Oil Investigation Targets Interior Official

The Justice Department is investigating whether the director of a multibillion-dollar oil-trading program at the Interior Department has been paid as a consultant for oil companies hoping for contracts, The New York Times reported on Saturday.

Citing unidentified officials who spoke on condition of anonymity, the Times said the director of a royalties program at the department's Minerals Management Service and three subordinates had been transferred to different jobs and ordered to cease all contacts with the oil industry until the investigation is completed in the spring.

The investigation into whether senior government officials steered large oil-trading contracts to favored companies has not been announced publicly, the Times said. It began several months ago but accelerated in recent weeks.

The investigation is only the latest by Congress and the Interior Department's inspector general into the Minerals Management Service, which oversees royalties collection.

So-called royalties-in-kind programs, in which companies pay royalties in the form oil or gas rather than cash, have been pushed by Interior officials touting it as a simpler, more efficient method for the government to collect royalties, the Times said.

The most prominent figure in the inquiry is Gregory Smith, director of the royalty-in-kind program at the Minerals Management Service in Denver, the Times said.

One person familiar with the investigation said it originally focused on potentially improper social ties between some of Smith's subordinates and executives at companies vying for contracts, the newspaper reported.

The subordinates include two women, including one who is said to be in charge of oil marketing, and a second man. One official said investigators were now looking at possible consulting arrangements between the Denver officials and oil companies, with the newest information hardening investigators' suspicions, the Times said.

Smith did not return calls seeking comment, and Interior Department spokesmen refused to comment, the Times said.

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