304 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 . Tuesday, June 10, 2008 of the Interior, et al. . 1:33 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 305 APPEARANCES, con't. 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 306 1 P R O C E E D I N G S 2 COURTROOM DEPUTY: Please come to order and remain 3 seated. 4 MR. GINGOLD: Good afternoon, your Honor. 5 THE COURT: Good afternoon. 6 DR. BRADFORD CORNELL, WITNESS FOR THE PLAINTIFFS, PREVIOUSLY 7 SWORN 8 DIRECT EXAMINATION 9 BY MR. GINGOLD (continuing): 10 Q. Dr. Cornell, you were asked to before by the Court before 11 the lunch recess to explain what effect you observed 12 disbursement was with respect to 1926, I believe. Do you recall 13 that? 14 A. Yes, I do. 15 Q. What have you done in that regard? 16 A. I did the calculation. 17 Q. And what is the result of your calculation? 18 A. $734 million in terms of the bottom line in 2008. 19 Q. If the observable disbursement in that document is correct? 20 A. Correct. The interest rates were a bit higher than I 21 remembered, particularly in that 1907 period when they get above 22 ten percent, so the compounding is quite important then. 23 MR. GINGOLD: In that regard, if this Court would 24 like, we can provide this Court and defendants with an Excel 25 version of what we are dealing with of Attachment A so Jacqueline M. Sullivan, RPR Official Court Reporter 307 1 calculations can be input. They would be linked and changes 2 could be made as a better or if better data is provided. 3 THE COURT: Well, I'm not asking for that now. But 4 thank you. 5 MR. GINGOLD: I'd like Plaintiffs' 41 to be back on 6 the screen, please. 7 BY MR. GINGOLD: 8 Q. I'd like you to turn to pages -- first page four of the 9 Plaintiffs' 41, which is Attachment A, and I'd like you to look 10 at the disbursement column. You have a yellow highlighted 11 figure in the disbursement column from 1988 through 2002 on this 12 page; is that correct? 13 A. Yes. 14 Q. And what does that mean? 15 A. Well, those were the years for which the actual CPNR data 16 was available and was used as the basis of the seventy percent 17 calculation, but in the particular years where I have that data 18 I plugged it in directly. 19 Q. And the seventy percent calculation means what? 20 A. Well, I think if we really need to go to the schedule, but 21 it's the ratio of disbursements to corrected revenue. 22 Q. Before we go to the schedule I'd like to turn to page five 23 of Attachment A. Once again, you have -- there are no other 24 disbursements calculated in that, correct? 25 A. Yes. Jacqueline M. Sullivan, RPR Official Court Reporter 308 1 Q. Okay. Let's go to Plaintiffs' Exhibit 56, which is 2 Attachment C, individual Indian trust disbursement calculation. 3 Dr. Cornell, do you recognize this document? 4 A. It likes like a black screen to me. I recognize this from 5 my home computer. There we go. 6 Q. Do you recognize this document, Dr. Cornell? 7 A. Yes. This is a document I prepared summarizing materials 8 sent to the plaintiffs by officials at the Department of 9 Treasury. 10 Q. Did you review the data yourself? 11 A. Yes. 12 Q. Under Column A, what is Column A? 13 A. Those are the number of checks issued out of AALC account 14 number 4844, which in the cover letter from the Treasury was 15 explained to be the individual Indians monies account. 16 MR. GINGOLD: Plaintiffs would like to identify an 17 exhibit admitted in trial 1.5, which is DX 272. DX 272 is a 18 letter from Charles Schwann, who is document production 19 coordinator, Department of the Treasury, Financial Management 20 Service, to Bert Edwards, executive director, Office of his 21 Historical Accounting, Office of the U.S. Interior, dated 22 November 4, 2003. 23 BY MR. GINGOLD: 24 Q. Is this the letter you're referring to? 25 A. Yes. Jacqueline M. Sullivan, RPR Official Court Reporter 309 1 Q. I'd like you to turn to page two of this document, which is 2 identified as Bates 272-00032, and at the top of the page, the 3 first sentence states, Exhibit B provides the number and amount 4 of checks issued under symbol 4844 and captured in CPNR since 5 the implementation of CPNR on November 6, 1986. Is that your 6 understanding? 7 A. Yes, it is. 8 Q. I'd like to turn to page eighteen of this document, which 9 is at Bates 48. It's identified as Exhibit B, and it's 10 identified as CPNR information for symbol 4844 by calendar year. 11 Do you recognize this information, Dr. Cornell? 12 A. Yes. That's the same information you'll find in my 13 Attachment C. 14 Q. Okay. Under "number of records," what does that mean? 15 A. Number of checks issued. 16 Q. Under "dollar amount," what does that mean? 17 A. The aggregate amount for all those checks. 18 Q. And what did you take from this information, including 19 Attachment A? 20 A. Well, 1987 turned out to be a partial year, so I excluded 21 it and then I took the rest of the information. 22 Q. So is that the reason you have the highlighted disbursement 23 numbers in under Column F of Attachment A on page four? 24 A. They're drawn directly from that schedule with a slight 25 adjustment. Jacqueline M. Sullivan, RPR Official Court Reporter 310 1 Q. The slight adjustment for what? 2 A. For the fact that not all the checks that were issued were 3 cashed. 4 Q. So what did you specifically include then in that total 5 with regard -- 6 A. Well, as I recall -- 7 Q. Let's go back to Attachment C. That's Plaintiffs' 56. 8 A. I included the CPNR disbursements adjusted, which is Column 9 F. 10 Q. What does Column C, corrected revenues, mean? 11 A. Column C is just directly off of my schedule. That's 12 Column E from Attachment A, the corrected revenues. 13 Q. And under Column D, checks paid, that is what you just 14 described as you took only the data from the checks that were 15 identified as paid or negotiated? 16 A. Correct. Not all the checks issued were paid. Some were 17 never cashed. 18 Q. I'd like to go back to DX 272 for a moment, please. 19 THE COURT: On this percentage of checks paid and 20 cashed -- 21 MR. GINGOLD: Back to Attachment C, your Honor. 22 THE COURT: Well, whatever attachment you were just 23 on, if hypothetically there were $200 million worth of 24 disbursement checks cut and let's say two hundred thousand 25 checks and ten percent of those checks were not cashed, what did Jacqueline M. Sullivan, RPR Official Court Reporter 311 1 you do? Did you discount the total payment by ten percent? 2 THE WITNESS: Yes. In fact, you can see that. You 3 can in Column E you see the percentage of checks paid as a 4 fraction of the percentage of checks issued. 5 THE COURT: What do you do with the likelihood -- I'm 6 assuming it's a likelihood that most of the checks not cashed 7 are the checks for twenty-five cents or a dollar-and-a-quarter 8 or two-dollars-and-a-half, that kind that aren't worth cashing. 9 THE WITNESS: I did not make an adjustment for check 10 size. It's just prorated. 11 THE COURT: All right. 12 MR. GINGOLD: 13 Q. Did you make any determination as to whether or not that 14 was a characteristic typically of checks that were not paid or 15 cashed? 16 A. No. There was no data on that. This is the complete data 17 from the Treasury. 18 Q. Now, if the checks weren't paid or cashed, do you know 19 where the money remained? 20 A. Well, presumably it would remain in the Treasury account, 21 because it wasn't drawn down from it. 22 Q. And the CPNR data, was that summary-level data? 23 A. Yes. 24 Q. So there was no checks that were provided to you that 25 supported the check disbursements, was there? Jacqueline M. Sullivan, RPR Official Court Reporter 312 1 A. Yes. 2 Q. Yes, there were none? 3 A. Excuse me? 4 Q. There were no checks provided to you? 5 A. No, no. I got an output from a computer database that had 6 been accessed by the Treasury official. 7 Q. And if you had checks which identified the amounts, you'd 8 be able to make a determination as to whether or not the checks 9 had a diminimus amount, correct, that were not paid? 10 A. Correct. 11 Q. But at this point in time you can't testify to that? 12 A. That's right. 13 Q. Now, there was data in the CPNR database for 1987, wasn't 14 there? 15 A. Yes. 16 Q. Did you use it? 17 A. No. After looking at it, it turned out to be a partial 18 year, and rather than trying to annualize incomplete data, since 19 we had fifteen years of good data, I just used the full annual 20 data. 21 Q. Is that appropriate for you to do when you're trying to 22 determine what a reasonable or reasonable approximation of the 23 check disbursements or other data? 24 A. This is the first time I've ever dealt with this type of 25 check disbursement data, but when you have a large unambiguous Jacqueline M. Sullivan, RPR Official Court Reporter 313 1 sample, I think it's reason to not pollute it with one more 2 observation, which is not comparable. 3 Q. Is that because it's incomplete data? 4 A. Yeah. Because it's incomplete, it's not exact comparable, 5 and actually if I included it it would reduce my disbursement 6 rate, but I don't think it would be appropriate to include it. 7 Q. So from the period of time 1988 to 2002, you had actual 8 disbursements data from the trust, from the individual named 9 trust by check, correct? 10 A. Yes. 11 Q. And is that the basis for your extrapolation on the 12 disbursement total for the remainder of the years that we're 13 dealing with here? 14 A. Yes. I took this data as being based on conversation with 15 counsel and what I had been able to find as being the most 16 reliable data and extrapolated it. 17 Q. Again, if you had data that was proven to be reliable, you 18 could easily use that in your model, correct? 19 A. Correct. 20 Q. Let's talk about the Osage issue Attachment A. Under 21 Column C you have Osage government calculated. Do you see that? 22 A. I see that. 23 Q. Let's go to page one of Attachment A. You have Osage 24 government calculated but you have nothing highlighted to 1908; 25 is that correct? Jacqueline M. Sullivan, RPR Official Court Reporter 314 1 A. Correct. The government calculations of the Osage receipts 2 doesn't begin until 1909. 3 Q. Now, you do have in Column D Osage corrected, and in Osage 4 corrected on this page and on the remainder of this document 5 it's highlighted, correct? 6 A. Correct. 7 Q. What does that mean? 8 A. It's actual data that was made available by the Osage tribe 9 and is published on their website. 10 Q. Is it your understanding that this is data regarding the 11 tribal money or individual Indian trust money? 12 A. Individual Indian trust money data, but provided by the 13 Osage tribe. 14 Q. Now, in 1909, which is the first year the government 15 provided -- seems to have provide the Osage data as identified 16 on Attachment A, Column C, you had Osage corrected with a point 17 seventy statement, correct? 18 A. Correct. 19 Q. And what does that mean? 20 A. That means the Osage tribe reported $700,000 worth of IIM 21 revenue that year. 22 Q. And each one of the items in Column D reflects -- does it 23 reflect the reporting of information on IIM Osage data from the 24 tribe? 