On Tuesday the United States Department of Justice indicted former Chesapeake Energy Corporation (NYSE:CHK) CEO Aubrey McClendon on federal charges.
McClendon is accused of conspiring to rig bids for oil and natural gas leases, according to an indictment filed in Oklahoma this Tuesday. Court papers allege that McClendon was the ringleader in a plot between two companies which meant that they would not bid against each other for some leases in Oklahoma, writes Jacob Pramuk for CNBC.
Former CEO McClendon accused of conspiring to rig leases
Under the terms of the leases the company would have been allowed to draw natural gas and oil from the land for the course of a contract. It is alleged that the conspiracy ran from December 2007 to March 2012, during which time the companies decided between themselves who would win the bids before handing over an interest in the lease to the other.
The Justice Department did not reveal the name of the other company.
“While serving as CEO of a major oil and gas company, the defendant formed and led a conspiracy to suppress prices paid to leaseholders in northwest Oklahoma,” said U.S. Assistant Attorney General Bill Baer in a statement. “His actions put company profits ahead of the interests of leaseholders entitled to competitive bids for oil and gas rights on their land.”
Chesapeake Energy does not expect to face charges
As it stands Chesapeake is the second biggest producer of natural gas in the United States. Former CEO McClendon left the company in 2013, and Chesapeake is confident that it will not be in hot water as a result of the investigation.
According to its director of strategic communications, Gordon Pennoyer, Chesapeake cooperated fully with the investigation and “does not expect to face criminal prosecution or fines relating to the matter.”.
“Chesapeake has taken significant steps to address legacy issues and enhance legal and regulatory compliance throughout the organization,” he said.
In after-hours trading shares in the company tumbled over 3%. This year more than 40% has been wiped off the company share price due to sustained low natural gas prices.
McClendon now works work American Energy Partners. The company did not immediately respond to a request for comment.