Judge Hears Arguments On Chesapeake Injunction - News9.com - Oklahoma City, OK - News, Weather, Video and Sports |

Judge Hears Arguments On Chesapeake Injunction

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Jeff Raymond, Oklahoma Impact Team

OKLAHOMA CITY -- A federal judge heard arguments Tuesday to delay Chesapeake Energy's annual shareholder meeting but did not make an immediate ruling.

6/5/2012 Related Story: Judge To Hear Motion For Chesapeake Shareholder's

Attorneys representing a group of shareholders asked U.S. District Judge Vicki Miles-LaGrange to postpone the meeting – scheduled for Friday -- until the company provides greater information regarding CEO Aubrey McClendon's borrowing of more than $1 billion using his stake in the Founder Well Participation Program, a unique arrangement in which he owns a 2.5 percent of every well the company drills. Some of McClendon's lenders also did business with Chesapeake, potentially presenting a conflict of interest.

Arguments largely came down to whether shareholders already know enough about McClendon's transactions and board oversight to make informed decisions and whether greater scrutiny is relevant to the matters under consideration at Friday's meeting.

Two directors, Burns Hargis and Richard Davidson, are up for re-election, although Chesapeake announced Monday that four yet-to-be-specified directors would step down. Shareholders also will cast an advisory vote on changing executive compensation and increasing stock in the long-term incentive plan.

6/4/2012 Related Story: Chesapeake Announces Major Board Changes

Attorney Matthew Houston, who spoke for the plaintiffs, described Chesapeake's filings with the Securities and Exchange Commission as "inadequate" and the board as "nonfunctioning."

"They have the right to know what the board was doing and when the board was doing it," Houston said of shareholders, complaining that the board has acted "paternalistically" by not being more forthcoming. "Shareholders should not be in an adversarial position with their board of directors."

Chesapeake attorney Robert Varian argued that the company's filings with the Securities and Exchange Commission were complete and properly vetted, and intense media coverage has disclosed details on McClendon and the company.

Chesapeake History Timeline

"It's almost difficult to imagine a situation in which there is more information provided," he said.

Delaying the meeting would seriously harm the company and deprive shareholders of the opportunity to discuss important issues at a critical time, he argued.

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