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Financial Times: Ousted Shell chairman off SEC’s hook

By Carola Hoyos

Published: August 31 2006 03:00 | Last updated: August 31 2006 03:00

The US Securities and Exchange Commission has decided not to take action against Sir Philip Watts, the ousted chairman of Royal Dutch Shell, the energy group.

The decision ends the regulator’s two-year investigation into the role Sir Philip played in the reserves scandal that cost the Anglo-Dutch energy group its three most senior executives and £8bn of its market value.

Adriaen Morse, counsel at Mayer, Brown, Rowe & Maw, which represented Sir Philip, said: “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.”

But others were surprised that the SEC dropped such a high-profile case, during which an independent investigation had uncovered seemingly damning e-mails linking Sir Philip with the incorrect booking of Shell’s reserves with the SEC. Joseph Goldstein, partner at Mayer, Brown, Rowe & Maw, said the report had “created an atmosphere in which Phil did leave Shell. But at the end of the day, and at the end of a very thorough and rigorous investigation of all the facts and circumstances of Shell’s reserves reporting, the lead regulators [the UK’s Financial Services Authority and the SEC] decided not to bring any action.”

Robert Turner, who works at Simmons & Simmons and advises UK companies being investigated by the FSA, said: “The main lessons here are about making sure regulators have the evidence to stand these cases up before taking them on, or announcing them, especially given the reputational stakes involved and the sanction levels.”

He added that a regulator dropping an investigation did not necessarily mean the individual or party in question was innocent.

He said: “It has very much to do with evidence and whether or not they have enough evidence and whether that evidence would have been admissible in court.”

Sir Philip has long maintained his innocence but was forced to leave Shell in March 2004 after the company came under heavy pressure from the SEC for wrongly reporting a quarter of its oil and gas reserves.

In the following months the FSA and SEC found Shell guilty of market abuse and fined the company a total of $150m (£80m).

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