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
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
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.