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Report: Federal employees partied with energy reps

Government officials handling billions of dollars in oil royalties partied, had sex with and accepted golf and ski outings from employees of energy companies with whom they were dealing, federal investigators said Wednesday.

The alleged transgressions involve 13 former and current Interior Department employees in Denver and Washington. Their alleged improprieties include rigging contracts, working part-time as private oil consultants, and having sexual relationships with – and accepting golf and ski trips and dinners from – oil company employees, according to three reports released Wednesday by the Interior Department's inspector general.

The investigations reveal a “culture of substance abuse and promiscuity” by a small group of individuals “wholly lacking in acceptance of or adherence to government ethical standards,” wrote Inspector General Earl Devaney, whose office spent more than two years and $5.3 million on the investigation.

The reports describe a fraternity house atmosphere inside the Denver Minerals Management Service office responsible for marketing oil and natural gas that energy companies barter to the government in lieu of cash royalty payments for drilling on federal lands. The government received $4.3 billion in such royalty-in-kind payments last year. The oil and gas is then resold to energy companies or put in the nation's emergency stockpile.

“During the course of our investigation, we learned that some RIK employees frequently consumed alcohol at industry functions, had used cocaine and marijuana, and had sexual relationships with oil and gas company representatives,” the report said. Two government employees who had to spend the night after a daytime industry function because they were too intoxicated to drive home were commonly referred to by energy traders as the “MMS Chicks.”

Between 2002 and 2006, nearly a third of the 55-person staff in the Denver office received gifts and gratuities from oil and gas companies, including Chevron Corp., Shell, Hess Corp. and Denver-based Gary-Williams Energy Corp., the investigators found. Two oil marketers received gifts and gratuities on at least 135 occasions. One admitted having a one-night-stand with a Shell employee. That same individual allegedly passed out business cards for her sex toy business at work, bragging that her income from that business exceeded her salary at the Interior Department.

The reports also said former head of the Denver royalty-in-kind office, Gregory Smith, used cocaine and had sex with subordinates. The report said Smith also steered government contracts to a consulting business that paid him $30,000 for his work from April 2002 through June 2003. Smith retired from the office in May 2007.

Smith's attorney, Steve Peters, called the claims “sheer fantasy.”

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