SandRidge Energy Inc. CEO Tom Ward made the list by reporting he received $783,533 worth of “accounting support” from company employees last year. Chesapeake’s Aubrey McClendon was runner up in the same category with $250,000 in “personal accounting support.” In both cases, the Oklahoma City energy executives were allowed to use company accountants for their personal finances.
McClendon also was mentioned for his personal use of Chesapeake’s corporate jet.
Barry Diller, chairman of Expedia and InterActiveCorp., topped the category with $1.28 million worth of personal use of corporate aircraft. Forbes said McClendon would have been a contender, but he did not make the list because the company said he reimbursed Chesapeake for $650,000 of his $1.1 million aircraft use “after consultation between Mr. McClendon and the Compensation Committee.”
UPDATED: see below
Chesapeake Energy Corp could be facing additional scrutiny as Reuters reported today about how the company apparently plotted with rival Encana Corp. to keep land prices under control in a promising oil and natural gas play in Michigan.
Several experts raised the possibility of antitrust violations after reviewing emails provided by Reuters.
“The famous phrase is a ‘smoking gun.’ That’s a smoking H-bomb,” said Harry First, a former antitrust lawyer for the Department of Justice. “When the talk is explicitly about getting together to avoid bidding each other up, it’s a red flag for collusion, bid-rigging, market allocation.”
The report included excepts from several emails in 2010 that show how Chesapeake and Encana officials discussed ways to avoid bidding against each other in a public land auction.
The companies said they had talked about forming a joint venture in Michigan but ultimately decided against it. Chesapeake said it did not make any joint bids with Encana.
Antitrust attorneys told Reuters that won’t dispel their legal concerns.
“Nothing in the documents suggests any benefit to the joint venture other than making the price fall,” said Darren Bush, a former Justice Department antitrust lawyer who is now a law professor at the University of Houston. “If it has no other purpose, then it’s just a shell and doesn’t change the liability of the illegal conduct.”
Chesapeake already is facing inquiries from the IRS and U.S. Securities and Exchange Commission, as well as an internal review by its board of CEO Aubrey McClendon’s personal finances.
The company now is looking to unload its acreage in Michigan as it tries to sell billions of dollars worth of asset to shore up its cash flow.
Chesapeake said it has spent about $400 million acquiring its acreage in Michigan.
The company ran afoul of new Oklahoma City neighbor Continental Resources Inc. in 2010 when it allegedly tried to back out of a $28 million acreage deal. Continetal filed a breach of contract lawsuit against Chesapeake that eventually was settled.
UPDATE: Reuters continued reporting this story Tuesday with the story of landowner Walter Zaremba, who is suing Encana over an aborted deal that could have earned him at least $54 million.
Zaremba owns “deep” drilling rights to about 20,000 acres of land that had interested both Encana and Chesapeake in 2010.
He signed a “non-binding” letter of intent with Encana to lease the land for $54 million in June 2010, but the deal fell apart two days later.
Encana denied any collusion with Chesapeake in a letter to Zaremba’s attorneys in August 2010.
“Encana was not cooperating with Chesapeake, or any other entity, in any manner in connection with the negotiations with the Zaremba entities,” Encana attorney Erika Enger wrote.
Now Zaremba is seeking more than $60 million in damages from Encana, which he accuses of fraud and conspiracy in a lawsuit.
Encana has filed a lawsuit against Zaremba seeking the return of most of the $2 million in earnest money it paid before the lease deal was canceled.
Ohio Attorney General Mike DeWine is looking into allegations of fraud involving Chesapeake Energy Corp. that might have caused state pension funds to lose money, the Columbus Dispatch reports.
DeWine is responding to concerns raised by an environmental advocacy group that has compared Chesapeake to Enron.
“My office is reviewing the retirement system trading data in order to calculate possible losses attributable to the alleged fraud,” DeWine wrote in a letter to the group. “Please be assured that we will monitor the situation and take appropriate action if it appears that Ohio resources have been lost due to fraudulent activity.”
Ohio Citizen Action is devoted to preventing pollution.
The group, which boasts 80,000 members, earlier this month urged the attorney general to protect Ohio residents from Chesapeake’s possible collapse due to unaccountable management and the absence of effective state or federal regulation.
The allegations echo more than a dozen lawsuits filed by Chesapeake shareholders over the past two months amid reports of corporate governance issues at the Oklahoma City-based oil and natural gas producer.
Sinopec Chairman Fu Chengyu was in Oklahoma City this week to do the company’s due diligence on assets being sold by Chesapeake Energy Corp., according to the report.
The gem of the assets Chesapeake is offering at this time appears to be its acreage in west Texas’ oil-rich Permian Basin. The company is looking to sell its entire 1.5 million net acre position.
