Ass for Gas Isn't the Only Problem at MMS

When reading through the reports recently released by the Department of Interior (DOI) Inspector General (IG), it's important not to be blinded by Minerals Management Service (MMS) employees' industry-funded ski trips and cocaine use, because the reports also highlight some serious management problems in the Royalty-in-Kind (RIK) program.

Most people were unaware of MMS and the RIK program until recently, despite the fact that this agency is the second-biggest generator of government revenue after the IRS's collection of taxes (and the fact that POGO has written four reports on this corrupt agency).  So for everyone just learning about this program now, the RIK program, managed by DOI's MMS, is responsible for determining which properties will be converted from in-value (cash) to in-kind (actual product, e.g., barrels of oil and natural gas), negotiating transportation contracts to move the royalty oil and gas, negotiating contracts for selling the oil and gas to companies, auditing those leases, and performing their job to the benefit of the Treasury and taxpayers rather than of the oil companies.

One of the problems that we've been worried about for years is MMS's failure to adequately audit industry royalty payments--which the IG reports reveal are the main reasoning for industry backing the RIK program.  Even more disturbing, however, is the IG's findings that MMS manuals lacked guidance on how to improve their core-mission responsibilities, including instructions on how to analyze bids for federal oil and gas leases, how to develop minimum acceptable bids, how to amend bids (perhaps leading to the IG finding that amended bids usually were to the benefit of industry, not the taxpayers and government), how to properly audit leases, or how to document decisions--in addition to the clear lack of ethical guidance.

It's also appalling that the IG found that the Enterprise Products Company seemed to be more concerned about former RIK Director Greg Smith's work for them presenting a conflict of interest than MMS was.  While MMS was satiated by Smith insisting that the work would not conflict with his work at the agency, Enterprise actually had an attorney at Smith's meetings to make sure things were not improper.

Clearly, this is an agency that does not feel accountable to taxpayers.  The IG report points out that not only did MMS employees consider themselves to be "special" and exempt from standard ethics laws as a matter of course for creating a "market-friendly" environment, but that these people felt no remorse when the IG confronted them with their gross misconduct.

In an email to Minerals Revenue Management staff, MMS Director Randall Luthi said "it is important to remember that the investigation uncovered a very small number of employees whose behavior has been unacceptable."  However, the IG report clearly states that the corruption was widespread throughout the agency: "...we discovered that between 2002 and 2006, nearly 1/3 of the entire RIK staff socialized with, and received a wide array of gifts from, oil and gas companies with whom RIK was conducting official business." [Emphasis added]

At the full committee hearing scheduled for next Thursday, we hope the House Natural Resources Committee will inquire into why the Department of Justice is not prosecuting Smith and former MMS Associate Director Lucy Denett, who are both named in the report. 

Given the number of people involved, and billions of dollars at stake, POGO believes that this is the worst instance of government misconduct we have ever seen.  People should be held responsible for this gross abuse of the public trust.

-- Mandy Smithberger

Comments

[Lorane]

The papers are reporting that the Dept of Interrior testifed to Congress(on 9/18/08) that DOI has no clue---just out to lunch, totally---on how badly the MMS accounts were ripped off because the documentation on RIK was so crappy it was impossible to really tell what was going on.
This means RIK is a total sham. How was Scotty, the druggie, who held his sex toys (as if almsot some biker gang) hostage able to con the DOI for so long.
But, will the Bushy DOJ gives him a pass like he is gona get a MEDAL of Freedom from the Bush Admin in Austin Texas.
RIK was a set up to rip off the USA from the get go. But so many who filled MMS, never put their loyalty
to:
1) the USA
2) the notion of full accountability
3) the duty to expose corruption
Instead, there were dishonest managers in MMS who
1) put high loyalty to Party operatives in bed with the oil and gas industry
2) used extortion tactics to put fear over good honest federal employees
3) expected loyalty and a code of silence to druggie cons like Smitty the really bad dude.
4) rewarded corruption, waste fraud, and lies, and deception...

Who was the biggest pusher on the RIK rip offs... Yes, Barbara Cubin, and her clique.
I believe POGO knows a thing ---or 2--about Cubin, who thank God will be an ex Congresswoman on Jan 9, 2009.
This RIK rip off scandal may be one of the biggest scandals in U S history.
Lets hope more MMS employees who are honest will come forward, and help America to find out just how badly it was damged in this sorry saga. I fear the bad dues in MMS(who may still be lurking)---will seek more codes of silence, an almost omerta code that has infected some elements of MMS... I hope POGO can break the ice to thaw the code of omerta in MMS, or this will be a legacy in MMS to contiune to hurt America. At least after Jan 9, 2009, Cubin will not be able to run her trips as a Congresswoman, but will there be ture change.
I hope there is for the GOOD OF AMERICA.

[Roland]

If the MMS gets cash on a market sales prices(hopefully arms length with no collusion, why would it take oil in kind(RIK OFFS)--that then is subject to more cost,(lowers net royalit to USA) to corruption(same lowers net to USA) , sex party diversions,and misallocations on delivery points( lowers net to USA), and the many games that MMS rouges--there seem to be so many-- play games, & as they get cosy with its sex toy pardners.(in bed with BIG OIL: BIG TIME)
IS MMS a proven marketer of oil and gas... well Greg Smith was able to pull the wool over people's eyes for so long, it is still unclear how much MMS was ripped off. And, as POGO pointed out the Associate Director(Lucy D) was involved in serious scams, as found by the IG, but is it her political connections that have allowed her to excape indictment....congress needs to look inot that, and the all on that.... very thorougly.
And, what about her association with David Deal, who has been associated with the big Texas --corporate law firm, & oil trade groups.
Deal---what a name associated with the mess--was hanging around MMS DC, and is he under the radar, given how stuff at MMS went so awfully bad, to leave billions uncollected. There needs to be more controsl in place to trace any stolen monies, and, look at why the RIK scams turned into a haven for bilking the USA as if is a sucker, and nobody in MMS DC cares.
MMS really has no open market pricing in its RIK program, it is all in the shady backroom MMS Greg Smith cocaine parlors, and MMS probably has no clue on hwo badly it allowed the USA to get screwed by Fast lane... Smitty, and his trcks....

Here are 4 major questions for congress next week which I hope POOG urges Congress to take up with DOI/ MMS:
1) IS the DOI IG allowed to bring civil actions on its own.. or must it make referrals to the DOJ ?
2) How many civil referrals were made on any bilkings to DOJ, and the record on, declinations etc
3) Hwo many criminal declinations have there been where DOJ declines to indict like in the Greg Smith matters---i. e a whole range of stuff...... which has shocked America at the DOJ failures, even opeds around America noted... just outrage at DOJ failues to act
4) more questions to find out if MMS has effective means to sue crooks--and are there big problems in that area---and hopefuly Congress gets documents on before the Hearings....THE WWW is filled with ourtage in the total breakdowns in accountability, why do the two for Pres not get inot in teh Race---who will really put accountability first, America deserves to know, before Nov 4th...

POGO is helping to address the issues on the important questions, and helping to get input from around America...
Good work POGO, keep it up....
I once recall Greg Smith aruging to keep RIK sales secret for all time... is that transparanecy---NO ,it is the total lack thereof, it may be more shocking if any really peeled back what really was going on in the RIK OFF palace... some at DOI do not want the American public and Congress to get to the bottom of matters. SAD---the shocking range of unaccountability is beyond sickening...

[70s Dude]

Nobody Rides for Free!