Financial Times: US lawsuit puts more pressure on Shell chief
By Rebecca Bream
Published: January 27 2004
Sir Philip Watts, chairman of Shell, was again under fire yesterday, after a lawsuit filed on behalf of shareholders accused the oil company of a "shocking and unprecedented overstatement of oil and gas reserves".
Milberg Weiss Bershad Hynes & Lerach, the US law firm, filed the suit with the district court in New Jersey last Friday, and is inviting investors who bought Shell stock between December 3 1999 and January 9 2004 to take part in the potential class action. The complaint alleges that during this period Shell's management "deliberately violated accounting rules and guidelines relating to oil and gas reserves". The allegations stem from Shell's announcement this month that it had overestimated its proven oil reserves by 20 per cent or 3.9bn barrels, mainly because of mistakes made at its Gorgon project in Australia and at various Nigerian projects.
Shell's shares fell 2¼p to 359½p yesterday. The group said it had heard about the legal action, but was not aware that a suit had actually been served.
The legal action brought by Milberg, a law firm well known for instigating class action suits, was neither surprising nor a real threat to Shell, said analysts. However, the suit was a clear reflection of the current shareholder anger towards Shell and "the grassroots movement to dislodge Watts", said one analyst.
A more serious worry was the possibility that the US SEC might start an investigation into the reserves policies of oil companies, which could knock confidence across the whole sector, they said.
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