US House hearing looks into gov’t oil-sex scandal


Thu Sep 18, 2008 11:54am EDT
By Tom Doggett

WASHINGTON, Sept 18 (Reuters) – U.S. Interior Secretary Dirk Kempthorne told Congress on Thursday he was “dismayed” about the “inexcusable” behavior of some department employees who had sex, used drugs and took gifts from workers at regulated oil and gas companies.

Kempthorne testified at a House Natural Resources Committee hearing on the findings by the Interior Department’s inspector general about “a culture of substance abuse and promiscuity” at the department’s Minerals Management Service (MMS), whose employees handled billions of dollars in oil and natural gas supplies that were turned over by companies as in-kind royalty payments for drilling on federal lands.

“The abuse of the public trust in this instance is tragic,” Kempthorne testified. “I am outraged that the public’s trust, an important and necessary part of public service, has been abused.”

In his findings, Interior Department Inspector General Earl Devaney said about a dozen MMS workers in the royalty-in-kind program took cocaine and marijuana and had “illicit sexual encounters.”

Government workers also got drunk at social events with employees of oil companies doing business with the agency and MMS workers had “brief sexual relationships” with industry contacts, the inspector general said.

The oil companies named in the report were Chevron, Shell Oil, Hess Corp and Gary Williams Energy Corp.

While all the companies provided documents, Devaney said Chevron slowed the investigation by hiring counsel for its employees, who then did not make themselves available to be interviewed by the inspector general’s investigators.

Democratic Rep. Nick Rahall, who heads the House committee, asked whether “the cronyism between MMS employees and the oil and gas companies” cost the government lost royalty revenue.

Devaney said “there probably were some losses” in royalty money that should have been paid by the companies, but he has no idea how much.

“Those contract files were in terrible shape” and could not be audited, he said. However, Devaney said if the records had been in order there may have been criminal prosecution of some energy company workers.

Devaney said he did not uncover any evidence that energy company workers were directed by their managers to provide gifts to MMS employees. “I don’t think it went too high,” he said.

Devaney said he was disappointed that the Justice Department decided against prosecuting some MMS employees for their wrongdoing. “I would like to see a more aggressive approach,” he said.

Kempthorne said the MMS has accepted four recommendations the inspector general made to clean up the agency, including enhancing the ethics program for employees and boosting oversight of the agency’s Denver office where the royalty-in-kind program is run.

(Reporting by Tom Doggett, editing by Matthew Lewis)
© Thomson Reuters 2008. All rights reserved.


Associated Press

Interior tries to set things right after scandal
By DINA CAPPIELLO – 1 hour ago

WASHINGTON (AP) – Interior Secretary Dirk Kempthorne told Congress Thursday he is considering firing employees in his department’s oil royalties office who investigators say were receiving lavish gifts, partying and having sexual relationships with oil company officials.

Kempthorne also told a House panel that he would appoint an attorney-adviser to watch over ethics in the Denver office at the center of the scandal. The office is responsible for marketing billions of dollars worth of oil and natural gas that energy companies barter to the government in lieu of cash royalty payments for drilling on federal lands, a program known as Royalty-In-Kind.

“I can assure the committee that this process will be completed as swiftly as possible, and we will examine the full spectrum of disciplinary actions, including termination,” said Kempthorne, who said he was outraged by employees’ abuse of the public’s trust. Kempthorne said he was also considering random drug testing for employees. The Royalty-In-Kind program employees were not subject to drug testing, Kempthorne said.

Last week, in three separate reports, the Interior Department Inspector General Earl E. Devaney alleged that 13 employees in Washington and Denver were rigging bids, accepting expensive gifts, and partying with oil company employees from 2002 to 2006. Several employees in the office were using marijuana and cocaine, according to the reports, and a third of the 55 employees in the Denver office accepted gifts from oil and gas companies.

Devaney told members of the House Natural Resources Committee Thursday that the conduct of the Minerals Management Service employees was “egregious” and said he was at a loss to explain the behavior of oil and gas company representatives.

“Simply stated, the MMS employees named in these latest reports had a callous disregard for the rules by which the rest of us are required to play,” Devaney said.

Devaney, under questioning, said there was no evidence that any of the personal relationships brought benefits to the oil companies, but he said there should be an outright ban on accepting gifts and gratuities from any industry.

Federal employees are currently barred from accepting individual gifts over $20, and can accept no more than $50 in gifts each year. The nine employees targeted by the investigation accepted snowboarding lessons, ski and golf trips and concert tickets from four oil companies – Shell, Chevron Corp., Hess Corp. and Denver-based Gary-Williams Energy Corp. – that were doing business with the government.

Some lawmakers on Thursday asked what the Interior Department was doing about the industry’s behavior.

“What’s the standard of conduct you’re developing for the people having conduct with the United States government?” asked Rep. George Miller, D-Calif. “What about the behavior by the private sector here?”

Earlier this week, the House passed legislation that would expand offshore drilling, increasing the royalties collected by the federal government. The bill also would establish penalties and jail time for oil executives and department employees who receive improper gifts.

House Natural Resources Chairman Nick Rahall, D-W.Va., said the problems within the Interior Department could be amplified if drilling is expanded.

“These are serious issues, but they are more serious now as we face the certain prospect that vast swaths of federal waters will become open to oil and gas leasing in the very near future,” Rahall said.

Associated Press Writer Natasha Metzler contributed to this report.

~ by fredfelleman on September 18, 2008.

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