Lessons of Weatherford ~ Part III

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.

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