Qui Tam and Big Oil, All Over Again


When it comes to classic whistleblower cases, oil always comes to the surface.

The recurring saga, alleged mismanagement, and waste, of the federal Minerals Management Service (MMS) revealed the recurring nature of oil oversight: and the frustrating, often ignored, role of whistleblowers.

In 2007, what was viewed as a vital internal reform effort against MMS, the Kerr-McGee jury verdict of $7.6M, was dismissed by the trial court. It took an agonizing, long year, but a federal court of appeals reversed the dismissal, and resurrected the award.

Ironically, but not at all unusual for a qui tam, the government was entitled to share equally with the whistle blower, Bobby Maxwell (a former MMS auditor). Ironic, since Maxwell had discovered a series of underpayments by the exploration company to MMS. After reporting the apparent underpayments to her MMS superiors, Maxwell’s complaints were apparently “deep sixed.” Evidence at trial suggested the total of Kerr-McGee’s underpayments in licensing, royalties, fees, and penalties might exceed $30 million.

Though not an apologist for the  industry—let alone any certainty of avoiding the 2010 Gulf leak— there is little doubt many experts see oil as being…between  a rock and  hard place, when it comes to harsh realities. Oil, expensive in its location, often prohibitive in its extraction, represents the drilling of human potential…and human exploitation: Niger Delta, Prudhoe Bay, California. All are viewed as pristine and natural bounties: and areas ripe for billions in payments to greedy government bureaucrats. But few people suspected, when Maxwell became a reluctant whistleblower, that many employees at MMS/Denver might be as open to graft as international oil cartels.

It is also remarkable, perhaps, to consider the revelations attendant to the Maxwell case were essentially ignored. Only when the top blew off the Deepwater Horizon platform were many of the reports aired by Maxwell’s whistle blowing revealed: employees accepting gifts, and even suggestions of improper liaisons (Reported by the Denver Post 09/11/2008).

The costs of forcing these resolutions to individual qui tam actions are high, in terms of oil market efficiency, as well. Kerr-McGee—after its losses in court—was absorbed by massive Anadarko Petroleum. Yet the problem goes much deeper than costs of whistle blowing. A study by the non-profit Common Dreams reported that MMS has cited thousands of oil spills in the last decade.