'Anything Goes' at Interior Department

WASHINGTON, Sept. 12, 2006 — -- Earl Devaney, the inspector general of the Department of the Interior, will give a blunt assessment of the level of ethics there in testimony to be presented to a congressional subcommittee Wednesday.

"Simply stated, short of a crime, anything goes at the highest levels of the Department of the Interior," Devaney will tell the subcommittee, according to an advance copy of his prepared remarks obtained by ABC News.

Devaney was asked to investigate a controversy that's been brewing on Capitol Hill for months over what critics call a giant giveaway to the major oil companies.

The giveaway, according to the critics, stems from leases issued by the government to oil companies in the late 1990s that exempted them from paying royalties on deepwater drilling, regardless of how much profit they ultimately reaped from that exploration.

The issue has taken on heightened urgency in the wake of the recent discovery of huge new oil fields in the Gulf of Mexico. The federal government could lose more than a billion dollars in royalty payments from this new source alone. Over the long term, the leases could cost the government as much as $20 billion, according to a recent report by the Government Accountability Office.

Devaney did not find evidence of outright collusion between Interior Department officials and oil companies over the leases in question -- writing that "we do not have a 'smoking gun.'"

Instead, he blames the leases on "bureaucratic bungling," calling it a "very costly mistake which might never have been aired publicly absent The New York Times," and inquiries by Congress. The Times first reported the omission of price thresholds in the leases.

But Devaney's overall indictment of the department's practices is stinging.

"Over the course of this seven-year tenure, I have observed one instance after another when the good work of my office has been dynamically disregarded by the department," he writes in his testimony. "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.'"

Devaney says previous reports of his that have chronicled such things as complex efforts to hide the true nature of agreements with outside parties, massive project collapses and bonuses awarded to the very people whose programs had failed were met with "vehement challenges" to the quality of his work.

He also describes high-level officials -- political appointees -- who were forced to leave after investigations into poor judgment or misconduct who were nevertheless sent off "with a party paying tribute to their good service."

It is not a partisan indictment, because the problems Devaney cites occurred under both Democratic and Republican administrations.

The controversial leases were issued during the Clinton administration, but Devaney also mentions how disappointed he was when former Interior Secretary Gale Norton, a Bush appointee, failed to take action against one high-level official. Still, he says he is hopeful things may change under new Secretary Dirk Kempthorne.