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Judge Tosses Indian Vets' Money Suit

By Scott Sandlin
Journal Staff Writer
    Paychecks of Native American soldiers and sailors were for decades shortchanged by military authorities who withheld state income taxes.
    The practice, dating to World War II, changed after pressure from native groups in 2001, but a group of veterans has gone to court seeking recompense of money they say never should have been withheld in the first place.
    A federal judge's dismissal of the class action lawsuit Tuesday means they'll have to try their luck in state court.
    The lawsuit was filed by Albuquerque attorney Jason Bowles on behalf of Lloyd Felipe and 14 other named plaintiffs, most from New Mexico pueblos. It claims the federal government had unjustly deprived them of their private property, a violation of their Fifth Amendment rights.
    Their "home of record" when they entered the military and during their time of service was Indian country, they said in the lawsuit. Native Americans earning income within Indian country are not subject to state taxation, the lawsuit says.
    The withheld pay was later turned over to the respective state treasuries under federal-state agreements.
    The lawsuit alleged the United States knew the practice was wrong and fraudulently hid it from Native American vets.
    But government lawyers responded that the federal government hadn't waived immunity and that the affected parties must seek redress from state taxing authorities.
    Assistant U.S. Attorney Elizabeth Martinez argued the case was not one of illegal taking.
    "My name is Elizabeth and I may claim to be the Queen of England, but that doesn't make it so," she said.
    Senior U.S. District Judge C. LeRoy Hansen repeatedly questioned whether federal court was the appropriate venue and in the end concluded it was not.
    But that does not mean the case will go away.
    Bowles plans to refile in state court, where legal questions dealing with class actions keep bubbling up.
    The New Mexico Court of Appeals heard oral arguments last spring in two cases on the question of whether New Mexico will permit nationwide class actions to be filed here. The matter is pending.
    Two Acoma Pueblo veterans of the Korean War came to Tuesday's hearing hoping for a different outcome. Eugene Paytiamo, 71, and Marvin Hailstorm, 63, both members of American Legion Post 16, estimate 300 veterans are from Acoma Pueblo alone.
    Rep. George Miller, D-Calif., led efforts to reverse the practice of withholding state income taxes from the paychecks of Native American military personnel. Miller's office issued a statement in December 2000 announcing success in persuading the Defense Department to change its policy, saying the decision "could mean thousands of dollars more each year for Native Americans in the military."
    In the statement, Miller said he was "disappointed that states will not automatically refund previously withheld wages." He added that veterans could apply to their respective states for refunds, subject to statutes of limitations.