25 A. Yes. Jacqueline M. Sullivan, RPR Official Court Reporter 315 1 Q. And let's go to page two. 2 THE COURT: Mr. Gingold, can I ask you to back up for 3 a minute and explain to me again how these three columns work, 4 because I'm trying to figure out what "government corrected" and 5 "Osage corrected" means, and it seems to me that what you're 6 doing, at least what this chart does, is it adds Column B and 7 Column D and subtracts Column C, but I don't know why. 8 THE WITNESS: Here's the explanation, your Honor. 9 Included in Column B is the government Osage data, so it's in 10 there in the revenues. 11 THE COURT: All right. 12 THE WITNESS: Plaintiffs believe and have argued to me 13 that the data provided by the Osage tribe, which is in Column D, 14 is more accurate and complete, so what I have done is I've 15 started with the government number, taken out their Osage 16 component and replaced it with the tribal component. That's why 17 I call Column E corrected revenue, so the government number 18 that's in B is taken out and then the Osage is put back in using 19 what plaintiffs believe is more accurate Osage data. 20 THE COURT: Thank you. That is succinct and 21 understandable. 22 BY MR. GINGOLD: 23 Q. But at least through 1908 the government didn't provide 24 data; is that correct? 25 A. There are some very early years. If we go up to the top Jacqueline M. Sullivan, RPR Official Court Reporter 316 1 I'll explain that too. 2 Q. Page one, please. 3 A. What the government did not provide Osage data explicitly 4 that I could then take out, so what I did was I noted in all the 5 years where there was data, 1909 to the present, the Osage 6 government was 41.4 percent I think it is of the Osage 7 corrected, so I plugged in 41.4 percent of the corrected as an 8 estimate of the Osage government and then did the same 9 technique, took it out and replaced it. 10 Q. So you didn't double count the revenue, correct? 11 A. I did not double count the Osage. 12 Q. Is that a reasonable approach to take when you have data 13 that is missing, to be able to plug in the number based on the 14 percentage that you observed for the other information? 15 A. Yes, I think that is. 16 Q. With respect to Attachment A, you identified a column under 17 G that's labeled nominal benefit to the government. What does 18 that mean? 19 A. That's just that year's revenues minus disbursements so 20 that you can see it and don't have to calculate it. 21 Q. Does that include interest? 22 A. No. 23 Q. And with regard to Column I, which is identified as accrued 24 benefit annual, what does that mean? 25 A. That is the interest earned on the balance at the beginning Jacqueline M. Sullivan, RPR Official Court Reporter 317 1 of the year, and I shouldn't say earned. It is really the 2 interest saved on the balance at the beginning of the year at 3 the government bond rate for that year. 4 Q. And Column J, what is Column J? 5 A. Column J is the accumulated benefit, which is the benefit 6 for that year plus the interest saving, plus the cummulated 7 benefits from previous years. 8 Q. If you can turn to page five, please. 9 THE COURT: Are there any of these years in which the 10 government was not a net borrower? 11 THE WITNESS: It was always a debter so it always was 12 in debt, but there were years where in that particular year they 13 were able to pay down part of the debt so they were not a net 14 borrower. I think there's a couple in the '20s and 1955, and 15 not many, but there are a few. 16 THE COURT: And should we be including interest for 17 those years? 18 THE WITNESS: Yes, because if the government -- in 19 order to not include the interest saved, the government would 20 have to not be a net borrower, so even if I'm paying down my 21 mortgage, as long as I have a mortgage outstanding I could save 22 interest if someone gave me some money and I could use it in 23 lieu of borrowing by paying down that borrowing further. 24 THE COURT: But by your theory, unless the national 25 debt got down below the accumulated amount, in other words, the Jacqueline M. Sullivan, RPR Official Court Reporter 318 1 Indian money would be the last money you'd credit? 2 THE WITNESS: Well, I'm treating it as the mariginal 3 money, that everything else is held the same and the government 4 either has or does not have the Indian monies. 5 THE COURT: Okay. 6 MR. GINGOLD: Your Honor, plaintiffs would like to 7 identify Exhibit 59. It's identified as Treasury Debt, 8 Historical Debt Outstanding Annual, 2000 to 2007. 9 THE COURT: That's too depressing. I don't want to 10 see that exhibit. 11 THE WITNESS: It's more depressing when you divide by 12 the working population. 13 MR. GINGOLD: We won't ask any questions about that, 14 your Honor. 15 Plaintiffs would like to mark for identification 16 Exhibit 58. Exhibit 58 is entitled IIM Banking Policy, prepared 17 by Terence Kehoe, Morgan, Angel & Associates. This too was 18 produced in trial 1.5 by the government. 19 (Plaintiffs' Exhibit No. 58 was marked for 20 identification at about 2:03 p.m.) 21 BY MR. GINGOLD: 22 Q. I'd like you to turn your attention to the second page of 23 this excerpted exhibit, which is Bates number it looks like 24 D1100034. The Court had asked you questions at the beginning of 25 your testimony about funds held on deposit in banks. Do you Jacqueline M. Sullivan, RPR Official Court Reporter 319 1 recall that? 2 A. I think so. 3 Q. Do you recall listening to the testimony of Mr. Miller? 4 A. Yes. There was extensive discussion of it there. 5 Q. In your view or if funds are held in banks, is there still 6 a benefit if individual Indian trust funds are held in 7 commercial banks and not directly in the general Treasury, is it 8 your view there is a benefit conferred on the government? 9 MR. KIRSCHMAN: Objection; lack of foundation. He's 10 testifying based on his understanding about legal rights and 11 money held in banks. 12 MR. GINGOLD: Is there an economic benefit conferred? 13 THE COURT: I'll allow it. I can sort that out. I'll 14 hear his answer. 15 BY MR. GINGOLD: 16 Q. Do you believe there would be an economic or financial 17 benefit conferred on the government if trust funds are held in 18 commercial banks? 19 A. Well, the critical question from an economic standpoint is 20 not where the monies are held, but how they're used. If the 21 monies were put into bank accounts and held there and disbursed 22 entirely to individual Indians, there would be no benefit 23 conferred on the government. If they were held there and 24 allowed to accumulate and eventually used for some government- 25 related expenditure or returned to the Treasury, there would be Jacqueline M. Sullivan, RPR Official Court Reporter 320 1 a benefit to the government. And I should add one thing, that 2 at that time banks gave free services to parties holding funds, 3 so the Treasury would probably get free banking services because 4 of the Indian monies held there, which would be a benefit. 5 Q. That is what is -- 6 THE COURT: What's that, a dollar a month? I mean, 7 what is it? 8 BY MR. GINGOLD: 9 Q. Is that what is referred to as compensating balances in 10 banking parlance? 11 A. What the government would be getting there is the clearing 12 services and the accounting services and so forth. 13 THE COURT: Are you putting in a claim for curing 14 services and accounting services? 15 MR. GINGOLD: Not yet, your Honor. 16 BY MR. GINGOLD: 17 Q. Now, if funds were removed from the banks and then pulled 18 back into the Treasury, it's a very direct issue, correct? 19 A. That would be a direct benefit to the government, or if the 20 funds were disbursed from the banks to pay for government 21 expenditures, such as to finance the Bureau of Indian Affairs, 22 for example. 23 Q. I'd like to point your attention to the highlighted section 24 of this exhibit, which says, In August 1934 acting centers 25 informed the controller general that, quote, except in five or Jacqueline M. Sullivan, RPR Official Court Reporter 321 1 six instances all IIM checking accounts had been closed and 2 practically all disbursements of such funds are now made by 3 check on the treasurer of the United States. Have you seen this 4 information before? 5 A. Yes. 6 Q. So if all the accounts were closed and the funds were 7 disbursed to the Treasury, it's just a standard benefit 8 conferred analysis, correct? 9 MR. WARSHAWSKY: Objection; leading. 10 THE COURT: I thought your objection was going to be 11 "hearsay." 12 MR. WARSHAWSKY: I'll object, hearsay. 13 THE COURT: Sustained. Sustained. I mean, good idea, 14 Mr. Warshawsky. 15 MR. GINGOLD: Your Honor, the government filed this 16 report in this Court and it was admitted into evidence. 17 THE COURT: Look, this is almost a collateral issue as 18 far as this witness is concerned. Let's move on. 19 BY MR. GINGOLD: 20 Q. Your Attachment A is your best approach to providing an 21 approximation of the benefit conferred on the government, isn't 22 it? 23 A. I want to say two things in that regard with respect to 24 Attachment A because it really has two aspects. One is it's a 25 financial economic model, and two is it relies on specific Jacqueline M. Sullivan, RPR Official Court Reporter 322 1 inputs. As a financial economist I believe that the methodology 2 used in Attachment A is the correct approach for computing 3 benefits conferred on the government. As to the precise numbers 4 to input into it, I've used the best approximation that I could 5 come up with having worked on this matter for a couple of 6 months, but I was also told that much of the input would come 7 from the government's efforts to, for example, prove 8 disbursements, and I indicated that if the inputs were improved, 9 then I could input that into the model and get an improved 10 estimate of the bottom line. 11 Q. But in your model, as you stated based on CPNR data, you 12 used the seventy percent disbursement for the years that were 13 actually provided in summary form in the CPNR database, correct? 14 A. Well, in the years where the CPNR data were provided I used 15 that actual data, and in all the other years I used seventy 16 percent, which was the average disbursement rate from the CPNR 17 data. 18 Q. So just as the disbursements can, the percentage of 19 disbursements could increase with the additional data that's 20 considered a benefit, it is also possible that the seventy 21 percent number could decrease if, for example, checks were not 22 identified to support a percentage? 23 A. That would be possibility. 24 Q. But we don't know, do we? 25 A. I don't know. Jacqueline M. Sullivan, RPR Official Court Reporter 323 1 Q. So based on the information you have, and based on your 2 analysis, subject to the modification that was raised based on 3 the $734.33 million adjustment for 1926 I believe, you believe 4 your model accurately states the benefit conferred on the 5 government through the use of individual Indian trust funds; is 6 that correct? 7 A. I believe the model is appropriate, and given the 8 assumptions that I've testified to today, it takes those 9 assumptions and translates them into a benefit conferred. 