Lessons Of Weatherford ~ Part III
This post is the third in a series that draw lessons from the compliance failures of
Weatherford International Ltd. (now known as Weatherford International plc). An
overview of the violations for which Weatherford has been penalized – to the tune of
$253 million – appears in Part I of this series, together with definitions of capitalized
terms that are not defined below.
Lesson 2 From Weatherford: As a direct result of its Weatherford investigation,
the SEC has effectively taken the position that violations of the FCPA’s “internal
accounting” requirements and America’s export control laws may also give rise to
violations of the Exchange Act’s “books and records/internal controls” requirements.
Weatherford paid substantial sums to the US Department of Justice for its violations
of the FCPA’s internal controls requirements; but it also paid some $61 million
to settle SEC charges under the Exchange Act that Weatherford had violated (in
addition to that Act’s own substantive anti-bribery provisions) that Act’s books
and records and internal controls provisions – because Weatherford and its
subsidiaries, when trying to characterize numerous payments as things other than
the bribes and other illegal transactions that they were, routinely and fraudulently
mischaracterized them on Weatherford’s books and records.
Weatherford’s minions were also alleged to have cooked the company’s books
to disguise illegal transactions with embargoed countries – e.g., by changing the
address of the end-user to which they exported US-origin good from “Iran” to,
say, “Algeria”. The SEC has signaled that it will likewise treat the accounting
shenanigans arising out of such violations of export control laws as violations of the
So now we have yet another agency (the SEC, in addition to DDTC, BIS and OFAC)
that is actively gunning for violators of US export control laws.
Part IV of this series on the Lessons Of Weatherford will focus on a compounding factor
that clearly led from compliance failures to increased fines.