SPEAKERS CONTENTS INSERTS
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65–382 l
1999
OVERSIGHT HEARINGS TO EXAMINE THE LAWS, POLICIES, PRACTICES, AND OPERATIONS OF THE DOI, DOE., AND OTHER AGENCIES PERTAINING TO PAYMENTS TO THEIR EMPLOYEES, INCLUDING PAYMENTS RELATIVE TO MINERAL ROYALTY PROGRAMS AND POLICIES FROM PUBLIC LANDS AND INDIAN LANDS
OVERSIGHT HEARINGS
before the
SUBCOMMITTEE ON ENERGY
AND MINERAL RESOURCES
of the
COMMITTEE ON RESOURCES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
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MAY 4 AND 18, 2000, WASHINGTON, DC
Serial No. 106–73
Printed for the use of the Committee on Resources
Available via the World Wide Web: http://www.access.gpo.gov/congress/house
or
Committee address: http://www.house.gov/resources
COMMITTEE ON RESOURCES
DON YOUNG, Alaska, Chairman
W.J. (BILLY) TAUZIN, Louisiana
JAMES V. HANSEN, Utah
JIM SAXTON, New Jersey
ELTON GALLEGLY, California
JOHN J. DUNCAN, Jr., Tennessee
JOEL HEFLEY, Colorado
JOHN T. DOOLITTLE, California
WAYNE T. GILCHREST, Maryland
KEN CALVERT, California
RICHARD W. POMBO, California
BARBARA CUBIN, Wyoming
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HELEN CHENOWETH-HAGE, Idaho
GEORGE P. RADANOVICH, California
WALTER B. JONES, Jr., North Carolina
WILLIAM M. (MAC) THORNBERRY, Texas
CHRIS CANNON, Utah
KEVIN BRADY, Texas
JOHN PETERSON, Pennsylvania
RICK HILL, Montana
BOB SCHAFFER, Colorado
JIM GIBBONS, Nevada
MARK E. SOUDER, Indiana
GREG WALDEN, Oregon
DON SHERWOOD, Pennsylvania
ROBIN HAYES, North Carolina
MIKE SIMPSON, Idaho
THOMAS G. TANCREDO, Colorado
GEORGE MILLER, California
NICK J. RAHALL II, West Virginia
BRUCE F. VENTO, Minnesota
DALE E. KILDEE, Michigan
PETER A. DeFAZIO, Oregon
ENI F.H. FALEOMAVAEGA, American Samoa
NEIL ABERCROMBIE, Hawaii
SOLOMON P. ORTIZ, Texas
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OWEN B. PICKETT, Virginia
FRANK PALLONE, Jr., New Jersey
CALVIN M. DOOLEY, California
CARLOS A. ROMERO-BARCELÓ, Puerto Rico
ROBERT A. UNDERWOOD, Guam
PATRICK J. KENNEDY, Rhode Island
ADAM SMITH, Washington
CHRIS JOHN, Louisiana
DONNA MC CHRISTENSEN, Virgin Islands
RON KIND, Wisconsin
JAY INSLEE, Washington
GRACE F. NAPOLITANO, California
TOM UDALL, New Mexico
MARK UDALL, Colorado
JOSEPH CROWLEY, New York
RUSH D. HOLT, New Jersey
LLOYD A. JONES, Chief of Staff
ELIZABETH MEGGINSON, Chief Counsel
CHRISTINE KENNEDY, Chief Clerk/Administrator
JOHN LAWRENCE, Democratic Staff Director
Subcommittee on Energy and Mineral Resources
BARBARA CUBIN, Wyoming, CHAIRMAN
W.J. (BILLY) TAUZIN, Louisiana
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WILLIAM M. (MAC) THORNBERRY, Texas
CHRIS CANNON, Utah
KEVIN BRADY, Texas
BOB SCHAFFER, Colorado
JIM GIBBONS, Nevada
GREG WALDEN, Oregon
THOMAS G. TANCREDO, Colorado
ROBERT A. UNDERWOOD, Guam
NICK J. RAHALL II, West Virginia
ENI F.H. FALEOMAVAEGA, American Samoa
SOLOMON P. ORTIZ, Texas
CALVIN M. DOOLEY, California
PATRICK J. KENNEDY, Rhode Island
CHRIS JOHN, Louisiana
JAY INSLEE, Washington
BILL CONDIT, Professional Staff
MIKE HENRY, Professional Staff
DEBORAH LANZONE, Professional Staff
Hearing held May 4, 2000
Statement of Members:
Cubin, Hon. Barbara, a Representative in Congress from the State of Wyoming
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Prepared statement of
Hon. George Miller, a Representative in Congress from the State of California
Prepared statement of
Statements of witnesses:
Banta, Henry M., Former Chairman and Current Director of POGO (Project On Government Oversight), and Member, Lobel, Novins & Lamont
Berman, Robert A., Department of the Interior
Brock, Leonard W.
Burnham, David,
Cavallo, Michael,
Hamel, Charles,
Hunter, David,
Kritzer, Bernard,
Martineck, John, and J. Benjamin Johnson, Jr.
Mintz, Morton
Mitchell, Jack,
Rasor, Dina,
Rutter, Keith
Sims, Marjorie,
Zill, Anne,
Additional material supplied:
Memo from the Department of Energy
Potential for Oil Recovery
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Letter from Lon Packard
Oral deposition of David Hunter
Letter from Daniel Packard
Deposition from Mr. Wagstaff
Letter from Dodge Wells
Transcript from United States District Court, Eastern District of Lufkin, Texas
Letter from Daniel Packard
Hearing held May 18, 2000
Statements of Members:
Cubin, Hon. Barbara, a Representative in Congress from the State of Wyoming
Prepared statement of
Miller, Hon. George, a Representative in Congress from the State of California
Witnesses statements:
Berman, Robert A., Department of the Interior
Dodd, Olen Kenneth, Assistant United States Attorney, Eastern District of Texas
Schiffer, Stuart E, Deputy Assistant Attorney, Civil Division
Prepared statement of
Stockton, Danielle Brian, Executive Director of POGO
Speir, Robert A., Retired, Department of Energy
OVERSIGHT HEARING TO EXAMINE THE LAWS, POLICIES, PRACTICES, AND OPERATIONS OF THE DEPARTMENT OF THE INTERIOR, DEPARTMENT OF ENERGY, AND OTHER AGENCIES PERTAINING TO PAYMENTS TO THEIR EMPLOYEES, INCLUDING PAYMENTS RELATIVE TO MINERAL ROYALTY PROGRAMS AND POLICIES FROM PUBLIC LANDS AND INDIAN LANDS
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THURSDAY, MAY 4, 2000
House of Representatives,
Subcommittee on Energy and Mineral Resources,
Committee on Resources,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:04 a.m., in Room 1334, Longworth House Office Building, Hon. Barbara Cubin, chairman of the Subcommittee, presiding.
STATEMENT HON. BARBARA CUBIN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WYOMING
Mrs. CUBIN. The Subcommittee on Energy and Minerals meets today to examine the laws, policies, practices, and operations of the Department of Interior, Department of Energy, and other agencies pertaining to payments to their employees, including payments relative to mineral royalty programs and policies from public and Indian lands. This oversight hearing will now please come to order.
Taxpayers should get every penny of oil royalties from public domain lands that they have coming, period. I say that up front and I mean that very, very seriously.
Oil royalties are an important subject underlying our work and grounding our jurisdiction. In fact, the Subcommittee on Energy and Mineral Resources has conducted extensive oversight of the Minerals Management Service and their ability to collect royalties for the past four years, since I have been chairman of this Subcommittee, and we have proposed a broad-based royalty in-kind collection system. Had that system that we proposed been in place during the period of the underpayments, that fraud could not have been committed.
I have been active in trying to ensure that every single penny, no more and no less, of royalties that are owed are collected. The cumbersome and costly procedures for collecting the government's share of revenue from production on Federal lands could be drastically reduced if the MMS were to expand the use of the R-I-K program where it now has pilot programs.
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Additionally, Congress has several times barred the MMS from finalizing a proposed rule because of concerns that it would create an enormous uncertainty for lessees associated with shifting the valuation far downstream from the wellhead. But last Fall—and I pointed out that it was the Congress that stopped that, not this Subcommittee—last Fall, the Congress gave the green light to MMS to finalize this rule. My concern continues to be the integrity of the rulemaking process and the integrity of the information received from the Department of Interior in regard to our efforts to reform how oil should be valued for royalty payment purposes.
But our primary focus for today's oversight hearing is different. This oversight review is framed to study the policies, practices, and operations of the Department of Interior and the Department of Energy related to payment by non-government organizations or by individuals to employees of those departments who deal with oil royalty policy.
Consequently, our exercise today examines one instance where a private corporation made payments to department employees involved in Federal royalty policies. Before the word of the payments became known—there was no reporting of those payments and no disclosure of them. After the payments became known, what appears to be an elaborate cover story was developed to hide the true nature of the payment.
Our witnesses today will help us to understand the details of the lawsuit, agreements, and transactions involving payment by the Project on Government Oversight to Mr. Robert A. Berman, an employee of the Department of Interior, and Mr. Robert A. Speir, an employee of the Department of Energy. Those agreements and transactions which resulted in payments of $383,600 to each of these gentlemen with the promise of more to come. Each of them worked at their departments on Federal oil royalty policy, a subject within the jurisdiction of this Subcommittee.
The details of those agreements and transactions will allow members of the Subcommittee to make informed judgments about whether the laws, policies, ethical standards, and procedures that apply to people who work in areas of the Subcommittee's jurisdiction is adequate or whether they need to be
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changed.
We study this example because it illustrates how even good intentions can corrupt the Federal decision making process, and I believe collecting the accurate, the right amount of royalty, is a good intention. This Subcommittee has a duty to monitor that decision making process and ensure that the operation of programs within our jurisdiction is free of undue influence.
Our responsibility under the rules of the U.S. House of Representatives requires us to review this type of matter. Payments of this magnitude by anyone or any group to an agency policy advisor cut to the core of what our system of government should not be about. Will agency employees make judgments subject to the influence of $383,600 in cash or will their counsel be given in the public interest?
We have learned much, but not everything, in the year that the Committee and Subcommittee have studied how these two Federal oil policy employees got paid $383,600 each. This hearing will lay out some of what we think we know and we hope to fill in some details about which we are unsure.
The review and our hearing today begins with the money, the two checks for $383,600. Where did the money come from? How did a private, well-intentioned watchdog corporation with an annual budget of about $300,000 get an extra $767,200 to make the lottery-sized payments to the Federal employees who advised on oil policy?
The answer, in part, will come from our first panel, Mr. Johnson and Mr. Martineck. They brought the original lawsuit in February 1996 for the United States to recover what they described as oil royalty underpayments. Their lawsuit alleged that major oil companies paid too little in royalties to the United States because they set an unfairly low value for the oil pumped from the Federal land. If there are whistleblowers on royalty underpayments in this room, then these gentlemen are it, Mr. Johnson and Mr. Martineck. They had the expertise and they had the knowledge required by law to expose the royalty underpayments, and they did it first.
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Mr. Johnson and Mr. Martineck will help us to understand the basic nature of their lawsuit and how their lawsuit relates to the Project on Government Oversight. They will lead us to the second point, a better understanding of the agreements and understandings between POGO and themselves and POGO and Mr. Berman and Mr. Speir. Remember, the agreements resulted in the transaction that paid nearly three-quarters of a million dollars to Federal employees, with the promise of far more to come after the first checks were out.
Mr. Johnson and Mr. Martineck, I want you to know that I sincerely appreciate your cooperation with the Subcommittee and I appreciate your being here today.
Our second witness, Mr. Kritzer, is a known oil valuation expert, but he did not receive a six-digit public service award. He will help us to understand the underlying issue of oil valuation and what it takes to be an expert, as he certainly is one.
Our third witness is Mr. Brock. POGO recruited him as an expert to testify in POGO's ''nearly identical''—in the words of the Department of Justice—lawsuit to Mr. Johnson's suit. His past statements are a good indication of his qualification and knowledge about oil valuation and royalties. He has profited by about $1 million of the recovery thus far. The big question for him is what did he know that motivated POGO to give him a $1 million jackpot?
Our fourth witness is Keith Rutter, the Assistant Executive Director of POGO. Mr. Rutter kept the records of the organization and wrote checks to Mr. Berman and Mr. Speir. We need to understand what he knows about the agreement and the transaction that led to his signature on these checks.
Our fifth panel is all of the known members of POGO's board of directors who held office when the agreements were made with and the payments made to the Federal employees.
This is an important panel. We need to understand from them what debate and discussion took place when the agreement was made to pay the Federal employees way back in December 1996. We need to understand how deeply the board was involved in the decision making process when the secret agreement was reduced to writing in January 1998 and again in October of 1998.
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We need to understand what role, if any, the Federal employees who are paid by their agencies to advise about oil policy played in injecting POGO into Mr. Johnson's and Mr. Martineck's lawsuit. Remember, this is the lawsuit that ultimately provided the funds to pay the Federal employees.
Were Federal employment positions used to gain knowledge about the Johnson/Martineck sealed lawsuit or about its theories? We understand there were phone calls and notes, but we need to hear from the recipient of these calls. We need to know what the board knew about the role of these Federal employees in this lawsuit. What did the board know of the decision to state that the payments were public service awards? Why was it necessary for POGO to invent this deception? Did the board approve this? Perhaps when the group consulted lawyers about the proprieties of all these things, someone knew the line had been crossed.
As it turns out, the agreement with the Federal employees and the corporation's $383,600 payments to them nearly compromised the integrity of Mr. Johnson's and Mr. Martineck's oil royalty lawsuit, and we have reviewed the court transcript on that issue.
The payments and secret agreements certainly have cast a shadow on the integrity of the Department's efforts to deal with the royalty issue in general. The agreement and the payments leave a broad question in my mind. Just what were those involved in the secret agreements, the transactions, and the payments thinking?
We are here today to determine and to verify the facts. We are interested in nothing more than the facts. Intentions are not relevant to our work here today. Neither are the most noble ends. The facts are what matter. This is what Chairman Young and I want to bring out today.
We spent one year gathering facts without much cooperation from the Project on Government Oversight. I really wonder why a self-described watchdog group is so interested in hiding the facts about this transaction from us. POGO has defied lawful Committee subpoenas. They did so openly and by choice, even when we tried to accommodate their concerns.
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As I said before, this oversight hearing is conducted as part of the Committee on Resources' inquiry into the operations, policies, and practices of the Department of Energy and the Department of Interior, and into rules which were either circumvented or which were inadequate to prevent this apparent and serious conflict of interest. Chairman Young set the parameters of our oversight review in the request letters that launched this investigation and in transmitting the matter to the Subcommittee. We have made this material generally available to everyone. These are matters within the jurisdiction of this Subcommittee.
The scope of this hearing means that we are not—listen very carefully—we are not going to rehash the oil royalty policy rules, the new ones nor the old ones. Although there are many questions related to the new rule, the Congress authorized the agency to publish this rule and the proper venue to sort out those questions is now the courts, or in possibly another oversight hearing of this Committee, but not this hearing. That is not what we are here to talk about today.
The witnesses have been subpoenaed to testify today. I advised each witness weeks ago that they will be sworn in. I expect to hear truthful and complete answers. Witnesses were also advised that they could bring a lawyer to advise them of constitutional rights because the testimony will be sworn. However, only the witnesses will address the Subcommittee. Their lawyers may not address the Subcommittee. This means that I do not want to hear any words from any attorneys who are accompanying their witness.
Lawyers should note that the rules of the House of Representatives restrict counsel to advising the witness in the assertion of constitutional rights and privileges. Lawyers may not sit at the witness table, but I have reserved a seat in the first row so that lawyers may counsel their client if the need arises. Lawyers may not coach their clients. The rules of the House will be enforced firmly and impartially. I will not allow this Subcommittee to be detoured or filibustered by debates or lawyers' antics.
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I remind everyone that this is a Subcommittee hearing that proceeds under Rule XI 2(g)(2) of the Rules of the House of Representatives. Procedures associated with those rules apply. This is an open hearing. This is not an investigative hearing. The Subcommittee has not voted to launch an investigation. We may consider that issue at another date.
Witnesses will not make oral summaries of their testimony, but they may place statements that comply with the rules in the record.
As we begin this hearing, I ask everyone in the audience, the media, Mr. Johnson, and the POGO board, everyone, to undertake the following exercise. Imagine just two changes in what we now know. First, imagine that it was Exxon or Shell or Mobil Oil instead of POGO that made the two $383,600 payments. Imagine that one of those major oil companies called them public service awards and they secretly promised one-third of everything it saved on the oil royalties to two Federal policy advisors. Just imagine that. If that scenario makes the Federal employees silent partners of the oil company, then the POGO payment makes the Federal employees silent partners of POGO. Agency decision makers should not be silent partners of anyone.
I guarantee every person here that if the situation were reversed, instead of the case we now have in front of us today, as witnesses we would have the executives and the board members of that oil company in front of us, and rightfully so.
I now turn to our ranking Democratic member, Mr. Underwood, for any opening statement he might have.
[The prepared statement of Mrs. Cubin follows:]
STATEMENT OF HON. BARBARA CUBIN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WYOMING
The oversight hearing will come to order.
Taxpayers should get every penny in oil royalties from public domain lands that we are owed, period. I say that up front to clear the air.
Oil royalties are an important subject underlying our work and grounding our jurisdiction. In fact, the Subcommittee on Energy and Mineral Resources has conducted extensive oversight of the Minerals Management Service's (MMS) ability to collect royalties for the last four years and has proposed a broad-based ''royalty in-kind'' (R-I-K) system. Had it been in place during the period of the alleged underpayments of royalties made, the fraud could not have occurred.
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I have been active in trying to ensure that every penny-no more, no less—of royalties owed are collected. The cumbersome and costly procedures for collecting the government's share of revenue from production on Federal leases could be drastically reduced if MMS were to expand the use of the RIK method.
Additionally, Congress has several times barred MMS from finalizing a proposed valuation rule because of concerns that it would create an enormous uncertainty for lessees associated with shifting valuation far downstream from the wellhead. But last fall the Congress gave the green light to MMS to finalize its rule.
My concern continues to be the integrity of the rule-making process and the integrity of the information received from the DOI in regard to our efforts to reform how oil should be valued for royalty payment purposes.
But our primary focus for today's oversight hearing is different.
This oversight review is framed to study the policies, practices, and operations of the Department of Interior and the Department of Energy related to payments by non-government organizations or by individuals to the employees of those departments who deal with oil royalty policy.
Consequently, our exercise today examines one instance where a private corporation made payments to department employees involved in Federal royalty policies. Before word of the payments became known, there was no reporting of these payments, and no disclosure of them. After the payments became known, what appears to be an elaborate cover story was developed to hide the true nature of the payments.
Our witnesses today will help us to understand the details of the lawsuit, agreements, and transactions involving payments by the Project on Government Oversight to Mr. Robert A. Berman, an employee of the Department of the Interior, and Mr. Robert A. Speir, an employee of the Department of Energy.
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Those agreements and transactions that resulted in payments of $383,600 to each of these gentlemen with the promise of more to come. Each of them worked at their departments on Federal oil royalty policy, a subject within the jurisdiction of this Subcommittee.
The details of those agreements and transactions will allow Members of this Subcommittee to make informed judgments about whether the laws, policies, ethical standards, and procedures that apply to people who work in areas of the Subcommittee's Jurisdiction are adequate or whether they need to be changed.
We study this example because it illustrates how even good intentions can corrupt the Federal decision making process, and I believe collecting the correct royalty is good. This Subcommittee has a duty to monitor that decision making process and to ensure that the operation of programs within our jurisdiction are free of undue influence.
Our responsibility under the Rules of the U.S. House requires us to review this type of matter. Payments of this magnitude by anyone or any group to an agency policy advisor cut to the core of what our system of government should not be about. Will agency employees make judgments subject to the influence of $383,600 in cash or will their counsel be given in the public interest.
We have learned much—but not everything—in the year that the Committee and Subcommittee have studied how these two Federal oil policy employees got paid $383,600 each. This hearing will lay out some of what we think we know, and we hope to fill in some details about which we are unsure.
The review, and our hearing, begins with the money—the two checks for $383,600. Where did the money come from? How did a private, well-intentioned, ''watchdog'' corporation with an annual budget of about $200,000 get an extra $767,200 to make the lottery-size payments to Federal employees who advised on oil policy?
The answer, in part, will come from our first panel—Mr. Johnson and Mr. Martineck. They brought the original lawsuit in February 1996 for the United States to recover what they described as oil royalty under-payments. Their lawsuit alleged that major oil companies paid too little in royalties to the United States because they set unfairly low values for oil pumped from Federal land. If there are whistle blowers on royalty under payments in this room, these gentlemen are it. They had the expertise and knowledge required by law to expose the oil royalty under payments. They did so first.
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Mr. Johnson and Mr. Martineck will help us to understand the basic nature of their lawsuit and how their lawsuit relates to the Project on Government Oversight.
They will lead us to the second point—a better understanding of the agreements and transactions between POGO and themselves and POGO and Mr. Berman and Mr. Speir. Remember, the agreements resulted in the transaction that paid nearly three-quarters of a million dollars to Federal employees, with the promise of far more to come after the first checks were out.
Mr. Johnson and Mr. Martineck, I appreciate your cooperation with the Subcommittee and I appreciate you being here today.
Our second witness, Mr. Kritzer, is a known oil valuation expert, but he did not receive a six digit ''public service award.'' He will help us to understand the underlying issue of oil valuation and what it takes to be an expert.
Our third witness is Mr. Brock. POGO recruited him as an expert to justfy, in the words of the Department of Justice, its ''nearly identical'' lawsuit to Mr. Johnson's lawsuit. His past statements are a good indication of his qualifications and knowledge about oil valuation and royalties. He has profited by about $1 million of the recovery thus far. The big question for him is what did he know that allowed him to hit the $1 million Jackpot?
Our fourth witness is Keith Rutter, the Assistant Executive Director, POGO. Mr. Rutter kept the records of the organization and he wrote the checks to Mr. Berman and Mr. Speir. We need to understand what he knows about the agreement and transaction that led to his signature on the checks.
Our fifth panel is all of the known members of POGO's board of directors who held office when the agreements were made with, and the payments made to, the Federal employees.
This is an important panel. We need to understand from them what debate and discussion took place when the agreement was made to pay the Federal employees way back in December 1996. We need to understand how deeply the board was involved in the decision-making process when the secret agreement was reduced to writing in January 1998 and again in October 1998.
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We need to understand what role, if any, the Federal employees who are paid by their agencies to advise about oil policy played in injecting POGO into Mr. Johnson's and Mr. Martineck's lawsuit. Remember, this is the lawsuit that ultimately provided the funds to pay the Federal employees.
Were Federal employment positions used to gain knowledge about the Johnson/Martineck sealed lawsuit or about its theories? We understand there were phone calls, and notes, but we need to hear from the recipient of the calls. We need to know what the board knew about the role of these Federal employees in this lawsuit.
What did the board know of the decision to state that the payments were ''public service awards?'' Why was it necessary for POGO to invent this deception? Did the board approve of this? Perhaps when the group consulted lawyers about the propriety of all of these things, someone knew the line had been crossed.
As it turns out, the agreement with the Federal employees and the corporation's $383,600 payments to them nearly compromised the integrity of Mr. Johnson's and Mr. Maritneck's oil royalty lawsuit, and we have reviewed the court transcript on that issue.
The payments and secret agreements certainly have cast a shadow on the integrity of the Department's efforts to deal with the royalty issue in general.
The agreement and payments leave a broad question in my mind, just what were those involved in the secret agreements, the transaction, and the payments thinking?
We are here today to determine and verify facts. We are interested in nothing more than the facts. Intentions are not relevant to our work, neither are the most noble ends. The facts matter. That is what Chairman Young and I want.
We spent one year of gathering facts, without much cooperation of the Project on Government Oversight. I really wonder why a self-described watchdog group is so interested in hiding the facts about this transaction from us. POGO has defied lawful Committee subpoenas. They did so openly and by choice, even when we tried to accommodate their concerns.
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As I said before, this oversight hearing is conducted as part of the Committee on Resources' inquiry into the operations, policies, and practices of the Departments of the Interior and Energy, which were either circumvented or which were inadequate to prevent this apparent and serious conflict of interest. Chairman Young set the parameters of our oversight review in record request letters that launched this investigation and in transmitting the matter to the Subcommittee. We have made this material generally available. These matters are within the jurisdiction of the Subcommittee.
The scope of this hearing means that we are not—listen carefully—we are not going to re-hash the oil royalty policy rules, new or old. Although there are many questions related to the new rule, the Congress authorized the agency to publish this rule and the proper venue to sort out those questions out is the courts or in an oversight hearing called for that purpose.
The witnesses have been subpoenaed to testify today. I advised each witness weeks ago that they will be sworn in. I expect to hear truthful and complete answers. Witnesses were also advised that the could bring a lawyer to advise them of constitutional rights because the testimony will be sworn. However, only the witnesses will address the Subcommittee.
This means I do not want to hear any words from any attorneys who are accompanying witnesses. Lawyers should note that the Rules of the House of Representatives restrict counsel to advise the witness in the assertion of constitutional rights and privileges. Lawyers may not sit at the witness table, but I have reserved a seat in the first row so that lawyers may counsel their client if need be. Lawyers may not coach their clients. The Rules of the House will be enforced firmly and impartially. I will not allow this Subcommittee be detoured or filibustered by debates over lawyer antics.
I remind everyone that this is a Subcommittee hearing that proceeds under Rule XI 2(g)(2) of the Rules of the House of Representatives. Procedures associated with those rules apply. This is an open hearing. This is not an investigative hearing. The Subcommittee has not voted to launch an investigation. We may consider the issue at a later date.
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Witnesses will not make oral summaries of their testimony, but may place statements that comply with the rules in the record.
As we begin this hearing, I ask everyone, the audience, the media, Mr. Johnson, the POGO board . . . everyone, to undertake the following exercise. Imagine just two changes in what we know now. First, imagine that it was Exxon, or Shell, or Mobil Oil instead of POGO that made two $383,600 payments, called them ''public service awards,'' and secretly promised one-third of everything it saved on oil royalties to two Federal oil policy advisors. Just imagine that. If that scenario makes the Federal employees silent partners of the oil companies, then the POGO payments makes the Federal employees silent partners of POGO. Agency decision-makers should not be silent partners of anyone.
I guarantee every person here that if the situation were reversed, instead of the cast we have in front of us today as witnesses, we would have the executives and board members of that oil company in front of us. And rightfully so.
Mr. UNDERWOOD. Mr. Miller will make the opening statement for our side.
STATEMENT OF HON. GEORGE MILLER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Mr. MILLER. I thank the gentleman for yielding. Madam Chair and fellow members, I am attending today's oversight hearing to express my very strong concern about the manner in which this investigation is being handled. I believe that the rights of the witnesses have been abused in the process of this hearing.
Today, the Committee is investigating ostensibly whether or not a nonprofit group and two Federal employees violated any regulations or law when the group made a public service award to employees for their work in exposing serious underpayment of Federal royalties owed to American taxpayers by numerous large oil companies. The Committee is not investigating the fact that the oil companies have regularly underpaid hundreds of millions of dollars of royalties that are owed to the American taxpayer.
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This Committee has been used time and again on behalf of special interests who find themselves on the wrong side of the law. Once again today, we find the Committee coming to the aid of the oil industry that has already settled numerous cases out of court for hundreds of millions of dollars because they underpaid royalties that they rightfully owed the American taxpayer. Members of this Committee and others in the House and Senate tried for years to delay the administration's method of determining the proper royalty payments, and now they have launched an investigation against those who brought those underpayments to light.
Let me be clear, no one is condoning the potential misconduct that is being alleged. If any wrongdoing is discovered, those responsible should be held accountable. But the alleged wrongdoing is already under investigation by the proper authorities at the Department of Justice and Interior.
When this Committee investigation was started last June over the objections of the Department of Justice, the Office of Inspector General, the Department of Interior, and the Democratic members of the Committee, the Subcommittee chair said, ''It is not the intent of the Committee to intervene in the criminal investigation at all, but we do have a need to know what is going on because we have things in front of us as far as oil valuation is concerned that are the purview of the Committee.''
Right now, the administration, the Minerals Management Service, have some regulations and proposed regulations that should not go into effect because we do not know whether this payment of money or anything to do with the new regulations. We just need to know whether the two people involved had any influence in MMS. The administration has testified that these two individuals did not effect the new regulations, but instead of dropping the investigation, this Committee has gone off and appears on a witch hunt or, at best, tangent without any additional direction or input from members of the Committee. We now find ourselves embroiled in a private dispute between litigants who successfully sued the oil companies for defrauding the American people of hundreds of millions of dollars. Let me describe some of the actions by the Majority that should concern every objective member of this Committee.
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Dina Rasor, a member of the board of the Project on Government Oversight, was contacted by Mr. Casey of the Majority staff who reportedly dismissed a repeated request to consult with her attorney. Ms. Rasor is a private investigator more than a little familiar with the appropriate interrogation methods and witnesses' rights. Mr. Casey reportedly became belligerent when Ms. Rasor insisted on speaking with her attorney and the conversation was terminated. Soon thereafter, Ms. Rasor received a subpoena to appear today. She was not afforded an opportunity to voluntarily appear as a witness.
Further, due to an error by the Majority staff, the subpoena was sent to the Southern California Branch of the U.S. Marshals Service and was not properly delivered to Ms. Rasor, who lives in my Bay Area district, until April 21. The Majority did not inform Ms. Rasor nor the other out-of-town witnesses they subpoenaed that under House rules, the Committee must pay their actual travel expenses and the Federal rate of per diem. My understanding is that the Majority staff, in fact, refused to pay these expenses until my staff cited the House rules.
Only on April 26, last Wednesday, did the Majority fully concede the point, and even then, they refused to reimburse actual expenses and instead offered each witness the value of a government rate e-ticket. Of course, having first been informed that the Committee would not pay their travel expenses, most of the witnesses had already purchased their own or made their own travel arrangements. The Majority staff told my constituent, Ms. Rasor, to take the overnight red-eye from San Francisco to Washington to appear before the Committee and return to California the same day, presumably to avoid having to pay the per diem expenses.
This not only ignores the clear rules of the House but comes close to harassing witnesses that the Majority summoned to appear in the first place. The Committee should not force witnesses that it has compelled to testify, whom it has misinformed about the conditions of the testimony, to bear the financial brunt of the Committee incompetence. I ask the Committee reimburse her actual transportation costs and regular government per diem expenses consistent with the House rules for any witness that is subpoenaed here today.
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I also submit for the record the correspondence from POGO's attorney, Mr. Stanley Brand, former counsel to the House, outlining his objections to the manner in which the inquiry is being conducted, the latest of which is the chair's refusal to allow witnesses time to make oral statements. I find it appalling that the Committee would summon these people to participate in clearly adversarial proceedings, then deny them the opportunity to make statements on their own behalf.
[The information of Mr. Miller follows:]
STATEMENT OF HON. GEORGE MILLER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Madame Chair and fellow Members, I am attending today's oversight hearing to express my very strong concern about the manner in which this investigation is being handled. I believe the rights of witnesses have been abused in the process of this hearing and I believe the Committee has been derelict in its investigative responsibilities.
Today, the Committee is investigating ostensibly whether a non-profit group and two Federal employees violated any regulations or laws when the group made a public service award to the employees for their work in exposing serious under-payments of Federal royalties owed to American taxpayers by numerous large oil companies.
The Committee is not investigating the fact that oil companies have regularly underpaid hundred of millions of dollars in royalties owed to the taxpayer.
This Committee has been used time and again on behalf of special interests who find themselves on the wrong side of the law.
Once again today, we find the Committee coming to the aid of the oil industry that has already settled numerous cases out of court for hundreds of millions of dollars because they underpaid royalties to the taxpayer. Members of this Committee and others in the House and Senate tried for years to delay the Administration's new method of determining proper royalty payments. And now they have launched this investigation against those who brought the under-payments to light.
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Let me be clear. No one is condoning the potential misconduct that is being alleged.
If any wrongdoing is discovered, those responsible should be held accountable. But, the alleged wrongdoing is already under investigation by the proper authorities at the Departments of Justice and Interior.
When this Committee's investigation was started last June, over the objections of the Department of Justice, the Office of the Inspector General of the Department of the Interior and the Democratic Members of this Committee, the Subcommittee Chair said,
''It isn't the intent of the Committee to intervene in the [criminal investigation] at all, but we do have a need to know what is going on because we have things in front of us as far as oil valuation is concerned that are the purview of this Committee. Right now the Administration and the Minerals Management Service [have] some regulation or proposed regulation that should not go into effect . . . because we don't know whether this . . . payment of money has anything to do with the new regulations. We just need to know whether the two people involved had any influence on the MMS.''
The Administration has testified that these two individuals did not effect the new regulations but instead of dropping the investigation, this Committee has gone off on what appears to be a witch hunt or at best a tangent—without any additional direction or input from the Members of this Committee.
And we now find ourselves embroiled in a private dispute between litigants who successfully sued the oil companies for defrauding the American people of hundreds of millions of dollars.
Let me describe some of the actions by the Majority that should concern every objective Member of this Committee.
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Dina Rasor, a member of the Board of the Project on Government Oversight, was contacted by Mr. Casey of the Majority staff who reportedly dismissed her repeated requests to consult with her attorney.
Ms. Rasor is a private investigator, and more than a little familiar with appropriate interrogation methods and witness rights. Mr. Casey reportedly became belligerent when Ms. Rasor insisted that he speak with her attorney, and the conversation was terminated. Soon thereafter, Ms. Rasor received a subpoena to appear today. She was not afforded an opportunity to voluntarily appear as a witness. Further, due to an error by the Majority staff, the subpoena was sent to a Southern California branch of the U.S. Marshals' Service, and was not properly delivered to Ms. Rasor, who lives in my Bay Area district, until April 21.
The Majority did not inform Ms. Rasor, nor the other out-of-town witnesses they subpoenaed, that under House Rules, the Committee must pay their actual travel expenses and a Federal-rate per diem. My understanding is that the Majority staff in fact refused to pay these expenses until my staff cited the House Rules.
Only on April 26—last Wednesday—did the Majority finally concede the point, and even then, they refused to reimburse actual expenses and instead offered each witness the value of a government-rate ''e-ticket''. Of course, having first been informed the Committee would not pay their travel expenses, most of the witnesses had already made their own travel arrangements.
The Majority staff told my constituent, Ms. Rasor, to take the overnight ''red-eye'' from San Francisco to Washington, appear before the Subcommittee, and return to California the same day, presumably to avoid having to pay per diem expenses.
This not only ignores the clear Rules of the House, but comes close to harassing witnesses that the Majority summoned to appear in the first place!
The Committee should not force witnesses it has compelled to testify, and whom it has misinformed about the conditions of that testimony, to bear the financial brunt of the Committee's incompetence.
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I ask that the Committee reimburse the actual transportation cost and regular government per diem expenses, consistent with the House Rules, for any witness it has subpoenaed to be here today. I also submit, for the record, the correspondence from POGO's attorney, Mr. Stanley Brand—former Counsel to the House—outlining his objections to the manner in which this inquiry has been conducted—the latest of which is the Chair's refusal to allow the witnesses time to make oral statements.
I find it appalling that the Committee would summon these people to participate in a clearly adversarial proceeding and then deny them the opportunity to make a statement on their own behalf.
As I said at the outset, I cannot help but wonder why the Committee is expending substantial amounts of time and money to investigate people who exposed hundreds of millions of dollars in royalty under-payments, but has utterly failed to focus on those who illegally shortchanged the taxpayers in the first place!
Mobil settled its False Claims suit last year for $45 million. Altogether, the oil companies have already coughed up over $300 million dollars in settlement costs.
But where are the witnesses from the oil industry today? When is the Committee going to focus on the systematic cheating of the American taxpayer?
The only attention this subject has received so far is the Majority's ceaseless promotion of its sham Royalty-In-Kind scheme which the Department of the Interior and the General Accounting Office say would cost taxpayers $330 million a year.
Madame Chairwoman, I would hope this Committee would devote at least as much energy and money to investigate the hundreds of millions of dollars the oil industry has underpaid the Federal taxpayer, state governments, Indian tribes and school children of this country as it has investigating the people who revealed those under-payments in the first place.
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Mr. MILLER. As I said at the outset, I cannot help but wonder why the Committee is expending substantial amounts of time and money to investigate people who exposed hundreds of millions of dollars in royalty underpayments but have utterly failed to focus those on who illegally shortchanged the taxpayers in the first place. Mobil settled its false claims suit last year for $45 million. Altogether, the oil companies have already coughed up over $300 million in settlement costs. But where are the witnesses from the oil industry today? When will the Committee focus on the systematic cheating of the American taxpayer? The only attention this subject has received so far is the Majority's ceaseless promotion of the sham royalty-in-kind scheme which the Department of Interior and the General Accounting Office say would cost the taxpayers $330 million a year.
Madam Chairwoman, I would hope that this Committee would devote at least as much energy and money to investigate the hundreds of millions of dollars the oil industry has underpaid the Federal taxpayer, State governments, Indian tribes, and school children of this country as it is investigating the people who revealed those very same underpayments in the first place.
Mrs. CUBIN. I would like to remind the ranking member on the Committee that this underpayment by the major oil companies apparently went on for at least ten years before I became chairman of this Subcommittee, and ever since I have been chairman of this Committee, for the last three-and-a-half years, we have recognized the problem and we have sought a solution. While Mr. Miller did not like our proposed solution, if he is being honest, he should be hard pressed to say that we have not recognized the problem and sought a solution.
But I would like to remind him, that is not what this hearing is about. What this hearing is about is examining the policies, the practices of the Department of Interior and the Department of Energy to see how this sort of payment from a nongovernmental agency, from a private corporation, could be made to employees of those departments while they were advisors in making oil royalty rules.
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So with that, I would like to recognize Mr. Thornberry for two motions.
Mr. THORNBERRY. Madam Chairman, under Clause 2(J)(2)(b) of Rule XI of the Rules of the House of Representatives, I move that you, myself, Mr. Tancredo, Mr. Brady, Mr. Gibbons, and Minority members of the Committee be allowed to question the witnesses, Mr. Johnson and Mr. Martineck, for equal periods of time, not to exceed 30 minutes.
Mrs. CUBIN. Without objection.
Mr. MILLER. Reserving the right to object, if you would just explain, that is 30 minutes a person or are you going to split that time on your side——
Mrs. CUBIN. It is per side.
Mr. THORNBERRY. It is 30 minutes a side.
Mr. MILLER. [continuing] to be equally divided?
Mr. THORNBERRY. It is 30 minutes a side, but it just avoids dealing with the five-minute rule. So it can be longer blocks of time.
Mr. MILLER. And that is for each panel, each witness?
Mrs. CUBIN. That is for each witness.
Mr. MILLER. So on the last panel, you have, what, five witnesses?
Mrs. CUBIN. This is for the first panel only.
Mr. MILLER. You are doing this just for the first panel?
Mr. THORNBERRY. That was my motion, just for the first panel.
Mrs. CUBIN. Do you withdraw your right to object?
Mr. MILLER. No objection. Madam Chair, I would like to request that our distinguished colleague, Carolyn Maloney from New York, be allowed to join us on the dais.
Mrs. CUBIN. I have no objection.
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Mr. MILLER. Thank you.
Mr. THORNBERRY. Madam Chair, under Clause 2(J)(2)(b) of Rule XI, the Rules of the House of Representatives, I move that Tom Casey of the Majority staff and a staff member designated by the Minority each be allowed to question the witnesses, Mr. Johnson and Mr. Martineck, for equal periods of time, not to exceed 30 minutes each.
Mrs. CUBIN. Is there any objection?
Mr. MILLER. Reserving the right to object, do this again? So that is an additional 30 minutes?
Mr. THORNBERRY. For the staff to question the two witnesses in the first panel.
Mr. MILLER. Well, the Minority was not informed of this. I do not object to it, but I wish—you know, it is just incredible how you continue to run this Committee and you do not consult with us on these kinds of procedures, but that is what is wrong with this hearing from the beginning in any case.
Mrs. CUBIN. Mr. Miller, we have genuinely tried to share every single piece of information we have had and——
Mr. MILLER. Do not do that.
Mrs. CUBIN. Well, it is.
Mr. MILLER. Do not insult me.
Mrs. CUBIN. It is, because——
Mr. UNDERWOOD. For clarification, what is the total amount of time we are going to spend on the first panel?
Mrs. CUBIN. The total amount of time on the first panel will be one hour divided for questioning of the staff——
Mr. MILLER. By members.
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Mrs. CUBIN. [continuing] 30 minutes by members, right, and then one half-hour divided into—or 15 minutes on each side.
Mr. MILLER. Reserving the right to object, let me ask, since we were not notified of the staff request, if the members on this side want to use that 30 minutes, that we be allowed to use that 30 minutes.
Mrs. CUBIN. Absolutely. And the chair would like to welcome Ms. Maloney to the dias and hope that you heard the opening statements and understand what the scope and view of this hearing is.
Now I would like to introduce our first panel, Mr. John Martineck and J. Benjamin Johnson, Jr. Would you please come forward and sit at the table.
I would like to ask the panel to remain standing. The witnesses had previously been advised of the Subcommittee's right to place the witnesses under oath. Would you please raise your right hands.
Do you solemnly swear or affirm under the penalty of perjury that the responses given and the statements made will be the truth, the whole truth, and nothing but the truth?
Mr. MARTINECK. Yes.
Mr. JOHNSON. Yes.
