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US Class Action reserves scandal lawsuit against Royal Dutch/Shell Newark Star-Ledger report on the multi-billion dollar US Class Action reserves scandal lawsuit against Royal Dutch/Shell and named former and current directors, including Royal Dutch Shell CEO Jeroen van der Veer and Shell E & P Executive Director, Malcolm Brinded

Sunday 24 July 2005

By Alfred Donovan

Civil Action 04431 in the US District Court of New Jersey

The Newark Star-Ledger article (link below) reports on a court hearing on the US Class Action Lawsuit brought against Royal Dutch/Shell and named former and current directors, including former Group Chairman Sir Mark Moody-Stuart; the first CEO of Royal Dutch Shell plc – Jeroen van der Veer, and Shell E & P Executive Director, Malcolm Brinded.

New York lawyers Bernstein Liebhard & Lifshitz LLP are the lead lawyers acting for Pennsylvania State Pension Funds – the plaintiffs. The lawsuit alleging that Shell reported “materially false and misleading information” about its reserves and cash flow to boost its stock price, and allegedly engaged in securities fraud,is also brought against Shell auditors/consultants, PriceWaterhouseCoopers & KPMG. has co-cooperated with Mr Steven J. Peitler of Bernstein Liebhard & Lifshitz LLP for over a year, providing him with information and contacts with potential knowledge/evidence relating to the case. Following the filing of the Amended Complaint, Mr Peitler kindly supplied a copy of the court document for publication on Amazingly, several hundred visitors to the website downloaded the relevant files. Mr Peitler said in a subsequent email message (29/09/04): “I am swamped with people calling me after reading the complaint.”

This weekend we have supplied Mr Peitler with extracts from potentially highly salient Shell internal documents left in our safe keeping by a Shell whistle-blower, Dr John Huong. The documents confirm that Dr Huong was a Shell Production Geologist on the Kinabalu and Kebabangan fields who worked for Shell for almost 30 years. One document contains the following question Dr Huong raised with his manager in relation to the Kinabalu field: “Do you want to tell your investors that the volume carried in the ARPR is suspected because a change in reservoir work will be expected! How can we live a day with a free conscience by getting the money from our investors through the 502F when our depositional model work is in question?”

The above incident related directly to the issue of inflated reserves during the tumultuous so called “transformation” period of Sir Mark Moody-Stuart’s tenure, when the calamitous decision was allegedly taken by his management to conjure up higher oil and gas reserve figures. Five “Value Creation Teams” were formed, one of which was tasked with “creating the maximum value from Shell’s hydrocarbon reserves.” This was the recipe for the reserves scandal which has destroyed Shell’s reputation.

Dr Huong’s protestations about deceiving shareholders was ignored then and subsequently, even though brought to the attention of successively higher levels of Shell management. His subsequent communications to Malcolm Brinded and Jeroen van der Veer also received no response. Instead, eight Royal Dutch Shell companies collectively obtained a High Court Injunction to silence him. The Injunction remains in force. Dr Huong wisely lodged evidence with the owner of and other trusted parties before the Injunction because he was deeply concerned about threats made against him by Shell. Dr Huong is suing Shell for wrongful dismissal.

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