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The Times: Shell faces double threat as FSA launches inquiry


By Carl Mortished, International Business Editor

April 24, 2004


THE prospect of a transatlantic criminal investigation into the Shell reserves scandal moved closer yesterday as the Financial Services Authority, the UK’s leading securities regulator, confirmed it had launched a formal investigation.

The FSA, which has both criminal and civil powers to pursue anyone who dishonestly misleads investors, said it was investigating “various issues” surrounding Shell’s recent announcements.  


The move follows the publication by Shell on Monday of its account of the reserves misreporting, which included evidence that senior management, including Sir Philip Watts, the former chairman, and Walter van de Vijver, the former head of exploration, had sought to conceal Shell’s weakness in replacing oil and gas reserves and, notably, the overstatement of reserves by about four billion barrels.


The UK regulator is acting some three months after the US Securities and Exchange Commission began its inquiry into the misreporting of reserves and a month after Shell admitted that the US Department of Justice had requested documents relating to the matter. The FSA said yesterday that it had been gathering evidence for “some weeks” and that it “has been in close contact with the relevant overseas regulators throughout”.


The FSA inquiry is the first confirmation that a prosecuting authority with criminal jurisdiction is investigating Shell. The FSA has the power, under the Financial Services and Markets Act, to pursue anyone who knowingly or recklessly makes misleading statements or dishonestly conceals material facts. A conviction could lead to a fine and imprisonment for up to seven years.


The emergence of another formal inquiry will be a blow to the oil company’s management, which on Monday said it wished “to draw a line” under the reserves affair as it published its own conclusions.


With both American and British authorities looking into the matter, any prosecutions may lead to a tussle of jurisdictions and issues of extradition.,,8209-1085848,00.html


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