“Ethical Failure” and Offshore Oil Drilling

September 12th, 2008 by Phil Mattera

The phrase repeatedly chanted at the recent Republican convention — “Drill, Baby, Drill” — now sounds pornographic in the wake of the new sex and money scandal involving oil drilling companies and the federal agency that is supposed to oversee them. The Interior Department’s Inspector General has just come out with allegations that more than a dozen current and former staffers at Interior’s Minerals Management Service received improper gifts from industry representatives, who also put on wild parties for MMS employees. Gregory Smith, former director of the royalty-in-kind program at MMS, was also accused of having an illicit sexual relationship with an subordinate and paying her to buy cocaine.

The three reports just submitted by Interior IG Earl E. Devaney (photo) may be the most salacious government documents since the 1998 Starr Report on President Bill Clinton’s sexual peccadilloes.

Although the Interior Department website prominently features Secretary Dirk Kempthorne’s outraged response to the revelations, it does not see fit to provide the reports themselves. Fortunately, ProPublica, the online investigative reporting site, has posted the reports for all to view. Here are some highlights:

First there is a cover memo from Devaney decrying what he calls “a culture of ethical failure” in which some MMS employees adopted a “private sector approach to essentially everything they did. This included effectively opting themselves out of the Ethics in Government Act.” The private sector itself also comes in for criticism. Devaney suggests that the oil companies overseen by MMS were not especially helpful in an investigation that took more than two years and cost nearly $5.3 million. Chevron, Devaney states, refused to cooperate with the probe.

The first of the three reports focuses on Smith, who seems to have been confused about who was actually employing him. The report says he spent a substantial amount of his paid time doing work not for the federal government but for a private firm called Geomatrix Consultants that worked for oil industry clients. Smith also is said to have received improper gifts from employees of Chevron, Shell and a small operator called Gary Williams Energy Company.

The second report focuses on the people who worked under Smith. Apparently following his lead, many of them, according to Devaney, “developed inappropriate relationships with representatives of oil companies doing business with” MMS. Some of these relationships were pecuniary: two staffers were said to have received prohibited gifts from major oil companies on at least 135 occasions. Here, too, the gifts came from Chevron, Shell and Gary Williams as well as Hess. The report also reports on some brief “intimate” relationships a couple of MMS employees had with oil industry people. The sexual misconduct seems to have been a lot more limited than the other hanky panky, but it is irresistible to talk about regulatory agency employees’ being literally in bed with the industry at a time when some major oil companies are involved in a multi-billion-dollar dispute with MMS.

The final report focuses on Lucy Denett, the former associate director of minerals revenue management and the highest-ranking MMS staffer to have been caught up in the scandal. Denett is mainly accused of being overly generous to her Special Assistant Jimmy Mayberry as he was getting ready for retirement. According to the report, she improperly arranged a lucrative consulting contract for the firm Mayberry was going to set up after he left the agency.

Mayberry is said to have pleaded guilty to a criminal charge. The cases against Smith and Denett were referred to the Justice Department. Devaney asks Interior Secretary Kempthorne to take disciplinary action against the remaining employees involved. It would be nice if someone thought to take some action against those drilling companies, which seemed to have had no hesitation in corrupting federal employees. But then again, “ethical failure” is nothing new in the oil industry.

One Response to ““Ethical Failure” and Offshore Oil Drilling”

  1. Most oil services giants made astounding profits while headquartered in the “Energy Capital” of America, Houston, Texas. Regardless, a number of these corporations are relocating overseas. (i.e. Switzerland, Dubai…) This news conveniently follows after news of the 700 Billion Dollar bailout, reports of recession and change in governmental leadership. Money, Abuse of Power and Politics has lead to a few of the following:

    – Previous high dollar prices at the gas pumps
    – Level of corporate discrimination (i.e. Schlumberger Limited, who is the number one oil services giant in the world…)
    – Reports of “Ethical Failures” (i.e. Interior Department’s Inspector General allegations that more than a dozen current and former staffers at Interior’s Minerals Management Service received improper gifts from industry representatives, who also put on wild parties for MMS employees…)
    – Guilty verdicts issued to oil services giant’s Schlumberger Limited for illegal Visas, Perjury & Environmental Protection…)

    It would seem that America has been “dumped”. Please become educated on going Green, and the “need” for unionization that services “the people”. America’s dependency on “foreign oil” has displaced an entire country.

    Are you actually surprised by the news???

    Please reference the following ariticle:

    Another oil firm puts base overseas
    Weatherford says Switzerland near key markets
    By BRETT CLANTON Copyright 2008 Houston Chronicle
    Dec. 11, 2008, 11:47PM

    U.S. oil field services firms also worry that the incoming Democratic administration and more solidly Democratic Congress will raise corporate taxes, and that may have spurred some companies to set up offices abroad, said Neal Dingmann, an industry analyst with Dahlman Rose & Co. in Houston.

    Transocean, the world’s largest driller, also run from Houston, said in October it would seek to change its incorporation from the Cayman Islands to Switzerland. The move has been approved by shareholders but is awaiting approval by a Cayman Island court. If approved, 14 company officers, including CEO Robert Long, will leave Houston to run the new headquarters in Geneva.

    Last year, Halliburton CEO Dave Lesar left Houston to open a dual headquarters in Dubai.

    Duroc-Danner, a native of France, said he still expects to spend about 20 percent of his time in Houston.

    After living in Houston for 20 years, building a family and growing the company, he said the city has become home, and he wants it to remain an important part of the company.

    “We’re not trying to dismantle what we have in Houston,” he said. “It’s just that in terms of being in the hierarchical pecking order, it’s not going to be Rome anymore.”

    http://www.chron.com/disp/story.mpl/headline/biz/6160806.html

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