Weatherford pays SEC $140 million for accounting fraud
Tuesday, September 27, 2016 at 12:18PM
Richard L. Cassin in OFAC, WEatherford International, sanctions violations

The Securities and Exchange Commission said Tuesday that oil services company Weatherford International paid a $140 million penalty to settle charges that it inflated earnings by using deceptive income tax accounting. 

Two of the company’s senior accounting executives at the time agreed to settle charges that they were behind the fraud.

Three years ago, Weatherford paid $152.6 million to the DOJ and SEC for FCPA offenses in the Middle East and Africa.

The Switzerland-based company also paid $100 million in November 2013 for violating U.S. trade sanctions.

Tuesday's SEC administrative order (pdf) said Weatherford fraudulently lowered its year-end provision for income taxes between 2007 and 2012 by at least $100 million each year to meet announced earnings projections and analysts’ expectations. 

James Hudgins, Weatherford’s vice president of tax, and Darryl Kitay, a tax manager, "made numerous post-closing adjustments to fill gaps and meet its previously disclosed effective tax rate," the SEC said.

Weatherford bragged about its favorable effective tax rate to analysts and investors as one of its key competitive advantages.

The fraud created the false perception that Weatherford’s tax structure was "far more successful than reality," the SEC said.

Weatherford was forced to restate its financial results three times in 2011 and 2012, lowering reported earnings by $500 million.

The company, Hudgins, and Kitay settled with the SEC without admitting or denying the charges.

Hudgins paid $334,067 in disgorgement, interest, and a penalty, and Kitay paid a $30,000 penalty. 

In the 2013 FCPA enforcement action, the SEC said managers at Weatherford’s subsidiary in Italy "flouted the lack of internal controls and misappropriated more than $200,000 in company funds, some of which was improperly paid to Albanian tax auditors."

In the sanctions case, Weatherford made at least $30 million in profits from improper sales to Cuba, Iran, Sudan, and Syria. The company settled the trade violations with the Commerce Department and OFAC through an out-of-court administrative action.

____

Richard L. Cassin is the publisher and editor of the FCPA Blog. He'll be the keynote speaker at the FCPA Blog NYC Conference 2016.

Article originally appeared on The FCPA Blog (http://www.fcpablog.com/).
See website for complete article licensing information.