Financial Times: US prosecutors to probe Shell over reserves
By Adrian Michaels in New York and Joanna Chung and Carola Hoyos in London
Published: March 17 2004
US federal criminal prosecutors have launched an investigation into Royal Dutch/Shell, increasing pressure on the Anglo-Dutch energy group that this month forced its chairman to retire amid a growing crisis over misbooked reserves.
The US attorney's office for the southern district of New York has joined the Securities and Exchange Commission, the chief US civil financial regulator, in looking at the circumstances behind the company's restatement of oil and gas reserves.
Shell is also under scrutiny from the Financial Services Authority, the UK financial regulator, and has said it is in contact with Euronext, the Dutch regulator.
Shell on January 9 slashed 3.9bn barrels - 20 per cent - of its oil and gas reserves, admitting they had been wrongly filed with the SEC. Two months later, Shell's board asked Sir Philip Watts, chairman, and Walter van de Vijver, head of exploration and production, to resign after it was no longer able to say the erroneous bookings had been made "in good faith".
However, people close to the probe said it was too early for any criminal behaviour to have been uncovered at Shell. The justice department's involvement, the people said, was an expected response to a large multinational announcing a big correction to its numbers.
The US attorney's office in Manhattan handles several white-collar crime cases for the justice department. It recently brought the case against Martha Stewart for obstruction of justice.
The department declined to comment and the SEC does not comment on individual investigations.
A Shell spokesman said he was not aware that the justice department had notified the company about an investigation.
Sir Philip, who also faces regulatory scrutiny and has been named in class-action law suits, hired lawyers from the Washington offices of Crowell & Moring.
Meanwhile, Shell on Wednesday made a US$371m profit by selling its 2.27 per cent stake in Sinopec, the Chinese oil group. The company offered the shares at HK$3.125 a piece, a 3.8 per cent discount to their closing price on Wednesday. Shell bought its Sinopec shares for HK$1.61 each in 2000.
Shell raised about HK$5.8bn (US$742m), before fees and expenses. Its disposal follows BP's decision last month to sell its 2.1 per cent holding in Sinopec, netting a US$357m profit.
The recent sales take advantage of the booming valuations of Chinese companies. JJ Traynor, analyst at Deutsche Bank, said: "[The disposal] is not unexpected because BP has sold."
Additional reporting by Joshua Chaffin in Washington