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Financial Times: Final settlement draws line under Shell scandal

By Sylvia Pfeifer
Published: March 7 2008 02:00 | Last updated: March 7 2008 02:00

Royal Dutch Shell has tried to draw a line under one of the darkest chapters in its corporate history by settling the final class action claim arising from an oil reserves misreporting scandal in 2004.

The Anglo-Dutch oil major shocked investors four years ago when it announced it had overstated its proven oil and gas reserves. Shares in Shell plummeted and the scandal led to the departure of its three most senior executives, including Sir Philip Watts as chairman.

Yesterday Shell said it had agreed in principle to settle a class action brought by US shareholders represented by the Pennsylvania State Employees’ Retirement System and the Pennsylvania Public School Employees’ Retirement System.

Under the terms of the deal, the group, which bought shares in the company before the reserves restatement, would receive a total of $79.9m (£39.8m) plus $2.95m and interest, Shell said.

The deal is subject to approval of the United States district court for the district of New Jersey.

A proposed settlement on behalf of non-US claimants who purchased shares in Shell on stock exchanges outside the US between April 8 1999 and March 18 2004 was announced in April last year. This earlier offer of $352.6m is pending ratification before the Amsterdam Court of Appeals in the Netherlands.

About 80 per cent of Shell’s shareholders are based in the UK and Europe. The rest are in the US.

In total the settlement bill for both cases will amount to $470m, within the provision of $500m made by Shell in 2006.

Shell has offered to pay an additional sum of about $33m in fees and expenses. Approval by the courts is expected to take several months.

On top of the settlement fees, the scandal cost Shell more than $150m in fines imposed by US and British regulators in 2005.

It also acted as a catalyst for the wholesale shake-up of the group and prompted the historic merger of its two operating companies, Shell Transport & Trading and Royal Dutch Petroleum, to form Royal Dutch Shell, now led by chief executive Jeroen van der Veer.

Shell said: “With this settlement, together with the settlement pending in an Amsterdam court, we made a huge step towards closing the chapter of legal disputes and controversies around the recategorisation of our hydrocarbon reserves.”

Copyright The Financial Times Limited 2008

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