News and Views
The Swiss oil-services company (Weatherford) pays a huge fine to settle charges of corruption in Sudan
The Swiss oil-services company pays a huge fine to settle charges of corruption and violating sanctions — including operations Fortune uncovered in 2007.
By Vivienne Walt
FORTUNE — It is easy to miss business news on the eve of Thanksgiving, when Americans have more urgent matters on their minds, like football and turkeys. So it is no surprise that many people overlooked last week's announcement by the Securities and Exchange Commission charging that oil-services giant Weatherford International Ltd. (WFT) had bribed foreign governments and that it violated U.S. sanctions by operating in Iran, Sudan, Cuba, and Syria between 2003 and 2007. Swiss-based Weatherford had agreed to pay fines of $253 million to settle the SEC's charges and similar actions by other federal entities.
The SEC complaint makes for colorful reading, providing a rare insight into the shenanigans involved when U.S. companies compete for multibillion dollar contracts in countries with lax anti-corruption standards. According to the complaint, Weatherford's campaign to sign new business in Algeria in 2006, for example, included paying for the honeymoon of the daughter of an official at Sonatrach, the national oil company, as well as for two Sonatrach officials to fly to the World Cup in Germany that year. And in the run-up to the Iraq War in 2003, the SEC charged, Weatherford paid kickbacks to the Saddam Hussein regime (standard m.o. for companies doing business with Saddam) in violation of the U.N. Oil for Food program, making millions off the contracts.
But it was the second part of Weatherford's settlement last week — sanctions violations — that especially caught our eye. That's because it was Fortune that first revealed, in 2007, that Weatherford was operating in Sudan, despite the fact that the U.S. had imposed sanctions on the Khartoum regime for its massacres in the war-torn province of Darfur. Weatherford last week agreed to $91 million in fines for operating in the four sanctioned countries of Sudan, Cuba, Iran, and Syria, the largest sanctions-violation fine ever imposed on a non-banking company, according to the Treasury Department.
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The story about Weatherford's operations in Sudan (worth about $296,000 in 2005 and 2006, according to the Treasury Dept.) warrants retelling, as a lesson in how U.S. companies were able to skirt sanctions rules with relative ease, using loopholes that in theory protected them under the law, but which offered little shelter from the PR fallout when they were exposed.
In 2007, Fortune dispatched me to Sudan to write about how China was filling the vacuum left by U.S. sanctions in the huge African oil nation. There were new Chinese restaurants and shopping malls in Khartoum, and a new Beijing-built high-rise luxury hotel was about to open.
A Sudanese journalist mentioned to me that he believed some American company was operating in a suburban neighborhood of Khartoum. The news was not a complete surprise to me. On assignment in Iran for Fortune two years before, I had stumbled upon Halliburton (HAL), yet another Texas oil-services company, which was operating from a high-rise building in central Tehran, despite decades of U.S. sanctions and intense hostilities between the two nations. When I called the company's office from their Tehran lobby, a receptionist answered, "Halliburton!" as though its presence was no secret. Indeed, at the time, the company spokeswoman Wendy Hall said their Iran operation was "clearly permissible," since it was part of a Dubai-based subsidiary registered in the Cayman Islands.