Dear Secretary Norton,
I am writing you regarding the Inspector General's (IG) report of investigation: "San Rafael Land Exchange" (the report). The Finance Committee is conducting a review of land conservation matters. To that end, I requested and received from the IG a complete and unredacted copy of the report and related materials. The report highlights that the American taxpayers were well-served by whistleblowers at Interior. However, of far greater concern is the jaw-dropping account of what appears to be cover-up and concealment by senior government officials at Interior. I cannot think of a time when an Assistant Secretary in an IG report has stated flat out that senior government officials provided her false information. (Report, P. 23). And that is only the tip of a very big iceberg exposed in the report.
I appreciate the steps you have taken in response to the report, but I would like to express my concerns about several matters that have not been raised publicly, particularly: 1) the need to hold responsible officials who appear to be part of a troubling culture of cover-up-and-conceal at Interior, and 2) the protection of the whistleblowers whose allegations have been wholly supported by the report.
1) Accountability of Responsible Officials
There are four individuals whose actions are called into question by the report: Mr. Tom Fulton, former Deputy Assistant Secretary of the Interior for Land and Minerals Management and who has now been appointed by you to be coordinator of the Lewis and Clark Caucus on Capitol Hill; Mr. Peter Schaumberg, Deputy Associate Solicitor, Division of Mineral Resources, Office of the Solicitor; Ms. Teresa Catlin, Bureau of Land Management (BLM) Realty Specialist, Salt Lake City, Utah; and Mr. Fred Ferguson, Associate Solicitor, Division of Mineral Resources, Office of the Solicitor.
In addition, I would note that the report raises questions about the conduct of Ms. Kathleen Clarke, Director of BLM. Given that she is the subject of an ongoing IG investigation, I will not comment until the reports are completed.
These issues are of a most serious nature: whether government officials misled Congress and senior Interior officials as to the true facts regarding the San Rafael Land Exchange.
Specifically, the question is whether Congress and senior Interior officials were properly informed that the split of any future revenues from oil shale would be 60% Utah School and Institutional Trust Lands Administration (SITLA), 20% federal government, and 20% State of Utah. The distribution of revenues was a critical fact in determining whether or not the U.S. taxpayer was receiving a fair deal in this land exchange.
The report shows that Congress and senior Interior officials were not provided the full facts. Again and again, Congress and senior Interior officials were told of a 40% federal government / 60% SITLA split. For example, Interior provided a briefing paper to interested members of Congress that stated:
The Agreement therefore, provides for a 40/60 split between the U.S. and SITLAof future revenues that may be generated from any mineral leasing activities on the "UaUb" tract (oil shale and oil and gas). (Attachment 34, P. 12).
In addition, testimony to Congress, prepared questions and answers for Congress and white papers prepared for senior Interior officials all talked of a 40/60 sharing or just sharing of the future revenues. Further, as discussed below, Interior officials created a scheme whereby Congress was told of the "exchange agreement" which provided for a 40/60 split, but was never informed that the "exchange legislation" contained arcane language that would provide for a 20/20/60 split.
That there was an effort to hide the ball is actually admitted by the participants. For example, the SITLA negotiator:
The SITLA negotiator ultimately agreed that the Department [of Interior] wastrying to hide details of the agreement by saying, "So they're trying to hide it, thatdoesn't mean it's not fair." (Report, P. 15).
Note: the report provides significant material - reflected by your actions to cancel the agreement - to support that it was not a fair agreement. As a SITLA-contracted appraiser states:
No commercial entity would have entered into the agreement the Departmenr didfor oil shale land. (Report, P. 20).
Further illumination is given by Sally Wisely, Director, BLM Utah State Office who stated to investigators:
Wisely speculated that the intent was indeed to hide the ball. She also said shethought the way the agreement was structured was "smoke and mirrors"? (Report, P. 15).
In addition, Wisely noted that it was clear to everyone at the negotiations on June 5 and 6 that what the parties agreed to would result in a 20% federal / 20% state / 60% SITLA split of future oil shale revenues. (Report, P. 15). The participants of the June 5/6 meeting from the federal government were Fulton, Catlin, Schaumberg, Wisely, and Ferguson. (Report, P. 10).
