Abuse of trust: the government as banker in Queensland and the United States

 

Aboriginal circumstances in Australia are the outcome of almost a century of social engineering whose premise of ‘care and protection’ was betrayed across many generations. This betrayal has been kept from the public, who are encouraged to blame the Aboriginal. This article is a summary grounded in twelve years of investigation of primary files and correspondence, generated by successive Queensland government departments as they established and then violated their ‘protection’ regime during the twentieth century.¹

 

Between 1897 and 1972, the government legislated to control every aspect of the life of any person of Aboriginal descent targeted for state ‘care’. This included where they lived, who they could marry, and guardianship of their children. It was accomplished under powers to ‘remove’ people from their family and country, to life-long confinement on government-controlled settlements and missions. The consequent starvation, sickness, scandalous mortality rates, substandard housing, inadequate or non-existent schooling, and non-paid or underpaid labour are the evidentiary indicators of how that duty of care was exercised.²

From 1904 until the late 1960s the government used this captive labour pool to build and maintain the missions and settlements, and as raw material for the lucrative contract labour market. There is a body of incriminating financial data which clearly shows the massive sums of money earned by generations of Aboriginal workers which did not reach their needy hands. The depth and duration of negligence, fraud, and government misuse of trust monies, all recorded on government files, convinces me that there is evidence aplenty for successful legal redress.³ If there are professionals out there who are willing to be part of this fight for justice, for what are now known as the Stolen Wages, feel free to step forward.

The current Queensland government is holding a hard line on what is effectively a bargain buyout for any and all of the damnable aspects of its regime of controls, because to access its current princely ‘offer’ of either $2000 or $4000 to survivors,⁴ the government demands an indemnity from any future actions against it. Moreover, the government demands that the estimated 16,500 claimants provide this indemnity without first giving them access to their personal financial records held by the government, and the incriminating evidence regarding government mismanagement. It seems to me, they are required to meet the government’s demands without advice as to their own best interests.⁵

The government is determined that the burden of proof remains anchored tightly to each individual who might dare to mount legal action against it concerning its role as guardian or banker. The government knows well that this is a lottery, and they are taking the chance that potential litigants will fail. Moreover, the government knows that they alone possess the vast repository of incriminating evidence so cavalierly recorded by men convinced of their superiority and safe in their anonymity. Successful litigation will depend on the government ‘finding’ relevant documents for the case against it, and making them available to plaintiffs. However, the government declares loudly and often that records are fragmentary, misplaced or destroyed. There is an obvious need for independent gate-keepers to oversee access and availability of these files. The government will drag out each case as long as possible, and the tenacity, the means, and the life-spans of those whose money went missing will ebb away. The amount each successful individual might recoup would barely make a blip on the government’s public relations budget. In this game plan the government holds all the cards. Surely there is a more equitable way to resolve this situation?

 

In the United States, since mid-1996, the federal government has been fighting and losing a class action brought on behalf of 300,000 past and present Native American account holders. They assert that monies due to them, which were collected and managed by the government have never been accurately accounted for.⁶ The funds at stake, like those in Queensland, belong to individuals. In the Individual Indian Money (‘IIM’) case these funds were generated from the sale or lease of natural resources on Indian lands allotted by treaties as reserves. It is estimated that the government amassed billions of dollars during the twentieth century through farming and grazing leases, and sales of timber, oil and gas. It is alleged that there is no way of knowing whether this money was fully disbursed to IIM account holders because the government failed, during 100 years of control, to properly account for the IIM funds it controlled, that it failed to prudently manage trust assets, that it refused to correct defects in its accounting system, and that its accounting of assets was fundamentally flawed and completely ineffective. Consequently billions of dollars remain unaccounted for.⁷

What parallels can be drawn to the Queensland case? The primary point of difference is the generation of the missing funds. In Australia proprietorship of reserve lands was not ceded by treaty to Aboriginal groups, who remain tenants on their own country. However, this is not the issue. The US case centres on the mismanagement of private funds by government, which is relevant to Queensland. The funds in question in Queensland are largely those of individual workers whose wages were quantified and collected, and whose savings were withheld, and too frequently defrauded and misused by government agents. Also under examination are child endowment and pension payments intercepted by government, since 1943 and 1959 respectively, and only partially distributed to endowees. In 1960, the department estimated over $500,000 (today’s value) of settlement pensions went directly to consolidated revenue. It was not until the early 1970s, when account holders were accorded the right to request management of their own funds, that they saw any record of wages and savings. Many found to their horror that little remained in their accounts after decades of work and financial deprivation.

