Royal Dutch/Shell Group, the world’s third-biggest public oil company, reached preliminary settlements with U.S. and British authorities to pay penalties of about $150 million for overstating its energy reserves. Earlier posts are here about the Shell overstatement controversy.
Shell announced the hefty settlements after months of negotiations with regulators. Shell ousted top executives, turned over millions of pages of documents and shared with the regulators the findings of an internal Shell investigation of the company’s overstatements of oil and natural-gas reserves. Shell essentially bet that cooperating with regulators would shorten the regulatory investigations and soften the blow from U.S. authorities, and the bet played out well.
Shell has agreed to pay a $120 million penalty to the Securities and Exchange Commission, which is one of the biggest penalties levied by the SEC on a foreign company in recent years. The agreement settles SEC findings that Shell violated the antifraud, reporting, record-keeping and internal-control procedures of U.S. securities laws and related SEC rules. Shell also said it agreed to pay £17 million ($30.9 million) to Britain’s Financial Services Authority, which had already found that Shell had violated British market-abuse regulations. As is usual in such settlements, Shell did not admit or deny the conclusions.
Although the announcements are clearly progress, Shell is not out of the woods just yet. The SEC must formally approve its settlement, and it can still bring civil charges against individuals involved in the fiasco. Moreover, the U.S. Justice Department is continuing its own investigation into the overstatement of reserves. Finally, Shell and its executives still could face costly civil settlements.