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Daily Telegraph: US regulator clears ex-Shell boss

By Alistair Osborne, Business Editor

(Filed: 31/08/2006)

After a two-year investigation, SEC tells Sir Philip Watts it won’t take any action regarding oil reserves overbooking scandal.

America’s financial regulator has decided not to take any action against former Shell chairman Sir Philip Watts over the oil and gas reserves overbooking scandal in 2004, which cost him his job and plunged the group into crisis.
Former Shell chairman Sir Philip Watts
The Securities and Exchange Commission told Sir Philip’s lawyers yesterday that it had closed its two-year investigation into his role in the debacle, which saw Shell overstate its proven oil and gas by 23pc, or 4.47bn barrels.

America’s financial watchdog has also ended its inquiry into the roles of ex-finance director Judy Boynton and former exploration and production chief Walter van de Vijver. He was the author of a famous email complaining that he was “becoming sick and tired about lying about the extent of our reserves issues”.

The SEC’s decision to drop its investigation comes despite fining Shell $120m (£63m) in July 2004. The SEC declined to comment. Its move comes nine months after Britain’s Financial Services Authority also dropped its investigation into Sir Philip.

By then, the FSA had already fined Shell £17m for breaching “market abuse provisions of the UK’s Financial Services and Markets Act 2000 and the listing rules”. As Shell was forced to admit the extent of its reserves overstatement, its shares plummeted.

Shell accepted both the SEC and FSA fines without admitting any wrongdoing.

Sir Philip said: “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.”

Some industry observers were surprised that regulators on both sides of the Atlantic, which had been swift to levy fines against the company, failed to find evidence to prosecute any individual.

One leading oil analyst said: “It is puzzling how the company gets fined but nothing gets done against anybody.”

Joseph Goldstein, partner at Mayer, Brown, Rowe & Maw, which represented Sir Philip, said the fines were levied in a “very harsh atmosphere” and added: “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. Sir Philip is a man of honour whose professional conduct has withstood the most searching inquiry.”

A Shell spokesman said: “We are pleased that the SEC has decided not to pursue this matter further with Sir Philip Watts, Judy Boynton and Walter Van der Vijver.” They received respective pay-offs of £1m, £522,000 and £2.5m.

Sir Philip still faces lawsuits from aggrieved shareholders, which are pursuing class actions against the company and its former directors.

The lead plaintiffs in one case are two Pennsylvania State retirement funds, which have lodged an action in New Jersey. Dutch pension funds and German and Luxembourg institutional shareholders also filed new class actions in the US in January seeking hundreds of millions of dollars.

The reserves scandal triggered a corporate restructuring at Shell bringing together its Dutch and British companies as a single entity. and its sister non-profit websites,,,,,, and are owned by John Donovan. There is also a Wikipedia feature.

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