Dutch pension funds sue Shell over reserves

By OGJ editors
HOUSTON, Jan. 9 -- A group of 26 Dutch pension funds, led by Stichting Pensioenfonds ABP, filed a shareholder securities fraud suit against Royal Dutch Shell PLC seeking "hundreds of millions of dollars" in damages for what it calls improper accounting for oil and gas reserves during 1997-2003.

The company reclassified reserves five times in a little over a year (OGJ Online, Feb. 4, 2005).

Grant & Eisenhofer PA, a law firm based in Wilmington, Del., and New York representing the pension funds, filed the lawsuit Jan. 6 in US District Court in Newark, NJ. The suit names several current and former Shell senior executives, including Chairman Jeroen van der Veer and former Chief Executive Officer Phillip Watts. Others named are Judith Boynton, former chief financial officer, and Mark Moody-Stuart, former chairman of Shell Transport. Defendants also include Shell's European auditors, PricewaterhouseCoopers and KPMG LLP.

"The coming together of so many public pension funds in one shareholder suit may be unprecedented in the Netherlands or in Europe," Grant & Eisenhofer said in a statement. ABP's coplaintiffs represent a broad cross section of the Netherlands workforce.

Shell issued a statement saying the lawsuit is against its subsidiary, the former NV Koninklijke Nederlandsche Petroleum Maatschappij, currently Shell Petroleum NV (SPNV). "SPNV contests ABP's claim and will vigorously defend itself against the action," the Shell statement said.

Lawsuit details
"This is an extraordinary harnessing of public interests against one of the biggest companies in the world, to recover losses arising from a massive corporate fraud," said the law firm's Jay Eisenhofer. "Although it may be the first time that such a broad coalition of public funds in one country has joined together in a shareholder suit, it reflects the increasing activism among European investors to seek recovery under US law."

The complaint says the pension funds purchased more than 200 million shares of Royal Dutch common stock during 1999-2005 and suffered "massive losses" because of Shell's restatements of reserves.

"Despite the complex oil reserve accounting issues behind the suit, this case is really about misplaced trust—a large group of public fiduciaries invested hundreds of millions of dollars in one of their country's most established companies, based on the company's own reporting of its most valuable asset, in this case oil and gas reserves," Eisenhofer said.

After the reserves adjustments, Royal Dutch Petroleum Co. and Shell Transport & Trading Co. were merged into a single parent, Royal Dutch Shell, the stock of which began trading July 20, 2005. Shareholders approved the unification formally combining the former Royal Dutch/Shell Group's British and Dutch parent companies under a single board and a single executive (OGJ Online, Oct. 28, 2004). Investors had said the old structure hindered transparency and financial accountability.

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