Mrs. CUBIN. I would like to remind the witnesses that there will be no opening statement from the panel today. Throughout the scope of the questioning, I think that we will be able to bring out a lot of information about you, your expertise, and what not. So thank you very much for being here, and also thank you for cooperating with our subpoenas for this appearance and for cooperating in the subpoenas for the important records that you gave us.
Mr. Johnson and Mr. Martineck, what is your background in the oil industry, both of you?
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STATEMENTS OF JOHN MARTINECK AND J. BENJAMIN JOHNSON, JR.
Mr. MARTINECK. My background started on the financial end with ARCO Oil and Gas. I recorded the revenues as they came in from the other oil companies, followed up with a long-term assignment in the marketing end of the business that started in 1985, and I have been working in the marketing business ever since that time.
Mrs. CUBIN. Mr. Johnson?
Mr. JOHNSON. Yes, I am a petroleum engineer by background. I worked for Atlantic Richfield Company, or ARCO Oil and Gas, since the late 1970s doing various projects, exploring, developing oil reserves around the United States. In 1991, I took the position of senior manager of crude oil marketing for the Eastern half of the U.S. for ARCO. At that time, I learned about the oil marketing systems and have worked in oil marketing since that time.
Mrs. CUBIN. While at ARCO as consultants, did you gain firsthand experience in how major oil producers, marketers, and refiners trade and price oil pumped from Federal leases?
Mr. MARTINECK. Yes, absolutely. The first assignment that I had in the marketing side was to work the offshore marketing area. I started as an area representative there, where we actually went out and negotiated with each one of these companies, later taking on an assignment for managing the group that did all of the offshore marketing operations for ARCO. At the time that Benjie came to the organization, he took over the job that I had in that area and he continued that assignment for two years after I had left it.
Mr. JOHNSON. By the time the two of us were co-managing marketing for ARCO, we were the final approvers for all of the marketing contracts with all of the other major—well, all of the oil companies in the United States for oil, not including California and Alaska.
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Mrs. CUBIN. In the world of lawyers, economists, Federal and State officials concerned with oil royalties, the names of John Martineck and Benjie Johnson and Summit Resources were well known and respected, even before your False Claims Act suit was made public, isn't that true?
Mr. JOHNSON. Yes.
Mrs. CUBIN. You do not have to be modest. Thank you. We know that was true.
Gentlemen, how did you conclude that a False Claims Act suit was necessary to address the underpayment of Federal oil royalties?
Mr. JOHNSON. Well, we had spoken with government employees, Federal employees of the MMS. We had presented seminars to State oil royalty people and we provided that information freely from about 1994 through 1995. We worked as consultants on some projects, as well, and it became obvious to us that nothing was being done to recover previous oil royalty underpayments by the Federal Government. That is when, in early 1996, we decided to file the False Claims Act case.
Mrs. CUBIN. When and where was your suit filed?
Mr. JOHNSON. The suit was filed in Lufkin, Texas, on early January, or February, I guess, 1996.
Mrs. CUBIN. And where? You did say where that was?
Mr. JOHNSON. It was in Lufkin, Texas.
Mrs. CUBIN. Thank you. When False Claims Act suit cases are filed, it is done in secret, is it not?
Mr. JOHNSON. Yes. This case was filed under seal.
Mrs. CUBIN. And what is the reason for that secrecy, because secrecy is unusual in Federal courts.
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Mr. MARTINECK. It gives the government time to do their own private investigation before it becomes public, to decide whether or not they are going to intervene in the case and to decide whether or not there is any merit behind the case.
Mrs. CUBIN. Mr. Johnson, during the period of court-imposed secrecy in your case, you learned that Danielle Brian, who is the Executive Director of POGO, appeared to have learned of the case, did you not?
Mr. JOHNSON. That is correct.
Mrs. CUBIN. Would you please tell the Subcommittee how you reached that conclusion?
Mr. JOHNSON. Well, in September—in fact, on September 23 of 1996, I received a phone call from Danielle and she—we had spoken before, so this was not the first time I had ever spoken with her, but in this phone call, she informed me that she had heard that John Martineck and I had filed a qui tam, or False Claims Act, case, and she proceeded to want to ask me some questions about it. Well, I said, first of all, if we had, we would not be able to talk about it. It would be under seal. And Danielle at that time said, ''Okay, do not talk, just listen,'' and then proceeded to give me the name and the phone number of a lawyer she recommended that we work with. She told me that there were some other government employees who were thinking about joining or working on a lawsuit, qui tam, False Claims Act case, and she suggested that we call this lawyer.
Mrs. CUBIN. Mr. Martineck, you and Mr. Johnson are business partners and you are also co-relators in the case that was still secret at the time of that call. Did Mr. Johnson tell you about Danielle Brian's phone call of September 23, 1996?
Mr. MARTINECK. Yes, absolutely. He called me immediately after receiving that call and was surprised that some one had found out that our case was out there.
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Mrs. CUBIN. How did you feel about that? Was that disturbing to the two of you?
Mr. JOHNSON. We were surprised, knowing that it was under seal.
Mrs. CUBIN. Mr. Johnson, in answering a subpoena for records required by this inquiry, you withheld a memo to your attorneys about the substance of that September 23, 1996, phone conversation with Ms. Brian. The memo was withheld under a claim of attorney-client privilege. The attorney-client privilege was devised by the courts to serve purposes which are valid but germane only to the judicial branch of government and their objectives. It is not a privilege that is established by the Constitution. It is not binding on the legislative branch of the Federal Government.
Because that phone call is important to this inquiry, I would ask you to produce it now, because the record was produced under subpoena, and because I overruled your claim of privilege, producing it will not prejudice a claim of privilege to protect that document in litigation. Do you have the document with you now?
Mr. JOHNSON. Yes, I do.
Mrs. CUBIN. May I have it, please?
Mr. MILLER. Madam Chairman, if I might——
Mrs. CUBIN. Mr. Miller?
Mr. MILLER. I just think that for you to——
Mrs. CUBIN. Stop the clock, the questioning clock.
Mr. MILLER. Stop the questioning clock?
Mrs. CUBIN. Yes, stop the questioning clock, not Mr. Miller.
Mr. MILLER. For you to sit here and assure what a court may or may not do or what a privilege may not be honored I do not think is accurate. I do not think you can do that. You may believe that, but that does not necessarily mean that that will be the case, that that will be a determination that a judge at some future time will make. I just think the witnesses and others ought to know that, that that may or may not be the case.
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Mrs. CUBIN. I believe the information that I presented to you is, in fact, correct. So did staff pick up the—would staff——
Mr. MILLER. Once again, this Committee finds itself constantly dabbling in other people's court cases and releasing testimony and evidence that is asserted under privilege or for other reasons, and constantly is releasing that evidence. We ought to go into executive session. You ought to receive the memo, if that is what you want to do. Obviously, you have the right to do that. But it ought to be done under some efforts not to screw up other people's litigation, whether it is the Department of Justice or whether it is the private litigation of these individuals or others.
Mrs. CUBIN. Mr. Miller——
Mr. MILLER. You know, it is a wonderful role this Committee plays of just wandering around the justice system when your sense of——
Mrs. CUBIN. Reclaiming my time, I certainly appreciate that you do not like the facts that are coming out and going——
Mr. MILLER. It is not about the facts, it is about——
Mrs. CUBIN. Mr. Miller——
Mr. MILLER. [continuing] it is about protecting——
Mrs. CUBIN. This Committee will stay in order.
Mr. MILLER. This is not about the facts.
Mrs. CUBIN. This Committee will stay——
Mr. MILLER. This is about the process and the procedure of this Committee.
Mrs. CUBIN. Reclaiming my time——
Mr. MILLER. This is about the process and the procedure and the fairness of this Committee and whether or not people's rights are going to be protected or whether you are going to ride roughshod——
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Mrs. CUBIN. Mr. Miller, the document was subpoenaed——
Mr. MILLER. [continuing] over individuals' rights.
Mrs. CUBIN. The tapes were subpoenaed and this Committee has the right to get them.
Mr. MILLER. You guys use subpoenas to take a drink of water, I mean, you know——
Mrs. CUBIN. The legislative branch of the Federal Government is not bound by attorney-client privilege.
Mr. MILLER. I appreciate that, but you ought to do what you can——
Mrs. CUBIN. Will the staff please——
Mr. MILLER. [continuing] to protect people's rights and fairness in other proceedings.
Mrs. CUBIN. [continuing] please pick up the—would the staff please give me the paper.
Mr. JOHNSON. Madam Chairman, we are producing this without——
Mrs. CUBIN. Thank you.
Mr. JOHNSON. [continuing] hopefully, without waiving other privilege——
Mrs. CUBIN. Absolutely.
Mr. JOHNSON. [continuing] and because we are being ordered to do so.
Mrs. CUBIN. I believe you are absolutely correct and I think that your own attorneys can advise you whether or not you are——
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Mr. MILLER. Judge Judy is going to rule next, but, I mean, this is——
[Laughter.]
Mrs. CUBIN. A sense of humor is helpful.
Mr. INSLEE. Madam Chair?
Mrs. CUBIN. Yes?
Mr. INSLEE. Madam Chair, over here, may I be recognized just for a minute?
Mr. MILLER. May I have a copy of that?
Mrs. CUBIN. Yes, you can have a copy, and you can be recognized, Mr. Inslee, when your side has the time.
Mr. INSLEE. It has a bearing on the use of this document, if I may ask the chair a question.
Mrs. CUBIN. No. When you have the time, when your side has the time, you can bring up all the information that you want.
Mr. MILLER. Madam Chairman, again——
Mr. INSLEE. But Madam Chair, I have a question.
Mr. MILLER. [continuing] this is about a process and a procedure of this Committee. A member of the Committee is asking you about procedure and the action that you are taking.
Mrs. CUBIN. I would ask the staff to keep track of the time that the other side is using.
Mr. MILLER. It is not related to the—subtract it from our time.
Mrs. CUBIN. Mr. Miller, you are out of order——
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Mr. MILLER. If we have got to lose a bit of our time to protect people's rights——
Mrs. CUBIN. [continuing] and subtract the time.
Mr. MILLER. [continuing] we are fully prepared to do that.
Mrs. CUBIN. We will let Mr. Miller have his tantrum on their time, not ours.
Mr. INSLEE. Madam Chair, may I be—I would like to ask the chair a question about your intentions.
Mrs. CUBIN. Mr. Inslee, we are in the middle of questioning the witnesses. When you have time, you can ask the chair a question.
Mr. INSLEE. Madam Chair, you are about to violate——
Mrs. CUBIN. Mr. Inslee, you are out of order.
Now I would like to go on——
Mr. MILLER. This Committee is out of order.
Mr. BRADY. Madam Chairman, if I may ask, because this is a serious subject, we do have a lot of ground to cover today. While the theatrics are very entertaining, I would think, just from a decorum standpoint, if members would ask to be recognized, then wait to be recognized to ask that question, I really think we could get to the heart of the matter much faster than that.
Mr. MILLER. That is what Mr. Inslee just asked——
Mr. BRADY. And there is another example.
Mr. MILLER. That is what Mr. Inslee just asked.
Mrs. CUBIN. Thank you, Mr. Brady.
Mr. INSLEE. Madam Chair, may I be recognized?
Mr. MILLER. We would be happy to live by those rules.
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Mrs. CUBIN. We will continue on.
Mr. BRADY. I do not think you have to be subject to——
Mr. MILLER. Apparently I am not going to be recognized——
Mr. BRADY. If I may reclaim my time, Mr. Miller, this issue is not about fairness. This is about harassing the chairman for trying to get to the truth. Now, if we will all hold our questions——
Mr. MILLER. This is about a process.
Mr. BRADY. Yes, it is, so let us honor the process of this Committee and give the chairwoman a chance to get this thing moving and ask those questions——
Mr. MILLER. So under your——
Mr. BRADY. And I still have my time, Mr. Miller, if you would wait for me to finish, and you know better. You know that we need to have decorum, so let us rely upon a fair process to go through this.
Mr. INSLEE. Madam Chair, I have a——
Mrs. CUBIN. There was an opportunity for the Minority to object to the procedure when we set it out at the beginning of the hearing, which was 30 minutes questioning time that belongs to one side, the Majority side, and then 30 minutes which belongs to the Minority side. I can guarantee you that the Majority side will not be interrupting, playing games, being rude and unprofessional during their questioning period and I would ask the same of the Minority side.
Mr. INSLEE. Madam Chair, may I be recognized for a serious question of the chair——
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Mrs. CUBIN. Now, I would like to go on.
Mr. INSLEE. [continuing] regarding the use of this document? Please, let me ask you the question.
Mrs. CUBIN. Because, Mr. Inslee, you were not here at the beginning of the hearing. Had you been, you could have posed that then. Unfortunately, you were not. When your time comes, you can make any point and ask any question that you wish.
Mr. INSLEE. It may be moot.
Mrs. CUBIN. I am going to proceed with my questioning, Mr. Inslee.
Mr. MILLER. Madam Chairman, he would not have been able to pose that question——
Mrs. CUBIN. Because the phone call——
Mr. MILLER. [continuing] because he did not know you were going to ask for this document which essentially waives their privilege. So now that you have done that——
Mrs. CUBIN. The document was subpoenaed and we have provided all of the subpoena requests to the other side. If he is not prepared, I cannot—that is his responsibility, not mine. Now, I am going to continue on asking questions. Mr. Johnson——
Mr. INSLEE. May I make a parliamentary inquiry?
Mrs. CUBIN. [continuing] in a sealed Federal court hearing last November, you also gave testimony describing a series of phone calls initiated by Bob Berman, the Interior Department employee who is party to the agreement with POGO and who was paid $383,600 from POGO's share of the first settlement in your suit. Will you tell the Subcommittee in detail about those calls?
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Mr. JOHNSON. The first call I received from Robert Berman was on April 11, 1996. I just receive a phone message from him. I returned the call the following day. In that conversation, Mr. Berman first told me that he was ''the watchdog'' or a watchdog for the MMS, that he was not in the Minerals Management Service but he was in the Interior Department. He told me that he had heard of Mr. Martineck's and my work in oil royalty issues and he asked pointedly how much we thought the underpayments could have been. In particular, he told me that they had been investigating underpayments in California, but there had not been investigations concerning east of the Rockies or non-California and he knew that we had spoken about that type of underpayment.
I did not give him any specific numbers, especially with regard to Federal oil royalty underpayments, but I did tell him what had been publicly stated in public hearings before, that the underpayment number was generally somewhere between 3 and 10 percent of the total revenue received on the oil. That was the end of that conversation.
Over the remaining year and a half, I spoke with Mr. Berman several times. He called. He told me that he had received information that we had given the State of New Mexico in some work, consulting work we had done for the State of New Mexico. He told me that he had been assigned to develop new oil royalty payment regulations and he asked me about how oil was marketed and how crude oil could be valued. In particular, he wanted to know how the value of crude oil could be hidden and have not been discovered to date.
I spent, over the course of a year and a half, I spent several hours on the phone with Mr. Berman, I guess in total, explaining to him many of the intricacies of oil marketing and how that worked. I sent him a fax, a long fax with graphics and I sent him a spreadsheet showing some of the financial calculations.
He called me on June 12, 1996, and he told me that he was going to be testifying to Congress shortly thereafter—I believe it was June 17, 1996—and he asked for, again, a reiteration of what I thought the underpayments were on the private side, not the Federal side, and what we had seen. He called me then later after his testimony to Congress in July and he told me that his testimony to Congress had been based upon the values that I had given him, the 3 to 10 percent of the revenue. He had simply taken the revenue and multiplied it by 3 to 10 percent to come up with the ''alleged underpayments.''
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I spoke with him several times after that. The last record of a conversation I have with Mr. Berman was on June 2 of 1997, and that was just a quick call and that was the last record I have of any conversation with him.
Mrs. CUBIN. Thank you. At this point, without objection, I understand that—well, certainly. The Committee subpoenaed your calendar and entries about these calls, is that correct?
Mr. JOHNSON. That is correct.
Mr. INSLEE. Madam Chair, may I be recognized for stating an objection? I have a sincere issue I would like to raise with the chair if you will allow me ten seconds. I would like to make a parliamentary inquiry whether the chair intends to keep under seal for executive purposes of the Committee any of these documents which the witnesses have described as subject to some privilege so that the privileges will not be——
Mrs. CUBIN. That is not——
Mr. INSLEE. Let me finish my question.
Mrs. CUBIN. Mr. Inslee, that is not a parliamentary inquiry.
Mr. INSLEE. Well, let me make it a non-parliamentary inquiry then to ask you what your intentions are in this regard, because I think it would be important for this Committee not to prejudice the judicial system in their ability to deal with the questions of these privileges and keeping these in the executive session of this Committee would be appropriate, and I would suggest you do so and I would ask you what your intentions are in that regard.
Mrs. CUBIN. We are not in executive session. Everything that we subpoenaed, we have the right to bring forward here. I will bring forward the documents that I think are pertinent to determining whether the policies and practices of the Department of Interior and the Department of Energy are adequate to protect the public interest in not allowing Federal employees to take payments that may affect their advisory capacity in oil royalty or any other Federal issues.
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Mr. INSLEE. I might inquire, I think the Committee needs to have a discussion about whether these should be kept under seal so that it will not prejudice the ability to raise these claims in court, and I would suggest the Committee needs to have that discussion. I would ask you, what would be the appropriate time to do so? I would be happy to do that now by motion or otherwise, but if there is another time to do so before disclosure, I would be happy to accommodate the chair in that regard. Otherwise, I would like an opportunity to raise this issue through motion with this Committee and I would ask you, when would be the best time for your purposes to allow us to do that?
Mrs. CUBIN. Mr. Inslee, if you are going to make an objection, we have documents which have have been subpoenaed. But they are not under seal.
Mr. INSLEE. I understand.
Mrs. CUBIN. All right. If you would like to object when I ask for unanimous consent to put something in the record, you certainly have the right to object——
Mr. INSLEE. We will deal with it——
Mrs. CUBIN. [continuing] and then we will take a vote at the Committee and——
Mr. INSLEE. Very well. Thank you. Thank you.
Mr. MILLER. Madam Chairman, on my reservation, let me ask you, if I look at the—do we have information—have you subpoenaed information from the Justice Department or from the Department of Interior or others, Energy?
Mrs. CUBIN. I am not sure that I understand your question, Mr. Miller.
Mr. MILLER. As I read the subpoena, it is said that information received from the Department of Justice, the Office of Inspector General, the Department of Interior, which is received in response to subpoena issued by the authority of the motion in response to the previous Committee document request in the matter be treated as received in executive session. Access is limited to members and the staff designated by the chairman and senior Democratic member. Release of any such material in any form must be authorized by a vote of the full Committee. I just do not know if this information is being received under that same basis or is this different——
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Mrs. CUBIN. It is only the Department of Justice information——
Mr. MILLER. That is directly from them, whether it is involved in their litigation——
Mrs. CUBIN. That is directly from them, that is correct, that is directly from the Department of Justice.
Mr. MILLER. And from the Inspector General, right.
Mrs. CUBIN. And from the Inspector General, but not the Department of Interior generally.
Mr. MILLER. But if we receive information from witnesses that is involved in their investigations, that will not be treated in this fashion? That can be——
Mrs. CUBIN. No, not necessarily. Information from another source is exemptible.
So, reminding the witness, I asked if you have a calendar and you made entries in that calendar about these calls. You provided them to be entered in the record and I would ask unanimous consent to allow the notes provided by Mr. Johnson under subpoena and the telephone records provided by the Interior Department subpoena to be entered into the record. These records indicate the key dates of telephone conversations between Mr. Johnson and Mr. Berman. Notably, these government records suggest that Mr. Berman found no reason——
Mr. MILLER. Wait. Wait. Reserving the right to object——
Mrs. CUBIN. Let me finish my statement and then I will give you time. Notably, these government records suggest that Mr. Berman found no reason to call Mr. Johnson in the year before his secret suit was filed and called Mr. Johnson on only one occasion after the POGO suit was filed in the same court hearing the then-secret Johnson and Martineck suit.
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So, Mr. Miller?
Mr. MILLER. Just again, and I seek this for clarification, because I guess I am at a loss. You just said—I do not have your statement in front of me, but you said these are the calendars you got from Mr. Johnson and from the Department of Interior.
Mrs. CUBIN. The calendar is from Mr. Johnson. The phone calls——
Mr. MILLER. The phone calls are from——
Mrs. CUBIN. The phone calls are from the Department of Interior, from Mr. Berman's number at the Department of Interior to Mr. Johnson, and those are the only calls.
Mr. MILLER. The documents you received from the Department of Interior, will those be treated as though we are in executive session?
Mrs. CUBIN. No. No. Those are public. Those came from the investigators. Excuse me, they did not come from the investigators.
Mr. INSLEE. Madam Chair?
Mr. MILLER. Again, if you will explain the conditions under which these will be released to the public, the Department of Interior documents. Are those separate from the Inspector General documents, or do we know if those are part of the Inspector General's investigation?
Mrs. CUBIN. Those are the property of the Committee as they came in as a result of the subpoena and they are available for public information.
Mr. MILLER. Well——
Mrs. CUBIN. It is very simple and straightforward, Mr. Miller. The phone calls are calls to—what the phone call records will do is they will just——
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Mr. MILLER. Before you say what they show, that is the whole point.
Mrs. CUBIN. I am going to say, what they will show is that the calls——
Mr. MILLER. Why do you not just trample on people's rights.
Mrs. CUBIN. The records indicate that the calls did occur to which Mr. Johnson is testifying, the calls from Mr. Berman to him.
Mr. MILLER. And the subpoena says that release of any material in this form must be first authorized by a vote of the full Committee. This is your subpoena.
Mrs. CUBIN. These are not law enforcement records, Mr. Miller. These are not law enforcement records. So——
Mr. INSLEE. Madam Chair, I had——
Mrs. CUBIN. Mr. Inslee?
Mr. MILLER. They are part of the investigation by the Inspector General and it says here in your subpoena, the Inspector General, Department of General——
Mrs. CUBIN. They are documents that the investigative people on the Majority side got from Interior but not from the I.G.
Mr. MILLER. I know. They got them by subpoena. That is why the subpoena protects the documents from public release. It says you have to have a vote of the Committee. I am asking you——
Mrs. CUBIN. Only if it is law enforcement records. Only if it is law enforcement records. But we do not need to continue to discuss this. Mr. Inslee?
Mr. INSLEE. Yes. I would object to public—putting these in the record in other than in executive session to the extent that any of these documents are either subject to a claim or privilege in the existing litigation that the witnesses have claimed and has not been adjudicated yet——
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Mr. MILLER. Or others have claimed.
Mr. INSLEE. [continuing] number one, or others have claimed, or two, records that were produced subject to a subpoena which my understanding, according to what Mr. Miller says, specifically said would be subject to a vote of the Committee before they are put in any form subject to public release, and let me suggest why I do this. I think it is an important point about how we in Congress proceed in these investigations at the same time where the Justice Department or the Judicial system has an ongoing litigation. I think it is important not for us in Congress to prejudice or jeopardize the judicial system's ability to deal with this. I speak as a former prosecuting attorney in this regard, and there are instances where our efforts could, frankly, foul up ongoing investigations and I think we should be sensitive to that in Congress.
So I would suggest to us that in the pursuit of this, we should adopt a procedure by which material that is provided to us but there is an objection as to a privilege in the judicial system investigation, that we use those in executive session, and I would object to the introduction of them in other form, and if you would like to, I would put this in the form of a motion and we can argue this right now, because there may be other documents that come up, so we can deal with this right now. We can make a rule for the Committee and abide by it. So I will state my objection——
Mrs. CUBIN. But this is not—fine. It just is astonishing to me.——
Mr. MILLER. The gentleman has objected.
Mr. INSLEE. Yes. Let me——
Mrs. CUBIN. And I am really not——
Mr. MILLER. You asked unanimous consent.
Mrs. CUBIN. Okay. He has objected. All right. Let me respond to the gentleman and then I will ask for a vote by the Committee. It is amazing to me that the Minority thinks that phone calls from the workplace of a Federal employee have to be kept a secret. The Supreme Court has repeatedly affirmed the breadth of Congress' right to investigate the government's conduct of criminal and civil litigation. The courts have also explicitly held that agencies may not deny Congress access to agency documents, even in situations where the inquiry may result in the exposure of criminal corruption or maladministration of agency officials. The Supreme Court has noted, ''But surely a Congressional Committee which is engaged in a legitimate legislative investigation need not grind to a halt whenever responses to its inquiries might potentially be harmful to a witness in some distinct proceeding or crime or wrongdoing is exposed.''
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Nor does the actual pendency of litigation disable Congress from the investigation of facts which have a bearing on that litigation where the information sought is needed to determine what, if any, legislation should be enacted to prevent further ills, and as I have stated, that is, in fact, the very purpose of this oversight hearing. So, having heard your objection——
Mr. MILLER. Madam Chairman, on your point——
Mrs. CUBIN. [continuing] having heard your objection, I will now——
Mr. MILLER. Madam Chairman——
Mrs. CUBIN. All those in favor of allowing the calendar and the phone records to be entered into the record will please say aye.
Mr. INSLEE. Madam Chairman——
[Chorus of ayes.]
Mrs. CUBIN. Opposed.
[Chorus of noes.]
Mrs. CUBIN. The ayes have it.
Mr. INSLEE. Madam Chair, I want to make clear just——
Mr. MILLER. Madam Chairman——
Mrs. CUBIN. The ayes have it.
Mr. MILLER. Madam Chairman?
Mr. INSLEE. Madam Chair, could I make one point clear? Just to make sure that we understand so that we do not have further disagreement in this regard, my objection is only to allowing some of these purportedly privileged documents to go out beyond executive session, and I agree with everything you said, that we have the right and responsibility on investigations. My only concern is, I think some of these could be held and used in executive session that could allow us to proceed with our inquiry and not prejudice the judiciary body and proceeding. That is the nature of my objection.
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I simply suggest on those specific documents where there is a privilege, we proceed with our investigatory function in this Committee but we do so in executive session so we do not prejudice their ongoing litigation rights. That is the nature of my objection, and I do not know if the last vote, if that was the specific intent of the chair or not, but that is the nature of what I would suggest.
Let me pose a motion, if I can, just so I can make sure that we understand your ruling in this regard. I would move that during the remaining portion of this hearing, that any articles that are subject to a claim of privilege by any of the witnesses that we handle in an executive session mode, that we accept them into the record but they are held for use in executive session, meaning that they are not disseminated to the public and thereby not, frankly, fouling up the ongoing litigation. I would make that motion. I think we can deal with this motion and have a ruling of the Committee.
Mr. MILLER. Madam Chairman, on the motion——
Mr. BRADY. Madam Chairman, on the motion myself, I think it is important to note here that the phone records are not under investigation from the standpoint of Mr. Johnson or his colleague broke any rules, unethical, illegal rules, that the Federal employees are being looked at. I think one of the points we are looking at today is did the Justice Department, which is conducting the investigation, did the Department of Energy, and did the Department of Interior turn a blind eye to the illegal and unethical conduct of their colleagues. And so information that can help us ascertain that truth, which these phone records are, I think are an important part of getting to the truth.
So if we have nothing to hide, I think this information should be part of this open hearing for the public, because so much of this illegal conduct was conducted in secret, let us make sure that we inquire in the open government forum that we have today.
Mrs. CUBIN. Mr. Brady, imagine that, again, an oil company where the executives were protesting the admission of certain documents. I can hear the screams and cries from the other side.
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Mr. MILLER. Madam Chairman, on the motion——
Mrs. CUBIN. The motion is out of order. The motion is out of order. I read from the Rules for the Committee on Resources, let me give you the cite here, Rule 4(i), Claims of Privilege. Claims of common law privileges made by witnesses in hearings or by interviewees or by deponents in investigations or inquiries are applicable only at the discretion of the chairman, subject to appeal to the Committee, which means the chairman decides what is privileged and if the Committee disagrees with the decision of the chair, then they can move to overrule the chair and a vote will be taken on that.
Mr. MILLER. Madam Chairman?
Mrs. CUBIN. So the chairman——
Mr. MILLER. Madam Chairman, parliamentary inquiry.
Mrs. CUBIN. Yes?
Mr. MILLER. If I might make a parliamentary inquiry, and that is this question. Nobody here is challenging the right of this Committee to have these documents. We have been through this before and clearly, as you stated in the portion of the opinion you read, this Committee has a right to these documents, whether the privilege is asserted or not.
The parliamentary inquiry I have is whether or not the release of these documents in public, not the right of the Committee to look at them and to look at them in executive session, whether or not—if the gentleman would let me finish my parliamentary inquiry—as to whether or not we can receive them, look at them in private as the conditions of the subpoena in the authorization for the subpoena set forth, because it appears that some of the information that you have, and that you have a right to have and you have a right to use in this hearing, but maybe not to use publicly, may be part of the criminal investigation with respect to the Department of Justice that apparently is now ongoing and is also received from the Department of Interior which has the Inspector General.
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So this is not about whether or not we have a right to look at this and to use it and to form our opinions and make findings of this Committee, but whether or not, as in the authorizing of the subpoena, it says that they will be treated as if received in executive session and access thereto limited to members and staff designated by the chairman and the senior Democrat.
This is not an attempt to keep this information away from the Committee and let the chips fall where they may, but it is a question of the language authorizing the subpoena and whether or not we are going to comply with that. At some point, people have a right to rely on the actions of this Committee, and my parliamentary inquiry is to whether or not the public release of these documents that have been received in this manner are in compliance with the authorization received by the Committee for the subpoena of these documents.
Mrs. CUBIN. Mr. Miller, you will recall the same exact debate going on when I was chairing hearings on the hard rock mining bonding issue. At that time, I assured you that I will follow the rules of the Committee and the House. I give you that assurance again. At that time, I also told you that I would judiciously look at the information and not release publicly information that I thought would be harmful. I told you that then. I lived up to that—or that would be harmful to a case—and I will do that again.
As chairman of this Committee, I have the responsibility of getting this information out in the best possible way, and that is my intention, and so what I——
Mr. MILLER. Madam Chairman, I do not for a moment——
Mrs. CUBIN. I am not finished. What I will do is after the hearing is over, if the Minority has—as we go, we will enter the documents into the record. If the Minority has particular heartburn over a certain document, I will discuss it with them. But we will proceed as though they are going to be made public, and then I am a reasonable person and you can, just as we did with the other issue, and I was good to my word, you were too, and you can expect me to be again.
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Mr. MILLER. Madam Chairman, as I understand what you are about to do, you are about to read from those very documents. They will now be public. It will not matter what the Majority says three weeks from now or two weeks from now. They will be displayed upon the public record here in the next few minutes and that is——
Mrs. CUBIN. Some of the documents absolutely will, but——
Mr. MILLER. And that is contrary to the authority, if you want to obey the rules, the authority that we voted on in this Committee, in the Subcommittee, the subpoena——
Mrs. CUBIN. Now listen, Judge Wapner——
[Laughter.]
Mrs. CUBIN. Now listen, Judge Wapner, the subpoena authority only speaks to the criminal law enforcement records that we received. It does not speak to the things that we received from Interior generally.
Mr. MILLER. With all due respect, you do not know factually whether or not these are part of that criminal investigation or not. Clearly, you are going to do what you do.
Mrs. CUBIN. Right.
Mr. MILLER. I am just telling you that you are trampling on the authority of this Committee, you are violating the rules of this Committee, and I think you are trampling on a criminal investigation and you may also be trampling on the rights of the parties to that criminal investigation. But Madam Chairman, I have known you long enough to know that you will proceed in the manner in which you proceed, and fortunately, you do keep a good sense of humor about you while you do it.
But nevertheless, I think you are about to trample on some people's rights and that should not be what this Committee should do and it should especially not do it to contradict the exact authority that the members of this Committee voted to give you and the conditions in which it was given.
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Mr. INSLEE. Madam Chair, I think that the chair has ruled. I take your statements as a ruling and I respect them. But I do, pursuant to Rule 4(i) appeal the ruling of the chair——
Mrs. CUBIN. Okay.
Mr. INSLEE. [continuing] to the Committee——
Mr. THORNBERRY. Madam Chairman?
Mr. INSLEE. [continuing] and let me state the basis of my appeal, if I may.
Mr. THORNBERRY. I move to table the appeal.
Mr. INSLEE. Well, let me state the basis of my appeal before you hear your motion to table. The basis for my appeal is this, Madam Chair. I think we really——
Mr. SCHAFFER. Madam Chairman, a parliamentary inquiry?
Mrs. CUBIN. Yes?
Mr. SCHAFFER. Is a motion to appeal the chair——
Mrs. CUBIN. It is not a debatable motion——
Mr. SCHAFFER. [continuing] a debatable motion?
Mrs. CUBIN. [continuing] because the motion has been made to table it, so it is not——
Mr. INSLEE. Well, I have not finished. I would appreciate my ability to finish my motion before we hear a motion to table it.
Mr. SCHAFFER. I would like an answer to my inquiry. Is the motion before us a debatable motion?
Mrs. CUBIN. The motion before us is not a debatable motion. Mr. Thornberry moved to table, and all in favor, say aye.
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[Chorus of ayes.]
Mrs. CUBIN. Opposed.
[Chorus of noes.]
Mrs. CUBIN. The ayes have it, so we—oh, I know. Gee, right to the heart.
[Laughter.]
Mrs. CUBIN. Okay. Now I need to recognize where we are. We have entered into the record the documents that have been discussed. I am going to ask one last question, and so the time needs to go back on.
Just to finish this up, to be clear, Mr. Johnson, all of the calls that are on the records that we just put into the record were initiated by Bob Berman, is that correct?
Mr. JOHNSON. That is correct. Mr. Berman called me, although many times I returned his calls.
Mrs. CUBIN. But he initiated the conversation, but you did return his calls sometimes?
Mr. JOHNSON. That is correct.
Mrs. CUBIN. Thank you very much.
Now the chair recognizes Mr. Thornberry.
Mr. THORNBERRY. Mr. Johnson, I want to try to get back together on the context for the suit that we are talking about. As I understand your testimony, you all filed your lawsuit in February 1996 and then, beginning in April 1996, you started getting some phone calls from Mr. Berman of the Department of Interior asking you lots of those questions, and those calls went on for more than a year, and in September 1996, you got a call from Ms. Brian with POGO saying that she knew you filed this case and you would not talk to her. Is that kind of a summary of where we have been so far?
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Mr. JOHNSON. Yes, really.
Mr. THORNBERRY. Now, one of my questions is, why did you talk with Mr. Berman? A few months later, you would not talk to Ms. Brian. Why did you talk to Mr. Berman?
Mr. JOHNSON. Well, first of all, we were right in the middle of a Justice Department investigation into our lawsuit. The lawsuit was under seal at the time. We had a number of people from the Federal Government calling, asking questions. Mr. Berman never identified himself specifically as an investigator in our lawsuit, although he did ask a lot of questions related to the subject, and without knowing if he was officially part of the investigation or even if he knew about our lawsuit, we responded. I gave him full cooperation, as I had with all government questioning.
Now, I had spoken with Danielle Brian at other times and I did give him information concerning not the Federal lawsuit, not underpayments on Federal lands, but the work that we had done on private litigation and we had cooperated with Ms. Brian, as well.
Mr. THORNBERRY. My understanding is, you cooperated fully with Mr. Berman. If he asked a question, you answered it?
Mr. JOHNSON. Absolutely.
Mr. THORNBERRY. Now, I also understand that you sent a letter to the Department of Justice to let them know those phone calls took place, is that right?
Mr. JOHNSON. Mr. Berman had been the most persistent in his questioning and his phone calls, and as I mentioned, he never had identified himself as being an investigator in our lawsuit. Because of that, we sent a memo to the Justice Department letting them know that he had been calling.
Mr. THORNBERRY. Did you ever hear back from the Justice Department?
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Mr. JOHNSON. Not to my knowledge.
Mr. THORNBERRY. When you file one of these suits, is it important to have very detailed knowledge of the subject matter that you file the suit about, or can you make some vague allegations and fill in the blanks later?
Mr. JOHNSON. Well, I am not an expert on the law, on the false claims act. It is certainly my understanding that we had to have very detailed personal direct knowledge, which we did, of this issue.
Mr. THORNBERRY. So you had to have that kind of detailed personal direct knowledge for your lawsuit?
Mr. JOHNSON. That is correct.
Mr. THORNBERRY. In your conversations with Mr. Berman that lasted over a year, did you form an impression about whether he had the same kind of detailed direct personal knowledge about how this stuff works?
Mr. JOHNSON. Clearly, Mr. Berman had a general understanding of oil prices, but he clearly did not have an understanding of the details involving how oil was sold from leases in the country and how it was actually valued and how the exchanges worked.
Mr. THORNBERRY. And were those the areas that you helped him with in your conversations?
Mr. JOHNSON. Very much so, yes.
Mr. THORNBERRY. Now, at some point, you, or you all both entered into an agreement with POGO and others to share in any money that you get out of these lawsuits, is that correct?
Mr. JOHNSON. That is correct.
Mr. THORNBERRY. I guess one of my biggest questions in this whole thing is why in the world you, who filed your suit first—and as I understand, that is the key, if you file your suit first, everybody else is shut out pretty much—you filed your suit first and yet you agreed, entered into an agreement to share part of the money that you get with these people who filed later suits. Why did you agree to share with POGO?
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Mr. JOHNSON. Well, at the time we entered into that agreement, it was not so clear to us what the law was. There certainly was a question as to if simply being the first to file answered all of the issues or if, in fact, there could have been another person, such as Mr. Brock, who a court or a jury could perhaps believe that he had been, in fact, the first person ever to bring this issue public. That was a question in our mind.
Mr. THORNBERRY. Now, you need to explain to us, I think, a little bit who Mr. Brock is, how he enters into it, and how that figured into your calculation.
Mr. JOHNSON. Well, Mr. Brock was—we had never met him at the time we signed the agreement, but it was represented to us by his attorneys he was in with the POGO, Danielle Brian, co-relators in their competing lawsuit, and we were told that he had been the first person back in the 1970s to bring up the issue of oil royalty underpayments in California. We were told that he understood and knew oil pricing and that he was, in fact, current on it and knew how oil underpayments could have been made or were made up into the 1990s, as well.
Mr. THORNBERRY. So was he represented to be an expert that could help you with your case, or is he another claimant out there?
Mr. JOHNSON. Well, actually, he was another claimant.
Mr. THORNBERRY. All right. And so based on what you were told, he might have had a claim that could in some way threaten your claim, and so to prevent that from happening, you agreed to share?
Mr. JOHNSON. Yes, and the long and short of it is, that is correct.
Mr. THORNBERRY. Did you find, in your dealings with him, did he help you? Did he have expert knowledge beyond what you had? Did he contribute?
Mr. JOHNSON. No. After we got into the case and met Mr. Brock, we saw that that was not the case.
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Mr. THORNBERRY. I understand that after it became public that POGO had these agreements with Mr. Berman and Mr. Speir to give them part of POGO's share of whatever they recovered, you and your lawyers hired somebody to look at this and got concerned about how it affected your ability to continue the suit, is that roughly what happened?
Mr. JOHNSON. Certainly, after we learned of that, yes.
Mr. THORNBERRY. What sort of ethics expert did you all look at and what did he tell you?
Mr. JOHNSON. Well, I mean, I am not an ethics expert and I am not sure how all that worked. It was my understanding that certainly there was a question whether government employees could be paid and whether, in fact, these people were—would have been witnesses in our litigation, and it, of course, has been my understanding that you cannot pay witnesses for their testimony. It certainly looked bad.
Mr. MARTINECK. And at the time we signed these agreements, we had no knowledge that these individuals were involved on that. So certainly we wanted to bring that to light, that we had found that out.
Mr. THORNBERRY. I want to ask that direct question. I think you have answered. But at the time that you reached the agreement with POGO and for a while thereafter, did you have any idea that POGO had these side agreements with these Federal officials to pay them part of what POGO received in any settlement? Did you all know that?
Mr. MARTINECK. No, we had no knowledge of that.
Mr. JOHNSON. Absolutely not.
Mr. THORNBERRY. And so it was a surprise to you when you found out?
Mr. JOHNSON. Yes.
Mr. MARTINECK. Very much so.
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Mr. THORNBERRY. I think that is all the questions I have at this time.
Mrs. CUBIN. Excuse me. I was trying to cut time short by possibly avoiding future disagreements. The chair now recognizes Mr. Schaffer.
Mr. SCHAFFER. Thank you, Madam Chairman.
I want to go back to the contacts by Mr. Berman and explore that a little further. I just want to be clear, all of the calls, the conversations that you had, were they initiated by Mr. Berman?
Mr. JOHNSON. Yes, I believe that is correct.
Mr. SCHAFFER. If you were to have called him back, would that just be in the course of returning phone calls, or did you initiate any at any time?
Mr. JOHNSON. I do not know of any phone calls that I initiated to him, so I believe that the calls from my phone to his would have been in a response to a question from him.
Mr. SCHAFFER. Mr. Berman mentioned or gave you the impression, as you stated, that he was an important player of some sort in oil royalty policy decisions at the Department of Interior. Did he ever specifically mention your case?
Mr. JOHNSON. No, he never did.
Mr. SCHAFFER. Did you take steps to assure yourself that Mr. Berman was genuine?
Mr. JOHNSON. Well, we, of course, wrote the letter to the Department of Justice informing them of his questioning and we did know that the phone number that he gave me to return his calls was in the government office.
Mr. SCHAFFER. You came to that conclusion on your own?
Mr. JOHNSON. Well, the conclusion——
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Mr. SCHAFFER. Or was that the answer the Justice Department gave you?
Mr. JOHNSON. No. The Justice Department did not give us an answer.
Mr. SCHAFFER. They gave you no answer at all as to these phone calls, the propriety of them or——
Mr. JOHNSON. I do not recall them telling us anything on that.
