Chesapeake Energy Corporation announces results of Board of Directors reviews
- The review, which was led by the Audit Committee of the Board, with the assistance of independent counsel retained by the independent members of the Board in April 2012, has been substantially completed.
Chesapeake Energy Corporation (NYSE:CHK) announced that its Board of Directors has received the results of its previously announced review of the financing arrangements between co-founder, Chief Executive Officer and President, Aubrey K. McClendon (and the entities through which he participates in the Founder Well Participation Program (“FWPP”)) and third parties identified as having a financial relationship with the company, as well as other matters. The review, which was led by the Audit Committee of the Board, with the assistance of independent counsel retained by the independent members of the Board in April 2012, has been substantially completed. In connection with the review, millions of pages of documents were collected and reviewed and more than 50 interviews of Chesapeake and third-party personnel were conducted.
Among the transactions reviewed were the 2008-2012 financing arrangements between EIG Global Energy Partners (“EIG”) and affiliates of Mr. McClendon regarding financing of his participation in the FWPP, as well as the preferred stock investments by EIG in CHK Utica, L.L.C. and CHK Cleveland-Tonkawa, L.L.C. The review of the financing arrangements did not reveal any improper benefit to Mr. McClendon or increased cost to the company as a result of the overlap in the financial relationships.
The review also covered:
- other relationships in which both Mr. McClendon and the company conducted business with the same financial institutions;
- the trading activities of the Heritage Hedge Fund (co-founded by Mr. McClendon) through 2007, when the Heritage Hedge Fund ceased operations; and
- other matters, including issues regarding administration of the FWPP, and a 1998 loan to Mr. McClendon by then Board member Frederick B. Whittemore.
Based on the documents reviewed and interviews conducted, no intentional misconduct by Mr. McClendon or any of the company’s management was found by the Board concerning these relationships and/or these transactions and issues.
As previously announced, Mr. McClendon has agreed with the Board that he will retire from the company on April 1, 2013, and will continue to serve as Chief Executive Officer until the earlier of his successor being appointed and April 1, 2013. The Board and Mr. McClendon’s decision to commence a search for a new leader was not related to the Board’s review of his financing arrangements and other matters.
Chesapeake also announced today that its Board of Directors has concluded that the company did not violate antitrust laws in connection with the acquisition of Michigan oil and gas rights in 2010. The company previously reported that in June 2012 it had received a subpoena duces tecum from the Antitrust Division, Midwest Field Office, of the United States Department of Justice, and demands for documents and information from state governmental agencies, investigating possible antitrust violations arising from 2010 leasing activities in Michigan. The company has been responding to these requests. The Board commenced its own investigation of these allegations in June 2012. The Board based the conclusion it announced today on a thorough review conducted independently by outside counsel, and on Chesapeake’s cooperation with the Department of Justice.
Chesapeake Energy Corporation
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