Did the Queensland government properly account for the Aboriginal monies it managed? We know thumb prints were introduced in 1904 and again in the early 1920s because of widespread fraud on private accounts by both employers and police protectors. In 1932, pilfering from private accounts was found to be common, and department supervision was described as ‘totally inadequate’. During the depression years the government seized private bank interest only on Aboriginal accounts. In the 1940s, auditors said there was ‘no system of internal checks’ on wage collections, and banking and withdrawal dockets were marked as witnessed despite the absence of thumb prints. In 1965, a public service inspection deplored the lack of a central signature register against which to check ‘signed’ withdrawals, and observed that there was no way to authenticate the witnessing of multiple withdrawals. In 1967, it was admitted that lax head office checks on withdrawals, payments and interest allocation allowed ‘room for fraud’. In 1970, auditors were still calling urgently for ‘vital checks’ to be implemented to avoid or deter forgeries. In 1974, the auditor again criticised head office controls as faulty. Therefore, it is surprising that in her frequent assertions that department accounts were regularly audited, the Minister for Aboriginal and Torres Strait Islander Policy Judy Spence has not felt it necessary to inform us of these constant and trenchant criticisms.

 

As employment broker, the department decreed that Aboriginal labour was to be supplied to pastoralists between 1919 and 1968 at the discounted rate of 66 percent. However, perusal of payments to workers shows in every year between 1931 and 1956 the department failed to secure even this fraction for its contracted workers, who received in that period wages as low as 31 percent of the award rate – a massive loss of earnings over time.

The ‘pocket money’ portion of wages, which was supposed to be paid to workers in cash during the contract period, was always known to be unverifiable. In 1932, a report on the workings of the department found there was ‘no system of inspection’, and therefore it could be ‘reasonably assumed’ that many workers were not getting this prescribed portion of their wages. In a 1943 survey, protectors described the system as a farce and a direct profit to employers. In 1948, the department rejected as ‘too costly’ the auditor’s call for external inspections of pocket money books. In 1956, the department admitted that ‘in many instances’ pocket money was probably not paid after protectors variously reported the system was ‘useless’, ‘futile’ and ‘out of control’, with workers ‘entirely at the mercy’ of employers who concocted the figures which protectors were far too busy to check. Yet this portion of the wages accounted for up to 80 percent of individual earnings – a further massive loss of income.

 

As banker, having proscribed any private sighting of transactions on individual accounts, the government wielded enormous power over personal savings. In 1919, a levy was imposed on accounts of all rural workers without their knowledge or consent. This was pooled into a trust fund, the Aboriginal Provident Fund (‘APF’), ostensibly as unemployment and sickness insurance. From the beginning, auditors complained as low as 10 percent was distributed in relief, while the fund was frequently diverted to cover government costs. By the mid-1920s the APF ‘surplus’ was invested, with the interest going to Treasury while rural families struggled and died in grinding poverty. From the 1930s depression, bulk amounts were transferred to cover budget shortfalls, a practice which continued until 1942 despite warnings from auditors that this was ‘wrong in principle’ and ‘without the authority of Parliament’.⁸  A separate trust fund, the Aboriginal Protection of Property Account, was established in 1902 to safeguard distribution of outstanding wages and estates to relatives of deceased workers. This fund was similarly raided to cover shortfalls in consolidated revenue, particularly in the period between 1925 and 1941.⁹Perusal of income and disbursements from this account show distributions were at times only 25 percent of revenue in any particular year, and a Public Service inquiry in the early 1940s condemned department failure ‘to make proper inquiries’ even where entitled relatives were listed on their records.

As banker, the government exploited the bulk savings for profit. In 1933, it began investing vast sums of ‘surplus’ private savings to generate interest for the Treasury.¹⁰ In the 1940s, private savings were ‘loaned’ to the department to enable the purchase of two cattle properties. By 1950, around $7.3 million (today’s value) was frozen in investments, and in 1956 a new regulation enabled the department to offer the ‘surplus’ to Hospital Boards for building projects at a time when Aboriginal patients were dying in the substandard underfunded equivalents on reserves. In 1960, almost $10.5 million was unavailable to account holders.

