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Shell SEC Deal Fails To Solve Governance Issues – Lawyer

The Wall Street Journal: Shell SEC Deal Fails To Solve Governance Issues – Lawyer

“accuses executives and board members of numerous wrongdoings – including breach of fiduciary duty and fraud”


July 30, 2004 5:27 a.m.

Posted 31 July 04

LONDON — Royal Dutch/Shell Group’s (RD, SC) agreement to pay a fine to the U.S. Securities and Exchange Commission over the company’s reserves overstatements fails to correct corporate governance flaws, the attorney for two large U.S. institutional shareholder groups said Thursday.

“The fine is the exact type of damage to the company that should be paid by the defaulting executives or board members,” Bill Lerach, a partner at the San Diego-based law firm Lerach Coughlin Stoia & Robbins, said in a statement.

The law firm has filed suit against directors and officers of Shell – as well as against their accounting and audit firms, PricewaterhouseCoopers International (PWC.XX) and KPMG International (KPMG.YY).

The suit was filed June 25 in a New Jersey state court on behalf of the UNITE National Pension Fund, based in New York, and the Plumbers and Pipefitters National Pension Fund, based in Virginia.

“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,” Lerach added.

Shell said Thursday that it had agreed to pay $120 million in fines to the U.S. Securities and Exchange Commission as well as a GBP17 million to the U.K.’s Financial Services Authority, ending probes of the company’s January downgrade of 20% of its proven oil and gas reserves.

Three other downgrades followed, for a total reduction in reserves of 23%, or 4.47 billion barrels, from previously reported levels.

The suit filed by Lerach accuses executives and board members of numerous of wrongdoings – including breach of fiduciary duty and fraud – and alleges that the accounting firms were guilty of professional negligence and accounting malpractice.

The suit also seeks to hold Shell board members and executives personally accountable for the SEC fine.

No one at Shell was immediately available to comment.

Shell and several of its current and former executives face a raft of purported class action lawsuits in the U.S., which allege the value of investors’ shares in the company was hurt by a deliberate overstatement of reserves by Shell.

Stanley Bernstein, a partner at New York law firm Bernstein, Liebhard & Lifshitz, is leading purported class actions against Shell and some of its executives.

Shell has undertaken a review of its corporate governance.

Investigations by the U.S. Justice Department and the Dutch financial regulator and bourse are continuing.

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-By Nicole Lee, Dow Jones Newswires; +44 (0)207-842-9366, [email protected]

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