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Sleaze, sex, cocaine -- and oh yeah, billions in lost revenues -- at Bush's Interior

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Former federal auditor Bobby Maxwell as seen in a Westword cover story.

Hot damn, the public servants at the Lakewood office of the U.S. Minerals Management Service sure know how to party. Blowjobs in moving cars, cocaine delivered to your desk as "office supplies," drunken sexual misadventures with Big Oil executives, trips and tee times and other gifts from the energy sugar daddies they're supposed to be auditing -- a whole passel of sordid allegations that can be found here, in the long-awaited reports from the Department of Interior's inspector general on the gross mismanagement of MMS under the Bush administration.

The report found "a culture of substance abuse and promiscuity" in the Lakewood office under former supervisor Greg Smith, whose attorney has denied the allegations of Smith's own drug use, sexual dalliances with subordinates and conflicts of interest. But the "unbridled, unethical conduct" of a few local employees is only a small piece of the ongoing scandal at MMS, which is responsible for collecting royalties from energy leases on federal lands; nearly a third of domestic oil production and a fourth of domestic gas comes from those leases. The flip side of sleeping around with the energy folks is that MMS has been firing and demoting auditors who try to do their jobs -- something we reported on in detail in "Fighting Mad" and "Duke of Oil."

The American public has lost billions in underpaid royalties from profit-gorged oil and gas companies in the past few years. Under Bush, the MMS implemented a new "royalty-in-kind" program that was supposed to make the whole royalty process less adversarial and allow the energy companies to deliver barrels of oil instead of checks. But that program, as former federal auditor Bobby Maxwell told Westword, depended on the RIK people doing their job. And that happens to be the very division that Greg Smith ran, apparently into an ethical abyss.

Sadly, it took the drug-and-sex aspect to bring the case to national attention. Although the royalty losses represent one of the biggest industry frauds on the government since the days of Teapot Dome, few media outlets (aside from some sterling investigative work at the New York Times) have paid much attention to the claims of Maxwell and other former auditors.

Maxwell was fired from MMS after pursuing a case against energy giant Kerr-McGee over $12 million in disputed royalty payments. Maxwell subsequently won $7.5 million in a False Claims Act case against the energy giant that he filed on his own, only to see the jury verdict dismissed on a technicality. In a peculiar bit of timing, just as the report on the MMS scandal was being prepared for release, the Tenth Circuit Court of Appeals overturned the dismissal and sent Maxwell's verdict back to the federal district court in Denver for further action.-- Alan Prendergast


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