By John Donovan of RoyalDutchShellPlc.com: 13 August 2007
PREFACE: The article below was supplied to the high command of the oil giant Royal Dutch Shell plc this morning including its Chief Executive, Jeroen van der Veer, its Chairman, Jorma Ollila and the Chief Executive of Shell Exploration & Production, Malcolm Brinded.
The invitation with the article contained the following sentence:
“You only have to ask for more time for consideration if you want to supply comment for unedited publication with the article or wish to point out in categorical terms any factual inaccuracy, in which event we would take the appropriate action”.
The article is about a claim by a senior Russian environmental official, Oleg Mitvol,Â that a $50 million bribe was allegedly offered to him by Shell in respect of the multi-billion dollar Sakhalin-2 project in Russia. Shell could have taken the opportunity to state that neither Shell nor any third party acting on their behalf had offered any bribe toÂ Mitvol. That simple statement would have ended any speculation on the subject. Instead, an email received from Shell EP General Counsel, Keith Ruddock, agreed that the following notice would be displayed: –
The lack of a rebuttal from, or comment by, Shell does not in any way constitute an acceptance on Shell’s part of the accuracy of any of the points made by you whether now or in the future, and whether on this or on any other matter, and we continue to reserve our position accordingly in respect of those matters.
THE ARTICLE: ROYAL DUTCH SHELL, BRIBES, CORRUPTION AND OLEG MIVOL
Oleg Mitvol, the Russian environmental official branded as a â€œKremlin attack dogâ€, by The Guardian, has been trying to backtrack on a report in the Russian tabloid â€œTvoy Denâ€ (Your Day), alleging Shell offered him a bribe to drop his investigations into the Sakhalin-2 Project. Mitvol insinuated during an interview with the tabloid published on 8 August 2007 that Shell had offered him a $50 million bribe.
The tabloid stands by the published account and has produced an audio tape of its interview with Mitvol which can be heard on its website. When asked how much they (Shell) offered, Mitvol replied â€œfiftyâ€. The newspaper interpreted this as meaning $50 million. A logical assumption given the limited options for the international currency used in such transactions e.g. $50, $50,000, $50 million and $50 billion.Â The first two sums would be seen as an insult given the billion dollar nature of the project and the last sum far too high and impossible to conceal.
The following day Shell raised objections to Mitvolâ€™s out-of-the-blue allegation. Shell believed they had put the worst of the Sakhalin-2 humiliation to rest by agreeing a surrender deal allowing Gazprom to take over control of the project. Now suddenly, the nightmare had returned.
Mitvol had focussed attention again on the period of Shellâ€™s panic stricken manoeuvres made while his ferocious campaign, which led to Shellâ€™s capitulation, was in full flow. He had obtained Shell internal documents and communications from what he described as an â€œan anti-Shell websiteâ€, www.royaldutchshellplc.com
The evidence of Shellâ€™s ecological abuses on Sakhalin-2 involved corner-cutting, pipeline design flaws, mismanagement and cover up. It completely undermined Shellâ€™s situation. The capitulation cost Shell upwards of $30 billion in lost revenues.
Mitvol desperately tried to put the genie back in the bottle. He made a half-hearted attempt to retract the allegation but actually made matters worse. In any event it was too late, the sensational story first published in a Russian language newspaper had been picked up by the international press.
The following are extracts from a Wall Street Journal article published on 9 August 2007:
In a statement distributed by the Natural Resource Ministry, Mitvol said that he had been approached by â€œintermediariesâ€ with a request to settle various issues raised in the course of his agencyâ€™s inspections of the Sakhalin-2 project, and that he didnâ€™t know whose interests they represented. The statement said Mitvol is â€œconvinced that Shell didnâ€™t intend to give bribes to any of the executives in federal government bodies.â€ â€œBut, at the same time, various business interests indirectly representing the business interests of Shell may have been pursuing their own goals -different from Shellâ€™s -including during the period on the eve of talks between the operator of the Sakhalin-2 project and Gazprom,â€ the statement said.
The article also reported that according to Mitvol, â€œthe same peopleâ€ offered the head of the Ministryâ€™s press service, Rinat Gizatulin, a job at a monthly salary of $30,000, with the rights to manage an annual budget of over $1 million, but that he refused.
The murky, carefully crafted statement from Mitvolâ€™s ministry raised more questions than it answered. Nonetheless it is official confirmation that â€œintermediariesâ€ â€œrepresenting the business interests of Shellâ€ approached Mitvol and, as it clearly implies, did indeed offer a bribe for him to stop his campaign. This is presumably the point at which the â€œfiftyâ€ figure was offered. $50 million was small change when literally billions of dollars were at stake.
