SALT LAKE CITY (CN) - Navajos claim in Federal Court that Utah abandoned a $54 million energy income trust for tribal housing, water, electricity and college scholarships, because top state officials don't want to deal with litigation over the trust's management.
Lead plaintiff Mary Benally, as a beneficiary of the Utah Navajo Trust Fund, claims that Utah unjustly "resigned" as administrator of the trust in 2008, and put the money in a holding fund.
The trust was established in 1933. "The state of Utah is required by federal law to receive 37.5 percent of royalties paid on oil and gas extracted from certain portions of the Navajo Reservation that extend into San Juan County, Utah. These royalties are to be placed into the Utah Navajo Trust Fund," the complaint states.
All Navajos who live in San Juan County are listed as beneficiaries, Congress declared by public law in 1968.
The fund was valued at about $54 million in 2011, according to Navajo Times. That money includes a $33 million settlement in Pelt v. Utah, a class action involving the state's management of the fund.
That 18-year litigation concluded in 2010. The Navajos claimed that the state had squandered $50 million in royalties on bribes, payoffs and shady business deals.
A three-person panel - including Utah's treasurer, director of finance, and an official appointed by the governor - oversaw the trust until June 30, 2008. That year, the Legislature, via House Bill 352 and "at the request" of then-Gov. Jon Huntsman Jr., moved responsibility of the trust to the Department of Administrative Services, resigned as trustee and asked that Congress appoint a successor trustee.
The plaintiff beneficiaries say the governor's general counsel complained to the U.S. House of Representatives in 2008 of the "numerous lawsuits" involving the fund, and that "In providing Congress of Utah's purported resignation as NTF trustee, and requesting Congress to appoint a successor trustee, the governor's general counsel testified before the U.S. House of Representatives that litigation regarding Utah's historically deficient management of the NTR did indeed motivate said resignation."
[NTR appears to be a typographical error for NTF.]
The plaintiffs add: "Utah sought to resign, in part, because 'litigation related to those royalties began almost immediately' following the discovery of oil and gas reserves in the Aneth Extension, and because of the 'litigious environment surrounding the State's administration of the [NTF].'" (Brackets in complaint.)
The complaint cites the testimony of the Utah governor's general counsel Tani Pack Downing to the House Committee on Natural Resources: "'The Utah Navajo Trust Fund has been the subject of numerous lawsuits over the 75 years since its creation. Each lawsuit has challenged Utah's management of the royalty fund and has requested an accounting.'"
Gov. Gary Herbert, the lead defendant in this case, took office in 2009, after Utah had "resigned" as trustee. The Navajo plaintiffs say Herbert has done little to respond to their plight.
"Utah is required by federal law to manage and dis[burse] funds from the NTF for the 'health, education and general welfare' of the Navajo Nation who reside in San Juan County, Utah. These Navajo are NTF 'beneficiaries.' These royalty proceeds do not belong to Utah, or to the Navajo Nation. They are intended for the benefit of the NTF beneficiaries.
"Where, as here, the instrument creating a trust fund does not define the process by which a trustee may voluntarily resign, any such trustee must petition a court for permission to resign. Under no circumstances may a trustee who seeks to resign do so until a successor trustee is in place, able and willing to carry out the terms so as to avoid violation of strict and exacting fiduciary obligations a trustee always owes to beneficiaries."
The resignation caused "irreparable harm to thousands of beneficiaries," and blocked funding for "healthcare, housing, roads, law enforcement, and water and power development," the Navajos say.
The Navajo Nation - which spans Utah, Arizona and New Mexico - formed a tribal government in the 1920s in response to oil discovery on its land, and oil companies negotiated with the tribe over oil leases. A 2011 census estimated the tribe's membership at more 300,000.
The defendants, as trust administrators, include Herbert, the State of Utah and three state officials.
The plaintiff beneficiaries seek an injunction requiring the defendants to resume administration of the Utah Navajo Trust Fund in compliance with the terms of the trust, and federal common and statutory law. They alleged breach of trust, and also seek costs of suit.
They are represented by John Pace with Lewis Hansen Waldo Pleshe and Flanders.
Subscribe to Closing Arguments
Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.