Rogue Bureaucracy is a look back through recent years at the patterns of U.S. Department of Interior/Federal mismanagement - deliberate mismanagement in the author's opinion - of oil, gas, and other minerals owned by the U.S. taxpayer, State's citizens and American Indian tribes and individuals. Bill Robinson calls this "Rogue Bureaucracy" because it is his firm belief that the fraud and deception are deliberate. Even if no one is taking money to allow these various types of malfeasance (and worse), the decades-long history clearly qualifies Interior (and Congress) as a Rogue Bureaucracy. Billions of dollars have been lost. Feel free to email Bill (via the mailto link above) if you see related information that you think he should add. Better yet, capture this entire set of info and give it to your local newspaper editor.

The June 1-15, 1998, issue of the newsletter CounterPunch (Volume 5, No. 11) carries an important analysis of the near-exact match between oil company's stated tactics (in the Holloway Letter) and their actual, on-target actions which (so far) match those plans. The title of the article is "A Billion Dollar Gameplan."

CounterPunch is published by Ken Silverstein and Alexander Cockburn, and Co-Writer Jeffrey St. Clair authored the four-column article, based heavily on input from Bill's Rogue Bureaucracy.

For copies, call CounterPunch at (202) 986-3665, or write to them at PO Box 18675, Washington, DC 20036. Back issues are only $3 each. Bill Robinson can email the text of that specific article to anyone, free of charge, because he has reprint rights and an emailed copy from the author.

Since returning from Houston this past weekend, Bill has received email from Interior's MMS "Freedom of Information Officer" indicating that his FOIA request -- on the ARCO voluntary offer (ca. 1993-1995) to pay 'underpaid' royalties -- will be automatically referred to the MMS Houston Office. Bill is eagerly awaiting Mr. Gary Johnson's prompt response, and hopes that Mr. Johnson harbors no bitterness about early postings here concerning his fine staff.

8 June 1998

Bill Robinson has received a copy of an Interior Memorandum to "The Secretary" (of Interior) from Wilma A. Lewis, then the Inspector General of Interior dated September 30, 1996. The subject is: Final Audit Report for Your Information - "Negotiated Royalty Settlements, Minerals Management Service."

Ms. Lewis told the Secretary of Interior that $94 million dollars flew out the window when MMS settled some nine royalty under-payments, with no explanation... she told The Secretary that MMS personnel "...said that documentation was inadequate because they did not have sufficient personnel to perform this task and because they were concerned that release of this information under the Freedom of Information Act could affect future settlement negotiations with other royalty payers." She also told The Secretary that MMS "...did not offer two Indian tribes the options to negotiate their issues separate from Federal and state issues in one of the settlements.." .even though offering the Tribes those options was required.

OK, let's put it in plain language, as VP Al Gore prefers. We could rewrite that memo as follows: 'Hey, Bruce! We just threw away $94 million we could have collected - hell, we just didn't have the time to be bothered with it; oh, yeah, and we screwed over two Indian tribes -- again. Ain't that a Hoot? sincerely, Wilma.'

---

Bill also just got copies of an exchange of letters between the U.S. Department of Justice and two Members of Congress on the matter of so-called "global settlements" of under-paid royalties with Exxon and Chevron. While there is too much material there to excerpt, here are a few choice lines:

Justice to Congressman Stephen Horn and Congresswoman Carolyn Maloney,in December 1996: "Each (royalty settlement) is intended to resolve all royalty disputes between the parties, absent 'fraud, malfeasance, concealment or misrepresentation of material fact'... the Chevron agreement specifically permints future MMS claims based on posted prices when those prices wer established through 'fraud or improper conduct which violates the lease obligations or the Mineral Leasing Act. However, we note that the Interagency Report of May 16, 1996 (referenced in your letter) did not identify fraud as the basis of the suspected undervaluations."

Justice to Congresswoman Maloney, January 1997: (responding to her letter in October 1996, in which she cited estimated losses of royalties on crude oil could reach $2 billion, and her concern about the "appearance of government acquiescence in the underpricing and culpable failure to collect the full royalties due". She noted that California alone had succeeded in collecting over $330 million after lengthy litigation...) Justice replied that two separate inquiries into the issue were presently underway, including one by the Civil Division. That samd Justice response passed over the $330 million actually collected by saying California "...has not been successful in its litigation efforts to collect additional royalties. It has collected in settlements with some lessees, but the only judicial decision has gone against California. That decision is now on appeal."

In February 1997, Maloney got a letter from Bob Armstrong, Assistant Secretary, Land and Minerals Management, Interior. (Loyal RB readers will remember Bob as the guy who never did provide the Holloway letter requested jointly under FOIA by Government Accountability Project and Project on Gvernment Oversight -- oh, and never mind, Bob, Bill Robinson got a letterhead copy from the source...) Bob's letter of 2/6/98 was quite instructive as to Interior's attitudes about audit findings and settlement: "In large measure, your misunderstanding relates to the fact that most of the issues being settled by MMS are not "claims" of the government. The fact that an auditor makes an initial determination that royalty is owed and issues an order to pay does not bind the auditor's superiors within the Department (of Interior), and does not itself constitute a 'claim'." Bob went on to say that MMS "...has acted well within its authority in entering into settlement agreements with oil and gas producers on Federal and Indian leases."

Bill Robinson cannot let that bullshit go unanswered. His comment: Well, Gee Whiz, Bob, did you happen to see Wilma's little note to The Secretary back in September 1996, just 4 months before? Do you really believe that letting $94 million go without any documentation on just a few cases is 'acting within its authority'?? Sure looks like gross negligence on somebody's part to ME, Bob! But, hey, all I have to go on is your Inspector General's report. BTW, Bob, you went on to tell Maloney that a certain Bob Fees from CA's State Controller's office was contacted in the Exxon settlement and had no objection to a settlement which included CA crude oil. Bob, I'm told that all MMS had in its files about Mr. Fees' reaction was a 'memo to self' that they'd called him -- and I'm told that Fees really didn't agree to anything, Bob. I'm also told that a certain party on your staff got his head handed to him by a CA representative over that little falsehood...

