Forbes.com Shell's Watts was fired face to face, escorted away
Reuters, 04.22.04, 8:18 AM ET
By Andrew Callus
LONDON, April 22 (Reuters) - Royal Dutch/Shell directors sacked their former chief Phil Watts face to face and then had him escorted out of the oil giant's London headquarters by security staff, according to company sources.
The sources do not know whether the former chairman, fired for his part in a scandal about over-optimistic booking of oil and gas reserves, knew his fate before the March 3 encounter at the Shell Centre building on the bank of London's River Thames.
But they said this week's internal report on the scandal, which describes Watts resisting moves to disclose the shortfall earlier, put the manner of his departure in context.
"It seemed a bit over the top at the time, but you can see now how this (report) would have put a gun to his head," said one source.
The report cites internal memos from executives dating back to 2001 showing that they knew some past bookings were at odds with U.S. regulatory guidance.
Reserves are a key indicator of value for investors in oil companies, and the downgrade they finally announced in January knocked billions off Shell's stock market value. This week the world's top three credit rating agencies reduced the company's top level credit rating.
News of Watts' treatment at the hands of his former colleagues comes as lawyers speculate that he and/or his former employer may now face criminal charges brought by the U.S. Department of Justice, which is already investigating the case.
Shell declined to comment on the circumstances of Watts dismissal, and would not say anything about possible legal proceedings. A spokesman said the report that led to the sackings was being shared with regulatory authorities. Watts' lawyer also declined to comment.
The report, by U.S. lawyers Davis Polk & Wardwell, was commissioned by non-executive directors on Shell's audit committee in the wake of Shell's shock January 9 revelation that it had overestimated proved reserves by 20 percent.
A summary was published only this week, but directors received a draft of it on March 1.
Watts' departure "by mutual consent", along with that of exploration and production chief Walter van de Vijver, was announced on March 3 at about 1400 GMT.
Two hours later, Shell officials later confirmed that both men had been fired. Shell employees could see that the decision had been taken at speed, because it took several more days before some key responsibilities held by the pair, and those who moved into their posts, were re-assigned.
The original January 9 reserves restatement came as a shock, and investors had pressed for heads to roll.
But by March 3, when the bombshell was dropped, the widely held view among company insiders, analysts, and shareholders, was that Watts would survive until his retirement due date in June 2005.
"I was gobsmacked," said one Shell insider. "I really thought he had ridden out the storm."
The sackings have since been followed by the removal from their posts of two more high level directors, first Frank Coopman, Chief Financial Officer (CFO) of exploration and production, and then group CFO Judy Boynton.
Shell's new top management team also embarked on a new review of reserves that has produced two further reserves downgrades.
The world number three oil company has published only a 24 page "executive summary" of the 450 page report, which says the authors interviewed Watts, van de Vijver, annd Boynton in the presence of their lawyers.
Ninety more employees were interviewed too, but these are not named in the summary. Shell would not say whether Chairman Jeroen van der Veer, Watts' replacement, was among those interviewed.
Copyright 2004, Reuters News Service