ShellNews.net: UPDATE, 30 SEPT 04: BERNSTEIN LIEBHARD & LIFSHITZ LLP MULTIBILLION DOLLAR CLASS ACTION LAWSUIT AGAINST ROYAL DUTCH SHELL, NAMED CURRENT & FORMER DIRECTORS, & SHELL AUDITORS/CONSULTANTS, PRICEWATERHOUSECOOPERS & KPMG: CIVIL ACTION 04431 IN THE US DISTRICT COURT OF NEW JERSEY:
BERNSTEIN LIEBHARD & LIFSHITZ LLP, LEAD PLAINTIFF LAWYERS (FOR PENNSYLVANIA STATE EMPLOYEES RETIREMENT SYSTEM & PENNSYLVANIA PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM)
By Alfred Donovan for ShellNews.net
Posted 2 Oct 04
Following the recent filing of the Amended Complaint, Mr Steven J. Peitler of Bernstein Liebhard & Lifshitz LLP kindly supplied a copy of the court document for publication on Shell2004.com. Amazingly, several hundred visitors to the website have subsequently downloaded the relevant files.
Mr Peitler said in a recent email message (29/09/04): “I am swamped with people calling me after reading the complaint.”
However, Steven would still like to hear from anyone who has further information regarding the Shell reserves scandal and will treat any such information supplied on a confidential basis. Information obtained from “numerous” former Shell employees is contained in the Amended Complaint. Readers can see from the document how carefully Bernstein Liebhard & Lifshitz LLP has protected the identity of the relevant individuals. Click here if you have insider information to disclose in confidence to Bernstein Liebhard & Lifshitz LLP about the Shell oil and gas reserves scandal)
Highlights (our interpretation) of the Amended Complaint include the allegations that: -
1. During the Class Period Shell management:-
(a) Issued false reports
(b) Overstated its reserves replacement ratio
(c) Concealed adverse facts concerning the Companies operations
(d) Artificially inflated the market price of Royal Dutch and Shell Transport securities
(e) Singly and in concert, the Group Defendants engaged in a common plan, scheme, and unlawful course of conduct… that operated as a fraud and deceit..
(f) Overstated future cash flows by over $100 BILLION.
2. The fraud resulted in impairment of the Shell Group’s credit ratings.
3. Shell has not disputed the conclusion that their top management not only knew of the overstated reserves but played for time…
4. Defendants Watt’s, Moody-Stuart, van den Bergh, van der Veer, Skinner, Brinded, Boynton, Miller, van de Vijver and Roels, authorised or signed the filing of Form 20-F to the US Securities & Exchange Commission knowing that the reports were materially false or recklessly disregarded their truth or falsity. To quote from the Amended Complaint: “Each Defendant named in this Count has engaged in some or all of the unlawful acts, transactions and activities alleged herein, including the preparation and/or distribution of false and misleading proxy materials…”
5. During the tenure of defendant, Mark Moody-Stuart, the Shell Group created five “Value Creation Teams”, one of which was tasked with “creating the maximum value from Shell’s hydrocarbon reserves.”
6. There were financial incentives for Shell executives to overstate reserves.
7. Reports and financial statements including Shell Transport and Royal Dutch Annual Reports and Form 20F submissions to the U.S. Securities & Exchange Commission were underpinned in the footnotes by the provisions of Shell’s Statement of General Business Principles in relation to corporate governance and internal controls. Shell management’s categorical undertaking that its reports and financial statements were in accordance with its internal principles was stated year after year. The Shell Statement of General Business Principles, and pledges relating to the principles, solemnly guarantee that Shell management will enforce them and work within them. The core principles include honesty, integrity and transparency in all of Shell’s dealings. Related commentary about Shell's Statement of General Business Principles is published below.
8. PricewaterhouseCoopers UK and KPMG NV: -
(a) Individually and jointly issued materially false and misleading audit opinions and made false representations.
(b) Improperly acted as both Shell auditors/consultants and consequently suffered from disabling conflicts of interest. This dual role violated Generally Accepted Accountancy Principles in the U.S. and contravened the spirit of the US Securities & Exchange Commission rules regarding auditor independence and thus compromised their required auditor independence.
