Weatherford, subsidiaries resolve FCPA, export control charges

Weatherford International Ltd. and three of its subsidiaries agreed to plead guilty to federal charges of violating the Foreign Corrupt Practices Act’s antibribery provisions and federal export controls regulations, the US Department of Justice announced on Nov. 26. The oil field services company and its subsidiaries also agreed to pay to pay nearly $252.7 million in penalties and fines subject to federal court approval, DOJ said.

It said subsidiary Weatherford Services Ltd. agreed to plead guilty to violating the FCPA, agreeing to pay an $87.2 million criminal penalty as part of a deferred prosecution agreement.

According to court documents DOJ filed in federal court in Houston, prior to 2008, Weatherford International knowingly failed to establish an effective system of internal accounting controls designed to detect and prevent corruption, including FCPA violations.

They said Weatherford Services employees established and operated a joint venture in Africa with two local entities controlled by foreign officials and their relatives from 2004 through at least 2008 for the purpose of bribing those officials. Employees of the subsidiary also bribed a foreign official in Africa to approve renewal of a contract in 2006, the documents said.

They also said employees in the Middle East of another subsidiary, Weatherford Oil Tools Middle East Ltd. (WOTME), paid $15 million of improper “volume discounts” to a distributor. The WOTME employees believed the discounts would create a slush fund to bribe a national oil company’s decision-makers, DOJ said.

It said court documents show these corrupt transactions in Africa and the Middle East earned Weatherford International nearly $54.5 million of profits that were included in consolidated financial statements the company filed with the US Securities and Exchange Commission.

Additional terms

DOJ said in addition to the guilty plea by Weatherford Services, a deferred prosecution agreement between Weatherford International and the department requires the company to cooperate with law enforcement, retain an independent corporate compliance monitor for at least 18 months, and continue to implement an enhanced compliance program and internal controls designed to prevent and detect future FCPA violations.

It also acknowledges Weatherford International’s cooperation in this matter, including conducting a thorough internal investigation into bribery and related misconduct, and its extensive remediation and compliance improvement efforts.

Other court documents which were filed said that between 1998 and 2007, Weatherford and some of its subsidiaries violated various US export control and sanctions laws by exporting or re-exporting oil and gas drilling equipment to, and conducting Weatherford business operations in, sanctioned countries without the required US government authorization.

In addition to the involvement of employees of several Weatherford International subsidiaries, some Weatherford International executives, managers, or employees on multiple occasions participated in, directed, approved, and facilitated the transactions and the conduct of its various subsidiaries, the documents said.

They said this conduct involved persons within the Geneva, Switzerland, company’s US-based management structure participating in conduct by foreign subsidiaries, and the unlicensed export or re-export of US-origin goods to Cuba, Iran, Sudan, and Syria.

Code names, bogus records

“They used code names like ‘Dubai across the water’ to conceal references to Iran in internal correspondence, placed key transaction documents in mislabeled binders, and created whatever bogus accounting and inventory records were necessary to hide illegal transactions,” said Andrew Ceresney, co-director of the SEC’s Enforcement Division.

Weatherford and its subsidiaries earned more than $30 million of illegal profits from the improper sales to US-sanctioned countries, the SEC indicated.

To resolve these charges, DOJ said Weatherford and its subsidiaries will pay a total $100 million penalty, with a $48 million monetary penalty paid pursuant to a deferred prosecution agreement, $2 million paid in criminal fines pursuant to the two guilty pleas, and a $50 million civil penalty paid pursuant to a US Department of Commerce settlement agreement to resolve 174 violations charged by DOC’s Bureau of Industry and Security.

Weatherford International and certain of its affiliates are also signing a $91 million settlement agreement with the US Department of the Treasury to resolve their civil liability arising out of the same underlying course of conduct, DOJ said.

In a statement issued from Weatherford’s Geneva headquarters on Nov. 26, Chief Executive Bernard J. Duroc-Danner said the company will move forward now with a full commitment to a sustainable culture of compliance. “With the internal policies and controls currently in place, we maintain a best-in-class compliance program and uphold the highest of ethical standards as we provide the industry's leading products and services to our customers worldwide,” he maintained.

Contact Nick Snow at nicks@pennwell.com.

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