Mr. SCHAFFER. Now, during these calls, did Mr. Berman not also ask you to help prepare him for testimony before Congress in June of 1996?
Mr. JOHNSON. He did call me prior to his testimony and asked several pointed questions about the alleged underpayments.
Mr. SCHAFFER. I understand why Mr. Berman would need your expertise to help him prepare for that hearing, but if we assume, and I stress that for now this is an assumption, if we assume that Mr. Berman and POGO were planning to file a lawsuit similar to yours, why would it be valuable to know the details of the oil trading described in your suit?
Mr. MARTINECK. Well, first of all, you have to have firsthand knowledge that you gained through your own efforts to be able to be qualified for the suit, and if he was wanting to meet that hurdle, he would have to be able to answer certain questions.
Mr. SCHAFFER. When you say firsthand knowledge, direct knowledge?
Mr. MARTINECK. Yes. It has to be direct independent knowledge, firsthand, that you had gained through your own efforts.
Mr. SCHAFFER. Now, during these many phone conversations, did Mr. Berman discuss with you the new oil royalty regulation then being developed by the Department of Interior?
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Mr. JOHNSON. Mr. Berman first told me that he was the person charged with developing new regulations and he did mention several times the fact that new regulations were being considered, but he never, at least to my recollection, specifically discussed the essence of proposed new regulations.
Mr. SCHAFFER. Did he characterize his involvement as perhaps framing the overall policy of the rule?
Mr. JOHNSON. I do not recall those particular words, but he did certainly say that he was very much an integral part of the new regulations.
Mr. SCHAFFER. Through all of these phone calls, beginning soon after the Interior lawyers and MMS experts began a secret review of your sealed lawsuit and concluding just seven days before POGO filed a complaint which the Justice Department found to be nearly identical to yours, did you form an impression of whether Bob Berman had a sophisticated understanding of the actual details of oil trading, other than the education you had given him?
Mr. JOHNSON. Well, I formed the understanding that he did not know that on his own.
Mr. SCHAFFER. I understand that POGO received a share of the settlement, a similar question to that that the gentleman from Texas just raised, a similar settlement. Did you provide POGO with such a large share because they could provide access to Berman and Speir?
Mr. JOHNSON. At the time we entered into the agreement, we absolutely had no idea there was a connection there, so the answer is no.
Mr. SCHAFFER. But is it not true that Ms. Brian offered you access to government experts in the September 23, 1996, phone call?
Mr. JOHNSON. No. That was not the essence of the phone call. The phone call was that there were a couple of government employees who were looking at filing their own competing qui tam lawsuit.
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Mr. SCHAFFER. One last question. You mentioned that Ms. Brian referred you to a lawyer?
Mr. JOHNSON. That is correct.
Mr. SCHAFFER. Who was the lawyer or law firm?
Mr. JOHNSON. Lon Packard.
Mr. SCHAFFER. Thank you, Madam Chairman. I have no further questions.
Mrs. CUBIN. I am going to reserve the balance of the Majority's time and now recognize the Minority side for 30 minutes of questions.
Mr. MILLER. Thank you very much. How did you and POGO get joined here as relators?
Mr. JOHNSON. Well, we signed an agreement to work together, to join our two lawsuits. I'm not sure I understand the complete question.
Mr. MILLER. So that is how it was done? You were brought together how? I mean, you knew of one another, or you knew you both had lawsuits? Were there other lawsuits, or just these two?
Mr. JOHNSON. There was one other lawsuit, as well, and——
Mr. MILLER. Were they joined as relators?
Mr. JOHNSON. Yes, they were.
Mr. MARTINECK. They were also part of that agreement.
Mr. MILLER. Pardon?
Mr. MARTINECK. They were also part of that agreement.
Mr. MILLER. And so that brought you together as relators, and then your action was successful and you have started to be paid a portion that you are entitled to under the law of the underpayments of the findings, correct?
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Mr. JOHNSON. Yes.
Mr. MILLER. And then since that, what, you have sued the other relators?
Mr. JOHNSON. No, we have not sued the other relators.
Mr. MILLER. What legal steps have you taken with regard to your agreement?
Mr. JOHNSON. We filed a motion—after learning about the Berman and Speir payments, we filed a motion in our—in the same court where our false claims act case is pending to have the relator, Multi-Relator Counsel Agreement set aside or taken apart with regard to POGO.
Mr. MILLER. And what did you allege in that motion?
Mr. JOHNSON. The allegations there were that we were fraudulently induced to enter into the agreement.
Mr. MILLER. And then what happened on that? What happened to the motion?
Mr. JOHNSON. The judge had denied the motion.
Mr. MILLER. Have you filed other motions since then?
Mr. JOHNSON. No, we have not.
Mr. MILLER. So the court looked at this, your allegation that, what, that there was misrepresentation or there was fraud or something in your agreement and determined that that is not the case?
Mr. JOHNSON. That is correct, or he denied our motion to have it set aside.
Mr. MILLER. Right. So apparently, he disagreed with your allegation that there was fraud and misrepresentation and, therefore, it should be set aside. So then you are now in the position of having to live with your agreement, and as opposed to getting, what, 100 percent, you got 30 percent? What do you get, a third? There are three entities here?
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Mr. JOHNSON. There are three groups.
Mr. MILLER. And it is divided how?
Mr. JOHNSON. It is divided 20 percent to one and then 40 percent to the other two groups.
Mr. MILLER. And your share is?
Mr. JOHNSON. Mr. Martineck's and my share is of the 40 percent group.
Mr. MILLER. So the two of you are 40 percent. POGO is what?
Mr. JOHNSON. Forty percent.
Mr. MILLER. And the third party is whom?
Mr. JOHNSON. Mr. Gene Wright, and that is 20 percent.
Mr. MILLER. And where did his suit come from?
Mr. JOHNSON. He had also filed a competing false claims act case some months after we had initially filed.
Mr. MILLER. So it was not a question of being first in time?
Mr. JOHNSON. I am sorry?
Mr. MARTINECK. We were the first. Mr. Wright was the second.
Mr. MILLER. But the law does not provide the first in time, it is winner-take-all. They look at all the lawsuits filed and then, in this case, apparently, join those lawsuits?
Mr. MARTINECK. Actually, the law does say the first to file.
Mr. JOHNSON. There are a variety of legal questions on that and we are not legal experts to tell you how the law works, but generally, the first to file gets the 100 percent. However, there are questions as to how that works and we did not have the answer to that.
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Mr. MILLER. I do not understand, then, why did you enter into this agreement? Who brought the agreement to you?
Mr. JOHNSON. Actually, I do not recall how we ended up all being introduced to each other.
Mr. MARTINECK. I think the seal was released as to just let the other parties know that there were other suits filed out there so that we could find out who the other parties were, but it was only—the seal was only lifted as to that.
Mr. MILLER. Did you talk to the other parties? Did you talk to Mr. Wright and to POGO?
Mr. MARTINECK. We had all gotten together to——
Mr. MILLER. You all got together and you shared information?
Mr. MARTINECK. I do not know about sharing information.
Mr. MILLER. Did you look at their, Mr. Wright's allegations and POGO's allegations and your allegations to see if you are all on the same track here or could you strengthen your case or was your case strengthened or was their case strengthened by your work back and forth? I mean, because you are about to sign an agreement to give away 60 percent of the proceeds here. I assume you wanted to know whether or not their information is worth 60 percent of the pot.
Mr. MARTINECK. Correct. In our minds, it was not so much the information that they provided as that there may be some question in the judge's mind that there may have been somebody like a Lenny Brock out there back in the 1970s that had an issue.
Mr. MILLER. This is not a new issue.
Mrs. CUBIN. Mr. Miller, I am sorry to interrupt you. I was just notified that there is a brown document case right out the back side door there with the initials ''CBM'' on it and if someone does not claim it in the next few minutes, the Capitol Hill Police will have to take it and we will have to clear the room, so if it is yours, please go get it. Go ahead. Is it Mrs. Maloney's? Will you send someone after it?
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[Laughter.]
Mr. MILLER. Would you mind going and getting it?
[Laughter.]
Mrs. CUBIN. I am sorry for the interruption. Go ahead, Mr. Miller.
Mr. MILLER. No, that is okay.
Mrs. CUBIN. I thought it meant coal bed methane.
[Laughter.]
Mr. MILLER. Such tunnel thought. This is not a new subject, underpayments. In my State of California, the State sued many years ago. Mr. Brock has been out there. The State Lands Commission, whether on the issues of seepage or actual royalty underpayment, the subject has been kicking around for a long time. We kicked it around when we had the Committee and obviously it has been done since then.
It is not yours? Oh. I guess we still need someone to come forward for the briefcase. Do they have it?
Mrs. CUBIN. Oh, okay.
Mr. MILLER. Okay. Is that correct?
Mr. JOHNSON. Certainly, underpayments, oil royalty underpayments have been around for years and years. What we bring, the information that we brought was very specific with regard to a specific type and methodology used for underpaying oil royalties.
Mr. MILLER. Right. No, no, and I am—so, but the point of the process here, at some point, you got together with Mr. Wright and with POGO and yourselves and you compared this information. You discussed where you thought you were legally. You are obviously trying to protect your case, and more power to you. I mean, I am a strong supporter of this law. I believe it is very important. And then you made a determination that you would join in your efforts and an apportionment was agreed upon? At that time, was an apportionment agreed upon, or was that later?
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Mr. JOHNSON. It was agreed up.
Mr. MILLER. It was agreed upon at that time, and you went forward. Now you do not like that agreement.
Mr. MARTINECK. Well, actually, we had realized that we had met the first hurdle, to be the first to file, and there was a question on whether or not a court might see that differently as far as, like you said, the issue being out there——
Mr. MILLER. No, I understand that. I mean, that is what I am saying. You sat down and somebody said, look, this could be a problem for us. This could be a problem for you. There is this fellow out there from California and so you weighed all that and you made the agreement. It is not that necessarily you were right or they were right, but that is an agreement. That is what you do. You weigh the trade-offs and the liabilities and the assets and you entered into it, and now you do not like it, so you went to court to get it dissolved and you alleged that there was fraud or there was misrepresentation and the court said no, your agreement is your agreement.
Mr. MARTINECK. Well, yes, it is not that we did not like the agreement. The fact of the matter is is they did not disclose a lot of information to us prior to entering into that agreement.
Mr. JOHNSON. And we never protested the agreement. We had not filed a motion with the court to disband the agreement until we found out about the involvement of Berman and Speir in this with POGO.
Mr. MARTINECK. And it was not until some time after that agreement was signed that we did find that out.
Mr. MILLER. Are you sure that is right in the chronology?
Mr. MARTINECK. Yes.
Mr. JOHNSON. Yes.
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Mr. MILLER. Okay. So, therefore, then you made a series of allegations to the court about the agreement and about their activities, and the court denied your motion, correct?
Mr. JOHNSON. That is correct.
Mr. MILLER. At this time, I will yield time to Mr. Inslee.
Mrs. CUBIN. Mr. Inslee?
Mr. MILLER. How much time do we have remaining?
Mrs. CUBIN. You have 21 minutes and 20 seconds.
Mr. MILLER. Thank you.
Mr. INSLEE. Well, I must say, I am a relatively new member of the U.S. Congress and I think I share a view of Americans who would be listening to this hearing of absolutely being stunningly shocked, shocked at what you gentlemen are telling us and what this hearing has disclosed is that some powerful corporations ripped off with a capital ''R'' and a capital ''O'' the American taxpayers for over $300 million, who reached their corporate hands into my constituents' back pockets and took $300 million out of their hard-earned tax money and did not pay it to the taxpayer when it was legally owed, and the whistleblower statute, which has been an incredibly effective statute, which allowed these taxpayers to be protected, to get their $300 million back, that this Committee, instead of investigating the robbers, is trying to investigate the cops—the cops, the ones who found the $300 million theft, the whistleblower statute that allowed them to do so, the taxpayers who have the only protection in statute which they enjoy, which is the whistleblower protection.
And here we are, intelligent, well-minded people with 50 days left in this session, instead of trying to figure how to make sure the mining industry and the oil and gas industry pays the taxpayers what they have coming, are messing around, mucking up an ongoing investigation by the Justice Department.
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Now, as a new member of Congress, I find this relatively shocking and I think Americans will, too, when they find out that groups that have massive campaign contributions to this institution took $300 million out of taxpayers' pockets, and what does the Majority party turn around and try to reduce the ability of taxpayers to get their money back. That is wrong.
Now, I made some procedural objections to what is going on here, and there may be legitimate issues that the Justice Department is looking at in this investigation, but I am concerned that we are looking in the wrong direction, that the American people ought to have us looking and using our energies to figure out how to be fair to the American taxpayers, fix our royalty payment system and our whistleblower statute so the American taxpayers can be treated fairly and so the agencies are treated fairly. We are not doing that today. We do have an organ of body that is doing that, the Justice Department, which is looking into this issue, and yet we have prejudiced their ability by allowing public disclosure of this. I am concerned about this, speaking as a former prosecuting attorney.
I just want to make sure I understand this. To make sure that my shock is not misplaced, I am going to ask you fellows this. My understanding is is that the Federal court ruled, and I am reading a quote, ''Whether POGO shared the proceeds of the Mobil settlement with Berman Speir has no bearing on whether the defendants paid royalties in compliance with the Federal regulations.'' In other words, the Federal court has ruled that what happened has no bearing on whether the taxpayers were offended or not. Is that your understanding of what happened here?
Mr. JOHNSON. I actually do not recall the court—those words from the court, but I do understand that that was the ruling.
Mr. INSLEE. Well, my understanding is, if that is correct, that our hearing today is not designed to take care of the taxpayers. It may be designed for other purposes. And I will tell you that I think this hearing today is a perfect example why we have got to pass meaningful campaign finance reform. The issue here is whether we are going to be fair to the taxpayers and not allow certain industries to abuse the American taxpayer. That ought to be the issue. We ought to be talking about campaign finance reform today so that we protect the whistleblower statute rather than weaken it, and this means if the Justice Department can find any nefarious dealings, they are going to do so and we should not prejudice their abilities in a moment.
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But I think what this hearing has disclosed is that this Committee is less interested in taking care of the taxpayers and more interested in reducing the ability of whistleblowers to point out to the American public that they have been abused by folks in certain industries. The American public needs to know this. And instead of trying to shine the light of truth, which the whistleblower statute does, this effort is trying to put a cloak of darkness to allow the continued abuse of the American taxpayer, and that is what has gone on in this hearing to date.
Let me just ask you, I understand you fellows are whistleblowers yourselves. I assume you would characterize yourselves as that, is that a fair characterization?
Mr. MARTINECK. That is correct.
Mr. JOHNSON. Yes.
Mr. INSLEE. Is it not your belief, is it not your firm belief, based on knowledge that you personally have, that a certain industry ripped off the American taxpayers for over $300 million in this case and that that was brought to light only because of the protection and incentives of this Whistleblower Act, is that not correct?
Mr. MARTINECK. We had actually brought this issue to the government's attention prior to getting involved in this case and that took place probably a year and a half prior to us filing the case. So, I mean, we tried to inform the government of what was going on prior to getting involved in this whistleblowers' case. When no action was taken, that is when we filed our case.
Mr. INSLEE. And so what we need to tell the American people is, the only reason we eventually got this $300 million back for the taxpayers is we had a whistleblower statute that worked in inspiring people to bring a lawsuit to uncover this inappropriate—failure to pay taxpayers, is that not right? I mean, it worked, right?
Mr. MARTINECK. The first case that was brought would have accomplished that.
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Mr. INSLEE. So the whistleblower statute worked, is that not right?
Mr. JOHNSON. In this case, we certainly have recovered settlements approximating $300 million, yes.
Mr. INSLEE. And do you think we in Congress should be at least somewhat concerned about efforts to intimidate whistleblowers by Congress? Do you think we should be a little concerned about that? Let me tell you why I suggest that.
When you are a whistleblower, you are taking a big, big risk. When you are an employee of any agency, you are hanging out, you are sticking your neck out to take a big risk to expose the nefarious dealings where there has been a $300 million, I will not use the word ''theft,'' but inappropriate failure to pay the U.S. taxpayers. There is a big risk. There is fear. There is concern. There is trepidation. Would you agree with me that the U.S. Congress ought to be a little bit Congress before it adds to the intimidation of whistleblowers?
Mr. JOHNSON. Well, I guess it is not our place to make policy or to dictate policy on that. Certainly, there are a lot of risks associated with being a whistleblower. There is a huge burden associated with that. It needs to be appropriately and properly done.
Mr. MARTINECK. And that is why the people that take the risks should be the ones that share the reward that comes along with that risk taken.
Mr. INSLEE. I think that is fair and it has been successful, as this case has indicated, that it has exposed some inappropriate conduct here. But do you think that when Congress tries to put the heat on whistleblowers, that that could reduce the number of people who may come forward to blow further whistles on further oil and gas industry failure to pay the American taxpayers? Do you think it might have that impact of intimidating future whistleblowers who are out there today who may know something about a failure of an oil and gas company to pay the American taxpayers, and maybe when they hear about these efforts that they may be a little more intimidated and they may be a little more reluctant to blow these whistles? Do you think that might be an impact?
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Mr. MARTINECK. Certainly, any time you raise the bar, that might be an impact on people taking the chance on getting involved with something like this.
Mr. INSLEE. And would you agree with me that the American taxpayers really need people to come forward to blow these whistles?
Mr. JOHNSON. Yes.
Mr. INSLEE. I would defer. I just want to make one statement, though, and I have expressed how I feel about this issue. Some have indicated I feel pretty strongly about it. But I want to reiterate, if there are issues here about government employees and their actions after they have, in effect, become whistleblowers, it is important to look at those issues, and there may be legitimate issues here. But I really believe, again speaking as a prosecutor, the Justice Department is better capable of dealing with this, frankly, than we are, and that in these investigations, we ought to be very cautious about fouling up those ongoing investigations and I am concerned that that has happened here.
Mrs. CUBIN. Ms. Maloney?
Ms. MALONEY. Thank you very much.
Mr. MILLER. How much time is remaining?
Mrs. CUBIN. Mr. Miller, approximately 11 minutes.
Ms. MALONEY. Thank you for being part of an effort——
Mrs. CUBIN. Excuse me, Ms. Maloney. The Committee did give unanimous consent to have you seated at the dais, but now I ask the Committee unanimous consent to allow Ms. Maloney to question the witnesses. Without objection.
Ms. MALONEY. Thank you very much, Madam Chairwoman.
As the Ranking Member on the Government Reform and Oversight Committee on Information and Technology, we held two hearings on the undervaluation of oil and Mr. Berman testified at one of those hearings. I issued a report on California alone, it was $300 million undervalued with the State. So when you combine the State with the Federal, the rip-off was in the billions, and the money that was coming to the government, whether it was State or Federal or tribe, was in the billions of dollars for schools and services in our communities. So I thank you for coming forward and being part of an effort that has helped us work together with Mr. Miller and others to change the valuation law.
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The MMS says that now they project that the government was losing $66 million a year from this valuation and that the change will bring an additional $66 million. As experts in this field, do you think that number is correct or do you think it is higher or lower?
Mr. JOHNSON. We have not actually looked at those specific numbers. I have heard those numbers, and I am sorry, but I just cannot comment one way or the other. I just have not looked at the data behind that.
Ms. MALONEY. I think it is important that you look at that because I think your knowledge could be helpful in analyzing it. Personally, I think the people that have worked to put forward this information and bring it to the public should be given awards by government for helping save taxpayers' dollars and not being hauled in front of committees for their actions.
Did you cooperate in any way with POGO in the mini-report that they issued on oil valuation and the loss of dollars to the American public, to the Federal Government, on oil extracted from Federal Government-owned land? Did you cooperate with any of those, I believe it was four or five reports that detailed the underpayment, the rip-off of the American public?
Mr. JOHNSON. Well, as I testified earlier, I did speak with Danielle Brian about some of that information in the later reports. I did not provide her with information, written information. Most of that had been sealed or confidential in other lawsuits. I believe she was able to obtain some of that and did, in fact, use that. But we were—I was open in speaking with her and explaining to her how the underpayments had occurred on private lands.
Ms. MALONEY. Did you ever speak with Mr. Speir about the lawsuit?
Mr. JOHNSON. No, I never did.
Mr. MARTINECK. No.
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Ms. MALONEY. And is it correct that Mr. Berman never asked you about the lawsuit?
Mr. JOHNSON. That is correct.
Ms. MALONEY. That is correct, he never asked you. And if Ms. Brian had contacted you about the lawsuit, why did you sign the agreement since that phone call would have been sufficient to have her disqualified as a participant since the phone call was evidence that she did not have direct knowledge of the lawsuit?
Mr. JOHNSON. I am not sure that the phone call was evidence that she did not have direct knowledge of the issues. Clearly, she did know about our lawsuit, but I am not sure and we were not sure at the time as to whether that would disqualify her or not.
Mrs. CUBIN. Could I get clarification? That is while the lawsuit was still under seal, is that right, or not?
Mr. JOHNSON. Yes, it was.
Mr. MARTINECK. That is correct.
Ms. MALONEY. Did you mention the call to the Department of Justice?
Mr. JOHNSON. No, we did not.
Ms. MALONEY. But you did mention the call from Mr. Berman?
Mr. JOHNSON. Yes. Mr. Berman called repeatedly and asked very detailed questions and he was representing himself to be the government watchdog, or the MMS watchdog within the government on this issue.
Ms. MALONEY. When did you first mention this alleged phone call from Ms. Brian?
Mr. MARTINECK. To who?
Mr. JOHNSON. To who?
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Ms. MALONEY. To anyone.
Mr. JOHNSON. Immediately after the phone call, I called Mr. Martineck and the two of us then immediately called Mr. Richard Coffman, our attorney at that time, and explained it to him. The issue there was that there were potentially some competing relators or people planning to file a competing lawsuit, not the fact that she knew about it.
Ms. MALONEY. How long do you think this underpayment and rip-off of the American taxpayer and the Federal Government was going on, how many years?
Mr. JOHNSON. Our lawsuit alleges that at least from 1986, and primarily from 1988 forward, included in our lawsuit.
Ms. MALONEY. And I feel that it is important that we understand the lawsuit, and I am reading from the document on the consolidated false claims complaint that was filed in September of 1998. You had seven scenarios that the oil companies were using to shortchange the government, the taxpayers, the people of royalties. Could you go over the most frequently used form that they underpaid?
Mr. MARTINECK. Probably the——
[Witnesses conferring with counsel.]
Mrs. CUBIN. They can talk to their attorneys but the attorney cannot talk to us.
Mr. MILLER. Only on constitutional questions.
Ms. MALONEY. I think this is an important question.
Mr. JOHNSON. Well, without compromising the ongoing litigation, because we still are right in the middle of the lawsuit with several remaining defendants, we can say that what we said in that complaint holds. All of those methods that we listed in the complaint are important and were used and we are still continuing to pursue that and to fight that in court.
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Ms. MALONEY. Well, could you describe one of the methods? Take the posted price. Instead of the market price which they sold oil to each other, they had a posted price. Can you explain that?
Mr. JOHNSON. One of the methods listed in the lawsuit itself was that the companies used the posted price to sell oil—to transfer oil essentially to themselves in an intra-company transfer and then actually received a higher value for that oil but paid their Federal royalties on the lower posted oil price. That is one of the methods.
Ms. MALONEY. So in other words, they kept two sets of books, one for themselves to rip off the government and one for the government when they charged them the higher price—the lower price, right?
Mr. JOHNSON. I am not sure that I could characterize it as, quote, two sets of books, but clearly, they understood what they had received and that it was more than the posted price transferred.
Ms. MALONEY. So two sets of methods, one that benefited them greatly at the expense of the American people.
I yield to the distinguished ranking member and I thank him for his leadership on this issue.
Mr. MILLER. When was that practice first discovered?
Mr. JOHNSON. The issue of intra-company transfers? That particular issue has—the potential for that has been around for——
Mr. MILLER. A long time, right?
Mr. JOHNSON. [continuing] many, many years.
Mr. MILLER. And the posting of sour crude versus sweet crude, taking the sweet oil and paying sour prices for it, how long has that been going on?
Mr. MARTINECK. That has also been——
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Mr. MILLER. A long time in California, right?
Mr. JOHNSON. A long time.
Mr. MILLER. Is that correct?
Mr. MARTINECK. That is correct.
Mr. MILLER. So the information, I mean, if you were going to put together one of these lawsuits, not making light of your technical capabilities or anything, but there is an awful lot of information and allegations out in the domain, in the public discussion about this practice, certainly since California started its aggressive actions and alleging these various actions, is that not true?
Mr. JOHNSON. There is a lot of information concerning some of those practices in the public domain, yes.
Mr. MILLER. And do not let me characterize it, but one of the things when you first sat down to testify, and do not let me put words in your mouth, but essentially what you are saying was there is this huge amount of information and it became rather apparent to you the Federal Government was never going to do a damn thing about it, and that is why you filed your lawsuit, that the taxpayers for all of these schemes that you alleged were ongoing, pretty well substantiated by practices that you knew from within the industries and other that allege, whether it was the State or people involved in California, this was out there but what was not happening was the Federal Government was not reacting to this to try to straighten out these practices and get the royalties and that was the basis for your lawsuit, was it not?
Mr. MARTINECK. I mean, clearly, we were aware of the issues for a period of time and that is the reason why we brought the lawsuit.
Mr. MILLER. And others may have made that same decision.
[Witnesses conferring with counsel.]
Mrs. CUBIN. The rule is that the attorneys cannot coach the witnesses, only advise them on their constitutional rights.
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Mr. MILLER. Give me your constitutional answer.
[Laughter.]
Mr. MARTINECK. Clearly, there was other cases filed.
Mr. JOHNSON. Well, yes.
Mrs. CUBIN. And it seems to me that Mr. Miller is doing what he accused me of, of possibly compromising your case, so be careful with your answers.
Mr. MILLER. Oh, I will be careful with my questions. I was asking him about the general state of public knowledge, but I think our time is expired. We are going to go vote and come back or what?
Ms. MALONEY. When were you aware of the underpayments?
Mr. JOHNSON. From the time we were working with this, myself in the early 1990s——
Ms. MALONEY. So you knew in the early—when did you start working for ARCO? Was this in 1986 or when?
Mr. MARTINECK. In 1981.
Ms. MALONEY. In 1981. Were you aware of the practices in 1981?
Mr. MARTINECK. We were aware of what they were paying at that time. We did not understand the implications of it at that time because we were only seeing that they were paying on posted prices. We did not know how that related into the grand scheme of things.
Mr. JOHNSON. It was not until the early 1990s——
Mr. MARTINECK. Right.
Mr. JOHNSON. [continuing] that we actually saw how this fit together.
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Mr. MARTINECK. When we got involved on the marketing side of it.
Ms. MALONEY. When you got in the marketing, then you put the pieces together and you understood?
Mr. MARTINECK. Right.
Ms. MALONEY. How much money do you think they have ripped off from the American government over the years?
Mr. MARTINECK. I would even hesitate to guess what that number is.
Mr. JOHNSON. We have no way to actually answer that.
Mrs. CUBIN. The time has expired. The members have a vote. We will go vote, give everyone a chance to grab something quick to eat, real quick. We will be back and reconvene in 20 minutes.
[Recess.]
Mrs. CUBIN. The Committee will please come to order, and I apologize that we are late. We ended up having two votes instead of one.
The Subcommittee, the oversight hearing will return to regular order. We will be operating under the five-minute rule prior to the staff questioning the witnesses.
I do want to first make a statement regarding Mr. Inslee's questioning. I want to refocus the Committee that this is an oversight hearing. I think all of us are outraged at the practices that cost the Federal taxpayer, people in my own State, our State treasury money because oil companies did not pay what they actually owed. Everyone is outraged by that. It was testified that since 1986, these underpayments had been made.
Now, I have only been chairman of this Committee three-and-a-half years. Ever since I have been chairman of this Committee, I have recognized that there is an underpayment problem and the pilot projects for royalty-in-kind, although some people disagree that is the way to go, the ones that are in place are working very well, and this could not have happened had that been in place at the time. So for Mr. Inslee to indicate that this Committee and these members do not want to get what is owed the government is simply, simply wrong.
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Also, his statement about intimidation of witnesses and reducing the government's ability to get the taxpayer everything they are owed in Federal royalties is absolutely absurd. The only thing that has been reduced, that reduces the ability of the taxpayer to collect the properties that they are rightly due is the fact that POGO made a payment to two government employees who were, in fact, in the business of dealing with oil royalties and oil valuation. That weakens the Federal taxpayers' case horribly in future settlements in future lawsuits. That is the only undermining of authority that has happened. It is due to POGO and the two employees that took the payments.
So with that, thank you for your indulgence. With that, we will now go under the five-minute rule. Mr. Brady?
Mr. BRADY. Thank you, Madam Chairman.
Let me address some of the issues raised earlier. I appreciate Mr. Inslee raising the issue of campaign contributions. I want to commend and congratulate our Democratic Minority on their record amount of soft money contributions and record amount of hard dollar contributions that they have so gainfully acquired this year.
I just wish the Minority were as interested in Federal, special interest purchasing Federal employees, which is the case here today, as their new-found interest in campaign reform, because, make no mistake, these are the whistleblowers in front of us right now. Mr. Johnson and Mr. Martineck are the ones who are at risk, who developed their information for this suit on their own. They were misled, intentionally misled by those inside with information. Their suit, the seal was breached. The confidentiality was not upheld and they were encouraged by everyone from insiders to a U.S. Attorney to enter into agreements that they feel, and rightfully so, does not pass the smell test.
It seems clear to all that we have three, at least three fairly common thieves, Robert Berman, Robert Speir, and Danielle Brian, who used their inside information gained from their position of public trust to line their own pockets. They had unprecedented means and motives. The secrecy with which they have worked so hard to conceal their actions is damning alone. I think the question before us is, did the Justice Department, Energy, and Interior Department turn a blind eye to special interest purchasing Federal employees or did these three intentionally and successfully hide their legal conduct from the authorities?
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My one question, because it—two questions, because it goes to the heart of the matter, to Mr. Johnson and Mr. Martineck, from what you have learned, from what you know now, do you believe that the seal and secrecy of your original suit was upheld or breached, and I am not going to follow it up with who you might think and how it might have happened. I am simply asking, do you believe that the seal and the secrecy of your original suit was upheld or breached?
Mr. JOHNSON. It clearly had been breached at some point.
Mr. BRADY. In, and the final question, it is a simple one, from what you know now, do you believe that Mr. Berman, Ms. Brian, others who contacted you about the suit, do you believe that they honestly represented to you their intentions and motives in this case, honestly represented to you all their intentions and motives in this case, from what you know now?
Mr. JOHNSON. As I testified last November in a hearing, clearly, we were not told about the payments to Berman and Speir. Mr. Berman never indicated to me anything either way. Danielle Brian did not tell us about that and we did not learn about it until April of 1999.
Mr. MARTINECK. And clearly, there was a good period of time that passed between the time the agreement was signed with those individuals, meaning the other relator groups and ourselves, until the time we found out that Mr. Berman and Mr. Speir were involved in this.
Mr. BRADY. Thank you for being candid, in being cautious in your answers, because you do have a great deal to lose in this case. You are the true whistleblowers. It is our responsibility to take that breach of confidentiality, the damning secrecy, the misrepresentation, and to find out, again, did our authorities turn a blind eye or did these three successfully conspire to hide their actions, and that is at the heart of this issue, not the oil royalty matter, which I would love to debate at any time, and I love that issue. But unfortunately, that is not the one before us today.
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Thank you, Madam Chairman.
Mrs. CUBIN. Thank you. Mr. Underwood?
Mr. UNDERWOOD. I do not have any real questions other than one and then I will yield to Mr. Miller. In your estimation, either one of you, since many of the questions apparently have called for some speculation, how was the seal breached? Do you have any idea?
Mr. JOHNSON. We do not know how the seal was breached.
Mr. UNDERWOOD. Mr. Martineck?
Mr. MARTINECK. No. I would echo Mr. Johnson's response. The only thing that we did know is that it was breached.
Mr. UNDERWOOD. Okay. George?
Mr. MILLER. I thank the gentleman for yielding. I am delighted that Mr. Brady has arrived at his conclusion at the outset of the hearing. He could have waited for the rest of the evidence.
Mr. BRADY. Mr. Miller, it is what it is——
Mr. MILLER. No, no——
Mr. BRADY. [continuing] and sometimes common sense really dictates that.
Mr. MILLER. [continuing] that is interesting, except based upon exactly the—this is my time—based upon exactly what you said——
Mr. BRADY. And Madam Chairman, I will respect Mr. Miller's right to finish his statement.
Mrs. CUBIN. Thank you, Mr. Brady. The time——
Mr. MILLER. The court determined exactly otherwise. It was not as you said it was, and that is why these gentlemen are here today, because they are still looking for the other 60 percent of their agreement. But, in fact, the court said that that was not the case. The fact of the matter is, I do not know, and this hearing may help determine that, but clearly the Justice Department investigations and the Inspector General's investigations will also help determine that, but the two, as I understand the law, and correct me if I am wrong, the Federal employees can and do file these very same cases. They are entitled under the law to do so.
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In this particular case, it appears that they were not the formal petitioners, and whether or not they were paid to develop information or not, those are all allegations that have yet to be proved and this Committee has yet to hear from those individuals, so I find it disconcerting when we rush to judgment even before you have heard from the last panel and others who were directly involved in that. But that is the nature of this Committee, unfortunately, all too often.
As was testified before we went to the vote, there clearly was sufficient evidence in the public domain, in hearings and records developed by the State of California, by other people who have been involved in this issue, by Committees of Congress, by reports issued, that if you wanted to put together the specifics for this lawsuit, and, in fact, POGO here had been involved with the State of California, with others, in those investigations, in those legal proceedings under false claims.
So we really do not know yet what happens if people are engaged in wrongdoing. Traditionally, as I understand it, if a Federal employee had filed such a case, they would have been walled off at that point. That, I think, is a normal process, because in this case, they were not formally filing. Their departments apparently did not know of that until later. So there is an awful lot that yet is to be determined before we rush to judgment. But what is not yet to be determined, or what has been certainly determined to the extent to which rewards have already been received, and that is the allegations of the false claims.
In your claim, you say that, in your first scenario, you say that the companies are misrepresenting that the first sale of oil under a buy or sell agreement between themselves and/or other parties is the actual value received for the oil. What are you telling us there?
Mr. JOHNSON. Okay. That is an issue that had not been brought forward before, was not used, and was not understood well by the government. This is an issue that we were the first people to bring out and to really explain to the government. This is the understanding that when a company enters into what is called a buy/sell agreement, that they essentially exchange the oil from one place to another, but it is structured in the manner of a sale at one location for some price and a purchase at another location for some related price, and the fact of the matter is, and what we have said, is that price is really irrelevant to the actual value of the oil.
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Mr. MILLER. That is a paper transaction? It is not a real—you say that is not a real sale?
Mr. JOHNSON. There are checks written, there are invoices created, wire transfers made. There are a lot of audit trails created from that, but they are not real.
Mr. MILLER. It sounds like a Colombian cartel.
Mrs. CUBIN. The gentleman's time is expired.
I would like to make a point of clarification. While, in fact, it is true that Federal employees can file in suits like this, these two employees did not file. And when Federal——
Mr. MILLER. That is what I said.
Mrs. CUBIN. Yes. I am not arguing with you. I am making a point. When Federal employees do file these suits, the vast, vast majority of the time, they are dismissed because the judicial branch of government and the Department of Justice do not want money to influence a government employee's decision about how they do their job. And so that is why they are practically always dismissed, and when they are not, as Mr. Miller said, the government employees are walled off from any further action on the issue at hand, in this case, oil valuation, and this did not happen. As a matter of fact, one of the people who received a check for $383,600 and more to come described himself as the key person in the regulatory revision process in this. So those are the facts. I just wanted to make sure they were on the record clearly.
Mr. Schaffer?
Mr. SCHAFFER. Thank you, Madam Chairman.
Mr. Johnson, just in answering Mr. Miller's question, I do not remember exactly how he characterized the particular methods that were used to obscure the value of the subsequent royalties in question, but your answer was that the government had not previously been aware of this scheme and this strategy or something to that effect. Did I characterize that so far correctly?
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Mr. JOHNSON. That is correct. The government did not understand it and was not aware of it.
Mr. SCHAFFER. The government, does that include Mr. Berman or Mr. Speir?
Mr. JOHNSON. Mr.—I do not know about Mr. Speir because I have never spoken to him. Mr. Berman did not understand how it worked. Clearly, the government and Mr. Berman were aware that those, quote, buy/sell agreements existed, but they were not aware of how they were used and the resulting impact.
Mr. MARTINECK. And the other thing I would like to point out, too, is Mr. Miller was referring to all these things being out in the public, and a lot of the issues that were brought in our case were unique to our case and they were not out in the public's eye as he would suggest in his statement.
Mr. SCHAFFER. I have not had a chance to go through the details of the differences in the three false claims acts, but were these unique discoveries included in either of the other two claims?
Mr. JOHNSON. No.
Mr. SCHAFFER. No? Okay. In the previous question, I asked you about the attorney you were advised to contact by Ms. Brian and you said the name of that attorney mentioned or suggested to you was Lon Packard. I neglected to ask, did you contact Lon Packard?
Mr. JOHNSON. No, neither I nor my attorney contacted him.
Mr. SCHAFFER. Thank you. Given your previous answers about the level of understanding by Mr. Brock of many of these issues, did you try to take advantage—and the testimony that he provided was more evidence that his level of understanding was perhaps not what you would suspect in being part of false claims suit—did you try to take advantage of his disappointing testimony to renegotiate the contract that you had?
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Mr. JOHNSON. Well, we certainly had discussed, after we learned about his actual background, we did have discussions with POGO and their attorneys regarding the renegotiation of the contract. However, in the end, we decided not to make any change and actually sent a letter saying essentially a deal is a deal. We are going to abide by the terms of this agreement. We signed it and we will honor it, and that was prior to the time we learned about Berman and Speir.
Mr. SCHAFFER. I really want to explore that particular aspect, because, obviously, at one point, you thought POGO and their witnesses or those collaborating in their particular interest, their false claims act, were credible additions to perhaps enhance the success of your claim. Later, you came to a different conclusion. What was it that persuaded you that POGO had something to add to your efforts?
Mr. MARTINECK. It was not so much that they had something to add, because we knew our knowledge of the facts were correct. We had seen the dealings of these companies in the past and we had all the certainty that we needed to know that we would be successful in proving our case. The fact of the matter is, we were not sure how a judge might see us as relators down the road and that was why we signed that agreement.
Mr. SCHAFFER. Were there any persuasive efforts by the U.S. Attorney to enter into this agreement with these other two false claims claimants?
Mr. JOHNSON. Well, certainly the U.S. Attorney's office encouraged all of the relators to work together. It is in the best interest of the country, the nation, for the relators not to be arguing and for there to be one suit versus three. But other than that, I mean, that was the motivation there.
Mr. SCHAFFER. One last thing. Two others have asked already, but I just want to ask one more time, if you were a member of Congress, where would you look to find out where this breach in secrecy took place, as to the fact that the claim was—if you were me, where would you look?
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Mrs. CUBIN. The gentleman's time has expired. Would you like to answer the question?
Mr. JOHNSON. My answer is, I really have no idea where I would look for that. It could have been a number of places.
Mr. MARTINECK. My response would be somewhere internal, because we filed it to the government and we expected that to be kept secret, like we were expected to keep it secret.
Mr. SCHAFFER. Sure. Thank you, Madam Chair.
Mrs. CUBIN. The gentleman's time is expired. Mr. Miller?
Mr. MILLER. Thank you, Madam Chairman.
Mr. Johnson, another way that in your suit you say that the oil companies would cheat the taxpayers is that they would falsely classify oil as lower priced sour—that is oil with a higher sulfur content, crude oil—or as oil subject to quality penalties when such oil was, in fact, higher valued sweet oil. Can you explain that, what the oil companies were doing there?
Mr. JOHNSON. That involves a situation where the oil companies take sweet oil and perhaps classify it as sour and pay a lower price than what it is really worth, or where it may, in fact, be blended and mischaracterized from that standpoint.
Mr. MILLER. So these would be—sweet oil and sour oil are not necessarily found in the same place, is that correct? In California, you can find sour oil, I think, in Bakersfield and sweet oil you might find offshore or something, is that correct?
Mr. JOHNSON. You can find sweet and sour oil in the same fields, the same locations, not within the same well.
Mr. MILLER. Not in the same well. So this would be a conscious decision to label oil as sour or label oil that was subject to penalties when, in fact, it was not. You would have to make that conscious decision?
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Mr. JOHNSON. Clearly, in our lawsuit, we said this was done consciously.
Mr. MILLER. Another one that you allege was that they used sales to affiliated companies to mask the true value of the oil. What are they doing there? What are the oil companies doing there to be deceptive?
Mr. JOHNSON. As I believe I mentioned this morning in testimony, they have what they call a transfer price, which is usually the posted price, to represent the value of the oil at which royalties are paid. That is not necessarily what they actually receive for the oil and we have shown we knew that they had received higher values, in fact, for the oil.
Mr. MILLER. Again, that would have to be a conscious decision. You would have to go through these transactions, paper transactions or otherwise, to make it appear as though the sale to the subsidiary had accomplished that fact?
Mr. JOHNSON. Certainly. As we alleged in our lawsuit, they were aware of the situation.
Mr. MILLER. Another one was the suggestion that the oil companies would pay royalties on the basis of the API gravity penalties when, in fact, the oil had been commingled to yield a mixture of oil that would not be subject to that. What is going on there? That is a variation on the sour/sweet scheme.
