Probers Say Some Oil Firms Cheat Indians

Senate investigators first secretly taped a major Indian leader seeking payments from a businessman holding contracts on his reservation.

Then, in preparation for a second phase of hearings into problems confronting Native Americans, the investigators hid themselves on remote sections of some reservations to observe oil company employees who monitor the flow of billions of gallons of petroleum from Indian lands.

Today, members of a special Senate subcommittee on Indian affairs will open that second phase of hearings with charges that a number of petroleum companies are cheating tribes out of millions of dollars a year in royalties.

In a number of instances, the oil company employees were found to be underreporting the amount of oil and gas being taken from the Indian lands through what one investigator described as “a very sophisticated kind of theft.”

“They may slightly mismeasure the amount of oil they take out” of storage facilities, said Kenneth M. Ballen, chief counsel of the investigations subcommittee of the Senate Select Committee on Indian Affairs. “Maybe they mismeasure it by a barrel, one of 100 barrels, 200 barrels . . . but if you do that every single time . . . it adds up,” Ballen said.

During hearings that resume today, the investigations subcommittee is also expected to accuse officials in the Interior Department of not properly monitoring the oil leases, which are a major source of income for a number of tribes in the West and Midwest. Committee officials said Interior’s Minerals Management Service has allowed questionable accounting practices used by some petroleum companies to go unchallenged.

None of the nation’s largest oil companies are implicated in the corrupt practices, a spokesman said.