by Suevon Lee, ProPublica
The last four months have been rather bumpy for Chesapeake Energy Corp., the nation’s second-largest natural gas company behind Exxon Mobil.
Starting in April, Reuters took aim at the company’s flamboyant chief executive, Aubrey McClendon, in a series of articles, prompting his ouster as company chairman (he remains CEO) last month at the behest of disgruntled shareholders. The revelations also triggered an SEC probe.
The company was rocked anew last week when the news agency disclosed a series of email exchanges in which McClendon and other Chesapeake executives appeared to collude with officials at EnCana Corp., Canada’s largest natural gas company, to suppress the price of land leases in Michigan.
Reuters reported on Monday that the Justice Department has launched a probe into whether these communications violated laws against price fixing.
As a prominent player in the national debate over hydraulic fracturing, Chesapeake was hardly a stranger to controversy even before the Reuters investigation. Last May, ProPublica reported that Chesapeake was fined more than $1 million by Pennsylvania state officials — the largest fine the state had issued to an oil and gas company — for contaminating water supplies in Bradford County.
The company’s business practices earlier came under criticism when it emerged in mid-2009 that Chesapeake’s board gave McClendon a $112.5 million pay package in 2008 even as the company’s stock dropped 58 percent amid slumping natural gas prices. The contract, which included a $75 million bonus and other generous perks, was brokered as McClendon staved off a personal financial crisis by selling off approximately $552 million worth of Chesapeake shares over a three-day stretch to cover margin calls.
Shareholders expressed their displeasure with the generous compensation package, the highest awarded to any Fortune 500 CEO in 2008, by suing Chesapeake. In 2011, as part of a settlement, McClendon agreed to buy back a collection of antique maps sold to the company for $12 million under the 2008 plan. Today, the 52-year-old, who owns a 19 percent stake in the NBA’s Oklahoma City Thunder, has an estimated net worth of $1.1 billion.
Copyright 2012 The National Memo