Is there any evidence of Shell having a track record of engaging in corrupt practices? The answer is an unequivocal YES. Shell has admitted many instances of corruption, 96 cases of bribery and fraud in 2006 alone. Perhaps those figures include the alleged Sakhalin-2 bribes?
The following extract is from The Shell Sustainability Report 2006:
â€œWe report cases of bribery and fraud to the Audit Committee of the Board of Royal Dutch Shell plc. In 2006, 96 violations were reported. As a result we ended our relationship with 143 staff and contractorsâ€.
It was interesting to note the reference in the same section of the report dealing with bribes and fraud to â€œthe proper use of intermediaries in business transactionsâ€. It would of course be wise to use intermediaries to distance Shell from any bribe, thereby providing room for plausible denial of the kind now being advanced.
A further example of Shell being linked to corruption: in a leaked confidential report entitled â€œPEACE AND SECURITY IN THE NIGER DELTAâ€, which run to 112 pages, Shell admits that its activities have â€œinadvertentlyâ€ fuelled corruption (and violence) in Nigeria.
Turning to Sakhalin-2, there have already been a number of accusations of bribery involving David Greer, the former Deputy Chief Executive of Sakhalin Energy Investment Company (SEIC), the previously Shell owned company running the Sakhalin-2 project. On one occasion, a $50,000 bribe was allegedly offered by Greer to the mayor of Korsakov.
Greer resigned in June 2007 after 27 years as a Shell executive when Sakhalin-2 insider information leaked to the Financial Times by the website www.royaldutchshellplc resulted in a non-related scandal being exposed.
Regretfully there is also evidence of a benign attitude to corrupt practises at Royal Dutch Shell board level. Malcolm Brinded, the Executive Director of Shell Exploration and Production was, during the relevant period, the ultimate boss of the Sakhalin-2 project. Consequently it would be important for him to have a strong anti-corruption track record so as to set an example. Unfortunately, exactly the opposite is the case. Brinded has a record of supporting corrupt practices both in regards to safety on Shellâ€™s North Sea production platforms and in the tendering process for awarding Shell contracts.
In the Shell Brent Bravo North Sea platform scandal, Bill Campbell, a former Group Auditor of Shell International exposed a corrupted â€œTouch F*** Allâ€ safety culture which put profits before safety. Safety reports were falsified and repairs bodged. Brinded supported the platform management responsible for the flawed policies which led to the deaths of Shell employees in a subsequent massive gas leak. Shell was fined Â£900,000 (nearly $2 million) after admitting responsibility for the avoidable deaths.
The link below is to an article providing an example of how Brinded gave his full support to a thoroughly dishonest Shell manager, who in a conspiracy with colleagues, planned and executed a rigged tendering process for a major Shell contract.
Brinded also signed Form 20F returns to the U.S. Securities & Exchange containing substantially inflated and fraudulent claims in respect of Shellâ€™s hydrocarbon reserves. The securities fraud resulted in Shell being fined $150 million by the financial regulators for â€œfooling the marketâ€. Shell has already settled consequential class action lawsuits and has set aside $500 million to settle the remaining lawsuit.
When this is the record of the man at the helm of Shell, it should be no surprise that Shell continues to be associated with bribery and corruption in its desperation to replace its vanished hydrocarbon reserves.
THE LEAKS CONTINUE
Despite the best efforts of Shell Global Security led by a former senior British secret service officer, Ian Forbes McCredie OBE, the royaldutchshellplc.com website and its owners Alfred and John Donovan, have continued to receive leaked information from Shell SEIC insiders.
The most recent posting today, 13 August 2007, on the sites â€œLive Chatâ€ facility used regularly by Shell insidersâ€™, ominously states: –
So when are SEIC (and more importantly Shell) going to admit to the other shareholders that the cost has increased and schedule has slipped (again)? Also – Will they blame David Greer and suggest that is why he went? Or will they have the guts to admit they’ve (Malcolm B) known about the cost/schedule for months but didn’t feel it necessary to tell anyone?
Jeroen van der Veer must be quaking at the prospect of another roasting from President Putin when he does work up the courage to reveal further increased costs and delays. The repercussion for Shell is likely to be dire not only in respect of retaining a stake in the project it once owned, but also in regard to participation in other Russian energy projects. Shellâ€™s reputation for elephant project management will be destroyed.