Outgoing Chesapeake Energy Corp. CEO Aubrey McClendon is being formally investigated by the Securities and Exchange Commission for a controversial financial perk that allowed him to personally invest in the company’s oil and gas wells.
The Associated Press reports Chesapeake revealed the investigation Friday in an annual filing with the SEC:
According to the report, the SEC opened an investigation in December, stepping up what had begun as an informal inquiry started in May.
The probe is looking into a deal that McClendon, who founded Chesapeake in 1989, has long had with the company that allows him to invest personally in the oil and gas wells the company drills.
StateImpact Pennsylvania and StateImpact Texas teamed up last spring to explain more about the controversy surrounding McClendon and Chesapeake:
In March , the Pittsburgh Post-Gazette reported that Aubrey McClendon was taking out loans against the company’s West Virginia holdings … Reuters expanded the story by reporting that this was happening in multiple states: McClendon has taken out more than $1 billion in loans, using Chesapeake’s land holdings as collateral. And as Reuters documented, he is using that money to expand his holdings in those very same wells. The circular loans — and the fact they weren’t disclosed to shareholders — raised questions about whether McClendon’s mixing of his personal and business dealings constitute a conflict of interest.
McClendon was able to purchase personal stakes in Chesapeake’s wells through an initiative called the “Founder Well Participation Program.” Chesapeake shut the program down shortly after it became public.
Last month McClendon announced he would step down as CEO of Chesapeake on April 1 due to “philosophical differences” he has with the company’s new board of directors.