(c) In the five years from 1998 to 2002 inclusive the combined remuneration received from Shell by PwC and KPMG was $96 million in Audit fees and a staggering $185 for “non-audit” services. The fees were of great importance to the partners in PwC and KPMG as part of their income was dependent on the continued business with the Shell Group who were “crown jewel” clients.
A related letter to Shell Group Chairman can be assessed vis this link: AN OPEN LETTER TO ROYAL DUTCH SHELL CHAIRMAN JEROEM VAN DER VEER (18/07/04)
LEGAL TIMETABLE: We understand that a Judge will decide in January if the litigation will be allowed to proceed. Given the remarkable information in the Amended Complaint it seems certain that it will be given the green light. To access the Amended Compliant click on the link below: -
It is ironical that the class action lawsuit is being brought by U.S. Pension Funds, bearing in mind that just days ago several hundred former Shell Malaysian employees successfully sued Shell in respect of its Employee Pension Fund scheme. With typical ruthlessness, Shell is threatening to appeal even though many of its former employees are elderly and/or infirm and the case has already dragged on too long. To read the relevant news report, click on the link below: -
ShellNews.net COMMENTARY ON 7 ABOVE RELATING TO SHELL'S STATEMENT OF GENERAL BUSINESS PRINCIPLES
The following example is an extract from the 2001 Annual Reports under the heading of “Other Matters”: -
“Within the essential framework provided by the Statement of General Business Principles, the Group’s primary control mechanisms are self-appraisal processes in combination with strict accountability for results.”
The 2002 Annual Reports (paragraph 436 of the Amended Complaint) also contain information about the Companies’ corporate-governance and internal –control policies. Both van der Veer, in his message from the President (of Royal Dutch Petroleum) and Watts, in his message from the Chairman (of Shell Transport), underscored the Companies’ purported commitment to the values of “honest” and “integrity”, and to “having strong corporate governance” and “committing to transparency.” Similar pledges were made time after time, year after year, by Shell’s most senior executives
Notably, reference was made to the core Shell business principle of “transparency” by Defendant Watts in the following exchange with Bloomberg’s Mr Guy Collins on 8 February 2002: -
COLLINS: I want to ask you about Enron and any parallels there. Do you have any off balance sheet liabilities? Do you have trigger mechanisms in place, that make you vulnerable to changes in the share price or credit ratings?
WATTS: Shell is very different from Enron. We were criticized for that some time ago and I’m glad we have a absolutely rock-solid way we do business. And, if you read our annual report, you read our footnotes and all the details, everything is in there. It’s all completely transparent, as far as Shell is concerned.
The reality was very far removed from the pious pledges of transparency and integrity: On 9 November 2003 Royal Dutch Shell Group Managing Director/Boss of Exploration & Production, van de Vijver, sent the following infamous email to the Group Chairman, Sir Philip Watts complaining that he was: “becoming sick and tired about lying about the extent of our reserves issues and the downward revisions that need to be done because of far too aggressive/optimistic bookings.”
Weeks later, on 2 December 2002, he sent an email to his Head of Finance at Shell Exploration & Production, Frank Cooper, demanding that an incriminating email about the reserves situation should be destroyed: “This is absolute dynamite, not at all what I expected and needs to be destroyed.”
What is not widely known is that Shell's Statement of General Businesses Principles has no legal value whatsoever - the "principles" exploit a glaring loophole in the law. They are not subject to UK law or any regulatory control. Like a bet with a bookie, Shell’s much vaunted “core principles” are binding in honour only. Shell senior directors have consequently been able to cloak themselves and their actions in fine but worthless words which have conned the public and investors. Shell Legal Director Richard Wiseman has admitted in writing that “there was no intention to create a document for use in the courts. It was intended to lay down a code of behaviour by which we think we should be judged by the public at large and in this respect perhaps define higher standards than some other commercial organisations impose upon themselves”. He confirmed this again just a matter of months ago. Click on the link below to access his email.
http://www.shell2004.com/2004%20Documents/emaifromwiseman26april04second.htm
The Statement of General Business Principles is not even subject to UK advertising and marketing regulation/standards as is confirmed by the correspondence with the UK Advertising Standards Authority, which can be accessed via the link below: -
Alfred Donovan for ShellNews.net
30 Sept 04
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