Weatherford International agreed Tuesday to pay $152.6 million to the DOJ and SEC for FCPA offenses in the Middle East and Africa and violation of the Iraq oil-for-food program.
The Switzerland-based company also paid $100 million for export controls violations under the International Emergency Economic Powers Act and the Trading with the Enemy Act.
The FCPA portion of the settlement ranks as the ninth biggest FCPA enforcement action of all time.
Weatherford paid the DOJ a criminal fine of $87.2 million. A subsidiary, Weatherford Services Limited, agreed to plead guilty Tuesday to violating the anti-bribery provisions of the FCPA. Parent-company Weatherford International was also charged a criminal information filed in U.S. District Court for the Southern District of Texas with one count of violating the internal controls provisions of the FCPA.
In the SEC case, Weatherford International agreed to pay $65.6 million in disgorgement, prejudgment interest, and civil penalties for FCPA violations. The company also agreed to retain an independent corporate compliance monitor for 18 months and to self-report to the SEC for an additional 18 months.
Before 2008, the DOJ said, Weatherford International ‘knowingly failed to establish an effective system of internal accounting controls designed to detect and prevent corruption, including FCPA violations.’
Weatherford Services set up a joint venture in Africa with two local entities controlled by foreign officials and their relatives from 2004 through at least 2008, the DOJ said.
Notwithstanding the fact that the local entities did not contribute capital, expertise or labor to the joint venture, neither Weatherford Services nor Weatherford International investigated why the local entities were involved in the joint venture. The sole purpose of those local entities, in fact, was to serve as conduits through which Weatherford Services funneled hundreds of thousands of dollars in payments to the foreign officials controlling them. In exchange for the payments they received from Weatherford Services through the joint venture, the foreign officials awarded the joint venture lucrative contracts, gave Weatherford Services inside information about competitors’ pricing, and took contracts away from Weatherford Services’ competitors and awarded them to the joint venture.
Weatherford employees in Africa bribed a foreign official so he would approve the renewal of an oil services contract, the DOJ said. It funneled the bribes ‘through a freight forwarding agent it retained via a consultancy agreement in July 2006.’
In the Middle East from 2005 through 2011, employees of another subsidiary, Weatherford Oil Tools Middle East Limited (WOTME), gave improper ‘volume discounts’ to a Weatherford distributor to create a $15 million slush fund for bribe payments.
WOTME also paid nearly $1.5 million in kickbacks to the government of Iraq on nine contracts with Iraq’s Ministry of Oil, as well as other ministries, to provide oil drilling and refining equipment. It hid the kickbacks from the U.N. by inflating contract prices by 10 percent.
In Africa and the Middle East, Weatherford made about $59 million in profits from business obtained through bribes and kickbacks.
It also made at least $30 million in profits from its improper sales to sanctioned countries including Cuba, Iran, Sudan, and Syria. The sanctions violations were settled through an administrative action (out of court) with the Department of Commerce’s Bureau of Industry and Security, Office of Export Enforcement, and the Department of the Treasury’s Office of Foreign Assets Control.
The SEC said managers at Weatherford’s subsidiary in Italy ‘flouted the lack of internal controls and misappropriated more than $200,000 in company funds, some of which was improperly paid to Albanian tax auditors.’
Included in the $65.6 million Weatherford paid to the SEC was a $1.875 million penalty ‘assessed in part for lack of cooperation early in the investigation.’
But in its release, the DOJ said the global resolution ‘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.’
Weatherford said earlier this year that it spent about $115 million on the investigations.
It first disclosed an overseas bribery probe in 2007. The investigation later expanded to include oil-for-food program violations and illegal trade with sanctioned countries.
‘A Weatherford employee reported in a 2006 ethics questionnaire that Weatherford personnel were making payments to government officials in Angola and elsewhere, but the company failed to investigate,’ the SEC said.
Weatherford operates in about 100 countries with more than 65,000 employees. Annual revenues topped $15 billion.
The company stopped doing business with Cuba, Iran, Sudan, and Syria in 2008, it said earlier.
Weatherford International Ltd. trades on the NYSE under the symbol WFT.
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.