Weatherford International Settles Foreign Bribery Probes

Weatherford International Ltd., a Geneva-based oil services company, agreed to pay almost $253 million to settle U.S. allegations it bribed officials in Congo and Iraq and violated sanctions against countries including Iran, Syria and Cuba.

Three Weatherford units will plead guilty under deferred-prosecution agreements with U.S. prosecutors and the company settled a lawsuit by the Securities and Exchange Commission in federal court in Houston. From 2002 to July 2011, Weatherford “authorized bribes and improper travel and entertainment” to win or keep contracts that produced more than $59 million in profit, the SEC said in its complaint.

“When business executives engage in bribery and payoffs in order to obtain contracts, an uneven marketplace is created and honest competitor companies are put at a disadvantage,” Valerie Parlave, assistant director in charge of the Federal Bureau of Investigation’s Washington field office said in a statement. “The FBI is committed to investigating corrupt backroom deals that influence contract procurement and threaten our global commerce.”

The settlement today, which needs approval by a judge, closes what Weatherford’s Chairman Bernard Duroc-Danner said earlier this month has been “a very long and expensive” probe into the company’s conduct abroad. The world’s fourth-largest oilfield services provider took a $100 million charge in the second quarter last year in preparation for today’s settlement involving improper sales to nations under U.S. trade sanctions.

‘Fully Committed’

“This matter is now behind us,” Duroc-Danner said in a statement today. “We move forward fully committed to a sustainable culture of compliance.”

In the second quarter this year, the company estimated a loss of $153 million for payments to U.S. government agencies involving probes related to the United Nations’ oil-for-food program and the Foreign Corrupt Practices Act.

Weatherford, which provides services including evaluating underground reservoirs and completing wells for oil and natural-gas production, generated 58 percent of net sales outside the U.S. and Canada during the third quarter.

Penalties the company agreed to pay include an $87.2 million criminal fine for the alleged bribery and $100 million to resolve criminal and administrative probes, including one by the Treasury Department, into sanctions violations, according to a Justice Department statement. A $50 million penalty will be paid to the Commerce Department, the largest civil fine ever imposed by its Bureau of Industry and Security, the department said in a statement.

Joint Venture

In Africa, Weatherford employees operated a joint venture with companies controlled by foreign officials and their relatives for at least four years beginning in 2004, according to the Justice Department. The sole purpose of the local entities was to serve as a conduit to funnel illicit payments to the officials. In return, the officials ensured Weatherford would win contracts, in part by leaking information about competitor pricing, the department said in its statement.

In another scheme, Weatherford employees paid about $1.47 million in kickbacks to the government of Iraq on nine contracts relating the UN program to provide oil drilling and refining equipment, according to the department. The company concealed the payments from the UN by inflating contract prices by 10 percent.

Export Control

From 1998 to 2007, Weatherford violated U.S export control laws by selling drilling equipment to sanctioned countries without government approval. This conduct involved U.S.-based managers and company units in Canada and the United Arab Emirates, according to the department.

Weatherford was also accused by the SEC of destroying evidence and misleading investigators during the probe. In one instance detailed in the complaint, company employees told investigators a manager in Iraq whom the SEC sought to interview “was missing or dead when, in fact, he remained employed by Weatherford,” Jennifer Brandt, an SEC attorney, said in the complaint.

The SEC case is U.S. Securities and Exchange Commission v. Weatherford International Ltd., 13-cv-03500, U.S. District Court, Southern District of Texas (Houston).

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