Posts Tagged ‘Enron’

By John Donovan

Information herein is sourced from Wikipedia articles relating to:

(1) Hakluyt – the British private intelligence agency, “…staffed almost entirely by ex-intelligence [services] staff”, according to a 2006 report in The Times^[1]

(2) Shell, the oil giant notorious for a massive securities fraud when it swindled its shareholders. The company is closely associated with Hakluyt.

(3) Enron, a corrupt energy company based in Houston, Texas that went bankrupt as a result of committing institutionalized, systematic and well-planned accounting fraud.

In May 2001, Christopher James of Hakluyt wrote to Enron‘s Jeff Skilling following up on introductory letter from Phillip J Carroll, the then President of Shell Oil.

“Following Phil Carroll‘s letter to you of April 16 I would be delighted to call on you to tell you more about Hakluyt. While we have already done some work for Enron (Scott Tholan), virtually all our work for our clients is at a strategic level where our coverage of issues is of greatest value. With your challenging international objectives I am confident we could be of value to you. If you would find it useful to meet I will contact your office to arrange a suitable time.”^[4]

In an apparent follow-up email in August of that year, James expanded on what Hakluyt could offer:

“Your office has asked me to outline Hakluyt’s services. Rather than fall back on the usual corporate information that we have sent to your people previously, I would say simply this; Hakluyt is what you make of it – it places an unparalleled private intelligence network at the personal disposal of senior commercial figures.”

“The range of deployments we have completed for core clients is wide. In all cases we guarantee complete confidentiality. And, although we work for divisional directors on tactical issues, we have found our most rewarding work in personal dealings with CEOs who wish – for whatever reason – to have a confidential agency at their own disposal. It was this, which prompted Phil Carroll to write to you about us in April as he has found our work of considerable value to him personally. We look at people and the issues, which often drive them to make the decisions or act as they do. All our work is unattributable… We also have an association with Kissinger/McLarty Associates for although our work is very different the services we both provide can be complementary. Our US client base is increasing well but at the same time we wish to remain small and discreet.”^[5]

Recommended by Shell CEO?

James’s assertion that Phil Carroll wrote to Enron’s Skilling in April 2001 about Hakluyt appears likely to be a reference to a former Shell CEO. In January 2006, Carroll was quoted by the Houston Chronicle as a friend of disgraced Enron CEO Ken Lay:

“Despite the burdens of his high-profile indictment, Lay hasn’t lost his warm demeanor, according to his friends. ‘Ken is always extremely pleasant,’ said Phil Carroll, the former CEO of Shell Oil Co. who served as the Bush administration’s first energy czar in Iraq.”

POSTING BY AN OUTSPOKEN FORMER EMPLOYEE OF SHELL OIL USA

Saw your article on Enron and Shell.

FYI Enron was populated by a host of former Shell USA managers who were let go by Shell in the early 1990′s as part of Shell USA’s reorganization and downsizing program (Shell USA had finally managed to manage the company into a serious financial problem with a host of bad decisions).

So, it comes as no surprise to anyone familiar with the two organizations that RD Shell had it own financial scandal a few years later. The reserves scandal at Shell was a long time in coming but the ‘problem’ was known about internally for many, many years. Shell USA knew it had a credibility issue with its reserve bookings in the mid-1980′s.

Senior level Shell management simply hid it for as long as they could. Nobody wanted to be the ‘Grinch that stole Christmas’, so the reserves fraud continued from one succession of senior management to another. Finally, the chickens came home to roost.

This issue does, of course, point to the fact that RD Shell has a serious ‘corporate culture’ problem, i.e., it is fundamentally corrupt. Management was and is not only lying to investors and securities regulators, they were and are lying to themselves. Maybe that is why RD Shell is no longer on the list of ‘most sustainable’ companies.

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.

Sir Phillip Watts, Group Chairman, Royal Dutch Shell Group

By John Donovan

During a Bloomberg interview in 2002, with the then Group Chairman of Royal Dutch Shell, Sir Phillip Watts, reference was made to the core Royal Dutch Shell business principle of complete transparency.

The following is an extract from his exchange with Guy Collins of Bloomberg 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 pledges of transparency.

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.

The Shell reserves scandal burst into the public domain in January 2004. Links to a selection of news reports are provided below. Sir Phillip and van de Vijver were forced to resign.

They did not suffer financially. Shell directors are Teflon protected by contracts which stipulate that they are bailed out by Shell shareholder funds even if they cheat shareholders by engaging in outright lies, deception and cover-up, as happened in the reserves scandal. The disgraced Sir Philip Watts ended up with a package worth over $18 million (USD) to help cushion his sudden departure from the company.

