Blog Coverage Weatherford Intl Agrees to Pay up to $140 million as Settlement to SEC Without Agreeing or Denying Charges

LONDON, UK / ACCESSWIRE / September 29, 2016 / Active Wall St. blog coverage looks at the headline from Weatherford International PLC (NYSE: WFT). The US Securities and Exchange Commission (SEC) had announced on September 27, 2016, that Weatherford International, an oil services company which was charged with inflating its earnings by using deceptive income tax accounting, had agreed to settle the charges by paying a penalty of $ 140 million. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.

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The settlement

According to SEC’s two senior level executives – James Hudgins, former vice president of tax and Darryl Kitay, former tax manager – are said to have perpetrated the fraud.

Weatherford Intl. and its former accounting executives, James Hudgins and Darryl Kitay, have agreed to pay the fines without actually agreeing or denying the SEC findings that they violated antifraud provisions of federal securities laws. SEC has directed Weatherford Intl. to pay $140 million; James to pay $334,067 in disgorgement, interest, and penalty; and Darryl to pay a $30,000 penalty. Apart from these, James had been barred from serving as an officer or director of a public company for a period of five years. Additionally, James and Darryl have been suspended from practicing as accountants including suspension from participating in the financial reporting or audits of public companies for five years. At the end of the five years, both can apply for reinstatements.

The first installment of the settlement amounting to $50 million is due in October 2016 and the balance amount is to be paid in three installments of $30 million each, which are due within 120, 240, and 360 days from the date of SEC order, i.e. September 27, 2016.

Commenting on the settlement, Andrew Ceresney, Director of the SEC’s Enforcement Division said:

“Weatherford denied its investors accurate and reliable financial reporting by allowing two executives to choose their own numbers when the actual financial results fell short of what was previously disclosed to analysts and the public.”

The case

SEC had charged Weatherford Intl. of inflating its earnings by more than $900 million using deceptive income tax accounting. It also fraudulently lowered its year-end provision for income taxes by as much as $154 million on financial statements released between 2007-2012 to match projected results and expectations of analysts. James and Darryl allegedly made multiple post-closing adjustments to fill gaps and meet the company’s previously disclosed effective tax rate. Due to this, Weatherford Intl. had to repeat its financial statements three times in 2010 and 2012.

SEC feels that it was a clear case of intentional fraud and not gross negligence. The fraud helped Weatherford Intl. use the artificially inflated stock to acquire a number of companies and at the same time it gave a hefty bonus to James in 2010.

The settlement is not the end of the case as SEC stated that it will continue its investigation. Incidentally, this is not the first time Weatherford Intl. had paid a fine to the US government for violations. In 2013, Weatherford Intl.’s subsidiaries had finalized a $253 million settlement for multiple investigations by the U.S. Department of Justice, the U.S. Securities and Exchange Commission, and the U.S. Departments of Treasury and Commerce for bribery and exports control violations.

Stock Performance

Shares of Weatherford Intl. have been down since the beginning of 2016 due to low oil prices, an overall trend in energy sector. At the close of Wednesday’s session, however, the company’s shares finished at $5.47, jumping 4.99% from its previous closing price of $5.21. A total volume of 49.11 million shares exchanged hands at the end of the day, which was higher than the 3-month average volume of 15.72 million shares. The stock currently has a market cap of $4.90 billion.

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