On March 25, 2015, Schlumberger Oilfield Holdings, Ltd. (“SOHL”), a wholly owned subsidiary of Schlumberger Ltd., the world’s largest oil-field services company (collectively “Schlumberger”), agreed to plead guilty to criminal charges, enter into a plea agreement, and pay $232.7 million in penalties for willfully facilitating illegal transactions and engaging in trade with Iran and Sudan. The charges were brought under the International Emergency Economic Powers Act (“IEEPA”), 50 U.S.C. § 1705, which makes it a crime to willfully commit, attempt, or cause a violation of any regulations issued pursuant to IEEPA. In this case, charges included violations of the Iranian Transaction Regulations, now known as the Iranian Transactions and Sanctions Regulations, and the Sudanese Sanctions Regulations, both issued pursuant to IEEPA.
Though both SOHL and Schlumberger Ltd. are non-U.S. entities, the charges outline a series of activities between February 2004 through June 2010, undertaken by Drilling & Measurements (“D&M”), a Schlumberger business segment headquartered in Sugar Land, Texas.
D&M personnel in the United States facilitated transactions with Iran and Sudan, systematically violating U.S. sanctions when they:
- Made and implemented business decisions and company processes specifically concerning Iran and Sudan
- Provided technical services to troubleshoot mechanical failures and sustain oilfield drilling equipment in Iran and Sudan
- Approved and disguised capital expenditure requests from Iran and Sudan for the manufacture of new tools
- Directed the transfer of equipment from oilfields in non-embargoed countries to oilfields in Iran and Sudan
Schlumberger is now paying the price for its failure to ensure U.S. entity and personnel compliance with U.S. economic sanctions. While Schlumberger had policies and procedures in place designed to ensure U.S. based entities complied with U.S. sanctions, Schlumberger failed to train or monitor its employees adequately to ensure that all U.S. personnel, including non-U.S. citizens, fully understood and complied with Schlumberger’s policies and procedures.
While a risk-based approach to compliance is encouraged by U.S. regulators, compliance programs require not only thorough implementation, including personnel and management training, but also continuous monitoring and auditing to ensure compliance.
In addition to Schlumberger, there are now several recent examples, including the PayPal, Inc. settlement with OFAC this week, of companies paying a steep price for inconsistent or inadequate implementation of existing compliance programs, along with a lack of training, or monitoring of compliance.