Sex, drugs, oil and gas
PAUL WALDIE
Thursday, September 11, 2008
A group of U.S. bureaucrats who collected billions of dollars in royalties from energy companies operated in a culture so bereft of ethics they regularly consumed cocaine and marijuana at industry gatherings, had sexual relations with oil company representatives and routinely received gifts from energy firms, including divisions of Chevron Corp., Royal Dutch Shell PLC and BP, according to an internal investigation.
"We discovered that between 2002 and 2006, nearly one-third of the entire [division] staff socialized with, and received a wide array of gifts and gratuities from, oil and gas companies with whom [the division] was conducting official business," the report found.
Some of the employees held side jobs as industry consultants while others provided confidential information about upcoming government contracts to company representatives, the investigators said.
The director, Gregory Smith, allegedly "engaged in illegal drug use and had sexual relations with subordinates, and in consort with industry," the report said. Mr. Smith, who retired in 2007, allegedly had employees buy him cocaine during work hours, referring to the drugs as "office supplies." He allegedly acknowledged his drug use to investigators, calling it "episodic," and admitted inappropriate relations with some staff, the report said.
The employees worked in a division of the Denver-based Minerals Management Service, or MMS. MMS, part of the Department of Interior, collects royalties and lease payments from energy companies operating on federal land.
The division in question has about 50 employees and runs a special program that collects royalties on an in-kind basis and then sells the oil and gas on behalf of the government. The section sold about $11-billion (U.S.) worth of oil and gas last year.
The division was created in the late 1990s but came under investigation by the Office of the Inspector-General a couple of years ago when it received an anonymous tip about misconduct. That prompted a $5.3-million probe that has already led to some criminal charges, one guilty plea and several resignations.
In releasing two final reports yesterday, Inspector-General Earl Devaney expressed exasperation at the findings.
Mr. Devaney said in a letter accompanying the reports that many of those involved had escaped potential administrative action by resigning "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."
He said none of the employees involved in the conduct expressed remorse for their actions. For example, the report referred to two employees who got so drunk at a day-long company-sponsored event the company had to pay for hotel rooms so they could stay overnight.
When investigators asked the employees about their actions, they insisted they "were developing business relationships and had gathered invaluable industry-related information."
The report also contained several e-mails between division staff and energy company officials discussing upcoming parties, trips and events. One e-mail told staff, "this trip is to be kept quiet," and in others, industry representatives called two staffers the "MMS Chicks."
In his letter, Mr. Devaney singled out Chevron for refusing to co-operate with the investigation. However, Chevron spokesman Donald Campbell said the company did co-operate, providing all requested documents.
Randall Luthi, head of MMS, said the agency would "take action" when it receives the report.
"It's something we take very seriously," Mr. Luthi said.
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