Special Report on the CEO of Chesapeake Energy

by Duane Nichols on April 20, 2012

CEO McClendon

According to a Special Report by Reuters, the CEO of Chesapeake Energy helped cause stock shares to plummet amid a financial crisis when he sold hundreds of millions of dollars in stock to raise cash for himself. And, to settle a lawsuit by shareholders, he agreed to buy back a $12 million map collection that he’d sold to Chesapeake.

Now, a series of undisclosed loans to McClendon could once again put Chesapeake’s CEO and shareholders in disagreement. McClendon borrowed about $1.1 billion in the last three years using his stake in the company’s oil and natural gas wells as collateral, documents reviewed by Reuters show.

The loans were made through three companies controlled by McClendon that list Chesapeake’s headquarters as their address. The money is being used to help finance a 2.5% ownership in each of the drilled wells for McClendon himself. This raises conflict of interest questions on behalf of the Chesapeake CEO.

“Basically what you have here is a private transaction that could potentially impact a public company, depending on the manner in which the clause is interpreted and applied,” says Thomas O. Gorman, a partner at law firm Dorsey & Whitney in Washington, D.C., and a former special trial counsel at the Securities and Exchange Commission (SEC). “That may create a conflict of interest.” As a result, the loans should have been fully disclosed to Chesapeake shareholders, the academics, attorneys and analysts said.

The Special Report from Reuters was prepared by Anna Driver in Houston and Brian Grow in Atlanta.  It is an extensive report on many of the less well known aspects of Chesapeake Energy and its unusual CEO Aubrey McClendon. And, this report provides some of the responses from Chesapeake Energy to the critical comments that others have made.

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