Natural gas giant Chesapeake Energy and its CEO Aubrey McClendon are the subjects of a Securities and Exchange Commission inquiry into McClendon’s controversial compensation plan, the company confirmed on Thursday. In a statement released after the close of the stock market, Chesapeake said it had been notified by the SEC that the regulator’s Fort Worth regional office has launched an informal investigation and asked the company and McClendon to preserve certain documents related to the probe.
The SEC inquiry, which had been previously reported, comes amid growing scrutiny of a controversial plan that allows McClendon to buy a stake of each of the wells that Chesapeake drills, as a well as a billion-dollar loan McClendon reportedly used to help finance the stakes. In the program, called the Founder Well Participation Program, McClendon was allowed to buy a 2.5% stake in each of the company’s thousands of wells.
Facing growing scrutiny, the company’s board said it would not extend the plan beyond its scheduled end in 2015. The board also said that McClendon would give up his post as company chairman.
Meanwhile, Reuters reported on Wednesday that from 2004 through 2008, McClendon ran a secret $200 million hedge fund that traded oil and gas contracts at a time when McClendon was privy to potentially market-moving information in his role as CEO of the energy giant. U.S. Sen. Bill Nelson, a Florida Democrat, asked the the Justice Dept. to investigate Chesapeake for potential “fraud, price manipulation, conflicts-of-interest, or other illegal activities.”
During the conference call Wednesday, McClendon said he was “deeply sorry for all the distractions of the past two weeks.” He also referred to media reports as “misinformation.” Chesapeake did not offer details about what the regulators are investigating, but said that the company and McClendon would cooperate with the probe.