This post is the fourth 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 3 From Weatherford: However meager your controls, enforce the ones you

have. As “permissive and uncontrolled” as Weatherford’s compliance environment

was, it nonetheless appears to have required employees of its foreign subsidiaries

to answer an annual ethics questionnaire that was designed to surface suspect

activities. After collecting these questionnaires, however, Weatherford apparently

did nothing with them – not even review them, much less follow-up on them to halt

disclosed violations.

 

Explaining the significance of such behavior requires a short digression into the law

of criminal prosecutions. Before prosecutors can send people to jail for violations of

the FCPA or America’s export control laws, they have to prove that alleged violators

acted willfully, in conscious disregard of a known legal obligation. But judges

routinely instruct juries that willfulness can be inferred from a course of conduct

that shows willful blindness to illegal or corrupt activity. Thus, when a company

requires its employees to answer ethics questionnaires, it implicitly acknowledges

that the activities asked about may be crimes; and when it ignores answers to those

questions that point to the commission of crimes, a jury can properly find that the

persons who ignored those answers are themselves guilty of conspiracy to cover up

crimes.

 

As explained in a prior post, Weatherford’s employees and agents managed to

avoid prosecution, but only by having their companies pay hundreds of millions

in fines, the amounts of which were surely increased due factors such as willful

blindness. It also appears from the record that, to dissuade the government from

prosecuting, Weatherford fired a couple of dozen employees. It’s a safe bet that the

non-reviewers of those questionnaires were among the gone.

For the rest, the answers to these questionnaires probably served only as road-
maps for regulators in their after-the-fact search for violations that Weatherford

should have been pursuing and stopping all along.

 

Bottom Line: What laymen might see as mere negligence can amount to a crime if

it comes in the form of failure to enforce known obligations under the FCPA and US

export control laws.

 

Part V of this series on the Lessons Of Weatherford will focus on legal-department

malfeasance that also led to increased fines and costs.