Well, it's late and I want to wrap up these letters I've been discussing in this way: In March 1997, Maloney told Bob Armstrong she was "not convinced by your arguments concerning the MMS' settlement authority;she told Bob that Fees did not have the standing or authority to speak on the behalf of CA, and that saying the State of CA concurred with the Chevron agreement (settlement) is not factually supported. She pointed out that MMS' own staff reported undervalued CA posted prices and underpayment of royalties in 1993...and that major oil producers in CA could owe the government as much as $442 million. She asked how one is to explain MMS' abandonment of hundreds of millions of dollars in royalties due from undervaluation. She said "I must conclude that MMS entered into settlement agreements with two major oil companies with neither the authority nor the willingness to act in the interest of the United States."

In June of 1997, the Congressional Research Service basically agreed with her on Interior's lack of authority at the time of those settlements in cases where Justice did not approve claims settled over $100 thousand.

In July of 1997, Justice told Maloney that "We can find no indication that Justice was involved in the Exxon settlement or that we were aware of the disputes being settled." The letter also stated that, while Justice was aware that Interior settles administrative actions before they reach the courts, it could find no documentation of DOI's authority to do so. That letter also noted that the final approval level in Justice for the other settlement was ... Webster Hubbell ... (What the letter didn't say was just as interesting, though; it didn't say that Interior's illegal settlements would be investigated now.) It was signed by Andrew Fois, Assistant Attorney General, on July 23, 1997, less than one year ago.

Bill Robinson's comment:

Yo, Andrew! Janet! Y'all going to investigate now?

Well, in September 1997, Maloney wrote to Interior's Solicitor, John Leshy, about that absence of settlement authority, and about some new rules published in August which seemed to modify States' roles in settlements of royalty under-payments. She noted that MMS' "suppositions concerning what it 'believes' was Congress intent is without any support in the legislative history. She also complemented MMS on its efforts to come up with new (market based, as you all will remember) valuation rules. Then she said "Unfortunately, at the same time, it is becoming clearer to me that many of the problems MMS continues to face, particularly with regard to settlements, emanate from guidance provided by your office." She called the earlier responses from Interior about settlement authority a "facile attempt to look for legal loopholes to the government-wide requirements of the Debt Collection Act. She asked Leshy to respond within three weeks, and sent copies to Bob Armstrong and to Congressman stephen Horn. Bill Robinson is told by reliable sources that Congresswoman Carolyn B. Maloney, Member of Congress, has yet to get a response from Solictor of Interior John Leshy.

Bill's Comment; What's the matter, John? Cat got your tongue? It's been about 9 months now, John. It looks like Interior didn't have that settlement authority, John. All those hundreds of millions in underpaid royalties that Interior has simply wiped off the books ... improperly done, John.

2 August 1998

In the last week of July, 1998, the U.S. Department of Justice completed review of Interior's "settlement" authority for royalty underpayments.

We understand that Justice essentially supported Interior's position, which is to allow Inteior to settle claims over $100,000 without prior Justice approval under some conditions.

Thus we see both Congressional Research Service and the U.S. General Accounting Office saying this is totally un-allowable, and some part of Justice saying it is allowable.

Word is, certain committees of Congress will not be happy with this interpretation by Justice, because if it was implemented it would essentially modify the law. And if Justice is not aware of the fact, it is an Executive Branch agency, and only the Legislative Branch can do that.

More details in about 10 days...

16 August 1998

We now know that the U.S. Department of Justice's Office of Legal Counsel did indeed issue an advisory memorandum dated July 28, 1998, with the subject "Administrative Settlement of (federal oil and gas) Royalty Determinations". We read that as "write-off of legally owed debts to the American taxpayer in the hundreds of millions of dollars".

We know that the head of the Office of Legal Counsel at Justice, Randy Moss, DID NOT sign the letter. His subordinate, Todd Peterson, did.

We know that Mr. Peterson (can we call you Todd ... thanks!), that Todd sent the letter to the Interior Department's Solicitor (John Leske) and to Justice's Assistant Attorney General for Natural Resources (Lois Schiffer).

We know that Todd advised John and Lois that it is perfectly kosher (not his exact words) to continue to "settle" royalty debts above $100,000 without Justice's approval. Bravo, Todd!! You singlehandedly overturned the professional, official opinions of both the U.S. General Accounting Office and the Congressional Research Service on this issue -- not to mention the intent of Congress. I have those two recent letters (from GAO and CRS) communicating the exact opposite expert opinion to Congresswoman Maloney, Todd. Do you have those two letters?? Would you like a faxed copy?

Oh, and by the way, Todd, why didn't the head of your office, Mr. Moss, sign the July 28, 1998 memo? Could that be the reason we haven't heard a whimper from Interior on your memo? Could it be that your memo carries no weight at all? Would you like to email me to discuss these questions?

29 August 1998

Mobil Oil Co. settled it's combined underpayment of oil and gas royalties to the Federal government (and 10 States & some Indian Tribes) for $45 million (less $ 8M to the claimants in the qui tam) in the qui tam suit, and paid Texas $11.5 million under it's parallel suit. Bruce Babbitt is crowing about this, but Bill Robinson can't figure out why -- he had nothing to do with it.

If that $8.1 million figure is correct, each of the six 'relators' in the qui tam action get over a million dollars from the Mobil settlement alone. Hooray, Danielle Brian and her watchdog organization POGO are both RICH ...

