Judge limits Utah's role in managing Navajo trust

Tuesday, March 18, 2008  

The state of Utah is not a "co-trustee" of Navajo trust funds, a federal judge ruled last Friday.

In a 28-page decision, Judge Tena Campbell agreed that Utah plays a role in managing oil and gas royalties on behalf of Navajos who live in San Juan County. But she rejected arguments that the state has a duty to verify whether tribal members are receiving the right amount of money for use of their land.

"[C]ontrary to the plaintiffs' assertion, the state is not a co-trustee with the United States," Campbell wrote.

As a result, the Navajo plaintiffs can only force Utah to account for the money "actually received" into the Navajo Trust Fund, Campbell said. Under a 1933 act of Congress, the state manages 37.5 percent of oil and gas royalties, but only after the royalties are first collected by the Interior Department.

"The court finds that the 1933 Act creates distinct, rather than overlapping, responsibilities for the United States and for the state of Utah," Campbell wrote. "The federal government collects the income due the NTF and sends it to Utah for deposit into the NTF. Utah manages the trust monies once they are received from the United States government."

Campbell didn't leave the state off the hook entirely. She said the Navajo plaintiffs can challenge whether Utah properly invested their royalties -- but she determined the proper standard is found in state law rather than federal law.

"At this point, the state has already invested the money as it saw fit," Campbell wrote. "So the question of whether such investment satisfied the state's trust duty is a matter for the liability phase of this case."

The judge also left open the question of whether Utah violated its duty to exercise "reasonable care" in managing the NTF She said this issue can be resolved in the liability phase as well.

The decision comes amid efforts by the state to relinquish its role in managing the NTF. Lawmakers have passed bills to put more control on the hands of the Navajo Nation, which receives the majority of the oil and gas royalties.

But some tribal members in San Juan County and Navajo Nation President Joe Shirley Jr. have raised concerns about the legislation. They have been waiting on Campbell's ruling and on an historical accounting report from the state that is due in court on June 30.

The Navajo plaintiffs want the state to account for the trust, which they say has been mismanaged since its inception. They point to a 1991 legislative report that said at least $150 million went unaccounted between 1993 and 1990. Some people were convicted of embezzlement in connection with the fund.

Court Decision:
Pelt v. Utah (March 14, 2008)

Navajo Trust Fund Bills:
Amendments Related to Monies Derived from Navajo Nation Reservation Lands in Utah (HB 352) | Encouraging Congressional Action to Designate a New Recipient of Royalties from Navajo Reservation Lands in Utah (HCR 4)