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Government officials who failed to collect millions of dollars in fees from oil companies for drilling on America's public lands were having sex with energy executives, a bombshell report revealed Wednesday.

A two-year internal Interior Department probe concluded that officials in the Denver-based Minerals Management Service had improperly cozied up to oil companies: rigging contracts, accepting multiple gifts and even working part-time as oil consultants.

Investigators found a "pervasive" culture of boozing, drugs and sex in the office and rampant improper contacts between government officials and oil company employees.

"Sexual relationships with prohibited sources cannot, by definition, be arm's-length," Inspector General Earl Devaney noted dryly.

The scandal exploded just as the debate over off-shore oil drilling took center stage in the presidential campaign. Delegates at last week's Republican National Convention even burst into a chant about drilling.
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"This gives new meaning to the phrase 'drill, baby, drill,'" said Rep. Carolyn Maloney (D-Manhattan), who has long called for greater oversight of oil royalties.

"We can't afford another four years of Republican leadership that's literally in bed with the oil industry."

The inspector general's probe centered on the officials handling the government's Royalty in Kind office, a payment system long pushed by the oil-and-gas lobby.

Put into effect in 2004 by the Bush administration, the Royalty in Kind program allows energy companies to pay the government in oil instead of cash for the rights to drill, thereby complicating, and sometimes skirting, rigorous accounting.

A report last year lashed the office for a "profound failure" in monitoring $4 billion in annual oil and gas payments. Four auditors said top officials blocked them from recovering money from energy companies that had vastly underpaid the government.

Estimates of lost revenue range as high as $10 billion.

As the underpayments were being ignored, 19 employees were taking ski outings, meals and concert tickets from Chevron, Shell, Hess and the Gary-Williams Energy Corp., Devaney's reports said. "None of the employees involved displayed remorse," he wrote.

The probe singled out Gregory Smith, the former head of the Royalty in Kind office, for allegedly using marijuana, cocaine and crystal meth, coercing employees to buy him drugs and have sex with him, and moonlighting as a private oil consultant.

The Justice Department declined to prosecute Smith in May. His lawyer called the claims "sheer fantasy."

Bow-Wow may look like your average terrier. The streets he walks may seem familiar. But just around the corner, things get a little unusual. With nary a word, Mark Newgarden and Megan Montague Cash have created a story about a bold new doggy who goes where no doggy has gone before. With a spring in his step and his tail only occasionally between his legs, Bow-Wow faces down every foe--well, almost every foe--in his path.Step aside, mutts. There's a new dog in town.


More details
Bow-Wow Bugs a Bug
By Mark Newgarden, Megan Montague Cash
Published by Harcourt, 2007
ISBN 0152058133, 9780152058135
56 pages
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In 1976, Adolf Tolkachev, a Soviet aviation specialist working on stealth technology for aircraft, began leaving notes in, or on, the cars of U.S. diplomats near the American Embassy in Moscow. He was interested in meeting with CIA officials.

For almost a decade?after finally making that contact?he proved to be a tremendous reporting asset. He provided plans, specifications and test results on existing and planned Soviet aircraft and missiles. The information provided by Tolkachev saved the U.S. government billions of dollars in defense expenditures, a coup that prompted some intelligence historians to call him ?the greatest spy since Penkovsky.?


Tolkachev in KGB custody. Tolkachev?s espionage ended with his arrest by the KGB on June 9, 1985. On Sept. 25, 1986, a TASS (Russia?s official news agency) news article announced that Tolkachev had been tried, convicted and executed the day before. Although initial suspicion for his arrest fell on former CIA employee and defector Edward Lee Howard, who had been slated to handle Tolkachev while stationed in Moscow, subsequent information revealed that Tolkachev was also betrayed by Aldrich Ames.
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For more on Tolkachev, visit ?Tolkachev, A Worthy Successor to Penkovsky? from Studies in Intelligence.