10 Q. And to the extent that there's evidence to support the 11 $734.33 million or more, that would also be included in your 12 model and the results would be adjusted; is that correct? 13 A. Yes. If you make the change in the model the spreadsheet 14 would automatically adjust the bottom line. 15 MR. GINGOLD: No further questions, your Honor. 16 THE COURT: Mr. Warshawsky? 17 CROSS-EXAMINATION 18 BY MR. WARSHAWSKY: 19 Q. Good afternoon, Professor Cornell. My name is John 20 Warshawsky from the Justice Department. I am going to ask you a 21 number of questions this afternoon. 22 You've testified a number of times before, correct. 23 A. Yes. 24 Q. So you know how the process works. If I ask you anything 25 and you'd like it clarified or rephrased, please let me know. Jacqueline M. Sullivan, RPR Official Court Reporter 324 1 I'll be happy to work with you, okay? 2 A. Okay. 3 Q. All right. I want to follow-up on the last exchange that 4 you just had with Mr. Gingold. You were talking about the 5 methodology in your model which you've represented is the proper 6 methodology, but you're also talking about making some 7 adjustments based on government data? 8 A. Correct. 9 Q. So to be sure we understand what you're testifying to 10 today, it's your opinion that the methodology is correct, right? 11 A. Yes. 12 Q. But you're not here today to tell the judge that this is 13 actually the precise measure of the government's benefit from 14 the government's alleged use of funds that couldn't be explained 15 from the accounting? 16 A. Well, I think that requires work further than I've done. 17 For example, one of the first things I asked was to hear the 18 government's evidence regarding disbursements, and to the extent 19 that I hear that and it influences decisions about what 20 disbursements number to put into that spreadsheet, it's going to 21 change the bottom line. 22 Q. Professor Cornell, do you prefer "professor" or "doctor"? 23 A. I think "professor." "Doctor" sounds too medical to me. 24 Q. All right. Professor Cornell, when were you first hired to 25 work on the Cobell case? Jacqueline M. Sullivan, RPR Official Court Reporter 325 1 A. I don't know precisely, but recently, two, three months 2 ago. 3 Q. And prior to your being hired to work on the case, did you 4 have any background or experience working with the individual 5 Indian trust system? 6 A. No. 7 Q. Approximately how many hours have you spent reviewing 8 materials in connection with your engagement on this case? 9 A. I don't know exactly, but in the range of fifty to a 10 hundred. 11 Q. And you mentioned during your testimony that you were 12 assisted by staff? 13 A. Yes. 14 Q. And approximately how many people were assisting you? 15 A. There were three primary individuals who have worked on 16 this project from CRA International. 17 Q. And that's your company, right, or that's the company 18 you're associated with? 19 A. I'm a senior consultant to that company. 20 Q. That's Charles River? 21 A. It used to be Charles River, but it's renamed itself CRA 22 International. 23 Q. Who's spoken to you in connection with your engagement on 24 this case? In other words, what I'm trying to learn is, since 25 we haven't met before, I'm trying to get an understanding as to Jacqueline M. Sullivan, RPR Official Court Reporter 326 1 where you may have gotten information for your analysis. 2 A. Well, two sources. To some extent the plaintiffs' 3 attorneys directly, but primarily via my staff who corresponded 4 extensively with plaintiffs' attorneys and documents float back 5 and forth, but most of those documents were sent to CRA opened 6 and examined by the staff and then presented to me. 7 Q. Did you personally ask to speak with anyone besides 8 Plaintiffs' counsel, for example? 9 A. I spoke with some of the other experts who have testified 10 today, Mr. Miller, Dr. Miller, Mr. Laykoc. That's about all I 11 recall. 12 Q. Professor Cornell, what document did you review in the 13 context in preparing your opinion? 14 A. Well, a lot. They were accumulated into more than a dozen 15 large binders. They were primarily historical documents, 16 reports, government documents, things of the nature that have 17 been introduced as exhibits to Attachment A. 18 Q. And how did you obtain these documents? 19 A. Well, I obtained them from Mr. Herschlifer who is working 20 with me, but I imagine Mr. Herschlifer obtained them from the 21 Plaintiffs' attorneys. 22 Q. Aside from documents that you believe Mr. Herschlifer 23 obtained from Plaintiffs' counsel, do you know if you or any of 24 your associates obtained documents from any other source? 25 A. Well, some of the information we, "we" being CRA, obtained Jacqueline M. Sullivan, RPR Official Court Reporter 327 1 because I happened to know the sources for that, like a long- 2 time series on Treasury bond data. That was obtained from 3 Professor Schiller's website. I'm trying to think if there were 4 any others. There were things like the Treasury debt schedule. 5 We obtained that directly from the U.S. Treasury. 6 Q. Are you referring to the, it was I think Plaintiffs' 57, 7 the Treasury direct website shot? 8 A. Yes, yes. And there were probably other documents that I 9 couldn't tell you which they are that CRA staff obtained 10 directly, such as the Treasury information from websites rather 11 than getting it through the Plaintiffs' attorneys, but by the 12 time it was shown to me its source wasn't noted, just it was a 13 document in the case. 14 Q. Fair to say, though, that the overwhelming majority of 15 documents that you reviewed were the historical materials 16 provided by Plaintiffs' counsel; is that correct? 17 A. I think that's correct. 18 Q. And you've talked about reviewing, for example, 19 Commissioner of Indian reports, Indian Affairs reports in 20 connection with your analysis, correct? 21 A. Yes. 22 Q. Did you review any documents such as journal vouchers? 23 A. I may have, but I'm not sure. I don't recall specifically. 24 Q. In forming your opinions is it fair to say you've assumed 25 that money has been wrongfully withheld from the IIM trust Jacqueline M. Sullivan, RPR Official Court Reporter 328 1 accounts? 2 A. Well, I didn't make that assumption, per se. I eventually 3 made the assumptions that went into Attachment A, but I did say 4 to counsel in this matter that I was not a historian and had not 5 been working on this matter long enough to have delved into the 6 nature of each number, so to some extent I would be operating at 7 a high level that may have to be refined. 8 Q. Now, I know you were sitting in court part of yesterday and 9 this morning when Dr. Miller was testifying so you heard some 10 testimony about the Treasury general account. Prior to your 11 coming to court this week had you heard about the Treasury 12 general account? 13 A. Yes. 14 Q. And is that something you have a fair amount of familiarity 15 with from your work? 16 A. Well, there's a great amount to know about Treasury 17 finance, but I worked on the Treasury bidding scandal for Warren 18 Buffett back in 1986, so as part of that assignment I spent some 19 time learning about government debt financing and the operation 20 of the Treasury, but it's been a while. 21 Q. Okay. And aside from what you've heard this week, for 22 example, did you have a sense as to how much money typically was 23 in the Treasury general account? 24 A. I didn't -- that $5 billion number that I saw in a 25 document, that was the first time I saw that as working balance. Jacqueline M. Sullivan, RPR Official Court Reporter 329 1 I didn't know that prior. 2 Q. And you're referring to the GAO report that was reviewed 3 yesterday I believe with Dr. Miller? 4 A. I think that was it, yes. 5 Q. It was a GAO report about debt management? 6 A. Yes. 7 Q. I gather you've never published any articles or done any 8 research studies related to the Treasury general account; is 9 that correct? 10 A. Not specifically, no. 11 Q. Now, I'd like to talk about we've referred to -- you've 12 referred to Attachment A, Plaintiffs' Exhibit 41, and I may use 13 those terms interchangeably. We were up until today working 14 with a version of Attachment A which was attached to a brief 15 filed by the Plaintiffs' counsel. You're familiar with that 16 document, are you not, from a couple of months ago? 17 A. I think so, yes. 18 Q. This is slightly different. It appears that it's just some 19 numbers have been rounded, that is basically the only 20 difference? 21 A. You know, there's been a couple versions of Attachment A. 22 For example, the CPNR data were not available a month or so ago, 23 so that's changed. You'd have to show me which particular 24 version you have before I could tell you for sure. 25 Q. Well, if that's necessary we'll get to the old Attachment Jacqueline M. Sullivan, RPR Official Court Reporter 330 1 A, but would you please describe the process that went into 2 preparing Attachment A? In other words, what was your role and 3 how did you all decide to undertake this approach? 4 A. Well, the first thing I did was have extensive conversation 5 with Plaintiffs' counsel to understand the legal framework in 6 which a calculation would be done. And this would be somewhat 7 analogous to the damages versus restitution discussion that I 8 started with and Professor Laycok talked about in detail, and I 9 learned what they were looking for was a model that would 10 reflect benefits to the government, which I explained would be 11 damages to, let's say, a class of Indians, so once I understood 12 that, I said the benefits to the government, I pretty much then 13 knew what to do. The financial economics of Attachment A are 14 things that I've done in the past that I knew how to do and so I 15 basically developed the template for it and said that we're 16 going to have to do a lot of work to find the right numbers to 17 go in there. 18 Q. So was it you that decided, and I'm going to have to ask if 19 we could have Plaintiffs' Exhibit 41 put up. We can just go to 20 the first page. Were you the person who actually made the 21 decision to have the various columns in Plaintiffs' Exhibit 41? 22 A. Well, some, but not -- some I had to learn facts from 23 others. For example, I had no idea about this Osage calculated 24 or Osage corrected, but it was my view that the critical columns 25 would be you need a measure of revenues and you need a measure Jacqueline M. Sullivan, RPR Official Court Reporter 331 1 of disbursements, and in disbursements you would have to include 2 things like theft, because if we're doing a benefit to the 3 government analysis, then suppose somebody just wrote a check to 4 themselves or somehow faudulently took money. That would be a 5 damage to the Indians but not a benefit to the government, so 6 disbursements would have to be net of all disbursements that did 7 not benefit the government. 8 Q. By the way, you didn't actually see any evidence of fraud 9 when were you doing your disbursements calculation, did you? 10 A. No, not per se, but, you know, I thought with 11 a-hundred-and-some years and processing being what they are, I 12 would be surprised if there wasn't some of that. 13 Q. There may have been a crook somewhere, right? 