Back to top

Weatherford Charged $140 Million for Accounting Malpractices

Read MoreHide Full Article

According to the U.S. Securities and Exchange Commission (SEC), Weatherford International Ltd. (WFT - Free Report) has agreed to pay $140 million to settle charges brought against it for overstating earnings by over $900 million. The company had also used misleading income tax accounting practices to justify the incorrect earnings figures.

The SEC also mentioned that two former Weatherford senior accounting executives – James Hudgins and Darryl Kitay – agreed to settle charges that they were the masterminds behind the scheme. Hudgins, who was the vice president of tax, is liable to pay a fine of $334,067 on grounds of disgorgement, interest and penalty. Kitay, who was a tax manager, has been charged a penalty of $30,000.

Weatherford’s CEO, Bernard Duroc-Danner, has also agreed to pay $140 million to settle charges brought against the company.

Per the SEC release, Weatherford, Hudgins and Kitay neither confessed nor contradicted the verdicts. Investigation by SEC is expected to continue.

Hudgins has also been prohibited from serving as an officer or director of a public company for five years. Both Hudgins and Kitay have been debarred from appearing and practicing before the SEC as accountants. Nonetheless, these Weatherford executives can apply for reinstatement after five years.

Per a company filing, Weatherford has also agreed to prepare and provide certain reports to the SEC over the next two years.

The SEC asserts that between 2007 and 2012, Weatherford deceitfully lowered its year-end provision for income taxes. This was done to better align the company’s earnings results with its previously-announced projections and analysts' expectations. Apparently, Hudgins and Kitay made numerous post-closing adjustments to fill gaps and meet the company's earlier released effective tax rate.

In fact, Weatherford later had to restate its financial statements thrice in 2011 and 2012.

In Nov 2013, Weatherford had finalized a settlement of about $253 million with the U.S. government. The Department of Justice (DOJ) said that Weatherford subsidiaries agreed to plead guilty to anti-bribery provisions of the Foreign Corrupt Practices Act and export controls violations under the International Emergency Economic Powers Act and the Trading With the Enemy Act.

Per the Houston Business Journal research, Weatherford is the 18th largest energy employer in Bayou City. In 2015, it reported revenues of $9.43 and had a workforce of 2,209 employees.

Some better-ranked players from the energy sector include Enbridge Inc. (ENB - Free Report) , NGL Energy Partners LP (NGL - Free Report) and Evolution Petroleum Corp. (EPM - Free Report) .

Enbridge posted a positive earnings surprise of 19.57% in the preceding quarter.

NGL Energy Partners has a mixed earnings surprise history. The partnership posted positive earnings surprise in two of the last four quarters. It reported a positive earnings surprise of 1480.0% in the preceding quarter.

In the last reported quarter, Evolution Petroleum Corp. delivered a positive earnings surprise of 350.00%. Coming to the earnings surprise history, the company beat estimates in two of the last four quarters.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>

More from Zacks Analyst Blog

You May Like