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US pension fund giants lead Shell onslaught

FROM OUR ARCHIVES

By John Donovan

In May 2005, Royal Dutch Shell was in the middle of the maelstrom arising from the reserves scandal. Shell had defrauded many of its own shareholders as a result of filing false information with the US Securities & Exchange Commission. The Sunday Telegraph article printed below provides an insight into the subsequent legal “onslaught”.

After being approached by the U.S. lawyers, Bernstein Liebhard & Lifshitz, acting for the lead plaintiffs, I supplied Shell insider evidence and contact with Shell whistleblowers, including Dr John Huong, a Shell production geologist. 

Following a telephone conference I had in 2006 with the senior partners of the law firm, this website published an appeal for a European Shell shareholder to represent all relevant non American holders of Royal Dutch Shell stock. The appeal was successful and the claim was expended into a global class action. All claims, including cases brought by Shell’s own employees, were eventually settled by Shell, which was also fined by U.S. and UK financial regulatory authorities for market abuse.

The Sunday Telegraph: US pension fund giants lead Shell onslaught

By Sylvia Pfeifer (Filed: 09/05/2004)

Two of the oldest and most powerful pension funds in the US have been elected to act as lead plaintiffs to head the multiple class action lawsuits filed against Royal Dutch/Shell, the embattled oil giant.

The Pennsylvania State Employees’ Retirement System and the Pennsylvania Public School Employees’ Retirement System are two of America’s largest statewide retirement plans for public employees.

The two funds have combined assets of around $70bn. As investors in Shell, the funds claim they lost $67m (£37m) after shares in the Anglo-Dutch oil giant plummeted when it admitted in January that it had overstated its proven oil and gas reserves by 25 per cent.

The pension funds were awarded the coveted role of “lead plaintiffs” at a hearing late on Friday. They are being advised by Bernstein Liebhard & Lifshitz, the law firm.

As lead plaintiffs the pension funds will now consolidate the host of competing class actions from retail and institutional Shell shareholders into one single claim. The class action is against the company and a number of its present and former directors.

The directors named in the legal action include Sir Philip Watts, the former Shell chairman sacked in March, as well as several heavyweight FTSE100 chairmen and former Shell executives. Sir Mark Moody-Stuart, Watts’s predecessor (who now chairs Anglo American, the mining giant), Paul Skinner, the chairman of Rio Tinto, and Maarten van den Bergh of Lloyds TSB have all been named as defendants.

Analysts believe Shell could ultimately face claims running to several billion dollars from the raft of lawsuits which include an action by the oil giant’s own employees. Milberg Weiss Bershad Hynes & Lerach, the New York law firm, is working on a claim on behalf of members of Shell’s various company pension schemes.

A similar claim has also been filed by Scott & Scott, another law firm, on behalf of the Shell Provident Fund and the Shell Pay Deferral Investment Fund. These claims can run side by side with the consolidated class action for other Shell shareholders.

The emergence of two of its largest US shareholders as lead plaintiffs in the class action lawsuits will unsettle Shell’s directors, who have been trying hard to restore the company’s image. An independent report prepared for Shell’s internal audit committee by Davis Polk & Wardwell, the US law firm, found that the group’s top executive committee was warned as long ago as February 2002 that a large part of the company’s proved reserves were not compliant with Securities & Exchange Commission (SEC) rules.

The company is still waiting to hear the outcome of a formal SEC investigation into the reserves downgrades. Shell is also facing probes by the US Justice Department, which has the power to bring criminal charges, as well as the Financial Services Authority, the UK regulator.

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