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“…Shell shareholders have to foot the bill for lawyers fees run up in the course of defending fat cat crooks, such as Sir Phillip Watts, the disgraced former Group Chairman of the Royal Dutch Shell Group. Sir Phillip ended up with a $18 million USD pension pot AND with all his ongoing legal fees being paid by Shell shareholders. This was after he had LIED AND COVERED UP THE TRUTH ABOUT SHELL’S RESERVES, AND IN THE PROCESS, DESTROYED SHELL’S REPUTATION”

By Alfred Donovan: Monday 12 Sept 2005

The press is having a field day in devising colourful headlines about the scandal ridden Royal Dutch Shell Group. An article in “The Sunday Times” yesterday had a story under the headline: “Shell move robs UK investors”. It reported on the horrendous tax implications for UK Royal Dutch shareholders resulting from the recent Royal Dutch/Shell unification and the dubious way in which Shell has dealt with the controversy thus far.

Yesterdays “Independent on Sunday” used the term “Clever Rascals” about Shell in a headline relating to the Sakhalin project in Russia and the potential ramifications in respect of the critically endangered western grey whale. For the record, the Encarta Online Dictionary definition of a “rascal” is: “dishonest person: somebody, especially a man, who is dishonest or otherwise unethical”.

There is of course nothing new about newspaper headlines slating Shell. The oil giant has been under fire from all quarters in relation to the reserves debacle and other scandals and controversies for some time, with numerous class action law suits being brought against Royal Dutch Shell companies and individual Shell directors by Shell shareholders, and even by Shell’s own employees in the USA and Malaysia.

However, Shell directors seem to be in a vastly superior position to mere shareholders (the owners of Royal Dutch Shell Plc) and ordinary Shell employees. In fact, Shell directors seem to be impervious to any form of redress irrespective of the seriousness of misdeeds by them in performance of their fiduciary duties. Director contracts give them immunity even to the extent that Shell shareholders have to foot the bill for lawyers fees run up in the course of defending fat cat crooks, such as Sir Phillip Watts, the disgraced former Group Chairman of the Royal Dutch Shell Group. Sir Phillip ended up with a $18 million USD pension pot AND with all his ongoing legal fees being paid by Shell shareholders. This was after he had LIED AND COVERED UP THE TRUTH ABOUT SHELL’S RESERVES, AND IN THE PROCESS, DESTROYED SHELL’S REPUTATION. He (and other Shell directors) signed Form 20F Declarations filed with the US Securities & Exchange Commission knowing that they contained materially false information.

Is it morally right that directors of public companies should be able to escape retribution and end up with massive pay off settlements (possibly to buy their silence) even if they have cheated, lied, and engaged in a corporate culture of deception and cover-up to keep shareholders in the dark, as Shell management has been doing consistently for over a decade to my personal knowledge?

Is it right that instead of being made examples of, Shell directors accused of serious charges including securities fraud, have been rewarded, in the case of Jeroen van der Veer, with elevation to the position of Chief Executive Officer of Royal Dutch Shell Plc. What kind of signal does that send? Shell shareholders are paying his legal fees for an on-going class action lawsuit in which he is a named Defendant along with his fellow Royal Dutch Shell Plc directors, Malcolm Brinded and Maarten van den Bergh.

Currently Shell directors cannot lose even if they act in blatant breach of financial regulations and in breach of Shell’s much vaunted ethical code – Shell’s Statement of General Business Principles. On the grounds of Shell striving to put the reserves scandal behind it ASAP, Shell contends that it is in the best interest of Shell and its shareholders to bailout and/or shield directors who have engaged in dishonest actions in breach of fiduciary duties. However, is that policy also in the best interest of corporate transparency and director accountability? As matters stand, corporate crooks are showered with money and insulated from any penalty or court room justice by shareholder funds, used like confetti, on their behalf.

Is this unbelievable situation really in the public interest and in the best interests of shareholders and employees generally? I believe that the answer is NO. It is morally unacceptable and encourages corporate corruption and malfeasance. It is wrong that wider shareholder interests can be treated with such utter contempt and neglect. The corporate playing field has been tilted much too far in favour of directors, as opposed to other stakeholders and the public at large.

The US Justice Department decided against pursuing a criminal investigation against Shell because it reasoned that it would not be in the best interest of Shell shareholders who have already had to fund some $150 million dollars in fines imposed by the US Securities & Exchange Commission and the UK Financial Services Authority after Shell “fooled the market” by engaging in “market abuse”. Again I do not believe that this decision has been in the best interest of shareholders generally.

(Bearing in mind the importance given to “transparency” in Shell’s Statement of General Business Principles, I believe the time is right for Shell to put into the public domain, the full 400 plus pages of the Davis, Polk & Wardwell Report into the circumstances of the reserves scandal. Thus far, shareholders have only been allowed to see an “Executive Summary”.)

