After agreeing to pay $250M to SEC, Department of Justice and Department of Treasury Oil, in 2013, to settle charges that it authorized bribes and other kickbacks to foreign officials to win business overseas; Weatherford International has now agreed to pay another $140M penalty to the SEC. This time for inflating its earnings between the period 2007 and 2012 by massaging their income tax numbers.
Along with the company Weatherford’s former vice president of tax, James Hudgins, and former tax manager Darryl Kitay have also agreed to settle. Obviously the two neither confirmed nor denied any wrong doings. But both have now been disbarred for a period of time from working with public companies.
Over the years the two of them made numerous adjustments to their final calculations “to fill gaps” to match the average tax rate on pretax profit that Weatherford disclosed to investors. Per the SEC, “the company lowered its year end tax number each year by $100-$154M to better align the earnings with its earlier-announced projections and analysts’ expectations”. The company considered and flaunted its favorable tax rate as a competitive advantage. The tax structure as it turned out was not as successful as the company wanted the analysts and investors to believe!