Breaking News: Republican Scandal - Sex, Drugs, Oil - A Culture of Ethical Failure!

Do you wonder why gas prices are so high?

As many of us have suspected for some time, recent reports indicate the Bush Administration is up to its elbows in bed, literally and figuratively, with the Oil Companies, including Chevron, Shell, Hess and Williams Energy. The Office of Minerals Management Service (MMS), particularly the Royalty-in-Kind (RIK) Program (started in 2003) , where offshore drilling meets the U.S. government, has been caught up in a wide-ranging ethics scandal — including allegations of financial self-dealing, accepting gifts from energy companies, cocaine use and sexual misconduct. In three reports delivered to Congress on Wednesday, the department’s inspector general, Earl E. Devaney, found wrongdoing by a dozen current and former employees of the Minerals Management Service, which collects about $10 billion in royalties annually and is one of the government’s largest sources of revenue other than taxes.

Financial Self Dealing & Cronyism:

1. Lucy Q. Denett, the former associate director of minerals revenue management, worked with two aides to steer a lucrative consulting contract to one of the aides after he retired, violating competitive procurement rules. Ms. Denet´s husband is Paul A. Denett, who was the top procurement official in the White House Office of Management and Budget.

2. In late 2002, when he was about to retire, Mr. Jimmy Mayberry drafted a “statement of work” for a consulting contract to perform essentially identical functions to his own. He then retired, started a company, and in June 2003 won the contract with the help of Ms. Denett and Milton Dial, another friend at the agency.

3. Gregory W. Smith, program director of the royalty-in-kind program, improperly used his position with the royalty program to get an outside consulting job helping a technical services firm seek deals with oil and gas companies with which he was also conducting official business. The report also accused Mr. Smith of improperly accepting gifts from the oil and gas industry, of engaging in sex with two subordinates (including his secretary) and of using cocaine (which were called "office supplies") that he purchased from his secretary or her boyfriend several times a year between 2002 and 2005. He sometimes asked for the drugs and received them in his office during work hours.

4. A Chevron representative who had won a bid to purchase some of the government’s oil to pay taxpayers a lower amount than his winning offer because he said he made a mistake in his calculations. A report from Mr. Devaney’s office earlier this year found that the program frequently allowed companies that purchased the oil and gas to revise their bids downward after they won contracts. It documented 118 such occasions that cost taxpayers about $4.4 million.

5. One of the officials shared (inside) information about the confidential price a pipeline company was charging the government.

Lavish Expense Accounts:

Two other reports focus on “a culture of substance abuse and promiscuity” in the service’s Royalty-in-Kind (RIK) program. That part of the agency collects about $4 billion a year in oil and gas rather than cash royalties. Based in suburban Denver and modeled to operate like a private sector energy company, the royalty-in-kind program sells oil and gas on the open market. Its employees are subject to government ethics rules, such as restrictions on taking gifts from people and companies with whom they conduct official business. One of the reports says that the officials viewed themselves as exempt from those limits, indulging themselves in the expense-account-fueled world of oil and gas executives, “a pattern of abuses and mismanagement” costing taxpayers billions. The report also detailed cozy relationships between energy companies and other officials in the royalty-in-kind program office. Some 19 officials — a third of the staff — took gifts from oil and gas executives, some with “prodigious frequency,” it said.

Sex, Drugs, Ethics Violations

The report says that eight officials in the royalty program accepted gifts from energy companies whose value exceeded limits set by ethics rules — including golf, ski and paintball outings; meals and drinks; and tickets to a Toby Keith concert, a Houston Texans football game and a Colorado Rockies baseball game. The investigation also concluded that several of the officials “frequently consumed alcohol at industry functions, had used cocaine and marijuana, and had sexual relationships with oil and gas company representatives.”
The investigation separately found that the program’s manager mixed official and personal business. In sometimes lurid detail, the report also accuses him of having intimate relations with two subordinates, one of whom regularly sold him cocaine. The culture of the organization “appeared to be devoid of both the ethical standards and internal controls sufficient to protect the integrity of this vital revenue-producing program,” one report said. The director of the Minerals Management Service, Randall Luthi, said in a conference call with reporters that the officials implicated in the reports had violated the public’s trust.

1. Greg Smith, the assistant RIK program director, who, according to the inspector general's report, referred to "cocaine" as "office supplies" and who moonlighted for an environmental services firm that hired him to set up meetings with MMS clients, comes off as a one-of-a-kind wild man.

2. Two of the officials who marketed taxpayers’ oil got so drunk at a daytime golfing event sponsored by Shell that they could not drive to their hotels and were put up in Shell-provided lodging. Two female employees “engaged in brief sexual relationships with industry contacts.”

They said they did not view socializing with oil company representatives and taking gifts as inappropriate because they said they needed to be part of the marketing culture in order to market the program’s oil and gas.

About the MMS:

The Minerals Management Service is an agency within the Department of Interior, set up during the Reagan administration to manage natural mineral resources on the Outer Continental Shelf and some federal and Indian lands. MMS generates about $8 billion in revenue from leasing the rights to drill for oil and gas -- that's the single largest non-tax source of revenue for the federal government. MMS has two mechanisms for carving out that revenue. In the Royalty-in-Value program, it gets a cut off the top of whatever the oil companies are able to sell their mineral resources for. In the Royalty-in-Kind program -- which is where all the above abuses occurred -- the energy companies physically deliver oil and gas to MMS, which then pockets the proceeds from selling the goods itself. Of course, MMS does not actually own any transportation pipelines or storage facilities, so it has to contract out for these services from the private sector. Such a scenario carries with it obvious potential for conflicts of interest and corruption.

McCain and the Scandal:

Think about this every time you hear John McCain chant "drill, baby, drill." You might be familiar with the name of one of the oil companies lavishing gifts on MMS employees: the Hess Corp. You may recall that at precisely the moment that McCain recanted his long-held position against offshore drilling, he was showered with campaign contributions from Hess family members and company employees. I guess that's how the oil business works -- you pay off your government officials, and you get the contract.

References:

US Interior Secy 'outraged' by oil-sex scandal

Sex, Drug Use and Graft Cited in Interior Department

Snorting speed off of toaster ovens