Energy
SEC Hits Oilfield Services Firm Weatherford With $140 Million Fine
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The U.S. Securities and Exchange Commission (SEC) announced Tuesday that oilfield services company Weatherford International Inc. (NYSE: WFT) has agreed to pay a $140 million fine to settle charges that the company inflated earnings by using deceptive income tax accounting. Two of Weatherford’s accounting executives also have agreed to settle charges that they were behind the deception.
The company was forced to restate its financial statements three times between 2011 and 2012 after the two employees “made numerous post-closing adjustments to fill gaps and meet [Weatherford’s] previously disclosed effective tax rate.” The SEC said that the company “regularly touted” its favorable effective tax rate to investors and analysts as a key competitive advantage.
In addition to the fine against the company, Weatherford’s former vice-president of tax, James Hudgins, will pay $334,067 in disgorgement, interest and penalty, and former tax manager Darryl Kitay will pay a $30,000 fine.
SEC enforcement division director Andrew Ceresney 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. This case is part of our continued focus on financial reporting and disclosure fraud.
Furthermore, Hudgins is being barred from serving as an officer or director of a public company for five years, and Hudgins and Kitay are being suspended from appearing and practicing before the SEC as accountants, which includes not participating in the financial reporting or audits of public companies. Hudgins and Kitay may reapply for reinstatement after five years.
Weatherford, Hudgins and Kitay consented to the SEC’s order without admitting or denying that they violated antifraud provisions of federal securities laws.
Weatherford’s shares dropped about 4.7% to $5.25 Tuesday morning. The stock’s 52-week range is $4.71 to $11.49, and the consensus 12-month price target is $40.60.
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