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Judge sides with state over Navajo oil trust

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A federal judge's ruling could mean Utah is off the hook for potentially millions of dollars in oil royalties that belong to the Navajo Oil Trust.

In a decision filed Friday. U.S. District Judge Tena Campbell ruled that the federal government is responsible for oil royalties disbursed from gas and oil exploration on Navajo land and not the state, which receives the money and places it into a trust.

Assistant Utah Attorney General Phil Lott said the ruling is a victory for the state and means Utah does not have to account for "potentially millions of dollars" in oil royalties that the Navajos claim has been lost between the oil wellheads and their bank account.

The state still may be on the hook regarding expenditures from the oil trust. The Navajos say the state still needs to account for an estimated $150 million, compound interest included, of trust expenditures.

Congress created the oil trust in 1933, requiring that 37.5 percent of royalties from gas and oil exploration on Navajo land be placed in a trust and administered by the state of Utah through the federal government.

After there was evidence that the state had given money from the trust to organizations that embezzled it, a group of Navajos filed suit against the state, alleging mismanagement. The group is demanding an accounting of the trust funds.

At issue currently is just how far back the state must go in showing expenditures. State officials say they have documents dating back to about 1955, however the accounting effort would be massive. Already the state has produced about 100 very large binders of documents that only account for five years.

Just how far back the state must go is pending a ruling by the 10th Circuit Court of Appeals in Denver.

Brian Barnard, the attorney for the Navajo group, said Friday the state can spend hundreds of thousands of dollars in accounting but doubts it can show what the money was used for. "What Utah is doing is like balancing your checkbook. While that shows money that came in and money that went out, that does not necessarily show how the money was used," Barnard said.

One example is that the state can show that $1,000 was paid to Barnes & Noble in 1989, but it does not show that the books were used for the benefit of the Navajos, Barnard said.

In another victory for the state, Campbell ruled that the state does not have to provide an accounting for money going out of the trust that is considered an investment, such as loans to Navajo organizations.

The Utah Legislature passed a bill in an attempt to relinquish control of the trust when the fund is supposed to sunset at the end of this year, however, it will be up to Congress to determine how the trust will be managed.

E-mail: gfattah@desnews.com