[govinfo] Gov Info News 9-21-2006

  • From: "Patrice McDermott" <pmcdermott@xxxxxxxxxxxxxxxxxxxxx>
  • To: "govinfo@xxxxxxxxxxxxx" <govinfo@xxxxxxxxxxxxx>, "FOI-L@xxxxxxxxxxxxxxxx" <FOI-L@xxxxxxxxxxxxxxxx>
  • Date: Thu, 21 Sep 2006 12:59:53 -0400

- Govt Auditor Suits Say U.S. Impeded Audits for Oil Leases
- White House says whistleblower bill threatens national security

Patrice McDermott, Director
202-332-OPEN (6736)


September 21, 2006

WASHINGTON, Sept. 20 - 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 
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 
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 

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.
. Lawyers who have specialized in lawsuits under the False Claims Act said they 
had never seen a group of government investigators use the law against their 
own agency.
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.
Under federal regulations, companies are supposed to pay the federal government 
a royalty of 12 percent or 16 percent on oil and gas they extract from federal 
lands or coastal waters.
Mr. Maxwell's job was eliminated in 2004. He received a settlement from the 
government and is now living in Hawaii.
A much-praised auditor who recovered hundreds of millions of dollars over a 
20-year career, Mr. Maxwell concluded in late 2002 that Kerr-McGee had used a 
clever marketing deal to reduce its apparent sales receipts and royalty 
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. 
But a few days later, lawyers in the Interior Department's solicitor's office 
urged him to drop the case.  .
In two of the lawsuits that were unsealed last week in Oklahoma, senior 
auditors in Oklahoma City said they had been ordered to drop claims that Shell 
Oil had underpaid by $18 million.

The suits were brought by Joel F. Arnold, a supervisory auditor who oversees a 
team of offshore auditors based in Oklahoma City, and Randall L. Little, a 
senior auditor on Mr. Arnold's team in Oklahoma City.

Like Mr. Maxwell, both of the Oklahoma auditors have more than two decades of 
experience in government and industry and have received numerous government 
awards for the money they have recovered.
The Justice Department, which reviews such suits and sometimes joins them, 
declined to participate in these cases. But it did not urge the courts to 
dismiss the suits, as some senior Interior Department had wanted.
.according to their suits, the auditors presented their findings about Shell 
last October to their supervisor in Houston, Lonnie Kimball. Mr. Kimball, 
according to court papers, initially told the auditors to "go straight to 
Shell" with the complaints.

But in January, after meeting with a Shell executive, Mr. Kimball abruptly 
reversed course and told the auditors to "cease work on all false claims" 
against Shell.

In its statement on Wednesday, the Interior Department acknowledged that the 
auditors had been told not to send "issue letters" - an official notification 
that a company appears to have underpaid royalties.

But it said that other auditing offices had been investigating the issues and 
taken certain actions. "In fact," it said, "our actions to date include: 
issuing late-payment interest bills; continuing an ongoing audit; and 
determining that an issue was not supported by the regulations."
In another clash, frustrated federal auditors have complained that the Interior 
Department no longer allows them to subpoena documents from oil companies.

"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."

Bill Myers, The Examiner
Sep 21, 2006 5:00 AM

WASHINGTON - Advocates of a whistle-blower protection bill made a furious push 
Wednesday to save it from the White House and defense lobbyists.

Foes of the bill, including the White House, say that it will endanger national 
security by allowing disgruntled Pentagon or defense contract employees to 
reveal secrets without being held to account.

The bill, officially entitled the Federal Employee Protection of Disclosures 
Act, would give whistle-blowers the right to appeal punishments derived from 
their revelations to the federal circuits.

Right now, any whistle-blower who feels he or she has been unfairly punished 
for revealing waste, fraud or abuse must take the case to the Merit Systems 
Protection Board and then appeal to the Federal Circuit Court of Appeals.

Critics, like the Government Accountability Project's Tom Devine, say that 
those administrative courts are "a rubber stamp" that allows government 
agencies to squash do-gooders who take their cases public.

Since it began hearing cases in 1978, the Federal Circuit has ruled for 
whistle-blowers once, Devine said. It has ruled for the government 122 times.

"You don't have a chance," Devine said.

Proponents of the measure tacked it to the most recent Defense Department 
authorization bill, hoping that it slip through because the authorization must 
pass in order for the Pentagon to spend its budget.

The authorization is currently in conference.

But the White House has been pressuring conferees to strip the whistle-blower 
bill out of the authorization. The Bush administration says that the law would 
endanger national security.

Josh Holly, spokesman for conference co-chair and U.S. Rep. Duncan Hunter, 
R-Calif., said Hunter "is engaged" in the conference negotiations. He refused 
to comment further because Hunter and Virginia Republican Sen. John Warner - 
the other conference chair - have agreed to keep negotiations secret.

U.S. Rep. Tom Davis, R-Va., is one of the bill's champions. His spokesman, 
David Marin, said that Davis was working the phones and hallways furiously 
Wednesday to lobby conferees in the bill's favor.

"It's clear that without constant pressure from Congress, some agencies will 
continue to choose to shoot the messenger instead of responding to the 
message," Davis said in a statement Wednesday. [A pdf of the letter to Chairman 
Hunter from Reps. Tom Davis and Todd Platts can be sent on request - it is not 
online anywhere yet.]

"We need reforms that make it crystal clear that that choice is not an option."

White House officials didn't respond to requests for comment.

Used with permission.


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