I appreciate that it is not an easy thread to follow. There are several key points of concern:
-The June 5/6, 2002 negotiation
-The white papers prepared for the Secretary of Interior and other senior Interior officials on June 19, 2002.
-The testimony of Fulton on June 27, 2002.
-August 9, 2002 memorandum prepared for Congress.
Sunshine is the best disinfectant - but it appears there are employees at Interior who are trying to shut the blinds and pull the curtains. I highlight below the main participants and key parts of the report that relate to their role:
A) Mr. Tom Fulton
Mr. Fulton reviewed the June 19, 2002 Secretary briefing paper ("briefing paper") authored by Catlin, which Fulton provided to Rebecca Watson, Assistant Secretary of the Interior for Land and Mineral Management. The briefing paper contained a statement that it would be a 40/60 split. (Report, P. 22).
When asked by the investigating agent if the information in the paper about oil shale revenue sharing was true, Fulton said it was not completely accurate in the context of the entire exchange package. Fulton agreed that a decision-maker reading this briefing paper might have understood it to mean that the U.S. would receive a 40% share of future oil shale revenues, and he also agreed that the fact that the 40% would be split and that it would only really be 20% was an important point. Fulton further agreed that anyone reading the White Paper written to explain and support the exchange valuations, or the exchange agreement itself, might also be under the impression that the U.S. would maintain a 40% share. (Report, P. 22).
Fulton also said he briefed Watson about the exchange before she signed the agreement and that this was Watson's only involvement in the exchange. Fulton believed he provided Watson with the June 19, 2002 Secretarial briefing paper that stated the U.S. would share future oil shale revenues on a 40% federal / 60% SITLA basis. Fulton said he did not tell Watson that the U.S. share of future oil shale revenues would only be 20%, not 40% as stated in the exchange agreement and briefing paper. He agreed that the only way Watson would have known this would have been for her to compare and contrast the legislation and the exchange agreement, which he agreed was not her job to do. Fulton was unable to articulate a reason why he did not provide Watson with the correct facts. (Report, P. 22, - emphasis added).
Again, the report emphasizes the importance of the 40/60 v. 20/20/60 stating that Assistant Secretary Watson would have had further questions if it had been presented to her as only a 20% share. (Report, P. 23). The report's statement after this point is extremely disturbing:
Watson concluded that Fulton had provided her with false information about the oil shale revenue sharing agreement when he told her there would be a 40/60 split of future revenues. Watson also concluded that splitting the oil shale revenue sharing agreement between the exchange agreement and the legislation was an attempt to hide what the true agreement was, something she would not condone. Watson said that what was done with the oil shale agreement was not right and was not good public policy and she was shocked by it. (Report, P. 23 - emphasis added).
Let me be blunt: Ms. Watson is not the only one who is shocked. I would be interested in learning your opinion of the appropriateness of such conduct for any government official, much less a senior attorney?
Fulton is then called to testify on June 27, 2002 before the House Resources Subcommittee on 'Parks, Recreation, and Public Lands' in support of the San Rafael exchange legislation. A BLM Legislative Analyst prepared the testimony based on the material provided to him - the earlier, inaccurate, briefing paper as well as the inaccurate executive agreement (discussed further below). The analyst said he thought that the percentage was an important point to Congress and would have raised difficult questions for the Department if 20% had been noted. (Report, P. 23).
As will be discussed below, the statement that it was 40/60 was stricken by Mr. Schaumberg and replaced with a comment that the U.S. would receive "a share." (Report, P. 23).
Fulton agreed that the oil shale revenue sharing arrangement between the Department and the state was an important point for Congress to understand but said that Congressional staffers had the responsibility to review the legislation and the exchange agreement and then to inform their bosses about what the interplay between the two would result in. (Report. P. 25 - emphasis added).
Let me assure you, "Catch Me If You Can" may be a good movie, but it is not how we conduct business in Congress. We expect complete and accurate information from government officials. I cannot believe that the President's commitment to change the tone in Washington envisioned Congress having to second guess every pronouncement and scrutinize every comment with the assumption that government officials are not providing a full and complete picture. Recall that the only plain language information provided to Congress would have been the exchange agreement that stated a 40/60 split and a white paper provided to Congress after Watson's testimony (discussed below) on September 9, 2002 that also stated that it would be a 40/60 split.
