However, unbeknown to Van de Vijver, Michiel Brandjes (right), who was alarmed by the findings of the report, sent a copy to a New York law firm Cravath, Swaine & Moore. This meant that events were no longer in the control of Shell. Instead, Shell’s most sensitive issue since its close association with Adolf Hitler and the Nazis several decades ago, had been disclosed to an outside firm, that had to consider and protect its own reputation.
By John Donovan
In May 2003, Frank Coopman, the then Chief Financial Officer of Shell EP, delivered bad news about Shell’s operations in Nigeria to the Chief Executive of Shell EP, Walter van de Vijver.
Van de Vijver sent Coopman back to Nigeria to investigate further.
The subsequent findings, set out in a status report, were even more devastating, revealing an overstatement of 1.1 billion boe.
Van de Vijver had instructed a team led by Coopman to work on the reserves issues.
The team included a top Shell lawyer, Michiel Brandjes, the then Company Secretary of Royal Dutch Petroleum.
Upon receiving Coopman’s status report in early December, Van de Vijver said that he “considered the report to be incomplete and prematurely conclusive…”
He sent an email dated December 2, 2003, instructing Coopman to destroy the report.
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However, unbeknown to Van de Vijver, Michiel Brandjes, who was alarmed by the findings of the status report, sent a copy to a New York law firm Cravath, Swaine & Moore.
This meant that events were no longer in the control of Shell.
Instead, Shell’s most sensitive issue since its close association with Adolf Hitler and the Nazis several decades ago, had been disclosed to an outside firm that had to consider and protect its own reputation.
The advice which came back from Carvath’s was unequivocal. Shell must downgrade its reserves and notify the US Securities & Exchange & Commission accordingly.
Brandjes summarized the relevant legal advice within a section of a three-page document “Script for Walter” as follows:
“If and from the time onwards that it is accepted or acknowledged by the management of the issuers (Royal Dutch and SIT) that, when applying the SEC rules, the 2002 proved reserves as reported in the Form 2o-F are materially wrong, the issuers are under a legal obligation to disclose that information to all investors at the same time and without delay_ Not to disclose it would constitute a violation o f US Securities law and the multiple listing requirements….”
The “Script for WaIter” noted that Oman and Nigeria reserves were overstated by 1.3 billion boe and that LKH compliance would require an additional 300 million boe debooking. It also noted that approximately 757 million boe of the reserves disclosed in the 2002 Annual Report on Form 20-F (including Gorgon), which formerly had complied with the Shell Guidelines when booked, now were “possibly at odds with the strictest possible interpretation of the SEC guidelines.”
The “Script” was e-mailed by Coopman to van de Vijver and Boynton on the morning of December 2, 2002 in advance of a CMD meeting (Committee of Managing Directors) scheduled for that day.
Approximately one hour later, van de Vijver e-mailed Coopman directly with the now infamous message:
“This is absolute dynamite, not at all what I expected and needs to be destroyed!
But it was too late, Michiel Brandjes had already acted and the genie could not be put back in the bottle.
Mr. Brandjes is currently the Company Secretary and General Counsel Corporate of Royal Dutch Shell Plc. In that capacity he had an important role in the recent issuance of a profits warning by the company, which once again took the markets by surprise.
SADISTIC SACKING OF WALTER VAN DE VIJVER“The Squeeze” also contains some information about the sadistic sacking of Walter van de Vijver. Apparently when Lord Oxburgh appeared in Walters office, the Dutchman was expecting to be offered the chairmanship, replacing Sir Philip Watts, the then Group Chairman of the Royal Dutch Shell Group. Instead, Oxburgh demanded his resignation. In tears, Walter called his wife Bernadette who quickly arrived at his office and “firmly shut the door.” John Hofmeister forced the door open and dramatically issued a ultimatum.
The hapless Jeroen van der Veer was appointed as successor of Sir Philip “although he had been party to the mismanagement of the group since 2002. He was, it was decided, the least guilty of the group“.
Chris Fay, the former CEO & Chairman of Shell UK Limited who had lost out to Watts in the race for the top job at Shell, is said by Tom Bower to have told Mark Moody-Stuart, a former Shell Group chairman, ‘I warned you that Watts was a cover-up guy, that there was a geological mafia cover-up.‘
Interesting to note that Ben van Beurden, the recently appointed CEO of Royal Dutch Shell Plc was at the time of the reserves scandal, advising Sir Philip Watts and presumably was his close confidant?
Walter van de Vijver (middle) was forced to quit Shell in 2004, together with former chairman Philip Watts (left), and CFO Judy Boynton (right) in a huge scandal that resulted from Shell’s downgrading of its proven oil and gas reserves. Van de Vijver was a Royal Dutch Shell Group Managing Director and head of the Exploration & Production division.
Royal Dutch Shell employed on a part time basis, one non-independent retired former employee, Anton Barendregt, to audit its oil and gas reserves. In stark contrast, Exxon used eight full-time employees – all expert reservoir engineers, supported by a former lawyer for the US Securities & Exchange Commission.
Some of the above information comes directly from the Report of Davis Polk & Wardwell to The Shell Group Audit Committee.
I have also relied on information from the excellent book by Tom Bower “THE SQUEEZE” – “Oil, Money & Greed in the 21st Century” and from an 850 page searchable legal document containing the testimony of Walter van de Vijver also containing related exhibits. The comments about Exxon reserve auditors come from page 326 of his book.
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