SEC Investigating Chesapeake, Aubrey McClendon

by Christopher Freeburn | March 4, 2013 8:20 pm

Chesapeake Energy truck 630 300x224 SEC Investigating Chesapeake, Aubrey McClendon[1]Regulatory documents filed by Chesapeake Energy (NYSE:CHK[2]) last week revealed that federal investigators are continuing their probe of the financial relationship between the company and its CEO[3].

The Securities and Exchange Commission’s (SEC) Texas office is reviewing a controversial practice under which CEO Aubrey McClendon was awarded a 2.5% stake in drilling wells opened by Chesapeake. McClendon leveraged his stake in the wells to borrow $1 billion from an company investor, Reuters noted.

Investors were not amused when the arrangement — dubbed the Founder Well Participation Program (FWPP) — was revealed by media outlets.[4] The company says the program will be terminated next year.

Last month, Chesapeake announced that an internal investigation of FWPP had discovered no deliberate misbehavior by McClendon[5], who has announced that he will leave the company on April 1.

Over the past year, the company has been selling gas fields and oil pipeline assets[6] in a bid to cover a $10 billion funding shortfall.

Shares of Chesapeake fell almost 1% in Monday trading.

Endnotes:
  1. [Image]: http://investorplace.com/wp-content/uploads/2011/11/Chesapeake-Energy-truck-630.jpg
  2. CHK: http://studio-5.financialcontent.com/investplace/quote?Symbol=CHK
  3. continuing their probe of the financial relationship between the company and its CEO: http://www.reuters.com/article/2013/03/01/us-chesapeake-investigation-sec-idUSBRE9200JX20130301
  4. was revealed by media outlets.: http://investorplace.com/2012/05/the-worsening-stink-at-chesapeake-energy/
  5. discovered no deliberate misbehavior by McClendon: http://investorplace.com/2013/01/chesapeake-energy-ceo-is-out-shares-soar/
  6. has been selling gas fields and oil pipeline assets: http://investorplace.com/2012/09/chesapeake-to-sell-permian-basin-assets-for-6-9b/

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