Chesapeake CEO Aubrey McClendon said last month that there have been plenty of potential buyers looking over its data on the company’s Permian acreage.
A Chesapeake spokesman declined to comment Wednesday on the Financial Times report of Sinopec’s interest in the company’s assets.
Sinopec has history with another Oklahoma City-based energy company.
Sinopec struck a $2.5 billion deal with Devon Energy Corp. in January for a stake in five new resource U.S. plays.
Chengyu also has some past history with Chesapeake from his time at China’s CNOOC Limited.
CNOOC paid more than $2 billion in 2010 for a stake in Chesapeake’s holdings in south Texas’ Eagle Ford Shale and $1.2 billion in early 2011 for a share of the company’s operations in the Niobrara Shale in Colorado and Wyoming.
A former Chesapeake Energy Corp. employee has filed a federal lawsuit against the company and its board of directors, accusing them of breaching their fiduciary duty to participants in Chesapeake’s employee stock ownership plan.
Debra Boggs is seeking to have the lawsuit certified as a class action case on behalf of all current or former Chesapeake employees who are beneficiaries of the program. It was filed under the Employee Retirement Income Security Act.
Her lawsuit does not indicate when Boggs, a former officer cleaner, worked at Chesapeake or how much stock she owns.
The 104-page lawsuit details Chesapeake’s alleged misdeeds, as laid out over the past two months in media reports and the company’s regulatory filings.
The allegations are similar to those brought by at least 16 other Chesapeake shareholders who have filed lawsuits since April 19.
Boggs’ lawsuit seeks to force Chesapeake to repay losses suffered by participants in the stock program.
The company’s stock dipped to as low as $13.32 a share over the past two months, but it closed Tuesday at $18.71. That is down about 2 percent from the day before the initial Reuters report about CEO Aubrey McClendon’s personal loans.
Chesapeake Energy Corp. is trimming the number of employees at its offices in North Texas as low natural gas prices have forced the company to curtail its operations in the gas-rich Barnett Shale.
Chesapeake currently has only two drilling rigs in the Barnett, so the company intends to cut loose about 70 employees at its offices in Fort Worth and Cleburne. That represents about 8 percent of its work force in North Texas.
“The colleagues we’re releasing are wonderful people, passionate about their work and true assets to our community,” Julie Wilson, Chesapeake’s vice president of urban planning, wrote in an email to employees. “I hope you’ll help us find new career opportunities for them.”
Chesapeake is eliminating positions in several departments that are most directly impacted by the company’s reduced drilling and leasing operations in the area. It had 44 active rigs in the Barnett as recently as 2008, but low gas prices have spurred the company to shift its focus to oil and liquids production.
Wilson said Chesapeake already has transferred employees to more prolific shale plays or its home base in Oklahoma City.
“Although in no way do I want to trivialize our local staff reductions, I feel compelled to note that our company remains in a strong growth mode. We continue to add staff at our headquarters in Oklahoma City and in many of our field offices as the company continues to drill approximately 1,650 new wells this year to develop our enormous reserves of domestic oil, natural gas, and liquids.”
Wilson also noted employees of pipeline subsidiary Chesapeake Midstream Partners will move into new offices once Chesapeake completes the sale of those assets to Global Infrastructure Partners later this year.
She said that does not mean the company will sell downtown Fort Worth’s Chesapeake Plaza, although it will remain open to offers.
Wilson said Chesapeake is more interested in leasing space in the building.
Carl Icahn associate Vincent Intrieri will become one of Chesapeake Energy Corp.’s new directors, CNBC reported Monday.
Chesapeake declined comment on the report Monday.
Intrieri is senior managing director of Icahn Enterprises LP and has been named to several boards on Icahn’s behalf, including Dynegy Inc., National Energy Group Inc., XO Holdings Inc., WestPoint International Inc., Federal-Mogul Corp. and CVR Energy, which owns the oil refinery in Wynnewood.
Intrieri spoke at Chesapeake’s annual shareholders meeting earlier this month, praising Chesapeake CEO Aubrey McClendon, while also calling for stronger oversight of the company founder.
We believe you are a great oil and gas man, but even great executives need oversight from a board that is focused on creating value,” Intrieri told McClendon at the June 8 meeting. “Good corporate governance is at the essence of all well-run companies. We’re extremely pleased the company has announced a reconstruction of its board. This is a positive step in the right direction.”
Chesapeake has previously announced that by this Friday it will name four new directors — one selected by Icahn and three selected by Southeastern Asset Management, Chesapeake’s largest shareholder.
Former U.S. Sen. Don Nickles declined Tuesday to discuss his future as a member of Chesapeake Energy Corp.’s board of directors, but he predicted an announcement would come “pretty soon.”
