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From Securities Regulation Daily, November 26, 2013

Swiss company charged with authorizing bribes and kickbacks, fined over $250 million

By Amanda Maine, J.D.

The SEC charged a Swiss energy company with operations in Texas with violating the Foreign Corrupt Practices Act. The SEC alleged that the company’s subsidiaries authorized bribes and kickbacks to get favorable treatment from foreign officials. The company agreed to pay over a quarter-million dollars in fines to the SEC, the Department of Justice, and other federal agencies (SEC v. Weatherford International Ltd., November 26, 2013).

Background. Weatherford International Ltd. (Weatherford), a Swiss corporation with operations in Texas, is a global provider of equipment and services to the oil and gas industry. According to the SEC, Weatherford subsidiaries violated the Foreign Corrupt Practices Act (FCPA) stemming from their activities in West Africa, the Middle East, and Eastern Europe.

Allegations. The SEC’s complaint alleged that Weatherford and its subsidiaries violated the FCPA in places around the globe. Among other violations, the SEC alleged that a Weatherford subsidiary retained an agent to bribe Angolan officials to approve a lucrative oil services contract in Angola. Another Weatherford subsidiary awarded improper “volume discounts” to a Middle East company without doing due diligence. Internal memos make it clear that employees of the Weatherford subsidiary believed that the volume discounts were being used to influence national oil company officials, according to the SEC’s complaint.

The SEC also alleged that Weatherford provided travel and entertainment to officials of an Algerian state-owned company in violation of FCPA, and that these expenses served no legitimate business purpose. A financial manager of another Weatherford subsidiary misappropriated company funds to bribe Albanian tax auditors, the SEC alleged.

In addition, a Weatherford subsidiary took advantage of a humanitarian effort in Iraq, the Oil for Food Program, the SEC alleged. According to the SEC, the subsidiary paid millions of dollars in improper payments.

The SEC also alleged that Weatherford concealed its business with Cuba, Iran, Syria, and Sudan. During the time in question, these transactions violated U.S. sanctions and export control laws. Among the steps taken by Weatherford to conceal these prohibited transactions were creating false shipping documents, removing origin shipping labels and serial numbers, and placing key transaction documents in mislabeled binders.

In addition, the SEC alleged that conduct by Weatherford and some of its employees compromised the staff’s investigation into the irregularities, including the failure to provide staff with complete and accurate information. The complaint noted, however, that subsequent to the misconduct, Weatherford had greatly improved its cooperation efforts.

Sanctions. The SEC charged Weatherford with violating the anti-bribery, books and records, and internal accounting controls provisions of the FCPA. Weatherford agreed to pay more than $90 million in disgorgement, $4.3 million in pre-judgment interest, and a $1.875 million civil penalty assessed in part for lack of cooperation during the investigation. The SEC stated that over $31 million of the payment to the SEC will be satisfied by Weatherford’s agreement to pay an equal amount to the U.S. Attorney’s Office. In addition, Weatherford agreed to pay $87 million in criminal fines to the Department of Justice for the FCPA violations, and $100 million to the other three agencies for the sanctions violations. Weatherford is also obliged to comply with undertakings, which include the retention of an independent compliance monitor for 18 months and self-reporting to the SEC staff for an additional 18 months.

The case is No. 4:13-cv-3500.

Attorney: Jennifer D. Brandt for the SEC

Company: Weatherford International Ltd

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