Interior IG's probe finds wide range of improper behavior in MMS RIK office

Employees in the US Minerals Management Service's royalty-in-kind office in Denver were paid for outside work, abused drugs and alcohol, and solicited sex, an investigation by the Department of the Interior solicitor general's office found.

Employees in the US Minerals Management Service's royalty-in-kind office in Denver were paid for outside work, abused drugs and alcohol, and solicited sex, an investigation by the Department of the Interior solicitor general's office found.

"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," Interior IG Earl E. Devaney said in a Sept. 9 memorandum to DOI Secretary Dirk A. Kempthorne. He noted that Kempthorne already has taken "assertive steps to replace key leadership and staff in the affected components of MMS" and expressed confidence that the secretary would act quickly "to bring this disturbing chapter of MMS history to a close."

In a Sept. 11 statement, Kempthorne said: "I am outraged by the immoral behavior, illegal activities and appalling misconduct of several former and current long-serving career employees in [MMS's RIK] program. These individuals have eroded the trust the American citizens deserve to have in their public servants." He confirmed that employees were transferred out of the RIK program as he awaited Devaney's final reports and promised swift action.

Later that day, MMS Director Randall B. Luthi said in a memorandum to Kempthorne that he agreed with the secretary's suggestion that the DOI agency consider implementing random drug tests. "Consistent with your emphasis on ethical behavior, we have strengthened our comprehensive ethics training for all employees, completed additional RIK-specific ethics training for RIK personnel, and reinforced existing policies and procedures so employees fully understand their ethical responsibilities when dealing with private industry," he said.

Luthi also noted that several changes have occurred within MMS since the 2002-06 period when the violations took place. "Four of the employees named in the OIG reports have retired and upon initiation of this program, several were transferred from the RIK program. The leadership of MMS has changed since the time of these activities. The new leadership team fully understands and supports the ethical standards expected of federal employees, no matter what their position. Should I receive any report or hint of impropriety, this new team knows that I will take disciplinary action," the MMS director said.

'A cheap date'

Several members of Congress reacted to Devaney's findings. "Democrats have been saying it for some time, but this confirms it. This administration is literally in bed with Big Oil. Little did we know they were such a cheap date," House Rules Committee Chairwoman Louise M. Slaughter (D-NY) quipped on Sept. 10.

"The activities at the RIK office are so outlandish that this whole IG report reads like a script from a television miniseries, and one that cannot air during family viewing time. It is no wonder that the office was doing such a lousy job of overseeing the RIK program; clearly the employees had 'other' priorities in that office," said Natural Resources Committee Chairman Nick J. Rahall (D-W.Va.), who has frequently criticized the RIK operations. He announced on Sept. 11 that the committee would hold a hearing on Sept. 18 to examine Devaney's findings.

Oversight and Investigations Committee Chairman Henry A. Waxman (D-Calif.) also scheduled a hearing but canceled it when Rahall's committee exercised jurisdiction. "The administration's energy policy has enriched oil companies at the expense of consumers, the environment and our national security. 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," he said.

The committee's ranking minority member, Thomas M. Davis III (R-Va.), and the ranking minority member of its Domestic Policy Subcommittee, Darrell E. Issa (R-Calif.), said on Sept. 10 that Waxman had not made good on his February 2007 promise to continue investigations of MMS operations that began when the Republicans were in charge.

"It was bad enough when we were merely trying to find out how much money had been lost and how it might be recovered because of the improperly executed leases. It was even worse when we discovered MMS could not even accurately tell how much oil was being pumped, and thus how much the government was owed. Now, we find this entire agency is in free fall. Employees are much too close to the private sector executives they work with, and the culture of corruption, ineptitude and dirty dealing at the agency can't go on," Davis declared.

'Very serious questions'

"From my vantage point, this investigation raises very serious questions about management and organization at the Interior Department. American taxpayers deserve to have confidence that their interests are being protected when it comes to collecting royalties from the production of public oil and gas resources, especially given the potential for expanded domestic drilling. Unfortunately, that confidence has been eroded by the activities exposed by the IG, widely-reported whistleblower claims and the findings of the Government Accountability Office, where additional reviews of the federal royalty program are ongoing," Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-NM) said on Sept. 10.

"This isn't about a few renegade individuals. It's about a government agency fostering a climate of disrespect for both the public's resources and trust. It's time to clean house at the [MMS]. We also need to bring back the process of rigorous audits and establish a level of accountability for employees that makes it crystal clear that the federal government will no longer employ anyone serving any interest other than the public's," added Sen. Ron Wyden (D-Ore.), an Energy and Natural Resources Committee member.

In his letter to Kempthorne, Devaney said that he previously had gone on record as saying that 99.9% of DOI's 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 or adherence to government ethical standards; management that through passive neglect, at best, or purposeful ignorance, at worse, was blind to easily discernible misconduct; and a program that had aggressive goals and admirable ideals, but was launched without the necessary internal controls to ensure conformity with one of its most important principles: 'Maintain the highest ethical and professional standards.' This must be corrected," he continued.

The OIG investigation reports described instances where RIK employees helped representatives from producers prepare bids, held outside paying jobs while still on MMS's payroll, and promoted private enterprises within the office.

'With prodigious frequency'

"More specifically, 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 and gratuities with prodigious frequency," Delaney said in the letter.

He suggested that this began when the program decided to adopt a "business model" approach under which RIK marketers began to act more as if they were part of the private sector. "This included effectively opting out of the Ethics in Government Act, both in practice and, at one point, even explored doing so by policy or regulation," he said.

In particular, two RIK marketers received such gifts and gratuities from four oil and gas producers with whom they did business on at least 135 occasions, "a textbook example of improperly receiving gifts from prohibited sources. When confronted by our investigators, none of the employees involved displayed remorse," Devaney said.

He said that IG investigators also found "a culture of substance abuse and promiscuity in the RIK program," both within it (including the case of a supervisor who used illegal drugs and sought sex from subordinates) and in contacts with the oil and gas industry (including two RIK marketers who had brief sexual relationships with company representatives).

Devaney said that some individuals' conduct might warrant their removal and possibly being banned for life from the RIK program. He also recommended that DOI and MMS develop an enhanced ethics program specifically designed for the RIK program and a clear, strict code of conduct for it. Finally, he said that MMS should consider moving RIK oversight from DOI headquarters in Washington to Denver as it tries to rebuild the program.

Editor's note: This story originally was posted on Sept. 11. It was updated on Sept. 12 with new information about MMS Director Luthi's response and the House Natural Resources Committee scheduling a hearing on the matter for Sept. 18.

Contact Nick Snow at nicks@pennwell.com

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