A previously announced review of conflicts of interest involving Chesapeake Energy CEO and President Aubrey K. McClendon, including financial arrangements involving the Founder Well Participation Program (FWPP) did not find any evidence of intentional misconduct, the company reported Wednesday.
The review, led by the Audit Committee of the Board with the assistance of independent counsel retained by independent board members in April 2012, has been substantially completed, Chesapeake said in a statement.
Among transactions reviewed were the 2008-2012 financial arrangements between EIG Global Energy Partners and affiliates of McClendon regarding financing of his participation in the FWPP, as well as preferred stock investments by EIG in CHK Utica, LLC and CHK Cleveland-Tonkawa LLC.
"The review of the financing arrangements did not reveal any improper benefit to Mr. McClendon or increased cost to the company as a result of the overlap in the financial relationships," the company commented.
The review also covered other relationships in which McClendon and the company conducted business with the same financial institutions, trading activities of the Heritage Hedge Fund, co-founded with McClendon through 2007, when the Heritage Hedge Fund ceased operations and issues regarding administration of the FWPP, and a 1998 loan to McClendon by then-board member Frederick B. Whittemore.
Chesapeake's board of directors also announced Wednesday that they have concluded the company did not violate anti-trust laws in connection with the acquisition of Michigan oil and gas rights in 2010. The company is responding to requests to provide documents and information for an investigation by the U.S. Department of Justice of possible anti-trust violations stemming from Chesapeake's leasing activities in Michigan. Chesapeake's board launched its own investigation into these matters in June 2012.
McClendon will retire from the company April 1, but will continue to serve as chief executive officer until a successor is named. The company has faced criticism over its financial dealings and capital spending budget, at a time when its cash flow diminished by declines in natural gas. As a result, the company replaced four members of its board of directors and named former ConocoPhillips chairman Archie W. Dunham on board as its new independent chairman.
During 2012, the company sought to sell between $13 billion and $14 billion in assets as it refocused its business strategy from acquisitions to drilling and to shore up its cash flow.
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