Dave Hodges

More About: Corruption

Senator Jon Kyl Has Gone Vegas: The Greenhouse Effect

In his most recent series of campaign ads, Jon Kyl has abandoned his blue suit, red power tie and the make-up which served to obscure his facial flaws in favor of a more humble, less powerful appearance. This is an obvious Jeffersonian ploy to display himself as one of the common people because his opponent, Jim Pederson, has been successful in exposing Kyl's extreme loyalty to the oil interests. Kyl is trying to convince Arizona voters that he is truly looking out for the public's interests while at the same time, he has taken over a quarter of a million dollars in campaign donations from the oil industry.

Through the last election cycle, Kyl and his fellow Neocons, have walked lockstep with big oil as the industry has shaped our foreign policy and have price gouged the American public at the gas pump. Does anyone truly believe that the recent and dramatic fall in oil prices will not quickly be reversed as soon as the 2006 election cycle is completed? The oil companies know a good thing when they have it and they are willing to sacrifice the trend curve which resulted in several, successive quarters of record profits. If the oil companies have to sacrifice one quarter of record profits to get their servants, like Jon Kyl, reelected, then so be it! Recent history shows that investing in the Jon Kyl's of the political world is a very prudent use of their blood money. As we race towards the midterm elections, it might prove wise to examine some of the practices of the industry that oil company indenture servant, Jon Kyl, is beholding to.

Five years ago, energy companies paid more than $400 million to settle charges that they had not paid royalties owed on oil taken from public land. Much of the money goes to the acquisition of lands for parks or habitat protection, with states and Indian tribes also benefiting. The fees are a form of recognition that these oil rich, publicly owned lands are both a natural and national resources. Further, because these lands are publicly owned, taxpaying Americans, not just energy companies and their shareholders, should benefit from the private use of these lands. At a time when these oil corporations are making record profits, government officials should not be allowed to turn a blind eye while the public is cheated of what is rightfully owns. Beth Daly, of the Project on Government Oversight (POGO), believes that the problem of oil company underpayment is far worse than is being reported. 1

Daly joins a growing chorus of private voices which are alleging that drilling companies and pipeline operators are grossly understating the amount and the quality of the natural gas they pump on public land, and as a result, are paying far less in royalties than required by law. As expected, the oil companies, despite their recent fines for not paying enough in royalties, claim that they have paid their full share of royalties from both public and Native American tribal lands. The present administration is quick to lead the defense of the oil and gas industries and the suggestions that the government should be collecting more money even as the level of oil and gas drilling escalates. Daly notes that the oil and gas companies are creative in avoiding paying what they owe while she accuses the Bush administration of lessening the amount of federal oversight. In predictable fashion, the present administration (e.g., Bush, McCain, and Kyl) has sided with the oil industry, resisting suggestions that it should be collecting more money as gas and oil drilling escalates. Bush's water boy, Jon Kyl, is a major player in protecting the oil and energy industry.

Self-described "bounty hunter", Jack Grynberg, 81, and his crusading team of lawyers, have sued 73 energy and pipeline companies in a false claims action in Casper, Wyoming. Some of the more notable defendants in the claim are Unocal, Exxon Mobil Corporation and Conoco-Phillips. Please note that Kyl is a stockholder in Exxon and sponsored legislation which resulted in a $6.5 billion tax break for the company. Exxon is also one of Kyl's biggest campaign contributors. I am surprised that the Pederson camp has not raised the specter of a "blatant conflict of interest".

The False Claims Act suits allege royalty underpayments totaling in the tens of billions of dollars. If Grynberg's team of attorneys prevails in court, the potential triple damage punitive assessment could become quite expensive for the oil companies and could potentially serve to offset some of the record profit gains since the advent of the Iraq War.

The 73 energy companies have unsuccessfully tried to dismiss Grynberg's suit, citing a lack of evidence necessary to support the claim of underpayment. However, a special agent, appointed by the federal court, ruled that the cases against 35 of the 73 companies should go to trial. U.S. District Judge William F. Downes, in Casper, Wyoming will serve as the presiding judge. The current administration has refused to be a partner to the law suits against the oil companies. 2

In addition to Jack Grynberg's suits, several frustrated former Interior Department auditors are bringing a separate series of false claims cases which are also alleging oil company underpayment of mineral royalties. It is important to note that the operative word for this second group of group of litigants is the phrase "former Interior Department auditors." These suits are not being brought by these auditors while under the employee of the United States government. These individuals are bringing suit on their private time, with their own money, because their superiors at the Interior Department have refused to perform the job that Americans are paying them to do.

As the oil industry continues to have its way with the American people, it is up to the free press and a small, brave group of whistleblowers to identify corporate and government wrongdoing in order that justice may be served and the public interest is preserved. Since the media is primarily controlled by six corporate entities, there is essentially no free and objective press. Therefore, whistle blowers have become the last bastion of defense against corporate impropriety and government complicity in that corruption. Previously, whistle blowers, who identify wrongdoing, have historically been protected by various governmental agencies, the courts and/or the media. Today, an increasing number of whistle blowers are suffering dire consequences for bravely performing their duty.

Take the cases of Kevin Gambrell, the former director of the Federal Indian Minerals Office in Farmington, New Mexico, and Bunnatine Greenhouse, the former top ranked civilian contracting officer of the Army Corps of Engineers, stand as disgraceful examples of the power that the oil companies hold over the enforcement and the regulatory powers of the United States governments and its agencies. Increasingly, whistle blowers such as Grambrell and Greenhouse are simply steamrolled while the energy companies continue to plunder the resources of United States.