As noted, the Post article indicates Mobil paid Texas $11.5 million. The Texas total so far in it's parallel royalties suit against eight companies (filed in 1995 - about 3 years ahead of the Federal suit, which Interior did not initiate) is just over $30 million, or just below what the entire nationwide Federal settlement gained from Mobil. And that's from just three of those eight companies!

Why does the Federal settlement not impress Bill Robinson? Can it be that he thinks Justice allowed Interior to dictate the settlement and to once again low-ball it?? What were the original estimates of underpayment in the qui tam action against Mobil? How were penalties and interest figured in to this settlement? Too many questions remain unanswered.

The qui tam action against Mobil in Lufkin, Texas was unsealed and dismissed, according to today's Washington Post (p. A18 - AP Item).

Interior Secretary Bruce Babbitt was quoted by the Post as saying that "This is money that state governments, Native American tribes and all Americans are rightfully due for their mineral resources". This from the Secretary of Interior who oversaw that $94 million give-away in 1996 because Interior 'did not have the staff to document it? (See earlier notes on the IG report, September 30, 1996). Bruce, that was three times this settlement! And your lapdog of an agency had absolutely nothing to do with the lawsuit, so where in the absolute hell do you get off, crowing about this measly settlement with Mobil?

04 October 1998

Government Accountability Project
1612 K Street, NW - 4th Floor
Washington, DC 20006
202-408-0034 * fax: 202-408-9855

Website:

September 30, 1998

Janet Reno
Attorney General
U.S. Department of Justice

ATTN: Marshall Jarrett, Counsel
Office of Professional Responsibility
U.S. Department of Justice
950 Pennsylvania Avenue NW
Washington, DC 20530

Dear Ms. Reno:

This is to advise you that an employee of the U. S. Department of Justice (Justice), Office of Legal Counsel (Todd David Peterson) signed a memorandum dated 28 July 1998, addressed both to Justice's AAG for Natural Resources (Lois Schiffer) and to the U.S. Department of Interior's Solicitor (John Leshy) -- with the subject being "Administrative Settlement of Royalty Determinations" (copy attached; page 3 missing). In doing so, Mr. Peterson appears to have invalidated significant statutory provisions of the Debt Collection Act pertaining -- at the time of settlement -- to the Exxon oil and gas "global" settlement of some $44 million in underpaid oil and gas royalties owed on Federal leases. At that tirile, the law required that Justice review any settlement of any claim over $ 100,000; and, both GAO and CRS agreed (see attached) that Justice should have reviewed the Exxon settlement., Subsequent modifications to the Debt Collection Act in 1996 noted in the second paragraph below were not retroactive.

We bring this to your attention because several knowledgeable parties who have reviewed Peterson's memorandum are in full agreement that it clearly reverses the intent of the Federal Claims Collection Act of 1966 (P.L. 89-108), as amended by the Debt Collection Act of 1982 (P.L. 97-365),re the Exxon settlement. The 1996 revisions to the Federal Oil and Gas Royalty Management Act (FOGRMA) clearly came well after Exxon's global settlement, and Justice clearly did not review that settlement inany way. Peterson's finding was made in complete contradiction to opposing opinions in 1997 by both the U.S. General Accounting Office and the Congress.ional Research Service, as cited by his July 28th memorandum.

Furthermore, it is not clear at all that Peterson even had the authority to set Justice policy in regard to such important legislation, because he is subordinate to Mr. Randy Moss in the Office of Legal Counsel, and did not sign for the chief of that office. Nor is it clear that his finding can be contained to issues involving the Interior Department.

That apparent invalidation of public law is supported by other enclosures listed below. Again, note especially that the GAO and CRS correspondence specifically oppose Mr. Peterson's findings- as Peterson himself notes!

Congresswoman Carolyn Maloney's letter to Robert Armstrong, Assistant Secretary. Interior Lands and Minerals Management (March 12, 1997), enclosed;

Maloney's letter to James F. Hinchman, Acting Comptroller General of the United States (March 12, 1997), enclosed;

Congressional Research Service letter to Maloney (June 26, 1997), enclosed;

Justice Department letter to Maloney (July 23, 1997). See especially page 2, the paragraph beginning "Sixth..." enclosed;

U.S. General Accounting Office letter to Maloney (September 30, 1997, enclosed. See especially the eference to the Exxon settlement, as cross-referenced by Mr. Peterson on page. 6 of his July 28, 1998 letter to Leshy and Schiffer, which clearly indicates that Exxon settlement should have been referred to Justice for approval. Mr. Peterson merely glosses over that finding.

So it is a fact that Justice had no involvement in an extremely large settlement of royalty claims with Exxon (about $44 million) well before the FOGRMA amendments, yet your agency showed no intent of pursuing that issue further, then or now. How is it that Justice can pinpoint a violation of law and not initiate an investigation? Is this another instance where there was "no controlling legal authority"?

Justice's Office of Legislative Affairs did send another letter to Maloney (November 26, 1997, also enclosed) which made a passing reference to Interior's interpretation of the term "claim" under 31 U.S.C. Section 3711 (a) and brushed aside the matter of the Exxon settlement. That letter did, however, indicate that the Justice Department's Office of Legal Counsel had been asked to examine Interior's responsibilities under the Debt Collection Act.

So now, only eight months later, Todd David Peterson, a subordinate of Mr. Randy Moss, the acting head of the Office of Legal Counsel for your agency, has responded with the July 28, 1998 memo noted in the opening paragraph of this letter. One would think that a policy-making decision of this magnitude (involving at least $44 million dollars, and a write-off of many more millions of dollars) would be signed by the Attorney General of the United States -- or at least by her Office of Legislative Affairs. But neither of those options were used, and even Mr. Peterson's acting superior in the Office of Legal Council did not sign -- nor did Mr. Peterson sign on that swerior's behalf. In summary, Mr. Peterson's memorandum of July 28, 1998 to Leshy and Schiffer has the apparent effect of waiving or reversing an important component of the Debt Collection Act of 1982, at least concerning large "settlements" of oil and gas royalty claims owed the Federal government before the 1996 FOGRMA amendments. That action should be carefully reviewed, and if that conclusion is correct, that July 28, 1998 Peterson memorandum should be rescinded.

