a lady there that had a lot of money flowing 22 through her account, but she lived in California. She came out 23 to the reservation periodically to pick up her money, and a 24 worker there thought that -- as a matter of fact, when she saw 25 the volume of money going through this lady's account the lady Jacqueline M. Sullivan, RPR Official Court Reporter 132 1 even commented to her that, geez, I'm getting killed on income 2 taxes for all this income I'm getting, and she says, I need a 3 charity, so this lady decided in her deposition as her -- it's 4 deposition, or what would you call that? 5 Q. You're correct. 6 A. Her interview. With the IG she said that she just thought 7 she'd take it upon herself to be that charity, and in her 8 account and her boyfriend's account, who was also an area IIM 9 area manager, he was her live-in, she got pregnant, decided she 10 needed some money, they had a joint account and we saw something 11 like 130, $155,000 being deposited into her account using two 12 schemes, and her boyfriend, although they had a joint account, 13 said he knew nothing about it. She justified it because she 14 needed the money. Her parents needed money. She took a lot of 15 money from that one account, so we had that one person that 16 actually confessed to part of that $155,000. During that same 17 investigation we spent about seven hundred hours out there I 18 think. We just picked on accounts that had a thousand dollars 19 or more going out of them at a time and certain accounts that 20 had maybe only five hundred going out, but in the course of a 21 month maybe $5,000 was taken out, so there would be like ten 22 transactions totaling five thousand a month, so we looked at 23 those, looked at patterns, found patterns. We knew that there 24 were -- there was money being taken out to certain parties, but 25 we could not get, at the time we performed the work we didn't Jacqueline M. Sullivan, RPR Official Court Reporter 133 1 have subpoenas or the IG didn't have subpoenas for their bank 2 account records so we couldn't look at the other side of it, but 3 it was, I mean, there were hundreds of thousands of dollars that 4 were problems at that one location. 5 Q. Thank you. In the one instance that you talked about, this 6 one employee, and I think you said about one hundred fifty-five 7 thousand, that she had a couple of different schemes, but did 8 all of them involve access to treasury checks and writing 9 treasury checks? 10 A. Yes. And, you know, then when we received the information, 11 the documentation justifying those disbursements, they had 12 disappeared, none of them had existed, and the only track we 13 could get on them was to get cancelled checks from treasury and 14 find out whose accounts that they were going to, so it was a 15 very long process. It took a long time to do it, but the two 16 mechanisms were just to write the check out to herself but turn 17 in the carbon papers as though they were written out to the 18 correct beneficiary. That was done. And then in another case 19 they were made out to a vendor name that ultimately got 20 deposited into her account, so two schemes. 21 Q. Let me ask you now to look at the bottom of page 25 of 22 Plaintiffs' Exhibit 31. And this is the one item, a 23 noncompliance dealing with receipts that I wanted to ask you 24 about. It's titled Proper Recording and Safeguarding of Cash 25 Receipts, and then you see it cites to a particular section. It Jacqueline M. Sullivan, RPR Official Court Reporter 134 1 talks about only authorized employees designated in writing by 2 proper authority will receive, handle, or deposit monies. 3 A. Correct. 4 Q. And then if you'll go to the top of the next page, please, 5 that first full paragraph. And it goes on to the quote from the 6 manual, but it says employees in the realty division. If you'll 7 read that to yourself I want to ask some questions to you. 8 A. Okay. 9 Q. What's happening here and what's the problem with it? 10 A. Persons with no authority to receive money were receiving 11 money, and then we saw steal deposit sitting around that had not 12 been deposited for a long period of time, so two issues. One of 13 them is because the segregation of duties. You would apparently 14 -- the design of the system was to ensure that employees that 15 shouldn't be making deposits if they had access to certain other 16 information for segregation of duty purposes, if you had those 17 people actually receiving money and then they weren't doing the 18 job. They weren't depositing, at least for some period of time. 19 Maybe they got ultimately deposited but they sat around for at 20 least a long period of time. 21 Q. Okay. It also indicates here that, in addition, it was 22 noted that in certain instances cash receipts were kept in an 23 opened and unlocked safe. These practices are in violation of 24 the regulations referenced above. Is that an instance that was 25 observed by Arthur Andersen? Jacqueline M. Sullivan, RPR Official Court Reporter 135 1 A. Yes. 2 Q. Now, with respect to the items of internal control 3 weaknesses, this report identifies 59 specific findings. I want 4 to ask you briefly about three. 5 A. Okay. 6 Q. If we'll turn to page 47 of Plaintiffs' Exhibit 31. This 7 is where it talks about inability to reconcile cash, including 8 balances of vested overnight in the U.S. Treasury. 9 MR. DORRIS: Your Honor, the computer went down and 10 he's rebooting so it may take just a moment. 11 BY MR. DORRIS: 12 Q. But I'll tell you what, maybe we can do it without looking 13 at it. 14 A. Okay. 15 Q. You've already described this issue? 16 A. Yes. 17 Q. And on page 47 where it talks about this inability of 18 treasury and BIA to reconcile, it says this condition represents 19 a material weakness in an internal control. You say this about 20 a couple of them, but was this in Arthur Andersen's material 21 weakness in connection with internal accounting controls? 22 A. Probably the largest concern before anything. 23 Q. Now, the next internal control weakness that I want to ask 24 you about has to do with the IIM accounts, and it begins on page 25 61 when our system comes back up, and it's talking about IIM Jacqueline M. Sullivan, RPR Official Court Reporter 136 1 reconciliations. And it talks about being IRMS and the finance 2 system being out of balance, and it states specific, we 3 recommend that IRMS be reconciled to the finance system with 4 emphasis placed on area and agency offices with large 5 discrepancies between the two systems. That was Arthur -- was 6 that Arthur Andersen's recommendation on that point? 