Florida Senator Asks Justice Dept. To Investigate Chesapeake

By Alex Cameron, Oklahoma Impact Team

The Oklahoma Impact Team confirmed today that U.S. Sen. Bill Nelson, (D)-Florida, has sent a letter to the U.S. Attorney General, requesting an investigation into possible civil or criminal violations related to the hedge fund that was reportedly set up and run by Chesapeake CEO Aubrey McClendon and his former partner, Tom Ward, from 2004 to 2008. 

Nelson says the matter, in his mind, raises questions about the integrity of "our oil and gas markets" and could cause harm to American consumers.

Also, the Impact Team has learned that, to date, 10 lawsuits have been filed against Chesapeake, nine in federal court and one in state court. They have come either from individual Chesapeake stockholders or investors that manage investments that include Chesapeake stock. At least one seeks class-action status.

The lawsuits are brought against McClendon, Chesapeake and the company's board of directors. The lawsuits allege that the board of directors failed in its duty to adequately monitor McClendon's investments and failed to disclose them in corporate filings, which led to a substantial decrease in the company's stock price.

The lawsuits allege that McClendon's use of wells from the Founder Well Participation Program as collateral for loans and borrowing money from companies that do business with Chesapeake present a conflict of interest.

The following is Sen. Nelson's letter to Attorney General Eric Holder:

Dear Attorney General Holder,

I am deeply concerned by recent reports regarding the financial and trading activities of senior management at Chesapeake Energy Corporation and the potential implications of those activities for energy prices and American consumers.

For several years, I have advocated for greater transparency and oversight for energy trading markets. Left largely unregulated, some financial traders have profited at the expense of consumers by artificially inflating energy and gas prices through speculative trading of energy futures contracts and derivatives.

Chesapeake is the second largest producer of natural gas and accounts for five percent of U.S. natural gas production. The size and magnitude of Chesapeake ensures that its activities play an influential role in the industry – and market. Recent press reports suggesting that Chesapeake's chief executive managed a "secret" hedge fund that traded the same commodities that Chesapeake produces raise legitimate questions concerning conflicts of interest, fiduciary duties and securities fraud that should be examined. If the reports are substantiated, I fear this and other undisclosed transactions by Chesapeake management have the potential to distort energy prices, weaken investor confidence in U.S. markets and hurt American consumers.

In light of these serious reports, I'm asking that the Financial Fraud Enforcement Task Force investigate whether executives at Chesapeake committed fraud or violated any other criminal or civil laws that could undermine the integrity of our oil and gas markets and cause harm to American consumers.