The ethical malaise at the top of Royal Dutch Shell

international | rights, freedoms and repression | opinion/analysis Wednesday September 06, 2006 23:34 by John Donovan - http://royaldutchshellplc.com/ john at shellnews dot net

The dark side of Shell

John Donovan, a long term shareholder and critic of Royal Dutch Shell Plc management, provides an overview of a board room culture which has allowed a series of scandals to damage Shell’s once proud reputation. A culture where directors have been prepared to cook the books and have whistleblowers (Dr John Huong) and campaigners (the “Rossport Five”), terrorised and thrown in jail. Shell's reputation has been ruined due to the rapacious greed, arrogance and aggressive tactics of some Shell executives.

By John Donovan

As a result of operating our Shell focused websites for many years, we have made contact with many Shell insiders and other individuals and organisations having an interest in Shell. As far as I know, we are all agreed on one aspect. The vast majority of Shell employees are decent hard working people who are entitled to the greatest respect. The problem is that a few disreputable individuals wheedled their way to the very top of Shell. They have been described as "bandits" by one Shell insider. Their actions have unfortunately stained the reputation of the Shell brand. Some have departed. A few executives, like a bad smell, linger on - due purely to the huge profits generated by the one factor outside of their bungling control - the record high price of oil.

The reserves fraud was one manifestation of the ethical malaise at the top of Shell. The Brent scandal is another. A number of excellent articles have already been published in relation to the Brent Bravo oil platform fatal accident, revealing details of falsified documents and cover-up, with one Shell executive, Malcolm Brinded, turning his customary blind eye to serious misdeeds.

I will not go into any detailed analysis regarding the Brent tragedy. I will leave that to experts such as Bill Campbell, a much respected former senior Shell Group Auditor of the highest ethical standing.

I would however like to provide an overview of the board room culture of Shell which has allowed yet another scandal to damage Shell’s once proud reputation. A culture where directors have been prepared to cook the books and have whistleblowers (Dr John Huong) and campaigners (the “Rossport Five”), terrorised and thrown in jail. Shell's reputation has been ruined due to the rapacious greed, arrogance and aggressive tactics of some Shell executives.

In the case of Brent Bravo, the ruthless determination by Shell management to put production before safety cost the lives of two offshore workers on the Shell-operated Brent Bravo platform in the North Sea on 11 September 2003. The Fatal Accident Report by Sheriff Colin John Harris published on 18 July 2006 confirmed that it was a preventable tragedy. Shell had already admitted culpability, receiving a record breaking fine of £900,000 ($1.6 million USD approx) fine for Health and Safety offences. What I have termed as a blind eye culture by Shell senior management has been memorably described by Bill Campbell as “a hostile environment of extreme denial”. This time the ruthless disregard of unwelcome facts led to the deaths of two men, Keith Moncrieff and Sean McCue. Their loved ones have naturally been devastated by their untimely demise.

According to Bill Campbell, Shell management ignored the results of an investigation at the Brent Bravo platform in a Platform Management Safety Review in 1999, which was led by him in his then capacity as Shell International Group Auditor. From what I have read, Mr Campbell is still trying to come to terms with the fact that Shell management actions bear no relationship to the core strictures of the Statement of General Business Principles which Shell executives have repeatedly pledged to uphold. The promises of ethical trading have proven in practise to be worthless. Shell General Counsel, Richard Wiseman let the cat out of the bag when he confessed in an email to me that the SGBP was not drafted for use in the courts. In other words, like a bet with a bookie, they are binding in honour only. What use is that, if Shell executives such as Jeroen van der Veer and Malcolm Brinded behave dishonourably?

The unpalatable reality is that the solemn pledges made in speech after speech about honesty, integrity, and respect for employees, is nothing but a confidence trick by over paid shyster’s who for over a decade (to my knowledge) have used bully boy tactics to intimidate employees, suppliers and Shell retailers. If placed under attack, they are happy to hide behind an in-house army of 650 lawyers, some of whom are equally lacking in professionalism and integrity: the name of Thavakumar Kandiah Pillai, Shell’s legal manager in Malaysia immediately springs to mind.

