Scandal: Sex, Drugs, and Oil

Updated Sept. 10

According to a series of reports sent to Congress on September 10 by the Interior Department's inspector general, department employees have engaged in serious misconduct throughout the last several years. Allegations include rigging oil contracts, taking money as oil consultants, having sexual relationships with oil and gas company representatives, and drug use.

The report focuses on the Mineral Management Services' royalty-in-kind program. MMS receives $10 billion annually in royalties from oil companies. 

An oil platform off the coast of New Orleans, La. (Jessica Rinaldi/Reuters)One official has already pleaded guilty to a felony conflict-of-interest charge. Several years ago, he wrote a consulting contract for the agency, retired, and proceeded to create a company that, unsurprisingly, won the contract. Several employees were complicit in steering the contract his way.

But two of the highest-ranking officials involved in the scandal will likely avoid punishment, reports the New York Times.

Essential Documents:

In a cover letter (PDF), Inspector General Earl Devaney details the "culture of ethical failure" in the department.

In the first report (PDF), investigators focus on Gregory Smith, the former program director of the royalty-in-kind program. As the Times reports, "The report accuses Mr. Smith of improperly accepting gifts from the oil and gas industry, of engaging in sex with two subordinates, and of using cocaine that he purchased from his secretary or her boyfriend several times a year between 2002 and 2005."

The second report (PDF) look at the Interior officials who marketed taxpayers' oil. From the Times: "The report found that 19 officials -- about one-third of the program's staff -- accepted gratuities from oil companies, which was prohibited because they conducted official business with the industry."

And the third report (PDF) focuses on Lucy Denett, the former associate director of minerals revenue management, who allegedly manipulated the contracting process to steer a contract to her friend Jimmy Mayberry. Mayberry pleaded guilty to conflict of interest charges earlier this year.

Essential Reading:

Check out TPMmuckraker's coverage - they were covering rumors of the scandal back in January of last year.

Latest Stories

IG of Abramoff Fame to Oversee Stimulus Spending ProPublica, 2/24

IG of Abramoff Fame to Oversee Stimulus Spending ProPublica, 2/24

Former Interior Official Gets Probation AP, 2/4

Interior Official Admits Taking Bribe Washington Post, 1/30

Ex-Interior Official Charged With Taking Payments Washington Post, 11/26

Interior Dept. Takes Action After Scandal AP, 11/21

Former Interior Dept. Official Gets Probation AP, 11/14

Government Oil Supervisor Pleads Guilty Washington Post, 11/6

Third Oil Royalty Office Official Indicted Washington Post, 10/30

DoJ: We Lacked Evidence to Charge Oil Royalty Officials Washington Post, 10/23

Scandal-Plagued Oil Industry Revamps Itself Washington Post, 10/21

Rep. Conyers Demands Answers in DoJ’s Oil Decision McClatchy, 9/23

Interior Dept Protests Decision to Not Prosecute Ex-Officials Washington Post, 9/19

Interior Secretary May Fire Gift-Takers New York Times, 9/19

Interior Officials: Money Losses ‘Probable’ at Scandal-Ridden Office Washington Post, 9/18

Interior Dept. to Expand Oversight After Scandal AP, 9/18

Lawmakers Unveil Bill to Reform Interior Dept. Reuters, 9/18

Second Interior Official Pleads Guilty in Sex, Drugs and Oil Scandal ProPublica, 9/18

House Adopts Plan to Ease Offshore Drilling Ban New York Times, 9/17

GAO Auditors Question Interior’s Collection of Energy Royalties Wall Street Journal ($), 9/17

Congress to Investigate Oil and Gas Royalty Collections Government Executive, 9/17

Sex and Drugs Aside, Interior Dept. Scandal Is Story of Corruption ProPublica, 9/15

Interior Scandal Reflects Broader Problems The Project on Government Oversight, 9/15

Interior IG Report Alleges Sexual Assault of a Subordinate Empty Wheel, 9/12

Days Before Scandal, Interior Dept Got Ethics Award Washington Post, 9/12

More on the Interior Dept’s Sex and Oil Scandal Mother Jones, 9/12

Ex-MMS Auditor Wins Appeals Case over Oil Royalty Fraud POGO, 9/12

This Week in Scandals ProPublica, 9/12

Interior Secretary Pledges Reform after Scandal Washington Post, 9/12

Pelosi Sets Minerals Agency ‘Integrity’ Plan Wall Street Journal ($), 9/12

Interior Dept Officials Tried to Rewrite Ethics Rules Think Progress, 9/11

Oil Brokers Sex Scandal May Affect Drilling Debate AP, 9/11

Report: Interior, Oil Firms Too Cozy Denver Post, 9/10

Wide-Ranging Ethics Scandal Emerges at Interior Dept New York Times, 9/10

More Oversight Urged for Federal Oil Leases POGO, 9/10

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