7 A. It sounds like it from what you're saying. I don't have it 8 in front of me, but it sounds like something we would have said, 9 yes. 10 Q. All right. It goes on and states: We also understand that 11 management does not believe it will be possible to reconcile all 12 the differences which have accumulated over a period of several 13 years. The reference there to management, who is that referring 14 to? 15 A. Oh, I don't remember specifically who we would have 16 discussed this with, but I'm sure we, as part of the audit 17 process, we requested that that differential be reconciled down 18 to as small a number as possible by the time the audit was over, 19 and it was not. 20 Q. Okay. Let's go to page 61 at the bottom. The third 21 specific finding on internal control issues deals with IIM 22 withdrawals. And here at the bottom of page 61 of Plaintiffs' 23 Exhibit 31 it says, A number of instances were noted in which 24 applications for withdrawal from IIM accounts were not signed by 25 either the accountholder or guardian. And then at the top of Jacqueline M. Sullivan, RPR Official Court Reporter 137 1 the next page it continues on and says, Management at one agency 2 office indicated that a signature is not required by current 3 regulations. In many cases money will be released based on a 4 telephone call with formal documentation to follow. Was this 5 adequate internal accounting controls over disbursements? 6 A. No. 7 Q. Why do you say that? 8 A. Well, you have -- there's no hurdle there to make sure that 9 the disbursement went to an appropriate party. If you're making 10 disbursements using phone calls as your basis for that support 11 and leaving documentation to follow as how you're going to 12 perfect that transaction, that's pretty much of a hit-and-miss 13 proposition. 14 Q. Mr. Ziler, I want to get you to identify three exhibits. 15 I'm not going to ask you other questions, but I just want you to 16 identify them here. Plaintiffs' Exhibit 32, if we could bring 17 up the first page, and once that's brought up can you identify 18 that and confirm that it's the report by Arthur Andersen on 19 compliance and internal controls for the next audit year, which 20 is the one that ended September 30th, 1989? 21 A. That's correct. 22 Q. Okay. Now, if you'll look at Plaintiffs' Exhibit 33, and I 23 want you to confirm that that's the report on compliance and 24 internal controls for 1990. 25 A. Yes. Jacqueline M. Sullivan, RPR Official Court Reporter 138 1 Q. Now, you've also described for the judge an issue there at 2 the Crown Point agency, and is that on the Navaho reservation? 3 A. Yes, it is. 4 Q. Can you bring up Plaintiffs' Exhibit 34, and look at the 5 next page. And can you confirm that those are the work papers 6 of Arthur Andersen with respect to this issue at the Crown Point 7 agency that you've described to Judge Robertson? 8 A. Yes, they are. 9 Q. And finally, would you pull up, please, Plaintiffs' Exhibit 10 35? And is Plaintiffs' Exhibit 35 a sample of about ten or 11 fifteen of the responses that Arthur Andersen received back from 12 accountholders in connection with this confirmation that you 13 went through? Could you bring up the -- 14 A. I can read it. I'm sorry. I can read it fine. Yes, 15 that's one of the positive confirmations we sent out. 16 Q. Now, when you say "positive confirmation," that's where you 17 send the confirmation asking them whether they agree or disagree 18 to respond? 19 A. Right. It would have accompanied the statement that they 20 received. 21 Q. I was asking that because when you say it's a positive 22 confirmation, that wasn't coming back and saying everything was 23 okay? 24 A. No. It was that's a definition I used previously, and a 25 positive confirmation is one where we ask for a response whether Jacqueline M. Sullivan, RPR Official Court Reporter 139 1 or not they agreed. 2 Q. And we've put together I guess twelve here. You see the 3 first one is a concern about not receiving disbursements checks. 4 Let's look at the next page. If you can highlight what's 5 written there. What was the problem here as you understood it 6 on behalf of Arthur Andersen? 7 A. Well, this person is stating that they received an account 8 statement that shows that monies are being withheld for 9 repayment of a loan that they had no knowledge of, so again, 10 this is -- we would have given all of these to the bureau 11 management for them to follow-up on, but it's an apparent 12 situation where the loan is reflected on this person's account 13 either didn't exist or it was somebody else's loan, or I suppose 14 the person could just be making this up, but it's certainly left 15 a lot to the imagination. 16 Q. But these are the type of responses that you were referring 17 to earlier when you indicated -- 18 A. Correct. 19 Q. -- when you testified about the confirmations that were 20 received back? 21 A. Correct. 22 MR. DORRIS: Your Honor, we would move for admission 23 Plaintiffs' Exhibits 31 through 35. 24 THE COURT: 31 through 35 are received. 25 (Plaintiffs' Exhibit Nos. 31-35 received into evidence Jacqueline M. Sullivan, RPR Official Court Reporter 140 1 at about 2:40 p.m.) 2 MR. DORRIS: Thank you, Mr. Ziler. 3 THE COURT: Go ahead, Mr. Kirschman. 4 BY MR. KIRSCHMAN: 5 Q. Good afternoon, Mr. Ziler. 6 A. Good afternoon. 7 Q. I have some follow questions based on what you just 8 testified to. 9 A. Okay. 10 Q. Are you being paid to testify today? 11 A. Yes. 12 Q. And who are you being paid by? 13 A. The contract was, let's see, I believe signed by Elouise 14 Cobell. I can't remember the exact payment mechanism, but she 15 signed the contract. 16 Q. Okay. Your knowledge regarding the individual Indian money 17 trust fund is limited to your work with Arthur Andersen; is that 18 correct? 19 A. Correct. 20 Q. And you're testifying today to this Court about what you 21 know based on that work? 22 A. Correct. 23 Q. Is it correct to say that your work related to IIM trust 24 accounts ended in 1992? 25 A. Possibly not. That was, let's see, '88, '89. We finished Jacqueline M. Sullivan, RPR Official Court Reporter 141 1 the last audit probably in '91 and I continued on as managing 2 partner of the office where the work was being performed on up 3 to '99. At some point prior to '99 we stopped doing the work in 4 the office. 