14 A. Right. I don't have any direct evidence of that. 15 Q. Okay. 16 A. At any rate -- 17 Q. And you certainly I gather in the materials that you 18 reviewed didn't see any evidence of systemic fraud, did you? 19 A. No. But part of the problem is that everything that I saw, 20 it seems extraordinarly incomplete, so I didn't really see 21 evidence of systemic anything like clear evidence of systemic 22 payments to individual recipients. It's just, as I testified 23 before, pretty scattered data as far as I've seen to this point. 24 Q. Did that surprise you looking back at a history of over a 25 hundred years? Jacqueline M. Sullivan, RPR Official Court Reporter 332 1 A. No. You had somewhat the same problem with Swiss banking 2 records related to the Holocaust. There were -- and that was 3 only since 1945. Changes had occurred, documents had been lost 4 or destroyed. That is a problem with these long-run issues. 5 Q. Now, you specifically referred to the Osage government 6 calculated and the Osage corrected columns as being columns that 7 you didn't decide I guess needed to be in there; is that 8 correct? 9 A. Correct. At the time I started I didn't know anything 10 about any revenues earned by the Osage tribe. 11 Q. And so how did you learn about the Osage revenues? 12 A. Conversations with my staff and with counsel, looking at 13 documents, having meetings, trying to put together what the 14 total revenues earned for the IIM trusts were. 15 Q. Now, in the course of your work have you gained any 16 understanding as to why the Osage revenues might be treated as 17 unique from other revenues? 18 A. Just at a high level. 19 Q. Well, give us your best high-level understanding. 20 A. Well, the Osage tribe has occupied lands that have 21 particularly large oil and gas reserves, and some of the 22 individual Indian lands have wells on them and there's wellhead 23 rights, so accounting for -- first of all, more dollars are 24 involved than for most land, and second of all, accounting for 25 them depend on how you treat those wellhead rights and so forth. Jacqueline M. Sullivan, RPR Official Court Reporter 333 1 Q. Putting aside the Osage for a moment, have you ever heard 2 the term land-based IIM accountholders or something like that? 3 A. What's that? 4 Q. Land-based, l-a-n-d hyphen b-a-s-e-d? 5 A. No, I don't think so. 6 Q. Do you have an understanding as to how most members of the 7 class become entitled to collect revenues from their land 8 interests? 9 A. No, I don't think so. 10 Q. So if in the case of the Osage do you have an understanding 11 as to whether those revenues go directly from, say, the oil and 12 gas producers to the individual accounts? 13 A. No. It's my understanding they do not. 14 Q. So what is your understanding about how the revenues from 15 oil and gas go in the case of Osage? 16 A. They are aggregated into an IIM trust and then the 17 individuals are allocated payments out of that trust. 18 Q. Now, and that's why you've gone ahead and calculated an 19 Osage corrected column; is that correct? Sorry for the two 20 "corrects." 21 A. Well, I'm really not the detailed expert on the Osage 22 accounting, but in conversations with plaintiff counsel it is 23 their belief, and I believe they believe they can show that the 24 data collected by the tribe are more accurate as to the actual 25 receipts that would have gone into the trust than the Jacqueline M. Sullivan, RPR Official Court Reporter 334 1 government-calculated numbers. 2 Q. Well, I know, and you referred to that in your direct 3 examination, so I want to be clear. Is it your understanding 4 that Columns C and D are simply two different measures of the 5 same activity? 6 A. Yes. 7 Q. And so you, for example -- let me just give you a different 8 view on Osage as a hypothetical. Assume that revenues from the 9 Osage lands go into a tribal account, not an individual account. 10 A. Yes. 11 Q. And monies from that tribal account are disbursed directly 12 to individuals, not to a trust account but to individuals who 13 have what are called headright interests. Are you with me? 14 A. Yes. 15 Q. In that case, those monies would not flow through the IIM 16 trust; is that correct? 17 A. The way you've defined it, that sounds like that's correct, 18 yes. 19 Q. And if in fact you've included those types of revenues in 20 the Osage corrected amounts in Column D, would you agree that 21 those amounts should come out of the calculation? 22 A. If the amounts never flowed into the IIM trust then they 23 should not be in my calculation. 24 Q. Okay. And have you ever done a calculation to get a sense 25 as to how much of the $58 billion that you showed us your bottom Jacqueline M. Sullivan, RPR Official Court Reporter 335 1 line, how much of that is attributable to the difference between 2 the use of Column D versus the use of the government's Osage 3 calculation? 4 A. I haven't, but if we went to the bottom, maybe we can see. 5 Q. If you want to go -- 6 A. I don't know if the totals -- I need to see the totals. 7 Q. You want to go to the last page. Thanks. 8 Be careful with the back of the envelope. I 9 embarrassed myself a little, I was off by a fact, but here I 10 think we can see how that might work. You notice that the 11 difference between the corrected revenues and disbursements is 12 about $4-and-a-half billion? 13 Q. Right. 14 A. And that translates up into when you consider the long 15 period of time and the interest rate, about 58 billion. The 16 difference between Osage corrected and Osage calculated looks to 17 be about nine hundred million, so that's about 1/5 of the 4.5, 18 about twenty percent. I would suspect that undoing that would 19 reduce the number therefore by about twenty percent. 20 Q. That's like about eleven-plus billion dollars? 21 A. Yes. 22 Q. I wanted to ask you a couple more questions about the 23 methodology on Attachment A. I know your background includes 24 statistics, you have a master's in statistics and you've 25 obviously done work in statistics, correct? Jacqueline M. Sullivan, RPR Official Court Reporter 336 1 A. Yes. 2 Q. Okay. Does Attachment A represent a regression, the 3 product of a regression analysis? 4 A. I did regressions to, quote, fill in the blanks, but I in 5 fact didn't use them. I just used a simple linear 6 interpolation. 7 Q. Are there other ways to fill in missing data becides a 8 linear interpolation? 9 A. Yes. I looked at four or five, and there's probably many 10 more than the ones that I looked at, but I looked at some of the 11 standard techniques. 12 Q. What are some of those standard techniques? 13 A. Well, you can use a regression model, a standard linear 14 regression model. You could use a logrythmic aggression, you 15 could use an exponential smoothing model. I found that as long 16 as I focused on the 1887-to-1972 period the bottom line was not 17 very sensitive to how I filled in the blanks. 18 Q. Have you ever, and I'm sure you have, but I have to ask it 19 this way anyway, have you ever heard the term multi-variate 20 model? 21 A. Multi-variate regression. 22 Q. I'll take that one. 23 A. Yes. 24 Q. What is a multi-variate regression? 25 A. It's where you try to explain a variable, like, let's say, Jacqueline M. Sullivan, RPR Official Court Reporter 337 1 sales of iphones by a number of other variables such as GNP or 2 sales of other Apple products where you don't just use one 3 explanatory variable. You have several. 4 Q. Are there any advantages to using more than one variable? 5 A. As long as you have a reasonable basis for so doing, and 6 it's not data-fishing, there would be, yes. 7 Q. And what are those advantages? 8 A. Well, you typically increase the explanatory power by using 9 more variables. 10 Q. Okay. In the case of Attachment A how many variables did 11 you use? 12 A. I just used the actual data itself, though I suspect if I 13 had done a multi-variate model it would not have much impact 14 either. 15 Q. Now, I want to get to this 69.82 percent disbursement rate 16 that you utilized. 17 And you have to bear with me, your Honor. You stole 18 some of my cross-examination so I'll try not to be duplicative 19 on some of these points. 20 THE COURT: I'm sorry, Mr. Warshawsky. 21 MR. WARSHAWSKY: I wasn't, nor are my co-counsel. 22 BY MR. WARSHAWSKY: 23 Q. I'll just refer as a seventy percent disbursement rate, if 24 that's okay. 25 A. That's fine. Jacqueline M. Sullivan, RPR Official Court Reporter 338 1 Q. All right. Now, let's go ahead and look at -- why don't 2 you go back to the first page of Plaintiffs' 41. As I 3 understand it, when you take your seventy percent, you look at 4 your total revenues for a particular year, like year, let's go 5 to the bottom, 1915, Column E; is that correct? 6 A. Yes. 7 Q. And that's the one that you multiply times .7? 8 A. Correct. 9 Q. To get disbursements of 5.7? 10 A. Yes. 11 Q. And then what happens to the remain -- the difference 12 between the 5.7? What is that, 2.46; is that right? What 13 happens to the difference? 14 A. It's assumed that that -- the model effectively assumes 15 that that difference is available to the government for use. 16 Q. Didn't get -- 17 A. Except to the extent that it built up an external account. 18 Q. I'm sorry, except to the extent? 19 A. Except to the extent that it builds up in an external 20 account. 21 Q. What does that mean? 22 A. Well, if you go to the very end, and I talked about this in 23 my direct, but go to the last page, you have a balance of 423 24 million. If all of those funds, all of those two-point whatever 25 you said it was, 2.4. Jacqueline M. Sullivan, RPR Official Court Reporter 339 1 Q. 2.46? 2 A. 2.46, if all of those had simply been dumped into another 3 account and not touched and just built up for a hundred years, 4 hundred plus years, I presume you'd have a number pretty close 5 to $58 billion. That obviously did not happen because we don't 6 have that sort of money, so I don't know what happened to it, 7 but it is an assumption of the model that it was available for 8 use by the United States government. 9 Q. It's an assumption, is it not, that that thirty percent is 10 never disbursed to the plaintiffs? 11 A. Except to the extent that it builds up -- 12 Q. Well -- 13 A. -- so that is available for disbursement. 14 Q. Well, let's look then -- oh, we can probably do it with 15 this one here. Let me do my calculation real quick. 16 THE COURT: 58 million isn't money the government 17 spent, it's money the government didn't have to spend, isn't it? 18 It's basically the opportunity cost? I mean, it's interest that 19 did not have to be paid because the money did not have to be 20 borrowed. 21 THE WITNESS: Correct. But the point I was making is, 22 we can't ignore that some of the money, $423 million, it hasn't 23 been used by the government, it is in the account, and it could 24 be disbursed tomorrow presumably to individual Indians. 25 BY MR. WARSHAWSKY: Jacqueline M. Sullivan, RPR Official Court Reporter 340 1 Q. We can keep it on this page here. 2 We're on the last page of DX Exhibit 41. I'm looking, 3 for example, at 2003, fiscal year 2003, and we take your 4 corrected revenues of roughly 180 million, multiply it times 70 5 percent, and we get the disbursements of about 126 million, 6 right? 