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ShellNewsnet Archive: ROYAL DUTCH: 2004 Marc Henzel Lodges Securities Fraud Lawsuit in NJ

20040323 ROYAL DUTCH Marc Henzel Lodges Securities Fraud Lawsuit in NJ
Tuesday, March 23, 2004, Vol. 6, No. 58
ROYAL DUTCH: Marc Henzel Lodges Securities Fraud Lawsuit in NJ
The Law Offices of Marc S. Henzel initiated a securities class
action lawsuit was filed in the United States District Court for
the District of New Jersey against Royal Dutch Petroleum Company
(1) Shell Transport,
(2) Shell Petroleum N.V.,
(3) the Shell Petroleum Limited,
(4) Maarten van der Bergh,
(5) Judy Boynton,
(6) Malcolm Brinded,
(7) S.L. Miller,
(8) Harry J.M. Roels,
(9) Paul D. Skinner,
(10) M. Moody- Stuart,
(11) Jeroen van der Veer, and
(12) Philip R. Watts
The suit was filed on behalf of purchasers of the securities,
including the common stock traded in overseas markets and the
American Depository Receipts trading on the NYSE, of Royal Dutch
Petroleum Company (NYSE: RD) and/or The Shell Transport and
Trading Company, PLC (NYSE: SC) between December 3, 1999 and
January 9, 2004, inclusive, seeking to pursue remedies under the
Securities Exchange Act of 1934.
According to the complaint, defendants violated sections 10(b)
and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5
promulgated thereunder by the Securities and Exchange
Commission, and all amendments thereto by issuing a series of
material misrepresentations to the market during the Class
The complaint alleges that defendants' deliberately violated
accounting rules and guidelines relating to oil and gas reserves
which resulted in a shocking and unprecedented overstatement of
oil and gas reserves, the eventual disclosure of which damaged
purchasers of Royal Dutch and Shell Transport securities and
rocked the investment community.
The complaint alleges that
Royal Dutch and Shell Transport had classified and reported, in
SEC filings and other public documents, certain reserves as
“proved reserves” from a project off the western coast of
Australia called the Gorgon Joint Venture, and various projects
in Nigeria.
In fact, unbeknownst to investors, the reserves did not meet SEC
and industry requirements necessary to be classified as
“proved,” and were improperly reported as proved reserves in
Royal Dutch's and Shell Transport's financial reports, thereby
materially artificially inflating a key measure of the
companies' financial position and competitive standing. As a
result of these material misrepresentations, Royal Dutch and
Shell Transport's true value in the marketplace was severely
overstated and misunderstood.
On January 9, 2004, Royal Dutch announced that it was going to
write-down its proved oil and gas reserves by 20%, or 3.9
billion barrels, from 19.5 billion barrels to 15.6 billion
barrels. The write-down:
(i) cut Shell's reserve life from 13.4 years to 10.6 years;
(ii) increased its worldwide 5-year average reserve
replacement cost per barrel from $5.49 to $12.57 —
$7.06, or 128% greater than the industry average of
(iii) increased Shell's finding and development costs to
$7.90 per barrel — well above the costs of its
competitors; and
(iv) reduced Shell's Appraised Net Worth downward by up to
7.1%, or $9.6 billion.
Following the announcement, Royal Dutch ADRs fell 7.87% from
$52.76 to $48.61 on the NYSE and Royal Dutch ordinary shares
fell by 7.10% from the U.S. equivalent of $52.91 to $49.15 on
the Amsterdam exchange. Shell Transport ADRs were down 6.96%
from $44.81 to $41.69 on the NYSE and Shell Transport ordinary
shares were down 6.84% on the London exchange from the U.S.
equivalent of $7.36 to $6.86. In addition, Moody's placed the
Aaa rating of Royal Dutch and Shell Transport under review for
possible downgrade because the write-down materially and
adversely affected the companies' reserves-to-debt ratio.
Following the belated disclosure, most analysts and commentators
concluded that, because of the magnitude of the write-down and
the clear SEC and industry guidelines relating to reserve
classification, the reserve overstatements could not have been a
result of error or accident, but rather, that the reserves were
knowingly overstated to preserve the companies' credit rating
and to shore up their competitive position.
For more details, contact Marc S. Henzel by Mail: 273 Montgomery
Ave., Suite 202, Bala Cynwyd, PA 19004 by Phone: 610-660-8000 or
888-643-6735 by Fax: 610-660-8080 or by E-Mail:
[email protected]

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