5 Q. I'm sorry. Some? 6 A. At some point prior to '99 I don't believe we were doing 7 any more work in the office on the IIM accounts. 8 Q. At some point, Mr. Ziler, you became Andersen's assurance 9 and business advisory services head, the head of Andersen's 10 assurance and business advisory services prior to 1994? 11 A. When I came to the Albuquerque office from the L.A. office 12 that was what I became. That would have been like in 1984, so I 13 ran the audit and business advisory services practice out of the 14 Albuquerque office for those years until I became managing 15 partner probably in '91, '92; something like that. 16 Q. Okay. And when you became managing partner did you have 17 any direct involvement in the IIM trust accounts? 18 A. Not as the point person, but probably had some continuing 19 general awareness of what was going on. 20 Q. Continuing what? 21 A. General awareness of what was going on. Other partners in 22 the office were working on it. 23 Q. But you did not perform any work related to those accounts? 24 A. Not directly. 25 Q. So it's fair to say that you did not do any work on these Jacqueline M. Sullivan, RPR Official Court Reporter 142 1 accounts prior to 1994? 2 A. Subsequent to '94 or? 3 Q. Prior to 1994, subsequent to 1994. 4 A. No. 5 Q. When was the last time you saw Plaintiffs' Exhibits 31 6 through I believe it's 35 prior to preparing for this trial? 7 A. Were those the confirmations? 8 Q. I'm sorry? 9 A. Were those the confirmation exhibits? I don't know what 10 they are. 11 Q. Those were all the documents you just reviewed with Mr. 12 Dorris. When was the last time you had seen those before you 13 prepared for your testimony today? 14 A. Oh, probably yesterday. 15 Q. Okay. And before that? 16 A. Some of the documents were sent to me a few weeks ago. 17 Q. Did you ask to see any documents? 18 A. Well, I was asked if I would provide some testimony on what 19 we saw during our audits, and the law firm sent me a set of 20 documents that they had for me to kind of review and refresh my 21 memory. 22 Q. In preparing to testify today, Mr. Ziler, did you see any 23 of the exhibits or review any of the transcripts from the 24 October 2007 trial in this case? 25 A. I believe I did receive it. I did receive that Jacqueline M. Sullivan, RPR Official Court Reporter 143 1 information, yes. 2 Q. Did you review it? 3 A. I skimmed it. 4 Q. For what purpose? 5 A. Just to get a general sense of what the status of the 6 process was. 7 Q. Now, you stated regarding the first audit for the period 8 ending September 30th, 1988 that you were requested to perform 9 that audit by the BIA, correct? 10 A. Correct. 11 Q. And in fact, I believe you testified that the BIA was aware 12 of its weaknesses, correct? 13 A. Correct. 14 Q. And did the BIA make it aware to you that they wanted to 15 correct those weaknesses? 16 A. Well, I believe the whole process was designed to help 17 guard their weaknesses and get a better inventory of them. I'm 18 not sure they were fully known, so I think the audit process 19 illuminated some things. 20 Q. Do you have any firsthand knowledge as to what BIA and the 21 Department of the Interior in general did subsequent to 1990 to 22 improve those processes? 23 A. I haven't kept track of that. 24 Q. Have you ever seen or heard of the record depository in 25 Lenexa, Kansas that houses documents? Jacqueline M. Sullivan, RPR Official Court Reporter 144 1 A. Something I saw referred to that. 2 Q. But that's the extent of your knowledge? 3 A. Yes. 4 Q. So your testimony today is limited to what Arthur Andersen 5 saw or reported up to 1999 -- I'm sorry. Up to September 1990? 6 A. Correct. 7 Q. For these audits what role did you personally play in 8 performance of the audit? 9 A. Well, I was the engagement partner, so I oversaw it, I 10 coordinated it, I reviewed the work papers, I conferred with 11 other concurring partners. I talked with all of our key staff 12 members on the team and interfaced with people at the bureau. 13 Q. In your role as engagement partner did you ever review any 14 of the confirmation letters? 15 A. Yes. 16 Q. Now, as a result of Andersen's audit work it was not your 17 conclusion that no audit or reconciliation could be performed 18 for all of the different types of IIM accounts, isn't that 19 correct? 20 A. Well, we were asked by Congressman Synard at one time to 21 give him an estimation of what we thought could be done and 22 could not be done. 23 Q. And do you recall telling the Congressman that you, Arthur 24 Andersen, believed that judgment accounts could possibly be 25 reconciled and audited? Jacqueline M. Sullivan, RPR Official Court Reporter 145 1 A. Correct. 2 Q. And that's because in that time frame there was enough 3 information and paperwork for judgment accounts, correct? 4 A. Well, there were a couple of factors. A judgment account 5 usually doesn't have a long history, so it has a defined start 6 date that's within the recent enough past to where, you know, 7 the trust period is over a limited number of years versus 8 decades or centuries. So that was one factor. And another 9 factor was judgment accounts are usually from a single source 10 that makes the -- 11 Q. I'm sorry. I could not hear you. 12 A. Judgment accounts are usually from a single source so that 13 the money, you can kind of anticipate what should be going into 14 the account. It makes it easier to tackle, and it did cover a 15 fairly large number of dollars, so we did recommend that this be 16 undertaken. I don't know what subsequently happened, if that 17 was done or not. 18 Q. Do you recall in your communication with the Congressman 19 that you also suggested that, although there were issues 20 regarding the documentation, that nonjudgment award account- 21 holders should not be ignored? 22 A. Oh, I'm sure we did say that. 23 Q. And do you recall suggesting that account balances 24 exceeding a specific dollar amount should be analyzed to the 25 extent reasonably possible? Jacqueline M. Sullivan, RPR Official Court Reporter 146 1 A. I imagine. I don't remember that specifically, but that 2 seems like a suggestion we would have made. Going after the 3 large dollars first would make the most sense, yes. 4 Q. Would it help your recollection if I showed you the letter 5 I'm referring to? 6 A. That would be fine. 7 MR. KIRSCHMAN: Your Honor, may I approach the 8 witness? 