Michigan Attorney General Bill Schuette announced yesterday afternoon that he was filing criminal charges against Chesapeake Energy Corporation (NYSE:CHK) for illegal business dealings allegedly undertaken in 2010. The statement also noted related antitrust charges were also filed against Delaware-based Encana Oil and Gas USA.

Chesapeake Energy Logo

AG Schuette said in a press release, “I will aggressively prosecute any company who conspires to break the law.”

Background to the charges

The antitrust charges filed today are related an October 2010 public auction of oil and gas leases by the Michigan Department of Natural Resources. The alleged incident occurred while semi-disgraced former CEO Aubrey McClendon was still in charge at Chesapeake Energy Corporation (NYSE:CHK).

Chesapeake Energy Corporation (NYSE:CHK) and Encana Corporation (USA) (NYSE:ECA) were the main bidders at the auction, and the average price was less than $40 an acre. The companies paid $1,510 per acre for leases auctioned off in May.

A Reuters news story broke in mid-2012 that reported communication between Chesapeake and Encana management after the May auction in which they both appeared to show interest in not bidding competitively in the October auction. This type of agreement could be considered a conspiracy and a violation of U.S. antitrust laws. The company could face fines up to $1 million if convicted.

Chesapeake Energy Corporation (NYSE:CHK)’s BoD eventually hired independent counsel to investigate the allegations, but the counsel finally concluded the company did not violate antitrust laws.

Chesapeake statement

The company responded to Schuette’s allegations late yesterday afternoon. “It is disappointing that the Michigan Attorney General has filed these charges against Chesapeake regarding leasing activity in Michigan in 2010. No agreement was ever reached between Chesapeake and Encana. As previously disclosed, a thorough investigation conducted by independent counsel retained by Chesapeake’s Board in 2012 concluded that Chesapeake’s activities in Michigan did not violate antitrust laws. This action has no merit and we will vigorously contest it.”

Chesapeake Energy Corporation (NYSE:CHK) is trading unchanged at $25.50 as of 11:51 AM ET today.