The board is searching for a new chairman to replace co-founder and CEO Aubrey McClendon amid questions about Chesapeake’s corporate governance. The company announced last week it would replace four of its directors by June 22 with representatives of its two largest shareholders, Southeastern Asset Management and activist billionaire Carl Icahn.
Nickles, who owns a lobbying firm in Washington, told The Oklahoman’s Washington bureau that he couldn’t talk about his own future. He also declined to make other comments about the board and its makeup until the company announces changes expected later this month.
Nickles was on Capitol Hill to testify before the Senate Finance Committee, on which he once served, about how federal tax reform could affect the oil and gas industry.
Nickles, who also serves on the board of Valero Energy, said his company represents ExxonMobil, Anadarko Petroleum, National Oilwell Varco and other energy-related companies.
National Oilwell Varco’s CEO is Merrill A. “Pete” Miller Jr., another member of Chesapeake’s nine-person board.
Chesapeake Energy Corp. is done with the Sierra Club.
CEO Aubrey McClendon was questioned by the president of the National Center for Public Policy Research about the company’s past donations totaling $26 million to the environmental group at Friday’s annual meeting.
Center President David Ridenour said he was concerned the Sierra Club would use those funds in its new “Beyond Natural Gas” campaign.
McClendon said he has no regrets about working with the Sierra Club to go after the coal industry.
“We’re in a market share struggle with coal,” McClendon said. “As a result of that campaign, 150 new coal plants were not built. That demand will go to natural gas.”
The Sierra Club distanced itself from Chesapeake earlier this year after new executive director Michael Brune rewrote the group’s gift acceptance policy and began to campaign for tougher regulation of the natural gas industry.
On Friday, McClendon said Chesapeake is no longer associated with the Sierra Club.
“Our relationship with them is a little different today than it was a few years ago,” he said.
Ridenour said he was not satisfied to McClendon’s response to his question at Friday’s meeting.
“Mr. McClendon largely ignored my question, ‘By funding Beyond Coal, did you not unnecessarily pick a fight with another fossil fuel industry that now will have every incentive to fund Beyond Natural Gas? It would be darkly amusing if the coal industry did turn out to be funding Beyond Natural Gas, and did have a stipulation in its grant contract limiting the use of the gift to fighting Mr. McClendon’s industry.”
“Since the Sierra Club has been used as a corporate tool in the past, there is no reason to believe that it isn’t being used as one now, so we call upon it to fully disclose who is underwriting Beyond Natural Gas. If the Sierra Club won’t say who is funding its anti-natural gas campaign, we probably can assume there is a conflict of interest in there somewhere.”
“As a representative of a Chesapeake shareholder and an employee of another shareholder, I’m not thrilled that Mr. McClendon gave money to an activist group dedicated to the company’s destruction, but I’m even less happy as an American. Energy independence is important to national security, and low-cost energy is important to American jobs and prosperity. We shouldn’t be fighting things that are good for us.”
Ridenour said he still hopes to find out where Chesapeake’s donations to the Sierra Club went, while letting such groups know that people are watching those types of charitable contributions.
New York State Comptroller Thomas P. DiNapoli, who oversees the state’s common retirement fund, was one of several institutional investors who had called for leadership changes at Chesapeake Energy Corp.
He was pleased that shareholders on Friday voted against retaining two members of the Oklahoma City oil and natural gas company’s board.
“Today’s voting results are a rebuke to the failed leadership of the board of directors of Chesapeake Energy.
Given today’s decisive withhold vote against Chesapeake directors V. Burns Hargis and Richard K. Davidson, it is imperative that the board of directors accept their resignations. To fail to do so would be a direct contradiction of the clear will of a majority of shareholders.
The board should take immediate steps to implement the shareholder proposals that passed today, including proxy access and the elimination of supermajority voting. The days of an entrenched and unaccountable board structure at Chesapeake must be numbered.
In addition, the advisory vote on executive compensation sends a strong message that Chesapeake must overhaul its plan to align the interests of shareholders with management.”
The New York State Common Retirement Fund owned about 3.6 million shares of Chesapeake stock on June 1. Those holdings were worth about $57.2 million.
New York City Comptroller John C. Liu was another also had called on Chesapeake shareholders to vote out Hargis and Davidson, who made up the board’s audit committee.
“Today’s overwhelming vote of no-confidence in two directors was, in fact, a referendum on Chesapeake’s entire board and reflects its failure to protect the company and its shareowners. It will be up to the new board to take tangible steps to restore lost investor confidence and exercise independent oversight of management. An immediate step would be to adopt the proxy access proposal, which a wide majority of shareowners supported today.”
Liu’s office proposed the proxy access measure, which received support from 60 percent of Chesapeake shareholders in Friday’s vote.