Chesapeake Energy Corp.'s stock plummeted nearly 9 percent Monday after Reuters reported on a series of emails that detailed possible collusion with another oil and natural gas company ahead of a 2010 land auction in Michigan.
“The allegations expose both companies to potential fines and claims for damages in the hundreds of millions of dollars and put Chesapeake's beleaguered CEO Aubrey McClendon at the forefront of yet another corporate scandal,” Morningstar analyst Mark Hanson wrote in a note to clients.
The Reuters report indicates McClendon directed Chesapeake to work with rival Canadian company Encana Corp. to reduce the cost of land in Michigan's developing Collingwood play two years ago.
Officials from the two companies allegedly discussed ways to avoid bidding against each other in a public auction and negotiations with at least nine landowners.
Harry First, a former antitrust lawyer with the U.S. Department of Justice, described the email exchanges as a “smoking H-bomb” that could result in criminal charges, according to Reuters.
Chesapeake said Monday it had explored a potential joint venture with Encana in 2010 to secure Michigan leases, but the companies never made any joint bids.
Encana officials told Reuters the company has launched an internal investigation.