There are a number of related matters which should focus your attention (and Ms. Reno's) on this issue. Consider that Justice is now pursuing a "qui tam" or Fraud Claims Act civil lawsuit against multiple oil and gas companies claiming what some sources estimate to be several billion dollars in so-called "underpaid" oil and gas royalties. Also consider that one of those same companies was recently invited to explain its actions on the same matters to a criminal grand jury in Wyoming.

You might also be interested in the enclosed September 20, 1996 Interior audit report to Interior Secretary Bruce Babbitt from his then-Inspector General, Wilma A. Lewis, showing the almost casual disregard of MMS toward a "loss" of some $94,000,000 in audited oil and gas royalties underpaid. Instances such as that provide clear evidence that FOGRMA should never have been liberalized in 1996 to allow such discretion to Interior's maladroit minions.

In any event, GAP requests a written notice of Justice's decision as regards Peterson's July 28, 1998 memo, and in particular it's impact on Justice's statutory authority to review and approve settlements of oil and gas royalty determinations above $ 100,000 before the 1996 amendments to FOGRMA.

GAP requests that Justice recall and/or rescind the Peterson memorandum of July 28, 1998 for actions taken by Interior before those recent amendments. GAP also requests that the entire matter of the Exxon "global" settlement be re-opened and assiduously reviewed by Justice under the pre- 1996 legal requirements.

GAP is convinced that this entire matter requires your close attention, Ms. Reno. We also are hopeful that you will provide a prompt decision and response. Also, We are sure that all the parties whose correspondence have been referenced herein would appreciate getting a copy of your decision on this matter.

Sincerely Yours,

Thomas Devine, Legal Director

18 November 1998

U.S. Department of Justice
Office of Professional Responsibility
Washington, D.C. 20530
October 21, 1998

Thomas Devine
Legal Director
Government Accountability Project
1612 K Street, NW, 4th Floor
Washington, DC 20006

Dear Mr. Devine:

This is in response to your September 30, 1998 letter to this office alleging that the legal conclusions reached in a July 28, 1998 memorandum from Deputy Assistan Attorney General Todd David Peterson of the Office of Legal Counsel (OLC) to the Assistant Attorney General for the Environment and Natural Resources Division and the Solicitor of the Department of Interior concerning the settlement of oil and gas lease royalty determinations are inconsistent with applicable statutory law.

This office investigates allegations that attorneys for the Department of Justice have committed specific acts of professional misconduct. We have reviewed your letter and its attachments carefully. The focus of your letter is on your disagreement with the legal conclusions in the July 28 memorandum and your suggestion that they be reconsidered. We do not read your letter as containing any allegation that Mr. Peterson or some other attorney in OLC engaged in a specific act of professional misconduct. In the absense of any such allegation, this office will not reconsider the legal conclusions OLC reached in the ordinary ocurse of its review of the matter. We are, however, referring your letter to Acting Assistant Attorney General Randy Moss for his consideration.

Thank you for bringing this matter to the attention of the Department of Justice.

Sincerely,
H. Marshall Jarrett
Counsel

8 December 1998

Interior Secretary Babbitt, in addition to facing contempt of court for inaction on a suit involving 300,000 Indians' lost royalties, has in the past few months lost his Assistant Secretary for Land and Minerals Management (Bob Armstrong), his head of Minerals Management, Quarterman, and yesterday, his special trustee for American Indians, Paul Homan.

Are the rats finally leaving the sinking ship?

27 January 1999

The Washington Post reported this week that Judge Royce Lamberth concluded his hearing to determine whether Bruce Babbitt and Rubin (both Cabinet level agency heads) will be found in contempt of court for failing to produce records in the Indian Trust Fund case. The special trustee, Homan, testified earlier this month, after he resigned, and allegedly said he'd been blocked repeatedly by Babbitt and Company.

While the Judge reserved judgement for a short while, sources tell Bill Robinson that he is likely to find one or both of them to be in contempt. Sources also say that, while neither will be likely to face jail time, both may face agency and/or personal fines for holding back records for two years.

Also, some of the government's attorneys in the case may face contempt of court findings in the same action.

Wouldn't it be great if someone could link this to the Fraud Claims Act case for Federal royalties -- showing the same clear pattern of non-action by cognizant Interior officials in the face of States' lawsuits for years AND the qui tam FCA lawsuit? And what if someone puzzled out why Interior should be helping Justice determine the settlements in that case? Isn't that like having the fox audit the henhouse after years of raids?

Also, GAP's request for Justice review of a global back-royalties settlement - which Justice illegally did not approve - has not been answered.

Inquiring minds want to know when Janet will act, and when Interior will face a massive investigation for aiding and abetting Indian Trust Fund losses for decades ( including a close look at how those fifty-some-odd checks to Indians got cashed (and where) without the owners' endorsements).

It's time to go after the Rogue Bureaucracy. Write your congressman and Sentators. Pass this whole webpage to the press. I'll clear the copywrite on a case by case basis. Contact me at (301) 270-8057.

23 February 1999

On February 23, 1999, the Washington Post reported that Judge Royce C. Lamberth found Interior Secretary Bruce Babbitt and Treasury Secretary Robert Rubin in contempt of court on the 22nd, for showing a "flagrant disregard" for his orders regarding the alleged mismanagement of billions of dollars in trust funds held for Indians. In a 76 page opinion (which all of us should seek), Lamberth (according to the Post) warned that Babbitt and Rubin and Assistant Secretary of Interior Kevin Gover could face 'criminal contempt sanctions and stiffer penalties if they do not meet orders in the future.' He (Lamberth) was said to have stated that the lapses were made worse by a lack of candor from lawyers working the case from the Justice Department.

