ShellNews.net: New SEC Chairman, Christopher Cox, brands Royal Dutch Shell reserves debacle a European “fraud” on a par with the Enron and WorldCom scandals: Tuesday 11 October 2005: 04.00am EDT
Burson-Marsteller wins Royal Dutch Shell Plc global PR account: triumph or poisoned chalice?
On Monday 3 October 2005, a story in PR Week announced that Burson-Marsteller has been appointed as global PR consultants by Royal Dutch Shell Plc. In view of recent reports about its new client, Burson-Marsteller may be wondering if it has been handed a poisoned chalice.
11 out of a 15 member Board of Directors of the new unified company Royal Dutch Shell Plc are tainted by what the incoming Chairman of the US Securities & Exchange Commission, Christopher Cox, has branded as a fraud (the Shell reserves debacle). He has described the fraud as being on a par with the Enron, WorldCom, Global Crossing, Tyco, Vivendi and Parmalat scandals (FT article 7 October).
Aad Jabobs, (non-executive Chairman of the Board of Directors, his deputy Lord Kerr (the senior independent Director), Jeroen van der Veer (CEO), Malcolm Brinded (Executive Director for Exploration and Production), Rob Routs (Executive Director, Oil Products and Chemicals), plus non-executive directors, Maarten van den Bergh, Sir Peter Burt, Sir Peter Job, Wim Kok, Jonkheer Aarnout Loudon and Lawrence Ricciardi, are ALL tainted by the reserves fraud.
All are named Defendants in a US Class Action lawsuit brought by the UNITE National Retirement Fund and the Plumbers and Pipefitters National Pension Fund. The lawsuit names 27 directors and officers of Royal Dutch/Shell. The suit accuses Shell executives of breach of duties to shareholders, abuse of control, mismanagement, fraud and unjust enrichment. Shell has agreed to settle the lawsuit for $9.2 million (USD). Although Shell officially denies any wrongdoing, the settlement amounts to a tacit admittance of misdeeds in return for a lesser penalty. Shell management has also agreed to changes in respect of corporate structure and governance, including business ethics.
This is the unnerving reality which Burson-Marsteller will have to cope with: a $200 billion dollar oil giant headed up by a Chief Executive who appears from his public appearances to be in dire need of a charisma transplant, who often speaks in double-dutch, and worst of all, like the majority of his fellow board members, is indelibly tainted by the reserves fraud.
The fraud has generated almost continuous negative publicity since the story broke in January 2004 in a global firestorm of negative news. It was a colossal fraud involving billions of dollars in hydrocarbon reserves. Stanley Bernstein of Bernstein Liebhard & Lifshitz LLP, the lead US plaintiff lawyers bringing a different US class action case against Shell and named directors, including some of those mentioned above, described the fraud on the BBC TV Money Programme in the following terms: "There are a lot of investors and many maybe more investors that were affected by this fraud than any other fraud in history".
By a sheer fluke, on the same day as the announcement in PR Week that Burson-Marsteller had won the Shell PR account, Google News inadvertently republished several ShellNews.net news stories about Shell, all of which were negative and of fairly ancient origin. This turned out to be unfortunate timing for Burson-Marsteller as anyone making a Google News search for Royal Dutch Shell news discovered that the PR Week story was featured in a cluster headed by a ShellNews.net report with the following caption: Secret Censorship on Royal Dutch Shell “Tell Shell” Internet Forum”.
Just prior to Burson-Marsteller being appointed, Shell management had performed two highly embarrassing U-turns. First came the humiliating climb-down in respect of the shareholder “refusnicks”: Shell management was rightly castigated in the press for its treatment of British investors in Royal Dutch who were faced with significant tax liabilities arising from the unification of Royal Dutch/Shell. This debacle was followed by the news that Shell had decided to back down in the case of the “Rossport Five” - the Irish landowners who were jailed at the behest of Shell after objecting on health and safety grounds to the laying of the Corrib pipeline near their homes. Shell management may now face contempt proceedings over the laying of the pipeline without first obtaining ministerial consent.
