Earlier this month, Chesapeake Energy Corp. revealed that it has been subpoenaed by the U.S. Department of Justice, along with multiple states, over alleged wrong-doing in the companys business dealings. Federal prosecutors and state attorneys have demanded that the company turn over documents, provide information, and give testimony in cases centering on the royalty payments that Chesapeake Energy pays to landowners who allow them to tap the shale oil and gas beneath the surface of their land. Separately, the company said, it has received subpoenas from both federal and state attorneys general over potential violations of anti-trust laws, the laws designed to protect against abuse of monopoly power or collusion between competitors. This is hardly the first time the company has found itself in legal trouble. Across the U.S., Chesapeake faces a large number civil lawsuits from angry landowners, investors and other business partners. In Pennsylvania and Michigan, it faces racketeering counts, under the same law often used to convict members of organized crime. In Texas and Oklahoma, dozens of landowners have sued the company for shortchanging them. The new Department of Justice investigations come after federal attorneys dropped their investigation into the financial misdeeds of former CEO Aubrey McClendon, which were the subject of a year-long investigation by Reuters in 2012 that roiled the company and led to his ouster. State authorities have continued to investigate, however. “The suits against us allege, among other things, that we used below-market prices, made improper deductions, used improper measurement techniques and/or entered into arrangements with affiliates that resulted in underpayment of royalties in connection with the production and sale of natural gas and NGL,” Chesapeake, the countrys second largest producer of natural gas, said in its quarterly filing. “The Company also has received DOJ and state subpoenas seeking information on the Company’s royalty payment practices.” The news comes at a time when Chesapeake is still trying to recover from the financial misdeeds of former CEO Aubrey McClendon. While on Wall Street say that the company has turned around, with one Sterne Agee analyst calling the companys balance sheet “close to being fully healed,” the news of the Department of Justice investigations represent yet another skeleton in Chesapeakes closet.
Posted on: Tue, 25 Nov 2014 23:09:54 +0000