The Post says that, for months after Lamberth ordered calls for records, government lawyers told Lamberth that "they were complying with the court's demands", and it was not until last spring that Lambreth became aware that the materials were not being provided. He then gave the government until June 30 to meet the order. After more time lapsed with little progress, he launched the contempt proceedings.

This article, Bill Robinson notes, did not discuss the excuses offered in the last few months -- rat poop on records; "viral" contamination" of records; no signatures on checks made out to Indians which were cashed. One wishes the entire story could be told.

POINT MADE, AGAIN: ROGUE BUREAUCRACY EXISTS !! The Post article went on to indicate that, after two years of dogging and twisting and avoiding, the Treasury and Interior Departments were not just found to have "stubbed their toe", but to have engaged in a "shocking pattern of deception of the court."

"I have never seen more egregious conduct by the federal government ... The court cannot tolerate more empty promises to these Indian plaintiffs." said Lamberth.

The lawsuit was filed in 1986 by five Native Americans on behalf of 300,000 others of their class. The government, said the Post " pumps" $500 million a year" into 300,000 Indian trust accounts held by individual Indians (never mind the Tribal Accounts). Besides the two Cabinet members, the Post said that the Judge held Assistant Interior Secretary Kevin Gover in civil contempt. Bill Robinson wonders, is that position which Gover occupies now the same position Armstrong just vacated? If so, Mr. Gover, please read RB completely and then call me at (301) 270-8057 to discuss your impending legal problems with me. I am sure that 15 years or more of my research will assist you and your attorney when you respond to your own and Mr. Babbitt's "campaign of stonewalling" and "strained interpretations" of court orders.

It is over. Give it up. Your organization, Interior, *is* a Rogue Bureaucracy, Mr. Babbitt -- through the past until February 22, 1999. Just barely in the past, as defined by this analysis. Don't wait too long to leave the sinking ship. Armstrong didn't.

21 March 1999

The National Association of Royalty Owners' February 1999 newsletter reported that "NARO members were among the hundreds of thousands of royalty owners accross the nation who, in January, received notice of a proposed 'global' settlement of several class action lawsuits against crude oil purchasers"... claiming underpayments for oil produced and sold between January 1, 1986 and September 30, 1998.

Approximately three million copies of the 16 page "Notice of Class Action and Proposed Settlement" were mailed to royalty and working interest owners accross the nation.

The settlement offer was said to be extremely complex. However, NARO's newsletter indicated in it's page 3 article that "Although neither side can claim a clear-cut judicial victory, attorneys for the plaintiffs did an excellent job of focusing attention on what has been a historical thorn in the side of royalty interest owners -- oil pricing and fair payment practices."

Bill Robinson has asked the editor of that newsletter, Jim Stafford, for additional macro information on companies, states, groups of claimants and gross amount offered in settlement for posting to RB, before the settlement seals the information forever.

These global settements may not be related to the Fraud Claims Act lawsuit, but that remains to be researched. It would be interesting to learn also how many individual American Indians and Tribes are affected, if any.

Bill Robinson also emailed the last set of updates to RB to Jim Stafford, some 33K of recent info, in case any of those updates prove useful. This site now contains about 216K of research on oil, gas, and other mineral revenues -- and on the pervasive pattern of underpayment which this current settlement continues to validate.

If anyone reading this has information on the current status of the Fraud Claims Act lawsuit which Justice took over last year, especially concerning any new settlements in the past year, please email me at wrob@erols.com as soon as possible. Confidentiality is assured.

31 March 1999

To call this analysis of Lamberth's contempt decision in favor of five American Indian plaintiffs and against Babbit and Rubin (which Bill Robinson reviews below) an "update" would be like calling the UConn - Duke game a playground exercise. This is the quintessential, the purest and most telling finding he's seen yet of the true nature of the Rogue Bureaucracy.

Lamberth, on page 59 of his opinion (www.dcd.uscourts.gov -- Eloise Pepion Cobell et.al., Plaintiffs v. Bruce Babbitt, Secretary of the Interior, Robert Rubin, Secretary of the Treasury, and Kevin Gover, Assistant Secretary of the Interior, Defendants in Civil No. 96-1285 RCL)said that "In terms of a good faith analysis, the defendants' and their attorneys' actions up to this point {before February 1998} can be characterized as nothing short of contumacious."

Now, folks, we had to look that one up! It means "obstinantly disobedient or rebellious; insubordinate" and the noun form of that adjective, contumacy, means "obstinate or contemptuous resistance to authority; stubborn rebelliousness".

Hey, that makes Rogue Bureaucracy sound downright tame, doesn't it!!

Bill recommends you download the full 78 pages of that February 1999 opinion, since Lamberth clearly warns the defendants on page 68 that "It should be noted that there was a substantial amount of evidence produced at the contempt trial that suggests the defendants' misconduct rises above the level of reckless disregard ...The court cannot, however, be oblivous to these instances of willful dereliction ...These statements and corresponding actions are direct evidence of conduct that comes perilously close to *criminal* {underlined in opinion}contempt of court.

Herewith, a few choice excerpts on earlier pages of the cited opinion:

Page 16: "In this case, the laws, the orders of this court were either ignored or thwarted at every turn by these officials and their subordinates."

Page 19, concerning a finding that prior statements by defendants' representatives had been erroneous: "This misbehavior is especially egregious considering that it occured six months beyond the document production deadline."

Page 19-20: "The court finds by clear and convincing evidence that defendants {named again} are in civil contempt of this court's orders of November 27, 1996 and May 4, 1998."

Page 29: "The incompetence was compounded when the Department of Justice attorneys failed to require Perlmutter to do a document log and neglected to do the job themselves."

