Daily Telegraph: Watts attacks FSA over 'flawed' Shell inquiry: “Sacked boss says watchdog violated his rights in ruling on reserves scandal” (ShellNews.net)
By James Moore (Filed: 17/09/2004)
Sacked boss says watchdog violated his rights in ruling on reserves scandal
Former Shell chief Sir Philip Watts yesterday accused the Financial Services Authority of "violating" his rights and running a "fundamentally flawed" investigation into the company's oil and gas reserves debacle.
Breaking his silence for the first time since he was ousted in February, Sir Philip said in a statement that the FSA had identified and prejudiced him in its published judgment on the scandal despite not mentioning him by name.
Herbert Smith, his law firm, also called the FSA's investigation "limited" and said it published findings with undue "haste". It said: "While the FSA has recently publicly committed to increasing the speed with which it concludes enforcement actions, on this occasion, early publication has been achieved at the expense of proper investigation and fairness to our client."
The regulator last month fined Shell £17m and released its sharply critical judgment on the same day as America's Securities & Exchange Commission imposed a $120m (£68m) penalty. It followed the company's January announcement that it was debooking 20pc of its oil and gas reserves classed as "proven" under SEC rules. There were further debookings during subsequent months.
Under Section 393 of the Financial Services & Markets Act, people named in regulatory actions are allowed to view evidence relating to them and make representations. Sir Philip's lawyers said they tried to contact the FSA over this three times before the judgment was released.
While no individuals were named in the FSA's decision notice, Sir Philip said he could be clearly identified. He added: "The FSA violated my statutory rights to review and rebut the allegations." Herbert Smith said: "In its haste to resolve its investigation into Shell, the FSA has flouted those obligations." Sir Philip, Herbert Smith said, had no option but to seek redress from the independent Financial Services & Markets Tribunal.
The law firm said that both KPMG, Shell's external auditor, and executives from its Exploration & Production business had certified that Shell's guidelines for booking oil and gas reserves as proven were compliant with SEC rules.
It said: "The FSA's final notice fails to acknowledge that Sir Philip relied on the reviews by Shell's experts in oil and gas reserves estimation and Shell's external auditors to ensure the accuracy of reserves information." The law firm said Sir Philip was "at no time" informed that there was a need for reserve debookings before November 2003.
The FSA's report said Shell received indications of problems in 2000 and 2001 and did not follow up warnings that its disclosed proved reserves were false or misleading in 2002 and 2003. Herbert Smith, however, said as soon as Shell's committee of managing directors was alerted to "unsatisfactory reserve audits" in Oman and Nigeria on November 18, 2003, Sir Philip established a thorough review leading to the January 9 announcement of the need to debook around 20pc of Shell's reserves.
Sir Philip said that "in this proceeding, and others that may follow" a "full and fair" examination of the facts would demonstrate that he had always acted in good faith.
A spokesman for Shell said: "We are aware of Sir Philip's action today, but in light of the on going investigations, we can't make any comment."
The FSA declined to comment.