A court-appointed special master released a blistering report yesterday accusing federal government lawyers of failing to preserve potential evidence in a class action lawsuit brought by Native Americans and then keeping the destruction of 162 boxes of documents a secret for more than three months.

The documents, apparently shredded as part of a routine housecleaning at a Treasury Department facility in Hyattsville, included papers that could have been relevant to a suit challenging the government's management of Indian trust funds, the special master reported. The suit alleges that the Treasury and Interior Departments have mismanaged the trusts for decades.

Besides condemning the conduct of Treasury attorneys, special master Alan L. Balaran said the actions were "part of a general pattern of obfuscation" carried out by government officials involved in the litigation. In this instance, Balaran said, the Treasury attorneys kept the destruction a secret even from the Justice Department, which is managing the case.

"This is a system clearly out of control," Balaran wrote.

The 121-page report is the latest in a series of government setbacks. In February, U.S. District Judge Royce C. Lamberth found then-Treasury Secretary Robert E. Rubin, Interior Secretary Bruce Babbitt and Assistant Interior Secretary Kevin Gover in contempt of court for failing to ensure that records were turned over to lawyers representing the Indians. Lamberth later ordered the government to pay $625,000 to cover legal fees incurred by the Indians.

Lamberth explored the possibility of putting the trust fund system into a receivership, stripping the government of control, after hearing testimony in the lawsuit last summer. He was on the verge of ruling in October when the two sides agreed to enter into mediation. That process is continuing, with the Indians seeking hundreds of millions of dollars in damages.

Treasury and Justice officials issued a joint statement yesterday saying they were disappointed with some of Balaran's conclusions. They said the Treasury Department's inspector general is investigating the matter, and noted the government will be given an opportunity to respond to Balaran's report before any final court action is taken. "In fairness to all concerned, we caution against drawing conclusions prematurely," the statement said.

The lawsuit, filed in 1996 by the Native American Rights Fund, concerns individual Indian trust accounts established more than 100 years ago to hold and disburse income generated for Native American beneficiaries from the use of their land. The government was supposed to manage and pass along to Indians and their heirs royalties from the sale of petroleum, natural gas, timber and other natural resources, but both sides agree the records have been a mess for decades.

Lamberth asked Balaran to investigate the document destruction after it came to his attention on May 11. The judge unsealed Balaran's report yesterday despite protests from the government attorneys, who wanted to keep the findings secret until they had a chance to respond.

Balaran reviewed thousands of pages of internal papers and met with the Treasury attorneys, who hired private lawyers to represent them. Balaran said the attorneys showed a "lack of accountability" by not stepping forward once the document destruction came to light and at least some engaged in serious ethical lapses.

Elouise Cobell, a member of the Blackfeet tribe and the lead plaintiff in the case, said the revelations underscored the need for strong court intervention. "Why the coverup?" she asked. "I think it's horrible."

According to Balaran's report, the materials were collected and shredded starting last November at the behest of Treasury's Financial Management Service. More than 400 boxes of documents were scheduled for destruction, but the process came to a halt on Jan. 28, when officials first realized that some could contain papers relevant to the Indians' case.

What concerned Balaran the most, he said, was why a seemingly careless mistake wasn't reported immediately. He said he got conflicting reports from the attorneys, who included the Treasury Department's assistant general counsel, Roberta McInerney; Deputy Assistant General Counsel Eleni Constantine; and Ingrid Falanga, Randall Lewis, Daniel Mazella and James Regan, who work for the financial management branch. Some insisted they had no idea that any of the destroyed records concerned Indian accounts, according to the report.