Chesapeake: Internal Probe of McClendon Reveals No ‘Intentional Misconduct’

• Joe Wertz
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  Joe Wertz was a reporter and managing editor for StateImpact Oklahoma from 2011-2019. He reported on energy and environment issues for national NPR audiences and other national outlets. He previously worked as a managing editor, assistant editor and staff reporter at several major Oklahoma newspapers and studied journalism at the University of Central Oklahoma.

Scott Detrow / StateImpact Pennsylvania

Chesapeake Energy on Wednesday said its internal review of outgoing CEO Aubrey McClendon’s financial transactions revealed no “intentional misconduct.”

Reuters reporters Anna Driver and Brian Grow noted the Oklahoma City natural gas giant did not release a full report of the investigation and that state and federal investigations of the Oklahoma City company are ongoing:

Authorities and analysts viewed Chesapeake’s self-exoneration with skepticism.

“The importance of independent – rather than internal – investigations cannot be emphasized enough in a case involving antitrust bid-rigging allegations,” said a spokeswoman for Michigan Attorney General Bill Schuette. “Our thorough, independent investigation into these serious allegations will continue.”

McClendon is retiring from Chesapeake on April 1. He still faces scrutiny from the Securities and Exchange Commission, and the Department of Justice and the Michigan attorney general are still investigating Chesapeake’s Michigan land deals.

The company was examining McClendon’s financing of a controversial CEO perk, which allowed him a stake in every well the country’s No. 2 natural gas producer drilled. From the company’s statement:

Among the transactions reviewed were the 2008-2012 financing arrangements between EIG Global Energy Partners (“EIG”) and affiliates of Mr. McClendon regarding financing of his participation in the FWPP, as well as the preferred stock investments by EIG in CHK Utica, L.L.C. and CHK Cleveland-Tonkawa, L.L.C. The review of the financing arrangements did not reveal any improper benefit to Mr. McClendon or increased cost to the company as a result of the overlap in the financial relationships.

The review also covered:

1. other relationships in which both Mr. McClendon and the company conducted business with the same financial institutions;
2. the trading activities of the Heritage Hedge Fund (co-founded by Mr. McClendon) through 2007, when the Heritage Hedge Fund ceased operations; and
3. other matters, including issues regarding administration of the FWPP, and a 1998 loan to Mr. McClendon by then Board member Frederick B. Whittemore.