Jean Lemierre, President, European Bank for Reconstruction and Development/Photo from www.ebrd.com
From Alfred Donovan
Re: Sakhalin II loan application
I have been following with interest the progress of the loan application to the European Bank for Reconstruction and Development from Sakhalin Energy in respect of the Sakhalin II mega-project. I am the co-owner of a unique website, ShellNews.net, which contains over 6,500 web pages of information focused on the lead partner in the Sakhalin II consortium, Royal Dutch Shell.
It seems to me that the fundamentally important issues of competence, judgement and honesty must all be crucial factors in deciding whether to place the banks trust in Shell management, bearing in mind its leadership role in the Sakhalin Energy consortium. In other words, can Shell management be trusted to comply with undertakings given in respect of health, safety and environmental issues in relation to the Sakhalin II mega-project? I believe the answer is a resounding NO and will explain my reasons for saying so.
I can testify from personal experience to the issue of competence. Due to an incredible blunder by Shell management, the ShellNews.net website also operates under the domain name of RoyalDutchShellPlc.com which happens to be the dotcom name of their new $200 BILLION unified company, ROYAL DUTCH SHELL PLC. The domain name was available before the company name was released into the public domain, but Shell neglected to register it. The subsequent ill conceived attempt by Shell's lawyers to seize the domain name by issuing proceedings against me in May 2005 ended in further humiliation for Shell. An article in the The Wall Street Journal was but one of many embarrassing reports in major publications around the world.
The domain name debacle was a frivolous but illuminating example of the gross ineptitude of Shell senior management which has resulted in Shell sliding down the ranks of the super-major oil giants, from number one to number three, with it now being viewed as a wounded beast and consequently a potential takeover target. However, Shell is in such a mess, plagued with incompetent management, huge cost overruns on projects in Canada, Nigeria and Russia, continuing litigation and investigations arising from the reserves fraud, demoralised employees, and a shortage of reserves, that it may not be a particularly appetising catch.
In relation to the fundamentally important issues mentioned above, I would also respectfully draw your attention to my recent email to President Vladimir Putin of Russia which sets out some information about which you may be unaware. For example, did you know that 11 out of the 15 member board of Royal Dutch Shell Plc are tainted by what has been described as the biggest investor fraud in history - the Shell reserves fraud for which Shell shareholders have already paid over a quarter of a BILLION (USD) in financial regulator fines, class action settlements and legal costs. My email to President Putin also reveals that a reliable insider source at Shell says that management is aware that the ultimate cost for the project could be $26 BILLION (USD), not the revised $20 BILLION figure, which itself was double the original estimated cost. In my recent correspondence with Shell International General Counsel, Mr Richard Wiseman, he did not take the opportunity to deny the $26 BILLION figure.
ShellNews.net: Dire warning to President Putin about $26 BILLION overrun on Sakhalin2 project: Friday 25 November 2005: 04.30am EST: READ
Please note that we have a number of reliable sources. Testimony to the accuracy of the information being published on ShellNews.net is the fact that on Tuesday we reported news of the one month deferment of the EBRD decision days before the news broke elsewhere.
THE ENLIGHTENED ATTITUDE OF THE EBRD TO WHISTLEBLOWERS
Reading through the information on your website (www.ebrd.com) I noticed the section dealing with the enlightened attitude of the EBRD to whistleblowers. The EBRD encourages and protects whistleblowers. This is a strikingly different policy to Shell where there is a climate of fear among employees designed to deter and severely punish such activity. The deeply ingrained corporate culture of deceit and cover-up at the highest levels of Shell management was of course a major factor in the reserves fraud which ruined Shell's once proud reputation, which is now on a par with the likes of Enron. However, Shell management seems to have learnt nothing from the epic scandal. If the warnings of whistleblowers, including me, as a member of Shell Transport & Trading Company plc (and Chairman of the Shell Shareholders Org) had not been ignored, the reserves fraud would almost certainly have been exposed before dealing a death blow to Shell in its pre-unified form.
