SEC upgrades Chesapeake inquiry, company reports

Chesapeake Energy Corp. on Friday revealed the U.S. Securities and Exchange Commission has upgraded its informal inquiry of the company into a formal investigation.

Chesapeake caught the eye of the SEC’s Fort Worth office last year after Reuters reported CEO Aubrey McClendon took more than $1 billion in shrouded personal loans to fund his stake in the company’s wells. It confirmed the SEC’s informal inquiry in May.

The company’s board, revamped last year amid shareholder unrest, announced last week its review of McClendon’s finances revealed no sign of intentional misconduct.

On Friday, Chesapeake filed its annual report, showing received notice Dec. 21 the SEC would continue its inquiry as an investigation.

“The company, including Mr. McClendon, is providing information to the SEC in connection with this matter. The company is also responding to related inquiries from other governmental and regulatory agencies and self- regulatory organizations,” according to Friday’s filing.

Chesapeake’s board still faces more than a dozen breach of fiduciary duty lawsuits filed by shareholders after news of McClendon’s loan deals emerged last year.

McClendon is leaving the company by April 1, but the board said its review had nothing to do with his departure.

The company also is being investigated by the U.S. Department of Justice for possible antitrust violations in Michigan, where Chesapeake and rival Encana Corp. have admitted to sharing information before lease auctions in 2010. Both companies have denied any wrongdoing.

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