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Oiling The Wheels Of Government

Our spouse has somehow remained cheerful this week, despite the gloomy news from Fenway and the Pats' loss of Tom Brady because of a knee injury. Knees, by the way, seem oddly under-designed, unless their real purpose is to keep us humble.

Bob Lanier was a knee-injury pioneer during St. Bonaventure's only trip to the Final Four in 1971. Pavel Bure, Serena Williams and David Beckham have followed suit and bounced back. Gov. Arnold Schwarzenegger went gimpy for a while, as did Faith Hill and even Lil' Romeo. The hot-yoga yogi, Bikram Choudhury, rehabbed injured knees along the way -- his and thousands of others. Pierce Brosnan, a Hollywood James Bond, and Bond-girl Michelle Yeoh, have both been hobbled. When Nicole Kidman hurt her right knee filming Moulin Rouge, insurance companies had to pay $3 million for delays. Tiger Woods' knee has probably cost the PGA Tour about a billion eyeballs so far.

So human frailty is never far from home. Speaking of which, the scandal du jour isn't an overseas FCPA story. It's a spectacular made-in-the-USA compliance failure. We're talking about the fun folks at Uncle Sam's Minerals Management Service (MMS). Among other things, they're in charge of the government's royalty-in-kind program, which collects oil and gas as payment for drilling on federally-owned offshore lands. Last year MMS' cash flow was around $11 billion. But cash wasn't the only thing flowing freely.

According to a series of reports by the Interior Department's inspector general (available here), some MMS employees in Denver "frequently consumed alcohol at industry functions, had used cocaine and marijuana, and had sexual relations with oil and gas company representatives." Nineteen of the employees between 2002 and 2006 -- about a third of the program's total staff -- "socialized with and had received a wide array of gifts from oil and gas companies with whom the employees were conducting official business."

Two MMSers accepted dinners, tickets to shows, and golfing trips "on at least 135 occasions from four major oil and gas companies with whom they were doing business," the report said. It named gift-giving companies as Chevron, Shell, Gary-Williams Energy and Hess. Eight people in the royalty-in-kind program accepted golf, ski and paintball outings, meals and drinks, tickets to a Toby Keith concert, a Colorado Rockies baseball game, and a Houston Texans football game (we liked it better when the team was called the Houston Oilers).

An AFP story quoted Congressman Nick Rahall of West Virginia, the Democratic chairman of the House Natural Resources Committee, as saying the report "reads like a script from a television miniseries -- and one that cannot air during family viewing time."

The New York Times said the MMS staffers "did not view socializing with oil company representatives and taking gifts as inappropriate because they said they needed to be part of the marketing culture in order to market the program?s oil and gas." Right. It's not easy selling oil and gas these days.

The inspector general's recommended reforms include an explicit prohibition against acceptance of any gifts or gratuities from industry sources, regardless of value; a robust training program with written certification by employees that they know and understand the ethics requirements by which they are bound; and an augmented MMS Ethics Office. And finally . . . random drug testing.

Former MMS official Jimmy W. Mayberry pleaded guilty to a felony conflict-of-interest charge in August and faces up to five years in prison and a $250,000 fine. The DOJ has declined to prosecute two others, which irked the inspector general. Most of the implicated MMS officials, he says, "escaped potential administrative action by departing from federal service, with the usual celebratory send-offs that allegedly highlighted the impeccable service these individuals had given to the Federal Government. Our reports belie this notion."

Enjoy the weekend.

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Full post as published by The FCPA Blog on September 11, 2008 (boomark / email).