Landmark securities fraud settlement reached against Shell
1 June 2009
Written by Sophie Baker
The largest securities fraud settlement ever has been reached
in Europe, with a Dutch appeals court ordering Royal Dutch Shell plc to
begin the payment of $381million, plus interest, to a foundation representing
a group of institutional investors from 17 European countries.
Investors from Canada and Australia were also represented, and in total
more than 150 institutional investors were involved. The landmark settlement
resolves securities fraud claims that stem from the oil giant’s
inflation of its proven oil and gas reserves during the years 1997-2003.
The case is a landmark as a new statute, that had not before been applied
to a securities case, in Dutch law allowed the court to accept a collective
resolution as long as both sides were in agreement, even in the absence
of a civil lawsuit.
The settlement covers all non-US purchasers of Shell stock that was obtained
on European securities exchanges, principally in London and Amsterdam,
during the period in which Shell was allegedly involved in illegal energy
reserve accounting. European pension funds from the Netherlands, UK, Germany,
Sweden, Luxembourg, France, Denmark, Austria, Belgium, Finland, Italy,
Liechtenstein, Spain, Switzerland and Norway were represented in the form
of public and trade-based employees.
Shell will make its payment to a foundation created to petition the Court
of Appeals on behalf of the investor group, and US law firm Grant &
Eisenhofer represents both this foundation and the pension funds. This
fund held in excess of one billion shares of Shell during the period under
question.
“We are pleased that the Amsterdam Court of Appeals has issued its
final approval on this historic settlement, which represents a watershed
outcome for European and other non-IS investors in gaining substantial,
collective recovery in one of the most high-profile securities cases in
recent years,” commented Jay Eisenhofer, co-managing partner of
Grant & Eisenhofer.
“It is important that investors have a proper mechanism and forum
for pursuing securities claims in European courts – the Amsterdam
Court of Appeals has done a tremendous service for advancing shareholder
rights in its handling of the Shell case. This was a uniquely European
resolution in the context of a securities fraud, but one that can present
huge implications in other disputes going forward,” he added.
Shell allegedly overstated more than $100bn of future cash flows over
the six-year period covered by the case, based on billions of barrels
of oil that were not actually held in its reserves.
