If the state doesn't like San Juan County Navajos complaining about how it spent oil and gas royalties reaped from tribal land, then it shouldn't have accepted the money in the first place, attorneys for the Navajos said Friday.

"There is nothing that said the state couldn't refuse the money," said attorney John Pace, fending off arguments from the state that the Navajos' lawsuit should be dismissed. "The state voluntarily accepted a $70 million gift."But Assistant Attorney General Lee Dever characterized the Navajos' position as "ludicrous" and "unbelievable."

"If they don't like how the money is spent, then they file suit and the state must replenish the fund and try again," Dever said, noting the complaint is the fourth the state has had to defend since the trust fund was established.

U.S. District Judge David Sam didn't immediately rule on the state's motion to dismiss but took the arguments under advisement.

The suit was filed in March 1992 by five Navajo Indians from San Juan County on behalf of all Indians living there. It accuses the state of squandering more than $100 million of Navajo trust funds through mismanagement, misappropriation and possible fraud.

The Navajos want an accounting by the state of all money received by the Navajo trust fund since it was created in 1933.

Under federal law, 37.5 percent of all oil and gas royalties realized from the San Juan County portion of the reservation should go into a trust fund to be administered by the state for the benefit of the Navajos.

Few royalties were paid until 1955, but between then and 1990, $61 million was collected. However, a state audit revealed in 1991 just $10 million was left. The state spent trust money on off-reservation road projects and construction of a state social services building in San Juan County.

Pace alleged during the hearing that money was also spent on a failed business venture, a marina in a flood plain and a venture to sell jeans on the Russian black market.

Attorneys for the tribe estimate the fund, even considering the money spent on Navajo projects, should now be worth $100 million including interest.

Dever didn't defend how the money was spent, but he argued the tribe has no legal standing to address the issue in court.

"They should use the political process like everyone else," he said. "If they don't like how the money is spent they should vote out their representatives" in state government.

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Past court cases have ruled against taxpayers suing over government fiscal policies. But Dever also noted the federal Constitution prohibits citizens from suing a state over any issue in federal court.

Pace countered that the 1933 federal law creating the trust fund gives the Navajos the right to sue the state. Navajo attorneys have also contended the complaint was initially filed in state court but was transferred to federal court because the state argued it was a federal issue.

He explained there was a difference between spending tax money and trust fund money. Pace said when the state accepted trust fund royalties, it "took money" it didn't have a right to, but the money was intended for the benefit of the San Juan County Navajos.

"They have a right to ask for an accounting of that money and if it is lost or stolen to have the state put it back," Pace said. "The bottom line is there is a trust relationship and the tribe is the bene-ficiary. As soon as Utah took the money, a fiduciary responsibility arose."

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