Spot the difference

Royal Dutch Shell – third quarter (2004) net profits £4.123 billion

City watchdog drops action against ex-Shell chairman Watts

The main City watchdog, the Financial Services Authority, ignored the advice of its own specialist enforcement staff yesterday by announcing that no further action would be taken against Sir Philip Watts, the disgraced ex-chairman of Shell, over the oil giant’s reserves reporting scandal.

The FSA’s Regulatory Decisions Committee (RDC) reached the verdict despite a recommendation from the organisation’s enforcement division that action be taken against Sir Philip, who was ousted from Shell last year after admitting that its oil reserves had been overstated by a quarter or almost 4.5 billion barrels…

… In April last year, Shell published a devastating report commissioned from an independent US law firm revealing that Sir Philip had been warned on several occasions over a two-year period that the market was being misled. In one e-mail, sent to Sir Philip in November 2003, the then head of Shell’s exploration and production division, Walter van de Vijver, said: “I am sick and tired about lying about the extent of our reserves issues and the downward revisions that need to be done because of far too aggressive/ optimistic bookings.”

Sir Philip was fired along with Mr Van de Vijver and Shell’s former finance director Judy Boynton, but still received a pay-off of more than £1m.

Software company AIT – profits (2003) £6.8 million

Former AIT chairman and chief executive Carl Rigby, 43, and former chief financial officer Gareth Bailey, 36, were disqualified from their company directorships and sentenced to three and a half years and two years in prison respectively.

The pair were convicted of ‘recklessly’ issuing a statement via the Regulatory News Service three years ago, announcing that company turnover and profits were in line with expectations.

But the software firm had not closed several deals, which subsequently fell through, that were key to company forecasts, resulting in a share price drop.

‘Directors can expect to be held personally responsible for the announcements they make to the market, as these convictions have shown,’ said Margaret Cole, director of enforcement at the Financial Services Authority (FSA), which prosecuted the pair.

“Directors can expect to be held personally responsible for the announcements they make to the market”… but not Chairmen of Multinational oil companies it seems.