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Three Government Agencies Announce $250 Million Settlement for FCPA Violations
Practical Law Legal Update 2-550-1048 (Approx. 5 pages)
Three Government Agencies Announce $250 Million Settlement for FCPA Violations
by Practical Law Commercial
| Published on 27 Nov 2013 • USA (National/Federal) |
The US Department of Justice (DOJ), the US Department of the Treasury and the Securities and Exchange Commission (SEC) have reached a $250 million settlement with Weatherford International Limited based on the company's violating the FCPA and US export control laws.
On November 26, 2013, the US Department of Justice (DOJ), the US Department of the Treasury (Treasury) and the Securities and Exchange Commission (SEC) issued separate press releases announcing that each agency has reached a settlement agreement with Weatherford International Limited over allegations that Weatherford and its subsidiaries violated the Foreign Corrupt Practices Act (FCPA) and certain US export control laws.
Under these settlement agreements:
- Weatherford entered into two deferred prosecution agreements and a civil settlement.
- Weatherford agreed to pay a total of $252,690,606 in penalties and fines to various government agencies.
- Three Weatherford subsidiaries were convicted for violating the FCPA and US export control laws.
DOJ Settlement
In its press release, the DOJ accused Weatherford and its subsidiaries of violating the FCPA, the International Emergency Economic Powers Act and the Trading With the Enemy Act.
In particular, the DOJ alleged that:
- Despite operating in an industry with a substantial corruption risk profile, Weatherford knowingly failed to establish an effective system of internal accounting controls to detect and prevent corruption.
- Between 2004 and 2008, Weatherford's subsidiary, Weatherford Services Limited, established and operated a joint venture in Africa with two local entities controlled by foreign officials and their relatives and then used the joint venture as a conduit through which it funneled hundreds of thousands of dollars in payments to the foreign officials controlling the local entities. In return, these officials:
- awarded the joint venture lucrative contracts;
- gave Weatherford Services inside information about competitors' pricing; and
- took contracts away from Weatherford Services' competitors and awarded them to the joint venture.
- Weatherford Services employees in Africa bribed a foreign official so that he would approve the renewal of an oil services contract.
- Between 2005 and 2011, Weatherford's subsidiary, Weatherford Oil Tools Middle East Limited, awarded $15 million in improper volume discounts to a distributor who supplied Weatherford products to a government-owned national oil company.
- Weatherford Oil Tools paid more than $1 million in kickbacks to the government of Iraq on nine contracts with Iraqi ministries to provide oil drilling and refining equipment.
- Weatherford and certain of its subsidiaries violated various US export control and sanctions laws by exporting or re-exporting oil and gas drilling equipment to, and conducting Weatherford business operations in, sanctioned countries.
As part of its settlement with the DOJ, Weatherford has agreed to:
- Pay an $87.2 million criminal penalty as part of a deferred prosecution.
- Cooperate with law enforcement.
- Retain an independent corporate compliance monitor for at least 18 months.
- Continue to implement an enhanced compliance program and internal controls to prevent and detect future FCPA violations.
Treasury Settlement
In its press release, Treasury announced that Weatherford has agreed to pay $91 million to settle its potential liability for violating US export control law. This is the largest ever settlement outside of the banking industry for apparent violations of US sanctions on Iran, Sudan and Cuba. In addition, Weatherford must undergo external audits of its efforts to comply with relevant US sanctions laws during 2012, 2013 and 2014.
Treasury accused Weatherford of violating the:
- Iranian Transactions and Sanctions Regulations.
- Cuban Assets Control Regulations.
- Sudanese Sanctions Regulations.
Specifically, Treasury alleged that Weatherford violated US sanctions law between 2003 and 2008 by conducting:
- Extensive oilfield services business in Iran, which involved the direct or indirect exportation of goods, technology and services to Iran and the facilitation of those transactions by US persons.
- Extensive business that provided oilfield equipment and services in which the government of Cuba or blocked Cuban nationals had an interest, including travel-related transactions by Weatherford employees to and from Cuba.
- Oilfield services business in Sudan, which involved the direct or indirect exportation of goods, technology and services from the US to Sudan.
This settlement is simultaneous with Weatherford's settlements with other government parties, including the US Attorney's Office for the Southern District of Texas and the Department of Commerce's Bureau of Industry and Security (Commerce). Because these settlements are based on the same underlying course of conduct, Weatherford's $91 million settlement with Treasury will be satisfied by its separate agreement to pay:
- $50 million in criminal fines and monetary penalties to the US Attorney's Office.
- $50 million civil penalty to Commerce.
SEC Settlement
Similar to the DOJ and Treasury, the SEC charged Weatherford and its subsidiaries with violating:
- The FCPA by authorizing bribes and improper travel and entertainment for foreign officials in the Middle East and Africa to win business.
- US sanctions and export control laws by conducting business in and with Cuba, Iran, Syria and Sudan.
The SEC's press release announced that Weatherford has agreed to settle these charges by paying the SEC $65,612,360.