SEC v. Weatherford International Ltd., No. 4:13-cv-3500 (S.D. Tex. 2013)
In addition to allegations of improper payments and bribes, the SEC Complaint also contains allegations that Weatherford violated sanctions and export controls laws, as well as allegations of commercial bribes paid in the Congo. These allegations relate to the books and records and internal controls provisions of the FCPA.
Weatherford entered into two separate DPAs for the conduct alleged in the SEC Complaint: a DPA relating to the bribes and kickbacks with the U.S. Department of Justice, Criminal Division, Fraud Section; and a DPA with the U.S. Attorney's Office for the Southern District of Texas, relating to the violations of the sanctions and export control laws. The SEC imposed a penalty of disgorgement against Weatherford, the amount of which was offset by the fine paid pursuant to the DPA it entered into with the U.S. Attorney's Office.
Energy (Non-Utility)-Oil & Gas-Exploration/Production
Government officials in Angola; Employees at a state-owned oil company in the Middle East; Iraqi Ministry of Oil; Employees at Sonatrach, an Algerian state-owned company; employees at Albania's National Petroleum Agency; Albanian tax director.
Weatherford International Ltd. is a multinational corporation that provides equipment and services to the oil industry in over 100 countries. Prior to March 2009, Weatherford was incorporated in Bermuda and headquartered in Texas. As of March 2009, Weatherford was incorporated and headquartered in Switzerland. It also maintains a class of securities trading on the New York Stock Exchange.
Weatherford Services Ltd. ("WSL"), a wholly-owned subsidiary of Weatherford, managed many of Weatherford's activities in West Africa. Weatherford Oil Tool Middle East Limited ("WOTME"), also a wholly-owned subsidiary of Weatherford, managed most of Weatherford's activities in North Africa and the Middle East. Weatherford Mediterranean S.p.A. ("WEMESPA"), a third wholly-owned subsidiary of Weatherford is based in Ortona, Italy. The SEC's allegations are as follows:
In Angola, from 2005 to 2007, WSL employees bribed a foreign official so that he would approve the renewal of a contract. WSL funneled the bribes through a freight forwarding agent it retained via a consultancy agreement. WSL did not conduct any anti-corruption due diligence on the agent, even though the agent refused to sign an initial draft of the consultancy agreement including an FCPA clause, stating "in view of the nature of the business I cannot accept the original wording." The contract was revised by removing the FCPA clause and simply requiring the agent to "comply with all applicable laws, rules, and regulations issued by any government entity in the countries of business involved." The renewal was subsequently approved, and the payments to the agent were mischaracterized as legitimate consulting expenses on WSL's books and records.
Also in Angola, from 2004 to 2008, WSL established a joint venture with local entities controlled by certain foreign officials, without engaging in meaningful due diligence of the JV partners. The JV partners did not contribute capital, expertise, or labor, but only served as conduits through which WSL funneled payments to the foreign officials controlling them. In exchange, the foreign officials awarded the JV lucrative contracts and took away contracts from WSL's competitors to award them to the JV.
In the Congo, WSL used the same freight forwarding agent to pay commercial bribes to employees of a commercial customer. The bribes were mischaracterized as legitimate expenses on WSL's books and records.
In the Middle East, from 2005 to 2011, WOTME employees awarded improper "volume discounts" to a distributor who supplied Weatherford products to a government-owned national oil company, believing that those discounts were being used to create a slush fund with which to make bribe payments to decisionmakers at the national oil company. Weatherford and WOTME did not conduct due diligence on the distributor, even though the foreign officials directed WOTME to use the distributor, and the distributor was partly owned by the country's royal family.
In Algeria, Weatherford provided improper travel and entertainment to officials of Sonatrach, an Algerian state-owned company, that were not justified by a legitimate business purpose. The travel included trips to the FIFA World Cup soccer tournament, the honeymoon trip for the daughter of a Sonatrach official, and a religious trip by a Sonatrach official that was improperly booked as a donation. In addition, when Sonatrach officials visited Houston, Weatherford paid Sonatrach officials cash sums with no apparently legitimate business purpose.
In Albania, from 2001 to 2006 the general manager and financial manager of WEMESPA misappropriated over $200,000 of company funds, a portion of which was improperly paid to Albanian tax auditors. In addition, WEMESPA provided laptop computers to the Albanian tax director and two members of Albania's National Petroleum Agency.
In Iraq, WOTME paid illegal kickbacks to the Iraqi government as part of the United Nations Oil for Food Program.
From 2002 to 2007, Weatherford conducted business with Cuba, Iran, Syria, and Sudan in violation of U.S. sanctions and export controls laws. Weatherford concealed its business with the sanctioned countries by falsifying entries in its books and records, using code words and removing serial numbers.
In addition, Weatherford and its employees engaged in misconduct during the course of the SEC's investigation of Weatherford, including failing to provide the SEC with accurate and complete information. Subsequent to the misconduct, however, Weatherford greatly improved its cooperation and remediation.
Anti-bribery (Issuer), Books and records (Issuer), Internal controls (Issuer)
Disgorgement of $90,984,844, prejudgment interest of $4,399,423.34, and civil penalty of $1,875,000. The disgorgement amount was offset by the $31,646,907 fine Weatherford paid pursuant to a DPA with the U.S. Attorney's Office.
The SEC also imposed a corporate compliance monitor for 18 months (with possible extension to a total of 36 months), followed by a period of self-reporting.
Contract Procurement/Retention, Other Business Advantage