Former Chesapeake CEO McClendon charged with bid-rigging of land leases

Mar 02, 2016, 09:57

The Justice Department announced Tuesday that former Chesapeake Energy CEO Aubrey McClendon was indicted for conspiring to rig bids for oil and natural gas leases.

Mr. McClendon co-founded Chesapeake in 1989 and led the company until he was pushed out in 2013 by activist investors who had become concerned about his leadership and cash short-falls at the debt-laden company.

The indictment alleged that McClendon led a conspiracy to keep bid prices down of oil and gas leases in Oklahoma from 2007 to 2012 while he was Chesapeake's CEO.

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The Justice Department said McClendon "instructed his subordinates to execute the conspiratorial agreement", which kept prices low and "put company profits ahead of the interests of leaseholders".

Chesapeake spokesman Gordon Pennoyer said the company has been cooperating with prosecutors and received immunity under a Justice Department leniency program that shields companies from criminal prosecutionif they are the first to report an antitrust violation.

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The conspirators allegedly decided ahead of time who would win the leases and the winning bidder would then allocate an interest in the leases to the other company, the government said. "Chesapeake does not expect to face criminal prosecution or fines relating to this matter".

The indictment, which does not name the companies involved in the scheme McClendon is alleged to have orchestrated, was filed in U.S. District Court for the Western District of Oklahoma. "Executives who abuse their positions as leaders of major corporations to organize criminal activity must be held accountable for their actions", according to Baer. "Starting today, Aubrey gets his day in court where we will show that this prosecutorial overreach was completely unjustified". The Justice Department opened a grand jury inquiry into the MI bid rigging allegations, though it never brought charges. Producing properties are tracts of land where the existing lessee has drilled wells on the land and the wells are producing a stream of oil and/or natural gas.

The Justice Department's investigation is ongoing.

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