Switzerland-based oilfield services giant Weatherford International disclosed in a recent quarterly earnings report that it has reached agreements totaling $153 million with the Department of Justice and the Securities and Exchange Commission arising from violations of the Foreign Corrupt Practices Act and participation in Iraq's oil-for-food program.
The $153 million reserve is in addition to the $100 million accrual for a loss contingency related to U.S. government investigations for sanctioned country matters in June 2012. That settlement would require a two-year deferred prosecution agreement, "and plea agreements imposing potential criminal convictions on two of the company's subsidiaries," Weatherford stated.
As Compliance Week previously reported, the company stated in a filing with the SEC in July that it had reserved $153 million for a potential settlement with the U.S. government arising from violations of the FCPA and participation in Iraq's oil-for-food program, which ended in 2003. At the time, Weatherford Chief Financial Officer and Senior Vice President John Briscoe said in a July 31, 2013, earnings call that no agreement had been reached.
“Since our last 10-Q filing, substantial progress in the negotiations was made, and these negotiations have recently concluded,” the company stated in a Nov. 5 quarterly earnings report. These agreements are subject to final review and approval by the Justice Department, SEC, and judicial approval.
In addition to the $153 million loss contingency that the Weatherford recognized in the quarter ending June 30, 2013, the agreement would also impose a three-year deferred prosecution agreement, "and a criminal conviction on one of the company's subsidiaries."
Weatherford also will be required to retain, for a period of at least 18 months, an independent monitor responsible for assessing the company's compliance with the terms of the agreement “so as to address and reduce the risk of recurrence of alleged misconduct,” the company stated. After that 18-month period, the company will continue to evaluate its own compliance program and make periodic reports to the Justice Department and SEC, Weatherford stated.
As part of the agreement, Weatherford must also agree to “maintain agreed compliance monitoring and reporting systems.” If the final terms of the settlement differ from the agreements reached with the Justice Department and SEC, or the necessary approvals are not obtained, Weatherford stated, “we could become subject to injunctive relief, disgorgement, fines, penalties, sanctions or imposed modifications to business practices that could adversely affect our results of operations.”