U.S. Govt workers punished in oil-sex scandal

WASHINGTON (Reuters) - The U.S. Interior Department said on Friday it took disciplinary action against government workers who had sex, used drugs and took gifts from employees of regulated oil and gas companies.

The punishments stem from an investigation by the department's inspector general, who found there was "a culture of substance abuse and promiscuity" among employees at the department's Minerals Management Service, which handles billions of dollars in oil and natural gas supplies that are turned over by companies as in-kind royalty payments for drilling on federal lands.

The scandal shocked Congress, which held several hearings on the matter and proposed legislation to clean up the agency. Interior Secretary Dirk Kempthorne testified at the time that he was "outraged" by the government workers accused of wrongdoing and their "abuse of the public trust."

The disciplinary measures ranged from a letter of warning and reprimand up to and including permanent reassignment from the agency's royalty-in-kind program, suspension without pay, demotion to a lower pay grade and being fired.

The MMS did not name the employees who were punished.

MMS Director Randall Luthi said on Friday the behavior of some agency employees "was clearly inappropriate and warranted strong administrative action (but) 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."

During his two-year investigation, Inspector General Earl Devaney said, about a dozen MMS workers in the royalty-in-kind program took cocaine and marijuana and had "illicit sexual encounters."

Government workers also got drunk at social events with employees of oil companies doing business with the agency and MMS workers had "brief sexual relationships" with industry contacts, he said.

The oil companies named in the inspector general's report were Chevron, Shell Oil and Gary Williams Energy Corp. Hess Corp was accused of providing gifts to MMS employees.

Devaney told Congress "there probably were some losses" in royalty money that should have been paid by the companies, but he had no idea how much.

In addition to punishing the employees, other steps the MMS has taken to clean up its royalty-in-kind program include improving record-keeping, strengthening internal controls and enhancing the ethics program for workers.

(Editing by Walter Bagley)