Mr. JOHNSON. Yes. That refers to the situation where oil of a, say, a lower gravity may be blended with oil of a higher gravity, yet still may be sweet. Both streams may be sweet. The final commingled stream is sold for a higher value than either of the two entry streams are paid on royalties.
Mr. MILLER. So there, the oil companies are paying a royalty to the Federal Government. They are paying a royalty based upon a sour price or a penalty price. They then commingle that oil and when they then go to sell that oil in the real market, that oil is not subject to penalties because it has been commingled, either due to a sourness and sweetness or because of the penalty nature of the oil. They then sell that at a higher price and the royalty does not reflect that higher price.
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Again, here, an oil company would have to make a conscious decision to commingle the oil, blend it to such a state so that the purchaser would not be subject to penalties, and then report two different prices to the government in the State of California or to the Federal Government.
Mr. MARTINECK. Just one correction on what you said there, was that it does not necessarily have to be a sour barrel. It could be a lesser gravity——
Mr. MILLER. There are two classifications. You could do this with sweet and sour oil or you could do this with penalty oil, which is not subject to questions of sweet and sourness.
Mr. MARTINECK. Correct.
Mr. MILLER. But the point is here, you have to make a series of conscious decisions to defraud the public. You have to make a decision to take penalty oil and commingle it with non-penalty oil but pay the government a royalty based upon the penalty oil, and then when you sell the commingled oil, which is now of higher quality, you get a higher price, do not tell the government what the real sale price or the real value of that oil was. That is the process you go through.
Mr. MARTINECK. That is what we allege, sir.
Mr. MILLER. Again, that would have to be a conscious decision?
Mr. MARTINECK. Yes.
Mr. MILLER. That is why it is called fraud. You make an intentional decision to perpetrate a fraud.
Mr. MARTINECK. Yes. That is what we alleged in our lawsuit.
Mr. MILLER. This was very prevalent, I know, in my State and in Wyoming, where you have various grades of oil in relation to one another, is that correct?
Mr. MARTINECK. That is correct.
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Mr. MILLER. Thank you.
Mrs. CUBIN. The gentleman's time is expired. I would like to point out that while Mr. Miller's questioning did not fall within the jurisdiction or within the subject of this oversight hearing, I was glad to allow that information to go onto the record because I find that practice just as distasteful, despicable, if you will, as Mr. Miller does. However, that is not the subject of this hearing, although having it on the record certainly——
Mr. MILLER. Will the gentlewoman, because I would like to——
Mrs. CUBIN. Yes, sir.
Mr. MILLER. God knows, I would not intentionally violate the rules of this Committee.
Mrs. CUBIN. Oh, I know.
[Laughter.]
Mrs. CUBIN. Nor I.
Mr. MILLER. Just teasing.
Mrs. CUBIN. Nor I.
Mr. MILLER. Nor you, absolutely. We have difference of opinions.
But my point here is that these were practices that were fairly common, tragically so for the taxpayer, but these were fairly common in my State. These were tragically common business practices that were ongoing and they could not have been conducted without a lot of people being involved in order to do this.
Mrs. CUBIN. Mr. Miller?
Mr. MILLER. You know, you are not dealing with a suitcase full of cocaine. You are dealing with a train of tanker cars or trucks or pipelines, so you are moving a lot of product here to get $66 million on royalties a year just from the Federal Government, and that is pertinent to this because the question, one of the underlying questions of the investigation is, how was this information developed, was the seal breached, was it taken from a breached seal, was it developed by government employees and then back-channeled to somebody else, or did POGO or, what was the other person, Mr. Wright, did they develop this on their own independently, and as we see, was it developed from public documents? I mean, I think——
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Mrs. CUBIN. Mr. Miller, I allowed——
Mr. MILLER. So, you see, I did not intentionally break the rules——
Mrs. CUBIN. Obviously, and I was certainly glad to have that.
Mr. MILLER. Good. Thank you. I feel better.
Mrs. CUBIN. Now, would it be rude——
Mr. MILLER. I feel like I got a Good Housekeeping seal of approval.
Mrs. CUBIN. Would it be rude, Mr. Miller, if I were to ask you why, when you were chairman of this Committee, if you knew this was going on, why did you not do anything about it?
Mr. MILLER. We went after them, and——
Mrs. CUBIN. Why was no attempt made——
Mr. MILLER. The same reason the whistleblowers——
Mrs. CUBIN. [continuing] to change this until I became chairman of this Subcommittee?
Mr. MILLER. Because for the same reason our whistleblowers found out——
Mrs. CUBIN. Mr. Tancredo?
Mr. MILLER. [continuing] that the Reagan-Bush Administration would not deal with this——
Mr. TANCREDO. Thank you, Madam Chairman. I appreciate the time that you have allowed me to speak.
Mrs. CUBIN. The question was, would it be rude? I guess the answer would be yes?
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[Laughter.]
Mr. MILLER. I was traveling all over Wyoming chasing these people around. Where were you? You should have run for office earlier.
Mrs. CUBIN. It was not these oil people you were chasing around in Wyoming.
Mr. MILLER. Oh yes, it was. It was those people up there in that tight, tight sands. Is that not where a tax break breaks oil——
Mrs. CUBIN. What you were calling tight then?
Mr. MILLER. There were tight, tight sands and apparently the only way you can get oil out of tight, tight sands is through a tax break.
[Laughter.]
Mr. MILLER. You do not even have to drill for it. You ask the Ways and Means Committee.
Mrs. CUBIN. Mr. Tancredo—those tight sands are gas, not oil.
Mr. MILLER. That is gas?
Mrs. CUBIN. Mr. Tancredo?
Mr. MILLER. They were selling it as oil.
[Laughter.]
Mrs. CUBIN. Were they collecting royalties? The Committee will come to order.
Mr. MILLER. Back to the subject matter at hand.
Mrs. CUBIN. Mr. Tancredo?
Mr. TANCREDO. Thank you, Madam Chairman. I have something in common with Mr. Inslee and his earlier comments, strangely enough, in that I, too, am relatively new to the Congress and I, too, I guess I will use the word ''shocked'' in the Casablancan sense of that word, as I think Mr. Inslee was using it, shocked. But our shock is at two different things entirely.
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We were apparently observing two different events, because although there has been a certainly sometimes spirited and constantly blatant attempt on the part of the Minority to refocus the direction of this Committee's work onto issues totally irrelevant to the original, to the stated purpose, it is nonetheless important for us to try and determine where true concern should exist and why, if we are shocked, why we should be concerned as public policy people here.
And I think we have a right to be concerned and, indeed, shocked because, in fact, although some oil companies have settled in this situation, in this case, others have not, and very large oil companies have not yet settled. It is my concern that, in fact, those cases may have been—the government's case against them may very well have been jeopardized by the actions taken by these employees. Certainly, the possibility that these two gentlemen working for the Federal Government in policymaking roles in the oil industry receiving huge payments from people who benefitted as a result of legal actions brought against oil companies, surely that would bring question, at least question, to the mind of any juror or any judge in cases not yet settled.
And that is what we should all be concerned about here, whether or not the government's case has been jeopardized, not whether the oil companies are going to get—these greedy oil companies, we are not getting at them enough. I am worried about the government's case here and that is the real purpose of this hearing, is to determine what policies need to be changed, perhaps, looked at in the Department of Interior and the Department of Energy so as to prevent this kind of thing from happening again. And that is something we all have a responsibility for, it seems to me, and that is where we are trying to go with this hearing, all bantering to the contrary, not being relevant.
I would like to ask you, you mentioned earlier, I think, that there were other members of—well, no, let me ask you this. Did the Justice Department ask you at any time to brief Interior employees in regard to your allegations?
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Mr. JOHNSON. Yes, they did.
Mr. TANCREDO. So other members of the Federal Government, other employees of the Department of Interior knew, while you were under seal, they knew about your allegations. That is essentially the purpose of putting it under seal, so that, what, people can begin to look at this from—I am not sure exactly why they would have to know. Could you help me understand that part?
Mr. JOHNSON. This is a very technical lawsuit——
Mr. TANCREDO. Oh.
Mr. JOHNSON. [continuing] and the Justice Department did not have the expertise within the Justice Department to understand it and they enlisted the aid of the Interior Department personnel, selected people. We do not know who all they talked to. We do not know who all knew about it. There were some meetings where we had Interior Department or Minerals Management Service people present. There were other times when we were not sure if maybe the people who we initially talked to had perhaps told others about it and then they were calling to ask questions. We did field a number of questions from Interior Department people.
Mr. TANCREDO. So it is true, then, that many other Federal employees knew about at least your allegations in this case?
Mr. JOHNSON. Yes, that is true.
Mr. TANCREDO. So when there is some sort of attempt to deflect attention to the idea that these people, Berman and others, were just two good employees and therefore deserved almost $400,000 in payments, just because they were a couple of good guys, but there were a lot of people. Do you know of anybody else in the Federal Government, any of these other people who were involved who knew about this case? Do you know of any of the others that got any money from it?
Mr. MARTINECK. No.
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Mr. JOHNSON. No.
Mr. TANCREDO. No, just Berman and Wright. What an interesting——
Mr. MARTINECK. Berman and Speir.
Mr. TANCREDO. Berman and Speir, excuse me. What an interesting coincidence. Thank you, Madam Chair.
Mrs. CUBIN. The gentleman's time is expired.
We will now move to the staff questioning period. Under the prior motion, Mr. Casey is recognized on behalf of the Majority for 15 minutes. We will then turn to the Minority side to have staff or member, whomever they decide, to do their questioning. Mr. Casey?
Mr. CASEY. Thank you, Madam Chairman.
Mr. Johnson and Mr. Martineck, did the court in your case ever rule that the seal had been breached? Did they ever address that issue?
Mr. JOHNSON. It was never addressed.
Mr. CASEY. Did the court in your case, when you made your motion to void the sharing agreement, the Multi-Relator Counsel Agreement, rule on whether or not the payments to Mr. Berman and Mr. Speir were appropriate or proper or address them at all?
Mr. JOHNSON. No, the judge did not address that directly.
Mr. CASEY. I want to make sure I understand it. I have read the file there, and as I understand it, Judge Hannah was simply ruling that you had not made your claim that you had been fraudulently induced into that contract, and that is all he said?
Mr. MARTINECK. That is correct. I believe all he said was, motion denied.
Mr. CASEY. Thank you. Let me go back to the telephone calls from Mr. Berman. In those telephone calls, was this a mutual education or was he seeking information or giving you information or was it all one way?
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Mr. JOHNSON. From the technical standpoint of how the oil was marketed and how oil could be valued, that was strictly one way. I helped Mr. Berman understand that. Mr. Berman did, however, tell me occasionally that activities within the Interior Department, he expressed disappointment in the way that the MMS had behaved at times. He was frustrated at times and he, perhaps the word is vented to me about that.
Mr. CASEY. I am sorry. Did I interrupt you, Mr. Martineck?
Mr. MARTINECK. No.
Mr. CASEY. During the occasions when you briefed other Interior employees on your case, and I think, as I understand it, there was at least one large session out in Colorado at the request of the Justice Department, were the government employees at that meeting that you recall given any kind of explicit warning that this case was under seal and the facts of it were to be kept confidential?
Mr. JOHNSON. Yes. Clearly, at the beginning of the one large meeting that I had, I know that that was discussed and that this was strictly under seal and not to be talked about.
Mr. CASEY. So I think we can assume that a Justice Department lawyer would have understood that. So any Interior employee who learned of this case in the course of his or her job, as far as you know, was expressly warned that the case was under seal and that it should not be discussed outside the workplace, and, in fact, a limited crew within the workplace?
Mr. JOHNSON. To the best of my knowledge, every time that was discussed or was explained to an Interior Department employee, they were told that this was under seal.
Mr. CASEY. Back to the telephone call with Ms. Brian, if I heard you correctly and if I understand correctly, she did make reference to some kind of government employees considering their own qui tam or suggesting they might want to join yours or something of that sort. Did she suggest to you why it would be that she would want to call your lawyer and have them get in touch with these folks?
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Mr. JOHNSON. Well, she explained that, or she told me that these folks, these government employees, did not have the degree of understanding that Mr. Martineck and I did, but that they had been around for a long time and that there could be some confusion about whether they had, in fact, been the first. She clearly understood and made clear to me that she believed we were the ones who had the specific information and knew it, but she did say that these other people might be considered by somebody, a court, to be the first, and—and—she encouraged that we should talk to them and see about joining with them.
Mr. CASEY. Now, prior to the time of you filing your case and subsequent to the Long Beach cases, the State of Alaska, the State of Texas, as well as the State of California had succeeded in suits on related claims, similar allegations, if you will. So when Ms. Brian refers to government employees, did you even have any clue that she was talking about Federal employees, or might it have been a State employee or a city employee?
Mr. JOHNSON. Well, in fact, the groups who had actually collected the money were the State of California and the State of Alaska, to my recollection. I was not sure and she did not make clear to me.
Mr. CASEY. Okay. Did I deduce properly during your earlier answers when you were discussing the MRCA, the sharing agreement—let me just sort of rephrase it and see if I am correct—that when the point is reached at which there is your case filed first, Mr. Wright's case filed second, and the POGO, Brian, and Brock case filed third, that the best strategic decision in the interests of moving ahead, establishing the fact of the allegations in your case, putting an end to the underpayments, collecting past royalties, was for all three groups to make a common cause and cooperate with each other.
Mr. JOHNSON. That is correct. We did, in fact, join with each other and we filed a joint suit after that.
Mr. CASEY. Now, at the moment, I mean, there has been some mixing of terms and we all—terms like relator and so forth become comfortable, but, in fact, right now, who are the relators in Johnson v. Shell?
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Mr. MARTINECK. Mr. Johnson and Mr. Martineck. We are the only ones that the court saw to be proper relators.
Mr. CASEY. Is Harold E. ''Gene'' Wright a relator?
Mr. MARTINECK. No, he is not.
Mr. JOHNSON. No.
Mr. CASEY. Is Danielle Brian a relator?
Mr. MARTINECK. No, she is not.
Mr. CASEY. Is Leonard Brock a relator?
Mr. MARTINECK. No, he is not.
Mr. CASEY. Is the Project on Government Oversight a relator?
Mr. MARTINECK. No.
Mr. CASEY. Do any of those parties contribute at this point to the prosecuting of the case on a daily basis? Do you all meet together and plan trial strategy, share information and so forth?
Mr. MARTINECK. No, we do not.
Mr. CASEY. Who does that job?
Mr. MARTINECK. Our attorneys are the only ones that are working on the legal side of it, and myself and Mr. Johnson are the ones that handle the details.
Mr. CASEY. So you carry the burden of proving this case and effectively following through on the whistleblowing, is that right?
Mr. MARTINECK. That is correct.
Mr. CASEY. But Mr. Wright continues to receive his share of settlement checks as they come through?
Mr. MARTINECK. Yes, he does.
Mr. CASEY. And POGO continues to receive a share? The POGO, Brian, and Brock group continues to receive a 40 percent share of every settlement check that comes through?
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Mr. MARTINECK. That is correct.
Mr. CASEY. And they do not participate in carrying this workload or proving the allegations?
Mr. MARTINECK. None whatsoever.
Mr. CASEY. I forget who used the phrase. Is that what is meant by the phrase ''mailbox money''? You just sit back and wait and you do not have to do anything?
Mr. MARTINECK. I have heard that term before.
Mr. CASEY. Somebody along the way had used that. I would reserve my time.
Mrs. CUBIN. The gentleman reserves the balance of his time. Now I recognize the Minority side for whomever would wish to ask questions.
Mr. MILLER. Thank you. Thank you, Madam Chairman. I would ask unanimous consent that a letter from Mr. Lon Packard to Chairman Young and myself be made a part of this hearing record.
Mrs. CUBIN. Without objection, so ordered.
[The information of Mr. Miller follows:]
Mr. MILLER. Mr. Johnson, how much time have you spent with the Majority staff on this Committee going over testimony?
Mr. JOHNSON. Prior to the hearing today, we met with them one time, one meeting.
Mr. MILLER. When was that?
Mr. JOHNSON. Last week, I believe.
Mr. MILLER. For how long?
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Mr. JOHNSON. I am not sure, but it was several hours.
Mr. MILLER. What did you do?
Mr. MARTINECK. We talked about how the process would be handled as far as, you know, how we are to address people, how the room was going to be set up, what types of things we could be expecting.
Mr. MILLER. Did you go over questions?
Mr. MARTINECK. No, we did not go over questions.
Mr. MILLER. No questions at all?
Mr. MARTINECK. No.
Mr. MILLER. Did you go over the characterizations of the various parties, POGO or other relators or non-relators or people or what have you?
Mr. JOHNSON. No, I do not believe so. I think that had been pretty clear.
Mr. MILLER. On the question of when you say that you are now involved in the continued prosecution, what is left to continue to prosecute?
Mr. JOHNSON. Well, we have three remaining defendants who have not settled. We are taking depositions. We are attending depositions. We are—both Mr. Martineck and I have participated in writing an expert report and doing the calculations of damage analysis, pretty much a full-time job.
Mr. MILLER. You are the lead on this?
Mr. JOHNSON. That is correct.
Mr. MILLER. What is the Justice Department doing?
Mr. JOHNSON. Well, the Justice Department is taking depositions on two of the companies in which they have intervened against, two of the defendants. However, we are participating with them. We attend their depositions. We actually help write questions for them.
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Mr. MILLER. So it is not just you. The Justice Department is involved in, what, two of the three, is that what you are saying?
Mr. JOHNSON. That is correct.
Mr. MARTINECK. That the Justice Department has taken the lead on those two, but we play a substantial role in helping them in that.
Mr. MILLER. Who will make the decisions whether there will be settlements or not or whether there will be prosecution or to go forward or not?
Mr. JOHNSON. That is a joint——
Mr. MARTINECK. Yes.
Mr. JOHNSON. That is a joint effort. We jointly do the calculations with the Interior Department personnel and the Justice Department people. Any time a settlement is reached or negotiated, we work——
Mr. MILLER. No, but, I mean, do you get to make a decision? Do you or the other relators, do you have a veto over a decision to settle as opposed to go to trial?
Mr. MARTINECK. We are certainly a signing party to that settlement and we could hold up the settlement——
Mr. MILLER. You could hold up that settlement?
Mr. MARTINECK. Yes, if we deemed it not to be appropriate.
Mr. MILLER. And the other relators could do that also?
Mr. JOHNSON. I am not sure that they could.
Mr. MILLER. No, I mean, do they have the authority under your agreement and under the way the suit is progressing? Did they review settlement agreements?
Mr. JOHNSON. No.
Mr. MILLER. Are they signatories to it?
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Mr. JOHNSON. No.
Mr. MILLER. And so when we see settlements, we can assume that you have, in fact, agreed to each of those settlements?
Mr. MARTINECK. We have agreed to the compromise to settle the case.
Mr. MILLER. I am sorry?
Mr. MARTINECK. We have agreed to the compromise to settle the case, taking into consideration all the risks of taking a suit such as that to trial. In that you may be unsuccessful, there is a lot of risk to weigh in that, so yes.
Mr. MILLER. And if you decided otherwise, Justice would not be able to bring about that settlement?
Mr. MARTINECK. I believe that is right. We have never encountered that situation.
Mr. MILLER. Yes. But what is the role of the other joint parties here, in the three joined parties?
Mr. JOHNSON. Right now——
Mr. MILLER. Are you their agent in this case? I mean, do you stand in their shoes, or——
Mr. JOHNSON. We are not lawyers, and so I am not sure—I do not know legally how that works. I know we have an agreement with them. We are prosecuting the case to the best of our ability and——
Mr. MILLER. That was the original agreement when the three cases were brought together?
Mr. JOHNSON. I am not sure that the original agreement ever anticipated exactly how it ended up, where the other relators were actually dismissed. But because we were left in, we have continued to do this to the best of our ability, to bring the maximum value return in a reasonable manner.
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Mr. MARTINECK. Without their assistance.
Mr. MILLER. Have you differed with the government? I mean, you have some experience in these valuations. Have you differed with the government on valuations at time of settlement?
Mr. MARTINECK. Sure. We have had issues that have come up that we have had to reach compromise on. They have got facts that we do not have that we have looked at, and what we have always come to the bottom line, that the facts are what they are and we come to an agreement on what the settlement should be.
Mr. MILLER. Madam Chairman, I will reserve the balance of my time until we vote.
Mrs. CUBIN. Actually, I did not hear what you said. You reserve the balance of your time?
Mr. MILLER. Yes. We have a vote on, so we have to go vote.
Mrs. CUBIN. Okay.
Mr. MILLER. You have reserved your time, so you will get to ask questions when you come back or I will ask questions when we come back.
Mrs. CUBIN. Let us just go vote and we will be straight back, and we will keep your time.
[Recess.]
Mrs. CUBIN. The Subcommittee will please return to order. The chair recognizes Minority staff to conclude their questioning. Ms. Lanzone?
Ms. LANZONE. Thank you. Mr. Johnson or Mr. Martineck, the Multi-Relator Counsel Agreement dated March 9, 1999, that is still in effect, correct?
Mr. JOHNSON. Yes.
Mr. MARTINECK. Yes, it is.
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Ms. LANZONE. And on page two of that document, paragraph two, it says that the agreement clearly says that any relator's recovery shall be divided 40/40/20 after the payment of the 2 percent consulting fee to Johnson and Martineck. That would be you, correct?
Mr. JOHNSON. That is correct.
Mr. MARTINECK. That is correct.
Ms. LANZONE. And you are receiving that two percent off the top?
Mr. JOHNSON. Yes, we have.
Ms. LANZONE. Okay. And then on the next page, there is a series of conditions, I guess, which include—four, five, and six relate to fees, attorneys' fees, manpower, I mean, I will give this to the chairman so that it can go into the record, but it looks like the other relators in the agreement are contributing significant costs to the ongoing litigation, is that correct?
Mr. JOHNSON. No, it is my understanding that there are not. There have been some contributions from the other groups, but——
Ms. LANZONE. It says, each group must invest equal manpower to the case. In other words, if it takes 21 attorneys and 21 paralegals working full time to prosecute the case, then each group must commit seven full-time lawyers and seven full-time paralegals. Is that not——
Mr. MARTINECK. That has not happened.
Mr. JOHNSON. That has not happened, that is correct.
Ms. LANZONE. That has not happened. Okay. What about expenses of the common litigation fund must be paid equally by the three groups? That is not happening? Right now, the Brock/POGO group would owe $220,000 and the Wright group would own—own or owe?—$170,000 to achieve parity.
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Mr. MARTINECK. I know at some point, all those groups contributed something. I do not believe that they have continued to contribute. I think the Wright group has continued to honor their obligations. I am not sure that the Brock/POGO group has.
Ms. LANZONE. Okay. Well, maybe we will—I guess next week we can pursue that.
Mr. JOHNSON. The answer to that is that we do not know exactly how all that has worked.
Ms. LANZONE. Okay. So before, when you were saying that you are doing everything and they do nothing, then that is not exactly correct if they are contributing financially by paying your attorneys, I guess——
Mr. JOHNSON. Well——
Ms. LANZONE. [continuing] and you get the 2 percent off the top. That is really all I was asking.
Mr. JOHNSON. Well, in answer to your question, we are doing all the work in the case and we do know that we have contributed the vast majority of the money. But in response to your question, we do not know exactly how much the other groups have contributed.
Ms. LANZONE. Even though the agreement says it will be shared equally?
Mr. JOHNSON. That is correct.
Mr. MARTINECK. That is correct.
Mrs. CUBIN. Do you yield back the balance of your time?
Ms. LANZONE. Yes. I am sorry.
Mrs. CUBIN. Thank you. Mr. Casey?
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Mr. CASEY. Thank you, Madam Chairman.
I have perhaps just two, and forgive me, I continue to get confused a bit and I want to make sure it is clear on the record. The purpose of the Multi-Relator Counsel Agreement, well, its purpose but its motivation, I guess you might say, originally was to strengthen the joint effort to expose the underpayments, put a stop to it, collect past-due underpaid royalties, is that correct?
Mr. JOHNSON. Sure.
Mr. CASEY. So when you moved to void that contract back in November, there had already been other disputes within the group. Had you made any attempts, formal or otherwise, prior, in relation to those disputes, to void the contract? As I understand it, there has been friction regarding the various weight that parties brought to that agreement and contributions and knowledge and expertise they were making and there were some serious disagreements within the three groups, Wright, Johnson/Martineck, POGO/Brian/Brock. Had you, Mr. Johnson and Mr. Martineck, made prior attempts to void the contract?
Mr. JOHNSON. I do not—no, I do not think you could say we tried to void it. We certainly had negotiated changes to the situation. We had disagreements. There is no question about that. But in the end, we agreed unilaterally on our side. We wrote a letter to the other groups and said we are going to abide by this. A deal is a deal and we will honor those terms.
Mr. CASEY. So after learning about the payments, and as I understand it, you learned essentially when the rest of the world learned, after learning about the payments to Mr. Berman and Mr. Speir, what about that caused you to take the drastic step, and very difficult legally, as I understand it, step of trying to void the contract?
Mr. MARTINECK. Clearly, there was information that they withheld from us when we entered into that agreement which would have entered into our decision to make an agreement with them, and without knowledge of that, there is no way we would have signed that agreement.
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Mr. CASEY. At a hearing back in November of 1999 on your motion to void the contract, an attorney who was a witness for POGO, in other words, opposing your motion to void the contract, gave a deposition in which he offered the opinion that neither Mr. Berman nor Mr. Speir would have qualified as a relator or a fact witness or an expert witness in your case and that neither POGO nor Danielle Brian would have qualified as a relator in a Federal oil royalty false claims case. Do you take issue with that assessment?
Mr. JOHNSON. Based upon the knowledge that we have today, I would agree with that. But that was not the knowledge that we had at the time we originally entered into that agreement.
Mr. CASEY. Thank you, ma'am.
Mrs. CUBIN. Since we still have a little over three minutes on the Majority side, I just have one question for you, Mr. Johnson. If the government were to have taken large volumes, and I mean large volumes of its royalty oil in kind rather than in value, could the sweet versus sour misclassification have occurred?
Mr. JOHNSON. That particular misclassification would have been much more difficult to have been hidden.
Mrs. CUBIN. Thank you very much, and I thank you both, Mr. Martineck and Mr. Johnson, for your candid testimony. It has been highly educational. I think that you have given us a firm and credible account of everything that happened. The phone calls from Ms. Brian and from Mr. Berman, in my opinion, are quite disturbing. I appreciate your willingness to respond to the subpoena and answer our questions. Those folks will have an opportunity in two weeks to provide their version of the conversations, but in the meantime, please accept the Committee's thanks for being here and your cooperation in this oversight hearing. You are now free to go get some lunch or something, so thank you very much.
Mrs. CUBIN. Next, the chairman requests Mr. Bernard Kritzer to come forward to the table. I think he is out in the hall. Would someone ask him to come in? Mr. Kritzer has been here waiting and is just not here for the moment.
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Mr. Kritzer, would you please take a seat at the table? Oh, before you are seated, as you know, we had advised you earlier that all the witnesses would be sworn in and so I ask you to raise your right hand.
Do you solemnly swear or affirm under the penalty of perjury that the responses and statements given will be the truth, the whole truth, and nothing but the truth?
Mr. KRITZER. I do.
Mrs. CUBIN. Thank you very much. I would like to start out by saying how relieved and glad we are that all your medical tests turned out all right. Thank you for being here today and please accept my apology for having to wait for so long before you have been able to come forward. Your testimony will be very important to us and I do appreciate your cooperation.
Mr. KRITZER. Thank you.
Mrs. CUBIN. We will start out, I would like to just make a brief statement. Mr. Kritzer is now a Commerce Department expert on international chemical weapons treaty enforcement. Previously, Mr. Kritzer was the Department of Commerce's expert on oil markets. He was a widely known and highly regarded, and I would like to underscore that, authority on undervaluation of oil and royalties in the California market. Mr. Kritzer's work on oil matters is cited as a key source by Bob Armstrong, former Assistant Secretary at Interior.
Mr. Kritzer has also been cited, along with Mr. Berman, Mr. Speir, and Mr. Henry Banta and the Lobel law firm, who were comrades in arms in fighting for greater Federal attention on California royalty underpayments. Yet in the December 1996 agreement and then again in November 1998, the checks that were awarded to Mr. Speir and Mr. Berman were kept secret from Mr. Kritzer.
I think we will learn that Mr. Kritzer's depth of knowledge and depth of feeling on this matter is matched by the strength of his commitment to be an honest public servant. So with that, I would like to begin questioning.
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We are back under the five-minute rule, which is regular order for the Committee, so I will allow the questioning to begin with Mr. Brady.
Mr. BRADY. Madam Chairman, if I may reserve my question at this time.
Mrs. CUBIN. Certainly. I will go ahead, then, for five minutes and then I will yield to the other members of the Committee.
Mrs. CUBIN. Mr. Kritzer, would you please describe your career at Commerce and your responsibility for analyzing oil markets?
STATEMENT OF BERNARD KRITZER
Mr. KRITZER. My career at Commerce began in 1982. At that time, I worked for the Under Secretary for the International Trade Administration who was responsible for export control matters, among other things, controls on oil and natural gas equipment that was sold to East Bloc countries, and this involved in great detail work on the Soviet pipeline embargo and the sanctions in 1982-83.
Following that, I worked on the Alaskan oil and did a study on Alaskan oil in the 1980s, followed by a study on West Coast oil markets and the opportunities to export heavy crude oil from California in the late 1980s. At the same time that these things were going on, I worked on a whole series of national security studies involving imports of oil, involving U.S. energy trade with Communist countries.
Sometime in the mid-1990s, I began to move away from oil, specifically in 1996, and with the exception of work on a Section 232 analysis, in the last four years, my work has been in high technology and it has been, now, in the chemical weapons and nonproliferation areas.
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Mrs. CUBIN. Are you generally familiar with the oil royalty problems that were described by Mr. Johnson and Mr. Martineck and do you agree with their conclusions about the underpayment of the royalties?
Mr. KRITZER. I was not here for the attendance. I was outside, so I cannot—since I did not hear their conclusions, I cannot—I can tell you, based on personal experience, I am familiar with the problems and recognize that for some time there has been underpayment.
Mrs. CUBIN. And I think that you have been pretty vocal about that, is that correct?
Mr. KRITZER. Yes.
Mrs. CUBIN. It has been no secret that you have been aware of the practices, as well?
Mr. KRITZER. Yes.
Mrs. CUBIN. Interior, I believe, should have come forward and done more and done it sooner. How long ago did Interior have sufficient information to start collecting underpayments and to put a stop to those continuing underpayments, do you know—an estimation.
Mr. KRITZER. If I had to estimate the time at which the situation obviously became very sensitive to all was in late 1991. After a period of approximately 10 or 15 years, the State of California was able to settle with the oil industry for some $350 million. Around that time, the State of Alaska also worked out a settlement for greater sums of money.
Mrs. CUBIN. You are an acknowledged expert in oil markets. In fact, you played a key role in Interior's interagency study on California's undervaluation. Let me ask you, do you consider yourself a whistleblower?
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Mr. KRITZER. How do you define a whistleblower?
Mrs. CUBIN. Well, I think maybe that is the question. What is a whistleblower? You were an expert. You vocalized the underpayment, how it was done. You wanted this practice to stop. But you did not ever get any money for having done that, is that correct?
Mr. KRITZER. That is correct.
Mrs. CUBIN. Did you know about the Johnson and Martineck False Claims Act suit while it was sealed?
Mr. KRITZER. My only familiarity with that suit came as a result of some discovery requests in the last couple of years and an occasional reading of the newspapers. In these last four years, I really have not been heavily involved in this area. So other than occasional glimpse at the newspaper or in some request under discovery and, I believe, FOIA, that this was going on.
Mrs. CUBIN. How long have you known Bob Speir and have you worked on oil matters together?
Mr. KRITZER. I have known Mr. Speir approximately a decade. We worked on a wide variety of issues together.
Mrs. CUBIN. So that is quite a long time. You have known him very well, and have you collaborated on these oil underpayments work with Mr. Speir?
Mr. KRITZER. Mr. Speir and I were members of the Interagency Task Force in Interior between 1994 and 1996 and we worked together as part of a team on that.
Mrs. CUBIN. And what about Mr. Berman? Have you consulted with Mr. Berman or has he consulted with you on oil issues?
Mr. KRITZER. I have known Mr. Berman for a similar amount of time. We have worked on a number of issues. I would say that in both instances, since many of the studies that my agency did and other agencies do in the field of petroleum are interagency, I worked with these two gentlemen on many studies, and at the time, on a wide variety of energy issues, I found them to be highly competent, authoritative, and they did a very good job.
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Mrs. CUBIN. Mr. Berman was not a member of that task force; is that correct? But you and Mr. Speir were?
Mr. KRITZER. That is correct.
Mrs. CUBIN. Did Mr. Berman work closely with the task force? Was he at the meetings of the task force? And although he didn't belong to the task force, per se, did he frame the study that was being developed by the task force?
Mr. KRITZER. To the best of my recollection in 1993 and 1994, Mr. Berman was part of a process at Interior where a study was set up. For whatever decisions they made, he was not a member of the task force. I found him, in the times that we consulted, to be a useful source of technical information or if I wanted to corroborate, he was among the number of people you could corroborate if there was something that had been said to us, you know, by people from Interior.
Mrs. CUBIN. And did he attend most of the task force or all of the task force meetings?
Mr. KRITZER. To the best of my recollection, no, he did not.
Mrs. CUBIN. Do you have any idea how many he did attend?
Mr. KRITZER. I can't recollect that. I don't think many——
Mrs. CUBIN. But he did attend——
Mr. KRITZER. I don't think many, if any, but I don't have a——
Mrs. CUBIN. But you don't know.
Mr. KRITZER. [continuing] complete recollection.
Mrs. CUBIN. Okay. Thank you very much. My time has expired. And now I will recognize Mr. Brady.
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Mr. BRADY. Thank you, Madam Chairwoman, and thank you Mr. Kritzer for being here.
I am curious, you are very knowledgeable in the area of oil valuation. You had, like the others, inside access to information dealing with this issue. You had perhaps the same motivation in that you think and believe strongly it is unfair how the valuation has been paid and collected, and you want to see that righted. But you weren't approached, you weren't part of a scheme to pay off Government officials for insider information. Knowing what you know now, but more importantly knowing your own principles, why do you think you weren't approached?
Mr. KRITZER. Excuse me for a second.
[Witness conferring with counsel.]
Mr. KRITZER. To answer your question, Mr. Congressman, in general, there at one time was a passing conversation between myself and Mr. Banta about the possibilities of looking into this. The conversation took place sometime in 1996, long before the California study was over. Absent that conversation, there were no other discussions.
Mr. BRADY. Sure. And I was asking more so, in that conversation, do you feel like you encouraged more contact with Mr. Banta or discouraged more conversation with him about this issue?
Mr. KRITZER. Well, all I can tell you is the issue never came up again in that context.
Mr. BRADY. Good. Let me ask you this: If looking at that check to a Government official, looking at that agreement between two Government officials and a special interest group, if you had been approached, in your personal view, if you had been approached to provide information that would enter into an agreement to receive payment for that information, would you have considered that agreement illegally supplementing the salary of a Federal employee, in your belief?
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Mr. KRITZER. Well, one, I am not expert on, you know, what's legal and——
Mr. BRADY. No, I'm just asking you——
Mr. KRITZER. [continuing] illegal in this.
Mr. BRADY. [continuing] your personal view from——
Mr. KRITZER. My mandate, my mission at that point in time, in light of where I was in my career and the assignments I had, was to complete the study, to bring to the attention of the Congress what was going on on this issue. We'd hoped that there would be a public to deal with it.
Mr. BRADY. So——
Mr. KRITZER. Once I completed that mission, that was my, that was my job.
Mr. BRADY. So, no, you wouldn't see—you would have thought that agreement was just fine?
Mr. KRITZER. No, I didn't say that.
Mr. BRADY. Would you have viewed it as unethical?
Mr. KRITZER. I don't think I want to choose to use words and judge something where other people may be sort of viewing it. This as something I would not have gotten into. But I cannot, you know, I'm not going to judge what others——
Mr. BRADY. Sure. And I'm not asking you. The reasons you wouldn't have gotten into it, was it it would have been simply personal ethics? Would it have been statutory law against that? Would it have been disclosure or ethical regulations which you were under as an employee? Any of those?
Mr. KRITZER. Throughout my career, in addition to the work that I have done, there have been a number of times where I have done a number of things that were pro bono, that were supplemental to what I did. Once I have completed the assignment, I move on. I think that's about as clear as I can make it to you.
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Mr. BRADY. Well, that's—I was hoping you'd be a little clearer than that. But just let me summarize because your answer is, I take it, you didn't see anything unethical, improper, any violation of law or ethical standards with an agreement had you approached to participate in this scheme?
Mr. KRITZER. I was, until the news came up last year that this had broke, I was unaware of any agreement.
Mr. BRADY. Sure.
Mr. KRITZER. Okay.
Mr. BRADY. But, again, back to the question. Had you been approached to participate in that agreement, receiving that type of check for the information that was provided, would you have viewed that to be proper?
Mr. KRITZER. I would have viewed it as something I would not have done.
Mr. BRADY. So improper?
Mr. KRITZER. You can, you know, you can determine as appropriate with that.
Mr. BRADY. I don't——
Mr. KRITZER. I'm not trying to——
Mr. BRADY. Oh, I'm not asking you to cast aspersions. I'm just trying to find out——
Mr. KRITZER. It's not something that I would be involved with.
Mr. BRADY. Yeah. It's not something you would be involved in.
Mr. KRITZER. Yeah. That is correct.
Mr. BRADY. And the reason is personal beliefs or statutory, agency laws, regulations against such an agreement?
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Mr. KRITZER. A series of things, to be——
Mr. BRADY. Both?
Mr. KRITZER. A combination of things.
Mr. BRADY. A combination of both?
Mr. KRITZER. A combination of those issues, plus the fact that at the time, after some 25 years in the field, I was moving away from the field, so that I was seeking other assignments, plus the fact that I just, I just do my job, and I, you know, go about my business.
Mr. BRADY. So you see your job——
Mrs. CUBIN. The gentleman's time has expired.
Mr. BRADY. Thank you very much.
Mrs. CUBIN. Mr. Schaffer is now recognized for 5 minutes, and Mr. Jones's phone needs to be answered before it keeps ringing.
Mr. SCHAFFER. Thank you, Madam Chairman.
I want to get back to your impressions of a couple of issues with respect to Mr. Berman. You stated that, although that he did not belong to that study team—let me state it a different way.
During Mr. Johnson's testimony, he had suggested that his role in new oil royalty regulations being developed by the Department of Interior were rather substantive, and that suggested that he took some credit for framing the overall policy of the rule. Do you believe that to be accurate? Was Mr. Berman—how involved was he in framing policy and the rules at the Department of Interior?
Mr. KRITZER. My comments on Mr. Berman's activities in this area would have to cut off in the middle of 1996. I think that he was a very good analyst. He worked on some of these issues. And to the best of my knowledge and recollection, he worked on a whole series of other issues related to coal, Indian issues, other things.
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Mr. SCHAFFER. And although he was not a member of the study team, would you say he framed the study?
Mr. KRITZER. I think he was one of a number of people who had initially identified or framed the issues prior to the start-up of the study based on his knowledge.
Mr. SCHAFFER. A number of people being how many?
Mr. KRITZER. Whoever else would have been over there in Interior working with him, which I assumed would have been MMS people.
Mr. SCHAFFER. His involvement you would characterize as substantial, as remote, what? Can you give us a better picture of——
Mr. KRITZER. Once the study began, he was a person if you had a question, a technical question, a question on an issue that had been represented to us by MMS, he was one of a number of people that I could check on because I make a practice that when I work on a study that I corroborate facts to make sure that they are accurate, and there frankly were some times I was not sure that the facts I received were accurate.
Mr. SCHAFFER. Thank you. Do you know POGO?
Mr. KRITZER. Yes, I know POGO.
Mr. SCHAFFER. Do you know Danielle Brian and Henry Banta?
Mr. KRITZER. Yes, I know them.
Mr. SCHAFFER. Do you know other members of the law firm of Lobell, Novins, Lamont?
Mr. KRITZER. I know several.
Mr. SCHAFFER. Do you know why they would be interested in oil valuation in royalty matters?
Mr. KRITZER. I think probably this was something that they had done in the past and had some past activity and involvement in with regard to the State of California.
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Mr. SCHAFFER. Did Berman or Speir ever tell you they were going to share proceeds of such a suit with——
Mr. KRITZER. No.
Mr. SCHAFFER. [coninuing] POGO, Mr. Banta and Ms. Brian are clearly familiar with your work in oil royalty underpayments. Did Banta, Brian or anyone else connected with POGO ever offer you a public service award?
Mr. KRITZER. No.
Mr. SCHAFFER. Any other kind of recognition, plaque, citations, certificates, anything like that——
Mr. KRITZER. Again, I would have to mention——
Mr. SCHAFFER. [continuing] awards of any sort?
Mr. KRITZER. [continuing] one thing to you, Mr. Congressman, that I can talk to you and help you, in terms of the valuation study in the 1994-1996 period. Once I left this area, my knowledge of what activities went on or were alleged to have gone on, I have no knowledge of it. I was removed and involved in other activities.
Mr. SCHAFFER. Sure. Thank you. In your view, would former Interior Assistant Secretary Bob Armstrong deserve credit for supporting efforts to address the California underpayment problems?
