Schlumberger Oilfield Holdings, a wholly-owned subsidiary of oilfield services giant Schlumberger, entered into a guilty plea this week and will pay a record $232.7 million criminal fine to the government for economic sanctions violations. The penalty amount represents the largest criminal fine in connection with an International Emergency Economic Powers Act (IEEPA) prosecution.
According to court documents filed this week in U.S. District Court for the District of Columbia, Schlumberger Oilfield was charged with one count of knowingly and willfully conspiring to violate the IEEPA by willfully facilitating illegal transactions and engaging in trade with Iran and Sudan. Schlumberger Oilfield agreed to waive indictment and has accepted responsibility for its criminal conduct and that of its employees by entering into a plea agreement with the government.
The plea agreement, subject to approval by the court, requires the oilfield company to pay the U.S. government $232.7 million, including forfeiture of $77.5 million and an additional $155 million criminal fine. The plea agreement also requires Schlumberger Oilfield to enter into a three-year period of corporate probation and agree to continue to cooperate with the government and not commit any additional felony violations of U.S. federal law.
The guilty plea concludes a joint investigation commenced in 2009 and led by the Justice Department’s National Security Division, the U.S. Attorney’s Office for the District of Columbia, and the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) Dallas Field Office.
For several years, Schlumberger Oilfield “conducted business with Iran and Sudan from the United States and took steps to disguise those business dealings, thereby willfully violating the U.S. economic sanctions against those regimes,” said John Carlin, Assistant Attorney General for National Security.
According to court documents, starting in 2004 and continuing through 2010, Drilling & Measurements (D&M), a U.S.-based Schlumberger business segment, provided oilfield services to Schlumberger customers in Iran and Sudan through non-U.S. subsidiaries of Schlumberger Oilfield. Although Schlumberger Oilfield had policies and procedures designed to ensure that D&M did not violate U.S. sanctions, the company “failed to train its employees adequately to ensure that all U.S. persons, including non-U.S. citizens who resided in the United States while employed at D&M, complied with Schlumberger’s sanctions policies and compliance procedures,” the Justice Department stated.
As a result of D&M’s lack of adherence to U.S. sanctions combined with SOHL’s failure to train properly U.S. persons and to enforce fully its policies and procedures, D&M, through the acts of U.S. employees violated U.S. sanctions against Iran and Sudan by:
Approving and disguising the company’s capital expenditure requests from Iran and Sudan for the manufacture of new oilfield drilling tools and for the spending of money for certain company purchases;
Making and implementing business decisions specifically concerning Iran and Sudan; and
Providing certain technical services and expertise in order to troubleshoot mechanical failures and to sustain expensive drilling tools and related equipment in Iran and Sudan.
In addition to SOHL’s agreement to continue its cooperation with U.S. authorities throughout the three-year period of probation and not to engage in any felony violation of U.S. federal law, parent company Schlumberger has also agreed to the following additional terms during the three-year term of probation:
Maintain its cessation of all operations in Iran and Sudan;
Report on Schlumberger’s compliance with sanctions;
Respond to requests to disclose information and materials related to Schlumberger’s compliance with U.S. sanctions laws when requested by U.S. authorities; and
Hire an independent consultant to review the Schlumberger’s internal sanctions policies and procedures and the parent company’s internal audits focused on sanctions compliance.
“This is a landmark case that puts global corporations on notice that they must respect our trade laws when on American soil,” said U.S. Attorney Ronald Machen. “Even if you don’t directly ship goods from the United States to sanctioned countries, you violate our laws when you facilitate trade with those countries from a U.S.-based office building.”