7 A. Yes. 8 Q. And then the thirty percent goes off somewhere. The next 9 year, 2004, you do the same thing again, right, we take 195 -- 10 A. Yes. 11 Q. -- times .7, and we get the 136? 12 A. Yes. 13 Q. Isn't it correct, then, that implicit in your model that is 14 that thirty percent that's collected in a given year is never 15 disbursed for over a hundred years? 16 A. Well, you can't say that any particular amount -- I think 17 Dr. Miller talked about this -- wasn't disbursed, because when 18 you disburse monies in 2004, are those new or are those for 19 prior years, but you are saying that thirty percent of the 20 money, except to the extent that it goes and builds up in the 21 account with a 423, disappears into the coffers of the Treasury 22 and goes who knows where to the benefit of the government. 23 Q. Well, you're saying that this is money, thirty percent of 24 revenues collected for the beneficiaries each year never get 25 disbursed to the beneficiaries? Jacqueline M. Sullivan, RPR Official Court Reporter 341 1 A. Net of the 423, that's correct. 2 Q. Right. And we can confirm that, because if you take thirty 3 percent of your total corrected revenues, the fifteen-plus 4 billion dollars, we're going to get -- we'll get the 5 disbursements figure, the 10.6 billion, and that's how we're 6 going to get to the 4.6 billion that you show as a nominal 7 benefit to the government? 8 A. Correct. Virtually all of this money in this model leaks 9 out to the benefit of the government. Some stays in the trust 10 and builds up, but it's only 423 million, which is a small 11 fraction of the total potential benefit. 12 Q. Have you reviewed anything that provides with you a factual 13 basis to believe its reasonable to assume that thirty cents out 14 of every dollar collected for beneficiaries stays in the 15 government and never gets paid to beneficiaries? 16 A. I literally couldn't tell you one way or the other. 17 Q. But that's an assumption implicit in your model, isn't it? 18 A. That is an assumption. The only thing I have direct 19 evidence on that is the CPNR data that I looked at. 20 Q. And how -- 21 A. That's what that indicates. 22 Q. The CPNR dated indicated -- you're not saying it indicated 23 that thirty cents out of every dollar failed to get disbursed to 24 plaintiffs, are you? 25 A. Well, it's showing that only seventy cents of the corrected Jacqueline M. Sullivan, RPR Official Court Reporter 342 1 revenue number was disbursed. 2 Q. I beg your pardon? 3 A. It's showing that thirty cents of every corrected revenue 4 dollar was disbursed. 5 Q. Okay. It's showing that that's how you've calculated it on 6 Attachment C? 7 A. That's correct. 8 Q. When I say Plaintiffs', I forget what, 56? 9 A. That's correct. 10 Q. So this is Plaintiffs' 56 is the sole basis for your 11 conclusion that in a given year in every year thirty cents out 12 of every dollar collected for beneficiaries disappears somewhere 13 and never gets distributed to beneficiaries? 14 A. That's correct. 15 Q. Now, Judge Robertson asked some questions which I had in my 16 outline, but you are aware that the number in the pre-1972 17 years, you had actual data for disbursements. Judge Robertson 18 pointed out one for you, I believe, for 1926? 19 A. There were mentions of disbursements in some of the 20 documents I reviewed, yes. 21 Q. Okay. Can you pull up Attachment B, please? I misplaced 22 my version but it doesn't matter. All right. We're back at 23 Plaintiffs' Exhibit 55. Can you tell from reviewing Plaintiffs' 24 Exhibit 55 how many years outside the 1988 to 2002 period, how 25 many years you had actual disbursement data that failed to use Jacqueline M. Sullivan, RPR Official Court Reporter 343 1 it? 2 A. No. 3 Q. Okay. Can you estimate at all? I mean, any recollection? 4 A. I don't remember from looking at the individual years. The 5 individual years, three or four mentioned disbursements, and I 6 brought this to the attention of plaintiffs' counsel. I said 7 there is numbers here claimed as disbursements which I could use 8 as a disbursement number, and they said they believe that that 9 disbursement data was particularly questionable and that Mr. 10 Pallais -- do I have the name right? 11 Q. Mr. Pallais, it would be. 12 A. Mr. Pallais would be testifying that that was unreliable 13 data, and I said okay, in that case if that's the position, I 14 won't use that individual data. I will extrapolate backward 15 from the CPNR. 16 Q. When you had that conversation were you told why Mr. 17 Pallais believed that data was unreliable? 18 A. I was told that it was part of a 70-page memo. It was a 19 detailed and complex analysis. 20 Q. Okay. And in fact, isn't it true every time you saw a 21 disbursement figure that you could have used instead of your 22 seventy percent imputed value, that disbursement figure was 23 actually larger? 24 A. Several of them were right around seventy percent and 25 several others were substantially larger, and one was less than Jacqueline M. Sullivan, RPR Official Court Reporter 344 1 seventy percent, as I recall. 2 Q. Okay. So sitting here today you don't know how, for 3 example, your model would have been impacted had you used all of 4 the available disbursement data rather than simply plugging in 5 the seventy percent calculation? 6 A. No. I'd have to go back and carefully get that data and 7 substitute it. 8 Q. Did you ever review any audited figures related to the 9 individual Indian money accounts? 10 A. When you say "audited," I mean, they aren't a private 11 company so I don't really quite know what you mean by "audited." 12 Q. I'm actually referring to the audit of the IIM system. 13 Why don't we go ahead and pull up for example 14 Defendants' Exhibit 438. 15 MR. WARSHAWSKY: Your Honor, would you like a copy of 16 that? 17 THE COURT: No. 18 BY MR. WARSHAWSKY: 19 Q. Professor Cornell, I've placed before you what we've had 20 marked as Defendants' Exhibit 438. This actually was also part 21 of the administative record from our prior hearing, but it's 22 captioned Independent Auditors' Report of the Tribal and Other 23 Trust Funds and Individual Indian Monies Trust Funds, and this 24 is for the fiscal years 2006 and 2005. Have you ever seen a 25 document like this before? Jacqueline M. Sullivan, RPR Official Court Reporter 345 1 A. It looks familiar, but not precisely familiar. 2 Q. Okay. Well, let's go to page 24 of this document. Why 3 don't you blow up -- 4 A. How are the pages Bates number 24 on the bottom? 5 Q. I'm sorry. Right in the lower right-hand corner, or if you 6 want you can actually look on the screen. 7 A. I'm pulling it up here as well. I've got it. 8 Q. And I have pulled up a statement of changes in trust fund 9 balances for the years ended September 30th, 2006 and 2005. And 10 as you'll see from the top of this, this is with respect to the 11 individual Indian monies trust funds. Do you see that, sir? 12 A. Yes. 13 Q. Okay. And if you look on, there's a line there under 14 Decreases, disbursements to and on behalf of accountholders for 15 2006, 3.74.5 million; for 2005, 278.4 million. Do you see that? 16 A. Yes. 17 Q. And what numbers did you use for disbursements in 18 Attachment A? 19 A. Well, we'd have to go back and look. 20 Q. Would you mind pulling up Attachment A, the last page, and 21 you can compare it to the hard copy there. So, for example, for 22 2006 your disbursements figure was how much? 23 A. 271.1 million. 24 Q. And what was it in the audited report? 25 A. It appears to be the 374.5 million. Jacqueline M. Sullivan, RPR Official Court Reporter 346 1 Q. So it was a hundred million dollars more, roughly; is that 2 correct? 3 A. Yes. 4 Q. And then 2005, since you have the numbers right in front of 5 you, what's the difference there? 6 A. We're comparing 202.7 with 278.4. 7 Q. So again, about 75 million? 8 A. Yes. 9 Q. In retrospect, do you think it would have been more 10 reasonable to use audited disbursement figures in your analysis 11 than the seventy percent that you imputed for those two years? 12 A. I don't think even in retrospect that as a financial 13 economist I'm in the position to do the detailed trust 14 accounting. I can develop a model, which I have done, but I'm 15 going to need help from the Court and from both parties to make 16 sure that the most accurate figures go in there. 17 Q. Okay. Fair enough. Let me ask you another question. Why 18 don't we go, we're looking again at Attachment A, and you can go 19 to the first page if you'd like so we don't have all these 20 footnotes in front of us. Now, again, assume, remember we 21 talked earlier about Osage and I asked you to assume that 22 payments were made directly from -- well, strike that. 23 Your total revenues figure? 24 A. Corrected revenue is actually the word I use. 25 Q. I'm sorry, yes. Right. Your corrected revenue figures, Jacqueline M. Sullivan, RPR Official Court Reporter 347 1 that includes all of the Osage payments, all the amounts 2 collected by Osage, right? 3 A. All the ones reported on their website, yes. 4 Q. I'd like you to -- let's see. I'm sorry. Bear with me a 5 moment. If we can go to the disbursement figure in Column F, 6 does that include disbursements to Osage headright owners under 7 your model? 8 A. I'm hesitating because I don't have the -- I've testified 9 before that, you know, the checks, it would be my understanding 10 I think that it would. 11 Q. Okay. Let me see something here. 12 So bear with me, your Honor. 13 I just want to compare this, the Attachment C that we 14 had, to the current one. Okay. Why don't we -- now, the 15 disbursements data, again, you've explained that that came from 16 the CPNR data, right? 17 A. Yes. 18 Q. And what is your understanding of what CPNR is? 19 A. Check reconciliation and payment accounting produced by the 20 Treasury. 21 Q. Okay. And I'm looking at Attachment C now. Your 22 Attachment C which is Plaintiffs' Exhibit 56, sorry, you had 23 your footnote two -- I'm sorry. Attachment A, Column E, so is 24 it fair to say that to the extent disbursements were made to 25 headright owners, that would -- you're assuming it's encompassed Jacqueline M. Sullivan, RPR Official Court Reporter 348 1 within the CPNR data, correct? 2 A. Yes. 3 Q. Okay. 4 A. I'm assuming that the Osage money went into the general IIM 5 account and then would be paid out, so it would be included in 6 both the revenues and the disbursements. 7 Q. Are you familiar with, have you ever heard about something 8 like something called Treasury disbursing symbol 4844? 9 A. Yes. 10 Q. And what is your understanding of what that is? 11 A. That that's an account number related to the individual 12 Indian trust. 13 Q. Okay. And the CPNR data that is utilized, was that simply 14 for 4844? 15 A. That's my understanding, yes. 16 Q. So if in fact the payments made to headright owners go 17 through a different Treasury disbursing symbol, your 18 disbursements data wouldn't capture that; is that correct? 19 A. I believe that's correct. 20 Q. Are you familiar with the terms, and they both refer to 21 basically the same thing, ACH, EFT, the acronyms? 