SEC v. Weatherford International Ltd. (S.D. Tex. 2013)
Case Details
- Case Name
- SEC v. Weatherford International Ltd. (S.D. Tex. 2013)
- Countries
- Angola, Algeria, Albania, Iraq
- Foreign Official
- Government officials in Angola; Employees at a state-owned oil company in unnamed Middle Eastern country; Iraqi Ministry of Oil; employees at Algerian state-owned oil company; Employees at Albania’s National Petroleum Agency; Albanian Tax Director.
- Date of Conduct
-
2002 to 2011
- Nature of Business
- Weatherford International Ltd., a Swiss corporation, provides equipment and services to the oil industry in over 100 countries. During the relevant period, Weatherford was incorporated in Bermuda and headquartered in Texas. It maintains a class of securities trading on the New York Stock Exchange.
- Influence to be Obtained
- According to the SEC’s complaint, between 2002 and 2011, Weatherford and its subsidiaries made improper payments to government officials in Angola, Algeria, Albania, and Iraq to win lucrative oil services contracts and to gain significant market share.
In Angola, between 2006 and 2007, Weatherford Services, Limited (“WSL”), a wholly owned subsidiary of Weatherford that is incorporated in Bermuda, retained a Swiss freight-forwarding and logistics services company (the “Swiss agent”) as part of a scheme to pay bribes to an Angolan official. WSL paid these bribes to secure the approval for an oil services contract renewal. Although the contract was with a privately-owned corporation, Angolan law requires Sonangol, the Angolan state-owned oil company, to approve the award or renewal of any oil services contract in Angola. To facilitate these bribes, WSL entered into a consultancy agreement with the Swiss agent, pursuant to which WSL produced sham work orders and the Swiss agent generated sham invoices. Weatherford also paid the Angolan official’s travel expenses, which included a week-long vacation to Italy and Portugal.
Also in Angola, in 2004, Sonangol officials informed WSL that if it formed a joint venture with Sonangol-chosen companies it would obtain the entirety of the well screens market in Angola. Shortly thereafter, the subsidiary formed the joint venture with a company controlled by Sonangol officials and a company controlled by a relative of an Angolan minister. As a result of this joint venture, Sonangol officials awarded all well screens contracts to Weatherford.
In the Middle East, between 2005 and 2011, Weatherford Oil Tool Middle East Limited (“WOTME”), a wholly owned subsidiary of Weatherford, improperly discounted products sold to a state-owned and state-controlled national oil company. The volume discounts were used to create a slush fund for bribe payments to decision makers at the national oil company. WOTME recorded the volume discounts on its contra revenue account entitled “Volume Discount Account,” despite the absence of an official volume discount contractual provision in the contracts between WOTME and the distributer.
In Algeria, Weatherford provided improper travel and entertainment to officials of Sonatrach, an Algerian state-owned company. 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. Additionally, when Sonatrach officials visited Houston, Weatherford paid Sonatrach officials cash sums with no apparent legitimate business purpose.
In Albania, from 2001 to 2006, Weatherford’s Italian subsidiary “WEMESPA” misappropriated company funds and made $41,000 in payments to Albanian tax auditors to close out the audit or to speed up the certification process. WEMESPA also 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. To conceal the payments, WOTME inflated the price of the contracts before submitting them to the UN for approval. The payments were then recorded as cost-of-goods-sold on the company’s books and records. WOTME also paid improper inland transportation fees to the Iraqi government for the transportation of items that did not actually require delivery.
- Enforcement
- On November 26, 2013, the SEC filed a complaint against Weatherford, alleging violations of the anti-bribery, books-and-records, and internal controls provisions of the FCPA. Weatherford agreed to pay disgorgement and prejudgment interest of $95,384,267, and a civil penalty of $1.875 million. The disgorgement amount was offset by a $31,646,907 fine Weatherford paid pursuant to a deferred prosecution agreement with the U.S. Attorney’s Office relating to violations of sanctions and export control laws.
Weatherford entered into a separate deferred prosecution agreement with the DOJ relating to violations of the FCPA. Under the DOJ agreement, Weatherford agreed to pay a monetary penalty of approximately $87.2 million. Deducted from this amount was a separate $420,000 penalty imposed on WSL pursuant to a plea agreement.
- Amount of the Value
- Not Stated.
- Amount of Business Related to Payment
- Approximately $59.3 million.
- Intermediary
- Subsidiaries; Third-party Distributors; Third-party Agents; Joint Ventures.
- Citizenship of Parent Entity
- United States
- Total Sanction
- $ 97,259,267
- Reporting Requirements
- No
- Total Combined Monetary Sanction
- $ 152,392,360
Defendants
Weatherford International Ltd.
- Citation
- SEC v. Weatherford Int’l Ltd., No. 4:13-cv-03500 (Nov. 26, 2013 S.D. Tex. 2013).
- Other Statutory Provision
- None
- Defendant Jurisdictional Basis
- Issuer
- Defendant's Citizenship
- United States
