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Shell’s Ousted Ex-Boss Breaks Cover, Slams FSA

THE WALL STREET JOURNAL: Shell’s Ousted Ex-Boss Breaks Cover, Slams FSA

“Both of Shell ‘s parent companies – Royal Dutch Petroleum Co., of The Hague, and London-based Shell Transport & Trading Co. – as well as Watts, Van de Vijver and other individuals face purported class action law suits in the U.S. from aggrieved shareholders. Watts and other involved individuals still also face probes from the SEC and the U.S. Justice Department.” (ShellNews.net)

By MARK LONG

September 17, 2004

Of DOW JONES NEWSWIRES

LONDON — Philip Watts, the ousted former chairman of Royal Dutch/Shell Group (RD, SC), broke cover Thursday, accusing the U.K.’s financial regulator of violating his rights and running a flawed investigation into Shell ‘s downgrade of its oil reserves.

“I believe that a full and fair examination of all the facts will demonstrate that I have acted properly and in good faith at all times,” Watts said in a cover letter to a filing requesting that the U.K.’s financial regulator’s appeals board give him a chance to clear his name.

Last month, both the U.K.’s Financial Services Authority and the U.S.’s Securities and Exchange Commission issued notices saying they were levying fines totaling around $150 million on Shell after finding the company misled the market by overstating its tally of oil and natural gas reserves.

At the time, the FSA said it would continue to investigate “other aspects of this matter,” though it stopped short of naming individuals or saying it was looking into Watts’ role in the affair.

Nevertheless, Watts’ lawyers Thursday filed a so-called reference notice to the Financial Services and Markets Tribunal, claiming the FSA identified and prejudiced Watts in its findings without giving him a chance to represent himself or review the evidence.

The FSA declined to comment. A spokeswoman for Shell said the company was aware of Watts’ action, but wouldn’t comment further.

Reached by telephone, Watts’ lawyer, Joseph Goldstein of Washington D.C. firm Crowell & Moring, said Watts had nothing further to say on the matter at this time.

Watts and the company’s former head of exploration and production, Walter van de Vijver, were both forced out of their jobs this spring following the first disclosure that oil and gas reserves had been overstated. The Anglo-Dutch company eventually reduced its tally by more than a fifth, or 4.47 billion barrels.

Both of Shell ‘s parent companies – Royal Dutch Petroleum Co., of The Hague, and London-based Shell Transport & Trading Co. – as well as Watts, Van de Vijver and other individuals face purported class action law suits in the U.S. from aggrieved shareholders.

Watts and other involved individuals still also face probes from the SEC and the U.S. Justice Department.

The scandal prompted Shell to launch a wide-ranging review of its 97-year-old corporate governance structure, the conclusions of which are expected in November, according to Watts’ replacement, Jeroen van der Veer.

In Thursday’s filing, Watts, through his lawyers, tries to distance himself from the reserves scandal, saying he was “not an expert in the estimation of reserves or SEC reporting.”

“The FSA’s Final Notice fails to acknowledge that Sir Philip relied on the reviews by Shell ‘s experts in oil and gas reserves estimation and Shell ‘s external auditors to ensure the accuracy of reserves information,” the statement says.

Before being named chairman of the Anglo-Dutch oil giant’s committee of managing directors in 2001, Watts was head of Shell ‘s Exploration & Production division.

A spokesman for KPMG, one of Shell ‘s two outside auditors, said the firm stands by the quality of its audit work for Shell , but declined to comment specifically on the matter. A spokesman for the other auditor, Pricewaterhouse Coopers, wasn’t able to comment immediately.

A spokesman for the Tribunal said the FSA has 30 days to respond to Watts’ claims. Watts will then have another 30 days to make his response.

Only then could it go to a hearing, which would be likely in early 2005. The tribunal only publishes its decisions and won’t be publishing the FSA’s response.

Company Web site: http://www.shell.com/

-By Mark Long; Dow Jones Newswires; +44 (0)20 7842 9356; [email protected]

(Silvia Ascarelli in London contributed to this article.)

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