Mr. KRITZER. I would like to say this: That I thought that Assistant Secretary Armstrong was an outstanding person. I found that it was a pleasure to serve with him, that he had to balance a whole series of competing interests, including not only his staff, but for the first time taking people from another agency, integrating them into a study, being prepared to recognize that everybody brought a different perspective, had different things that they could bring to share. Had he not been on the study, I think that, and somebody else had directed the study, the results could have been much more confrontational.
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Mr. SCHAFFER. I just want to, before that light turns red, did he, in your opinion, support or oppose the efforts by you, Berman, Speir, POGO and the Lobell firm?
Mr. KRITZER. I wouldn't phrase it that way. I thought he supported the efforts by the members of the team to do the best job possible. I always felt it was kind of sad that he became sick at the end when it was an important time to shape things. But he was one of the best people in this field that I've worked with in my years in the government.
Mr. SCHAFFER. So you couldn't say whether you would characterize it as support or——
Mr. KRITZER. He worked—all I know is my contact with Bob Armstrong was through that team.
Mr. SCHAFFER. Yeah.
Mr. KRITZER. It was not through any other activity. I have not seen him since probably April or May of 1996.
Mr. SCHAFFER. Any indication that he opposed the efforts?
Mr. KRITZER. The efforts of the Interagency Working Group?
Mr. SCHAFFER. Yes.
Mr. KRITZER. No. I thought he was, without him——
Mr. SCHAFFER. That and the subsequent False Claims Act.
Mr. KRITZER. I have no knowledge that he was involved in that. As I tried to tell you a little earlier and to your colleagues, once I left in 1996, I moved on to other things, so my knowledge in those areas is nonexistent.
Mr. SCHAFFER. Thank you, Madam Chairman.
Mrs. CUBIN. The chair now recognizes Mr. Gibbons.
Mr. GIBBONS. Thank you, Madam Chairman.
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Mr. Kritzer, welcome. We are pleased that you have come here to help us better understand the issue that's before us today. I would like to step back, if I could, to that time frame in the 1996 time frame.
Prior to you leaving, your area of expertise dealing with oil royalties in, as you said, I believe, 1996——
Mr. KRITZER. Uh-huh.
Mr. GIBBONS. Had you any knowledge at that point in time when you left of the Johnson and Martineck qui tam lawsuit or false claim lawsuit?
Mr. KRITZER. I think the answer is no, but I really don't recollect.
Mr. GIBBONS. You told the Committee that you learned of it through news reports, newspaper.
Mr. KRITZER. It was either newspaper reports or, which mentioned the whole series of false claims, or more appropriately, when I first dealt with it in the sense that I had to deal with it directly, it was through some discovery requests for documents in my Department.
Mr. GIBBONS. Do you remember what time frame that would have been?
Mr. KRITZER. The document request would have been last year some time.
Mr. GIBBONS. So you had no knowledge of the Johnson qui tam lawsuit prior to 1999.
Mr. KRITZER. There was a general knowledge through reading several articles that there were a number of people who were pursuing lawsuits. And I think one of the articles identified one of these people.
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Mr. GIBBONS. Now, general knowledge, though, is what I'm trying to get at. What did you generally——
Mr. KRITZER. It would have just been reading the industry press. That's all.
Mr. GIBBONS. Okay. You indicated that you know of the Program on Government Oversight or POGO——
Mr. KRITZER. Uh-huh.
Mr. GIBBONS. When did you first become familiar with them?
Mr. KRITZER. Well, I knew about them because Mr. Banta and I have been friends for a number of years.
Mr. GIBBONS. And when would that friendship have developed?
Mr. KRITZER. This friendship developed in the 1980s, long before these issues were raised.
Mr. GIBBONS. And I would presume that that friendship carried over into some of your roles in the 1980s dealing with the California oil royalty issues?
Mr. KRITZER. There were no California oil royalty issues in the 1980s. The only issue that occurred was in the 1988 Omnibus Trade and Competitiveness Act, there was a requirement placed by Members of the Congress, the California delegation, to take a look at the heavy oil in California, which basically was not able to be marketed because there was such an excess, and to see if it was appropriate to consider an experiment to market small quantities of that oil. And at that time he and I got, you know, met.
Mr. GIBBONS. You indicated that you knew Ms. Danielle Brian. How do you know her?
Mr. KRITZER. I met her on several occasions through Mr. Banta.
Mr. GIBBONS. Do you recall the first time you met her?
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Mr. KRITZER. It was probably at a Christmas party.
Mr. GIBBONS. Do you recall when that was?
Mr. KRITZER. Possibly the mid-1990s. I don't have that good a recollection.
Mr. GIBBONS. Okay. What relationship have you had with POGO since you left your oil valuation job in 1996? What relationships have you been involved with POGO?
Mr. KRITZER. Okay. Well, oil valuation was just one of a number of activities I did.
Mr. GIBBONS. Well——
Mr. KRITZER. Okay.
Mr. GIBBONS. Okay.
Mr. KRITZER. My relationship——
Mr. GIBBONS. You know what I'm asking the question about.
Mr. KRITZER. My relationship was, other than occasionally having lunch and keeping up contact as old friends, none.
Mr. GIBBONS. So nothing professional.
Mr. KRITZER. No, just keeping up contact as old friends or if somebody were to call me. And on occasions, Mr. Banta would call me about nothing related to oil, but just say, ''I have a case in a particular area. Who should I contact at your Department?'' You know, it would be a social call for a couple of minutes.
Mr. GIBBONS. And you indicated in your testimony that no one ever advised you that Mr. Speir or Mr. Berman was going to be paid any sort of a fee for their efforts in this lawsuit; is that correct?
Mr. KRITZER. That's correct.
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Mr. GIBBONS. When did you ever hear that they were paid or going to be paid?
Mr. KRITZER. I heard allegations that they were going to be paid surprisingly in sometime about this time a year ago, when I was convening an interagency study on an issue. And following the meeting, I went up to someone and just said, ''You know, we have a mutual friend.'' And I forget, one of them I identified, and somebody said to me, ''Oh, by the way, did you know this?'' That was the first time I had any, you know, clear indications or allegations that this had gone on.
Mr. GIBBONS. Mr. Kritzer, I presume in all of your time that you've spent within Federal Government in the employment of our Nation that you are familiar with the ethics requirements.
Mr. KRITZER. Yes.
Mr. GIBBONS. Can you help this Committee understand what the ethics rules are with regard to unsolicited gifts?
Mr. KRITZER. I have never accepted anything.
Mr. GIBBONS. Do you know if the ethics rules address that issue?
Mr. KRITZER. Yes, it does address that issue.
Mr. GIBBONS. Would you expect that most employees in the employment of the Federal Government would understand the same thing you understand?
Mr. KRITZER. I can only speak for myself, sir.
Mr. GIBBONS. Well, just your expectation.
Mr. KRITZER. There is certainly an expectation of that.
Mr. GIBBONS. Thank you, Madam Chairman.
Mrs. CUBIN. Thank you.
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I just have one final question that I wanted to ask you, Mr. Kritzer. If I understand your view correctly, you saw correcting the royalty underpayment problems, when you were involved in that, to be your duty as a Federal employee; is that right?
Mr. KRITZER. It was to provide a completed report, which then hopefully recommendations would be made, and they would have been acted upon to revise the basis upon which oil royalties were evaluated for the State of California at that time and that, you know, some other—any other actions that were necessary would have been carried out.
Mrs. CUBIN. But you never viewed that as a personal financial opportunity for yourself; is that correct?
Mr. KRITZER. No.
Mrs. CUBIN. I would like to commend you for the work that you do. And frankly, Mr. Kritzer, I think that you are an excellent model for other Federal employees to follow. I think that your integrity and your personal behavior certainly is above reproach, and I appreciate that very much coming from any government employee. So I do thank you for that. I think if someone was handing out awards for diligent, public-spirited people that understand the problems in valuation of oil, that you certainly ought to be a person to receive that credit.
So, with that, I would like to ask if you would be willing to respond in writing to any further questions that the Committee might have at a future time.
Mr. KRITZER. Yes, I will. I'd be glad to.
Mrs. CUBIN. The record will be kept open for 2 weeks, as is the policy of this Committee.
So, with that, I thank you again very much for being here, and you are excused.
Mr. KRITZER. Thank you.
Mrs. CUBIN. Thank you.
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The chair now will call forward Mr. Leonard Brock. If you would just remain standing for a moment, Mr. Brock. Again, we advised you earlier that your testimony would be taken under oath.
[Witness sworn.]
Mrs. CUBIN. Thank you very much.
Mr. Brock, I want to start out by acknowledging the hardship that you have gone through in coming all of the way from California. Believe me, if anyone knows that travel isn't easy, I am one. We will try to not keep you any longer than necessary, but I do thank you for being here.
You have been subpoenaed to help this Subcommittee learn whether a valid public service award program motivated you, Danielle Brian and POGO to share your information of Johnson v. Shell proceeds with two Federal employees.
Mr. Brock, POGO told Mr. Martineck, Mr. Johnson and Mr. Wright that you provided the key to success in any False Claims Act. They highly value your contribution to the case. What share do you receive from the settlement proceeds paid to the group consisting of you, Ms. Brian and POGO? What is your share?
STATEMENT OF LEONARD W. BROCK
Mr. BROCK. I'd like you to rephrase that, please.
Mrs. CUBIN. Okay. Do you receive 25 percent of the amount distributed by the relators to the Brian, Brock and POGO group? Do you receive 25 percent?
Mr. BROCK. That's right.
Mrs. CUBIN. Did you participate in the decision to share the money with Mr. Berman and Mr. Speir?
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Mr. BROCK. I never heard those names until the thing hit the fan with the other relators.
Mrs. CUBIN. Did Mr. Banta or Ms. Brian or anyone connected with your suit tell you that POGO had a plan or an agreement to share the money with two Federal employees?
Mr. BROCK. Never until the thing came to light.
Mrs. CUBIN. So POGO represented to their partners in the settlement sharing contract that you were a highly valued ally, so valuable that Ms. Brian and POGO deserved a share equal to the relators, but POGO never told you a key fact about their intention for that money, which was to share it with Mr. Berman and Mr. Speir. Do you approve of POGO paying those Federal employees and withholding the information from you and the other parties until it was too late to stop the first check?
Mr. BROCK. I don't know enough about what they did and why to comment on that.
Mrs. CUBIN. As a general principle, would you think it was appropriate for Federal employees to accept this sort of payment?
Mr. BROCK. I don't know what it was for.
Mrs. CUBIN. We don't either. That's what we're trying to find out.
Mr. BROCK. That's good. You're not going to find out from me.
[Laughter.]
Mrs. CUBIN. As a City of Long Beach employee, can I ask you if you would have accepted payment like this, as a city employee in the Long Beach case?
Mr. BROCK. There would have been no reason for any city employee to have to be paid to give them any information about any of our oil properties. Anything we did was a public record, and we're very happy to discuss with anybody what we got, and why and how.
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Mrs. CUBIN. Mr. Brock, I know that is true, and I'd like to say amen to that. Wish it were the case in this situation.
Mr. BROCK. If it were, you wouldn't have this problem.
Mrs. CUBIN. That's right. We wouldn't be here today.
How did POGO recruit you to join the false claim act suit?
Mr. BROCK. You'll have to ask them on that. I got a call from Danielle, asked me if I would like to participate in this, and I told her yeah.
Mrs. CUBIN. And so you didn't really think that you had a lot of pertinent information.
Mr. BROCK. I knew I had as much as anybody about California.
Mrs. CUBIN. About the California, the Long Beach lawsuit.
Mr. BROCK. That's right.
Mrs. CUBIN. Okay. Did you know Ms. Brian at that time? Had you ever spoken to her before?
Mr. BROCK. She called me one day. I'm not sure how she got my name or why, but she called me, and we discussed it, and then after several discussions, I agreed that I would help her.
Mrs. CUBIN. So did you know her before that time?
Mr. BROCK. Never.
Mrs. CUBIN. And what kind of help was it that she told you you could give to the case?
Mr. BROCK. Well, in what we discussed was the fact that the Federal Government leases in California were being underpaid. I knew that, and I told her I would be involved and help her.
Mrs. CUBIN. And what would that involvement entail? I mean, what actions—was it just lending your name or were there——
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Mr. BROCK. Would you like me to tell you why?
Mrs. CUBIN. Pardon me?
Mr. BROCK. Would you like me to tell you why?
Mrs. CUBIN. Yes.
Mr. BROCK. I had dealt on my job, and by the way, I'm not a whistleblower. I worked for the City of Long Beach and the State of California, and it was my job to get as much money for the oil as I could.
Mrs. CUBIN. Good.
Mr. BROCK. I wrote contracts that I thought would do that. I tried to get the top price that we could get and deserved for our oil, and I was doing that when price controls came in. We got frozen—low-gravity oil got frozen at a depressed level, and I tried to convince the DOE, the cost of living or whoever they were, whoever would listen, Senators, Congressmen, that the price of oil was low, and it was frozen wrong, and they should change it.
And along the line, when I was trying everything I knew why, it dawned on me, look, the Feds are probably getting paid on the posted price, so they're getting robbed. And so I tried to get from the Fed, not me personally, but my staff—I had a good staff of petroleum engineers—they tried to find out what royalty oil was in California from the Feds, what they were paid for it, and they were told that that was proprietary information and they couldn't get it.
So what I did, I had my staff find out from the Conservation Committee of California how much Federal oil there was. I assumed that probably the royalty was 12.5 percent because I had seen bids that that's what it was. So I took 12.5 percent of that. I knew how much the oil was underpriced, and so I came up with a number. And I went to the Interior, to the DOE, to Senators, to Congressmen, and in our discussions I said that the Federal Government is being underpaid on Federal oil by ''X'' number of dollars.
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Mrs. CUBIN. And that——
Mr. BROCK. I was told by one gentleman in the FEA that their duty was to keep the price of gasoline down and not worry about what oil was. To me, that's wrong. My life has been in the oil business. When it came up that this other was coming up, I was very happy to lend what little support I could give to it, and I thought it might be substantial.
Mrs. CUBIN. So just to sum this up, your expertise all related to the situation in the Long Beach suit, and you didn't really have any knowledge of oil valuation and taxation or royalties in the rest of California. Would that be correct for me to say?
Mr. BROCK. Not at all. I represented the California Independent Producers Association before the DOE and before Congress Committees and whatever, and we collaborated on what the prices were and what people were being paid for. We had an evaluation made of the price of California low crude oil. We had a very complete study that the oil companies never refuted, except the fact that they said that it didn't include amortization. Well, after several years, you know, a buck a barrel at 100,000 barrels a day pays out pretty fast. And so we tried to get them to change, to give us an answer again, and that's when they had just started to change what they were doing, and the Feds put the price control on.
During this period of time, one of the contracts that I was very instrumental in drawing up, we had the right to have the oil companies tell us what they paid for oil all over, what they paid for our oil and everything. And in one of these discussions that we had, it happened, I believe it was in 1974, one of—I'm not sure if it was my people or one of the State people, but somebody got a letter they picked up from the oil company, and in there it showed the scheme that they were using, which is called a three-cut exchange, how they were concealing to us what the value of the oil was. The oil companies tried to hide that. We finally had to, I guess Ken Corey [ph] probably went to court, and we got that. That's when we decided to file the oil suit.
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And after the oil suit——
Mrs. CUBIN. Excuse me, Mr. Brock. While that is very interesting, the focus of this oversight hearing is to determine the payment to two Federal employees who were involved in policymaking about oil valuation. So it really isn't relevant. But I do thank you for your information.
My time has expired, and the Chair will now recognize Mr. Brady.
Mr. BROCK. Let me say you asked me why I was involved. I was trying to tell you.
Mrs. CUBIN. Thank you very much.
Mr. BROCK. I'm a good citizen of the United States. I was a Boy Scout, and I felt that it was important that I gave my knowledge to somebody that would listen and maybe do something about it.
Mrs. CUBIN. And I commend you for that. And I certainly would agree that you are a good citizen. Your being here also demonstrates that. Thank you, Mr. Brock.
Mr. Brady?
Mr. BRADY. Thank you, Madam Chairman.
Let's go back to something you said that's very important. I don't know how you were raised, but in Washington one of the excuses for dismissing inquiries like this is that everybody does it, everybody does things like this. As a city employee, as a government employee in a position of trust, with inside information on the California royalty issue, would you have entered into agreement like this? Would you have accepted that check, as a Federal—as a government employee, for the information you had dealing with oil royalties in California?
Mr. BROCK. It wouldn't be necessary in California.
Mr. BRADY. So California would have stopped you from it or your own ethics would have stopped you from it?
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Mr. BROCK. No. That information that—I can't think of any information that anybody would need that wasn't readily available in California.
Mr. BRADY. So, in that case, you didn't provide any additional expertise. But had you been approached to participate, you would not have or you would have? No problem or it wouldn't have been—earlier you said, ''In California we are very open. We don't go, we don't do things like this.'' I'm just trying to clarify would you have participated in that——
Mr. BROCK. That is our side of it. That is the government side of it.
Mr. BRADY. So it's no problem from your standpoint? You'd have been happy to be——
Mr. BROCK. Well, I don't know——
Mr. BRADY. I don't get the impression you would, and I don't know why you wouldn't simply say ''no.'' Because I get the impression from you that you were doing your job, that you felt it was a duty, and you feel strongly about it. And in your earlier statement you said this would not have happened in our government, in our city government. So is the answer, yes, you would have participated or, no, you wouldn't have?
Mr. BROCK. Participated in what?
Mr. BRADY. In any agreement where, as a government official, you were paid by special interest to provide insider information that ultimately lined everyone's pocket.
Mr. BROCK. I can't think of any information that I would have that somebody would be willing to pay me for.
[Laughter.]
Mr. BRADY. But, well, now you've been paid $900,000 for the information you were supposed to have known in this case.
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Mr. BROCK. In this case? Look, I did in California——
Mr. BRADY. And I would think having a million-dollar expertise didn't occur overnight. So are you knowledgeable or are you not knowledgeable?
Mr. BROCK. Would you like me to finish?
Mr. BRADY. Sure.
Mr. BROCK. Okay. I did and presented for the State and city exactly the same thing that Benjie Johnson and his partner are doing, and they're getting millions of dollars for it. When I was in California, I did it for the city and State and got nothing except my paycheck. I felt that the government was being taken, and when I had an opportunity, somebody suggested to me will I help them, I agreed.
Now, do you think that those two gentlemen there had an agreement with us and said that we'll give you 40 percent——take 40 percent and give 20 percent to somebody else if they didn't think, at that time, there was a good reason for it? We could have been the relators and they could have been on the outside.
Mr. BRADY. In that case, because you bring it to a wonderful close, in that case, if they had come to you, and you were an employee of the government and had that million-dollar, $900,000-information that you possess, would you have, as a government employee, would you have entered into this secret agreement to be paid for that information?
Mr. BROCK. I probably wouldn't.
Mr. BRADY. I don't think you would.
Final question: There's 600 courts in America these suits can be filed in. I don't know how many other cases you're a relator in. I would imagine not a lot. Is there reason out of 600 that you chose the Lufkin court to file this brief in?
Mr. BROCK. Pardon?
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Mr. BRADY. Is there a reason your attorneys, on your behalf in this important case, filed it in the Lufkin court?
Mr. BROCK. I don't understand that. Rephrase that.
Mr. BRADY. As an important part of this case, filing a very important lawsuit on an issue you're very knowledgeable on, a suit was filed in the Lufkin court on your behalf. What was the reason, from your knowledge, why was the Lufkin court chosen to file this suit?
Mr. BROCK. Well, you'll have to ask them.
Mr. BRADY. No. But you are them.
Mr. BROCK. Pardon?
Mr. BRADY. I apologize. But you are them. You filed the suit.
Mr. BROCK. Okay.
Mr. BRADY. So why did you choose Lufkin court, out of 600 in the country, to file?
Mr. BROCK. Well, I still don't understand.
Mr. BRADY. Was there——did you want to say something? Does your attorney understand that question?
Mr. BROCK. No, I didn't understand it, and all of the legal——
Mr. BRADY. No, I'm sorry. Does your attorney understand it?
Mr. BROCK. All of the legal stuff that went on has been done by the attorneys. When I entered this thing, I had never heard of a, what is it, a qui pay or whatever, or a relator or any of those things. I had never heard of those. I was doing the end of my job that I wasn't being able to do in California.
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Mr. BRADY. Thank you, Madam Chairman.
Mrs. CUBIN. The gentleman's time has expired.
You stated, Mr. Brock, that you did all of the work in Long Beach and you didn't get one dime for yourself out of all of the millions that were recovered in unpaid royalties in that suit. And then you referred to Mr. Johnson and Mr. Martineck, who have received millions. And you asked if that was right.
So what I wanted——
Mr. BROCK. You misunderstood me if you said if I thought that was right. Of course it was right. That's the law. I'm not objecting to that. I'm just saying that you seem—the Committee seems to have the feeling that those two guys are doing a great job for the government, and nobody seems to think that I have anything to do with it. I think the questions of your attorneys, ''You mean, you're not doing anything, and you're getting all of this money?'' I think that we were part of the law. We had an agreement with them, and the only reason they made that agreement was because they thought that we might have been the only relators. That's what they said, if you read between the lines.
Mrs. CUBIN. Okay. So——
Mr. BROCK. They didn't give us 40 percent for nothing.
Mrs. CUBIN. Was what you were trying to say that you think you deserved the million dollars that you have so far received? You think you deserved that because of the work that you did in Long Beach?
Mr. BROCK. No, I think I deserve that because I had an agreement with them. What I'm getting has no affect on what the government gets. They get it all, and then because of a side agreement they had with me, I get my share.
Mrs. CUBIN. Mr. Schaffer?
Mr. SCHAFFER. Thank you, Madam Chairman.
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Mr. Brock, a minute ago you—Mr. Brady mentioned that you had received about $900,000 as your, so far, for your involvement in the suit; is that accurate?
Mr. BROCK. That sounds about right.
Mr. SCHAFFER. Does that sound right? Let me ask you about the False Claims suit. Your deposition was delayed about a day. Why was that? Do you remember? It was scheduled for, I don't remember the date, but it was pushed back one day. Do you know why? Can you tell us why?
Mr. BROCK. When was this?
Mr. SCHAFFER. In Dallas. You were scheduled for the deposition, and it had to be delayed for one day?
Mr. BROCK. Oh, I had a back problem.
Mr. SCHAFFER. Is it true that the other parties questioned your knowledge in the case?
Mr. BROCK. Pardon?
Mr. SCHAFFER. Was it true that the other parties questioned your knowledge in the case——
Mr. BROCK. I don't believe so.
Mr. SCHAFFER. [continuing] about the case for that day.
Mr. BROCK. I don't believe so.
Mr. SCHAFFER. You don't believe so?
Mr. BROCK. No.
Mr. SCHAFFER. Okay.
Mr. BROCK. I don't think that anybody there has ever questioned my knowledge on that case.
Mr. SCHAFFER. Did Mr. Wright ever request that you be removed from the case at that time?
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Mr. BROCK. I'm not sure. They had some—that side agreement came and went, and I don't know how long it took to get it.
Mr. SCHAFFER. Did you show up the next day for the briefing——
Mr. BROCK. Pardon?
Mr. SCHAFFER. Did you show up the next day for the deposition with three pages of handwritten notes?
Mr. BROCK. Yes. Yes.
Mr. SCHAFFER. Did you have three pages of handwritten notes?
Mr. BROCK. Pardon?
Mr. SCHAFFER. Did you have three pages of notes with you?
Mr. BROCK. Three pages of notes?
Mr. SCHAFFER. Were you coached/briefed on what needed to be, on the matters of the case at the deposition?
Mr. BROCK. Yeah.
Mr. SCHAFFER. You were. Okay. How about for today's testimony?
Mr. BROCK. How about what now?
Mr. SCHAFFER. How about for today's testimony? Were you briefed and coached on your presentation to the Committee today?
Mr. BROCK. Well, not really. I was briefed on how this thing works, and what I'm doing, why I'm here, and that sort of stuff. It had nothing to do with what I'm going to say, if that's what you mean.
Mr. SCHAFFER. Okay. As far as content, what you're telling us is your own——
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Mr. BROCK. Yeah. They said what this is, and what you're doing——
Mr. SCHAFFER. Very good.
Mr. BROCK. And why I'm here, which is a little——I don't understand.
Mr. SCHAFFER. How would you characterize your knowledge of the suit filed?
Mr. BROCK. Pardon?
Mr. SCHAFFER. How would you characterize your knowledge, your involvement with the specifics of the False Claims case? Are you very knowledgeable about it? Are you involved in a detailed sort of way?
Mr. BROCK. No. Let me say this: I think it came out in all of this that my knowledge of the Texas problems is limited. However, I think I know probably together as much as anybody else about California. This lawsuit went to both California and every place, the United States. There is no doubt but what Benjie Johnson and those guys know so much more about Texas than I do. However, I know a whole heck of a lot more about California than they do.
Mr. SCHAFFER. Well, congratulations.
Mr. BROCK. Now, then, when the relators split out, they, for their own reasons, I don't know, decided to handle it all alone. They never talked to me. They're doing it all themselves, and that's their legal right. They are a relator and I'm not. However the judge could have made it the other way.
Mr. SCHAFFER. How do you know the law firm Lobell, Novins and Lamont?
Mr. BROCK. How? Pardon?
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Mr. SCHAFFER. How do you know them, the law firm? How did you come into contact with them? How did you learn about them? How do you know them?
Mr. BROCK. Which ones are you talking about?
Mr. SCHAFFER. The name of the law firm, Lobell, Novins and Lamont, are you familiar with them?
Mr. BROCK. Very well, from California.
Mr. SCHAFFER. How did you come to know them?
Mr. BROCK. Well, they were the lawyers for the State of California, and——
Mr. SCHAFFER. Very good. How long have you closely worked with them?
Mr. BROCK. Probably from early seventies, after price control.
Mr. SCHAFFER. Do you know Lon Packard?
Mr. BROCK. Yes.
Mr. SCHAFFER. Did Mr. Packard ever discuss with you the False Claims case that you're involved in?
Mr. BROCK. I can't recall specifically anything. And I understand that my lawyer and I have a privilege on such things.
Mr. SCHAFFER. Thank you, Madam Chairman.
Mrs. CUBIN. The gentleman's time has expired.
Mr. Brock, could you refresh my memory. Who are the relators in this case?
Mr. BROCK. Benjie and his partner.
Mrs. CUBIN. The only ones?
Mr. BROCK. No.
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Mrs. CUBIN. The chair now recognizes Mr. Inslee for 5 minutes.
Mr. INSLEE. Thank you, Madam Chair.
Mr. Brock, you expressed some kind of mysticism as to why you're here, and some of us share that view. But I want to take a stab at explaining to you how that's come about. And I guess the best way I can try to explain it is to sort of explain the way this Committee works at the moment, and I want to give just kind of a metaphor. Perhaps you'll understand.
Mr. BROCK. I think I've seen.
[Laughter.]
Mr. INSLEE. It's kind of like this: Let's assume that you were standing outside of a bank, and these two big trucks pulled up beside the bank, and these guys went into the bank, and they came out with about—big sacks stuffed with $300 million, and they threw it in the back of the truck, and the trucks had ''Acme'' written on the big side, and the other one said ''AAA, Inc.'' on the other side of the other truck. And then the trucks pulled away, and the bank tellers came out screaming, ''These guys just heisted $300 million from us,'' and then this Committee showed up on the scene. What we would do is haul, give a subpoena to you to investigate you about whether you had removed tags from your mattresses or not——
[Laughter.]
Mr. INSLEE. [continuing] in violation of the prohibition against removal of the tags from mattresses that is an important American policy. And I just want to explain to you that, so you'll understand how this works because essentially that's what we're doing here today, and we're not using our time to make sure the taxpayers' get their monies' worth, and we're not using our time how to make sure whistleblowers will continue to have faith in this system to allow us to save money for taxpayers, and we are also not allowing the Justice Department review of the facts of this case to continue unimpeded by politics.
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And I just want to tell you that it's a sad day that the politics of this have intruded in this situation. And when I get a chance in this Committee, we're going to ask questions about the fellows in the trucks, rather than the fellows and the mattresses, and I appreciate your attendance here, Mr. Brock, and patience.
Mr. BROCK. Well——
Mrs. CUBIN. Mr. Inslee's comments clearly reveal that he hasn't been here for the hearing and really doesn't understand what the oversight hearing is about.
The chair now calls on Mr. Gibbons for 5 minutes.
Mr. GIBBONS. Thank you, Madam Chairman. And certainly, Mr. Brock, if those two big guys coming out of that bank with two big sacks of money stopped and gave you or tried to give you money, would you have taken it? Certainly not. I mean, that's a rhetorical question, but it ought to bring us all back to reality.
What we're here to talk today about is the ethical problems of whether two Government employees illegally or unethically took money they weren't entitled to for their part in discovering the illegal payments or failure to make payments to the United States for royalty problems. So that's where we're going with this Committee hearing, and I hope that it's evidently clear to you and your attorney, who is sitting behind you. This is not a hearing on whether or not you, Mr. Brock, have committed any crime at all. What we're trying to do is discover the facts and circumstances surrounding whether or not two Government employees should or should not have been paid by a private corporation money. This is where we're going, and this is where we want to focus on. Nothing should be drawn to any other conclusion other than that.
Now, when, Mr. Brock, did you file your lawsuit, your qui tam or False Claim lawsuit in this case?
Mr. BROCK. I'm not sure. The attorneys did that.
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Mr. GIBBONS. Do you remember even the year you filed it?
Mr. BROCK. Probably 1997.
Mr. GIBBONS. Probably 1997. Do you recall why you chose the lawyers you chose?
Mr. BROCK. I didn't choose anything. The attorneys did it.
Mr. GIBBONS. All right. So you are sort of an innocent bystander, and they came along and asked you to be a named relator in this lawsuit.
Mr. BROCK. I submitted a lot of data to them.
Mr. GIBBONS. When did you or when were you first contacted by Danielle Brian and POGO?
Mr. BROCK. Sometime in the middle nineties.
Mr. GIBBONS. Middle nineties. Would that have been 1995?
Mr. BROCK. It could have been.
Mr. GIBBONS. Had they contacted you at any point in time from the middle nineties about filing a lawsuit or joining them in their lawsuit?
Mr. BROCK. When I first talked to them, I don't know that we discussed a lawsuit. I agreed that I would help to try to correct the inequities that was being paid for the Federal Government oil. I wasn't sure at the time if it involved a lawsuit. I haven't been involved in one for 15 years in California. I thought it was a very distinct possibility.
Mr. GIBBONS. You've already testified that you didn't know anything about the royalty process in Texas. Did you agree——
Mr. BROCK. The sale of oil?
Mr. GIBBONS. The Texas royalty problems in Texas.
Mr. BROCK. I wasn't familiar with how the oil was sold. I didn't know what schemes they were using in Texas.
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Mr. GIBBONS. Certainly. Did you agree when your lawyers indicated that they wanted to file your suit in Texas?
Mr. BROCK. I don't even know if I was considered in where they filed it.
Mr. GIBBONS. I certainly understand that.
Could you have filed your complaint for a false claim in California?
Mr. BROCK. What did you say, should I have?
Mr. GIBBONS. Could you have?
Mr. BROCK. I don't know why not.
Mr. GIBBONS. I would agree. Let me go back——
Mr. BROCK. And I certainly don't know why they filed in Lufkin, Texas.
Mr. GIBBONS. Thank you. And I agree. We don't know why either, and that's part of the process and part of the problem that we want to find out about later on.
Mr. BROCK. Good luck.
Mr. GIBBONS. I agree.
[Laughter.]
Mr. GIBBONS. It's going to be difficult because there are so many people that here are intentionally avoiding answers or that come here with a convenient lapse of money that we have got to delve into.
Let me ask you what you talked to Danielle Brian about when she invited you to be part of the process to recover these oil royalties? How did she talk to this matter with you?
Mr. BROCK. Well, as I say, it's about as fuzzy as when it was. But I'm sure that over a period of several conversations we talked about what I could offer, what my involvement was in California. And I made it very clear to her that I didn't want to get stuck with a bunch of attorneys' fees. I think you have a letter in front of you which was our agreement that she show that. I was willing to get involved, and do some help and try to correct something that was very wrong, and I was willing to get involved, but I just didn't want to pay a bunch of attorneys.
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Mr. GIBBONS. One final question, Madam Chairman, and I see my time has elapsed. But let me say that you can obviously remember that you did not want to get in touch—or did not want to get settled with a bunch of attorneys' fees. Did she ask you about what you knew about the oil royalty schemes in Texas at the time?
Mr. BROCK. I don't know that we discussed that.
Mr. GIBBONS. The gentleman's time has expired.
The chair recognizes Mr. Underwood for 5 minutes.
Mr. UNDERWOOD. Thank you, Madam Chairwoman. I appreciate the opportunity to interact with obviously the star witness of the afternoon, Mr. Brock.
I'm trying to understand as well how it is, what is the nature of your appearance before the Committee. Are you an expert on ethics laws?
Mr. BROCK. Pardon? Am I what?
Mr. UNDERWOOD. Are you an expert on ethics?
Mr. BROCK. Hardly.
Mr. UNDERWOOD. Are you an expert on the False Claims Act?
Mr. BROCK. No, I've never even read it.
Mr. UNDERWOOD. So what it is that you really think that you could contribute to these hearings that will clarify some of the questions that have been raised before the Committee relative to the payments to Berman and Speir?
Mr. BROCK. Well, that's a difficult question. I think that there isn't anything that can be done to solve the overall problem as long as there are people that are willing to make undercover deals. You have an industry that controls the refining. And if they do not fairly deal with the government or anybody else, I'm not sure there's anything that you can do.
Mr. UNDERWOOD. Well, I appreciate that very much because I think that brings us back to the nub of the question that should be in front of the Committee. And while I appreciate and understand the majority's insistence on drawing attention to the problems that they are trying to draw attention to, I think that your statement there really indicates where we should focus our attention.
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Thank you very much.
Mr. INSLEE. Would the gentleman yield some of your time just for a moment?
Mr. UNDERWOOD. Sure.
Mr. INSLEE. I'd like to ask a question. Perhaps one of the members of the panel or the Chair could help me on this. Is there any question but that the two government employees themselves could have been the relators in this case? Is it clear that they, if they had chosen so, that there is nothing that would have prohibited them for themselves initiating this lawsuit? Is that clear or is there an issue about that?
Mrs. CUBIN. Mr. Inslee, I suggest you discuss that with your staff. I'm sorry that you aren't prepared.
Mr. INSLEE. I was looking for a higher power. So I was seeking the Chair's comments in this regard. And I guess reclaiming my friend's time, my understanding, and I have been advised by our staff that the two employees, should they have decided to, could themselves have been the relators in the case. And if that is true, they could have legally received the compensation associated with being a relator in a whistleblower case one way or another, whether they get it first through a third party or they get it directly as the relators themselves.
And the reason I ask that is, assuming that's true, and to my knowledge that is true, I am having difficulty seeing the difference of an effect receiving it from a third party, assuming that they had not involved themselves in any decision making that would somehow create——
Mrs. CUBIN. Would the gentleman yield?
Mr. INSLEE. I would certainly do that. And I would appreciate your wisdom in that regard.
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Mrs. CUBIN. The fact is, and had you been able to stay, I understand you are busy, and we can't all always be here, the fact is that it is true that Federal employees can file a qui tam suit. They, however, the vast, huge majority of the time are thrown out by the courts because the courts do not want money to be the determining factor in policy decisions that Federal employees or government employees might have to make. But in the very, very small percentage of cases where the Federal employee, where it may not be thrown out, in those cases, that employee is then walled off from any decision relating to the issue at hand.
So Mr. Berman and Mr. Speir would have been walled off from advising on the new oil valuation regulation. They would have been walled off, not been able to advise or make any policy. So that is where it falls short. That's where the break in ethics and possibly the legal system goes.
Mr. BRADY. Madam Chairman, may I inquire——
Mrs. CUBIN. The time is Mr. Underwood's.
Mr. UNDERWOOD. Go ahead.
Mr. INSLEE. If I could reclaim just for a moment. My understanding is we haven't had any witnesses involving the False Claims Act who are experts on it. And I would suggest that if that is really the thrust of this inquiry, that really is what we should be looking for on how to deal with issues that you raise under the False Claims Act. And I would suggest to you if that is the inquiry of the Committee, we would be well advised to sort of seek some expert testimony in that regard. It's just a suggestion. It's a friendly suggestion, and I'm sincere about it.
Mrs. CUBIN. Thank you.
Mr. Brady?
Mr. BRADY. Madam Chairman, I have an inquiry of the Chair. As I understand it, Mr. Brock filed a suit on a State topic with which he wasn't familiar with, under an Act he never read, based on knowledge that many people in California had and received $900,000 for it. My question to you is we don't know anything either. Can we get in on this lawsuit before it ends?
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Mrs. CUBIN. Mr. Brady, your question is out of order.
Mr. Brock, the last thing of you, and thank you very much for being here. We do appreciate that it was difficult for you, and thank you for being here.
Mr. BROCK. I was happy to be here.
Mrs. CUBIN. Thank you.
I want to make this clear: You did offer something to this lawsuit, to POGO, and that is you gave them information, and that is why you are being paid, why you have raised money; isn't that correct?
Mr. BROCK. Yes.
Mrs. CUBIN. That's what your testimony is. And so do you think it's fair then to say that's why the other people who have received money from this lawsuit; that is, like Mr. Berman and Mr. Speir, they received the money because of information they provided as well?
Mr. BROCK. I'm not sure. I had nothing to do with that, and I don't know what the deal was.
Mrs. CUBIN. Thank you very much. And again thank you for your testimony and have a safe trip back to California.
Mr. BROCK. Thank you.
Mrs. CUBIN. Mr. Schaffer, did you have a——
Mr. SCHAFFER. Yes. Thank you, Madam Chairman. Just in response to the questions raised by Mr. Inslee. There's an e-mail here that I would quote from, and it's to the senior attorney in the Johnson case. He says, I don't want to mention exactly who.
Mrs. CUBIN. Mr. Schaffer——
Mr. SCHAFFER. Madam Chairman, that essentially characterizes the point that you just made. It's that it's important to note that had the Department of Interior known that employees were actively involved in a case of that sort, that they would have been walled off for fear of giving the appearance, effectively, that Federal regulators are subject to personal gain as a result of their involvement. And your characterization of the likely effect is not just one of speculation, but one that this Committee is aware is a very real consideration.
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Mrs. CUBIN. So do you have a document that you are asking to be submitted to the record?
Mr. SCHAFFER. No, Madam Chairman.
Mrs. CUBIN. Oh, okay then. We'll move on to——
Mr. INSLEE. Mr. Schaffer, would you yield? I want to ask you a question about that document. Would you entertain one question?
Mrs. CUBIN. Certainly, Mr. Inslee.
Mr. INSLEE. Mr. Schaffer, I just took a look at the document I think you're referring to. Has there been any suggestion by any quarter that, in essence, the oil companies paid too much because of some action by the two employees in question here? Has anyone asserted that somehow their actions resulted in the oil companies paying more than they should have because these individuals made some decision that was influenced adversely by this payment? Has there been any suggestion like that? To my knowledge, I have not heard any.
And the reason I think that's significant in this inquiry is so far I haven't seen an assertion that there has been any damage to any party resulting from this. I haven't heard anyone saying these, you know, these agents of the government made me pay more to the government than I was supposed to. Now, I've heard the opposite. I've heard that the oil companies have been made to pay what they were supposed to pay due to litigation and whistleblower efforts that they did not pay and were required to do so. But I haven't heard anyone say that these employees made a mistake and made us pay more than we were supposed to. Is there any assertion like that, that anyone is aware of?
I'm seeing the Chair shake her head no. And if that is not true, aren't we sort of looking a little bit down a dead end here if we don't have any injury, if we don't have anything that went wrong here, if nothing's broke, I haven't seen anybody assert that there was a broken leg economically suffered by anyone, as a result of these employees' misconduct. And I guess what I'm questioning is if we haven't seen a crime, what are we looking for here? And that's a serious question.
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Mrs. CUBIN. Mr. Inslee, I'd like to respond to your question because I agree with you.
The only party—I can't say the only party—but the party that we care most about that may have been damaged are the American public, are the taxpayers, are the people who should be receiving every single penny of royalties that are due them. It is not out of the realm of possibility—okay. So, first of all, number one, we have to protect the integrity of the process of government. We have to protect the ethical rules that apply to public servants for the sake of the public. But then going beyond that, my sincere question is, and I am sincere about this, has POGO damaged or has POGO, through good intentions. I am not saying that I think anyone set out to do anything evil, but because of the payments to these two Federal employees, there are still lawsuits out there that are pending.
Now, because these employees were involved in the new oil valuation regulation, they remained involved after they had the agreement for sure and possibly after they received the checks. Have they damaged the standing of the citizens of the United States so that those oil companies will be more brazen about going to court and challenging the existing rule? In my opinion, the existing rule is tainted by the fact that two advisers at least and policy makers at most took this money. That's the damaged party, Mr. Inslee.
So now with that, the Chair would call Mr. Keith Rutter to the table please.
Mr. Rutter, thank you for being here.
[Witness sworn.]
Mrs. CUBIN. Thank you very much. I appreciate your being here.
Mr. Rutter, as the assistant executive director of POGO, you have been subpoenaed to help the Subcommittee understand the process which resulted in POGO reporting to the Internal Revenue Service that payments to Mr. Berman and Mr. Speir were one-time public service awards; the process by which the POGO board decided to establish such an award program, if they did; the decisions by the board to file and prosecute an oil royalty lawsuit and the meeting minutes reflecting their decisions.
