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Drilled, Baby, Drilled: The strange battle to keep Big Oil from cheating

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The IG's office discovered that roughly a third of the entire RIK staff had socialized with and accepted gifts from oil- and gas-company executives. Many of the favors didn't amount to much — a free dinner, Colorado Rockies tickets, that kind of thing. But at least eight of the employees had exceeded the allowable limits for gifts, and several had been showered with more golf and ski trips, luggage and silver trays than your typical game-show contestant. Two employees, Stacy Leyshon and Crystal Edler, were known among industry execs as "the MMS chicks" because of their frequent presence at social events ("Crossing Over," September 18, 2008).

Leyshon, who supervised the government's oil-marketing efforts, also operated a sex-toy business on the side. When first questioned by investigators, she denied having inappropriate personal relationships with industry executives. Later she acknowledged having intimate relations with two oil-company people, including a Shell employee, but clarified that she "did not consider a 'one-night stand' to be a personal relationship."

Like Leyshon, Edler denied that the gifts or socializing influenced how she did her job. She also admitted to two romantic relationships with oil-company people, including a Shell employee. It was the RIK group's goal to be "part of industry," she explained. "Being in the business and going out and meeting with these people and becoming friends with them has gotten me very far with them."

Sources complained that Edler had leaked information about a pipeline deal that RIK had made with one company to a competitor, which happened to be Shell; Edler denied divulging any confidential data. The penchant for fraternizing and party gifts demonstrated by the MMS chicks seemed tame compared to the boorishness ascribed to Greg Smith, the director of the RIK program; in addition to running an energy consulting business on the side, Smith was accused of awarding a performance bonus to an underling who sold him cocaine and pressuring female employees for sex. (Smith admitted using cocaine away from the office but denied the other allegations.) In the long run, though, the friendly relationships with industry execs may have cost the government much, much more.

To this day, there's been no thorough accounting of the lost royalty revenues that occurred during the RIK fiasco. MMS defenders say the matter was blown out of proportion by Bush-bashing media types and point out that the alleged misconduct involved only a few thousand dollars in gifts and a handful of employees — some of whom, like Smith and Denett, retired during the investigation, while others, including Edler, still work there. But the IG's office found that of 121 contract amendments approved by Leyshon that it reviewed, only three favored the government; the others cost the government an estimated $4.4 million. Little maintains that the change in transport costs on a single Shell contract ended up costing the taxpayers $10 million a year. And there's no way of knowing how much revenue vanished down the rabbit hole of dubious deductions while the RIK watchdogs were substituting token "compliance reviews" for real audits and turning into party animals.

Secretary Salazar abolished the RIK program at the end of 2009, drily observing in the termination memo that his department "should be regulating, not participating in, industry activities." After an appeal to the U.S. Office of Special Counsel, Little and Arnold were eventually reinstated in their MMS auditor jobs in Oklahoma City. But it wasn't the same.

"They took us off the offshore leases — that's where the big money is — and put us in charge of doing audits for the Indian reservations," Little says. "The whole office. We went from collecting thirty to forty million dollars a year to a few hundred thousand dollars, maybe a million."

Like the former "oil marketing specialists" over at RIK, the auditors were no longer playing in the Big Game.

*****

Last year, the federal government recovered a record-busting $2.8 billion in False Claims Act lawsuits initiated by whistleblowers. More than 80 percent of that total involved cases of health-care fraud, but the rest included some tidy sums drilled out of Big Oil's wallets, such as a $20.5 million settlement from BP Amoco and affiliates and a $16.35 million settlement from Kerr-McGee and Anadarko. Both cases involved claims that the companies deliberately underpaid royalties on natural gas produced on federal and Indian lands.

Yet at the same time that Justice Department attorneys were trumpeting their successes under the False Claims Act, they were actively opposing the lawsuit launched by Little and Arnold against Shell. And they avoided direct involvement in Maxwell's case against Kerr-McGee until it was time to put in an appearance in order to collect the government's share of the settlement.

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Alan Prendergast has been writing for Westword for over thirty years. He teaches journalism at Colorado College; his stories about the justice system, historic crimes, high-security prisons and death by misadventure have won numerous awards and appeared in a wide range of magazines and anthologies.
Contact: Alan Prendergast