22 A. Electronic funds transfer. 23 Q. Exactly, or ACH, automated clearing house? 24 A. Yes, I'm familiar with those. 25 Q. Okay. And are you a -- have you been made aware whether Jacqueline M. Sullivan, RPR Official Court Reporter 349 1 any disbursements from the Indian -- to the individual Indian 2 beneficiaries are made electronically as opposed to by checks, 3 being made by checks? 4 A. Well, you can make it electronically and still have a, 5 quote, check number. You get a nonnegotiable check. That's the 6 way CRA pays me, for example, but I'm not aware of the details 7 of how these are distributed. 8 Q. Well, do you know whether the CPNR data includes payments 9 made by EFT or ACH? 10 A. I interpreted it to be all payments made out of 4844, so if 11 some of those were electronic I would think it would include the 12 electronic. That would have been my interpretation. 13 Q. Have you ever heard of a system called PACER with 14 respect -- not the judicial one, but with respect to electronic 15 payments? 16 A. No. 17 Q. So if in fact the CPNR data did not include the electronic 18 transfers that we've been talking about, would you agree with me 19 that your disbursement rate is artificially low? 20 A. It might be. I would have to understand, I don't want to 21 draw a conclusion until I've looked at the actual data and 22 understood it, but I couldn't rule out that possibility. 23 Q. I'd like to refer to Plaintiffs' Exhibit 50. If you could 24 pull that up, please. And I'll tell you what. I'm going to try 25 to make this easier. If I can step over here and show -- Jacqueline M. Sullivan, RPR Official Court Reporter 350 1 Professor Cornell, you recall we were reviewing a number of 2 these commissioner Indian affairs reports earlier today, 3 specifically Plaintiffs' Exhibit 45 to Plaintiffs' Exhibit 50 4 related to the years 1915 to 1920? 5 A. Yes, I remember that. 6 Q. And if you recall talking about how you utilized the total 7 income figures on the right-hand side? 8 A. Correct. 9 Q. And I'm sorry, I should have actually -- we're going to 10 have to bring it down a little bit so you can see the years, and 11 you can see over on the left-hand side the first year is 1920 12 and then there's 1919, 1918 on down like that. Do you see that? 13 A. Yes. 14 Q. Now, let's go back to where I was before under the last 15 caption. Do you see there are two categories, allotted and 16 unallotted? 17 A. Yes. 18 Q. Do you have an understanding as to the distinction between 19 those two categories? 20 A. I think I did when we originally went through this. I 21 don't recall it now. 22 Q. Let me see. Would it refresh your recollection if I were 23 to suggest that the unallotted referred to tribal trust as 24 opposed to individual trust, individual Indian trust, does that 25 sound familiar? Jacqueline M. Sullivan, RPR Official Court Reporter 351 1 A. That might be right, but I'm not sure. 2 Q. Well, I don't want you to guess here. Suffice it to say if 3 in fact the unallotted amounts should not have been included as 4 income for the individual Indian monies trust accounts, is it 5 fair to say that your revenue figures have been overstated to 6 the extent you've utilized unallotted revenues? 7 A. I think that follows by definition from your assumptions. 8 I'm trying to get out the total receipts into the individual 9 Indian trust, and if there is a number that was included in 10 that, it was not a receipt for that trust, it would indeed be 11 overstated. 12 Q. Have you ever heard the expression tribal IIM? 13 A. Yes. 14 Q. And what is your understanding of what tribal IIM referred 15 to? You know, it's been a long day. Let me see if we can 16 refresh your recollection. 17 A. I'm trying to remember, yes. 18 Q. This might help. You stated very eloquently -- would you 19 pull up Cobell 20, please? 20 This is Judge Robertson's opinion from January 30th of 21 this year. We're going to go specifically to, the citation is 22 532 F Supp 2d at page 84. So go to the 41st page of this 23 document. 24 And would you blow up the yellow section here? Blow 25 it up a little bit more. It's been a long day. Okay. Jacqueline M. Sullivan, RPR Official Court Reporter 352 1 Can you see the highlighted section where Judge 2 Robertson was discussing tribal IIM accounts and tribal IIM 3 money, and he states, Tribes utilized IIM accounts as 4 convenience as a realitively easy way to obtain checks from the 5 IIM system. Such accounts oxymoronically are referred to as 6 tribal IIM accounts containing tribal IIM money, and citing to 7 Kathy Ramirez's testimony. Does that refresh your recollection 8 as to what tribal IIM money is? 9 A. I think so, and if I read above it, it refreshes me better 10 that tribal IIM money is money owned by or the tribal unit has 11 the right to that gets deposited into the IIM account. 12 Q. How does Attachment A treat tribal IIM money? 13 A. It doesn't break it out. 14 Q. And so for example, to the extent you've included 15 collections within your collections figure tribal IIM money, 16 that overstates revenues; is that correct? 17 A. That sounds correct, but again, sitting here under oath I 18 wouldn't want to say for sure. 19 Q. Okay. Did you ever become aware of circumstances where 20 revenues into the IIM system include amounts that subsequently 21 were transferred to the tribal trust? 22 A. I became aware of instances of that, yes. 23 Q. And how did those -- how were those transfers accomplished? 24 I mean, in other words, mechanically? Was a journal entry 25 prepared? Jacqueline M. Sullivan, RPR Official Court Reporter 353 1 A. I don't know. 2 Q. Well, let's take a look at, I had this marked as 3 Defendants' Exhibit 480. This is actually a much larger 4 exhibit. We're just going to go to the last page, page nine, if 5 you can pull that up, please. Page nine, the last page. And 6 why don't you focus on the top half first. Have you ever seen a 7 document like this before? 8 A. No, I don't believe so. 9 Q. Okay. And you see on the left-hand side a reference to 10 14X63039? 11 A. Yes. 12 Q. Do you know what that is? 13 A. No. 14 Q. And over on the right-hand side obviously then you wouldn't 15 know what the 14X7433 and on down is? 16 A. No, I don't believe so. 17 Q. So you don't know whether this represents money being 18 transferred from the IIM account to the tribal trust accounts? 19 A. I couldn't testify that I do today, no. 20 Q. If that's what this is, though, am I correct that your 21 disbursement calculation wouldn't have captured such a transfer 22 because this wouldn't have been something included in the CPNR 23 data? 24 A. I believe that's correct, but I'd have to understand it 25 more fully to be sure. Jacqueline M. Sullivan, RPR Official Court Reporter 354 1 Q. Have you become aware of instances -- strike that actually. 2 Are you aware that some of the amounts collected 3 within the IIM system represented deposits made by unsuccessful 4 bidders? 5 A. Yes. 6 Q. Okay. And for example, why don't we go ahead and -- let's 7 go to Defendants' Exhibit 33. This is actually, I believe this 8 is actually -- I believe this is from one of the same reports 9 you looked at earlier with Mr. Gingold, but why don't we go to 10 page two, and if you look in the upper right-hand corner you see 11 there's under disbursement amounts returned to unsuccessful 12 bidders, do you see that? 13 A. Yes. 14 Q. And that represented in that particular year about a third 15 of the disbursements? 16 A. Yes. 17 Q. That's very rough, but 2.7 million out of 7.6, 7.7 million, 18 right? 19 A. Yes. 20 Q. And how does your model treat disbursements and collections 21 related to unsuccessful bids? 22 A. Unsuccessful bids, because it would not -- if they were 23 earnedd it would not accrew as a benefit to the government and 24 should be debunked out. 25 Q. That's happened in your days? Jacqueline M. Sullivan, RPR Official Court Reporter 355 1 A. Well, it's hard to say, because with just applying the 2 thity, it isn't clear exactly what's in that thirty percent. 3 Q. Okay. Now, you talked a little bit this morning and 4 earlier this afternoon about your calculation and the benefit to 5 the government. In connection with that, there is discussion -- 6 THE COURT: Mr. Warshawsky, let's not leave that last 7 point. I thought the question was does the thirty percent 8 number of monies that was disbursed include these funds returned 9 to unsuccessful bidders or not, and your answer was you don't 10 know. Why is it you don't know? 11 THE WITNESS: Because I don't have a detailed audit of 12 what the actual payments are or where they went. I'm trying to 13 operate at a very high level without understanding the micro- 14 data. 15 BY MR. WARSHAWSKY: 16 Q. So you don't know, and if the if thirty percent 17 disbursement does not include money that was returned to 18 unsuccessful bidders, then you're way off, aren't you? 19 A. I'm off by whatever the return to the unsuccessful bidders. 20 THE COURT: If it were a third, as in this case, it 21 would wipe out the delta. 22 THE WITNESS: Well, that's a third of the 23 disbursements, not a third of the revenues, but it would take a 24 big chunk out of it, yes. 25 THE COURT: Okay. Jacqueline M. Sullivan, RPR Official Court Reporter 356 1 BY MR. WARSHAWSKY: 2 Q. By the way, Professor Cornell, and while we're having that 3 exchange, which I recall in particular you did this afternoon 4 talk to Mr. Gingold this afternoon about monies held in banks as 5 opposed to held in the Treasury. Do you recall that? 6 A. Yes. 7 Q. And so, for example, and this was even discussed I believe 8 during your direct, we looked again at this Defendants' Exhibit 9 33, total balance on hand June 30th, 1999, of 10.9 million out 10 of about 959.6 million is reported being held in bonded banks to 11 credit individual Indians, right? 12 A. Yes. 13 Q. How does your model -- strike that. 14 Isn't it true that your model, however, treats those 15 monies as though they were held in the Treasury? 16 A. The government, like an individual, can have many different 17 Treasury accounts. It could have been prior bank accounts. The 18 critical question is when money leaves the bank where does it 19 go. 20 Q. What's your understanding of the term there to credit 21 Indians. 22 A. I don't know exactly what that means. 23 Q. Implicit in your calculation, though, is an assumption that 24 the government has free access to it, that the individual have 25 no right to it? Jacqueline M. Sullivan, RPR Official Court Reporter 357 1 A. No, I don't think so. 2 Q. How is it that the government can tap it just like it could 3 tap money into the Treasury? 4 A. We have the opinion the Treasury, the government should be 5 disbursing funds according to the appropriate rules, but if 6 there's a deposit at a bank, and I understand that the 7 government would have the rights to recall those funds if it 8 chose to. 9 Q. If in fact the government didn't have free access to those 10 funds that were held in credit for individual Indians, your 11 model would overstate the benefit to the government; is that 12 correct? 