- The Washington Times - Thursday, September 11, 2008

Government brokers responsible for collecting billions of dollars in federal oil royalties operated in a “culture of substance abuse and promiscuity” that included having sex with energy company employees, accepting lavish gifts and rigging contracts to favored firms, investigators said Wednesday.

The purported transgressions involve 13 former and current Interior Department employees in Denver and Washington. Their purported improprieties include influencing contracts, working part-time as private oil consultants and having sexual relationships with - and accepting golf and ski trips, snowboarding lessons and concert tickets from - oil company employees, according to three reports released Wednesday by the Interior Department’s inspector general.

The investigations expose a small group of individuals “wholly lacking in acceptance of or adherence to government ethical standards,” wrote Inspector General Earl E. Devaney, whose office spent more than two years and $5.3 million on the investigation.

“Sexual relationships with prohibited sources cannot, by definition, be arms-length,” Mr. Devaney said.

The reports describe a fraternity house atmosphere inside the Denver Minerals Management Service office responsible for marketing oil and natural gas that energy companies barter to the government in lieu of cash royalty payments for drilling on federal lands. The government received $4.3 billion in such royalty-in-kind payments last year. The oil and gas is then resold to energy companies or put in the nation’s emergency stockpile.

“During the course of our investigation, we learned that some RIK employees frequently consumed alcohol at industry functions, had used cocaine and marijuana, and had sexual relationships with oil and gas company representatives,” the report said. Two government employees who had to spend the night after a daytime industry function because they were too intoxicated to drive home were commonly referred to by energy traders as the “MMS Chicks.”

Between 2002 and 2006, 19 oil marketers, nearly a third of the 55-person staff in the Denver office, received gifts and gratuities from oil and gas companies, including Chevron Corp., Shell, Hess Corp. and Denver-based Gary-Williams Energy Corp., the investigators found. The investigation focuses on nine employees, all but one of whom received ethics training, who attended meals, parties, paintball games and concerts whose value exceeded the $20-per-gift limit or $50-a-year thresholds on outside gifts. In the case of two marketers, gifts were accepted on at least 135 occasions. The report identifies eight of the employees by name and a ninth only by job description.

One worker admitted having a one-night-stand with a Shell employee. That same individual purportedly passed out business cards for her sex toy business, Passion Parties Inc., at work, and bragged that her income from that business exceeded her salary at the Interior Department. The employee was authorized to conduct such outside employment, and denied to investigators that she advertised for it during work hours, the report said. She admitted selling products to several of her subordinates.

Mr. Devaney said the investigations took so long because Chevron refused to cooperate. An Interior Department official said Chevron would not allow investigators to interview its employees.

Don Campbell, a Chevron spokesman, said Wednesday that the company “produced all of the documents that the government requested months ago.” A Shell spokeswoman said it would be premature for the company to comment on the report until it had time to review it.

Maripat Sexton, a spokeswoman for Hess Corp., said the company’s investigations “indicated no wrongdoing on our employee’s part.”

“We do not believe we are the focus of the investigation,” she said.

MMS Director Randall Luthi said the agency was taking the report “extremely seriously” and would review the allegations and weigh taking appropriate action in coming months. He said four of the employees were transferred to other departments last year. The inspector general is recommending that employees implicated be fired and be barred for life from working within the royalty program.

AP writers H. Josef Hebert and Ivan Moreno contributed to this report.