Let me give you an example of Shell's attitude to whistleblowers: A Shell whistleblower, Dr John Huong (left), who worked for Shell for over 29 years, is currently being sued for defamation by EIGHT different Royal Dutch Shell Companies, one from the UK, one Dutch and six based in Asia. They collectively obtained a High Court Injunction and Restraining Order against him. Dr Huong is a deeply religious Malaysian of the highest integrity. He is a humanitarian who has offered his services as a geologist free to underprivileged people (in Iraq). He has deeply held convictions completely in line with Shell's Statement of General Business Principles - its code of ethics pledging honesty, integrity and openness in all of Shell's dealings. Unfortunately he discovered to his astonishment and immense disappointment that Shell management does not share his respect and enthusiasm for the code, nor his conscience.
Dr Huong felt compelled to raise health and safety issues internally in respect of duties assigned to him. This turned out to be a turning point in his long and previously enjoyable career with Shell. Raising such concerns brought him nothing but grief. Basically Shell management's attitude towards him changed overnight. After he was humiliated and dismissed on false charges, Dr John Huong chose ShellNews.net as the public platform for his revelations about Shell management’s blatant disregard for health and safety issues.
Dr Huong placed on record in Shell internal documents his concerns over the following issues: -
When he was the Shell Production Geologist for the multi-billion dollar Kinabalu Field project, Dr Huong drew attention to design flaws which potentially rendered the platform unsafe.
While in that same post Dr Huong also put into writing his moral reservations about providing information to shareholders which would mislead them over the reserves volume for the Kinabalu Field. His warning was ignored. Shell shareholders have subsequently paid the fines and settlements mentioned above for filing false declarations in respect of hydrocarbon reserves. What a shame that Shell management did not have the same scruples as Dr Huong.
In a subsequent role as a Shell Asset Integrity Engineer responsible among other things for Shell helicopter safety, Dr Huong felt compelled to put into writing his concerns about what he considered to be dangerous working practices which put the lives of passengers - Shell employees - at risk. A crash involving one of the same helicopters in June 2005 suggests that Dr Huong was once again absolutely right and that his managers were negligent by failing to heed his warnings. If anyone had been killed in the accident, a public inquiry might well have found those managers to be guilty of a serious criminal offence. That would certainly be the likely outcome in the UK.
Details of the events listed above are set out as an Appendage to this letter.
Shell's extraordinary litigation against Dr Huong has been in progress since June 2004. Shell has made an example of him. That is called victimisation. Most people would be frightened if they were sued by one major company. I can only imagine what it must feel like to be sued by EIGHT major companies. David only had to fight Goliath.
It has of course been impossible for Dr Huong to secure any alternative employment as a geologist under such circumstances. That is unfortunate bearing in mind the current market situation with high oil prices and geologists being in short supply to find new reserves during a period of ever increasing demand. Dr Huong is suffering financially at a time when his training and vast experience could have otherwise paid dividends.
Naturally he is devastated and appalled at the cruel and inhuman treatment he has received in return for trying to protect the Company's integrity, assets and reputation. There is a dark cloud over him and his family with no end in sight. Dr Huong has even been threatened with imprisonment by Shell. There is a precedence for intimidatory tactics by Shell. As you may have seen in the news media, Shell had five landowners (the Rossport Five) jailed in Ireland for opposing the Corrib pipeline on safety and environmental grounds. Shell management subsequently performed an embarrassing U-turn by allowing the men to be released when faced with massive street protests in Ireland involving thousands of people.
Shell employees are also well aware of managements sinister track record in using undercover activity against its perceived enemies, which is basically any individual or party which has focused public attention on Shell's misdeeds. This includes Greenpeace, The Body Shop, Nigerian activists and me. Shell's admitted undercover "activities" against me and my family were one of the issues covered in my correspondence a few weeks ago with Shell General Counsel Richard Wiseman. Shell directors were until recently also directors/shareholders and the ultimate spymasters of a commercial espionage firm closely linked with the British Secret Service. Shell was forced to admit after a Sunday Times investigation that an uncover agent had carried out missions on Shell's behalf including infiltration, sabotage and intelligence gathering. It is therefore understandable that following a series of burglaries at his home and regular interference with his communications, Dr Huong is anxious and suspicious about what is going on in his case.