Page 32-33: Evidence was provided the court that 20,000 cubic feet of boxes containing potentially relevant records were reduced to 8,000 cu.ft. despite a contact advising that they were "potentially relevant" to the Indian's case, and that even the remaining 8,000 have not been either searched or produced.

Page 38: "Unfortunately, the contemptuous conduct arises out of intra-departmental fingerpointing compounded by case mismanagement by the attorneys." Later on the same page, the court states that "While revealing your warts is an honest and commmendable theory of constructing a defense, it does not provide a vehicle for proving good faith, especially when several attorneys in the underlying action have acted incompetently and with a shocking lack of candor to this court."

Page 50: Remarks on an instruction to hold all document production for the five named plaintiffs in abeyance ...This abeyance order was the equivalent of an order not to produce, for a period of over one year, since it was never followed with a superceding order to the contrary. "This meant that the entire financial side of document production, in a trust accounting action, was not even instructed to be produced by the defendants to their field employees, despite an outstanding court order."

Page 56: "This conduct evidences baseless representation as to deadlines and a total lack of candor to the court."

Page 58: "These statements were made to the court at a time when defendants' counsel either knew or should have known, through reasonable oversight of this litigation, that his representations were utterly false."

Page 59: "The disparity between what was being reported to the court and what was in fact true could not have been greater." This was followed by characterizing attorneys' actions to that point as "nothing short of contumacious" before early February 1998. At that point "Yet, despite this behavior, the saga became even more disturbing in early February 1998."

Page 61: "Instead {of informing the court}, as will be seen shortly, the defendants began to stonewall the court and the plaintiffs from learning this information and unilaterally decided to produce a set of documents that clearly would not comply with court orders."

Page 69: "The defendants first concede that they must be ordered to pay reasonable expenses and attorneys' fees." (On the next page, this was clarified to exclude the expense of obtaining these disobeyed - earlier - orders.) On the same page: "The court will appoint a special master soon to oversee discovery, document production, and related matters and to effectuate compliance with this court's orders. The defendants simply cannot be trusted to do this job themselves." "More alarmingly, their attorneys cannot be trusted to accurately inform the court should compliance become a further issue."

Page 73: "This two-week contempt trial has certainly proved that the court's trust in the Justice Department was misplaced."

Bill's summation: Good God Almighty. Babbitt ought to resign, if he has half a spine.

4 April 1999

First with a tornado relief bill, then an appropriations bill, and now with a farm aid / hurricane relief bill -- has our Senate no shame when blocking proper revenue collection from oil and gas wells on public property?

On Sunday, April 4, 1999, the Washington Post (page A4) reported yet another egregious assualt on proper oil and gas royalty collections.

This time, the Senate has loaded a relief bill for U.S. farmers and for Central American hurricane victims with completely un-related "relief" for their oil company and mining company buddies - more delays in proper royalty determinations.

We have a friend in the House, though -- Congressman C.W. Bill Young of Florida -- who successfully kept such junk out of the House relief bill. Unfortunately, the conference committee could force the Senate's claptrap bill into the final one sent to Clinton. Good-government advocates are said to be fighting the Senate provisions, and this has produced a veto "threat" from Clinton's people.

Readers will recall (and the article mentions) that Texas Senator Kay Bailey Hutchison blocked the 'valuation' regs (which compute value and thus the basis for computing royalties owed the taxpayers) last April in a tornado relief bill. Then she and others extended the blockage of the regs in an appropriations bill. Now, with the blockage set to expire in June, this action by the Senate would extend the blocked regs until October. (It would also halt cleanup and other financial requirements on mining companies which are taking (free) valuable minerals such as gold, silver and platinum from our Nation's public lands.)

I have only one quibble with the article: it refers to collection of $1.5 billion in federal oil and gas royalties in 1996; I believe that should have been closer to $3.5 billion, and that the author was given only on-shore figures.

However, the thrust of the article and all other facts were right on track. This fits the pattern of DELAYS in appropriate action by oil and gas and mining companies which Rogue Bureaucracy has so often noted in the past.

10 May 1999

Pete Domenici, U.S. Senator : for $188K, you can have him ... lock, stock and barrel.

At least, that's what the numbers say. And the numbers never lie, right?

On April 21, 1999, Mr. Domenici issued a press release which indicated that setting royalty values by requiring oil and gas companies to actually MARKET their product and determine value from that price, was tantamount to the government "mooching" (his term) for fair market value and fair royalties.

Guess it pays to give a guy like him $188,000 (in one '96 election cycle), eh?

Well, now we know not only WHAT he is, but how MUCH he charges!!

$300 to $500 million a year for $188,000. What is he thinking, except about re-election?

10 June 1999

U.S. District Judge Royce C. Lamberth began hearing testimony on June 10th concerning "decades of mismanagement" which have deprived American Indians of "billions of dollars."

Readers will remember that Lamberth found Interior Secretary Babbitt and Treasury Secretary Rubin in civil contempt recently for failing to produce records. Yesterday's article (Washington Post, page 35) indicates that the government has brought in a new team of lawyers because the Judge was so critical of the other team (see the excerpts of that opinion above).

The current line from Interior is that court intervention is not necessary because of a 13-point plan developed by Babbitt which is moving forward in "high gear," including installation of a computer system to begin straightening out records.

Hmmmm...where have I heard new computer system before? Oh, yeah, it was that 12-year effort by Interior to build a sysytem to manage Federal royalties & it fell apart because it needed one more year and one more million dollars to finish it ... but I'm SURE Interior will not disappoint us again!!

