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MarketWatch: SEC Closes Watts Investigation (*the chief crook gets off)

SEC Concludes Investigation of Royal Dutch/Shell’s Former Chairman
Last Update: 1:13 PM ET Aug 30, 2006

WASHINGTON, Aug 30, 2006 (BUSINESS WIRE) — Late yesterday, the United States Securities and Exchange Commission (“SEC”) provided notice that it had completed its investigation into the circumstances surrounding the recategorization of proved oil and gas reserves by Royal Dutch Shell in 2004.

The SEC, which conducted a two-year joint investigation with the United Kingdom’s Financial Services Authority (“FSA”), has concluded that no action should be taken against Sir Philip Watts, the former Chairman of Shell’s Committee of Managing Directors.

This announcement comes nine months after the FSA’s November 2005 announcement that it had completed its investigation and that no action should be taken against any individuals involved in Shell’s recategorization of reserves.

Sir Philip, commenting on the news of the SEC’s decision, said, “I am extremely pleased that the U.S. authorities have closed the investigation. As I have stated from the beginning, I have acted in good faith throughout and I had every reason to believe that all at Shell acted properly and in good faith when disclosing proved reserves.”

Mayer, Brown, Rowe & Maw LLP partner, Joseph Goldstein, who has represented Sir Philip throughout the joint SEC and FSA investigation stated that, “The SEC has now joined the FSA in deciding not to charge Sir Philip with any violations of law. The two regulators made their decisions after conducting rigorous and thorough investigations of Shell’s recategorization of its oil and gas reserves. Sir Philip is a man of honor whose professional conduct has withstood the most searching inquiry.”

Mayer Brown counsel Adriaen Morse, who also represents Sir Philip, added, “Sir Philip’s integrity is beyond reproach. The closing of the investigation lays to rest any doubt as to whether Sir Philip acted properly while Chairman of Royal Dutch/Shell.”


I am extremely pleased to be in a position to make this statement at the conclusion of a very long regulatory process.

Two Investigations Closed Without Action

My conduct has been reviewed by the regulators on both sides of the Atlantic. First, last November, the FSA issued a Notice of Discontinuance to me and made a public announcement that the case was over.

Now, the SEC has notified my counsel that the investigation has been terminated and that no action will be taken.

After two years of investigation by both the FSA and SEC, review of hundreds of thousands of documents, and sworn testimony of dozens of people, both regulatory authorities have determined to close their investigations without bringing any charges.
I said from the beginning that I acted in good faith throughout and am delighted with the decisions of both the FSA and SEC.

Shell Reserves Accounting Process Transparent

As I have always said, Shell’s proved reserves accounting process involved professionals and experts in many countries who, acting in good faith, exercised their independent judgment in estimating and booking the reserves.

Shell’s internal experts on proved reserves, Shell’s independent reserves auditor, and Shell’s external auditors all opined that Shell’s proves reserves were materially compliant with the SEC requirements under Rule 4-10.

Shell’s proved reserves accounting process was transparent, the experts who ran it were professionals and I, along with others at Shell, believed the process yielded proper proved reserves disclosures.

    My Position
    In Brief:

    —  Shell’s reserves reporting process was transparent and
        involved experts around the world with integrity who believed
        Shell’s proved reserves complied with Rule 4-10.

        —  I relied on this process.

    —  Shell’s External Auditors followed the required procedures,
        reviewed all the relevant reserves and did not object to
        Shell’s proved reserves submissions to the SEC.

        —  I relied on the External Auditors

    —  Shell’s reserves booking was discussed transparently with the
        Committee of Managing Directors and Group Audit Committee.

    I made these and other arguments to both the FSA and the SEC. Both
decided not to bring any action.


1. FSA Notice of Discontinuance (9 Nov 2005)

2. The Times CityLaw Article (7 Feb 2006)
— Times Opinion Piece 060207.pdf

3. Press coverage,,9072-1865930,00.html
tts13.xml (Due to its length, this URL may need to be copied/pasted
into your Internet browser’s address field. Remove the extra space if
one exists.)


1. “In Search of Reasonable Certainty: Oil and Gas Reserves
    Disclosures” (23 Feb 2005),2318,7215,00.html

2. “Industry Consensus: Repair Outdated Reserves Reporting…” (7 Feb
SOURCE: Mayer, Brown, Rowe & Maw LLP
Mayer, Brown, Rowe & Maw LLP Washington, DC Joseph Goldstein, 202-263-3344 [email protected] or Washington, DC Adriaen Morse, 202-263-3387 [email protected] or Head, Marketing and Communications, London, UK Will Hulbert, +44 (0)20 7782 8804 [email protected] or Public Relations Coordinator, New York, NY Michael W. Phillips, 212-506-2171 [email protected] Copyright Business Wire 2006

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