A government watchdog has detailed bid-rigging, acceptance of improper gifts and sexual relationships among top Interior Department officials charged with overseeing oil and gas companies, just as Congress launches a debate about relaxing limits on offshore oil drilling.
“A culture of ethical failure” pervades the Minerals Management Service, according to a cover letter accompanying three reports delivered yesterday to Congress by Interior Department Inspector General Earl E. Devaney.
The accusations center on about a dozen current and former employees of the Minerals Management Service, an Interior Department agency which handles mineral extraction, leases, and royalties for the Department of the Interior and collects about $10 billion in oil and gas royalties annually. It is the government’s largest sources of revenue besides taxes.
In response to the reports, Oversight Committee Chairman Henry A. Waxman announced a hearing next week to examine the accusations. “It appears that the officials who are supposed to be looking out for the taxpayers have instead been corrupted by gifts from the oil companies and a culture of ethical failure,” Waxman said.
The highest-ranking official criticized in the latest reports is Lucy Q. Denett, a former associate director who retired earlier this year as the inquiry progressed. Investigators detail in one report how Denett worked with two aides to steer a lucrative consulting contract to one of them after he retired, violating competitive procurement rules.
The aide who received the consulting contract, Denett’s special assistant, Jimmy W. Mayberry, pleaded guilty in August to a felony conflict-of-interest charge and faces up to five years in prison and a $250,000 fine.
Although not mentioned in the reports, Denett’s husband, Paul A. Denett, had been the senior procurement executive at the Interior Department, and more recently was counselor to the deputy director of the federal Office of Management and Budget. He resigned this month.
In another report, the inspector general singled out the agency’s royalty-in-kind program, based in suburban Denver, describing “a culture of substance abuse and promiscuity.”
Devaney said that former program director, Gregory W. Smith, improperly accepted over $1,000 in gifts from oil and gas companies, billed the government for trips he made for private consulting work, engaged in sex with two subordinates and used cocaine purchased from his secretary or her boyfriend. The report said he sometimes asked for the drugs and received them in his office during work hours.
Like Denett, Smith also retired as the investigation was progressing.
The royalty-in-kind program collects about $4 billion a year in oil and gas, rather than cash royalties from energy companies. It is modeled to operate like a private sector energy company, selling oil and gas on the open market.
Although employees are subject to government ethics rules, such as restrictions on taking gifts from people and companies with whom they conducted official business, nearly a third of the program’s staff, or 19 people, received gifts and gratuities from oil and gas company employees between 2002 and 2006, according to the probe.
The gifts received included golf, ski and paintball outings, meals and drinks; and tickets to a Toby Keith concern, a Houston Texans football game and a Colorado Rockies baseball game, according to the report. The report listed four gift givers - Chevron Corp., a U.S. unit of Royal Dutch Shell PLC, Gary-Williams Energy Corp. and Hess Corp.
Investigators also concluded that several officials “frequently consumed alochol at industry functions, had used cocaine and marijuana, and had sexual relationships with oil and gas company representatives.”
The director of the Minerals Management Service, Randall Luthi, said in a conference call yesterday that the officials identified in the reports had violated the public’s trust.
Luthi, who was named director in July 2007, said the agency had requested the investigation after receiving whistle-blower complaints, and that it had already made several changes.
In previous reports, the Interior Department’s inspector general documented how Minerals Management Service officials allowed certain oil companies to skirt bidding procedures, modify contracts and avoid paying interest on royalties owed to the government.
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1 Comments
#1. kang 09.11.2008
just when i thought the feds couldn’t be more corrupt and incompetent, an all-new low is discovered.
there needs to be a major culture shift in washington, and in the whole country for that matter, where ethics and honor take on a higher priority than the selfish political interests of one party versus another. this needs to start at the top and work its way down. we can’t expect lower levels to follow rules the highest choose to ignore.
divided we fail indeed.
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