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MMS Wraps Up RIK Scandal with Disciplinary Action

Following reports this fall of sex, drugs and financial/contract misconduct at high levels within the Minerals Management Service's (MMS) royalty in kind (RIK) program, the agency's director, Randall Luthi, said Friday that actions have been taken against all of the personnel involved.

Luthi said the actions range from a letter of warning and reprimand up to and including permanent reassignment from the RIK program, suspension without pay, demotion to a lower pay grade, and termination from federal service. In April 2006, the then-director of the MMS asked Inspector General Earl E. Devaney to investigate allegations of ethical lapses that were raised by an MMS employee in the RIK program. Devaney returned three reports of his findings in early September (see NGI, Sept. 22; Sept. 15).

"These actions complete a long and thorough investigation into the royalty-in-kind program," said Luthi. "While the behavior of some MMS employees prior to 2007 was clearly inappropriate and warranted strong administrative action, the vast majority of our employees take great pride in the service they perform for our nation, and perform that service with a high degree of professionalism, every hour of every day, as noted by the [inspector general]."

The investigation, which took two years, explored allegations involving more than a dozen current and former employees of the MMS, the federal agency that collects billions of dollars of royalties each year from production on the federal Outer Continental Shelf. Most of the alleged misconduct and violations involved employees associated with the RIK program, which was set up by MMS to accept royalties in-kind (product) rather than in cash, and sell the oil and natural gas at competitive prices.

One of Devaney's reports focused exclusively on the alleged misconduct of Gregory W. Smith, who had been the RIK program director in Lakewood, CO. He was accused of using cocaine with a subordinate, engaging in sex with employees, accepting gifts from the oil and gas industry and accepting fees for marketing work that conflicted with his RIK position.

Another inspector general report found that Lucy Querques Denett, associate director of MMS' Minerals Revenue Management, had acted together with her special assistant, Jimmy Mayberry, to create a lucrative contract for Mayberry when he retired in January 2003 and started a consulting firm, which he called Federal Business Solutions. In June 2003 MMS awarded a contract to Mayberry's firm. Milton Dial, who was assistant program director for RIK and good friends with Denett and Mayberry, oversaw the contract for MMS. Shortly after his retirement from MMS, Dial began working for Mayberry.

Devaney's third report discovered that between 2002 and 2006 nearly one-third of the entire RIK staff socialized with and received an array of gifts and gratuities from oil and gas companies. The report also found that a group of MMS female coworkers who came to be known as "the MMS Chicks" engaged in over-the-top fraternizing, including casual drug use and sexual relations with oil and gas industry representatives.

In handing out the sanctions, MMS said all personnel actions were made following the guidelines and regulations that pertain to government personnel.

In the wake of the scandal, MMS said improvements made to the RIK program include strengthened internal controls, enhanced documentation requirements, improved record-keeping, and strengthened ethics training for all employees, among other improvements. Additionally, a new RIK program director was named, and the organizational structure modified so the head of the RIK program now reports directly to the deputy associate director in Denver.

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