9 THE COURT: You may. 10 MR. KIRSCHMAN: Your Honor, I was going to pass out 11 hard copies the old-fashioned way, but I believe we also have 12 this on the monitors 13 THE COURT: Let's hear it for monitors. The whole 14 idea of the monitors is to save all that walking. You'll have 15 to get your exercise some other way. 16 THE WITNESS: Thanks. 17 BY MR. KIRSCHMAN: 18 Q. Mr. Ziler, I'll turn your attention to page five of the 19 letter. 20 A. Okay. 21 Q. And refer you to the second paragraph on that page. And it 22 is a letter that was signed by you; is that correct? 23 A. I'm sure it is, yes. 24 Q. In that paragraph you state: We do not believe, however, 25 that nonjudgment award accountholders should be ignored. Jacqueline M. Sullivan, RPR Official Court Reporter 147 1 Whether or not all trust accounts are audited and reconciled, we 2 believe that unidentified and unallocated balances exceeding a 3 specific dollar amount should be analyzed to the extent 4 reasonably possible in significant accounts for which account- 5 holders indicate disagreement or misunderstanding should be 6 analyzed and researched and discussed with the beneficiaries. 7 Do you see that? 8 A. Yes. 9 Q. Do you have any knowledge today whether in fact that work 10 has been done? 11 A. Well, this was written in 1989, and I believe before the 12 end of the '90 audit, somewhere along that timeline, some of the 13 unallocated balances that had been hung up in the special 14 deposit accounts for years were analyzed and to the extent 15 possible the bureau made an effort to distribute some of those 16 funds, so to some extent I knew that part of the problem had 17 been resolved prior to the completion of our three-year 18 engagement. After that I lost track on it. 19 Q. Okay. And for the record, this is an October 2nd, 1989 20 letter from Arthur Andersen to representative Mike Cynar, 21 Chairman of Environment, Energy and Natural Resource 22 Subcommittee. 23 You testified, Mr. Ziler, regarding the confirmation 24 requests. 25 A. Yes. Jacqueline M. Sullivan, RPR Official Court Reporter 148 1 Q. Correct? 2 A. Um-hmm. 3 Q. And I apologize if I don't get this correct, but you called 4 them positive confirmations, right? 5 A. Some of them were positives and some we called negative 6 confirmations. The negative confirmation is when a request is 7 printed on the statement asking the beneficiary if they didn't 8 agree with the account to please contact us. 9 Q. Ask the beneficiary if they did not agree to please contact 10 Arthur Andersen? 11 A. Right. 12 Q. Okay. Plaintiffs' Exhibit 35 has I think Mr. Dorris said a 13 dozen confirmation letters. Which type are these? I note that 14 there's a paragraph that reads: If you do not return this page 15 to the auditors they will consider this statement to be correct. 16 A. That was still a positive confirmation. 17 Q. That's a positive one? 18 A. Yes. 19 Q. Now, how many positive confirmation letters went out? 20 A. I'm going by vague memory, but it varied probably by year. 21 We did it every year I believe, but I believe what we did is we 22 sent positive confirmations to accountholders with balances over 23 fifty thousand, and I believe that at least in one year I just 24 remember seeing some of our documentation, the number was 25 somewhere around five hundred accounts. Jacqueline M. Sullivan, RPR Official Court Reporter 149 1 Q. There were five hundred accounts over $50,000? 2 A. Right. 3 Q. And these positive confirmation letters went out? 4 A. To them. 5 Q. And of those do you recall how many were returned? 6 A. It's in the work papers that I've reviewed, but I don't 7 have that in my head right here. I think the response rate was 8 poor, but I can't tell you what the mix was. It might have been 9 50/50; something like that. 10 Q. You said the response rate was poor? 11 A. Yeah. The response rate was probably around 50/50. 12 Q. Do you know that or is that a guess? 13 A. I'm just going by memory right now. Okay. The thing is, 14 we didn't take a whole lot of comfort in that because we knew 15 that there were a lot of problems with the address system that 16 the bureau was using. They had one system that had the 17 addresses in it and that didn't necessarily mesh with the system 18 that the confirmations were sent from so we had a low confidence 19 rate that the correct addresses were being used. 20 Q. So even though this letter states if you're not returning 21 this page to the auditors, they will consider this statement to 22 be correct, you didn't put much stock in the fact that the 23 letters weren't returned? 24 A. That didn't give us a lot of comfort, but because I think 25 that wording was used to encourage people to send the response. Jacqueline M. Sullivan, RPR Official Court Reporter 150 1 Q. So if you received a response it was bad news, and if you 2 didn't receive a response you didn't give it much weight? 3 A. Probably not a lot. I'll tell you why. Because -- 4 Q. No, that's okay. 5 A. Okay. 6 Q. Is it a normal form of audit work to send out confirmation 7 letters? 8 A. Yes. 9 Q. So this wasn't an extraordinary step that Arthur Andersen 10 took because you were working with the BIA? 11 A. No. 12 Q. Did Arthur Andersen take any action to follow-up on these 13 responses when they were received? 14 A. No, other than to provide copies of them to the bureau that 15 was beyond the scope of our work. 16 Q. Do you recall, Mr. Ziler, if your work with Arthur Andersen 17 demonstrated that large amounts of tribal trust funds would 18 leave from the IIM system? 19 A. No. I believe it was to the contrary. I believe a lot of 20 money came into the tribal trust system that went into the IIM 21 accounts. 22 Q. I'm sorry. Again could you repeat that? 23 A. What you asked me. I believe the 1988 financial 24 statements, for instance, showed net transfers from the tribal 25 system to the IIM system of about $70 million. Jacqueline M. Sullivan, RPR Official Court Reporter 151 1 Q. $70 million for that one year? 2 A. Um-hmm. 3 Q. And just so I'm clear, that was money that was in the 4 tribal trust funds and then it was transferred to the IIM 5 accounts? 6 A. Yes. 7 Q. And do you recall if it was in fact transferred by the 8 tribes? 9 A. By the tribes? 10 Q. For the tribes. 