There have been negative news stories in the week following the appointment of Burson-Marsteller: The BBC and The Sunday Business Post published reports about the $10 billion dollar cost overrun on the Sakhalin2 project in Russia and the projects potential adverse effect on the endangered western Pacific gray whale. Under the headline: “Another PR blunder from the House of Shell…”, The Guardian reported on a conference speech by Ian McCredie, head of global security services at Shell, which must rank alongside Gerald Ratner’s disastrous gaffe in similar circumstances some years ago, when he described his own jewellery products as “crap”. Mr McCredie announced that up to 70 Shell staff have been kidnapped over the last year in Nigeria, before moving on to “slag off the royal family in Saudi Arabia, where Shell is desperately trying to ingratiate itself”. The Guardian also published a story about "rewards for failure" which included a proposal that former Shell directors implicated in the reserves fraud should repay settlement monies received when they departed from Shell. To cap it all, The Independent ran a story reminding its readers that we are a month away from the 10th anniversary of hanging of Ken Saro-Wiwa, killed by Nigeria's former military dictatorship after leading protests against Shell's activities in the region.
During the same period there has also been some lively debate on “TellShell”, the Shell “Blog” facility buried within Shell’s portal website, Shell.com. Much of it has been focused on ShellNews.net and its owners, including Alfred Donovan (the author of this article) and on Shell’s baffling attitude to free speech on the Internet. A posting by “Richard”, who mentions the appointment of the new PR agency, ignited the recent round of postings which includes reference to the reserves fraud. A selection is printed below, in chronological order.
Posted By Dr. John Huong – nickname: “none”: Subject: Wakey Wakey on Freedom of Expression under the Universal Declaration of Human Rights 1948 (United Nations): 01/10/2005 14:53:23
Wow, I’ve just read the posting below about the 2005 Accountability Rating – the article by Alfred Donovan- the owner of the worlds self proclaimed ultimate gripe site, ShellNews.net. I am baffled why Shell allows him to comprehensively tear Shell management to pieces on countless postings all over the Internet, including Shell’s own website – while I am not allowed the freedom to make criticism of Shell, my former employer of 29 years.
There has not been a peep from the Shell webmaster on this or any other issue for some time as fellow contributors have noticed. We seem to be on our own here guys!
For anyone who doesn’t know, it is a matter of public record that I am currently the subject of a High Court Injunction and a Restraining Order obtained collectively against me by eight Royal Dutch Shell Companies. As far as I know, I am the only person on the entire planet whose freedom of expression is being curtailed by a multinational goliath. It’s a strange feeling. I suppose that I should count myself lucky that unlike the Rossport Five, I was not imprisoned. I am not criticising Shell for having Irish citizens jailed but merely pointing out the fact that they put in jail for three months. I am regretfully not in a position to express my comments about Shell one way or the other (although I would love to do so) though I trust that it is in order for me to congratulate the Rossport Five on their release from prison.
I have read on ShellNews.net that the Rossport Five may have a case against Shell for wrongful imprisonment. Now that Shell has reversed course in respect of the Rossport Five, it might wish to withdraw its legal action against me, in which event I too would seek legal advice about the question of appropriate redress, as part of any resolution of Shell’s action against me.
Returning to the question of my freedom of speech on the Internet, why is it that Mr Donovan’s astonishingly candid and damaging commentary about Royal Dutch Shell is allowed by Shell lawyers? I have a copy of the legal statement made by Shell International Petroleum Company Limited in May 2005 recognising HIS rights to say anything he likes about Shell on his website. This just happens to be the same website where the posting of articles under my name led to Shell commencing proceedings against me. As indicated, for some unknown reason I do not enjoy the same basic human rights as Mr Donovan.
Does he get special treatment because of his age (88), race, nationality, or perhaps because he is a Shell shareholder? I am baffled. Is it proper that his rights are deemed to be different and superior to mine? I am not criticising the fact that I am being penalised because it would be dangerous for me to say anything about Shell – merely trying to fathom out why I have been singled out. There must be some valid reason which has not occurred to me although I cannot imagine what it could be.
