Tuesday, March 1, 2016

Aubrey McClendon Is Charged With Conspiracy in Oil and Natural Gas Bidding – New York Times

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Aubrey McClendon, former chief executive of Chesapeake Energy. Credit Sean Gardner/Reuters

HOUSTON — The Justice Department announced on Tuesday night that it had charged Aubrey K. McClendon, a swashbuckling Oklahoma wildcatter who turbocharged the shale revolution by buying up gas fields across the United States, with conspiring to suppress prices paid for oil and natural gas leases.

The indictment says that Mr. McClendon, who led Chesapeake Energy before he was forced to resign three years ago, orchestrated a conspiracy in which two oil and gas companies colluded not to bid against each other for the purchase of several leases in northwestern Oklahoma between late 2007 and early 2012.

According to the Justice Department, the companies decided who would win the leases, with the winning bidder allotting an interest in the leases to the other company.

"McClendon instructed his subordinates to execute the conspiratorial agreement, which included, among other things, withdrawing bids for certain leases and agreeing on the allocation of interests in the leases between the conspiring companies," the department said in a statement.

"His actions put company profits ahead of the interests of leaseholders entitled to competitive bids for oil and gas rights on their land," said Assistant Attorney General Bill Baer of the Justice Department's Antitrust Division. "Executives who abuse their positions as leaders of major corporations to organize criminal activity must be held accountable for their actions."

The indictment was filed on Tuesday in the United States District Court for the Western District of Oklahoma. The department said this was the first case resulting from a continuing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the oil and natural gas industry.

It did not mention anyone else or another company alleged to be in the conspiracy, or the number of leases involved.

Mr. McClendon did not respond to a text message requesting his comment.

Gordon Pennoyer, spokesman for Chesapeake, said the company "has been actively cooperating for some time" with the antitrust investigation. He added, "Chesapeake does not expect to face criminal prosecution or fines relating to this matter."

Mr. McClendon was nothing if not audacious as Chesapeake's chairman and chief executive. He became a billionaire as the company he co-founded 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 from an energy importer to an exporter, 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 after 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.

Meanwhile, his interests ranged far and wide, as he acquired trophy assets like the Oklahoma City Thunder of the National Basketball Association, interests in a French winery and a $ 12 million antique map collection.

He was once fined $ 250,000 by the N.B.A. for bragging that he and his partners did not buy the Seattle SuperSonics to keep it in Seattle — a statement that was at odds with the N.B.A. commissioner's intentions. The Sonics moved to Oklahoma City anyway for the 2008-9 season. 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 disposal of fracking fluids.

The indictment follows a four-year federal antitrust probe that began after an investigation by Reuters revealed in 2012 that Chesapeake had discussed with Encana, a rival Canadian energy giant, how to suppress land lease prices in Michigan.

Last year, Chesapeake settled charges of antitrust, fraud and racketeering violations by agreeing to pay $ 25 million as compensation to land owners with leases.

Mr. McClendon is now chairman of American Energy Partners, a private firm that seeks investments in shale fields globally. It recently signed an agreement with YPF, the Argentine national oil company, to help develop a giant shale field in Patagonia.

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