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I'd like to start out with just some preliminary questions. How long have you been employed by POGO, Mr. Rutter?
STATEMENT OF KEITH RUTTER
Mr. RUTTER. Since 1989.
Mrs. CUBIN. And what are your responsibilities?
Mr. RUTTER. I have a variety of duties throughout the organization.
Mrs. CUBIN. Excuse me? I couldn't hear what you said. Is your microphone on?
Mr. RUTTER. My responsibilities include a variety of things throughout the organization.
Mrs. CUBIN. So do they include handling tax matters and record keeping, such as board minutes?
Mr. RUTTER. Yes, they do.
Mrs. CUBIN. Are you generally familiar with the requirements for making IRS Form 990 and IRS Form 1023 available to the public?
Mr. RUTTER. I'm sorry. Could you——
Mrs. CUBIN. Yes. I just wonder if you are generally familiar with the requirements for making those two Internal Revenue Service forms available to the public.
Mr. RUTTER. I'm sorry. When you say ''generally familiar——''
Mrs. CUBIN. You are aware that there is a requirement to make those forms public.
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Mr. RUTTER. Yes. We comply with the IRS regulations.
Mrs. CUBIN. Can anyone just walk in off the street and review a copy of those records in your office?
Mr. RUTTER. Yes. Anyone can walk off the street and review those records.
Mrs. CUBIN. Well, then can you tell me why POGO won't furnish those documents to this Committee.
[Witness conferring with counsel.]
Mr. RUTTER. Madam Chair, I am advised by my counsel that the Committee may require me to answer all questions pertinent to the subject under inquiry. My attorney advises me that this question is not pertinent to a proper subject before the Committee.
Mrs. CUBIN. Mr. Rutter, I would advise you that the forms that I referred to were subpoenaed by this Committee, and therefore they are pertinent to this hearing.
[Witness conferring with counsel.]
Mr. RUTTER. The chairman, according to the rules of the House and of this Committee, the chairman is solely authorized to determine what is pertinent for a hearing and what is not. Additionally, the proceeds from those lawsuits, Mr. Rutter, are reported on those forms. And since the payments to Mr. Berman and Mr. Speir came out of the proceeds of that lawsuit, which is reported on that form, I again ask you, since these are public documents and since someone can walk in off of the street and see them, what is the reason that POGO refused to honor the subpoena and supply those to this Committee?
Mr. RUTTER. With respect, and I understand the chair's position, and upon advice of counsel, I will stand by my objection.
Mrs. CUBIN. Upon advice of counsel, excuse me? I didn't hear the last.
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Mr. RUTTER. I said that upon advice of counsel, I am going to stand by my objection.
Mrs. CUBIN. Moving right along. Were you asked to consult an accountant and lawyers about POGO's payments to Mr. Berman and Mr. Speir? I want to point out I am not asking what advice those experts gave, but according to some of the minutes that I saw, I will repeat the question. Were you asked to consult an accountant and lawyers about the payments to Mr. Speir and Mr. Berman?
Mr. RUTTER. I'm sorry. When you say ''was I asked to consult an accountant and an attorney——''
Mrs. CUBIN. Yes, or did you just do that of your own accord? According to the minutes, an accountant and lawyers were contacted about POGO's payments to Mr. Berman and Mr. Speir.
Mr. RUTTER. Correct.
Mrs. CUBIN. And who contacted those accountants and lawyers?
Mr. RUTTER. I was involved in the meetings with the accountants and the lawyers.
Mrs. CUBIN. So you selected the lawyers and the accountants yourself or did someone recommend that to you?
Mr. RUTTER. The accountant we have had for several years, and I don't recall who suggested this particular lawyer that we went to see.
Mrs. CUBIN. Who determined that there was a necessity for an accountant, and particularly a lawyer, to be consulted regarding those payments?
Mr. RUTTER. I think it probably was a joint decision.
Mrs. CUBIN. A joint decision of whom?
Mr. RUTTER. Of the staff.
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Mrs. CUBIN. And the staff would be you and Danielle Brian and no one else?
Mr. RUTTER. No. There are more staff members than just Danielle and I.
Mrs. CUBIN. So who decided then—please give me the names—that it was necessary to contact an accountant and an attorney to give these awards?
Mr. RUTTER. I don't know if it was, when you say ''it was necessary,'' it was, you know, probably reached upon agreement. It was a good idea.
Mrs. CUBIN. Who decided that it was a good idea and who decided who you should call?
Mr. RUTTER. I think the staff. I'm sure there were——
Mrs. CUBIN. Please give me the names of all of the people that were involved in the decision.
Mr. RUTTER. At the time of——
Mrs. CUBIN. When the decision was made.
Mr. RUTTER. Right. The staff at the time would have been Danielle Brian, myself, Marcus Corbin. I don't know if there was anybody else at the time. I'm not familiar with——
Mrs. CUBIN. So you're saying it was your own decision to do that. Danielle Brian didn't recommend you to do that or tell you to do that.
Mr. RUTTER. No. I said it was a joint decision. I'm sure that we were in, you know, contact with the board of directors as well.
Mrs. CUBIN. That was my next question. Who on the board did you consult about whether or not you needed to contact an attorney?
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Mr. RUTTER. I can't recall specifically.
Mrs. CUBIN. But you do recall that the board was in on that decision or not?
Mr. RUTTER. Yes. The board was aware.
Mrs. CUBIN. Were they aware prior to the time that you contacted the accountant and the attorney or were they notified after?
Mr. RUTTER. As I recall, some of the board might have been aware prior to the contacting of the attorney and the accountant.
Mrs. CUBIN. Okay. So you have a recollection about that. Which board members were those that you recall?
Mr. RUTTER. No, I said, you know, I'm sure somewhere. I don't know. I don't know specifically.
Mrs. CUBIN. You do know that, you do remember that you're under oath.
Mr. RUTTER. Yes.
Mrs. CUBIN. And you do recall that there were board members that knew prior to the time you, but you don't know who they were; is that your testimony?
Mr. RUTTER. No. I'm saying that I'm recalling that they were, but I don't remember specifically who each particular one was or not.
Mrs. CUBIN. Any one, not each—any one.
Mr. RUTTER. I'm sorry. Any one?
Mrs. CUBIN. Any one board member that was aware before you contacted the accountant and the attorney.
Mr. RUTTER. You know, more than likely it would have been, you know, David Hunter I think was chair at the time, but——
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Mrs. CUBIN. Mr. Banta was chairman at the time.
Mr. RUTTER. I don't think that's correct, ma'am.
Mrs. CUBIN. Oh, okay. Hunter in 1998. Did Mr. Banta take part in—did Mr. Banta specifically take part in the notification and the contacting of an accountant and an attorney?
Mr. RUTTER. I'm sorry?
Mrs. CUBIN. Did Mr. Banta contribute anything to that decision?
Mr. RUTTER. I don't think so. I don't recall.
Mrs. CUBIN. So you don't know. Okay.
So your testimony is that the accountants were accountants that you had used on a regular basis.
Mr. RUTTER. Uh-huh.
Mrs. CUBIN. And that the lawyers, you don't know how they were selected.
Mr. RUTTER. No, they were just recommended.
Mrs. CUBIN. And who recommended them?
Mr. RUTTER. I don't know. I don't recall.
Mrs. CUBIN. Do you recall if the lawyers were specifically identified to you as experts in the field of employee ethics?
Mr. RUTTER. [No response.]
Mrs. CUBIN. I mean, why would you feel the need to call an attorney is my question. You don't know who told you to do it, you did it, and you don't remember why you would feel the need to do it? I'm confused here.
Mr. RUTTER. We were—we were going to share the settlement money, and we wanted——
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Mrs. CUBIN. And was there some question of whether or not that was legal or ethical?
Mr. RUTTER. We wanted to make sure that we took all of the proper procedures to ensure that the funds were distributed in a proper manner. And these were just some of the steps that we took.
Mrs. CUBIN. So was there a question then whether or not——
Mr. RUTTER. We had never done this before. We wanted to talk to people who had advice on, you know, doing it.
Mrs. CUBIN. So these lawyers were experts in ethics?
Mr. RUTTER. I don't know.
Mrs. CUBIN. But your question was based on ethical concerns; is that correct?
Mr. RUTTER. When you say ''ethical concerns,'' we wanted to make sure the decisions were, that the payments were made properly.
Mrs. CUBIN. And what do you mean by ''properly''? What do you mean by that?
Mr. RUTTER. Within the rules.
Mrs. CUBIN. Pardon me?
Mr. RUTTER. Within the rules.
Mrs. CUBIN. Within what rules?
Mr. RUTTER. Well, the rules of law and the rules of accounting.
Mrs. CUBIN. The rules of law? So there was a question in your mind whether or not this was legal.
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Mr. RUTTER. No, ma'am. I said we wanted to make sure that they were done properly. I'm not saying that there was any question at the time.
Mrs. CUBIN. Does POGO keep minutes of all of their board meetings?
Mr. RUTTER. Yes, we do.
Mrs. CUBIN. Are they circulated to the board after the meetings?
Mr. RUTTER. Yes, they are.
Mrs. CUBIN. Are they then approved at the next meeting?
Mr. RUTTER. Yes.
Mrs. CUBIN. And whose job is it to take minutes at the meetings?
Mr. RUTTER. It is my job.
Mrs. CUBIN. And you type them, file them, and circulate them to the members?
Mr. RUTTER. Yes, I do.
Mrs. CUBIN. Were you present at the December 9th, 1996, board meeting?
Mr. RUTTER. I think I was.
Mrs. CUBIN. Did you keep the minutes of that meeting?
Mr. RUTTER. Yes. If I was there, I would have kept the minutes.
Mrs. CUBIN. Were you present at the October 27, 1998, board meeting?
Mr. RUTTER. I don't have the minutes in front of me, but if I was there, I would have kept the minutes.
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Mrs. CUBIN. You would have typed and kept the minutes of that meeting as well?
Mr. RUTTER. Yes.
[Discussion off the record.]
Mrs. CUBIN. I'm going to have a copy of some minutes that we have run and delivered to Mr. Rutter. So I will yield to Mr. Underwood.
Mr. UNDERWOOD. Well, thank you, Madam Chair.
I just wanted to clarify, I thought we were operating under the 5-minute rule. And—pardon me? It was a little bit more than that.
I just want to clarify, we are operating under the——
Mrs. CUBIN. I only have two ears and a lot of people asking.
Mr. UNDERWOOD. Yeah, well, you can give me some attention now.
Mrs. CUBIN. I am happy to do that.
[Laughter.]
Mrs. CUBIN. You certainly deserve it.
Mr. UNDERWOOD. So are operating under the 5-minute rule for this?
Mrs. CUBIN. Yes.
Mr. UNDERWOOD. Okay. Thank you.
Mr. Rutter, I guess some inferences have been made about the fact that you asked, POGO asked for legal assistance or some kind of legal representation in the process of acquiring this sum of money. Did POGO ever have experience, an experience like this previously?
Mr. RUTTER. No, we did not.
Mr. UNDERWOOD. And so wouldn't it have been kind of a prudent course of action, don't you think, that if you all of a sudden came into this large sum of money that you would then do the prudent thing, which is to seek legal assistance? Is that the general spirit in which you sought legal assistance?
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Mr. RUTTER. Yes, it is.
Mr. UNDERWOOD. And so there was nothing, at the time that you asked for it, there was nothing nefarious or, at the time, there was nothing like that in your consideration.
Mr. RUTTER. No, not at all.
Mr. UNDERWOOD. I would also like to ask about the nature of your services to the organization. How would you characterize the minutes that you keep for POGO board meetings. We have a very organized and formal set-up here, where we have a stenographer, and we have lots of people here taking minutes, and we have all kinds of staff up here recording every single nuance. And even then we have disagreement about what our intentions were or trying to read back in the record.
So maybe you could just characterize for the Committee how do you keep minutes, and were they transcribed? Were these impressions? Did you just use paper and pencil? And was it just solely left up to you? Could you describe that.
Mr. RUTTER. Yes. These minutes are not verbatim minutes. I will take notes, brief notes at the time. Sometimes it's, you know, a few days afterwards, and I will, when I get the time, I will type them up, and I'll send them out to the board. The board reviews them. I might give the minutes to the board again. At the next board meeting, they review the minutes and vote to accept the minutes or edit or amend them.
Mr. UNDERWOOD. So would it be fair to characterize the nature of the minutes as kind of impressionistic on your part? You know, you'd have the——
Mr. RUTTER. Absolutely.
Mr. UNDERWOOD. [continuing] the details are in there, but you know, if you put in an additional word or two, there was not a lot of quibbling in the subsequent board meeting about what did you mean by this or——
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Mr. RUTTER. Yes.
Mr. UNDERWOOD. [continuing] as there would be today, perhaps.
Mr. RUTTER. It's my imp—yes, it was totally based on my impression of what transpired.
Mr. UNDERWOOD. Okay. Since you weren't allowed to, in the conduct of this hearing, witnesses are not allowed to give an opening statement. Perhaps there's something you would like to say to the Committee, and perhaps you'd like to—is there—I'm sure there's a lot of, maybe the temptation would be not to say anything, and that would be better. You'd be better off not saying anything. But is there something that you would like to add based on your observation of the previous witnesses and the likely questions and the kinds of questions that have been asked? Is there something that you would like to characterize your end of the decision-making process?
Mr. RUTTER. I greatly appreciate the offer, but I'm going to abstain from at this time.
Mr. UNDERWOOD. Okay. Thank you.
Jay, would you like to ask a quick question?
Mr. INSLEE. I would appreciate a moment if I could.
Mr. UNDERWOOD. Sure.
Mr. INSLEE. Mr. Rutter, approximately how much has been paid by the oil companies to the Federal Government or their agencies as a result of the whistleblower activities, approximately?
Mr. RUTTER. It's my understanding it's over $300 million.
Mr. INSLEE. And could you help me on the sequence of those payments relative to when the payment to the whistleblowers in this case took place?
Mr. RUTTER. I'm sorry. Could you rephrase that?
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Mr. INSLEE. Tell me the sequence of the payments by the oil companies to the Federal Government relative to when knowledge came out about these payments to the whistleblowers.
Let me start again. Let's scrub that.
Mr. RUTTER. Okay.
Mr. INSLEE. It's late in the afternoon. Let me try a different tack.
What I'd like to know is whether anyone has, to your knowledge, asserted that they were injured, wrongfully injured, as a result of the decisions or any actions by the two government employees in this case? In other words, have any of the oil companies said, ''We paid too much. We paid $300 million, and we only should have paid $250 million''? In any of these lawsuits, have they made that assertion?
Mr. RUTTER. Not to my knowledge.
Mr. INSLEE. Have they made that assertion anywhere in public, to your knowledge?
Mr. RUTTER. No, not to my knowledge.
Mr. INSLEE. Have you been sitting through this hearing? I had to step out to some other hearings. Have you been here the whole time?
Mr. RUTTER. No, I've been in and out. Sorry.
Mr. INSLEE. Okay. Thank you.
Thank you, Madam Chair.
Mrs. CUBIN. The gentleman's time has expired.
The chair now recognizes Mr. Brady.
Mr. BRADY. Thank you, Madam Chairman.
Mr. Rutter, did Mr. Berman or Mr. Speir provide any information to POGO or to POGO's attorneys that led to or were incorporated into the lawsuit that you filed?
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Mr. RUTTER. Not to my knowledge.
Mr. BRADY. So you are saying that Mr. Speir and Mr. Berman absolutely provided no information to the organization or to your attorneys that was used, incorporated, developed for that lawsuit, none whatsoever?
[Witness conferring with counsel.]
Mr. RUTTER. Not to the best of my knowledge.
Mr. BRADY. To your knowledge, absolutely no information was provided.
Mr. RUTTER. No.
Mr. BRADY. What then, what services then were Mr. Berman and Mr. Speir compensated for to the tune of $383,000, as your minutes and agreement reflect?
Mr. RUTTER. I'm sorry. When you say ''services,'' they had, for years, spoken out loud to anybody who would listen to them about the problem.
Mr. BRADY. Let me read you the minutes of December 9th.
''Ms. Brian informed the board that POGO was pursuing a False Claims lawsuit that Mr. Banta, then chair, know that POGO is the only relator that is public. The others are in private agreements. Ms. Brian mentioned that an agreement had been worked out if there was some reward or whatever and whenever an amount would be won, that the individuals that have been doing this for years would be compensated.'' These individuals, she confirms, are Mr. Berman and Mr. Speir.
My question is, since my guess is POGO doesn't write a lot of $383,000 checks and that people simply don't walk out and give them to people along the street, my question is simple, and any common-sense person would ask it.
What services did they provide that POGO compensated them for?
Mr. RUTTER. As I said, they didn't provide any information——
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Mr. BRADY. They provided no services?
Mr. RUTTER. For the lawsuit.
Mr. BRADY. Even though they were identified as to be compensated, they were confirmed that they were owed that money, owed that money as the prior agreement had said, and you're saying that there was no services whatsoever provided that they were compensated. I just want to make clear.
Mr. RUTTER. Right. Could I see the—incidentally, you're reading from this. Can I see a copy of those minutes?
Mr. BRADY. Of the minutes of December 9th? Sure. Since you provided them to us, I was hopeful that you might have a copy.
Mr. RUTTER. Okay. I'm sorry, sir, you're reading from the?
Mr. BRADY. December 9th, 1996 minutes.
Mr. RUTTER. Oh, I have the October 27, '98.
Mrs. CUBIN. Would staff please get Mr. Rutter the correct minutes?
Mr. BRADY. The pertinent question still remains. What services were they compensated for?
Mr. RUTTER. I just want to make sure that I'm reading the same thing, so that——
Mr. BRADY. Sure.
Mr. RUTTER. I mean, you're referring to something that was in the minutes, correct?
Mr. BRADY. Yes, sir.
Mr. RUTTER. Well, in this instance here, sir, of the board minutes, when I say ''compensated'' I just mean that—you know, I'm referring to they'd be doing this work for years, and if we saw any money from the lawsuit, we would share it with them.
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Mr. BRADY. But later on you pursued—when one of the insiders protested that they weren't being paid as per the agreement—so under award, this was an agreement—your executive director, Ms. Brian, confirmed, ''Yes, we will pay you as we promised to.'' My question is very simple. What services did they provide you that warranted $383,000?
Mr. RUTTER. They provided no services for the lawsuit.
Mr. BRADY. That is hard to believe, and for an entity that purports to be open and honest in their dealings, it is unbelievable. I think POGO can rightfully change its name to ''Paying Off Government Officials'', because clearly, in this case, unless you're the greatest Santa Claus that ever walked this earth—and I have some suggestions of other people who could use $383,000 for doing nothing for your organization—your testimony is not believable.
Thank you, Mr. Chairman.
Mr. GIBBONS. [presiding] Mr. Inslee.
Mr. INSLEE. If I may inquire of my friends across the aisle or the chair—and this is maybe a procedural question as much as anything—it seems to me that there's two questions I don't think we're going to get to today as far as answers that I think are really pertinent here. One is what the real policies are of the respective agencies regarding situations like this where there might be compensation to an employee, either as a relator or as a witness who's getting information. And my understanding is, at least today, we're not going to have testimony. I guess the question is, in any part of this hearing do we intend to do that? And second, are we going to hear any testimony that you're aware of to assert that these employees in fact did something inappropriate that changed a person's payment to the Federal Government?
And that is a question, because I think those really are the important questions, and I don't think we're going to get to them today. And I would just my friends across the aisle if they have any intention to bring witnesses forward on those issues?
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Mr. GIBBONS. First, Mr. Inslee, let me say that we're well aware of those questions, that we certainly can bring those at a later time. I think also one would have to also be aware that the purpose and policies of asking these very questions go to standards of conduct of government employees, and that's the basis by which we're trying to get to the matter at hand. According to 5 CFR 2635, Subpart B, which is the Ethical Requirements of all Government Employees, there are some rules and regulations in which they have violated that we are going after with this determination, and relevancy of the testimony as regard to those violations of those standards of conduct. We would be happy to bring, in my view, and I would make the recommendation along with you, that another hearing we do delve into the questions of those standards and whether or not these employees violated those standards.
And I am informed also that there is a hearing planned for the 18th on those issues.
Mr. INSLEE. Well, let me just suggest that the real kernel of the issue here ought to be was someone prejudiced or injured wrongfully by these employees' conduct? And I would just suggest that if someone's going to assert that, that we need to hear testimony, and of course, the Majority's in charge of the panel who will be called, so let me just make that suggestion. If people want to know that, we need to hear testimony in that regard.
Mr. GIBBONS. And I would suggest to you, Mr. Inslee, that any time there's a breach of ethical violation, there is indeed a damage done to the American public, and that is the damage we're after.
Mr. INSLEE. I would agree with you. I would agree with that rhetorical statement.
Mr. GIBBONS. Thank you. Did you have any questions, Mr. Inslee?
Mr. INSLEE. No, thank you.
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Mr. GIBBONS. Mr. Schaffer? Mr. Schaffer, before you begin your questioning, let me say we've just been called on a vote of approving the conference report for the Africa Trade Bill. I will defer to the chairwoman of the Committee, but I would think that if we recessed for a short break to go vote and come back, that would be appropriate, rather than delaying any further comments.
We will recess for approximately 20 minutes.
[Recess.]
Mr. BRADY. Madam Chairman?
Mrs. CUBIN. Mr. Brady.
Mr. BRADY. Under Clause 2(j)(2)(c) Rule 11 of the Rules of House of Representatives, I move that Tom Casey of the Majority staff, and a staff member designated by the Minority each be allowed to question the witness, Keith Rutter, for equal periods of time not to exceed 30 minutes.
Mrs. CUBIN. Without objection, so ordered.
Mr. Tancredo, who has been here for most of the hearing, does desire to question this witness. He's tied up for a few minutes. So I think I would like to make one point, and then hopefully Mr. Tancredo will be here, and if not then—oh, here he is right now—then I'll recognize Mr. Thornberry.
Mr. Rutter, I'm referring back to your not answering the question that I asked regarding the Internal Revenue Service forms because you declare that answering is not pertinent. Pertinency is important. It is one of the four elements that must be proven to convict someone in a criminal contempt of Congress.
Here is how pertinency fits in. First of all, the Subcommittee must have jurisdiction over the subject of the hearing. It does fall under the House Rules. Then the Subcommittee must have the authority to conduct oversight. Our authority comes from Article I of the Constitution, under which Congress has the authority to collect information so that it can legislate. That authority was delegated by the House Rules to the Committee, and then by the Committee Rules to the Subcommittee. Third, the Subcommittee must have a legislative purpose. It is clear, based on the Subcommittee's past work on oil policy. Finally, the testimony or records subpoenaed must be pertinent to the inquiry.
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Because these elements exist, the Committee's oversight project is valid. Its subpoenas for documents and testimony can be properly enforced. So I ask you again, do you wish to answer the question about the Internal Revenue Service forms that I referred to?
Mr. RUTTER. I'm sorry. Those questions specifically were?
Mrs. CUBIN. The questions were—the question was: why did you refuse to produce the documents according to the subpoena? Why did you refuse to answer the questions about the documents here in front of the Committee today, the Internal Revenue documents that in fact had the award from the settlement included in those documents, and other years?
[Witness conferring with counsel.]
Mr. RUTTER. Madam Chair, in addition to my pertinency objection, I have also been advised by my counsel that the jurisdiction of this Committee is limited to matters delegated to the Committee under House Rules 10, Clause 1(L), Mineral Resources of Public Lands; and under House Rule 10, Clause 2(A), Oversight and Administration of the Department of Interior. I have also been advised that POGO's tax status and its compliance with applicable tax laws do not come within that delegation of authority, and therefore, I decline to respond.
Mrs. CUBIN. Mr. Rutter, I would like to remind you that—and to warn you—that failure to answer the question or to provide the documents that were subpoenaed by the Committee—the Committee determines that the material is pertinent and the Chairman determines that the material is pertinent—can cause you to be held in contempt of Congress. Are you aware of that?
Mr. RUTTER. Yes, I am aware of that.
Mrs. CUBIN. Mr. Rutter, will you turn those documents over to the Subcommittee at this time?
[Witness conferring with counsel.]
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Mr. RUTTER. With respect—and understand the Chair's position, and upon advice of counsel, I will stand on my objection.
Mrs. CUBIN. Do you wish at this time to answer the question about the Form 990?
Mr. RUTTER. I'm sorry. And the question being?
Mrs. CUBIN. To produce it and tell the Committee why you would not explain the form, and why you would not give it to the Committee?
[Witness conferring with counsel.]
Mr. RUTTER. You know, I'm going to stand on the advice of my counsel, and also stand on my objection.
Mrs. CUBIN. Mr. Rutter, it's easy for the former counsel to the House to instruct you that way, because he's not on the line here. He's not the one who can be charged with contempt of Congress, and sir, his advice to you is bad, because I want you to know that I will pursue in every way that I can contempt of Congress charges against you, not as thinking that it is the material that is the most important factor. It is the contempt that you are showing for the process and for Congress.
So with that, I will now recognize Mr. Tancredo for 5 minutes questioning.
Mr. TANCREDO. Thank you, Madam Chairman.
Mr. Rutter, understanding that you will not produce the documents in question or not tell us why, perhaps you would tell me in fact—let me back up and ask you another question.
How long have you worked for POGO as an executive director?
Mr. RUTTER. Sir, I'm not the executive director.
Mr. TANCREDO. Well, in whatever capacity you serve.
Mr. RUTTER. I've been with the organization since 1989.
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Mr. TANCREDO. And what exactly do you do there; what are your responsibilities?
Mr. RUTTER. My duties include doing the administrative work of the administration. I do fund raising for the organization, and I do some research for the organization.
Mr. TANCREDO. In the administrative work that you do for the organization, are you responsible for the preparation of the IRS Form 990?
Mr. RUTTER. When you say am I responsible for the preparation, we have accountants that do the IRS Form 990.
Mr. TANCREDO. And when the accountant calls POGO and asks for information, who gives it to him?
Mr. RUTTER. That's exactly what I was going to say. The accountant then will call me or meet with me, and say, ''We need, you know, this information'', and I supply the information.
Mr. TANCREDO. And when you prepared or worked on or in whatever capacity you serve POGO that allows you to work on the IRS Form 990, do you recall listing the source of income for your organization on that IRS Form 990? Do you recall, first of all, saying anything about the amount of money that POGO takes in in a year?
Mr. RUTTER. No.
Mr. TANCREDO. On the IRS Form 990. Do you remember that? That's what's part of——
Mr. RUTTER. Well, specifically, which IRS Form 990 are we talking about, sir?
Mr. TANCREDO. Any year that you want.
Mr. RUTTER. Any year that I want.
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Mr. TANCREDO. Yes.
Mr. RUTTER. Do I recall listing the amount of the organization's——
Mr. TANCREDO. Do you recall that that's actually one of the things on a IRS Form 990, an amount of money that the——
Mr. RUTTER. I'm sure it is, but I can't recall that that's a specific question.
Mr. TANCREDO. In your preparation or in your help for the creation of the IRS Form 990, exactly what information did you provide the accountant?
Mr. RUTTER. I'm sorry. Could you say that again?
Mr. TANCREDO. Yes. In your aid, in the aid that you give the accountant in the preparation of the IRS Form 990, what information did you provide for last year or the year before? The one that you recall, any one that you recall?
Mr. RUTTER. I provide the accurate information.
Mr. TANCREDO. Like what?
Mr. RUTTER. I provide the accurate information.
Mr. TANCREDO. Be specific. What kind of information?
Mr. RUTTER. Whatever the question.
Mr. TANCREDO. Do you have any idea what's on there at all?
Mr. RUTTER. Not really. I mean, there's a variety of questions that the accountants ask me.
Mr. TANCREDO. Do you know the purpose of the IRS Form 990?
Mr. RUTTER. It's to publicly disclose information.
Mr. TANCREDO. About what?
Mr. RUTTER. About our tax information.
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Mr. TANCREDO. About tax information.
Mr. RUTTER. But we're actually a non-profit, so——
Mr. TANCREDO. I know exactly what you are. And I ran a non-profit. I also know what's in a IRS Form 990, and I'm asking—and I know the administrator from my organization knew very well what was in a IRS Form 990 and what his responsibilities were. And I'm trying to figure out—how many people work there at POGO in the administrative division?
Mr. RUTTER. Well, in the administrative division——
Mr. TANCREDO. It's just you?
Mr. RUTTER. It's just me at the time.
Mr. TANCREDO. And so therefore, since you're the only person there that helps prepare the IRS Form 990, it seems to me logical that you would have some information available to you about what is actually on there, and the structure of it.
Mr. RUTTER. I didn't—I'm sorry. Did I——
Mr. TANCREDO. Do you recall, for instance, telling your accountant the source of or the amount of the income that POGO had for the preceding year, for last year?
Mr. RUTTER. As I said, sir, if that's a question, I must have done it.
Mr. TANCREDO. Okay. You gave him the information about the source of income for POGO. Do you recall giving him information directly related to the funds that came to POGO as a result of this lawsuit?
Mr. RUTTER. Yes, we were very open with our accountants as far as funds coming from this lawsuit.
Mr. TANCREDO. So that's listed on there someplace.
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Mr. RUTTER. That's my understanding.
Mr. TANCREDO. And were payments listed on there, payments to anybody else, payments that came out of those funds listed on your 990?
Mr. RUTTER. When you say payments to anybody else——
Mr. TANCREDO. Expenditures, costs to the organization.
Mr. RUTTER. If it's a question on the 990, we provided the answer to our accountants.
Mr. TANCREDO. If you know what's on the 990 and you know exactly what it is—you know that it requires and you know what you told them.
Mr. RUTTER. I'm not here as an accountant, sir. I'm not——
Mr. TANCREDO. I know. You're an administrative officer. I know that. But if you know that, if you know what I just asked, what's on it and what's required and what you provided, then why can't you tell us what that was, what that is?
Mr. RUTTER. I'm sorry. What the information was? I'm telling you that I provided the information to the accountants.
Mr. TANCREDO. We're not going to get anywhere here. Let's move on to the IRS Form 1023. Are you familiar with that particular document?
Mr. RUTTER. I'm not very familiar with it, no. Prior to last year nobody had requested our IRS Form 1023s before.
Mr. TANCREDO. But you do know what's on them?
Mr. RUTTER. It's a form and a file, sir. When somebody requests it, we make a copy. I don't reread—
Mr. TANCREDO. You've never looked at it?
Mr. RUTTER. Yes, I——
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Mr. TANCREDO. When you make a copy.
Mr. RUTTER. Not when I've made a copy, no. I'm not being quizzed on the IRS Form 1023, sir.
Mr. TANCREDO. Well, I'm asking you about the IRS Form 1023.
Mr. RUTTER. I understand that, but I didn't realize there was going to be a quiz on the IRS Form 1023.
Mr. TANCREDO. Well, you know, are these questions really all that challenging for an administrative officer for an organization of this nature?
Mr. RUTTER. I can only tell you what I know, sir.
Mr. TANCREDO. Do you know whether on your IRS Form 1023 you listed the payment of any public service awards?
Mr. RUTTER. On our IRS Form 1023?
Mr. TANCREDO. Yes.
Mr. RUTTER. I wouldn't think so, but I have no idea. The IRS FOrm 1023's an old document.
Mr. TANCREDO. That is true. Let me ask you this. Your testimony here, have you ever testified before a Committee of the Congress before, by the way?
Mr. RUTTER. Not this one, no, not a congressional Committee.
Mr. TANCREDO. But have you supplied testimony to——
Mr. RUTTER. To different panels and forums, things like that, workshops.
Mr. TANCREDO. But nothing of the Congress?
Mr. RUTTER. Nothing of the Congress, sir.
Mr. TANCREDO. Madam Chairman, I really do not think we're going to get really much farther here, and I just don't have any other questions I think will be answered, frankly and candidly, and we're just wasting time, and I apologize.
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Mrs. CUBIN. The Chair now recognizes Mr. Casey for staff questioning for 15 minutes.
Mr. CASEY. Thank you, Madam Chairman.
And there are a couple of things I do want to go over with you that were touched on earlier, Mr. Rutter, and perhaps a few things that are new.
I don't think we, at least in my mind, clarified who were among the people, to the best of your recollection, among the POGO staff and on the POGO board of directors, who thought out loud, directed or suggested that lawyers and accountants might be or should be or could be consulted before writing the checks in November 2nd of '98 to Mr. Berman and Mr. Speir.
Could you try again to go through the names of the folks who you—to the best of your recollection were probably involved, or if there's anyone you could exclude who was on staff or on the board at the time?
Mr. RUTTER. Well, as I mentioned, you know, Marcus Corbin, Danielle Brian and I, I think were the folks on staff at the time. I don't think that necessarily Marcus Corbin—I think one of your questions directed me?
Mr. CASEY. I gave you a variety of—directed, suggested, thought out loud, you don't seem to recall very——
Mr. RUTTER. I'm sure he was aware of that, but I don't know that he directed, suggested. But you know, we're a small office. I'm sure he was aware of that. As far as the board of directors, I don't remember who on the board knew and who didn't, and the only thing I can recall is it's more than likely I would think that Mr. Hunter, being the chair of the board at the time, that he was aware of it.
Mr. CASEY. Is there anybody on the board or on the staff who you can exclude as having taken part in this general discussion or decision or direction?
Mr. RUTTER. No, there's nobody that—but when—no. I mean, exclude.
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Mr. CASEY. Again, not asking, as Mrs. Cubin did not, not asking what advice was given by the accountants or by the lawyers, among the issues presented to the accountants and the lawyers, did it include only accounting procedures and IRS matters?
[Witness conferring with counsel.]
Mr. RUTTER. What we said to our lawyer is privileged, but, you know, we did go to see the accountant.
Mr. CASEY. Did you show the lawyers or the accountant, when you consulted them on this in—must have been, I guess, October or at some point in the second half of '98, it would appear, before November 2nd—did you show them either the board meeting minutes such as they are from December 9th of 1996, or the January 5, 1998 agreement signed by Mr. Berman, Mr. Speir and Ms. Brian?
Mr. RUTTER. As I said before, as far as our attorneys are concerned, I can't speak to that. However, what the accountants—you made a list of things. I can take them one at a time if you'd like.
Mr. CASEY. Of course.
Mr. RUTTER. And could you do me a favor and read them back? Did I show our accountants——
Mr. CASEY. Did you show the accountant either the December 9th, 1996 board meeting minutes——
Mr. RUTTER. No.
Mr. CASEY. The discussion pertaining to this question, the agreement to pay?
Mr. RUTTER. No.
Mr. CASEY. Did you show the accountant the January 5, 1998 agreement signed by Ms. Brian, Mr. Speir and Mr. Berman?
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Mr. RUTTER. No.
Mr. CASEY. Did you provide them any information, whether on paper or otherwise, that at some point the board of directors had decided to establish a program of public service awards?
Mr. RUTTER. I don't think so. I can't recall exactly, but I don't think so.
Mr. CASEY. Since December of '96, has your IRS Form 1023 been amended or modified or renewed in any way to include, among the organization's exempt charitable purposes, awarding cash public service awards?
[Witness conferring with counsel.]
Mr. RUTTER. I've been advised by my attorneys that the answer to that question is not pertinent, and not within jurisdiction.
Mr. CASEY. If I could—all right. If I could just make sure I understand correctly, your position is that the giving of cash public service awards by POGO is not pertinent to this inquiry?
[Witness conferring with counsel.]
Mr. RUTTER. Sir, that wasn't your question before. Your question before related to the IRS Form 1023.
Mr. CASEY. And whether the IRS Form 1023 reflects now or originally that one of POGO's exempt charitable purposes is to make cash public service awards?
[Witness conferring with counsel.]
Mr. CASEY. Are you all talking case or constitutional law?
Mr. RUTTER. Constitutional law, sir.
Mr. CASEY. Good.
Mr. RUTTER. I'm just going to have to stand on my objection, sir.
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Mr. CASEY. Okay. I'm not sure I followed the discussion about the board meeting minutes and them being impressionistic, but could I just recount my understanding and see if I have it right, that during board meetings, you keep notes?
Mr. RUTTER. Sometimes I do——
Mr. CASEY. Sometimes you don't?
Mr. RUTTER. As I said, sometimes I actually write out notes; sometimes I jot along—if there's a board agenda or an outline, sometimes I'll just make note, you know, ''discussed'', something like that. Sometimes I'll just totally go by memory.
Mr. CASEY. When did you reduce to typed form the documents that were produced as board meeting minutes for December 12—excuse me—December 9, 1996?
Mr. RUTTER. I can't recall, sir.
Mr. CASEY. You can't recall. Do you think it was in December of '96?
Mr. RUTTER. I'm pretty sure it was in December of '96.
Mr. CASEY. I think somebody handed you that document before. So you believe—are you testifying that you believe that you typed up the December 9, 1996 minutes as they appear now in the excerpt you have, in the month of December 1996?
Mr. RUTTER. Yes. Usually, as I stated before, it might be, you know, a day or two. Ideally it would be a day, the next day, but——
Mr. CASEY. But proximate to the date of the actual meeting.
Mr. RUTTER. But it would usually be within a week or so of the meeting.
Mr. CASEY. Did you retype them before they were produced to this Committee or anybody else under a subpoena?
Mr. RUTTER. No. Did I retype the minutes that were already typed?
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Mr. CASEY. Is the document that was produced to this Committee or to anybody else under a subpoena, the document that you see in front of you now, at least the relevant portion, or did you at some point take what you had typed up in December of 1996 and put it in a different format, or reword or restate it?
Mr. RUTTER. Okay. I think what you're alluding to, sir——
Mr. CASEY. I'm not alluding to anything, Mr. Rutter. I'm asking a direct question.
Mr. RUTTER. Well, then, I'm sorry. Then can you state the question again?
Mr. CASEY. As I understand it, sometime in the month of December 1996 you took your memory and your notes from that board meeting, and you typed them up as something called minutes. Is that the document that's in front of you right now in the very same form, same format, et cetera?
Mr. RUTTER. No, that is not the exact document that I typed up.
Mr. CASEY. How is it different?
Mr. RUTTER. How it is different is I gave our attorneys the full document, the minutes. They went through and looked at what was the relevant part of the minutes relating to the questions on the subpoena. And in this particular case here, I guess they just put pieces of white paper—I don't know what they did—cut out to submit to you.
Mr. CASEY. Is the wording exactly the same as you gave it to the lawyers?
Mr. RUTTER. I guess so, but without having it exactly in front of me—I mean, it seems like it is, but I can't be 100 percent unless I had——
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Mr. CASEY. Can't be 100 percent sure, but it is possible that your lawyers altered the minutes before they were given to the Committee?
Mr. RUTTER. No. I was referring to that it's possible that you might have altered them prior to giving them back here to me.
Mr. CASEY. I can rule that out.
Mr. RUTTER. Well, I can probably rule—well, I can check with the attorneys to see if they altered them, but it's my understanding they did not.
Mr. CASEY. Is the document you gave to the attorneys exactly the same as the one you typed up in December of '96, or did you in any way alter it before giving it to them?
Mr. RUTTER. I did not do anything to alter that before I gave it to my attorneys.
Mr. CASEY. Did anybody?
Mr. RUTTER. Not that I know of.
Mr. CASEY. Can you exclude that possibility?
Mr. RUTTER. You know, I guess you can't.
Mr. CASEY. Okay. So of the December 1996 board minutes we have are a true and genuine document, why is there no mention of a public service award? Was there a discussion that was not recorded about making public service awards to the two individuals named?
Mr. RUTTER. I can't recall, sir.
Mr. CASEY. If there had been such a discussion do you think you would have included it in the minutes?
Mr. RUTTER. I don't know.
Mr. CASEY. Do you recall any discussion from any prior board meeting about establishing a public service award that would be paid in cash?
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Mr. RUTTER. No.
Mr. CASEY. Same exercise—similar exercise on the October 27, '98 board meeting minutes. Is what you have there exactly what you gave to the lawyers—we know that things have been redacted—but is the description of that meeting that you have in front of you now exactly what you gave to your lawyers?
Mr. RUTTER. No. I gave the full minutes to the lawyers.
Mr. CASEY. No. I'm talking about just the relevant portion that you have in front of you.
Mr. RUTTER. I gave the full minutes to the lawyers, and the lawyers made the decision on what portion was relevant or not.
Mr. CASEY. Okay. On the portion that they deemed relevant and that's in front of you now, is that exactly the way you gave it to them?
Mr. RUTTER. No.
Mr. CASEY. How is it different?
Mr. RUTTER. This is different, because after giving the full minutes to the lawyers, they said about that there are certain relevant parts, and they said that we only need to turn over to the questions, the certain relevant parts.
Mr. CASEY. Do you recall information in the original full minutes that dealt with the payments to Mr. Berman and Mr. Speir that are not in the document that you have in front of you? You don't have to tell me what those discussions were, but if there are discussions that were in the document you gave them which pertained to the payments to Mr. Berman and Mr. Speir and which are not in the documents in front of you.
[Witness conferring with counsel.]
Mr. RUTTER. I'm sorry. Can you repeat the question for me, please?
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Mr. CASEY. Do you recall that in the original document you gave to the lawyers, whether there was any discussion or reference to the payment to Mr. Berman and Mr. Speir, which is not in the document in front of you now? But I'm not asking what the substance of that discussion was, merely if there's any missing discussion or missing part that is relevant to the payments to Berman and Speir.
Mr. RUTTER. Okay. I don't know the answer to that, sir.
Mr. CASEY. You don't know the answer.
Mr. RUTTER. I don't know. I mean, without the full minutes here to compare, I don't know.
