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SEC to Continue With Shell Interviews Despite Striking Deal

Energy Intelligence Group: SEC to Continue With Shell Interviews Despite Striking Deal: “(SEC) is to continue interviewing Royal Dutch/Shell witnesses next month in connection with the group’s reserves downgrades, despite the deal in principle struck between the two sides”

(Copyright © 2004 Energy Intelligence Group, Inc.)

Thursday, August 5, 2004
Posted 14 August 2004

The US Securities and Exchange Commission (SEC) is to continue interviewing Royal Dutch/Shell witnesses next month in connection with the group’s reserves downgrades, despite the deal in principle struck between the two sides last week to halt the SEC’s investigation into the company, a Shell source told International Oil Daily on Wednesday.

“There are still some interviews being conducted in September,” the source said.

Shell announced agreements last week with the SEC and the UK Financial Services Authority (FSA), under which it agreed to pay penalties totaling roughly $150 million in return for the two regulators calling a halt to their investigations into the company (IOD Jul.30,p1).

“What the agreements in principle mean is that as far as the reserves issues are concerned, there are no further claims from the FSA or the SEC vis-à-vis the company,” Shell Chairman Jeroen van der Veer explained.

However, the regulators are still permitted to investigate whether individuals — rather than Shell as a corporate entity — have violated any laws or regulations. It is on this basis that the SEC is continuing to interview Shell witnesses, the Shell source said.

The SEC and FSA were among a number of regulators that launched investigations into Shell in the wake of the company’s 3.9 billion barrels of oil equivalent reserves downgrade in January (IOD Jan.12,p1). Investigations are continuing into Shell by three other bodies — the US Department of Justice, Dutch stock market regulator AFM and the Amsterdam-based, cross-border stock exchange Euronext.

When the SEC and FSA deals were announced last month, it was understood that a number of leading players in the reserves fiasco had not been interviewed by SEC investigators. These included former Chairman Phil Watts, former exploration and production chief Walter van de Vijver, and former Chief Financial Officer Judy Boynton. “It appears that the FSA have started at the top and the SEC have started at the bottom,” the Shell source said.

Van de Vijver’s US lawyer John Dowd confirmed to International Oil Daily that the former upstream chief “has not been interviewed” by the SEC, and added that he had “no idea” whether he would be. Lawyers for Watts and Boynton could not be reached for comment, although a separate Shell source has confirmed that Boynton had already been interviewed by the FSA by the time the deals were struck.

A total of 30 Shell employees had been interviewed by SEC lawyers by the end of June, Michiel Brandjes, company secretary of Royal Dutch Petroleum, told shareholders at the annual general meeting in The Hague on Jun. 28.

Shell’s deal in principle with the SEC has yet to be approved by the SEC commissioners, an official from the regulator said. “It’s a deal with the [SEC’s] enforcement division,” the official said. “The enforcement division then has to go to the commissioners and convince them that this is the right way to go.” In practice, the SEC commissioners approve such deals in the overwhelming majority of cases.

Evidence gathered by SEC lawyers in the course of their investigation into Shell as a corporate entity would, under SEC rules, still be admissible as evidence in any subsequent probe of individuals, the official added. “What we got initially still counts,” he said, noting that SEC lawyers were also still allowed to re-interview earlier witnesses.

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