Perhaps the hibernating Tell Shell webmaster will enlighten me on this matter? Wakey Wakey!!!
Or does anyone else have any suggestions????????
Posted By Richard: Re: posting by none: 02/10/2005 10:24:41
none, (or should I call you John?),
"Perhaps the hibernating Tell Shell webmaster will enlighten me on this matter? Wakey Wakey!!!
Or does anyone else have any suggestions????????"
I think that many will empathise with your Wakey Wakey message. It is quite frankly embarrassing that the webmaster has failed of late to respond to any postings. Failure to respond to postings which are illiterate or offensive is understandable, but there are plenty of recent postings which made valid points which should have drawn a response even if only "working, reverting". Perhaps when and if Shell confirms the appointment of its new outside PR adviser we will get some response, though it may well be that the corporate attitude is: "Lie low and say nothing; they'll soon get bored". (I hope we don't).
With regard to your request for suggestions, my advice would be that it would be in everyone's interest to seek an amicable resolution of your differences with Shell informally and outside a public forum. Regardless of your perception of the rights and wrongs,hurling abuse at Shell is unlikely to produce a positive result when you are a single individual up against a phalanx of Shell lawyers who are spending shareholders' money rather than their own.
I also have doubts about the wisdom of allying yourself so closely and obviously to the Donovans, who seem to have raised Shell-baiting to such a level of vituperation (cleverly mixed with plenty of apparent balance and reasonableness) that it is difficult to see how either side can compromise without losing an unacceptable amount of face (Shell) or a rich and ongoing stream of damages (the Donovans).
Having said all that, there are probably quite a few people who would sympathise with your view that it is, shall we say, odd that you are effectively gagged and they are not.
Posted By Dr John Huong: In response to Mr. Richard's message “none”: 03/10/2005 16:17:50
It amuses me how I ended up as “none" and that is very appropriate to my career – a man with no name (and no job). It brings to mind a character played by Clint Eastwood in a spaghetti Western. When I logged onto TellShell, I was asked to provide a nickname and since I do not have one, my reply was “none”. Had I been asked for my pen name, my reply would probably be John Huong. So yes, please call me John in short.
I am grateful to you for your empathy. As a former Shell employee, you may have some idea of what it means to be in my shoes, investing some 29 years with Shell. For the first 23 years I received excellent-outstanding staff appraisals before my career came to an abrupt stop. I am not in the position to say more about the circumstances of my sad departure from Shell because I do not want to breach the current Malaysian High Court Injunction. The situation is serious, as I have been threatened by Shell with imprisonment if I were to exercise my human right to freedom of speech, for example by making any insightful criticism in a healthy exchange of views about Shell management, or Shell activities - the supposed purpose of this Internet forum.
As a former hard working and loyal Shell employee, I have empathy with the TellShell webmaster and the predicament he or she is in. I was once assigned to Shell corporate affairs dealing with issues management and if I were given the same difficult and almost impossible task which the TellShell webmaster has, I would probably be busy looking for another job (that may be what the webmaster is currently doing).
You mention Shell’s new PR advisers. They will also have a challenging and daunting task ahead of them in view of recent events reported in the news, including spectacular Shell management climb-downs on potential tax liabilities for UK shareholders in Royal Dutch Shell and the release from prison of the “Rossport Five" following which Shell is now faced with the apparent prospect of a contempt hearing for allegedly supplying false information to the court.
I must again thank you Richard for a mature gentlemanly approach to resolving differences with Shell on an informal internal basis. I can tell you wholeheartedly and sincerely that it was always my wish to resolve matters on that eminently sensible basis. I consistently pleaded with Shell Management to resolve the difficulties in an amicable way - the very words contained in an email from me to Shell management in 1997. For now, I cannot say anything that may be construed as damaging to Shell's reputation and in any event, would not wish to hurl unfounded abuse at Shell, as I do not need to. I note your comment that I am "a single individual up against a phalanx of Shell lawyers who are spending shareholders' money rather than their own." Indeed Shell has all the necessary resources of one kind or the other, a proxy given by many shareholders to their Directors and that may perhaps change with resolutions made at the next AGM. All I can say is that I trust in God and His power in all circumstances and I am not going to contest that luminous statement of yours. Maybe Shell will take action against you for suggesting that naughty statement of yours, which you have put as a matter of fact. Is it the Donovan’s who are leading you from the path of righteousness or maybe Tippi can provide some insight?