13 A. Well, my model would still work. What you'd basically be 14 saying, if the government could not take any of the monies that 15 went into the bank accounts, let's take an extreme hypothetical. 16 Ones it goes into a bank it cannot be used for the benefit of 17 the government. It's either got to be disbursed to Indians or 18 pilferred by some corrupt officials. Those are the 19 alternatives. In that case the disbursement rate by definition 20 would be a hundred percent. 21 Q. Well, let's look a little bit higher on this exhibit under 22 disbursements, the third line, checks drawn by Indians on bank 23 accounts. Can you draw any inference from that as to who had 24 the right to the funds in those bank accounts? 25 A. If those funds were drawn by individual Indians, those Jacqueline M. Sullivan, RPR Official Court Reporter 358 1 should be considered disbursements and they would be -- how they 2 were drawn I don't know. 3 Q. Do you know what years IIM monies were deposited in banks 4 rather than the Treasury? 5 A. Well, there was a document put up this afternoon I believe 6 that continued up until the early 1930s. 7 Q. So the basis for your understanding is the Terry Keyhoe 8 document that Mr. Gringold showed you? 9 A. Yes. 10 Q. Now, let me ask you about the interest calculations. Why 11 don't we go back to Column H? I think it's Column H. It was 12 Column H of Plaintiffs' Exhibit 41. Have you checked the 13 interest rates that were included in this column? 14 A. Yes. 15 Q. Okay. And the reason I ask is the last two interest rates 16 or the ones I should say for 2000 -- let's go to 2005, 2006, and 17 2007. They're all on the same page. Do you see 2005 is 4.22 18 percent and 2006 went up a hundred basis points to 5.22 percent? 19 A. Yes. 20 Q. And then to 6.22 percent in 2007? 21 A. Yes. 22 Q. I'll tell you, I checked the Schiller Data on the website, 23 and we can pull that up if you want. Why don't we do that just 24 to make sure we're comparing it to the right one? We saw a 25 slightly different interest rate and I want to make sure we're Jacqueline M. Sullivan, RPR Official Court Reporter 359 1 going to the right source. And go to the last year's. Oh, boy, 2 not that. 3 A. I don't think you want that page either. 4 MR. WARSHAWSKY: Your Honor, if I may approach the 5 witness. I've got a hard copy. May I, your Honor? 6 THE COURT: You may approach the witness, please. 7 BY MR. WARSHAWSKY: 8 Q. Why don't you try the third page and see if that does it. 9 There we are. Okay. No, don't go that small, please. You see 10 there, that's good. 11 The column, it looks like it's one. You've got the 12 years and then one, two, three, four, fifth column over. 13 A. Yes, I see that. 14 Q. The 4.22 and then 4.42 and 4.76? 15 A. Yes. 16 Q. Are those the figures that should have appeared in 17 Attachment A? 18 A. As I look at this, it makes me think I think so, but I can 19 check that during the break. 20 Q. How did you determine that the ten-year Treasury bond rate 21 was the appropriate way to gage interest here? 22 A. Well, I believe that the government borrowing rate was, and 23 as I testified directly, I thought the average of the ten-year 24 rate over the one-hundred-and-some-year period would be a good 25 aapproximation of the average government borrowing rate. Jacqueline M. Sullivan, RPR Official Court Reporter 360 1 Q. Now -- 2 A. And it's also a number that you have available. For 3 example, the government hasn't issued 30-year bonds throughout 4 the time period. 5 Q. Are you familiar with the factors that a money manager 6 would consider in making borrowing decisions? 7 A. When you say a money manager, are you talking about a 8 government money manager or just any money manager? 9 Q. We can take any money manager first. 10 A. Okay. Yes, I think I am. 11 Q. And what are those factors? 12 A. Expected borrowing costs; risk. Those would be the two 13 most important. 14 Q. Okay. You look at the time that you're going to need to 15 borrow; is that correct? 16 A. If you're a very long-lived entity that just continually 17 roles over that's less important. The U.S. government never 18 really pays back its debt. In fact, it just gets bigger. 19 Q. We'll talk about that. Then let's talk about the people 20 that make borrowing decisions for the United States. What do 21 you know -- I'm sorry. Let me ask it differently. What's the 22 basis for your understanding about how those decisions are made, 23 how much to borrow, say, at Treasury? 24 A. Are you talking about how much to borrow, or how to borrow 25 it? How to borrow, I mean what term of securities to issue. Jacqueline M. Sullivan, RPR Official Court Reporter 361 1 Q. I'll take either one. I have a suspicion it's a more 2 complicated question than I understand. So why don't you 3 answer? 4 A. Well, how to borrow, I think Dr. Miller was the better 5 witness to answer that, but they basically have got to borrow 6 enough to meet the operations to which the United States 7 government has committed itself, which includes all the 8 programmatic undertakings of the government, plus paying the 9 interest and the principal on the maturing debt. 10 Q. Is there a reason you didn't for example in putting 11 together your analysis in Attachment A, a reason you didn't try 12 to come up with some kind of weighted cost of capital or 13 weighted cost of borrowing rather than just picking a particular 14 debt instrument like the ten-year bond? 15 A. Because you're not going to have data on that back a 16 hundred years and I didn't think it was a material consideration 17 to go through this massive analysis for what would have been a 18 marginal change. 19 Q. Long-term rates, and I understand that there can be times 20 when the yield flips, but typically long-term rates are larger 21 than short-term rates, right? 22 A. Somewhat. That's a very hotly researched and disputed 23 issue, but typically that's been the case, yes. 24 Q. Okay. But for purposes of your choices, the ten-year bond 25 was the long-term rate, right? Jacqueline M. Sullivan, RPR Official Court Reporter 362 1 A. No. I interpreted as the intermediate. There's '20s and 2 '30s. 3 Q. But you said that data wasn't available for the entire -- 4 A. Not continuously. 5 Q. Okay. But of the available data, the ten-year was on the 6 high end, right? 7 A. A little bit, but I felt the ten-year was a reasonable 8 approximation of the government's borrowing costs. 9 Q. Have you undertaken any efforts to become informed about 10 how the government actually does make decisions as to how much 11 to borrow? 12 A. As to how much? 13 Q. Right. 14 A. Other than the general point that I spoke of a moment ago, 15 no. 16 Q. Well, and you were here this morning of course for Dr. 17 Miller's testimony. So let's try to go through it this way. In 18 Attachment A, if you want to pull up Attachment A again, Exhibit 19 41, for 2007, I'm going to take your corrected -- well, nominal 20 amount to the government. That's the net amount of revenue over 21 disbursements as you've calculated it, right? 22 A. Yes. 23 Q. And that's what you applied the interest rate to, correct? 24 A. Correct. 25 Q. So 102 million, and we'll divide it by 52 weeks, it's about Jacqueline M. Sullivan, RPR Official Court Reporter 363 1 roughly $2 million a week coming in net to the government; is 2 that correct? 3 A. Based on those numbers, yes. 4 Q. And I'd like you to assume since I understand you don't 5 have any knowledge about this, assume that the government, that 6 the Treasury on a weekly basis looks at its borrowing needs and 7 makes determinations of how much to borrow in the billions. 8 A. Oh, it would easily be in the billions. 9 Q. So $2 million, that is going to be material to a borrowing 10 decision? 11 A. Well, I think you're making the famous mistake the Greek 12 mathematicians made, which is because a number is small, say 13 that you can't consider it that way. 14 Let me give you an analogy. I paid my taxes in April 15 and I wrote a check to the government. It's a lot smaller even 16 than that. I can say, well, this isn't material, it doesn't 17 affect their borrowing decision, how about if the government and 18 I just forget it and I won't pay my taxes this year. It 19 wouldn't affect anything. Unfortunately, if a hundred million 20 people thought the same way it would affect the government in a 21 very real way so every little bit affects them. It's just that 22 when you look at any little bit in isolation it seems 23 unimportant, but to the extent that they don't have two million 24 here they are going to have to get it elsewhere. 25 Q. Well, that's the question I want to ask. Let's take that Jacqueline M. Sullivan, RPR Official Court Reporter 364 1 two million. Assume further, though, that when the government 2 makes the decision about how much to borrow, they don't borrow 3 based on a projection of, well, we need an extra two million. 4 They say we're going to borrow, we're going to use a half 5 billion dollars as the threshold. Say we calculate, we need 2.2 6 billion coming up, we're going to borrow two billion. If we 7 need 2.8 billion we're going to borrow three billion. Are you 8 with me? 9 A. Yes. 10 Q. If that's the actual -- and I'm sure I've oversimplified 11 it, but if that's basically the decision-making process that 12 goes on, isn't it true that that $2 million isn't going to tip 13 the borrowing decision one way or the other? 14 A. I don't think that's correct logic because that could be 15 true of any $2 million receipt and yet in the aggregate they do. 16 So no, that's incorrect. $2 million means $2 million of added 17 borrowing. The way it flows through the actual decision making 18 may be complex but the only way to think about it is it would 19 increase the borrowing needs by $2 million. 20 Q. And with whom are you going to aggregate the $2 million of 21 income from the IIM trust here? 22 A. With all the other sources that the government has in 23 revenue. 24 MR. WARSHAWSKY: Your Honor, may I take a short break? 25 THE COURT: A short break? Jacqueline M. Sullivan, RPR Official Court Reporter 365 1 MR. WARSHAWSKY: Well, just take a moment to confer. 2 THE COURT: Yes. Okay. 3 (There was a pause in the proceeding.) 4 MR. WARSHAWSKY: Professor Cornell, thank you very 5 much. 6 Thank you, your Honor. 7 THE COURT: Thank you, sir. 8 Any redirect? 9 MR. GINGOLD: Yes. 10 REDIRECT EXAMINATION 11 BY MR. GINGOLD: 12 Q. Professor Cornell, Mr. Warshawsky asked you several 13 hypothetical questions, one of which is if in fact the Osage 14 individual Indian trust funds did not have a 4844ALC, would you 15 be able to conclude that seventy percent of the funds 16 represented in the CRA database were disbursed or not? 17 A. I remember that line of questioning. 18 Q. If in fact the Osage individual Indian trust beneficiaries 19 checks did not have the 4844 ALC, do you have any evidence that 20 any of those funds were disbursed to the individuals? 