At Interior, A ‘Culture of Ethical Failure’

By Richard Martin, 9-11-08

	Caption: Lucy Denett, right, with MMS officials and Marvin Odum (center), head of Shell's North American division.

The worst suspicions about the Dept. of Interior’s payment in kind program for energy companies, which is run out of the Minerals Management Service in suburban Denver, were confirmed yesterday by the release of a scathing series of reports on the program’s conduct and the behavior of the federal employees associated with it.

Produced by the department’s department’s inspector general, Earl Devaney, the reports give a picture of an out-of-control party culture that resembled the Playboy Mansion more than a federal agency overseeing billions of dollars of oil and gas royalties.

“For much of the Bush administration’s watch,” The New York times reports, the MMS has been “a dysfunctional organization riddled with conflicts of interest, unprofessional behavior and a free-for-all atmosphere.”

Among the findings: federal officials routinely accepted gifts and other illegal inducements in return for lucrative contracts; a group of employees known in the oil and gas industry as “the MMS Chicks” engaged in over-the-top fraternizing, including casual drug use and sexual relations, with industry reps; one program manager, Greg Smith, had an affair with a subordinate whom he paid to obtain cocaine; and so on.

Devaney’s report occasionally strays into unintentional deadpan humor: “Sexual relationships with prohibited sources cannot, by definition, be arms-length.”

For critics of the Bush Administration and the Interior Dept.’s questionable policies on energy producers, the reports betrayed a “culture of ethical failure” (as Devaney put it in his cover memo to Interior Secretary Dirk Kempthorne) stemming directly from the cozy relations between administration officials and the oil and gas industry.

Coming in for close scrutiny was Lucy Denett, the former associate director of minerals revenue management, who retired earlier this year as the investigation ramped up. Apparently under the impression that government ethics rules did not apply to her, Denett “is accused of improperly arranging a million-dollar deal for two retired employees,” The Washington Post reports. She is the wife of Paul A. Denett, the procurement policy administrator for the White House Office of Management and Budget.

She is also, apparently, beyond the reach of the law. Dennet and another high-ranking official accused by Devaney of malfeasance “retired during the investigation, rendering them safe from any administrative punishment, and the Justice Department has declined to prosecute them on the charges suggested by the inspector general.”

The outrageousness of the charges is likely to overshadow the real crime here: that for at least the last eight years our nation’s most precious mineral and energy resources have been given away at sub-market rates to energy companies that were, quite literally, in bed with the federal government.