The Guardian: Now Shell faces US legal storm
Oliver Morgan, industrial editor
Sunday March 7, 2004
Beleaguered energy giant Royal Dutch/Shell is facing increased pressure from US investors following the resignation of its chairman Sir Philip Watts and fellow director Walter Van de Vijver last week.
US legal experts acting for investors said that events surrounding the resignations, which followed the admission in January that the company had wrongly booked 3.9 billion barrels of oil as reserves, strengthened their multibillion-dollar case of alleged fraud against the company.
The news will deepen concern at Shell, which is trying to draw a line under the affair. Last week Jeroen van der Veer, who replaced Watts as chairman, warned that compared with other outstanding investigations - including its own audit and a probe by the US Securities and Exchange Commission - class actions 'have an even longer time to run before you get closure'.
Other investors seeking to speed reforms of RD/Shell's dual board structure are worried about the effects of the actions. One said: 'We want to see major changes in governance. The class actions could be very damaging to this process and major shareholders' interests.'
Last month one of America's leading class action law firms, New York-based Milberg Weiss Bershad Hynes and Lerach, filed a suit alleging deliberate violation of US securities laws in reporting of reserves. Milberg Weiss's Steve Schulman said that in dropping its claim that the 3.9 billion barrels were booked 'in good faith', a position fiercely defended by Watts before he quit, Shell greatly strengthened the investors' case. 'It would seem to be an admission that the claim they had booked these reserves in good faith was not true and cannot be supported.'
He said the company would be in a position to identify a lead plaintiff by the end of the month. Shell confirmed that at present it was unable to assert that the reserves were booked in good faith.