I first stumbled in amazement across Chapter 22 in the Donovan website while surfing the net a couple of years ago. Via their good offices, my predicament was quickly made known around the world. Since then I have come to have a deep respect and affection for Alfred and John Donovan. I thank God Almighty for putting us into contact. I have never met either of them, but would trust them with my life. I hope and believe that they feel the same about me. Please believe me Richard when I say that I have come to know these gentlemen very well and I know them to be men of the very highest integrity who, contrary to the implication behind your assertions, put principles before money. They, like the Rossport Five, will fight for their rights, principles and beliefs irrespective of the size, power and influence of an opponent.
As to your comment about “a level of vituperation", that seems to me with all due respect to be a rather sweeping generalisation. Specific examples would assist me in an assessment as to whether that comment is well-founded. It is true to say that there has been extensive negative commentary from the Donovan’s about Shell, but at the same it also applies to commentary from all news sources that have covered stories about Shell since January 2004. Is it the Donovan’s and the news media who have fabricated a string of negative stories about Shell, or were the stories well-founded i.e. has there been a high level of management misdeeds and incompetence which created the events which led to the proliferation of negative reports? If you don’t mind, I will not answer my own question. I have no appetite for imprisonment of the event that I should say the wrong thing.
Like many other Shell stakeholders I have been astonished and amused by how Alfred Donovan has managed to end up with the dotcom domain name for the $200 billion company Royal Dutch Shell Plc even after Shell launched proceedings against him through the World Intellectual Property Organisation. At the venerable age of 88, he miraculously achieved a unanimous verdict in his favour in August without even having any legal representation. Alfred really is a giant slayer par excellence. When will he be receiving his knighthood?
There is one other point to make. I view these matters from a different perspective to anyone else in the world. I am, to the best of my knowledge, the only person of any nationality who is under potential penalty of being thrown in prison if I were to criticise Shell on the Internet (and you are correct in saying that they are people who sympathise and empathise with me). I am, as is already indicated, also the only person who is currently the subject of an ongoing libel action by eight Royal Dutch Shell companies. This fact confirms beyond any doubt that Shell DOES take legal action against anyone it believes has stated falsehoods about Shell management or stands in the way of their project plans for principled reasons. (Of course the libel action will not succeed if my comments are judged to be well-founded, but that issue is not material to the point I am making.) If Shell truly believes and can prove that anything alleged or stated as fact by Alfred Donovan is untrue, then Shell would surely have sued him for libel. If it does not wish to do so because of his age, then they could sue his son John as he has also been very forthright in his many published comments about Shell. In this connection, I draw your attention to the following legal statement displayed on the home page of the Donovan website, RoyalDutchShellPlc.com (AKA ShellNews.net): “SHELL IS OF COURSE FREE TO ISSUE LIBEL PROCEEDINGS IF ANYTHING PUBLISHED HEREIN IS UNTRUE”. You and the world must draw your own conclusions about Shell’s reticence to take up the invitation.
Dr John Huong
PS. I am aware that an independent mediator is being sought to help resolve the Rossport Five controversy. Like Alfred Donovan, I am readily available to provide my impartial services…
REPLY TO RICHARD, DR HUONG & "COMMONSENSE" ALFRED DONOVAN: 10/10/2005 00:01:09
Dr Huong has already pointed out, as my son and I have previously, that we do not create bad news about Shell. We leave that function to Shell management. It is not our fault that there has been so much bad news over such a long period. That too is down to an incompetent dishonest Shell management.
We are certainly more consistently outspoken about the failings of Shell management than any other news source. That is partly because we feel more involved and frustrated by the reserves fraud, bearing in mind that no one listened when we rang the alarm bells far and wide about “a corporate culture of cover-up and deceit deeply ingrained at the highly levels of Shell management”.
