The Star-Ledger: Major shareholder lawsuit pending: “the Royal Dutch/Shell Group's legal woes aren't yet finished.”: “a mega-lawsuit making its way through the U.S. District Court in Newark.” (ShellNews.net)
Despite the fact that it agreed to pay more than $150 million in penalties for violations of securities laws on two continents, the Royal Dutch/Shell Group's legal woes aren't yet finished.
The world's third-largest publicly held oil company is still faces a Justice Department investigation, regulatory probing by the Netherlands and a mega-lawsuit making its way through the U.S. District Court in Newark.
"The regulatory action does not affect our case. Our case is recovering damage for the shareholders. The regulators are seeking payment to the government," said Stanley Bernstein, a New York lawyer in the case. "It does signal that these are very serious violations of the law."
Two weeks ago, the company said it had reached "agreements in principle" with the United Kingdom's Financial Services Authority and the Securities and Exchange Commission.
In the SEC agreement, Shell neither admitted nor denied any wrongdoing, but allowed that the company violated anti-fraud, reporting, bookkeeping and internal control provisions of the securities laws. It will pay about $125 million in penalties. The company will also pay roughly $31 million to cover the British penalties, according to a statement.
The case pending in Newark was filed earlier this year, shortly after the oil giant reduced by 20 percent the amount of oil and natural gas it had in proven reserves. Reserve estimates are a key measure of an oil company's worth.
Since that announcement, the market has been jolted by revelations of alleged fraud. In that time, the company's chairman and the head of exploration and production were asked to step down.
In Newark, a number of shareholder lawsuits have been filed and are being consolidated. Lawyers said they filed in New Jersey because the company has several gas terminals here.
The suits charge the company reported "materially false and misleading information" about its reserves and cash flow. As a result, the company "was able to inflate its share price, maintain its credit rating and maintain its status in the petroleum industry as a leader," court papers state.
It is unclear how many people were affected by the alleged fraud. The case is viewed as a significant securities fraud actions because of the size of the company and the fact that the class period is five years, starting in 1999, a relatively long time in this type of suit.
Lawyers in the case were back in court last week to sort out the timetable for the case. Instead of ending the case, attorneys said the regulatory findings only add weight to their claims.
The regulatory fines are "the equivalent in getting a ticket for a red light, and our case is the equivalent of seeking damages for the pedestrians who were damaged by the car that went through that red light," said Bernstein.
-- Kate Coscarelli
Know about happenings in the legal community? Contact Kate Cos carelli at kcoscarelli@starledger.com or (973) 392-4147.
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