Royal Dutch Shell has already settled class action law suits arising from the reserves fraud which involve Jeroen van der Veer and Malcolm Brinded as defendants. More information and links are provided at the foot of this article.

People tend to forget the incriminating emails revealing how Shell senior management lied for years to the U.S. Securities and Exchange Commission (the SEC) by inflating the volume of Shell hydrocarbon reserves declared on Form 20F returns. After four more successive downgrades (after Brinded had stated that he was confident there would be no further downgrades), Shell shareholders ended up paying $150 million USD in fines to financial regulators for "securities fraud" and "fooling the market". The crook in chief, Sir Philip Watts, was escorted from the Shell Centre by security staff after being relieved of his command. Naturally Shell tried to buy his silence with a remuneration/pension package reportedly worth $18.5 million USD. Nonetheless Sir Philip retained his knighthood for “services to Britain” and now probably spends his time counting the proceeds while basking in his Japanese garden.
Related link: http://shellbrand.blogspot.com/2004/03/fall-of-sir-phil....html

Shell executives are in the happy position of being indemnified so that they are covered even in the event of committing serious misdeeds. Shell shareholders have to pick up the tab.

When Campbell was issuing his Brent Heath and Safety warnings in 1999 to Malcolm Brinded (then Managing Director of Shell Expro) Campbell knew nothing about Shell management machinations behind the scenes in regards to the reserves fraud and other scandals e.g. Shell managements use of undercover agents in a closely associated private intelligence firm (with shared directors and shareholders) to engage in espionage and sabotage against Shell's perceived enemies. It is amazing that despite being tainted by the reserves fraud and his role in other debacles e.g. the humongous cost overruns on Shell’s white elephant projects such as Sakhalin II, Brinded is still Chief Executive of Shell Exploration and Production. Apparently a miscalculation of a mere £10 BILLION (18 BILLION USD approx) is not sufficient to be sacked. It has however landed Shell in deep mire with the Russian government.

Returning to the Brent scandal, Mr Campbell tried to put evidence to the Fatal Accident Inquiry, but the presiding Sheriff declined to admit it on the grounds that it was beyond the scope of his report. However, Sheriff Harris said that a more general inquiry would be appropriate to address wider issues. Dr Huong also corresponded with the Scottish Parliament Public Information Office and offered to provide important "similar fact" evidence relating to Health and Safety issues on a Shell/PETRONAS oil platform. His offer was transmitted to the Lord Advocate, Mr Colin Boyd QC but was not taken up. It seems to have been a rather restricted inquiry.

The news of falsification and cover-up in the Brent scandal is not the least bit surprising to me. Bill Campbell was not the only whistleblower in 1999. That same year, I personally brought to the attention of Malcolm Brinded irrefutable documentary evidence of corrupt practices by Shell managers in relation to the awarding of a major Shell contract. A contract was awarded to a company which did not even take part in the tender. This was like a horse winning a race in which it did not run. Details can be accessed via the following link:-

http://shellnews.net/week34/shellnewsalarmbellringingov...5.htm

The company which miraculously won the contract was linked to the Shell manager running the tender. He enjoyed socialising in the evening and weekends with the directors of the company in question and conveniently had an off shore bank account. This man claimed and got the full backing of Shell senior management, including Brinded, even though his actions were directly in breach of the SGBP and all other ethical norms.

A few words about Jeroen van der Veer:

Although I have it on good authority that he is an intelligent and nice man, my problem is with his integrity. He personally signed a Form 20F return to the SEC testifying to Shell's declared hydrocarbon reserves. When it became apparent to a shocked world that Shell management had lied for years about its reserves, why did he not resign after being exposed as having misled stock holders and the US regulator? That would have been the honourable course of action. He should not have signed the declaration without satisfying himself that the figures were fact, as opposed to fiction. How on earth has Shell allowed itself to end up with a discredited Chief Executive Officer implicated up to his neck in one of the biggest corporate frauds in history?

