Hiding the Slip-Up on Oil Lease Accounting: Interior Motives in 1998, the Depart

Question

Hiding the Slip-Up on Oil Lease Accounting: Interior Motives in 1998, the Department of the interior began an incentive plan for all oil companies that permitted the companies to waive the 12.5 percent royalty generally paid to the U. S. Government for oil leases on federal land. The idea behind the waiver was that oil companies would then have additional cash for purposes of drilling for more oil. However, the waiver was to stop of oil rose above $34 per barrel. When the leases with the oil companies were signed, Department of the Interior officials had neglected to put in the $34 per barrel cap. The leases ran for ten to fifteen years. Officials at the department discovered the omission in 1999 but did not reveal their mistake and just let the leases run without the cap. When an Office of the Inspector General audit began looking at the leases, an employee within the department, who was later given a bonus, forged and backdated documents to try and dupe auditors into believing that the lease caps were in place. With oil topping S34 per barrel by 2002, and over 1,100 oil leases, the federal govemment lost billions in royalty fees by the time the New York Times discovered the misstep in the contracts. 1. Evaluate the conduct of the govemment official who developed the idea for forging and backdated documents to cover the oil lease oversight. Would a credo have helped? Why do employees believe that they can conceal information from an auditor or, in this case as well, the ublic? 2. Should the oil companies pay the amounts that would have been due had the clause been in the lease? Why or why not?

Explanation / Answer

1.

The conduct was absolutely non-tolerable as because due to this forgery act the federal government could have earned the royalty fees which they lost for long years. As the oil rose up to $34per barrel it was intentionally neglected by the officials and later it was found by auditing that the forgery has occurred. But the auditors have later duped that the lease caps were in actual place no duping was done. In this way, the misconduct has been done to cover the oil lease oversight.

Yes, the credo has helped to do this act as the auditor has found out the unethical practice of forgery was going on but some of the employees influenced the inspector general auditor that nothing wrong has happened and the practice of royalty issue continues.

Concealing information will help them to continue with this activity for a long term and this will give them the added advantage to doing this activity for a prolonged time and they will get more opportunity to earn money illegally. This is the reason they want to hide this forgery act from public and auditors too.

2.

Yes, the company should return the royalty amount to the federal government as it is their money which the company neglected to give them and instead of a correct auditing check out, illegally they are duping the government organization from their royalty amount. The legal procedure must have to be undertaken for their duping and forgery act so that the money should immediately come back into their account and the process of leasing should continue with proper transparency in the agreement.

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