I would end the discussion on Fulton with the following excerpt from the report and by asking whether you believe that the behavior it describes deserves a paycheck from the taxpayers?
Fulton also initially stated that he did not know that as a result of the proposed exchange, the U.S. share of oil shale revenues would only be 20% adding that it was all very complicated. Fulton was asked what was complicated about understanding that half of 40% was 20%. Fulton then responded that it was not complicated and said he did know the U.S. share would only be 20%. Fulton then said the oil shale revenue sharing agreement was just one minor detail among many details in the exchange and that he was looking at the exchange from the "30,000 feet up view." Fulton later agreed that the oil shale revenue sharing was not a minor point but was instead, from a valuation standpoint, perhaps the most important aspect of the exchange. (Report, P. 16 - emphasis added).
B) Mr. Peter Schaumberg
According to Mr. Schaumberg, he attended the June 5/6 meetings "to make the exchange technically work by drafting language that would accomplish what management wanted to accomplish with respect to the transfer of minerals under the exchange." (Report, P. 16).
When it was decided to provide a 20/20/60 share, Schaumberg stated that it was his proposal (the "Schaumberg proposal") to structure the agreement in a way that divided the terms between the exchange agreement and the exchange legislation.
Specifically, the exchange agreement would say that there would be a 40% federal / 60% SITLA split, and then the legislation would provide that the federal share would be split according to the Mineral Leasing Act formula so that the state would get one half (1/2) of the 40% federal share. (Report P. 17).
This is a critical fact, because it is here where we see born the strategy mimicking that of a street corner cardsharp - asking Congress to keep its eyes on one hand (the exchange agreement stating 40/60) while the taxpayers' pocket is picked by the other hand (the exchange legislation providing 20/20/60). Mr. Schaumberg said an attorney from his office drafted the exchange agreement; Schaumberg then told IG investigators that he might have drafted or assisted in drafting Section 5 of the exchange legislation that reduced from 40 to 20 the federal government share. (Report. P. 22).
Schaumberg also stated that the revenue sharing agreement had to be structured the way it was because, absent the provision in the legislation on revenue sharing, the U.S. would not have authority to split its revenues with the state. Schaumberg then conceded that there was no legal reason why the exchange agreement could not simply have said that there would be a 20/20/60 split between the parties, thereby leaving SITLA responsible for disbursing revenues to the state and to the U.S. Schaumberg was sure there was discussion regarding language in the exchange agreement that the split would be 20/20/60. However, he said this was not acceptable to the SITLA negotiator or to Boyden. Schaumberg added that he did not know why this was not acceptable to them. (Report, P. 17 - emphasis added).
The report then states:
Schaumberg described the structure of the agreement as "conceptually defensible," though he agreed that the most logical course of action in drafting the oil shale revenue sharing agreement would have been to say in the agreement what the agreement actually was. However, he said the parties decided that the four corners of the exchange agreement would not reflect the intent of the parties, though everyone understood that the exchange would result in the U.S. receiving a 20% share of future oil shale revenues. (Report, P. 17-18, emphasis added).
Schaumberg himself admits that he understands why it looks like the structure of the revenue sharing agreement was an effort to hide what the agreement actually was by making it appear that the U.S. would receive a 40% share when it would actually only receive a 20% share of future revenues and that Congress could not make an informed decision without such complete disclosure. (Report, P. 18).
Another participant of the meeting, Mr. Ferguson, frames the Schaumberg proposal in a harsh light:
[Ferguson] later said the reason Schaumberg might have proposed structuring the agreement as he did was to "finesse the situation." When asked if he meant that this was an effort to hide the ball, Ferguson said, "a cynic might say so." Ferguson went on to state that the agreement could have been structured to "dress it up" to "make it more politically palatable." When Ferguson was asked if this was one reason why Schaumberg proposed what he proposed, Ferguson replied, "Yes, I guess so" and then said he thought, "That is why it came to pass." (Report, P. 18 - emphasis added).
Let me turn now to Mr. Schaumberg and his involvement in Mr. Fulton's testimony to Congress, discussed earlier. According to the report, Mr. Schaumberg stated originally to IG investigators that he did not review the testimony of Mr. Fulton. In a second interview, the investigators then showed Mr. Schaumberg his own handwritten revisions to Mr. Fulton's testimony to Congress. Mr. Schaumberg changed a statement that the Federal Government would receive a 40% share of future oil revenues and altered it to state that the Federal Government would receive "a share" of future oil shale revenues. (Report, P. 24).
