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MarketWatch: SEC drops investigation of former Shell exec

By Jim Jelter, MarketWatch
Last Update: 2:52 PM ET Aug 30, 2006

SAN FRANCISCO (MarketWatch) — The U.S. Securities and Exchange Commission has dropped its two-year investigation of Philip Watts, the former Royal Dutch Shell chairman, deciding to take no action against him for the company’s overstatement of its oil and gas reserves, according to media reports Wednesday.

News in early 2004 that the Anglo-Dutch oil giant had inflated its reserves by at least 20% dealt a severe blow to Shell’s share price, as shaken investors fled the company amid a flurry of lawsuits.

“I am extremely pleased that the U.S. authorities have closed the investigation. As I have stated from the beginning, I have acted in good faith throughout and I had every reason to believe that all at Shell acted properly and in good faith when disclosing proved reserves,” Watts said in a statement.

The executive resigned from Shell in March 2004 at the height of the scandal, which cost several top officers their jobs.

SEC officials declined to comment on the matter.

An investigation of Watts by British regulators reached the same conclusion late last year. Although Shell was fined 17 million pounds ($32 million), no further action was taken against individuals in the company.

Reports that Shell had exaggerated its oil and gas reserves surfaced after an internal audit found serious discrepancies between what was actually in the ground and what was being listed on their books. The gap indicated Shell’s exploration efforts were not keeping pace with the rate at which it was depleting existing fields.

Shell was forced to review and restate its reserves — a lengthy, painful process that unleashed a flood of downgrades. The tumble pushed Shell’s market capitalization below that of rival BP Plc, reducing it to Europe’s second-biggest oil company until reclaiming the top spot earlier this month.
Jim Jelter is Industrials Editor for MarketWatch in San Francisco. and its also non-profit sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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