BBC News: Shell facing $1bn US lawsuit
Published: 2004/01/27 11:34:35 GMT
Shell could be facing a $1bn damages bill after it admitted overestimating oil reserves, according to a US lawyer.
Robert Schulman, who is launching a legal action on behalf of Shell investors, has told the BBC he thinks they have a "very good case".
The oil giant admitted earlier this month that it had overstated its proven reserves by 20%.
It says the reserves were stated "in good faith at the time" and that it has not yet been served with legal papers.
Mr Schulman, of New York-based Milberg Weiss Bershad Hynes and Leach , claims Shell's "true value in the market place was severely overstated and misunderstood".
He admitted it was impossible to prove that Shell had deliberately misled the markets. But he told BBC Radio 5 Live's Wake Up to Money: "You can prove recklessness, which is the conscious disregard of fact, by which you should have known your statements were false.
"In this case the reserves were taken as proved several years ago, but none of the requirements under the Securities and Exchange Commission (SEC) and the petroleum industry, we allege, were satisfied."
He added: "It is not about whether the oil is in the ground. It is whether it was in a condition where the industry would allow it to be booked as proved, as developed or undeveloped reserves. That is what the issue is."
Mr Schulman claimed damages sustained by investors ran into "hundreds of millions, maybe even approaching or exceeding billions of dollars".
He denied he was simply trying to recruit enough disgruntled claimants to force Shell into making an out-of-court settlement.
"We think it is a very strong case. It could settle for a great deal of money. If it doesn't settle we think it could give rise to a very, very large judgement."
The class action, of the type used against tobacco and fast food companies, is open to any investor, including European shareholders, who bought shares in Shell between 3 December 1999 and 9 January 2004 .
However, analysts are sceptical about its chances of success.
Tony Alves, of Investec, said: "I think it would be extremely hard to establish culpability on the part of Shell. "This is not strictly speaking misrepresenting the financial condition of the company." But he said it would increase pressure on Shell chairman Sir Philip Watts, who has faced calls from shareholders to step down.
In a statement, Shell said: "We are aware of the announcement made by this firm in relation to pursuing a class action law suit, but we have not been served with any papers for any proceedings and don't intend to comment further at this stage."
Shell told a briefing of analysts on 9 January it had undertaken an extensive review of its oil reserves worldwide and needed to downgrade assets in Australia and Nigeria to meet the requirements of US financial watchdog the SEC.
Shell shares fell 7% following its announcement.
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