The Guardian: A slap on the wrist for Shell: “Nor can it yet draw a line under the costs of the affair. That lies with the US justice department and the American courts.” (ShellNews.net)

Reserves fine won't dent bottom line

Friday July 30, 2004

Posted 31 July 2004

The $120m it cost Royal Dutch/ Shell to settle with the securities and exchange commission over the reserves scandal sounds a lot. Even the significantly more modest £17m slapped on by the Financial Services Authority dwarfs the previous record fine (£4m) imposed by the British regulator. But when a company is the world's third-largest oil company, will it really notice fines on this scale?

Not surprisingly, Royal Dutch/Shell says it will. "Eye watering" was the term used by one executive yesterday. But pause a moment. A quick back-of-the-envelope calculation shows the fines equate to less than four days of the group's second-quarter net income of $4bn.

Punishment is not always to be measured in pounds. Reputational impact counts, too, and Royal Dutch/Shell's attempts to repair the damage already done by the reserves affair will not be helped by the no doubt frequent references to the group's place in the FSA's record books. Nor can it yet draw a line under the costs of the affair. That lies with the US justice department and the American courts.

There is also a question of levying fines on a scale that would dent even Royal Dutch/Shell's bottom line. Who would foot the bill? The group's already long-suffering shareholders.

Nevertheless, while justice may have been done, there is a niggling sense that it may not have been seen to be done.

http://www.guardian.co.uk/business/story/0,,1272296,00.html