Sex for Oil at Government’s Royalty-in-Kind Program

Add to Google
“We also discovered a culture of abuse and promiscuity in the RIK program. 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. Sexual relationships with prohibited sources cannot, by definition, be arms-length.” - Memo from the Inspector General at the U.S. Dept. of the Interior on the investigation of employees at the MMS.

A bureau within the Department of the Interior, the Minerals Management Service (MMS) oversee the USA’s oil, natural gas, and other mineral resources on the outer continental shelf (OCS). The Royalty-in-Kind (RIK) program receives oil instead of cash payments from energy companies to drill on government land. Energy companies turn over one-eighth to one-sixth of whatever they take from the ground. Last fiscal year, RIK revenue was $4.3 billion. In some years, RIK provides the second largest source of Treasury revenue (the I.R.S. is number one).

With planetary energies Jupiter in Capricorn (ethics in government) and Pluto in Sagittarius (“party atmosphere” of corruption and sex) prominent this week, it was no surprise that a government report has revealed numerous instances of illicit behavior at the MMS. Jupiter in Capricorn and Pluto’s final sojourn back into Sagittarius (June 13 – November 26, 2008), has coincided with a renewed push to expand (Jupiter/Sagittarius) offshore drilling and open up drilling in Alaska’s Arctic National Wildlife Refuge (ANWR).

Between 2002 and 2006, one third of the RIK’s 19 employees participated in alcohol, cocaine, and marijuana-filled parties sponsored by Chevron (CVX), Hess (HES), Shell (RDS), and Gary-Williams Energy. The Inspector General’s report cites a Shell pipeline employee email asking an RIK employee to attend “tailgating festivities” at a Houston Texans football game. “You’re invited…have you and the girls meet me at my place at 6am for bubble baths and final prep. Just kidding.” The report cites RIK employees didn’t believe government ethics rules applied to them; it was all part of a day’s work gathering “market intelligence.”

Randall Luthi, the MMS director since July 2007, said in a news conference yesterday that there was no evidence American taxpayers were hurt by the alleged misconduct. However, Interior Dept. reports show “the integrity of the RIK oil sales process undermined by poor business practices,” with government auditors estimating $10.5 billion in revenue was lost over almost 25 years. One former Interior Dept. auditor who sued the government for failing to collect royalties, said the RIK wouldn’t agree to be audited. Between 2001 and 2006, MMS modified 121 out of out of 718 energy company bids after the deadline. (The modified bids were valued at $4.4 million.) Only three of the 121 modifications benefited the government.

The Inspector General’s report alleges that Gregory W. Smith, RIK’s former director, who now works for a private oil company in Denver, netted over $30,000 from improper outside work, along with taking golf outings and ski trips with energy company reps. He is also accused of having an inappropriate sexual relationship with an RIK subordinate who he paid to buy cocaine in exchange for a $250 bonus. Smith has not been charged with any criminal wrongdoing but has admitted to the sexual relationship.

Lucy Querques Denett, the former MMS associate director (and wife of the procurement policy administrator for the White House Office of Management and Budget), is accused of arranging contracts for two retired RIK employees. According to the Washington Post, a rift has developed between Interior Dept. officials and the Justice Dept. for failing to pursue criminal charges against Denett and Smith.

65 year old Jimmy W. Mayberry wrote the job description and procurement specs, selecting himself as the winning bidder before retiring. Working out of his Texas home, Mayberry was awarded a $150,000 contract in June 2003. After hiring retired RIK employee Milton K. Dial, his firm received contracts worth $788,000. Mayberry pleaded guilty in U.S. District Court in July to violating conflict of interest laws.

The Wall Street Journal delves into the politics of the Inspector General’s Report that Democrats cite as “the Bush administration’s cozy relationship with the oil industry.” The Journal reports that “Congressional Republicans accused Democrats of not following up on earlier Republican-led investigations of possible wrongdoing within the bureau.” Good point. I suppose that stance means that Republicans, despite all their talk of moral hazard and family values, are unable or unwilling to control their own behavior. Pluto relates to the depths that companies must go below the surface to extract oil. In the final days of its transit in Sagittarius, Pluto is revealing a lot of hypocrisy can be found below the surface.

Related Post: “Paulson: Foreign Interests Drove Fannie-Freddie Conservatorship”

No disclosures.

No comments: