The U.S. Justice Department indicted former Chesapeake Energy CEO Aubrey McClendon on charges of conspiring to rig the price of oil and gas leases in Oklahoma.
McClendon, who is considered a pioneer in the U.S. shale boom, called the charges “wrong and unprecedented.”
Bradley Olson, Brent Kendall and Erin Ailworth of The Wall Street Journal had the day’s news:
Aubrey McClendon, one of the pioneers of the U.S. shale boom, was indicted by a federal grand jury Tuesday on charges of conspiring with an unnamed company to rig the price of oil and gas leases in Oklahoma.
The indictment alleged that Mr. McClendon orchestrated a campaign to keep bid prices down from 2007 to 2012, while he was chief executive of Chesapeake Energy Corp., amid a land-leasing boom across the U.S. The Justice Department didn’t name anyone else it believed participated in the alleged conspiracy.
“The charge that has been filed against me today is wrong and unprecedented,” Mr. McClendon said in a statement. “All my life I have worked to create jobs in Oklahoma, grow its economy, and to provide abundant and affordable energy to all Americans. I am proud of my track record in this industry, and I will fight to prove my innocence and to clear my name.”
Mr. McClendon said he is the only oil and gas industry executive in more than 110 years to be charged under the Sherman Act for oil and gas leasing activity. Violations of the Sherman Act, a federal antitrust statute, carry a maximum penalty of 10 years in prison and a $1 million fine, the Justice Department said.
Gordon Pennoyer, a spokesman for Chesapeake, said the company has been cooperating with the Justice Department “for some time,” providing investigators with information on its leasing practices under Mr. McClendon.
Clifford Krauss of The New York Times detailed McClendon’s eccentric personality:
Mr. McClendon was nothing if not audacious as Chesapeake’s chief executive. He became a billionaire as the company he helped found aggressively outbid competitors for land leases and drilled highly productive wells in virtually every major shale gas field in the country.
Under Mr. McClendon’s leadership, Chesapeake and a handful of other companies transformed the face of energy in the United States, turning the country from an energy importer to an exporter and pioneering hydraulic fracturing in newly explored shale fields with ample global financing.
In the end, they produced a glut of natural gas that sent Chesapeake and several other companies to the brink of bankruptcy as gas prices collapsed.
Chesapeake’s stock price, which is now under $3 a share, has been sinking for most of the last five years, especially since it was revealed that Mr. McClendon had taken a personal stake in Chesapeake wells and then used those investments as collateral for up to $1.1 billion in loans used mostly to pay for his share of the cost of drilling those wells.
His interests ranged far and wide, as he acquired trophy assets like the Oklahoma City Thunder basketball team, interests in a French winery and a $12 million antique map collection.
He was once fined $250,000 by the National Basketball Association for bragging that he and his partners did not buy the Seattle SuperSonics to keep the team in Seattle — a statement that was at odds with the N.B.A. commissioner’s intentions. The Sonics moved to Oklahoma City for the 2008-9 season, and they became the Thunder. They play in Chesapeake Energy Arena.
Mr. McClendon donated millions of dollars to the Sierra Club from 2007 to 2010, money that the environmental group neglected to disclose even as it advocated increased use of natural gas to replace coal burning.
The Sierra Club cut its ties to the natural gas industry as environmentalists raised concerns over pollution caused by fracking and the disposal of fracking fluids.
Brian Grow and Diane Bartz of Reuters explained how oil companies, such as Chesapeake and SandRidge, have been declining in recent years:
The indictment comes at a time when energy executives across America are already facing considerable distress. Oil and gas companies like Chesapeake, SandRidge, and McClendon’s new venture AEP, have struggled as the price of oil plummeted by 70 percent since late 2014.
Both Chesapeake and SandRidge, once storied firms in Oklahoma’s oil industry, have recently engaged restructuring experts as they scramble to pay off billions in debt and avoid potential bankruptcy. Chesapeake’s stock price has tumbled more than 80 percent in the last year. SandRidge was delisted from the New York Stock Exchange in January, and closed Tuesday at 4 cents per share.
Much of the companies’ debt was accrued in the period from 2007 through 2012 when McClendon was allegedly engaged in an antitrust conspiracy, a time when Chesapeake was snapping up millions of acres of land leases nationwide to expand its shale drilling.
McClendon has also been embroiled in a lawsuit with Chesapeake which alleged that he took sensitive company data from his former company to build his new business.
The Justice Department said that McClendon’s indictment was the first case in an ongoing federal antitrust investigation into price fixing, bid rigging and other anti-competitive conduct in the oil and natural gas industry.
“His actions put company profits ahead of the interests of leaseholders entitled to competitive bids for oil and gas rights on their land. Executives who abuse their positions as leaders of major corporations to organize criminal activity must be held accountable for their actions,” said Assistant Attorney General Bill Baer, head of Justice Department’s Antitrust Division.
Chesapeake, SandRidge, and McClendon had previously disclosed in securities filings that they were being investigated by the Justice Department’s Antitrust Division.
