E-mails expose scandal at Shell

Posted in Europe | 20-Apr-04 | Author: Karl West| Source: The Herald

BRITAIN'S biggest corporate scandal in 20 years blew wide apart yesterday as it emerged former Shell executives systematically lied to investors about overstating its oil re-serves and then attempted a cover-up by ordering damning documents be "destroyed".

The huge deception, which resulted in Shell having to downgrade its reserves by more than 20% in January, was detailed in a report compiled for the oil giant by a US law firm.

It charts angry and desperate e-mails between Sir Philip Watts, former chairman of Shell, and Walter van de Vijver, former chief executive of Shell's exploration and production division (EP), both of whom lost their posts. Yesterday Judy Boynton, chief financial officer, stepped down.

In total, 4.35 billion barrels of proven reserves for 2002 have been deducted since the start of the year.

The deception and attempted cover-up is almost certain to lead to a barrage of legal actions against Shell, the UK's seventh largest public company and the world's third-biggest oil company, from investors who believe they have lost billions as a result of the plummeting share price since the overstating of oil came to light in January.

There is also a possibility criminal charges will be brought against executives by US financial authorities.

In the e-mails, Mr Van de Vijver is clearly concerned about reserves bookings, dating as far back as February 2002. On November 9, 2003, after receiving what he considered to be an unfairly critical performance review from Mr Watts, he e-mailed his chief, saying: "I am becoming sick and tired about lying about the extent of our reserves issues and the downward revisions that need to be done because of far too aggressive/optimistic bookings."

Mr Van de Vijver also e-mailed a colleague in EP, and one of the authors of a bombshell report that confirmed the full extent of the overstatement, on December 2, 2003, saying: "This is absolute dynamite, not at all what I expected and needs to be destroyed."

The document was retained, but only after internal counsel intervened.

Shell said it had been asked not to publish the full 463-page report until the US securities and exchange commission (SEC) had studied the findings for evidence of possible criminal wrongdoing.

Lord Oxburgh, Shell's non-executive chairman, said: "The inappropriate be-haviour that clearly went on . . . was certainly not apparent to the board."

The scandal is being talked about as one of the most damaging at a blue-chip company since the Guinness affair in the 80s.