New Navajo Leader Seeks to Pull Tribe Together : Indians: His people are torn by poverty and unemployment. A scandal-plagued predecessor remains a charismatic force.

When Peter MacDonald was sworn in to a fourth term as chairman of the poverty-plagued Navajo Indian tribe, he celebrated in style, arriving with his top aides in a fleet of gleaming white limousines.

“At the inaugural ball,” recalls one longtime observer, “his guests wore almost as many diamonds as (traditional Navajo) turquoise and silver jewelry.”

Four years later, MacDonald spends his days in a spartan tribal courtroom--suspended from office, sentenced to five years in jail for taking kickbacks from businessmen and currently on trial for 13 additional ethics counts. Meanwhile, at the other end of the sprawling Navajo Nation government complex, Peterson Zah, whom MacDonald had defeated in the bitterly contested 1986 election race, feverishly prepares for his own, more low-key, Jan. 15 inaugural.

Proceeds from an inaugural banquet and powwow will benefit needy Navajo children, says Zah, elected in November to lead the nation’s largest Indian tribe. “And we’re either going to walk (to the ceremony) or come in on horseback.”

The former Navajo legal services director says that his plans are as much a reflection on his own personality as they are a symbolic statement.

But Zah, 53, also declares that the inauguration will provide a critical opportunity to forge a new beginning for the 160,000-member tribe, which has seen more than its share of turmoil since allegations first surfaced against MacDonald during a Senate subcommittee hearing almost two years ago.

“The first order of business is going to be putting the tribe back together,” said Zah, who previously served as tribal chairman from 1983 to 1987.

These days, the Navajos, whose rugged 25,000-square-mile reservation extends into three states, are in desperate need of unity and leadership.

While living on top of massive deposits of coal, oil, uranium and natural gas, reservation dwellers suffer from inadequate housing, chronic alcoholism and limited job opportunities.

Per capita income on the reservation is just over $4,300 yearly and the unemployment rate stands at nearly 40%.

Roughly one-third of the tribe’s 3,000 annual high school graduates receive academic or vocational scholarships to continue their schooling. But few who go on to higher education have a motive to remain on the reservation, says Navajo higher education scholarship director Regis M. Clauschee.

“The bottom line is that college is the only way to get out of the cycle of poverty. It’s the only ticket out. There’s no jobs here.”

Zah says creating new jobs will be a top priority of his Administration, no easy task in a time of national recession. One key project, he says, is the long-awaited construction of a marina on the eastern shore of Lake Powell.

Another priority, he says, is providing inspiration to poverty-stricken youngsters on a sprawling reservation where the majority of residents are under the age of 20.

One recent night, several groups of bored teen-agers huddled in the 21-degree cold outside Window Rock’s only cinema, where “Dances With Wolves” was screening. “We need recreation centers or something,” said a shivering youth, who asked to remain anonymous. “Now there’s nothing to do here but freeze.”

At this point, it is uncertain whether Zah--viewed as honest but ineffectual during his earlier term--can make needed reforms this time around.

“The previous downfall of Mr. Zah was that he had a lot of ineffective people in very important posts,” said attorney John Chapela, who coordinated an effort to recall MacDonald. “I just hope he’s learned his lesson.”

Speaking in deliberate but forceful tones during a recent interview, Zah responded that he has grown considerably since 1987. “I guess I’m like any other person who learns from experience. . . . Now I know a lot of people and their administrative skills.”

The wild card in the equation is the magnetic MacDonald, once regarded as the nation’s most powerful elected Indian official.

Since being accused of rampant corruption in explosive Washington testimony by his only son and one of his best friends, MacDonald, 61, has acted more recalcitrant than repentant.

For several months in 1989, he bitterly decried the tribal council’s action in suspending him from office, fomenting a series of demonstrations that culminated in two shooting deaths in the shadows of Window Rock’s magnificent sandstone monoliths.

Then, after being charged with 247 counts of bribery, extortion and ethics violations, the suspended chairman campaigned against arch-rival Zah for another term in the tribe’s top post, now called the tribal presidency. He was finally thrown off the ballot after being convicted of 41 kickback counts in his first trial last October.

Now in the middle of his second trial, MacDonald is free on personal recognizance but is under court order to refrain from public statements or face immediate incarceration. Last week, he sat impassively in the tribal courtroom, listening to one-time friend Byron (Bud) Brown testify under immunity about the tribe’s 1987 purchase of the Big Boquillas Ranch.

MacDonald, real estate broker Brown testified, agreed to buy the Grand Canyon area property for $33.4 million just minutes after it had been sold to a third party for $26.25 million--under the secret condition that MacDonald receive $850,000 of the profits.

Despite such legal woes, many tribal leaders say that MacDonald, first elected chairman in 1971, remains a potent force due to his strong personality and loyal legion of supporters.

“I’m amazed MacDonald still smiles and shakes hands with people as if nothing ever happened,” said Navajo government ethics officer Daniel Peaches, a former MacDonald aide. “Then again, this is a test of how much adversity a person can stand. . . . Only if there arrives on the horizon another person of his magnetism and personality will MacDonald fade into the background.”

Zah, for his part, puts a more positive spin on the situation. MacDonald’s trials and tribulations, Zah declares, should help attract new business to the Navajo Nation.

“Those businessmen who are afraid of creating a business development on the reservation, they should take a look at what’s going on.

“We have a strong tribal court system,” Zah added. “I don’t see any of the state judges throwing their governors in jail when they commit something wrong.”