First Nations making millions by controlling their investments of resource development royalites
From the Saskatoon Star Phoenix
Feds fail at good trustee role
Doug Cuthand - February 20, 2009
The Ermineskin and Samson First Nations in Alberta 20 years ago began the most costly legal battle in Canadian history. Last week, it came to a crashing end.
They took their battle all the way to the Supreme Court and, in the end, the court sided with the government. The case, which cost the bands legal fees in excess of $100 million, was launched over the federal government's alleged mishandling of the bands' trust funds. The two bands said they had lost close to $2 billion in revenue because the Department of Indian Affairs had simply held the money in trust without investing the funds.
The story goes back almost 60 years. Oil was discovered on the two reserves in the 1950s and the bands received hundreds of millions of dollars in oil royalties in the years since. Royalty income hit a peak in the 1970s and '80s, when Alberta experienced an oil boom. By the time the boom of the 2000s hit, the oil reserves were largely depleted.
Under terms of the Indian Act, revenue earned by First Nations is placed in trust and held by the Department of Indian Affairs and released for band infrastructure projects and payments to individuals. The money in trust earned the Bank of Canada's savings interest rate, which averaged from three per cent to six per cent.
The government, meanwhile, used the money as a part of its consolidated revenue fund. Indian monies thus became a cheap source of revenue for successive Canadian governments.
But the Supreme Court sided with the government, saying Indian Affairs officials had followed the Indian Act. Unfortunately, the court made the decision because the Indian act is the only piece of legislation that the department has to follow when handling First Nations' funds.
This is another sad reality our people face when it comes to realizing our independence. We are still held back and this decision is an example of the patronizing colonialism we must endure. No other level of government or federal institution faces this neglect when it comes to their money. Can you imagine the hue and cry if royalties earned by Alberta or Saskatchewan were placed in trust by the federal government? There would be a revolution, and rightly so.
The federal government holds CPP money in trust for all Canadians through an arms-length agency that invests the funds in stocks, bonds etc. The agency maintains a conservative portfolio that gives a steady return. Even with the recent downturn the CPP fund lost money but outperformed the stock market.
Money held by credit unions and insurance companies, too, is regulated by trust agreements. Why can't First nations' money be freed up and invested under proactive regulations?
Over the years, the Colonial Office has held us back. It has failed to be a positive trustee. God forbid the Indians should get rich and independent! The story of the Samson and Ermineskin Bands is a sorry example of colonialism and a department and successive federal governments that have failed us.
These two First Nations are not alone. Other bands, mainly in Alberta, have accumulated large trust accounts but they are frustrated because they can't invest the money to maximize their return.
In Saskatchewan, we are acquiring new land through land claims and the Treaty Land Entitlement process. Some of this land has mineral potential or rental revenue. This money is being scooped up and placed in trust accounts and frozen in place.
Amendments to the Indian Act and new legislation have focused on the administration of Indians and reduced the reach of our treaty rights. Self-government legislation was not about development but control. Legislation to place the trust accounts in a modern context has been ignored. The government is holding Indian money, with no pressure to maximize the return.
The issue is that the trust relationship must be maintained, but not at the cost of our well-being. The trust relationship is an important part of our relationship within Canada. It is necessary to protect our land and our rights, but the government has let us down on both counts. When it comes to our trust funds, the government plays the trustee role to the limit.
But the real victims in this tragedy are the people of the Samson and Ermineskin First Nations. Their oil revenue is effectively wiped out and they have little to show for it. If they had access to their revenue and invested it in income-generating assets such as real estate, bonds and other vehicles, they would be able to use the income and avoid spending the principle.
Now they are a tragic reminder of the failure of the federal trust responsibility.
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Alta. aboriginal bands lose SCOC case
By Karen Kleiss, February 13, 2009
EDMONTON - The Supreme Court of Canada has dismissed a multimillion-dollar lawsuit filed by two Alberta aboriginal bands who claimed the government failed to invest oil royalties collected on their behalf, depriving them of hundreds of millions of dollars in investment returns since 1972.
In a unanimous decision released Friday, the country's highest court says the Crown had no duty to invest the bands' royalties. Click here to read the decision
"The Crown did not have the obligation or the authority to invest the bands' royalties," the court wrote in a 203-page decision.
"The statutory framework within which the Crown must carry out its fiduciary obligations in this case limits its ability to invest the bands' royalties."
Writing for the court, Supreme Court Justice Marshall Rothstein also ruled the Crown was not unjustly enriched by making use of the bands' royalties while paying the interest rate that it did.
The suit dates back to 1989, when the Samson band filed the first statement of claim, followed by the Ermineskin band in 1992.
Under the terms of Treaty No. 6 and the Indian Act, the bands' interests in the oil and gas under the Pigeon Lake and Samson reserves were surrendered to the government so it could manage the exploitation of resources.
The royalties collected from the oil and gas reserves were put into the federal government's consolidated revenue fund, and the government paid the bands an interest rate of between three and six per cent.
The bands claimed the government had an obligation to invest the money, and that the government's failure to do so deprived them of hundreds of millions of dollars. The Samson Cree believe they lost more than $650 million, while the Ermineskin Cree believe they lost roughly $300 million.
Friday's Supreme Court ruling affects the more than 600 First Nations that have accounts with the federal government.
At least one Canadian First Nation now has control of its own royalty money, and is using it to earn returns that are substantially higher than those paid by government.
Following a Federal Court decision in 2006, the Samson band gained control of $350 million in royalties previously managed by the Crown.
The band used the money to establish a trust fund named Kisoniyaminaw, or Our Money. In the first fiscal year, the annual rate of return on the trust fund was almost 12.9 per cent, earning $41.2 million in 2006.
Meanwhile, the government paid out 4.3 per cent on funds it continued to manage for other bands.