Shell Whistleblowers

What is the message from Shell senior management to would be whistleblowers? If someone is aware of serious infractions of the SGBP is there evidence that they are encouraged to step forward, or does Shell management prefer to rely on intimidation to frighten them off?

In this connection, I have noted with interest the appointment of Miss Jyoti Munsiff as the Chief Ethics and Compliance Officer for Royal Dutch Shell PLC. This is like putting a fox in charge of a hen house. How likely is it that a would be whistleblower would approach Miss Munsiff bearing in mind her long close association with Shell senior executives and her track record in trying to use intimidation to prevent information from reaching Shell shareholders? Her appointment spoke volumes.

What is the experience of people who have had the courage to speak out?

Dr John Huong, a Shell employee of 29 years standing, blew the whistle internally at Shell in respect of inflated reserves in his then capacity as production geologist for the Kinabalu Field project. This proved to be a turning point in his career. He was downgraded and humiliated for giving information which Shell management did not want to hear. We have a copy of his email to a line manager when he stated: “How can we live a day with a free conscience by getting the money from our investors through the 502F when our depositional model work is in question?” Being a Shell employee of high integrity (and a deeply religious Malaysian humanitarian) he later also blew the whistle in respect of Health and Safety issues regarding a Shell helicopter fleet which was his responsibility as an asset manager. His warnings were once again ignored (including an email to Sir Philip Watts). One of the helicopters in the fleet subsequently crashed. That incident has haunted Dr Huong ever since. Even worse, for over two years he has been subjected to a deluge of litigation brought by EIGHT Royal Dutch Shell companies - multiple injunctions, writs, restraining orders etc. His crime? He dared to reveal wrongdoing at Shell. He is currently under threat of imprisonment by Shell for alleged contempt of court. Shell management is apparently so out of touch that it has no idea how bad it looks that EIGHT Royal Dutch Shell companies have ganged up on one former employee. Is this not all a deliberate ruthless move to frighten off other current or former employees from speaking out about Shell misdeeds?

Look at what has happened to Bill Campbell. How can any Shell employee be encouraged to blow the whistle internally to prevent such tragedies as the Brent Bravo scandal, knowing what the consequences have been for him for telling the truth? Campbell has made plain his revulsion at the way Shell has launched an unfounded attack on his reputation.

Our attention was recently drawn to emails widely circulated inside Shell which were originated by a senior Shell manager, Hans Bouman, before his compulsory redundancy from the company a couple of years ago. We published one such email in which Bouman commented on a moral decline at Shell. We appealed for more of the Bouman emails after establishing its authenticity. We did so after it became clear from Shell insiders that the Bouman emails are collector items because of their outspoken and eloquent content. Mr Bouman, like us and a few others, realised that all was not well with Shell and courageously said so internally, on the record. This it seems triggered his premature retirement. We note in this connection that a Shell director who is a named defendant in at least one class action lawsuit arising from the reserves fraud is being allowed to stay on at Shell past his official retirement date. Apparently Jeroen van der Veer, another defendant, is being touted for an extension beyond his retirement. It’s a strange unfair world when villainous behaviour which destroyed the 100 year partnership between Shell Transport and Trading Company and Royal Dutch Petroleum is rewarded while dedicated honest people like Dr John Huong, Bill Campbell and Hans Bouman are ill treated for acting entirely within the remit of the SGBP.

So it turns out that we were not on our own in ringing alarm bells. The internal warnings from these three gentleman were also all ignored (as was our warning to the largest shareholder in Shell, Her Majesty, Queen Beatrix of the Netherlands). No one at Shell senior management was listening to any of us. Shell management has even effectively closed down the "Tell Shell Forum" to shut off any negative feedback from Shell employees and stakeholders via that route. We have supplied a more up to date alternative forum - "Live Chat" - which is receiving far more postings per day than the Tell Shell Forum was, even in its heyday. So there is a need for such a facility, even if Shell management is not interested in taking note of what is being said.

