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The Wall Street Journal: SEC Decides Not to Act Against Ex-Shell Chairman

August 30, 2006 3:32 p.m.

The U.S. Securities and Exchange Commission has decided to take no action against the former Royal Dutch Shell PLC boss over a reserves overbooking scandal, his lawyer said Wednesday.

The SEC conducted a two-year joint investigation with the U.K.’s Financial Services Authority and concluded that no action should be taken against Philip Watts, the former chairman of Shell’s committee of managing directors.

“I am extremely pleased that the U.S. authorities have closed the investigation…. I had every reason to believe that all at Shell acted properly and in good faith when disclosing proved reserves,” Sir Philip was quoted as saying in a statement.


Sir Philip and other senior managers left the company after the oil major admitted in 2004 that it had been overstating the size of its oil and gas reserves — the amount of energy the company thinks it can pump someday from the ground — for years. The measure is an important barometer for investors.

The FSA dropped its investigation of Sir Philip and Walter van de Vijver, Shell’s former head of exploration and production, last November.

An internal report commissioned by Shell directors and issued in April 2004 put the bulk of the blame for the overstatements on Sir Philip and Mr. van de Vijver. The report faulted them for not adequately disclosing the extent of the company’s reserve problems. Both men have maintained they acted properly.

In August 2004, the FSA fined Shell £17 million ($30 million), citing market abuse stemming from the overstatements. The SEC settled a fraud investigation with the company after Shell agreed to pay $120 million in penalties. Shell didn’t admit or deny wrongdoing.

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