Interior Official Assails Agency for Ethics Slide

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WASHINGTON, Sept. 13 — The Interior Department’s chief official responsible for investigating abuses and overseeing operations accused the top officials at the agency on Wednesday of tolerating widespread ethical failures, from cronyism to cover-ups of incompetence.

“Simply stated, short of a crime, anything goes at the highest levels of the Department of the Interior,” charged Earl E. Devaney, the Interior Department’s inspector general, at a hearing of the House Government Reform subcommittee on energy.

“I have observed one instance after another when the good work of my office has been disregarded by the department,” he continued. “Ethics failures on the part of senior department officials — taking the form of appearances of impropriety, favoritism and bias — have been routinely dismissed with a promise ‘not to do it again.’ ”

The blistering attack was part of Mr. Devaney’s report on what he called the Interior Department’s “bureaucratic bungling” of oil and gas leases signed in the late 1990’s, mistakes that are now expected to cost the government billions of dollars but were covered up for six years.

While these leases were the specific focus of the hearing, Mr. Devaney directed most of his criticism at what he called a broader organizational culture at the Interior Department of denial and “defending the indefensible.”

He expressed particular fury at the willingness to dismiss two dozen potential ethical lapses by J. Steven Griles, a former industry lobbyist who served as deputy secretary of the interior during President Bush’s first term.

Mr. Griles resigned after allegations surfaced that he pushed policy decisions that favored some of his former oil and gas industry clients and that he tried to steer a $2 million contract to a technology firm that had also been one of his clients.

In a 145-page report in 2004, the inspector general described Mr. Griles as a “train wreck waiting to happen.” But on Wednesday, Mr. Devaney said he was appalled that the Interior Department’s office of ethics dismissed 23 out of 25 potential ethical breaches against Mr. Griles and that Gale A. Norton, then secretary of the interior, decided not to act on the two remaining allegations.

Mr. Griles is once again a lobbyist in Washington. Efforts to reach Mr. Griles on Wednesday evening at his lobbying firm, Lundquist, Nethercutt & Griles, were unsuccessful.

Mr. Devaney said that case was typical of a much broader “culture of managerial irresponsibility and lack of accountability” in the top reaches of the Interior Department.

“I have unfortunately watched a number of high-level Interior officials leave the department under the cloud of O.I.G. investigations,” Mr. Devaney said, referring to the Office of Inspector General.

“Absent criminal charges, however, they are sent off in the usual fashion, with a party paying tribute to their good service and the secretary wishing them well, to spend more time with their family or seek new opportunities.”

That was almost exactly what happened to Mr. Griles, who was never charged with any wrongdoing, though he admitted to using bad judgment in some cases.

Dirk Kempthorne, who succeeded Ms. Norton as interior secretary earlier this year, said Wednesday that he took the inspector general’s allegations “very seriously” and had sent a letter to all employees on his first day at the department on the need to follow ethical guidelines.

Mr. Kempthorne declined to say what additional actions he might take until he saw Mr. Devaney’s final report.

Mr. Devaney, a burly man who began his career as a police officer in Massachusetts, is no stranger to combative investigations or confrontations with top officials.

He spent more than 20 years as a special agent in the Secret Service, specializing in white-collar crime, eventually being put in charge of the service’s fraud division. In the 1990’s, he became director of criminal enforcement at the Environmental Protection Agency.

He was named inspector general at the Interior Department in 1999, just as whistle-blowers outside the government were pressing huge lawsuits alleging that oil companies were fraudulently underpaying royalties.

Three years ago, Mr. Devaney scathingly criticized the Interior Department’s auditing program for oil and gas royalties.

Beyond finding that investigators had missed millions of dollars in underpayments, his office uncovered evidence that agency auditors had lost key files, then tried to fool investigators by forging and backdating the missing documents. In an acid rebuke of the agency, Mr. Devaney noted that the agency gave a bonus to the official who came up with the false papers.

Mr. Devaney’s broadside against the Interior Department’s culture dovetailed with his tentative conclusions in his most recent investigation, into how the department had managed to sign 1,100 leases for offshore drilling that inadvertently let energy companies escape billions of dollars in royalties on gas and oil produced in the Gulf of Mexico.

The leases, signed in 1998 and 1999 during the Clinton administration, allow companies to escape normal federal royalties — usually 12.5 percent of sales — on the tens of millions of barrels of oil on each lease.

The royalty break was intended as an incentive for deepwater drilling, but it was also supposed to end if oil prices climbed above a “threshold” level of about $34 a barrel. The leases at issue omitted that restriction, and department officials kept quiet about their mistake for six years after they discovered it.

The problem was first disclosed by The New York Times in March. Government officials now estimate that the mistake could cost the Treasury as much as $10 billion over the next decade.

“The Interior Department holds our natural resources in trust for the American people,’’ said Representative Darrell Issa, Republican of California and chairman of the House Government Reform subcommittee on energy and resources. “It squandered billions instead.”

Mr. Devaney said the error, a result of compartmentalized thinking within the department, might have remained buried if senior officials had had their way.

“We do not have a ‘smoking gun,’ ’’ Mr. Devaney said. “We do, however, have a very costly mistake which might never have been aired publicly absent The New York Times, the interest of this committee, the Senate Committee on Energy and Natural Resources and several other interested members of Congress.”

Felicity Barringer contributed reporting.

http://www.nytimes.com/2006/09/14/business...amp;oref=slogin

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The royalty break was intended as an incentive for deepwater drilling, but it was also supposed to end if oil prices climbed above a “threshold” level of about $34 a barrel. The leases at issue omitted that restriction, and department officials kept quiet about their mistake for six years after they discovered it.

The problem was first disclosed by The New York Times in March. Government officials now estimate that the mistake could cost the Treasury as much as $10 billion over the next decade.

“http://www.nytimes.com/2006/09/14/business...amp;oref=slogin

WHOA! No wonder the oil companies love having oil at $60+/barrel!

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The blistering attack was part of Mr. Devaney’s report on what he called the Interior Department’s “bureaucratic bungling” of oil and gas leases signed in the late 1990’s, mistakes that are now expected to cost the government billions of dollars but were covered up for six years.

done while clinton was in office, i believe it was in 1998.