THE ROYAL DUTCH SHELL RESERVES FRAUD UNFOLDS IN NEWS HEADLINES

Daily Telegraph: Shell drops ‘bombshell’ on reserves: 9 January 2004

The Times: How Shell blew a hole in a 100-year reputation: 10 January 2004

The West Australian: Investors howl for Shell’s blood: 12 January 2004

London Evening Standard: Shell bosses lied to the City: 19 April 2004

(Former executives, led by ex-chairman Sir Philip Watts, admitted they had repeatedly lied to investors about the true level of Shell’s oil and gas reserves.)

Houston Chronicle: ‘Sick and tired about lying’ at Shell: 19 April 2004

Bloomberg: Shell Loses AAA Credit Rating: 19 April 2004

Shell bosses ‘fooled the market’: 19 April 2004

The Guardian: Trail of emails reveals depths of deceit at the heart of Shell: 20 April 2004

The Guardian: Shell admits it misled investors: 20 April 2004

The Independent: Lies, cover-ups, fat cats and an oil giant in crisis: 20 April 2004

The Scotsman: Shell admits reserve ‘lies’: 20 April 2004

The Scotsman: Shell implodes as e-mails provide damning evidence: 20 April 2004

The Times: Deceitful Shell ‘needs ten years’ to rebuild exploration business: 20 April 2004

Financial Times: Observer Column: Shell-shocked: Corporate slogans consigned to the dustbin of history no. 94: “You can be sure of Shell.”: 20 April 2004

Minneapolis Star Tribune: Dutch/Shell Group exec was ‘sick and tired’ of lying: 20 April 2004

Daily Telegraph: Memos expose Shell’s years of lying: 8 May 2004

The Scotsman: Shell’s reputation left in tatters: 21 April 2004

TheStarOnline: Shell report exposes lies, CFO sacked: 21 April 2004

Daily Telegraph: Shell suffers second cut to credit rating: 21 April 2004

Daily Telegraph: Sacked Shell boss ‘escorted from HQ’: 22 April 2004

The Times: A very British kind of scandal: why Shell is no Enron: 23 April 2004

Daily Telegraph: Shell’s lies over reserves spark FSA investigation: 24 April 2004

Times: “Shell is a disreputable company in need of a strong injection of ethics”: 25 April 2004 “

(“an audience with Sir Phillip Watts”)

The Mail On Sunday: Shell’s top bosses named in £8 billion lawsuit after being spared the sack: 25 April 2004

Daily Mail: Shell attacked from all sides: 26 April 2004

(OIL giant Shell urgently needs to embark on a damage limitation offensive with investors before regulatory probes and lawsuits send the crisis spiralling out of control.)

Daily Telegraph: Shell gives Watts a £1m golden farewell: 23 May 2004

Daily Telegraph: Shell slices still more off proven reserves: 25 May 2004

Daily Telegraph: Watts’ pension pot tops £10m: 28 May 2004

fin24: Shell directors under fire: 20 June 2004

Extract: “The report came just a day after Dutch paper NRC Handelsblad quoted a former executive of one of the oil group’s subsidiaries as saying half of the company’s 400 most senior managers were aware of the problem.”

London Evening Standard: Shell ‘has lied for 10 years’: 26 June 2004

Sadistic sacking of a Royal Dutch Shell whistleblower: 27 October 2010

Shell Closes Book on 2004 Reserves Scandal as Claims Deadline Passes: 5 November 2010

ShellNews.net webpage containing links to thousands of pages of U.S. court documents and reports relating to the U.S. consolidated class action in respect of the Shell Reserves Fraud

According to Goal, almost $12bn in settlements, to which shareholders were entitled, was not reclaimed through class actions from 2000 to 2007. The list includes settlements against Enron, Worldcom, Parmalat and Royal Dutch Shell.

But, as we have seen, the pursuit of personal reward by top executives, driven by a pursuit of profit above everything else, can lead to disaster – as it has in the banking sector and as it did for Enron and very nearly for Shell as well at the time of its “reserves crisis” a few years ago.

The Sunday Times reported in 2001 that Hakluyt hired Manfred Schlickenrieder, a German foreign intelligence operative tasked by the firm to spy on Greenpeace at the behest of oil giants BP and Shell.

Post-Enron, post-Shell, post-WorldCom, post-Parmalat, the collective knickers of the business world are in a twist about ethics, and rightly so.

The regulatory changes are on the agenda of Christopher Cox, chairman of the Securities and Exchange Commission. But critics say the changes appear to be a last-ditch push by appointees of President Bush to dilute securities rules passed after the collapse of Enron and other large companies — measures that were meant to forestall accounting gimmicks and corrupt practices that led to those corporate failures.

Federal regulators would have greater oversight of energy markets as part of the massive farm bill passed by the Senate Thursday. Traders cited the move to close the so-called Enron Loophole — one of several measures Congress is considering to damp speculative trading in oil — as a factor behind turbulent trading in the oil markets Thursday.