No wonder the oil companies were willing to roll back prices just in time for the election ...

posted by The Vidiot @ 6:54 PM Permalink

Suits Say U.S. Impeded Audits for Oil Leases

Four government auditors who monitor leases for oil and gas on federal property say the Interior Department suppressed their efforts to recover millions of dollars from companies they said were cheating the government.

The accusations, many of them in four lawsuits that were unsealed last week by federal judges in Oklahoma, represent a rare rebellion by government investigators against their own agency.

The auditors contend that they were blocked by their bosses from pursuing more than $30 million in fraudulent underpayments of royalties for oil produced in publicly owned waters in the Gulf of Mexico.

"The agency has lost its sense of mission, which is to protect American taxpayers," said Bobby L. Maxwell, who was formerly in charge of Gulf of Mexico auditing. "These are assets that belong to the American public, and they are supposed to be used for things like education, public infrastructure and roadways."
[...]
The new accusations surfaced just one week after the Interior Department's inspector general, Earl E. Devaney, told a House subcommittee that "short of crime, anything goes" at the top levels of the Interior Department.

In two of the lawsuits, two senior auditors with the Minerals Management Service in Oklahoma City said they were ordered to drop their claim that Shell Oil had fraudulently shortchanged taxpayers out of $18 million.

A third auditor, also in Oklahoma City, charged that senior officials in Denver ordered him to drop his demand that two dozen companies pay $1 million in back interest.

And in a suit that was filed in 2004, Mr. Maxwell charged that senior officials in Washington ordered him not to press claims that the Kerr-McGee Corporation had cheated the government out of $12 million in royalties.

On Wednesday, Interior officials denied that the agency had suppressed any valid claims and implied that the auditors simply wanted a share of any money recovered through their lawsuits.

"If these auditors believed there were fraud and or false claims on the part of the companies they were auditing, they should have followed the proper procedures," the Interior Department said in a written statement. "Instead, they opted to pursue private lawsuits under which, if they prevail, they could receive up to 30 percent of the monies recovered from the companies."

In defying their own agency, the Interior Department's auditors sued the oil companies under a federal law, called the False Claims Act, that was created to allow individuals to expose fraud against the government. People who successfully recover money for the government in such cases are entitled to a portion. A losing company is required to pay triple the amount of recovered money as well as back interest — potentially more than $120 million in the cases brought by the auditors.
[...]
"Most whistle-blowers are insiders at a company who spot something that government auditors have missed," said James Moorman, president of Taxpayers Against Fraud Education Fund, a nonprofit organization supported by lawyers that specializes in the False Claims Act.

"But here you have auditors saying, ‘We did our job, we found the problems and our superiors don't want to hear about it,' '' Mr. Moorman said. "If it were just one auditor, you could dismiss it. But with four auditors, that's a pattern of practice."

In their suits, the auditors contend that they had no choice but to go outside the agency because their supervisors ordered them to "cease work" on five separate investigations and drop their claims.

Documents recently unsealed in Mr. Maxwell's case against Kerr-McGee, which is scheduled for trial in November, show that federal officials abandoned his claims at almost the same moment that state auditors in Louisiana reached the same conclusions as Mr. Maxwell.

Mr. Maxwell's job was eliminated in 2004. He received a settlement from the government and is now living in Hawaii.
[...]
Interior officials initially encouraged Mr. Maxwell when he raised the concerns about Kerr-McGee in early 2003. "I am sure we can make the case," wrote John Price, then head of the agency's appeals division, in an e-mail message to Mr. Maxwell.

But a few days later, lawyers in the Interior Department's solicitor's office urged him to drop the case. "Although I did not understand the reasoning, it was made clear to me that the agency did not want the order issued," Mr. Maxwell wrote in an affidavit for his suit. "The next day, Mr. Price telephoned me and reiterated to me that if I issued the order, the director would be very upset with me."
[...]
None of the Oklahoma auditors would agree to an interview. Elizabeth Sharrock, a lawyer for Mr. Arnold and Mr. Little, said both men had already been removed from their usual jobs and were afraid of being fired.
[...]
Interior officials did not say how much money they had recovered from companies named by the auditors. But the agency's own statistics indicate that revenue from auditing and enforcement plunged after President Bush took office.
[...]
"Subpoenas are a very powerful tool to get the information you need, but I don't think they've approved a single subpoena in years," Mr. Maxwell said in an interview. "In the good old days when we were able to issue subpoenas on our own, each of us was able to recover millions of dollars a year."

Agency officials acknowledged that they have not issued any subpoenas in the last three years. "Enforcement of subpoenas by the courts can take years and be very costly," the agency said in a written response to questions. "We have not found them to be a very effective tool."

Somehow I suspect a very effective oilman tool is behind this.