(Adds comment from Michigan Attorney General, additional
July 10 A judge in Michigan has ruled that
Oklahoma-based Chesapeake Energy Corp must face a
criminal trial on a charge of bid-rigging with competitor Encana
Corp at a 2010 state land lease auction, citing
evidence of a conspiracy between the companies that drove state
lease prices down sharply.
The ruling, issued on Wednesday by Judge Maria Barton of
Michigan's Cheboygan County District Court, dismissed two other
criminal charges brought against Chesapeake by the office of
Michigan's Attorney General. The other charges alleged that the
company struck a deal with Encana to avoid competing for land
leases from private landowners in Michigan, and had attempted
antitrust violations against those landowners.
"The direct and circumstantial evidence established that the
parties did in fact strike an agreement to bid-rig the State
sale," Barton's ruling says.
It cites evidence including an email sent by Encana USA
Chief Executive Officer Jeff Wojahn to a landman bidding on
Encana's behalf on the morning of the October, 2010 auction. The
email makes reference to a lease area on offer, stating that
"This is a Chesapeake area and we will not be bidding."
Michigan's criminal investigation began in 2012 after a
Reuters report found that top executives from Chesapeake and
Encana discussed dividing up bidding responsibilities involving
nine private landowners and nine counties in the state.
Chesapeake and Encana were the biggest leasers of land
during a short-lived leasing boom in the state's Collingwood
Shale oil and gas play that year.
"We appreciate that the court carefully reviewed the
evidence and dismissed two of the three counts. We will continue
to contest the remaining count which we also believe has no
merit," said Chesapeake spokesman Gordon Pennoyer.
If found guilty of bid-rigging, Chesapeake could face a fine
of up to $1 million. The state would also seek restitution for
damages caused as a result of the criminal conduct, said a
spokeswoman for Michigan Attorney General Bill Schuette.
"Bid-rigging will not be tolerated in the Great Lakes
State," Schuette said in a statement on Thursday. "We are
confident in our case, and will be prepared for trial."
Schuette plans to appeal the charges that Judge Barton
dismissed, his office said.
Evidence presented at a recent hearing did not support a
trial on the two other charges involving private landowners,
Barton's ruling said.
"Although there is ample discussion by both Encana and the
Defendant to attempt to bid-rig the individual landowners, the
evidence is lacking as to an actual conspiracy," she wrote.
In May, Encana pleaded no contest to a misdemeanor charge
that it attempted to commit antitrust violations in Michigan
with Chesapeake, and agreed to pay $5 million in a civil
settlement that could clear the company of criminal charges.
The Chesapeake trial is slated to be heard in the 53rd
Judicial Circuit Court in Rogers City, Michigan. No trial date
has been set.
Case No. 14-0140-FY filed in Michigan's 89th District Court
- People of the State of Michigan v Chesapeake Energy
Also still pending are fraud and racketeering charges that
Michigan separately brought against Chesapeake last month for
allegedly cancelling hundreds of 2010 land leases with private
landowners on false pretenses.
Chesapeake has called those charges without merit and
pledged to fight them.
(Reporting By Joshua Schneyer in New York and Brian Grow in
Atlanta; Editing by Franklin Paul, Bernard Orr)