11 A. For the tribes? I don't have the detail information on 12 that, but I assume that if it went from the tribal trust funds 13 to the IIM accounts what that meant is that the tribes were the 14 initial recipient of the money and they knew that it needed to 15 be distributed down to the individual level so it was 16 transferred to the IIM accounts. 17 Q. Was that a practice you saw in 1988, 1989, and 1990? 18 A. Primarily 1988 I think. 19 Q. In the earlier year? 20 A. Yes. 21 Q. Mr. Dorris showed you Plaintiffs' Exhibit 34, a work paper. 22 Had you seen that before this week? 23 A. I'm not sure what No. 34 was. 24 Q. Could you please put that up? 25 A. Is that the Crown Point? Okay. Jacqueline M. Sullivan, RPR Official Court Reporter 152 1 Q. I cannot tell you standing here, Mr. Ziler. 2 A. It is. 3 MR. DORRIS: It is, your Honor. 34 was with Crown 4 Point Navaho issue with the checks. 5 THE COURT: The question is, had you seen it before a 6 few days ago? 7 THE WITNESS: Saturday or Sunday. I don't remember. 8 BY MR. KIRSCHMAN: 9 Q. I'm sorry? 10 A. I saw them Saturday or Sunday. 11 THE COURT: I think his question is: Did you see them 12 back when they were being developed and worked on? 13 THE WITNESS: I saw portions of them. I'm not sure I 14 saw all of them. Obviously I signed the contract amendment and 15 I had seen probably top-level memos. I'm not sure I went 16 through every work paper. 17 BY MR. KIRSCHMAN: 18 Q. But my question is regarding this group of papers. 19 A. Yes. 20 Q. Was this group sent to you? 21 A. No. 22 Q. Is this papers that you had in your possession? 23 A. No. 24 Q. How did you come upon these papers Saturday or Sunday? 25 A. From Plaintiffs' lawyers. Jacqueline M. Sullivan, RPR Official Court Reporter 153 1 Q. And they provided you that pack of documents? 2 A. Correct. 3 Q. And why did they do that? 4 A. To refresh my memory about that incident. 5 Q. I see. Did you ask them to refresh your memory with those 6 documents? 7 A. We talked in general about how many instances of fraud we 8 could remember, and I said, you know, twenty years ago? I 9 didn't remember that much, and they showed me this set of 10 documents because I think it was the only information that they 11 had specifically they could use to refresh my memory. 12 Q. Related to fraud generally? 13 A. To specific fraud work that Arthur Andersen performed. 14 Q. Okay. I believe you said that the woman who had written 15 these checks was caught by the IG? 16 A. She was interviewed by the IG. 17 Q. Do you recall how this matter resolved itself, how it was 18 resolved? 19 A. No. 20 Q. Do you know if the woman was required to repay the money? 21 A. I don't. 22 Q. Do you know if she was required to serve any prison time? 23 A. I don't. 24 Q. Did I understand you correctly that a worker first noticed 25 a high volume of dollars and reported this to the IG? Jacqueline M. Sullivan, RPR Official Court Reporter 154 1 A. No. 2 Q. Okay. Could you refresh my memory? 3 A. Just from reading those documents it appeared what happened 4 was the account beneficiary made an inquiry because it didn't 5 look like the money was getting into her account that she had 6 expected. I think she started the whole investigation off. 7 Q. I see. And do you recall if that account beneficiary then 8 received the balance that she was owed? 9 A. I don't know that. 10 Q. You don't know? 11 A. We weren't involved in any restitution process. 12 MR. KIRSCHMAN: One second, your Honor, please. 13 (There was a pause in the proceedings.) 14 BY MR. KIRSCHMAN: 15 Q. You testified about the fact that for a six-month period, I 16 believe in, I believe, 1988, that no notification deposits were 17 transmitted to treasury from the Department of the Interior; is 18 that correct? 19 A. I believe it was 1986. 20 Q. 1986? 21 A. The specific facts are in the financial statements, and I 22 don't know the specific amount. All I know is that the 23 quantification of estimated lost interest was $2 million for 24 that period. 25 Q. And you were informed of that by the Department of Interior Jacqueline M. Sullivan, RPR Official Court Reporter 155 1 staff itself? 2 A. Yes. 3 Q. And did they tell you that upon discovering that that the 4 $2 million in interest was then credited to the accounts? 5 A. No, it was not. 6 Q. It was not? 7 A. That's my understanding. 8 Q. And what's that based on? 9 A. It is based on a twenty-year recollection and reading the 10 financial statement footnote saying there was $2 million of 11 foregone interest that was gone and lost forever because it was 12 not invested and there was no way to recover interest on money 13 that was not invested. 14 Q. Okay. 15 MR. KIRSCHMAN: One moment, your Honor. 16 (There was a pause in the proceedings.) 17 MR. KIRSCHMAN: Your Honor, I have no other questions 18 for Mr. Ziler. 19 I would like to mark if I could and introduce the 20 letter to Congressman Cynar as DX 465 and move that into 21 evidence. 22 THE COURT: DX 465 will be received. 23 MR. KIRSCHMAN: Thank you, Mr. Ziler. 24 THE WITNESS: Thank you. 25 (Exhibit No. DX 465 received into evidence at about Jacqueline M. Sullivan, RPR Official Court Reporter 156 1 3:08 p.m.) 2 THE COURT: Anything further, Mr. Dorris? 3 MR. DORRIS: I have no further questions for Mr. 4 Ziler. 5 I would just note for the record, your Honor, the work 6 papers of Plaintiffs' Exhibit 34 was previously admitted in 7 trial 1.5 as Plaintiffs' Exhibit 102 there, and would I just 8 note that for the record, but I have no further questions for 9 Mr. Ziler. 10 THE COURT: Mr. Ziler, you're excused. Thank you, 11 sir. 12 THE WITNESS: Thank you. 13 (Witness excused at about 3:09 p.m.) 14 THE COURT: Now, before we go any further, I'm going 15 to ask counsel to convene a little seminar here. I wish we 16 could do this in jury cases. I want to know what the testimony 17 we've just heard adds to the Plaintiffs' case and where it fits 18 the Plaintiffs' case. I mean, it was previously noted in my 19 opinion back in January about the Arthur Andersen audit in 1988 20 and 1989. We knew that. We knew about the unreliability. I 21 don't know what the testimony was about or how it advances the 22 Plaintiffs' position in this case. I don't know what the 23 cross-examination was about, so teach me, guys. 24 MR. DORRIS: I'll give that a shot, your Honor. 