Washington (Aug. 25, 2004) -- Foreign-based oil companies Royal Dutch Petroleum Company and The "Shell" Transport and Trading Company plc agreed to pay $120 million to settle fraud charges brought by the Securities and Exchange Commission related to their overstatement of 4.47 billion barrels of previously reported proved hydrocarbon reserves.
Without admitting or denying the SEC's findings, Shell agreed to a cease-and-desist order finding violations of the antifraud and other provisions of the federal securities laws, and to pay $1 disgorgement and a $120 million penalty in a related civil action that the commission filed in U.S. District Court. Shell also agreed to commit an additional $5 million to develop and implement an internal compliance program under the direction and oversight of the group's legal director.
Shell simultaneously agreed to pay £17 million to settle a market abuse enforcement action initiated by the Financial Services Authority, the primary financial market regulator in the United Kingdom.
The SEC’s staff coordinated its investigation closely with the FSA and the Autoriteit Financiële Markten, the primary financial market regulator in the Netherlands. "The degree of international and interagency cooperation in this case has been extraordinary, and sets an important precedent for investors that regulatory efforts to police the financial markets will transcend national borders," said Stephen M. Cutler, director of the commission's Division of Enforcement.
"As our investigation continues, we intend to focus on, among other things, the people responsible for Shell's failures," said Harold F. Degenhardt, administrator of the SEC's Fort Worth Office.
The SEC charged that Shell overstated proved reserves reported in its 2002 Form 20-F by 4.47 billion barrels of oil equivalent -- approximately 23 percent -- and that Shell overstated the standardized measure of future cash flows reported in this filing by approximately $6.6 billion. According to the SEC order, Shell also materially misstated its reserves replacement ratio for the five-year period from 1998 through 2002.
-- WebCPA staff
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