The article in the Post noted that former Representative William F. Clinger, Jr (R-PA) testified yesterday that he had helped draft a report in 1992 about mismanagement of the trust fund, and that both the Bush and Clinton administrations had failed to deliver on promises. Clinger was quoted as saying "We were pretty much appalled by what we saw." Former Special Trustee Paul M. Homan, who served from 1995 through January of this year, also reiterated that he never was given enough money to do his job properly. The Post quoted Homan as saying that the trust funds "seemed to always come in last on anybody's list of priorities." Well, there go only the past seven years. What the hell, right?

Say, here's a modest proposal. Why not offer to distribute two-thirds of the trust fund to all living individual Indian claimants in a manner agreed upon by all, and argue about the last third from now until the year 3000?? That alone would give financial independence to many Indians who are at this time destitute millionaires.

29 August 1999

Pages 26-30 of the September 1999 edition of Washington Monthly contain an article by Eric Umansky, a contributing editor to Mother Jones magazine, entitled "Shooting the Whistle-blower" -- "How Congress is sabotaging an effort to stop oil companies from cheating taxpayers." It should be available on the washingtonmonthly.com website next month.

Here's one wonderful quote from Umansky's article (which also verifies my longstanding belief in harassment of those who 'commit truth' in Washington and in Big Oil):

"There are plenty of smoking guns in this story, but this one, if not the most remarkable, is certainly the most colorful. Harry Anderson, a now retired Arco executive, admitted last month in testimony that as part of his job he had lied about royalties. Q: 'At your disposition five years ago, did you testify that posted price represented fair market price?' A: 'Yes' Q: 'And from your personal point of view was that a fully accurate statement?' A: 'No'

Later, Anderson explained why he fibbed five years ago: "I was an Arco employee. My plan was to get to retirement. We had seen on numerous occasions the nail that stood up getting beat down. I was there to drink the milk, not count the cows."

For some reason, Umansky & the WM editors chose to ignore the "Dear Senator" letter (see separate link at bottom of this section) from 32 organizations on similar issues. I know they had it in time. In fact, I sent it by email to Mother Jones on August 8, 1999 and faxed it to Washington Monthly shortly after that date.

However, the article is sound, and accurately depicts the attack on two whistleblowers (who received a large cash award from the Project on Government Oversight) as a diversionary action by Congress. It also airs part of the Holloway letter (see much earlier in this webpage) re the major companies conspiring to stop the new valuation regs by procedural means -- including blocking them by Appropriations Committee action. As we all know, that has happened at least three times recently at the hands of the Friends Of Oil (FOO) in the Senate -- especially by Domenici and Hutchison, whose actions are also referenced in the Umansky article.

I'll post my letter to the WM editor here if it does not appear in the next edition.

31 October 1999

"According to the sworn testimony of a retired Atlantic Richfield executive in a California lawsuit in July, the policy of his company and others was to pay royalties based on a price 'at least four or five dollars below what we accepted as the fair market value.' The retired executive, Harry Anderson, said his company's senior executives had decided 'they would take the money, accrue for the day of judgment, and that's what we did.' "

This excerpt from a September 21, 1999 article in the New York Times by Tim Weiner substantiates fully the assertion by Bill Robinson that some companies have actually set up reserve funds in anticipation of being caught red-handed stealing Federal / State oil and gas royalties. Setting the price at 'four or five dollars below what we accepted as the market price' may not sound like much, but it's probably well over 10 percent low on average, and could be well over 20 percent when prices were low. Given this knowledge, it is totally unacceptable for Justice to be settling oil royalty underpayments at such abysmally low levels currently.

The article also links Senator K.B. Hutchison's receipt of $1.2 million in oil company contributions to her campaign funds with her four-year (successful) effort to block royalty reform in Congress.

12 November 1999

On Friday, November 12, 1999, Bill Robinson received a followup phone call from a top official of a major educational association, AASA.

He acknowledged that the current effot to transfer all offshore royaties to land and fish is suspect, and Bill has alerted the educaionsl interests that they may lose all... repeat...all...royalty support for education... under the current congressional action.

15 March 2000

Lawsuits by oil and gas companies to be initiated on March 15th to block Interior valuation regs; and questionable supoenas for a House hearing on the same date; and 50% losses on major companies' improper use of "stripper wells" legislation.

Oil and gas companies are expected to sue Interior on Wednesday, March 15th, 2000, in order to stop new oil royalty (market value based) regulations --the very day they become effective (after 4 years of blocking efforts by Congress finally failed late last year). Senator Kay B. Hutchison and her fellow Friends Of the Oil Leaches Society finally were defeated on their blockade last year.

Also, Congressman Don Young issued subpoenas to a number of persons who helped push the new valuation regs and/or sued the companies under the fraud claims act (POGO and one CA attorney) and the hearing was then shifted to a subcommittee chairperson, Congresswoman Barbara Kubin -- also to occur on March 15th. That shift to subcommittee effectively should invalidate the supoenas, since only the full committee has such powers, but who's going to quibble? It's all in a good cause -- harrassing the truth-tellers via government intimidation. Is Joe McCarthy back in town?

Talk about a campaign finance issue -- when giving out several hundred thousand dollars a year in campaign money and getting Congress to run your blockade for years will save up to a million dollars a day in underpaid royalties...

Also, major companies are said to be grossly abusing rules set up by Interior in 1993 to save low-production "stripper" wells to such an extent that the losses to California are greater than they were under the "honor" system rules (where they collected over $350 million in back royalties in court)... and that stripper well issue has never received press attention.

Basically, the companies claim that production of an entire lease is low, and the Interior Department gives them suspended or reduced royalty payment rights. California is said to be losing up to 50% of royalties previously received from the same areas with the same production levels.

There are said to be two blocked Interior / Bureau of Land Management reports (by their Inspector General) which agree with the position California has taken ... that the "stripper" regs are being applied inappropriately to large leases and large companies, and that the practice has resulted in a major reduction in royalties owed by Chevron and others combined ... but both 1999 reports are being held up indefinitely by Interior under the premise that agency review is taking place.

