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Aubrey McClendon's 2009 contract bars him from directing hedge funds

In 2009, Chesapeake revised its contract with CEO Aubrey McClendon to ban him from taking an active role in a hedge fund about a year after McClendon's hedge fund dissolved.
by Adam Wilmoth Published: May 9, 2012

Chesapeake Energy Corp.'s most recent contract with CEO Aubrey McClendon specifically allowed him to participate in hedge funds that trade in natural gas, but barred him from directing such a fund, according to regulatory filings.

McClendon's 2009 contract said he can invest in a hedge fund as long as it does not actively engage in oil and natural gas production activities and as long as McClendon “does not directly or indirectly provide input, advice or management,” Reuters reported Tuesday.

Spokesmen for Chesapeake and McClendon declined to comment Tuesday.

Reuters reported last week that McClendon and Chesapeake co-founder Tom Ward — now CEO at SandRidge Energy Inc. — ran a $200 million hedge fund from 2004 to 2008. A veteran trader who helped run the fund told Reuters that McClendon engaged in “near daily” communications and “exhaustive” calls to help direct the fund's trading.

Ward has said he doesn't see anything wrong with the arrangement, and Chesapeake and McClendon have not commented on the report about Heritage Management Co. LLC.

A hedge fund uses advanced investment strategies designed to generate high returns. The funds are often set up as private partnerships, and are mostly unregulated because they recruit only accredited — very wealthy — investors.

Chesapeake has been under intense scrutiny since April 18, when Reuters reported that McClendon had borrowed up to $1.1 billion using his personal stake in Chesapeake wells as collateral with some of the same lenders who have given money to Chesapeake.

In the following days, at least 11 shareholder groups have filed lawsuits against McClendon, the company and its directors.

On May 1, McClendon said he will step down as chairman, while retaining his title of CEO.

The company's stock price has dropped 11 percent since April 18, closing Tuesday at $16.93, down 20 cents on the day.

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by Adam Wilmoth
Energy Editor
Adam Wilmoth returned to The Oklahoman as energy editor in 2012 after working for four years in public relations. He previously spent seven years as a business reporter at The Oklahoman, including five years covering the state's energy sector....
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