Report: CEO Aubrey McClendon ran hedge fund inside Chesapeake

Chesapeake Energy Corp. CEO Aubrey McClendon apologized during today’s earnings call for the “distractions” caused by news coverage of his participation in the company’s to-be-discontinued founders well program.

He didn’t mention the latest special report from Reuters, which indicates he ran a $200 million hedge fund on the side between 2004 and 2008.

A veteran trader told the wire service that McClendon was involved in the fund’s operation on a “near daily” basis,” making “exhaustive” calls to direct its trading in the same commodities produced by Chesapeake.

Heritage Management Co. LLC was started by McClendon and Chesapeake co-founder Tom Ward, who is now CEO of SandRidge Energy Inc.

McClendon did not comment for the Reuters report, while Ward said there was nothing wrong with the arrangement.

A commodity market regulation expert quoted by Reuters saw things differently.

“An executive’s first responsibility is to shareholders and the betterment of their investment,” said Carl Holland, who ran the trading-compliance department at former U.S. oil major Texaco. “Personal trading in the commodity around which the CEO’s business is based would be a clear no. We would never have tolerated that, ever.”

Chesapeake accounts for about 5 percent of U.S. natural gas production, Reuters noted, so the company has “tremendous sway” over gas markets.

Sterne Agee analyst Tim Rezvan said the disclosure of the hedge fund activity, if correct, would be even more alarming than reports of the personal loans McClendon secured from private equity firms that also have dealings with Chesapeake.