Schaumberg identified the handwritten revisions and the initials on the referral cover page as his own, and he confirmed that he, in fact, has reviewed and made changes to the testimony. Schaumberg said that he simply did not remember having done so when asked about it at the previous interview. (Report, P. 24).
In Schaumberg's earlier interview he stated "there was never any talk of hiding what the agreement was and he expected that Fulton would have fully disclosed the terms of the agreement to the decision-makers in the Department and to Congress. Schaumberg added that the decision-makers could not make an informed decision about the agreement without such complete disclosure." (Report, P. 18).
I ask you whether Mr. Schaumberg's actions in editing Mr. Fulton's testimony, coupled with his authorship of the Schaumberg proposal, helped or hurt in ensuring that decision-makers could make an informed decision; I also ask you to gauge these actions against your standards of appropriate and ethical behavior for a government attorney.
C) Mr. Fred Ferguson
Mr. Ferguson reviewed the changes Schaumberg made to Fulton's testimony (discussed above).
Ferguson agreed that Schaumberg could have made Fulton's testimony more accurate by putting in the actual numbers and saying the U.S. would receive a 20% share of future revenues, but he argued Schaumberg's decision to only use the word "share" instead was simply a matter of choice. Ferguson agreed that telling Congress the U.S. would receive a "share" of future revenues was vague and was not particularly informative, but he saw nothing inappropriate with the change Schaumberg made. . . . Ferguson was asked whether Watson, Congress, or the public could have known what the actual agreement on oil shale revenue sharing was, given the information they were provided. Ferguson replied that the information was available to anyone who wanted to look for it. When asked whether they should have to look for it. Ferguson again said, "If they wanted the information, it was there." (Report. P. 24-25).
I ask you whether it is an appropriate attitude for a senior government attorney --that full disclosure is not necessary to an Assistant Secretary, Congress or the public. I am confident it is your view that if Congress and the public want honest and complete answers as to government actions they should be able to rely on government statements instead of having to "look for it" elsewhere. I expect government officials in statements to provide the full story - and not require me to engage in a game of "hide and seek" to find the truth.
Ferguson also prepared an August 9, 2002 memorandum to Fulton providing a legal analysis of the revenue implications of the conveyance of the Ua-Ub parcel.
The memo said that the exchange agreement called for a 40/60 split between the U.S. and SITLA but cautioned that Congress might choose to modify this revenue sharing agreement. It then went on to state that, in fact, the legislation that was introduced contained a provision under which the State of Utah would receive one half of the 40% share the U.S. was to get under the terms of the exchange agreement. It did not mention that this was part of the Department's agreement with SITLA and the State of Utah. (Report, P. 26).
The report then quotes from the memo:
When faced with ratifying the Agreement, Congress may consider the equities associated with the diminished revenue stream the state of Utah would receive from the UA/UB parcel as a result of the exchange compared to the revenue stream the state would have received in the absence of an exchange, and accommodate those equities in establishing a permanent and indefinite appropriation to the state. Such an accommodation may appropriately recognize concerns beyond the equal value consideration reflected in the substance of the Agreement. (Report, P. 26 - emphasis in report).
Let me pause and revisit what we know. At this date of the August 9th memo, the critical June 5/6 meeting had already taken place. The agreement had already been reached that it would be 20/20/60 split. That agreement was made between Interior and SITLA - NOT Congress. Of note: Catlin acknowledged that the exchange legislation was drafted by the Department and SITLA and agreed that the provision in the exchange legislation that would cause the federal share to be split with the state did not originate with Congress. (Report, P. 16).
Again the contrast of viewpoints on the accuracy of this memo is striking. Ferguson and Schaumberg viewed that the memo was accurate. By contrast, Assistant Secretary Watson:
Watson reviewed the August 9, 2002 memorandum during her interview, and she agreed that the legal analysis is written in a way that creates the appearance that the Department and SITLA had agreed to a 40/60 split of future oil shale revenues but that Congress had, on its own initiative, decided to modify that split by having the Federal Government share its 40% with the State of Utah. (Report, P. 26 - emphasis added).