 

The Aboriginal Welfare Fund (‘AWF’) was started in 1943 to absorb APF payments and all profits from community enterprises on reserves, and to legitimise expenditure on development of government assets. To date, I have identified occasions in 1946, 1948, 1958, 1959 and 1960 when the director of Native Affairs complained that the AWF was forced to cover items which were legitimate government liabilities. From 1960 to the mid-1980s, settlement wage costs were increasingly charged against the AWF, following the government’s refusal to meet wage rises from revenue. In 1970, auditors were critical that there had never been a profit and loss accounting of the AWF’s cattle enterprises, which were worth almost $2.5 million in the 1970s. In 1979, they complained there was no way to quantify cattle holdings. In the mid-1980s, they condemned incomplete livestock controls which ‘comprised the handwritten sheet attached to the inside cover of the relevant file’.¹¹ In 1990, they again identified ‘significant problems’, including failure to muster, substantial shortages, and disappearances which were not investigated. It is no surprise that cattle losses between 1975-1980 were $2.4 million, increasing to $11 million for the decade 1980 to 1990. And this is a trust fund ostensibly operating ‘for the benefit of Aborigines generally’.

This is but one area of gross mismanagement relating to AWF dealings. Housing construction and rentals were similarly the source of constant criticisms. Commonwealth housing funds absorbed annually into the AWF were $16 million in 1980, rising to over $29 million in 1990. By that year around $133 million of commonwealth housing money had passed through the AWF without any accurate accounting procedures nor any assets register.¹² Therefore, it is deeply disturbing that despite criminal overcrowding in Aboriginal communities, the government maintained housing fund ‘surpluses’ totalling over $11 million during the 1980s. These surpluses were invested in the high-interest short-term money market, the interest going to Treasury. In 1990, it was discovered that rental income, which was supposed to be returned to the housing pool fund, was being improperly listed as ‘administration costs’ against the AWF. This was an apparently ‘longstanding practice’ which contravened the Financial Administration and Audit Act 1977-1988, and effectively credited consolidated revenue.¹³ In 1991, it was stated that no housing register existed to itemize this multi-million dollar asset pool.

In 1993, after intense lobbying the Queensland government finally stopped dealing on the AWF, leaving a residue now estimated at almost $9 million for disbursement ‘to Aborigines generally’, which it is very anxious to clear from its books. It has been suggested that distribution is being delayed due to ‘indecision’ within the Aboriginal community. However, in truth people want a detailed account of this trust fund, and reinstatement of monies missing through misapplication, negligence and incompetent dealing of government officers.

 

There is no doubt Aboriginal account holders in Queensland can pose the same charges as their IIM colleagues: that it is up to the government to provide an accurate account of its management of private wages and the savings of account holders. The government must fully account for its dealings on trust funds, acknowledge that it failed to properly manage trust assets, that it refused to correct systemic defects in its accounting system, and that its registration of assets was grossly inadequate.

By June 1999 in the US, secretary of the Interior Bruce Babbitt admitted that the fiduciary responsibilities of the US to the IIM beneficiaries were not being fulfilled, and his Bureau of Indian Affairs counterpart admitted that the asset management system was faulty. In December 1999, a court ruled that the US government had breached its trust responsibilities to individual trust beneficiaries, and directed that the government reform the system. A government appeal was rejected, the three-judge panel noting specifically ‘the magnitude of government malfeasance at issue in the case’, and holding that the government had an obligation to accountfor every dollar from the inception of the trust.¹⁴

Queensland Minister Judy Spence is disingenuous to suggest that payment of final balances to private account holders constitutes an adequate acquittal of savings accounts. The Queensland government knows full well the question is not distribution of pitiful residues but full restitution of wages, savings, and associated trust monies managed by government. During a century of Aboriginal labour there has never been proper accounting, and there exists a wealth of incriminating evidence from government agents demonstrating official knowledge of enduring negligence, mismanagement and misappropriation. There can be no dispute that the rightful ‘beneficiaries’ of this system were and still are trapped in appalling poverty.

In December 1999, Judge Lambeth ruled that US mismanagement of the IIM trust ‘is far more inexcusable’ than misuse of normal donative trusts because of its involuntary nature and because the plaintiffs were among ‘the poorest people in this nation. Human welfare and livelihood are at stake’.¹⁵ The Queensland case is no different.

There is a wealth of incriminating evidence in government files to substantiate allegations of multiple breaches of fiduciary duty and breaches of trust in its role as financial custodian. International precedent exists to force the Queensland government to account in a court of law for their endemic negligence and mismanagement. Its actions over time have exacted an appalling, and too often fatal toll on the ‘beneficiaries’ of its ‘protection’ regime, a toll they are still paying today.

Aboriginal people laboured long and hard. They earned this money. It is theirs. They want it back.

 

Endnotes