25 Really in two ways that it's significant to our case that is at Jacqueline M. Sullivan, RPR Official Court Reporter 157 1 issue here in this hearing. The first goes to a very funda- 2 mental part of our case, which is that money can be in the 3 treasury without being accounted for by BIA and that there are 4 no reconciliation processes that go on between the two of them. 5 For example, there is the instance that he testified about where 6 money came in to treasury, was not -- was deposited into 7 treasury from IIM funds and was not accounted for by BIA and 8 that treasury didn't even know that had to do with the IIM 9 trust, so that's point number one. 10 The second point is that -- well, really three points. 11 The second -- 12 THE COURT: How am I supposed to make use of that? 13 What we have on that point is one man's recollection of what 14 happened twenty years ago. We've got no documentation, we've 15 got no quantification. What am I supposed to do with it? 16 Remember we're trying to put a number together here. How does 17 it help me put a number together? 18 MR. DORRIS: Well, first of all, that it's not just 19 that one incident that's important. What's also important is 20 that you have -- we will be looking at BIA records, and 21 essentially treasury was their bank, and there's no 22 reconciliation between BIA records and what cash was actually 23 deposited in the treasury throughout the course of that this 24 time, so that doesn't help you actually quantify the number, but 25 it is an underlying premise for part of what we hope to prove Jacqueline M. Sullivan, RPR Official Court Reporter 158 1 when we do get around to proving a number, which is that there's 2 more money in treasury that has come in than has been paid out. 3 THE COURT: All right. 4 MR. DORRIS: The second of -- I guess it's really 5 three areas, but I guess the last two points go to the same 6 issue, which goes to some extent to perhaps it's anticipating, 7 since we called this witness, a little bit of the government's 8 burden, which is as we look at these entries from the automated 9 accounts that we will do in which they rely on when they prepare 10 AR-171, they revised it on May 30th, and they gave us another 11 revision last Friday night at 6:30, that those rely on automated 12 systems, the reliability of which is questionable such that as 13 you go to make this calculation and quantification it doesn't 14 help you with the math but it helps provide you with the 15 underlying information that it is from those very systems that 16 he audited and found from a C.P.A.'s standpoint as being 17 unreliable. It is from those same systems that the government 18 is pulling their numbers. I don't think that that is 19 satisfactory for them to make the burden that they will have in 20 this case. However, from the Plaintiffs' standpoint we can 21 essentially use that information from their own systems as an 22 admission by them of at least at a minimum of what is there so 23 it puts into context the evidence that will have to do with the 24 quantification. I admit it does not have direct bearing on 25 how -- on what numbers you add up in a column to get to that Jacqueline M. Sullivan, RPR Official Court Reporter 159 1 quantification, but we hope that it puts some of the numbers 2 you'll hear into the proper context and will be important for 3 you we believe as you begin to try to judge the burdens and who 4 has met their burden and who has not. 5 THE COURT: All right. 6 Do you want to add or subtract anything from that, Mr. 7 Kirschman? 8 MR. KIRSCHMAN: Well, your Honor, I would just note 9 that I only objected once but it was to a line of questioning 10 that we did not believe were relevant that was relevant to this 11 trial. So we did not see the relevance of Mr. Ziler's 12 testimony. The basis of the cross-examination once you allowed 13 the testimony was to demonstrate that he was testifying from a 14 twenty-year old memory and that his knowledge was limited to 15 events well before the passage of the '94 act, and that to the 16 extent he spoke with specificity he was doing so based on a 17 document that plaintiffs had sent him which they had in their 18 possession to help establish I guess one singular case of fraud, 19 so that was the purpose of the cross, and we agree, we do not 20 see the relevance of that testimony. 21 THE COURT: All right. 22 MR. KIRSCHMAN: Regarding the government's burden, I 23 think plaintiffs' counsel has it backwards but they have to 24 present a case and that has not been done yet. 25 THE COURT: Okay. Look, there are only two people in Jacqueline M. Sullivan, RPR Official Court Reporter 160 1 this room whose continued presence is mandatory, and I'm one of 2 them and the court reporter is the other one, and till and 3 unless the court reporter or myself think it's time for a break, 4 we're just going to keep plugging right along. 5 You've got the right report? 6 MR. HARPER: I'm fine. 7 THE COURT: You're fine. Let's go. Call your next 8 witness. 9 MR. HARPER: Good afternoon, sir. 10 Plaintiffs call Ms. Mona Infield. 11 THE COURT: Ms. Infield, we haven't used this device 12 for some time. Do you know if it works? 13 MS. INFIELD: I brought my cane with me today, your 14 Honor, so I'll be fine. 15 THE COURT: All right. Thank you, ma'am. I can't 16 tell you how much money we spent for those lifts, and I don't 17 think they've been used more than twice in the whole courthouse 18 in two years, and I'm not sure they work, to be honest with you. 19 COURTROOM DEPUTY: Please raise your right hand. Do 20 you solemnly swear that the testimony you should give to the 21 Court in this case now on trial should be the truth, the whole 22 truth and nothing but the truth so help you God? 23 MS. INFIELD: I do. 24 COURTROOM DEPUTY: Thank you. 25 MONA INFIELD, WITNESS FOR THE PLAINTIFF, SWORN Jacqueline M. Sullivan, RPR Official Court Reporter 161 1 DIRECT EXAMINATION 2 BY MR. HARPER: 3 Q. Good afternoon, Ms. Infield. 4 A. Good afternoon. 5 Q. Could you please state your name and spell your last name 6 for the record? 7 A. Mona B. Infield, I-n-f-i-e-l-d. 8 Q. And could you tell me where you reside? 9 A. I reside in Chorales, New Mexico, just outside of 10 Albuquerque. 11 Q. Where are you currently employed? 12 A. I'm currently with the Bureau of Indian Affairs at the 13 Albuquerque data center in the Office of Operations. 14 Q. Have you been -- how long have you been a government 15 employee? 16 A. I started my government career 26 years and one week ago 17 today. 