Report: Chesapeake CEO borrowed money from former director

Chesapeake Energy Corp. CEO Aubrey McClendon in the late 1990s borrowed money from a former Chesapeake director using his stake in Chesapeake wells as collateral, Reuters reported Friday.

The wire service cited a June 1998 document filed in Oklahoma Co0unty court that showed the loan between McClendon and now-retired director Frederick Whittemore, who served on Chesapeake’s compensation committee. The loan’s terms and amounts were not disclosed.

Ron Hutcheson, McClendon’s personal spokesman, acknowledged to Reuters the existence of the loan but said the deal between Whittemore and McClendon ended in March 1999. He did not say whether the debt was repaid.

The document showed that McClendon listed as collateral a company called Chesapeake Investments LP. According to Reuters, McClendon used the investments company to hold interests in the Chesapeake Energy Corp. wells he acquired through the controversial Founders Well Participation Program.

For an independent board member on the compensation and corporate governance committees to be doing a deal with the CEO, that’s something that would be inappropriate governance and that should be disclosed,” said David Larcker, a corporate governance specialist and professor of accounting at the Stanford University Graduate School of Business.