Kevin Gambrell was the former director of the Federal Indian Minerals Office in Farmington, New Mexico from 1996 to 2003. Gambrell's job was to manage Indian allotments in the Four Corners to make sure that the Indian people were getting what they were entitled to, the payment of oil company royalties. Gambrell reports that three years ago where an oil and gas company was producing oil and gas from a well site and the oil company never reported any oil extraction to the federal government.

Gambrell had formally accused some of these companies of lying and cheating, which he says could cost American taxpayers billions of dollars as a result. Gambrell also stated that the Minerals Management Service, the governmental bureau in charge of collecting such royalties, "fail in their duties to protect taxpayers." oil and gas companies were always trying to figure out how to not pay royalties or to pay as little as possible. As a result the American taxpayers are losing billions of dollars. Gambrell noted that the oil companies would routinely take deductions which were illegal under the law. For example, they would price their oil to gas using artificial pricing mechanisms that weren't true to the market. In addition, they would get bonuses, premiums and other considerations that were not visible to the royalty collectors.

In order to escape Gambrell's scrutiny, he described how the industry would divert the issue to his superiors and question his authority to enforce the royalty laws. When Gambrell took the industry to court, he reports that they would often bring in their lawyers and try to negotiate their way around the law. On several occasions, when negotiations failed to convince Gambrell to play ball with the industry, they would resort to having key politicians contact Gambrell and/or his supervisor in order to circumvent the enforcement process. Gambrell stated that his bosses stepped up the pressure to look the other way. His subsequent complaints to senior officials and even to the Washington D.C. court system were stonewalled at every turn despite the detailed documentation that the oil companies were fleecing the American taxpayer. The Bush directive of serving the needs of the oil companies were being carried out with a zealousness that would sweep away all potential whistle blowers. Gambrell was unceremoniously fired.

It may be stating the obvious to note that the American taxpayers have already paid hundreds of millions of dollars in taxes to ensure that the Interior Department to ensure oil company compliance. The Four Corners area encompasses Arizona. Where is ARIZONA Senator Jon Kyl on this issue? Where is Kyl's expressed outrage for the fraud being perpetrated against indigenous persons? Is Kyl complicit in this second wave of Manifest Destiny against Native Americans? I think the voting public should ask Kyl these questions before voting in the upcoming election. 3

Speaking of outrage, where was Kyl when Haliburton and its subsidiary, KBR, was raking in billions from the unbidded military contracts for construction projects related to the Iraq War?

Once the top civilian supervising billions of dollars in work assignments from the Army Corps of Engineers, Bunnatine Greenhouse, was in charge of making sure that the American tax dollar was being put to the best possible use. When energy and construction mogul, Halliburton and its subsidiaries, were able to get preferential treatment, including billion-dollar contracts, for Iraq rebuilding projects, Greenhouse attempted to stop it. Unable to stem the tide of this Tammany Hall type of corruption, Greenhouse testified before Congress where she stated that the contracts awarded to one of these subsidiaries, KBR, represented the "most blatant and improper contract abuse" that she had witnessed during her 20 year tenure working for the government. Greenhouse is an American hero.

It is interesting to note that Greenhouse's last performance review stated that she had "no equal when it comes to technical issues"; she is "not timid and has the fortitude to tell it as it is"; and, that her "ethics are above reproach". What was her reward for the whistle blowing? She received a demotion from her job as the top contract overseer for the Army Corps of Engineers. If Jon Kyl was truly looking out for the good of the people, why is he silent on this issue which is costing the American taxpayer billions for the overpayment of these unbidded contracts? 4

What does this say about a democratic republic when wholesale factions of the United States government are an accomplice to this fraud being perpetrated upon every American? No doubt some readers are asking the question, "How could this happen in America?" When one considers that several former oil executives are in the nation's top political jobs and another, Donald Evans, is heading up the Commerce Department, along with former energy executives sprinkled throughout the administration, it is not a surprise that the present administration's National Energy Policy emphasizes increased production and far less regulation of the energy industry. Because of his stockholdings in Exxon and the massive amounts of campaign donations that he is garnering from the energy companies, Kyl is a willing a participant in this betrayal of the public trust. With this type of support, it is easy to comprehend how the oil companies are getting away with this gigantic rip-off of the American taxpayer. And to add insult to injury, the American people are being forced to pay for beefed up security for these same oil companies at a time when they are realizing record profits. I know that you are doing a double take, but this is correct as Jon Kyl voted for a bill that pays companies like Exxon millions of dollars to beef up their security against "the terrorist threat" while major segments of our infrastructure and public transportation go unprotected due to a lack of funds. This corporate welfare is taking place at a time when the energy industry is realizing previously unfathomable profits!

We are all to familiar with the notion that evil triumphs when good men do nothing. When "good" men take campaign money from these entities, then evil not only triumphs, it flourishes. If Jon Kyl is going to imitate the persona of Jefferson, he might want to think about imitating his character as well.

In his campaign ads, Jim Pederson accuses Kyl of "going Washington" in an obvious reference to his oil company servitude. I would like to correct Jim Pederson because I believe the good Senator has instead "gone Vegas". For Kyl is betting that with temporary decline in oil prices, that you will forget about his support the oil companies and their abuses against the American people. Come November, we have a choice.


1 Daly, Beth, Project on Government Oversight (http://pogo.org)

2 Reid, T. R. Under the False Claims Act, Groups Sue for More Fees

Washington Post, May 7, 2006; Page A03

3 PBS Frontline July 15, 2004 http://www.pbs.org/wgbh/pages/frontline/shows/blackout/traders/power.html

4 Senate Democratic Policy Committee Hearing

"An Oversight Hearing on Whether the Army Corps of Engineers Retaliated Against Whistleblowers Who Objected to Iraq Contracting Abuses"

Bunnatine Greenhouse-Former Top-Ranking Civilian Contracting Officer-United States Army Corps of Engineers September 16, 2005

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