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Shell Pays $90M to Settle Shareholder Lawsuit for Overbooking Reserves

Royal Dutch Shell agreed last week to pay $90 million to settle a U.S. lawsuit brought last year by pension holders following the company's writedown for overbooking oil and natural gas reserves over a five-year period (see NGI, May 31, 2004; Jan. 12, 2004).

The agreement comes two weeks after federal prosecutors decided not to file criminal charges in the case, citing cooperation by the oil giant, and a month after the company announced revisions to its reserves bookings guidelines (see NGI, June 13). Shell also agreed to pay up to $1 million toward the cost of the expenses of the plaintiffs' counsel, New York-based Milberg Weiss. Expenses also include the costs of providing notice of the settlement to class members.

The class action lawsuit, which was filed in July 2004 at a New Jersey federal court, is separate from an out-of-court settlement with the U.S. and British regulators last year, in which Shell agreed to a $151 million fine (see NGI, Sept. 6, 2004).

The lawsuit was filed by U.S. current and former employees subscribing to a savings plan subject to the Employee Retirement Income Security Act of 1974, or ERISA. The plaintiffs claimed the value of their pension benefits was hurt by a drop in Shell's share price, which fell up to 15% in the two months that followed the original restatements in January 2004.

In the settlement agreement, Shell agreed to adopt new procedures for monitoring and training individuals appointed to fiduciary positions in savings plans that are subject to ERISA.

Shareholder lawsuits related to derivatives, which were filed in June 2004, and a consolidated complaint filed in September 2004 in the United States are pending.

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