Sex for Oil? Reports Blast Interior Dept.

Sept. 10, 2008— -- Officials charged with ensuring that American taxpayers receive their share of revenue from oil and gas companies drilling on federal lands reportedly engaged in a "culture of ethical failure," one plagued by sexual relationships with oil industry employees and improper acceptance of dinners, gifts and travel, according to a series of Interior Department inspector general reports released today.

The investigation "revealed a relatively small group of individuals wholly lacking in acceptance of or adherence to government ethical standards; management that through passive neglect, at best, or purposeful ignorance, at worst, was blind to easily discernible misconduct," Interior Department Inspector General Earl E. Devaney wrote in a letter accompanying the reports to Interior Secretary Dirk Kempthorne.

The two-year, $5.3 million investigation targeted the department's Minerals Management Service and several of its subsidiaries and officials.

There was a party atmosphere at the key Royalty in Kind (RIK) program office in Denver, investigators say.

Devaney said in his letter that the probe uncovered a "culture of substance abuse and promiscuity" in the RIK program, noting that "several staff admitted to illegal drug use as well as illicit sexual encounters."

The office, which manages the sale of commercial oil and gas commodities, averages approximately $11 million in business per day, according to the report.

Investigators also say they confirmed allegations that Gregory W. Smith, the former head of the Royalty in Kind program, "engaged in outside employment that conflicted with his RIK position, that he accepted gifts from the oil and gas industry and that he engaged in sex and drug use with subordinates."

The report notes that Smith retired before the investigation was completed and that earlier this year the Justice Department declined to prosecute him for the activities alleged by investigators.

The Associated Press contacted Smith, who told the wire service that he had not seen the report and therefore could not comment on the allegations against him.