In her interview, the report states:
Watson agreed that the Solicitors memorandum did not spell out how the oil shale revenue sharing agreement really happened. (Attachment 49, P. 3 - emphasis added).
These actions of Mr. Ferguson and Mr. Schaumberg raise serious questions about the appropriate role for a government attorney. Government attorneys should be going the extra mile to ensure that senior government officials and the Congress are fully informed, not aiding and abetting efforts to cover-up and conceal key matters. Mr. Ferguson himself agreed that an attorney with his office had a duty to step in and advise members of management if they believed a management decision was inappropriate or not in the best interests of the Department. (Report, P. 18). I would like to know whether you believe that these two attorneys are meeting your standards of proper work performance and ethical behavior at the Department of Interior.
D) Ms. Teresa Catlin
Ms. Catlin was the primary author of the white paper provided to Congress that showed a 40/60 split cited above. (Report, P. 12-13). Ms. Catlin agreed that the intent of the parties was for revenues to be shared 20/20/60. (Report, P. 15).
While claiming that there was no intent to hide the actual agreement:
[Catlin) agreed that there was no reason why the exchange agreement could not have said that the split was going to be 20/20/60. She acknowledged that "appearances" might have been in the back of people's minds in structuring the agreement. She explained that had the exchange agreement said there would be a 20% federal / 80% state split, it would not sound fair. (Report, P. 16 - emphasis added),
From the report, it appears that not only did Ms. Catlin not provide full and complete information in material drafted for Congress but also to senior Interior officials in two Secretarial briefing papers dated June 7 and 19, 2002 which stated a 40/60 exchange. (See Report, P. 21).
[Catlin] said that when she wrote the papers, she was writing from the perspective of just what was in the exchange agreement. She denied having any intent to mislead. [Catlin] agreed that the information she put in the briefing papers did not fully reflect the intent of the parties with respect to oil shale revenue sharing and she had no explanation for why it did not. She said that she would not disagree with the assertion that the information in the papers was not true. (Report, P. 21 - emphasis added).
Finally, the report discussed at length her role in the appraisal process. (Report, P. 4-2 and 27-38). I will not examine these point-by-point but would note that the report generally substantiates the concerns raised by the whistleblowers about valuation and appraisal. (Report, P. 1) However, the statements by BLM employees (disputed by Catlin) that there were efforts to limit FOIA material and other written records are of additional concern. (Report, P. 36-38).
Again, I would ask whether the conduct outlined in the report meets your standards for a government employee.
Finally, I would mention that the report states that Mr. Ray Brady, then-Group Manager, Lands & Realty, BLM Washington Office, sought to suppress information regarding San Rafael from being included in a report by the Appraisal Foundation:
?[Brady] insisted that the [Appraisal] Foundation remove the reference to San Rafael from what Brady termed their "draft" report.? [Dorchester, an Appraisal Foundation official] said that after the meeting, [Brady] approached him and told him that he did not understand the problems the Foundation was causing by commenting on San Rafael in their report and that they needed to find a way to get rid of the comment. (Report, P. 12).
While Mr. Brady's role in San Rafael appears limited from the report, I would ask whether this action of limiting information is appropriate for a government official?
2) The Whistleblowers
While I have discussed at length the actions of several Interior officials that are of great concern, the Department of Interior has been fortunate to be well-served by a number of whistleblowers, particularly Kent Wi1kinson and Bill Buge. I ask for your assurances that there will be no actions taken to retaliate against these two men. I would in no small part credit the Inspector General's new program to encourage whistleblowers. It has fostered an atmosphere wherein disclosures similar to these can come to light. It is to your benefit, as well as the taxpayers', to have such a valuable source of unvarnished facts.
It is my understanding that after several requests for extensions, the formal Department of Interior response to these disclosures is due to the Office of Special Counsel (OSC) by August 11, 2003. I trust that there will be no further extensions necessary now that the IG report has been completed and ask that I be provided a copy of the Department's response to OSC.
Thank you for your time in reviewing this important matter. Sunshine is the best disinfectant - but the IG report indicates that there are employees at Interior who are trying to shut the blinds and pull the curtains. I look forward to reading your response.
Cordially yours,
Charles E. Grassley
Chairman
Cc: Senator Baucus