MI6 'Firm' Spied on Green Groups (Sunday Times archive article 17 June 2001)
The persecution of Dr Huong is clearly part of Shell's strategy to frighten employees so that they will not spill the beans on corporate wrongdoing. I know from security precautions taken by employees who do contact us that the strategy is working. I do not believe that such despicable Gestapo tactics are in the best interests of Shell stakeholders.
On 7 July 2003, Dr Huong sent an email to Sir Phillip Watts (the then Group Chairman of Royal Dutch/Shell) and Dominique Gardy, a director of Shell E & P. He also copied it to the Chairman of Shell in Malaysia, Jon Chadwick. Dr Huong mentioned his concerns over helicopter safety. The email was ignored. Shell would not take any notice of his legitimate concerns which fell within his area of responsibilities and used draconian legal measures to silence him - the legal action mentioned above - after he had been wrongfully dismissed. The helicopter safety cover-up and the related accidents have haunted Dr Huong ever since.
Dr Huong sought the intervention of Malcolm Brinded, the Executive Director of Shell Exploration & Production (the Shell Executive ultimately responsible for the Sakhalin II mega-project). Dr Huong asked to meet him when Mr Brinded visited Malaysia in 2004. His email was ignored. Mr Brinded has a track record of turning a blind eye to wrongdoing at Shell. Please click on the link below for further information and then please ask yourself the question whether Mr Brinded can be trusted to enforce the terms attached to any loan agreement.
ShellNews.net: ALARM BELLS RING OVER TENDERING FOR ROYAL DUTCH SHELL CONTRACTS: Monday 29 August 2005: 03.00 ET: READMr Brinded is one of the Shell Directors who signed Form 20F Declarations filed with the US Securities & Exchange Commission which contained material false information in regards to Shell's hydrocarbon reserves. As a consequence, he is a named Defendant in a US class action lawsuit which has been given permission to proceed by a Federal Judge.
Malcolm Brinded OBE Executive Director Shell Exploration & Production Shell has suspended its "Tell Shell" discussion forum on its own portal website because management has apparently decided that it no longer wishes to listen to criticism from employees and other stakeholders. Shell first used a censorship approach on Tell Shell, then resorted to suspension when the censorship policy was exposed. Our own site is quickly meeting the demand for candid commentary and publication of disclosures received from Shell employees. It is now the bootleg Shell portal website for such activity. Shell management claims that it is unmoved and disinterested, but at the same time has sued Dr Huong for his contributions to the site and in November 2005 Shell General Counsel Richard Wiseman issued a written threat to me in relation to a webpage about the Sakhalin II cost overrun debacle.
It is interesting to note that during a period of unprecedented trauma and change at Shell, its management has been distracted by the acquisition of a fleet of four luxury executive jets. Perhaps if more time had been spent on project management rather than ego and status driven pursuits and personal enrichment by Shell senior management (and negotiating multimillion dollar payoffs to silence discredited former senior management figures), Shell would not be in the almost perpetual state of crisis which its stakeholders have witnessed in recent years.
I trust that the EBRD will take all of this information into account when considering if Shell management is sufficiently trustworthy and competent to meet lenders policies and standards.Yours sincerely Alfred Donovan Appendage: MORE DETAILED INFORMATION ABOUT THE SHELL INTERNAL ALARM BELLS RUNG BY DR JOHN HUONG When Dr Huong was the Shell Production Geologist for the multi-billion dollar Kinabalu Field project, he made the mistake of raising issues relating to faulty design which rendered the platform unsafe. His warnings were suppressed. Dr Huong also put into writing his moral reservations about providing information which would mislead shareholders over the reserves volume in relation to the Kinabalu Field. One document contained the following question which Dr Huong raised with his manager in 1997: “Do you want to tell your investors that the volume carried in the ARPR (Annual Review on Petroleum Reserves) is suspected because a change in reservoir work will be expected! How can we live a day with a free conscience by getting the money from our investors through the 502F when our depositional model work is in question?” ShellNews.net has a copy of the relevant Shell internal document. His warning made him extremely unpopular with his management and was in any event ignored. So the reserves fraud came as no surprise to Dr Huong.