U.S. to pay $3.4 billion to settle Indian trust lawsuit

WASHINGTON (Reuters) - The U.S. government said on Tuesday it will pay $3.4 billion to settle a long-running lawsuit against the Interior Department for mismanaging the revenue in Native American trust funds.

As part of the settlement, the government will pay $1.4 billion directly to members of Indian tribes and establish a $2 billion fund to buy land from Native Americans.

"We are here to right a past wrong," said U.S. Interior Secretary Ken Salazar in announcing the settlement, which must still be approved by the U.S. Congress and the court.

Under the settlement, most of the 300,000 individual Indians that were part of the class action lawsuit would receive at least $1,500 each.

"With this announcement, we take an important step toward a sincere reconciliation between the trust beneficiaries and the federal government and lay the foundation for more effective management of Indian trust assets in the future," President Barack Obama said in a statement.

The Interior Department was sued 13 years ago for mishandling the revenue in Indian trust funds going back to 1887. The funds includes 10 million acres (4 million hectares) of land owned by individual Indians and 46 million acres (19 million hectares) belonging to Indian tribes.

On these lands, the department manages more than 100,000 leases and the money they generate from mineral mining, oil and gas drilling, timber, livestock grazing, recreational and agricultural uses are deposited into the trust. That money is disbursed by the department to individuals and tribes.

Native Americans claimed the government owed them $47 billion. At one point, a judge ruled the government should pay only $456 million.

Elouise Cobell, the lead plaintiff in the lawsuit and a member of Montana's Blackfeet tribe said the settlement was less than what she thought Native Americans deserved, but it was better to settle because some of the older members of the lawsuit had died.

"Over the past 13 years, the parties have tried to settle this case many, many times, each time unsuccessfully," said U.S. Attorney General Eric Holder. "But today we turn the page. This settlement is fair to the plaintiffs, responsible for the United States and provides a path forward for the future."

The settlement also creates a $60 million federal scholarship to improve access to higher education for Indian youth.

Salazar said he hoped Congress would approve the settlement this month. (Reporting by Tom Doggett; Editing by David Gregorio and Lisa Shumaker)