The part in quotes is taken from a letter I sent in 1999 to Queen Beatrix of the Netherlands - the largest shareholder in Royal Dutch Petroleum at that time. I also wrote in similar terms to UK government departments, Prime Minister Blair, institutional shareholders, the UK Advertising Standards Authority etc. No one took any notice. Shell had a wonderful reputation built up over a century, with some more recent blemishes, but it was still generally well thought of and respected. So it is understandable that our ever more strident warnings were ignored. Unfortunately for my fellow shareholders and the reputation of Shell, the warnings were very well founded, as subsequent events have confirmed.
With regards to my use of the term “fraud” above, this is how we will refer to the reserves scandal henceforth because that is how it has now been described, on the record, by no less a person than the incoming Chairman of the US Securities and Exchange Commission, Mr Christopher Cox. Others have used the term previously, but his use of the word is the ultimate confirmation that it is the appropriate description. Personally I doubt that it was a planned fraud but rather a case of resorting to the unscrupulous corporate culture described above, which amounted to a fraud, when things went awry.
As we have also pointed out a number of times, almost everything in the control of Shell management turns into a disaster e.g. selling off oil fields to Cairn Energy for a pittance which subsequently yielded multi-billion barrel black gold; the doubling of costs on the Sakhalin2 project to $20 BILLION USD; costs also spiralling on the Bonga field in Nigeria, the Athabasca oil sands project in Canada and most recently, the Pearl GTL project in Qatar — priced at $5 billion at its launch last year, but now already creeping up to around $6 billion; the spectacular U-turns in respect of the Rossport Five in Ireland and the UK shareholders in Royal Dutch – the so called “refusnicks”: The only saving grace, as we have said before, has been the one factor over which Shell management has no obvious involvement: the high price of oil.
Amazingly, 11 out of the 15 members of the board of directors of Royal Dutch Shell Plc are tainted by the reserves fraud: This includes Chief Executive, Jeroen van der Veer. A number of class action law suits arising from the fraud have been settled by Shell. Some lawsuits are still pending, having been given permission by the US courts to proceed.
So what has Shell management been doing during this maelstrom of negative publicity (of their making not ours): The answer: ordering a fleet of luxury jets.
If Shell had decided on a completely fresh start by parting company with ALL directors/employees tainted by the reserves fraud, then the current situation would be very different. Much of the ammunition feeding negative reporting would have been removed and Shell could have benefited from an injection of integrity into the ranks of senior management, by recruiting more people like Jorma Ollila. As it is, Shell is stuck with members of the same discredited management which dealt a mortal blow to Shell Transport And Trading Company plc.
DR JOHN HUONG
We do reciprocate the sentiment expressed by Dr Huong in terms of regard, respect and affection. We have always found him to be a man of unbending principles. This was his undoing at Shell. He insisted on working within Shell’s Statement of General Business Principles, pledging honesty, openness and integrity in all of Shell’s dealings. That was a huge mistake in view of the then prevailing corporate culture as mentioned above. In other words, the hard reality rather than the PR spin and hype. If people in high places, such as Sir Philip Watts, had displayed the same integrity, the reserves fraud would never have happened.
Dr Huong has been victimised by Shell. He has been robbed of his human rights and humiliated by Shell. His perilous legal position has already been mentioned in his posting. No oil company will employ him while the defamation action brought by eight Royal Dutch Shell companies remains hanging over his head, possibly for years given the slow legal process in Malaysia. How is it possible that this one individual could have destroyed Shell’s reputation, as is claimed by Shell in its High Court Writ? Anyone who has a reasonable knowledge of Shell is aware of the people responsible for leaving Shell’s reputation in tatters. Dr Huong is not one of them. With all due respect, he was a lowly Shell geologist.
