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SEC Settlement With Royal Dutch Shell Fails to Fix Governance Flaws

Yahoo.com: SEC Settlement With Royal Dutch Shell Fails to Fix Governance Flaws That Allowed Fraud to Occur and Fails to Hold Executives Personally Accountable for Over $150 Million in Fines

Thursday July 29, 3:14 pm ET

SAN DIEGO, July 29 /PRNewswire/ — The Securities and Exchange Commission’s (SEC) decision to end its investigation of the Royal Dutch Shell Group petroleum companies is short-sighted and disappointing because it does nothing to force the company to correct corporate governance flaws that allowed the oil reserve fraud to occur and fails to hold personally accountable the corporate insiders who perpetrated the fraud, the attorney for two large American institutional shareholder groups said today.

The Royal Dutch Shell Group announced today that it would pay the SEC $120 million in fines, on top of $31.1 million to Britain’s Financial Service Authority, to shut down further probing by the two agencies into the Group’s fraudulent overstatement of its proven petroleum reserves by 4.5 billion barrels. The false claims resulted in massive financial restatements and depressed Royal Dutch Shell Group share prices dramatically.

“The fine is the exact type of damage to the Company that should be paid by the defaulting executives or board members,” said Bill Lerach of Lerach Coughlin Stoia & Robbins, which filed suit June 25 in New Jersey state court, on behalf of workers and retirees participating in the UNITE National Pension Fund, based in New York, and the Plumbers and Pipefitters National Pension Fund, based in Virginia. The suit names 27 directors and officers of The Shell Group, and also their accounting and audit firms, PricewaterhouseCoopers International and KPMG International. It accuses the executives and board members of breach of fiduciary duty, abuse of control, mismanagement, fraud and unjust enrichment and alleges that the accounting firms, which had unlimited access to information in all of the companies, were guilty of professional negligence and accounting malpractice.

“The settlement involves no admission of wrongdoing and, far worse, includes no promise of changes in the way the Royal Dutch Shell Group operates. Without significant internal governance reform, there is nothing to keep this disaster from repeating. Also, we will seek to hold board members and executives personally accountable for this fine as well as the other harm their misconduct has inflicted on the Royal Dutch Shell Group.”

Among other relief, the suit seeks to force the Shell Group to break down the walls that limit shareholder access to company decision-making. It proposes to simplify Shell’s structure, including a demand for a shareholder vote on the combining of Royal Dutch Shell’s and Shell Transports’ boards, the right of shareholders to nominate three directors and other new procedures that give shareholders better information and influence on policies, particularly in the area of executive compensation.

World-renowned corporate governance guru, Bob Monks, an advisor to the Lerach Coughlin firm, has observed: “The Shell Group of companies has an arcane structure that for years has frustrated investors’ attempts to obtain reliable information and influence the board’s policies. The scandal that has engulfed the Group and the boards’ staunch refusal to lay out a clear and informative plan to fix the problems, has justifiably resulted in investors seeking to hold board members personally accountable and force the necessary changes through litigation. We are going to insist on improved internal controls and corporate compliance procedures to protect Shell and its shareholders from any recurrence of such events.”

“Executives and directors cannot be permitted to use shareholders’ money to buy their way out of problems that they cause — and we are going to try to hold them accountable for these fines. Shareholders deserve assurance that the companies will take the steps required to open up their processes and make it much harder for future officers to enrich themselves by lying and withholding information,” Lerach said.

Lerach Coughlin Stoia & Robbins LLP is the nation’s largest plaintiffs’ securities law firm, with 140 lawyers and offices in San Diego, Los Angeles, San Francisco, Houston, Washington DC, Philadelphia, Florida and New York. It specializes in shareholder litigation involving many of America’s high profile public companies.

Source: Lerach Coughlin Stoia & Robbins LLP

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