21 A. No. 22 Q. So the seventy percent disbursement you applied to the 23 Osage individuals was applied even though you didn't have a 24 single shred of evidence that any money went to the Osage, 25 correct? Jacqueline M. Sullivan, RPR Official Court Reporter 366 1 A. Yes. The seventy percent was applied across the board from 2 the aggregate data. 3 Q. Now, in the series of Osage hypotheticals asked by Mr. 4 Warshawsky, he asked you to assume that the funds were held 5 outside the IIM trust. Do you recall that? 6 A. Yes. 7 Q. And he asked you a question if the funds were held outside 8 the IIM trust, would you include those funds in Attachment A, 9 correct? 10 A. In the what? 11 Q. In Attachment A in your model. 12 A. Yes. 13 Q. And what was your answer to that? 14 A. Well, I said that if they never entered the IIM funds then 15 they should not be in IIM receipts. 16 Q. If the funds are held in trust in Treasury for the 17 individual Indians, should they be included in your model? 18 A. Well, then in my understanding they would be included and 19 they should be. 20 Q. So is it important as to whether they're held in a 21 particular system in your opinion or whether they're held in the 22 Treasury? 23 A. The importance as I understand it is that they'd be held in 24 the IIM trust for the benefit of individual Indians, not for the 25 particular account. Jacqueline M. Sullivan, RPR Official Court Reporter 367 1 Q. So if the account is labeled something other than the IIM 2 trust but the funds are held in trust in the Treasury, should 3 they be included in your model? 4 A. I think so, but I'd want to make sure I understand it a 5 little further. 6 THE COURT: I want to make sure I understand it a 7 little further too. I thought this whole thing was premised on 8 the TGA. 9 BY MR. GINGOLD: Yes, it is, your Honor. Would you 10 like me to explain it? 11 THE COURT: I'd like you to ask sharper questions so 12 that we know whether the money is in the TGA or some other 13 place. 14 BY MR. GRINGOLD: 15 Q. Are you aware of what happens when a check is cut on funds 16 held by the Treasury? Let's say in the 14X6039 account, what 17 happens to the funds when a check is actually written? 18 A. Well, when it's written, you mean when it's cleared? 19 Q. No. When a check is actually written do you know what 20 happens to the funds? 21 A. No. 22 Q. Let me give you a hypothetical. If a check is written for 23 an individual Indian that comes out of the 14X6039 account, if 24 the funds are then immediately transferred to Treasury, general 25 account, and they stay in the general account until the checks Jacqueline M. Sullivan, RPR Official Court Reporter 368 1 are negotiated or paid, is it your understanding those funds are 2 being held in the general account until such time, if my 3 hypothetical is true, until such time as the check is actually 4 paid? 5 A. Yes. 6 Q. Whatever amount of time that would take, correct? 7 A. Correct. 8 Q. Now, if the Osage funds were held in an Osage account and 9 the Treasury cut checks to the individuals and their funds were 10 similarly transferred into the general Treasury account, under 11 those circumstances that I described in the hypothetical 12 wouldn't they too remain in the general Treasury until the 13 checks were paid? 14 A. The way you've described it, yes, it sounds so. 15 Q. Now, if in fact all of the funds of the Osage that are held 16 in that account, or no, 98-and-a-half percent, assuming 17 98-and-a-half percent of the funds held in the Osage account are 18 soley the only rights to those funds are solely in the 19 individuals, would you assume that those funds are the 20 individuals' funds? If all rights to those funds are the 21 individuals' rights, would you assume those funds are the 22 individuals' funds? 23 A. Yes. 24 Q. If in fact the individuals paid taxes on those funds would 25 you assume that they're the individuals' funds? Jacqueline M. Sullivan, RPR Official Court Reporter 369 1 A. Yes. 2 Q. If you assume that the government used to issue K-1s to the 3 individuals whose funds were held in that account, would you 4 assume that's from the individuals' funds? 5 A. Yes. 6 Q. And today if you assumed that the government issued 1099 7 forms for those funds that are held in that account, would you 8 assume that the individuals' funds -- 9 MR. WARSHAWSKY: Your Honor, I'm going to object. I'm 10 far beyond Professor Cornell's expertise. 11 THE COURT: Oh, he's making a lot of assumptions. I'm 12 happy to hear them. What I want to know is whether the 13 Plaintiffs' position is that all Native Americans are entitled 14 to an undifferentiated share of all the money that may have been 15 held for the Osage. 16 BY MR. GINGOLD: Your Honor, because we're looking at 17 restitution, which is a benefit conferred on the government and 18 not the injury sustained by the individual, and as Professor 19 Laycock stated in his testimony, if in fact Professor Laycock is 20 correct in his understanding of the law, the only thing that 21 would happen on this is whatever the benefit conferred to the 22 individual an as allocated to the Osage, so long as it did not 23 receive whatever injuries they sustained they could also recover 24 in damages on that which remains if they chose to bring that 25 action in the proper court. Jacqueline M. Sullivan, RPR Official Court Reporter 370 1 THE COURT: I didn't understand that. You're asking 2 for a sum of money that is restitution. 3 BY MR. GINGOLD: That's correct. 4 THE COURT: You're asking for this restitutionary sum 5 of money to be given to a plaintiff class. 6 MR. GINGOLD: That's correct. 7 THE COURT: Are owners of Osage headrights members of 8 the plaintiff class? 9 MR. GINGOLD: Yes, they are. They're individual 10 Indian trust beneficiaries in accordance with February 4th, 11 1998. 12 THE COURT: Okay. And is it your position that if 13 this money, that this hypothetical award of restitution is made 14 to the plaintiff class, that it will be distributed equally 15 among all Native Americans? 16 BY MR. GINGOLD: What we've said in our briefs is this 17 Court can make a determination on how the funds should be 18 distributed. We believe, however, it's within the discretion of 19 this Court, your Honor. We believe, however, because we're 20 seeking benefit conferred, it is proper to distribute the funds 21 on a per capita basis. To the extent that an individual -- 22 THE COURT: Have you told the Osage about that? 23 MR. GRINGOLD: Yes, as a matter of fact we did. We 24 went down to the Osage when we filed this action in 1996. We 25 met with the Osage individuals in the Osage tribe and they Jacqueline M. Sullivan, RPR Official Court Reporter 371 1 endorsed us, and Ms. Cobell and I and others were down there. 2 Yes, we did, your Honor. 3 THE COURT: Okay. Proceed. 4 MR. GINGOLD: But your Honor, one of the most 5 important aspects of this is, and when we filed in litigation in 6 response to your question we looked at this issue quite 7 carefully, we looked at whether or not we believed there would 8 be any preconclusion with regard to the damages claims to the 9 extent that an individual would be damaged and otherwise 10 wouldn't be able to be, let's say, obtain justice in this court 11 because we're well aware of all the issues and we concluded and 12 we believe the law is quite clear as Professor Laycock 13 explained. 14 BY MR. GINGOLD: 15 Q. There is no preconclusion, there is no barring as long as 16 you don't obtain a double recovery, so we looked at that issue, 17 and again Dr. Laycock confirmed that in review. So we're 18 dealing with a situation where we, Plaintiffs' counsel asked you 19 to apply a seventy-percent rate across the board without regard 20 to what tribe any individual is a member of? 21 A. Correct. 22 Q. And was there a reason Plaintiffs' counsel asked you to do 23 that, do you know? 24 A. I don't recall. 25 Q. Was there any issue with respect to the reliability of the Jacqueline M. Sullivan, RPR Official Court Reporter 372 1 data that otherwise exists? 2 A. Oh, oh, oh, I thought were you asking a different question. 3 Yes, as I testified earlier, that Plaintiffs' counsel said that 4 the bits and pieces of disbursement data that were available 5 were highly unreliable and there would be testimony as to that, 6 and I therefore said, well, the most reliable thing I have is 7 the CPNR data and I will use that pending further word from the 8 government. 9 Q. Now, Mr. Warshawsky identified DX438, which is the 10 Independent Auditors' Report of Tribal and Other Trust Funds and 11 Individual Indian Monies Funds Financial Statements for fiscal 12 years 2006 and 2005. Do you recall seeing a page? 13 A. Yes. I still have that up here in fact. 14 Q. And I believe Mr. Warshawsky pointed you to page 438. If 15 you can please look at that. 16 A. I actually still have it open there. 17 Q. Okay. Now, this is for both fiscal years 2006 and 2005, 18 correct? 19 A. Yes. 20 Q. I'd like you to turn your attention to DX438 at page 31. 21 A. 31? 22 Q. Yes, that's correct. And if you see it says tribal and 23 other trust funds and individual Indian monies trust funds 24 managed by the U.S. Department of the Interior independent 25 auditors' report of internal conform on financial reporting and Jacqueline M. Sullivan, RPR Official Court Reporter 373 1 compliance with other matters. Do you see that? 2 A. Yes. 3 Q. And it's dated 2006, correct? 4 A. Yes. 5 MR. GRINGOLD: Your Honor, would you like us to have 6 this brought back? 7 THE COURT: Yes, please, on the screen. 8 BY MR. GRINGOLD: 9 Q. You've stated you're not an auditor, correct? 10 A. Correct. 11 Q. And you've stated you're not a C.P.A., correct? 12 A. Correct. 13 Q. Do you have any understanding of what it means if an audit 14 is qualified? 15 A. Well, if an audit is qualified it usually means that the 16 auditor does not feel that they have adequate information to 17 provide their normal audited opinion. 18 Q. Please turn to page 32. 19 A. Okay. 20 Q. If we can focus in on the paragraph which is a summary 21 paragraph. The first sentence begins in that paragraph, Our 22 audit reports on the trust funds financial statements were 23 qualified because it was not practical to extend our auditing 24 procedures sufficiently to satisfy ourselves as to the fairness 25 of trust fund balances and the trust fund's financial statements Jacqueline M. Sullivan, RPR Official Court Reporter 374 1 as of September 30, 2006 and 2005. It goes on almost the entire 2 paragraph. Do you see that? 3 A. Yes. 4 Q. So this is a qualified audit, correct? 5 A. It looks like it, yes. 6 Q. Okay. I'd like you to turn your attention to the next 7 page, the first paragraph in the next page. It states, Our 8 consideration of internal control over financial reporting 9 resulted in a following condition being identified as a 10 reportable condition. Reliance and processing of trust 11 transactions at the Bureau of Indian Affairs and unresolved 12 financial reporting matters from prior periods, we consider this 13 reportable condition to be a material weakness. Do you have any 14 understanding of what that means? 15 A. It means that they're not comfortable with the financial 16 controls and reporting. 17 Q. I'd like you to turn to the next page, page 34. Under the 18 paragraph that's identified as condition, the second paragraph 19 under that, I'd like to read this to you. If you can, is this