The Observer: FSA probes scandal of 'missing' Shell reserves
Richard Wachman, City editor
Sunday March 14, 2004
City watchdog the Financial Services Authority is investigating whether Shell breached stock market rules by not giving investors sufficient notice of
the accounting scandal that has shaken the 100-year-old company to its foundations.
Although the FSA refused to make a formal comment, it is understood that regulators are looking into claims that executives were alerted to problems linked to the level of its oil reserves in early 2002.
The FSA inquiry into Shell is believed to be based on similar grounds to that launched two years ago into Marconi. That investigation centred on UK stock market listing rules that oblige companies to warn shareholders in good time about developments that could have a significant impact on the share price.
Two weeks ago, Sir Philip Watts resigned as Shell chairman after revealing that it had overstated its 'proven' oil and gas reserves by about 20 per cent, or 4 billion barrels.
Internal Shell memos have emerged that suggest the reserves issue was discussed by executives in 2002, and that among those briefed on the subject were new chairman Jeroen van der Veer and Judy Boynton, financial director.
The US Securities and Exchange Commission is separately considering claims that Shell executives were encouraged to exaggerate the size of reserves as their bonuses were tied to the level of energy assets booked.
Meanwhile, powerful City investors are refusing to endorse the appointment of Van der Veer as chairman; and are preparing to wage a long and protracted war to force the company to over haul its complex structure, and to become less secretive and bureaucratic.
One investment institution said: 'Shell should recruit senior executive directors from outside the group; the chairman shouldn't have to come from within its own ranks.'
Another shareholder said: 'The trouble with Shell is that the top executive positions appear to be closed to anyone who hasn't been with the company for at least 20 years.'
He added: 'There is too much inbreeding and introspection.'