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U.S. v. Weatherford International Ltd.

 
:
Weatherford International Ltd.
:
DOJ Criminal
:
November 26, 2013
:
U.S. v. Weatherford International Ltd.
:
U.S. v. Weatherford International Ltd., No. 13-cr-733 (S.D. Tex. 2013)
:
Weatherford International was only charged with internal controls violations. The court documents do not indicate the specific countries in which the conduct took place, but the Information against subsidiary Weatherford Services Ltd., as well as the parallel SEC Complaint, indicates that the conduct in Africa took place in Angola. The Middle Eastern country is identified neither in the DOJ Information nor the SEC Complaint.
:
Energy (Non-Utility)-Oil & Gas-Exploration/Production
:
Angola, Iraq
:
2004; 2005; 2006; 2007; 2008; 2009; 2010; 2011
:
Foreign officials in Angola; Employees at state-owned oil company in the Middle East; Iraqi Ministry of Oil.
:
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.

Prior to 2008, Weatherford failed to institute effective internal accounting controls relating to areas such as corruption-related due diligence on third parties, anti-corruption risk management, and gifts, travel, and entertainment. Weatherford did not have a dedicated compliance officer or compliance personnel, did not conduct anti-corruption training, did not translate its anti-corruption policy into languages besides English, and did not have a system for investigating reports of compliance or ethics violations. These failures resulted in various instances of corrupt conduct.

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 its 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, gave WSL inside information about competitors' pricing, and took away contracts from WSL's competitors to award them to the JV.

Also in Angola, WSL employees bribed a foreign officials 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 prohibiting giving anything of value to a government official. The renewal was subsequently approved.

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 Iraq, WOTME paid illegal kickbacks to the Iraqi government as part of the United Nations Oil for Food Program.
:
Internal controls (Issuer)
:
Compliance Monitor, Deferred-prosecution Agreement, Fine
:
Monetary penalty of $87,178,256, with the penalty imposed on Weatherford Services Ltd. ($420,000) to be deducted from amount; Corporate compliance monitor for 18 months, followed by self-monitoring until termination of the DPA.
:
86,758,256
:
0
:
Offense Level
Base Offense Level: 6
Value of resulting gain more than $50mm: +24
Conduct outside of the U.S.: +2
= 32

Culpability Score
Base Culpability Score: 5
5,000+ employees and high-level personnel participated/condoned conduct: +5
Cooperation and affirmative acceptance of responsibility for criminal conduct: -2
= 8

Base Fine: $54,486,410
Multipliers: 1.6 (min) / 3.2 (max)
Fine Range: $87,178,256 / $174,356,512
:
Issuer
:
Foreign
:
Bermuda
:
Contract Procurement/Retention, Other Business Advantage
:
54,486,410
:
Cash, Travel, Wire/check
:
Direct, Freight-forwarder, Joint Venture, Sales Agent/Consultant, Subsidiary Company
:
Not stated.
:
Angola, Iraq
:
No
:
No