Under the circumstances I have to conclude that scandal, blunder, disaster and preventable deaths will continue until the blind eye culture is brought to an end. Until then, as previously indicated, the malady will linger on.

MAIN ARTICLE ENDS

THE RESERVES FRAUD:

I will just mention a few of the relevant lawsuits.

The majority of the directors of Royal Dutch Shell Plc are Defendants in a global class action lawsuit against Shell in respect of the reserves fraud. The Plaintiffs include the Pennsylvania State Employees Retirement System. Shell CEO Jeroen van der Veer is one of the Defendants.

Shell has already agreed to settle for $90 million USD a U.S. lawsuit brought by brought by current and former Shell employees enrolled in savings plans covered by the Employee Retirement Income Security Act, or Erisa. ( http://shellnews.net/week28/wall_street_journalshell13j...5.htm )

Shell has also agreed to settle an action by Shell shareholders and the Unite National Retirement Fund and the Plumbers and Pipefitters National Pension Fund. The action alleged that the defendants breached their fiduciary duties, abused their control over the Companies, aided and abetted breaches by others, and/or committed gross mismanagement and/or constructive fraud. The named defendants included Jeroen van der Veer, Malcolm Brinded and Maarten van den Berg. In effect they made a plea bargain. Under the terms of the settlement, Royal Dutch Shell agreed to adopt and implement certain corporate governance principles including a section covering corporate ethics, honesty and legal compliance.

http://shellnews.net/week39/stanford_law_school30sept20...5.htm

http://shellnews.net/week35/shellnewsanotherclassaction...5.htm

Shell has already paid USD150 million dollar fines imposed by the SEC and the UK Financial Services Authority after these financial regulators found Shell guilty of providing misleading/false filings in respect of claimed hydrocarbon reserves.

SHELL'S CONDUCT IN NIGERIA

In Nigeria, Shell acted in a conspiracy with a corrupt military regime to repress a campaign led by a peace loving Nobel Laureate, Ken Saro Wiwa, who tragically ended up being hanged on false charges along with several of his close colleagues. Shell has for decades plundered and polluted in Nigeria.

SHELL MANAGEMENT CONNECTION WITH UNDERCOVER AGENTS

Shell admitted after a story published by a UK newspaper, The Sunday Times, on 17 June 2001, that it had used a serving German Secret Service Agent on undercover missions targeted against its perceived enemies including Greenpeace, The Body Shop and Nigerian activists. The agent, who was employed by a Hakluyt Limited, a sinister London-based "business intelligence bureau", had engaged in sabotage, espionage, betrayal, deception and intelligence gathering. The following are extracts from The Sunday Times article: “Behind the facade, however, Schlickenrieder was a spy working for both the German secret service and for Hakluyt, a private intelligence agency based in London's West End and set up by former officers of MI6, the secret intelligence service. His codename was Camus after Albert Camus, the existentialist author of L'Etranger. Hakluyt paid him thousands of pounds to inform on the activities of Greenpeace, Anita Roddick's Body Shop and other environmental campaigners. The BND, the German equivalent of MI6, allegedly paid him £3,125 a month living expenses.” The agent also had a sinister role in connection with Ken Saro Wiwa, the Nigerian Nobel prize laureate, who was hanged on false charges by the then corrupt military regime in Nigeria with which Shell was closely involved. Mr. Wiwa was hung along with eight others after leading a peaceful campaign against Shell’s activities including horrendous environmental consequences resulting from oil spills and gas flaring in Ogoniland in the Nigerian Delta. We discovered that senior titled directors of Shell were also directors and the ultimate spymasters of Hakluyt, one serving as Chairman of the operating company and the other as President of what is supposed to be an oversight organisation, The Hakluyt Foundation. The relevant gentlemen were simultaneously major shareholders in Shell and Hakluyt.