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US prosecutors help Shell close chapter on reserves scandal

Daily Telegraph: US prosecutors help Shell close chapter on reserves scandal

Friday 1 July 2005

By Christopher Hope, Business Correspondent (Filed: 01/07/2005)

Shell will not face charges from United States prosecutors after the oil and gas giant admitted last year that it had over-exaggerated its proven reserves by a quarter.

However the US Department of Justice said it was “still evaluating” the case against individual directors involved.

The scandal resulted in the resignations of Sir Phil Watts, chairman and Walter van der Vijver, head of exploration and production.

David Kelley, US lawyer for the Southern District of New York, took the decision because Shell had paid millions of dollars in fines and had taken steps to ensure that such a scandal can never happen again.

Shell paid $120m (£65.7m) to the US’s Securities and Exchange Commission last year and was hit with a £17m fine by the Financial Services Authority – the heaviest penalty ever imposed by the UK regulator.

Mr Kelley said: “Because Shell has co-operated fully with the Government’s investigation, has implemented substantial remedial efforts to enhance its reserves reporting and compliance, and has paid a $120m civil penalty to the SEC, the public interest has been sufficiently vindicated.

“Moreover, criminal prosecution would likely have a severe and unintended disproportionate economic impact upon thousands of innocent Shell employees.”

Jeroen van der Veer, Shell’s chief executive who was drafted in to fill the role vacated by Sir Phil, welcomed the news. He said: “Shell appreciates Mr Kelley’s decision. The conclusion of this investigation is a most important step toward putting the matter of reserves reclassification behind us.”

Shell has been told by Dutch securities regulator AFM that its investigation does not give rise to any further action. However, it is still being investigated by the Euronext Amsterdam stock exchange and Shell is also facing class action lawsuits in the US.

The group is in talks with the legal representatives of the plaintiffs in the US to settle the case without the need for further litigation.

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