18 Q. And I just would like to start by outlining a little bit of 19 your experience with the government for the Court. Could you 20 tell me what your first position was and where it was at? 21 A. My first position was as a clerk-typist with the appraisals 22 office in the Osage agency in Pahos, Oklahoma. I also did some 23 clerk work for the adult vocational education program and the 24 Social Services program at that time. I then moved into the 25 realty shop as a realty clerk. And then I left government Jacqueline M. Sullivan, RPR Official Court Reporter 162 1 service and went to work for the Osage tribe on a 638 contract 2 where they were performing minerals function for the Bureau of 3 Indian Affairs. I worked as a clerk in the minerals office and 4 then became the senior systems operator for the computer systems 5 on that 638 contract at Osage. 6 Q. When you say the "minerals office," could you explain 7 exactly what the minerals office did? 8 A. Well, Osage is a little different from the rest of the 9 Bureau of Indiana Affairs in that not only does the agency take 10 care of the leasing activities for minerals production but they 11 also take care of the oil, gas, accounting, which in the rest of 12 the bureaus is handled by the minerals service, and they also 13 handle the field work, which for the rest of them is handled by 14 the Osage agency, is fairly self-contained as far as their oil 15 and gas operation is concerned. They do not use minerals 16 management purposes for accounting purposes. They do not use 17 BLM for field purposes. 18 Q. When you say the minerals, what minerals are you talking 19 about? 20 A. Oil and gas and some hard rock minerals, sand, gravel; you 21 know, things like that. 22 Q. And who do these -- what happens with the proceeds from 23 these minerals? 24 A. The share that belongs to the shareholders is collected by 25 the agency and forwarded to a treasury account where it's Jacqueline M. Sullivan, RPR Official Court Reporter 163 1 invested and subsequently disbursed to the annuitants, Osage 2 estate, and there are -- at the Osage allotment there were 2,229 3 allotted Osages that received their surface ownership of land 4 and their one head right share of the mineral estate. 5 Q. And when you say the annuitants, are you familiar with the 6 term the Osage Annuity Account? 7 A. Yes. That's generally how the treasury account that all 8 these funds are collected into as they come in or is referred 9 to. 10 Q. And the annuitants in that annuity account, who are they? 11 A. The annuitants are the shareholders, the people who own the 12 head right shares. 13 Q. Are they exclusively individual Indians? 14 A. Well, no. Mostly individual Indians. You do have some 15 nonIndians, you have some charity organizations, some faith- 16 based organizations that have inherited shares of the head right 17 over the years. 18 Q. And what was your personal involvement in the management of 19 the Osage annuity account? 20 A. Well, I worked closely with the people that were 21 distributing the money to the annuitants at each quarter. 22 Quarterly payments are made from that annuity account to those 23 head right shareholders. Now, realizing an allotment time they 24 were allotted 2,229 shares each to an individual Osage Indian on 25 the role at that time. When I went to work for the agency in Jacqueline M. Sullivan, RPR Official Court Reporter 164 1 1982 there had been some error made over the years in estate 2 distributions and so we were not distributing a full 2,229 3 shares. We were distributing 2,228.97393 shares, and that is 4 today still the number of shares that are distributed on a 5 quarterly basis. 6 Q. So that fraction of a share, do you know what happened to 7 that fraction of a share? 8 A. We have -- nobody knows. Nobody has ever taken the time to 9 go back to discover when it was lost or how it was lost. 10 Q. We'll get further into specific Osage issues in a moment, 11 but I do want to continue down with your work history before we 12 get into the specifics. Could you tell me at what point did you 13 leave the Osage agency office? 14 A. I worked for the tribe on the 638 contract until October of 15 1987, at which time I came back into the bureau in Muskogee, 16 Oklahoma, and the Muskogee area office was what today they term 17 as a regional office, and it encompassed the oversight for the 18 Miami agency, the Osage agency, and those agencies for the five 19 civilized tribes. 20 Q. And what was your position at the Muskogee area office? 21 A. I was a computer specialist, and actually I was the only 22 computer specialist in the Muskogee area office at the time. We 23 had an information management center that provided some services 24 out of the Anadarko area office, and that's where they ran the 25 IRMS system for Anadarko and Muskogee was in the Anadarko Jacqueline M. Sullivan, RPR Official Court Reporter 165 1 information management center. 2 Q. For the court reporter I'm going to restate, you mentioned 3 an acronym, and that's IRMS, correct? 4 A. The integrated records management system. 5 Q. And what is IRMS and how is IRMS related to individual 6 Indian trusts? 7 A. Well, at its conception IRMS was a set of subsystems that 8 were interrelated by ID number where you would have the account, 9 the individual Indian money account for an individual. You 10 would have their people record and the people subsystem which 11 would show their heritage and their blood quantum and their 12 decadency and their education and other things about their 13 background and demographics, and you would also have ownership 14 records that showed by that ID number what piece of -- which 15 trust property was owned by that person, and those ownership 16 records were also retrievable by track number so that you could 17 get to a specific piece of land, and then you have the lease 18 subsystem which held all of the lease instruments that had been 19 approved and were being operated under for trust income to be 20 received on those -- on the trust property. 21 Q. And we'll get a little bit more into the IRMS system after 22 we get through your history here and experience. 