By: Brooke Driver
In November, Weatherford International Ltd. broke a BIS penalty record, suffering a fine of $100 million for its subsidiaries’ 174 violations of the regulations. The company was also charged with violating the Foreign Corrupt Practices Act’s anti-bribery provisions and federal export controls regulations. On November 26, Weatherford and three of its subsidiaries pled guilty to these charges, and agreed to pay a massive penalty of nearly $252.7 million, to retain an independent corporate compliance monitor for at least 18 months, and to implement an improved compliance program in order to prevent and detect future FCPA violations. The huge fines demanded by the U.S. Government in this case are a reflection of the company’s repeated (and varied) efforts to intentionally evade U.S. law. According to the Department of Justice, Weatherford International’s subsidiaries:
- purposely failed to establish an effective system of internal accounting controls designed to detect and prevent corruption, including FCPA violations
- operated a joint venture in Africa with two local entities controlled by foreign officials and their relatives for the purpose of bribing those officials
- bribed a foreign official in Africa to approve renewal of a contract in 2006
- paid $15 million of improper “volume discounts” to a distributor in hopes of establishing a slush fund to bribe a national oil company’s executives
Apparently, these illegal activities earned the company nearly $54.5 million in profits.
Co-director of the SEC’s Enforcement Division Andrew Ceresney described some of the methods Weatherford used to conceal its illegal activities:
“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.”
Given the extensive measures to which Weatherford went in order to avoid U.S. regulations and the widespread corruption of the organization, it is difficult to believe Chief Executive Bernard J. Duroc-Danner’s statement that:
“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.”
If Weatherford’s compliance program is truly “best-in-class” material, the exporting world as we know it is doomed.