13 April 2000

A widely respected national media outlet is looking at the overview of royalty losses v-a-v States' education losses and impact on the Indian Trust Fund. We are scheduled to meet later in April. Here is a slightly edited list of the documents which I will provide:

Summary of information to be provided to national media source:

1. Overview - how State education programs, American Indians and Federal oil and gas royalties are inter-related. 2 pp.

2. AP news 3/31/00 "US Joins More Oil, Gas Royalty Suits" (note penalties levels - probably not being applied by Justice in False Claims Act Lawsuit)

3. 60 minutes 4/2/00 "Did U.S. Mismanage Indian Fees?" 2pp - just for backup.

4. My update from Rogue Bureaucracy, a website with 17 years of compiled info on subject, and the website address.

5. Taxpayer Source - $856 million lost since 1991 - Taxpayer Source "False Claims Act Under Attack" - my note with transmittal to Project Censored

6. New York Times 9/21/99 Tim Weiner "Battle Waged in the Senate Over Royalties by Oil Firms" 4pp NB p. 3 Arco retired official's court testimony on "accrual" funds, in case underpayments were discovered.

7. AP news 4/12000 "Bush, Oil Industry, Help Each Other" 2pp Texas granted $45 million in tax breaks to big oil under effort to help small oil and natural gas producers. (Note: Not in article, but CA says it's lost tens of millions to big oil under 'stripper well" legislation also meant to help the little guys -

8. AP news 2/24/2000 4pp "Gov'ts False Claims Recoveries Rise" Includes on p.3 a reference to Chevron's paying $86.2 million of underpaid royalties on Indian and Federal Land since 1988. Note: Not in article - Chevron paid $150 million in back royalties to the Feds earlier in the 90's as a final" settlement, too.

9. Letter to Washington Monthly on their 9/99 article 'shooting the Whistleblower", which referred to a letter from Pat Holloway to Interior (in Rogue Bureaucracy) detailing big oil's efforts to stop royalty reform.

10. Platt's Oilgram News 7/22/99 "Retired Arco employee says company underpaid oil royalties" 1p "The senior executives of Arco had the judgement that they would take the money, accrue for the day of judgement, and that's what we did." ... "A separate federal suit in Texas by private parties under the False Claims Act alleges a number of companies, including Exxon and Chevron, manipulated their posted prices to pay lower royalties. Arco was not named in that suit."

(Note: the reason ARCO was not named is that it offered to pay Interior back royalites without being sued, but Interior turned down the offer - Source email below withheld. ARCO did make similar documented offers to Texas and several other States, and the company also provided pattern and practice info on industry practices which led to multiple States"class action suits - successful ones.)

Other documents available:

USPIRG +30 other groups" "Dear Senator" letter of 7/21/99 3pp, which opposed further blockage of proper "valuation" rules which would allow royalty calculations on the true market value of oil, not on posted price. In early 2000, that fight on oil valuation was won. The next fight is on the other 2/3 of losses, from gas price undervaluation (see p. 157 of the next article, top right corner).

Tax Notes 7/5/99 "Transfer Pricing and Oil Royalties: A Cautionary Tale" Quite simply, the best overall analysis Bill Robinson has ever seen. Transfer pricing is a euphemism for claiming a lower value for taxes and royalties, then marketing at true value. Note esp. The info on the fourth page (155 in the issue) about Alaska's settling similar claims for underpaid state royalties and taxes for more than $3.5 billion. (Withheld -tax related)

My memo to Juliette Eilperin - unused - highlighting item 12 above and next item below.

GAO's 5/19/99 report "Federal Oil Valuation: Efforts to Revise Regulations and an Analysis of Royalties in Kind" 7pp; Another excellent resource which summarizes collections (from States, mostly) of over $1 billion in back royalties) and continuing blockage of new valuation rules by Congress. Source of the claim in item 5 of up to $856 million lost from 78 to 93 on p. 5. Also the source of some State's successful collections (LA, TX, NM) on p.6. Notes the multi-year blockage of new regs (by Congress -Hutchison et.al.- not noted). Debunks royalty-in -kind.

Part of an unpublished email to my website, about the ARCO alleged offer to the gov"t. which was allegedly rejected -- probably because it would make Interior investigate and sue, as did California, Texas, Alaska and other States when ARCO provided proof of systemic fraud by the industry.

(Withheld - a solid, confidential source on ARCO offer above)

AP 5/4/98 "Critics of Hutchison action aiding oil industry to offer rival legislation. 2pp Barbara Boxer fights Hutchison blockade of new oil royalty valuation regs.

San Francisco Chronicle 5/6/98 Molly Ivins "Oil Companies Treated with Royalties" , on Hutchison's blockade of the royalty valuation regs. 1p,

Washington Post 4/29/98 Martha Hamilton "Lawsuit Over Royalties Poses Threat to Oil Firms." 1p. Details POGO estimate that firms owe more than $2 billion in underpaid royalties.

Email from Bill Robinson 4/24/98 to Democracy Now, detailing text of lawsuit (the original False Claims Act suit before Justice took over) including "nationwide conspiracy by some of the world's largest oil companies" (words in text of lawsuit) under the lawsuit filed in Lufkin, Texas on 2/16/98. 4pp. Excerpted from a 70-page document.

Email 3/8/98 mentions Reuter article on Rayford Etherton's assertion that he estimates that the companies could owe civil penalties on oil and gas underpayments in excess of $5 billion. His phone number (not in article) at that time was (334) 433-1936.

Email Feb. 98 detailing names of plaintiffs / relators" in False Claims lawsuit, and a journalist who would cooperate. Article 6/30/97 included 5pp.

Two Houston Chronicle copywright article on False Claims Act lawsuit. 4pp

Reuters" article on same lawsuit - and correction of Etherton's first name, plus associate's name (Ruben Guttman)