US agency implicated in sex scandal

September 11, 2008 12:00 am

, WASHINGTON, September 11 – US Department of the Interior employees who handled billions of dollars in oil contracts improperly engaged in sex with energy company employees, a report released Wednesday said.

The report drafted by the department’s inspector general Earl Devaney deplored "a culture of ethical failure" in which regulators received gifts including ski junkets and golf outings.

The investigation uncovered a "culture of substance abuse and promiscuity," Devaney said in a memo to Interior Secretary Dirk Kempthorne.

The alleged misconduct involved at least 13 current and former employees of the department’s Minerals Management Service (MMS) accused of rigging contracts and accepting gifts and engaging in "illicit sexual encounters" with subordinates and industry representatives, Devaney said.

One of the accused has already pleaded guilty to a criminal charge, the report said.

Following a two-year, five-million-dollar investigation which included testimony from 233 witnesses and 470,000 pages of documentation, Devaney said the inquiry "revealed a pervasive culture of exclusivity, exempt from the rules that govern all other employees of the federal government," Devaney said.

Between 2002 and 2006, nearly one-third of the MMS staff, in Washington and the western city of Denver, received gifts and gratuities from energy companies.

Two of the accused received gifts including dinners, tickets to various shows, and golf outings "on at least 135 occasions from four major oil and gas companies with whom they were doing business," according to Devaney.

US federal employees are forbidden from receiving gifts valued above 20 dollars.

The explosive accusations focus on the MMS’s Royalty in Kind (RIK) program, which manages commercial oil and gas sales activity and barters that oil and gas to the government in lieu of payments for drilling on federally-owned offshore lands.

One MMS supervisor used cocaine and engaged in sex with subordinates, the reports said.

"Internally, several staff admitted to illegal drug use as well as illicit sexual encounters," Devaney said.

A memorandum accompanying the report also revealed that several representatives engaged in corruption, including one MMS official who "manipulated the contracting process from the start" on a lucrative MMS deal.
Outrage over the misconduct was immediate.

Danielle Brian, executive director of the non-partisan watchdog Project on Government Oversight, said that "given the billions of dollars at stake, and the number of people involved, this is easily the worst instance of government misconduct that POGO has seen."

The group said the charges "illustrate the improper relationship between the regulatory agency and the oil and gas industry that it is tasked with overseeing."

Senator Bill Nelson of Florida on Tuesday said earlier reports in 2007 and 2008 uncovered the MMS officials’ "inappropriate relationships with industry" including allowing companies to change their bids.

"This all shows the oil industry holds shocking sway over the administration and even key federal employees," said Nelson, who is an opponent of expanded offshore leasing that President George W. Bush has been demanding from Congress.

Congressman Nick Rahall of West Virginia, the Democratic chairman of the House Natural Resources Committee, said the inspector general report "reads like a script from a television miniseries, and one that cannot air during family viewing time."

Separate investigative reports showed that the RIK unit’s former Denver office director, Gregory Smith is accused of having sex with two subordinates and accepting 30,000 dollars from a private company for marketing its engineering services to oil companies.


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