I am amazed that parties interested in Shell and business ethics have not raised their voices about these outrageous decisions and policies which actually reward dishonest, incompetent behaviour by directors of multinational companies – masters of the universe who already often seem to believe that they are beyond the powers of retribution, and/or the law, apparently with some justification.

The controversies/litigation listed below (updated from an earlier version) have all arisen from the misjudgement/misdeeds of Shell management: –

  1. Shell has had five Irishman jailed since June for standing up for their principles in regards to the Corrib pipeline.
  1. Shell has threatened to have Dr John Huong, a reserves whistleblower and former Shell employee/geologist jailed for standing up for Shell’s claimed core principles of honesty, integrity and openness.
  1. Shell has announced a cost overrun of $10 BILLION DOLLARS in respect the Sakhalin-2 project in Russia (and a delay).
  1. Costs have also spiraled on the Bonga field in Nigeria, the Athabasca oil sands project in Canada and most recently on the Pearl GTL project in Qatar — priced at $5 billion at its launch last year, but now already creeping up to around $6 billion.
  1. UK shareholders in Royal Dutch Petroleum are threatening legal action in regards to tax penalties arising from the unification of Shell Transport and Royal Dutch Shell. They are furious that Shell management was disinterested in their plight until the UK press took up their story.(Read)
  1. Shell management has been made to look like fools by the spectacular success of Cairn Energy to whom Shell sold off drilling licence rights for a pittance.
  1. Shell is faced with a continuing criminal investigation by the US Justice Department into the actions of former and current members of Shell senior management. Other investigations are still in progress including an FSA investigation into the conduct of individual Shell directors.
  1. Shell has deliberately delayed the implementation of a judgement in favour of Shell Malaysian employees where a Judge held that Shell had acted “unlawfully” in misappropriating funds from an employee pension fund.
  1. Shell is faced with a Public Inquiry after the deaths of two workers on the Brent Bravo offshore platform for which Shell has already admitted liability and paid a record high fine of £900,000 ($1,620,000 approx). (READ)
  1. Shell has agreed to a proposal to pay a $90 million dollars settlement in respect of a class action lawsuit brought against Shell by its own employees.
  1. On 31 August 2005, Shell announced a $9.2 million dollar settlement of a shareholder derivative class action lawsuit, again in relation to the reserves scandal. The Lead Plaintiffs are Unite National Retirement Fund and the Plumbers and Pipefitters National Pension Fund. The action is against named individual defendants including current directors of the unified new company, Royal Dutch Shell plc – namely its CEO Jeroen van der Veer, Executive Director Malcolm Brinded and Maarten van den Berg, who all, amazingly, remain at the helm of Shell. The action alleged that they acted in breach of their fiduciary duties to Shell companies, abused their control over the Companies, aided and abetted breaches by others, and/or committed gross mismanagement and/or constructive fraud.
  1. Shell is faced with a separate US class action securities fraud case which has just been given permission to proceed by a Federal Judge – District Chief Judge John Bissell who has accepted that Shell and certain named directors including Jeroen van der Veer have a case to answer for alleged securities fraud in relation to the hydrocarbon reserves scandal.
  1. In a fourth US class action lawsuit, fourteen individual plaintiffs have charged Royal Dutch Shell with violations of customary international law. This is in relating to Shell’s oil operations in Ogoniland, an area located in the Niger River delta area of Nigeria. “The complaint alleges that Shell engaged in militarized commerce in a conspiracy with the former Military Government of Nigeria and that Shell knowingly instigated, planned, facilitated, and participated in unprovoked attacks by the Nigerian military against the unarmed residents of Ogoniland, resulting in extrajudicial murder, crimes against humanity, torture, rape, cruel, inhuman and degrading treatment, arbitrary arrest and detention, forced exile and the deliberate destruction of private property.” Shell has already admitted after the leaking of a Shell internal report that the corporate behaviour of Royal Dutch/Shell in Nigeria fed a vicious cycle of violence and corruption.
  1. Shell management has lost its attempt via proceedings issued through the World Intellectual Property Organisation to seize the domain name for its own new company ROYAL DUTCH SHELL PLC: The fact that a private individual, the author of this article, owns and uses the domain name, stands as a monument to the blithering incompetence of Shell management. Jeroen van dr Veer and his colleagues knew before anyone else of their plans for the unified business to trade under the name ROYAL DUTCH SHELL PLC but failed to ensure that the domain name was secured.

For Shell senior management to reward itself, as it recently did, with the purchase of a fleet of luxury jets against the above backdrop of misjudgement and gross ineptitude is simply obscene and shows that it has learnt nothing from the series of dramatic revelations since January 2004 which have destroyed Shell’s reputation.

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