I am also baffled, like Dr Huong, on why I have Shell’s written permission to castigate Shell management on the Internet while he is sued by them for doing a lot less. I have been publishing very forthright articles for several years (Richard has been aware of my track record for over a year). In comparison, Dr Huong has published nothing on the net. I published a few articles under his name. That is the extent of his crime. It is inexplicable that Shell has taken draconian legal measures against Dr Huong, even threatening him with imprisonment, while encouraging me, the publisher of his alleged libel, to exercise my right to freedom of speech on the Internet and to continue my Shell commentary activities at full throttle. I am British, he is a Malaysian. I am ancient, he is in his forties. So is it ageism or racism? We still have no answer.
Shell directors have used shareholders money like confetti to escape penalty for their disgraceful behaviour (settling one US class action lawsuit after another and paying SEC and FSA fines) while at the same time persecuting an honest man, who like the Rossport Five, has stood up for his principles.
As to whether our litigation against Shell has been a profitable exercise, the answer is no. Spread over so many years the compensation has not been worth the effort in monetary terms, but there is more at stake than money.
Some multinationals have more power and influence than many Countries and someone has to be prepared to stand up to them if they trample on the rights of ordinary people, whether they be stakeholders or otherwise. It is fair to say that the Internet has helped to redress the balance between the weak and the rich and powerful of this world, who must not be allowed to use their financial clout to suppress freedom of speech, as Shell has successfully done thus far with Dr Huong.
Shell management in Malaysia led by County Chairman Datuk Jon Chadwick, seems to be particularly ruthless in its treatment of former Shell employees, including Dr Huong. This will be highlighted later this month in a court hearing involving 399 former Shell employees, when Shell appeals against a High Court Judgement that it acted unlawfully in misappropriating employee pension fund monies.
Although Dr Huong is cheerful by nature there is a deep sadness in his soul and God willing, I will continue campaigning on his behalf until this terrible injustice is ended. I am sorry if using the Tell Shell facility to publicise this or any other wrongdoing by Shell is tedious or upsetting to any other participant.
I have not had time to provide the promised detailed response to the message posted recently by “commonsense”. I have obtained a complete transcript of the three week trial which is revealing some astonishing information. I will get round to drafting a new analysis of the trial in due course.
In the meantime, my letter to Prime Minister Tony Blair in January 2005 which is accessible on ShellNews.net, deals comprehensively with the Judges Comments quoted by “commonsense” and contains an unedited version of them. By coincidence or otherwise, a I have mentioned, the High Court Judge who was the subject of my letter subsequently became the first to resign in decades and in bizarre circumstances (which has led national newspapers to raise doubts about his judgement and his ethics).
The URL to copy and paste in your web browser is:
With regards to the amusing suggestion from Dr John Huong, that either he or I act as an independent mediator in respect of the Rossport Five controversy, in my case I would prefer to act as an arbitrator. I could then make a binding decision, in which event we would need to reserve some more prison cells, this time to cater for Shell management, rather that five principled Irishman.
EXTRACTS FROM “TELL SHELL” END
It is fair to say in view of all of the above news and commentary, Burson-Marsteller is faced with a considerable challenge in repairing the damage to Shell’s reputation.
*ABOUT THE AUTHOR: Alfred Donovan has had business dealings with Shell stretching back almost 50 years. In the 1980’s & 90’s the sales promotion company he founded with his son, John (Don Marketing) created and supplied multimillion dollar national promotions for Shell on an international basis. He and his son probably hold the world record for suing Shell, having subsequently brought a series of court actions: five for breach of confidence or breach of contract, and two for libel. They have never lost a case against Shell. Details about the litigation are published on ShellNews.net, the unique website owned by the Donovan’s. It contains the world’s largest collection of articles, news and reports focused on Royal Dutch Shell and its activities – astonishingly, over 6,000 web pages. Mr Donovan own and uses the registration to the dotcom domain name for Shell’s unified $200 billion (USD) company: Royal Dutch Shell Plc (royaldutchshellplc.com). Shell made an unsuccessful attempt to seize it by instituting proceedings via the World Intellectual Property Organisation in May 2005. A WIPO panel gave a unanimous verdict in favour of Mr Donovan in August.
Disclaimer: 'The author (Alfred Donovan) ShellNews.net and the web site RoyalDutchShellplc.com are not endorsed by Royal Dutch Shell plc or affiliated with them in any way.'
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