The Interior Department inspector general's scathing report this week on misconduct at the Denver office of the Minerals Management Service (MMS) could be titled "Sex, Drugs and Oil" or maybe "Sex: Not an Arm's Length Transaction." The MMS is important, if obscure. It issues on- and offshore drilling leases and collects billions of dollars in royalties from oil and gas companies. Some years, the royalties are the largest source of government revenue besides taxes. The report's most sensational details concern the agency's royalty-in-kind (RIK) program, which allows energy companies to pay the government in oil and gas instead of cash for drilling in taxpayer-owned land. The investigation revealed "a culture of ethical failure." Here are excerpts from Inspector General Earl E. Devaney's reports.
The single-most serious problem our investigations revealed is a pervasive culture of exclusivity, exempt from the rules that govern all other employees of the federal government.
•••
We discovered that between 2002 and 2006, nearly one-third of the entire RIK staff socialized with, and received a wide array of gifts and gratuities from oil and gas companies with whom RIK was conducting official business. While the dollar amount of gifts and gratuities was not enormous, these employees accepted gifts with prodigious frequency. In particular, two RIK marketers received combined gifts and gratuities on at least 135 occasions from four major oil and gas companies with whom they were doing business — a textbook example of improperly receiving gifts from prohibited sources. When confronted by our investigators, none of the employees involved displayed remorse.
•••
The CS (confidential source) in this case also told us about a sex toy business (one MMS employee) owned and advertised by passing out business cards at work. ... (Later in the report, this same woman) admitted to having a "one-night stand" with a Shell employee. She said she did not subsequently recuse herself from work involving Shell because she only had a "one-night stand" with its employee and did not think this would affect RIK business.
•••
We also discovered a culture of substance abuse and promiscuity in the RIK program — both within the program, including a supervisor, Greg Smith, who engaged in illegal drug use and had sexual relations with subordinates, and in consort with industry. Internally, several staff admitted to illegal drug use as well as illicit sexual encounters. Alcohol abuse appears to have been a problem when RIK staff socialized with industry. For example, two RIK staff accepted lodging from industry after industry events because they were too intoxicated to drive home or to their hotel. These same RIK marketers also engaged in brief sexual relationships with industry contacts. Sexual relationships with prohibited sources cannot, by definition, be arms-length.
•••
One RIK employee opined that because RIK regularly paid a major producer to transport oil, it was perfectly appropriate for him to attend a "treasure hunt" in the desert with all expenses paid by the producer. Another RIK employee went so far as to say RIK's goal was to be "part of industry."
•••
(Some of the employees investigated) have escaped potential administrative action by departing from federal service, with the usual celebratory send-offs that allegedly highlighted the impeccable service these individuals had given to the federal government. Our reports belie this notion.
•••
Collectively, our recent work in MMS has taken well over two years, involved countless OIG (Office of Inspector General) human resources and an expenditure of nearly $5.3-million of OIG funds. Two hundred thirty-three witnesses and subjects were interviewed, many of them multiple times, and roughly 470,000 pages of documents and e-mails were obtained and reviewed as part of these investigations. ... I am confident that you will now act quickly to take the appropriate administrative action to bring this disturbing chapter of MMS history to a close.
•••
As you know, I have gone on record to say that I believe that 99.9 percent of DOI employees are hard-working, ethical and well-intentioned. Unfortunately, from the cases highlighted here, the conduct of a few has cast a shadow on an entire bureau.
•••
In summary, our investigation revealed a relatively small group of individuals wholly lacking in acceptance of or adherence to government ethical standards.
News
