Pension Funds Sue Shell

Filed in the New Jersey Superior Court, the suit seeks “equitable relief and damages” from 26 individual defendants, including current top executives Jeroen van der Veer, Robert Routs and Malcolm Brinded, in addition to the company’s auditors, PriceWaterhouseCoopers and KPMG.   The suit charges the petroleum company with breach of fiduciary duty, abuse of control, unjust enrichment and constructive fraud, according to a Financial Times report.

Along with disgorgement of executive compensation payouts, the suit also demands increased accountability, a vote on combining the boards and the right to nominate directors.

The charges stem from Shell’s overnight elimination at the start of the year of almost 4.5 billion barrels of proved reserves, which led the company to restate financial statements for 2002-2003, and eliminate hundreds of millions of dollars in previously reported net income.   In the lawsuit, the pension funds say executives for the company admitted the essential allegations, quoting from the 2003 annual report issued in May, which states there were “deficiencies and material weaknesses in the internal controls”. Additionally, the suit cites positive spin by executives even as e-mails and private notes between them “show they were aware of these serious reserve-accounting abuses for years”.

Also, the lawsuitfaults Shell’s accounting firms for issuing unqualified audit reports on 1998-2002 financial statements, even as “the discrepancy between the publicly represented proved reserves and the actual proved reserves increased every year”.