At least two Chesapeake Energy Corp. shareholders have filed lawsuits against CEO Aubrey McClendon and other board members after a news report this week revealed McClendon had secured up to $1.1 billion in loans to pay for his stake in the company’s wells.
Chesapeake on Friday reiterated its position that the program aligns the interests of the company and its chief executive by allowing McClendon to buy a 2.5 percent stake in all of its wells. “The company believes the FWPP (Founders Well Participation Program) fosters and promotes the development and execution of the company’s business,” Chesapeake said in a preliminary proxy statement filed in advance of its annual meeting in June. Connecticut resident Christopher Snyder and New York-based Deborah G. Mallow IRA SEP Investment Plan are asking a federal judge in Oklahoma City to rescind the loan program and force McClendon and the rest of Chesapeake’s board to disclose all material facts about the loans. The lawsuits filed in federal court in Oklahoma City were spurred by a Reuters report on a series of loans secured by McClendon to fund his investment in the well program, which has been available to him as Chesapeake’s co-founder since 1993. One of the loans involved EIG Global Energy Partners, a private equity firm that was involved in a $1.25 billion deal last fall for a piece of Chesapeake’s operations in Ohio’s emerging Utica Shale play. “Such huge loans raise serious conflicts of interest,” the lawsuit alleges. “They can easily cloud the CEO’s judgment on key issues ranging from how quickly Chesapeake should generate cash flow, to how it operates wells, to how aggressively it can bargain with EIG on financing terms.” A Chesapeake spokesman said Friday the company is aware of the lawsuits. “We ... will vigorously defend the allegations,” said Michael D. Kehs, Chesapeake’s vice president of strategic affairs and public relations. “We don’t believe it is appropriate to discuss matters related to the litigation at this time.” The company also has denied any conflict or wrongdoing in its disclosures about the well program and McClendon’s loans, but its stock has suffered. Chesapeake’s stock closed Friday at $17.44 a share, down more than $1.50 since news of McClendon’s loan deals broke Wednesday.