Times Online: American class action lawyers take on Shell
By Carl Mortished, International Business Editor
January 27, 2004
SHELL is being targeted by a leading New York law firm that is seeking support from UK fund managers for a class action lawsuit against the oil multinational.
Milberg Weiss Bershad Hynes & Lerach has filed suit in a New Jersey court alleging that Shell and its directors deliberately violated accounting rules when it misreported its reserves in filings to the Securities and Exchange Commission. The misreporting came to light this month when the company wrote down its proven reserves by 20 per cent, leading to a fall in the stock price of the parent firms, Shell Transport & Trading and Royal Dutch Petroleum.
Stephen Shulman, a partner at Milberg Weiss, said investors had 60 days to include themselves in the class action and that US litigators had been actively courting pension funds and insurance companies in Britain with a view to their taking the role of lead plaintiff. “We are in touch with a number of European investors. We have found increasing interest among European investors seeking remedies under American securities law.” A case against Shell will probably involve separate actions and lead plaintiffs against each of the UK and Dutch listed parents.
Shell said yesterday it had not yet been served with a writ and insisted there was no evidence of misconduct by Shell staff. “Individuals worked in good faith and (in relation to booking reserves) in accordance with our interpretation of reasonable certainty,” it said.
The claim, filed in a US district court in Newark, an area where Shell has significant petrochemical businesses, alleges that Shell’s reserve figures were improperly reported in order to “artificially inflate a key measure of the company’s financial position and competitive standing”. According to Mr Shulman, the law does not require proof of intent by Shell to commit a fraud but a “conscious disregard” that the reserve figures were inaccurate.
Class action lawsuits by investors are common in the US where law firms often initiate proceedings, offering to act for plaintiffs on a contingency fee basis. Milberg Weiss is pursuing a major class action by Enron investors and has been involved in big claims including the second largest US securities settlement of $600 million for aggrieved investors in Lucent, the hi-tech firm.
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