23 As a computer specialist at the Muskogee area office, 24 did you then become familiar with the integrated resource 25 management system? Jacqueline M. Sullivan, RPR Official Court Reporter 166 1 A. I actually got my first training in IRMS when I was at 2 Osage, and in probably late '82 or early '83 because no one in 3 the Muskogee regional area was using IRMS at the time and 4 computers were fairly new to the bureau. As a matter of fact, 5 the personal computers were pretty much nonexistent at that 6 point in time so we used -- we were trained to use IRMS, and it 7 was such an antiquated system at that time that we didn't even 8 have data entry screens. We would take information from, for 9 instance, an IIM jacket folder and put the information off of 10 that on to a code sheet, and then you would take the code sheet 11 to the computer and sit down and in code an 80-character stream 12 of letters and/or numbers across the screen and that's how you 13 got data into the system. 14 MR. KIRSCHMAN: Your Honor, continuing objection to 15 the relevance of this testimony, and we'd also point out that 16 this is very much repetitive of testimony Ms. Infield supplied 17 this Court in October of last year. 18 THE COURT: Yes. I'm looking at my notes of her 19 testimony when she was here before me, and I really don't have 20 to have that repeated, but I'll allow some leeway here, Mr. 21 Harper. 22 MR. HARPER: Thank you, your Honor. I won't spend too 23 much time on the background. I think the basis of some of the 24 more substantive questions, I wanted to give the Court a little 25 sense of some of the experiences Ms. Infield has had. Jacqueline M. Sullivan, RPR Official Court Reporter 167 1 THE COURT: All right, go ahead. 2 MR. HARPER: Thank you. 3 BY MR. HARPER: 4 Q. We'll talk more about the IRMS system and some of the 5 importance for this particular trial, Ms. Infield, but moving 6 from the Muskogee area office, what was your next position at 7 the Department of Interior? 8 A. In August of 1991 I took a position in the data center in 9 Albuquerque, New Mexico as a programmer. 10 Q. And what is the data center? 11 A. The data center at that time was where we housed all of the 12 computer systems used nationwide by the Bureau of Indian Affairs 13 with the exception of those IRMS and auto systems. They were 14 out of six information management systems at the time. Those 15 IRMS or information management centers, those systems were 16 brought into the data center in the '90s so that now it's all 17 operated centrally in a data center. 18 Q. And what additional positions have you had since that time 19 in Albuquerque? 20 A. I was first -- my first job was as a programmer for the 21 royalty distribution and reporting system. I was then the team 22 leader for the IRMS programmers. I became a section chief for 23 data management and scheduling. I was acting as the branch 24 chief for the applications support branch, which was all of the 25 programmers for all of the applications used. Jacqueline M. Sullivan, RPR Official Court Reporter 168 1 Q. And in the mid-1990s when there started to be the Office of 2 Special Trustee offices was created pursuant to the '94 act, did 3 you have any particular role with respect to the OST and the 4 trust reform effort? 5 A. I took a detail and then applied for a permanent position 6 in the Office of Trust Funds Management. About the same time or 7 maybe right before I was removed from the Bureau of Indiana 8 Affairs and put in the Office of the Special Trustee. 9 Q. Were you involved in any projects that allowed you to 10 review the systems and procedures used within the Bureau of 11 Indiana Affairs for the management of trust assets and funds? 12 A. I was in charge of the Whereabouts Unknown project where we 13 tried to locate accountholders that we did not have a good 14 address for. I also worked on several IIM reform projects, or 15 trust reform projects as they later became known. I was also 16 the coordinator for the federal tribal task force that went 17 around the country and took -- did tribal and individual 18 consultation on the problems with the trust systems and we 19 gathered all the problems together. The task force came back 20 together. We prioritized the problems and that subsequently 21 became the basis for Paul Homeman's first strategic plan for 22 Office of the Special Trustee. 23 Q. I'd like to step back now and discuss one of your earlier 24 experiences, and you mentioned your experience at the Osage, and 25 talk a little bit about the Osage annuity account. From where Jacqueline M. Sullivan, RPR Official Court Reporter 169 1 were those funds derived that were placed in the Osage annuity 2 account? 3 A. Those were royalties on oil and gas production. Sand, 4 gravel, limestone, salt water disposal easements and things like 5 that for the mineral estate. 6 Q. And you said at one point you were working for BIA and then 7 you were also working for the tribe under a 638 contract? 8 A. Yes. 9 Q. In both those roles you had you worked with -- 10 A. I worked on the annuity system, yes. 11 Q. The funds in the annuity system, did you at the time -- who 12 did you think those funds belonged to? 13 A. The annuitants, the head right shareholders. 14 Q. And who were they? 15 A. They belonged to the head right shareholders at allotment 16 time. 17 Q. When you described earlier is mostly individual Indians? 18 A. Yes. 19 Q. At the time did you ever hear anybody suggest that those 20 funds belonged actually to the tribe by and large? 21 A. No. No, and that's the general understanding, and the 22 culture at Osage was that those funds belonged to the head right 23 shareholders and the counsel was allowed to use a certain 24 percentage of the interest earned on those funds to operate the 25 minerals counsel from, but other than that, the shareholders Jacqueline M. Sullivan, RPR Official Court Reporter 170 1 were the owners of the money. 2 Q. Did the tribe have any head rights of their own? 3 A. They have a few, I think. They did have then or a piece of 4 one or a piece of two. A handful maybe. 5 Q. And you said that they also had in addition to that the 6 ability to use a certain percentage of the earnings? 7 A. The interest earned on those deposits, yes. 8 Q. And do you know about what percent that was? 9 A. I think it was somewhere around one-and-a-half percent. 10 Q. And other than those two, the few head rights that they 11 have out the 2,229 and the one-and-a-half percent they could 12 utilize from the earnings, was the tribe able to spend any of 13 the other monies? 14 A. No. 15 Q. And was there ever a suggestion by an