* Departing CEO McClendon did no "intentional" wrong -probe
* Civil, criminal investigations continue
* Chesapeake reports quarterly earnings on Thursday
By Anna Driver and Brian Grow
Feb 20 Chesapeake Energy Corp said on
Wednesday its internal investigation of the financial dealings
of outgoing chief executive Aubrey McClendon found no
"intentional" wrongdoing, but authorities and analysts said the
issue was far from over.
The company's statement also said a review by its board of
directors found Chesapeake "did not violate antitrust laws" as
it acquired oil and gas rights in Michigan in 2010.
The company did not say how it reached its conclusions and
did not release a full report of its investigation, and state
and federal investigations of the company continue.
The U.S. Securities and Exchange Commission is examining
McClendon's financial transactions, while the Department of
Justice and the attorney general in Michigan are investigating
whether Chesapeake violated antitrust laws.
"The importance of independent - rather than internal -
investigations cannot be emphasized enough in a case involving
antitrust bid-rigging allegations," said a spokeswoman for
Michigan Attorney General Bill Schuette. "Our thorough,
independent investigation into these serious allegations will
A series of Reuters investigations last year triggered civil
and criminal probes into the second-largest U.S. producer of
natural gas. Big shareholders Carl Icahn and Southeastern Asset
Management took control of the board in June after McClendon was
stripped of the chairmanship of the company he co-founded in
"A finding of 'no intentional misconduct' still does not
mean there was no misconduct," said Mark Hanson, an oil and gas
analyst at Morningstar Inc in Chicago. "I think just the
appearance of impropriety should be avoided and I think that
certainly wasn't the case for either McClendon or the former
A U.S. Justice Department spokeswoman confirmed late on
Wednesday that the department's Antitrust Division still had an
open investigation into "the possibility of anticompetitive
practices in the purchase and lease of oil and gas properties."
Charles Elson, director of the Weinberg Center for Corporate
Governance at the University of Delaware said the company still
faces shareholder litigation as well as government probes.
"Board investigations are only part of the process. I would
not say this is the final word," said Elson.
Last month, Chesapeake said McClendon was stepping down as
CEO. McClendon cited philosophical differences with the board as
the reason for his departure. He will leave on April 1.
As the board tried to rein in capital spending and salary,
McClendon resisted, a situation that created tension and
eventually ended in the executive's departure, according to a
source familiar with the board.
"I don't think that any of this was done intentionally to
harm the company or shareholders," the source said. "There's
probably an error in judgment that a lot of CEOs have."
Last June, Reuters reported that Chesapeake plotted with
Encana Corp, its top competitor, to suppress land
prices in the Collingwood shale formation in northern Michigan.
A Reuters investigation last April found McClendon arranged
to personally borrow more than $1 billion from EIG Global Energy
Partners, a firm that is a big investor in Chesapeake.
The loans, arranged through McClendon's personal shell
companies, were secured by his interest in Chesapeake wells.
Under the controversial Founders Well Participation Program
(FWPP), McClendon is allowed to take up to a 2.5 percent stake
in every well Chesapeake drills. The board has
since set a termination date of June 2014 for the FWPP.
The Chesapeake probe was led by director V. Burns Hargis,
president of Oklahoma State University and former vice chairman
of Bank of Oklahoma and BOK Financial from 1997 to 2008.
More than 70 percent of Chesapeake shareholders voted to
remove Hargis as a director at the company's annual meeting in
June. The vote was non-binding and Chesapeake elected to keep
him on pending completion of the investigation of McClendon.
It is unclear whether Hargis will step down now. His
spokesman declined to comment.
The Chesapeake board did not disclose the total number of
transactions included in its investigation, nor the names of the
More than a million pages of documents were collected and
reviewed and more than 50 interviews conducted, the company
said, without providing specifics.
The shares of Chesapeake, which is due to report
fourth-quarter earnings on Thursday, closed down almost 0.6
percent Wednesday on the New York Stock Exchange.