Mr. CASEY. All right. Now, the phrasing, which I can't quote from memory—here we go. ''The staff consulted with our consultants and a non-profit/tax attorney recommended by Mr. Hunter to make sure we were following proper procedure. The staff also consulted with a constitutional attorney. The lawyers and our accountant agreed that we send a letter stating that it was an award for public service, and that we would send them the appropriate tax form at the end of the year.''
At that meeting, did the board affirmatively decide, by vote or assent, to make a public service award to Mr. Berman or Mr. Speir?
Mr. RUTTER. No. I mean, if there was a vote, it would be reflected in the minutes, and so if there wasn't a vote, then it means that—you know, and would come to some consensus.
Mr. CASEY. Did they acquiesce in or confirm a staff decision to make a public service award?
Mr. RUTTER. I would say they came to consensus. If there was dissension. If somebody had a problem, an issue or something like that, you know, anybody could say, ''Let's vote on this'', or there would have been more of a debate.
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Mr. CASEY. Was there a debate about making these men a public service award at that meeting?
Mr. RUTTER. Not that I recall. I would have reflected it if there would have been a——
Mr. CASEY. So there was never an affirmative decision by the POGO board to award cash public service awards to Mr. Berman or Mr. Speir at any time?
Mr. RUTTER. Well, when you say an affirmative decision, I mean, as I said, the board does things by consensus, and so if there wasn't consensus——
Mr. CASEY. When did they reach the consensus to establish a public service award program or to make one-time public service awards to Mr. Berman and Mr. Speir?
Mr. RUTTER. I don't know as far as the minutes are concerned.
Mr. CASEY. Well, leave aside the minutes. In your memory, do you know when that was?
Mr. RUTTER. No, I can't recall.
Mr. CASEY. Did it ever happen?
Mr. RUTTER. What I was going to say is I can't recall. I guess it happened during this meeting here.
Mr. CASEY. And if it's not reflected in that meeting—those meeting minutes, then it never happened?
Mr. RUTTER. Well, I'm not saying it never happened. I'm just saying that as I recall, I can only—you know.
Mr. CASEY. Would you have forgotten a consensus or decision that resulted in the checks to Berman and Speir?
Mr. RUTTER. No, I don't think I would have forgotten, but you know, these minutes accurately reflect the proceedings of the board meetings.
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Mrs. CUBIN. The gentleman's time has expired.
I thank the witness for his testimony. You are dismissed. Oh, I'm sorry. Yes, I knew they didn't have questions over there. They had already told me that, so officially for the record, the Minority has no questions for this witness.
Thank you very much for your testimony, what there was of it, and you'll hear from us again.
I would like to ask the next Panel to please come forward, Anne Zill, Marjorie Sims, Dina Rasor, Jack Mitchell, Morton Mintz, David Hunter, Charles Hamel, Michael Cavallo, David Burnham and Henry Banta.
Would you please rise and raise your right hand?
[Witnesses sworn.]
Mrs. CUBIN. Mr. Thornberry, for the purpose of making a motion.
Mr. THORNBERRY. Under Clause 2(J)(2)(b) of Rule 11 of the House of Representatives, I move that Chairman Cubin, myself, Mr. Brady and a Minority member of the Committee each be allowed to question the panel now seated for equal periods of time, not to exceed 30 minutes each.
Mrs. CUBIN. Without objection, so ordered.
Mr. THORNBERRY. Madam Chairman, under Clause 2(J)(2)(c) of Rule 11 of the Rules of the House of Representatives, I move that Tom Casey, the Majority staff, and a staff member designated by the Minority, each be allowed to question the panel now seated for equal period of time not to exceed 30 minutes.
Mrs. CUBIN. Without objection, so ordered.
Ladies and gentlemen, you have been subpoenaed to tell this inquiry how you decided to enter into an agreement among POGO, Robert A. Berman and Robert A. Speir, to share all the proceeds of an oil royalty suit filed by POGO. We also seek to understand whether you intended this agreement and the payments made pursuant to it, to be public service awards from the inception in early December 1996. We also wish to understand the process by which you, as the responsible governing party of a private corporation with substantial financial interests in Federal royalty policy matters, chose two Federal employees involved in those matters as recipients of payments running well into seven figures.
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Attempts by Committee staff to informally interview the directors were blocked by POGO attorneys. Those lawyers have repeatedly insured the Committee that all relevant board meeting minutes have been produced. If so, they shed no light on the why and how of selecting Messrs. Berman and Speir to become multimillionaires.
So the only way to determine what qualifications and ethical or fiduciary considerations were discussed is to ask you here today.
Because of the number of witnesses necessary for today's hearing, and because the Subcommittee is keenly interested in your answers, your written statements will be entered in the record, rather than taking the time for statements at this time. With your cooperation in making concise, candid answers, we will try to make this round of questioning run smoothly, and we will try to get this finished as quickly as we can.
I am going to ask a series of questions. Each question will be stated once, and would you please answer in turn with the first question by identifying yourself, and then giving an answer?
For the convenience of the reporter, as I said, the court reporter, I guess we need you to identify yourself each—we don't? Okay. So the first time around please identify yourself for the convenience of the reporter.
I have a question for all of you. At the time of the meeting of December 9, 1996, did you specifically understand that the agreement described by Mr. Banta and Ms. Brian, was that POGO would split its proceeds in equal thirds with Mr. Berman and Mr. Speir? We could start to my left, please. Identify yourself, and answer the question.
STATEMENT OF CHARLES HAMEL
Mr. HAMEL. My name is Charles Hamel. Would you repeat the question, please? I didn't know it was for me.
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Mrs. CUBIN. Certainly. At the time of the December 9th meeting of 1996, did you specifically understand that the agreement described by Mr. Banta and Ms. Brian, was that POGO would split its proceeds in equal thirds with Mr. Berman and Mr. Speir; did you understand that on December the 9th?
Mr. HAMEL. I don't think you've read my statement. I have recused myself at all meetings having to do with the oil industry of the United States of America.
Mrs. CUBIN. So, Mr. Hamel, you were present at the meeting; is that correct?
Mr. HAMEL. I stepped—I don't know about that particular meeting, because every time the word ''Exxon, et al.'' came up, I left the room, didn't return again until we were on a new subject.
Mrs. CUBIN. The next?
STATEMENT OF MORTON MINTZ
Mr. MINTZ. I'm Morton Mintz. I did not become a member of the board until September 1997.
Mrs. CUBIN. The reporter would ask you to please speak into the microphone.
Mr. MINTZ. My name is Morton Mintz. I did not become a member of the board of POGO until September 1997, so the question is absolutely irrelevant to me.
Mrs. CUBIN. Thank you, Mr. Mintz. And certainly we would have known that, had POGO decided to honor the subpoena and give us the names of the people on the board of directors.
Mr. MINTZ. I have that information in my prepared statement.
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Mrs. CUBIN. No, I'm talking about the board of directors for the last few years, over the time that is relevant to this situation.
Next person, please.
STATEMENT OF HENRY BANTA
Mr. BANTA. Madam Chair, I'm Henry Banta. I'm not sure I would characterize the decision of the board to share the proceeds as an agreement. I think it was just a decision to award these people for their distinguished service.
Mrs. CUBIN. Next person, please.
STATEMENT OF JACK MITCHELL
Mr. MITCHELL. My name is Jack Mitchell. I'm sorry, but I don't have any recollection of the specific dates you've cited, Madam Chairwoman, so I'm not positive, not having had an opportunity to review any of these minutes, that the timing of this is right. I generally recall some discussion about this. I don't remember a particular proportion as you've stated, but I do recall there being a discussion at some point among the board of making a public service award of a type to these two gentlemen.
Mrs. CUBIN. Do you recall what year that would have been in?
Mr. MITCHELL. I'm sorry, I do not, without benefit of seeing the minutes that would record both what meetings I was at, which might not have been all of them, at which they were discussed. I honestly don't recall at this time if I participated in all of the meetings at which this might have been discussed. I cannot give you the year. I'm sorry.
Mrs. CUBIN. Once again, it would certainly benefit the Committee if we had access to those minutes. Then we too would understand that, although it's my understanding that you were listed as present at that meeting, but if you don't know, then——
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Mr. MITCHELL. And I certainly don't say that I was not there. I just honestly after—we're talking three and a half years—if I was there on that particular date, without a review of the written record.
Mrs. CUBIN. And I can certainly understand that, sir, Mr. Mitchell.
STATEMENT OF DAVID HUNTER
Mr. HUNTER. Hello, Madam Chair. My name is David Hunter. I'm the current chair of the Board of the Project on Government Oversight, and on behalf of the board I'd like to introduce an objection at this time to the Subcommittee's refusal to allow us to present our oral presentations, the board members' written statements. This decision violates the Committee of Resources own Rule——
Mrs. CUBIN. Excuse me. Could you speak a little slower? I couldn't hear what rule you said it violated?
Mr. HUNTER. I'm sorry. This decision violates the Committee on Resources' own Rule 4(b), which requires that each witness shall have an opportunity to provide a 5-minute summary of his or her written statement. Rule 4(b) provides no basis for the elimination of this oral presentation.
Mrs. CUBIN. The issue—that issue would be for the courts to decide, but this is certainly a creative theory that is completely wrong. The Rules of the House and the Committee Rules do not give any witness a right to make a statement. In fact, House Rule XI(2)(f) imposes a limitation on initial presentations by witnesses to brief summaries of their written statements. It does not grant a right to a witness to make an opening statement. Furthermore, Committee Rule 4(b) echoes that limitation on oral presentations. It says that witnesses shall, quote, ''limit his or her oral presentation to a five-minute statement unless the time is extended by the chairman or Ranking Member. This limitation is a ceiling, not a floor.''
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While it may be customary to allow a five-minute statement, we are treating all witnesses equally today, and none of them will be making statements. This is in the interest of time and efficiency. It is within the discretion of the Chair, but your entire comments will be seen in the record. We appreciate the point of view of your counsel, but unfortunately his judgment is mistaken at this time.
Now, do you wish to answer the question?
Mr. HUNTER. Yes, I do, and I stand by my objection. Thank you, Madam Chair.
I don't recall exactly the conversations, but I do recall generally on the board that we have discussed this matter, and again, I don't actually recall specifically the time when it would have been, but, yes, we did discuss it at the board that we would provide award to—at some point to two whistle-blowers—this is what I recall—who had been working for a long time to promote this issue and to get it into the public realm after years when nobody seemed to, in this town, want to talk about the oil fraud that was being perpetrated by the industry.
Mrs. CUBIN. So let me get this clear. You don't know the time frame of that; is that what you said; you don't know when that was that that discussion took place on the board? You don't know if it was December 9th, 1996?
Mr. HUNTER. I don't have at this point in time any recollection of the exact time. I have reviewed the minutes of the December board date, and I have no reason to believe that wasn't the time of the discussion.
Mrs. CUBIN. And it's interesting that the Committee subpoenaed the minutes and was to have received and purportedly did receive all of the information in the minutes that were pertinent to this investigation and to this, quote, unquote, public service award. It was never mentioned in the minutes until the payments were actually made, so I think that's quite an interesting point.
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Mr. HUNTER. If I may add, I don't know what the point is, but that the—I would like to say something about our minutes. They're not meant to be verbatim, as Mr. Rutter had mentioned. But they give a general reflection of what was discussed, and I think a lot is trying to be made out of a specific verbiage that's used in those minutes, and I think you're trying to make too much out of it, quite frankly.
Mrs. CUBIN. Well, you're certainly entitled to your opinion, and I think you're making too little.
Next witness, please.
STATEMENT OF DINA RASOR
Ms. RASOR. Yes, I'm Dina Rasor. And while I may not have recalled the exact dates of the minutes, I also need to put in the caveat that sometimes I was at the board meetings via telephone since I live in California.
But I recall these discussions, and I recall the board's view of it, and by the way, I have a lot of confidence in Keith Rutter's record keeping. I hired him in 1989, and he's been a marvelous person.
Mrs. CUBIN. Thank you. You say you recollect discussions. Do you recollect when they took place?
Ms. RASOR. Not exactly, because I don't have the board minutes in front of me.
Mrs. CUBIN. Next person.
STATEMENT OF MARJORIE SIMS
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Ms. SIMS. My name is Marjorie Sims, and I do not recall conversations on that specific date, but I do recall being at board meetings where we discussed honoring the service of those two Federal employees.
Mrs. CUBIN. Do you recall whether that occurred before or how long before the checks were actually issued?
Ms. SIMS. I do not recall specifics at all.
Mrs. CUBIN. Could you give me an idea within a year?
Ms. SIMS. I have no idea.
Mrs. CUBIN. Next person.
STATEMENT OF ANNE ZILL
Ms. ZILL. I'm Anne Zill. I was in the process of moving to Maine, so it's very possible that I wasn't at that board meeting. I don't recall.
What I do recall is during this entire last four and a half years, there have been discussions about this not-for-profit organization wishing to honor people who do a tough job, who work in bureaucracies—sometimes they're called whistle-blowers; others call them truth-tellers—who face adversity, and who try to get the government to do the right thing on the behalf of the American people, and it was in that context, the board—from my general recollection, nothing specific—felt that it would be a good idea to help the people who had been in the trenches for ten years, in this case these two public servants.
Mrs. CUBIN. It's curious to me that these two public servants who were involved with the rule-making on oil valuation are the ones that were rewarded, when Mr. Kritzer, who certainly had at least during the same time period, spoken out as ardently against the practices that were taking place, he wasn't offered an award.
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And I assume that Assistant Deputy Mr. Armstrong, who also, going years and years back, tried to bring this out, wasn't offered an award either. And neither of them were involved with the rule-making process, so I find that somewhat curious. The next person, please.
STATEMENT OF MICHAEL CAVALLO
Mr. CAVALLO. My name is Michael Cavallo. I'm not sure whether I was at the December meeting in question. I may have been. I remember general discussions about sort of recognizing these two individuals, and that the board saw no objection in that, and in many cases were wholeheartedly behind the idea.
Mrs. CUBIN. Thank you. Next person, please.
STATEMENT OF DAVID BURNHAM
Mr. BURNHAM. My name is David Burnham. I was not on the board at the time of this meeting.
Mrs. CUBIN. The chair will now yield to Mr. Brady.
Mr. BRADY. Thank you, Madam Chairman. My question is really very simple.
During your term of service on the board—and I'll start with Mr. Banta first, so we'll have some fair warning. During your term of service on the board, did you have full knowledge of the private agreement between POGO and the two government insiders, and of the legal ramifications of the compensation POGO paid Mr. Berman and Mr. Speir? Did you have full knowledge of that agreement and of the legal ramifications? I'm sorry, Mr. Banta.
Mr. BANTA. We didn't hear who you were addressing. I'm sorry.
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Mr. BRADY. Did you have full knowledge of the private agreement between POGO and the two government insiders, and of the legal ramifications of the compensation you paid Mr. Berman and Mr. Speir?
Mr. BANTA. Well, if you would note from my statement, I recused myself after the lawsuit was filed.
Mr. BRADY. So you had no knowledge of either the private agreement——
Mr. BANTA. No. I understood the decision to make the awards, but after the lawsuit was filed, I recused myself. So I was involved in the first part of——
Mr. BRADY. Well, then let's go to some of those who we know at least served in 1998. Ms. Sims, did you have full knowledge of the private agreement and the legal ramifications of the compensation?
Ms. SIMS. No, I didn't, and I just want to make a clarification, because we just received these minutes, and I was not at this board meeting on December the 9th, 1996.
Mr. BRADY. Actually, I'm looking at October 27, 1998.
Ms. SIMS. No. I was making a clarification on an earlier comment that I made, and no, I'm not aware of that.
Mr. BRADY. So you did not have full knowledge of this private agreement nor of the legal ramifications?
Ms. SIMS. No.
Mr. BRADY. Knowing what you do today, that this compensation is not disclosed, that it is illegal to supplement a Federal employee's salary, and that the Justice Department clearly and emphatically advised against such compensation, would you as a board member approve that compensation today?
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Ms. SIMS. I'm still not aware that that is the law. I just heard that you stated that. I'm not aware of that being the law.
Mr. BRADY. Are you aware the Justice Department advised against——
Ms. SIMS. No, I'm not.
Mr. BRADY. Do you think anyone else on the board knows that?
Ms. SIMS. I'm not certain. I don't know.
Mr. BRADY. It's a complete surprise to everybody.
Ms. SIMS. I don't know. I am just stating what I understand and know.
Mr. BRADY. Thank you. Well, let's go to another member who was there. Mr. Mitchell, did you have full knowledge of this private agreement and the legal ramifications of compensation?
Mr. MITCHELL. Well, I doubt if I would have what you would term as full knowledge. There was discussion among the board. Our view was that the staff was carrying out the details of these matters. We are board members as advisors, and we discuss these issues. We are not always involved in the details themselves, and in terms of what you said, the full legal ramifications, I'm not an attorney, and I would trust the organization to—as your counsel earlier referred—to seek whatever legal counsel we needed to make sure we were doing things according to appropriate procedure.
Mr. BRADY. Now, as a Federal employee, clearly you knew the requirement that disclose compensation. You know it is illegal to supplement the salary of a Federal employee. Did you need to be advised on that or——
Mr. MITCHELL. I didn't know that.
Mr. BRADY. [continuing] as placed on this board——
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Mr. MITCHELL. Mr. Brady, my understanding is that the Federal ethics laws is for each individual Federal employee to know and understand and follow those. And I try to do that, and I believe I've done that very rigorously.
I cannot speak for anyone else as to what their understanding is, and I do not know, with all due respect, that it is correct that Federal employees may not receive any kind of outside compensation. I don't know that to be a fact.
Mr. BRADY. But your answer is, you did not have full knowledge?
Mr. MITCHELL. I did not have full knowledge of all of the legal ramifications in the sense I'm not an attorney.
Mr. BRADY. Knowing what you do now, as a fiduciary board member of POGO, would you approve such compensation to the two government insiders?
Mr. MITCHELL. I wouldn't refer to them as government insiders, with all due respect, sir.
Mr. BRADY. Well, one was employed by the government, and one was a recent retiree. Would you call them a——
Mr. MITCHELL. That's your phrase. We saw them as public servants in this particular instance.
Mr. BRADY. Would you approve such compensation knowing what you know now?
Mr. MITCHELL. I've heard no evidence that these gentlemen did anything appropriate, and as a matter of fact, it's my understanding, and it was represented to me, that the Interior Department has said that neither of these gentlemen were involved in the decision or policy-making process involving this. And I have no reason, even at this time, to disbelieve that.
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Mr. BRADY. So you're not aware that the Justice Department advised POGO's attorneys against this?
Mr. MITCHELL. No, I'm not aware of that.
Mr. BRADY. The first time you've heard of it. Come on now, you're under oath. The first time you've heard of it?
Mr. MITCHELL. I'm aware that there was some contact by the Justice Department.
Mr. BRADY. Let's go forward. Let's see if we can get a straight answer from someone here.
David Hunter, did you have full knowledge of the private agreement between POGO and the government insiders, and did you know the legal ramifications of the compensation?
Mr. HUNTER. Thank you. Yes, I did know about the arrangement. I am going to have to object to your continuing use of the legal ramifications of the compensation. It suggests that there is——
Mr. BRADY. Actually, I am using your board minutes which term them compensation.
Mr. HUNTER. But the legal ramifications, I don't think that there are any legal ramifications that arise from the verbiage of those minutes. I don't think there are any legal ramifications——
Mr. BRADY. When the Justice Department advises against it——
Mr. HUNTER. May I—excuse me—may I——
Mr. BRADY. [conmtinuing] do you believe that there are legal ramifications?
Mr. HUNTER. Excuse me, Congressman, with all due respect, if I could be given an opportunity to finish my answers, then——
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Mr. BRADY. If I could ask you to answer, I would respectfully allow you to.
Mr. HUNTER. Okay. We never know what we don't know. I had some knowledge, so let's get away from full knowledge, because I don't know what the full knowledge. I don't know what I don't know. I don't know—I don't think we have agreement on what the, quote, unquote, legal ramifications are. I do not think there are any legal ramifications from use of the word ''compensation.'' It was not compensation as we understood it. It was an award. That's what we were doing. We had our—if I may continue and finish—as a board and what I understood, is that we were going to provide an award for people who had for a long time been trying to disclose and get people in this town to pay attention to what had been going on for a long time. I think that that's a worthwhile thing to do when we can do it, and I'm glad that we were able to do it.
Mr. BRADY. I applaud that public view, but your own board, your own organization says that's not the case. Your own organization says ''We are entering into a private agreement to compensate individuals who have been doing this work for years.'' So my question to you would be, what services did these two government insiders provide POGO that you awarded them, compensated them $383,000?
Mr. HUNTER. Let me be clear. I have no understanding, nor do I believe that there were any services that were provided by these two employees to POGO. That was not what we gave them money for, and it was not in that sense compensation. So if you would——
Mr. BRADY. So you agree that no information was provided by Mr. Berman and Mr. Speir to POGO, their attorneys, that was included, used, developed or a portion of your lawsuit, absolutely no information from those two individuals?
Mr. HUNTER. To my knowledge, no.
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Mr. BRADY. Thank you, Madam Chairman.
Mrs. CUBIN. Mr. Thornberry?
Mr. THORNBERRY. Thank you, Madam Chairman.
Ms. Zill, in answering the questions earlier, you mentioned that you remember some conversations about trying to acknowledge people's work that were doing a tough job, and you remember that coming up from time to time at board meetings. Do you remember specifically these two individuals, and talking about rewarding or compensating them in some way?
Ms. ZILL. I've heard the names, but I don't remember at which board meetings, and I only now learn that I was at the first board meeting that we have part of the minutes for, but not at the second.
No, what I know, because I've been on the board for almost ten years, is that this is an organization that is concerned with the non-profits' mandate to do things, not for special interest, but for the public interest. And so it's a different concept than a for-profit operation.
Mr. THORNBERRY. And I appreciate that perspective. Are you aware of any other times that the board has looked at rewarding, compensating, acknowledging someone for their work, where there were written agreements on how much these people would receive?
Ms. ZILL. No, I don't have any knowledge of that.
Mr. THORNBERRY. Mr. Cavallo, I think you said that you remembered some discussions at various board meetings about these folks. Do you remember how many times you discussed it at board meetings?
Mr. CAVALLO. No, I don't remember exactly how many times.
Mr. THORNBERRY. Can you give me your best estimate, understanding that it's been a while?
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Mr. CAVALLO. If I were going to make a wild guess, I would say that this situation came up at maybe three of the board meetings that I attended, just a guess.
Mr. THORNBERRY. And do you recall when it came up at these board meetings, three or four or two times, do you recall that you all were made aware that there were written agreements between POGO and these individuals, that whatever was received from POGO at whatever time, that these individuals would get a share of it?
Mr. CAVALLO. I wasn't aware that there were written agreements, but I understood is as sort of the intention of POGO to not keep all of whatever money it received in these settlements, but to distribute it to other people who had been sort of fighting the good fight on this issue for a long time.
Mr. THORNBERRY. Ms. Rasor, let me ask you. You said that you didn't recall for sure if you were there, because you were in California, and as a matter of fact, neither of these board minutes seem to indicate your presence. Do you think you might have been there, but—listening on the telephone, but they just didn't make a note of that?
Ms. RASOR. I would trust that if I was on the telephone, that Keith Rutter would have recorded that I was there.
Mr. THORNBERRY. Okay. Well, do you remember having payments to Mr. Berman and Mr. Speir discussed at board meetings when you were sitting in listening, listening on the telephone?
Ms. RASOR. Yes, very much so, yes.
Mr. THORNBERRY. You do remember that?
Ms. RASOR. Oh, yes.
Mr. THORNBERRY. Okay. Do you remember approximately how many times you heard these payments to these—or compensation in some way to these specific individuals discussed?
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Ms. RASOR. I need to make a distinction here. I had discussions with the—much like Mr. Hunter, I'm the treasurer of the organization, and I have discussions with the staff about items outside of board meetings. And so——
Mr. THORNBERRY. And so you can't distinguish when you discussed it from one time to another?
Ms. RASOR. It's very hard to do that when you're in weekly contact with people and talking about things, when yo discussed it in a board meeting, when you discussed it otherwise.
Mr. THORNBERRY. Okay. Were you aware of these written agreements with Mr. Berman and Mr. Speir before the checks were made?
Ms. RASOR. Yes, I was.
Mr. THORNBERRY. When did you become aware of them?
Ms. RASOR. Can't remember. Part of that long stream of consciousness discussion you have over two or three years.
Mr. THORNBERRY. Do you recall that raising any red flags, that we are here to try to recognize what these people have done over a period of years, and yet we have, one, a written agreement that says we're going to pay a third of—or a third each of whatever we get; and then there appears to be some specific need to reinforce it? It's like somebody was getting nervous. And so there's another memo later in 1998 that says, ''We're really going to do what we've promised you to do.'' Did that concern you at all that that's not exactly—that would maybe not be consistent with public service recognition?
Ms. RASOR. No, not at all. You may not know it, I was the founder of this organization, and in 1981, and one of the things that I have learned from doing 22 years of working with whistle-blowers, and I have to say I'm very proud of this board because most of us have done exactly the same thing. You don't make decisions, you don't do things unless you know. You don't go out and criticize the Federal government or large corporations if you don't have a clean house. If they were going to get something on us, you know, I've been deposed by Lockheed, numerous people.
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So the bottom line was, when this came up, I remember in one of the board meetings a very strong sense of the board that you dot your ''i's'' and you cross your ''t's'', and we felt that these people had toiled for a long time without—you know, one thing that needs to be brought in context here, we worked on this issue way before a lawsuit was ever filed.
Mr. THORNBERRY. Sure.
Ms. RASOR. So I'm just saying that when we came down to this kind of decision to award these people for what went on way before the lawsuit, you better believe everybody on this board makes sure their tax forms—if you're going to criticize the government and you're going to be criticizing corporations, you'd better have a clean closet, and I am confident that this board does. And that was the reason that we went to professionals, because we're not all lawyers, to review this.
Mr. THORNBERRY. Sure. Well, can I understand what you're saying if I summarize it by saying that because of the nature of the work you do and your past experience, you felt certain that these payments were thoroughly vetted with lawyers and ethics people, everybody—they were checked out before these agreements were made or before the checks were written? I mean, as a board member you felt that was checked out and it was okay.
Ms. RASOR. I don't want to go into ethics situations. I'm telling you right now we specifically went to the professional people you go to—as Mr. David Hunter said, the most dangerous thing in the world is you don't know what you don't know.
Mr. THORNBERRY. Sure.
Ms. RASOR. So we knew we didn't know. We wanted to make sure our ''t's'' were crossed, ''i's'' were dotted. We checked it out. We felt confident. We felt confident of the staff. We felt confident of the professionals, and the board has had no reason to ever doubt our staff before.
Mr. THORNBERRY. Sure. Let me move. Mr. Mitchell, I think you also said that you recalled at board meetings this coming up. Do you recall how many times the payments to Mr. Berman, Mr. Speir, or a desire to compensate Mr. Berman and Mr. Speir, recognize them in some way, how many times that came up at board meetings?
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Mr. MITCHELL. Sir, again that would be a guess on my part, and I would say between one and three times, probably twice I would say, in my own memory, relative to perhaps my own participation or my own memory.
Mr. THORNBERRY. Do you recall whether you were aware that there were written agreements which Mr.—a written agreement which Mr. Berman and Mr. Speir signed about what they would receive by way of payments from POGO?
Mr. MITCHELL. I don't recall the written agreements, per se, formally, but I do remember the discussion of them and——
Mr. THORNBERRY. Of the written agreements?
Mr. MITCHELL. No, discussion of Mr. Berman and trying to award him this public service award for his getting out in front of this issue in the past, something we've been working on for many years. We were briefed on that by the staff, and we felt that was—as you've already heard—a very legitimate idea to do so.
Mr. THORNBERRY. Sure. And I appreciate—you all have expressed that very well.
Mr. MITCHELL. And again, in terms of the time, I'd just like to add that we started talking about this—we had no idea what kinds of monies, if any, would be involved, because we didn't know exactly what was going to happen in the future.
Mr. THORNBERRY. Sure. But is it consistent with your idea of a public service award, recognizing someone for working away and toiling, to have this kind of a written agreement that we've seen, where POGO agrees that it will share the proceeds, a third with each of them, whenever they occur?
Mr. MITCHELL. Well, Congressman, I'd just like to note that POGO's made a lot of public service awards—and this probably was a little bit different in the sense that we've given many whistle-blower awards in the past, including one I recall to senator Grassley. This, because it involved a sum of money, was different. And as Dina has just said, to whatever extent we found the staff, and the professional staff should do it, they needed to make sure that they consulted the appropriate people to follow through on this in whatever way they thought was appropriate, and my recollection is the board supported that.
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Mr. THORNBERRY. You've given me my question, which I guess I've been fumbling around to try to understand. Of all of the public service awards that POGO has ever given, is any of the witnesses on this panel aware of a prior agreement with the recipient of the public service award, on how much they're going to get or how that public service award is going to be decided?
Ms. ZILL. Well, I'm the President of the Fund for Constitutional Government, which used to be the fiscal sponsor for POGO before it was POGO. And what I can say is that I think that what isn't reflected in the minutes, but that was discussed every time we heard about this, the whole issue of oil royalties, was the unlikely nature of every getting any money. It isn't really the case that POGO has ever gotten huge sums of money. This was an almost unimaginable windfall. And so I think it ought to be seen as very much out of the ordinary situation.
Mrs. CUBIN. Would the gentlemen yield?
Mr. THORNBERRY. Yes. Can I——
Mrs. CUBIN. Go ahead.
Mr. THORNBERRY. Is there anyone, of all the public service awards that POGO has received, that can recall a specific written agreement with the recipient of the public service award? And I understand, and I wanted to actually get to this area later with Mr. Banta, about whether there was a likelihood of recovery, but can anybody remember the recipient of the public service award saying, ''I agree that I'm going to get this much money'', and have it in writing?
Mr. HUNTER. No.
Mr. THORNBERRY. Madam Chairman, I don't see any response. I'll be happy to yield.
Mrs. CUBIN. I wanted to ask Ms. Zill. You were talking about a foundation that gives public service awards, and I believe those are generally $10,000 awards, is it? Oh, that's Cavallo. Excuse me. I had the wrong award. Okay.
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Do you have a written policy or do you have a procedure by which these awards are approved?
Mr. CAVALLO. Yes, we do.
Mrs. CUBIN. But there's no such procedure or policy involved here; is that correct?
Mr. CAVALLO. I believe this—whereas, that was the regular main purpose of my foundation, this was an unusual situation for POGO.
Mrs. CUBIN. You know, I have been a member of a non—of many non-profits for 25 years, so even more than you, Dina. And this is exactly the sort of thing that every board member should be having nightmares about, letting situations, letting things go on that you are not aware of, letting executive directors have enough authority that they can make secret agreements that all of you admit you didn't know anything about, but you don't know when you knew it, so, you know, that isn't very good dotting ''i's'' and crossing ''t's'', as far as I'm concerned.
Mr. Brady, I think you had some follow up.
Mr. BRADY. Yes, Madam Chairman. It seems incredible that a public service award would be given after not only an agreement was signed, but your honoree demanded his fair share of the award that he believed was coming to him. I don't know how grateful these honorees are these days, but routinely, I'd say they don't demand enough so that a board has to—an executive has to reaffirm their commitment.
The bottom line is, this was not a public service award. Your records clearly show this was a contractual agreement between POGO and these two government insiders. Your records show that you reaffirmed that commitment in writing to them, and then only after that did you decide to cloak it in a public service award.
It still comes back to the point, what services under this written contract did these two government insiders provide POGO? And let me tell you, they are not whistle-blowers. They have not filed whistle-blower suits. They do not have or claim to be whistle-blowers. These are two government officials you paid for some contractual service you entered into. So what was that service?
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Mr. HUNTER. I believe you've asked and I've answered that question. There was no service.
Mr. BRADY. No service. It was—we're the Santa Claus of Washington, and that we are, while we've entered into this agreement, we do it of our own goodwill. This contractual agreement.
Ms. ZILL. Well, about whistle-blowers I have a few facts. In the 27 years that I've been associated with the Fund for Constitutional Government, we've worked with whistle-blowers, both in the military audit project originally, then the project on military procurement, and the project on government oversight, the government accountability project, a series of projects. There are several facts about whistle-blowers that aren't true. They are difficult to work with. They have difficult jobs. They are frequently vilified by their agencies. In the best of circumstances, they do not get recognition, and they very often do not get their agencies to do the right thing from the point of view of open, honest and accountable government.
Mr. BRADY. And in those cases, thankfully, our law provides for a whistle-blower protection for them, which these two didn't accrue. The other thing is most whistle-blowers that I'm aware of—are you aware of any whistle-blower who has demanded payment from a special interest for an agreement they entered into?
Ms. ZILL. I'm not aware that these two did. I'm just not aware of it.
Mr. BRADY. Well, your records show that you did enter into an agreement. Your records show that you did have to reaffirm that commitment. And while we're dealing in facts, while you say you were uncertain that there would be any money due to this lawsuit, the fact of the matter is, California had settled for $350 million almost a decade ago, Alaska $1.5 billion. You had every expectation of receiving compensation, and you entered into a contract for some type of service with two government officials who were legally prevented from doing so, and no claim of no knowledge, or we're good guys, or this is a great service award, those arguments or excuses really, simply aren't credible.
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Thank you, Madam Chairman.
Mrs. CUBIN. The time of the Committee has expired. The Chair now recognizes Mr. Casey—there's no member to do on the other side, so the Chair now recognizes Mr. Casey for staff questioning.
Mr. CASEY. Thank you, Madam Chairman.
At any time in the last, let's say two years, let's say since January 1st of 1998, has the board as a whole or any subset of the board undertaken any effort to reassure itself that you knew all you think you should have known in December of 1996 or after that, about what was put on paper, what Mr. Berman and Spear may have expected, and what they—what POGO was perhaps—had committed itself to do on paper or verbally?
In other words, to sum up, knowing what you do now, in the last year since this has become an issue, a controversy, and even beyond that, have you taken any steps—if so, what—to make sure that everybody who signed that January 5, 1998 agreement understood that it did not mean what it said?
Mr. HUNTER. We've taken no steps to reassure ourselves, because at least speaking for myself, I don't need any reassurance, and as far as I know, the second part of your question, no, I don't—certainly I have not, and I don't believe any other member of the board has approached any member who signed that agreement, other than obviously the conversations we had with our staff.
Mr. CASEY. Does anybody else have a different or a fuller answer?
[No response.]
Mr. CASEY. Ms. Zill, the Fund for Constitutional Government makes grants, I think you said, you have given grants to POGO. Is it the practice of the Fund for Constitutional Government to give grants without any written application?
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Ms. ZILL. We have projects that are of long standing. We adopt in a sense projects after a long review, or sometimes they are created, and there's always paperwork, but——
Mr. CASEY. And a long review?
Ms. ZILL. But I don't mean to imply that we get a grant request in a long written form every time we make a grant. We make an annual grant or sometimes divided into two.
Mr. CASEY. But I think there is a staff for you, a formal—whether it's on paper or not, there's a formalized process to review the progress of the project and its suitability?
Ms. ZILL. Yes, we get progress reports from the project directors at least twice and sometimes three times a year or four times a year on occasion.
Mr. CASEY. Do you recall your organization ever giving out as much as $750,000 without any kind of written record or formal staff process or board process, to assure itself that the ''i's'' were dotted and the ''t's'' were crossed?
Ms. ZILL. Well, what I would say is that we have not given out a grant of that size to my knowledge. On the other hand, we are not—we haven't engaged in the kind of activities that POGO has, and I don't think in the case of POGO that the monies were distributed without a very careful review and the crossing of ''i's'' and dotting—dotting of ''i's'' and crossing of ''t's.''
Mr. CASEY. Thank you. Mr. Banta, at what exact time did you recuse yourself from discussions of the payments to Mr. Berman and Speir?
Mr. BANTA. I don't remember. I think they're reflected in the board minutes that you have.
Mr. CASEY. No, sir, they're not. You have in front of you what we have.
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Mr. BANTA. I can't remember that. It was in between the—it was shortly after the lawsuit gets filed. I don't remember when it was.
Mr. CASEY. Well, this first complaint was filed June 9th, 1997.
Mr. BANTA. It was later than that. It was——
Mr. CASEY. Later than that. How much later?
Mr. BANTA. I haven't a clue.
Mr. CASEY. Please try to remember. Before the end of that year?
Mr. BANTA. I don't remember. I really don't.
Mr. CASEY. Is there any written record in the board meeting minutes; did you put something in writing in the board files, in the POGO files to indicate that you were formally recusing yourself from the issue of the payments, not the lawsuit in general, the payments to Mr. Berman and Mr. Speir with regard to the——
Mr. BANTA. No. My recusal was with regard to everything relating to the lawsuit.
Mr. CASEY. And that would include the payments to Berman and Speir?
Mr. BANTA. That included everything.
Mr. CASEY. Oh, good. So the payments to Berman and Speir are related to the lawsuit?
Mr. BANTA. Very funny.
Mr. CASEY. Do you think you had recused yourself before January 5, 1998?
Mr. BANTA. I just don't remember. I really don't.
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Mr. CASEY. Do you recall meeting in your office on or about that day with Mr. Berman, Mr. Speir and Danielle Brian to sign the agreement dated that day?
Mr. BANTA. I remember being—I remember knowing of the agreement. Whether it was signed in my office or not, I knew about it. Whether I was physically present—but, yeah.
Mr. CASEY. Do you remember being asked about this very subject in your deposition for the November 29 hearing on the motion to void the MRCA?
Mr. BANTA. I probably was, yes.
Mr. CASEY. And do you remember what you said in that deposition about your physical presence when that agreement was signed?
Mr. BANTA. I don't. I'm sure you'll refresh my——
Mr. CASEY. You said you were present, and you said it was in your office.
Mr. BANTA. Okay.
Mr. CASEY. Do you remember being present, apparently sometime in early December 1996, in your office with Mr. Berman, Mr. Speir and Danielle Brian, to discuss the filing of a False Claims Act lawsuit dealing with oil royalties?
Mr. BANTA. I remember having discussions. I can't give you dates. I am just lost on dates.
Mr. CASEY. Do you recall the December 9, 1996 board meeting at which you gave a presentation along with Ms. Brian——
Mr. BANTA. Yes, I do remember that.
Mr. CASEY. [continuing] the decision to fill the suit.
Mr. BANTA. Yes, I do remember it.
Mr. CASEY. Do you remember a meeting shortly before that with Mr. Berman, Mr. Speir and Ms. Brian to discuss that plan?
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Mr. BANTA. I have no specific recollection of it, but——
Mr. CASEY. Do you recall——
Mr. BANTA. [continuing] I'm sure there was conversations.
Mr. CASEY. Do you recall being asked, in your deposition taken for the November 29 hearing on the motion to void the MRCA, do you remember being asked whether the agreement put in writing in January 5th, 1998, and signed on that day, essentially reflected the agreement reached in your office with Mr. Berman, Mr. Speir and Ms. Brian?
Mr. BANTA. That's probably the case, yes.
Mr. CASEY. Probably the case.
Mr. BANTA. Yes.
Mr. CASEY. When did you give us the chairmanship of the POGO board?
Mr. BANTA. Help me, Dave. I don't—when did you become chairman?
Mr. HUNTER. I took over in February of '98, I believe.
Mr. CASEY. February of '98. So if someone under oath recollected that it was early January of 1998, would that—can we exclude that as being possible?
Mr. HUNTER. My recollection is——
Mr. CASEY. Did it take place at a board meeting?
Mr. HUNTER. Yes.
Mr. CASEY. Was there a vote to make you chairman, Mr. Hunter?
Mr. HUNTER. Yes.
Mr. CASEY. Could you give us that portion of that board meeting sometime in the next two weeks?
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Mr. HUNTER. I will certainly consider it without waiving any objections at this time on pertinency or any other objections.
Mr. CASEY. Okay. Now, the answer to many questions from many of you, you've stated your great faith in Mr. Rutter, Danielle Brian and the rest of the POGO staff, and how you've trusted them to carry out the details of this agreement and other things. Did any of you understand in December of '96, in January of '98 or at any time since then, that Mr. Banta took a direct part in negotiating the agreement which resulted in the payments to Mr. Berman and Mr. Speir? Anybody? And in fact, everybody, please, except for Mr. Banta, who obviously knows what he did or didn't do.
Mr. HUNTER. I think I probably have a general understanding that Mr. Banta was often in contact with Ms. Brian——
Mr. CASEY. A specific understanding that he took a direct part in the signing of the January 5, 1998, agreement and a direct part in the——
Mr. HUNTER. I can't recall whether I——
Mr. CASEY. You can't recall. Does anybody recall having that specific understanding at any time?
[No response.]
Mr. CASEY. I assume your silence means nobody has such a recollection.
Ms. RASOR. Well, you are saying ''specific.'' I think that is why you are not getting any answers. You know, we all knew that Hank Banta was the chairman and was working very closely with Danielle Brian on the suit. But we all weren't standing there specifically with a glass to the wall listening.
Mr. CASEY. Okay. The meeting minutes from December of 1996 reflect that there was a general presentation of some kind by Mr. Banta and/or Ms. Brian about the likelihood of success in the lawsuit. At that meeting or at any prior meeting, did the POGO Board discuss explore asking a law firm as a pro bono matter to undertake litigation that would have stopped the underpayments and/or even collected past royalties owed, but would not enrich POGO, an injunction of some kind?
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A couple of you are lawyers. I am sure you could think of something. In other words, any kind of discussion of that?
Mr. BANTA. The cost of such a lawsuit would have been prohibitive.
Mr. CASEY. I said pro bono, Mr. Banta.
Mr. BANTA. Yes. The cost would have prohibited a pro bono effort in that regard.
