SALT LAKE CITY — Utah is slated to pay $33 million in a proposed settlement of a long-standing lawsuit over management of an oil-royalty trust fund intended for Navajos in San Juan County.

After 17 years of litigation and recent months of mediation, all sides have reached a tentative agreement.

The case, Pelt v. Utah, was a class-action lawsuit filed in 1992 by eight people on behalf of San Juan County's 8,000 Navajos. It challenged Utah's management of a trust fund that had been created by the federal government in 1933. The state was chosen to manage the trust.

Money for the trust came from oil found on Navajo land, and 37.5 percent of the royalties were supposed to be deposited into the fund for the health, education and welfare of San Juan County Navajos.

The case was filed because plaintiffs alleged Utah had mismanaged the fund, did not keep proper records and lost money or spent it incorrectly.

Representatives from both sides began mediation in June, with U.S. Court of Appeals Senior Judge William Canby overseeing the talks.

"While a trial might have meant different results, that would have been years from now and at great additional expense to all," said Salt Lake attorney Brian Barnard, who represented one of the individuals. "Settlement of the case means an end to litigation, but more importantly, it means money more quickly into the trust to aid the beneficiaries. The eight individuals who brought this class (action) lawsuit look forward to the help the increased fund can bring to San Juan County Navajos in the future."

Utah Attorney General Mark Shurtleff said he also was satisfied with the proposed settlement.

"It's been long, drawn-out and costly, so we were very pleased to be able to resolve it, not only for the benefit of the state of Utah and the taxpayers, but also for the Navajos," Shurtleff said. "Now, there will be significant monies going down there to help the Navajo nation in the future."

Barnard noted that Gov. Gary Herbert, shortly after he took office, met with leaders of the Navajo community and indicated he wanted to get the dispute settled.

"I think he had some influence in the case," Barnard said. "I appreciate the leadership and wisdom of the current state administration in being willing to sit down with us. We mediated this for the last six or seven months."

The settlement does not accuse the current administration of doing anything wrong, but it does acknowledge that "errors and problems" with the trust stretch back as far as 50 years, Barnard said.

"The money started coming in in 1955, and the trust fund was not taken seriously," Barnard said. "Some of the money that came into the trust fund was spent properly."

But therein lies the problem — what money went to help the Navajo community and what was misused? "It would take another five years to litigate that," Barnard said.

As for the $33 million, Shurtleff said the state will have to pay for it out of the general fund.

He admitted this is a sizeable sum, but he said the proposed settlement makes financial sense because the lawsuit could have exposed Utah to a bill of more than $100 million.

The lawsuit alleged that Utah did not handle the trust money correctly from 1959 through 1992. A federal judge ruled that although the state could account for how it spent the money, the state was still responsible for all trust funds, even after money had been sent to the Utah Navajo Development Council and Utah Navajo Industries.

"The court ruled that after royalty money was sent to those groups, the state did not give up its fiduciary duty to monitor how that money was spent — that's where the exposure came from," Shurtleff said.

"We have 700 boxes of documents in this case and, when that additional responsibility came to try to account for what they (the Navajo groups) did, it became very labor-intensive and very expert-witness-intensive."

In addition, Shurtleff said, the settlement frees Utah from having to pay compounded interest.

The payment schedule that was agreed upon requires payment of $1 million next year, $5 million in 2011, and $13.5 million each in years 2012 and 2013.

The Utah Legislature and Herbert must sign off on the settlement. The Navajos in San Juan County can voice their opinions, and the final decision will be made by a federal judge.

e-mail: [email protected]