Mr. CASEY. But did you ask? Was any law firm approached or asked?
Ms. ZILL. Well, not to my knowledge, but one of the things I believe is correct is that the Fund for Constitutional Government produced a little booklet on the history of the qui tam—the history of the qui tam Act, not Act, but whatever.
Mr. CASEY. Ma'am, we are running out of time. Is the answer——
Ms. ZILL. So the reason we went that route is because we knew something about it and it seemed at least vaguely possible. At least that is my memory of it.
Mr. CASEY. If POGO wished to stop the underpayments and provide money to those who had taken part in all of this, why not give away everything after paying your expenses?
Mr. HUNTER. First, let me say that I don't know that we ever discussed, and I don't think we did discuss, doing it in any other way. We did discuss, and I think we decided that a qui tam lawsuit was a good way of highlighting and publicizing what was going on. That is why we did it, I believe, and my recollection was we didn't really think we were going to ever win anything.
Mr. CASEY. I understand that.
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Mr. HUNTER. Now, as far as—could you repeat your last question about why we don't give it all away? We still may. We have to cover some of our expenses right now, but let me be quite serious about this.
Mr. CASEY. Well, I don't know that that is giving it away.
Mr. HUNTER. Let me be quite serious about this, about the money, because it seems to be something that some of you are having a difficulty understanding. And I think somebody twice now has referred to POGO as Santa Claus, and I am reminded of the movie ''Miracle on 42nd Street'' where we had a whole bit of a trial about whether Santa Claus existed.
One of the things that is most disconcerting about this process is that it seems to be inconceivable to the members of this Congress that a small non-profit could give away some resources. We don't necessarily want to grow bigger. We are not a for-profit company. We don't have investors for whom we have to maximize profits.
This was in some ways—once money started appearing, it provides a challenge for us. We have to go through strategic planning. This wasn't why we did it. We did it to get the rules changed and we got the rules changed.
Mr. BRADY. I just want to point out the reason you did it is you had a contractual relationship that you have to provide, and the only reason you are here today is that someone blew the whistle on you and that is why we are here.
Mr. HUNTER. May I respond to that?
Mr. BRADY. I would yield back to Mr. Casey.
Mr. CASEY. We are getting short of time.
Mr. HUNTER. Madam Chairman?
Mrs. CUBIN. Yes. Mr. Casey has the time.
Mr. CASEY. Once POGO discovered that two solid relator groups had preceded you in this cause of action, or one extremely similar, and that therefore there would be in all likelihood a False Claims Act lawsuit that would put a stop to this process, why did you push forward with your own if the motivation wasn't money?
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If the motivation was to stop the underpayments, recoup past underpayments, make it a public issue, why did you need to proceed with your own case when you discovered that there were two before you?
Mr. HUNTER. First off, I am not certain when the Board discovered there were two before us. And, secondly—well, I can only speak for myself—we never really addressed it. The lawsuit was being handled. It didn't come up. It wasn't something—so we filed it in order to highlight the things and it kept going; it had its own momentum.
Mr. CASEY. Ms. Rasor, have you ever been employed by any of the law firms of Packard, Packard and Johnson, or Packard and Packard?
Ms. RASOR. Not Packard and Packard, but I have been employed by Packard, Packard and Johnson.
Mr. CASEY. Did you play any role in putting together the Packard law firms in POGO?
Ms. RASOR. Yes. I would also have liked to—since that was a general question, the last question, I work quite intimately with a lot of qui tam lawsuits and it is one of my areas of expertise, even though I am not an attorney. And one of the things that you find in a qui tam lawsuit when there are multiple cases that are combined together is that everybody brings something to the table.
And so it would probably have not been a good idea to stop the bleeding of the taxpayers' money for us to just say, oh, they have got it, forget it, because we had knowledge that would also add to—each relator brought information.
Mr. CASEY. Okay, I get your drift.
In your experience with the False Claims Act, have you become aware that the False Claims Act itself specifically prohibits retaliation against Federal employees who file as relators openly? Yes or no, please.
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Ms. RASOR. I worked to get the law passed and so I am very aware of it. Now, repeat your question because it doesn't make sense to me.
Mr. CASEY. Are you aware of any provision of the False Claims Act which provides that Federal employees who openly file as relators may not be retaliated against for doing so by their agencies?
Ms. RASOR. Yes. In fact, I worked on getting that provision passed. Unfortunately, getting laws passed and getting what reality happens to a Federal whistleblower is two different things.
Mr. CASEY. Mr. Hunter, have your attorneys in this case, the attorneys representing the organization, been authorized to use private investigators to look into the private lives of any member of this Subcommittee?
Mr. HUNTER. Not that I now of. Which attorneys?
Mr. CASEY. Brand and Frulla.
Mr. HUNTER. Not that I know of.
Mr. CASEY. Would you authorize them to or would you prohibit them to do that?
Mr. HUNTER. I never thought about it one way or the other.
Mr. CASEY. Your attorneys have. According to the National Journal of March 25 of this year, it is standard operating procedure.
Are any of you—and I think this is my last question, Madam Chairman—are any of you——
Mr. HUNTER. Will this one be pertinent, because I am——
Mr. CASEY. Are any of you aware of any specific harm to the career, to the prospects, to the finances, to the physical well-being of Mr. Berman or Mr. Speir for the positions they took on the subject of oil royalty underpayments?
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[No response.]
Mr. CASEY. Do I take that as a no?
Mr. BANTA. I don't know about Mr. Speir, but I know that Mr. Berman got into some difficulty when the first memo went to Lakewood asking for a response to his questions. I know that there was some—that was not an appropriate question for him to ask in his position, at least in the view of some of his superiors. You would have to ask him about the details, but I think there was a problem.
Mr. CASEY. In the meeting in your office sometime in early December, it appears, possibly very late November of 1996, at which you and Ms. Brian and Mr. Berman and Mr. Speir discussed the filing of an oil royalty lawsuit, did either gentleman clearly indicate that he feared retaliation or retribution from his agency if he openly filed such a suit?
Mr. BANTA. Yes, that was discussed.
Mr. CASEY. Do you have a clear recollection that either or both gentlemen——
Mr. BANTA. I think both of them.
Mr. CASEY. [continuing] affirmatively represented——
Mr. BANTA. My recollection is that both of them expressed fears of that kind.
Mr. CASEY. If I might, let me ask again and try to be specific and see if this changes your answer. Did either of them specifically and affirmatively say that they feared retribution or retaliation from their agencies if they put their names on a False Claims Act lawsuit dealing with oil royalties?
Mr. BANTA. It is difficult for me, you know, at this distance in time to be that precise, Mr. Casey, but that is a sense that I still have that that type of fear was there and that they expressed it. I am a little reluctant to—I mean, I know you want precision and I am a little reluctant to give it to you because I can't. But my present recollection is that that type of fear was expressed.
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Mr. CASEY. Earlier today, Mr. Kritzer recalled a conversation with you about filing a False Claims Act dealing with oil royalties. Do you remember that conversation?
Mr. BANTA. Yes, I do.
Mr. CASEY. Do you have a more clear recollection than he did about how it went and what the discussion was?
Mr. BANTA. Not much more. I think that once again it reflects what one of my colleagues represented, which is that at least certainly in my mind at the time the chances of recovery weren't very great. And I suppose I said something to Bernie, would you like to have a piece of the pie in the sky.
And I think his characterization of it as being somewhat—I forget how he put it, but being rather vague probably was accurate. But I did have the conversation with him and my recollection does pretty much comport with his.
Mr. CASEY. And I promise this really is the last one, Madam Chairman.
Earlier, Mr. Schaffer was asking about advice from the Justice Department that the payments should not be made, and I honestly forget—one of you represented that, yes, there was some kind of general discussion.
Was that you, Mr. Mitchell?
Mr. MITCHELL. I believe I was asked if I was aware that the Justice Department had disapproved or told us not to do that, and I wasn't aware of that.
Mr. CASEY. I am sorry. You were told, but you weren't aware of it?
Mr. MITCHELL. I thought the question was, was I aware that the Justice Department had told us not to do this, and my answer was I was not at the time aware that that representation was made.
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Mr. CASEY. Were you aware that any of the False Claims Act attorneys had reservations or objections to it?
Mr. MITCHELL. Not specifically, no, I was not.
Mr. CASEY. Does anybody else have a specific recollection of whether you had any impression or information that either the Justice Department, the office of the U.S. Attorney for the Eastern District of Texas, or your own False Claims Act lawyers had reservations or objections or qualms about proceeding with the payments to Mr. Berman and Mr. Speir?
Mr. MITCHELL. That is a lot broader than the question you asked me, but I will let Mr. Hunter field that.
Mr. HUNTER. Well, one portion of that with respect to discussions with our lawyers is protected by attorney-client privilege and we won't answer it.
Mr. CASEY. Well, the Packards specifically deny that they represent you on the subject of paying Mr. Berman and Mr. Speir.
Mr. HUNTER. That is fine.
Mr. CASEY. Okay.
Mr. HUNTER. You can repeat the question if you like, but——
Mr. CASEY. Excuse me?
Mr. HUNTER. That is fine.
Mrs. CUBIN. Would you like us to read the documentation we have from the Packards that they don't represent you?
Mr. HUNTER. No, I don't——
Mrs. CUBIN. Are you claiming they do represent you in this?
Mr. HUNTER. With respect to the payments, no. But the question was very broad. I didn't understand which lawyers he meant and I was just—— Mr. CASEY. Would it help if I stated it again more specifically?
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Mr. HUNTER. I am sorry?
Mr. CASEY. Would it help if I stated it again more specifically?
Mr. HUNTER. Certainly.
Mr. CASEY. To each of you, not just Mr. Hunter, what, if anything, do you recall about having an impression or information that any of your False Claims Act lawyers—and among those would be the firm of Rio, Morgan and Quinn; Packard, Packard, and Johnson; and Packard and Packard—that any of those attorneys expressed qualms or reservations or objections about proceeding to pay Mr. Berman and Mr. Speir?
[Mr. Hunter conferring with counsel.]
Mr. HUNTER. If I may, I would like to continue the objection because though they may not—the exact scope of what they represent or not, they did continue to be our attorneys within the litigation.
Mr. CASEY. Okay.
Mr. HUNTER. There may have been some conversations that are still protected by attorney-client privilege, and I believe they are.
Mr. CASEY. Okay.
Mrs. CUBIN. Excuse me. Mr. Hunter, I think I have said this before, but it has been a long day and so I am not sure. But the attorney-client privilege and other judicial privileges that are not grounded in the Constitution, as this is not, are not applicable in this hearing as a general rule.
This includes the attorney-client privilege and the attorney work product privilege. Courts created these privileges for their proceedings. They are not applicable to this hearing because this Subcommittee's authority comes from Article I of the Constitution dealing with the Legislative Branch, not Article III dealing with the courts.
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In practice, some Committees have exercised discretion on whether to accept or reject these privileges, weighing the need for disclosure against the possible injury resulting from that disclosure. Therefore, the privileges are within the chairman's discretion to accept or reject.
I find that the Subcommittee needs this information to understand the subject that we are investigating. Compelled disclosure, on the other hand, does not constitute a waiver of the privilege on the part of the witnesses, so possible harm is not great. I find that the question that is asked ought to be answered.
Mr. HUNTER. Thank you. I respect your position, but on advice of counsel, I will stand on my objection that this is covered by the attorney-client privilege, and I don't believe that what you have stated has been definitively decided otherwise. Thank you.
Mrs. CUBIN. Again, as in the case with Mr. Rutter, failure to answer these questions after the determination by the chairman of the Committee that privilege is not accepted could constitute grounds for you and the other Board members to be held in contempt of Congress.
I don't want to have to go that route, but this Subcommittee does need the information that we have asked for. We need the information that we have subpoenaed in order to complete this oversight responsibility. So would you please answer the question?
Mr. HUNTER. Thank you. And, again, with all due respect and on advice of counsel, I will stand by the objection on the attorney-client privilege. Thank you.
Mrs. CUBIN. Well, your objection is overruled.
Mr. Casey, would you——
Mr. CASEY. Thank you, ma'am. To complete the restatement, I will pose it again, and this time regarding any Federal Government lawyer, the Justice Department specifically, anybody employed in the office of the United States Attorney for the Eastern District of Texas, and this question is posed to each of you.
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Were you in any way aware on any level that any Federal lawyer—Justice Department, Civil Division, in Washington; U.S. Attorney out in Texas—had expressed qualms, objections, reservations, any such negative advice regarding the plan to pay Mr. Berman and Speir on November 2 of 1998?
Are you planning an attorney-client relationship with the Justice Department?
Mr. HUNTER. No, I am not, but I am claiming the objection on advice of counsel because any information I may have with respect to that would have come from my attorney. Thank you.
Mrs. CUBIN. Thank you.
As I said, my career is being a wife and a mother, and during the time I was raising my children I truly served on many, many non-profits boards. And I think it is certainly a noble way to spend your time, and I congratulate all of you for that.
I am mystified, however, at the entire Board's reluctance, number one, to honor the subpoenas that were earnestly issued by the chairman of this Committee. I don't understand why it is that you would want to keep anything secret. In my opinion, letting the light of day shine on all of the activities of a non-profit is your best protection and your best insulation from any sort of thing like this.
So I guess the last question of the day is I would just like to ask you each, did you vote as a Committee not to honor the subpoenas? As a Board, each one of you, did you vote on that?
Mr. MITCHELL. No. I would say that I received one subpoena and that was for the appearance today, and I have appeared and spent all day here at the pleasure of the——
Mrs. CUBIN. Were you aware of all of the subpoenas asking for documents from POGO? Were you aware of that?
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Mr. MITCHELL. I am generally aware of them, and POGO and our counsel, our good counsel, was dealing with that. That was not my responsibility. I received the subpoena to appear here today to answer the Subcommittee's questions.
Mrs. CUBIN. And we thank you for that.
Mr. MITCHELL. And I have honored that.
Mrs. CUBIN. We thank you for that. However, being the responsible governing Board of the organization, and not granting the documents that we feel necessary to determine whether or not the existing policy and procedures that are in place are adequate to ensure that Government employees don't receive money in exchange for a decision on royalty evaluation, for example—I just don't understand why you are reluctant to honor the subpoenas of this Committee.
Mr. HUNTER. Madam Chair, may I answer that with respect to me at least and as the Chair?
Mrs. CUBIN. Well, I am not sure because you have so many other secrets, I am sure I am interested in this information.
Mr. HUNTER. Well, you asked the question. I assumed you wanted the answer.
Mrs. CUBIN. I have wanted a lot of answers that you have refused to give me, Mr. Hunter.
Mr. HUNTER. I would like to answer the question about why we didn't provide questions from this Committee and documents regarding our IRS status. I would like to answer that. I don't believe that is within your jurisdiction, and I received a letter from the Chair of this Committee that, in my view, was a veiled threat about our status. I don't think that our IRS status is a part of the jurisdiction of this Committee.
Mrs. CUBIN. I don't think it is either.
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Mr. HUNTER. So I am comfortable not answering those questions. Thank you.
Mrs. CUBIN. I certainly don't think your status as a non-profit is within the jurisdiction of this Committee either, and you haven't heard those words come from any Member.
Ms. ZILL. I think if you examine the long history of POGO, you will see that their hallmark is openness and——
Mrs. CUBIN. Well, it certainly isn't today, Ms. Zill.
Ms. ZILL. And you will see that they have a long reputation for openness.
Mrs. CUBIN. It certainly hasn't been since we have been asking, in the kindest way, first of all, to cooperate. We received no cooperation. We couldn't get the documents by request. We subpoena them, and then you refuse to honor the subpoena. That certainly does not indicate an open organization to me.
I do thank you for your endurance. It has been a long day for all of us.
Deborah, do you have questions?
Ms. LANZONE. Yes.
Mrs. CUBIN. Certainly. The Chair yields 15 minutes to the Minority side staff.
Ms. LANZONE. Mr. Hunter, why did you decide to serve on the Board of POGO?
Mr. HUNTER. Because I thought at the time, and I still think at the time, that it is one of those rare non-profit organizations that have a real chance of making a difference in this town, making Government work better. I am very proud to have made that decision and I am very proud to still be a member of it. Thank you.
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Ms. LANZONE. Ms. Rasor, why did you decide to serve on the Board, and how much are you paid for serving on the Board? Maybe that goes to all of you.
Ms. RASOR. Well, to my knowledge, no one on the Board is paid to serve on the Board. I served on the Board because I started this organization. Danielle Brian was my employee, and when she agreed to come back and take over the organization, I was delighted. And I agreed to serve on the Board when we finally became our own freestanding non-profit because I knew that she would keep the integrity and the effectiveness of this organization, not make it into a large bureaucracy, not have it be—you know, be a place for whistleblowers to come and be safe.
And that is what I wanted to do in 1981, and I am really proud that it is still going on and that we have—I have such a deep respect for all the other Board members because they have all dedicated their lives to the same kind of thing.
Ms. LANZONE. How often does the Board meet? Is it once a month or every two months or so? Is it a regularly scheduled——
Mr. HUNTER. No, it is not regular. It is basically quarterly or thereabouts.
Ms. LANZONE. Quarterly. So would you be the correct people to ask about—I mean, to what degree do you stay on top of the day-to-day operations of POGO and any kinds of exchanges that would be going on between POGO's attorneys and the Department of Justice or people involved in the qui tam, I mean, to the extent that you can answer that question?
Mr. HUNTER. As a Board, I don't think that is our role to stay involved in day-to-day operations of an organization as a Board. As individuals, I think we have different expertises and we bring different types of advice. Some of us have been more involved than others in different aspects, and I have certainly at times been involved in at least weekly discussions, if not daily, on different aspects of different cases and controversies.
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Ms. LANZONE. And there is some ongoing dispute about whether or not POGO's attorney's contacted the Justice Department or to what degree they contacted them, and back and forth. So it is not, at least to my knowledge, an absolute actual fact that the Justice Department told somebody that POGO shouldn't write these checks. Is that correct? Or maybe you don't know the answer to that question or you shouldn't answer it either. I don't know.
Mr. HUNTER. I can't answer that question, with respect, as I mentioned before, with privilege.
Ms. LANZONE. You know, in the staff I have read, it looks like there seems to be some ongoing questions about that.
Ms. Zill, when you were talking earlier about whistleblowers, I don't know that you have ever met Mr. Berman or Mr. Speir, but from what you do know about whistleblowers, is it true that they are often—their ability to get things done within the department that they work in is minimized because of their activism? And so it would not be surprising that, say, Mr. Berman, would say to someone that he was involved in one area, but he really wasn't.
Ms. ZILL. I don't know Messrs. Berman and Speir, but I do know a lot of other whistleblowers, and I have appeared before the various congressional Committees with them. And my sense, in general, is that you need a great sense of humor, which it is hard to have when you are beleaguered, and that lives of people who tell the truth about things that are not being done correctly within their own agencies are changed forever.
And I have seen many people who commit truth, as it is also known, go off the deep end and lose it. So it is a hard role to play, and it is an unfortunate fact of a democracy today that isn't functioning perfectly as a democracy that we have to depend on whistleblowers.
And the problem with the whistleblower rule is that it isn't often carried out. The law is not honored correctly. So there are a lot of people who do get vilified and whose lives are ruined, really, and so it is a sad commentary on where we are at this point.
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Ms. LANZONE. Ms. Rasor, did you have something to add to that?
Ms. RASOR. Well, I just wanted to say that when we founded the Project of Military Procurement, which became POGO—and this is still POGO's thing—I don't think that you understand the situation that there are whistleblowers who decide to go public and decide to take the risk. And we really go through there and say, do you realize that your life will never be the same? You are going to be shunned, get ready.
But then the Project has been for years a place for people to come inside corporations or inside the government bureaucracy to give information anonymously so that they don't have to ruin their lives to do the right thing. So you have to understand there are two levels of that, and POGO is pretty unique on that that this is a place for whistleblowers to come, give the information, let us be the front for the information, so that their lives are not ruined for doing the right thing.
Ms. LANZONE. Thank you.
Chairman Cubin, since you are the only Member left, I thank you for the time.
Mrs. CUBIN. Thank you.
I think I would like to mention to this panel that despite POGO's self-described good intentions to fix the oil valuation problems—and I do believe that the intentions were good—I think the lack of oversight by your Board has allowed Ms. Brian and Mr. Banta to make a major mistake in agreeing to pay the Federal employees with what can only be described as a resultant diminishment in the ability of the government to recover greater sums in settlements, in future jury awards, and the new royalty, which it is no secret I disagreed with all along, but did not do anything as a Committee chairman or a Member to stop that from happening.
That rule may well be struck down because of the involvement of these two gentlemen and because of these payments. And I think that is tragic because, as I said, I do believe and I do know that all of your intentions, as well as Ms. Brian's, are good and I agree with them. And I am personally insulted and indignant at the practices of the oil companies, where they tried to fleece the taxpayer out of what was duly owed them.
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So with that, I do thank you for your endurance. It has been a long day. You have been very patient and I appreciate that very much.
Mr. Banta, the Subcommittee has more questions for you that don't require the presence of the rest of the Board, and so to give you a fair opportunity to answer those questions, we will again issue you a subpoena for the May 18 hearing, I believe it is, at 2.
I thank everyone for their participation.
[The prepared statements of Messrs. Banta, Burnham, Cavallo, Hamel, Hunter, Mintz, Mitchell; and Ms. Rasor, Ms. Sims, and Ms. Zill follow:]
Mrs. CUBIN. With that, the Subcommittee is adjourned.
[Whereupon, at 5:49 p.m., the Subcommittee was adjourned.]
OVERSIGHT HEARING TO EXAMINE THE LAWS, POLICIES, PRACTICES, AND OPERATIONS OF THE DEPARTMENT OF THE INTERIOR, DEPARTMENT OF ENERGY, AND OTHER AGENCIES PERTAINING TO PAYMENTS TO THEIR EMPLOYEES, INCLUDING PAYMENTS RELATIVE TO MINERAL ROYALTY PROGRAMS AND POLICIES FROM PUBLIC LANDS AND INDIAN LANDS
THURSDAY, MAY 18, 2000
House of Representatives,
Subcommittee on Energy and Mineral Resources,
Committee on Resources,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:13 p.m., in Room 1324, Longworth House Office Building, Hon. Barbara Cubin, [chairman of the Subcommittee], presiding.
STATEMENT OF HON. BARBARA CUBIN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WYOMING
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Mrs. CUBIN. This oversight hearing will come to order.
Two weeks ago, this Subcommittee held the first hearing conducted as part of the Resources Committee's inquiry into an agreement between POGO and two Federal employees to share cash proceeds from an oil royalty lawsuit and into the policies and practices of the Department of Energy and the Department of the Interior, which were either circumvented or inadequate to stop the deal.
If that agreement had not been uncovered by the press and pursued by this Committee, POGO, Mr. Berman, and Mr. Speir would have split $5.7 million as of today, and that is only from 5 of 18 defendants writing settlement checks so far. After we hear testimony from two Justice Department officials, we will hear from Robert A. Berman. Mr. Berman is a highly paid GS-15 in the Office of the Secretary of the Interior. He has pocketed $383,600 already and has another million dollars coming to at him, at least.
There was a secret handshake that took place in this agreement. That secret handshake was among Bob Berman, Danielle Brian, Bob Speir, and Henry Banta, and it was wrong. It was wrong because Federal employees are not allowed to have secret financial interests which may be affected by their work. Messrs. Berman and Speir actively pursued involvement in oil royalty matters. By December of 1996, when the deal was finalized, they were up to their eyeballs in it.
This deal is wrong because Mr. Banta and his law firm relied on relationships with Mr. Berman and Mr. Speir in promoting the interests of their biggest oil royalty client. Indeed, everyone approached by POGO to share these riches has long ties to Lobel, Novins & Lamont and to its clients' stake in Federal oil valuation policies: Mr. Kritzer and former California State Controller Ken Cory, who prudently declined participation in the deal, Bob Berman, Bob Speir and Lenny Brock, who foolishly accepted the offer, were involved with the firm. In fact, as the Subcommittee learned 2 weeks ago, Mr. Brock had been of no service to POGO and had never heard of it, and he had no background in Federal royalty issues involved in this litigation. But Mr. Brock does have a decades-long association with the Lobel law firm and with its biggest client.
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Mr. Banta's firm claims to specialize in legal ethics. Was it ethical and appropriate for Mr. Banta to use his power at POGO to enrich those who enriched his law firm? This secret deal was also wrong because it was secret. Mr. Berman and Mr. Speir know now and they knew in 1996 that this was so. There were several conversations leading up to the secret handshake of November 1996. After that meeting, more than a year elapsed before the deal was put on paper. But during those 13 months, nobody revealed the secret to ethics officials. After the deal was put on paper, something that they must all regret by now, 9 months passed before the first check was written. But still, no one breathes a word to their agency. Mr. Berman's ethics file confirms this. Mr. Speir acknowledges that he had no clearance for this agreement while employed at the Department of Energy.
Each year, these two public servants filed financial disclosure reports. Why was the agreement with POGO left out of those reports? Because it was not a money maker? I am sorry, but that is not the rule. Losing money- as well as winning investments and partnerships have to be disclosed.
If this was a public service award, what harm could come from getting the approval required before accepting it? If this was a contract to share in a lawsuit either employee could have filed himself, what harm could come from revealing this direct and predictable financial interest? Mr. Berman, and Mr. Speir, and Ms. Brian, and Mr. Banta know the answer. I will tell you what they knew all along, what Mr. Speir has already admitted to. If this award, or agreement which is what it really was, had been revealed and cleared by Interior and Energy ethics officials, Mr. Berman and Mr. Speir would have been barred from further involvement in matters directly linked to the financial prospects of POGO, of the Lobel law firm and of themselves. After the fact and in the glare of public scrutiny, they call that retaliation. I call that ethics.
If Mr. Berman and Mr. Speir had put their names on the case and if their knowledge had been the basis for claiming status as the whistleblower, the Justice Department would have insisted on sealing them off from decisions related to the litigation and underlying policy. The Justice Department takes a dim view of Federal employees seeking to profit from False Claims Act suits directly related to their work. Once the defendants had been notified of the case and learned who Berman and Speir were, they would have launched an all-out effort to dismiss the case. They probably would have succeeded. That would mean nobody, not POGO, not Berman, not Speir not any other long-time asset of the Lobel law firm would have made a nickel.
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The select few of POGO's leadership who knew of the secret handshake include experts in the False Claims Act. The Utah lawyers POGO chose to file their case in Lufkin, Texas, are experts in False Claims Act cases. Everybody knew that putting Berman's and Speir's names on the case meant Federal whistleblower protection for both of them. But that would be at the price of their continued participation in vital oil royalty debates. The only retribution reasonably feared by this crowd was a motion filed by the defendants to dismiss the lawsuit.
Before proceeding to the first panel of witnesses, let me summarize what I believe our oversight inquiry has learned. All of these statements are based on POGO's own documents to the limited extent that they were supplied to us and to the limited extent that our subpoenas were complied with. They are based on sworn testimony from the principal players and from staff interviews with cooperating sources.
Early in December 1996, Mr. Banta, Ms. Brian, Mr. Berman and Mr. Speir agreed that POGO would divide its expected royalty litigation proceeds in equal thirds and share it with Berman and Speir. This deal included no other conditions. Further POGO board approval was not required or sought. Agency ethics office approval and Justice Department notification was not required. The January 5th, 1998, written agreement is the sum and substance of the pact made early in December 1996.
In December of 1996 and thereafter, there was a wealth of legal, ethics, False Claims Act and whistleblower protection expertise available to Banta, Brian, Berman and Speir, yet no one ''dotted the i's'' or ''crossed the t's'' of this deal in advance. And everyone understood that it was an agreement to share the money. It was not a public service award. When asked under oath to cite specific acts of whistleblowing by Berman or Speir, after a struggle, all Ms. Brian could come up with was a memo or two. POGO's after-the-fact paperwork praises Mr. Speir for a decade of work to focus attention on royalty underpayment. Yet, Mr. Speir's own sworn testimony admits that he did not work on the issue at all until 1994. He retired in 1997.
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But Mr. Speir, Mr. Berman and Mr. Brock, along with Mr. Kritzer and Mr. Cory, who declined to accept the money, can claim a long history of holding views on a host of valuation questions which directly benefitted the Lobel law firm. In late 1993, Mr. Banta, then and now a member of POGO board of directors, brought together Danielle Brian and his firm's key Federal employee allies on oil valuation matters. Soon thereafter, POGO embarked on a campaign which succeeded, by their own claims, in changing Interior oil valuation policy. This benefited the Lobel firm's top client and succeeded in making millionaires of three of the Lobel firm's key allies.
The same Henry Banta, who brought together this alliance; who agreed to pay Berman and Speir as if they were plaintiffs in the case; and who sits by as POGO concocts a defense that these Federal employees were whistleblowers who could have benefited had they filed a case on their own, told a different tale when POGO stood to lose its millions. Under penalty of perjury, Mr. Banta acknowledged that Danielle Brian, Bob Berman and Bob Speir probably could not have qualified as relators under the False Claims Act. He also acknowledges that the two public servants supposedly rewarded for 10 years of work to expose oil royalty underpayments could not have qualified as expert witnesses or as fact witnesses in Johnson v. Shell.
This breathtaking arrogance and duplicity is not unique to Mr. Banta. In sworn testimony and in public, Ms. Brian has asserted that there was never an agreement to pay either Federal official. No, there was simply POGO's unilateral commitment to do what was morally right, to honor these men as the moral equivalents of plaintiffs in this case. The January 5, 1998, agreement calls itself an agreement because that is what it was. But Ms. Brian says it just states what Berman and Speir could expect when the oil company money started flowing.
But now that questions are being asked, she says that there were key conditions that were not included in that supposedly clear statement of her moral commitment. When a different question is asked, Ms. Brian acknowledges under oath that it was an agreement after all, but says that POGO will not live up to its part of the bargain. Why? Not for any moral reason, but because she and her board decided that neither Berman nor Speir would succeed in court if they tried to force POGO to comply. Maybe that is why, as we understand it, Mr. Berman threatened to pursue legal action against POGO if it did not live up to its agreement.
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Finally, our oversight inquiry has learned this: The Interior Department did a very poor job of maintaining secrecy over the Johnson v. Shell case while it was under seal. Even Mr. Speir, who was located over at Energy, admits the case was ''coffee table conversation'' while under seal. Interviews indicate that dozens of MMS and Interior employees knew about the case. Anyone who tells us today that they did not know at least one sealed False Claims Act case alleging oil royalty underpayments was pending in Eastern Texas is the only person in that loop who did not know. Yet only two of these Federal employees have been paid from that case.
So far, this appears to be a classic and tragic Washington scandal: hypocrisy, and greed and coverup. In the hunger for profits, a nonprofit lost sight of its guiding principles. In the scramble to cover the truth, rather than make a mistake, a watchdog refuses to be watched. In the name of public service, lies are told and retold. An organization once fighting to expose Government wrongdoing now says, ''So what? Others have done worse things.'' This is truly a shame.
The board of directors and the record keeper with no records who sat before us 2 weeks ago have been manipulated by Mr. Banta and Ms. Brian. Mr. Banta, the trusted lawyer and chairman, recruited POGO to benefit his law firm, and he and Danielle Brian should both be ashamed of what they have done to the reputation of POGO.
As I said at our last hearing, this oversight hearing is conducted as a part of the Committee on Resources' inquiry into the operations, policies and practices of the departments of the Interior and Energy which were either circumvented or which were inadequate to prevent this serious conflict of interest. The parameters of this oversight review are contained in the letter transmitting the inquiry to the Subcommittee from Chairman Young. These matters are within the jurisdiction of this Committee.
The witnesses have been subpoenaed to testify today. I advised each witness that he or she will be sworn in. Witnesses were also advised that they could bring a lawyer to advise them of constitutional rights because the testimony will be sworn. However, only the witnesses will be allowed to address the Subcommittee. Lawyers should note that the rules of the House of Representatives restrict counsel to advising witnesses in the assertion of constitutional rights and privileges. That means, after a consultation with a lawyer, I should hear one of two things: an assertion of a constitutional right or the answer to the question.
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Lawyers may not sit at the witness table, but I have reserved seats in the first row so that lawyers may counsel their client if need be. Lawyers may not coach their clients. The Rules of the House will be enforced firmly and impartially. I remind everyone that this is a Subcommittee hearing which proceeds under Rule XI 2(g)(2) of the Rules of the House of Representatives. Procedures associated with those rules apply. This is an open hearing under those rules. This is not an investigative hearing.
Witnesses will not make oral summaries of their testimony, but may place statements which comply with the rules in the record.
As I announced at our last hearing, our exercise examines an instance where a private corporation made payments to Federal employees involved in royalty policies and rules. Our Subcommittee is responsible for ensuring that there is integrity in the Federal policy and rule-making process concerning oil royalties from public domain land. We are responsible for ensuring that the departments are organized and operated properly. The hearing today is to gather the facts to discharge our responsibility.
At our last hearing, I became quite concerned with how the payments affected advice, recommendations and deliberations concerning the Subcommittee's proposal on royalty in-kind system. Did the employees have an incentive to keep the system in place so that they could collect their share of the settlements under the secret agreement with POGO? We worked on the R-I-K proposal and oversight for 4 years to ensure a fair system that allows collection of every penny of royalties that is owed. But did the payments affect the policy of the Interior Department regarding our proposal? How can any of us know?
Now, we have a new rule for royalties, but the integrity of the rule-making process is in serious question because of the payments to Mr. Berman and Mr. Speir. POGO supported the approach followed in the rule, and Mr. Berman wrote the first paper outlining that approach.
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As we begin this hearing, I ask everyone to imagine that it was an oil company, instead of POGO, that made two $383,600 payments to Federal employees who worked on oil policy. Imagine that the employees wrote papers that advocated a position similar to that of the oil companies. Imagine that the employees fed the companies information over the years or sat on task forces concerning oil valuation policies? Then imagine that when the payments were made the oil companies called them public service awards. If you are a member of the press, imagine what you would write. Well, write that story as you listen to today's testimony, but every time you write the name of that oil company, strike it out and insert ''the Project on Government Oversight.'' Agency policy advisers should not be silent partners of anyone.
[The prepared statement of Mrs. Cubin follows:]
STATEMENT OF HON. BARBARA CUBIN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WYOMING
The oversight hearing will come to order.
Two weeks ago this Subcommittee held the first hearing conducted as part of the Committee on Resources inquiry into an agreement between POGO and two Federal employees to share cash proceeds from an oil royalty law suit and into the policies and practices of the Department of Energy and the Department of the Interior which were either circumvented or inadequate to stop the deal.
If that agreement had not been uncovered by the press and pursued by this Committee, POGO, Mr. Berman and Mr. Speir would have split $5.7 million as of today—and that is from only five of eighteen defendants writing settlement checks so far. After we hear testimony from two Justice Department officials, we will hear from Robert A. Berman. Mr. Berman is a highly paid, GS-15 in the Office of the Secretary of the Interior. He has pocketed $383,600 already and has another 1 million coming to him—at least.
That secret handshake among Bob Berman, Danielle Brian, Bob Speir, and Henry Banta was wrong. It is wrong because Federal employees are not allowed to have secret financial interests which may be affected by their work. Berman and Speir actively pursued involvement in oil royalty matters. By December 1996 when the deal was finalized—they were up to their eyeballs in it.
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That deal is wrong because Mr. Banta and his law firm relied on relationships with Mr. Berman and Mr. Speir in promoting the interests of their biggest oil royalty client. Indeed, everyone approached by POGO to share in these riches has long ties to Lobel, Novins & Lamont and to its' clients' stake in Federal oil valuation policies: Mr. Kritzer and former California State Controller Ken Cory—who prudently declined, Bob Berman, Bob Speir, and Lenny Brock—who foolishly accepted the offer. In fact, as the Subcommittee learned two weeks ago, Mr. Brock had been of no service to POGO and had never heard of it and he had no background in Federal royalty issues involved in the litigation. But, Mr. Brock does have a decades-long association with the Lobel law firm and with its' biggest client.
Mr. Banta's firm claims to specialize in legal ethics. Was it ethical and appropriate for Mr. Banta to use his power at POGO to enrich those who enriched his law firm?
This secret deal is also wrong because it was secret. Mr. Berman and Mr. Speir know now and they knew in 1996 this was so. There were several conversations leading up to the secret handshake of December 1996. But neither public employee asked his agency ethics office for advice. After that meeting, more than a year elapsed before the deal was put on paper. But during those 13 months, nobody revealed the secret to ethics officials. After the deal was put on paper—something they must regret by now—nine months passed before the first check was written. But still, no one breathes a word to their agency. Berman's ethics file confirms this. Mr. Speir acknowledges that he had no clearance for this agreement while employed at Energy.
Each year, these two public servants filed financial disclosure reports. Why was the agreement with POGO left off? Because it was not a certain moneymaker? I am sorry but that is not the rule. Losing and winning investments and partnerships have to be disclosed.
If this was a ''public service award,'' what harm could come from getting the approval required before accepting it? If this was a contract to share in a law suit either employee could have filed himself, what harm could come from revealing this direct and predictable financial interest? Berman and Speir and Brian and Banta know the answer.
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I'll tell you what they knew all along—what Mr. Speir has already admitted—if this ''award'' or agreement had been revealed and cleared by Interior and Energy ethics officials, Mr. Berman and Mr. Speir would have been barred from further involvement in matters directly linked to the financial prospects of POGO, of the Lobel law firm, and of themselves. After the fact and in the glare of public scrutiny, they call that ''retaliation.''
I call it ethics.
If Berman and Speir had put their names on the case and their knowledge had been the basis for claiming status as the whistle-blower, the Justice Department would have insisted on sealing them off from decisions related to the litigation and underlying policy. The Justice Department takes a dim view of Federal employees seeking to profit from False Claims Acts suits directly related to their work. Once the defendants had been notified of the case and learned who Berman and Speir were, they would have launched an all-out effort to dismiss the case. They probably would have succeeded.
That would mean that nobody—not POGO, not Berman, not Speir, not any other long-time asset of the Lobel law firm would have made a nickel!
The select few of POGO's leadership who knew of this secret handshake include experts in False Claims Act cases. The Utah lawyers POGO chose to file their case in Lufkin, Texas are experts in False Claims Act cases. Everybody knew that putting Berman and Speir's names on the case meant Federal whistleblower protection for Berman and Speir but at the price of their continued participation in vital oil royalty debates. The only retribution reasonably feared by this crowd was a Motion to Dismiss filed by the defendants.
Before proceeding to the first panel of witnesses, let me summarize what I believe our oversight inquiry has learned. All of these statements are based on POGO's own documents—to the limited extent they complied with our subpoenas—on sworn testimony from the principal players, and from staff interviews with cooperating sources:
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In early December 1996, Mr. Banta, Ms. Brian, Mr. Berman and Mr. Speir agreed that POGO would divide its' expected oil royalty litigation proceeds in equal thirds and share it with Berman and Speir. This deal included no other conditions. Further POGO Board approval was not required nor sought. Agency ethics office approval and Justice Department notification was made. The January 5, 1998 written agreement is the sum and substance of the pact made in early December 1996.
In December of 1996 and thereafter, there was a wealth of legal, ethics, False Claims Act, and whistle-blower protection expertise available to Banta, Brian, Berman, and Speir. Yet no one ''dotted the i's or crossed the t's'' of this deal in advance, and everyone understood that it was an agreement to share money—not a ''public service award.'' When asked under oath to cite specific acts of ''whistle-blowing'' by Berman or Speir, after a struggle, all Ms. Brian could come up with was a memo or two. POGO's after-the-fact paperwork praises Mr. Speir for a decade of work to focus attention on royalty under-payment. Yet, Speir's own sworn testimony admits that he did not work on the issue at all until 1994. He retired in 1997.
But, Mr. Speir, Mr. Berman, and Mr. Brock—along with Mr. Kritzer and Mr. Cory who declined to accept money—can claim a long history of sharing views on a host of oil valuation questions which directly benefited the Lobel law firm. In late 1993, Mr. Banta, then and now a member of Lobel, Novins & Lamont and the single most influential member of the POGO Board of Directors, brought together Danielle Brian and his firm's key Federal Government allies on oil valuation matters. Soon thereafter, POGO embarked on a campaign which succeeded—by their own claims—in changing Interior oil policy. This benefited the Lobel firm's top client and succeeded in making millionaires of three of the Lobel firm's key allies.
The same Henry Banta, who brought together this alliance, who agreed to pay Berman and Speir as if they were plaintiffs in the case, and who sits by as POGO concocts a defense that these Federal employees were whistle-blowers who could have file the case on their own told a different tale when POGO stood to lose its millions. Under penalty of perjury, Mr. Banta acknowledged that Danielle Brian, Bob Berman and Bob Speir probably could NOT have qualified as Relators under the False Claims Act. He also acknowledges that the two public servants supposedly rewarded for ten years of work to expose oil royalty under-payments could NOT have qualified as expert witnesses or fact witnesses in Johnson v. Shell.
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This breathtaking arrogance and duplicity is not unique to Mr. Banta. In sworn testimony and in public, Ms. Brian has asserted that there was never an agreement to pay either Federal official. No. There was simply POGO's unilateral commitment to do what was morally right—to honor these men as the moral equivalents as plaintiffs in the case. The January 5, 1998 agreement calls itself an ''agreement'' but Ms. Brian says it just states what Berman and Speir could expect when the oil company money started flowing.
But now that questions are being asked, she says there were key conditions not included in that clear statement of her moral commitment. When a different question is asked, Ms Brian acknowledges under oath that it was an agreement after all—but says POGO will not live up to its part of the bargain. Why? Not for any moral reason. Because she and her Boar